<PAGE>
--------------------------
The Brinson Funds
Brinson Global Fund
Brinson Global Equity Fund
Brinson Global Bond Fund
Annual Report
June 30, 1998
[ART]
Institutional Asset Management
--------------------------
<PAGE>
Trustees and Officers
[ART]
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
<PAGE>
The Funds' Advisor -- Brinson Partners, Inc.
[ART]
The UBS Brinson Division is the institutional asset management division of UBS
AG. UBS Brinson is the name used outside North America while Brinson Partners
continues as the primary name within North America. The UBS Brinson Division
manages over USD 390 billion of institutional assets, including over USD 277
billion of discretionary institutional assets on an active basis and mutual fund
assets for UBS Private Banking which total over USD 113 billion. In addition,
UBS Brinson acts as the investment advisor to UBS Private Banking on an advisory
basis. UBS Brinson manages investment portfolios for corporations, public funds,
endowments, foundations, central banks and other investors located throughout
the world. The UBS Brinson Division employs over 1,500 people in offices in
Chicago, Bahrain, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New
York, Paris, Rio de Janeiro, Singapore, Sydney, Tokyo and Zurich.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment markets
and their interrelationships. Portfolio structure is focused upon both risk and
return considerations in the context of full investment cycles. Our investment
decisions are based on fundamental research, internally developed valuation
systems and seasoned judgment. Our independent team approach allows for rapid
responses to market changes, while providing each client with the benefit of our
best talent and the flexibility to customize portfolios to meet unique
requirements.
2
<PAGE>
Table of Contents
[ART]
Shareholder Letter............................................................ 4
Global Economic and Market Highlights......................................... 5
Global Fund................................................................... 6
Schedule of Investments....................................................11
Financial Statements.......................................................21
Financial Highlights.......................................................25
Global Equity Fund............................................................28
Schedule of Investments....................................................33
Financial Statements.......................................................39
Financial Highlights.......................................................42
Global Bond Fund..............................................................45
Schedule of Investments....................................................49
Financial Statements.......................................................53
Financial Highlights.......................................................56
The Brinson Funds--Notes to Financial Statements..............................59
Report of Independent Auditors................................................64
3
<PAGE>
Shareholder Letter
[ART]
August 22, 1998
Dear Shareholder:
We are very pleased to present the June 30, 1998 Annual Report for the Global
Fund, Global Equity Fund and Global Bond Fund. Within this Report, we focus on
the current global economic outlook as well as our current strategies and
performance updates for the three Global Funds.
In December 1997, Union Bank of Switzerland and Swiss Bank Corporation announced
their intention to merge, which included the integration of UBS Asset Management
and SBC Brinson into the UBS Brinson Division. The merger was consummated on
June 29, 1998. We are excited about the formation of the UBS Brinson Division
and the additional resources we have brought together to further the tradition
of delivering value-added investment performance and the highest level of
professional client service.
Brinson Global Fund Class I
Since its inception on August 31, 1992, the Brinson Global Fund Class I has
produced an annualized total return of 11.44% compared to the return of 13.81%
of its benchmark, the Global Securities Markets Mutual Fund Index. The Brinson
Global Fund Class I achieved this performance with a volatility of 5.36%, below
the benchmark volatility of 6.86% and reflecting our cautious strategy at this
time toward investment risk.
Brinson Global Equity Fund Class I
The Brinson Global Equity Fund Class I has provided an annualized return of
12.45% since its performance inception on January 31, 1994. This is compared to
a 14.95% return for the benchmark, the MSCI World Equity (Free) Index. This
performance was achieved with volatility of 8.80%, below the benchmark
volatility of 10.35% and reflecting our cautious strategy at this time toward
investment risk.
Brinson Global Bond Fund Class I
The Brinson Global Bond Fund Class I has provided an annualized return of 6.49%
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
6.38%. This performance was achieved with volatility of 4.08%, below the 5.15%
volatility of the benchmark and reflecting our cautious strategy at this time
toward investment risk.
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
Chief Executive Officer
Brinson Partners, Inc.
4
<PAGE>
Global Economic and Market Highlights
[ART]
The economic situation in Japan remains bleak. With real GDP growth negative in
the last two quarters, the country is officially in recession. The downturn in
output has brought on the highest unemployment rate recorded in the post-war
period, at just over 4%. In response to the news, the voters have delivered a
severe rebuke to the ruling LDP, although it is not at all certain that this
will result in the implementation of "solutions" proffered by Western
governments and commentators.
Many of Japan's problems are magnified elsewhere in Asia. Last year's financial
and economic crisis has not diminished to any great extent. With financial
systems straining under large amounts of defunct debts, and the IMF prescribing
high interest rates in the interest of currency support and inflation control,
real economic activity has slowed substantially. While Asia suffers from falling
living standards, the crisis has been a partial benefit to the U.S. and Europe
by keeping commodity and import prices in check, and by not augmenting strong
domestic demand in those economies.
Continental Europe's cyclical recovery is well under way, and is starting to
have some beneficial effects on the high unemployment rate. Previously, output
and profit growth were reasonably strong, but did not carry over into the labor
market. Although unemployment has been reduced, the failure to address
structural problems will almost certainly guarantee that the Continent's poor
overall unemployment picture will persist for several years. The U.K.'s economic
performance has been at odds with most of the rest of Europe. A series of Bank
of England rate hikes has not prevented the headline inflation rate from rising
above 4% this year. Now however, there are signs that these hikes, coupled with
a strong pound, have started to cool the economy.
The U.S. expansion is unabated; more than 7 years have elapsed since the
recession at the start of the decade. However, the Federal Reserve's attempts to
maintain a neutral policy stance, in light of the Asian crisis' effect on demand
and costs, has resulted in substantial growth in the money supply. This could
set the stage for a modest resurgence in inflation. Profit growth, which had
reflected the strength of the domestic economy in prior years, is now showing
signs of the fall-off in Asian demand and the strength of the dollar.
<TABLE>
<CAPTION>
Global Environment
6 months 1 year 3 years 5 years 8/31/92*
Major Markets ended ended ended ended to
Total Return in U.S. Dollars 6/30/98 6/30/98 6/30/98 6/30/98 6/30/98
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Equity 15.47% 28.86% 28.13% 21.56% 21.91%
Non-U.S. Equities (currency unhedged) 15.53 6.00 11.04 10.29 11.54
Non-U.S. Equities (currency hedged) 18.55 16.90 23.41 14.05 15.28
U.S. Bonds 8.97 10.59 7.88 6.91 7.40
Non-U.S. Bonds (currency unhedged) 2.09 0.89 0.44 6.36 5.93
Non-U.S. Bonds (currency hedged) 5.44 11.89 12.14 9.88 10.12
U.S. Cash Equivalents 2.38 4.87 4.99 4.58 4.32
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
6 months 1 year 3 years 5 years 8/31/92*
Major Currencies ended ended ended ended to
Percent Change Relative to U.S. Dollars 6/30/98 6/30/98 6/30/98 6/30/98 6/30/98
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Yen -6.31% -17.55% -15.11% -6.35% -2.01%
Pound 1.41 0.25 1.60 2.81 -2.91
Deutschemark -0.39 -3.46 -8.47 -1.42 -4.18
Canadian Dollar -2.69 -6.19 -2.24 -3.36 -3.47
- --------------------------------------------------------------------------------------------------------
</TABLE>
* Inception date of the Brinson Global Fund Class I
All total returns in excess of 1 year are average annualized returns.
5
<PAGE>
Global Fund
[ART]
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 with each market
is based on the fundamental research of our analytical teams in our offices
worldwide.
Since its inception on August 31, 1992 the Brinson Global Fund Class I has
produced an annualized return of 11.44%, compared to the return of 13.81% for
its benchmark, the Global Securities Markets Mutual Fund Index. The Fund
achieved this performance with a volatility of 5.36%, well-below the benchmark
volatility of 6.86%. For the first half of 1998, the Brinson Global Fund Class I
returned 6.21%, trailing the 10.16% return of the benchmark.
The Global Fund market strategy centers on reducing the risk of exposure to the
overpriced equity markets; most global bond markets are neutrally valued and,
because they provide relative attraction, are the primary overweights. The
Japanese bond market is an exception and is extremely overvalued at all points
along the yield curve. Market allocation made a substantial negative
contribution to Fund performance during the first half of 1998 as developed
global equity markets, with a few Asian exceptions, were strong. Numerous
developed equity markets provided double-digit returns in dollar-hedged terms.
Developed bond markets provided positive returns but failed to match those of
world equity markets.
The strategy for emerging markets equities is neutral to the normal policy
exposure of 3.0%. The emerging markets debt strategy mirrors the developed bond
market overweight, with a 5.0% exposure relative to the 2.0% normal policy. A
small underweight is carried in the U.S. high yield bond market.
Active currency had little impact on the performance of the Fund. Current
strategy involves yen and sterling underweights and Australian and U.S. dollar
overweights.
6
<PAGE>
Global Fund
(ART)
<TABLE>
<CAPTION>
Total Return
6 months 1 year 3 years 5 years 8/31/92*
ended ended ended ended to
6/30/98 6/30/98 6/30/98 6/30/98 6/30/98
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brinson Global Fund Class I 6.21% 8.28% 14.38% 11.17% 11.44%
- -------------------------------------------------------------------------------------------------------------------------
GSMI Mutual Fund Index** 10.16 13.76 15.93 13.69 13.81
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Inception date of the Brinson Global Fund Class I.
** An un-managed index compiled by the Advisor, constructed as follows: 40%
Wilshire 5000 Index; 22% MSCI Non-U.S. Equity (Free) Index; 21% Salomon BIG
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 Class I 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 June 30, 1998. No adjustment has been made for any income
taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
Brinson Global Fund Class I
vs. GSMI Mutual Fund Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
LABEL B A
- --------------------------------------------------
Brinson Global Fund Class I GSMI
- --------------------------------------------------
8/31/92 1,000,000 1,000,000
- --------------------------------------------------
12/31/92 1,032,925 1,030,790
- --------------------------------------------------
6/30/93 1,107,567 1,119,316
- --------------------------------------------------
12/31/93 1,148,054 1,179,801
- --------------------------------------------------
6/30/94 1,116,140 1,164,819
- --------------------------------------------------
12/31/94 1,126,372 1,196,582
- --------------------------------------------------
6/30/95 1,256,423 1,364,548
- --------------------------------------------------
12/31/95 1,398,239 1,500,615
- --------------------------------------------------
6/30/96 1,462,269 1,583,964
- --------------------------------------------------
12/31/96 1,595,424 1,688,579
- --------------------------------------------------
6/30/97 1,736,975 1,869,036
- --------------------------------------------------
12/31/97 1,770,868 1,930,073
- --------------------------------------------------
6/30/98 1,880,791 2,126,253
- --------------------------------------------------
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
7
<PAGE>
Global Fund
- -------------------------------------------------------------------
[ART APPEARS HERE]
<TABLE>
<CAPTION>
Total Return
6 months 6/30/97*
ended to
6/30/98 6/30/98
- -------------------------------------------------------------------
<S> <C> <C>
Brinson Global Fund Class N 6.01% 7.90%
- -------------------------------------------------------------------
GSMI Mutual Fund Index** 10.16 13.76
- -------------------------------------------------------------------
</TABLE>
* Inception date of the Brinson Global Fund Class N.
** An un-managed index compiled by the Advisor, constructed as follows: 40%
Wilshire 5000 Index; 22% MSCI Non-U.S. Equity (Free) Index; 21% Salomon
BIG Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged); 2%
JP Morgan EMBI+; 3% IFC Investable Index; and 3% High Yield Bond Index.
Total return includes reinvestment of all capital gain and income distributions.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
Fund Class N and the GSMI Mutual Fund Index if you had invested $1,000,000 on
June 30, 1997, and had reinvested all your income dividends and capital gain
distributions through June 30, 1998. No adjustment has been made for any income
taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
Brinson Global Fund Class N
vs. GSMI Mutual Fund Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Brinson Global Fund Class N GSMI Index Fund Index
<S> <C> <C>
6/30/97 $1,000,000 $1,000,000
9/30/97 1,035,796 1,045,072
12/31/97 1,017,857 1,032,657
3/31/98 1,090,861 1,128,321
6/30/98 1,079,019 1,137,621
</TABLE>
Data through 6/30/98
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
(ART)
<TABLE>
<CAPTION>
Asset Allocation
As of June 30, 1998
Current
Benchmark Strategy
- --------------------------------------------------------------------
<S> <C> <C>
U.S. Equity 40.0% 23.0%
Global Equities Ex-U.S. 22.0 17.0
Emerging Markets Equities 3.0 3.0
Dollar Bonds 21.0 31.0
High Yield Bonds 3.0 2.5
Global Bonds Ex-U.S. 9.0 18.5
Emerging Markets Debt 2.0 5.0
Cash Equivalents 0.0 0.0
- --------------------------------------------------------------------
100.0% 100.0%
Top Ten U.S. Equity Holdings
As of June 30, 1998
Percent of
Net Assets
- --------------------------------------------------------------------
<S> <C>
1. Xerox Corp. 1.36%
2. Lockheed Martin Corp. 1.35
3. Burlington Northern Santa Fe Corp. 1.25
4. Aon Corp. 0.96
5. FDX, Corp. 0.92
6. Philip Morris Companies, Inc. 0.91
7. CIGNA Corp. 0.76
8. Automatic Data Processing, Inc. 0.73
9. Goodyear Tire & Rubber Co. 0.70
10. Baxter International, Inc. 0.67
- --------------------------------------------------------------------
Currency Allocation
As of June 30, 1998
Current
Benchmark Strategy
- --------------------------------------------------------------------
<S> <C> <C>
U.S. 66.0% 69.0%
Japan 6.7 2.7
U.K. 5.6 2.3
Continental Europe 16.0 16.0
Canada 1.5 1.5
Emerging Markets 3.0 3.0
Other 1.2 5.5
- --------------------------------------------------------------------
100.0% 100.0%
Top Ten Non-U.S. Equity Holdings
As of June 30, 1998
Percent of
Net Assets
- --------------------------------------------------------------------
<S> <C>
1. Glaxo Wellcome PLC 0.31%
2. Novartis AG (Reg.) 0.29
3. Nokia Oyj A Shares 0.26
4. British Petroleum Co. PLC 0.24
5. Royal Dutch Petroleum Co. 0.23
6. British Telecommunications PLC 0.23
7. Lloyds TSB Group PLC 0.22
8. CS Holdings AG (Reg.) 0.22
9. B.A.T. Industries PLC 0.20
10. Roche Holding AG (Gen.) 0.20
- --------------------------------------------------------------------
</TABLE>
9
<PAGE>
Global Fund
[ART]
Industry Diversification
As a Percentage of Net Assets
As of June 30, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
U.S. EQUITIES
<S> <C>
Energy.......................... 0.73%
------
Capital Investment
Capital Goods.................. 3.02
Technology..................... 2.80
------
5.82
------
Basic Industries
Chemicals...................... 1.28
Housing/Paper.................. 2.26
Metals......................... 0.21
------
3.75
------
Consumer
Non-Durables................... 2.02
Retail/Apparel................. 1.30
Autos/Durables................. 0.87
Discretionary.................. 0.23
Health: Drugs.................. 2.17
Health: Non-Drugs.............. 1.60
------
8.19
------
Financial
Banks.......................... 2.07
Non-Banks...................... 2.09
------
4.16
------
Utilities
Electric....................... 1.72
Telephone...................... 0.26
------
1.98
------
Transportation.................. 2.39
Services/Misc................... 1.85
Post Venture.................... 1.28
------
Total U.S. Equities......... 30.15*
------
NON-U.S. EQUITIES
Aerospace & Military............ 0.04%
Airlines........................ 0.07
Appliances & Household.......... 0.26
Automobiles..................... 0.62
Banking......................... 2.05
Beverages & Tobacco............. 0.36
Broadcasting & Publishing....... 0.51
Building Materials.............. 0.29
Business & Public Service....... 0.48
Chemicals....................... 0.48
Construction.................... 0.11
Consumer........................ 0.24
Data Processing................. 0.09
Electric Components............. 0.14
Electronics..................... 0.69
Energy.......................... 1.30
Financial Services.............. 0.44
Food & House Products........... 0.69
Forest Products................. 0.21
Gold Mining..................... 0.01
Health: Drugs................... 0.63
Health: Non-Drugs............... 0.73
Housing/Paper................... 0.01
Industrial Components........... 0.23
Insurance....................... 1.06
Investment Companies............ 0.07
Leisure & Tourism............... 0.12
Machinery & Engineering......... 0.09
Merchandising................... 0.67
Metals--Steel................... 0.34
Miscellaneous Materials......... 0.01
Multi-Industry.................. 0.93
Non-Ferrous Metals.............. 0.30
Real Estate..................... 0.08
Recreation...................... 0.05
Retail/Apparel.................. 0.10
Telecommunications.............. 1.52
Textiles & Apparel.............. 0.05
Transportation.................. 0.15
Utilities....................... 0.58
Wholesale & International Trade. 0.09
------
Total Non-U.S. Equities..... 16.89
------
EMERGING MARKETS EQUITIES....... 3.38
------
U.S. BONDS
Corporate Bonds
Aerospace & Military........... 0.74
Airlines....................... 0.03
Asset-Backed................... 0.33
Auto/Durables.................. 0.09
Banks.......................... 0.57
Broadcasting & Public Service.. 0.69
CMO............................ 1.85
Financial Services............. 1.80
Industrial Components.......... 0.37
Services/Miscellaneous......... 0.04
Telecommunications............. 0.20
Transportation................. 0.28
------
6.99
------
U.S. Government Agencies........ 8.32
U.S. Government Obligations..... 4.18
International Dollar Bonds...... 3.57
------
Total U.S. Bonds............ 23.06*
------
HIGH YIELD BONDS................ 2.51
------
NON-U.S. BONDS
Foreign Government Bonds....... 17.33
------
EMERGING MARKETS DEBT........... 4.93
------
SHORT TERM INVESTMENTS.......... 16.86*
------
TOTAL INVESTMENTS........... 115.11
LIABILITIES, LESS CASH AND
OTHER ASSETS................... (15.11)
------
NET ASSETS.................. 100.00%
======
- --------------------------------------------------------------------------------
</TABLE>
* The Fund held a long position in U.S. Treasury futures on June 30, 1998 which
increased U.S. Bond exposure from 23.06% to 29.90%. The Fund held a short
position in stock index futures on June 30, 1998 which reduced U.S. Equity
exposure from 30.15% to 22.92%. These adjustments result in a net increase in
the Fund's exposure to Short-Term Investments from 16.86% to 17.25%.
10
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Equities -- 50.42%
U.S. EQUITIES -- 30.15%
Aetna Inc............................................ 33,800 $ 2,573,025
Allergan, Inc........................................ 52,300 2,425,412
Alza Corp. (b)....................................... 53,300 2,305,225
American Home Products Corp.......................... 54,200 2,804,850
Aon Corp............................................. 95,399 6,701,745
Automatic Data Processing, Inc....................... 69,800 5,086,675
BankBoston Corp...................................... 38,800 2,158,250
Baxter International, Inc............................ 87,000 4,681,687
Beckman Coulter PLC.................................. 23,100 1,345,575
Bestfoods............................................ 46,600 2,705,712
Biogen, Inc.......................................... 20,900 1,024,100
Birmingham Steel Corp................................ 21,400 264,825
Brinson Post-Venture Fund (b)........................ 423,765 8,960,844
Burlington Northern Santa Fe Corp.................... 88,900 8,728,869
Champion Enterprises, Inc............................ 16,300 478,813
Champion International Corp.......................... 26,500 1,303,469
CIGNA Corp........................................... 77,000 5,313,000
Circuit City Stores--Circuit City Group.............. 78,700 3,689,062
Citicorp............................................. 1,700 253,725
CMS Energy Corp...................................... 68,800 3,027,200
Columbia/HCA Healthcare Corp......................... 14,100 410,663
Comerica, Inc........................................ 22,000 1,457,500
Commscope, Inc. (b).................................. 37,433 605,947
Comverse Technology, Inc. (b)........................ 24,360 1,263,675
Consolidated Stores Corp............................. 25,400 920,750
Corning, Inc......................................... 126,700 4,402,825
Covance, Inc. (b).................................... 26,872 604,620
Crown Cork & Seal Co., Inc........................... 25,300 1,201,750
Dial Corp............................................ 27,600 715,875
Eastman Chemical Co.................................. 29,400 1,830,150
EMC Corp. (b)........................................ 47,400 2,124,112
Enron Corp........................................... 58,900 3,184,281
Entergy Corp......................................... 151,000 4,341,250
FDX Corp. (b)........................................ 102,100 6,406,775
First American Corp. of Tennessee.................... 13,900 668,938
First Data Corp...................................... 128,830 4,291,649
First Security Corp.................................. 26,375 564,590
FirstEnergy Corp..................................... 10,805 332,254
Fleet Financial Group, Inc........................... 32,800 2,738,800
Fleetwood Enterprises, Inc........................... 1,200 48,000
Food Lion, Inc., Class A............................. 103,200 1,096,500
Forest Laboratories, Inc. Class A (b)................ 40,900 1,462,175
Fort James Corp...................................... 68,500 3,048,250
Gannett Co., Inc..................................... 23,100 1,641,544
General Instrument Corp. (b)......................... 121,500 3,303,281
General Semiconductor, Inc. (b)...................... 27,550 272,056
Genzyme Corp. (b).................................... 21,500 549,594
Geon Co.............................................. 14,700 337,181
Goodyear Tire & Rubber Co............................ 76,500 4,929,469
Great Lakes Chemical Corp............................ 15,100 595,506
Harnischfeger Industries, Inc........................ 37,200 1,053,225
Health Care and Retirement Corp. (b)................. 24,000 946,500
Hibernia Corp........................................ 29,600 597,550
IMC Global Inc....................................... 28,400 855,550
Informix Corp. (b)................................... 28,500 225,328
</TABLE>
<TABLE>
<S> <C> <C>
Interpublic Group of Companies, Inc.................. 22,250 $ 1,350,297
Kimberly Clark Corp.................................. 99,800 4,578,325
Lafarge Corp......................................... 15,500 609,344
Lear Corp. (b)....................................... 22,900 1,175,056
Lockheed Martin Corp................................. 89,223 9,446,485
Lyondell Petrochemical Co............................ 72,100 2,194,544
Manor Care, Inc...................................... 27,298 1,049,267
Martin Marietta Materials, Inc....................... 15,584 701,280
Masco Corp........................................... 62,100 3,757,050
Medusa Corp.......................................... 2,200 138,050
Nabisco Holdings Corp................................ 54,300 1,958,194
National Service Industries, Inc..................... 10,400 529,100
Nextel Communications, Inc. (b)...................... 74,400 1,850,700
Norfolk Southern Corp................................ 51,100 1,523,419
Peco Energy Co....................................... 149,100 4,351,856
Pentair, Inc......................................... 28,196 1,198,330
Philip Morris Companies, Inc......................... 161,900 6,374,813
Praxair, Inc......................................... 49,400 2,312,537
Raytheon Co., Class B................................ 73,200 4,327,950
Regions Financial Corp............................... 13,700 562,556
Reynolds & Reynolds Co............................... 17,600 320,100
Schering Plough Corp................................. 51,000 4,672,875
Seagate Technology, Inc. (b)......................... 47,600 1,133,475
Sears, Roebuck and Co................................ 55,000 3,358,437
Southdown, Inc....................................... 10,700 763,713
St. Jude Medical, Inc. (b)........................... 26,800 986,575
Timken Co............................................ 9,400 289,638
Tyson Foods, Inc., Class A........................... 108,498 2,353,050
Ultramar Diamond Shamrock Corp....................... 60,602 1,912,751
US Bancorp........................................... 68,380 2,940,340
Vencor, Inc. (b)..................................... 56,400 408,900
Ventas, Inc.......................................... 56,400 779,025
Viad Corp............................................ 52,200 1,448,550
Wells Fargo & Co..................................... 6,800 2,509,200
Westvaco Corp........................................ 12,698 358,719
Witco Corp........................................... 28,100 821,925
Xerox Corp........................................... 93,700 9,522,262
York International Corp.............................. 33,200 1,446,275
------------
Total U.S. Equities.................................. 210,875,139
------------
NON-U.S. EQUITIES -- 16.89%
AUSTRALIA -- 0.86%
Amcor Ltd............................................ 23,770 104,076
Boral Ltd............................................ 89,240 167,457
Brambles Industries Ltd.............................. 12,590 247,086
Broken Hill Proprietary Co., Ltd..................... 84,200 711,778
Coca-Cola Amatil Ltd................................. 14,270 95,444
CSR Ltd.............................................. 42,930 123,893
David Jones Ltd...................................... 182,010 208,529
Lend Lease Corp. Ltd................................. 11,596 234,472
Mayne Nickless Ltd................................... 42,000 222,390
National Australia Bank Ltd.......................... 58,467 771,242
News Corp., Ltd...................................... 110,549 902,340
News Corp. Ltd., Preferred........................... 27,886 197,566
Orica Ltd............................................ 18,700 110,597
Pacific Dunlop Ltd................................... 85,210 137,731
Qantas Airways Ltd................................... 83,587 125,790
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
-------- -----------
<S> <C> <C>
Rio Tinto Ltd........................................ 19,845 $ 235,968
Santos Ltd........................................... 38,610 119,556
Telstra Corp., Ltd................................... 173,200 444,067
Westpac Bank Corp., Ltd.............................. 93,408 569,797
WMC Ltd.............................................. 70,040 210,806
Woolworth's Ltd...................................... 30,790 100,108
-----------
6,040,693
-----------
BELGIUM -- 0.82%
Delhaize-Le Lion S.A................................. 6,390 446,493
Electrabel S.A....................................... 3,490 989,506
Fortis AG............................................ 216 12
Fortis AG Strip (b).................................. 4,853 1,239,008
Groupe Bruxelles Lambert S.A. (b).................... 1,830 369,344
KBC Bancassurance Holding-Strip (b).................. 250 20
Kredietbank NV....................................... 8,650 774,106
Petrofina S.A........................................ 1,775 728,652
Solvay S.A., Class A................................. 5,220 413,840
Tractebel............................................ 4,065 595,384
Union Miniere S.A.................................... 3,105 191,924
-----------
5,748,289
-----------
CANADA -- 0.57%
Agrium, Inc.......................................... 9,500 118,540
Alcan Aluminum Ltd................................... 7,250 199,663
Bank of Montreal..................................... 5,290 291,371
Barrick Gold Corp.................................... 4,200 79,967
Canadian National Railway Co......................... 5,150 273,854
Canadian Pacific Ltd................................. 15,663 440,941
Extendicare Inc. (b)................................. 11,500 93,057
Hudson's Bay Co...................................... 6,800 155,828
Imasco, Ltd.......................................... 8,400 155,080
Imperial Oil Ltd..................................... 17,160 299,886
Magna International Inc., Class A.................... 2,200 150,646
Moore Corp., Ltd..................................... 8,100 107,405
Newbridge Networks Corp. (b)......................... 2,200 52,584
Noranda, Inc......................................... 7,440 128,503
NOVA Corp............................................ 19,520 223,658
Potash Corporation of Saskatchewan, Inc.............. 2,200 165,755
Royal Bank of Canada................................. 6,250 376,122
Seagram Co., Ltd..................................... 3,090 125,966
Shaw Communications Inc., Class B.................... 11,300 219,761
TransCanada Pipelines Ltd............................ 10,020 222,122
Westcoast Energy, Inc................................ 5,000 111,349
-----------
3,992,058
-----------
DENMARK -- 0.06%
Den Danske Bank Group................................ 1,900 227,934
Tele Danmark A/S..................................... 2,100 201,541
-----------
429,475
-----------
FINLAND -- 0.43%
Cultor Oyj........................................... 2,400 38,932
Merita Ltd., Class A................................. 49,350 325,612
Metsa Serla Oyj, Class B............................. 7,400 71,485
Nokia Oyj A Shares (b)............................... 25,100 1,845,958
Outokumpu Oyj, Class A............................... 9,680 123,503
</TABLE>
<TABLE>
<S> <C> <C>
Sampo Insurance Co., Ltd., Series A.................. 3,720 $ 176,287
UPM-Kymmene Corp..................................... 12,870 354,209
Valmet Oyj........................................... 5,800 100,005
-----------
3,035,991
-----------
FRANCE -- 1.64%
Air Liquide.......................................... 1,395 230,731
Alcatel Alsthom...................................... 2,632 535,890
AXA-UAP.............................................. 5,358 602,620
AXA-UAP Certificat de valeur guarantie............... 4,328 1,475
Banque Nationale de Paris............................ 5,909 482,805
Carrefour SA......................................... 600 379,590
Cie de Saint Gobain.................................. 2,967 550,117
Dexia France (b)..................................... 2,699 363,378
Elf Aquitaine S.A.................................... 4,394 617,747
Eridania Beghin-Say SA............................... 1,100 242,888
France Telecom S.A................................... 11,200 772,478
Groupe Danone........................................ 1,600 441,151
Lafarge S.A.......................................... 2,470 255,334
Lagardere S.C.A...................................... 8,300 345,536
Michelin, Class B.................................... 5,449 314,539
Paribas.............................................. 3,895 416,815
Pechiney S.A., Class A............................... 4,884 196,701
Peugeot S.A.......................................... 2,580 554,747
Pinault-Printemps-Redoute S.A........................ 390 326,398
Rhone-Poulenc, Class A............................... 9,644 543,931
SEITA................................................ 9,910 449,113
Societe Generale..................................... 2,295 477,144
Suez Lyonnaise des Eaux S.A. (b)..................... 4,071 670,047
Thomson CSF.......................................... 7,900 300,529
Total S.A., Class B.................................. 3,386 440,191
Usinor Sacilor....................................... 8,580 132,546
Vivendi.............................................. 3,844 820,808
Vivendi Warrants "01" (b)............................ 4,224 8,314
-----------
11,473,563
-----------
GERMANY -- 1.93%
Allianz AG........................................... 4,176 1,376,576
Allianz AG........................................... 122 39,878
BASF AG.............................................. 6,130 290,368
Bayer AG............................................. 15,240 786,063
Bayerische Motoren Werke (BMW)....................... 117 116,352
Bayerische Motoren Werke AG.......................... 390 393,457
Commerzbank AG....................................... 3,390 129,590
Continental AG....................................... 10,550 328,482
Daimler-Benz AG...................................... 6,435 631,022
Deutsche Bank AG..................................... 10,061 851,980
Deutsche Telekom AG.................................. 42,280 1,140,740
Dresdner Bank AG..................................... 12,050 649,565
Hochtief AG.......................................... 3,500 167,729
Hoechst AG........................................... 5,110 255,075
M.A.N. AG............................................ 750 291,690
Mannesmann AG (b).................................... 6,470 656,320
Metro AG............................................. 8,458 513,103
Metro AG Right (b)................................... 8,458 328
Muenchener Rueckver AG............................... 2,115 1,048,712
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
-------- -----------
<S> <C> <C>
Preussag AG.......................................... 1,172 $ 418,154
RWE AG............................................... 7,470 442,820
Schering AG.......................................... 3,805 448,379
Siemens AG........................................... 12,400 754,305
Thyssen AG........................................... 1,550 392,438
Veba AG.............................................. 8,839 602,325
Volkswagen AG........................................ 818 786,277
-----------
13,511,728
-----------
HONG KONG -- 0.10%
Cheung Kong Holdings Ltd............................. 26,000 127,842
Citic Pacific Ltd.................................... 14,000 24,753
CLP Holdings Ltd..................................... 14,500 66,057
Hang Seng Bank Ltd................................... 10,700 60,483
Hong Kong & China Gas Co., Ltd....................... 71,500 81,202
Hong Kong and China Gas Warrants "99" (b)............ 3,250 222
Hong Kong Telecommunications Ltd..................... 37,000 69,477
Hutchison Whampoa Ltd................................ 29,000 153,073
Johnson Electric Holdings Ltd........................ 14,000 51,855
South China Morning Post (Holdings) Ltd.............. 30,000 14,422
Sun Hung Kai Properties Ltd.......................... 13,000 55,197
-----------
704,583
-----------
ITALY -- 0.74%
Assicurazioni Generali............................... 16,800 546,280
Banca Commercial Italiana............................ 8,000 47,841
Credito Italiano S.p.A............................... 77,000 403,074
Danieli & Co. Savings (Risp)......................... 43,000 199,572
ENI ADR.............................................. 7,600 494,000
ENI S.p.A............................................ 102,000 668,504
Fiat S.p.A.-Priveleged Preferred..................... 128,600 320,134
INA-Istituto Nazionale delle Assicurazioni........... 13,000 36,933
Instituto Mobiliare Italiano S.p.A................... 18,800 296,138
Istituto Bancario San Paolo di Torino................ 18,000 259,740
Italgas S.p.A........................................ 6,800 27,697
La Rinascente S.p.A.................................. 25,740 256,307
Montedison S.p.A..................................... 250,700 310,986
Parmalat Finanziaria S.p.A........................... 93,000 189,657
Telecom Italia Mobile S.p.A.......................... 84,000 513,673
Telecom Italia Mobile S.p.A. RNC..................... 41,500 140,080
Telecom Italia S.p.A................................. 63,666 468,662
-----------
5,179,278
-----------
JAPAN -- 1.59%
Amada Co., Ltd....................................... 25,000 121,591
Bank of Tokyo-Mitsubishi, Ltd........................ 22,000 232,864
Canon Sales Co., Inc................................. 8,000 108,715
Canon, Inc........................................... 20,000 453,940
Citizen Watch Co., Ltd............................... 23,000 189,754
Dai Nippon Printing Co., Ltd......................... 22,000 351,119
Daiichi Pharmaceutical Co., Ltd...................... 20,000 263,717
Daikin Industries Ltd................................ 25,000 161,040
Daiwa House Industry Co., Ltd........................ 12,000 105,919
Denso Corp........................................... 20,000 331,448
Fanuc................................................ 10,000 345,859
</TABLE>
<TABLE>
<S> <C> <C>
Fuji Photo Film...................................... 1,000 $ 34,802
Fujitsu.............................................. 15,000 157,798
Hitachi Ltd.......................................... 47,000 306,481
Honda Motor Co....................................... 10,000 355,946
Hoya Corp............................................ 5,000 141,586
Inax................................................. 17,000 58,429
Ito Yokado Co., Ltd.................................. 9,000 423,461
Kaneka Corp.......................................... 23,000 120,978
Keio Teito Electric Railway.......................... 27,000 98,245
Kinki Nippon Railway................................. 28,000 131,138
Kirin Brewery Co., Ltd............................... 26,000 245,416
Kokuyo............................................... 8,000 135,461
Kuraray Co., Ltd..................................... 29,000 246,359
Kyocera Corp......................................... 3,000 146,558
Marui Co., Ltd....................................... 13,000 193,897
Matsushita Electric Industrial Co.................... 28,000 449,905
NGK Insulators....................................... 39,000 338,617
Nintendo Co., Ltd.................................... 1,900 175,920
Nippon Meat Packers, Inc............................. 16,000 195,871
Nippon Steel Co...................................... 19,000 33,404
Okumura Corp......................................... 24,000 84,217
Omron Corp........................................... 7,000 106,928
Osaka Gas Co......................................... 46,000 117,995
Sankyo Co., Ltd...................................... 18,000 409,843
Secom Co., Ltd....................................... 6,000 346,291
Sega Enterprises Ltd................................. 3,000 51,771
Seino Transportation................................. 16,000 88,770
Sekisui House Ltd.................................... 22,000 170,407
Shin-Etsu Chemical Co., Ltd.......................... 1,000 17,293
Sony Corp............................................ 5,200 447,743
Sumitomo Bank........................................ 4,000 38,909
Sumitomo Chemical Co................................. 28,000 86,349
Sumitomo Electric Industries......................... 19,000 192,074
Takeda Chemical Industries........................... 15,000 398,818
TDK Corp............................................. 4,000 295,421
Tokio Marine & Fire Insurance Co..................... 21,000 215,773
Tokyo Electric Power................................. 5,900 115,632
Tonen Corp........................................... 17,000 88,071
Toray Industries, Inc................................ 61,000 316,461
Toshiba Corp......................................... 56,000 228,786
Toyo Suisan Kaisha................................... 14,000 85,341
Toyota Motor Corp.................................... 17,000 439,745
Yamato Transport Co., Ltd............................ 2,000 22,409
Yamazaki Baking Co., Ltd............................. 9,000 79,764
-----------
11,101,049
-----------
MALAYSIA -- 0.08%
Berjaya Sports Toto Bhd.............................. 22,000 32,622
Kuala Lumpur Kepong Bhd.............................. 35,500 57,348
Malayan Banking Bhd.................................. 13,000 12,961
Malayan Banking Bhd.................................. 13,000 13,102
Malaysia International Shipping Bhd (Frgn.).......... 15,000 21,881
Nestle (Malaysia) Bhd................................ 13,000 58,927
Petronas Gas Bhd..................................... 22,000 40,844
Public Bank Bhd (Frgn.).............................. 22,000 6,631
Resorts World Bhd.................................... 30,000 32,984
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Rothmans of Pall Mall Bhd............................ 11,000 $ 76,251
Sime Darby Bhd....................................... 8,000 5,517
Tanjong PLC.......................................... 14,000 19,409
Telekom Malaysia Bhd................................. 32,000 54,008
Tenaga Nasional Bhd.................................. 33,000 39,783
UMW Holdings Bhd..................................... 15,000 6,727
YTL Corp. Bhd........................................ 42,000 31,595
YTL Power International Bhd (b)...................... 19,400 10,571
-----------
521,161
-----------
NETHERLANDS -- 0.93%
ABN AMRO Holdings NV................................. 22,490 526,263
Akzo Nobel NV........................................ 760 168,947
Elsevier NV.......................................... 23,580 355,868
Heineken NV (b)...................................... 10,313 405,058
Hoogovens NV......................................... 2,441 105,598
ING Groep NV......................................... 13,090 857,137
KLM Royal Dutch Air Lines NV......................... 3,492 141,795
KPN NV............................................... 11,613 447,005
Philips Electronics NV............................... 6,850 575,828
PolyGram NV.......................................... 4,200 214,315
Royal Dutch Petroleum Co............................. 29,420 1,631,391
Royal Dutch Petroleum Co., NY Shares................. 700 38,369
TNT Post Group NV (b)................................ 11,613 296,862
Unilever NV.......................................... 9,600 761,695
-----------
6,526,131
-----------
NEW ZEALAND -- 0.41%
Brierley Investments Ltd............................. 756,530 377,006
Carter Holt Harvey Ltd............................... 261,110 227,711
Fletcher Challenge Building.......................... 86,775 108,108
Fletcher Challenge Energy............................ 95,405 227,814
Fletcher Challenge Forests Ltd....................... 185,585 104,044
Fletcher Challenge Paper............................. 171,640 190,671
Lion Nathan Ltd...................................... 75,100 166,853
Telecom Corp. of New Zealand Ltd..................... 326,830 1,347,081
Telecom Corp. of New Zealand Ltd. ADR................ 3,800 124,450
-----------
2,873,738
-----------
NORWAY -- 0.04%
Norsk Hydro ASA...................................... 5,000 219,913
Norske Skogindustrier ASA Class A.................... 1,800 55,594
-----------
275,507
-----------
SINGAPORE -- 0.23%
City Developments Ltd................................ 31,000 86,606
Creative Technology Ltd. (b)......................... 3,000 36,401
DBS Land Ltd......................................... 58,000 48,062
Development Bank of Singapore Ltd.................... 13,800 76,372
Elec & Eltek International Co., Ltd.................. 8,100 27,378
Fraser & Neave Ltd................................... 12,000 32,246
Keppel Corp., Ltd.................................... 33,000 49,612
Keppel Land Ltd...................................... 35,000 32,110
Oversea-Chinese Banking Corp., Ltd................... 34,000 115,715
Rothmans Industries Ltd.............................. 11,000 48,831
</TABLE>
<TABLE>
<S> <C> <C>
Singapore Airlines Ltd. (Frgn.)...................... 38,000 $ 177,686
Singapore Press Holdings Ltd......................... 31,036 207,580
Singapore Technologies Engineering Ltd. (b).......... 36,000 25,357
Singapore Telecommunications, Ltd.................... 266,000 377,863
United Overseas Bank Ltd. (Frgn.).................... 74,000 229,950
Venture Manufacturing (Singapore) Ltd................ 12,000 22,729
-----------
1,594,498
-----------
SWEDEN -- 0.57%
ABB AB, A Shares..................................... 16,400 232,379
Astra AB, A Shares................................... 21,800 445,573
Electrolux AB Series B............................... 9,600 164,917
Investor AB-B Shares................................. 8,000 466,965
Nordbanken Holding AB................................ 62,700 459,937
Skandia Forsakrings AB............................... 18,200 260,166
Skanska AB, B Shares................................. 5,600 251,389
Svenska Handelsbanken, A Shares...................... 6,300 292,292
Swedish Match AB..................................... 61,800 205,357
Telefonaktiebloaget LM Ericsson, B Shares............ 27,100 791,772
Volvo AB, B Shares................................... 12,900 384,174
-----------
3,954,921
-----------
SWITZERLAND -- 1.28%
ABB AG (Bearer)...................................... 275 406,118
CS Holdings AG (Reg.)................................ 7,016 1,561,116
Holderbank Financiere Glarus, B Shares............... 264 335,918
Julius Baer Holding AG............................... 122 381,652
Nestle S.A. (Reg.)................................... 565 1,209,118
Novartis AG (Reg.)................................... 1,214 2,020,132
Roche Holding AG (Gen.).............................. 144 1,414,082
Sairgroup............................................ 775 254,961
Saurer AG............................................ 270 275,910
Sulzer AG............................................ 277 218,598
Swiss Reinsurance Co. (Reg.)......................... 332 839,631
-----------
8,917,236
-----------
UNITED KINGDOM -- 4.61%
Abbey National PLC................................... 31,620 561,873
B.A.T. Industries PLC................................ 149,484 1,496,486
BOC Group PLC........................................ 18,500 252,031
BTR PLC (b).......................................... 49,904 141,550
Barclays PLC......................................... 36,500 1,052,358
Bass PLC............................................. 16,027 300,299
Billiton PLC......................................... 169,000 342,602
Booker PLC........................................... 91,220 372,892
British Petroleum Co. PLC............................ 115,667 1,686,738
British Sky Broadcasting PLC......................... 51,000 366,328
British Steel PLC.................................... 323,470 711,068
British Telecommunications PLC....................... 127,980 1,580,158
Cable & Wireless PLC................................. 30,000 364,401
Cadbury Schweppes PLC................................ 44,500 688,653
Charter PLC.......................................... 55,846 582,836
Coats Viyella PLC.................................... 312,860 383,676
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
Diageo PLC........................................... 57,290 $ 678,673
FKI PLC.............................................. 181,500 523,901
General Electric Co. PLC............................. 101,550 875,139
Glaxo Wellcome PLC................................... 71,100 2,134,163
Greenalls Group PLC.................................. 56,000 484,933
HSBC Holdings PLC.................................... 38,104 967,000
Hanson PLC........................................... 64,102 389,581
Hillsdown Holdings PLC............................... 149,520 406,643
House of Fraser PLC.................................. 166,400 483,091
Inchcape PLC......................................... 79,470 250,606
Legal & General Group PLC............................ 13,400 142,979
Lloyds TSB Group PLC................................. 112,409 1,572,646
Marks & Spencer PLC.................................. 140,040 1,274,599
Mirror Group PLC..................................... 146,450 549,792
National Westminster Bank PLC........................ 25,380 453,532
Peninsular & Oriental Steam Navigation Co............ 59,420 855,599
Prudential Corp. PLC................................. 21,000 276,629
RJB Mining PLC....................................... 100,570 206,396
Reckitt & Colman PLC................................. 15,938 304,219
Reed International PLC............................... 64,000 578,770
Reuters Group PLC.................................... 10,659 121,829
Rio Tinto PLC........................................ 40,580 457,028
Royal & Sun Alliance Insurance Group PLC............. 42,943 443,875
Scottish Hydro-Electric PLC.......................... 45,480 403,700
Sears PLC............................................ 206,480 180,869
Sedgwick Group PLC................................... 133,360 289,265
SmithKline Beecham PLC............................... 109,180 1,332,552
Smurfit (Jefferson) Group PLC........................ 150,477 449,417
Tate & Lyle PLC...................................... 74,000 586,787
Tesco PLC............................................ 58,140 567,489
Thames Water PLC..................................... 39,210 713,754
The Great Universal Stores PLC....................... 4,000 52,725
Unilever PLC......................................... 88,040 937,190
United News & Media PLC.............................. 30,000 419,461
Vodafone Group PLC................................... 46,528 590,392
Williams PLC......................................... 50,010 321,251
Willis Corroon Group PLC............................. 26,000 65,939
------------
32,226,363
------------
Total Non-U.S. Equities.............................. 118,106,262
------------
EMERGING MARKETS EQUITIES -- 3.38%
Brinson Emerging Markets Equity Fund (b)............. 2,926,942 23,662,860
------------
Total Equities (Cost $297,790,589)................... 352,644,261
------------
</TABLE>
<TABLE>
FACE
AMOUNT VALUE
----------- ------------
<S> <C> <C>
Bonds -- 47.83%
U.S. BONDS -- 23.06%
U.S. CORPORATE BONDS -- 6.99%
Aetna Services Inc., 6.970%, due 08/15/36............ $ 265,000 $ 273,999
Asset Securitization Corp., 7.210%, due 10/13/26..... 2,310,000 2,422,613
AT&T Corp., 8.250%, due 01/11/00..................... 945,000 976,400
Bellsouth Savings & Employee ESOP, 9.125%, 07/01/03.. 254,503 275,023
Capital One Bank, 6.830%, due 05/17/99............... 1,946,000 1,956,950
Chase Manhattan Auto Owner Trust, 96-C, Class A4,
6.150%, due 03/15/02................................ 1,000,000 1,007,370
Chemical Master Credit Card Trust, 6.230%, due
06/15/03............................................ 1,430,000 1,445,101
Chesapeake & Potomac Telephone of Maryland, 8.000%,
due 10/15/29........................................ 98,000 120,886
Chrysler Financial Corp., 7.400%, due 08/01/2097..... 252,000 271,991
Citicorp, Series F, 6.150%, due 03/15/02............. 500,000 500,933
Continental Airlines, Inc.
97-4A, 6.900%, due 01/02/18......................... 1,850,000 1,924,333
98-1B, 6.748%, due 09/15/18......................... 220,000 223,672
Countrywide Funding Corp., 93-12, Class A5, 6.000%,
due 02/25/24........................................ 1,045,000 1,035,783
CS First Boston Mortgage Securities Corp., 97-C1,
Class A1B, 7.150%, due 08/20/06..................... 1,465,000 1,540,081
Dayton Hudson Credit Card Master Trust, 95-1, Class
A, 6.100%, due 02/25/02............................. 132,000 132,161
DLJ Mortgage Acceptance Corp., 6.500%, 08/19/28...... 1,545,000 1,525,687
Donaldson Lufkin & Jenrette FRN, 6.700%, due
06/30/00............................................ 600,000 608,659
First National Bank of Chicago, Series E, 7.000%, due
05/08/00............................................ 1,000,000 1,014,173
Ford Credit Grantor Trust, 95-B, Class A, 5.900%, due
10/15/00............................................ 48,062 48,101
General Motors Acceptance Corp. 6.375%, due 12/01/01. 500,000 505,652
9.625%, due 12/15/01................................ 331,000 367,579
Lehman Brothers Holdings, 7.250%, due 04/15/03....... 1,250,000 1,302,437
Lockheed Martin Corp., 7.700%, due 06/15/08.......... 148,000 162,891
Lockheed Martin Corp., 6.550%, due 05/15/99.......... 5,000,000 5,026,005
MBNA Global Capital Securities FRN, 6.519%, due
02/01/27............................................ 1,100,000 1,022,417
Nationsbanc Asset Securities, Inc., 97-1, Class A1,
5.958%, due 10/20/27................................ 2,330,559 2,336,082
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ ------------
<S> <C> <C>
News America Holdings, 7.750%, due 12/01/45.......... $ 1,877,000 $ 2,014,359
Norwest Asset Securities, Corp., 96-2, Class A9,
7.000%, due 09/25/11................................ 520,000 528,888
Panamsat Corp., 144A, 6.000%, due 01/15/03........... 275,000 272,253
Premier Auto Trust
93-5, Class A2, 4.220%, due 03/02/99............... 3,292 3,279
96-3, Class A3, 6.500%, due 03/06/00................ 157,355 157,840
96-4, Class A4, 6.400%, due 10/06/01................ 455,000 458,394
Prudential Home Mortgage Securities 94-3, Class A10,
6.500%, due 02/25/24.............................. 1,000,000 969,040
Residential Asset Securitization Trust 97-A7, Class
A1, 7.500%, due 09/25/27.......................... 797,106 805,837
97-A10, Class A5, 7.250%, due 12/25/27.............. 1,480,000 1,511,585
97-A11, Class A2, 7.000%, due 01/25/28.............. 200,000 201,280
Salomon, Inc.
6.500%, due 03/01/00................................ 2,520,000 2,539,628
6.750%, due 02/15/03................................ 550,000 563,378
SASCO LLC, 98-RF1, Class A, 8.712%, due 03/15/27..... 1,397,292 1,498,596
Standard Credit Card Trust, 95-1, Class A, 8.250%,
due 01/01/07........................................ 500,000 562,590
Thrift Financial Corp., 11.250%, due 01/01/16........ 76,046 80,866
Time Warner, Inc.
8.375%, due 03/15/23................................ 1,206,000 1,411,929
7.570%, due 02/01/24................................ 2,165,000 2,343,998
Turner Broadcasting, 7.400%, due 02/01/04............ 1,000,000 1,044,941
UCFC Home Equity Loan FRN, 97-C, Class A8, 5.888%,
due 09/15/27........................................ 1,413,172 1,414,755
Vendee Mortgage Trust, 98-2, Class 1G, 6.750%, due
06/15/28............................................ 2,400,000 2,429,250
------------
48,839,665
------------
INTERNATIONAL DOLLAR BONDS -- 3.57%
Abbey National PLC, 6.700%, Resettable Perpetual Pre-
ferred.............................................. 230,000 230,980
ABN AMRO Bank NV (Chicago) 6.625%, due 10/31/01...... 250,000 254,740
Banca Commercial Italian, 8.250%, due 07/15/07....... 450,000 503,122
Banco Santiago S.A., 7.000%, due 07/18/07............ 2,000,000 2,007,880
Banque Centrale de Tunisie, 8.250%, due 09/19/27..... 1,750,000 1,647,357
Banque Paribas, Sub. Notes, 6.875%, due 03/01/09..... 175,000 179,427
</TABLE>
<TABLE>
<S> <C> <C>
Credit Suisse London, 144A, 7.900%, Resettable Perpet-
ual Preferred........................................ $ 2,600,000 $ 2,779,881
Den Danske Bank, 144A, Step Coupon Bond, 6.375%, due
06/15/08............................................. 2,570,000 2,576,428
DR Investments, 144A, 7.450%, due 05/15/07............ 320,000 341,583
Empressa Nacional Electric, 7.875%, due 02/01/27...... 231,000 231,109
International Telecom Satellite, 8.125%, due 02/28/05. 335,000 371,568
Japanese Development Bank, 8.375%, due 02/15/01....... 970,000 1,026,443
Korea Development Bank, 7.125%, due 09/17/01.......... 200,000 176,260
Pan Pacific Industry PLC, 144A, 4.047%, due 04/28/07.. 2,130,000 745,500
Petroliam Nasional, 144A, 7.125%, due 08/15/05........ 420,000 370,211
Poland Non-U.S. Global Registered FRN, 6.688%, due
10/27/24............................................. 300,000 293,625
Province of Quebec, 7.500%, due 07/15/23.............. 1,325,000 1,473,042
Ras Laffan Liquified Natural Gas Co., Ltd., 144A,
8.294%, due 03/15/14................................. 1,910,000 1,906,965
Repsol International Finance, 7.000%, due 08/01/05.... 735,000 779,402
Republic of South Africa Debenture, 9.625%, due
12/15/99............................................. 1,079,000 1,122,160
Royal Bank of Scotland, 7.375%, Resettable Perpetual
Preferred............................................ 690,000 734,775
Skandinaviska Enskilda Banken, 144A, 6.625%,
Resettable Perpetual Preferred....................... 500,000 502,700
Sociedad Quimica y Minera de Chiles S.A., 144A,
7.700%, due 09/15/06................................. 1,500,000 1,546,503
Southern Investments UK, 6.800%, due 12/01/06......... 1,625,000 1,683,680
United Utilities, 6.450%, due 04/01/08................ 1,485,000 1,506,235
------------
24,991,576
------------
U.S. GOVERNMENT AGENCIES -- 8.32%
Aid-Israel, Series 10Z, 0.000%, due 02/15/03.......... 6,720,000 5,196,845
Federal Home Loan Mortgage Corp.
6.200%, due 08/15/07................................. 700,000 697,585
7.000%, due 10/15/13................................. 2,275,469 2,345,785
8.500%, due 07/15/21................................. 831,287 863,589
6.950%, due 04/15/22................................. 2,400,000 2,453,887
7.500%, due 01/15/23................................. 823,105 881,887
7.240%, due 05/01/26................................. 227,170 235,073
Federal Home Loan Mortgage Corp. Gold
8.000%, due 11/01/22................................. 118,252 122,169
8.000%, due 05/01/23................................. 1,238,385 1,279,406
9.000%, due 03/01/24................................. 863,675 925,013
Federal National Mortgage Assoc.
5.000%, due 06/01/01................................. 1,211,785 1,172,074
6.540%, due 09/18/02................................. 4,690,000 4,760,106
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
-------------- ------------
<S> <C> <C>
6.220%, due 03/13/06...............................$ 1,700,000 $ 1,754,181
8.000%, due 02/25/07............................... 1,635,000 1,674,343
6.500%, due 05/01/08............................... 3,696,873 3,817,761
6.360%, due 06/01/08............................... 1,640,000 1,678,868
8.000%, due 03/01/11............................... 1,481,440 1,528,199
6.000%, due 12/01/12 TBA........................... 1,470,000 1,453,455
8.000%, due 05/25/21............................... 1,610,000 1,665,793
9.000%, due 08/01/21............................... 244,512 261,733
8.000%, due 05/01/22............................... 115,815 119,796
8.500%, due 07/01/22............................... 533,209 563,752
7.500%, due 07/25/22............................... 2,250,686 2,392,335
8.000%, due 11/01/23............................... 1,525,009 301,517
6.500%, due 12/25/23............................... 4,610,000 4,629,274
9.000%, due 04/25/25............................... 36,864 38,677
6.500%, due 12/01/27 TBA........................... 3,500,000 3,484,663
7.500%, due 01/01/28............................... 1,765,720 1,810,940
6.000%, due 03/01/28............................... 2,436,930 2,371,913
3.500%, due 05/01/28............................... 1,313,554 1,128,184
Federal National Mortgage Assoc. Strips 0.000%, due
04/01/27 principal only............................ 1,481,065 1,253,146
Government National Mortgage Assoc.
10.000%, due 09/15/00.............................. 2,535 2,706
10.000%, due 05/15/01.............................. 3,577 3,819
9.000%, due 11/15/04............................... 10,061 10,602
9.000%, due 11/15/04............................... 5,376 5,665
8.000%, due 08/15/22............................... 444,049 460,008
8.000%, due 11/15/22............................... 361,577 376,325
8.000%, due 12/15/22............................... 1,253,454 1,304,582
7.500%, due 12/15/23............................... 844,929 867,902
7.500%, due 11/15/24............................... 2,242,403 2,306,155
------------
58,199,713
------------
U.S. GOVERNMENT OBLIGATIONS 4.18%
U.S. Treasury Notes and Bonds
5.500%, due 02/29/00............................... 12,325,000 12,321,155
6.625%, due 07/31/01............................... 4,050,000 4,171,500
6.250%, due 08/31/02............................... 4,635,000 4,755,223
3.625%, due 01/15/08............................... 1,558,975 1,541,436
8.000%, due 11/15/21............................... 2,760,000 3,557,814
6.000%, due 02/15/26............................... 2,750,000 2,860,861
------------
29,207,989
------------
Total U.S. Bonds.................................... 161,238,943
------------
HIGH YIELD BONDS -- 2.51% SHARES
------------
Brinson High Yield Fund (b)......................... 1,231,792 17,562,145
------------
FACE
NON-U.S. BONDS 17.33% AMOUNT
------------
AUSTRALIA -- 1.19%
Government of Australia
9.750%, due 03/15/02............................AUD 1,700,000 1,207,781
9.000%, due 09/15/04............................... 3,800,000 2,790,161
Queensland Treasury Global Notes 8.000%, due
05/14/03........................................... 6,350,000 4,330,716
------------
8,328,658
------------
</TABLE>
<TABLE>
<S> <C> <C>
CANADA -- 1.77%
Government of Canada
7.500%, due 09/01/00............................CAD 1,880,000 $ 1,334,690
6.500%, due 06/01/04............................... 500,000 359,734
8.750%, due 12/01/05............................... 2,600,000 2,131,219
7.000%, due 12/01/06............................... 4,270,000 3,223,551
4.250%, due 12/01/21............................... 6,790,000 5,345,751
-----------
12,394,945
-----------
DENMARK -- 1.76%
Kingdom of Denmark
9.000%, due 11/15/00............................DKK 13,600,000 2,178,136
6.000%, due 11/15/02............................... 10,000,000 1,534,390
7.000%, due 12/15/04............................... 9,900,000 1,612,331
8.000%, due 03/15/06............................... 40,000,000 6,962,338
-----------
12,287,195
-----------
FRANCE -- 2.19%
Government of France (BTAN)
5.750%, due 03/12/01............................FRF 24,000,000 4,125,571
Government of France (OAT)
9.500%, due 01/25/01............................... 20,300,000 4,924,347
7.500%, due 04/25/05............................... 13,000,000 3,791,393
8.500%, due 12/26/12............................... 22,000,000 2,505,822
-----------
15,347,133
-----------
GERMANY -- 3.77%
Bundesrepublik Deutschland
8.500%, due 08/21/00............................DEM 2,180,000 1,315,609
9.000%, due 01/22/01............................... 2,500,000 1,545,291
8.375%, due 05/21/01............................... 3,080,000 1,897,826
6.750%, due 04/22/03............................... 4,900,000 2,985,064
6.750%, due 07/15/04............................... 6,300,000 3,889,596
6.250%, due 01/04/24............................... 5,000,000 3,121,884
7.000%, due 09/20/99............................... 13,700,000 7,869,341
Treuhandanstalt 6.250%, due 03/04/04................ 6,200,000 3,727,213
-----------
26,351,824
-----------
ITALY -- 0.95%
Republic of Italy (BTP)
10.500%, due 04/01/00...........................ITL 995,000,000 614,280
12.000%, due 09/01/02.............................. 1,700,000,000 1,215,358
9.000%, due 10/01/03............................... 900,000,000 604,894
8.500%, due 04/01/04............................... 4,600,000,000 3,061,922
9.500%, due 12/01/99............................... 1,900,000,000 1,136,547
-----------
6,633,001
-----------
NETHERLANDS -- 1.45%
Government of Netherlands
8.500%, due 03/15/01............................NLG 5,600,000 3,048,864
8.750%, due 09/15/01............................... 700,000 389,195
6.500%, due 04/15/03............................... 1,600,000 854,587
7.250%, due 10/01/04............................... 3,200,000 1,796,480
8.250%, due 02/15/07............................... 4,815,000 2,938,660
7.500%, due 04/15/10............................... 1,800,000 1,085,292
-----------
10,113,078
-----------
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- ------------
<S> <C> <C>
SPAIN -- 1.14%
Kingdom of Spain
6.750%, due 04/15/00..............................ESP 415,000,000 $ 2,827,389
7.900%, due 02/28/02................................. 140,000,000 1,018,519
8.000%, due 05/30/04................................. 300,000,000 2,287,772
10.000%, due 02/28/05................................ 30,000,000 253,007
7.350%, due 03/31/07................................. 85,000,000 648,369
6.150%, due 01/31/13................................. 130,000,000 927,807
------------
7,962,863
------------
SWEDEN -- 0.43%
Kingdom of Sweden
5.500%, due 04/12/02..............................SEK 3,500,000 453,962
10.250%, due 05/05/03................................ 16,300,000 2,539,807
------------
2,993,769
------------
UNITED KINGDOM -- 2.68%
UK Treasury
8.000%, due 06/10/03..............................GBP 2,190,000 3,908,659
6.750%, due 11/26/04................................. 380,000 658,996
8.500%, due 12/07/05................................. 4,570,000 8,709,242
8.500%, due 07/16/07................................. 1,200,000 2,355,716
7.250%, due 12/07/07................................. 1,200,000 2,204,925
8.750%, due 08/25/17................................. 390,000 881,720
------------
18,719,258
------------
Total Non-U.S. Bonds.................................. 121,131,724
------------
<CAPTION>
SHARES
-----------
<S> <C> <C>
EMERGING MARKETS DEBT -- 4.93%
Brinson Emerging Markets Debt
Fund (b)............................................. 1,692,314 34,515,928
------------
Total Bonds (Cost $322,004,943)....................... 334,448,740
------------
<CAPTION>
FACE
AMOUNT
-----------
<S> <C> <C>
Short-Term Investments -- 16.86%
U.S. CORPORATE BONDS -- 0.78%
Bank of America,
5.730%, due 09/24/98 FRN............................. $ 2,000,000 1,999,728
Texas Utilities,
5.750%, due 07/01/98................................. 2,500,000 2,500,000
Union Oil of California Ser B,
5.730%, due 07/27/98................................. 1,000,000 1,009,505
------------
5,509,233
------------
U.S. GOVERNMENT OBLIGATIONS -- 0.34%
U.S. Treasury Bill
5.125%, due 11/27/98................................. 2,400,000 2,350,135
------------
</TABLE>
<TABLE>
<S> <C> <C>
NON-U.S. GOVERNMENT OBLIGATIONS -- 0.17%
Government of Netherlands
6.250%, due 07/15/98................................ $ 1,400,000 $ 688,575
Kingdom of Denmark
9.000%, due 11/15/98................................ 3,200,000 472,857
------------
1,161,432
------------
CERTIFICATE OF DEPOSIT -- 0.86%
Canadian Imperial Bank,
5.940%, due 10/23/98................................ 3,000,000 2,999,462
Societe General Yankee,
5.940%, due 10/20/98................................ 3,000,000 2,999,129
------------
5,998,591
------------
COMMERCIAL PAPER -- 14.71%
ARCO Chemical, 5.730%, due 07/10/98.................. 5,000,000 4,992,837
American Stores, 5.720%, due 08/03/98................ 5,000,000 4,973,783
Bausch & Lomb,
5.750%, due 07/08/98................................ 2,500,000 2,497,205
5.700%, due 07/13/98................................ 5,000,000 4,990,500
Cincinnati Bell Inc.
5.850%, due 07/01/98................................ 2,000,000 2,000,000
5.850%, due 07/13/98................................ 2,000,000 1,996,100
5.900%, due 07/17/98................................ 1,500,000 1,496,067
Crown, Cork & Seal,
5.690%, due 07/13/98................................ 4,321,000 4,312,805
5.680%, due 07/23/98................................ 5,000,000 4,982,644
CVS Corp.,
5.750%, due 07/10/98................................ 5,000,000 4,992,813
Dayton Hudson,
5.600%, due 07/15/98................................ 3,000,000 2,993,467
Excel Paralubes,
5.800%, due 07/07/98................................ 4,070,000 4,066,066
Hilton Hotels Corp.,
5.720%, due 07/15/98................................ 1,500,000 1,496,663
5.750%, due 10/01/98................................ 5,000,000 4,926,528
5.780%, due 10/13/98................................ 2,500,000 2,458,256
IMC Global,
5.720%, due 07/30/98................................ 4,261,000 4,241,366
ITT Industries,
5.720%, due 07/09/98................................ 5,000,000 4,993,644
NGC Corp.,
6.750%, due 07/01/98................................ 2,307,000 2,307,000
Occidental Petroleum,
5.700%, due 07/06/98................................ 5,000,000 4,996,042
PG & E Gas,
6.000%, due 07/10/98................................ 1,000,000 998,500
Raytheon Co.,
6.998%, due 07/01/98................................ 2,200,000 2,200,000
5.700%, due 07/20/98................................ 5,000,000 4,984,959
Sprint Capital,
5.720%, due 07/07/98................................ 6,643,000 6,636,668
Tenneco Inc.,
5.750%, due 07/17/98................................ 2,000,000 1,994,889
</TABLE>
- --------------------------------------------------------------------------------
18
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Texas Utilities Co.,
5.730%, due 07/17/98................................ $2,500,000 $ 2,493,633
6.100%, due 07/17/98................................ 1,000,000 997,289
5.750%, due 08/21/98................................ 5,000,000 4,959,271
Union Pacific Resources,
5.730%, due 07/27/98................................ 5,000,000 4,979,308
Union Pacific Resources,
5.760%, due 10/30/98................................ 3,000,000 2,941,920
------------
102,900,223
------------
Total Short-Term Investments (Cost $118,077,052)..... 117,919,614
------------
Total Investments (Cost
$737,872,584) -- 115.11% (a)........................ 805,012,615
------------
Liabilities, less cash and other
assets -- (15.11%).................................. (105,669,892)
------------
Net Assets -- 100%................................... $699,342,723
============
</TABLE>
See accompanying notes to Schedule of Investments.
- --------------------------------------------------------------------------------
19
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $737,872,584; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation............................... $ 94,882,489
Gross unrealized depreciation............................... (27,742,458)
------------
Net unrealized appreciation.............................. $ 67,140,031
============
</TABLE>
(b) Linked to Canada's retail price index. Reset semi-annually
FRN: Floating Rate Note
MTN: Medium term note
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 1998,
the value of these securities amounted to $11,042,024 or 1.58% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FORWARD FOREIGN CURRENCY CONTRACTS
The Global Fund had the following open forward foreign currency contracts as of
June 30, 1998:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
Australian Dollar........... 8/05/98 28,500,000 $17,658,102 $(1,350,708)
Canadian Dollar............. 8/05/98 1,900,000 1,292,948 541
Danish Krone................ 8/05/98 9,000,000 1,310,734 252
French Franc................ 7/06/98 62,281,506 10,305,195 6,475
French Franc................ 8/05/98 22,200,000 3,679,956 17,436
German Mark................. 8/05/98 4,600,000 2,554,094 (2,456)
Japanese Yen................ 8/05/98 1,260,000,000 9,127,544 (1,041,517)
Netherlands Guilder......... 8/05/98 3,700,000 1,822,956 (422)
Spanish Peseta.............. 8/05/98 825,000,000 5,395,923 14,143
Swiss Franc................. 8/05/98 7,700,000 5,095,019 (247,751)
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Australian Dollar........... 7/06/98 1,233,770 764,143 832
British Pound............... 7/06/98 1,400,000 2,335,124 1,336
British Pound............... 8/05/98 21,700,000 36,132,943 (905,057)
Canadian Dollar............. 7/06/98 1,604,844 1,091,441 (512)
Canadian Dollar............. 8/05/98 11,300,000 7,689,638 88,191
Danish Kroner............... 7/06/98 7,653,250 1,113,166 (144)
Danish Kroner............... 8/05/98 78,600,000 11,447,080 (44,221)
French Franc................ 8/05/98 62,300,000 10,327,085 (7,390)
German Mark................. 7/06/98 4,600,000 2,549,451 2,560
German Mark................. 8/05/98 34,000,000 18,878,086 (43,109)
Netherlands Guilder......... 7/06/98 2,202,850 1,083,317 282
Netherlands Guilder......... 8/05/98 15,200,000 7,488,902 9,307
Spanish Peseta.............. 7/06/98 116,852,795 763,461 (1,113)
Spanish Peseta.............. 8/05/98 825,000,000 5,395,923 (36,344)
Swedish Krona............... 7/06/98 3,135,011 393,207 (38)
-----------
Total...................... $(3,539,427)
===========
</TABLE>
FUTURES CONTRACTS
The Global Fund had the following open futures contracts as of June 30, 1998:
<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,
340 contracts............ September 1998 $37,072,972 $37,293,750 $ 220,778
10 year U.S. Treasury
Note, 66 contracts....... September 1998 7,421,886 7,513,688 91,802
30 year U.S. Treasury
Bonds, 25 contracts...... September 1998 2,976,555 3,089,844 113,289
INDEX FUTURES SALES CON-
TRACTS
Standard & Poor's 500, 177
contracts................ September 1998 49,204,572 50,577,750 (1,373,178)
-----------
Total.................... $ (947,309)
===========
</TABLE>
The market value of investments pledged to cover margin requirements for the
open futures positions at June 30, 1998 was $2,350,135.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Note 1):
Unaffiliated issuers (Cost $659,099,950)....................... $720,310,838
Affiliated issuers (Cost $78,772,634).......................... 84,701,777
Cash........................................................... 15,353
Foreign currency, at value (Cost $2,688,302).................... 2,672,795
Receivables:
Investment securities sold..................................... 17,512,017
Dividends...................................................... 850,203
Interest....................................................... 5,067,092
Fund shares sold............................................... 524,097
Variation margin............................................... 442,309
Other assets.................................................... 55,119
------------
TOTAL ASSETS................................................. 832,151,600
------------
LIABILITIES:
Payables:
Securities loaned.............................................. 104,946,044
Investment securities purchased................................ 23,236,470
Fund shares redeemed........................................... 416,119
Investment advisory fees....................................... 461,215
Accrued expenses............................................... 209,602
Net unrealized depreciation on forward foreign currency con-
tracts......................................................... 3,539,427
------------
TOTAL LIABILITIES............................................ 132,808,877
------------
NET ASSETS....................................................... $699,342,723
============
NET ASSETS CONSIST OF:
Paid in capital................................................. $618,908,532
Accumulated distribution in excess of net investment income..... (845,490)
Accumulated net realized gain................................... 18,624,289
Net unrealized appreciation..................................... 62,655,392
------------
NET ASSETS................................................... $699,342,723
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $667,744,541 and 52,298,571 shares is-
sued and outstanding)......................................... $ 12.77
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,162,613 and 91,194 shares issued and outstanding).......... $ 12.75
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $30,435,569 and 2,395,337 shares is-
sued and outstanding)......................................... $ 12.71
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $19,403 for foreign taxes withheld; including
securities lending income of $256,807).......................... $18,386,739
Dividends (net of $339,731 for foreign taxes withheld)........... 6,105,294
-----------
TOTAL INCOME.................................................. 24,492,033
-----------
EXPENSES:
Advisory......................................................... 5,378,141
Administration................................................... 464,398
Distribution..................................................... 191,376
Custodian........................................................ 151,260
Other............................................................ 350,006
-----------
TOTAL EXPENSES................................................ 6,535,181
-----------
NET INVESTMENT INCOME ........................................ 17,956,852
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 40,696,600
Futures contracts............................................... (4,402,062)
Foreign currency transactions................................... 3,479,537
-----------
Net realized gain............................................. 39,774,075
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ 3,727,996
Futures contracts............................................... (654,367)
Forward contracts............................................... (9,657,319)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 37,869
-----------
Change in net unrealized appreciation or depreciation......... (6,545,821)
-----------
Net realized and unrealized gain................................. 33,228,254
-----------
Net increase in net assets resulting from operations............. $51,185,106
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1998
CASH FLOWS FROM INVESTING AND OPERATING ACTIVITIES:
<TABLE>
<S> <C>
Proceeds from sales of investments............................. $ 559,718,591
Purchases of investments....................................... (623,990,589)
Net increase in short term investments......................... (91,292,986)
Net realized gain on foreign currency transactions............. 3,479,537
Net realized loss on futures contracts......................... (4,066,409)
Interest and dividend income received.......................... 23,974,925
Expenses paid.................................................. (6,458,212)
-------------
Net cash used in investing and operating activities........... (138,635,143)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net capital share transactions................................. 36,501,192
Net increase from securities lending........................... 104,946,044
Cash distributions paid........................................ (3,851,296)
-------------
Net cash provided by financing activities..................... 137,595,940
-------------
Net decrease in cash............................................ (1,039,203)
-------------
CASH AT BEGINNING OF YEAR....................................... 1,054,556
-------------
CASH AT END OF YEAR............................................. $ 15,353
=============
RECONCILIATION OF NET INVESTMENT INCOME TO NET CASH
USED IN INVESTING AND OPERATING ACTIVITIES:
Net investment income.......................................... $ 17,956,852
Proceeds from sale of investments.............................. 559,718,591
Purchase of investments........................................ (623,990,589)
Net increase in short term investments......................... (91,292,986)
Net realized gain on foreign currency transactions............. 3,479,537
Net realized loss on futures contracts......................... (4,066,409)
Net decrease in receivables pertaining to investing and operat-
ing activities................................................. 271,165
Net increase in payables pertaining to investing and operating
activities..................................................... 115,429
(Accretion)/amortization of premium/discount................... (826,733)
-------------
Net cash used in investing and operating activities........... $(138,635,143)
=============
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Reinvestment of distributions.................................. $ 64,950,197
=============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
YEAR ENDED
ENDED JUNE 30,
JUNE 30, 1998 1997
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 17,956,852 $ 16,194,760
Net realized gain................................. 39,774,075 43,268,043
Change in net unrealized appreciation or
depreciation..................................... (6,545,821) 35,756,888
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 51,185,106 95,219,691
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income........... (28,265,915) (24,660,333)
Distributions in excess of net investment income... (5,070,122) --
Distributions from net realized gain............... (35,465,456) (26,428,094)
------------ ------------
Total distributions to shareholders*.............. (68,801,493) (51,088,427)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 256,422,880 192,297,100
Shares issued on reinvestment of distributions.... 64,950,197 49,580,585
Shares redeemed................................... (217,384,769) (145,001,283)
------------ ------------
Net increase in net assets resulting from capital
share transactions............................... 103,988,308 96,876,402
------------ ------------
TOTAL INCREASE IN NET ASSETS................... 86,371,921 141,007,666
------------ ------------
NET ASSETS:
Beginning of year................................. 612,970,802 471,963,136
------------ ------------
End of year (including accumulated distribution in
excess of net investment income of $845,490 and
$964,704, respectively).......................... $699,342,723 $612,970,802
============ ============
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net investment
income
Brinson Class I................................... (32,129,657) (25,579,684)
Brinson Class N................................... (9,572) --
SwissKey Class.................................... (1,196,808) (848,410)
Distributions from net realized gain
Brinson Class I................................... (33,973,096) (23,918,105)
Brinson Class N................................... (53) --
SwissKey Class.................................... (1,492,307) (742,228)
------------ ------------
Total distributions to shareholders................ $(68,801,493) $(51,088,427)
============ ============
</TABLE>
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>
YEAR ENDED JUNE 30,
------------------------------------------------
BRINSON CLASS I 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year........................ $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87
-------- -------- -------- -------- --------
Income from investment oper-
ations:
Net investment income...... 0.37 0.38 0.44 0.43 0.33
Net realized and unrealized
gain (loss)............... 0.62 1.79 1.37 0.86 (0.23)
-------- -------- -------- -------- --------
Total income from invest-
ment operations......... 0.99 2.17 1.81 1.29 0.10
-------- -------- -------- -------- --------
Less distributions:
Distributions from and in
excess of net investment
income.................... (0.65) (0.61) (0.62) (0.27) (0.27)
Distributions from and in
excess of net realized
gain...................... (0.70) (0.65) (0.32) (0.10) (0.27)
-------- -------- -------- -------- --------
Total distributions...... (1.35) (1.26) (0.94) (0.37) (0.54)
-------- -------- -------- -------- --------
Net asset value, end of year. $ 12.77 $ 13.13 $ 12.22 $ 11.35 $ 10.43
======== ======== ======== ======== ========
Total return................. 8.28% 18.79% 16.38% 12.57% 0.77%
Ratios/Supplemental data
Net assets, end of year (in
000s)...................... $667,745 $586,667 $457,933 $365,678 $278,859
Ratio of expenses to average
net assets:
Before expense reimburse-
ment...................... 0.94% 0.99% 1.04% 1.09% 1.14%
After expense reimburse-
ment...................... N/A N/A N/A N/A 1.10%
Ratio of net investment in-
come to average net assets:
Before expense reimburse-
ment...................... 2.70% 3.03% 3.69% 4.27% 3.21%
After expense reimburse-
ment...................... N/A N/A N/A N/A 3.25%
Portfolio turnover rate..... 88% 150% 142% 238% 231%
Average commission rate paid
per share.................. $ 0.0274 $ 0.0326 $ 0.0291 N/A N/A
</TABLE>
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
<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>
YEAR ENDED
JUNE 30,
BRINSON CLASS N 1998*
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of year................................... $ 13.13
-------
Income from investment operations:
Net investment income.............................................. 0.63
Net realized and unrealized gain................................... 0.32
-------
Total income from investment operations.......................... 0.95
-------
Less distributions:
Distributions from and in excess of net investment income.......... (0.63)
Distributions from net realized gain............................... (0.70)
-------
Total distributions.............................................. (1.33)
-------
Net asset value, end of year......................................... $ 12.75
=======
Total return......................................................... 7.90%
Ratios/Supplemental Data:
Net assets, end of year (in 000s)................................... $ 1,163
Ratio of expenses to average net assets............................. 1.19%
Ratio of net investment income to average net assets................ 2.45%
Portfolio turnover rate............................................. 88%
Average commission rate paid per share.............................. $0.0274
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26
<PAGE>
GLOBAL FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR YEAR JULY 31, 1995*
ENDED ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of peri-
od................................. $ 13.05 $ 12.18 $ 11.60
------- ------- -------
Income from investment operations:
Net investment income............. 0.30 0.34 0.39
Net realized and unrealized gain.. 0.61 1.75 1.10
------- ------- -------
Total income from investment op-
erations....................... 0.91 2.09 1.49
------- ------- -------
Less distributions:
Distributions from and in excess
of net investment income......... (0.55) (0.57) (0.59)
Distributions from net realized
gain............................. (0.70) (0.65) (0.32)
------- ------- -------
Total distributions............. (1.25) (1.22) (0.91)
------- ------- -------
Net asset value, end of period...... $ 12.71 $ 13.05 $ 12.18
======= ======= =======
Total return (non-annualized)....... 7.60% 18.13% 13.24%
Ratios/Supplemental data
Net assets, end of period (in
000s)............................. $30,436 $26,303 $14,030
Ratio of expenses to average net
assets............................ 1.59% 1.64% 1.69%**
Ratio of net investment income to
average net assets................ 2.05% 2.38% 3.04%**
Portfolio turnover rate............ 88% 150% 142%
Average commission rate paid per
share............................. $0.0274 $0.0326 $0.0291
</TABLE>
* Commencement of SwissKey Class
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
27
<PAGE>
Global Equity Fund
[ART]
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 Class I has provided an annualized return of
12.45% since its inception on January 31, 1994, compared to the 14.95% return
for the benchmark, the MSCI World Equity (Free) Index. This performance was
achieved with a volatility of 8.80%, well-below the 10.35% volatility of the
benchmark.
Year-to-date, the Brinson Global Equity Fund Class I has risen 10.86%, lagging
the index's unhedged return of 16.76%. Most major global equity markets have
experienced strikingly strong performance year-to-date, in response to EMU
euphoria, consolidation and improving economies, led by star performer Finland
(67%), with Belgium, Spain and France up 40% or more. While strong, the U.S.
market somewhat lagged the others, rising 18%, with much of its excellent
performance concentrated in the top 25 stocks with respect to market
capitalization. Japan has been a relative underperformer, gaining only 5.7% in
hedged terms. Adding back the currency effect of -7.8%, which combines both the
decline of the yen and the very low Japanese cash rates, Japan's unhedged mid-
year return was only -2.6%.
Early in the year, Germany was reduced and France increased, bringing these
positions into closer alignment. In February, the position in Spain was
eliminated, with proceeds split between Finland and Switzerland; Spain's strong
performance in anticipation of monetary union led that market to become
overpriced. In April the U.K. was modestly increased and Malaysia reduced to
neutral. Italy was reduced in early June, with funds added to several
Scandinavian markets. As with the elimination of Spain, this move reflected a
shift out of the expensive southern European markets into the more attractively
priced northern European markets.
One currency strategy change took place. An Australian dollar overweight was
established, paired with the yen, allowing us to take advantage of a strong
positive interest rate differential in favor of the Australian currency.
Market allocation was negatively impacted by strategic cash, offsetting the
positive benefits from the Japan and Hong Kong underweights and the overweight
to several European markets. Currency management was hurt by the overweight of
the Australian and New Zealand dollars and the pound sterling underweight.
Security selection had an important negative impact due to the underperformance
of U.S. stock selection. Returns were hurt by the underweight of size and
overweight of cyclicals. Japan stock selection added value.
28
<PAGE>
Global Equity Fund
[ART]
Total Return
6 months 1 year 3 years 1/31/94*
ended ended ended to
6/30/98 6/30/98 6/30/98 6/30/98
- ------------------------------------------------------------------------------
Brinson Global Equity Fund Class I 10.86% 8.99% 18.41% 12.45%
- ------------------------------------------------------------------------------
MSCI World Equity (Free) Index 16.76 17.18 19.56 14.95
- ------------------------------------------------------------------------------
*Performance inception date of the Brinson Global Equity Fund Class I.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
Equity Fund Class I and the MSCI World Equity (Free) Index if you had invested
$1,000,000 on January 31, 1994, and had reinvested all your income dividends and
capital gain distributions through June 30, 1998. No adjustment has been made
for any income taxes payable by shareholders on income dividends and capital
gain distributions. Past performance is no guarantee of future results. Share
price and return will vary with market conditions; investors may realize a gain
or loss upon redemption.
Brinson Global Equity Fund Class I
vs. MSCI World Equity (Free) Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
DATE BRINSON GLOBAL MSCI WORD EQUITY
01/31/94 1,000,000 1,000,000
06/30/94 953,025 974,101
12/31/94 956,520 989,551
06/30/95 1,010,802 1,082,851
12/31/95 1,166,324 1,200,236
06/30/96 1,270,202 1,287,765
12/31/96 1,367,688 1,367,286
06/30/97 1,540,253 1,579,321
12/31/97 1,514,304 1,584,937
06/30/98 1,678,772 1,850,637
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
================================================================================
29
<PAGE>
Global Equity Fund
[ART APPEARS HERE]
Total Return
<TABLE>
<CAPTION>
6 months 6/30/97*
ended to
6/30/98 6/30/98
- -------------------------------------------------------------------------------
<S> <C> <C>
Brinson Global Equity Fund Class N 10.66% 8.60%
- -------------------------------------------------------------------------------
MSCI World Equity (Free) Index 16.76 17.18
- -------------------------------------------------------------------------------
</TABLE>
*Inception date of the Brinson Global Equity Fund Class N.
Total return includes reinvestment of all capital gain and income distributions.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
Equity Fund Class N and the MSCI World Equity (Free) Index if you had invested
$1,000,000 on June 30, 1997, and had reinvested all your income dividends and
capital gain distributions through June 30, 1998. No adjustment has been made
for any income taxes payable by shareholders on income dividends and capital
gain distributions. Past performance is no guarantee of future results. Share
price and return will vary with market conditions; investors may realize a gain
or loss upon redemption.
Brinson Global Equity Fund Class N
vs. MSCI World Equity (Free) Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Brinson Global MSCI World
Date Equity Fund Class N Equity (Free) Index
- ---- ------------------- -------------------
<S> <C> <C>
06/30/97 1000000 1000000
07/31/97 1032915 1046155
08/31/97 984326 975353
09/30/97 1026646 1028381
10/31/97 970219 974399
11/30/97 969436 991441
12/31/97 981339 1003556
01/31/98 996889 1031710
02/28/98 1058222 1101493
03/31/98 1101415 1147852
04/30/98 1098823 1159076
05/31/98 1096232 1145012
06/30/98 1085985 1171793
</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.
30
<PAGE>
Global Equity Fund
(ART)
<TABLE>
<CAPTION>
Market Allocation
As of June 30, 1998
Current
Benchmark Strategy
<S> <C> <C>
- -----------------------------------------------------------------
U.S. 49.6% 34.1%
Australia 1.1 2.5
Austria 0.2 0.0
Belgium 0.9 2.2
Canada 2.3 1.4
Denmark 0.5 0.2
Finland 0.5 1.3
France 4.6 4.5
Germany 5.5 5.2
Hong Kong 0.8 0.1
Ireland 0.2 0.0
Italy 2.2 1.7
Japan 9.9 3.9
Malaysia 0.2 0.1
Netherlands 2.8 2.4
New Zealand 0.2 1.9
Norway 0.3 0.2
Portugal 0.3 0.0
Singapore 0.3 0.7
Spain 1.6 0.0
Sweden 1.5 1.6
Switzerland 3.8 3.3
United Kingdom 10.7 12.7
Cash Reserves 0.0 20.0
- -----------------------------------------------------------------
100.0% 100.0%
</TABLE>
<TABLE>
<CAPTION>
Currency Allocation
As of June 30, 1998
Current
Benchmark Strategy
<S> <C> <C>
- -----------------------------------------------------------------
U.S. 49.6% 52.7%
Australia 1.1 5.1
Austria 0.2 0.2
Belgium 0.9 0.9
Canada 2.3 2.3
Denmark 0.5 0.5
Finland 0.5 0.5
France 4.6 4.6
Germany 5.5 5.5
Hong Kong 0.8 0.0
Japan 9.9 5.9
Ireland 0.2 0.2
Italy 2.2 2.2
Malaysia 0.2 0.2
Netherlands 2.8 2.8
New Zealand 0.2 1.9
Norway 0.3 0.3
Portugal 0.3 0.3
Singapore 0.3 0.3
Spain 1.6 1.6
Sweden 1.5 1.5
Switzerland 3.8 3.8
United Kingdom 10.7 6.7
- -----------------------------------------------------------------
100.0% 100.0%
</TABLE>
<TABLE>
<CAPTION>
Top Ten U.S. Equity Holdings
As of June 30, 1998
Percent of
Net Assets
<S> <C>
- -----------------------------------------------------------------
1. Xerox Corp. 2.48%
2. Lockheed Martin Corp. 2.44
3. Burlington Northern Santa Fe Corp. 2.25
4. Aon Corp. 1.73
5. FDX, Corp. 1.66
6. Philip Morris Companies, Inc. 1.64
7. CIGNA Corp. 1.42
8. Automatic Data Processing, Inc. 1.31
9. Goodyear Tire & Rubber Co. 1.28
10. Entergy Corp. 1.21
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Top Ten Non-U.S. Equity Holdings
As of June 30, 1998
Percent of
Net Assets
- -----------------------------------------------------------------
<S> <C>
1. Telecom Corp. of New Zealand Ltd. 0.90%
2. Novartis AG (Reg.) 0.89
3. Glaxo Wellcome PLC 0.77
4. Nokia Oyj, A Shares 0.77
5. Royal Dutch Petroleum Co. 0.65
6. British Petroleum Co. PLC 0.64
7. Roche Holding AG (Gen.) 0.61
8. British Telecommunications PLC 0.58
9. B.A.T. Industries PLC 0.57
10. Lloyds TSB Group PLC 0.57
- -----------------------------------------------------------------
</TABLE>
31
<PAGE>
Global Equity Fund
[ART]
Industry Diversification
As a Percent of Net Assets
As of June 30, 1998
<TABLE>
<CAPTION>
U.S. EQUITIES
<S> <C>
Energy............................ 1.32%
Capital Investment
Capital Goods.................... 5.43
Technology....................... 5.06
------
10.49
Basic Industries
Chemicals........................ 2.26
Housing/Paper.................... 4.09
Metals........................... 0.38
------
6.73
------
Consumer
Non-Durables..................... 3.64
Retail/Apparel................... 2.33
Autos/Durables................... 1.58
Descretionary.................... 0.43
Health: Drugs.................... 3.91
Health: Non-Drugs................ 2.91
------
14.80
Financial
Banks............................ 3.70
Non-Banks........................ 3.82
------
7.52
Utilities
Electric......................... 3.19
Telephone........................ 0.47
------
3.66
Transportation.................... 4.31
Services/Misc..................... 3.36
------
Total U.S. Equities........... 52.19
------
NON-U.S. EQUITIES
Aerospace & Military.............. 0.13
Airplanes......................... 0.22
Appliances & Household............ 0.57
Autos/Durables.................... 1.63
Banking........................... 5.34
Beverages and Tobacco............. 1.27
Broadcasting & Publishing......... 1.38
Building Materials................ 0.81
Business & Public Service......... 1.27
Chemicals......................... 1.04
Construction...................... 0.29
Consumer.......................... 0.01
Data Processing................... 0.19
Electric Components............... 0.28
Electronics....................... 2.03
Energy............................ 3.69
Financial Services................ 1.34
Food & House Products............. 2.31
Forest Products................... 0.72
Gold Mining....................... 0.03
Health: Drugs..................... 1.66
Health: Non-Drugs................. 2.13
Housing/Paper..................... 0.05
Industrial Components............. 0.45
Insurance......................... 3.19
Investment Companies.............. 0.19
Leisure & Tourism................. 0.33
Machinery & Engineering........... 0.20
Merchandising..................... 1.77
Metals--Steel..................... 0.93
Miscellaneous Materials........... 0.12
Multi-Industry.................... 2.65
Non-Ferrous Metals................ 0.83
Real Estate....................... 0.21
Recreation........................ 0.15
Retail & Apparel.................. 0.19
Shipping.......................... 0.01
Technology........................ 0.01
Telecommunications................ 4.76
Textiles & Apparel................ 0.15
Transportation.................... 0.32
Utilities......................... 1.56
Wholesale & International Trade... 0.24
------
Total Non-U.S. Equities....... 46.65
------
SHORT-TERM INVESTMENTS............ 0.97
------
TOTAL INVESTMENTS............. 99.81
------
CASH AND OTHER ASSETS,
LESS LIABILITIES................. 0.19
------
NET ASSETS.................... 100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
* The Fund held a short position in stock index futures on June 30, 1998 which
reduced U.S. Equity exposure from 52.19% to 34.04%. This adjustment results in
an increase in the Fund's exposure to Short-Term Investments from 0.97% to
19.12%.
32
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C>
Equities -- 98.84%
U.S. EQUITIES -- 52.19%
Aetna Inc.................................................. 7,100 $ 540,488
Allergan, Inc.............................................. 11,000 510,125
Alza Corp. (b)............................................. 11,200 484,400
American Home Products Corp................................ 11,100 574,425
Aon Corp................................................... 20,150 1,415,538
Automatic Data Processing, Inc............................. 14,700 1,071,262
BankBoston Corp............................................ 7,800 433,875
Baxter International, Inc.................................. 18,400 990,150
Beckman Coulter Inc........................................ 4,900 285,425
Bestfoods.................................................. 9,800 569,012
Biogen, Inc. (b)........................................... 4,400 215,600
Birmingham Steel Corp...................................... 4,500 55,687
Burlington Northern Santa Fe Corp.......................... 18,800 1,845,925
Champion Enterprises, Inc. (b)............................. 3,400 99,875
Champion International Corp................................ 5,600 275,450
CIGNA Corp................................................. 16,900 1,166,100
Circuit City Stores-Circuit City Group..................... 16,600 778,125
Citicorp................................................... 500 74,625
CMS Energy Corp............................................ 14,500 638,000
Columbia/HCA Healthcare Corp............................... 3,300 96,112
Comerica, Inc.............................................. 4,600 304,750
Commscope, Inc. (b)........................................ 7,933 128,415
Comverse Technology, Inc. (b).............................. 5,125 265,859
Consolidated Stores Corp................................... 5,300 192,125
Corning, Inc............................................... 26,800 931,300
Covance, Inc. (b).......................................... 5,700 128,250
Crown Cork & Seal Co., Inc................................. 5,400 256,500
Dial Corp.................................................. 5,800 150,437
Eastman Chemical Co........................................ 6,200 385,950
EMC Corp. (b).............................................. 10,000 448,125
Enron Corp................................................. 12,400 670,375
Entergy Corp............................................... 34,500 991,875
FDX Corp. (b).............................................. 21,600 1,355,400
First American Corp. of Tennessee.......................... 2,900 139,563
First Data Corp............................................ 27,204 906,233
First Security Corp........................................ 5,550 118,805
FirstEnergy Corp........................................... 2,327 71,555
Fleet Financial Group, Inc................................. 6,900 576,150
Fleetwood Enterprises, Inc................................. 900 36,000
Food Lion, Inc., Class A................................... 21,800 231,625
Forest Laboratories, Inc. Class A (b)...................... 8,900 318,175
Fort James Corp............................................ 14,400 640,800
Gannett Co., Inc........................................... 4,900 348,206
General Instrument Corp. (b)............................... 25,600 696,000
General Semiconductor, Inc. (b)............................ 5,825 57,522
Genzyme Corp. (b).......................................... 4,500 115,031
Geon Co.................................................... 3,100 71,106
Goodyear Tire & Rubber Co.................................. 16,200 1,043,888
Great Lakes Chemical Corp.................................. 2,200 86,762
Harnischfeger Industries, Inc.............................. 7,800 220,837
Health Care and Retirement Corp. (b)....................... 5,050 199,159
Hibernia Corp.............................................. 6,200 125,162
IMC Global Inc............................................. 6,000 180,750
Informix Corp. (b)......................................... 6,000 47,437
Interpublic Group of Companies, Inc........................ 4,650 282,197
</TABLE>
<TABLE>
<S> <C> <C>
Kimberly Clark Corp........................................ 21,100 $ 967,962
Lafarge Corp............................................... 3,300 129,731
Lear Corp. (b)............................................. 4,800 246,300
Lockheed Martin Corp....................................... 18,851 1,995,850
Lyondell Petrochemical Co.................................. 15,500 471,781
Manor Care, Inc............................................ 5,800 222,937
Martin Marietta Materials, Inc............................. 3,335 150,075
Masco Corp................................................. 13,100 792,550
Medusa Corp................................................ 200 12,550
Nabisco Holdings Corp...................................... 11,500 414,719
National Service Industries, Inc........................... 2,200 111,925
Nextel Communications, Inc................................. 15,700 390,537
Norfolk Southern Corp...................................... 10,800 321,975
Peco Energy Co............................................. 31,300 913,569
Pentair, Inc............................................... 5,900 250,750
Philip Morris Companies, Inc............................... 34,200 1,346,625
Praxair, Inc............................................... 10,400 486,850
Raytheon Co., Class B...................................... 15,300 904,612
Regions Financial Corp..................................... 2,900 119,081
Reynolds & Reynolds Co..................................... 4,900 89,119
Schering Plough Corp....................................... 10,800 989,550
Seagate Technology, Inc.................................... 10,000 238,125
Sears, Roebuck and Co...................................... 11,600 708,325
Southdown, Inc............................................. 2,200 157,025
St. Jude Medical, Inc...................................... 5,700 209,831
Timken Co.................................................. 2,000 61,625
Tyson Foods, Inc., Class A................................. 22,900 496,644
Ultramar Diamond Shamrock Corp............................. 12,852 405,641
US Bancorp................................................. 14,463 621,909
Vencor, Inc................................................ 11,900 86,275
Ventas, Inc................................................ 11,900 164,369
Viad Corp.................................................. 11,000 305,250
Wells Fargo & Co........................................... 1,400 516,600
Westvaco Corp.............................................. 2,650 74,862
Witco Corp................................................. 5,900 172,575
Xerox Corp................................................. 20,000 2,032,500
York International Corp.................................... 7,000 304,937
-----------
Total U.S. Equities........................................ 42,728,064
-----------
NON-U.S. EQUITIES -- 46.65%
AUSTRALIA -- 2.68%
Amcor Ltd.................................................. 10,300 45,098
Boral Ltd.................................................. 30,600 57,420
Brambles Industries Ltd.................................... 5,000 98,128
Broken Hill Proprietary Co., Ltd........................... 29,050 245,572
Coca-Cola Amatil Ltd....................................... 6,200 41,468
CSR Ltd.................................................... 19,000 54,833
David Jones Ltd............................................ 65,200 74,700
Lend Lease Corp. Ltd....................................... 4,697 94,974
Mayne Nickless Ltd......................................... 14,500 76,778
National Australia Bank Ltd................................ 21,075 278,002
News Corp. Ltd., Preferred................................. 12,700 89,977
News Corp., Ltd............................................ 37,940 309,680
Orica Ltd.................................................. 6,400 37,852
Pacific Dunlop Ltd......................................... 31,200 50,431
Qantas Airways Ltd......................................... 31,577 47,520
</TABLE>
- --------------------------------------------------------------------------------
33
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C>
Rio Tinto Ltd.............................................. 6,863 $ 81,605
Santos Ltd................................................. 13,000 40,254
Telstra Corp., Ltd......................................... 59,500 152,552
Westpac Bank Corp., Ltd.................................... 33,945 207,068
WMC Ltd.................................................... 24,200 72,837
Woolworth's Ltd............................................ 12,000 39,016
-----------
2,195,765
-----------
BELGIUM -- 2.35%
Delhaize-Le Lion S.A. (b).................................. 2,110 147,433
Electrabel S.A............................................. 1,180 334,561
Fortis AG.................................................. 88 5
Fortis AG Strip (b)........................................ 1,588 405,429
Groupe Bruxelles Lambert S.A. (b).......................... 620 125,133
KBC Bancassurance Holding-Strip (b)........................ 110 9
Kredietbank NV (b)......................................... 2,860 255,947
Petrofina S.A.............................................. 620 254,515
Solvay S.A., Class A....................................... 1,720 136,361
Tractebel.................................................. 1,380 202,123
Union Miniere S.A. (b)..................................... 1,032 63,789
-----------
1,925,305
-----------
CANADA -- 1.63%
Agrium, Inc................................................ 3,100 38,681
Alcan Aluminum Ltd......................................... 2,500 68,849
Bank of Montreal........................................... 1,700 93,635
Barrick Gold Corp.......................................... 1,500 28,560
Canadian National Railway Co............................... 1,700 90,398
Canadian Pacific Ltd....................................... 5,216 146,840
Extendicare Inc. (b)....................................... 4,000 32,368
Hudson's Bay Co............................................ 2,300 52,706
Imasco, Ltd................................................ 2,800 51,693
Imperial Oil Ltd........................................... 6,000 104,855
Magna International Inc., Class A.......................... 700 47,933
Moore Corp., Ltd........................................... 2,700 35,802
Newbridge Networks Corp. (b)............................... 800 19,121
Noranda, Inc............................................... 2,500 43,180
NOVA Corp.................................................. 6,900 79,060
Potash Corporation of Saskatchewan, Inc.................... 700 52,740
Royal Bank of Canada....................................... 2,000 120,359
Seagram Co., Ltd........................................... 1,100 44,842
Shaw Communications Inc., Class B.......................... 3,900 75,847
TransCanada Pipelines Ltd.................................. 3,400 75,371
Westcoast Energy, Inc...................................... 1,600 35,632
-----------
1,338,472
-----------
DENMARK -- 0.25%
Den Danske Bank Group...................................... 800 95,972
Tele Danmark A/S........................................... 1,100 105,569
-----------
201,541
-----------
FINLAND -- 1.26%
Cultor Oyj................................................. 900 14,599
Merita Ltd., Class A....................................... 17,800 117,445
</TABLE>
<TABLE>
<S> <C> <C>
Metsa Serla Oyj, Class B................................... 3,700 $ 35,742
Nokia Oyj Class A Preferred................................ 8,600 632,480
Outokumpu Oyj, Class A..................................... 2,500 31,896
Sampo Insurance Co., Ltd., Series A........................ 1,300 61,606
UPM-Kymmene Corp........................................... 4,000 110,088
Valmet Oyj................................................. 1,400 24,139
-----------
1,027,995
-----------
FRANCE -- 4.42%
Air Liquide................................................ 438 72,445
Alcatel Alsthom............................................ 816 166,142
AXA-UAP.................................................... 1,681 189,064
Banque Nationale de Paris.................................. 1,810 147,890
Carrefour SA............................................... 200 126,530
Cie de Saint Gobain........................................ 916 169,837
Dexia France (b)........................................... 857 115,382
Elf Aquitaine S.A.......................................... 1,392 195,700
Eridania Beghin-Say SA..................................... 340 75,074
France Telecom S.A......................................... 3,510 242,089
Groupe Danone.............................................. 510 140,617
Lafarge Corp............................................... 777 80,322
Lagardere S.C.A............................................ 2,600 108,240
Michelin, Class B.......................................... 1,711 98,766
Paribas.................................................... 1,233 131,947
Pechiney S.A., Class A..................................... 1,635 65,849
Peugeot S.A................................................ 812 174,595
Pinault-Printemps-Redoute S.A.............................. 120 100,430
Rhone-Poulenc, Class A..................................... 3,020 170,331
SEITA...................................................... 2,990 135,504
Societe Generale........................................... 773 160,711
Suez Lyonnaise des Eaux S.A. (b)........................... 1,297 213,449
Thomson CSF................................................ 2,475 94,153
Total S.A., Class B........................................ 1,079 140,274
Usinor Sacilor............................................. 2,520 38,930
Vivendi.................................................... 1,208 257,944
Vivendi Warrants "01" (b).................................. 1,771 3,486
-----------
3,615,701
-----------
GERMANY -- 5.30%
Allianz AG................................................. 1,335 440,069
Allianz AG (b)............................................. 45 14,709
BASF AG.................................................... 2,000 94,737
Bayer AG................................................... 4,890 252,221
Bayerische Motoren Werke (BMW) AG.......................... 33 32,817
Bayerische Motoren Werke AG................................ 110 110,975
Commerzbank AG............................................. 1,050 40,139
Continental AG............................................. 3,400 105,861
Daimler-Benz AG............................................ 2,060 202,006
Deutsche Bank AG........................................... 3,250 275,215
Deutsche Telekom AG........................................ 13,560 365,857
Dresdner Bank AG........................................... 4,050 218,319
Hochtief AG................................................ 1,160 55,590
Hoechst AG................................................. 1,550 77,371
M.A.N. AG.................................................. 260 101,119
Mannesmann AG.............................................. 2,100 213,025
Metro AG................................................... 2,718 164,887
</TABLE>
- --------------------------------------------------------------------------------
34
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
Metro AG Right (b)......................................... 2,718 $ 105
Muenchener Rueckver AG..................................... 680 337,175
Preussag AG................................................ 390 139,147
RWE AG..................................................... 2,420 143,457
Schering AG................................................ 1,210 142,586
Siemens AG................................................. 4,020 244,541
Thyssen AG................................................. 450 113,934
Veba AG.................................................... 2,860 194,892
Volkswagen AG.............................................. 269 258,568
----------
4,339,322
----------
HONG KONG -- 0.18%
Cheung Kong Holdings Ltd................................... 5,000 24,585
Citic Pacific Ltd.......................................... 3,000 5,304
CLP Holdings Ltd........................................... 2,500 11,389
Hang Seng Bank Ltd......................................... 1,800 10,175
Hong Kong & China Gas Co., Ltd............................. 13,200 14,991
Hong Kong and China Gas Warrants "99 " (b)................. 1,100 75
Hong Kong Telecommunications Ltd........................... 10,000 18,778
Hutchison Whampoa Ltd...................................... 6,000 31,670
Johnson Electric Holdings Ltd.............................. 3,000 11,112
South China Morning Post (Holdings) Ltd.................... 10,000 4,807
Sun Hung Kai Properties Ltd................................ 3,000 12,738
----------
145,624
----------
ITALY -- 2.13%
Assicurazioni Generali..................................... 5,700 185,345
Credito Italiano S.p.A..................................... 27,000 141,338
Danieli & Co. Savings (Risp)............................... 16,400 76,116
ENI ADR (c)................................................ 1,700 110,500
ENI S.p.A.................................................. 44,000 288,374
Fiat S.p.A.-Preferred...................................... 42,300 105,301
INA-Istituto Nazionale delle Assicurazioni................. 6,000 17,046
Instituto Mobiliare Italiano S.p.A......................... 6,700 105,539
Istituto Bancario San Paolo di Torino...................... 6,000 86,580
La Rinascente S.p.A........................................ 8,875 88,373
Montedison S.p.A........................................... 81,560 101,173
Parmalat Finanziaria S.p.A................................. 32,000 65,258
Telecom Italia Mobile S.p.A................................ 27,000 165,109
Telecom Italia Mobile S.p.A. RNC........................... 14,000 47,256
Telecom Italia S.p.A....................................... 22,111 162,765
----------
1,746,073
----------
JAPAN -- 3.51%
Amada Co., Ltd............................................. 6,000 29,182
Bank of Tokyo-Mitsubishi, Ltd.............................. 6,000 63,508
Canon Sales Co., Inc....................................... 2,000 27,179
Canon, Inc................................................. 5,000 113,485
Citizen Watch Co., Ltd..................................... 6,000 49,501
Dai Nippon Printing Co., Ltd............................... 6,000 95,760
Daiichi Pharmaceutical Co., Ltd............................ 5,000 65,929
Daikin Industries Ltd...................................... 6,000 38,650
Daiwa House Industry Co., Ltd.............................. 3,000 26,480
</TABLE>
<TABLE>
<S> <C> <C>
Denso Corp................................................. 5,000 $ 82,862
Fanuc...................................................... 2,400 83,006
Fuji Photo FIlm............................................ 1,000 34,802
Fujitsu.................................................... 4,000 42,079
Hitachi Ltd................................................ 12,000 78,251
Honda Motor Co............................................. 3,000 106,784
Hoya Corp.................................................. 1,000 28,317
Inax....................................................... 4,000 13,748
Ito Yokado Co., Ltd........................................ 2,000 94,102
Kaneka Corp................................................ 6,000 31,560
Keio Teito Electric Railway................................ 7,000 25,471
Kinki Nippon Railway....................................... 7,000 32,785
Kirin Brewery Co., Ltd..................................... 7,000 66,073
Kokuyo..................................................... 2,000 33,865
Kuraray Co., Ltd........................................... 7,000 59,466
Kyocera Corp............................................... 1,200 58,623
Marui Co., Ltd............................................. 3,000 44,745
Matsushita Electric Industrial Co.......................... 7,000 112,476
NGK Insulators............................................. 10,000 86,825
Nintendo Co., Ltd.......................................... 800 74,071
Nippon Meat Packers, Inc................................... 4,000 48,968
Nippon Steel Co............................................ 5,000 8,791
Okumura Corp............................................... 6,000 21,054
Omron Corp................................................. 2,000 30,551
Osaka Gas Co............................................... 12,000 30,781
Sankyo Co., Ltd............................................ 4,000 91,076
Secom Co., Ltd............................................. 1,000 57,715
Sega Enterprises Ltd....................................... 1,000 17,257
Seino Transportation....................................... 4,000 22,193
Sekisui House Ltd.......................................... 6,000 46,475
Shin-Etsu Chemical Co., Ltd................................ 2,000 34,586
Sony Corp.................................................. 1,000 86,104
Sumitomo Chemical Co....................................... 7,000 21,587
Sumitomo Electric Industries............................... 5,000 50,546
Takeda Chemical Industries................................. 4,000 106,352
TDK Corp................................................... 1,000 73,855
Tokio Marine & Fire Insurance Co........................... 6,000 61,649
Tokyo Electric Power....................................... 1,300 25,478
Tonen Corp................................................. 4,000 20,723
Toray Industries, Inc...................................... 16,000 83,006
Toshiba Corp............................................... 14,000 57,196
Toyo Suisan Kaisha......................................... 3,000 18,287
Toyota Motor Corp.......................................... 4,000 103,469
Yamato Transport Co., Ltd.................................. 3,000 33,613
Yamazaki Baking Co., Ltd................................... 3,000 26,588
----------
2,877,485
----------
MALAYSIA -- 0.22%
Berjaya Sports Toto Bhd.................................... 8,000 11,863
Kuala Lumpur Kepong Bhd.................................... 14,000 22,616
Malayan Banking Bhd Bonus Issue............................ 4,600 4,586
Malayan Banking Bhd........................................ 4,600 4,636
Malaysia International Shipping Bhd (Frgn.)................ 5,000 7,294
Nestle (Malaysia) Bhd...................................... 3,000 13,599
Petronas Gas Bhd........................................... 8,000 14,852
Public Bank Bhd (Frgn.).................................... 7,999 2,411
</TABLE>
- --------------------------------------------------------------------------------
35
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
Resorts World Bhd.......................................... 10,000 $ 10,995
Rothmans of Pall Mall Bhd.................................. 4,000 27,728
Sime Darby Bhd............................................. 3,000 2,069
Tanjong PLC................................................ 5,000 6,932
Telekom Malaysia Bhd....................................... 10,500 17,722
Tenaga Nasional Bhd........................................ 11,000 13,261
UMW Holdings Bhd........................................... 6,000 2,691
YTL Corp. Bhd.............................................. 15,000 11,284
YTL Power International Bhd (b)............................ 7,800 4,250
----------
178,789
----------
NETHERLANDS -- 2.55%
ABN AMRO Holdings NV....................................... 7,201 168,502
Akzo Nobel NV.............................................. 200 44,460
Elsevier NV................................................ 7,300 110,171
Heineken NV................................................ 3,593 141,127
Koninklijke Hoogovens NV................................... 813 35,171
ING Groep NV............................................... 4,102 268,600
KLM Royal Dutch Air Lines NV............................... 1,118 45,397
Koninklijke KPN NV......................................... 3,583 137,916
Philips Electronics NV..................................... 2,237 188,048
PolyGram NV................................................ 1,500 76,541
Royal Dutch Petroleum Co................................... 9,575 530,951
TNT Post Group NV.......................................... 3,583 91,592
Unilever NV................................................ 3,100 245,964
----------
2,084,440
----------
NEW ZEALAND -- 1.73%
Brierley Investments Ltd................................... 379,200 188,969
Carter Holt Harvey Ltd..................................... 131,500 114,680
Fletcher Challenge Building................................ 43,450 54,132
Fletcher Challenge Energy.................................. 47,850 114,259
Fletcher Challenge Forests Ltd............................. 63,695 35,709
Fletcher Challenge Paper................................... 86,200 95,757
Lion Nathan Ltd............................................ 33,400 74,206
Telecom Corp. of New Zealand Ltd........................... 179,500 739,837
----------
1,417,549
----------
NORWAY -- 0.14%
Norsk Hydro ASA............................................ 2,200 96,762
Norske Skogindustrier ASA Class A.......................... 600 18,531
----------
115,293
----------
SINGAPORE -- 0.64%
City Developments Ltd...................................... 7,000 19,556
Creative Technology Ltd.................................... 1,000 12,134
DBS Land Ltd............................................... 14,000 11,601
Development Bank of Singapore Ltd.......................... 4,700 26,011
Elec & Eltek International Co., Ltd........................ 2,200 7,436
Fraser & Neave Ltd......................................... 3,000 8,062
Keppel Corp., Ltd.......................................... 11,750 17,665
Keppel Land Ltd............................................ 9,000 8,257
Oversea-Chinese Banking Corp., Ltd......................... 10,600 36,076
Rothmans Industries Ltd.................................... 4,000 17,757
</TABLE>
<TABLE>
<S> <C> <C>
Singapore Airlines Ltd. (Frgn.)............................ 13,000 $ 60,787
Singapore Press Holdings Ltd. (Frgn.)...................... 9,828 65,733
Singapore Technologies Engineering Ltd..................... 23,000 16,200
Singapore Telecommunications Ltd........................... 94,000 133,531
United Overseas Bank Ltd. (Frgn.).......................... 24,000 74,578
Venture Manufacturing (Singapore) Ltd...................... 3,000 5,682
----------
521,066
----------
SWEDEN -- 1.76%
ABB AB, A Shares........................................... 6,310 89,409
Astra AB, A Shares......................................... 9,030 184,565
Electrolux AB Series B..................................... 3,600 61,844
Investor AB-B Shares....................................... 2,600 151,764
Nordbanken Holding AB...................................... 20,840 152,872
Skandia Forsakrings AB..................................... 6,000 85,769
Skanska AB, B Shares....................................... 1,870 83,946
Svenska Handelsbanken, A Shares............................ 2,060 95,575
Swedish Match AB........................................... 26,610 88,423
Telefonaktiebloaget LM Ericsson, B Shares.................. 10,600 309,697
Volvo AB, B Shares......................................... 4,530 134,908
----------
1,438,772
----------
SWITZERLAND -- 3.69%
ABB AG (Bearer)............................................ 96 141,772
CS Holdings AG (Reg.)...................................... 1,866 415,200
Holderbank Financiere Glarus, B Shares..................... 91 115,790
Julius Baer Holding AG..................................... 41 128,260
Nestle S.A. (Reg.)......................................... 204 436,566
Novartis AG (Reg.)......................................... 436 725,517
Roche Holding AG (Gen.).................................... 51 500,821
Sairgroup.................................................. 270 88,825
Saurer AG.................................................. 91 92,992
Sulzer AG.................................................. 96 75,759
Swiss Reinsurance Co. (Reg.)............................... 120 303,481
----------
3,024,983
----------
UNITED KINGDOM -- 12.21%
Abbey National PLC......................................... 9,750 173,253
B.A.T. Industries PLC...................................... 46,750 468,015
Barclays PLC............................................... 12,000 345,981
Bass PLC................................................... 5,446 102,043
Billiton PLC............................................... 52,000 105,416
BOC Group PLC.............................................. 6,000 81,740
Booker PLC................................................. 27,870 113,928
British Petroleum Co. PLC.................................. 35,671 520,180
British Sky Broadcasting PLC............................... 15,500 111,335
British Steel PLC.......................................... 100,750 221,474
British Telecommunications PLC............................. 38,520 475,603
BTR PLC (b)................................................ 14,875 42,192
Cable & Wireless PLC....................................... 8,500 103,247
Cadbury Schweppes PLC...................................... 13,000 201,180
Charter PLC................................................ 17,422 181,824
Coats Viyella PLC.......................................... 97,250 119,262
Diageo PLC................................................. 16,630 197,005
FKI PLC.................................................... 54,405 157,040
</TABLE>
- --------------------------------------------------------------------------------
36
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
-------- ------------
<S> <C> <C>
General Electric Co. PLC................................... 30,820 $ 265,601
Glaxo Wellcome PLC......................................... 21,120 633,945
Greenalls Group PLC........................................ 17,000 147,212
Hanson PLC................................................. 19,750 120,031
Hillsdown Holdings PLC..................................... 46,000 125,104
House of Fraser PLC........................................ 50,250 145,885
HSBC Holdings PLC.......................................... 12,201 309,636
Inchcape PLC............................................... 25,000 78,837
Legal & General Group PLC.................................. 4,250 87,562
Lloyds TSB Group PLC....................................... 33,220 464,761
Marks & Spencer PLC........................................ 46,120 419,769
Mirror Group PLC........................................... 44,000 165,182
National Westminster Bank PLC.............................. 7,350 131,342
Peninsular & Oriental Steam Navigation Co.................. 17,475 251,626
Prudential Corp. PLC....................................... 6,000 79,037
Reckitt & Colman PLC....................................... 4,635 88,471
Reed International PLC..................................... 20,000 180,866
Reuters Group PLC.......................................... 3,400 37,284
Rio Tinto PLC.............................................. 13,020 146,636
RJB Mining PLC............................................. 27,500 56,437
Royal & Sun Alliance Insurance Group PLC................... 13,779 142,425
Scottish Hydro-Electric PLC................................ 14,650 130,040
Sears PLC.................................................. 68,250 59,785
Sedgwick Group PLC......................................... 43,000 93,269
SmithKline Beecham PLC..................................... 35,850 437,553
Smurfit (Jefferson) Group PLC.............................. 51,196 152,903
Tate & Lyle PLC............................................ 24,000 190,309
Tesco PLC.................................................. 17,750 173,253
Thames Water PLC........................................... 12,500 227,542
Unilever PLC............................................... 26,000 276,771
United News & Media PLC.................................... 9,000 125,838
Vodafone Group PLC......................................... 15,825 200,803
Williams PLC............................................... 16,750 107,598
Willis Corroon Group PLC................................... 10,000 25,361
-----------
9,999,392
-----------
Total Non-U.S. Equities.................................... 38,193,567
-----------
Total Equities (Cost $65,038,146).......................... 80,921,631
-----------
</TABLE>
<TABLE>
FACE
AMOUNT VALUE
-------- ------------
<S> <C> <C>
Short-Term Investments -- 0.97%
U.S. GOVERNMENT OBLIGATIONS -- 0.72%
U.S. Treasury Bills 5.125%, due 11/27/98...................$600,000 $ 587,534
-----------
COMMERCIAL PAPER -- 0.25%
NGC Corp.
6.640%, due 07/01/98...................................... 209,000 209,000
-----------
Total Short-Term Investments
(Cost $796,358)........................................... 796,534
-----------
Total Investments
(Cost $65,834,504) -- 99.81% (a).......................... 81,718,165
-----------
Cash and other assets, less
liabilities -- 0.19%...................................... 153,843
-----------
Net Assets -- 100%......................................... $81,872,008
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
37
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $65,834,504; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $19,727,697
Gross unrealized depreciation................................ (3,844,036)
-----------
Net unrealized appreciation.............................. $15,883,661
===========
</TABLE>
(b) Non-income producing security.
(c) Denominated in U.S. dollars.
RNC: Non-Convertible Savings Shares
FORWARD FOREIGN CURRENCY CONTRACTS
The Global Equity Fund had the following open forward foreign currency
contracts as of June 30, 1998:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
Belgian Franc................... 12/03/98 44,000,000 $1,192,967 $ 14,166
British Pound................... 12/03/98 3,300,000 5,456,800 (94,960)
Danish Krone.................... 12/03/98 3,000,000 439,340 (2,125)
Finnish Markka.................. 12/03/98 2,800,000 514,632 6,201
Hong Kong Dollar................ 12/03/98 2,000,000 253,156 (87)
Forward Foreign Currency Sale
Contracts
Australian Dollar............... 12/03/98 3,800,000 2,358,286 6,846
British Pound................... 12/03/98 400,000 661,430 13,910
Canadian Dollar................. 12/03/98 1,150,000 784,052 (8,970)
Danish Krone.................... 12/03/98 3,000,000 439,340 (5,797)
Hong Kong Dollar................ 12/03/98 1,000,000 126,578 1,483
Japanese Yen.................... 12/03/98 205,000,000 1,511,998 3,702
Spanish Peseta.................. 12/03/98 222,000,000 1,459,422 (18,164)
--------
Total....................... $(83,795)
========
</TABLE>
FUTURES CONTRACTS
The Global Equity Fund had the following open index futures contracts as of
June 30, 1998:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE PROCEEDS VALUE LOSS
-------------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
INDEX FUTURES SALE CON-
TRACTS
Standard & Poor's 500, 52
contracts................. September 1998 $ 14,283,386 $ 14,859,000 $ 575,614
=========
</TABLE>
The segregated cash and aggregate market value of investments pledged to cover
margin requirements for the open positions at June 30, 1998 were $10,000 and
$587,534, respectively.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
38
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $65,834,504)......................... $81,718,165
Cash............................................................. 15,710
Foreign currency, at value (Cost $321,710)....................... 322,019
Receivables:
Investment securities sold...................................... 694,723
Dividends....................................................... 218,500
Fund shares sold................................................ 29,324
Variation margin................................................ 110,500
Other assets..................................................... 2,603
-----------
TOTAL ASSETS.................................................. 83,111,544
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 836,123
Fund shares redeemed............................................ 182,327
Investment advisory fees........................................ 54,145
Accrued expenses................................................ 83,146
Net unrealized depreciation on forward foreign currency con-
tracts........................................................... 83,795
-----------
TOTAL LIABILITIES............................................. 1,239,536
-----------
NET ASSETS........................................................ $81,872,008
===========
NET ASSETS CONSIST OF:
Paid in capital.................................................. $66,347,204
Accumulated undistributed net investment income.................. 377,184
Accumulated net realized loss.................................... (78,467)
Net unrealized appreciation...................................... 15,226,087
-----------
NET ASSETS.................................................... $81,872,008
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $22,724,003 and 1,811,660 shares issued
and outstanding)............................................... $ 12.54
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,090 and 87 shares issued and outstanding)................... $ 12.53
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $59,146,915 and 4,727,806 shares issued
and outstanding)............................................... $ 12.51
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
39
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $147,165 for foreign taxes withheld)........... $ 1,778,109
Interest......................................................... 298,325
-----------
TOTAL INCOME.................................................. 2,076,434
-----------
EXPENSES:
Advisory......................................................... 719,439
Distribution..................................................... 500,537
Custodian........................................................ 15,731
Other............................................................ 185,256
-----------
TOTAL EXPENSES................................................ 1,420,963
Expenses waived by Advisor.................................... (21,898)
-----------
NET EXPENSES.................................................. 1,399,065
-----------
NET INVESTMENT INCOME ........................................ 677,369
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 9,912,136
Futures contracts............................................... (2,561,807)
Foreign currency transactions................................... (446,626)
-----------
Net realized gain............................................. 6,903,703
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ (927,168)
Futures contracts............................................... (272,124)
Forward contracts............................................... (82,521)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. (1,175)
-----------
Change in net unrealized appreciation or depreciation......... (1,282,988)
-----------
Net realized and unrealized gain.................................. 5,620,715
-----------
Net increase in net assets resulting from operations.............. $ 6,298,084
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
40
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
YEAR ENDED
ENDED JUNE 30,
JUNE 30, 1998 1997
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 677,369 $ 960,262
Net realized gain................................. 6,903,703 5,232,778
Change in net unrealized appreciation or
depreciation..................................... (1,282,988) 10,619,517
----------- ------------
Net increase in net assets resulting from opera-
tions............................................ 6,298,084 16,812,557
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................... (242,673) (425,929)
Brinson Class N................................... (11) --
SwissKey Class.................................... (397,017) (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............... (7,213,754) (7,152,760)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 40,216,740 42,520,630
Shares issued on reinvestment of distributions.... 6,378,677 6,711,937
Shares redeemed................................... (73,542,587) (9,295,598)
----------- ------------
Net increase (decrease) in net assets resulting
from capital share transactions.................. (26,947,170) 39,936,969
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ (27,862,840) 49,596,766
----------- ------------
NET ASSETS:
Beginning of year................................. 109,734,848 60,138,082
----------- ------------
End of year (including accumulated undistributed
net investment income of $377,184 and $336,561,
respectively).................................... $81,872,008 $109,734,848
=========== ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
41
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, JANUARY 28, 1994*
---------------------------------- THROUGH
BRINSON CLASS I 1998 1997 1996 1995 JUNE 30, 1994
- -------------------------------------------------------------------------------
<S> <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.. 0.22 0.16 0.18 0.18 0.07
Net realized and
unrealized gain
(loss)................ 0.78 2.14 2.29 0.39 (0.54)
------- ------- ------- ------- -------
Total income (loss)
from investment
operations.......... 1.00 2.30 2.47 0.57 (0.47)
------- ------- ------- ------- -------
Less distributions:
Distributions from net
investment income..... (0.17) (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.. (1.22) (1.11) (0.83) (0.13) (0.04)
------- ------- ------- ------- -------
Net asset value, end of
period.................. $ 12.54 $ 12.76 $ 11.57 $ 9.93 $ 9.49
======= ======= ======= ======= =======
Total return (non-
annualized)............. 8.99% 21.26% 25.66% 6.06% (4.70)%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)......... $22,724 $48,054 $27,126 $20,706 $20,642
Ratio of expenses to
average net assets:
Before expense
reimbursement......... 1.02% 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......... 1.29% 1.35% 0.57% 0.71% 0.24%**
After expense
reimbursement......... 1.31% 1.60% 1.34% 1.77% 1.89%**
Portfolio turnover rate. 46% 32% 74% 36% 21%
Average commission rate
paid per share......... $0.0254 $0.0246 $0.0288 N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
42
<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>
YEAR ENDED
JUNE 30,
BRINSON CLASS N 1998*
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of year................................... $ 12.76
-------
Income from investment operations:
Net investment income.............................................. 0.13
Net realized and unrealized gain................................... 0.82
-------
Total income from investment operations.......................... 0.95
-------
Less distributions:
Distributions from net investment income........................... (0.13)
Distributions from net realized gain............................... (1.05)
-------
Total distributions.............................................. (1.18)
-------
Net asset value, end of year......................................... $ 12.53
=======
Total return......................................................... 8.60%
Ratios/Supplemental data
Net assets, end of year (in 000s)................................... $ 1
Ratio of expenses to average net assets:
Before expense reimbursement....................................... 1.27%
After expense reimbursement........................................ 1.25%
Ratio of net investment income to average net assets:
Before expense reimbursement....................................... 1.04%
After expense reimbursement........................................ 1.06%
Portfolio turnover rate............................................. 46%
Average commission rate paid per share.............................. $0.0254
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
43
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR YEAR JULY 31, 1995*
ENDED ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of peri-
od................................. $ 12.73 $ 11.57 $ 10.35
------- ------- -------
Income from investment operations:
Net investment income (loss)...... 0.07 0.08 (0.01)
Net realized and unrealized gain.. 0.83 2.13 1.93
------- ------- -------
Total income from investment op-
erations....................... 0.90 2.21 1.92
------- ------- -------
Less distributions:
Distributions from net investment
income........................... (0.07) (0.06) (0.01)
Distributions from net realized
gain............................. (1.05) (0.99) (0.69)
------- ------- -------
Total distributions............. (1.12) (1.05) (0.70)
------- ------- -------
Net asset value, end of period...... $ 12.51 $ 12.73 $ 11.57
======= ======= =======
Total return (non-annualized)....... 8.15% 20.34% 19.25%
Ratios/Supplemental data
Net assets, end of period (in
000s)............................. $59,147 $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...... 0.53% 0.60% (0.19)%**
After expense reimbursement....... 0.55% 0.85% 0.58%**
Portfolio turnover rate............ 46% 32% 74%
Average commission rate paid per
share............................. $0.0254 $0.0246 $0.0288
</TABLE>
* Commencement of SwissKey Class
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
44
<PAGE>
Global Bond Fund
[ART]
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 on a global asset allocation framework, in
conjunction with senior fixed income professionals in our offices worldwide.
The Brinson Global Bond Fund Class I has provided an annualized return of 6.49%
since its inception on July 31, 1993. Over the same time period, the return of
the fund's benchmark was 6.38%. This performance was achieved with volatility of
4.08%, below the 5.15% volatility of the benchmark.
During the first half of 1998, the Fund returned 1.68% compared to the index
return of 2.78% on an unhedged basis. On a dollar-hedged basis, the index
returned 5.03%, with individual market returns ranging from 7.89% in Sweden down
to 4.16% in Switzerland and 4.20% in U.S. Treasuries. Yields continued to
decline, in many markets to record low levels, in a low inflation environment.
The Asian crisis contributed to lower inflation but also supported government
bonds by encouraging a "flight to quality".
Market allocation made a minor positive contribution to the Fund's performance
relative to the benchmark in the first six months of the year. The Fund
benefited from being overweight in Denmark, while the overweight in U.S. bonds
detracted slightly from relative performance.
Currency allocation made virtually no net contribution to relative performance
for the period. The Fund suffered from being underweight in the U.K. pound, but
benefited from the offsetting overweight in the U.S. dollar. Similarly the
"paired" overweight of the Australian dollar and underweight of the Japanese yen
netted to a wash. While the yen was relatively weak, so too was the Australian
dollar, which suffered (as did the Canadian dollar) from weakening commodity
prices in the wake of the Asian crisis.
Bond management was the largest detractor from relative performance. Although
the Fund benefited from being overweight in Canadian Real Return bonds, overall
short duration strategies hurt performance. This was particularly true in Japan,
where the worsening economic situation drove down the compound yield on ten year
JGBs to just 1.45% in early June. At present, the average duration of holdings
is equal to the market index average in Denmark and the U.S., 0.95 times average
in Australia, and 0.9 times average in the other countries in the Fund.
45
<PAGE>
Global Bond Fund
[ART]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 7/31/93*
ended ended ended to
6/30/98 6/30/98 6/30/98 6/30/98
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson Global Bond Fund Class I 1.68% 2.69% 7.23% 6.49%
- --------------------------------------------------------------------------------
Salomon World Government Bond Index 2.78 4.32 2.84 6.38
- --------------------------------------------------------------------------------
</TABLE>
*Performance inception date of the Brinson Global Bond Fund Class I.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
Bond Fund Class I and the Salomon World Government Bond Index if you had
invested $1,000,000 on July 31, 1993, and had reinvested all your income
dividends and capital gain distributions through June 30, 1998. No adjustment
has been made for any income taxes payable by shareholders on income dividends
and capital gain distributions. Past performance is no guarantee of future
results. Share price and return will vary with market conditions; investors may
realize a gain or loss upon redemption.
Brinson Global Bond Fund Class I
vs. Salomon World Government Bond Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Brinson Global Salomon World
Date Bond Fund Class I Gov't Bond Index
- ---- ----------------- ---------------
<S> <C> <C>
07/31/93 1000000 1000000
12/31/93 1038591 1041929
06/30/94 992146 1048832
12/31/94 1002296 1066185
06/30/95 1104638 1245919
12/31/95 1206119 1269184
06/30/96 1231653 1250502
12/31/96 1318299 1315287
06/30/97 1326556 1299088
12/31/97 1339835 1318469
06/30/98 1362306 1355150
</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.
46
<PAGE>
Global Bond Fund
[ART]
Total Return
<TABLE>
<CAPTION>
6 months 6/30/97*
ended to
6/30/98 6/30/98
- -------------------------------------------------------------------------------
<S> <C> <C>
Brinson Global Bond Fund Class N 1.54% 2.37%
- -------------------------------------------------------------------------------
Salomon World Government Bond Index 2.78 4.32
- -------------------------------------------------------------------------------
</TABLE>
*Inception date of the Brinson Global Bond Fund Class N.
Total return includes reinvestment of all capital gain and income distributions.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
Bond Fund Class N and the Salomon World Government Bond Index if you had
invested $1,000,000 on June 30, 1997, and had reinvested all your income
dividends and capital gain distributions through June 30, 1998. No adjustment
has been made for any income taxes payable by shareholders on income dividends
and capital gain distributions. Past performance is no guarantee of future
results. Share price and return will vary with market conditions; investors may
realize a gain or loss upon redemption.
Brinson Global Bond Fund Class N
vs. Salomon World Government Bond Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Brinson Global Salomon World
Date Bond Fund Class N Gov't Bond Index
- ---- ----------------- ---------------
<S> <C> <C>
06/30/97 $1,000,000 $1,000,000
09/30/97 1,011,411 1,012,726
12/31/97 1,008,216 1,014,920
03/31/98 1,011,454 1,022,838
06/30/98 1,023,719 1,043,156
</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.
47
<PAGE>
Global Bond Fund
[ART]
Asset Allocation
As of June 30, 1998
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ------------------------------------------------
<S> <C> <C>
U.S. 33.4% 39.4%
Australia 0.8 4.0
Austria 0.9 0.0
Belgium 2.4 0.0
Canada 3.3 6.1
Denmark 1.6 6.3
Finland 0.6 0.0
France 7.4 7.6
Germany 9.2 13.3
Ireland 0.4 0.0
Italy 7.2 3.6
Japan 18.3 0.0
Netherlands 3.0 5.3
Spain 3.0 3.9
Sweden 1.5 1.5
Switzerland 0.5 0.0
U.K. 6.5 9.0
- ------------------------------------------------
100.0% 100.0%
</TABLE>
Currency Allocation
As of June 30, 1998
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ------------------------------------------------
<S> <C> <C>
U.S. 33.4% 36.9%
Australia 0.8 4.7
Austria 0.9 0.9
Belgium 2.4 2.4
Canada 3.3 3.3
Denmark 1.6 1.6
Finland 0.6 0.6
France 7.4 7.4
Germany 9.2 9.2
Ireland 0.4 0.4
Italy 7.2 7.2
Japan 18.3 14.3
Netherlands 3.0 3.0
Spain 3.0 3.0
Sweden 1.5 1.5
Switzerland 0.5 0.5
U.K. 6.5 3.1
- ------------------------------------------------
100.0% 100.0%
</TABLE>
Industry Diversification
<TABLE>
<CAPTION>
As a Percent of Net Assets
As of June 30, 1998
- ------------------------------------------------
<S> <C>
U.S. BONDS
Corporate Bonds
Aerospace &Military..................... 0.14%
Asset-Backed............................ 2.28
Banking................................. 0.21
CMO..................................... 5.02
Consumer................................ 1.23
Financial Services...................... 1.56
Food and Housing Products............... 0.52
Industrial Components................... 1.16
Services/Miscellaneous.................. 0.32
Telecommunications...................... 0.92
Transportation.......................... 0.77
------
14.13
------
International Dollar Bonds.............. 2.33
U.S. Government Agencies................ 9.38
U.S. Government Obligations............ 8.61
------
Total U.S. Bonds.................... 34.45
------
NON-U.S. BONDS
Foreign Financial Bonds................. 14.04
Foreign Government Bonds................ 44.34
------
Total Non-U.S. Bonds................ 58.38
------
SHORT-TERM INVESTMENTS.................. 13.44
------
TOTAL INVESTMENTS................... 106.27
LIABILITIES, LESS CASH AND
OTHER ASSETS........................... (6.27)
------
NET ASSETS.......................... 100.00%
======
</TABLE>
48
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Bonds -- 92.83%
U.S. BONDS -- 34.45%
U.S. CORPORATE BONDS -- 14.13%
Archer Daniels, 6.950%, due 12/15/2097.................. $ 500,000 $ 533,778
Bear Stearns Mortgage Securities, Inc., 96-7, Class A4,
6.000%, due 01/28/09................................... 200,000 197,182
Capital One Bank, 6.830%, due 05/17/99.................. 200,000 201,125
Chase Manhattan Auto Owner Trust, 96-C, Class A4,
6.150%, due 03/15/02................................... 125,000 125,921
Continental Airlines, Inc.,
6.900%, due 01/02/18................................... 710,000 738,528
Countrywide Capital, Inc.,
8.000%, due 12/15/26................................... 250,000 264,901
DLJ Mortgage Acceptance Corp., 98-3, Class A, 6.500%,
due 08/19/28........................................... 620,000 612,250
Donaldson Lufkin & Jenrette FRN, 6.700%, due 06/30/00... 375,000 380,412
First Bank Corporate Card Master Trust, 97-1, Class A,
6.400%, due 02/15/03................................... 240,000 244,322
First Union-Lehman Brothers Commercial Mortgage, 97-C2,
Class A2, 6.600%, due 05/18/07......................... 240,000 244,920
Ford Credit Grantor Trust,
95-B, Class A, 5.900%, due 10/15/00.................... 25,233 25,253
GE Capital Mortgage Services, Inc., 93-7F, Class FA3,
6.500%, due 09/25/08................................... 383,524 384,444
Kroger Co., 6.000%, due 07/01/00........................ 500,000 498,888
Lockheed Martin Corp.,
7.700%, due 06/15/08................................... 125,000 137,577
Merrill Lynch & Co., Series B,
5.930%, due 03/23/01................................... 550,000 549,690
Metlife Capital Equipment Loan Trust,
97-A, Class A, 6.850%, due 05/20/08.................... 225,000 232,973
News America Holdings,
7.750%, due 12/01/45................................... 775,000 831,715
PNC Mortgage Securities Corp.,
94-3, Class A8, 7.500%, due 07/25/24................... 190,000 197,362
Premier Auto Trust,
96-3, Class A4, 6.750%, due 11/06/00................... 475,000 479,888
Prudential Home Mortgage Securities
93-43, Class A9, 6.750%, due 10/25/23.................. 215,869 216,776
96-7, Class A4, 6.750%, due 06/25/11................... 150,000 151,989
Residential Asset Securitization Trust
97-A7, Class A1, 7.500%, due 09/25/27.................. 245,263 247,950
97-A10, Class A5, 7.250%, due 12/25/27................. 335,000 342,149
97-A11, Class A6, 7.000%, due 01/25/28................. 430,000 435,688
97-A11, Class A2, 7.000%, due 01/25/28................. 260,000 261,664
98-A1, Class A1, 7.000%, due 03/25/28.................. 252,863 254,492
Salomon, Inc. 6.500%, due 03/01/00...................... 300,000 302,337
SASCO LLC,
98-RF1, Class A, 8.712%, due 03/15/27.................. 289,264 310,236
Structured Mortgage Asset Residential Trust, 93-5C,
Class CI, 7.150%, due 03/25/23......................... 925,000 943,881
</TABLE>
<TABLE>
<S> <C> <C>
The Money Store,
94-A, Class A3, 5.525%, due 09/15/18.................... $ 58,553 $ 58,049
Time Warner, Inc., 7.570%, due 02/01/24.................. 315,000 341,044
U.S. West Capital Funding Inc.,
6.875%, due 07/15/28.................................... 375,000 376,801
USA Waste Services, 7.000%, due 10/01/04................. 300,000 309,331
UCFC Home Equity Loan FRN,
97-C, Class A8, 5.888%, due 09/15/27.................... 153,606 153,778
USX Corp., 8.125%, due 07/15/23.......................... 500,000 571,971
Vanderbilt Mortgage Finance,
98-B, Class 1A2, 6.120%, due 05/07/09................... 600,000 602,238
World Omni Automobile Lease Securitization Trust, 97-A,
Class A3, 6.850%, due 06/25/03.......................... 254,868 257,129
Worldcom Inc., Series *, 8.875%, due 01/15/06............ 465,000 503,363
----------
13,521,995
----------
INTERNATIONAL DOLLAR BONDS -- 2.33%
Banco Santiago S.A., 7.000%, due 07/18/07................ 400,000 401,576
Banque Centrale de Tunisie,
8.250%, due 09/19/27.................................... 400,000 376,539
DR Investments, 144A,
7.450%, due 05/15/07.................................... 455,000 485,688
Pan Pacific Industry PLC,
144A, 0.000%, due 04/28/07.............................. 715,000 250,250
Province of Quebec, 7.500%, due 07/15/23................. 235,000 261,257
Republic of South Africa,
9.625%, due 12/15/99.................................... 125,000 130,000
Royal Bank of Scotland,
7.375%, Resettable Perpetual Preferred.................. 300,000 319,467
----------
2,224,777
----------
U.S. GOVERNMENT AGENCIES -- 9.38%
Federal Home Loan Mortgage Corp.
7.000%, due 10/15/13.................................... 68,215 70,323
7.500%, due 01/15/23.................................... 82,460 88,349
7.238%, due 05/01/26.................................... 38,619 39,962
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23.................................... 77,152 79,707
9.000%, due 03/01/24.................................... 216,460 231,833
Federal National Mortgage Assoc.
6.220%, due 03/13/06.................................... 150,000 154,781
6.820%, due 10/01/07.................................... 480,108 503,970
6.361%, due 06/01/08.................................... 390,000 399,243
8.000%, due 03/01/11.................................... 124,028 127,942
6.000%, due 12/01/12 TBA................................ 300,000 296,624
9.000%, due 08/01/21.................................... 21,590 23,111
8.500%, due 07/01/22.................................... 15,054 15,916
8.000%, due 11/01/23.................................... 224,266 44,341
7.000%, due 12/18/24.................................... 700,000 706,124
9.000%, due 04/25/25.................................... 17,462 18,321
7.500%, due 05/18/25.................................... 250,000 257,380
7.890%, due 04/01/26.................................... 267,300 276,762
6.500%, due 12/01/27 TBA................................ 3,400,000 3,385,101
3.500%, due 05/01/28.................................... 328,389 282,046
Federal National Mortgage Assoc. Strips 0.000%, due
04/01/27 principal only................................. 218,262 184,674
Government National Mortgage Assoc.
7.500%, due 08/15/23.................................... 95,868 98,475
7.500%, due 12/15/23.................................... 141,583 145,432
7.500%, due 01/15/24.................................... 98,868 101,556
</TABLE>
- --------------------------------------------------------------------------------
49
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
7.375%, due 06/20/24................................... $ 129,621 $ 132,848
7.000%, due 08/15/24................................... 470,983 479,677
7.000%, due 07/15/25................................... 65,462 66,565
Jordan Aid, 8.750%, due 09/01/19........................ 193,941 243,842
Tennessee Valley Authority
6.375%, due 06/15/05................................... 500,000 519,105
-----------
8,974,010
-----------
U.S. GOVERNEMENT OBLIGATIONS -- 8.61%
U.S. Treasury Notes and Bonds
5.500%, due 02/29/00................................... 4,550,000 4,548,580
6.625%, due 07/31/01................................... 1,765,000 1,817,950
6.250%, due 08/31/02................................... 240,000 246,225
7.000%, due 07/15/06................................... 260,000 284,050
3.625%, due 01/15/08................................... 346,998 343,094
8.000%, due 11/15/21................................... 425,000 547,852
6.000%, due 02/15/26................................... 430,000 447,335
-----------
8,235,086
-----------
Total U.S. Bonds........................................ 32,955,868
-----------
NON-U.S. BONDS -- 58.38%
AUSTRALIA -- 3.92%
Government of Australia
9.750%, due 03/15/02................................AUD 1,500,000 1,065,689
9.000%, due 09/15/04................................... 1,200,000 881,103
New South Wales Treasury Corp., 7.000%, due 04/01/04.... 1,000,000 657,231
Queensland Treasury Corp.-Global Note 8.000%, due
05/14/03............................................... 980,000 668,363
6.500%, due 06/14/05................................... 730,000 472,188
-----------
3,744,574
-----------
AUSTRIA -- 1.81%
Republic of Austria,
5.500%, due 01/18/04............................... FRF 10,000,000 1,728,250
-----------
CANADA -- 5.93%
British Columbia,
7.750%, due 06/16/03............................... CAD 1,540,000 1,149,345
Government of Canada
9.000%, due 12/01/04................................... 400,000 325,337
4.250%, due 12/01/21 (b)............................... 3,300,000 2,598,082
Province of Ontario-Global Bond
7.500%, due 01/19/06................................... 2,100,000 1,601,132
-----------
5,673,896
-----------
CHILE -- 0.49%
Embot Andina S.A.,
7.875%, due 10/01/97............................... USD 500,000 470,003
-----------
DENMARK -- 5.90%
City of Copenhagen,
6.250%, due 03/15/01............................... DKK 2,400,000 363,385
Great Belt, 7.000%, due 09/02/03........................ 10,650,000 1,696,729
Kingdom of Denmark
8.000%, due 11/15/01................................... 8,000,000 1,288,352
7.000%, due 12/15/04................................... 10,500,000 1,710,048
7.000%, due 11/15/07................................... 1,400,000 234,419
7.000%, due 11/10/24................................... 2,000,000 352,857
-----------
5,645,790
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------ -----
<S> <C> <C>
FINLAND -- 1.49%
Republic of Finland,
9.000%, due 08/13/03............................ FRF 7,200,000 $ 1,429,044
-----------
FRANCE -- 2.66%
Government of France (BTAN)
7.750%, due 04/12/00................................ 4,000,000 703,143
Government of France (OAT)
9.500%, due 01/25/01................................ 1,800,000 336,183
7.500%, due 04/25/05................................ 5,600,000 1,079,431
8.500%, due 04/25/23................................ 1,800,000 426,421
-----------
2,545,178
-----------
GERMANY -- 10.82%
Bundesobligation Ser 114,
6.500%, due 03/15/00............................ DEM 2,900,000 1,672,199
Bundesrepublik Deutschland
8.000%, due 07/22/02................................ 3,800,000 2,387,579
6.000%, due 07/04/07................................ 1,000,000 602,936
6.250%, due 01/04/24................................ 700,000 437,064
International Bank Reconstruction & Development,
7.125%, due 04/12/05................................ 2,250,000 1,415,443
European Economic Community,
6.500%, due 03/10/00................................ 1,910,000 1,098,911
KFW International Finance,
6.625%, due 04/15/03................................ 2,800,000 1,688,920
LKB Baden-Wuerttemberg Finance, 6.500%, due 09/15/08. 1,300,000 800,886
Treuhandanstalt, 7.125%, due 01/29/03................ 400,000 246,116
-----------
10,350,054
-----------
IRELAND -- 1.87%
Republic of Ireland,
7.250%, due 03/18/03................................ 2,900,000 1,790,609
-----------
ITALY -- 3.46%
Bayerische Landesbank,
10.750%, due 03/01/03............................ITL 750,000,000 524,774
International Bank for Reconstruction & Development
5.000%, due 10/16/00................................ 1,000,000,000 568,905
LKB Baden-Wuerttemberg Finance, 10.750%, due
04/14/03............................................ 650,000,000 457,547
Republic of Italy (BTP)
7.750%, due 09/15/01................................ 200,000,000 123,080
9.000%, due 10/01/03................................ 1,800,000,000 1,209,789
9.500%, due 02/01/06................................ 300,000,000 216,855
9.000%, due 11/01/23................................ 250,000,000 207,842
-----------
3,308,792
-----------
NETHERLANDS -- 5.02%
Government of Netherlands
5.750%, due 09/15/02............................ NLG 250,000 129,154
7.250%, due 10/01/04................................ 3,000,000 1,684,200
8.500%, due 06/01/06................................ 1,750,000 1,071,490
7.500%, due 11/15/99................................ 1,850,000 950,828
International Nederland GRP Verzekeringen, 6.250%,
due 12/28/05........................................ 1,800,000 962,914
-----------
4,798,586
-----------
PORTUGAL -- 1.28%
Republic of Portugal,
5.625%, due 04/03/07............................ FRF 7,000,000 1,221,369
-----------
</TABLE>
- --------------------------------------------------------------------------------
50
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- ------------
<S> <C> <C>
SPAIN -- 3.72%
Kingdom of Spain
6.750%, due 04/15/00.............................. ESP 100,000,000 $ 681,299
7.900%, due 02/28/02.................................. 100,000,000 727,513
8.000%, due 05/30/04.................................. 100,000,000 762,591
10.000%, due 02/28/05................................. 70,000,000 590,764
7.350%, due 03/31/07.................................. 105,000,000 800,926
------------
3,563,093
------------
SWEDEN -- 1.35%
Kingdom of Sweden
6.000%, due 02/09/05...............................SEK 3,000,000 402,182
10.250%, due 05/05/03................................. 5,700,000 888,153
------------
1,290,335
------------
UNITED KINGDOM -- 8.66%
Abbey National PLC,
8.750%, due 05/24/04...............................GBP 350,000 635,074
British Gas PLC, 8.125%, due 03/31/03.................. 545,000 945,707
European Investment Bank,
7.625%, due 12/07/06.................................. 1,460,000 2,627,849
UK Treasury
10.000%, due 09/08/03................................. 600,000 1,159,400
7.750%, due 09/08/06.................................. 555,000 1,028,459
9.000%, due 10/13/08.................................. 340,000 702,377
8.000%, due 09/27/13.................................. 580,000 1,183,351
------------
8,282,217
------------
Total Non-U.S. Bonds................................... 55,841,790
------------
Total Bonds (Cost $88,760,827)......................... 88,797,658
------------
Short-Term Investments -- 13.44%
COMMERCIAL PAPER -- 13.44%
ARCO Chemical Co.,
5.770%, due 07/06/98.................................. $ 1,000,000 999,199
Cincinnati Bell Inc.
5.850%, due 07/13/98.................................. 1,000,000 998,050
5.900%, due 07/17/98.................................. 1,000,000 997,378
Hilton Hotels Corp.,
5.720%, due 07/15/98.................................. 1,407,000 1,403,870
NGC Corp., 6.750%, due 07/01/98........................ 3,000,000 3,000,000
Raytheon Co., 6.998%, due 07/01/98..................... 2,466,000 2,466,000
Tenneco Inc., 5.750%, due 07/17/98..................... 1,500,000 1,496,167
Texas Utilities Co., 6.100%, due 07/17/98.............. 1,500,000 1,495,933
------------
Total Short-Term Investments (Cost $12,856,597)........ 12,856,597
------------
Total Investments (Cost $101,617,424) --106.27% (a).... 101,654,255
------------
Liabilities, less cash and other assets -- (6.27%)..... (5,994,046)
------------
Net Assets -- 100%..................................... $ 95,660,209
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
51
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $101,617,424; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................. $1,669,877
Gross unrealized depreciation................................. (1,633,046)
----------
Net unrealized appreciation............................... $ 36,831
==========
</TABLE>
(b) Linked to Canada's retail price index. Reset semi-annually
FRN: Floating Rate Note
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30,
1998, the value of these securities amounted to $745,938 or 0.77% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FORWARD FOREIGN CURRENCY CONTRACTS
The Global Bond Fund had the following open forward foreign currency contracts
as of June 30, 1998:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
Australian Dollar............. 7/06/98 562,392 $ 348,321 $ (379)
Australian Dollar............. 11/30/98 1,200,000 744,689 (12,031)
Austrian Schilling............ 11/30/98 10,100,000 802,238 (13,396)
Belgian Franc................. 11/30/98 77,000,000 2,087,336 (33,292)
British Pound................. 7/06/98 299,393 499,370 (286)
Canadian Dollar............... 7/06/98 637,068 433,264 203
Danish Krone.................. 7/06/98 2,319,532 337,376 44
Finnish Markka................ 11/30/98 2,800,000 514,549 (7,352)
French Franc.................. 7/06/98 3,539,078 585,581 368
French Franc.................. 11/30/98 25,400,000 4,238,724 (64,028)
German Mark................... 7/06/98 1,849,674 1,025,142 (1,029)
Italian Lira.................. 7/06/98 880,703,379 495,505 32
Italian Lira.................. 11/30/98 5,600,000,000 3,163,489 (49,086)
Japanese Yen.................. 5/28/98 1,900,000,000 14,007,272 (337,064)
Netherlands Guilder........... 7/06/98 811,598 399,128 (104)
Spanish Peseta................ 7/06/98 53,443,173 349,173 509
FORWARD FOREIGN CURRENCY SALE
CONTRACTS
British Pound................. 11/30/98 3,400,000 5,623,181 (113,891)
Canadian Dollar............... 11/30/98 3,600,000 2,454,289 38,268
Danish Kroner................. 11/30/98 30,200,000 4,422,083 57,285
French Franc.................. 11/30/98 26,000,000 4,338,851 82,850
German Mark................... 11/30/98 6,900,000 3,856,882 54,810
Netherlands Guilder........... 11/30/98 4,000,000 1,984,452 32,287
Spanish Peseta................ 11/30/98 97,000,000 637,597 8,898
---------
Total..................... $(356,384)
=========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
52
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $101,617,424)....................... $101,654,255
Cash............................................................ 12,764
Foreign currency, at value (Cost $551,655)...................... 545,899
Receivables:
Investment securities sold..................................... 1,145,929
Interest....................................................... 1,953,602
Fund shares sold............................................... 1,153,887
Other assets.................................................... 40,817
------------
TOTAL ASSETS................................................. 106,507,153
------------
LIABILITIES:
Payables:
Investment securities purchased................................ 10,384,748
Investment advisory fees....................................... 53,440
Accrued expenses............................................... 52,372
Net unrealized depreciation on forward foreign currency con-
tracts.......................................................... 356,384
------------
TOTAL LIABILITIES............................................ 10,846,944
------------
NET ASSETS....................................................... $95,660,209
============
NET ASSETS CONSIST OF:
Paid in capital................................................. $ 96,506,368
Accumulated undistributed net investment income................. 1,003,399
Accumulated net realized loss................................... (1,521,835)
Net unrealized depreciation..................................... (327,723)
------------
NET ASSETS................................................... $ 95,660,209
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of
$91,274,483 and 9,698,203 shares issued and outstanding)...... $ 9.41
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$8,965 and 954 shares issued and outstanding)................. $ 9.40
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$4,376,761 and 466,193 shares issued and outstanding)......... $ 9.39
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
53
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $18,306 for foreign taxes withheld).............. $3,631,663
----------
TOTAL INCOME................................................... 3,631,663
----------
EXPENSES:
Advisory.......................................................... 500,982
Custodian......................................................... 21,709
Professional...................................................... 45,990
Distribution...................................................... 20,731
Other............................................................. 75,917
----------
TOTAL EXPENSES................................................. 665,329
----------
Expenses waived by Advisor..................................... (43,502)
----------
NET EXPENSES................................................... 621,827
----------
NET INVESTMENT INCOME.......................................... 3,009,836
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... 1,085,343
Futures contracts................................................ 21,780
Foreign currency transactions.................................... (2,221,924)
----------
Net realized loss............................................... (1,114,801)
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................. 224,905
Futures contracts................................................ (12,019)
Forward contracts................................................ (493,663)
Translation of other assets and liabilities denominated in for-
eign currency................................................... 4,151
----------
Change in net unrealized appreciation or depreciation........... (276,626)
----------
Net realized and unrealized loss.................................. (1,391,427)
----------
Net increase in net assets resulting from operations.............. $1,618,409
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
54
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
YEAR ENDED
ENDED JUNE
JUNE 30, 1998 30, 1997
------------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income.............................. $ 3,009,836 $ 2,426,764
Net realized gain (loss)........................... (1,114,801) 1,723,264
Change in net unrealized appreciation or deprecia-
tion ............................................. (276,626) (381,459)
----------- -----------
Net increase in net assets resulting from opera-
tions............................................. 1,618,409 3,768,569
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income........... (2,183,342) (3,479,707)
Distributions in excess of net investment income... -- (340,005)
Distributions from net realized gain............... (1,041,855) (769,789)
----------- -----------
Total distributions to shareholders*............... (3,225,197) (4,589,501)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................ 46,034,839 23,164,253
Shares issued on reinvestment of distributions..... 2,230,731 3,667,961
Shares redeemed.................................... (9,266,587) (12,462,273)
----------- -----------
Net increase in net assets resulting from capital
share transactions................................ 38,998,983 14,369,941
----------- -----------
TOTAL INCREASE IN NET ASSETS.................... 37,392,195 13,549,009
----------- -----------
NET ASSETS:
Beginning of year.................................. 58,268,014 44,719,005
----------- -----------
End of year (including accumulated undistributed
net investment income of $1,003,399 and $489,146,
respectively)..................................... $95,660,209 $58,268,014
=========== ===========
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net investment
income
Brinson Class I................................... $(2,070,571) $(3,503,032)
Brinson Class N................................... (98) --
SwissKey Class.................................... (112,673) (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................ $(3,225,197) $(4,589,501)
=========== ===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
55
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, JULY 30, 1993*
------------------------------------ THROUGH
BRINSON CLASS I 1998 1997 1996 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................ $ 9.64 $ 10.04 $ 10.39 $ 9.55 $ 10.00
------- ------- ------- ------- -------
Income (loss) from in-
vestment operations:
Net investment income .. 0.43*** 0.67 0.84 0.50 0.45
Net realized and
unrealized gain (loss). (0.18) 0.08 0.31 0.58 (0.52)
------- ------- ------- ------- -------
Total income (loss)
from investment oper-
ations............... 0.25 0.75 1.15 1.08 (0.07)
------- ------- ------- ------- -------
Less distributions:
Distributions from and
in excess of net
investment income...... (0.31) (0.96) (1.40) (0.24) (0.28)
Distributions from net
realized gain.......... (0.17) (0.19) (0.10) -- (0.10)
------- ------- ------- ------- -------
Total distributions... (0.48) (1.15) (1.50) (0.24) (0.38)
------- ------- ------- ------- -------
Net asset value, end of
period................... $ 9.41 $ 9.64 $ 10.04 $ 10.39 $ 9.55
======= ======= ======= ======= =======
Total return (non-
annualized).............. 2.69 % 7.71% 11.50% 11.34% (0.79)%
Ratios/Supplemental data
Net assets, end of period
(in 000s)............... $91,274 $54,157 $41,066 $51,863 $36,849
Ratio of expenses to av-
erage net assets:
Before expense reim-
bursement.............. 0.96% 1.32% 1.65% 1.43% 1.78%**
After expense reimburse-
ment................... 0.90% 0.90% 0.90% 0.90% 0.90%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement.............. 4.47% 4.90% 4.98% 5.53% 4.03%**
After expense reimburse-
ment................... 4.53% 5.32% 5.73% 6.06% 4.91%**
Portfolio turnover rate.. 151% 235% 184% 199% 189%
</TABLE>
*Commencement of investment operations
**Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
56
<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>
YEAR ENDED
JUNE 30,
BRINSON CLASS N 1998*
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of year................................... $ 9.64
------
Income from investment operations:
Net investment income.............................................. 0.42**
Net realized and unrealized loss................................... (0.20)
------
Total income from investment operations.......................... 0.22
------
Less distributions:
Distributions from and in excess of net investment income.......... (0.29)
Distributions from net realized gain............................... (0.17)
------
Total distributions.............................................. (0.46)
------
Net asset value, end of year......................................... $ 9.40
======
Total return......................................................... 2.37%
Ratios/Supplemental Data:
Net assets, end of year (in 000s)................................... $ 9
Ratio of expenses to average net assets:
Before expense reimbursement....................................... 1.21%
After expense reimbursement........................................ 1.15%
Ratio of net investment income to average net assets:
Before expense reimbursement....................................... 4.22%
After expense reimbursement........................................ 4.28%
Portfolio turnover rate............................................. 151%
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
** The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
57
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR YEAR JULY 31, 1995*
ENDED ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of peri-
od................................. $ 9.61 $10.02 $10.56
------ ------ ------
Income from investment operations:
Net investment income............. 0.38*** 0.62 0.78
Net realized and unrealized gain
(loss)........................... (0.18) 0.10 0.15
------ ------ ------
Total income from investment op-
erations....................... 0.20 0.72 0.93
------ ------ ------
Less distributions:
Distributions from and in excess
of net investment income......... (0.25) (0.94) (1.37)
Distributions from net realized
gain............................. (0.17) (0.19) (0.10)
------ ------ ------
Total distributions............. (0.42) (1.13) (1.47)
------ ------ ------
Net asset value, end of period...... $ 9.39 $ 9.61 $10.02
====== ====== ======
Total return (non-annualized)....... 2.28% 7.20% 9.17%
Ratios/Supplemental data
Net assets, end of period (in
000s)............................. $4,377 $4,110 $3,653
Ratio of expenses to average net
assets:
Before expense reimbursement...... 1.45% 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...... 3.98% 4.41% 4.49%**
After expense reimbursement....... 4.04% 4.83% 5.24%**
Portfolio turnover rate............ 151% 235% 184%
</TABLE>
* Commencement of SwissKey Class
** Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
58
<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 eight series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund (each a
"Fund," collectively the "Funds"). 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 in the preparation of their financial statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. U.S. equity securities traded over the counter are priced
at the most recent bid price. Securities for which market quotations are not
readily available, including restricted securities which are subject to
limitations on their sale, are valued at fair value as determined in good faith
by or under the direction of the Trust's Board of Trustees. Investments in
affiliated investment companies are valued each day based on the closing net
asset value of the fund. Debt securities are valued at the most recent bid
price by using market quotations or independent services. Futures contracts are
valued at the settlement price established each day on the exchange on which
they are traded. Forward foreign currency contracts are valued daily using
quoted forward exchange rates. Short-term obligations with a maturity of 60
days or less are valued at amortized cost, which approximates market value.
B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases
and sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and
unrealized gain or loss on investments in the statement of operations.
C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as the information becomes available.
E.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the year ended June 30, 1998,
therefore, no federal income tax provision was required.
F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions. Differences in dividends per
share between the classes are due to distribution expenses. Amounts equal to
10.37% and 44.43% of the amount taxable as ordinary income qualify for
dividends received deduction available to corporate shareholders for the Global
Fund and the Global Equity Fund, respectively.
- --------------------------------------------------------------------------------
59
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
G.INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by
each Fund will be borne on a pro rata basis by each of the classes, except that
the Brinson Class I 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 year
ended June 30, 1998, were as follows:
<TABLE>
<CAPTION>
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES
FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES WAIVED
-------- --------------- --------------- -------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Global Fund............. 0.80% 1.10% 1.35% 1.75% $5,378,141 $ --
Global Equity Fund...... 0.80 1.00 1.25 1.76 719,439 21,898
Global Bond Fund........ 0.75 0.90 1.15 1.39 500,982 43,502
</TABLE>
Certain officers of the Funds are also officers and directors of the Advisor.
All officers serve without direct compensation from the Funds. Trustees' fees
paid to unaffiliated trustees for the year ended June 30, 1998 were $11,680,
$4,745 and $4,380 for the Global Fund, Global Equity Fund and Global Bond Fund,
respectively.
The Global Fund invests in shares of certain affiliated investment companies
also sponsored by the Advisor. These investments represented 12.11% of the
Fund's total net assets at June 30, 1998. Activity for the year ended June 30,
1998 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................... $ -- $ -- -- $ 1,712,136 $ 8,960,844
Brinson High Yield Fund. 3,000,000 -- -- 1,234,705 17,562,145
Brinson Emerging Markets
Equity Fund............ 17,300,000 -- -- (10,234,783) 23,662,860
Brinson Emerging Markets
Debt Fund.............. 12,000,000 -- -- 2,146,849 34,515,928
----------- ----- ----- ----------- -----------
$32,300,000 $ -- $ -- $(5,141,093) $84,701,777
=========== ===== ===== =========== ===========
</TABLE>
3.INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1998, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
Global Fund........................................... $623,122,331 $565,947,059
Global Equity Fund.................................... 39,788,298 67,808,003
Global Bond Fund...................................... 129,422,765 93,539,341
</TABLE>
- --------------------------------------------------------------------------------
60
<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 each Fund on a forward foreign currency contract.
Fluctuations in the value of forward foreign currency contracts are recorded
daily as net unrealized gains or losses. The Funds realize a gain or loss upon
settlement of the contracts. The statement of operations reflects net realized
and net unrealized gains and losses on these contracts. The counterparty to all
forward foreign currency contracts at and for the year ended June 30, 1998, was
the Funds' custodian or an affiliate of the Funds' custodian.
5.FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market or that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Funds, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6.SECURITY LENDING
The Global Fund loaned securities to certain brokers, with the Fund's custodian
acting as the Fund's lending agent. The Fund earned negotiated lenders' fees,
which are included in interest income in the statement of operations.
Securities loaned are recorded at the amount of cash collateral received. The
Fund monitors the market value of securities loaned on a daily basis and
initially requires collateral against the loaned securities in an amount at
least equal to 102% of the value of domestic securities loaned and 105% of the
value of non-U.S. securities loaned. The cash collateral received is invested
in short-term investments. The value of loaned securities and related
collateral outstanding at June 30, 1998 were as follows:
<TABLE>
<CAPTION>
VALUE OF LOANED VALUE OF
SECURITIES COLLATERAL
--------------- ------------
<S> <C> <C>
Global Fund........................................ $98,984,231 $104,946,044
=========== ============
</TABLE>
7.DISTRIBUTION PLANS
The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1
under the Investment Company Act of 1940 as amended for the Brinson Class N and
the SwissKey Class. Each Plan governs payments made for the expenses incurred
in the promotion and distribution of the Brinson Class N and the SwissKey
Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the
average daily net assets of the Brinson Class N of the Global Fund, Global
Equity Fund and Global Bond Fund. 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.
8.LINE OF CREDIT
The Trust has entered into an agreement with Chase Manhattan Bank to provide a
364 day $100 million committed line of credit to the Funds. Borrowings will be
made for temporary purposes. Interest on amounts borrowed is calculated at an
annual rate of the Federal Funds Rate plus 0.50%. The Funds pay an annual
commitment fee of 0.08% of the average daily unutilized amount of the line of
credit. During the year ended June 30, 1998 the Funds had no borrowings under
the agreement.
- --------------------------------------------------------------------------------
61
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
GLOBAL FUND
-----------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I............... 18,850,057 $244,898,004 14,513,488 $180,787,534
Brinson Class N............... 90,370 1,177,290 76 1,000
SwissKey Class................ 803,666 10,347,586 932,414 11,508,566
---------- ------------ ---------- ------------
Total Sales................ 19,744,093 $256,422,880 15,445,978 $192,297,100
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I............... 5,179,618 $ 62,332,662 4,022,259 $ 48,025,771
Brinson Class N............... 769 9,625 -- --
SwissKey Class................ 217,810 2,607,910 130,547 1,554,814
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 5,398,197 $ 64,950,197 4,152,806 $ 49,580,585
========== ============ ========== ============
Redemptions:
Brinson Class I............... 16,402,396 $209,137,318 11,346,380 $142,532,012
Brinson Class N............... 21 276 -- --
SwissKey Class................ 641,736 8,247,175 198,888 2,469,271
---------- ------------ ---------- ------------
Total Redemptions.......... 17,044,153 $217,384,769 11,545,268 $145,001,283
========== ============ ========== ============
<CAPTION>
GLOBAL EQUITY FUND
-----------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I............... 1,466,054 $ 17,934,645 1,338,623 $ 15,816,109
Brinson Class N............... -- -- 78 1,000
SwissKey Class................ 1,779,376 22,282,095 2,271,465 26,703,521
---------- ------------ ---------- ------------
Total Sales................ 3,245,430 $ 40,216,740 3,610,166 $ 42,520,630
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I............... 126,859 $ 1,426,171 308,273 $ 3,485,504
Brinson Class N............... 9 93 -- --
SwissKey Class................ 442,472 4,952,413 286,226 3,226,433
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 569,340 $ 6,378,677 594,499 $ 6,711,937
========== ============ ========== ============
Redemptions:
Brinson Class I............... 3,546,702 $ 44,596,092 225,435 $ 2,683,391
Brinson Class N............... -- -- -- --
SwissKey Class................ 2,339,080 28,946,495 565,431 6,612,207
---------- ------------ ---------- ------------
Total Redemptions.......... 5,885,782 $ 73,542,587 790,866 $ 9,295,598
========== ============ ========== ============
</TABLE>
- --------------------------------------------------------------------------------
62
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL BOND FUND
-------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
--------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.................... 4,561,105 $43,233,367 2,335,856 $22,155,311
Brinson Class N.................... 860 8,169 104 1,000
SwissKey Class..................... 293,533 2,793,303 103,968 1,007,942
--------- ----------- --------- -----------
Total Sales..................... 4,855,498 $46,034,839 2,439,928 $23,164,253
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Class I.................... 220,347 $ 2,058,040 348,609 $ 3,318,757
Brinson Class N.................... 12 115 -- --
SwissKey Class..................... 18,525 172,576 36,719 349,204
--------- ----------- --------- -----------
Total Dividend Reinvestment..... 238,884 $ 2,230,731 385,328 $ 3,667,961
========= =========== ========= ===========
Redemptions:
Brinson Class I.................... 699,882 $ 6,667,104 1,159,373 $11,665,371
Brinson Class N.................... 22 210 -- --
SwissKey Class..................... 273,680 2,599,273 77,300 796,902
--------- ----------- --------- -----------
Total Redemptions............... 973,584 $ 9,266,587 1,236,673 $12,462,273
========= =========== ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
63
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds --
Global Fund
Global Equity Fund
Global Bond Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Brinson Funds--Global Fund,
Global Equity Fund and Global Bond Fund as of June 30, 1998, the related
statements of operations and cash flows (Global Fund only) for the year then
ended and changes in net assets and the financial highlights for the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--Global Fund, Global Equity Fund and Global Bond Fund at June 30,
1998, the results of their operations and cash flows (Global Fund only) for the
year then ended and the changes in their net assets and the financial
highlights for the periods indicated therein in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
August 7, 1998
- --------------------------------------------------------------------------------
64
<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>
[ART]
The Brinson Funds
- --------------------------------------------------------------------------------
Chicago . Bahrain . Basel . Frankfurt . Geneva . Hong Kong . London . Melbourne
New York . Paris . Rio de Janiero . Singapore . Sydney . Tokyo . Zurich
209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430
<PAGE>
----------------------------
The Brinson Funds
Brinson U.S. Balanced Fund
Brinson U.S. Equity Fund
Brinson U.S. Large Capitalization Equity Fund
Brinson U.S. Bond Fund
Annual Report
June 30, 1998
[ARTWORK APPEARS HERE]
Institutional Asset Management
----------------------------
<PAGE>
Trustees and Officers
[ART]
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.
[ART]
The UBS Brinson Division is the institutional asset management division of UBS
AG. UBS Brinson is the name used outside North America while Brinson Partners
continues as the primary name within North America. The UBS Brinson Division
manages over USD 390 billion of institutional assets, including over USD 277
billion of discretionary institutional assets on an active basis and mutual fund
assets for UBS Private Banking which total over USD 113 billion. In addition,
UBS Brinson acts as the investment advisor to UBS Private Banking on an advisory
basis. UBS Brinson manages investment portfolios for corporations, public funds,
endowments, foundations, central banks and other investors located throughout
the world. The UBS Brinson Division employs over 1,500 people in offices in
Chicago, Bahrain, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New
York, Paris, Rio de Janeiro, Singapore, Sydney, Tokyo and Zurich.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment markets
and their interrelationships. Portfolio structure is focused upon both risk and
return considerations in the context of full investment cycles. Our investment
decisions are based on fundamental research, internally developed valuation
systems and seasoned judgment. Our independent team approach allows for rapid
responses to market changes, while providing each client with the benefit of our
best talent and the flexibility to customize portfolios to meet unique
requirements.
2
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
<S> <C>
[ART]
Shareholder Letter............................................... 4
U.S. Economic and Market Highlights.............................. 6
U.S. Balanced Fund............................................... 7
Schedule of Investments...................................... 11
Financial Statements......................................... 14
Financial Highlights......................................... 17
U.S. Equity Fund................................................. 20
Schedule of Investments...................................... 24
Financial Statements......................................... 26
Financial Highlights......................................... 29
U.S. Large Capitalization Equity Fund............................ 32
Schedule of Investments...................................... 36
Financial Statements......................................... 38
Financial Highlights......................................... 41
U.S. Bond Fund................................................... 44
Schedule of Investments...................................... 47
Financial Statements......................................... 49
Financial Highlights......................................... 52
The Brinson Funds--Notes to Financial Statements................. 55
Report of Independent Auditors................................... 59
</TABLE>
<PAGE>
Shareholder Letter
[ART]
August 22, 1998
Dear Shareholder:
We are very pleased to present the June 30, 1998 Annual Report for the U.S.
Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund and U.S.
Bond Fund. Within this Report, we focus on the current domestic economic outlook
as well as our current strategies and performance updates for the four Domestic
Funds.
In December 1997, Union Bank of Switzerland and Swiss Bank Corporation announced
their intention to merge, which included the integration of UBS Asset Management
and SBC Brinson into the UBS Brinson Division. The merger was consummated on
June 29, 1998. UBS Brinson is managed today by the same senior management that
has led the business over the past decades with a consistently applied
investment philosophy and process. The UBS Brinson Division manages over USD 390
billion of institutional assets, including over USD 277 billion of discretionary
institutional assets on an active basis and mutual fund assets for UBS Private
Banking which total over USD 113 billion. The UBS Brinson Division employs over
1,500 people in fifteen different cities throughout the world.
We are excited about the formation of the UBS Brinson Division and the
additional resources we have brought 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 performance inception on December 31, 1994, the Brinson U.S. Balanced
Fund Class I has produced an annualized total return of 15.90% compared to the
return of 22.71% of its benchmark, the U.S. Balanced Mutual Fund Index. This
performance was achieved with a volatility of 4.93%, well below the benchmark
volatility of 7.52% and reflecting our cautious strategy at this time toward
investment risk.
4
<PAGE>
Shareholder Letter
[ART]
Brinson U.S. Equity Fund
The Brinson U.S. Equity Fund Class I has provided an annualized return of 23.11%
since its performance inception on February 28, 1994. This is compared to a
23.38% return for the benchmark, the Wilshire 5000 Index. This performance was
achieved with volatility of 11.42%, compared to the benchmark volatility of
11.04%. The Fund operates with a fully invested policy.
Brinson U.S. Large Capitalization Equity Fund
The Brinson U.S. Large Capitalization Equity Fund Class I has provided a return
of -0.13% since its performance inception on April 30, 1998. This is compared to
a 2.25% return for the benchmark, the S&P 500 Index. The Fund operates with a
fully invested policy.
Brinson U.S. Bond Fund
The Brinson U.S. Bond Fund Class I has provided an annualized return of 7.97%
since its inception on August 31, 1995. This is compared to a 8.01% return for
the benchmark, the Salomon Brothers BIG Bond Index. The U.S. Bond Fund achieved
this performance with a volatility of 4.16% compared to the benchmark volatility
of 3.46%.
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
Chief Executive Officer
Brinson Partners, Inc.
5
<PAGE>
U.S. Economic and Market Highlights
[ARTWORK APPEARS HERE]
The Federal Reserve's latest signals lean more toward tightening than at any
other time in the last year and a half. Despite the weakness in Asia and its
impact on import prices and export demand, rapid growth in monetary aggregates
and strength in labor markets and employment costs has increased concern at the
Fed that inflationary biases are increasing in magnitude. While an actual move
to tighten monetary policy may not be imminent, the prospects for a looser
stance and rate reduction have diminished.
Reported economic growth in the U.S. is likely to be much slower in the second
quarter due to the strike at General Motors, a reduction in some of the
inventory build-up from earlier in the year, and the unabated Asian situation.
However, domestic demand has not yet shown signs of substantial cooling. This is
a major factor in the 4.5% unemployment rate and in the rising wage and salary
pressures since 1995.
The pattern of consumer price inflation, both recently and in the last few
years, contrasts sharply with the concerns voiced by the Fed. Twelve-month
changes in the CPI continue to run well under 2%. However, this spectacular
performance has occurred largely because of declines in the volatile food and
energy components of the index. Measures of the core CPI inflation have not
fallen in step with the headline inflation rate, but have flattened out around
2 1/4%. This can be taken as a sign that the underlying disinflation trend has
been interrupted, and may turn up in the future as strong money supply growth
starts to have an impact.
U.S. Environment
<TABLE>
<CAPTION>
Major Markets
Year to date June 30,
Total Return
- ------------------------------------
<S> <C>
U.S. Cash Equivalents 2.38
U.S. Bonds 3.97
U.S. Equities 15.47
</TABLE>
<TABLE>
<CAPTION>
Salomon U.S. Treasury Benchmark Returns
Year to date June 30, 1998
Maturity (Years) Total Return
- --------------------------------------------
<S> <C>
1 5.95
2 6.60
3 7.75
5 9.13
10 13.19
30 22.96
</TABLE>
<TABLE>
<CAPTION>
Top Ten Industry Returns Relative to S&P 500
Year to date June 30, 1998
- -------------------------------------------------
<S> <C>
Coal & Uranium 28.04
Forest Products 17.34
Trucking, Freight 14.16
Misc. Finance 13.61
Retail (Other) 11.97
Motor Vehicles 9.14
Media 6.76
Drugs, Medicine 6.65
Construction 4.61
Services 4.20
</TABLE>
Source: BARRA
<TABLE>
<CAPTION>
Bottom Ten Industry Returns Relative to S&P 500
Year to date June 30, 1998
- -------------------------------------------------
<S> <C>
Precious Metals -14.07
Oil Refining, Dist. -14.31
Railroads -14.39
Electronics -14.50
Photographic -14.60
Containers -15.70
Tire & Rubber -16.32
Dom. Petroleum Res. -18.00
Oil Service -27.60
Tobacco -33.63
</TABLE>
Source: BARRA
6
<PAGE>
U.S. Balanced Fund
[ARTWORK APPEARS HERE]
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 Brinson U.S. Balanced Fund Class I has provided an annualized return of
15.90% since its performance inception on December 31, 1994. Over the same
period, the return on the U.S. Balanced Mutual Fund Index was 22.71%. The
volatility of the Fund, 4.93% annualized over this period, was considerably
below the benchmark's volatility of 7.52%. For the first six months of 1998, the
return on the Fund was 5.95%, compared to the benchmark return of 11.42%.
The first half of 1998 continued what can only be characterized as an
extraordinary period of U.S. risky asset returns. The U.S. equity market has
provided extremely high returns, protracting an annualized gain of 29.09% in the
prior two years, as measured by the Wilshire 5000, with a 15.47% return in the
first half of 1998. U.S. fixed income assets returned 3.77% in the first half of
the year, extending annualized gains of 9.52% in the prior two years.
The Fund strategy centers on reducing the risk of exposure to the overpriced
equity assets, maintaining a significant underweight to the overvalued U.S.
equity market and an overweight to the U.S. bond market. Consequently, asset
allocation decisions provided a substantial detraction from the performance of
the Fund relative to its benchmark. The strategic cash allocation relative to a
benchmark weight of zero also detracted from the performance of the U.S.
Balanced Fund.
Security selection in the U.S. equity segment of the Fund was a contributor to
the underperformance of the Fund relative to the benchmark. An underweighting of
large capitalization stocks was an important contributor to this
underperformance.
The U.S. Balanced Fund maintains a 5% risk hedge in this environment of
extremely overvalued equity assets and neutrally valued fixed income assets.
7
<PAGE>
U.S. Balanced Fund
[ART]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 12/31/94*
ended ended ended to
6/30/98 6/30/98 6/30/98 6/30/98
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson U.S. Balanced Fund Class I 5.95% 12.19% 13.72% 15.90%
- --------------------------------------------------------------------------------
U.S. Balanced Mutual Fund Index** 11.42 22.38 20.83 22.71
- --------------------------------------------------------------------------------
</TABLE>
* Performance inception date of the Brinson U.S. Balanced Fund Class I.
** An un-managed index compiled by the Advisor, constructed as follows: 65%
Wilshire 5000 Index and 35% Salomon 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 Class I and the U.S. Balanced Mutual Fund Index if you had
invested $1,000,000 on December 31, 1994, and had reinvested all your income
dividends and capital gain distributions through June 30, 1998.
No adjustment has been made for any income taxes payable by shareholders on
income dividends and capital gain distributions. Past performance is no
guarantee of future results. Share price and return will vary with market
conditions; investors may realize a gain or loss upon redemption.
Brinson U.S. Balanced Fund Class I
vs. U.S. Balanced Mutual Fund Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. Balanced U.S. Balanced Mutual
Date Fund Class I Fund Index
- ---- --------------------- --------------------
<S> <C> <C>
12/31/94 1,000,000 1,000,000
6/30/95 1,139,086 1,160,041
12/31/95 1,254,813 1,294,523
6/30/96 1,293,124 1,374,034
12/31/96 1,396,859 1,487,401
6/30/97 1,493,510 1,672,330
12/31/97 1,581,464 1,836,885
6/30/98 1,675,623 2,046,664
</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
- ------------------------------------------------------------------------------
[ART]
- ------------------------------------------------------------------------------
Total Return
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 months 6/30/97*
ended to
6/30/98 6/30/98
- ------------------------------------------------------------------------------
<S> <C> <C>
Brinson U.S. Balanced Fund Class N 6.09% 12.15%
- ------------------------------------------------------------------------------
U.S. Balanced Mutual Fund Index** 11.42 22.38
- ------------------------------------------------------------------------------
</TABLE>
* Inception date of the Brinson U.S. Balanced Fund Class N.
** An un-managed index compiled by the Advisor, constructed as follows: 65%
Wilshire 5000 Index and 35% Salomon Brothers Broad Investment Grade Bond
Index.
Total return includes reinvestment of all capital gain and income
distributions.
- ------------------------------------------------------------------------------
Illustration of an Assumed Investment of $1,000,000
- ------------------------------------------------------------------------------
This chart shows the growth in the value of an investment in the Brinson U.S.
Balanced Fund Class N and the U.S. Balanced Mutual Fund Index if you had
invested $1,000,000 on June 30, 1997, and had reinvested all your income
dividends and capital gain distributions through June 30, 1998.
No adjustment has been made for any income taxes payable by shareholders on
income dividends and capital gain distributions. Past performance is no
guarantee of future results. Share price and return will vary with market
conditions; investors may realize a gain or loss upon redemption.
Brinson U.S. Balanced Fund Class N
vs. U.S. Balanced Mutual Fund Index
Wealth Value with Dividends Reinvested
[LINE GRAPH APPEARS HERE]
[PLOT POINTS FOR LINE GRAPH]
<TABLE>
<CAPTION>
BRINSON U.S. U.S. BALANCED
BALANCED FUND MUTUAL FUND
DATE CLASS N INDEX
------------------------------------------------
<S> <C> <C>
6/30/97 $1,000,000 $1,000,000
8/31/97 1,023,962 1,030,382
10/31/97 1,035,144 1,057,307
12/31/97 1,057,159 1,098,399
2/28/98 1,095,359 1,159,358
4/30/98 1,114,903 1,210,087
6/30/98 1,121,533 1,223,840
</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.
9
<PAGE>
<TABLE>
<CAPTION>
U.S. Balanced Fund
Industry Diversification
As a Percent of Net Assets
As of June 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Energy................................................................. 2.19%
Capital Investment
Capital Goods......................................................... 4.77
Technology............................................................ 4.54
------
9.31
Basic Industries
Chemicals............................................................. 1.84
Housing/Paper......................................................... 3.60
Metals................................................................ 0.34
------
5.78
Consumer
Non-Durables.......................................................... 3.41
Retail/Apparel........................................................ 2.06
Autos/Durables........................................................ 1.39
Discretionary......................................................... 0.38
Health: Drugs......................................................... 3.49
Health: Non-Drugs..................................................... 2.56
------
13.29
Financial
Banks................................................................. 3.27
Non-Banks............................................................. 3.39
------
6.66
Utilities
Electric.............................................................. 1.75
Telephone............................................................. 0.42
------
2.17
Transportation......................................................... 3.77
Services/Misc.......................................................... 3.13
------
Total U.S. Equities................................................ 46.30*
------
U.S. BONDS
Corporate Bonds
Autos/Durables........................................................ 1.15
Airlines.............................................................. 1.60
Banks................................................................. 2.68
Consumer.............................................................. 2.34
Financial Services.................................................... 1.04
Industrial Components................................................. 1.29
Services/Miscellaneous................................................ 0.88
Utilities............................................................. 0.62
------
11.60
International Dollar Bonds............................................. 4.82
Mortgage-Backed Securities............................................. 8.98
U.S. Government Agencies............................................... 17.04
U.S. Government Obligations............................................ 2.89
------
Total U.S. Bonds................................................... 45.33*
------
SHORT-TERM INVESTMENTS................................................. 12.58*
------
TOTAL INVESTMENTS.................................................. 104.21
LIABILITIES, LESS CASH
AND OTHER ASSETS...................................................... (4.21)
------
NET ASSETS............................................................. 100.00%
======
- --------------------------------------------------------------------------------
</TABLE>
* The Fund held a long position in U.S. Treasury futures on June 30, 1998 which
increased U.S. bond exposure from 45.33% to 59.76%. The Fund also held a short
position in stock index futures which reduced U.S. equity exposure from 46.30%
to 29.32%. These two adjustments result in a net increase in the Fund's
exposure to Short-Term Investments from 12.58% to 15.13%.
<TABLE>
<CAPTION>
Asset Allocation
<S> <C> <C>
As of June 30, 1998
Current
Benchmark Strategy
- --------------------------------------------------------------------------------
U.S. Equity 65% 30%
U.S. Bonds 35 65
Cash Equivalents 0 5
- --------------------------------------------------------------------------------
100% 100%
Top Ten U.S. Equity Holdings
As of June 30, 1998
Percent of
Net Assets
- --------------------------------------------------------------------------------
1. Xerox Corp. 2.23%
2. Lockheed Martin Corp. 2.13%
3. Burlington Northern Santa Fe Corp. 1.97%
4. Aon Corp. 1.54%
5. FDX Corp. 1.46%
6. Philip Morris Companies, Inc. 1.45%
7. CIGNA Corp. 1.26%
8. Automatic Data Processing, Inc. 1.16%
9. Goodyear Tire & Rubber Co. 1.13%
10. Baxter International, Inc. 1.08%
- --------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
U.S. Equities -- 46.30%
Aetna Life & Casualty Co.................................... 6,400 $ 487,200
Allergan, Inc............................................... 10,300 477,662
Alza Corp. (b).............................................. 10,000 432,500
American Home Products Corp................................. 10,000 517,500
Aon Corp.................................................... 18,100 1,271,525
Automatic Data Processing, Inc.............................. 13,100 954,663
BankBoston Corp............................................. 6,200 344,875
Baxter International, Inc................................... 16,500 887,906
Beckman Coulter Inc......................................... 4,300 250,475
Bestfoods................................................... 8,800 510,950
Biogen, Inc. (b)............................................ 3,900 191,100
Birmingham Steel Corp....................................... 4,000 49,500
Burlington Northern Santa Fe Corp........................... 16,500 1,620,094
Champion Enterprises, Inc. (b).............................. 3,200 94,000
Champion International Corp................................. 5,000 245,937
CIGNA Corp.................................................. 15,000 1,035,000
Circuit City Stores-Circuit City Group...................... 14,800 693,750
Citicorp.................................................... 300 44,775
CMS Energy Corp............................................. 12,900 567,600
Columbia/HCA Healthcare Corp................................ 2,500 72,813
Comerica, Inc............................................... 4,200 278,250
Commscope, Inc. (b)......................................... 7,666 124,093
Comverse Technology, Inc. (b)............................... 4,620 239,663
Consolidated Stores Corp.................................... 4,700 170,375
Corning, Inc................................................ 23,800 827,050
Covance, Inc. (b)........................................... 5,075 114,188
Crown Cork & Seal Co., Inc.................................. 4,800 228,000
Dial Corp................................................... 5,200 134,875
Eastman Chemical Co......................................... 5,500 342,375
EMC Corp. (b)............................................... 9,000 403,313
Enron Corp.................................................. 11,100 600,094
Entergy Corp................................................ 29,100 836,625
FDX Corp. (b)............................................... 19,200 1,204,800
First American Corp. of Tennessee........................... 2,600 125,125
First Data Corp............................................. 24,258 808,095
First Security Corp......................................... 4,925 105,426
FirstEnergy Corp............................................ 2,075 63,806
Fleet Financial Group, Inc.................................. 6,100 509,350
Fleetwood Enterprises, Inc.................................. 900 36,000
Food Lion, Inc., Class A.................................... 19,400 206,125
Forest Laboratories, Inc. Class A (b)....................... 7,900 282,425
Fort James Corp............................................. 12,900 574,050
Gannett Co., Inc............................................ 4,400 312,675
General Instrument Corp. (b)................................ 22,800 619,875
General Semiconductor, Inc. (b)............................. 5,150 50,856
Genzyme Corp. (b)........................................... 4,000 102,250
Geon Co..................................................... 2,800 64,225
Goodyear Tire & Rubber Co................................... 14,400 927,900
Great Lakes Chemical Corp................................... 2,500 98,594
Harnischfeger Industries, Inc............................... 7,600 215,175
Health Care and Retirement Corp. (b)........................ 4,550 179,441
Hibernia Corp............................................... 5,600 113,050
IMC Global Inc.............................................. 5,300 159,663
Informix Corp. (b).......................................... 5,300 41,903
Interpublic Group of Companies, Inc......................... 4,150 251,853
Kimberly Clark Corp......................................... 18,500 848,687
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
Lafarge Corp............................................ 2,900 $ 114,006
Lear Corp. (b).......................................... 4,300 220,644
Lockheed Martin Corp.................................... 16,571 1,754,455
Lyondell Petrochemical Co............................... 13,800 420,037
Manor Care, Inc......................................... 5,100 196,031
Martin Marietta Materials, Inc.......................... 2,936 132,120
Masco Corp.............................................. 11,700 707,850
Medusa Corp............................................. 700 43,925
Nabisco Holdings Corp................................... 10,200 367,837
National Service Industries, Inc........................ 2,000 101,750
Nextel Communications, Inc. (b)......................... 14,000 348,250
Norfolk Southern Corp................................... 9,600 286,200
Peco Energy Co.......................................... 28,100 820,169
Pentair, Inc............................................ 5,300 225,250
Philip Morris Companies, Inc............................ 30,400 1,197,000
Praxair, Inc............................................ 9,400 440,038
Raytheon Co., Class B................................... 13,500 798,187
Regions Financial Corp.................................. 2,600 106,762
Reynolds & Reynolds Co.................................. 9,900 180,056
Schering Plough Corp.................................... 9,600 879,600
Seagate Technology, Inc. (b)............................ 8,900 211,931
Sears, Roebuck and Co................................... 10,300 628,944
Southdown, Inc.......................................... 2,000 142,750
St. Jude Medical, Inc. (b).............................. 5,000 184,062
Timken Co............................................... 1,800 55,462
Tyson Foods, Inc., Class A.............................. 20,400 442,425
Ultramar Diamond Shamrock Corp.......................... 11,390 359,497
US Bancorp.............................................. 12,759 548,637
Vencor, Inc. (b)........................................ 10,600 76,850
Ventas, Inc............................................. 10,600 146,413
Viad Corp............................................... 9,800 271,950
Wells Fargo & Co........................................ 1,300 479,700
Westvaco Corp........................................... 2,350 66,388
Witco Corp.............................................. 5,300 155,025
Xerox Corp.............................................. 18,100 1,839,412
York International Corp................................. 6,200 270,088
-----------
Total U.S. Equities (Cost $31,626,718).................. 38,169,776
-----------
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Bonds -- 45.33%
U.S. CORPORATE BONDS -- 11.60%
Archer Daniels, 6.950%, due 12/15/2027.................. $ 995,000 $ 1,062,217
Capital One Bank, 6.830%, due 05/17/99.................. 2,000,000 2,011,254
Chrysler Corp., 7.400%, due 08/01/2097.................. 880,000 949,810
Continental Airlines, Inc., 974A, 6.900%, due 01/02/18.. 950,000 988,171
Donaldson Lufkin & Jenrette FRN, 6.700%, due 06/30/00... 840,000 852,122
Enron Corp., 6.750%, due 08/01/09....................... 500,000 511,639
MBNA Global Capital Securities FRN, 6.519%, due 02/01/27
....................................................... 215,000 199,836
News America Holdings, 7.750%, due 12/01/45............. 1,000,000 1,073,180
PanAmSat Corp., 144A, 6.000%, due 01/15/03.............. 335,000 331,654
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ----------
<S> <C> <C>
Time Warner, Inc., 7.570%, due 02/01/24.................. $ 790,000 $ 855,316
USA Waste Services, 6.500%, due 12/15/02................. 720,000 724,262
----------
9,559,461
----------
INTERNATIONAL DOLLAR BONDS -- 4.82%
Credit Suisse London, 144A, 7.900%, Resettable Perpetual
Preferred............................................... 1,170,000 1,250,946
LKB Baden-Wuerttemberg Finance NV, 8.125%, due 01/27/00.. 280,000 289,049
Montell Finance Co., 144A, 8.100%, due 03/15/27.......... 610,000 732,450
Ras Laffan Liquefied Natural Gas Co., Ltd., 144A, 8.294%,
due 03/15/14............................................ 735,000 733,832
Southern Investments UK
6.800%, due 12/01/06.................................... 930,000 963,583
----------
3,969,860
----------
MORTGAGE-BACKED SECURITIES -- 8.98%
Chase Manhattan Auto Owner Trust, 96-C, Class A4, 6.150%,
due 03/15/02............................................ 1,360,000 1,370,023
First Security Auto Grantor Trust, 98-A, Class A, 5.970%,
due 04/15/04............................................ 641,609 642,937
GE Capital Mortgage Services, Inc., 93-7F, Class FA3,
6.500%, due 09/25/08.................................... 1,425,922 1,429,344
Prudential Home Mortgage Securities, 93-43, Class A9,
6.750%, due 10/25/23.................................... 1,358,707 1,364,413
Residential Asset Securitization Trust,
97-A11, Class A2, 7.000%, due 01/25/28.................. 280,000 281,792
UCFC Home Equity Loan FRN , 97-C, Class A8, 5.888%, due
09/15/27................................................ 1,110,350 1,111,593
Morgan Stanley Capital, Inc., 97-WF1, Class A1, 6.830%,
due 10/15/06............................................ 1,168,264 1,201,560
----------
7,401,662
----------
U.S. GOVERNMENT AGENCIES -- 17.04%
Federal Home Loan Mortgage Corp.
8.000%, due 08/15/22.................................... 1,980,000 2,119,077
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23.................................... 593,475 613,134
9.000%, due 03/01/24.................................... 283,051 303,153
Federal National Mortgage Association
0.000%, due 09/25/22.................................... 403,557 370,833
7.000%, due 02/25/22.................................... 702,093 737,267
6.959%, due 08/01/07.................................... 1,066,955 1,127,131
6.789%, due 11/01/07.................................... 501,822 525,032
8.000%, due 12/18/11.................................... 1,000,000 1,064,263
6.500%, due 06/01/28.................................... 250,000 248,925
Government National Mortgage Association
8.000%, due 08/15/22.................................... 738,633 765,179
7.500%, due 08/15/23.................................... 910,746 935,509
7.500%, due 09/15/23.................................... 961,998 988,155
7.500%, due 12/15/23.................................... 805,637 820,299
7.375%, due 06/20/24.................................... 491,583 503,818
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Jordan Aid, 8.750%, due 09/01/19........................ $2,327,295 $ 2,926,108
-----------
14,047,883
-----------
U.S. GOVERNMENT OBLIGATIONS -- 2.89%
U.S. Treasury Notes and Bonds
5.500%, due 02/29/00................................... 1,600,000 1,599,501
6.625%, due 07/31/01................................... 400,000 412,000
3.625%, due 01/15/08................................... 377,171 372,928
-----------
2,384,429
-----------
Total U.S. Bonds (Cost $36,367,398)..................... 37,363,295
-----------
Short-Term Investments -- 12.58%
U.S. GOVERNMENT OBLIGATIONS -- 0.66%
U.S. Treasury Bill 5.236%, due 11/27/98................. 555,000 543,469
-----------
COMMERCIAL PAPER -- 11.92%
Cincinnati Bell Inc., 6.601%, due 07/01/98.............. 2,000,000 2,000,000
NGC Corp., 6.751%, due 07/01/98......................... 3,332,000 3,332,000
Raytheon Co., 6.998%, due 07/01/98...................... 3,000,000 3,000,000
Tenneco Inc., 5.765%, due 07/17/98...................... 1,500,000 1,496,168
-----------
9,828,168
-----------
Total Short-Term Investments
(Cost $10,371,394)..................................... 10,371,637
-----------
Total Investments
(Cost $78,365,510)--104.21% (a)........................ 85,904,708
-----------
Liabilities, less cash and other
assets--(4.21%)........................................ (3,467,537)
-----------
Net Assets--100%........................................ $82,437,171
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
12
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $78,365,510; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $ 8,712,737
Gross unrealized depreciation................................ (1,173,539)
-----------
Net unrealized appreciation................................ $ 7,539,198
===========
</TABLE>
(b) Non-income producing security
FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1998.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 1998,
the value of these securities amounted to $3,048,882, or 3.70% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FUTURES CONTRACTS
The U.S. Balanced Fund had the following open futures contracts as of June 30,
1998:
<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, 83 contracts..... September 1998 $9,057,919 $9,104,062 $ 46,143
10 Year U.S. Treasury
Note, 17 contracts..... September 1998 1,915,893 1,935,344 19,451
30 Year U.S. Treasury
Bond, 7 contracts...... September 1998 842,576 865,156 22,580
INDEX FUTURES SALE CON-
TRACTS
Standard & Poor's 500,
49 contracts........... September 1998 13,860,157 14,001,750 (141,593)
--------
Total................. $(53,419)
========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at June 30, 1998 was $543,469.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $78,365,510).......................... $85,904,708
Cash.............................................................. 68,056
Receivables:
Investment securities sold....................................... 4,246,178
Dividends........................................................ 60,929
Interest......................................................... 421,102
Fund shares sold................................................. 66,040
Variation margin................................................. 120,790
Other assets...................................................... 7,933
-----------
TOTAL ASSETS................................................... 90,895,736
-----------
LIABILITIES:
Payables:
Investment securities purchased.................................. 1,470,055
Fund shares redeemed............................................. 6,907,290
Investment advisory fees......................................... 45,525
Accrued expenses................................................. 35,695
-----------
TOTAL LIABILITIES.............................................. 8,458,565
-----------
NET ASSETS......................................................... $82,437,171
===========
NET ASSETS CONSIST OF:
Paid in capital................................................... $40,373,749
Accumulated undistributed net investment income................... 1,337,239
Accumulated net realized gain..................................... 33,240,404
Net unrealized appreciation....................................... 7,485,779
-----------
NET ASSETS..................................................... $82,437,171
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $80,555,719 and 6,578,813 shares issued
and outstanding)................................................ $ 12.24
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,117 and 91 shares issued and outstanding).................... $ 12.27
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,880,335 and 154,261 shares issued and outstanding)........... $ 12.19
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest......................................................... $ 9,614,198
Dividends........................................................ 1,594,329
------------
TOTAL INCOME.................................................. 11,208,527
------------
EXPENSES:
Advisory......................................................... 1,674,661
Administration................................................... 79,503
Distribution..................................................... 8,818
Other............................................................ 179,045
------------
TOTAL EXPENSES................................................ 1,942,027
Expenses waived by Advisor.................................... (19,097)
------------
NET EXPENSES.................................................. 1,922,930
------------
NET INVESTMENT INCOME ........................................ 9,285,597
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 47,884,782
Futures contracts............................................... (4,490,965)
------------
Net realized gain............................................. 43,393,817
------------
Change in net unrealized appreciation or depreciation on:
Investments .................................................... (20,526,001)
Futures contracts............................................... 1,138,171
------------
Change in net unrealized appreciation or depreciation......... (19,387,830)
------------
Net realized and unrealized gain................................. 24,005,987
------------
Net increase in net assets resulting from operations............. $ 33,291,584
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
YEAR ENDED
ENDED JUNE 30,
JUNE 30, 1998 1997
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 9,285,597 $ 9,809,363
Net realized gain................................. 43,393,817 16,067,241
Change in net unrealized appreciation or deprecia-
tion............................................. (19,387,830) 10,534,773
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 33,291,584 36,411,377
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I.................................. (11,202,072) (7,953,731)
Brinson Class N.................................. (62) --
SwissKey Class................................... (96,209) (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................ (31,622,305) (18,388,140)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 58,797,856 80,528,530
Shares issued on reinvestment of distributions.... 31,535,417 18,312,423
Shares redeemed................................... (294,075,195) (60,962,669)
------------ ------------
Net increase (decrease) in net assets resulting
from capital share
transactions .................................... (203,741,922) 37,878,284
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ (202,072,643) 55,901,521
------------ ------------
NET ASSETS:
Beginning of year................................. 284,509,814 228,608,293
------------ ------------
End of year (including accumulated undistributed
net investment income of $1,337,239 and
$3,271,123, respectively)........................ $ 82,437,171 $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>
YEAR ENDED JUNE 30, DECEMBER 30, 1994*
----------------------------- THROUGH
BRINSON CLASS I 1998 1997 1996 JUNE 30, 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 12.53 $ 11.71 $ 11.23 $ 10.00
------- -------- -------- --------
Income from investment oper-
ations:
Net investment income...... 0.49*** 0.47 0.44 0.23
Net realized and unrealized
gain...................... 0.93 1.29 1.04 1.16
------- -------- -------- --------
Total income from invest-
ment operations......... 1.42 1.76 1.48 1.39
------- -------- -------- --------
Less distributions:
Distributions from net in-
vestment income........... (0.77) (0.40) (0.43) (0.16)
Distributions from net re-
alized gain............... (0.94) (0.54) (0.57) --
------- -------- -------- --------
Total distributions...... (1.71) (0.94) (1.00) (0.16)
------- -------- -------- --------
Net asset value, end of peri-
od.......................... $ 12.24 $ 12.53 $ 11.71 $ 11.23
======= ======== ======== ========
Total return (non-
annualized)................. 12.19% 15.50% 13.52% 13.91%
Ratios/Supplemental Data:
Net assets, end of period
(in 000s).................. $80,556 $282,860 $227,829 $157,724
Ratio of expenses to average
net assets:
Before expense reimburse-
ment...................... 0.81% 0.88% 1.01% 1.06%**
After expense reimburse-
ment...................... 0.80% 0.80% 0.80% 0.80%**
Ratio of net investment in-
come to average net assets:
Before expense reimburse-
ment...................... 3.88% 3.78% 3.76% 4.36%**
After expense reimburse-
ment...................... 3.89% 3.86% 3.97% 4.63%**
Portfolio turnover rate..... 194% 329% 240% 196%
Average commission rate paid
per share.................. $0.0549 $0.0441 $ 0.0481 N/A
</TABLE>
*Commencement of investment operations
**Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
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>
YEAR*
ENDED
BRINSON CLASS N JUNE 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period.............................. $ 12.53
-------
Income from investment operations:
Net investment income........................................... 0.47**
Net realized and unrealized gain................................ 0.94
-------
Total income from investment operations....................... 1.41
-------
Less distributions:
Distributions from net investment income........................ (0.73)
Distributions from net realized gain............................ (0.94)
-------
Total distributions........................................... (1.67)
-------
Net asset value, end of period.................................... $ 12.27
=======
Total return...................................................... 12.15%
Ratios/Supplemental Data:
Net assets, end of period (in 000s).............................. $ 1
Ratio of expenses to average net assets:
Before expense reimbursement.................................... 1.06%
After expense reimbursement..................................... 1.05%
Ratio of net investment income to average net assets:
Before expense reimbursement.................................... 3.63%
After expense reimbursement..................................... 3.64%
Portfolio turnover rate.......................................... 194%
Average commission rate paid per share........................... $0.0549
</TABLE>
*Commencement of Brinson Class N was June 30, 1997.
**The net investment income per share data was determined by using average
shares outstanding throughout the period.
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>
JULY 31, 1995*
YEAR ENDED YEAR ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of peri-
od................................. $ 12.46 $ 11.67 $ 11.38
------- ------- -------
Income from investment operations:
Net investment income............. 0.42*** 0.38 0.42
Net realized and unrealized gain.. 0.95 1.31 0.86
------- ------- -------
Total income from investment op-
erations....................... 1.37 1.69 1.28
------- ------- -------
Less distributions:
Distributions from net investment
income........................... (0.70) (0.36) (0.42)
Distributions from net realized
gain............................. (0.94) (0.54) (0.57)
------- ------- -------
Total distributions............. (1.64) (0.90) (0.99)
------- ------- -------
Net asset value, end of period...... $ 12.19 $ 12.46 $ 11.67
======= ======= =======
Total return (non-annualized)....... 11.79% 14.99% 11.54%
Ratios/Supplemental data
Net assets, end of period (in
000s)............................. $ 1,880 $ 1,649 $ 779
Ratio of expenses to average net
assets:
Before expense reimbursement...... 1.31% 1.38% 1.51%**
After expense reimbursement....... 1.30% 1.30% 1.30%**
Ratio of net investment income to
average net assets:
Before expense reimbursement...... 3.38% 3.28% 3.26%**
After expense reimbursement....... 3.39% 3.36% 3.47%**
Portfolio turnover rate............ 194% 329% 240%
Average commission rate paid per
share............................. $0.0549 $0.0441 $0.0481
</TABLE>
*Commencement of SwissKey Class
**Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
================================================================================
U.S. Equity Fund
================================================================================
[ART]
The U.S. Equity Fund is an actively managed fund invested in common stocks of
U.S. corporations. The Fund is diversified by issue and industry; it is
typically 70% invested in large capitalization stocks, with the remaining 30% in
intermediate and small capitalization stocks. Investment strategies emphasize
stock selection with attention to the management of factor and industry
exposures.
Since its performance inception on February 28, 1994, the Brinson U.S. Equity
Fund Class I has provided an annualized return of 23.11% compared to 23.38% for
the Wilshire 5000 Equity Index. This performance was achieved at an annualized
volatility of 11.42%, only slightly above the index volatility of 11.04%. For
the first six months of 1998, the total return of the Brinson U.S. Equity Fund
Class I was 13.67%, 180 basis points behind the 15.47% return for the Wilshire
5000 Equity Index. The following paragraphs review the sources of Fund
underperformance in the first half of the year.
Market exposure (average beta of .95) detracted modestly from the Fund relative
performance in the strong equity market environment which characterized the
first half of 1998. Factor weightings generally subtracted from results. The
most significant negative factor positions were the underweighting in the
relative strength and size measures. The largest capitalization stocks continued
to dominate market performance. Most of these stocks are perceived as high
quality companies with predictable, sustainable growth rates, attributes that
have been highly favored in an environment with increasing economic uncertainty
exacerbated by Southeast Asian problems. The Fund has minimal exposure to these
largest stocks because they appear to be relatively overvalued. Some positive
benefit to Fund performance was derived from an underweighting in the price
volatility and growth factors.
Industry weightings had the largest negative impact on active returns in the
first half. The overweight in the tobacco industry detracted from performance as
the industry continues to struggle with political and legal issues. Other
negative industry positions were the overweights in the railroad, tire and
rubber and paper industries, and the underweights in miscellaneous finance and
retail industries. The non-health related consumer sector, especially the retail
industry, was very strong in the first half of 1998 due to high employment
levels combined with low inflation and the positive wealth effect associated
with the strong stock market. However, our valuation work continues to suggest
that consumer stock valuations already reflect this positive outlook and are not
attractive, while many of the basic industries appear much more undervalued. A
partial offset to these negative contributions were several positive industry
positions including the underweights in energy, producer goods, and electronics.
Stock selection had a positive effect on the Fund for the first six months.
Among large capitalization issues, the best performers were EMC Corp., Xerox,
and Enron while the worst were Federal Express, Lockheed Martin and Corning. In
the intermediate capitalization segment of the Fund, the most positive
contributors were General Instrument, Comverse Technology and Peco Energy while
the weakest were Nabisco Holdings, Harnischfeger and Nextel Communications.
20
<PAGE>
U.S. Equity Fund
[ART]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 2/28/94*
ended ended ended to
6/30/98 6/30/98 6/30/98 6/30/98
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson U.S. Equity Fund Class I 13.67% 21.48% 27.86% 23.11%
- -----------------------------------------------------------------------------
Wilshire 5000 Index 15.47% 28.86% 28.13% 23.38%
- -----------------------------------------------------------------------------
</TABLE>
* Performance inception date of the Brinson U.S. Equity Fund Class I.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Equity Fund Class I and the Wilshire 5000 Index if you had invested $1,000,000
on February 28, 1994, and had reinvested all your income dividends and capital
gain distributions through June 30, 1998. No adjustment has been made for any
income taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
Brinson U.S. Equity Fund Class I
vs. Wilshire 5000 Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
Brinson U.S. Equity Fund Class I Wilshire 5000 Index
6/30/94 $ 970,003 $ 947,285
12/31/94 983,676 991,086
6/30/95 1,178,023 1,181,470
12/31/95 1,382,877 1,352,348
6/30/96 1,538,200 1,491,254
12/31/96 1,737,594 1,639,211
6/30/97 2,028,487 1,928,453
12/31/97 2,167,878 2,152,123
6/30/98 2,461,722 2,484,991
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
- --------------------------------------------------------------------------------
[ART]
Total Return
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 months 6/30/97*
ended to
6/30/98 6/30/98
- --------------------------------------------------------------------------------
<S> <C> <C>
Brinson U.S. Equity Fund Class N 13.46% 21.10%
- --------------------------------------------------------------------------------
Wilshire 5000 Index 15.47% 28.86%
- --------------------------------------------------------------------------------
</TABLE>
*Inception date of the Brinson U.S. Equity Fund Class N.
Total return includes reinvestment of all capital gain and income distributions.
Illustration of an Assumed Investment of $1,000,000
- --------------------------------------------------------------------------------
This chart shows the growth in the value of an investment in the Brinson U.S.
Equity Fund Class N and the Wilshire 5000 Index if you had invested $1,000,000
on June 30, 1997, and had reinvested all your income dividends and capital gain
distributions through June 30, 1998. No adjustment has been made for any income
taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
Brinson U.S. Equity Fund Class N
vs. Wilshire 5000 Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. Equity Fund Class N Wilshire 5000 Index
<S> <C> <C>
6/30/97 1,000,000 1,000,000
8/31/97 1,034,580 1,036,400
10/31/97 1,023,243 1,060,998
12/31/97 1,067,291 1,115,985
2/28/98 1,168,071 1,203,729
4/30/98 1,222,103 1,278,979
6/30/98 1,210,968 1,288,593
</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.
22
<PAGE>
<TABLE>
<CAPTION>
U.S. Equity Fund
[ART APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of June 30, 1998
<S> <C>
- --------------------------------------------------------------------------------
U.S. EQUITIES
Energy................................................................ 2.48%
Capital Investment
Capital Goods........................................................ 10.20
Technology........................................................... 9.49
------
19.69
Basic Industries
Chemicals............................................................ 4.35
Housing/Paper........................................................ 7.66
Metals............................................................... 0.71
------
12.72
Consumer
Non-Durables......................................................... 6.84
Retail/Apparel....................................................... 4.38
Autos/Durables....................................................... 2.96
Discretionary........................................................ 0.77
Health: Drugs........................................................ 7.34
Health: Non-Drugs.................................................... 5.43
------
27.72
Financial
Banks................................................................ 7.00%
Non-Banks............................................................ 7.00
------
14.00
Utilities
Electric............................................................. 5.95
Telephone............................................................ 0.90
------
6.85
Transportation........................................................ 8.05
Services/Misc......................................................... 6.33
------
Total U.S. Equities............................................... 97.84*
------
SHORT-TERM INVESTMENTS................................................ 1.49*
------
TOTAL INVESTMENTS................................................. 99.33
------
CASH AND OTHER ASSETS,
LESS LIABILITIES..................................................... 0.67
------
NET ASSETS............................................................ 100.00%
======
</TABLE>
- -------------------------------------------------------------------------------
* The Fund held a long position in stock index futures on June 30, 1998 which
increased U.S. Equity exposure from 97.84% to 99.40% and reduced exposure to
Short-Term Investments from 1.49% to -0.07%
<TABLE>
<CAPTION>
Top Ten U.S. Equity Holdings
<S> <C>
As of June 30, 1998
Percent of
Net Assets
- -------------------------------------------------------
1. Xerox Corp. 4.64%
2. Lockheed Martin Corp. 4.58
3. Burlington Northern Santa Fe Corp. 4.23
4. Aon Corp. 3.24
5. FDX Corp. 3.11
6. Philip Morris Companies, Inc. 3.09
7. CIGNA Corp. 2.50
8. Automatic Data Processing, Inc. 2.47
9. Goodyear Tire & Rubber Co. 2.39
10. Baxter International, Inc. 2.27
- -------------------------------------------------------
</TABLE>
23
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ----------
<S> <C> <C>
U.S. Equities -- 97.84%
Aetna Life & Casualty Co..................................... 108,500 $8,259,562
Allergan, Inc................................................ 167,600 7,772,450
Alza Corp. (b)............................................... 170,750 7,384,937
American Home Products Corp.................................. 168,300 8,709,525
Aon Corp..................................................... 305,200 21,440,300
Automatic Data Processing, Inc............................... 223,800 16,309,425
BankBoston Corp.............................................. 127,600 7,097,750
Baxter International, Inc.................................... 279,000 15,013,687
Beckman Coulter PLC.......................................... 73,900 4,304,675
Bestfoods.................................................... 149,500 8,680,344
Biogen, Inc. (b)............................................. 66,950 3,280,550
Birmingham Steel Corp........................................ 68,350 845,831
Burlington Northern Santa Fe Corp............................ 284,900 27,973,619
Champion Enterprises, Inc. (b)............................... 51,900 1,524,562
Champion International Corp.................................. 85,100 4,185,856
CIGNA Corp................................................... 239,950 16,556,550
Circuit City Stores-Circuit City Group....................... 252,200 11,821,875
Citicorp..................................................... 4,900 731,325
CMS Energy Corp.............................................. 220,450 9,699,800
Columbia/HCA Healthcare Corp................................. 44,900 1,307,712
Comerica, Inc................................................ 70,450 4,667,312
Commscope, Inc. (b).......................................... 120,399 1,948,959
Comverse Technology, Inc. (b)................................ 78,065 4,049,622
Consolidated Stores Corp..................................... 79,900 2,896,375
Corning, Inc................................................. 406,100 14,111,975
Covance, Inc. (b)............................................ 85,850 1,931,625
Crown Cork & Seal Co., Inc................................... 81,200 3,857,000
Dial Corp.................................................... 88,300 2,290,281
Eastman Chemical Co.......................................... 94,050 5,854,612
EMC Corp. (b)................................................ 152,550 6,836,147
Enron Corp................................................... 189,400 10,239,437
Entergy Corp................................................. 510,100 14,665,375
FDX Corp. (b)................................................ 327,300 20,538,075
First American Corp. of Tennessee............................ 44,700 2,151,188
First Data Corp.............................................. 413,030 13,759,062
First Security Corp.......................................... 84,500 1,808,828
FirstEnergy Corp............................................. 34,605 1,064,104
Fleet Financial Group, Inc................................... 104,400 8,717,400
Fleetwood Enterprises, Inc................................... 3,800 152,000
Food Lion, Inc., Class A..................................... 331,100 3,517,937
Forest Laboratories, Inc. Class A (b)........................ 128,500 4,593,875
Fort James Corp.............................................. 219,200 9,754,400
Gannett Co., Inc............................................. 71,200 5,059,650
General Instrument Corp. (b)................................. 389,350 10,585,453
General Semiconductor, Inc. (b).............................. 88,175 870,728
Genzyme Corp. (b)............................................ 68,950 1,762,534
Geon Co...................................................... 47,050 1,079,209
Goodyear Tire & Rubber Co.................................... 245,200 15,800,075
Great Lakes Chemical Corp.................................... 49,600 1,956,100
Harnischfeger Industries, Inc................................ 119,150 3,373,434
Health Care and Retirement Corp. (b)......................... 76,850 3,030,772
Hibernia Corp................................................ 94,850 1,914,784
IMC Global Inc............................................... 91,300 2,750,413
Informix Corp. (b)........................................... 91,000 719,469
Interpublic Group of Companies, Inc.......................... 71,600 4,345,225
Kimberly Clark Corp.......................................... 314,850 14,443,744
Lafarge Corp................................................. 49,700 1,953,831
Lear Corp. (b)............................................... 73,550 3,774,034
Lockheed Martin Corp......................................... 286,076 30,288,297
Lyondell Petrochemical Co.................................... 231,750 7,053,891
Manor Care, Inc.............................................. 87,500 3,363,281
Martin Marietta Materials, Inc............................... 50,107 2,254,815
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C> <C>
Masco Corp.......................................... 199,100 $ 12,045,550
Medusa Corp......................................... 8,000 502,000
Nabisco Holdings Corp............................... 174,000 6,274,875
National Service Industries, Inc.................... 33,300 1,694,138
Nextel Communications, Inc. (b)..................... 238,550 5,933,931
Norfolk Southern Corp............................... 160,400 4,781,925
Peco Energy Co...................................... 476,500 13,907,844
Pentair, Inc........................................ 90,300 3,837,750
Philip Morris Companies, Inc........................ 519,150 20,441,531
Praxair, Inc........................................ 158,100 7,401,056
Raytheon Co., Class B............................... 233,750 13,820,469
Regions Financial Corp.............................. 43,800 1,798,538
Reynolds & Reynolds Co.............................. 57,450 1,044,872
Schering Plough Corp................................ 163,400 14,971,525
Seagate Technology, Inc. (b)........................ 152,450 3,630,216
Sears, Roebuck and Co............................... 176,050 10,750,053
Southdown, Inc...................................... 37,300 2,662,288
St. Jude Medical, Inc. (b).......................... 84,700 3,118,019
Timken Co........................................... 30,050 925,916
Tyson Foods, Inc., Class A.......................... 347,550 7,537,491
Ultramar Diamond Shamrock Corp...................... 194,218 6,130,006
US Bancorp.......................................... 218,841 9,410,163
Vencor, Inc. (b).................................... 180,900 1,311,525
Ventas, Inc......................................... 180,900 2,498,681
Viad Corp........................................... 167,450 4,646,738
Wells Fargo & Co.................................... 21,700 8,007,300
Westvaco Corp....................................... 40,800 1,152,600
Witco Corp.......................................... 90,050 2,633,963
Xerox Corp.......................................... 301,550 30,645,019
York International Corp............................. 106,400 4,635,050
------------
Total U.S. Equities
(Cost $530,151,977)................................ 646,836,695
------------
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C> <C>
Short-Term Investments -- 1.49%
U.S. GOVERNMENT OBLIGATIONS -- 0.08%
U.S. Treasury Bill
5.165%, due 11/27/98............................... $ 500,000 $ 489,612
------------
COMMERCIAL PAPER -- 1.41%
Cincinnati Bell Inc.
6.660%, due 07/01/98............................... 2,730,000 2,730,000
NGC Corp.
6.7500%, due 07/01/98.............................. 2,924,000 2,924,000
Raytheon Co.
7.000%, due 07/01/98............................... 3,000,000 3,000,000
Texas Utilities Co.
6.1000%, due 07/17/98.............................. 675,000 673,170
------------
9,327,170
------------
Total Short-Term Investments
(Cost $9,816,564).................................. 9,816,782
------------
Total Investments
(Cost $539,968,541) -- 99.33% (a).................. 656,653,477
------------
Cash and other assets,
less liabilities -- 0.67%.......................... 4,445,373
------------
Net Assets -- 100%.................................. $661,098,850
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
24
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $539,968,541; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation............................... $131,931,680
Gross unrealized depreciation............................... (15,246,744)
------------
Net unrealized appreciation............................... $116,684,936
============
</TABLE>
(b) Non-income producing security
FUTURES CONTRACTS
The U.S. Equity Fund had the following open index futures contracts as of June
30, 1998:
<TABLE>
<CAPTION>
SETTLEMENT COST/ CURRENT UNREALIZED
DATE PROCEEDS VALUE GAIN
-------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CON-
TRACTS
Standard & Poor's 500,
36 contracts........... September 1998 $10,190,052 $10,287,000 $96,948
=======
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at June 30, 1998 was $489,612.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $539,968,541) ....................... $656,653,477
Cash............................................................. 211,911
Receivables:
Investment securities sold...................................... 2,290,931
Dividends....................................................... 1,036,060
Fund shares sold................................................ 4,436,998
Other assets..................................................... 19,339
------------
TOTAL ASSETS.................................................. 664,648,716
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 1,521,040
Fund shares redeemed............................................ 1,505,921
Investment advisory fees ....................................... 372,011
Accrued expenses................................................ 74,394
Variation margin ............................................... 76,500
------------
TOTAL LIABILITIES............................................. 3,549,866
------------
NET ASSETS........................................................ $661,098,850
============
NET ASSETS CONSIST OF:
Paid in capital ................................................. $515,109,561
Accumulated undistributed net investment income.................. 1,242,787
Accumulated net realized gain.................................... 27,964,618
Net unrealized appreciation...................................... 116,781,884
------------
NET ASSETS.................................................... $661,098,850
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $605,767,723 and 30,426,776 shares is-
sued and outstanding) ......................................... $ 19.91
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$268,269 and 13,497 shares issued and outstanding) ............ $ 19.88
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $55,062,858 and 2,776,912 shares issued
and outstanding) .............................................. $ 19.83
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends........................................................ $ 9,615,819
Interest......................................................... 766,543
------------
TOTAL INCOME.................................................. 10,382,362
------------
EXPENSES:
Advisory ........................................................ 3,792,120
Administration................................................... 247,167
Distribution .................................................... 254,241
Other............................................................ 297,092
------------
TOTAL EXPENSES................................................ 4,590,620
------------
NET INVESTMENT INCOME......................................... 5,791,742
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments..................................................... 41,062,216
Futures contracts............................................... 3,068,863
------------
Net realized gain ............................................ 44,131,079
------------
Change in net unrealized appreciation or depreciation on:
Investments .................................................... 58,415,670
Futures contracts .............................................. (137,787)
------------
Change in net unrealized appreciation or depreciation......... 58,277,883
------------
Net realized and unrealized gain ................................ 102,408,962
------------
Net increase in net assets resulting from operations............. $108,200,704
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
27
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE
1998 30, 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 5,791,742 $ 2,268,618
Net realized gain ................................ 44,131,079 21,580,018
Change in net unrealized appreciation or deprecia-
tion ............................................ 58,277,883 40,886,740
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 108,200,704 64,735,376
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................. (4,978,081) (1,717,943)
Brinson Class N................................. (832) --
SwissKey Class.................................. (249,586) (87,137)
Distributions from net realized gain:
Brinson Class I................................. (28,383,478) (12,393,329)
Brinson Class N................................. (64) --
SwissKey Class.................................. (2,678,143) (838,501)
------------ ------------
Total distributions to shareholders............... (36,290,184) (15,036,910)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 346,081,960 212,394,882
Shares issued on reinvestment of distributions.... 33,981,329 14,138,565
Shares redeemed................................... (163,864,419) (34,971,198)
------------ ------------
Net increase in net assets resulting from capital
share transactions .............................. 216,198,870 191,562,249
------------ ------------
TOTAL INCREASE IN NET ASSETS................... 288,109,390 241,260,715
------------ ------------
NET ASSETS:
Beginning of year................................. 372,989,460 131,728,745
------------ ------------
End of year (including accumulated undistributed
net investment income of $1,242,787 and $679,544,
respectively).................................... $661,098,850 $372,989,460
============ ============
</TABLE>
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 each period presented.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, FEBRUARY 22, 1994*
------------------------------------- THROUGH
BRINSON CLASS I 1998 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. 0.19 0.15 0.17 0.16 0.05
Net realized and
unrealized gain
(loss)............... 3.39 4.27 3.31 1.89 (0.36)
-------- -------- -------- ------- ------
Total income (loss)
from investment
operations......... 3.58 4.42 3.48 2.05 (0.31)
-------- -------- -------- ------- ------
Less distributions:
Distributions from net
investment income.... (0.18) (0.14) (0.17) (0.14) (0.04)
Distributions from net
realized gain........ (1.13) (1.23) (0.25) (0.03) --
-------- -------- -------- ------- ------
Total distributions. (1.31) (1.37) (0.42) (0.17) (0.04)
-------- -------- -------- ------- ------
Net asset value, end of
period................. $ 19.91 $ 17.64 $ 14.59 $ 11.53 $ 9.65
======== ======== ======== ======= ======
Total return (non-
annualized)............ 21.48% 31.87% 30.57% 21.45% (3.10)%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $605,768 $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............ 1.12% 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.................. 42% 43% 36% 33% 9%
Average commission rate
paid per share........ $ 0.0469 $ 0.0422 $ 0.0457 N/A N/A
</TABLE>
*Commencement of investment operations
**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 the period presented.
<TABLE>
<CAPTION>
YEAR ENDED
BRINSON CLASS N JUNE 30, 1998*
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period............................. $ 17.64
-------
Income from investment operations:
Net investment income.......................................... 0.15
Net realized and unrealized gain............................... 3.37
-------
Total income from investment operations...................... 3.52
-------
Less distributions:
Distributions from net investment income....................... (0.15)
Distributions from net realized gain........................... (1.13)
-------
Total distributions.......................................... (1.28)
-------
Net asset value, end of period................................... $ 19.88
=======
Total return..................................................... 21.10%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)............................. $ 268
Ratio of expenses to average net assets......................... 1.05%
Ratio of net investment income to average net assets............ 0.87%
Portfolio turnover rate......................................... 42%
Average commission rate paid per share.......................... $0.0469
</TABLE>
*Commencement of Brinson Class N was June 30, 1997
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
30
<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>
JULY 31, 1995*
YEAR ENDED YEAR ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of peri-
od................................. $ 17.59 $ 14.58 $ 11.94
------- ------- -------
Income from investment operations:
Net investment income............. 0.09 0.11 0.10
Net realized and unrealized gain.. 3.38 4.22 2.92
------- ------- -------
Total income from investment op-
erations....................... 3.47 4.33 3.02
------- ------- -------
Less distributions:
Distributions from net investment
income........................... (0.10) (0.09) (0.13)
Distributions from net realized
gain............................. (1.13) (1.23) (0.25)
------- ------- -------
Total distributions............. (1.23) (1.32) (0.38)
------- ------- -------
Net asset value, end of period...... $ 19.83 $ 17.59 $ 14.58
======= ======= =======
Total return (non-annualized)....... 20.80% 31.28% 25.70%
Ratios/Supplemental Data:
Net assets, end of period (in
000s)............................. $55,063 $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...... 0.60% 0.54% 0.61%**
After expense reimbursement....... N/A 0.63% 0.95%**
Portfolio turnover rate............ 42% 43% 36%
Average commission rate paid per
share............................. $0.0469 $0.0422 $0.0457
</TABLE>
*Commencement of SwissKey Class
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
31
<PAGE>
================================================================================
U.S. Large Capitalization Equity Fund
================================================================================
[ART]
The U.S. Large Capitalization Equity Fund is an actively managed portfolio that
invests in common stocks of the largest U.S. corporations. Issues are selected
from a universe of less than 300 of the largest capitalization domestic stocks
collectively comprising 65% of the value of the U.S. equity market.
Since its performance inception on April 30, 1998, the Brinson U.S. Large
Capitalization Equity Fund Class I has provided an annualized return of -0.13%
compared to 2.25% for its benchmark, the S&P 500 Equity Index. The discussion
below focuses on Brinson's management of Large Capitalization Equities during
the first half of 1998. Please note that the Fund's commencement of operations
was during the second quarter of 1998.
Market exposure (average beta of .98) modestly detracted from relative
performance in the strong equity market environment which characterized the
first half of 1998. Other broad factor positions had a negative effect on
performance. The most significant negative factor position was the
underweighting in relative strength (price momentum) and the size measure. The
strongest relative performance within the stock market was posted by the largest
capitalization companies. The Fund has minimal exposure to these largest
companies because they appear to be relatively overvalued. The Fund benefited
from an underweight in the price volatility and growth factors.
Industry weightings were a negative contributor to relative results year-to-
date. The Fund was negatively impacted by an overweight in tobacco stocks, which
have been impacted by adverse legislative and litigation developments, and in
chemicals, which have suffered from cyclical earnings problems. Fund results
were also hurt by the overweight in the railroad industry which has been hurt by
Union Pacific operational snafus and the resultant threat of punitive regulatory
actions. These negative influences were only partially offset by the positive
impact of the underweight in energy, where our analysis continues to produce
lackluster value rankings for most stocks despite the dramatic declines in oil
prices. The Fund was also positively impacted by an underweight in producer
goods and electronics, particularly PC-related technology.
Stock selection had a positive effect on the Fund for the first six months. The
best performers were EMC Corp., Xerox, Enron, Schering Plough and Burlington
Northern, while the worst were Federal Express, Lockheed Martin, Corning,
Kimberly Clark and Baxter.
32
<PAGE>
U.S. Large Capitalization Equity Fund
[ART]
Total Return
4/30/98*
to 6/30/98
- --------------------------------------------------------------------------------
Brinson U.S. Large Capitalization Equity Fund Class I -0.13%
- --------------------------------------------------------------------------------
S&P 500 Equity Index 2.25
- --------------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Large Capitalization Equity
Fund Class I.
Total return includes reinvestment of all capital gain and income distributions.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Large Capitalization Equity Fund Class I and the S&P 500 Equity Index if you had
invested $1,000,000 on April 30, 1998, and had reinvested all your income
dividends and capital gain distributions through June 30, 1998. No adjustment
has been made for any income taxes payable by shareholders on income dividends
and capital gain distributions. Past performance is no guarantee of future
results. Share price and return will vary with market conditions; investors may
realize a gain or loss upon redemption.
Brinson U.S. Large Capitalization Equity Fund Class I
vs. S&P 500 Equity Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
Brinson U.S. Large
Capitalization Equity
Fund Class I S&P 500 Index
4/30/98 1000000 1000000
5/31/98 983723 982610
6/30/98 998652 1022524
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. Large Capitalization Equity Fund
[ART]
Total Return
<TABLE>
<CAPTION>
4/30/98*
to 6/30/98
- -------------------------------------------------------------------
<S> <C>
Brinson U.S. Large Capitalization Equity Fund Class N -0.37%
- -------------------------------------------------------------------
S&P 500 Equity Index 2.25
- -------------------------------------------------------------------
</TABLE>
* Performance inception date of the Brinson U.S. Large Capitalization Equity
Fund Class N.
Total return includes reinvestment of all capital gain and income distributions.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Large Capitalization Equity Fund Class N and the S&P 500 Equity Index if you had
invested $1,000,000 on April 30, 1998, and had reinvested all your income
dividends and capital gain distributions through June 30, 1998. No adjustment
has been made for any income taxes payable by shareholders on income dividends
and capital gain distributions. Past performance is no guarantee of future
results. Share price and return will vary with market conditions; investors may
realize a gain or loss upon redemption.
Brinson U.S. Large Capitalization Equity Fund Class N
vs. S&P 500 Equity Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
Brinson U.S.
Large Capitalization
Equity Fund-N S&P 500 Equity Index
4/30/98 1,000,000 1,000,000
5/31/98 983,723 982,610
6/30/98 996,297 1,022,524
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.
34
<PAGE>
U.S. Large Capitalization Equity Fund
[ART APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of June 30, 1998
<TABLE>
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals......................... 1.65%
Housing/Paper..................... 5.95
Metals............................ 0.85
------
8.45
Capital Investment
Capital Goods..................... 9.66
Technology........................ 9.17
------
18.83
Consumer
Autos/Durables.................... 3.50
Discretionary..................... 0.97
Health: Drugs..................... 8.42
Health: Non-Drugs................. 4.09
Non-Durables...................... 6.46
Retail/Apparel.................... 2.38
------
25.82
Energy............................. 2.27%
Financial
Banks............................. 8.42
Non-Banks......................... 9.98
------
18.40
Transportation..................... 11.85
Services/Miscellaneous............. 6.65
Utilities
Electric.......................... 2.52
------
Total U.S. Equities............. 94.79*
SHORT-TERM INVESTMENTS............. 5.09*
------
TOTAL INVESTMENTS............... 99.88
CASH AND OTHER ASSETS,
LESS LIABILITIES.................. 0.12
------
NET ASSETS......................... 100.00%
======
</TABLE>
* The Fund held a long position in stock index futures on June 30, 1998 which
increased U.S. equity exposure from 94.79% to 98.32% and reduced exposure to
short-term investments from 5.09% to 1.56%.
Top 10 U.S. Equity Holdings
As of June 30, 1998
<TABLE>
<CAPTION>
Percent of
Net Assets
- ----------------------------------------------------
<S> <C>
1. Xerox Corp. 6.84%
2. Lockheed Martin Corp. 6.74
3. Burlington Northern Santa Fe Corp. 6.19
4. Aon Corp. 4.77
5. FDX Corp. 4.57
6. Philip Morris Companies, Inc. 4.52
7. Automatic Data Processing, Inc. 3.60
8. Goodyear Tire & Rubber Co. 3.50
9. CIGNA Corp. 3.37
10. Schering Plough Corp. 3.34
- ----------------------------------------------------
</TABLE>
35
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- SCHEDULE OF
INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
U.S. Equities -- 94.79%
Aetna Life & Casualty Co.................................... 3,900 $ 296,888
American Home Products Corp................................. 6,100 315,675
Aon Corp.................................................... 11,000 772,750
Automatic Data Processing, Inc.............................. 8,000 583,000
BankBoston Corp............................................. 3,600 200,250
Baxter International, Inc................................... 10,000 538,125
Bestfoods................................................... 5,400 313,538
Burlington Northern Santa Fe Corp........................... 10,200 1,001,512
CIGNA Corp.................................................. 7,900 545,100
Citicorp.................................................... 300 44,775
Columbia/HCA Healthcare Corp................................ 1,900 55,338
Comerica, Inc............................................... 2,500 165,625
Corning, Inc................................................ 14,600 507,350
Covance, Inc. (b)........................................... 3,100 69,750
Crown Cork & Seal Co., Inc.................................. 2,900 137,750
EMC Corp. (b)............................................... 5,500 246,469
Enron Corp.................................................. 6,800 367,625
Entergy Corp................................................ 14,200 408,250
FDX Corp. (b)............................................... 11,800 740,450
First Data Corp............................................. 14,800 493,025
Fleet Financial Group, Inc.................................. 3,800 317,300
Gannett Co., Inc............................................ 2,200 156,338
Goodyear Tire & Rubber Co................................... 8,800 567,050
Kimberly Clark Corp......................................... 11,500 527,562
Lockheed Martin Corp........................................ 10,300 1,090,512
Masco Corp.................................................. 7,200 435,600
Norfolk Southern Corp....................................... 5,900 175,894
Philip Morris Companies, Inc................................ 18,600 732,375
Praxair, Inc................................................ 5,700 266,831
Raytheon Co., Class B....................................... 8,000 473,000
Schering Plough Corp........................................ 5,900 540,587
Seagate Technology, Inc. (b)................................ 5,500 130,969
Sears, Roebuck and Co....................................... 6,300 384,694
US Bancorp.................................................. 7,900 339,700
Wells Fargo & Co............................................ 800 295,200
Xerox Corp.................................................. 10,900 1,107,712
-----------
Total U.S. Equities Stock (Cost $15,532,291)................ 15,344,569
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
-------- -----------
<S> <C> <C>
Short-Term Investments -- 5.09%
COMMERCIAL PAPER -- 5.09%
NGC Corp., 6.750%, due 07/01/98........................... $424,000 $ 424,000
Raytheon Co., 7.000%, due 07/01/98........................ 400,000 400,000
-----------
Total Short-Term Investments
(Cost $824,000).......................................... 824,000
-----------
Total Investments
(Cost $16,356,291) -- 99.88% (a)......................... 16,168,569
-----------
Cash and other assets, less
liabilities -- 0.12%..................................... 18,804
-----------
Net Assets -- 100%........................................ $16,187,373
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
36
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- SCHEDULE OF
INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $16,356,291; and net
unrealized depreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................. $ 317,890
Gross unrealized depreciation................................. (505,612)
---------
Net unrealized depreciation................................. $(187,722)
=========
</TABLE>
(b) Non-income producing security
FUTURES CONTRACTS
The U.S. Large Capitalization Equity Fund had the following open futures
contracts as of June 30, 1998:
<TABLE>
<CAPTION>
SETTLEMENT COST/ CURRENT UNREALIZED
DATE PROCEEDS VALUE GAIN
-------------- -------- -------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CONTRACTS
Standard & Poor's 500, 2 con-
tracts...................... September 1998 $562,464 $571,500 $9,036
======
</TABLE>
The segregated cash pledged to cover margin requirements for the open futures
positions at June 30, 1998 was $20,100.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $16,356,291)......................... $16,168,569
Cash............................................................. 25,077
Receivables:
Dividends....................................................... 26,247
Due from Advisor................................................ 2,759
Fund shares sold................................................ 41,691
Other assets..................................................... 35,562
-----------
TOTAL ASSETS.................................................. 16,299,905
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 56,256
Variation margin................................................ 4,250
Accrued expenses................................................ 52,026
-----------
TOTAL LIABILITIES............................................. 112,532
-----------
NET ASSETS........................................................ $16,187,373
===========
NET ASSETS CONSIST OF:
Paid in capital.................................................. $16,423,723
Accumulated undistributed net investment income.................. 11,637
Accumulated net realized loss.................................... (69,301)
Net unrealized depreciation...................................... (178,686)
-----------
NET ASSETS.................................................... $16,187,373
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $153,503 and 15,666 shares issued and
outstanding)................................................... $ 9.80
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$16,032,852 and 1,638,635 shares issued and outstanding)....... $ 9.78
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,018 and 104 shares issued and outstanding).................. $ 9.79
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
38
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1998*
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends.......................................................... $ 49,557
Interest........................................................... 14,677
---------
TOTAL INCOME.................................................... 64,234
---------
EXPENSES:
Advisory........................................................... 21,230
Professional....................................................... 10,880
Distribution....................................................... 7,537
Other.............................................................. 16,142
---------
TOTAL EXPENSES.................................................. 55,789
Expenses waived and reimbursed by Advisor....................... (23,989)
---------
NET EXPENSES.................................................... 31,800
---------
NET INVESTMENT INCOME .......................................... 32,434
---------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments....................................................... (71,182)
Futures contracts................................................. 1,881
---------
Net realized loss............................................... (69,301)
---------
Change in net unrealized appreciation or depreciation on:
Investments....................................................... (187,722)
Futures contracts................................................. 9,036
---------
Change in net unrealized appreciation or depreciation.............. (178,686)
---------
Net realized and unrealized loss................................... (247,987)
---------
Net decrease in net assets resulting from operations............... $(215,553)
=========
</TABLE>
*The Fund commenced operations on April 6, 1998.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
39
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
APRIL 6,
1998* THROUGH
JUNE 30, 1998
OPERATIONS: -------------
<S> <C>
Net investment income........................................... $ 32,434
Net realized loss............................................... (69,301)
Change in net unrealized appreciation or depreciation........... (178,686)
-----------
Net decrease in net assets resulting from operations............ (215,553)
-----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................................ (191)
Brinson Class N................................................ (20,605)
SwissKey Class................................................. (1)
-----------
Total distributions to shareholders............................. (20,797)
-----------
CAPITAL SHARE TRANSACTIONS:
Shares sold..................................................... 16,922,491
Shares issued on reinvestment of distributions.................. 20,775
Shares redeemed................................................. (519,553)
-----------
Net increase in net assets resulting from capital share
transactions................................................... 16,423,713
-----------
TOTAL INCREASE IN NET ASSETS................................. 16,187,363
-----------
NET ASSETS:
Beginning of period............................................. 10
-----------
End of period (including accumulated undistributed net invest-
ment
income of $11,637)............................................. $16,187,373
===========
</TABLE>
*Commencement of investment operations
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
40
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
APRIL 6, 1998*
THROUGH
BRINSON CLASS I JUNE 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period............................. $ 10.00
-------
Income from investment operations:
Net investment income.......................................... 0.02
Net realized and unrealized loss............................... (0.20)
-------
Total loss from investment operations........................ (0.18)
-------
Less distributions:
Distributions from net investment income....................... (0.02)
Distributions from net realized gain........................... --
-------
Total distributions.......................................... (0.02)
-------
Net asset value, end of period................................... $ 9.80
=======
Total return (non-annualized).................................... (1.83)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)............................. $154
Ratio of expenses to average net assets:
Before expense reimbursement................................... 1.59%**
After expense reimbursement.................................... 0.80%**
Ratio of net investment income to average net assets:
Before expense reimbursement................................... 0.52%**
After expense reimbursement.................................... 1.31%**
Portfolio turnover rate......................................... 12%
Average commission rate paid per share.......................... $0.0350
</TABLE>
*Commencement of investment operations
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
41
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
APRIL 6,
1998* THROUGH
BRINSON CLASS N JUNE 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period.............................. $ 10.00
-------
Income from investment operations:
Net investment income........................................... 0.02
Net realized and unrealized loss................................ (0.23)
-------
Total loss from investment operations......................... (0.21)
-------
Less distributions:
Distributions from net investment income........................ (0.01)
Distributions from net realized gain............................ --
-------
Total distributions........................................... (0.01)
-------
Net asset value, end of period.................................... $ 9.78
=======
Total return (non-annualized)..................................... (2.02)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s).............................. $16,033
Ratio of expenses to average net assets:
Before expense reimbursement.................................... 1.84%**
After expense reimbursement..................................... 1.05%**
Ratio of net investment income to average net assets:
Before expense reimbursement.................................... 0.27%**
After expense reimbursement..................................... 1.06%**
Portfolio turnover rate.......................................... 12%
Average commission rate paid per share........................... $0.0350
</TABLE>
*Commencement of investment operations.
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
42
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
APRIL 6, 1998*
THROUGH
SWISSKEY CLASS JUNE 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period............................. $ 10.00
-------
Income from investment operations:
Net investment income.......................................... 0.02
Net realized and unrealized loss............................... (0.22)
-------
Total loss from investment operations........................ (0.20)
-------
Less distributions:
Distributions from net investment income....................... (0.01)
Distributions from net realized gain........................... --
-------
Total distributions.......................................... (0.01)
-------
Net asset value, end of period................................... $ 9.79
=======
Total return (non-annualized).................................... (2.06)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)............................. $ 1
Ratio of expenses to average net assets:
Before expense reimbursement................................... 2.11%**
After expense reimbursement.................................... 1.32%**
Ratio of net investment income to average net assets:
Before expense reimbursement................................... 0.00%**
After expense reimbursement.................................... 0.79%**
Portfolio turnover rate......................................... 12%
Average commission rate paid per share.......................... $0.0350
</TABLE>
*Commencement of investment operations
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
43
<PAGE>
U.S. Bond Fund
[ART]
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.
The first half of 1998 in U.S. fixed income markets was characterized by
unusually low volatility, stable short-term interest rates and modestly
declining long-term interest rates. The Federal Reserve's overnight funds
target rate has not changed in the past fifteen months. Inflation has remained
stable at historically low levels despite robust economic growth and a tight
labor market. Higher domestic productivity and lower import prices due to a
strong dollar and troubled foreign economies has allowed the U.S. economy to
continue to grow without an acceleration in inflation.
The Brinson U.S. Bond Fund Class I has produced an annualized return of 7.97%
since its inception on August 31, 1995, compared to an 8.01% return for the
Salomon Brothers Broad Investment Grade Bond Index. The annualized volatility of
returns for the Fund was 4.16% compared to 3.46% for the index. In the most
recent six month period the Fund returned 3.77% relative to a 3.97% return
for the index.
Industry Diversification
As a Percent of Net Assets
As of June 30, 1998
- --------------------------------------------------------------------------------
U.S. BONDS
Corporate Bonds
Airlines.......................................................... 0.18%
Asset-Backed...................................................... 5.50
Banks............................................................. 1.35
Business and Public Service....................................... 0.97
CMO............................................................... 8.78
Consumer.......................................................... 0.50
Energy............................................................ 1.40
Financial Services................................................ 4.27
Industrial Components............................................. 4.25
Real Estate....................................................... 0.54
Telecommunications................................................ 1.38
-------
Total U.S. Corporate Bonds..................................... 29.12
U.S. Government Agencies........................................... 25.30
U.S. Government Obligations........................................ 25.05
International Dollar Bonds......................................... 7.10
-------
Total U.S. Bonds............................................... 86.57
-------
SHORT-TERM INVESTMENTS............................................. 11.58
-------
TOTAL INVESTMENTS.............................................. 98.15
CASH AND OTHER ASSETS, LESS LIABILITIES............................ 1.85
-------
NET ASSETS......................................................... 100.00%
=======
- --------------------------------------------------------------------------------
44
<PAGE>
U.S. Bond Fund
[ART]
<TABLE>
<CAPTION>
Total Return
6 months 1 year Annualized
ended ended 8/31/95* to
6/30/98 6/30/98 6/30/98
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson U.S. Bond Fund Class I 3.77% 10.60% 7.97%
- -------------------------------------------------------------------------------------
Salomon Brothers Broad Investment
Grade (BIG) Bond Index 3.97 10.59 8.01
- -------------------------------------------------------------------------------------
</TABLE>
* Inception date of the Brinson U.S. Bond Fund Class I.
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 Class I and the Salomon Brothers Broad Investment Grade (BIG) Bond
Index if you had invested $1,000,000 on August 31, 1995, and had reinvested all
your income dividends and capital gain distributions through June 30, 1998. No
adjustment has been made for any income taxes payable by shareholders
on income dividends and capital gain distributions. Past performance is no
guarantee of future results. Share price and return will vary with market
conditions; investors may realize a gain or loss upon redemption.
Brinson U.S. Bond Fund Class I
vs. Salomon Brothers BIG Bond Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
BRINSON U.S. BOND SALOMON BROTHERS
FUND CLASS I BIG BOND INDEX
8/31/95 1,000,000 1,000,000
12/31/95 1,054,932 1,053,220
6/30/96 1,035,997 1,040,029
12/31/96 1,092,169 1,091,411
6/30/97 1,123,558 1,124,790
12/31/97 1,197,458 1,196,413
6/30/98 1,242,614 1,243,892
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.
45
<PAGE>
U.S. Bond Fund
[ART APPEARS HERE]
Total Return
<TABLE>
<CAPTION>
6 months 6/30/97
ended to
6/30/98 6/30/98
- --------------------------------------------------------------------------------
<S> <C> <C>
Brinson U.S. Bond Fund Class N 3.55% 10.30%
- --------------------------------------------------------------------------------
Salomon Brothers Broad Investment Grade (BIG) Bond Index 3.97 10.59
- --------------------------------------------------------------------------------
</TABLE>
* Inception date of the Brinson U.S. Bond Fund Class N.
Total return includes reinvestment of all capital gain and income distributions.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Bond Fund Class N and the Salomon Brothers Broad Investment Grade (BIG) Bond
Index if you had invested $1,000,000 on June 30, 1997, and had reinvested all
your income dividends and capital gain distributions through June 30, 1998. No
adjustment has been made for any income taxes payable by shareholders on income
dividends and capital gain distributions. Past performance is no guarantee of
future results. Share price and return will vary with market conditions;
investors may realize a gain or loss upon redemption.
Brinson U.S. Bond Fund Class N
vs. Salomon Brothers BIG Bond Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. Bond Fund Salomon Brothers BIG
Class N Bond Index
- --------------------------------------------------------------------------------
<S> <C> <C>
6/30/97 $1,000,000 $1,000,000
8/31/97 1,021,484 1,018,267
10/31/97 1,049,805 1,048,011
12/31/97 1,065,178 1,063,676
2/28/98 1,076,488 1,076,644
4/30/98 1,084,714 1,086,463
6/30/98 1,103,029 1,105,887
- --------------------------------------------------------------------------------
</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.
46
<PAGE>
U.S. BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Bonds -- 86.57%
U.S. CORPORATE BONDS -- 29.12%
Aetna Services Inc., 6.970%, due 08/15/36............... $ 235,000 $ 242,980
Bellsouth Savings & Employee ESOP, 9.125%, due 07/01/03. 81,528 88,101
Capital One Bank, 6.830%, due 05/17/99.................. 359,000 361,020
Chase Mortgage Finance Corp., 93-J1, Class 1A5, 6.625%,
due 08/25/09........................................... 65,055 64,776
Chemical Mortgage Securities, Inc., 93-1, Class A5,
7.450%, due 02/25/23................................... 785,000 794,925
Chesapeake & Potomac Telephone of Maryland, 8.000%, due
10/15/29............................................... 87,000 107,317
Chrysler Corp., 7.400%, due 08/01/97.................... 223,000 240,690
Citicorp Mortgage Securities, Inc., 94-9, Class A8,
5.750%, due 06/25/09................................... 97,953 93,170
Comcast Cable Communications,
8.500%, due 05/01/27................................... 300,000 361,420
Con Edison, 6.450%, due 12/01/07........................ 300,000 306,595
Continental Airlines Inc., 98-1B,
6.748%, due 09/15/18................................... 75,000 76,252
Countrywide Funding Corp. FRN,
5.880%, due 12/01/03................................... 250,000 248,125
CS First Boston Mortgage Securities Corp., 7.150%, due
08/20/06............................................... 245,000 257,556
Dayton Hudson Credit Card Master Trust, 95-1, Class A,
6.100%, due 02/25/02................................... 218,000 218,266
DLJ Mortgage Acceptance Corp., 98-2, 6.500%, due
08/19/28............................................... 520,000 513,500
First Bank Corporate Card Master Trust, 97-1, Class A,
6.400%, due 02/15/03................................... 155,000 157,791
GE Capital Mortgage Services, Inc., 97-HE4, Class A7,
6.735%, due 12/25/28................................... 410,000 417,552
General Motors Acceptance Corp.,
6.375%, due 12/01/01................................... 400,000 404,522
General Motors Acceptance Corp.,
9.625%, due 12/15/01................................... 294,000 326,490
GreenTree Financial Corp., 94-5, Class A5, 8.300%, due
11/15/19............................................... 320,000 352,659
Interamer Development Bank,
6.800%, due 10/15/25................................... 100,000 111,784
Lehman Brothers Holdings,
7.250%, due 04/15/03................................... 225,000 234,439
Lockheed Martin Corp.,
7.700%, due 06/15/08................................... 282,000 310,374
MBNA Global Capital Securities FRN, 6.519%, due
02/01/27............................................... 90,000 83,652
Mid-America Energy,
6.375%, due 06/15/06................................... 275,000 273,749
News America Holdings,
7.750%, due 12/01/45................................... 358,000 384,198
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
PanAmSat Corp. 144A,
6.000%, due 01/15/03................................... $ 375,000 $ 371,254
PNC Mortgage Securities Corp., 94-3, Class A8, 7.500%,
due 07/25/24........................................... 215,000 223,330
Premier Auto Trust
96-3, Class A3, 6.500%, due 03/06/00................... 139,058 139,486
96-4, Class A4, 6.400%, due 10/06/01................... 350,000 352,611
Prudential Home Mortgage Securities 93-43, Class A9,
6.750%, due 10/25/23................................... 287,826 289,035
94-3, Class A10, 6.500%, due 02/25/24.................. 170,000 164,737
Residential Accredit Loans, Inc., 96-QS4, Class AI10,
7.900%, due 08/25/26................................... 275,000 285,092
Salomon, Inc., 6.750%, due 02/15/03..................... 300,000 307,297
SASCO LLC, 98-RF1, Class A,
8.712%, due 03/15/27................................... 539,306 578,405
The Money Store Home Equity Trust, 98-A, Class AF5,
6.370%, due 12/15/23................................... 465,000 467,269
Thrift Financing Corp., A, Class 4,
11.250%, due 01/01/16.................................. 43,328 46,075
Time Warner Entertainment, Inc.,
8.375%, due 03/15/23................................... 94,000 110,051
Time Warner, Inc., 7.570%, due 02/01/24................. 90,000 97,441
UCFC Home Equity Loan FRN, 97-C, Class A8, 5.888%, due
09/15/27............................................... 166,772 166,959
USA Waste Services,
6.500%, due 12/15/02................................... 400,000 402,368
USX Corp., 8.125%, due 07/15/23......................... 400,000 457,576
Vendee Mortgage Trust, 92-1, Class 2Z, 7.750%, due
05/15/22............................................... 492,787 540,023
-----------
12,030,912
-----------
INTERNATIONAL DOLLAR BONDS -- 7.10%
Banco Santiago S.A.,
7.000%, due 07/18/07................................... 380,000 381,497
Empressa Nacional Electric,
7.875%, due 02/01/27................................... 394,000 394,187
Den Danske Bank, 144A,
6.375%, due 06/15/08................................... 560,000 561,401
Province of Quebec,
7.500%, due 07/15/23................................... 200,000 222,346
Repsol International Finance,
7.000%, due 08/01/05................................... 200,000 212,082
Republic of South Africa,
9.625%, due 12/15/99................................... 71,000 73,840
Royal Bank of Scotland, 7.375%, Resettable Perpetual
Preferred.............................................. 80,000 85,191
Skandinaviska Enskilda Banken, 144A, Resettable Perpet-
ual Preferred.......................................... 305,000 306,647
Tyco International Group,
6.250%, due 06/15/03................................... 700,000 697,913
-----------
2,935,104
-----------
</TABLE>
- --------------------------------------------------------------------------------
47
<PAGE>
U.S. BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES -- 25.30%
Aid-Israel, Series 10 Z, 0.000%, due 02/15/03........... $ 805,000 $ 622,539
Federal Home Loan Mortgage Corp.
7.000%, due 10/15/13................................... 492,125 507,333
8.500%, due 07/15/21................................... 102,207 106,179
7.500%, due 01/15/23................................... 151,427 162,242
7.238%, due 05/01/26................................... 27,260 28,209
Federal Home Loan Mortgage Corp. Gold
6.000%, due 06/01/03................................... 90,031 89,806
8.000%, due 11/01/22................................... 156,826 162,021
9.000%, due 03/01/24................................... 121,218 129,826
Federal National Mortgage Assoc.
6.959%, due 08/01/07................................... 486,332 513,762
6.361%, due 06/01/08................................... 430,000 440,191
8.000%, due 12/18/11................................... 100,000 106,426
6.000%, due 12/01/12 TBA............................... 160,000 158,199
8.000%, due 05/25/21................................... 260,000 269,010
9.000%, due 08/01/21................................... 25,369 27,155
8.500%, due 07/01/22................................... 17,764 18,781
9.500%, due 08/01/22................................... 111,949 119,400
8.000%, due 11/01/23................................... 210,810 41,680
7.000%, due 12/18/24................................... 300,000 302,625
9.000%, due 04/25/25................................... 227,003 238,170
6.000%, due 12/01/27 TBA............................... 2,000,000 1,945,610
7.500%, due 01/01/28................................... 377,668 387,340
6.000%, due 03/01/28................................... 741,026 721,255
Federal National Mortgage Assoc. Strips
0.000%, due 09/25/22 principal only.................... 526,998 484,264
7.500%, due 05/01/23 interest only..................... 150,875 34,289
0.000%, due 04/01/27 principal only.................... 346,881 293,500
3.500%, due 05/01/28 interest only..................... 293,559 252,132
Government National Mortgage Assoc.
10.000%, due 09/15/00.................................. 2,234 2,385
10.000%, due 05/15/01.................................. 3,149 3,362
9.000%, due 11/15/04................................... 8,857 9,333
9.000%, due 11/15/04................................... 4,759 5,015
9.000%, due 12/15/17................................... 48,048 51,917
8.000%, due 08/15/22................................... 66,477 68,866
7.500%, due 12/15/22................................... 320,163 329,825
7.500%, due 12/15/23................................... 383,643 394,075
7.500%, due 01/15/24................................... 86,110 88,452
7.000%, due 02/16/24................................... 150,000 151,857
7.375%, due 06/20/24................................... 303,265 310,813
7.500%, due 06/15/25................................... 107,318 110,290
7.000%, due 07/15/25................................... 111,670 113,551
Jordan Aid, 8.750%, due 09/01/19........................ 517,177 650,246
-----------
10,451,931
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS-- 25.05%
U.S. Treasury Notes and Bonds
5.500%, due 02/29/00................................... $4,735,000 $ 4,733,523
6.625%, due 07/31/01................................... 2,875,000 2,961,250
6.250%, due 08/31/02................................... 360,000 369,338
3.625%, due 01/15/08................................... 357,056 353,039
8.000%, due 11/15/21................................... 1,060,000 1,366,407
6.000%, due 02/15/26................................... 545,000 566,971
-----------
10,350,528
-----------
Total U.S. Bonds (Cost $35,235,550)..................... 35,768,475
-----------
Short-Term Investments-- 11.58%
COMMERCIAL PAPER -- 11.58%
ARCO Chemical, 5.770%, due 07/06/98..................... 1,000,000 999,199
Cincinnati Bell Inc., 6.599%, due 07/01/98.............. 270,000 270,000
NGC Corp., 6.750%, due 07/01/98......................... 500,000 500,000
PG & E Gas Transmission,
5.670%, due 07/02/98................................... 521,000 520,918
Raytheon Co., 6.996%, due 07/01/98...................... 500,000 500,000
Tenneco Inc., 5.750%, due 07/17/98...................... 1,000,000 997,604
Texas Utilities Co., 6.100%, due 07/17/98............... 1,000,000 997,289
-----------
Total Short-Term Investments
(Cost $4,785,010)...................................... 4,785,010
-----------
Total Investments
(Cost $40,020,560) -- 98.15% (a)....................... 40,553,485
-----------
Cash and other assets, less liabilities -- 1.85%........ 764,939
-----------
Net Assets -- 100%...................................... $41,318,424
===========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $40,020,560; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized ap-
preciation........... $613,576
Gross unrealized de-
preciation........... (80,651)
--------
Net unrealized ap-
preciation........... $532,925
========
</TABLE>
FRN: Floating rate note -- The rate disclosed is that in effect at June 30,
1998.
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30,
1998, the value of these securities amounted to $1,239,302, or 3.00% 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.
- --------------------------------------------------------------------------------
48
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $40,020,560).......................... $40,553,485
Cash.............................................................. 14,172
Receivables:
Investment securities sold....................................... 2,352,284
Fund shares sold................................................. 2,732,416
Interest......................................................... 427,521
Other assets...................................................... 10,252
-----------
TOTAL ASSETS................................................... 46,090,130
-----------
LIABILITIES:
Payables:
Investment securities purchased.................................. 4,712,267
Fund shares redeemed............................................. 6,893
Investment advisory fees......................................... 11,802
Accrued expenses................................................. 40,744
-----------
TOTAL LIABILITIES.............................................. 4,771,706
-----------
NET ASSETS......................................................... $41,318,424
===========
NET ASSETS CONSIST OF:
Paid in capital................................................... $40,134,461
Accumulated undistributed net investment income................... 300,973
Accumulated net realized gain..................................... 350,065
Net unrealized appreciation....................................... 532,925
-----------
NET ASSETS..................................................... $41,318,424
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $38,873,821 and 3,674,422 shares issued
and outstanding)................................................ $ 10.58
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,100 and 104 shares issued and outstanding)................... $ 10.58
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$2,443,503 and 231,723 shares issued and outstanding)........... $ 10.54
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
49
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest........................................................... $1,818,237
----------
TOTAL INCOME.................................................... 1,818,237
----------
EXPENSES:
Advisory........................................................... 142,474
Professional....................................................... 37,230
Registration....................................................... 17,245
Distribution....................................................... 9,160
Other.............................................................. 41,928
----------
TOTAL EXPENSES.................................................. 248,037
Expenses waived by Advisor...................................... (67,848)
----------
NET EXPENSES.................................................... 180,189
----------
NET INVESTMENT INCOME .......................................... 1,638,048
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain.................................................. 801,133
Change in net unrealized appreciation or depreciation.............. 335,673
----------
Net realized and unrealized gain................................... 1,136,806
----------
Net increase in net assets resulting from operations............... $2,774,854
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
50
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
YEAR ENDED
ENDED JUNE 30,
JUNE 30, 1998 1997
OPERATIONS: ------------- -----------
<S> <C> <C>
Net investment income.............................. $ 1,638,048 $ 836,232
Net realized gain (loss)........................... 801,133 (36,166)
Change in net unrealized appreciation or deprecia-
tion.............................................. 335,673 343,515
----------- -----------
Net increase in net assets resulting from opera-
tions............................................. 2,774,854 1,143,581
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................... (1,526,152) (598,393)
Brinson Class N................................... (54) --
SwissKey Class.................................... (103,513) (31,712)
Distributions from net realized gain:
Brinson Class I................................... (335,742) (675)
Brinson Class N................................... (14) --
SwissKey Class.................................... (25,812) (39)
----------- -----------
Total distributions to shareholders................ (1,991,287) (630,819)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................ 21,794,978 16,583,813
Shares issued on reinvestment of distributions..... 1,174,894 461,917
Shares redeemed.................................... (6,255,720) (3,420,321)
----------- -----------
Net increase in net assets resulting from capital
share transactions................................ 16,714,152 13,625,409
----------- -----------
TOTAL INCREASE IN NET ASSETS.................... 17,497,719 14,138,171
----------- -----------
NET ASSETS:
Beginning of year.................................. 23,820,705 9,682,534
----------- -----------
End of year (including accumulated undistributed
net investment
income of $300,973 and $271,841, respectively).... $41,318,424 $23,820,705
=========== ===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
51
<PAGE>
U.S. BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
AUGUST 31, 1995*
YEAR ENDED YEAR ENDED THROUGH
BRINSON CLASS I JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of pe-
riod............................. $ 10.24 $ 9.93 $10.00
------- ------- ------
Income from investment opera-
tions:
Net investment income........... 0.53 0.51*** 0.50
Net realized and unrealized gain
(loss)......................... 0.53 0.32 (0.14)
------- ------- ------
Total income from investment
operations................... 1.06 0.83 0.36
------- ------- ------
Less distributions:
Distributions from net invest-
ment income.................... (0.58) (0.52) (0.40)
Distributions in excess of net
realized gain.................. (0.14) -- (0.03)
------- ------- ------
Total distributions........... (0.72) (0.52) (0.43)
------- ------- ------
Net asset value, end of period.... $ 10.58 $ 10.24 $ 9.93
======= ======= ======
Total return (non-annualized)..... 10.60% 8.45% 3.60%
Ratios/Supplemental Data:
Net assets, end of period (in
000s)........................... $38,874 $22,421 $9,047
Ratio of expenses to average net
assets:
Before expense reimbursement.... 0.84% 1.65% 3.63%**
After expense reimbursement..... 0.60% 0.60% 0.60%**
Ratio of net investment income to
average net assets:
Before expense reimbursement.... 5.61% 5.14% 3.00%**
After expense reimbursement..... 5.85% 6.19% 6.03%**
Portfolio turnover rate.......... 198% 410% 363%
</TABLE>
*Commencement of investment operations
**Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
52
<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>
YEAR ENDED
BRINSON CLASS N JUNE 30, 1998*
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period............................. $10.24
------
Income from investment operations:
Net investment income.......................................... 0.61
Net realized and unrealized gain............................... 0.42
------
Total income from investment operations...................... 1.03
------
Less distributions:
Distributions from net investment income....................... (0.55)
Distributions from net realized gain........................... (0.14)
------
Total distributions.......................................... (0.69)
------
Net asset value, end of period................................... $10.58
======
Total return (non-annualized).................................... 10.30%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)............................. $ 1
Ratio of expenses to average net assets:
Before expense reimbursement................................... 1.09%
After expense reimbursement.................................... 0.85%
Ratio of net investment income to average net assets:
Before expense reimbursement................................... 5.36%
After expense reimbursement.................................... 5.60%
Portfolio turnover rate......................................... 198%
</TABLE>
*Commencement of Brinson Class N was June 30, 1997.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
53
<PAGE>
U.S. BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
AUGUST 31, 1995*
YEAR ENDED YEAR ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of pe-
riod............................. $10.22 $ 9.92 $10.00
------ ------ ------
Income from investment opera-
tions:
Net investment income........... 0.50 0.46*** 0.46
Net realized and unrealized gain
(loss)......................... 0.49 0.32 (0.13)
------ ------ ------
Total income from investment
operations................... 0.99 0.78 0.33
------ ------ ------
Less distributions:
Distributions from net invest-
ment income.................... (0.53) (0.48) (0.38)
Distributions in excess of net
realized gain.................. (0.14) -- (0.03)
------ ------ ------
Total distributions........... (0.67) (0.48) (0.41)
------ ------ ------
Net asset value, end of period.... $10.54 $10.22 $ 9.92
====== ====== ======
Total return (non-annualized)..... 9.97% 7.91% 3.24%
Ratios/Supplemental Data:
Net assets, end of period (in
000s)........................... $2,444 $1,399 $ 636
Ratio of expenses to average net
assets:
Before expense reimbursement.... 1.31% 2.12% 4.10%**
After expense reimbursement..... 1.07% 1.07% 1.07%**
Ratio of net investment income to
average net assets:
Before expense reimbursement.... 5.14% 4.67% 2.53%**
After expense reimbursement..... 5.38% 5.72% 5.56%**
Portfolio turnover rate.......... 198% 410% 363%
</TABLE>
*Commencement of investment operations
**Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
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 eight series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund (each a
"Fund" and collectively, the "Funds"). Each Fund has three classes of shares
outstanding, Brinson Class I, Brinson Class N and 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,
U.S. Large Capitalization Equity Fund and U.S. Bond Fund in the preparation of
their financial statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Equity securities traded over-the-counter are valued at the
most recent bid price. Securities for which the most recent bid price or market
quotations are not readily available, including restricted securities which are
subject to limitations on their sale, are valued at fair value as determined in
good faith by or under the direction of the Trust's Board of Trustees. Debt
securities are valued at the most recent bid price by using market quotations
or independent services. Futures contracts are valued at the settlement price
established each day on the exchange on which they are traded. Short-term
obligations with a maturity of 60 days or less are valued at amortized cost,
which approximates market value.
B.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
C.INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date.
D.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the year ended June 30, 1998,
therefore, no federal income tax provision was required.
E.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Differences in dividends per share between the classes
are due to distribution expenses. Amounts equal to 10.72%, 35.30% and 100% of
the amount taxable as ordinary income qualify for the dividends received
deduction available to corporate shareholders for the U.S. Balanced Fund, U.S.
Equity Fund and U.S. Large Capitalization Equity Fund, respectively.
F.INCOME AND EXPENSE ALLOCATIONS: All income earned and expenses incurred by
the Funds will be borne on a pro rata basis by each of the classes, except that
the Brinson Class I will not incur any of the distribution expenses of the
Brinson Class N nor the SwissKey Class.
G.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
- --------------------------------------------------------------------------------
55
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, each Fund pays the Advisor a monthly fee based on the Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates for the year
ended June 30, 1998, were as follows:
<TABLE>
<CAPTION>
FEES
WAIVED
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY AND/OR
FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES REIMBURSED
-------- --------------- --------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Balanced Fund...... 0.70% 0.80% 1.05% 1.30% $1,674,661 $19,097
U.S. Equity Fund........ 0.70 0.80 1.05 1.32 3,792,120 --
U.S. Large Capitaliza-
tion Equity Fund....... 0.70 0.80 1.05 1.32 21, 230 23,989
U.S. Bond Fund.......... 0.50 0.60 0.85 1.07 142,474 67,848
</TABLE>
Certain officers of the Funds are also officers of the Advisor. All officers
serve without direct compensation from the Funds. Trustees' fees paid to
unaffiliated trustees for the year ended June 30, 1998 were $7,665, $9,205,
$1,785 and $4,015 for the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund and U.S. Bond Fund, respectively.
3.INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1998, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Balanced Fund................................... $415,621,140 $630,096,518
U.S. Equity Fund..................................... 413,499,173 218,951,890
U.S. Large Capitalization Equity Fund................ 17,063,797 1,460,325
U.S. Bond Fund....................................... 65,711,529 52,607,836
</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 distribution plans (the "Plans") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for the Brinson Class N
and the SwissKey Class. Each Plan governs payments made for the expenses
incurred in the promotion and distribution of the Brinson Class N and the
SwissKey Class. Annual fees under the Brinson Class N Plan shall not exceed
0.25% of the average daily net assets of the Brinson Class N of the U.S.
Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund and U.S.
Bond Fund. Annual fees under the SwissKey Plan, which include a 0.25% service
fee, total 0.50%, 0.52%, 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, U.S. Large
Capitalization Equity Fund and U.S. Bond Fund, respectively.
6.LINE OF CREDIT
The Trust has entered into an agreement with Chase Manhattan Bank to provide a
364 day $100 million committed line of credit to the Funds. Borrowings will be
made for temporary purposes. Interest on amounts borrowed is calculated at an
annual rate of the Federal Funds rate plus 0.50%. The Funds pay an annual
commitment fee of 0.08% of the average daily unutilized balance of the line of
credit. During the year ended June 30, 1998, the Funds had no borrowings under
the agreement.
- --------------------------------------------------------------------------------
56
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
U.S. BALANCED FUND
-----------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.............. 4,720,912 $ 58,173,143 6,578,157 $ 78,728,712
Brinson Class N.............. -- -- 80 1,000
SwissKey Class............... 49,659 624,713 148,317 1,798,818
---------- ------------ ---------- ------------
Total Sales................ 4,770,571 $ 58,797,856 6,726,554 $ 80,528,530
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I.............. 2,662,862 $ 31,359,575 1,541,262 $ 18,266,191
Brinson Class N.............. 11 136 -- --
SwissKey Class............... 14,933 175,706 3,904 46,232
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 2,677,806 $ 31,535,417 1,545,166 $ 18,312,423
========== ============ ========== ============
Redemptions:
Brinson Class I.............. 23,388,425 $293,534,522 4,988,208 $ 59,912,281
Brinson Class N.............. -- -- -- --
SwissKey Class............... 42,682 540,673 86,625 1,050,388
---------- ------------ ---------- ------------
Total Redemptions.......... 23,431,107 $294,075,195 5,074,833 $ 60,962,669
========== ============ ========== ============
<CAPTION>
U.S. EQUITY FUND
-----------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.............. 16,875,765 $314,205,812 11,551,336 $183,660,431
Brinson Class N.............. 13,398 269,368 57 1,000
SwissKey Class............... 1,697,355 31,606,780 1,834,556 28,733,451
---------- ------------ ---------- ------------
Total Sales................ 18,586,518 $346,081,960 13,385,949 $212,394,882
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I.............. 1,861,660 $ 32,092,717 907,559 $ 13,745,444
Brinson Class N.............. 47 896 -- --
SwissKey Class............... 110,158 1,887,716 25,905 393,121
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 1,971,865 $ 33,981,329 933,464 $ 14,138,565
========== ============ ========== ============
Redemptions:
Brinson Class I.............. 7,470,182 $144,565,891 1,959,184 $ 31,250,336
Brinson Class N.............. 5 100 -- --
SwissKey Class............... 1,023,014 19,298,428 237,473 3,720,862
---------- ------------ ---------- ------------
Total Redemptions.......... 8,493,201 $163,864,419 2,196,657 $ 34,971,198
========== ============ ========== ============
<CAPTION>
U.S. LARGE
CAPITALIZATION EQUITY
FUND*
-----------------------
PERIOD ENDED
JUNE 30, 1998*
-----------------------
SHARES VALUE
---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.............. 16,662 $ 163,328
Brinson Class N.............. 1,688,092 16,758,163
SwissKey Class............... 104 1,000
---------- ------------
Total Sales................ 1,704,858 $ 16,922,491
========== ============
Dividend Reinvestment:
Brinson Class I.............. 18 $ 168
Brinson Class N.............. 2,204 20,606
SwissKey Class............... -- 1
---------- ------------
<PAGE>
Total Dividend Reinvest-
ment...................... 2,222 $ 20,775
========== ============
Redemptions:
Brinson Class I.............. 1,015 $ 9,875
Brinson Class N.............. 51,661 509,678
SwissKey Class............... -- --
---------- ------------
Total Redemptions.......... 52,676 $ 519,553
========== ============
</TABLE>
*The Fund commenced operations on April 6, 1998.
- --------------------------------------------------------------------------------
57
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. BOND FUND
--------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
---------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.................. 1,926,960 $ 20,378,131 1,521,821 $15,371,166
Brinson Class N.................. -- -- 98 1,000
SwissKey Class................... 134,362 1,416,847 119,951 1,211,647
--------- ------------ --------- -----------
Total Sales.................... 2,061,322 $ 21,794,978 1,641,870 $16,583,813
========= ============ ========= ===========
Dividend Reinvestment:
Brinson Class I.................. 107,565 $ 1,114,591 44,351 $ 449,362
Brinson Class N.................. 6 68 -- --
SwissKey Class................... 5,825 60,235 1,239 12,555
--------- ------------ --------- -----------
Total Dividend Reinvestment.... 113,396 $ 1,174,894 45,590 $ 461,917
========= ============ ========= ===========
Redemptions:
Brinson Class I.................. 549,381 $ 5,780,080 288,064 $ 2,929,252
Brinson Class N.................. -- -- -- --
SwissKey Class................... 45,413 475,640 48,365 491,069
--------- ------------ --------- -----------
Total Redemptions.............. 594,794 $ 6,255,720 336,429 $ 3,420,321
========= ============ ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
58
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds --
U.S. Balanced Fund
U.S. Equity Fund
U.S. Large Capitalization Equity Fund
U.S. Bond Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Brinson Funds--U.S. Balanced
Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund and U.S. Bond
Fund as of June 30, 1998, the related statements of operations for the period
then ended and changes in net assets and the financial highlights for the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization
Equity Fund and U.S. Bond Fund at June 30, 1998, the results of their
operations for the period then ended and the changes in their net assets and
the financial highlights for the periods indicated therein in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
August 7, 1998
- --------------------------------------------------------------------------------
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 Logo]
Chicago . Bahrain . Basel . Frankfurt . Geneva . Hong Kong . London . Melbourne
. New York . Paris . Rio de Janeiro . Singapore . Sydney . Tokyo . Zurich
209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430
<PAGE>
--------------------------------
The Brinson Funds
Brinson Non-U.S. Equity Fund
Annual Report
June 30, 1998
[ART]
Institutional Asset Management
--------------------------------
<PAGE>
Trustees and Officers
[ART]
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.
[ART]
The UBS Brinson Division is the institutional asset management division of UBS
AG. UBS Brinson is the name used outside North America while Brinson Partners
continues as the primary name within North America. The UBS Brinson Division
manages over USD 390 billion of institutional assets, including over USD 277
billion of discretionary institutional assets on an active basis and mutual fund
assets for UBS Private Banking which total over USD 113 billion. In addition,
UBS Brinson acts as the investment advisor to UBS Private Banking on an advisory
basis. UBS Brinson manages investment portfolios for corporations, public funds,
endowments, foundations, central banks and other investors located throughout
the world. The UBS Brinson Division employs over 1,500 people in offices in
Chicago, Bahrain, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New
York, Paris, Rio de Janeiro, Singapore, Sydney, Tokyo and Zurich.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment markets
and their interrelationships. Portfolio structure is focused upon both risk and
return considerations in the context of full investment cycles. Our investment
decisions are based on fundamental research, internally developed valuation
systems and seasoned judgment. Our independent team approach allows for rapid
responses to market changes, while providing each client with the benefit of our
best talent and the flexibility to customize portfolios to meet unique
requirements.
2
<PAGE>
Table of Contents
[ART]
<TABLE>
<S> <C>
Shareholder Letter.......................... 4
Global Economic and Market Highlights....... 5
Non-U.S. Equity Fund........................ 6
Schedule of Investments.....................10
Financial Statements........................15
Financial Highlights........................18
Notes to Financial Statements...............21
Report of Independent Auditors..............24
</TABLE>
3
<PAGE>
Shareholder Letter
[ART]
August 22, 1998
Dear Shareholder:
We are very pleased to present the June 30, 1998 Annual Report for the Non-U.S.
Equity Fund. Within this Report, we focus on the current global economic outlook
as well as our current strategy and performance update for the Non-U.S. Equity
Fund.
In December 1997, Union Bank of Switzerland and Swiss Bank Corporation announced
their intention to merge which included the integration of UBS Asset Management
and SBC Brinson into the UBS Brinson Division. The merger was consummated on
June 29, 1998. UBS Brinson is managed today by the same senior management that
has led the business over the past decades with a consistently applied
investment philosophy and process. The UBS Brinson Division manages over USD 390
billion of institutional assets, including over USD 277 billion of discretionary
institutional assets on an active basis and mutual fund assets for UBS Private
Banking which total over USD 113 billion. The UBS Brinson Division employs over
1,500 people in fifteen different cities throughout the world.
We are excited about the formation of the UBS Brinson Division and the
additional resources we have brought together to further the tradition of
delivering value-added investment performance and the highest level of
professional client service.
Brinson Non-U.S. Equity Fund Class I
Since its inception on August 31, 1993, the Brinson Non-U.S. Equity Fund Class I
has produced an annualized total return of 9.03% versus 8.75% for the Morgan
Stanley Capital International Non-U.S. Equity (Free) Index benchmark. This
return was achieved at an annualized volatility of 10.92%, below the benchmark
volatility of 12.78% and reflecting our cautious strategy at this time toward
investment risk.
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
Chief Investment Officer
Brinson Partners, Inc.
4
<PAGE>
Global Economic and Market Highlights
[ART]
The economic situation in Japan remains bleak. With real GDP growth negative in
the last two quarters, the country is officially in a recession. The downturn in
output has brought on the highest unemployment rate recorded in the post-war
period, at just over 4%. In response to the news, the voters have delivered a
severe rebuke to the ruling LDP, although it is not at all certain that this
will result in the implementation of "Solutions" proffered by Western
governments and commentators.
Many of Japan's problems are magnified elsewhere in Asia. Last year's financial
and economic crisis has not diminished to any great extent. With financial
systems straining under large amounts of defunct debts, and the IMF prescribing
high interest rates in the interest of currency support and inflation control,
real economic activity has slowed substantially. While Asia suffers from falling
living standards, the crisis has been a partial benefit to the U.S. and Europe
by keeping commodity and import prices in check, and by not augmenting strong
domestic demand in those economies.
Continental Europe's cyclical recovery is well under way, and is starting to
have some beneficial effects on the high unemployment rate. Previously, output
and profit growth were reasonably strong, but did not carry over into the labor
market. Although unemployment has been reduced, the failure to address
structural problems will almost certainly guarantee that the Continent's poor
overall unemployment picture will persist for several years. The U.K.'s economic
performance has been at odds with most of the rest of Europe. A series of Bank
of England rate hikes has not prevented the headline inflation rate from rising
above 4% this year. Now however, there are signs that these hikes, coupled with
a strong pound, have started to cool the economy.
The U.S. expansion is unabated; more than 7 years have elapsed since the
recession at the start of the decade. However, the Federal Reserve's attempts to
maintain a neutral policy stance, in light of the Asian crisis' effect on demand
and costs, has resulted in substantial growth in the money supply. This could
set the stage for a modest resurgence in inflation. Profit growth, which had
reflected the strength of the domestic economy in prior years, is now showing
signs of the fall-off in Asian demand and the strength of the dollar.
<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 6/30/98 6/30/98 6/30/98 6/30/98
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MSCI Non-US Equity (Free) Index 18.55% 16.90% 23.41% 12.62%
Japan 6.69 -12.84 9.66 0.27
U.K. 12.94 27.19 22.48 15.91
Germany 38.48 54.41 40.75 25.15
France 40.90 49.97 35.47 18.18
Canada 12.73 19.79 22.70 17.63
Netherlands 24.69 34.80 44.73 29.26
Australia 7.21 4.55 10.55 8.54
- ----------------------------------------------------------------------------------------------
6 months 1 year 3 years 8/31/93*
Major Currencies ended ended ended to
Percent Change Relative to U.S. Dollars 6/30/98 6/30/98 6/30/98 6/30/98
- ----------------------------------------------------------------------------------------------
Yen -6.31% -17.55% -15.11% -5.66%
Pound 1.41 -0.25 1.60 2.40
Deutschemark -0.39 -3.46 -8.47 -1.50
Canadian Dollar -2.69 -6.19 -2.24 -2.20
- ----------------------------------------------------------------------------------------------
</TABLE>
*Inception date of the Non-U.S. Equity Fund Class I
All total returns in excess of 1 year are average annualized total returns
5
<PAGE>
Non-U.S. Equity Fund
[ART]
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 Brinson Non-U.S. Equity Fund Class I
has earned an annualized return of 9.03% versus 8.75% for the Morgan Stanley
Capital International Non-U.S. Equity (Free) Index benchmark. This return was
achieved at an annualized volatility of 10.92%, below the benchmark volatility
of 12.78%. For the six months ended June 30, 1998, the Fund returned 13.10%,
compared to the index return of 15.53%.
During the first half of 1998, the aggregate non-U.S. markets outperformed,
rising 17.45% in dollar-hedged terms. The continental European markets continued
to set the pace, with the best performing markets in dollar-hedged terms.
Finland, Belgium and Spain led the pack, followed by France, Germany and Italy,
each growing in excess of 30%. In strong contrast, the Far East ex-Japan region
lost 29%. All three Southeast Asian markets had steep declines, led by Singapore
(-35%), Hong Kong, (-28%) and Malaysia, (-26%). New Zealand was also quite weak,
losing almost 14%. While positive, Japan's 5.7% hedged return was the sixth
weakest as of mid-year. Currency weakness, coupled with debt and banking
problems were behind the first group's weakness, while Japan's very weak
economy, troubled banking system and seeming inability to resolve these problems
has kept the market down.
During the first half of 1998 several strategy changes took place. France was
increased and Germany decreased, bringing the two markets into closer alignment.
In February, Spain was eliminated, with proceeds added to Finland and
Switzerland. In mid-April Malaysia was reduced to neutral and the U.K.
overweight was increased. In early June Italy was reduced, with funds added to
Denmark, Norway and Sweden, as part of an ongoing shift away from overvalued
southern European markets to more attractively priced northern European markets.
One currency strategy change took place. An Australian dollar overweight was
established, paired with the yen, allowing us to take advantage of a strong
positive interest rate differential in favor of the Australian currency.
Market allocation had a significant negative effect on returns, largely due to
strategic cash. Value added from underweighting Japan and Hong Kong and from
overweighting Belgium, Finland and Italy, was more than offset by holding
strategic cash, overweighting New Zealand and Singapore and underweighting
Spain.
Currency management had a negative impact on performance. The value added by the
yen and U.S. dollar strategies was reduced by the overweights of the weak
Australian and New Zealand dollars and the underweight of the rising pound
sterling.
Overall stock selection was positive due to the solid value added by Japan stock
selection, as well as contributions from France, Italy and Hong Kong.
6
<PAGE>
Non-U.S. Equity Fund
[ART]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 8/31/93*
ended ended ended to
6/30/98 6/30/98 6/30/98 6/30/98
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson Non-U.S. Equity Fund Class I 13.10% 4.78% 15.91% 9.03%
MSCI Non-U.S. Equity (Free) Index** 15.53% 6.04% 11.04% 8.75%
- ------------------------------------------------------------------------------
</TABLE>
* Inception date of the Brinson Non-U.S. Equity Fund Class I
** Performance is net of withholding taxes on dividends.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Non-
U.S. Equity Fund Class I 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 June 30, 1998. 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 Class I
vs. MSCI Non-U.S. Equity (Free) Index
Wealth Value with Dividends Reinvested
[CHART]
Brinson MSCI
12/31/93 $ 965,500 $ 988,754
6/30/94 $ 975,547 $1,068,786
12/31/94 $ 974,540 $1,062,774
6/30/95 $ 974,540 $1,095,525
12/31/95 $1,126,103 $1,187,456
6/30/96 $1,204,891 $1,244,668
12/31/96 $1,269,637 $1,271,887
6/30/97 $1,449,115 $1,414,422
12/31/97 $1,342,509 $1,298,199
6/30/98 $1,518,353 $1,499,791
8/31/93 = $1,000,000 Data through 6/30/98
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
7
<PAGE>
Non-U.S. Equity Fund
[ART]
Total Return
6 months 6/30/97*
ended to
6/30/98 6/30/98
- ----------------------------------------------------------
Brinson Non-U.S. Equity Fund Class N 12.97% 4.51%
MSCI Non-U.S. Equity (Free) Index** 15.53% 6.04%
- ----------------------------------------------------------
* Inception date of the Brinson Non-U.S. Equity Fund Class N
** Performance is net of withholding taxes on dividends.
Total return includes reinvestment of all capital gain and income
distributions.
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 Class N and the MSCI Non-U.S. Equity (Free) Index if you had
invested $1,000,000 on June 30, 1997, and had reinvested all your income
dividends and capital gain distributions through June 30, 1998. 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 Class N
vs. MSCI Non-U.S. Equity (Free) Index
Wealth Value with Dividends Reinvested
[GRAPH APEARS HERE]
$1,045,088 ========= Brinson Non-U.S. Equity Fund Class N
$1,060,356 --------- MSCI Non-U.S. Equity (Free) Index
[PLOT POINTS]
Brinson MSCI
6/30/97 $1,000,000 $1,000,000
9/30/97 $ 999,206 $ 994,869
12/31/97 $ 925,127 $ 917,830
3/31/98 $1,044,194 $1,052,548
6/30/98 $1,045,088 $1,060,356
6/30/97 = $1,000,000 Data through 6/30/98
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
(ART)
Industry Diversification
<TABLE>
<S> <C>
As a Percent of Net Assets
As of June 30, 1998
- ---------------------------------------------------
NON-U.S. EQUITIES
Aerospace & Military...................... 0.22%
Airlines.................................. 0.37
Appliances & Household.................... 2.09
Autos/Durables............................ 3.65
Banking................................... 11.51
Beverages & Tobacco....................... 2.39
Broadcasting & Publishing................. 2.47
Building Materials........................ 1.50
Business & Public Service................. 3.41
Chemicals................................. 3.01
Construction.............................. 1.03
Data Processing........................... 0.82
Electric Components....................... 1.24
Electronics............................... 4.14
Energy.................................... 6.52
Financial Services........................ 1.71
Food & House Products..................... 4.53
Forest Products........................... 1.21
Gold Mining............................... 0.06
Health & Personal Care.................... 7.45
Housing/Paper............................. 0.04
Industrial Components..................... 1.57
Insurance................................. 4.99
Investment Companies...................... 0.36
Leisure & Tourism......................... 0.69
Machinery & Engineering................... 0.72
Merchandising............................. 3.88
Metals-Steel.............................. 1.74
Miscellaneous Materials................... 0.04
Multi-Industry............................ 4.76
Non-Ferrous Metals........................ 1.52
Real Estate............................... 0.44
Recreation................................ 0.55
Retail/Apparel............................ 0.24
Shipping.................................. 0.01
Shipping.................................. 0.02
Telecommunications........................ 7.53
Textiles & Apparel........................ 0.28
Transportation............................ 1.08
Utilities................................. 3.07
Wholesale & International Trade........... 0.46
------
Total Non-U.S. Equities.............. 93.32
------
SHORT-TERM INVESTMENTS.................... 7.58
------
TOTAL INVESTMENTS.................... 100.90
LIABILITIES, LESS CASH
AND OTHER ASSETS........................ (0.90)
------
NET ASSETS................................ 100.00%
</TABLE>
Market and Currency Strategy
As of June 30, 1998
<TABLE>
<CAPTION>
Fund
---------------------
Market Currency
Strategy Strategy Index
- ---------------------------------------------------
<S> <C> <C> <C>
U.S. Dollar 0.0% 2.1% 0.0%
Australia 5.1 6.2 2.2
Austria 0.0 0.4 0.4
Belgium 4.5 1.8 1.8
Canada 2.9 4.6 4.6
Denmark 0.4 0.9 0.9
Finland 2.6 1.0 1.0
France 9.2 9.1 9.2
Germany 10.6 10.9 10.8
Hong Kong 0.2 0.0 1.6
Ireland 0.0 0.5 0.5
Italy 3.5 4.4 4.4
Japan 14.7 15.7 19.7
Malaysia 0.3 0.5 0.5
Netherlands 4.9 5.5 5.6
New Zealand 3.7 3.8 0.2
Norway 0.4 0.5 0.5
Portugal 0.0 0.6 0.6
Singapore 1.3 0.5 0.5
Spain 0.0 3.2 3.2
Sweden 3.3 3.1 3.1
Switzerland 6.8 7.4 7.4
U.K. 25.6 17.3 21.3
Cash Reserves 0.0 0.0 0.0
- ---------------------------------------------------
100.0% 100.0% 100.0%
</TABLE>
Top Ten Non-U.S. Equity Holdings
As of June 30, 1998
<TABLE>
<CAPTION>
Percent of
Net Assets
- -----------------------------------------------------------
<S> <C>
1. Novartis AG (Reg.) 1.50%
2. Glaxo Wellcome PLC 1.49
3. Nokia Oyj. Class A Preferred 1.28
4. British Petroleum Co. PLC 1.21
5. Royal Dutch Petroleum Co. 1.16
6. CS Holdings AG 1.13
7. British Telecommunications PLC 1.09
8. B.A.T. Industries PLC 1.08
9. Telecom Corp. of New Zealand Ltd. 1.04
10. Roche Holding AG (Gen.) 1.04
- -----------------------------------------------------------
</TABLE>
9
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Non-U.S. Equities -- 93.32%
AUSTRALIA -- 4.46%
Amcor Ltd................................................. 91,600 $ 401,065
Boral Ltd................................................. 270,300 507,211
Brambles Industries Ltd................................... 43,600 855,675
Broken Hill Proprietary Co., Ltd.......................... 267,270 2,259,347
Coca-Cola Amatil Ltd...................................... 52,100 348,467
CSR Ltd................................................... 166,200 479,642
David Jones Ltd........................................... 579,500 663,935
Lend Lease Corp. Ltd...................................... 39,978 808,359
Mayne Nickless Ltd........................................ 133,100 704,765
National Australia Bank Ltd............................... 189,848 2,504,296
News Corp., Ltd........................................... 335,121 2,735,377
News Corp., Ltd., Preferred............................... 112,061 793,927
Orica Ltd................................................. 61,200 361,955
Pacific Dunlop Ltd........................................ 278,200 449,674
Qantas Airways Ltd........................................ 278,668 419,366
Rio Tinto Ltd............................................. 65,010 773,004
Santos Ltd................................................ 119,900 371,270
Telstra Corp., Ltd........................................ 567,600 1,455,267
Westpac Bank Corp., Ltd................................... 306,251 1,868,159
WMC Ltd................................................... 223,300 672,086
Woolworth's Ltd........................................... 117,200 381,054
------------
19,813,901
------------
BELGIUM -- 4.18%
Delhaize-Le Lion S.A. (b)................................. 20,650 1,442,892
Electrabel S.A............................................ 11,285 3,199,590
Fortis AG (b)............................................. 623 34
Fortis AG Strip (b)....................................... 15,673 4,001,438
Groupe Bruxelles Lambert S.A. (b)......................... 5,860 1,182,709
KBC Bancassurance Holding-Strip (b)....................... 660 53
KBC Bancassurance Holding (b)............................. 27,760 2,484,300
Petrofina S.A............................................. 5,810 2,385,051
Solvay S.A., Class A...................................... 16,860 1,336,657
Tractebel................................................. 13,200 1,933,351
Union Miniere S.A.(b)..................................... 9,990 617,495
------------
18,583,570
------------
CANADA -- 2.83%
Agrium, Inc............................................... 29,500 368,098
Alcan Aluminum Ltd........................................ 22,400 616,891
Bank of Montreal.......................................... 17,100 941,861
Barrick Gold Corp......................................... 13,700 260,846
Canadian National Railway Co.............................. 15,500 824,222
Canadian Pacific Ltd...................................... 51,294 1,444,017
Extendicare Inc. (b)...................................... 38,300 309,921
Hudson's Bay Co........................................... 20,300 465,191
Imasco, Ltd............................................... 26,500 489,239
Imperial Oil Ltd.......................................... 55,300 966,415
Magna International Inc., Class A......................... 6,800 465,633
Moore Corp., Ltd.......................................... 25,200 334,149
Newbridge Networks Corp. (b).............................. 7,000 167,313
Noranda, Inc.............................................. 23,100 398,980
NOVA Corp................................................. 62,800 719,557
Potash Corporation of Saskatchewan, Inc................... 6,800 512,335
Royal Bank of Canada...................................... 20,000 1,203,590
Seagram Co., Ltd.......................................... 9,400 383,197
Shaw Communications Inc., Class B......................... 36,200 704,012
TransCanada Pipelines Ltd................................. 30,500 676,119
Westcoast Energy, Inc..................................... 15,300 340,728
------------
12,592,314
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
DENMARK -- 0.34%
Den Danske Bank Group..................................... 6,700 $ 803,766
Tele Danmark A/S.......................................... 7,400 710,194
------------
1,513,960
------------
FINLAND -- 2.12%
Cultor Oyj................................................ 7,600 123,285
Merita Ltd., Class A...................................... 161,510 1,065,645
Metsa Serla Oyj, Class B.................................. 31,590 305,162
Nokia Oyj Class A, Preferred (b).......................... 77,260 5,682,021
Outokumpu Oyj, Class A.................................... 29,620 377,909
Sampo Insurance Co., Ltd., Class A........................ 11,360 538,340
UPM-Kymmene Corp.......................................... 36,830 1,013,639
Valmet Oyj................................................ 19,000 327,604
------------
9,433,605
------------
FRANCE -- 8.36%
Air Liquide............................................... 4,483 741,399
Alcatel Alsthom........................................... 8,405 1,711,306
AXA-UAP................................................... 17,402 1,957,221
AXA-UAP Certificate de Valeur Guarantie (b)............... 9,002 3,067
Banque Nationale de Paris................................. 18,610 1,520,566
Carrefour SA.............................................. 2,000 1,265,299
Cie de Saint Gobain....................................... 9,443 1,750,844
Dexia France (b).......................................... 8,840 1,190,169
Elf Aquitaine S.A......................................... 14,214 1,998,329
Eridania Beghin-Say SA.................................... 3,600 794,906
France Telecom S.A........................................ 36,300 2,503,655
Groupe Danone............................................. 5,220 1,439,256
Lafarge S.A............................................... 7,964 823,272
Lagardere S.C.A........................................... 26,760 1,114,041
Michelin, Class B......................................... 17,993 1,038,630
Paribas (b)............................................... 12,643 1,352,964
Pechiney S.A., Class A.................................... 17,685 712,256
Peugeot S.A............................................... 8,160 1,754,548
Pinault-Printemps-Redoute S.A............................. 1,260 1,054,515
Rhone-Poulenc, Class A.................................... 31,130 1,755,761
SEITA..................................................... 31,430 1,424,383
Societe Generale.......................................... 7,913 1,645,161
Suez Lyonnaise des Eaux S.A. (b).......................... 12,942 2,129,886
Thomson CSF............................................... 25,590 973,487
Total S.A., Class B....................................... 11,025 1,433,286
Usinor Sacilor............................................ 25,980 401,345
Vivendi................................................... 12,434 2,655,027
Vivendi Warrants "01" (b)................................. 12,664 24,926
------------
37,169,505
------------
GERMANY -- 9.83%
Allianz AG (b)............................................ 436 142,515
Allianz AG................................................ 13,530 4,460,028
BASF AG................................................... 19,940 944,526
Bayer AG.................................................. 49,400 2,548,000
Bayerische Motoren Werke (BMW) (b)........................ 402 399,773
Bayerische Motoren Werke AG............................... 1,240 1,250,992
Commerzbank AG............................................ 10,830 414,000
Continental AG............................................ 34,500 1,074,183
Daimler-Benz AG........................................... 20,792 2,038,883
Deutsche Bank AG.......................................... 32,917 2,787,459
Deutsche Telekom AG....................................... 137,010 3,696,613
Dresdner Bank AG.......................................... 39,800 2,145,451
Hochtief AG............................................... 11,690 560,213
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
GERMANY (CONTINUED)
Hoechst AG................................................ 15,610 $ 779,203
M.A.N. AG................................................. 2,500 972,299
Mannesmann AG (b)......................................... 20,470 2,076,486
Metro AG.................................................. 27,353 1,659,365
Metro AG Right (b)........................................ 27,353 1,061
Muenchener Rueckver AG.................................... 6,820 3,381,662
Preussag AG............................................... 3,719 1,326,890
RWE AG.................................................... 24,300 1,440,499
Schering AG............................................... 12,622 1,487,368
Siemens AG................................................ 39,520 2,404,042
Thyssen AG................................................ 4,850 1,227,950
Veba AG................................................... 28,708 1,956,279
Volkswagen AG............................................. 2,621 2,519,355
------------
43,695,095
------------
HONG KONG -- 0.57%
Cheung Kong Holdings Ltd.................................. 95,000 467,117
Citic Pacific Ltd......................................... 49,000 86,635
CLP Holdings Ltd.......................................... 53,500 243,728
Hang Seng Bank Ltd........................................ 38,400 217,061
Hong Kong & China Gas Co., Ltd............................ 258,700 293,803
Hong Kong & China Gas Warrants "99" (b)................... 11,850 811
Hong Kong Telecommunications Ltd.......................... 111,600 209,558
Hutchison Whampoa Ltd..................................... 103,000 543,672
Johnson Electric Holdings Ltd............................. 54,000 200,010
South China Morning Post (Holdings) Ltd................... 100,000 48,073
Sun Hung Kai Properties Ltd............................... 49,000 208,050
------------
2,518,518
------------
ITALY -- 3.67%
Assicurazioni Generali.................................... 54,446 1,770,402
Banca Commercial Italiana................................. 21,000 125,583
Credito Italiano S.p.A.................................... 241,500 1,264,188
Danieli & Co. Savings (Risp).............................. 129,100 599,181
Edison S.p.A.............................................. 6,000 48,151
ENI ADR................................................... 18,500 1,202,500
ENI S.p.A................................................. 369,000 2,418,413
Fiat S.p.A.-Privileged Preferred.......................... 399,220 993,811
INA-Istituto Nazionale delle Assicurazioni................ 33,100 94,037
Instituto Mobiliare Italiano S.p.A........................ 62,000 976,625
Istituto Bancario San Paolo di Torino..................... 56,000 808,079
Italgas S.p.A............................................. 14,000 57,022
La Rinascente S.p.A....................................... 79,140 788,039
Montedison S.p.A.......................................... 833,280 1,033,660
Parmalat Finanziaria S.p.A................................ 295,000 601,601
Telecom Italia Mobile S.p.A............................... 270,000 1,651,093
Telecom Italia Mobile S.p.A. RNC.......................... 121,000 408,427
Telecom Italia S.p.A...................................... 202,666 1,491,876
------------
16,332,688
------------
JAPAN -- 16.02%
Amada Co., Ltd............................................ 150,000 729,546
Bank of Tokyo-Mitsubishi, Ltd............................. 139,000 1,471,276
Canon Sales Co., Inc...................................... 56,000 761,005
Canon, Inc................................................ 115,000 2,610,152
Citizen Watch Co., Ltd.................................... 136,000 1,122,023
Dai Nippon Printing Co., Ltd.............................. 142,000 2,266,311
Daiichi Pharmaceutical Co., Ltd........................... 139,000 1,832,835
Daikin Industries Ltd..................................... 159,000 1,024,217
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Daiwa House Industry Co., Ltd............................. 85,000 $ 750,261
Denso Corp................................................ 118,000 1,955,543
Fanuc..................................................... 57,700 1,995,605
Fuji Photo Film........................................... 11,000 382,822
Fujitsu................................................... 89,000 936,268
Hitachi Ltd............................................... 286,000 1,864,971
Honda Motor Co............................................ 61,000 2,171,272
Hoya Corp................................................. 34,000 962,784
Inax...................................................... 121,000 415,874
Ito Yokado Co., Ltd....................................... 56,000 2,634,867
Kaneka Corp............................................... 162,000 852,109
Keio Teito Electric Railway............................... 178,000 647,693
Kinki Nippon Railway...................................... 178,000 833,664
Kirin Brewery Co., Ltd.................................... 168,000 1,585,762
Kokuyo.................................................... 51,000 863,566
Kuraray Co., Ltd.......................................... 181,000 1,537,623
Kyocera Corp.............................................. 18,300 894,001
Marui Co., Ltd............................................ 82,000 1,223,043
Matsushita Electric Industrial Co......................... 166,000 2,667,291
NGK Insulators............................................ 259,000 2,248,766
Nintendo Co., Ltd......................................... 14,500 1,342,544
Nippon Meat Packers, Inc.................................. 99,000 1,211,954
Nippon Steel Co........................................... 142,000 249,652
Okumura Corp.............................................. 157,000 550,917
Omron Corp................................................ 46,000 702,670
Osaka Gas Co.............................................. 285,000 731,059
Sankyo Co., Ltd........................................... 148,000 3,369,817
Secom Co., Ltd............................................ 37,000 2,135,461
Sega Enterprises Ltd...................................... 19,000 327,881
Seino Transportation...................................... 123,000 682,423
Sekisui House Ltd......................................... 141,000 1,092,157
Shin-Etsu Chemical Co., Ltd............................... 12,000 207,515
Sony Corp................................................. 30,500 2,626,184
Sumitomo Bank............................................. 14,000 136,182
Sumitomo Chemical Co...................................... 203,000 626,033
Sumitomo Electric Industries.............................. 125,000 1,263,645
Takeda Chemical Industries................................ 94,000 2,499,262
TDK Corp.................................................. 26,000 1,920,236
Tokio Marine & Fire Insurance Co.......................... 148,000 1,520,683
Tokyo Electric Power...................................... 37,000 725,150
Tonen Corp................................................ 110,000 569,874
Toray Industries, Inc..................................... 385,000 1,997,334
Toshiba Corp.............................................. 387,000 1,581,072
Toyo Suisan Kaisha........................................ 79,000 481,565
Toyota Motor Corp......................................... 103,000 2,664,337
Yamato Transport Co., Ltd................................. 24,000 268,905
Yamazaki Baking Co., Ltd.................................. 56,000 496,307
------------
71,221,969
------------
MALAYSIA -- 0.39%
Berjaya Sports Toto Bhd................................... 71,000 105,280
Kuala Lumpur Kepong Bhd................................... 118,000 190,621
Malayan Banking Bhd A Shares (b).......................... 47,000 46,858
Malayan Banking Bhd....................................... 39,000 39,306
Malaysia International Shipping Bhd (Frgn.)............... 47,000 68,559
Nestle (Malaysia) Bhd..................................... 38,000 172,248
Petronas Gas Bhd.......................................... 73,000 135,527
Public Bank Bhd (Frgn.)................................... 71,000 21,398
Resorts World Bhd......................................... 100,000 109,946
Rothmans of Pall Mall Bhd................................. 37,000 256,480
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
MALAYSIA (CONTINUED)
Sime Darby Bhd.......................................... 25,000 $ 17,239
Tanjong PLC............................................. 46,000 63,773
Telekom Malaysia Bhd (b)................................ 104,000 175,527
Tenaga Nasional Bhd..................................... 110,000 132,610
UMW Holdings Bhd........................................ 58,000 26,011
YTL Corp. Bhd........................................... 162,000 121,866
YTL Power International Bhd (b)......................... 64,900 35,364
------------
1,718,613
------------
NETHERLANDS -- 4.55%
ABN AMRO Holdings NV.................................... 69,730 1,631,672
Akzo Nobel NV........................................... 2,230 495,726
Elsevier NV............................................. 74,910 1,130,536
Heineken NV (b)......................................... 32,062 1,259,342
Hoogovens NV............................................ 7,303 315,930
ING Groep NV............................................ 39,998 2,619,081
KLM Royal Dutch Air Lines NV............................ 10,150 412,147
KPN NV.................................................. 36,890 1,419,962
Philips Electronics NV.................................. 21,070 1,771,198
PolyGram NV............................................. 13,400 683,768
Royal Dutch Petroleum Co................................ 92,660 5,138,161
TNT Post Group NV (b)................................... 36,890 943,014
Unilever NV............................................. 30,660 2,432,663
------------
20,253,200
------------
NEW ZEALAND -- 2.28%
Brierley Investments Ltd................................ 2,683,400 1,337,236
Carter Holt Harvey Ltd.................................. 929,700 810,781
Fletcher Challenge Building............................. 307,650 383,283
Fletcher Challenge Energy............................... 339,250 810,082
Fletcher Challenge Forests Ltd.......................... 626,593 351,286
Fletcher Challenge Paper................................ 609,800 677,411
Lion Nathan Ltd......................................... 256,600 570,101
Telecom Corp. of New Zealand Ltd........................ 1,122,800 4,627,796
Telecom Corp. of New Zealand Ltd. ADR................... 17,600 576,400
------------
10,144,376
------------
NORWAY -- 0.21%
Norsk Hydro ASA......................................... 17,000 747,703
Norske Skogindustrier ASA Class A....................... 6,300 194,579
------------
942,282
------------
SINGAPORE -- 1.13%
City Developments Ltd................................... 89,000 248,642
Creative Technology Ltd. (b)............................ 10,000 121,338
DBS Land Ltd............................................ 168,000 139,213
Development Bank of Singapore Ltd....................... 43,200 239,077
Elec & Eltek International Co., Ltd..................... 26,100 88,218
Fraser & Neave Ltd...................................... 35,000 94,051
Keppel Corp., Ltd....................................... 109,750 164,999
Keppel Land Ltd......................................... 105,000 96,330
Oversea-Chinese Banking Corp., Ltd...................... 112,400 382,539
Rothmans Industries Ltd................................. 22,000 97,662
Singapore Airlines Ltd. (Frgn.)......................... 125,000 584,492
Singapore Press Holdings Ltd............................ 99,972 668,650
Singapore Technologies Engineering Ltd. (b). 111,000 78,183
Singapore Telecommunications, Ltd....................... 870,000 1,235,869
United Overseas Bank Ltd. (Frgn.)....................... 241,000 748,890
Venture Manufacturing (Singapore) Ltd. (b).............. 27,000 51,139
------------
5,039,292
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
SWEDEN -- 2.97%
ABB AB, A Shares........................................ 64,400 $ 912,513
Astra AB, A Shares...................................... 64,800 1,324,455
Electrolux AB Series B.................................. 29,400 505,060
Ericsson, B Shares...................................... 93,700 2,737,602
Investor AB-B Shares.................................... 27,300 1,593,518
Nordbanken Holding AB................................... 205,700 1,508,915
Skandia Forsakrings AB.................................. 60,800 869,127
Skanska AB, B Shares.................................... 18,600 834,970
Svenska Handelsbanken, A Shares......................... 20,900 969,667
Swedish Match AB........................................ 169,100 561,907
Volvo AB, B Shares...................................... 46,100 1,372,901
------------
13,190,635
------------
SWITZERLAND -- 6.55%
ABB AG (Bearer)......................................... 892 1,317,300
CS Holdings AG (Reg.)................................... 22,671 5,044,477
Holderbank Financiere Glarus, B Shares.................. 840 1,068,829
Julius Baer Holding AG.................................. 377 1,179,368
Nestle S.A. (Reg.)...................................... 1,875 4,012,559
Novartis AG (Reg.)...................................... 4,020 6,689,399
Roche Holding AG (Gen.)................................. 470 4,615,407
Sairgroup............................................... 2,475 814,231
Saurer AG............................................... 845 863,496
Sulzer AG............................................... 886 699,197
Swiss Reinsurance Co. (Reg.)............................ 1,109 2,804,670
------------
29,108,933
------------
UNITED KINGDOM -- 22.86%
Abbey National PLC...................................... 91,400 1,624,137
B.A.T. Industries PLC................................... 477,800 4,783,262
Barclays PLC............................................ 116,900 3,370,427
Bass PLC................................................ 49,407 925,753
Billiton PLC............................................ 554,300 1,123,694
BOC Group PLC........................................... 62,100 846,008
Booker PLC.............................................. 283,200 1,157,673
British Petroleum Co. PLC............................... 368,294 5,370,724
British Sky Broadcasting PLC............................ 164,400 1,180,869
British Steel PLC....................................... 1,060,800 2,331,905
British Telecommunications PLC.......................... 391,600 4,835,052
BTR PLC (b)............................................. 177,306 502,920
Cable & Wireless PLC.................................... 92,200 1,119,925
Cadbury Schweppes PLC................................... 134,200 2,076,793
Charter PLC............................................. 182,218 1,901,715
Coats Viyella PLC....................................... 997,900 1,223,774
Diageo PLC.............................................. 165,135 1,956,249
FKI PLC................................................. 551,925 1,593,136
General Electric Co. PLC................................ 320,400 2,761,147
Glaxo Wellcome PLC...................................... 220,300 6,612,602
Greenalls Group PLC..................................... 177,200 1,534,468
Hanson PLC.............................................. 205,712 1,250,219
Hillsdown Holdings PLC.................................. 489,700 1,331,817
House of Fraser PLC..................................... 517,200 1,501,532
HSBC Holdings PLC....................................... 125,251 3,178,609
Inchcape PLC............................................ 275,100 867,519
Legal & General Group PLC............................... 58,800 627,400
Lloyds TSB Group PLC.................................... 318,285 4,452,931
Marks & Spencer PLC..................................... 453,600 4,128,521
Mirror Group PLC........................................ 489,000 1,835,769
National Westminster Bank PLC........................... 81,600 1,458,164
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Peninsular & Oriental Steam Navigation Co................. 179,260 $ 2,581,196
Prudential Corp. PLC...................................... 65,800 866,772
Reckitt & Colman PLC...................................... 49,646 947,626
Reed International PLC.................................... 210,000 1,899,089
Reuters Group PLC......................................... 46,353 529,780
Rio Tinto PLC............................................. 129,800 1,461,858
RJB Mining PLC............................................ 325,800 668,625
Royal & Sun Alliance Insurance Group PLC.................. 137,714 1,423,463
Scottish Hydro-Electric PLC............................... 145,600 1,292,408
Sears PLC................................................. 702,600 615,452
Sedgwick Group PLC........................................ 412,300 894,300
SmithKline Beecham PLC.................................... 351,200 4,286,428
Smurfit (Jefferson) Group PLC............................. 496,729 1,483,540
Tate & Lyle PLC........................................... 242,000 1,918,953
Tesco PLC................................................. 179,300 1,750,100
Thames Water PLC.......................................... 121,500 2,211,708
Unilever PLC.............................................. 273,600 2,912,484
United News & Media PLC................................... 94,100 1,315,711
Vodafone Group PLC........................................ 148,327 1,882,115
Williams PLC.............................................. 162,000 1,040,645
Willis Corroon Group PLC.................................. 89,100 225,969
------------
101,672,936
------------
Total Non-U.S. Equities
(Cost $354,901,674)...................................... 414,945,392
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Short-Term Investments -- 7.58%
UNITED STATES -- 7.58%
ARCO Chemical Co.
5.770%, due 07/06/98.................................. $2,894,000 $ 2,891,681
Cincinnati Bell Inc.
6.600%, due 07/01/98.................................. 3,000,000 3,000,000
5.850%, due 07/13/98.................................. 2,000,000 1,996,100
5.900%, due 07/17/98.................................. 3,500,000 3,490,822
Hilton Hotels Corp.
5.720%, due 07/15/98.................................. 1,500,000 1,496,663
NGC Corp.
6.750%, due 07/01/98.................................. 2,304,000 2,304,000
PG & E Gas Transmission
5.670%, due 07/02/98.................................. 2,000,000 1,999,685
Raytheon Co.
7.000%, due 07/01/98.................................. 3,599,000 3,599,000
5.700%, due 07/09/98.................................. 4,000,000 3,994,933
Tenneco Inc.
5.750%, due 07/17/98.................................. 5,000,000 4,987,222
Union Pacific Resources Inc.
5.740%, due 08/31/98.................................. 2,000,000 1,981,090
5.750%, due 08/31/98.................................. 2,000,000 1,981,090
------------
Total Short-Term Investments
(Cost $33,721,297).................................... 33,722,286
------------
Total Investments
(Cost $388,622,971) -- 100.90% (a).................... 448,667,678
------------
Liabilities, less cash and other assets--(0.90%)....... (4,018,530)
------------
Net Assets -- 100%..................................... $444,649,148
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
13
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $388,622,971; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $94,020,292
Gross unrealized depreciation................................ (33,975,585)
-----------
Net unrealized appreciation................................ $60,044,707
===========
</TABLE>
(b) Non-income producing security.
(c) Denominated in U.S. dollars.
FORWARD FOREIGN CURRENCY CONTRACTS
The Non-U.S. Equity Fund had the following open forward foreign currency
contracts as of June 30, 1998:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY
BUY CONTRACTS
Australian Dollar.......... 8/19/98 10,350,000 $ 6,382,807 $ (510,975)
Canadian Dollar............ 8/19/98 9,200,000 6,262,423 (126,466)
Danish Krone............... 8/19/98 29,900,000 4,357,171 349
French Franc............... 8/19/98 13,000,000 2,156,781 179
German Mark................ 8/19/98 5,800,000 3,223,135 (2,671)
Hong Kong Dollar........... 8/19/98 6,500,000 835,044 962
Italian Lira............... 8/19/98 12,690,000,000 7,144,834 (7,706)
Japanese Yen............... 8/19/98 1,110,000,000 8,057,759 (996,074)
Malaysian Ringgit.......... 8/19/98 11,800,000 2,779,466 (165,013)
Netherlands Guilder........ 8/19/98 7,900,000 3,895,636 (4,058)
Norwegian Krona............ 8/19/98 15,700,000 2,048,360 (40,795)
Spanish Peseta............. 8/19/98 2,270,000,000 14,854,400 19,808
Swedish Krona.............. 8/19/98 24,900,000 3,128,687 38,590
Swiss Franc................ 8/19/98 13,600,000 9,011,815 (498,675)
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Belgian Franc.............. 8/19/98 455,000,000 12,262,773 (23,501)
British Pound.............. 8/19/98 20,700,000 34,440,876 (649,116)
Finnish Markka............. 8/19/98 29,300,000 5,355,628 56,243
Hong Kong Dollar........... 8/19/98 27,500,000 3,532,879 2,053
Italian Lira............... 8/19/98 3,550,000,000 1,998,752 (18,587)
Malaysian Ringgit.......... 8/19/98 11,800,000 2,779,466 214,318
Singapore Dollar........... 8/19/98 6,300,000 3,716,529 26,786
Swedish Krona.............. 8/19/98 24,900,000 3,128,687 (12,214)
Swiss Franc................ 8/19/98 6,700,000 4,439,644 227,069
-----------
Total.................... $(2,469,494)
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $388,622,971)....................... $448,667,678
Cash............................................................ 26,932
Receivables:
Investment securities sold..................................... 7,890,263
Dividends...................................................... 1,342,491
Interest....................................................... 32,326
Fund shares sold............................................... 63,095
Other assets.................................................... 475
------------
TOTAL ASSETS................................................. 458,023,260
------------
LIABILITIES:
Payables:
Investment securities purchased................................ 5,994,611
Fund shares sold............................................... 3,978,248
Investment advisory fees....................................... 313,798
Accrued expenses............................................... 617,961
Net unrealized depreciation on forward foreign currency con-
tracts......................................................... 2,469,494
------------
TOTAL LIABILITIES............................................ 13,374,112
------------
NET ASSETS....................................................... $444,649,148
============
NET ASSETS CONSIST OF:
Paid in capital................................................. $385,674,481
Accumulated undistributed net investment income................. 1,437,308
Accumulated net realized loss................................... (65,467)
Net unrealized appreciation..................................... 57,602,826
------------
NET ASSETS................................................... $444,649,148
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $439,328,830 and 36,163,586 shares is-
sued and outstanding)......................................... $ 12.15
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$10,772 and 887 shares issued and outstanding)................ $ 12.14
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $5,309,546 and 440,453 shares issued
and outstanding).............................................. $ 12.05
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,314,183 for foreign taxes withheld)......... $ 9,245,122
Interest (including securities lending income of $82,824)........ 1,703,252
-----------
TOTAL INCOME.................................................. 10,948,374
-----------
EXPENSES:
Advisory......................................................... 3,475,953
Administrative................................................... 305,643
Custodian........................................................ 228,877
Distribution..................................................... 67,597
Other............................................................ 331,206
-----------
TOTAL EXPENSES................................................ 4,409,276
-----------
NET INVESTMENT INCOME ........................................ 6,539,098
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 11,812,215
Futures contracts............................................... (1,031,399)
Foreign currency transactions................................... 1,443,040
-----------
Net realized gain............................................. 12,223,856
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency ............................... 10,352,717
Translation of other assets and liabilities denominated in for-
eign currency.................................................. (107,626)
Futures contracts .............................................. (3,327,266)
Forward contracts............................................... (42,714)
-----------
Change in net unrealized appreciation or depreciation......... 6,875,111
-----------
Net realized and unrealized gain.................................. 19,098,967
-----------
Net increase in net assets resulting from operations.............. $25,638,065
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
YEAR ENDED
ENDED JUNE 30,
JUNE 30, 1998 1997
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 6,539,098 $ 5,529,755
Net realized gain................................. 12,223,856 24,421,499
Change in net unrealized appreciation or deprecia-
tion ............................................ 6,875,111 35,391,730
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 25,638,065 65,342,984
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I ................................. (6,380,973) (4,371,883)
Brinson Class N.................................. (58) --
SwissKey Class................................... (51,271) (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............... (32,242,400) (16,715,414)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 317,039,181 232,045,893
Shares issued on reinvestment of distributions.... 31,189,854 16,204,754
Shares redeemed................................... (325,627,875) (81,854,223)
------------ ------------
Net increase in net assets resulting from capital
share transactions............................... 22,601,160 166,396,424
------------ ------------
TOTAL INCREASE IN NET ASSETS.................... 15,996,825 215,023,994
------------ ------------
NET ASSETS:
Beginning of year................................. 428,652,323 213,628,329
------------ ------------
End of year (including accumulated undistributed
net investment income of $1,437,308 and
$1,777,930, respectively)........................ $444,649,148 $428,652,323
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, AUGUST 31, 1993*
---------------------------------------- THROUGH
BRINSON CLASS I 1998 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. 0.18 0.18 0.18 0.15 0.10
Net realized and
unrealized gain
(loss)............... 0.30 1.97 2.05 (0.16) (0.34)
-------- -------- -------- -------- -------
Total income (loss)
from investment
operations......... 0.48 2.15 2.23 (0.01) (0.24)
-------- -------- -------- -------- -------
Less distributions:
Distributions from in-
vestment income...... (0.18) (0.17) (0.18) -- (0.07)
Distributions from net
realized gain........ (0.74) (0.56) (0.56) -- --
-------- -------- -------- -------- -------
Total distributions. (0.92) (0.73) (0.74) -- (0.07)
-------- -------- -------- -------- -------
Net asset value, end of
period................. $ 12.15 $ 12.59 $ 11.17 $ 9.68 $ 9.69
======== ======== ======== ======== =======
Total return (non-
annualized)............ 4.78% 20.27% 23.64% (0.10)% (2.45)%
Ratios/Supplemental da-
ta:
Net assets, end of pe-
riod (in 000s)........ $439,329 $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............ 1.52% 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.................. 49% 25% 20% 14% 12%
Average commission rate
paid per share........ $ 0.0221 $ 0.0245 $ 0.0219 N/A N/A
</TABLE>
* Commencement of investment operations
** 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 the period presented.
<TABLE>
<CAPTION>
YEAR*
ENDED
BRINSON CLASS N JUNE 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of year $ 12.59
-------
Income from investment operations:
Net investment income........................................... 0.16
Net realized and unrealized gain................................ 0.29
-------
Total income from investment operations....................... 0.45
-------
Less distributions:
Distributions from net investment income........................ (0.16)
Distributions from net realized gain............................ (0.74)
-------
Total distributions........................................... (0.90)
-------
Net asset value, end of year $ 12.14
=======
Total return...................................................... 4.51%
Ratios/Supplemental data:
Net assets, end of year (in 000s)................................ $ 11
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.................................... 1.27%
After expense reimbursement..................................... N/A
Portfolio turnover rate.......................................... 49%
Average commission rate paid per share........................... $0.0221
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR ENDED JUNE
30, JULY 31, 1995*
----------------- THROUGH
SWISSKEY CLASS 1998 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........ $ 12.49 $ 11.12 $ 10.26
------- ------- -------
Income from investment operations:
Net investment income..................... 0.08 0.11 0.12
Net realized and unrealized gain.......... 0.30 1.93 1.45
------- ------- -------
Total income from investment operations. 0.38 2.04 1.57
------- ------- -------
Less distributions:
Distributions from net investment income.. (0.08) (0.11) (0.15)
Distributions from net realized gain...... (0.74) (0.56) (0.56)
------- ------- -------
Total distributions..................... (0.82) (0.67) (0.71)
------- ------- -------
Net asset value, end of period.............. $ 12.05 $ 12.49 $ 11.12
======= ======= =======
Total return (non-annualized)............... 3.90% 19.32% 15.78%
Ratios/Supplemental data:
Net assets, end of period (in 000s)........ $ 5,310 $ 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.............. 0.68% 1.02% 0.83%**
After expense reimbursement............... N/A N/A 1.03%**
Portfolio turnover rate.................... 49% 25% 20%
Average commission rate paid per share..... $0.0221 $0.0245 $0.0219
</TABLE>
* Commencement of SwissKey Class
** Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20
<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 eight series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund (each a
"Fund" and collectively, the "Funds"). Each Fund has three classes of shares
outstanding, Brinson Class I, Brinson Class N and 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 Non-U.S. Equity Fund in the preparation
of its financial statements.
A.INVESTMENT VALUATION:Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Futures contracts are valued at
the settlement price established each day on the exchange on which they are
traded. Forward foreign currency contracts are valued daily using quoted
forward exchange rates. Short-term obligations with a maturity of 60 days or
less are valued at amortized cost, which approximates market value.
B.FOREIGN CURRENCY TRANSLATION:Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and
sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and
unrealized gain or loss on investments in the statement of operations.
C.INVESTMENT TRANSACTIONS:Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME:Interest income, which includes amortization of premiums
and discounts, is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date, except that certain dividends from foreign securities are
recorded as the information becomes available.
E.FEDERAL INCOME TAXES:It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of its taxable income
to its shareholders. The Fund has met the requirements of the Code applicable
to regulated investment companies for the year ended June 30, 1998, 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.
- --------------------------------------------------------------------------------
21
<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 year ended June 30, 1998, were as follows:
<TABLE>
<CAPTION>
ADVISORY ADVISORY
FEE FEES
-------- ----------
<S> <C> <C>
Non-U.S. Equity Fund........................................ 0.80% $3,475,953
</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 for the year ended June 30, 1998 were $5,840.
3.INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1998, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
Non-U.S. Equity Fund.................................. $196,176,481 $198,897,969
</TABLE>
4.FORWARD FOREIGN CURRENCY CONTRACTS
The Fund engages in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation strategies. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Risks associated with such contracts include movement
in the value of the foreign currency relative to the U.S. dollar and the
ability of the counterparty to perform. The unrealized gain, if any, represents
the credit risk to the Fund on a forward foreign currency contract.
Fluctuations in the value of forward foreign currency contracts are recorded
daily as net unrealized gains or losses. The Fund realizes a gain or loss upon
settlement of the contracts. The statement of operations reflects net realized
and net unrealized gains and losses on these contracts. The counterparty to all
forward foreign currency contracts, at and for the year ended June 30, 1998,
was the Fund's custodian or an affiliate of the Fund's custodian.
5.FUTURES CONTRACTS
The Fund may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Fund to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Fund enters into such 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.
- --------------------------------------------------------------------------------
22
<PAGE>
NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6.SECURITY LENDING
The Fund loaned securities to certain brokers with the Fund's custodian acting
as the Fund's lending agent. The Fund earned negotiated lenders' fees, which
are included in interest income in the statement of operations. The Fund
receives securities, which are not reflected in the statement of assets and
liabilities, as collateral against the loaned securities. The Fund monitors the
market value of securities loaned on a daily basis and initially requires
collateral against the loaned securities in an amount at least equal to 105% of
the value of non-U.S. securities loaned. The value of loaned securities and
related collateral at June 30, 1998 was $34,770,031 and $39,692,153,
respectively.
7.DISTRIBUTION PLANS
The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for the Brinson Class N
and the SwissKey Class. Each Plan governs payments made for the expenses
incurred in the promotion and distribution of the Brinson Class N and 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. 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.
8.LINE OF CREDIT
The Trust has entered into an agreement with Chase Manhattan Bank to provide a
364 day $100 million committed line of credit to the Funds. Borrowings will be
made for temporary purposes. Interest on amounts borrowed are calculated at the
Federal Funds rate plus 0.50% per year. The Funds pay a commitment fee of 0.08%
per year of the average daily unutilized amount of the line of credit. During
the year ended June 30, 1998, the Non-U.S. Equity Fund had total borrowings of
$32,600,000 outstanding for 1 day under the agreement.
9.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I............... 26,268,807 $312,436,986 19,910,853 $225,344,857
Brinson Class N............... 798 9,817 79 1,000
SwissKey Class................ 387,174 4,592,378 590,377 6,700,036
---------- ------------ ---------- ------------
Total Sales................ 26,656,779 $317,039,181 20,501,309 $232,045,893
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I............... 2,849,536 $ 30,664,100 1,461,013 $ 16,110,105
Brinson Class N............... 10 117 -- --
SwissKey Class................ 49,433 525,637 8,477 94,649
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 2,898,979 $ 31,189,854 1,469,490 $ 16,204,754
========== ============ ========== ============
Redemptions:
Brinson Class I............... 26,391,131 $318,236,785 6,945,571 $ 80,838,515
Brinson Class N............... -- -- -- --
SwissKey Class................ 620,542 7,391,090 87,985 1,015,708
---------- ------------ ---------- ------------
Total Redemptions.......... 27,011,673 $325,627,875 7,033,556 $ 81,854,223
========== ============ ========== ============
</TABLE>
- --------------------------------------------------------------------------------
23
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds--Non-U.S. Equity Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Brinson Funds--Non-U.S. Equity Fund as of
June 30, 1998, the related statements of operations for the year then ended and
changes in net assets and the financial highlights for the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--Non-U.S. Equity Fund at June 30, 1998, the results of its
operations for the year then ended and the changes in its net assets and the
financial highlights for the periods indicated therein in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
August 7, 1998
- --------------------------------------------------------------------------------
24
<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>
[ART]
The Brinson Funds
- --------------------------------------------------------------------------------
Chicago . Bahrain . Basel . Frankfurt . Geneva . Hong Kong . London . Melbourne
New York . Rio de Janiero . Paris . Singapore . Sydney . Tokyo . Zurich
209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430
<PAGE>
[SWISSKEY FUNDS LOGO]
SwissKey Global Fund
SwissKey Global Equity Fund
Swisskey Global Bond Fund
Annual Report
June 30, 1998
Your Key to Performance
-----------------------
<PAGE>
Trustees and Officers
[SWISSKEY FUNDS LOGO]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA
Chairman of the Board
E. Thomas McFarlan
President
Thomas J. Digenan, CFA, CPA
Vice President
Debra L. Nichols
Vice President
Carolyn M. Burke, CPA
Secretary and Treasurer
Catherine E. Macrae
Assistant Secretary
1
<PAGE>
The Funds' Advisor -- Brinson Partners, Inc.
[SWISSKEY FUNDS LOGO]
The UBS Brinson Division is the institutional asset management division of UBS
AG. UBS Brinson is the name used outside North America while Brinson Partners
continues as the primary name within North America. The UBS Brinson Division
manages over USD 390 billion of institutional assets, including over USD 277
billion of discretionary institutional assets on an active basis and mutual fund
assets for UBS Private Banking which total over USD 113 billion. In addition,
UBS Brinson acts as the investment advisor to UBS Private Banking on an advisory
basis. UBS Brinson manages investment portfolios for corporations, public funds,
endowments, foundations, central banks and other investors located throughout
the world. The UBS Brinson Division employs over 1,500 people in offices in
Chicago, Bahrain, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New
York, Paris, Rio de Janeiro, Singapore, Sydney, Tokyo and Zurich.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment markets
and their interrelationships. Portfolio structure is focused upon both risk and
return considerations in the context of full investment cycles. Our investment
decisions are based on fundamental research, internally developed valuation
systems and seasoned judgment. Our independent team approach allows for rapid
responses to market changes, while providing each client with the benefit of our
best talent and the flexibility to customize portfolios to meet unique
requirements.
2
<PAGE>
Table of Contents
[SWISSKEY FUNDS LOGO]
<TABLE>
<S> <C>
Shareholder Letter...................................... 4
Global Economic and Market Highlights................... 5
Global Fund............................................. 6
Schedule of Investments............................ 10
Financial Statements............................... 20
Financial Highlights............................... 24
Global Equity Fund...................................... 27
Schedule of Investments............................ 31
Financial Statements............................... 37
Financial Highlights............................... 40
Global Bond Fund........................................ 43
Schedule of Investments............................ 46
Financial Statements............................... 50
Financial Highlights............................... 53
The SwissKey Funds--Notes to Financial Statements....... 56
Report of Independent Auditors.......................... 61
</TABLE>
3
<PAGE>
Shareholder Letter
[SWISS KEY FUND LOGO]
August 22, 1998
Dear Shareholder:
We are very pleased to present the June 30, 1998 Annual Report for the Global
Fund, Global Equity Fund and Global Bond Fund. Within this Report, we focus on
the current global economic outlook as well as our current strategies and
performance updates for the three Global Funds.
In December 1997, Union Bank of Switzerland and Swiss Bank Corporation announced
their intention to merge, which included the integration of UBS Asset Management
and SBC Brinson into the UBS Brinson Division. The merger was consummated on
June 29, 1998. UBS Brinson is managed today by the same senior management that
has led the business over the past decades with a consistently applied
investment philosophy and process. We are excited about the formation of the UBS
Brinson Division and the additional resources we have brought together to
further the tradition of delivering value-added investment performance and the
highest level of professional client service.
SwissKey Global Fund
Since its inception on July 31, 1995, the SwissKey Global Fund has produced an
annualized total return of 13.30% compared to the return of 15.21% of its
benchmark, the Global Securities Markets Mutual Fund Index.
SwissKey Global Equity Fund
The SwissKey Global Equity Fund has provided an annualized return of 16.26%
since its performance inception on July 31, 1995. This is compared to an 18.18%
return for the benchmark, the MSCI World Equity (Free) Index.
SwissKey Global Bond Fund
The SwissKey Global Bond Fund has provided an annualized return of 6.36% since
its performance inception on July 31, 1995. Over the same period, the return of
the Fund's benchmark, the Salomon World Government Bond Index, was 2.84%.
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
[SWISS KEY FUND LOGO]
The economic situation in Japan remains bleak. With real GDP growth negative in
the last two quarters, the country is officially in recession. The downturn in
output has brought on the highest unemployment rate recorded in the post-war
period, at just over 4%. In response to the news, the voters have delivered a
severe rebuke to the ruling LDP, although it is not at all certain that this
will result in the implementation of "solutions" proffered by Western
governments and commentators.
Many of Japan's problems are magnified elsewhere in Asia. Last year's financial
and economic crisis has not diminished to any great extent. With financial
systems straining under large amounts of defunct debts, and the IMF prescribing
high interest rates in the interest of currency support and inflation control,
real economic activity has slowed substantially. While Asia suffers from falling
living standards, the crisis has been a partial benefit to the U.S. and Europe
by keeping commodity and import prices in check, and by not augmenting strong
domestic demand in those economies.
Continental Europe's cyclical recovery is well under way, and is starting to
have some beneficial effects on the high unemployment rate. Previously, output
and profit growth were reasonably strong, but did not carry over into the labor
market. Although unemployment has been reduced, the failure to address
structural problems will almost certainly guarantee that the Continent's poor
overall unemployment picture will persist for several years. The U.K.'s economic
performance has been at odds with most of the rest of Europe. A series of Bank
of England rate hikes has not prevented the headline inflation rate from rising
above 4% this year. Now however, there are signs that these hikes, coupled with
a strong pound, have started to cool the economy.
The U.S. expansion is unabated; more than 7 years have elapsed since the
recession at the start of the decade. However, the Federal Reserve's attempts to
maintain a neutral policy stance, in light of the Asian crisis' effect on demand
and costs, has resulted in substantial growth in the money supply. This could
set the stage for a modest resurgence in inflation. Profit growth, which had
reflected the strength of the domestic economy in prior years, is now showing
signs of the fall-off in Asian demand and the strength of the dollar.
Global Environment
<TABLE>
<CAPTION>
6 months 1 year 7/31/95*
Major Markets ended ended to
Total Return in U.S. Dollars 6/30/98 6/30/98 6/30/98
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Equity 15.47% 28.86% 27.26
Non-U.S. Equities (currency unhedged) 15.53 6.04 9.15
Non-U.S. Equities (currency hedged) 18.55 16.90 21.22
U.S. Bonds 3.97 10.59 8.01
Non-U.S. Bonds (currency unhedged) 2.09 0.89 0.28
Non-U.S. Bonds (currency hedged) 5.44 11.89 12.05
U.S. Cash Equivalents 2.38 4.87 4.97
- -----------------------------------------------------------------------------
6 months 1 year 7/31/95*
Major Currencies ended ended to
Percent Change Relative to U.S. Dollars 6/30/98 6/30/98 6/30/98
- -----------------------------------------------------------------------------
Yen -6.31% -17.55% -14.45%
Pound 1.41 0.25 1.45
Deutschemark -0.39 -3.46 -8.78
Canadian Dollar -2.69 -6.19 -2.34
- -----------------------------------------------------------------------------
</TABLE>
* Inception date of the SwissKey Global Fund
All total returns in excess of 1 year are average annualized returns.
5
<PAGE>
Global Fund
[SWISS KEY FUND LOGO]
The Global Fund is diversified across the equity and fixed income markets of the
U.S. and a broad range of other countries. 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 with each market
is based on the fundamental research of our analytical teams in our offices
worldwide.
Since its inception on July 31, 1995 the SwissKey Global Fund has produced an
annualized return of 13.30%, compared to the return of 15.21% for its benchmark,
the Global Securities Markets Mutual Fund Index. For the first half of 1998, the
SwissKey Global Fund returned 5.92%, trailing the 10.16% return of the
benchmark.
The Global Fund market strategy centers on reducing the risk of exposure to the
overpriced equity markets; most global bond markets are neutrally valued and,
because they provide relative attraction, are the primary overweights. The
Japanese bond market is an exception and is extremely overvalued at all points
along the yield curve. Market allocation made a substantial negative
contribution to Fund performance during the first half of 1998 as developed
global equity markets, with a few Asian exceptions, were strong. Numerous
developed equity markets provided double-digit returns in dollar-hedged terms.
Developed bond markets provided positive returns but failed to match those of
world equity markets.
The strategy for emerging markets equities is neutral to the normal policy
exposure of 3.0%. The emerging markets debt strategy mirrors the developed bond
market overweight, with a 5.0% exposure relative to the 2.0% normal policy. A
small underweight is carried in the U.S. high yield bond market.
Active currency had little impact on the performance of the Fund. Current
strategy involves yen and sterling underweights and Australian and U.S. dollar
overweights.
6
<PAGE>
Global Fund
- --------------------------------------------------------------------------------
[SWISS KEY FUND LOGO]
- --------------------------------------------------------------------------------
Total Return
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 months 1 year 7/31/95*
ended ended to
6/30/98 6/30/98 6/30/98
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
SwissKey Global Fund 5.92% 7.60% 13.30%
- --------------------------------------------------------------------------------
GSMI Mutual Fund Index** 10.16 13.76 15.21
- --------------------------------------------------------------------------------
</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; 21% Salomon
BIG Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged);
2% JP Morgan EMBI+; 3% IFC Investable Index; and 3% High Yield Bond Index.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
- --------------------------------------------------------------------------------
Illustration of an Assumed Investment of $10,000
- --------------------------------------------------------------------------------
This chart shows the growth in the value of an investment in the SwissKey Global
Fund and the GSMI Mutual Fund Index if you had invested $10,000 on July 31,
1995, and had reinvested all your income dividends and capital gain
distributions through June 30, 1998. 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
[LINE GRAPH APPEARS HERE]
[PLOT POINTS FOR GRAPH]
<TABLE>
<CAPTION>
GSMI
SWISSKEY MUTUAL
GLOBAL FUND
DATE FUND INDEX
----------------------------------
<S> <C> <C>
7/31/95 10,000 10,000
12/31/95 10,861 10,665
6/30/96 11,324 11,257
12/31/96 12,332 12,001
6/30/97 13,377 13,283
12/31/97 13,589 13,717
6/30/98 14,394 15,111
</TABLE>
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
================================================================================
7
<PAGE>
Global Fund
[SWISSKEY FUNDS LOGO]
<TABLE>
<CAPTION>
Asset Allocation
As of June 30, 1998
Current
Benchmark Strategy
- ----------------------------------------------------------------
<S> <C> <C>
U.S. Equities 40.0% 23.0%
Global Equities Ex-U.S. 22.0 17.0
Emerging Markets Equities 3.0 3.0
Dollar Bonds 21.0 31.0
High Yield Bonds 3.0 2.5
Global Bonds Ex-U.S. 9.0 18.5
Emerging Markets Debt 2.0 5.0
Cash Equivalents 0.0 0.0
- ----------------------------------------------------------------
100.0% 100.0%
</TABLE>
<TABLE>
<CAPTION>
Currency Allocation
As of June 30, 1998
Current
Benchmark Strategy
- ----------------------------------------------------------------
<S> <C> <C>
U.S. 66.0% 69.0%
Japan 6.7 2.7
U.K. 5.6 2.3
Continental Europe 16.0 16.0
Canada 1.5 1.5
Emerging Markets 3.0 3.0
Other 1.2 5.5
- ----------------------------------------------------------------
100.0% 100.0%
</TABLE>
<TABLE>
<CAPTION>
Top Ten U.S. Equity Holdings
As of June 30, 1998
Percent of
Net Assets
- ----------------------------------------------------------------
<S> <C>
1. Xerox Corp. 1.36%
2. Lockheed Martin Corp. 1.35
3. Burlington Northern Santa Fe Corp. 1.25
4. Aon Corp. 0.96
5. FDX, Corp. 0.92
6. Philip Morris Companies, Inc. 0.91
7. CIGNA Corp. 0.76
8. Automatic Data Processing, Inc. 0.73
9. Goodyear Tire & Rubber Co. 0.70
10. Baxter International, Inc. 0.67
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Top Ten Non-U.S. Equity Holdings
As of June 30, 1998
Percent of
Net Assets
- ----------------------------------------------------------------
<S> <C>
1. Glaxo Wellcome PLC 0.31%
2. Novartis AG (Reg.) 0.29
3. Nokia Oyj A Shares 0.26
4. British Petroleum Co. PLC 0.24
5. Royal Dutch Petroleum Co. 0.23
6. British Telecommunications PLC 0.23
7. Lloyds TSB Group PLC 0.22
8. CS Holdings AG (Reg.) 0.22
9. B.A.T. Industries PLC 0.20
10. Roche Holding AG (Gen.) 0.20
- ----------------------------------------------------------------
</TABLE>
8
<PAGE>
Global Fund
[SWISSKEY FUNDS LOGO]
Industry Diversification
As a Percentage of Net Assets
As of June 30, 1998
<TABLE>
<S> <C>
U.S. EQUITIES
Energy............................. 0.73%
------
Capital Investment
Capital Goods..................... 3.02
Technology........................ 2.80
------
5.82
------
Basic Industries
Chemicals......................... 1.28
Housing/Paper..................... 2.26
Metals............................ 0.21
------
3.75
------
Consumer
Non-Durables...................... 2.02
Retail/Apparel.................... 1.30
Autos/Durables.................... 0.87
Discretionary..................... 0.23
Health: Drugs..................... 2.17
Health: Non-Drugs................. 1.60
------
8.19
------
Financial
Banks............................. 2.07
Non-Banks......................... 2.09
------
4.16
------
Utilities
Electric.......................... 1.72
Telephone......................... 0.26
------
1.98
------
Transportation..................... 2.39
Services/Misc...................... 1.85
Post Venture....................... 1.28
------
Total U.S. Equities............ 30.15*
------
NON-U.S. EQUITIES
Aerospace & Military............... 0.04%
Airlines........................... 0.07
Appliances & Household............. 0.26
Automobiles........................ 0.62
Banking............................ 2.05
Beverages & Tobacco................ 0.36
Broadcasting & Publishing.......... 0.51
Building Materials................. 0.29
Business & Public Service.......... 0.48
Chemicals.......................... 0.48
Construction....................... 0.11
Consumer........................... 0.24
Data Processing.................... 0.09
Electric Components................ 0.14
Electronics........................ 0.69
Energy............................. 1.30
Financial Services................. 0.44
Food & House Products.............. 0.69
Forest Products.................... 0.21
Gold Mining........................ 0.01
Health: Drugs...................... 0.63
Health: Non-Drugs.................. 0.73
Housing/Paper...................... 0.01
Industrial Components.............. 0.23
Insurance.......................... 1.06
Investment Companies............... 0.07
Leisure & Tourism.................. 0.12
Machinery & Engineering............ 0.09
Merchandising...................... 0.67
Metals--Steel...................... 0.34
Miscellaneous Materials............ 0.01
Multi-Industry..................... 0.93
Non-Ferrous Metals................. 0.30
Real Estate........................ 0.08
Recreation......................... 0.05
Retail/Apparel..................... 0.10
Telecommunications................. 1.52
Textiles & Apparel................. 0.05
Transportation..................... 0.15
Utilities.......................... 0.58
Wholesale & International Trade.... 0.09
------
Total Non-U.S. Equities........ 16.89
------
EMERGING MARKETS EQUITIES.......... 3.38
------
U.S. BONDS
Corporate Bonds
Aerospace & Military.............. 0.74
Airlines.......................... 0.03
Asset-Backed...................... 0.33
Auto/Durables..................... 0.09
Banks............................. 0.57
Broadcasting & Public Service..... 0.69
CMO............................... 1.85
Financial Services................ 1.80
Industrial Components............. 0.37
Services/Miscellaneous............ 0.04
Telecommunications................ 0.20
Transportation.................... 0.28
------
6.99
------
U.S. Government Agencies........... 8.32
U.S. Government Obligations........ 4.18
International Dollar Bonds......... 3.57
------
Total U.S. Bonds............... 23.06*
------
HIGH YIELD BONDS................... 2.51
------
NON-U.S. BONDS
Foreign Government Bonds.......... 17.33
------
EMERGING MARKETS DEBT.............. 4.93
------
SHORT TERM INVESTMENTS............. 16.86*
------
TOTAL INVESTMENTS.............. 115.11
LIABILITIES, LESS CASH AND
OTHER ASSETS...................... (15.11)
------
NET ASSETS..................... 100.00%
======
</TABLE>
* The Fund held a long position in U.S. Treasury futures on June 30, 1998 which
increased U.S. Bond exposure from 23.06% to 29.90%. The Fund held a short
position in stock index futures on June 30, 1998 which reduced U.S. Equity
exposure from 30.15% to 22.92%. These adjustments result in a net increase in
the Fund's exposure to Short-Term Investments from 16.86% to 17.25%.
9
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Equities -- 50.42%
U.S. EQUITIES -- 30.15%
Aetna Inc............................................ 33,800 $ 2,573,025
Allergan, Inc........................................ 52,300 2,425,412
Alza Corp. (b)....................................... 53,300 2,305,225
American Home Products Corp.......................... 54,200 2,804,850
Aon Corp............................................. 95,399 6,701,745
Automatic Data Processing, Inc....................... 69,800 5,086,675
BankBoston Corp...................................... 38,800 2,158,250
Baxter International, Inc............................ 87,000 4,681,687
Beckman Coulter PLC.................................. 23,100 1,345,575
Bestfoods............................................ 46,600 2,705,712
Biogen, Inc.......................................... 20,900 1,024,100
Birmingham Steel Corp................................ 21,400 264,825
Brinson Post-Venture Fund (b)........................ 423,765 8,960,844
Burlington Northern Santa Fe Corp.................... 88,900 8,728,869
Champion Enterprises, Inc............................ 16,300 478,813
Champion International Corp.......................... 26,500 1,303,469
CIGNA Corp........................................... 77,000 5,313,000
Circuit City Stores--Circuit City Group.............. 78,700 3,689,062
Citicorp............................................. 1,700 253,725
CMS Energy Corp...................................... 68,800 3,027,200
Columbia/HCA Healthcare Corp......................... 14,100 410,663
Comerica, Inc........................................ 22,000 1,457,500
Commscope, Inc. (b).................................. 37,433 605,947
Comverse Technology, Inc. (b)........................ 24,360 1,263,675
Consolidated Stores Corp............................. 25,400 920,750
Corning, Inc......................................... 126,700 4,402,825
Covance, Inc. (b).................................... 26,872 604,620
Crown Cork & Seal Co., Inc........................... 25,300 1,201,750
Dial Corp............................................ 27,600 715,875
Eastman Chemical Co.................................. 29,400 1,830,150
EMC Corp. (b)........................................ 47,400 2,124,112
Enron Corp........................................... 58,900 3,184,281
Entergy Corp......................................... 151,000 4,341,250
FDX Corp. (b)........................................ 102,100 6,406,775
First American Corp. of Tennessee.................... 13,900 668,938
First Data Corp...................................... 128,830 4,291,649
First Security Corp.................................. 26,375 564,590
FirstEnergy Corp..................................... 10,805 332,254
Fleet Financial Group, Inc........................... 32,800 2,738,800
Fleetwood Enterprises, Inc........................... 1,200 48,000
Food Lion, Inc., Class A............................. 103,200 1,096,500
Forest Laboratories, Inc. Class A (b)................ 40,900 1,462,175
Fort James Corp...................................... 68,500 3,048,250
Gannett Co., Inc..................................... 23,100 1,641,544
General Instrument Corp. (b)......................... 121,500 3,303,281
General Semiconductor, Inc. (b)...................... 27,550 272,056
Genzyme Corp. (b).................................... 21,500 549,594
Geon Co.............................................. 14,700 337,181
Goodyear Tire & Rubber Co............................ 76,500 4,929,469
Great Lakes Chemical Corp............................ 15,100 595,506
Harnischfeger Industries, Inc........................ 37,200 1,053,225
Health Care and Retirement Corp. (b)................. 24,000 946,500
Hibernia Corp........................................ 29,600 597,550
IMC Global Inc....................................... 28,400 855,550
Informix Corp. (b)................................... 28,500 225,328
</TABLE>
<TABLE>
<S> <C> <C>
Interpublic Group of Companies, Inc.................. 22,250 $ 1,350,297
Kimberly Clark Corp.................................. 99,800 4,578,325
Lafarge Corp......................................... 15,500 609,344
Lear Corp. (b)....................................... 22,900 1,175,056
Lockheed Martin Corp................................. 89,223 9,446,485
Lyondell Petrochemical Co............................ 72,100 2,194,544
Manor Care, Inc...................................... 27,298 1,049,267
Martin Marietta Materials, Inc....................... 15,584 701,280
Masco Corp........................................... 62,100 3,757,050
Medusa Corp.......................................... 2,200 138,050
Nabisco Holdings Corp................................ 54,300 1,958,194
National Service Industries, Inc..................... 10,400 529,100
Nextel Communications, Inc. (b)...................... 74,400 1,850,700
Norfolk Southern Corp................................ 51,100 1,523,419
Peco Energy Co....................................... 149,100 4,351,856
Pentair, Inc......................................... 28,196 1,198,330
Philip Morris Companies, Inc......................... 161,900 6,374,813
Praxair, Inc......................................... 49,400 2,312,537
Raytheon Co., Class B................................ 73,200 4,327,950
Regions Financial Corp............................... 13,700 562,556
Reynolds & Reynolds Co............................... 17,600 320,100
Schering Plough Corp................................. 51,000 4,672,875
Seagate Technology, Inc. (b)......................... 47,600 1,133,475
Sears, Roebuck and Co................................ 55,000 3,358,437
Southdown, Inc....................................... 10,700 763,713
St. Jude Medical, Inc. (b)........................... 26,800 986,575
Timken Co............................................ 9,400 289,638
Tyson Foods, Inc., Class A........................... 108,498 2,353,050
Ultramar Diamond Shamrock Corp....................... 60,602 1,912,751
US Bancorp........................................... 68,380 2,940,340
Vencor, Inc. (b)..................................... 56,400 408,900
Ventas, Inc.......................................... 56,400 779,025
Viad Corp............................................ 52,200 1,448,550
Wells Fargo & Co..................................... 6,800 2,509,200
Westvaco Corp........................................ 12,698 358,719
Witco Corp........................................... 28,100 821,925
Xerox Corp........................................... 93,700 9,522,262
York International Corp.............................. 33,200 1,446,275
------------
Total U.S. Equities.................................. 210,875,139
------------
NON-U.S. EQUITIES -- 16.89%
AUSTRALIA -- 0.86%
Amcor Ltd............................................ 23,770 104,076
Boral Ltd............................................ 89,240 167,457
Brambles Industries Ltd.............................. 12,590 247,086
Broken Hill Proprietary Co., Ltd..................... 84,200 711,778
Coca-Cola Amatil Ltd................................. 14,270 95,444
CSR Ltd.............................................. 42,930 123,893
David Jones Ltd...................................... 182,010 208,529
Lend Lease Corp. Ltd................................. 11,596 234,472
Mayne Nickless Ltd................................... 42,000 222,390
National Australia Bank Ltd.......................... 58,467 771,242
News Corp., Ltd...................................... 110,549 902,340
News Corp. Ltd., Preferred........................... 27,886 197,566
Orica Ltd............................................ 18,700 110,597
Pacific Dunlop Ltd................................... 85,210 137,731
Qantas Airways Ltd................................... 83,587 125,790
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Rio Tinto Ltd........................................ 19,845 $ 235,968
Santos Ltd........................................... 38,610 119,556
Telstra Corp., Ltd................................... 173,200 444,067
Westpac Bank Corp., Ltd.............................. 93,408 569,797
WMC Ltd.............................................. 70,040 210,806
Woolworth's Ltd...................................... 30,790 100,108
------------
6,040,693
------------
BELGIUM -- 0.82%
Delhaize-Le Lion S.A................................. 6,390 446,493
Electrabel S.A....................................... 3,490 989,506
Fortis AG............................................ 216 12
Fortis AG Strip (b).................................. 4,853 1,239,008
Groupe Bruxelles Lambert S.A. (b).................... 1,830 369,344
KBC Bancassurance Holding-Strip (b).................. 250 20
Kredietbank NV....................................... 8,650 774,106
Petrofina S.A........................................ 1,775 728,652
Solvay S.A., Class A................................. 5,220 413,840
Tractebel............................................ 4,065 595,384
Union Miniere S.A.................................... 3,105 191,924
------------
5,748,289
------------
CANADA -- 0.57%
Agrium, Inc.......................................... 9,500 118,540
Alcan Aluminum Ltd................................... 7,250 199,663
Bank of Montreal..................................... 5,290 291,371
Barrick Gold Corp.................................... 4,200 79,967
Canadian National Railway Co......................... 5,150 273,854
Canadian Pacific Ltd................................. 15,663 440,941
Extendicare Inc. (b)................................. 11,500 93,057
Hudson's Bay Co...................................... 6,800 155,828
Imasco, Ltd.......................................... 8,400 155,080
Imperial Oil Ltd..................................... 17,160 299,886
Magna International Inc., Class A.................... 2,200 150,646
Moore Corp., Ltd..................................... 8,100 107,405
Newbridge Networks Corp. (b)......................... 2,200 52,584
Noranda, Inc......................................... 7,440 128,503
NOVA Corp............................................ 19,520 223,658
Potash Corporation of Saskatchewan, Inc.............. 2,200 165,755
Royal Bank of Canada................................. 6,250 376,122
Seagram Co., Ltd..................................... 3,090 125,966
Shaw Communications Inc., Class B.................... 11,300 219,761
TransCanada Pipelines Ltd............................ 10,020 222,122
Westcoast Energy, Inc................................ 5,000 111,349
------------
3,992,058
------------
DENMARK -- 0.06%
Den Danske Bank Group................................ 1,900 227,934
Tele Danmark A/S..................................... 2,100 201,541
------------
429,475
------------
FINLAND -- 0.43%
Cultor Oyj........................................... 2,400 38,932
Merita Ltd., Class A................................. 49,350 325,612
Metsa Serla Oyj, Class B............................. 7,400 71,485
Nokia Oyj A Shares (b)............................... 25,100 1,845,958
Outokumpu Oyj, Class A............................... 9,680 123,503
</TABLE>
<TABLE>
<S> <C> <C>
Sampo Insurance Co., Ltd., Series A.................. 3,720 $ 176,287
UPM-Kymmene Corp..................................... 12,870 354,209
Valmet Oyj........................................... 5,800 100,005
------------
3,035,991
------------
FRANCE -- 1.64%
Air Liquide.......................................... 1,395 230,731
Alcatel Alsthom...................................... 2,632 535,890
AXA-UAP.............................................. 5,358 602,620
AXA-UAP Certificat de valeur guarantie............... 4,328 1,475
Banque Nationale de Paris............................ 5,909 482,805
Carrefour SA......................................... 600 379,590
Cie de Saint Gobain.................................. 2,967 550,117
Dexia France (b)..................................... 2,699 363,378
Elf Aquitaine S.A.................................... 4,394 617,747
Eridania Beghin-Say SA............................... 1,100 242,888
France Telecom S.A................................... 11,200 772,478
Groupe Danone........................................ 1,600 441,151
Lafarge S.A.......................................... 2,470 255,334
Lagardere S.C.A...................................... 8,300 345,536
Michelin, Class B.................................... 5,449 314,539
Paribas.............................................. 3,895 416,815
Pechiney S.A., Class A............................... 4,884 196,701
Peugeot S.A.......................................... 2,580 554,747
Pinault-Printemps-Redoute S.A........................ 390 326,398
Rhone-Poulenc, Class A............................... 9,644 543,931
SEITA................................................ 9,910 449,113
Societe Generale..................................... 2,295 477,144
Suez Lyonnaise des Eaux S.A. (b)..................... 4,071 670,047
Thomson CSF.......................................... 7,900 300,529
Total S.A., Class B.................................. 3,386 440,191
Usinor Sacilor....................................... 8,580 132,546
Vivendi.............................................. 3,844 820,808
Vivendi Warrants "01" (b)............................ 4,224 8,314
------------
11,473,563
------------
GERMANY -- 1.93%
Allianz AG........................................... 4,176 1,376,576
Allianz AG........................................... 122 39,878
BASF AG.............................................. 6,130 290,368
Bayer AG............................................. 15,240 786,063
Bayerische Motoren Werke (BMW)....................... 117 116,352
Bayerische Motoren Werke AG.......................... 390 393,457
Commerzbank AG....................................... 3,390 129,590
Continental AG....................................... 10,550 328,482
Daimler-Benz AG...................................... 6,435 631,022
Deutsche Bank AG..................................... 10,061 851,980
Deutsche Telekom AG.................................. 42,280 1,140,740
Dresdner Bank AG..................................... 12,050 649,565
Hochtief AG.......................................... 3,500 167,729
Hoechst AG........................................... 5,110 255,075
M.A.N. AG............................................ 750 291,690
Mannesmann AG (b).................................... 6,470 656,320
Metro AG............................................. 8,458 513,103
Metro AG Right (b)................................... 8,458 328
Muenchener Rueckver AG............................... 2,115 1,048,712
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Preussag AG.......................................... 1,172 $ 418,154
RWE AG............................................... 7,470 442,820
Schering AG.......................................... 3,805 448,379
Siemens AG........................................... 12,400 754,305
Thyssen AG........................................... 1,550 392,438
Veba AG.............................................. 8,839 602,325
Volkswagen AG........................................ 818 786,277
------------
13,511,728
------------
HONG KONG -- 0.10%
Cheung Kong Holdings Ltd............................. 26,000 127,842
Citic Pacific Ltd.................................... 14,000 24,753
CLP Holdings Ltd..................................... 14,500 66,057
Hang Seng Bank Ltd................................... 10,700 60,483
Hong Kong & China Gas Co., Ltd....................... 71,500 81,202
Hong Kong and China Gas Warrants "99" (b)............ 3,250 222
Hong Kong Telecommunications Ltd..................... 37,000 69,477
Hutchison Whampoa Ltd................................ 29,000 153,073
Johnson Electric Holdings Ltd........................ 14,000 51,855
South China Morning Post (Holdings) Ltd.............. 30,000 14,422
Sun Hung Kai Properties Ltd.......................... 13,000 55,197
------------
704,583
------------
ITALY -- 0.74%
Assicurazioni Generali............................... 16,800 546,280
Banca Commercial Italiana............................ 8,000 47,841
Credito Italiano S.p.A............................... 77,000 403,074
Danieli & Co. Savings (Risp)......................... 43,000 199,572
ENI ADR.............................................. 7,600 494,000
ENI S.p.A............................................ 102,000 668,504
Fiat S.p.A.-Priveleged Preferred..................... 128,600 320,134
INA-Istituto Nazionale delle Assicurazioni........... 13,000 36,933
Instituto Mobiliare Italiano S.p.A................... 18,800 296,138
Istituto Bancario San Paolo di Torino................ 18,000 259,740
Italgas S.p.A........................................ 6,800 27,697
La Rinascente S.p.A.................................. 25,740 256,307
Montedison S.p.A..................................... 250,700 310,986
Parmalat Finanziaria S.p.A........................... 93,000 189,657
Telecom Italia Mobile S.p.A.......................... 84,000 513,673
Telecom Italia Mobile S.p.A. RNC..................... 41,500 140,080
Telecom Italia S.p.A................................. 63,666 468,662
------------
5,179,278
------------
JAPAN -- 1.59%
Amada Co., Ltd....................................... 25,000 121,591
Bank of Tokyo-Mitsubishi, Ltd........................ 22,000 232,864
Canon Sales Co., Inc................................. 8,000 108,715
Canon, Inc........................................... 20,000 453,940
Citizen Watch Co., Ltd............................... 23,000 189,754
Dai Nippon Printing Co., Ltd......................... 22,000 351,119
Daiichi Pharmaceutical Co., Ltd...................... 20,000 263,717
Daikin Industries Ltd................................ 25,000 161,040
Daiwa House Industry Co., Ltd........................ 12,000 105,919
Denso Corp........................................... 20,000 331,448
Fanuc................................................ 10,000 345,859
</TABLE>
<TABLE>
<S> <C> <C>
Fuji Photo Film...................................... 1,000 $ 34,802
Fujitsu.............................................. 15,000 157,798
Hitachi Ltd.......................................... 47,000 306,481
Honda Motor Co....................................... 10,000 355,946
Hoya Corp............................................ 5,000 141,586
Inax................................................. 17,000 58,429
Ito Yokado Co., Ltd.................................. 9,000 423,461
Kaneka Corp.......................................... 23,000 120,978
Keio Teito Electric Railway.......................... 27,000 98,245
Kinki Nippon Railway................................. 28,000 131,138
Kirin Brewery Co., Ltd............................... 26,000 245,416
Kokuyo............................................... 8,000 135,461
Kuraray Co., Ltd..................................... 29,000 246,359
Kyocera Corp......................................... 3,000 146,558
Marui Co., Ltd....................................... 13,000 193,897
Matsushita Electric Industrial Co.................... 28,000 449,905
NGK Insulators....................................... 39,000 338,617
Nintendo Co., Ltd.................................... 1,900 175,920
Nippon Meat Packers, Inc............................. 16,000 195,871
Nippon Steel Co...................................... 19,000 33,404
Okumura Corp......................................... 24,000 84,217
Omron Corp........................................... 7,000 106,928
Osaka Gas Co......................................... 46,000 117,995
Sankyo Co., Ltd...................................... 18,000 409,843
Secom Co., Ltd....................................... 6,000 346,291
Sega Enterprises Ltd................................. 3,000 51,771
Seino Transportation................................. 16,000 88,770
Sekisui House Ltd.................................... 22,000 170,407
Shin-Etsu Chemical Co., Ltd.......................... 1,000 17,293
Sony Corp............................................ 5,200 447,743
Sumitomo Bank........................................ 4,000 38,909
Sumitomo Chemical Co................................. 28,000 86,349
Sumitomo Electric Industries......................... 19,000 192,074
Takeda Chemical Industries........................... 15,000 398,818
TDK Corp............................................. 4,000 295,421
Tokio Marine & Fire Insurance Co..................... 21,000 215,773
Tokyo Electric Power................................. 5,900 115,632
Tonen Corp........................................... 17,000 88,071
Toray Industries, Inc................................ 61,000 316,461
Toshiba Corp......................................... 56,000 228,786
Toyo Suisan Kaisha................................... 14,000 85,341
Toyota Motor Corp.................................... 17,000 439,745
Yamato Transport Co., Ltd............................ 2,000 22,409
Yamazaki Baking Co., Ltd............................. 9,000 79,764
------------
11,101,049
------------
MALAYSIA -- 0.08%
Berjaya Sports Toto Bhd.............................. 22,000 32,622
Kuala Lumpur Kepong Bhd.............................. 35,500 57,348
Malayan Banking Bhd.................................. 13,000 12,961
Malayan Banking Bhd.................................. 13,000 13,102
Malaysia International Shipping Bhd (Frgn.).......... 15,000 21,881
Nestle (Malaysia) Bhd................................ 13,000 58,927
Petronas Gas Bhd..................................... 22,000 40,844
Public Bank Bhd (Frgn.).............................. 22,000 6,631
Resorts World Bhd.................................... 30,000 32,984
</TABLE>
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12
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Rothmans of Pall Mall Bhd............................ 11,000 $ 76,251
Sime Darby Bhd....................................... 8,000 5,517
Tanjong PLC.......................................... 14,000 19,409
Telekom Malaysia Bhd................................. 32,000 54,008
Tenaga Nasional Bhd.................................. 33,000 39,783
UMW Holdings Bhd..................................... 15,000 6,727
YTL Corp. Bhd........................................ 42,000 31,595
YTL Power International Bhd (b)...................... 19,400 10,571
------------
521,161
------------
NETHERLANDS -- 0.93%
ABN AMRO Holdings NV................................. 22,490 526,263
Akzo Nobel NV........................................ 760 168,947
Elsevier NV.......................................... 23,580 355,868
Heineken NV (b)...................................... 10,313 405,058
Hoogovens NV......................................... 2,441 105,598
ING Groep NV......................................... 13,090 857,137
KLM Royal Dutch Air Lines NV......................... 3,492 141,795
KPN NV............................................... 11,613 447,005
Philips Electronics NV............................... 6,850 575,828
PolyGram NV.......................................... 4,200 214,315
Royal Dutch Petroleum Co............................. 29,420 1,631,391
Royal Dutch Petroleum Co., NY Shares................. 700 38,369
TNT Post Group NV (b)................................ 11,613 296,862
Unilever NV.......................................... 9,600 761,695
------------
6,526,131
------------
NEW ZEALAND -- 0.41%
Brierley Investments Ltd............................. 756,530 377,006
Carter Holt Harvey Ltd............................... 261,110 227,711
Fletcher Challenge Building.......................... 86,775 108,108
Fletcher Challenge Energy............................ 95,405 227,814
Fletcher Challenge Forests Ltd....................... 185,585 104,044
Fletcher Challenge Paper............................. 171,640 190,671
Lion Nathan Ltd...................................... 75,100 166,853
Telecom Corp. of New Zealand Ltd..................... 326,830 1,347,081
Telecom Corp. of New Zealand Ltd. ADR................ 3,800 124,450
------------
2,873,738
------------
NORWAY -- 0.04%
Norsk Hydro ASA...................................... 5,000 219,913
Norske Skogindustrier ASA Class A.................... 1,800 55,594
------------
275,507
------------
SINGAPORE -- 0.23%
City Developments Ltd................................ 31,000 86,606
Creative Technology Ltd. (b)......................... 3,000 36,401
DBS Land Ltd......................................... 58,000 48,062
Development Bank of Singapore Ltd.................... 13,800 76,372
Elec & Eltek International Co., Ltd.................. 8,100 27,378
Fraser & Neave Ltd................................... 12,000 32,246
Keppel Corp., Ltd.................................... 33,000 49,612
Keppel Land Ltd...................................... 35,000 32,110
Oversea-Chinese Banking Corp., Ltd................... 34,000 115,715
Rothmans Industries Ltd.............................. 11,000 48,831
</TABLE>
<TABLE>
<S> <C> <C>
Singapore Airlines Ltd. (Frgn.)...................... 38,000 $ 177,686
Singapore Press Holdings Ltd......................... 31,036 207,580
Singapore Technologies Engineering Ltd. (b).......... 36,000 25,357
Singapore Telecommunications, Ltd.................... 266,000 377,863
United Overseas Bank Ltd. (Frgn.).................... 74,000 229,950
Venture Manufacturing (Singapore) Ltd................ 12,000 22,729
------------
1,594,498
------------
SWEDEN -- 0.57%
ABB AB, A Shares..................................... 16,400 232,379
Astra AB, A Shares................................... 21,800 445,573
Electrolux AB Series B............................... 9,600 164,917
Investor AB-B Shares................................. 8,000 466,965
Nordbanken Holding AB................................ 62,700 459,937
Skandia Forsakrings AB............................... 18,200 260,166
Skanska AB, B Shares................................. 5,600 251,389
Svenska Handelsbanken, A Shares...................... 6,300 292,292
Swedish Match AB..................................... 61,800 205,357
Telefonaktiebloaget LM Ericsson, B Shares............ 27,100 791,772
Volvo AB, B Shares................................... 12,900 384,174
------------
3,954,921
------------
SWITZERLAND -- 1.28%
ABB AG (Bearer)...................................... 275 406,118
CS Holdings AG (Reg.)................................ 7,016 1,561,116
Holderbank Financiere Glarus, B Shares............... 264 335,918
Julius Baer Holding AG............................... 122 381,652
Nestle S.A. (Reg.)................................... 565 1,209,118
Novartis AG (Reg.)................................... 1,214 2,020,132
Roche Holding AG (Gen.).............................. 144 1,414,082
Sairgroup............................................ 775 254,961
Saurer AG............................................ 270 275,910
Sulzer AG............................................ 277 218,598
Swiss Reinsurance Co. (Reg.)......................... 332 839,631
------------
8,917,236
------------
UNITED KINGDOM -- 4.61%
Abbey National PLC................................... 31,620 561,873
B.A.T. Industries PLC................................ 149,484 1,496,486
BOC Group PLC........................................ 18,500 252,031
BTR PLC (b).......................................... 49,904 141,550
Barclays PLC......................................... 36,500 1,052,358
Bass PLC............................................. 16,027 300,299
Billiton PLC......................................... 169,000 342,602
Booker PLC........................................... 91,220 372,892
British Petroleum Co. PLC............................ 115,667 1,686,738
British Sky Broadcasting PLC......................... 51,000 366,328
British Steel PLC.................................... 323,470 711,068
British Telecommunications PLC....................... 127,980 1,580,158
Cable & Wireless PLC................................. 30,000 364,401
Cadbury Schweppes PLC................................ 44,500 688,653
Charter PLC.......................................... 55,846 582,836
Coats Viyella PLC.................................... 312,860 383,676
</TABLE>
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13
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ ------------
<S> <C> <C>
Diageo PLC........................................... 57,290 $ 678,673
FKI PLC.............................................. 181,500 523,901
General Electric Co. PLC............................. 101,550 875,139
Glaxo Wellcome PLC................................... 71,100 2,134,163
Greenalls Group PLC.................................. 56,000 484,933
HSBC Holdings PLC.................................... 38,104 967,000
Hanson PLC........................................... 64,102 389,581
Hillsdown Holdings PLC............................... 149,520 406,643
House of Fraser PLC.................................. 166,400 483,091
Inchcape PLC......................................... 79,470 250,606
Legal & General Group PLC............................ 13,400 142,979
Lloyds TSB Group PLC................................. 112,409 1,572,646
Marks & Spencer PLC.................................. 140,040 1,274,599
Mirror Group PLC..................................... 146,450 549,792
National Westminster Bank PLC........................ 25,380 453,532
Peninsular & Oriental Steam Navigation Co............ 59,420 855,599
Prudential Corp. PLC................................. 21,000 276,629
RJB Mining PLC....................................... 100,570 206,396
Reckitt & Colman PLC................................. 15,938 304,219
Reed International PLC............................... 64,000 578,770
Reuters Group PLC.................................... 10,659 121,829
Rio Tinto PLC........................................ 40,580 457,028
Royal & Sun Alliance Insurance Group PLC............. 42,943 443,875
Scottish Hydro-Electric PLC.......................... 45,480 403,700
Sears PLC............................................ 206,480 180,869
Sedgwick Group PLC................................... 133,360 289,265
SmithKline Beecham PLC............................... 109,180 1,332,552
Smurfit (Jefferson) Group PLC........................ 150,477 449,417
Tate & Lyle PLC...................................... 74,000 586,787
Tesco PLC............................................ 58,140 567,489
Thames Water PLC..................................... 39,210 713,754
The Great Universal Stores PLC....................... 4,000 52,725
Unilever PLC......................................... 88,040 937,190
United News & Media PLC.............................. 30,000 419,461
Vodafone Group PLC................................... 46,528 590,392
Williams PLC......................................... 50,010 321,251
Willis Corroon Group PLC............................. 26,000 65,939
------------
32,226,363
------------
Total Non-U.S. Equities.............................. 118,106,262
------------
EMERGING MARKETS EQUITIES -- 3.38%
Brinson Emerging Markets Equity Fund (b)............. 2,926,942 23,662,860
------------
Total Equities (Cost $297,790,589)................... 352,644,261
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ ------------
<S> <C> <C>
Bonds -- 47.83%
U.S. BONDS -- 23.06%
U.S. CORPORATE BONDS -- 6.99%
Aetna Services Inc., 6.970%, due 08/15/36............ $ 265,000 $ 273,999
Asset Securitization Corp., 7.210%, due 10/13/26..... 2,310,000 2,422,613
AT&T Corp., 8.250%, due 01/11/00..................... 945,000 976,400
Bellsouth Savings & Employee ESOP, 9.125%, 07/01/03.. 254,503 275,023
Capital One Bank, 6.830%, due 05/17/99............... 1,946,000 1,956,950
Chase Manhattan Auto Owner Trust, 96-C, Class A4,
6.150%, due 03/15/02................................ 1,000,000 1,007,370
Chemical Master Credit Card Trust, 6.230%, due
06/15/03............................................ 1,430,000 1,445,101
Chesapeake & Potomac Telephone of Maryland, 8.000%,
due 10/15/29........................................ 98,000 120,886
Chrysler Financial Corp., 7.400%, due 08/01/2097..... 252,000 271,991
Citicorp, Series F, 6.150%, due 03/15/02............. 500,000 500,933
Continental Airlines, Inc.
97-4A, 6.900%, due 01/02/18......................... 1,850,000 1,924,333
98-1B, 6.748%, due 09/15/18......................... 220,000 223,672
Countrywide Funding Corp., 93-12, Class A5, 6.000%,
due 02/25/24........................................ 1,045,000 1,035,783
CS First Boston Mortgage Securities Corp., 97-C1,
Class A1B, 7.150%, due 08/20/06..................... 1,465,000 1,540,081
Dayton Hudson Credit Card Master Trust, 95-1, Class
A, 6.100%, due 02/25/02............................. 132,000 132,161
DLJ Mortgage Acceptance Corp., 6.500%, 08/19/28...... 1,545,000 1,525,687
Donaldson Lufkin & Jenrette FRN, 6.700%, due
06/30/00............................................ 600,000 608,659
First National Bank of Chicago, Series E, 7.000%, due
05/08/00............................................ 1,000,000 1,014,173
Ford Credit Grantor Trust, 95-B, Class A, 5.900%, due
10/15/00............................................ 48,062 48,101
General Motors Acceptance Corp. 6.375%, due 12/01/01. 500,000 505,652
9.625%, due 12/15/01................................ 331,000 367,579
Lehman Brothers Holdings, 7.250%, due 04/15/03....... 1,250,000 1,302,437
Lockheed Martin Corp., 7.700%, due 06/15/08.......... 148,000 162,891
Lockheed Martin Corp., 6.550%, due 05/15/99.......... 5,000,000 5,026,005
MBNA Global Capital Securities FRN, 6.519%, due
02/01/27............................................ 1,100,000 1,022,417
Nationsbanc Asset Securities, Inc., 97-1, Class A1,
5.958%, due 10/20/27................................ 2,330,559 2,336,082
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ ------------
<S> <C> <C>
News America Holdings, 7.750%, due 12/01/45.......... $ 1,877,000 $ 2,014,359
Norwest Asset Securities, Corp., 96-2, Class A9,
7.000%, due 09/25/11................................ 520,000 528,888
Panamsat Corp., 144A, 6.000%, due 01/15/03........... 275,000 272,253
Premier Auto Trust
93-5, Class A2, 4.220%, due 03/02/99............... 3,292 3,279
96-3, Class A3, 6.500%, due 03/06/00................ 157,355 157,840
96-4, Class A4, 6.400%, due 10/06/01................ 455,000 458,394
Prudential Home Mortgage Securities 94-3, Class A10,
6.500%, due 02/25/24.............................. 1,000,000 969,040
Residential Asset Securitization Trust 97-A7, Class
A1, 7.500%, due 09/25/27.......................... 797,106 805,837
97-A10, Class A5, 7.250%, due 12/25/27.............. 1,480,000 1,511,585
97-A11, Class A2, 7.000%, due 01/25/28.............. 200,000 201,280
Salomon, Inc.
6.500%, due 03/01/00................................ 2,520,000 2,539,628
6.750%, due 02/15/03................................ 550,000 563,378
SASCO LLC, 98-RF1, Class A, 8.712%, due 03/15/27..... 1,397,292 1,498,596
Standard Credit Card Trust, 95-1, Class A, 8.250%,
due 01/01/07........................................ 500,000 562,590
Thrift Financial Corp., 11.250%, due 01/01/16........ 76,046 80,866
Time Warner, Inc.
8.375%, due 03/15/23................................ 1,206,000 1,411,929
7.570%, due 02/01/24................................ 2,165,000 2,343,998
Turner Broadcasting, 7.400%, due 02/01/04............ 1,000,000 1,044,941
UCFC Home Equity Loan FRN, 97-C, Class A8, 5.888%,
due 09/15/27........................................ 1,413,172 1,414,755
Vendee Mortgage Trust, 98-2, Class 1G, 6.750%, due
06/15/28............................................ 2,400,000 2,429,250
------------
48,839,665
------------
INTERNATIONAL DOLLAR BONDS -- 3.57%
Abbey National PLC, 6.700%, Resettable Perpetual Pre-
ferred.............................................. 230,000 230,980
ABN AMRO Bank NV (Chicago) 6.625%, due 10/31/01...... 250,000 254,740
Banca Commercial Italian, 8.250%, due 07/15/07....... 450,000 503,122
Banco Santiago S.A., 7.000%, due 07/18/07............ 2,000,000 2,007,880
Banque Centrale de Tunisie, 8.250%, due 09/19/27..... 1,750,000 1,647,357
Banque Paribas, Sub. Notes, 6.875%, due 03/01/09..... 175,000 179,427
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ ------------
<S> <C> <C>
Credit Suisse London, 144A, 7.900%, Resettable Perpet-
ual Preferred........................................ $ 2,600,000 $ 2,779,881
Den Danske Bank, 144A, Step Coupon Bond, 6.375%, due
06/15/08............................................. 2,570,000 2,576,428
DR Investments, 144A, 7.450%, due 05/15/07............ 320,000 341,583
Empressa Nacional Electric, 7.875%, due 02/01/27...... 231,000 231,109
International Telecom Satellite, 8.125%, due 02/28/05. 335,000 371,568
Japanese Development Bank, 8.375%, due 02/15/01....... 970,000 1,026,443
Korea Development Bank, 7.125%, due 09/17/01.......... 200,000 176,260
Pan Pacific Industry PLC, 144A, 4.047%, due 04/28/07.. 2,130,000 745,500
Petroliam Nasional, 144A, 7.125%, due 08/15/05........ 420,000 370,211
Poland Non-U.S. Global Registered FRN, 6.688%, due
10/27/24............................................. 300,000 293,625
Province of Quebec, 7.500%, due 07/15/23.............. 1,325,000 1,473,042
Ras Laffan Liquified Natural Gas Co., Ltd., 144A,
8.294%, due 03/15/14................................. 1,910,000 1,906,965
Repsol International Finance, 7.000%, due 08/01/05.... 735,000 779,402
Republic of South Africa Debenture, 9.625%, due
12/15/99............................................. 1,079,000 1,122,160
Royal Bank of Scotland, 7.375%, Resettable Perpetual
Preferred............................................ 690,000 734,775
Skandinaviska Enskilda Banken, 144A, 6.625%,
Resettable Perpetual Preferred....................... 500,000 502,700
Sociedad Quimica y Minera de Chiles S.A., 144A,
7.700%, due 09/15/06................................. 1,500,000 1,546,503
Southern Investments UK, 6.800%, due 12/01/06......... 1,625,000 1,683,680
United Utilities, 6.450%, due 04/01/08................ 1,485,000 1,506,235
------------
24,991,576
------------
U.S. GOVERNMENT AGENCIES -- 8.32%
Aid-Israel, Series 10Z, 0.000%, due 02/15/03.......... 6,720,000 5,196,845
Federal Home Loan Mortgage Corp.
6.200%, due 08/15/07................................. 700,000 697,585
7.000%, due 10/15/13................................. 2,275,469 2,345,785
8.500%, due 07/15/21................................. 831,287 863,589
6.950%, due 04/15/22................................. 2,400,000 2,453,887
7.500%, due 01/15/23................................. 823,105 881,887
7.240%, due 05/01/26................................. 227,170 235,073
Federal Home Loan Mortgage Corp. Gold
8.000%, due 11/01/22................................. 118,252 122,169
8.000%, due 05/01/23................................. 1,238,385 1,279,406
9.000%, due 03/01/24................................. 863,675 925,013
Federal National Mortgage Assoc.
5.000%, due 06/01/01................................. 1,211,785 1,172,074
6.540%, due 09/18/02................................. 4,690,000 4,760,106
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ ------------
<S> <C> <C>
6.220%, due 03/13/06................................ $ 1,700,000 $ 1,754,181
8.000%, due 02/25/07................................ 1,635,000 1,674,343
6.500%, due 05/01/08................................ 3,696,873 3,817,761
6.360%, due 06/01/08................................ 1,640,000 1,678,868
8.000%, due 03/01/11................................ 1,481,440 1,528,199
6.000%, due 12/01/12 TBA............................ 1,470,000 1,453,455
8.000%, due 05/25/21................................ 1,610,000 1,665,793
9.000%, due 08/01/21................................ 244,512 261,733
8.000%, due 05/01/22................................ 115,815 119,796
8.500%, due 07/01/22................................ 533,209 563,752
7.500%, due 07/25/22................................ 2,250,686 2,392,335
8.000%, due 11/01/23................................ 1,525,009 301,517
6.500%, due 12/25/23................................ 4,610,000 4,629,274
9.000%, due 04/25/25................................ 36,864 38,677
6.500%, due 12/01/27 TBA............................ 3,500,000 3,484,663
7.500%, due 01/01/28................................ 1,765,720 1,810,940
6.000%, due 03/01/28................................ 2,436,930 2,371,913
3.500%, due 05/01/28................................ 1,313,554 1,128,184
Federal National Mortgage Assoc. Strips 0.000%, due
04/01/27 principal only............................. 1,481,065 1,253,146
Government National Mortgage Assoc.
10.000%, due 09/15/00............................... 2,535 2,706
10.000%, due 05/15/01............................... 3,577 3,819
9.000%, due 11/15/04................................ 10,061 10,602
9.000%, due 11/15/04................................ 5,376 5,665
8.000%, due 08/15/22................................ 444,049 460,008
8.000%, due 11/15/22................................ 361,577 376,325
8.000%, due 12/15/22................................ 1,253,454 1,304,582
7.500%, due 12/15/23................................ 844,929 867,902
7.500%, due 11/15/24................................ 2,242,403 2,306,155
------------
58,199,713
------------
U.S. GOVERNMENT OBLIGATIONS 4.18%
U.S. Treasury Notes and Bonds
5.500%, due 02/29/00................................ 12,325,000 12,321,155
6.625%, due 07/31/01................................ 4,050,000 4,171,500
6.250%, due 08/31/02................................ 4,635,000 4,755,223
3.625%, due 01/15/08................................ 1,558,975 1,541,436
8.000%, due 11/15/21................................ 2,760,000 3,557,814
6.000%, due 02/15/26................................ 2,750,000 2,860,861
------------
29,207,989
------------
Total U.S. Bonds..................................... 161,238,943
------------
HIGH YIELD BONDS -- 2.51% SHARES
------------
Brinson High Yield Fund (b).......................... 1,231,792 17,562,145
------------
FACE
NON-U.S. BONDS 17.33% AMOUNT
------------
AUSTRALIA -- 1.19%
Government of Australia
9.750%, due 03/15/02.............................AUD 1,700,000 1,207,781
9.000%, due 09/15/04................................ 3,800,000 2,790,161
Queensland Treasury Global Notes 8.000%, due
05/14/03............................................ 6,350,000 4,330,716
------------
8,328,658
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------- -----------
<S> <C> <C>
CANADA -- 1.77%
Government of Canada
7.500%, due 09/01/00.............................CAD 1,880,000 $ 1,334,690
6.500%, due 06/01/04................................ 500,000 359,734
8.750%, due 12/01/05................................ 2,600,000 2,131,219
7.000%, due 12/01/06................................ 4,270,000 3,223,551
4.250%, due 12/01/21................................ 6,790,000 5,345,751
-----------
12,394,945
-----------
DENMARK -- 1.76%
Kingdom of Denmark
9.000%, due 11/15/00.............................DKK 13,600,000 2,178,136
6.000%, due 11/15/02................................ 10,000,000 1,534,390
7.000%, due 12/15/04................................ 9,900,000 1,612,331
8.000%, due 03/15/06................................ 40,000,000 6,962,338
-----------
12,287,195
-----------
FRANCE -- 2.19%
Government of France (BTAN)
5.750%, due 03/12/01.............................FRF 24,000,000 4,125,571
Government of France (OAT)
9.500%, due 01/25/01................................ 20,300,000 4,924,347
7.500%, due 04/25/05................................ 13,000,000 3,791,393
8.500%, due 12/26/12................................ 22,000,000 2,505,822
-----------
15,347,133
-----------
GERMANY -- 3.77%
Bundesrepublik Deutschland
8.500%, due 08/21/00.............................DEM 2,180,000 1,315,609
9.000%, due 01/22/01................................ 2,500,000 1,545,291
8.375%, due 05/21/01................................ 3,080,000 1,897,826
6.750%, due 04/22/03................................ 4,900,000 2,985,064
6.750%, due 07/15/04................................ 6,300,000 3,889,596
6.250%, due 01/04/24................................ 5,000,000 3,121,884
7.000%, due 09/20/99................................ 13,700,000 7,869,341
Treuhandanstalt 6.250%, due 03/04/04................. 6,200,000 3,727,213
-----------
26,351,824
-----------
ITALY -- 0.95%
Republic of Italy (BTP)
10.500%, due 04/01/00............................ITL 995,000,000 614,280
12.000%, due 09/01/02............................... 1,700,000,000 1,215,358
9.000%, due 10/01/03................................ 900,000,000 604,894
8.500%, due 04/01/04................................ 4,600,000,000 3,061,922
9.500%, due 12/01/99................................ 1,900,000,000 1,136,547
-----------
6,633,001
-----------
NETHERLANDS -- 1.45%
Government of Netherlands
8.500%, due 03/15/01.............................NLG 5,600,000 3,048,864
8.750%, due 09/15/01................................ 700,000 389,195
6.500%, due 04/15/03................................ 1,600,000 854,587
7.250%, due 10/01/04................................ 3,200,000 1,796,480
8.250%, due 02/15/07................................ 4,815,000 2,938,660
7.500%, due 04/15/10................................ 1,800,000 1,085,292
-----------
10,113,078
-----------
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- ------------
<S> <C> <C>
SPAIN -- 1.14%
Kingdom of Spain
6.750%, due 04/15/00..............................ESP 415,000,000 $ 2,827,389
7.900%, due 02/28/02................................. 140,000,000 1,018,519
8.000%, due 05/30/04................................. 300,000,000 2,287,772
10.000%, due 02/28/05................................ 30,000,000 253,007
7.350%, due 03/31/07................................. 85,000,000 648,369
6.150%, due 01/31/13................................. 130,000,000 927,807
------------
7,962,863
------------
SWEDEN -- 0.43%
Kingdom of Sweden
5.500%, due 04/12/02..............................SEK 3,500,000 453,962
10.250%, due 05/05/03................................ 16,300,000 2,539,807
------------
2,993,769
------------
UNITED KINGDOM -- 2.68%
UK Treasury
8.000%, due 06/10/03..............................GBP 2,190,000 3,908,659
6.750%, due 11/26/04................................. 380,000 658,996
8.500%, due 12/07/05................................. 4,570,000 8,709,242
8.500%, due 07/16/07................................. 1,200,000 2,355,716
7.250%, due 12/07/07................................. 1,200,000 2,204,925
8.750%, due 08/25/17................................. 390,000 881,720
------------
18,719,258
------------
Total Non-U.S. Bonds.................................. 121,131,724
------------
<CAPTION>
SHARES
-----------
<S> <C> <C>
EMERGING MARKETS DEBT -- 4.93%
Brinson Emerging Markets Debt
Fund (b)............................................. 1,692,314 34,515,928
------------
Total Bonds (Cost $322,004,943)....................... 334,448,740
------------
<CAPTION>
FACE
AMOUNT
-----------
<S> <C> <C>
Short-Term Investments -- 16.86%
U.S. CORPORATE BONDS -- 0.78%
Bank of America,
5.730%, due 09/24/98 FRN............................. $ 2,000,000 1,999,728
Texas Utilities,
5.750%, due 07/01/98................................. 2,500,000 2,500,000
Union Oil of California Ser B,
5.730%, due 07/27/98................................. 1,000,000 1,009,505
------------
5,509,233
------------
U.S. GOVERNMENT OBLIGATIONS -- 0.34%
U.S. Treasury Bill
5.125%, due 11/27/98................................. 2,400,000 2,350,135
------------
</TABLE>
<TABLE>
<S> <C> <C>
NON-U.S. GOVERNMENT OBLIGATIONS -- 0.17%
Government of Netherlands
6.250%, due 07/15/98................................ $ 1,400,000 $ 688,575
Kingdom of Denmark
9.000%, due 11/15/98................................ 3,200,000 472,857
------------
1,161,432
------------
CERTIFICATE OF DEPOSIT -- 0.86%
Canadian Imperial Bank,
5.940%, due 10/23/98................................ 3,000,000 2,999,462
Societe General Yankee,
5.940%, due 10/20/98................................ 3,000,000 2,999,129
------------
5,998,591
------------
COMMERCIAL PAPER -- 14.71%
ARCO Chemical, 5.730%, due 07/10/98.................. 5,000,000 4,992,837
American Stores, 5.720%, due 08/03/98................ 5,000,000 4,973,783
Bausch & Lomb,
5.750%, due 07/08/98................................ 2,500,000 2,497,205
5.700%, due 07/13/98................................ 5,000,000 4,990,500
Cincinnati Bell Inc.
5.850%, due 07/01/98................................ 2,000,000 2,000,000
5.850%, due 07/13/98................................ 2,000,000 1,996,100
5.900%, due 07/17/98................................ 1,500,000 1,496,067
Crown, Cork & Seal,
5.690%, due 07/13/98................................ 4,321,000 4,312,805
5.680%, due 07/23/98................................ 5,000,000 4,982,644
CVS Corp.,
5.750%, due 07/10/98................................ 5,000,000 4,992,813
Dayton Hudson,
5.600%, due 07/15/98................................ 3,000,000 2,993,467
Excel Paralubes,
5.800%, due 07/07/98................................ 4,070,000 4,066,066
Hilton Hotels Corp.,
5.720%, due 07/15/98................................ 1,500,000 1,496,663
5.750%, due 10/01/98................................ 5,000,000 4,926,528
5.780%, due 10/13/98................................ 2,500,000 2,458,256
IMC Global,
5.720%, due 07/30/98................................ 4,261,000 4,241,366
ITT Industries,
5.720%, due 07/09/98................................ 5,000,000 4,993,644
NGC Corp.,
6.750%, due 07/01/98................................ 2,307,000 2,307,000
Occidental Petroleum,
5.700%, due 07/06/98................................ 5,000,000 4,996,042
PG & E Gas,
6.000%, due 07/10/98................................ 1,000,000 998,500
Raytheon Co.,
6.998%, due 07/01/98................................ 2,200,000 2,200,000
5.700%, due 07/20/98................................ 5,000,000 4,984,959
Sprint Capital,
5.720%, due 07/07/98................................ 6,643,000 6,636,668
Tenneco Inc.,
5.750%, due 07/17/98................................ 2,000,000 1,994,889
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------ ------------
<S> <C> <C>
Texas Utilities Co.,
5.730%, due 07/17/98................................ $ 2,500,000 $ 2,493,633
6.100%, due 07/17/98................................ 1,000,000 997,289
5.750%, due 08/21/98................................ 5,000,000 4,959,271
Union Pacific Resources,
5.730%, due 07/27/98................................ 5,000,000 4,979,308
Union Pacific Resources,
5.760%, due 10/30/98................................ 3,000,000 2,941,920
------------
102,900,223
------------
Total Short-Term Investments (Cost $118,077,052)..... 117,919,614
------------
Total Investments (Cost
$737,872,584) -- 115.11% (a)........................ 805,012,615
------------
Liabilities, less cash and other
assets -- (15.11%).................................. (105,669,892)
------------
Net Assets -- 100%................................... $699,342,723
============
</TABLE>
See accompanying notes to Schedule of Investments.
- --------------------------------------------------------------------------------
18
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $737,872,584; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation............................... $ 94,882,489
Gross unrealized depreciation............................... (27,742,458)
------------
Net unrealized appreciation.............................. $ 67,140,031
============
</TABLE>
(b) Linked to Canada's retail price index. Reset semi-annually
FRN: Floating Rate Note
MTN: Medium term note
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 1998,
the value of these securities amounted to $11,042,024 or 1.58% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FORWARD FOREIGN CURRENCY CONTRACTS
The Global Fund had the following open forward foreign currency contracts as of
June 30, 1998:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
Australian Dollar........... 8/05/98 28,500,000 $17,658,102 $(1,350,708)
Canadian Dollar............. 8/05/98 1,900,000 1,292,948 541
Danish Krone................ 8/05/98 9,000,000 1,310,734 252
French Franc................ 7/06/98 62,281,506 10,305,195 6,475
French Franc................ 8/05/98 22,200,000 3,679,956 17,436
German Mark................. 8/05/98 4,600,000 2,554,094 (2,456)
Japanese Yen................ 8/05/98 1,260,000,000 9,127,544 (1,041,517)
Netherlands Guilder......... 8/05/98 3,700,000 1,822,956 (422)
Spanish Peseta.............. 8/05/98 825,000,000 5,395,923 14,143
Swiss Franc................. 8/05/98 7,700,000 5,095,019 (247,751)
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Australian Dollar........... 7/06/98 1,233,770 764,143 832
British Pound............... 7/06/98 1,400,000 2,335,124 1,336
British Pound............... 8/05/98 21,700,000 36,132,943 (905,057)
Canadian Dollar............. 7/06/98 1,604,844 1,091,441 (512)
Canadian Dollar............. 8/05/98 11,300,000 7,689,638 88,191
Danish Kroner............... 7/06/98 7,653,250 1,113,166 (144)
Danish Kroner............... 8/05/98 78,600,000 11,447,080 (44,221)
French Franc................ 8/05/98 62,300,000 10,327,085 (7,390)
German Mark................. 7/06/98 4,600,000 2,549,451 2,560
German Mark................. 8/05/98 34,000,000 18,878,086 (43,109)
Netherlands Guilder......... 7/06/98 2,202,850 1,083,317 282
Netherlands Guilder......... 8/05/98 15,200,000 7,488,902 9,307
Spanish Peseta.............. 7/06/98 116,852,795 763,461 (1,113)
Spanish Peseta.............. 8/05/98 825,000,000 5,395,923 (36,344)
Swedish Krona............... 7/06/98 3,135,011 393,207 (38)
-----------
Total...................... $(3,539,427)
===========
</TABLE>
FUTURES CONTRACTS
The Global Fund had the following open futures contracts as of June 30, 1998:
<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,
340 contracts............ September 1998 $37,072,972 $37,293,750 $ 220,778
10 year U.S. Treasury
Note, 66 contracts....... September 1998 7,421,886 7,513,688 91,802
30 year U.S. Treasury
Bonds, 25 contracts...... September 1998 2,976,555 3,089,844 113,289
INDEX FUTURES SALES CON-
TRACTS
Standard & Poor's 500, 177
contracts................ September 1998 49,204,572 50,577,750 (1,373,178)
-----------
Total.................... $ (947,309)
===========
</TABLE>
The market value of investments pledged to cover margin requirements for the
open futures positions at June 30, 1998 was $2,350,135.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Note 1):
Unaffiliated issuers (Cost $659,099,950)....................... $720,310,838
Affiliated issuers (Cost $78,772,634).......................... 84,701,777
Cash........................................................... 15,353
Foreign currency, at value (Cost $2,688,302).................... 2,672,795
Receivables:
Investment securities sold..................................... 17,512,017
Dividends...................................................... 850,203
Interest....................................................... 5,067,092
Fund shares sold............................................... 524,097
Variation margin............................................... 442,309
Other assets.................................................... 55,119
------------
TOTAL ASSETS................................................. 832,151,600
------------
LIABILITIES:
Payables:
Securities loaned.............................................. 104,946,044
Investment securities purchased................................ 23,236,470
Fund shares redeemed........................................... 416,119
Investment advisory fees....................................... 461,215
Accrued expenses............................................... 209,602
Net unrealized depreciation on forward foreign currency con-
tracts......................................................... 3,539,427
------------
TOTAL LIABILITIES............................................ 132,808,877
------------
NET ASSETS....................................................... $699,342,723
============
NET ASSETS CONSIST OF:
Paid in capital................................................. $618,908,532
Accumulated distribution in excess of net investment income..... (845,490)
Accumulated net realized gain................................... 18,624,289
Net unrealized appreciation..................................... 62,655,392
------------
NET ASSETS................................................... $699,342,723
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $667,744,541 and 52,298,571 shares is-
sued and outstanding)......................................... $ 12.77
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,162,613 and 91,194 shares issued and outstanding).......... $ 12.75
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $30,435,569 and 2,395,337 shares is-
sued and outstanding)......................................... $ 12.71
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $19,403 for foreign taxes withheld; including
securities lending income of $256,807).......................... $18,386,739
Dividends (net of $339,731 for foreign taxes withheld)........... 6,105,294
-----------
TOTAL INCOME.................................................. 24,492,033
-----------
EXPENSES:
Advisory......................................................... 5,378,141
Administration................................................... 464,398
Distribution..................................................... 191,376
Custodian........................................................ 151,260
Other............................................................ 350,006
-----------
TOTAL EXPENSES................................................ 6,535,181
-----------
NET INVESTMENT INCOME ........................................ 17,956,852
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 40,696,600
Futures contracts............................................... (4,402,062)
Foreign currency transactions................................... 3,479,537
-----------
Net realized gain............................................. 39,774,075
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ 3,727,996
Futures contracts............................................... (654,367)
Forward contracts............................................... (9,657,319)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 37,869
-----------
Change in net unrealized appreciation or depreciation......... (6,545,821)
-----------
Net realized and unrealized gain................................. 33,228,254
-----------
Net increase in net assets resulting from operations............. $51,185,106
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1998
CASH FLOWS FROM INVESTING AND OPERATING ACTIVITIES:
<TABLE>
<S> <C>
Proceeds from sales of investments............................. $ 559,718,591
Purchases of investments....................................... (623,990,589)
Net increase in short term investments......................... (91,292,986)
Net realized gain on foreign currency transactions............. 3,479,537
Net realized loss on futures contracts......................... (4,066,409)
Interest and dividend income received.......................... 23,974,925
Expenses paid.................................................. (6,458,212)
-------------
Net cash used in investing and operating activities........... (138,635,143)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net capital share transactions................................. 36,501,192
Net increase from securities lending........................... 104,946,044
Cash distributions paid........................................ (3,851,296)
-------------
Net cash provided by financing activities..................... 137,595,940
-------------
Net decrease in cash............................................ (1,039,203)
-------------
CASH AT BEGINNING OF YEAR....................................... 1,054,556
-------------
CASH AT END OF YEAR............................................. $ 15,353
=============
RECONCILIATION OF NET INVESTMENT INCOME TO NET CASH
USED IN INVESTING AND OPERATING ACTIVITIES:
Net investment income.......................................... $ 17,956,852
Proceeds from sale of investments.............................. 559,718,591
Purchase of investments........................................ (623,990,589)
Net increase in short term investments......................... (91,292,986)
Net realized gain on foreign currency transactions............. 3,479,537
Net realized loss on futures contracts......................... (4,066,409)
Net decrease in receivables pertaining to investing and operat-
ing activities................................................. 271,165
Net increase in payables pertaining to investing and operating
activities..................................................... 115,429
(Accretion)/amortization of premium/discount................... (826,733)
-------------
Net cash used in investing and operating activities........... $(138,635,143)
=============
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Reinvestment of distributions.................................. $ 64,950,197
=============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 17,956,852 $ 16,194,760
Net realized gain................................. 39,774,075 43,268,043
Change in net unrealized appreciation or
depreciation..................................... (6,545,821) 35,756,888
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 51,185,106 95,219,691
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income........... (28,265,915) (24,660,333)
Distributions in excess of net investment income... (5,070,122) --
Distributions from net realized gain............... (35,465,456) (26,428,094)
------------ ------------
Total distributions to shareholders*.............. (68,801,493) (51,088,427)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 256,422,880 192,297,100
Shares issued on reinvestment of distributions.... 64,950,197 49,580,585
Shares redeemed................................... (217,384,769) (145,001,283)
------------ ------------
Net increase in net assets resulting from capital
share transactions............................... 103,988,308 96,876,402
------------ ------------
TOTAL INCREASE IN NET ASSETS................... 86,371,921 141,007,666
------------ ------------
NET ASSETS:
Beginning of year................................. 612,970,802 471,963,136
------------ ------------
End of year (including accumulated distribution in
excess of net investment income of $845,490 and
$964,704, respectively).......................... $699,342,723 $612,970,802
============ ============
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net investment
income
Brinson Class I................................... (32,129,657) (25,579,684)
Brinson Class N................................... (9,572) --
SwissKey Class.................................... (1,196,808) (848,410)
Distributions from net realized gain
Brinson Class I................................... (33,973,096) (23,918,105)
Brinson Class N................................... (53) --
SwissKey Class.................................... (1,492,307) (742,228)
------------ ------------
Total distributions to shareholders................ $(68,801,493) $(51,088,427)
============ ============
</TABLE>
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 each period presented.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------
BRINSON CLASS I 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year........................ $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87
-------- -------- -------- -------- --------
Income from investment oper-
ations:
Net investment income...... 0.37 0.38 0.44 0.43 0.33
Net realized and unrealized
gain (loss)............... 0.62 1.79 1.37 0.86 (0.23)
-------- -------- -------- -------- --------
Total income from invest-
ment operations......... 0.99 2.17 1.81 1.29 0.10
-------- -------- -------- -------- --------
Less distributions:
Distributions from and in
excess of net investment
income.................... (0.65) (0.61) (0.62) (0.27) (0.27)
Distributions from and in
excess of net realized
gain...................... (0.70) (0.65) (0.32) (0.10) (0.27)
-------- -------- -------- -------- --------
Total distributions...... (1.35) (1.26) (0.94) (0.37) (0.54)
-------- -------- -------- -------- --------
Net asset value, end of year. $ 12.77 $ 13.13 $ 12.22 $ 11.35 $ 10.43
======== ======== ======== ======== ========
Total return................. 8.28% 18.79% 16.38% 12.57% 0.77%
Ratios/Supplemental data
Net assets, end of year (in
000s)...................... $667,745 $586,667 $457,933 $365,678 $278,859
Ratio of expenses to average
net assets:
Before expense reimburse-
ment...................... 0.94% 0.99% 1.04% 1.09% 1.14%
After expense reimburse-
ment...................... N/A N/A N/A N/A 1.10%
Ratio of net investment in-
come to average net assets:
Before expense reimburse-
ment...................... 2.70% 3.03% 3.69% 4.27% 3.21%
After expense reimburse-
ment...................... N/A N/A N/A N/A 3.25%
Portfolio turnover rate..... 88% 150% 142% 238% 231%
Average commission rate paid
per share.................. $ 0.0274 $ 0.0326 $ 0.0291 N/A N/A
</TABLE>
N/A = Not applicable
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 the period presented.
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
BRINSON CLASS N 1998*
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of year................................... $ 13.13
-------
Income from investment operations:
Net investment income.............................................. 0.63
Net realized and unrealized gain................................... 0.32
-------
Total income from investment operations.......................... 0.95
-------
Less distributions:
Distributions from and in excess of net investment income.......... (0.63)
Distributions from net realized gain............................... (0.70)
-------
Total distributions.............................................. (1.33)
-------
Net asset value, end of year......................................... $ 12.75
=======
Total return......................................................... 7.90%
Ratios/Supplemental Data:
Net assets, end of year (in 000s)................................... $ 1,163
Ratio of expenses to average net assets............................. 1.19%
Ratio of net investment income to average net assets................ 2.45%
Portfolio turnover rate............................................. 88%
Average commission rate paid per share.............................. $0.0274
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
<PAGE>
GLOBAL FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR YEAR JULY 31, 1995*
ENDED ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of peri-
od................................. $ 13.05 $ 12.18 $ 11.60
------- ------- -------
Income from investment operations:
Net investment income............. 0.30 0.34 0.39
Net realized and unrealized gain.. 0.61 1.75 1.10
------- ------- -------
Total income from investment op-
erations....................... 0.91 2.09 1.49
------- ------- -------
Less distributions:
Distributions from and in excess
of net investment income......... (0.55) (0.57) (0.59)
Distributions from net realized
gain............................. (0.70) (0.65) (0.32)
------- ------- -------
Total distributions............. (1.25) (1.22) (0.91)
------- ------- -------
Net asset value, end of period...... $ 12.71 $ 13.05 $ 12.18
======= ======= =======
Total return (non-annualized)....... 7.60% 18.13% 13.24%
Ratios/Supplemental data
Net assets, end of period (in
000s)............................. $30,436 $26,303 $14,030
Ratio of expenses to average net
assets............................ 1.59% 1.64% 1.69%**
Ratio of net investment income to
average net assets................ 2.05% 2.38% 3.04%**
Portfolio turnover rate............ 88% 150% 142%
Average commission rate paid per
share............................. $0.0274 $0.0326 $0.0291
</TABLE>
* Commencement of SwissKey Class
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26
<PAGE>
Global Equity Fund
[SWISSKEY FUNDS LOGO]
The Global Equity Fund is actively managed, providing a fully integrated
approach to the primary equity markets across the world. Market selection and
currency strategies are managed within a global asset allocation framework.
Industry strategies and individual security selections are based on the
fundamental research of our analytical teams in our offices worldwide.
The SwissKey Global Equity Fund has provided an annualized return of 16.26%
since its inception on July 31, 1995, compared to the 18.18% return for the
benchmark, the MSCI World Equity (Free) Index.
Year-to-date, the SwissKey Global Equity Fund has risen 10.48%, lagging the
index's unhedged return of 16.76%. Most major global equity markets have
experienced strikingly strong performance year-to-date, in response to EMU
euphoria, consolidation and improving economies, led by star performer Finland
(67%), with Belgium, Spain and France up 40% or more. While strong, the U.S.
market somewhat lagged the others, rising 18%, with much of its excellent
performance concentrated in the top 25 stocks with respect to market
capitalization. Japan has been a relative underperformer, gaining only 5.7% in
hedged terms. Adding back the currency effect of -7.8%, which combines both the
decline of the yen and the very low Japanese cash rates, Japan's unhedged mid-
year return was only -2.6%.
Early in the year, Germany was reduced and France increased, bringing these
positions into closer alignment. In February, the position in Spain was
eliminated, with proceeds split between Finland and Switzerland; Spain's strong
performance in anticipation of monetary union led that market to become
overpriced. In April the U.K. was modestly increased and Malaysia reduced to
neutral. Italy was reduced in early June, with funds added to several
Scandinavian markets. As with the elimination of Spain, this move reflected a
shift out of the expensive southern European markets into the more attractively
priced northern European markets.
One currency strategy change took place. An Australian dollar overweight was
established, paired with the yen, allowing us to take advantage of a strong
positive interest rate differential in favor of the Australian currency.
Market allocation was negatively impacted by strategic cash, offsetting the
positive benefits from the Japan and Hong Kong underweights and the overweight
to several European markets. Currency management was hurt by the overweight of
the Australian and New Zealand dollars and the pound sterling underweight.
Security selection had an important negative impact due to the underperformance
of U.S. stock selection. Returns were hurt by the underweight of size and
overweight of cyclicals. Japan stock selection added value.
27
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
[SWISS KEY FUND LOGO]
- --------------------------------------------------------------------------------
Total Return
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 months 1 year 7/31/95*
ended ended to
6/30/98 6/30/98 6/30/98
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
SwissKey Global Equity Fund 10.48% 8.15% 16.26%
- --------------------------------------------------------------------------------
MSCI World Equity (Free) Index 16.76 17.18 18.18
- --------------------------------------------------------------------------------
</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 June 30, 1998. 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
[LINE GRAPH APPEARS HERE]
[PLOT POINTS FOR GRAPH]
<TABLE>
<CAPTION>
SWISSKEY MSCI
GLOBAL WORLD EQUITY
DATE EQUITY FUND (FREE) INDEX
----------------------------------------
<S> <C> <C>
7/31/95 10,000 10,000
12/31/95 10,993 10,556
6/30/96 11,925 11,325
12/31/96 12,787 12,025
6/30/97 14,328 13,889
12/31/97 14,048 13,939
6/30/98 15,519 16,276
</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.
28
<PAGE>
Global Equity Fund
[SWISS KEY FUND LOGO]
Market Allocation
As of June 30, 1998
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ------------------------------------------------------------------
<S> <C> <C>
U.S. 49.6% 34.1%
Australia 1.1 2.5
Austria 0.2 0.0
Belgium 0.9 2.2
Canada 2.3 1.4
Denmark 0.5 0.2
Finland 0.5 1.3
France 4.6 4.5
Germany 5.5 5.2
Hong Kong 0.8 0.1
Ireland 0.2 0.0
Italy 2.2 1.7
Japan 9.9 3.9
Malaysia 0.2 0.1
Netherlands 2.8 2.4
New Zealand 0.2 1.9
Norway 0.3 0.2
Portugal 0.3 0.0
Singapore 0.3 0.7
Spain 1.6 0.0
Sweden 1.5 1.6
Switzerland 3.8 3.3
United Kingdom 10.7 12.7
Cash Reserves 0.0 20.0
- ------------------------------------------------------------------
100.0% 100.0%
</TABLE>
Top Ten U.S. Equity Holdings
As of June 30, 1998
<TABLE>
<CAPTION>
Percent of
Net Assets
- -----------------------------------------------------------------
<S> <C>
1. Xerox Corp. 2.48%
2. Lockheed Martin Corp. 2.44
3. Burlington Northern Santa Fe Corp. 2.25
4. Aon Corp. 1.73
5. FDX, Corp. 1.66
6. Philip Morris Companies, Inc. 1.64
7. CIGNA Corp. 1.42
8. Automatic Data Processing, Inc. 1.31
9. Goodyear Tire & Rubber Co. 1.28
10. Entergy Corp. 1.21
- -----------------------------------------------------------------
</TABLE>
Currency Allocation
As of June 30, 1998
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- -----------------------------------------------------------------
<S> <C> <C>
U.S. 49.6% 52.7%
Australia 1.1 5.1
Austria 0.2 0.2
Belgium 0.9 0.9
Canada 2.3 2.3
Denmark 0.5 0.5
Finland 0.5 0.5
France 4.6 4.6
Germany 5.5 5.5
Hong Kong 0.8 0.0
Japan 9.9 5.9
Ireland 0.2 0.2
Italy 2.2 2.2
Malaysia 0.2 0.2
Netherlands 2.8 2.8
New Zealand 0.2 1.9
Norway 0.3 0.3
Portugal 0.3 0.3
Singapore 0.3 0.3
Spain 1.6 1.6
Sweden 1.5 1.5
Switzerland 3.8 3.8
United Kingdom 10.7 6.7
- -----------------------------------------------------------------
100.0% 100.0%
</TABLE>
Top Ten Non-U.S. Equity Holdings
As of June 30, 1998
<TABLE>
<CAPTION>
Percent of
Net Assets
- ---------------------------------------------------------------
<S> <C>
1. Telecom Corp. of New Zealand Ltd. 0.90%
2. Novartis AG (Reg.) 0.89
3. Glaxo Wellcome PLC 0.77
4. Nokia Oyj, A Shares 0.77
5. Royal Dutch Petroleum Co. 0.65
6. British Petroleum Co. PLC 0.64
7. Roche Holding AG (Gen.) 0.61
8. British Telecommunications PLC 0.58
9. B.A.T. Industries PLC 0.57
10. Lloyds TSB Group PLC 0.57
- ---------------------------------------------------------------
</TABLE>
29
<PAGE>
Global Equity Fund
[SWISS KEY FUND LOGO]
Industry Diversification
As a Percent of Net Assets
As of June 30, 1998
- -----------------------------------------
<TABLE>
<S> <C>
U.S. EQUITIES
Energy........................... 1.32%
Capital Investment
Capital Goods................... 5.43
Technology...................... 5.06
------
10.49
Basic Industries
Chemicals....................... 2.26
Housing/Paper................... 4.09
Metals.......................... 0.38
------
6.73
------
Consumer
Non-Durables.................... 3.64
Retail/Apparel.................. 2.33
Autos/Durables.................. 1.58
Descretionary................... 0.43
Health: Drugs................... 3.91
Health: Non-Drugs............... 2.91
------
14.80
Financial
Banks........................... 3.70
Non-Banks....................... 3.82
------
7.52
Utilities
Electric........................ 3.19
Telephone....................... 0.47
------
3.66
Transportation................... 4.31
Services/Misc.................... 3.36
------
Total U.S. Equities.......... 52.19*
------
NON-U.S. EQUITIES
Aerospace & Military............. 0.13
Airplanes........................ 0.22
Appliances & Household........... 0.57
Autos/Durables................... 1.63
Banking.......................... 5.34
Beverages and Tobacco............ 1.27
Broadcasting & Publishing........ 1.38
Building Materials............... 0.81
Business & Public Service........ 1.27
Chemicals........................ 1.04
Construction..................... 0.29
Consumer......................... 0.01
Data Processing.................. 0.19
Electric Components.............. 0.28
Electronics...................... 2.03
Energy........................... 3.69
Financial Services............... 1.34
Food & House Products............ 2.31
Forest Products.................. 0.72
Gold Mining...................... 0.03
Health: Drugs.................... 1.66
Health: Non-Drugs................ 2.13
Housing/Paper.................... 0.05
Industrial Components............ 0.45
Insurance........................ 3.19
Investment Companies............. 0.19
Leisure & Tourism................ 0.33
Machinery & Engineering.......... 0.20
Merchandising.................... 1.77
Metals--Steel.................... 0.93
Miscellaneous Materials.......... 0.12
Multi-Industry................... 2.65
Non-Ferrous Metals............... 0.83
Real Estate...................... 0.21
Recreation....................... 0.15
Retail & Apparel................. 0.19
Shipping......................... 0.01
Technology....................... 0.01
Telecommunications............... 4.76
Textiles & Apparel............... 0.15
Transportation................... 0.32
Utilities........................ 1.56
Wholesale & International Trade.. 0.24
------
Total Non-U.S. Equities...... 46.65
------
SHORT-TERM INVESTMENTS........... 0.97*
------
TOTAL INVESTMENTS............ 99.81
------
CASH AND OTHER ASSETS,
LESS LIABILITIES................ 0.19
------
NET ASSETS................... 100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
* The Fund held a short position in stock index futures on June 30, 1998 which
reduced U.S. Equity exposure from 52.19% to 34.04%. This adjustment results in
an increase in the Fund's exposure to Short-Term Investments from 0.97% to
19.12%.
30
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
Equities -- 98.84%
U.S. EQUITIES -- 52.19%
Aetna Inc.................................................. 7,100 $ 540,488
Allergan, Inc.............................................. 11,000 510,125
Alza Corp. (b)............................................. 11,200 484,400
American Home Products Corp................................ 11,100 574,425
Aon Corp................................................... 20,150 1,415,538
Automatic Data Processing, Inc............................. 14,700 1,071,262
BankBoston Corp............................................ 7,800 433,875
Baxter International, Inc.................................. 18,400 990,150
Beckman Coulter Inc........................................ 4,900 285,425
Bestfoods.................................................. 9,800 569,012
Biogen, Inc. (b)........................................... 4,400 215,600
Birmingham Steel Corp...................................... 4,500 55,687
Burlington Northern Santa Fe Corp.......................... 18,800 1,845,925
Champion Enterprises, Inc. (b)............................. 3,400 99,875
Champion International Corp................................ 5,600 275,450
CIGNA Corp................................................. 16,900 1,166,100
Circuit City Stores-Circuit City Group..................... 16,600 778,125
Citicorp................................................... 500 74,625
CMS Energy Corp............................................ 14,500 638,000
Columbia/HCA Healthcare Corp............................... 3,300 96,112
Comerica, Inc.............................................. 4,600 304,750
Commscope, Inc. (b)........................................ 7,933 128,415
Comverse Technology, Inc. (b).............................. 5,125 265,859
Consolidated Stores Corp................................... 5,300 192,125
Corning, Inc............................................... 26,800 931,300
Covance, Inc. (b).......................................... 5,700 128,250
Crown Cork & Seal Co., Inc................................. 5,400 256,500
Dial Corp.................................................. 5,800 150,437
Eastman Chemical Co........................................ 6,200 385,950
EMC Corp. (b).............................................. 10,000 448,125
Enron Corp................................................. 12,400 670,375
Entergy Corp............................................... 34,500 991,875
FDX Corp. (b).............................................. 21,600 1,355,400
First American Corp. of Tennessee.......................... 2,900 139,563
First Data Corp............................................ 27,204 906,233
First Security Corp........................................ 5,550 118,805
FirstEnergy Corp........................................... 2,327 71,555
Fleet Financial Group, Inc................................. 6,900 576,150
Fleetwood Enterprises, Inc................................. 900 36,000
Food Lion, Inc., Class A................................... 21,800 231,625
Forest Laboratories, Inc. Class A (b)...................... 8,900 318,175
Fort James Corp............................................ 14,400 640,800
Gannett Co., Inc........................................... 4,900 348,206
General Instrument Corp. (b)............................... 25,600 696,000
General Semiconductor, Inc. (b)............................ 5,825 57,522
Genzyme Corp. (b).......................................... 4,500 115,031
Geon Co.................................................... 3,100 71,106
Goodyear Tire & Rubber Co.................................. 16,200 1,043,888
Great Lakes Chemical Corp.................................. 2,200 86,762
Harnischfeger Industries, Inc.............................. 7,800 220,837
Health Care and Retirement Corp. (b)....................... 5,050 199,159
Hibernia Corp.............................................. 6,200 125,162
IMC Global Inc............................................. 6,000 180,750
Informix Corp. (b)......................................... 6,000 47,437
Interpublic Group of Companies, Inc........................ 4,650 282,197
</TABLE>
<TABLE>
<S> <C> <C>
Kimberly Clark Corp........................................ 21,100 $ 967,962
Lafarge Corp............................................... 3,300 129,731
Lear Corp. (b)............................................. 4,800 246,300
Lockheed Martin Corp....................................... 18,851 1,995,850
Lyondell Petrochemical Co.................................. 15,500 471,781
Manor Care, Inc............................................ 5,800 222,937
Martin Marietta Materials, Inc............................. 3,335 150,075
Masco Corp................................................. 13,100 792,550
Medusa Corp................................................ 200 12,550
Nabisco Holdings Corp...................................... 11,500 414,719
National Service Industries, Inc........................... 2,200 111,925
Nextel Communications, Inc................................. 15,700 390,537
Norfolk Southern Corp...................................... 10,800 321,975
Peco Energy Co............................................. 31,300 913,569
Pentair, Inc............................................... 5,900 250,750
Philip Morris Companies, Inc............................... 34,200 1,346,625
Praxair, Inc............................................... 10,400 486,850
Raytheon Co., Class B...................................... 15,300 904,612
Regions Financial Corp..................................... 2,900 119,081
Reynolds & Reynolds Co..................................... 4,900 89,119
Schering Plough Corp....................................... 10,800 989,550
Seagate Technology, Inc.................................... 10,000 238,125
Sears, Roebuck and Co...................................... 11,600 708,325
Southdown, Inc............................................. 2,200 157,025
St. Jude Medical, Inc...................................... 5,700 209,831
Timken Co.................................................. 2,000 61,625
Tyson Foods, Inc., Class A................................. 22,900 496,644
Ultramar Diamond Shamrock Corp............................. 12,852 405,641
US Bancorp................................................. 14,463 621,909
Vencor, Inc................................................ 11,900 86,275
Ventas, Inc................................................ 11,900 164,369
Viad Corp.................................................. 11,000 305,250
Wells Fargo & Co........................................... 1,400 516,600
Westvaco Corp.............................................. 2,650 74,862
Witco Corp................................................. 5,900 172,575
Xerox Corp................................................. 20,000 2,032,500
York International Corp.................................... 7,000 304,937
-----------
Total U.S. Equities........................................ 42,728,064
-----------
NON-U.S. EQUITIES -- 46.65%
AUSTRALIA -- 2.68%
Amcor Ltd.................................................. 10,300 45,098
Boral Ltd.................................................. 30,600 57,420
Brambles Industries Ltd.................................... 5,000 98,128
Broken Hill Proprietary Co., Ltd........................... 29,050 245,572
Coca-Cola Amatil Ltd....................................... 6,200 41,468
CSR Ltd.................................................... 19,000 54,833
David Jones Ltd............................................ 65,200 74,700
Lend Lease Corp. Ltd....................................... 4,697 94,974
Mayne Nickless Ltd......................................... 14,500 76,778
National Australia Bank Ltd................................ 21,075 278,002
News Corp. Ltd., Preferred................................. 12,700 89,977
News Corp., Ltd............................................ 37,940 309,680
Orica Ltd.................................................. 6,400 37,852
Pacific Dunlop Ltd......................................... 31,200 50,431
Qantas Airways Ltd......................................... 31,577 47,520
</TABLE>
- --------------------------------------------------------------------------------
31
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
Rio Tinto Ltd.............................................. 6,863 $ 81,605
Santos Ltd................................................. 13,000 40,254
Telstra Corp., Ltd......................................... 59,500 152,552
Westpac Bank Corp., Ltd.................................... 33,945 207,068
WMC Ltd.................................................... 24,200 72,837
Woolworth's Ltd............................................ 12,000 39,016
-----------
2,195,765
-----------
BELGIUM -- 2.35%
Delhaize-Le Lion S.A. (b).................................. 2,110 147,433
Electrabel S.A............................................. 1,180 334,561
Fortis AG.................................................. 88 5
Fortis AG Strip (b)........................................ 1,588 405,429
Groupe Bruxelles Lambert S.A. (b).......................... 620 125,133
KBC Bancassurance Holding-Strip (b)........................ 110 9
Kredietbank NV (b)......................................... 2,860 255,947
Petrofina S.A.............................................. 620 254,515
Solvay S.A., Class A....................................... 1,720 136,361
Tractebel.................................................. 1,380 202,123
Union Miniere S.A. (b)..................................... 1,032 63,789
-----------
1,925,305
-----------
CANADA -- 1.63%
Agrium, Inc................................................ 3,100 38,681
Alcan Aluminum Ltd......................................... 2,500 68,849
Bank of Montreal........................................... 1,700 93,635
Barrick Gold Corp.......................................... 1,500 28,560
Canadian National Railway Co............................... 1,700 90,398
Canadian Pacific Ltd....................................... 5,216 146,840
Extendicare Inc. (b)....................................... 4,000 32,368
Hudson's Bay Co............................................ 2,300 52,706
Imasco, Ltd................................................ 2,800 51,693
Imperial Oil Ltd........................................... 6,000 104,855
Magna International Inc., Class A.......................... 700 47,933
Moore Corp., Ltd........................................... 2,700 35,802
Newbridge Networks Corp. (b)............................... 800 19,121
Noranda, Inc............................................... 2,500 43,180
NOVA Corp.................................................. 6,900 79,060
Potash Corporation of Saskatchewan, Inc.................... 700 52,740
Royal Bank of Canada....................................... 2,000 120,359
Seagram Co., Ltd........................................... 1,100 44,842
Shaw Communications Inc., Class B.......................... 3,900 75,847
TransCanada Pipelines Ltd.................................. 3,400 75,371
Westcoast Energy, Inc...................................... 1,600 35,632
-----------
1,338,472
-----------
DENMARK -- 0.25%
Den Danske Bank Group...................................... 800 95,972
Tele Danmark A/S........................................... 1,100 105,569
-----------
201,541
-----------
FINLAND -- 1.26%
Cultor Oyj................................................. 900 14,599
Merita Ltd., Class A....................................... 17,800 117,445
</TABLE>
<TABLE>
<S> <C> <C>
Metsa Serla Oyj, Class B................................... 3,700 $ 35,742
Nokia Oyj Class A Preferred................................ 8,600 632,480
Outokumpu Oyj, Class A..................................... 2,500 31,896
Sampo Insurance Co., Ltd., Series A........................ 1,300 61,606
UPM-Kymmene Corp........................................... 4,000 110,088
Valmet Oyj................................................. 1,400 24,139
-----------
1,027,995
-----------
FRANCE -- 4.42%
Air Liquide................................................ 438 72,445
Alcatel Alsthom............................................ 816 166,142
AXA-UAP.................................................... 1,681 189,064
Banque Nationale de Paris.................................. 1,810 147,890
Carrefour SA............................................... 200 126,530
Cie de Saint Gobain........................................ 916 169,837
Dexia France (b)........................................... 857 115,382
Elf Aquitaine S.A.......................................... 1,392 195,700
Eridania Beghin-Say SA..................................... 340 75,074
France Telecom S.A......................................... 3,510 242,089
Groupe Danone.............................................. 510 140,617
Lafarge Corp............................................... 777 80,322
Lagardere S.C.A............................................ 2,600 108,240
Michelin, Class B.......................................... 1,711 98,766
Paribas.................................................... 1,233 131,947
Pechiney S.A., Class A..................................... 1,635 65,849
Peugeot S.A................................................ 812 174,595
Pinault-Printemps-Redoute S.A.............................. 120 100,430
Rhone-Poulenc, Class A..................................... 3,020 170,331
SEITA...................................................... 2,990 135,504
Societe Generale........................................... 773 160,711
Suez Lyonnaise des Eaux S.A. (b)........................... 1,297 213,449
Thomson CSF................................................ 2,475 94,153
Total S.A., Class B........................................ 1,079 140,274
Usinor Sacilor............................................. 2,520 38,930
Vivendi.................................................... 1,208 257,944
Vivendi Warrants "01" (b).................................. 1,771 3,486
-----------
3,615,701
-----------
GERMANY -- 5.30%
Allianz AG................................................. 1,335 440,069
Allianz AG (b)............................................. 45 14,709
BASF AG.................................................... 2,000 94,737
Bayer AG................................................... 4,890 252,221
Bayerische Motoren Werke (BMW) AG.......................... 33 32,817
Bayerische Motoren Werke AG................................ 110 110,975
Commerzbank AG............................................. 1,050 40,139
Continental AG............................................. 3,400 105,861
Daimler-Benz AG............................................ 2,060 202,006
Deutsche Bank AG........................................... 3,250 275,215
Deutsche Telekom AG........................................ 13,560 365,857
Dresdner Bank AG........................................... 4,050 218,319
Hochtief AG................................................ 1,160 55,590
Hoechst AG................................................. 1,550 77,371
M.A.N. AG.................................................. 260 101,119
Mannesmann AG.............................................. 2,100 213,025
Metro AG................................................... 2,718 164,887
</TABLE>
- --------------------------------------------------------------------------------
32
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Metro AG Right (b)......................................... 2,718 $ 105
Muenchener Rueckver AG..................................... 680 337,175
Preussag AG................................................ 390 139,147
RWE AG..................................................... 2,420 143,457
Schering AG................................................ 1,210 142,586
Siemens AG................................................. 4,020 244,541
Thyssen AG................................................. 450 113,934
Veba AG.................................................... 2,860 194,892
Volkswagen AG.............................................. 269 258,568
-----------
4,339,322
-----------
HONG KONG -- 0.18%
Cheung Kong Holdings Ltd................................... 5,000 24,585
Citic Pacific Ltd.......................................... 3,000 5,304
CLP Holdings Ltd........................................... 2,500 11,389
Hang Seng Bank Ltd......................................... 1,800 10,175
Hong Kong & China Gas Co., Ltd............................. 13,200 14,991
Hong Kong and China Gas Warrants "99 " (b)................. 1,100 75
Hong Kong Telecommunications Ltd........................... 10,000 18,778
Hutchison Whampoa Ltd...................................... 6,000 31,670
Johnson Electric Holdings Ltd.............................. 3,000 11,112
South China Morning Post (Holdings) Ltd.................... 10,000 4,807
Sun Hung Kai Properties Ltd................................ 3,000 12,738
-----------
145,624
-----------
ITALY -- 2.13%
Assicurazioni Generali..................................... 5,700 185,345
Credito Italiano S.p.A..................................... 27,000 141,338
Danieli & Co. Savings (Risp)............................... 16,400 76,116
ENI ADR (c)................................................ 1,700 110,500
ENI S.p.A.................................................. 44,000 288,374
Fiat S.p.A.-Preferred...................................... 42,300 105,301
INA-Istituto Nazionale delle Assicurazioni................. 6,000 17,046
Instituto Mobiliare Italiano S.p.A......................... 6,700 105,539
Istituto Bancario San Paolo di Torino...................... 6,000 86,580
La Rinascente S.p.A........................................ 8,875 88,373
Montedison S.p.A........................................... 81,560 101,173
Parmalat Finanziaria S.p.A................................. 32,000 65,258
Telecom Italia Mobile S.p.A................................ 27,000 165,109
Telecom Italia Mobile S.p.A. RNC........................... 14,000 47,256
Telecom Italia S.p.A....................................... 22,111 162,765
-----------
1,746,073
-----------
JAPAN -- 3.51%
Amada Co., Ltd............................................. 6,000 29,182
Bank of Tokyo-Mitsubishi, Ltd.............................. 6,000 63,508
Canon Sales Co., Inc....................................... 2,000 27,179
Canon, Inc................................................. 5,000 113,485
Citizen Watch Co., Ltd..................................... 6,000 49,501
Dai Nippon Printing Co., Ltd............................... 6,000 95,760
Daiichi Pharmaceutical Co., Ltd............................ 5,000 65,929
Daikin Industries Ltd...................................... 6,000 38,650
Daiwa House Industry Co., Ltd.............................. 3,000 26,480
</TABLE>
<TABLE>
<S> <C> <C>
Denso Corp................................................. 5,000 $ 82,862
Fanuc...................................................... 2,400 83,006
Fuji Photo FIlm............................................ 1,000 34,802
Fujitsu.................................................... 4,000 42,079
Hitachi Ltd................................................ 12,000 78,251
Honda Motor Co............................................. 3,000 106,784
Hoya Corp.................................................. 1,000 28,317
Inax....................................................... 4,000 13,748
Ito Yokado Co., Ltd........................................ 2,000 94,102
Kaneka Corp................................................ 6,000 31,560
Keio Teito Electric Railway................................ 7,000 25,471
Kinki Nippon Railway....................................... 7,000 32,785
Kirin Brewery Co., Ltd..................................... 7,000 66,073
Kokuyo..................................................... 2,000 33,865
Kuraray Co., Ltd........................................... 7,000 59,466
Kyocera Corp............................................... 1,200 58,623
Marui Co., Ltd............................................. 3,000 44,745
Matsushita Electric Industrial Co.......................... 7,000 112,476
NGK Insulators............................................. 10,000 86,825
Nintendo Co., Ltd.......................................... 800 74,071
Nippon Meat Packers, Inc................................... 4,000 48,968
Nippon Steel Co............................................ 5,000 8,791
Okumura Corp............................................... 6,000 21,054
Omron Corp................................................. 2,000 30,551
Osaka Gas Co............................................... 12,000 30,781
Sankyo Co., Ltd............................................ 4,000 91,076
Secom Co., Ltd............................................. 1,000 57,715
Sega Enterprises Ltd....................................... 1,000 17,257
Seino Transportation....................................... 4,000 22,193
Sekisui House Ltd.......................................... 6,000 46,475
Shin-Etsu Chemical Co., Ltd................................ 2,000 34,586
Sony Corp.................................................. 1,000 86,104
Sumitomo Chemical Co....................................... 7,000 21,587
Sumitomo Electric Industries............................... 5,000 50,546
Takeda Chemical Industries................................. 4,000 106,352
TDK Corp................................................... 1,000 73,855
Tokio Marine & Fire Insurance Co........................... 6,000 61,649
Tokyo Electric Power....................................... 1,300 25,478
Tonen Corp................................................. 4,000 20,723
Toray Industries, Inc...................................... 16,000 83,006
Toshiba Corp............................................... 14,000 57,196
Toyo Suisan Kaisha......................................... 3,000 18,287
Toyota Motor Corp.......................................... 4,000 103,469
Yamato Transport Co., Ltd.................................. 3,000 33,613
Yamazaki Baking Co., Ltd................................... 3,000 26,588
-----------
2,877,485
-----------
MALAYSIA -- 0.22%
Berjaya Sports Toto Bhd.................................... 8,000 11,863
Kuala Lumpur Kepong Bhd.................................... 14,000 22,616
Malayan Banking Bhd Bonus Issue............................ 4,600 4,586
Malayan Banking Bhd........................................ 4,600 4,636
Malaysia International Shipping Bhd (Frgn.)................ 5,000 7,294
Nestle (Malaysia) Bhd...................................... 3,000 13,599
Petronas Gas Bhd........................................... 8,000 14,852
Public Bank Bhd (Frgn.).................................... 7,999 2,411
</TABLE>
- --------------------------------------------------------------------------------
33
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Resorts World Bhd.......................................... 10,000 $ 10,995
Rothmans of Pall Mall Bhd.................................. 4,000 27,728
Sime Darby Bhd............................................. 3,000 2,069
Tanjong PLC................................................ 5,000 6,932
Telekom Malaysia Bhd....................................... 10,500 17,722
Tenaga Nasional Bhd........................................ 11,000 13,261
UMW Holdings Bhd........................................... 6,000 2,691
YTL Corp. Bhd.............................................. 15,000 11,284
YTL Power International Bhd (b)............................ 7,800 4,250
-----------
178,789
-----------
NETHERLANDS -- 2.55%
ABN AMRO Holdings NV....................................... 7,201 168,502
Akzo Nobel NV.............................................. 200 44,460
Elsevier NV................................................ 7,300 110,171
Heineken NV................................................ 3,593 141,127
Koninklijke Hoogovens NV................................... 813 35,171
ING Groep NV............................................... 4,102 268,600
KLM Royal Dutch Air Lines NV............................... 1,118 45,397
Koninklijke KPN NV......................................... 3,583 137,916
Philips Electronics NV..................................... 2,237 188,048
PolyGram NV................................................ 1,500 76,541
Royal Dutch Petroleum Co................................... 9,575 530,951
TNT Post Group NV.......................................... 3,583 91,592
Unilever NV................................................ 3,100 245,964
-----------
2,084,440
-----------
NEW ZEALAND -- 1.73%
Brierley Investments Ltd................................... 379,200 188,969
Carter Holt Harvey Ltd..................................... 131,500 114,680
Fletcher Challenge Building................................ 43,450 54,132
Fletcher Challenge Energy.................................. 47,850 114,259
Fletcher Challenge Forests Ltd............................. 63,695 35,709
Fletcher Challenge Paper................................... 86,200 95,757
Lion Nathan Ltd............................................ 33,400 74,206
Telecom Corp. of New Zealand Ltd........................... 179,500 739,837
-----------
1,417,549
-----------
NORWAY -- 0.14%
Norsk Hydro ASA............................................ 2,200 96,762
Norske Skogindustrier ASA Class A.......................... 600 18,531
-----------
115,293
-----------
SINGAPORE -- 0.64%
City Developments Ltd...................................... 7,000 19,556
Creative Technology Ltd.................................... 1,000 12,134
DBS Land Ltd............................................... 14,000 11,601
Development Bank of Singapore Ltd.......................... 4,700 26,011
Elec & Eltek International Co., Ltd........................ 2,200 7,436
Fraser & Neave Ltd......................................... 3,000 8,062
Keppel Corp., Ltd.......................................... 11,750 17,665
Keppel Land Ltd............................................ 9,000 8,257
Oversea-Chinese Banking Corp., Ltd......................... 10,600 36,076
Rothmans Industries Ltd.................................... 4,000 17,757
</TABLE>
<TABLE>
<S> <C> <C>
Singapore Airlines Ltd. (Frgn.)............................ 13,000 $ 60,787
Singapore Press Holdings Ltd. (Frgn.)...................... 9,828 65,733
Singapore Technologies Engineering Ltd..................... 23,000 16,200
Singapore Telecommunications Ltd........................... 94,000 133,531
United Overseas Bank Ltd. (Frgn.).......................... 24,000 74,578
Venture Manufacturing (Singapore) Ltd...................... 3,000 5,682
-----------
521,066
-----------
SWEDEN -- 1.76%
ABB AB, A Shares........................................... 6,310 89,409
Astra AB, A Shares......................................... 9,030 184,565
Electrolux AB Series B..................................... 3,600 61,844
Investor AB-B Shares....................................... 2,600 151,764
Nordbanken Holding AB...................................... 20,840 152,872
Skandia Forsakrings AB..................................... 6,000 85,769
Skanska AB, B Shares....................................... 1,870 83,946
Svenska Handelsbanken, A Shares............................ 2,060 95,575
Swedish Match AB........................................... 26,610 88,423
Telefonaktiebloaget LM Ericsson, B Shares.................. 10,600 309,697
Volvo AB, B Shares......................................... 4,530 134,908
-----------
1,438,772
-----------
SWITZERLAND -- 3.69%
ABB AG (Bearer)............................................ 96 141,772
CS Holdings AG (Reg.)...................................... 1,866 415,200
Holderbank Financiere Glarus, B Shares..................... 91 115,790
Julius Baer Holding AG..................................... 41 128,260
Nestle S.A. (Reg.)......................................... 204 436,566
Novartis AG (Reg.)......................................... 436 725,517
Roche Holding AG (Gen.).................................... 51 500,821
Sairgroup.................................................. 270 88,825
Saurer AG.................................................. 91 92,992
Sulzer AG.................................................. 96 75,759
Swiss Reinsurance Co. (Reg.)............................... 120 303,481
-----------
3,024,983
-----------
UNITED KINGDOM -- 12.21%
Abbey National PLC......................................... 9,750 173,253
B.A.T. Industries PLC...................................... 46,750 468,015
Barclays PLC............................................... 12,000 345,981
Bass PLC................................................... 5,446 102,043
Billiton PLC............................................... 52,000 105,416
BOC Group PLC.............................................. 6,000 81,740
Booker PLC................................................. 27,870 113,928
British Petroleum Co. PLC.................................. 35,671 520,180
British Sky Broadcasting PLC............................... 15,500 111,335
British Steel PLC.......................................... 100,750 221,474
British Telecommunications PLC............................. 38,520 475,603
BTR PLC (b)................................................ 14,875 42,192
Cable & Wireless PLC....................................... 8,500 103,247
Cadbury Schweppes PLC...................................... 13,000 201,180
Charter PLC................................................ 17,422 181,824
Coats Viyella PLC.......................................... 97,250 119,262
Diageo PLC................................................. 16,630 197,005
FKI PLC.................................................... 54,405 157,040
</TABLE>
- --------------------------------------------------------------------------------
34
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
General Electric Co. PLC................................... 30,820 $ 265,601
Glaxo Wellcome PLC......................................... 21,120 633,945
Greenalls Group PLC........................................ 17,000 147,212
Hanson PLC................................................. 19,750 120,031
Hillsdown Holdings PLC..................................... 46,000 125,104
House of Fraser PLC........................................ 50,250 145,885
HSBC Holdings PLC.......................................... 12,201 309,636
Inchcape PLC............................................... 25,000 78,837
Legal & General Group PLC.................................. 4,250 87,562
Lloyds TSB Group PLC....................................... 33,220 464,761
Marks & Spencer PLC........................................ 46,120 419,769
Mirror Group PLC........................................... 44,000 165,182
National Westminster Bank PLC.............................. 7,350 131,342
Peninsular & Oriental Steam Navigation Co.................. 17,475 251,626
Prudential Corp. PLC....................................... 6,000 79,037
Reckitt & Colman PLC....................................... 4,635 88,471
Reed International PLC..................................... 20,000 180,866
Reuters Group PLC.......................................... 3,400 37,284
Rio Tinto PLC.............................................. 13,020 146,636
RJB Mining PLC............................................. 27,500 56,437
Royal & Sun Alliance Insurance Group PLC................... 13,779 142,425
Scottish Hydro-Electric PLC................................ 14,650 130,040
Sears PLC.................................................. 68,250 59,785
Sedgwick Group PLC......................................... 43,000 93,269
SmithKline Beecham PLC..................................... 35,850 437,553
Smurfit (Jefferson) Group PLC.............................. 51,196 152,903
Tate & Lyle PLC............................................ 24,000 190,309
Tesco PLC.................................................. 17,750 173,253
Thames Water PLC........................................... 12,500 227,542
Unilever PLC............................................... 26,000 276,771
United News & Media PLC.................................... 9,000 125,838
Vodafone Group PLC......................................... 15,825 200,803
Williams PLC............................................... 16,750 107,598
Willis Corroon Group PLC................................... 10,000 25,361
-----------
9,999,392
-----------
Total Non-U.S. Equities.................................... 38,193,567
-----------
Total Equities (Cost $65,038,146).......................... 80,921,631
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Short-Term Investments -- 0.97%
U.S. GOVERNMENT OBLIGATIONS -- 0.72%
U.S. Treasury Bills 5.125%, due 11/27/98................ $ 600,000 $ 587,534
-----------
COMMERCIAL PAPER -- 0.25%
NGC Corp.
6.640%, due 07/01/98................................... 209,000 209,000
-----------
Total Short-Term Investments
(Cost $796,358)........................................ 796,534
-----------
Total Investments
(Cost $65,834,504) -- 99.81% (a)....................... 81,718,165
-----------
Cash and other assets, less
liabilities -- 0.19%................................... 153,843
-----------
Net Assets -- 100%...................................... $81,872,008
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
35
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $65,834,504; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $19,727,697
Gross unrealized depreciation................................ (3,844,036)
-----------
Net unrealized appreciation.............................. $15,883,661
===========
</TABLE>
(b) Non-income producing security.
(c) Denominated in U.S. dollars.
RNC: Non-Convertible Savings Shares
FORWARD FOREIGN CURRENCY CONTRACTS
The Global Equity Fund had the following open forward foreign currency
contracts as of June 30, 1998:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
Belgian Franc................... 12/03/98 44,000,000 $1,192,967 $ 14,166
British Pound................... 12/03/98 3,300,000 5,456,800 (94,960)
Danish Krone.................... 12/03/98 3,000,000 439,340 (2,125)
Finnish Markka.................. 12/03/98 2,800,000 514,632 6,201
Hong Kong Dollar................ 12/03/98 2,000,000 253,156 (87)
Forward Foreign Currency Sale
Contracts
Australian Dollar............... 12/03/98 3,800,000 2,358,286 6,846
British Pound................... 12/03/98 400,000 661,430 13,910
Canadian Dollar................. 12/03/98 1,150,000 784,052 (8,970)
Danish Krone.................... 12/03/98 3,000,000 439,340 (5,797)
Hong Kong Dollar................ 12/03/98 1,000,000 126,578 1,483
Japanese Yen.................... 12/03/98 205,000,000 1,511,998 3,702
Spanish Peseta.................. 12/03/98 222,000,000 1,459,422 (18,164)
--------
Total....................... $(83,795)
========
</TABLE>
FUTURES CONTRACTS
The Global Equity Fund had the following open index futures contracts as of
June 30, 1998:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE PROCEEDS VALUE LOSS
-------------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
INDEX FUTURES SALE CON-
TRACTS
Standard & Poor's 500, 52
contracts................. September 1998 $ 14,283,386 $ 14,859,000 $ 575,614
=========
</TABLE>
The segregated cash and aggregate market value of investments pledged to cover
margin requirements for the open positions at June 30, 1998 were $10,000 and
$587,534, respectively.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $65,834,504)......................... $81,718,165
Cash............................................................. 15,710
Foreign currency, at value (Cost $321,710)....................... 322,019
Receivables:
Investment securities sold...................................... 694,723
Dividends....................................................... 218,500
Fund shares sold................................................ 29,324
Variation margin................................................ 110,500
Other assets..................................................... 2,603
-----------
TOTAL ASSETS.................................................. 83,111,544
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 836,123
Fund shares redeemed............................................ 182,327
Investment advisory fees........................................ 54,145
Accrued expenses................................................ 83,146
Net unrealized depreciation on forward foreign currency con-
tracts........................................................... 83,795
-----------
TOTAL LIABILITIES............................................. 1,239,536
-----------
NET ASSETS........................................................ $81,872,008
===========
NET ASSETS CONSIST OF:
Paid in capital.................................................. $66,347,204
Accumulated undistributed net investment income.................. 377,184
Accumulated net realized loss.................................... (78,467)
Net unrealized appreciation...................................... 15,226,087
-----------
NET ASSETS.................................................... $81,872,008
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $22,724,003 and 1,811,660 shares issued
and outstanding)............................................... $ 12.54
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,090 and 87 shares issued and outstanding)................... $ 12.53
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $59,146,915 and 4,727,806 shares issued
and outstanding)............................................... $ 12.51
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $147,165 for foreign taxes withheld)........... $ 1,778,109
Interest......................................................... 298,325
-----------
TOTAL INCOME.................................................. 2,076,434
-----------
EXPENSES:
Advisory......................................................... 719,439
Distribution..................................................... 500,537
Custodian........................................................ 15,731
Other............................................................ 185,256
-----------
TOTAL EXPENSES................................................ 1,420,963
Expenses waived by Advisor.................................... (21,898)
-----------
NET EXPENSES.................................................. 1,399,065
-----------
NET INVESTMENT INCOME ........................................ 677,369
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 9,912,136
Futures contracts............................................... (2,561,807)
Foreign currency transactions................................... (446,626)
-----------
Net realized gain............................................. 6,903,703
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ (927,168)
Futures contracts............................................... (272,124)
Forward contracts............................................... (82,521)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. (1,175)
-----------
Change in net unrealized appreciation or depreciation......... (1,282,988)
-----------
Net realized and unrealized gain.................................. 5,620,715
-----------
Net increase in net assets resulting from operations.............. $ 6,298,084
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
38
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
YEAR ENDED
ENDED JUNE 30,
JUNE 30, 1998 1997
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 677,369 $ 960,262
Net realized gain................................. 6,903,703 5,232,778
Change in net unrealized appreciation or
depreciation..................................... (1,282,988) 10,619,517
----------- ------------
Net increase in net assets resulting from opera-
tions............................................ 6,298,084 16,812,557
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................... (242,673) (425,929)
Brinson Class N................................... (11) --
SwissKey Class.................................... (397,017) (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............... (7,213,754) (7,152,760)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 40,216,740 42,520,630
Shares issued on reinvestment of distributions.... 6,378,677 6,711,937
Shares redeemed................................... (73,542,587) (9,295,598)
----------- ------------
Net increase (decrease) in net assets resulting
from capital share transactions.................. (26,947,170) 39,936,969
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ (27,862,840) 49,596,766
----------- ------------
NET ASSETS:
Beginning of year................................. 109,734,848 60,138,082
----------- ------------
End of year (including accumulated undistributed
net investment income of $377,184 and $336,561,
respectively).................................... $81,872,008 $109,734,848
=========== ============
</TABLE>
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 each period presented.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, JANUARY 28, 1994*
---------------------------------- THROUGH
BRINSON CLASS I 1998 1997 1996 1995 JUNE 30, 1994
- -------------------------------------------------------------------------------
<S> <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.. 0.22 0.16 0.18 0.18 0.07
Net realized and
unrealized gain
(loss)................ 0.78 2.14 2.29 0.39 (0.54)
------- ------- ------- ------- -------
Total income (loss)
from investment
operations.......... 1.00 2.30 2.47 0.57 (0.47)
------- ------- ------- ------- -------
Less distributions:
Distributions from net
investment income..... (0.17) (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.. (1.22) (1.11) (0.83) (0.13) (0.04)
------- ------- ------- ------- -------
Net asset value, end of
period.................. $ 12.54 $ 12.76 $ 11.57 $ 9.93 $ 9.49
======= ======= ======= ======= =======
Total return (non-
annualized)............. 8.99% 21.26% 25.66% 6.06% (4.70)%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)......... $22,724 $48,054 $27,126 $20,706 $20,642
Ratio of expenses to
average net assets:
Before expense
reimbursement......... 1.02% 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......... 1.29% 1.35% 0.57% 0.71% 0.24%**
After expense
reimbursement......... 1.31% 1.60% 1.34% 1.77% 1.89%**
Portfolio turnover rate. 46% 32% 74% 36% 21%
Average commission rate
paid per share......... $0.0254 $0.0246 $0.0288 N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
N/A = Not applicable
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 the period presented.
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
BRINSON CLASS N 1998*
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of year................................... $ 12.76
-------
Income from investment operations:
Net investment income.............................................. 0.13
Net realized and unrealized gain................................... 0.82
-------
Total income from investment operations.......................... 0.95
-------
Less distributions:
Distributions from net investment income........................... (0.13)
Distributions from net realized gain............................... (1.05)
-------
Total distributions.............................................. (1.18)
-------
Net asset value, end of year......................................... $ 12.53
=======
Total return......................................................... 8.60%
Ratios/Supplemental data
Net assets, end of year (in 000s)................................... $ 1
Ratio of expenses to average net assets:
Before expense reimbursement....................................... 1.27%
After expense reimbursement........................................ 1.25%
Ratio of net investment income to average net assets:
Before expense reimbursement....................................... 1.04%
After expense reimbursement........................................ 1.06%
Portfolio turnover rate............................................. 46%
Average commission rate paid per share.............................. $0.0254
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
41
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR YEAR JULY 31, 1995*
ENDED ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of peri-
od................................. $ 12.73 $ 11.57 $ 10.35
------- ------- -------
Income from investment operations:
Net investment income (loss)...... 0.07 0.08 (0.01)
Net realized and unrealized gain.. 0.83 2.13 1.93
------- ------- -------
Total income from investment op-
erations....................... 0.90 2.21 1.92
------- ------- -------
Less distributions:
Distributions from net investment
income........................... (0.07) (0.06) (0.01)
Distributions from net realized
gain............................. (1.05) (0.99) (0.69)
------- ------- -------
Total distributions............. (1.12) (1.05) (0.70)
------- ------- -------
Net asset value, end of period...... $ 12.51 $ 12.73 $ 11.57
======= ======= =======
Total return (non-annualized)....... 8.15% 20.34% 19.25%
Ratios/Supplemental data
Net assets, end of period (in
000s)............................. $59,147 $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...... 0.53% 0.60% (0.19)%**
After expense reimbursement....... 0.55% 0.85% 0.58%**
Portfolio turnover rate............ 46% 32% 74%
Average commission rate paid per
share............................. $0.0254 $0.0246 $0.0288
</TABLE>
* Commencement of SwissKey Class
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
42
<PAGE>
Global Bond Fund
[SWISS KEY FUND LOGO]
The Global Bond Fund is actively managed, providing a fully integrated treatment
of the U.S. and other major fixed income markets across the world. This global
approach takes full advantage of relationships both within and across markets,
based on consistent analysis of macroeconomic and market conditions. Market and
currency strategies are developed on 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 6.36% since
its inception on July 31, 1995. Over the same time period, the return of the
Fund's benchmark was 2.84%.
During the first half of 1998, the Fund returned 1.52% compared to the index
return of 2.78% on an unhedged basis. On a dollar-hedged basis, the index
returned 5.03%, with individual market returns ranging from 7.89% in Sweden down
to 4.16% in Switzerland and 4.20% in U.S. Treasuries. Yields continued to
decline, in many markets to record low levels, in a low inflation environment.
The Asian crisis contributed to lower inflation but also supported government
bonds by encouraging a "flight to quality".
Market allocation made a minor positive contribution to the Fund's performance
relative to the benchmark in the first six months of the year. The Fund
benefited from being overweight in Denmark, while the overweight in U.S. bonds
detracted slightly from relative performance.
Currency allocation made virtually no net contribution to relative performance
for the period. The Fund suffered from being underweight in the U.K. pound, but
benefited from the offsetting overweight in the U.S. dollar. Similarly the
"paired" overweight of the Australian dollar and underweight of the Japanese yen
netted to a wash. While the yen was relatively weak, so too was the Australian
dollar, which suffered (as did the Canadian dollar) from weakening commodity
prices in the wake of the Asian crisis.
Bond management was the largest detractor from relative performance. Although
the Fund benefited from being overweight in Canadian Real Return bonds, overall
short duration strategies hurt performance. This was particularly true in Japan,
where the worsening economic situation drove down the compound yield on ten year
JGBs to just 1.45% in early June. At present, the average duration of holdings
is equal to the market index average in Denmark and the U.S., 0.95 times average
in Australia, and 0.9 times average in the other countries in the Fund.
43
<PAGE>
Global Bond Fund
[SWISS KEY FUND LOGO]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 7/31/95*
ended ended to
6/30/98 6/30/98 6/30/98
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SwissKey Global Bond Fund 1.52% 2.28% 6.36%
- --------------------------------------------------------------------------------
Salomon World Government Bond Index 2.78 4.32 2.84
- --------------------------------------------------------------------------------
</TABLE>
*Inception date of the SwissKey Global Bond Fund.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the SwissKey Global
Bond Fund and the Salomon World Government Bond Index if you had invested
$10,000 on July 31, 1995, and had reinvested all your income dividends and
capital gain distributions through June 30, 1998. No adjustment has been made
for any income taxes payable by shareholders on income dividends and capital
gain distributions. Past performance is no guarantee of future results. Share
price and return will vary with market conditions; investors may realize a gain
or loss upon redemption.
SwissKey Global Bond Fund
vs. Salomon World Government Bond Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
SwissKey Global Salomon World
Date Bond Fund Gov't Bond Index
- ---- --------------- ----------------
<S> <C> <C>
07/31/95 10,000 10,000
12/31/95 10,722 10,162
06/30/96 10,917 10,013
12/31/96 11,654 10,531
06/30/97 11,703 10,402
12/31/97 11,791 10,557
06/30/98 11,970 10,851
</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.
44
<PAGE>
Global Bond Fund
[SWISS KEY FUND LOGO]
Asset Allocation
As of June 30, 1998
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ---------------------------------------------
<S> <C> <C>
U.S. 33.4% 39.4%
Australia 0.8 4.0
Austria 0.9 0.0
Belgium 2.4 0.0
Canada 3.3 6.1
Denmark 1.6 6.3
Finland 0.6 0.0
France 7.4 7.6
Germany 9.2 13.3
Ireland 0.4 0.0
Italy 7.2 3.6
Japan 18.3 0.0
Netherlands 3.0 5.3
Spain 3.0 3.9
Sweden 1.5 1.5
Switzerland 0.5 0.0
U.K. 6.5 9.0
- ---------------------------------------------
100.0% 100.0%
</TABLE>
Currency Allocation
As of June 30, 1998
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ---------------------------------------------
<S> <C> <C>
U.S. 33.4% 36.9%
Australia 0.8 4.7
Austria 0.9 0.9
Belgium 2.4 2.4
Canada 3.3 3.3
Denmark 1.6 1.6
Finland 0.6 0.6
France 7.4 7.4
Germany 9.2 9.2
Ireland 0.4 0.4
Italy 7.2 7.2
Japan 18.3 14.3
Netherlands 3.0 3.0
Spain 3.0 3.0
Sweden 1.5 1.5
Switzerland 0.5 0.5
U.K. 6.5 3.1
- ---------------------------------------------
100.0% 100.0%
</TABLE>
Industry Diversification
As a Percent of Net Assets
As of June 30, 1998
- ---------------------------------------------
<TABLE>
<S> <C>
U.S. BONDS
Corporate Bonds
Aerospace & Military............... 0.14%
Asset-Backed....................... 2.28
Banking............................ 0.21
CMO................................ 5.02
Consumer........................... 1.23
Financial Services................. 1.56
Food and Housing Products.......... 0.52
Industrial Components.............. 1.16
Services/Miscellaneous............. 0.32
Telecommunications................. 0.92
Transportation..................... 0.77
------
14.13
------
International Dollar Bonds......... 2.33
U.S. Government Agencies........... 9.38
U.S. Government Obligations........ 8.61
------
Total U.S. Bonds................ 34.45
------
NON-U.S. BONDS
Foreign Financial Bonds............. 14.04
Foreign Government Bonds............ 44.34
------
Total Non-U.S. Bonds............ 58.38
------
SHORT-TERM INVESTMENTS.............. 13.44
------
TOTAL INVESTMENTS............... 106.27
LIABILITIES, LESS CASH AND
OTHER ASSETS....................... (6.27)
------
NET ASSETS...................... 100.00%
======
</TABLE>
45
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Bonds -- 92.83%
U.S. BONDS -- 34.45%
U.S. CORPORATE BONDS -- 14.13%
Archer Daniels, 6.950%, due 12/15/2097.................. $ 500,000 $ 533,778
Bear Stearns Mortgage Securities, Inc., 96-7, Class A4,
6.000%, due 01/28/09................................... 200,000 197,182
Capital One Bank, 6.830%, due 05/17/99.................. 200,000 201,125
Chase Manhattan Auto Owner Trust, 96-C, Class A4,
6.150%, due 03/15/02................................... 125,000 125,921
Continental Airlines, Inc.,
6.900%, due 01/02/18................................... 710,000 738,528
Countrywide Capital, Inc.,
8.000%, due 12/15/26................................... 250,000 264,901
DLJ Mortgage Acceptance Corp., 98-3, Class A, 6.500%,
due 08/19/28........................................... 620,000 612,250
Donaldson Lufkin & Jenrette FRN, 6.700%, due 06/30/00... 375,000 380,412
First Bank Corporate Card Master Trust, 97-1, Class A,
6.400%, due 02/15/03................................... 240,000 244,322
First Union-Lehman Brothers Commercial Mortgage, 97-C2,
Class A2, 6.600%, due 05/18/07......................... 240,000 244,920
Ford Credit Grantor Trust,
95-B, Class A, 5.900%, due 10/15/00.................... 25,233 25,253
GE Capital Mortgage Services, Inc., 93-7F, Class FA3,
6.500%, due 09/25/08................................... 383,524 384,444
Kroger Co., 6.000%, due 07/01/00........................ 500,000 498,888
Lockheed Martin Corp.,
7.700%, due 06/15/08................................... 125,000 137,577
Merrill Lynch & Co., Series B,
5.930%, due 03/23/01................................... 550,000 549,690
Metlife Capital Equipment Loan Trust,
97-A, Class A, 6.850%, due 05/20/08.................... 225,000 232,973
News America Holdings,
7.750%, due 12/01/45................................... 775,000 831,715
PNC Mortgage Securities Corp.,
94-3, Class A8, 7.500%, due 07/25/24................... 190,000 197,362
Premier Auto Trust,
96-3, Class A4, 6.750%, due 11/06/00................... 475,000 479,888
Prudential Home Mortgage Securities
93-43, Class A9, 6.750%, due 10/25/23.................. 215,869 216,776
96-7, Class A4, 6.750%, due 06/25/11................... 150,000 151,989
Residential Asset Securitization Trust
97-A7, Class A1, 7.500%, due 09/25/27.................. 245,263 247,950
97-A10, Class A5, 7.250%, due 12/25/27................. 335,000 342,149
97-A11, Class A6, 7.000%, due 01/25/28................. 430,000 435,688
97-A11, Class A2, 7.000%, due 01/25/28................. 260,000 261,664
98-A1, Class A1, 7.000%, due 03/25/28.................. 252,863 254,492
Salomon, Inc. 6.500%, due 03/01/00...................... 300,000 302,337
SASCO LLC,
98-RF1, Class A, 8.712%, due 03/15/27.................. 289,264 310,236
Structured Mortgage Asset Residential Trust, 93-5C,
Class CI, 7.150%, due 03/25/23......................... 925,000 943,881
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ----------
<S> <C> <C>
The Money Store,
94-A, Class A3, 5.525%, due 09/15/18.................... $ 58,553 $ 58,049
Time Warner, Inc., 7.570%, due 02/01/24.................. 315,000 341,044
U.S. West Capital Funding Inc.,
6.875%, due 07/15/28.................................... 375,000 376,801
USA Waste Services, 7.000%, due 10/01/04................. 300,000 309,331
UCFC Home Equity Loan FRN,
97-C, Class A8, 5.888%, due 09/15/27.................... 153,606 153,778
USX Corp., 8.125%, due 07/15/23.......................... 500,000 571,971
Vanderbilt Mortgage Finance,
98-B, Class 1A2, 6.120%, due 05/07/09................... 600,000 602,238
World Omni Automobile Lease Securitization Trust, 97-A,
Class A3, 6.850%, due 06/25/03.......................... 254,868 257,129
Worldcom Inc., Series *, 8.875%, due 01/15/06............ 465,000 503,363
----------
13,521,995
----------
INTERNATIONAL DOLLAR BONDS -- 2.33%
Banco Santiago S.A., 7.000%, due 07/18/07................ 400,000 401,576
Banque Centrale de Tunisie,
8.250%, due 09/19/27.................................... 400,000 376,539
DR Investments, 144A,
7.450%, due 05/15/07.................................... 455,000 485,688
Pan Pacific Industry PLC,
144A, 0.000%, due 04/28/07.............................. 715,000 250,250
Province of Quebec, 7.500%, due 07/15/23................. 235,000 261,257
Republic of South Africa,
9.625%, due 12/15/99.................................... 125,000 130,000
Royal Bank of Scotland,
7.375%, Resettable Perpetual Preferred.................. 300,000 319,467
----------
2,224,777
----------
U.S. GOVERNMENT AGENCIES -- 9.38%
Federal Home Loan Mortgage Corp.
7.000%, due 10/15/13.................................... 68,215 70,323
7.500%, due 01/15/23.................................... 82,460 88,349
7.238%, due 05/01/26.................................... 38,619 39,962
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23.................................... 77,152 79,707
9.000%, due 03/01/24.................................... 216,460 231,833
Federal National Mortgage Assoc.
6.220%, due 03/13/06.................................... 150,000 154,781
6.820%, due 10/01/07.................................... 480,108 503,970
6.361%, due 06/01/08.................................... 390,000 399,243
8.000%, due 03/01/11.................................... 124,028 127,942
6.000%, due 12/01/12 TBA................................ 300,000 296,624
9.000%, due 08/01/21.................................... 21,590 23,111
8.500%, due 07/01/22.................................... 15,054 15,916
8.000%, due 11/01/23.................................... 224,266 44,341
7.000%, due 12/18/24.................................... 700,000 706,124
9.000%, due 04/25/25.................................... 17,462 18,321
7.500%, due 05/18/25.................................... 250,000 257,380
7.890%, due 04/01/26.................................... 267,300 276,762
6.500%, due 12/01/27 TBA................................ 3,400,000 3,385,101
3.500%, due 05/01/28.................................... 328,389 282,046
Federal National Mortgage Assoc. Strips 0.000%, due
04/01/27 principal only................................. 218,262 184,674
Government National Mortgage Assoc.
7.500%, due 08/15/23.................................... 95,868 98,475
7.500%, due 12/15/23.................................... 141,583 145,432
7.500%, due 01/15/24.................................... 98,868 101,556
</TABLE>
- --------------------------------------------------------------------------------
46
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
7.375%, due 06/20/24................................... $ 129,621 $ 132,848
7.000%, due 08/15/24................................... 470,983 479,677
7.000%, due 07/15/25................................... 65,462 66,565
Jordan Aid, 8.750%, due 09/01/19........................ 193,941 243,842
Tennessee Valley Authority
6.375%, due 06/15/05................................... 500,000 519,105
-----------
8,974,010
-----------
U.S. GOVERNEMENT OBLIGATIONS -- 8.61%
U.S. Treasury Notes and Bonds
5.500%, due 02/29/00................................... 4,550,000 4,548,580
6.625%, due 07/31/01................................... 1,765,000 1,817,950
6.250%, due 08/31/02................................... 240,000 246,225
7.000%, due 07/15/06................................... 260,000 284,050
3.625%, due 01/15/08................................... 346,998 343,094
8.000%, due 11/15/21................................... 425,000 547,852
6.000%, due 02/15/26................................... 430,000 447,335
-----------
8,235,086
-----------
Total U.S. Bonds........................................ 32,955,868
-----------
NON-U.S. BONDS -- 58.38%
AUSTRALIA -- 3.92%
Government of Australia
9.750%, due 03/15/02................................AUD 1,500,000 1,065,689
9.000%, due 09/15/04................................... 1,200,000 881,103
New South Wales Treasury Corp., 7.000%, due 04/01/04.... 1,000,000 657,231
Queensland Treasury Corp.-Global Note 8.000%, due
05/14/03............................................... 980,000 668,363
6.500%, due 06/14/05................................... 730,000 472,188
-----------
3,744,574
-----------
AUSTRIA -- 1.81%
Republic of Austria,
5.500%, due 01/18/04............................... FRF 10,000,000 1,728,250
-----------
CANADA -- 5.93%
British Columbia,
7.750%, due 06/16/03............................... CAD 1,540,000 1,149,345
Government of Canada
9.000%, due 12/01/04................................... 400,000 325,337
4.250%, due 12/01/21 (b)............................... 3,300,000 2,598,082
Province of Ontario-Global Bond
7.500%, due 01/19/06................................... 2,100,000 1,601,132
-----------
5,673,896
-----------
CHILE -- 0.49%
Embot Andina S.A.,
7.875%, due 10/01/97............................... USD 500,000 470,003
-----------
DENMARK -- 5.90%
City of Copenhagen,
6.250%, due 03/15/01............................... DKK 2,400,000 363,385
Great Belt, 7.000%, due 09/02/03........................ 10,650,000 1,696,729
Kingdom of Denmark
8.000%, due 11/15/01................................... 8,000,000 1,288,352
7.000%, due 12/15/04................................... 10,500,000 1,710,048
7.000%, due 11/15/07................................... 1,400,000 234,419
7.000%, due 11/10/24................................... 2,000,000 352,857
-----------
5,645,790
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
------------- -----------
<S> <C> <C>
FINLAND -- 1.49%
Republic of Finland,
9.000%, due 08/13/03............................ FRF 7,200,000 $ 1,429,044
-----------
FRANCE -- 2.66%
Government of France (BTAN)
7.750%, due 04/12/00................................ 4,000,000 703,143
Government of France (OAT)
9.500%, due 01/25/01................................ 1,800,000 336,183
7.500%, due 04/25/05................................ 5,600,000 1,079,431
8.500%, due 04/25/23................................ 1,800,000 426,421
-----------
2,545,178
-----------
GERMANY -- 10.82%
Bundesobligation Ser 114,
6.500%, due 03/15/00............................ DEM 2,900,000 1,672,199
Bundesrepublik Deutschland
8.000%, due 07/22/02................................ 3,800,000 2,387,579
6.000%, due 07/04/07................................ 1,000,000 602,936
6.250%, due 01/04/24................................ 700,000 437,064
International Bank Reconstruction & Development,
7.125%, due 04/12/05................................ 2,250,000 1,415,443
European Economic Community,
6.500%, due 03/10/00................................ 1,910,000 1,098,911
KFW International Finance,
6.625%, due 04/15/03................................ 2,800,000 1,688,920
LKB Baden-Wuerttemberg Finance, 6.500%, due 09/15/08. 1,300,000 800,886
Treuhandanstalt, 7.125%, due 01/29/03................ 400,000 246,116
-----------
10,350,054
-----------
IRELAND -- 1.87%
Republic of Ireland,
7.250%, due 03/18/03................................ 2,900,000 1,790,609
-----------
ITALY -- 3.46%
Bayerische Landesbank,
10.750%, due 03/01/03............................ITL 750,000,000 524,774
International Bank for Reconstruction & Development
5.000%, due 10/16/00................................ 1,000,000,000 568,905
LKB Baden-Wuerttemberg Finance, 10.750%, due
04/14/03............................................ 650,000,000 457,547
Republic of Italy (BTP)
7.750%, due 09/15/01................................ 200,000,000 123,080
9.000%, due 10/01/03................................ 1,800,000,000 1,209,789
9.500%, due 02/01/06................................ 300,000,000 216,855
9.000%, due 11/01/23................................ 250,000,000 207,842
-----------
3,308,792
-----------
NETHERLANDS -- 5.02%
Government of Netherlands
5.750%, due 09/15/02............................ NLG 250,000 129,154
7.250%, due 10/01/04................................ 3,000,000 1,684,200
8.500%, due 06/01/06................................ 1,750,000 1,071,490
7.500%, due 11/15/99................................ 1,850,000 950,828
International Nederland GRP Verzekeringen, 6.250%,
due 12/28/05........................................ 1,800,000 962,914
-----------
4,798,586
-----------
PORTUGAL -- 1.28%
Republic of Portugal,
5.625%, due 04/03/07............................ FRF 7,000,000 1,221,369
-----------
</TABLE>
- --------------------------------------------------------------------------------
47
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
----------- -----------
<S> <C> <C>
SPAIN -- 3.72%
Kingdom of Spain
6.750%, due 04/15/00.............................. ESP 100,000,000 $ 681,299
7.900%, due 02/28/02.................................. 100,000,000 727,513
8.000%, due 05/30/04.................................. 100,000,000 762,591
10.000%, due 02/28/05................................. 70,000,000 590,764
7.350%, due 03/31/07.................................. 105,000,000 800,926
-----------
3,563,093
-----------
SWEDEN -- 1.35%
Kingdom of Sweden
6.000%, due 02/09/05...............................SEK 3,000,000 402,182
10.250%, due 05/05/03................................. 5,700,000 888,153
-----------
1,290,335
-----------
UNITED KINGDOM -- 8.66%
Abbey National PLC,
8.750%, due 05/24/04...............................GBP 350,000 635,074
British Gas PLC, 8.125%, due 03/31/03.................. 545,000 945,707
European Investment Bank,
7.625%, due 12/07/06.................................. 1,460,000 2,627,849
UK Treasury
10.000%, due 09/08/03................................. 600,000 1,159,400
7.750%, due 09/08/06.................................. 555,000 1,028,459
9.000%, due 10/13/08.................................. 340,000 702,377
8.000%, due 09/27/13.................................. 580,000 1,183,351
-----------
8,282,217
-----------
Total Non-U.S. Bonds................................... 55,841,790
-----------
Total Bonds (Cost $88,760,827)......................... 88,797,658
-----------
Short-Term Investments -- 13.44%
COMMERCIAL PAPER -- 13.44%
ARCO Chemical Co.,
5.770%, due 07/06/98.................................. $ 1,000,000 999,199
Cincinnati Bell Inc.
5.850%, due 07/13/98.................................. 1,000,000 998,050
5.900%, due 07/17/98.................................. 1,000,000 997,378
Hilton Hotels Corp.,
5.720%, due 07/15/98.................................. 1,407,000 1,403,870
NGC Corp., 6.750%, due 07/01/98........................ 3,000,000 3,000,000
Raytheon Co., 6.998%, due 07/01/98..................... 2,466,000 2,466,000
Tenneco Inc., 5.750%, due 07/17/98..................... 1,500,000 1,496,167
Texas Utilities Co., 6.100%, due 07/17/98.............. 1,500,000 1,495,933
-----------
Total Short-Term Investments (Cost $12,856,597)........ 12,856,597
-----------
Total Investments (Cost $101,617,424) --106.27% (a).... 101,654,255
-----------
Liabilities, less cash and other assets -- (6.27%)..... (5,994,046)
-----------
Net Assets -- 100%..................................... $95,660,209
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
48
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $101,617,424; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................. $1,669,877
Gross unrealized depreciation................................. (1,633,046)
----------
Net unrealized appreciation............................... $ 36,831
==========
</TABLE>
(b) Linked to Canada's retail price index. Reset semi-annually
FRN: Floating Rate Note
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30,
1998, the value of these securities amounted to $745,938 or 0.77% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FORWARD FOREIGN CURRENCY CONTRACTS
The Global Bond Fund had the following open forward foreign currency contracts
as of June 30, 1998:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
Australian Dollar............. 7/06/98 562,392 $ 348,321 $ (379)
Australian Dollar............. 11/30/98 1,200,000 744,689 (12,031)
Austrian Schilling............ 11/30/98 10,100,000 802,238 (13,396)
Belgian Franc................. 11/30/98 77,000,000 2,087,336 (33,292)
British Pound................. 7/06/98 299,393 499,370 (286)
Canadian Dollar............... 7/06/98 637,068 433,264 203
Danish Krone.................. 7/06/98 2,319,532 337,376 44
Finnish Markka................ 11/30/98 2,800,000 514,549 (7,352)
French Franc.................. 7/06/98 3,539,078 585,581 368
French Franc.................. 11/30/98 25,400,000 4,238,724 (64,028)
German Mark................... 7/06/98 1,849,674 1,025,142 (1,029)
Italian Lira.................. 7/06/98 880,703,379 495,505 32
Italian Lira.................. 11/30/98 5,600,000,000 3,163,489 (49,086)
Japanese Yen.................. 5/28/98 1,900,000,000 14,007,272 (337,064)
Netherlands Guilder........... 7/06/98 811,598 399,128 (104)
Spanish Peseta................ 7/06/98 53,443,173 349,173 509
FORWARD FOREIGN CURRENCY SALE
CONTRACTS
British Pound................. 11/30/98 3,400,000 5,623,181 (113,891)
Canadian Dollar............... 11/30/98 3,600,000 2,454,289 38,268
Danish Kroner................. 11/30/98 30,200,000 4,422,083 57,285
French Franc.................. 11/30/98 26,000,000 4,338,851 82,850
German Mark................... 11/30/98 6,900,000 3,856,882 54,810
Netherlands Guilder........... 11/30/98 4,000,000 1,984,452 32,287
Spanish Peseta................ 11/30/98 97,000,000 637,597 8,898
---------
Total..................... $(356,384)
=========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
49
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $101,617,424)....................... $101,654,255
Cash............................................................ 12,764
Foreign currency, at value (Cost $551,655)...................... 545,899
Receivables:
Investment securities sold..................................... 1,145,929
Interest....................................................... 1,953,602
Fund shares sold............................................... 1,153,887
Other assets.................................................... 40,817
------------
TOTAL ASSETS................................................. 106,507,153
------------
LIABILITIES:
Payables:
Investment securities purchased................................ 10,384,748
Investment advisory fees....................................... 53,440
Accrued expenses............................................... 52,372
Net unrealized depreciation on forward foreign currency con-
tracts.......................................................... 356,384
------------
TOTAL LIABILITIES............................................ 10,846,944
------------
NET ASSETS....................................................... $95,660,209
============
NET ASSETS CONSIST OF:
Paid in capital................................................. $ 96,506,368
Accumulated undistributed net investment income................. 1,003,399
Accumulated net realized loss................................... (1,521,835)
Net unrealized depreciation..................................... (327,723)
------------
NET ASSETS................................................... $ 95,660,209
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of
$91,274,483 and 9,698,203 shares issued and outstanding)...... $ 9.41
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$8,965 and 954 shares issued and outstanding)................. $ 9.40
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$4,376,761 and 466,193 shares issued and outstanding)......... $ 9.39
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
50
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $18,306 for foreign taxes withheld).............. $3,631,663
----------
TOTAL INCOME................................................... 3,631,663
----------
EXPENSES:
Advisory.......................................................... 500,982
Custodian......................................................... 21,709
Professional...................................................... 45,990
Distribution...................................................... 20,731
Other............................................................. 75,917
----------
TOTAL EXPENSES................................................. 665,329
----------
Expenses waived by Advisor..................................... (43,502)
----------
NET EXPENSES................................................... 621,827
----------
NET INVESTMENT INCOME.......................................... 3,009,836
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments...................................................... 1,085,343
Futures contracts................................................ 21,780
Foreign currency transactions.................................... (2,221,924)
----------
Net realized loss............................................... (1,114,801)
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................. 224,905
Futures contracts................................................ (12,019)
Forward contracts................................................ (493,663)
Translation of other assets and liabilities denominated in for-
eign currency................................................... 4,151
----------
Change in net unrealized appreciation or depreciation........... (276,626)
----------
Net realized and unrealized loss.................................. (1,391,427)
----------
Net increase in net assets resulting from operations.............. $1,618,409
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
51
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
YEAR ENDED
ENDED JUNE
JUNE 30, 1998 30, 1997
------------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income.............................. $ 3,009,836 $ 2,426,764
Net realized gain (loss)........................... (1,114,801) 1,723,264
Change in net unrealized appreciation or deprecia-
tion ............................................. (276,626) (381,459)
----------- -----------
Net increase in net assets resulting from opera-
tions............................................. 1,618,409 3,768,569
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income........... (2,183,342) (3,479,707)
Distributions in excess of net investment income... -- (340,005)
Distributions from net realized gain............... (1,041,855) (769,789)
----------- -----------
Total distributions to shareholders*............... (3,225,197) (4,589,501)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................ 46,034,839 23,164,253
Shares issued on reinvestment of distributions..... 2,230,731 3,667,961
Shares redeemed.................................... (9,266,587) (12,462,273)
----------- -----------
Net increase in net assets resulting from capital
share transactions................................ 38,998,983 14,369,941
----------- -----------
TOTAL INCREASE IN NET ASSETS.................... 37,392,195 13,549,009
----------- -----------
NET ASSETS:
Beginning of year.................................. 58,268,014 44,719,005
----------- -----------
End of year (including accumulated undistributed
net investment income of $1,003,399 and $489,146,
respectively)..................................... $95,660,209 $58,268,014
=========== ===========
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net investment
income
Brinson Class I................................... $(2,070,571) $(3,503,032)
Brinson Class N................................... (98) --
SwissKey Class.................................... (112,673) (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................ $(3,225,197) $(4,589,501)
=========== ===========
</TABLE>
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 each period presented.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, JULY 30, 1993*
------------------------------------ THROUGH
BRINSON CLASS I 1998 1997 1996 1995 JUNE 30, 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................ $ 9.64 $ 10.04 $ 10.39 $ 9.55 $ 10.00
------- ------- ------- ------- -------
Income (loss) from in-
vestment operations:
Net investment income .. 0.43*** 0.67 0.84 0.50 0.45
Net realized and
unrealized gain (loss). (0.18) 0.08 0.31 0.58 (0.52)
------- ------- ------- ------- -------
Total income (loss)
from investment oper-
ations............... 0.25 0.75 1.15 1.08 (0.07)
------- ------- ------- ------- -------
Less distributions:
Distributions from and
in excess of net
investment income...... (0.31) (0.96) (1.40) (0.24) (0.28)
Distributions from net
realized gain.......... (0.17) (0.19) (0.10) -- (0.10)
------- ------- ------- ------- -------
Total distributions... (0.48) (1.15) (1.50) (0.24) (0.38)
------- ------- ------- ------- -------
Net asset value, end of
period................... $ 9.41 $ 9.64 $ 10.04 $ 10.39 $ 9.55
======= ======= ======= ======= =======
Total return (non-
annualized).............. 2.69 % 7.71% 11.50% 11.34% (0.79)%
Ratios/Supplemental data
Net assets, end of period
(in 000s)............... $91,274 $54,157 $41,066 $51,863 $36,849
Ratio of expenses to av-
erage net assets:
Before expense reim-
bursement.............. 0.96% 1.32% 1.65% 1.43% 1.78%**
After expense reimburse-
ment................... 0.90% 0.90% 0.90% 0.90% 0.90%**
Ratio of net investment
income to average net
assets:
Before expense reim-
bursement.............. 4.47% 4.90% 4.98% 5.53% 4.03%**
After expense reimburse-
ment................... 4.53% 5.32% 5.73% 6.06% 4.91%**
Portfolio turnover rate.. 151% 235% 184% 199% 189%
</TABLE>
*Commencement of investment operations
**Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
53
<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>
YEAR ENDED
JUNE 30,
BRINSON CLASS N 1998*
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of year................................... $ 9.64
------
Income from investment operations:
Net investment income.............................................. 0.42**
Net realized and unrealized loss................................... (0.20)
------
Total income from investment operations.......................... 0.22
------
Less distributions:
Distributions from and in excess of net investment income.......... (0.29)
Distributions from net realized gain............................... (0.17)
------
Total distributions.............................................. (0.46)
------
Net asset value, end of year......................................... $ 9.40
======
Total return......................................................... 2.37%
Ratios/Supplemental Data:
Net assets, end of year (in 000s)................................... $ 9
Ratio of expenses to average net assets:
Before expense reimbursement....................................... 1.21%
After expense reimbursement........................................ 1.15%
Ratio of net investment income to average net assets:
Before expense reimbursement....................................... 4.22%
After expense reimbursement........................................ 4.28%
Portfolio turnover rate............................................. 151%
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
** The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
54
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR YEAR JULY 31, 1995*
ENDED ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of peri-
od................................. $ 9.61 $10.02 $10.56
------ ------ ------
Income from investment operations:
Net investment income............. 0.38*** 0.62 0.78
Net realized and unrealized gain
(loss)........................... (0.18) 0.10 0.15
------ ------ ------
Total income from investment op-
erations....................... 0.20 0.72 0.93
------ ------ ------
Less distributions:
Distributions from and in excess
of net investment income......... (0.25) (0.94) (1.37)
Distributions from net realized
gain............................. (0.17) (0.19) (0.10)
------ ------ ------
Total distributions............. (0.42) (1.13) (1.47)
------ ------ ------
Net asset value, end of period...... $ 9.39 $ 9.61 $10.02
====== ====== ======
Total return (non-annualized)....... 2.28% 7.20% 9.17%
Ratios/Supplemental data
Net assets, end of period (in
000s)............................. $4,377 $4,110 $3,653
Ratio of expenses to average net
assets:
Before expense reimbursement...... 1.45% 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...... 3.98% 4.41% 4.49%**
After expense reimbursement....... 4.04% 4.83% 5.24%**
Portfolio turnover rate............ 151% 235% 184%
</TABLE>
* Commencement of SwissKey Class
** Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
55
<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 eight series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund (each a
"Fund," collectively the "Funds"). 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 in the preparation of their financial statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. U.S. equity securities traded over the counter are priced
at the most recent bid price. Securities for which market quotations are not
readily available, including restricted securities which are subject to
limitations on their sale, are valued at fair value as determined in good faith
by or under the direction of the Trust's Board of Trustees. Investments in
affiliated investment companies are valued each day based on the closing net
asset value of the fund. Debt securities are valued at the most recent bid
price by using market quotations or independent services. Futures contracts are
valued at the settlement price established each day on the exchange on which
they are traded. Forward foreign currency contracts are valued daily using
quoted forward exchange rates. Short-term obligations with a maturity of 60
days or less are valued at amortized cost, which approximates market value.
B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases
and sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and
unrealized gain or loss on investments in the statement of operations.
C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as the information becomes available.
E.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the year ended June 30, 1998,
therefore, no federal income tax provision was required.
F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions. Differences in dividends per
share between the classes are due to distribution expenses. Amounts equal to
10.37% and 44.43% of the amount taxable as ordinary income qualify for
dividends received deduction available to corporate shareholders for the Global
Fund and the Global Equity Fund, respectively.
- --------------------------------------------------------------------------------
56
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
G.INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by
each Fund will be borne on a pro rata basis by each of the classes, except that
the Brinson Class I 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 year
ended June 30, 1998, were as follows:
<TABLE>
<CAPTION>
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY FEES
FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES WAIVED
-------- --------------- --------------- -------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Global Fund............. 0.80% 1.10% 1.35% 1.75% $5,378,141 $ --
Global Equity Fund...... 0.80 1.00 1.25 1.76 719,439 21,898
Global Bond Fund........ 0.75 0.90 1.15 1.39 500,982 43,502
</TABLE>
Certain officers of the Funds are also officers and directors of the Advisor.
All officers serve without direct compensation from the Funds. Trustees' fees
paid to unaffiliated trustees for the year ended June 30, 1998 were $11,680,
$4,745 and $4,380 for the Global Fund, Global Equity Fund and Global Bond Fund,
respectively.
The Global Fund invests in shares of certain affiliated investment companies
also sponsored by the Advisor. These investments represented 12.11% of the
Fund's total net assets at June 30, 1998. Activity for the year ended June 30,
1998 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................... $ -- $ -- -- $ 1,712,136 $ 8,960,844
Brinson High Yield Fund. 3,000,000 -- -- 1,234,705 17,562,145
Brinson Emerging Markets
Equity Fund............ 17,300,000 -- -- (10,234,783) 23,662,860
Brinson Emerging Markets
Debt Fund.............. 12,000,000 -- -- 2,146,849 34,515,928
----------- ----- ----- ----------- -----------
$32,300,000 $ -- $ -- $(5,141,093) $84,701,777
=========== ===== ===== =========== ===========
</TABLE>
3.INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1998, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
Global Fund........................................... $623,122,331 $565,947,059
Global Equity Fund.................................... 39,788,298 67,808,003
Global Bond Fund...................................... 129,422,765 93,539,341
</TABLE>
- --------------------------------------------------------------------------------
57
<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 each Fund on a forward foreign currency contract.
Fluctuations in the value of forward foreign currency contracts are recorded
daily as net unrealized gains or losses. The Funds realize a gain or loss upon
settlement of the contracts. The statement of operations reflects net realized
and net unrealized gains and losses on these contracts. The counterparty to all
forward foreign currency contracts at and for the year ended June 30, 1998, was
the Funds' custodian or an affiliate of the Funds' custodian.
5.FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market or that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Funds, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6.SECURITY LENDING
The Global Fund loaned securities to certain brokers, with the Fund's custodian
acting as the Fund's lending agent. The Fund earned negotiated lenders' fees,
which are included in interest income in the statement of operations.
Securities loaned are recorded at the amount of cash collateral received. The
Fund monitors the market value of securities loaned on a daily basis and
initially requires collateral against the loaned securities in an amount at
least equal to 102% of the value of domestic securities loaned and 105% of the
value of non-U.S. securities loaned. The cash collateral received is invested
in short-term investments. The value of loaned securities and related
collateral outstanding at June 30, 1998 were as follows:
<TABLE>
<CAPTION>
VALUE OF LOANED VALUE OF
SECURITIES COLLATERAL
--------------- ------------
<S> <C> <C>
Global Fund........................................ $98,984,231 $104,946,044
=========== ============
</TABLE>
7.DISTRIBUTION PLANS
The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1
under the Investment Company Act of 1940 as amended for the Brinson Class N and
the SwissKey Class. Each Plan governs payments made for the expenses incurred
in the promotion and distribution of the Brinson Class N and the SwissKey
Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the
average daily net assets of the Brinson Class N of the Global Fund, Global
Equity Fund and Global Bond Fund. 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.
8.LINE OF CREDIT
The Trust has entered into an agreement with Chase Manhattan Bank to provide a
364 day $100 million committed line of credit to the Funds. Borrowings will be
made for temporary purposes. Interest on amounts borrowed is calculated at an
annual rate of the Federal Funds Rate plus 0.50%. The Funds pay an annual
commitment fee of 0.08% of the average daily unutilized amount of the line of
credit. During the year ended June 30, 1998 the Funds had no borrowings under
the agreement.
- --------------------------------------------------------------------------------
58
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
GLOBAL FUND
-----------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I............... 18,850,057 $244,898,004 14,513,488 $180,787,534
Brinson Class N............... 90,370 1,177,290 76 1,000
SwissKey Class................ 803,666 10,347,586 932,414 11,508,566
---------- ------------ ---------- ------------
Total Sales................ 19,744,093 $256,422,880 15,445,978 $192,297,100
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I............... 5,179,618 $ 62,332,662 4,022,259 $ 48,025,771
Brinson Class N............... 769 9,625 -- --
SwissKey Class................ 217,810 2,607,910 130,547 1,554,814
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 5,398,197 $ 64,950,197 4,152,806 $ 49,580,585
========== ============ ========== ============
Redemptions:
Brinson Class I............... 16,402,396 $209,137,318 11,346,380 $142,532,012
Brinson Class N............... 21 276 -- --
SwissKey Class................ 641,736 8,247,175 198,888 2,469,271
---------- ------------ ---------- ------------
Total Redemptions.......... 17,044,153 $217,384,769 11,545,268 $145,001,283
========== ============ ========== ============
<CAPTION>
GLOBAL EQUITY FUND
-----------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I............... 1,466,054 $ 17,934,645 1,338,623 $ 15,816,109
Brinson Class N............... -- -- 78 1,000
SwissKey Class................ 1,779,376 22,282,095 2,271,465 26,703,521
---------- ------------ ---------- ------------
Total Sales................ 3,245,430 $ 40,216,740 3,610,166 $ 42,520,630
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I............... 126,859 $ 1,426,171 308,273 $ 3,485,504
Brinson Class N............... 9 93 -- --
SwissKey Class................ 442,472 4,952,413 286,226 3,226,433
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 569,340 $ 6,378,677 594,499 $ 6,711,937
========== ============ ========== ============
Redemptions:
Brinson Class I............... 3,546,702 $ 44,596,092 225,435 $ 2,683,391
Brinson Class N............... -- -- -- --
SwissKey Class................ 2,339,080 28,946,495 565,431 6,612,207
---------- ------------ ---------- ------------
Total Redemptions.......... 5,885,782 $ 73,542,587 790,866 $ 9,295,598
========== ============ ========== ============
</TABLE>
- --------------------------------------------------------------------------------
59
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL BOND FUND
-------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
--------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.................... 4,561,105 $43,233,367 2,335,856 $22,155,311
Brinson Class N.................... 860 8,169 104 1,000
SwissKey Class..................... 293,533 2,793,303 103,968 1,007,942
--------- ----------- --------- -----------
Total Sales..................... 4,855,498 $46,034,839 2,439,928 $23,164,253
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Class I.................... 220,347 $ 2,058,040 348,609 $ 3,318,757
Brinson Class N.................... 12 115 -- --
SwissKey Class..................... 18,525 172,576 36,719 349,204
--------- ----------- --------- -----------
Total Dividend Reinvestment..... 238,884 $ 2,230,731 385,328 $ 3,667,961
========= =========== ========= ===========
Redemptions:
Brinson Class I.................... 699,882 $ 6,667,104 1,159,373 $11,665,371
Brinson Class N.................... 22 210 -- --
SwissKey Class..................... 273,680 2,599,273 77,300 796,902
--------- ----------- --------- -----------
Total Redemptions............... 973,584 $ 9,266,587 1,236,673 $12,462,273
========= =========== ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
60
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds --
Global Fund
Global Equity Fund
Global Bond Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Brinson Funds--Global Fund,
Global Equity Fund and Global Bond Fund as of June 30, 1998, the related
statements of operations and cash flows (Global Fund only) for the year then
ended and changes in net assets and the financial highlights for the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--Global Fund, Global Equity Fund and Global Bond Fund at June 30,
1998, the results of their operations and cash flows (Global Fund only) for the
year then ended and the changes in their net assets and the financial
highlights for the periods indicated therein in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
August 7, 1998
- --------------------------------------------------------------------------------
61
<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>
[SWISS KEY FUND LOGO]
10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY
http://networth.galt.com/swisskey
<PAGE>
[SWISS KEY FUNDS LOGO]
SWISSKEY U.S. BALANCED FUND
SWISSKEY U.S. EQUITY FUND
SWISSKEY U.S. LARGE CAPITALIZATION EQUITY FUND
SWISSKEY U.S. BOND FUND
ANNUAL REPORT
JUNE 30, 1998
YOUR KEY TO PERFORMANCE
-----------------------
<PAGE>
TRUSTEES AND OFFICERS
[SWISS KEY FUNDS LOGO]
TRUSTEES
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
OFFICERS
Frank K. Reilly, CFA
Chairman of the Board
E. Thomas McFarlan
President
Thomas J. Digenan, CFA, CPA
Vice President
Debra L. Nichols
Vice President
Carolyn M. Burke, CPA
Secretary and Treasurer
Catherine E. Macrae
Assistant Secretary
1
<PAGE>
THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC.
[SWISS KEY FUNDS LOGO]
The UBS Brinson Division is the institutional asset management division of UBS
AG. UBS Brinson is the name used outside North America while Brinson Partners
continues as the primary name within North America. The UBS Brinson Division
manages over USD 390 billion of institutional assets, including over USD 277
billion of discretionary institutional assets on an active basis and mutual fund
assets for UBS Private Banking which total over USD 113 billion. In addition,
UBS Brinson acts as the investment advisor to UBS Private Banking on an advisory
basis. UBS Brinson manages investment portfolios for corporations, public funds,
endowments, foundations, central banks and other investors located throughout
the world. The UBS Brinson Division employs over 1,500 people in offices in
Chicago, Bahrain, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New
York, Paris, Rio de Janeiro, Singapore, Sydney, Tokyo and Zurich.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment markets
and their interrelationships. Portfolio structure is focused upon both risk and
return considerations in the context of full investment cycles. Our investment
decisions are based on fundamental research, internally developed valuation
systems and seasoned judgment. Our independent team approach allows for rapid
responses to market changes, while providing each client with the benefit of our
best talent and the flexibility to customize portfolios to meet unique
requirements.
2
<PAGE>
TABLE OF CONTENTS
[SWISS KEY FUNDS LOGO]
Shareholder Letter.......................................... 4
U.S. Economic and Market Highlights......................... 6
U.S. Balanced Fund.......................................... 7
Schedule of Investments.................................. 10
Financial Statements..................................... 13
Financial Highlights..................................... 16
U.S. Equity Fund............................................ 19
Schedule of Investments.................................. 22
Financial Statements..................................... 24
Financial Highlights..................................... 27
U.S. Large Capitalization Equity Fund....................... 30
Schedule of Investments.................................. 33
Financial Statements..................................... 35
Financial Highlights..................................... 38
U.S. Bond Fund.............................................. 41
Schedule of Investments.................................. 43
Financial Statements..................................... 45
Financial Highlights..................................... 48
The SwissKey Funds--Notes to Financial Statements........... 51
Report of Independent Auditors.............................. 55
3
<PAGE>
SHAREHOLDER LETTER
[SWISS KEY FUNDS LOGO]
August 22, 1998
Dear Shareholder:
We are very pleased to present the June 30, 1998 Annual Report for the U.S.
Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund and U.S.
Bond Fund. Within this Report, we focus on the current domestic economic outlook
as well as our current strategies and performance updates for the four Domestic
Funds.
In December 1997, Union Bank of Switzerland and Swiss Bank Corporation announced
their intention to merge, which included the integration of UBS Asset Management
and SBC Brinson into the UBS Brinson Division. The merger was consummated on
June 29, 1998. UBS Brinson is managed today by the same senior management that
has led the business over the past decades with a consistently applied
investment philosophy and process. We are excited about the formation of the UBS
Brinson Division and the additional resources we have brought 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 performance inception on July 31, 1995, the SwissKey U.S. Balanced
Fund has produced an annualized total return of 13.15% compared to the return of
20.42% of its benchmark, the U.S. Balanced Mutual Fund Index.
SwissKey U.S. Equity Fund
The SwissKey U.S. Equity Fund has provided an annualized return of 26.66% since
its performance inception on July 31, 1995. This is compared to a 27.26% return
for the benchmark, the Wilshire 5000 Index. The Fund operates with a fully
invested policy.
4
<PAGE>
SHAREHOLDER LETTER
[SWISS KEY FUNDS LOGO]
SwissKey U.S. Large Capitalization Equity Fund
The SwissKey U.S. Large Capitalization Equity Fund has provided a return of
- -0.32% since its performance inception on April 30, 1998. This is compared to a
2.25% return for the benchmark, the S&P 500 Index. The Fund operates with a
fully invested policy.
SwissKey U.S. Bond Fund
The SwissKey U.S. Bond Fund has provided an annualized return of 7.43% since its
inception on August 31, 1995. This is compared to a 8.01% return for the
benchmark, the Salomon Brothers BIG Bond Index.
We very much appreciate your continued trust and the confidence you have placed
in The Brinson Funds.
Sincerely,
/s/ Hanspeter A. Walder /s/ Raymond Simon
- ---------------------- ---------------------
Hanspeter A. Walder Raymond Simon
Executive Director Executive Director
Private Banking Private Banking
5
<PAGE>
U.S. ECONOMIC AND MARKET HIGHLIGHTS
[LOGO]
The Federal Reserve's latest signals lean more toward tightening than at any
other time in the last year and a half. Despite the weakness in Asia and its
impact on import prices and export demand, rapid growth in monetary aggregates
and strength in labor markets and employment costs has increased concern at the
Fed that inflationary biases are increasing in magnitude. While an actual move
to tighten monetary policy may not be imminent, the prospects for a looser
stance and rate reduction have diminished.
Reported economic growth in the U.S. is likely to be much slower in the second
quarter due to the strike at General Motors, a reduction in some of the
inventory build-up from earlier in the year, and the unabated Asian situation.
However, domestic demand has not yet shown signs of substantial cooling. This is
a major factor in the 4.5% unemployment rate and in the rising wage and salary
pressures since 1995.
The pattern of consumer price inflation, both recently and in the last few
years, contrasts sharply with the concerns voiced by the Fed. Twelve-month
changes in the CPI continue to run well under 2%. However, this spectacular
performance has occurred largely because of declines in the volatile food and
energy components of the index. Measures of the core CPI inflation have not
fallen in step with the headline inflation rate, but have flattened out around
2 1/4%. This can be taken as a sign that the underlying disinflation trend has
been interrupted, and may turn up in the future as strong money supply growth
starts to have an impact.
U.S. ENVIRONMENT
[GRAPH APPEARS HERE]
Major Markets
Year to date June 30, 1998
U.S. Cash Equivalents 2.38
U.S. Bonds 3.97
U.S. Equities 15.47
[GRAPH APPEARS HERE]
Salomon U.S. Treasury Benchmark Returns
Year to date June 30, 1998
1 5.95
2 6.60
3 7.75
5 9.13
10 13.19
30 22.96
[GRAPH APPEARS HERE]
Top Ten Industry Returns Relative to S&P 500
Year to date June 30, 1998
Coal & Uranium 28.04
Forest Products 17.34
Trucking, Freight 14.16
Misc. Finance 13.61
Retail (Other) 11.97
Motor Vehicles 9.14
Media 6.76
Drugs, Medicine 6.65
Construction 4.61
Services 4.2
[GRAPH APPEARS HERE]
Bottom Ten Industry Returns Relative to S&P 500
Year to date June 30, 1998
Precious Metals -14.07
Oil Refining, Dist. -14.31
Railroads -14.39
Electronics -14.50
Photographic -14.60
Containers -15.70
Tire & Rubber -16.32
Dom. Petroleum Res. -18.00
Oil Service -27.60
Tobacco -33.63
<PAGE>
U.S. BALANCED FUND
[LOGO OF SWISS KEY FUNDS]
TRUSTEES AND OFFICERS
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 13.15%
since its inception on July 31, 1995. Over the same period, the return on the
U.S. Balanced Mutual Fund Index was 20.42%. For the first six months of 1998,
the return on the Fund was 5.90%, compared to the benchmark return of 11.42%.
The first half of 1998 continued what can only be characterized as an
extraordinary period of U.S. risky asset returns. The U.S. equity market has
provided extremely high returns, protracting an annualized gain of 29.09% in the
prior two years, as measured by the Wilshire 5000, with a 15.47% return in the
first half of 1998. U.S. fixed income assets returned 3.77% in the first half
of the year, extending annualized gains of 9.52% in the prior two years.
The Fund strategy centers on reducing the risk of exposure to the overpriced
equity assets, maintaining a significant underweight to the overvalued U.S.
equity market and an overweight to the U.S. bond market. Consequently, asset
allocation decisions provided a substantial detraction from the performance of
the Fund relative to its benchmark. The strategic cash allocation relative to a
benchmark weight of zero also detracted from the performance of the U.S.
Balanced Fund.
Security selection in the U.S. equity segment of the Fund was a contributor to
the underperformance of the Fund relative to the benchmark. An underweighting
of large capitalization stocks was an important contributor to this
underperformance.
The U.S. Balanced Fund maintains a 5% risk hedge in this environment of
extremely overvalued equity assets and neutrally valued fixed income assets.
7
<PAGE>
U.S. BALANCED FUND
[LOGO OF SWISS KEY FUNDS]
TOTAL RETURN
<TABLE>
<CAPTION>
6 months 1 year 7/31/95*
ended ended to
6/30/98 6/30/98 6/30/98
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SWISSKEY U.S. BALANCED FUND 5.90% 11.79% 13.15%
- ---------------------------------------------------------------------------------------------------------------
U.S. Balanced Mutual Fund Index** 11.42 22.38 20.42
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Performance 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 June 30, 1998.
No adjustment has been made for any income taxes payable by shareholders on
income dividends and capital gain distributions. Past performance is no
guarantee of future results. Share price and return will vary with market
conditions; investors may realize a gain or loss upon redemption.
SWISSKEY U.S. BALANCED FUND
VS. U.S. BALANCED MUTUAL FUND INDEX
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
SwissKey U.S. Balanced Fund U.S. Balanced Mutal Fund Index
<S> <C> <C>
7/31/95 10,000 10,000
12/31/95 10,841 10,876
6/30/96 11,154 11,544
12/31/96 12,018 12,496
6/30/97 12,826 14,050
12/31/97 13,540 15,433
6/30/98 14,338 17,195
</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
[SWISS KEY FUNDS LOGO]
- ------------------------------------------------------------------------
INDUSTRY DIVERSIFICATION
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
As a Percent of Net Assets
As of June 30, 1998
- ------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Energy ........................................................ 2.19%
Capital Investment
Capital Goods ............................................. 4.77
Technology ................................................ 4.54
------
9.31
Basic Industries
Chemicals ................................................. 1.84
Housing/Paper ............................................. 3.60
Metals .................................................... 0.34
------
5.78
Consumer
Non-Durables .............................................. 3.41
Retail/Apparel ............................................ 2.06
Autos/Durables ............................................ 1.39
Discretionary ............................................. 0.38
Health: Drugs ............................................. 3.49
Health: Non-Drugs ......................................... 2.56
------
13.29
Financial
Banks ..................................................... 3.27
Non-Banks ................................................. 3.39
------
6.66
Utilities
Electric .................................................. 1.75
Telephone ................................................. 0.42
------
2.17
Transportation ................................................ 3.77
Services/Misc ................................................. 3.13
------
Total U.S. Equities ................................... 46.30*
------
U.S. BONDS
Corporate Bonds
Autos/Durables ............................................ 1.15
Airlines .................................................. 1.60
Banks ..................................................... 2.68
Consumer .................................................. 2.34
Financial Services ........................................ 1.04
Industrial Components ..................................... 1.29
Services/Miscellaneous .................................... 0.88
Utilities ................................................. 0.62
------
11.60
International Dollar Bonds .................................... 4.82
Mortgage-Backed Securities .................................... 8.98
U.S. Government Agencies ...................................... 17.04
U.S. Government Obligations ................................... 2.89
------
Total U.S. Bonds ...................................... 45.33*
------
SHORT-TERM INVESTMENTS ........................................ 12.58*
------
TOTAL INVESTMENTS ..................................... 104.21
LIABILITIES, LESS CASH AND OTHER ASSETS ....................... (4.21)
------
NET ASSETS .................................................... 100.00%
======
</TABLE>
- -------------------------------------------------------------------------
* The Fund held a long position in U.S. Treasury futures on June 30, 1998
which increased U.S. bond exposure from 45.33% to 59.76%. The Fund also
held a short position in stock index futures which reduced U.S. equity
exposure from 46.30% to 29.32%. These two adjustments result in a net
increase in the Fund's exposure to Short-Term Investments from 12.58%
to 15.13%.
- -------------------------------------------------------------------------
ASSET ALLOCATION
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of June 30, 1998
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
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of June 30, 1998
PERCENT OF
NET ASSETS
- -------------------------------------------------------------------------
<S> <C>
1. Xerox Corp. 2.23%
2. Lockheed Martin Corp. 2.13%
3. Burlington Northern Santa Fe Corp. 1.97%
4. Aon Corp. 1.54%
5. FDX Corp. 1.46%
6. Philip Morris Companies, Inc. 1.45%
7. CIGNA Corp. 1.26%
8. Automatic Data Processing, Inc. 1.16%
9. Goodyear Tire & Rubber Co. 1.13%
10. Baxter International, Inc. 1.08%
- -------------------------------------------------------------------------
</TABLE>
9
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
U.S. Equities -- 46.30%
Aetna Life & Casualty Co.................................... 6,400 $ 487,200
Allergan, Inc............................................... 10,300 477,662
Alza Corp. (b).............................................. 10,000 432,500
American Home Products Corp................................. 10,000 517,500
Aon Corp.................................................... 18,100 1,271,525
Automatic Data Processing, Inc.............................. 13,100 954,663
BankBoston Corp............................................. 6,200 344,875
Baxter International, Inc................................... 16,500 887,906
Beckman Coulter Inc......................................... 4,300 250,475
Bestfoods................................................... 8,800 510,950
Biogen, Inc. (b)............................................ 3,900 191,100
Birmingham Steel Corp....................................... 4,000 49,500
Burlington Northern Santa Fe Corp........................... 16,500 1,620,094
Champion Enterprises, Inc. (b).............................. 3,200 94,000
Champion International Corp................................. 5,000 245,937
CIGNA Corp.................................................. 15,000 1,035,000
Circuit City Stores-Circuit City Group...................... 14,800 693,750
Citicorp.................................................... 300 44,775
CMS Energy Corp............................................. 12,900 567,600
Columbia/HCA Healthcare Corp................................ 2,500 72,813
Comerica, Inc............................................... 4,200 278,250
Commscope, Inc. (b)......................................... 7,666 124,093
Comverse Technology, Inc. (b)............................... 4,620 239,663
Consolidated Stores Corp.................................... 4,700 170,375
Corning, Inc................................................ 23,800 827,050
Covance, Inc. (b)........................................... 5,075 114,188
Crown Cork & Seal Co., Inc.................................. 4,800 228,000
Dial Corp................................................... 5,200 134,875
Eastman Chemical Co......................................... 5,500 342,375
EMC Corp. (b)............................................... 9,000 403,313
Enron Corp.................................................. 11,100 600,094
Entergy Corp................................................ 29,100 836,625
FDX Corp. (b)............................................... 19,200 1,204,800
First American Corp. of Tennessee........................... 2,600 125,125
First Data Corp............................................. 24,258 808,095
First Security Corp......................................... 4,925 105,426
FirstEnergy Corp............................................ 2,075 63,806
Fleet Financial Group, Inc.................................. 6,100 509,350
Fleetwood Enterprises, Inc.................................. 900 36,000
Food Lion, Inc., Class A.................................... 19,400 206,125
Forest Laboratories, Inc. Class A (b)....................... 7,900 282,425
Fort James Corp............................................. 12,900 574,050
Gannett Co., Inc............................................ 4,400 312,675
General Instrument Corp. (b)................................ 22,800 619,875
General Semiconductor, Inc. (b)............................. 5,150 50,856
Genzyme Corp. (b)........................................... 4,000 102,250
Geon Co..................................................... 2,800 64,225
Goodyear Tire & Rubber Co................................... 14,400 927,900
Great Lakes Chemical Corp................................... 2,500 98,594
Harnischfeger Industries, Inc............................... 7,600 215,175
Health Care and Retirement Corp. (b)........................ 4,550 179,441
Hibernia Corp............................................... 5,600 113,050
IMC Global Inc.............................................. 5,300 159,663
Informix Corp. (b).......................................... 5,300 41,903
Interpublic Group of Companies, Inc......................... 4,150 251,853
Kimberly Clark Corp......................................... 18,500 848,687
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- -----------
<S> <C> <C>
Lafarge Corp............................................ 2,900 $ 114,006
Lear Corp. (b).......................................... 4,300 220,644
Lockheed Martin Corp.................................... 16,571 1,754,455
Lyondell Petrochemical Co............................... 13,800 420,037
Manor Care, Inc......................................... 5,100 196,031
Martin Marietta Materials, Inc.......................... 2,936 132,120
Masco Corp.............................................. 11,700 707,850
Medusa Corp............................................. 700 43,925
Nabisco Holdings Corp................................... 10,200 367,837
National Service Industries, Inc........................ 2,000 101,750
Nextel Communications, Inc. (b)......................... 14,000 348,250
Norfolk Southern Corp................................... 9,600 286,200
Peco Energy Co.......................................... 28,100 820,169
Pentair, Inc............................................ 5,300 225,250
Philip Morris Companies, Inc............................ 30,400 1,197,000
Praxair, Inc............................................ 9,400 440,038
Raytheon Co., Class B................................... 13,500 798,187
Regions Financial Corp.................................. 2,600 106,762
Reynolds & Reynolds Co.................................. 9,900 180,056
Schering Plough Corp.................................... 9,600 879,600
Seagate Technology, Inc. (b)............................ 8,900 211,931
Sears, Roebuck and Co................................... 10,300 628,944
Southdown, Inc.......................................... 2,000 142,750
St. Jude Medical, Inc. (b).............................. 5,000 184,062
Timken Co............................................... 1,800 55,462
Tyson Foods, Inc., Class A.............................. 20,400 442,425
Ultramar Diamond Shamrock Corp.......................... 11,390 359,497
US Bancorp.............................................. 12,759 548,637
Vencor, Inc. (b)........................................ 10,600 76,850
Ventas, Inc............................................. 10,600 146,413
Viad Corp............................................... 9,800 271,950
Wells Fargo & Co........................................ 1,300 479,700
Westvaco Corp........................................... 2,350 66,388
Witco Corp.............................................. 5,300 155,025
Xerox Corp.............................................. 18,100 1,839,412
York International Corp................................. 6,200 270,088
-----------
Total U.S. Equities (Cost $31,626,718).................. 38,169,776
-----------
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Bonds -- 45.33%
U.S. CORPORATE BONDS -- 11.60%
Archer Daniels, 6.950%, due 12/15/2027.................. $ 995,000 $ 1,062,217
Capital One Bank, 6.830%, due 05/17/99.................. 2,000,000 2,011,254
Chrysler Corp., 7.400%, due 08/01/2097.................. 880,000 949,810
Continental Airlines, Inc., 974A, 6.900%, due 01/02/18.. 950,000 988,171
Donaldson Lufkin & Jenrette FRN, 6.700%, due 06/30/00... 840,000 852,122
Enron Corp., 6.750%, due 08/01/09....................... 500,000 511,639
MBNA Global Capital Securities FRN, 6.519%, due 02/01/27
....................................................... 215,000 199,836
News America Holdings, 7.750%, due 12/01/45............. 1,000,000 1,073,180
PanAmSat Corp., 144A, 6.000%, due 01/15/03.............. 335,000 331,654
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ----------
<S> <C> <C>
Time Warner, Inc., 7.570%, due 02/01/24.................. $ 790,000 $ 855,316
USA Waste Services, 6.500%, due 12/15/02................. 720,000 724,262
----------
9,559,461
----------
INTERNATIONAL DOLLAR BONDS -- 4.82%
Credit Suisse London, 144A, 7.900%, Resettable Perpetual
Preferred............................................... 1,170,000 1,250,946
LKB Baden-Wuerttemberg Finance NV, 8.125%, due 01/27/00.. 280,000 289,049
Montell Finance Co., 144A, 8.100%, due 03/15/27.......... 610,000 732,450
Ras Laffan Liquefied Natural Gas Co., Ltd., 144A, 8.294%,
due 03/15/14............................................ 735,000 733,832
Southern Investments UK
6.800%, due 12/01/06.................................... 930,000 963,583
----------
3,969,860
----------
MORTGAGE-BACKED SECURITIES -- 8.98%
Chase Manhattan Auto Owner Trust, 96-C, Class A4, 6.150%,
due 03/15/02............................................ 1,360,000 1,370,023
First Security Auto Grantor Trust, 98-A, Class A, 5.970%,
due 04/15/04............................................ 641,609 642,937
GE Capital Mortgage Services, Inc., 93-7F, Class FA3,
6.500%, due 09/25/08.................................... 1,425,922 1,429,344
Prudential Home Mortgage Securities, 93-43, Class A9,
6.750%, due 10/25/23.................................... 1,358,707 1,364,413
Residential Asset Securitization Trust,
97-A11, Class A2, 7.000%, due 01/25/28.................. 280,000 281,792
UCFC Home Equity Loan FRN , 97-C, Class A8, 5.888%, due
09/15/27................................................ 1,110,350 1,111,593
Morgan Stanley Capital, Inc., 97-WF1, Class A1, 6.830%,
due 10/15/06............................................ 1,168,264 1,201,560
----------
7,401,662
----------
U.S. GOVERNMENT AGENCIES -- 17.04%
Federal Home Loan Mortgage Corp.
8.000%, due 08/15/22.................................... 1,980,000 2,119,077
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23.................................... 593,475 613,134
9.000%, due 03/01/24.................................... 283,051 303,153
Federal National Mortgage Association
0.000%, due 09/25/22.................................... 403,557 370,833
7.000%, due 02/25/22.................................... 702,093 737,267
6.959%, due 08/01/07.................................... 1,066,955 1,127,131
6.789%, due 11/01/07.................................... 501,822 525,032
8.000%, due 12/18/11.................................... 1,000,000 1,064,263
6.500%, due 06/01/28.................................... 250,000 248,925
Government National Mortgage Association
8.000%, due 08/15/22.................................... 738,633 765,179
7.500%, due 08/15/23.................................... 910,746 935,509
7.500%, due 09/15/23.................................... 961,998 988,155
7.500%, due 12/15/23.................................... 805,637 820,299
7.375%, due 06/20/24.................................... 491,583 503,818
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Jordan Aid, 8.750%, due 09/01/19........................ $2,327,295 $ 2,926,108
-----------
14,047,883
-----------
U.S. GOVERNMENT OBLIGATIONS -- 2.89%
U.S. Treasury Notes and Bonds
5.500%, due 02/29/00................................... 1,600,000 1,599,501
6.625%, due 07/31/01................................... 400,000 412,000
3.625%, due 01/15/08................................... 377,171 372,928
-----------
2,384,429
-----------
Total U.S. Bonds (Cost $36,367,398)..................... 37,363,295
-----------
Short-Term Investments -- 12.58%
U.S. GOVERNMENT OBLIGATIONS -- 0.66%
U.S. Treasury Bill 5.236%, due 11/27/98................. 555,000 543,469
-----------
COMMERCIAL PAPER -- 11.92%
Cincinnati Bell Inc., 6.601%, due 07/01/98.............. 2,000,000 2,000,000
NGC Corp., 6.751%, due 07/01/98......................... 3,332,000 3,332,000
Raytheon Co., 6.998%, due 07/01/98...................... 3,000,000 3,000,000
Tenneco Inc., 5.765%, due 07/17/98...................... 1,500,000 1,496,168
-----------
9,828,168
-----------
Total Short-Term Investments
(Cost $10,371,394)..................................... 10,371,637
-----------
Total Investments
(Cost $78,365,510)--104.21% (a)........................ 85,904,708
-----------
Liabilities, less cash and other
assets--(4.21%)........................................ (3,467,537)
-----------
Net Assets--100%........................................ $82,437,171
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
11
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $78,365,510; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $ 8,712,737
Gross unrealized depreciation................................ (1,173,539)
-----------
Net unrealized appreciation................................ $ 7,539,198
===========
</TABLE>
(b) Non-income producing security
FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1998.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 1998,
the value of these securities amounted to $3,048,882, or 3.70% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FUTURES CONTRACTS
The U.S. Balanced Fund had the following open futures contracts as of June 30,
1998:
<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, 83 contracts..... September 1998 $9,057,919 $9,104,062 $ 46,143
10 Year U.S. Treasury
Note, 17 contracts..... September 1998 1,915,893 1,935,344 19,451
30 Year U.S. Treasury
Bond, 7 contracts...... September 1998 842,576 865,156 22,580
INDEX FUTURES SALE CON-
TRACTS
Standard & Poor's 500,
49 contracts........... September 1998 13,860,157 14,001,750 (141,593)
--------
Total................. $(53,419)
========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at June 30, 1998 was $543,469.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
12
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $78,365,510).......................... $85,904,708
Cash.............................................................. 68,056
Receivables:
Investment securities sold....................................... 4,246,178
Dividends........................................................ 60,929
Interest......................................................... 421,102
Fund shares sold................................................. 66,040
Variation margin................................................. 120,790
Other assets...................................................... 7,933
-----------
TOTAL ASSETS................................................... 90,895,736
-----------
LIABILITIES:
Payables:
Investment securities purchased.................................. 1,470,055
Fund shares redeemed............................................. 6,907,290
Investment advisory fees......................................... 45,525
Accrued expenses................................................. 35,695
-----------
TOTAL LIABILITIES.............................................. 8,458,565
-----------
NET ASSETS......................................................... $82,437,171
===========
NET ASSETS CONSIST OF:
Paid in capital................................................... $40,373,749
Accumulated undistributed net investment income................... 1,337,239
Accumulated net realized gain..................................... 33,240,404
Net unrealized appreciation....................................... 7,485,779
-----------
NET ASSETS..................................................... $82,437,171
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $80,555,719 and 6,578,813 shares issued
and outstanding)................................................ $ 12.24
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,117 and 91 shares issued and outstanding).................... $ 12.27
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,880,335 and 154,261 shares issued and outstanding)........... $ 12.19
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest......................................................... $ 9,614,198
Dividends........................................................ 1,594,329
------------
TOTAL INCOME.................................................. 11,208,527
------------
EXPENSES:
Advisory......................................................... 1,674,661
Administration................................................... 79,503
Distribution..................................................... 8,818
Other............................................................ 179,045
------------
TOTAL EXPENSES................................................ 1,942,027
Expenses waived by Advisor.................................... (19,097)
------------
NET EXPENSES.................................................. 1,922,930
------------
NET INVESTMENT INCOME ........................................ 9,285,597
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 47,884,782
Futures contracts............................................... (4,490,965)
------------
Net realized gain............................................. 43,393,817
------------
Change in net unrealized appreciation or depreciation on:
Investments .................................................... (20,526,001)
Futures contracts............................................... 1,138,171
------------
Change in net unrealized appreciation or depreciation......... (19,387,830)
------------
Net realized and unrealized gain................................. 24,005,987
------------
Net increase in net assets resulting from operations............. $ 33,291,584
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
YEAR ENDED
ENDED JUNE 30,
JUNE 30, 1998 1997
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 9,285,597 $ 9,809,363
Net realized gain................................. 43,393,817 16,067,241
Change in net unrealized appreciation or deprecia-
tion............................................. (19,387,830) 10,534,773
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 33,291,584 36,411,377
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I.................................. (11,202,072) (7,953,731)
Brinson Class N.................................. (62) --
SwissKey Class................................... (96,209) (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................ (31,622,305) (18,388,140)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 58,797,856 80,528,530
Shares issued on reinvestment of distributions.... 31,535,417 18,312,423
Shares redeemed................................... (294,075,195) (60,962,669)
------------ ------------
Net increase (decrease) in net assets resulting
from capital share
transactions .................................... (203,741,922) 37,878,284
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ (202,072,643) 55,901,521
------------ ------------
NET ASSETS:
Beginning of year................................. 284,509,814 228,608,293
------------ ------------
End of year (including accumulated undistributed
net investment income of $1,337,239 and
$3,271,123, respectively)........................ $ 82,437,171 $284,509,814
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, DECEMBER 30, 1994*
----------------------------- THROUGH
BRINSON CLASS I 1998 1997 1996 JUNE 30, 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period...................... $ 12.53 $ 11.71 $ 11.23 $ 10.00
------- -------- -------- --------
Income from investment oper-
ations:
Net investment income...... 0.49*** 0.47 0.44 0.23
Net realized and unrealized
gain...................... 0.93 1.29 1.04 1.16
------- -------- -------- --------
Total income from invest-
ment operations......... 1.42 1.76 1.48 1.39
------- -------- -------- --------
Less distributions:
Distributions from net in-
vestment income........... (0.77) (0.40) (0.43) (0.16)
Distributions from net re-
alized gain............... (0.94) (0.54) (0.57) --
------- -------- -------- --------
Total distributions...... (1.71) (0.94) (1.00) (0.16)
------- -------- -------- --------
Net asset value, end of peri-
od.......................... $ 12.24 $ 12.53 $ 11.71 $ 11.23
======= ======== ======== ========
Total return (non-
annualized)................. 12.19% 15.50% 13.52% 13.91%
Ratios/Supplemental Data:
Net assets, end of period
(in 000s).................. $80,556 $282,860 $227,829 $157,724
Ratio of expenses to average
net assets:
Before expense reimburse-
ment...................... 0.81% 0.88% 1.01% 1.06%**
After expense reimburse-
ment...................... 0.80% 0.80% 0.80% 0.80%**
Ratio of net investment in-
come to average net assets:
Before expense reimburse-
ment...................... 3.88% 3.78% 3.76% 4.36%**
After expense reimburse-
ment...................... 3.89% 3.86% 3.97% 4.63%**
Portfolio turnover rate..... 194% 329% 240% 196%
Average commission rate paid
per share.................. $0.0549 $0.0441 $ 0.0481 N/A
</TABLE>
*Commencement of investment operations
**Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<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>
YEAR*
ENDED
BRINSON CLASS N JUNE 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period.............................. $ 12.53
-------
Income from investment operations:
Net investment income........................................... 0.47**
Net realized and unrealized gain................................ 0.94
-------
Total income from investment operations....................... 1.41
-------
Less distributions:
Distributions from net investment income........................ (0.73)
Distributions from net realized gain............................ (0.94)
-------
Total distributions........................................... (1.67)
-------
Net asset value, end of period.................................... $ 12.27
=======
Total return...................................................... 12.15%
Ratios/Supplemental Data:
Net assets, end of period (in 000s).............................. $ 1
Ratio of expenses to average net assets:
Before expense reimbursement.................................... 1.06%
After expense reimbursement..................................... 1.05%
Ratio of net investment income to average net assets:
Before expense reimbursement.................................... 3.63%
After expense reimbursement..................................... 3.64%
Portfolio turnover rate.......................................... 194%
Average commission rate paid per share........................... $0.0549
</TABLE>
*Commencement of Brinson Class N was June 30, 1997.
**The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
JULY 31, 1995*
YEAR ENDED YEAR ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of peri-
od................................. $ 12.46 $ 11.67 $ 11.38
------- ------- -------
Income from investment operations:
Net investment income............. 0.42*** 0.38 0.42
Net realized and unrealized gain.. 0.95 1.31 0.86
------- ------- -------
Total income from investment op-
erations....................... 1.37 1.69 1.28
------- ------- -------
Less distributions:
Distributions from net investment
income........................... (0.70) (0.36) (0.42)
Distributions from net realized
gain............................. (0.94) (0.54) (0.57)
------- ------- -------
Total distributions............. (1.64) (0.90) (0.99)
------- ------- -------
Net asset value, end of period...... $ 12.19 $ 12.46 $ 11.67
======= ======= =======
Total return (non-annualized)....... 11.79% 14.99% 11.54%
Ratios/Supplemental data
Net assets, end of period (in
000s)............................. $ 1,880 $ 1,649 $ 779
Ratio of expenses to average net
assets:
Before expense reimbursement...... 1.31% 1.38% 1.51%**
After expense reimbursement....... 1.30% 1.30% 1.30%**
Ratio of net investment income to
average net assets:
Before expense reimbursement...... 3.38% 3.28% 3.26%**
After expense reimbursement....... 3.39% 3.36% 3.47%**
Portfolio turnover rate............ 194% 329% 240%
Average commission rate paid per
share............................. $0.0549 $0.0441 $0.0481
</TABLE>
*Commencement of SwissKey Class
**Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
U.S. EQUITY FUND
- --------------------------------------------------------------------------------
[SWISS KEY FUNDS LOGO]
The U.S. Equity Fund is an actively managed fund invested in common stocks of
U.S. corporations. The Fund is diversified by issue and industry; it is
typically 70% invested in large capitalization stocks, with the remaining 30% in
intermediate and small capitalization stocks. Investment strategies emphasize
stock selection with attention to the management of factor and industry
exposures.
Since its inception on July 31, 1995, the SwissKey U.S. Equity Fund has provided
an annualized return of 26.66% compared to 27.26% for the Wilshire 5000 Equity
Index. For the first six months of 1998, the total return of the SwissKey U.S.
Equity Fund was 13.33%, 214 basis points behind the 15.47% return for the
Wilshire 5000 Equity Index. The following paragraphs review the sources of Fund
underperformance in the first half of the year.
Market exposure (average beta of .95) detracted modestly from the Fund relative
performance in the strong equity market environment which characterized the
first half of 1998. Factor weightings generally subtracted from results. The
most significant negative factor positions were the underweighting in the
relative strength and size measures. The largest capitalization stocks continued
to dominate market performance. Most of these stocks are perceived as high
quality companies with predictable, sustainable growth rates, attributes that
have been highly favored in an environment with increasing economic uncertainty
exacerbated by Southeast Asian problems. The Fund has minimal exposure to these
largest stocks because they appear to be relatively overvalued. Some positive
benefit to Fund performance was derived from an underweighting in the price
volatility and growth factors.
Industry weightings had the largest negative impact on active returns in the
first half. The overweight in the tobacco industry detracted from performance as
the industry continues to struggle with political and legal issues. Other
negative industry positions were the overweights in the railroad, tire and
rubber and paper industries, and the underweights in miscellaneous finance and
retail industries. The non-health related consumer sector, especially the retail
industry, was very strong in the first half of 1998 due to high employment
levels combined with low inflation and the positive wealth effect associated
with the strong stock market. However, our valuation work continues to suggest
that consumer stock valuations already reflect this positive outlook and are not
attractive, while many of the basic industries appear much more undervalued. A
partial offset to these negative contributions were several positive industry
positions including the underweights in energy, producer goods, and electronics.
Stock selection had a positive effect on the Fund for the first six months.
Among large capitalization issues, the best performers were EMC Corp., Xerox,
and Enron while the worst were Federal Express, Lockheed Martin and Corning. In
the intermediate capitalization segment of the Fund, the most positive
contributors were General Instrument, Comverse Technology and Peco Energy while
the weakest were Nabisco Holdings, Harnischfeger and Nextel Communications.
19
<PAGE>
U.S. EQUITY FUND
[LOGO]
<TABLE>
<S> <C> <C> <C>
TOTAL RETURN
6 months 1 year 7/31/95*
ended ended to
6/30/98 6/30/98 6/30/98
- -----------------------------------------------------------------------------
SwissKey U.S. Equity Fund 13.33% 20.80% 26.66%
- -----------------------------------------------------------------------------
Wilshire 5000 Index 15.47% 28.86% 27.26%
- -----------------------------------------------------------------------------
</TABLE>
* Performance inception date of the SwissKey U.S. Equity Fund.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
This chart shows the growth in the value of an investment in the SwissKey U.S.
Equity Fund and the Wilshire 5000 Index if you had invested $10,000 on July 31,
1995, and had reinvested all your income dividends and capital gain
distributions through June 30, 1998. No adjustment has been made for any income
taxes payable by shareholders on income dividends and capital gain
distributions. Past performance is no guarantee of future results. Share price
and return will vary with market conditions; investors may realize a gain or
loss upon redemption.
SWISSKEY U.S. EQUITY FUND
VS. WILSHIRE 5000 INDEX
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
SwissKey U.S.
Equity Fund Wilshire 5000 Index
7/31/95 10,000 10,000
12/31/95 11,335 10,994
6/30/96 12,570 12,123
12/31/96 14,157 13,326
6/30/97 16,499 15,677
12/31/97 17,587 17,496
6/30/98 19,931 20,202
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
20
<PAGE>
U.S. EQUITY FUND
[LOGO]
INDUSTRY DIVERSIFICATION
<TABLE>
As a Percent of Net Assets
As of June 30, 1998
- --------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Energy............................................. 2.48%
Capital Investment
Capital Goods..................................... 10.20
Technology........................................ 9.49
-------
19.69
Basic Industries
Chemicals......................................... 4.35
Housing/Paper..................................... 7.66
Metals............................................ 0.71
-------
12.72
Consumer
Non-Durables...................................... 6.84
Retail/Apparel.................................... 4.38
Autos/Durables.................................... 2.96
Discretionary..................................... 0.77
Health: Drugs..................................... 7.34
Health: Non-Drugs................................. 5.43
-------
27.72
Financial
Banks............................................. 7.00%
Non-Banks......................................... 7.00
-------
14.00
Utilities
Electric.......................................... 5.95
Telephone......................................... 0.90
-------
6.85
Transportation..................................... 8.05
Services/Misc...................................... 6.33
-------
Total U.S. Equities............................ 97.84*
-------
SHORT-TERM INVESTMENTS............................. 1.49*
-------
TOTAL INVESTMENTS.............................. 99.33
-------
CASH AND OTHER ASSETS,
LESS LIABILITIES.................................. 0.67
-------
NET ASSETS......................................... 100.00%
=======
</TABLE>
- --------------------------------------------------------------
* The Fund held a long position in stock index futures on June 30, 1998 which
increased U.S. Equity exposure from 97.84% to 99.40% and reduced exposure to
Short-Term Investments from 1.49% to -0.07%
<TABLE>
<CAPTION>
TOP TEN U.S. EQUITY HOLDINGS
As of June 30, 1998
Percent of
Net Assets
- ----------------------------------------------------
<S> <C>
1. Xerox Corp. 4.64%
2. Lockheed Martin Corp. 4.58
3. Burlington Northern Santa Fe Corp. 4.23
4. Aon Corp. 3.24
5. FDX Corp. 3.11
6. Philip Morris Companies, Inc. 3.09
7. CIGNA Corp. 2.50
8. Automatic Data Processing, Inc. 2.47
9. Goodyear Tire & Rubber Co. 2.39
10. Baxter International, Inc. 2.27
- ----------------------------------------------------
</TABLE>
21
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ----------
<S> <C> <C>
U.S. Equities -- 97.84%
Aetna Life & Casualty Co..................................... 108,500 $8,259,562
Allergan, Inc................................................ 167,600 7,772,450
Alza Corp. (b)............................................... 170,750 7,384,937
American Home Products Corp.................................. 168,300 8,709,525
Aon Corp..................................................... 305,200 21,440,300
Automatic Data Processing, Inc............................... 223,800 16,309,425
BankBoston Corp.............................................. 127,600 7,097,750
Baxter International, Inc.................................... 279,000 15,013,687
Beckman Coulter PLC.......................................... 73,900 4,304,675
Bestfoods.................................................... 149,500 8,680,344
Biogen, Inc. (b)............................................. 66,950 3,280,550
Birmingham Steel Corp........................................ 68,350 845,831
Burlington Northern Santa Fe Corp............................ 284,900 27,973,619
Champion Enterprises, Inc. (b)............................... 51,900 1,524,562
Champion International Corp.................................. 85,100 4,185,856
CIGNA Corp................................................... 239,950 16,556,550
Circuit City Stores-Circuit City Group....................... 252,200 11,821,875
Citicorp..................................................... 4,900 731,325
CMS Energy Corp.............................................. 220,450 9,699,800
Columbia/HCA Healthcare Corp................................. 44,900 1,307,712
Comerica, Inc................................................ 70,450 4,667,312
Commscope, Inc. (b).......................................... 120,399 1,948,959
Comverse Technology, Inc. (b)................................ 78,065 4,049,622
Consolidated Stores Corp..................................... 79,900 2,896,375
Corning, Inc................................................. 406,100 14,111,975
Covance, Inc. (b)............................................ 85,850 1,931,625
Crown Cork & Seal Co., Inc................................... 81,200 3,857,000
Dial Corp.................................................... 88,300 2,290,281
Eastman Chemical Co.......................................... 94,050 5,854,612
EMC Corp. (b)................................................ 152,550 6,836,147
Enron Corp................................................... 189,400 10,239,437
Entergy Corp................................................. 510,100 14,665,375
FDX Corp. (b)................................................ 327,300 20,538,075
First American Corp. of Tennessee............................ 44,700 2,151,188
First Data Corp.............................................. 413,030 13,759,062
First Security Corp.......................................... 84,500 1,808,828
FirstEnergy Corp............................................. 34,605 1,064,104
Fleet Financial Group, Inc................................... 104,400 8,717,400
Fleetwood Enterprises, Inc................................... 3,800 152,000
Food Lion, Inc., Class A..................................... 331,100 3,517,937
Forest Laboratories, Inc. Class A (b)........................ 128,500 4,593,875
Fort James Corp.............................................. 219,200 9,754,400
Gannett Co., Inc............................................. 71,200 5,059,650
General Instrument Corp. (b)................................. 389,350 10,585,453
General Semiconductor, Inc. (b).............................. 88,175 870,728
Genzyme Corp. (b)............................................ 68,950 1,762,534
Geon Co...................................................... 47,050 1,079,209
Goodyear Tire & Rubber Co.................................... 245,200 15,800,075
Great Lakes Chemical Corp.................................... 49,600 1,956,100
Harnischfeger Industries, Inc................................ 119,150 3,373,434
Health Care and Retirement Corp. (b)......................... 76,850 3,030,772
Hibernia Corp................................................ 94,850 1,914,784
IMC Global Inc............................................... 91,300 2,750,413
Informix Corp. (b)........................................... 91,000 719,469
Interpublic Group of Companies, Inc.......................... 71,600 4,345,225
Kimberly Clark Corp.......................................... 314,850 14,443,744
Lafarge Corp................................................. 49,700 1,953,831
Lear Corp. (b)............................................... 73,550 3,774,034
Lockheed Martin Corp......................................... 286,076 30,288,297
Lyondell Petrochemical Co.................................... 231,750 7,053,891
Manor Care, Inc.............................................. 87,500 3,363,281
Martin Marietta Materials, Inc............................... 50,107 2,254,815
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C> <C>
Masco Corp.......................................... 199,100 $ 12,045,550
Medusa Corp......................................... 8,000 502,000
Nabisco Holdings Corp............................... 174,000 6,274,875
National Service Industries, Inc.................... 33,300 1,694,138
Nextel Communications, Inc. (b)..................... 238,550 5,933,931
Norfolk Southern Corp............................... 160,400 4,781,925
Peco Energy Co...................................... 476,500 13,907,844
Pentair, Inc........................................ 90,300 3,837,750
Philip Morris Companies, Inc........................ 519,150 20,441,531
Praxair, Inc........................................ 158,100 7,401,056
Raytheon Co., Class B............................... 233,750 13,820,469
Regions Financial Corp.............................. 43,800 1,798,538
Reynolds & Reynolds Co.............................. 57,450 1,044,872
Schering Plough Corp................................ 163,400 14,971,525
Seagate Technology, Inc. (b)........................ 152,450 3,630,216
Sears, Roebuck and Co............................... 176,050 10,750,053
Southdown, Inc...................................... 37,300 2,662,288
St. Jude Medical, Inc. (b).......................... 84,700 3,118,019
Timken Co........................................... 30,050 925,916
Tyson Foods, Inc., Class A.......................... 347,550 7,537,491
Ultramar Diamond Shamrock Corp...................... 194,218 6,130,006
US Bancorp.......................................... 218,841 9,410,163
Vencor, Inc. (b).................................... 180,900 1,311,525
Ventas, Inc......................................... 180,900 2,498,681
Viad Corp........................................... 167,450 4,646,738
Wells Fargo & Co.................................... 21,700 8,007,300
Westvaco Corp....................................... 40,800 1,152,600
Witco Corp.......................................... 90,050 2,633,963
Xerox Corp.......................................... 301,550 30,645,019
York International Corp............................. 106,400 4,635,050
------------
Total U.S. Equities
(Cost $530,151,977)................................ 646,836,695
------------
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C> <C>
Short-Term Investments -- 1.49%
U.S. GOVERNMENT OBLIGATIONS -- 0.08%
U.S. Treasury Bill
5.165%, due 11/27/98............................... $ 500,000 $ 489,612
------------
COMMERCIAL PAPER -- 1.41%
Cincinnati Bell Inc.
6.660%, due 07/01/98............................... 2,730,000 2,730,000
NGC Corp.
6.7500%, due 07/01/98.............................. 2,924,000 2,924,000
Raytheon Co.
7.000%, due 07/01/98............................... 3,000,000 3,000,000
Texas Utilities Co.
6.1000%, due 07/17/98.............................. 675,000 673,170
------------
9,327,170
------------
Total Short-Term Investments
(Cost $9,816,564).................................. 9,816,782
------------
Total Investments
(Cost $539,968,541) -- 99.33% (a).................. 656,653,477
------------
Cash and other assets,
less liabilities -- 0.67%.......................... 4,445,373
------------
Net Assets -- 100%.................................. $661,098,850
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
22
<PAGE>
U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $539,968,541; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation............................... $131,931,680
Gross unrealized depreciation............................... (15,246,744)
------------
Net unrealized appreciation............................... $116,684,936
============
</TABLE>
(b) Non-income producing security
FUTURES CONTRACTS
The U.S. Equity Fund had the following open index futures contracts as of June
30, 1998:
<TABLE>
<CAPTION>
SETTLEMENT COST/ CURRENT UNREALIZED
DATE PROCEEDS VALUE GAIN
-------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CON-
TRACTS
Standard & Poor's 500,
36 contracts........... September 1998 $10,190,052 $10,287,000 $96,948
=======
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at June 30, 1998 was $489,612.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $539,968,541) ....................... $656,653,477
Cash............................................................. 211,911
Receivables:
Investment securities sold...................................... 2,290,931
Dividends....................................................... 1,036,060
Fund shares sold................................................ 4,436,998
Other assets..................................................... 19,339
------------
TOTAL ASSETS.................................................. 664,648,716
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 1,521,040
Fund shares redeemed............................................ 1,505,921
Investment advisory fees ....................................... 372,011
Accrued expenses................................................ 74,394
Variation margin ............................................... 76,500
------------
TOTAL LIABILITIES............................................. 3,549,866
------------
NET ASSETS........................................................ $661,098,850
============
NET ASSETS CONSIST OF:
Paid in capital ................................................. $515,109,561
Accumulated undistributed net investment income.................. 1,242,787
Accumulated net realized gain.................................... 27,964,618
Net unrealized appreciation...................................... 116,781,884
------------
NET ASSETS.................................................... $661,098,850
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $605,767,723 and 30,426,776 shares is-
sued and outstanding) ......................................... $ 19.91
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$268,269 and 13,497 shares issued and outstanding) ............ $ 19.88
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $55,062,858 and 2,776,912 shares issued
and outstanding) .............................................. $ 19.83
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends........................................................ $ 9,615,819
Interest......................................................... 766,543
------------
TOTAL INCOME.................................................. 10,382,362
------------
EXPENSES:
Advisory ........................................................ 3,792,120
Administration................................................... 247,167
Distribution .................................................... 254,241
Other............................................................ 297,092
------------
TOTAL EXPENSES................................................ 4,590,620
------------
NET INVESTMENT INCOME......................................... 5,791,742
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments..................................................... 41,062,216
Futures contracts............................................... 3,068,863
------------
Net realized gain ............................................ 44,131,079
------------
Change in net unrealized appreciation or depreciation on:
Investments .................................................... 58,415,670
Futures contracts .............................................. (137,787)
------------
Change in net unrealized appreciation or depreciation......... 58,277,883
------------
Net realized and unrealized gain ................................ 102,408,962
------------
Net increase in net assets resulting from operations............. $108,200,704
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
25
<PAGE>
U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 5,791,742 $ 2,268,618
Net realized gain ................................ 44,131,079 21,580,018
Change in net unrealized appreciation or deprecia-
tion ............................................ 58,277,883 40,886,740
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 108,200,704 64,735,376
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................. (4,978,081) (1,717,943)
Brinson Class N................................. (832) --
SwissKey Class.................................. (249,586) (87,137)
Distributions from net realized gain:
Brinson Class I................................. (28,383,478) (12,393,329)
Brinson Class N................................. (64) --
SwissKey Class.................................. (2,678,143) (838,501)
------------ ------------
Total distributions to shareholders............... (36,290,184) (15,036,910)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 346,081,960 212,394,882
Shares issued on reinvestment of distributions.... 33,981,329 14,138,565
Shares redeemed................................... (163,864,419) (34,971,198)
------------ ------------
Net increase in net assets resulting from capital
share transactions .............................. 216,198,870 191,562,249
------------ ------------
TOTAL INCREASE IN NET ASSETS................... 288,109,390 241,260,715
------------ ------------
NET ASSETS:
Beginning of year................................. 372,989,460 131,728,745
------------ ------------
End of year (including accumulated undistributed
net investment income of $1,242,787 and $679,544,
respectively).................................... $661,098,850 $372,989,460
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26
<PAGE>
U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, FEBRUARY 22, 1994*
------------------------------------- THROUGH
BRINSON CLASS I 1998 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. 0.19 0.15 0.17 0.16 0.05
Net realized and
unrealized gain
(loss)............... 3.39 4.27 3.31 1.89 (0.36)
-------- -------- -------- ------- ------
Total income (loss)
from investment
operations......... 3.58 4.42 3.48 2.05 (0.31)
-------- -------- -------- ------- ------
Less distributions:
Distributions from net
investment income.... (0.18) (0.14) (0.17) (0.14) (0.04)
Distributions from net
realized gain........ (1.13) (1.23) (0.25) (0.03) --
-------- -------- -------- ------- ------
Total distributions. (1.31) (1.37) (0.42) (0.17) (0.04)
-------- -------- -------- ------- ------
Net asset value, end of
period................. $ 19.91 $ 17.64 $ 14.59 $ 11.53 $ 9.65
======== ======== ======== ======= ======
Total return (non-
annualized)............ 21.48% 31.87% 30.57% 21.45% (3.10)%
Ratios/Supplemental data
Net assets, end of pe-
riod (in 000s)........ $605,768 $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............ 1.12% 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.................. 42% 43% 36% 33% 9%
Average commission rate
paid per share........ $ 0.0469 $ 0.0422 $ 0.0457 N/A N/A
</TABLE>
*Commencement of investment operations
**Annualized
N/A = Not applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
27
<PAGE>
U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
YEAR ENDED
BRINSON CLASS N JUNE 30, 1998*
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period............................. $ 17.64
-------
Income from investment operations:
Net investment income.......................................... 0.15
Net realized and unrealized gain............................... 3.37
-------
Total income from investment operations...................... 3.52
-------
Less distributions:
Distributions from net investment income....................... (0.15)
Distributions from net realized gain........................... (1.13)
-------
Total distributions.......................................... (1.28)
-------
Net asset value, end of period................................... $ 19.88
=======
Total return..................................................... 21.10%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)............................. $ 268
Ratio of expenses to average net assets......................... 1.05%
Ratio of net investment income to average net assets............ 0.87%
Portfolio turnover rate......................................... 42%
Average commission rate paid per share.......................... $0.0469
</TABLE>
*Commencement of Brinson Class N was June 30, 1997
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 each period presented.
<TABLE>
<CAPTION>
JULY 31, 1995*
YEAR ENDED YEAR ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of peri-
od................................. $ 17.59 $ 14.58 $ 11.94
------- ------- -------
Income from investment operations:
Net investment income............. 0.09 0.11 0.10
Net realized and unrealized gain.. 3.38 4.22 2.92
------- ------- -------
Total income from investment op-
erations....................... 3.47 4.33 3.02
------- ------- -------
Less distributions:
Distributions from net investment
income........................... (0.10) (0.09) (0.13)
Distributions from net realized
gain............................. (1.13) (1.23) (0.25)
------- ------- -------
Total distributions............. (1.23) (1.32) (0.38)
------- ------- -------
Net asset value, end of period...... $ 19.83 $ 17.59 $ 14.58
======= ======= =======
Total return (non-annualized)....... 20.80% 31.28% 25.70%
Ratios/Supplemental Data:
Net assets, end of period (in
000s)............................. $55,063 $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...... 0.60% 0.54% 0.61%**
After expense reimbursement....... N/A 0.63% 0.95%**
Portfolio turnover rate............ 42% 43% 36%
Average commission rate paid per
share............................. $0.0469 $0.0422 $0.0457
</TABLE>
*Commencement of SwissKey Class
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
29
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND
[SWISSKEY FUNDS LOGO]
The U.S. Large Capitalization Equity Fund is an actively managed portfolio that
invests in common stocks of the largest U.S. corporations. Issues are selected
from a universe of less than 300 of the largest capitalization domestic stocks
collectively comprising 65% of the value of the U.S. equity market.
Since its performance inception on April 30, 1998, the SwissKey U.S. Large
Capitalization Equity Fund has provided a return of -0.32% compared to 2.25% for
its benchmark, the S&P 500 Equity Index. The discussion below focuses on
Brinson's management of Large Capitalization Equities during the first half of
1998. Please note that the Fund's commencement of operations was during the
second quarter of 1998.
Market exposure (average beta of .98) modestly detracted from relative
performance in the strong equity market environment which characterized the
first half of 1998. Other broad factor positions had a negative effect on
performance. The most significant negative factor position was the
underweighting in relative strength (price momentum) and the size measure. The
strongest relative performance within the stock market was posted by the largest
capitalization companies. The Fund has minimal exposure to these largest
companies because they appear to be relatively overvalued. The Fund benefited
from an underweight in the price volatility and growth factors.
Industry weightings were a negative contributor to relative results year-to-
date. The Fund was negatively impacted by an overweight in tobacco stocks, which
have been impacted by adverse legislative and litigation developments, and in
chemicals, which have suffered from cyclical earnings problems. Fund results
were also hurt by the overweight in the railroad industry which has been hurt by
Union Pacific operational snafus and the resultant threat of punitive regulatory
actions. These negative influences were only partially offset by the positive
impact of the underweight in energy, where our analysis continues to produce
lackluster value rankings for most stocks despite the dramatic declines in oil
prices. The Fund was also positively impacted by an underweight in producer
goods and electronics, particularly PC-related technology.
Stock selection had a positive effect on the Fund for the first six months. The
best performers were EMC Corp., Xerox, Enron, Schering Plough and Burlington
Northern, while the worst were Federal Express, Lockheed Martin, Corning,
Kimberly Clark and Baxter.
30
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND
[LOGO]
TOTAL RETURN
4/30/98*
to 6/30/98
- ----------------------------------------------------------------
SwissKey U.S. Large Capitalization Equity Fund -0.32%
- ----------------------------------------------------------------
S&P 500 Equity Index 2.25
- ----------------------------------------------------------------
* Performance inception date of the SwissKey U.S. Large Capitalization Equity
Fund.
Total return includes reinvestment of all capital gain and income distributions.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
This chart shows the growth in the value of an investment in the SwissKey U.S.
Large Capitalization Equity Fund and the S&P 500 Equity Index if you had
invested $10,000 on April 30, 1998, and had reinvested all your income dividends
and capital gain distributions through June 30, 1998. 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. LARGE CAPITALIZATION EQUITY FUND
VS. S&P 500 EQUITY INDEX
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
SwissKey U.S.
Large
Capitalization S&P 500
Equity Fund Equity Index
<S> <C> <C>
4/30/98 10,000 10,000
5/31/98 9,826 9,827
6/30/98 10,225 9,968
</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.
31
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND
[LOGO OF SWISS KEY FUNDS]
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
As a Percent of Net Assets
As of June 30, 1998
- ---------------------------------
<S> <C>
U.S. EQUITIES
Basic Industries
Chemicals................ 1.65%
Housing/Paper............ 5.95
Metals................... 0.85
------
8.45
Capital Investment
Capital Goods............ 9.66
Technology............... 9.17
------
18.83
Consumer
Autos/Durables........... 3.50
Discretionary............ 0.97
Health: Drugs............ 8.42
Health: Non-Drugs........ 4.09
Non-Durables............. 6.46
Retail/Apparel........... 2.38
------
25.82
Energy.................... 2.27%
Financial
Banks.................... 8.42
Non-Banks................ 9.98
------
18.40
Transportation............ 11.85
Services/Miscellaneous.... 6.65
Utilities
Electric................. 2.52
------
Total U.S. Equities.... 94.79*
SHORT-TERM INVESTMENTS.... 5.09*
------
TOTAL INVESTMENTS...... 99.88
CASH AND OTHER ASSETS,
LESS LIABILITIES......... 0.12
------
NET ASSETS................ 100.00%
======
- ---------------------------------
</TABLE>
* The Fund held a long position in stock index futures on June 30, 1998 which
increased U.S. equity exposure from 94.79% to 98.32% and reduced exposure to
short-term investments from 5.09% to 1.56%.
<TABLE>
<CAPTION>
TOP 10 U.S. EQUITY HOLDINGS
As of June 30, 1998
PERCENT OF
NET ASSETS
- ----------------------------------------------------
<S> <C>
1. Xerox Corp. 6.84%
2. Lockheed Martin Corp. 6.74
3. Burlington Northern Santa Fe Corp. 6.19
4. Aon Corp. 4.77
5. FDX Corp. 4.57
6. Philip Morris Companies, Inc. 4.52
7. Automatic Data Processing, Inc. 3.60
8. Goodyear Tire & Rubber Co. 3.50
9. CIGNA Corp. 3.37
10. Schering Plough Corp. 3.34
- ----------------------------------------------------
</TABLE>
32
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- SCHEDULE OF
INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
U.S. Equities -- 94.79%
Aetna Life & Casualty Co.................................... 3,900 $ 296,888
American Home Products Corp................................. 6,100 315,675
Aon Corp.................................................... 11,000 772,750
Automatic Data Processing, Inc.............................. 8,000 583,000
BankBoston Corp............................................. 3,600 200,250
Baxter International, Inc................................... 10,000 538,125
Bestfoods................................................... 5,400 313,538
Burlington Northern Santa Fe Corp........................... 10,200 1,001,512
CIGNA Corp.................................................. 7,900 545,100
Citicorp.................................................... 300 44,775
Columbia/HCA Healthcare Corp................................ 1,900 55,338
Comerica, Inc............................................... 2,500 165,625
Corning, Inc................................................ 14,600 507,350
Covance, Inc. (b)........................................... 3,100 69,750
Crown Cork & Seal Co., Inc.................................. 2,900 137,750
EMC Corp. (b)............................................... 5,500 246,469
Enron Corp.................................................. 6,800 367,625
Entergy Corp................................................ 14,200 408,250
FDX Corp. (b)............................................... 11,800 740,450
First Data Corp............................................. 14,800 493,025
Fleet Financial Group, Inc.................................. 3,800 317,300
Gannett Co., Inc............................................ 2,200 156,338
Goodyear Tire & Rubber Co................................... 8,800 567,050
Kimberly Clark Corp......................................... 11,500 527,562
Lockheed Martin Corp........................................ 10,300 1,090,512
Masco Corp.................................................. 7,200 435,600
Norfolk Southern Corp....................................... 5,900 175,894
Philip Morris Companies, Inc................................ 18,600 732,375
Praxair, Inc................................................ 5,700 266,831
Raytheon Co., Class B....................................... 8,000 473,000
Schering Plough Corp........................................ 5,900 540,587
Seagate Technology, Inc. (b)................................ 5,500 130,969
Sears, Roebuck and Co....................................... 6,300 384,694
US Bancorp.................................................. 7,900 339,700
Wells Fargo & Co............................................ 800 295,200
Xerox Corp.................................................. 10,900 1,107,712
-----------
Total U.S. Equities Stock (Cost $15,532,291)................ 15,344,569
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
-------- -----------
<S> <C> <C>
Short-Term Investments -- 5.09%
COMMERCIAL PAPER -- 5.09%
NGC Corp., 6.750%, due 07/01/98........................... $424,000 $ 424,000
Raytheon Co., 7.000%, due 07/01/98........................ 400,000 400,000
-----------
Total Short-Term Investments
(Cost $824,000).......................................... 824,000
-----------
Total Investments
(Cost $16,356,291) -- 99.88% (a)......................... 16,168,569
-----------
Cash and other assets, less
liabilities -- 0.12%..................................... 18,804
-----------
Net Assets -- 100%........................................ $16,187,373
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
33
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- SCHEDULE OF
INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $16,356,291; and net
unrealized depreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................. $ 317,890
Gross unrealized depreciation................................. (505,612)
---------
Net unrealized depreciation................................. $(187,722)
=========
</TABLE>
(b) Non-income producing security
FUTURES CONTRACTS
The U.S. Large Capitalization Equity Fund had the following open futures
contracts as of June 30, 1998:
<TABLE>
<CAPTION>
SETTLEMENT COST/ CURRENT UNREALIZED
DATE PROCEEDS VALUE GAIN
-------------- -------- -------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CONTRACTS
Standard & Poor's 500, 2 con-
tracts...................... September 1998 $562,464 $571,500 $9,036
======
</TABLE>
The segregated cash pledged to cover margin requirements for the open futures
positions at June 30, 1998 was $20,100.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
34
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $16,356,291)......................... $16,168,569
Cash............................................................. 25,077
Receivables:
Dividends....................................................... 26,247
Due from Advisor................................................ 2,759
Fund shares sold................................................ 41,691
Other assets..................................................... 35,562
-----------
TOTAL ASSETS.................................................. 16,299,905
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 56,256
Variation margin................................................ 4,250
Accrued expenses................................................ 52,026
-----------
TOTAL LIABILITIES............................................. 112,532
-----------
NET ASSETS........................................................ $16,187,373
===========
NET ASSETS CONSIST OF:
Paid in capital.................................................. $16,423,723
Accumulated undistributed net investment income.................. 11,637
Accumulated net realized loss.................................... (69,301)
Net unrealized depreciation...................................... (178,686)
-----------
NET ASSETS.................................................... $16,187,373
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $153,503 and 15,666 shares issued and
outstanding)................................................... $ 9.80
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$16,032,852 and 1,638,635 shares issued and outstanding)....... $ 9.78
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,018 and 104 shares issued and outstanding).................. $ 9.79
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
35
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1998*
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends.......................................................... $ 49,557
Interest........................................................... 14,677
---------
TOTAL INCOME.................................................... 64,234
---------
EXPENSES:
Advisory........................................................... 21,230
Professional....................................................... 10,880
Distribution....................................................... 7,537
Other.............................................................. 16,142
---------
TOTAL EXPENSES.................................................. 55,789
Expenses waived and reimbursed by Advisor....................... (23,989)
---------
NET EXPENSES.................................................... 31,800
---------
NET INVESTMENT INCOME .......................................... 32,434
---------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments....................................................... (71,182)
Futures contracts................................................. 1,881
---------
Net realized loss............................................... (69,301)
---------
Change in net unrealized appreciation or depreciation on:
Investments....................................................... (187,722)
Futures contracts................................................. 9,036
---------
Change in net unrealized appreciation or depreciation.............. (178,686)
---------
Net realized and unrealized loss................................... (247,987)
---------
Net decrease in net assets resulting from operations............... $(215,553)
=========
</TABLE>
*The Fund commenced operations on April 6, 1998.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
APRIL 6,
1998* THROUGH
JUNE 30, 1998
OPERATIONS: -------------
<S> <C>
Net investment income........................................... $ 32,434
Net realized loss............................................... (69,301)
Change in net unrealized appreciation or depreciation........... (178,686)
-----------
Net decrease in net assets resulting from operations............ (215,553)
-----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................................ (191)
Brinson Class N................................................ (20,605)
SwissKey Class................................................. (1)
-----------
Total distributions to shareholders............................. (20,797)
-----------
CAPITAL SHARE TRANSACTIONS:
Shares sold..................................................... 16,922,491
Shares issued on reinvestment of distributions.................. 20,775
Shares redeemed................................................. (519,553)
-----------
Net increase in net assets resulting from capital share
transactions................................................... 16,423,713
-----------
TOTAL INCREASE IN NET ASSETS................................. 16,187,363
-----------
NET ASSETS:
Beginning of period............................................. 10
-----------
End of period (including accumulated undistributed net invest-
ment
income of $11,637)............................................. $16,187,373
===========
</TABLE>
*Commencement of investment operations
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
APRIL 6, 1998*
THROUGH
BRINSON CLASS I JUNE 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period............................. $ 10.00
-------
Income from investment operations:
Net investment income.......................................... 0.02
Net realized and unrealized loss............................... (0.20)
-------
Total loss from investment operations........................ (0.18)
-------
Less distributions:
Distributions from net investment income....................... (0.02)
Distributions from net realized gain........................... --
-------
Total distributions.......................................... (0.02)
-------
Net asset value, end of period................................... $ 9.80
=======
Total return (non-annualized).................................... (1.83)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)............................. $154
Ratio of expenses to average net assets:
Before expense reimbursement................................... 1.59%**
After expense reimbursement.................................... 0.80%**
Ratio of net investment income to average net assets:
Before expense reimbursement................................... 0.52%**
After expense reimbursement.................................... 1.31%**
Portfolio turnover rate......................................... 12%
Average commission rate paid per share.......................... $0.0350
</TABLE>
*Commencement of investment operations
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
38
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
APRIL 6,
1998* THROUGH
BRINSON CLASS N JUNE 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period.............................. $ 10.00
-------
Income from investment operations:
Net investment income........................................... 0.02
Net realized and unrealized loss................................ (0.23)
-------
Total loss from investment operations......................... (0.21)
-------
Less distributions:
Distributions from net investment income........................ (0.01)
Distributions from net realized gain............................ --
-------
Total distributions........................................... (0.01)
-------
Net asset value, end of period.................................... $ 9.78
=======
Total return (non-annualized)..................................... (2.02)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s).............................. $16,033
Ratio of expenses to average net assets:
Before expense reimbursement.................................... 1.84%**
After expense reimbursement..................................... 1.05%**
Ratio of net investment income to average net assets:
Before expense reimbursement.................................... 0.27%**
After expense reimbursement..................................... 1.06%**
Portfolio turnover rate.......................................... 12%
Average commission rate paid per share........................... $0.0350
</TABLE>
*Commencement of investment operations.
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
39
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND -- FINANCIAL
HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
APRIL 6, 1998*
THROUGH
SWISSKEY CLASS JUNE 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period............................. $ 10.00
-------
Income from investment operations:
Net investment income.......................................... 0.02
Net realized and unrealized loss............................... (0.22)
-------
Total loss from investment operations........................ (0.20)
-------
Less distributions:
Distributions from net investment income....................... (0.01)
Distributions from net realized gain........................... --
-------
Total distributions.......................................... (0.01)
-------
Net asset value, end of period................................... $ 9.79
=======
Total return (non-annualized).................................... (2.06)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)............................. $ 1
Ratio of expenses to average net assets:
Before expense reimbursement................................... 2.11%**
After expense reimbursement.................................... 1.32%**
Ratio of net investment income to average net assets:
Before expense reimbursement................................... 0.00%**
After expense reimbursement.................................... 0.79%**
Portfolio turnover rate......................................... 12%
Average commission rate paid per share.......................... $0.0350
</TABLE>
*Commencement of investment operations
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
40
<PAGE>
U.S. BOND FUND
[SWISS KEY FUNDS LOGO]
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.
The first half of 1998 in U.S. fixed income markets was characterized by
unusually low volatility, stable short-term interest rates and modestly
declining long-term interest rates. The Federal Reserve's overnight funds
target rate has not changed in the past fifteen months. Inflation has remained
stable at historically low levels despite robust economic growth and a tight
labor market. Higher domestic productivity and lower import prices due to a
strong dollar and troubled foreign economies has allowed the U.S. economy to
continue to grow without an acceleration in inflation.
The SwissKey U.S. Bond Fund has produced an annualized return of 7.43% since its
inception on August 31, 1995, compared to an 8.01% return for the Salomon
Brothers Broad Investment Grade Bond Index. The annualized volatility of returns
for the Fund was 4.19% compared to 3.46% for the index. In the most recent six
month period the Fund returned 3.45% relative to a 3.97% return for the index.
INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
As a Percent of Net Assets
As of June 30, 1998
- --------------------------------------------------
<S> <C>
U.S. BONDS
Corporate Bonds
Airlines................................ 0.18%
Asset-Backed............................ 5.50
Banks................................... 1.35
Business and Public Service............. 0.97
CMO..................................... 8.78
Consumer................................ 0.50
Energy.................................. 1.40
Financial Services...................... 4.27
Industrial Components................... 4.25
Real Estate............................. 0.54
Telecommunications...................... 1.38
------
Total U.S. Corporate Bonds........... 29.12
U.S. Government Agencies................. 25.30
U.S. Government Obligations.............. 25.05
International Dollar Bonds............... 7.10
------
Total U.S. Bonds..................... 86.57
------
SHORT-TERM INVESTMENTS................... 11.58
------
TOTAL INVESTMENTS.................... 98.15
CASH AND OTHER ASSETS, LESS LIABILITIES.. 1.85
------
NET ASSETS............................... 100.00%
======
- --------------------------------------------------
</TABLE>
41
<PAGE>
U.S. BOND FUND
[SWISS KEY FUNDS LOGO]
TOTAL RETURN
<TABLE>
<CAPTION>
6 months 1 year Annualized
ended ended 8/31/95* to
6/30/98 6/30/98 6/30/98
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SWISSKEY U.S. BOND FUND 3.45% 9.97% 7.43%
- --------------------------------------------------------------------------------------------
Salomon Brothers Broad Investment Grade (BIG) Bond Index 3.97 10.59 8.01
- --------------------------------------------------------------------------------------------
</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 June 30, 1998. No adjustment
has been made for any income taxes payable by shareholders on income dividends
and capital gain distributions. Past performance is no guarantee of future
results. Share price and return will vary with market conditions; investors may
realize a gain or loss upon redemption.
SWISSKEY U.S. BOND FUND
VS. SALOMON BROTHERS BIG BOND INDEX
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Salomon Brothers
Date SwissKey U.S. Bond Fund BIG Bond Index
- ---- ----------------------- ----------------
<S> <C> <C>
8/31/95 10,000 10,000
12/31/95 10,532 10,529
6/30/96 10,400 10,324
12/31/96 10,914 10,861
6/30/97 11,248 11,141
12/31/97 11,964 11,844
6/30/98 12,439 12,252
</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.
42
<PAGE>
U.S. BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Bonds -- 86.57%
U.S. CORPORATE BONDS -- 29.12%
Aetna Services Inc., 6.970%, due 08/15/36............... $ 235,000 $ 242,980
Bellsouth Savings & Employee ESOP, 9.125%, due 07/01/03. 81,528 88,101
Capital One Bank, 6.830%, due 05/17/99.................. 359,000 361,020
Chase Mortgage Finance Corp., 93-J1, Class 1A5, 6.625%,
due 08/25/09........................................... 65,055 64,776
Chemical Mortgage Securities, Inc., 93-1, Class A5,
7.450%, due 02/25/23................................... 785,000 794,925
Chesapeake & Potomac Telephone of Maryland, 8.000%, due
10/15/29............................................... 87,000 107,317
Chrysler Corp., 7.400%, due 08/01/97.................... 223,000 240,690
Citicorp Mortgage Securities, Inc., 94-9, Class A8,
5.750%, due 06/25/09................................... 97,953 93,170
Comcast Cable Communications,
8.500%, due 05/01/27................................... 300,000 361,420
Con Edison, 6.450%, due 12/01/07........................ 300,000 306,595
Continental Airlines Inc., 98-1B,
6.748%, due 09/15/18................................... 75,000 76,252
Countrywide Funding Corp. FRN,
5.880%, due 12/01/03................................... 250,000 248,125
CS First Boston Mortgage Securities Corp., 7.150%, due
08/20/06............................................... 245,000 257,556
Dayton Hudson Credit Card Master Trust, 95-1, Class A,
6.100%, due 02/25/02................................... 218,000 218,266
DLJ Mortgage Acceptance Corp., 98-2, 6.500%, due
08/19/28............................................... 520,000 513,500
First Bank Corporate Card Master Trust, 97-1, Class A,
6.400%, due 02/15/03................................... 155,000 157,791
GE Capital Mortgage Services, Inc., 97-HE4, Class A7,
6.735%, due 12/25/28................................... 410,000 417,552
General Motors Acceptance Corp.,
6.375%, due 12/01/01................................... 400,000 404,522
General Motors Acceptance Corp.,
9.625%, due 12/15/01................................... 294,000 326,490
GreenTree Financial Corp., 94-5, Class A5, 8.300%, due
11/15/19............................................... 320,000 352,659
Interamer Development Bank,
6.800%, due 10/15/25................................... 100,000 111,784
Lehman Brothers Holdings,
7.250%, due 04/15/03................................... 225,000 234,439
Lockheed Martin Corp.,
7.700%, due 06/15/08................................... 282,000 310,374
MBNA Global Capital Securities FRN, 6.519%, due
02/01/27............................................... 90,000 83,652
Mid-America Energy,
6.375%, due 06/15/06................................... 275,000 273,749
News America Holdings,
7.750%, due 12/01/45................................... 358,000 384,198
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
PanAmSat Corp. 144A,
6.000%, due 01/15/03................................... $ 375,000 $ 371,254
PNC Mortgage Securities Corp., 94-3, Class A8, 7.500%,
due 07/25/24........................................... 215,000 223,330
Premier Auto Trust
96-3, Class A3, 6.500%, due 03/06/00................... 139,058 139,486
96-4, Class A4, 6.400%, due 10/06/01................... 350,000 352,611
Prudential Home Mortgage Securities 93-43, Class A9,
6.750%, due 10/25/23................................... 287,826 289,035
94-3, Class A10, 6.500%, due 02/25/24.................. 170,000 164,737
Residential Accredit Loans, Inc., 96-QS4, Class AI10,
7.900%, due 08/25/26................................... 275,000 285,092
Salomon, Inc., 6.750%, due 02/15/03..................... 300,000 307,297
SASCO LLC, 98-RF1, Class A,
8.712%, due 03/15/27................................... 539,306 578,405
The Money Store Home Equity Trust, 98-A, Class AF5,
6.370%, due 12/15/23................................... 465,000 467,269
Thrift Financing Corp., A, Class 4,
11.250%, due 01/01/16.................................. 43,328 46,075
Time Warner Entertainment, Inc.,
8.375%, due 03/15/23................................... 94,000 110,051
Time Warner, Inc., 7.570%, due 02/01/24................. 90,000 97,441
UCFC Home Equity Loan FRN, 97-C, Class A8, 5.888%, due
09/15/27............................................... 166,772 166,959
USA Waste Services,
6.500%, due 12/15/02................................... 400,000 402,368
USX Corp., 8.125%, due 07/15/23......................... 400,000 457,576
Vendee Mortgage Trust, 92-1, Class 2Z, 7.750%, due
05/15/22............................................... 492,787 540,023
-----------
12,030,912
-----------
INTERNATIONAL DOLLAR BONDS -- 7.10%
Banco Santiago S.A.,
7.000%, due 07/18/07................................... 380,000 381,497
Empressa Nacional Electric,
7.875%, due 02/01/27................................... 394,000 394,187
Den Danske Bank, 144A,
6.375%, due 06/15/08................................... 560,000 561,401
Province of Quebec,
7.500%, due 07/15/23................................... 200,000 222,346
Repsol International Finance,
7.000%, due 08/01/05................................... 200,000 212,082
Republic of South Africa,
9.625%, due 12/15/99................................... 71,000 73,840
Royal Bank of Scotland, 7.375%, Resettable Perpetual
Preferred.............................................. 80,000 85,191
Skandinaviska Enskilda Banken, 144A, Resettable Perpet-
ual Preferred.......................................... 305,000 306,647
Tyco International Group,
6.250%, due 06/15/03................................... 700,000 697,913
-----------
2,935,104
-----------
</TABLE>
- --------------------------------------------------------------------------------
43
<PAGE>
U.S. BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES -- 25.30%
Aid-Israel, Series 10 Z, 0.000%, due 02/15/03........... $ 805,000 $ 622,539
Federal Home Loan Mortgage Corp.
7.000%, due 10/15/13................................... 492,125 507,333
8.500%, due 07/15/21................................... 102,207 106,179
7.500%, due 01/15/23................................... 151,427 162,242
7.238%, due 05/01/26................................... 27,260 28,209
Federal Home Loan Mortgage Corp. Gold
6.000%, due 06/01/03................................... 90,031 89,806
8.000%, due 11/01/22................................... 156,826 162,021
9.000%, due 03/01/24................................... 121,218 129,826
Federal National Mortgage Assoc.
6.959%, due 08/01/07................................... 486,332 513,762
6.361%, due 06/01/08................................... 430,000 440,191
8.000%, due 12/18/11................................... 100,000 106,426
6.000%, due 12/01/12 TBA............................... 160,000 158,199
8.000%, due 05/25/21................................... 260,000 269,010
9.000%, due 08/01/21................................... 25,369 27,155
8.500%, due 07/01/22................................... 17,764 18,781
9.500%, due 08/01/22................................... 111,949 119,400
8.000%, due 11/01/23................................... 210,810 41,680
7.000%, due 12/18/24................................... 300,000 302,625
9.000%, due 04/25/25................................... 227,003 238,170
6.000%, due 12/01/27 TBA............................... 2,000,000 1,945,610
7.500%, due 01/01/28................................... 377,668 387,340
6.000%, due 03/01/28................................... 741,026 721,255
Federal National Mortgage Assoc. Strips
0.000%, due 09/25/22 principal only.................... 526,998 484,264
7.500%, due 05/01/23 interest only..................... 150,875 34,289
0.000%, due 04/01/27 principal only.................... 346,881 293,500
3.500%, due 05/01/28 interest only..................... 293,559 252,132
Government National Mortgage Assoc.
10.000%, due 09/15/00.................................. 2,234 2,385
10.000%, due 05/15/01.................................. 3,149 3,362
9.000%, due 11/15/04................................... 8,857 9,333
9.000%, due 11/15/04................................... 4,759 5,015
9.000%, due 12/15/17................................... 48,048 51,917
8.000%, due 08/15/22................................... 66,477 68,866
7.500%, due 12/15/22................................... 320,163 329,825
7.500%, due 12/15/23................................... 383,643 394,075
7.500%, due 01/15/24................................... 86,110 88,452
7.000%, due 02/16/24................................... 150,000 151,857
7.375%, due 06/20/24................................... 303,265 310,813
7.500%, due 06/15/25................................... 107,318 110,290
7.000%, due 07/15/25................................... 111,670 113,551
Jordan Aid, 8.750%, due 09/01/19........................ 517,177 650,246
-----------
10,451,931
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- -----------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS-- 25.05%
U.S. Treasury Notes and Bonds
5.500%, due 02/29/00................................... $4,735,000 $ 4,733,523
6.625%, due 07/31/01................................... 2,875,000 2,961,250
6.250%, due 08/31/02................................... 360,000 369,338
3.625%, due 01/15/08................................... 357,056 353,039
8.000%, due 11/15/21................................... 1,060,000 1,366,407
6.000%, due 02/15/26................................... 545,000 566,971
-----------
10,350,528
-----------
Total U.S. Bonds (Cost $35,235,550)..................... 35,768,475
-----------
Short-Term Investments-- 11.58%
COMMERCIAL PAPER -- 11.58%
ARCO Chemical, 5.770%, due 07/06/98..................... 1,000,000 999,199
Cincinnati Bell Inc., 6.599%, due 07/01/98.............. 270,000 270,000
NGC Corp., 6.750%, due 07/01/98......................... 500,000 500,000
PG & E Gas Transmission,
5.670%, due 07/02/98................................... 521,000 520,918
Raytheon Co., 6.996%, due 07/01/98...................... 500,000 500,000
Tenneco Inc., 5.750%, due 07/17/98...................... 1,000,000 997,604
Texas Utilities Co., 6.100%, due 07/17/98............... 1,000,000 997,289
-----------
Total Short-Term Investments
(Cost $4,785,010)...................................... 4,785,010
-----------
Total Investments
(Cost $40,020,560) -- 98.15% (a)....................... 40,553,485
-----------
Cash and other assets, less liabilities -- 1.85%........ 764,939
-----------
Net Assets -- 100%...................................... $41,318,424
===========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $40,020,560; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized ap-
preciation........... $613,576
Gross unrealized de-
preciation........... (80,651)
--------
Net unrealized ap-
preciation........... $532,925
========
</TABLE>
FRN: Floating rate note -- The rate disclosed is that in effect at June 30,
1998.
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30,
1998, the value of these securities amounted to $1,239,302, or 3.00% 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.
- --------------------------------------------------------------------------------
44
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $40,020,560).......................... $40,553,485
Cash.............................................................. 14,172
Receivables:
Investment securities sold....................................... 2,352,284
Fund shares sold................................................. 2,732,416
Interest......................................................... 427,521
Other assets...................................................... 10,252
-----------
TOTAL ASSETS................................................... 46,090,130
-----------
LIABILITIES:
Payables:
Investment securities purchased.................................. 4,712,267
Fund shares redeemed............................................. 6,893
Investment advisory fees......................................... 11,802
Accrued expenses................................................. 40,744
-----------
TOTAL LIABILITIES.............................................. 4,771,706
-----------
NET ASSETS......................................................... $41,318,424
===========
NET ASSETS CONSIST OF:
Paid in capital................................................... $40,134,461
Accumulated undistributed net investment income................... 300,973
Accumulated net realized gain..................................... 350,065
Net unrealized appreciation....................................... 532,925
-----------
NET ASSETS..................................................... $41,318,424
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $38,873,821 and 3,674,422 shares issued
and outstanding)................................................ $ 10.58
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$1,100 and 104 shares issued and outstanding)................... $ 10.58
===========
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of
$2,443,503 and 231,723 shares issued and outstanding)........... $ 10.54
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
45
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest........................................................... $1,818,237
----------
TOTAL INCOME.................................................... 1,818,237
----------
EXPENSES:
Advisory........................................................... 142,474
Professional....................................................... 37,230
Registration....................................................... 17,245
Distribution....................................................... 9,160
Other.............................................................. 41,928
----------
TOTAL EXPENSES.................................................. 248,037
Expenses waived by Advisor...................................... (67,848)
----------
NET EXPENSES.................................................... 180,189
----------
NET INVESTMENT INCOME .......................................... 1,638,048
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain.................................................. 801,133
Change in net unrealized appreciation or depreciation.............. 335,673
----------
Net realized and unrealized gain................................... 1,136,806
----------
Net increase in net assets resulting from operations............... $2,774,854
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
46
<PAGE>
U.S. BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
YEAR ENDED
ENDED JUNE 30,
JUNE 30, 1998 1997
OPERATIONS: ------------- -----------
<S> <C> <C>
Net investment income.............................. $ 1,638,048 $ 836,232
Net realized gain (loss)........................... 801,133 (36,166)
Change in net unrealized appreciation or deprecia-
tion.............................................. 335,673 343,515
----------- -----------
Net increase in net assets resulting from opera-
tions............................................. 2,774,854 1,143,581
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................... (1,526,152) (598,393)
Brinson Class N................................... (54) --
SwissKey Class.................................... (103,513) (31,712)
Distributions from net realized gain:
Brinson Class I................................... (335,742) (675)
Brinson Class N................................... (14) --
SwissKey Class.................................... (25,812) (39)
----------- -----------
Total distributions to shareholders................ (1,991,287) (630,819)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................ 21,794,978 16,583,813
Shares issued on reinvestment of distributions..... 1,174,894 461,917
Shares redeemed.................................... (6,255,720) (3,420,321)
----------- -----------
Net increase in net assets resulting from capital
share transactions................................ 16,714,152 13,625,409
----------- -----------
TOTAL INCREASE IN NET ASSETS.................... 17,497,719 14,138,171
----------- -----------
NET ASSETS:
Beginning of year.................................. 23,820,705 9,682,534
----------- -----------
End of year (including accumulated undistributed
net investment
income of $300,973 and $271,841, respectively).... $41,318,424 $23,820,705
=========== ===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
47
<PAGE>
U.S. BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
AUGUST 31, 1995*
YEAR ENDED YEAR ENDED THROUGH
BRINSON CLASS I JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of pe-
riod............................. $ 10.24 $ 9.93 $10.00
------- ------- ------
Income from investment opera-
tions:
Net investment income........... 0.53 0.51*** 0.50
Net realized and unrealized gain
(loss)......................... 0.53 0.32 (0.14)
------- ------- ------
Total income from investment
operations................... 1.06 0.83 0.36
------- ------- ------
Less distributions:
Distributions from net invest-
ment income.................... (0.58) (0.52) (0.40)
Distributions in excess of net
realized gain.................. (0.14) -- (0.03)
------- ------- ------
Total distributions........... (0.72) (0.52) (0.43)
------- ------- ------
Net asset value, end of period.... $ 10.58 $ 10.24 $ 9.93
======= ======= ======
Total return (non-annualized)..... 10.60% 8.45% 3.60%
Ratios/Supplemental Data:
Net assets, end of period (in
000s)........................... $38,874 $22,421 $9,047
Ratio of expenses to average net
assets:
Before expense reimbursement.... 0.84% 1.65% 3.63%**
After expense reimbursement..... 0.60% 0.60% 0.60%**
Ratio of net investment income to
average net assets:
Before expense reimbursement.... 5.61% 5.14% 3.00%**
After expense reimbursement..... 5.85% 6.19% 6.03%**
Portfolio turnover rate.......... 198% 410% 363%
</TABLE>
*Commencement of investment operations
**Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
48
<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>
YEAR ENDED
BRINSON CLASS N JUNE 30, 1998*
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period............................. $10.24
------
Income from investment operations:
Net investment income.......................................... 0.61
Net realized and unrealized gain............................... 0.42
------
Total income from investment operations...................... 1.03
------
Less distributions:
Distributions from net investment income....................... (0.55)
Distributions from net realized gain........................... (0.14)
------
Total distributions.......................................... (0.69)
------
Net asset value, end of period................................... $10.58
======
Total return (non-annualized).................................... 10.30%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)............................. $ 1
Ratio of expenses to average net assets:
Before expense reimbursement................................... 1.09%
After expense reimbursement.................................... 0.85%
Ratio of net investment income to average net assets:
Before expense reimbursement................................... 5.36%
After expense reimbursement.................................... 5.60%
Portfolio turnover rate......................................... 198%
</TABLE>
*Commencement of Brinson Class N was June 30, 1997.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
49
<PAGE>
U.S. BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
AUGUST 31, 1995*
YEAR ENDED YEAR ENDED THROUGH
SWISSKEY CLASS JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of pe-
riod............................. $10.22 $ 9.92 $10.00
------ ------ ------
Income from investment opera-
tions:
Net investment income........... 0.50 0.46*** 0.46
Net realized and unrealized gain
(loss)......................... 0.49 0.32 (0.13)
------ ------ ------
Total income from investment
operations................... 0.99 0.78 0.33
------ ------ ------
Less distributions:
Distributions from net invest-
ment income.................... (0.53) (0.48) (0.38)
Distributions in excess of net
realized gain.................. (0.14) -- (0.03)
------ ------ ------
Total distributions........... (0.67) (0.48) (0.41)
------ ------ ------
Net asset value, end of period.... $10.54 $10.22 $ 9.92
====== ====== ======
Total return (non-annualized)..... 9.97% 7.91% 3.24%
Ratios/Supplemental Data:
Net assets, end of period (in
000s)........................... $2,444 $1,399 $ 636
Ratio of expenses to average net
assets:
Before expense reimbursement.... 1.31% 2.12% 4.10%**
After expense reimbursement..... 1.07% 1.07% 1.07%**
Ratio of net investment income to
average net assets:
Before expense reimbursement.... 5.14% 4.67% 2.53%**
After expense reimbursement..... 5.38% 5.72% 5.56%**
Portfolio turnover rate.......... 198% 410% 363%
</TABLE>
*Commencement of investment operations
**Annualized
***The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
50
<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 eight series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund (each a
"Fund" and collectively, the "Funds"). Each Fund has three classes of shares
outstanding, Brinson Class I, Brinson Class N and 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,
U.S. Large Capitalization Equity Fund and U.S. Bond Fund in the preparation of
their financial statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Equity securities traded over-the-counter are valued at the
most recent bid price. Securities for which the most recent bid price or market
quotations are not readily available, including restricted securities which are
subject to limitations on their sale, are valued at fair value as determined in
good faith by or under the direction of the Trust's Board of Trustees. Debt
securities are valued at the most recent bid price by using market quotations
or independent services. Futures contracts are valued at the settlement price
established each day on the exchange on which they are traded. Short-term
obligations with a maturity of 60 days or less are valued at amortized cost,
which approximates market value.
B.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
C.INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date.
D.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the year ended June 30, 1998,
therefore, no federal income tax provision was required.
E.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Differences in dividends per share between the classes
are due to distribution expenses. Amounts equal to 10.72%, 35.30% and 100% of
the amount taxable as ordinary income qualify for the dividends received
deduction available to corporate shareholders for the U.S. Balanced Fund, U.S.
Equity Fund and U.S. Large Capitalization Equity Fund, respectively.
F.INCOME AND EXPENSE ALLOCATIONS: All income earned and expenses incurred by
the Funds will be borne on a pro rata basis by each of the classes, except that
the Brinson Class I will not incur any of the distribution expenses of the
Brinson Class N nor the SwissKey Class.
G.USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results may differ from those estimates.
- --------------------------------------------------------------------------------
51
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, each Fund pays the Advisor a monthly fee based on the Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates for the year
ended June 30, 1998, were as follows:
<TABLE>
<CAPTION>
FEES
WAIVED
ADVISORY BRINSON CLASS I BRINSON CLASS N SWISSKEY CLASS ADVISORY AND/OR
FEE EXPENSE CAP EXPENSE CAP EXPENSE CAP FEES REIMBURSED
-------- --------------- --------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Balanced Fund...... 0.70% 0.80% 1.05% 1.30% $1,674,661 $19,097
U.S. Equity Fund........ 0.70 0.80 1.05 1.32 3,792,120 --
U.S. Large Capitaliza-
tion Equity Fund....... 0.70 0.80 1.05 1.32 21, 230 23,989
U.S. Bond Fund.......... 0.50 0.60 0.85 1.07 142,474 67,848
</TABLE>
Certain officers of the Funds are also officers of the Advisor. All officers
serve without direct compensation from the Funds. Trustees' fees paid to
unaffiliated trustees for the year ended June 30, 1998 were $7,665, $9,205,
$1,785 and $4,015 for the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund and U.S. Bond Fund, respectively.
3.INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1998, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
U.S. Balanced Fund................................... $415,621,140 $630,096,518
U.S. Equity Fund..................................... 413,499,173 218,951,890
U.S. Large Capitalization Equity Fund................ 17,063,797 1,460,325
U.S. Bond Fund....................................... 65,711,529 52,607,836
</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 distribution plans (the "Plans") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for the Brinson Class N
and the SwissKey Class. Each Plan governs payments made for the expenses
incurred in the promotion and distribution of the Brinson Class N and the
SwissKey Class. Annual fees under the Brinson Class N Plan shall not exceed
0.25% of the average daily net assets of the Brinson Class N of the U.S.
Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund and U.S.
Bond Fund. Annual fees under the SwissKey Plan, which include a 0.25% service
fee, total 0.50%, 0.52%, 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, U.S. Large
Capitalization Equity Fund and U.S. Bond Fund, respectively.
6.LINE OF CREDIT
The Trust has entered into an agreement with Chase Manhattan Bank to provide a
364 day $100 million committed line of credit to the Funds. Borrowings will be
made for temporary purposes. Interest on amounts borrowed is calculated at an
annual rate of the Federal Funds rate plus 0.50%. The Funds pay an annual
commitment fee of 0.08% of the average daily unutilized balance of the line of
credit. During the year ended June 30, 1998, the Funds had no borrowings under
the agreement.
- --------------------------------------------------------------------------------
52
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
U.S. BALANCED FUND
-----------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.............. 4,720,912 $ 58,173,143 6,578,157 $ 78,728,712
Brinson Class N.............. -- -- 80 1,000
SwissKey Class............... 49,659 624,713 148,317 1,798,818
---------- ------------ ---------- ------------
Total Sales................ 4,770,571 $ 58,797,856 6,726,554 $ 80,528,530
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I.............. 2,662,862 $ 31,359,575 1,541,262 $ 18,266,191
Brinson Class N.............. 11 136 -- --
SwissKey Class............... 14,933 175,706 3,904 46,232
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 2,677,806 $ 31,535,417 1,545,166 $ 18,312,423
========== ============ ========== ============
Redemptions:
Brinson Class I.............. 23,388,425 $293,534,522 4,988,208 $ 59,912,281
Brinson Class N.............. -- -- -- --
SwissKey Class............... 42,682 540,673 86,625 1,050,388
---------- ------------ ---------- ------------
Total Redemptions.......... 23,431,107 $294,075,195 5,074,833 $ 60,962,669
========== ============ ========== ============
<CAPTION>
U.S. EQUITY FUND
-----------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.............. 16,875,765 $314,205,812 11,551,336 $183,660,431
Brinson Class N.............. 13,398 269,368 57 1,000
SwissKey Class............... 1,697,355 31,606,780 1,834,556 28,733,451
---------- ------------ ---------- ------------
Total Sales................ 18,586,518 $346,081,960 13,385,949 $212,394,882
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I.............. 1,861,660 $ 32,092,717 907,559 $ 13,745,444
Brinson Class N.............. 47 896 -- --
SwissKey Class............... 110,158 1,887,716 25,905 393,121
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 1,971,865 $ 33,981,329 933,464 $ 14,138,565
========== ============ ========== ============
Redemptions:
Brinson Class I.............. 7,470,182 $144,565,891 1,959,184 $ 31,250,336
Brinson Class N.............. 5 100 -- --
SwissKey Class............... 1,023,014 19,298,428 237,473 3,720,862
---------- ------------ ---------- ------------
Total Redemptions.......... 8,493,201 $163,864,419 2,196,657 $ 34,971,198
========== ============ ========== ============
<CAPTION>
U.S. LARGE
CAPITALIZATION EQUITY
FUND*
-----------------------
PERIOD ENDED
JUNE 30, 1998*
-----------------------
SHARES VALUE
---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.............. 16,662 $ 163,328
Brinson Class N.............. 1,688,092 16,758,163
SwissKey Class............... 104 1,000
---------- ------------
Total Sales................ 1,704,858 $ 16,922,491
========== ============
Dividend Reinvestment:
Brinson Class I.............. 18 $ 168
Brinson Class N.............. 2,204 20,606
SwissKey Class............... -- 1
---------- ------------
Total Dividend Reinvest-
ment...................... 2,222 $ 20,775
========== ============
Redemptions:
Brinson Class I.............. 1,015 $ 9,875
Brinson Class N.............. 51,661 509,678
SwissKey Class............... -- --
---------- ------------
Total Redemptions.......... 52,676 $ 519,553
========== ============
</TABLE>
*The Fund commenced operations on April 6, 1998.
- --------------------------------------------------------------------------------
53
<PAGE>
THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. BOND FUND
--------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
---------------------- ---------------------
SHARES VALUE SHARES VALUE
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.................. 1,926,960 $ 20,378,131 1,521,821 $15,371,166
Brinson Class N.................. -- -- 98 1,000
SwissKey Class................... 134,362 1,416,847 119,951 1,211,647
--------- ------------ --------- -----------
Total Sales.................... 2,061,322 $ 21,794,978 1,641,870 $16,583,813
========= ============ ========= ===========
Dividend Reinvestment:
Brinson Class I.................. 107,565 $ 1,114,591 44,351 $ 449,362
Brinson Class N.................. 6 68 -- --
SwissKey Class................... 5,825 60,235 1,239 12,555
--------- ------------ --------- -----------
Total Dividend Reinvestment.... 113,396 $ 1,174,894 45,590 $ 461,917
========= ============ ========= ===========
Redemptions:
Brinson Class I.................. 549,381 $ 5,780,080 288,064 $ 2,929,252
Brinson Class N.................. -- -- -- --
SwissKey Class................... 45,413 475,640 48,365 491,069
--------- ------------ --------- -----------
Total Redemptions.............. 594,794 $ 6,255,720 336,429 $ 3,420,321
========= ============ ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
54
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds --
U.S. Balanced Fund
U.S. Equity Fund
U.S. Large Capitalization Equity Fund
U.S. Bond Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Brinson Funds--U.S. Balanced
Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund and U.S. Bond
Fund as of June 30, 1998, the related statements of operations for the period
then ended and changes in net assets and the financial highlights for the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization
Equity Fund and U.S. Bond Fund at June 30, 1998, the results of their
operations for the period then ended and the changes in their net assets and
the financial highlights for the periods indicated therein in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
August 7, 1998
- --------------------------------------------------------------------------------
55
<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>
[SWISS KEY FUNDS LOGO]
10 East 50th Street, New York, New York 10022 . Tel:(800) SWISSKEY.
http://networth.galt.com/swisskey
<PAGE>
[LOGO]
SWISSKEY NON-U.S. EQUITY FUND
ANNUAL REPORT
JUNE 30, 1998
YOUR KEY TO PERFORMANCE
-----------------------------------
<PAGE>
Trustees and Officers
[LOGO]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA
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.
[LOGO]
The UBS Brinson Division is the institutional asset management division of UBS
AG. UBS Brinson is the name used outside North America while Brinson Partners
continues as the primary name within North America. The UBS Brinson Division
manages over USD 390 billion of institutional assets, including over USD 277
billion of discretionary institutional assets on an active basis and mutual fund
assets for UBS Private Banking which total over USD 113 billion. In addition,
UBS Brinson acts as the investment advisor to UBS Private Banking on an advisory
basis. UBS Brinson manages investment portfolios for corporations, public funds,
endowments, foundations, central banks and other investors located throughout
the world. The UBS Brinson Division employs over 1,500 people in offices in
Chicago, Bahrain, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne, New
York, Paris, Rio de Janeiro, Singapore, Sydney, Tokyo and Zurich.
Investment performance for our clients is maximized within and across major
asset classes through a comprehensive understanding of global investment markets
and their interrelationships. Portfolio structure is focused upon both risk and
return considerations in the context of full investment cycles. Our investment
decisions are based on fundamental research, internally developed valuation
systems and seasoned judgment. Our independent team approach allows for rapid
responses to market changes, while providing each client with the benefit of our
best talent and the flexibility to customize portfolios to meet unique
requirements.
2
<PAGE>
Table of Contents
[LOGO]
<TABLE>
<S> <C>
Shareholder Letter........................................................... 4
Global Economic and Market Highlights........................................ 5
Non-U.S. Equity Fund......................................................... 6
Schedule of Investments...................................................... 9
Financial Statements......................................................... 14
Financial Highlights......................................................... 17
Notes to Financial Statements................................................ 20
Report of Independent Auditors............................................... 23
</TABLE>
3
<PAGE>
Shareholder Letter
[LOGO]
August 22, 1998
Dear Shareholder:
We are very pleased to present the June 30, 1998 Annual Report for the Non-U.S.
Equity Fund. Within this Report, we focus on the current global economic outlook
as well as our current strategy and performance update for the Non-U.S. Equity
Fund.
In December 1997, Union Bank of Switzerland and Swiss Bank Corporation announced
their intention to merge which included the integration of UBS Asset Management
and SBC Brinson into the UBS Brinson Division. The merger was consummated on
June 29, 1998. UBS Brinson is managed today by the same senior management that
has led the business over the past decades with a consistently applied
investment philosophy and process. The UBS Brinson Division manages over USD 390
billion of institutional assets, including over USD 277 billion of discretionary
institutional assets on an active basis and mutual fund assets for UBS Private
Banking which total over USD 113 billion. The UBS Brinson Division employs over
1,500 people in fifteen different cities throughout the world.
We are excited about the formation of the UBS Brinson Division and the
additional resources we have brought together to further the tradition of
delivering value-added investment performance and the highest level of
professional client service.
SwissKey Non-U.S. Equity Fund
Since its inception on July 31, 1995, the SwissKey Non-U.S. Equity Fund has
produced an annualized total return of 13.19% versus 9.15% for the Morgan
Stanley Capital International Non-U.S. Equity (Free) Index benchmark.
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
[SWISS KEY LOGO]
The economic situation in Japan remains bleak. With real GDP growth negative in
the last two quarters, the country is officially in a recession. The downturn in
output has brought on the highest unemployment rate recorded in the post-war
period, at just over 4%. In response to the news, the voters have delivered a
severe rebuke to the ruling LDP, although it is not at all certain that this
will result in the implementation of "Solutions" proffered by Western
governments and commentators.
Many of Japan's problems are magnified elsewhere in Asia. Last year's financial
and economic crisis has not diminished to any great extent. With financial
systems straining under large amounts of defunct debts, and the IMF prescribing
high interest rates in the interest of currency support and inflation control,
real economic activity has slowed substantially. While Asia suffers from falling
living standards, the crisis has been a partial benefit to the U.S. and Europe
by keeping commodity and import prices in check, and by not augmenting strong
domestic demand in those economies.
Continental Europe's cyclical recovery is well under way, and is starting to
have some beneficial effects on the high unemployment rate. Previously, output
and profit growth were reasonably strong, but did not carry over into the labor
market. Although unemployment has been reduced, the failure to address
structural problems will almost certainly guarantee that the Continent's poor
overall unemployment picture will persist for several years. The U.K.'s economic
performance has been at odds with most of the rest of Europe. A series of Bank
of England rate hikes has not prevented the headline inflation rate from rising
above 4% this year. Now however, there are signs that these hikes, coupled with
a strong pound, have started to cool the economy.
The U.S. expansion is unabated; more than 7 years have elapsed since the
recession at the start of the decade. However, the Federal Reserve's attempts to
maintain a neutral policy stance, in light of the Asian crisis' effect on demand
and costs, has resulted in substantial growth in the money supply. This could
set the stage for a modest resurgence in inflation. Profit growth, which had
reflected the strength of the domestic economy in prior years, is now showing
signs of the fall-off in Asian demand and the strength of the dollar.
<TABLE>
<CAPTION>
Non-U.S. Equity Environment
6 months 1 year 7/31/95*
Major Markets ended ended to
Total Return in U.S. Dollar Hedged Terms 6/30/98 6/30/98 6/30/98
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
MSCI Non-US Equity (Free) Index 18.55% 16.90% 21.22%
Japan 6.69 -12.84 5.65
U.K. 12.94 27.19 21.17
Germany 38.48 54.41 39.41
France 40.90 49.97 35.36
Canada 12.73 19.79 22.73
Netherlands 24.69 34.80 43.51
Australia 7.21 4.55 9.12
- ---------------------------------------------------------------------------
6 months 1 year 7/31/95*
Major Currencies ended ended to
Percent Change Relative to U.S. Dollars 6/30/98 6/30/98 6/30/98
- ---------------------------------------------------------------------------
Yen -6.31% -17.55% -14.45%
Pound 1.41 -0.25 1.45
Deutschemark -0.39 -3.46 -8.78
Canadian Dollar -2.69 -6.19 -2.34
- ---------------------------------------------------------------------------
</TABLE>
*Inception date of the SwissKey Class
All total returns in excess of 1 year are average annualized total returns
5
<PAGE>
Non-U.S. Equity Fund
[SWISS KEY LOGO]
The Non-U.S. Equity Fund invests in the common stocks of companies headquartered
outside the U.S. We believe that in a non-U.S. investment program the country
allocation decision is the most important. Country assessments are 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 13.19% versus 9.15% for the Morgan Stanley
Capital International Non-U.S. Equity (Free) Index benchmark. For the six months
ended June 30, 1998, the Fund returned 12.58%, compared to the index return of
15.53%.
During the first half of 1998, the aggregate non-U.S. markets outperformed,
rising 17.45% in dollar-hedged terms. The continental European markets continued
to set the pace, with the best performing markets in dollar-hedged terms.
Finland, Belgium and Spain led the pack, followed by France, Germany and Italy,
each growing in excess of 30%. In strong contrast, the Far East ex-Japan region
lost 29%. All three Southeast Asian markets had steep declines, led by Singapore
(-35%), Hong Kong (-28%) and Malaysia (-26%). New Zealand was also quite weak,
losing almost 14%. While positive, Japan's 5.7% hedged return was the sixth
weakest as of mid-year. Currency weakness, coupled with debt and banking
problems were behind the first group's weakness, while Japan's very weak
economy, troubled banking system and seeming inability to resolve these problems
has kept the market down.
During the first half of 1998 several strategy changes took place. France was
increased and Germany decreased, bringing the two markets into closer alignment.
In February, Spain was eliminated, with proceeds added to Finland and
Switzerland. In mid-April Malaysia was reduced to neutral and the U.K.
overweight was increased. In early June Italy was reduced, with funds added to
Denmark, Norway and Sweden, as part of an ongoing shift away from overvalued
southern European markets to more attractively priced northern European markets.
One currency strategy change took place. An Australian dollar overweight was
established, paired with the yen, allowing us to take advantage of a strong
positive interest rate differential in favor of the Australian currency.
Market allocation had a significant negative effect on returns, largely due to
strategic cash. Value added from underweighting Japan and Hong Kong and from
overweighting Belgium, Finland and Italy, was more than offset by holding
strategic cash, overweighting New Zealand and Singapore and underweighting
Spain.
Currency management had a negative impact on performance. The value added by the
yen and U.S. dollar strategies was reduced by the overweights of the weak
Australian and New Zealand dollars and the underweight of the rising pound
sterling.
Overall stock selection was positive due to the solid value added by Japan stock
selection, as well as contributions from France, Italy and Hong Kong.
6
<PAGE>
Non-U.S. Equity Fund
[LOGO]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 7/31/95*
ended ended to
6/30/98 6/30/98 6/30/98
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
SwissKey Non-U.S. Equity Fund 12.58% 3.90% 13.19%
MSCI Non-U.S. Equity (Free) Index** 15.53% 6.04% 9.15%
- ------------------------------------------------------------------------------
</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 June 30, 1998. No adjustment has been made
for any income taxes payable by shareholders on income dividends and capital
gain distributions. Past performance is no guarantee of future results. Share
price and return will vary with market conditions; investors may realize a gain
or loss upon redemption.
SwissKey Non-U.S. Equity Fund
vs. MSCI Non-U.S. Equity (Free) Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
Non US Equity Fund MSCI
7/31/95 $10,000 $10,000
12/31/95 $10,858 $10,220
6/30/96 $11,578 $10,713
12/31/96 $12,140 $10,947
6/30/97 $13,815 $12,174
12/31/97 $12,750 $11,174
6/30/98 $14,354 $12,909
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
7
<PAGE>
Non-U.S. Equity Fund
[LOGO]
<TABLE>
<CAPTION>
Industry Diversification
As a Percent of Net Assets
As of June 30, 1998
- ------------------------------------------------------
<S> <C>
NON-U.S. EQUITIES
Aerospace & Military......................... 0.22%
Airlines..................................... 0.37
Appliances & Household....................... 2.09
Autos/Durables............................... 3.65
Banking...................................... 11.51
Beverages & Tobacco.......................... 2.39
Broadcasting & Publishing.................... 2.47
Building Materials........................... 1.50
Business & Public Service.................... 3.41
Chemicals.................................... 3.01
Construction................................. 1.03
Data Processing.............................. 0.82
Electric Components.......................... 1.24
Electronics.................................. 4.14
Energy....................................... 6.52
Financial Services........................... 1.71
Food & House Products........................ 4.53
Forest Products.............................. 1.21
Gold Mining.................................. 0.06
Health & Personal Care....................... 7.45
Housing/Paper................................ 0.04
Industrial Components........................ 1.57
Insurance.................................... 4.99
Investment Companies......................... 0.36
Leisure & Tourism............................ 0.69
Machinery & Engineering...................... 0.72
Merchandising................................ 3.88
Metals--Steel................................ 1.74
Miscellaneous Materials...................... 0.04
Multi-Industry............................... 4.76
Non-Ferrous Metals........................... 1.52
Real Estate.................................. 0.44
Recreation................................... 0.55
Retail/Apparel............................... 0.24
Shipping..................................... 0.01
Shipping..................................... 0.02
Telecommunications........................... 7.53
Textiles & Apparel........................... 0.28
Transportation............................... 1.08
Utilities.................................... 3.07
Wholesale & International Trade.............. 0.46
------
Total Non-U.S. Equities......... 93.32
------
SHORT-TERM INVESTMENTS....................... 7.58
------
TOTAL INVESTMENTS................ 100.90
LIABILITIES, LESS CASH
AND OTHER ASSETS........................... (0.90)
------
NET ASSETS................................... 100.00%
------
</TABLE>
Market and Currency Strategy
As of June 30, 1998
<TABLE>
<CAPTION>
Fund
-------------------
Market Currency
Strategy Strategy Index
- ------------------------------------------------------
<S> <C> <C> <C>
U.S. Dollar 0.0% 2.1% 0.0%
Australia 5.1 6.2 2.2
Austria 0.0 0.4 0.4
Belgium 4.5 1.8 1.8
Canada 2.9 4.6 4.6
Denmark 0.4 0.9 0.9
Finland 2.6 1.0 1.0
France 9.2 9.1 9.2
Germany 10.6 10.9 10.8
Hong Kong 0.2 0.0 1.6
Ireland 0.0 0.5 0.5
Italy 3.5 4.4 4.4
Japan 14.7 15.7 19.7
Malaysia 0.3 0.5 0.5
Netherlands 4.9 5.5 5.6
New Zealand 3.7 3.8 0.2
Norway 0.4 0.5 0.5
Portugal 0.0 0.6 0.6
Singapore 1.3 0.5 0.5
Spain 0.0 3.2 3.2
Sweden 3.3 3.1 3.1
Switzerland 6.8 7.4 7.4
U.K. 25.6 17.3 21.3
Cash Reserves 0.0 0.0 0.0
- ------------------------------------------------------
100.0% 100.0% 100.0%
</TABLE>
Top Ten Non-U.S. Equity Holdings
As of June 30, 1998
<TABLE>
<CAPTION>
Percent of
Net Assets
- ------------------------------------------------------
<S> <C>
1. Novartis AG (Reg.) 1.50%
2. Glaxo Wellcome PLC 1.49
3. Nokia Oyj. Class A Preferred 1.28
4. British Petroleum Co. PLC 1.21
5. Royal Dutch Petroleum Co. 1.16
6. CS Holdings AG 1.13
7. British Telecommunications PLC 1.09
8. B.A.T. Industries PLC 1.08
9. Telecom Corp. of New Zealand Ltd. 1.04
10. Roche Holding AG (Gen.) 1.04
- ------------------------------------------------------
</TABLE>
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Non-U.S. Equities -- 93.32%
AUSTRALIA -- 4.46%
Amcor Ltd................................................. 91,600 $ 401,065
Boral Ltd................................................. 270,300 507,211
Brambles Industries Ltd................................... 43,600 855,675
Broken Hill Proprietary Co., Ltd.......................... 267,270 2,259,347
Coca-Cola Amatil Ltd...................................... 52,100 348,467
CSR Ltd................................................... 166,200 479,642
David Jones Ltd........................................... 579,500 663,935
Lend Lease Corp. Ltd...................................... 39,978 808,359
Mayne Nickless Ltd........................................ 133,100 704,765
National Australia Bank Ltd............................... 189,848 2,504,296
News Corp., Ltd........................................... 335,121 2,735,377
News Corp., Ltd., Preferred............................... 112,061 793,927
Orica Ltd................................................. 61,200 361,955
Pacific Dunlop Ltd........................................ 278,200 449,674
Qantas Airways Ltd........................................ 278,668 419,366
Rio Tinto Ltd............................................. 65,010 773,004
Santos Ltd................................................ 119,900 371,270
Telstra Corp., Ltd........................................ 567,600 1,455,267
Westpac Bank Corp., Ltd................................... 306,251 1,868,159
WMC Ltd................................................... 223,300 672,086
Woolworth's Ltd........................................... 117,200 381,054
------------
19,813,901
------------
BELGIUM -- 4.18%
Delhaize-Le Lion S.A. (b)................................. 20,650 1,442,892
Electrabel S.A............................................ 11,285 3,199,590
Fortis AG (b)............................................. 623 34
Fortis AG Strip (b)....................................... 15,673 4,001,438
Groupe Bruxelles Lambert S.A. (b)......................... 5,860 1,182,709
KBC Bancassurance Holding-Strip (b)....................... 660 53
KBC Bancassurance Holding (b)............................. 27,760 2,484,300
Petrofina S.A............................................. 5,810 2,385,051
Solvay S.A., Class A...................................... 16,860 1,336,657
Tractebel................................................. 13,200 1,933,351
Union Miniere S.A.(b)..................................... 9,990 617,495
------------
18,583,570
------------
CANADA -- 2.83%
Agrium, Inc............................................... 29,500 368,098
Alcan Aluminum Ltd........................................ 22,400 616,891
Bank of Montreal.......................................... 17,100 941,861
Barrick Gold Corp......................................... 13,700 260,846
Canadian National Railway Co.............................. 15,500 824,222
Canadian Pacific Ltd...................................... 51,294 1,444,017
Extendicare Inc. (b)...................................... 38,300 309,921
Hudson's Bay Co........................................... 20,300 465,191
Imasco, Ltd............................................... 26,500 489,239
Imperial Oil Ltd.......................................... 55,300 966,415
Magna International Inc., Class A......................... 6,800 465,633
Moore Corp., Ltd.......................................... 25,200 334,149
Newbridge Networks Corp. (b).............................. 7,000 167,313
Noranda, Inc.............................................. 23,100 398,980
NOVA Corp................................................. 62,800 719,557
Potash Corporation of Saskatchewan, Inc................... 6,800 512,335
Royal Bank of Canada...................................... 20,000 1,203,590
Seagram Co., Ltd.......................................... 9,400 383,197
Shaw Communications Inc., Class B......................... 36,200 704,012
TransCanada Pipelines Ltd................................. 30,500 676,119
Westcoast Energy, Inc..................................... 15,300 340,728
------------
12,592,314
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
DENMARK -- 0.34%
Den Danske Bank Group..................................... 6,700 $ 803,766
Tele Danmark A/S.......................................... 7,400 710,194
------------
1,513,960
------------
FINLAND -- 2.12%
Cultor Oyj................................................ 7,600 123,285
Merita Ltd., Class A...................................... 161,510 1,065,645
Metsa Serla Oyj, Class B.................................. 31,590 305,162
Nokia Oyj Class A, Preferred (b).......................... 77,260 5,682,021
Outokumpu Oyj, Class A.................................... 29,620 377,909
Sampo Insurance Co., Ltd., Class A........................ 11,360 538,340
UPM-Kymmene Corp.......................................... 36,830 1,013,639
Valmet Oyj................................................ 19,000 327,604
------------
9,433,605
------------
FRANCE -- 8.36%
Air Liquide............................................... 4,483 741,399
Alcatel Alsthom........................................... 8,405 1,711,306
AXA-UAP................................................... 17,402 1,957,221
AXA-UAP Certificate de Valeur Guarantie (b)............... 9,002 3,067
Banque Nationale de Paris................................. 18,610 1,520,566
Carrefour SA.............................................. 2,000 1,265,299
Cie de Saint Gobain....................................... 9,443 1,750,844
Dexia France (b).......................................... 8,840 1,190,169
Elf Aquitaine S.A......................................... 14,214 1,998,329
Eridania Beghin-Say SA.................................... 3,600 794,906
France Telecom S.A........................................ 36,300 2,503,655
Groupe Danone............................................. 5,220 1,439,256
Lafarge S.A............................................... 7,964 823,272
Lagardere S.C.A........................................... 26,760 1,114,041
Michelin, Class B......................................... 17,993 1,038,630
Paribas (b)............................................... 12,643 1,352,964
Pechiney S.A., Class A.................................... 17,685 712,256
Peugeot S.A............................................... 8,160 1,754,548
Pinault-Printemps-Redoute S.A............................. 1,260 1,054,515
Rhone-Poulenc, Class A.................................... 31,130 1,755,761
SEITA..................................................... 31,430 1,424,383
Societe Generale.......................................... 7,913 1,645,161
Suez Lyonnaise des Eaux S.A. (b).......................... 12,942 2,129,886
Thomson CSF............................................... 25,590 973,487
Total S.A., Class B....................................... 11,025 1,433,286
Usinor Sacilor............................................ 25,980 401,345
Vivendi................................................... 12,434 2,655,027
Vivendi Warrants "01" (b)................................. 12,664 24,926
------------
37,169,505
------------
GERMANY -- 9.83%
Allianz AG (b)............................................ 436 142,515
Allianz AG................................................ 13,530 4,460,028
BASF AG................................................... 19,940 944,526
Bayer AG.................................................. 49,400 2,548,000
Bayerische Motoren Werke (BMW) (b)........................ 402 399,773
Bayerische Motoren Werke AG............................... 1,240 1,250,992
Commerzbank AG............................................ 10,830 414,000
Continental AG............................................ 34,500 1,074,183
Daimler-Benz AG........................................... 20,792 2,038,883
Deutsche Bank AG.......................................... 32,917 2,787,459
Deutsche Telekom AG....................................... 137,010 3,696,613
Dresdner Bank AG.......................................... 39,800 2,145,451
Hochtief AG............................................... 11,690 560,213
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
GERMANY (CONTINUED)
Hoechst AG................................................ 15,610 $ 779,203
M.A.N. AG................................................. 2,500 972,299
Mannesmann AG (b)......................................... 20,470 2,076,486
Metro AG.................................................. 27,353 1,659,365
Metro AG Right (b)........................................ 27,353 1,061
Muenchener Rueckver AG.................................... 6,820 3,381,662
Preussag AG............................................... 3,719 1,326,890
RWE AG.................................................... 24,300 1,440,499
Schering AG............................................... 12,622 1,487,368
Siemens AG................................................ 39,520 2,404,042
Thyssen AG................................................ 4,850 1,227,950
Veba AG................................................... 28,708 1,956,279
Volkswagen AG............................................. 2,621 2,519,355
------------
43,695,095
------------
HONG KONG -- 0.57%
Cheung Kong Holdings Ltd.................................. 95,000 467,117
Citic Pacific Ltd......................................... 49,000 86,635
CLP Holdings Ltd.......................................... 53,500 243,728
Hang Seng Bank Ltd........................................ 38,400 217,061
Hong Kong & China Gas Co., Ltd............................ 258,700 293,803
Hong Kong & China Gas Warrants "99" (b)................... 11,850 811
Hong Kong Telecommunications Ltd.......................... 111,600 209,558
Hutchison Whampoa Ltd..................................... 103,000 543,672
Johnson Electric Holdings Ltd............................. 54,000 200,010
South China Morning Post (Holdings) Ltd................... 100,000 48,073
Sun Hung Kai Properties Ltd............................... 49,000 208,050
------------
2,518,518
------------
ITALY -- 3.67%
Assicurazioni Generali.................................... 54,446 1,770,402
Banca Commercial Italiana................................. 21,000 125,583
Credito Italiano S.p.A.................................... 241,500 1,264,188
Danieli & Co. Savings (Risp).............................. 129,100 599,181
Edison S.p.A.............................................. 6,000 48,151
ENI ADR................................................... 18,500 1,202,500
ENI S.p.A................................................. 369,000 2,418,413
Fiat S.p.A.-Privileged Preferred.......................... 399,220 993,811
INA-Istituto Nazionale delle Assicurazioni................ 33,100 94,037
Instituto Mobiliare Italiano S.p.A........................ 62,000 976,625
Istituto Bancario San Paolo di Torino..................... 56,000 808,079
Italgas S.p.A............................................. 14,000 57,022
La Rinascente S.p.A....................................... 79,140 788,039
Montedison S.p.A.......................................... 833,280 1,033,660
Parmalat Finanziaria S.p.A................................ 295,000 601,601
Telecom Italia Mobile S.p.A............................... 270,000 1,651,093
Telecom Italia Mobile S.p.A. RNC.......................... 121,000 408,427
Telecom Italia S.p.A...................................... 202,666 1,491,876
------------
16,332,688
------------
JAPAN -- 16.02%
Amada Co., Ltd............................................ 150,000 729,546
Bank of Tokyo-Mitsubishi, Ltd............................. 139,000 1,471,276
Canon Sales Co., Inc...................................... 56,000 761,005
Canon, Inc................................................ 115,000 2,610,152
Citizen Watch Co., Ltd.................................... 136,000 1,122,023
Dai Nippon Printing Co., Ltd.............................. 142,000 2,266,311
Daiichi Pharmaceutical Co., Ltd........................... 139,000 1,832,835
Daikin Industries Ltd..................................... 159,000 1,024,217
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
Daiwa House Industry Co., Ltd............................. 85,000 $ 750,261
Denso Corp................................................ 118,000 1,955,543
Fanuc..................................................... 57,700 1,995,605
Fuji Photo Film........................................... 11,000 382,822
Fujitsu................................................... 89,000 936,268
Hitachi Ltd............................................... 286,000 1,864,971
Honda Motor Co............................................ 61,000 2,171,272
Hoya Corp................................................. 34,000 962,784
Inax...................................................... 121,000 415,874
Ito Yokado Co., Ltd....................................... 56,000 2,634,867
Kaneka Corp............................................... 162,000 852,109
Keio Teito Electric Railway............................... 178,000 647,693
Kinki Nippon Railway...................................... 178,000 833,664
Kirin Brewery Co., Ltd.................................... 168,000 1,585,762
Kokuyo.................................................... 51,000 863,566
Kuraray Co., Ltd.......................................... 181,000 1,537,623
Kyocera Corp.............................................. 18,300 894,001
Marui Co., Ltd............................................ 82,000 1,223,043
Matsushita Electric Industrial Co......................... 166,000 2,667,291
NGK Insulators............................................ 259,000 2,248,766
Nintendo Co., Ltd......................................... 14,500 1,342,544
Nippon Meat Packers, Inc.................................. 99,000 1,211,954
Nippon Steel Co........................................... 142,000 249,652
Okumura Corp.............................................. 157,000 550,917
Omron Corp................................................ 46,000 702,670
Osaka Gas Co.............................................. 285,000 731,059
Sankyo Co., Ltd........................................... 148,000 3,369,817
Secom Co., Ltd............................................ 37,000 2,135,461
Sega Enterprises Ltd...................................... 19,000 327,881
Seino Transportation...................................... 123,000 682,423
Sekisui House Ltd......................................... 141,000 1,092,157
Shin-Etsu Chemical Co., Ltd............................... 12,000 207,515
Sony Corp................................................. 30,500 2,626,184
Sumitomo Bank............................................. 14,000 136,182
Sumitomo Chemical Co...................................... 203,000 626,033
Sumitomo Electric Industries.............................. 125,000 1,263,645
Takeda Chemical Industries................................ 94,000 2,499,262
TDK Corp.................................................. 26,000 1,920,236
Tokio Marine & Fire Insurance Co.......................... 148,000 1,520,683
Tokyo Electric Power...................................... 37,000 725,150
Tonen Corp................................................ 110,000 569,874
Toray Industries, Inc..................................... 385,000 1,997,334
Toshiba Corp.............................................. 387,000 1,581,072
Toyo Suisan Kaisha........................................ 79,000 481,565
Toyota Motor Corp......................................... 103,000 2,664,337
Yamato Transport Co., Ltd................................. 24,000 268,905
Yamazaki Baking Co., Ltd.................................. 56,000 496,307
------------
71,221,969
------------
MALAYSIA -- 0.39%
Berjaya Sports Toto Bhd................................... 71,000 105,280
Kuala Lumpur Kepong Bhd................................... 118,000 190,621
Malayan Banking Bhd A Shares (b).......................... 47,000 46,858
Malayan Banking Bhd....................................... 39,000 39,306
Malaysia International Shipping Bhd (Frgn.)............... 47,000 68,559
Nestle (Malaysia) Bhd..................................... 38,000 172,248
Petronas Gas Bhd.......................................... 73,000 135,527
Public Bank Bhd (Frgn.)................................... 71,000 21,398
Resorts World Bhd......................................... 100,000 109,946
Rothmans of Pall Mall Bhd................................. 37,000 256,480
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
MALAYSIA (CONTINUED)
Sime Darby Bhd.......................................... 25,000 $ 17,239
Tanjong PLC............................................. 46,000 63,773
Telekom Malaysia Bhd (b)................................ 104,000 175,527
Tenaga Nasional Bhd..................................... 110,000 132,610
UMW Holdings Bhd........................................ 58,000 26,011
YTL Corp. Bhd........................................... 162,000 121,866
YTL Power International Bhd (b)......................... 64,900 35,364
------------
1,718,613
------------
NETHERLANDS -- 4.55%
ABN AMRO Holdings NV.................................... 69,730 1,631,672
Akzo Nobel NV........................................... 2,230 495,726
Elsevier NV............................................. 74,910 1,130,536
Heineken NV (b)......................................... 32,062 1,259,342
Hoogovens NV............................................ 7,303 315,930
ING Groep NV............................................ 39,998 2,619,081
KLM Royal Dutch Air Lines NV............................ 10,150 412,147
KPN NV.................................................. 36,890 1,419,962
Philips Electronics NV.................................. 21,070 1,771,198
PolyGram NV............................................. 13,400 683,768
Royal Dutch Petroleum Co................................ 92,660 5,138,161
TNT Post Group NV (b)................................... 36,890 943,014
Unilever NV............................................. 30,660 2,432,663
------------
20,253,200
------------
NEW ZEALAND -- 2.28%
Brierley Investments Ltd................................ 2,683,400 1,337,236
Carter Holt Harvey Ltd.................................. 929,700 810,781
Fletcher Challenge Building............................. 307,650 383,283
Fletcher Challenge Energy............................... 339,250 810,082
Fletcher Challenge Forests Ltd.......................... 626,593 351,286
Fletcher Challenge Paper................................ 609,800 677,411
Lion Nathan Ltd......................................... 256,600 570,101
Telecom Corp. of New Zealand Ltd........................ 1,122,800 4,627,796
Telecom Corp. of New Zealand Ltd. ADR................... 17,600 576,400
------------
10,144,376
------------
NORWAY -- 0.21%
Norsk Hydro ASA......................................... 17,000 747,703
Norske Skogindustrier ASA Class A....................... 6,300 194,579
------------
942,282
------------
SINGAPORE -- 1.13%
City Developments Ltd................................... 89,000 248,642
Creative Technology Ltd. (b)............................ 10,000 121,338
DBS Land Ltd............................................ 168,000 139,213
Development Bank of Singapore Ltd....................... 43,200 239,077
Elec & Eltek International Co., Ltd..................... 26,100 88,218
Fraser & Neave Ltd...................................... 35,000 94,051
Keppel Corp., Ltd....................................... 109,750 164,999
Keppel Land Ltd......................................... 105,000 96,330
Oversea-Chinese Banking Corp., Ltd...................... 112,400 382,539
Rothmans Industries Ltd................................. 22,000 97,662
Singapore Airlines Ltd. (Frgn.)......................... 125,000 584,492
Singapore Press Holdings Ltd............................ 99,972 668,650
Singapore Technologies Engineering Ltd. (b). 111,000 78,183
Singapore Telecommunications, Ltd....................... 870,000 1,235,869
United Overseas Bank Ltd. (Frgn.)....................... 241,000 748,890
Venture Manufacturing (Singapore) Ltd. (b).............. 27,000 51,139
------------
5,039,292
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
--------- ------------
<S> <C> <C>
SWEDEN -- 2.97%
ABB AB, A Shares........................................ 64,400 $ 912,513
Astra AB, A Shares...................................... 64,800 1,324,455
Electrolux AB Series B.................................. 29,400 505,060
Ericsson, B Shares...................................... 93,700 2,737,602
Investor AB-B Shares.................................... 27,300 1,593,518
Nordbanken Holding AB................................... 205,700 1,508,915
Skandia Forsakrings AB.................................. 60,800 869,127
Skanska AB, B Shares.................................... 18,600 834,970
Svenska Handelsbanken, A Shares......................... 20,900 969,667
Swedish Match AB........................................ 169,100 561,907
Volvo AB, B Shares...................................... 46,100 1,372,901
------------
13,190,635
------------
SWITZERLAND -- 6.55%
ABB AG (Bearer)......................................... 892 1,317,300
CS Holdings AG (Reg.)................................... 22,671 5,044,477
Holderbank Financiere Glarus, B Shares.................. 840 1,068,829
Julius Baer Holding AG.................................. 377 1,179,368
Nestle S.A. (Reg.)...................................... 1,875 4,012,559
Novartis AG (Reg.)...................................... 4,020 6,689,399
Roche Holding AG (Gen.)................................. 470 4,615,407
Sairgroup............................................... 2,475 814,231
Saurer AG............................................... 845 863,496
Sulzer AG............................................... 886 699,197
Swiss Reinsurance Co. (Reg.)............................ 1,109 2,804,670
------------
29,108,933
------------
UNITED KINGDOM -- 22.86%
Abbey National PLC...................................... 91,400 1,624,137
B.A.T. Industries PLC................................... 477,800 4,783,262
Barclays PLC............................................ 116,900 3,370,427
Bass PLC................................................ 49,407 925,753
Billiton PLC............................................ 554,300 1,123,694
BOC Group PLC........................................... 62,100 846,008
Booker PLC.............................................. 283,200 1,157,673
British Petroleum Co. PLC............................... 368,294 5,370,724
British Sky Broadcasting PLC............................ 164,400 1,180,869
British Steel PLC....................................... 1,060,800 2,331,905
British Telecommunications PLC.......................... 391,600 4,835,052
BTR PLC (b)............................................. 177,306 502,920
Cable & Wireless PLC.................................... 92,200 1,119,925
Cadbury Schweppes PLC................................... 134,200 2,076,793
Charter PLC............................................. 182,218 1,901,715
Coats Viyella PLC....................................... 997,900 1,223,774
Diageo PLC.............................................. 165,135 1,956,249
FKI PLC................................................. 551,925 1,593,136
General Electric Co. PLC................................ 320,400 2,761,147
Glaxo Wellcome PLC...................................... 220,300 6,612,602
Greenalls Group PLC..................................... 177,200 1,534,468
Hanson PLC.............................................. 205,712 1,250,219
Hillsdown Holdings PLC.................................. 489,700 1,331,817
House of Fraser PLC..................................... 517,200 1,501,532
HSBC Holdings PLC....................................... 125,251 3,178,609
Inchcape PLC............................................ 275,100 867,519
Legal & General Group PLC............................... 58,800 627,400
Lloyds TSB Group PLC.................................... 318,285 4,452,931
Marks & Spencer PLC..................................... 453,600 4,128,521
Mirror Group PLC........................................ 489,000 1,835,769
National Westminster Bank PLC........................... 81,600 1,458,164
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Peninsular & Oriental Steam Navigation Co................. 179,260 $ 2,581,196
Prudential Corp. PLC...................................... 65,800 866,772
Reckitt & Colman PLC...................................... 49,646 947,626
Reed International PLC.................................... 210,000 1,899,089
Reuters Group PLC......................................... 46,353 529,780
Rio Tinto PLC............................................. 129,800 1,461,858
RJB Mining PLC............................................ 325,800 668,625
Royal & Sun Alliance Insurance Group PLC.................. 137,714 1,423,463
Scottish Hydro-Electric PLC............................... 145,600 1,292,408
Sears PLC................................................. 702,600 615,452
Sedgwick Group PLC........................................ 412,300 894,300
SmithKline Beecham PLC.................................... 351,200 4,286,428
Smurfit (Jefferson) Group PLC............................. 496,729 1,483,540
Tate & Lyle PLC........................................... 242,000 1,918,953
Tesco PLC................................................. 179,300 1,750,100
Thames Water PLC.......................................... 121,500 2,211,708
Unilever PLC.............................................. 273,600 2,912,484
United News & Media PLC................................... 94,100 1,315,711
Vodafone Group PLC........................................ 148,327 1,882,115
Williams PLC.............................................. 162,000 1,040,645
Willis Corroon Group PLC.................................. 89,100 225,969
------------
101,672,936
------------
Total Non-U.S. Equities
(Cost $354,901,674)...................................... 414,945,392
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
---------- ------------
<S> <C> <C>
Short-Term Investments -- 7.58%
UNITED STATES -- 7.58%
ARCO Chemical Co.
5.770%, due 07/06/98.................................. $2,894,000 $ 2,891,681
Cincinnati Bell Inc.
6.600%, due 07/01/98.................................. 3,000,000 3,000,000
5.850%, due 07/13/98.................................. 2,000,000 1,996,100
5.900%, due 07/17/98.................................. 3,500,000 3,490,822
Hilton Hotels Corp.
5.720%, due 07/15/98.................................. 1,500,000 1,496,663
NGC Corp.
6.750%, due 07/01/98.................................. 2,304,000 2,304,000
PG & E Gas Transmission
5.670%, due 07/02/98.................................. 2,000,000 1,999,685
Raytheon Co.
7.000%, due 07/01/98.................................. 3,599,000 3,599,000
5.700%, due 07/09/98.................................. 4,000,000 3,994,933
Tenneco Inc.
5.750%, due 07/17/98.................................. 5,000,000 4,987,222
Union Pacific Resources Inc.
5.740%, due 08/31/98.................................. 2,000,000 1,981,090
5.750%, due 08/31/98.................................. 2,000,000 1,981,090
------------
Total Short-Term Investments
(Cost $33,721,297).................................... 33,722,286
------------
Total Investments
(Cost $388,622,971) -- 100.90% (a).................... 448,667,678
------------
Liabilities, less cash and other assets--(0.90%)....... (4,018,530)
------------
Net Assets -- 100%..................................... $444,649,148
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
12
<PAGE>
NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1998
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $388,622,971; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $94,020,292
Gross unrealized depreciation................................ (33,975,585)
-----------
Net unrealized appreciation................................ $60,044,707
===========
</TABLE>
(b) Non-income producing security.
(c) Denominated in U.S. dollars.
FORWARD FOREIGN CURRENCY CONTRACTS
The Non-U.S. Equity Fund had the following open forward foreign currency
contracts as of June 30, 1998:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY
BUY CONTRACTS
Australian Dollar.......... 8/19/98 10,350,000 $ 6,382,807 $ (510,975)
Canadian Dollar............ 8/19/98 9,200,000 6,262,423 (126,466)
Danish Krone............... 8/19/98 29,900,000 4,357,171 349
French Franc............... 8/19/98 13,000,000 2,156,781 179
German Mark................ 8/19/98 5,800,000 3,223,135 (2,671)
Hong Kong Dollar........... 8/19/98 6,500,000 835,044 962
Italian Lira............... 8/19/98 12,690,000,000 7,144,834 (7,706)
Japanese Yen............... 8/19/98 1,110,000,000 8,057,759 (996,074)
Malaysian Ringgit.......... 8/19/98 11,800,000 2,779,466 (165,013)
Netherlands Guilder........ 8/19/98 7,900,000 3,895,636 (4,058)
Norwegian Krona............ 8/19/98 15,700,000 2,048,360 (40,795)
Spanish Peseta............. 8/19/98 2,270,000,000 14,854,400 19,808
Swedish Krona.............. 8/19/98 24,900,000 3,128,687 38,590
Swiss Franc................ 8/19/98 13,600,000 9,011,815 (498,675)
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Belgian Franc.............. 8/19/98 455,000,000 12,262,773 (23,501)
British Pound.............. 8/19/98 20,700,000 34,440,876 (649,116)
Finnish Markka............. 8/19/98 29,300,000 5,355,628 56,243
Hong Kong Dollar........... 8/19/98 27,500,000 3,532,879 2,053
Italian Lira............... 8/19/98 3,550,000,000 1,998,752 (18,587)
Malaysian Ringgit.......... 8/19/98 11,800,000 2,779,466 214,318
Singapore Dollar........... 8/19/98 6,300,000 3,716,529 26,786
Swedish Krona.............. 8/19/98 24,900,000 3,128,687 (12,214)
Swiss Franc................ 8/19/98 6,700,000 4,439,644 227,069
-----------
Total.................... $(2,469,494)
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $388,622,971)....................... $448,667,678
Cash............................................................ 26,932
Receivables:
Investment securities sold..................................... 7,890,263
Dividends...................................................... 1,342,491
Interest....................................................... 32,326
Fund shares sold............................................... 63,095
Other assets.................................................... 475
------------
TOTAL ASSETS................................................. 458,023,260
------------
LIABILITIES:
Payables:
Investment securities purchased................................ 5,994,611
Fund shares sold............................................... 3,978,248
Investment advisory fees....................................... 313,798
Accrued expenses............................................... 617,961
Net unrealized depreciation on forward foreign currency con-
tracts......................................................... 2,469,494
------------
TOTAL LIABILITIES............................................ 13,374,112
------------
NET ASSETS....................................................... $444,649,148
============
NET ASSETS CONSIST OF:
Paid in capital................................................. $385,674,481
Accumulated undistributed net investment income................. 1,437,308
Accumulated net realized loss................................... (65,467)
Net unrealized appreciation..................................... 57,602,826
------------
NET ASSETS................................................... $444,649,148
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $439,328,830 and 36,163,586 shares is-
sued and outstanding)......................................... $ 12.15
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of
$10,772 and 887 shares issued and outstanding)................ $ 12.14
============
SwissKey Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $5,309,546 and 440,453 shares issued
and outstanding).............................................. $ 12.05
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,314,183 for foreign taxes withheld)......... $ 9,245,122
Interest (including securities lending income of $82,824)........ 1,703,252
-----------
TOTAL INCOME.................................................. 10,948,374
-----------
EXPENSES:
Advisory......................................................... 3,475,953
Administrative................................................... 305,643
Custodian........................................................ 228,877
Distribution..................................................... 67,597
Other............................................................ 331,206
-----------
TOTAL EXPENSES................................................ 4,409,276
-----------
NET INVESTMENT INCOME ........................................ 6,539,098
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................... 11,812,215
Futures contracts............................................... (1,031,399)
Foreign currency transactions................................... 1,443,040
-----------
Net realized gain............................................. 12,223,856
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency ............................... 10,352,717
Translation of other assets and liabilities denominated in for-
eign currency.................................................. (107,626)
Futures contracts .............................................. (3,327,266)
Forward contracts............................................... (42,714)
-----------
Change in net unrealized appreciation or depreciation......... 6,875,111
-----------
Net realized and unrealized gain.................................. 19,098,967
-----------
Net increase in net assets resulting from operations.............. $25,638,065
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
YEAR ENDED
ENDED JUNE 30,
JUNE 30, 1998 1997
------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 6,539,098 $ 5,529,755
Net realized gain................................. 12,223,856 24,421,499
Change in net unrealized appreciation or deprecia-
tion ............................................ 6,875,111 35,391,730
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 25,638,065 65,342,984
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I ................................. (6,380,973) (4,371,883)
Brinson Class N.................................. (58) --
SwissKey Class................................... (51,271) (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............... (32,242,400) (16,715,414)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 317,039,181 232,045,893
Shares issued on reinvestment of distributions.... 31,189,854 16,204,754
Shares redeemed................................... (325,627,875) (81,854,223)
------------ ------------
Net increase in net assets resulting from capital
share transactions............................... 22,601,160 166,396,424
------------ ------------
TOTAL INCREASE IN NET ASSETS.................... 15,996,825 215,023,994
------------ ------------
NET ASSETS:
Beginning of year................................. 428,652,323 213,628,329
------------ ------------
End of year (including accumulated undistributed
net investment income of $1,437,308 and
$1,777,930, respectively)........................ $444,649,148 $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>
YEAR ENDED JUNE 30, AUGUST 31, 1993*
---------------------------------------- THROUGH
BRINSON CLASS I 1998 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. 0.18 0.18 0.18 0.15 0.10
Net realized and
unrealized gain
(loss)............... 0.30 1.97 2.05 (0.16) (0.34)
-------- -------- -------- -------- -------
Total income (loss)
from investment
operations......... 0.48 2.15 2.23 (0.01) (0.24)
-------- -------- -------- -------- -------
Less distributions:
Distributions from in-
vestment income...... (0.18) (0.17) (0.18) -- (0.07)
Distributions from net
realized gain........ (0.74) (0.56) (0.56) -- --
-------- -------- -------- -------- -------
Total distributions. (0.92) (0.73) (0.74) -- (0.07)
-------- -------- -------- -------- -------
Net asset value, end of
period................. $ 12.15 $ 12.59 $ 11.17 $ 9.68 $ 9.69
======== ======== ======== ======== =======
Total return (non-
annualized)............ 4.78% 20.27% 23.64% (0.10)% (2.45)%
Ratios/Supplemental da-
ta:
Net assets, end of pe-
riod (in 000s)........ $439,329 $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............ 1.52% 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.................. 49% 25% 20% 14% 12%
Average commission rate
paid per share........ $ 0.0221 $ 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>
YEAR*
ENDED
BRINSON CLASS N JUNE 30, 1998
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of year $ 12.59
-------
Income from investment operations:
Net investment income........................................... 0.16
Net realized and unrealized gain................................ 0.29
-------
Total income from investment operations....................... 0.45
-------
Less distributions:
Distributions from net investment income........................ (0.16)
Distributions from net realized gain............................ (0.74)
-------
Total distributions........................................... (0.90)
-------
Net asset value, end of year $ 12.14
=======
Total return...................................................... 4.51%
Ratios/Supplemental data:
Net assets, end of year (in 000s)................................ $ 11
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.................................... 1.27%
After expense reimbursement..................................... N/A
Portfolio turnover rate.......................................... 49%
Average commission rate paid per share........................... $0.0221
</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>
YEAR ENDED JUNE
30, JULY 31, 1995*
----------------- THROUGH
SWISSKEY CLASS 1998 1997 JUNE 30, 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period........ $ 12.49 $ 11.12 $ 10.26
------- ------- -------
Income from investment operations:
Net investment income..................... 0.08 0.11 0.12
Net realized and unrealized gain.......... 0.30 1.93 1.45
------- ------- -------
Total income from investment operations. 0.38 2.04 1.57
------- ------- -------
Less distributions:
Distributions from net investment income.. (0.08) (0.11) (0.15)
Distributions from net realized gain...... (0.74) (0.56) (0.56)
------- ------- -------
Total distributions..................... (0.82) (0.67) (0.71)
------- ------- -------
Net asset value, end of period.............. $ 12.05 $ 12.49 $ 11.12
======= ======= =======
Total return (non-annualized)............... 3.90% 19.32% 15.78%
Ratios/Supplemental data:
Net assets, end of period (in 000s)........ $ 5,310 $ 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.............. 0.68% 1.02% 0.83%**
After expense reimbursement............... N/A N/A 1.03%**
Portfolio turnover rate.................... 49% 25% 20%
Average commission rate paid per share..... $0.0221 $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 eight series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund (each a
"Fund" and collectively, the "Funds"). Each Fund has three classes of shares
outstanding, Brinson Class I, Brinson Class N and 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 Non-U.S. Equity Fund in the preparation
of its financial statements.
A.INVESTMENT VALUATION:Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or
market on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under
the direction of the Trust's Board of Trustees. Futures contracts are valued at
the settlement price established each day on the exchange on which they are
traded. Forward foreign currency contracts are valued daily using quoted
forward exchange rates. Short-term obligations with a maturity of 60 days or
less are valued at amortized cost, which approximates market value.
B.FOREIGN CURRENCY TRANSLATION:Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases and
sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and
unrealized gain or loss on investments in the statement of operations.
C.INVESTMENT TRANSACTIONS:Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME:Interest income, which includes amortization of premiums
and discounts, is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date, except that certain dividends from foreign securities are
recorded as the information becomes available.
E.FEDERAL INCOME TAXES:It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of its taxable income
to its shareholders. The Fund has met the requirements of the Code applicable
to regulated investment companies for the year ended June 30, 1998, 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 year ended June 30, 1998, were as follows:
<TABLE>
<CAPTION>
ADVISORY ADVISORY
FEE FEES
-------- ----------
<S> <C> <C>
Non-U.S. Equity Fund........................................ 0.80% $3,475,953
</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 for the year ended June 30, 1998 were $5,840.
3.INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1998, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
Non-U.S. Equity Fund.................................. $196,176,481 $198,897,969
</TABLE>
4.FORWARD FOREIGN CURRENCY CONTRACTS
The Fund engages in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation strategies. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Risks associated with such contracts include movement
in the value of the foreign currency relative to the U.S. dollar and the
ability of the counterparty to perform. The unrealized gain, if any, represents
the credit risk to the Fund on a forward foreign currency contract.
Fluctuations in the value of forward foreign currency contracts are recorded
daily as net unrealized gains or losses. The Fund realizes a gain or loss upon
settlement of the contracts. The statement of operations reflects net realized
and net unrealized gains and losses on these contracts. The counterparty to all
forward foreign currency contracts, at and for the year ended June 30, 1998,
was the Fund's custodian or an affiliate of the Fund's custodian.
5.FUTURES CONTRACTS
The Fund may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Fund to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Fund enters into such 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.SECURITY LENDING
The Fund loaned securities to certain brokers with the Fund's custodian acting
as the Fund's lending agent. The Fund earned negotiated lenders' fees, which
are included in interest income in the statement of operations. The Fund
receives securities, which are not reflected in the statement of assets and
liabilities, as collateral against the loaned securities. The Fund monitors the
market value of securities loaned on a daily basis and initially requires
collateral against the loaned securities in an amount at least equal to 105% of
the value of non-U.S. securities loaned. The value of loaned securities and
related collateral at June 30, 1998 was $34,770,031 and $39,692,153,
respectively.
7.DISTRIBUTION PLANS
The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for the Brinson Class N
and the SwissKey Class. Each Plan governs payments made for the expenses
incurred in the promotion and distribution of the Brinson Class N and 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. 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.
8.LINE OF CREDIT
The Trust has entered into an agreement with Chase Manhattan Bank to provide a
364 day $100 million committed line of credit to the Funds. Borrowings will be
made for temporary purposes. Interest on amounts borrowed are calculated at the
Federal Funds rate plus 0.50% per year. The Funds pay a commitment fee of 0.08%
per year of the average daily unutilized amount of the line of credit. During
the year ended June 30, 1998, the Non-U.S. Equity Fund had total borrowings of
$32,600,000 outstanding for 1 day under the agreement.
9.CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
----------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I............... 26,268,807 $312,436,986 19,910,853 $225,344,857
Brinson Class N............... 798 9,817 79 1,000
SwissKey Class................ 387,174 4,592,378 590,377 6,700,036
---------- ------------ ---------- ------------
Total Sales................ 26,656,779 $317,039,181 20,501,309 $232,045,893
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I............... 2,849,536 $ 30,664,100 1,461,013 $ 16,110,105
Brinson Class N............... 10 117 -- --
SwissKey Class................ 49,433 525,637 8,477 94,649
---------- ------------ ---------- ------------
Total Dividend Reinvest-
ment...................... 2,898,979 $ 31,189,854 1,469,490 $ 16,204,754
========== ============ ========== ============
Redemptions:
Brinson Class I............... 26,391,131 $318,236,785 6,945,571 $ 80,838,515
Brinson Class N............... -- -- -- --
SwissKey Class................ 620,542 7,391,090 87,985 1,015,708
---------- ------------ ---------- ------------
Total Redemptions.......... 27,011,673 $325,627,875 7,033,556 $ 81,854,223
========== ============ ========== ============
</TABLE>
- --------------------------------------------------------------------------------
22
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds--Non-U.S. Equity Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Brinson Funds--Non-U.S. Equity Fund as of
June 30, 1998, the related statements of operations for the year then ended and
changes in net assets and the financial highlights for the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--Non-U.S. Equity Fund at June 30, 1998, the results of its
operations for the year then ended and the changes in its net assets and the
financial highlights for the periods indicated therein in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
August 7, 1998
- --------------------------------------------------------------------------------
23
<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>
[SWISS KEY FUNDS LOGO]
10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY .
http://networth.galt.com/swisskey
