<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
Semi-Annual Report
(Unaudited)
Brinson U.S. Large Capitalization Growth Fund
Brinson U.S. Small Capitalization Growth Fund
Brinson High Yield Fund
Annual Report
December 31, 1998
Institutional Asset Management
------------------------------
<PAGE>
Trustees and Officers
Trustees
[BRINSON LOGO Walter E. Auch
APPEARS HERE]
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA Debra L. Nichols
Chairman of the Board Vice President
E. Thomas McFarlan Carolyn M. Burke, CPA
President Secretary and Treasurer
Thomas J. Digenan, CFA, CPA David E. Floyd
Vice President Assistant Secretary
1
<PAGE>
The Funds' Advisor -- Brinson Partners, Inc.
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 265
billion of discretionary institutional assets on an active basis and mutual fund
assets for UBS Private Banking which total over USD 125 billion. In addition,
UBS Brinson acts as the investment advisor to UBS Private Banking. 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 tailored to specific client
objectives and focused upon both risk and return considerations in the context
of full investment cycles. Our investment decisions are based on fundamental
research, internally developed valuation systems and seasoned judgment. Our
independent team approach allows for rapid responses to market changes, while
providing each client with the benefit of our best talent.
2
<PAGE>
Table of Contents
[BRINSON LOGO APPEARS HERE]
Shareholder Letter 4
U.S. Economic and Market Highlights 6
U.S. Balanced Fund (Unaudited) 7
Schedule of Investments 11
Financial Statements 14
Financial Highlights 17
U.S. Equity Fund (Unaudited) 20
Schedule of Investments 24
Financial Statements 26
Financial Highlights 29
U.S. Large Capitalization Equity Fund (Unaudited) 32
Schedule of Investments 36
Financial Statements 37
Financial Highlights 40
U.S. Bond Fund (Unaudited) 43
Schedule of Investments 46
Financial Statements 49
Financial Highlights 52
U.S. Large Capitalization Growth Fund 55
Schedule of Investments 58
Financial Statements 59
Financial Highlights 62
U.S. Small Capitalization Growth Fund 63
Schedule of Investments 66
Financial Statements 67
Financial Highlights 70
High Yield Fund 71
Schedule of Investments 74
Financial Statements 76
Financial Highlights 79
The Brinson Funds--Notes to Financial Statements 80
Report of Independent Auditors 88
Special Meeting of Shareholders 89
3
<PAGE>
Shareholder Letter
[BRINSON LOGO APPEARS HERE]
February 20, 1999
Dear Shareholder:
We are very pleased to present the Report for The Brinson Funds for the six
months ended December 31, 1998. Within this Report, we'll focus on current
domestic economic outlook as well as our current strategies and performance
updates for our seven Domestic Funds: U.S. Balanced Fund, U.S. Equity Fund, U.S.
Bond Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization
Growth Fund, U.S. Small Capitalization Growth Fund and High Yield Fund.
Since our last report to you, Union Bank of Switzerland and Swiss Bank
Corporation merged to become UBS AG, one of the world's major financial
institutions. In connection with this merger, the former SBC Brinson/Brinson
Partners, Inc.'s activities of Swiss Bank Corporation were combined with the
worldwide UBS asset management operations into the UBS Brinson Division of UBS
AG. During this process, the UBS Private Investor Funds merged into the Brinson
fund family on December 18, 1998. This merger created the following three new
Brinson Funds: the U.S. Large Capitalization Growth Fund, the U.S. Small
Capitalization Growth Fund and the High Yield Fund.
The UBS Brinson Division manages over USD 390 billion of institutional assets,
including USD 265 billion of discretionary institutional assets on an active
basis and mutual fund assets for the UBS Private Banking Division and The
Brinson Funds which total over USD 125 billion. The Advisor of The Brinson
Funds, Brinson Partners, Inc., also manages investment portfolios for
corporations, public funds, endowments, foundations, central banks and other
investors located throughout the world.
The U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Large
Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund and High Yield Fund are all actively managed funds
that provide integrated asset management across and within security markets. The
investment process is strategic in nature and is driven by deviations of market
price from fundamental value. This philosophy offers the greatest potential for
achieving enhanced, long-term returns while controlling risk.
4
<PAGE>
Shareholder Letter
[BRINSON LOGO APPEARS HERE]
Each of our Funds employ the same value-oriented investment philosophy applied
across the U.S. spectrum. Each Fund also uses the resources of our entire
worldwide research team. All of our analysts apply the same value philosophy to
their work. Investment performance for our clients is maximized within and
across major asset classes through a comprehensive understanding of global
investment markets and their interrelationships. Portfolio structure is tailored
to specific objectives and focused upon both risk and return considerations in
the context of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our talent. The Reports that follow highlight the investment
characteristics and the performance of the respective Funds.
We very much appreciate your continued trust and the confidence you have placed
in The Brinson Funds.
Sincerely,
/s/ Gary P. Brinson
Gary P. Brinson
President and Chief Investment Officer
Brinson Partners, Inc.
5
<PAGE>
U.S. Economic and Market Highlights
[BRINSON LOGO APPEARS HERE]
Economic growth in 1998 was largely unaffected by the turmoil in Asia and
Russia. While demand for exports softened and imports continued strong, the
consumer kept spending throughout the year and the measured savings rate turned
negative for the first time ever. Corporate investment spending was also very
strong, contributing about 13/4 percentage points of real GDP growth on average
for the first three quarters of the year.
A primary driver of the strong investment spending was the low cost of equity
capital. By the end of the year, the market had shaken off the credit worries of
autumn and risen to new highs. This was in spite of a quickly deteriorating
earnings picture. Because of the strong investment environment of the last few
years and the downturn in Asia, many industries, particularly commodity-related,
are suffering from relatively severe overcapacity.
Commodity weakness has hit the energy sector particularly hard, with real oil
prices lower than at any time in the last 30 years. This has had a positive
effect on inflation, as the headline Consumer Price Index rose by only 11/2%
during the year. Looking at the core rate, absent energy and food price effects,
inflation has been running at about 21/4% for the last few years. The provision
of substantial amounts of liquidity by the Fed, while not immediately boosting
inflation, has increased the risks of a jump in the CPI in the future.
U.S. Environment
[CHARTS APPEAR HERE]
Major Markets
One Year Ended December 31, 1998
U.S. Cash Equivalents U.S. Bonds U.S. Equities
12/31/98 4.55 8.72 23.43
Saloman U.S. Treasury Benchmark Returns
One Year Ended December 31, 1998
1 5.89
2 6.6
5 9.61
10 12.88
30 16.51
Maturity (Years)
Top Ten Industry Returns Relative to S&P 500
One Year Ended December 31, 1998
Coal & Uranium 47.03
Telephone, Telegraph 29.7
Liquor 28.17
Business Machines 21.67
Drugs, Medicine 21.51
Forest Products 12.13
Media 12.05
Mortgage Financing 10.66
Retail (Food) 8.91
Retail (Other) 8.13
Source BARRA
Bottom Ten Industry Returns Relative to S&P 500
One Year Ended December 31, 1998
Oil Service -62.88
Dom Petroleum -37.94
Photographic -34.80
Water Transpor -32.69
Precious Metals -28.16
Apparel, Textiles -27.83
Tire & Rubber -27.60
Containers -27.37
Oil Refining, Dis -25.53
Iron & Steel -25.50
Source BARRA
6
<PAGE>
U.S. Balanced Fund
[BRINSON LOGO 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 produced an annualized return of
14.81% since its performance inception on December 31, 1994. Over the same
period, the return on the U.S. Balanced Mutual Fund Index was 21.55%. The Fund's
performance was achieved with an annualized volatility over this period of
5.32%, considerably below the benchmark's volatility of 9.75%. For calendar year
1998, the Brinson U.S. Balanced Fund Class I returned 9.92%, substantially below
the benchmark return of 18.85%. This underperformance, and the reason for the
long-term performance characteristics, was due primarily to the equity
underweight and bond overweight. Performance was also adversely affected by
security selection as the Fund's U.S. Equity performance for the year fell below
its benchmark.
Performance of the equity market was particularly difficult to match, given that
it was driven in large part by a collection of the largest capitalization
companies, particularly in the technology area. In the bond market, high yield
and investment-grade corporate debt were hurt along with equities during the
market crisis in the fall. However, the debt markets only partially recovered on
the series of Federal Reserve interest rate cuts, whereas many equity indices
reached new highs before the end of the year.
This continuation of the upward march in equities has produced a very high level
of overpricing and consequent paltry return expectations. Bonds, although only
fairly priced on an absolute basis, remain quite attractive relative to
equities. Thus, the Fund strategy remains substantially overweighted bonds
relative to equities. A portion of the bond allocation is held in Treasury
Inflation Protected Securities, or TIPS. The difference in yields between these
bonds and conventional Treasury bonds, which is a measure of inflation
expectations, had fallen well below 1%. Our expectation is that average
inflation over the next decade is unlikely to be quite so subdued, and the TIPS
are an attractive alternative to conventional bonds.
7
<PAGE>
U.S. Balanced Fund
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 12/31/94*
ended ended ended to
12/31/98 12/31/98 12/31/98 12/31/98
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson U.S. Balanced Fund Class I 3.74% 9.92% 11.47% 14.81%
- ----------------------------------------------------------------------------------
U.S. Balanced Mutual Fund Index** 6.67 18.85 19.03 21.55
- ----------------------------------------------------------------------------------
Wilshire 5000 Index 6.90 23.43 25.24 27.95
- ----------------------------------------------------------------------------------
Salomon Smith Barney Broad Investment Grade
(BIG) Bond Index 4.57 8.72 7.29 10.00
- ----------------------------------------------------------------------------------
</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 Smith Barney Broad Investment Grade Bond
Index.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Balanced Fund Class I, the U.S. Balanced Mutual Fund Index, the Wilshire 5000
Index and the Salomon Smith Barney BIG Bond Index if you had invested $1,000,000
on December 31, 1994, and had reinvested all your income dividends and capital
gain distributions through December 31, 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,
Wilshire 5000 Index and Salomon Smith Barney BIG Bond Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
Brinson U.S. Balanced Salomon Smith
U.S. Balanced Mutual Fund Barney Big Bond
Fund Class I Index Wilshire 5000 Index
-------------- ------------- ------------- ---------------
12/31/94 1,000,000 1,000,000 1,000,000 1,000,000
1/31/95 1,019,000 1,020,459 1,021,610 1,020,700
2/28/95 1,050,000 1,054,246 1,062,301 1,044,584
3/31/95 1,064,000 1,074,390 1,090,303 1,050,643
4/30/95 1,080,000 1,096,416 1,117,397 1,065,037
5/31/95 1,120,000 1,133,880 1,155,243 1,107,319
6/30/95 1,139,086 1,160,041 1,192,095 1,115,070
7/31/95 1,154,301 1,190,257 1,241,150 1,112,840
8/31/95 1,170,530 1,202,592 1,253,251 1,125,637
9/30/95 1,192,845 1,236,362 1,301,050 1,136,219
10/31/95 1,199,945 1,234,092 1,287,988 1,151,444
11/30/95 1,236,461 1,274,817 1,342,560 1,169,406
12/31/95 1,254,813 1,294,523 1,364,511 1,185,544
1/31/96 1,278,797 1,320,146 1,401,066 1,193,606
2/29/96 1,273,346 1,327,345 1,425,571 1,173,434
3/31/96 1,276,616 1,333,439 1,441,166 1,164,985
4/30/96 1,279,887 1,351,402 1,476,778 1,156,364
5/31/96 1,284,248 1,375,182 1,517,153 1,155,786
6/30/96 1,293,124 1,374,034 1,504,667 1,170,696
7/31/96 1,273,247 1,327,149 1,423,490 1,173,857
8/31/96 1,287,603 1,354,048 1,469,027 1,172,096
9/30/96 1,324,045 1,409,152 1,547,238 1,192,490
10/31/96 1,354,965 1,433,054 1,568,869 1,219,321
11/30/96 1,405,762 1,503,041 1,672,806 1,239,440
12/31/96 1,396,859 1,487,401 1,653,954 1,228,533
1/31/97 1,414,616 1,541,133 1,742,490 1,233,201
2/28/97 1,419,351 1,541,265 1,741,688 1,234,558
3/31/97 1,394,492 1,491,506 1,664,653 1,222,089
4/30/97 1,418,167 1,541,250 1,737,249 1,239,565
5/31/97 1,459,599 1,617,300 1,860,333 1,251,217
6/30/97 1,493,510 1,672,330 1,945,797 1,266,106
7/31/97 1,555,541 1,771,762 2,095,390 1,300,418
8/31/97 1,530,490 1,723,138 2,016,624 1,289,234
9/30/97 1,563,891 1,798,097 2,135,625 1,308,186
10/31/97 1,548,383 1,768,165 2,064,487 1,326,893
11/30/97 1,559,120 1,808,702 2,132,078 1333,129
12/31/97 1,581,464 1,836,885 2,171,479 1,346,727
1/31/98 1,597,411 1,851,662 2,183,270 1,364,100
2/28/98 1,638,609 1,938,829 2,342,213 1,363,145
3/31/98 1,670,504 2,004,551 2,459,440 1,368,461
4/30/98 1,666,517 2,023,665 2,488,634 1,375,577
5/31/98 1,670,504 1,995,462 2,422,411 1,388,783
6/30/98 1,675,623 2,046,664 2,507,341 1,400,171
7/31/98 1,661,933 2,019,021 2,452,405 1,403,111
8/31/98 1,614,019 1,825,458 2,070,492 1,424,579
9/30/98 1,672,885 1,918,042 2,205,737 1,458,199
10/31/98 1,705,740 2,007,777 2,369,843 1,451,637
11/30/98 1,726,275 2,093,822 2,519,072 1,459,621
12/31/98 1,738,302 2,183,183 2,680,268 1,464,146
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
Total Return
<TABLE>
<CAPTION>
6 months 1 year 6/30/97*
ended ended to
12/31/98 12/31/98 12/31/98
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson U.S. Balanced Fund Class N 3.61% 9.92% 10.50%
- --------------------------------------------------------------------------
U.S. Balanced Mutual Fund Index** 6.67 18.85 19.45
- --------------------------------------------------------------------------
Wilshire 5000 Index 6.90 23.43 23.80
- --------------------------------------------------------------------------
Salomon Smith Barney Broad Investment Grade
(BIG) Bond Index 4.57 8.72 10.17
- --------------------------------------------------------------------------
</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 Smith Barney Broad Investment Grade Bond
Index.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Balanced Fund Class N, the U.S. Balanced Mutual Fund Index, the Wilshire 5000
Index and the Salomon Smith Barney BIG Bond Index if you had invested $1,000,000
on June 30, 1997, and had reinvested all your income dividends and capital gain
distributions through December 31, 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,
Wilshire 5000 Index and Salomon Smith Barney BIG Bond Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
Brinson U.S. Balanced Salomon Smith
U.S. Balanced Mutual Fund Barney Big Bond
Fund Class N Index Wilshire 5000 Index
-------------- ------------- ------------ ---------------
6/30/97 $1,000,000 $1,000,000 $1,000,000 $1,000,000
7/31/97 $1,041,534 $1,059,457 $1,076,880 $1,027,100
8/31/97 $1,023,962 $1,030,382 $1,036,400 $1,018,267
9/30/97 $1,046,326 $1,075,205 $1,097,558 $1,033,235
10/31/97 $1,035,144 $1,057,307 $1,060,998 $1,048,011
11/30/97 $1,042,332 $1,081,546 $1,095,735 $1,052,936
12/31/97 $1,057,159 $1,098,399 $1,115,985 $1,063,676
1/31/98 $1,067,820 $1,107,235 $1,122,044 $1,077,398
2/28/98 $1,095,359 $1,159,358 $1,203,729 $1 076,644
3/31/98 $1,117,569 $1,198,658 $1,263,976 $1,080,842
4/30/98 $1,114,903 $1,210,087 $1,278,979 $1,086,463
5/31/98 $1,117,569 $1,193,223 $1,244,946 $1,096,893
6/30/98 $1,121,533 $1,223,840 $1,288,593 $1,105,887
7/31/98 $1,112,392 $1,207,310 $1,260,360 $1,108,210
8/31/98 $1,080,401 $1,091,566 $1,064,084 $1,125,165
9/30/98 $1,118,791 $1,146,928 $1,133,590 $1,l51,719
10/31/98 $1,l40,728 $1,200,587 $1,217,930 $1,146,537
11/30/98 $1,154,438 $1,252,039 $1,294,623 $1,152,8431
12/31/98 $1,162,059 $1,305,474 $1,337,466 $1,156,416
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>
U.S. Balanced Fund
[BRINSON LOGO APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- ------------------------------------------------------------------------------
U.S. Equities
Energy 1.49%
-------
Capital Investment
Capital Goods 4.53
Technology 6.93
-------
11.46
Basic Industries
Chemicals 1.31
Housing/Paper 4.61
Metals 0.21
-------
6.13
Consumer
Non-Durables 3.70
Retail/Apparel 2.17
Autos/Durables 1.73
Health: Drugs 2.29
Health: Non-Drugs 2.22
-------
12.11
Financial
Banks 4.69
Non-Banks 3.37
-------
8.06
Utilities
Electric 1.62
Telephone 0.39
-------
2.01
Transportation 4.90%
Services/Misc 2.16
-------
Total U.S. Equities 48.32*
-------
U.S. BONDS
Corporate Bonds
Airlines 1.02
Banks 0.90
Consumer 0.73
Financial Services 3.35
Industrial Components 0.60
Services/Miscellaneous 1.10
Utilities 2.55
-------
10.25
International Dollar Bonds 3.57
Mortgage-Backed Securities 7.17
U.S. Government Agencies 12.66
U.S. Government Obligations 15.24
-------
Total U.S. Bonds 48.89*
-------
SHORT-TERM INVESTMENTS 2.21*
-------
TOTAL INVESTMENTS 99.42
CASH AND OTHER ASSETS,
LESS LIABILITIES 0.58
-------
NET ASSETS 100.00%
=======
* The Fund held a long position in U.S. Treasury futures on December 31, 1998
which increased U.S. bond exposure from 48.89% to 66.13%. The Fund also held a
short position in stock index futures which reduced U.S. equity exposure from
48.32% to 31.00%. These two adjustments result in a net increase in the Fund's
exposure to Short-Term Investments from 2.21% to 2.29%.
Asset Allocation
As of December 31, 1998 (Unaudited)
Current
Benchmark Strategy
- ------------------------------------
U.S. Equity 65% 30%
U.S. Bonds 35 70
- ------------------------------------
100% 100%
Top Ten U.S. Equity Holdings
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- ------------------------------------------------
1. Xerox Corp. 2.94%
2. FDX Corp. 2.04%
3. Burlington Northern Santa Fe Corp. 2.03%
4. Lockheed Martin Corp. 1.77%
5. Philip Morris Companies, Inc. 1.69%
6. Baxter International, Inc. 1.26%
7. Kimberly Clark Corp. 1.23%
8. Entergy Corp. 1.16%
9. CIGNA Corp. 1.14%
10. Aon Corp. 1.13%
- ------------------------------------------------
10
<PAGE>
U.S. Balanced Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
Shares Value
----------- ------------------
U.S. Equities -- 48.32%
Advanced Micro Devices, Inc. (b) 10,300 $ 298,056
Aetna, Inc. 6,300 495,337
Allergan, Inc. 2,600 168,350
Alza Corp. (b) 5,400 282,150
American Standard Companies, Inc. (b) 5,700 204,844
Aon Corp. 9,200 509,450
Automatic Data Processing, Inc. 4,200 336,787
BankBoston Corp. 2,900 112,919
Baxter International, Inc. 8,800 565,950
Beckman Coulter Inc. 2,300 124,775
Bestfoods 3,800 202,350
Biogen, Inc. (b) 1,300 107,900
Birmingham Steel Corp. 3,200 13,400
Burlington Northern Santa Fe Corp. 27,000 911,250
Champion Enterprises, Inc. (b) 1,200 32,850
Champion International Corp. 2,700 109,350
Chase Manhattan Corp. 4,700 319,894
CIGNA Corp. 6,600 510,262
Circuit City Stores-Circuit City Group 7,400 369,537
CMS Energy Corp. 7,000 339,062
Comerica, Inc. 2,200 150,013
CommScope, Inc. (b) 3,766 63,316
Comverse Technology, Inc. (b) 2,420 171,820
Consolidated Stores Corp. (b) 7,200 145,350
Corning, Inc. 10,600 477,000
Covance, Inc. (b) 2,675 77,909
Crown Cork & Seal Co., Inc. 2,600 80,113
Dial Corp. 2,800 80,850
Eastman Chemical Co. 3,000 134,250
Electronic Data Systems Corp. 9,900 497,475
EMC Corp. (b) 3,200 272,000
Entergy Corp. 16,700 519,787
FDX Corp. (b) 10,300 916,700
First American Corp. of Tennessee 1,400 62,125
First Data Corp. 13,058 413,775
First Security Corp. 2,625 61,359
Fleet Financial Group, Inc. 7,000 312,812
Fleetwood Enterprises, Inc. 900 31,275
Food Lion Inc., Class A 12,300 130,688
Fort James Corp. 9,300 372,000
General Instrument Corp. (b) 12,300 417,431
General Semiconductor, Inc. (b) 3,950 32,341
Genzyme Corp. (b) 2,200 109,450
Genzyme-Molecular Oncology (b) 237 770
Geon Co. 1,500 34,500
Goodyear Tire & Rubber Co. 7,100 358,106
Great Lakes Chemical Corp. 1,700 68,000
GreenPoint Financial Corp. 3,100 108,888
Harnischfeger Industries, Inc. 3,800 38,713
HCR Manor Care, Inc. (b) 2,850 83,719
Hibernia Corp., Class A 3,000 52,125
Household International Inc. 5,100 202,088
IMC Global Inc. 8,500 181,688
Johnson Controls Inc. 2,600 153,400
Kimberly Clark Corp. 10,100 550,450
Shares Value
----------- ------------------
Lafarge Corp. 2,400 $ 97,200
Lear Corp. (b) 6,500 250,250
Lockheed Martin Corp. 9,371 794,192
Lyondell Petrochemical Co. 7,800 140,400
Martin Marietta Materials, Inc. 1,536 95,520
Masco Corp. 12,600 362,250
Nabisco Holdings Corp., Class A 5,500 228,250
National Service Industries, Inc. 1,600 60,800
Nextel Communications, Inc., Class A (b) 7,500 177,188
Norfolk Southern Corp. 11,800 373,912
Peco Energy Co. 9,400 391,275
Pentair, Inc. 2,900 115,456
Philip Morris Companies, Inc. 14,200 759,700
Praxair, Inc. 5,000 176,250
Raytheon Co., Class B 9,200 489,900
Regions Financial Corp. 1,400 56,438
Schering Plough Corp. 5,000 276,250
Sears, Roebuck and Co. 7,800 331,500
Southdown, Inc. 3,116 184,428
St. Jude Medical, Inc. (b) 5,100 141,206
Timken Co. 900 16,988
TRW, Inc. 300 16,856
Tyson Foods, Inc., Class A 10,000 212,500
Ultramar Diamond Shamrock Corp. 6,090 147,683
Unocal Corp. 3,800 110,913
US Bancorp 6,959 247,044
USG Corp. 1,200 61,125
Vencor, Inc. (b) 5,200 23,400
Ventas, Inc. 5,200 63,375
Viad Corp. 5,300 160,988
Wells Fargo and Co. 7,000 279,562
Witco Corp. 1,900 30,281
Xerox Corp. 11,200 1,321,600
York International Corp. 3,400 138,763
------------------
Total U.S. Equities (Cost $18,571,684) 21,710,202
------------------
Face
Amount Value
----------- ------------------
Bonds -- 48.89%
U.S. Corporate Bonds -- 10.25%
Archer Daniels, 6.950%, due 12/15/97 $ 250,000 $ 270,313
Citicorp Series F, 6.375%, due 11/15/08 200,000 207,480
Continental Airlines, Inc., EETC, 6.900%,
due 01/02/18 450,000 457,389
Donaldson Lufkin & Jenrette FRN, 6.700%,
due 06/30/00 415,000 419,243
Enron Corp., 6.750%, due 08/01/09 125,000 128,924
MBNA Global Capital Securities FRN,
6.019%, due 02/01/27 215,000 197,857
Noram Energy Corp., 6.375%,
due 11/01/03 200,000 203,244
PanAMSat Corp., 6.000%, due 01/15/03 335,000 332,368
Residential Asset Securitization Trust
97-A10, Class A1, 7.250%, due 12/25/27 609,890 615,336
97-A11, Class A2, 7.000%, due 01/25/28 221,995 222,808
Sprint Capital Corp., 6.875%, due 11/15/28 200,000 207,676
11
<PAGE>
Face
Amount Value
----------- ------------------
TCI Communications, Inc., 8.750%,
due 08/01/15 $ 220,000 $ 274,132
Time Warner Inc., 7.570%, due 02/01/24 290,000 327,065
Tyco International Group, 144A, 5.875%,
due 11/01/04 250,000 248,459
U.S.A. Waste Services, 6.500%,
due 12/15/02 360,000 367,336
Williams Holdings of Delaware, 6.500%,
due 12/01/08 125,000 123,620
4,603,250
International Dollar Bonds -- 3.57%
Abbey National PLC, 6.700%, Resettable
Perpetual Step-up Notes 250,000 244,866
Credit Suisse-London, 144A, 7.900%,
Resettable Perpetual Step-up Notes 270,000 270,000
Empresa Nacional Electric, 8.125%,
due 02/01/2097 200,000 164,000
LKB-Baden Wuerttemberg Finance NV,
8.125%, due 01/27/00 280,000 287,451
Ras Laffan Liquified Natural Gas Co., Ltd.,
144A, 8.294%, due 03/15/14 235,000 193,701
Southern Investments UK, 6.800%,
due 12/01/06 430,000 445,894
------------------
1,605,912
------------------
Mortgage-Backed Securities -- 7.17%
First Security Auto Grantor Trust Series 98-A,
Class A, 5.970%, due 04/15/04 494,513 498,306
Morgan Stanley Capital, Inc., 6.830%,
due 10/15/06 1,058,814 1,101,166
Prudential Home Mortgage Securities
93-43, Class A9, 6.750%, due 10/25/23 728,674 733,935
UCFC Home Equity Loan 97-C, Class A8,
FRN, 5.478%, due 09/15/27 894,012 885,420
------------------
3,218,827
------------------
U.S. Government Agencies -- 12.66%
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23 454,644 472,021
9.000%, due 03/01/24 228,551 243,014
Federal National Mortgage Association
6.789%, due 11/01/07 499,291 532,694
7.500%, due 02/25/22 728,836 761,691
0.000%, due 09/25/22 330,540 305,896
FNCI, 8.000%, due 02/01/13 415,446 428,169
Government National Mortgage Association
8.000%, due 08/15/22 625,324 651,092
7.000%, due 12/15/23 730,038 747,464
7.500%, due 06/15/24 568,246 585,733
Jordan Aid, 8.750%, due 09/01/19 775,765 961,731
------------------
5,689,505
------------------
Face
Amount Value
----------- ------------------
U.S. Government Obligations -- 15.24%
U.S. Treasury Notes and Bonds
7.500%, due 02/15/05 $ 140,000 $ 160,258
8.000%, due 11/15/21 1,605,000 2,150,199
U.S. Treasury Inflation Indexed Note
3.625%, due 01/15/08 4,210,000 4,189,272
3.625%, due 04/15/28 350,000 345,768
------------------
6,845,497
------------------
Total U.S. Bonds (Cost $21,742,928) 21,962,991
------------------
Short-Term Investments -- 2.21%
U.S. Government Obligations -- 1.02%
U.S. Treasury Bill 4.320%, due 02/25/99 460,000 457,143
------------------
Investment Companies -- 1.19%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund 534,192 534,192
------------------
Total Short-Term Investments
(Cost $991,086) 991,335
------------------
Total Investments
(Cost $41,305,698) -- 99.42% (a) 44,664,528
------------------
Cash and other assets, less
liabilities -- 0.58% 261,475
------------------
Net Assets -- 100% $ 44,926,003
==================
See accompanying notes to schedule of investments.
12
<PAGE>
U.S. Balanced Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $41,305,698; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $ 4,581,591
Gross unrealized depreciation (1,222,761)
-----------
Net unrealized appreciation $ 3,358,830
===========
(b) Non-income producing security
FRN: Floating rate note--The rate disclosed is that in effect at December 31,
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 December 31,
1998, the value of these securities amounted to $831,037, or 1.85% of net
assets.
Resettable Perpetual Step-up Notes: 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 December
31, 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, 51 contracts March 1999 $5,768,578 $5,780,531 $ 11,953
10 Year U.S. Treasury Note, 9 contracts March 1999 1,067,688 1,072,406 4,718
30 Year U.S. Treasury Bond, 7 contracts March 1999 896,737 894,469 (2,268)
Index Futures Sale Contracts
Standard & Poor's 500, 25 contracts March 1999 7,302,950 7,784,375 (481,425)
-----------
Total $ (467,022)
===========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at December 31, 1998 was $457,143.
See accompanying notes to financial statements.
13
<PAGE>
U.S. Balanced Fund -- Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $40,771,506) $ 44,130,336
Affiliated issuers (Cost $534,192) 534,192
Cash 93,114
Receivables:
Investment securities sold 34,069
Dividends 42,873
Interest 295,082
Other assets 7,676
------------
TOTAL ASSETS 45,137,342
------------
LIABILITIES:
Payables:
Investment securities purchased 116,073
Fund shares redeemed 1,833
Investment advisory fees 19,654
Variation margin 23,203
Accrued expenses 50,576
------------
TOTAL LIABILITIES 211,339
------------
NET ASSETS $ 44,926,003
============
NET ASSETS CONSIST OF:
Paid in capital 14,425,066
Distribution in excess of net investment income (16,787)
Accumulated net realized gain 27,625,916
Net unrealized appreciation 2,891,808
------------
NET ASSETS $ 44,926,003
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per
share (Based on net assets of $42,780,766 and 4,554,478
shares issued and outstanding) $ 9.39
============
Brinson Class N:
Net asset value, offering price and redemption price per
share (Based on net assets of $1,159 and 123 shares
issued and outstanding) $ 9.42
============
UBS Investment Funds Class:
Net asset value, offering price and redemption price per
share (Based on net assets of $2,144,078 and 229,620
shares issued and outstanding) $ 9.34
============
See accompanying notes to financial statements.
14
<PAGE>
U.S. Balanced Fund -- Financial Statements
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
INVESTMENT INCOME:
Interest $ 956,815
Dividends 184,098
-------------
TOTAL INCOME 1,140,913
-------------
EXPENSES:
Advisory 198,756
Professional 28,974
Registration 14,530
Distribution 5,002
Other 25,127
-------------
TOTAL EXPENSES 272,389
Expenses waived by Advisor (40,475)
-------------
NET EXPENSES 231,914
-------------
NET INVESTMENT INCOME 908,999
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on:
Investments 3,445,075
Future contracts 498,232
-------------
Net realized gain 3,943,307
-------------
Change in net unrealized appreciation or depreciation on:
Investments (4,180,368)
Future contracts (413,603)
-------------
Change in net unrealized appreciation or depreciation (4,593,971)
-------------
Net realized and unrealized loss (650,664)
-------------
Net increase in net assets resulting from operations $ 258,335
=============
See accompanying notes to financial statements.
15
<PAGE>
U.S. Balanced Fund -- Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 908,999 $ 9,285,597
Net realized gain 3,943,307 43,393,817
Change in net unrealized appreciation or
depreciation (4,593,971) (19,387,830)
------------- --------------
Net increase in net assets resulting from
operations 258,335 33,291,584
------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from and in excess of net investment
income:
Brinson Class I (2,154,721) (11,202,072)
Brinson Class N (56) (62)
UBS Investment Funds Class (108,248) (96,209)
Distributions from net realized gain:
Brinson Class I (9,074,452) (20,202,719)
Brinson Class N (243) (75)
UBS Investment Funds Class (483,100) (121,168)
------------- --------------
Total distributions to shareholders (11,820,820) (31,622,305)
------------- --------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 8,764,497 58,797,856
Shares issued on reinvestment of distributions 11,632,239 31,535,417
Shares redeemed (46,345,419) (294,075,195)
------------- --------------
Net decrease in net assets resulting from capital
share transactions (25,948,683) (203,741,922)
------------- --------------
TOTAL DECREASE IN NET ASSETS (37,511,168) (202,072,643)
------------- --------------
NET ASSETS:
Beginning of period 82,437,171 284,509,814
------------- --------------
End of period (including accumulated
undistributed (distributions in excess of)
net investment income of $(16,787) and
$1,337,239, respectively) $ 44,926,003 $ 82,437,171
============= ==============
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
U.S. Balanced Fund -- Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, December 30, 1994*
December 31, 1998 ------------------------------------- Through
Brinson Class I (Unaudited) 1998 1997 1996 June 30, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.24 $ 12.53 $ 11.71 $ 11.23 $ 10.00
------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.19*** 0.49*** 0.47 0.44 0.23
Net realized and unrealized gain 0.24 0.93 1.29 1.04 1.16
------- -------- -------- -------- --------
Total income from investment operations 0.43 1.42 1.76 1.48 1.39
------- -------- -------- -------- --------
Less distributions:
Distributions from net investment income (0.63) (0.77) (0.40) (0.43) (0.16)
Distributions from net realized gain (2.65) (0.94) (0.54) (0.57) --
------- -------- -------- -------- --------
Total distributions (3.28) (1.71) (0.94) (1.00) (0.16)
------- -------- -------- -------- --------
Net asset value, end of period $ 9.39 $ 12.24 $ 12.53 $ 11.71 $ 11.23
======= ======== ======== ======== ========
Total return (non-annualized) 3.74% 12.19% 15.50% 13.52% 13.91%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $42,781 $80,556 $282,860 $227,829 $157,724
Ratio of expenses to average net assets:
Before expense reimbursement 0.94%** 0.81% 0.88% 1.01% 1.06%**
After expense reimbursement 0.80%** 0.80% 0.80% 0.80% 0.80%**
Ratio of net investment income to average net assets:
Before expense reimbursement 3.08%** 3.88% 3.78% 3.76% 4.36%**
After expense reimbursement 3.22%** 3.89% 3.86% 3.97% 4.63%**
Portfolio turnover rate 65% 194% 329% 240% 196%
</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.
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>
Six Months Ended Year*
December 31, 1998 Ended
Brinson Class N (Unaudited) June 30, 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $12.27 $12.53
------- -------
Income from investment operations:
Net investment income 0.19*** 0.47***
Net realized and unrealized gain 0.23 0.94
------- -------
Total income from investment operations 0.42 1.41
------- -------
Less distributions:
Distributions from net investment income (0.62) (0.73)
Distributions from net realized gain (2.65) (0.94)
------- -------
Total distributions (3.27) (1.67)
------- -------
Net asset value, end of period $ 9.42 $12.27
======= =======
Total return (non-annualized) 3.61% 12.15%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 1 $ 1
Ratio of expenses to average net assets:
Before expense reimbursement 1.19%** 1.06%
After expense reimbursement 1.05%** 1.05%
Ratio of net investment income to average net assets:
Before expense reimbursement 2.83%** 3.63%
After expense reimbursement 2.97%** 3.64%
Portfolio turnover rate 65% 194%
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
** 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. Balanced Fund -- Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended July 31, 1995*
December 31, 1998 Year Ended Year Ended Through
UBS Investment Funds Class (Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.19 $ 12.46 $ 11.67 $ 11.38
--------- -------- --------- --------
Income from investment operations:
Net investment income 0.16*** 0.42*** 0.38 0.42
Net realized and unrealized gain 0.23 0.95 1.31 0.86
--------- -------- --------- --------
Total income from investment operations 0.39 1.37 1.69 1.28
--------- -------- --------- --------
Less distributions:
Distributions from net investment income (0.59) (0.70) (0.36) (0.42)
Distributions from net realized gain (2.65) (0.94) (0.54) (0.57)
--------- -------- --------- --------
Total distributions (3.24) (1.64) (0.90) (0.99)
--------- -------- --------- --------
Net asset value, end of period $ 9.34 $ 12.19 $ 12.46 $ 11.67
========= ======== ========= ========
Total return (non-annualized) 3.46% 11.79% 14.99% 11.54%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 2,144 $ 1,880 $ 1,649 $ 779
Ratio of expenses to average net assets:
Before expense reimbursement 1.44%** 1.31% 1.38% 1.51%**
After expense reimbursement 1.30%** 1.30% 1.30% 1.30%**
Ratio of net investment income to average net assets:
Before expense reimbursement 2.58%** 3.38% 3.28% 3.26%**
After expense reimbursement 2.72%** 3.39% 3.36% 3.47%**
Portfolio turnover rate 65% 194% 329% 240%
</TABLE>
* Commencement of UBS Investment Funds 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
[BRINSON LOGO APPEARS HERE]
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 21.53% compared to the 22.40%
return of its benchmark, the Wilshire 5000 Equity Index. This performance was
achieved at an annualized volatility of 14.02%, below the 14.30% volatility for
the Wilshire 5000 Equity Index. For calendar year 1998, the total return of the
Brinson U.S. Equity Fund Class I was 18.57%, trailing the 23.43% return for its
benchmark. The following paragraphs review the sources of Fund underperformance
for the year.
Market exposure (average beta of 0.95) detracted modestly from the Fund relative
performance in the very strong equity environment which characterized 1998.
Factor weightings had the largest negative impact on active returns for the full
year. Among the most significant negative factor positions were the
underexposure in the relative strength and size measures, as a relatively narrow
segment of the largest capitalization stocks continued to dominate market
performance. Most of these large 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
pockets of global stress such as South East Asia, Russia and Brazil. The Fund
has minimal exposure to these largest stocks. Our valuation work suggests peak
levels of overvaluation.
Industry weightings also detracted from active returns during 1998. The
technology, telecommunications and drug industries relatively outperformed for
the year. Underweights to these industries detracted from performance. The
underweight in energy continued to contribute to performance as oil prices
plunged to nearly ten dollars per barrel by the end of the year. Our overweights
in economically sensitive basic industry, tire and railroad stocks also
detracted from performance. Slowing industrial production, lower capacity
utilization rates and the build-up of capital stock over the last seven years
have led to overcapacity in many of the basic industries. Commodity prices,
which deteriorated throughout the year, fell more sharply during the fourth
quarter, below our estimate of normal or equilibrium levels for a number of
metals, chemicals and paper grades.
Stock selection had a modest positive effect on the Fund for the year. Among
large capitalization issues, the best performers were Federal Express, EMC Corp.
and Cigna while the worst were Lockheed Martin and Sears. In the intermediate
capitalization segment of the Fund, the most positive contributors were Peco
Energy, Allergan and Circuit City while the weakest were Harnischfeger,
Lyondell, Nextel and Consolidated Stores.
20
<PAGE>
U.S. Equity Fund
[BRINSON LOGO APPEARS HERE]
Total Return
6 months 1 year 3 years 2/28/94*
ended ended ended to
12/31/98 12/31/98 12/31/98 12/31/98
- ----------------------------------------------------------------------------
Brinson U.S. Equity Fund Class I 4.32% 18.57% 22.93% 21.53%
- ----------------------------------------------------------------------------
Wilshire 5000 Equity Index 6.90 23.43 25.24 22.40
- ----------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Equity Fund Class I.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Equity Fund Class I and the Wilshire 5000 Equity Index if you had invested
$1,000,000 on February 28, 1994, and had reinvested all your income dividends
and capital gain distributions through December 31, 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 Equity Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
Brinson U.S.
Equity Fund Wilshire 5000
Class I Index
------------- -------------
2/28/94 1,000,000 1,000,000
942,943 954,720
964,965 963,876
984,985 973,322
6/30/94 970,003 947,285
992,118 975,401
1,055,444 1,018,484
1,019,258 998,766
1,014,232 1,015,076
979,050 977,904
12/31/94 983,676 991,086
1,004,021 1,012,504
1,049,797 1,052,832
1,076,245 1,080,584
1,099,642 1,107,437
1,140,332 1,144,946
6/30/95 1,178,023 1,181,470
1,219,913 1,230,087
1,242,391 1,242,080
1,289,389 1,289,453
1,285,302 1,276,507
1,358,865 1,330,593
12/31/95 1,382,877 1,352,348
1,439,578 1,388,577
1,462,678 1,412,864
1,489,979 1,428,320
1,518,329 1,463,614
1,542,480 1,503,629
6/30/96 1,538,200 1,491,254
1,464,400 1,410,801
1,520,277 1,455,933
1,588,806 1,533,447
1,622,543 1,554,884
1,735,351 1,657,895
12/31/96 1,737,594 1,639,211
1,800,717 1,726,958
1,811,046 1,726,163
1,751,366 1,649,815
1,805,308 1,721,764
1,937,291 1,843,751
6/30/97 2,028,487 1,928,453
2,183,729 2,076,712
2,098,633 1,998,648
2,192,928 2,116,589
2,076,785 2,046,085
2,118,182 2,113,074
12/31/97 2,167,878 2,152,123
2,182/676 2,163,809
2,372,581 2,321,335
2,509,461 2,437,518
2,484,798 2,466,451
2,449,037 2,400,819
6/30/98 2,464,186 2,484,991
2,402,303 2,430,545
2,059,471 2,052,036
2,209,228 2,186,075
2,377,550 2,348,719
2,476,563 2,496,618
12/31/98 2,570,544 2,656,377
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
[BRINSON LOGO APPEARS HERE]
Total Return
6 months 1 year 6/30/97*
ended ended to
12/31/98 12/31/98 12/31/98
- ------------------------------------------------------------------
Brinson U.S. Equity Fund Class N 4.00% 17.99% 16.57%
- ------------------------------------------------------------------
Wilshire 5000 Equity Index 6.90 23.43 23.80
- ------------------------------------------------------------------
*Inception date of the Brinson U.S. Equity Fund Class N.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Equity Fund Class N and the Wilshire 5000 Equity Index if you had invested
$1,000,000 on June 30, 1997, and had reinvested all your income dividends and
capital gain distributions through December 31, 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 Equity Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
Brinson U.S.
Equity Fund Wilshire 5000
Class I Index
------------- -------------
6/30/97 1,000,000 1,000,000
7/31/97 1,076,531 1076880
8/31/97 1,034,580 1,036,400
9/30/97 1,080,499 1,097,558
10/31/97 1,023,243 1,060,998
11/30/97 1,043,084 1,095,735
12/31/97 1,067,291 1,115,985
1/31/98 1,074,577 1,122,044
2/28/98 1,168,071 1,203,729
3/31/98 1,234,245 1,263,976
4/30/98 1,222,103 1,278,979
5/31/98 1,203,890 1,244,946
6/30/98 1,210,968 1,288,593
7/31/98 1,179,902 1,260,360
8/31/98 1,011,779 1,064,084
9/30/98 1,083,049 1,133,590
10/31/98 1,165,282 1,217,930
11/30/98 1,214,013 1,294,623
12/31/98 1,259,349 1,377,466
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>
U.S. Equity Fund
U.S. Large Cap Equity Fund
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
U.S. EQUITIES
Energy 1.12%
Capital Investment
Capital Goods 9.75
Technology 14.55
-------
24.30
Basic Industries
Chemicals 4.79
Housing/Paper 8.98
Metals 0.41
-------
14.18
Consumer
Non-Durables 7.70
Retail/Apparel 4.47
Autos/Durables 2.75
Health: Drugs 4.36
Health: Non-Drugs 5.01
-------
24.29
Financial
Banks 7.78%
Non-Banks 7.04
-------
14.82
Utilities
Electric 5.68
Telephone 0.82
-------
6.50
Transportation 10.12
Services/Misc 4.50
-------
Total U.S. Equities 99.83
-------
SHORT-TERM INVESTMENTS 2.47
-------
TOTAL INVESTMENTS 102.30
-------
LIABILITIES, LESS CASH AND
OTHER ASSETS (2.30)
-------
NET ASSETS 100.00%
=======
Top Ten U.S. Equity Holdings
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- -------------------------------------------------
1. Xerox Corp. 6.07%
2. FDX Corp. 4.25
3. Burlington Northern Santa Fe Corp. 4.21
4. Lockheed Martin Corp. 3.74
5. Philip Morris Companies, Inc. 3.46
6. Baxter International, Inc. 2.60
7. Kimberly Clark Corp. 2.55
8. Aetna Life & Casualty Co. 2.38
9. Energy Corp. 2.34
10. CIGNA Corp. 2.34
- -------------------------------------------------
23
<PAGE>
U.S. Equity Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
Shares Value
----------- ------------------
U.S. Equities -- 99.83%
Advanced Micro Devices, Inc. (b) 362,700 $ 10,495,631
Aetna, Inc. 231,500 18,201,687
Allergan, Inc. 90,400 5,853,400
Alza Corp. (b) 190,650 9,961,462
American Home Products Corp. 6,100 343,506
American Standard Companies, Inc. (b) 190,000 6,828,125
Aon Corp. 321,600 17,808,600
Automatic Data Processing, Inc. 147,200 11,803,600
BankBoston Corp. 103,800 4,041,713
Baxter International, Inc. 309,000 19,872,562
Beckman Coulter Inc. 82,500 4,475,625
Bestfoods 82,800 4,409,100
Biogen, Inc. (b) 43,050 3,573,150
Birmingham Steel Corp. 44,650 186,972
Burlington Northern Santa Fe Corp. 954,300 32,207,625
Champion Enterprises, Inc. (b) 65,000 1,779,375
Champion International Corp. 95,100 3,851,550
Chase Manhattan Corp. 165,000 11,230,312
CIGNA Corp. 231,650 17,909,441
Circuit City Stores-Circuit City Group 258,200 12,893,862
CMS Energy Corp. 246,150 11,922,891
Comerica, Inc. 78,650 5,362,947
CommScope, Inc. (b) 134,499 2,261,264
Comverse Technology, Inc. (b) 87,165 6,188,715
Consolidated Stores Corp. (b) 251,500 5,077,156
Corning, Inc. 373,800 16,821,000
Covance, Inc. (b) 95,850 2,791,631
Crown Cork & Seal Co., Inc. 93,700 2,887,131
Cummins Engine Co., Inc. 26,600 944,300
Dial Corp. 98,500 2,844,188
Eastman Chemical Co. 105,150 4,705,463
Electronic Data Systems Corp. 340,000 17,085,000
EMC Corp. (b) 112,550 9,566,750
Entergy Corp. 576,700 17,949,787
FDX Corp. (b) 365,500 32,529,500
First American Corp. of Tennessee 49,900 2,214,313
First Data Corp. 461,230 14,615,226
First Security Corp. 94,200 2,201,925
Fleet Financial Group, Inc. 239,000 10,680,312
Fleetwood Enterprises, Inc. 50,400 1,751,400
Food Lion Inc., Class A 434,200 4,613,375
Fort James Corp. 327,800 13,112,000
General Instrument Corp. (b) 434,750 14,754,328
General Semiconductor, Inc. (b) 66,575 545,083
Genzyme Corp. (b) 76,850 3,823,288
Genzyme-Molecular Oncology (b) 7,409 24,079
Geon Co. 52,550 1,208,650
Goodyear Tire & Rubber Co. 242,800 12,246,225
Great Lakes Chemical Corp. 61,100 2,444,000
GreenPoint Financial Corp. 109,200 3,835,650
Harnischfeger Industries, Inc. 132,650 1,351,372
HCR Manor Care, Inc. (b) 99,050 2,909,594
Hibernia Corp., Class A 105,850 1,839,144
Household International Inc. 190,000 7,528,750
IMC Global Inc. 296,500 6,337,688
Johnson Controls Inc. 90,000 5,310,000
Kimberly Clark Corp. 358,150 19,519,175
Lafarge Corp. 90,800 3,677,400
Lear Corp. (b) 228,550 8,799,175
Lockheed Martin Corp. 337,676 28,618,041
Lyondell Petrochemical Co. 274,250 4,936,500
Shares Value
----------- ------------------
Martin Marietta Materials, Inc. 55,907 $ 3,476,717
Masco Corp. 444,700 12,785,125
Nabisco Holdings Corp., Class A 194,300 8,063,450
National Service Industries, Inc. 61,200 2,325,600
Nextel Communications, Inc., Class A (b) 266,450 6,294,881
Norfolk Southern Corp. 403,400 12,782,737
Peco Energy Co. 328,200 13,661,325
Pentair, Inc. 100,800 4,013,100
Philip Morris Companies, Inc. 495,750 26,522,625
Praxair, Inc. 176,600 6,225,150
Raytheon Co., Class B 321,950 17,143,837
Regions Financial Corp. 49,000 1,975,313
Schering Plough Corp. 178,200 9,845,550
Sears, Roebuck and Co. 274,150 11,651,375
Southdown, Inc. 110,340 6,530,749
St. Jude Medical, Inc. (b) 179,300 4,964,369
Timken Co. 33,550 633,256
TRW, Inc. 48,200 2,708,238
Tyson Foods, Inc., Class A 354,750 7,538,438
Ultramar Diamond Shamrock Corp. 196,418 4,763,137
Unocal Corp. 130,000 3,794,375
US Bancorp 245,641 8,720,255
USG Corp. 43,900 2,236,156
Vencor, Inc. (b) 193,600 871,200
Ventas, Inc. 193,000 2,352,188
Viad Corp. 187,350 5,690,756
Wells Fargo and Co. 241,000 9,624,937
Witco Corp. 21,150 337,078
Xerox Corp. 393,750 46,462,500
York International Corp. 117,700 4,803,631
------------------
Total U.S. Equities
(Cost $637,542,592) 764,359,762
------------------
Face
Amount
-----------
Short-Term Investments -- 2.47%
Commercial Paper -- 0.33%
Marriot International
5.750%, due 01/22/99 $ 1,500,000 1,494,968
Raytheon Co.
5.600%, due 01/22/99 1,000,000 997,365
------------------
2,492,333
U.S. Government Obligations -- 0.19%
------------------
U.S. Treasury Bill 4.320%, due 02/25/99 1,500,000 1,490,684
------------------
Shares
-----------
Investment Companies -- 1.95%
Brinson Supplementary Trust
U.S. Cash Management Prime Fund 14,913,259 14,913,259
------------------
Total Short-Term Investments
(Cost $18,894,832) 18,896,276
------------------
Total Investments
(Cost $656,437,424) -- 102.30% 783,256,038
------------------
Liabilities, less cash and other assets
-- (2.30%) (17,611,553)
------------------
Net Assets -- 100% $ 765,644,485
==================
See accompanying notes to schedule of investments.
24
<PAGE>
U.S. Equity Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $656,437,424; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $ 158,609,700
Gross unrealized depreciation (31,791,086)
-------------
Net unrealized appreciation $ 126,818,614
=============
(b) Non-income producing security
See accompanying notes to financial statements.
25
<PAGE>
U.S. Equity Fund -- Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $641,524,165) $768,342,779
Affiliated issuers (Cost $14,913,259) 14,913,259
Cash 222,399
Receivables:
Investment securities sold 2,179,776
Dividends 1,450,031
Interest 23,580
Fund shares sold 279,437
Other assets 15,000
-------------
TOTAL ASSETS 787,426,261
-------------
LIABILITIES:
Payables:
Investment securities purchased 4,474,672
Fund shares redeemed 16,863,628
Investment advisory fees 438,298
Accrued expenses 5,178
TOTAL LIABILITIES 21,781,776
-------------
NET ASSETS $765,644,485
=============
NET ASSETS CONSIST OF:
Paid in capital $626,791,335
Distributions in excess of net investment income (61,799)
Accumulated net realized gain 12,096,335
Net unrealized appreciation 126,818,614
-------------
NET ASSETS $765,644,485
=============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of
$691,214,075 and 35,393,125 shares
issued and outstanding) $ 19.53
=============
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of
$4,337,407 and 222,981 shares
issued and outstanding) $ 19.45
=============
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of
$70,093,003 and 3,602,379 shares
issued and outstanding) $ 19.46
=============
See accompanying notes to financial statements.
26
<PAGE>
U.S. Equity Fund -- Financial Statements
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
INVESTMENT INCOME:
Dividends $5,256,751
Interest 369,095
-----------
TOTAL INCOME 5,625,846
-----------
EXPENSES:
Advisory 2,368,764
Administration 154,148
Distribution 179,065
Other 180,729
-----------
TOTAL EXPENSES 2,882,706
-----------
NET INVESTMENT INCOME 2,743,140
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments 21,292,728
Futures contracts 1,501,017
-----------
Net realized gain 22,793,745
-----------
Change in net unrealized appreciation or depreciation on:
Investments 10,133,678
Futures contracts (96,948)
-----------
Change in net unrealized appreciation or depreciation 10,036,730
-----------
Net realized and unrealized gain 32,830,475
-----------
Net increase in net assets resulting from operations $35,573,615
===========
See accompanying notes to financial statements.
27
<PAGE>
U.S. Equity Fund -- Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,743,140 $ 5,791,742
Net realized gain 22,793,745 44,131,079
Change in net unrealized appreciation or depreciation 10,036,730 58,277,883
------------ -------------
Net increase in net assets resulting from operations 35,573,615 108,200,704
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from and in excess of net investment income:
Brinson Class I (3,835,995) (4,978,081)
Brinson Class N (21,154) (832)
UBS Investment Funds Class (190,577) (249,586)
Distributions from net realized gain:
Brinson Class I (34,670,366) (28,383,478)
Brinson Class N (216,952) (64)
UBS Investment Funds Class (3,774,710) (2,678,143)
------------ -------------
Total distributions to shareholders (42,709,754) (36,290,184)
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 153,042,464 346,081,960
Shares issued in connection with reorganization 23,269,419 --
Shares issued on reinvestment of distributions 39,648,720 33,981,329
Shares redeemed (104,278,829) (163,864,419)
------------ -------------
Net increase in net assets resulting from capital
share transactions 111,681,774 216,198,870
------------ -------------
TOTAL INCREASE IN NET ASSETS 104,545,635 288,109,390
------------ -------------
NET ASSETS:
Beginning of period 661,098,850 372,989,460
------------ -------------
End of period (including accumulated undistributed
(distributions in excess of) net investment income
of $(61,799) and $1,242,787, respectively) $765,644,485 $661,098,850
============ =============
</TABLE>
See accompany 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>
Six Months Ended Year Ended June 30, February 22, 1994*
December 31, 1998 ----------------------------------------- Through
Brinson Class I (Unaudited) 1998 1997 1996 1995 June 30, 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.91 $ 17.64 $ 14.59 $ 11.53 $ 9.65 $ 10.00
------- -------- -------- -------- -------- -------
Income from investment operations:
Net investment income 0.08*** 0.19 0.15 0.17 0.16 0.05
Net realized and unrealized gain (loss) 0.73 3.39 4.27 3.31 1.89 (0.36)
------- -------- -------- -------- -------- -------
Total income (loss) from
investment operations 0.81 3.58 4.42 3.48 2.05 (0.31)
------- -------- -------- -------- -------- -------
Less distributions:
Distributions from net investment income (0.12) (0.18) (0.14) (0.17) (0.14) (0.04)
Distributions from net realized gain (1.07) (1.13) (1.23) (0.25) (0.03) --
------- -------- -------- -------- -------- -------
Total distributions (1.19) (1.31) (1.37) (0.42) (0.17) (0.04)
------- -------- -------- -------- -------- -------
Net asset value, end of period $ 19.53 $ 19.91 $ 17.64 $ 14.59 $ 11.53 $ 9.65
======= ======== ======== ======== ======== =======
Total return (non-annualized) 4.32% 21.48% 31.87% 30.57% 21.45% (3.10)%
Ratios/Supplemental data:
Net assets, end of period (in 000s) $691,214 $605,768 $337,949 $126,342 $42,573 $8,200
Ratio of expenses to average net assets:
Before expense reimbursement 0.80%** 0.80% 0.89% 1.14% 1.70% 5.40%**
After expense reimbursement N/A N/A 0.80% 0.80% 0.80% 0.80%**
Ratio of net investment income to average
net assets:
Before expense reimbursement 0.86%** 1.12% 1.06% 1.13% 1.09% (2.82)%**
After expense reimbursement N/A N/A 1.15% 1.47% 1.99% 1.78%**
Portfolio turnover rate 17% 42% 43% 36% 33% 9%
</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.
29
<PAGE>
U.S. Equity Fund -- Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended Year*
December 31, 1998 Ended
Brinson Class N (Unaudited) June 30, 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 19.88 $ 17.64
------- -------
Income from investment operations:
Net investment income 0.07*** 0.15
Net realized and unrealized gain 0.67 3.37
------- -------
Total income from investment operations 0.74 3.52
------- -------
Less distributions:
Distributions from net investment income (0.10) (0.15)
Distributions from net realized gain (1.07) (1.13)
------- -------
Total distributions (1.17) (1.28)
------- -------
Net asset value, end of period $ 19.45 $ 19.88
======= =======
Total return (non-annualized) 4.00% 21.10%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 4,337 $ 268
Ratio of expenses to average net assets 1.05%** 1.05%
Ratio of net investment income to average net assets 0.61%** 0.87%
Portfolio turnover rate 17% 42%
</TABLE>
* Commencement of Brinson Class N was June 30, 1997
** Annualized
*** The net investment income per share data was determined by using
average shares outstanding throughout the period.
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>
Six Months Ended July 31, 1995*
December 31, 1998 Year Ended Year Ended Through
UBS Investment Funds Class (Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.83 $ 17.59 $ 14.58 $ 11.94
--------- -------- --------- --------
Income from investment operations:
Net investment income 0.04*** 0.09 0.11 0.10
Net realized and unrealized gain 0.71 3.38 4.22 2.92
--------- -------- --------- --------
Total income from investment operations 0.75 3.47 4.33 3.02
--------- -------- --------- --------
Less distributions:
Distributions from net investment income (0.05) (0.10) (0.09) (0.13)
Distributions from net realized gain (1.07) (1.13) (1.23) (0.25)
--------- -------- --------- --------
Total distributions (1.12) (1.23) (1.32) (0.38)
--------- -------- --------- --------
Net asset value, end of period $ 19.46 $ 19.83 $ 17.59 $ 14.58
========= ======== ========= ========
Total return (non-annualized) 4.04% 20.80% 31.28% 25.70%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 70,093 $ 55,063 $ 35,039 $ 5,387
Ratio of expenses to average net assets:
Before expense reimbursement 1.32%** 1.32% 1.41% 1.66%**
After expense reimbursement N/A N/A 1.32% 1.32%**
Ratio of net investment income to average net assets:
Before expense reimbursement 0.34%** 0.60% 0.54% 0.61%**
After expense reimbursement N/A N/A 0.63% 0.95%**
Portfolio turnover rate 17% 42% 43% 36%
</TABLE>
* Commencement of UBS Investment Funds Class
** 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.
31
<PAGE>
U.S. Large Capitalization Equity Fund
[BRINSON LOGO APPEARS HERE]
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 5.87%,
compared to the 11.71% return of its benchmark, the S&P 500 Equity Index. The
discussion below focuses on Brinson's management of Large Capitalization
Equities during 1998.
The Brinson U.S. Large Capitalization Equity Fund Class I has underperformed
since its performance inception on April 30, 1998. Market exposure detracted
modestly from active returns, consistent with a slightly below market beta and
very strong equity market returns. Results suffered from a meaningful
underweight in the largest capitalization, highest momentum issues at a time
when investors turned to large, stable growth stocks for safety. Industry
exposures also detracted from active returns with negative contributions from
our overweights in tires, tobacco and rails and relative underweights in drugs
and telephone utilities. These negative returns were only partially offset by
positive contributions from our overweights to electronics and electric
utilities and underweights to producer goods and business machines. Stock
selection has had a positive effect on the Fund. Among the strongest
contributors were Federal Express, EMC Corp., Cigna and Schering Plough, while
holdings in Lockheed Martin and Sears hurt stock-specific performance.
Within the large capitalization segment of the market, a relatively small and
increasingly narrow group of stocks provided the majority of returns during the
year. Our research suggested that many of the widely held, "mega-cap" stocks
like General Electric, Microsoft, Bristol Myers, Bell Atlantic, Procter &
Gamble, Pfizer and AT&T were overvalued even before the turmoil in emerging
markets surfaced. Here at the beginning of 1999, we remain convinced that there
are greater relative values away from such issues, and the Fund is positioned
accordingly. Specifically, the Fund's most important factor exposures, as we
enter 1999, include underweightings in size, momentum and foreign earnings and
overweightings in the traditional value measures of earnings-price, book-price
and yield. From an industry standpoint, the Fund is underweighted in energy,
drugs, telephone utilities, miscellaneous finance, chemicals and retail/apparel.
Meaningful overweights include aerospace/defense, housing and paper,
construction, transportation and service related issues.
32
<PAGE>
U.S. Large Capitalization Equity Fund
[BRINSON LOGO APPEARS HERE]
Total Return
6 Months 4/30/98*
Ended to
12/31/98 12/31/98
- ----------------------------------------------------------------------------
Brinson U.S. Large Capitalization Equity Fund Class I 6.01% 5.87%
- ----------------------------------------------------------------------------
S&P 500 Equity Index 9.23 11.71
- ----------------------------------------------------------------------------
* 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 December 31, 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
[CHART APPEARS HERE]
Brinson U.S. S&P 500
Large Capitalization Equity
Equity Fund Class I Index
-------------------- ---------
4/30/98 1,000,000 1,000,000
5/31/98 983,723 982,810
6/30/98 996,297 1,022,732
7/31/98 977,960 1,011,840
8/31/98 848,584 865,548
9/30/98 914,800 920,995
10/31/98 981,016 995,909
11/30/98 1,023,802 1,056,263
12/31/98 1,058,703 1,117,131
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
[BRINSON LOGO APPEARS HERE]
Total Return
6 Months 4/30/98*
ended to
12/31/98 12/31/98
- -----------------------------------------------------------------------------
Brinson U.S. Large Capitalization Equity Fund Class N 5.97% 5.58%
- -----------------------------------------------------------------------------
S&P 500 Equity Index 9.23 11.71
- -----------------------------------------------------------------------------
* 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 December 31, 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
[CHART APPEARS HERE]
Brinson U.S. S&P 500
Large Capitalization Equity
Equity Fund Class N Index
-------------------- ---------
4/30/98 1,000,000 1,000,000
5/31/98 983,723 982,810
6/30/98 998,652 1,022,732
7/31/98 980,310 1,011,840
8/31/98 850,893 865,548
9/30/98 917,130 920,995
10/31/98 984,386 995,909
11/30/98 1,026,166 1,056,263
12/31/98 1,055,758 1,117,131
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
[BRINSON LOGO APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
U.S. EQUITIES
Basic Industries
Chemicals 1.18%
Housing/Paper 6.07
Metals 0.53
-------
7.78
Capital Investment
Capital Goods 8.54
Technology 13.77
-------
22.31
Consumer
Autos/Durables 2.37
Health: Drugs 1.85
Health: Non-Drugs 4.30
Non-Durables 5.92
Retail/Apparel 2.19
16.63
Energy 0.71%
Financial
Banks 10.77
Non-Banks 10.04
-------
20.81
Transportation 14.58
Services/Miscellaneous 8.13
Utilities
Electric 2.98
-------
Total U.S. Equities 93.93*
SHORT-TERM INVESTMENTS 6.27*
-------
TOTAL INVESTMENTS 100.20
LIABILITIES, LESS CASH AND
OTHER ASSETS (0.20)
-------
NET ASSETS 100.00%
=======
*The Fund held a long position in stock index futures on December 31, 1998 which
increased U.S. Equity exposure from 93.93% to 99.56% and reduced exposure to
Short-Term Investments from 6.27% to 0.64%.
Top 10 U.S. Equity Holdings
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- ---------------------------------------------------
1. Xerox Corp. 8.74%
2. FDX Corp. 6.11
3. Burlington Northern Santa Fe Corp. 6.07
4. Lockheed Martin Corp. 5.32
5. Philip Morris Companies, Inc. 5.03
6. Baxter International, Inc. 3.78
7. Kimberly Clark Corp. 3.67
8. CIGNA Corp. 3.39
9. Aon Corp. 3.35
10. Aetna Life & Casualty Co. 3.30
- ---------------------------------------------------
35
<PAGE>
U.S. Large Capitalization Equity Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
Shares Value
----------- ------------------
U.S. Equities -- 93.93%
Aetna, Inc. 9,300 $ 731,212
Aon Corp. 13,400 742,025
Automatic Data Processing, Inc. 6,100 489,144
BankBoston Corp. 4,300 167,431
Baxter International, Inc. 13,000 836,062
Bestfoods 3,700 197,025
Burlington Northern Santa Fe Corp. 39,800 1,343,250
Chase Manhattan Corp. 6,900 469,631
CIGNA Corp. 9,700 749,931
Comerica, Inc. 3,300 225,019
Corning, Inc. 15,600 702,000
Covance, Inc. (b) 4,000 116,500
Crown Cork & Seal Co., Inc. 3,800 117,088
Electronic Data Systems Corp. 14,200 713,550
EMC Corp. (b) 4,700 399,500
Entergy Corp. 21,200 659,850
FDX Corp. (b) 15,200 1,352,800
First Data Corp. 19,200 608,400
Fleet Financial Group, Inc. 10,000 446,875
Goodyear Tire & Rubber Co. 10,400 524,550
Household International Inc. 7,800 309,075
Kimberly Clark Corp. 14,900 812,050
Lockheed Martin Corp. 13,900 1,178,025
Masco Corp. 18,500 531,875
Norfolk Southern Corp. 16,800 532,350
Philip Morris Companies, Inc. 20,800 1,112,800
Shares Value
----------- ------------------
Praxair, Inc. 7,400 $ 260,850
Raytheon Co., Class B 13,400 713,550
Schering Plough Corp. 7,400 408,850
Sears, Roebuck and Co. 11,400 484,500
Unocal Corp. 5,400 157,613
US Bancorp 10,200 362,100
Wells Fargo and Co. 10,100 403,369
Xerox Corp. 16,400 1,935,200
------------------
Total U.S. Equities (Cost $19,887,009) 20,794,050
Face
Amount
-----------
Short-Term Investments -- 6.27%
Investment Companies -- 6.27%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund
(Cost $1,386,884) $ 1,386,884 1,386,884
------------------
Total Investments
(Cost $21,273,893) -- 100.20% (a) 22,180,934
------------------
Liabilities, less cash and other
assets -- (0.20%) (43,198)
------------------
Net Assets -- 100% $ 22,137,736
==================
See accompanying notes to schedule of investments.
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $21,273,893; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $ 2,018,260
Gross unrealized depreciation (1,111,219)
-----------
Net unrealized appreciation $ 907,041
===========
(b) Non-income producing security
FUTURES CONTRACTS
The U.S. Large Capitalization Equity Fund had the following open futures
contracts as of December 31, 1998:
<TABLE>
<CAPTION>
Settlement Cost/ Current Unrealized
Date Proceeds Value Gain
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Index Futures Buy Contracts
Standard & Poor's 500, 4 contracts March 1999 $1,239,928 $1,245,500 $ 5,572
</TABLE>
The segregated cash pledged to cover margin requirements for the open futures
positions at December 31, 1998 was $54,000.
See accompanying notes to financial statements.
36
<PAGE>
U.S. Large Capitalization Equity Fund -- Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $19,887,009) $ 20,794,050
Affiliated issuers (Cost $1,386,884) 1,386,884
Cash 35,998
Receivables:
Investment securities sold 6,194
Dividends 50,850
Interest 1,392
Fund shares sold 1,595
Variation margin 3,400
Other assets 32,594
-------------
TOTAL ASSETS $ 22,312,957
-------------
LIABILITIES:
Payables:
Investment securities purchased 77,485
Fund shares redeemed 20,989
Investment advisory fees 4,624
Accrued expenses 72,123
-------------
TOTAL LIABILITIES 175,221
-------------
NET ASSETS $ 22,137,736
=============
NET ASSETS CONSIST OF:
Paid in capital $ 21,319,701
Distributions in excess of net investment income (30,001)
Accumulated net realized loss (64,577)
Net unrealized appreciation 912,613
-------------
NET ASSETS $ 22,137,736
=============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of
$9,432,446 and 913,878 shares
issued and outstanding) $ 10.32
=============
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of
$12,704,221 and 1,232,392 shares
issued and outstanding) $ 10.31
=============
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of
$1,069 and 104 shares issued and outstanding) $ 10.28
=============
See accompanying notes to financial statements.
37
<PAGE>
U.S. Large Capitalization Equity Fund -- Financial Statements
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED December 31, 1998 (Unaudited)
INVESTMENT INCOME:
Dividends $ 141,180
Interest 19,744
------------
TOTAL INCOME 160,924
------------
EXPENSES:
Advisory 59,251
Professional 24,181
Distribution 17,757
Other 35,497
TOTAL EXPENSES 136,686
Expenses deferred by Advisor (51,141)
------------
NET EXPENSES 85,545
------------
NET INVESTMENT INCOME 75,379
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments (87,071)
Futures contracts 91,795
------------
Net realized gain 4,724
------------
Change in net unrealized appreciation or depreciation on:
Investments 1,094,763
Futures contracts (3,464)
------------
Change in net unrealized appreciation or depreciation 1,091,299
------------
Net realized and unrealized gain 1,096,023
------------
Net increase in net assets resulting from operations $1,171,402
============
See accompanying notes to financial statements.
38
<PAGE>
U.S. Large Capitalization Equity Fund -- Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months April 6, 1998*
December 31, 1998 Through
(Unaudited) June 30, 1998
----------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 75,379 $ 32,434
Net realized gain (loss) 4,724 (69,301)
Change in net unrealized appreciation or depreciation 1,091,299 (178,686)
------------ ---------
Net increase (decrease) in net assets resulting
from operations 1,171,402 (215,553)
------------ ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from and in excess of net investment income:
Brinson Class I (47,131) (191)
Brinson Class N (69,880) (20,605)
UBS Investment Funds Class (6) (1)
------------ ---------
Total distributions to shareholders (117,017) (20,797)
------------ ---------
CAPITAL SHARE TRANSACTIONS:
Shares sold 9,027,897 16,922,491
Shares issued on reinvestment of distributions 116,156 20,775
Shares redeemed (4,248,075) (519,553)
------------ ---------
Net increase in net assets resulting from capital
share transactions 4,895,978 16,423,713
------------ ---------
TOTAL INCREASE IN NET ASSETS 5,950,363 16,187,363
------------ ---------
NET ASSETS:
Beginning of period 16,187,373 10
------------ ---------
End of period (including accumulated undistributed
(distributions in excess of) net investment
income of $(30,001) and $11,637, respectively) $22,137,736 $16,187,373
============ =========
</TABLE>
* Commencement of investment operations
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 each period presented.
<TABLE>
<CAPTION>
Six Months Ended April 6, 1998*
December 31, 1998 Through
Brinson Class I (Unaudited) June 30, 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.80 $10.00
------- --------
Income from investment operations:
Net investment income 0.03 0.02
Net realized and unrealized gain (loss) 0.56 (0.20)
------- --------
Total income (loss) from investment
operations 0.59 (0.18)
------- --------
Less distributions:
Distributions from net investment income (0.07) (0.02)
Distributions from net realized gain -- --
------- --------
Total distributions (0.07) (0.02)
------- --------
Net asset value, end of period $10.32 $9.80
======= ========
Total return (non-annualized) 6.01% (1.83)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $9,432 $ 154
Ratio of expenses to average net assets:
Before expense reimbursement 1.40%** 1.59%**
After expense reimbursement 0.80%** 0.80%**
Ratio of net investment income to average net assets:
Before expense reimbursement 0.50%** 0.52%**
After expense reimbursement 1.10%** 1.31%**
Portfolio turnover rate 19% 12%
</TABLE>
* Commencement of investment operations
** Annualized
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 each period presented.
<TABLE>
<CAPTION>
Six Months Ended April 6, 1998*
December 31, 1998 Through
Brinson Class N (Unaudited) June 30, 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.78 $ 10.00
------- --------
Income from investment operations:
Net investment income 0.04 0.02
Net realized and unrealized gain (loss) 0.54 (0.23)
------- --------
Total income (loss) from investment
operations 0.58 (0.21)
------- --------
Less distributions:
Distributions from net investment income (0.05) (0.01)
Distributions from net realized gain -- --
------- --------
Total distributions (0.05) (0.01)
------- --------
Net asset value, end of period $ 10.31 $ 9.78
======= ========
Total return (non-annualized) 5.97% (2.02)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $12,704 $ 16,033
Ratio of expenses to average net assets:
Before expense reimbursement 1.65%** 1.84%**
After expense reimbursement 1.05%** 1.05%**
Ratio of net investment income to average net assets:
Before expense reimbursement 0.25%** 0.27%**
After expense reimbursement 0.85%** 1.06%**
Portfolio turnover rate 19% 12%
</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 each period presented.
<TABLE>
<CAPTION>
Six Months Ended April 6, 1998*
December 31, 1998 Through
UBS Investment Funds Class (Unaudited) June 30, 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.79 $ 10.00
------- --------
Income from investment operations:
Net investment income 0.02 0.02
Net realized and unrealized gain (loss) 0.53 (0.22)
------- --------
Total income (loss) from
investment operations 0.55 (0.20)
------- --------
Less distributions:
Distributions from net investment income (0.06) (0.01)
Distributions from net realized gain -- --
------- --------
Total distributions (0.06) (0.01)
------- --------
Net asset value, end of period $ 10.28 $ 9.79
======= ========
Total return (non-annualized) 5.63% (2.06)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 1 $ 1
Ratio of expenses to average net assets:
Before expense reimbursement 1.92%** 2.11%**
After expense reimbursement 1.32%** 1.32%**
Ratio of net investment income to average
net assets:
Before expense reimbursement (0.02)%** 0.00%**
After expense reimbursement 0.58%** 0.79%**
Portfolio turnover rate 19% 12%
</TABLE>
* Commencement of investment operations
** Annualized
See accompanying notes to financial statements.
42
<PAGE>
U.S. Bond Fund
[BRINSON LOGO APPEARS HERE]
The U.S. Bond Fund is an actively managed diversified portfolio of U.S.
investment-grade fixed income securities. Using fundamental research, 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
drives both sector and individual issue selection.
Since its inception on August 31, 1995, the Brinson U.S. Bond Fund Class I has
provided an annualized return of 8.12%, compared to the 8.21% return of the
Salomon Smith Barney Broad Investment Grade (BIG) Bond Index. The Fund's
annualized volatility over the same period has been 3.97% which is similar to
the benchmark's 3.42%. For calendar year 1998, the Brinson U.S. Bond Fund Class
I returned 8.37% versus 8.72% for the index. Returns were depressed by the
unprecedented spread widening of corporate securities during the third quarter.
Interest rates fell roughly 100 basis points during 1998 with nearly all of this
decline occurring during the volatile third quarter.
The Federal Reserve initiated an easing of monetary policy late in the third
quarter to combat global instability. In all, the Fed lowered short rates 75
basis points to their current level of 4.75%.
Most investors will remember 1998 as one of the more tumultuous years on record.
A confluence of global events at mid-year raised fears that a global economic
crisis was unfolding. This precipitated a reassessment of risk on the part of
most investors, which severely impacted market liquidity. A general
"flight-to-quality" characterized the U.S. bond market for most of the second
half of the year. While many financial assets responded negatively to these
developments, corporate securities suffered disproportionately as investors
sought the safe-haven of U.S. Treasuries. Signs of increasing global stability
and market liquidity have become evident as we enter 1999. Overall, quality and
liquidity were the most rewarded factors during 1998.
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
U.S. BONDS
Corporate Bonds
Airlines 0.08%
Asset-Backed 7.60
Banks 0.58
Business and Public Service 2.16
CMO 5.46
Consumer 2.69
Energy 2.96
Financial Services 4.89
Industrial Components 0.85
Real Estate 0.22
Telecommunications 3.42
-------
Total U.S. Corporate Bonds 30.91
U.S. Government Agencies 21.09
U.S. Government Obligations 38.32
International Dollar Bonds 4.77
-------
Total U.S. Bonds 95.09
-------
U.S. Equities 1.04
-------
SHORT-TERM INVESTMENTS 10.04
-------
TOTAL INVESTMENTS 106.17
LIABILITIES, LESS CASH AND OTHER ASSETS (6.17)
-------
NET ASSETS 100.00%
=======
43
<PAGE>
U.S. Bond Fund
Total Return
6 months 1 year 3 years Annualized
ended ended ended 8/31/95* to
12/31/98 12/31/98 12/31/98 12/31/98
- -------------------------------------------------------------------------------
Brinson U.S. Bond Fund Class I 4.43% 8.37% 7.14% 8.12%
- -------------------------------------------------------------------------------
Salomon Smith Barney Broad Investment
Grade (BIG) Bond Index 4.57 8.72 7.29 8.21
- -------------------------------------------------------------------------------
* Inception date of the Brinson U.S. Bond Fund Class I.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Bond Fund Class I and the Salomon Smith Barney BIG Bond Index if you had
invested $1,000,000 on August 31, 1995, and had reinvested all your income
dividends and capital gain distributions through December 31, 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 Smith Barney BIG Bond Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
Brinson U.S. Salomon Smith
Bond Fund Barney Big
Class I Bond Index
------------- ---------------
8/31/95 1,000,000 1,000,000
1,009,000 1,009,400
1,024,000 1,022,926
1,040,000 1,038,884
12/31/95 1,054,932 1,053,220
1,061,071 1,060,382
1,038,561 1,042,462
1,031,398 1,034,956
1,023,213 1,027,297
1,020,143 1,026,784
6/30/96 1,035,997 1,040,029
1,039,127 1,042,837
1,032,867 1,041,273
1,054,776 1,059,391
1,081,902 1,083,227
1,109,028 1,101,101
12/31/96 1,092,169 1,091,411
1,094,338 1,095,558
1,096,507 1,096,763
1,081,323 1,085,686
1,098,676 1,101,211
1,109,522 1,111,563
6/30/97 1,123,558 1,124,790
1,158,669 1,155,272
1,148,794 1,145,337
1,164,156 1,162,173
1,180,614 1,178,792
1,183,906 1,184,333
12/31/97 1,197,458 1,196,413
1,211,341 1,211,847
1,211,341 1,210,998
1,214,812 1,215,721
1,220,597 1,222,043
1,232,167 1,233,775
6/30/98 1,242,614 1,243,892
1,243,789 1,246,504
1,264,930 1,265,575
1,287,245 1,295,443
1,282,547 1,289,613
1,291,943 1,296,706
12/31/98 1,297,674 1,300,726
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>
U.S. Bond Fund
[BRINSON LOGO APPEARS HERE]
Total Return
6 months 1 year 6/30/97*
ended ended to
12/31/98 12/31/98 12/31/98
- ------------------------------------------------------------------------
Brinson U.S. Bond Fund Class N 4.53% 8.25% 9.93%
- ------------------------------------------------------------------------
Salomon Smith Barney Broad Investment
Grade (BIG) Bond Index 4.57 8.72 10.17
- ------------------------------------------------------------------------
* Inception date of the Brinson U.S. Bond Fund Class N.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Bond Fund Class N and the Salomon Smith Barney BIG Bond Index if you had
invested $1,000,000 on June 30, 1997, and had reinvested all your income
dividends and capital gain distributions through December 31, 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 Smith Barney BIG Bond Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
Brinson U.S. Salomon Smith
Bond Fund Barney Big
Class N Bond Index
------------- ---------------
6/30/97 1,000,000 1,000,000
1,031,250 1,027,100
1,021,484 1,018,267
9/30/97 1,035,156 1,033,235
1,049,805 1,048,011
1,052,734 1,052,936
12/31/97 1,065,178 1,063,676
1,077,516 1,077,398
1,076,488 1,076,644
3/31/97 1,079,573 1,080,842
1,084,714 1,086,463
1,094,995 1,096,893
6/30/98 1,103,029 1,105,887
1,104,072 1,108,210
1,121,795 1,125,165
9/30/98 1,141,604 1,151,719
1,140,561 1,146,537
1,148,902 1,152,843
12/31/98 1,153,031 1,156,416
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 -- Schedule of Investments
December 31, 1998 (Unaudited)
Face
Amount Value
----------- ------------------
Bonds -- 95.09%
U.S. Corporate Bonds -- 30.91%
Aid-Israel, Series 10-Z, 0.000%,
due 02/15/03 $ 805,000 $ 660,123
Capital One Bank, 6.830%, due 05/17/99 359,000 360,070
Cendant Corp., 7.750%, due 12/01/03 700,000 715,388
Chase Mortgage Finance Corp. 93-J1,
Class 1A5, 6.625%, due 08/25/09 63,049 63,217
Chemical Mortgage Securities Inc. 93-1,
Class A5, 7.450%, due 02/25/23 667,258 671,028
Ches Pot Tel MD, 8.000%, due 10/15/29 87,000 108,754
Chrysler Financial Corp.,
7.400%, due 08/01/97 100,000 112,690
Citicorp Mortgage Securities, Inc. 94-9,
Class A8, 5.750%, due 06/25/09 1,039,536 1,023,381
Comed Transitional Funding Trust, 98-1,
Class A7, 5.740%, due 12/25/10 695,000 698,996
Continental Airlines, Inc., EETC, 98-1B,
6.748%, due 09/15/18 75,000 75,088
Countrywide Funding Corp. FRN, 5.680%,
due 12/01/03 250,000 241,250
Enron Corp., 6.750%, due 08/01/09 800,000 825,114
Farmers Exchange Capital, 144A,
7.050%, due 07/15/28 400,000 402,451
First Bank Corporate Card Master Trust, 97-1,
Class A, 6.400%, due 02/15/03 980,000 1,007,048
First Nationwide Trust, 98-3, Class 1PPA,
6.500%, due 09/19/28 514,243 514,706
Ford Motor Co., 6.625%, due 10/01/28 500,000 514,440
GE Capital Mortgage Services, Inc.,
97-HE4 A7, 6.735%, due 12/25/28 410,000 422,649
General Motors Acceptance Corp.,
9.625%, due 12/15/01 294,000 327,018
GreenTree Financial Corp., 94.5, Class A5,
8.300%, due 11/15/19 320,000 347,977
Interamer Development Bank,
6.800%, due 10/15/25 100,000 113,318
Jefferson-Pilot, 144A,
8.285%, due 03/01/46 640,000 697,637
Lehman Brothers, Inc., Senior Note
7.250%, due 04/15/03 225,000 231,763
LG&E Capital Corp., 144A,
5.750%, due 11/01/01 65,000 64,744
Lockheed Martin Corp., Note
7.700%, due 06/15/08 282,000 318,932
MBNA Global Capital Securities FRN,
6.019%, due 02/01/27 90,000 82,824
Mid-America Energy,
6.375%, due 06/15/06 275,000 282,232
Monsanto Co., 144A,
6.600%, due 12/01/28 1,250,000 1,247,692
News America Holdings,
7.750%, due 12/01/45 358,000 380,216
Face
Amount Value
----------- ------------------
Norwest Asset Securities Corp., 98-25,
Class A5, 6.000%, due 12/25/28 $2,400,000 $ 2,358,624
PanAmSat Corp.,
6.000%, due 01/15/03 375,000 372,054
6.375%, due 01/15/08 500,000 489,297
PNC Mortgage Securities Corp., 94-3,
Class A8, 7.500%, due 07/25/24 215,000 221,787
Premier Auto Trust,
96-3A, 6.500%, due 03/06/00 53,129 53,246
96-4A, Class A4, 6.400%, due 10/06/01 350,000 353,707
Prudential Home Mortgage Securities,
93-30, Class A9, 6.963%, due 08/25/23 85,000 85,806
93-43, Class A9, 6.750%, due 10/25/23 281,533 283,566
94-3, Class A10, 6.500%, due 02/25/24 170,000 169,536
Residential Accredit Loans, Inc.,
96-QS4, Class Al10,
7.900%, due 08/25/26 275,000 283,257
98-QS4, Class AI5,
7.000%, due 03/25/28 1,850,000 1,919,657
Residential Asset Securitization Trust,
97-A10, Class A1, 7.250%,
due 12/25/27 692,587 698,772
SafeWay, Inc., 6.500%, due 11/15/08 315,000 326,486
Salomon, Inc., Debenture,
6.750%, due 02/15/03 300,000 308,976
Service Corp., International,
6.000%, due 12/15/05 250,000 249,223
Sprint Capital Corp., 6.875%,
due 11/15/28 1,000,000 1,038,382
Structured Asset Securities Corp.,
98-RF1, Class A, 8.712%,
due 03/15/27 487,887 523,564
98-RF2, 144A, 8.582%, due 07/15/27 171,060 183,035
Teco Energy, Inc., 5.540%, due 09/15/01 1,250,000 1,249,579
Tele-Communications Inc,
9.800%, due 02/01/12 950,000 1,268,065
Texas Utilities, 5.940%, due 10/15/11
(putable 10/15/01) 420,000 419,107
The Money Store Home Equity Trust,
98-A, Class AF5, 6.370%,
due 12/15/23 465,000 469,548
Thrift Financial Corp., 11.250%,
due 01/01/16 38,455 40,400
Time Warner Entertainment, Inc.,
8.375%, due 03/15/23 94,000 114,971
Time Warner Inc., 7.570%, due 02/01/24 340,000 383,456
Transamerica Capital III,
7.625%, due 11/15/37 735,000 767,566
U.S.A. Waste Services,
6.500%, due 12/15/02 400,000 408,151
UCFC Home Equity Loan, 97-C, Class A8,
FRN, 5.478%, due 09/15/27 134,278 132,988
Vendee Mortgage Trust, 92-1, Class 2Z,
7.750%, due 05/15/22 512,194 561,243
Williams Co., 6.200%, due 08/01/02 1,100,000 1,102,748
Williams Holdings of Delaware,
6.500%, due 12/01/08 315,000 311,522
------------------
29,659,065
------------------
46
<PAGE>
U.S. Bond Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
Face
Amount Value
----------- ------------------
International Dollar Bonds -- 4.77%
Banco Santiago S.A., 7.000%,
due 07/18/07 $ 380,000 $ 318,432
Banque Paribas, Sub. Notes,
6.875%, due 03/01/09 700,000 711,927
Credit Suisse-London, 144A, 7.900%,
Resettable Perpetual Step-up Notes 500,000 500,000
Den Danske Bank, 144A,
6.375%, due 06/15/08 560,000 568,896
Empresa Nacional de Electricidad S.A.,
7.875%, due 02/01/27 394,000 328,906
Petroliam Nasional Berhad, 144A,
7.625%, due 10/15/26 430,000 293,273
Province of Quebec, 7.500%,
due 07/15/23 200,000 228,700
Ras Laffan Liquified Natural Gas Co., Ltd.,
144A, 8.294%, due 03/15/14 450,000 370,917
Repsol International Finance,
7.000%, due 08/01/05 200,000 215,886
Republic of South Africa,
9.625%, due 12/15/99 71,000 72,420
Royal Bank of Scotland, 7.375%, Resettable
Perpetual Step-up Notes 80,000 82,353
Skandinaviska Enskilda Banken, 144A,
Resettable Perpetual Step-up Notes 305,000 297,362
Tyco International Group, 144A,
5.875%, due 11/01/04 595,000 591,332
------------------
4,580,404
------------------
U.S. Government Agencies -- 21.09%
Federal Home Loan Bank,
5.570%, due 08/17/00 1,500,000 1,513,068
Federal Home Loan Mortgage Corp.
7.000%, due 10/15/13 492,125 504,474
7.500%, due 01/15/23 157,195 165,716
7.238%, due 05/01/26 19,486 19,807
Federal Home Loan Mortgage Corp. Gold
8.000%, due 11/01/22 128,980 133,495
9.000%, due 03/01/24 97,878 104,072
Federal National Mortgage Association
6.959%, due 08/01/07 484,016 521,672
6.361%, due 06/01/08 1,422,447 1,482,190
8.000%, due 12/18/11 100,000 105,710
6.000%, due 01/01/14 TBA 295,000 295,832
8.000%, due 05/25/21 260,000 266,325
8.500%, due 07/15/21 82,101 84,870
9.000%, due 08/01/21 21,471 22,779
8.500%, due 07/01/22 14,724 15,605
Face
Amount Value
----------- ------------------
9.500%, due 08/01/22 $ 90,958 $ 97,069
0.000%, due 09/25/22 431,647 399,464
7.500%, due 12/01/23 624,461 641,049
7.500%, due 01/01/28 338,058 347,249
8.500%, due 02/01/28 138,666 145,252
6.000%, due 03/01/28 712,617 703,417
6.500%, due 06/01/28 780,479 785,851
6.500%, due 09/01/28 246,454 248,150
6.500%, due 11/01/28 3,511,180 3,535,351
6.000%, due 12/01/28 TBA 4,790,000 4,728,156
Federal National Mortgage Association Strips,
7.500%, due 05/01/23 interest only 298,479 47,911
0.000%, due 04/01/27 principal only 270,732 238,007
FNCI, 8.000%, due 02/01/13 254,508 262,302
FNW, Series 95-W3, Class A,
9.000%, due 04/25/25 170,324 177,497
Government National Mortgage Association
10.000%, due 09/15/00 1,782 1,887
10.000%, due 05/15/01 2,642 2,797
9.000%, due 11/15/04 12,190 12,799
9.000%, due 12/15/17 39,834 42,816
8.000%, due 08/15/22 56,279 58,598
7.500%, due 12/15/22 275,793 284,425
7.500%, due 12/15/23 1,121,946 1,156,769
7.500%, due 01/15/24 74,829 77,132
7.000%, due 02/16/24 150,000 152,450
7.500%, due 06/15/25 93,707 96,611
7.000%, due 07/15/25 101,728 104,135
Jordan Aid, 8.750%, due 09/01/19 517,177 641,154
------------------
20,223,913
------------------
U.S. Government Obligations -- 38.32%
U.S. Treasury Notes and Bonds
5.500%, due 02/29/00 4,525,000 4,567,422
5.500%, due 05/31/00 2,450,000 2,478,329
6.625%, due 07/31/01 5,110,000 5,352,725
6.250%, due 08/31/02 2,200,000 2,312,064
6.500%, due 05/15/05 2,000,000 2,191,876
7.000%, due 07/15/06 6,320,000 7,196,900
5.625%, due 05/15/08 4,540,000 4,843,612
8.000%, due 11/15/21 4,905,000 6,571,170
U.S. Treasury Inflation Indexed Note,
3.625%, due 04/15/28 1,270,000 1,254,644
------------------
36,768,742
------------------
Total Bonds (Cost $90,665,694) 91,232,124
------------------
47
<PAGE>
U.S. Bond Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
Shares Value
----------- ------------------
Equities -- 1.04%
U.S. Equities -- 1.04%
Centaur Funding Corp., 144A 1,355 $ 248,815
Centaur Funding Corp., 144A 715 747,622
------------------
Total Equities (Cost $896,080) 996,437
------------------
Face
Amount
-----------
Short-Term Investments -- 10.04%
Commercial Paper -- 3.12%
Marriot International,
5.750%, due 01/22/99 $1,500,000 1,494,969
Raytheon Co., 5.600%, due 01/22/99 1,500,000 1,496,047
------------------
Total Commercial Paper
(Cost $2,990,068) 2,991,016
------------------
Shares
-----------
Investment Companies -- 6.92
Brinson Supplementary Trust U.S. Cash
Management Prime Fund
(Cost $6,638,700) 6,638,700 6,638,700
------------------
Total Short-Term Investments
(Cost $9,628,768) 9,629,716
------------------
Total Investments
(Cost $101,190,542) -- 106.17% 101,858,277
------------------
Liabilities, less cash and other
assets -- (6.17%) (5,916,014)
------------------
Net Assets -- 100% $95,942,263
==================
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $101,190,542; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $1,154,761
Gross unrealized depreciation (487,026)
----------
Net unrealized appreciation $ 667,735
==========
FRN: Floating rate note -- The rate disclosed is that in effect at December 31,
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 December 31,
1998, the value of these securities amounted to $6,213,776, or 6.48% 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.
48
<PAGE>
U.S. Bond Fund -- Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998 (Unaudited)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $94,551,842) $ 95,219,577
Affiliated issuers (Cost $6,638,700) 6,638,700
Cash 35,470
Receivables:
Investment securities sold 344,847
Fund shares sold 1,750
Interest 1,160,848
Other assets 8,846
------------
TOTAL ASSETS 103,410,038
------------
LIABILITIES:
Payables:
Investment securities purchased 7,403,466
Investment advisory fees 35,915
Dividends 1,774
Accrued expenses 26,620
------------
TOTAL LIABILITIES 7,467,775
------------
NET ASSETS $ 95,942,263
============
NET ASSETS CONSIST OF:
Paid in capital $ 95,212,858
Accumulated undistributed net investment income 10,071
Accumulated net realized gain 51,599
Net unrealized appreciation 667,735
------------
NET ASSETS $ 95,942,263
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and
redemption price per share (Based on
net assets of $90,868,678 and 8,556,121
shares issued and outstanding) $ 10.62
============
Brinson Class N:
Net asset value, offering price and
redemption price per share (Based on
net assets of $1,150 and 108 shares
issued and outstanding) $ 10.65
============
UBS Investment Funds Class:
Net asset value, offering price and
redemption price per share (Based on
net assets of $5,072,435 and 479,337
shares issued and outstanding) $ 10.58
============
See accompanying notes to financial statements.
49
<PAGE>
U.S. Bond Fund -- Financial Statements
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (Unaudited)
INVESTMENT INCOME:
Interest $ 1,955,254
------------
TOTAL INCOME 1,955,254
------------
EXPENSES:
Advisory 164,957
Professional 19,203
Registration 13,667
Distribution 10,134
Other 12,089
------------
TOTAL EXPENSES 220,050
Expenses waived by Advisor (12,367)
------------
NET EXPENSES 207,683
------------
NET INVESTMENT INCOME 1,747,571
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain 809,071
Change in net unrealized appreciation
or depreciation 134,810
------------
Net realized and unrealized
appreciation 943,881
------------
Net increase in net assets resulting
from operations $ 2,691,452
============
See accompanying notes to financial statements.
50
<PAGE>
U.S. Bond Fund -- Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,747,571 $ 1,638,048
Net realized gain 809,071 801,133
Change in net unrealized appreciation or depreciation 134,810 335,673
------------ -----------
Net increase in net assets resulting from operations 2,691,452 2,774,854
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I (1,922,429) (1,526,152)
Brinson Class N (27) (54)
UBS Investment Funds Class (116,017) (103,513)
Distributions from net realized gain:
Brinson Class I (1,038,553) (335,742)
Brinson Class N (16) (14)
UBS Investment Funds Class (68,968) (25,812)
------------ -----------
Total distributions to shareholders (3,146,010) (1,991,287)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold 69,994,288 21,794,978
Shares issued in connection with reorganization 15,177,263 --
Shares issued on reinvestment of distributions 2,681,835 1,174,894
Shares redeemed (32,774,989) (6,255,720)
------------ -----------
Net increase in net assets resulting from
capital share transactions 55,078,397 16,714,152
------------ -----------
TOTAL INCREASE IN NET ASSETS 54,623,839 17,497,719
------------ -----------
NET ASSETS:
Beginning of period 41,318,424 23,820,705
------------ -----------
End of period (including accumulated undistributed
net investment income of $10,071 and $300,973,
respectively) $95,942,263 $41,318,424
============ ===========
</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>
Six Months Ended August 31, 1995*
December 31, 1998 Year Ended Year Ended Through
Brinson Class I (Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.58 $ 10.24 $ 9.93 $ 10.00
------- ------- ------- -------
Income from investment operations:
Net investment income 0.29*** 0.53 0.51*** 0.50
Net realized and unrealized gain (loss) 0.18 0.53 0.32 (0.14)
------- ------- ------- -------
Total income from investment operations 0.47 1.06 0.83 0.36
------- ------- ------- -------
Less distributions:
Distributions from net investment income (0.28) (0.58) (0.52) (0.40)
Distributions in excess of net realized gain (0.15) (0.14) -- (0.03)
------- ------- ------- -------
Total distributions (0.43) (0.72) (0.52) (0.43)
------- ------- ------- -------
Net asset value, end of period $ 10.62 $ 10.58 $ 10.24 $ 9.93
======= ======= ======= =======
Total return (non-annualized) 4.43% 10.60% 8.45% 3.60%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $90,869 $38,874 $22,421 $ 9,047
Ratio of expenses to average net assets:
Before expense reimbursement 0.64%** 0.84% 1.65% 3.63%**
After expense reimbursement 0.60%** 0.60% 0.60% 0.60%**
Ratio of net investment income to average net assets:
Before expense reimbursement 5.30%** 5.61% 5.14% 3.00%**
After expense reimbursement 5.34%** 5.85% 6.19% 6.03%**
Portfolio turnover rate 140% 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>
Six Months Ended
December 31, 1998 Year Ended
Brinson Class N (Unaudited) June 30, 1998
- ---------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 10.58 $ 10.24
------- -------
Income from investment operations:
Net investment income ` 0.34*** 0.61
Net realized and unrealized gain 0.14 0.42
------- -------
Total income from investment operations 0.48 1.03
------- -------
Less distributions:
Distributions from net investment income (0.26) (0.55)
Distributions from net realized gain (0.15) (0.14)
------- -------
Total distributions (0.41) (0.69)
------- -------
Net asset value, end of period $ 10.65 $ 10.58
======= =======
Total return (non-annualized) 4.53% 10.30%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 1 $ 1
Ratio of expenses to average net assets:
Before expense reimbursement 0.89%** 1.09%
After expense reimbursement 0.85%** 0.85%
Ratio of net investment income to average
net assets:
Before expense reimbursement 5.05%** 5.36%
After expense reimbursement 5.09%** 5.60%
Portfolio turnover rate 140% 198%
</TABLE>
* Commencement of Brinson Class N was June 30, 1997
** 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>
U.S. Bond Fund -- Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended August 31, 1995*
December 31, 1998 Year Ended Year Ended Through
UBS Investment Funds Class (Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.54 $ 10.22 $ 9.92 $ 10.00
--------- -------- --------- --------
Income from investment operations:
Net investment income 0.26*** 0.50 0.46*** 0.46
Net realized and unrealized gain (loss) 0.18 0.49 0.32 (0.13)
--------- -------- --------- --------
Total income from investment operations 0.44 0.99 0.78 0.33
--------- -------- --------- --------
Less distributions:
Distributions from net investment income (0.25) (0.53) (0.48) (0.38)
Distributions in excess of net realized gain (0.15) (0.14) -- (0.03)
--------- -------- --------- --------
Total distributions (0.40) (0.67) (0.48) (0.41)
--------- -------- --------- --------
Net asset value, end of period $ 10.58 $ 10.54 $ 10.22 $ 9.92
========= ======== ========= ========
Total return (non-annualized) 4.21% 9.97% 7.91% 3.24%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 5,072 $ 2,444 $ 1,399 $ 636
Ratio of expenses to average net assets:
Before expense reimbursement 1.11%** 1.31% 2.12% 4.10%**
After expense reimbursement 1.07%** 1.07% 1.07% 1.07%**
Ratio of net investment income to average net assets:
Before expense reimbursement 4.83%** 5.14% 4.67% 2.53%**
After expense reimbursement 4.87%** 5.38% 5.72% 5.56%**
Portfolio turnover rate 140% 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>
U.S. Large Capitalization Growth Fund
[BRINSON LOGO APPEARS HERE]
The U.S. Large Capitalization Growth Fund is an actively managed portfolio
invested in the common stocks of companies whose internal financial returns and
earnings or cash flow growth prospects are well above the average large
capitalization company ($3 billion or larger). While valuation is an important
aspect in the screening process, fundamental dynamics are more heavily weighted.
The investment strategy emphasizes stock selection with attention given to
factor and sector exposures relative to the benchmark.
Since its performance inception on October 31, 1997, the Brinson U.S. Large
Capitalization Growth Fund Class I has returned 25.03% compared to a return of
the S&P 500 Index of 30.84%. For the calendar year 1998, the Fund returned
24.90%, compared to the benchmark's return of 28.58%.
Generally, 1998 was a very good year to be a large capitalization growth
manager. The uncertainties around the world led investors to seek assured growth
wherever they could find it, particularly in larger sized companies. In the
second half of the year, however, there began to be some differentiation among
the favorites as many of the dominant global franchise companies such as
Coca-Cola began to stumble with fundamental problems. This put even more focus
on health care and technology where performance broadened out beyond just the
biggest companies. Our performance was helped by our stock selection in the
latter part of the year with investments such as Sun Microsystems, Oracle,
Immunex, and AT&T. Areas which hurt performance were an overweighting in
financial stocks and a small but meaningful commitment in the energy sector,
particularly oil service companies such as Schlumberger.
The major challenge facing growth investors in 1999 is twofold. First, some
major sectors such as technology and health care have performed extremely well
and are clearly not undervalued. World economic trends and populist political
initiatives respectively could make both sectors more risky going forward. Our
solution is to continue to look at companies which have not been the major
leaders but which have strong fundamentals and relatively good valuations.
Secondly, growth investing as a strategy has enjoyed extreme popularity in
recent years at the expense of value investing. Efforts to reflate here and
overseas may lead to more competitive earnings gains from more cyclical sources,
something which has not been present for some time. Our solution is to look for
growth companies which have been hurt by global economic woes and which may
actually perform well under these conditions. We have consciously underweighted
the major companies in most sectors unless we are extremely confident of
fundamentals.
55
<PAGE>
U.S. Large Capitalization Growth Fund
Total Return
6 Months 1 Year
ended ended 10/31/97*
12/31/98 12/31/98 to 12/31/98
- -----------------------------------------------------------------------------
Brinson U.S. Large Capitalization Growth
Fund Class I 10.40% 24.90% 20.42%
- -----------------------------------------------------------------------------
S&P 500 Equity Index 9.23 28.58 30.84
- -----------------------------------------------------------------------------
* Performance inception date of the Brinson U.S. Large Capitalization Growth
Fund Class I.
Total return includes
reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Large Capitalization Growth Fund Class I and the S&P 500 Equity Index if you had
invested $1,000,000 on October 31, 1997, and had reinvested all your income
dividends and capital gain distributions through December 31, 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 Growth Fund Class I
vs. S&P 500 Equity Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
Brinson U.S.
Large
Capitalization S&P 500
Growth Fund Equity
Class I Index
---------------- ------------
10/31/97 1,000,000 1,000,000
11/30/97 1,018,495 1,046,290
12/31/97 1,039,140 1,064,255
1/31/98 1,031,495 1,076,025
2/28/98 1,091,715 1,153,628
3/31/98 1,134,665 1,212,706
4/30/98 1,156,858 1,224,906
5/31/98 1,131,408 1,203,849
6/30/98 1,175,605 1,252,750
7/31/98 1,171,311 1,239,408
8/31/98 973,788 1,060,214
9/30/98 1,026,697 1,128,132
10/31/98 1,026,697 1,219,894
11/30/98 1,129,126 1,293,822
12/31/98 1,297,885 1,368,380
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.
56
<PAGE>
U.S. Large Capitalization Growth Fund
[BRINSON LOGO APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998
- -----------------------------------------------------------------------------
U.S. EQUITIES
Basic Industries
Chemicals 2.17%
Housing/Paper 2.10
------
4.27
Capital Investment
Capital Goods 1.99
Technology 18.77
------
20.76
Consumer
Autos/Durables 7.29
Health: Drugs 13.84
Health: Non-Drugs 8.13
Non-Durables 9.02
Retail/Apparel 5.10
------
43.38
Energy 4.17%
Financial
Banks 1.74
Non-Banks 6.01
------
7.75
Transportation 0.73
Services/Miscellaneous 8.04
Utilities
Telephone 7.10
------
Total U.S. Equities 96.20
SHORT-TERM INVESTMENTS 3.18
------
TOTAL INVESTMENTS 99.38
CASH AND OTHER ASSETS,
LESS LIABILITIES 0.62
------
NET ASSETS 100.00%
======
Top 10 U.S. Equity Holdings
As of December 31, 1998
Percent of
Net Assets
- -----------------------------------------------------
1. Sun Microsystems, Inc. 4.13%
2. International Business Machines Corp. 4.01
3. General Electric Co. 3.69
4. Wal-Mart Stores, Inc. 2.75
5. Abbott Laboratories 2.72
6. Albertson's, Inc. 2.61
7. Philip Morris Companies, Inc. 2.58
8. AFLAC, Inc. 2.55
9. Time Warner, Inc. 2.54
10. Medtronics, Inc. 2.51
- -----------------------------------------------------
57
<PAGE>
U.S. Large Capitalization Growth Fund -- Schedule of Investments
December 31, 1998
- -----------------------------------------------------------------------------
Shares Value
----------- ------------------
U.S. Equities -- 96.20%
Abbott Laboratories 2,300 $ 112,700
AFLAC, Inc. 2,400 105,600
Albertson's, Inc. 1,700 108,269
American Express, Co. 1,000 102,250
AT&T Corp. 1,100 82,775
Autozone, Inc. (b) 2,200 72,463
BankAmerica Corp. 1,200 72,150
Bristol-Myers Squibb Co. 600 80,287
CBS Corp. 2,100 68,775
Chubb Corp. 1,000 64,875
Citigroup, Inc. 800 39,600
Compaq Computer Corp. 2,300 96,456
Continental Airlines, Inc., Class B (b) 900 30,150
Dayton Hudson Corp. 1,800 97,650
E.I. du Pont de Nemours & Co. 1,700 90,206
Exxon Corp. 900 65,813
Fox Entertainment Group, Inc., Class A (b) 800 20,150
General Electric Co. 1,500 153,094
Halliburton Co. 1,600 47,400
Hewlett-Packard Co. 700 47,819
Immunex Corp. (b) 800 100,650
Intel Corp. 500 59,281
International Business Machines Corp. 900 166,275
Johnson & Johnson 900 75,487
Kimberly Clark Corp. 1,600 87,200
Liberty Media Group, Class A (b) 1,400 64,488
Lilly (Eli) & Co. 1,100 97,762
Loral Space & Communications Ltd. (b) 3,600 64,125
Lowe's Companies, Inc. 1,500 76,781
Lucent Technologies, Inc. 400 44,000
McDonald's Corp. 900 68,963
Medtronic, Inc. 1,400 103,950
Merck & Co., Inc. 600 88,612
Microsoft, Inc. (b) 400 55,475
Monsanto Co. 1,100 52,250
Morgan Stanley Dean Witter & Co. 600 42,600
Northern Telecom Ltd. 800 40,100
Oracle Corp. (b) 1,200 51,750
PepsiCo, Inc. 2,200 90,062
Philip Morris Companies, Inc. 2,000 107,000
QUALCOMM, Inc. (b) 700 36,269
Raytheon Co., Class A 1,600 82,700
Schering Plough Corp. 1,700 93,925
Schlumberger Ltd. 1,300 59,963
Sun Microsystems, Inc. (b) 2,000 171,250
Tele-Communications
TCI Ventures Group, Class A (b) 2,700 63,619
Texas Instruments, Inc. 1,100 94,119
Time Warner, Inc. 1,700 105,506
Wal-Mart Stores, Inc. 1,400 114,012
Waste Management, Inc. 1,600 74,600
-------------
Total U.S. Equities (Cost $3,402,970) 3,991,256
Face
Amount Value
----------- ------------------
Short-Term Investments -- 3.18%
Investment Companies -- 3.18%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund (Cost $131,691) $131,691 $ 131,691
-------------
Total Investments
(Cost $3,534,661) -- 99.38% 4,122,947
-------------
Cash and other assets,
less liabilities -- 0.62% 25,841
-------------
Net Assets -- 100% $4,148,788
=============
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $3,534,661; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $677,003
Gross unrealized depreciation (88,717)
--------
Net unrealized appreciation $588,286
========
(b) Non-income producing security
See accompanying notes to financial statements.
58
<PAGE>
U.S. Large Capitalization Growth Fund -- Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $3,402,970) $3,991,256
Affiliated issuers (Cost $131,691) 131,691
Cash 114
Receivables:
Dividends 1,881
Interest 393
Fund shares sold 50,010
----------
TOTAL ASSETS 4,175,345
----------
LIABILITIES:
Payables:
Investment securities purchased 25,397
Accrued expenses 1,160
----------
TOTAL LIABILITIES 26,557
----------
NET ASSETS $4,148,788
==========
NET ASSETS CONSIST OF:
Paid in capital $3,291,916
Accumulated net realized gain 268,586
Net unrealized appreciation 588,286
----------
NET ASSETS $4,148,788
==========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of
$4,146,788 and 350,212 shares issued
and outstanding) $ 11.84
==========
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of
$1,000 and 84 shares issued and outstanding) $ 11.84
==========
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of
$1,000 and 84 shares issued and outstanding) $ 11.84
==========
See accompanying notes to financial statements.
59
<PAGE>
U.S. Large Capitalization Growth Fund -- Financial Statements
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Dividends $ 61,083
Interest 14,387
----------
TOTAL INCOME 75,470
----------
EXPENSES:
Advisory 33,493
Registration 22,522
Fund accounting 19,260
Transfer agent 14,665
Shareholder servicing 13,511
Shareholder reporting 12,757
Professional 11,125
Custodian 10,976
Administration 7,361
Other 7,579
----------
TOTAL EXPENSES 153,249
Expenses waived and reimbursed by Advisor (98,048)
----------
NET EXPENSES 55,201
----------
NET INVESTMENT INCOME 20,269
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 438,421
Change in net unrealized appreciation or depreciation
on investments 554,465
----------
Net realized and unrealized gain 992,886
----------
Net increase in net assets resulting from operations $1,013,155
==========
See accompanying notes to financial statements.
60
<PAGE>
U.S. Large Capitalization Growth Fund -- Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
October 14, 1997*
Year Ended Through
December 31, 1998 December 31, 1997
----------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 20,269 $ 9,350
Net realized gain (loss) 438,421 (14,545)
Change in net unrealized appreciation or depreciation 554,465 33,821
Net increase in net assets resulting from operations 1,013,155 28,626
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I (19,205) (9,050)
Distributions from net realized gain:
Brinson Class I (151,936) --
Total distributions to shareholders (171,141) (9,050)
Capital share transactions:
Shares sold 4,973,380 4,108,844
Shares issued on reinvestment of distributions 170,881 9,050
Shares redeemed (5,974,601) (356)
Net increase (decrease) in net assets resulting
from capital share transactions (830,340) 4,117,538
TOTAL INCREASE IN NET ASSETS 11,674 4,137,114
NET ASSETS:
Beginning of period 4,137,114 --
End of period (including accumulated undistributed
net investment income of $300 in 1997) $4,148,788 $4,137,114
</TABLE>
* Commencement of investment operations
See accompanying notes to financial statements.
61
<PAGE>
U.S. Large Capitalization Growth Fund -- Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.***
<TABLE>
<CAPTION>
October 14, 1997*
Year Ended Through
Brinson Class I December 31, 1998 December 31, 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.92 $ 10.00
------- --------
Income from investment operations:
Net investment income 0.06 0.02
Net realized and unrealized gain (loss) 2.38 (0.08)
------- --------
Total income (loss) from investment operations 2.44 (0.06)
------- --------
Less distributions:
Distributions from net investment income (0.06) (0.02)
Distributions from net realized gain (0.46) --
------- --------
Total distributions (0.52) (0.02)
------- --------
Net asset value, end of period $ 11.84 $ 9.92
======= ========
Total return (non-annualized) 24.90% (0.55)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 4,147 $ 4,137
Ratio of expenses to average net assets:
Before expense reimbursement 2.76% 8.54%**
After expense reimbursement 0.99% 1.00%**
Ratio of net investment income (loss) to
average net assets:
Before expense reimbursement (1.40)% (6.19)%**
After expense reimbursement 0.37% 1.35%**
Portfolio turnover rate N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
*** Reflects 10 for 1 share split effective December 9, 1998.
N/A = Information is not available for periods prior to reorganization,
as described in notes to financial statements.
See accompanying notes to financial statements.
62
<PAGE>
U.S. Small Capitalization Growth Fund
[BRINSON LOGO APPEARS HERE]
The U.S. Small Capitalization Growth Fund invests in companies with market
capitalizations of less than $1 billion which we expect to experience
above-average earnings/cash flow growth or meaningful changes in underlying
value. As such, we seek to identify rapidly growing companies with leading
products or industry positions and a proven record of achievement. The Fund
concentrates on companies with strong business franchises that generate rapidly
rising earnings. The Fund also places emphasis on controlling risk through
diversification and attention to reasonable valuations.
Since September 30, 1997, the Brinson U.S. Small Capitalization Growth Fund
Class I has experienced a -9.66% annualized return, versus a -4.67% return for
the Russell 2000 Index, a commonly cited index of small capitalization stocks.
For the calendar year 1998, the U.S. Small Capitalization Growth Fund Class I
experienced a 6.70% decline in value, which trailed the 2.55% loss recorded for
the Russell 2000 Index.
Industry weighting and stock selection accounted for the poor performance of the
U.S. Small Capitalization Growth Fund in 1998. The largest negative impact was
from the Fund's overweight in the oil services area, which was down sharply, and
from underweights in technology and utilities, which performed well. On the
positive side, the Fund's overweights in retail foods, miscellaneous finance,
and life insurance helped results. We have taken steps to narrow our portfolio
ranges in order to keep industry selection from continuing to be such a large
factor going forward.
Stock selection was also negative this year, with a larger than usual number of
companies experiencing unexpected accounting and operating problems. Stocks that
detracted from performance in 1998 included Vesta Insurance, Oakwood Homes,
Landry's Seafood, Technology Solutions, and General Nutrition. The Fund's better
performing stocks included Waters Corp, Foodmaker, U.S. Foodservice, Sanmina,
and Swift Transportation.
If we widen our perspective to the overall small cap market, it was a difficult
year for small cap investors. The Russell 2000 underperformed the large cap S&P
500 by almost 31 percentage points in 1998, which is the worst relative calendar
year performance by small cap stocks in the past 25 years. The damage incurred
by the average small cap stock was even worse than the market averages would
indicate. The median stock in the Russell 2000, for example, declined 9.1% in
1998, and more than 500 companies in the index fell more than 30%.
Despite the poor performance, fundamentals continue to be quite positive for
small cap stocks. The average stock in the Russell 2000 has grown earnings per
share by 16.5% annually over the past five years, which compares well with the
16.8% annual gains chalked up by the S&P 500. In addition, the Wall Street
analyst consensus is forecasting 20.5% annual earnings growth for small cap
stocks over the next five years, which is well above the 14.8% yearly gain
projected for the S&P 500. Finally, relative price-earnings and price-sales
ratios for small cap stocks have sunk to record lows versus large cap stocks, so
we think it is only a matter of time before a small cap rally of substantial
proportions occurs.
63
<PAGE>
U.S. Small Capitalization Growth Fund
Total Return
6 months 1 year
ended ended 9/30/97*
12/31/98 12/31/98 to 12/31/98
- ----------------------------------------------------------------------
Brinson U.S. Small Capitalization
Growth Fund Class I -9.32% -6.70% -9.66%
- ----------------------------------------------------------------------
Russell 2000 Index -7.12 -2.55 -4.67
- ----------------------------------------------------------------------
* Inception date of the Brinson U.S. Small Capitalization Growth Fund Class I.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year represent average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Small Capitalization Growth Fund Class I and the Russell 2000 Index if you had
invested $1,000,000 on September 30, 1997, and had reinvested all your income
dividends and capital gain distributions through December 31, 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. Small Capitalization Growth Fund Class I
vs. Russell 2000 Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
Brinson U.S.
Small
Capitalization Russell
Growth Fund 2000
Class I Index
--------------- ------------
1,000,000 1,000,000
10/31/97 953,600 956071
936,600 949,887
12/31/97 943,800 996,513
932,700 951,260
2/28/98 1,007,600 1,021,599
1,049,900 1,063,732
4/30/98 1,047,200 1,069,618
990,700 1,012,012
6/30/98 971,100 1,014,141
887,800 932,042
8/31/98 700,200 751,059
739,372 809,835
10/31/98 788,803 842,863
807,515 887,022
12/31/98 880,562 941,913
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.
64
<PAGE>
U.S. Small Capitalization Growth Fund
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998
- -----------------------------------------------------------------------------
U.S. EQUITIES
Basic Industries
Housing/Paper 1.35%
------
1.35
Capital Investment
Capital Goods 6.29
Technology 9.12
------
15.41
Consumer
Autos/Durables 7.00
Discretionary 4.04
Health: Drugs 0.39
Health: Non-Drugs 8.74
Non-Durables 8.27
Retail/Apparel 3.03
------
31.47
Energy 3.30%
Financial
Banks 11.22
Non-Banks 8.15
------
19.37
Transportation 11.21
Services/Miscellaneous 15.59
------
Total U.S. Equities 97.70
------
SHORT-TERM INVESTMENTS 4.24
------
TOTAL INVESTMENTS 101.94
LIABILITIES, LESS CASH
AND OTHER ASSETS (1.94)
------
NET ASSETS 100.00%
======
Top 10 U.S. Equity Holdings
As of December 31, 1998
Percent of
Net Assets
- -----------------------------------------------------
1. Waters Corp. 2.97%
2. U.S. Foodservice 2.95
3. Protective Life Corp. 2.89
4. Foodmaker, Inc. 2.88
5. Swift Transportation Co., Inc. 2.86
6. U.S. Trust Corp. 2.86
7. Patterson Dental Co. 2.83
8. Ha-Lo Industries, Inc. 2.81
9. Peoples Heritage Financial Group, Inc. 2.72
10. North Fork Bancorporation, Inc. 2.49
- -----------------------------------------------------
65
<PAGE>
U.S. Small Capitalization Growth Fund -- Schedule of Investments
December 31, 1998
- -----------------------------------------------------------------------------
Shares Value
----------- ------------------
U.S. Equities -- 97.70%
Aeroflex, Inc. (b) 13,200 $ 199,650
AFC Cable Systems, Inc. (b) 6,000 201,750
Airborne Freight Corp. 12,200 439,962
American Italian Pasta Co., Class A (b) 8,500 224,188
Andrx Corp. (b) 1,700 87,125
AXENT Technologies, Inc. (b) 12,500 382,031
Brightpoint, Inc. (b) 28,300 389,125
Casey's General Stores, Inc. 32,900 428,728
Coach USA, Inc. (b) 14,900 516,844
Comfort Systems USA, Inc. (b) 8,400 150,150
Commercial Federal Corp. 14,200 329,262
Consolidated Graphics, Inc. (b) 6,300 425,644
Datastream Systems, Inc. (b) 15,500 178,250
Dendrite International, Inc. (b) 9,800 244,694
Eclipsys Corp. (b) 3,500 101,500
Elcor Corp. 8,100 261,731
Emmis Broadcasting Corp. (b) 5,500 238,563
Ethan Allen Interiors, Inc. 4,500 184,500
Expeditors International of Washington, Inc. 12,100 508,200
Finova Group, Inc. 7,000 377,562
Foodmaker, Inc. (b) 29,500 650,844
Friede Goldman International, Inc. (b) 9,800 111,475
General Nutrition Companies, Inc. (b) 14,200 230,750
HA-LO Industries, Inc. (b) 16,900 635,862
Horace Mann Educators Corp. 11,100 316,350
Investors Financial Services Corp. 5,400 321,975
Ivex Packaging Corp. (b) 3,500 81,375
Kellstrom Industries, Inc. (b) 11,800 339,250
Kuhlman Corp. 13,100 496,162
Lason, Inc. (b) 4,900 285,119
Level One Communications, Inc. (b) 5,300 188,150
Mercury Interactive Corp. (b) 3,400 215,050
Mesaba Holdings, Inc. (b) 20,500 422,812
META Group, Inc. (b) 6,700 199,325
Metro Information Services, Inc. (b) 12,400 372,000
North Fork Bancorporation, Inc. 23,500 562,531
Ocular Sciences, Inc. (b) 13,300 355,775
Orthodontic Centers of America, Inc. (b) 17,000 330,437
Patterson Dental Co. (b) 14,700 639,450
Pediatrix Medical Group, Inc. (b) 6,500 389,594
Peoples Heritage Financial Group, Inc. 30,700 614,000
Personnel Group of America, Inc. (b) 17,900 313,250
Pier 1 Imports, Inc. 26,600 257,688
Pride International, Inc. (b) 19,600 138,425
Prime Bancshares, Inc. 5,300 91,425
Prime Group Realty Trust 11,400 172,425
Promus Hotel Corp. (b) 6,200 200,725
Protective Life Corp. 16,400 652,925
Shares Value
----------- ------------------
Province Healthcare Co. (b) 1,300 $ 46,638
R & B Falcon Corp. (b) 12,000 91,500
Richfood Holdings, Inc. 15,500 321,625
Sanmina Corp. (b) 6,700 418,750
Smith Int'l, Inc. (b) 10,400 261,950
Sunrise Assisted Living, Inc. (b) 8,800 456,500
Superior Consulting Holdings Corp. (b) 2,000 87,000
Swift Transportation Co., Inc. (b) 23,100 647,522
Sykes Enterprises, Inc. (b) 9,400 286,700
Tetra Tech, Inc. (b) 12,100 327,456
TMP Worldwide, Inc. (b) 5,800 243,600
Toll Brothers, Inc. (b) 10,000 225,625
Tuboscope Inc. (b) 17,700 143,813
U.S. Foodservice (b) 13,600 666,400
U.S. Trust Corp. 8,500 646,000
United Stationers, Inc. (b) 18,300 475,800
Waters Corp. (b) 7,700 671,825
Xoom.com, Inc. (b) 1,400 46,200
Zebra Technologies Corp., Class A (b) 9,600 276,000
Zions Bancorporation 4,700 293,163
-------------
Total U.S. Equities (Cost $19,919,618) 22,088,675
-------------
Short-Term Investments -- 4.24%
Investment Companies -- 4.24%
Brinson Supplementary Trust U.S.
Cash Management Prime Fund
(Cost $958,871) 958,871 958,871
-------------
Total Investments
(Cost $20,878,489) -- 101.94% 23,047,546
-------------
Liabilities, less cash and other
assets -- (1.94%) (438,235)
-------------
Net Assets -- 100% $22,609,311
=============
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $20,878,489; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $3,485,524
Gross unrealized depreciation (1,316,467)
----------
Net unrealized appreciation $2,169,057
==========
(b) Non-income producing security
See accompanying notes to financial statements.
66
<PAGE>
U.S. Small Capitalization Growth Fund -- Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $19,919,618) $22,088,675
Affiliated issuers (Cost $958,871) 958,871
Receivables:
Investment securities sold 5,600
Dividends 9,074
Interest 1,136
Fund shares sold 39,000
------------
TOTAL ASSETS 23,102,356
------------
LIABILITIES:
Payables:
Investment securities purchased 484,257
Investment advisory fees 2,108
Accrued expenses 6,680
------------
TOTAL LIABILITIES 493,045
------------
NET ASSETS $22,609,311
============
NET ASSETS CONSIST OF:
Paid in capital $24,061,801
Accumulated net realized loss (3,621,547)
Net unrealized appreciation 2,169,057
------------
NET ASSETS $22,609,311
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of
$22,607,311 and 2,569,863 shares
issued and outstanding) $ 8.80
============
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of
$1,000 and 114 shares issued and outstanding) $ 8.80
============
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of
$1,000 and 114 shares issued and outstanding) $ 8.80
============
See accompanying notes to financial statements.
67
<PAGE>
U.S. Small Capitalization Growth Fund -- Financial Statements
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Dividends $ 96,327
Interest 76,924
-----------
TOTAL INCOME 173,251
-----------
EXPENSES:
Advisory 114,211
Shareholder servicing 44,635
Fund accounting 27,596
Registration 27,361
Administration 24,165
Custodian 19,857
Professional 17,149
Other 40,310
-----------
TOTAL EXPENSES 315,284
Expenses waived by Advisor (92,133)
-----------
NET EXPENSES 223,151
-----------
NET INVESTMENT LOSS (49,900)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on investments (3,615,782)
Change in net unrealized appreciation or depreciation
on investments 2,695,815
-----------
Net realized and unrealized loss (919,967)
-----------
Net decrease in net assets resulting from operations $ (969,867)
===========
See accompanying notes to financial statements.
68
<PAGE>
U.S. Small Capitalization Growth Fund -- Financial Statements
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
September 30, 1997*
Year Ended Through
December 31, 1998 December 31, 1997
----------------- -------------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (49,900) $ (2,313)
Net realized gain (loss) (3,615,782) 6,540
Change in net unrealized appreciation or depreciation 2,695,815 (526,758)
----------- -----------
Net decrease in net assets resulting from operations (969,867) (522,531)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from capital gains:
Brinson Class I (10,014) --
----------- -----------
Total distributions to shareholders (10,014) --
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold 18,352,730 12,731,529
Shares issued on reinvestment of distributions 9,859 --
Shares redeemed (6,727,395) (255,000)
----------- -----------
Net increase in net assets resulting from capital
share transactions 11,635,194 12,476,529
----------- -----------
TOTAL INCREASE IN NET ASSETS 10,655,313 11,953,998
----------- -----------
NET ASSETS:
Beginning of period 11,953,998 --
----------- -----------
End of period $22,609,311 $11,953,998
=========== ===========
</TABLE>
* Commencement of investment operations
See accompanying notes to financial statements.
69
<PAGE>
U.S. Small Capitalization Growth Fund -- Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.***
<TABLE>
<CAPTION>
September 30, 1997*
Year Ended Through
Brinson Class I December 31, 1998 December 31, 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.44 $ 10.00
------- --------
Income from investment operations:
Net investment income (loss) (0.02) --
Net realized and unrealized loss (0.57) (0.56)
------- --------
Total income (loss) from investment operations (0.59) (0.56)
------- --------
Less distributions:
Distributions from net realized gain (0.05) --
------- --------
Total distributions (0.05) --
------- --------
Net asset value, end of period $ 8.80 $ 9.44
======= ========
Total return (non-annualized) (6.70)% (5.62)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $22,607 $11,954
Ratio of expenses to average net assets:
Before expense reimbursement 1.69% 3.63%**
After expense reimbursement 1.20% 1.20%**
Ratio of net investment income (loss) to
average net assets:
Before expense reimbursement (0.76)% (2.53)%**
After expense reimbursement (0.27)% (0.10)%**
Portfolio turnover rate N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
*** Reflects 10 for 1 share split effective December 9, 1998.
N/A = Information is not available for periods prior to reorganization,
as described in notes to financial statements.
See accompanying notes to financial statements.
70
<PAGE>
High Yield Fund
UBS Brinson is an active manager of high yield fixed income client portfolios.
We believe successful high yield investing involves capturing the market's high
total return potential while minimizing losses due to credit deterioration or
default. We believe that our research-intensive effort and our focus on
long-term performance will result in superior risk-adjusted returns. At the
forefront of our philosophy is a focus on diversification and preservation of
principal.
The Brinson High Yield Fund Class I earned an annualized return of 8.12% since
inception on September 30, 1997, versus 5.04% for its benchmark, the Merrill
Lynch High Yield Master Index. The Fund's total return for the calendar year
1998 was 7.75%, versus 3.66% for the benchmark.
During 1998, the benchmark's yield-to-worst increased markedly, from 8.85% at
year-end 1997 to 10.18% at year-end 1998. Spreads in the high yield market
widened by 242 basis points during 1998 as investors fled the high yield market
for the safety and liquidity of U.S. Treasuries. By year-end, liquidity had
improved and spreads had tightened by 100 basis points from the October peak to
end the year at 554 basis points.
Industry weightings contributed significantly to 1998 results. During 1998, the
Fund underweighted the energy, metals and paper industries, which all posted
negative returns, and overweighted broadcasting and diversified media, which
outperformed. Issue selection also played an important role in 1998 as bond
holdings in Simmons Co. and Ryder TRS, among others, were refinanced via tender
offers, resulting in significant capital appreciation. Most importantly, the
Fund suffered no default-related losses and, since inception, has maintained a
default rate of 0.00%.
At year end, the Fund contained approximately 100 issues, with 19% in double-B,
74% in single-B and 7% in CCC/CC/C rated issues.
71
<PAGE>
High Yield Fund
Total Return
6 months 1 year 9/30/97*
ended ended to
12/31/98 12/31/98 12/31/98
- --------------------------------------------------------------------
Brinson High Yield Fund Class I 1.93% 7.75% 8.12%
- --------------------------------------------------------------------
Merrill Lynch High Yield Master Index -0.81 3.66 5.04%
- --------------------------------------------------------------------
* Inception date of the Brinson High Yield Fund Class I.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson High
Yield Fund Class I and the Merrill Lynch High Yield Master Index if you had
invested $1,000,000 on September 30, 1997, and had reinvested all your income
dividends and capital gain distributions through December 31, 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 High Yield Fund Class I
vs. Merrill Lynch High Yield Master Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
Brinson High Merill Lynch
Yield Fund High Yield
Class I Master Index
-------------- ---------------
9/30/97 1,000,000 1,000,000
10/31/97 995,405 1,006,640
11/30/97 1,005,534 1,016,173
12/31/97 1,023,434 1,025,816
1/31/98 1,047,259 1,041,091
2/28/98 1,054,152 1,045,391
3/31/98 1,066,777 1,054,402
4/30/98 1,068,387 1,059,410
5/31/98 1,070,928 1,066,784
6/30/98 1,081,780 1,072,064
7/31/98 1,098,343 1,078,175
8/31/98 1,042,275 1,031,652
9/30/98 1,057,065 1,033,715
10/31/98 1,049,791 1,016,742
11/30/98 1,109,624 1,063,035
12/31/98 1,102,713 1,063,388
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
72
<PAGE>
High Yield Fund
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998
- -----------------------------------------------------------------------------
U.S. bonds
Corporate Bonds
Auto 2.01%
Broadcasting & Public Service 15.28
Construction 6.29
Consumer Goods 4.11
Electronics and Electric Components 3.31
Energy 0.87
Financial 1.55
Food & House Products 2.88
Health 1.26
Industrial 13.68
Machinery & Engineering 3.17
Multi-Industry 2.76
Real Estate 1.19
Recreation 9.85
Retail 2.09
Services 3.80
Telecommunications 19.74%
Utilities 0.95
Wholesale & International Trade 0.59
-------
Total U.S. Bonds 95.38
SHORT-TERM INVESTMENTS 3.86
-------
TOTAL INVESTMENTS 99.24
-------
CASH AND OTHER ASSETS,
LESS LIABILITIES 0.76
-------
NET ASSETS 100.00%
=======
Top Ten U.S. Bond Holdings
As of December 31, 1998
Percent of
Net Assets
- --------------------------------------------------
1. Echostar Communications 2.20%
2. Chancellor Media 1.73
3. Bally Total Fitness Holdings 1.69
4. Ackerley Group Inc. 1.60
5. Big Flower Press Holdings 1.59
6. Allbritton Communications 1.59
7. Verio Inc. 1.59
8. Mail-Well Corp. 1.58
9. PSINET Inc. 1.58
10. Diamond Triumph Inc. 1.57
- --------------------------------------------------
73
<PAGE>
High Yield Fund -- Schedule of Investments
December 31, 1998
- -----------------------------------------------------------------------------
Face
Amount Value
------------- --------------
U.S. Bonds -- 95.38%
U.S. Corporate Bonds -- 95.38%
Ackerley Group, Inc., Series 144A, 9.000%,
due 01/15/09 $550,000 $558,250
Allbritton Communications, Series B,
8.875%, due 02/01/08 550,000 555,500
Alliance Laundry Systems, Series 144A,
9.625%, due 05/01/08 425,000 408,000
Aurora Foods, Series B
9.875%, due 02/15/07 300,000 327,000
8.750%, due 07/01/08 150,000 156,000
Avalon Cable, Series 144A, 9.375%, due
12/01/08 425,000 434,562
Bally Total Fitness Holdings Corp., Series B,
9.875%, due 10/15/07 600,000 588,000
Big Flower Press Holdings, Series 144A,
8.625%, due 12/01/08 550,000 555,500
Building Materials Holding Corp.,
Series 144A, 8.000%, due 12/01/08 425,000 423,937
CB Richard Ellis Services, Inc.,
8.875%, due 06/01/06 425,000 416,500
Centennial Cellular, Series 144A,
10.750%, due 12/15/08 550,000 547,250
Century Communications Corp.,
0.000%, due 01/15/08 425,000 212,500
Chancellor Media Corp., Series B,
10.500%, due 01/15/07 550,000 602,250
Citadel Broadcasting Co.
10.250%, due 07/01/07 275,000 299,063
Series 144A, 9.250%, due 11/15/08 275,000 286,688
Collins & Aikman Corp.,
11.500%, due 04/15/06 500,000 520,000
CSC Holdings, Inc.,
7.625%, due 07/15/18 250,000 245,150
Cumulus Media, Inc.,
10.375%, due 07/01/08 450,000 477,000
Dan River, Inc., Snr-Sub-Nts,
10.125%, due 12/15/03 200,000 209,500
Diamond Triumph Autoglass, Inc.,
Series 144A, 9.250%, due 04/01/08 550,000 547,250
Digital Television, Series B,
12.500%, due 08/01/07 300,000 327,000
Dobson / Sygnet, Series 144A,
12.250%, due 12/15/08 125,000 127,188
E Spire Communications, Inc., Snr-Nts,
Step, 0.000%, due 07/01/08 (c) 550,000 214,500
Eagle Family Foods, Series B,
8.750%, due 01/15/08 550,000 519,750
Echostar Communications, Step,
0.000%, due 06/01/04 (d) 750,000 768,750
Fedders North America,
9.375%, due 08/15/07 300,000 302,250
Federal-Mogul Corp.,
7.875%, due 07/01/10 150,000 153,120
Face
Amount Value
------------- --------------
Fox / Liberty Networks, Step,
0.000%, due 08/15/07 (e) $750,000 $510,000
Golden Sky Systems, Series 144A,
12.375%, due 08/01/06 450,000 465,750
Harrahs Operating Co., Inc.,
7.875%, due 12/05/05 425,000 429,709
Harvey Casinos Resorts,
10.625%, due 06/01/06 100,000 108,000
Hollinger International, Inc.,
9.250%, due 03/15/07 425,000 448,375
ICG Holdings, Inc., Step,
0.000%, due 09/15/05 (f) 425,000 350,625
Interep National Radio Sales, Series 144A,
10.000%, due 07/01/08 425,000 437,750
Intermedia Communications, Inc., Snr-Nts,
Series B, 0.000%, due 07/15/07 550,000 374,000
International Comfort Products Corp.,
Series B, 8.625%, due 05/15/08 275,000 277,750
Iron Mountain, Inc.,
10.125%, due 10/01/06 200,000 217,000
J.H. Heafner Co., Series 144A,
10.000%, due 05/15/08 425,000 427,125
JCAC, Inc., 10.125%, due 06/15/06 450,000 501,750
Level 3 Communications, Inc.,
9.125%, due 05/01/08 450,000 444,375
Liberty Group Operating,
9.375%, due 02/01/08 550,000 539,000
LIN Holdings Corp., Step,
0.000%, due 03/01/08 (g) 600,000 420,000
Lowes Cineplex, 8.875%, due 08/01/08 350,000 361,375
Mail Well Corp. Series 144A,
8.750%, due 12/15/08 550,000 550,000
Marcus Cable Co., Step,
0.000%, due 12/15/05 (h) 500,000 473,750
McLeodusa, Inc., 9.250%, due 07/15/07 300,000 313,500
Mediacom LLC., Series B,
8.500%, due 04/15/08 500,000 511,875
Microcell Telecommunications, Snr-Nts,
Series B, Step, 0.000%, due 06/01/06 (i) 350,000 259,875
MTS, Inc., 9.375%, due 05/01/05 450,000 438,750
National Equipment Services, Series 144A,
10.000%, due 11/30/04 550,000 536,250
Nationsrent, Inc., Series 144A,
10.375%, due 12/15/08 550,000 544,500
NBTY, Inc., Series B, 8.625%, due 09/15/07 450,000 438,750
Newpark Resource, Inc., Series B,
8.625%, due 12/15/07 350,000 331,625
Nextel Communications, Inc.
Series 144A, Step, 0.000%,
due 09/15/07 (j) 375,000 239,063
Snr-Nts, Step, 0.000%, due 10/31/07 (k) 250,000 151,250
Nextlink Communications, Series 144A,
10.750%, due 11/15/08 375,000 381,562
74
<PAGE>
High Yield Fund -- Schedule of Investments
December 31, 1998
- -----------------------------------------------------------------------------
Face
Amount Value
------------- --------------
Nortek, Inc, 144A, 8.875%, due 08/01/08 $375,000 $382,500
NTL, Inc., Series 144A, Step,
0.000%, due 10/01/08 (l) 550,000 344,438
Outdoor Communications, Inc., Snr-Sub-Nts,
9.250%, due 08/15/07 200,000 212,000
Parker Drilling Corp., Series D, 9.750%,
due 11/15/06 150,000 133,500
Paxson Communications, 11.625%,
due 10/01/02 500,000 512,500
Pegasus Communications Corp.
Series 144A, 9.750%, due 12/01/06 150,000 150,375
Series B, 9.625%, due 10/15/05 450,000 451,125
Pilgrim's Pride Corp., Snr-Sub-Nts,
10.875%, due 08/01/03 200,000 206,000
Premier Parks, Inc., Step, 0.000%,
due 04/01/08 (m) 660,000 447,150
Pride Petroleum Service, Snr-Nts, 9.375%,
due 05/01/07 325,000 302,250
PSINet, Inc. Series 144A, 11.500%
due 11/01/08 525,000 549,937
R. H. Donnelley, Inc., 9.125%, due 06/01/08 350,000 366,625
Rayovac Corp., Series B, 10.250%,
due 11/01/06 350,000 385,000
RCN Corp., Step, 0.000%, due 10/15/07 (n) 450,000 263,250
Revlon Consumer Products, 8.625%,
due 02/01/08 550,000 500,500
SFX Entertainment, Inc., Series B, 9.125%,
due 02/01/08 550,000 544,500
Sinclair Broadcast Group
10.000%, due 09/30/05 250,000 265,000
8.750%, due 12/15/07 250,000 252,500
Splitrock Services, Inc., Series B, 11.750%,
due 07/15/08 220,000 190,300
Station Casinos, Series 144A, 8.875%,
due 12/01/08 500,000 507,500
Trans-Resources, Inc., Series B, Step,
0.000%, due 03/15/08 (o) 250,000 132,500
Transwestern
9.625%, due 11/15/07 275,000 286,000
Snr-Nts, Series 144A, 9.625%,
due 11/15/07 250,000 260,000
Trump Atlantic City Funding, Inc.,
11.250%, due 05/01/06 100,000 88,000
Unisys Corp., 11.750%, due 10/15/04 300,000 348,000
United Artists Theatre Circuit, Inc., Series B
Snr-Sub-Nts, 9.750%, due 10/15/07 125,000 115,000
9.750%, due 04/15/08 350,000 334,250
United Rentals
Series B, 9.500%, due 06/01/08 125,000 126,250
Series 144A, 8.800%, due 08/15/08 425,000 416,500
Series 144A, 9.250%, due 01/15/09 250,000 250,625
Verio, Inc., Series 144A, 11.250%,
due 12/01/08 550,000 552,750
Face
Amount Value
------------- --------------
Weirton Steel Corp., 10.750%, due 06/01/05 $425,000 $ 365,500
Wesco Distribution, Inc., Series B, 9.125%,
due 06/01/08 300,000 300,000
Young Broadcasting, Inc., Series B, 8.750%,
due 06/15/07 475,000 482,125
-----------
Total U.S. Bonds (Cost $33,507,290) 33,290,242
-----------
Shares
-------------
U.S. Equities -- 0.00%
Splitrock Services, Inc., Warrants
due 07/15/08 (b) (Cost $11,307) 220 --
-----------
Short-Term Investments -- 3.86%
Investment Companies -- 3.86%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund
(Cost $1,345,443) 1,345,443 1,345,443
-----------
Total Investments --
(Cost $34,864,040) 99.24% (a) 34,635,685
-----------
Cash and other assets,
less liabilities -- 0.76% 266,237
-----------
Net Assets -- 100% $34,901,922
===========
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $34,864,040; and net
unrealized depreciation consisted of:
Gross unrealized appreciation $ 423,318
Gross unrealized depreciation (651,672)
----------
Net unrealized depreciation $(228,355)
==========
(b) Non-income producing security
(c) Interest rate 0.000% until 07/01/03, then 10.625% to maturity
(d) Interest rate 0.000% until 05/31/99, then 12.875% to maturity
(e) Interest rate 0.000% until 08/15/02, then 9.750% to maturity
(f) Interest rate 0.000% until 09/14/00, then 13.500% to maturity
(g) Interest rate 0.000% until 03/01/03, then 10.000% to maturity
(h) Interest rate 0.000% until 06/15/00, then 14.250% to maturity
(i) Interest rate 0.000% until 12/01/01, then 14.000% to maturity
(j) Interest rate 0.000% until 09/15/02, then 10.450% to maturity
(k) Interest rate 0.000% until 10/31/02, then 9.750% to maturity
(l) Interest rate 0.000% until 10/01/03, then 12.375% to maturity
(m) Interest rate 0.000% until 04/01/03, then 10.000% to maturity
(n) Interest rate 0.000% until 10/15/02, then 11.125% to maturity
(o) Interest rate 0.000% until 03/15/03, then 12.000% to maturity
144A: Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1998, the value of these securities amounted to $10,885,250 or 31.22% of
net assets.
See accompanying notes to financial statements.
75
<PAGE>
High Yield Fund -- Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $33,518,597) $ 33,290,242
Affiliated issuers (Cost $1,345,443) 1,345,443
Receivables:
Investment securities sold 529,452
Interest 601,631
Fund shares sold 33,000
------------
TOTAL ASSETS 35,799,768
------------
LIABILITIES:
Payables:
Investment securities purchased 888,736
Investment advisory fees 3,721
Accrued expenses 5,389
------------
TOTAL LIABILITIES 897,846
------------
NET ASSETS $ 34,901,922
============
NET ASSETS CONSIST OF:
Paid in capital $ 35,056,372
Accumulated net realized gain 73,905
Net unrealized depreciation (228,355)
------------
NET ASSETS $ 34,901,922
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of
$34,899,922 and 3,498,244 shares issued
and outstanding) $ 9.98
============
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of
$1,000 and 100 shares issued and outstanding) $ 9.98
============
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of
$1,000 and 100 shares issued and outstanding) $ 9.98
============
See accompanying notes to financial statements.
76
<PAGE>
High Yield Fund -- Financial Statements
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED December 31, 1998
INVESTMENT INCOME:
Dividends $ 349
Interest 1,537,251
-----------
TOTAL INCOME 1,537,600
-----------
EXPENSES:
Advisory 78,138
Shareholder servicing 39,782
Fund accounting 31,164
Registration 27,308
Administration 21,515
Custodian 17,544
Professional 16,347
Shareholder reporting 15,051
Transfer agent 14,999
Other 10,466
-----------
TOTAL EXPENSES 272,314
Expenses waived and reimbursed by Advisor (120,078)
-----------
NET EXPENSES 152,236
-----------
NET INVESTMENT INCOME 1,385,364
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments 261,744
Change in net unrealized appreciation or depreciation (260,233)
-----------
Net realized and unrealized gain 1,511
-----------
Net increase in net assets resulting from operations $1,386,875
===========
See accompanying notes to financial statements.
77
<PAGE>
High Yield Fund -- Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
September 30, 1997*
Year Ended Through
December 31, 1998 December 31, 1997
----------------- -------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,385,364 $ 131,850
Net realized gain 261,744 17,380
Change in net unrealized appreciation or depreciation (260,233) 31,878
------------ -----------
Net increase in net assets resulting from operations 1,386,875 181,108
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I (1,395,944) (129,573)
Distributions from net realized gain:
Brinson Class I (196,916) --
------------ -----------
Total distributions to shareholders (1,592,860) (129,573)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold 29,258,184 7,756,774
Shares issued on reinvestment of distributions 1,381,731 129,246
Shares redeemed (3,393,269) (76,294)
------------ -----------
Net increase in net assets resulting from capital
share transactions 27,246,646 7,809,726
------------ -----------
TOTAL INCREASE IN NET ASSETS 27,040,661 7,861,261
------------ -----------
NET ASSETS:
Beginning of period 7,861,261 --
------------ -----------
End of period (including accumulated undistributed
net investment income of $2,277 in 1997) $ 34,901,922 $7,861,261
============ ===========
</TABLE>
* Commencement of investment operations.
See accompanying notes to financial statements.
78
<PAGE>
High Yield Fund -- Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.***
<TABLE>
<CAPTION>
September 30, 1997*
Year Ended Through
Brinson Class I December 31, 1998 December 31, 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 10.05 $ 10.00
-------- --------
Income from investment operations:
Net investment income 7.30 0.18
Net realized and unrealized gain 0.02 0.05
-------- --------
Total income from investment operations 7.32 0.23
-------- --------
Less distributions:
Distributions from net investment income (7.33) (0.18)
Distributions from net realized gain (0.06) --
-------- --------
Total distributions (7.39) (0.18)
-------- --------
Net asset value, end of period $ 9.98 $ 10.05
======== ========
Total return (non-annualized) 7.75% 2.34%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $34,900 $7,861
Ratio of expenses to average net assets:
Before expense reimbursement 1.59% 4.98%**
After expense reimbursement 0.89% 0.90%**
Ratio of net investment income to average
net assets:
Before expense reimbursement 7.38% 3.15%**
After expense reimbursement 8.08% 7.23%**
Portfolio turnover rate N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
*** Reflects 10 for 1 share split effective December 9, 1998
N/A = Information is not available for periods prior to reorganization,
as described in notes to financial statements.
See accompanying notes to financial statements.
79
<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 eleven series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (ex-U.S.)
Equity Fund (formerly, Non-U.S. Equity Fund) (each a "Fund" and collectively,
the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class
I, Brinson Class N and UBS Investment Funds Class (formerly, SwissKey Class).
There are an unlimited number of shares of each class with par value of $0.001
authorized. Each share represents an identical interest in the investments of
the Funds and has the same rights.
Prior to December 19, 1998, the U.S. Large Capitalization Growth Fund (formerly,
UBS Large Cap Growth Fund), U.S. Small Capitalization Growth Fund (formerly, UBS
Small Cap Fund), High Yield Fund (formerly, UBS High Yield Bond Fund), UBS Value
Equity Fund and UBS Bond Fund sought to achieve their investment objectives by
investing substantially all of their investable assets in a corresponding
portfolio of UBS Investor Portfolios Trust (each a "Portfolio" and collectively,
the "Portfolios"), an open-end management investment company that had the same
investment objective. On October 20, 1998, the Board of Directors approved a
tax-free plan of reorganization (the "Reorganization").
Pursuant to the Reorganization, the net assets of the UBS Large Cap Growth Fund,
UBS Small Cap Fund and UBS High Yield Bond Fund were withdrawn from their
corresponding Portfolio and thereafter each began to operate, under its new
name, as a separate Fund in the Trust. The accompanying financial statements
reflect the results of operations for each of these Funds for the year ended
December 31, 1998, including the operations of these Funds prior to their
Reorganization.
In addition, pursuant to the Reorganization, the net assets of the UBS Value
Equity Fund and UBS Bond Fund were withdrawn from their corresponding Portfolio
and acquired by the U.S. Equity Fund and U.S. Bond Fund, respectively, in
exchange solely for Brinson Class I shares of each Fund. The UBS Value Equity
Fund and UBS Bond Fund were then dissolved. Shares issued in exchange, net asset
value and corresponding net unrealized appreciation at December 18, 1998, were
as follows:
Net Unrealized
Fund Shares Asset Value Appreciation
- ---- ------ ----------- ------------
UBS Value Equity Fund 1,233,797 $23,269,419 $774,047
UBS Bond Fund 1,429,121 15,177,263 27,192
The aggregate net assets of the U.S. Equity Fund, UBS Value Equity Fund, U.S.
Bond Fund and UBS Bond Fund immediately before the mergers were $729,679,727,
$23,269,419, $80,523,890 and $15,177,263, respectively.
Information for the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund and U.S. Bond Fund for the six-month period ended
December 31, 1998, is not covered by the Report of Independent Auditors.
The following is a summary of significant accounting policies consistently
followed by the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization
Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization
Growth Fund, U.S. Bond Fund and High Yield Fund in the preparation of their
financial statements.
A. Investment Valuation:
Securities for which market quotations are readily available are valued at the
last available sales price on the exchange or market on which they are
principally traded, or lacking any sales, at the last available bid price on the
exchange or market on which such securities are principally traded. Equity
securities traded over-the-counter are valued at the most recent bid price.
Securities for which the most recent bid price or market quotations are not
readily available, including restricted securities which are subject to
limitations on their sale, are valued at fair value as determined in good faith
by or under the direction of the Trust's Board of Trustees. Investments in
affiliated investment companies are valued each day based on the closing net
asset value of the 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. Short-term obligations with a maturity of 60 days or less are valued at
amortized cost, which approximates market value.
80
<PAGE>
The Brinson Funds -- Notes To Financial Statements
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 period ended December 31,
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 9.18% and .02% of the amount
taxable as ordinary income qualify for the dividends received deduction
available to corporate shareholders for the U.S. Large Capitalization Growth
Fund and High Yield Fund, respectively. At December 31, 1998, the U.S. Small
Capitalization Growth Fund had a capital loss carry-forward for Federal income
tax purposes of approximately $1,768,000 available to offset future net capital
gains. This capital loss carry-forward will expire on December 31, 2006
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 UBS Investment Funds Class.
G. Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, each Fund pays the Advisor a monthly fee based on 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 for the six months ended
December 31, 1998, were as follows:
<TABLE>
<CAPTION>
UBS Investment
Advisory Brinson Class I Brinson Class N Funds Class Advisory Fees
Fee Expense Cap Expense Cap Expense Cap Fees Deferred
-------- --------------- --------------- -------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
U.S. Balanced Fund 0.70% 0.80% 1.05% 1.30% $ 198,756 $40,475
U.S. Equity Fund 0.70 0.80 1.05 1.32 2,368,764 --
U.S. Large Capitalization Equity Fund 0.70 0.80 1.05 1.32 59,251 51,141
U.S. Bond Fund 0.50 0.60 0.85 1.07 164,957 12,367
</TABLE>
81
<PAGE>
The Brinson Funds -- Notes To Financial Statements
Investment advisory fees and other transactions for the period December 19, 1998
through December 31, 1998, were as follows:
<TABLE>
<CAPTION>
UBS Investment Fees Waived
Advisory Brinson Class I Brinson Class N Funds Class Advisory and/or
Fee Expense Cap Expense Cap Expense Cap Fees Reimbursed
-------- --------------- --------------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Large Capitalization Growth Fund 0.70% 0.80% 1.05% 1.57% $ 849 $ 849
U.S. Small Capitalization Growth Fund 1.00 1.15 1.40 1.92 6,538 4,431
High Yield Fund 0.60 0.70 0.95 1.55 6,278 2,648
</TABLE>
The investment advisor of the Portfolios was the Union Bank of Switzerland, New
York Branch ("UBS"). Prior to December 19, 1998, the UBS Large Cap Growth Fund,
UBS Small Cap Fund and UBS High Yield Bond Fund, (the "UBS Funds") recorded
their share of advisory expense, allocated from their corresponding Portfolio,
on a daily basis. UBS voluntarily agreed to reimburse each Portfolio to the
extent total operating expenses exceeded a specified percentage of each
Portfolio's and each UBS fund's respective average daily net assets. Investment
advisory fees allocated to the Funds and other transactions for the period
January 1, 1998 through December 18, 1998, were as follows:
Fees
Expense Cap Advisory Fees Reimbursed
----------- ------------- ----------
UBS Large Capitalization Growth Fund 1.00% $ 32,644 $ 97,199
UBS Small Capitalization Growth Fund 1.20 107,673 87,702
UBS High Yield Bond Fund 0.90 71,860 117,430
Prior to the Reorganization, the UBS Funds had a Shareholder Servicing Agreement
with UBS pursuant to which UBS provided certain services to shareholders of each
UBS Fund. Each UBS Fund incurred a fee equal to 0.25% of the average daily net
assets for these services. Fees incurred, all of which were waived, for the
period January 1, 1998 through December 18, 1998, were as follows:
Shareholder
Servicing
Fees
-----------
UBS Large Capitalization Growth Fund $13,511
UBS Small Capitalization Growth Fund 44,635
UBS High Yield Bond Fund 39,782
Prior to the Reorganization, UBS provided certain administrative services to the
UBS Funds under the terms of a Funds Services Agreement. UBS did not receive any
additional compensation pursuant to that agreement.
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 six months ended December 31, 1998 were $3,864,
$3,128, $3,864 and $2,024 for the U.S. Balanced Fund, U.S. Equity Fund, U.S.
Large Capitalization Equity Fund and U.S. Bond Fund, respectively. For the year
ended December 31, 1998, Trustees' fees paid to unaffiliated trustees were
$5,635, $6,876 and $7,412 for the U.S. Large Capitalization Growth Fund, U.S.
Small Capitalization Growth Fund and High Yield Fund, respectively.
The following Funds invest in shares of the
Brinson Supplementary Trust U.S. Cash Management Prime Fund ("Supplementary
Trust"). The Supplementary Trust is managed by the Advisor. The Supplementary
Trust is offered as a cash management option to mutual funds and other accounts
managed by the Advisor. The Supplementary Trust pays no management fees.
Distributions from the Supplementary
82
<PAGE>
The Brinson Funds -- Notes To Financial Statements
Trust are reflected as interest income on the statement of operations. Amounts
relating to those investments at December 31, 1998 and for the period then ended
are summarized as follows:
<TABLE>
<CAPTION>
% of
Sales Interest Net
Fund Purchases Proceeds Income Value Assets
- ---- --------- -------- -------- ----- ------
<S> <C> <C> <C> <C> <C>
U.S. Balanced Fund $ 983,860 $ 449,668 $ 1,069 $ 534,192 1.19%
U.S. Equity Fund 17,274,632 2,361,373 23,580 14,913,259 1.95
U.S. Large Capitalization Equity Fund 1,630,080 243,196 1,392 1,386,884 6.27
U.S. Bond Fund 8,213,871 1,575,171 10,333 6,638,700 6.92
U.S. Large Capitalization Growth Fund 139,680 7,989 393 131,691 3.18
U.S. Small Capitalization Growth Fund 958,871 -- 1,136 958,871 4.24
High Yield Fund 3,805,498 2,460,055 4,240 1,345,443 3.86
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1998, excluding
short-term investments, were as follows:
Proceeds
Purchases From Sales
------------- -------------
U.S. Balanced Fund $ 33,150,071 $ 62,821,982
U.S. Equity Fund 178,283,409 114,182,027
U.S. Large Capitalization Equity Fund 7,501,992 3,060,203
U.S. Bond Fund 128,393,569 85,978,273
Investment transactions for the period December 19, 1998 through December 31,
1998, excluding short-term investments, were as follows:
Proceeds
Purchases From Sales
------------- -------------
U.S. Large Capitalization Growth Fund $ 25,396 $ --
U.S. Small Capitalization Growth Fund 1,110,379 1,239,887
High Yield Fund 2,456,438 654,750
4. FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date at
a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market or that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Funds, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
5. DISTRIBUTION PLANS The Trust has adopted
distribution plans (the "Plans") pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended, for the Brinson Class N and the UBS Investment
Funds Class. Each Plan governs payments made for the expenses incurred in the
promotion and distribution of the Brinson Class N and the UBS Investment Funds
Class. Annual fees under the Brinson Class N Plan shall not exceed 0.25% of the
average daily net assets of the Brinson Class N of each of the Funds. Annual
fees under the UBS Investment Funds Plan, which include a 0.25% service fee,
total 0.50%, 0.52%, 0.52%, 0.77%, 0.77%, 0.47%, and 0.85% of the average daily
net assets of the UBS Investment Funds Class of the U.S. Balanced Fund, U.S.
Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization
Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High
Yield Fund, respectively.
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
83
<PAGE>
The Brinson Funds -- Notes To Financial Statements
Funds. Borrowings will be made for temporary purposes. Interest on amounts
borrowed is calculated based on the Federal Funds rate plus 0.50%. The Funds pay
an annual commitment fee of 0.08% of the average daily unutilized balance of the
line of credit. During the period ended December 31, 1998, the Funds had no
borrowings under the agreement.
7. CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
U.S. Balanced Fund
-------------------------------------------------
Six Months Ended
December 31, 1998 Year Ended
(Unaudited) June 30, 1998
----------------------- ------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I 645,486 $ 7,769,946 4,720,912 $ 58,173,143
Brinson Class N -- -- -- --
UBS Investment Funds Class 84,835 994,551 49,659 624,713
---------- ------------ ---------- ------------
Total Sales 730,321 $ 8,764,497 4,770,571 $ 58,797,856
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I 1,193,337 $ 11,121,901 2,662,862 $ 31,359,575
Brinson Class N 32 299 11 136
UBS Investment Funds Class 55,020 510,039 14,933 175,706
---------- ------------ ---------- ------------
Total Dividend Reinvestment 1,248,389 $ 11,632,239 2,677,806 $ 31,535,417
========== ============ ========== ============
Redemptions:
Brinson Class I 3,863,158 $ 45,621,386 23,388,425 $293,534,522
Brinson Class N -- -- -- --
UBS Investment Funds Class 64,496 724,033 42,682 540,673
---------- ------------ ---------- ------------
Total Redemptions 3,927,654 $ 46,345,419 23,431,107 $294,075,195
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
U.S. Equity Fund
-------------------------------------------------
Six Months Ended
December 31, 1998 Year Ended
(Unaudited) June 30, 1998
----------------------- ------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I** 8,066,362 $150,512,394 16,875,765 $314,205,812
Brinson Class N 216,548 4,021,529 13,398 269,368
UBS Investment Funds Class 1,081,207 21,777,960 1,697,355 31,606,780
---------- ------------ ---------- ------------
Total Sales 9,364,117 $176,311,883 18,586,518 $346,081,960
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I 2,026,930 $ 37,801,864 1,861,660 $ 32,092,717
Brinson Class N 12,815 238,104 47 896
UBS Investment Funds Class 86,539 1,608,752 110,158 1,887,716
---------- ------------ ---------- ------------
Total Dividend Reinvestment 2,126,284 $ 39,648,720 1,971,865 $ 33,981,329
========== ============ ========== ============
Redemptions:
Brinson Class I 5,126,943 $ 97,655,470 7,470,182 $144,565,891
Brinson Class N 19,879 361,850 5 100
UBS Investment Funds Class 342,279 6,261,509 1,023,014 19,298,428
---------- ------------ ---------- ------------
Total Redemptions 5,489,101 $104,278,829 8,493,201 $163,864,419
========== ============ ========== ============
</TABLE>
**Includes shares issued in connection with reorganization.
84
<PAGE>
The Brinson Funds -- Notes To Financial Statements
<TABLE>
<CAPTION>
U.S. Large Capitalization Equity Fund
-------------------------------------------------
Six Months Ended
December 31, 1998 Period Ended
(Unaudited) June 30, 1998*
----------------------- ------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I 916,683 $ 8,949,197 16,662 $ 163,328
Brinson Class N 8,098 78,700 1,688,092 16,758,163
UBS Investment Funds Class -- -- 104 1,000
---------- ------------ ---------- ------------
Total Sales 924,781 $ 9,027,897 1,704,858 $ 16,922,491
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I 4,692 $ 46,270 18 $ 168
Brinson Class N 7,095 69,880 2,204 20,606
UBS Investment Funds Class -- 6 -- 1
---------- ------------ ---------- ------------
Total Dividend Reinvestment 11,787 $ 116,156 2,222 $ 20,775
========== ============ ========== ============
Redemptions:
Brinson Class I 23,163 $ 228,994 1,015 $ 9,875
Brinson Class N 421,436 4,019,081 51,661 509,678
UBS Investment Funds Class -- -- -- --
---------- ------------ ---------- ------------
Total Redemptions 444,599 $ 4,248,075 52,676 $ 519,553
========== ============ ========== ============
</TABLE>
* The Fund commenced operations on April 6, 1998.
<TABLE>
<CAPTION>
U.S. Bond Fund
-------------------------------------------------
Six Months Ended
December 31, 1998 Year Ended
(Unaudited) June 30, 1998*
----------------------- ------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I** 7,557,553 $81,377,100 1,926,960 $20,378,131
Brinson Class N 2,379 25,964 -- --
UBS Investment Funds Class 350,102 3,768,487 134,362 1,416,847
---------- ------------ ---------- -----------
Total Sales 7,910,034 $85,171,551 2,061,322 $21,794,978
========== ============ ========== ===========
Dividend Reinvestment:
Brinson Class I 239,645 $ 2,545,027 107,565 $ 1,114,591
Brinson Class N 4 43 6 68
UBS Investment Funds Class 12,927 136,765 5,825 60,235
---------- ------------ ---------- -----------
Total Dividend Reinvestment 252,576 $ 2,681,835 113,396 $ 1,174,894
========== ============ ========== ===========
Redemptions:
Brinson Class I 2,915,499 $31,500,447 549,381 $ 5,780,080
Brinson Class N 2,379 25,905 -- --
UBS Investment Funds Class 115,415 1,248,637 45,413 475,640
---------- ------------ ---------- -----------
Total Redemptions 3,033,293 $32,774,989 594,794 $ 6,255,720
========== ============ ========== ===========
</TABLE>
** Includes shares issued in connection with reorganization.
85
<PAGE>
The Brinson Funds -- Notes To Financial Statements
<TABLE>
<CAPTION>
U.S. Large Capitalization Growth Fund
----------------------------------------------------
Six Months Ended Period from October 14, 1997
December 31, 1998 (commencement of operations)
(Unaudited) to December 31, 1997
----------------------- ----------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I* 349,475 $ 4,971,380 41,609 $ 4,108,844
Brinson Class N 84 1,000 -- --
UBS Investment Funds Class 84 1,000 -- --
---------- ------------ ---------- -----------
Total Sales 349,643 $ 4,973,380 41,609 $ 4,108,844
========== ============ ========== ===========
Dividend Reinvestment:
Brinson Class I 15,430 $ 170,881 92 $ 9,050
Brinson Class N -- -- -- --
UBS Investment Funds Class -- -- -- --
---------- ------------ ---------- -----------
Total Dividend Reinvestment 15,430 $ 170,881 92 $ 9,050
========== ============ ========== ===========
Redemptions:
Brinson Class I 56,390 $ 5,974,601 4 $ 356
Brinson Class N -- -- -- --
UBS Investment Funds Class -- -- -- --
---------- ------------ ---------- -----------
Total Redemptions 56,390 $ 5,974,601 4 $ 356
========== ============ ========== ===========
</TABLE>
<TABLE>
<CAPTION>
U.S. Small Capitalization Growth Fund
-----------------------------------------------------
Six Months Ended Period from September 30, 1997
December 31, 1998 (commencement of operations)
(Unaudited) to December 31, 1997
----------------------- ----------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I** 2,571,818 $18,350,730 129,190 $ 12,731,529
Brinson Class N 114 1,000 -- --
UBS Investment Funds Class 114 1,000 -- --
---------- ----------- -------- ------------
Total Sales 2,572,046 $18,352,730 129,190 $ 12,731,529
========== =========== ======== ============
Dividend Reinvestment:
Brinson Class I 132 $ 9,859 -- $ --
Brinson Class N -- -- -- --
UBS Investment Funds Class -- -- -- --
---------- ----------- -------- ------------
Total Dividend Reinvestment 132 $ 9,859 -- $ --
========== =========== ======== ============
Redemptions:
Brinson Class I 128,744 $ 6,727,395 2,533 $ 255,000
Brinson Class N -- -- -- --
UBS Investment Funds Class -- -- -- --
---------- ----------- -------- ------------
Total Redemptions 128,744 $ 6,727,395 2,533 $ 255,000
========== =========== ======== ============
</TABLE>
* Includes 298,108 shares issued in 10 for 1 share split.
** Includes 2,227,053 shares issued in 10 for 1 share split.
86
<PAGE>
The Brinson Funds -- Notes To Financial Statements
<TABLE>
<CAPTION>
High Yield Fund
-----------------------------------------------------
Six Months Ended Period from September 30, 1997
December 31, 1998 (commencement of operations)
(Unaudited) to December 31, 1997
----------------------- ----------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I* 3,412,082 $29,256,184 77,644 $ 7,756,774
Brinson Class N 100 1,000 -- --
UBS Investment Funds Class 100 1,000 -- --
---------- ----------- -------- -----------
Total Sales 3,412,282 $29,258,184 77,644 $ 7,756,774
========== =========== ======== ===========
Dividend Reinvestment:
Brinson Class I 47,240 $ 1,381,731 1,296 $ 129,246
Brinson Class N -- -- -- --
UBS Investment Funds Class -- -- -- --
---------- ----------- -------- -----------
Total Dividend Reinvestment 47,240 $ 1,381,731 1,296 $ 129,246
========== =========== ======== ===========
Redemptions:
Brinson Class I 39,259 $ 3,393,269 759 $ 76,294
Brinson Class N -- -- -- --
UBS Investment Funds Class -- -- -- --
---------- ----------- -------- -----------
Total Redemptions 39,259 $ 3,393,269 759 $ 76,294
========== =========== ======== ===========
</TABLE>
*Includes 2,898,051 shares issued in 10 for 1 share split.
87
<PAGE>
Report of Independent Auditors
The Board of Trustees and Shareholders
The Brinson Funds --
U.S. Large Capitalization Growth Fund
U.S. Small Capitalization Growth Fund
High Yield Fund
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of The Brinson Funds--U.S. Large Capitalization
Growth Fund, U.S. Small Capitalization Growth Fund and High Yield Fund as of
December 31, 1998, the related statements of operations and changes in net
assets and the financial highlights for the year then ended. 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 audit. The financial statements
and financial highlights of U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund and High Yield Fund for the period ended December 31,
1997, were audited by other auditors whose report dated February 17, 1998,
expressed an unqualified opinion on those statements and financial highlights.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--U.S. Large Capitalization Growth Fund, U.S. Small Capitalization
Growth Fund and High Yield Fund at December 31, 1998, the results of their
operations, the changes in their net assets and the financial highlights for the
year then ended in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG
Chicago, Illinois
February 12, 1999
88
<PAGE>
Special Meeting of Shareholders
89
Voting Results of Special Meeting of Shareholders (Unaudited)
The proposal described below was submitted to a vote of shareholders of UBS
Private Investor Funds, Inc. ("UBS Funds") at a special meeting of shareholders
held on December 11, 1998 (the "Meeting"):
Proposal No. 1 - Approval of a Plan of Reorganization pursuant to which UBS
Fund's Value Equity, Bond, Large Cap Growth, Small Cap and High Yield Bond Funds
(each, a "Fund") will be reorganized into Class I shares of the U.S. Equity,
U.S. Bond, U.S. Large Capitalization Growth, U.S. Small Capitalization Growth
and High Yield Fund, respectively.
At the Meeting, the shareholders of each Fund approved Proposal No. 1 as
follows:
Fund For Against Abstain
---- --- ------- -------
UBS Value Equity Fund 104,031 0 0
UBS Bond Fund 136,024 0 0
UBS Large Cap Growth Fund 26,932 0 0
UBS Small Cap Fund 153,501 0 0
UBS High Yield Bond Fund 168,730 0 0
89
<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>
[BRINSON LOGO APPEARS HERE]
The Brinson Funds
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 Global (ex-U.S.) Equity Fund
Semi-Annual Report
December 31, 1998
Institutional Asset Management
------------------------------
<PAGE>
Trustees and Officers
[BRINSON LOGO APPEARS HERE]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA Debra L. Nichols
Chairman of the Board Vice President
E. Thomas McFarlan Carolyn M. Burke, CPA
President Secretary and Treasurer
Thomas J. Digenan, CFA, CPA David E. Floyd
Vice President Assistant Secretary
1
<PAGE>
The Fund's Advisor -- Brinson Partners, Inc.
[BRINSON LOGO APPEARS HERE]
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 265
billion of discretionary institutional assets on an active basis and mutual fund
assets for UBS Private Banking which total over USD 125 billion. In addition,
UBS Brinson acts as the investment advisor to UBS Private Banking. 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 tailored to specific client
objectives and focused upon both risk and return considerations in the context
of full investment cycles. Our investment decisions are based on fundamental
research, internally developed valuation systems and seasoned judgment. Our
independent team approach allows for rapid responses to market changes, while
providing each client with the benefit of our best talent.
2
<PAGE>
Table of Contents
[BRINSON LOGO APPEARS HERE]
Shareholder Letter 4
Global Economic and Market Highlights 5
Global (ex-U.S.) Equity Fund 6
Schedule of Investments 10
Financial Statements 15
Financial Highlights 18
Notes to Financial Statements 21
3
<PAGE>
Shareholder Letter
[BRINSON LOGO APPEARS HERE]
February 20, 1999
Dear Shareholder:
We are very pleased to present the Semi-Annual report for the Global (ex-U.S.)
Equity Fund for the six months ended December 31, 1998. The Non-U.S. Equity Fund
was renamed the Global (ex-U.S.) Equity Fund on December 10, 1998. This change
affects only the name of the Fund; the management, benchmark and all other
aspects of the Fund will remain the same. Within this Report, we will focus on
the current international economic outlook as well as our current strategy and
performance update for the Global (ex-U.S.) Equity Fund.
Since our last report to you, Union Bank of Switzerland and Swiss Bank
Corporation merged to become UBS AG, one of the world's major financial
institutions. In connection with this merger, the former SBC Brinson/Brinson
Partners, Inc.'s activities of Swiss Bank Corporation were combined with the
worldwide UBS asset management operations into the UBS Brinson division of UBS
AG. During this process, the UBS Private Investor Funds merged into the Brinson
fund family on December 18, 1998. This merger created the following three new
Brinson Funds; the U.S. Large Capitalization Growth Fund, the U.S. Small
Capitalization Growth Fund and the High Yield Fund.
The UBS Brinson Division manages over USD 390 billion of institutional assets,
including USD 265 billion of discretionary institutional assets on an active
basis and mutual fund assets for the UBS Private Banking Division and The
Brinson Funds which total over USD 125 billion. The Advisor of The Brinson
Funds, Brinson Partners, Inc., also manages investment portfolios for
corporations, public funds, endowments, foundations, central banks and other
investors located throughout the world.
The Global (ex-U.S.) Equity Fund is an actively managed fund that provides
integrated asset management across and within security markets. The investment
process is strategic in nature and is driven by deviations of market price from
fundamental value. This philosophy offers the greatest potential for achieving
enhanced, long-term returns while controlling risk.
Our international funds employ the same value-oriented investment philosophy
within and across the international spectrum, as do our other funds. Each Fund
uses the resources of our entire worldwide organization. Investment performance
for out clients is maximized within and across major asset classes through a
comprehensive understanding of global investment markets and their
interrelationships. Portfolio structure is tailored to specific objectives and
focused upon both risk and return considerations in the context of full
investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our talent. The Report that follows highlights the investment
characteristics and the performance of the Global (ex-U.S.) Equity Fund.
We very much appreciate your continued trust and the confidence you have placed
in The Brinson Funds.
Sincerely,
/s/ Gary P. Brinson
Gary P. Brinson
President and Chief Investment Officer
Brinson Partners, Inc.
4
<PAGE>
Global Economic and Market Highlights
Japan and most of Asia continue to be mired in severe downturns. The Japanese
economy is particularly troubled, as the one bright spot in the economy, the
export sector, has started to weaken in response to a dramatic strengthening of
the yen. Bond yields have risen sharply as the government's deficit financing
has pushed the gross debt to GDP ratio among the highest of the developed
countries.
The single European currency enjoyed a successful launch on January 1, 1999.
Monetary policy for the eleven participating nations is now being administered
by the European Central Bank. Cash rates and bond yields have converged, except
for small spreads due to credit and liquidity differences. Although the euro's
success in the near term is not in doubt, some longer-term concerns remain.
Economic convergence of the EMU economies is not complete, and the economic
environment appears to be softening. This creates an element of political risk
for the ECB and the new currency.
Inflation remains in check throughout the developed world and in many of the
emerging markets. Weakness in Asia and overcapacity in basic industries have
combined to push down commodity prices, particularly oil and related energy
prices. Consumer price inflation is essentially zero in Japan, less than 1% in
most of Europe, and under 2% in the U.S. The voices predicting global deflation
seem to have largely disappeared however, after the Federal Reserve's series of
rate cuts to provide liquidity during the market downturns in the fall.
Global (ex-U.S.) Equity Environment
<TABLE>
<CAPTION>
6 months 1 year 3 years 5 years 8/31/93*
Major Markets ended ended ended ended to
Total Return in U.S. Dollar Hedged Terms 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MSCI World ex USA (Free) Index -3.98% 13.84% 14.86% 10.84% 10.53%
Japan -6.00 0.29 -4.17 -0.78 -0.90
U.K. 0.87 13.92 17.32 12.51 14.26
Germany -6.89 28.92 30.32 19.99 20.56
France 1.59 43.14 31.72 16.00 16.41
Canada -4.00 8.22 17.07 13.27 14.73
Netherlands -10.24 11.92 31.05 21.69 23.25
Australia 10.11 18.04 10.74 6.78 9.52
- -----------------------------------------------------------------------------------------
6 months 1 year 3 years 5 years 8/31/93*
Major Currencies ended ended ended ended to
Percent Change Relative to U.S. Dollars 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Yen 23.04% 15.27% -2.94% -0.21% -1.39%
Pound -0.28 1.12 2.33 2.38 2.12
Deutschemark 8.37 7.95 -4.93 0.84 0.14
Canadian Dollar -4.26 -6.83 -3.88 -2.93 -2.79
- -----------------------------------------------------------------------------------------
</TABLE>
*Performance inception date of the Global (ex-U.S.) Equity Fund Class I
All total returns in excess of 1 year are average annualized total returns
5
<PAGE>
Global (ex-U.S.) Equity Fund
The Global (ex-U.S.) Equity Fund is actively managed, providing a fully
integrated approach to the developed equity markets across the world. We employ
fundamental valuation models to determine the relative attractiveness of
aggregate markets, as well as of individual stocks. Our portfolio construction
process simultaneously sets country, currency, industry/factor and stock
selection strategies. This interactive investment process has evolved within the
context of an environment marked by growing globalization and increasingly
integrated economies, industries and capital markets.
The Brinson Global (ex-U.S.) Equity Fund Class I has provided an annualized
return of 8.37% since its inception on August 31, 1993, compared to the 8.44%
return of the MSCI World ex USA (Free) Index. This was achieved with a
volatility of 12.69%, below the 14.52% volatility of the benchmark. For the year
ended December 31, 1998, the Fund gained 14.39%, compared to the index's
unhedged return of 18.67%. With the exception of the Pacific Rim and several
small markets, most developed equity markets enjoyed solid performance.
Monetary Union, privatization, restructuring, merger activity and increased
capital flows have boosted European equity markets. Despite their excellent
performance, European corporations are still early into their restructuring,
with the potential for improving profitability ahead. Europe is our largest
overweight. Most Pacific markets continued to suffer the consequences of last
year's currency crisis. This situation has been aggravated in Japan by flawed
macroeconomic policies, a largely insolvent financial sector and an unprofitable
domestic corporate sector. We remain significantly underweight in Japan, Hong
Kong and Singapore. In comparison, Australia and New Zealand have been unduly
impacted by their geographic proximity to Asia and are attractively priced. We
maintain an overweight in these markets.
Overall market allocation detracted from performance. Holding cash (through
July) in a period of unusually strong returns and overweighting New Zealand
offset the positive effects of underweighting Japan and overweighting Belgium
and Finland. Currency management was hurt by the yen underweight and the New
Zealand dollar and Australian dollar overweights. Stock selection was positive
due to successful strategies in Japan, helped by the significant underweight to
banks, overweight to blue chips and stock specific returns, but hurt in the U.K.
due to stock specific factors, the underweight to size and the overweight to
basic industries.
6
<PAGE>
Global (ex-U.S.) Equity Fund
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 5 years 8/31/93*
ended ended ended ended to
12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brinson Global (ex-U.S.) Equity Fund Class I 1.14% 14.39% 10.88% 9.72% 8.37%
- -------------------------------------------------------------------------------------------
MSCI World ex USA (Free) Index** 2.72 18.67 9.06 9.27 8.44
- -------------------------------------------------------------------------------------------
</TABLE>
* Performance inception date of the Brinson Global (ex-U.S.) Equity Fund
Class I
** Formerly known as the MSCI Non-U.S. Equity (Free) Index. Performance is net
of withholding taxes on dividends.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
(ex-U.S.) Equity Fund Class I and the MSCI World ex USA (Free) Index if you had
invested $1,000,000 on August 31, 1993, and had reinvested all your income
dividends and capital gain distributions through December 31, 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 (ex-U.S.) Equity Fund Class I
vs. MSCI World ex USA (Free) Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
MSCI World Brinson Global (ex-U.S.)
ex USA (Free) Index Equity Fund Class N
------------------- ------------------------
8/31/93 $1,000,000 $1,000,000
$976,801 $972,000
$1,009,608 $997,000
$923,179 $929,000
12/31/93 $988,754 $965,500
$1,070,906 $1,033,606
$1,065,670 $1,002,558
$1,019,802 $957,488
$1,061,899 $984,530
$1,056,878 $985,531
6/30/94 $1,066,786 $975,547
$1,080,676 $990,648
$1,107,766 $1,019,844
$1,075,157 $990,648
$1,109,504 $1,007,763
$1,055,989 $974,540
12/31/94 $1,062,774 $974,540
$1,021,304 $940,310
$1,020,965 $936,283
$1,083,956 $952,391
$1,124,094 $983,601
$1,113,640 $984,608
6/30/95 $1,095,525 $974,540
$1,161,851 $1,032,932
$1,119,130 $1,049,040
$1,140,633 $1,066,155
$1,111,131 $1,056,087
$1,142,655 $1,082,263
12/31/95 $1,187,456 $1,126,103
$1,195,638 $1,148,603
$1,199,070 $1,144,317
$1,224,309 $1,159,318
$1,260,387 $1,202,176
$1,238,760 $1,196,819
6/30/96 $1,244,668 $1,204,891
$1,208,125 $1,171,452
$1,213,344 $1,176,845
$1,246,309 $1,212,442
$1,237,797 $1,209,206
$1,289,539 $1,270,691
12/31/96 $1,271,887 $1,269,637
$1,232,998 $1,262,768
$1,251,330 $1,283,375
$1,251,910 $1,291,389
$1,259,870 $1,300,548
$1,343,159 $1,385,267
6/30/97 $1,414,422 $1,449,115
$1,440,682 $1,475,588
$1,332,372 $1,371,998
$1,407,165 $1,449,115
$1,301,262 $1,358,186
$1,285,972 $1,335,166
12/31/97 $1,298,199 $1,342,509
$1,353,933 $1,387,259
$1,441,984 $1,460,600
$1,488,747 $1,516,538
$1,500,225 $1,528,968
$1,493,504 $1,528,968
6/30/98 $1,499,791 $1,518,353
$1,509,693 $1,533,349
$1,316,941 $1,343,399
$1,279,306 $1,310,908
$1,412,768 $1,412,131
$1,484,565 $1,484,612
12/31/98 $1,540,540 $1,535,729
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 (ex-U.S.) Equity Fund
Total Return
<TABLE>
<CAPTION>
6 months 1 year 6/30/97*
ended ended to
12/31/98 12/31/98 12/31/98
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson Global (ex-U.S.) Equity Fund Class N 0.88% 13.96% 3.58%
- -------------------------------------------------------------------------
MSCI World ex USA (Free) Index** 2.72 18.67 5.86
- -------------------------------------------------------------------------
</TABLE>
* Inception date of the Brinson Global (ex-U.S.) Equity Fund Class N
** Formerly known as the MSCI Non-U.S. Equity (Free) Index. Performance is net
of withholding taxes on dividends.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
(ex-U.S.) Equity Fund Class N and the MSCI World ex USA (Free) Index if you had
invested $1,000,000 on June 30, 1997, and had reinvested all your income
dividends and capital gain distributions through December 31, 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 (ex-U.S.) Equity Fund Class N
vs. MSCI World ex USA (Free) Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
MSCI World Brinson Global (ex-U.S.)
ex USA (Free) Index Equity Fund Class N
------------------- ------------------------
6/30/97 $1,000,000 $1,000,000
$1,018,566 $1,018,268
$941,990 $946,783
9/30/97 $994,869 $999,206
$919,996 $936,458
$909,186 $920,572
12/31/97 $917,830 $925,127
$957,234 $955,964
$1,019,486 $1,005,647
3/31/98 $1,052,548 $1,044,194
$1,060,663 $1,052,760
$1,055,911 $1,052,760
6/30/98 $1,060,356 $1,045,088
$1,067,357 $1,055,419
$931,081 $924,567
9/30/98 $904,473 $902,185
$998,831 $971,054
$1,049,591 $1,019,262
12/31/98 $1,089,166 $1,054,292
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 (ex-U.S.) Equity Fund
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- -----------------------------------------------
Global (ex-U.S.) EQUITIES
Aerospace & Military 0.45%
Airlines 0.16
Appliances & Households 3.18
Autos/Durables 1.69
Banking 10.47
Beverages & Tobacco 3.70
Broadcasting & Publishing 1.98
Building Materials 1.50
Business & Public Service 4.06
Chemicals 4.59
Construction 0.40
Data Processing 0.60
Electric Components 0.83
Electronics 5.50
Energy 8.13
Financial Services 1.60
Food & House Products 3.65
Forest Products 1.16
Health & Personal Care 9.34
Housing/Paper 0.10
Industrial Components 1.62
Insurance 8.81
Leisure & Tourism 0.31
Machinery & Engineering 0.23
Merchandising 4.65
Metals-Steel 0.87
Miscellaneous Materials 0.14
Multi-Industry 3.23
Non-Ferrous Metals 0.98
Real Estate 0.43
Recreation 0.58
Retail/Apparel 0.18
Telecommunications 8.83
Textiles & Apparel 0.19
Transportation 0.28
Utilities 4.40
Wholesale & International Trade 0.06
------
Total Global (ex-U.S.) Equities 98.88
------
CONVERTIBLE BONDS 0.05
SHORT-TERM INVESTMENTS 0.70
TOTAL INVESTMENTS 99.63
CASH AND OTHER ASSETS,
LESS LIABILITIES 0.37
------
NET ASSETS 100.00%
======
Market and Currency Strategy
As of December 31, 1998 (Unaudited)
Fund
-------------------
Market Currency
Strategy Strategy Index
- --------------------------------------------------
Australia 5.38% 8.86% 2.47%
Belgium 3.15 0.00 0.00
Canada 1.98 3.70 3.70
Denmark 0.59 0.86 0.86
Euro 0.00 38.67 38.67
Finland 2.99 0.00 0.00
France 10.41 0.00 0.00
Germany 11.69 0.00 0.00
Hong Kong 0.00 0.00 1.99
Italy 4.41 0.00 0.00
Japan 12.90 14.25 20.25
Netherlands 7.49 0.00 0.00
New Zealand 1.77 1.77 0.17
Norway 0.37 0.37 0.37
Singapore 0.74 0.72 0.72
Spain 1.92 0.00 0.00
Sweden 4.12 6.54 2.54
Switzerland 7.47 7.76 7.76
U.K. 22.62 16.50 20.50
- --------------------------------------------------
100.00% 100.00% 100.00%
Top Ten Global (ex-U.S.) Equity Holdings
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- --------------------------------------------------
1. Novartis AG (Reg.) 2.31%
2. Nestle S.A. (Reg.) 1.86
3. Allianz AG 1.85
4. Royal Dutch Petroleum Co. 1.80
5. Bayer AG 1.73
6. Nokia Oyj -D A Shares 1.66
7. Lloyds TSB Group PLC 1.58
8. Glaxo Wellcome PLC 1.51
9. Veba AG 1.50
10. Siemens AG 1.46
- --------------------------------------------------
9
<PAGE>
Global (ex-U.S.) Equity Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
----------- ----------------
Global (ex-U.S.) Equities -- 98.88%
Australia -- 4.98%
Amcor Ltd. 85,740 $ 366,730
Australia & New Zealand Banking Group 33,000 216,186
Brambles Industries Ltd. 68,040 1,658,993
Broken Hill Proprietary Co., Ltd. 269,620 1,987,758
Burns Philp & Co. Ltd. 254,362 20,283
CSR Ltd. 358,990 878,614
David Jones Ltd. 503,200 555,592
Goodman Fielder Ltd. 120,000 121,453
Lend Lease Corp. Ltd. 89,996 1,214,476
M.I.M. Holdings Ltd. 488,000 215,524
National Australia Bank Ltd. 204,648 3,088,060
News Corp., Ltd. 301,747 1,995,285
News Corp., Ltd., Preferred 129,469 788,603
Orica Ltd. 85,820 446,930
Pacific Dunlop Ltd. 365,450 591,800
Pasminco Ltd. 297,000 225,903
Qantas Airways Ltd. 391,138 798,946
QBE Insurance Group Ltd. 205,223 849,714
Rio Tinto Ltd. 66,560 790,223
Santos Ltd. 237,140 637,121
Telstra Corp., Ltd. (b) 705,210 3,300,549
Westpac Banking Corp., Ltd. 391,841 2,624,676
WMC Ltd. 256,270 773,403
Woolworth's Ltd. 117,460 400,309
------------
24,547,131
------------
Belgium -- 2.74%
Electrabel S.A. 11,895 5,228,374
Fortis AG 583 34
Fortis AG Strip (b) 17,173 6,223,587
KBC Bancassurance Holding 26,100 2,066,496
KBC Bancassurance Holding-Strip (b) 610 35
------------
13,518,526
------------
Canada -- 2.04%
Agrium, Inc. 37,580 330,293
Alcan Aluminum Ltd. 23,940 646,816
Bank of Montreal 16,010 643,110
Canadian National Railway Co. 17,390 902,899
Canadian Pacific 40,014 897,137
Extendicare Inc, Class A (b) 35,840 203,000
Hudson's Bay Co. 36,620 461,326
Imasco, Ltd. 24,800 527,969
Imperial Oil Ltd. 47,060 752,163
Magna International Inc., Class A 6,360 395,016
Newbridge Networks Corp. (b) 16,510 500,889
NOVA Chemicals Corp. 26,521 345,325
Potash Corporation of Saskatchewan, Inc. 6,360 407,852
Royal Bank of Canada 18,720 932,953
Seagram Co., Ltd. 8,800 333,724
Shaw Communications, Inc. Class B 33,880 818,326
TransCanada Pipelines Ltd. 46,376 677,826
Westcoast Energy, Inc. 14,320 284,349
------------
10,060,973
------------
Denmark -- 0.54%
Den Danske Bank Group 1,240 $ 166,580
Tele Danmark A/S 18,500 2,496,897
------------
2,663,477
------------
Finland -- 2.51%
Merita Ltd., Class A 301,600 1,917,984
Nokia Oyj-A Shares 66,730 8,170,913
UPM-Kymmene Corp. 81,000 2,271,596
------------
12,360,493
------------
France -- 10.36%
Air Liquide 16,122 2,958,192
Alcatel Alsthom 28,127 3,443,999
Axa 22,624 3,280,484
Axa Certificate de Valeur Garante (b) 8,422 3,995
Banque Nationale de Paris 33,146 2,730,620
Cie de Saint Gobain 14,263 2,014,519
Dexia France 11,810 1,820,273
Elf Aquitaine S.A. 17,934 2,073,926
France Telecom S.A. 33,090 2,630,045
Groupe Danone 7,790 2,282,768
Lafarge S.A. 1,687 160,359
Lagardere S.C.A. 70,530 2,998,617
Michelin, Class B 28,023 1,121,181
Moulinex 16,745 257,791
Paribas 14,973 1,301,849
Pinault-Printemps-Redoute S.A. 7,650 1,462,568
Rhone-Poulenc, Class A 43,420 2,235,436
SEFIMEG 2,126 150,329
SEITA 59,480 3,726,684
Societe Generale 11,573 1,874,900
Suez Lyonnaise des Eaux S.A. 16,042 3,296,734
Thomson CSF 52,120 2,239,232
Total S.A., Class B 25,833 2,617,428
Vivendi 16,794 4,359,189
------------
51,041,118
------------
Germany -- 12.40%
Allianz AG 24,472 9,109,414
Bayer AG 202,556 8,506,720
DaimlerChrysler AG (b) 66,618 6,619,404
Deutsche Bank AG 47,097 2,778,994
Deutsche Telekom AG 115,010 3,780,498
Dresdner Bank AG 62,180 2,605,766
Hoechst AG 66,610 2,755,421
Mannesmann AG (b) 42,850 4,958,776
SAP AG 5,230 2,260,807
Siemens AG 109,590 7,204,674
Veba AG 124,588 7,382,826
Volkswagen AG 38,206 3,092,080
------------
61,055,380
------------
Hong Kong -- 0.08%
Hongkong Land Holdings, Ltd. 153,000 180,540
Wharf (Holdings) Ltd. 136,000 198,366
------------
378,906
------------
Indonesia -- 0.02%
Indah Kiat Pulp & Paper Corp. 296,000 80,981
------------
10
<PAGE>
Global (ex-U.S.) Equity Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
----------- ----------------
Italy -- 4.05%
Assicurazioni Generali 104,446 $ 4,370,544
Danieli & Co. Savings (Risp) 59,100 235,835
ENI Spa 768,000 5,030,134
ENI Spa ADR (c) 11,080 750,670
La Rinascente Spa 264,140 2,722,388
Montedison Spa 1,614,280 2,148,859
San Paolo-imi, Spa 113,610 2,011,843
Telecom Italia Mobile Spa 360,000 2,663,526
------------
19,933,799
------------
Japan -- 13.56%
Acorn Co., Ltd. 9,000 579,255
Amada Co., Ltd. 131,000 635,257
Bridgestone Corp. 29,000 659,441
Canon, Inc. 91,000 1,948,271
Citizen Watch Co., Ltd. 115,000 693,262
Dai Nippon Printing Co., Ltd. 119,000 1,901,046
Daiichi Pharmaceutical Co., Ltd. 108,000 1,827,766
Daikin Industries Ltd. 130,000 1,290,780
Daiwa House Industry Co., Ltd. 61,000 650,559
Fanuc 51,700 1,773,750
Fuji Photo Film 23,000 856,383
Fujitsu 75,000 1,000,665
Hitachi Ltd. 53,000 328,901
Honda Motor Co. 56,000 1,841,844
Hoya Corp. 30,000 1,462,766
Ishikawajima-Harima Heavy Industries
Co., Ltd. 9,000 15,957
Ito Yokado Co., Ltd. 50,000 3,501,773
Japan Wool Textile Co., Ltd. 27,000 146,729
Kajima Corp. 22,000 57,535
Kaneka Corp. 133,000 998,679
Kansai Paint Co., Ltd. 42,000 122,128
Kao Corp. 39,000 881,649
Kirin Brewery Co., Ltd. 142,000 1,812,766
Koito Manufacturing Co., Ltd. 54,000 229,309
Kokuyo 40,000 539,362
Kuraray Co., Ltd. 158,000 1,746,684
Marui Co., Ltd. 69,000 1,330,452
Matsushita Electric Industrial Co. 168,000 2,977,234
Mitsubishi Estate Co., Ltd. 42,000 377,181
Mitsubishi Heavy Industries, Ltd. 43,000 167,731
NGK Insulators 219,000 2,828,750
Nikko Securities Co., Ltd. 56,000 156,383
Nintendo Co., Ltd. 13,500 1,310,505
Nippon Denso Co., Ltd. 110,000 2,038,121
Nippon Meat Packers, Inc. 84,000 1,355,319
Nippon Yusen Kabushiki Kaisha 88,000 278,511
Nisshinbo Industries, Inc. 42,000 146,702
Omron Corp. 35,000 480,319
Sakura Bank, Ltd. 96,000 220,426
Sankyo Co., Ltd. 92,000 2,014,539
Secom Co., Ltd. 31,000 2,572,340
Sega Enterprises Ltd. 16,000 355,319
Sekisui House Ltd. 120,000 1,271,277
Sharp Corp. 11,000 99,371
Shin-Etsu Chemical Co., Ltd. 20,000 482,270
Sony Corp. 31,500 2,298,271
Shares Value
----------- ----------------
Sumitomo Chemical Co. 150,000 $ 585,106
Sumitomo Electric Industries 108,000 1,216,915
Sumitomo Marine & Fire Insurance Co., Ltd. 35,000 222,163
Taiheiyo Cement Corp. 78,600 197,197
Takeda Chemical Industries 76,000 2,930,851
TDK Corp. 20,000 1,831,560
Tokio Marine & Fire Insurance Co. 119,000 1,424,202
Tokyo Gas Co. 197,000 518,697
Tokyo Steel Mfg. 28,000 140,496
Toray Industries, Inc. 366,000 1,914,362
Toshiba Corp. 300,000 1,789,894
Toyo Seikan Kaisha, Ltd. 17,000 289,060
Toyo Suisan Kaisha 3,000 25,957
Toyota Motor Corp. 87,000 2,367,819
UNY Co., Ltd. 4,000 73,227
West Japan Railway Co. 70 310,284
Yamaha Motor Co., Ltd. 34,000 219,734
Yamato Transport Co., Ltd. 33,000 462,234
------------
66,783,296
------------
Korea -- 0.09%
Hyundai Motor Co., Ltd. 7,246 128,952
Korea Electric Power Corp. 1,000 24,782
Shinhan Bank (b) 25,300 193,563
SK Telecom Co., Ltd. 130 98,221
------------
445,518
------------
Malaysia -- 0.02%
Malayan Banking Bhd 27,000 38,287
Nestle (Malaysia) Bhd 15,000 41,989
------------
80,276
------------
Netherlands -- 7.15%
ABN AMRO Holdings NV 90,088 1,896,135
Akzo Nobel NV 12,825 584,290
Elsevier NV 189,870 2,660,831
Heineken NV 65,902 3,968,096
ING Groep NV 112,427 6,859,323
KPN NV 135,445 6,784,158
Philips Electronics NV 1,349 90,571
Royal Dutch Petroleum Co. 181,380 9,036,623
Unilever NV 38,740 3,313,140
------------
35,193,167
------------
New Zealand -- 1.95%
Auckland International Airport Ltd. (b) 248,210 347,493
Brierley Investments Ltd. 1,811,340 411,481
Carter Holt Harvey Ltd. 1,158,540 1,040,498
Fletcher Challenge Building 285,560 442,025
Fletcher Challenge Energy 306,600 583,118
Fletcher Challenge Paper 642,540 431,107
Lion Nathan Ltd. 348,570 889,444
Telecom Corp. of New Zealand Ltd. 1,111,890 4,846,155
Telecom Corp. of New Zealand Ltd. ADR (c) 16,500 588,844
------------
9,580,165
------------
Norway -- 0.40%
Norsk Hydro ASA 26,510 894,221
Norske Skogindustrier ASA 36,350 1,059,155
------------
1,953,376
------------
11
<PAGE>
Global (ex-U.S.) Equity Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
----------- ----------------
Singapore -- 0.85%
Development Bank of Singapore Ltd. 20,000 $ 180,606
Singapore Press Holdings Ltd. 216,975 2,353,850
United Overseas Bank Ltd. (Frgn.) 259,000 1,663,879
------------
4,198,335
------------
Spain -- 1.79%
Banco Popular Espanol S.A. 32,239 2,434,496
Endesa S.A. 178,238 4,729,680
Telefonica S.A. 37,432 1,666,925
Telefonica S.A. Rights
(expiring 1/30/99) (b) 748 665
------------
8,831,766
------------
Sweden -- 3.94%
Astra AB, A Shares 144,058 2,941,301
Electrolux AB, B Shares 194,460 3,346,637
ForeningsSparbanken AB 4,971 128,786
Investor AB 44,870 2,026,009
Nordbanken Holding AB 231,960 1,488,060
Skandia Forsakrings AB 225,180 3,444,733
Stora Kopparbergs Berglags Aktiebolag 20,639 226,612
Svenska Handelsbanken, A Shares 19,560 825,276
Swedish Match AB 605,370 2,203,165
Telefonaktiebolaget LM Ericsson, B Shares 116,780 2,780,545
------------
19,411,124
------------
Switzerland -- 7.24%
CS Holdings AG (Reg.) 1,603 250,925
Julius Baer Holding AG 423 1,405,894
Nestle S.A. (Reg.) 4,203 9,149,596
Novartis AG (Reg.) 5,797 11,395,632
Roche Holding AG (Gen.) 512 6,247,630
Swiss Reinsurance Co. (Reg.) 1,306 3,405,013
SwissCom AG (Reg.) (b) 9,023 3,777,375
------------
35,632,065
------------
Thailand -- 0.07%
Bangkok Bank Public Co., Ltd. (b) 60,000 123,848
Italian-Thai Development Public Co.,
Ltd. (b) 15,000 30,136
Shinawatra Computer Public Co., Ltd. (b) 22,000 75,685
Thai Farmers Bank Public Co., Ltd.
(Frgn) (b) 71,000 125,058
------------
354,727
------------
United Kingdom -- 22.10%
Allied Zurich AG (b) 232,252 3,464,285
Barclays PLC 157,230 3,390,348
BG PLC 83,250 525,308
Billiton PLC 116,500 231,147
BOC Group PLC 161,450 2,308,808
Booker PLC 295,950 307,753
Boots Company PLC 174,340 2,968,853
BPB PLC 5,000 18,905
British American Tobacco PLC 299,252 2,631,394
British Petroleum Co. PLC 380,383 5,680,145
British Steel PLC 1,457,140 2,157,720
BTR PLC 200,000 412,625
Cable & Wireless PLC 115,200 1,416,449
Charter PLC 278,988 1,531,804
Coats Viyella PLC 1,445,489 649,355
Diageo PLC 231,935 2,639,528
Shares Value
----------- ----------------
Fairview Holdings PLC (b) 154,702 $ 229,081
FKI PLC 1,093,225 2,437,352
Garban PLC (b) 12,658 48,229
General Electric Co. PLC 466,240 4,208,362
Glaxo Wellcome PLC 216,260 7,440,988
Greenalls Group PLC 201,750 1,075,834
Hanson PLC 375,482 2,981,528
Hillsdown Holdings PLC 309,395 386,081
House of Fraser PLC 484,090 426,880
IMI PLC 49,800 195,544
Lloyds TSB Group PLC 545,545 7,760,694
Marks & Spencer PLC 718,550 4,928,577
Marley PLC 202,230 410,496
Mirror Group PLC 600,240 1,500,525
National Westminster Bank PLC 138,050 2,662,096
Nycomed Amersham PLC 266,090 1,832,875
Peninsular & Oriental Steam Navigation Co. 166,986 1,974,004
Pennon Group PLC 11,860 229,690
Prudential Corp. PLC 406,820 6,142,608
Rank Group PLC 31,000 119,403
Reed International PLC 251,190 1,964,283
Rio Tinto PLC 186,890 2,173,537
RJB Mining PLC 408,840 530,581
Royal & Sun Alliance Insurance Group PLC 180,174 1,471,148
Safeway PLC 63,898 321,069
Sainsbury (J.) PLC 115,950 929,386
Scottish & Newcastle PLC 37,081 430,636
Scottish Hydro-Electric PLC 364,720 4,108,205
Smith & Nephew PLC 97,532 303,454
SmithKline Beecham PLC 317,750 4,440,877
Smurfit (Jefferson) Group PLC 293,929 528,166
Tarmac PLC 135,601 253,816
Tate & Lyle PLC 118,720 653,816
Terranova Foods PLC (b) 154,702 283,134
Tesco PLC 1,131,830 3,224,895
Thames Water PLC 153,589 2,938,744
Thames Water PLC, Class B (b) 134,310 168,717
United News & Media PLC 163,580 1,434,315
United Utilities PLC 21,046 291,688
Vodafone Group PLC 98,547 1,600,284
Williams PLC 189,277 1,074,668
Yorkshire Water PLC 260,000 2,379,249
------------
108,829,942
------------
Total Global (ex-U.S.) Equities
(Cost $408,772,123) 486,934,541
Face
Amount
-----------
Convertible Bonds -- 0.05%
Australia -- 0.03%
Burns, Philp Treasury, 7.50%,
due 8/14/03 AUD 1,228,664 150,733
------------
Japan -- 0.02%
Sanwa Finance Trust, 1.25%,
due 8/01/05 JPY 15,000,000 113,365
------------
Total Convertible Bonds
(Cost $264,410) 264,098
------------
12
<PAGE>
Global (ex-U.S.) Equity Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
----------- ----------------
Short-Term Investments -- 0.70%
Investment Companies -- 0.70%
Brinson Supplementary Trust U.S.
Cash Management Prime Fund
(Cost $3,451,114) 3,451,114 $ 3,451,114
------------
Total Investments
(Cost $412,487,647) -- 99.63% (a) 490,649,753
------------
Cash and other assets,
less liabilities -- 0.37% 1,805,777
------------
Net Assets -- 100% $492,455,530
============
See accompanying notes to schedule of investments.
13
<PAGE>
Global (ex-U.S.) Equity Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $412,487,647; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $ 102,678,967
Gross unrealized depreciation (24,516,861)
-------------
Net unrealized appreciation $ 78,162,106
=============
(b) Non-income producing security
(c) Denominated in U.S. dollars
FORWARD FOREIGN CURRENCY CONTRACTS
The Global (ex-U.S.) Equity Fund had the following open forward foreign currency
contracts as of December 31, 1998:
<TABLE>
<CAPTION>
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
---------- -------- ------- -----------
<S> <C> <C> <C> <C>
Forward Foreign Currency
Buy Contracts
Australian Dollar 2/19/99 32,300,000 $19,821,180 $ (677,170)
Belgian Franc 2/19/99 333,000,000 9,716,971 163,459
British Pound 2/19/99 6,600,000 10,963,637 11,096
Canadian Dollar 2/19/99 10,600,000 6,901,985 (71,699)
Finnish Markka 2/19/99 14,600,000 2,890,477 30,311
German Mark 2/19/99 33,700,000 20,282,511 1,146,743
Hong Kong Dollar 2/19/99 16,000,000 2,064,513 52,694
Italian Lira 2/19/99 13,390,000,006 8,140,230 316,699
Japanese Yen 2/19/99 1,695,000,000 15,126,051 2,319,252
Portguese Escudos 2/19/99 520,000,000 3,053,162 165,717
Singapore Dollars 2/19/99 6,300,000 3,834,846 280,344
Spanish Peseta 2/19/99 2,240,000,000 15,847,221 903,926
Swedish Krona 2/19/99 126,700,000 15,664,602 (776,812)
Swiss Franc 2/19/99 17,900,000 13,098,967 155,531
Forward Foreign Currency
Sale Contracts
Australian Dollar 2/19/99 6,000,000 3,681,953 (86,153)
Belgian Franc 2/19/99 455,000,000 13,276,942 (776,942)
British Pound 2/19/99 22,600,000 37,542,152 (991,172)
Finnish Markka 2/19/99 41,800,000 8,275,474 (462,390)
French Franc 2/19/99 20,000,000 3,589,028 (72,853)
German Mark 2/19/99 45,300,000 27,264,028 181,657
Hong Kong Dollar 2/19/99 16,000,000 2,064,513 (61,007)
Italian Lira 2/19/99 9,140,000,000 5,556,512 (125,347)
Japanese Yen 2/19/99 1,000,000,000 8,923,924 (308,062)
Netherlands Guilder 2/19/99 15,600,000 8,332,799 (151,270)
Singapore Dollar 2/19/99 6,300,000 3,834,846 (264,429)
Spanish Peseta 2/19/99 1,279,000,000 9,048,480 (145,772)
Swedish Krona 2/19/99 24,000,000 2,967,249 24,076
Swiss Franc 2/19/99 13,900,000 10,171,823 (59,345)
----------
Total $ 721,082
==========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
Global (ex-U.S.) Equity Fund -- Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $409,036,533) $487,198,639
Affiliated issuers (Cost $3,451,114) 3,451,114
Foreign currency, at value (Cost $2,680,240) 2,653,947
Receivables:
Investment securities sold 902,478
Dividends 890,378
Interest 55,532
Fund shares sold 6,285
Net unrealized appreciation on forward foreign
currency contracts 721,082
-------------
TOTAL ASSETS 495,879,455
-------------
LIABILITIES:
Payables:
Investment securities purchased 2,985,374
Due to custodian bank 88,790
Investment advisory fees 311,394
Accrued expenses 38,367
-------------
TOTAL LIABILITIES 3,423,925
-------------
NET ASSETS $492,455,530
=============
NET ASSETS CONSIST OF:
Paid in capital $431,264,036
Accumulated undistributed net investment income 1,427,023
Accumulated net realized loss (19,100,417)
Net unrealized appreciation 78,864,888
-------------
NET ASSETS $492,455,530
=============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of
$487,467,742 and 40,220,544 shares
issued and outstanding) $ 12.12
=============
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of
$13,188 and 1,092 shares issued and outstanding) $ 12.08
=============
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of
$4,974,600 and 414,597 shares issued
and outstanding) $ 12.00
=============
See accompanying notes to financial statements.
15
<PAGE>
Global (ex-U.S.) Equity Fund -- Financial Statements
<TABLE>
<CAPTION>
<S> <C>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of $278,261 for foreign taxes withheld) $ 3,094,946
Interest (including securities lending income of $60,855) 466,546
------------
TOTAL INCOME 3,561,492
------------
EXPENSES:
Advisory 1,759,921
Administrative 163,950
Custodian 137,494
Distribution 20,399
Other 120,708
------------
TOTAL EXPENSES 2,202,472
------------
NET INVESTMENT INCOME 1,359,020
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments (11,921,708)
Foreign currency transactions (2,561,948)
------------
Net realized loss (14,483,656)
------------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency 18,056,900
Forward contracts 3,190,576
Translation of other assets and liabilities
denominated in foreign currency 14,586
------------
Change in net unrealized appreciation or depreciation 21,262,062
------------
Net realized and unrealized gain 6,778,406
------------
Net increase in net assets resulting from operations $ 8,137,426
============
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
Global (ex-U.S.) Equity Fund -- Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,359,020 $ 6,539,098
Net realized gain (loss) (14,483,656) 12,223,856
Change in net unrealized appreciation or depreciation 21,262,062 6,875,111
------------ ------------
Net increase in net assets resulting from operations 8,137,426 25,638,065
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I (1,364,369) (6,380,973)
Brinson Class N (36) (58)
UBS Investment Funds Class (4,900) (51,271)
Distributions from net realized gain:
Brinson Class I (4,498,729) (25,288,399)
Brinson Class N (126) (59)
UBS Investment Funds Class (52,439) (521,640)
------------ ------------
Total distributions to shareholders (5,920,599) (32,242,400)
------------ ------------
Capital share transactions:
Shares sold 328,933,304 317,039,181
Shares issued in connection with reorganization 21,515,034 --
Shares issued on reinvestment of distributions 5,616,506 31,189,854
Shares redeemed (310,475,289) (325,627,875)
------------ ------------
Net increase in net assets resulting from capital
share transactions 45,589,555 22,601,160
------------ ------------
TOTAL INCREASE IN NET ASSETS 47,806,382 15,996,825
------------ ------------
NET ASSETS:
Beginning of period 444,649,148 428,652,323
------------ ------------
End of period (including accumulated undistributed
net investment income of $1,427,023 and
$1,437,308, respectively) $492,455,530 $444,649,148
============ ============
</TABLE>
See accompany notes to financial statements
17
<PAGE>
Global (ex-U.S.) Equity Fund -- Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, August 31, 1993*
December 31, 1998 ---------------------------------------- Through
Brinson Class I (Unaudited) 1998 1997 1996 1996 June 30, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.15 $ 12.59 $ 11.17 $ 9.68 $ 9.69 $ 10.00
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.04 0.18 0.18 0.18 0.15 0.10
Net realized and unrealized gain (loss) 0.09 0.30 1.97 2.05 (0.16) (0.34)
Total income (loss) from investment
operations 0.13 0.48 2.15 2.23 (0.01) (0.24)
-------- -------- -------- -------- -------- --------
Less distributions:
Distributions from investment income (0.04) (0.18) (0.17) (0.18) -- (0.07)
Distributions from net realized gain (0.12) (0.74) (0.56) (0.56) -- --
-------- -------- -------- -------- -------- --------
Total distributions (0.16) (0.92) (0.73) (0.74) -- (0.07)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 12.12 $ 12.15 $ 12.59 $ 11.17 $ 9.68 $ 9.69
======== ======== ======== ======== ======== ========
Total return (non-annualized) 1.14% 4.78% 20.27% 23.64% (0.10) (2.45)%
Ratios/Supplemental data:
Net assets, end of period (in 000s) $487,468 $439,329 $420,855 $212,366 $148,319 $ 71,544
Ratio of expenses to average net assets:
Before expense reimbursement 0.99%** 1.00% 1.00% 1.20% 1.23% 1.60%**
After expense reimbursement N/A N/A N/A 1.00% 1.00% 1.00%**
Ratio of net investment income to average net assets:
Before expense reimbursement 0.63%** 1.52% 1.83% 1.67% 1.93% 1.28%**
After expense reimbursement N/A N/A N/A 1.87% 2.16% 1.88%**
Portfolio turnover rate 37% 49% 25% 20% 14% 12%
</TABLE>
* Commencement of investment operations
** Annualized
N/A = Not Applicable
See accompanying notes to financial statements.
18
<PAGE>
Global (ex-U.S.) Equity Fund -- Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Year Ended
Brinson Class N (Unaudited) June 30, 1998*
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 12.14 $ 12.59
------- -------
Income from investment operations:
Net investment income 0.02 0.16
Net realized and unrealized gain 0.08 0.29
------- -------
Total income from investment operations 0.10 0.45
------- -------
Less distributions:
Distributions from net investment income (0.04) (0.16)
Distributions from net realized gain (0.12) (0.74)
------- -------
Total distributions (0.16) (0.90)
------- -------
Net asset value, end of period $ 12.08 $ 12.14
======= =======
Total return 0.88% 4.51%
Ratios/Supplemental data:
Net assets, end of period (in 000s) $ 13 $ 11
Ratio of expenses to average net assets:
Before expense reimbursement 0.38%** 1.25%
After expense reimbursement N/A N/A
Ratio of net investment income to average net assets:
Before expense reimbursement 1.24%** 1.27%
After expense reimbursement N/A N/A
Portfolio turnover rate 37% 49%
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
** Annualized
N/A = Not Applicable
See accompany notes to financial statements
19
<PAGE>
Global (ex-U.S.) Equity Fund -- Financial Highlights
20
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, July 31, 1995*
December 31, 1998 ------------------------- Through
UBS Investment Funds Class (Unaudited) 1998 1997 June 30, 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.05 $ 12.49 $ 11.12 $ 10.26
------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.01) 0.08 0.11 0.12
Net realized and unrealized gain 0.09 0.30 1.93 1.45
------- -------- -------- --------
Total income from investment operations 0.08 0.38 2.04 1.57
------- -------- -------- --------
Less distributions:
Distributions from net investment income (0.01) (0.08) (0.11) (0.15)
Distributions from net realized gain (0.12) (0.74) (0.56) (0.56)
------- -------- -------- --------
Total distributions (0.13) (0.82) (0.67) (0.71)
------- -------- -------- --------
Net asset value, end of period $ 12.00 $ 12.05 $ 12.49 $ 11.12
======= ======== ======== ========
Total return (non-annualized) 0.76% 3.90% 19.32% 15.78%
Ratios/Supplemental data:
Net assets, end of period (in 000s) $ 4,975 $ 5,310 $ 7,797 $ 1,262
Ratio of expenses to average net assets:
Before expense reimbursement 1.83%** 1.84% 1.81% 2.04%**
After expense reimbursement N/A N/A N/A 1.84%**
Ratio of net investment income to average net assets:
Before expense reimbursement (0.21)%** 0.68% 1.02% 0.83%**
After expense reimbursement N/A N/A N/A 1.03%**
Portfolio turnover rate 37% 49% 25% 20%
</TABLE>
* Commencement of UBS Investment Funds Class
** Annualized
N/A = Not Applicable
See accompanying notes to financial statements.
20
<PAGE>
Global (ex-U.S.) Equity Fund -- Notes To Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, as a series
company. The Trust currently offers shares of eleven series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (ex-U.S.)
Equity Fund (formerly, Non-U.S. Equity Fund) (each a "Fund" and collectively,
the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class
I, Brinson Class N and UBS Investment Funds Class (formerly, SwissKey Class).
There are an unlimited number of shares of each class with par value of $0.001
authorized. Each share represents an identical interest in the investments of
the Funds and has the same rights.
On December 19, 1998, the Fund acquired all the net assets of the UBS
International Equity Fund pursuant to a plan of reorganization approved by
shareholders on December 11, 1998. The acquisition was accomplished by a
tax-free exchange of 1,827,955 shares of the Global (ex-U.S.) Equity Fund for
the shares of UBS International Equity Fund outstanding on December 18, 1998.
The net assets of the UBS International Equity Fund, including $38,003 of
unrealized appreciation, were combined with those of the Fund. The aggregate net
assets of the Global (ex-U.S.) Equity Fund and the UBS International Equity Fund
immediately before the mergers were $463,315,718 and $21,515,034, respectively.
The following is a summary of significant accounting policies consistently
followed by the Global (ex-U.S.) Equity Fund in the preparation of its financial
statements.
A. Investment Valuation: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or market
on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under the
direction of the Trust's Board of Trustees. Investments in affiliated investment
companies are valued each day based on the closing net asset value of the 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 of which they are traded.
Forward foreign currency contracts are valued daily using quoted forward
exchange rates. Short-term obligations with a maturity of 60 days or less are
valued at amortized cost, which approximates market value.
B. Foreign Currency Translation: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases
and sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and unrealized
gain or loss on investments in the statement of operations.
C. Investment Transactions: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D. Investment Income: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as the information becomes available.
E. Federal Income Taxes: It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable income
to their shareholders. The Fund has met the requirements of the Code applicable
to regulated investment companies for the six months ended December 31, 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.
21
<PAGE>
Global (ex-U.S.) Equity Fund -- Notes To Financial Statements
G. Income and Expense Allocation: All income earned and expenses incurred by the
Fund will be borne on a pro rata basis by each of the classes, except that the
Brinson Class I will not incur any of the distribution expenses of the Brinson
Class N nor the UBS Investment Funds Class.
H. Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Fund with investment management services. As compensation for these
services, the Fund pays the Advisor a monthly fee based on the Fund's average
daily net assets. The Advisor has agreed to waive its fees and reimburse the
Fund to the extent total annualized expenses exceed a specified percentage of
the Fund's average daily net assets. The expense cap is 1.00%, 1.25% and 1.84%
of the average daily net assets of the Brinson Class I, Brinson Class N and UBS
Investment Funds Class, respectively. Investment advisory fees for the six
months ended December 31, 1998, were as follows:
Advisory Advisory
Fee Fees
--------- ----------
Global (ex-U.S.) Equity Fund 0.80% $1,759,921
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 six months ended December 31, 1998 were $2,944.
The Fund invests in shares of the Brinson Supplementary Trust U.S. Cash
Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is
managed by the Advisor. The Supplementary Trust is offered as a cash management
option to mutual funds and other accounts managed by the Advisor. The
Supplementary Trust pays no management fees. Distributions from the
Supplementary Trusts are reflected as interest income on the statement of
operations. Amounts relating to those investments at December 31, 1998 and for
the six months then ended are summarized as follows:
<TABLE>
<CAPTION>
% of
Sales Interest Net
Purchases Proceeds Income Value Assets
----------- ----------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
Global (ex-U.S.) Equity Fund $24,086,054 $20,634,940 $27,845 $3,451,114 0.70%
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1998, excluding
short-term investments, were as follows:
Proceeds
Purchases From Sales
------------ ------------
Global (ex U.S.) Equity Fund $204,961,081 $158,506,370
4. FORWARD FOREIGN CURRENCY CONTRACTS
The Fund engages in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation strategies. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Risks associated with such contracts include movement
in the value of the foreign currency relative to the U.S. dollar and the ability
of the counterparty to perform. The unrealized gain, if any, represents the
credit risk to the Fund on a forward foreign currency contract. Fluctuations in
the value of forward foreign currency contracts are recorded daily as net
unrealized gains or losses. The Fund realizes a gain or loss upon settlement of
the contracts. The statement of operations reflects net realized and net
unrealized gains and losses on these contracts. The counterparty to all forward
foreign currency contracts at and for the six months ended December 31, 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
22
<PAGE>
Global (ex-U.S.) Equity Fund -- Notes To Financial Statements
contracts to hedge a portion of its portfolio. Risks of entering into futures
contracts include the possibility that there may be an illiquid market or that a
change in the value of the contract may not correlate with changes in the value
of the underlying securities. Upon entering into a futures contract, the Fund is
required to deposit either cash or securities (initial margin). Subsequent
payments (variation margin) are made or received by the Fund, generally on a
daily basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Fund
recognizes a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6. SECURITY LENDING
The Fund loaned securities to certain brokers with the Fund's custodian acting
as the Fund's lending agent. The Fund earned negotiated lenders' fees, which are
included in interest income in the statement of operations. The Fund receives
securities, which are not reflected in the statement of assets and liabilities,
as collateral against the loaned securities. The Fund monitors the market value
of securities loaned on a daily basis and initially requires collateral against
the loaned securities in an amount at least equal to 105% of the value of
non-U.S. securities loaned. The value of loaned securities and related
collateral at December 31, 1998 was $15,400,404 and $15,505,536, respectively.
7. DISTRIBUTION PLANS
The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for the Brinson Class N
and the UBS Investment Funds Class. Each Plan governs payments made for the
expenses incurred in the promotion and distribution of the Brinson Class N and
the UBS Investment Funds Class. Annual fees under the Brinson Class N Plan shall
not exceed 0.25% of the daily net assets of the Brinson Class N. Annual fees
under the UBS Investment Funds Plan, which include a 0.25% service fee, shall
not exceed 0.84% of the average daily net assets of the UBS Investment Funds
Class.
8. LINE OF CREDIT
The Trust has entered into an agreement with Chase Manhattan Bank to provide a
364 day $100 million committed line of credit to the Funds. Borrowings will be
made for temporary purposes. Interest on amounts borrowed is based on the
Federal Funds rate plus 0.50% per year. The Funds pay a commitment fee of 0.08%
per year of the average daily unutilized amount of the line of credit. During
the six months ended December 31, 1998, the Global (ex-U.S.) Equity Fund had
borrowings of $1,300,000 and $3,600,000 outstanding for 1 day each under the
agreement.
9. CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1998 (Unaudited) June 30, 1998
--------------------------------- ---------------------------------
Shares Value Shares Value
------------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I* 30,605,579 $347,475,664 26,268,807 $312,436,986
Brinson Class N 205 2,348 798 9,817
UBS Investment Funds Class 261,400 2,970,326 387,174 4,592,378
----------- ------------ ----------- ------------
Total Sales 30,867,184 $350,448,338 26,656,779 $317,039,181
=========== ============ =========== ============
Dividend Reinvestment:
Brinson Class I 488,199 $ 5,565,465 2,849,536 $ 30,664,100
Brinson Class N 15 162 10 117
UBS Investment Funds Class 4,502 50,879 49,433 525,637
----------- ------------ ----------- ------------
Total Dividend Reinvestment 492,716 $ 5,616,506 2,898,979 $ 31,189,854
=========== ============ =========== ============
Redemptions:
Brinson Class I 27,036,820 $307,200,527 26,391,131 $318,236,785
Brinson Class N 15 187 -- --
UBS Investment Funds Class 291,758 3,274,575 620,542 7,391,090
----------- ------------ ----------- ------------
Total Redemptions 27,328,593 $310,475,289 27,011,673 $325,627,875
=========== ============ =========== ============
</TABLE>
*Includes shares issued in connection with reorganization.
23
<PAGE>
Special Meeting of Shareholders
Voting Results of Special Meeting of Shareholders (Unaudited)
The proposal described below was submitted to a vote of shareholders of UBS
Private Investor Funds, Inc. ("UBS Funds") at a special meeting of shareholders
held on December 11, 1998 (the "Meeting"):
Proposal No. 1 -D Approval of a Plan of Reorganization pursuant to which UBS
Fund's International Equity Fund (the "Fund") will be reorganized into Class I
shares of the Global (ex-U.S.) Equity Fund.
At the Meeting, the shareholders of the Fund approved Proposal No. 1 as follows:
For Against Abstain
------- ------- -------
UBS International Equity Fund 126,983 0 0
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>
[BRINSON LOGO APPEARS HERE]
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>
[UBS LOGO APPEARS HERE]
Global (ex-U.S.) Equity Fund
Semi-Annual Report
December 31, 1998
<PAGE>
Trustees and Officers
[UBS LOGO APPEARS HERE]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA Debra L. Nichols
Chairman of the Board Vice President
E. Thomas McFarlan Carolyn M. Burke, CPA
President Secretary and Treasurer
Thomas J. Digenan, CFA, CPA David E. Floyd
Vice President Assistant Secretary
1
<PAGE>
The Fund's Advisor - Brinson Partners, Inc.
[UBS LOGO APPEARS HERE]
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 265
billion of discretionary institutional assets on an active basis and mutual fund
assets for UBS Private Banking which total over USD 125 billion. In addition,
UBS Brinson acts as the investment advisor to UBS Private Banking. 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 tailored to specific client
objectives and focused upon both risk and return considerations in the context
of full investment cycles. Our investment decisions are based on fundamental
research, internally developed valuation systems and seasoned judgment. Our
independent team approach allows for rapid responses to market changes, while
providing each client with the benefit of our best talent.
2
<PAGE>
Table of Contents
[UBS LOGO APPEARS HERE]
Shareholder Letter 4
Global Economic and Market Highlights 5
Global (ex-U.S.) Equity Fund 6
Schedule of Investments 9
Financial Statements 14
Financial Highlights 17
Notes to Financial Statements 20
Special Meeting of Shareholders 23
3
<PAGE>
Shareholder Letter
[UBS LOGO APPEARS HERE]
February 20, 1999
Dear Shareholder:
We are very pleased to present the December 31, 1998 Semi-Annual Report for the
Global (ex-U.S.) Equity Fund. The Non-U.S. Equity Fund was renamed the Global
(ex-U.S.) Equity Fund effective December 10, 1998. This change affects only the
name of the Fund; the management, benchmark and all other aspects of the Fund
will remain the same. Within this Report, we will focus on the current
international economic outlook as well as our current strategy and performance
update for the Global (ex-U.S.) Equity Fund.
Since our last report to you, Union Bank of Switzerland and Swiss Bank
Corporation merged to become UBS AG, one of the world's major financial
institutions. In connection with this merger, the former SBC Brinson/Brinson
Partners, Inc.'s activities of Swiss Bank Corporation were combined with the
worldwide UBS asset management operations into the UBS Brinson division of UBS
AG. During this process, the UBS Private Investor Funds merged into the Brinson
fund family on December 18, 1998. This merger created the following three new
UBS Investment Funds on December 31, 1998; the U.S. Large Capitalization Growth
Fund, the U.S. Small Capitalization Growth Fund and the High Yield Fund.
The Global (ex-U.S.) Equity Fund is an actively managed fund that provides
integrated asset management across and within security markets. The investment
process is strategic in nature and is driven by deviations of market price from
fundamental value. This philosophy offers the greatest potential for achieving
enhanced, long-term returns while controlling risk.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our talent. The Report that follows highlights the investment
characteristics and the performance of the Global (ex-U.S.) Equity Fund.
We very much appreciate your continued trust and the confidence you have placed
in the UBS Investment 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
[UBS LOGO APPEARS HERE]
Japan and most of Asia continue to be mired in severe downturns. The Japanese
economy is particularly troubled, as the one bright spot in the economy, the
export sector, has started to weaken in response to a dramatic strengthening of
the yen. Bond yields have risen sharply as the government's deficit financing
has pushed the gross debt to GDP ratio among the highest of the developed
countries.
The single European currency enjoyed a successful launch on January 1, 1999.
Monetary policy for the eleven participating nations is now being administered
by the European Central Bank. Cash rates and bond yields have converged, except
for small spreads due to credit and liquidity differences. Although the euro's
success in the near term is not in doubt, some longer-term concerns remain.
Economic convergence of the EMU economies is not complete, and the economic
environment appears to be softening. This creates an element of political risk
for the ECB and the new currency.
Inflation remains in check throughout the developed world and in many of the
emerging markets. Weakness in Asia and overcapacity in basic industries have
combined to push down commodity prices, particularly oil and related energy
prices. Consumer price inflation is essentially zero in Japan, less than 1% in
most of Europe, and under 2% in the U.S. The voices predicting global deflation
seem to have largely disappeared however, after the Federal Reserve's series of
rate cuts to provide liquidity during the market downturns in the fall.
Global (ex-U.S.) Equity Environment
6 months 1 year 3 years 7/31/95*
Major Markets ended ended ended to
Total Return in U.S. Dollar Hedged Terms 12/31/98 12/31/98 12/31/98 12/31/98
- -------------------------------------------------------------------------------
MSCI World ex USA (Free) Index -3.98% 13.84% 14.86% 16.47%
Japan -6.00 0.29 -4.17 2.85
U.K. 0.87 13.92 17.32 17.64
Germany -6.89 28.92 30.32 29.23
France 1.59 43.14 31.72 29.28
Canada -4.00 8.22 17.07 17.24
Netherlands -10.24 11.92 31.05 31.02
Australia 10.11 18.04 10.74 10.55
- -------------------------------------------------------------------------------
6 months 1 year 3 years 7/31/95*
Major Currencies ended ended ended to
Percent Change Relative to U.S. Dollars 12/31/98 12/31/98 12/31/98 12/31/98
- -------------------------------------------------------------------------------
Yen 23.04% 15.27% -2.94% -7.00%
Pound -0.28 1.12 2.33 1.15
Deutschemark 8.37 7.95 -4.93 -5.34
Canadian Dollar -4.26 -6.83 -3.88 -3.24
- -------------------------------------------------------------------------------
*Performance inception date of the the UBS Investment Fund-Global (ex-U.S.)
Equity
All total returns in excess of 1 year are average annualized total returns
5
<PAGE>
Global (ex-U.S.) Equity Fund
[UBS LOGO APPEARS HERE]
The Global (ex-U.S.) Equity Fund is actively managed, providing a fully
integrated approach to the developed equity markets across the world. We employ
fundamental valuation models to determine the relative attractiveness of
aggregate markets, as well as of individual stocks. Our portfolio construction
process simultaneously sets country, currency, industry/factor and stock
selection strategies. This interactive investment process has evolved within the
context of an environment marked by growing globalization and increasingly
integrated economies, industries and capital markets.
The UBS Investment Fund - Global (ex-U.S.) Equity has provided an annualized
return of 11.39% since its inception on July 31, 1995, compared to the 8.61%
return of the MSCI World ex USA (Free) Index. This was achieved with a
volatility of 13.08%, below the 14.68% volatility of the benchmark. For the year
ended December 31, 1998, the Fund gained 13.44%, compared to the index's return
of 18.67%. With the exception of the Pacific Rim and several small markets, most
developed equity markets enjoyed solid performance.
Monetary Union, privatization, restructuring, merger activity and increased
capital flows have boosted European equity markets. Despite their excellent
performance, European corporations are still early into their restructuring,
with the potential for improving profitability ahead. Europe is our largest
overweight. Most Pacific markets continued to suffer the consequences of last
year's currency crisis. This situation has been aggravated in Japan by flawed
macroeconomic policies, a largely insolvent financial sector and an unprofitable
domestic corporate sector. We remain significantly underweight in Japan, Hong
Kong and Singapore. In comparison, Australia and New Zealand have been unduly
impacted by their geographic proximity to Asia and are attractively priced. We
maintain an overweight in these markets.
Overall market allocation detracted from performance. Holding cash (through
July) in a period of unusually strong returns and overweighting New Zealand
offset the positive effects of underweighting Japan and overweighting Belgium
and Finland. Currency management was hurt by the yen underweight and the New
Zealand dollar and Australian dollar overweights. Stock selection was positive
due to successful strategies in Japan, helped by the significant underweight to
banks, overweight to blue chips and stock specific returns, but hurt in the U.K.
due to stock specific factors, the underweight to size and the overweight to
basic industries.
6
<PAGE>
Global (ex-U.S.) Equity Fund
[UBS LOGO APPEARS HERE]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 7/31/95*
ended ended ended to
12/31/98 12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UBS Investment Fund - Global (ex-U.S.) Equity 0.76% 13.44% 10.02% 11.39%
- ---------------------------------------------------------------------------------------
MSCI World ex USA (Free) Index** 2.72 18.67 9.06 8.61
- ---------------------------------------------------------------------------------------
</TABLE>
* Performance inception date of the UBS Investment Fund - Global (ex-U.S.)
Equity
** Formerly known as the MSCI Non-U.S. Equity (Free) Index. Performance is net
of withholding taxes on dividends.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the UBS Investment
Fund - Global (ex-U.S.) Equity and the MSCI World ex USA (Free) Index if you had
invested $10,000 on July 31, 1995, and had reinvested all your income dividends
and capital gain distributions through December 31, 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.
UBS Investment Fund - Global (ex-U.S.) Equity
vs. MSCI World ex USA (Free) Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
UBS Investment MSCI Index
Fund ex USA (Free) Index
-------------- -------------------
7/31/95 $10,000 $10,000
$10,146 $9,632
9/30/95 $10,302 $9,817
$10,205 $9,563
$10,448 $9,835
12/31/95 $10,858 $10,220
$11,065 $10,291
$11,024 $10,320
3/31/96 $11,158 $10,538
$11,563 $10,848
$11,500 $10,662
6/30/96 $11,578 $10,713
$11,256 $10,398
$11,287 $10,443
9/30/96 $11,630 $10,727
$11,578 $10,654
$12,161 $11,099
12/31/96 $12,140 $10,947
$12,074 $10,612
$12,262 $10,770
3/31/97 $12,328 $10,775
$12,405 $10,844
$13,220 $11,561
6/30/97 $13,815 $12,174
$14,059 $12,400
$13,063 $11,468
9/30/97 $13,782 $12,111
$12,920 $11,200
$12,687 $11,068
12/31/97 $12,750 $11,174
$13,166 $11,653
$13,844 $12,411
3/31/98 $14,379 $12,814
$14,486 $12,912
$14,475 $12,855
6/30/98 $14,354 $12,909
$14,497 $12,994
$12,698 $11,335
9/30/98 $12,377 $11,011
$13,318 $12,160
$13,985 $12,778
12/31/98 $14,463 $13,259
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 (ex-U.S.) Equity Fund
[UBS LOGO APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- ---------------------------------------------------
Global (ex-U.S.) EQUITIES
Aerospace & Military 0.45%
Airlines 0.16
Appliances & Households 3.18
Autos/Durables 1.69
Banking 10.47
Beverages & Tobacco 3.70
Broadcasting & Publishing 1.98
Building Materials 1.50
Business & Public Service 4.06
Chemicals 4.59
Construction 0.40
Data Processing 0.60
Electric Components 0.83
Electronics 5.50
Energy 8.13
Financial Services 1.60
Food & House Products 3.65
Forest Products 1.16
Health & Personal Care 9.34
Housing/Paper 0.10
Industrial Components 1.62
Insurance 8.81
Leisure & Tourism 0.31
Machinery & Engineering 0.23
Merchandising 4.65
Metals-Steel 0.87
Miscellaneous Materials 0.14
Multi-Industry 3.23
Non-Ferrous Metals 0.98
Real Estate 0.43
Recreation 0.58
Retail/Apparel 0.18
Telecommunications 8.83
Textiles & Apparel 0.19
Transportation 0.28
Utilities 4.40
Wholesale & International Trade 0.06
-------
Total Global (ex-U.S.) Equities 98.88
-------
CONVERTIBLE BONDS 0.05
SHORT-TERM INVESTMENTS 0.70
TOTAL INVESTMENTS 99.63
CASH AND OTHER ASSETS,
LESS LIABILITIES 0.37
-------
NET ASSETS 100.00%
=======
Market and Currency Strategy
As of December 31, 1998 (Unaudited)
Fund
-------------------
Market Currency
Strategy Strategy Index
- ------------------------------------------------
Australia 5.38% 8.86% 2.47%
Belgium 3.15 0.00 0.00
Canada 1.98 3.70 3.70
Denmark 0.59 0.86 0.86
Euro 0.00 38.67 38.67
Finland 2.99 0.00 0.00
France 10.41 0.00 0.00
Germany 11.69 0.00 0.00
Hong Kong 0.00 0.00 1.99
Italy 4.41 0.00 0.00
Japan 12.90 14.25 20.25
Netherlands 7.49 0.00 0.00
New Zealand 1.77 1.77 0.17
Norway 0.37 0.37 0.37
Singapore 0.74 0.72 0.72
Spain 1.92 0.00 0.00
Sweden 4.12 6.54 2.54
Switzerland 7.47 7.76 7.76
U.K. 22.62 16.50 20.50
- ------------------------------------------------
100.00% 100.00% 100.00%
Top Ten Global (ex-U.S.) Equity Holdings
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- -------------------------------------
1. Novartis AG (Reg.) 2.31%
2. Nestle S.A. (Reg.) 1.86
3. Allianz AG 1.85
4. Royal Dutch Petroleum Co. 1.80
5. Bayer AG 1.73
6. Nokia Oyj -D A Shares 1.66
7. Lloyds TSB Group PLC 1.58
8. Glaxo Wellcome PLC 1.51
9. Veba AG 1.50
10. Siemens AG 1.46
- -------------------------------------
8
<PAGE>
Global (ex-U.S.) Equity Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
----------- ----------------
Global (ex-U.S.) Equities - 98.88%
Australia - 4.98%
Amcor Ltd. 85,740 $ 366,730
Australia & New Zealand Banking Group 33,000 216,186
Brambles Industries Ltd. 68,040 1,658,993
Broken Hill Proprietary Co., Ltd. 269,620 1,987,758
Burns Philp & Co. Ltd. 254,362 20,283
CSR Ltd. 358,990 878,614
David Jones Ltd. 503,200 555,592
Goodman Fielder Ltd. 120,000 121,453
Lend Lease Corp. Ltd. 89,996 1,214,476
M.I.M. Holdings Ltd. 488,000 215,524
National Australia Bank Ltd. 204,648 3,088,060
News Corp., Ltd. 301,747 1,995,285
News Corp., Ltd., Preferred 129,469 788,603
Orica Ltd. 85,820 446,930
Pacific Dunlop Ltd. 365,450 591,800
Pasminco Ltd. 297,000 225,903
Qantas Airways Ltd. 391,138 798,946
QBE Insurance Group Ltd. 205,223 849,714
Rio Tinto Ltd. 66,560 790,223
Santos Ltd. 237,140 637,121
Telstra Corp., Ltd. (b) 705,210 3,300,549
Westpac Banking Corp., Ltd. 391,841 2,624,676
WMC Ltd. 256,270 773,403
Woolworth's Ltd. 117,460 400,309
-------------
24,547,131
-------------
Belgium - 2.74%
Electrabel S.A. 11,895 5,228,374
Fortis AG 583 34
Fortis AG Strip (b) 17,173 6,223,587
KBC Bancassurance Holding 26,100 2,066,496
KBC Bancassurance Holding-Strip (b) 610 35
-------------
13,518,526
-------------
Canada - 2.04%
Agrium, Inc. 37,580 330,293
Alcan Aluminum Ltd. 23,940 646,816
Bank of Montreal 16,010 643,110
Canadian National Railway Co. 17,390 902,899
Canadian Pacific Ltd. 48,014 897,137
Extendicare Inc., Class A (b) 35,840 203,000
Hudson's Bay Co. 36,620 461,326
Imasco, Ltd. 24,800 527,969
Imperial Oil Ltd. 47,060 752,163
Magna International Inc., Class A 6,360 395,016
Newbridge Networks Corp. (b) 16,510 500,889
NOVA Chemicals Corp. 26,521 345,325
Potash Corporation of Saskatchewan, Inc. 6,360 407,852
Royal Bank of Canada 18,720 932,953
Seagram Co., Ltd. 8,800 333,724
Shaw Communications, Inc., Class B 33,880 818,326
TransCanada Pipelines Ltd. 46,376 677,826
Westcoast Energy, Inc. 14,320 284,349
-------------
10,060,973
-------------
Shares Value
----------- ----------------
Denmark - 0.54%
Den Danske Bank Group 1,240 $ 166,580
Tele Danmark A/S 18,500 2,496,897
-------------
2,663,477
-------------
Finland - 2.51%
Merita Ltd., Class A 301,600 1,917,984
Nokia Oyj-A Shares 66,730 8,170,913
UPM-Kymmene Corp. 81,000 2,271,596
-------------
12,360,493
-------------
France - 10.36%
Air Liquide 16,122 2,958,192
Alcatel Alsthom 28,127 3,443,999
Axa 22,624 3,280,484
Axa Certificate de Valeur Garante (b) 8,422 3,995
Banque Nationale de Paris 33,146 2,730,620
Cie de Saint Gobain 14,263 2,014,519
Dexia France 11,810 1,820,273
Elf Aquitaine S.A. 17,934 2,073,926
France Telecom S.A. 33,090 2,630,045
Groupe Danone 7,970 2,282,768
Lafarge S.A. 1,687 160,359
Lagardere S.C.A. 70,530 2,998,617
Michelin, Class B 28,023 1,121,181
Moulinex 16,745 257,791
Paribas 14,973 1,301,849
Pinault-Printemps-Redoute S.A. 7,650 1,462,568
Rhone-Poulenc, Class A 43,420 2,235,436
SEFIMEG 2,126 150,329
SEITA 59,480 3,726,684
Societe Generale 11,573 1,874,900
Suez Lyonnaise des Eaux S.A. 16,042 3,296,734
Thomson CSF 52,120 2,239,232
Total S.A., Class B 25,833 2,617,428
Vivendi 16,794 4,359,189
-------------
51,041,118
-------------
Germany - 12.40%
Allianz AG 24,472 9,109,414
Bayer AG 202,556 8,506,720
DaimlerChrysler AG (b) 66,618 6,619,404
Deutsche Bank AG 47,097 2,778,994
Deutsche Telekom AG 115,010 3,780,498
Dresdner Bank AG 62,180 2,605,766
Hoechst AG 66,610 2,755,421
Mannesmann AG (b) 42,850 4,958,776
SAP AG 5,230 2,260,807
Siemens AG 109,590 7,204,674
Veba AG 124,588 7,382,826
Volkswagen AG 38,206 3,092,080
-------------
61,055,380
-------------
Hong Kong - 0.08%
Hongkong Land Holdings, Ltd. 153,000 180,540
Wharf (Holdings) Ltd. 136,000 198,366
-------------
378,906
-------------
Indonesia - 0.02%
Indah Kiat Pulp & Paper Corp. 296,000 80,981
-------------
9
<PAGE>
Global (ex-U.S.) Equity Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
----------- ----------------
Italy - 4.05%
Assicurazioni Generali 104,446 $ 4,370,544
Danieli & Co. Savings (Risp) 59,100 235,835
ENI Spa 768,000 5,030,134
ENI Spa ADR (c) 11,080 750,670
La Rinascente Spa 264,140 2,722,388
Montedison Spa 1,614,280 2,148,859
San Paolo-imi, Spa 113,610 2,011,843
Telecom Italia Mobile Spa 360,000 2,663,526
-------------
19,933,799
Japan - 13.56%
Acorn Co., Ltd. 9,000 579,255
Amada Co., Ltd. 131,000 635,257
Bridgestone Corp. 29,000 659,441
Canon, Inc. 91,000 1,948,271
Citizen Watch Co., Ltd. 115,000 693,262
Dai Nippon Printing Co., Ltd. 119,000 1,901,046
Daiichi Pharmaceutical Co., Ltd. 108,000 1,827,766
Daikin Industries Ltd. 130,000 1,290,780
Daiwa House Industry Co., Ltd. 61,000 650,559
Fanuc 51,700 1,773,750
Fuji Photo Film 23,000 856,383
Fujitsu 75,000 1,000,665
Hitachi Ltd. 53,000 328,901
Honda Motor Co. 56,000 1,841,844
Hoya Corp. 30,000 1,462,766
Ishikawajima-Harima Heavy Industries
Co., Ltd. 9,000 15,957
Ito Yokado Co., Ltd. 50,000 3,501,773
Japan Wool Textile Co., Ltd. 27,000 146,729
Kajima Corp. 22,000 57,535
Kaneka Corp. 133,000 998,679
Kansai Paint Co., Ltd. 42,000 122,128
Kao Corp. 39,000 881,649
Kirin Brewery Co., Ltd. 142,000 1,812,766
Koito Manufacturing Co., Ltd. 54,000 229,309
Kokuyo 40,000 539,362
Kuraray Co., Ltd. 158,000 1,746,684
Marui Co., Ltd. 69,000 1,330,452
Matsushita Electric Industrial Co. 168,000 2,977,234
Mitsubishi Estate Co., Ltd. 42,000 377,181
Mitsubishi Heavy Industries, Ltd. 43,000 167,731
NGK Insulators 219,000 2,828,750
Nikko Securities Co., Ltd. 56,000 156,383
Nintendo Co., Ltd. 13,500 1,310,505
Nippon Denso Co., Ltd. 110,000 2,038,121
Nippon Meat Packers, Inc. 84,000 1,355,319
Nippon Yusen Kabushiki Kaisha 88,000 278,511
Nisshinbo Industries, Inc. 42,000 146,702
Omron Corp. 35,000 480,319
Sakura Bank, Ltd. 96,000 220,426
Sankyo Co., Ltd. 92,000 2,014,539
Secom Co., Ltd. 31,000 2,572,340
Sega Enterprises Ltd. 16,000 355,319
Sekisui House Ltd. 120,000 1,271,277
Sharp Corp. 11,000 99,371
Shin-Etsu Chemical Co., Ltd. 20,000 482,270
Sony Corp. 31,500 2,298,271
Shares Value
----------- ----------------
Sumitomo Chemical Co. 150,000 $ 585,106
Sumitomo Electric Industries 108,000 1,216,915
Sumitomo Marine & Fire Insurance Co., Ltd. 35,000 222,163
Taiheiyo Cement Corp. 78,600 197,197
Takeda Chemical Industries 76,000 2,930,851
TDK Corp. 20,000 1,831,560
Tokio Marine & Fire Insurance Co. 119,000 1,424,202
Tokyo Gas Co. 197,000 518,697
Tokyo Steel Mfg. 28,000 140,496
Toray Industries, Inc. 366,000 1,914,362
Toshiba Corp. 300,000 1,789,894
Toyo Seikan Kaisha, Ltd. 17,000 289,060
Toyo Suisan Kaisha 3,000 25,957
Toyota Motor Corp. 87,000 2,367,819
UNY Co., Ltd. 4,000 73,227
West Japan Railway Co. 70 310,284
Yamaha Motor Co., Ltd. 34,000 219,734
Yamato Transport Co., Ltd. 33,000 462,234
-------------
66,783,296
-------------
Korea - 0.09%
Hyundai Motor Co., Ltd. 7,246 128,952
Korea Electric Power Corp. 1,000 24,782
Shinhan Bank (b) 25,300 193,563
SK Telecom Co., Ltd. 130 98,221
-------------
445,518
-------------
Malaysia - 0.02%
Malayan Banking Bhd 27,000 38,287
Nestle (Malaysia) Bhd 15,000 41,989
-------------
80,276
-------------
Netherlands - 7.15%
ABN AMRO Holdings NV 90,088 1,896,135
Akzo Nobel NV 12,825 584,290
Elsevier NV 189,870 2,660,831
Heineken NV 65,902 3,968,096
ING Groep NV 112,427 6,859,323
KPN NV 135,445 6,784,158
Philips Electronics NV 1,349 90,571
Royal Dutch Petroleum Co. 181,380 9,036,623
Unilever NV 38,740 3,313,140
-------------
35,193,167
-------------
New Zealand - 1.95%
Auckland International Airport Ltd. (b) 248,210 347,493
Brierley Investments Ltd. 1,811,340 411,481
Carter Holt Harvey Ltd. 1,158,540 1,040,498
Fletcher Challenge Building 285,560 442,025
Fletcher Challenge Energy 306,600 583,118
Fletcher Challenge Paper 642,540 431,107
Lion Nathan Ltd. 348,570 889,444
Telecom Corp. of New Zealand Ltd. 1,111,890 4,846,155
Telecom Corp. of New Zealand Ltd. ADR (c) 16,500 588,844
-------------
9,580,165
-------------
Norway - 0.40%
Norsk Hydro ASA 26,510 894,221
Norske Skogindustrier ASA 36,350 1,059,155
-------------
1,953,376
-------------
10
<PAGE>
Global (ex-U.S.) Equity Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
----------- ----------------
Singapore - 0.85%
Development Bank of Singapore Ltd. 20,000 $ 180,606
Singapore Press Holdings Ltd. 216,975 2,353,850
United Overseas Bank Ltd. (Frgn.) 259,000 1,663,879
-------------
4,198,335
-------------
Spain - 1.79%
Banco Popular Espanol S.A. 32,239 2,434,496
Endesa S.A. 178,238 4,729,680
Telefonica S.A. 37,432 1,666,925
Telefonica S.A. Rights
(expiring 1/30/99) (b) 748 665
-------------
8,831,766
-------------
Sweden - 3.94%
Astra AB, A Shares 144,058 2,941,301
Electrolux AB, B Shares 194,460 3,346,637
ForeningsSparbanken AB 4,971 128,786
Investor AB 44,870 2,026,009
Nordbanken Holding AB 231,960 1,488,060
Skandia Forsakrings AB 225,180 3,444,733
Stora Kopparbergs Berglags Aktiebolag 20,639 226,612
Svenska Handelsbanken, A Shares 19,560 825,276
Swedish Match AB 605,370 2,203,165
Telefonaktiebolaget LM Ericsson, B Shares 116,780 2,780,545
-------------
19,411,124
-------------
Switzerland - 7.24%
CS Holdings AG (Reg.) 1,603 250,925
Julius Baer Holding AG 423 1,405,894
Nestle S.A. (Reg.) 4,203 9,149,596
Novartis AG (Reg.) 5,797 11,395,632
Roche Holding AG (Gen.) 512 6,247,630
Swiss Reinsurance Co. (Reg.) 1,306 3,405,013
SwissCom AG (Reg.) (b) 9,023 3,777,375
-------------
35,632,065
-------------
Thailand - 0.07%
Bangkok Bank Public Co., Ltd. (b) 60,000 123,848
Italian-Thai Development Public Co.,
Ltd. (b) 15,000 30,136
Shinawatra Computer Public Co., Ltd. (b) 22,000 75,685
Thai Farmers Bank Public Co., Ltd.
(Frgn) (b) 71,000 125,058
-------------
354,727
-------------
United Kingdom - 22.10%
Allied Zurich AG (b) 232,252 3,464,285
Barclays PLC 157,230 3,390,348
BG PLC 83,250 525,308
Billiton PLC 116,500 231,147
BOC Group PLC 161,450 2,308,808
Booker PLC 295,950 307,753
Boots Company PLC 174,340 2,968,853
BPB PLC 5,000 18,905
British American Tobacco PLC 299,252 2,631,394
British Petroleum Co. PLC 380,383 5,680,145
British Steel PLC 1,457,140 2,157,720
BTR PLC 200,000 412,625
Cable & Wireless PLC 115,200 1,416,449
Charter PLC 278,988 1,531,804
Coats Viyella PLC 1,445,489 649,355
Diageo PLC 231,935 2,639,528
Shares Value
----------- ----------------
Fairview Holdings PLC (b) 154,702 $ 229,081
FKI PLC 1,093,225 2,437,352
Garban PLC (b) 12,658 48,229
General Electric Co. PLC 466,240 4,208,362
Glaxo Wellcome PLC 216,260 7,440,988
Greenalls Group PLC 201,750 1,075,834
Hanson PLC 375,482 2,981,528
Hillsdown Holdings PLC 309,395 386,081
House of Fraser PLC 484,090 426,880
IMI PLC 49,800 195,544
Lloyds TSB Group PLC 545,545 7,760,694
Marks & Spencer PLC 718,550 4,928,577
Marley PLC 202,230 410,496
Mirror Group PLC 600,240 1,500,525
National Westminster Bank PLC 138,050 2,662,096
Nycomed Amersham PLC 266,090 1,832,875
Peninsular & Oriental Steam Navigation Co. 166,986 1,974,004
Pennon Group PLC 11,860 229,690
Prudential Corp. PLC 406,820 6,142,608
Rank Group PLC 31,000 119,403
Reed International PLC 251,190 1,964,283
Rio Tinto PLC 186,890 2,173,537
RJB Mining PLC 408,840 530,581
Royal & Sun Alliance Insurance Group PLC 180,174 1,471,148
Safeway PLC 63,898 321,069
Sainsbury (J.) PLC 115,950 929,386
Scottish & Newcastle PLC 37,081 430,636
Scottish Hydro-Electric PLC 364,720 4,108,205
Smith & Nephew PLC 97,532 303,454
SmithKline Beecham PLC 317,750 4,440,877
Smurfit (Jefferson) Group PLC 293,929 528,166
Tarmac PLC 135,601 253,816
Tate & Lyle PLC 118,720 653,816
Terranova Foods PLC (b) 154,702 283,134
Tesco PLC 1,131,830 3,224,895
Thames Water PLC 153,589 2,938,744
Thames Water PLC, Class B (b) 134,310 168,717
United News & Media PLC 163,580 1,434,315
United Utilities PLC 21,046 291,688
Vodafone Group PLC 98,547 1,600,284
Williams PLC 189,277 1,074,668
Yorkshire Water PLC 260,000 2,379,249
-------------
108,829,942
-------------
Total Global (ex-U.S.) Equities
(Cost $408,772,123) 486,934,541
-------------
Face
Amount
-------------
Convertible Bonds - 0.05%
Australia - 0.03%
Burns, Philp Treasury, 7.50%,
due 8/14/03 AUD 1,228,664 150,733
-------------
Japan - 0.02%
Sanwa Finance Trust, 1.25%,
due 8/01/05 JPY 15,000,000 113,365
-------------
Total Convertible Bonds
(Cost $264,410) 264,098
-------------
11
<PAGE>
Global (ex-U.S.) Equity Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
----------- ----------------
Short-Term Investments - 0.70%
Investment Companies - 0.70%
Brinson Supplementary Trust U.S.
Cash Management Prime Fund
(Cost $3,451,114) 3,451,114 $ 3,451,114
-------------
Total Investments
(Cost $412,487,647) - 99.63% (a) 490,649,753
-------------
Cash and other assets,
less liabilities - 0.37% 1,805,777
-------------
Net Assets - 100% $ 492,455,530
=============
See accompanying notes to schedule of investments.
12
<PAGE>
Global (ex-U.S.) Equity Fund - Schedule of Investments
December 31, 1998 (Unaudited)
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $412,487,647; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $102,678,967
Gross unrealized depreciation (24,516,861)
-------------
Net unrealized appreciation $ 78,162,106
=============
(b) Non-income producing security
(c) Denominated in U.S. dollars
FORWARD FOREIGN CURRENCY CONTRACTS
The Global (ex-U.S.) Equity Fund had the following open forward foreign currency
contracts as of December 31, 1998:
<TABLE>
<CAPTION>
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
---------- -------- ------- -----------
<S> <C> <C> <C> <C>
Forward Foreign Currency
Buy Contracts
Australian Dollar 2/19/99 32,300,000 $19,821,180 $ (677,170)
Belgian Franc 2/19/99 333,000,000 9,716,971 163,459
British Pound 2/19/99 6,600,000 10,963,637 11,096
Canadian Dollar 2/19/99 10,600,000 6,901,985 (71,699)
Finnish Markka 2/19/99 14,600,000 2,890,477 30,311
German Mark 2/19/99 33,700,000 20,282,511 1,146,743
Hong Kong Dollar 2/19/99 16,000,000 2,064,513 52,694
Italian Lira 2/19/99 13,390,000,006 8,140,230 316,699
Japanese Yen 2/19/99 1,695,000,000 15,126,051 2,319,252
Portuguese Escudos 2/19/99 520,000,000 3,053,162 165,717
Singapore Dollars 2/19/99 6,300,000 3,834,846 280,344
Spanish Peseta 2/19/99 2,240,000,000 15,847,221 903,926
Swedish Krona 2/19/99 126,700,000 15,664,602 (776,812)
Swiss Franc 2/19/99 17,900,000 13,098,967 155,531
Forward Foreign Currency
Sale Contracts
Australian Dollar 2/19/99 6,000,000 3,681,953 (86,153)
Belgian Franc 2/19/99 455,000,000 13,276,942 (776,942)
British Pound 2/19/99 22,600,000 37,542,152 (991,172)
Finnish Markka 2/19/99 41,800,000 8,275,474 (462,390)
French Franc 2/19/99 20,000,000 3,589,028 (72,853)
German Mark 2/19/99 45,300,000 27,264,028 181,657
Hong Kong Dollar 2/19/99 16,000,000 2,064,513 (61,007)
Italian Lira 2/19/99 9,140,000,000 5,556,512 (125,347)
Japanese Yen 2/19/99 1,000,000,000 8,923,924 (308,062)
Netherlands Guilder 2/19/99 15,600,000 8,332,799 (151,270)
Singapore Dollar 2/19/99 6,300,000 3,834,846 (264,429)
Spanish Peseta 2/19/99 1,279,000,000 9,048,480 (145,772)
Swedish Krona 2/19/99 24,000,000 2,967,249 24,076
Swiss Franc 2/19/99 13,900,000 10,171,823 (59,345)
-----------
Total $ 721,082
===========
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
Global (ex-U.S.) Equity Fund - Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $409,036,533) $487,198,639
Affiliated issuers (Cost $3,451,114) 3,451,114
Foreign currency, at value (Cost $2,680,240) 2,653,947
Receivables:
Investment securities sold 902,478
Dividends 890,378
Interest 55,532
Fund shares sold 6,285
Net unrealized appreciation on forward foreign
currency contracts 721,082
-------------
TOTAL ASSETS 495,879,455
-------------
LIABILITIES:
Payables:
Investment securities purchased 2,985,374
Due to custodian bank 88,790
Investment advisory fees 311,394
Accrued expenses 38,367
-------------
TOTAL LIABILITIES 3,423,925
-------------
NET ASSETS $492,455,530
=============
NET ASSETS CONSIST OF:
Paid in capital $431,264,036
Accumulated undistributed net investment income 1,427,023
Accumulated net realized loss (19,100,417)
Net unrealized appreciation 78,864,888
-------------
NET ASSETS $492,455,530
=============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and
redemption price per share (Based on net
assets of $487,467,742 and 40,220,544
shares issued and outstanding) $ 12.12
=============
Brinson Class N:
Net asset value, offering price and
redemption price per share (Based on net
assets of $13,188 and 1,092 shares
issued and outstanding) $ 12.08
=============
UBS Investment Funds Class:
Net asset value, offering price and
redemption price per share (Based on net
assets of $4,974,600 and 414,597 shares
issued and outstanding) $ 12.00
=============
See accompanying notes to financial statements.
14
<PAGE>
Global (ex-U.S.) Equity Fund - Financial Statements
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of $278,261 for foreign taxes withheld) $ 3,094,946
Interest (including securities lending income of $60,855) 466,546
------------
TOTAL INCOME 3,561,492
------------
EXPENSES:
Advisory 1,759,921
Administrative 163,950
Custodian 137,494
Distribution 20,399
Other 120,708
------------
TOTAL EXPENSES 2,202,472
------------
NET INVESTMENT INCOME 1,359,020
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments (11,921,708)
Foreign currency transactions (2,561,948)
------------
Net realized loss (14,483,656)
------------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency 18,056,900
Forward contracts 3,190,576
Translation of other assets and liabilities denominated
in foreign currency 14,586
------------
Change in net unrealized appreciation or depreciation 21,262,062
------------
Net realized and unrealized gain 6,778,406
------------
Net increase in net assets resulting from operations $ 8,137,426
============
See accompanying notes to financial statements.
15
<PAGE>
Global (ex-U.S.) Equity Fund - Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,359,020 $ 6,539,098
Net realized gain (loss) (14,483,656) 12,223,856
Change in net unrealized appreciation or depreciation 21,262,062 6,875,111
------------ ------------
Net increase in net assets resulting from operations 8,137,426 25,638,065
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I (1,364,369) (6,380,973)
Brinson Class N (36) (58)
UBS Investment Funds Class (4,900) (51,271)
Distributions from net realized gain:
Brinson Class I (4,498,729) (25,288,399)
Brinson Class N (126) (59)
UBS Investment Funds Class (52,439) (521,640)
------------ ------------
Total distributions to shareholders (5,920,599) (32,242,400)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 328,933,304 317,039,181
Shares issued in connection with reorganization 21,515,034 -
Shares issued on reinvestment of distributions 5,616,506 31,189,854
Shares redeemed (310,475,289) (325,627,875)
------------ ------------
Net increase in net assets resulting from capital
share transactions 45,589,555 22,601,160
------------ ------------
TOTAL INCREASE IN NET ASSETS 47,806,382 15,996,825
------------ ------------
NET ASSETs:
Beginning of period 444,649,148 428,652,323
------------ ------------
End of period (including accumulated undistributed
net investment income of $1,427,023 and $1,437,308,
respectively) $492,455,530 $444,649,148
============ ============
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
Global (ex-U.S.) Equity Fund - Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, August 31, 1993*
December 31, 1998 ----------------------------------------- Through
Brinson Class I (Unaudited) 1998 1997 1996 1995 June 30, 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.15 $ 12.59 $ 11.17 $ 9.68 $ 9.69 $ 10.00
-------- -------- -------- -------- -------- -------
Income from investment operations:
Net investment income 0.04 0.18 0.18 0.18 0.15 0.10
Net realized and unrealized gain (loss) 0.09 0.30 1.97 2.05 (0.16) (0.34)
-------- -------- -------- -------- -------- -------
Total income (loss) from investment
operations 0.13 0.48 2.15 2.23 (0.01) (0.24)
-------- -------- -------- -------- -------- -------
Less distributions:
Distributions from investment income (0.04) (0.18) (0.17) (0.18) - (0.07)
Distributions from net realized gain (0.12) (0.74) (0.56) (0.56) - -
-------- -------- -------- -------- -------- -------
Total distributions (0.16) (0.92) (0.73) (0.74) - (0.07)
-------- -------- -------- -------- -------- -------
Net asset value, end of period $ 12.12 $ 12.15 $ 12.59 $ 11.17 $ 9.68 $ 9.69
======== ======== ======== ======== ======== =======
Total return (non-annualized) 1.14% 4.78% 20.27% 23.64% (0.10)% (2.45)%
Ratios/Supplemental data:
Net assets, end of period (in 000s) $487,468 $439,329 $420,855 $212,366 $148,319 $71,544
Ratio of expenses to average net assets:
Before expense reimbursement 0.99%** 1.00% 1.00% 1.20% 1.23% 1.60%**
After expense reimbursement N/A N/A N/A 1.00% 1.00% 1.00%**
Ratio of net investment income to average net assets:
Before expense reimbursement 0.63%** 1.52% 1.83% 1.67% 1.93% 1.28%**
After expense reimbursement N/A N/A N/A 1.87% 2.16% 1.88%**
Portfolio turnover rate 37% 49% 25% 20% 14% 12%
</TABLE>
* Commencement of investment operations
** Annualized
N/A = Not Applicable
See accompanying notes to financial statements.
17
<PAGE>
Global (ex-U.S.) Equity Fund - Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Year Ended
Brinson Class N (Unaudited) June 30, 1998*
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 12.14 $ 12.59
Income from investment operations:
Net investment income 0.02 0.16
Net realized and unrealized gain 0.08 0.29
------- -------
Total income from investment operations 0.10 0.45
------- -------
Less distributions:
Distributions from net investment income (0.04) (0.16)
Distributions from net realized gain (0.12) (0.74)
------- -------
Total distributions (0.16) (0.90)
------- -------
Net asset value, end of period $ 12.08 $ 12.14
======= =======
Total return 0.88% 4.51%
Ratios/Supplemental data:
Net assets, end of period (in 000s) $ 13 $ 11
Ratio of expenses to average net assets:
Before expense reimbursement 0.38%** 1.25%
After expense reimbursement N/A N/A
Ratio of net investment income to average net assets:
Before expense reimbursement 1.24%** 1.27%
After expense reimbursement N/A N/A
Portfolio turnover rate 37% 49%
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
** Annualized
N/A = Not Applicable
See accompanying notes to financial statements.
18
<PAGE>
Global (ex-U.S.) Equity Fund - Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, July 31, 1993*
December 31, 1998 --------------------- Through
UBS Investment Funds Class (Unaudited) 1998 1997 June 30, 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.05 $ 12.49 $ 11.12 $ 10.26
-------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.01) 0.08 0.11 0.12
Net realized and unrealized gain 0.09 0.30 1.93 1.45
-------- -------- -------- --------
Total income from investment operations 0.08 0.38 2.04 1.57
-------- -------- -------- --------
Less distributions:
Distributions from net investment income (0.01) (0.08) (0.11) (0.15)
Distributions from net realized gain (0.12) (0.74) (0.56) (0.56)
-------- -------- -------- --------
Total distributions (0.13) (0.82) (0.67) (0.71)
-------- -------- -------- --------
Net asset value, end of period $ 12.00 $ 12.05 $ 12.49 $ 11.12
======== ======== ======== ========
Total return (non-annualized) 0.76% 3.90% 19.32% 15.78%
Ratios/Supplemental data:
Net assets, end of period (in 000s) $ 4,975 $ 5,310 $ 7,797 $ 1,262
Ratio of expenses to average net assets:
Before expense reimbursement 1.83%** 1.84% 1.81% 2.04%**
After expense reimbursement N/A N/A N/A 1.84%**
Ratio of net investment income to average net assets:
Before expense reimbursement (0.21)%** 0.68% 1.02% 0.83%**
After expense reimbursement N/A N/A N/A 1.03%**
Portfolio turnover rate 37% 49% 25% 20%
</TABLE>
* Commencement of UBS Investment Funds Class
** Annualized
N/A = Not Applicable
See accompanying notes to financial statements.
19
<PAGE>
Global (ex-U.S.) Equity Fund - Notes To Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an
open-end, management investment company registered under the Investment Company
Act of 1940, as amended, as a series company. The Trust currently offers shares
of eleven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S.
Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S.
Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S.
Bond Fund, High Yield Fund and Global (ex-U.S.) Equity Fund (formerly, Non-U.S.
Equity Fund) (each a "Fund" and collectively, the "Funds"). Each Fund has three
classes of shares outstanding, Brinson Class I, Brinson Class N and UBS
Investment Funds Class (formerly, SwissKey Class). There are an unlimited number
of shares of each class with par value of $0.001 authorized. Each share
represents an identical interest in the investments of the Funds and has the
same rights.
On December 19, 1998, the Fund acquired all the net assets of the UBS
International Equity Fund pursuant to a plan of reorganization approved by
shareholders on December 11, 1998. The acquisition was accomplished by a
tax-free exchange of 1,827,955 shares of the Global (ex-U.S.) Equity Fund for
the shares of UBS International Equity Fund outstanding on December 18, 1998.
The net assets of the UBS International Equity Fund, including $38,003 of
unrealized appreciation, were combined with those of the Fund. The aggregate net
assets of the Global (ex-U.S.) Equity Fund and the UBS International Equity Fund
immediately before the mergers were $463,315,718 and $21,515,034, respectively.
The following is a summary of significant accounting policies consistently
followed by the Global (ex-U.S.) Equity Fund in the preparation of its financial
statements.
A. Investment Valuation: Securities for which market quotations are readily
available are valued at the last available sales price on the exchange or market
on which they are principally traded, or lacking any sales, at the last
available bid price on the exchange or market on which such securities are
principally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under the
direction of the Trust's Board of Trustees. Investments in affiliated investment
companies are valued each day based on the closing net asset value of the 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 of which they are traded.
Forward foreign currency contracts are valued daily using quoted forward
exchange rates. Short-term obligations with a maturity of 60 days or less are
valued at amortized cost, which approximates market value.
B. Foreign Currency Translation: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases
and sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and unrealized
gain or loss on investments in the statement of operations.
C. Investment Transactions: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D. Investment Income: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as the information becomes available.
E. Federal Income Taxes: It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable income
to their shareholders. The Fund has met the requirements of the Code applicable
to regulated investment companies for the six months ended December 31, 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.
20
<PAGE>
Global (ex-U.S.) Equity Fund - Notes To Financial Statements
G. Income and Expense Allocation: All income earned and expenses incurred by the
Fund will be borne on a pro rata basis by each of the classes, except that the
Brinson Class I will not incur any of the distribution expenses of the Brinson
Class N nor the UBS Investment Funds Class.
H. Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Fund with investment management services. As compensation for these
services, the Fund pays the Advisor a monthly fee based on the Fund's average
daily net assets. The Advisor has agreed to waive its fees and reimburse the
Fund to the extent total annualized expenses exceed a specified percentage of
the Fund's average daily net assets. The expense cap is 1.00%, 1.25% and 1.84%
of the average daily net assets of the Brinson Class I, Brinson Class N and UBS
Investment Funds Class, respectively. Investment advisory fees for the six
months ended December 31, 1998, were as follows:
Advisory Advisory
Fee Fees
--------- -----------
Global (ex-U.S.) Equity Fund 0.80% $1,759,921
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 six months ended December 31, 1998 were $2,944.
The Fund invests in shares of the Brinson Supplementary Trust U.S. Cash
Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is
managed by the Advisor. The Supplementary Trust is offered as a cash management
option to mutual funds and other accounts managed by the Advisor. The
Supplementary Trust pays no management fees. Distributions from the
Supplementary Trusts are reflected as interest income on the statement of
operations. Amounts relating to those investments at December 31, 1998 and for
the six months then ended are summarized as follows:
<TABLE>
<CAPTION>
% of
Sales Interest Net
Purchases Proceeds Income Value Assets
----------- ----------- ------- --------- ------
<S> <C> <C> <C> <C> <C>
Global (ex-U.S.) Equity Fund $24,086,054 $20,634,940 $27,845 $3,451,114 0.70%
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1998, excluding
short-term investments, were as follows:
Proceeds
Purchases From Sales
------------ --------------
Global (ex U.S.) Equity Fund $204,961,081 $158,506,370
4. FORWARD FOREIGN CURRENCY CONTRACTS
The Fund engages in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation strategies. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Risks associated with such contracts include movement
in the value of the foreign currency relative to the U.S. dollar and the ability
of the counterparty to perform. The unrealized gain, if any, represents the
credit risk to the Fund on a forward foreign currency contract. Fluctuations in
the value of forward foreign currency contracts are recorded daily as net
unrealized gains or losses. The Fund realizes a gain or loss upon settlement of
the contracts. The statement of operations reflects net realized and net
unrealized gains and losses on these contracts. The counterparty to all forward
foreign currency contracts at and for the six months ended December 31, 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
21
<PAGE>
Global (ex-U.S.) Equity Fund - Notes To Financial Statements
contracts to hedge a portion of its portfolio. Risks of entering into futures
contracts include the possibility that there may be an illiquid market or that a
change in the value of the contract may not correlate with changes in the value
of the underlying securities. Upon entering into a futures contract, the Fund is
required to deposit either cash or securities (initial margin). Subsequent
payments (variation margin) are made or received by the Fund, generally on a
daily basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Fund
recognizes a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6. SECURITY LENDING
The Fund loaned securities to certain brokers with the Fund's custodian acting
as the Fund's lending agent. The Fund earned negotiated lenders' fees, which are
included in interest income in the statement of operations. The Fund receives
securities, which are not reflected in the statement of assets and liabilities,
as collateral against the loaned securities. The Fund monitors the market value
of securities loaned on a daily basis and initially requires collateral against
the loaned securities in an amount at least equal to 105% of the value of
non-U.S. securities loaned. The value of loaned securities and related
collateral at December 31, 1998 was $15,505,536 and $15,400,404, respectively.
7. DISTRIBUTION PLANS
The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for the Brinson Class N
and the UBS Investment Funds Class. Each Plan governs payments made for the
expenses incurred in the promotion and distribution of the Brinson Class N and
the UBS Investment Funds Class. Annual fees under the Brinson Class N Plan shall
not exceed 0.25% of the daily net assets of the Brinson Class N. Annual fees
under the UBS Investment Funds Plan, which include a 0.25% service fee, shall
not exceed 0.84% of the average daily net assets of the UBS Investment Funds
Class.
8. LINE OF CREDIT
The Trust has entered into an agreement with Chase Manhattan Bank to provide a
364 day $100 million committed line of credit to the Funds. Borrowings will be
made for temporary purposes. Interest on amounts borrowed is based on the
Federal Funds rate plus 0.50% per year. The Funds pay a commitment fee of 0.08%
per year of the average daily unutilized amount of the line of credit. During
the six months ended December 31, 1998, the Global (ex-U.S.) Equity Fund had
borrowings of $1,300,000 and $3,600,000 outstanding for 1 day each under the
agreement.
9. CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
December 31, 1998 (Unaudited) June 30, 1998
--------------------------------- ---------------------------------
Shares Value Shares Value
------------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I* 30,605,579 $347,475,664 26,268,807 $312,436,986
Brinson Class N 205 2,348 798 9,817
UBS Investment Funds Class 261,400 2,970,326 387,174 4,592,378
----------- ------------ ----------- ------------
Total Sales 30,867,184 $350,448,338 26,656,779 $317,039,181
=========== ============ =========== ============
Dividend Reinvestment:
Brinson Class I 488,199 $ 5,565,465 2,849,536 $ 30,664,100
Brinson Class N 15 162 10 117
UBS Investment Funds Class 4,502 50,879 49,433 525,637
----------- ------------ ----------- ------------
Total Dividend Reinvestment 492,716 $ 5,616,506 2,898,979 $ 31,189,854
=========== ============ =========== ============
Redemptions:
Brinson Class I 27,036,820 $307,200,527 26,391,131 $318,236,785
Brinson Class N 15 187 - -
UBS Investment Funds Class 291,758 3,274,575 620,542 7,391,090
----------- ------------ ----------- ------------
Total Redemptions 27,328,593 $310,475,289 27,011,673 $325,627,875
=========== ============ =========== ============
</TABLE>
*Includes shares issued in connection with reorganization.
22
<PAGE>
Special Meeting of Shareholders
Voting Results of Special Meeting of Shareholders (Unaudited)
The proposal described below was submitted to a vote of shareholders of UBS
Private Investor Funds, Inc. ("UBS Funds") at a special meeting of shareholders
held on December 11, 1998 (the "Meeting"):
Proposal No. 1 -D Approval of a Plan of Reorganization pursuant to which UBS
Fund's International Equity Fund (the "Fund") will be reorganized into Class I
shares of the Global (ex-U.S.) Equity Fund.
At the Meeting, the shareholders of the Fund approved Proposal No. 1 as follows:
For Against Abstain
------- ------- -------
UBS International Equity Fund 126,983 0 0
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>
[UBS LOGO APPEARS HERE]
P.O. Box 2798, Boston, Massachusetts 02208-9915 - Tel: (800) 794-7753
<PAGE>
[UBS LOGO APPEARS HERE]
U.S. Balanced Fund
U.S. Equity Fund
U.S. Large Capitalization Equity Fund
U.S. Bond Fund
Semi-Annual Report
(Unaudited)
U.S. Large Capitalization Growth Fund
U.S. Small Capitalization Growth Fund
High Yield Fund
Annual Report
December 31, 1998
<PAGE>
Trustees and Officers
[UBS LOGO APPEARS HERE]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA Debra L. Nichols
Chairman of the Board Vice President
E. Thomas McFarlan Carolyn M. Burke, CPA
President Secretary and Treasurer
Thomas J. Digenan, CFA, CPA David E. Floyd
Vice President Assistant Secretary
1
<PAGE>
The Funds' Advisor - Brinson Partners, Inc.
[UBS LOGO APPEARS HERE]
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 265
billion of discretionary institutional assets on an active basis and mutual fund
assets for UBS Private Banking which total over USD 125 billion. In addition,
UBS Brinson acts as the investment advisor to UBS Private Banking. 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 tailored to specific client
objectives and focused upon both risk and return considerations in the context
of full investment cycles. Our investment decisions are based on fundamental
research, internally developed valuation systems and seasoned judgment. Our
independent team approach allows for rapid responses to market changes, while
providing each client with the benefit of our best talent.
2
<PAGE>
Table of Contents
[UBS LOGO APPEARS HERE]
Shareholder Letter 4
U.S. Economic and Market Highlights 5
U.S. Balanced Fund (Unaudited) 6
Schedule of Investments 9
Financial Statements 12
Financial Highlights 15
U.S. Equity Fund (Unaudited) 18
Schedule of Investments 21
Financial Statements 23
Financial Highlights 26
U.S. Large Capitalization Equity Fund (Unaudited) 29
Schedule of Investments 32
Financial Statements 34
Financial Highlights 37
U.S. Bond Fund (Unaudited) 40
Schedule of Investments 42
Financial Statements 45
Financial Highlights 48
U.S. Large Capitalization Growth Fund 51
Schedule of Investments 53
Financial Statements 54
Financial Highlights 57
U.S. Small Capitalization Growth Fund 58
Schedule of Investments 60
Financial Statements 61
Financial Highlights 64
High Yield Fund 65
Schedule of Investments 67
Financial Statements 69
Financial Highlights 72
The UBS Investment Funds-Notes to Financial Statements 73
Report of Independent Auditors 81
Special Meeting of Shareholders 82
3
<PAGE>
Shareholder Letter
[UBS LOGO APPEARS HERE]
February 20, 1999
Dear Shareholder:
We are very pleased to present the December 31, 1998 Report for the U.S.
Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Large Capitalization
Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization
Growth Fund and High Yield Fund. Within this Report, we'll focus on current
domestic economic outlook as well as our current strategies and performance
updates for our seven Domestic Funds.
Since our last report to you, Union Bank of Switzerland and Swiss Bank
Corporation merged to become UBS AG, one of the world's major financial
institutions. In connection with this merger, the former SBC Brinson/Brinson
Partners, Inc.'s activities of Swiss Bank Corporation were combined with the
worldwide UBS asset management operations into the UBS Brinson division of UBS
AG. During this process, the UBS Private Investor Funds merged into the Brinson
Fund family on December 18, 1998. This merger created the following three new
UBS Investment Funds on December 31, 1998; the U.S. Large Capitalization Growth
Fund, the U.S. Small Capitalization Growth Fund and the High Yield Fund.
The U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Large
Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund and High Yield Fund are all actively managed funds
that provide integrated asset management across and within security markets. The
investment process is strategic in nature and is driven by deviations of market
price from fundamental value. This philosophy offers the greatest potential for
achieving enhanced, long-term returns while controlling risk.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our talent. The Reports that follow highlight the investment
characteristics and the performance of the respective Funds.
We very much appreciate your continued trust and the confidence you have placed
in the UBS Investment Funds.
Sincerely,
/s/ Hanspeter A. Walder /s/ Raymond Simon
Hanspeter A. Walder Raymond Simon
Executive Director Executive Director
Private Banking Private Banking
4
<PAGE>
U.S. Economic and Market Highlights
[UBS LOGO APPEARS HERE]
Economic growth in 1998 was largely unaffected by the turmoil in Asia and
Russia. While demand for exports softened and imports continued strong, the
consumer kept spending throughout the year and the measured savings rate turned
negative for the first time ever. Corporate investment spending was also very
strong, contributing about 13/4 percentage points of real GDP growth on average
for the first three quarters of the year.
A primary driver of the strong investment spending was the low cost of equity
capital. By the end of the year, the market had shaken off the credit worries of
autumn and risen to new highs. This was in spite of a quickly deteriorating
earnings picture. Because of the strong investment environment of the last few
years and the downturn in Asia, many industries, particularly commodity-related,
are suffering from relatively severe overcapacity.
Commodity weakness has hit the energy sector particularly hard, with real oil
prices lower than at any time in the last 30 years. This has had a positive
effect on inflation, as the headline Consumer Price Index rose by only 1 1/2%
during the year. Looking at the core rate, absent energy and food price effects,
inflation has been running at about 2 1/4% for the last few years. The provision
of substantial amounts of liquidity by the Fed, while not immediately boosting
inflation, has increased the risks of a jump in the CPI in the future.
U.S. Environment
[CHARTS APPEAR HERE]
Major Markets
One Year Ended December 31, 1998
U.S. Cash Equivalents U.S. Bonds U.S. Equities
12/31/98 4.55 8.72 23.43
Salomon U.S. Treasury Benchmark Returns
One Year Ended December 31, 1998
1 5.89
2 6.6
5 9.61
10 12.88
30 16.51
Maturity (Years)
Top Ten Industry Returns Relative to S&P 500
One Year Ended December 31, 1998
Coal & Uranium 47.03
Telephone, Telegraph 29.7
Liquor 28.17
Business Machines 21.67
Drugs, Medicine 21.51
Forest Products 12.13
Media 12.05
Mortgage Financing 10.66
Retail (Food) 8.91
Retail (Other) 8.13
Bottom Ten Industry Returns Relative to S&P 500
One Year Ended December 31, 1998
Oil Service -62.88
Dom. Petroleum Res. -37.94
Photographic -34.80
Water Transport -32.69
Precious Metals -28.16
Apparel, Textiles -27.83
Tire & Rubber -27.60
Containers -27.37
Oil Refining, Dist. -25.53
Iron & Steel -25.50
5
<PAGE>
U.S. Balanced Fund
[UBS LOGO 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 UBS Investment Fund-U.S. Balanced Fund has produced an annualized return of
12.22% since its performance inception on July 31, 1995. Over the same period,
the return on the U.S. Balanced Mutual Fund Index was 19.43%. The Fund's
performance was achieved with an annualized volatility over this period of
5.45%, considerably below the benchmark's volatility of 10.45%. For calendar
year 1998, the UBS Investment Fund-U.S. Balanced returned 9.57%, substantially
below the benchmark return of 18.85%. This underperformance, and the reason for
the long-term performance characteristics, was due primarily to the equity
underweight and bond overweight. Performance was also adversely affected by
security selection.
Performance of the equity market was particularly difficult to match, given that
it was driven in large part by a collection of the largest capitalization
companies, particularly in the technology area. In the bond market, high yield
and investment-grade corporate debt were hurt along with equities during the
market crisis in the fall. However, the debt markets only partially recovered on
the series of Federal Reserve interest rate cuts, whereas many equity indices
reached new highs before the end of the year.
This continuation of the upward march in equities has produced a very high level
of overpricing and consequent paltry return expectations. Bonds, although only
fairly priced on an absolute basis, remain quite attractive relative to
equities. Thus, the Fund strategy remains substantially overweighted bonds
relative to equities. A portion of the bond allocation is held in Treasury
Inflation Protected Securities, or TIPS. The difference in yields between these
bonds and conventional Treasury bonds, which is a measure of inflation
expectations, had fallen well below 1%. Our expectation is that average
inflation over the next decade is unlikely to be quite so subdued, and the TIPS
are an attractive alternative to conventional bonds.
6
<PAGE>
U.S. Balanced Fund
[UBS LOGO APPEARS HERE]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 7/31/95*
ended ended ended to
12/31/98 12/31/98 12/31/98 12/31/98
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UBS Investment Fund - U.S. Balanced 3.46% 9.57% 11.01% 12.22%
- ------------------------------------------------------------------------------------
U.S. Balanced Mutual Fund Index** 6.67 18.85 19.03 19.43
- ------------------------------------------------------------------------------------
Wilshire 5000 Index 6.90 23.43 25.24 25.27
- ------------------------------------------------------------------------------------
Salomon Smith Barney Big Bond Index 4.57 8.72 7.29 8.36
- ------------------------------------------------------------------------------------
</TABLE>
* Performance inception date of the UBS Investment Fund - U.S. Balanced.
** An un-managed index compiled by the Advisor, constructed as follows: 65%
Wilshire 5000 Index and 35% Salomon Smith Barney Broad Investment Grade Bond
Index.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the UBS Investment
Fund - U.S. Balanced, the U.S. Balanced Mutual Fund Index, the Wilshire 5000
Index and the Salomon Smith Barney Big Bond Index if you had invested $10,000 on
July 31, 1995, and had reinvested all your income dividends and capital gain
distributions through December 31, 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.
UBS Investment Fund - U.S. Balanced vs. U.S. Balanced Mutual Fund Index,
Wilshire 5000 Index and Salomon Smith Barney Big Bond Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
UBS Investment U.S. Balanced Wilshire Salomon Smith
Fund - U.S. Mutual Fund 5000 Barney BIG
Balanced Index Index Bond Index
-------------- ------------- ------- -------------
7/31/95 $10,000 $10,000 $10,000 $10,000
8/31/95 $10,141 $10,104 $10,098 $10,115
9/30/95 $10,325 $10,387 $10,483 $10,210
10/31/95 $10,387 $10,368 $10,377 $10,347
11/30/95 $10,694 $10,710 $10,817 $10,508
12/31/95 $10,841 $10,876 $10,994 $10,653
1/31/96 $11,058 $11,091 $11,288 $10,726
2/29/96 $11,001 $11,152 $11,486 $10,544
3/31/96 $11,030 $11,203 $11,612 $10,469
4/30/96 $11,049 $11,354 $11,898 $10,391
5/31/96 $11,086 $11,554 $12,224 $10,386
6/30/96 $11,154 $11,544 $12,123 $10,520
7/31/96 $10,982 $11,150 $11,469 $10,548
8/31/96 $11,096 $11,376 $11,836 $10,532
9/30/96 $11,412 $11,839 $12,466 $10,716
10/31/96 $11,670 $12,040 $12,640 $10,957
11/30/96 $12,100 $12,628 $13,478 $11,138
12/31/96 $12,018 $12,496 $13,326 $11,040
1/31/97 $12,162 $12,948 $14,039 $11,082
2/28/97 $12,202 $12,949 $14,033 $11,094
3/31/97 $11,988 $12,531 $13,412 $10,982
4/30/97 $12,182 $12,949 $13,997 $11,139
5/31/97 $12,530 $13,588 $14,989 $11,243
6/30/97 $12,826 $14,050 $15,677 $11,377
7/31/97 $13,351 $14,886 $16,883 $11,686
8/31/97 $13,125 $14,477 $16,248 $11,585
9/30/97 $13,413 $15,107 $17,207 $11,755
10/31/97 $13,269 $14,855 $16,634 $11,923
11/30/97 $13,351 $15,196 $17,178 $11,980
12/31/97 $13,540 $15,433 $17,496 $12,102
1/31/98 $13,665 $15,557 $17,591 $12,258
2/28/98 $14,020 $16,289 $18,871 $12,249
3/31/98 $14,294 $16,841 $19,816 $12,297
4/30/98 $14,260 $17,002 $20,051 $12,361
5/31/98 $14,294 $16,765 $19,517 $12,480
6/30/98 $14,338 $17,195 $20,202 $12,582
7/31/98 $14,209 $16,963 $19,759 $12,608
8/31/98 $13,797 $15,337 $16,682 $12,801
9/30/98 $14,280 $16,115 $17,772 $13,103
10/31/98 $14,562 $16,868 $19,094 $13,044
11/30/98 $14,738 $17,591 $20,296 $13,116
12/31/98 $14,835 $18,342 $21,595 $13,157
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
7
<PAGE>
U.S. Balanced Fund
[UBS LOGO APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
U.S. Equities
Energy 1.49%
Capital Investment
Capital Goods 4.53
Technology 6.93
-------
11.46
Basic Industries
Chemicals 1.31
Housing/Paper 4.61
Metals 0.21
-------
6.13
Consumer
Non-Durables 3.70
Retail/Apparel 2.17
Autos/Durables 1.73
Health: Drugs 2.29
Health: Non-Drugs 2.22
-------
12.11
Financial
Banks 4.69
Non-Banks 3.37
-------
8.06
Utilities
Electric 1.62
Telephone 0.39
-------
2.01
Transportation 4.90%
Services/Misc 2.16
-------
Total U.S. Equities 48.32*
-------
U.S. BONDS
Corporate Bonds
Airlines 1.02
Banks 0.90
Consumer 0.73
Financial Services 3.35
Industrial Components 0.60
Services/Miscellaneous 1.10
Utilities 2.55
-------
10.25
International Dollar Bonds 3.57
Mortgage-Backed Securities 7.17
U.S. Government Agencies 12.66
U.S. Government Obligations 15.24
-------
Total U.S. Bonds 48.89*
-------
SHORT-TERM INVESTMENTS 2.21*
-------
TOTAL INVESTMENTS 99.42
CASH AND OTHER ASSETS,
LESS LIABILITIES 0.58
-------
NET ASSETS 100.00%
=======
- -----------------------------------------------------------------------------
* The Fund held a long position in U.S. Treasury futures on December 31, 1998
which increased U.S. bond exposure from 48.89% to 66.13%. The Fund also held a
short position in stock index futures which reduced U.S. equity exposure from
48.32% to 31.00%. These two adjustments result in a net increase in the Fund's
exposure to Short-Term Investments from 2.21% to 2.29%.
Asset Allocation
As of December 31, 1998 (Unaudited)
Current
Benchmark Strategy
- ----------------------------------------------------
U.S. Equity 65% 30%
U.S. Bonds 35 70
- ----------------------------------------------------
100% 100%
Top Ten U.S. Equity Holdings
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- ----------------------------------------------------
1. Xerox Corp. 2.94%
2. FDX Corp. 2.04%
3. Burlington Northern Santa Fe Corp. 2.03%
4. Lockheed Martin Corp. 1.77%
5. Philip Morris Companies, Inc. 1.69%
6. Baxter International, Inc. 1.26%
7. Kimberly Clark Corp. 1.23%
8. Energy Corp. 1.16%
9. CIGNA Corp. 1.14%
10. Aon Corp. 1.13%
- ----------------------------------------------------
8
<PAGE>
U.S. Balanced Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
------------ ----------------
U.S. Equities - 48.32%
Advanced Micro Devices, Inc. (b) 10,300 $ 298,056
Aetna, Inc. 6,300 495,337
Allergan, Inc. 2,600 168,350
Alza Corp. (b) 5,400 282,150
American Standard Companies, Inc. (b) 5,700 204,844
Aon Corp. 9,200 509,450
Automatic Data Processing, Inc. 4,200 336,787
BankBoston Corp. 2,900 112,919
Baxter International, Inc. 8,800 565,950
Beckman Coulter Inc. 2,300 124,775
Bestfoods 3,800 202,350
Biogen, Inc. (b) 1,300 107,900
Birmingham Steel Corp. 3,200 13,400
Burlington Northern Santa Fe Corp. 27,000 911,250
Champion Enterprises, Inc. (b) 1,200 32,850
Champion International Corp. 2,700 109,350
Chase Manhattan Corp. 4,700 319,894
CIGNA Corp. 6,600 510,262
Circuit City Stores-Circuit City Group 7,400 369,537
CMS Energy Corp. 7,000 339,062
Comerica, Inc. 2,200 150,013
CommScope, Inc. (b) 3,766 63,316
Comverse Technology, Inc. (b) 2,420 171,820
Consolidated Stores Corp. (b) 7,200 145,350
Corning, Inc. 10,600 477,000
Covance, Inc. (b) 2,675 77,909
Crown Cork & Seal Co., Inc. 2,600 80,113
Dial Corp. 2,800 80,850
Eastman Chemical Co. 3,000 134,250
Electronic Data Systems Corp. 9,900 497,475
EMC Corp. (b) 3,200 272,000
Entergy Corp. 16,700 519,787
FDX Corp. (b) 10,300 916,700
First American Corp. of Tennessee 1,400 62,125
First Data Corp. 13,058 413,775
First Security Corp. 2,625 61,359
Fleet Financial Group, Inc. 7,000 312,812
Fleetwood Enterprises, Inc. 900 31,275
Food Lion Inc., Class A 12,300 130,688
Fort James Corp. 9,300 372,000
General Instrument Corp. (b) 12,300 417,431
General Semiconductor, Inc. (b) 3,950 32,341
Genzyme Corp. (b) 2,200 109,450
Genzyme-Molecular Oncology (b) 237 770
Geon Co. 1,500 34,500
Goodyear Tire & Rubber Co. 7,100 358,106
Great Lakes Chemical Corp. 1,700 68,000
GreenPoint Financial Corp. 3,100 108,888
Harnischfeger Industries, Inc. 3,800 38,713
HCR Manor Care, Inc. (b) 2,850 83,719
Hibernia Corp., Class A 3,000 52,125
Household International Inc. 5,100 202,088
IMC Global Inc. 8,500 181,688
Johnson Controls Inc. 2,600 153,400
Kimberly Clark Corp. 10,100 550,450
Shares Value
------------ ----------------
Lafarge Corp. 2,400 $ 97,200
Lear Corp. (b) 6,500 250,250
Lockheed Martin Corp. 9,371 794,192
Lyondell Petrochemical Co. 7,800 140,400
Martin Marietta Materials, Inc. 1,536 95,520
Masco Corp. 12,600 362,250
Nabisco Holdings Corp., Class A 5,500 228,250
National Service Industries, Inc. 1,600 60,800
Nextel Communications, Inc., Class A (b) 7,500 177,188
Norfolk Southern Corp. 11,800 373,912
Peco Energy Co. 9,400 391,275
Pentair, Inc. 2,900 115,456
Philip Morris Companies, Inc. 14,200 759,700
Praxair, Inc. 5,000 176,250
Raytheon Co., Class B 9,200 489,900
Regions Financial Corp. 1,400 56,438
Schering Plough Corp. 5,000 276,250
Sears, Roebuck and Co. 7,800 331,500
Southdown, Inc. 3,116 184,428
St. Jude Medical, Inc. (b) 5,100 141,206
Timken Co. 900 16,988
TRW, Inc. 300 16,856
Tyson Foods, Inc., Class A 10,000 212,500
Ultramar Diamond Shamrock Corp. 6,090 147,683
Unocal Corp. 3,800 110,913
US Bancorp 6,959 247,044
USG Corp. 1,200 61,125
Vencor, Inc. (b) 5,200 23,400
Ventas, Inc. 5,200 63,375
Viad Corp. 5,300 160,988
Wells Fargo and Co. 7,000 279,562
Witco Corp. 1,900 30,281
Xerox Corp. 11,200 1,321,600
York International Corp. 3,400 138,763
-------------
Total U.S. Equities (Cost $18,571,684) 21,710,202
-------------
Face
Amount Value
------------ ----------------
Bonds - 48.89%
U.S. Corporate Bonds - 10.25%
Archer Daniels, 6.950%, due 12/15/97 $ 250,000 $ 270,313
Citicorp Series F, 6.375%, due 11/15/08 200,000 207,480
Continental Airlines, Inc., EETC, 6.900%,
due 01/02/18 450,000 457,389
Donaldson Lufkin & Jenrette FRN, 6.700%,
due 06/30/00 415,000 419,243
Enron Corp., 6.750%, due 08/01/09 125,000 128,924
MBNA Global Capital Securities FRN,
6.019%, due 02/01/27 215,000 197,857
Noram Energy Corp., 6.375%,
due 11/01/03 200,000 203,244
PanAMSat Corp., 6.000%, due 01/15/03 335,000 332,368
Residential Asset Securitization Trust
97-A10, Class A1, 7.250%, due 12/25/27 609,890 615,336
97-A11, Class A2, 7.000%, due 01/25/28 221,995 222,808
Sprint Capital Corp., 6.875%, due 11/15/28 200,000 207,676
9
<PAGE>
U.S. Balanced Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Face
Amount Value
------------ ----------------
TCI Communications, Inc., 8.750%,
due 08/01/15 $ 220,000 $ 274,132
Time Warner Inc., 7.570%, due 02/01/24 290,000 327,065
Tyco International Group, 144A, 5.875%,
due 11/01/04 250,000 248,459
U.S.A. Waste Services, 6.500%,
due 12/15/02 360,000 367,336
Williams Holdings of Delaware, 6.500%,
due 12/01/08 125,000 123,620
-------------
4,603,250
-------------
International Dollar Bonds - 3.57%
Abbey National PLC, 6.700%, Resettable
Perpetual Step-up Notes 250,000 244,866
Credit Suisse-London, 144A, 7.900%,
Resettable Perpetual Step-up Notes 270,000 270,000
Empresa Nacional Electric, 8.125%,
due 02/01/2097 200,000 164,000
LKB-Baden Wuerttemberg Finance NV,
8.125%, due 01/27/00 280,000 287,451
Ras Laffan Liquified Natural Gas Co., Ltd.,
144A, 8.294%, due 03/15/14 235,000 193,701
Southern Investments UK, 6.800%,
due 12/01/06 430,000 445,894
-------------
1,605,912
-------------
Mortgage-Backed Securities - 7.17%
First Security Auto Grantor Trust Series 98-A,
Class A, 5.970%, due 04/15/04 494,513 498,306
Morgan Stanley Capital, Inc., 6.830%,
due 10/15/06 1,058,814 1,101,166
Prudential Home Mortgage Securities
93-43, Class A9, 6.750%,
due 10/25/23 728,674 733,935
UCFC Home Equity Loan 97-C, Class A8,
FRN, 5.478%, due 09/15/27 894,012 885,420
-------------
3,218,827
-------------
U.S. Government Agencies - 12.66%
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23 454,644 472,021
9.000%, due 03/01/24 228,551 243,014
Federal National Mortgage Association
6.789%, due 11/01/07 499,291 532,694
7.500%, due 02/25/22 728,836 761,691
0.000%, due 09/25/22 330,540 305,896
FNCI, 8.000%, due 02/01/13 415,446 428,169
Government National Mortgage Association
8.000%, due 08/15/22 625,324 651,092
7.000%, due 12/15/23 730,038 747,464
7.500%, due 06/15/24 568,246 585,733
Jordan Aid, 8.750%, due 09/01/19 775,765 961,731
-------------
5,689,505
-------------
Face
Amount Value
------------ ----------------
U.S. Government Obligations - 15.24%
U.S. Treasury Notes and Bonds
7.500%, due 02/15/05 $ 140,000 $ 160,258
8.000%, due 11/15/21 1,605,000 2,150,199
U.S. Treasury Inflation Indexed Note
3.625%, due 01/15/08 4,210,000 4,189,272
3.625%, due 04/15/28 350,000 345,768
-------------
6,845,497
-------------
Total U.S. Bonds (Cost $21,742,928) 21,962,991
-------------
Short-Term Investments - 2.21%
U.S. Government Obligations - 1.02%
U.S. Treasury Bill 4.320%, due 02/25/99 460,000 457,143
-------------
Investment Companies - 1.19%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund 534,192 534,192
-------------
Total Short-Term Investments
(Cost $991,086) 991,335
-------------
Total Investments
(Cost $41,305,698) - 99.42% (a) 44,664,528
-------------
Cash and other assets, less
liabilities - 0.58% 261,475
-------------
Net Assets - 100% $ 44,926,003
=============
See accompanying notes to schedule of investments.
10
<PAGE>
U.S. Balanced Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $41,305,698; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $ 4,581,591
Gross unrealized depreciation (1,222,761)
-----------
Net unrealized appreciation $ 3,358,830
===========
(b) Non-income producing security
FRN: Floating rate note-The rate disclosed is that in effect at December 31,
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 December 31,
1998, the value of these securities amounted to $831,037, or 1.85% of net
assets.
Resettable Perpetual Step-up Notes: 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 December
31, 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, 51 contracts March 1999 $5,768,578 $5,780,531 $ 11,953
10 Year U.S. Treasury Note, 9 contracts March 1999 1,067,688 1,072,406 4,718
30 Year U.S. Treasury Bond, 7 contracts March 1999 896,737 894,469 (2,268)
Index Futures Sale Contracts
Standard & Poor's 500, 25 contracts March 1999 7,302,950 7,784,375 (481,425)
----------
Total $ (467,022)
==========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at December 31, 1998 was $457,143.
See accompanying notes to financial statements.
11
<PAGE>
U.S. Balanced Fund - Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $40,771,506) $ 44,130,336
Affiliated issuers (Cost $534,192) 534,192
Cash 93,114
Receivables:
Investment securities sold 34,069
Dividends 42,873
Interest 295,082
Other assets 7,676
------------
TOTAL ASSETS 45,137,342
------------
LIABILITIES:
Payables:
Investment securities purchased 116,073
Fund shares redeemed 1,833
Investment advisory fees 19,654
Variation margin 23,203
Accrued expenses 50,576
------------
TOTAL LIABILITIES 211,339
------------
NET ASSETS $ 44,926,003
============
NET ASSETS CONSIST OF:
Paid in capital 14,425,066
Distributions in excess of net investment income (16,787)
Accumulated net realized gain 27,625,916
Net unrealized appreciation 2,891,808
------------
NET ASSETS $ 44,926,003
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of
$42,780,766 and 4,554,478 shares issued
and outstanding) $ 9.39
============
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of
$1,159 and 123 shares issued and outstanding) $ 9.42
============
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of
$2,144,078 and 229,620 shares issued and outstanding) $ 9.34
============
See accompanying notes to financial statements.
12
<PAGE>
U.S. Balanced Fund - Financial Statements
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
INVESTMENT INCOME:
Interest $ 956,815
Dividends 184,098
-----------
TOTAL INCOME 1,140,913
-----------
EXPENSES:
Advisory 198,756
Professional 28,974
Registration 14,530
Distribution 5,002
Other 25,127
-----------
TOTAL EXPENSES 272,389
Expenses waived by Advisor (40,475)
-----------
NET EXPENSES 231,914
-----------
NET INVESTMENT INCOME 908,999
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on:
Investments 3,445,075
Future contracts 498,232
-----------
Net realized gain 3,943,307
-----------
Change in net unrealized appreciation or depreciation on:
Investments (4,180,368)
Future contracts (413,603)
-----------
Change in net unrealized appreciation or depreciation (4,593,971)
-----------
Net realized and unrealized loss (650,664)
-----------
Net increase in net assets resulting from operations $ 258,335
===========
See accompanying notes to financial statements.
13
<PAGE>
U.S. Balanced Fund - Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 908,999 $ 9,285,597
Net realized gain 3,943,307 43,393,817
Change in net unrealized appreciation or depreciation (4,593,971) (19,387,830)
------------- -------------
Net increase in net assets resulting from operations 258,335 33,291,584
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from and in excess of net investment income:
Brinson Class I (2,154,721) (11,202,072)
Brinson Class N (56) (62)
UBS Investment Funds Class (108,248) (96,209)
Distributions from net realized gain:
Brinson Class I (9,074,452) (20,202,719)
Brinson Class N (243) (75)
UBS Investment Funds Class (483,100) (121,168)
------------- -------------
Total distributions to shareholders (11,820,820) (31,622,305)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 8,764,497 58,797,856
Shares issued on reinvestment of distributions 11,632,239 31,535,417
Shares redeemed (46,345,419) (294,075,195)
------------- -------------
Net decrease in net assets resulting from capital
share transactions (25,948,683) (203,741,922)
------------- -------------
TOTAL DECREASE IN NET ASSETS (37,511,168) (202,072,643)
------------- -------------
NET ASSETS:
Beginning of period 82,437,171 284,509,814
------------- -------------
End of period (including accumulated undistributed
(distributions in excess of) net investment income of
$(16,787) and $1,337,239, respectively) $ 44,926,003 $ 82,437,171
============= =============
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
U.S. Balanced Fund - Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, December 30, 1994*
December 31, 1998 --------------------------------- Through
Brinson Class I (Unaudited) 1998 1997 1996 June 30, 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.24 $ 12.53 $ 11.71 $ 11.23 $ 10.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.19*** 0.49*** 0.47 0.44 0.23
Net realized and unrealized gain 0.24 0.93 1.29 1.04 1.16
-------- -------- -------- -------- --------
Total income from investment operations 0.43 1.42 1.76 1.48 1.39
-------- -------- -------- -------- --------
Less distributions:
Distributions from net investment income (0.63) (0.77) (0.40) (0.43) (0.16)
Distributions from net realized gain (2.65) (0.94) (0.54) (0.57) --
-------- -------- -------- -------- --------
Total distributions (3.28) (1.71) (0.94) (1.00) (0.16)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.39 $ 12.24 $ 12.53 $ 11.71 $ 11.23
Total return (non-annualized) 3.74% 12.19% 15.50% 13.52% 13.91%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 42,781 $ 80,556 $282,860 $227,829 $157,724
Ratio of expenses to average net assets:
Before expense reimbursement 0.94%** 0.81% 0.88% 1.01% 1.06%**
After expense reimbursement 0.80%** 0.80% 0.80% 0.80% 0.80%**
Ratio of net investment income to average net assets:
Before expense reimbursement 3.08%** 3.88% 3.78% 3.76% 4.36%**
After expense reimbursement 3.22%** 3.89% 3.86% 3.97% 4.63%**
Portfolio turnover rate 65% 194% 329% 240% 196%
</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.
15
<PAGE>
U.S. Balanced Fund - Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Year Ended
Brinson Class N (Unaudited) June 30, 1998*
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 12.27 $ 12.53
------- -------
Income from investment operations:
Net investment income 0.19*** 0.47***
Net realized and unrealized gain 0.23 0.94
------- -------
Total income from investment operations 0.42 1.41
------- -------
Less distributions:
Distributions from net investment income (0.62) (0.73)
Distributions from net realized gain (2.65) (0.94)
------- -------
Total distributions (3.27) (1.67)
------- -------
Net asset value, end of period $ 9.42 $ 12.27
======= =======
Total return (non-annualized) 3.61% 12.15%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 1 $ 1
Ratio of expenses to average net assets:
Before expense reimbursement 1.19%** 1.06%
After expense reimbursement 1.05%** 1.05%
Ratio of net investment income to average net assets:
Before expense reimbursement 2.83%** 3.63%
After expense reimbursement 2.97%** 3.64%
Portfolio turnover rate 65% 194%
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
** Annualized
*** The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
16
<PAGE>
U.S. Balanced Fund - Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended July 31, 1995*
December 31, 1998 Year Ended Year Ended Through
UBS Investment Funds Class (Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.19 $ 12.46 $ 11.67 $ 11.38
------- ------- ------- -------
Income from investment operations:
Net investment income 0.16*** 0.42*** 0.38 0.42
Net realized and unrealized gain 0.23 0.95 1.31 0.86
------- ------- ------- -------
Total income from investment operations 0.39 1.37 1.69 1.28
------- ------- ------- -------
Less distributions:
Distributions from net investment income (0.59) (0.70) (0.36) (0.42)
Distributions from net realized gain (2.65) (0.94) (0.54) (0.57)
------- ------- ------- -------
Total distributions (3.24) (1.64) (0.90) (0.99)
------- ------- ------- -------
Net asset value, end of period $ 9.34 $ 12.19 $ 12.46 $ 11.67
======= ======= ======= =======
Total return (non-annualized) 3.46% 11.79% 14.99% 11.54%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 2,144 $ 1,880 $ 1,649 $ 779
Ratio of expenses to average net assets:
Before expense reimbursement 1.44%** 1.31% 1.38% 1.51%**
After expense reimbursement 1.30%** 1.30% 1.30% 1.30%**
Ratio of net investment income to average net assets:
Before expense reimbursement 2.58%** 3.38% 3.28% 3.26%**
After expense reimbursement 2.72%** 3.39% 3.36% 3.47%**
Portfolio turnover rate 65% 194% 329% 240%
</TABLE>
* Commencement of UBS Investment Funds 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.
17
<PAGE>
U.S. Equity Fund
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 July 31, 1995, the UBS Investment Fund-U.S.
Equity has provided an annualized return of 23.75% compared to the 25.27% return
of its benchmark, the Wilshire 5000 Equity Index. For calendar year 1998, the
total return of the UBS Investment Fund-U.S. Equity was 17.91%, trailing the
23.43% return for its benchmark. The following paragraphs review the sources of
Fund underperformance for the year.
Market exposure (average beta of 0.95) detracted modestly from the Fund relative
performance in the very strong equity environment which characterized 1998.
Factor weightings had the largest negative impact on active returns for the full
year. Among the most significant negative factor positions were the
underexposure in the relative strength and size measures, as a relatively narrow
segment of the largest capitalization stocks continued to dominate market
performance. Most of these large 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
pockets of global stress such as South East Asia, Russia and Brazil. The Fund
has minimal exposure to these largest stocks. Our valuation work suggests peak
levels of overvaluation.
Industry weightings also detracted from active returns during 1998. The
technology, telecommunications and drug industries relatively outperformed for
the year. Underweights to these industries detracted from performance. The
underweight in energy continued to contribute to performance as oil prices
plunged to nearly ten dollars per barrel by the end of the year. Our overweights
in economically sensitive basic industry, tire and railroad stocks also
detracted from performance. Slowing industrial production, lower capacity
utilization rates and the build-up of capital stock over the last seven years
have led to overcapacity in many of the basic industries. Commodity prices,
which deteriorated throughout the year, fell more sharply during the fourth
quarter, below our estimate of normal or equilibrium levels for a number of
metals, chemicals and paper grades.
Stock selection had a modest positive effect on the portfolio for the year.
Among large capitalization issues, the best performers were Federal Express, EMC
Corp. and Cigna while the worst were Lockheed Martin and Sears. In the
intermediate capitalization segment of the portfolio, the most positive
contributors were Peco Energy, Allergan and Circuit City while the weakest were
Harnischfeger, Lyondell, Nextel and Consolidated Stores.
18
<PAGE>
U.S. Equity Fund
[UBS LOGO APPEARS HERE]
Total Return
6 months 1 year 3 years 7/31/95*
ended ended ended to
12/31/98 12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------------
UBS Investment Fund - U.S. Equity 4.04% 17.91% 22.28% 23.75%
- ---------------------------------------------------------------------------
Wilshire 5000 Equity Index 6.90 23.43 25.24 25.27
- ---------------------------------------------------------------------------
* Performance inception date of the UBS Investment Fund - U.S. Equity
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the UBS Investment
Fund - U.S. Equity and the Wilshire 5000 Equity Index if you had invested
$10,000 on July 31, 1995, and had reinvested all your income dividends and
capital gain distributions through December 31, 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.
UBS Investment Fund - U.S. Equity
vs. Wilshire 5000 Equity Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
UBS
Investment Fund Wilshire
U.S. Equity 5000 Index
--------------- ----------
7/31/95 10,000 10,000
8/31/95 10,184 10,098
9/30/95 10,570 10,483
10/31/95 10,528 10,377
11/30/95 11,122 10,817
12/31/95 11,335 10,994
1/31/96 11,790 11,288
2/29/96 11,971 11,486
3/31/99 12,194 11,612
4/30/96 12,418 11,898
5/31/96 12,615 12,224
6/30/96 12,570 12,123
7/31/96 11,958 11,469
8/31/96 12,415 11,836
9/30/96 12,966 12,466
10/31/96 13,242 12,640
11/30/96 14,156 13,478
12/31/96 14,157 13,326
1/31/97 14,663 14,039
2/28/97 14,757 14,033
3/31/97 14,260 13,412
4/30/97 14,691 13,997
5/31/97 15,759 14,989
6/30/97 16,499 15,677
7/31/97 17,756 16,883
8/31/97 17,053 16,248
9/30/97 17,812 17,207
10/31/97 16,865 16,634
11/30/97 17,193 17,178
12/31/97 17,587 17,196
1/31/98 17,697 17,591
2/28/98 19,232 18,871
3/31/98 20,326 19,816
4/30/98 20,115 20,051
5/31/98 19,814 19,517
6/30/98 19,931 20,202
7/31/98 19,418 19,759
8/31/98 16,644 16,682
9/30/98 17,840 17,772
10/31/98 19,187 19,094
11/30/98 19,991 20,296
12/31/98 20,737 21,595
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
19
<PAGE>
U.S. Equity Fund
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
U.S. EQUITIES
Energy 1.12%
Capital Investment
Capital Goods 9.75
Technology 14.55
-------
24.30
Basic Industries
Chemicals 4.79
Housing/Paper 8.98
Metals 0.41
-------
14.18
Consumer
Non-Durables 7.70
Retail/Apparel 4.47
Autos/Durables 2.75
Health: Drugs 4.36
Health: Non-Drugs 5.01
-------
24.29
Financial
Banks 7.78%
Non-Banks 7.04
-------
14.82
Utilities
Electric 5.68
Telephone 0.82
-------
6.50
Transportation 10.12
Services/Misc 4.50
-------
Total U.S. Equities 99.83
-------
SHORT-TERM INVESTMENTS 2.47
-------
TOTAL INVESTMENTS 102.30
-------
LIABILITIES, LESS CASH AND
OTHER ASSETS (2.30)
-------
NET ASSETS 100.00%
=======
Top Ten U.S. Equity Holdings
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- ----------------------------------------------------
1. Xerox Corp. 6.07%
2. FDX Corp. 4.25
3. Burlington Northern Santa Fe Corp. 4.21
4. Lockheed Martin Corp. 3.74
5. Philip Morris Companies, Inc. 3.46
6. Baxter International, Inc. 2.60
7. Kimberly Clark Corp. 2.55
8. Aetna Life & Casualty Co. 2.38
9. Energy Corp. 2.34
10. CIGNA Corp. 2.34
- ----------------------------------------------------
20
<PAGE>
U.S. Equity Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
------------- ----------------
U.S. Equities - 99.83%
Advanced Micro Devices, Inc. (b) 362,700 $ 10,495,631
Aetna, Inc. 231,500 18,201,687
Allergan, Inc. 90,400 5,853,400
Alza Corp. (b) 190,650 9,961,462
American Home Products Corp. 6,100 343,506
American Standard Companies, Inc. (b) 190,000 6,828,125
Aon Corp. 321,600 17,808,600
Automatic Data Processing, Inc. 147,200 11,803,600
BankBoston Corp. 103,800 4,041,713
Baxter International, Inc. 309,000 19,872,562
Beckman Coulter Inc. 82,500 4,475,625
Bestfoods 82,800 4,409,100
Biogen, Inc. (b) 43,050 3,573,150
Birmingham Steel Corp. 44,650 186,972
Burlington Northern Santa Fe Corp. 954,300 32,207,625
Champion Enterprises, Inc. (b) 65,000 1,779,375
Champion International Corp. 95,100 3,851,550
Chase Manhattan Corp. 165,000 11,230,312
CIGNA Corp. 231,650 17,909,441
Circuit City Stores-Circuit City Group 258,200 12,893,862
CMS Energy Corp. 246,150 11,922,891
Comerica, Inc. 78,650 5,362,947
CommScope, Inc. (b) 134,499 2,261,264
Comverse Technology, Inc. (b) 87,165 6,188,715
Consolidated Stores Corp. (b) 251,500 5,077,156
Corning, Inc. 373,800 16,821,000
Covance, Inc. (b) 95,850 2,791,631
Crown Cork & Seal Co., Inc. 93,700 2,887,131
Cummins Engine Co., Inc. 26,600 944,300
Dial Corp. 98,500 2,844,188
Eastman Chemical Co. 105,150 4,705,463
Electronic Data Systems Corp. 340,000 17,085,000
EMC Corp. (b) 112,550 9,566,750
Entergy Corp. 576,700 17,949,787
FDX Corp. (b) 365,500 32,529,500
First American Corp. of Tennessee 49,900 2,214,313
First Data Corp. 461,230 14,615,226
First Security Corp. 94,200 2,201,925
Fleet Financial Group, Inc. 239,000 10,680,312
Fleetwood Enterprises, Inc. 50,400 1,751,400
Food Lion Inc., Class A 434,200 4,613,375
Fort James Corp. 327,800 13,112,000
General Instrument Corp. (b) 434,750 14,754,328
General Semiconductor, Inc. (b) 66,575 545,083
Genzyme Corp. (b) 76,850 3,823,288
Genzyme-Molecular Oncology (b) 7,409 24,079
Geon Co. 52,550 1,208,650
Goodyear Tire & Rubber Co. 242,800 12,246,225
Great Lakes Chemical Corp. 61,100 2,444,000
GreenPoint Financial Corp. 109,200 3,835,650
Harnischfeger Industries, Inc. 132,650 1,351,372
HCR Manor Care, Inc. (b) 99,050 2,909,594
Hibernia Corp., Class A 105,850 1,839,144
Household International Inc. 190,000 7,528,750
IMC Global Inc. 296,500 6,337,688
Johnson Controls Inc. 90,000 5,310,000
Kimberly Clark Corp. 358,150 19,519,175
Lafarge Corp. 90,800 3,677,400
Lear Corp. (b) 228,550 8,799,175
Lockheed Martin Corp. 337,676 28,618,041
Lyondell Petrochemical Co. 274,250 4,936,500
Shares Value
------------- ----------------
Martin Marietta Materials, Inc. 55,907 $ 3,476,717
Masco Corp. 444,700 12,785,125
Nabisco Holdings Corp., Class A 194,300 8,063,450
National Service Industries, Inc. 61,200 2,325,600
Nextel Communications, Inc., Class A (b) 266,450 6,294,881
Norfolk Southern Corp. 403,400 12,782,737
Peco Energy Co. 328,200 13,661,325
Pentair, Inc. 100,800 4,013,100
Philip Morris Companies, Inc. 495,750 26,522,625
Praxair, Inc. 176,600 6,225,150
Raytheon Co., Class B 321,950 17,143,837
Regions Financial Corp. 49,000 1,975,313
Schering Plough Corp. 178,200 9,845,550
Sears, Roebuck and Co. 274,150 11,651,375
Southdown, Inc. 110,340 6,530,749
St. Jude Medical, Inc. (b) 179,300 4,964,369
Timken Co. 33,550 633,256
TRW, Inc. 48,200 2,708,238
Tyson Foods, Inc., Class A 354,750 7,538,438
Ultramar Diamond Shamrock Corp. 196,418 4,763,137
Unocal Corp. 130,000 3,794,375
US Bancorp 245,641 8,720,255
USG Corp. 43,900 2,236,156
Vencor, Inc. (b) 193,600 871,200
Ventas, Inc. 193,000 2,352,188
Viad Corp. 187,350 5,690,756
Wells Fargo and Co. 241,000 9,624,937
Witco Corp. 21,150 337,078
Xerox Corp. 393,750 46,462,500
York International Corp. 117,700 4,803,631
-------------
Total U.S. Equities
(Cost $637,542,592) 764,359,762
-------------
Face
Amount
-------------
Short-Term Investments - 2.47%
Commercial Paper - 0.33%
Marriot International
5.750%, due 01/22/99 $ 1,500,000 1,494,968
Raytheon Co.
5.600%, due 01/22/99 1,000,000 997,365
-------------
2,492,333
-------------
U.S. Government Obligations - 0.19%
U.S. Treasury Bill 4.320%, due 02/25/99 1,500,000 1,490,684
-------------
Shares
-------------
Shares
Investment Companies - 1.95%
Brinson Supplementary Trust
U.S. Cash Management Prime Fund 14,913,259 14,913,259
-------------
Total Short-Term Investments
(Cost $18,894,832) 18,896,276
-------------
Total Investments
(Cost $656,437,424) - 102.30% 783,256,038
-------------
Liabilities, less cash and other assets
- (2.30%) (17,611,553)
-------------
Net Assets - 100% $ 765,644,485
=============
See accompanying notes to schedule of investments.
21
<PAGE>
U.S. Equity Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $656,437,424; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $ 158,609,700
Gross unrealized depreciation (31,791,086)
-------------
Net unrealized appreciation $ 126,818,614
=============
(b) Non-income producing security
See accompanying notes to financial statements.
22
<PAGE>
U.S. Equity Fund - Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $641,524,165) $ 768,342,779
Affiliated issuers (Cost $14,913,259) 14,913,259
Cash 222,399
Receivables:
Investment securities sold 2,179,776
Dividends 1,450,031
Interest 23,580
Fund shares sold 279,437
Other assets 15,000
-------------
TOTAL ASSETS 787,426,261
-------------
LIABILITIES:
Payables:
Investment securities purchased 4,474,672
Fund shares redeemed 16,863,628
Investment advisory fees 438,298
Accrued expenses 5,178
-------------
TOTAL LIABILITIES 21,781,776
-------------
NET ASSETS $ 765,644,485
=============
NET ASSETS CONSIST OF:
Paid in capital $ 626,791,335
Distributions in excess of net investment income (61,799)
Accumulated net realized gain 12,096,335
Net unrealized appreciation 126,818,614
-------------
NET ASSETS $ 765,644,485
=============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price
per share (Based on net assets of $691,214,075
and 35,393,125 shares issued and outstanding) $ 19.53
=============
Brinson Class N:
Net asset value, offering price and redemption price
per share (Based on net assets of $4,337,407
and 222,981 shares issued and outstanding) $ 19.45
=============
UBS Investment Funds Class:
Net asset value, offering price and redemption price
per share (Based on net assets of $70,093,003
and 3,602,379 shares issued and outstanding) $ 19.46
=============
See accompanying notes to financial statements.
23
<PAGE>
U.S. Equity Fund - Financial Statements
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
INVESTMENT INCOME:
Dividends $ 5,256,751
Interest 369,095
-------------
Total income 5,625,846
-------------
EXPENSES:
Advisory 2,368,764
Administration 154,148
Distribution 179,065
Other 180,729
-------------
TOTAL EXPENSES 2,882,706
-------------
NET INVESTMENT INCOME 2,743,140
-------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments 21,292,728
Futures contracts 1,501,017
-------------
Net realized gain 22,793,745
-------------
Change in net unrealized appreciation or depreciation on:
Investments 10,133,678
Futures contracts (96,948)
-------------
Change in net unrealized appreciation or depreciation 10,036,730
-------------
Net realized and unrealized gain 32,830,475
-------------
Net increase in net assets resulting from operations $ 35,573,615
=============
See accompanying notes to financial statements.
24
<PAGE>
U.S. Equity Fund - Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,743,140 $ 5,791,742
Net realized gain 22,793,745 44,131,079
Change in net unrealized appreciation or depreciation 10,036,730 58,277,883
------------- -------------
Net increase in net assets resulting from operations 35,573,615 108,200,704
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from and in excess of net investment income:
Brinson Class I (3,835,995) (4,978,081)
Brinson Class N (21,154) (832)
UBS Investment Funds Class (190,577) (249,586)
Distributions from net realized gain:
Brinson Class I (34,670,366) (28,383,478)
Brinson Class N (216,952) (64)
UBS Investment Funds Class (3,774,710) (2,678,143)
------------- -------------
Total distributions to shareholders (42,709,754) (36,290,184)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 153,042,464 346,081,960
Shares issued in connection with reorganization 23,269,419 --
Shares issued on reinvestment of distributions 39,648,720 33,981,329
Shares redeemed (104,278,829) (163,864,419)
------------- -------------
Net increase in net assets resulting from capital
share transactions 111,681,774 216,198,870
------------- -------------
TOTAL INCREASE IN NET ASSETS 104,545,635 288,109,390
------------- -------------
NET ASSETs:
Beginning of period 661,098,850 372,989,460
------------- -------------
End of period (including accumulated undistributed
(distributions in excess of) net investment income
(loss) of $(61,799) and $1,242,787, respectively) $ 765,644,485 $ 661,098,850
============= =============
</TABLE>
See accompany notes to financial statements
25
<PAGE>
U.S. Equity Fund - Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, February 22, 1994*
December 31, 1998 ---------------------------------------- Through
Brinson Class I (Unaudited) 1998 1997 1996 1995 June 30, 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.91 $ 17.64 $ 14.59 $ 11.53 $ 9.65 $ 10.00
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.08*** 0.19 0.15 0.17 0.16 0.05
Net realized and unrealized gain (loss) 0.73 3.39 4.27 3.31 1.89 (0.36)
-------- -------- -------- -------- -------- --------
Total income (loss) from investment
operations 0.81 3.58 4.42 3.48 2.05 (0.31)
-------- -------- -------- -------- -------- --------
Less distributions:
Distributions from net investment income (0.12) (0.18) (0.14) (0.17) (0.14) (0.04)
Distributions from net realized gain (1.07) (1.13) (1.23) (0.25) (0.03) --
-------- -------- -------- -------- -------- --------
Total distributions (1.19) (1.31) (1.37) (0.42) (0.17) (0.04)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 19.53 $ 19.91 $ 17.64 $ 14.59 $ 11.53 $ 9.65
======== ======== ======== ======== ======== ========
Total return (non-annualized) 4.32% 21.48% 31.87% 30.57% 21.45% (3.10)%
Ratios/Supplemental data:
Net assets, end of period (in 000s) $691,214 $605,768 $337,949 $126,342 $ 42,573 $ 8,200
Ratio of expenses to average net assets:
Before expense reimbursement 0.80%** 0.80% 0.89% 1.14% 1.70% 5.40%**
After expense reimbursement N/A N/A 0.80% 0.80% 0.80% 0.80%** 0.80%**
Ratio of net investment income to average net assets:
Before expense reimbursement 0.86%** 1.12% 1.06% 1.13% 1.09% (2.82)%**
After expense reimbursement N/A N/A 1.15% 1.47% 1.99% 1.78%**
Portfolio turnover rate 17% 42% 43% 36% 33% 9%
</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.
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>
Six Months Ended
December 31, 1998 Year Ended
Brinson Class N (Unaudited) June 30, 1998*
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 19.88 $ 17.64
------- -------
Income from investment operations:
Net investment income 0.07*** 0.15
Net realized and unrealized gain 0.67 3.37
------- -------
Total income from investment operations 0.74 3.52
------- -------
Less distributions:
Distributions from net investment income (0.10) (0.15)
Distributions from net realized gain (1.07) (1.13)
------- -------
Total distributions (1.17) (1.28)
------- -------
Net asset value, end of period $ 19.45 $ 19.88
======= =======
Total return (non-annualized) 4.00% 21.10%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 4,337 $ 268
Ratio of expenses to average net assets 1.05%** 1.05%
Ratio of net investment income to average
net assets 0.61%** 0.87%
Portfolio turnover rate 17% 42%
</TABLE>
* Commencement of Brinson Class N was June 30, 1997
** Annualized
*** The net investment income per share data was determined by using
average shares outstanding throughout the period.
See accompanying notes to financial statements.
27
<PAGE>
U.S. Equity Fund - Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended July 31, 1995*
December 31, 1998 Year Ended Year Ended Through
UBS Investment Funds Class (Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.83 $ 17.59 $ 14.58 $ 11.94
------- ------- ------- -------
Income from investment operations:
Net investment income 0.04*** 0.09 0.11 0.10
Net realized and unrealized gain 0.71 3.38 4.22 2.92
------- ------- ------- -------
Total income from investment operations 0.75 3.47 4.33 3.02
------- ------- ------- -------
Less distributions:
Distributions from net investment income (0.05) (0.10) (0.09) (0.13)
Distributions from net realized gain (1.07) (1.13) (1.23) (0.25)
------- ------- ------- -------
Total distributions (1.12) (1.23) (1.32) (0.38)
------- ------- ------- -------
Net asset value, end of period $ 19.46 $ 19.83 $ 17.59 $ 14.58
======= ======= ======= =======
Total return (non-annualized) 4.04% 20.80% 31.28% 25.70%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $70,093 $55,063 $35,039 $ 5,387
Ratio of expenses to average net assets:
Before expense reimbursement 1.32%** 1.32% 1.41% 1.66%**
After expense reimbursement N/A N/A 1.32% 1.32%**
Ratio of net investment income to average net assets:
Before expense reimbursement 0.34%** 0.60% 0.54% 0.61%**
After expense reimbursement N/A N/A 0.63% 0.95%**
Portfolio turnover rate 17% 42% 43% 36%
</TABLE>
* Commencement of UBS Investment Funds Class
** Annualized
*** The net investment income per share data was determined by using
average shares outstanding throughout the period.
N/A = Not Applicable
See accompany notes to financial statements
28
<PAGE>
U.S. Large Capitalization Equity Fund
[UBS LOGO APPEARS HERE]
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 UBS Investment Fund -
U.S. Large Capitalization Equity has provided an annualized return of 5.29%,
compared to the 11.71% return of its benchmark, the S&P 500 Equity Index. The
discussion below focuses on Brinson's management of Large Capitalization
Equities during 1998.
The UBS Investment Fund - U.S. Large Capitalization Equity has underperformed
since its performance inception on April 30, 1998. Market exposure detracted
modestly from active returns, consistent with a slightly below market beta and
very strong equity market returns. Results suffered from a meaningful
underweight in the largest capitalization, highest momentum issues at a time
when investors turned to large, stable growth stocks for safety. Industry
exposures also detracted from active returns with negative contributions from
our overweights in tires, tobacco and rails and relative underweights in drugs
and telephone utilities. These negative returns were only partially offset by
positive contributions from our overweights to electronics and electric
utilities and underweights to producer goods and business machines. Stock
selection had a positive effect on the Fund in 1998. Among the strongest
contributors were Federal Express, EMC Corp., Cigna and Schering Plough, while
holdings in Lockheed Martin and Sears hurt stock-specific performance.
Within the large capitalization segment of the market, a relatively small and
increasingly narrow group of stocks provided the majority of returns during the
year. Our research suggested that many of the widely held, "mega-cap" stocks
like General Electric, Microsoft, Bristol Myers, Bell Atlantic, Procter &
Gamble, Pfizer and AT&T were overvalued even before the turmoil in emerging
markets surfaced. Here at the beginning of 1999, we remain convinced that there
are greater relative values away from such issues, and the Fund is positioned
accordingly. Specifically, the Fund's most important factor exposures, as we
enter 1999, include underweightings in size, momentum and foreign earnings and
overweightings in the traditional value measures of earnings-price, book-price
and yield. From an industry standpoint, the portfolio is underweighted in
energy, drugs, telephone utilities, miscellaneous finance, chemicals and
retail/apparel. Meaningful overweights include aerospace/defense, housing and
paper, construction, transportation and service related issues.
29
<PAGE>
U.S. Large Capitalization Equity Fund
Total Return
6 Months
Ended 4/30/98*
12/31/98 to 12/31/98
- -----------------------------------------------------------------------------
UBS Investment Fund - U.S. Large Capitalization Equity 5.63% 5.29%
- -----------------------------------------------------------------------------
S&P 500 Equity Index 9.23 11.71
- -----------------------------------------------------------------------------
* Performance inception date of the UBS Investment Fund - U.S. Large
Capitalization Equity.
Total return includes reinvestment of all capital gain and income distributions.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the UBS Investment
Fund - U.S. Large Capitalization Equity and the S&P 500 Equity Index if you had
invested $10,000 on April 30, 1998, and had reinvested all your income dividends
and capital gain distributions through December 31, 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.
UBS Investment Fund - U.S. Large Capitalization Equity
vs. S&P 500 Equity Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
UBS Investment
Fund - U.S.
Large Capitalization S&P 500
Equity Equity Index
-------------------- ------------
4/30/96 $10,000 $10,000
5/31/98 $9,827 $9,828
6/30/98 $9,968 $10,227
7/31/98 $9,774 $10,118
8/31/98 $8,481 $8,655
9/30/98 $9,133 $9,210
10/31/98 $9,795 $9,959
11/30/98 $10,212 $10,563
12/31/98 $10,529 $11,171
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
30
<PAGE>
U.S. Large Capitalization Equity Fund
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
U.S. EQUITIES
Basic Industries
Chemicals 1.18%
Housing/Paper 6.07
Metals 0.53
------
7.78
Capital Investment
Capital Goods 8.54
Technology 13.77
------
22.31
Consumer
Autos/Durables 2.37
Health: Drugs 1.85
Health: Non-Drugs 4.30
Non-Durables 5.92
Retail/Apparel 2.19
------
16.63
Energy 0.71%
Financial
Banks 10.77
Non-Banks 10.04
------
20.81
Transportation 14.58
Services/Miscellaneous 8.13
Utilities
Electric 2.98
------
Total U.S. Equities 93.93*
------
SHORT-TERM INVESTMENTS 6.27*
------
TOTAL INVESTMENTS 100.20
LIABILITIES, LESS CASH AND
OTHER ASSETS (0.20)
------
NET ASSETS 100.00%
======
- -----------------------------------------------------------------------------
*The Fund held a long position in stock index futures on December 31, 1998 which
increased U.S. Equity exposure from 93.93% to 99.56% and reduced exposure to
Short-Term Investments from 6.27% to 0.64%.
Top 10 U.S. Equity Holdings
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- ------------------------------------------------
1. Xerox Corp. 8.74%
2. FDX Corp. 6.11
3. Burlington Northern Santa Fe Corp. 6.07
4. Lockheed Martin Corp. 5.32
5. Philip Morris Companies, Inc. 5.03
6. Baxter International, Inc. 3.78
7. Kimberly Clark Corp. 3.67
8. CIGNA Corp. 3.39
9. Aon Corp. 3.35
10. Aetna Life & Casualty Co. 3.30
- ------------------------------------------------
31
<PAGE>
U.S. Large Capitalization Equity Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
----------- --------------
U.S. Equities - 93.93%
Aetna, Inc. 9,300 $ 731,212
Aon Corp. 13,400 742,025
Automatic Data Processing, Inc. 6,100 489,144
BankBoston Corp. 4,300 167,431
Baxter International, Inc. 13,000 836,062
Bestfoods 3,700 197,025
Burlington Northern Santa Fe Corp. 39,800 1,343,250
Chase Manhattan Corp. 6,900 469,631
CIGNA Corp. 9,700 749,931
Comerica, Inc. 3,300 225,019
Corning, Inc. 15,600 702,000
Covance, Inc. (b) 4,000 116,500
Crown Cork & Seal Co., Inc. 3,800 117,088
Electronic Data Systems Corp. 14,200 713,550
EMC Corp. (b) 4,700 399,500
Entergy Corp. 21,200 659,850
FDX Corp. (b) 15,200 1,352,800
First Data Corp. 19,200 608,400
Fleet Financial Group, Inc. 10,000 446,875
Goodyear Tire & Rubber Co. 10,400 524,550
Household International Inc. 7,800 309,075
Kimberly Clark Corp. 14,900 812,050
Lockheed Martin Corp. 13,900 1,178,025
Masco Corp. 18,500 531,875
Norfolk Southern Corp. 16,800 532,350
Philip Morris Companies, Inc. 20,800 1,112,800
Praxair, Inc. 7,400 260,850
Raytheon Co., Class B 13,400 713,550
Schering Plough Corp. 7,400 408,850
Sears, Roebuck and Co. 11,400 484,500
Unocal Corp. 5,400 157,613
US Bancorp 10,200 362,100
Wells Fargo and Co. 10,100 403,369
Xerox Corp. 16,400 1,935,200
-------------
Total U.S. Equities (Cost $19,887,009) 20,794,050
-------------
Face
Amount Value
----------- --------------
Short-Term Investments - 6.27%
Investment Companies - 6.27%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund
(Cost $1,386,884) $ 1,386,884 $ 1,386,884
-------------
Total Investments
(Cost $21,273,893) - 100.20% (a) 22,180,934
-------------
Liabilities, less cash and other
assets - (0.20%) (43,198)
-------------
Net Assets - 100% $ 22,137,736
=============
See accompanying notes to schedule of investments.
32
<PAGE>
U.S. Large Capitalization Equity Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $21,273,893; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $ 2,018,260
Gross unrealized depreciation (1,111,219)
-----------
Net unrealized appreciation $ 907,041
===========
(b) Non-income producing security
FUTURES CONTRACTS
The U.S. Large Capitalization Equity Fund had the following open futures
contracts as of December 31, 1998:
<TABLE>
<CAPTION>
Settlement Cost/ Current Unrealized
Date Proceeds Value Gain
---------- -------- ------- ----------
<S> <C> <C> <C> <C>
Index Futures Buy Contracts
Standard & Poor's 500, 4 contracts March 1999 $1,239,928 $1,245,500 $ 5,572
</TABLE>
The segregated cash pledged to cover margin requirements for the open futures
positions at December 31, 1998 was $54,000.
See accompanying notes to financial statements.
33
<PAGE>
U.S. Large Capitalization Equity Fund - Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $19,887,009) $ 20,794,050
Affiliated issuers (Cost $1,386,884) 1,386,884
Cash 35,998
Receivables:
Investment securities sold 6,194
Dividends 50,850
Interest 1,392
Fund shares sold 1,595
Variation margin 3,400
Other assets 32,594
------------
TOTAL ASSETS $ 22,312,957
------------
LIABILITIES:
Payables:
Investment securities purchased 77,485
Fund shares redeemed 20,989
Investment advisory fees 4,624
Accrued expenses 72,123
------------
TOTAL LIABILITIES 175,221
------------
NET ASSETS $ 22,137,736
============
NET ASSETS CONSIST OF:
Paid in capital $ 21,319,701
Distributions in excess of net investment income (30,001)
Accumulated net realized loss (64,577)
Net unrealized appreciation 912,613
------------
NET ASSETS $ 22,137,736
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of $9,432,446
and 913,878 shares issued and outstanding) $ 10.32
============
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of $12,704,221
and 1,232,392 shares issued and outstanding) $ 10.31
============
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of $1,069
and 104 shares issued and outstanding) $ 10.28
============
See accompanying notes to financial statements.
34
<PAGE>
U.S. Large Capitalization Equity Fund - Financial Statements
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
INVESTMENT INCOME:
Dividends $ 141,180
Interest 19,744
-----------
TOTAL INCOME 160,924
-----------
EXPENSES:
Advisory 59,251
Professional 24,181
Distribution 17,757
Other 35,497
TOTAL EXPENSES 136,686
-----------
Expenses waived by Advisor (51,141)
-----------
NET EXPENSES 85,545
-----------
NET INVESTMENT INCOME 75,379
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments (87,071)
Futures contracts 91,795
-----------
Net realized gain 4,724
-----------
Change in net unrealized appreciation or depreciation on:
Investments 1,094,763
Futures contracts (3,464)
-----------
Change in net unrealized appreciation or depreciation 1,091,299
-----------
Net realized and unrealized gain 1,096,023
-----------
Net increase in net assets resulting from operations $ 1,171,402
===========
See accompanying notes to financial statements.
35
<PAGE>
U.S. Large Capitalization Equity Fund - Financial Statements
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended April 6, 1998*
December 31, 1998 Through
(Unaudited) June 30, 1998
------------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 75,379 $ 32,434
Net realized gain (loss) 4,724 (69,301)
Change in net unrealized appreciation or depreciation 1,091,299 (178,686)
------------ ------------
Net increase (decrease) in net assets resulting from operations 1,171,402 (215,553)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from and in excess of net investment income:
Brinson Class I (47,131) (191)
Brinson Class N (69,880) (20,605)
UBS Investment Funds Class (6) (1)
------------ ------------
Total distributions to shareholders (117,017) (20,797)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 9,027,897 16,922,491
Shares issued on reinvestment of distributions 116,156 20,775
Shares redeemed (4,248,075) (519,553)
------------ ------------
Net increase in net assets resulting from
capital share transactions 4,895,978 16,423,713
------------ ------------
TOTAL INCREASE IN NET ASSETS 5,950,363 16,187,363
------------ ------------
NET ASSETS:
Beginning of period 16,187,373 10
------------ ------------
End of period (including accumulated undistributed
(distributions in excess of) net investment income of
$(30,001) and $11,637, respectively) $ 22,137,736 $ 16,187,373
============ ============
</TABLE>
See accompanying notes to financial statements.
36
<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>
Six Months Ended April 6, 1998*
December 31, 1998 Through
Brinson Class I (Unaudited) June 30, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.80 $10.00
-------- ------
Income from investment operations:
Net investment income 0.03 0.02
Net realized and unrealized gain (loss) 0.56 (0.20)
-------- ------
Total income (loss) from investment operations 0.59 (0.18)
-------- ------
Less distributions:
Distributions from net investment income (0.07) (0.02)
Distributions from net realized gain -- --
-------- ------
Total distributions (0.07) (0.02)
-------- ------
Net asset value, end of period $ 10.32 $ 9.80
======== ======
Total return (non-annualized) 6.01% (1.83)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 9,432 $ 154
Ratio of expenses to average net assets:
Before expense reimbursement 1.40%** 1.59%**
After expense reimbursement 0.80%** 0.80%**
Ratio of net investment income to average net assets:
Before expense reimbursement 0.50%** 0.52%**
After expense reimbursement 1.10%** 1.31%**
Portfolio turnover rate 19% 12%
</TABLE>
* Commencement of investment operations
** Annualized
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>
Six Months Ended April 6, 1998*
December 31, 1998 Through
Brinson Class N (Unaudited) June 30, 1998*
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.78 $ 10.00
------- -------
Income from investment operations:
Net investment income 0.04 0.02
Net realized and unrealized gain (loss) 0.54 (0.23)
------- -------
Total income (loss) from investment operations 0.58 (0.21)
------- -------
Less distributions:
Distributions from net investment income (0.05) (0.01)
Distributions from net realized gain -- --
------- -------
Total distributions (0.05) (0.01)
------- -------
Net asset value, end of period $ 10.31 $ 9.78
======= =======
Total return (non-annualized) 5.97% (2.02)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $12,704 $16,033
Ratio of expenses to average net assets:
Before expense reimbursement 1.65%** 1.84%**
After expense reimbursement 1.05%** 1.05%**
Ratio of net investment income to average net assets:
Before expense reimbursement 0.25%** 0.27%**
After expense reimbursement 0.85%** 1.06%**
Portfolio turnover rate 19% 12%
</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>
Six Months Ended April 6, 1998*
December 31, 1998 Through
UBS Investment Funds Class (Unaudited) June 30, 1998*
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.79 $ 10.00
------- -------
Income from investment operations:
Net investment income 0.02 0.02
Net realized and unrealized gain (loss) 0.53 (0.22)
Total income (loss) from investment operations 0.55 (0.20)
Less distributions:
Distributions from net investment income (0.06) (0.01)
Distributions from net realized gain -- --
Total distributions (0.06) (0.01)
Net asset value, end of period $ 10.28 $ 9.79
Total return (non-annualized) 5.63% (2.06)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 1 $ 1
Ratio of expenses to average net assets:
Before expense reimbursement 1.92%** 2.11%**
After expense reimbursement 1.32%** 1.32%**
Ratio of net investment income to average net assets:
Before expense reimbursement (0.02)%** 0.00%**
After expense reimbursement 0.58%** 0.79%**
Portfolio turnover rate 19% 12%
</TABLE>
* Commencement of investment operations
** Annualized
See accompanying notes to financial statements.
39
<PAGE>
U.S. Bond Fund
[UBS LOGO APPEARS HERE]
The U.S. Bond Fund is an actively managed diversified portfolio of U.S.
investment-grade fixed income securities. Using fundamental research, 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
drives both sector and individual issue selection.
Since its inception on August 31, 1995, the UBS Investment Fund - U.S. Bond has
provided an annualized return of 7.60%, compared to the 8.21% return of the
Salomon Smith Barney Broad Investment Grade (BIG) Bond Index. The fund's
annualized return volatility over the same period has been 3.99% which is
similar to the benchmark's 3.42%. For calendar year 1998, the UBS Investment
Fund - U.S. Bond returned 7.80% versus 8.72% for the index. Returns were
depressed by the unprecedented spread widening of corporate securities during
the third quarter.
Interest rates fell roughly 100 basis points during 1998 with nearly all of this
decline occurring during the volatile third quarter. The Federal Reserve
initiated an easing of monetary policy late in the third quarter to combat
global instability. In all, the Fed lowered short rates 75 basis points to their
current level of 4.75%.
Most investors will remember 1998 as one of the more tumultuous years on record.
A confluence of global events at mid-year raised fears that a global economic
crisis was unfolding. This precipitated a reassessment of risk on the part of
most investors, which severely impacted market liquidity. A general
"flight-to-quality" characterized the U.S. bond market for most of the second
half of the year. While many financial assets responded negatively to these
developments, corporate securities suffered disproportionately as investors
sought the safe-haven of U.S. Treasuries. Signs of increasing global stability
and market liquidity have become evident as we enter 1999. Overall, quality and
liquidity were the most rewarded factors during 1998.
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
U.S. BONDS
Corporate Bonds
Airlines 0.08%
Asset-Backed 7.60
Banks 0.58
Business and Public Service 2.16
CMO 5.46
Consumer 2.69
Energy 2.96
Financial Services 4.89
Industrial Components 0.85
Real Estate 0.22
Telecommunications 3.42
Total U.S. Corporate Bonds 30.91
U.S. Government Agencies 21.09
U.S. Government Obligations 38.32
International Dollar Bonds 4.77
-------
Total U.S. Bonds 95.09
-------
U.S. Equities 1.04
-------
SHORT-TERM INVESTMENTS 10.04
-------
TOTAL INVESTMENTS 106.17
LIABILITIES, LESS CASH AND OTHER ASSETS (6.17)
-------
NET ASSETS 100.00%
=======
40
<PAGE>
U.S. Bond Fund
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years Annualized
ended ended ended 8/31/95* to
12/31/98 12/31/98 12/31/98 12/31/98
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UBS Investment Fund - U.S. Bond 4.21% 7.80% 6.63% 7.60%
- ----------------------------------------------------------------------------------------
Salomon Smith Barney Broad Investment
Grade (BIG) Bond Index 4.57 8.72 7.29 8.21
- ----------------------------------------------------------------------------------------
</TABLE>
* Inception date of the UBS Investment Fund - U.S. Bond.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the UBS Investment
Fund - U.S. Bond and the Salomon Smith Barney BIG Bond Index if you had invested
$10,000 on August 31, 1995, and had reinvested all your income dividends and
capital gain distributions through December 31, 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.
UBS Investment Fund - U.S. Bond
vs. Salomon Smith Barney BIG Bond Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
UBS Salomon Smith
Investment Fund Barney BIG
U.S. Bond Bond Index
--------------- -------------
8/31/95 10,000 10,000
10,080 10,094
10,230 10,229
10,390 10,389
12/31/95 10,529 10,532
10,591 10,604
10,366 10,425
10,284 10,350
10,202 10,273
10,161 10,268
6/30/96 10,324 10,400
10,345 10,428
10,283 10,413
10,491 10,594
10,762 10,832
11,032 11,011
12/31/96 10,861 10,914
10,871 10,956
10,893 10,968
10,731 10,857
10,893 11,012
11,011 11,116
6/30/97 11,141 11,248
11,479 11,553
11,370 11,453
11,522 11,622
11,675 11,788
11,708 11,843
12/31/97 11,844 11,964
11,981 12,118
11,970 12,110
12,004 12,157
12,050 12,220
12,165 12,338
6/30/98 12,252 12,439
12,264 12,465
12,461 12,656
12,682 12,954
12,636 12,896
12,717 12,967
12/31/98 12,767 13,007
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
41
<PAGE>
U.S. Bond Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Face
Amount Value
------------- ----------------
Bonds - 95.09%
U.S. Corporate Bonds - 30.91%
Aid-Israel, Series 10-Z, 0.000%,
due 02/15/03 $ 805,000 $ 660,123
Capital One Bank, 6.830%, due 05/17/99 359,000 360,070
Cendant Corp., 7.750%, due 12/01/03 700,000 715,388
Chase Mortgage Finance Corp. 93-J1,
Class 1A5, 6.625%, due 08/25/09 63,049 63,217
Chemical Mortgage Securities Inc. 93-1,
Class A5, 7.450%, due 02/25/23 667,258 671,028
Ches Pot Tel MD, 8.000%, due 10/15/29 87,000 108,754
Chrysler Financial Corp.,
7.400%, due 08/01/97 100,000 112,690
Citicorp Mortgage Securities, Inc. 94-9,
Class A8, 5.750%, due 06/25/09 1,039,536 1,023,381
Comed Transitional Funding Trust, 98-1,
Class A7, 5.740%, due 12/25/10 695,000 698,996
Continental Airlines, Inc., EETC, 98-1B,
6.748%, due 09/15/18 75,000 75,088
Countrywide Funding Corp. FRN, 5.680%,
due 12/01/03 250,000 241,250
Enron Corp., 6.750%, due 08/01/09 800,000 825,114
Farmers Exchange Capital, 144A,
7.050%, due 07/15/28 400,000 402,451
First Bank Corporate Card Master Trust, 97-1,
Class A, 6.400%, due 02/15/03 980,000 1,007,048
First Nationwide Trust, 98-3, Class 1PPA,
6.500%, due 09/19/28 514,243 514,706
Ford Motor Co., 6.625%, due 10/01/28 500,000 514,440
GE Capital Mortgage Services, Inc.,
97-HE4 A7, 6.735%, due 12/25/28 410,000 422,649
General Motors Acceptance Corp.,
9.625%, due 12/15/01 294,000 327,018
GreenTree Financial Corp., 94.5, Class A5,
8.300%, due 11/15/19 320,000 347,977
Interamer Development Bank,
6.800%, due 10/15/25 100,000 113,318
Jefferson-Pilot, 144A,
8.285%, due 03/01/46 640,000 697,637
Lehman Brothers, Inc., Senior Note
7.250%, due 04/15/03 225,000 231,763
LG&E Capital Corp., 144A,
5.750%, due 11/01/01 65,000 64,744
Lockheed Martin Corp., Note
7.700%, due 06/15/08 282,000 318,932
MBNA Global Capital Securities FRN,
6.019%, due 02/01/27 90,000 82,824
Mid-America Energy,
6.375%, due 06/15/06 275,000 282,232
Monsanto Co., 144A,
6.600%, due 12/01/28 1,250,000 1,247,692
News America Holdings,
7.750%, due 12/01/45 358,000 380,216
Face
Amount Value
------------- ----------------
Norwest Asset Securities Corp., 98-25,
Class A5, 6.000%, due 12/25/28 $2,400,000 $ 2,358,624
PanAmSat Corp.,
6.000%, due 01/15/03 375,000 372,054
6.375%, due 01/15/08 500,000 489,297
PNC Mortgage Securities Corp., 94-3,
Class A8, 7.500%, due 07/25/24 215,000 221,787
Premier Auto Trust,
96-3A, 6.500%, due 03/06/00 53,129 53,246
96-4A, Class A4, 6.400%, due 10/06/01 350,000 353,707
Prudential Home Mortgage Securities,
93-30, Class A9, 6.963%, due 08/25/23 85,000 85,806
93-43, Class A9, 6.750%, due 10/25/23 281,533 283,566
94-3, Class A10, 6.500%, due 02/25/24 170,000 169,536
Residential Accredit Loans, Inc.,
96-QS4, Class Al10,
7.900%, due 08/25/26 275,000 283,257
98-QS4, Class AI5,
7.000%, due 03/25/28 1,850,000 1,919,657
Residential Asset Securitization Trust,
97-A10, Class A1, 7.250%, due 12/25/27 692,587 698,772
SafeWay, Inc., 6.500%, due 11/15/08 315,000 326,486
Salomon, Inc., Debenture,
6.750%, due 02/15/03 300,000 308,976
Service Corp., International,
6.000%, due 12/15/05 250,000 249,223
Sprint Capital Corp., 6.875%, due 11/15/28 1,000,000 1,038,382
Structured Asset Securities Corp.,
98-RF1, Class A, 8.712%, due 03/15/27 487,887 523,564
98-RF2, 144A, 8.582%, due 07/15/27 171,060 183,035
Teco Energy, Inc., 5.540%, due 09/15/01 1,250,000 1,249,579
Tele-Communications Inc,
9.800%, due 02/01/12 950,000 1,268,065
Texas Utilities, 5.940%, due 10/15/11
(putable 10/15/01) 420,000 419,107
The Money Store Home Equity Trust,
98-A, Class AF5, 6.370%, due 12/15/23 465,000 469,548
Thrift Financial Corp., 11.250%,
due 01/01/16 38,455 40,400
Time Warner Entertainment, Inc.,
8.375%, due 03/15/23 94,000 114,971
Time Warner Inc., 7.570%, due 02/01/24 340,000 383,456
Transamerica Capital III,
7.625%, due 11/15/37 735,000 767,566
U.S.A. Waste Services,
6.500%, due 12/15/02 400,000 408,151
UCFC Home Equity Loan, 97-C, Class A8,
FRN, 5.478%, due 09/15/27 134,278 132,988
Vendee Mortgage Trust, 92-1, Class 2Z,
7.750%, due 05/15/22 512,194 561,243
Williams Co., 6.200%, due 08/01/02 1,100,000 1,102,748
Williams Holdings of Delaware,
6.500%, due 12/01/08 315,000 311,522
-------------
29,659,065
-------------
42
<PAGE>
U.S. Bond Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Face
Amount Value
------------- ----------------
International Dollar Bonds - 4.77%
Banco Santiago S.A., 7.000%,
due 07/18/07 $ 380,000 $ 318,432
Banque Paribas, Sub. Notes,
6.875%, due 03/01/09 700,000 711,927
Credit Suisse-London, 144A, 7.900%,
Resettable Perpetual Step-up Notes 500,000 500,000
Den Danske Bank, 144A,
6.375%, due 06/15/08 560,000 568,896
Empresa Nacional de Electricidad S.A.,
7.875%, due 02/01/27 394,000 328,906
Petroliam Nasional Berhad, 144A,
7.625%, due 10/15/26 430,000 293,273
Province of Quebec, 7.500%, due 07/15/23 200,000 228,700
Ras Laffan Liquified Natural Gas Co., Ltd.,
144A, 8.294%, due 03/15/14 450,000 370,917
Repsol International Finance,
7.000%, due 08/01/05 200,000 215,886
Republic of South Africa,
9.625%, due 12/15/99 71,000 72,420
Royal Bank of Scotland, 7.375%, Resettable
Perpetual Step-up Notes 80,000 82,353
Skandinaviska Enskilda Banken, 144A,
Resettable Perpetual Step-up Notes 305,000 297,362
Tyco International Group, 144A,
5.875%, due 11/01/04 595,000 591,332
-------------
4,580,404
-------------
U.S. Government Agencies - 21.09%
Federal Home Loan Bank,
5.570%, due 08/17/00 1,500,000 1,513,068
Federal Home Loan Mortgage Corp.
7.000%, due 10/15/13 492,125 504,474
7.500%, due 01/15/23 157,195 165,716
7.238%, due 05/01/26 19,486 19,807
Federal Home Loan Mortgage Corp. Gold
8.000%, due 11/01/22 128,980 133,495
9.000%, due 03/01/24 97,878 104,072
Federal National Mortgage Association
6.959%, due 08/01/07 484,016 521,672
6.361%, due 06/01/08 1,422,447 1,482,190
8.000%, due 12/18/11 100,000 105,710
6.000%, due 01/01/14 TBA 295,000 295,832
8.000%, due 05/25/21 260,000 266,325
8.500%, due 07/15/21 82,101 84,870
9.000%, due 08/01/21 21,471 22,779
8.500%, due 07/01/22 14,724 15,605
Face
Amount Value
------------- ----------------
9.500%, due 08/01/22 $ 90,958 $ 97,069
0.000%, due 09/25/22 431,647 399,464
7.500%, due 12/01/23 624,461 641,049
7.500%, due 01/01/28 338,058 347,249
8.500%, due 02/01/28 138,666 145,252
6.000%, due 03/01/28 712,617 703,417
6.500%, due 06/01/28 780,479 785,851
6.500%, due 09/01/28 246,454 248,150
6.500%, due 11/01/28 3,511,180 3,535,351
6.000%, due 12/01/28 TBA 4,790,000 4,728,156
Federal National Mortgage Association Strips,
7.500%, due 05/01/23 interest only 298,479 47,911
0.000%, due 04/01/27 principal only 270,732 238,007
FNCI, 8.000%, due 02/01/13 254,508 262,302
FNW, Series 95-W3, Class A,
9.000%, due 04/25/25 170,324 177,497
Government National Mortgage Association
10.000%, due 09/15/00 1,782 1,887
10.000%, due 05/15/01 2,642 2,797
9.000%, due 11/15/04 12,190 12,799
9.000%, due 12/15/17 39,834 42,816
8.000%, due 08/15/22 56,279 58,598
7.500%, due 12/15/22 275,793 284,425
7.500%, due 12/15/23 1,121,946 1,156,769
7.500%, due 01/15/24 74,829 77,132
7.000%, due 02/16/24 150,000 152,450
7.500%, due 06/15/25 93,707 96,611
7.000%, due 07/15/25 101,728 104,135
Jordan Aid, 8.750%, due 09/01/19 517,177 641,154
-------------
20,223,913
-------------
U.S. Government Obligations - 38.32%
U.S. Treasury Notes and Bonds
5.500%, due 02/29/00 4,525,000 4,567,422
5.500%, due 05/31/00 2,450,000 2,478,329
6.625%, due 07/31/01 5,110,000 5,352,725
6.250%, due 08/31/02 2,200,000 2,312,064
6.500%, due 05/15/05 2,000,000 2,191,876
7.000%, due 07/15/06 6,320,000 7,196,900
5.625%, due 05/15/08 4,540,000 4,843,612
8.000%, due 11/15/21 4,905,000 6,571,170
U.S. Treasury Inflation Indexed Note,
3.625%, due 04/15/28 1,270,000 1,254,644
-------------
36,768,742
-------------
Total Bonds (Cost $90,665,694) 91,232,124
-------------
43
<PAGE>
U.S. Bond Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
------------- ----------------
Equities - 1.04%
U.S. Equities - 1.04%
Centaur Funding Corp., 144A 1,355 $ 248,815
-------------
Centaur Funding Corp., 144A 715 747,622
-------------
Total Equities (Cost $896,080) 996,437
-------------
Face
Amount
-------------
Short-Term Investments - 10.04%
Commercial Paper - 3.12%
Marriot International,
5.750%, due 01/22/99 $ 1,500,000 1,494,969
Raytheon Co., 5.600%, due 01/22/99 1,500,000 1,496,047
-------------
Total Commercial Paper
(Cost $2,990,068) 2,991,016
-------------
Shares
-------------
Investment Companies - 6.92
Brinson Supplementary Trust U.S. Cash
Management Prime Fund
(Cost $6,638,700) 6,638,700 6,638,700
-------------
Total Short-Term Investments
(Cost $9,628,768) 9,629,716
-------------
Total Investments
(Cost $101,190,542) - 106.17% 101,858,277
-------------
Liabilities, less cash and other
assets - (6.17%) (5,916,014)
-------------
Net Assets - 100% $ 95,942,263
=============
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $101,190,542; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $1,154,761
Gross unrealized depreciation (487,026)
----------
Net unrealized appreciation $ 667,735
==========
FRN: Floating rate note - The rate disclosed is that in effect at December 31,
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 December 31,
1998, the value of these securities amounted to $6,213,776, or 6.48% 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
DECEMBER 31, 1998 (UNAUDITED)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $94,551,842) $ 95,219,577
Affiliated issuers (Cost $6,638,700) 6,638,700
Cash 35,470
Receivables:
Investment securities sold 344,847
Fund shares sold 1,750
Interest 1,160,848
Other assets 8,846
------------
TOTAL ASSETS 103,410,038
------------
LIABILITIES:
Payables:
Investment securities purchased 7,403,466
Investment advisory fees 35,915
Dividends 1,774
Accrued expenses 26,620
------------
TOTAL LIABILITIES 7,467,775
------------
NET ASSETS $ 95,942,263
============
NET ASSETS CONSIST OF:
Paid in capital $ 95,212,858
Accumulated undistributed net investment income 10,071
Accumulated net realized gain 51,599
Net unrealized appreciation 667,735
------------
NET ASSETS $ 95,942,263
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of $90,868,678
and 8,556,121shares issued and outstanding) $ 10.62
============
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of $1,150 and
108 shares issued and outstanding) $ 10.65
============
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of
$5,072,435 and 479,337 shares issued and outstanding) $ 10.58
============
See accompanying notes to financial statements.
45
<PAGE>
U.S. Bond Fund - Financial Statements
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (Unaudited)
INVESTMENT INCOME:
Interest $ 1,955,254
-----------
TOTAL INCOME 1,955,254
-----------
EXPENSES:
Advisory 164,957
Professional 19,203
Registration 13,667
Distribution 10,134
Other 12,089
-----------
TOTAL EXPENSES 220,050
Expenses waived by Advisor (12,367)
-----------
NET EXPENSES 207,683
-----------
NET INVESTMENT INCOME 1,747,571
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain 809,071
Change in net unrealized appreciation or depreciation 134,810
-----------
Net realized and unrealized appreciation 943,881
-----------
Net increase in net assets resulting from operations $ 2,691,452
See accompanying notes to financial statements.
46
<PAGE>
U.S. Bond Fund - Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,747,571 $ 1,638,048
Net realized gain 809,071 801,133
Change in net unrealized appreciation or depreciation 134,810 335,673
------------ ------------
Net increase in net assets resulting from operations 2,691,452 2,774,854
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I (1,922,429) (1,526,152)
Brinson Class N (27) (54)
UBS Investment Funds Class (116,017) (103,513)
Distributions from net realized gain:
Brinson Class I (1,038,553) (335,742)
Brinson Class N (16) (14)
UBS Investment Funds Class (68,968) (25,812)
------------ ------------
Total distributions to shareholders (3,146,010) (1,991,287)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 69,994,288 21,794,978
Shares issued in connection with reorganization 15,177,263 --
Shares issued on reinvestment of distributions 2,681,835 1,174,894
Shares redeemed (32,774,989) (6,255,720)
------------ ------------
Net increase in net assets resulting from capital
share transactions 55,078,397 16,714,152
------------ ------------
TOTAL INCREASE IN NET ASSETS 54,623,839 17,497,719
------------ ------------
NET assets:
Beginning of period 41,318,424 23,820,705
------------ ------------
End of period (including accumulated undistributed net
investment income of $10,071 and $300,973, respectively) $ 95,942,263 $ 41,318,424
============ ============
</TABLE>
See accompanying notes to financial statements.
47
<PAGE>
U.S. Bond Fund - Financial Statements
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended August 31, 1995*
December 31, 1998 Year Ended Year Ended Through
Brinson Class I (Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.58 $ 10.24 $ 9.93 $ 10.00
------- ------- ------- -------
Income from investment operations:
Net investment income 0.29*** 0.53 0.51*** 0.50
Net realized and unrealized gain (loss) 0.18 0.53 0.32 (0.14)
------- ------- ------- -------
Total income from investment operations 0.47 1.06 0.83 0.36
------- ------- ------- -------
Less distributions:
Distributions from net investment income (0.28) (0.58) (0.52) (0.40)
Distributions in excess of net realized gain (0.15) (0.14) -- (0.03)
------- ------- ------- -------
Total distributions (0.43) (0.72) (0.52) (0.43)
------- ------- ------- -------
Net asset value, end of period $ 10.62 $ 10.58 $ 10.24 $ 9.93
======= ======= ======= =======
Total return (non-annualized) 4.43% 10.60% 8.45% 3.60%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $90,869 $38,874 $22,421 $ 9,047
Ratio of expenses to average net assets:
Before expense reimbursement 0.64%** 0.84% 1.65% 363%**
After expense reimbursement 0.60%** 0.60% 0.60% 0.60%**
Ratio of net investment income to average net assets:
Before expense reimbursement 5.30%** 5.61% 5.14% 3.00%**
After expense reimbursement 5.34%** 5.85% 6.19% 6.03%**
Portfolio turnover rate 140% 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>
Six Months Ended
December 31, 1998 Year Ended
Brinson Class N (Unaudited) June 30, 1998*
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 10.58 $ 10.24
------- -------
Income from investment operations:
Net investment income 0.34*** 0.61
Net realized and unrealized gain 0.14 0.42
------- -------
Total income from investment operations 0.48 1.03
------- -------
Less distributions:
Distributions from net investment income (0.26) (0.55)
Distributions from net realized gain (0.15) (0.14)
------- -------
Total distributions (0.41) (0.69)
------- -------
Net asset value, end of period $ 10.65 $ 10.58
======= =======
Total return (non-annualized) 4.53% 10.30%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 1 $ 1
Ratio of expenses to average net assets:
Before expense reimbursement 0.89%** 1.09%
After expense reimbursement 0.85%** 0.85%
Ratio of net investment income to average net assets:
Before expense reimbursement 5.05%** 5.36%
After expense reimbursement 5.09%** 5.60%
Portfolio turnover rate 140% 198%
</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.
49
<PAGE>
U.S. Bond Fund - Financial Statements
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended August 31, 1995*
December 31, 1998 Year Ended Year Ended Through
UBS Investment Class (Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.54 $ 10.22 $ 9.92 $ 10.00
------- ------- ------- -------
Income from investment operations:
Net investment income 0.26*** 0.50 0.46*** 0.46
Net realized and unrealized gain (loss) 0.18 0.49 0.32 (0.13)
------- ------- ------- -------
Total income from investment operations 0.44 0.99 0.78 0.33
------- ------- ------- -------
Less distributions:
Distributions from net investment income (0.25) (0.53) (0.48) (0.38)
Distributions in excess of net realized gain (0.15) (0.14) -- (0.03)
------- ------- ------- -------
Total distributions (0.40) (0.67) (0.48) (0.41)
------- ------- ------- -------
Net asset value, end of period $ 10.58 $ 10.54 $ 10.22 $ 9.92
======= ======= ======= =======
Total return (non-annualized) 4.21% 9.97% 7.91% 3.24%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 5,072 $ 2,444 $ 1,399 $ 636
Ratio of expenses to average net assets:
Before expense reimbursement 1.11%** 1.31% 2.12% 4.10%**
After expense reimbursement 1.07%** 1.07% 1.07% 1.07%**
Ratio of net investment income to average net assets:
Before expense reimbursement 4.83%** 5.14% 4.67% 2.53%**
After expense reimbursement 4.87%** 5.38% 5.72% 5.56%**
Portfolio turnover rate 140% 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>
U.S. Large Capitalization Growth Fund
[UBS LOGO APPEARS HERE]
The U.S. Large Capitalization Growth Fund is an actively managed portfolio
invested in the common stocks of companies whose internal financial returns and
earnings or cash flow growth prospects are well above the average large
capitalization company ($3 billion or larger). While valuation is an important
aspect in the screening process, fundamental dynamics are more heavily weighted.
The investment strategy emphasizes stock selection with attention given to
factor and sector exposures relative to the benchmark.
The distribution of the UBS Investment Fund Class of the U.S. Large
Capitalization Growth Fund commenced on December 31, 1998. The discussion that
follows relates to the performance of the U.S. Large Capitalization Growth Fund
for the year ended December 31, 1998.
Generally, 1998 was a very good year to be a large capitalization growth
manager. The uncertainties around the world led investors to seek assured growth
wherever they could find it, particularly in larger sized companies. In the
second half of the year, however, there began to be some differentiation among
the favorites as many of the dominant global franchise companies such as
Coca-Cola began to stumble with fundamental problems. This put even more focus
on health care and technology where performance broadened out beyond just the
biggest companies. Our performance was helped by our stock selection in the
latter part of the year with investments such as Sun Microsystems, Oracle,
Immunex, and AT&T. Areas which hurt performance were an overweighting in
financial stocks and a small but meaningful commitment in the energy sector,
particularly oil service companies such as Schlumberger.
The major challenge facing growth investors in 1999 is twofold. First, some
major sectors such as technology and health care have performed extremely well
and are clearly not undervalued. World economic trends and populist political
initiatives respectively could make both sectors more risky going forward. Our
solution is to continue to look at companies which have not been the major
leaders but which have strong fundamentals and relatively good valuations.
Secondly, growth investing as a strategy has enjoyed extreme popularity in
recent years at the expense of value investing. Efforts to reflate here and
overseas may lead to more competitive earnings gains from more cyclical sources,
something which has not been present for some time. Our solution is to look for
growth companies which have been hurt by global economic woes and which may
actually perform well under these conditions. We have consciously underweighted
the major companies in most sectors unless we are extremely confident of
fundamentals.
51
<PAGE>
U.S. Large Capitalization Growth Fund
[UBS LOGO APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998
- -----------------------------------------------------------------------------
U.S. EQUITIES
Basic Industries
Chemicals 2.17%
Housing/Paper 2.10
------
4.27
Capital Investment
Capital Goods 1.99
Technology 18.77
------
20.76
Consumer
Autos/Durables 7.29
Health: Drugs 13.84
Health: Non-Drugs 8.13
Non-Durables 9.02
Retail/Apparel 5.10
------
43.38
Energy 4.17%
Financial
Banks 1.74
Non-Banks 6.01
------
7.75
Transportation 0.73
Services/Miscellaneous 8.04
Utilities
Telephone 7.10
------
Total U.S. Equities 96.20
SHORT-TERM INVESTMENTS 3.18
------
TOTAL INVESTMENTS 99.38
CASH AND OTHER ASSETS,
LESS LIABILITIES 0.62
------
NET ASSETS 100.00%
======
Top 10 U.S. Equity Holdings
As of December 31, 1998
Percent of
Net Assets
- ----------------------------------------------------
1. Sun Microsystems, Inc. 4.13%
2. International Business Machines Corp. 4.01
3. General Electric Co. 3.69
4. Wal-Mart Stores, Inc. 2.75
5. Abbott Laboratories 2.72
6. Albertson's, Inc. 2.61
7. Philip Morris Companies, Inc. 2.58
8. AFLAC, Inc. 2.55
9. Time Warner, Inc. 2.54
10. Medtronics, Inc. 2.51
- ----------------------------------------------------
52
<PAGE>
U.S. Large Capitalization Growth Fund - Schedule of Investments
December 31, 1998
- -----------------------------------------------------------------------------
Shares Value
----------- -----------------
U.S. Equities - 96.20%
Abbott Laboratories 2,300 $ 112,700
AFLAC, Inc. 2,400 105,600
Albertson's, Inc. 1,700 108,269
American Express, Co. 1,000 102,250
AT&T Corp. 1,100 82,775
Autozone, Inc. (b) 2,200 72,463
BankAmerica Corp. 1,200 72,150
Bristol-Myers Squibb Co. 600 80,287
CBS Corp. 2,100 68,775
Chubb Corp. 1,000 64,875
Citigroup, Inc. 800 39,600
Compaq Computer Corp. 2,300 96,456
Continental Airlines, Inc., Class B (b) 900 30,150
Dayton Hudson Corp. 1,800 97,650
E.I. du Pont de Nemours & Co. 1,700 90,206
Exxon Corp. 900 65,813
Fox Entertainment Group, Inc., Class A (b) 800 20,150
General Electric Co. 1,500 153,094
Halliburton Co. 1,600 47,400
Hewlett-Packard Co. 700 47,819
Immunex Corp. (b) 800 100,650
Intel Corp. 500 59,281
International Business Machines Corp. 900 166,275
Johnson & Johnson 900 75,487
Kimberly Clark Corp. 1,600 87,200
Liberty Media Group, Class A (b) 1,400 64,488
Lilly (Eli) & Co. 1,100 97,762
Loral Space & Communications Ltd. (b) 3,600 64,125
Lowe's Companies, Inc. 1,500 76,781
Lucent Technologies, Inc. 400 44,000
McDonald's Corp. 900 68,963
Medtronic, Inc. 1,400 103,950
Merck & Co., Inc. 600 88,612
Microsoft, Inc. (b) 400 55,475
Monsanto Co. 1,100 52,250
Morgan Stanley Dean Witter & Co. 600 42,600
Northern Telecom Ltd. 800 40,100
Oracle Corp. (b) 1,200 51,750
PepsiCo, Inc. 2,200 90,062
Philip Morris Companies, Inc. 2,000 107,000
QUALCOMM, Inc. (b) 700 36,269
Raytheon Co., Class A 1,600 82,700
Schering Plough Corp. 1,700 93,925
Schlumberger Ltd. 1,300 59,963
Sun Microsystems, Inc. (b) 2,000 171,250
Tele-Communications
TCI Ventures Group, Class A (b) 2,700 63,619
Texas Instruments, Inc. 1,100 94,119
Time Warner, Inc. 1,700 105,506
Wal-Mart Stores, Inc. 1,400 114,012
Waste Management, Inc. 1,600 74,600
------------
Total U.S. Equities (Cost $3,402,970) 3,991,256
------------
Face
Amount Value
----------- -----------------
Short-Term Investments - 3.18%
Investment Companies - 3.18%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund (Cost $131,691) $131,691 $ 131,691
------------
Total Investments
(Cost $3,534,661) - 99.38% 4,122,947
------------
Cash and other assets,
less liabilities - 0.62% 25,841
------------
Net Assets - 100% $4,148,788
============
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $3,534,661; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $677,003
Gross unrealized depreciation (88,717)
--------
Net unrealized appreciation $588,286
========
(b) Non-income producing security
See accompanying notes to financial statements.
53
<PAGE>
U.S. Large Capitalization Growth Fund - Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $3,402,970) $3,991,256
Affiliated issuers (Cost $131,691) 131,691
Cash 114
Receivables:
Dividends 1,881
Interest 393
Fund shares sold 50,010
-----------
Total Assets 4,175,345
-----------
LIABILITIES:
Payables:
Investment securities purchased 25,397
Accrued expenses 1,160
-----------
TOTAL LIABILITIES 26,557
-----------
NET ASSETS $4,148,788
===========
NET ASSETS CONSIST OF:
Paid in capital $3,291,916
Accumulated net realized gain 268,586
Net unrealized appreciation 588,286
-----------
NET ASSETS $4,148,788
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of $4,146,788
and 350,212 shares issued and outstanding) $ 11.84
===========
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of $1,000 and
84 shares issued and outstanding) $ 11.84
===========
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of $1,000 and
84 shares issued and outstanding) $ 11.84
===========
See accompanying notes to financial statements.
54
<PAGE>
U.S. Large Capitalization Growth Fund - Financial Statements
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Dividends $ 61,083
Interest 14,387
-----------
TOTAL INCOME 75,470
-----------
EXPENSES:
Advisory 33,493
Registration 22,522
Fund accounting 19,260
Transfer agent 14,665
Shareholder servicing 13,511
Shareholder reporting 12,757
Professional 11,125
Custodian 10,976
Administration 7,361
Other 7,579
-----------
TOTAL EXPENSES 153,249
Expenses waived and reimbursed by advisor (98,048)
-----------
NET EXPENSES 55,201
-----------
NET INVESTMENT INCOME 20,269
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 438,421
Change in net unrealized appreciation or depreciation
on investments 554,465
-----------
Net realized and unrealized gain 992,886
-----------
Net increase in net assets resulting from operations $ 1,013,155
===========
See accompanying notes to financial statements.
55
<PAGE>
U.S. Large Capitalization Growth Fund - Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
October 14, 1997*
Year Ended Through
December 31, 1998 December 31, 1997
----------------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 20,269 $ 9,350
Net realized gain (loss) 438,421 (14,545)
Change in net unrealized appreciation or depreciation 554,465 33,821
----------- -----------
Net increase in net assets resulting from operations 1,013,155 28,626
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I (19,205) (9,050)
Distributions from net realized gain:
Brinson Class I (151,936) --
----------- -----------
Total distributions to shareholders (171,141) (9,050)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold 4,973,380 4,108,844
Shares issued on reinvestment of distributions 170,881 9,050
Shares redeemed (5,974,601) (356)
----------- -----------
Net increase (decrease) in net assets resulting
from capital share transactions (830,340) 4,117,538
----------- -----------
TOTAL INCREASE IN NET ASSETS 11,674 4,137,114
----------- -----------
NET ASSETS:
Beginning of period 4,137,114 --
----------- -----------
End of period (including accumulated undistributed net
investment income of $300 in 1997) $ 4,148,788 $ 4,137,114
=========== ===========
</TABLE>
* Commencement of investment operations
See accompanying notes to financial statements.
56
<PAGE>
U.S. Large Capitalization Growth Fund - Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.***
<TABLE>
<CAPTION>
Six Months Ended October 14, 1997**
December 31, 1998 Through
Brinson Class I (Unaudited) June 30, 1998*
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.92 $ 10.00
------- -------
Income from investment operations:
Net investment income 0.06 0.02
Net realized and unrealized gain (loss) 2.38 (0.08)
------- -------
Total income from investment operations 2.44 (0.06)
------- -------
Less distributions:
Distributions from net investment income (0.06) (0.02)
Distributions from net realized gain (0.46) --
------- -------
Total distributions (0.52) (0.02)
======= =======
Net asset value, end of period $ 11.84 $ 9.92
Total return (non-annualized) 24.90% (0.55)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 4,147 $ 4,137
Ratio of expenses to average net assets:
Before expense reimbursement 2.76% 8.54%**
After expense reimbursement 0.99% 1.00%**
Ratio of net investment income (loss) to
average net assets:
Before expense reimbursement (1.40)% (6.19)%**
After expense reimbursement 0.37% 1.35%**
Portfolio turnover rate N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
*** Reflects 10 for 1 share split effective December 9, 1998.
N/A = Information is not available for periods prior to reorganization,
as described in notes to financial statements.
See accompanying notes to financial statements.
57
<PAGE>
U.S. Small Capitalization Growth Fund
[UBS LOGO APPEARS HERE]
The U.S. Small Capitalization Growth Fund invests in companies with market
capitalizations of less than $1 billion which we expect to experience
above-average earnings/cash flow growth or meaningful changes in underlying
value. As such, we seek to identify rapidly growing companies with leading
products or industry positions and a proven record of achievement. The Fund's
emphasis is on companies with strong business franchises that generate rapidly
rising earnings and controlling risk through diversification and attention to
reasonable valuations.
The distribution of the UBS Investment Fund Class of the U.S. Small
Capitalization Growth Fund commenced on December 31, 1998. The discussion that
follows relates to the performance of the U.S. Small Capitalization Growth Fund
for the year ended December 31, 1998.
The largest negative impact was from the Fund's overweight in the oil services
area, which was down sharply, and from underweights in technology and utilities,
which performed well. On the positive side, the Fund's overweights in retail
foods, miscellaneous finance, and life insurance helped results. We have taken
steps to narrow our portfolio ranges in order to keep industry selection from
continuing to be such a large factor going forward.
Stock selection was also negative this year, with a larger than usual number of
companies experiencing unexpected accounting and operating problems. Stocks that
detracted from performance in 1998 included Vesta Insurance, Oakwood Homes,
Landry's Seafood, Technology Solutions, and General Nutrition. The Fund's better
performing stocks included Waters Corp, Foodmaker, U.S. Foodservice, Sanmina,
and Swift Transportation.
If we widen our perspective to the overall small cap market, it was a difficult
year for small cap investors. The Russell 2000 underperformed the large cap S&P
500 by almost 31 percentage points in 1998, which is the worst relative calendar
year performance by small cap stocks in the past 25 years. The damage incurred
by the average small cap stock was even worse than the market averages would
indicate. The median stock in the Russell 2000, for example, declined 9.1% in
1998, and more than 500 companies in the index fell more than 30%.
Despite the poor performance, fundamentals continue to be quite positive for
small cap stocks. The average stock in the Russell 2000 has grown earnings per
share by 16.5% annually over the past five years, which compares well with the
16.8% annual gains chalked up by the S&P 500. In addition, the Wall Street
analyst consensus is forecasting 20.5% annual earnings growth for small cap
stocks over the next five years, which is well above the 14.8% yearly gain
projected for the S&P 500. Finally, relative price-earnings and price-sales
ratios for small cap stocks have sunk to record lows versus large cap stocks, so
we think it is only a matter of time before a small cap rally of substantial
proportions occurs.
58
<PAGE>
U.S. Small Capitalization Growth Fund
[UBS LOGO APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998
- -----------------------------------------------------------------------------
U.S. EQUITIES
Basic Industries
Housing/Paper 1.35%
------
1.35
Capital Investment
Capital Goods 6.29
Technology 9.12
------
15.41
Consumer
Autos/Durables 7.00
Discretionary 4.04
Health: Drugs 0.39
Health: Non-Drugs 8.74
Non-Durables 8.27
Retail/Apparel 3.03
------
31.47
Energy 3.30%
Financial
Banks 11.22
Non-Banks 8.15
------
19.37
Transportation 11.21
Services/Miscellaneous 15.59
------
Total U.S. Equities 97.70
SHORT-TERM INVESTMENTS 4.24
------
TOTAL INVESTMENTS 101.94
LIABILITIES, LESS CASH
AND OTHER ASSETS (1.94)
------
NET ASSETS 100.00%
======
Top 10 U.S. Equity Holdings
As of December 31, 1998
Percent of
Net Assets
- ------------------------------------------------------
1. Waters Corp. 2.97%
2. U.S. Foodservice 2.95
3. Protective Life Corp. 2.89
4. Foodmaker, Inc. 2.88
5. Swift Transportation Co., Inc. 2.86
6. U.S. Trust Corp. 2.86
7. Patterson Dental Co. 2.83
8. Ha-Lo Industries, Inc. 2.81
9. Peoples Heritage Financial Group, Inc. 2.72
10. North Fork Bancorporation, Inc. 2.49
- ------------------------------------------------------
59
<PAGE>
U.S. Small Capitalization Growth Fund - Schedule of Investments
December 31, 1998
- -----------------------------------------------------------------------------
Shares Value
U.S. Equities - 97.70% ---------- -----------
Aeroflex, Inc. (b) 13,200 $ 199,650
AFC Cable Systems, Inc. (b) 6,000 201,750
Airborne Freight Corp. 12,200 439,962
American Italian Pasta Co., Class A (b) 8,500 224,188
Andrx Corp. (b) 1,700 87,125
AXENT Technologies, Inc. (b) 12,500 382,031
Brightpoint, Inc. (b) 28,300 389,125
Casey's General Stores, Inc. 32,900 428,728
Coach USA, Inc. (b) 14,900 516,844
Comfort Systems USA, Inc. (b) 8,400 150,150
Commercial Federal Corp. 14,200 329,262
Consolidated Graphics, Inc. (b) 6,300 425,644
Datastream Systems, Inc. (b) 15,500 178,250
Dendrite International, Inc. (b) 9,800 244,694
Eclipsys Corp. (b) 3,500 101,500
Elcor Corp. 8,100 261,731
Emmis Broadcasting Corp. (b) 5,500 238,563
Ethan Allen Interiors, Inc. 4,500 184,500
Expeditors International of Washington, Inc. 12,100 508,200
Finova Group, Inc. 7,000 377,562
Foodmaker, Inc. (b) 29,500 650,844
Friede Goldman International, Inc. (b) 9,800 111,475
General Nutrition Companies, Inc. (b) 14,200 230,750
HA-LO Industries, Inc. (b) 16,900 635,862
Horace Mann Educators Corp. 11,100 316,350
Investors Financial Services Corp. 5,400 321,975
Ivex Packaging Corp. (b) 3,500 81,375
Kellstrom Industries, Inc. (b) 11,800 339,250
Kuhlman Corp. 13,100 496,162
Lason, Inc. (b) 4,900 285,119
Level One Communications, Inc. (b) 5,300 188,150
Mercury Interactive Corp. (b) 3,400 215,050
Mesaba Holdings, Inc. (b) 20,500 422,812
META Group, Inc. (b) 6,700 199,325
Metro Information Services, Inc. (b) 12,400 372,000
North Fork Bancorporation, Inc. 23,500 562,531
Ocular Sciences, Inc. (b) 13,300 355,775
Orthodontic Centers of America, Inc. (b) 17,000 330,437
Patterson Dental Co. (b) 14,700 639,450
Pediatrix Medical Group, Inc. (b) 6,500 389,594
Peoples Heritage Financial Group, Inc. 30,700 614,000
Personnel Group of America, Inc. (b) 17,900 313,250
Pier 1 Imports, Inc. 26,600 257,688
Pride International, Inc. (b) 19,600 138,425
Prime Bancshares, Inc. 5,300 91,425
Prime Group Realty Trust 11,400 172,425
Promus Hotel Corp. (b) 6,200 200,725
Protective Life Corp. 16,400 652,925
Shares Value
---------- -----------
Province Healthcare Co. (b) 1,300 $ 46,638
R & B Falcon Corp. (b) 12,000 91,500
Richfood Holdings, Inc. 15,500 321,625
Sanmina Corp. (b) 6,700 418,750
Smith Int'l, Inc. (b) 10,400 261,950
Sunrise Assisted Living, Inc. (b) 8,800 456,500
Superior Consulting Holdings Corp. (b) 2,000 87,000
Swift Transportation Co., Inc. (b) 23,100 647,522
Sykes Enterprises, Inc. (b) 9,400 286,700
Tetra Tech, Inc. (b) 12,100 327,456
TMP Worldwide, Inc. (b) 5,800 243,600
Toll Brothers, Inc. (b) 10,000 225,625
Tuboscope Inc. (b) 17,700 143,813
U.S. Foodservice (b) 13,600 666,400
U.S. Trust Corp. 8,500 646,000
United Stationers, Inc. (b) 18,300 475,800
Waters Corp. (b) 7,700 671,825
Xoom.com, Inc. (b) 1,400 46,200
Zebra Technologies Corp., Class A (b) 9,600 276,000
Zions Bancorporation 4,700 293,163
------------
Total U.S. Equities (Cost $19,919,618) 22,088,675
------------
Short-Term Investments - 4.24%
Investment Companies - 4.24%
Brinson Supplementary Trust U.S.
Cash Management Prime Fund
(Cost $958,871) 958,871 958,871
------------
Total Investments
(Cost $20,878,489) - 101.94% 23,047,546
------------
Liabilities, less cash and other
assets - (1.94%) (438,235)
------------
Net Assets - 100% $22,609,311
============
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $20,878,489; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $3,485,524
Gross unrealized depreciation (1,316,467)
-----------
Net unrealized appreciation $2,169,057
==========
(b) Non-income producing security
See accompanying notes to financial statements.
60
<PAGE>
U.S. Small Capitalization Growth Fund - Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
ASSETS:
INVESTMENTS, AT VALUE:
Unaffiliated issuers (Cost $19,919,618) $ 22,088,675
Affiliated issuers (Cost $958,871) 958,871
Receivables:
Investment securities sold 5,600
Dividends 9,074
Interest 1,136
Fund shares sold 39,000
------------
TOTAL ASSETS 23,102,356
------------
LIABILITIES:
Payables:
Investment securities purchased 484,257
Investment advisory fees 2,108
Accrued expenses 6,680
------------
TOTAL LIABILITIES 493,045
------------
NET ASSETS $ 22,609,311
============
NET ASSETS CONSIST OF:
Paid in capital $ 24,061,801
Accumulated net realized loss (3,621,547)
Net unrealized appreciation 2,169,057
------------
NET ASSETS $ 22,609,311
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of $22,607,311
and 2,569,863 shares issued and outstanding) $ 8.80
============
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of $1,000 and
114 shares issued and outstanding) $ 8.80
============
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of $1,000 and
114 shares issued and outstanding) $ 8.80
============
See accompanying notes to financial statements.
61
<PAGE>
U.S. Small Capitalization Growth Fund - Financial Statements
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Dividends $ 96,327
Interest 76,924
-----------
TOTAL INCOME 173,251
-----------
EXPENSES:
Advisory 114,211
Shareholder servicing 44,635
Administration 24,165
Fund accounting 27,596
Registration 27,361
Custodian 19,857
Professional 17,149
Other 40,310
-----------
TOTAL EXPENSES 315,284
-----------
Expenses waived and reimbursed by advisor (92,133)
-----------
NET EXPENSES 223,151
-----------
NET INVESTMENT LOSS (49,900)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on investments (3,615,782)
Change in net unrealized appreciation or depreciation on
investments 2,695,815
-----------
Net realized and unrealized loss (919,967)
-----------
Net decrease in net assets resulting from operations $(969,867)
===========
See accompanying notes to financial statements.
62
<PAGE>
U.S. Small Capitalization Growth Fund - Financial Statements
StatementS of Changes in Net Assets
<TABLE>
<CAPTION>
September 30, 1997*
Year Ended Through
December 31, 1998 December 31, 1997
----------------- -------------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (49,900) $ (2,313)
Net realized gain (loss) (3,615,782) 6,540
Change in net unrealized appreciation or depreciation 2,695,815 (526,758)
------------- -------------
Net decrease in net assets resulting from operations (969,867) (522,531)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from capital gains:
Brinson Class I (10,014) --
------------- -------------
Total distributions to shareholders (10,014) --
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 18,352,730 12,731,529
Shares issued on reinvestment of distributions 9,859 --
Shares redeemed (6,727,395) (255,000)
------------- -------------
Net increase in net assets resulting from capital share transactions 11,635,194 12,476,529
------------- -------------
TOTAL INCREASE IN NET ASSETS 10,655,313 11,953,998
------------- -------------
NET ASSETS:
Beginning of period 11,953,998 --
------------- -------------
End of period $ 22,609,311 $ 11,953,998
============= =============
</TABLE>
* Commencement of investment operations
See accompanying notes to financial statements.
63
<PAGE>
U.S. Small Capitalization Growth Fund - Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.***
<TABLE>
<CAPTION>
September 30, 1997*
Year Ended Through
Brinson Class I December 31, 1998 December 31, 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.44 $ 10.00
------- -------
Income from investment operations:
Net investment income (loss) (0.02) --
Net realized and unrealized loss (0.57) (0.56)
------- -------
Total income (loss) from investment operations (0.59) (0.56)
------- -------
Less distributions:
Distributions from net realized gain (0.05) --
------- -------
Total distributions (0.05) --
------- -------
Net asset value, end of period $ 8.80 $ 9.44
======= =======
Total return (non-annualized) (6.70)% (5.62)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $22,607 $11,954
Ratio of expenses to average net assets:
Before expense reimbursement 1.69% 3.63%**
After expense reimbursement 1.20% 1.20%**
Ratio of net investment income (loss) to
average net assets:
Before expense reimbursement (0.76) (2.53)%**
After expense reimbursement (0.27) (0.10)%**
Portfolio turnover rate N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
*** Reflects 10 for 1 share split effective December 9, 1998.
N/A = Information is not available for periods prior to reorganization,
as described in notes to financial statements.
See accompanying notes to financial statements.
64
<PAGE>
High Yield Fund
[UBS LOGO APPEARS HERE]
UBS Brinson is an active manager of high yield fixed income client portfolios.
We believe successful high yield investing involves capturing the market's high
total return potential while minimizing losses due to credit deterioration or
default. We believe that our research-intensive effort and our focus on
long-term performance will result in superior risk-adjusted returns. At the
forefront of our philosophy is a focus on diversification and preservation of
principal.
The distribution of the UBS Investment Fund Class of the High Yield Fund
commenced on December 31, 1998. The discussion that follows relates to the
performance of the High Yield Fund for the year ended December 31, 1998.
During 1998, the benchmark's yield-to-worst increased markedly, from 8.85% at
year-end 1997 to 10.18% at year-end 1998. Spreads in the high yield market
widened by 242 basis points during 1998 as investors fled the high yield market
for the safety and liquidity of U.S. Treasuries. By year-end, liquidity had
improved and spreads had tightened by 100 basis points from the October peak to
end the year at 554 basis points.
Industry weightings contributed significantly to 1998 results. During 1998, the
Fund underweighted the energy, metals and paper industries, which all posted
negative returns, and overweighted broadcasting and diversified media, which
outperformed. Issue selection also played an important role in 1998 as bond
holdings in Simmons Co. and Ryder TRS, among others, were refinanced via tender
offers, resulting in significant capital appreciation. Most importantly, the
Fund suffered no default-related losses and, since inception, has maintained a
default rate of 0.00%.
At year end, the Fund contained approximately 100 issues, with 19% in double-B,
74% in single-B and 7% in CCC/CC/C rated issues.
65
<PAGE>
High Yield Fund
[UBS LOGO APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998
- -----------------------------------------------------------------------------
U.S. bonds
Corporate Bonds
Auto 2.01%
Broadcasting & Public Service 15.28
Construction 6.29
Consumer Goods 4.11
Electronics and Electric Components 3.31
Energy 0.87
Financial 1.55
Food & House Products 2.88
Health 1.26
Industrial 13.68
Machinery & Engineering 3.17
Multi-Industry 2.76
Real Estate 1.19
Recreation 9.85
Retail 2.09
Services 3.80
Telecommunications 19.74%
Utilities 0.95
Wholesale & International Trade 0.59
-------
Total U.S. Bonds 95.38
-------
U.S. EQUITIES
Warrants 0.00
Total U.S. Equities 0.00
-------
SHORT-TERM INVESTMENTS 3.86
-------
TOTAL INVESTMENTS 99.24
-------
CASH AND OTHER ASSETS,
LESS LIABILITIES 0.76
-------
NET ASSETS 100.00%
=======
- -----------------------------------------------------------------------------
Top Ten U.S. Bond Holdings
As of December 31, 1998
Percent of
Net Assets
- -------------------------------------------------
1. Echostar Communications 2.20%
2. Chancellor Media 1.73
3. Bally Total Fitness Holdings 1.69
4. Ackerley Group Inc. 1.60
5. Big Flower Press Holdings 1.59
6. Allbritton Communications 1.59
7. Verio Inc. 1.59
8. Mail-Well Corp. 1.58
9. PSINET Inc. 1.58
10. Diamond Triumph Inc. 1.57
- -------------------------------------------------
66
<PAGE>
High Yield Fund - Schedule of Investments
December 31, 1998
- -----------------------------------------------------------------------------
Face
Amount Value
----------- -----------------
U.S. Bonds - 95.38%
U.S. Corporate Bonds - 95.38%
Ackerley Group, Inc., Series 144A, 9.000%,
due 01/15/09 $550,000 $ 558,250
Allbritton Communications, Series B,
8.875%, due 02/01/08 550,000 555,500
Alliance Laundry Systems, Series 144A,
9.625%, due 05/01/08 425,000 408,000
Aurora Foods, Series B
9.875%, due 02/15/07 300,000 327,000
8.750%, due 07/01/08 150,000 156,000
Avalon Cable, Series 144A, 9.375%, due
12/01/08 425,000 434,562
Bally Total Fitness Holdings Corp., Series B,
9.875%, due 10/15/07 600,000 588,000
Big Flower Press Holdings, Series 144A,
8.625%, due 12/01/08 550,000 555,500
Building Materials Holding Corp.,
Series 144A, 8.000%, due 12/01/08 425,000 423,937
CB Richard Ellis Services, Inc.,
8.875%, due 06/01/06 425,000 416,500
Centennial Cellular, Series 144A,
10.750%, due 12/15/08 550,000 547,250
Century Communications Corp.,
0.000%, due 01/15/08 425,000 212,500
Chancellor Media Corp., Series B,
10.500%, due 01/15/07 550,000 602,250
Citadel Broadcasting Co.
10.250%, due 07/01/07 275,000 299,063
Series 144A, 9.250%, due 11/15/08 275,000 286,688
Collins & Aikman Corp.,
11.500%, due 04/15/06 500,000 520,000
CSC Holdings, Inc.,
7.625%, due 07/15/18 250,000 245,150
Cumulus Media, Inc.,
10.375%, due 07/01/08 450,000 477,000
Dan River, Inc., Snr-Sub-Nts,
10.125%, due 12/15/03 200,000 209,500
Diamond Triumph Autoglass, Inc.,
Series 144A, 9.250%, due 04/01/08 550,000 547,250
Digital Television, Series B,
12.500%, due 08/01/07 300,000 327,000
Dobson / Sygnet, Series 144A,
12.250%, due 12/15/08 125,000 127,188
E Spire Communications, Inc., Snr-Nts,
Step, 0.000%, due 07/01/08 (c) 550,000 214,500
Eagle Family Foods, Series B,
8.750%, due 01/15/08 550,000 519,750
Echostar Communications, Step,
0.000%, due 06/01/04 (d) 750,000 768,750
Fedders North America,
9.375%, due 08/15/07 300,000 302,250
Federal-Mogul Corp.,
7.875%, due 07/01/10 150,000 153,120
Face
Amount Value
----------- -----------------
Fox / Liberty Networks, Step,
0.000%, due 08/15/07 (e) $750,000 $ 510,000
Golden Sky Systems, Series 144A,
12.375%, due 08/01/06 450,000 465,750
Harrahs Operating Co., Inc.,
7.875%, due 12/05/05 425,000 429,709
Harvey Casinos Resorts,
10.625%, due 06/01/06 100,000 108,000
Hollinger International, Inc.,
9.250%, due 03/15/07 425,000 448,375
ICG Holdings, Inc., Step,
0.000%, due 09/15/05 (f) 425,000 350,625
Interep National Radio Sales, Series 144A,
10.000%, due 07/01/08 425,000 437,750
Intermedia Communications, Inc., Snr-Nts,
Series B, 0.000%, due 07/15/07 550,000 374,000
International Comfort Products Corp.,
Series B, 8.625%, due 05/15/08 275,000 277,750
Iron Mountain, Inc.,
10.125%, due 10/01/06 200,000 217,000
J.H. Heafner Co., Series 144A,
10.000%, due 05/15/08 425,000 427,125
JCAC, Inc., 10.125%, due 06/15/06 450,000 501,750
Level 3 Communications, Inc.,
9.125%, due 05/01/08 450,000 444,375
Liberty Group Operating,
9.375%, due 02/01/08 550,000 539,000
LIN Holdings Corp., Step,
0.000%, due 03/01/08 (g) 600,000 420,000
Lowes Cineplex, 8.875%, due 08/01/08 350,000 361,375
Mail Well Corp. Series 144A,
8.750%, due 12/15/08 550,000 550,000
Marcus Cable Co., Step,
0.000%, due 12/15/05 (h) 500,000 473,750
McLeodusa, Inc., 9.250%, due 07/15/07 300,000 313,500
Mediacom LLC., Series B,
8.500%, due 04/15/08 500,000 511,875
Microcell Telecommunications, Snr-Nts,
Series B, Step, 0.000%, due 06/01/06 (i) 350,000 259,875
MTS, Inc., 9.375%, due 05/01/05 450,000 438,750
National Equipment Services, Series 144A,
10.000%, due 11/30/04 550,000 536,250
Nationsrent, Inc., Series 144A,
10.375%, due 12/15/08 550,000 544,500
NBTY, Inc., Series B, 8.625%, due 09/15/07 450,000 438,750
Newpark Resource, Inc., Series B,
8.625%, due 12/15/07 350,000 331,625
Nextel Communications, Inc.
Series 144A, Step, 0.000%,
due 09/15/07 (j) 375,000 239,063
Snr-Nts, Step, 0.000%, due 10/31/07 (k) 250,000 151,250
Nextlink Communications, Series 144A,
10.750%, due 11/15/08 375,000 381,562
67
<PAGE>
High Yield Fund - Schedule of Investments
December 31, 1998
- -----------------------------------------------------------------------------
Face
Amount Value
----------- -----------------
Nortek, Inc, 144A, 8.875%, due 08/01/08 $375,000 $382,500
NTL, Inc., Series 144A, Step,
0.000%, due 10/01/08 (l) 550,000 344,438
Outdoor Communications, Inc., Snr-Sub-Nts,
9.250%, due 08/15/07 200,000 212,000
Parker Drilling Corp., Series D, 9.750%,
due 11/15/06 150,000 133,500
Paxson Communications, 11.625%,
due 10/01/02 500,000 512,500
Pegasus Communications Corp.
Series 144A, 9.750%, due 12/01/06 150,000 150,375
Series B, 9.625%, due 10/15/05 450,000 451,125
Pilgrim's Pride Corp., Snr-Sub-Nts,
10.875%, due 08/01/03 200,000 206,000
Premier Parks, Inc., Step, 0.000%,
due 04/01/08 (m) 660,000 447,150
Pride Petroleum Service, Snr-Nts, 9.375%,
due 05/01/07 325,000 302,250
PSINet, Inc. Series 144A, 11.500%
due 11/01/08 525,000 549,937
R. H. Donnelley, Inc., 9.125%, due 06/01/08 350,000 366,625
Rayovac Corp., Series B, 10.250%,
due 11/01/06 350,000 385,000
RCN Corp., Step, 0.000%, due 10/15/07 (n) 450,000 263,250
Revlon Consumer Products, 8.625%,
due 02/01/08 550,000 500,500
SFX Entertainment, Inc., Series B, 9.125%,
due 02/01/08 550,000 544,500
Sinclair Broadcast Group
10.000%, due 09/30/05 250,000 265,000
8.750%, due 12/15/07 250,000 252,500
Splitrock Services, Inc., Series B, 11.750%,
due 07/15/08 220,000 190,300
Station Casinos, Series 144A, 8.875%,
due 12/01/08 500,000 507,500
Trans-Resources, Inc., Series B, Step,
0.000%, due 03/15/08 (o) 250,000 132,500
Transwestern
9.625%, due 11/15/07 275,000 286,000
Snr-Nts, Series 144A, 9.625%,
due 11/15/07 250,000 260,000
Trump Atlantic City Funding, Inc.,
11.250%, due 05/01/06 100,000 88,000
Unisys Corp., 11.750%, due 10/15/04 300,000 348,000
United Artists Theatre Circuit, Inc., Series B
Snr-Sub-Nts, 9.750%, due 10/15/07 125,000 115,000
9.750%, due 04/15/08 350,000 334,250
United Rentals
Series B, 9.500%, due 06/01/08 125,000 126,250
Series 144A, 8.800%, due 08/15/08 425,000 416,500
Series 144A, 9.250%, due 01/15/09 250,000 250,625
Verio, Inc., Series 144A, 11.250%,
due 12/01/08 550,000 552,750
Face
Amount Value
----------- -----------------
Weirton Steel Corp., 10.750%, due 06/01/05 $425,000 $ 365,500
Wesco Distribution, Inc., Series B, 9.125%,
due 06/01/08 300,000 300,000
Young Broadcasting, Inc., Series B, 8.750%,
due 06/15/07 475,000 482,125
-----------
Total U.S. Bonds (Cost $33,507,290) 33,290,242
-----------
Shares
-----------
U.S. Equities - 0.00%
Splitrock Services, Inc., Warrants
due 07/15/08 (b) (Cost $11,307) 220 -
-----------
Short-Term Investments - 3.86%
Investment Companies - 3.86%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund
(Cost $1,345,443) 1,345,443 1,345,443
-----------
Total Investments -
(Cost $34,864,040) 99.24% (a) 34,635,685
-----------
Cash and other assets,
less liabilities - 0.76% 266,237
-----------
Net Assets - 100% $34,901,922
===========
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $34,864,040; and net
unrealized depreciation consisted of:
Gross unrealized appreciation $ 423,318
Gross unrealized depreciation (651,672)
---------
Net unrealized depreciation $(228,355)
=========
(b) Non-income producing security
(c) Interest rate 0.000% until 07/01/03, then 10.625% to maturity
(d) Interest rate 0.000% until 05/31/99, then 12.875% to maturity
(e) Interest rate 0.000% until 08/15/02, then 9.750% to maturity
(f) Interest rate 0.000% until 09/14/00, then 13.500% to maturity
(g) Interest rate 0.000% until 03/01/03, then 10.000% to maturity
(h) Interest rate 0.000% until 06/15/00, then 14.250% to maturity
(i) Interest rate 0.000% until 12/01/01, then 14.000% to maturity
(j) Interest rate 0.000% until 09/15/02, then 10.450% to maturity
(k) Interest rate 0.000% until 10/31/02, then 9.750% to maturity
(l) Interest rate 0.000% until 10/01/03, then 12.375% to maturity
(m) Interest rate 0.000% until 04/01/03, then 10.000% to maturity
(n) Interest rate 0.000% until 10/15/02, then 11.125% to maturity
(o) Interest rate 0.000% until 03/15/03, then 12.000% to maturity
144A: Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1998, the value of these securities amounted to $10,885,250 or 31.22% of
net assets.
See accompanying notes to financial statements.
68
<PAGE>
High Yield Fund - Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
ASSETS:
Investments, at value (Cost $34,864,040) $ 34,635,685
Receivables:
Investment securities sold 529,452
Interest 601,631
Fund shares sold 33,000
------------
TOTAL ASSETS 35,799,768
------------
LIABILITIES:
Payables:
Investment securities purchased 888,736
Investment advisory fees 3,721
Accrued expenses 5,389
------------
TOTAL LIABILITIES 897,846
------------
NET ASSETS $ 34,901,922
============
NET ASSETS CONSIST OF:
Paid in capital $ 35,056,372
Accumulated net realized gain 73,905
Net unrealized depreciation (228,355)
------------
NET ASSETS $ 34,901,922
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of $34,899,922
and 3,498,244 shares issued and outstanding) $ 9.98
============
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of $1,000
and 100 shares issued and outstanding) $ 9.98
============
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of $1,000 and
100 shares issued and outstanding) $ 9.98
============
See accompanying notes to financial statements.
69
<PAGE>
High Yield Fund - Financial Statements
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Dividends $ 349
Interest 1,537,251
------------
TOTAL INCOME 1,537,600
------------
EXPENSES:
Advisory 78,138
Shareholder servicing 39,782
Fund accounting 31,164
Registration 27,308
Administration 21,515
Custodian 17,544
Professional 16,347
Shareholder reporting 15,051
Transfer agent 14,999
Other 10,466
------------
TOTAL EXPENSES 272,314
Expenses waived and reimbursed by advisor (120,078)
------------
NET EXPENSES 152,236
------------
NET INVESTMENT INCOME 1,385,364
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments 261,744
Change in net unrealized appreciation or depreciation (260,233)
------------
Net realized and unrealized gain 1,511
------------
Net increase in net assets resulting from operations $ 1,386,875
============
See accompanying notes to financial statements.
70
<PAGE>
High Yield Fund - Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
September 30, 1997*
Year Ended Through
December 31, 1998 December 31, 1997
----------------- --------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,385,364 $ 131,850
Net realized gain 261,744 17,380
Change in net unrealized appreciation or depreciation (260,233) 31,878
------------ ------------
Net increase in net assets resulting from operations 1,386,875 181,108
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I (1,395,944) (129,573)
Distributions from net realized gain:
Brinson Class I (196,916) --
------------ ------------
Total distributions to shareholders (1,592,860) (129,573)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 29,258,184 7,756,774
Shares issued on reinvestment of distributions 1,381,731 129,246
Shares redeemed (3,393,269) (76,294)
------------ ------------
Net increase in net assets resulting from capital share transactions 27,246,646 7,809,726
------------ ------------
TOTAL INCREASE IN NET ASSETS 27,040,661 7,861,261
------------ ------------
NET ASSETS:
Beginning of period 7,861,261 --
------------ ------------
End of period (including accumulated undistributed net investment
income of $2,277 in 1997) $ 34,901,922 $ 7,861,261
============ ============
</TABLE>
* Commencement of investment operations.
See accompanying notes to financial statements.
71
<PAGE>
High Yield Fund - Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.***
<TABLE>
<CAPTION>
September 30, 1997*
Year Ended Through
Brinson Class I December 31, 1998 December 31, 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 10.05 $ 10.00
------- -------
Income from investment operations:
Net investment income 7.30 0.18
Net realized and unrealized gain 0.02 0.05
------- -------
Total income from investment operations 7.32 0.23
------- -------
Less distributions:
Distributions from net investment income (7.33) (0.18)
Distributions from net realized gain (0.06) --
------- -------
Total distributions (7.39) (0.18)
------- -------
Net asset value, end of period $ 9.98 $ 10.05
======= =======
Total return (non-annualized) 7.75% 2.34%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $34,900 $ 7,861
Ratio of expenses to average net assets:
Before expense reimbursement 1.59% 4.98%**
After expense reimbursement 0.89% 0.90%**
Ratio of net investment income to average net assets:
Before expense reimbursement 7.38% 3.15%**
After expense reimbursement 8.08% 7.23%**
Portfolio turnover rate N/A N/A
</TABLE>
* Commencement of investment operations
** Annualized
*** Reflects 10 for 1 share split effective December 9, 1998
N/A = Information is not available for periods prior to reorganization,
as described in notes to financial statements.
See accompanying notes to financial statements.
72
<PAGE>
The UBS Investment Funds - Notes To Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, as a series
company. The Trust currently offers shares of eleven series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (ex-U.S.)
Equity Fund (formerly, Non-U.S. Equity Fund) (each a "Fund" and collectively,
the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class
I, Brinson Class N and UBS Investment Funds Class (formerly, SwissKey Class).
There are an unlimited number of shares of each class with par value of $0.001
authorized. Each share represents an identical interest in the investments of
the Funds and has the same rights.
Prior to December 21, 1998, the U.S. Large Capitalization Growth Fund (formerly,
UBS Large Cap Growth Fund), U.S. Small Capitalization Growth Fund (formerly, UBS
Small Cap Fund), High Yield Fund (formerly, UBS High Yield Bond Fund), UBS Value
Equity Fund and UBS Bond Fund sought to achieve their investment objectives by
investing substantially all of their investable assets in a corresponding
portfolio of UBS Investor Portfolios Trust (each a "Portfolio" and collectively,
the "Portfolios"), an open-end management investment company that had the same
investment objective. On October 20, 1998, the Board of Directors of the
Portfolios approved a tax-free plan of reorganization (the "Reorganization").
The Reorganization was ratified by the shareholders at a special meeting of the
shareholders held on December 8, 1998.
Pursuant to the Reorganization, the net assets of the UBS Large Cap Growth Fund,
UBS Small Cap Fund and UBS High Yield Bond Fund were withdrawn from their
corresponding Portfolio and thereafter each began to operate, under its new
name, as a separate Fund in the Trust. The accompanying financial statements
reflect the results of operations for each of these Funds for the year ended
December 31, 1998, including the operations of these Funds prior to their
Reorganization.
In addition, pursuant to the Reorganization, the net assets of the UBS Value
Equity Fund and UBS Bond Fund were withdrawn from their corresponding Portfolio
and acquired by the U.S. Equity Fund and U.S. Bond Fund, respectively, in
exchange solely for Brinson Class I shares of each Fund. The UBS Value Equity
Fund and UBS Bond Fund were then dissolved. Shares issued in exchange, net asset
value and corresponding net unrealized appreciation at December 18, 1998, were
as follows:
Net Unrealized
Fund Shares Asset Value Appreciation
- ---- ------ ----------- ------------
UBS Value Equity Fund 1,233,797 23,269,419 774,047
UBS Bond Fund 1,429,121 15,177,263 27,192
The aggregate net assets of the U.S. Equity Fund and UBS Value Equity Fund and
the U.S. Bond Fund and UBS Bond Fund immediately before the mergers were
$729,679,727 and $23,269,419 and $80,523,890 and $15,177,263, respectively.
These Reorganizations occurred because of the merger of Union Bank of
Switzerland, the corporate parent of the UBS Portfolios investment advisor, and
Swiss Bank Corporation, the corporate parent of the Trusts' investment advisor.
The fiscal year end for U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund and High Yield Fund is December 31 and the fiscal
year end for U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization
Equity Fund, and U.S. Bond Fund is June 30. Information for the U.S. Balanced
Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund and U.S. Bond Fund
for the six-month period ended December 31, 1998, is not covered by the Report
of Independent Auditors.
The following is a summary of significant accounting policies consistently
followed by the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization
Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization
Growth Fund, U.S. Bond Fund and High Yield Fund in the preparation of their
financial statements.
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
73
<PAGE>
The UBS Investment Funds - Notes To Financial Statements
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. 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 period ended December 31,
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 9.18% and .02% of the amount
taxable as ordinary income qualify for the dividends received deduction
available to corporate shareholders for the U.S. Large Capitalization Growth
Fund and High Yield Fund, respectively. At December 31, 1998, the U.S. Small
Capitalization Growth Fund had a capital loss carry-forward for Federal income
tax purposes of approximately $1,768,000 available to offset future net capital
gains which will expire on December 31, 2006.
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 UBS Investment Funds Class.
G. Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, each Fund pays the Advisor a monthly fee based on the Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates for the six
months ended December 31, 1998 (unaudited), were as follows:
<TABLE>
<CAPTION>
UBS Investment Fees Waived
Advisory Brinson Class I Brinson Class N Funds Class Advisory and/or
Fee Expense Cap Expense Cap Expense Cap Fees Reimbursed
-------- --------------- --------------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Balanced Fund 0.70% 0.80% 1.05% 1.30% $ 198,756 $ 40,475
U.S. Equity Fund 0.70 0.80 1.05 1.32 2,368,764 --
U.S. Large Capitalization Equity Fund 0.70 0.80 1.05 1.32 59,251 51,141
U.S. Bond Fund 0.50 0.60 0.85 1.07 164,957 12,367
</TABLE>
74
<PAGE>
The UBS Investment Funds - Notes To Financial Statements
Investment advisory fees and other transactions with affiliates for the period
December 21, 1998 through December 31, 1998, were as follows:
<TABLE>
<CAPTION>
UBS Investment Fees Waived
Advisory Brinson Class I Brinson Class N Funds Class Advisory and/or
Fee Expense Cap Expense Cap Expense Cap Fees Reimbursed
-------- --------------- --------------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Large Capitalization Growth Fund 0.70% 0.80% 1.05% 1.57% $ 849 $ 849
U.S. Small Capitalization Growth Fund 1.00 1.15 1.40 1.92 6,538 4,431
High Yield Fund 0.60 0.70 0.95 1.55 6,278 2,648
</TABLE>
The investment advisor of the Portfolios was the Union Bank of Switzerland, New
York Branch ("UBS"). Prior to December 21, 1998, the UBS Large Cap Growth Fund,
UBS Small Cap Fund and UBS High Yield Bond Fund, (the "UBS Funds") recorded
their share of advisory expense, allocated from their corresponding Portfolio,
on a daily basis. UBS voluntarily agreed to reimburse each Portfolio to the
extent total operating expenses exceeded a specified percentage of each
Portfolio's and each UBS fund's respective average daily net assets. Investment
advisory fees allocated to the Funds and other transactions with affiliates for
the period January 1, 1998 through December 20, 1998, were as follows:
Fees
Expense Cap Advisory Fees Reimbursed
----------- ------------- ----------
UBS Large Capitalization Growth Fund 1.00% $ 32,644 $ 97,199
UBS Small Capitalization Growth Fund 1.20 107,673 87,702
UBS High Yield Bond Fund 0.90 71,860 117,430
Prior to the Reorganization, the UBS Funds had a Shareholder Servicing Agreement
with UBS pursuant to which UBS provided certain services to shareholders of each
UBS Fund. Each UBS Fund incurred a fee equal to 0.25% of the average daily net
assets for these services. Fees incurred, all of which were waived, for the
period January 1, 1998 through December 18, 1998, were as follows:
Shareholder
Servicing
Fees
-----------
UBS Large Capitalization Growth Fund $13,511
UBS Small Capitalization Growth Fund 44,635
UBS High Yield Bond Fund 39,782
Prior to the Reorganization, UBS provided certain administrative services to the
UBS Funds under the terms of a Funds Services Agreement. UBS did not receive any
additional compensation pursuant to that agreement.
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 six months ended December 31, 1998 were $3,864,
$3,128, $3,864 and $2,024 for the U.S. Balanced Fund, U.S. Equity Fund, U.S.
Large Capitalization Equity Fund and U.S. Bond Fund, respectively. For the year
ended December 31, 1998, Trustees' fees paid to unaffiliated trustees were
$5,635, $6,876 and $7,412 for the U.S. Large Capitalization Growth Fund, U.S.
Small Capitalization Growth Fund and High Yield Fund, respectively.
The following Funds invest in shares of the Brinson Supplementary Trust U.S.
Cash Management Prime Fund ("Supplementary Trust"). The Supplementary Trust is
managed by the Advisor. The Supplementary Trust is offered as a cash management
option only to mutual funds and other accounts managed by the Advisor and is not
available to the public. The Supplementary Trust pays no management fees.
75
<PAGE>
The UBS Investment Funds - Notes To Financial Statements
Distributions from the Supplementary Trust are reflected as interest income on
the statement of operations. Amounts relating to those investments at December
31, 1998 and for the period then ended are summarized as follows:
<TABLE>
<CAPTION>
% of
Sales Interest Net
Fund Purchases Proceeds Income Value Assets
- ---- --------- -------- --------- ----- ------
<S> <C> <C> <C> <C> <C>
U.S. Balanced Fund $ 983,860 $ 449,668 $ 1,069 $ 534,192 1.19%
U.S. Equity Fund 17,274,632 2,361,373 23,580 14,913,259 1.95
U.S. Large Capitalization Equity Fund 1,630,080 243,196 1,392 1,386,884 6.27
U.S. Bond Fund 8,213,871 1,575,171 10,333 6,638,700 6.92
U.S. Large Capitalization Growth Fund 139,680 7,989 393 131,691 3.18
U.S. Small Capitalization Growth Fund 958,871 -- 1,136 958,871 4.24
High Yield Fund 3,805,498 2,460,055 4,240 1,345,443 3.86
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1998 (unaudited),
excluding short-term investments, were as follows:
Proceeds
Purchases From Sales
--------- ----------
U.S. Balanced Fund $ 33,150,071 $ 62,821,982
U.S. Equity Fund 178,283,409 114,182,027
U.S. Large Capitalization Equity Fund 7,501,992 3,060,203
U.S. Bond Fund 128,393,569 85,978,273
Investment transactions for the period December 21, 1998 through December 31,
1998, excluding short-term investments, were as follows:
Proceeds
Purchases From Sales
--------- ----------
U.S. Large Capitalization Growth Fund $ 25,396 $ --
U.S. Small Capitalization Growth Fund 1,110,379 1,239,887
High Yield Fund 2,456,438 654,750
4. FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date at
a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market or that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Funds, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
5. DISTRIBUTION PLANS
The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for the Brinson Class N
and the UBS Investment Funds Class. Each Plan governs payments made for the
expenses incurred in the promotion and distribution of the Brinson Class N and
the UBS Investment Funds Class. Annual fees under the Brinson Class N Plan shall
not exceed 0.25% of the average daily net assets of the Brinson Class N of each
of the Funds. Annual fees under the UBS Investment Funds Plan, which include a
0.25% service fee, total 0.50%, 0.52%, 0.52%, 0.77%, 0.77%, 0.47%, and 0.85% of
the average daily net assets of the UBS Investment Funds Class of the U.S.
Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S.
Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S.
Bond Fund and High Yield Fund, respectively.
6. LINE OF CREDIT
The Trust has entered into an agreement with Chase Manhattan Bank to provide a
364 day $100 million committed line of credit to the Funds. Borrowings will be
made for temporary purposes. Interest on amounts borrowed is calculated based on
the Federal Funds rate plus
76
<PAGE>
The UBS Investment Funds - Notes To Financial Statements
0.50%. The Funds pay an annual commitment fee of 0.08% of the average daily
unutilized balance of the line of credit. During the period ended December 31,
1998, the Funds had no borrowings under the agreement.
7. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
U.S. Balanced Fund
<TABLE>
<CAPTION>
U.S. Balanced Fund
---------------------------------------------------------
Six Months Ended Year Ended
December 31, 1998 (Unaudited) June 30, 1998
---------------------------------------------------------
Shares Value Shares Value
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I 645,486 $ 7,769,946 4,720,912 $ 58,173,143
Brinson Class N -- -- -- --
UBS Investment Funds Class 84,835 994,551 49,659 624,713
----------- ------------ ---------- ------------
Total Sales 730,321 $ 8,764,497 4,770,571 $ 58,797,856
=========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I 1,193,337 $ 11,121,901 2,662,862 $ 31,359,575
Brinson Class N 32 299 11 136
UBS Investment Funds Class 55,020 510,039 14,933 175,706
----------- ------------ ---------- ------------
Total Dividend
Reinvestment 1,248,389 $ 11,632,239 2,677,806 $ 31,535,417
=========== ============ ========== ============
Redemptions:
Brinson Class I 3,863,158 $ 45,621,386 23,388,425 $293,534,522
Brinson Class N -- -- -- --
UBS Investment Funds Class 64,496 724,033 42,682 540,673
----------- ------------ ---------- ------------
Total Redemptions 3,927,654 $ 46,345,419 23,431,107 $294,075,195
=========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
U.S. Equity Fund
---------------------------------------------------------
Six Months Ended Year Ended
December 31, 1998 (Unaudited) June 30, 1998
---------------------------------------------------------
Shares Value Shares Value
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I** 8,066,362 $150,512,394 16,875,765 $314,205,812
Brinson Class N 216,548 4,021,529 13,398 269,368
UBS Investment Funds Class 1,081,207 21,777,960 1,697,355 31,606,780
----------- ------------ ---------- ------------
Total Sales 9,364,117 $176,311,883 18,586,518 $346,081,960
=========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I 2,026,930 $ 37,801,864 1,861,660 $ 32,092,717
Brinson Class N 12,815 238,104 47 896
UBS Investment Funds Class 86,539 1,608,752 110,158 1,887,716
----------- ------------ ---------- ------------
Total Dividend
Reinvestment 2,126,284 $ 39,648,720 1,971,865 $ 33,981,329
=========== ============ ========== ============
Redemptions:
Brinson Class I 5,126,943 $ 97,655,470 7,470,182 $144,565,891
Brinson Class N 19,879 361,850 5 100
UBS Investment Funds Class 342,279 6,261,509 1,023,014 19,298,428
----------- ------------ ---------- ------------
Total Redemptions 5,489,101 $104,278,829 8,493,201 $163,864,419
=========== ============ ========== ============
</TABLE>
** Includes shares issued in connection with reorganization.
77
<PAGE>
The UBS Investment Funds - Notes To Financial Statements
<TABLE>
<CAPTION>
U.S. Large Capitalization Equity Fund
---------------------------------------------------------
Six Months Ended Year Ended
December 31, 1998 (Unaudited) June 30, 1998
---------------------------------------------------------
Shares Value Shares Value
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I 916,683 $ 8,949,197 16,662 $ 163,328
Brinson Class N 8,098 78,700 1,688,092 16,758,163
UBS Investment Funds Class -- -- 104 1,000
----------- ------------ ---------- ------------
Total Sales 924,781 $ 9,027,897 1,704,858 $ 16,922,491
=========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I 4,692 $ 46,270 18 $ 168
Brinson Class N 7,095 69,880 2,204 20,606
UBS Investment Funds Class -- 6 -- 1
----------- ------------ ---------- ------------
Total Dividend
Reinvestment 11,787 $ 116,156 2,222 $ 20,775
=========== ============ ========== ============
Redemptions:
Brinson Class I 23,163 $ 228,994 1,015 $ 9,875
Brinson Class N 421,436 4,019,081 51,661 509,678
UBS Investment Funds Class -- -- -- --
----------- ------------ ---------- ------------
Total Redemptions 444,599 $ 4,248,075 52,676 $ 519,553
=========== ============ ========== ============
</TABLE>
* The Fund commenced operations on April 6, 1998.
<TABLE>
<CAPTION>
U.S. Bond Fund
---------------------------------------------------------
Six Months Ended Year Ended
December 31, 1998 (Unaudited) June 30, 1998
---------------------------------------------------------
Shares Value Shares Value
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I** 7,557,553 $ 81,377,100 1,926,960 $ 20,378,131
Brinson Class N 2,379 25,964 -- --
UBS Investment Funds Class 350,102 3,786,487 134,362 1,416,847
----------- ------------ ---------- ------------
Total Sales 7,910,034 $ 85,171,551 2,061,322 $ 21,794,978
=========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I 239,645 $ 2,545,027 107,565 $ 1,114,591
Brinson Class N 4 43 6 68
UBS Investment Funds Class 12,927 136,765 5,825 60,235
----------- ------------ ---------- ------------
Total Dividend
Reinvestment 252,576 $ 2,681,835 113,396 $ 1,174,894
=========== ============ ========== ============
Redemptions:
Brinson Class I 2,915,499 $ 31,500,447 549,381 $ 5,780,080
Brinson Class N 2,379 25,905 -- --
UBS Investment Funds Class 115,415 1,248,637 45,413 475,640
----------- ------------ ---------- ------------
Total Redemptions 3,033,293 $ 32,774,989 594,794 $ 6,255,720
=========== ============ ========== ============
</TABLE>
**Includes shares issued in connection with reorganization.
78
<PAGE>
The UBS Investment Funds - Notes To Financial Statements
<TABLE>
<CAPTION>
U.S. Large Capitalization Growth Fund
---------------------------------------------------------
Period from October 14, 1997
Year Ended (commencement of operations)
December 31, 1998 to December 31, 1997
---------------------------------------------------------
Shares Value Shares Value
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I* 349,475 $ 4,971,380 41,609 $ 4,108,844
Brinson Class N 84 1,000 -- --
UBS Investment Funds Class 84 1,000 -- --
----------- ------------ ---------- ------------
Total Sales 349,643 $ 4,973,380 41,609 $ 4,108,844
=========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I 15,430 $ 170,881 92 $ 9,050
Brinson Class N -- -- -- --
UBS Investment Funds Class -- -- -- --
----------- ------------ ---------- ------------
Total Dividend
Reinvestment 15,430 $ 170,881 92 $ 9,050
=========== ============ ========== ============
Redemptions:
Brinson Class I 56,390 $ 5,974,601 4 $ 356
Brinson Class N -- -- -- --
UBS Investment Funds Class -- -- -- --
----------- ------------ ---------- ------------
Total Redemptions 56,390 $ 5,974,601 4 $ 356
=========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
U.S. Small Capitalization Growth Fund
----------------------------------------------------------
Period from September 30, 1997
Year Ended (commencement of operations)
December 31, 1998 to December 31, 1997
----------------------------------------------------------
Shares Value Shares Value
------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I** 2,571,818 $ 18,350,730 129,190 $ 12,731,529
Brinson Class N 114 1,000 -- --
UBS Investment Funds Class 114 1,000 -- --
----------- ------------ ---------- ------------
Total Sales 2,572,046 $ 18,352,730 129,190 $ 12,731,529
=========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I 132 $ 9,859 -- $ --
Brinson Class N -- -- -- --
UBS Investment Funds Class -- -- -- --
----------- ------------ ---------- ------------
Total Dividend
Reinvestment 132 $ 9,859 -- $ --
=========== ============ ========== ============
Redemptions:
Brinson Class I 128,744 $ 6,727,395 2,533 $ 255,000
Brinson Class N -- -- -- --
UBS Investment Funds Class -- -- -- --
----------- ------------ ---------- ------------
Total Redemptions 128,744 $ 6,727,395 2,533 $ 255,000
=========== ============ ========== ============
</TABLE>
* Includes 298,108 shares issued in 10 for 1 share split.
** Includes 2,227,053 shares issued in 10 for 1 share split.
79
<PAGE>
The UBS Investment Funds - Notes To Financial Statements
<TABLE>
<CAPTION>
High Yield Fund
----------------------------------------------------------
Period from September 30, 1997
Year Ended (commencement of operations)
December 31, 1998 to December 31, 1997
----------------------------------------------------------
Shares Value Shares Value
------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I* 3,412,082 $ 29,256,184 77,644 $ 7,756,774
Brinson Class N 100 1,000 -- --
UBS Investment Funds Class 100 1,000 -- --
----------- ------------ ---------- ------------
Total Sales 3,412,282 $ 29,258,184 77,644 $ 7,756,774
=========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I 47,240 $ 1,381,731 1,296 $ 129,246
Brinson Class N -- -- -- --
UBS Investment Funds Class -- -- -- --
----------- ------------ ---------- ------------
Total Dividend
Reinvestment 47,240 $ 1,381,731 1,296 $ 129,246
=========== ============ ========== ============
Redemptions:
Brinson Class I 39,259 $ 3,393,269 759 $ 76,294
Brinson Class N -- -- -- --
UBS Investment Funds Class -- -- -- --
----------- ------------ ---------- ------------
Total Redemptions 39,259 $ 3,393,269 759 $ 76,294
=========== ============ ========== ============
</TABLE>
* Includes 2,898,051 shares issued in 10 for 1 share split.
80
<PAGE>
Report of Independent Auditors
The Board of Trustees and Shareholders
The Brinson Funds -
U.S. Large Capitalization Growth Fund
U.S. Small Capitalization Growth Fund
High Yield Fund
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of The Brinson Funds-U.S. Large Capitalization
Growth Fund, U.S. Small Capitalization Growth Fund and High Yield Fund as of
December 31, 1998, the related statements of operations and changes in net
assets and the financial highlights for the year then ended. 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 audit. The financial statements
and financial highlights of U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund and High Yield Fund for the period ended December 31,
1997, were audited by other auditors whose report dated February 17, 1998,
expressed an unqualified opinion on those statements and financial highlights.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds-U.S. Large Capitalization Growth Fund, U.S. Small Capitalization
Growth Fund and High Yield Fund at December 31, 1998, the results of their
operations, the changes in their net assets and the financial highlights for the
year then ended in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
February 12, 1999
81
<PAGE>
Special Meeting of Shareholders
Voting Results of Special Meeting of Shareholders (Unaudited)
The proposal described below was submitted to a vote of shareholders of UBS
Private Investor Funds, Inc. ("UBS Funds") at a special meeting of shareholders
held on December 11, 1998 (the "Meeting"):
Proposal No. 1 - Approval of a Plan of Reorganization pursuant to which UBS
Fund's Value Equity, Bond, Large Cap Growth, Small Cap and High Yield Bond Funds
(each, a "Fund") will be reorganized into Class I shares of the U.S. Equity,
U.S. Bond, U.S. Large Capitalization Growth, U.S. Small Capitalization Growth
and High Yield Fund, respectively.
At the Meeting, the shareholders of each Fund approved Proposal No. 1 as
follows:
Fund For Against Abstain
---- --- -------- -------
UBS Value Equity Fund 104,031 0 0
UBS Bond Fund 136,024 0 0
UBS Large Cap Growth Fund 26,932 0 0
UBS Small Cap Fund 153,501 0 0
UBS High Yield Bond Fund 168,730 0 0
82
<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>
[UBS LOGO APPEARS HERE]
P.O. Box 2798, Boston, Massachusetts 02208-9915 - Tel: (800) 794-7753
<PAGE>
[UBS LOGO APPEARS HERE]
Global Fund
Global Equity Fund
Global Bond Fund
Semi-Annual Report
December 31, 1998
<PAGE>
Trustees and Officers
[UBS LOGO APPEARS HERE]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA Debra L. Nichols
Chairman of the Board Vice President
E. Thomas McFarlan Carolyn M. Burke, CPA
President Secretary and Treasurer
Thomas J. Digenan, CFA, CPA David E. Floyd
Vice President Assistant Secretary
1
<PAGE>
The Funds' Advisor - Brinson Partners, Inc.
[UBS LOGO APPEARS HERE]
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 265
billion of discretionary institutional assets on an active basis and mutual fund
assets for UBS Private Banking which total over USD 125 billion. In addition,
UBS Brinson acts as the investment advisor to UBS Private Banking. 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 tailored to specific client
objectives and focused upon both risk and return considerations in the context
of full investment cycles. Our investment decisions are based on fundamental
research, internally developed valuation systems and seasoned judgment. Our
independent team approach allows for rapid responses to market changes, while
providing each client with the benefit of our best talent.
2
<PAGE>
Table of Contents
[UBS LOGO APPEARS HERE]
Shareholder Letter 4
Global Economic and Market Highlights 5
Global Fund 6
Schedule of Investments 10
Financial Statements 18
Financial Highlights 22
Global Equity Fund 25
Schedule of Investments 29
Financial Statements 34
Financial Highlights 37
Global Bond Fund 40
Schedule of Investments 43
Financial Statements 47
Financial Highlights 50
The Brinson Funds-Notes to Financial Statements 53
3
<PAGE>
Shareholder Letter
[UBS LOGO APPEARS HERE]
February 20, 1999
Dear Shareholder:
We are very pleased to present the December 31, 1998 Semi-Annual Report for the
Global Fund, Global Equity Fund and Global Bond Fund. Within this Report, we'll
focus on current global economic outlook as well as our current strategies and
performance for the three Global Funds.
Since our last report to you, Union Bank of Switzerland and Swiss Bank
Corporation merged to become UBS AG, one of the world's major financial
institutions. In connection with this merger, the former SBC Brinson / Brinson
Partners, Inc.'s activities of Swiss Bank Corporation were combined with the
worldwide UBS asset management operations into the UBS Brinson division of UBS
AG. During this process, the UBS Private Investor Funds merged into the Brinson
fund family on December 18, 1998. This merger created the following three new
UBS Investment Funds on December 31, 1998; the U.S. Large Capitalization Growth
Fund, the U.S. Small Capitalization Growth Fund and the High Yield Fund.
The Global Fund, Global Equity Fund and Global Bond Fund are all actively
managed funds that provide integrated asset management across and within
security markets. The investment process is strategic in nature and is driven by
deviations of market price from fundamental value. This philosophy offers the
greatest potential for achieving enhanced, long-term returns while controlling
risk.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgment. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our talent. The Reports that follow highlight the investment
characteristics and the performance of the respective Funds.
We very much appreciate your continued trust and the confidence you have placed
in the UBS Investment Funds.
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
[UBS LOGO APPEARS HERE]
Japan and most of Asia continue to be mired in severe downturns. The Japanese
economy is particularly troubled, as the one bright spot in the economy, the
export sector, has started to weaken in response to a dramatic strengthening of
the yen. Bond yields have risen sharply as the government's deficit financing
has pushed the gross debt to GDP ratio among the highest of the developed
countries.
The single European currency enjoyed a successful launch on January 1st.
Monetary policy for the eleven participating nations is now being administered
by the European Central Bank. Cash rates and bond yields have converged, except
for small spreads due to credit and liquidity differences. Although the euro's
success in the near term is not in doubt, some longer-term concerns remain.
Economic convergence of the EMU economies is not complete, and the economic
environment appears to be softening. This creates an element of political risk
for the ECB and the new currency.
Inflation remains in check throughout the developed world and in many of the
emerging markets. Weakness in Asia and overcapacity in basic industries have
combined to push down commodity prices, particularly oil and related energy
prices. Consumer price inflation is essentially zero in Japan, less than 1% in
most of Europe, and under 2% in the U.S. The voices predicting global deflation
seem to have largely disappeared however, after the Federal Reserve's series of
rate cuts to provide liquidity during the market downturns in the fall.
Global Environment
<TABLE>
<CAPTION>
6 months 1 year 3 years 7/31/95*
Major Markets ended ended ended to
Total Return in U.S. Dollars 12/31/98 12/31/98 12/31/98 12/31/98
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Equity 6.90% 23.43% 25.42% 25.27%
Global (ex-U.S.) Equities (currency unhedged) 2.72 18.67 9.06 8.61
Global (ex-U.S.) Equities (currency hedged) -3.98 13.84 14.86 16.47
U.S. Bonds 4.57 8.72 7.29 8.36
Global (ex-U.S.) Bonds (currency unhedged) 15.38 17.79 5.49 4.52
Global (ex-U.S.) Bonds (currency hedged) 5.79 11.54 11.48 12.03
U.S. Cash Equivalents 2.12 4.55 4.79 4.87
- ----------------------------------------------------------------------------------
6 months 1 year 3 years 7/31/95*
Major Currencies ended ended ended to
Percent Change Relative to U.S. Dollars 12/31/98 12/31/98 12/31/98 12/31/98
- ----------------------------------------------------------------------------------
Yen 23.04% 15.27% -2.94% -7.00%
Pound -0.28 1.12 2.33 1.15
Deutschemark 8.37 7.95 -4.93 -5.34
Canadian Dollar -4.26 -6.83 -3.88 -3.24
- ----------------------------------------------------------------------------------
</TABLE>
* Inception date of the UBS Investment Fund - Global
All total returns in excess of 1 year are average annualized returns.
5
<PAGE>
Global Fund
[UBS LOGO APPEARS HERE]
The Global Fund is diversified across the equity and fixed income markets of the
U.S. and a broad range of other countries. The Fund is actively managed within
an asset allocation framework, involving value-based market, currency, and
individual security selection. Our senior asset allocation, equity and fixed
income professionals form the investment team for the Fund, supported by a
globally integrated market analysis system. Security selection 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 UBS Investment Fund - Global has
provided an annualized return of 11.74%. This is compared to the 14.69% return
of the Global Securities Markets Mutual Fund Index. The Fund's performance over
this period was achieved with an annualized volatility of 7.80%, well below the
benchmark volatility of 10.16%. The Fund's 1998 return of 7.60% fell short of
the benchmark return of 16.45%. Security selection in the U.S. equity and bond
markets had a negative impact on added value, while security selection in
Japanese equities contributed positively. The underweight in developed equity
markets and the corresponding bond overweight detracted substantially, as
riskier assets, with the exception of the emerging markets tended to perform
better during the year.
The bond and equity markets of European nations participating in the new single
currency performed well. Yields on the previously high yielding peripheral bond
markets fell to historically low levels toward the end of the year. The
worst-performing equity markets were generally found in Asia, with emerging
markets leading the bond market underperformers. The effects of the crisis in
emerging markets spilled over into the developed equity and credit markets in
September, although equities had rebounded by year-end. Japan's bond market
suffered severely toward year-end, joining its equity market which continued to
be adversely affected by the country's economic woes and a strengthening yen.
Because of the renewed yen overvaluation, the Fund remains underweight. Sterling
is likewise held at a below-benchmark allocation. Overweight currencies include
the Canadian dollar and the Australian dollar. Asset class allocations remain
heavily biased toward bonds and underweight developed equities. Valuations and
risk considerations do not support normal equity allocations.
6
<PAGE>
Global Fund
[UBS LOGO APPEARS HERE]
Total Return
6 months 1 year 3 years 7/31/95*
ended ended ended to
12/31/98 12/31/98 12/31/98 12/31/98
- ------------------------------------------------------------------------------
UBS Investment Fund - Global 1.59% 7.60% 10.41% 11.74%
- ------------------------------------------------------------------------------
GSMI Mutual Fund Index** 5.71 16.45 14.42 14.69
- ------------------------------------------------------------------------------
MSCI World Equity (Free) Index 6.72 24.62 18.06 17.54
- ------------------------------------------------------------------------------
Salomon World Government Bond Index 12.17 15.29 6.20 5.92
- ------------------------------------------------------------------------------
* Inception date of the UBS Investment Fund - Global.
** An un-managed index compiled by the Advisor, constructed as follows:
40% Wilshire 5000 Index; 22% MSCI World ex USA (Free) Index; 21%
Salomon Smith Barney BIG Bond Index; 9% Salomon Non-U.S. Government
Bond Index (unhedged); 2% JP Morgan EMBI+; 3% IFC Investable Index; and
3% Merrill Lynch High Yield Master Index.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $10,000
This chart shows the growth in the value of an investment in the UBS Investment
Fund - Global, the GSMI Mutual Fund Index, the MSCI World Equity (Free) Index
and the Salomon World Government Bond Index if you had invested $10,000 on July
31, 1995, and had reinvested all your income dividends and capital gain
distributions through December 31, 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.
UBS Investment Fund - Global vs. GSMI Mutual Fund Index,
MSCI World Equity (Free) Index and Salomon World Government Bond Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
Salomon
UBS GSMI MSCI World
Investment Mutual Fund World Equity Government
Fund-Global Index (Free) Index Bond Index
----------- ----------- ------------ ----------
7/31/95 $10,000 $10,000 $10,000 $10,000
8/31/95 $10,129 $9,965 $9,777 $9,656
9/30/95 $10,293 $10,232 $10,066 $9,871
10/31/95 $10,362 $10,167 $9,909 $9,944
11/30/95 $10,655 $10,472 $10,255 $10,057
12/31/95 $10,861 $10,665 $10,556 $10,162
1/31/96 $11,063 $10,839 $10,753 $10,037
2/29/96 $11,008 $10,870 $10,818 $9,986
3/31/96 $11,091 $10,963 $10,998 $9,972
4/30/96 $11,229 $11,152 $11,256 $9,932
5/31/96 $11,266 $11,234 $11,265 $9,934
6/30/96 $11,324 $11,257 $11,325 $10,013
7/31/96 $11,157 $10,961 $10,925 $10,205
8/31/96 $11,334 $11,138 $11,054 $10,245
9/30/96 $11,687 $11,505 $11,488 $10,287
10/31/96 $11,873 $11,620 $11,567 $10,479
11/30/96 $12,329 $12,109 $12,219 $10,617
12/31/96 $12,332 $12,001 $12,025 $10,531
1/31/97 $12,475 $12,177 $12,172 $10,250
2/28/97 $12,567 $12,234 $12,311 $10,173
3/31/97 $12,373 $11,965 $12,064 $10,096
4/30/97 $12,506 $12,207 $12,460 $10,007
5/31/97 $13,008 $12,824 $13,231 $10,279
6/30/97 $13,377 $13,283 $13,889 $10,402
7/31/97 $13,797 $13,812 $14,531 $10,321
8/31/97 $13,428 $13,306 $13,547 $10,314
9/30/97 $13,838 $13,882 $14,284 $10,534
10/31/97 $13,428 $13,434 $13,534 $10,753
11/30/97 $13,449 $13,554 $13,771 $10,589
12/31/97 $13,589 $13,717 $13,939 $10,557
1/31/98 $13,735 $13,902 $14,330 $10,659
2/28/99 $14,575 $14,575 $15,299 $10,746
3/31/98 $14,556 $14,988 $15,943 $10,639
4/30/98 $14,568 $15,135 $16,099 $10,810
5/31/98 $14,478 $14,922 $15,904 $10,834
6/30/98 $14,394 $15,111 $16,276 $10,851
7/31/98 $14,349 $15,032 $16,251 $10,865
8/31/98 $13,193 $13,512 $14,085 $11,160
9/30/98 $13,601 $13,978 $14,335 $11,754
10/31/98 $14,088 $14,813 $15,634 $12,102
11/30/98 $14,473 $15,418 $16,565 $11,931
12/31/98 $14,622 $15,974 $17,370 $12,171
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
[UBS LOGO APPEARS HERE]
Asset Allocation
As of December 31, 1998 (Unaudited)
Current
Benchmark Strategy
- --------------------------------------------------
U.S. Equities 40.0% 22.0%
Global (ex-U.S.) Equities 22.0 18.0
Emerging Markets Equities 3.0 3.0
Dollar Bonds 21.0 33.0
High Yield Bonds 3.0 3.0
Global (ex-U.S.) Bonds 9.0 16.0
Emerging Markets Debt 2.0 5.0
Cash Equivalents 0.0 0.0
- --------------------------------------------------
100.0% 100.0%
Top Ten U.S. Equity Holdings
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- ----------------------------------------------------
1. Xerox Corp. 1.79%
2. FDX Corp. 1.25
3. Burlington Northern Santa Fe Corp. 1.24
4. Lockheed Martin Corp. 1.09
5. Philip Morris Companies, Inc. 1.03
6. Baxter International, Inc. 0.77
7. Kimberly Clark Corp. 0.75
8. Entergy Corp 0.71
9. Aetna, Inc. 0.70
10. CIGNA Corp. 0.69
- ----------------------------------------------------
Currency Allocation
As of December 31, 1998 (Unaudited)
Current
Benchmark Strategy
- ----------------------------------------------------
U.S. 66.0% 62.4%
Japan 7.0 1.0
U.K. 5.3 1.3
Continental Europe 16.3 20.3
Canada 1.2 5.2
Emerging Markets 3.0 3.0
Other 1.2 6.8
- ----------------------------------------------------
100.0% 100.0%
Top Ten Global (ex-U.S.) Equity Holdings
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- ----------------------------------------------------
1. Novartis AG (Reg.) 0.46%
2. Telecom Corp of New Zealand, Ltd. 0.40
3. Royal Dutch Petroleum Co. 0.37
4. Nokia Oyj- A Shares 0.35
5. Nestle S.A. (Reg.) 0.35
6. Allianz A.G. 0.34
7. Lloyds TSB Group PLC 0.34
8. Bayer AG 0.33
9. Glaxo Wellcome PLC 0.31
10. ING Groep NV 0.30
- ----------------------------------------------------
8
<PAGE>
Global Fund
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
U.S. Equities
Energy 0.36%
------
Capital Investment
Capital Goods 3.22
Technology 3.22
------
6.44
------
Basic Industries
Chemicals 0.93
Housing/Paper 2.67
Metals 0.15
------
3.75
------
Consumer
Non-Durables 2.62
Retail/Apparel 1.32
Autos/Durables 1.10
Health: Drugs 1.09
Health: Non-Drugs 1.67
------
7.80
------
Financial
Banks 2.67
Non-Banks 2.07
------
4.74
------
Utilities
Electric 1.70
Telephone 0.81
------
2.51
------
Transportation 1.73
Services/Misc 2.26
Post Venture 1.18
------
Total U.S. Equities 30.77*
------
global (ex-U.S.) Equities
Aerospace & Military 0.10
Airlines 0.06
Appliances & Household 0.23
Autos/Durables 0.43
Banking 2.07
Beverages & Tobacco 0.58
Broadcasting & Publishing 0.57
Building Materials 0.27
Business & Public Service 0.65
Chemicals 0.69
Construction 0.03
Consumer 0.14
Data Processing 0.06
Electric Components 0.28
Electronics 0.95
Energy 1.39
Financial Services 0.62
Food & House Products 0.60
Forest Products 0.25
Health: Drugs 0.68
Health: Non-Drugs 1.07
Housing/Paper 0.04
Industrial Components 0.21
Insurance 1.47%
Leisure & Tourism 0.09
Machinery & Engineering 0.03
Merchandising 0.75
Metals-Steel 0.18
Multi-Industry 0.67
Non-Ferrous Metals 0.19
Real Estate 0.06
Recreation 0.05
Retail & Apparel 0.08
Telecommunications 2.03
Textiles & Apparel 0.02
Transportation 0.04
Utilities 0.71
Wholesale & International Trade 0.01
------
Total global (ex-U.S.)
Equities 18.35
------
Emerging Markets Equities 3.01
------
TOTAL EQUITIES 52.13
------
U.S. BONDS
Corporate Bonds
Airlines 0.03
Auto/Durables 0.16
Banks 0.62
Broadcasting & Public
Service 0.21
CMO 2.80
Financial Services 1.26
Industrial Components 1.45
Telecommunications 0.02
Transportation 0.30
------
6.85
------
U.S. Government Agencies 4.17
U.S. Government Obligations 8.75
International Dollar Bonds 2.01
------
Total U.S. Bonds 21.78*
------
HIGH YIELD BONDS 3.01
------
GLOBAL (EX-U.S.) BONDS
Foreign Government Bonds 15.19
------
EMERGING MARKETS DEBT 5.47
------
SHORT TERM INVESTMENTS 23.31*
------
TOTAL INVESTMENTS 120.89
------
LIABILITIES, LESS CASH AND
OTHER ASSETS (20.89)
------
NET ASSETS 100.00%
======
* The Fund held a long position in U.S. Treasury futures on December 31, 1998
which increased U.S. Bond exposure from 21.78% to 31.12%.
The Fund held a short position in stock index futures on December 31, 1998
which reduced U.S. Equity exposure from 30.77% to 20.84%.
These adjustments result in a net increase in the Fund's exposure to
Short-Term Investments from 23.31% to 23.90%.
9
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
--------- -------------
Equities 52.13%
U.S. Equities 30.77%
Advanced Micro Devices, Inc. (b) 70,500 $ 2,040,094
Aetna, Inc. 45,300 3,561,712
Allergan, Inc. 17,800 1,152,550
Alza Corp. (b) 37,500 1,959,375
American Standard Companies, Inc. (b) 36,200 1,300,937
Aon Corp. 63,398 3,510,664
Automatic Data Processing, Inc. 28,600 2,293,362
BankBoston Corp. 20,400 794,325
Baxter International, Inc. 61,400 3,948,787
Beckman Coulter Inc. 16,300 884,275
Bestfoods 17,900 953,175
Biogen, Inc. (b) 8,500 705,500
Birmingham Steel Corp. 12,000 50,250
Brinson Post-Venture Fund (b) 317,715 6,015,904
Burlington Northern Santa Fe Corp. 187,900 6,341,625
Centaur Funding Corp., 144A 1,430 262,586
Centaur Funding Corp., 144A 750 784,219
Champion Enterprises, Inc. (b) 11,700 320,288
Champion International Corp. 18,800 761,400
Chase Manhattan Corp. 32,100 2,184,806
CIGNA Corp. 45,600 3,525,450
Circuit City Stores-Circuit City Group 50,800 2,536,825
CMS Energy Corp. 48,400 2,344,375
Comerica, Inc. 15,500 1,056,906
CommScope, Inc. (b) 26,333 442,724
Comverse Technology, Inc. (b) 17,160 1,218,360
Consolidated Stores Corp. (b) 49,400 997,263
Corning, Inc. 73,600 3,312,000
Covance, Inc. (b) 18,872 549,647
Crown Cork & Seal Co., Inc. 17,800 548,463
Cummins Engine Co., Inc. 4,200 149,100
Dial Corp. 19,400 560,175
Eastman Chemical Co. 20,700 926,325
Electronic Data Systems Corp. 66,100 3,321,525
EMC Corp. (b) 22,100 1,878,500
Entergy Corp. 116,400 3,622,950
FDX Corp. (b) 71,900 6,399,100
First American Corp. of Tennessee 9,800 434,875
First Data Corp. 90,830 2,878,176
First Security Corp. 18,575 434,191
Fleet Financial Group, Inc. 49,200 2,198,625
Fleetwood Enterprises, Inc. 8,100 281,475
Food Lion Inc., Class A 85,500 908,438
Fort James Corp. 64,500 2,580,000
General Instrument Corp. (b) 85,600 2,905,050
General Semiconductor, Inc. (b) 19,850 162,522
Genzyme Corp. (b) 15,100 751,225
Genzyme-Molecular Oncology (b) 1,594 5,179
Geon Co. 10,400 239,200
Goodyear Tire & Rubber Co. 47,900 2,415,956
Great Lakes Chemical Corp. 12,000 480,000
GreenPoint Financial Corp. 21,200 744,650
Harnischfeger Industries, Inc. 26,100 265,894
HCR Manor Care, Inc. (b) 19,198 563,941
Hibernia Corp., Class A 20,800 361,400
Household International Inc. 36,700 1,454,237
IMC Global Inc. 57,500 1,229,062
Johnson Controls Inc. 17,800 1,050,200
Shares Value
--------- -------------
Kimberly Clark Corp. 70,300 $ 3,831,350
Lafarge Corp. 15,300 619,650
Lear Corp. (b) 44,400 1,709,400
Lockheed Martin Corp. 65,823 5,578,499
Lyondell Petrochemical Co. 54,000 972,000
Martin Marietta Materials, Inc. 10,984 683,068
Masco Corp. 87,500 2,515,625
Nabisco Holdings Corp., Class A 38,200 1,585,300
National Service Industries, Inc. 11,900 452,200
Nextel Communications, Inc., Class A (b) 52,400 1,237,950
Norfolk Southern Corp. 79,400 2,515,987
Peco Energy Co. 64,600 2,688,975
Pentair, Inc. 19,796 788,128
Philip Morris Companies, Inc. 98,100 5,248,350
Praxair, Inc. 34,800 1,226,700
Raytheon Co., Class B 63,200 3,365,400
Regions Financial Corp. 9,600 387,000
Schering Plough Corp. 34,700 1,917,175
Sears, Roebuck and Co. 53,900 2,290,750
Southdown, Inc. 21,336 1,262,824
St. Jude Medical, Inc. (b) 35,300 977,369
Timken Co. 6,600 124,575
TRW, Inc. 7,900 443,881
Tyson Foods, Inc., Class A 69,798 1,483,207
Ultramar Diamond Shamrock Corp. 38,702 938,524
Unocal Corp. 25,600 747,200
US Bancorp 48,180 1,710,390
USG Corp. 8,600 438,063
Vencor, Inc. (b) 39,700 178,650
Ventas, Inc. 39,800 485,063
Viad Corp. 36,900 1,120,838
Wells Fargo and Co. 48,200 1,924,987
Witco Corp. 6,500 103,594
Xerox Corp. 77,600 9,156,800
York International Corp. 23,400 955,013
-------------
Total U.S. Equities 157,224,303
-------------
Global (ex-U.S.) Equities 18.35%
Australia 1.00%
Amcor Ltd. 25,920 110,866
Brambles Industries Ltd. 14,770 360,131
Broken Hill Proprietary Co., Ltd. 59,710 440,209
CSR Ltd. 79,870 195,479
David Jones Ltd. 103,330 114,088
Lend Lease Corp., Ltd. 21,132 285,172
National Australia Bank Ltd. 45,027 679,440
News Corp. Ltd. 64,089 423,785
News Corp. Ltd., Preferred 28,536 173,814
Orica Ltd. 18,550 96,604
Pacific Dunlop Ltd. 69,610 112,725
Qantas Airways Ltd. 85,237 174,107
QBE Insurance Group Ltd. 42,683 176,727
Rio Tinto Ltd. 14,645 173,870
Santos Ltd. 55,490 149,084
Telstra Corp., Ltd. (b) 149,700 700,631
Westpac Banking Corp., Ltd. 78,128 523,326
WMC Ltd. 37,340 112,689
Woolworth's Ltd. 25,860 88,132
-------------
5,090,879
-------------
10
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
--------- -------------
Belgium -- 0.62%
Delhaize-Le Lion S.A. 480 $ 42,476
Electrabel S.A. 2,650 1,164,791
Fortis AG 186 11
Fortis AG Strip (b) 3,913 1,418,092
KBC Bancassurance (Rights) (b) 8,790 0
KBC Bancassurance Holding Strip (b) 220 13
Kredietbank NV 6,600 522,562
-------------
3,147,945
-------------
Canada -- 0.38%
Agrium, Inc. 7,740 68,027
Alcan Aluminum Ltd. 5,120 138,333
Bank of Montreal 3,020 121,311
Canadian National Railway Co. 2,960 153,685
Canadian Pacific Ltd. 9,073 169,528
Extendicare, Inc., Class A (b) 6,960 39,422
Hudson's Bay Co. 6,810 85,790
Imasco, Ltd. 4,890 104,104
Imperial Oil Ltd. 9,110 145,606
Magna International, Inc., Class A 1,260 78,258
Newbridge Networks Corp. (b) 3,960 120,141
NOVA Corp. 6,004 78,177
Potash Corporation of Saskatchewan, Inc. 1,160 74,388
Royal Bank of Canada 3,570 177,919
Seagram Co., Ltd. 1,650 62,573
Shaw Communications, Inc., Class B 6,580 158,931
TransCanada Pipelines Ltd. 9,090 132,858
Westcoast Energy, Inc. 2,650 52,621
-------------
1,961,672
-------------
Denmark -- 0.11%
Den Danske Bank Group 390 52,392
Tele Danmark A/S 3,960 534,471
-------------
586,863
-------------
Finland -- 0.55%
Merita Ltd., Class A 70,330 447,254
Nokia Oyj-A Shares 14,780 1,809,772
UPM-Kymmene Corp. 19,770 554,438
-------------
2,811,464
-------------
France -- 2.11%
Air Liquide 3,495 641,290
Alcatel Alsthom 5,472 670,017
Axa 4,918 713,111
Banque Nationale de Paris 6,639 546,931
Cie de Saint Gobain 2,527 356,916
Dexia France 2,489 383,629
Elf Aquitaine S.A. 3,564 412,149
France Telecom S.A. 7,100 564,319
Groupe Danone 1,500 429,630
Lagardere S.C.A. 15,800 671,745
Michelin, Class B 6,819 272,823
Paribas 3,565 309,964
Pinault-Printemps-Redoute S.A. 1,740 332,663
Rhone-Poulenc, Class A 10,304 530,491
SEITA 12,900 808,242
Societe Generale 2,735 443,087
Suez Lyonnaise des Eaux S.A. 3,801 781,130
Shares Value
--------- -------------
Thomson CSF 11,460 $ 492,356
Total S.A., Class B 4,796 485,936
Vivendi 3,634 943,271
-------------
10,789,700
-------------
Germany -- 2.26%
Allianz AG 4,654 1,732,397
Bayer AG 39,930 1,676,935
DaimlerChrysler AG (b) 10,356 1,029,052
DaimlerChrysler AG (b) 2,300 228,533
Deutsche Bank AG 8,581 506,329
Deutsche Telekom AG 24,060 790,877
Dresdner Bank AG 11,120 466,004
Hoechst AG 12,630 522,459
Mannesmann AG (b) 9,280 1,073,919
SAP AG 920 397,695
Siemens AG 19,850 1,304,980
Veba AG 21,739 1,288,208
Volkswagen AG 6,870 556,001
-------------
11,573,389
-------------
Italy -- 0.87%
Assicurazioni Generali 22,800 954,066
Danieli & Co. Savings (Risp) 22,000 87,790
ENI Spa 160,000 1,047,945
ENI Spa ADR 3,070 207,992
La Rinascente Spa 56,740 584,797
Montedison Spa 351,700 468,168
San Paolo-imi, Spa 28,511 504,882
Telecom Italia Mobile Spa 83,000 614,091
-------------
4,469,731
-------------
Japan -- 1.11%
Acom Co., Ltd. 1,000 64,362
Amada Co., Ltd. 11,000 53,342
Bridgestone Corp. 3,000 68,218
Canon, Inc. 10,000 214,096
Citizen Watch Co., Ltd. 9,000 54,255
Dai Nippon Printing Co., Ltd. 10,000 159,752
Daiichi Pharmaceutical Co., Ltd. 9,000 152,314
Daikin Industries Ltd. 11,000 109,220
Daiwa House Industry Co., Ltd. 5,000 53,324
Fanuc 5,000 171,543
Fuji Photo Film 2,000 74,468
Fujitsu 6,000 80,053
Honda Motor Co. 5,000 164,450
Hoya Corp. 3,000 146,277
Ito Yokado Co., Ltd. 5,000 350,177
Kaneka Corp. 10,000 75,089
Kao Corp. 4,000 90,426
Kirin Brewery Co., Ltd. 12,000 153,191
Kokuyo 4,000 53,936
Kuraray Co., Ltd. 13,000 143,715
Marui Co., Ltd. 6,000 115,691
Matsushita Electric Industrial Co. 13,000 230,381
NGK Insulators 18,000 232,500
Nintendo Corp., Ltd. 1,900 184,442
Nippon Denso Co., Ltd. 9,000 166,755
11
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
--------- -------------
Nippon Meat Packers, Inc. 7,000 $ 112,943
Omron Corp. 4,000 54,894
Sankyo Co., Ltd. 8,000 175,177
Secom Co., Ltd. 3,000 248,936
Sega Enterprises Ltd. 2,000 44,415
Sekisui House Ltd. 9,000 95,346
Shin-Etsu Chemical Co., Ltd. 2,000 48,227
Sony Corp. 3,000 218,883
Sumitomo Chemical Co. 13,000 50,709
Sumitomo Electric Industries 8,000 90,142
Takeda Chemical Industries 7,000 269,947
TDK Corp. 2,000 183,156
Tokio Marine & Fire Insurance Co. 10,000 119,681
Toray Industries, Inc. 29,000 151,684
Toshiba Corp. 26,000 155,124
Toyota Motor Corp. 8,000 217,731
Yamato Transport Co., Ltd. 4,000 56,028
-------------
5,655,000
-------------
Malaysia -- 0.00%
Malayan Banking Bhd 6,000 8,508
-------------
Netherlands -- 1.43%
ABN AMRO Holdings NV 21,690 456,522
Elsevier NV 41,870 586,765
Heineken NV 14,252 858,142
ING Groep NV 25,020 1,526,504
KPN NV 25,009 1,252,649
Royal Dutch Petroleum Co. 37,790 1,882,754
Unilever NV 8,530 729,507
-------------
7,292,843
-------------
New Zealand -- 0.73%
Auckland International Airport Ltd. (b) 104,950 146,930
Brierley Investments Ltd. 703,970 159,920
Carter Holt Harvey Ltd. 368,840 331,260
Fletcher Challenge Building 101,985 157,865
Fletcher Challenge Energy 134,315 255,451
Fletcher Challenge Paper 232,730 156,148
Lion Nathan Ltd. 132,020 336,875
Telecom Corp. of New Zealand Ltd. 474,110 2,066,401
Telecom Corp. of New Zealand Ltd. ADR 2,790 99,568
-------------
3,710,418
-------------
Norway -- 0.07%
Norsk Hydro ASA 4,890 164,947
Norske Skogindustrier ASA 6,550 190,852
-------------
355,799
-------------
Singapore -- 0.22%
Oversea-Chinese Banking Corp., Ltd. 200 1,357
Singapore Press Holdings Ltd. 64,819 703,190
United Overseas Bank Ltd. (Frgn.) 66,360 426,313
-------------
1,130,860
-------------
Spain -- 0.36%
Banco Popular Espanol S.A. 6,991 527,918
Endesa S.A. 36,238 961,603
Shares Value
--------- -------------
Telefonica S.A. 8,117 $ 361,467
Telefonica S.A. Rights (expiring 1/30/99) (b) 162 144
-------------
1,851,132
-------------
Sweden -- 0.80%
Astra AB, A Shares 30,020 612,933
Electrolux AB, B Shares 37,840 651,223
Investor AB 9,730 439,337
Nordbanken Holding AB 53,470 343,019
Skandia Forsakrings AB 45,320 693,291
Svenska Handelsbanken, A Shares 4,710 198,724
Swedish Match AB 133,390 485,455
Telefonaktiebolaget LM Ericsson, B Shares 27,220 648,111
-------------
4,072,093
-------------
Switzerland -- 1.45%
Julius Baer Holding AG 90 299,126
Nestle S.A. (Reg.) 819 1,782,898
Novartis AG (Reg.) 1,207 2,372,697
Roche Holding AG (Gen.) 111 1,354,467
Swiss Reinsurance Co. (Reg.) 287 748,269
SwissCom AG (Reg.) (b) 2,026 848,161
-------------
7,405,618
-------------
United Kingdom -- 4.28%
Allied Zurich AG (b) 44,052 657,082
Barclays PLC 31,050 669,531
Billiton PLC 33,230 65,931
BOC Group PLC 36,350 519,821
Booker PLC 68,440 71,169
Boots Company PLC 38,230 651,023
British American Tobacco PLC 27,842 244,821
British Petroleum Co. PLC 83,873 1,252,450
British Steel PLC 322,950 478,222
Cable & Wireless PLC 24,000 295,093
Charter PLC 63,676 349,618
Coats Viyella PLC 269,970 121,278
Diageo PLC 45,209 514,499
Fairview Holdings PLC (b) 43,937 65,062
FKI PLC 239,040 532,941
Garban PLC (b) 3,489 13,294
General Electric Co. PLC 95,360 860,736
Glaxo Wellcome PLC 46,260 1,591,696
Greenalls Group PLC 43,620 232,604
Hanson PLC 82,982 658,922
Hillsdown Holdings PLC 69,775 87,069
House of Fraser PLC 124,780 110,033
Lloyds TSB Group PLC 120,969 1,720,854
Marks & Spencer PLC 142,060 974,398
Mirror Group PLC 144,390 360,957
National Westminster Bank PLC 27,430 528,948
Nycomed Amersham PLC 57,844 398,440
Peninsular & Oriental Steam Navigation Co. 23,540 278,275
Prudential Corp. PLC 84,540 1,276,476
Reed International PLC 51,010 398,894
Rio Tinto Ltd. 43,190 502,301
RJB Mining PLC 99,590 129,245
Royal & Sun Alliance Insurance Group PLC 35,073 286,376
12
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
--------- -------------
Sainsbury (J.) PLC 27,300 $ 218,821
Scottish Hydro-Electric PLC 81,880 922,295
SmithKline Beecham PLC 68,810 961,689
Smurfit (Jefferson) Group PLC 70,517 126,713
Terranova Foods PLC (b) 30,937 56,621
Tesco PLC 249,190 710,011
Thames Water PLC 29,997 573,957
Thames Water PLC, Class B (b) 29,370 36,894
United News & Media PLC 32,490 284,881
Vodafone Group PLC 21,678 352,025
Williams PLC 39,463 224,061
Yorkshire Water PLC 54,080 494,884
-------------
21,860,911
-------------
Total Global (ex-U.S.) Equities 93,774,825
-------------
Emerging Markets Equities -- 3.01%
Brinson Emerging Markets Equity Fund (b) 2,194,457 15,364,050
-------------
Total Equities (Cost $237,656,681) 266,363,178
-------------
Face
Amount
Bonds -- 45.45% -------------
U.S. Bonds -- 21.78%
U.S. Corporate Bonds -- 6.85%
Aid-Israel, Series 10-Z, 0.000%,
due 02/15/03 $ 4,935,000 4,046,843
Asset Securitization Corp., 7.210%,
due 10/13/26 1,695,000 1,813,921
Capital One Bank, 6.830%, due 05/17/99 1,321,000 1,324,938
Chase Manhattan Auto Owner Trust, 96-C,
Class A4, 6.150%, due 03/15/02 730,000 739,753
Chemical Master Credit Card Trust,
6.230%, due 06/15/03 1,055,000 1,072,745
Chesapeake & Potomac Telephone of
Maryland, 8.000%, due 10/15/29 78,000 97,504
Citicorp, Series F, 6.200%, due 11/10/00 355,000 360,736
Continental Airlines, Inc., EETC
6.900%, due 01/02/18 1,495,000 1,519,548
98-1B, 6.748%, due 09/15/18 175,000 175,205
Enron Corp., 6.750%, due 09/01/04 250,000 257,175
Floating Rate Note, due 03/30/00 5,000,000 5,000,000
Fanniemae Whole Loan, 95-W3, Class A,
9.000%, due 04/25/25 27,659 28,824
First Bank Corporate Card Master Trust,
97-1A, 6.400%, due 02/15/03 1,055,000 1,084,118
First Nationwide Trust, 98-3, Class 1PPA,
6.500%, due 09/19/28 1,527,896 1,529,271
Ford Credit Grantor Trust 95-B,
5.900%, due 01/01/80 29,110 29,177
General Motors Acceptance Corp.,
9.625%, due 12/15/01 241,000 268,066
Lehman Brothers, Inc., 7.250%,
due 04/15/03 510,000 525,330
LG&E Capital Corp., 144A, 5.750%,
due 11/01/01 215,000 214,153
MBNA Global Capital Securities FRN,
6.019%, due 02/01/27 810,000 745,413
Face
Amount Value
------------- ------------
News America Holdings, 7.750%,
due 12/01/45 $ 1,027,000 $ 1,090,730
Norwest Asset Securities Corp., 96-2,
Class A9, 7.000%, due 09/25/11 435,000 444,249
PanAMSat Corp., 6.000%, due 01/15/03 225,000 223,232
Premier Auto Trust 96-3A, 6.500%,
due 03/06/00 60,120 60,252
Prudential Home Mortgage Securities,
94-3, Class A10, 6.500%,
due 02/25/24 730,000 728,007
Residential Asset Securitization Trust,
97-A11, Class A2, 7.000%, due 01/25/28 142,711 143,234
97-A7, Class A1, 7.500%, due 09/25/27 550,980 555,911
97-A7, Class A1, 7.250%, due 12/25/27 1,080,000 1,101,377
Salomon, Inc., 7.200%, due 02/01/04 1,475,000 1,549,569
Structured Asset Securities Corp.
98-RF1, Class A, 8.712%, due 03/15/27 1,264,071 1,356,507
98-RF2, 144A, 8.582%, due 07/15/27 1,604,269 1,716,568
Thrift Financial Corp., 11.250%,
due 01/01/16 67,492 70,906
Time Warner Entertainment, Inc.,
8.375%, due 03/15/23 886,000 1,083,667
TransAmerica Financial Corp. Series E,
6.125%, due 11/01/01 405,000 406,707
UCFC Home Equity Loan 97-C, Class A8,
FRN, 5.478%, due 09/15/27 1,137,833 1,126,898
Vendee Mortgage Trust, 98-2, Class 1G,
6.750%, due 06/15/28 1,760,000 1,811,847
Viacom, Inc., 7.750%, due 06/01/05 610,000 666,071
-------------
34,968,452
-------------
International Dollar Bonds -- 2.01%
Abbey National PLC, 6.700%, Resettable
Perpetual Step-up Notes 1,075,000 1,052,926
ABN AMRO Bank NV (Chicago), 6.625%,
due 10/31/01 230,000 235,030
Banco Santiago S.A., 7.000%,
due 07/18/07 1,000,000 837,979
Banque Centrale de Tunisie, 8.250%,
due 09/19/27 785,000 628,000
Banque Paribas, Sub. Notes, 6.875%,
due 03/01/09 175,000 177,982
Credit Suisse-London, 144A, 7.900%,
Resettable Perpetual Step-up Notes 600,000 600,000
Empresa Nacional Electric, 7.875%,
due 02/01/27 166,000 138,575
International Telecom Satelite, 8.125%,
due 02/28/05 245,000 276,502
Korea Development Bank, 7.125%,
due 09/17/01 180,000 169,796
Pan Pacific Industry PLC 144A, 0.000%,
due 04/28/07 1,565,000 618,175
Province of Quebec, 7.500%,
due 07/15/23 530,000 606,055
Ras Laffan Liquified Natural Gas Co., Ltd.,
144A, 8.294%, due 03/15/14 1,000,000 824,260
13
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Face
Amount Value
------------- ------------
Repsol International Finance, 7.000%,
due 08/01/05 $ 575,000 $ 620,673
Republic of South Africa, 9.625%,
due 12/15/99 794,000 809,880
Royal Bank of Scotland, 7.375%,
Resettable Perpetual Step-up Notes 505,000 519,853
Skandinaviska Enskilda Banken, 144A,
Resettable Perpetual Step-up Notes 415,000 404,607
Sociedad Quimica y Minera de Chiles
S.A., 144A, 7.700%, due 09/15/06 900,000 792,717
Southern Investments UK, 6.800%,
due 12/01/06 915,000 948,820
-------------
10,261,830
-------------
U.S. Government Agencies -- 4.17%
Federal Home Loan Mortgage Corp.
6.200%, due 08/15/07 510,000 512,055
7.500%, due 01/15/23 854,458 900,771
7.238%, due 05/01/26 162,387 165,062
Federal Home Loan Mortgage Corp. Gold
8.000%, due 11/01/22 97,255 100,659
8.000%, due 05/01/23 948,691 984,950
9.000%, due 03/01/24 697,379 741,509
Federal National Mortgage Association
6.361%, due 06/01/08 1,631,338 1,699,854
9.000%, due 08/01/21 206,941 219,548
8.500%, due 07/01/22 441,957 468,410
8.500%, due 02/01/28 1,232,583 1,291,131
7.000%, due 10/01/28 996,959 1,016,275
Federal National Mortgage Assoc. Strips
0.000%, due 04/01/27 1,155,933 1,016,212
6.220%, due 03/13/06 1,370,000 1,452,396
7.500%, due 05/01/23 1,253,190 201,159
Federal National Mortgage Association
8.000%, due 02/25/07 1,380,276 1,407,560
8.000%, due 05/25/21 1,300,000 1,331,623
8.500%, due 07/15/21 667,754 690,278
8.000%, due 05/01/22 89,847 93,020
7.500%, due 07/25/22 2,336,416 2,455,620
FGGI, 7.500%, due 10/01/11 1,035,686 1,065,462
FNCI, 8.000%, due 02/01/13 748,552 771,476
Government National Mortgage Association
10.000%, due 09/15/00 2,022 2,141
10.000%, due 05/15/01 3,001 3,178
9.000%, due 11/15/04 9,339 9,806
9.000%, due 11/15/04 4,482 4,706
8.000%, due 08/15/22 375,930 391,421
8.000%, due 11/15/22 295,275 307,674
7.500%, due 11/15/24 1,953,955 2,014,455
-------------
21,318,411
-------------
U.S. Government Obligations -- 8.75%
U.S. Treasury Notes and Bonds
6.625%, due 05/15/07 135,000 151,833
8.000%, due 11/15/21 5,915,000 7,924,255
Face
Amount Value
------------- ------------
U.S. Treasury Inflation Indexed Note
3.625%, due 01/15/08 $35,665,000 $ 35,489,403
3.625%, due 04/15/28 1,170,000 1,155,854
-------------
44,721,345
-------------
Total U.S. Bonds 111,270,038
-------------
Shares
-------------
High Yield Bonds -- 3.01%
Brinson High Yield Fund (b) 1,168,955 15,399,222
-------------
Face
Global (ex-U.S.) Bonds - 15.19% Amount
-------------
Australia -- 1.48%
Government of Australia
9.500%, due 08/15/03 AUD 4,020,000 2,946,856
10.000%, due 02/15/06 4,020,000 3,208,237
Queensland Treasury Corp.-Global Notes,
8.000%, due 05/14/03 2,010,000 1,376,261
-------------
7,531,354
-------------
Canada -- 1.59%
Government of Canada
7.500%, due 09/01/00 CAD 500,000 339,248
8.750%, due 12/01/05 1,950,000 1,555,900
7.000%, due 12/01/06 2,640,000 1,955,181
4.250%, due 12/01/21 5,090,000 3,729,684
Hydro-Quebec, 8.050%, due 07/07/24 450,000 545,427
-------------
8,125,440
-------------
Denmark -- 1.52%
Kingdom of Denmark
9.000%, due 11/15/00 DKK 7,400,000 1,266,179
7.000%, due 12/15/04 3,780,000 684,730
8.000%, due 03/15/06 30,070,000 5,826,432
-------------
7,777,341
-------------
France -- 2.13%
Government of France (BTAN), 5.750%,
due 03/12/01 FRF 12,400,000 2,338,735
Government of France (OAT)
9.500%, due 01/25/01 9,740,000 1,963,274
7.500%, due 04/25/05 7,330,000 1,591,915
8.500%, due 12/26/12 19,120,000 4,999,567
-------------
10,893,491
-------------
Germany --- 2.23%
Bundesrepublik Deutscheland
8.500%, due 08/21/00 DEM 1,130,000 734,880
8.375%, due 05/21/01 2,880,000 1,931,412
6.250%, due 01/04/24 1,630,000 1,188,541
DSL Finance NV, 5.250%, due 04/15/04 3,095,000 1,999,876
Treuhandanstalt, 6.250%, due 03/04/04 8,200,000 5,563,653
-------------
11,418,362
-------------
14
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Face
Amount Value
------------- ------------
Italy -- 1.07%
Buoni Poliennali Del Tes, 8.500%,
due 08/01/04 ITL 3,220,000,000 $ 2,434,435
Republic of Italy (BTP)
12.000%, due 09/01/02 625,000,000 486,676
8.500%, due 04/01/04 3,447,000,000 2,558,479
-------------
5,479,590
-------------
Spain -- 1.82%
Government of Spain
6.750%, due 04/15/00 ESP 393,000,000 2,897,529
7.900%, due 02/28/02 105,000,000 844,213
8.000%, due 05/30/04 225,000,000 1,940,189
6.150%, due 01/31/13 434,000,000 3,616,064
-------------
9,297,995
-------------
Sweden -- 1.09%
Government of Sweden
10.250%, due 05/05/03 SEK 29,400,000 4,561,791
6.750%, due 05/05/14 6,400,000 984,066
-------------
5,545,857
-------------
United Kingdom -- 2.26%
UK Treasury
8.500%, due 12/07/05 GBP 3,420,000 7,060,439
8.500%, due 07/16/07 900,000 1,916,710
7.250%, due 12/07/07 900,000 1,800,659
8.750%, due 08/25/17 300,000 767,433
-------------
11,545,241
-------------
Total Global (ex-U.S.) Bonds 77,614,671
-------------
Emerging Markets Debt -- 5.47% Shares
-------------
Brinson Emerging Markets Debt Fund (b) 1,594,099 27,921,446
-------------
Total Bonds (Cost $260,497,023) 232,205,377
-------------
Face
Amount
-------------
Short-Term Investments -- 23.31%
U.S. Government Obligations -- 0.58%
U.S. Treasury Bill 4.320%, due 02/25/99 $3,000,000 2,981,367
Commercial Paper -- 13.78%
Case Credit, 5.950% due 02/23/99 5,000,000 4,956,201
Corning, Inc., 5.100% due 01/04/99 5,125,000 5,122,822
Crown, Cork & Seal, 5.650% due 02/25/99 5,000,000 4,956,840
Detroit Edison, 5.250% due 01/4/99 3,700,000 3,698,381
Excel Paralubes, 5.650% 01/4/99 10,000,000 9,995,292
Marriott International, 5.700% 01/11/99 5,000,000 4,992,084
Norfolk Southern,
6.000%, due 01/11/99 950,000 948,417
6.050%, due 01/29/99 2,000,000 1,990,589
Raytheon Co. 5.600%, due 01/22/99 1,000,000 997,366
Face
Amount Value
------------- ------------
Seagrams,
6.100%, due 01/29/99 $ 5,000,000 $ 4,976,278
7.000%, due 01/07/99 5,000,000 4,994,167
Tenneco, Inc., 6.450%, due 01/08/99 5,000,000 4,993,729
Texas Utilities Co. 5.500%, due
01/29/99 5,000,000 4,978,611
Times Mirror, 5.750%, due 01/08/99 1,106,000 1,104,763
Union Carbide, 6.130%, due 01/04/99 5,000,000 4,997,446
Union Pacific Resources, 5.670%,
due 01/29/99 5,000,000 4,977,950
Vastar Resources, 5.100%, due 01/22/99 1,733,000 1,727,844
-------------
70,408,780
-------------
U.S. Corporate Bonds -- 7.36%
Burlington North Santa Fe,
Variable Rate, due 05/13/99 5,000,000 5,000,000
Burlington Resources, 6.875%,
due 08/01/99 2,000,000 2,011,995
Dayton Hudson Co., 7.500%, due 03/01/99 1,000,000 1,002,654
FMC Corp., 8.750%, due 04/01/99 2,880,000 2,899,210
James River Corp., 6.750%, due 10/01/99 1,000,000 1,007,596
Lehman Brothers, Inc.,
6.300%, due 08/11/99 2,000,000 2,005,500
6.920%, due 10/04/99 3,000,000 3,022,342
Lockheed Martin Corp., 6.550%,
due 05/15/99 6,000,000 6,013,422
Nabisco, Inc., 6.300%, due 8/26/99 1,000,000 1,003,331
Sonat, Inc., 9.500%, due 08/15/99 2,000,000 2,042,731
Supervalu Stores, Inc., 7.250%,
due 07/15/99 2,000,000 2,014,276
Ultramar Corp., 8.250%, due 07/01/99 1,500,000 1,517,272
Union Carbide, 7.000%, due 08/01/99 5,000,000 5,031,435
Union Oil Of California, 7.240%,
due 04/01/99 3,000,000 3,009,855
-------------
37,581,619
-------------
Investment Companies -- 1.59%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund 8,124,241 8,124,241
-------------
Total Short-Term Investments
(Cost $81,512,130) 119,096,007
-------------
Total Investments
(Cost $579,665,834)-- 120.89% (a) 617,664,562
-------------
Liabilities, less cash and other
assets-- (20.89)% (106,728,507)
-------------
Net Assets-- 100% $510,936,055
=============
See accompanying notes to Schedule of Investments.
15
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $579,665,834; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $ 61,012,536
Gross unrealized depreciation (23,013,808)
------------
Net unrealized appreciation $ 37,998,728
============
(b) Non-income producing security.
FRN: Floating Rate Note
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1998, the value of these securities amounted to $6,217,285 or 1.22% of net
assets.
Resettable Perpetual Step-up Notes: 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
December 31, 1998:
<TABLE>
<CAPTION>
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
------------ ------------- ------------ -----------
<S> <C> <C> <C> <C>
Forward Foreign Currency Buy Contracts
Australian Dollar 02/05/99 46,200,000 $ 28,347,732 $ (310,442)
British Pound 02/05/99 7,100,000 11,799,508 (128,742)
Canadian Dollar 02/05/99 38,300,000 24,937,331 (413,476)
Danish Kroner 02/05/99 22,200,000 3,491,472 (25,553)
German Mark 02/05/99 58,100,000 34,943,795 1,498,421
Japanese Yen 02/05/99 1,560,000,000 13,895,569 2,198,529
Netherlands Guilder 02/05/99 13,600,000 7,259,528 (62,360)
Swedish Krona 02/05/99 135,000,000 16,680,670 (832,465)
Swiss Franc 02/05/99 5,000,000 3,653,715 223,654
Forward Foreign Currency Sale Contracts
Australian Dollar 02/05/99 7,817,000 4,796,258 (392,309)
British Pound 02/05/99 23,000,000 38,223,759 (792,229)
Canadian Dollar 02/05/99 9,200,000 5,990,168 162,032
Danish Kroner 02/05/99 70,500,000 11,087,782 (568,534)
French Franc 02/05/99 34,000,000 6,097,156 (310,907)
German Mark 02/05/99 67,800,000 40,777,785 (732,368)
Japanese Yen 02/05/99 1,560,000,000 13,895,569 (672,989)
Netherlands Guilder 02/05/99 13,600,000 7,259,528 (375,544)
Spanish Peseta 02/05/99 600,000,000 4,241,885 46,586
Swedish Krona 02/05/99 21,000,000 2,594,771 21,237
Swiss Franc 02/05/99 5,000,000 3,653,715 1,255
-----------
Total $(1,466,204)
===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
FUTURES CONTRACTS
The Global Fund had the following open futures contracts as of December 31,
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, 312 contracts March 1999 $ 35,289,052 $ 35,363,250 $ 74,198
10 year U.S. Treasury Note, 60 contracts March 1999 7,117,920 7,149,375 31,455
30 year U.S. Treasury Bonds, 41 contracts March 1999 5,251,256 5,239,031 (12,225)
Index Futures Sales Contracts
Standard & Poor's 500, 163 contracts March 1999 47,615,392 50,754,125 (3,138,733)
-----------
Total $(3,045,305)
===========
</TABLE>
The market value of investments pledged to cover margin requirements for the
open futures positions at December 31, 1998 was $2,981,367.
See accompanying notes to financial statements.
17
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $502,549,359) $544,839,699
Affiliated issuers (Cost $77,116,475) 72,824,863
Cash 589,467
Foreign currency, at value (Cost $888,209) 848,944
Receivables:
Investment securities sold 4,437,224
Dividends 564,221
Interest 3,684,828
Fund shares sold 51,518
Other assets 49,823
-------------
TOTAL ASSETS 627,890,587
-------------
LIABILITIES:
Payables:
Securities loaned 111,993,032
Investment securities purchased 2,847,196
Investment advisory fees 344,091
Variation margin 150,423
Accrued expenses 153,586
Net unrealized depreciation on forward
foreign currency contracts 1,466,204
-------------
TOTAL LIABILITIES 116,954,532
-------------
NET ASSETS $510,936,055
=============
NET ASSETS CONSIST OF:
Paid in capital $471,475,723
Accumulated distribution in excess of net
investment income (8,716,455)
Accumulated net realized gain 14,687,962
Net unrealized appreciation 33,488,825
-------------
NET ASSETS $510,936,055
=============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of
$482,171,091 and 40,853,135 shares issued
and outstanding) $ 11.80
=============
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of
$1,521,291 and 129,168 shares issued
and outstanding) $ 11.78
=============
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of
$27,243,673 and 2,318,602 shares issued
and outstanding) $ 11.75
=============
See accompanying notes to financial statements.
18
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
INVESTMENT INCOME:
Interest (net of $2,374 for foreign taxes withheld;
including securities lending income of $173,798) $ 7,276,219
Dividends (net of $71,815 for foreign taxes withheld) 2,114,913
------------
TOTAL INCOME 9,391,132
------------
EXPENSES:
Advisory 2,387,061
Administration 208,262
Distribution 93,124
Custodian 67,136
Professional 63,400
Other 116,031
------------
TOTAL EXPENSES 2,935,014
------------
NET INVESTMENT INCOME 6,456,118
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments 32,604,265
Futures contracts 641,645
Foreign currency transactions (4,173,116)
------------
Net realized gain 29,072,794
------------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency (29,165,044)
Futures contracts (2,097,996)
Forward contracts 2,070,460
Translation of other assets and liabilities denominated
in foreign currency 26,013
------------
Change in net unrealized appreciation or depreciation (29,166,567)
------------
Net realized and unrealized loss (93,773)
------------
Net increase in net assets resulting from operations $ 6,362,345
============
See accompanying notes to financial statements.
19
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Interest received $ 11,059,378
Expenses paid (3,093,522)
Purchases of long-term portfolio investments (258,143,687)
Proceeds from sales of long-term portfolio investments 437,460,077
Net purchases in excess of proceeds from sales of
short-term portfolio investments 36,387,615
Net cash from foreign currency and futures transactions (2,938,739)
-------------
Net cash provided by operating activities 220,731,122
-------------
CASH FLOWS USEDFOR FINANCING ACTIVITIES:
Net capital shares transactions (147,376,349)
Net cash provided by securities loaned 7,046,988
Net cash used for commercial paper (32,491,443)
Cash dividends paid to shareholders (47,336,204)
-------------
Net cash used for financing activities (220,157,008)
-------------
Net increase in cash 574,114
Cash at beginning of period 15,353
-------------
Cash at end of period $ 589,467
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 6,362,345
Decrease in investments 212,943,573
Net realized gain on investment transactions 32,604,265
Net change in unrealized appreciation on investments (29,166,567)
Net realized loss on foreign currency transactions (4,173,116)
Net realized gain on futures contracts 641,645
Decrease in interest receivable (1,668,246)
Accretion of discount (711,301)
Amortization of premium 888,608
Decrease in prepaid assets 5,296
Decrease in investment advisory fee payable 121,351
Decrease in accrued expenses and other liabilities 2,883,269
-------------
Total adjustments 214,368,777
-------------
Net cash provided by operating activities $220,731,122
=============
See accompanying notes to financial statements.
20
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,456,118 $ 17,956,852
Net realized gain 29,072,794 39,774,075
Change in net unrealized appreciation or depreciation (29,166,567) (6,545,821)
-------------- ------------
Net increase in net assets resulting from operations 6,362,345 51,185,106
-------------- ------------
Distributions to shareholders:
Distributions from net investment income (6,456,118) (28,265,915)
Distributions in excess of net investment income (7,870,965) (5,070,122)
Distributions from net realized gain (33,009,121) (35,465,456)
-------------- ------------
Total distributions to shareholders* (47,336,204) (68,801,493)
-------------- ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 167,229,603 256,422,880
Shares issued on reinvestment of distributions 44,653,081 64,950,197
Shares redeemed (359,315,493) (217,384,769)
-------------- ------------
Net increase (decrease) in net assets resulting from capital
share transactions (147,432,809) 103,988,308
-------------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (188,406,668) 86,371,921
-------------- ------------
NET ASSETS:
Beginning of period 699,342,723 612,970,802
-------------- ------------
End of period (including accumulated
distribution in excess of net investment
income of $8,716,455 and $845,490, respectively) $ 510,936,055 $ 699,342,723
============== ============
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net investment income
Brinson Class I (13,661,783) (32,129,657)
Brinson Class N (40,903) (9,572)
UBS Investment Funds Class (624,397) (1,196,808)
Distributions from net realized gain
Brinson Class I (31,201,392) (33,973,096)
Brinson Class N (97,443) (53)
UBSInvestment Funds Class (1,710,286) (1,492,307)
-------------- ------------
Total distributions to shareholders $(47,336,204) $(68,801,493)
============== ============
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
GLOBAL FUND -- FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Year Ended June 30,
Brinson Class I (Unaudited) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.77 $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.18 0.37 0.38 0.44 0.43 0.33
Net realized and unrealized gain (loss) 0.05 0.62 1.79 1.37 0.86 (0.23)
------- ------- ------- ------- ------- -------
Total income from investment
operations 0.23 0.99 2.17 1.81 1.29 0.10
------- ------- ------- ------- ------- -------
Less distributions:
Distributions from and in excess of net
investment income (0.37) (0.65) (0.61) (0.62) (0.27) (0.27)
Distributions from and in excess of net
realized gains (0.83) (0.70) (0.65) (0.32) (0.10) (0.27)
------- ------- ------- ------- ------- -------
Total distributions (1.20) (1.35) (1.26) (0.94) (0.37) (0.54)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 11.80 $ 12.77 $ 13.13 $ 12.22 $ 11.35 $ 10.43
======= ======= ======= ======= ======= =======
Total return (non-annualized) 1.99% 8.28% 18.79% 16.38% 12.57% 0.77%
Ratios/Supplemental data:
Net assets, end of period (in 000s) $482,171 $667,745 $586,667 $457,933 $365,678 $278,859
Ratio of expenses to average net assets:
Before expense reimbursement 0.95%* 0.94% 0.99% 1.04% 1.09% 1.14%
After expense reimbursement N/A N/A N/A N/A N/A 1.10%
Ratio of net investment income to average
net assets:
Before expense reimbursement 2.20%* 2.70% 3.03% 3.69% 4.27% 3.21%
After expense reimbursement N/A N/A N/A N/A N/A 3.25%
Portfolio turnover rate 41% 88% 150% 142% 238% 231%
</TABLE>
* Annualized
N/A = Not applicable
See accompanying notes to financial statements.
22
<PAGE>
GLOBAL FUND -- FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Year Ended
Brinson Class N (Unaudited) June 30, 1998*
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 12.75 $ 13.13
------- -------
Income from investment operations:
Net investment income 0.14 0.63
Net realized and unrealized gain 0.08 0.32
------- -------
Total income from investment operations 0.22 0.95
------- -------
Less distributions:
Distributions from and in excess of net investment income (0.36) (0.63)
Distributions from net realized gain (0.83) (0.70)
------- -------
Total distributions (1.19) (1.33)
------- -------
Net asset value, end of period $ 11.78 $ 12.75
======= =======
Total return (non-annualized) 1.88% 7.90%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 1,521 $ 1,163
Ratio of expenses to average net assets 1.20%** 1.19%
Ratio of net investment income to average net assets 1.95%** 2.45%
Portfolio turnover rate 41% 88%
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
** Annualized
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>
Six Months Ended July 31, 1995*
December 31, 1998 Year Ended Year Ended Through
UBS Investment Funds Class (Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.71 $ 13.05 $ 12.18 $ 11.60
-------- -------- -------- --------
Income from investment operations:
Net investment income 0.13 0.30 0.34 0.39
Net realized and unrealized gain 0.05 0.61 1.75 1.10
-------- -------- -------- --------
Total income from investment operations 0.18 0.91 2.09 1.49
-------- -------- -------- --------
Less distributions:
Distributions from and in excess of net investment income (0.31) (0.55) (0.57) (0.59)
Distributions from net realized gain (0.83) (0.70) (0.65) (0.32)
-------- -------- -------- --------
Total distributions (1.14) (1.25) (1.22) (0.91)
-------- -------- -------- --------
Net asset value, end of period $ 11.75 $ 12.71 $ 13.05 $ 12.18
======== ======== ======== ========
Total return (non-annualized) 1.59% 7.60% 18.13% 13.24%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $27,244 $30,436 $26,303 $14,030
Ratio of expenses to average net assets 1.60%** 1.59% 1.64% 1.69%**
Ratio of net investment income to average net assets 1.55%** 2.05% 2.38% 3.04%**
Portfolio turnover rate 41% 88% 150% 142%
</TABLE>
* Commencement of UBS Investment Funds Class
** Annualized
See accompanying notes to financial statements.
24
<PAGE>
GLOBAL EQUITY FUND
[UBS LOGO APPEARS HERE]
The Global Equity Fund is actively managed, providing a fully integrated
approach to the developed equity markets across the world. We employ fundamental
valuation models to determine the relative attractiveness of aggregate markets,
as well as of individual stocks. Our portfolio construction process
simultaneously sets country, currency, industry/factor and stock selection
strategies. This interactive investment process has evolved within the context
of an environment marked by growing globalization and increasingly integrated
economies, industries and capital markets.
The UBS Investment Fund - Global Equity has provided an annualized return of
14.51% since its performance inception on July 31, 1995, compared to the 17.54%
return for the benchmark, the MSCI World Equity (Free) Index. This performance
was achieved with a volatility of 11.37%, well below the 14.05% volatility of
the benchmark. For the full year, the Fund gained 13.17%, lagging the index's
unhedged return of 24.62%. With the exception of the Pacific Rim and several
small markets, most developed equity markets enjoyed solid market performance.
The EMU and North America both gained over 29%, in local terms.
The U.S. market has been remarkably resilient, continuing an unprecedented bull
market underpinned by various one-time events. This market is extremely
overvalued; the U.S. is our largest underweight. Monetary Union, privatization,
restructuring, merger activity and increased capital flows have boosted European
equity markets. Despite their excellent performance, European corporations are
still early into their restructuring, with the potential for improving
profitability ahead. Europe is our largest overweight.
Most Pacific markets continued to suffer the consequences of last year's
currency crisis. This situation has been aggravated in Japan by flawed
macroeconomic policies, a largely insolvent financial sector and an unprofitable
domestic corporate sector. We remain very underweight Japan, Hong Kong and
Singapore. In comparison, Australia and New Zealand have been unduly impacted by
their geographic proximity to Asia and are attractively priced. We maintain an
overweight in these markets.
Market allocation made a small positive contribution. The overweight of Belgium
and Finland and underweight of Japan were successful strategies, but the
overweight to New Zealand cost returns. Currency management decreased returns
somewhat due to underweights of the yen and overweights of the New Zealand
dollar and Australian dollar. Stock selection had an important impact on the
year's performance. Japan stock selection was positive, but both the U.S. and
the U.K. were negative. Japan was helped by the significant underweight to
banks, overweight to blue chips and stock specific returns. U.S. stock selection
was responsible for most of the underperformance, disadvantaged by the
underweight to size and the overweight to basic industries.
25
<PAGE>
GLOBAL EQUITY FUND
[UBS LOGO APPEARS HERE]
TOTAL RETURN
<TABLE>
<CAPTION>
6 months 1 year 3 years 7/31/95*
ended ended ended to
12/31/98 12/31/98 12/31/98 12/31/98
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UBS Investment Fund-- Global Equity 2.43% 13.17% 13.07% 14.51%
- --------------------------------------------------------------------------------------------
MSCI World Equity (Free) Index 6.72 24.62 18.06 17.54
- --------------------------------------------------------------------------------------------
</TABLE>
*Performance inception date of the UBS Investment Fund-- Global Equity.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
This chart shows the growth in the value of an investment in the UBS Investment
Fund -- Global Equity and the MSCI World Equity (Free) Index if you had invested
$10,000 on July 31, 1995, and had reinvested all your income dividends and
capital gain distributions through December 31, 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.
UBS Investment Fund -- Global Equity
vs. MSCI World Equity (Free) Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
UBS MCSI
Investment Fund- World Equity
Global Equity (Free) Index
---------------- -------------
7/31/95 $10,000 $10,000
8/31/95 $10,129 $9,965
9/30/95 $10,293 $10,232
10/31/95 $10,362 $10,167
11/30/95 $10,655 $10,472
12/31/95 $10,861 $10,665
1/31/96 $11,063 $10,839
2/29/96 $11,008 $10,870
3/31/96 $11,091 $10,963
4/30/96 $11,229 $11,152
5/31/96 $11,266 $11,234
6/30/96 $11,324 $11,257
7/31/96 $11,157 $10,961
8/31/96 $11,334 $11,138
9/30/96 $11,687 $11,505
10/31/96 $11,873 $11,620
11/30/96 $12,329 $12,109
12/31/96 $12,332 $12,001
1/31/97 $12,475 $12 177
2/28/97 $12,567 $12,234
3/31/97 $12,373 $11,965
4/30/97 $12,506 $12,207
5/31/97 $13,008 $12,824
6/30/97 $13,377 $13,283
7/31/97 $13,797 $13,812
8/31/97 $13,428 $13,306
9/30/97 $13,838 $13,882
10/31/97 $13,428 $13,434
11/30/97 $13,449 $13,554
12/31/97 $13,589 $13,717
1/31/98 $13,735 $13,902
2/28/98 $14,230 $14,575
3/31/98 $14,556 $14,988
4/30/98 $14,568 $15,135
5/31/98 $14,478 $14,922
6/30/98 $14,394 $15,111
7/31/98 $14,349 $15,032
8/31/98 $13,193 $13,512
9/30/98 $13,601 $13,978
10/31/98 $14,088 $14,813
11/30/98 $14,473 $15,418
12/31/98 $15,897 $17,370
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
26
<PAGE>
GLOBAL EQUITY FUND
MARKET ALLOCATION
As of December 31, 1998 (Unaudited)
Current
Benchmark Strategy
- -----------------------------------------------------
U.S. 51.0% 41.9%
Australia 1.2 3.2
Austria 0.2 0.0
Belgium 0.9 2.0
Canada 1.8 1.2
Denmark 0.4 0.4
Finland 0.7 1.9
France 4.5 6.5
Germany 5.0 7.3
Hong Kong 1.0 0.0
Ireland 0.2 0.0
Italy 2.5 2.7
Japan 9.9 2.6
Netherlands 3.1 4.7
New Zealand 0.1 2.3
Norway 0.2 0.2
Portugal 0.3 0.0
Singapore 0.3 0.6
Spain 1.6 1.2
Sweden 1.2 2.6
Switzerland 3.8 4.6
United Kingdom 10.1 14.1
- -----------------------------------------------------
100.0% 100.0%
TOP TEN U.S. EQUITY HOLDINGS
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- -----------------------------------------------------
1. Xerox Corp. 2.54%
2. FDX, Corp. 1.78
3. Burlington Northern Santa Fe Corp. 1.76
4. Lockheed Martin Corp. 1.55
5. Philip Morris Companies, Inc. 1.46
6. Baxter International, Inc. 1.10
7. Kimberly Clark Corp. 1.07
8. Entergy Corp 1.01
9. CIGNA Corp. 0.98
10. Aon Corp. 0.98
- -----------------------------------------------------
CURRENCY ALLOCATION
As of December 31, 1998 (Unaudited)
Current
Benchmark Strategy
- -----------------------------------------------------
U.S. 51.0% 48.0%
Australia 1.2 5.0
Canada 1.8 5.8
Denmark 0.4 0.4
EMU 19.0 19.0
Hong Kong 1.0 0.0
Japan 9.9 3.9
New Zealand 0.1 2.3
Norway 0.2 0.2
Singapore 0.3 0.3
Sweden 1.2 5.2
Switzerland 3.8 3.8
United Kingdom 10.1 6.1
- -----------------------------------------------------
100.0% 100.0%
TOP TEN GLOBAL (EX-U.S.) EQUITY HOLDINGS
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- -----------------------------------------------------
1. Novartis AG (Reg.) 1.50%
2. Telecom Corp. of New Zealand Ltd. 1.32
3. Royal Dutch Petroleum Co. 1.19
4. Nestle S.A. (Reg.) 1.13
5. Bayer AG 1.13
6. Nokia Oyj, A Shares 1.11
7. Lloyds TSB Group PLC 1.10
8. Allianz AG 1.06
9. Glaxo Wellcome PLC 0.98
10. ING Groep NV 0.97
- -----------------------------------------------------
27
<PAGE>
GLOBAL EQUITY FUND
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
U.S. EQUITIES
Energy 1.47%
Capital Investment
Capital Goods 4.34
Technology 5.68
-------
10.02
Basic Industries
Chemicals 2.04
Housing/Paper 3.73
Metals 0.17
-------
5.94
-------
Consumer
Non-Durables 2.84
Retail/Apparel 1.88
Autos/Durables 1.33
Health: Drugs 1.74
Health: Non-Drugs 2.18
-------
9.97
-------
Financial
Banks 3.79
Non-Banks 2.92
-------
6.71
-------
Utilities
Electric 1.41
Telephone 0.35
-------
1.76
-------
Transportation 4.25
Services/Misc 1.88
-------
Total U.S. Equities 42.00
-------
Global (ex-U.S.) EQUITIES
Aerospace & Military 0.31
Airlines 0.20
Appliances &Household 1.40
Autos/Durables 0.47
Banking 6.38
Beverages and Tobacco 1.98
Broadcasting & Publishing 1.83
Building Materials 0.84
Business & Public Service 1.60
Chemicals 1.46
Construction 0.07%
Data Processing 0.12
Electric Components 0.19
Electronics 3.53
Energy 4.59
Financial Services 1.78
Food & House Products 2.10
Forest Products 0.76
Health: Drugs 2.05
Health: Non-Drugs 3.41
Housing/Paper 0.15
Industrial Components 0.45
Insurance 5.60
Investment Companies 0.28
Leisure & Tourism 0.14
Machinery & Engineering 0.39
Merchandising 2.21
Metals--Steel 0.58
Miscellaneous Materials 0.41
Multi-Industry 1.94
Non-Ferrous Metals 0.63
Real Estate 0.15
Recreation 0.10
Retail & Apparel 0.26
Telecommunications 6.53
Textiles &Apparel 0.07
Transportation 0.08
Utilities 2.17
-------
Total Global (ex-U.S.) Equities 57.21
-------
SHORT-TERM INVESTMENTS 1.21
-------
TOTAL INVESTMENTS 100.42
-------
LIABILITIES, LESS CASH
AND OTHER ASSETS (0.42)
-------
NET ASSETS 100.00%
=======
28
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
----------- --------------
Equities -- 99.21%
U.S. Equities -- 42.00%
Advanced Micro Devices, Inc. (b) 14,700 $ 425,381
Aetna, Inc. 9,000 707,625
Allergan, Inc. 3,700 239,575
Alza Corp. (b) 7,700 402,325
American Standard Companies, Inc. (b) 7,900 283,906
Aon Corp. 13,050 722,644
Automatic Data Processing, Inc. 6,000 481,125
BankBoston Corp. 4,200 163,537
Baxter International, Inc. 12,600 810,337
Beckman Coulter Inc. 3,300 179,025
Bestfoods 5,100 271,575
Biogen, Inc. (b) 1,700 141,100
Birmingham Steel Corp. 3,100 12,981
Burlington Northern Santa Fe Corp. 38,600 1,302,750
Champion Enterprises, Inc. (b) 1,700 46,538
Champion International Corp. 3,800 153,900
Chase Manhattan Corp. 6,700 456,019
CIGNA Corp. 9,400 726,737
Circuit City Stores-Circuit City Group 10,500 524,344
CMS Energy Corp. 10,000 484,375
Comerica, Inc. 3,200 218,200
CommScope, Inc. (b) 5,433 91,342
Comverse Technology, Inc. (b) 3,525 250,275
Consolidated Stores Corp. (b) 10,200 205,912
Corning, Inc. 15,100 679,500
Covance, Inc. (b) 3,900 113,588
Crown Cork & Seal Co., Inc. 3,700 114,006
Cummins Engine Co., Inc. 600 21,300
Dial Corp. 4,000 115,500
Eastman Chemical Co. 4,300 192,425
Electronic Data Systems Corp. 13,800 693,450
EMC Corp. (b) 4,600 391,000
Entergy Corp. 23,900 743,887
FDX Corp. (b) 14,800 1,317,200
First American Corp. of Tennessee 2,000 88,750
First Data Corp. 18,704 592,683
First Security Corp. 3,850 89,994
Fleet Financial Group, Inc. 9,700 433,469
Fleetwood Enterprises, Inc. 1,500 52,125
Food Lion Inc., Class A 17,600 187,000
Fort James Corp. 13,300 532,000
General Instrument Corp. (b) 17,600 597,300
General Semiconductor, Inc. (b) 4,125 33,773
Genzyme Corp. (b) 3,100 154,225
Genzyme-Molecular Oncology (b) 399 1,297
Geon Co. 2,100 48,300
Goodyear Tire & Rubber Co. 10,100 509,419
Great Lakes Chemical Corp. 2,500 100,000
GreenPoint Financial Corp. 4,400 154,550
Harnischfeger Industries, Inc. 5,400 55,013
HCR Manor Care, Inc. (b) 4,050 118,969
Hibernia Corp., Class A 4,300 74,713
Household International Inc. 7,600 301,150
IMC Global Inc. 12,000 256,500
Johnson Controls Inc. 3,600 212,400
Kimberly Clark Corp. 14,500 790,250
Lafarge Corp. 3,700 149,850
Shares Value
----------- --------------
Lear Corp. (b) 9,200 $ 354,200
Lockheed Martin Corp. 13,551 1,148,447
Lyondell Petrochemical Co. 11,100 199,800
Martin Marietta Materials, Inc. 2,235 138,989
Masco Corp. 18,000 517,500
Nabisco Holdings Corp., Class A 7,900 327,850
National Service Industries, Inc. 2,300 87,400
Nextel Communications, Inc., Class A (b) 10,800 255,150
Norfolk Southern Corp. 16,300 516,506
Peco Energy Co. 13,300 553,612
Pentair, Inc. 4,100 163,231
Philip Morris Companies, Inc. 20,200 1,080,700
Praxair, Inc. 7,100 250,275
Raytheon Co., Class B 13,000 692,250
Regions Financial Corp. 2,000 80,625
Schering Plough Corp. 7,200 397,800
Sears, Roebuck and Co. 11,100 471,750
Southdown, Inc. 4,476 264,923
St. Jude Medical, Inc. (b) 7,300 202,119
Timken Co. 1,400 26,425
TRW, Inc. 2,100 117,994
Tyson Foods, Inc., Class A 14,400 306,000
Ultramar Diamond Shamrock Corp. 7,952 192,836
Unocal Corp. 5,300 154,694
US Bancorp 9,863 350,136
USG Corp. 1,800 91,688
Vencor, Inc. (b) 8,100 36,450
Ventas, Inc. 8,200 99,938
Viad Corp. 7,600 230,850
Wells Fargo and Co. 9,700 387,394
Witco Corp. 2,200 35,063
Xerox Corp. 15,900 1,876,200
York International Corp. 4,800 195,900
------------
Total U.S. Equities 31,021,809
------------
Global (ex-U.S.) Equities -- 57.21%
Australia --3.19%
Amcor Ltd. 10,700 45,766
Brambles Industries Ltd. 6,900 168,240
Broken Hill Proprietary Co., Ltd. 27,950 206,060
CSR Ltd. 37,400 91,535
David Jones Ltd. 48,400 53,439
Lend Lease Corp., Ltd. 8,294 111,926
National Australia Bank Ltd. 21,075 318,014
News Corp. Ltd. 30,040 198,638
News Corp. Ltd., Preferred 13,300 81,011
Orica Ltd. 8,500 44,266
Pacific Dunlop Ltd. 32,600 52,791
Qantas Airways Ltd. 38,977 79,615
QBE Insurance Group Ltd. 20,042 82,983
Rio Tinto Ltd. 6,863 81,480
Santos Ltd. 26,000 69,854
Telstra Corp. Ltd. (b) 70,100 328,084
Westpac Banking Corp., Ltd. 36,545 244,790
WMC Ltd. 17,500 52,814
Woolworth's Ltd. 12,100 41,237
------------
2,352,543
------------
29
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
----------- --------------
Belgium -- 1.82%
Electrabel S.A. 1,060 $ 465,917
Fortis AG 88 5
Fortis AG Strip (b) 1,798 651,605
KBC Bancassurance Holding Strip (b) 110 6
Kredietbank NV 2,870 227,235
------------
1,344,768
------------
Canada -- 1.04%
Agrium, Inc. 3,100 27,246
Alcan Aluminum Ltd. 1,900 51,335
Bank of Montreal 1,200 48,203
Canadian National Railway Co. 1,200 62,305
Canadian Pacific Ltd. 3,516 65,696
Extendicare, Inc., Class A (b) 2,700 15,293
Hudson's Bay Co. 3,200 40,312
Imasco, Ltd. 1,900 40,449
Imperial Oil Ltd. 3,800 60,736
Magna International, Inc., Class A 500 31,055
Newbridge Networks Corp. (b) 1,200 36,406
NOVA Chemicals Corp. 2,197 28,607
Potash Corporation of Saskatchewan, Inc. 500 32,064
Royal Bank of Canada 1,400 69,772
Seagram Co., Ltd. 700 26,546
Shaw Communications, Inc., Class B 2,600 62,799
TransCanada Pipelines Ltd. 3,588 52,442
Westcoast Energy, Inc. 1,000 19,857
------------
771,123
------------
Denmark -- 0.29%
Tele Danmark A/S 1,600 215,948
------------
Finland -- 1.70%
Merita Ltd., Class A 30,200 192,053
Nokia Oyj-A Shares 6,700 820,397
UPM-Kymmene Corp. 8,700 243,986
------------
1,256,436
------------
France -- 6.40% Accor S.A.
Air Liquide 1,638 300,553
Alcatel Alsthom 2,386 292,153
Axa-Certificate de Valeur Garante (b) 2,181 316,245
Banque Nationale de Paris 2,922 240,719
Cie de Saint Gobain 1,136 160,450
Dexia France 1,127 173,704
Elf Aquitaine S.A. 1,602 185,259
France Telecom S.A. 3,220 255,931
Groupe Danone 640 183,309
Lagardere S.C.A. 7,120 302,710
Michelin, Class B 3,031 121,268
Paribas 1,583 137,636
Pinault-Printemps-Redoute S.A. 790 151,036
Rhone-Poulenc, Class A 4,550 234,252
SEITA 4,090 256,257
Societe Generale 1,223 198,134
Shares Value
----------- --------------
Suez Lyonnaise des Eaux S.A. 1,687 $ 346,689
Thomson CSF 5,295 227,489
Total S.A., Class B 2,249 227,871
Vivendi 1,608 417,386
------------
4,729,051
------------
Germany -- 7.42%
Allianz AG 2,098 780,956
Bayer AG 19,840 833,218
DaimlerChrysler AG (b) 5,925 588,729
Deutsche Bank AG 3,950 233,073
Deutsche Telekom AG 11,260 370,128
Dresdner Bank AG 5,200 217,915
Hoechst AG 5,900 244,062
Mannesmann AG (b) 4,350 503,400
SAP AG 450 194,525
Siemens AG 9,220 606,142
Veba AG 11,010 652,430
Volkswagen AG 3,190 258,172
------------
5,482,750
------------
Italy -- 2.83%
Assicurazioni Generali 10,700 447,742
Danieli & Co. Savings (Risp) 7,400 29,529
ENI Spa 71,000 465,025
ENI Spa ADR 1,700 115,175
La Rinascente Spa 26,875 276,990
Montedison Spa 164,560 219,055
San Paolo-imi, Spa 13,912 246,349
Telecom Italia Mobile Spa 39,000 288,549
------------
2,088,414
------------
Japan -- 2.23%
Amada Co., Ltd. 4,000 19,397
Bridgestone Corp. 1,000 22,739
Canon, Inc. 3,000 64,229
Citizen Watch Co., Ltd. 4,000 24,114
Dai Nippon Printing Co., Ltd. 2,000 31,950
Daiichi Pharmaceutical Co., Ltd. 3,000 50,771
Daikin Industries Ltd. 4,000 39,716
Daiwa House Industry Co., Ltd. 2,000 21,330
Fanuc 1,400 48,032
Fuji Photo Film 1,000 37,234
Fujitsu 2,000 26,684
Honda Motor Co. 1,000 32,890
Hoya Corp. 1,000 48,759
Ito Yokado Co., Ltd. 1,000 70,036
Kaneka Corp. 3,000 22,527
Kao Corp. 1,000 22,606
Kirin Brewery Co., Ltd. 4,000 51,064
Kokuyo 1,000 13,484
Kuraray Co., Ltd. 3,000 33,165
Marui Co., Ltd. 2,000 38,564
Matsushita Electric Industrial Co. 3,000 53,165
NGK Insulators 5,000 64,583
Nintendo Corp., Ltd. 500 48,537
Nippon Denso Co., Ltd. 3,000 55,585
30
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
----------- --------------
Nippon Meat Packers, Inc. 1,000 $ 16,135
Omron Corp. 1,000 13,723
Sankyo Co., Ltd. 2,000 43,794
Secom Co., Ltd. 1,000 82,979
Sekisui House Ltd. 3,000 31,782
Shin-Etsu Chemical Co., Ltd. 1,000 24,114
Sony Corp. 1,000 72,961
Sumitomo Chemical Co. 5,000 19,504
Sumitomo Electric Industries 3,000 33,803
Takeda Chemical Industries 2,000 77,128
TDK Corp. 1,000 91,578
Tokio Marine & Fire Insurance Co. 2,000 23,936
Toray Industries, Inc. 11,000 57,535
Toshiba Corp. 10,000 59,663
Toyota Motor Corp. 2,000 54,433
------------
1,644,229
------------
Netherlands -- 4.72%
ABN AMRO Holdings NV 10,149 213,612
Elsevier NV 19,600 274,674
Heineken NV 6,693 402,999
ING Groep NV 11,702 713,955
KPN NV 13,115 656,903
Royal Dutch Petroleum Co. 17,675 880,595
Unilever NV 4,000 342,090
------------
3,484,828
------------
New Zealand -- 2.24%
Auckland International Airport Ltd. (b) 49,200 68,880
Brierley Investments Ltd. 282,400 64,153
Carter Holt Harvey Ltd. 170,900 153,487
Fletcher Challenge Building 41,450 64,161
Fletcher Challenge Energy 58,450 111,165
Fletcher Challenge Paper 104,700 70,248
Lion Nathan Ltd. 57,300 146,212
Telecom Corp. of New Zealand Ltd. 224,500 978,480
------------
1,656,786
------------
Norway -- 0.23%
Norsk Hydro ASA 2,300 77,582
Norske Skogindustrier ASA 3,200 93,241
------------
170,823
------------
Singapore -- 0.71%
Singapore Press Holdings Ltd. 29,046 315,105
United Overseas Bank Ltd. (Frgn.) 32,000 205,576
------------
520,681
------------
Spain -- 1.21%
Banco Popular Espanol S.A. 3,280 247,686
Endesa S.A. 17,803 472,416
Telefonica S.A. 3,808 169,578
Telefonica S.A. Rights
(expiring 1/30/99) (b) 76 68
------------
889,748
------------
Shares Value
----------- --------------
Sweden -- 2.49%
Astra AB, A Shares 13,160 $ 268,694
Electrolux AB, B Shares 16,970 292,052
Investor AB 4,560 205,897
Nordbanken Holding AB 23,910 153,387
Skandia Forsakrings AB 21,170 323,852
Svenska Handelsbanken, A Shares 2,220 93,666
Swedish Match AB 58,550 213,085
Telefonaktiebolaget LM Ericsson, B Shares 12,140 289,055
------------
1,839,688
------------
Switzerland -- 4.74%
CS Holdings AG (Reg.) 230 36,003
Julius Baer Holding AG 42 139,592
Nestle S.A. (Reg.) 383 833,761
Novartis AG (Reg.) 565 1,110,666
Roche Holding AG (Gen.) 52 634,525
Swiss Reinsurance Co. (Reg.) 134 349,366
SwissCom AG (Reg.) (b) 948 396,869
------------
3,500,782
------------
United Kingdom -- 13.95%
Allied Zurich AG (b) 20,375 303,915
Barclays PLC 15,000 323,445
BOC Group PLC 18,000 257,408
Boots Company PLC 18,000 306,524
British American Tobacco PLC 13,375 117,610
British Petroleum Co. PLC 39,313 587,049
British Steel PLC 151,750 224,710
Cable & Wireless PLC 10,500 129,103
Charter PLC 33,422 183,506
Coats Viyella PLC 120,250 54,020
Diageo PLC 21,630 246,159
Fairview Holdings PLC (b) 13,250 19,620
FKI PLC 111,405 248,378
Garban PLC (b) 900 3,429
General Electric Co. PLC 44,820 404,553
Glaxo Wellcome PLC 21,120 726,688
Greenalls Group PLC 20,000 106,650
Hanson PLC 38,750 307,696
Hillsdown Holdings PLC 32,500 40,555
House of Fraser PLC 45,250 39,902
Lloyds TSB Group PLC 57,220 813,988
Marks & Spencer PLC 66,120 453,521
Mirror Group PLC 66,000 164,992
National Westminster Bank PLC 13,350 257,436
Nycomed Amersham PLC 26,000 179,093
Peninsular & Oriental Steam Navigation Co. 12,475 147,472
Prudential Corp. PLC 37,000 558,666
Reed International PLC 24,000 187,678
Rio Tinto Ltd. 24,020 279,353
RJB Mining PLC 40,500 52,560
Royal & Sun Alliance Insurance Group PLC 15,779 128,838
Sainsbury (J.) PLC 12,500 100,193
Scottish Hydro-Electric PLC 36,650 412,825
Sedgwick Group PLC 40,000 148,412
31
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
----------- --------------
SmithKline Beecham PLC 31,850 $ 445,136
Smurfit (Jefferson) Group PLC 28,196 50,666
Tate & Lyle PLC 2,000 11,014
Terranova Foods PLC (b) 13,250 24,250
Tesco PLC 116,250 331,228
Thames Water PLC 14,458 276,637
Thames Water PLC, Class B (b) 12,500 15,702
United News & Media PLC 15,000 131,524
Vodafone Group PLC 9,825 159,546
Williams PLC 19,461 110,495
Yorkshire Water PLC 25,500 233,349
------------
10,305,494
------------
Total Global (ex-U.S.) Equities 42,254,092
------------
Total Equities (Cost $59,154,576) 73,275,901
------------
Face
Amount Value
----------- --------------
Short-Term Investments -- 1.21%
U.S. Government Obligations -- 0.81%
U.S. Treasury Bill 4.320%, due 02/25/99 $600,000 $ 596,273
Shares
-----------
Investment Companies -- 0.40%
Brinson Supplementary Trust U.S.
Cash Management Prime Fund 295,185 295,185
Total Short-Term Investments
(Cost $891,132) 891,458
------------
Total Investments
(Cost $60,045,708)-- 100.42% (a) 74,167,359
------------
Liabilities, less cash and other
assets-- (0.42%) (307,762)
------------
Net Assets-- 100% $ 73,859,597
============
See accompanying notes to schedule of investments.
32
<PAGE>
GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $60,045,708; and
net unrealized appreciation consisted of:
Gross unrealized appreciation $17,271,007
Gross unrealized depreciation (3,149,356)
------------
Net unrealized appreciation $14,121,651
===========
(b) Non-income producing security
(c) Denominated in U.S. dollars
Forward Foreign Currency Contracts
The Global Equity Fund had the following open forward foreign currency contracts
as of December 31, 1998:
<TABLE>
<CAPTION>
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
---------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Forward Foreign Currency Buy Contracts
Australian Dollar 6/04/99 3,200,000 $1,965,638 $(57,402)
Canadian Dollar 6/04/99 5,300,000 3,453,331 (33,786)
Japanese Yen 6/04/99 127,000,000 1,149,402 84,547
Spanish Peseta 6/04/99 79,000,000 561,943 6,134
Swedish Krona 6/04/99 20,900,000 2,596,051 (158)
Forward Foreign Currency Sale Contracts
Australian Dollar 6/04/99 1,200,000 737,114 (434)
Belgian Franc 6/04/99 10,100,000 296,325 (3,486)
British Pounds 6/04/99 3,400,000 5,640,064 (32,705)
Finnish Markka 6/04/99 4,000,000 796,227 (5,852)
French Franc 6/04/99 8,300,000 1,497,562 (6,098)
German Mark 6/04/99 1,700,000 1,028,726 (4,259)
Netherlands Guilder 6/04/99 2,600,000 1,396,371 (10,368)
Spanish Peseta 6/04/99 79,000,000 591,943 (2,532)
Swedish Krona 6/04/99 4,900,000 608,643 5,415
Swiss Franc 6/04/99 600,000 443,289 (1,788)
---------
Total $(62,772)
=========
</TABLE>
See accompanying notes to financial statements.
33
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $59,750,523) $73,872,174
Affiliated issuers (Cost $295,185) 295,185
Foreign currency, at value (Cost $160,851) 155,949
Receivables:
Investment securities sold 49,555
Dividends 134,275
Interest 3,190
Other assets 45
-----------
TOTAL ASSETS 74,510,373
-----------
LIABILITIES:
Payables:
Investment securities purchased 377,088
Due to custodian bank 101,328
Investment advisory fees 43,446
Accrued expenses 66,142
Net unrealized depreciation on forward foreign
currency contracts 62,772
-----------
TOTAL LIABILITIES 650,776
-----------
NET ASSETS $73,859,597
===========
NET ASSETS CONSIST OF:
Paid in capital $58,566,651
Accumulated undistributed net investment income 26,143
Accumulated net realized gain 1,212,206
Net unrealized appreciation 14,054,597
-----------
NET ASSETS $73,859,597
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of
$24,604,008 and 1,955,626 shares issued
and outstanding) $ 12.58
===========
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of
$205,845 and 16,400 shares issued
and outstanding) $ 12.55
===========
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of
$49,049,744 and 3,901,394 shares issued
and outstanding) $ 12.57
===========
See accompanying notes to financial statements.
34
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTs
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of $21,094 for foreign taxes withheld) $ 557,653
Interest 60,004
----------
Total income 617,657
----------
EXPENSES:
Advisory 289,624
Distribution 190,850
Professional 25,275
Other 65,630
----------
TOTAL EXPENSES 571,379
----------
Expenses deferred by Advisor (18,480)
----------
NET EXPENSES 552,899
----------
NET INVESTMENT INCOME 64,758
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments 2,495,750
Futures contracts (472,356)
Foreign currency transactions 333,247
----------
Net realized gain 2,356,641
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency (1,767,221)
Futures contracts 575,614
Forward contracts 21,023
Translation of other assets and liabilities denominated
in foreign currency (906)
----------
Change in net unrealized appreciation or depreciation (1,171,490)
----------
Net realized and unrealized gain 1,185,151
----------
Net increase in net assets resulting from operations $1,249,909
==========
See accompanying notes to financial statements.
35
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL STATEMENTs
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
--------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 64,758 $ 677,369
Net realized gain 2,356,641 6,903,703
Change in net unrealized appreciation or depreciation (1,171,490) (1,282,988)
------------ ------------
Net increase in net assets resulting from operations 1,249,909 6,298,084
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I (227,414) (242,673)
Brinson Class N (1,853) (11)
UBSInvestment Funds Class (186,532) (397,017)
Distributions from net realized gain:
Brinson Class I (352,100) (1,266,777)
Brinson Class N (2,950) (82)
UBSInvestment Funds Class (710,918) (5,307,194)
------------ ------------
Total distributions to shareholders (1,481,767) (7,213,754)
------------ ------------
Capital share transactions:
Shares sold 7,405,967 40,216,740
Shares issued on reinvestment of distributions 1,306,231 6,378,677
Shares redeemed (16,492,751) (73,542,587)
------------ ------------
Net decrease in net assets resulting from capital
share transactions (7,780,553) (26,947,170)
------------ ------------
TOTAL DECREASE IN NET ASSETS (8,012,411) (27,862,840)
------------ ------------
NET ASSETS:
Beginning of period 81,872,008 109,734,848
------------ ------------
End of period (including accumulated undistributed net
investment income of $26,143 and $377,184, respectively) $ 73,859,597 $ 81,872,008
============ ============
</TABLE>
See accompanying notes to financial statements.
36
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, January 28, 1994*
December 31, 1998 ----------------------------------------- Through
Brinson Class I (Unaudited) 1998 1997 1996 1995 June 30, 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.54 $ 12.76 $ 11.57 $ 9.93 $ 9.49 $ 10.00
------- -------- -------- -------- -------- -------
Income from investment operations:
Net investment income 0.04 0.22 0.16 0.18 0.18 0.07
Net realized and unrealized gain (loss) 0.30 0.78 2.14 2.29 0.39 (0.54)
------- -------- -------- -------- -------- -------
Total income (loss) from investment
operations 0.34 1.00 2.30 2.47 0.57 (0.47)
------- -------- -------- -------- -------- -------
Less distributions:
Distributions from net investment income (0.12) (0.17) (0.12) (0.14) (0.04) (0.04)
Distributions from and in excess of net
realized gain (0.18) (1.05) (0.99) (0.69) (0.09) --
------- -------- -------- -------- -------- -------
Total distributions (0.30) (1.22) (1.11) (0.83) (0.13) (0.04)
------- -------- -------- -------- -------- -------
Net asset value, end of period $ 12.58 $ 12.54 $ 12.76 $ 11.57 $ 9.93 $ 9.49
======= ======== ======== ======== ======== =======
Total return (non-annualized) 2.86% 8.99% 21.26% 25.66% 6.06% (4.70)%
Ratios/Supplemental data:
Net assets, end of period (in 000s) $24,604 $ 22,724 $ 48,054 $ 27,126 $ 20,706 $ 20,642
Ratio of expenses to average net assets:
Before expense reimbursement 1.05%** 1.02% 1.25% 1.77% 2.06% 2.65%**
After expense reimbursement 1.00%** 1.00% 1.00% 1.00% 1.00% 1.00%**
Ratio of net investment income to average net assets:
Before expense reimbursement 0.66%** 1.29% 1.35% 0.57% 0.71% 0.24%**
After expense reimbursement 0.71%** 1.31% 1.60% 1.34% 1.77% 1.89%**
Portfolio turnover rate 49% 46% 32% 74% 36% 21%
</TABLE>
* Commencement of investment operations
** Annualized
See accompanying notes to financial statements.
37
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Year Ended
Brinson Class N (Unaudited) June 30, 1998*
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 12.53 $ 12.76
Income from investment operations:
Net investment income 0.03 0.13
Net realized and unrealized gain 0.29 0.82
------- -------
Total income from investment operations 0.32 0.95
------- -------
Less distributions:
Distributions from net investment income (0.12) (0.13)
Distributions from net realized gain (0.18) (1.05)
------- -------
Total distributions (0.30) (1.18)
------- -------
Net asset value, end of period $ 12.55 $ 12.53
======= =======
Total return (non-annualized) 2.68% 8.60%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 206 $ 1
Ratio of expenses to average net assets:
Before expense reimbursement 1.30%** 1.27%
After expense reimbursement 1.25%** 1.25%
Ratio of net investment income to average net assets:
Before expense reimbursement 0.41%** 1.04%
After expense reimbursement 0.46%** 1.06%
Portfolio turnover rate 49% 46%
</TABLE>
* Commencement of Brinson Class N was June 30, 1997
** Annualized
See accompanying notes to financial statements.
38
<PAGE>
GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended July 31, 1995*
December 31, 1998 Year Ended Year Ended Through
UBS Investment Funds Class (Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.51 $ 12.73 $ 11.57 $ 10.35
--------- -------- --------- --------
Income from investment operations:
Net investment income (loss) 0.00 0.07 0.08 (0.01)
Net realized and unrealized gain 0.29 0.83 2.13 1.93
--------- -------- --------- --------
Total income from investment operations 0.29 0.90 2.21 1.92
--------- -------- --------- --------
Less distributions:
Distributions from net investment income (0.05) (0.07) (0.06) (0.01)
Distributions from net realized gain (0.18) (1.05) (0.99) (0.69)
--------- -------- --------- --------
Total distributions (0.23) (1.12) (1.05) (0.70)
--------- -------- --------- --------
Net asset value, end of period $ 12.57 $ 12.51 $ 12.73 $ 11.57
========= ======== ========= ========
Total return (non-annualized) 2.43% 8.15% 20.34% 19.25%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $49,050 $59,147 $ 61,680 $33,012
Ratio of expenses to average net assets:
Before expense reimbursement 1.81%** 1.78% 2.00% 2.53%**
After expense reimbursement 1.76%** 1.76% 1.75% 1.76%**
Ratio of net investment income (loss) to
average net assets:
Before expense reimbursement (0.10)%** 0.53% 0.60% (0.19)%**
After expense reimbursement (0.05)%** 0.55% 0.85% 0.58%**
Portfolio turnover rate 49% 46% 32% 74%
</TABLE>
* Commencement of UBS Investment Funds Class
** Annualized
See accompanying notes to financial statements.
39
<PAGE>
GLOBAL BOND FUND
[UBS LOGO APPEARS HERE]
The Global Bond Fund is actively managed, providing a fully integrated treatment
of the U.S. and other major developed fixed income markets across the world.
This global approach takes full advantage of relationships both within and
across markets, based on consistent analysis of macroeconomic and market
conditions. Market and currency strategies are developed in a global asset
allocation framework, in conjunction with senior fixed income professionals in
our offices around the world.
The UBS Investment Fund Global Bond has provided an annualized return of 8.35%
since its inception on July 31, 1995, above the 5.92% return of its benchmark,
the Salomon World Government Bond Index. The Fund's annualized volatility of
4.48% was below the index volatility of 5.65% over this period. For calendar
year 1998, the Fund returned 11.58%, trailing the index return of 15.29%.
Bond market returns were generally quite strong in dollar-hedged terms in 1998.
Declining inflation worldwide was the primary driver, to the point where
deflation worries began to surface. Causes for these concerns included the
continued economic weakness in Asia, the default of the Russian government in
August, and financial instability in Latin American countries. By mid-October
long yields had fallen to all time historical lows in many markets.
Market allocation strategies contributed positively to relative Fund performance
in 1998. The Fund benefited in particular from its underweight in Japan, where
rates spiked upward in December. The overweight to the U.K., which was the
strongest performer in 1998, also helped, as did the overweight in Sweden.
Bond selection strategies within markets detracted from overall performance. In
the U.S., holdings of corporate and mortgage securities reduced performance as
spreads on these bonds widened sharply in the third quarter. In addition,
defensive duration strategies in most markets detracted as yields fell
throughout the year. At the end of the year, duration was 0.9 times the index in
Canadian conventional bonds and the U.K. duration was equal to the index in all
other markets.
Currency allocation also hurt performance. The underweight of the yen detracted,
as did the overweight of the Australian dollar. The underweight of the U.S.
dollar helped offset these effects, as most currencies strengthened against it.
40
<PAGE>
GLOBAL BOND FUND
[UBS LOGO APPEARS HERE]
TOTAL RETURN
<TABLE>
<CAPTION>
6 months 1 year 3 years 7/31/95*
ended ended ended to
12/31/98 12/31/98 12/31/98 12/31/98
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UBS Investment Fund Global Bond 9.91% 11.58% 7.05% 8.35%
- -------------------------------------------------------------------------------------------
Salomon World Government Bond Index 12.17 15.29 6.20 5.92
- -------------------------------------------------------------------------------------------
</TABLE>
*Performance inception date of the UBS Investment Fund - Global Bond.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
This chart shows the growth in the value of an investment in the UBS Investment
Fund Global Bond and the Salomon World Government Bond Index if you had invested
$10,000 on July 31, 1995, and had reinvested all your income dividends and
capital gain distributions through December 31, 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.
UBS Investment Fund Global Bond
vs. Salomon World Government Bond Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
Salomon
UBS World
Investment Fund- Government
Global Bond Bond Index
---------------- ------------
7/31/95 $10,000 $10,000
8/31/95 $10,104 $9,656
9/30/95 $10,218 $9,871
10/31/95 $10,388 $9,944
11/30/95 $10,587 $10,057
12/31/95 $10,722 $10,162
1/31/96 $10,776 $10,037
2/29/96 $10 658 $9,986
3/31/96 $10,701 $9,972
4/30/96 $10,808 $9,932
5/31/96 $10,829 $9,934
6/30/96 $10,917 $10,013
7/31/96 $11,036 $10,205
8/31/96 $11,113 $10,245
9/30/96 $11,287 $10,287
10/31/96 $11,527 $10,479
11/30/96 $11,734 $10,617
12/31/96 $11,654 $10,531
1/31/97 $11,484 $10,250
2/28/97 $11,484 $10,173
3/31/97 $11,313 $10,096
4/30/97 $11,240 $10,007
5/31/97 $11,569 $10,279
6/30/97 $11,703 $10,402
7/31/97 $11,654 $10,321
8/31/97 $11,606 $10,314
9/30/97 $11,837 $10,534
10/31/97 $11,984 $10,753
11/30/97 $11 825 $10,589
12/31/97 $11,791 $10 557
1/31/98 $11,892 $10,659
2/28/98 $11,968 $10,746
3/31/98 $11,829 $10,639
4/30/98 $11,980 $10,810
5/31/98 $11,968 $10,834
6/30/98 $11,970 $10,851
7/31/98 $11,957 $10,865
8/31/98 $12,097 $11,160
9/30/98 $12,671 $11,754
10/31/98 $12,938 $12,102
11/30/98 $12,849 $11,931
12/31/98 $13,156 $12,171
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
41
<PAGE>
GLOBAL BOND FUND
[UBS LOGO APPEARS HERE]
ASSET ALLOCATION
As of December 31, 1998 (Unaudited)
Current
Benchmark Strategy
- -----------------------------------------------------
U.S. 29.8% 39.9%
Australia 0.7 5.8
Austria 0.8 0.0
Belgium 2.7 0.0
Canada 2.8 5.6
Denmark 1.5 6.2
Finland 0.8 0.0
France 8.7 9.3
Germany 8.7 8.2
Ireland 0.4 0.0
Italy 8.1 4.6
Japan 19.8 0.0
Netherlands 3.0 0.0
Portugal 0.4 0.0
Spain 3.5 7.3
Sweden 1.4 4.4
Switzerland 0.5 0.0
U.K. 6.4 8.7
- -----------------------------------------------------
100.0% 100.0%
CURRENCY ALLOCATION
As of December 31, 1998 (Unaudited)
Current
Benchmark Strategy
- -----------------------------------------------------
U.S. 29.8% 25.8%
Australia 0.7 6.7
Canada 2.8 6.8
Denmark 1.5 1.5
EMU 37.1 37.1
Japan 19.8 13.8
Sweden 1.4 5.4
Switzerland 0.5 0.5
U.K. 6.4 2.4
- -----------------------------------------------------
100.0% 100.0%
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
U.S. Bonds
Corporate Bonds
Aerospace &Military 0.11%
Asset-Backed 3.47
Banking 0.16
CMO 4.44
Consumer 0.49
Financial Services 1.61
Food and Housing Products 0.40
Industrial Components 0.85
Services/Miscellaneous 0.76
Telecommunications 0.79
Transportation 0.91
-------
13.99
-------
International Dollar Bonds 3.24
U.S. Government Agencies 8.13
U.S. Government Obligations 10.48
-------
21.85
-------
Total U.S. Bonds 35.84
-------
Global (Ex-U.S.) Bonds
Foreign Financial Bonds 14.18
Foreign Government Bonds 40.21
-------
Total Global (ex-U.S.) Bonds 54.39
-------
U.S. EQUITIES 0.44
-------
SHORT-TERM INVESTMENTS 7.36
-------
TOTAL INVESTMENTS 98.03
CASH AND OTHER ASSETS,
LESS LIABILITIES 1.97
-------
NET ASSETS 100.00%
=======
42
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Face
Amount Value
------------- ----------------
Bonds -- 90.23%
U.S. Bonds -- 35.84%
U.S. Corporate Bonds -- 13.99%
Archer Daniels, 6.950%, due 12/15/97 $ 500,000 $ 540,626
Bear Stearns Mortgage Securities, Inc.,
96-7A4 6.000%, due 01/28/09 200,000 198,938
Capital One Bank, 6.830%,
due 05/17/99 200,000 200,596
Cendant Corp., 7.750%, due 12/01/03 500,000 510,991
Chase Manhattan Auto Owner Trust,
96-C, Class A4, 6.150%,
due 03/15/02 125,000 126,670
Comed Transitional Funding Trust,
98-1, Class A7, 5.740%,
due 12/25/10 840,000 844,830
Continental Airlines, Inc., EETC, 6.900%,
due 01/02/18 710,000 721,658
Countrywide Capital, Inc., 8.000%,
due 12/15/26 250,000 259,129
Donaldson Lufkin & Jenrette FRN, 6.700%,
due 06/30/00 375,000 378,834
Fanniemae Whole Loan, 95-W3, Class A,
9.000%, due 04/25/25 13,102 13,654
First Bank Corporate Card Master Trust,
97-1A, 6.400%, due 02/15/03 240,000 246,624
First Nationwide Trust, 98-3, Class 1PPA,
6.500%, due 09/19/28 613,136 613,688
First Union Lehman Brothers, 97-C2,
Class A2, 6.600%, due 05/18/07 240,000 249,439
Ford Credit Grantor Trust 95-B, 5.900%,
due 10/15/00 379,155 380,030
Freddie Mac, 83, Class F, 6.288%,
due 08/15/27 66,020 66,041
GE Capital Mortgage Services, Inc., 93-7F,
Class FA3, 6.500%, due 09/25/08 313,155 313,897
Kroger Co., 6.000%, due 07/01/00 500,000 501,891
Lockheed Martin Corp., 7.700%,
due 06/15/08 125,000 141,371
Merrill Lynch & Co., Series B, 5.930%,
due 03/23/01 550,000 553,930
Metlife Funding, 6.850%, due 05/20/08 225,000 235,052
News America Holdings, 7.750%,
due 12/01/45 575,000 610,682
Norwest Asset Securities Corp., 98-25,
Class A5, 6.000%, due 12/25/28 965,000 948,363
PNC Mortgage Securities Corp., 94-3,
Class A8, 7.500%, due 07/25/24 190,000 195,998
Premier Auto Trust, 96-3, Class A4,
96-3A 6.750%, due 11/06/00 475,000 480,538
Prudential Home Mortgage Securities
96-7, Class A4, 6.750%,
due 06/25/11 150,000 152,477
93-43, Class A9, 6.750%,
due 10/25/23 211,150 212,674
Residential Accredit Loans, Inc.
96-QS4, Class Al10, 7.900%,
due 08/25/26 625,000 643,767
98-QS4, Class AI5, 7.000%,
due 03/25/28 400,000 415,061
Face
Amount Value
------------- ----------------
Residential Asset Securitization Trust,
97-A7, Class A1, 7.500%,
due 09/25/27 $169,532 $171,050
97-A7, Class A1, 7.250%,
due 12/25/27 335,000 341,631
97-A11, Class A2, 7.000%,
due 01/25/28 206,139 206,893
97-A11, Class A6, 7.000%,
due 01/25/28 430,000 438,626
98-A1, Class A1, 7.000%,
due 03/25/28 169,440 170,339
Salomon, Inc., 7.200%, due 02/01/04 240,000 252,133
Sprint Capital Corp., 6.875%,
due 11/15/28 450,000 467,272
Structured Asset Securities Corp.
98-RF1, Class A, 8.712%,
due 03/15/27 261,685 280,821
98-RF2, 144A, 8.582%, due 07/15/27 392,977 420,485
Structured Mortgage Asset Residential
Trust, 96-5C, Class CI, 7.150%,
due 03/25/23 925,000 939,946
The Money Store, 98-B, Class AF2, 6.115%,
due 05/15/10 60,000 60,055
Time Warner Inc., 7.570%,
due 02/01/24 560,000 631,574
UCFC Home Equity Loan 97-C, Class A8,
FRN, 5.478%, due 09/15/27 123,678 122,489
USA Waste Services, 7.000%,
due 10/01/04 300,000 313,696
Vanderbilt Mortgage Finance, 98-B, Class
1A26,.120%, due 05/07/09 600,000 603,852
Williams Co., 6.200%, due 08/01/02 400,000 400,999
World Omni Automobile Lease
Securitization Trust, 97-A, Class A3,
6.850%, due 06/25/03 253,906 256,531
Worldcom Inc., Series *, 8.875%,
due 01/15/06 465,000 506,560
------------
17,342,401
------------
International Dollar Bonds -- 3.24%
Banco Santiago S.A., 7.000%,
due 07/18/07 400,000 335,192
Banque Centrale de Tunisie, 8.250%,
due 09/19/27 400,000 320,000
Credit Suisse-London, 144A, 7.900%,
Resettable Perpetual Step-up Notes 500,000 500,000
DR Investments, 144A, 7.450%,
due 05/15/07 455,000 489,960
Den Danske Bank, 144A, 6.375%,
due 06/15/08 500,000 507,942
Empresa National Electric, 7.875%,
due 02/01/27 500,000 361,776
Pan Pacific Industry PLC, 144A, 0.000%,
due 04/28/07 715,000 282,425
Province of Quebec, 7.500%,
due 07/15/23 235,000 268,723
Republic of South Africa, 9.625%,
due 12/15/99 125,000 127,500
Royal Bank of Scotland, 7.375%, Resettable
Perpetual Step-up Notes 300,000 308,823
43
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Face
Amount Value
------------- ----------------
Southern Investments UK, 6.800%,
due 12/01/06 $ 500,000 $ 518,481
------------
4,020,822
------------
U.S. Government Agencies -- 8.13%
Federal Home Loan Mortgage Corp.
7.000%, due 10/15/13 68,215 69,927
7.500%, due 01/15/23 85,601 90,241
7.238%, due 05/01/26 27,606 28,061
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23 59,104 61,363
9.000%, due 03/01/24 174,782 185,842
Federal National Mortgage Assoc.
6.220%, due 03/13/06 150,000 159,021
6.820%, due 10/01/07 477,554 510,982
6.361%, due 06/01/08 686,356 715,183
8.000%, due 03/01/11 100,480 103,557
6.000%, due 01/01/14 TBA 615,000 616,735
9.000%, due 08/01/21 18,273 19,386
8.500%, due 07/01/22 12,478 13,224
7.500%, due 12/01/23 416,307 427,366
7.500%, due 05/18/25 250,000 256,169
7.890%, due 04/01/26 240,305 245,283
8.500%, due 02/01/28 308,146 322,783
6.500%, due 06/01/28 2,361,195 2,377,449
6.500%, due 09/01/28 1,261,839 1,270,525
6.000%, due 12/01/28 TBA 750,000 740,317
Federal National Mortgage Assoc. Strips
7.500%, due 05/01/23 interest only 184,168 29,562
0.000%, due 04/01/27 principal only 170,348 149,757
FNCI, 8.000%, due 02/01/13 108,540 111,864
Government National Mortgage Assoc.
7.500%, due 08/15/23 82,927 85,496
7.500%, due 12/15/23 122,466 126,267
7.500%, due 01/15/24 85,915 88,559
7.000%, due 08/15/24 425,074 435,164
7.000%, due 07/15/25 59,634 61,044
Jordan Aid, 8.750%, due 09/01/19 193,941 240,433
Tennesse Valley Authority, 6.375%,
due 06/15/05 500,000 530,948
------------
10,072,508
------------
U.S. Government Obligations -- 10.48%
U.S. Treasury Inflation Indexed Note,
3.625%, due 04/15/28 570,000 563,108
U.S. Treasury Notes and Bonds
5.500%, due 02/29/00 1,730,000 1,746,219
5.500%, due 05/31/00 1,345,000 1,360,552
6.625%, due 07/31/01 1,765,000 1,848,838
6.250%, due 08/31/02 610,000 641,072
7.500%, due 02/15/05 830,000 950,091
7.000%, due 07/15/06 110,000 125,263
6.625%, due 05/15/07 745,000 837,893
8.000%, due 11/15/21 3,675,000 4,923,353
------------
12,996,389
------------
Total U.S. Bonds 44,432,120
------------
Global (ex-U.S.) Bonds -- 54.39%
Australia -- 5.63%
Government of Australia, 9.500%,
due 08/15/03 AUD 3,000,000 2,199,146
New South Wales Treasury Corp., 7.000%,
due 04/01/04 1,000,000 669,372
Face
Amount Value
------------- ----------------
Queensland Treasury Corp.-Global Note
8.000%, due 05/14/03 AUD 980,000 $ 671,012
6.500%, due 06/14/05 5,230,000 3,436,653
------------
6,976,183
------------
Austria -- 2.01%
Republic of Austria, 5.500%,
due 01/18/04 FRF 12,800,000 2,487,559
------------
Canada -- 5.08%
British Columbia, 7.750%, due 06/16/03 1,540,000 1,112,353
Government of Canada
6.000%, due 06/01/08 CAD 1,200,000 845,703
4.250%, due 12/01/21 3,800,000 2,784,440
Province of Ontario, 7.500%,
due 01/19/06 . 2,100,000 1,549,195
------------
6,291,691
------------
Denmark -- 5.94%
City of Copenhagen, 6.250%,
due 03/15/01 DKK 2,400,000 393,825
Great Belt, 7.000%, due 09/02/03 10,650,000 1,866,825
Kingdom of Denmark
8.000%, due 11/15/01 8,000,000 1,394,862
7.000%, due 12/15/04 16,800,000 3,043,243
7.000%, due 11/15/07 1,400,000 264,118
7.000%, due 11/10/24 2,000,000 402,231
------------
7,365,104
------------
Finland -- 1.27%
Republic of Finland, 9.000%,
due 08/13/03 FIN 7,200,000 1,579,696
------------
France -- 3.42%
Government of France (BTAN), 7.750%,
due 04/12/00 FRF 4,000,000 756,722
Government of France (OAT)
9.500%, due 01/25/01 1,800,000 362,823
7.500%, due 04/25/05 7,200,000 1,563,682
8.500%, due 04/25/23 5,600,000 1,552,325
------------
4,235,552
------------
Germany -- 6.36%
Bundesrepublik Deutscheland, 6.250%,
due 01/04/24 DEM 700,000 510,417
European Economic Community, 6.500%,
due 03/10/00 1,110,000 691,001
IBRD, 7.125%, due 04/12/05 4,250,000 3,009,332
KFW International Finance, 6.625%,
due 04/15/03 3,800,000 2,558,087
LKB Baden-Wuerttemberg Finance,
6.500%, due 09/15/08 1,600,000 1,118,516
------------
7,887,353
------------
Ireland -- 1.60%
Republic of Ireland, 7.250%,
due 03/18/03 IEP 2,900,000 1,988,135
------------
Italy -- 3.78%
Bayerische Landesbank, 10.750%,
due 03/01/03 ITL 750,000,000 575,085
International Bank for Reconstruction &
Development, 5.000%, due 10/15/00 1,000,000,000 624,007
LKB Baden-Wuerttemberg Finance,
10.750%, due 04/14/03 650,000,000 500,870
44
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Face
Amount Value
------------- ----------------
Republic of Italy (BTP)
9.000%, due 10/01/03 ITL 2,300,000,000 $ 1,714,948
9.500%, due 02/01/06 800,000,000 650,114
9.000%, due 11/01/23 650,000,000 626,766
------------
4,691,790
------------
Luxembourg -- 0.33%
Tyco International Group S.A., 7.000%,
due 06/15/28 LUX 400,000 412,693
------------
Portugal -- 1.12%
Republic of Portugal, 5.625%,
due 04/03/07 FRF 7,000,000 1,383,879
------------
Spain -- 6.36%
Government of Spain
7.900%, due 02/28/02 ESP 460,000,000 3,698,457
10.000%, due 02/28/05 230,000,000 2,182,227
6.150%, due 01/31/13 240,000,000 1,999,667
------------
7,880,351
------------
Sweden -- 3.59%
Government of Sweden
10.250%, due 05/05/03 SEK 20,700,000 3,211,873
6.000%, due 02/09/05 4,600,000 628,688
6.750%, due 05/05/14 4,000,000 615,041
------------
4,455,602
------------
Face
Amount Value
------------- ----------------
United Kingdom -- 7.90%
Abbey National PLC, 8.750%,
due 05/24/04 GBP 350,000 $ 660,585
Abbey National Treasury Service,
6.500%, due 03/05/04 850,000 1,483,183
British Gas PLC, 8.125%, due 03/31/03 545,000 986,686
European Investment Bank, 7.625%,
due 12/07/06 1,820,000 3,505,066
UK Treasury, 8.000%, due 09/27/13 1,380,000 3,159,377
------------
9,794,897
------------
Total Global (ex-U.S.) Bonds 67,430,485
------------
Total Bonds (Cost $107,517,922) 111,862,605
------------
Shares
-------------
Equities -- 0.44%
U.S. Equities -- 0.44%
Centaur Funding Corp., 144A
0.000%, due 04/21/20 750 137,720
9.080%, due 04/21/20 390 407,794
------------
Total Equities (Cost $490,229) 545,514
------------
Short-Term Investments -- 7.36%
Investment Companies -- 7.36%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund
(Cost $9,131,709) 9,131,709 9,131,709
------------
Total Investments
(Cost $117,139,860)-- 98.03% (a) 121,539,828
------------
Cash and other assets,
less liabilities-- 1.97% 2,437,503
------------
Net Assets-- 100% $123,977,331
============
See accompanying notes to schedule of investments.
45
<PAGE>
GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $117,139,860; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $5,176,005
Gross unrealized depreciation (776,037)
----------
Net unrealized appreciation $4,399,968
==========
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 December 31,
1998, the value of these securities amounted to $2,746,326 or 2.22% of net
assets.
Resettable Perpetual Step-up Notes: 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 December 31, 1998:
<TABLE>
<CAPTION>
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
---------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Forward Foreign Currency
Buy Contracts
Australian Dollar 3/01/99 2,800,000 $ 1,718,413 $ (83,751)
Austrian Schilling 3/01/99 13,200,000 1,129,788 12,512
Belgian Franc 3/01/99 104,000,000 3,036,331 32,200
Canadian Dollar 3/01/99 2,800,000 1,823,237 11,749
Finnish Markka 3/01/99 4,000,000 792,332 8,594
German Mark 3/01/99 3,600,000 2,167,813 23,986
Italian Lira 3/01/99 7,500,000,000 4,561,908 51,172
Japanese Yen 3/01/99 2,000,000,000 17,874,166 1,007,205
Netherlands Guilder 3/01/99 6,600,000 3,527,280 39,185
Swedish Krona 3/01/99 10,900,000 1,348,376 (8,257)
Forward Foreign Currency
Sale Contracts
Australian Dollar 3/01/99 1,000,000 613,719 27,851
British Pound 3/01/99 4,440,000 7,374,680 (26,922)
Canadian Dollar 3/01/99 400,000 260,462 (537)
Danish Kroner 3/01/99 32,700,000 5,145,960 (34,764)
German Mark 3/01/99 2,200,000 1,324,774 (28,445)
Spanish Peseta 3/01/99 610,000,000 4,317,815 (51,998)
----------
Total $ 979,780
==========
</TABLE>
See accompanying notes to financial statements.
46
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (Unaudited)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $108,008,151) $112,408,119
Affiliated issuers (Cost $9,131,709) 9,131,709
Foreign currency, at value (Cost $350,083) 350,965
Receivables:
Investment securities sold 1,290
Interest 2,577,447
Fund shares sold 2,761
Net unrealized appreciation on forward foreign
currency contracts 979,780
Other assets 50,762
------------
TOTAL ASSETS 125,502,833
------------
LIABILITIES:
Payables:
Investment securities purchased 1,361,987
Investment advisory fees 77,599
Accrued expenses 52,961
Due to custodian bank 32,955
------------
TOTAL LIABILITIES 1,525,502
------------
NET ASSETS $123,977,331
============
NET ASSETS CONSIST OF:
Paid in capital $119,483,156
Accumulated distribution in excess of net
investment income (1,070,788)
Accumulated net realized gain 149,327
Net unrealized appreciation 5,415,636
------------
NET ASSETS $123,977,331
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of
$119,514,551 and 12,066,245 shares
issued and outstanding) $ 9.90
============
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of
$105,601 and 10,682 shares issued
and outstanding) $ 9.89
============
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of
$4,357,179 and 440,711 shares issued
and outstanding) $ 9.89
============
See accompanying notes to financial statements.
47
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (Unaudited)
INVESTMENT INCOME:
Interest (net of $14,950 for foreign taxes withheld) $ 2,832,036
------------
TOTAL INCOME 2,832,036
------------
EXPENSES:
Advisory 414,159
Professional 24,750
Distribution 10,402
Other 58,207
------------
TOTAL EXPENSES 507,518
------------
NET INVESTMENT INCOME 2,324,518
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments 1,093,835
Foreign currency transactions 1,538,594
------------
Net realized gain 2,632,429
------------
Change in net unrealized appreciation or
depreciation on:
Investments and foreign currency 4,369,775
Forward contracts 1,336,164
Translation of other assets and liabilities
denominated in foreign currency 37,420
------------
Change in net unrealized appreciation or depreciation 5,743,359
------------
Net realized and unrealized gain 8,375,788
------------
Net increase in net assets resulting from operations $10,700,306
============
48
<PAGE>
GLOBAL BOND FUND -- FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,324,518 $ 3,009,836
Net realized gain (loss) 2,632,429 (1,114,801)
Change in net unrealized appreciation or depreciation 5,743,359 (276,626)
------------ ------------
Net increase in net assets resulting from operations 10,700,306 1,618,409
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (3,327,917) (2,183,342)
Distributions in excess of net investment income (1,070,788) --
Distributions from net realized gain (961,267) (1,041,855)
------------ ------------
Total distributions to shareholders* (5,359,972) (3,225,197)
------------ ------------
Capital share transactions:
Shares sold 41,337,859 46,034,839
Shares issued on reinvestment of distributions 3,845,267 2,230,731
Shares redeemed (22,206,338) (9,266,587)
------------ ------------
Net increase in net assets resulting from capital
share transactions 22,976,788 38,998,983
------------ ------------
TOTAL INCREASE IN NET ASSETS 28,317,122 37,392,195
------------ ------------
NET assets:
Beginning of period 95,660,209 58,268,014
------------ ------------
End of period (including accumulated undistributed net investment
income of $(1,070,788) and $1,003,399, respectively) $123,977,331 $95,660,209
============ ============
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net investment income
Brinson Class I $ (4,248,289) $(2,070,571)
Brinson Class N (3,700) (98)
UBS Investment Funds Class (146,716) (112,673)
Distributions from net realized gain
Brinson Class I (925,451) (969,902)
Brinson Class N (811) (18)
UBS Investment Funds Class (35,005) (71,935)
------------ ------------
Total distributions to shareholders $ (5,359,972) $ (3,225,197)
============ ============
</TABLE>
See accompanying notes to financial statements.
49
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, July 30, 1993*
December 31, 1998 ----------------------------------------- Through
Brinson Class I (Unaudited) 1998 1997 1996 1995 June 30, 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.41 $ 9.64 $ 10.04 $ 10.39 $ 9.55 $ 10.00
------- -------- -------- -------- -------- -------
Income (loss) from investment operations:
Net investment income 0.21*** 0.43*** 0.67 0.84 0.50 0.45
Net realized and unrealized gain (loss) 0.74 (0.18) 0.08 0.31 0.58 (0.52)
------- -------- -------- -------- -------- -------
Total income (loss) from investment
operations 0.95 0.25 0.75 1.15 1.08 (0.07)
------- -------- -------- -------- -------- -------
Less distributions:
Distributions from and in excess of net
investment income (0.38) (0.31) (0.96) (1.40) (0.24) (0.28)
Distributions from net realized gain (0.08) (0.17) (0.19) (0.10) -- (0.10)
------- -------- -------- -------- -------- -------
Total distributions (0.46) (0.48) (1.15) (1.50) (0.24) (0.38)
------- -------- -------- -------- -------- -------
Net asset value, end of period $ 9.90 $ 9.41 $ 9.64 $ 10.04 $ 10.39 $ 9.55
======= ======== ======== ======== ======== =======
Total return (non-annualized) 10.14% 2.69% 7.71% 11.50% 11.34% (0.79)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $119,515 $ 91,274 $54,157 $41,066 $51,863 $36,849
Ratio of expenses to average net assets:
Before expense reimbursement 0.90%** 0.96% 1.32% 1.65% 1.43% 1.78%**
After expense reimbursement N/A 0.90% 0.90% 0.90% 0.90% 0.90%**
Ratio of net investment income to average net assets:
Before expense reimbursement 4.23%** 4.47% 4.90% 4.98% 5.53% 4.03%**
After expense reimbursement N/A 4.53% 5.32% 5.73% 6.06% 4.91%**
Portfolio turnover rate 49% 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.
N/A = Not Applicable
See accompanying notes to financial statements.
50
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Year Ended
Brinson Class N (Unaudited) June 30, 1998*
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.40 $ 9.64
------- -------
Income from investment operations:
Net investment income 0.18*** 0.42***
Net realized and unrealized gain (loss) 0.77 (0.20)
------- -------
Total income from investment operations 0.95 0.22
------- -------
Less distributions:
Distributions from and in excess of net investment income (0.38) (0.29)
Distributions from net realized gain (0.08) (0.17)
------- -------
Total distributions (0.46) (0.46)
------- -------
Net asset value, end of period $ 9.89 $ 9.40
======= =======
Total return (non-annualized) 10.13% 2.37%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 106 $ 9
Ratio of expenses to average net assets:
Before expense reimbursement 1.15%** 1.21%
After expense reimbursement N/A 1.15%
Ratio of net investment income to average net assets:
Before expense reimbursement 3.98%** 4.22%
After expense reimbursement N/A 4.28%
Portfolio turnover rate 49% 151%
</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.
51
<PAGE>
GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended July 31, 1995*
December 31, 1998 Year Ended Year Ended Through
UBS Investment Funds Class (Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.39 $ 9.61 $ 10.02 $10.56
------- ------ ------- ------
Income from investment operations:
Net investment income 0.18*** 0.38*** 0.62 0.78
Net realized and unrealized gain (loss) 0.75 (0.18) 0.10 0.15
------- ------ ------- ------
Total income from investment operations 0.93 0.20 0.72 0.93
------- ------ ------- ------
Less distributions:
Distributions from and in excess of net
investment income (0.35) (0.25) (0.94) (1.37)
Distributions from net realized gain (0.08) (0.17) (0.19) (0.10)
------- ------ ------- ------
Total distributions (0.43) (0.42) (1.13) (1.47)
------- ------ ------- ------
Net asset value, end of period $ 9.89 $ 9.39 $ 9.61 $10.02
======= ====== ======= ======
Total return (non-annualized) 9.91% 2.28% 7.20% 9.17%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 4,357 $ 4,377 $4,110 $3,653
Ratio of expenses to average net assets:
Before expense reimbursement 1.39%** 1.45% 1.81% 2.14%**
After expense reimbursement N/A 1.39% 1.39% 1.39%**
Ratio of net investment income to average
net assets:
Before expense reimbursement 3.74%** 3.98% 4.41% 4.49%**
After expense reimbursement N/A 4.04% 4.83% 5.24%**
Portfolio turnover rate 49% 151% 235% 184%
</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.
52
<PAGE>
THE UBS INVESTMENT FUNDS -- NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, as a series
company. The Trust currently offers shares of eleven series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (ex-U.S.)
Equity Fund (formerly, Non-U.S. Equity Fund) (each a "Fund" and collectively,
the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class
I, Brinson Class N and UBSInvestment Funds Class (formerly, SwissKey Class).
There are an unlimited number of shares of each class with par value of $0.001
authorized. Each share represents an identical interest in the investments of
the Funds and has the same rights. The 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 of
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and unrealized
gain or loss on investments in the statement of operations.
C. Investment Transactions: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D. Investment Income: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as the information becomes available.
E. Federal Income Taxes: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable income
to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the six months ended December
31, 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.
G. Income and Expense Allocation: All income earned and expenses incurred by
each Fund will be borne on a pro rata basis by each of the classes, except that
the Brinson Class I will not incur any of the distribution expenses of the
Brinson Class N nor the UBS Investment Funds Class.
H. Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
53
<PAGE>
THE UBS INVESTMENT 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, 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, for the six months ended
December 31, 1998, were as follows:
<TABLE>
<CAPTION>
UBS Investment
Advisory Brinson Class I Brinson Class N Funds Class Advisory
Fee Expense Cap Expense Cap Expense Cap Fees Fees Waived
-------- --------------- --------------- --------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Global Fund 0.80% 1.10% 1.35% 1.75% $2,387,061 $ --
Global Equity Fund 0.80 1.00 1.25 1.76 289,624 18,480
Global Bond Fund 0.75 0.90 1.15 1.39 414,159 --
</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 six months ended December 31, 1998 were
$5,888, $2,392 and $2,208 for the Global Fund, Global Equity Fund and Global
Bond Fund, respectively.
The Global Fund invests in shares of certain affiliated investment companies
also sponsored by the Advisor. These investments represented 14.25% of the
Fund's total net assets at December 31, 1998. Activity for the six months ended
December 31, 1998 was as follows:
<TABLE>
<CAPTION>
Net Net
Sales Realized Unrealized Interest
Affiliates Purchases Proceeds Gains/(Loss) Gains/(Loss) Income Value
- ---------- ------------- ------------ ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Brinson Post-Venture Fund $ -- $ 1,949,866 $ 448,329 $ (995,074) $ -- $ 6,015,904
Brinson High Yield Fund 3,900,000 4,900,682 766,824 (1,162,241) -- 15,399,222
Brinson Emerging Markets Equity Fund -- 5,140,074 (2,553,399) (3,158,736) -- 15,364,050
Brinson Emerging Markets Debt Fund 6,400,000 8,703,323 1,961,791 (4,291,159) -- 27,921,446
Brinson Supplementary Trust U.S. Cash
Management Prime Fund 12,835,861 4,711,620 -- -- 16,107 8,124,241
</TABLE>
The Global Equity Fund and Global Bond Fund invest in shares of the Brinson
Supplementary Trust U.S. Cash Management Prime Fund (Supplementary Trust). The
Supplementary Trust is managed by the Advisor. The Supplementary Trust is
offered as a cash management option to mutual funds and other accounts managed
by the Advisor. The Supplementary Trust pays no management fees. Distributions
from the Supplementary Trust are reflected as interest income in the statement
of operations. Amounts relating to those investments at December 31, 1998 and
for the six months then ended is summarized as follows:
<TABLE>
<CAPTION>
% of
Sales Interest Net
Affiliates Purchases Proceeds Income Value Assets
- ----------- ----------- ---------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
Global Equity Fund $ 4,693,073 $4,397,888 $ 3,173 $ 295,185 0.40%
Global Bond Fund 9,279,598 147,889 13,429 9,131,709 7.36%
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1998, excluding
short-term investments, were as follows:
Proceeds
Purchases From Sales
------------ ------------
Global Fund $237,754,413 $424,385,284
Global Equity Fund 34,531,153 38,516,369
Global Bond Fund 69,215,909 49,804,987
54
<PAGE>
THE UBS INVESTMENT FUNDS -- NOTES TO FINANCIAL STATEMENTS
4. FORWARD FOREIGN CURRENCY CONTRACTS
The Funds may engage in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation strategies. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Risks associated with such contracts include movement
in the value of the foreign currency relative to the U.S. dollar and the ability
of the counterparty to perform. The unrealized gain, if any, represents the
credit risk to each Fund on a forward foreign currency contract. Fluctuations in
the value of forward foreign currency contracts are recorded daily as net
unrealized gains or losses. The Funds realize a gain or loss upon settlement of
the contracts. The statement of operations reflects net realized and net
unrealized gains and losses on these contracts. The counterparty to all forward
foreign currency contracts at and for the six months ended December 31, 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 net unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6. SECURITY LENDING
The Global Fund loaned securities to certain brokers, with the Fund's custodian
acting as the Fund's lending agent. The Fund earned negotiated lenders' fees,
which are included in interest income in the statement of operations. Securities
loaned are recorded at the amount of cash collateral received. The Fund monitors
the market value of securities loaned on a daily basis and initially requires
collateral against the loaned securities in an amount at least equal to 102% of
the value of domestic securities loaned and 105% of the value of non-U.S.
securities loaned. The cash collateral received is invested in short-term
investments. The value of loaned securities and related collateral outstanding
at December 31, 1998 were as follows:
Value of Loaned Cash Collateral
Securities Received
---------------- ---------------
Global Fund $107,582,042 $111,993,032
============ ============
7. DISTRIBUTION PLANS
The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1
under the Investment Company Act of 1940 as amended for the Brinson Class N and
the UBSInvestment Funds Class. Each Plan governs payments made for the expenses
incurred in the promotion and distribution of the Brinson Class N and the
UBSInvestment Funds Class. Annual fees under the Brinson Class N Plan shall not
exceed 0.25% of the average daily net assets of the Brinson Class N of the
Global Fund, Global Equity Fund and Global Bond Fund. Annual fees under the
UBSInvestment Funds Plan, which include a 0.25% service fee, total 0.65%, 0.76%
and 0.49% of the average daily net assets of the UBSInvestment Funds Class of
the Global Fund, Global Equity Fund and Global Bond Fund, respectively.
8. LINE OF CREDIT
The Trust has entered into an agreement with Chase Manhattan Bank to provide a
364-day $100 million committed line of credit to the Funds. Borrowings will be
made for temporary purposes. Interest on amounts borrowed is calculated based on
the Federal Funds Rate plus 0.50%. The Funds pay an annual commitment fee of
0.08% of the average daily unutilized amount of the line of credit. During the
six months ended December 31, 1998 the Global Equity and Global Bond Funds had
no borrowings under the agreement. During the six months ended December 31,
1998, the Global Fund had borrowings of $33,900,000, $62,000,000 and $47,400,000
outstanding for 1 day each under the agreement.
55
<PAGE>
THE UBS INVESTMENT FUNDS -- NOTES TO FINANCIAL STATEMENTS
9. CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
Global Fund
--------------------------------------------------
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------------- --------------------------
Shares Value Shares Value
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I 13,259,375 $163,000,397 18,850,057 $244,898,004
Brinson Class N 26,870 342,468 90,370 1,177,290
UBS Investment Funds Class 323,181 3,886,738 803,666 10,347,586
---------- ------------ ---------- ------------
Total Sales 13,609,426 $167,229,603 19,744,093 $256,422,880
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I 3,653,840 $ 42,311,080 5,179,618 $ 62,332,662
Brinson Class N 11,968 138,346 769 9,625
UBS Investment Funds Class 190,958 2,203,655 217,810 2,607,910
---------- ------------ ---------- ------------
Total Dividend Reinvestment 3,856,766 $ 44,653,081 5,398,197 $ 64,950,197
========== ============ ========== ============
Redemptions:
Brinson Class I 28,358,651 $352,033,813 16,402,396 $209,137,318
Brinson Class N 864 10,547 21 276
UBS Investment Funds Class 590,874 7,271,133 641,736 8,247,175
---------- ------------ ---------- ------------
Total Redemptions 28,950,389 $359,315,493 17,044,153 $217,384,769
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
Global Equity Fund
--------------------------------------------------
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------------- --------------------------
Shares Value Shares Value
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I 413,888 $ 5,114,516 1,466,054 $17,934,645
Brinson Class N 15,911 200,000 -- --
UBS Investment Funds Class 173,268 2,091,451 1,779,376 22,282,095
---------- ------------ ----------- ------------
Total Sales 603,067 $ 7,405,967 3,245,430 $40,216,740
========== ============ =========== ============
Dividend Reinvestment:
Brinson Class I 44,491 $ 532,553 126,859 $ 1,426,171
Brinson Class N 402 4,803 9 93
UBS Investment Funds Class 64,233 768,875 442,472 4,952,413
---------- ------------ ----------- ------------
Total Dividend Reinvestment 109,126 $ 1,306,231 569,340 $ 6,378,677
========== ============ =========== ============
Redemptions:
Brinson Class I 314,413 $ 3,767,887 3,546,702 $44,596,092
Brinson Class N -- -- -- --
UBS Investment Funds Class 1,063,913 12,724,864 2,339,080 28,946,495
---------- ------------ ----------- ------------
Total Redemptions 1,378,326 $16,492,751 5,885,782 $73,542,587
========== ============ =========== ============
</TABLE>
56
<PAGE>
THE UBS INVESTMENT FUNDS -- NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Global Bond Fund
--------------------------------------------------
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------------- --------------------------
Shares Value Shares Value
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I 3,975,826 $39,062,948 4,561,105 $43,233,367
Brinson Class N 9,292 93,297 860 8,169
UBS Investment Funds Class 221,978 2,181,614 293,533 2,793,303
---------- ------------ ----------- ------------
Total Sales 4,207,096 $41,337,859 4,855,498 $46,034,839
========== ============ =========== ============
Dividend Reinvestment:
Brinson Class I 376,007 $ 3,681,105 220,347 $ 2,058,040
Brinson Class N 462 4,510 12 115
UBS Investment Funds Class 16,324 159,652 18,525 172,576
---------- ------------ ----------- ------------
Total Dividend Reinvestment 392,793 $ 3,845,267 238,884 $ 2,230,731
========== ============ =========== ============
Redemptions:
Brinson Class I 1,983,791 $19,658,928 699,882 $ 6,667,104
Brinson Class N 26 251 22 210
UBS Investment Funds Class 263,784 2,547,159 273,680 2,599,273
---------- ------------ ----------- ------------
Total Redemptions 2,247,601 $22,206,338 973,584 $ 9,266,587
========== ============ =========== ============
</TABLE>
57
<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>
[UBS LOGO APPEARS HERE]
P.O. Box 2798, Boston, Massachusetts 02208-9915 - Tel: (800) 794-7753
<PAGE>
-------------------------
The Brinson Funds
Brinson Global Fund
Brinson Global Equity Fund
Brinson Global Bond Fund
Semi-Annual Report
December 31, 1998
Institutional Asset Management
------------------------------
<PAGE>
Trustees and Officers
[BRINSON LOGO APPEARS HERE]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA Debra L. Nichols
Chairman of the Board Vice President
E. Thomas McFarlan Carolyn M. Burke, CPA
President Secretary and Treasurer
Thomas J. Digenan, CFA, CPA David E. Floyd
Vice President Assistant Secretary
1
<PAGE>
The Funds' Advisor -- Brinson Partners, Inc.
[BRINSON LOGO APPEARS HERE]
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 265
billion of discretionary institutional assets on an active basis and mutual fund
assets for UBS Private Banking which total over USD 125 billion. In addition,
UBS Brinson acts as the investment advisor to UBS Private Banking. 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 tailored to specific client
objectives and focused upon both risk and return considerations in the context
of full investment cycles. Our investment decisions are based on fundamental
research, internally developed valuation systems and seasoned judgment. Our
independent team approach allows for rapid responses to market changes, while
providing each client with the benefit of our best talent.
2
<PAGE>
Table of Contents
Shareholder Letter 4
Global Economic and Market Highlights 5
Global Fund 6
Schedule of Investments 11
Financial Statements 19
Financial Highlights 23
Global Equity Fund 26
Schedule of Investments 31
Financial Statements 36
Financial Highlights 39
Global Bond Fund 42
Schedule of Investments 46
Financial Statements 50
Financial Highlights 53
The Brinson Funds--Notes to Financial Statements 56
3
<PAGE>
Shareholder Letter
[BRINSON LOGO APPEARS HERE]
February 20, 1999
Dear Shareholder:
We are very pleased to present the Semi-Annual Report for The Brinson Funds for
the six months ended December 31, 1998. Within this Report, we'll focus on
current global economic outlook as well as our current strategies and
performance updates for our three Global Funds: Global Fund, Global Equity Fund
and Global Bond Fund.
Since our last report to you, Union Bank of Switzerland and Swiss Bank
Corporation merged to become UBS AG, one of the world's major financial
institutions. In connection with this merger, the former SBC Brinson / Brinson
Partners, Inc.'s activities of Swiss Bank Corporation were combined with the
worldwide UBS asset management operations into the UBS Brinson Division of UBS
AG. During this process, the UBS Private Investor Funds merged into the Brinson
Fund family on December 18, 1998. This merger created the following three new
Brinson Funds; the U.S. Large Capitalization Growth Fund, the U.S. Small
Capitalization Growth Fund and the High Yield Fund.
The UBS Brinson Division manages over USD 390 billion of institutional assets,
including USD 265 billion of discretionary institutional assets on an active
basis and mutual fund assets for the UBS Private Banking Division and The
Brinson Funds which total over USD 125 billion. The Advisor of The Brinson
Funds, Brinson Partners, Inc., also manages investment portfolios for
corporations, public funds, endowments, foundations, central banks and other
investors located throughout the world.
The Global Fund, the Global Equity Fund and the Global Bond Fund are all
actively managed funds that provide integrated asset management across and
within security markets. The investment process is strategic in nature and is
driven by deviations of market price from fundamental value. This philosophy
offers the greatest potential for achieving enhanced, long-term returns while
controlling risk.
Each of our Funds employ the same value-oriented investment philosophy applied
across the global spectrum. Each Fund also uses the resources of our entire
worldwide research team. All of our analysts apply the same value philosophy to
their work. Investment performance for our clients is maximized within and
across major asset classes through a comprehensive understanding of global
investment markets and their interrelationships. Portfolio structure is tailored
to specific objectives and focused upon both risk and return considerations in
the context of full investment cycles.
Our investment decisions are based on fundamental research, internally developed
valuation systems and seasoned judgement. Our independent team approach allows
for rapid responses to market changes, while providing each client with the
benefit of our talent. The Reports that follow highlight the investment
characteristics and the performance of the respective Funds.
We very much appreciate your continued trust and the confidence you have placed
in The Brinson Funds.
Sincerely,
/s/ Gary P. Brinson
Gary P. Brinson
President and Chief Investment Officer
Brinson Partners, Inc.
4
<PAGE>
Global Economic and Market Highlights
Japan and most of Asia continue to be mired in severe downturns. The Japanese
economy is particularly troubled, as the one bright spot in the economy, the
export sector, has started to weaken in response to a dramatic strengthening of
the yen. Bond yields have risen sharply as the government's deficit financing
has pushed the gross debt to GDP ratio among the highest of the developed
countries.
The single European currency enjoyed a successful launch on January 1st.
Monetary policy for the eleven participating nations is now being administered
by the European Central Bank. Cash rates and bond yields have converged, except
for small spreads due to credit and liquidity differences. Although the euro's
success in the near term is not in doubt, some longer-term concerns remain.
Economic convergence of the EMU economies is not complete, and the economic
environment appears to be softening. This creates an element of political risk
for the ECB and the new currency.
Inflation remains in check throughout the developed world and in many of the
emerging markets. Weakness in Asia and overcapacity in basic industries have
combined to push down commodity prices, particularly oil and related energy
prices. Consumer price inflation is essentially zero in Japan, less than 1% in
most of Europe, and under 2% in the U.S. The voices predicting global deflation
seem to have largely disappeared however, after the Federal Reserve's series of
rate cuts to provide liquidity during the market downturns in the fall.
Global Environment
<TABLE>
<CAPTION>
6 months 1 year 3 years 5 years 8/31/92*
Major Markets ended ended ended ended to
Total Return in U.S. Dollars 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Equity 6.90% 23.43% 25.42% 21.78% 20.38%
Global (ex-U.S.) Equities (currency unhedged) 2.72 18.67 9.06 9.27 11.05
Global (ex-U.S.) Equities (currency hedged) -3.98 13.84 14.86 10.84 13.26
U.S. Bonds 4.57 8.72 7.29 7.30 7.56
Global (ex-U.S.) Bonds (currency unhedged) 15.38 17.79 5.49 8.26 7.86
Global (ex-U.S.) Bonds (currency hedged) 5.79 11.54 11.48 9.42 10.26
U.S. Cash Equivalents 2.12 4.55 4.79 4.72 4.32
- ---------------------------------------------------------------------------------------------------
6 months 1 year 3 years 5 years 8/31/92*
Major Currencies ended ended ended ended to
Percent Change Relative to U.S. Dollars 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------------------------------------
Yen 23.04% 15.27% -2.94% -0.21% 1.41%
Pound -0.28 1.12 2.33 2.38 -2.73
Deutschemark 8.37 7.95 -4.93 0.84 -2.63
Canadian Dollar -4.26 -6.83 -3.88 -2.93 -3.87
- ---------------------------------------------------------------------------------------------------
</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
[BRINSON LOGO APPEARS HERE]
The Global Fund is diversified across the equity and fixed income markets of the
U.S. and a broad range of other countries. The Fund is actively managed within
an asset allocation framework, involving value-based market, currency, and
individual security selection. Our senior asset allocation, equity and fixed
income professionals form the investment team for the Fund, supported by a
globally integrated market analysis system. Security selection 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
provided an annualized return of 10.83%. This is compared to the 13.64% return
of the Global Securities Markets Mutual Fund Index. The Fund's performance over
this period was achieved with an annualized volatility of 6.54%, well below the
benchmark volatility of 8.52%. The Fund's 1998 return of 8.32% fell short of the
benchmark return of 16.45%. Security selection in the U.S. equity and bond
markets had a negative impact on added value, while security selection in
Japanese equities contributed positively. The underweight in developed equity
markets and the corresponding bond overweight detracted substantially, as
riskier assets, with the exception of the emerging markets tended to perform
better during the year.
The bond and equity markets of European nations participating in the new single
currency performed well. Yields on the previously high yielding peripheral bond
markets fell to historically low levels toward the end of the year. The
worst-performing equity markets were generally found in Asia, with emerging
markets leading the bond market underperformers. The effects of the crisis in
emerging markets spilled over into the developed equity and credit markets in
September, although equities had rebounded by year-end. Japan's bond market
suffered severely toward year-end, joining its equity market which continued to
be adversely affected by the country's economic woes and a strengthening yen.
Because of the renewed yen overvaluation, the Fund remains underweight. Sterling
is likewise held at a below-benchmark allocation. Overweight currencies include
the Canadian dollar and the Australian dollar. Asset class allocations remain
heavily biased toward bonds and underweight developed equities. Valuations and
risk considerations do not support normal equity allocations.
6
<PAGE>
Global Fund
[BRINSON LOGO APPEARS HERE]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 5 years 8/31/92*
ended ended ended ended to
12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brinson Global Fund Class I 1.99% 8.32% 11.11% 10.81% 10.83%
- ---------------------------------------------------------------------------------
GSMI Mutual Fund Index** 5.71 16.45 14.42 13.76 13.64
- ---------------------------------------------------------------------------------
MSCI World Equity (Free) Index 6.72 24.62 18.06 16.06 16.02
- ---------------------------------------------------------------------------------
Salomon World Govt. Bond Index 12.17 15.29 6.20 7.85 7.78
- ---------------------------------------------------------------------------------
</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 World ex USA (Free) Index; 21% Salomon Smith
Barney BIG Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged);
2% JP Morgan EMBI+; 3% IFC Investable Index; and 3% Merrill Lynch High Yield
Master Index.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
Fund Class I, the GSMI Mutual Fund Index, the MSCI World Equity (Free) Index and
the Salomon World Govt. Bond Index if you had invested $1,000,000 on August 31,
1992, and had reinvested all your income dividends and capital gain
distributions through December 31, 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,
MSCI World Equity (Free) Index and Salomon World Govt. Bond Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
GSMI Mutual Brinson Global MSCI World Salomon World
Fund Index Fund Class I (Free) Index Gov't Bond Index
------------ -------------- ------------- ----------------
8/31/92 $1,000,000 $1,000,000 $1,000,000 $1,000,000
9/30/92 $1,005,314 $1,013,000 $991,423 $1,010,000
10/31/92 $997,514 $1,007,000 $964,679 $982,528
11/30/92 $1,017,428 $1,022,000 $981,884 $966,906
12/31/92 $1,030,790 $1,032,925 $990,218 $972,746
1/31/93 $1,042,387 $1,048,115 $993,554 $989,769
2/28/93 $1,055,458 $1,068,369 $1,017,111 $1,009,267
3/31/93 $1,087,329 $1,081,142 $1,075,990 $1,024,810
4/30/93 $1,093,919 $1,086,223 $1,125,787 $1,046,434
5/31/93 $1,116,872 $1,097,400 $1,151,607 $1,056,898
6/30/93 $1,119,316 $1,107,567 $1,141,994 $1,054,636
7/31/93 $1,127,126 $1,110,624 $1,165,369 $1,057,589
8/31/93 $1,166,328 $1,134,059 $1,219,770 $1,089,423
9/30/93 $1,165,278 $1,134,084 $1,197,452 $1,102,387
10/31/93 $1,182,155 $1,143,329 $1,230,667 $1,100,513
11/30/93 $1,153,045 $1,131,002 $1,160,612 $1,092,699
12/31/93 $1,179,801 $1,148,054 $1,216,971 $1,101,932
1/31/94 $1,218,762 $1,173,590 $1,297,252 $1,110,748
2/28/94 $1,200,386 $1,152,310 $1,280,212 $1,103,528
3/31/94 $1,159,904 $1,118,262 $1,225,058 $1,101,983
4/30/94 $1,172,614 $1,122,518 $1,263,624 $1,103,195
5/31/94 $1,176,336 $1,124,646 $1,267,367 $1,093,487
6/30/94 $1,164,819 $1,116,140 $1,263,654 $1,109,233
7/31/94 $1,189,041 $1,132,192 $1,287,845 $1,118,107
8/31/94 $1,220,386 $1,156,805 $1,326,765 $1,114,194
9/30/94 $1,201,154 $1,139,683 $1,291,736 $1,122,216
10/31/94 $1,219,946 $1,137,543 $1,328,899 $1,140,171
11/30/94 $1,185,232 $1,122,561 $1,271,624 $1,124,437
12/31/94 $1,196,582 $1,126,372 $1,283,697 $1,127,585
1/31/95 $1,208,708 $1,139,482 $1,264,853 $1,151,265
2/28/95 $1,241,252 $1,167,887 $1,283,629 $1,180,737
3/31/95 $1,281,224 $1,183,182 $1,345,557 $1,250,873
4/30/95 $1,311,158 $1,206,125 $1,392,627 $1,274,014
5/31/95 $1,344,050 $1,244,362 $1,405,194 $1,309,941
6/30/95 $1,364,548 $1,256,423 $1,404,730 $1,317,670
7/31/95 $1,407,051 $1,284,098 $1,475,061 $1,320,832
8/31/95 $1,402,131 $1,300,703 $1,442,139 $1,275,396
9/30/95 $1,439,648 $1,322,842 $1,484,738 $1,303,837
10/31/95 $1,430,595 $1,332,805 $1,461,673 $1,313,485
11/30/95 $1,473,410 $1,371,549 $1,512,618 $1,328,328
12/31/95 $1,500,615 $1,398,239 $1,557,008 $1,342,275
1/31/96 $1,525,115 $1,424,264 $1,586,118 $1,325,765
2/29/96 $1,529,469 $1,418,349 $1,595,765 $1,319,004
3/31/96 $1,542,531 $1,428,996 $1,622,258 $1,317,157
4/30/96 $1,569,098 $1,447,923 $1,660,371 $1,311,889
5/31/96 $1,580,746 $1,452,655 $1,661,700 $1,312,151
6/30/96 $1,583,964 $1,462,269 $1,670,556 $1,322,517
7/31/96 $1,542,337 $1,440,730 $1,611,517 $1,347,900
8/31/96 $1,567,235 $1,463,465 $1,630,575 $1,353,166
9/30/96 $1,618,828 $1,511,330 $1,694,511 $1,358,714
10/31/96 $1,634,998 $1,536,459 $1,706,176 $1,384,122
11/30/96 $1,703,760 $1,596,290 $1,802,360 $1,402,393
12/31/96 $1,688,579 $1,595,424 $1,773,715 $1,391,033
1/31/97 $1,713,300 $1,615,268 $1,795,458 $1,353,893
2/28/97 $1,721,365 $1,629,820 $1,815,922 $1,343,738
3/31/97 $1,683,518 $1,604,685 $1,779,579 $1,333,526
4/30/97 $1,717,598 $1,621,882 $1,837,956 $1,321,791
5/31/97 $1,804,433 $1,689,351 $1,951,687 $1,357,744
6/30/97 $1,869,036 $1,736,975 $2,048,777 $1,373,901
7/31/97 $1,943,405 $1,792,537 $2,143,340 $1,363,184
8/31/97 $1,872,161 $1,746,236 $1,998,281 $1,362,366
9/30/97 $1,953,277 $1,800,475 $2,106,924 $1,391,385
10/31/97 $1,890,285 $1,747,558 $1,996,326 $1,420,326
11/30/97 $1,907,153 $1,751,527 $2,031,241 $1,398,595
12/31/97 $1,930,073 $1,770,868 $2,056,062 $1,394,399
1/31/98 $1,956,072 $1,791,307 $2,113,744 $1,407,925
2/28/98 $2,050,747 $1,857,002 $2,256,714 $1,419,329
3/31/98 $2,108,872 $1,899,340 $2,351,694 $1,405,277
4/30/98 $2,129,617 $1,902,260 $2,374,688 $1,427,762
5/31/98 $2,099,572 $1,892,040 $2,345,875 $1,431,046
6/30/98 $2,126,234 $1,880,791 $2,400,742 $1,433,192
7/31/98 $2,115,137 $1,876,373 $2,397,120 $1,435,055
8/31/98 $1,901,138 $1,726,145 $2,077,601 $1,474,089
9/30/98 $1,966,845 $1,780,639 $2,114,573 $1,552,510
10/31/98 $2,084,211 $1,845,443 $2,306,041 $1,598,465
11/30/98 $2,169,407 $1,896,992 $2,443,383 $1,575,926
12/31/98 $2,247,617 $1,918,264 $2,562,162 $1,607,603
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
Total Return
<TABLE>
<CAPTION>
6 months 1 year 6/30/97*
ended ended to
12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------
<S> <C> <C> <C>
Brinson Global Fund Class N 1.88% 8.00% 6.49%
- ---------------------------------------------------------------
GSMI Mutual Fund Index** 5.71 16.45 13.08
- ---------------------------------------------------------------
MSCI World Equity (Free) Index 6.72 24.62 16.08
- ---------------------------------------------------------------
Salomon World Gov't. Bond Index 12.17 15.29 11.04
- ---------------------------------------------------------------
</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 World ex USA (Free) Index; 21% Salomon Smith
Barney BIG Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged);
2% JP Morgan EMBI+; 3% IFC Investable Index; and 3% Merrill Lynch High Yield
Master Index.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
Fund Class N, the GSMI Mutual Fund Index, the MSCI World Equity (Free) Index and
the Salomon World Gov't. Bond Index if you had invested $1,000,000 on June 30,
1997, and had reinvested all your income dividends and capital gain
distributions through December 31, 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,
MSCI World Equity (Free) Index and Salomon World Gov't. Bond Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
MSCI
Brinson Global GSMI Mutual World Equity Salomon World
Fund Class N Fund Index (Free) Index Gov't Bond Index
-------------- ----------- ------------- ----------------
6/30/97 $1,000,000 $1,000,000 $1,000,000 $1,000,000
7/31/97 $1,032,226 $1,039,790 $1,046,155 $992,200
8/31/97 $1,003,808 $1,001,672 $975,353 $991,605
9/30/97 $1,035,796 $1,045,072 $1,028,381 $1,012,726
10/31/97 $1,004,570 $1,011,369 $974,399 $1,033,791
11/30/97 $1,006,093 $1,020,394 $991,441 $1,017,974
12/31/97 $1,017,857 $1,020,394 $1,003,556 $1,014,920
1/31/98 $1,028,766 $1,046,567 $1,031,710 $1,024,764
2/28/98 $1,066,526 $1,097,222 $1,101,493 $1,033,065
3/31/98 $1,090,861 $1,128,321 $1,147,852 $1,022,838
4/30/98 $1,091,700 $1,139,420 $1,159,076 $1,039,203
5/31/98 $1,085,826 $1,123,345 $1,145,012 $1,041,593
6/30/98 $1,079,019 $1,137,610 $1,171,793 $1,043,156
7/31/98 $1,076,480 $1,131,673 $1,170,024 $1,044,512
8/31/98 $990,159 $1,017,176 $1,014,069 $1,072,922
9/30/98 $1,021,471 $1,052,331 $1,032,115 $1,130,002
10/31/98 $1,057,862 $1,115,127 $1,125,569 $1,163,450
11/30/98 $1,086,636 $1,160,709 $1,192,605 $1,147,045
12/31/98 $1,099,252 $1,202,555 $1,250,581 $1,170,101
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
Asset Allocation
As of December 31, 1998 (Unaudited)
Current
Benchmark Strategy
- -------------------------------------------------------
U.S. Equities 40.0% 22.0%
Global (ex-U.S.) Equities 22.0 18.0
Emerging Markets Equities 3.0 3.0
Dollar Bonds 21.0 33.0
High Yield Bonds 3.0 3.0
Global (ex-U.S.) Bonds 9.0 16.0
Emerging Markets Debt 2.0 5.0
Cash Equivalents 0.0 0.0
- -------------------------------------------------------
100.0% 100.0%
Top Ten U.S. Equity Holdings
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- -------------------------------------------------------
1. Xerox Corp. 1.79%
2. FDX Corp. 1.25
3. Burlington Northern Santa Fe Corp. 1.24
4. Lockheed Martin Corp. 1.09
5. Philip Morris Companies, Inc. 1.03
6. Baxter International, Inc. 0.77
7. Kimberly Clark Corp. 0.75
8. Entergy Corp 0.71
9. Aetna, Inc. 0.70
10. CIGNA Corp. 0.69
- -------------------------------------------------------
Currency Allocation
As of December 31, 1998 (Unaudited)
Current
Benchmark Strategy
- -------------------------------------------------------
U.S. 66.0% 62.4%
Japan 7.0 1.0
U.K. 5.3 1.3
Continental Europe 16.3 20.3
Canada 1.2 5.2
Emerging Markets 3.0 3.0
Other 1.2 6.8
- -------------------------------------------------------
100.0% 100.0%
Top Ten Global (ex-U.S.) Equity Holdings
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- -------------------------------------------------------
1. Novartis AG (Reg.) 0.46%
2. Telecom Corp of New Zealand, Ltd. 0.40
3. Royal Dutch Petroleum Co. 0.37
4. Nokia Oyj- A Shares 0.35
5. Nestle S.A. (Reg.) 0.35
6. Allianz A.G. 0.34
7. Lloyds TSB Group PLC 0.34
8. Bayer AG 0.33
9. Glaxo Wellcome PLC 0.31
10. ING Groep NV 0.30
- -------------------------------------------------------
9
<PAGE>
Global Fund
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
U.S. Equities
Energy 0.36%
Capital Investment
Capital Goods 3.22
Technology 3.22
-------
6.44
-------
Basic Industries
Chemicals 0.93
Housing/Paper 2.67
Metals 0.15
-------
3.75
-------
Consumer
Non-Durables 2.62
Retail/Apparel 1.32
Autos/Durables 1.10
Health: Drugs 1.09
Health: Non-Drugs 1.67
-------
7.80
-------
Financial
Banks 2.67
Non-Banks 2.07
-------
4.74
-------
Utilities
Electric 1.70
Telephone 0.81
-------
2.51
-------
Transportation 1.73
Services/Misc 2.26
Post Venture 1.18
-------
Total U.S. Equities 30.77*
-------
GLOBAL (EX-U.S.) EQUITIES
Aerospace & Military 0.10
Airlines 0.06
Appliances & Household 0.23
Autos/Durables 0.43
Banking 2.07
Beverages & Tobacco 0.58
Broadcasting & Publishing 0.57
Building Materials 0.27
Business & Public Service 0.65
Chemicals 0.69
Construction 0.03
Consumer 0.14
Data Processing 0.06
Electric Components 0.28
Electronics 0.95
Energy 1.39
Financial Services 0.62
Food & House Products 0.60
Forest Products 0.25
Health: Drugs 0.68
Health: Non-Drugs 1.07
Housing/Paper 0.04
Industrial Components 0.21
Insurance 1.47%
Leisure & Tourism 0.09
Machinery & Engineering 0.03
Merchandising 0.75
Metals--Steel 0.18
Multi-Industry 0.67
Non-Ferrous Metals 0.19
Real Estate 0.06
Recreation 0.05
Retail & Apparel 0.08
Telecommunications 2.03
Textiles & Apparel 0.02
Transportation 0.04
Utilities 0.71
Wholesale & International Trade 0.01
-------
Total global
(ex-U.S.) Equities 18.35
-------
EMERGING MARKETS EQUITIES 3.01
-------
TOTAL EQUITIES 52.13
-------
U.S. BONDS
Corporate Bonds
Airlines 0.03
Auto/Durables 0.16
Banks 0.62
Broadcasting & Public
Service 0.21
CMO 2.80
Financial Services 1.26
Industrial Components 1.45
Telecommunications 0.02
Transportation 0.30
-------
6.85
-------
U.S. Government Agencies 4.17
U.S. Government Obligations 8.75
International Dollar Bonds 2.01
-------
Total U.S. Bonds 21.78*
-------
High Yield Bonds 3.01
-------
global (ex-U.S.) Bonds
Foreign Government Bonds 15.19
-------
Emerging Markets Debt 5.47
-------
Short Term Investments 23.31*
-------
Total Investments 120.89
Liabilities, Less Cash and
other Assets (20.89)
-------
NET ASSETS 100.00%
=======
* The Fund held a long position in U.S. Treasury futures on December 31, 1998
which increased U.S. Bond exposure from 21.78% to 31.12%.
The Fund held a short position in stock index futures on December 31, 1998 which
reduced U.S. Equity exposure from 30.77% to 20.84%.
These adjustments result in a net increase in the Fund's exposure to Short-Term
Investments from 23.31% to 23.90%.
10
<PAGE>
Global Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
------------ ---------------
Equities -- 52.13%
U.S. Equities -- 30.77%
Advanced Micro Devices, Inc. (b) 70,500 $ 2,040,094
Aetna, Inc. 45,300 3,561,712
Allergan, Inc. 17,800 1,152,550
Alza Corp. (b) 37,500 1,959,375
American Standard Companies, Inc. (b) 36,200 1,300,937
Aon Corp. 63,398 3,510,664
Automatic Data Processing, Inc. 28,600 2,293,362
BankBoston Corp. 20,400 794,325
Baxter International, Inc. 61,400 3,948,787
Beckman Coulter Inc. 16,300 884,275
Bestfoods 17,900 953,175
Biogen, Inc. (b) 8,500 705,500
Birmingham Steel Corp. 12,000 50,250
Brinson Post-Venture Fund (b) 317,715 6,015,904
Burlington Northern Santa Fe Corp. 187,900 6,341,625
Centaur Funding Corp., 144A 1,430 262,586
Centaur Funding Corp., 144A 750 784,219
Champion Enterprises, Inc. (b) 11,700 320,288
Champion International Corp. 18,800 761,400
Chase Manhattan Corp. 32,100 2,184,806
CIGNA Corp. 45,600 3,525,450
Circuit City Stores-Circuit City Group 50,800 2,536,825
CMS Energy Corp. 48,400 2,344,375
Comerica, Inc. 15,500 1,056,906
CommScope, Inc. (b) 26,333 442,724
Comverse Technology, Inc. (b) 17,160 1,218,360
Consolidated Stores Corp. (b) 49,400 997,263
Corning, Inc. 73,600 3,312,000
Covance, Inc. (b) 18,872 549,647
Crown Cork & Seal Co., Inc. 17,800 548,463
Cummins Engine Co., Inc. 4,200 149,100
Dial Corp. 19,400 560,175
Eastman Chemical Co. 20,700 926,325
Electronic Data Systems Corp. 66,100 3,321,525
EMC Corp. (b) 22,100 1,878,500
Entergy Corp. 116,400 3,622,950
FDX Corp. (b) 71,900 6,399,100
First American Corp. of Tennessee 9,800 434,875
First Data Corp. 90,830 2,878,176
First Security Corp. 18,575 434,191
Fleet Financial Group, Inc. 49,200 2,198,625
Fleetwood Enterprises, Inc. 8,100 281,475
Food Lion Inc., Class A 85,500 908,438
Fort James Corp. 64,500 2,580,000
General Instrument Corp. (b) 85,600 2,905,050
General Semiconductor, Inc. (b) 19,850 162,522
Genzyme Corp. (b) 15,100 751,225
Genzyme-Molecular Oncology (b) 1,594 5,179
Geon Co. 10,400 239,200
Goodyear Tire & Rubber Co. 47,900 2,415,956
Great Lakes Chemical Corp. 12,000 480,000
GreenPoint Financial Corp. 21,200 744,650
Harnischfeger Industries, Inc. 26,100 265,894
HCR Manor Care, Inc. (b) 19,198 563,941
Hibernia Corp., Class A 20,800 361,400
Household International Inc. 36,700 1,454,237
IMC Global Inc. 57,500 1,229,062
Johnson Controls Inc. 17,800 1,050,200
Shares Value
------------ ---------------
Kimberly Clark Corp. 70,300 $ 3,831,350
Lafarge Corp. 15,300 619,650
Lear Corp. (b) 44,400 1,709,400
Lockheed Martin Corp. 65,823 5,578,499
Lyondell Petrochemical Co. 54,000 972,000
Martin Marietta Materials, Inc. 10,984 683,068
Masco Corp. 87,500 2,515,625
Nabisco Holdings Corp., Class A 38,200 1,585,300
National Service Industries, Inc. 11,900 452,200
Nextel Communications, Inc., Class A (b) 52,400 1,237,950
Norfolk Southern Corp. 79,400 2,515,987
Peco Energy Co. 64,600 2,688,975
Pentair, Inc. 19,796 788,128
Philip Morris Companies, Inc. 98,100 5,248,350
Praxair, Inc. 34,800 1,226,700
Raytheon Co., Class B 63,200 3,365,400
Regions Financial Corp. 9,600 387,000
Schering Plough Corp. 34,700 1,917,175
Sears, Roebuck and Co. 53,900 2,290,750
Southdown, Inc. 21,336 1,262,824
St. Jude Medical, Inc. (b) 35,300 977,369
Timken Co. 6,600 124,575
TRW, Inc. 7,900 443,881
Tyson Foods, Inc., Class A 69,798 1,483,207
Ultramar Diamond Shamrock Corp. 38,702 938,524
Unocal Corp. 25,600 747,200
US Bancorp 48,180 1,710,390
USG Corp. 8,600 438,063
Vencor, Inc. (b) 39,700 178,650
Ventas, Inc. 39,800 485,063
Viad Corp. 36,900 1,120,838
Wells Fargo and Co. 48,200 1,924,987
Witco Corp. 6,500 103,594
Xerox Corp. 77,600 9,156,800
York International Corp. 23,400 955,013
-------------
Total U.S. Equities 157,224,303
-------------
Global (ex-U.S.) Equities -- 18.35%
Australia -- 1.00%
Amcor Ltd. 25,920 110,866
Brambles Industries Ltd. 14,770 360,131
Broken Hill Proprietary Co., Ltd. 59,710 440,209
CSR Ltd. 79,870 195,479
David Jones Ltd. 103,330 114,088
Lend Lease Corp., Ltd. 21,132 285,172
National Australia Bank Ltd. 45,027 679,440
News Corp. Ltd. 64,089 423,785
News Corp. Ltd., Preferred 28,536 173,814
Orica Ltd. 18,550 96,604
Pacific Dunlop Ltd. 69,610 112,725
Qantas Airways Ltd. 85,237 174,107
QBE Insurance Group Ltd. 42,683 176,727
Rio Tinto Ltd. 14,645 173,870
Santos Ltd. 55,490 149,084
Telstra Corp., Ltd. (b) 149,700 700,631
Westpac Banking Corp., Ltd. 78,128 523,326
WMC Ltd. 37,340 112,689
Woolworth's Ltd. 25,860 88,132
-------------
5,090,879
-------------
11
<PAGE>
Global Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
------------ ---------------
Belgium -- 0.62%
Delhaize-Le Lion S.A. 480 $ 42,476
Electrabel S.A. 2,650 1,164,791
Fortis AG 186 11
Fortis AG Strip (b) 3,913 1,418,092
KBC Bancassurance (Rights) (b) 8,790 0
KBC Bancassurance Holding Strip (b) 220 13
Kredietbank NV 6,600 522,562
-------------
3,147,945
-------------
Canada -- 0.38%
Agrium, Inc. 7,740 68,027
Alcan Aluminum Ltd. 5,120 138,333
Bank of Montreal 3,020 121,311
Canadian National Railway Co. 2,960 153,685
Canadian Pacific Ltd. 9,073 169,528
Extendicare, Inc., Class A (b) 6,960 39,422
Hudson's Bay Co. 6,810 85,790
Imasco, Ltd. 4,890 104,104
Imperial Oil Ltd. 9,110 145,606
Magna International, Inc., Class A 1,260 78,258
Newbridge Networks Corp. (b) 3,960 120,141
NOVA Corp. 6,004 78,177
Potash Corporation of Saskatchewan, Inc. 1,160 74,388
Royal Bank of Canada 3,570 177,919
Seagram Co., Ltd. 1,650 62,573
Shaw Communications, Inc., Class B 6,580 158,931
TransCanada Pipelines Ltd. 9,090 132,858
Westcoast Energy, Inc. 2,650 52,621
-------------
1,961,672
-------------
Denmark -- 0.11%
Den Danske Bank Group 390 52,392
Tele Danmark A/S 3,960 534,471
-------------
586,863
-------------
Finland -- 0.55%
Merita Ltd., Class A 70,330 447,254
Nokia Oyj-A Shares 14,780 1,809,772
UPM-Kymmene Corp. 19,770 554,438
-------------
2,811,464
-------------
France -- 2.11%
Air Liquide 3,495 641,290
Alcatel Alsthom 5,472 670,017
Axa 4,918 713,111
Banque Nationale de Paris 6,639 546,931
Cie de Saint Gobain 2,527 356,916
Dexia France 2,489 383,629
Elf Aquitaine S.A. 3,564 412,149
France Telecom S.A. 7,100 564,319
Groupe Danone 1,500 429,630
Lagardere S.C.A. 15,800 671,745
Michelin, Class B 6,819 272,823
Paribas 3,565 309,964
Pinault-Printemps-Redoute S.A. 1,740 332,663
Rhone-Poulenc, Class A 10,304 530,491
SEITA 12,900 808,242
Societe Generale 2,735 443,087
Shares Value
------------ ---------------
Suez Lyonnaise des Eaux S.A. 3,801 $ 781,130
Thomson CSF 11,460 492,356
Total S.A., Class B 4,796 485,936
Vivendi 3,634 943,271
-------------
10,789,700
-------------
Germany -- 2.26%
Allianz AG 4,654 1,732,397
Bayer AG 39,930 1,676,935
DaimlerChrysler AG (b) 10,356 1,029,052
DaimlerChrysler AG (b) 2,300 228,533
Deutsche Bank AG 8,581 506,329
Deutsche Telekom AG 24,060 790,877
Dresdner Bank AG 11,120 466,004
Hoechst AG 12,630 522,459
Mannesmann AG (b) 9,280 1,073,919
SAP AG 920 397,695
Siemens AG 19,850 1,304,980
Veba AG 21,739 1,288,208
Volkswagen AG 6,870 556,001
-------------
11,573,389
-------------
Italy -- 0.87%
Assicurazioni Generali 22,800 954,066
Danieli & Co. Savings (Risp) 22,000 87,790
ENI Spa 160,000 1,047,945
ENI Spa ADR 3,070 207,992
La Rinascente Spa 56,740 584,797
Montedison Spa 351,700 468,168
San Paolo-imi, Spa 28,511 504,882
Telecom Italia Mobile Spa 83,000 614,091
-------------
4,469,731
-------------
Japan -- 1.11%
Acom Co., Ltd. 1,000 64,362
Amada Co., Ltd. 11,000 53,342
Bridgestone Corp. 3,000 68,218
Canon, Inc. 10,000 214,096
Citizen Watch Co., Ltd. 9,000 54,255
Dai Nippon Printing Co., Ltd. 10,000 159,752
Daiichi Pharmaceutical Co., Ltd. 9,000 152,314
Daikin Industries Ltd. 11,000 109,220
Daiwa House Industry Co., Ltd. 5,000 53,324
Fanuc 5,000 171,543
Fuji Photo Film 2,000 74,468
Fujitsu 6,000 80,053
Honda Motor Co. 5,000 164,450
Hoya Corp. 3,000 146,277
Ito Yokado Co., Ltd. 5,000 350,177
Kaneka Corp. 10,000 75,089
Kao Corp. 4,000 90,426
Kirin Brewery Co., Ltd. 12,000 153,191
Kokuyo 4,000 53,936
Kuraray Co., Ltd. 13,000 143,715
Marui Co., Ltd. 6,000 115,691
Matsushita Electric Industrial Co. 13,000 230,381
NGK Insulators 18,000 232,500
Nintendo Corp., Ltd. 1,900 184,442
Nippon Denso Co., Ltd. 9,000 166,755
12
<PAGE>
Global Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
------------ ---------------
Nippon Meat Packers, Inc. 7,000 $ 112,943
Omron Corp. 4,000 54,894
Sankyo Co., Ltd. 8,000 175,177
Secom Co., Ltd. 3,000 248,936
Sega Enterprises Ltd. 2,000 44,415
Sekisui House Ltd. 9,000 95,346
Shin-Etsu Chemical Co., Ltd. 2,000 48,227
Sony Corp. 3,000 218,883
Sumitomo Chemical Co. 13,000 50,709
Sumitomo Electric Industries 8,000 90,142
Takeda Chemical Industries 7,000 269,947
TDK Corp. 2,000 183,156
Tokio Marine & Fire Insurance Co. 10,000 119,681
Toray Industries, Inc. 29,000 151,684
Toshiba Corp. 26,000 155,124
Toyota Motor Corp. 8,000 217,731
Yamato Transport Co., Ltd. 4,000 56,028
-------------
5,655,000
-------------
Malaysia -- 0.00%
Malayan Banking Bhd 6,000 8,508
-------------
Netherlands -- 1.43%
ABN AMRO Holdings NV 21,690 456,522
Elsevier NV 41,870 586,765
Heineken NV 14,252 858,142
ING Groep NV 25,020 1,526,504
KPN NV 25,009 1,252,649
Royal Dutch Petroleum Co. 37,790 1,882,754
Unilever NV 8,530 729,507
-------------
7,292,843
-------------
New Zealand -- 0.73%
Auckland International Airport Ltd. (b) 104,950 146,930
Brierley Investments Ltd. 703,970 159,920
Carter Holt Harvey Ltd. 368,840 331,260
Fletcher Challenge Building 101,985 157,865
Fletcher Challenge Energy 134,315 255,451
Fletcher Challenge Paper 232,730 156,148
Lion Nathan Ltd. 132,020 336,875
Telecom Corp. of New Zealand Ltd. 474,110 2,066,401
Telecom Corp. of New Zealand Ltd. ADR 2,790 99,568
-------------
3,710,418
-------------
Norway -- 0.07%
Norsk Hydro ASA 4,890 164,947
Norske Skogindustrier ASA 6,550 190,852
-------------
355,799
-------------
Singapore -- 0.22%
Oversea-Chinese Banking Corp., Ltd. 200 1,357
Singapore Press Holdings Ltd. 64,819 703,190
United Overseas Bank Ltd. (Frgn.) 66,360 426,313
-------------
1,130,860
-------------
Spain -- 0.36%
Banco Popular Espanol S.A. 6,991 527,918
Endesa S.A. 36,238 961,603
Shares Value
------------ ---------------
Telefonica S.A. 8,117 $ 361,467
Telefonica S.A. Rights (expiring 1/30/99) (b) 162 144
-------------
1,851,132
-------------
Sweden -- 0.80%
Astra AB, A Shares 30,020 612,933
Electrolux AB, B Shares 37,840 651,223
Investor AB 9,730 439,337
Nordbanken Holding AB 53,470 343,019
Skandia Forsakrings AB 45,320 693,291
Svenska Handelsbanken, A Shares 4,710 198,724
Swedish Match AB 133,390 485,455
Telefonaktiebolaget LM Ericsson, B Shares 27,220 648,111
-------------
4,072,093
-------------
Switzerland -- 1.45%
Julius Baer Holding AG 90 299,126
Nestle S.A. (Reg.) 819 1,782,898
Novartis AG (Reg.) 1,207 2,372,697
Roche Holding AG (Gen.) 111 1,354,467
Swiss Reinsurance Co. (Reg.) 287 748,269
SwissCom AG (Reg.) (b) 2,026 848,161
-------------
7,405,618
-------------
United Kingdom -- 4.28%
Allied Zurich AG (b) 44,052 657,082
Barclays PLC 31,050 669,531
Billiton PLC 33,230 65,931
BOC Group PLC 36,350 519,821
Booker PLC 68,440 71,169
Boots Company PLC 38,230 651,023
British American Tobacco PLC 27,842 244,821
British Petroleum Co. PLC 83,873 1,252,450
British Steel PLC 322,950 478,222
Cable & Wireless PLC 24,000 295,093
Charter PLC 63,676 349,618
Coats Viyella PLC 269,970 121,278
Diageo PLC 45,209 514,499
Fairview Holdings PLC (b) 43,937 65,062
FKI PLC 239,040 532,941
Garban PLC (b) 3,489 13,294
General Electric Co. PLC 95,360 860,736
Glaxo Wellcome PLC 46,260 1,591,696
Greenalls Group PLC 43,620 232,604
Hanson PLC 82,982 658,922
Hillsdown Holdings PLC 69,775 87,069
House of Fraser PLC 124,780 110,033
Lloyds TSB Group PLC 120,969 1,720,854
Marks & Spencer PLC 142,060 974,398
Mirror Group PLC 144,390 360,957
National Westminster Bank PLC 27,430 528,948
Nycomed Amersham PLC 57,844 398,440
Peninsular & Oriental Steam Navigation Co. 23,540 278,275
Prudential Corp. PLC 84,540 1,276,476
Reed International PLC 51,010 398,894
Rio Tinto Ltd. 43,190 502,301
RJB Mining PLC 99,590 129,245
Royal & Sun Alliance Insurance Group PLC 35,073 286,376
13
<PAGE>
Global Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
------------ ---------------
Sainsbury (J.) PLC 27,300 $ 218,821
Scottish Hydro-Electric PLC 81,880 922,295
SmithKline Beecham PLC 68,810 961,689
Smurfit (Jefferson) Group PLC 70,517 126,713
Terranova Foods PLC (b) 30,937 56,621
Tesco PLC 249,190 710,011
Thames Water PLC 29,997 573,957
Thames Water PLC, Class B (b) 29,370 36,894
United News & Media PLC 32,490 284,881
Vodafone Group PLC 21,678 352,025
Williams PLC 39,463 224,061
Yorkshire Water PLC 54,080 494,884
-------------
21,860,911
Total Global (ex-U.S.) Equities 93,774,825
-------------
Emerging Markets Equities -- 3.01%
Brinson Emerging Markets Equity Fund (b) 2,194,457 15,364,050
-------------
Total Equities (Cost $237,656,681) 266,363,178
-------------
Face
Amount
------------
Bonds -- 45.45%
U.S. Bonds -- 21.78%
U.S. Corporate Bonds -- 6.85%
Aid-Israel, Series 10-Z, 0.000%,
due 02/15/03 $ 4,935,000 4,046,843
Asset Securitization Corp., 7.210%,
due 10/13/26 1,695,000 1,813,921
Capital One Bank, 6.830%, due 05/17/99 1,321,000 1,324,938
Chase Manhattan Auto Owner Trust, 96-C,
Class A4, 6.150%, due 03/15/02 730,000 739,753
Chemical Master Credit Card Trust,
6.230%, due 06/15/03 1,055,000 1,072,745
Chesapeake & Potomac Telephone of
Maryland, 8.000%, due 10/15/29 78,000 97,504
Citicorp, Series F, 6.200%, due 11/10/00 355,000 360,736
Continental Airlines, Inc., EETC
6.900%, due 01/02/18 1,495,000 1,519,548
98-1B, 6.748%, due 09/15/18 175,000 175,205
Enron Corp., 6.750%, due 09/01/04 250,000 257,175
Floating Rate Note, due 03/30/00 5,000,000 5,000,000
Fanniemae Whole Loan, 95-W3, Class A,
9.000%, due 04/25/25 27,659 28,824
First Bank Corporate Card Master Trust,
97-1A, 6.400%, due 02/15/03 1,055,000 1,084,118
First Nationwide Trust, 98-3, Class 1PPA,
6.500%, due 09/19/28 1,527,896 1,529,271
Ford Credit Grantor Trust 95-B,
5.900%, due 01/01/80 29,110 29,177
General Motors Acceptance Corp.,
9.625%, due 12/15/01 241,000 268,066
Lehman Brothers, Inc., 7.250%,
due 04/15/03 510,000 525,330
LG&E Capital Corp., 144A, 5.750%,
due 11/01/01 215,000 214,153
MBNA Global Capital Securities FRN,
6.019%, due 02/01/27 810,000 745,413
Face
Value Value
------------ ---------------
News America Holdings, 7.750%,
due 12/01/45 $ 1,027,000 $ 1,090,730
Norwest Asset Securities Corp., 96-2,
Class A9, 7.000%, due 09/25/11 435,000 444,249
PanAMSat Corp., 6.000%, due 01/15/03 225,000 223,232
Premier Auto Trust 96-3A, 6.500%,
due 03/06/00 60,120 60,252
Prudential Home Mortgage Securities,
94-3, Class A10, 6.500%,
due 02/25/24 730,000 728,007
Residential Asset Securitization Trust,
97-A11, Class A2, 7.000%, due 01/25/28 142,711 143,234
97-A7, Class A1, 7.500%, due 09/25/27 550,980 555,911
97-A7, Class A1, 7.250%, due 12/25/27 1,080,000 1,101,377
Salomon, Inc., 7.200%, due 02/01/04 1,475,000 1,549,569
Structured Asset Securities Corp.
98-RF1, Class A, 8.712%, due 03/15/27 1,264,071 1,356,507
98-RF2, 144A, 8.582%, due 07/15/27 1,604,269 1,716,568
Thrift Financial Corp., 11.250%, due 01/01/16 67,492 70,906
Time Warner Entertainment, Inc.,
8.375%, due 03/15/23 886,000 1,083,667
TransAmerica Financial Corp. Series E,
6.125%, due 11/01/01 405,000 406,707
UCFC Home Equity Loan 97-C, Class A8,
FRN, 5.478%, due 09/15/27 1,137,833 1,126,898
Vendee Mortgage Trust, 98-2, Class 1G,
6.750%, due 06/15/28 1,760,000 1,811,847
Viacom, Inc., 7.750%, due 06/01/05 610,000 666,071
-------------
34,968,452
-------------
International Dollar Bonds -- 2.01%
Abbey National PLC, 6.700%, Resettable
Perpetual Step-up Notes 1,075,000 1,052,926
ABN AMRO Bank NV (Chicago), 6.625%,
due 10/31/01 230,000 235,030
Banco Santiago S.A., 7.000%,
due 07/18/07 1,000,000 837,979
Banque Centrale de Tunisie, 8.250%,
due 09/19/27 785,000 628,000
Banque Paribas, Sub. Notes, 6.875%,
due 03/01/09 175,000 177,982
Credit Suisse-London, 144A, 7.900%,
Resettable Perpetual Step-up Notes 600,000 600,000
Empresa Nacional Electric, 7.875%,
due 02/01/27 166,000 138,575
International Telecom Satelite, 8.125%,
due 02/28/05 245,000 276,502
Korea Development Bank, 7.125%,
due 09/17/01 180,000 169,796
Pan Pacific Industry PLC 144A, 0.000%,
due 04/28/07 1,565,000 618,175
Province of Quebec, 7.500%,
due 07/15/23 530,000 606,055
Ras Laffan Liquified Natural Gas Co., Ltd.,
144A, 8.294%, due 03/15/14 1,000,000 824,260
14
<PAGE>
Global Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Face
Value Value
------------ ---------------
Repsol International Finance, 7.000%,
due 08/01/05 $ 575,000 $ 620,673
Republic of South Africa, 9.625%,
due 12/15/99 794,000 809,880
Royal Bank of Scotland, 7.375%,
Resettable Perpetual Step-up Notes 505,000 519,853
Skandinaviska Enskilda Banken, 144A,
Resettable Perpetual Step-up Notes 415,000 404,607
Sociedad Quimica y Minera de Chiles
S.A., 144A, 7.700%, due 09/15/06 900,000 792,717
Southern Investments UK, 6.800%,
due 12/01/06 915,000 948,820
-------------
10,261,830
-------------
U.S. Government Agencies -- 4.17%
Federal Home Loan Mortgage Corp.
6.200%, due 08/15/07 510,000 512,055
7.500%, due 01/15/23 854,458 900,771
7.238%, due 05/01/26 162,387 165,062
Federal Home Loan Mortgage Corp. Gold
8.000%, due 11/01/22 97,255 100,659
8.000%, due 05/01/23 948,691 984,950
9.000%, due 03/01/24 697,379 741,509
Federal National Mortgage Association
6.361%, due 06/01/08 1,631,338 1,699,854
9.000%, due 08/01/21 206,941 219,548
8.500%, due 07/01/22 441,957 468,410
8.500%, due 02/01/28 1,232,583 1,291,131
7.000%, due 10/01/28 996,959 1,016,275
Federal National Mortgage Assoc. Strips
0.000%, due 04/01/27 1,155,933 1,016,212
6.220%, due 03/13/06 1,370,000 1,452,396
7.500%, due 05/01/23 1,253,190 201,159
Federal National Mortgage Association
8.000%, due 02/25/07 1,380,276 1,407,560
8.000%, due 05/25/21 1,300,000 1,331,623
8.500%, due 07/15/21 667,754 690,278
8.000%, due 05/01/22 89,847 93,020
7.500%, due 07/25/22 2,336,416 2,455,620
FGGI, 7.500%, due 10/01/11 1,035,686 1,065,462
FNCI, 8.000%, due 02/01/13 748,552 771,476
Government National Mortgage Association
10.000%, due 09/15/00 2,022 2,141
10.000%, due 05/15/01 3,001 3,178
9.000%, due 11/15/04 9,339 9,806
9.000%, due 11/15/04 4,482 4,706
8.000%, due 08/15/22 375,930 391,421
8.000%, due 11/15/22 295,275 307,674
7.500%, due 11/15/24 1,953,955 2,014,455
-------------
21,318,411
-------------
U.S. Government Obligations -- 8.75%
U.S. Treasury Notes and Bonds
6.625%, due 05/15/07 135,000 151,833
8.000%, due 11/15/21 5,915,000 7,924,255
Face
Amount Value
------------ ---------------
U.S. Treasury Inflation Indexed Note
3.625%, due 01/15/08 $35,665,000 $ 35,489,403
3.625%, due 04/15/28 1,170,000 1,155,854
-------------
44,721,345
-------------
Total U.S. Bonds 111,270,038
-------------
Shares
------------
High Yield Bonds -- 3.01%
Brinson High Yield Fund (b) 1,168,955 15,399,222
-------------
Face
Amount
------------
Global (ex-U.S.) Bonds -D 15.19%
Australia -- 1.48%
Government of Australia
9.500%, due 08/15/03 AUD 4,020,000 2,946,856
10.000%, due 02/15/06 4,020,000 3,208,237
Queensland Treasury Corp.-Global Notes,
8.000%, due 05/14/03 2,010,000 1,376,261
-------------
7,531,354
-------------
Canada -- 1.59%
Government of Canada
7.500%, due 09/01/00 CAD 500,000 339,248
8.750%, due 12/01/05 1,950,000 1,555,900
7.000%, due 12/01/06 2,640,000 1,955,181
4.250%, due 12/01/21 5,090,000 3,729,684
Hydro-Quebec, 8.050%, due 07/07/24 450,000 545,427
-------------
8,125,440
-------------
Denmark -- 1.52%
Kingdom of Denmark
9.000%, due 11/15/00 DKK 7,400,000 1,266,179
7.000%, due 12/15/04 3,780,000 684,730
8.000%, due 03/15/06 30,070,000 5,826,432
-------------
7,777,341
-------------
France -- 2.13%
Government of France (BTAN), 5.750%,
due 03/12/01 FRF 12,400,000 2,338,735
Government of France (OAT)
9.500%, due 01/25/01 9,740,000 1,963,274
7.500%, due 04/25/05 7,330,000 1,591,915
8.500%, due 12/26/12 19,120,000 4,999,567
-------------
10,893,491
-------------
Germany --- 2.23%
Bundesrepublik Deutscheland
8.500%, due 08/21/00 DEM 1,130,000 734,880
8.375%, due 05/21/01 2,880,000 1,931,412
6.250%, due 01/04/24 1,630,000 1,188,541
DSL Finance NV, 5.250%, due 04/15/04 3,095,000 1,999,876
Treuhandanstalt, 6.250%, due 03/04/04 8,200,000 5,563,653
-------------
11,418,362
-------------
15
<PAGE>
Global Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Face
Value Value
------------ ---------------
Italy -- 1.07%
Buoni Poliennali Del Tes, 8.500%,
due 08/01/04 ITL 3,220,000,000 $ 2,434,435
Republic of Italy (BTP)
12.000%, due 09/01/02 625,000,000 486,676
8.500%, due 04/01/04 3,447,000,000 2,558,479
-------------
5,479,590
-------------
Spain -- 1.82%
Government of Spain
6.750%, due 04/15/00 ESP 393,000,000 2,897,529
7.900%, due 02/28/02 105,000,000 844,213
8.000%, due 05/30/04 225,000,000 1,940,189
6.150%, due 01/31/13 434,000,000 3,616,064
-------------
9,297,995
-------------
Sweden -- 1.09%
Government of Sweden
10.250%, due 05/05/03 SEK 29,400,000 4,561,791
6.750%, due 05/05/14 6,400,000 984,066
-------------
5,545,857
-------------
United Kingdom -- 2.26%
UK Treasury
8.500%, due 12/07/05 GBP 3,420,000 7,060,439
8.500%, due 07/16/07 900,000 1,916,710
7.250%, due 12/07/07 900,000 1,800,659
8.750%, due 08/25/17 300,000 767,433
-------------
11,545,241
-------------
Total Global (ex-U.S.) Bonds 77,614,671
-------------
Shares
------------
Emerging Markets Debt -- 5.47%
Brinson Emerging Markets Debt Fund (b) 1,594,099 27,921,446
-------------
Total Bonds (Cost $260,497,023) 232,205,377
-------------
Face
Amount
------------
Short-Term Investments -- 23.31%
U.S. Government Obligations -- 0.58%
U.S. Treasury Bill 4.320%, due 02/25/99 $ 3,000,000 2,981,367
Commercial Paper -- 13.78%
Case Credit, 5.950% due 02/23/99 5,000,000 4,956,201
Corning, Inc., 5.100% due 01/04/99 5,125,000 5,122,822
Crown, Cork & Seal, 5.650% due 02/25/99 5,000,000 4,956,840
Detroit Edison, 5.250% due 01/4/99 3,700,000 3,698,381
Excel Paralubes, 5.650% 01/4/99 10,000,000 9,995,292
Marriott International, 5.700% 01/11/99 5,000,000 4,992,084
Norfolk Southern,
6.000%, due 01/11/99 950,000 948,417
6.050%, due 01/29/99 2,000,000 1,990,589
Raytheon Co. 5.600%, due 01/22/99 1,000,000 997,366
Face
Value Value
------------ ---------------
Seagrams,
6.100%, due 01/29/99 $ 5,000,000 $ 4,976,278
7.000%, due 01/07/99 5,000,000 4,994,167
Tenneco, Inc., 6.450%, due 01/08/99 5,000,000 4,993,729
Texas Utilities Co. 5.500%, due 01/29/99 5,000,000 4,978,611
Times Mirror, 5.750%, due 01/08/99 1,106,000 1,104,763
Union Carbide, 6.130%, due 01/04/99 5,000,000 4,997,446
Union Pacific Resources, 5.670%,
due 01/29/99 5,000,000 4,977,950
Vastar Resources, 5.100%, due 01/22/99 1,733,000 1,727,844
-------------
70,408,780
-------------
U.S. Corporate Bonds -- 7.36%
Burlington North Santa Fe, Variable Rate,
due 05/13/99 5,000,000 5,000,000
Burlington Resources, 6.875%,
due 08/01/99 2,000,000 2,011,995
Dayton Hudson Co., 7.500%, due 03/01/99 1,000,000 1,002,654
FMC Corp., 8.750%, due 04/01/99 2,880,000 2,899,210
James River Corp., 6.750%, due 10/01/99 1,000,000 1,007,596
Lehman Brothers, Inc.,
6.300%, due 08/11/99 2,000,000 2,005,500
6.920%, due 10/04/99 3,000,000 3,022,342
Lockheed Martin Corp., 6.550%,
due 05/15/99 6,000,000 6,013,422
Nabisco, Inc., 6.300%, due 8/26/99 1,000,000 1,003,331
Sonat, Inc., 9.500%, due 08/15/99 2,000,000 2,042,731
Supervalu Stores, Inc., 7.250%,
due 07/15/99 2,000,000 2,014,276
Ultramar Corp., 8.250%, due 07/01/99 1,500,000 1,517,272
Union Carbide, 7.000%, due 08/01/99 5,000,000 5,031,435
Union Oil Of California, 7.240%,
due 04/01/99 3,000,000 3,009,855
-------------
37,581,619
-------------
Investment Companies -- 1.59%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund 8,124,241 8,124,241
-------------
Total Short-Term Investments
(Cost $81,512,130) 119,096,007
-------------
Total Investments
(Cost $579,665,834) -- 120.89% (a) 617,664,562
-------------
Liabilities, less cash and other
assets -- (20.89)% (106,728,507)
-------------
Net Assets -- 100% $ 510,936,055
=============
See accompanying notes to Schedule of Investments.
16
<PAGE>
Global Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $579,665,834; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $ 61,012,536
Gross unrealized depreciation (23,013,808)
------------
Net unrealized appreciation $ 37,998,728
============
(b) Non-income producing security.
FRN: Floating Rate Note
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1998, the value of these securities amounted to $6,217,285 or 1.22% of net
assets.
Resettable Perpetual Step-up Notes: 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
December 31, 1998:
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
----------- -------- ------- -----------
Forward Foreign Currency
Buy Contracts
Australian Dollar 02/05/99 46,200,000 $ 28,347,732 $ (310,442)
British Pound 02/05/99 7,100,000 11,799,508 (128,742)
Canadian Dollar 02/05/99 38,300,000 24,937,331 (413,476)
Danish Kroner 02/05/99 22,200,000 3,491,472 (25,553)
German Mark 02/05/99 58,100,000 34,943,795 1,498,421
Japanese Yen 02/05/99 1,560,000,000 13,895,569 2,198,529
Netherlands Guilder 02/05/99 13,600,000 7,259,528 (62,360)
Swedish Krona 02/05/99 135,000,000 16,680,670 (832,465)
Swiss Franc 02/05/99 5,000,000 3,653,715 223,654
Forward Foreign Currency
Sale Contracts
Australian Dollar 02/05/99 7,817,000 4,796,258 (392,309)
British Pound 02/05/99 23,000,000 38,223,759 (792,229)
Canadian Dollar 02/05/99 9,200,000 5,990,168 162,032
Danish Kroner 02/05/99 70,500,000 11,087,782 (568,534)
French Franc 02/05/99 34,000,000 6,097,156 (310,907)
German Mark 02/05/99 67,800,000 40,777,785 (732,368)
Japanese Yen 02/05/99 1,560,000,000 13,895,569 (672,989)
Netherlands Guilder 02/05/99 13,600,000 7,259,528 (375,544)
Spanish Peseta 02/05/99 600,000,000 4,241,885 46,586
Swedish Krona 02/05/99 21,000,000 2,594,771 21,237
Swiss Franc 02/05/99 5,000,000 3,653,715 1,255
-----------
Total $(1,466,204)
===========
17
<PAGE>
Global Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
FUTURES CONTRACTS
The Global Fund had the following open futures contracts as of December 31,
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, 312 contracts March 1999 $ 35,289,052 $35,363,250 $ 74,198
10 year U.S. Treasury Note, 60 contracts March 1999 7,117,920 7,149,375 31,455
30 year U.S. Treasury Bonds, 41 contracts March 1999 5,251,256 5,239,031 (12,225)
Index Futures Sales Contracts
Standard & Poor's 500, 163 contracts March 1999 47,615,392 50,754,125 (3,138,733)
-----------
Total $(3,045,305)
===========
</TABLE>
The market value of investments pledged to cover margin requirements for the
open futures positions at December 31, 1998 was $2,981,367.
See accompanying notes to financial statements.
18
<PAGE>
Global Fund -- Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value:
Unaffilliated issuers (Cost $502,549,359) $ 544,839,699
Affilliated issuers (Cost $77,116,475) 72,824,863
Cash 589,467
Foreign currency, at value (Cost $888,209) 848,944
Receivables:
Investment securities sold 4,437,224
Dividends 564,221
Interest 3,684,828
Fund shares sold 51,518
Other assets 49,823
-------------
TOTAL ASSETS 627,890,587
-------------
LIABILITIES:
Payables:
Securities loaned 111,993,032
Investment securities purchased 2,847,196
Investment advisory fees 344,091
Variation margin 150,423
Accrued expenses 153,586
Net unrealized depreciation on forward foreign currency contracts 1,466,204
TOTAL LIABILITIES 116,954,532
-------------
NET ASSETS $ 510,936,055
=============
NET ASSETS CONSIST OF:
Paid in capital $ 471,475,723
Accumulated distribution in excess of net investment income (8,716,455)
Accumulated net realized gain 14,687,962
Net unrealized appreciation 33,488,825
-------------
NET ASSETS $ 510,936,055
=============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price
per share (Based on net assets of $482,171,091 and 40,853,135
shares issued and outstanding) $ 11.80
=============
Brinson Class N:
Net asset value, offering price and redemption price
per share (Based on net assets of $1,521,291 and 129,168
shares issued and outstanding) $ 11.78
=============
UBS Investment Funds Class:
Net asset value, offering price and redemption price
per share (Based on net assets of $27,243,673 and 2,318,602
shares issued and outstanding) $ 11.75
=============
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
Global Fund -- Financial Statements
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
INVESTMENT INCOME:
Interest (net of $2,374 for foreign taxes withheld; including
securities lending income of $173,798) $ 7,276,219
Dividends (net of $71,815 for foreign taxes withheld) 2,114,913
------------
TOTAL INCOME 9,391,132
------------
EXPENSES:
Advisory 2,387,061
Administration 208,262
Distribution 93,124
Custodian 67,136
Professional 63,400
Other 116,031
------------
TOTAL EXPENSES 2,935,014
------------
NET INVESTMENT INCOME 6,456,118
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments 32,604,265
Futures contracts 641,645
Foreign currency transactions (4,173,116)
------------
Net realized gain 29,072,794
------------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency (29,165,044)
Futures contracts (2,097,996)
Forward contracts 2,070,460
Translation of other assets and liabilities denominated in
foreign currency 26,013
------------
Change in net unrealized appreciation or depreciation (29,166,567)
------------
Net realized and unrealized loss (93,773)
------------
Net increase in net assets resulting from operations $ 6,362,345
============
See accompanying notes to financial statements.
20
<PAGE>
Global Fund -- Financial Statements
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Interest received $ 11,059,378
Expenses paid (3,093,522)
Purchases of long-term portfolio investments (258,143,687)
Proceeds from sales of long-term portfolio investments 437,460,077
Net purchases in excess of proceeds from sales of
short-term portfolio investments 36,387,615
Net cash from foreign currency and futures transactions (2,938,739)
-------------
Net cash provided by operating activities 220,731,122
-------------
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Net capital shares transactions (147,376,349)
Net cash provided by securities loaned 7,046,988
Net cash used for commercial paper (32,491,443)
Cash dividends paid to shareholders (47,336,204)
-------------
Net cash used for financing activities (220,157,008)
-------------
Net increase in cash 574,114
Cash at beginning of period 15,353
-------------
Cash at end of period $ 589,467
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 6,362,345
Decrease in investments 212,943,573
Net realized gain on investment transactions 32,604,265
Net change in unrealized appreciation on investments (29,166,567)
Net realized loss on foreign currency transactions (4,173,116)
Net realized gain on futures contracts 641,645
Decrease in interest receivable (1,668,246)
Accretion of discount (711,301)
Amortization of premium 888,608
Decrease in prepaid assets 5,296
Decrease in investment advisory fee payable 121,351
Decrease in accrued expenses and other liabilities 2,883,269
-------------
Total adjustments 214,368,777
-------------
Net cash provided by operating activities $ 220,731,122
=============
See accompanying notes to financial statements.
21
<PAGE>
Global Fund -- Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,456,118 $ 17,956,852
Net realized gain 29,072,794 39,774,075
Change in net unrealized appreciation or depreciation (29,166,567) (6,545,821)
------------- -------------
Net increase in net assets resulting from operations 6,362,345 51,185,106
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (6,456,118) (28,265,915)
Distributions in excess of net investment income (7,870,965) (5,070,122)
Distributions from net realized gain (33,009,121) (35,465,456)
------------- -------------
Total distributions to shareholders* (47,336,204) (68,801,493)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 167,229,603 256,422,880
Shares issued on reinvestment of distributions 44,653,081 64,950,197
Shares redeemed (359,315,493) (217,384,769)
------------- -------------
Net increase (decrease) in net assets resulting from
capital share transactions (147,432,809) 103,988,308
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (188,406,668) 86,371,921
------------- -------------
NET ASSETS:
Beginning of period 699,342,723 612,970,802
End of period (including accumulated distribution in
excess of net investment income of $8,716,455 and
$845,490, respectively) $ 510,936,055 $ 699,342,723
============= =============
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net investment income
Brinson Class I (13,661,783) (32,129,657)
Brinson Class N (40,903) (9,572)
UBS Investment Funds Class (624,397) (1,196,808)
Distributions from net realized gain
Brinson Class I (31,201,392) (33,973,096)
Brinson Class N (97,443) (53)
UBS Investment Funds Class (1,710,286) (1,492,307)
------------- -------------
Total distributions to shareholders $ (47,336,204) $ (68,801,493)
============= =============
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
Global Fund -- Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30,
December 31, 1998 -------------------------------------------------------
Brinson Class I (Unaudited) 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.77 $ 13.13 $ 12.22 $ 11.35 $ 10.43 $ 10.87
------- -------- -------- -------- -------- -------
Income from investment operations:
Net investment income 0.18 0.37 0.38 0.44 0.43 0.33
Net realized and unrealized gain (loss) 0.05 0.62 1.79 1.37 0.86 (0.23)
------- -------- -------- -------- -------- -------
Total income from investment
operations 0.23 0.99 2.17 1.81 1.29 0.10
------- -------- -------- -------- -------- -------
Less distributions:
Distributions from and in excess of net
investment income (0.37) (0.65) (0.61) (0.62) (0.27) (0.27)
Distributions from and in excess of net
realized gains (0.83) (0.70) (0.65) (0.32) (0.10) (0.27)
------- -------- -------- -------- -------- -------
Total distributions (1.20) (1.35) (1.26) (0.94) (0.37) (0.54)
------- -------- -------- -------- -------- -------
Net asset value, end of period $ 11.80 $ 12.77 $ 13.13 $ 12.22 $ 11.35 $ 10.43
======= ======== ======== ======== ======== =======
Total return (non-annualized) 1.99% 8.28% 18.79% 16.38% 12.57% 0.77%
Ratios/Supplemental data:
Net assets, end of period (in 000s) $482,171 $667,745 $586,667 $457,933 $365,678 $278,859
Ratio of expenses to average net assets:
Before expense reimbursement 0.95%* 0.94% 0.99% 1.04% 1.09% 1.14%
After expense reimbursement N/A N/A N/A N/A N/A 1.10%
Ratio of net investment income to average net assets:
Before expense reimbursement 2.20%* 2.70% 3.03% 3.69% 4.27% 3.21%
After expense reimbursement N/A N/A N/A N/A N/A 3.25%
Portfolio turnover rate 41% 88% 150% 142% 238% 231%
</TABLE>
* Annualized
N/A = Not applicable
See accompanying notes to financial statements.
23
<PAGE>
Global Fund -- Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Year Ended
Brinson Class N (Unaudited) June 30, 1998*
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 12.75 $ 13.13
------- -------
Income from investment operations:
Net investment income 0.14 0.63
Net realized and unrealized gain 0.08 0.32
------- -------
Total income from investment operations 0.22 0.95
------- -------
Less distributions:
Distributions from and in excess of net investment income (0.36) (0.63)
Distributions from net realized gain (0.83) (0.70)
------- -------
Total distributions (1.19) (1.33)
------- -------
Net asset value, end of period $ 11.78 $ 12.75
======= =======
Total return (non-annualized) 1.88% 7.90%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 1,521 $ 1,163
Ratio of expenses to average net assets 1.20%** 1.19%
Ratio of net investment income to average net assets 1.95%** 2.45%
Portfolio turnover rate 41% 88%
</TABLE>
* Commencement of Brinson Class N was June 30, 1997.
** Annualized
See accompanying notes to financial statements.
24
<PAGE>
Global Fund -- Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended July 31, 1995*
December 31, 1998 Year Ended Year Ended Through
UBS Investment Funds Class (Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, begining of period $ 12.71 $ 13.05 $ 12.18 $ 11.60
------- ------- ------- -------
Income from investment operations:
Net investment income 0.13 0.30 0.34 0.39
Net realized and unrealized gain 0.05 0.61 1.75 1.10
------- ------- ------- -------
Total income from investment operations 0.18 0.91 2.09 1.49
------- ------- ------- -------
Less distributions:
Distributions from and in excess of net
investment income (0.31) (0.55) (0.57) (0.59)
------- ------- ------- -------
Distributions from net realized gain (0.83) (0.70) (0.65) (0.32)
------- ------- ------- -------
Total distributions (1.14) (1.25) (1.22) (0.91)
------- ------- ------- -------
Net asset value, end of period $ 11.75 $ 12.71 $ 13.05 $ 12.18
======= ======= ======= =======
Total return (non-annualized) 1.59% 7.60% 18.13% 12.24%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $27,244 $30,436 $26,303 $14,030
Ratio of expenses to average net assets 1.60%** 1.59% 1.64% 1.69%**
Ratio of net investment income to average net assets 1.55%** 2.05% 2.38% 3.04%**
Portfolio turnover rate 41% 88% 150% 142%
</TABLE>
* Commencement of UBS Investment Funds Class
** Annualized
See accompanying notes to financial statements.
25
<PAGE>
Global Fund -- Financial Highlights
[BRINSON LOGO APPEARS HERE]
The Global Equity Fund is actively managed, providing a fully
integrated approach to the developed equity markets across the world. We employ
fundamental valuation models to determine the relative attractiveness of
aggregate markets, as well as of individual stocks. Our portfolio construction
process simultaneously sets country, currency, industry/factor and stock
selection strategies. This interactive investment process has evolved within the
context of an environment marked by growing globalization and increasingly
integrated economies, industries and capital markets.
The Brinson Global Equity Fund Class I has provided an annualized return of
11.75% since its performance inception on January 31, 1994, compared to the
14.85% return for the benchmark, the MSCI World Equity (Free) Index. This
performance was achieved with a volatility of 10.56%, well below the 12.83%
volatility of the benchmark. For the full year, the Fund gained 14.03%, lagging
the index's return of 24.62%. With the exception of the Pacific Rim and several
small markets, most developed equity markets enjoyed solid market performance.
The EMU and North America both gained over 29%, in local terms.
The U.S. market has been remarkably resilient, continuing an unprecedented bull
market underpinned by various one-time events. This market is extremely
overvalued; the U.S. is our largest underweight. Monetary Union, privatization,
restructuring, merger activity and increased capital flows have boosted European
equity markets. Despite their excellent performance, European corporations are
still early into their restructuring, with the potential for improving
profitability ahead. Europe is our largest overweight.
Most Pacific markets continued to suffer the consequences of last year's
currency crisis. This situation has been aggravated in Japan by flawed
macroeconomic policies, a largely insolvent financial sector and an unprofitable
domestic corporate sector. We remain very underweight Japan, Hong Kong and
Singapore. In comparison, Australia and New Zealand have been unduly impacted by
their geographic proximity to Asia and are attractively priced. We maintain an
overweight in these markets.
Market allocation made a small positive contribution. The overweight of Belgium
and Finland and underweight of Japan were successful strategies, but the
overweight to New Zealand cost returns. Currency management decreased returns
somewhat due to underweights of the yen and overweights of the New Zealand
dollar and Australian dollar. Stock selection had an important impact on the
year's performance. Japan stock selection was positive, but both the U.S. and
the U.K. were negative. Japan was helped by the significant underweight to
banks, overweight to blue chips and stock specific returns. U.S. stock selection
was responsible for most of the underperformance, disadvantaged by the
underweight to size and the overweight to basic industries.
26
<PAGE>
Global Equity Fund
[BRINSON LOGO APPEARS HERE]
Total Return
6 months 1 year 3 years 1/31/94*
ended ended ended to
12/31/98 12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------------
Brinson Global Equity Fund Class I 2.86% 14.03% 13.96% 11.75%
- ---------------------------------------------------------------------------
MSCI World Equity (Free) Index 6.72 24.62 18.06 14.85
- ---------------------------------------------------------------------------
*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 December 31, 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 Ivs. MSCI World Equity (Free) Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
MSCI World Brinson Global
Equity (Free) Equity Fund
Index Class I
------------- --------------
31/01/94 1000000 1000000
28/02/94 986865 978000
31/03/94 944349 935000
31/05/94 974078 957000
30/06/94 976963 964000
31/07/94 974101 953025
31/08/94 992749 967085
30/09/94 1022751 1008259
31/10/94 995748 981144
30/11/94 1024396 983153
31/12/94 980245 957042
31/01/95 975025 942320
28/02/95 989499 957535
31/03/95 1037236 965650
30/04/95 1073521 991008
31/05/95 1083208 1004194
30/06/95 1082851 1010802
31/07/95 1137066 1057638
31/08/95 1111688 1075010
30/09/95 1144526 1094426
31/10/95 1126746 1092382
30/11/95 1166018 1131213
31/12/95 1200236 1166324
31/01/96 1222676 1201270
29/02/96 1230112 1206730
31/03/96 1250534 1227479
30/04/96 1279914 1261333
31/05/96 1280939 1264610
30/06/96 1287765 1270202
31/07/96 1242255 1229582
31/08/96 1256945 1251539
30/09/96 1306231 1293257
31/10/96 1315223 1297648
30/11/96 1389368 1363519
31/12/96 1367286 1367688
31/01/97 1384047 1379696
28/02/97 1399822 1398908
31/03/97 1371807 1392904
30/04/97 1416808 1401310
31/05/97 1504478 1484164
30/06/97 1579321 1540253
31/07/97 1652216 1590951
31/08/97 1540396 1517318
30/09/97 1624144 1582501
31/10/97 1538889 1496797
30/11/97 1565803 1495590
31/12/97 1584937 1514304
31/01/98 1629401 1539631
28/02/98 1739612 1634275
31/03/98 1812828 1700926
30/04/98 1830553 1698260
31/05/98 1808342 1692928
30/06/98 1850637 1678772
31/07/98 1847845 1670739
31/08/98 1601540 1487333
30/09/98 1630041 1511430
31/10/98 1777635 1611835
30/11/98 1883507 1673417
31/12/98 1975069 1726828
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
27
<PAGE>
Global Equity Fund
Total Return
[BRINSON LOGO APPEARS HERE]
6 months 1 year 6/30/97*
ended ended to
12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------
Brinson Global Equity Fund Class N 2.68% 13.63% 7.51%
- ---------------------------------------------------------------------
MSCI World Equity (Free) Index 6.72 24.62 16.08
- ---------------------------------------------------------------------
*Inception date of the Brinson Global Equity Fund Class N.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
Equity Fund Class N and the MSCI World Equity (Free) Index if you had invested
$1,000,000 on June 30, 1997, and had reinvested all your income dividends and
capital gain distributions through December 31, 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
[CHART APPEARS HERE]
MSCI World Brinson Global
Equity (Free) Equity Fund
Index Class N
-------------- --------------
6/30/97 $1,000,000 $1,000,000
7/31/97 $1,046,155 $1,032,915
8/31/97 $975,353 $984,326
9/30/97 $1,028,381 $1,026,646
10/31/97 $974,399 $970,219
11/30/97 $991,441 $969,436
12/31/97 $1,003,556 $981,339
1/31/98 $1,031,710 $996,889
2/28/98 $1,101,493 $1,058,222
3/31/98 $1,147,852 $1,101,415
4/30/98 $1,159,076 $1,098,823
5/31/98 $1,145,012 $1,096,232
6/30/98 $1,171,793 $1,085,985
7/31/98 $1,170,024 $1,080,785
8/31/98 $1,014,069 $962,046
9/30/98 $1,032,115 $976,780
10/31/98 $1,125,569 $1,040,917
11/30/98 $1,192,605 $1,080,785
12/31/98 $1,250,581 $1,115,067
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
[BRINSON LOGO APPEARS HERE]
Market Allocation
As of December 31, 1998 (Unaudited)
Current
Benchmark Strategy
- --------------------------------------------
U.S. 51.0% 41.9%
Australia 1.2 3.2
Austria 0.2 0.0
Belgium 0.9 2.0
Canada 1.8 1.2
Denmark 0.4 0.4
Finland 0.7 1.9
France 4.5 6.5
Germany 5.0 7.3
Hong Kong 1.0 0.0
Ireland 0.2 0.0
Italy 2.5 2.7
Japan 9.9 2.6
Netherlands 3.1 4.7
New Zealand 0.1 2.3
Norway 0.2 0.2
Portugual 0.3 0.0
Singapore 0.3 0.6
Spain 1.6 1.2
Sweden 1.2 2.6
Switzerland 3.8 4.6
United Kingdom 10.1 14.1
Cash Reserves 0.0 0.0
- --------------------------------------------
100.0% 100.0%
Top Ten U.S. Equity Holdings
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- ------------------------------------------------
1. Xerox Corp. 2.54%
2. FDX, Corp. 1.78
3. Burlington Northern Santa Fe Corp. 1.76
4. Lockheed Martin Corp. 1.55
5. Philip Morris Companies, Inc. 1.46
6. Baxter International, Inc. 1.10
7. Kimberly Clark Corp. 1.07
8. Entergy Corp 1.01
9. CIGNA Corp. 0.98
10. Aon Corp. 0.98
- -----------------------------------------------
Currency Allocation
As of December 31, 1998 (Unaudited)
Current
Benchmark Strategy
- ------------------------------------------------
U.S. 51.0% 48.0%
Australia 1.2 5.0
Canada 1.8 5.8
Denmark 0.4 0.4
EMU 19.0 19.0
Hong Kong 1.0 0.0
Japan 9.9 3.9
New Zealand 0.1 2.3
Norway 0.2 0.2
Singapore 0.3 0.3
Sweden 1.2 5.2
Switzerland 3.8 3.8
United Kingdom 10.1 6.1
- ------------------------------------------------
100.0% 100.0%
Top Ten Global (ex-U.S.) Equity Holdings
As of December 31, 1998 (Unaudited)
Percent of
Net Assets
- ------------------------------------------------
1. Novartis AG (Reg.) 1.50%
2. Telecom Corp. of New Zealand Ltd. 1.32
3. Royal Dutch Petroleum Co. 1.19
4. Nestle S.A. (Reg.) 1.13
5. Bayer AG 1.13
6. Nokia Oyj, A Shares 1.11
7. Lloyds TSB Group PLC 1.10
8. Allianz AG 1.06
9. Glaxo Wellcome PLC 0.98
10. ING Groep NV 0.97
- ------------------------------------------------
29
<PAGE>
Global Equity Fund
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
U.S.EQUITIES
Energy 1.47%
Capital Investment
Capital Goods 4.34
Technology 5.68
-------
10.02
Basic Industries
Chemicals 2.04
Housing/Paper 3.73
Metals 0.17
-------
5.94
-------
Consumer
Non-Durables 2.84
Retail/Apparel 1.88
Autos/Durables 1.33
Health: Drugs 1.74
Health: Non-Drugs 2.18
-------
9.97
Financial
Banks 3.79
Non-Banks 2.92
-------
6.71
Utilities
Electric 1.41
Telephone 0.35
-------
1.76
Transportation 4.25
Services/Misc 1.88
-------
Total U.S. Equities 42.00
-------
Global (ex-U.S.)
EQUITIES
Aerospace & Military 0.31
Airlines 0.20
Appliances & Household 1.40
Autos/Durables 0.47
Banking 6.38
Beverages and Tobacco 1.98
Broadcasting & Publishing 1.83
Building Materials 0.84
Business & Public Service 1.60
Chemicals 1.46
Construction 0.07%
Data Processing 0.12
Electric Components 0.19
Electronics 3.53
Energy 4.59
Financial Services 1.78
Food & House Products 2.10
Forest Products 0.76
Health: Drugs 2.05
Health: Non-Drugs 3.41
Housing/Paper 0.15
Industrial Components 0.45
Insurance 5.60
Investment Companies 0.28
Leisure & Tourism 0.14
Machinery & Engineering 0.39
Merchandising 2.21
Metals--Steel 0.58
Miscellaneous Materials 0.41
Multi-Industry 1.94
Non-Ferrous Metals 0.63
Real Estate 0.15
Recreation 0.10
Retail & Apparel 0.26
Telecommunications 6.53
Textiles & Apparel 0.07
Transportation 0.08
Utilities 2.17
-------
Total Global (ex-U.S.)
Equities 57.21
-------
SHORT-TERM INVESTMENTS 1.21
-------
TOTAL INVESTMENTS 100.42
-------
LIABILITIES, LESS CASH
AND OTHER ASSETS (0.42)
-------
NET ASSETS 100.00%
=======
30
<PAGE>
Global Equity Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
------------ ---------------
Equities -- 99.21%
U.S. Equities -- 42.00%
Advanced Micro Devices, Inc. (b) 14,700 $ 425,381
Aetna, Inc. 9,000 707,625
Allergan, Inc. 3,700 239,575
Alza Corp. (b) 7,700 402,325
American Standard Companies, Inc. (b) 7,900 283,906
Aon Corp. 13,050 722,644
Automatic Data Processing, Inc. 6,000 481,125
BankBoston Corp. 4,200 163,537
Baxter International, Inc. 12,600 810,337
Beckman Coulter Inc. 3,300 179,025
Bestfoods 5,100 271,575
Biogen, Inc. (b) 1,700 141,100
Birmingham Steel Corp. 3,100 12,981
Burlington Northern Santa Fe Corp. 38,600 1,302,750
Champion Enterprises, Inc. (b) 1,700 46,538
Champion International Corp. 3,800 153,900
Chase Manhattan Corp. 6,700 456,019
CIGNA Corp. 9,400 726,737
Circuit City Stores-Circuit City Group 10,500 524,344
CMS Energy Corp. 10,000 484,375
Comerica, Inc. 3,200 218,200
CommScope, Inc. (b) 5,433 91,342
Comverse Technology, Inc. (b) 3,525 250,275
Consolidated Stores Corp. (b) 10,200 205,912
Corning, Inc. 15,100 679,500
Covance, Inc. (b) 3,900 113,588
Crown Cork & Seal Co., Inc. 3,700 114,006
Cummins Engine Co., Inc. 600 21,300
Dial Corp. 4,000 115,500
Eastman Chemical Co. 4,300 192,425
Electronic Data Systems Corp. 13,800 693,450
EMC Corp. (b) 4,600 391,000
Entergy Corp. 23,900 743,887
FDX Corp. (b) 14,800 1,317,200
First American Corp. of Tennessee 2,000 88,750
First Data Corp. 18,704 592,683
First Security Corp. 3,850 89,994
Fleet Financial Group, Inc. 9,700 433,469
Fleetwood Enterprises, Inc. 1,500 52,125
Food Lion Inc., Class A 17,600 187,000
Fort James Corp. 13,300 532,000
General Instrument Corp. (b) 17,600 597,300
General Semiconductor, Inc. (b) 4,125 33,773
Genzyme Corp. (b) 3,100 154,225
Genzyme-Molecular Oncology (b) 399 1,297
Geon Co. 2,100 48,300
Goodyear Tire & Rubber Co. 10,100 509,419
Great Lakes Chemical Corp. 2,500 100,000
GreenPoint Financial Corp. 4,400 154,550
Harnischfeger Industries, Inc. 5,400 55,013
HCR Manor Care, Inc. (b) 4,050 118,969
Hibernia Corp., Class A 4,300 74,713
Household International Inc. 7,600 301,150
IMC Global Inc. 12,000 256,500
Johnson Controls Inc. 3,600 212,400
Kimberly Clark Corp. 14,500 790,250
Lafarge Corp. 3,700 149,850
Shares Value
------------ ---------------
Lear Corp. (b) 9,200 $ 354,200
Lockheed Martin Corp. 13,551 1,148,447
Lyondell Petrochemical Co. 11,100 199,800
Martin Marietta Materials, Inc. 2,235 138,989
Masco Corp. 18,000 517,500
Nabisco Holdings Corp., Class A 7,900 327,850
National Service Industries, Inc. 2,300 87,400
Nextel Communications, Inc., Class A (b) 10,800 255,150
Norfolk Southern Corp. 16,300 516,506
Peco Energy Co. 13,300 553,612
Pentair, Inc. 4,100 163,231
Philip Morris Companies, Inc. 20,200 1,080,700
Praxair, Inc. 7,100 250,275
Raytheon Co., Class B 13,000 692,250
Regions Financial Corp. 2,000 80,625
Schering Plough Corp. 7,200 397,800
Sears, Roebuck and Co. 11,100 471,750
Southdown, Inc. 4,476 264,923
St. Jude Medical, Inc. (b) 7,300 202,119
Timken Co. 1,400 26,425
TRW, Inc. 2,100 117,994
Tyson Foods, Inc., Class A 14,400 306,000
Ultramar Diamond Shamrock Corp. 7,952 192,836
Unocal Corp. 5,300 154,694
US Bancorp 9,863 350,136
USG Corp. 1,800 91,688
Vencor, Inc. (b) 8,100 36,450
Ventas, Inc. 8,200 99,938
Viad Corp. 7,600 230,850
Wells Fargo and Co. 9,700 387,394
Witco Corp. 2,200 35,063
Xerox Corp. 15,900 1,876,200
York International Corp. 4,800 195,900
------------
Total U.S. Equities 31,021,809
------------
Global (ex-U.S.) Equities -- 57.21%
Australia -- 3.19%
Amcor Ltd. 10,700 45,766
Brambles Industries Ltd. 6,900 168,240
Broken Hill Proprietary Co., Ltd. 27,950 206,060
CSR Ltd. 37,400 91,535
David Jones Ltd. 48,400 53,439
Lend Lease Corp., Ltd. 8,294 111,926
National Australia Bank Ltd. 21,075 318,014
News Corp. Ltd. 30,040 198,638
News Corp. Ltd., Preferred 13,300 81,011
Orica Ltd. 8,500 44,266
Pacific Dunlop Ltd. 32,600 52,791
Qantas Airways Ltd. 38,977 79,615
QBE Insurance Group Ltd. 20,042 82,983
Rio Tinto Ltd. 6,863 81,480
Santos Ltd. 26,000 69,854
Telstra Corp. Ltd. (b) 70,100 328,084
Westpac Banking Corp., Ltd. 36,545 244,790
WMC Ltd. 17,500 52,814
Woolworth's Ltd. 12,100 41,237
------------
2,352,543
------------
31
<PAGE>
Global Equity Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
------------ ---------------
Belgium -- 1.82%
Electrabel S.A. 1,060 $ 465,917
Fortis AG 88 5
Fortis AG Strip (b) 1,798 651,605
KBC Bancassurance Holding Strip (b) 110 6
Kredietbank NV 2,870 227,235
------------
1,344,768
------------
Canada -- 1.04%
Agrium, Inc. 3,100 27,246
Alcan Aluminum Ltd. 1,900 51,335
Bank of Montreal 1,200 48,203
Canadian National Railway Co. 1,200 62,305
Canadian Pacific Ltd. 3,516 65,696
Extendicare, Inc., Class A (b) 2,700 15,293
Hudson's Bay Co. 3,200 40,312
Imasco, Ltd. 1,900 40,449
Imperial Oil Ltd. 3,800 60,736
Magna International, Inc., Class A 500 31,055
Newbridge Networks Corp. (b) 1,200 36,406
NOVA Chemicals Corp. 2,197 28,607
Potash Corporation of Saskatchewan, Inc. 500 32,064
Royal Bank of Canada 1,400 69,772
Seagram Co., Ltd. 700 26,546
Shaw Communications, Inc., Class B 2,600 62,799
TransCanada Pipelines Ltd. 3,588 52,442
Westcoast Energy, Inc. 1,000 19,857
------------
771,123
------------
Denmark -- 0.29%
Tele Danmark A/S 1,600 215,948
Finland -- 1.70%
Merita Ltd., Class A 30,200 192,053
Nokia Oyj-A Shares 6,700 820,397
UPM-Kymmene Corp. 8,700 243,986
------------
1,256,436
------------
France -- 6.40% Accor S.A.
Air Liquide 1,638 300,553
Alcatel Alsthom 2,386 292,153
Axa-Certificate de Valeur Garante (b) 2,181 316,245
Banque Nationale de Paris 2,922 240,719
Cie de Saint Gobain 1,136 160,450
Dexia France 1,127 173,704
Elf Aquitaine S.A. 1,602 185,259
France Telecom S.A. 3,220 255,931
Groupe Danone 640 183,309
Lagardere S.C.A. 7,120 302,710
Michelin, Class B 3,031 121,268
Paribas 1,583 137,636
Pinault-Printemps-Redoute S.A. 790 151,036
Rhone-Poulenc, Class A 4,550 234,252
SEITA 4,090 256,257
Societe Generale 1,223 198,134
Shares Value
------------ ---------------
Suez Lyonnaise des Eaux S.A. 1,687 $ 346,689
Thomson CSF 5,295 227,489
Total S.A., Class B 2,249 227,871
Vivendi 1,608 417,386
------------
4,729,051
------------
Germany -- 7.42%
Allianz AG 2,098 780,956
Bayer AG 19,840 833,218
DaimlerChrysler AG (b) 5,925 588,729
Deutsche Bank AG 3,950 233,073
Deutsche Telekom AG 11,260 370,128
Dresdner Bank AG 5,200 217,915
Hoechst AG 5,900 244,062
Mannesmann AG (b) 4,350 503,400
SAP AG 450 194,525
Siemens AG 9,220 606,142
Veba AG 11,010 652,430
Volkswagen AG 3,190 258,172
------------
5,482,750
------------
Italy -- 2.83%
Assicurazioni Generali 10,700 447,742
Danieli & Co. Savings (Risp) 7,400 29,529
ENI Spa 71,000 465,025
ENI Spa ADR 1,700 115,175
La Rinascente Spa 26,875 276,990
Montedison Spa 164,560 219,055
San Paolo-imi, Spa 13,912 246,349
Telecom Italia Mobile Spa 39,000 288,549
------------
2,088,414
------------
Japan -- 2.23%
Amada Co., Ltd. 4,000 19,397
Bridgestone Corp. 1,000 22,739
Canon, Inc. 3,000 64,229
Citizen Watch Co., Ltd. 4,000 24,114
Dai Nippon Printing Co., Ltd. 2,000 31,950
Daiichi Pharmaceutical Co., Ltd. 3,000 50,771
Daikin Industries Ltd. 4,000 39,716
Daiwa House Industry Co., Ltd. 2,000 21,330
Fanuc 1,400 48,032
Fuji Photo Film 1,000 37,234
Fujitsu 2,000 26,684
Honda Motor Co. 1,000 32,890
Hoya Corp. 1,000 48,759
Ito Yokado Co., Ltd. 1,000 70,036
Kaneka Corp. 3,000 22,527
Kao Corp. 1,000 22,606
Kirin Brewery Co., Ltd. 4,000 51,064
Kokuyo 1,000 13,484
Kuraray Co., Ltd. 3,000 33,165
Marui Co., Ltd. 2,000 38,564
Matsushita Electric Industrial Co. 3,000 53,165
NGK Insulators 5,000 64,583
Nintendo Corp., Ltd. 500 48,537
Nippon Denso Co., Ltd. 3,000 55,585
32
<PAGE>
Global Equity Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
------------ ---------------
Nippon Meat Packers, Inc. 1,000 $ 16,135
Omron Corp. 1,000 13,723
Sankyo Co., Ltd. 2,000 43,794
Secom Co., Ltd. 1,000 82,979
Sekisui House Ltd. 3,000 31,782
Shin-Etsu Chemical Co., Ltd. 1,000 24,114
Sony Corp. 1,000 72,961
Sumitomo Chemical Co. 5,000 19,504
Sumitomo Electric Industries 3,000 33,803
Takeda Chemical Industries 2,000 77,128
TDK Corp. 1,000 91,578
Tokio Marine & Fire Insurance Co. 2,000 23,936
Toray Industries, Inc. 11,000 57,535
Toshiba Corp. 10,000 59,663
Toyota Motor Corp. 2,000 54,433
------------
1,644,229
------------
Netherlands -- 4.72%
ABN AMRO Holdings NV 10,149 213,612
Elsevier NV 19,600 274,674
Heineken NV 6,693 402,999
ING Groep NV 11,702 713,955
KPN NV 13,115 656,903
Royal Dutch Petroleum Co. 17,675 880,595
Unilever NV 4,000 342,090
------------
3,484,828
------------
New Zealand -- 2.24%
Auckland International Airport Ltd. (b) 49,200 68,880
Brierley Investments Ltd. 282,400 64,153
Carter Holt Harvey Ltd. 170,900 153,487
Fletcher Challenge Building 41,450 64,161
Fletcher Challenge Energy 58,450 111,165
Fletcher Challenge Paper 104,700 70,248
Lion Nathan Ltd. 57,300 146,212
Telecom Corp. of New Zealand Ltd. 224,500 978,480
------------
1,656,786
------------
Norway -- 0.23%
Norsk Hydro ASA 2,300 77,582
Norske Skogindustrier ASA 3,200 93,241
------------
170,823
------------
Singapore -- 0.71%
Singapore Press Holdings Ltd. 29,046 315,105
United Overseas Bank Ltd. (Frgn.) 32,000 205,576
------------
520,681
------------
Spain -- 1.21%
Banco Popular Espanol S.A. 3,280 247,686
Endesa S.A. 17,803 472,416
Telefonica S.A. 3,808 169,578
Telefonica S.A. Rights (expiring 1/30/99) (b) 76 68
------------
889,748
------------
Shares Value
------------ ---------------
Sweden -- 2.49%
Astra AB, A Shares 13,160 $ 268,694
Electrolux AB, B Shares 16,970 292,052
Investor AB 4,560 205,897
Nordbanken Holding AB 23,910 153,387
Skandia Forsakrings AB 21,170 323,852
Svenska Handelsbanken, A Shares 2,220 93,666
Swedish Match AB 58,550 213,085
Telefonaktiebolaget LM Ericsson, B Shares 12,140 289,055
------------
1,839,688
------------
Switzerland -- 4.74%
CS Holdings AG (Reg.) 230 36,003
Julius Baer Holding AG 42 139,592
Nestle S.A. (Reg.) 383 833,761
Novartis AG (Reg.) 565 1,110,666
Roche Holding AG (Gen.) 52 634,525
Swiss Reinsurance Co. (Reg.) 134 349,366
SwissCom AG (Reg.) (b) 948 396,869
------------
3,500,782
------------
United Kingdom -- 13.95%
Allied Zurich AG (b) 20,375 303,915
Barclays PLC 15,000 323,445
BOC Group PLC 18,000 257,408
Boots Company PLC 18,000 306,524
British American Tobacco PLC 13,375 117,610
British Petroleum Co. PLC 39,313 587,049
British Steel PLC 151,750 224,710
Cable & Wireless PLC 10,500 129,103
Charter PLC 33,422 183,506
Coats Viyella PLC 120,250 54,020
Diageo PLC 21,630 246,159
Fairview Holdings PLC (b) 13,250 19,620
FKI PLC 111,405 248,378
Garban PLC (b) 900 3,429
General Electric Co. PLC 44,820 404,553
Glaxo Wellcome PLC 21,120 726,688
Greenalls Group PLC 20,000 106,650
Hanson PLC 38,750 307,696
Hillsdown Holdings PLC 32,500 40,555
House of Fraser PLC 45,250 39,902
Lloyds TSB Group PLC 57,220 813,988
Marks & Spencer PLC 66,120 453,521
Mirror Group PLC 66,000 164,992
National Westminster Bank PLC 13,350 257,436
Nycomed Amersham PLC 26,000 179,093
Peninsular & Oriental Steam Navigation Co. 12,475 147,472
Prudential Corp. PLC 37,000 558,666
Reed International PLC 24,000 187,678
Rio Tinto Ltd. 24,020 279,353
RJB Mining PLC 40,500 52,560
Royal & Sun Alliance Insurance Group PLC 15,779 128,838
Sainsbury (J.) PLC 12,500 100,193
Scottish Hydro-Electric PLC 36,650 412,825
Sedgwick Group PLC 40,000 148,412
33
<PAGE>
Global Equity Fund - Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Shares Value
------------ ---------------
SmithKline Beecham PLC 31,850 $ 445,136
Smurfit (Jefferson) Group PLC 28,196 50,666
Tate & Lyle PLC 2,000 11,014
Terranova Foods PLC (b) 13,250 24,250
Tesco PLC 116,250 331,228
Thames Water PLC 14,458 276,637
Thames Water PLC, Class B (b) 12,500 15,702
United News & Media PLC 15,000 131,524
Vodafone Group PLC 9,825 159,546
Williams PLC 19,461 110,495
Yorkshire Water PLC 25,500 233,349
------------
10,305,494
------------
Total Global (ex-U.S.) Equities 42,254,092
------------
Total Equities (Cost $59,154,576) 73,275,901
------------
Face
Amount Value
------------ ---------------
Short-Term Investments -- 1.21%
U.S. Government Obligations -- 0.81%
U.S. Treasury Bill 4.320%, due 02/25/99 $ 600,000 $ 596,273
Shares
------------
Investment Companies -- 0.40%
Brinson Supplementary Trust U.S.
Cash Management Prime Fund 295,185 295,185
Total Short-Term Investments
(Cost $891,132) 891,458
------------
Total Investments
(Cost $60,045,708) -- 100.42% (a) 74,167,359
------------
Liabilities, less cash and other
assets -- (0.42%) (307,762)
------------
Net Assets -- 100% $ 73,859,597
============
See accompanying notes to schedule of investments.
34
<PAGE>
Global Equity Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $60,045,708; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $ 17,271,007
Gross unrealized depreciation (3,149,356)
------------
Net unrealized appreciation $ 14,121,651
============
(b) Non-income producing security
(c) Denominated in U.S. dollars
Forward Foreign Currency Contracts
The Global Equity Fund had the following open forward foreign currency contracts
as of December 31, 1998:
<TABLE>
<CAPTION>
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
---------- -------- ------- -----------
<S> <C> <C> <C> <C>
Forward Foreign Currency
Buy Contracts
Australian Dollar 6/04/99 3,200,000 $1,965,638 $(57,402)
Canadian Dollar 6/04/99 5,300,000 3,453,331 (33,786)
Japanese Yen 6/04/99 127,000,000 1,149,402 84,547
Spanish Peseta 6/04/99 79,000,000 561,943 6,134
Swedish Krona 6/04/99 20,900,000 2,596,051 (158)
Forward Foreign Currency
Sale Contracts
Australian Dollar 6/04/99 1,200,000 737,114 (434)
Belgian Franc 6/04/99 10,100,000 296,325 (3,486)
British Pounds 6/04/99 3,400,000 5,640,064 (32,705)
Finnish Markka 6/04/99 4,000,000 796,227 (5,852)
French Franc 6/04/99 8,300,000 1,497,562 (6,098)
German Mark 6/04/99 1,700,000 1,028,726 (4,259)
Netherlands Guilder 6/04/99 2,600,000 1,396,371 (10,368)
Spanish Peseta 6/04/99 79,000,000 591,943 (2,532)
Swedish Krona 6/04/99 4,900,000 608,643 5,415
Swiss Franc 6/04/99 600,000 443,289 (1,788)
----------
Total $(62,772)
==========
</TABLE>
See accompanying notes to financial statements.
35
<PAGE>
Global Equity Fund -- Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (UNAUDITED)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $59,750,523) $73,872,174
Affiliated issuers (Cost $295,185) 295,185
Foreign currency, at value (Cost $160,851) 155,949
Receivables:
Investment securities sold 49,555
Dividends 134,275
Interest 3,190
Other assets 45
------------
TOTAL ASSETS 74,510,373
------------
LIABILITIES:
Payables:
Investment securities purchased 377,088
Due to custodian bank 101,328
Investment advisory fees 43,446
Accrued expenses 66,142
Net unrealized depreciation on forward foreign currency
contracts 62,772
------------
TOTAL LIABILITIES 650,776
------------
NET ASSETS $73,859,597
============
NET ASSETS CONSIST OF:
Paid in capital $58,566,651
Accumulated undistributed net investment income 26,143
Accumulated net realized gain 1,212,206
Net unrealized appreciation 14,054,597
------------
NET ASSETS $73,859,597
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price
per share (Based on net assets of $24,604,008 and
1,955,626 shares issued and outstanding) $ 12.58
============
Brinson Class N:
Net asset value, offering price and redemption price
per share (Based on net assets of $205,845 and 16,400
shares issued and outstanding) $ 12.55
============
UBS Investment Funds Class:
Net asset value, offering price and redemption price
per share (Based on net assets of $49,049,744 and
3,901,394 shares issued and outstanding) $ 12.57
============
See accompanying notes to financial statements.
36
<PAGE>
Global Equity Fund -- Financial Statements
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of $21,094 for foreign taxes withheld) $ 557,653
Interest 60,004
-----------
TOTAL INCOME 617,657
-----------
EXPENSES:
Advisory 289,624
Distribution 190,850
Professional 25,275
Other 65,630
-----------
TOTAL EXPENSES 571,379
-----------
Expenses deferred by Advisor (18,480)
-----------
NET EXPENSES 552,899
-----------
NET INVESTMENT INCOME 64,758
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments 2,495,750
Futures contracts (472,356)
Foreign currency transactions 333,247
-----------
Net realized gain 2,356,641
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency (1,767,221)
Futures contracts 575,614
Forward contracts 21,023
Translation of other assets and liabilities denominated in
foreign currency (906)
-----------
Change in net unrealized appreciation or depreciation (1,171,490)
-----------
Net realized and unrealized gain 1,185,151
-----------
Net increase in net assets resulting from operations $ 1,249,909
===========
See accompanying notes to financial statements.
37
<PAGE>
Global Equity Fund -- Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 64,758 $ 677,369
Net realized gain 2,356,641 6,903,703
Change in net unrealized appreciation or depreciation (1,171,490) (1,282,988)
------------ -------------
Net increase in net assets resulting from operations 1,249,909 6,298,084
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I (227,414) (242,673)
Brinson Class N (1,853) (11)
UBS Investment Funds Class (186,532) (397,017)
Distributions from net realized gain:
Brinson Class I (352,100) (1,266,777)
Brinson Class N (2,950) (82)
UBS Investment Funds Class (710,918) (5,307,194)
------------ -------------
Total distributions to shareholders (1,481,767) (7,213,754)
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 7,405,967 40,216,740
Shares issued on reinvestment of distributions 1,306,231 6,378,677
Shares redeemed (16,492,751) (73,542,587)
------------ -------------
Net decrease in net assets resulting from capital share
transactions (7,780,553) (26,947,170)
------------ -------------
TOTAL DECREASE IN NET ASSETS (8,012,411) (27,862,840)
------------ -------------
NET ASSETs:
Beginning of period 81,872,008 109,734,848
------------ -------------
End of period (including accumulated undistributed net
investment income of $26,143 and $377,184, respectively) $ 73,859,597 $ 81,872,008
============ =============
</TABLE>
See accompany notes to financial statements
38
<PAGE>
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended Year Ended June 30, January 28, 1994*
December 31, 1998 ----------------------------------------- Through
Brinson Class I (Unaudited) 1998 1997 1996 1995 June 30, 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, begining of period $ 12.54 $ 12.76 $ 11.57 $ 9.93 $ 9.49 $ 10.00
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.04 0.22 0.16 0.18 0.18 0.07
Net realized and unrealized gain (loss) 0.30 0.78 2.14 2.29 0.39 (0.54)
Total income (loss) from investment
operations 0.34 1.00 2.30 2.47 0.57 (0.47)
Less distributions:
Distributions from net investment income (0.12) (0.17) (0.12) (0.14) (0.04) (0.04)
Distributions from and in excess of net
realized gain (0.18) (1.05) (0.99) (0.69) (0.09) --
Total distributions (0.30) (1.22) (1.11) (0.83) (0.13) (0.04)
Net asset value, end of period $ 12.58 $ 12.54 $ 12.76 $ 11.57 $ 9.93 $ 9.49
Total return (non-annualized) 2.86% 8.99% 21.26% 25.66% 6.06% (4.70)%
Ratios/Supplemental data:
Net assets, end of period (in 000s) $ 24,604 $ 22,724 $ 48,054 $ 27,126 $ 20,706 $ 20,642
Ratio of expenses to average net assets:
Before expense reimbursement 1.05%** 1.02% 1.25% 1.77% 2.06% 2.65%**
After expense reimbursement 1.00%** 1.00% 1.00% 1.00% 1.00% 1.00%**
Ratio of net investment income to average net assets:
Before expense reimbursement 0.66%** 1.29% 1.35% 0.57% 0.71% 0.24%**
After expense reimbursement 0.71%** 1.31% 1.60% 1.34% 1.77% 1.89%**
Portfolio turnover rate 49% 46% 32% 74% 36% 21%
</TABLE>
* Commencement of investment operations
** Annualized
See accompany 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>
Six Months Ended
December 31, 1998 Year Ended
Brinson Class N (Unaudited) June 30, 1998*
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 12.53 $ 12.76
------- -------
Income from investment operations:
Net investment income 0.03 0.13
Net realized and unrealized gain 0.29 0.82
------- -------
Total income from investment operations 0.32 0.95
------- -------
Less distributions:
Distributions from net investment income (0.12) (0.13)
Distributions from net realized gain (0.18) (1.05)
------- -------
Total distributions (0.30) (1.18)
------- -------
Net asset value, end of period $ 12.55 $ 12.53
======= =======
Total return (non-annualized) 2.68% 8.60%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 206 $ 1
Ratio of expenses to average net assets:
Before expense reimbursement 1.30%** 1.27%
After expense reimbursement 1.25%** 1.25%
Ratio of net investment income to average net assets:
Before expense reimbursement 0.41%** 1.04%
After expense reimbursement 0.46%** 1.06%
Portfolio turnover rate 49% 46%
</TABLE>
* Commencement of Brinson Class N was June 30, 1997
** Annualized
See accompany notes to financial statements
40
<PAGE>
Global Equity Fund -- Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended July 31, 1995*
December 31, 1998 Year Ended Year Ended Through
UBS Investment Funds Class (Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.51 $ 12.73 $ 11.57 $ 10.35
------- ------- ------- -------
Income from investment operations:
Net investment income (loss) 0.00 0.07 0.08 (0.01)
Net realized and unrealized gain 0.29 0.83 2.13 1.93
------- ------- ------- -------
Total income from investment operations 0.29 0.90 2.21 1.92
------- ------- ------- -------
Less distributions:
Distributions from net investment income (0.05) (0.07) (0.06) (0.01)
Distributions from net realized gain (0.18) (1.05) (0.99) (0.69)
------- ------- ------- -------
Total distributions (0.23) (1.12) (1.05) (0.70)
------- ------- ------- -------
Net asset value, end of period $ 12.57 $ 12.51 $ 12.73 $ 11.57
======= ======= ======= =======
Total return (non-annualized) 2.43% 8.15% 20.34% 19.25%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $49,050 $59,147 $61,680 $33,012
Ratio of expenses to average net assets:
Before expense reimbursement 1.81%** 1.78% 2.00% 2.53%**
After expense reimbursement 1.76%** 1.76% 1.75% 1.76%**
Ratio of net investment income (loss) to average
net assets:
Before expense reimbursement (0.10)%** 0.53% 0.60% (0.19)%**
After expense reimbursement (0.05)%** 0.55% 0.85% 0.58%**
Portfolio turnover rate 49% 46% 32% 74%
</TABLE>
* Commencement of UBS Investment Funds Class
** Annualized
See accompanying notes to financial statements.
41
<PAGE>
Global Bond Fund
[BRINSON LOGO APPEARS HERE]
The Global Bond Fund is actively managed, providing a fully integrated treatment
of the U.S. and other major developed fixed income markets across the world.
This global approach takes full advantage of relationships both within and
across markets, based on consistent analysis of macroeconomic and market
conditions. Market and currency strategies are developed in a global asset
allocation framework, in conjunction with senior fixed income professionals in
our offices around the world.
The Brinson Global Bond Fund Class I has provided an annualized return of 7.77%
since its inception on July 31, 1993, below the 8.04% return of its benchmark,
the Salomon World Government Bond Index. The Fund's annualized volatility of
4.44% was below the index volatility of 5.57% over this period. For calendar
year 1998, the Fund returned 11.98%, trailing the index return of 15.29%.
Bond market returns were generally quite strong in dollar-hedged terms in 1998.
Declining inflation worldwide was the primary driver, to the point where
deflation worries began to surface. Causes for these concerns included the
continued economic weakness in Asia, the default of the Russian government in
August, and financial instability in Latin American countries. By mid-October
long yields had fallen to all time historical lows in many markets.
Market allocation strategies contributed positively to relative Fund performance
in 1998. The Fund benefited in particular from its underweight in Japan, where
rates spiked upward in December. The overweight to the U.K., which was the
strongest performer in 1998, also helped, as did the overweight in Sweden.
Bond selection strategies within markets detracted from overall performance. In
the U.S., holdings of corporate and mortgage securities reduced performance as
spreads on these bonds widened sharply in the third quarter. In addition,
defensive duration strategies in most markets detracted as yields fell
throughout the year. At the end of the year, duration was 0.9 times the index in
Canadian conventional bonds and the U.K. duration was equal to the index in all
other markets.
Currency allocation also hurt performance. The underweight of the yen detracted,
as did the overweight of the Australian dollar. The underweight of the U.S.
dollar helped offset these effects, as most currencies strengthened against it.
42
<PAGE>
Global Bond Fund
[BRINSON LOGO APPEARS HERE]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 5 years 7/31/93*
ended ended ended ended to
12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brinson Global Bond Fund Class I 10.14% 11.98% 7.54% 7.63% 7.77%
- ---------------------------------------------------------------------------------------
Salomon World Government Bond Index 12.17 15.29 6.20 7.85 8.04
- ---------------------------------------------------------------------------------------
</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 December 31, 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
[CHART APPEARS HERE]
Salomon World Brinson Global
Gov't Bond Bond Fund
Index Class I
------------- --------------
31/07/93 $1,000,000 $1,000,000
31/08/93 $1,030,100 $1,019,000
30/09/93 $1,042,358 $1,022,010
31/10/93 $1,040,586 $1,032,059
30/11/93 $1,033,198 $1,023,015
31/12/93 $1,041,929 $1,038,591
31/01/94 $1,050,264 $1,045,818
28/02/94 $1,043,437 $1,021,040
31/03/94 $1,041,976 $1,007,619
30/04/94 $1,043,123 $1,002,457
31/05/94 $1,033,943 $994,198
30/06/94 $1,048,832 $992,146
31/07/94 $1,057,223 $999,419
31/08/94 $1,053,522 $1,000,457
30/09/94 $1,061,108 $1,001,496
31/10/94 $1,078,085 $1,005,652
30/11/94 $1,063,208 $1,003,574
31/12/94 $1,066,185 $1,002,396
31/01/95 $1,088,575 $1,012,827
28/02/95 $1,116,442 $1,030,559
31/03/95 $1,182,759 $1,044,119
30/04/95 $1,204,640 $1,069,153
31/05/95 $1,238,611 $1,106,704
30/06/95 $1,245,919 $1,104,638
31/07/95 $1,248,909 $1,122,712
31/08/95 $1,205,946 $1,134,406
30/09/95 $1,232,839 $1,148,228
31/10/95 $1,241,962 $1,167,365
30/11/95 $1,255,996 $1,190,755
31/12/95 $1,269,184 $1,206,119
31/01/96 $1,253,573 $1,212,149
28/02/96 $1,247,180 $1,200,088
31/03/96 $1,245,434 $1,204,913
30/04/96 $1,240,452 $1,216,974
31/05/96 $1,240,700 $1,220,592
30/06/96 $1,250,502 $1,231,653
31/07/96 $1,274,511 $1,243,921
31/08/96 $1,279,482 $1,253,735
30/09/96 $1,284,728 $1,274,590
31/10/96 $1,308,752 $1,301,578
30/11/96 $1,326,028 $1,326,113
31/12/96 $1,315,287 $1,318,299
31/01/97 $1,280,169 $1,297,658
28/02/97 $1,270,567 $1,299,034
31/03/97 $1,260,911 $1,279,768
30/04/97 $1,249,815 $1,272,888
31/05/97 $1,283,810 $1,310,043
30/06/97 $1,299,088 $1,326,556
31/07/97 $1,288,955 $1,321,051
31/08/97 $1,288,181 $1,316,923
30/09/97 $1,315,619 $1,343,069
31/10/97 $1,342,984 $1,360,958
30/11/97 $1,322,437 $1,343,069
31/12/97 $1,318,469 $1,339,835
31/01/98 $1,331,259 $1,351,311
28/02/98 $1,342,042 $1,359,918
31/03/98 $1,328,756 $1,345,573
30/04/98 $1,350,016 $1,362,787
31/05/98 $1,353,121 $1,362,787
30/06/98 $1,355,150 $1,362,306
31/07/98 $1,356,912 $1,362,306
31/08/98 $1,393,820 $1,378,231
30/09/98 $1,467,971 $1,444,826
31/10/98 $1,511,423 $1,476,676
30/11/98 $1,490,112 $1,466,542
31/12/98 $1,520,063 $1,500,412
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
43
<PAGE>
Global Bond Fund
[BRINSON LOGO APPEARS HERE]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 6/30/97*
ended ended to
12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Brinson Global Bond Fund Class N 10.13% 11.83% 8.30%
- ---------------------------------------------------------------------
Salomon World Government Bond Index 12.17 15.29 11.04
- ---------------------------------------------------------------------
</TABLE>
*Inception date of the Brinson Global Bond Fund Class N.
Total return includes reinvestment of all capital gain and income
distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
Bond Fund Class N and the Salomon 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 December 31, 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
[CHART APPEARS HERE]
Salomon World Brinson Global
Government Bond Index Bond Fund
--------------------- ---------------
30/06/97 $1,000,000 $1,000,000
31/07/97 $992,200 $995,851
31/08/97 $991,605 $991,701
30/09/97 $1,012,726 $1,011,411
31/10/97 $1,033,791 $1,023,859
30/11/97 $1,017,974 $1,010,373
31/12/97 $1,014,9210 $1,008,216
31/01/98 $1,024,764 $1,015,772
28/02/98 $1,033,065 $1,022,249
31/03/98 $1,022,838 $1,011,454
30/04/98 $1,039,203 $1,024,408
31/05/98 $1,041,593 $1,023,328
30/06/98 $1,043,156 $1,023,719
31/7/98 $1,044,512 $1,022,630
31/8/98 $1,072,922 $1,034,610
30/9/98 $1,130,002 $1,083,618
31/10/98 $1,163,450 $1,106,488
30/11/98 $1,147,045 $1,101,043
31/12/98 $1,170,101 $1,127,443
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
Asset Allocation
As of December 31, 1998 (Unaudited)
Current
Benchmark Strategy
- ------------------------------------------
U.S. 29.8% 39.9%
Australia 0.7 5.8
Austria 0.8 0.0
Belgium 2.7 0.0
Canada 2.8 5.6
Denmark 1.5 6.2
Finland 0.8 0.0
France 8.7 9.3
Germany 8.7 8.2
Ireland 0.4 0.0
Italy 8.1 4.6
Japan 19.8 0.0
Netherlands 3.0 0.0
Portugal 0.4 0.0
Spain 3.5 7.3
Sweden 1.4 4.4
Switzerland 0.5 0.0
U.K. 6.4 8.7
- ------------------------------------------
100.0% 100.0%
Currency Allocation
As of December 31, 1998 (Unaudited)
Current
Benchmark Strategy
- ------------------------------------------
U.S. 29.8% 25.8%
Australia 0.7 6.7
Canada 2.8 6.8
Denmark 1.5 1.5
EMU 37.1 37.1
Japan 19.8 13.8
Sweden 1.4 5.4
Switzerland 0.5 0.5
U.K. 6.4 2.4
- ------------------------------------------
100.0% 100.0%
Industry Diversification
As a Percent of Net Assets
As of December 31, 1998 (Unaudited)
- ------------------------------------------
U.S. Bonds
Corporate Bonds
Aerospace & Military 0.11%
Asset-Backed 3.47
Banking 0.16
CMO 4.44
Consumer 0.49
Financial Services 1.61
Food and Housing Products 0.40
Industrial Components 0.85
Services/Miscellaneous 0.76
Telecommunications 0.79
Transportation 0.91
-------
13.99
International Dollar Bonds 3.24
U.S. Government Agencies 8.13
U.S. Government Obligations 10.48
-------
21.85
-------
Total U.S. Bonds 35.84
-------
Global (Ex-U.S.) Bonds
Foreign Financial Bonds 14.18
Foreign Government Bonds 40.21
-------
Total Global
(ex-U.S.) Bonds 54.39
-------
U.S. Equities 0.44
-------
SHORT-TERM INVESTMENTS 7.36
-------
Total Investments 98.03
Cash and other Assets,
LESS LIABILITIES 1.97
-------
Net Assets 100.00%
=======
45
<PAGE>
Global Bond Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Face
Amount Value
------------ ---------------
Bonds -- 90.23%
U.S. Bonds -- 35.84%
U.S. Corporate Bonds -- 13.99%
Archer Daniels, 6.950%, due 12/15/97 $ 500,000 $ 540,626
Bear Stearns Mortgage Securities, Inc.,
96-7A4 6.000%, due 01/28/09 200,000 198,938
Capital One Bank, 6.830%,
due 05/17/99 200,000 200,596
Cendant Corp., 7.750%, due 12/01/03 500,000 510,991
Chase Manhattan Auto Owner Trust,
96-C, Class A4, 6.150%,
due 03/15/02 125,000 126,670
Comed Transitional Funding Trust,
98-1, Class A7, 5.740%,
due 12/25/10 840,000 844,830
Continental Airlines, Inc., EETC, 6.900%,
due 01/02/18 710,000 721,658
Countrywide Capital, Inc., 8.000%,
due 12/15/26 250,000 259,129
Donaldson Lufkin & Jenrette FRN, 6.700%,
due 06/30/00 375,000 378,834
Fanniemae Whole Loan, 95-W3, Class A,
9.000%, due 04/25/25 13,102 13,654
First Bank Corporate Card Master Trust,
97-1A, 6.400%, due 02/15/03 240,000 246,624
First Nationwide Trust, 98-3, Class 1PPA,
6.500%, due 09/19/28 613,136 613,688
First Union Lehman Brothers, 97-C2,
Class A2, 6.600%, due 05/18/07 240,000 249,439
Ford Credit Grantor Trust 95-B, 5.900%,
due 10/15/00 379,155 380,030
Freddie Mac, 83, Class F, 6.288%,
due 08/15/27 66,020 66,041
GE Capital Mortgage Services, Inc., 93-7F,
Class FA3, 6.500%, due 09/25/08 313,155 313,897
Kroger Co., 6.000%, due 07/01/00 500,000 501,891
Lockheed Martin Corp., 7.700%,
due 06/15/08 125,000 141,371
Merrill Lynch & Co., Series B, 5.930%,
due 03/23/01 550,000 553,930
Metlife Funding, 6.850%, due 05/20/08 225,000 235,052
News America Holdings, 7.750%,
due 12/01/45 575,000 610,682
Norwest Asset Securities Corp., 98-25,
Class A5, 6.000%, due 12/25/28 965,000 948,363
PNC Mortgage Securities Corp., 94-3,
Class A8, 7.500%, due 07/25/24 190,000 195,998
Premier Auto Trust, 96-3, Class A4,
96-3A 6.750%, due 11/06/00 475,000 480,538
Prudential Home Mortgage Securities
96-7, Class A4, 6.750%,
due 06/25/11 150,000 152,477
93-43, Class A9, 6.750%,
due 10/25/23 211,150 212,674
Residential Accredit Loans, Inc.
96-QS4, Class Al10, 7.900%,
due 08/25/26 625,000 643,767
98-QS4, Class AI5, 7.000%,
due 03/25/28 400,000 415,061
Face
Amount Value
------------ ---------------
Residential Asset Securitization Trust,
97-A7, Class A1, 7.500%,
due 09/25/27 $ 169,532 $ 171,050
97-A7, Class A1, 7.250%,
due 12/25/27 335,000 341,631
97-A11, Class A2, 7.000%,
due 01/25/28 206,139 206,893
97-A11, Class A6, 7.000%,
due 01/25/28 430,000 438,626
98-A1, Class A1, 7.000%,
due 03/25/28 169,440 170,339
Salomon, Inc., 7.200%, due 02/01/04 240,000 252,133
Sprint Capital Corp., 6.875%,
due 11/15/28 450,000 467,272
Structured Asset Securities Corp.
98-RF1, Class A, 8.712%,
due 03/15/27 261,685 280,821
98-RF2, 144A, 8.582%, due 07/15/27 392,977 420,485
Structured Mortgage Asset Residential
Trust, 96-5C, Class CI, 7.150%,
due 03/25/23 925,000 939,946
The Money Store, 98-B, Class AF2, 6.115%,
due 05/15/10 60,000 60,055
Time Warner Inc., 7.570%,
due 02/01/24 560,000 631,574
UCFC Home Equity Loan 97-C, Class A8,
FRN, 5.478%, due 09/15/27 123,678 122,489
USA Waste Services, 7.000%,
due 10/01/04 300,000 313,696
Vanderbilt Mortgage Finance, 98-B, Class
1A26,.120%, due 05/07/09 600,000 603,852
Williams Co., 6.200%, due 08/01/02 400,000 400,999
World Omni Automobile Lease
Securitization Trust, 97-A, Class A3,
6.850%, due 06/25/03 253,906 256,531
Worldcom Inc., Series *, 8.875%,
due 01/15/06 465,000 506,560
------------
17,342,401
International Dollar Bonds -- 3.24%
Banco Santiago S.A., 7.000%,
due 07/18/07 400,000 335,192
Banque Centrale de Tunisie, 8.250%,
due 09/19/27 400,000 320,000
Credit Suisse-London, 144A, 7.900%,
Resettable Perpetual Step-up Notes 500,000 500,000
DR Investments, 144A, 7.450%,
due 05/15/07 455,000 489,960
Den Danske Bank, 144A, 6.375%,
due 06/15/08 500,000 507,942
Empresa National Electric, 7.875%,
due 02/01/27 500,000 361,776
Pan Pacific Industry PLC, 144A, 0.000%,
due 04/28/07 715,000 282,425
Province of Quebec, 7.500%,
due 07/15/23 235,000 268,723
Republic of South Africa, 9.625%,
due 12/15/99 125,000 127,500
Royal Bank of Scotland, 7.375%, Resettable
Perpetual Step-up Notes 300,000 308,823
46
<PAGE>
Global Bond Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Face
Amount Value
------------ ---------------
Southern Investments UK, 6.800%,
due 12/01/06 $ 500,000 $ 518,481
------------
4,020,822
------------
U.S. Government Agencies -- 8.13%
Federal Home Loan Mortgage Corp.
7.000%, due 10/15/13 68,215 69,927
7.500%, due 01/15/23 85,601 90,241
7.238%, due 05/01/26 27,606 28,061
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23 59,104 61,363
9.000%, due 03/01/24 174,782 185,842
Federal National Mortgage Assoc.
6.220%, due 03/13/06 150,000 159,021
6.820%, due 10/01/07 477,554 510,982
6.361%, due 06/01/08 686,356 715,183
8.000%, due 03/01/11 100,480 103,557
6.000%, due 01/01/14 TBA 615,000 616,735
9.000%, due 08/01/21 18,273 19,386
8.500%, due 07/01/22 12,478 13,224
7.500%, due 12/01/23 416,307 427,366
7.500%, due 05/18/25 250,000 256,169
7.890%, due 04/01/26 240,305 245,283
8.500%, due 02/01/28 308,146 322,783
6.500%, due 06/01/28 2,361,195 2,377,449
6.500%, due 09/01/28 1,261,839 1,270,525
6.000%, due 12/01/28 TBA 750,000 740,317
Federal National Mortgage Assoc. Strips
7.500%, due 05/01/23 interest only 184,168 29,562
0.000%, due 04/01/27 principal only 170,348 149,757
FNCI, 8.000%, due 02/01/13 108,540 111,864
Government National Mortgage Assoc.
7.500%, due 08/15/23 82,927 85,496
7.500%, due 12/15/23 122,466 126,267
7.500%, due 01/15/24 85,915 88,559
7.000%, due 08/15/24 425,074 435,164
7.000%, due 07/15/25 59,634 61,044
Jordan Aid, 8.750%, due 09/01/19 193,941 240,433
Tennesse Valley Authority, 6.375%,
due 06/15/05 500,000 530,948
------------
10,072,508
------------
U.S. Government Obligations -- 10.48%
U.S. Treasury Inflation Indexed Note,
3.625%, due 04/15/28 570,000 563,108
U.S. Treasury Notes and Bonds
5.500%, due 02/29/00 1,730,000 1,746,219
5.500%, due 05/31/00 1,345,000 1,360,552
6.625%, due 07/31/01 1,765,000 1,848,838
6.250%, due 08/31/02 610,000 641,072
7.500%, due 02/15/05 830,000 950,091
7.000%, due 07/15/06 110,000 125,263
6.625%, due 05/15/07 745,000 837,893
8.000%, due 11/15/21 3,675,000 4,923,353
------------
12,996,389
------------
Total U.S. Bonds 44,432,120
------------
Global (ex-U.S.) Bonds -- 54.39%
Australia -- 5.63%
Government of Australia, 9.500%,
due 08/15/03 AUD 3,000,000 2,199,146
New South Wales Treasury Corp., 7.000%,
due 04/01/04 1,000,000 669,372
Face
Amount Value
------------ ---------------
Queensland Treasury Corp.-Global Note
8.000%, due 05/14/03 AUD 980,000 $ 671,012
6.500%, due 06/14/05 5,230,000 3,436,653
------------
6,976,183
------------
Austria -- 2.01%
Republic of Austria, 5.500%,
due 01/18/04 FRF 12,800,000 2,487,559
------------
Canada -- 5.08%
British Columbia, 7.750%, due 06/16/03 1,540,000 1,112,353
Government of Canada
6.000%, due 06/01/08 CAD 1,200,000 845,703
4.250%, due 12/01/21 3,800,000 2,784,440
Province of Ontario, 7.500%,
due 01/19/06 2,100,000 1,549,195
------------
6,291,691
------------
Denmark -- 5.94%
City of Copenhagen, 6.250%,
due 03/15/01 DKK 2,400,000 393,825
Great Belt, 7.000%, due 09/02/03 10,650,000 1,866,825
Kingdom of Denmark
8.000%, due 11/15/01 8,000,000 1,394,862
7.000%, due 12/15/04 16,800,000 3,043,243
7.000%, due 11/15/07 1,400,000 264,118
7.000%, due 11/10/24 2,000,000 402,231
------------
7,365,104
------------
Finland -- 1.27%
Republic of Finland, 9.000%,
due 08/13/03 FIN 7,200,000 1,579,696
------------
France -- 3.42%
Government of France (BTAN), 7.750%,
due 04/12/00 FRF 4,000,000 756,722
Government of France (OAT)
9.500%, due 01/25/01 1,800,000 362,823
7.500%, due 04/25/05 7,200,000 1,563,682
8.500%, due 04/25/23 5,600,000 1,552,325
------------
4,235,552
------------
Germany -- 6.36%
Bundesrepublik Deutscheland, 6.250%,
due 01/04/24 DEM 700,000 510,417
European Economic Community, 6.500%,
due 03/10/00 1,110,000 691,001
IBRD, 7.125%, due 04/12/05 4,250,000 3,009,332
KFW International Finance, 6.625%,
due 04/15/03 3,800,000 2,558,087
LKB Baden-Wuerttemberg Finance,
6.500%, due 09/15/08 1,600,000 1,118,516
------------
7,887,353
------------
Ireland -- 1.60%
Republic of Ireland, 7.250%,
due 03/18/03 IEP 2,900,000 1,988,135
------------
Italy -- 3.78%
Bayerische Landesbank, 10.750%,
due 03/01/03 ITL 750,000,000 575,085
International Bank for Reconstruction &
Development, 5.000%,
due 10/15/00 1,000,000,000 624,007
LKB Baden-Wuerttemberg Finance,
10.750%, due 04/14/03 650,000,000 500,870
47
<PAGE>
Global Bond Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
Face
Amount Value
------------ ---------------
Republic of Italy (BTP)
9.000%, due 10/01/03 ITL 2,300,000,000 $ 1,714,948
9.500%, due 02/01/06 800,000,000 650,114
9.000%, due 11/01/23 650,000,000 626,766
------------
4,691,790
Luxembourg -- 0.33%
Tyco International Group S.A., 7.000%,
due 06/15/28 LUX 400,000 412,693
------------
Portugal -- 1.12%
Republic of Portugal, 5.625%,
due 04/03/07 FRF 7,000,000 1,383,879
------------
Spain -- 6.36%
Government of Spain
7.900%, due 02/28/02 ESP 460,000,000 3,698,457
10.000%, due 02/28/05 230,000,000 2,182,227
6.150%, due 01/31/13 240,000,000 1,999,667
------------
7,880,351
------------
Sweden -- 3.59%
Government of Sweden
10.250%, due 05/05/03 SEK 20,700,000 3,211,873
6.000%, due 02/09/05 4,600,000 628,688
6.750%, due 05/05/14 4,000,000 615,041
------------
4,455,602
------------
Face
Amount Value
------------ ---------------
United Kingdom -- 7.90%
Abbey National PLC, 8.750%,
due 05/24/04 GBP 350,000 $ 660,585
Abbey National Treasury Service,
6.500%, due 03/05/04 850,000 1,483,183
British Gas PLC, 8.125%, due 03/31/03 545,000 986,686
European Investment Bank, 7.625%,
due 12/07/06 1,820,000 3,505,066
UK Treasury, 8.000%, due 09/27/13 1,380,000 3,159,377
------------
9,794,897
------------
Total Global (ex-U.S.) Bonds 67,430,485
------------
Total Bonds (Cost $107,517,922) 111,862,605
------------
Share
------------
Equities -- 0.44%
U.S. Equities -- 0.44%
Centaur Funding Corp., 144A
0.000%, due 04/21/20 750 137,720
9.080%, due 04/21/20 390 407,794
------------
Total Equities (Cost $490,229) 545,514
------------
Short-Term Investments -- 7.36%
Investment Companies -- 7.36%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund
(Cost $9,131,709) 9,131,709 9,131,709
------------
Total Investments
(Cost $117,139,860) -- 98.03% (a) 121,539,828
------------
Cash and other assets,
less liabilities -- 1.97% 2,437,503
------------
Net Assets -- 100% $123,977,331
============
See accompanying notes to schedule of investments.
48
<PAGE>
Global Bond Fund -- Schedule of Investments
December 31, 1998 (Unaudited)
- -----------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $117,139,860; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $5,176,005
Gross unrealized depreciation (776,037)
-----------
Net unrealized appreciation $4,399,968
===========
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 December 31,
1998, the value of these securities amounted to $2,746,326 or 2.22% of net
assets.
Resettable Perpetual Step-up Notes: 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 December 31, 1998:
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
---------- -------- ------- -----------
Forward Foreign Currency
Buy Contracts
Australian Dollar 3/01/99 2,800,000 $1,718,413 $ (83,751)
Austrian Schilling 3/01/99 13,200,000 1,129,788 12,512
Belgian Franc 3/01/99 104,000,000 3,036,331 32,200
Canadian Dollar 3/01/99 2,800,000 1,823,237 11,749
Finnish Markka 3/01/99 4,000,000 792,332 8,594
German Mark 3/01/99 3,600,000 2,167,813 23,986
Italian Lira 3/01/99 7,500,000,000 4,561,908 51,172
Japanese Yen 3/01/99 2,000,000,000 17,874,166 1,007,205
Netherlands Guilder 3/01/99 6,600,000 3,527,280 39,185
Swedish Krona 3/01/99 10,900,000 1,348,376 (8,257)
Forward Foreign Currency
Sale Contracts
Australian Dollar 3/01/99 1,000,000 613,719 27,851
British Pound 3/01/99 4,440,000 7,374,680 (26,922)
Canadian Dollar 3/01/99 400,000 260,462 (537)
Danish Kroner 3/01/99 32,700,000 5,145,960 (34,764)
German Mark 3/01/99 2,200,000 1,324,774 (28,445)
Spanish Peseta 3/01/99 610,000,000 4,317,815 (51,998)
----------
Total $ 979,780
==========
See accompanying notes to financial statements.
49
<PAGE>
Global Bond Fund -- Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 (Unaudited)
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $108,008,151) $ 112,408,119
Affiliated issuers (Cost $9,131,709) 9,131,709
Foreign currency, at value (Cost $350,083) 350,965
Receivables:
Investment securities sold 1,290
Interest 2,577,447
Fund shares sold 2,761
Net unrealized appreciation on forward foreign
currency contracts 979,780
Other assets 50,762
-------------
TOTAL ASSETS 125,502,833
-------------
LIABILITIES:
Payables:
Investment securities purchased 1,361,987
Investment advisory fees 77,599
Accrued expenses 52,961
Due to custodian bank 32,955
-------------
TOTAL LIABILITIES 1,525,502
-------------
NET ASSETS $ 123,977,331
=============
NET ASSETS CONSIST OF:
Paid in capital $ 119,483,156
Accumulated distribution in excess of net
investment income (1,070,788)
Accumulated net realized gain 149,327
Net unrealized appreciation 5,415,636
-------------
NET ASSETS $ 123,977,331
=============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of
$119,514,551 and 12,066,245 shares issued
and outstanding) $ 9.90
=============
Brinson Class N:
Net asset value, offering price and redemption
price per share (Based on net assets of
$105,601 and 10,682 shares issued and outstanding) $ 9.89
=============
UBS Investment Funds Class:
Net asset value, offering price and redemption
price per share (Based on net assets of
$4,357,179 and 440,711 shares issued and outstanding) $ 9.89
=============
See accompanying notes to financial statements.
50
<PAGE>
Global Bond Fund -- Financial Statements
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (Unaudited)
INVESTMENT INCOME:
Interest (net of $14,950 for foreign taxes withheld) $ 2,832,036
------------
TOTAL INCOME 2,832,036
------------
EXPENSES:
Advisory 414,159
Professional 24,750
Distribution 10,402
Other 58,207
------------
TOTAL EXPENSES 507,518
------------
NET INVESTMENT INCOME 2,324,518
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments 1,093,835
Foreign currency transactions 1,538,594
------------
Net realized gain 2,632,429
------------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency 4,369,775
Forward contracts 1,336,164
Translation of other assets and liabilities denominated
in foreign currency 37,420
------------
Change in net unrealized appreciation or depreciation 5,743,359
------------
Net realized and unrealized gain 8,375,788
------------
Net increase in net assets resulting from operations $10,700,306
============
See accompanying notes to financial statements.
51
<PAGE>
Global Bond Fund -- Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year
December 31, 1998 Ended
(Unaudited) June 30, 1998
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,324,518 $ 3,009,836
Net realized gain (loss) 2,632,429 (1,114,801)
Change in net unrealized appreciation or depreciation 5,743,359 (276,626)
------------- ------------
Net increase in net assets resulting from operations 10,700,306 1,618,409
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (3,327,917) (2,183,342)
Distributions in excess of net investment income (1,070,788) --
Distributions from net realized gain (961,267) (1,041,855)
------------- ------------
Total distributions to shareholders* (5,359,972) (3,225,197)
------------- ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 41,337,859 46,034,839
Shares issued on reinvestment of distributions 3,845,267 2,230,731
Shares redeemed (22,206,338) (9,266,587)
------------- ------------
Net increase in net assets resulting from capital
share transactions 22,976,788 38,998,983
------------- ------------
TOTAL INCREASE IN NET ASSETS 28,317,122 37,392,195
------------- ------------
NET ASSETS:
Beginning of period 95,660,209 58,268,014
------------- ------------
End of period (including accumulated undistributed net
investment income of $(1,070,788) and
$1,003,399, respectively) $ 123,977,331 $ 95,660,209
============= ============
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net investment income
Brinson Class I $ (4,248,289) $ (2,070,571)
Brinson Class N (3,700) (98)
UBS Investment Funds Class (146,716) (112,673)
Distributions from net realized gain
Brinson Class I (925,451) (969,902)
Brinson Class N (811) (18)
UBS Investment Funds Class (35,005) (71,935)
------------- ------------
Total distributions to shareholders $ (5,359,972) $ (3,225,197)
============= ============
</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>
Six Months Ended Year Ended June 30, July 30, 1993*
December 31, 1998 ----------------------------------------- Through
Brinson Class I (Unaudited) 1998 1997 1996 1995 June 30, 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.41 $ 9.64 $ 10.04 $ 10.39 $ 9.55 $ 10.00
-------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income 0.21*** 0.43*** 0.67 0.84 0.50 0.45
Net realized and unrealized gain (loss) 0.74 (0.18) 0.08 0.31 0.58 (0.52)
-------- -------- -------- -------- -------- --------
Total income (loss) from investment
operations 0.95 0.25 0.75 1.15 1.08 (0.07)
-------- -------- -------- -------- -------- --------
Less distributions:
Distributions from and in excess of net
investment income (0.38) (0.31) (0.96) (1.40) (0.24) (0.28)
Distributions from net realized gain (0.08) (0.17) (0.19) (0.10) -- (0.10)
-------- -------- -------- -------- -------- --------
Total distributions (0.46) (0.48) (1.15) (1.50) (0.24) (0.38)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 9.90 $ 9.41 $ 9.64 $ 10.04 $ 10.39 $ 9.55
======== ======== ======== ======== ======== ========
Total return (non-annualized) 10.14% 2.69% 7.71% 11.50% 11.34% (0.79)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $119,515 $ 91,274 $ 54,157 $ 41,066 $ 51,863 $ 36,849
Ratio of expenses to average net assets:
Before expense reimbursement 0.90%** 0.96% 1.32% 1.65% 1.43% 1.78%**
After expense reimbursement N/A 0.90% 0.90% 0.90% 0.90% 0.90%**
Ratio of net investment income to average net assets:
Before expense reimbursement 4.23%** 4.47% 4.90% 4.98% 5.53% 4.03%**
After expense reimbursement N/A 4.53% 5.32% 5.73% 6.06% 4.91%**
Portfolio turnover rate 49% 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.
N/A = Not Applicable
See accompanying notes to financial statements.
53
<PAGE>
Global Bond Fund -- Financial Highlights
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1998 Year Ended
Brinson Class N (Unaudited) June 30, 1998*
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.40 $ 9.64
------- -------
Income from investment operations:
Net investment income 0.18*** 0.42***
Net realized and unrealized gain 0.77 (0.20)
------- -------
Total income from investment operations 0.95 0.22
------- -------
Less distributions:
Distributions from net investment income (0.38) (0.29)
Distributions from net realized gain (0.08) (0.17)
------- -------
Total distributions (0.46) (0.46)
------- -------
Net asset value, end of period $ 9.89 $ 9.40
======= =======
Total return (non-annualized) 10.13% 2.37%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 106 $ 9
Ratio of expenses to average net assets:
Before expense reimbursement 1.15%** 1.21%
After expense reimbursement N/A 1.15%
Ratio of net investment income to average net assets:
Before expense reimbursement 3.98%** 4.22%
After expense reimbursement N/A 4.28%
Portfolio turnover rate 49% 151%
</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.
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>
Six Months Ended July 31, 1995*
December 31, 1998 Year Ended Year Ended Through
UBS Investment Funds Class (Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.39 $ 9.61 $ 10.02 $ 10.56
------- ------- ------- -------
Income from investment operations:
Net investment income 0.18*** 0.38*** 0.62 0.78
Net realized and unrealized gain (loss) 0.75 (0.18) 0.10 0.15
------- ------- ------- -------
Total income from investment operations 0.93 0.20 0.72 0.93
------- ------- ------- -------
Less distributions:
Distributions from and in excess of net
investment income (0.35) (0.25) (0.94) (1.37)
Distributions from net realized gain (0.08) (0.17) (0.19) (0.10)
------- ------- ------- -------
Total distributions (0.43) (0.42) (1.13) (1.47)
------- ------- ------- -------
Net asset value, end of period $ 9.89 $ 9.39 $ 9.61 $ 10.02
======= ======= ======= =======
Total return (non-annualized) 9.91% 2.28% 7.20% 9.17%
Ratios/Supplemental Data:
Net assets, end of period (in 000s) $ 4,357 $ 4,377 $ 4,110 $ 3,653
Ratio of expenses to average net assets:
Before expense reimbursement 1.39%** 1.45% 1.81% 2.14%**
After expense reimbursement N/A 1.39% 1.39% 1.39%**
Ratio of net investment income to average net assets:
Before expense reimbursement 3.74%** 3.98% 4.41% 4.49%**
After expense reimbursement N/A 4.04% 4.83% 5.24%**
Portfolio turnover rate 49% 151% 235% 184%
</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.
55
<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 eleven series: Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (ex-U.S.)
Equity Fund (formerly, Non-U.S. Equity Fund) (each a "Fund" and collectively,
the "Funds"). Each Fund has three classes of shares outstanding, Brinson Class
I, Brinson Class N and UBS Investment Funds Class (formerly, SwissKey Class).
There are an unlimited number of shares of each class with par value of $0.001
authorized. Each share represents an identical interest in the investments of
the Funds and has the same rights. The 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 of
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and unrealized
gain or loss on investments in the statement of operations.
C. Investment Transactions: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D. Investment Income: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as the information becomes available.
E. Federal Income Taxes: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable income
to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the six months ended December
31, 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.
G. Income and Expense Allocation: All income earned and expenses incurred by
each Fund will be borne on a pro rata basis by each of the classes, except that
the Brinson Class I will not incur any of the distribution expenses of the
Brinson Class N nor the UBS Investment Funds Class.
H. Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
56
<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, 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 for the six months ended
December 31, 1998, were as follows:
<TABLE>
<CAPTION>
UBS Investment
Advisory Brinson Class I Brinson Class N Funds Class Advisory
Fee Expense Cap Expense Cap Expense Cap Fees Fees Waived
-------- --------------- --------------- ----------- -------- -----------
<C> <C> <C> <C> <C> <C>
<S>
Global Fund 0.80% 1.10% 1.35% 1.75% $2,387,061 $ --
Global Equity Fund 0.80 1.00 1.25 1.76 289,624 18,480
Global Bond Fund 0.75 0.90 1.15 1.39 414,159 --
</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 six months ended December 31, 1998 were
$5,888, $2,392 and $2,208 for the Global Fund, Global Equity Fund and Global
Bond Fund, respectively.
The Global Fund invests in shares of certain affiliated investment companies
also sponsored by the Advisor. These investments represented 14.25% of the
Fund's total net assets at December 31, 1998. Activity for the six months ended
December 31, 1998 was as follows:
<TABLE>
<CAPTION>
Net Net
Sales Realized Unrealized Interest
Affiliates Purchases Proceeds Gains/(Loss) Gains/(Loss) Income Value
- ---------- --------- --------- ------------ ------------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
Brinson Post-Venture Fund $ -- $1,949,866 $ 448,329 $ (995,074) $ -- $ 6,015,904
Brinson High Yield Fund 3,900,000 4,900,682 766,824 -- 15,399,222
Brinson Emerging Markets Equity Fund -- 5,140,074 (2,553,399) (3,158,736) -- 15,364,050
Brinson Emerging Markets Debt Fund 6,400,000 8,703,323 1,961,791 (4,291,159) -- 27,921,446
Brinson Supplementary Trust U.S. Cash
Management Prime Fund 12,835,861 4,711,620 -- -- 16,107 8,124,241
</TABLE>
The Global Equity Fund and Global Bond Fund invest in shares of the Brinson
Supplementary Trust U.S. Cash Management Prime Fund (Supplementary Trust). The
Supplementary Trust is managed by the Advisor. The Supplementary Trust is
offered as a cash management option to mutual funds and other accounts managed
by the Advisor. The Supplementary Trust pays no management fees. Distributions
from the Supplementary Trust are reflected as interest income in the statement
of operations. Amounts relating to those investments at December 31, 1998 and
for the six months then ended is summarized as follows:
<TABLE>
<CAPTION>
% of
Sales Interest Net
Affiliates Purchases Proceeds Income Value Assets
- ---------- --------- -------- -------- ----- ------
<S> <C> <C> <C> <C> <C>
Global Equity Fund $4,693,073 $4,397,888 $ 3,173 $ 295,185 0.40%
Global Bond Fund 9,279,598 147,889 13,429 9,131,709 7.36%
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the six months ended December 31, 1998, excluding
short-term investments, were as follows:
Proceeds
Purchases From Sales
--------- ----------
Global Fund $237,754,413 $424,385,284
Global Equity Fund 34,531,153 38,516,369
Global Bond Fund 69,215,909 49,804,987
57
<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 six months ended December 31, 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 net unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
6. SECURITY LENDING
The Global Fund loaned securities to certain brokers, with the Fund's custodian
acting as the Fund's lending agent. The Fund earned negotiated lenders' fees,
which are included in interest income in the statement of operations. Securities
loaned are recorded at the amount of cash collateral received. The Fund monitors
the market value of securities loaned on a daily basis and initially requires
collateral against the loaned securities in an amount at least equal to 102% of
the value of domestic securities loaned and 105% of the value of non-U.S.
securities loaned. The cash collateral received is invested in short-term
investments. The value of loaned securities and related collateral outstanding
at December 31, 1998 were as follows:
Value of Loaned Cash Collateral
Securities Received
--------------- ---------------
Global Fund $107,582,042 $111,993,032
7. DISTRIBUTION PLANS
The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1
under the Investment Company Act of 1940 as amended for the Brinson Class N and
the UBS Investment Funds Class. Each Plan governs payments made for the expenses
incurred in the promotion and distribution of the Brinson Class N and the UBS
Investment Funds Class. Annual fees under the Brinson Class N Plan shall not
exceed 0.25% of the average daily net assets of the Brinson Class N of the
Global Fund, Global Equity Fund and Global Bond Fund. Annual fees under the UBS
Investment Funds Plan, which include a 0.25% service fee, total 0.65%, 0.76% and
0.49% of the average daily net assets of the UBS Investment Funds Class of the
Global Fund, Global Equity Fund and Global Bond Fund, respectively.
8. LINE OF CREDIT
The Trust has entered into an agreement with Chase Manhattan Bank to provide a
364-day $100 million committed line of credit to the Funds. Borrowings will be
made for temporary purposes. Interest on amounts borrowed is calculated based on
the Federal Funds Rate plus 0.50%. The Funds pay an annual commitment fee of
0.08% of the average daily unutilized amount of the line of credit. During the
six months ended December 31, 1998 the Global Equity and Global Bond Funds had
no borrowings under the agreement. During the six months ended December 31,
1998, the Global Fund had borrowings of $33,900,000, $62,000,000 and $47,400,000
outstanding for 1 day each under the agreement.
58
<PAGE>
The Brinson Funds -- Notes To Financial Statements
9. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
<TABLE>
<CAPTION>
Global Fund
---------------------------------------------------------
Six Months Ended Year Ended
December 31, 1998 (Unaudited) June 30, 1998
---------------------------------------------------------
Shares Value Shares Value
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I 13,259,375 $163,000,397 18,850,057 $244,898,004
Brinson Class N 26,870 342,468 90,370 1,177,290
UBS Investment Funds Class 323,181 3,886,738 803,666 10,347,586
----------- ------------ ---------- ------------
Total Sales 13,609,426 $167,229,603 19,744,093 $256,422,880
=========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I 3,653,840 $ 42,311,080 5,179,618 $ 62,332,662
Brinson Class N 11,968 138,346 769 9,625
UBS Investment Funds Class 190,958 2,203,655 217,810 2,607,910
----------- ------------ ---------- ------------
Total Dividend
Reinvestment 3,856,766 $ 44,653,081 5,398,197 $ 64,950,197
=========== ============ ========== ============
Redemptions:
Brinson Class I 28,358,651 $352,033,813 16,402,396 $209,137,318
Brinson Class N 864 10,547 21 276
UBS Investment Funds Class 590,874 7,271,133 641,736 8,247,175
----------- ------------ ---------- ------------
Total Redemptions 28,950,389 $359,315,493 17,044,153 $217,384,769
=========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
Global Equity Fund
---------------------------------------------------------
Six Months Ended Year Ended
December 31, 1998 (Unaudited) June 30, 1998
---------------------------------------------------------
Shares Value Shares Value
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I 413,888 $ 5,114,516 1,466,054 $ 17,934,645
Brinson Class N 15,911 200,000 -- --
UBS Investment Funds Class 173,268 2,091,451 1,779,376 22,282,095
----------- ------------ ---------- ------------
Total Sales 603,067 $ 7,405,967 3,245,430 $ 40,216,740
=========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I 44,491 $ 532,553 126,859 $ 1,426,171
Brinson Class N 402 4,803 9 93
UBS Investment Funds Class 64,233 768,875 442,472 4,952,413
----------- ------------ ---------- ------------
Total Dividend
Reinvestment 109,126 $ 1,306,231 569,340 $ 6,378,677
=========== ============ ========== ============
Redemptions:
Brinson Class I 314,413 $ 3,767,887 3,546,702 $ 44,596,092
Brinson Class N -- -- -- --
UBS Investment Funds Class 1,063,913 12,724,864 2,339,080 28,946,495
----------- ------------ ---------- ------------
Total Redemptions 1,378,326 $ 16,492,751 5,885,782 $ 73,542,587
=========== ============ ========== ============
</TABLE>
59
<PAGE>
The Brinson Funds -- Notes To Financial Statements
<TABLE>
<CAPTION>
Global Bond Fund
---------------------------------------------------------
Six Months Ended Year Ended
December 31, 1998 (Unaudited) June 30, 1998
---------------------------------------------------------
Shares Value Shares Value
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I 3,975,826 $39,062,948 4,561,105 $43,233,367
Brinson Class N 9,292 93,297 860 8,169
UBS Investment Funds Class 221,978 2,181,614 293,533 2,793,303
----------- ------------ ---------- ------------
Total Sales 4,207,096 $41,337,859 4,855,498 $46,034,839
=========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I 376,007 $ 3,681,105 220,347 $ 2,058,040
Brinson Class N 462 4,510 12 115
UBS Investment Funds Class 16,324 159,652 18,525 172,576
----------- ------------ ---------- ------------
Total Dividend
Reinvestment 392,793 $ 3,845,267 238,884 $ 2,230,731
=========== ============ ========== ============
Redemptions:
Brinson Class I 1,983,791 $19,658,928 699,882 $ 6,667,104
Brinson Class N 26 251 22 210
UBS Investment Funds Class 263,784 2,547,159 273,680 2,599,273
----------- ------------ ---------- ------------
Total Redemptions 2,247,601 $22,206,338 973,584 $ 9,266,587
=========== ============ ========== ============
</TABLE>
60
<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>
[BRINSON LOGO APPEARS HERE]
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
