<PAGE>
________________________
The Brinson Funds
Brinson U.S. Balanced Fund
Brinson U.S. Equity Fund
Brinson U.S. Large Capitalization Equity Fund
Brinson U.S. Large Capitalization Growth Fund
Brinson U.S. Small Capitalization Growth Fund
Brinson U.S. Bond Fund
Brinson High Yield Fund
Annual Report
June 30, 1999
Institutional Asset Management
[LOGO OF BRINSON APPEARS HERE]
_____________________________________
<PAGE>
Trustees and Officers
[LOGO OF BRINSON APPEARS HERE]
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Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA
Chairman of the Board
E. Thomas McFarlan
President
Thomas J. Digenan, CFA, CPA
Vice President
Debra L. Nichols
Vice President
Carolyn M. Burke, CPA
Secretary and Treasurer
David E. Floyd, CPA
Assistant Secretary
Mark F. Kemper
Assistant Secretary
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<PAGE>
The Funds' Advisor -- Brinson Partners, Inc.
[LOGO OF BRINSON APPEARS HERE]
- -------------------------------------------------------------------------------
Since the entrepreneurial founding of our organization nearly twenty years ago,
we have focused our collective energy on two goals: creating meaningful value-
added investment performance; and providing our clients with unrivaled, custom-
tailored service of the highest quality.
Now, in 1999, more than 1,100 employees located in 11 countries around the world
continue to deliver investment strategies that meet our clients' needs. With an
unrelenting focus on our goals, we have grown into one of the world's premier
investment management organizations, with approximately USD 280 billion in
assets under management, and industry recognition as a global thought leader. In
North America, we make our services available to institutions and individual
investors through the Brinson Family of Funds. The Brinson Funds are
diversified, no-load, institutionally priced mutual funds that provide investors
convenient access to our global investment expertise and services.
Within a framework of integrated capital markets, we select portfolio
investments by focusing on long-term investment fundamentals. Investment
performance for our clients is maximized within and across asset classes through
a comprehensive understanding of global investment markets and their
interrelationships. We apply a systematic, disciplined approach to valuing
investments and combine the seasoned judgement of our global investment teams to
construct optimal portfolios--balancing considerations for both risk and return.
Brinson Partners, Inc. is a member of the UBS Brinson Division, the
institutional asset management division of UBSAG.
================================================================================
2
<PAGE>
Table of Contents
[LOGO OF BRINSON APPEARS HERE]
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Shareholder Letter.......................................... 4
U.S. Economic and Market Highlights......................... 5
U.S. Balanced Fund.......................................... 6
Schedule of Investments................................ 10
Financial Statements................................... 13
Financial Highlights................................... 16
U.S. Equity Fund............................................ 18
Schedule of Investments................................ 22
Financial Statements................................... 23
Financial Highlights................................... 26
U.S. Large Capitalization Equity Fund....................... 28
Schedule of Investments................................ 32
Financial Statements................................... 33
Financial Highlights................................... 36
U.S. Large Capitalization Growth Fund....................... 38
Schedule of Investments................................ 42
Financial Statements................................... 43
Financial Highlights................................... 46
U.S. Small Capitalization Growth Fund....................... 48
Schedule of Investments................................ 52
Financial Statements................................... 54
Financial Highlights................................... 57
U.S. Bond Fund.............................................. 59
Schedule of Investments................................ 63
Financial Statements................................... 66
Financial Highlights................................... 69
High Yield Fund............................................. 71
Schedule of Investments................................ 75
Financial Statements................................... 78
Financial Highlights................................... 81
The Brinson Funds--Notes to Financial Statements............ 83
Report of Independent Auditors.............................. 90
================================================================================
3
<PAGE>
Shareholder Letter
[LOGO OF BRINSON APPEARS HERE]
- -------------------------------------------------------------------------------
July 26, 1999
Dear Shareholder:
We are pleased to present the Annual Report for The Brinson Funds covering the
year ended June 30, 1999. This report focuses on the current 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. Large Capitalization Equity
Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth
Fund, U.S. Bond Fund and High Yield Fund.
During the second quarter of 1999, momentum shifted away from growth stocks.
Growth-oriented stocks had outperformed value for much of the last two years,
leading to what we believe to be significant overvaluation among many of the
largest capitalization issues. Several factors contributed to this shift,
including improving expectations for global growth (bottoming in Asia and Latin
America), firming in key industrial commodity prices (notably oil) and
expectations for stronger corporate profits. Steeper yield curves and higher
interest rates also contributed to this rotation. An improving economic picture,
coupled with increased profitability for value stocks, suggests that there is
scope for continued outperformance relative to growth stocks in the coming
months. Our work continues to indicate that many large-capitalization growth
stocks remain overvalued and are likely to underperform.
Our current strategies for U.S. fixed income portfolios indicate that current
U.S. market interest rates provide positive excess returns. Market expectations
of higher inflation and Fed tightening (the Fed did raise rates by 25 basis
points on June 30) have driven bond yields in the U.S. to levels above our
estimates of fair value. The prevailing credit spreads provide more than
adequate compensation for risk, given our assumptions about the economy and the
probabilities we assign to different scenarios for default rates.
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 are all actively managed funds that provide
integrated asset management across and within the U.S. security markets. Each of
our Funds employ the same value-oriented investment philosophy of applied growth
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. The reports that follow highlight the investment characteristics and
the performance of the respective Funds.
We appreciate your continued trust and the confidence you have placed in The
Brinson Funds, and look forward to a long lasting, quality relationship.
Sincerely,
/s/Gary P. Brinson
Gary P. Brinson
Chairman and Chief Investment Officer
Brinson Partners, Inc.
================================================================================
4
<PAGE>
U.S. Economic and Market Highlights
[LOGO OF BRINSON APPEARS HERE]
________________________________________________________________________________
The U.S. economy continued to expand at a rapid pace in the second quarter of
1999, with weakness in the housing sector being largely compensated by
rebounding activity in manufacturing. With no signs of a recession in sight, the
current business cycle will break the record for longevity established by the
business expansion of the 1960s. Despite the strong momentum in economic growth,
price pressures, as measured by consumer prices excluding food and energy, have
remained moderate. Largely as a result of higher energy prices, headline
inflation has moved back above 2%.
Strong momentum in domestic demand, sluggish demand for U.S. products in Asia,
Europe and Latin America and higher oil prices all contributed to a massive
widening in the nation's trade deficit in May. Large net capital imports --which
reflects global investors' confidence in the U.S. economy -- and a strong U.S.
dollar are the flip side of the current account deficit.
By increasing the federal funds rate on June 30, the Federal Reserve has partly
reversed some of the rate cuts adopted during the Asia/Russia/LTCM crisis last
year. The move reflects growing doubts about a permanent surge in productivity
growth. Despite this tightening, the FOMC's policy stance continues to be
expansionary with money supply expanding at rates inconsistent with long-run
price stability.
U.S. Environment
[BAR CHARTS APPEAR HERE]
Major Markets
Year to date June 30, 1999
Total Return
U.S. Cash Equivalents 2.17
U.S. Bonds -1.39
U.S. Equities 11.87
Salomon U.S. Treasury Benchmark Returns
Year to date June 30, 1999
Maturity (Years) Total Return
1 2.25
2 0.52
5 -2.35
10 -6.5
30 -10.54
Top Ten Industry Returns Relative to S&P 500
Year to date June 30, 1999
Aerospace 24.93
For. Petroleum Res. 22.84
Dom. Petroleum Res. 21.83
Electronics 21.4
Oil Service 19.41
Forest Products 14.54
Aluminum 12.91
Producer Goods 11.72
Media 11.08
Telephone, Telegraph 10.66
Source: BARRA
Bottom Ten Industry Returns Relative to S&P 500
Year to date June 30, 1999
Miscellaneous -9.61
Containers -9.69
Health (Non-Drug) -9.78
Drugs, Medicine -11.03
Electric Utilities -16.05
Beverages -17.05
Trucking, Freight -22.07
Precious Metals -24.55
Water Transport -26.82
Tobacco -30.91
Source: BARRA
================================================================================
5
<PAGE>
U.S. Balanced Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
We actively manage the U.S. Balanced Fund in all of its aspects. We seek out
price/value discrepancies across capital markets (at the asset class level), and
within capital markets (through sector, sub-sector and individual security
selection). The Fund is monitored on an ongoing basis, and rebalanced with both
risk and return considerations in mind. Our value estimates and investment
decisions are based on comprehensive analysis of forward-looking investment
fundamentals, drawing on the collective judgement of our seasoned investment
teams.
Since its performance inception on December 31, 1994, the Brinson U.S. Balanced
Fund Class I has produced an annualized rate of return of 13.32% compared to the
20.78% return of its benchmark, the U.S. Balanced Mutual Fund Index. This
performance record was obtained with significantly less risk or volatility than
the benchmark, 5.45% versus 9.66%, respectively. The lower risk level implies
that the Fund has generated a much more constant return stream over time,
protecting its investors from abrupt fluctuations in the overall Fund's value.
For the first six months of 1999, the Fund returned 0.96% versus 7.13% for the
benchmark.
The key reason for the Fund's underperformance is its relative underweight to
the U.S. equity market, which we believe has reached historic levels of
overvaluation. Today a record 76% of U.S. fund managers believe that Wall Street
is overvalued. Based on our analysis, the U.S. equity market is now
approximately 50% overvalued, a level higher than that seen prior to the
market's "crash" in 1987. The Fund currently holds only 20% of its assets in
equities versus 65% for the benchmark, which is the maximum underweight
position.
In 1998 and the first half of this year, the U.S. equity market was fueled by
the desire to not miss out on market momentum. These feelings appear to have
overshadowed concerns about the fundamentals of stock valuation, and the market
has been driven to extremes. Infatuations with technology (especially internet-
related) companies and a few other sectors were the key drivers of this
phenomenon. The market had experienced an incredible lack of breadth leading
into the second quarter of 1999, and was forced higher by an ever-smaller number
of "in-vogue" stocks.
Momentum shifted away from U.S growth stocks in the second quarter of 1999 after
a long period of outperformance relative to value stocks. Factors contributing
to this shift include higher global industrial production, the rebound in many
commodity prices (notably oil) and expectations for stronger corporate profits.
This is a significant change from the momentum in growth stocks over the past
two years. While strong value stock performance this quarter helped broaden the
market, valuation imbalances still remain. The market on the whole remains
overvalued, with growth stocks at the extreme.
With risk considerations uppermost in mind, overweight positions relative to the
benchmark are held in conventional U.S. bonds at +25%, and in Treasury Inflation
Protected Securities (TIPS) at +20%. TIPS are bonds linked to the Consumer Price
Index whose future cash flows are regularly adjusted according to prevailing
inflation. While it is likely that future average inflation will be moderate, it
is also likely that it will be more pronounced than currently expected by market
participants. In this type of environment, TIPS provide unusual upside
potential.
================================================================================
6
<PAGE>
U.S. Balanced Fund
________________________________________________________________________________
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 12/31/94*
ended ended ended to
6/30/99 6/30/99 6/30/99 6/30/99
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson U.S. Balanced Fund Class I 0.96% 4.74% 10.72% 13.32%
- ----------------------------------------------------------------------------------------------------------
U.S. Balanced Mutual Fund Index** 7.13 14.27 19.40 20.78
- ----------------------------------------------------------------------------------------------------------
Wilshire 5000 Index 11.87 19.59 25.84 27.64
- ----------------------------------------------------------------------------------------------------------
Salomon Smith Barney Broad
Investment Grade (BIG) Bond Index -1.39 3.12 7.24 8.51
- ----------------------------------------------------------------------------------------------------------
</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 June 30, 1999. 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
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. Balanced U.S. Balanced Mutual Wilshire 5000 Salomon Smith Barney
Fund Class I Fund Index Index BIG Bond Index
<S> <C> <C> <C> <C>
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 1,333,129
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
1/31/99 1,734,600 2,241,002 2,778,795 1,474,981
2/28/99 1,693,873 2,174,472 2,678,063 1,449,168
3/31/99 1,712,385 2,233,354 2,781,410 1,457,429
4/30/99 1,762,368 2,305,512 2,914,723 1,462,238
5/31/99 1,753,112 2,265,285 2,850,919 1,448,786
6/30/99 1,755,023 2,338,817 2,998,512 1,443,860
</TABLE>
12/31/94 = $1,000,000
Data through 6/30/99
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
________________________________________________________________________________
Total Return
<TABLE>
<CAPTION>
6 months 1 year 6/30/97*
ended ended to
6/30/99 6/30/99 6/30/99
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson U.S. Balanced Fund Class N 0.53% 4.17% 8.09%
- ------------------------------------------------------------------------------------
U.S. Balanced Mutual Fund Index** 7.13 14.27 18.26
- ------------------------------------------------------------------------------------
Wilshire 5000 Index 11.87 19.59 24.14
- ------------------------------------------------------------------------------------
Salomon Smith Barney Broad Investment Grade (BIG)
Bond Index -1.39 3.12 6.79
- ------------------------------------------------------------------------------------
</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 June 30, 1999. 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
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. Balanced U.S. Balanced Mutual Wilshire 5000 Salomon Smith Barney
Fund Class N Fund Index Index BIG Bond Index
<S> <C> <C> <C> <C>
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 $1,151,719
10/31/98 $1,140,728 $1,200,587 $1,217,930 $1,146,537
11/30/98 $1,154,438 $1,252,039 $1,294,623 $1,152,843
12/31/98 $1,162,059 $1,305,474 $1,337,466 $1,156,416
1/31/99 $1,159,592 $1,340,048 $1,428,101 $1,164,974
2/28/99 $1,128,752 $1,300,265 $1,376,333 $1,144,587
3/31/99 $1,139,854 $1,335,474 $1,429,445 $1,151,111
4/30/99 $1,173,162 $1,378,623 $1,497,958 $1,154,910
5/31/99 $1,168,227 $1,354,568 $1,465,168 $1,144,284
6/30/99 $1,168,251 $1,398,538 $1,541,020 $1,140,394
</TABLE>
6/30/97 = $1,000,000
Data through 6/30/99
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
[LOGO OF BRINSON APPEARS HERE]
________________________________________________________________________________
Industry Diversification
As a Percent of Net Assets
As of June 30, 1999
- --------------------------------------------------------------------------------
U.S. EQUITIES
Energy.................................... 0.27%
Capital Investment
Capital Goods............................ 4.71
Technology............................... 6.10
------
10.81
Basic Industries
Chemicals................................ 1.82
Housing/Paper............................ 3.13
Metals................................... 1.18
------
6.13
Consumer
Non-Durables............................. 1.39
Retail/Apparel........................... 2.43
Autos/Durables........................... 1.71
Health: Drugs............................ 1.93
Health: Non-Drugs........................ 2.25
------
9.71
Financial
Banks.................................... 4.71
Non-Banks................................ 3.48
------
8.19
Utilities
Electric................................. 1.75
Telephone................................ 0.71
------
2.46
Transportation............................ 3.78%
Services/Misc............................. 2.61
------
Total U.S. Equities................... 43.96*
U.S. BONDS
Corporate Bonds
Asset-Backed............................. 0.99
CMO...................................... 0.46
Consumer................................. 1.05
Financial Services....................... 1.06
Industrial Components.................... 0.59
Services/Miscellaneous................... 0.91
Utilities................................ 2.43
------
Total U.S. Corporate Bonds............ 7.49
International Dollar Bonds................ 3.10
Mortgage-Backed Securities................ 5.13
U.S. Government Agencies.................. 12.14
U.S. Government Obligations............... 24.97
------
Total U.S. Bonds...................... 52.83*
SHORT-TERM INVESTMENTS.................... 2.17*
------
TOTAL INVESTMENTS..................... 98.96
CASH AND OTHER ASSETS,
LESS LIABILITIES......................... 1.04
------
NET ASSETS................................ 100.00%
======
- --------------------------------------------------------------------------------
*The Fund held a long position in U.S. Treasury futures on June 30, 1999 which
increased U.S. bond exposure from 52.83% to 77.27%. The Fund also held a short
position in stock index futures which reduced U.S. equity exposure from 43.96%
to 18.53%. These two adjustments result in a net increase in the Fund's exposure
to Short-Term Investments from 2.17% to 3.16%.
Asset Allocation
As of June 30, 1999
Current
Benchmark Strategy
- --------------------------------------------
U.S. Equity 65% 20%
U.S. Bonds 35 80
- --------------------------------------------
100% 100%
Top Ten U.S. Equity Holdings
As of June 30, 1999
Percent of
Net Assets
- --------------------------------------------
1. Xerox Corp. 2.46%
2. FDX Corp. 1.68%
3. Burlington Northern Santa Fe
Corp. 1.57%
4. Raytheon Co., Class B 1.45%
5. Electronic Data Systems Corp. 1.42%
6. Corning, Inc. 1.39%
7. Aetna, Inc. 1.34%
8. Lockheed Martin Corp. 1.19%
9. CIGNA Corp. 1.08%
10. General Instrument Corp. 1.08%
- --------------------------------------------
================================================================================
9
<PAGE>
U.S. Balanced Fund -- Schedule of Investments
June 30, 1999
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
U.S. Equities -- 43.96%
Advanced Micro Devices, Inc. (b)............. 8,900 $ 160,756
Aetna, Inc................................... 5,900 527,681
Allergan, Inc................................ 1,900 210,900
Alza Corp. (b)............................... 7,700 391,737
American Standard Companies, Inc. (b)........ 4,100 196,800
Aon Corp..................................... 10,050 414,562
Armstrong World Industries, Inc.............. 1,100 63,594
BankBoston Corp.............................. 2,200 112,475
Baxter International, Inc.................... 4,400 266,750
Burlington Northern Santa Fe Corp............ 19,900 616,900
Champion Enterprises, Inc. (b)............... 3,500 65,188
Champion International Corp.................. 1,200 57,450
Chase Manhattan Corp......................... 3,400 294,525
CIGNA Corp................................... 4,800 427,200
Circuit City Stores-Circuit City Group....... 3,700 344,100
CMS Energy Corp.............................. 3,700 154,937
CommScope, Inc. (b).......................... 3,166 97,355
Compaq Computer Corp......................... 1,100 26,056
Computer Sciences Corp. (b).................. 1,900 131,456
Compuware Corp. (b).......................... 3,200 101,800
Comverse Technology, Inc. (b)................ 1,230 92,865
Consolidated Stores Corp. (b)................ 5,100 137,700
Corning, Inc................................. 7,800 546,975
Covance, Inc. (b)............................ 3,075 73,608
Delphi Automotive Systems Corp............... 7,200 133,650
Dial Corp.................................... 2,100 78,094
Dominion Resources, Inc...................... 600 25,988
Eastman Chemical Co.......................... 2,200 113,850
Electronic Data Systems Corp................. 9,900 559,969
Eli Lilly and Company........................ 2,200 157,575
Entergy Corp................................. 10,400 325,000
FDX Corp. (b)................................ 12,200 661,850
Federal-Mogul Corp........................... 2,000 104,000
First American Corp. of Tennessee............ 1,000 41,563
First Data Corp.............................. 7,958 389,445
First Security Corp.......................... 1,925 52,456
First Union Corp............................. 3,300 155,100
Fleet Financial Group, Inc................... 5,000 221,875
Fleetwood Enterprises, Inc................... 2,200 58,163
Food Lion Inc., Class A...................... 11,600 137,750
Fort James Corp.............................. 7,000 265,125
General Instrument Corp. (b)................. 10,000 425,000
Genzyme Corp. (b)............................ 1,600 77,600
Genzyme Surgical Products Division (b)....... 286 1,262
Geon Co...................................... 1,000 32,250
GreenPoint Financial Corp.................... 6,400 210,000
Hibernia Corp., Class A...................... 4,700 73,731
Household International, Inc................. 6,400 303,200
Illinois Tool Works, Inc..................... 1,300 106,600
IMC Global, Inc.............................. 7,200 126,900
Johnson Controls, Inc........................ 1,900 131,694
Kimberly-Clark Corp.......................... 3,600 205,200
Lafarge Corp................................. 2,200 77,963
Lear Corp. (b)............................... 4,800 238,800
Lockheed Martin Corp......................... 12,542 467,189
Lyondell Chemical Company.................... 5,700 117,563
Martin Marietta Materials, Inc............... 1,136 67,024
Masco Corp................................... 12,400 $ 358,050
Mattel, Inc.................................. 5,600 148,050
MCN Energy Group, Inc........................ 800 16,600
Nabisco Holdings Corp., Class A.............. 1,100 47,575
National Service Industries, Inc............. 2,000 72,000
New York Times Co............................ 2,100 77,306
Newell Rubbermaid, Inc....................... 4,100 190,650
Nextel Communications, Inc. (b).............. 5,600 281,050
Norfolk Southern Corp........................ 7,000 210,875
Peco Energy Co............................... 4,400 184,250
Pentair, Inc................................. 2,100 96,075
Philip Morris Companies, Inc................. 6,400 257,200
PNC Bank Corp................................ 3,200 184,400
Praxair, Inc................................. 3,400 166,387
Raytheon Co., Class B........................ 8,100 570,037
Regions Financial Corp....................... 1,000 38,438
Southdown, Inc............................... 2,316 148,803
St. Jude Medical, Inc. (b)................... 5,600 199,500
Tyson Foods, Inc., Class A................... 7,400 166,500
U.S. Bancorp................................. 5,059 172,006
Ultramar Diamond Shamrock Corp............... 4,090 89,213
United Healthcare Corp....................... 4,000 250,500
USG Corp..................................... 2,100 117,600
Vencor, Inc. (b)............................. 4,200 630
Ventas, Inc.................................. 2,800 15,050
Viad Corp.................................... 3,900 120,656
W.W. Grainger, Inc........................... 1,200 64,575
Wells Fargo and Co........................... 7,000 299,250
Westvaco Corp................................ 1,400 40,600
Xerox Corp................................... 16,400 968,625
York International Corp...................... 2,500 107,031
-----------
Total U.S. Equities (Cost $14,121,165)....... 17,316,281
-----------
Face
Amount
------
Bonds -- 52.83%
U.S. Corporate Bonds -- 7.49%
Archer Daniels 6.950%, due 12/15/69.......... $ 250,000 232,287
Donaldson Lufkin & Jenrette, FRN
6.700%, due 06/30/00......................... 415,000 417,222
Heller Financial Commercial Mortgage
Assets, 99-PH1, Class A1 6.500%,
due 05/15/61................................. 184,130 182,451
MBNA Global Capital Securities,
FRN 5.795%, due 02/01/27..................... 215,000 186,425
Noram Energy Corp. 6.375%, due 11/01/03...... 200,000 195,519
PanAmSat Corp. 6.000%, due 01/15/03.......... 335,000 327,904
Peco Energy Transition Trust 6.130%,
due 03/01/09................................. 215,000 203,857
Rite Aid Corp., 144A 6.125%, due 12/15/08.... 140,000 126,805
Sprint Capital Corp. 6.875%, due 11/15/28.... 200,000 182,106
TCI Communications, Inc. 8.750%,
due 08/01/15................................. 220,000 249,899
Time Warner, Inc. 7.570%, due 02/01/24....... 290,000 288,806
U.S.A. Waste Services 6.500%, due 12/15/02... 360,000 356,994
-----------
2,950,275
-----------
</TABLE>
===============================================================================
10
<PAGE>
U.S. Balanced Fund -- Schedule of Investments
June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
------ -----
<S> <C> <C>
International Dollar Bonds -- 3.10%
Abbey National PLC, Resettable Perpetual
Preferred 6.700%, due 06/29/49............................ 250,000 $ 231,861
British Sky Broadcasting Group plc
6.875%, due 02/23/09...................................... 125,000 113,989
Credit Suisse-London, 144A, Resettable
Perpetual Preferred 7.900%, due 05/01/07.................. 270,000 262,863
Empresa Nacional de Electricidad S.A.
8.125%, due 02/01/97...................................... 200,000 155,920
Ras Laffan Liquified Natural Gas Co., Ltd.,
144A, 8.294%, due 03/15/14................................ 235,000 216,865
Tyco International Group, S.A.
5.875%, due 11/01/04...................................... 250,000 241,254
-----------
1,222,752
-----------
Mortgage-Backed Securities -- 5.13%
LB Commercial Conduit Mortgage Trust,
99-C1, Class A1, 6.410%, due 10/15/30..................... 90,000 88,809
Prudential Home Mortgage Securities, 93-43,
Class A9 6.750%, due 10/25/23............................. 711,829 695,607
Residential Asset Securitization Trust 97-A10,
Class A1, 7.250%, due 12/25/27............................ 432,331 434,501
97-A11, Class A2, 7.000%, due 01/25/28.................... 93,689 93,927
UCFC Home Equity Loan 97-C, Class A8,
FRN 5.069%, due 09/15/27.................................. 710,969 709,256
-----------
2,022,100
-----------
U.S. Government Agencies -- 12.14%
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23...................................... 386,445 398,293
9.000%, due 03/01/24...................................... 178,064 189,558
Federal Home Loan Mortgage Corp.
9.000%, due 01/01/29...................................... 164,979 174,620
Federal National Mortgage Assoc.
5.250%, due 01/15/09...................................... 440,000 401,812
7.500%, due 07/01/10...................................... 277,137 281,711
7.500%, due 12/01/27...................................... 228,125 230,712
Federal National Mortgage Assoc. Series
97-72 Class EG 0.000%, due 09/25/22....................... 263,539 234,686
FNCI 8.000%, due 02/01/13................................. 327,222 337,170
Government National Mortgage Association
7.000%, due 12/15/23...................................... 651,117 645,402
7.500%, due 06/15/24...................................... 478,831 485,108
8.000%, due 08/15/22...................................... 506,068 521,774
Jordan Aid 8.750%, due 09/01/19........................... 775,765 881,285
-----------
4,782,131
-----------
U.S. Government Obligations -- 24.97%
U.S. Treasury Bond 8.000%, due 11/15/21................... $ 1,535,000 $ 1,846,797
U.S. Treasury Inflation Indexed Note
3.625%, due 01/15/08...................................... 5,140,000 5,137,858
3.625%, due 04/15/28...................................... 2,940,000 2,852,343
-----------
9,836,998
-----------
Total U.S. Bonds (Cost $21,149,598)....................... 20,814,256
-----------
Short-Term Investments -- 2.17%
U.S. Treasury Bills -- 1.57%
U.S. Treasury Bill 4.46%, due 08/05/99.................... 620,000 617,348
-----------
Investment Companies -- 0.60%............................. Shares
------
Brinson Supplementary Trust U.S. Cash
Management Prime Fund..................................... 236,079 236,079
-----------
Total Short-Term Investments
(Cost $853,397)........................................... 853,427
-----------
Total Investments
(Cost $36,124,160) -- 98.96% (a).......................... 38,983,964
Cash and other assets,
less liabilities -- 1.04%................................. 409,130
-----------
Net Assets -- 100%........................................ $39,393,094
===========
</TABLE>
See accompanying notes to Schedule of Investments.
================================================================================
11
<PAGE>
U.S. Balanced Fund -- Schedule of Investments
June 30, 1999
- -----------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $36,124,160; and net
unrealized appreciation consisted of:
Gross unrealized appreciation..................... $ 3,895,161
Gross unrealized depreciation..................... (1,035,357)
-----------
Net unrealized appreciation................... $ 2,859,804
===========
(b) Non-income producing security
FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1999.
144A:Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 1999,
the value of these securities amounted to $606,533, or 1.54% of net assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FUTURES CONTRACTS
The U.S. Balanced Fund had the following open futures contracts as of June 30,
1999:
<TABLE>
<CAPTION>
Settlement Cost/ Current Unrealized
Date Proceeds Value Loss
-------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Interest Rate Futures Buy Contracts
5 Year U.S. Treasury Note, 57 contracts.......... September 1999 $6,256,594 $ 6,213,000 $ (43,594)
10 Year U.S. Treasury Note, 14 contracts......... September 1999 1,574,551 1,556,625 (17,926)
30 Year U.S. Treasury Bond, 16 contracts......... September 1999 1,881,096 1,854,500 (26,596)
Index Futures Sale Contracts
Standard & Poor's 500, 29 contracts.............. September 1999 9,569,072 10,017,325 (448,254)
---------
Total........................................ $(536,370)
=========
</TABLE>
The segregated cash and aggregate market value of investments pledged to cover
margin requirements for the open futures positions at June 30, 1999 were $83,300
and $617,348, respectively.
See accompanying notes to financial statements.
================================================================================
12
<PAGE>
U.S. Balanced Fund -- Financial Statements
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<S> <C>
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $35,888,081)........................................................... $38,747,885
Affiliated issuers (Cost $236,079)................................................................ 236,079
Cash................................................................................................ 69,398
Receivables:
Investment securities sold........................................................................ 334,340
Dividends......................................................................................... 21,037
Interest.......................................................................................... 273,042
Fund shares sold.................................................................................. 87,121
Other assets........................................................................................ 1,621
-----------
TOTAL ASSETS.................................................................................... 39,770,523
-----------
LIABILITIES:
Payables:
Investment securities purchased................................................................... 67,513
Fund shares redeemed.............................................................................. 120,328
Investment advisory fees.......................................................................... 15,906
Variation margin.................................................................................. 111,813
Accrued expenses.................................................................................. 61,869
-----------
TOTAL LIABILITIES............................................................................... 377,429
-----------
NET ASSETS........................................................................................... $39,393,094
===========
NET ASSETS CONSIST OF:
Paid in capital..................................................................................... $36,848,035
Accumulated undistributed net investment income..................................................... 200,223
Accumulated net realized gain....................................................................... 21,402
Net unrealized appreciation......................................................................... 2,323,434
-----------
NET ASSETS...................................................................................... $39,393,094
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based on net assets of
$37,603,028 and 4,010,404 shares issued and outstanding)......................................... $ 9.38
===========
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on net assets of
$1,266 and 135 shares issued and outstanding).................................................... $ 9.38
===========
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share (Based on net assets of
$1,788,800 and 191,943 shares issued and outstanding)............................................ $ 9.32
===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
13
<PAGE>
U.S. Balanced Fund -- Financial Statements
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<S> <C>
INVESTMENT INCOME:
Interest.................................................................................. $ 1,648,958
Dividends................................................................................. 315,958
-----------
TOTAL INCOME.......................................................................... 1,964,916
-----------
EXPENSES:
Advisory.................................................................................. 347,297
Professional.............................................................................. 43,123
Registration.............................................................................. 36,449
Printing.................................................................................. 27,654
Distribution.............................................................................. 9,774
Other..................................................................................... 21,483
-----------
TOTAL EXPENSES........................................................................ 485,780
Expenses waived by Advisor............................................................ (79,286)
-----------
NET EXPENSES.......................................................................... 406,494
-----------
NET INVESTMENT INCOME................................................................. 1,558,422
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.............................................................................. 4,805,976
Futures contracts........................................................................ (548,763)
-----------
Net realized gain..................................................................... 4,257,213
-----------
Change in net unrealized appreciation or depreciation on:
Investments.............................................................................. (4,679,394)
Futures contracts........................................................................ (482,951)
-----------
Change in net unrealized appreciation or depreciation................................. (5,162,345)
-----------
Net realized and unrealized loss.......................................................... (905,132)
-----------
Net increase in net assets resulting from operations...................................... $ 653,290
===========
</TABLE>
See accompanying notes to financial statements.
==============================================================================
14
<PAGE>
U.S. Balanced Fund -- Financial Statements
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Year Year
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income....................................................... $ 1,558,422 $ 9,285,597
Net realized gain........................................................... 4,257,213 43,393,817
Change in net unrealized appreciation or depreciation....................... (5,162,345) (19,387,830)
------------ -------------
Net increase in net assets resulting from operations........................ 653,290 33,291,584
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I............................................................ (2,554,055) (11,202,072)
Brinson Class N............................................................ (68) (62)
UBS Investment Funds Class................................................. (123,921) (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.......................................... (12,235,839) (31,622,305)
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................................................. 14,184,340 58,797,856
Shares issued on reinvestment of distributions.............................. 12,036,064 31,535,417
Shares redeemed............................................................. (57,681,932) (294,075,195)
------------ -------------
Net decrease in net assets resulting from capital share transactions........ (31,461,528) (203,741,922)
------------ -------------
TOTAL DECREASE IN NET ASSETS............................................ (43,044,077) (202,072,643)
------------ -------------
NET ASSETS:
Beginning of period......................................................... 82,437,171 284,509,814
------------ -------------
End of period (including accumulated undistributed net investment
income of $200,223 and $1,337,239, respectively)........................... $ 39,393,094 $ 82,437,171
============ =============
</TABLE>
See accompanying notes to financial statements.
===============================================================================
15
<PAGE>
U.S. Balanced Fund -- Financial Highlights
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
December 30, 1994*
Year Ended June 30, Through
-----------------------------------------------
Brinson Class I 1999 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...................... 0.34** 0.49** 0.47 0.44 0.23
Net realized and unrealized gain........... 0.18 0.93 1.29 1.04 1.16
--------- --------- --------- --------- ---------
Total income from investment operations. 0.52 1.42 1.76 1.48 1.39
--------- --------- --------- --------- ---------
Less distributions:
Distributions from net investment income... (0.73) (0.77) (0.40) (0.43) (0.16)
Distributions from net realized gain....... (2.65) (0.94) (0.54) (0.57) --
--------- --------- --------- --------- ---------
Total distributions..................... (3.38) (1.71) (0.94) (1.00) (0.16)
--------- --------- --------- --------- ---------
Net asset value, end of period................ $ 9.38 $ 12.24 $ 12.53 $ 11.71 $ 11.23
========= ========= ========= ========= =========
Total return (non-annualized)................. 4.74% 12.19% 15.50% 13.52% 13.91%
Ratios/Supplemental data:
Net assets, end of period (in 000s)......... $ 37,603 $ 80,556 $ 282,860 $ 227,829 $ 157,724
Ratio of expenses to average net assets:
Before expense reimbursement............... 0.96% 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............... 3.00% 3.88% 3.78% 3.76% 4.36%***
After expense reimbursement................ 3.16% 3.89% 3.86% 3.97% 4.63%***
Portfolio turnover rate..................... 113% 194% 329% 240% 196%
</TABLE>
* Commencement of investment operations
** The net investment income per share data was determined by using average
shares outstanding throughout the period.
*** Annualized
See accompanying notes to financial statements.
================================================================================
16
<PAGE>
U.S. Balanced Fund -- Financial Highlights
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Year Year
Ended Ended
Brinson Class N June 30, 1999 June 30, 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period................... $ 12.27 $ 12.53
---------- ----------
Income from investment operations:
Net investment income................................ 0.29* 0.47*
Net realized and unrealized gain..................... 0.18 0.94
---------- ----------
Total income from investment operations........... 0.47 1.41
---------- ----------
Less distributions:
Distributions from net investment income............. (0.71) (0.73)
Distributions from net realized gain................. (2.65) (0.94)
---------- ----------
Total distributions............................... (3.36) (1.67)
---------- ----------
Net asset value, end of period......................... $ 9.38 $ 12.27
========== ==========
Total return........................................... 4.17% 12.15%
Ratios/Supplemental data:
Net assets, end of period (in 000s)................... $ 1 $ 1
Ratio of expenses to average net assets:
Before expense reimbursement......................... 1.21% 1.06%
After expense reimbursement.......................... 1.05% 1.05%
Ratio of net investment income to average net assets:
Before expense reimbursement......................... 2.75% 3.63%
After expense reimbursement.......................... 2.91% 3.64%
Portfolio turnover rate............................... 113% 194%
</TABLE>
*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
[LOGO OF BRINSON APPEARS HERE]
- -------------------------------------------------------------------------------
The investment strategies implemented in the U.S. Equity Fund are designed to
enhance returns, while controlling risk. Our investment strategies emphasize
stock selection with attention to avoiding unintended concentrations in
particular industry and other common characteristic exposures. The Fund is
typically 70% invested in large capitalization stocks with the remaining 30% in
intermediate and small capitalization stocks. Industry exposures are normally
maintained within 10% of the benchmark weightings.
Since its performance inception on February 28, 1994, the Brinson U.S. Equity
Fund Class I has produced an annualized return of 21.60%, compared to the 22.66%
return of its benchmark, the Wilshire 5000 Equity Index. These results have been
achieved with a risk level or volatility very similar to that of the benchmark:
14.02% versus 14.10%, respectively. For the last six months, the Fund has
underperformed the benchmark, returning 10.45% compared to the benchmark return
of 11.87%.
Stock selection has provided the largest positive contribution to the Fund's
returns over the last six months. Positions in Circuit City, First Data Corp.
and FDX Corp. were some of the best performers. The Fund's underperformance on a
year-to-date basis results mainly from our protective industry and common
characteristic exposures which we feel are appropriate given the current
environment of increasing volatility and stratification of equity returns across
market segments.
The equity market continued to favor a small group of fashionable large
capitalization growth and technology (especially internet-related) stocks in the
first quarter of 1999. These types of stocks represent, in our opinion, the most
overvalued segments of the U.S. equity market. They have been driven to extremes
by investors' unwillingness to miss out on the market's momentum. Demand for
this niche group of stocks alone drove the entire market higher in the first
quarter.
Momentum, however, shifted away from U.S. growth stocks in the second quarter of
1999 after a long period of outperformance relative to "value" stocks. Factors
contributing to this shift include higher global industrial production, the
rebound in many commodity prices (notably oil) and expectations for stronger
corporate profits. That shift helped the Fund regain nearly 400 basis points
relative to the benchmark during the second quarter, with the Fund holding a
pronounced overweight in stocks with "value" style affiliations. This is a
significant change from the momentum in growth stocks over the past two years.
While strong value stock performance this quarter helped broaden the market,
valuation imbalances still remain, and growth stocks are likely to underperform.
In addition to the value overweight, common characteristic exposures include
underweights to size, momentum and earnings variability--chief characteristics
of the "growth" segment of the market. While these underweights have hampered
performance on a year-to-date basis, they were beneficial in the second quarter,
and we believe the Fund is well positioned for the coming months.
================================================================================
18
<PAGE>
U.S. Equity Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 5 years 2/28/94*
ended ended ended ended to
6/30/99 6/30/99 6/30/99 6/30/99 6/30/99
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brinson U.S. Equity Fund Class I 10.45% 15.22% 22.67% 23.95% 21.60%
- -------------------------------------------------------------------------------------------------
Wilshire 5000 Equity Index 11.87 19.59 25.84 25.69 22.66
- -------------------------------------------------------------------------------------------------
</TABLE>
* Performance inception date of the Brinson U.S. Equity Fund Class I.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson U.S.
Equity Fund Class I and the Wilshire 5000 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 June 30, 1999. 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
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. Equity Fund Wilshire 5000 Equity
Class I Index
<S> <C> <C>
2/28/94 1,000,000 1,000,000
3/31/94 942,943 954,720
4/30/94 964,965 963,876
5/31/94 984,985 973,322
6/30/94 970,003 947,285
992,118 975,401
1,055,444 1,018,484
9/30/94 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
3/31/95 1,076,245 1,080,584
4/30/95 1,099,642 1,107,437
5/31/95 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
9/30/95 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
3/31/96 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
9/30/96 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
3/31/97 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
9/30/97 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
3/31/98 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
9/30/98 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
1/31/99 2,553,433 2,754,025
2/28/99 2,459,983 2,654,192
3/31/99 2,540,271 2,756,617
4/30/99 2,769,291 2,888,742
5/31/99 2,735,069 2,825,507
6/30/99 2,839,240 2,971,784
</TABLE>
2/28/94 = $1,000,000
Data through 6/30/99
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
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year 6/30/97*
ended ended to
6/30/99 6/30/99 6/30/99
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson U.S. Equity Fund Class N 10.34% 14.75% 17.88%
- -------------------------------------------------------------------------
Wilshire 5000 Equity Index 11.87 19.59 24.14
- -------------------------------------------------------------------------
</TABLE>
*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 June 30, 1999. 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
<TABLE>
<CAPTION>
Brinson U.S. Equity Fund Wilshire 5000 Equity
Class N Index
<S> <C> <C>
6/30/97 1,000,000 1,000,000
7/31/97 1,076,531 1,076,880
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
1/31/99 1,250,932 1,428,101
2/28/99 1,204,961 1,376,333
3/31/99 1,243,810 1,429,445
4/30/99 1,355,824 1,497,958
5/31/99 1,338,342 1,465,168
6/30/99 1,389,546 1,541,020
</TABLE>
6/30/97 = $1,000,000
Data through 6/30/99
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
================================================================================
20
<PAGE>
U.S. Equity Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
Industry Diversification
As a Percent of Net Assets
As of June 30, 1999
- ------------------------------------------------------------------
U.S. EQUITIES
Energy............................................... 0.69%
Capital Investment
Capital Goods..................................... 10.54
Technology........................................ 13.90
------
24.44
Basic Industries
Chemicals......................................... 4.00
Housing/Paper..................................... 7.07
Metals............................................ 2.61
------
13.68
Consumer
Non-Durables...................................... 2.93
Retail/Apparel.................................... 5.42
Autos/Durables.................................... 3.81
Health: Drugs..................................... 4.32
Health: Non-Drugs................................. 5.02
------
21.50
Financial
Banks............................................. 10.62%
Non-Banks......................................... 7.81
------
18.43
Utilities
Electric.......................................... 3.91
Telephone......................................... 1.58
------
5.49
Transportation....................................... 8.60
Services/Misc........................................ 5.89
------
Total U.S. Equities...................... 98.72
SHORT-TERM INVESTMENTS............................... 4.77
------
TOTAL INVESTMENTS........................ 103.49
LIABILITIES, LESS CASH AND
OTHER ASSETS...................................... (3.49)
------
NET ASSETS........................................... 100.00%
======
- --------------------------------------------------------------------------------
Top Ten U.S. Equity Holdings
As of June 30, 1999
Percent of
Net Assets
- -----------------------------------------------------------
1. Xerox Corp. 5.51%
2. FDX Corp. 3.75
3. Burlington Northern Santa Fe Corp. 3.51
4. Raytheon Co., Class B 3.22
5. Electronic Data Systems Corp. 3.18
6. Corning, Inc. 3.11
7. Aetna, Inc. 3.01
8. Lockheed Martin Corp. 2.66
9. CIGNA Corp. 2.44
10. General Instrument Corp. 2.44
- -----------------------------------------------------------
================================================================================
21
<PAGE>
U.S. Equity Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- ------------
<S> <C> <C>
U.S. Equities -- 98.72%
Advanced Micro Devices, Inc. (b)..................... 400,500 $ 7,234,031
Aetna, Inc........................................... 265,800 23,772,487
Allergan, Inc........................................ 84,600 9,390,600
Alza Corp. (b)....................................... 349,150 17,763,006
American Standard Companies, Inc. (b)................ 183,900 8,827,200
Aon Corp............................................. 451,950 18,642,937
Armstrong World Industries, Inc...................... 48,200 2,786,563
BankBoston Corp...................................... 97,200 4,969,350
Baxter International, Inc............................ 195,400 11,846,125
Burlington Northern Santa Fe Corp.................... 894,000 27,714,000
Champion Enterprises, Inc. (b)....................... 157,000 2,924,125
Champion International Corp.......................... 55,500 2,657,063
Chase Manhattan Corp................................. 154,700 13,400,887
CIGNA Corp........................................... 216,950 19,308,550
Circuit City Stores-Circuit City Group............... 164,000 15,252,000
CMS Energy Corp...................................... 164,850 6,903,094
CommScope, Inc. (b).................................. 140,999 4,335,719
Compaq Computer Corp................................. 50,100 1,186,744
Computer Sciences Corp. (b).......................... 94,100 6,510,544
Compuware Corp. (b).................................. 184,600 5,872,588
Comverse Technology, Inc. (b)........................ 51,847 3,914,449
Consolidated Stores Corp. (b)........................ 221,100 5,969,700
Corning, Inc......................................... 350,200 24,557,775
Covance, Inc. (b).................................... 140,050 3,352,447
Delphi Automotive Systems Corp....................... 323,700 6,008,681
Dial Corp............................................ 92,400 3,436,125
Dominion Resources, Inc.............................. 43,300 1,875,431
Eastman Chemical Co.................................. 98,450 5,094,788
Electronic Data Systems Corp......................... 443,600 25,091,125
Eli Lilly and Co..................................... 97,000 6,947,625
Entergy Corp......................................... 467,800 14,618,750
FDX Corp. (b)........................................ 545,800 29,609,650
Federal-Mogul Corp................................... 89,900 4,674,800
First American Corp. of Tennessee.................... 46,700 1,940,969
First Data Corp...................................... 358,430 17,540,668
First Security Corp.................................. 88,300 2,406,175
First Union Corp..................................... 148,400 6,974,800
Fleet Financial Group, Inc........................... 223,900 9,935,562
Fleetwood Enterprises, Inc........................... 107,900 2,852,606
Food Lion Inc., Class A.............................. 528,600 6,277,125
Fort James Corp...................................... 320,100 12,123,787
GATX Corp............................................ 30,200 1,149,488
General Instrument Corp. (b)......................... 454,250 19,305,625
Genzyme Corp. (b).................................... 72,150 3,499,275
Genzyme Surgical Products Division (b)............... 12,916 56,909
Geon Co.............................................. 24,550 791,738
GreenPoint Financial Corp............................ 288,000 9,450,000
Hibernia Corp........................................ 226,750 3,557,141
Household International, Inc......................... 289,200 13,700,850
Illinois Tool Works, Inc............................. 54,600 4,477,200
IMC Global, Inc...................................... 323,700 5,705,213
Johnson Controls, Inc................................ 84,500 5,856,906
Kimberly-Clark Corp.................................. 180,650 10,297,050
Lafarge Corp......................................... 96,700 3,426,806
Lear Corp. (b)....................................... 214,050 10,648,987
Lockheed Martin Corp................................. 565,052 21,048,187
Lyondell Chemical Company............................ 257,250 5,305,781
Martin Marietta Materials, Inc....................... 52,307 3,086,113
Masco Corp........................................... 557,500 16,097,812
Mattel, Inc.......................................... 258,700 6,839,381
MCN Energy Group, Inc................................ 66,900 1,388,175
Nabisco Holdings Corp................................ 20,300 $ 877,975
National Service Industries, Inc..................... 88,000 3,168,000
New York Times Co.................................... 105,100 3,868,994
Newell Rubbermaid, Inc............................... 183,200 8,518,800
Nextel Communications, Inc., Class A (b)............. 249,450 12,519,272
Norfolk Southern Corp................................ 314,600 9,477,325
Peco Energy Co....................................... 179,600 7,520,750
Pentair, Inc......................................... 94,500 4,323,375
Philip Morris Companies, Inc......................... 283,450 11,391,147
PNC Bank Corp........................................ 145,500 8,384,438
Praxair, Inc......................................... 153,400 7,507,013
Raytheon Co., Class B................................ 361,950 25,472,232
Regions Financial Corp............................... 45,900 1,764,281
Southdown, Inc....................................... 102,840 6,607,470
St. Jude Medical, Inc. (b)........................... 253,100 9,016,687
Tyson Foods, Inc..................................... 332,350 7,477,875
U.S. Bancorp......................................... 229,141 7,790,794
Ultramar Diamond Shamrock Corp....................... 184,218 4,018,255
United Healthcare Corp............................... 178,700 11,191,087
USG Corp............................................. 71,600 4,009,600
Vencor, Inc. (b)..................................... 169,000 25,350
Ventas, Inc.......................................... 119,700 643,388
Viad Corp............................................ 175,650 5,434,172
W.W. Grainger, Inc................................... 54,400 2,927,400
Wells Fargo and Co................................... 311,900 13,333,725
Westvaco Corp........................................ 72,800 2,111,200
Xerox Corp........................................... 737,900 43,582,219
York International Corp.............................. 111,300 4,765,031
------------
Total U.S. Equities (Cost $611,467,321).............. 779,917,143
------------
Short-Term Investments -- 4.77%
Investment Companies -- 4.77%
Brinson Supplementary Trust U.S.
Cash Management
Prime Fund (Cost $37,684,984).................... 37,684,984 37,684,984
------------
Total Investments
(Cost $649,152,305) -- 103.49% (a)............... 817,602,127
Liabilities, less cash and other assets -- (3.49%) (27,551,605)
------------
Net Assets -- 100%................................... $790,050,522
============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $649,152,305; and net
unrealized appreciation consisted of:
Gross unrealized appreciation $191,506,645
Gross unrealized depreciation (23,056,823)
------------
Net unrealized appreciation $168,449,822
============
(b) Non-income producing security
See accompanying notes to financial statements.
================================================================================
22
<PAGE>
U.S. Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $611,467,321)........................ $779,917,143
Affiliated issuers (Cost $37,684,984)........................... 37,684,984
Cash............................................................. 939
Receivables:
Investment securities sold...................................... 4,034,378
Dividends....................................................... 935,568
Interest........................................................ 163,922
Fund shares sold................................................ 1,589,198
Other assets..................................................... 914
------------
TOTAL ASSETS................................................. 824,327,046
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 4,197,075
Fund shares redeemed............................................ 29,582,170
Investment advisory fees........................................ 462,359
Accrued expenses................................................ 34,920
------------
TOTAL LIABILITIES............................................ 34,276,524
------------
NET ASSETS........................................................ $790,050,522
============
NET ASSETS CONSIST OF:
Paid in capital.................................................. $577,012,442
Accumulated undistributed net investment income.................. 1,363,158
Accumulated net realized gain.................................... 43,225,100
Net unrealized appreciation...................................... 168,449,822
------------
NET ASSETS................................................... $790,050,522
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $713,320,572 and 33,205,246 shares
issued and outstanding)....................................... $ 21.48
============
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of $7,563,160 and 353,550 shares
issued and outstanding)....................................... $ 21.39
============
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $69,166,790 and 3,233,960 shares
issued and outstanding)....................................... $ 21.39
============
</TABLE>
See accompanying notes to financial statements.
================================================================================
23
<PAGE>
U.S. Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends.................................................. $ 10,840,069
Interest................................................... 860,262
------------
TOTAL INCOME............................................. 11,700,331
------------
EXPENSES:
Advisory................................................... 5,047,492
Distribution............................................... 363,195
Administration............................................. 267,455
Other...................................................... 459,718
------------
TOTAL EXPENSES........................................... 6,137,860
------------
NET INVESTMENT INCOME.................................... 5,562,471
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments............................................... 52,263,712
Futures contracts......................................... 1,685,319
------------
Net realized gain........................................ 53,949,031
------------
Change in net unrealized appreciation or depreciation on:
Investments............................................... 51,764,886
Futures contracts......................................... (96,948)
------------
Change in net unrealized appreciation or depreciation.... 51,667,938
------------
Net realized and unrealized gain........................... 105,616,969
------------
Net increase in net assets resulting from operations....... $111,179,440
============
</TABLE>
See accompanying notes to financial statements.
===============================================================================
24
<PAGE>
U.S. Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income.......................................................... $ 5,562,471 $ 5,791,742
Net realized gain.............................................................. 53,949,031 44,131,079
Change in net unrealized appreciation or depreciation.......................... 51,667,938 58,277,883
------------- -------------
Net increase in net assets resulting from operations........................... 111,179,440 108,200,704
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I............................................................... (5,223,351) (4,978,081)
Brinson Class N............................................................... (28,171) (832)
UBS Investment Funds Class.................................................... (190,578) (249,586)
Distributions from net realized gain:
Brinson Class I............................................................... (36,404,562) (28,383,478)
Brinson Class N............................................................... (234,496) (64)
UBS Investment Funds Class.................................................... (3,937,537) (2,678,143)
------------- -------------
Total distributions to shareholders............................................ (46,018,695) (36,290,184)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................................................... 283,730,686 346,081,960
Shares issued in connection with the acquisition of the UBS Value Equity Fund.. 23,269,419 --
Shares issued on reinvestment of distributions................................. 42,645,369 33,981,329
Shares redeemed................................................................ (285,854,547) (163,864,419)
------------- -------------
Net increase in net assets resulting from capital share transactions........... 63,790,927 216,198,870
------------- -------------
TOTAL INCREASE IN NET ASSETS............................................... 128,951,672 288,109,390
------------- -------------
NET ASSETS:
Beginning of period............................................................ 661,098,850 372,989,460
------------- -------------
End of period (including accumulated undistributed net investment income of
$1,363,158 and $1,242,787, respectively)....................................... $ 790,050,522 $ 661,098,850
============= =============
</TABLE>
See accompanying notes to financial statements.
================================================================================
25
<PAGE>
U.S. Equity Fund -- Financial Highlights
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------
Brinson Class I 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 19.91 $ 17.64 $ 14.59 $ 11.53 $ 9.65
-------- -------- -------- -------- -------
Income from investment operations:
Net investment income.................... 0.17* 0.19 0.15 0.17 0.16
Net realized and unrealized gain......... 2.67 3.39 4.27 3.31 1.89
-------- -------- -------- -------- -------
Total income from investment
operations................................ 2.84 3.58 4.42 3.48 2.05
-------- -------- -------- -------- -------
Less distributions:
Distributions from net investment income. (0.15) (0.18) (0.14) (0.17) (0.14)
Distributions from net realized gain..... (1.12) (1.13) (1.23) (0.25) (0.03)
-------- -------- -------- -------- -------
Total distributions................... (1.27) (1.31) (1.37) (0.42) (0.17)
-------- -------- -------- -------- -------
Net asset value, end of period.............. $ 21.48 $ 19.91 $ 17.64 $ 14.59 $ 11.53
======== ======== ======== ======== =======
Total return................................ 15.22% 21.48% 31.87% 30.57% 21.45%
Ratios/Supplemental data:
Net assets, end of period (in 000s)....... $713,321 $605,768 $337,949 $126,342 $42,573
Ratio of expenses to average net assets:
Before expense reimbursement............. 0.80% 0.80% 0.89% 1.14% 1.70%
After expense reimbursement.............. N/A N/A 0.80% 0.80% 0.80%
Ratio of net investment income to average
net assets:
Before expense reimbursement............. 0.82% 1.12% 1.06% 1.13% 1.09%
After expense reimbursement.............. N/A N/A 1.15% 1.47% 1.99%
Portfolio turnover rate................... 48% 42% 43% 36% 33%
</TABLE>
* 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>
Year Ended Year Ended
Brinson Class N June 30, 1999 June 30, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period....................... $19.88 $17.64
------ ------
Income from investment operations:
Net investment income................................... 0.08* 0.15
Net realized and unrealized gain........................ 2.67 3.37
------ ------
Total income from investment operations............... 2.75 3.52
------ ------
Less distributions:
Distributions from net investment income................ (0.12) (0.15)
Distributions from net realized gain.................... (1.12) (1.13)
------ ------
Total distributions................................... (1.24) (1.28)
------ ------
Net asset value, end of period............................. $21.39 $19.88
====== ======
Total return............................................... 14.75% 21.10%
Ratios/Supplemental data:
Net assets, end of period (in 000s)....................... $7,563 $ 268
Ratio of expenses to average net assets................... 1.05% 1.05%
Ratio of net investment income to average net assets...... 0.57% 0.87%
Portfolio turnover rate................................... 48% 42%
</TABLE>
* 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. Large Capitalization Equity Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
The investment strategies implemented in the U.S. Large Capitalization Equity
Fund are designed to enhance returns, while controlling risk. Our investment
strategies emphasize stock selection with attention directed to avoiding
unintended concentrations in particular industry and other common characteristic
exposures. Issues are selected from a universe of less than 300 of the largest
capitalization domestic stocks, collectively comprising approximately 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 produced an annualized return of 12.21%,
compared to the 21.53% return of its benchmark, the S&P 500 Equity Index. These
results have been achieved with a risk level or volatility somewhat lower than
that of the benchmark: 19.90% versus 21.14% respectively. For the last six
months, the Fund has underperformed the benchmark, returning 8.04% compared to
the benchmark return of 12.38%.
In 1998 and the first quarter of this year, the U.S. equity market has been
fueled by the desire to not miss out on market momentum. The very largest stocks
and stocks characterized as growth stocks have outperformed the broader market
by historic margins, driving the market to extremes. Based on current prices,
the market is extrapolating super-normal earnings growth for a small group of
"in vogue" stocks far into the future, making the realization of such
projections increasingly unattainable. For the year-to-date period, this
momentum has created a difficult environment for the U.S. Large Capitalization
Equity Fund. We believe that many of the largest, most successful companies (in
terms of recent price appreciation) are currently among the most overvalued.
However, market momentum has continued to carry them higher.
The largest 25 stocks by market capitalization in the S&P 500 were up 6.59% in
the first quarter of the year compared to an increase of 3.79% for the bottom
475 stocks. The largest four stocks alone accounted for 33% of the S&P 500
return for the quarter. Some of the best performing stocks for the quarter were
again found in the computer, electronics, and telecommunications industries.
While many of the companies driving the market are characterized as "good
companies," their future prospects simply cannot support current prices.
Momentum did, in fact, shift away from growth stocks in the second quarter of
1999 to the benefit of value stocks, and our Fund. The Fund outperformed the
benchmark in the second quarter by more than 100 basis points due to this value
shift. Contributing factors included higher global industrial production, the
rebound in many commodity prices (notably oil) and expectations for stronger
corporate profits. This is a significant change from the momentum driving growth
stocks over the past two years. While strong value stock performance this
quarter helped broaden the market, valuation imbalances still remain. Based on
our analysis, growth stocks are likely to underperform the broader market by a
wide margin in the coming months. Such conditions should benefit the Fund which
maintains underweight positions in common characteristics such as size, momentum
and earnings variability and overweights to more traditional value measures.
================================================================================
28
<PAGE>
U.S. Large Capitalization Equity Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year 4/30/98*
ended ended to
6/30/99 6/30/99 6/30/99
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson U.S. Large Capitalization Equity Fund Class I 8.04% 14.54% 12.21%
- ---------------------------------------------------------------------------------------------------------------------------------
S&P 500 Equity Index 12.38 22.76 21.53
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
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 Equity Fund Class I and the S&P 500 Equity Index if you had
invested $1,000,000 on April 30, 1998, and had reinvested all your income
dividends and capital gain distributions through June 30, 1999. 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
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. Large Capitalization
Equity Fund Class I S&P 500 Equity Index
<S> <C> <C>
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 1,058,703 1,117,132
1/31/99 1,065,884 1,163,846
2/28/99 1,032,030 1,127,676
3/31/99 1,057,677 1,172,792
4/30/99 1,147,954 1,218,210
5/31/99 1,114,100 1,189,470
6/30/99 1,143,860 1,255,482
</TABLE>
4/30/98 = $1,000,000 Data through 6/30/99
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
================================================================================
29
<PAGE>
U.S. Large Capitalization Equity Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year 4/30/98*
ended ended to
6/30/99 6/30/99 6/30/99
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson U.S. Large Capitalization Equity Fund Class N 7.95% 14.40% 11.86%
- --------------------------------------------------------------------------------------------------------------------------------
S&P 500 Equity Index 12.38 22.76 21.53
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Performance inception date of the Brinson U.S. Large Capitalization Equity
Fund Class N.
Total return includes reinvestment of all capital gain and income distributions.
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 Equity Fund Class N and the S&P 500 Equity Index if you had
invested $1,000,000 on April 30, 1998, and had reinvested all your income
dividends and capital gain distributions through June 30, 1999. 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
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. Large Capitalization S&P 500 Equity
Equity Fund Class N Index
<S> <C> <C>
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 1,055,758 1,117,132
1/31/99 1,062,927 1,163,846
2/28/99 1,029,134 1,127,676
3/31/99 1,054,734 1,172,792
4/30/99 1,143,824 1,218,210
5/31/99 1,110,031 1,189,470
6/30/99 1,139,728 1,255,482
</TABLE>
4/30/98 = $1,000,000 Data through 6/30/99
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
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
Industry Diversification
<TABLE>
<CAPTION>
As a Percent of Net Assets
As of June 30, 1999
- --------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Capital Investment
Capital Goods..................................................... 13.52%
Technology........................................................ 15.47
------
28.99
Basic Industries
Chemicals......................................................... 1.41
Housing/Paper..................................................... 1.79
Metals............................................................ 3.90
------
7.10
Consumer
Non-Durables...................................................... 2.17
Retail/Apparel.................................................... 2.88
Autos/Durables.................................................... 0.88
Health: Drugs..................................................... 1.30
Health: Non-Drugs................................................. 4.96
------
12.19
Financial
Banks............................................................. 12.24%
Non-Banks......................................................... 11.76
------
24.00
Utilities
Electric.......................................................... 3.11
Transportation....................................................... 12.68
Services/Miscellaneous............................................... 5.95
------
Total U.S. Equities...................................... 94.02
SHORT-TERM INVESTMENTS............................................... 5.80
------
TOTAL INVESTMENTS........................................ 99.82
CASH AND OTHER ASSETS,
LESS LIABILITIES.................................................. 0.18
------
NET ASSETS........................................................... 100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
Top 10 U.S. Equity Holdings
<TABLE>
<CAPTION>
As of June 30, 1999
Percent of
Net Assets
- --------------------------------------------------------------------------------
<S> <C>
1. Xerox Corp. 8.29%
2. FDX Corp. 5.64
3. Burlington Northern Santa Fe Corp. 5.28
4. Raytheon Co., Class B 4.85
5. Electronic Data Systems Corp. 4.77
6. Corning, Inc. 4.67
7. Aetna, Inc. 4.53
8. Lockheed Martin Corp. 4.02
9. CIGNA Corp. 3.67
10. Aon Corp. 3.55
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
U.S. Large Capitalization Equity Fund -- Schedule of Investments
June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----------
<S> <C> <C>
U.S. Equities -- 94.02%
Aetna, Inc.......................................... 13,400 $ 1,198,462
Aon Corp............................................ 22,750 938,437
BankBoston Corp..................................... 4,800 245,400
Baxter International, Inc........................... 9,800 594,125
Burlington Northern Santa Fe Corp................... 45,000 1,395,000
Chase Manhattan Corp................................ 7,800 675,675
CIGNA Corp.......................................... 10,900 970,100
Compaq Computer Corp................................ 2,500 59,219
Computer Sciences Corp. (b)......................... 4,400 304,425
Compuware Corp. (b)................................. 8,600 273,588
Corning, Inc........................................ 17,600 1,234,200
Covance, Inc. (b)................................... 6,900 165,169
Delphi Automotive Systems Corp...................... 12,500 232,031
Dominion Resources, Inc............................. 2,000 86,625
Electronic Data Systems Corp........................ 22,300 1,261,344
Eli Lilly and Company............................... 4,800 343,800
Entergy Corp........................................ 23,500 734,375
FDX Corp. (b)....................................... 27,500 1,491,875
First Data Corp..................................... 18,000 880,875
First Union Corp.................................... 7,300 343,100
Fleet Financial Group, Inc.......................... 11,100 492,562
Household International, Inc........................ 14,600 691,675
Illinois Tool Works, Inc............................ 2,700 221,400
Kimberly-Clark Corp................................. 8,300 473,100
Lockheed Martin Corp................................ 28,500 1,061,625
Masco Corp.......................................... 28,000 808,500
Mattel, Inc......................................... 12,800 338,400
Shares Value
------ -----------
Newell Rubbermaid, Inc.............................. 9,100 $ 423,150
Norfolk Southern Corp............................... 15,400 463,925
Philip Morris Companies, Inc........................ 14,300 574,681
PNC Bank Corp....................................... 7,200 414,900
Praxair, Inc........................................ 7,600 371,925
Raytheon Co., Class B............................... 18,200 1,280,825
U.S. Bancorp........................................ 11,500 391,000
United Healthcare Corp.............................. 8,800 551,100
Wells Fargo and Co.................................. 15,700 671,175
Xerox Corp.......................................... 37,100 2,191,219
----------
Total U.S. Equities (Cost $22,653,111).............. 24,848,987
----------
Investment Companies -- 5.80%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund
(Cost $1,533,005)................................... 1,533,005 1,533,005
----------
Total Investments
(Cost $24,186,116) -- 99.82% (a).................... 26,381,992
Cash and other assets,
less liabilities -- 0.18%........................... 47,712
-----------
Net Assets -- 100%.................................. $26,429,704
===========
</TABLE>
See accompanying notes to schedule of investments.
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $24,186,116; and net
unrealized appreciation consisted of:
Gross unrealized appreciation............. $2,715,404
Gross unrealized depreciation (519,528)
Net unrealized appreciation $2,195,876
(b) Non-income producing security
See accompanying notes to financial statements.
================================================================================
32
<PAGE>
U.S. Large Capitalization Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<S> <C>
JUNE 30, 1999
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $22,653,111)........................................................ $24,848,987
Affiliated issuers (Cost $1,533,005)........................................................... 1,533,005
Receivables:
Investment securities sold..................................................................... 68,635
Dividends...................................................................................... 40,400
Interest....................................................................................... 5,840
Fund shares sold............................................................................... 75,369
----------
TOTAL ASSETS................................................................................ 26,572,236
LIABILITIES:..................................................................................... ----------
Payables:
Investment securities purchased................................................................ 83,692
Fund shares redeemed........................................................................... 22,374
Investment advisory fees....................................................................... 7,436
Accrued expenses............................................................................... 29,030
TOTAL LIABILITIES........................................................................... 142,532
-----------
NET ASSETS....................................................................................... $26,429,704
===========
NET ASSETS CONSIST OF:
Paid in capital................................................................................. $23,882,590
Accumulated undistributed net investment income................................................. 81,256
Accumulated net realized gain................................................................... 269,982
Net unrealized appreciation..................................................................... 2,195,876
-----------
NET ASSETS.................................................................................. $26,429,704
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based on net assets of
$22,668,003 and 2,036,524 shares issued and outstanding)....................................... $ 11.13
===========
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on net assets of
$3,755,814 and 337,580 shares issued and outstanding).......................................... $ 11.13
===========
UBSInvestment Funds Class:
Net asset value, offering price and redemption price per share (Based on net assets of
$5,887 and 532 shares issued and outstanding).................................................. $ 11.07
===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
33
<PAGE>
U.S. Large Capitalization Equity Fund -- Financial Statements
<TABLE>
<CAPTION>
<S> <C>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
INVESTMENT INCOME:
Dividends........................................................ $ 315,848
Interest......................................................... 52,331
----------
TOTAL INCOME................................................. 368,179
----------
EXPENSES:
Advisory......................................................... 137,200
Professional..................................................... 35,054
Distribution..................................................... 24,699
Other............................................................ 82,697
----------
TOTAL EXPENSES............................................... 279,650
Expenses waived by Advisor................................... (97,158)
----------
NET EXPENSES................................................. 182,492
----------
NET INVESTMENT INCOME........................................ 185,687
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on:
Investments..................................................... 233,080
Futures contracts............................................... 106,203
Net realized gain............................................ 339,283
Change in net unrealized appreciation or depreciation on:
Investments..................................................... 2,383,598
Futures contracts............................................... (9,036)
----------
Change in net unrealized appreciation or depreciation............ 2,374,562
----------
Net realized and unrealized gain................................. 2,713,845
----------
Net increase in net assets resulting from operations............. $2,899,532
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
34
<PAGE>
U.S. Large Capitalization Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
Year April 6, 1998*
Ended Through
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income................................................. $ 185,687 $ 32,434
Net realized gain (loss).............................................. 339,283 (69,301)
Change in net unrealized appreciation or depreciation................. 2,374,562 (178,686)
------------ -----------
Net increase (decrease) in net assets resulting from operations....... 2,899,532 (215,553)
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I...................................................... (87,626) (191)
Brinson Class N...................................................... (69,880) (20,605)
UBS Investment Funds Class........................................... (12) (1)
------------ -----------
Total distributions to shareholders................................... (157,518) (20,797)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................................... 24,853,429 16,922,491
Shares issued on reinvestment of distributions........................ 147,324 20,775
Shares redeemed....................................................... (17,500,436) (519,553)
------------ -----------
Net increase in net assets resulting from capital share transactions.. 7,500,317 16,423,713
------------ -----------
TOTAL INCREASE IN NET ASSETS...................................... 10,242,331 16,187,363
------------ -----------
NET ASSETS:
Beginning of period................................................... 16,187,373 10
------------ -----------
End of period (including accumulated undistributed net investment
income of $81,256 and $11,637, respectively)......................... $ 26,429,704 $16,187,373
============ ===========
</TABLE>
*Commencement of investment operations
See accompanying notes to financial statements.
================================================================================
35
<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>
Year April 6, 1998*
Ended Through
Brinson Class I June 30, 1999 June 30, 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period..................................................... $ 9.80 $ 10.00
------- ---------
Income from investment operations:
Net investment income.................................................................. 0.11** 0.02
Net realized and unrealized gain (loss)................................................ 1.31 (0.20)
------- ---------
Total income (loss) from investment operations...................................... 1.42 (0.18)
------- ---------
Less distributions:
Distributions from net investment income............................................... (0.09) (0.02)
------- ---------
Total distributions................................................................. (0.09) (0.02)
------- ---------
Net asset value, end of period........................................................... $ 11.13 $ 9.80
======= =========
Total return (non-annualized)............................................................ 14.54% (1.83)%
Ratios/Supplemental data:
Net assets, end of period (in 000s)..................................................... $22,668 $ 154
Ratio of expenses to average net assets:
Before expense reimbursement........................................................... 1.29% 1.59%***
After expense reimbursement............................................................ 0.80% 0.80%***
Ratio of net investment income to average net assets:
Before expense reimbursement........................................................... 0.57% 0.52%***
After expense reimbursement............................................................ 1.06% 1.31%***
Portfolio turnover rate................................................................. 88% 12%
</TABLE>
*Commencement of investment operations
**The net investment income per share data was determined by using average
shares outstanding throughout the period.
***Annualized
See accompanying notes to financial statements.
================================================================================
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 each period presented.
<TABLE>
<CAPTION>
Year April 6, 1998*
Ended Through
Brinson Class N June 30, 1999 June 30, 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period...................................................... $ 9.78 $ 10.00
------- ---------
Income from investment operations:
Net investment income................................................................... 0.09** 0.02
Net realized and unrealized gain (loss)................................................. 1.31 (0.23)
------- ---------
Total income (loss) from investment operations....................................... 1.40 (0.21)
------- ---------
Less distributions:
Distributions from net investment income................................................ (0.05) (0.01)
------- ---------
Total distributions.................................................................. (0.05) (0.01)
------- ---------
Net asset value, end of period............................................................ $ 11.13 $ 9.78
======= =========
Total return (non-annualized)............................................................. 14.40% (2.02)%
Ratios/Supplemental data:
Net assets, end of period (in 000s)...................................................... $ 3,756 $ 16,033
Ratio of expenses to average net assets:
Before expense reimbursement............................................................ 1.54% 1.84%***
After expense reimbursement............................................................. 1.05% 1.05%***
Ratio of net investment income to average net assets:
Before expense reimbursement............................................................ 0.32% 0.27%***
After expense reimbursement............................................................. 0.81% 1.06%***
Portfolio turnover rate.................................................................. 88% 12%
</TABLE>
*Commencement of investment operations
**The net investment income per share data was determined by using average
shares outstanding throughout the period.
***Annualized
See accompanying notes to financial statements.
================================================================================
37
<PAGE>
U.S. Large Capitalization Growth Fund
[LOGO OF BRINSON APPEARS HERE]
- -----------------------------------------------------------------------------
The investment strategies implemented in the U.S. Large Capitalization Growth
Fund are designed to enhance returns while controlling risk. We invest in large
companies with market capitalizations of $3 billion and larger that we believe
possess a unique competitive advantage that will allow them to achieve high
returns through above average sales and profit growth. We employ quantitative
and qualitative analysis to identify companies that are undervalued relative to
current market prices, and construct portfolios with attention to both risk and
return.
Since its performance inception on October 31, 1997, the Brinson U.S. Large
Capitalization Growth Fund Class I has returned 28.87% compared to 29.46% for
its benchmark, the S&P 500 Equity Index. Over the most recent six-month period,
the Fund has returned 17.48% versus the index return of 12.38%. While large
growth stocks have outperformed the broader market over this period, the Fund's
success on a year-to-date basis is not a result of its large growth style
affiliation. The Fund also outperformed the Russell 1000 Growth Index (an index
of the market's largest 1000 growth companies) by a wide margin. The Russell
1000 Growth Index posted a return of 10.45% for the six months ending June 30,
more than 700 basis points lower than the Fund.
In our December 31, 1998 report, we discussed our expectations of improving
earnings for cyclical companies in 1999, and the consequences of those
expectations for the growth segment of the market. At that time, our solution
was to look for growth companies that were hurt by global economic woes, and
which we expected to perform well in this emerging environment. We consciously
underweighted the major companies in most sectors unless we were extremely
confident of the underlying fundamentals. In the second quarter of 1999 we did
in fact experience a shift in favor of cyclicals. The Fund was well-positioned
for that occurrence.
The strongest positive contribution to performance came from issue selection,
while the remainder came from our industry allocation decisions. The strongest
performing stocks for the Fund were Qualcomm (up more than 450%), Texas
Instruments (up nearly 70%), and Sun Microsytems (up approximately 60%). Other
positives for the Fund were holdings in Immunex and Liberty Media, while
positions in Compaq computer and Becton Dickinson caused a slight on
performance. With respect to industry weightings, the largest positive
contributors to performance were overweights in electronics, media and oil
services. On the opposing side, negative contributions came from our underweight
of producer goods and our overweight of the business machines industry.
As we enter the remainder of the year, the Fund is positioned to take advantage
of a continuation in the trends that helped performance in the first half of
1999. The largest overweights relative to the S&P 500 Equity Index are held in
the consumer staples, healthcare and technology sectors. The largest relative
industry underweight is maintained to financials.
================================================================================
38
<PAGE>
U.S. Large Capitalization Growth Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year 10/31/97*
ended ended to
6/30/99 6/30/99 6/30/99
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson U.S. Large Capitalization Growth Fund Class I 17.48% 29.70% 28.87%
- ---------------------------------------------------------------------------------------------------------------------------------
S&P 500 Equity Index 12.38 22.76 29.46
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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 June 30, 1999. 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
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. Large Capitalization
Growth Fund Class I S&P 500 Equity Index
<S> <C> <C>
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 1,134,655 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 1,129,126 1,219,894
11/30/98 1,210,713 1,293,822
12/31/98 1,297,885 1,368,381
1/31/99 1,380,099 1,425,601
2/28/99 1,319,808 1,381,297
3/31/99 1,384,483 1,436,559
4/30/99 1,436,004 1,492,192
5/31/99 1,418,465 1,456,988
6/30/99 1,524,795 1,537,847
</TABLE>
10/31/97 = $1,000,000 Data through 6/30/99
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
================================================================================
39
<PAGE>
U.S. Large Capitalization Growth Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
12/31/98*
to
6/30/99
- --------------------------------------------------------------------------------
<S> <C>
Brinson U.S. Large Capitalization Growth Fund Class N 17.23%
- --------------------------------------------------------------------------------
S&P 500 Equity Index 12.38
- --------------------------------------------------------------------------------
</TABLE>
* Inception date of the Brinson U.S. Large Capitalization Growth 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 Growth Fund Class N and the S&P 500 Equity Index if you had
invested $1,000,000 on December 31, 1998, and had reinvested all your income
dividends and capital gain distributions through June 30, 1999. 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 N
vs. S&P 500 Equity Index
Wealth Value with Dividends Reinvested
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. Large Capitalization
Growth Fund Class N S&P 500 Equity Index
<S> <C> <C>
12/31/98 $1,000,000 $1,000,000
1/31/99 $1,062,500 $1,041,816
2/28/99 $1,016,047 $1,009,439
3/31/99 $1,065,034 $1,049,824
4/30/99 $1,104,730 $1,090,480
5/31/99 $1,091,216 $1,064,753
6/30/99 $1,172,297 $1,123,844
</TABLE>
12/31/98 = $1,000,000 Data through 6/30/99
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
================================================================================
40
<PAGE>
U.S. Large Capitalization Growth Fund
[LOGO OF BRINSON APPEARS HERE]
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Industry Diversification
<S> <C>
As a Percent of Net Assets
As of June 30, 1999
- --------------------------------------------------------------------------------
U.S. EQUITIES
Energy..................................................... 3.52%
Basic Industries
Chemicals............................................... 1.35
Housing/Paper........................................... 1.68
------
3.03
Capital Investment
Capital Goods........................................... 2.04
Technology.............................................. 19.26
------
21.30
Consumer
Non-Durables............................................ 4.40
Retail/Apparel.......................................... 7.21
Autos/Durables.......................................... 1.23
Health: Drugs........................................... 9.49
Health: Non-Drugs....................................... 8.05
------
30.38
Financial
Banks................................................... 1.72%
Non-Banks............................................... 6.45
------
8.17
Utilities
Telephone............................................... 13.46
Transportation............................................. 1.58
Services/Miscellaneous..................................... 13.74
------
Total U.S. Equities............................ 95.18
------
TOTAL INVESTMENTS.............................. 95.18
CASH AND OTHER ASSETS,
LESS LIABILITIES........................................ 4.82
------
NET ASSETS................................................. 100.00%
======
- --------------------------------------------------------------------------------
Top 10 U.S. Equity Holdings
As of June 30, 1999
Percent of
Net Assets
<S> <C>
- --------------------------------------------------------------
1. International Business Machines Corp. 3.36%
2. General Electric Co. 3.35
3. Texas Instruments, Inc. 3.23
4. Oracle Corp. 2.50
5. Dayton-Hudson Corp. 2.41
6. Waste Management, Inc. 2.39
7. Qualcomm, Inc. 2.31
8. SBC Communications, Inc. 2.22
9. Wal-Mart Stores, Inc. 2.21
10. Sun Microsystems, Inc. 2.13
- --------------------------------------------------------------
</TABLE>
================================================================================
41
<PAGE>
U.S. Large Capitalization Growth Fund -- Schedule of Investments
June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ --------
<S> <C> <C>
U.S. Equities -- 95.18%
Abbott Laboratories....................... 2,000 $ 91,000
AFLAC, Inc................................ 3,300 157,987
Albertson's, Inc.......................... 2,000 103,125
American Express, Co...................... 1,100 143,137
American International Group, Inc......... 700 81,944
AT&T Corp................................. 2,950 164,647
AT&T Corp. - Liberty Media Goup, Inc. (b). 4,156 152,733
Autozone, Inc............................. 3,300 99,413
Avon Products, Inc........................ 2,000 111,000
Bank of America Corp...................... 1,900 139,294
Becton Dickinson & Co..................... 2,300 69,000
Bell Atlantic Corp........................ 1,200 78,450
BMC Software, Inc. (b).................... 2,100 113,400
Boeing Co................................. 2,900 128,144
Boston Scientific Corp. (b)............... 1,800 79,088
Bristol-Myers Squibb Co................... 2,200 154,962
CBS Corp. (b)............................. 2,600 112,937
Citigroup, Inc............................ 1,900 90,250
Dayton Hudson Corp........................ 3,000 195,000
E.I. du Pont de Nemours & Co.............. 1,600 109,300
Electronic Data Systems Corp.............. 2,100 118,781
Exxon Corp................................ 900 69,413
Federal Home Loan Association Co.......... 1,900 110,200
General Electric Co....................... 2,400 271,200
Gillette Co............................... 1,500 61,500
Halliburton Co............................ 1,800 81,450
Hewlett-Packard Co........................ 1,200 120,600
Immunex Corp. (b)......................... 800 101,950
Intel Corp................................ 1,700 101,150
International Business Machines Corp...... 2,100 271,425
Johnson & Johnson Co...................... 1,300 127,400
Lilly (Eli) & Co.......................... 1,500 107,438
Loral Space & Communications Ltd. (b)..... 5,900 106,200
Lowe's Companies, Inc..................... 2,400 136,050
Lucent Technologies, Inc.................. 1,700 114,644
Medtronic, Inc............................ 2,000 155,750
Merck & Co., Inc.......................... 1,800 133,200
Merrill Lynch & Co........................ 1,200 95,925
Microsoft, Inc. (b)....................... 1,400 126,262
Motorola, Inc............................. 1,000 94,750
Nortel Networks, Inc...................... 1,200 104,175
Oracle Corp. (b).......................... 5,450 202,331
Pepsi Bottling Group, Inc................. 5,200 119,925
Philip Morris Companies, Inc.............. 3,300 132,619
Proctor & Gamble Co....................... 1,100 98,175
QUALCOMM, Inc. (b)........................ 1,300 186,550
Raytheon Co., Class A..................... 2,400 165,300
<CAPTION>
Shares Value
------ ---------
<S> <C> <C>
SBC Communications, Inc................... 3,100 $179,800
Schering Plough Corp...................... 3,100 164,300
Schlumberger Ltd.......................... 2,100 133,744
Sun Microsystems, Inc. (b)................ 2,500 172,187
Texas Instruments, Inc.................... 1,800 261,000
Time Warner, Inc.......................... 2,300 169,050
Tyco International Co..................... 900 85,275
Wal-Mart Stores, Inc...................... 3,700 178,525
Walt Disney Co............................ 2,700 83,194
Waste Management, Inc..................... 3,600 193,500
Watson Pharmaceutical Co.................. 400 14,025
Xerox Corp................................ 2,900 171,281
----------
Total Equities (Cost $6,642,892).......... 7,695,055
----------
Total Investments
(Cost $6,642,892) -- 95.18% (a)........... 7,695,055
----------
Cash and other assets,
less liabilities -- 4.82%................. 389,844
----------
Net Assets -- 100%........................ $8,084,899
==========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $6,642,892; and net
unrealized appreciation consisted of:
Gross unrealized appreciation.. $1,141,787
Gross unrealized depreciation.. (89,624)
----------
Net unrealized appreciation $1,052,163
==========
(b) Non-income producing security
See accompanying notes to financial statements.
================================================================================
42
<PAGE>
U.S. Large Capitalization Growth Fund -- Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<S> <C>
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $6,642,892)......................................... $7,695,055
Cash............................................................................ 409,188
Receivables:
Due from Advisor............................................................... 23,548
Dividends...................................................................... 5,334
Investment securities sold..................................................... 73,230
Fund shares sold............................................................... 30,752
Other assets................................................................... 18,639
----------
TOTAL ASSETS................................................................ 8,255,746
----------
LIABILITIES:
Payables:
Investment securities purchased................................................ 126,965
Accrued expenses............................................................... 43,882
----------
TOTAL LIABILITIES........................................................... 170,847
----------
NET ASSETS....................................................................... $8,084,899
----------
NET ASSETS CONSIST OF:
Paid in capital................................................................ $6,447,525
Accumulated net realized gain.................................................. 585,211
Net unrealized appreciation.................................................... 1,052,163
----------
NET ASSETS.................................................................. $8,084,899
==========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based on net
assets of $2,947,293 and 211,874 shares issued and outstanding)............... $ 13.91
=========
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on net
assets of $1,166 and 84 shares issued and outstanding)........................ $ 13.88
=========
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share (Based on net
assets of $5,136,440 and 370,958 shares issued and outstanding)............... $ 13.85
=========
</TABLE>
See accompanying notes to financial statements.
================================================================================
43
<PAGE>
U.S. Large Capitalization Growth Fund -- Financial Statements
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1999
<S> <C>
INVESTMENT INCOME:
Dividends....................................................................... $ 20,814
Interest........................................................................ 9,130
--------
TOTAL INCOME................................................................. 29,944
--------
EXPENSES:
Registration.................................................................... 23,053
Advisory........................................................................ 18,582
Professional.................................................................... 17,394
Distribution.................................................................... 8,837
Other........................................................................... 4,337
--------
TOTAL EXPENSES............................................................... 72,203
Expenses waived and reimbursed by Advisor.................................... (42,136)
--------
NET EXPENSES................................................................. 30,067
--------
NET INVESTMENT LOSS.......................................................... (123)
--------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on investments................................................ 408,525
Change in net unrealized appreciation or depreciation on investments............ 463,877
--------
Net realized and unrealized gain................................................ 872,402
--------
Net increase in net assets resulting from operations............................ $872,279
========
</TABLE>
See accompanying notes to financial statements.
================================================================================
44
<PAGE>
U.S. Large Capitalization Growth Fund -- Financial Statements
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
Period Ended Year Ended
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)..................................................... $ (123) $ 20,269
Net realized gain................................................................ 408,525 438,421
Change in net unrealized appreciation or depreciation............................ 463,877 554,465
----------- -----------
Net increase in net assets resulting from operations............................. 872,279 1,013,155
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................................................. -- (19,205)
Distributions from net realized gain:
Brinson Class I................................................................. -- (151,936)
----------- -----------
Total distributions to shareholders.............................................. -- (171,141)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold...................................................................... 5,233,678 4,973,380
Shares issued on reinvestment of distributions................................... -- 170,881
Shares redeemed.................................................................. (2,169,846) (5,974,601)
----------- -----------
Net increase (decrease) in net assets resulting from capital share transactions.. 3,063,832 (830,340)
----------- -----------
TOTAL INCREASE IN NET ASSETS................................................. 3,936,111 11,674
----------- -----------
NET ASSETS:
Beginning of period.............................................................. 4,148,788 4,137,114
----------- -----------
End of period.................................................................... $ 8,084,899 $ 4,148,788
=========== ===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
45
<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*
Period Ended Year Ended Through
Brinson Class I June 30, 1999 December 31, 1998** December 31, 1998**
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period............................. $ 11.84 $ 9.92 $ 10.00
------- ------- --------
Income from investment operations:
Net investment income......................................... 0.02 0.06 0.02
Net realized and unrealized gain (loss)....................... 2.05 2.38 (0.08)
------- ------- --------
Total income from investment operations..................... 2.07 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................................... $ 13.91 $ 11.84 $ 9.92
======= ======= ========
Total return (non-annualized).................................... 17.48% 24.90% (0.55)%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)............................. $ 2,947 $ 4,147 $ 4,137
Ratio of expenses to average net assets:
Before expense reimbursement.................................. 2.38%*** 2.76% 8.54%***
After expense reimbursement................................... 0.80%*** 0.99% 1.00%***
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement.................................. (1.26)%*** (1.40)% (6.19)%***
After expense reimbursement................................... 0.32%*** 0.37% 1.35%***
Portfolio turnover rate......................................... 51% N/A N/A
</TABLE>
* Commencement of investment operations
** Reflects 10 for 1 share split effective December 9, 1998.
*** Annualized
N/A = Information is not available for periods prior to reorganization, as
described in notes to financial statements.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
46
<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>
Period Ended
Brinson Class N June 30, 1999*
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period........................................................................ $ 11.84
-------------
Income from investment operations:
Net investment loss...................................................................................... (0.01)
Net realized and unrealized gain......................................................................... 2.05
-------------
Total income from investment operations................................................................ 2.04
-------------
Net asset value, end of period.............................................................................. $ 13.88
=============
Total return (non-annualized)............................................................................... 17.23%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)........................................................................ $ 1
Ratio of expenses to average net assets:
Before expense reimbursement............................................................................. 2.63%**
After expense reimbursement.............................................................................. 1.05%**
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement............................................................................. (1.51)%**
After expense reimbursement.............................................................................. 0.07%**
Portfolio turnover rate.................................................................................... 51%
</TABLE>
* Commencement of Brinson Class N was December 31, 1998.
** Annualized
See accompanying notes to financial statements.
================================================================================
47
<PAGE>
U.S. Small Capitalization Growth Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
The investment strategies implemented in the U.S. Small Capitalization Growth
Fund are designed to enhance returns while controlling risk. We invest in
smaller companies with market capitalizations less than $1 billion that we
believe possess a unique competitive advantage that will allow them to achieve
high returns through above average sales and profit growth. We employ
quantitative and qualitative analysis to identify companies that are undervalued
relative to current market prices, and construct portfolios with attention to
both risk and return.
Since its inception on September 30, 1997, the Brinson U.S. Small Capitalization
Growth Fund Class I has returned - 4.74% compared to 1.67% for its benchmark,
the Russell 2000 Index. Over the most recent six-month period, the Fund has
returned 4.32% versus the index return of 9.28%. Small stocks have dramatically
underperformed large stocks over the period since the Fund's inception making
the environment difficult for small capitalization equity managers. The market
has been driven to extremes. Valuation imbalances between large and small stocks
reached a historical peak during this period. Additionally, the market has
experienced an incredible lack of breadth, with a small number of fashionable
stocks driving index returns.
Our positions relative to the benchmark in some broad common characteristics
were the biggest detractors from relative performance for the year-to-date
period. Our underweight of the "variability in market" characteristic had the
worst effect, costing us more than 100 basis points of relative performance.
This was largely due to our underweight of the high-flying internet sector,
which has notoriously high variability in returns. Our overweight to the "labor
intensity" factor was also a negative for the year-to-date period, resulting
from poor performance of some of the stocks we owned in the services sector.
Stock selection was negative for the first half of the year, while our active
industry positions relative to the index added value. These two factors combined
for a negligible effect on overall performance. The Fund was helped by its
overweight to electronics and oil services, but hurt by underweights to producer
goods and telephones.
While the Fund's underperformance over the period is uncomfortable, it has come
during a unique period in the market's history, and should not be indicative of
our future performance. As a result of both a recent broadening of the market,
and steps that we have taken to reposition the Fund, we have experienced a
strong uptick in recent performance. For the month of June, the Fund returned
6.87%, beating the benchmark's return of 4.52% by 235 basis points. We remain
committed to uncovering price/value discrepancies in the small capitalization
segment of the market. We are confident that our sound investment philosophy and
consistent, long-term approach can create value for our clients.
================================================================================
48
<PAGE>
U.S. Small Capitalization Growth Fund
[LOGO OF BRINSON APPEARS HERE]
- -------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year
ended ended 9/30/97*
6/30/99 6/30/99 to 6/30/99
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson U.S. Small Capitalization Growth Fund Class I 4.32% -5.41% -4.74%
- ----------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index 9.28 1.50 1.67
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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 June 30, 1999. 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
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. Small Capitalization Growth
Growth Fund Class I Russell 2000 Index
<S> <C> <C>
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
881,563 954,430
2/28/99 807,515 877,126
825,527 890,820
4/30/99 823,526 970,644
859,549 984,822
6/30/99 918,586 1,029,355
</TABLE>
9/30/97 = $1,000,000
Data through 6/30/99
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.
===============================================================================
49
<PAGE>
U.S. Small Capitalization Growth Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
Total Return
12/31/98*
to
6/30/99
- --------------------------------------------------------------------------------
Brinson U.S. Small Capitalization Growth Fund Class N 4.09
- --------------------------------------------------------------------------------
Russell 2000 Index 9.28
- --------------------------------------------------------------------------------
* Inception date of the Brinson U.S. Small Capitalization Growth 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.
Small Capitalization Growth Fund Class N and the Russell 2000 Index if you had
invested $1,000,000 on December 31, 1998, and had reinvested all your income
dividends and capital gain distributions through June 30, 1999. 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 N
vs. Russell 2000 Index
Wealth Value with Dividends Reinvested
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Brinson U.S. Small Capitalization
Growth Fund Class N Russell 2000 Index
<S> <C> <C>
12/31/98 1,000,000 1,000,000
1/31/99 1,000,000 1,013,289
2/28/99 915,909 931,218
3/31/99 935,227 945,756
4/30/99 932,955 1,030,503
5/31/99 973,864 1,045,555
6/30/99 1,040,909 1,092,835
</TABLE>
12/31/98 = $1,000,000
Data through 6/30/99
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.
===============================================================================
50
<PAGE>
U.S. Small Capitalization Growth Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
Industry Diversification
<TABLE>
<CAPTION>
As a Percent of Net Assets
As of June 30, 1999
- --------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Capital Investment
Capital Goods..................................................... 2.76%
Technology........................................................ 17.19
------
19.95
Basic Industries
Chemicals......................................................... 1.23
Housing/Paper..................................................... 0.70
------
1.93
Consumer
Non-Durables...................................................... 6.29
Retail/Apparel.................................................... 7.99
Autos/Durables.................................................... 10.97
Health: Drugs..................................................... 1.37
Health: Non-Drugs................................................. 6.65
------
33.27
Financial
Banks............................................................. 7.79%
Non-Banks......................................................... 8.38
------
16.17
Utilities
Telephone......................................................... 1.29
Transportation....................................................... 5.05
Services/Miscellaneous............................................... 13.31
-----
Total U.S. Equities...................................... 90.97
SHORT-TERM INVESTMENTS............................................... 5.95
------
TOTAL INVESTMENTS........................................ 96.92
CASH AND OTHER ASSETS,
LESS LIABILITIES.................................................. 3.08
------
NET ASSETS........................................................... 100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
Top 10 U.S. Equity Holdings
<TABLE>
<CAPTION>
As of June 30, 1999
Percent of
Net Assets
- --------------------------------------------------------------------------------
<S> <C>
1. Waters Corp. 2.86%
2. Foodmaker, Inc. 2.81
3. U.S. Trust Corp. 2.79
4. U.S. Foodservice, Inc. 2.37
5. Protective Life Corp. 2.24
6. Swift Transportation Co., Inc. 2.06
7. North Fork Bancorporation, Inc. 1.99
8. Expeditors International of Washington, Inc. 1.97
9. Smith International, Inc. 1.87
10. Investors Financial Services Corp. 1.82
- --------------------------------------------------------------------------------
</TABLE>
================================================================================
51
<PAGE>
U.S. Small Capitalization Growth Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
<S> <C> <C>
U.S. Equities -- 90.97%
Aeroflex, Inc. (b)............................................... 29,800 $ 588,550
AFC Cable Systems, Inc. (b)...................................... 8,400 296,625
Airborne Freight Corp. .......................................... 5,700 157,819
American Italian Pasta Co., Class A (b).......................... 13,100 397,912
Ariba, Inc. (b).................................................. 2,000 194,500
Ask Jeeves, Inc. (b)............................................. 2,500 35,000
Astec Industries, Inc. (b)....................................... 12,100 493,075
AVT Corp. (b).................................................... 14,900 564,337
Bally Total Fitness Holdings, Inc. (b)........................... 14,100 400,087
Bindley Western Industries, Inc. ................................ 21,066 485,849
Casey's General Stores, Inc. .................................... 30,000 450,000
Comfort Systems USA, Inc. (b).................................... 14,000 252,000
Commercial Federal Corp. ........................................ 11,000 255,063
Consolidated Graphics, Inc. (b).................................. 7,100 355,000
Copper Mountain Networks, Inc. (b)............................... 2,300 177,675
Cost Plus, Inc. (b).............................................. 11,400 518,700
Critical Path, Inc. (b).......................................... 600 33,188
CTS Corp. ....................................................... 2,000 140,000
Dendrite International, Inc. (b)................................. 15,800 570,775
DII Group, Inc. (b).............................................. 14,300 533,569
DLJdirect (b).................................................... 2,700 79,650
Eclipsys Corp. (b)............................................... 6,100 146,019
Elcor Corp. ..................................................... 12,600 550,462
Emmis Communications Corp. (b)................................... 6,800 335,750
Ethan Allen Interiors, Inc. ..................................... 10,450 394,487
eToys Inc. (b)................................................... 2,100 85,575
Expeditors International of Washington, Inc. .................... 25,900 705,775
Finova Group, Inc. .............................................. 10,700 563,087
Foodmaker, Inc. (b).............................................. 35,500 1,007,312
FPIC Insurance Group, Inc. (b)................................... 9,300 451,050
H.B. Fuller Co. ................................................. 6,400 437,600
Haverty Furniture Cos., Inc. .................................... 5,000 175,938
Hooper Holmes, Inc. ............................................. 21,200 431,950
Horace Mann Educators Corp. ..................................... 6,100 165,844
Insight Enterprises, Inc. (b).................................... 15,500 383,625
Investors Financial Services Corp. .............................. 16,300 652,000
Juniper Networks, Inc. (b)....................................... 1,400 208,600
Kellstrom Industries, Inc. (b)................................... 18,200 332,150
Kenneth Cole Productions, Inc. (b)............................... 13,800 384,675
Kronos, Inc. (b)................................................. 3,400 154,700
Labor Ready, Inc. (b)............................................ 11,000 357,500
Level One Communications, Inc. (b)............................... 7,300 357,244
Manitowoc Co., Inc. ............................................. 5,500 228,938
MapQuest.com, Inc. (b)........................................... 900 14,681
Marimba, Inc. (b)................................................ 1,800 94,838
Media Metrix, Inc. (b)........................................... 900 47,925
MedQuist, Inc. (b)............................................... 11,900 520,625
Mercury Computer Systems, Inc. (b)............................... 14,500 467,625
Mercury Interactive Corp. (b).................................... 12,700 449,262
Mesaba Holdings, Inc. (b)........................................ 16,400 209,100
Metro Information Services, Inc. (b)............................. 14,000 232,750
Monaco Coach Corp. (b)........................................... 13,400 566,987
MotivePower Industries, Inc. (b)................................. 17,850 321,300
North Fork Bancorporation, Inc. ................................. 33,500 713,969
Ocular Sciences, Inc. (b)........................................ 10,700 185,913
Orthodontic Centers of America, Inc. (b)......................... 17,900 252,838
Pacific Sunwear of California, Inc. (b).......................... 16,650 405,844
Pantry, Inc. (b)................................................. 19,900 320,887
Patterson Dental Co. ............................................ 17,900 622,025
Peoples Heritage Financial Group, Inc. .......................... 30,400 571,900
Peregrine Systems, Inc. (b)...................................... 20,400 524,025
Personnel Group of America, Inc. (b)............................. 11,700 117,000
Phone.com, Inc. (b).............................................. 1,200 67,200
Prime Group Realty Trust......................................... 18,100 311,094
Protective Life Corp. ........................................... 24,300 801,900
QRS Corp. (b).................................................... 5,500 429,000
ResMed, Inc. (b)................................................. 7,700 255,544
Sanmina Corp. (b)................................................ 7,800 591,825
Scient Corp. (b)................................................. 4,600 218,788
Smith Int'l, Inc. (b)............................................ 15,400 668,937
Sonic Automotive, Inc. (b)....................................... 18,400 253,000
StarMedia Network, Inc. (b)...................................... 1,900 121,838
Sunrise Assisted Living, Inc. (b)................................ 13,500 470,812
Swift Transportation Co., Inc. (b)............................... 33,600 739,200
Sykes Enterprises, Inc. (b)...................................... 15,100 503,962
Tetra Tech, Inc. (b)............................................. 15,750 259,875
TheStreet.com, Inc. (b).......................................... 1,800 64,800
TMP Worldwide, Inc. (b).......................................... 7,800 495,300
Tower Automotive, Inc. (b)....................................... 10,900 277,269
U.S. Foodservice (b)............................................. 19,900 848,237
U.S. Trust Corp. ................................................ 10,800 999,000
United Stationers, Inc. (b)...................................... 8,400 184,800
Vignette Corp. (b)............................................... 800 60,000
Waters Corp. (b)................................................. 19,300 1,025,312
Zebra Technologies Corp., Class A (b)............................ 15,200 584,250
Zions Bancorporation............................................. 4,000 254,000
-----------
Total U.S. Equities (Cost $28,475,224)........................... 32,615,092
-----------
Investment Companies -- 5.95%
Brinson Supplementary Trust U.S.
Cash Management Prime Fund
(Cost $2,134,217).............................................. 2,134,217 2,134,217
-----------
Total Investments
(Cost $30,609,441) -- 96.92% (a)............................... 34,749,309
Cash and other assets,
less liabilities -- 3.08%...................................... 1,102,657
-----------
Net Assets -- 100%............................................... $35,851,966
===========
</TABLE>
See accompanying notes to schedule of investments.
================================================================================
52
<PAGE>
U.S. Small Capitalization Growth Fund -- Schedule of Investments
June 30, 1999
- -------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $30,609,441;
and net unrealized appreciation consisted of:
Gross unrealized appreciation........ $ 5,312,470
Gross unrealized depreciation........ (1,172,602)
------------
Net unrealized appreciation....... $ 4,139,868
============
(b) Non-income producing security
See accompanying notes to financial statements.
================================================================================
53
<PAGE>
U.S. Small Capitalization Growth Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $28,475,224)............................................................ $32,615,092
Affiliated issuers (Cost $2,134,217)............................................................... 2,134,217
Cash................................................................................................ 142,822
Receivables:
Investment securities sold......................................................................... 719,015
Dividends.......................................................................................... 9,768
Interest........................................................................................... 9,943
Fund shares sold................................................................................... 553,305
Other assets........................................................................................ 18,639
-----------
TOTAL ASSETS.................................................................................... 36,202,801
-----------
LIABILITIES:
Payables:
Investment securities purchased.................................................................... 257,629
Investment advisory fees........................................................................... 17,969
Fund shares purchased.............................................................................. 31,580
Accrued expenses................................................................................... 43,657
-----------
TOTAL LIABILITIES............................................................................... 350,835
-----------
NET ASSETS........................................................................................... $35,851,966
===========
NET ASSETS CONSIST OF:
Paid in capital..................................................................................... $35,967,096
Accumulated net realized loss....................................................................... (4,254,998)
Net unrealized appreciation......................................................................... 4,139,868
-----------
NET ASSETS...................................................................................... $35,851,966
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based on net assets of
$35,211,394 and 3,836,230 shares issued and outstanding)........................................... $ 9.18
===========
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on net assets of
$1,044 and 114 shares issued and outstanding)...................................................... $ 9.16
===========
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share (Based on net assets of
$639,528 and 69,990 shares issued and outstanding)................................................. $ 9.14
===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
54
<PAGE>
U.S. Small Capitalization Growth Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends..................................................................................... $ 57,456
Interest...................................................................................... 47,194
----------
TOTAL INCOME.............................................................................. 104,650
----------
EXPENSES:
Advisory...................................................................................... 148,873
Registration.................................................................................. 22,283
Professional.................................................................................. 15,150
Other......................................................................................... 12,307
----------
TOTAL EXPENSES............................................................................ 198,613
Expenses waived by Advisor................................................................ (25,786)
----------
NET EXPENSES.............................................................................. 172,827
----------
NET INVESTMENT LOSS....................................................................... (68,177)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on investments.............................................................. (633,451)
Change in net unrealized appreciation or depreciation on investments.......................... 1,970,811
----------
Net realized and unrealized gain.............................................................. 1,337,360
----------
Net increase in net assets resulting from operations.......................................... $1,269,183
==========
</TABLE>
See accompanying notes to financial statements.
================================================================================
55
<PAGE>
U.S. Small Capitalization Growth Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period Ended Year Ended
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment loss................................................................... $ (68,177) $ (49,900)
Net realized loss..................................................................... (633,451) (3,615,782)
Change in net unrealized appreciation or depreciation................................. 1,970,811 2,695,815
------------- ---------------
Net increase (decrease) in net assets resulting from operations....................... 1,269,183 (969,867)
------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain:
Brinson Class I...................................................................... -- (10,014)
------------- ---------------
Total distributions to shareholders................................................... -- (10,014)
------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................................................... 23,560,273 18,352,730
Shares issued on reinvestment of distributions........................................ -- 9,859
Shares redeemed....................................................................... (11,586,801) (6,727,395)
------------- ---------------
Net increase in net assets resulting from capital share transactions.................. 11,973,472 11,635,194
------------- ---------------
TOTAL INCREASE IN NET ASSETS....................................................... 13,242,655 10,655,313
------------- ---------------
NET ASSETS:
Beginning of period................................................................... 22,609,311 11,953,998
------------- ---------------
End of period......................................................................... $ 35,851,966 $22,609,311
============= ===============
</TABLE>
See accompanying notes to financial statements.
================================================================================
56
<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>
Period Year September 30, 1997*
Ended Ended Through
Brinson Class I June 30, 1999 December 31, 1998** December 31, 1997**
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.............................. $ 8.80 $ 9.44 $ 10.00
-------- -------- --------
Income from investment operations:
Net investment loss............................................ (0.02) (0.02) --
Net realized and unrealized gain (loss)........................ 0.40 (0.57) (0.56)
-------- -------- --------
Total income (loss) from investment operations............... 0.38 (0.59) (0.56)
-------- -------- --------
Less distributions:
Distributions from net realized gain........................... -- (0.05) --
-------- -------- --------
Total distributions.......................................... -- (0.05) --
-------- -------- --------
Net asset value, end of period.................................... $ 9.18 $ 8.80 $ 9.44
======== ======== ========
Total return (non-annualized)..................................... 4.32% (6.70)% (5.62)%
Ratios/Supplemental data:
Net assets, end of period (in 000s).............................. $ 35,211 $ 22,607 $ 11,954
Ratio of expenses to average net assets:
Before expense reimbursement................................... 1.32%*** 1.69% 3.63%***
After expense reimbursement.................................... 1.15%*** 1.20% 1.20%***
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement................................... (0.62)%*** (0.76)% (2.53)%***
After expense reimbursement.................................... (0.45)%*** (0.27)% (0.10)%***
Portfolio turnover rate.......................................... 71% N/A N/A
</TABLE>
* Commencement of investment operations
** Reflects 10 for 1 share split effective December 9, 1998.
*** Annualized
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 -- Financial Highlights
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Period Ended
Brinson Class N June 30, 1999*
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period........................................................ $ 8.80
------
Income from investment operations:
Net investment loss...................................................................... (0.04)
Net realized and unrealized gain......................................................... 0.40
------
Total income from investment operations................................................ 0.36
------
Net asset value, end of period.............................................................. $ 9.16
======
Total return (non-annualized)............................................................... 4.09%
Ratios/Supplemental data:
Net assets, end of period (in 000s)........................................................ $ 1
Ratio of expenses to average net assets:
Before expense reimbursement............................................................. 1.57%**
After expense reimbursement.............................................................. 1.40%**
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement............................................................. (0.87)%**
After expense reimbursement.............................................................. 0.70%**
Portfolio turnover rate.................................................................... 71%
</TABLE>
* Commencement of Brinson Class N was December 31, 1998.
** Annualized
See accompanying notes to financial statements.
================================================================================
58
<PAGE>
U.S. Bond Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
In selecting issues for the U.S. Bond Fund, we incorporate our analysis of
interest rate sensitivity, maturity mix and sector valuation, as well as
security specific research compiled by our fixed income and equity research
teams. We invest the Fund's assets in investment grade (high quality)
securities.
Since its inception on August 31, 1995, the Brinson U.S. Bond Fund Class I has
produced an annualized return of 6.64%, compared to the 6.71% return of its
benchmark, the Salomon Smith Barney Broad Investment Grade (BIG) Bond Index. The
annualized volatility of the Fund was similar to that of the benchmark at 4.01%
and 3.54% respectively. During the first half of 1999, the Fund was down 1.40%
while the benchmark was down similarly by 1.39%.
U.S. bond markets were characterized by a high level of volatility in the first
quarter of 1999. After a fairly stable January, February turned in the worst
one-month performance record for U.S. Treasury securities in 18 years. The
largest changes took place among securities with longer terms to maturity, while
shorter-term treasury bills were relatively stable.
This volatility was spurred somewhat by Federal Reserve (Fed) chairman Alan
Greenspan's testimony to Congress in February. He stated that the Fed expects
stronger growth and higher inflation in the U.S. than was originally called for
in the fall of 1998. Even though these adjustments were modest, they were
sufficient enough to disappoint investors.
During this period of volatility, corporate bonds and other spread sectors
(bonds that have credit risk because they are not backed by the U.S. Government)
performed well, retracing some of the weakness caused by a general flight-to-
quality that rounded out 1998.
We trimmed our corporate bond weighting on the heels of this strong showing, but
maintained a meaningful overweight to corporate bonds and, to a lesser extent,
mortgages throughout the first half of the year.
U.S. bond yields in the second quarter were driven well above our estimates of
fair value by market expectations of higher inflation and anticipation of the 25
basis point rate hike by the Federal Reserve which occurred on June 30. As a
result we have set representative duration strategies longer than the benchmark-
- -at 1.05 times the benchmark.
From a sector standpoint, we believe that prevailing credit spreads provide more
than adequate compensation for risk--given our assumptions about the economy and
the probabilities we assign to different scenarios for default rates. While
credit fundamentals have modestly deteriorated in recent months, this has
already been accounted for in our sector modeling. As a consequence, exposure to
corporate bonds remains one of the largest active portfolio positions relative
to the index. Overweights are also maintained in the mortgage and asset-backed
sectors.
================================================================================
59
<PAGE>
U.S. Bond Fund
[LOGO OF BRINSON APPEARS HERE]
- -------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years Annualized
ended ended ended 8/31/95* to
6/30/99 6/30/99 6/30/99 6/30/99
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Brinson U.S. Bond Fund Class I -1.40% 2.97% 7.29% 6.64%
- ----------------------------------------------------------------------------------------------------------
Salomon Smith Barney Broad Investment Grade (BIG) Bond Index -1.39 3.12 7.24 6.71
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* 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 June 30, 1999. 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]
<TABLE>
<CAPTION>
Brinson U.S. Bond Salomon Smith Barney
Fund Class I BIG Bond Index
<S> <C>
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
1,308,672 1,310,351
1,286,677 1,287,420
1,295,231 1,294,759
1,298,896 1,299,031
1,285,455 1,287,080
6/30/99 1,279,528 1,282,704
</TABLE>
8/31/95 = $1,000,000
Data through 6/30/99
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.
================================================================================
60
<PAGE>
U.S. Bond Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
Total Return
<TABLE>
<CAPTION>
6 months 1 year 6/30/97*
ended ended to
6/30/99 6/30/99 6/30/99
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson U.S. Bond Fund Class N -1.58% 2.88% 6.53%
- ----------------------------------------------------------------------------------------------
Salomon Smith Barney Broad Investment Grade (BIG) Bond Index -1.39 3.12 6.79
- ----------------------------------------------------------------------------------------------
</TABLE>
* 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 June 30, 1999. 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]
<TABLE>
<CAPTION>
Brinson U.S. Bond Salomon Smith Barney
Fund Class N BIG Bond Index
<S> <C>
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
3/31/98 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
1,162,774 1,164,974
1,142,204 1,144,587
1,149,783 1,151,111
1,153,031 1,154,910
1,140,039 1,144,284
6/30/99 1,134,778 1,140,394
</TABLE>
6/30/97 = $1,000,000
Data through 6/30/99
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.
================================================================================
61
<PAGE>
US Bond Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
Industry Diversification
<TABLE>
<CAPTION>
As a Percent of Net Assets
As of June 30, 1999
- ------------------------------------------------------------------------------------
<S> <C>
U.S. BONDS
Corporate Bonds
Airlines............................................................... 0.07%
Asset-Backed........................................................... 7.08
Banks.................................................................. 0.98
CMO.................................................................... 4.98
Consumer............................................................... 2.40
Energy................................................................. 0.27
Financial Services..................................................... 4.78
Industrial Components.................................................. 0.45
Services/Miscellaneous................................................. 2.43
Utilities.............................................................. 3.50
------
Total U.S. Corporate Bonds.......................................... 26.94
International Dollar Bonds.............................................. 9.14
Mortgage-Backed Securities.............................................. 8.72
U.S. Government Agencies................................................ 32.62
U.S. Government Obligations............................................. 16.46
------
Total U.S. Bonds.................................................... 93.88
SHORT-TERM INVESTMENTS.................................................. 5.61
------
TOTAL INVESTMENTS................................................... 99.49
CASH AND OTHER ASSETS, LESS LIABILITIES................................. 0.51
------
NET ASSETS.............................................................. 100.00%
======
</TABLE>
================================================================================
62
<PAGE>
U.S. Bond Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
---------- -----------
<S> <C> <C>
Bonds -- 93.88%
U.S. Corporate Bonds -- 26.94%
ABN Amro Mortgage Corp., 99-2 IA2,
6.300%, due 04/25/29................................... $2,100,000 $ 2,040,612
ABN Amro Mortgage Corp., 99-3, Class A2,
6.300%, due 05/25/29................................... 1,000,000 972,050
Cendant Corp., 7.750%, due 12/01/03...................... 1,060,000 1,070,622
Centaur Funding Corp., 144A, (b)
0.000%, due 04/21/20................................... 1,355 209,348
9.080%, due 04/21/20................................... 715 767,284
Chase Mortgage Finance Corp., 93-J1,
Class 1A5, 6.625%, due 08/25/09........................ 60,423 58,912
Ches Pot Tel MD, 8.000%, due 10/15/29.................... 87,000 95,466
Chrysler Financial Corp.,
7.400%, due 08/01/97................................... 100,000 97,942
Continental Airlines, Inc., 98-1B,
6.748%, due 09/15/18................................... 71,387 67,966
Countrywide Funding Corp. FRN,
5.420%, due 12/01/03................................... 250,000 237,500
Farmers Exchange Capital, 144A,
7.050%, due 07/15/28................................... 1,090,000 985,126
First Bank Corporate Card Master Trust, 97-1,
Class A, 6.400%, due 02/15/03.......................... 980,000 982,852
General Motors Acceptance Corp.,
9.625%, due 12/15/01................................... 294,000 315,322
Heller Financial Commercial Mortgage Assets,
99-PH1 A1, 6.500%, due 05/15/61........................ 1,244,122 1,232,775
Illinois Power Special Purpose Trust, 98-1,
5.650%, due 12/25/10................................... 1,565,000 1,445,590
LB Commercial Conduit Mortgage Trust,
99-C1 A1, 6.410%, due 10/15/30......................... 705,000 695,673
Lehman Brothers, Inc., Senior Note
7.250%, due 04/15/03................................... 225,000 225,783
MBNA Global Capital Securities FRN,
5.795%, due 02/01/27................................... 90,000 78,038
Merrill Lynch & Co., Inc.,
6.000%, due 02/17/09................................... 1,000,000 921,990
Mid-America Energy,
6.375%, due 06/15/06................................... 275,000 261,566
Monsanto Co., 144A,
6.600%, due 12/01/28................................... 1,250,000 1,110,850
Morgan Stanley Dean Witter, MTN,
5.625%, due 01/20/04................................... 1,000,000 960,268
News America Holdings,
7.750%, due 12/01/45................................... 358,000 339,350
Norwest Asset Securities Corp., 98-25,
Class A5, 6.000%, due 12/25/28......................... 2,400,000 2,306,280
PanAmSat Corp.,
6.000%, due 01/15/03................................... 375,000 367,057
6.375%, due 01/15/08................................... 500,000 472,114
Peco Energy Transition Trust,
6.130%, due 03/01/09................................... 1,135,000 1,076,173
Premier Auto Trust 96-4A, Class A4,
6.400%, due 10/06/01................................... 350,000 351,421
Rite Aid Corp., 144A,
6.125%, due 12/15/08................................... $ 890,000 $ 806,115
Salomon, Inc., 6.750%, due 02/15/03...................... 300,000 300,693
Service Corp., International,
6.000%, due 12/15/05................................... 750,000 689,197
Sprint Capital Corp.,
6.875%, due 11/15/28................................... 1,000,000 910,531
Tele-Communications, Inc,
9.800%, due 02/01/12................................... 950,000 1,160,336
Texas Utilities, 5.940%, due 10/15/11.................... 420,000 416,947
Thrift Financial Corp.,
11.250%, due 01/01/16.................................. 34,157 35,681
Time Warner Entertainment, Inc.,
Debenture 8.375%, due 03/15/23
Pool #298198........................................... 94,000 101,723
Time Warner, Inc., 7.570%, due 02/01/24.................. 340,000 338,600
U.S.A. Waste Services,
6.500%, due 12/15/02................................... 400,000 396,660
Vendee Mortgage Trust, 92-1, Class 2Z,
7.750%, due 05/15/22................................... 532,364 548,565
Westdeutsche Landesbank NY,
6.050%, due 01/15/09................................... 1,035,000 957,835
-----------
26,408,813
-----------
Mortgage-Backed Securities -- 8.72%
Chemical Mortgage Securities Inc. 93-1
Class A5, 7.450%, due 02/25/23......................... 327,646 329,661
Citicorp Mortgage Securities, Inc. 94-9
Class A8, 5.750%, due 06/25/09......................... 1,069,783 1,000,065
GE Capital Mortgage Services, Inc., 97-HE4,
Class A7, 6.735%, due 12/25/28......................... 410,000 408,930
GreenTree Financial Corp., 94-5, Class A5,
8.300%, due 11/15/19................................... 320,000 335,797
PNC Mortgage Securities Corp., 94-3,
Class A8, 7.500%, due 07/25/24......................... 215,000 212,766
Prudential Home Mortgage Securities, 93-43,
Class A9, 6.750%, due 10/25/23......................... 275,025 268,757
Prudential Home Mortgage Securities, 94-3,
Class A10, 97-HE4 A76.500%,
due 02/25/24........................................... 170,000 164,492
Residential Accredit Loans, Inc., 96-QS4,
Class Al10, 7.900%, due 08/25/26....................... 275,000 279,570
Residential Accredit Loans, Inc., 98-QS4,
Class AI5, 7.000%, due 03/25/28........................ 2,850,000 2,842,296
Residential Asset Securitization Trust, 97-A10,
Class A1, 7.250%, due 12/25/27......................... 490,952 493,417
Residential Funding Mortgage, Series 95-S6,
Class A7, 7.500%, due 11/25/25......................... 955,358 961,730
SASCO LLC., 98-RF1, Class A, 7.900%,
144A, due 10/15/28..................................... 517,811 530,109
Structured Asset Securities Corp., 98-RF1,
Class A, 8.712%, due 03/15/27.......................... 434,456 455,093
Structured Asset Securities Corp., 98-RF2,
8.582%, due 07/15/27................................... 152,810 159,687
</TABLE>
================================================================================
63
<PAGE>
U.S. Bond Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
June 30, 1999
<TABLE>
<CAPTION>
Face
Amount Value
---------- ----------
<S> <C> <C>
Mortgage-Backed Securities -- (Continued)
UCFC Home Equity Loan 97-C, Class A8,
FRN, 5.069%, due 09/15/27................................. $ 106,786 $ 106,529
-----------
8,548,899
-----------
International Dollar Bonds -- 9.14%
Banco Santiago S.A., 7.000%,
due 07/18/07.............................................. 380,000 333,217
Banque Paribas, Sub. Notes,
6.875%, due 03/01/09...................................... 700,000 675,146
British Sky Broadcasting Group plc,
6.875%, due 02/23/09...................................... 820,000 747,771
Credit Suisse-London, 144A,
Resettable Perpetual Preferred,
7.90%, due 05/01/07....................................... 500,000 486,783
Empresa Nacional de Electricidad S.A.,
7.875%, due 02/01/27...................................... 594,000 502,946
Interamer Development Bank, 6.80%,
due 10/15/25.............................................. 100,000 100,188
Korea Development Bank, 7.125%,
due 09/17/01.............................................. 500,000 498,573
Pemex Finance Ltd., 2A-B1, 8.450%,
due 02/15/07, 144A........................................ 940,000 942,406
Petroliam Nasional Berhad, 144A,
7.625%, due 10/15/26...................................... 430,000 344,523
Ras Laffan Liquified Natural Gas Co., Ltd.,
144A, 8.294%, due 03/15/14................................ 450,000 415,274
Repsol International Finance,
7.000%, due 08/01/05...................................... 200,000 198,779
Republic of South Africa,
9.625%, due 12/15/99...................................... 71,000 71,710
Royal Bank of Scotland, Resettable
Perpetual Preferred, 7.375%,
due 04/29/49.............................................. 80,000 77,767
Skandinaviska Enskilda Banken, 144A,
6.625%, due 03/29/49...................................... 960,000 949,317
Skandinaviska Enskilda Banken, 144A,
Resettable Perpetual Preferred,
6.500%, due 12/29/49...................................... 305,000 290,079
Southern Investments UK, 6.800%,
due 12/01/06.............................................. 1,345,000 1,296,974
Tyco International Group, S.A.,
5.875%, due 11/01/04...................................... 595,000 574,186
7.000%, due 06/15/28...................................... 500,000 463,137
-----------
8,968,776
-----------
U.S. Government Agencies -- 32.62%
Aid-Israel, Series 10-Z, 0.000%,
due 02/15/03 (b).......................................... 805,000 650,286
Fannie Mae Whole Loan, Series 95-W3,
Class A, 9.000%, due 04/25/25............................. 138,477 144,700
Federal Home Loan Mortgage Corp.,
7.000%, due 10/15/13...................................... $ 492,125 $ 486,244
7.238%, due 05/01/26...................................... 15,110 15,224
Federal Home Loan Mortgage Corp. Gold,
8.000%, due 11/01/22...................................... 99,552 102,604
9.000%, due 03/01/24...................................... 76,257 81,179
Federal National Mortgage Association
5.625%, due 03/15/01...................................... 5,080,000 5,068,458
6.500%, due 03/01/19...................................... 488,377 475,426
6.000%, due 03/01/28...................................... 689,567 649,320
6.000%, due 01/01/29...................................... 1,624,551 1,528,964
6.000%, due 02/01/29...................................... 3,480,663 3,277,511
6.500%, due 06/01/28...................................... 750,168 726,093
6.500%, due 09/01/28...................................... 241,593 233,840
6.500%, due 11/01/28...................................... 1,965,912 1,901,493
6.500%, due 11/01/28...................................... 3,407,597 3,298,235
6.500%, due 02/01/29...................................... 512,629 495,832
7.000%, due 12/01/24...................................... 2,790,375 2,762,223
7.000%, due 03/01/29...................................... 47,731 47,275
7.500%, due 12/01/23...................................... 523,038 528,969
7.500%, due 01/01/28...................................... 285,300 288,975
8.000%, due 08/01/08...................................... 637,337 656,714
8.000%, due 12/18/11...................................... 100,000 104,443
8.000%, due 05/25/21...................................... 2,260,000 2,301,753
8.500%, due 07/01/22...................................... 11,754 12,362
8.500%, due 07/15/21...................................... 61,292 63,438
9.500%, due 08/01/22...................................... 72,528 77,376
Federal National Mortgage Assoc.,
Series 97-72, Class EG, 0.000%,
due 09/25/22.............................................. 344,151 306,473
Federal National Mortgage Assoc. Strips,
8.000%, due 08/01/23...................................... 333,287 85,297
0.000%, due 02/01/28 (b).................................. 239,536 168,071
Federal National Mortgage Assoc. TBA
N12L8, 0.000%............................................. 1,090,000 1,025,281
Federal National Mortgage Association,
FNCI, 8.000%, due 02/01/13................................ 200,460 206,555
Freddie Mac, 5.750%, due 06/15/01........................... 1,000,000 998,241
Government National Mortgage Association
Class L SEQ, 7.000%, due 02/16/24......................... 150,000 149,410
Government National Mortgage Association,
7.000%, due 07/15/25...................................... 91,342 90,490
7.500%, due 12/15/22...................................... 226,748 229,914
7.500%, due 12/15/23...................................... 949,000 962,014
7.500%, due 01/15/24...................................... 64,928 65,779
7.500%, due 06/15/25...................................... 79,422 80,486
8.000%, due 08/15/22...................................... 45,546 46,960
9.000%, due 11/15/04...................................... 7,671 8,079
9.000%, due 11/15/04...................................... 3,126 3,292
9.000%, due 12/15/17...................................... 32,630 34,783
10.000%, due 09/15/00..................................... 1,306 1,392
10.000%, due 05/15/01..................................... 1,527 1,628
Jordan Aid, 8.750%, due 09/01/19............................ 1,357,589 1,542,248
-----------
31,985,330
-----------
</TABLE>
================================================================================
64
<PAGE>
U.S. Bond Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
---------- ------------
<S> <C> <C>
U.S. Government Obligations -- 16.46%
U.S. Treasury Bond,
8.000%, due 11/15/21.......................... $7,985,000 $ 9,606,953
U.S. Treasury Inflation Indexed Note,
3.625%, due 04/15/28.......................... 1,770,000 1,717,227
U.S. Treasury Note,
5.000%, due 04/30/01.......................... 3,400,000 3,370,250
5.625%, due 05/15/08.......................... 1,470,000 1,439,681
------------
16,134,111
------------
Total Bonds (Cost $94,549,344).................. 92,045,929
------------
Shares
----------
Short-Term Investments -- 5.61%
Investment Companies -- 5.61%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund
(Cost $5,504,377)............................. 5,504,377 5,504,377
------------
Total Investments
(Cost $100,053,721) -- 99.49% (a)............. 97,550,306
Cash and other assets, less
liabilities -- 0.51%.......................... 495,277
------------
Net Assets -- 100%.............................. $ 98,045,583
============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $100,053,721; and net
unrealized depreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation.............. $ 342,432
Gross unrealized depreciation.............. (2,845,847)
-----------
Net unrealized depreciation............. $(2,503,415)
===========
</TABLE>
FRN: Floating rate note --The rate disclosed is that in effect at June 30,
1999.
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30,
1999, the value of these securities amounted to $7,837,214, or 7.99% 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.
================================================================================
65
<PAGE>
U.S. Bond Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $94,549,344)................................................. $ 92,045,929
Affiliated issuers (Cost $5,504,377).................................................... 5,504,377
Receivables:
Investment securities sold.............................................................. 299
Fund shares sold........................................................................ 757,363
Interest................................................................................ 930,662
Other assets............................................................................. 3,248
------------
TOTAL ASSETS......................................................................... 99,241,878
------------
LIABILITIES:
Payables:
Investment securities purchased......................................................... 1,022,193
Fund shares redeemed.................................................................... 102,892
Investment advisory fees................................................................ 39,926
Accrued expenses........................................................................ 31,284
------------
TOTAL LIABILITIES.................................................................... 1,196,295
------------
NET ASSETS................................................................................ $ 98,045,583
============
NET ASSETS CONSIST OF:
Paid in capital.......................................................................... $100,639,632
Accumulated undistributed net investment income.......................................... 961,121
Distributions in excess of net realized gain............................................. (1,051,755)
Net unrealized depreciation.............................................................. (2,503,415)
------------
NET ASSETS........................................................................... $ 98,045,583
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based on net assets of
$92,029,678 and 8,955,888 shares issued and outstanding)................................. $ $10.28
============
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on net assets of
$1,133 and 110 shares issued and outstanding)............................................ $ $10.30
============
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share (Based on net assets of
$6,014,772 and 587,717 shares issued and outstanding).................................... $ 10.23
============
</TABLE>
See accompanying notes to financial statements.
================================================================================
66
<PAGE>
U.S. Bond Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends................................................................................ $ 29,756
Interest................................................................................. 5,014,331
-----------
TOTAL INCOME......................................................................... 5,044,087
-----------
EXPENSES:
Advisory................................................................................. 418,445
Registration............................................................................. 36,405
Professional............................................................................. 27,870
Distribution............................................................................. 25,254
Other.................................................................................... 30,338
-----------
TOTAL EXPENSES....................................................................... 538,312
Expenses waived by Advisor........................................................... (11,372)
-----------
NET EXPENSES......................................................................... 526,940
-----------
NET INVESTMENT INCOME................................................................ 4,517,147
-----------
NET REALIZED AND UNREALIZED LOSS:.........................................................
Net realized loss........................................................................ (338,906)
Change in net unrealized appreciation or depreciation.................................... (3,036,340)
-----------
Net realized and unrealized loss......................................................... (3,375,246)
-----------
Net increase in net assets resulting from operations..................................... $ 1,141,901
===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
67
<PAGE>
U.S. Bond Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income........................................................ $ 4,517,147 $ 1,638,048
Net realized gain (loss)..................................................... (338,906) 801,133
Change in net unrealized appreciation or depreciation........................ (3,036,340) 335,673
------------- -------------
Net increase in net assets resulting from operations......................... 1,141,901 2,774,854
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income..................................... (3,812,376) (1,629,719)
Distributions from net realized gain......................................... (55,782) (361,568)
Distributions in excess of net realized gain................................. (1,051,755) --
------------- -------------
Total distributions to shareholders*......................................... (4,919,913) (1,991,287)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................................................. 156,386,946 21,794,978
Shares issued in connection with the acquisition of UBS Bond Fund............ 15,177,263 --
Shares issued on reinvestment of distributions............................... 4,271,987 1,174,894
Shares redeemed.............................................................. (115,331,025) (6,255,720)
------------- -------------
Net increase in net assets resulting from capital share transactions......... 60,505,171 16,714,152
------------- -------------
TOTAL INCREASE IN NET ASSETS............................................... 56,727,159 17,497,719
------------- -------------
NET ASSETS:
Beginning of period.......................................................... 41,318,424 23,820,705
------------- -------------
End of period (including accumulated undistributed net investment income of
$961,121 and $300,973, respectively)......................................... $ 98,045,583 $41,318,424
============= =============
*DISTRIBUTIONS BY CLASS:
Distributions from net investment income:
Brinson Class I............................................................. (3,583,162) (1,526,152)
Brinson Class N............................................................. (46) (54)
UBS Investment Funds Class.................................................. (229,168) (103,513)
Distributions from and in excess of 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.......................................... (4,919,913) (1,991,287)
------------- -------------
</TABLE>
See accompanying notes to financial statements.
================================================================================
68
<PAGE>
U.S. Bond Fund -- Financial Highlights
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
August 31, 1995*
Year Ended June 30, Through
----------------------------------------
Brinson Class I 1999 1998 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......................... 0.58** 0.53 0.51** 0.50
Net realized and unrealized gain (loss)....... (0.26) 0.53 0.32 (0.14)
------- ------- ------- ---------
Total income from investment operations.... 0.32 1.06 0.83 0.36
------- ------- ------- ---------
Less distributions:
Distributions from net investment income...... (0.47) (0.58) (0.52) (0.40)
Distributions in excess of net realized gain.. (0.15) (0.14) -- (0.03)
------- ------- ------- ---------
Total distributions........................ (0.62) (0.72) (0.52) (0.43)
------- ------- ------- ---------
Net asset value, end of period.................. $ 10.28 $ 10.58 $ 10.24 $ 9.93
======= ======= ======= =========
Total return (non-annualized)................... 2.97% 10.60% 8.45% 3.60%
Ratios/Supplemental data:
Net assets, end of period (in 000s)............ $92,030 $38,874 $22,421 $ 9,047
Ratio of expenses to average net assets:
Before expense reimbursement.................. 0.61% 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.................. 5.42% 5.61% 5.14% 3.00%***
After expense reimbursement................... 5.43% 5.85% 6.19% 6.03%***
Portfolio turnover rate........................ 260% 198% 410% 363%
</TABLE>
* Commencement of investment operations
** The net investment income per share data was determined by using average
shares outstanding throughout the period.
*** Annualized
See accompanying notes to financial statements.
================================================================================
69
<PAGE>
U.S. Bond Fund -- Financial Highlights
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
Year Ended Year Ended
Brinson Class N June 30, 1999 June 30, 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period............................................. $10.58 $10.24
------ ------
Income from investment operations:
Net investment income......................................................... 0.57* 0.61
Net realized and unrealized gain (loss)....................................... (0.26) 0.42
------ ------
Total income from investment operations..................................... 0.31 1.03
------ ------
Less distributions:
Distributions from net investment income...................................... (0.44) (0.55)
Distributions from net realized gain.......................................... (0.15) (0.14)
------ ------
Total distributions......................................................... (0.59) (0.69)
------ ------
Net asset value, end of period................................................... $10.30 $10.58
====== ======
Total return..................................................................... 2.88% 10.30%
Ratios/Supplemental data:
Net assets, end of period (in 000s)............................................. $ 1 $ 1
Ratio of expenses to average net assets:
Before expense reimbursement.................................................. 0.86% 1.09%
After expense reimbursement................................................... 0.85% 0.85%
Ratio of net investment income to average net assets:
Before expense reimbursement.................................................. 5.17% 5.36%
After expense reimbursement................................................... 5.18% 5.60%
Portfolio turnover rate......................................................... 260% 198%
</TABLE>
* The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
70
<PAGE>
High Yield Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
In selecting issues for the High Yield Fund, we incorporate our analysis of
interest rate sensitivity, maturity mix, sector valuation, as well as security
specific research compiled by our fixed income and equity research teams.
Successful high yield fixed income investing involves capturing the market's
high total return potential while minimizing losses due to credit deterioration
or default. We believe that many high yield managers sacrifice safety while
reaching for high current income. In contrast, at the forefront of our
philosophy is a focus on asset coverage and preservation of principal. Our
disciplined process avoids taking large risks solely for the sake of a high
indicated yield.
Our investment process consists of four stages:
. Identify high quality issuers with substantial asset coverage.
. Identify issuers generating free cash flow with a focus on deleveraging their
balance sheet.
. Consider relative value: does expected return from the investment adequately
compensate for risk?
. Diversify holdings by issuer and industry.
Since its inception on September 30, 1997, the Brinson High Yield Fund Class I
has returned 7.50% compared to 4.61% for its benchmark, the Merrill Lynch High
Yield Master Index. Over the most recent six-month period, the Fund has returned
2.91% versus the index return of 1.76%. Volatility of the Fund since its
inception has been slightly higher than that of the benchmark at 7.00% versus
5.53%.
Rising U.S. Treasury yields, above-trend GDP growth and a more benign global
economic outlook resulted in tighter high yield bond spreads in the first half
of 1999. Prices of high yield bonds increased relative to U.S. treasuries,
bringing forward-looking "risky" bond yields closer to those of "riskless"
government-backed treasury bonds. Spreads over treasuries tightened
significantly from 5.55% at December 31, 1998 to 4.51% at June 30, 1999. Lower
rated high yield bonds have generally outperformed their higher quality
counterparts thus far in 1999, as investors have, to some degree, reversed the
flight-to-quality which occurred during the second half of 1998. We continue to
believe that additional spread tightening is warranted at current levels.
Our valuation model indicates that the high yield bond market is expected to
generate an annualized total return of approximately 10.5% over the course of
the next 3 years. We continue to believe that issue selection remains paramount
in generating solid returns from a high yield portfolio, and our focus remains
on single-B rated companies that we expect will demonstrate improving credit
quality over a 12 to 18 month horizon. Specifically, we have reduced our
underweight in cyclical industries which performed well during the first half of
the year, including paper and energy, and modestly reduced our overweight in
cable television and broadcasting.
================================================================================
71
<PAGE>
High Yield Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
<TABLE>
Total Return
6 months 1 year 9/30/97*
ended ended to
6/30/99 6/30/99 6/30/99
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson High Yield Fund Class I 2.91% 4.90% 7.50%
- ----------------------------------------------------------------------------------------------
Merrill Lynch High Yield Master Index 1.76 0.94 4.61
- ----------------------------------------------------------------------------------------------
</TABLE>
* 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 June 30, 1999. 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
[BAR CHART APPEARS HERE]
Brinson High Yield Merrill Lynch High
Date Fund Class I Yield 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
1/31/99 1,129,231 1,073,905
2/28/99 1,134,755 1,065,711
3/31/99 1,146,909 1,074,897
4/30/99 1,163,483 1,091,709
5/31/99 1,140,280 1,084,132
6/30/99 1,134,755 1,082,094
9/30/97 = $1,000,000
Data through 6/30/99
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
[LOGO OF BRINSON APPEARS HERE]
- -------------------------------------------------------------------------------
Total Return
12/31/98*
to
6/30/99
- -------------------------------------------------------------------------------
Brinson High Yield Fund Class N 2.71%
- -------------------------------------------------------------------------------
Merrill Lynch High Yield Master Index 1.76
- -------------------------------------------------------------------------------
* Inception date of the Brinson High Yield 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 High
Yield Fund Class N and the Merrill Lynch High Yield Master Index if you had
invested $1,000,000 on December 31, 1998, and had reinvested all your income
dividends and capital gain distributions through June 30, 1999. 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 N
vs. Merrill Lynch High Yield Master Index
Wealth Value with Dividends Reinvested
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
Brinson High Yield Merrill Lynch High
Date Fund Class N Yield Master Index
<S> <C> <C> <C>
12/31/98 1,000,000 1,000,000
1/31/99 1,024,048 1,009,890
2/28/99 1,028,056 1,002,184
3/31/99 1,039,078 1,010,823
4/30/99 1,054,108 1,026,633
5/31/99 1,032,064 1,019,508
6/30/99 1,027,054 1,017,591
</TABLE>
12/31/98 = $1,000,000
Data through 6/30/99
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.
===============================================================================
73
<PAGE>
High Yield Fund
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
Industry Diversification
<TABLE>
<CAPTION>
As a Percent of Net Assets
As of June 30, 1999
<S> <C>
U.S. BONDS
Corporate Bonds
Auto..................................... 2.51%
Business & Public Service................ 3.29
Chemicals................................ 3.23
Construction............................. 2.19
Consumer................................. 3.59
Electronics and Electric Components...... 1.10
Energy................................... 0.68
Financial Services....................... 1.13
Food & House Products.................... 5.83
Health................................... 6.39
Industrial............................... 0.41
Multi-Industry........................... 0.59
Radio Broadcasting....................... 3.75
Real Estate.............................. 0.76
Recreation............................... 8.53
Retail................................... 4.81
Services/Miscellaneous................... 19.24
Telecommunications....................... 12.22%
Television Broadcasting.................. 13.21
------
Total U.S. Corporate Bonds............ 93.46
International Dollar Bonds................ 1.69
------
Total U.S. Bonds...................... 95.15
SHORT-TERM INVESTMENTS.................... 3.39
TOTAL INVESTMENTS..................... 98.54
CASH AND OTHER ASSETS,
LESS LIABILITIES......................... 1.46
------
NET ASSETS................................ 100.00%
======
</TABLE>
- -------------------------------------------------------------------------------
Top Ten U.S. Bond Holdings
As of June 30, 1999
<TABLE>
<CAPTION>
Percent of
Net Assets
- ---------------------------------------------------
<S> <C>
1. Phoenix Color Corp. 1.48%
2. Mediacomm LLC. 1.42
3. Mail Well Corp. 1.32
4. Waterford Gaming LLC. 1.27
5. Outdoor Communications, Inc. 1.27
6. Scotts Co. 1.26
7. Group Maintenance America 1.26
8. Dobson/Sygnet Communications 1.25
9. Eagle Family Foods, Inc. 1.20
10. Cumulus Media, Inc. 1.20
- ---------------------------------------------------
</TABLE>
================================================================================
74
<PAGE>
High Yield Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
---------- --------
<S> <C> <C>
U.S. Bonds -- 95.15%
U.S. Corporate Bonds -- 93.46%
Ackerley Group, Inc. Series B,
9.000%, due 01/15/09........................................ $ 675,000 $666,562
Adams Outdoor Advertising,
10.750%, due 03/15/06....................................... 550,000 585,750
Allbritton Communications Co.,Series B,
8.875%, due 02/01/08........................................ 550,000 529,375
Alliance Laundry Systems,144A,
9.625%, due 05/01/08........................................ 425,000 389,938
American Plumbing & Mechanic, Inc., 144A,
11.625%, due 11/15/08....................................... 650,000 627,250
Aurora Foods, Inc., Series B,
9.875%, due 02/15/07........................................ 700,000 724,500
Avalon Cable Holdings, 144A,
9.375%, due 12/01/08........................................ 600,000 609,750
Bally Total Fitness Corp., Series B,
9.875%, due 10/15/07........................................ 750,000 727,500
BGF Industries, Inc. 144A,
10.250%, due 01/15/09....................................... 300,000 273,000
Big City Radio, Inc., (c)
0.000%, due 03/15/05........................................ 1,100,000 781,000
Big Flower Holdings, Inc.,
8.625%, due 12/01/08........................................ 800,000 736,000
Bresnan Communications Group, 144A, (d)
0.000%, due 02/01/09........................................ 500,000 325,000
Budget Group, Inc.,
9.125%, due 04/01/06........................................ 500,000 465,000
Capstar Broadcasting Partners, Inc., (e)
0.000%, due 02/01/09........................................ 500,000 422,500
CB Richard Ellis Services, Inc.,
8.875%, due 06/01/06........................................ 525,000 506,625
Centennial Cellular, 144A,
10.750%, due 12/15/08........................................ 750,000 774,375
Century Communications Corp.,
0.000%, due 01/15/08........................................ 425,000 189,125
Century Communications Corp.,
8.375%, due 11/15/17........................................ 300,000 276,375
Collins & Alkman Corp.,
11.500%, due 04/15/06....................................... 700,000 703,500
CSC Holdings, Inc.,
7.625%, due 07/15/18........................................ 600,000 555,750
Cumulus Media, Inc.,
10.375%, due 07/01/08........................................ 750,000 795,000
Dan River, Inc., Snr-Sub-Nts,
10.125%, due 12/15/03....................................... 500,000 510,000
Diamond Triumph Autoglass, Inc., 144A,
9.250%, due 04/01/08,....................................... 700,000 679,000
Digital Television Services, Series B,
12.500%, due 08/01/07....................................... 550,000 604,312
Dobson Sygnet Communications, Inc.,
12.250%, due 12/15/08....................................... 800,000 832,000
Eagle Family Foods, Series B,
8.750%, due 01/15/08........................................ 890,000 796,550
Echostar DBS Corp. 144A,
9.375%, due 02/01/09........................................ $ 250,000 $254,375
Exodus Communications, Inc., 144A,
11.250%, due 07/01/08....................................... 500,000 525,000
Exodus Communications, Inc.,
11.250%, due 07/01/08....................................... 250,000 262,500
Falcon Holding Group, Series B, (f)
0.000%, due 04/15/10........................................ 750,000 525,000
Fedders North America,
9.375%, due 08/15/07........................................ 500,000 505,000
Federal-Mogul Corp. 144A,
7.500%, due 01/15/09........................................ 500,000 460,813
Florida Panthers Corp.,
9.875%, due 04/15/09........................................ 750,000 701,250
Fox/Liberty Networks, Step,
0.000%, due 08/15/07........................................ 500,000 390,000
Global Imaging Systems, Inc. 144A,
10.750%, due 02/15/07....................................... 500,000 490,000
Golden Sky DBS, Inc., 144A, (g)
0.000%, due 03/01/07........................................ 375,000 223,125
Golden Sky Systems, Inc., Series B, (h)
12.375%, due 08/01/06....................................... 700,000 784,000
Granite Broadcasting, Corp.,
10.375%, due 05/15/05....................................... 400,000 404,000
Group Maintenance America Corp., 144A,
9.750%, due 01/15/09........................................ 850,000 834,062
Harvey Casinos Resorts,
10.625%, due 06/01/06....................................... 450,000 468,000
Hollinger International Publishing Corp.,
9.250%, due 02/01/06........................................ 750,000 765,937
ICG Holdings, Inc., (i)
0.000%, due 05/01/06........................................ 750,000 585,000
Integrated Electrical Services, Inc., 144A,
9.375%, due 02/01/09........................................ 750,000 738,750
Interep National Radio Sales, Series B,
10.000%, due 07/01/08....................................... 650,000 664,625
Intermedia Communications, Series B, (j)
8.600%, due 06/01/08........................................ 250,000 230,000
Intermedia Communications, Inc.,
Series B, 0.000%, due 07/15/07.............................. 550,000 391,875
Iron Mountain, Inc.,
10.125%, due 10/01/06....................................... 200,000 207,000
Iron Mountain, Inc.,
8.750%, due 09/30/09........................................ 500,000 485,000
Isle of Capri Casinos, Inc., 144A,
8.750%, due 04/15/09........................................ 500,000 468,750
ISP Holdings Inc., Series B,
9.000%, due 10/15/03........................................ 415,000 412,925
J.H. Heafner Co., 144A,
10.000%, due 05/15/08....................................... 425,000 422,875
J.H. Heafner Co., Inc.,
10.000%, due 05/15/08....................................... 100,000 99,500
JCAC, Inc.,
10.125%, due 06/15/06....................................... 450,000 487,688
</TABLE>
================================================================================
75
<PAGE>
High Yield Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
---------- --------
<S> <C> <C>
Level 3 Communications, Inc., (k)
0.000%, due 12/01/08.......................................... $1,250,000 $768,750
Liberty Group Operating,
9.375%, due 02/01/08.......................................... 800,000 752,000
Lifepoint Hospitals Holdings, 144A,
10.750%, due 05/15/09......................................... 650,000 661,375
LIN Holdings Corp., Step, (l)
0.000%, due 03/01/08.......................................... 1,000,000 660,000
Lyondell Chemical Co.,144A,
9.875%, due 05/01/07.......................................... 750,000 766,875
Mail Well Corp.,
8.750%, due 12/15/08.......................................... 900,000 873,000
Mediacom LLC., Series B,
8.500%, due 04/15/08.......................................... 1,000,000 940,000
Mohegan Tribal Gaming Authority,
8.750%, due 01/01/09.......................................... 600,000 594,000
MTS, Inc.,
9.375%, due 05/01/05.......................................... 750,000 570,000
NationsRent, Inc.,
10.375%, due 12/15/08......................................... 675,000 668,250
NBTY, Inc., Series B,
8.625%, due 09/15/07.......................................... 550,000 473,000
New World Pasta Co., 144A,
9.250%, due 02/15/09.......................................... 795,000 773,137
Newpark Resources, Inc., Series B,
8.625%, due 12/15/07.......................................... 500,000 482,500
Nextel Communications, Inc., (n)
0.000%, due 02/15/08.......................................... 250,000 171,250
Nextel Communications, Inc.,
Step, 144A, (o) 0.000%, due 09/15/07.......................... 800,000 582,000
Nortek, Inc, 144A,
8.875%, due 08/01/08.......................................... 375,000 367,500
Nortex, Inc.,
9.875%, due 03/01/04......................................... 450,000 454,500
NTL Communications Corp., Series B,
Step, (p) 0.000%, due 10/01/08................................ 900,000 614,250
Outdoor Communications, Inc.,
Snr-Sub-Nts, 9.250%, due 08/15/07............................. 800,000 842,000
Packaging Corp. of America, 144A,
9.625%, due 04/01/09.......................................... 500,000 507,500
Paxson Communications Corp., (b)
0.000%, due 10/31/06.......................................... 750 684,375
Pegasus Communications Corp., Series B,
9.625%, due 10/15/05.......................................... 750,000 735,000
Pegasus Communications Corp., Series B,
9.750%, due 12/01/06.......................................... 150,000 150,000
Supreme International Corp., 144A,
12.250%, due 04/01/06......................................... 650,000 656,500
Phoenix Color, Inc.,
10.375%, due 02/01/09......................................... 1,000,000 980,000
Pilgrim's Pride Corp., Snr-Sub-Nts,
10.875%, due 08/01/03......................................... $ 200,000 $204,000
Premier Parks, Inc., Step, (q)
0.000%, due 04/01/08.......................................... 1,100,000 731,500
Protection One Alarm, Inc., (r)
13.625%, due 06/30/05......................................... 250,000 279,688
PSINet Inc.,
11.500%, due 11/01/08......................................... 700,000 738,500
Quest Diagnostic, 144A,
9.875%, due 07/01/09.......................................... 500,000 506,250
Qwest Communications International, Inc.,
(s) 0.000%, due 10/15/07...................................... 500,000 390,000
R. H. Donnelly, Inc.,
9.125%, due 06/01/08.......................................... 750,000 751,875
Range Resources Corp.,
8.750%, due 01/15/07.......................................... 500,000 450,000
Rayovac Corp., Series B,
10.250%, due 11/01/06......................................... 500,000 535,000
RCN Corp., Step, (t)
0.000%, due 10/15/07.......................................... 450,000 302,625
Revlon Consumer Products,
8.625%, due 02/01/08.......................................... 650,000 607,750
Scotts Co., 144A,
8.625%, due 01/15/09.......................................... 850,000 837,250
SFX Entertainment, Inc., Series B,
9.125%, due 02/01/08.......................................... 800,000 784,000
Simmons Co., 144A,
10.250%, due 03/15/09......................................... 700,000 710,500
Sinclair Broadcast Group,
10.000%, due 09/30/05......................................... 250,000 255,625
Sinclair Broadcast Group,
8.750%, due 12/15/07.......................................... 425,000 412,250
Sleepmaster Corp., 144A,
11.000%, due 05/15/09......................................... 650,000 661,375
Speedway Motorsports, Inc.,
8.500%, due 08/15/07.......................................... 600,000 606,000
Speedway Motorsports, Inc., 144A,
8.500%, due 08/15/07.......................................... 250,000 252,500
T/SF Communications Corp., Series B,
10.375%, due 11/01/07......................................... 550,000 550,000
Telecorp PCS Inc., 144A, (u)
0.000%, due 04/15/09.......................................... 500,000 276,250
TeleWest Communications PLC,144A,
0.000%, due 04/15/09.......................................... 500,000 333,125
Tenet Healthcare Corp.,
8.625%, due 01/15/07.......................................... 750,000 738,750
Trans-Resources, Inc., Series B, (v)
0.000%, due 03/15/08.......................................... 650,000 328,250
TransWestern Publishing Co.,
9.625%, due 11/15/07.......................................... 625,000 614,844
</TABLE>
================================================================================
76
<PAGE>
High Yield Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
---------- -----------
<S> <C> <C>
Triton PCS, Inc., (w)
0.000%, due 05/01/08................................. $1,000,000 $ 642,500
Twin Labs, Inc.,
10.250%, due 05/15/06................................ 500,000 525,000
Unisys Corp.,
11.750%, due 10/15/04................................ 450,000 499,500
United Artists Theatre Circuit, Inc.,
Series B, 9.750%, due 04/15/08....................... 150,000 106,500
United Artists Theatre Circuit, Inc.,
Series B, Snr-Sub-Nts, 9.375%,
due 10/15/07......................................... 125,000 98,750
United Industries Corp., 144A,
9.875%, due 04/01/09................................. 700,000 637,000
United Rentals, Inc., Series B,
9.500%, due 06/01/08................................. 625,000 628,125
United Rentals, Inc., Series B,
9.250%, due 01/15/09................................. 250,000 246,250
Verio Inc.,
13.500%, due 06/15/04................................ 550,000 616,000
Waterford Gaming, 144A,
9.500%, due 03/15/10................................. 850,000 843,625
Wesco Distribution, Inc., Series B,
9.125%, due 06/01/08................................. 250,000 241,875
Young Broadcasting, Inc., Series B,
8.750%, due 06/15/07................................. 475,000 460,750
-----------
62,004,331
-----------
International Dollar Bonds -- 1.69%
Energis plc, Series 144A,
9.750%, due 06/15/09................................. 250,000 253,125
Imax, Corp.,
7.875%, due 12/01/05................................. 500,000 470,625
Microcell Telecommunications, Inc.,
Series B, (m) 0.000%, due 06/01/06................... 490,000 395,675
-----------
1,119,425
-----------
Total U.S. Bonds (Cost $65,268,225).................... 63,123,756
-----------
Shares
----------
Short-Term Investments -- 3.39%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund,
(Cost $2,246,149).................................... 2,246,149 2,246,149
-----------
Total Investments
(Cost $67,514,374) -- 98.54% (a)..................... 65,369,905
-----------
Cash and other assets,
less liabilities -- 1.46%............................ 967,242
-----------
Net Assets -- 100%..................................... $66,337,147
===========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $67,514,374; and net
unrealized depreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 239,974
Gross unrealized depreciation (2,384,443)
-----------
Net unrealized depreciation $(2,144,469)
===========
</TABLE>
(b) Non-income producing security
(c) Interest rate 0.000% until 03/15/01, then 11.125% to maturity
(d) Interest rate 0.000% until 02/01/04, then 9.25% to maturity
(e) Interest rate 0.000% until 02/01/02, then 12.750% to maturity
(f) Interest rate 0.000% until 04/15/03, then 9.285% to maturity
(g) Interest rate 0.000% until 03/01/04, then 13.50% to maturity
(h) Interest rate 12.875% until 03/22/99, then 12.375% to maturity
(i) Interest rate 0.000% until 05/01/01, then 12.50% to maturity
(j) Interest rate 0.000% until 07/15/02, then 11.250% to maturity
(k) Interest rate 0.000% until 12/01/03, then 10.50% to maturity
(l) Interest rate 0.000% until 03/01/03, then 10.00% to maturity
(m) Interest rate 0.000% until 12/01/01, then 14.00% to maturity
(n) Interest rate 0.000% until 10/01/03, then 12.375% to maturity
(o) Interest rate 0.000% until 10/15/02, then 11.125% to maturity
(p) Interest rate 0.000% until 10/01/03, then 12.375% to maturity
(q) Interest rate 0.000% until 04/01/03, then 10.000% to maturity
(r) Interest rate 0.000% until 06/30/98, then 13.625% to maturity
(s) Interest rate 0.000% until 10/15/02, then 9.47% to maturity
(t) Interest rate 0.000% until 10/15/02, then 11.125% to maturity
(u) Interest rate 0.000% until 04/15/01, then 11.625% to maturity
(v) Interest rate 0.000% until 03/15/08, then 12.00% to maturity
(w) Interest rate 0.000% until 05/01/03, then 11.00% 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 June 30,
1999, the value of these securities amounted to $17,139,950 or 25.84% of
net assets.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
77
<PAGE>
High Yield Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $65,268,225)................................................. $63,123,756
Affiliated issuers (Cost $2,246,149).................................................... 2,246,149
Cash..................................................................................... 170
Receivables:
Investment securities sold.............................................................. 77,562
Interest................................................................................ 1,328,077
Fund shares sold........................................................................ 496,649
Other assets............................................................................. 18,638
-----------
TOTAL ASSETS......................................................................... 67,291,001
-----------
LIABILITIES:
Payables:
Fund shares redeemed.................................................................... 5,281
Investment securities purchased......................................................... 893,623
Investment advisory fees................................................................ 8,858
Accrued expenses........................................................................ 46,092
-----------
TOTAL LIABILITIES.................................................................... 953,854
-----------
NET ASSETS................................................................................ $66,337,147
===========
NET ASSETS CONSIST OF:
Paid in capital.......................................................................... $67,513,756
Accumulated undistributed net investment income.......................................... 611,744
Accumulated net realized gain............................................................ 356,116
Net unrealized depreciation.............................................................. (2,144,469)
-----------
NET ASSETS................................................................................ $66,337,147
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based on net assets of
$60,043,677 and 6,029,168 shares issued and outstanding)................................ $9.96
===========
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on net assets of
$1,025 and 103 shares issued and outstanding)........................................... $9.95
===========
UBSInvestment Funds Class:
Net asset value, offering price and redemption price per share (Based on net assets of
$6,292,445 and 632,435 shares issued and outstanding)................................... $9.95
===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
78
<PAGE>
High Yield Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest............................................................ $ 2,705,081
-----------
TOTAL INCOME.................................................... 2,705,081
-----------
EXPENSES:
Advisory............................................................ 173,302
Professional........................................................ 27,506
Registration........................................................ 22,303
Distribution........................................................ 15,676
Other............................................................... 15,372
-----------
TOTAL EXPENSES.................................................. 254,159
Expenses waived by Advisor...................................... (36,263)
-----------
NET EXPENSES.................................................... 217,896
-----------
NET INVESTMENT INCOME........................................... 2,487,185
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments.................................... 420,129
Change in net unrealized appreciation or depreciation............... (1,916,114)
-----------
Net realized and unrealized loss.................................... (1,495,985)
-----------
Net increase in net assets resulting from operations................ $ 991,200
===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
79
<PAGE>
High Yield Fund -- Financial Statements
[LOGO OF BRINSON APPEARS HERE]
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period Ended Year Ended
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income................................................... $ 2,487,185 $ 1,385,364
Net realized gain....................................................... 420,129 261,744
Change in net unrealized appreciation or depreciation................... (1,916,114) (260,233)
------------ -----------
Net increase in net assets resulting from operations.................... 991,200 1,386,875
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I......................................................... (1,845,754) (1,395,944)
Brinson Class N........................................................ (30) --
UBS Investment Funds Class............................................. (167,575) --
Distributions from net realized gain:
Brinson Class I......................................................... -- (196,916)
------------ -----------
Total distributions to shareholders..................................... (2,013,359) (1,592,860)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 52,695,849 29,258,184
Shares issued on reinvestment of distributions.......................... 1,797,826 1,381,731
Shares redeemed......................................................... (22,036,291) (3,393,269)
------------ -----------
Net increase in net assets resulting from capital share transactions.... 32,457,384 27,246,646
------------ -----------
TOTAL INCREASE IN NET ASSETS......................................... 31,435,225 27,040,661
------------ -----------
NET ASSETS:
Beginning of period..................................................... 34,901,922 7,861,261
------------ -----------
End of period (including accumulated undistributed net investment
income of $611,744 and $0, respectively)................................ $ 66,337,147 $34,901,922
============ ===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
80
80
<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*
Period Ended Year Ended through
Brinson Class I June 30, 1999 December 31, 1998** December 31, 1997**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period..................... $ 9.98 $ 10.05 $ 10.00
------------- ----------------- ----------------
Income from investment operations:
Net investment income.................................. 0.44*** 7.30 0.18
Net realized and unrealized gain (loss)................ (0.15) 0.02 0.05
------------- ----------------- ----------------
Total income from investment operations............... 0.29 7.32 0.23
------------- ----------------- ----------------
Less distributions:
Distributions from net investment income............... (0.31) (7.33) (0.18)
Distributions from net realized gain................... -- (0.06) --
------------- ----------------- ----------------
Total distributions................................... (0.31) (7.39) (0.18)
------------- ----------------- ----------------
Net asset value, end of period........................... 9.96 $ 9.98 $ 10.05
============= ================= ================
Total return (non-annualized)............................ 2.91% 7.75% 2.34%
Ratios/Supplemental Data:
Net assets, end of period (in 000s)..................... $ 60,044 $ 34,900 $ 7,861
Ratio of expenses to average net assets:
Before expense reimbursement........................... 0.83%**** 1.59% 4.98%****
After expense reimbursement............................ 0.70%**** 0.89% 0.90%****
Ratio of net investment income to average net assets:
Before expense reimbursement........................... 8.54%**** 7.38% 3.15%****
After expense reimbursement............................ 8.67%**** 8.08% 7.23%****
Portfolio turnover rate................................. 77% N/A N/A
</TABLE>
* Commencement of investment operations
** Reflects 10 for 1 share split effective December 9, 1998
*** The net investment income per share data was determined by using average
shares outstanding throughout the period.
**** Annualized
N/A = Information is not available for periods prior to reorganization, as
described in notes to financial statements.
See accompanying notes to financial statements.
================================================================================
<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>
Period Ended
Brinson Class N June 30, 1999*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period.................................................. $ 9.98
-------------
Income from investment operations:
Net investment income.............................................................. 0.42**
Net realized and unrealized loss................................................... (0.15)
-------------
Total income from investment operations.......................................... 0.27
-------------
Less distributions:
Distributions from net investment income........................................... (0.30)
Distributions from net realized gain............................................... --
-------------
Total distributions.............................................................. (0.30)
-------------
Net asset value, end of period........................................................ $ 9.95
=============
Total return (non-annualized)......................................................... 2.71%
Ratios/Supplemental Data:
Net assets, end of period (in 000s).................................................. $ 1
Ratio of expenses to average net assets:
Before expense reimbursement....................................................... 1.08%***
After expense reimbursement........................................................ 0.95%***
Ratio of net investment income to average net assets:
Before expense reimbursement....................................................... 8.29%***
After expense reimbursement........................................................ 8.42%***
Portfolio turnover rate.............................................................. 77%
</TABLE>
* Commencement of Brinson Class N was December 31, 1998
** The net investment income per share data was determined by using average
shares outstanding throughout the period.
*** Annualized
See accompanying notes to financial statements.
================================================================================
82
<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 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 financial highlights of the UBS
Investment Funds Class are presented separately.
Prior to December 19, 1998, the U.S. Large Capitalization Growth Fund (formerly,
UBS Large CapGrowth Fund), U.S. Small Capitalization Growth Fund (formerly, UBS
Small CapFund), High Yield Fund (formerly, UBS High YieldBond Fund), UBS Value
Equity Fund and UBSBond 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.
In addition, pursuant to the Reorganization, the net assets of the UBSValue
Equity Fund and UBSBond Fund were withdrawn from their corresponding Portfolio
and acquired by the U.S. Equity Fund and U.S. Bond Fund, respectively, in a tax-
free exchange solely for Brinson Class I shares of each Fund. The UBS Value
Equity Fund and UBSBond Fund were then dissolved. Shares issued in exchange,
net asset value and corresponding net unrealized appreciation at December 18,
1998, were as follows:
Net
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 U.S. Bond Fund immediately
before the mergers were $729,679,727 and $80,523,890, respectively.
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. The U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund and High Yield Fund have each changed its fiscal
year-end from December 31 to June 30.
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 respective fund. Debt securities are valued at
the most recent bid price by using market quotations or independent pricing
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.
================================================================================
83
<PAGE>
The Brinson Funds -- Notes To Financial Statements
- -----------------------------------------------------------------------------
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 June 30, 1999,
therefore, no federal income tax provision was required.
E. Distributions to Shareholders: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Differences in dividends per share between the classes
are due to distribution expenses. Amounts equal to 10.26%, 44.82%, 34.64%, and
0.49% of the amount taxable as ordinary income qualify for the dividends
received deduction available to corporate shareholders for the U.S. Balanced
Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund , and U.S. Bond
Fund, respectively. At June 30, 1999, the U.S. Small Capitalization Growth Fund
had a capital loss carry forward for Federal income tax purposes of
approximately $4,242,000 available to offset future net capital gains, of which
$1,768,000 expires on December 31, 2006 and $2,474,000 expires on June 30, 2007.
F. Income and Expense Allocations: 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.
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 each Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions for the year ended June 30,
1999, 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 Waived
-------- --------------- --------------- -------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
U.S. Balanced Fund...................... 0.70% 0.80% 1.05% 1.30% $ 347,297 $79,286
U.S. Equity Fund........................ 0.70 0.80 1.05 1.32 5,047,492 --
U.S. Large Capitalization Equity Fund... 0.70 0.80 1.05 1.32 137,200 97,158
U.S. Bond Fund.......................... 0.50 0.60 0.85 1.07 418,445 11,372
Investment advisory fees and other transactions for the period ended June 30,
1999, were as follows:
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
-------- --------------- --------------- ------------ --------- -----------
U.S. Large Capitalization Growth Fund... 0.70% 0.80% 1.05% 1.57% $ 18,582 $42,136
U.S. Small Capitalization Growth Fund... 1.00 1.15 1.40 1.92 148,873 25,786
High Yield Fund......................... 0.60 0.70 0.95 1.55 173,302 36,263
</TABLE>
Certain officers of the Funds are also officers of the Advisor. All officers
serve without direct compensation from the Funds. Trustees' fees paid to
unaffiliated trustees for the year ended June 30, 1999 were $7,665, $6,205,
$3,665 and $4,015 for the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund and U.S. Bond Fund, respectively. For the six months
ended June 30, 1999, Trustees' fees paid to unaffiliated trustees were $1,955,
$1,877 and $1,949 for the U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund and High Yield Fund, respectively.
================================================================================
84
<PAGE>
The Brinson Funds -- Notes To Financial Statements
- -------------------------------------------------------------------------------
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 charges no management fees. Distributions received from the
Supplementary Trust are reflected as interest income on the statement of
operations. Amounts relating to those investments at June 30, 1999 and for the
period then ended, were as follows:
<TABLE>
<CAPTION>
% of
Sales Interest Net
Fund Purchases Proceeds Income Value Assets
- ---- --------- -------- --------- ----- -------
<S> <C> <C> <C> <C> <C>
U.S. Balanced Fund......................... 12,954,575 $ 12,718,496 $ 24,984 $ 236,079 0.60%
U.S. Equity Fund........................... 49,752,656 112,067,672 496,321 37,684,984 4.77
U.S. Large Capitalization Equity Fund...... 17,583,562 16,050,557 33,979 1,533,005 5.80
U.S. Large Capitalization Growth Fund...... 3,645,460 3,777,151 7,359 -- --
U.S. Small Capitalization Growth Fund...... 26,063,602 24,888,256 47,338 2,134,217 5.95
U.S. Bond Fund............................. 110,752,960 105,248,583 190,546 5,504,377 5.61
High Yield Fund 49,314,348 48,413,642 84,390 2,246,149 3.39
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1999, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
Proceeds
Purchases From Sales
------------ ------------
<S> <C> <C>
U.S. Balanced Fund................................. $ 52,357,150 $ 87,129,265
U.S. Equity Fund................................... 344,235,845 337,180,719
U.S. Large Capitalization Equity Fund.............. 23,604,030 16,716,289
U.S. Bond Fund..................................... 252,784,699 204,053,072
Investment transactions for the period ended June 30, 1999, excluding short-term
investments, were as follows:
Proceeds
Purchases From Sales
------------ ------------
U.S. Large Capitalization Growth Fund.............. $ 5,470,029 $ 2,638,632
U.S. Small Capitalization Growth Fund.............. 29,120,655 19,843,223
High Yield Fund.................................... 72,095,801 41,178,328
</TABLE>
4. FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date at
a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market or that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Funds, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
5. DISTRIBUTION PLANS
The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for the Brinson Class N
and the 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 each
of the Funds. Annual fees under the UBSInvestment 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 UBSInvestment 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.
================================================================================
85
<PAGE>
The Brinson Funds -- Notes To Financial Statements
- --------------------------------------------------------------------------------
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 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 June 30, 1999, the Funds had no borrowings under the agreement.
7. CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
U.S. Balanced Fund
-----------------------------------------------------
Year Ended Year Ended
June 30, 1999 June 30, 1998
--------------------------- -----------------------
Shares Value Shares Value
---------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.............................. 1,174,303 $12,704,822 4,720,912 $ 58,173,143
Brinson Class N.............................. 1,652 15,306 -- --
UBS Investment Funds Class................... 135,474 1,464,212 49,659 624,713
--------- ----------- --------- ------------
Total Sales................................. 1,311,429 $14,184,340 4,770,571 $ 58,797,856
========= =========== ========= ============
Dividend Reinvestment:
Brinson Class I.............................. 1,235,079 $11,512,192 2,662,862 $ 31,359,575
Brinson Class N.............................. 33 311 11 136
UBS Investment Funds Class................... 56,474 523,561 14,933 175,706
--------- ----------- --------- ------------
Total Dividend Reinvestment................. 1,291,586 $12,036,064 2,677,806 $ 31,535,417
========= =========== ========= ============
Redemptions:
Brinson Class I.............................. 4,977,791 $56,107,946 23,388,425 $293,534,522
Brinson Class N.............................. 1,641 15,210 -- --
UBS Investment Funds Class................... 154,266 1,558,776 42,682 540,673
--------- ----------- --------- ------------
Total Redemptions........................... 5,133,698 $57,681,932 23,431,107 $294,075,195
========= =========== ========= ============
</TABLE>
================================================================================
86
<PAGE>
The Brinson Funds -- Notes To Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Equity Fund
--------------------------------------------------
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------------------- ------------------------
Shares Value Shares Value
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I*.............. 14,157,093 $272,587,287 16,875,765 $314,205,812
Brinson Class N............... 417,980 8,022,220 13,398 269,368
UBS Investment Funds Class.... 1,317,474 26,390,598 1,697,355 31,606,780
---------- ------------ ---------- ------------
Total Sales................ 15,892,547 $307,000,105 18,586,518 $346,081,960
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I............... 2,164,601 $ 40,726,871 1,861,660 $ 32,092,717
Brinson Class N............... 12,904 239,980 47 896
UBS Investment Funds Class.... 89,839 1,678,518 110,158 1,887,716
---------- ------------ ---------- ------------
Total Dividend Reinvestment 2,267,344 $ 42,645,369 1,971,865 $ 33,981,329
========== ============ ========== ============
Redemptions:
Brinson Class I............... 13,543,224 $265,910,621 7,470,182 $144,565,891
Brinson Class N............... 90,831 1,768,705 5 100
UBS Investment Funds Class.... 950,265 18,175,221 1,023,014 19,298,428
---------- ------------ ---------- ------------
Total Redemptions.......... 14,584,320 $285,854,547 8,493,201 $163,864,419
========== ============ ========== ============
</TABLE>
*Includes shares issued in connection with the acquisition of the UBS Value
Equity Fund.
<TABLE>
<CAPTION>
U.S. Large Capitalization Equity Fund
----------------------------------------------------
Year Ended Period Ended
June 30, 1999 June 30, 1998**
----------------------- --------------------------
Shares Value Shares Value
-------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I............... 2,384,176 $24,164,112 16,662 $ 163,328
Brinson Class N............... 61,091 684,700 1,688,092 16,758,163
UBS Investment Funds Class.... 427 4,617 104 1,000
--------- ----------- --------- -----------
Total Sales................ 2,445,694 $24,853,429 1,704,858 $16,922,491
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Class I............... 7,506 $ 77,433 18 $ 168
Brinson Class N............... 7,094 69,880 2,204 20,606
UBS Investment Funds Class.... 1 11 -- 1
--------- ----------- --------- -----------
Total Dividend Reinvestment 14,601 $ 147,324 2,222 $ 20,775
========= =========== ========= ===========
Redemptions:
Brinson Class I............... 370,824 $ 3,862,037 1,015 $ 9,875
Brinson Class N............... 1,369,240 13,638,399 51,661 509,678
UBS Investment Funds Class.... -- -- -- --
--------- ----------- --------- -----------
Total Redemptions.......... 1,740,064 $17,500,436 52,676 $ 519,553
========= =========== ========= ===========
</TABLE>
**The Fund commenced operations on April 6, 1998.
================================================================================
87
<PAGE>
The Brinson Funds -- Notes To Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Large Capitalization Growth Fund
---------------------------------------------
Year Ended Year Ended
June 30, 1999 December 31, 1998
-------------------- -----------------------
Shares Value Shares Value
-------- ---------- -------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I*............... 35,111 $ 451,776 349,475 $4,971,380
Brinson Class N................ -- -- 84 1,000
UBS Investment Funds Class..... 372,727 4,781,902 84 1,000
------- ---------- ------- ----------
Total Sales................ 407,838 $5,233,678 349,643 $4,973,380
======= ========== ======= ==========
Dividend Reinvestment:
Brinson Class I................ -- -- 15,430 $ 170,881
Brinson Class N................ -- -- -- --
UBS Investment Funds Class..... -- -- -- --
------- ---------- ------- ----------
Total Dividend Reinvestment. -- $ -- 15,430 $ 170,881
======= ========== ======= ==========
Redemptions:
Brinson Class I................ 173,449 $2,143,629 56,390 $5,974,601
Brinson Class N................ -- -- -- --
UBS Investment Funds Class..... 1,853 26,217 -- --
------- ---------- ------- ----------
Total Redemptions........... 175,302 $2,169,846 56,390 $5,974,601
======= ========== ======= ==========
</TABLE>
*Includes 298,108 shares issued in 10 for 1 share split.
<TABLE>
<CAPTION>
U.S. Small Capitalization Growth Fund
-----------------------------------------------
Year Ended Year Ended
June 30, 1999 December 31, 1998
----------------------- ----------------------
Shares Value Shares Value
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I**............... 2,641,837 $22,702,120 2,571,818 $18,350,730
Brinson Class N................. -- -- 114 1,000
UBS Investment Funds Class...... 99,579 858,153 114 1,000
--------- ----------- --------- -----------
Total Sales.................. 2,741,416 $23,560,273 2,572,046 $18,352,730
========= =========== ========= ===========
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................. 1,375,470 $11,346,801 128,744 $ 6,727,395
Brinson Class N................. -- -- -- --
UBS Investment Funds Class...... 29,703 240,000 -- --
--------- ----------- --------- -----------
Total Redemptions............ 1,405,173 $11,586,801 128,744 $ 6,727,395
========= =========== ========== ===========
</TABLE>
**Includes 2,227,053 shares issued in 10 for 1 share split.
===============================================================================
88
<PAGE>
The Brinson Funds -- Notes To Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Bond Fund
------------------------------------------------
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------------------ ----------------------
Shares Value Shares Value
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I*................. 15,463,879 $165,316,122 1,926,960 $20,378,131
Brinson Class N.................. 2,379 25,964 -- --
UBS Investment Funds Class....... 582,475 6,222,123 134,362 1,416,847
---------- ------------ --------- -----------
Total Sales................... 16,048,733 $171,564,209 2,061,322 $21,794,978
========== ============ ========= ===========
Dividend Reinvestment:
Brinson Class I.................. 386,462 $ 4,042,561 107,565 $ 1,114,591
Brinson Class N.................. 6 62 6 68
UBS Investment Funds Class....... 22,041 229,364 5,825 60,235
---------- ------------ --------- -----------
Total Dividend Reinvestment... 408,509 $ 4,271,987 113,396 $ 1,174,894
========== ============ ========= ===========
Redemptions:
Brinson Class I.................. 10,568,875 $112,692,202 549,381 $ 5,780,080
Brinson Class N.................. 2,379 25,905 -- --
UBS Investment Funds Class....... 248,522 2,612,918 45,413 475,640
---------- ------------ --------- -----------
Total Redemptions............. 10,819,776 $115,331,025 594,794 $ 6,255,720
========== ============ ========= ===========
</TABLE>
*Includes shares issued in connection with the acquisition of the UBS Bond Fund.
<TABLE>
<CAPTION>
High Yield Fund
------------------------------------------------
Year Ended Year Ended
June 30, 1999 December 31, 1998
------------------------ ----------------------
Shares Value Shares Value
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I**................ 4,509,034 $ 46,327,741 3,412,082 $29,256,184
Brinson Class N.................. -- -- 100 1,000
UBS Investment Funds Class....... 620,093 6,368,108 100 1,000
---------- ------------ --------- -----------
Total Sales................... 5,129,127 $ 52,695,849 3,412,282 $29,258,184
========== ============ ========= ===========
Dividend Reinvestment:
Brinson Class I.................. 166,520 $ 1,658,538 47,240 $ 1,381,731
Brinson Class N.................. 3 30 -- --
UBS Investment Funds Class....... 13,996 139,258 -- --
---------- ------------ --------- -----------
Total Dividend Reinvestment... 180,519 $ 1,797,826 47,240 $ 1,381,731
========== ============ ========= ===========
Redemptions:
Brinson Class I.................. 2,144,630 $ 22,018,291 39,259 $ 3,393,269
Brinson Class N.................. -- -- -- --
UBS Investment Funds Class....... 1,754 18,000 -- --
---------- ------------ --------- -----------
Total Redemptions............. 2,146,384 $ 22,036,291 39,259 $ 3,393,269
========== ============ ========= ===========
</TABLE>
**Includes 2,898,051 shares issued in 10 for 1 share split.
================================================================================
89
<PAGE>
Report of Independent Auditors
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds --
U.S. Balanced Fund
U.S. Equity Fund
U.S. Large Capitalization Equity Fund
U.S. Large Capitalization Growth Fund
U.S. Small Capitalization Growth Fund
U.S. Bond 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. 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 as of June 30, 1999, and the related statements of operations and
changes in net assets and the financial highlights for the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The 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 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 June 30, 1999, 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. 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 at June 30, 1999, the results of
their operations, the changes in their net assets and the financial highlights
for the periods indicated therein in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Chicago, Illinois
August 11, 1999
================================================================================
90
<PAGE>
Distributed by:
Funds Distributor, Inc.
60 State Street
Boston, MA 02109
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which includes
details regarding the Funds' objectives, policies, expenses and other
information.
================================================================================
<PAGE>
[LOGO OF BRINSON APPEARS HERE]
[LETTERHEAD OF THE BRINSON FUNDS APPEARS HERE]
<PAGE>
________________________
The Brinson Funds
Brinson Global Fund
Brinson Global Equity Fund
Brinson Global Bond Fund
Annual Report
June 30, 1999
[LOGO OF BRINSON]
Institutional Asset Management
________________________
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
[LOGO OF BRINSON]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA
Chairman of the Board
E. Thomas McFarlan
President
Thomas J. Digenan, CFA, CPA
Vice President
Debra L. Nichols
Vice President
Carolyn M. Burke, CPA
Secretary and Treasurer
David E. Floyd, CPA
Assistant Secretary
Mark F. Kemper
Assistant Secretary
================================================================================
1
<PAGE>
THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC.
- --------------------------------------------------------------------------------
[LOGO OF BRINSON]
Since the entrepreneurial founding of our organization nearly twenty years ago,
we have focused our collective energy on two goals: creating meaningful
value-added investment performance; and providing our clients with unrivaled,
custom-tailored service of the highest quality.
Now, in 1999, more than 1,100 employees located in 11 countries around the world
continue to deliver investment strategies that meet our clients' needs. With an
unrelenting focus on our goals, we have grown into one of the world's premier
investment management organizations, with approximately USD 280 billion in
assets under management, and industry recognition as a global thought leader. In
North America, we make our services available to institutions and individual
investors through the Brinson Family of Funds. The Brinson Funds are
diversified, no-load, institutionally priced mutual funds that provide investors
convenient access to our global investment expertise and services.
Within a framework of integrated capital markets, we select portfolio
investments by focusing on long-term investment fundamentals. Investment
performance for our clients is maximized within and across asset classes through
a comprehensive understanding of global investment markets and their
interrelationships. We apply a systematic, disciplined approach to valuing
investments and combine the seasoned judgement of our global investment teams to
construct optimal portfolios--balancing considerations for both risk and return.
Brinson Partners, Inc. is a member of the UBS Brinson Division, the
institutional asset management division of UBS AG.
================================================================================
2
<PAGE>
<TABLE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
[LOGO OF BRINSON]
<S> <C>
Shareholder Letter............................................. 4
Global Economic and Market Highlights.......................... 5
Global Fund.................................................... 6
Schedule of Investments.................................. 11
Financial Statements..................................... 18
Financial Highlights..................................... 22
Global Equity Fund............................................. 24
Schedule of Investments.................................. 29
Financial Statements..................................... 33
Financial Highlights..................................... 36
Global Bond Fund............................................... 38
Schedule of Investments.................................. 42
Financial Statements..................................... 45
Financial Highlights..................................... 48
The Brinson Funds--Notes to Financial Statements............... 50
Report of Independent Auditors................................. 55
</TABLE>
================================================================================
3
<PAGE>
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
[LOGO OF BRINSON]
July 26, 1999
Dear Shareholder:
We are pleased to present the Annual Report for The Brinson Funds covering the
year ended June 30, 1999. This report focuses on the 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.
We would also like to take this opportunity to discuss a new theme that we will
call, "The Industrial Evolution." Accelerating globalization of business
enterprise and integration of capital markets is altering the equity investment
environment. In prior decades, equity investing typically focused on a
collection of separate country-defined markets with foreign countries considered
as diversifying alternatives to an investor's domestic equity market. Within
this framework, individuals and advisors typically structured their equity
portfolios into separate domestic and foreign allocations. Today, investors
confront a global equity market in which the country-level distinction is but
one of several important determinants of equity returns. The home country of a
company is declining in relative importance, and the industry classification is
becoming increasingly important. Consequently, relative comparisons of stock
prices within global industries should become a more prominent feature of active
portfolio management. As such, individuals will likely reconsider the separation
of their equity portfolios into domestic and foreign components.
Today, an allocation to Global Equity is likely to lead to a more efficient
portfolio, maximizing the return/risk relationship, than separate allocations to
domestic and foreign equities. We believe The Brinson Funds provide you with
optimal access to the global capital markets and desirable configurations of
global assets.
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. 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 focused upon both risk and return considerations in the
context of full investment cycles.
Our independent team investment approach allows for rapid responses to market
changes, while providing each investor with the benefit of our talent and the
flexibility to deliver portfolios that produce returns appropriate to a client's
risk tolerance. 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, and look forward to a long lasting, quality relationship.
Sincerely,
/s/ Garry P. Brinson
Gary P. Brinson
Chairman and Chief Investment Officer
Brinson Partners, Inc.
================================================================================
4
<PAGE>
GLOBAL ECONOMIC AND MARKET HIGHLIGHTS
- --------------------------------------------------------------------------------
[LOGO OF BRINSON]
Thanks to a weaker euro and better prospects for the world economy,
growth in Euroland is picking up steam after having experienced a
slowdown in the first half of 1999. Business confidence is supported
by ever stronger commitments of the European governments to implement
structural reforms. This should eventually create a better environment
for the labor market, boost employment and lift consumers' confidence.
Due to divergence of inflation and GDP growth rates, the ECB is still
facing a very heterogeneous situation, ranging from above average
growth and below average inflation (as in France) to below average
growth and above average inflation (as in Italy). No signs of strain
have emerged from this situation so far.
In Japan, first quarter growth (at 7.9% QI/99 over QIV/98 annualized
rate) caught market attention. The positive expectations shared by
many market participants depend heavily on the government's massive
injection of public funds rather than on increased productivity
resulting from structural reforms undertaken in the private sector.
Only the latter would allow the Japanese economy to move toward a
sustainable long-term growth path. The Bank of Japan continues its
policy of zero overnight call rates, which it sees as an alternative
for full-fledged money supply targeting.
Growing current account imbalances are emerging. A healthy American
economy is attracting capital from all over the world, but at the same
time private savings are falling in the U.S. (and this is only partly
compensated by higher public savings). The result is a widening
current account deficit. With growth picking up in the rest of the
world, capital flows are likely to be rerouted. This should alleviate
the current account problem and weaken the USD.
<TABLE>
<CAPTION>
Global Environment
<S> <C> <C> <C> <C> <C>
6 months 1 year 3 years 5 years 8/31/92*
Major Markets ended ended ended ended to
Total Return in U.S. Dollars 6/30/99 6/30/99 6/30/99 6/30/99 6/30/99
------------------------------------------------------------------------------------------------------
U.S. Equity 11.87% 19.59% 25.84% 25.69% 20.72%
Global (Ex-U.S.) Equities (currency unhedged) 4.34 7.18 8.90 8.50 10.89
Global (Ex-U.S.) Equities (currency hedged) 14.26 9.72 16.34 14.07 14.44
U.S. Bonds -1.39 3.12 7.24 7.82 6.77
Global (Ex-U.S.) Bonds (currency unhedged) -9.12 4.86 2.62 5.45 5.77
Global (Ex-U.S.) Bonds (currency hedged) 1.20 7.06 10.62 10.96 9.67
U.S. Cash Equivalents 2.46 5.32 5.57 5.63 5.02
------------------------------------------------------------------------------------------------------
6 months 1 year 3 years 5 years 8/31/92*
Major Currencies ended ended ended ended to
Percent Change Relative to U.S. Dollars 6/30/99 6/30/99 6/30/99 6/30/99 6/30/99
------------------------------------------------------------------------------------------------------
Yen -6.81% 14.66% -3.23% -4.01% 0.27%
Pound -5.26 -5.53 0.48 0.42 -3.30
Euro** -12.18 -4.83 -7.07 -3.45 -4.28
Canadian Dollar 3.78 -0.64 -2.65 1.37 -3.07
------------------------------------------------------------------------------------------------------
</TABLE>
* Inception date of the Brinson Global Fund Class I
** Deutschemark prior to 1/1/99
All total returns in excess of 1 year are average annualized returns.
================================================================================
5
<PAGE>
GLOBAL FUND
- --------------------------------------------------------------------------------
[LOGO OF BRINSON]
The Global Fund provides investors with a single investment vehicle
for comprehensive diversification across global markets and asset
classes. It is a long-term, value-driven investment option designed to
maximize total U.S. dollar return without assuming unnecessary risk.
Its benchmark is the Global Securities Markets Mutual Fund Index.
In selecting securities for the Global Fund, we seek out price/value
discrepancies across capital markets at the asset class, country and
currency levels and within capital markets through sector, sub-sector
and individual security selection. The Fund is monitored on an ongoing
basis, and rebalanced with both risk and return considerations in
mind. Our value estimates and investment decisions are based on
comprehensive analysis of forward-looking investment fundamentals,
drawing on the collective judgment of our global investment teams.
Since its inception on August 31, 1992, the Brinson Global Fund Class
I has produced an annualized return of 10.43%, compared to the 13.52%
return of its benchmark. This performance record was achieved with
significantly less risk or volatility than the benchmark; 6.63% versus
8.56%, respectively. The lower risk level implies that the Fund has
generated a much more constant return stream over time, protecting its
investors from unwanted fluctuations in the Fund's value. For the
year-to-date period, the Fund has returned 2.71% versus the benchmark
return of 5.83%.
The greatest reason for the Fund's underperformance relative to the
benchmark is its underweight of what we consider to be overvalued
global equity markets. Our analysis indicates that the current
overvaluation of the U.S. market exceeds that seen prior to the
"crash" in 1987. Other major equity markets throughout the world are
significantly overvalued but not to the same extent as the U.S.
However, these markets would be expected to suffer in the wake of a
setback in the U.S., and as a consequence, equity allocation for the
Fund is at its minimum limit.
Offsetting the Fund's equity underweight is a general overweight to
global bond markets. The largest of these overweights is to the U.S.
market (+20%), of which 15.5% is in Treasury Inflation Protected
Securities (TIPS). The next largest overweight in the Fund is to
Australian bonds (+9.7%), which we believe are undervalued at current
levels. Emerging market debt offers the best valuation among all asset
classes. The returns from the still very high spreads to Treasuries
outweigh the probabilities of loss due to default risk and the
required risk premium that is related to the high volatility of these
securities. As a result, the Fund holds a 3% overweight position in
emerging market debt.
The Fund's largest currency overweight positions are in the euro,
Swedish krona and Australian dollars. The Australian dollar has
benefited from slightly firmer commodities prices and robust domestic
growth, but we estimate that it is still undervalued against the U.S.
dollar. The krona has strengthened this year against the euro, and has
appreciated to a level closer to fundamental value. Due to pessimism
regarding economies and policy-setting within the EMU currency area,
the euro was one of the weakest currencies over the last quarter.
However, a cyclical strengthening seems to be underway, and we
maintain our overweight position.
================================================================================
6
<PAGE>
GLOBAL FUND
- --------------------------------------------------------------------------------
[LOGO OF BRINSON]
<TABLE>
<CAPTION>
Total Return
<S> <C> <C> <C> <C> <C>
6 months 1 year 3 years 5 years 8/31/92*
ended ended ended ended to
6/30/99 6/30/99 6/30/99 6/30/99 6/30/99
-----------------------------------------------------------------------------------------------------
Brinson Global Fund Class I 2.71% 4.76% 10.45% 12.03% 10.43%
-----------------------------------------------------------------------------------------------------
GSMI Mutual Fund Index** 5.83 11.87 14.52 15.35 13.52
-----------------------------------------------------------------------------------------------------
MSCI World Equity (Free) Index 8.57 15.87 18.53 17.09 16.15
-----------------------------------------------------------------------------------------------------
Salomon Smith Barney World Gov't. Bond Index -7.17 4.13 4.11 6.11 6.03
-----------------------------------------------------------------------------------------------------
</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 BIGBond Index; 9% Salomon Non-U.S.
Government Bond Index (unhedged); 2% JPMorgan EMBI+; 3% MSCI
Emerging Markets Free 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 Smith Barney World Gov't.
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 June 30, 1999. 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 Smith Barney World Gov't. Bond Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Date Brinson Global Fund Class I GSMI Mutual Fund Index MSCI World Equity (Free) Index Solomon
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8/31/92 $ 1,000,000 $ 1,000,000 $ 1,000,000 $1,000,000
9/30/92 $ 1,013,000 $ 1,005,314 $ 991,423 $1,010,000
10/31/92 $ 1,007,000 $ 997,514 $ 964,679 $ 982,528
11/30/92 $ 1,022,000 $ 1,017,428 $ 981,884 $ 966,906
12/31/92 $ 1,032,925 $ 1,030,790 $ 990,218 $ 972,746
1/31/93 $ 1,048,115 $ 1,042,387 $ 993,554 $ 989,769
2/28/93 $ 1,068,369 $ 1,055,458 $ 1,017,111 $1,009,267
3/31/93 $ 1,081,142 $ 1,087,329 $ 1,075,990 $1,024,810
4/30/93 $ 1,086,223 $ 1,093,919 $ 1,125,787 $1,046,434
5/31/93 $ 1,097,400 $ 1,116,872 $ 1,151,607 $1,056,898
6/30/93 $ 1,107,567 $ 1,119,316 $ 1,141,994 $1,054,636
7/31/93 $ 1,110,624 $ 1,127,126 $ 1,165,369 $1,057,589
8/31/93 $ 1,134,059 $ 1,166,328 $ 1,219,770 $1,089,423
9/30/93 $ 1,134,084 $ 1,165,278 $ 1,197,452 $1,102,387
10/31/93 $ 1,143,329 $ 1,182,155 $ 1,230,667 $1,100,513
11/30/93 $ 1,131,002 $ 1,153,045 $ 1,160,612 $1,092,699
12/31/93 $ 1,148,054 $ 1,179,801 $ 1,216,971 $1,101,932
1/31/94 $ 1,173,590 $ 1,218,762 $ 1,297,252 $1,110,748
2/28/94 $ 1,152,310 $ 1,200,386 $ 1,280,212 $1,103,528
3/31/94 $ 1,118,262 $ 1,159,904 $ 1,225,058 $1,101,983
4/30/94 $ 1,122,518 $ 1,172,614 $ 1,263,624 $1,103,195
5/31/94 $ 1,124,646 $ 1,176,336 $ 1,267,367 $1,093,487
6/30/94 $ 1,116,140 $ 1,164,819 $ 1,263,654 $1,109,233
7/31/94 $ 1,132,192 $ 1,189,041 $ 1,287,845 $1,118,107
8/31/94 $ 1,156,805 $ 1,220,386 $ 1,326,765 $1,114,194
9/30/94 $ 1,139,683 $ 1,201,154 $ 1,291,736 $1,122,216
10/31/94 $ 1,137,543 $ 1,219,946 $ 1,328,899 $1,140,171
11/30/94 $ 1,122,561 $ 1,185,232 $ 1,271,624 $1,124,437
12/31/94 $ 1,126,372 $ 1,196,582 $ 1,283,697 $1,127,585
1/31/95 $ 1,139,482 $ 1,208,708 $ 1,264,853 $1,151,265
2/28/95 $ 1,167,887 $ 1,241,252 $ 1,283,629 $1,180,737
3/31/95 $ 1,183,182 $ 1,281,224 $ 1,345,557 $1,250,873
4/30/95 $ 1,206,125 $ 1,311,158 $ 1,392,627 $1,274,014
5/31/95 $ 1,244,362 $ 1,344,050 $ 1,405,194 $1,309,941
6/30/95 $ 1,256,423 $ 1,364,548 $ 1,404,730 $1,317,670
7/31/95 $ 1,284,098 $ 1,407,051 $ 1,475,061 $1,320,832
8/31/95 $ 1,300,703 $ 1,402,131 $ 1,442,139 $1,275,396
9/30/95 $ 1,322,842 $ 1,439,648 $ 1,484,738 $1,303,837
10/31/95 $ 1,332,805 $ 1,430,595 $ 1,461,673 $1,313,485
11/30/95 $ 1,371,549 $ 1,473,410 $ 1,512,618 $1,328,328
12/31/95 $ 1,398,239 $ 1,500,615 $ 1,557,008 $1,342,275
1/31/96 $ 1,424,264 $ 1,525,115 $ 1,586,118 $1,325,765
2/29/96 $ 1,418,349 $ 1,529,469 $ 1,595,765 $1,319,004
3/31/96 $ 1,428,996 $ 1,542,531 $ 1,622,258 $1,317,157
4/30/96 $ 1,447,923 $ 1,569,098 $ 1,660,371 $1,311,889
5/31/96 $ 1,452,655 $ 1,580,746 $ 1,661,700 $1,312,151
6/30/96 $ 1,462,269 $ 1,583,964 $ 1,670,556 $1,322,517
7/31/96 $ 1,440,730 $ 1,542,337 $ 1,611,517 $1,347,909
8/31/96 $ 1,463,465 $ 1,567,235 $ 1,630,575 $1,353,166
9/30/96 $ 1,511,330 $ 1,618,828 $ 1,694,511 $1,358,714
10/31/96 $ 1,536,459 $ 1,634,998 $ 1,706,176 $1,384,122
11/30/96 $ 1,596,290 $ 1,703,760 $ 1,802,360 $1,402,393
12/31/96 $ 1,595,424 $ 1,688,579 $ 1,773,715 $1,391,033
1/31/97 $ 1,615,268 $ 1,713,300 $ 1,795,458 $1,353,893
2/28/97 $ 1,629,820 $ 1,721,365 $ 1,815,922 $1,343,738
3/31/97 $ 1,604,685 $ 1,683,518 $ 1,779,579 $1,333,526
4/30/97 $ 1,621,882 $ 1,717,598 $ 1,837,956 $1,321,791
5/31/97 $ 1,689,351 $ 1,804,433 $ 1,951,687 $1,357,744
6/30/97 $ 1,736,975 $ 1,869,036 $ 2,048,777 $1,373,901
7/31/97 $ 1,792,537 $ 1,943,405 $ 2,143,340 $1,363,184
8/31/97 $ 1,746,236 $ 1,872,161 $ 1,998,281 $1,362,366
9/30/97 $ 1,800,475 $ 1,953,277 $ 2,106,924 $1,391,385
10/31/97 $ 1,747,558 $ 1,890,285 $ 1,996,326 $1,420,326
11/30/97 $ 1,751,527 $ 1,907,153 $ 2,031,241 $1,398,595
12/31/97 $ 1,770,868 $ 1,930,073 $ 2,056,062 $1,394,399
1/31/98 $ 1,791,307 $ 1,956,072 $ 2,113,744 $1,407,925
2/28/98 $ 1,857,002 $ 2,050,747 $ 2,256,714 $1,419,329
3/31/98 $ 1,899,340 $ 2,108,872 $ 2,351,694 $1,405,277
4/30/98 $ 1,902,260 $ 2,129,617 $ 2,374,688 $1,427,762
5/31/98 $ 1,892,040 $ 2,099,572 $ 2,345,875 $1,431,046
6/30/98 $ 1,880,791 $ 2,126,234 $ 2,400,742 $1,433,192
7/31/98 $ 1,876,373 $ 2,115,137 $ 2,397,120 $1,435,055
8/31/98 $ 1,726,145 $ 1,901,138 $ 2,077,601 $1,474,089
9/30/98 $ 1,780,639 $ 1,966,845 $ 2,114,573 $1,552,510
10/31/98 $ 1,845,443 $ 2,084,211 $ 2,306,041 $1,598,465
11/30/98 $ 1,896,992 $ 2,169,407 $ 2,443,383 $1,575,926
12/31/98 $ 1,918,264 $ 2,247,617 $ 2,562,162 $1,607,603
1/31/99 $ 1,921,515 $ 2,278,825 $ 2,618,459 $1,592,813
2/28/99 $ 1,874,371 $ 2,218,396 $ 2,548,880 $1,541,683
3/31/99 $ 1,905,259 $ 2,288,480 $ 2,654,612 $1,545,538
4/30/99 $ 1,983,290 $ 2,368,078 $ 2,759,702 $1,544,919
5/31/99 $ 1,947,525 $ 2,308,167 $ 2,658,037 $1,518,965
6/30/99 $ 1,970,339 $ 2,378,762 $ 2,781,681 $1,492,383
</TABLE>
8/31/92=$1,000,000 Data through 6/30/99
Fund returns are net of all fees and costs, while the Index returns
are based solely on market returns without deduction for fees or
transaction costs for rebalancing.
===============================================================================
7
<PAGE>
GLOBAL FUND
- --------------------------------------------------------------------------------
[LOGO OF BRINSON]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 6/30/97*
ended ended to
6/30/99 6/30/99 6/30/99
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson Global Fund Class N 2.55% 4.47% 6.17%
-----------------------------------------------------------------------------------------------------
GSMI Mutual Fund Index** 5.83 11.87 12.81
-----------------------------------------------------------------------------------------------------
MSCI World Equity (Free) Index 8.57 15.87 16.52
-----------------------------------------------------------------------------------------------------
Salomon Smith Barney World Gov't. Bond Index -7.17 4.13 4.22
-----------------------------------------------------------------------------------------------------
</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 BIGBond Index; 9% Salomon Non-U.S.
Government Bond Index (unhedged); 2% JPMorgan EMBI+; 3% MSCI
Emerging Markets Free 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 Smith Barney 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 June 30, 1999. 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, MSCIWorld
Equity (Free) Index and Salomon Smith Barney World Gov't. Bond Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Label A B C D
Brinson Global Fund Class N GSMI Mutual Fund Index MSCI World Equity (Free) Index Salomon Smith Barney World
<S> <C> <C> <C> <C>
6/30/97 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000
$ 1,031,226 $ 1,039,790 $ 1,046,155 $ 992,200
$ 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
$ 1,004,570 $ 1,011,369 $ 974,399 $ 1,033,791
$ 1,006,093 $ 1,020,394 $ 991,441 $ 1,017,974
12/31/97 $ 1,017,857 $ 1,032,657 $ 1,003,556 $ 1,014,920
$ 1,028,766 $ 1,046,567 $ 1,031,710 $ 1,024,764
$ 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
$ 1,091,700 $ 1,139,420 $ 1,159,076 $ 1,039,203
$ 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
$ 1,076,480 $ 1,131,673 $ 1,170,024 $ 1,044,512
$ 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
$ 1,057,862 $ 1,115,127 $ 1,125,569 $ 1,163,450
$ 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
$ 1,101,119 $ 1,219,252 $ 1,278,059 $ 1,159,336
$ 1,073,124 $ 1,186,920 $ 1,244,098 $ 1,122,121
3/31/99 $ 1,089,921 $ 1,224,418 $ 1,295,705 $ 1,124,927
$ 1,134,712 $ 1,267,005 $ 1,346,999 $ 1,124,477
$ 1,114,183 $ 1,234,951 $ 1,297,377 $ 1,105,585
6/30/99 $ 1,127,275 $ 1,272,722 $ 1,357,727 $ 1,086,238
</TABLE>
6/30/97=$1,000,000 Data through 6/30/99
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
- --------------------------------------------------------------------------------
[LOGO OF BRINSON]
<TABLE>
<CAPTION>
Asset Allocation
As of June 30, 1999
Current
Benchmark Strategy
--------------------------------------------------------
<S> <C> <C>
U.S. Equities 40.0% 17.0%
Global (Ex-U.S.) Equities 22.0 15.0
Emerging Markets Equities 3.0 3.0
Dollar Bonds 21.0 41.0
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%
</TABLE>
<TABLE>
<CAPTION>
Top Ten U.S. Equity Holding
As of June 30, 1999
Percent of
Net Assets
--------------------------------------------------------
<S> <C>
1. Xerox Corp. 1.39%
2. FDX Corp. 0.94
3. Burlington Northern Santa Fe Corp. 0.88
4. Raytheon Co., Class B 0.81
5. Electronic Data Systems Corp. 0.80
6. Corning, Inc. 0.78
7. Aetna, Inc. 0.76
8. Lockheed Martin Corp. 0.67
9. CIGNA Corp. 0.62
10. General Instrument Corp. 0.61
-------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Currency Allocation
As of June 30, 1999
Current
Benchmark Strategy
--------------------------------------------------------
<S> <C> <C>
U.S. 66.0% 62.5%
Japan 7.8 0.0
U.K. 5.5 0.0
Euro 12.4 19.7
Other Europe 2.6 6.6
Canada 1.3 1.3
Emerging Markets 3.0 3.0
Other 1.4 6.9
--------------------------------------------------------
100.0% 100.0%
</TABLE>
<TABLE>
<CAPTION>
Top Ten Global (Ex-U.S.) Equity Holdings
As of June 30, 1999
Percent of
Net Assets
--------------------------------------------------------
<S> <C>
1. BP Amoco PLC 0.25%
2. Veba AG 0.24
3. ING Groep NV 0.22
4. Lloyds TSB Group PLC 0.20
5. Nippon Telegraph & Telephone Corp. 0.19
6. Nestle S.A. (Reg.) 0.19
7. General Electric Co. PLC 0.18
8. Glaxo Wellcome PLC 0.18
9. Marks & Spencer PLC 0.18
10. Siemens AG 0.17
--------------------------------------------------------
</TABLE>
================================================================================
9
<PAGE>
----------------------------------------------------------------------
GLOBAL FUND
----------------------------------------------------------------------
----------------------------------------------------------------------
Industry Diversification
----------------------------------------------------------------------
As a Percent of Net Assets
As of June 30, 1999
----------------------------------------------------------------------
U.S. EQUITIES
Energy................................ 0.17%
Capital Investment
Capital Goods....................... 2.41
Technology.......................... 3.50
-----
5.91
Basic Industries
Chemicals.......................... 1.01
Housing/Paper...................... 1.93
Metals............................. 0.75
-----
3.69
Consumer
Non-Durables....................... 0.74
Retail/Apparel..................... 1.37
Autos/Durables..................... 0.95
Health: Drugs...................... 1.09
Health: Non-Drugs.................. 1.26
-----
5.41
Financial
Banks.............................. 2.37
Non-Banks.......................... 2.27
-----
4.64
Utilities
Electric........................... 0.99
Telephone.......................... 0.40
-----
1.39
Transportation........................ 2.15
Services/Misc......................... 1.48
Post Venture.......................... 1.55
-----
Total U.S. Equities............ 26.39*
GLOBAL (EX-U.S.) EQUITIES
Aerospace & Military.................. 0.16
Airlines.............................. 0.12
Appliances & Household................ 0.20
Autos/Durables........................ 0.37
Banking............................... 1.57
Beverages & Tobacco................... 0.44
Broadcasting & Publishing............. 0.67
Building Materials.................... 0.14
Business & Public Service............. 0.63
Chemicals............................. 0.61
Construction.......................... 0.10
Data Processing....................... 0.21
Electric Components................... 0.18
Electronics........................... 0.84
Energy................................ 0.81
Financial Services.................... 0.36
Food & House Products................. 0.57
Forest Products....................... 0.17
Health: Drugs......................... 0.93
Industrial Components................. 0.35
Insurance............................. 0.76%
Leisure & Tourism..................... 0.05
Machinery & Engineering............... 0.12
Merchandising......................... 0.69
Metals--Steel......................... 0.06
Multi-Industry........................ 0.23
Non-Ferrous Metals.................... 0.40
Real Estate........................... 0.12
Recreation............................ 0.14
Telecommunications.................... 1.30
Textiles & Apparel.................... 0.03
Transportation........................ 0.23
Utilities............................. 0.75
Wholesale & International Trade....... 0.08
-----
Total global (Ex-U.S.) Equities. 14.39
EMERGING MARKETS EQUITIES............. 3.56
-----
TOTAL EQUITIES........................ 44.34
U.S. BONDS
Corporate Bonds
Aerospace & Military............... 0.61
Airlines........................... 0.03
Asset-Backed....................... 0.72
Banks.............................. 0.03
CMO................................ 0.10
Consumer........................... 0.44
Energy............................. 0.32
Financial Services................. 0.44
Food and Housing Products.......... 0.41
Services and Miscellaneous......... 0.96
Telecommunications................. 0.48
Transportation..................... 0.31
-----
4.85
International Dollar Bonds............ 1.96
Mortgage-Backed Securities............ 1.86
U.S. Government Agencies.............. 5.08
U.S. Government Obligations........... 15.43
-----
Total U.S. Bonds................ 29.18*
HIGH YIELD BONDS...................... 2.89
GLOBAL (EX-U.S.) BONDS
Foreign Financial Bonds............... 1.62
Foreign Government Bonds.............. 13.57
-----
Total Global (Ex-U.S.) Bonds.... 15.19
EMERGING MARKETS DEBT................. 5.02
SHORT-TERM INVESTMENTS................ 25.10*
-----
TOTAL INVESTMENTS............... 121.72
LIABILITIES, LESS CASH AND
OTHER ASSETS......................... (21.72)
------
NET ASSETS...................... 100.00%
======
================================================================================
* The Fund held a long position in U.S. Treasury futures on June 30, 1999 which
increased U.S. Bond exposure from 29.18% to 39.37%. * The Fund held a short
position in stock index futures on June 30, 1999 which reduced U.S. Equity
exposure from 26.39% to 16.44%. * These adjustments result in a net decrease in
the Fund's exposure to Short-Term Investments from 25.10% to 24.86%.
================================================================================
10
<PAGE>
Global Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- ----------
<S> <C> <C>
Equities -- 44.34%
U.S. Equities -- 26.39%
Advanced Micro Devices, Inc. (b)..................... 62,700 $1,132,519
Aetna, Inc........................................... 41,700 3,729,544
Allergan, Inc........................................ 13,300 1,476,300
Alza Corp. (b)....................................... 55,100 2,803,212
American Standard Companies, Inc. (b)................ 28,900 1,387,200
Aon Corp............................................. 70,947 2,926,564
Armstrong World Industries, Inc...................... 7,700 445,156
BankBoston Corp...................................... 15,300 782,213
Baxter International, Inc............................ 30,700 1,861,187
Brinson Post-Venture Fund (b)........................ 397,192 7,660,445
Burlington Northern Santa Fe Corp.................... 140,400 4,352,400
Champion Enterprises, Inc. (b)....................... 24,700 460,038
Champion International Corp.......................... 8,700 416,513
Chase Manhattan Corp................................. 24,300 2,104,987
CIGNA Corp........................................... 34,100 3,034,900
Circuit City Stores-Circuit City Group............... 25,800 2,399,400
CMS Energy Corp...................................... 25,900 1,084,562
CommScope, Inc. (b).................................. 22,133 680,590
Compaq Computer Corp................................. 7,800 184,763
Computer Sciences Corp. (b).......................... 14,600 1,010,137
Compuware Corp. (b).................................. 29,000 922,563
Comverse Technology, Inc. (b)........................ 8,540 644,770
Consolidated Stores Corp. (b)........................ 34,900 942,300
Corning, Inc......................................... 55,000 3,856,875
Covance, Inc. (b).................................... 22,072 528,349
Delphi Automotive Systems Corp....................... 50,600 939,262
Dial Corp............................................ 14,500 539,219
Dominion Resources Inc............................... 7,000 303,188
Eastman Chemical Co.................................. 15,500 802,125
Electronic Data Systems Corp......................... 69,700 3,942,406
Eli Lilly and Co..................................... 15,200 1,088,700
Entergy Corp......................................... 73,500 2,296,875
FDX Corp. (b)........................................ 85,700 4,649,225
Federal-Mogul Corp................................... 14,100 733,200
First American Corp. of Tennessee.................... 7,300 303,406
First Data Corp...................................... 56,230 2,751,756
First Security Corp.................................. 13,875 378,094
First Union Corp..................................... 23,300 1,095,100
Fleet Financial Group, Inc........................... 35,200 1,562,000
Fleetwood Enterprises, Inc........................... 16,300 430,931
Food Lion Inc., Class A.............................. 82,700 982,062
Fort James Corp...................................... 48,600 1,840,725
GATX Corp............................................ 4,000 152,250
General Instrument Corp. (b)......................... 71,200 3,026,000
Genzyme Corp. (b).................................... 11,300 548,050
Genzyme Surgical Products Division (b)............... 2,023 8,913
Geon Co.............................................. 4,500 145,125
GreenPoint Financial Corp............................ 45,400 1,489,687
Hibernia Corp........................................ 34,800 545,925
Household International, Inc......................... 45,400 2,150,825
Illinois Tool Works, Inc............................. 8,300 680,600
IMC Global Inc....................................... 50,800 895,350
Johnson Controls, Inc................................ 13,300 921,856
Kimberly-Clark Corp.................................. 28,200 1,607,400
Lafarge Corp......................................... 15,200 538,650
Lear Corp. (b)....................................... 33,600 1,671,600
Lockheed Martin Corp................................. 89,046 3,316,963
Lyondell Chemical Company............................ 40,400 833,250
Martin Marietta Materials, Inc....................... 8,184 $ 482,856
Masco Corp........................................... 87,600 2,529,450
Mattel, Inc.......................................... 40,700 1,076,006
MCN Energy Group, Inc................................ 10,700 222,025
Nabisco Holdings Corp................................ 3,100 134,075
National Service Industries, Inc..................... 13,800 496,800
New York Times Co.................................... 16,200 596,363
Newell Rubbermaid, Inc............................... 28,800 1,339,200
Nextel Communications, Inc........................... 39,200 1,967,350
Norfolk Southern Corp................................ 48,100 1,449,012
Peco Energy Co....................................... 28,100 1,176,687
Pentair, Inc......................................... 14,896 681,492
Philip Morris Companies, Inc......................... 44,500 1,788,344
PNC Bank Corp........................................ 22,800 1,313,850
Praxair, Inc......................................... 24,100 1,179,394
Raytheon Co., Class B................................ 56,800 3,997,300
Regions Financial Corp............................... 7,200 276,750
Southdown, Inc....................................... 16,136 1,036,738
St. Jude Medical, Inc. (b)........................... 39,600 1,410,750
Tyson Foods, Inc..................................... 52,198 1,174,455
U.S. Bancorp......................................... 35,980 1,223,320
Ultramar Diamond Shamrock Corp....................... 28,902 630,425
United Healthcare Corp............................... 28,100 1,759,762
USG Corp............................................. 12,600 705,600
Vencor, Inc. (b)..................................... 28,100 4,215
Ventas, Inc.......................................... 19,200 103,200
Viad Corp............................................ 27,600 853,875
W.W. Grainger, Inc................................... 7,500 403,594
Wells Fargo and Co................................... 49,000 2,094,750
Westvaco Corp........................................ 11,400 330,600
Xerox Corp........................................... 115,900 6,845,344
York International Corp.............................. 17,500 749,219
-----------
Total U.S. Equities.................................. 130,031,006
-----------
Global (Ex-U.S.) Equities -- 14.39%
Australia -- 1.17%
Amcor Ltd............................................ 16,420 91,273
Amp Limited.......................................... 23,100 252,528
Brambles Industries Ltd.............................. 9,570 252,109
Broken Hill Proprietary Co., Ltd..................... 49,610 574,646
CSR Ltd.............................................. 62,270 178,056
David Jones Ltd...................................... 73,830 72,325
Lend Lease Corp., Ltd................................ 16,432 225,608
National Australia Bank Ltd.......................... 49,427 817,894
News Corp. Ltd....................................... 74,389 634,680
News Corp. Ltd., Preferred........................... 20,436 155,691
Orica Ltd............................................ 10,350 56,525
Pacific Dunlop Ltd................................... 10,610 15,310
Qantas Airways Ltd................................... 95,837 316,539
QBE Insurance Group Ltd.............................. 37,683 143,419
Rio Tinto Ltd........................................ 16,945 277,840
Santos Ltd........................................... 39,790 130,368
Telstra Corp., Ltd................................... 131,300 752,359
Westpac Banking Corp., Ltd........................... 82,028 532,085
WMC Ltd.............................................. 39,840 171,142
Woolworth's Ltd...................................... 40,060 133,242
-----------
5,783,639
-----------
Austria -- 0.02%
Austria Tabakwerke AG................................ 1,800 104,883
-----------
</TABLE>
================================================================================
11
<PAGE>
Global Fund -- Schedule Of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ ---------
<S> <C> <C>
Belgium -- 0.17%
Fortis (B).............................................. 20,367 $ 639,587
KBC Bancassurance Holding............................... 3,490 206,956
---------
846,543
---------
Canada -- 0.35%
Agrium, Inc............................................. 9,940 86,633
Alcan Aluminum Ltd...................................... 3,720 117,499
Bank of Montreal........................................ 2,320 83,859
Canadian National Railway Co............................ 2,260 151,013
Canadian Pacific Ltd.................................... 6,873 162,526
Hudson's Bay Co......................................... 7,210 80,376
Imasco, Ltd............................................. 3,690 98,975
Imperial Oil Ltd........................................ 5,710 108,020
Magna International, Inc., Class A...................... 1,360 76,587
Newbridge Networks Corp. (b)............................ 4,060 115,208
Nova Chemicals Corp. NPV................................ 4,204 97,992
Potash Corporation of Saskatchewan, Inc................. 960 49,391
Royal Bank of Canada.................................... 3,170 139,214
Seagram Co., Ltd........................................ 1,250 61,947
Shaw Communications, Inc., Class B...................... 4,580 180,403
TransCanada Pipelines Ltd............................... 5,490 76,966
Westcoast Energy, Inc................................... 2,050 40,028
---------
1,726,637
---------
Denmark -- 0.05%
Tele Danmark A/S........................................ 4,920 242,169
---------
Finland -- 0.26%
Merita PLC, Class A..................................... 47,730 271,224
Nokia Oyj............................................... 7,160 627,649
UPM-Kymmene Corp........................................ 13,670 391,921
---------
1,290,794
---------
France -- 1.24%
Aerospatiale Matra...................................... 9,160 211,134
Air Liquide............................................. 2,205 346,787
Banque Nationale de Paris............................... 3,899 324,900
Carrefour S.A........................................... 1,920 282,164
Cie de Saint Gobain..................................... 1,597 254,459
Elf Aquitaine S.A....................................... 3,734 547,979
France Telecom S.A...................................... 6,070 458,544
Groupe Air France (b)................................... 13,060 233,010
Groupe Danone........................................... 1,620 417,676
Michelin, Class B....................................... 4,239 173,425
Rhone-Poulenc, Class A.................................. 6,094 278,477
SEITA................................................... 11,830 683,216
Societe Generale........................................ 1,705 300,505
Suez Lyonnaise des Eaux S.A............................. 2,261 407,826
Thomson CSF............................................. 14,210 493,866
Total Fina S.A., Class B................................ 3,016 389,111
Vivendi................................................. 4,040 327,275
---------
6,130,354
---------
Germany -- 1.43%
Allianz AG.............................................. 2,030 567,349
Bayer AG................................................ 19,880 827,266
Continental AG.......................................... 12,200 291,899
DaimlerChrysler AG...................................... 6,456 563,939
Deutsche Bank AG........................................ 11,740 $ 715,551
Deutsche Telekom AG..................................... 13,260 557,258
Deutsche Telekom AG, Rights (b)......................... 13,260 2,598
Dresdner Bank AG........................................ 11,670 453,730
Mannesmann AG........................................... 4,530 677,409
SAP AG.................................................. 570 195,457
Siemens AG.............................................. 10,750 829,268
Veba AG................................................. 20,089 1,185,057
Volkswagen AG........................................... 2,970 191,650
---------
7,058,431
---------
Italy -- 0.37%
Assicurazioni Generali.................................. 12,800 443,542
ENI Spa................................................. 83,000 495,612
ENI Spa ADR............................................. 3,070 184,200
La Rinascente Spa....................................... 29,740 225,124
Montedison Spa.......................................... 119,964 195,476
San Paolo-imi Spa....................................... 19,511 265,606
---------
1,809,560
---------
Japan -- 3.31%
Acom Co., Ltd........................................... 3,800 328,073
Amada Co., Ltd.......................................... 19,000 134,212
Bank of Tokyo-Mitsubushi, Ltd........................... 31,000 441,284
Bridgestone Corp........................................ 10,000 302,379
Canon, Inc.............................................. 15,000 431,262
Citizen Watch Co., Ltd.................................. 18,000 156,147
Dai Nippon Printing Co., Ltd............................ 17,000 271,770
Daiichi Pharmaceutical Co., Ltd......................... 15,000 232,733
Daikin Industries Ltd................................... 38,000 441,094
Daiwa House Industry Co., Ltd........................... 9,000 94,655
East Japan Railway Co................................... 53 284,617
Fanuc................................................... 7,400 397,389
Fuji Photo Film......................................... 5,000 189,194
Fujitsu................................................. 31,000 623,637
Honda Motor Co.......................................... 13,000 550,975
Hoya Corp............................................... 4,000 225,710
Ito Yokado Co., Ltd..................................... 9,000 602,280
Kaneka Corp............................................. 19,000 178,949
Kao Corp................................................ 12,000 337,079
Kirin Brewery Co., Ltd.................................. 20,000 239,590
Kokuyo.................................................. 6,000 96,662
Kuraray Co., Ltd........................................ 22,000 264,640
Marui Co., Ltd.......................................... 10,000 165,235
Matsushita Electric Industrial Co....................... 22,000 427,132
Mitsubishi Estate Co., Ltd.............................. 35,000 341,499
Mitsubishi Corp......................................... 60,000 406,477
NGK Insulators.......................................... 30,000 313,285
Nintendo Corp., Ltd..................................... 2,200 309,171
Nippon Denso Co., Ltd................................... 16,000 325,182
Nippon Meat Packers, Inc................................ 14,000 182,749
Nippon Steel Co......................................... 127,000 294,836
Nippon Telegraph & Telephone Corp....................... 80 931,923
Nomura Securities Co., Ltd.............................. 32,000 374,620
Obayashi Corp........................................... 32,000 161,005
Osaka Gas Co............................................ 90,000 305,601
Sankyo Co., Ltd......................................... 13,000 327,578
Sanwa Bank Ltd.......................................... 21,000 206,634
Secom Co., Ltd.......................................... 4,000 416,391
Sega Enterprises Ltd.................................... 2,400 31,745
</TABLE>
================================================================================
12
<PAGE>
Global Fund -- Schedule Of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- ---------
<S> <C> <C>
Sekisui House Ltd.................................. 20,000 $ 215,796
Shin-Etsu Chemical Co., Ltd........................ 4,000 133,840
Sony Corp.......................................... 4,200 452,826
Sumitomo Bank...................................... 23,000 285,220
Sumitomo Chemical Co............................... 51,000 233,848
Sumitomo Electric Industries....................... 20,000 227,363
Takeda Chemical Industries......................... 11,000 509,831
TDK Corp........................................... 3,000 274,372
Tokio Marine & Fire ............................... 18,000 195,555
Tokyo Electric Power............................... 19,000 401,066
Toshiba Corp....................................... 45,000 320,844
Toyota Motor Corp.................................. 17,000 537,921
Yamato Transport Co., Ltd......................... 11,000 191,755
----------
16,325,631
----------
Netherlands -- 0.67%
Elsevier NV........................................ 41,570 482,300
Heineken NV........................................ 3,152 161,395
ING Groep NV....................................... 19,727 1,068,084
Koninklijke KPN NV................................. 11,276 529,117
Royal Dutch Petroleum Co........................... 11,090 649,628
Unilever NV........................................ 5,723 385,704
----------
3,276,228
----------
New Zealand -- 0.25%
Auckland International Airport Ltd................. 62,150 95,507
Carter Holt Harvey Ltd............................. 70,640 84,597
Fletcher Challenge Paper........................... 138,030 103,130
Lion Nathan Ltd.................................... 53,920 129,146
Telecom Corp. of New Zealand Ltd................... 189,010 811,266
----------
1,223,646
----------
Norway -- 0.06%
Norsk Hydro ASA.................................... 3,190 120,347
Norske Skogindustrier ASA.......................... 4,550 167,608
----------
287,955
----------
Portugal -- 0.06%
EDP Electricidade de Portugal S.A.................. 15,300 275,499
----------
Singapore -- 0.20%
Singapore Press Holdings Ltd....................... 39,820 678,285
United Overseas Bank Ltd. (Frgn.).................. 44,360 310,064
----------
988,349
----------
Spain -- 0.31%
Banco Popular ..................................... 4,329 311,399
Banco Santander Central Hispano SA................. 42,398 441,623
Endesa S.A......................................... 14,323 305,470
Telefonica S.A. (b)................................ 9,278 446,940
----------
1,505,432
----------
Sweden -- 0.35%
Electrolux AB, B Shares........................... 25,740 538,899
Investor AB - B Shares............................. 24,400 272,642
Nordbanken Holding AB.............................. 32,110 187,705
Swedish Match AB................................... 92,620 330,085
Telefonaktiebolaget LM Ericsson, B Shares.......... 12,940 414,744
----------
1,744,075
----------
Switzerland -- 0.71%
Adecco S.A......................................... 289 154,855
Holderbank Financiere Glarus AG, B Shares.......... 234 $ 276,206
Nestle S.A. (Reg.)................................. 515 927,901
Novartis AG (Reg.)................................. 543 792,879
Roche Holding AG (Gen.)............................ 69 709,263
Swiss Reinsurance Co. (Reg.)....................... 46 87,585
Swisscom AG (Reg.)................................. 1,416 532,844
----------
3,481,533
----------
United Kingdom -- 3.41%
Allied Zurich PLC.................................. 31,052 390,352
AstraZeneca Group PLC.............................. 12,002 464,264
Barclays PLC....................................... 16,050 467,029
BOC Group PLC...................................... 38,350 749,590
Boots Company PLC.................................. 26,230 311,543
British Aerospace PLC.............................. 10,000 64,904
British Airways PLC................................ 40,000 276,009
BP Amoco PLC....................................... 69,473 1,245,126
British Telecommunications PLC..................... 29,000 485,924
Charter PLC........................................ 69,676 408,567
Coats Viyella PLC.................................. 181,970 146,287
Diageo PLC......................................... 44,209 461,672
FKI PLC............................................ 165,040 512,654
General Electric Co. PLC........................... 88,360 901,149
Glaxo Wellcome PLC................................. 32,260 896,507
Greenalls Group PLC................................ 42,358 237,028
House of Fraser PLC................................ 82,780 114,175
Lloyds TSB Group PLC............................... 71,969 975,620
Marks & Spencer PLC................................ 153,060 885,451
Mirror Group PLC................................... 101,390 393,765
National Power PLC................................. 63,500 462,437
Nycomed Amersham PLC............................... 54,844 381,245
Peninsular & Oriental Steam Navigation Co.......... 18,540 278,363
Prudential Corp. PLC............................... 55,540 817,692
Reckitt & Colman PLC............................... 26,000 271,106
Reed International PLC............................. 47,010 313,635
Rio Tinto Ltd...................................... 48,190 807,851
RJB Mining PLC..................................... 66,590 55,107
Royal & Sun Alliance Insurance Group PLC........... 21,884 196,280
Sainsbury (J.) PLC................................. 19,300 121,690
Scottish Hydro-Electric PLC........................ 67,880 694,422
Tesco PLC.......................................... 259,190 666,973
Thames Water PLC................................... 20,997 332,960
Unilever PLC....................................... 34,000 302,538
United News & Media PLC............................ 48,490 466,250
Yorkshire Water PLC................................ 37,080 257,760
----------
16,813,925
----------
Total Global (Ex-U.S.) Equities.................... 70,915,283
----------
Emerging Markets Equities -- 3.56%
Brinson Emerging Markets Equity Fund (b)........... 1,868,295 17,543,286
-----------
Total Equities (Cost $193,689,005)................. 218,489,575
-----------
</TABLE>
================================================================================
13
<PAGE>
Global Fund -- Schedule Of Investments
June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
------ ------
<S> <C> <C>
Bonds -- 52.28%
U.S. Bonds -- 29.18%
U.S. Corporate Bonds -- 4.85%
Banque Paribas, Sub. Notes, 6.875%,
due 03/01/09.......................................... $175,000 $ 168,787
Bell Atlantic Corp., 8.000%, due 10/15/29............... 78,000 85,590
Cendant Corp., 7.750%, due 12/01/03..................... 640,000 646,414
Centaur Funding Corp., 144A............................. 750 804,844
Centaur Funding Corp., 144A (b)......................... 1,430 220,935
Chase Manhattan Auto Owner Trust, 96-C,
Class A4, 6.150%, due 03/15/02........................ 730,000 733,570
Chemical Master Credit Card Trust, 95-Z,
Class A, 6.230%, due 06/15/03......................... 1,055,000 1,061,193
Continental Airlines, Inc., 98-1B, 6.748%,
due 09/15/18......................................... 166,569 158,588
First Bank Corporate Card Master Trust, 97-1,
Class A, 6.400%, due 02/15/03......................... 1,055,000 1,058,070
GATX Capital Corp., 6.500%, due 11/01/00................ 1,500,000 1,510,387
General Motors Acceptance Corp., 9.625%,
due 12/15/01.......................................... 241,000 258,478
Hertz Corp., 6.625%, due 07/15/00....................... 2,500,000 2,525,184
International Telecom Satelite, 8.125%,
due 02/28/05......................................... 245,000 258,423
Lehman Brothers, Inc., 7.250%,
due 04/15/03.......................................... 510,000 511,775
MBNA Global Capital Securities FRN,
5.795%, due 02/01/27.................................. 810,000 702,346
Monsanto Co., 144A, 6.600%, due 12/01/28................ 545,000 484,331
Morgan Stanley Dean Witter, Series MTN,
5.625%, due 01/20/04.................................. 355,000 340,895
Noram Energy Corp., 6.375%, due 11/01/03................ 615,000 601,222
Norwest Asset Securities Corp., 96-2,
Class A9, 7.000%, due 09/25/11........................ 435,000 430,167
PanAmSat Corp.
6.000%, due 01/15/03.................................. 225,000 220,234
6.375%, due 01/15/08.................................. 1,000,000 944,227
Raytheon Co., 6.300%, due 08/15/00...................... 3,000,000 3,027,356
Rohm & Haas Co., 144A, 7.400%,
due 07/15/09.......................................... 750,000 749,820
Safeway, Inc., 5.750%, due 11/15/00..................... 1,000,000 998,792
Service Corp., International, 6.000%,
due 12/15/05.......................................... 1,000,000 918,929
Sprint Capital Corp., 6.875%, due 11/15/28.............. 750,000 682,898
Supervalu Stores, Inc., Series A, MTN
6.500%, due 10/06/00.................................. 1,000,000 1,008,079
Telecommunicaciones de Puerto Rico Inc.,
144A, 6.150%, due 05/15/02........................... 200,000 197,923
Thrift Financial Corp., 11.250%, due 01/01/16........... 59,949 62,625
Time Warner Entertainment, Inc., 8.375%,
due 03/15/23.......................................... 386,000 417,715
TIme Warner, Inc., 6.625%, due 05/15/29................. 550,000 484,490
Waste Management, Inc., 6.875%, 144A,
due 05/15/09.......................................... 640,000 623,763
Western Resources, Inc., 6.875%,
due 08/01/04.......................................... 975,000 972,777
----------
23,870,827
----------
Mortgage-Backed Securities -- 1.86%
Asset Securitization Corp., 96-D,
Class A1B, 7.210%, due 10/13/26......................$1,695,000 $ 1,730,612
Prudential Home Mortgage Securities, 94-3,
Class A10, 6.500%, due 02/25/24....................... 730,000 706,348
Residential Asset Securitization Trust,
97-A11, Class A2, 7.000%, due 01/25/28................ 60,229 60,382
97-A7, Class A1, 7.500%, due 09/25/27................. 324,501 327,143
97-A7, Class A1, 7.250%, due 12/25/27................. 1,080,000 1,060,106
Structured Asset Securities Corp.,
98-RF1, Class A, 8.712%, due 03/15/27................. 1,125,637 1,179,105
98-RF2, 144A, 8.582%, due 07/15/27.................... 1,433,113 1,497,603
UCFC Home Equity Loan 97-C,
Class A8, FRN, 5.069%, due 09/15/27................... 904,870 902,689
Vendee Mortgage Trust, 98-2,
Class 1G, 6.750%, due 06/15/28........................ 1,760,000 1,700,459
-----------
9,164,447
-----------
International Dollar Bonds -- 1.96%
Abbey National PLC, Resettable
Perpetual Preferred, 6.700%, due 06/29/49............. 1,075,000 997,001
Amvescap PLC, 6.600%,
due 05/15/05.......................................... 870,000 822,067
Banco Santiago S.A., 7.000%, due 07/18/07............... 650,000 569,976
Banque Centrale de Tunisie, 8.250%,
due 09/19/27.......................................... 785,000 651,550
British Sky Broadcasting Group PLC, 6.875%,
due 02/23/09.......................................... 135,000 123,109
Credit Suisse-London, 144A, Resettable
Perpetual Preferred, 7.900%, due 05/01/07............. 600,000 584,139
Empresa Nacional de Electricidad S.A.,
7.875%, due 02/01/27.................................. 166,000 140,554
Government of Malaysia, 8.750%,
due 06/01/09.......................................... 690,000 695,175
Korea Development Bank, 7.125%,
due 09/17/01.......................................... 180,000 179,487
National Australia Bank, FRN, 6.400%,
due 12/10/07.......................................... 700,000 690,468
Pan Pacific Industry PLC 144A, 0.000%,
due 04/28/07.......................................... 1,565,000 759,025
Ras Laffan Liquified Natural Gas Co., Ltd.,
144A, 8.294%, due 03/15/14............................ 1,000,000 922,830
Repsol International Finance, 7.000%,
due 08/01/05.......................................... 575,000 571,491
Republic of South Africa, 9.625%,
due 12/15/99.......................................... 794,000 801,940
Royal Bank of Scotland, Resettable
Perpetual Preferred, 7.375%, due 04/29/49............. 505,000 490,902
Skandinaviska Enskilda Banken, 144A, 6.625%,
due 03/29/49.......................................... 285,000 281,829
144A, Resettable Perpetual Preferred, 6.500%,
due 12/29/49......................................... 415,000 394,697
---------
9,676,240
---------
</TABLE>
================================================================================
14
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
----------- ------------
<S> <C> <C>
U.S. Government Agencies -- 5.08%
Aid-Israel, Series 10-Z, 0.000%,
due 02/15/03.............................. $ 4,935,000 $ 3,986,537
Fannie Mae Whole Loan, Series 95-W3,
Class A, 9.000%, due 04/25/25............. 22,488 23,498
Federal Home Loan Mortgage Corp.............
6.200%, due 08/15/07...................... 446,183 440,013
7.238%, due 05/01/26...................... 125,917 126,868
Federal Home Loan Mortgage Corp. Gold.......
8.000%, due 11/01/22...................... 75,066 77,367
8.000%, due 05/01/23...................... 806,381 831,105
9.000%, due 03/01/24...................... 543,328 578,400
Federal National Mortgage Association.......
5.625%, due 05/14/04...................... 1,790,000 1,746,852
8.000%, due 02/25/07...................... 1,045,657 1,066,888
6.500%, due 03/01/19...................... 286,120 278,532
8.000%, due 05/25/21...................... 1,300,000 1,324,018
8.500%, due 07/15/21...................... 498,509 515,960
8.000%, due 05/01/22...................... 63,828 65,501
8.500%, due 07/01/22...................... 352,813 371,076
7.500%, due 07/25/22...................... 2,425,413 2,424,210
7.000%, due 10/01/28...................... 979,919 970,033
6.500%, due 02/01/29...................... 1,523,101 1,473,192
7.000%, due 03/01/29...................... 272,067 269,468
Federal National Mortgage Association Strips
8.000%, due 08/01/23...................... 1,417,412 362,753
0.000%, due 02/01/28...................... 1,017,105 713,655
FGGI, 7.500%, due 10/01/11.................. 795,665 809,113
FNCI, 8.000%, due 02/01/13.................. 589,589 607,514
Freddie Mac Series
194 Class PO, 0.000%, due 04/01/28........ 745,014 491,765
2121 Class H, 5.500%, due 02/15/14........ 2,302,392 2,153,174
Government National Mortgage Association
10.000%, due 09/15/00..................... 1,482 1,579
10.000%, due 05/15/01..................... 1,735 1,849
9.000%, due 11/15/04...................... 8,714 9,177
9.000%, due 11/15/04...................... 3,532 3,720
8.000%, due 08/15/22...................... 304,236 313,678
8.000%, due 11/15/22...................... 231,255 238,750
TBA, 7.000%, due 06/15/29................. 2,780,000 2,745,250
------------
25,021,495
------------
U.S. Government Obligations -- 15.43%
U.S. Treasury Bond, 8.000%,
due 11/15/21.............................. 7,200,000 8,662,500
U.S. Treasury Inflation Indexed Note........
3.625%, due 01/15/08...................... 6,945,000 6,942,105
3.625%, due 04/15/28...................... 45,590,000 44,230,725
3.875%, due 04/15/29...................... 15,000,000 14,962,259
U.S. Treasury Note..........................
4.875%, due 03/31/01...................... 970,000 959,997
5.625%, due 05/15/08...................... 290,000 284,019
------------
76,041,605
------------
Total U.S. Bonds............................ 143,774,614
------------
<CAPTION>
Shares
-----------
<S> <C> <C>
High Yield Bonds -- 2.89%
Brinson High Yield Fund (b)................. 1,058,868 14,221,334
------------
<CAPTION>
Face
Amount Value
----------- ------------
<S> <C> <C>
Global (Ex-U.S.) Bonds -- 15.19%
Australia -- 1.48%
Queensland Treasury Corp., Series 05-G,
6.500%, due 06/14/05...................AUD 10,900,000 $ 7,303,822
------------
Canada -- 1.48%
Government of Canada
7.000%, due 12/01/06...................CAD 2,640,000 1,943,141
6.000%, due 06/01/08...................... 1,600,000 1,108,574
4.250%, due 12/01/21...................... 5,440,000 4,227,844
------------
7,279,559
------------
Denmark -- 1.12%
Kingdom of Denmark
9.000%, due 11/15/00...................DKK 11,100,000 1,654,505
7.000%, due 12/15/04...................... 7,980,000 1,248,484
8.000%, due 03/15/06...................... 12,100,000 2,008,479
7.000%, due 11/10/24...................... 3,850,000 624,072
------------
5,535,540
------------
France -- 2.31%
Government of France (BTAN),
5.750%, due 03/12/01...................EUR 990,000 1,064,481
Government of France (OAT)
9.500%, due 01/25/01...................... 3,200,000 3,607,405
7.500%, due 04/25/05...................... 850,000 1,026,943
8.500%, due 12/26/12...................... 3,499,999 4,950,496
5.500%, due 04/25/29...................... 700,000 728,407
------------
11,377,732
------------
Germany -- 1.95%
Bundesrepublik Deutscheland
8.375%, due 05/21/01...................... 3,500,000 3,944,516
6.250%, due 01/04/24...................... 2,000,000 2,309,699
DePfa Deutsche Pfandbriefbank AG,
4.750%, due 03/20/03...................... 1,080,000 1,144,879
Treuhandanstalt, 6.250%, due 03/04/04....... 1,950,000 2,205,502
------------
9,604,596
------------
Italy -- 0.60%
Buoni Poliennali Del Tes,
5.000%, due 05/01/08...................... 1,700,000 1,784,066
Republic of Italy (BTP)
12.000%, due 09/01/02..................... 900,000 1,152,416
8.500%, due 04/01/04...................... 1 1
------------
2,936,483
------------
Netherlands -- 1.51%
Government of Netherlands
8.250%, due 02/15/02...................... 3,700,000 4,258,444
5.500%, due 01/15/28...................... 1,600,000 1,664,931
Koninklijke KPN NV.......................... 550,000 557,686
LBW Finance NV, 5.125%, due 03/05/04........ 900,000 964,879
------------
7,445,940
------------
Spain -- 0.77%
Government of Spain
8.000%, due 05/30/04...................... 1,352,277 1,633,196
6.150%, due 01/31/13...................... 1,900,001 2,161,341
------------
3,794,537
------------
</TABLE>
================================================================================
15
<PAGE>
GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
----------- ------------
<S> <C> <C>
Sweden -- 1.08%
Government of Sweden
10.250%, due 05/05/03................SEK 29,700,000 $ 4,199,664
6.750%, due 05/05/14.................... 8,400,000 1,117,057
------------
5,316,721
------------
United Kingdom -- 2.89%
Halifax PLC, Series E, MTN, 8.75%
due 07/10/06.........................GBP 2,980,000 5,302,925
UK Treasury...............................
7.250%, due 12/07/07.................... 4,450,000 7,929,894
8.750%, due 08/25/17.................... 440,000 1,012,610
------------
14,245,429
------------
Total Global (Ex-U.S.) Bonds.............. 74,840,359
------------
Shares
-----------
Emerging Markets Debt -- 5.02%
Brinson Emerging Markets Debt Fund (b).... 1,240,578 24,713,550
------------
Total Bonds (Cost $256,399,033)........... 257,549,857
------------
Short-Term Investments -- 25.10%
Investment Companies -- 6.51%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund................... 32,094,680 32,094,680
------------
U.S. Corporate Bonds -- 10.08%
Burlington Resources,
6.875%, due 08/01/99.................... $ 2,000,000 2,001,755
Centex Corp., Series A, MTN
5.828%, due 06/30/00.................... 5,000,000 5,000,000
Enron Corp., 5.778%, due 03/30/00......... 5,000,000 5,000,000
General Motors Corporate Notes,
9.375%, due 04/01/00.................... 2,000,000 2,058,750
James River Corp., 6.750%, due 10/01/99... 1,000,000 1,002,560
Lehman Brothers, Inc., Series A, MTN
6.920%, due 10/04/99.................... 3,000,000 3,007,690
Lehman Brothers, Inc., Series E, MTN
6.300%, due 08/11/99.................... 2,000,000 2,001,016
MCI Communications Corp.,
7.125%, due 01/20/00.................... 1,200,000 1,210,857
MCI Communications Corp., Series A, MTN
6.260%, due 03/03/00.................... 2,000,000 2,011,325
Nabisco Inc., 6.300%, due 08/26/99........ 1,000,000 1,000,786
Occidental Petroleum, Inc., Series B, MTN
6.080%, due 11/26/99.................... 3,000,000 3,005,074
Philadelphia Electric Co.,
9.250%, due 10/01/99.................... 1,000,000 1,009,845
Quaker Oats, Inc., Series B, MTN
9.100%, due 08/31/99.................... 1,800,000 1,811,690
Sonat, Inc.
9.500%, due 08/15/99.................... 2,000,000 2,008,509
Supervalu Stores, Inc.
7.250%, due 07/15/99.................... $ 2,000,000 $ 2,001,026
Texas Utilities, Inc.
7.375%, due 11/01/99.................... 3,500,000 3,520,893
Textron Financial Corp., Series C, MTN
5.299%, due 12/20/99.................... 3,000,000 3,000,307
Ultramar Corp., 8.250%, due 07/01/99...... 1,500,000 1,500,000
Union Carbide, Inc., 7.000%, due 08/01/99. 5,000,000 5,004,598
Vastar Resources, Inc.
6.000%, due 04/20/00.................... 2,500,000 2,508,589
------------
49,665,270
------------
U.S. Government Obligations -- 0.65%
U.S. Treasury Bill, 0.000%, due 08/05/99.. 3,200,000 3,186,310
------------
Commercial Paper -- 7.86%
FMC Corp., 6.25%, due 07/01/99............ 5,000,000 5,000,000
GPU Australia, 5.15%, due 07/07/99........ 5,000,000 4,995,708
Kroger Corp., 6.40%, due 07/01/99......... 3,560,000 3,560,000
Phillips Petroleum Co.,
5.22%, due 07/15/99..................... 5,236,000 5,225,368
Rohm & Haas Co., 6.30%, due 07/01/99...... 5,000,000 5,000,000
Tyco International Corp.,
5.12%, due 07/30/99..................... 5,000,000 4,979,378
U.S. Generating LLC,
6.30%, due 07/01/99..................... 5,000,000 5,000,000
Union Pacific Corp., 5.30%, due 07/30/99.. 5,000,000 4,978,653
------------
38,739,107
------------
Total Short-Term Investments
(Cost $123,682,048)..................... 123,685,367
------------
Total Investments
(Cost $573,770,086) -- 121.72% (a)...... 599,724,799
Liabilities, less cash and
other assets -- (21.72%)............... (107,008,544)
------------
Net Assets -- 100%........................ $492,716,255
============
</TABLE>
See accompanying notes to Schedule of Investments.
================================================================================
16
<PAGE>
Global Fund -- Schedule of Investments
June 30, 1999
- -------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $573,770,086; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation...................... $ 42,244,574
Gross unrealized depreciation...................... (16,289,861)
---------------
Net unrealized appreciation................... $ 25,954,713
===============
</TABLE>
(b) Non-income producing security.
FRN: Floating Rate Note -- The rate disclosed is that in effect at June 30,
1999.
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 buyers. At June 30, 1999, the value of
these securities amounted to $7,521,739 or 1.53% of net assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FORWARD FOREIGN CURRENCY CONTRACTS
The Global Fund had the following open forward foreign currency contracts as of
June 30, 1999:
<TABLE>
<CAPTION>
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
------------ ------------- ------------ -----------
<S> <C> <C> <C> <C>
Forward Foreign Currency Buy Contracts
Australian Dollar............................................. 8/6/99 33,200,000 $ 21,984,134 $ 1,052,514
British Pound................................................. 8/6/99 3,200,000 5,045,488 (80,133)
Canadian Dollar............................................... 8/6/99 26,100,000 17,643,122 454,542
Danish Kroner................................................. 8/6/99 7,600,000 1,059,269 (65,191)
Euro.......................................................... 8/6/99 22,200,000 22,959,263 (1,244,933)
Japanese Yen.................................................. 8/6/99 200,000,000 1,661,403 (9,986)
Swedish Krona................................................. 8/6/99 114,000,000 13,439,371 (1,470,093)
Swiss Franc................................................... 8/6/99 4,400,000 2,842,616 (315,581)
Forward Foreign Currency Sale Contracts
Australian Dollar............................................. 8/6/99 2,500,000 1,655,432 (102,182)
British Pound................................................. 8/6/99 18,700,000 29,484,572 1,319,939
Danish Kroner................................................. 8/6/99 42,800,000 5,965,356 742,414
Euro.......................................................... 8/6/99 6,500,000 6,722,307 878,273
Japanese Yen.................................................. 8/6/99 1,950,000,000 16,198,681 248,437
-----------
Total..................................................... $ 1,408,020
===========
</TABLE>
FUTURES CONTRACTS
The Global Fund had the following open futures contracts as of June 30, 1999:
<TABLE>
<CAPTION>
Settlement Cost/ Current Unrealized
Date Proceeds Value Loss
------------ ------------- ------------ -----------
<S> <C> <C> <C> <C>
U.S. Interest Rate Futures Buy Contracts
5 year U.S. Treasury Notes, 297 contracts..................... September 1999 $ 32,600,149 $ 32,373,000 $ ($227,149)
10 year U.S. Treasury Notes, 72 contracts..................... September 1999 8,097,692 8,005,500 (92,192)
30 year U.S. Treasury Bonds, 85 contracts..................... September 1999 9,977,704 9,852,031 (125,673)
Index Futures Sales Contracts
Standard & Poor's 500, 142 contracts.......................... September 1999 46,854,992 49,050,350 (2,195,358)
-----------
Total.................................................... $(2,640,372)
===========
</TABLE>
The segregated cash and aggregate market value of investments pledged to cover
margin requirements for the open positions at June 30, 1999 were $291,353 and
$3,186,310, respectively.
See accompanying notes to financial statements.
================================================================================
17
<PAGE>
Global Fund -- Financial Statements
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
ASSETS:
<S> <C>
Investments, at value:
Unaffiliated issuers (Cost $480,775,779).............................................. $503,491,504
Affiliated issuers (Cost $92,994,307)................................................. 96,233,295
Cash.................................................................................... 1,791,353
Foreign currency, at value (Cost $2,375,814)............................................ 2,369,487
Receivables:
Investment securities sold............................................................ 8,893,781
Dividends............................................................................. 343,049
Interest.............................................................................. 2,891,212
Fund shares sold...................................................................... 5,680,357
Net unrealized appreciation on forward foreign currency contracts....................... 1,408,020
Other assets............................................................................ 1,548
------------
TOTAL ASSETS...................................................................... 623,103,606
------------
LIABILITIES:
Payables:
Securities loaned..................................................................... 97,474,174
Investment securities purchased....................................................... 25,213,162
Investment advisory fees.............................................................. 321,311
Fund shares redeemed.................................................................. 6,648,047
Variation margin...................................................................... 525,125
Accrued expenses...................................................................... 205,532
------------
TOTAL LIABILITIES................................................................. 130,387,351
------------
NET ASSETS................................................................................. $492,716,255
============
NET ASSETS CONSIST OF:
Paid in capital......................................................................... $456,511,413
Accumulated undistributed net investment income......................................... 753,116
Accumulated net realized gain........................................................... 10,789,381
Net unrealized appreciation............................................................. 24,662,345
------------
NET ASSETS.............................................................................. $492,716,255
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based on net assets of
$469,080,017 and 39,038,154 shares issued and outstanding).......................... $ 12.02
============
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on net assets of
$1,576,267 and 131,510 shares issued and outstanding)............................... $ 11.99
============
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share (Based on net assets of
$22,059,971 and 1,845,252 shares issued and outstanding)............................ $ 11.95
============
</TABLE>
See accompanying notes to financial statements.
================================================================================
18
<PAGE>
Global Fund -- Financial Statements
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
INVESTMENT INCOME:
<S> <C>
Interest (net of $15,418 for foreign taxes withheld; including securities lending income of $442,842)...... $ 13,551,311
Dividends (net of $201,714 for foreign taxes withheld)..................................................... 4,051,102
--------------
TOTAL INCOME......................................................................................... 17,602,413
--------------
EXPENSES:
Advisory................................................................................................... 4,403,642
Administration............................................................................................. 381,250
Professional............................................................................................... 173,750
Distribution............................................................................................... 173,246
Printing................................................................................................... 116,160
Custodian.................................................................................................. 98,852
Other...................................................................................................... 146,069
--------------
TOTAL EXPENSES....................................................................................... 5,492,969
--------------
NET INVESTMENT INCOME................................................................................ 12,109,444
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.............................................................................................. 54,822,140
Futures contracts........................................................................................ (5,993,590)
Foreign currency transactions............................................................................ (4,134,930)
--------------
Net realized gain.................................................................................... 44,693,620
--------------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency......................................................................... (41,176,138)
Futures contracts........................................................................................ (1,693,063)
Forward contracts........................................................................................ 4,947,447
Translation of other assets and liabilities denominated in foreign currency.............................. (71,293)
--------------
Change in net unrealized appreciation or depreciation.................................................... (37,993,047)
--------------
Net realized and unrealized gain......................................................................... 6,700,573
--------------
Net increase in net assets resulting from operations....................................................... $ 18,810,017
==============
</TABLE>
See accompanying notes to financial statements.
================================================================================
19
<PAGE>
Global Fund -- Financial Statements
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net increase in net assets resulting from operations.................................................... $ 18,810,017
Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by operating activities:
Net realized and unrealized gain on investments....................................................... (6,700,573)
Decrease in receivable for investment securities sold................................................. 8,618,236
Decrease in dividends and interest receivable......................................................... 2,683,034
Decrease in other assets.............................................................................. 55,119
Increase in payable for securities purchased.......................................................... 1,976,692
Decrease in payable for investment advisory fee....................................................... (139,904)
Decrease in accrued expenses.......................................................................... (4,070)
Increase in variation margin.......................................................................... 967,434
Net amortization of premium........................................................................... 716,822
---------------
Net cash provided by operating activities........................................................... 26,982,807
===============
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Purchases of investments................................................................................ (2,072,240,772)
Proceeds from sales of investments...................................................................... 2,290,447,040
Net realized loss on futures contracts.................................................................. (5,993,590)
Net realized loss on foreign currency transactions...................................................... (4,134,930)
Change in net unrealized appreciaton or depreciation on futures contracts............................... (1,693,063)
Change in net unrealized appreciation or depreciation on other assets and liabilities................... (71,293)
Net decrease in foreign currency........................................................................ 312,488
---------------
Net cash provided by investing activities........................................................... 206,625,880
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net capital shares transactions......................................................................... (220,959,157)
Net decrease from securities lending.................................................................... (7,471,870)
Dividends and capital gain distributions paid........................................................... (3,401,660)
---------------
Net cash used for financing activities.............................................................. (231,832,687)
---------------
Net increase in cash....................................................................................... 1,776,000
Cash at beginning of year.................................................................................. 15,353
---------------
Cash at end of year........................................................................................ $ 1,791,353
===============
</TABLE>
See accompanying notes to financial statements.
================================================================================
20
<PAGE>
GLOBAL FUND -- FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
June 30, 1999 June 30, 1998
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income..................................................................... $ 12,109,444 $ 17,956,852
Net realized gain......................................................................... 44,693,620 39,774,075
Change in net unrealized appreciation or depreciation..................................... (37,993,047) (6,545,821)
------------- -------------
Net increase in net assets resulting from operations...................................... 18,810,017 51,185,106
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income.................................................. (12,109,444) (28,265,915)
Distributions in excess of net investment income.......................................... (6,197,274) (5,070,122)
Distributions from net realized gain...................................................... (33,009,121) (35,465,456)
------------- -------------
Total distributions to shareholders*...................................................... (51,315,839) (68,801,493
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................................... 410,521,495 256,422,880
Shares issued on reinvestment of distributions............................................ 47,914,179 64,950,197
Shares redeemed........................................................................... (632,556,320) (217,384,769)
------------- -------------
Net increase (decrease) in net assets resulting from capital share transactions........... (174,120,646) 103,988,308
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS............................................. (206,626,468) 86,371,921
------------- -------------
NET ASSETS:
Beginning of year......................................................................... 699,342,723 612,970,802
------------- -------------
End of year (including undistributed net investment
income of $753,116 and ($845,490), respectively)........................................ $ 492,716,255 $ 699,342,723
============= =============
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net investment income:
Brinson Class I........................................................................... (17,500,696) (32,129,657)
Brinson Class N........................................................................... (753,377) (9,572)
UBS Investment Funds Class................................................................ (52,645) (1,196,808)
Distributions from net realized gain:
Brinson Class I........................................................................... (31,201,392) (33,973,096)
Brinson Class N........................................................................... (1,710,286) (53)
UBS Investment Funds Class................................................................ (97,443) (1,492,307)
------------- -------------
Total distributions to shareholders.......................................................... (51,315,839) (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>
Year Ended June 30,
------------------------------------------------------------------
Brinson Class I 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............................ $ 12.77 $ 13.13 $ 12.22 $ 11.35 $ 10.43
--------- --------- --------- --------- --------
Income from investment operations:
Net investment income................................... 0.30 0.37 0.38 0.44 0.43
Net realized and unrealized gain........................ 0.25 0.62 1.79 1.37 0.86
--------- --------- --------- --------- --------
Total income from investment operations........... 0.55 0.99 2.17 1.81 1.29
--------- --------- --------- --------- --------
Less distributions:
Distributions from and in excess of net
investment income.................................... (0.46) (0.65) (0.61) (0.62) (0.27)
Distributions from and in excess of net
realized gains....................................... (0.84) (0.70) (0.65) (0.32) (0.10)
--------- --------- --------- --------- --------
Total distributions................................ (1.30) (1.35) (1.26) (0.94) (0.37)
--------- --------- --------- --------- --------
Net asset value, end of year.................................. $ 12.02 $ 12.77 $ 13.13 $ 12.22 $ 11.35
========= ========= ========= ========= ========
Total return.................................................. 4.76% 8.28% 18.79% 16.38% 12.57%
Ratios/Supplemental data:
Net assets, end of year (in 000s).......................... $ 469,080 $ 667,745 $ 586,667 $ 457,933 $ 365,678
Ratio of expenses to average net assets.................... 0.96% 0.94% 0.99% 1.04% 1.09%
Ratio of net investment income to average net
assets.................................................. 2.23% 2.70% 3.03% 3.69% 4.27%
Portfolio turnover rate.................................... 105% 88% 150% 142% 238%
</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 the period presented.
<TABLE>
<CAPTION>
Year Ended Year Ended
Brinson Class N June 30, 1999 June 30, 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of year..................................................... $ 12.75 $ 13.13
------- -------
Income from investment operations:
Net investment income............................................................. 0.27 0.63
Net realized and unrealized gain.................................................. 0.25 0.32
------- -------
Total income from investment operations...................................... 0.52 0.95
------- -------
Less distributions:
Distributions from and in excess of net investment income......................... (0.44) (0.63)
Distributions from net realized gain.............................................. (0.84) (0.70)
------- -------
Total distributions.......................................................... (1.28) (1.33)
------- -------
Net asset value, end of year........................................................... $ 11.99 $ 12.75
======= =======
Total return........................................................................... 4.47% 7.90%
Ratios/Supplemental data:
Net assets, end of year (in 000s)................................................... $ 1,576 $ 1,163
Ratio of expenses to average net assets............................................. 1.21% 1.19%
Ratio of net investment income to average net assets................................ 1.98% 2.45%
Portfolio turnover rate............................................................. 105% 88%
</TABLE>
See accompanying notes to financial statements.
================================================================================
23
<PAGE>
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
[LOGO OF BRINSON]
In managing the Global Equity Fund, our investment research focuses on
identifying discrepancies between a security's fundamental value and its
observed market price -- both across and within global equity markets. We
exploit these discrepancies using a disciplined fundamental approach. Our
research teams evaluate companies in their markets around the world and assign
relative price/value rankings based on the present value of each company's
expected future cash flows. Industry and factor teams, in cooperation with the
dedicated country strategy team, use our global network of resources to
systematically develop portfolio strategy in the context of integrated global
capital markets. Currency strategies are separately developed and coordinated
with country allocations.
The Brinson Global Equity Fund Class I has provided an annualized return of
12.02% since its performance inception, January 31, 1994. Its benchmark, the
MSCI World Equity (Free) Index has returned 15.12% over the same period. The
Fund achieved these results while maintaining a risk or volatility level much
lower than the benchmark at 10.80% versus 12.72%. The lower risk level implies
that the Fund has generated a relatively constant return stream over time,
protecting its investors from unwanted fluctuations in the Fund's value. For the
year-to-date period, the Fund has returned 7.08% versus the benchmark return of
8.57%.
For the year-to-date period, security selection was the largest cause of the
Fund's underperformance relative to the index. More specifically, our
underweights of large growth-oriented stocks and internet-related technology
stocks in the U.S. detracted from performance. While a shift toward
value-oriented cyclicals boosted Fund performance in the second quarter, earlier
influences dominate year-to-date results. We continue to believe that the U.S.
equity market is overvalued by a wide margin, and maintain our underweight.
Security selection in Japan also hampered performance as some of the financially
risky stocks (which we have steered away from) provided strong returns during
the first part of the year, as expectations for some strengthening in the
Japanese economy were increased. Currency allocation provided the largest
positive contribution, mainly due to the Fund's overweights in the Australian
dollar and Swedish krona, two of the strongest performing currencies for the
year.
Equity prices in Australia/New Zealand are still depressed, having been
disproportionately impacted by their geographic proximity to Asia and the
related cyclical downturn in basic material prices. In the case of Japan,
long-term fundamental valuation of the equity market is critically dependent
upon expectations of government reform of the domestic microeconomic
environment, and the nature and timing of overdue corporate restructuring. While
we believe that restructuring may raise profit margins in Japan to levels of a
decade ago, it is unlikely that they will reach levels similar to those found in
Continental Europe or the U.K. The implications for employment, bankruptcy and
social stress are too severe. As a result, we maintain our neutral exposure to
Japan at the present time.
The current set of socialist-oriented governments in core Europe seems to have
slowed previous reform momentum there. While we continue to expect a policy that
is more favorable to capital returns over the long run (driven by a combination
of demographic pressure and globalization of capital markets), near term
prospects have dimmed. As a result, we favor U.K. equities over those of
Continental Europe.
================================================================================
24
<PAGE>
GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
LOGO OF BRINSON]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 5 years 1/31/94*
ended ended ended ended to
6/30/99 6/30/99 6/30/99 6/30/99 6/30/99
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brinson Global Equity Fund Class I 7.08% 10.14% 13.33% 14.17% 12.02%
- ----------------------------------------------------------------------------------------------------------
MSCI World Equity (Free) Index 8.57 15.87 18.53 17.09 15.12
- ----------------------------------------------------------------------------------------------------------
</TABLE>
*Performance inception date of the Brinson Global Equity Fund Class I.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
Illustration of an Assumed Investment of $1,000,000
This chart shows the growth in the value of an investment in the Brinson Global
Equity Fund Class I and the MSCI World Equity (Free) Index if you had invested
$1,000,000 on January 31, 1994, and had reinvested all your income dividends and
capital gain distributions through June 30, 1999. No adjustment has been made
for any income taxes payable by shareholders on income dividends and capital
gain distributions. Past performance is no guarantee of future results. Share
price and return will vary with market conditions; investors may realize a gain
or loss upon redemption.
Brinson Global Equity Fund Class I
VS. MSCI World Equity (Free) Index
Wealth Value with Dividends Reinvested
$1,849,022 ---- Brinson Global Equity Fund Class I
$2,144,287 ---- MSCI World Equity (Free) Index
[GRAPH APPEARS HERE]
1/31/94 $1,000,000 $1,000,000
2/28/94 $ 978,000 $ 986,865
3/31/94 $ 935,000 $ 944,349
4/30/94 $ 957,000 $ 974,078
5/31/94 $ 964,000 $ 976,963
6/30/94 $ 953,025 $ 974,101
7/31/94 $ 967,085 $ 992,749
8/31/94 $1,008,259 $1,022,751
9/30/94 $ 981,144 $ 995,748
10/31/94 $ 983,153 $1,024,396
11/30/94 $ 957,042 $ 980,245
12/31/94 $ 956,520 $ 989,551
1/31/95 $ 942,320 $ 975,025
2/28/95 $ 957,535 $ 989,499
3/31/95 $ 965,650 $1,037,236
4/30/95 $ 991,008 $1,073,521
5/31/95 $1,004,194 $1,083,208
6/30/95 $1,010,802 $1,082,851
7/31/95 $1,057,638 $1,137,066
8/31/95 $1,075,010 $1,111,688
9/30/95 $1,094,426 $1,144,526
10/31/95 $1,092,382 $1,126,746
11/30/95 $1,131,213 $1,166,018
12/31/95 $1,166,324 $1,200,236
1/31/96 $1,201,270 $1,222,676
2/29/96 $1,206,730 $1,230,112
3/31/96 $1,227,479 $1,250,534
4/30/96 $1,261,333 $1,279,914
5/31/96 $1,264,610 $1,280,939
6/30/96 $1,270,202 $1,287,765
7/31/96 $1,229,582 $1,242,255
8/31/96 $1,251,539 $1,256,945
9/30/96 $1,293,257 $1,306,231
10/31/96 $1,297,648 $1,315,223
11/30/96 $1,363,519 $1,389,368
12/31/96 $1,367,688 $1,367,286
1/31/97 $1,379,696 $1,384,047
2/28/97 $1,398,908 $1,399,822
3/31/97 $1,392,904 $1,371,807
4/30/97 $1,401,310 $1,416,808
5/31/97 $1,484,164 $1,504,478
6/30/97 $1,540,253 $1,579,321
7/31/97 $1,590,951 $1,652,216
8/31/97 $1,517,318 $1,540,396
9/30/97 $1,582,501 $1,624,144
10/31/97 $1,496,797 $1,538,889
11/30/97 $1,495,590 $1,565,803
12/31/97 $1,514,304 $1,584,937
1/31/98 $1,539,631 $1,629,401
2/28/98 $1,634,275 $1,739,612
3/31/98 $1,700,926 $1,812,828
4/30/98 $1,698,260 $1,830,553
5/31/98 $1,692,928 $1,808,342
6/30/98 $1,678,772 $1,850,637
7/31/98 $1,670,739 $1,847,845
8/31/98 $1,487,333 $1,601,540
9/30/98 $1,511,430 $1,630,041
10/31/98 $1,611,835 $1,777,635
11/30/98 $1,673,417 $1,883,507
12/31/98 $1,726,828 $1,975,069
1/31/99 $1,726,828 $2,018,467
2/28/99 $1,676,039 $1,964,831
3/31/99 $1,728,200 $2,046,335
4/31/99 $1,847,623 $2,127,345
5/31/99 $1,780,362 $2,048,976
6/30/99 $1,849,022 $2,144,287
1/31/94=$1,000,000
Data through 6/30/99
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.
================================================================================
25
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
Total Return
[LOGO OF BRINSON]
<TABLE>
<CAPTION>
6 months 1 year 6/30/97*
ended ended to
6/30/99 6/30/99 6/30/99
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson Global Equity Fund Class N 6.93% 9.80% 9.20%
-------------------------------------------------------------------------------------------------------
MSCI World Equity (Free) Index 8.57 15.87 16.52
-------------------------------------------------------------------------------------------------------
</TABLE>
*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 June 30, 1999. 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]
<TABLE>
<CAPTION>
----------------------------------------------------------------
Label A B
----------------------------------------------------------------
MSCI World Equity
Label Brinson Global (Free) Index
----------------------------------------------------------------
<S> <C> <C> <C>
1 6/30/97 $1,000,000 $1,000,000
2 7/31/97 $1,032,915 $1,046,155
3 8/31/97 $ 984,326 $ 975,353
4 9/30/97 $1,026,646 $1,028,381
5 10/31/97 $ 970,219 $ 974,399
6 11/30/97 $ 969,436 $ 991,441
7 12/31/97 $ 981,339 $1,003,556
8 1/31/98 $ 996,889 $1,031,710
9 2/28/98 $1,058,222 $1,101,493
10 3/31/98 $1,101,415 $1,147,852
11 4/30/98 $1,098,823 $1,159,076
12 5/31/98 $1,096,232 $1,145,012
13 6/30/98 $1,085,985 $1,171,793
14 7/31/98 $1,080,785 $1,170,024
15 8/31/98 $ 962,046 $1,014,069
16 9/30/98 $ 976,780 $1,032,115
17 10/31/98 $1,040,917 $1,125,569
18 11/30/98 $1,080,785 $1,192,605
19 12/31/98 $1,115,067 $1,250,581
20 1/31/99 $1,115,067 $1,278,059
21 2/28/99 $1,081,304 $1,244,098
22 3/31/99 $1,115,067 $1,295,705
23 4/30/99 $1,191,478 $1,346,999
24 5/31/99 $1,148,830 $1,297,377
25 6/30/99 $1,192,373 $1,357,727
6/30/97 = $1,000,000
Data through 6/30/99
</TABLE>
Fund returns are net of all fees and costs, while the Index returns
are based solely on market returns without deduction for fees or
transaction costs for rebalancing.
================================================================================
26
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
[LOGO OF BRINSON]
Market Allocation
As of June 30, 1999
Current
Benchmark Strategy
--------------------------------------------------------
U.S. 52.0% 43.0%
Australia 1.3 5.1
Austria 0.1 0.1
Belgium 0.6 0.7
Canada 2.0 1.7
Denmark 0.4 0.2
Finland 0.9 1.1
France 4.5 5.2
Germany 4.5 6.0
Hong Kong 1.2 0.0
Ireland 0.2 0.0
Italy 2.0 1.5
Japan 11.0 11.0
Netherlands 2.6 2.7
New Zealand 0.1 0.6
Norway 0.2 0.1
Portugual 0.2 0.2
Singapore 0.4 0.8
Spain 1.4 1.3
Sweden 1.1 1.5
Switzerland 3.1 3.0
United Kingdom 10.2 14.2
Cash Reserves 0.0 0.0
--------------------------------------------------------
100.0% 100.0%
Top Ten U.S. Equity Holdings
As of June 30, 1999
Percent of
Net Assets
--------------------------------------------------------
1. Xerox Corp. 2.33%
2. FDX Corp. 1.58
3. Burlington Northern Santa Fe Corp. 1.48
4. Raytheon Co., Class B 1.36
5. Electronic Data Systems Corp. 1.34
6. Corning, Inc. 1.32
7. Aetna, Inc. 1.27
8. Lockheed Martin Corp. 1.13
9. General Instrument Corp. 1.04
10. CIGNA Corp. 1.03
--------------------------------------------------------
Currency Allocation
As of June 30, 1999
Current
Benchmark Strategy
--------------------------------------------------------
U.S. 52.0% 49.2%
Australia 1.3 6.8
Canada 2.0 2.0
Denmark 0.4 0.4
Euro 17.0 27.0
Hong Kong 1.2 0.0
Japan 11.0 3.0
New Zealand 0.1 0.6
Norway 0.2 0.2
Singapore 0.4 0.4
Sweden 1.1 5.1
Switzerland 3.1 3.1
United Kingdom 10.2 2.2
--------------------------------------------------------
100.0% 100.0%
Top Ten Global (Ex-U.S.) Equity Holdings
As of June 30, 1999
Percent of
Net Assets
--------------------------------------------------------
1. BP Amoco PLC 1.08%
2. Veba AG 1.01
3. ING Groep NV 0.86
4. Nestle S.A. (Reg.) 0.84
5. Lloyds TSB Group PLC 0.80
6. Glaxo Wellcome PLC 0.79
7. Marks & Spencer PLC 0.78
8. General Electric Co. PLC 0.73
9. Bayer AG 0.72
10. Siemens AG 0.72
--------------------------------------------------------
================================================================================
27
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
[LOGO OF BRINSON]
Industry Diversification
As a Percent of Net Assets
As of June 30, 1999
----------------------------------------------------------------------
U.S. EQUITIES
Energy.................................................. 0.28%
Capital Investment
Capital Goods........................................ 4.46
Technology........................................... 5.88
------
10.34
Basic Industries
Chemicals............................................ 1.69
Housing/Paper........................................ 3.09
Metals............................................... 1.17
------
5.95
Consumer
Non-Durables......................................... 1.28
Retail/Apparel....................................... 2.29
Autos/Durables....................................... 1.56
Health: Drugs........................................ 1.83
Health: Non-Drugs.................................... 2.12
------
9.08
Financial
Banks................................................ 4.41
Non-Banks............................................ 3.30
------
7.71
Utilities
Electric............................................. 1.66
Telephone............................................ 0.67
------
2.33
Transportation.......................................... 3.61
Services/Misc........................................... 2.49
------
Total U.S. Equities............................. 41.79
GLOBAL (EX-U.S.) EQUITIES
Aerospace & Military.................................... 0.65
Airlines................................................ 0.73
Appliances & Household.................................. 1.04
Autos/Durables.......................................... 1.38
Banking................................................. 6.25
Beverages and Tobacco................................... 1.80
Broadcasting & Publishing............................... 2.69
Building Materials...................................... 0.64
Business & Public Service............................... 2.31
Chemicals............................................... 2.38
Construction............................................ 0.31%
Data Processing......................................... 0.72
Electric Components..................................... 0.61
Electronics............................................. 3.08
Energy.................................................. 3.88
Financial Services...................................... 1.31
Food & House Products................................... 2.35
Forest Products......................................... 0.70
Health & Personal Care.................................. 3.76
Industrial Components................................... 1.22
Insurance............................................... 3.13
Leisure & Tourism....................................... 0.22
Machinery & Engineering................................. 0.39
Merchandising........................................... 2.99
Metals--Steel........................................... 0.20
Multi-Industry.......................................... 0.92
Non-Ferrous Metals...................................... 1.19
Real Estate............................................. 0.44
Recreation.............................................. 0.43
Telecommunications...................................... 5.21
Textiles & Apparel...................................... 0.12
Transportation.......................................... 0.66
Utilities............................................... 3.07
Wholesale & International Trade......................... 0.27
------
Total Global (Ex-U.S.) Equities................. 57.05
SHORT-TERM INVESTMENTS.................................. 1.18
------
TOTAL INVESTMENTS............................... 100.02
LIABILITIES, LESS CASH AND OTHER ASSETS................. (0.02)
------
NET ASSETS...................................... 100.00%
======
----------------------------------------------------------------------
================================================================================
28
<PAGE>
Global Equity Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- ------------
<S> <C> <C>
Equities -- 98.84%
U.S. Equities -- 41.79%
Advanced Micro Devices, Inc. (b)........ 17,800 $ 321,513
Aetna, Inc.............................. 12,300 1,100,081
Allergan, Inc........................... 3,900 432,900
Alza Corp. (b).......................... 16,200 824,175
American Standard Companies, Inc. (b)... 8,500 408,000
Aon Corp................................ 20,925 863,156
Armstrong World Industries, Inc......... 2,200 127,188
BankBoston Corp......................... 4,500 230,063
Baxter International, Inc............... 9,000 545,625
Burlington Northern Santa Fe Corp....... 41,300 1,280,300
Champion Enterprises, Inc. (b).......... 6,700 124,788
Champion International Corp............. 2,600 124,475
Chase Manhattan Corp.................... 7,100 615,037
CIGNA Corp.............................. 10,000 890,000
Circuit City Stores-Circuit City Group.. 7,600 706,800
CMS Energy Corp......................... 7,600 318,250
CommScope, Inc. (b)..................... 7,133 219,340
Compaq Computer Corp.................... 2,400 56,850
Computer Sciences Corp. (b)............. 3,700 255,994
Compuware Corp. (b)..................... 8,600 273,588
Comverse Technology, Inc. (b)........... 2,637 199,094
Consolidated Stores Corp. (b)........... 10,500 283,500
Corning, Inc............................ 16,200 1,136,025
Covance, Inc. (b)....................... 6,500 155,594
Crown Cork & Seal Co., Inc.............. 2,100 59,850
Delphi Automotive Systems Corp.......... 14,900 276,581
Dial Corp............................... 4,300 159,906
Dominion Resources, Inc................. 2,000 86,625
Eastman Chemical Co..................... 4,600 238,050
Electronic Data Systems Corp............ 20,500 1,159,531
Eli Lilly and Co........................ 4,500 322,312
Entergy Corp............................ 21,600 675,000
FDX Corp. (b)........................... 25,200 1,367,100
Federal-Mogul Corp...................... 4,100 213,200
First American Corp. of Tennessee....... 2,200 91,438
First Data Corp......................... 17,304 846,814
First Security Corp..................... 4,050 110,363
First Union Corp........................ 6,900 324,300
Fleet Financial Group, Inc.............. 10,300 457,062
Fleetwood Enterprises, Inc.............. 5,300 140,119
Food Lion Inc., Class A................. 24,100 286,188
Fort James Corp......................... 14,300 541,612
GATX Corp............................... 1,100 41,869
General Instrument Corp. (b)............ 21,100 896,750
Genzyme Corp. (b)....................... 3,300 160,050
Genzyme Surgical Products Division (b).. 591 2,603
Geon Co................................. 1,400 45,150
GreenPoint Financial Corp............... 12,400 406,875
Hibernia Corp........................... 8,700 136,481
Household International, Inc............ 13,400 634,825
Illinois Tool Works, Inc................ 2,500 205,000
IMC Global, Inc......................... 15,000 264,375
Johnson Controls, Inc................... 3,900 270,319
Kimberly-Clark Corp..................... 9,600 547,200
Lafarge Corp............................ 4,500 159,469
Lear Corp. (b).......................... 9,900 $ 492,525
Lockheed Martin Corp.................... 26,202 976,024
Lyondell Chemical Company............... 11,900 245,438
Martin Marietta Materials, Inc.......... 2,435 143,665
Masco Corp.............................. 25,800 744,975
Mattel, Inc............................. 11,700 309,319
MCN Energy Group, Inc................... 2,800 58,100
Nabisco Holdings Corp................... 1,600 69,200
National Service Industries, Inc........ 3,600 129,600
New York Times Co....................... 4,400 161,975
Newell Rubbermaid, Inc.................. 8,500 395,250
Nextel Communications, Inc. (b)......... 11,500 577,156
Norfolk Southern Corp................... 14,200 427,775
Peco Energy Co.......................... 8,510 356,356
Pentair, Inc............................ 4,400 201,300
Philip Morris Companies, Inc............ 13,100 526,456
PNC Bank Corp........................... 6,700 386,087
Praxair, Inc............................ 7,000 342,562
Raytheon Co., Class B................... 16,700 1,175,263
Regions Financial Corp.................. 2,100 80,719
Southdown, Inc.......................... 4,776 306,858
St. Jude Medical, Inc. (b).............. 11,700 416,812
Tyson Foods, Inc........................ 15,400 346,500
U.S. Bancorp............................ 10,563 359,142
Ultramar Diamond Shamrock Corp.......... 8,552 186,541
United Healthcare Corp.................. 8,300 519,787
USG Corp................................ 3,800 212,800
Vencor, Inc. (b)........................ 9,100 1,365
Ventas, Inc............................. 5,600 30,100
Viad Corp............................... 8,100 250,594
W.W. Grainger, Inc...................... 1,700 91,481
Wells Fargo and Co...................... 14,400 615,600
Westvaco Corp........................... 3,600 104,400
Xerox Corp.............................. 34,100 2,014,031
York International Corp................. 5,100 218,344
------------
Total U.S. Equities..................... 36,093,454
------------
Global (Ex-U.S.) Equities -- 57.05%
Australia --5.04%
Amcor Ltd............................... 14,200 78,933
Amp Ltd................................. 17,300 189,123
Brambles Industries Ltd................. 6,900 181,771
Broken Hill Proprietary Co., Ltd........ 39,350 455,802
CSR Ltd................................. 54,400 155,552
David Jones Ltd......................... 48,400 47,413
Lend Lease Corp., Ltd................... 13,194 181,151
National Australia Bank Ltd............. 34,875 577,095
News Corp., Ltd......................... 58,540 499,458
News Corp., Ltd., Preferred............. 13,300 101,326
Orica Ltd............................... 4,000 21,845
Qantas Airways Ltd...................... 73,977 244,338
QBE Insurance Group Ltd................. 25,042 95,308
Rio Tinto Ltd........................... 14,363 235,504
Santos Ltd.............................. 26,000 85,187
Telstra Corp., Ltd...................... 98,400 563,839
Westpac Banking Corp., Ltd.............. 57,945 375,868
</TABLE>
================================================================================
29
<PAGE>
Global Equity Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- ------------
<S> <C> <C>
WMC Ltd................................. 30,800 $ 132,309
Woolworth's Ltd......................... 39,900 132,709
------------
4,354,531
------------
Austria -- 0.06%
Austria Tabakwerke AG................... 900 52,442
------------
Belgium -- 0.75%
Fortis (B).............................. 15,562 488,695
KBC Bancassurance Holding............... 2,620 155,365
------------
644,060
------------
Canada -- 1.19%
Agrium, Inc............................. 6,200 54,037
Alcan Aluminum Ltd...................... 2,300 72,647
Bank of Montreal........................ 1,400 50,605
Canadian National Railway Co............ 1,400 93,548
Canadian Pacific Ltd.................... 4,116 97,331
Hudson's Bay Co......................... 4,300 47,936
Imasco Ltd.............................. 2,300 61,692
Imperial Oil Ltd........................ 3,600 68,103
Magna International, Inc., Class A...... 600 33,788
Newbridge Networks Corp. (b)............ 1,900 53,915
NOVA Chemicals Corp..................... 2,597 60,534
Potash Corporation of Saskatchewan, Inc. 600 30,870
Royal Bank of Canada.................... 1,600 70,265
Seagram Co., Ltd........................ 700 34,690
Shaw Communications, Inc., Class B...... 3,000 118,168
TransCanada Pipelines Ltd............... 3,988 55,909
Westcoast Energy, Inc................... 1,000 19,526
------------
1,023,564
------------
Denmark -- 0.22%
Tele Danmark A/S........................ 3,800 187,041
------------
Finland -- 1.14%
Merita Ltd., Class A.................... 36,700 208,546
Nokia Oyj............................... 5,400 473,367
UPM-Kymmene Corp........................ 10,700 306,770
------------
988,683
------------
France -- 5.30%
Aerospatiale Matra...................... 7,180 165,496
Air Liquide............................. 1,638 257,614
Banque Nationale de Paris............... 2,922 243,487
Carrefour S.A........................... 1,500 220,440
Cie de Saint Gobain..................... 1,136 181,005
Elf Aquitaine S.A....................... 2,832 415,607
France Telecom S.A...................... 4,540 342,964
Air France (b).......................... 9,780 174,490
Groupe Danone........................... 1,230 317,125
Michelin, Class B....................... 3,031 124,003
Rhone-Poulenc, Class A.................. 4,550 207,921
SEITA................................... 9,070 523,818
Societe Generale........................ 1,223 215,553
Suez Lyonnaise des Eaux S.A............. 1,687 $ 304,292
Thomson CSF............................. 10,045 349,112
Total Fina S.A., Class B................ 2,249 290,156
Vivendi................................. 3,009 243,755
------------
4,576,838
------------
Germany -- 6.01%
Allianz AG.............................. 1,463 408,882
Bayer AG................................ 14,890 619,617
Continental AG.......................... 9,100 217,728
DaimlerChrysler AG...................... 4,625 403,999
Deutsche Bank AG........................ 8,811 537,029
Deutsche Telekom AG..................... 9,960 418,574
Deutsche Telekom AG, Rights (b)......... 9,960 1,951
Dresdner Bank AG........................ 8,400 326,592
Mannesmann AG........................... 3,250 486,000
SAP AG.................................. 400 137,163
Siemens AG.............................. 8,020 618,673
Veba AG................................. 14,810 873,647
Volkswagen AG........................... 2,140 138,091
------------
5,187,946
------------
Italy -- 1.53%
Assicurazioni Generali.................. 9,700 336,121
ENI Spa................................. 66,000 394,101
ENI Spa ADR............................. 1,700 102,000
La Rinascente Spa....................... 20,875 158,018
Montedison Spa.......................... 86,091 140,282
San Paolo-imi, Spa...................... 13,911 189,373
------------
1,319,895
------------
Japan -- 10.99%
Acom Co., Ltd........................... 2,100 181,304
Amada Co., Ltd.......................... 11,000 77,702
Bank of Tokyo-Mitsubushi Ltd............ 18,000 256,229
Bridgestone Corp........................ 6,000 181,428
Canon, Inc............................. 9,000 258,757
Citizen Watch Co., Ltd.................. 10,000 86,748
Dai Nippon Printing Co., Ltd............ 10,000 159,864
Daiichi Pharmaceutical Co., Ltd......... 9,000 139,640
Daikin Industries Ltd................... 22,000 255,370
Daiwa House Industry Co., Ltd........... 5,000 52,586
Denso Corp., Ltd........................ 9,000 182,915
East Japan Railway Co................... 31 166,474
Fanuc................................... 4,300 230,915
Fuji Photo Film......................... 3,000 113,516
Fujitsu................................. 18,000 362,112
Honda Motor Co.......................... 8,000 339,061
Hoya Corp............................... 2,000 112,855
Ito Yokado Co., Ltd..................... 5,000 334,600
Kaneka Corp............................. 11,000 103,602
Kao Corp................................ 7,000 196,629
Kirin Brewery Co., Ltd.................. 12,000 143,754
Kokuyo.................................. 3,000 48,331
Kuraray Co., Ltd........................ 13,000 156,378
Marui Co., Ltd.......................... 6,000 99,141
Matsushita Electric Industrial Co....... 13,000 252,396
</TABLE>
================================================================================
30
<PAGE>
Global Equity Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ------------
<S> <C> <C>
Mitsubishi Estate Co., Ltd.................. 20,000 $ 195,142
Mitsubishi Corp............................. 35,000 237,112
NGK Insulators.............................. 17,000 177,528
Nintendo Corp., Ltd......................... 1,100 154,585
Nippon Meat Packers, Inc.................... 8,000 104,428
Nippon Steel Co............................. 73,000 169,473
Nippon Telegraph & Telephone Corp........... 46 535,856
Nomura Securities Co., Ltd.................. 18,000 210,724
Obayashi Corp............................... 17,000 85,534
Osaka Gas Co................................ 52,000 176,570
Sankyo Co., Ltd............................. 8,000 201,586
Sanwa Bank Ltd.............................. 12,000 118,077
Secom Co., Ltd.............................. 3,000 312,293
Sega Enterprises Ltd........................ 1,000 13,227
Sekisui House Ltd........................... 12,000 129,478
Shin-Etsu Chemical Co., Ltd................. 2,000 66,920
Sony Corp................................... 2,300 247,976
Sumitomo Bank............................... 13,000 161,211
Sumitomo Chemical Co........................ 26,000 119,217
Sumitomo Electric Industries................ 12,000 136,418
Takeda Chemical Industries.................. 7,000 324,438
TDK Corp.................................... 2,000 182,915
Tokio Marine & Fire Insurance Co............ 10,000 108,642
Tokyo Electric Power........................ 11,000 232,196
Toshiba Corp................................ 25,000 178,247
Toyota Motor Corp........................... 10,000 316,424
Yamato Transport Co., Ltd................... 6,000 104,594
------------
9,493,118
------------
Netherlands -- 2.78%
Elsevier NV................................. 31,100 360,826
Heineken NV................................. 2,393 122,531
ING Groep NV................................ 13,762 745,120
Koninklijke KPN NV.......................... 8,644 405,612
Royal Dutch Petroleum Co.................... 8,275 484,732
Unilever NV................................. 4,236 285,487
------------
2,404,308
------------
New Zealand -- 0.84%
Auckland International Airport Ltd.......... 32,000 49,175
Carter Holt Harvey Ltd...................... 48,000 57,483
Fletcher Challenge Paper.................... 73,100 54,617
Lion Nathan Ltd............................. 36,000 86,225
Telecom Corp. of New Zealand Ltd............ 111,400 478,150
------------
725,650
------------
Norway -- 0.22%
Norsk Hydro ASA............................. 2,100 79,225
Norske Skogindustrier ASA................... 3,000 110,511
------------
189,736
------------
Portugal -- 0.24%
EDP Electricidade de Portugal S.A........... 11,500 207,075
------------
Singapore -- 0.69%
Singapore Press Holdings Ltd................ 24,046 409,594
United Overseas Bank Ltd. (Frgn.)........... 27,000 188,723
------------
598,317
------------
Spain -- 1.28%
Banco Popular S.A........................... 2,883 $ 207,383
Banco Santander Central Hispano, S.A........ 32,134 334,712
Endesa, S.A................................. 10,383 221,441
Telefonica, S.A. (b)........................ 7,090 341,540
------------
1,105,076
------------
Sweden -- 1.52%
Electrolux AB, B Shares.................... 19,060 399,045
Ericsson LM, B Shares....................... 10,080 323,077
Investor AB, B Shares....................... 18,240 203,811
Nordbanken Holding AB....................... 23,910 139,770
Swedish Match AB............................ 69,250 246,798
------------
1,312,501
------------
Switzerland -- 3.10%
Adecco S.A.................................. 220 117,882
Holderbank Financiere Glarus AG, B Shares... 180 212,466
Holderbank Financiere Glarus AG, Rights..... 24 352
Nestle S.A. (Reg.).......................... 402 724,303
Novartis AG (Reg.).......................... 415 605,976
Roche Holding AG (Gen.)..................... 53 544,796
Swiss Reinsurance Co. (Reg.)................ 35 66,641
Swisscom AG (Reg.).......................... 1,083 407,536
------------
2,679,952
------------
United Kingdom -- 14.15%
Allied Zurich PLC........................... 23,375 293,846
AstraZeneca PLC............................. 6,639 256,811
Barclays PLC................................ 12,000 349,180
BOC Group PLC............................... 29,000 566,834
Boots Company PLC........................... 19,500 231,609
British Aerospace PLC....................... 7,000 45,433
British Airways PLC......................... 31,000 213,907
BP Amoco PLC................................ 51,904 930,247
British Telecommunications PLC.............. 20,000 335,120
Charter PLC................................. 49,922 292,733
Coats Viyella PLC........................... 128,250 103,101
Diageo PLC.................................. 32,630 340,753
FKI PLC..................................... 122,405 380,220
General Electric Co. PLC.................... 61,820 630,478
Glaxo Wellcome PLC.......................... 24,620 684,191
Greenalls Group PLC......................... 33,500 187,461
House of Fraser PLC......................... 45,250 62,411
Lloyds TSB Group PLC........................ 51,220 694,344
Marks & Spencer PLC......................... 116,120 671,753
Mirror Group PLC............................ 66,000 256,322
National Power PLC.......................... 49,500 360,482
Nycomed Amersham PLC........................ 41,000 285,009
Peninsular & Oriental Steam Navigation Co... 13,475 202,316
Prudential Corp. PLC........................ 39,000 574,180
Reckitt & Colman PLC........................ 18,000 187,689
Reed International PLC...................... 35,000 233,508
Rio Tinto Ltd............................... 35,020 587,071
RJB Mining PLC.............................. 52,500 43,447
Royal & Sun Alliance Insurance Group PLC.... 16,162 144,959
Sainsbury (J.) PLC.......................... 13,500 85,120
</TABLE>
================================================================================
31
<PAGE>
Global Equity Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- ------------
<S> <C> <C>
Scottish Southern Energy PLC.......... 49,650 $ 507,926
Tesco PLC............................. 190,250 489,570
Thames Water PLC...................... 15,458 245,125
Unilever PLC.......................... 24,000 213,556
United News & Media PLC............... 36,000 346,154
Yorkshire Water PLC................... 27,500 191,165
------------
12,224,031
------------
Total Global (Ex-U.S.) Equities....... 49,274,764
------------
Total Equities (Cost $69,139,277)..... 85,368,218
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
--------- ------------
<S> <C> <C>
Short-Term Investments -- 1.18%
Investment Companies -- 1.18%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund
(Cost $1,022,188)................... 1,022,188 $ 1,022,188
------------
Total Investments
(Cost $70,161,465)-- 100.02% (a).. 86,390,406
Liabilities, less cash and other
assets-- (0.02%)................... (22,199)
------------
Net Assets-- 100%..................... $ 86,368,207
============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $70,161,465; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation.................... $ 18,488,893
Gross unrealized depreciation.................... (2,259,952)
------------
Net unrealized appreciation.................. $ 16,228,941
============
</TABLE>
(b) Non-income producing security
FORWARD FOREIGN CURRENCY CONTRACTS
The Global Equity Fund had the following open forward foreign currency contracts
as of June 30, 1999:
<TABLE>
<CAPTION>
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Forward Foreign Currency Buy Contracts
Australian Dollar........................................... 12/3/99 2,300,000 $ 1,525,877 $ 21,010
Canadian Dollar............................................. 12/3/99 5,500,000 3,723,714 (7,123)
Euro........................................................ 12/3/99 3,400,000 3,549,505 (57,895)
Swedish Krona............................................... 12/3/99 26,600,000 3,161,221 30,520
Forward Foreign Currency Sale Contracts
British Pound............................................... 12/3/99 6,500,000 10,344,610 130,813
Japanese Yen................................................ 12/3/99 818,000,000 6,923,483 13,424
---------
Total.............................................. $130,749
=========
</TABLE>
See accompanying notes to financial statements.
================================================================================
32
<PAGE>
Global Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
ASSETS:
<S> <C>
Investments, at value:
Unaffiliated issuers (Cost $69,139,277).............................................. $85,368,218
Affiliated issuers (Cost $1,022,188)................................................. 1,022,188
Foreign currency, at value (Cost $517,126).............................................. 518,741
Receivables:
Investment securities sold............................................................ 351,137
Dividends............................................................................. 183,865
Interest.............................................................................. 2,812
Fund shares sold...................................................................... 134,588
Net unrealized appreciation on forward foreign currency contracts....................... 130,749
Other assets............................................................................ 2,450
-----------
TOTAL ASSETS...................................................................... 87,714,748
-----------
LIABILITIES:
Payables:
Investment securities purchased....................................................... 782,515
Fund shares redeemed.................................................................. 423,872
Investment advisory fees.............................................................. 53,551
Accrued expenses...................................................................... 86,603
-----------
TOTAL LIABILITIES................................................................. 1,346,541
-----------
NET ASSETS................................................................................. $86,368,207
===========
NET ASSETS CONSIST OF:
Paid in capital......................................................................... $65,256,033
Accumulated undistributed net investment income......................................... 302,311
Accumulated net realized gain........................................................... 4,451,473
Net unrealized appreciation............................................................. 16,358,390
-----------
NET ASSETS........................................................................ $86,368,207
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based on net assets of
$42,106,094 and 3,136,505 shares issued and outstanding)............................ $ 13.42
===========
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on net assets of
$220,133 and 16,424 shares issued and outstanding).................................. $ 13.40
===========
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share (Based on net assets of
$44,041,980 and 3,285,531 shares issued and outstanding)............................ $ 13.40
===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
33
<PAGE>
Global Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
INVESTMENT INCOME:
<S> <C>
Dividends (net of $122,328 for foreign taxes withheld)................................ $ 1,543,814
Interest.............................................................................. 103,965
--------------
TOTAL INCOME.................................................................... 1,647,779
--------------
EXPENSES:
Advisory.............................................................................. 628,067
Distribution.......................................................................... 362,686
Printing.............................................................................. 66,751
Professional.......................................................................... 44,351
Custodian............................................................................. 26,931
Other................................................................................. 58,844
--------------
TOTAL EXPENSES.................................................................. 1,187,630
--------------
Expenses waived by Advisor...................................................... (36,960)
--------------
NET EXPENSES.................................................................... 1,150,670
--------------
NET INVESTMENT INCOME........................................................... 497,109
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................................... 5,304,186
Futures contracts................................................................... (511,514)
Foreign currency transactions....................................................... 804,005
--------------
Net realized gain............................................................... 5,596,677
--------------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency.................................................... 346,586
Futures contracts................................................................... 575,614
Forward contracts................................................................... 214,544
Translation of other assets and liabilities denominated in foreign currency......... (4,441)
--------------
Change in net unrealized appreciation or depreciation........................... 1,132,303
--------------
Net realized and unrealized gain...................................................... 6,728,980
--------------
Net increase in net assets resulting from operations.................................. $ 7,226,089
==============
</TABLE>
See accompanying notes to financial statements.
================================================================================
34
<PAGE>
Global Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
June 30, 1999 June 30, 1998
-------------- -------------
OPERATIONS:
<S> <C> <C>
Net investment income............................................................... $ 497,109 $ 677,369
Net realized gain................................................................... 5,596,677 6,903,703
Change in net unrealized appreciation or depreciation............................... 1,132,303 (1,282,988)
-------------- -------------
Net increase in net assets resulting from operations................................ 7,226,089 6,298,084
-------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................................................... (384,423) (242,673)
Brinson Class N................................................................... (2,181) (11)
UBS Investment Funds Class........................................................ (219,326) (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........................................................ (713,059) (5,307,194)
-------------- -------------
Total distributions to shareholders............................................... (1,674,039) (7,213,754)
-------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold......................................................................... 34,808,631 40,216,740
Shares issued on reinvestment of distributions...................................... 1,462,446 6,378,677
Shares redeemed..................................................................... (37,326,928) (73,542,587)
-------------- -------------
Net decrease in net assets resulting from capital share transactions................ (1,055,851) (26,947,170)
-------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS...................................... 4,496,199 (27,862,840)
-------------- -------------
NET ASSETs:
Beginning of year................................................................... 81,872,008 109,734,848
-------------- -------------
End of year (including accumulated undistributed net investment income of
$302,311 and $377,184, respectively).............................................. $ 86,368,207 $ 81,872,008
=============== =============
</TABLE>
See accompanying notes to financial statements.
================================================================================
35
<PAGE>
Global Equity Fund -- Financial Highlights
________________________________________________________________________________
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------------
Brinson Class I 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year......................... $ 12.54 $ 12.76 $ 11.57 $ 9.93 $ 9.49
------- ------- ------- ------- -------
Income from investment operations:
Net investment income................................ 0.14* 0.22 0.16 0.18 0.18
Net realized and unrealized gain..................... 1.09 0.78 2.14 2.29 0.39
------- ------- ------- ------- -------
Total income from investment operations.......... 1.23 1.00 2.30 2.47 0.57
------- ------- ------- ------- -------
Less distributions:
Distributions from net investment income............. (0.17) (0.17) (0.12) (0.14) (0.04)
Distributions from and in excess of net
realized gain...................................... (0.18) (1.05) (0.99) (0.69) (0.09)
------- ------- ------- ------- -------
Total distributions.............................. (0.35) (1.22) (1.11) (0.83) (0.13)
------- ------- ------- ------- -------
Net asset value, end of year............................... $ 13.42 $ 12.54 $ 12.76 $ 11.57 $ 9.93
======= ======= ======= ======= =======
Total return............................................... 10.14% 8.99% 21.26% 25.66% 6.06%
Ratios/Supplemental data:
Net assets, end of year (in 000s)....................... $42,106 $22,724 $48,054 $27,126 $20,706
Ratio of expenses to average net assets:
Before expense reimbursement......................... 1.05% 1.02% 1.25% 1.77% 2.06%
After expense reimbursement.......................... 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of net investment income to average
net assets:
Before expense reimbursement......................... 1.05% 1.29% 1.35% 0.57% 0.71%
After expense reimbursement.......................... 1.10% 1.31% 1.60% 1.34% 1.77%
Portfolio turnover rate................................. 86% 46% 32% 74% 36%
</TABLE>
*The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompany notes to financial statements.
================================================================================
36
<PAGE>
Global Equity Fund -- Financial Highlights
________________________________________________________________________________
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Year Ended Year Ended
Brinson Class N June 30, 1999 June 30, 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of year.............................. $ 12.53 $ 12.76
------- -------
Income from investment operations:
Net investment income..................................... 0.10* 0.13
Net realized and unrealized gain.......................... 1.09 0.82
------- -------
Total income from investment operations............... 1.19 0.95
------- -------
Less distributions:
Distributions from net investment income.................. (0.14) (0.13)
Distributions from net realized gain...................... (0.18) (1.05)
------- -------
Total distributions................................... (0.32) (1.18)
------- -------
Net asset value, end of year.................................... $ 13.40 $ 12.53
======= =======
Total return.................................................... 9.80% 8.60%
Ratios/Supplemental data:
Net assets, end of year (in 000s)............................ $ 220 $ 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.............................. 0.80% 1.04%
After expense reimbursement............................... 0.85% 1.06%
Portfolio turnover rate...................................... 86% 46%
</TABLE>
* The net investment income per share data was determined by using average
shares outstanding throughout the period.
See accompanying notes to financial statements.
================================================================================
37
<PAGE>
Global Bond Fund
- --------------------------------------------------------------------------------
[LOGO OF BRINSON]
Our Global Bond Fund strategy is the result of several key investment
decisions. We determine optimal country and currency weightings based
on our assessments of global macroeconomic and political landscapes.
We choose a maturity mix that provides opportunity for appreciation
while also limiting interest rate risks. And importantly, we analyze
and select the very best issues within each country or market. All of
these decisions are made in a global asset allocation framework. They
are interactive and synthesize the ideas of our fixed income
professionals around the world.
Since its performance inception on July 31, 1993, the Brinson Global
Bond Fund Class I has produced an annualized return of 5.91% compared
to the 5.99% return of its benchmark, the Salomon Smith Barney World
Government Bond Index. The annualized volatility or risk of the Fund
was lower than that of the benchmark at 4.74% and 5.76% respectively.
During the first half of 1999, the Fund was down 6.37% while the
benchmark was down 7.17%.
The first half of 1999 was very difficult for global bond markets with
two consecutive quarters of negative returns. Yield increases have
been spurred by increasing volatility and strong economic activity
that is causing market participants to worry increasingly about future
inflation rates.
Bond markets were characterized by a high level of volatility in the
first quarter of 1999. After a fairly stable January, February turned
in the worst one-month performance record for U.S. Treasury securities
in 18 years. The largest changes took place among securities with
longer terms to maturity, while shorter-term treasury bills were
relatively stable.
This volatility was spurred somewhat by Federal Reserve (Fed) chairman
Alan Greenspan's testimony to Congress in February. He stated that the
Fed expects stronger growth and higher inflation in the U.S. than was
originally called for in the fall of 1998. Even though these
adjustments were modest, they were sufficient enough to disappoint
investors.
U.S. bond yields in the second quarter were driven well above our
estimates of fair value by market expectations of higher inflation and
anticipation of the 25 basis point rate hike by the Fed which occurred
on June 30. As a result, we have set representative duration
strategies longer than the benchmark in the U.S. component of the Fund
at 1.05 times the benchmark.
Interest rates were cut in the U.K. and EMU during the second quarter.
While these rate cuts might ordinarily be seen as bullish
developments, easier monetary policy in the context of improving
economic prospects has led instead to steeper yield curves providing
further evidence that market participants are concerned about the
longer-term inflation outlook.
Downward movement in bond yields in Japan during the quarter took this
already overvalued market to extremes not seen since last summer, and
prompted us to eliminate our small exposure to Japan. Proceeds were
invested in the U.K., taking it to an overweight position. Our
strategies elsewhere continue to emphasize the higher yielding market
of the U.S. (our largest country overweight), Australia and Canada.
================================================================================
38
<PAGE>
Global Bond Fund
- --------------------------------------------------------------------------------
[LOGO OF BRINSON]
<TABLE>
<CAPTION>
Total Return
6 months 1 year 3 years 5 years 7/31/93*
ended ended ended ended to
6/30/99 6/30/99 6/30/99 6/30/99 6/30/99
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brinson Global Bond Fund Class I -6.37% 3.13% 4.48% 7.20% 5.91%
------------------------------------------------------------------------------------------------------------------------
Salomon Smith Barney World Gov't Bond Index -7.17 4.13 4.11 6.11 5.99
------------------------------------------------------------------------------------------------------------------------
</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 Smith Barney
World Government Bond Index if you had invested $1,000,000
on July 31, 1993, and had reinvested all your income dividends
and capital gain distributions through June 30, 1999. 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 Smith Barney World Government Bond Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
- -----------------------------------------------------
Label A B
- -----------------------------------------------------
Brinson Global B Salmon Smith E
- -----------------------------------------------------
Label 7/31/93 $1,000,000 $1,000,000
- -----------------------------------------------------
1 8/31/93 $1,019,000 $1,030,100
- -----------------------------------------------------
2 9/30/93 $1,022,010 $1,042,358
- -----------------------------------------------------
3 10/31/93 $1,032,059 $1,040,586
- -----------------------------------------------------
4 11/30/93 $1,023,015 $1,033,198
- -----------------------------------------------------
5 12/31/93 $1,038,591 $1,041,929
- -----------------------------------------------------
6 1/31/94 $1,045,818 $1,050,264
- -----------------------------------------------------
7 2/28/94 $1,021,040 $1,043,437
- -----------------------------------------------------
8 3/31/94 $1,007,619 $1,041,976
- -----------------------------------------------------
9 4/30/94 $1,002,457 $1,043,123
- -----------------------------------------------------
10 5/31/94 $ 994,198 $1,033,943
- -----------------------------------------------------
11 6/30/94 $ 992,146 $1,048,832
- -----------------------------------------------------
12 7/31/94 $ 999,419 $1,057,223
- -----------------------------------------------------
13 8/31/94 $1,000,457 $1,053,522
- -----------------------------------------------------
14 9/30/94 $1,001,496 $1,061,108
- -----------------------------------------------------
15 10/31/94 $1,005,652 $1,078,085
- -----------------------------------------------------
16 11/30/94 $1,003,574 $1,063,208
- -----------------------------------------------------
17 12/31/94 $1,002,396 $1,066,185
- -----------------------------------------------------
18 1/31/95 $1,012,827 $1,088,575
- -----------------------------------------------------
19 2/28/95 $1,030,559 $1,116,442
- -----------------------------------------------------
20 3/31/95 $1,044,119 $1,182,759
- -----------------------------------------------------
21 4/30/95 $1,069,153 $1,204,640
- -----------------------------------------------------
22 5/31/95 $1,106,704 $1,238,611
- -----------------------------------------------------
23 6/30/95 $1,104,638 $1,245,919
- -----------------------------------------------------
24 7/31/95 $1,122,712 $1,248,909
- -----------------------------------------------------
25 8/31/95 $1,134,406 $1,205,946
- -----------------------------------------------------
26 9/30/95 $1,148,228 $1,232,839
- -----------------------------------------------------
27 10/31/95 $1,167,365 $1,241,962
- -----------------------------------------------------
28 11/30/95 $1,190,755 $1,255,996
- -----------------------------------------------------
29 12/31/95 $1,206,119 $1,269,184
- -----------------------------------------------------
30 1/31/96 $1,212,149 $1,253,573
- -----------------------------------------------------
31 2/29/96 $1,200,088 $1,247,180
- -----------------------------------------------------
32 3/31/96 $1,204,913 $1,245,434
- -----------------------------------------------------
33 4/30/96 $1,216,974 $1,240,452
- -----------------------------------------------------
34 5/31/96 $1,220,592 $1,240,700
- -----------------------------------------------------
35 6/30/96 $1,231,653 $1,250,502
- -----------------------------------------------------
36 7/31/96 $1,243,921 $1,274,511
- -----------------------------------------------------
37 8/31/96 $1,253,735 $1,279,482
- -----------------------------------------------------
38 9/30/96 $1,274,590 $1,284,728
- -----------------------------------------------------
39 10/31/96 $1,301,578 $1,308,752
- -----------------------------------------------------
40 11/30/96 $1,326,113 $1,326,028
- -----------------------------------------------------
41 12/31/96 $1,318,299 $1,315,287
- -----------------------------------------------------
42 1/31/97 $1,297,658 $1,280,169
- -----------------------------------------------------
43 2/28/97 $1,299,034 $1,270,567
- -----------------------------------------------------
44 3/31/97 $1,279,768 $1,260,911
- -----------------------------------------------------
45 4/30/97 $1,272,888 $1,249,815
- -----------------------------------------------------
46 5/31/97 $1,310,043 $1,283,810
- -----------------------------------------------------
47 6/30/97 $1,326,556 $1,299,088
- -----------------------------------------------------
48 7/31/97 $1,321,051 $1,288,955
- -----------------------------------------------------
49 8/31/97 $1,316,923 $1,288,181
- -----------------------------------------------------
50 9/30/97 $1,343,069 $1,315,619
- -----------------------------------------------------
51 10/31/97 $1,360,958 $1,342,984
- -----------------------------------------------------
52 11/30/97 $1,343,069 $1,322,437
- -----------------------------------------------------
53 12/31/97 $1,339,835 $1,318,469
- -----------------------------------------------------
54 1/31/98 $1,351,311 $1,331,259
- -----------------------------------------------------
55 2/28/98 $1,359,918 $1,342,042
- -----------------------------------------------------
56 3/31/98 $1,345,573 $1,328,756
- -----------------------------------------------------
57 4/30/98 $1,362,787 $1,350,016
- -----------------------------------------------------
58 5/31/98 $1,362,787 $1,353,121
- -----------------------------------------------------
59 6/30/98 $1,362,306 $1,355,150
- -----------------------------------------------------
60 7/31/98 $1,362,306 $1,356,912
- -----------------------------------------------------
61 8/31/98 $1,378,231 $1,393,820
- -----------------------------------------------------
62 9/30/98 $1,444,826 $1,467,971
- -----------------------------------------------------
63 10/31/98 $1,476,676 $1,511,423
- -----------------------------------------------------
64 11/30/98 $1,466,542 $1,490,112
- -----------------------------------------------------
65 12/31/98 $1,500,412 $1,520,063
- -----------------------------------------------------
66 1/31/99 $1,500,412 $1,506,079
- -----------------------------------------------------
67 2/28/99 $1,451,914 $1,457,734
- -----------------------------------------------------
68 3/31/99 $1,450,398 $1,461,378
- -----------------------------------------------------
69 4/30/99 $1,453,429 $1,460,793
- -----------------------------------------------------
71 5/31/99 $1,427,665 $1,436,252
- -----------------------------------------------------
72 6/30/99 $1,404,902 $1,411,118
- -----------------------------------------------------
Fund returns are net of all fees and costs, while the index returns
are based solely on market returns without deduction for fees or
transactions costs for rebalancing.
===============================================================================
39
<PAGE>
Global Bond Fund
- -------------------------------------------------------------------------------
[LOGO OF BRINSON]
Total Return
<TABLE>
<CAPTION>
6 months 1 year 6/30/97*
ended ended to
6/30/99 6/30/99 6/30/99
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson Global Bond Fund Class N -6.57% 2.89% 2.63%
-------------------------------------------------------------------------------------------------------
Salomon Smith Barney World Gov't Bond Index -7.17 4.13 4.22
-------------------------------------------------------------------------------------------------------
</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 Smith Barney World
Government Bond Index if you had invested $1,000,000 on June 30, 1997,
and had reinvested all your income dividends and capital gain
distributions through June 30, 1999. 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 Smith Barney World Government Bond Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Label A B
-------------------------------------------------------------------------------------------------------------
Label Brinson Global Bond Fund Class N Salomon Smith Barney World Gov't Bond Index
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
30/06/97 $1,000,000 $1,000,000
31/07/97 $ 995,851 $ 992,200
31/08/97 $ 991,701 $ 991,605
30/09/97 $1,011,411 $1,012,726
31/10/97 $1,023,859 $1,033,791
30/11/97 $1,010,373 $1,017,974
31/12/97 $1,008,216 $1,014,920
31/01/98 $1,015,772 $1,024,764
28/02/98 $1,022,249 $1,033,065
31/03/98 $1,011,454 $1,022,838
30/04/98 $1,024,408 $1,039,203
31/05/98 $1,023,328 $1,041,593
30/06/98 $1,023,719 $1,043,156
31/7/98 $1,022,630 $1,044,512
31/8/98 $1,034,610 $1,072,922
30/9/98 $1,083,618 $1,130,002
31/10/98 $1,106,488 $1,163,450
30/11/98 $1,101,043 $1,147,045
31/12/98 $1,127,443 $1,170,101
31/01/99 $1,126,303 $1,159,336
28/02/99 $1,089,823 $1,122,121
31/03/99 $1,088,683 $1,124,927
30/04/99 $1,090,963 $1,124,477
31/05/99 $1,069,304 $1,105,585
30/06/99 $1,053,324 $1,086,238
6/30/97=$1,000,000
Data through 6/30/99
</TABLE>
Fund returns are net of all fees and costs, while the Index returns
are based solely on market returns without deduction for fees or
transaction costs for rebalancing.
=====================================================================
40
<PAGE>
Global Bond Fund
- -------------------------------------------------------------------------------
[LOGO OF BRINSON]
Asset Allocation
As of June 30, 1999
Current
Benchmark Strategy
----------------------------------------------------
U.S. 29.5% 39.5%
Australia 0.7 5.7
Austria 0.9 0.0
Belgium 2.7 0.0
Canada 3.0 5.8
Denmark 1.5 4.5
Finland 0.7 0.0
France 8.1 9.2
Germany 8.5 6.7
Ireland 0.3 0.0
Italy 8.4 2.4
Japan 21.3 0.0
Netherlands 2.8 4.8
Portugal 0.4 0.0
Spain 3.3 3.1
Sweden 1.2 6.8
Switzerland 0.5 0.0
U.K. 6.2 9.2
Euro 0.0 2.3
----------------------------------------------------
100.0% 100.0%
Currency Allocation
As of June 30, 1999
Current
Benchmark Strategy
---------------------------------------------------
U.S. 29.5% 25.5%
Australia 0.7 6.7
Canada 3.0 3.0
Denmark 1.5 1.5
Euro 36.0 44.3
Japan 21.3 13.3
Sweden 1.3 5.2
Switzerland 0.5 0.5
U.K. 6.2 0.0
---------------------------------------------------
100.0% 100.0%
Industry Diversification
As a Percent of Net Assets
As of June 30, 1999
---------------------------------------------------
U.S. Bonds
Corporate Bonds
Airlines............................... 0.72%
Asset-Backed........................... 2.05
CMO.................................... 1.38
Consumer............................... 0.57
Financial Services..................... 1.28
Food and Housing Products.............. 0.51
Industrial Components.................. 0.55
Services/Miscellaneous................. 0.82
Utilities.............................. 0.24
------
8.12
------
International Dollar Bonds............. 3.95
Mortgage-Backed Securities............. 6.08
U.S. Government Agencies............... 10.74
U.S. Government Obligations............ 7.91
------
28.68
------
Total U.S. Bonds................. 36.80
------
Global (Ex-U.S.) Bonds
Foreign Financial Bonds................ 8.52
Foreign Government Bonds............... 70.21
------
Total Global (Ex-U.S.) Bonds.. 78.73
SHORT-TERM INVESTMENTS................. 6.24
------
TOTAL INVESTMENTS............. 121.77
LIABILITIES, LESS Cash
AND OTHER ASSETS.................... (21.77)
------
NET ASSETS.................... 100.00%
======
================================================================================
41
<PAGE>
Global Bond Fund -- Schedule of Investments
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
------------ ------------
<S> <C> <C>
Bonds -- 115.53%
U.S. Bonds -- 36.80%
U.S. Corporate Bonds -- 8.12%
ABN Amro Mortgage Corp., Series
99-2 IA2, 6.300%, due 04/25/29.............. $ 345,000 $ 335,243
Bear Stearns Mortgage Securities, Inc.,
96-7A4 6.000%, due 01/28/09................. 200,000 193,000
Cendant Corp., 7.750%, due 12/01/03........... 500,000 505,011
Centaur Funding Corp., 144A, 0.000%,
due 04/21/20 (b)............................ 750 115,875
Centaur Funding Corp., 144A, 9.080%,
due 04/21/20................................ 390 418,519
Chase Manhattan Auto Owner Trust, 96-C,
Class A4, 6.150%, due 03/15/02.............. 125,000 125,611
Citigroup Inc., 5.800%, due 03/15/04.......... 500,000 484,932
Comed Transitional Funding Trust, 98-1,
Class A7, 5.740%, due 12/25/10.............. 370,000 345,081
Continental Airlines, Inc., 99-2, 7.056%,
due 09/15/09............................... 710,000 712,577
Countrywide Capital, Inc., 8.000%,
due 12/15/26............................... 250,000 238,167
First Bank Corporate Card Master Trust, 97-1,
Class A, 6.400%, due 02/15/03............... 240,000 240,698
First Union Lehman Brothers, 97-C2,
Class A2, 6.600%, due 05/18/07.............. 240,000 235,702
Kroger Co., 6.000%, due 07/01/00.............. 500,000 499,475
News America Holdings, 7.750%, due 12/01/45... 575,000 545,045
Noram Energy Corp., 6.375%, due 11/01/03...... 75,000 73,320
Norwest Asset Securities Corp., 98-25,
Class A5, 6.000%, due 12/25/28.............. 965,000 927,317
Peco Energy Transition Trust, 6.130%,
due 03/01/09................................ 540,000 512,012
Premier Auto Trust, 96-3, Class A4,
96-3A 6.750%, due 11/06/00.................. 400,365 402,183
The Money Store, 98-B, Class AF2,
6.115%, due 05/15/10........................ 56,335 56,272
Time Warner, Inc., 7.570%, due 02/01/24....... 560,000 557,693
USA Waste Services, 7.000%, due 10/01/04...... 300,000 302,797
Western Resources, Inc., 6.875%, due 08/01/04. 160,000 159,635
------------
7,986,165
------------
Mortgage-Backed Securities -- 6.08%
GE Capital Mortgage Services, Inc., 93-7F,
Class FA3, 6.500%, due 09/25/08............. 194,457 194,429
Heller Financial Commercial Mortgage Assets,
Series 99-PH1 A1, 6.500%, due 05/15/31...... 413,048 409,281
LB Commercial Conduit Mortgage Trust,
Series 99-C1 A1, 6.410%, due 10/15/30....... 560,000 552,591
PNC Mortgage Securities Corp., 94-3,
Class A8, 7.500%, due 07/25/24.............. 190,000 188,026
Prudential Home Mortgage Securities
93-43, Class A9, 6.750%, due 10/25/23....... 206,269 201,568
96-7, Class A4, 6.750%, due 06/25/11........ 150,000 148,257
Residential Accredit Loans, Inc.
96-QS4, Class Al10, 7.900%, due 08/25/26.... 625,000 635,387
98-QS4, Class AI5, 7.000%, due 03/25/28..... 400,000 398,919
Residential Asset Securitization Trust
97-A11, Class A2, 7.000%, due 01/25/28...... 86,997 87,218
97-A11, Class A6, 7.000%, due 01/25/28...... 430,000 418,515
97-A7, Class A1, 7.250%, due 12/25/27....... $ 335,000 $ 328,829
97-A7, Class A1, 7.500%, due 09/25/27....... 99,847 100,659
98-A1, Class A1, 7.000%, due 03/25/28....... 92,018 92,036
Structured Asset Securities Corp.
98-RF1, Class A, 8.712%, due 03/15/27....... 233,027 244,096
98-RF2, 144A, 8.582%, due 07/15/27.......... 351,051 366,848
Structured Mortgage Asset Residential Trust,
96-5C, Class CI, 7.150%, due 03/25/23....... 925,000 917,563
UCFC Home Equity Loan 97-C,
Class A8, FRN, 5.069%, due 09/15/27......... 98,356 98,119
Vanderbilt Mortgage Finance, 98-B,
Class 1A2, 6.120%, due 05/07/09............. 600,000 599,892
------------
5,982,233
------------
International Dollar Bonds -- 3.95%
Banco Santiago S.A., 7.000%, due 07/18/07..... 400,000 350,754
Banque Centrale de Tunisie, 8.250%,
due 09/19/27................................ 400,000 332,000
British Sky Broadcasting Group plc,
6.875%, due 02/23/09........................ 130,000 118,549
Credit Suisse-London, 144A, Resettable
Perpetual Preferred, 7.900%, due 05/01/07... 500,000 486,783
Empresa National Electric, 7.875%,
due 10/01/97................................ 500,000 398,826
Korea Development Bank, 7.125%,
due 09/17/01................................ 300,000 299,144
National Australia Bank, FRN, 6.400%,
due 12/10/07................................ 640,000 631,285
Pan Pacific Industry PLC 144A, 0.000%,
due 04/28/07................................ 715,000 346,775
PDVSA Fin. LTD 1999-F, 144A, 8.750%,
due 02/15/04................................ 500,000 501,370
Republic of South Africa, 9.625%,
due 12/15/99................................ 125,000 126,250
Royal Bank of Scotland, Resettable Perpetual
Preferred, 7.375%, due 04/29/49............. 300,000 291,625
------------
3,883,361
------------
U.S. Government Agencies -- 10.74%
Fannie Mae Whole Loan, Series 95-W3,
Class A, 9.000%, due 04/25/25............... 10,652 11,131
Federal Home Loan Mortgage Corp.
7.000%, due 10/15/13........................ 68,215 67,400
7.238%, due 05/01/26........................ 21,406 21,567
9.000%, due 01/01/29........................ 824,897 873,102
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23........................ 50,238 51,778
9.000%, due 03/01/24........................ 136,173 144,963
Federal National Mortgage Assoc.
6.000%, due 01/01/29........................ 157,532 148,263
6.500%, due 04/29/09........................ 1,170,000 1,127,039
6.500%, due 03/01/19........................ 123,327 120,057
6.500%, due 09/01/28........................ 1,236,954 1,197,256
6.500%, due 02/01/29........................ 611,212 591,184
7.000%, due 12/01/24........................ 435,297 430,905
7.000%, due 03/01/29........................ 28,639 28,365
7.500%, due 07/01/10........................ 852,730 866,802
</TABLE>
================================================================================
42
<PAGE>
Global Bond Fund -- Schedule of Investments
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
------------ ------------
<S> <C> <C>
U.S. Government Agencies -- Continued
7.500%, due 12/01/23........................ $ 348,692 $ 352,646
7.500%, due 05/18/25........................ 250,000 251,937
7.500%, due 12/01/27........................ 675,821 683,484
7.890%, due 04/01/26........................ 213,724 218,950
8.000%, due 03/01/11........................ 79,069 81,473
8.500%, due 07/01/22........................ 9,961 10,476
Federal National Mortgage Assoc. Strips
0.000%, due 02/01/28........................ 151,092 106,014
8.000%, due 08/01/23........................ 210,034 53,753
FNCI, 8.000%, due 02/01/13.................... 85,491 88,090
Freddie Mac
5.500%, due 02/15/14........................ 32,399 30,299
5.750%, due 06/15/01........................ 1,300,000 1,297,713
6.000%, due 09/15/25........................ 9,180 8,858
Government National Mortgage Assoc.
7.000%, due 08/15/24........................ 382,338 378,923
7.000%, due 07/15/25........................ 53,545 53,046
7.500%, due 08/15/23........................ 67,926 68,830
7.500%, due 12/15/23........................ 103,588 105,009
7.500%, due 01/15/24........................ 74,547 75,524
Jordan Aid, 8.750%, due 09/01/19.............. 452,530 514,083
Tennesse Valley Authority, 6.375%,
due 06/15/05................................ 500,000 501,468
------------
10,560,388
------------
U.S. Government Obligations -- 7.91%
U.S. Treasury Bond, 8.000%, due 11/15/21...... 4,505,000 5,420,078
U.S. Treasury Inflation Indexed Note,
3.625%, due 04/15/28........................ 570,000 553,005
U.S. Treasury Notes and Bonds, 6.625%,
due 07/31/01................................ 1,765,000 1,801,956
------------
7,775,039
------------
Total U.S. Bonds.............................. 36,187,186
------------
Global (Ex-U.S.) Bonds -- 78.73%
Australia -- 7.79%
Queensland Treasury Corp.-Global Note
6.500%, due 06/14/05........................AUD 5,230,000 3,504,495
8.000%, due 05/14/03........................ 3,000,000 2,124,206
8.000%, due 09/14/07........................ 2,800,000 2,033,493
------------
7,662,194
------------
Austria -- 2.19%
Republic of Austria, 5.500%,
due 01/18/04................................EUR 1,951,347 2,152,590
------------
Canada -- 7.94%
Government of Canada
4.250%, due 12/01/21........................CAD 5,550,000 4,313,333
6.000%, due 06/01/08........................ 2,800,000 1,951,558
Province of Ontario, 7.500%, due 01/19/06..... 2,100,000 1,548,858
------------
7,813,749
------------
Denmark -- 5.77%
City of Copenhagen, 6.250%,
due 03/15/01................................DKK 2,400,000 346,368
Great Belt, 7.000%, due 09/02/03.............. 3,650,000 553,006
Kingdom of Denmark
7.000%, due 12/15/04........................DKK 12,200,000 $ 1,908,710
7.000%, due 11/15/07........................ 1,400,000 224,230
7.000%, due 11/10/24........................ 5,200,000 842,903
8.000%, due 11/15/01........................ 11,800,000 1,797,400
------------
5,672,617
------------
Finland -- 1.37%
Republic of Finland, 9.000%,
due 08/13/03................................EUR 1,097,633 1,345,029
------------
France -- 7.33%
Government of France (BTAN), 7.750%,
due 04/12/00................................ 609,796 652,654
Government of France (OAT)
6.000%, due 10/25/25........................ 950,000 1,056,154
7.500%, due 04/25/05........................ 2,000,000 2,416,337
8.500%, due 04/25/23........................ 1,350,000 1,971,433
9.500%, due 01/25/01........................ 990,000 1,116,041
------------
7,212,619
------------
Germany -- 8.72%
Bundesrepublik Deutschland
5.250%, due 01/04/08........................ 900,000 973,465
5.625%, due 01/04/28........................ 1,000,000 1,063,064
6.250%, due 01/04/24........................ 357,904 413,326
European Economic Community, 6.500%,
due 03/10/00................................ 567,534 599,286
International Bank of Recon & Dev,
7.125%, due 04/12/05........................ 2,019,603 2,372,536
KFW International Finance, 6.625%,
due 04/15/03................................ 2,800,000 3,154,891
------------
8,576,568
------------
Ireland -- 1.73%
Republic of Ireland, 7.250%,
due 03/18/03................................ 1,482,746 1,700,881
------------
Italy -- 2.73%
Republic of Italy (BTP)
7.750%, due 11/01/06........................ 1,800,000 2,203,537
9.000%, due 10/01/03........................ 387,849 477,026
------------
2,680,563
------------
Netherlands -- 7.32%
LKB Baden-Wuerttemberg Finance,
6.500%, due 09/15/08........................ 818,067 942,382
Netherlands Government
5.500%, due 01/15/28........................ 1,700,000 1,768,989
8.250%, due 02/15/02........................ 3,900,000 4,490,283
------------
7,201,654
------------
Portugal -- 1.19%
Republic of Portugal, 5.625%,
due 04/03/07................................ 1,067,143 1,173,731
------------
Spain -- 4.00%
Kingdom of Spain
7.350%, due 03/31/07........................ 2,150,000 2,597,162
10.000%, due 02/28/05....................... 1,000,000 1,332,773
------------
3,929,935
------------
</TABLE>
================================================================================
43
43
<PAGE>
Global Bond Fund -- Schedule of Investments
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
------------ ------------
<S> <C> <C>
Sweden -- 5.69%
Government of Sweden
6.000%, due 02/09/05........................SEK 15,000,000 $ 1,876,937
6.750%, due 05/05/14........................ 6,900,000 917,582
10.250%, due 05/05/03....................... 19,800,000 2,799,777
------------
5,594,296
------------
United Kingdom -- 14.96%
Abbey National Treasury Service,
6.500%, due 03/05/04........................GBP 850,000 1,346,816
British Gas PLC, 8.125%, due 03/31/03......... 795,000 1,316,248
European Investment Bank, 7.625%,
due 12/07/06................................ 1,400,000 2,414,029
UK Treasury
7.250%, due 12/07/07........................ 4,800,000 8,553,594
8.000%, due 09/27/13........................ 530,000 1,082,724
------------
14,713,411
------------
Total Global (Ex-U.S.) Bonds.................. 77,429,837
------------
Total Bonds (Cost $118,625,590)............... 113,617,023
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
------------ ------------
<S> <C> <C>
Short-Term Investments -- 6.24%
Investment Companies -- 6.24%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund,
(Cost $6,139,233)........................... 6,139,233 $ 6,139,233
------------
Total Investments
(Cost $124,764,823) -- 121.77% (a) 119,756,256
Liabilities, less cash and
other assets-- (21.77%)..................... (21,410,524)
------------
Net Assets-- 100%............................. $ 98,345,732
============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $124,764,823; and net
unrealized depreciation consisted of:
Gross unrealized appreciation....................... $ 503,056
Gross unrealized depreciation ...................... (5,511,623)
------------
Net unrealized depreciation ($5,008,567)
============
(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 June 30,
1999, the value of these securities amounted to $2,236,170 or 2.27% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FORWARD FOREIGN CURRENCY CONTRACTS
The Global Bond Fund had the following open forward foreign currency contracts
as of June 30, 1999:
<TABLE>
<CAPTION>
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
---------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Forward Foreign Currency Buy Contracts
Australian Dollar.......................................... 9/1/99 2,500,000 $ 1,655,936 $ 63,936
British Pound.............................................. 9/1/99 1,700,000 2,681,177 (25,427)
Canadian Dollar............................................ 9/1/99 3,100,000 2,096,351 14,976
Danish Kroner.............................................. 9/1/99 3,900,000 544,495 676
Euro....................................................... 9/1/99 22,100,000 22,902,978 (1,856,372)
Japanese Yen............................................... 9/1/99 2,510,000,000 20,934,897 (356,029)
Swedish Krona.............................................. 9/1/99 18,200,000 2,149,237 (162,901)
Forward Foreign Currency Sale Contracts
British Pound.............................................. 9/1/99 11,100,000 17,506,506 344,192
Canadian Dollar............................................ 9/1/99 1,000,000 676,242 8,896
Danish Kroner.............................................. 9/1/99 32,400,000 4,523,497 351,852
Euro....................................................... 9/1/99 5,400,000 5,596,203 247,654
Japanese Yen............................................... 9/1/99 310,000,000 2,585,585 28,750
Swedish Krona.............................................. 9/1/99 3,300,000 389,697 14,888
-----------
Total............................................. ($1,324,909)
===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
44
44
<PAGE>
Global Bond Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $118,625,590)............................................................ $113,617,023
Affiliated issuers (Cost $6,139,233)................................................................ 6,139,233
Foreign currency, at value (Cost $64,733)............................................................. 65,260
Receivables:
Investment securities sold.......................................................................... 15,848,438
Interest............................................................................................ 1,940,121
Fund shares sold.................................................................................... 3,474,923
Other assets.......................................................................................... 17,566
------------
TOTAL ASSETS................................................................................... 141,102,564
------------
LIABILITIES:
Payables:
Investment securities purchased..................................................................... 637,698
Fund shares redeemed................................................................................ 39,306,083
Investment advisory fees............................................................................ 89,477
Accrued expenses.................................................................................... 34,638
Due to custodian bank............................................................................... 1,364,027
Net unrealized depreciation on forward foreign currency contracts..................................... 1,324,909
------------
TOTAL LIABILITIES.............................................................................. 42,756,832
------------
NET ASSETS............................................................................................... $ 98,345,732
============
NET ASSETS CONSIST OF:
Paid in capital....................................................................................... $105,466,609
Accumulated undistributed net investment income....................................................... 1,161,994
Distribution in excess of net realized gain........................................................... (1,902,730)
Net unrealized depreciation........................................................................... (6,380,141)
------------
NET ASSETS..................................................................................... $ 98,345,732
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based on net assets of
$92,832,427 and 10,117,968 shares issued and outstanding).......................................... $ 9.18
============
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on net assets of
$1,084,713 and 118,464 shares issued and outstanding).............................................. $ 9.16
============
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share (Based on net assets of
$4,428,592 and 483,424 shares issued and outstanding).............................................. $ 9.16
============
</TABLE>
See accompanying notes to financial statements.
================================================================================
45
<PAGE>
Global Bond Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $13,362 for foreign taxes withheld)................................ $ 6,294,138
Dividends........................................................................... 16,230
-------------
TOTAL INCOME................................................................. 6,310,368
-------------
EXPENSES:
Advisory............................................................................ 957,176
Professional........................................................................ 38,814
Distribution........................................................................ 21,834
Administration...................................................................... 15,889
Other............................................................................... 136,719
-------------
TOTAL EXPENSES............................................................... 1,170,432
-------------
NET INVESTMENT INCOME........................................................ 5,139,936
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on:
Investments....................................................................... 435,436
Foreign currency transactions..................................................... 1,064,191
-------------
Net realized gain.............................................................. 1,499,627
-------------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency.................................................. (5,039,115)
Forward contracts................................................................. (968,525)
Translation of other assets and liabilities denominated in foreign currency....... (44,778)
-------------
Change in net unrealized appreciation or depreciation.......................... (6,052,418)
-------------
Net realized and unrealized loss.................................................... (4,552,791)
-------------
Net increase in net assets resulting from operations................................ $ 587,145
=============
</TABLE>
================================================================================
46
<PAGE>
Global Bond Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
June 30, 1999 June 30, 1998
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income............................................................ $ 5,139,936 $ 3,009,836
Net realized gain (loss)......................................................... 1,499,627 (1,114,801)
Change in net unrealized appreciation or depreciation............................ (6,052,418) (276,626)
--------------- --------------
Net increase in net assets resulting from operations............................. 587,145 1,618,409
--------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................................................ (5,705,972) (2,070,571)
Brinson Class N................................................................ (13,166) (98)
UBS Investment Funds Class..................................................... (180,397) (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.............................................. (6,860,802) (3,225,197)
--------------- --------------
Capital share transactions:
Shares sold...................................................................... 115,882,090 46,034,839
Shares issued on reinvestment of distributions................................... 4,872,310 2,230,731
Shares redeemed.................................................................. (111,795,220) (9,266,587)
--------------- --------------
Net increase in net assets resulting from capital share transactions............. 8,959,180 38,998,983
--------------- --------------
TOTAL INCREASE IN NET ASSETS............................................... 2,685,523 37,392,195
--------------- --------------
NET assets:
Beginning of year................................................................ 95,660,209 58,268,014
--------------- --------------
End of year (including accumulated undistributed net investment income of
$1,161,994 and $1,003,399, respectively)......................................... $ 98,345,732 $ 95,660,209
=============== ==============
</TABLE>
See accompanying notes to financial statements.
================================================================================
47
<PAGE>
Global Bond Fund -- Financial Highlights
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------------------------
Brinson Class I 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......................... $ 9.41 $ 9.64 $ 10.04 $ 10.39 $ 9.55
-------- ------- ------- ------- --------
Income (loss) from investment operations:
Net investment income................................. 0.39* 0.43* 0.67 0.84 0.50
Net realized and unrealized gain (loss)............... (0.07) (0.18) 0.08 0.31 0.58
-------- ------- ------- ------- --------
Total income from investment
operations............................................... 0.32 0.25 0.75 1.15 1.08
-------- ------- ------- ------- --------
Less distributions:
Distributions from and in excess of net
investment income.................................. (0.47) (0.31) (0.96) (1.40) (0.24)
Distributions from net realized gain.................. (0.08) (0.17) (0.19) (0.10) --
-------- ------- ------- ------- --------
Total distributions................................ (0.55) (0.48) (1.15) (1.50) (0.24)
-------- ------- ------- ------- --------
Net asset value, end of year................................ $ 9.18 $ 9.41 $ 9.64 $ 10.04 $ 10.39
======== ======= ======= ======= ========
Total return................................................ 3.13% 2.69% 7.71% 11.50% 11.34%
Ratios/Supplemental data:
Net assets, end of year (in 000s)........................ $ 92,832 $91,274 $54,157 $41,066 $ 51,863
Ratio of expenses to average net assets:
Before expense reimbursement.......................... 0.90% 0.96% 1.32% 1.65% 1.43%
After expense reimbursement........................... N/A 0.90% 0.90% 0.90% 0.90%
Ratio of net investment income to average net assets:
Before expense reimbursement.......................... 4.05% 4.47% 4.90% 4.98% 5.53%
After expense reimbursement........................... N/A 4.53% 5.32% 5.73% 6.06%
Portfolio turnover rate.................................. 138% 151% 235% 184% 199%
</TABLE>
* The net investment income per share data was determined by using average
shares outstanding throughout the year.
N/A = Not Applicable
See accompanying notes to financial statements.
================================================================================
48
<PAGE>
Global Bond Fund -- Financial Highlights
- --------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Year Ended Year Ended
Brinson Class N June 30, 1999 June 30, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of year................................................... $ 9.40 $ 9.64
----------- -----------
Income from investment operations:
Net investment income.......................................................... 0.37* 0.42*
Net realized and unrealized gain (loss)........................................ (0.07) (0.20)
----------- -----------
Total income from investment operations..................................... 0.30 0.22
----------- -----------
Less distributions:
Distributions from and in excess of net investment income...................... (0.46) (0.29)
Distributions from net realized gain........................................... (0.08) (0.17)
----------- -----------
Total distributions......................................................... (0.54) (0.46)
----------- -----------
Net asset value, end of year......................................................... $ 9.16 $ 9.40
=========== ===========
Total return......................................................................... 2.89% 2.37%
Ratios/Supplemental Data:
Net assets, end of year (in 000s)................................................. $ 1, 085 $ 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................................................... 3.80% 4.22%
After expense reimbursement.................................................... N/A 4.28%
Portfolio turnover rate........................................................... 138% 151%
</TABLE>
* The net investment income per share data was determined by using average
shares outstanding throughout the year.
N/A = Not Applicable
See accompanying notes to financial statements.
================================================================================
49
<PAGE>
The Brinson Funds -- Notes To Financial Statements
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, as a series
company. The Trust currently offers shares of 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 financial highlights of the UBS
Investment Funds Class are presented separately. 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 respective fund. Debt securities are valued at the most
recent bid price by using market quotations or independent pricing 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 year ended June 30, 1999,
therefore, no federal income tax provision was required.
F. Distributions to Shareholders: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions. Differences in dividends per share
between the classes are due to distribution expenses. Amounts equal to 14.04%
and 58.92% of the amount taxable as ordinary income qualify for the dividends
received deduction available to corporate shareholders for the Global Fund and
Global Equity Fund, respectively.
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.
================================================================================
50
<PAGE>
The Brinson Funds -- Notes To Financial Statements
- --------------------------------------------------------------------------------
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 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 year ended June 30,
1999, 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% $4,403,642 $ --
Global Equity Fund............ 0.80 1.00 1.25 1.76 628,067 36,960
Global Bond Fund.............. 0.75 0.90 1.15 1.39 957,176 --
</TABLE>
Certain officers of the Funds are also officers and directors of the Advisor.
All officers serve without direct compensation from the Funds. Trustees' fees
paid to unaffiliated trustees for the year ended June 30, 1999 were $11,680,
$4,993 and $4,380 for the Global Fund, Global Equity Fund and Global Bond Fund,
respectively.
The Global Fund invests in shares of certain affiliated investment companies
also sponsored by the Advisor. These investments represented 19.53% of the
Fund's total net assets at June 30, 1999. Activity for the year ended June 30,
1999 was as follows:
<TABLE>
<CAPTION>
Net Change in
Sales Realized Net Unrealized Interest
Affiliates Purchases Proceeds Gain/(Loss) Gain/(Loss) Income Value
- ---------- ------------ ------------ ------------- -------------- --------- ---------
<S> <C> <C>
Brinson Post-Venture Fund................ $ 1,500,000 $ 1,949,866 $ 448,329 $ (850,533) $ -- $ 7,660,445
Brinson High Yield Fund.................. 3,900,000 6,400,682 1,016,827 (840,129) -- 14,221,334
Brinson Emerging Markets Equity Fund..... -- 7,602,574 3,701,103 1,483,000 -- 17,543,286
Brinson Emerging Markets Debt Fund....... 6,400,000 15,503,323 4,019,383 (699,055) -- 24,713,550
Brinson Supplementary Trust U.S. Cash
Management Prime Fund.................... 319,658,653 287,563,973 -- -- 500,538 32,094,680
</TABLE>
The Global Equity Fund and Global Bond Fund also 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 charges no management fees.
Distributions received from the Supplementary Trust are reflected as interest
income in the statement of operations. Amounts relating to those investments at
June 30, 1999 and for the year then ended were as follows:
<TABLE>
<CAPTION>
% of
Sales Interest Net
Affiliates Purchases Proceeds Income Value Assets
- ---------- ------------ ------------ --------- ----------- ------
<S> <C> <C> <C> <C> <C>
Global Equity Fund................. $ 26,901,425 $ 25,879,238 $ 43,064 $ 1,022,188 1.18%
Global Bond Fund................... 77,341,746 71,202,513 276,943 6,139,233 6.24%
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1999, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
Proceeds
Purchases From Sales
------------- ------------
<S> <C> <C>
Global Fund.................................. $555,636,189 $775,205,447
Global Equity Fund........................... 68,882,280 65,637,189
Global Bond Fund............................. 194,378,936 160,439,778
</TABLE>
================================================================================
51
<PAGE>
The Brinson Funds -- Notes To Financial Statements
- --------------------------------------------------------------------------------
4. FORWARD FOREIGN CURRENCY CONTRACTS
The Funds may engage in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation strategies. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Risks associated with such contracts include movement
in the value of the foreign currency relative to the U.S. dollar and the ability
of the counterparty to perform. The unrealized gain, if any, represents the
credit risk to each Fund on a forward foreign currency contract. Fluctuations in
the value of forward foreign currency contracts are recorded daily as net
unrealized gains or losses. The Funds realize a gain or loss upon settlement of
the contracts. The statement of operations reflects net realized and net
unrealized gains and losses on these contracts. The counterparty to all forward
foreign currency contracts at and for the year ended June 30, 1999, 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 June 30, 1999 were as follows:
<TABLE>
<CAPTION>
Value of Loaned Cash Collateral
Securities Received
--------------- ---------------
<S> <C> <C>
Global Fund....................... $90,987,855 $97,474,174
=========== ===========
</TABLE>
7. DISTRIBUTION PLANS
The Trust has adopted distribution plans (the `'Plans") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for the Brinson Class N
and the 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 each
of the Funds. 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 balance of the line of credit. During the
year ended June 30, 1999, the Global Equity and Global Bond Funds had no
borrowings under the agreement. During the year ended June 30, 1999, the Global
Fund had borrowings of $33,900,000, $62,000,000 and $47,400,000 outstanding for
1 day each under the agreement.
================================================================================
52
<PAGE>
The Brinson Funds -- Notes To Financial Statements
________________________________________________________________________________
9. CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
Global Fund
-------------------------------------------------------
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------------------- -------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.......................... 33,634,272 $404,497,836 18,850,057 $244,898,004
Brinson Class N.......................... 31,878 401,372 90,370 1,177,290
UBS Investment Funds Class............... 469,115 5,622,287 803,666 10,347,586
---------- ------------ ---------- ------------
Total Sales......................... 34,135,265 $410,521,495 19,744,093 $256,422,880
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I.......................... 3,914,936 $ 45,438,730 5,179,618 $ 62,332,662
Brinson Class N.......................... 12,826 148,599 769 9,625
UBS Investment Funds Class............... 201,293 2,326,850 217,810 2,607,910
---------- ------------ ---------- ------------
Total Dividend Reinvestment......... 4,129,055 $ 47,914,179 5,398,197 $ 64,950,197
========== ============ ========== ============
Redemptions:
Brinson Class I.......................... 50,809,625 $617,784,220 16,402,396 $209,137,318
Brinson Class N.......................... 4,388 53,226 21 276
UBS Investment Funds Class............... 1,220,493 14,718,874 641,736 8,247,175
---------- ------------ ---------- ------------
Total Redemptions................... 52,034,506 $632,556,320 17,044,153 $217,384,769
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
Global Equity Fund
-------------------------------------------------------
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------------------- -------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.......................... 2,413,314 $ 30,206,170 1,466,054 $ 17,934,645
Brinson Class N.......................... 15,911 200,000 -- --
UBS Investment Funds Class............... 352,164 4,402,461 1,779,376 22,282,095
---------- ------------ ---------- ------------
Total Sales......................... 2,781,389 $ 34,808,631 3,245,430 $ 40,216,740
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I.......................... 54,126 $ 661,376 126,859 $ 1,426,171
Brinson Class N.......................... 426 5,130 9 93
UBS Investment Funds Class............... 66,261 795,940 442,472 4,952,413
---------- ------------ ---------- ------------
Total Dividend Reinvestment......... 120,813 $ 1,462,446 569,340 $ 6,378,677
========== ============ ========== ============
Redemptions:
Brinson Class I.......................... 1,142,595 $ 14,484,716 3,546,702 $ 44,596,092
Brinson Class N.......................... -- -- -- --
UBS Investment Funds Class............... 1,860,700 22,842,212 2,339,080 28,946,495
---------- ------------ ---------- ------------
Total Redemptions................... 3,003,295 $ 37,326,928 5,885,782 $ 73,542,587
========== ============ ========== ============
</TABLE>
===============================================================================
53
<PAGE>
The Brinson Funds -- Notes To Financial Statements
________________________________________________________________________________
<TABLE>
<CAPTION>
Global Bond Fund
-------------------------------------------------------
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------------------- -------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I............................ 11,338,295 $110,539,879 4,561,105 $ 43,233,367
Brinson Class N............................ 117,021 1,120,104 860 8,169
UBS Investment Funds Class................. 432,357 4,222,107 293,533 2,793,303
---------- ------------ ---------- ------------
Total Sales......................... 11,887,673 $115,882,090 4,855,498 $ 46,034,839
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I............................ 484,490 $ 4,679,150 220,347 $ 2,058,040
Brinson Class N............................ 579 5,581 12 115
UBS Investment Funds Class................. 19,366 187,579 18,525 172,576
---------- ------------ ---------- ------------
Total Dividend Reinvestment......... 504,435 $ 4,872,310 238,884 $ 2,230,731
========== ============ ========== ============
Redemptions:
Brinson Class I............................ 11,403,020 $107,591,860 699,882 $ 6,667,104
Brinson Class N............................ 90 871 22 210
UBS Investment Funds Class................. 434,492 4,202,489 273,680 2,599,273
---------- ------------ ---------- ------------
Total Redemptions................... 11,837,602 $111,795,220 973,584 $ 9,266,587
========== ============ ========== ============
</TABLE>
================================================================================
54
<PAGE>
Report of Independent Auditors
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds--
Global Fund
Global Equity Fund
Global Bond Fund
We have audited the accompanying statements of assets and liabilities, including
the schedule of investments, of The Brinson Funds--Global Fund, Global Equity
Fund and Global Bond Fund as of June 30, 1999, the related statements of
operations and cash flows (Global Fund only) for the year then ended and changes
in net assets and the financial highlights for the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--Global Fund, Global Equity Fund and Global Bond Fund at June 30,
1999, the results of their operations and cash flows (Global Fund only) for the
year then ended and the changes in their net assets and the financial highlights
for the periods indicated therein in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
August 11, 1999
<PAGE>
Distributed by:
Funds Distributor, Inc.
60 State Street
Boston, MA 02109
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which includes
details regarding the Funds' objectives, policies, expenses and other
information.
================================================================================
<PAGE>
[LOGO OF BRINSON]
The Brinson Funds
- -------------------------------------------------------------------------------
Chicago . Bahrain . Basel . Frankfurt . Geneva . Hong Kong . London . Melbourne
. New York . Paris . Rio de Janiero . Singapore . Sydney . Tokyo .
Zurich
209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430
<PAGE>
-------------------------
The Brinson Funds
Brinson Global (Ex-U.S.) Equity Fund
Annual Report
June 30, 1999
[BRINSON LOGO]
Institutional Asset Management
----------------------------
<PAGE>
Trustees and Officers
[BRINSON LOGO]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA
Chairman of the Board
E. Thomas McFarlan
President
Thomas J. Digenan, CFA, CPA
Vice President
Debra L. Nichols
Vice President
Carolyn M. Burke, CPA
Secretary and Treasurer
David E. Floyd, CPA
Assistant Secretary
Mark F. Kemper
Assistant Secretary
1
<PAGE>
The Fund's Advisor -- Brinson Partners, Inc.
[BRINSON LOGO]
Since the entrepreneurial founding of our organization nearly twenty years ago,
we have focused our collective energy on two goals: creating meaningful value-
added investment performance; and providing our clients with unrivaled, custom-
tailored service of the highest quality.
Now, in 1999, more than 1,100 employees located in 11 countries around the world
continue to deliver investment strategies that meet our clients' needs. With an
unrelenting focus on our goals, we have grown into one of the world's premier
investment management organizations, with approximately USD 280 billion in
assets under management, and industry recognition as a global thought leader. In
North America, we make our services available to institutions and individual
investors through the Brinson Family of Funds. The Brinson Funds are
diversified, no-load, institutionally priced mutual funds that provide investors
convenient access to our global investment expertise and services.
Within a framework of integrated capital markets, we select portfolio
investments by focusing on long-term investment fundamentals. Investment
performance for our clients is maximized within and across asset classes through
a comprehensive understanding of global investment markets and their
interrelationships. We apply a systematic, disciplined approach to valuing
investments and combine the seasoned judgement of our global investment teams to
construct optimal portfolios-balancing considerations for both risk and return.
Brinson Partners, Inc. is a member of the UBS Brinson Division, the
institutional asset management division of UBS AG.
2
<PAGE>
Table of Contents
[BRINSON LOGO]
Shareholder Letter....................................... 4
Global Economic and Market Highlights.................... 5
Global (Ex-U.S.) Equity Fund............................. 6
Schedule of Investments.................................. 10
Financial Statements..................................... 14
Financial Highlights..................................... 17
Notes to Financial Statements............................ 19
Report of Independent Auditors........................... 22
3
<PAGE>
Shareholder Letter
[BRINSON LOGO]
July 26, 1999
Dear Shareholder:
We are pleased to present the Annual Report for the Global (Ex-U.S.) Equity Fund
covering the year ended June 30, 1999. This report focuses on the current
international economic outlook as well as our current strategy and performance
update.
Global Capital markets are becoming more integrated and global industries more
homogenous. These trends have important implications for the management of both
Global Equities and Global (Ex-U.S.) Equities. Allocation to, and the management
of, industry exposure are increasing in relative importance, providing investors
with important investment characteristics that require thoughtful attention.
The accelerating globalization of business enterprise and integration of capital
markets will also create a change in active equity portfolio management. During
the coming years, capital market integration will reduce the market inefficiency
produced by country segmentation. The period during which this inefficiency is
reduced presents a compelling active management opportunity. To fully capture
this opportunity for excess returns, portfolio mandates must be structured to
allow active industry management across countries and active stock selection
across the domestic/foreign boundary.
The Global (Ex-U.S.) Equity Fund is an actively managed fund that provides
integrated asset management across and within security markets. The Global
(Ex-U.S.) Equity Fund employs a value-oriented investment philosophy. The Fund
also uses the resources of our entire worldwide research team. All of our
analysts apply the same value philosophy to their work. All of our portfolios
are structured to specific objectives and focused upon both risk and return
considerations in the context of full investment cycles. The enclosed report
highlights the investment characteristics and the performance of the Fund.
We very much appreciate your continued trust and the confidence you have placed
in The Brinson Funds, and look forward to a long lasting, quality relationship.
Sincerely,
/s/ Gary P. Brinson
Gary P. Brinson
Chairman and Chief Investment Officer
Brinson Partners, Inc.
4
<PAGE>
GLOBAL ECONOMIC AND MARKET HIGHLIGHTS
[BRINSON LOGO]
Thanks to a weaker euro and better prospects for the world economy, growth in
Euroland is picking up steam after having experienced a slowdown in the first
half of 1999. Business confidence is supported by ever stronger commitments of
the European governments to implement structural reforms. This should
eventually create a better environment for the labor market, boost employment
and lift consumers' confidence. Due to divergence of inflation and GDP growth
rates, the ECB is still facing a very heterogeneous situation, ranging from
above average growth and below average inflation (as in France) to below
average growth and above average inflation (as in Italy ). No signs of strain
have emerged from this situation so far.
In Japan, first quarter growth (at 7.9% QI/99 over QIV/98 annualized rate)
caught market attention. The positive expectations shared by many market
participants depend heavily on the government's massive injection of public
funds rather than on increased productivity resulting from structural reforms
undertaken in the private sector. Only the latter would allow the Japanese
economy to move toward a sustainable long-term growth path. The Bank of Japan
continues its policy of zero overnight call rates, which it sees as an
alternative for full-fledged money supply targeting.
Growing current account imbalances are emerging. A healthy American economy is
attracting capital from all over the world, but at the same time private
savings are falling in the U.S. (and this is only partly compensated by higher
public savings). The result is a widening current account deficit. With growth
picking up in the rest of the world, capital flows are likely to be rerouted.
This should alleviate the current account problem and weaken the USD.
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 6/30/99 6/30/99 6/30/99 6/30/99 6/30/99
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MSCI World Ex USA (Free) Index 14.26% 9.72% 16.34% 14.07% 12.12%
Europe Ex U.K. 9.08 3.60 31.73 24.48 20.59
U.K. 7.64 8.50 20.34 18.14 14.60
Canada 14.41 3.08 18.60 17.73 15.00
Japan 32.60 19.51 1.42 3.75 3.33
Asia Ex Japan 33.51 68.29 -4.08 1.75 4.67
- --------------------------------------------------------------------------------------------------------
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 6/30/99 6/30/99 6/30/99 6/30/99 6/30/99
- --------------------------------------------------------------------------------------------------------
Yen -6.81% 14.66% -3.23% -4.01% -2.46%
Pound -5.26 -5.53 0.48 0.42 1.00
Euro** -12.18 -4.83 -7.07 -3.45 -2.08
Canadian Dollar 3.78 -0.64 -2.65 1.37 -1.93
- --------------------------------------------------------------------------------------------------------
*Performance inception date of the Brinson Global (Ex-U.S.) Equity Fund Class I
**Deutschemark prior to 1/1/99
All total returns in excess of 1 year are average annualized total returns
5
</TABLE>
<PAGE>
GLOBAL (EX-U.S.) EQUITY FUND
[SET BRINSON LOGO]
In managing the Global (Ex-U.S.) Equity Fund, we apply our fundamental
price/value philosophy with an integrated view of global capital markets. We
add value by focusing on four key portfolio management activities. We select the
best securities, focus on industries that have the best earnings prospects,
concentrate investments in countries with above average political and structural
environments, and control exposure to various global currencies. We manage the
portfolio within predefined ranges (relative to the benchmark) and use both
qualitative and quantitative techniques to control portfolio risk.
Since its inception on August 31, 1993, the Brinson Global (Ex-U.S.) Equity Fund
Class I has produced an annualized return of 8.08% compared to the 8.48% return
of its benchmark, the MSCI World Ex USA (Free) Index. These results were
achieved at a risk level or volatility well below that of the benchmark at
12.63% versus 14.29% respectively. For the most recent six months, the Fund has
returned 2.47% versus the benchmark return of 4.34%.
The main driver of the Fund's relative underperformance on a year-to-date basis
was unfavorable security selection decisions. We continued to underweight many
of the high-flying internet stocks and stocks in the growth sector of the
market. While these stocks are overvalued in our opinion, and we did see some
correction in favor of value stocks in the second quarter, growth stocks
continued to drive the overall markets higher during the first half of 1999.
Most European equity markets were very strong in the first quarter, and we took
that strength as an opportunity to reduce our overweight position in Europe.
Proceeds from the sales were deployed in Japan, where recent macroeconomic
policy moves have recently served to support higher asset prices. The Japan
equity position is now approximately equal to the benchmark weighting. During
the first quarter we also increased the Fund's currency exposure to the euro,
while decreasing exposure to the U.K. sterling and Japanese yen. Renewed
investor confidence in global growth boosted economically sensitive stocks
during the second quarter. Value stocks outperformed growth by a wide margin
opposing a long-running trend of overperformance by growth issues. An improving
economic picture coupled with increased profitability for value stocks suggests
that there is scope for continued outperformance of growth stocks in the coming
months. Our work continues to suggest that many large capitalization growth
stocks remain significantly overvalued.
As a result, the Fund's largest industry overweights (relative to the benchmark)
are to producer goods, basic materials and consumer stocks. The largest
underweights are maintained in financials, telecommunication services &
equipment and information technology. With respect to country strategy, the
Fund's largest overweights are to Australia/New Zealand, the U.K. and Germany,
with the largest underweights in Hong Kong, Canada and Switzerland.
Strong price increases among the European cyclicals prompted us to pare back on
certain positions near the end of the second quarter. The unexciting outlook for
the British steel industry prompted us to eliminate our position in British
Steel after taking advantage of a recent rebound in the stock price. We maintain
an overweight in cyclicals however, due to some strong value opportunities in
Australia and New Zealand, a new position in the German tire manufacturer,
Continental, and a position in Swiss construction and building group,
Holderbank.
6
<PAGE>
GLOBAL (EX-U.S.) EQUITY FUND
Total Return
<TABLE>
6 months 1 year 3 years 5 years 8/31/93*
ended ended ended ended to
6/30/99 6/30/99 6/30/99 6/30/99 6/30/99
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brinson Global (Ex-U.S.) Equity Fund Class I 2.47% 3.65% 9.31% 10.03% 8.08%
- --------------------------------------------------------------------------------------------------------
MSCI World Ex USA (Free) Index 4.34 7.18 8.90 8.50 8.48
- --------------------------------------------------------------------------------------------------------
* Performance inception date of the Brinson Global (Ex-U.S.) Equity Fund Class I
Performance is net of withholding taxes on dividends.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns
</TABLE>
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 U SA (Free) Index if you had
invested $1,000,000 on August 31, 1993, and had reinvested all your income
dividends and capital gain distributions through June 30, 1999. 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
[Graph appears here]
<TABLE>
Brinson Global
(Ex-U.S.) MSCI World
Equity Fund Ex USA
Class I (Free) Index
<S> <C> <C>
- -----------------------------------
8/31/93 $1,000,000 $1,000,000
- -----------------------------------
12/31/93 $965,500 $988,754
- -----------------------------------
6/30/94 $975,547 $1,068,786
- -----------------------------------
12/31/94 $974,540 $1,062,774
- -----------------------------------
6/30/95 $974,540 $1,095,525
- -----------------------------------
12/31/95 $1,126,103 $1,187,456
- -----------------------------------
6/30/96 $1,204,891 $1,244,668
- -----------------------------------
12/31/96 $1,269,637 $1,271,887
- -----------------------------------
6/30/97 $1,449,115 $1,414,422
- -----------------------------------
12/31/97 $1,342,509 $1,298,199
- -----------------------------------
6/30/98 $1,518,353 $1,499,791
- -----------------------------------
12/31/98 $1,535,729 $1,540,540
- -----------------------------------
6/30/99 $1,573,726 $1,607,444
- -----------------------------------
</TABLE>
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
7
<PAGE>
GLOBAL (EX-U.S.) EQUITY FUND
Total Return
<TABLE>
<CAPTION>
6 months 1 year 6/30/97*
ended ended to
6/30/99 6/30/99 6/30/99
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brinson Global (Ex-U.S.) Equity Fund Class N 2.40% 3.30% 3.90%
- -------------------------------------------------------------------------------------
MSCI World Ex USA (Free) Index 4.34 7.18 6.61
- -------------------------------------------------------------------------------------
* Inception date of the Brinson Global (Ex-U.S.) Equity Fund Class N
Performance is net of withholding taxes on dividends.
Total return includes reinvestment of all capital gain and income distributions.
All total returns in excess of 1 year are average annualized returns.
</TABLE>
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 June 30, 1999. 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
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Brinson Global
MSCI World (Ex-U.S.)
Ex USA Equity Fund
(Free) Index Class N
<S> <C> <C>
- ---------------------------------------------
6/30/97 $1,000,000 $1,000,000
- ---------------------------------------------
9/30/97 $999,206 $994,869
- ---------------------------------------------
12/31/97 $925,127 $917,830
- ---------------------------------------------
3/31/98 $1,044,194 $1,052,548
- ---------------------------------------------
6/30/98 $1,045,088 $1,060,356
- ---------------------------------------------
9/30/98 $902,185 $904,473
- ---------------------------------------------
12/31/98 $1,054,292 $1,089,166
- ---------------------------------------------
3/31/99 $1,046,437 $1,105,498
- ---------------------------------------------
6/30/99 $1,079,597 $1,136,467
- ---------------------------------------------
</TABLE>
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
8
<PAGE>
Global (Ex-U.S.) Equity Fund
[Brinson Logo]
Industry Diversification
<TABLE>
<CAPTION>
As a Percent of Net Assets
As of June 30, 1999
- ----------------------------------------------
GLOBAL (Ex-U.S.) EQUITIES
<S> <C>
Aerospace & Military.................. 1.05%
Airlines.............................. 1.03
Appliances & Households............... 2.01
Autos/Durables........................ 2.69
Banking............................... 10.06
Beverages & Tobacco................... 2.98
Broadcasting & Publishing............. 4.06
Building Materials.................... 0.98
Business & Public Service............. 3.73
Chemicals............................. 4.26
Construction.......................... 0.64
Data Processing....................... 1.45
Electric Components................... 1.27
Electronics........................... 5.17
Energy................................ 6.05
Financial Services.................... 2.39
Food & House Products................. 4.00
Forest Products....................... 1.06
Health & Personal Care................ 6.36
Industrial Components................. 2.37
Insurance............................. 5.14
Leisure & Tourism..................... 0.32
Machinery & Engineering............... 0.75
Merchandising......................... 4.85
Metals-Steel.......................... 0.40
Multi-Industry........................ 1.67
Non-Ferrous Metals.................... 1.76
Real Estate........................... 0.72
Recreation............................ 0.92
Telecommunications.................... 8.39
Textiles & Apparel.................... 0.19
Transportation........................ 1.28
Utilities............................. 5.15
Wholesale & International Trade....... 0.56
------
Total Global (Ex-U.S.) Equities.. 95.71
CONVERTIBLE BONDS..................... 0.03
SHORT-TERM INVESTMENTS................ 0.87
------
TOTAL INVESTMENTS................ 96.61
CASH AND OTHER ASSETS,
LESS LIABILITIES................. 3.39
NET ASSETS............................100.00%
======
</TABLE>
Market and Currency Strategy
<TABLE>
<CAPTION>
As of June 30, 1999
Fund
----------------------
Market Currency
Strategy Strategy Index
- ------------------------------------------------------------
<S> <C> <C> <C>
Australia 5.74% 8.24% 2.75%
Austria 0.16 0.00 0.00
Belgium 1.30 0.00 0.00
Canada 2.91 4.18 4.18
Denmark 0.38 0.73 0.73
Euro 0.00 43.79 35.36
Finland 1.94 0.00 0.00
France 9.50 0.00 0.00
Germany 10.80 0.00 0.00
Hong Kong 0.00 0.00 2.43
Italy 2.70 0.00 0.00
Japan 23.01 15.01 23.01
Netherlands 4.94 0.00 0.00
New Zealand 0.70 0.70 0.19
Norway 0.23 0.40 0.40
Portugal 0.42 0.00 0.00
Singapore 0.92 0.92 0.92
Spain 2.26 0.00 0.00
Sweden 2.75 6.19 2.19
Switzerland 5.49 6.49 6.49
U.K. 23.85 13.35 21.35
- ------------------------------------------------------------
100.00% 100.00% 100.00%
</TABLE>
Top Ten Global (Ex-U.S.) Equity Holdings
As of June 30, 1999
<TABLE>
<CAPTION>
Percent of
Net Assets
- ----------------------------------------------------
<S> <C>
1. BP Amoco PLC 1.67%
2. Veba AG 1.65
3. ING Groep NV 1.46
4. Nestle S.A. (Reg.) 1.40
5. Nippon Telegraph & Telephone Corp. 1.27
6. Lloyds TSB Group PLC 1.24
7. Bayer AG 1.24
8. Siemens AG 1.24
9. Glaxo Wellcome PLC 1.20
10. Novartis AG (Reg.) 1.20
- ----------------------------------------------------
</TABLE>
9
<PAGE>
Global (Ex-U.S.) Equity Fund -- Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
--------- -----------
Global (Ex-U.S.) Equities - 95.71%
Australia - 5.79%
<S> <C> <C>
Amcor Ltd................................. 85,740 $ 476,598
Amp Limited............................... 116,500 1,273,573
Brambles Industries Ltd................... 37,040 975,769
Broken Hill Proprietary Co., Ltd.......... 244,720 2,834,657
CSR Ltd................................... 350,590 1,002,481
David Jones Ltd........................... 334,200 327,387
Lend Lease Corp., Ltd..................... 92,296 1,267,207
National Australia Bank Ltd............... 221,648 3,667,726
News Corp. Ltd............................ 373,588 3,187,417
News Corp. Ltd., Preferred................ 157,179 1,197,465
Orica Ltd................................. 54,020 295,022
Qantas Airways Ltd........................ 473,538 1,564,042
QBE Insurance Group Ltd................... 211,823 806,184
Rio Tinto Ltd............................. 97,060 1,591,455
Santos Ltd................................ 241,340 790,729
Telstra Corp. Ltd......................... 632,310 3,623,185
Westpac Banking Corp., Ltd................ 373,841 2,424,968
WMC Ltd................................... 187,070 803,603
Woolworth's Ltd........................... 200,960 668,403
------------
28,777,871
------------
Austria - 0.14%
Austria Tabakwerke AG..................... 12,300 716,702
Belgium - 1.25%
Fortis (B)................................ 149,047 4,680,535
KBC Bancassurance Holding................. 25,510 1,512,737
------------
6,193,272
------------
Canada - 2.79%
Agrium, Inc............................... 74,680 650,883
Alcan Aluminum Ltd........................ 31,240 986,737
Bank of Montreal.......................... 19,210 694,369
Canadian National Railway Co.............. 19,190 1,282,272
Canadian Pacific Ltd...................... 57,614 1,362,401
Hudson's Bay Co........................... 60,120 670,211
Imasco, Ltd............................... 31,200 836,862
Imperial Oil Ltd.......................... 47,960 907,290
Magna International, Inc., Class A........ 9,860 555,254
Newbridge Networks Corp. (b).............. 30,610 868,604
NOVA Chemicals Corp....................... 8,800 205,121
NOVA Corp................................. 26,521 618,184
Potash Corporation of Saskatchewan, Inc... 7,660 394,101
Royal Bank of Canada...................... 24,620 1,081,211
Seagram Co., Ltd.......................... 8,300 411,327
Shaw Communications, Inc., Class B........ 35,580 1,401,469
TransCanada Pipelines Ltd................. 42,876 601,093
Westcoast Energy, Inc..................... 17,120 334,280
------------
13,861,669
------------
Denmark - 0.37%
Tele Danmark A/S.......................... 36,800 1,811,346
------------
Finland - 1.86%
Merita Ltd., Class A...................... 357,400 2,030,912
Nokia Oyj................................. 49,060 4,300,624
UPM-Kymmene Corp.......................... 102,200 2,930,088
------------
9,261,624
------------
France - 8.68%
Aerospatiale Matra........................ 63,150 1,455,579
Air Liquide............................... 15,632 2,458,495
Banque Nationale de Paris................. 27,686 2,307,048
Carrefour S.A............................. 13,970 2,053,035
Cie de Saint Gobain....................... 10,813 1,722,898
Elf Aquitaine S.A......................... 26,244 3,851,412
France Telecom S.A........................ 44,530 3,363,917
Air France (b)............................ 95,890 1,710,820
Groupe Danone............................. 11,360 2,928,892
Michelin, Class B......................... 28,783 1,177,561
Rhone-Poulenc, Class A.................... 43,280 1,977,762
SEITA..................................... 83,099 4,799,200
Societe Generale.......................... 11,593 2,043,256
Suez Lyonnaise des Eaux S.A............... 16,052 2,895,369
Thomson CSF............................... 95,800 3,329,511
Total S.A., Class B....................... 21,443 2,766,482
Vivendi................................... 28,195 2,284,038
------------
43,125,275
------------
Germany - 10.55%
Allianz AG................................ 15,308 4,278,315
Bayer AG.................................. 148,206 6,167,289
Continental AG............................ 90,800 2,172,495
DaimlerChrysler AG........................ 49,513 4,325,015
Deutsche Bank AG.......................... 87,591 5,338,656
Deutsche Telekom AG....................... 98,910 4,156,740
Deutsche Telekom AG, Rights (b)........... 100,610 19,714
Dresdner Bank AG.......................... 88,030 3,422,607
Mannesmann AG............................. 34,250 5,121,694
SAP AG.................................... 4,280 1,467,643
Siemens AG................................ 79,940 6,166,671
Veba AG................................... 138,638 8,178,305
Volkswagen AG............................. 25,506 1,645,862
------------
52,461,006
------------
Italy - 2.60%
Assicurazioni Generali.................... 94,446 3,272,712
ENI Spa................................... 688,000 4,108,204
ENI Spa ADR............................... 11,080 664,800
La Rinascente Spa......................... 208,140 1,575,566
Montedison Spa............................ 849,305 1,383,903
San Paolo-imi, Spa........................ 141,610 1,927,760
------------
12,932,945
------------
Japan - 22.25%
Acom Co., Ltd............................. 24,400 2,106,576
Amada Co., Ltd............................ 127,000 897,100
Bank of Tokyo-Mitsubushi, Ltd............. 208,000 2,960,872
Bridgestone Corp.......................... 65,000 1,965,466
Canon, Inc................................ 102,000 2,932,584
Citizen Watch Co., Ltd.................... 117,000 1,014,954
Dai Nippon Printing Co., Ltd.............. 117,000 1,870,415
Daiichi Pharmaceutical Co., Ltd........... 103,000 1,598,100
Daikin Industries Ltd..................... 245,000 2,843,895
Daiwa House Industry Co., Ltd............. 61,000 641,548
East Japan Railway Co..................... 361 1,938,615
Fanuc..................................... 50,700 2,722,654
Fuji Photo Film........................... 34,000 1,286,517
Fujitsu................................... 213,000 4,284,988
Honda Motor Co............................ 88,000 3,729,676
</TABLE>
10
<PAGE>
Global (Ex-U.S.) Equity Fund -- Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
-------- ------------
<S> <C> <C>
Japan -- continued
Hoya Corp. ................................ 28,000 $ 1,579,974
Ito Yokado Co., Ltd. ...................... 60,000 4,015,202
Kaneka Corp. .............................. 125,000 1,177,297
Kao Corp. ................................. 81,000 2,275,281
Kirin Brewery Co., Ltd. ................... 137,000 1,641,193
Kokuyo..................................... 41,000 660,525
Kuraray Co., Ltd. ......................... 154,000 1,852,479
Marui Co., Ltd. ........................... 66,000 1,090,549
Matsushita Electric Industrial Co. ........ 149,000 2,892,845
Mitsubishi Estate Co., Ltd. ............... 238,000 2,322,191
Mitsubishi Corp. .......................... 410,000 2,777,594
NGK Insulators............................. 205,000 2,140,780
Nintendo Corp., Ltd. ...................... 14,500 2,037,715
Nippon Denso Co., Ltd. .................... 106,000 2,154,329
Nippon Meat Packers, Inc. ................. 98,000 1,279,247
Nippon Steel Co. .......................... 865,000 2,008,138
Nippon Telegraph & Telephone Corp. ........ 544 6,337,079
Nomura Securities Co., Ltd. ............... 217,000 2,540,392
Obayashi Corp. ............................ 209,000 1,051,561
Osaka Gas Co. ............................. 578,000 1,962,640
Sankyo Co., Ltd. .......................... 91,000 2,293,044
Sanwa Bank Ltd. ........................... 146,000 1,436,600
Secom Co., Ltd. ........................... 29,000 3,018,837
Sega Enterprises Ltd. ..................... 16,100 212,955
Sekisui House Ltd. ........................ 138,000 1,488,995
Shin-Etsu Chemical Co., Ltd. .............. 25,000 836,500
Sony Corp. ................................ 28,800 3,105,089
Sumitomo Bank.............................. 148,000 1,835,327
Sumitomo Chemical Co. ..................... 329,000 1,508,551
Sumitomo Electric Industries............... 140,000 1,591,540
Taiheiyo Cement Corp. ..................... 600 1,720
Takeda Chemical Industries................. 77,000 3,568,820
TDK Corp. ................................. 22,000 2,012,062
Tokio Marine & Fire Insurance Co. ......... 115,000 1,249,380
Tokyo Electric Power....................... 129,400 2,731,469
Toshiba Corp. ............................. 295,000 2,103,313
Toyota Motor Corp. ........................ 116,000 3,670,522
Yamato Transport Co., Ltd. ................ 76,000 1,324,851
------------
110,580,546
------------
Netherlands -- 4.70%
Elsevier NV................................ 301,170 3,494,212
Heineken NV................................ 23,602 1,208,518
ING Groep NV............................... 134,000 7,255,195
Koninklijke KPN NV......................... 84,012 3,942,192
Royal Dutch Petroleum Co. ................. 80,180 4,696,771
Unilever NV................................ 41,143 2,772,851
------------
23,369,739
------------
New Zealand -- 0.92%
Auckland International Airport Ltd. ....... 223,210 343,009
Carter Holt Harvey Ltd. ................... 325,940 390,337
Fletcher Challenge Paper................... 500,840 374,207
Lion Nathan Ltd. .......................... 251,670 602,786
Telecom Corp. of New Zealand Ltd. ......... 670,890 2,879,585
------------
4,589,924
------------
Norway -- 0.37%
Norsk Hydro ASA............................ 20,510 773,766
Norske Skogindustrier ASA.................. 29,150 1,073,801
------------
1,847,567
------------
Portugal -- 0.40%
EDP Electricidade de Portugal S.A. ........ 111,000 1,998,721
------------
Singapore -- 0.91%
Singapore Press Holdings Ltd. ............. 181,975 3,099,721
United Overseas Bank Ltd. (Frgn.).......... 203,000 1,418,913
------------
4,518,634
------------
Spain -- 2.17%
Banco Popular Espanol S.A. ................ 27,615 1,986,435
Banco Santander Central Hispano, S.A. ..... 317,557 3,307,715
Endesa S.A. ............................... 100,186 2,136,695
Telefonica S.A. (b)........................ 69,915 3,367,947
------------
10,798,792
------------
Sweden -- 2.58%
Electrolux AB, B Shares.................... 191,870 4,017,038
Investor AB, B Shares...................... 179,480 2,005,481
Nordbanken Holding AB...................... 231,960 1,355,965
Swedish Match AB........................... 655,980 2,337,826
Ericsson LM, B Shares...................... 96,600 3,096,154
------------
12,812,464
------------
Switzerland -- 5.24%
Adecco S.A. ............................... 2,036 1,090,948
Holderbank Financiere Glarus AG, B Shares.. 1,795 2,118,760
Holderbank Financiere Glarus AG, Rights.... 1 15
Nestle S.A. (Reg.)......................... 3,854 6,943,943
Novartis AG (Reg.)......................... 4,093 5,976,528
Roche Holding AG (Gen.).................... 512 5,262,936
Swiss Reinsurance Co. (Reg.)............... 341 649,273
Swisscom AG (Reg.)......................... 10,674 4,016,654
------------
26,059,057
------------
United Kingdom -- 22.14%
Allied Zurich PLC.......................... 210,252 2,643,064
AstraZeneca Group PLC...................... 62,234 2,407,349
Barclays PLC............................... 105,230 3,062,021
BOC Group PLC.............................. 256,450 5,012,579
Boots Company PLC.......................... 176,340 2,094,454
British Aerospace PLC...................... 66,000 428,365
British Airways PLC........................ 268,000 1,849,259
BP Amoco PLC............................... 463,475 8,306,606
British Telecommunications PLC............. 183,000 3,066,346
Charter PLC................................ 461,988 2,709,009
Coats Viyella PLC.......................... 1,154,489 928,104
Diageo PLC................................. 297,935 3,111,317
FKI PLC.................................... 1,103,225 3,426,884
General Electric Co. PLC................... 561,240 5,723,869
Glaxo Wellcome PLC......................... 215,260 5,982,084
Greenalls Group PLC........................ 283,375 1,585,721
House of Fraser PLC........................ 555,090 765,611
John Mansfield Group PLC................... 108,500 13,682
Lloyds TSB Group PLC....................... 456,545 6,188,977
Marks & Spencer PLC........................ 1,013,550 5,863,380
Mirror Group PLC........................... 650,240 2,525,317
National Power PLC......................... 423,000 3,080,486
</TABLE>
11
<PAGE>
Global (Ex-U.S.) Equity Fund -- Schedule of Investments
June 30, 1999
<TABLE>
<CAPTION>
Shares Value
---------- -----------
<S> <C> <C>
United Kingdom - continued
Nycomed Amersham PLC..................................... 363,090 $ 2,524,002
Peninsular & Oriental Steam Navigation Co................ 121,986 1,831,521
Pennon Group PLC......................................... 177 2,963
Prudential Corp. PLC..................................... 354,820 5,223,863
Reckitt & Colman PLC..................................... 168,000 1,751,765
Reed International PLC................................... 316,190 2,109,512
Rio Tinto Ltd............................................ 318,890 5,345,831
RJB Mining PLC........................................... 476,840 394,611
Royal & Sun Alliance Insurance Group PLC................. 163,794 1,469,086
Sainsbury (J.) PLC....................................... 120,950 762,610
Scottish & Southern Energy PLC........................... 448,720 4,590,468
Tesco PLC................................................ 1,647,830 4,240,357
Thames Water PLC......................................... 139,589 2,213,533
Unilever PLC............................................. 217,000 1,930,903
United News & Media PLC.................................. 327,580 3,149,808
Yorkshire Water PLC...................................... 249,000 1,730,911
------------
110,046,228
------------
Total Global (Ex-U.S.) Equities
(Cost $398,136,572).................................... 475,763,382
------------
Face
Amount
--------
Convertible Bonds -- 0.03%
Australia -- 0.03%
Burns, Philp Treasury, 7.50%,
due 08/14/03.....................................AUD 1,228,664 162,651
Burns, Philp & Co., Ltd., Warrants (b)................ 1,228,664 --
------------
Total Convertible Bonds (Cost $147,071)............... 162,651
------------
Short-Term Investments -- 0.87%
Investment Companies -- 0.87%
Brinson Supplementary Trust U.S.
Cash Management Prime Fund
(Cost $4,300,836).................................. 4,300,836 4,300,836
------------
Total Investments
(Cost $402,584,479) -- 96.61% (a).................. 480,226,869
Cash and other assets, less liabilities -- 3.39%...... 16,850,002
------------
Net Assets -- 100%.................................... $497,076,871
============
</TABLE>
See accompanying notes to schedule of investments.
12
<PAGE>
Global (Ex-U.S.) Equity Fund -- Schedule of Investments
June 30, 1999
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $402,584,479; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation.............................. $ 92,641,130
Gross unrealized depreciation.............................. (14,998,740)
------------
Net unrealized appreciation.............................. $ 77,642,390
============
</TABLE>
(b) Non-income producing security
FORWARD FOREIGN CURRENCY CONTRACTS
The Global (Ex-U.S.) Equity Fund had the following open forward foreign currency
contracts as of June 30, 1999:
<TABLE>
<CAPTION>
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Forward Foreign Currency Buy Contracts
Australian Dollar...................................... 8/19/99 38,300,000 $25,364,742 $ 617,401
British Pound.......................................... 8/19/99 7,800,000 12,299,541 (167,910)
Canadian Dollar........................................ 8/19/99 11,800,000 7,978,040 48,838
Euro................................................... 8/19/99 39,350,000 40,735,833 (2,280,810)
Swedish Krona.......................................... 8/19/99 142,600,000 16,824,549 (1,213,556)
Swiss Franc............................................ 8/19/99 7,500,000 4,852,767 (364,721)
Forward Foreign Currency Sale Contracts
Australian Dollar...................................... 8/19/99 3,100,000 2,053,021 2,589
British Pound.......................................... 8/19/99 36,500,000 57,555,545 1,797,020
Euro................................................... 8/19/99 3,150,000 3,260,937 76,803
Japanese Yen........................................... 8/19/99 4,740,000,000 39,451,235 1,003,056
-----------
Total.......................................... $ (481,290)
===========
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
Global (Ex-U.S.) Equity Fund -- Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $398,283,643)................................................ $475,926,033
Affiliated issuers (Cost $4,300,836).................................................... 4,300,836
Foreign currency, at value (Cost $1,015,491).............................................. 1,049,683
Cash...................................................................................... 17,112,328
Receivables:
Investment securities sold.............................................................. 13,832,745
Dividends............................................................................... 1,240,203
Interest................................................................................ 73,124
Fund shares sold........................................................................ 8,440,505
Variation margin.......................................................................... 575,931
------------
TOTAL ASSETS.......................................................................... 522,551,388
------------
LIABILITIES:
Payables:
Investment securities purchased......................................................... 2,012,851
Fund shares redeemed.................................................................... 22,339,144
Investment advisory fees................................................................ 360,906
Accrued expenses........................................................................ 280,326
Net unrealized depreciation on forward foreign currency contracts......................... 481,290
------------
TOTAL LIABILITIES..................................................................... 25,474,517
------------
NET ASSETS.................................................................................. $497,076,871
============
NET ASSETS CONSIST OF:
Paid in capital........................................................................... $416,353,774
Accumulated undistributed net investment income........................................... 2,738,174
Accumulated net realized gain............................................................. 823,091
Net unrealized appreciation............................................................... 77,161,832
------------
NET ASSETS............................................................................ $497,076,871
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based on net assets of
$490,322,498 and 39,737,271 shares issued and outstanding)............................ $ 12.34
============
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on net assets of
$15,148 and 1,232 shares issued and outstanding)...................................... $ 12.30
============
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share (Based on net assets of
$6,739,225 and 552,223 shares issued and outstanding)................................. $ 12.20
============
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
Global (Ex-U.S.) Equity Fund -- Financial Statements
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,179,337 for foreign taxes withheld)....................... $ 9,985,856
Interest (including securities lending income of $148,237)..................... 882,438
------------
TOTAL INCOME........................................................... 10,868,294
------------
EXPENSES:
Advisory....................................................................... 3,713,448
Administrative................................................................. 347,175
Custodian...................................................................... 200,713
Distribution................................................................... 43,892
Other.......................................................................... 354,845
------------
TOTAL EXPENSES......................................................... 4,660,073
------------
NET INVESTMENT INCOME.................................................. 6,208,221
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.................................................................. (2,681,583)
Futures contracts............................................................ 575,931
Foreign currency transactions................................................ 188,730
------------
Net realized loss...................................................... (1,916,922)
------------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency............................................... 17,631,875
Forward contracts.............................................................. 1,988,204
Translation of other assets and liabilities denominated in foreign currency.... (61,073)
------------
Change in net unrealized appreciation or depreciation.................. 19,559,006
------------
Net realized and unrealized gain................................................. 17,642,084
------------
Net increase in net assets resulting from operations............................. $ 23,850,305
============
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
Global (Ex-U.S.) Equity Fund -- Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income........................................................... $ 6,208,221 $ 6,539,098
Net realized gain (loss)........................................................ (1,916,922) 12,223,856
Change in net unrealized appreciation or depreciation........................... 19,559,006 6,875,111
------------- -------------
Net increase in net assets resulting from operations............................ 23,850,305 25,638,065
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I............................................................... (4,564,403) (6,380,973)
Brinson Class N............................................................... (121) (58)
UBS Investment Funds Class.................................................... (23,356) (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............................................. (9,139,174) (32,242,400)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold..................................................................... 842,598,303 317,039,181
Shares issued in connection with acquisition of UBS International Equity Fund... 21,515,034 --
Shares issued on reinvestment of distributions.................................. 8,583,385 31,189,854
Shares redeemed................................................................. (834,980,130) (325,627,875)
------------- -------------
Net increase in net assets resulting from capital share transactions............ 37,716,592 22,601,160
------------- -------------
TOTAL INCREASE IN NET ASSETS................................................ 52,427,723 15,996,825
------------- -------------
NET ASSETS:
Beginning of year............................................................... 444,649,148 428,652,323
------------- -------------
End of year (including accumulated undistributed net investment income of
$2,738,174 and $1,437,308, respectively)...................................... $ 497,076,871 $ 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>
Year Ended June 30,
-------------------------------------------------------------
Brinson Class I 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 12.15 $ 12.59 $ 11.17 $ 9.68 $ 9.69
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income...................... 0.16 0.18 0.18 0.18 0.15
Net realized and unrealized gain (loss).... 0.27 0.30 1.97 2.05 (0.16)
-------- -------- -------- -------- --------
Total income (loss) from investment
operations........................... 0.43 0.48 2.15 2.23 (0.01)
-------- -------- -------- -------- --------
Less distributions:
Distributions from investment income....... (0.12) (0.18) (0.17) (0.18) --
Distributions from net realized gain....... (0.12) (0.74) (0.56) (0.56) --
-------- -------- -------- -------- --------
Total distributions................... (0.24) (0.92) (0.73) (0.74) --
======== ======== ======== ======== ========
Net asset value, end of period.................. $ 12.34 $ 12.15 $ 12.59 $ 11.17 $ 9.68
Total return.................................... 3.65% 4.78% 20.27% 23.64% (0.10)%
Ratios/Supplemental data:
Net assets, end of period (in 000s)........... $490,322 $439,329 $420,855 $212,366 $148,319
Ratio of expenses to average net assets:
Before expense reimbursement............... 0.99 1.00% 1.00% 1.20% 1.23%
After expense reimbursement................ N/A N/A N/A 1.00% 1.00%
Ratio of net investment income to average
net assets:
Before expense reimbursement............... 1.35% 1.52% 1.83% 1.67% 1.93%
After expense reimbursement................ N/A N/A N/A 1.87% 2.16%
Portfolio turnover rate....................... 74% 49% 25% 20% 14%
</TABLE>
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>
Year Ended Year Ended
Brinson Class N June 30, 1999 June 30, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period......................................... $ 12.14 $ 12.59
------- -------
Income from investment operations:
Net investment income................................................... 0.12 0.16
Net realized and unrealized gain........................................ 0.27 0.29
------- -------
Total income from investment operations............................ 0.39 0.45
------- -------
Less distributions:
Distributions from net investment income................................ (0.11) (0.16)
Distributions from net realized gain.................................... (0.12) (0.74)
------- -------
Total distributions................................................ (0.23) (0.90)
------- -------
Net asset value, end of period............................................... $ 12.30 $ 12.14
======= =======
Total return................................................................. 3.30% 4.51%
Ratios/Supplemental data:
Net assets, end of period (in 000s)........................................ $ 15 $ 11
Ratio of expenses to average net assets.................................... 1.24% 1.25%
Ratio of net investment income to average net assets....................... 1.10% 1.27%
Portfolio turnover rate.................................................... 74% 49%
</TABLE>
See accompany notes to financial statements.
18
<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. The financial highlights of
the UBS Investment Funds Class are presented separately.
On December 19, 1998, the Global (Ex-U.S.) Equity Fund (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 Brinson Class I 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 net 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 merger 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
respective fund. Debt securities are valued at the most recent bid price by
using market quotations or independent pricing services. Futures contracts are
valued at the settlement price established each day on the exchange on which
they are traded. Forward foreign currency contracts are valued daily using
quoted forward exchange rates. Short-term obligations with a maturity of 60
days or less are valued at amortized cost, which approximates market value.
B. Foreign Currency Translation: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases
and sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and unrealized
gain or loss on investments in the statement of operations.
C. Investment Transactions: Investment transactions are accounted for on a
trade date basis. Gains and losses on securities sold are determined on an
identified cost basis.
D. Investment Income: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as the information becomes available.
E. Federal Income Taxes: It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of its taxable income
to its shareholders. The Fund has met the requirements of the Code applicable
to regulated investment companies for the year ended June 30, 1999, 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.
19
<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 year
ended June 30, 1999, were as follows:
<TABLE>
<CAPTION>
Advisory Advisory
Fee Fees
------------ ------------
<S> <C> <C>
Global (Ex-U.S.) Equity Fund....................................................................... 0.80% $3,713,448
</TABLE>
Certain officers of the Fund are also officers of the Advisor. All officers
serve without direct compensation from the Fund. Trustees' fees paid to
unaffiliated trustees for the year ended June 30, 1999 were $6,792.
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 charges no management fees. Distributions received from the
Supplementary Trust are reflected as interest income on the statement of
operations. Amounts relating to those investments at June 30, 1999 and for the
year then ended, were 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...................... $424,308,794 $420,007,958 $331,042 $4,300,836 0.87%
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1999, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
Proceeds
Purchases From Sales
--------------- --------------
<S> <C> <C>
Global (Ex U.S.) Equity Fund..................................................................... $ 358,514,001 $333,571,232
</TABLE>
4. FORWARD FOREIGN CURRENCY CONTRACTS
The Fund engages in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation strategies. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Risks associated with such contracts include movement
in the value of the foreign currency relative to the U.S. dollar and the ability
of the counterparty to perform. The unrealized gain, if any, represents the
credit risk to the Fund on a forward foreign currency contract. Fluctuations in
the value of forward foreign currency contracts are recorded daily as net
unrealized gains or losses. The Fund realizes a gain or loss upon settlement of
the contracts. The statement of operations reflects net realized and net
unrealized gains and losses on these contracts. The counterparty to all forward
foreign currency contracts at and for the year ended June 30, 1999, 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
20
<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 June 30, 1999 was $19,889,426 and $21,802,826,
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 balance of the line of credit. During
the year ended June 30, 1999, 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>
Year Ended Year Ended
June 30, 1999 June 30, 1998
-------------------------------- --------------------------------
Shares Value Shares Value
----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I*....................................... 72,650,740 $857,199,838 26,268,807 $312,436,986
Brinson Class N ....................................... 365 4,263 798 9,817
UBS Investment Funds Class............................. 587,229 6,909,236 387,174 4,592,378
---------- ------------ ---------- -----------
Total Sales....................................... 73,238,334 $864,113,337 26,656,779 $317,039,181
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I........................................ 726,832 $ 8,514,975 2,849,536 $ 30,664,100
Brinson Class N........................................ 21 247 10 117
UBS Investment Funds Class............................. 5,917 68,163 49,433 525,637
---------- ------------ ---------- ------------
Total Dividend Reinvestment....................... 732,770 $ 8,583,385 2,898,979 $ 31,189,854
========== ============ ========== ============
Redemptions:
Brinson Class I........................................ 69,803,887 $829,422,705 26,391,131 $318,236,785
Brinson Class N........................................ 41 487 -- --
UBS Investment Funds Class............................. 481,376 5,556,938 620,542 7,391,090
---------- ------------ ---------- ------------
Total Redemptions................................. 70,285,304 $834,980,130 27,011,673 $325,627,875
========== ============ ========== ============
</TABLE>
*Includes shares issued in connection with acquisition of UBS International
Equity Fund.
21
<PAGE>
Report of Independent Auditors
The Board of Trustees and Shareholders
The Brinson Funds--Global (Ex-U.S.) Equity
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Brinson Funds--Global (Ex-U.S.) Equity Fund
(formerly Non-U.S. Equity Fund) as of June 30, 1999, the related statements of
operations for the year then ended and changes in net assets and the financial
highlights for the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--Global (Ex-U.S.) Equity Fund at June 30, 1999, the results of its
operations for the year then ended and the changes in its net assets and the
financial highlights for the periods indicated therein in conformity with
generally accepted accounting principles.
/s/ Ernst & Young, LLP
Chicago, Illinois
August 11, 1999
22
<PAGE>
Distributed by:
Funds Distributor, Inc.
60 State Street
Boston, MA 02109
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective Prospectus which includes
details regarding the Fund's objectives, policies, expenses and other
information.
<PAGE>
[Brinson Logo]
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>
[LOGO]UBS
Investment Funds
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
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
Trustees and Officers
- --------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA
Chairman of the Board
E. Thomas McFarlan
President
Thomas J. Digenan, CFA, CPA
Vice President
Debra L. Nichols
Vice President
Carolyn M. Burke, CPA
Secretary and Treasurer
David E. Floyd, CPA
Assistant Secretary
Mark F. Kemper
Assistant Secretary
1
<PAGE>
The Funds Advisor - Brinson Partners, Inc.
- --------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
Since the entrepreneurial founding of our organization nearly twenty years ago,
we have focused our collective energy on two goals: creating meaningful value-
added investment performance; and providing our clients with unrivaled, custom-
tailored service of the highest quality.
Now, in 1999, more than 1,100 employees located in 11 countries around the world
continue to deliver investment strategies that meet our clients' needs. With an
unrelenting focus on our goals, we have grown into one of the world's premier
investment management organizations, with approximately USD 280 billion in
assets under management, and industry recognition as a global thought leader. In
North America, we make our services available to institutions and individual
investors through the Brinson Family of Funds. The Brinson Funds are
diversified, institutionally priced mutual funds that provide investors
convenient access to our global investment expertise and services.
Within a framework of integrated capital markets, we select portfolio
investments by focusing on long-term investment fundamentals. Investment
performance for our clients is maximized within and across asset classes through
a comprehensive understanding of global investment markets and their
interrelationships. We apply a systematic, disciplined approach to valuing
investments and combine the seasoned judgement of our global investment teams to
construct optimal portfolios - balancing considerations for both risk and
return.
Brinson Partners, Inc. is a member of the UBS Brinson Division, the
institutional asset management division of UBS AG.
2
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
<TABLE>
<CAPTION>
<S> <C>
Shareholder Letter.......................................... 4
U.S. Economic and Market Highlights......................... 5
U.S. Balanced Fund.......................................... 6
Schedule of Investments.................................. 9
Financial Statements..................................... 12
Financial Highlights..................................... 15
U.S. Equity Fund............................................ 16
Schedule of Investments.................................. 19
Financial Statements..................................... 20
Financial Highlights..................................... 23
U.S. Large Capitalization Equity Fund....................... 24
Schedule of Investments.................................. 27
Financial Statements..................................... 28
Financial Highlights..................................... 31
U.S. Large Capitalization Growth Fund....................... 32
Schedule of Investments.................................. 35
Financial Statements..................................... 36
Financial Highlights..................................... 39
U.S. Small Capitalization Growth Fund....................... 40
Schedule of Investments.................................. 43
Financial Statements..................................... 45
Financial Highlights..................................... 48
U.S. Bond Fund.............................................. 49
Schedule of Investments.................................. 52
Financial Statements..................................... 55
Financial Highlights..................................... 58
High Yield Fund............................................. 59
Schedule of Investments.................................. 62
Financial Statements..................................... 65
Financial Highlights..................................... 68
The UBS Investment Funds - Notes to Financial Statements.... 69
Report of Independent Auditors.............................. 76
</TABLE>
3
<PAGE>
Shareholder Letter
- --------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
July 26, 1999
Dear Shareholder:
We are pleased to present the Annual Report for the UBS Investment Funds
covering the year ended June 30, 1999. This report focuses on the current
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. Large
Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund.
During the second quarter of 1999, momentum shifted away from growth stocks.
Growth-oriented stocks had outperformed value for much of the last two years,
leading to what we believe to be significant overvaluation among many of the
largest capitalization issues. Several factors contributed to this shift,
including improving expectations for global growth (bottoming in Asia and Latin
America), firming in key industrial commodity prices (notably oil) and
expectations for stronger corporate profits. Steeper yield curves and higher
interest rates also contributed to this rotation. An improving economic picture,
coupled with increased profitability for value stocks, suggests that there is
scope for continued outperformance relative to growth stocks in the coming
months. Our work continues to indicate that many large-capitalization growth
stocks remain overvalued and are likely to underperform.
Our current strategies for U.S. fixed income portfolios indicate that current
U.S. market interest rates provide positive excess returns. Market expectations
of higher inflation and Fed tightening (the Fed did raise rates by 25 basis
points on June 30) have driven bond yields in the U.S. to levels above our
estimates of fair value. The prevailing credit spreads provide more than
adequate compensation for risk, given our assumptions about the economy and the
probabilities we assign to different scenarios for default rates.
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 are all actively managed funds that provide
integrated asset management across and within the U.S. security markets. Each of
our Funds employ the same value-oriented investment philosophy of applied growth
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. The reports that follow highlight the investment characteristics and
the performance of the respective Funds.
We appreciate your continued trust and the confidence you have placed in the UBS
Investment Funds, and look forward to a long lasting, quality relationship.
Sincerely,
Hanspeter A. Walder Raymond Simon
Executive Director Managing Director
Private Banking Private Banking
4
<PAGE>
U.S. Economic and Market Highlights
- --------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
The U.S. economy continued to expand at a rapid pace in the second quarter of
1999, with weakness in the housing sector being largely compensated by
rebounding activity in manufacturing. With no signs of a recession in sight,
the current business cycle will break the record for longevity established by
the business expansion of the 1960s. Despite the strong momentum in economic
growth, price pressures, as measured by consumer prices excluding food and
energy, have remained moderate. Largely as a result of higher energy prices,
headline inflation has moved back above 2%.
Strong momentum in domestic demand, sluggish demand for U.S. products in Asia,
Europe and Latin America and higher oil prices all contributed to a massive
widening in the nation's trade deficit in May. Large net capital imports--which
reflects global investors' confidence in the U.S. economy--and a strong U.S.
dollar are the flip side of the current account deficit.
By increasing the federal funds rate on June 30, the Federal Reserve has partly
reversed some of the rate cuts adopted during the Asia/Russia/LTCM crisis last
year. The move reflects growing doubts about a permanent surge in productivity
growth. Despite this tightening, the FOMC's policy stance continues to be
expansionary with money supply expanding at rates inconsistent with long-run
price stability.
U.S. Environment
Major Markets Salomon U.S. Treasury Benchmark Returns
Year to date June 30, 1999 Year to date June 30, 1999
Total Return Total Return
U.S. Cash U.S. U.S. 1 2 5 10 30
Equivalents Bonds Equities Maturity (Years)
2.17 -1.39 11.87 2.25 0.52 -2.35 -6.50 -10.54
Top Ten Industry Returns Relative to S&P 500
Year to date June 30, 1999
Aerospace 24.93
For. Petroleum Res. 22.84
Dom. Petroleum Res. 21.83
Electronics 21.4
Oil Service 19.41
Forest Products 14.54
Aluminum 12.91
Producer Goods 11.72
Media 11.08
Telephone, Telegraph 10.66
Source: BARRA
Bottom Ten Industry Returns Relative to S&P 500
Year to date June 30, 1999
Miscellaneous -9.61
Containers -9.69
Health (Non-Drug) -9.78
Drugs, Medicine -11.03
Electric Utilities -16.05
Beverages -17.05
Trucking, Freight -22.07
Precious Metals -24.55
Water Transport -26.82
Tobacco -30.91
Source: BARRA
- --------------------------------------------------------------------------------
5
<PAGE>
U.S. Balanced Fund
- --------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
We actively manage the U.S. Balanced Fund in all of its aspects. We seek out
price/value discrepancies across capital markets (at the asset class level), and
within capital markets (through sector, sub-sector and individual security
selection). The Fund is monitored on an ongoing basis, and rebalanced with both
risk and return considerations in mind. Our value estimates and investment
decisions are based on comprehensive analysis of forward-looking investment
fundamentals, drawing on the collective judgement of our seasoned investment
teams.
Since its performance inception on July 31, 1995, the UBS Investment Fund--U.S.
Balanced has produced an annualized rate of return of 10.77% compared to the
18.82% return of its benchmark, the U.S. Balanced Mutual Fund Index. This
performance record was obtained with significantly less risk or volatility than
the benchmark, 5.55% versus 10.25%, respectively. The lower risk level implies
that the Fund has generated a much more constant return stream over time,
protecting its investors from abrupt fluctuations in the overall Fund's value.
For the first six months of 1999, the Fund returned 0.64% versus 7.13% for the
benchmark.
The key reason for the Fund's underperformance is its relative underweight to
the U.S. equity market, which we believe has reached historic levels of
overvaluation. Today a record 76% of U.S. fund managers believe that Wall Street
is overvalued. Based on our analysis, the U.S. equity market is now
approximately 50% overvalued, a level higher than that seen prior to the
market's "crash" in 1987. The Fund currently holds only 20% of its assets in
equities versus 65% for the benchmark, which is the maximum underweight
position.
In 1998 and the first half of this year, the U.S. equity market was fueled by
the desire to not miss out on market momentum. These feelings appear to have
overshadowed concerns about the fundamentals of stock valuation, and the market
has been driven to extremes. Infatuations with technology (especially internet-
related) companies and a few other sectors were the key drivers of this
phenomenon. The market had experienced an incredible lack of breadth leading
into the second quarter of 1999, and was forced higher by an ever-smaller
number of "in-vogue" stocks.
Momentum shifted away from U.S growth stocks in the second quarter of 1999 after
a long period of outperformance relative to value stocks. Factors contributing
to this shift include higher global industrial production, the rebound in many
commodity prices (notably oil) and expectations for stronger corporate profits.
This is a significant change from the momentum in growth stocks over the past
two years. While strong value stock performance this quarter helped broaden the
market, valuation imbalances still remain. The market on the whole remains
overvalued, with growth stocks at the extreme.
With risk considerations uppermost in mind, overweight positions relative to the
benchmark are held in conventional U.S. bonds at +25%, and in Treasury Inflation
Protected Securities (TIPS) at +20%. TIPS are bonds linked to the Consumer Price
Index whose future cash flows are regularly adjusted according to prevailing
inflation. While it is likely that future average inflation will be moderate, it
is also likely that it will be more pronounced than currently expected by market
participants. In this type of environment, TIPS provide unusual upside
potential.
- --------------------------------------------------------------------------------
6
<PAGE>
U.S. Balanced Fund
- --------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 7/31/95*
ended ended ended to
6/30/99 6/30/99 6/30/99 6/30/99
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UBS Investment Fund -- U.S. Balanced 0.64% 4.13% 10.21% 10.77%
- -------------------------------------------------------------------------------
U.S. Balanced Mutual Fund Index** 7.13 14.27 19.40 18.82
- -------------------------------------------------------------------------------
Wilshire 5000 Index 11.87 19.59 25.84 25.26
- -------------------------------------------------------------------------------
Salomon Smith Barney Broad Investment
Grade (BIG) Bond Index -1.39 3.12 7.24 6.87
- -------------------------------------------------------------------------------
</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 June 30, 1999. 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
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
UBS Investment U.S. Balanced Wilshire Salomon Smith
Fund -- U.S. Mutual Fund 5000 Barney BIG
Balanced Index Index Bond Index
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7/31/95 $10,000 $10,000 $10,000 $10,000
12/31/95 $10,841 $10,876 $10,994 $10,653
6/30/96 $11,154 $11,544 $12,123 $10,520
12/31/96 $12,018 $12,496 $13,326 $11,040
6/30/97 $12,826 $14,050 $15,677 $11,377
12/31/97 $13,540 $15,433 $17,496 $12,102
6/30/98 $14,338 $17,195 $20,202 $12,582
12/31/98 $14,835 $18,342 $21,595 $13,157
6/30/99 $14,931 $19,650 $24,159 $12,975
- --------------------------------------------------------------------------------
</TABLE>
7/31/95 = $10,000 Data through 6/30/99
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 Investment Funds LOGO APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of June 30, 1999
<TABLE>
<CAPTION>
- -------------------------------------------
<S> <C>
U.S. Equities
Energy............................ 0.27%
Capital Investment
Capital Goods................... 4.71
Technology...................... 6.10
------
10.81
Basic Industries
Chemicals....................... 1.82
Housing/Paper................... 3.13
Metals.......................... 1.18
------
6.13
Consumer
Non-Durables.................... 1.39
Retail/Apparel.................. 2.43
Autos/Durables.................. 1.71
Health: Drugs................... 1.93
Health: Non-Drugs............... 2.25
------
9.71
Financial
Banks........................... 4.71
Non-Banks....................... 3.48
------
8.19
Utilities
Electric........................ 1.75
Telephone....................... 0.71
------
2.46
Transportation.................... 3.78
Services/Misc..................... 2.61
------
Total U.S. Equities........... 43.96*
U.S. BONDS
Corporate Bonds
Asset-Backed.................... 0.99
CMO............................. 0.46
Consumer........................ 1.05
Financial Services.............. 1.06
Industrial Components........... 0.59
Services/Miscellaneous.......... 0.91
Utilities....................... 2.43
------
Total U.S. Corporate Bonds.... 7.49
International Dollar Bonds........ 3.10
Mortgage-Backed Securities........ 5.13
U.S. Government Agencies.......... 12.14
U.S. Government Obligations....... 24.97
------
Total U.S. Bonds.............. 52.83*
SHORT-TERM INVESTMENTS............ 2.17*
------
TOTAL INVESTMENTS............. 98.96
CASH AND OTHER ASSETS,
LESS LIABILITIES................ 1.04
------
NET ASSETS........................ 100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
*The Fund held a long position in U.S. Treasury futures on June 30, 1999 which
increased U.S. bond exposure from 52.83% to 77.27%. The Fund also held a short
position in stock index futures which reduced U.S. equity exposure from 43.96%
to 18.53%. These two adjustments result in a net increase in the Fund's
exposure to Short-Term Investments from 2.17% to 3.16%.
Asset Allocation
As of June 30, 1999
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ----------------------------------------
<S> <C> <C>
U.S. Equity 65% 20%
U.S. Bonds 35 80
- ----------------------------------------
100% 100%
</TABLE>
Top Ten U.S. Equity Holdings
As of June 30, 1999
<TABLE>
<CAPTION>
Percent of
Net Assets
- ----------------------------------------
<S> <C>
1. Xerox Corp. 2.46%
2. FDX Corp. 1.68%
3. Burlington Northern
Santa Fe Corp. 1.57%
4. Raytheon Co., Class B 1.45%
5. Electronic Data Systems
Corp. 1.42%
6. Corning, Inc. 1.39%
7. Aetna, Inc. 1.34%
8. Lockheed Martin Corp. 1.19%
9. CIGNA Corp. 1.08%
10. General Instrument Corp. 1.08%
- ----------------------------------------
</TABLE>
================================================================================
8
<PAGE>
U.S. Balanced Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
<S> <C> <C>
U.S. Equities -- 43.96%
Advanced Micro Devices, Inc. (b).................. 8,900 $ 160,756
Aetna, Inc........................................ 5,900 527,681
Allergan, Inc..................................... 1,900 210,900
Alza Corp. (b).................................... 7,700 391,737
American Standard Companies, Inc. (b)............. 4,100 196,800
Aon Corp.......................................... 10,050 414,562
Armstrong World Industries, Inc................... 1,100 63,594
BankBoston Corp................................... 2,200 112,475
Baxter International, Inc......................... 4,400 266,750
Burlington Northern Santa Fe Corp................. 19,900 616,900
Champion Enterprises, Inc. (b).................... 3,500 65,188
Champion International Corp....................... 1,200 57,450
Chase Manhattan Corp.............................. 3,400 294,525
CIGNA Corp........................................ 4,800 427,200
Circuit City Stores-Circuit City Group............ 3,700 344,100
CMS Energy Corp................................... 3,700 154,937
CommScope, Inc. (b)............................... 3,166 97,355
Compaq Computer Corp.............................. 1,100 26,056
Computer Sciences Corp. (b)....................... 1,900 131,456
Compuware Corp. (b)............................... 3,200 101,800
Comverse Technology, Inc. (b)..................... 1,230 92,865
Consolidated Stores Corp. (b)..................... 5,100 137,700
Corning, Inc...................................... 7,800 546,975
Covance, Inc. (b)................................. 3,075 73,608
Delphi Automotive Systems Corp.................... 7,200 133,650
Dial Corp......................................... 2,100 78,094
Dominion Resources, Inc........................... 600 25,988
Eastman Chemical Co............................... 2,200 113,850
Electronic Data Systems Corp...................... 9,900 559,969
Eli Lilly and Company............................. 2,200 157,575
Entergy Corp...................................... 10,400 325,000
FDX Corp. (b)..................................... 12,200 661,850
Federal-Mogul Corp................................ 2,000 104,000
First American Corp. of Tennessee................. 1,000 41,563
First Data Corp................................... 7,958 389,445
First Security Corp............................... 1,925 52,456
First Union Corp.................................. 3,300 155,100
Fleet Financial Group, Inc........................ 5,000 221,875
Fleetwood Enterprises, Inc........................ 2,200 58,163
Food Lion Inc., Class A........................... 11,600 137,750
Fort James Corp................................... 7,000 265,125
General Instrument Corp. (b)...................... 10,000 425,000
Genzyme Corp. (b)................................. 1,600 77,600
Genzyme Surgical Products Division (b)............ 286 1,262
Geon Co........................................... 1,000 32,250
GreenPoint Financial Corp......................... 6,400 210,000
Hibernia Corp., Class A........................... 4,700 73,731
Household International, Inc...................... 6,400 303,200
Illinois Tool Works, Inc.......................... 1,300 106,600
IMC Global, Inc................................... 7,200 126,900
Johnson Controls, Inc............................. 1,900 131,694
Kimberly-Clark Corp............................... 3,600 205,200
Lafarge Corp...................................... 2,200 77,963
Lear Corp. (b).................................... 4,800 238,800
Lockheed Martin Corp.............................. 12,542 467,189
Lyondell Chemical Company......................... 5,700 117,563
Martin Marietta Materials, Inc.................... 1,136 67,024
Masco Corp........................................ 12,400 358,050
Mattel, Inc....................................... 5,600 148,050
MCN Energy Group, Inc............................. 800 16,600
Nabisco Holdings Corp., Class A................... 1,100 47,575
National Service Industries, Inc.................. 2,000 72,000
New York Times Co................................. 2,100 77,306
Newell Rubbermaid, Inc............................ 4,100 190,650
Nextel Communications, Inc. (b)................... 5,600 281,050
Norfolk Southern Corp............................. 7,000 210,875
Peco Energy Co.................................... 4,400 184,250
Pentair, Inc...................................... 2,100 96,075
Philip Morris Companies, Inc...................... 6,400 257,200
PNC Bank Corp..................................... 3,200 184,400
Praxair, Inc...................................... 3,400 166,387
Raytheon Co., Class B............................. 8,100 570,037
Regions Financial Corp............................ 1,000 38,438
Southdown, Inc.................................... 2,316 148,803
St. Jude Medical, Inc. (b)........................ 5,600 199,500
Tyson Foods, Inc., Class A........................ 7,400 166,500
U.S. Bancorp...................................... 5,059 172,006
Ultramar Diamond Shamrock Corp.................... 4,090 89,213
United Healthcare Corp............................ 4,000 250,500
USG Corp.......................................... 2,100 117,600
Vencor, Inc. (b).................................. 4,200 630
Ventas, Inc....................................... 2,800 15,050
Viad Corp......................................... 3,900 120,656
W.W. Grainger, Inc................................ 1,200 64,575
Wells Fargo and Co................................ 7,000 299,250
Westvaco Corp..................................... 1,400 40,600
Xerox Corp........................................ 16,400 968,625
York International Corp........................... 2,500 107,031
----------
Total U.S. Equities (Cost $14,121,165)............ 17,316,281
----------
Face
Amount
----------
Bonds -- 52.83%
U.S. Corporate Bonds -- 7.49%
Archer Daniels 6.950%, due 12/15/69............... $ 250,000 232,287
Donaldson Lufkin & Jenrette, FRN
6.700%, due 06/30/00............................. 415,000 417,222
Heller Financial Commercial Mortgage
Assets, 99-PH1, Class A1 6.500%,
due 05/15/61..................................... 184,130 182,451
MBNA Global Capital Securities,
FRN 5.795%, due 02/01/27......................... 215,000 186,425
Noram Energy Corp. 6.375%, due 11/01/03........... 200,000 195,519
PanAmSat Corp. 6.000%, due 01/15/03............... 335,000 327,904
Peco Energy Transition Trust 6.130%,
due 03/01/09..................................... 215,000 203,857
Rite Aid Corp., 144A 6.125%, due 12/15/08......... 140,000 126,805
Sprint Capital Corp. 6.875%, due 11/15/28......... 200,000 182,106
TCI Communications, Inc. 8.750%,
due 08/01/15..................................... 220,000 249,899
Time Warner, Inc. 7.570%, due 02/01/24............ 290,000 288,806
U.S.A. Waste Services 6.500%, due 12/15/02........ 360,000 356,994
----------
2,950,275
----------
</TABLE>
================================================================================
9
<PAGE>
U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
---------- -----------
<S> <C> <C>
International Dollar Bonds -- 3.10%
Abbey National PLC, Resettable Perpetual Preferred
6.700%, due 06/29/49............................... $ 250,000 $ 231,861
British Sky Broadcasting Group plc
6.875%, due 02/23/09............................... 125,000 113,989
Credit Suisse-London, 144A, Resettable Perpetual
Preferred 7.900%, due 05/01/07..................... 270,000 262,863
Empresa Nacional de Electricidad S.A.
8.125%, due 02/01/97............................... 200,000 155,920
Ras Laffan Liquified Natural Gas Co., Ltd., 144A,
8.294%, due 03/15/14............................... 235,000 216,865
Tyco International Group, S.A. 5.875%, due 11/01/04. 250,000 241,254
-----------
1,222,752
-----------
Mortgage-Backed Securities -- 5.13%
LB Commercial Conduit Mortgage Trust, 99-C1,
Class A1, 6.410%, due 10/15/30..................... 90,000 88,809
Prudential Home Mortgage Securities, 93-43, Class A9
6.750%, due 10/25/23............................... 711,829 695,607
Residential Asset Securitization Trust 97-A10,
Class A1, 7.250%, due 12/25/27..................... 432,331 434,501
97-A11, Class A2, 7.000%, due 01/25/28.............. 93,689 93,927
UCFC Home Equity Loan 97-C, Class A8, FRN 5.069%,
due 09/15/27....................................... 710,969 709,256
-----------
2,022,100
-----------
U.S. Government Agencies -- 12.14%
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23.............................. 386,445 398,293
9.000%, due 03/01/24.............................. 178,064 189,558
Federal Home Loan Mortgage Corp.
9.000%, due 01/01/29.............................. 164,979 174,620
Federal National Mortgage Assoc.
5.250%, due 01/15/09.............................. 440,000 401,812
7.500%, due 07/01/10.............................. 277,137 281,711
7.500%, due 12/01/27.............................. 228,125 230,712
Federal National Mortgage Assoc. Series 97-72
Class EG 0.000%, due 09/25/22...................... 263,539 234,686
FNCI 8.000%, due 02/01/13........................... 327,222 337,170
Government National Mortgage Association
7.000%, due 12/15/23.............................. 651,117 645,402
7.500%, due 06/15/24.............................. 478,831 485,108
8.000%, due 08/15/22.............................. 506,068 521,774
Jordan Aid 8.750%, due 09/01/19..................... 775,765 881,285
-----------
4,782,131
-----------
U.S. Government Obligations -- 24.97%
U.S. Treasury Bond 8.000%, due 11/15/21............. $1,535,000 $ 1,846,797
U.S. Treasury Inflation Indexed Note
3.625%, due 01/15/08.............................. 5,140,000 5,137,858
3.625%, due 04/15/28.............................. 2,940,000 2,852,343
-----------
9,836,998
-----------
Total U.S. Bonds (Cost $21,149,598)................. 20,814,256
-----------
Short-Term Investments -- 2.17%
U.S. Treasury Bills -- 1.57%
U.S. Treasury Bill 4.46%, due 08/05/99.............. 620,000 617,348
-----------
Investment Companies -- 0.60% Shares
----------
Brinson Supplementary Trust U.S. Cash Management
Prime Fund......................................... 236,079 236,079
-----------
Total Short-Term Investments
(Cost $853,397).................................... 853,427
-----------
Total Investments
(Cost $36,124,160) -- 98.96% (a)................... 38,983,964
Cash and other assets, less liabilities -- 1.04%.... 409,130
-----------
Net Assets -- 100%.................................. $39,393,094
===========
</TABLE>
See accompanying notes to Schedule of Investments.
10
<PAGE>
U.S. Balanced Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $36,124,160; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation......................... $ 3,895,161
Gross unrealized depreciation......................... (1,035,357)
------------
Net unrealized appreciation..................... $ 2,859,804
============
</TABLE>
(b) Non-income producing security
FRN: Floating rate note--The rate disclosed is that in effect at June 30,
1999.
144A: Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30,
1999, the value of these securities amounted to $606,533, or 1.54% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay
interest indefinitely. The issuer generally retains the right to call such
a bond.
FUTURES CONTRACTS
The U.S. Balanced Fund had the following open futures contracts as of June 30,
1999:
<TABLE>
<CAPTION>
Settlement Cost/ Current Unrealized
Date Proceeds Value Loss
-------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Interest Rate Futures Buy Contracts
5 Year U.S. Treasury Note, 57 contracts.................... September 1999 $6,256,594 $ 6,213,000 $ (43,594)
10 Year U.S. Treasury Note, 14 contracts................... September 1999 1,574,551 1,556,625 (17,926)
30 Year U.S. Treasury Bond, 16 contracts................... September 1999 1,881,096 1,854,500 (26,596)
Index Futures Sale Contracts
Standard & Poor's 500, 29 contracts........................ September 1999 9,569,072 10,017,325 (448,254)
---------
Total............................................... $(536,370)
=========
</TABLE>
The segregated cash and aggregate market value of investments pledged to cover
margin requirements for the open futures positions at June 30, 1999 were $83,300
and $617,348, respectively.
See accompanying notes to financial statements.
================================================================================
11
<PAGE>
U.S. Balanced Fund--Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $35,888,081)....................... $38,747,885
Affiliated issuers (Cost $236,079)............................ 236,079
Cash............................................................ 69,398
Receivables:
Investment securities sold.................................... 334,340
Dividends..................................................... 21,037
Interest...................................................... 273,042
Fund shares sold.............................................. 87,121
Other assets.................................................... 1,621
-----------
TOTAL ASSETS................................................ 39,770,523
-----------
LIABILITIES:
Payables:
Investment securities purchased............................... 67,513
Fund shares redeemed.......................................... 120,328
Investment advisory fees...................................... 15,906
Variation margin.............................................. 111,813
Accrued expenses.............................................. 61,869
-----------
TOTAL LIABILITIES........................................... 377,429
-----------
NET ASSETS........................................................ $39,393,094
===========
NET ASSETS CONSIST OF:
Paid in capital................................................. $36,848,035
Accumulated undistributed net investment income................. 200,223
Accumulated net realized gain................................... 21,402
Net unrealized appreciation..................................... 2,323,434
-----------
NET ASSETS.................................................. $39,393,094
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $37,603,028 and 4,010,404 shares
issued and outstanding)...................................... $ 9.38
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of $1,266 and 135 shares issued and
outstanding)................................................. $ 9.38
===========
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $1,788,800 and 191,943 shares issued
and outstanding) $ 9.32
===========
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
U.S. Balanced Fund -- Financial Statements
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<S> <C>
INVESTMENT INCOME:
Interest....................................................... $ 1,648,958
Dividends...................................................... 315,958
-----------
TOTAL INCOME............................................... 1,964,916
-----------
EXPENSES:
Advisory....................................................... 347,297
Professional................................................... 43,123
Registration................................................... 36,449
Printing....................................................... 27,654
Distribution................................................... 9,774
Other.......................................................... 21,483
-----------
TOTAL EXPENSES............................................. 485,780
Expenses waived by Advisor................................. (79,286)
-----------
NET EXPENSES ............................................. 406,494
-----------
NET INVESTMENT INCOME ..................................... 1,558,422
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.................................................. 4,805,976
Futures contracts............................................ (548,763)
-----------
Net realized gain.......................................... 4,257,213
-----------
Change in net unrealized appreciation or depreciation on:
Investments.................................................... (4,679,394)
Futures contracts.............................................. (482,951)
-----------
Change in net unrealized appreciation or depreciation........ (5,162,345)
-----------
Net realized and unrealized loss................................. (905,132)
-----------
Net increase in net assets resulting from operations............. $ 653,290
===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
13
<PAGE>
U.S. Balanced Fund--Financial Statements
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Year Year
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income.......................................... $ 1,558,422 $ 9,285,597
Net realized gain.............................................. 4,257,213 43,393,817
Change in net unrealized appreciation or depreciation.......... (5,162,345) (19,387,830)
------------- -------------
Net increase in net assets resulting from operations........... 653,290 33,291,584
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I.............................................. (2,554,055) (11,202,072)
Brinson Class N.............................................. (68) (62)
UBS Investment Funds Class................................... (123,921) (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.............................. (12,235,839) (31,622,305)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................................... 14,184,340 58,797,856
Shares issued on reinvestment of distributions................. 12,036,064 31,535,417
Shares redeemed................................................ (57,681,932) (294,075,195)
------------- -------------
Net decrease in net assets resulting from capital
share transactions........................................... (31,461,528) (203,741,922)
------------- -------------
TOTAL DECREASE IN NET ASSETS................................. (43,044,077) (202,072,643)
------------- -------------
NET ASSETS:
Beginning of period............................................ 82,437,171 284,509,814
------------- -------------
End of period (including accumulated undistributed net
investment income of $200,223 and $1,337,239,
respectively)................................................ $ 39,393,094 $ 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>
Year Ended June 30, August 31, 1995*
--------------------------------------- Through
UBS Investment Funds Class 1999 1998 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.............................. 0.27** 0.42** 0.38 0.42
Net realized and unrealized gain................... 0.18 0.95 1.31 0.86
------- ------- ------- -------
Total income from investment operations........ 0.45 1.37 1.69 1.28
------- ------- ------- -------
Less distributions:
Distributions from net investment income........... (0.67) (0.70) (0.36) (0.42)
Distributions from net realized gain............... (2.65) (0.94) (0.54) (0.57)
------- ------- ------- -------
Total distributions............................ (3.32) (1.64) (0.90) (0.99)
------- ------- ------- -------
Net asset value, end of period......................... $ 9.32 $ 12.19 $ 12.46 $ 11.67
======= ======= ======= =======
Total return (non-annualized).......................... 4.13% 11.79% 14.99% 11.54%
Ratios/Supplemental data:
Net assets, end of period (in 000s).................. $ 1,789 $ 1,880 $ 1,649 $ 779
Ratio of expenses to average net assets:
Before expense reimbursement....................... 1.46% 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....................... 2.50% 3.38% 3.28% 3.26%***
After expense reimbursement........................ 2.66% 3.39% 3.36% 3.47%***
Portfolio turnover rate.............................. 113% 194% 329% 240%
</TABLE>
* Commencement of UBS Investment Funds Class
** The net investment income per share data was determined by using average
shares outstanding throughout the period.
***Annualized
See accompanying notes to financial statements.
================================================================================
15
<PAGE>
U.S. Equity Fund
[LOGO]UBS
Investment Funds
The investment strategies implemented in the U.S. Equity Fund are designed to
enhance returns, while controlling risk. Our investment strategies emphasize
stock selection with attention to avoiding unintended concentrations in
particular industry and other common characteristic exposures. The Fund is
typically 70% invested in large capitalization stocks with the remaining 30% in
intermediate and small capitalization stocks. Industry exposures are normally
maintained within 10% of the benchmark weightings.
Since its performance inception on July 31, 1995, the UBS Investment Fund --U.S.
Equity has produced an annualized return of 23.48%, compared to the 25.26%
return of its benchmark, the Wilshire 5000 Equity Index. These results have been
achieved with a risk level or volatility very similar to that of the benchmark:
15.03% versus 15.44%, respectively. For the last six months, the Fund has
underperformed the benchmark, returning 10.18% compared to the benchmark return
of 11.87%.
Stock selection has provided the largest positive contribution to the Fund's
returns over the last six months. Positions in Circuit City, First Data Corp.
and FDX Corp. were some of the best performers. The Fund's underperformance on a
year-to-date basis results mainly from our protective industry and common
characteristic exposures which we feel are appropriate given the current
environment of increasing volatility and stratification of equity returns across
market segments.
The equity market continued to favor a small group of fashionable large
capitalization growth and technology (especially internet-related) stocks in the
first quarter of 1999. These types of stocks represent, in our opinion, the most
overvalued segments of the U.S. equity market. They have been driven to extremes
by investors' unwillingness to miss out on the market's momentum. Demand for
this niche group of stocks alone drove the entire market higher in the first
quarter.
Momentum, however, shifted away from U.S. growth stocks in the second quarter of
1999 after a long period of outperformance relative to "value" stocks. Factors
contributing to this shift include higher global industrial production, the
rebound in many commodity prices (notably oil) and expectations for stronger
corporate profits. That shift helped the Fund regain nearly 400 basis points
relative to the benchmark during the second quarter, with the Fund holding a
pronounced overweight in stocks with "value" style affiliations. This is a
significant change from the momentum in growth stocks over the past two years.
While strong value stock performance this quarter helped broaden the market,
valuation imbalances still remain, and growth stocks are likely to underperform.
In addition to the value overweight, common characteristic exposures include
underweights to size, momentum and earnings variability -- chief characteristics
of the "growth" segment of the market. While these underweights have hampered
performance on a year-to-date basis, they were beneficial in the second quarter,
and we believe the Fund is well positioned for the coming months.
16
<PAGE>
U.S. Equity Fund
- --------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years 7/31/95*
ended ended ended to
6/30/99 6/30/99 6/30/99 6/30/99
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UBS Investment Fund -- U.S. Equity 10.18% 14.63% 22.04% 23.48%
- -------------------------------------------------------------------------------
Wilshire 5000 Equity Index 11.87 19.59 25.84 25.26
- -------------------------------------------------------------------------------
</TABLE>
* 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 June 30, 1999. 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
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
UBS Investment Wilshire
Fund -- U.S. 5000
Equity Equity Index
- --------------------------------------------------------------------------------
<S> <C> <C>
7/31/95 $10,000 $10,000
12/31/95 11,335 10,994
6/30/96 12,570 12,123
12/31/96 14,157 13,326
6/30/97 16,499 15,677
12/31/97 17,587 17,496
6/30/98 19,931 20,202
12/31/98 20,737 21,595
6/30/99 22,847 24,159
- --------------------------------------------------------------------------------
</TABLE>
7/31/95 = $10,000 Data through 6/30/99
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.
================================================================================
17
<PAGE>
U.S. Equity Fund
[LOGO]UBS
Investment Funds
Industry Diversification
<TABLE>
<CAPTION>
As a Percent of Net Assets
As of June 30, 1999
- ---------------------------------------------
<S> <C>
U.S. EQUITIES
Energy............................... 0.69%
Capital Investment
Capital Goods...................... 10.54
Technology......................... 13.90
------
24.44
Basic Industries
Chemicals.......................... 4.00
Housing/Paper...................... 7.07
Metals............................. 2.61
------
13.68
Consumer
Non-Durables....................... 2.93
Retail/Apparel..................... 5.42
Autos/Durables..................... 3.81
Health: Drugs...................... 4.32
Health: Non-Drugs.................. 5.02
------
21.50
Financial
Banks.............................. 10.62%
Non-Banks.......................... 7.81
------
18.43
Utilities
Electric........................... 3.91
Telephone.......................... 1.58
------
5.49
Transportation....................... 8.60
Services/Misc........................ 5.89
------
Total U.S. Equities............ 98.72
SHORT-TERM INVESTMENTS............... 4.77
------
TOTAL INVESTMENTS.............. 103.49
LIABILITIES, LESS CASH AND
OTHER ASSETS........................ (3.49)
------
NET ASSETS........................... 100.00%
======
- ---------------------------------------------
</TABLE>
Top Ten U.S. Equity Holdings
<TABLE>
<CAPTION>
As of June 30, 1999
Percent of
Net Assets
- ------------------------------------------------
<S> <C>
1. Xerox Corp. 5.51%
2. FDX Corp. 3.75
3. Burlington Northern Santa Fe Corp. 3.51
4. Raytheon Co., Class B 3.22
5. Electronic Data Systems Corp. 3.18
6. Corning, Inc. 3.11
7. Aetna, Inc. 3.01
8. Lockheed Martin Corp. 2.66
9. CIGNA Corp. 2.44
10. General Instrument Corp. 2.44
- ------------------------------------------------
</TABLE>
18
<PAGE>
U.S. Equity Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------------ ------------
<S> <C> <C>
U.S. Equities -- 98.72%
Advanced Micro Devices, Inc. (b).............. 400,500 $ 7,234,031
Aetna, Inc.................................... 265,800 23,772,487
Allergan, Inc................................. 84,600 9,390,600
Alza Corp. (b)................................ 349,150 17,763,006
American Standard Companies, Inc. (b)......... 183,900 8,827,200
Aon Corp...................................... 451,950 18,642,937
Armstrong World Industries, Inc............... 48,200 2,786,563
BankBoston Corp............................... 97,200 4,969,350
Baxter International, Inc..................... 195,400 11,846,125
Burlington Northern Santa Fe Corp............. 894,000 27,714,000
Champion Enterprises, Inc. (b)................ 157,000 2,924,125
Champion International Corp................... 55,500 2,657,063
Chase Manhattan Corp.......................... 154,700 13,400,887
CIGNA Corp.................................... 216,950 19,308,550
Circuit City Stores-Circuit City Group........ 164,000 15,252,000
CMS Energy Corp............................... 164,850 6,903,094
CommScope, Inc. (b)........................... 140,999 4,335,719
Compaq Computer Corp.......................... 50,100 1,186,744
Computer Sciences Corp. (b)................... 94,100 6,510,544
Compuware Corp. (b)........................... 184,600 5,872,588
Comverse Technology, Inc. (b)................. 51,847 3,914,449
Consolidated Stores Corp. (b)................. 221,100 5,969,700
Corning, Inc.................................. 350,200 24,557,775
Covance, Inc. (b)............................. 140,050 3,352,447
Delphi Automotive Systems Corp................ 323,700 6,008,681
Dial Corp..................................... 92,400 3,436,125
Dominion Resources, Inc....................... 43,300 1,875,431
Eastman Chemical Co........................... 98,450 5,094,788
Electronic Data Systems Corp.................. 443,600 25,091,125
Eli Lilly and Co.............................. 97,000 6,947,625
Entergy Corp.................................. 467,800 14,618,750
FDX Corp. (b)................................. 545,800 29,609,650
Federal-Mogul Corp............................ 89,900 4,674,800
First American Corp. of Tennessee............. 46,700 1,940,969
First Data Corp............................... 358,430 17,540,668
First Security Corp........................... 88,300 2,406,175
First Union Corp.............................. 148,400 6,974,800
Fleet Financial Group, Inc.................... 223,900 9,935,562
Fleetwood Enterprises, Inc.................... 107,900 2,852,606
Food Lion Inc., Class A....................... 528,600 6,277,125
Fort James Corp............................... 320,100 12,123,787
GATX Corp..................................... 30,200 1,149,488
General Instrument Corp. (b).................. 454,250 19,305,625
Genzyme Corp. (b)............................. 72,150 3,499,275
Genzyme Surgical Products Division (b)........ 12,916 56,909
Geon Co....................................... 24,550 791,738
GreenPoint Financial Corp..................... 288,000 9,450,000
Hibernia Corp................................. 226,750 3,557,141
Household International, Inc.................. 289,200 13,700,850
Illinois Tool Works, Inc...................... 54,600 4,477,200
IMC Global, Inc............................... 323,700 5,705,213
Johnson Controls, Inc......................... 84,500 5,856,906
Kimberly-Clark Corp........................... 180,650 10,297,050
Lafarge Corp.................................. 96,700 3,426,806
Lear Corp. (b)................................ 214,050 10,648,987
Lockheed Martin Corp.......................... 565,052 21,048,187
Lyondell Chemical Company..................... 257,250 5,305,781
Martin Marietta Materials, Inc................ 52,307 3,086,113
Masco Corp.................................... 557,500 16,097,812
Mattel, Inc................................... 258,700 6,839,381
MCN Energy Group, Inc......................... 66,900 1,388,175
Nabisco Holdings Corp......................... 20,300 877,975
National Service Industries, Inc.............. 88,000 3,168,000
New York Times Co............................. 105,100 3,868,994
Newell Rubbermaid, Inc........................ 183,200 8,518,800
Nextel Communications, Inc., Class A (b)...... 249,450 12,519,272
Norfolk Southern Corp......................... 314,600 9,477,325
Peco Energy Co................................ 179,600 7,520,750
Pentair, Inc.................................. 94,500 4,323,375
Philip Morris Companies, Inc.................. 283,450 11,391,147
PNC Bank Corp................................. 145,500 8,384,438
Praxair, Inc.................................. 153,400 7,507,013
Raytheon Co., Class B......................... 361,950 25,472,232
Regions Financial Corp........................ 45,900 1,764,281
Southdown, Inc................................ 102,840 6,607,470
St. Jude Medical, Inc. (b).................... 253,100 9,016,687
Tyson Foods, Inc.............................. 332,350 7,477,875
U.S. Bancorp.................................. 229,141 7,790,794
Ultramar Diamond Shamrock Corp................ 184,218 4,018,255
United Healthcare Corp........................ 178,700 11,191,087
USG Corp...................................... 71,600 4,009,600
Vencor, Inc. (b).............................. 169,000 25,350
Ventas, Inc................................... 119,700 643,388
Viad Corp..................................... 175,650 5,434,172
W.W. Grainger, Inc............................ 54,400 2,927,400
Wells Fargo and Co............................ 311,900 13,333,725
Westvaco Corp................................. 72,800 2,111,200
Xerox Corp.................................... 737,900 43,582,219
York International Corp....................... 111,300 4,765,031
------------
Total U.S. Equities (Cost $611,467,321)....... 779,917,143
------------
Short-Term Investments -- 4.77%
Investment Companies -- 4.77%
Brinson Supplementary Trust U.S.
Cash Management
Prime Fund (Cost $37,684,984)............... 37,684,984 37,684,984
------------
Total Investments
(Cost $649,152,305) -- 103.49% (a).......... 817,602,127
Liabilities, less cash and other
assets -- (3.49%)........................... (27,551,605)
------------
Net Assets -- 100%............................ $790,050,522
============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $649,152,305; and net
unrealized appreciation consisted of:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation............... $191,506,645
Gross unrealized depreciation............... (23,056,823)
------------
Net unrealized appreciation............... $168,449,822
============
</TABLE>
(b) Non-income producing security
See accompanying notes to financial statements.
================================================================================
19
<PAGE>
U.S. Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $611,467,321).................................... $ 779,917,143
Affiliated issuers (Cost $37,684,984)....................................... 37,684,984
Cash.......................................................................... 939
Receivables:
Investment securities sold.................................................. 4,034,378
Dividends................................................................... 935,568
Interest.................................................................... 163,922
Fund shares sold............................................................ 1,589,198
Other assets.................................................................. 914
-------------
TOTAL ASSETS.............................................................. 824,327,046
-------------
LIABILITIES:
Payables:
Investment securities purchased............................................. 4,197,075
Fund shares redeemed........................................................ 29,582,170
Investment advisory fees.................................................... 462,359
Accrued expenses............................................................ 34,920
-------------
TOTAL LIABILITIES......................................................... 34,276,524
-------------
NET ASSETS...................................................................... $ 790,050,522
=============
NET ASSETS CONSIST OF:
Paid in capital............................................................... $ 577,012,442
Accumulated undistributed net investment income............................... 1,363,158
Accumulated net realized gain................................................. 43,225,100
Net unrealized appreciation................................................... 168,449,822
-------------
NET ASSETS................................................................ $ 790,050,522
=============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based
on net assets of $713,320,572 and 33,205,246 shares issued and
outstanding).............................................................. $ 21.48
=============
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on
net assets of $7,563,160 and 353,550 shares issued and outstanding)....... $ 21.39
=============
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share (Based
on net assets of $69,166,790 and 3,233,960 shares issued and
outstanding).............................................................. $ 21.39
=============
</TABLE>
See accompanying notes to financial statements.
================================================================================
20
<PAGE>
U.S. Equity Fund -- Financial Statements
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends.................................................... $ 10,840,069
Interest..................................................... 860,262
------------
TOTAL INCOME........................................... 11,700,331
------------
EXPENSES:
Advisory..................................................... 5,047,492
Distribution................................................. 363,195
Administration............................................... 267,455
Other........................................................ 459,718
------------
TOTAL EXPENSES......................................... 6,137,860
------------
NET INVESTMENT INCOME.................................. 5,562,471
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments................................................ 52,263,712
Futures contracts.......................................... 1,685,319
------------
Net realized gain........................................ 53,949,031
------------
Change in net unrealized appreciation or depreciation on:
Investments.................................................. 51,764,886
Futures contracts............................................ (96,948)
------------
Change in net unrealized appreciation or depreciation...... 51,667,938
------------
Net realized and unrealized gain............................... 105,616,969
------------
Net increase in net assets resulting from operations........... $111,179,440
============
</TABLE>
See accompanying notes to financial statements.
- -------------------------------------------------------------------------------
21
<PAGE>
U.S. Equity Fund -- Financial Statements
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income............................................................. $ 5,562,471 $ 5,791,742
Net realized gain................................................................. 53,949,031 44,131,079
Change in net unrealized appreciation or depreciation............................. 51,667,938 58,277,883
------------ ------------
Net increase in net assets resulting from operations.............................. 111,179,440 108,200,704
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................................................. (5,223,351) (4,978,081)
Brinson Class N................................................................. (28,171) (832)
UBS Investment Funds Class...................................................... (190,578) (249,586)
Distributions from net realized gain:
Brinson Class I................................................................. (36,404,562) (28,383,478)
Brinson Class N................................................................. (234,496) (64)
UBS Investment Funds Class...................................................... (3,937,537) (2,678,143)
------------ ------------
Total distributions to shareholders............................................... (46,018,695) (36,290,184)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................................................... 283,730,686 346,081,960
Shares issued in connection with the acquisition of the UBS Value Equity Fund..... 23,269,419 --
Shares issued on reinvestment of distributions.................................... 42,645,369 33,981,329
Shares redeemed................................................................... (285,854,547) (163,864,419)
------------ ------------
Net increase in net assets resulting from capital share transactions.............. 63,790,927 216,198,870
------------ ------------
TOTAL INCREASE IN NET ASSETS................................................ 128,951,672 288,109,390
------------ ------------
NET ASSETS:
Beginning of period............................................................... 661,098,850 372,989,460
------------ ------------
End of period (including accumulated undistributed net investment income of
$1,363,158 and $1,242,787, respectively).......................................... $790,050,522 $661,098,850
============ ============
</TABLE>
See accompanying notes to financial statements.
================================================================================
22
<PAGE>
U.S. Equity Fund -- Financial Highlights
- -------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Year Ended June 30, August 31, 1995*
------------------------------- Through
UBS Investment Funds Class 1999 1998 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................................................. 0.06** 0.09 0.11 0.10
Net realized and unrealized gain...................................... 2.67 3.38 4.22 2.92
------- ------- ------- -------
Total income from investment operations......................... 2.73 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.................................. (1.12) (1.13) (1.23) (0.25)
------- ------- ------- -------
Total distributions............................................. (1.17) (1.23) (1.32) (0.38)
------- ------- ------- -------
Net asset value, end of period............................................ $ 21.39 $ 19.83 $ 17.59 $ 14.58
======= ======= ======= =======
Total return (non-annualized)............................................. 14.63% 20.80% 31.28% 25.70%
Ratios/Supplemental data:
Net assets, end of period (in 000s)..................................... $69,167 $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.......................................... 0.30% 0.60% 0.54% 0.61%***
After expense reimbursement........................................... N/A N/A 0.63% 0.95%***
Portfolio turnover rate................................................. 48% 42% 43% 36%
*Commencement of UBS Investment Funds Class
**The net investment income per share data was determined by using average shares outstanding throughout the period.
***Annualized
N/A = Not Applicable
</TABLE>
See accompanying notes to financial statements.
================================================================================
23
<PAGE>
U.S. Large Capitalization Equity Fund
[LOGO]UBS
Investment Funds
The investment strategies implemented in the U.S. Large Capitalization Equity
Fund are designed to enhance returns, while controlling risk. Our investment
strategies emphasize stock selection with attention directed to avoiding
unintended concentrations in particular industry and other common characteristic
exposures. Issues are selected from a universe of less than 300 of the largest
capitalization domestic stocks, collectively comprising approximately 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 produced an annualized return of 11.45%,
compared to the 21.53% return of its benchmark, the S&P 500 Equity Index. These
results have been achieved with a risk level or volatility somewhat lower than
that of the benchmark: 19.90% versus 21.14% respectively. For the last six
months, the Fund has underperformed the benchmark, returning 7.78% compared to
the benchmark return of 12.38%.
In 1998 and the first quarter of this year, the U.S. equity market has been
fueled by the desire to not miss out on market momentum. The very largest stocks
and stocks characterized as growth stocks have outperformed the broader market
by historic margins, driving the market to extremes. Based on current prices,
the market is extrapolating super-normal earnings growth for a small group of
"in vogue" stocks far into the future, making the realization of such
projections increasingly unattainable. For the year-to-date period, this
momentum has created a difficult environment for the U.S. Large Capitalization
Equity Fund. We believe that many of the largest, most successful companies (in
terms of recent price appreciation) are currently among the most overvalued.
However, market momentum has continued to carry them higher.
The largest 25 stocks by market capitalization in the S&P 500 were up 6.59% in
the first quarter of the year compared to an increase of 3.79% for the bottom
475 stocks. The largest four stocks alone accounted for 33% of the S&P 500
return for the quarter. Some of the best performing stocks for the quarter were
again found in the computer, electronics, and telecommunications industries.
While many of the companies driving the market are characterized as "good
companies," their future prospects simply cannot support current prices.
Momentum did, in fact, shift away from growth stocks in the second quarter of
1999 to the benefit of value stocks, and our Fund. The Fund outperformed the
benchmark in the second quarter by more than 100 basis points due to this value
shift. Contributing factors included higher global industrial production, the
rebound in many commodity prices (notably oil) and expectations for stronger
corporate profits. This is a significant change from the momentum driving growth
stocks over the past two years. While strong value stock performance this
quarter helped broaden the market, valuation imbalances still remain. Based on
our analysis, growth stocks are likely to underperform the broader market by a
wide margin in the coming months. Such conditions should benefit the Fund which
maintains underweight positions in common characteristics such as size,
momentum and earnings variability and overweights to more traditional value
measures.
24
<PAGE>
U.S. Large Capitalization Equity Fund
- --------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
Total Return
<TABLE>
<CAPTION>
6 months 1 year 4/30/98*
ended ended to
6/30/99 6/30/99 6/30/99
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
UBS Investment Fund -- U.S. Large
Capitalization Equity 7.78% 13.86% 11.45%
- --------------------------------------------------------------------------------
S&P 500 Equity Index 12.38 22.76 21.53
- --------------------------------------------------------------------------------
</TABLE>
*Performance inception date of the UBS Investment Fund -- U.S. Large
Capitalization 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. 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 June 30, 1999. 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
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
UBS Investment Fund
-- U.S. Large S&P 500
Capitalization Equity Equity Index
- --------------------------------------------------------------------------------
<S> <C> <C>
4/30/98 $10,000 $10,000
6/30/98 9,968 10,227
9/30/98 9,133 9,210
12/31/98 10,529 11,171
3/31/99 10,509 11,728
6/30/99 11,349 12,555
- --------------------------------------------------------------------------------
</TABLE>
4/30/98 = $10,000 Data through 6/30/99
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.
================================================================================
25
<PAGE>
U.S. Large Capitalization Equity Fund
- --------------------------------------------------------------------------------
[LOGO]
UBS
Investment Funds
Industry Diversification
As a Percent of Net Assets
As of June 30, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------
<S> <C>
U.S. EQUITIES
Capital Investment
Capital Goods.......................... 13.52%
Technology............................. 15.47
------
28.99
Basic Industries
Chemicals.............................. 1.41
Housing/Paper.......................... 1.79
Metals................................. 3.90
------
7.10
Consumer
Non-Durables........................... 2.17
Retail/Apparel......................... 2.88
Autos/Durables......................... 0.88
Health: Drugs.......................... 1.30
Health: Non-Drugs...................... 4.96
------
12.19
Financial
Banks.................................. 12.24
Non-Banks.............................. 11.76
------
24.00
Utilities
Electric............................... 3.11
Transportation........................... 12.68
Services/Miscellaneous................... 5.95
------
Total U.S. Equities................. 94.02
SHORT-TERM INVESTMENTS................... 5.80
------
TOTAL INVESTMENTS................... 99.82
CASH AND OTHER ASSETS,
LESS LIABILITIES....................... 0.18
------
NET ASSETS...............................100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
Top 10 U.S. Equity Holdings
As of June 30, 1999
<TABLE>
<CAPTION>
Percent of
Net Assets
- ---------------------------------------------------
<S> <C>
1. Xerox Corp. 8.29%
2. FDX Corp. 5.64
3. Burlington Northern Santa Fe Corp. 5.28
4. Raytheon Co., Class B 4.85
5. Electronic Data Systems Corp. 4.77
6. Corning, Inc. 4.67
7. Aetna, Inc. 4.53
8. Lockheed Martin Corp. 4.02
9. CIGNA Corp. 3.67
10. Aon Corp. 3.55
- ---------------------------------------------------
</TABLE>
================================================================================
26
<PAGE>
U.S. Large Capitalization Equity Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
----------- -----------
<S> <C> <C>
U.S. Equities -- 94.02%
Aetna, Inc........................................ 13,400 $ 1,198,462
Aon Corp.......................................... 22,750 938,437
BankBoston Corp................................... 4,800 245,400
Baxter International, Inc......................... 9,800 594,125
Burlington Northern Santa Fe Corp................. 45,000 1,395,000
Chase Manhattan Corp.............................. 7,800 675,675
CIGNA Corp........................................ 10,900 970,100
Compaq Computer Corp.............................. 2,500 59,219
Computer Sciences Corp. (b)....................... 4,400 304,425
Compuware Corp. (b)............................... 8,600 273,588
Corning, Inc...................................... 17,600 1,234,200
Covance, Inc. (b)................................. 6,900 165,169
Delphi Automotive Systems Corp.................... 12,500 232,031
Dominion Resources, Inc........................... 2,000 86,625
Electronic Data Systems Corp...................... 22,300 1,261,344
Eli Lilly and Company............................. 4,800 343,800
Entergy Corp...................................... 23,500 734,375
FDX Corp. (b)..................................... 27,500 1,491,875
First Data Corp................................... 18,000 880,875
First Union Corp.................................. 7,300 343,100
Fleet Financial Group, Inc........................ 11,100 492,562
Household International, Inc...................... 14,600 691,675
Illinois Tool Works, Inc.......................... 2,700 221,400
Kimberly-Clark Corp............................... 8,300 473,100
Lockheed Martin Corp.............................. 28,500 1,061,625
Masco Corp........................................ 28,000 808,500
Mattel, Inc....................................... 12,800 338,400
Newell Rubbermaid, Inc............................ 9,100 423,150
Norfolk Southern Corp............................. 15,400 463,925
Philip Morris Companies, Inc...................... 14,300 574,681
PNC Bank Corp..................................... 7,200 414,900
Praxair, Inc...................................... 7,600 371,925
Raytheon Co., Class B............................. 18,200 1,280,825
U.S. Bancorp...................................... 11,500 391,000
United Healthcare Corp............................ 8,800 551,100
Wells Fargo and Co................................ 15,700 671,175
Xerox Corp........................................ 37,100 2,191,219
-----------
Total U.S. Equities (Cost $22,653,111)............ 24,848,987
-----------
Investment Companies -- 5.80%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund
(Cost $1,533,005)............................... 1,533,005 1,533,005
-----------
Total Investments
(Cost $24,186,116) -- 99.82% (a)................ 26,381,992
Cash and other assets,
less liabilities -- 0.18%....................... 47,712
-----------
Net Assets -- 100%................................ $26,429,704
===========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $24,186,116; and net
unrealized appreciation consisted of:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation.................. $2,715,404
Gross unrealized depreciation.................. (519,528)
----------
Net unrealized appreciation................. $2,195,876
==========
</TABLE>
(b) Non-income producing security
See accompanying notes to financial statements.
================================================================================
27
<PAGE>
U.S. Large Capitalization Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
ASSETS:
Investments, at value:
<S> <C>
Unaffiliated issuers (Cost $22,653,111).......................... $24,848,987
Affiliated issuers (Cost $1,533,005)............................. 1,533,005
Receivables:
Investment securities sold....................................... 68,635
Dividends........................................................ 40,400
Interest......................................................... 5,840
Fund shares sold................................................. 75,369
-----------
TOTAL ASSETS................................................... 26,572,236
-----------
LIABILITIES:
Payables:
Investment securities purchased.................................. 83,692
Fund shares redeemed............................................. 22,374
Investment advisory fees......................................... 7,436
Accrued expenses................................................. 29,030
-----------
TOTAL LIABILITIES.............................................. 142,532
-----------
NET ASSETS......................................................... $26,429,704
===========
NET ASSETS CONSIST OF:
Paid in capital.................................................. $23,882,590
Accumulated undistributed net investment income.................. 81,256
Accumulated net realized gain.................................... 269,982
Net unrealized appreciation...................................... 2,195,876
-----------
NET ASSETS..................................................... $26,429,704
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption
price per share (Based on net assets of
$22,668,003 and 2,036,524 shares issued and outstanding)........ $ 11.13
===========
Brinson Class N:
Net asset value, offering price and redemption price per
share (Based on net assets of $3,755,814 and 337,580 shares
issued and outstanding)......................................... $ 11.13
===========
UBS Investment Funds Class:
Net asset value, offering price and redemption price per
share (Based on net assets of $5,887 and 532 shares issued
and outstanding)................................................. $ 11.07
===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
28
<PAGE>
U.S. Large Capitalization Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends.......................................................... $ 315,848
Interest........................................................... 52,331
----------
TOTAL INCOME.................................................... 368,179
----------
EXPENSES:
Advisory........................................................... 137,200
Professional....................................................... 35,054
Distribution....................................................... 24,699
Other.............................................................. 82,697
----------
TOTAL EXPENSES.................................................. 279,650
Expenses waived by Advisor...................................... (97,158)
----------
NET EXPENSES.................................................... 182,492
----------
NET INVESTMENT INCOME........................................... 185,687
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on:
Investments....................................................... 233,080
Futures contracts................................................. 106,203
----------
Net realized gain............................................... 339,283
----------
Change in net unrealized appreciation or depreciation on:
Investments....................................................... 2,383,598
Futures contracts................................................. (9,036)
----------
Change in net unrealized appreciation or depreciation................ 2,374,562
----------
Net realized and unrealized gain..................................... 2,713,845
----------
Net increase in net assets resulting from operations................. $2,899,532
==========
</TABLE>
See accompanying notes to financial statements.
================================================================================
29
<PAGE>
U.S. Large Capitalization Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year April 6, 1998*
Ended Through
June 30, 1999 June 30, 1998
------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income....................................................... $ 185,687 $ 32,434
Net realized gain (loss).................................................... 339,283 (69,301)
Change in net unrealized appreciation or depreciation....................... 2,374,562 (178,686)
------------ -----------
Net increase (decrease) in net assets resulting from operations............. 2,899,532 (215,553)
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I.......................................................... (87,626) (191)
Brinson Class N.......................................................... (69,880) (20,605)
UBS Investment Funds Class............................................... (12) (1)
------------ -----------
Total distributions to shareholders......................................... (157,518) (20,797)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................................................. 24,853,429 16,922,491
Shares issued on reinvestment of distributions.............................. 147,324 20,775
Shares redeemed............................................................. (17,500,436) (519,553)
------------ -----------
Net increase in net assets resulting from capital share transactions........ 7,500,317 16,423,713
------------ -----------
TOTAL INCREASE IN NET ASSETS.......................................... 10,242,331 16,187,363
------------ -----------
NET ASSETS:
Beginning of period......................................................... 16,187,373 10
------------ -----------
End of period (including accumulated undistributed net investment
income of $81,256 and $11,637, respectively)............................... $ 26,429,704 $16,187,373
============ ===========
</TABLE>
*Commencement of investment operations
See accompanying notes to financial statements.
================================================================================
30
<PAGE>
U.S. Large Capitalization Equity Fund -- Financial Highlights
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
April 6, 1998*
Year Ended Through
UBS Investment Funds Class June 30, 1999 June 30, 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period............................................. $ 9.79 $ 10.00
------- --------
Income from investment operations:
Net investment income.......................................................... 0.04** 0.02
Net realized and unrealized gain (loss)........................................ 1.31 (0.22)
------- --------
Total income (loss) from investment operations............................... 1.35 (0.20)
------- --------
Less distributions:
Distributions from net investment income........................................ (0.07) (0.01)
------- --------
Total distributions.......................................................... (0.07) (0.01)
------- --------
Net asset value, end of period................................................... $ 11.07 $ 9.79
======= ========
Total return (non-annualized).................................................... 13.86% (2.06)%
Ratios/Supplemental data:
Net assets, end of period (in 000s)............................................. $ 6 $ 1
Ratio of expenses to average net assets:
Before expense reimbursement................................................... 1.81% 2.11%***
After expense reimbursement.................................................... 1.32% 1.32%***
Ratio of net investment income to average net assets:
Before expense reimbursement.................................................... 0.05% 0.00%***
After expense reimbursement..................................................... 0.54% 0.79%***
Portfolio turnover rate.......................................................... 88% 12%
</TABLE>
*Commencement of investment operations
**The net investment income per share data was determined using average shares
outstanding throughout the period.
***Annualized
See accompanying notes to financial statements.
===============================================================================
31
<PAGE>
U.S. Large Capitalization Growth Fund
- --------------------------------------------------------------------------------
[LOGO] UBS Investment Funds
The investment strategies implemented in the U.S. Large Capitalization Growth
Fund are designed to enhance returns while controlling risk. We invest in large
companies with market capitalizations of $3 billion and larger that we believe
possess a unique competitive advantage that will allow them to achieve high
returns through above average sales and profit growth. We employ quantitative
and qualitative analysis to identify companies that are undervalued relative to
current market prices, and construct portfolios with attention to both risk and
return.
Since its inception on December 31, 1998, the UBS Investment Fund -- U.S. Large
Capitalization Growth has returned 16.98% compared to 12.38% for its benchmark,
the S&P 500 Equity Index. While large growth stocks have outperformed the
broader market over this period, the Fund's success on a year-to-date basis is
not a result of its large growth style affiliation. The Fund also outperformed
the Russell 1000 Growth Index (an index of the market's largest 1000 growth
companies) by a wide margin. The Russell 1000 Growth Index posted a return of
10.45% for the six months ending June 30, more than 650 basis points lower than
the Fund.
At the inception of the UBS Investment Funds class on December 31, 1998, we had
expectations of improving earnings for cyclical companies in 1999, and we
incorporated the consequences of those expectations for the growth segment of
the market into our investment decision making process. At that time, our
solution was to look for growth companies that were hurt by global economic
woes, and which we expected to perform well in this emerging environment. We
consciously underweighted the major companies in most sectors unless we were
extremely confident of the underlying fundamentals. In the second quarter of
1999 we did in fact experience a shift in favor of cyclicals. The Fund was well-
positioned for that occurrence.
The strongest positive contribution to performance came from issue selection,
while the remainder came from our industry allocation decisions. The strongest
performing stocks for the Fund were Qualcomm (up more than 450%), Texas
Instruments (up nearly 70%), and Sun Microsystems (up approximately 60%). Other
positives for the Fund were holdings in Immunex and Liberty Media, while
positions in Compaq computer and Becton Dickinson caused a slight on
performance. With respect to industry weightings, the largest positive
contributors to performance were overweights in electronics, media and oil
services. On the opposing side, negative contributions came from our underweight
of producer goods and our overweight of the business machines industry.
As we enter the remainder of the year, the Fund is positioned to take advantage
of a continuation in the trends that helped performance in the first half of
1999. The largest overweights relative to the S&P 500 Equity Index are held in
the consumer staples, healthcare and technology sectors. The largest relative
industry underweight is maintained to financials.
32 -----------------------------------------------------------------------------
<PAGE>
U.S. Large Capitalization Growth Fund
- --------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
Total Return
<TABLE>
<CAPTION>
12/31/98*
to
6/30/99
- --------------------------------------------------------------------------------
<S> <C>
UBS Investment Fund -- U.S. Large
Capitalization Growth 16.98%
- --------------------------------------------------------------------------------
S&P 500 Equity Index 12.38
- --------------------------------------------------------------------------------
</TABLE>
*Performance inception date of the UBS Investment Fund -- U.S. Large
Capitalization Growth.
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 Growth and the S&P 500 Equity Index if you had
invested $10,000 on December 31, 1998, and had reinvested all your income
dividends and capital gain distributions through June 30, 1999. 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 Growth
vs. S&P 500 Equity Index
Wealth Value with Dividends Reinvested
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
UBS Investment Fund
-- U.S. Large S&P 500
Capitalization Growth Equity Index
- --------------------------------------------------------------------------------
<S> <C> <C>
12/31/98 $10,000 $10,000
1/31/99 10,617 10,418
2/28/99 10,152 10,094
3/31/99 10,633 10,498
4/30/99 11,030 10,905
5/31/99 10,887 10,648
6/30/99 11,698 11,238
- --------------------------------------------------------------------------------
</TABLE>
12/31/98 = $10,000 Data through 6/30/99
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 Growth Fund
- --------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
Industry Diversification
As a Percent of Net Assets
As of June 30, 1999
------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. EQUITIES
<S> <C>
Energy........................ 3.52%
Basic Industries
Chemicals.................... 1.35
Housing/Paper................ 1.68
------
3.03
Capital Investment
Capital Goods................ 2.04
Technology................... 19.26
------
21.30
Consumer
Non-Durables................. 4.40
Retail/Apparel............... 7.21
Autos/Durables............... 1.23
Health: Drugs................ 9.49
Health: Non-Drugs............ 8.05
------
30.38
Financial
Banks........................ 1.72
Non-Banks.................... 6.45
------
8.17
Utilities
Telephone.................... 13.46
Transportation............... 1.58
Services/Miscellaneous........ 13.74
------
Total U.S. Equities........ 95.18
------
TOTAL INVESTMENTS.......... 95.18
CASH AND OTHER ASSETS,
LESS LIABILITIES............. 4.82
------
NET ASSETS.................... 100.00%
======
</TABLE>
Top 10 U.S. Equity Holdings
As of June 30, 1999
<TABLE>
<CAPTION>
Percent of
Net Assets
- --------------------------------------------------------
<S> <C>
1. International Business Machines Corp. 3.36%
2. General Electric Co. 3.35
3. Texas Instruments, Inc. 3.23
4. Oracle Corp. 2.50
5. Dayton-Hudson Corp. 2.41
6. Waste Management, Inc. 2.39
7. Qualcomm, Inc. 2.31
8. SBC Communications, Inc. 2.22
9. Wal-Mart Stores, Inc. 2.21
10. Sun Microsystems, Inc. 2.13
- --------------------------------------------------------
</TABLE>
34
<PAGE>
U.S. Large Capitalization Growth Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- ----------
<S> <C> <C>
U.S. Equities -- 95.18%
Abbott Laboratories............................. 2,000 $ 91,000
AFLAC, Inc...................................... 3,300 157,987
Albertson's, Inc................................ 2,000 103,125
American Express, Co............................ 1,100 143,137
American International Group, Inc............... 700 81,944
AT&T Corp....................................... 2,950 164,647
AT&T Corp. - Liberty Media Goup, Inc. (b)....... 4,156 152,733
Autozone, Inc................................... 3,300 99,413
Avon Products, Inc.............................. 2,000 111,000
Bank of America Corp............................ 1,900 139,294
Becton Dickinson & Co........................... 2,300 69,000
Bell Atlantic Corp.............................. 1,200 78,450
BMC Software, Inc. (b).......................... 2,100 113,400
Boeing Co....................................... 2,900 128,144
Boston Scientific Corp. (b)..................... 1,800 79,088
Bristol-Myers Squibb Co......................... 2,200 154,962
CBS Corp. (b)................................... 2,600 112,937
Citigroup, Inc.................................. 1,900 90,250
Dayton Hudson Corp.............................. 3,000 195,000
E.I. du Pont de Nemours & Co.................... 1,600 109,300
Electronic Data Systems Corp.................... 2,100 118,781
Exxon Corp...................................... 900 69,413
Federal Home Loan Association Co................ 1,900 110,200
General Electric Co............................. 2,400 271,200
Gillette Co..................................... 1,500 61,500
Halliburton Co.................................. 1,800 81,450
Hewlett-Packard Co.............................. 1,200 120,600
Immunex Corp. (b)............................... 800 101,950
Intel Corp...................................... 1,700 101,150
International Business Machines Corp............ 2,100 271,425
Johnson & Johnson Co............................ 1,300 127,400
Lilly (Eli) & Co................................ 1,500 107,438
Loral Space & Communications Ltd. (b)........... 5,900 106,200
Lowe's Companies, Inc........................... 2,400 136,050
Lucent Technologies, Inc........................ 1,700 114,644
Medtronic, Inc.................................. 2,000 155,750
Merck & Co., Inc................................ 1,800 133,200
Merrill Lynch & Co.............................. 1,200 95,925
Microsoft, Inc. (b)............................. 1,400 126,262
Motorola, Inc................................... 1,000 94,750
Nortel Networks, Inc............................ 1,200 104,175
Oracle Corp. (b)................................ 5,450 202,331
Pepsi Bottling Group, Inc....................... 5,200 119,925
Philip Morris Companies, Inc.................... 3,300 132,619
Proctor & Gamble Co............................. 1,100 98,175
QUALCOMM, Inc. (b).............................. 1,300 186,550
Raytheon Co., Class A........................... 2,400 165,300
SBC Communications, Inc......................... 3,100 179,800
Schering Plough Corp............................ 3,100 164,300
Schlumberger Ltd................................ 2,100 133,744
Sun Microsystems, Inc. (b)...................... 2,500 172,187
Texas Instruments, Inc.......................... 1,800 261,000
Time Warner, Inc................................ 2,300 169,050
Tyco International Co........................... 900 85,275
Wal-Mart Stores, Inc............................ 3,700 178,525
Walt Disney Co.................................. 2,700 83,194
Waste Management, Inc........................... 3,600 193,500
Watson Pharmaceutical Co........................ 400 14,025
Xerox Corp...................................... 2,900 171,281
----------
Total Equities (Cost $6,642,892)................ 7,695,055
----------
Total Investments
(Cost $6,642,892) -- 95.18% (a)............... 7,695,055
----------
Cash and other assets,
less liabilities -- 4.82%..................... 389,844
----------
Net Assets -- 100%.............................. $8,084,899
==========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $6,642,892; and net
unrealized appreciation consisted of:
<TABLE>
<CAPTION>
<S> <C>
Gross unrealized appreciation............ $1,141,787
Gross unrealized depreciation............ (89,624)
----------
Net unrealized appreciation............ $1,052,163
==========
</TABLE>
(b) Non-income producing security
See accompanying notes to financial statements.
================================================================================
35
<PAGE>
U.S. Large Capitalization Growth Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value:
Unaffiliated issuers (Cost $6,642,892)................................................. $7,695,055
Cash..................................................................................... 409,188
Receivables:
Due from Advisor....................................................................... 23,548
Dividends.............................................................................. 5,334
Investment securities sold............................................................. 73,230
Fund shares sold....................................................................... 30,752
Other assets........................................................................... 18,639
----------
TOTAL ASSETS....................................................................... 8,255,746
----------
LIABILITIES:
Payables:
Investment securities purchased........................................................ 126,965
Accrued expenses....................................................................... 43,882
TOTAL LIABILITIES.................................................................. 170,847
----------
NET ASSETS................................................................................. $8,084,899
==========
NET ASSETS CONSIST OF:
Paid in capital.......................................................................... $6,447,525
Accumulated net realized gain............................................................ 585,211
Net unrealized appreciation.............................................................. 1,052,163
----------
NET ASSETS......................................................................... $8,084,899
==========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based on net assets of
$2,947,293 and 211,874 shares issued and outstanding)................................ $ 13.91
==========
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on net assets of
$1,166 and 84 shares issued and outstanding)......................................... $ 13.88
==========
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share (Based on net assets of
$5,136,440 and 370,958 shares issued and outstanding).................................. $ 13.85
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
U.S. Large Capitalization Growth Fund -- Financial Statements
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1999
INVESTMENT INCOME:
Dividends....................................................... $ 20,814
Interest........................................................ 9,130
--------
TOTAL INCOME................................................ 29,944
--------
EXPENSES:
Registration.................................................... 23,053
Advisory........................................................ 18,582
Professional.................................................... 17,394
Distribution.................................................... 8,837
Other........................................................... 4,337
--------
TOTAL EXPENSES.............................................. 72,203
Expenses waived and reimbursed by Advisor................... (42,136)
--------
NET EXPENSES................................................ 30,067
--------
NET INVESTMENT LOSS......................................... (123)
--------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on investments................................ 408,525
Change in net unrealized appreciation or depreciation on
investments.................................................... 463,877
--------
Net realized and unrealized gain................................ 872,402
--------
Net increase in net assets resulting from operations............ $872,279
========
See accompanying notes to financial statements.
- -------------------------------------------------------------------------------
37
<PAGE>
U.S. Large Capitalization Growth Fund -- Financial Statements
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Period Ended Year Ended
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)................................................................... $ (123) $ 20,269
Net realized gain.............................................................................. 408,525 438,421
Change in net unrealized appreciation or depreciation.......................................... 463,877 554,465
---------- ----------
Net increase in net assets resulting from operations........................................... 872,279 1,013,155
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I.............................................................................. - (19,205)
Distributions from net realized gain:
Brinson Class I.............................................................................. - (151,936)
---------- ----------
Total distributions to shareholders............................................................ - (171,141)
---------- ----------
Capital share transactions:
Shares sold.................................................................................... 5,233,678 4,973,380
Shares issued on reinvestment of distributions................................................. - 170,881
Shares redeemed................................................................................ (2,169,846) (5,974,601)
---------- ----------
Net increase (decrease) in net assets resulting from capital share transactions................ 3,063,832 (830,340)
---------- ----------
TOTAL INCREASE IN NET ASSETS................................................................. 3,936,111 11,674
---------- ----------
NET ASSETS:
Beginning of period........................................................................... 4,148,788 4,137,114
---------- ----------
End of period................................................................................. $8,084,899 $4,148,788
========== ==========
See accompanying notes to financial statements.
==================================================================================================================================
</TABLE>
38
<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>
Period Ended
UBS Investment Funds Class June 30, 1999*
- ----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period............................. $11.84
------
Income from investment operations:
Net investment loss......................................... (0.04)
Net realized and unrealized gain............................ 2.05
------
Total income from investment operations.................. 2.01
------
Net asset value, end of period................................... $13.85
======
Total return (non-annualized).................................... 16.98%
Ratios/Supplemental data:
Net assets, end of period (in 000s)............................ $5,136
Ratio of expenses to average net assets:
Before expense reimbursement................................ 3.15%**
After expense reimbursement................................. 1.57%**
Ratio of net investment loss to average net assets:
Before expense reimbursement................................ (2.03)%**
After expense reimbursement................................. (0.45)%**
Portfolio turnover rate........................................ 51%
</TABLE>
* Commencement of UBS Investment Funds Class was December 31, 1998.
** Annualized
See accompanying notes to financial statements.
================================================================================
39
<PAGE>
U.S. Small Capitalization Growth Fund
- --------------------------------------------------------------------------------
[LOGO]UBS
Investment Funds
The investment strategies implemented in the U.S. Small Capitalization Growth
Fund are designed to enhance returns while controlling risk. We invest in
smaller companies with market capitalizations less than $1 billion that we
believe possess a unique competitive advantage that will allow them to achieve
high returns through above average sales and profit growth. We employ
quantitative and qualitative analysis to identify companies that are undervalued
relative to current market prices, and construct portfolios with attention to
both risk and return.
Since its inception on December 31, 1998, the UBS Investment Fund -- U.S. Small
Capitalization Growth has returned 3.86% compared to 9.28% for its benchmark,
the Russell 2000 Index. Small stocks have dramatically underperformed large
stocks over the period since the Fund's inception making the environment
difficult for small capitalization equity managers. The market has been driven
to extremes. Valuation imbalances between large and small stocks reached a
historical peak during this period. Additionally, the market has experienced an
incredible lack of breadth, with a small number of fashionable stocks driving
index returns.
Our positions relative to the benchmark in some broad common characteristics
were the biggest detractors from relative performance for the year-to-date
period. Our underweight of the "variability in market" characteristic had the
worst effect, costing us more than 100 basis points of relative performance.
This was largely due to our underweight of the high-flying internet sector,
which has notoriously high variability in returns. Our overweight to the "labor
intensity" factor was also a negative for the year-to-date period, resulting
from poor performance of some of the stocks we owned in the services sector.
Stock selection was negative for the first half of the year, while our active
industry positions relative to the index added value. These two factors combined
for a negligible effect on overall performance. The Fund was helped by its
overweight to electronics and oil services, but hurt by underweights to producer
goods and telephones.
While the Fund's underperformance over the period is uncomfortable, it has come
during a unique period in the market's history, and should not be indicative of
our future performance. As a result of both a recent broadening of the market,
and steps that we have taken to reposition the Fund, we have experienced a
strong uptick in recent performance. For the month of June, the Fund returned
6.78%, beating the benchmark's return of 4.52% by 226 basis points. We remain
committed to uncovering price/value discrepancies in the small capitalization
segment of the market. We are confident that our sound investment philosophy and
consistent, long-term approach can create value for our clients.
- --------------------------------------------------------------------------------
40
<PAGE>
U.S. Small Capitalization Growth Fund
[LOGO FOR UBS Investment Funds APPEARS HERE]
Total Return
<TABLE>
<CAPTION>
12/31/98*
to 6/30/99
- -------------------------------------------------------------------------------
<S> <C>
UBS Investment Fund -- U.S. Small Capitalization Growth 3.86%
- -------------------------------------------------------------------------------
Russell 2000 Index 9.28
- -------------------------------------------------------------------------------
</TABLE>
* Inception date of the UBS Investment Fund -- U.S. Small Capitalization Growth.
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. Small Capitalization Growth and the Russell 2000 Index if you had
invested $10,000 on December 31, 1998, and had reinvested all your income
dividends and capital gain distributions through June 30, 1999. 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. Small Capitalization Growth vs. Russell 2000 Index
Wealth Value with Dividends Reinvested
[CHART APPEARS HERE]
UBS Investment Fund -- U.S. Small
Capitalization Growth Russell 2000 Index
- -------------------------------------------------------------------------
12/31/98 10,000 10,000
1/31/99 9,989 10,133
2/28/99 9,148 9,312
3/31/99 9,352 9,458
4/30/99 9,318 10,305
5/31/99 9,727 10,456
6/30/99 10,386 10,928
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. Small Capitalization Growth Fund
[LOGO FOR UBS Investment Funds APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of June 30, 1999
<TABLE>
<CAPTION>
- ----------------------------------------------------------
<S> <C>
U.S. EQUITIES
Capital Investment
Capital Goods.................................. 2.76%
Technology..................................... 17.19
------
19.95
Basic Industries
Chemicals...................................... 1.23
Housing/Paper.................................. 0.70
------
1.93
Consumer
Non-Durables................................... 6.29
Retail/Apparel................................. 7.99
Autos/Durables................................. 10.97
Health: Drugs.................................. 1.37
Health: Non-Drugs.............................. 6.65
------
33.27
Financial
Banks.......................................... 7.79
Non-Banks...................................... 8.38
------
16.17
Utilities
Telephone...................................... 1.29
Transportation................................. 5.05
Services/Miscellaneous......................... 13.31
------
Total U.S. Equities......................... 90.97
SHORT-TERM INVESTMENTS........................... 5.95
------
TOTAL INVESTMENTS........................... 96.92
CASH AND OTHER ASSETS,
LESS LIABILITIES.............................. 3.08
------
NET ASSETS....................................... 100.00%
======
</TABLE>
Top 10 U.S. Equity Holdings
As of June 30, 1999
<TABLE>
<CAPTION> Percent of
Net Assets
- ------------------------------------------------------------
<S> <C>
1. Waters Corp. 2.86%
2. Foodmaker, Inc. 2.81
3. U.S. Trust Corp. 2.79
4. U.S. Foodservice, Inc. 2.37
5. Protective Life Corp. 2.24
6. Swift Transportation Co., Inc. 2.06
7. North Fork Bancorporation, Inc. 1.99
8. Expeditors International of Washington, Inc. 1.97
9. Smith International, Inc. 1.87
10. Investors Financial Services Corp. 1.82
</TABLE>
================================================================================
42
<PAGE>
U.S. Small Capitalization Growth Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- -----------
<S> <C> <C>
U.S. Equities -- 90.97%
Aeroflex, Inc. (b)............................... 29,800 $ 588,550
AFC Cable Systems, Inc. (b)...................... 8,400 296,625
Airborne Freight Corp............................ 5,700 157,819
American Italian Pasta Co., Class A (b).......... 13,100 397,912
Ariba, Inc. (b).................................. 2,000 194,500
Ask Jeeves, Inc. (b)............................. 2,500 35,000
Astec Industries, Inc. (b)....................... 12,100 493,075
AVT Corp. (b).................................... 14,900 564,337
Bally Total Fitness Holdings, Inc. (b)........... 14,100 400,087
Bindley Western Industries, Inc. ................ 21,066 485,849
Casey's General Stores, Inc. .................... 30,000 450,000
Comfort Systems USA, Inc. (b).................... 14,000 252,000
Commercial Federal Corp.......................... 11,000 255,063
Consolidated Graphics, Inc. (b).................. 7,100 355,000
Copper Mountain Networks, Inc. (b)............... 2,300 177,675
Cost Plus, Inc. (b).............................. 11,400 518,700
Critical Path, Inc. (b).......................... 600 33,188
CTS Corp. ....................................... 2,000 140,000
Dendrite International, Inc. (b)................. 15,800 570,775
DII Group, Inc. (b).............................. 14,300 533,569
DLJdirect (b).................................... 2,700 79,650
Eclipsys Corp. (b)............................... 6,100 146,019
Elcor Corp. ..................................... 12,600 550,462
Emmis Communications Corp. (b)................... 6,800 335,750
Ethan Allen Interiors, Inc. ..................... 10,450 394,487
eToys Inc. (b)................................... 2,100 85,575
Expeditors International of Washington, Inc...... 25,900 705,775
Finova Group, Inc. .............................. 10,700 563,087
Foodmaker, Inc. (b).............................. 35,500 1,007,312
FPIC Insurance Group, Inc. (b)................... 9,300 451,050
H.B. Fuller Co. ................................. 6,400 437,600
Haverty Furniture Cos., Inc. .................... 5,000 175,938
Hooper Holmes, Inc. ............................. 21,200 431,950
Horace Mann Educators Corp. ..................... 6,100 165,844
Insight Enterprises, Inc. (b).................... 15,500 383,625
Investors Financial Services Corp. .............. 16,300 652,000
Juniper Networks, Inc. (b)....................... 1,400 208,600
Kellstrom Industries, Inc. (b)................... 18,200 332,150
Kenneth Cole Productions, Inc. (b)............... 13,800 384,675
Kronos, Inc. (b)................................. 3,400 154,700
Labor Ready, Inc. (b)............................ 11,000 357,500
Level One Communications, Inc. (b)............... 7,300 357,244
Manitowoc Co., Inc. ............................. 5,500 228,938
MapQuest.com, Inc. (b)........................... 900 14,681
Marimba, Inc. (b)................................ 1,800 94,838
Media Metrix, Inc. (b)........................... 900 47,925
MedQuist, Inc. (b)............................... 11,900 520,625
Mercury Computer Systems, Inc. (b)............... 14,500 467,625
Mercury Interactive Corp. (b).................... 12,700 449,262
Mesaba Holdings, Inc. (b)........................ 16,400 209,100
Metro Information Services, Inc. (b)............. 14,000 232,750
Monaco Coach Corp. (b)........................... 13,400 566,987
MotivePower Industries, Inc. (b)................. 17,850 321,300
North Fork Bancorporation, Inc. ................. 33,500 713,969
Ocular Sciences, Inc. (b)........................ 10,700 185,913
Orthodontic Centers of America, Inc. (b)......... 17,900 252,838
Pacific Sunwear of California, Inc. (b).......... 16,650 405,844
Pantry, Inc. (b)................................. 19,900 320,887
Patterson Dental Co. ............................ 17,900 622,025
Peoples Heritage Financial Group, Inc. .......... 30,400 571,900
Peregrine Systems, Inc. (b)...................... 20,400 524,025
Personnel Group of America, Inc. (b)............. 11,700 117,000
Phone.com, Inc. (b).............................. 1,200 67,200
Prime Group Realty Trust......................... 18,100 311,094
Protective Life Corp. ........................... 24,300 801,900
QRS Corp. (b).................................... 5,500 429,000
ResMed, Inc. (b)................................. 7,700 255,544
Sanmina Corp. (b)................................ 7,800 591,825
Scient Corp. (b)................................. 4,600 218,788
Smith Int'l, Inc. (b)............................ 15,400 668,937
Sonic Automotive, Inc. (b)....................... 18,400 253,000
StarMedia Network, Inc. (b)...................... 1,900 121,838
Sunrise Assisted Living, Inc. (b)................ 13,500 470,812
Swift Transportation Co., Inc. (b)............... 33,600 739,200
Sykes Enterprises, Inc. (b)...................... 15,100 503,962
Tetra Tech, Inc. (b)............................. 15,750 259,875
TheStreet.com, Inc. (b).......................... 1,800 64,800
TMP Worldwide, Inc. (b).......................... 7,800 495,300
Tower Automotive, Inc. (b)....................... 10,900 277,269
U.S. Foodservice (b)............................. 19,900 848,237
U.S. Trust Corp. ................................ 10,800 999,000
United Stationers, Inc. (b)...................... 8,400 184,800
Vignette Corp. (b)............................... 800 60,000
Waters Corp. (b)................................. 19,300 1,025,312
Zebra Technologies Corp., Class A (b)............ 15,200 584,250
Zions Bancorporation............................. 4,000 254,000
-----------
Total U.S. Equities (Cost $28,475,224)........... 32,615,092
-----------
Investment Companies -- 5.95%
Brinson Supplementary Trust U.S.
Cash Management Prime Fund
(Cost $2,134,217).............................. 2,134,217 2,134,217
-----------
Total Investments
(Cost $30,609,441) -- 96.92% (a)............... 34,749,309
Cash and other assets,
less liabilities -- 3.08%...................... 1,102,657
-----------
Net Assets -- 100%............................... $35,851,966
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
43
<PAGE>
U.S. Small Capitalization Growth Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $30,609,441; and net
unrealized appreciation consisted of:
Gross unrealized appreciation.... $5,312,470
Gross unrealized depreciation.... (1,172,602)
----------
Net unrealized appreciation...... $4,139,868
==========
(b) Non-income producing security
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
44
<PAGE>
U.S. Small Capitalization Growth Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $28,475,224)...................... $32,615,092
Affiliated issuers (Cost $2,134,217)......................... 2,134,217
Cash........................................................... 142,822
Receivables:
Investment securities sold................................... 719,015
Dividends.................................................... 9,768
Interest..................................................... 9,943
Fund shares sold............................................. 553,305
Other assets................................................... 18,639
-----------
TOTAL ASSETS........................................... 36,202,801
-----------
LIABILITIES:
Payables:
Investment securities purchased.............................. 257,629
Investment advisory fees..................................... 17,969
Fund shares purchased........................................ 31,580
Accrued expenses............................................. 43,657
-----------
TOTAL LIABILITIES...................................... 350,835
-----------
NET ASSETS....................................................... $35,851,966
===========
NET ASSETS CONSIST OF:
Paid in capital................................................ $35,967,096
Accumulated net realized loss.................................. (4,254,998)
Net unrealized appreciation.................................... 4,139,868
-----------
NET ASSETS............................................. $35,851,966
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price
per share (Based on net assets of $35,211,394 and 3,836,230
shares issued and outstanding).............................. $ 9.18
===========
Brinson Class N:
Net asset value, offering price and redemption price
per share (Based on net assets of $1,044 and 114 shares
issued and outstanding)..................................... $ 9.16
===========
UBS Investment Funds Class:
Net asset value, offering price and redemption price
per share (Based on net assets of $639,528 and 69,990
shares issued and outstanding).............................. $ 9.14
===========
See accompanying notes to financial statements.
================================================================================
45
<PAGE>
U.S. Small Capitalization Growth Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1999
INVESTMENT INCOME:
Dividends...................................................... $ 57,456
Interest....................................................... 47,194
-----------
TOTAL INCOME........................................... 104,650
-----------
EXPENSES:
Advisory....................................................... 148,873
Registration................................................... 22,283
Professional................................................... 15,150
Other.......................................................... 12,307
-----------
TOTAL EXPENSES......................................... 198,613
Expenses waived by Advisor............................. (25,786)
-----------
NET EXPENSES........................................... 172,827
-----------
NET INVESTMENT LOSS.................................... (68,177)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on investments............................... (633,451)
Change in net unrealized appreciation or depreciation
on investments................................................ 1,970,811
-----------
Net realized and unrealized gain............................... 1,337,360
-----------
Net increase in net assets resulting from operations........... $ 1,269,183
===========
See accompanying notes to financial statements.
================================================================================
46
<PAGE>
U.S. Small Capitalization Growth Fund -- Financial Statements
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Period Ended Year Ended
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment loss........................................................ $ (68,177) $ (49,900)
Net realized loss.......................................................... (633,451) (3,615,782)
Change in net unrealized appreciation or depreciation...................... 1,970,811 2,695,815
------------ -----------
Net increase (decrease) in net assets resulting from operations............ 1,269,183 (969,867)
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net realized gain:
Brinson Class I........................................................... -- (10,014)
------------ -----------
Total distributions to shareholders........................................ -- (10,014)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................................................ 23,560,273 18,352,730
Shares issued on reinvestment of distributions............................. -- 9,859
Shares redeemed............................................................ (11,586,801) (6,727,395)
------------ -----------
Net increase in net assets resulting from capital share transactions....... 11,973,472 11,635,194
------------ -----------
TOTAL INCREASE IN NET ASSETS........................................... 13,242,655 10,655,313
------------ -----------
NET ASSETS:
Beginning of period........................................................ 22,609,311 11,953,998
------------ -----------
End of period.............................................................. $ 35,851,966 $22,609,311
============ ===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
47
<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>
Period Ended
UBS Investment Funds Class June 30, 1999*
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period............................. $8.80
-----
Income from investment operations:
Net investment loss.......................................... (0.06)
Net realized and unrealized gain............................. 0.40
-----
Total income from investment operations.................... 0.34
-----
Net asset value, end of period................................... $9.14
=====
Total return (non-annualized).................................... 3.86%
Ratios/Supplemental data:
Net assets, end of period (in 000s)............................ $640
Ratio of expenses to average net assets:
Before expense reimbursement................................. 2.09%**
After expense reimbursement.................................. 1.92%**
Ratio of net investment loss to average net assets:
Before expense reimbursement................................. (1.39%)**
After expense reimbursement.................................. (1.22%)**
Portfolio turnover rate........................................ 71%
*Commencement of UBS Investment Funds Class was December 31, 1998.
**Annualized
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
48
<PAGE>
U.S. Bond Fund
- --------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
In selecting issues for the U.S. Bond Fund, we incorporate our analysis of
interest rate sensitivity, maturity mix and sector valuation, as well as
security specific research compiled by our fixed income and equity research
teams. We invest the Fund's assets in investment grade (high quality)
securities.
Since its inception on August 31, 1995, the UBS Investment Fund -- U.S. Bond has
produced an annualized return of 6.11%, compared to the 6.71% return of its
benchmark, the Salomon Smith Barney Broad Investment Grade (BIG) Bond Index. The
annualized volatility of the Fund was similar to that of the benchmark at 4.04%
and 3.54% respectively. During the first half of 1999, the Fund was down 1.69%
while the benchmark was down similarly by 1.39%.
U.S. bond markets were characterized by a high level of volatility in the first
quarter of 1999. After a fairly stable January, February turned in the worst
one-month performance record for U.S. Treasury securities in 18 years. The
largest changes took place among securities with longer terms to maturity,
while shorter-term treasury bills were relatively stable.
This volatility was spurred somewhat by Federal Reserve (Fed) chairman Alan
Greenspan's testimony to Congress in February. He stated that the Fed expects
stronger growth and higher inflation in the U.S. than was originally called for
in the fall of 1998. Even though these adjustments were modest, they were
sufficient enough to disappoint investors.
During this period of volatility, corporate bonds and other spread sectors
(bonds that have credit risk because they are not backed by the U.S.
Government) performed well, retracing some of the weakness caused by a general
flight-to-quality that rounded out 1998.
We trimmed our corporate bond weighting on the heels of this strong showing, but
maintained a meaningful overweight to corporate bonds and, to a lesser extent,
mortgages throughout the first half of the year.
U.S. bond yields in the second quarter were driven well above our estimates of
fair value by market expectations of higher inflation and anticipation of the 25
basis point rate hike by the Federal Reserve which occurred on June 30. As a
result we have set representative duration strategies longer than the
benchmark--at 1.05 times the benchmark.
From a sector standpoint, we believe that prevailing credit spreads provide more
than adequate compensation for risk--given our assumptions about the economy and
the probabilities we assign to different scenarios for default rates. While
credit fundamentals have modestly deteriorated in recent months, this has
already been accounted for in our sector modeling. As a consequence, exposure to
corporate bonds remains one of the largest active portfolio positions relative
to the index. Overweights are also maintained in the mortgage and asset-backed
sectors.
- --------------------------------------------------------------------------------
49
<PAGE>
U.S. Bond Fund
- -------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
Total Return
<TABLE>
<CAPTION>
6 months 1 year 3 years Annualized
ended ended ended 8/31/95* to
6/30/99 6/30/99 6/30/99 6/30/99
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UBS Investment Fund -- U.S. Bond -1.69% 2.45% 6.73% 6.11%
- --------------------------------------------------------------------------------------------------------------------
Salomon Smith Barney Broad Investment Grade (BIG) Bond Index -1.39 3.12 7.24 6.71
- --------------------------------------------------------------------------------------------------------------------
</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 June 30, 1999. 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
<TABLE>
<CAPTION>
Salomon
UBS Smith Barney
Investment Fund BIG Bond
--U.S. Bond Index
- -------------------------------------------------------
<S> <C> <C>
8/31/95 10,000 10,000
- -------------------------------------------------------
12/31/95 10,529 10,532
- -------------------------------------------------------
6/30/96 10,324 10,400
- -------------------------------------------------------
12/31/96 10,861 10,914
- -------------------------------------------------------
6/30/97 11,141 11,248
- -------------------------------------------------------
12/31/97 11,844 11,964
- -------------------------------------------------------
6/30/98 12,252 12,439
- -------------------------------------------------------
12/31/98 12,767 13,007
- -------------------------------------------------------
6/30/99 12,552 12,827
- -------------------------------------------------------
</TABLE>
8/31/95 = $10,000 Data through 6/30/99
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.
===============================================================================
50
<PAGE>
U.S. Bond Fund
- -------------------------------------------------------------------------------
[LOGO HERE] UBS
Investment Funds
Industry Diversification
As a Percent of Net Assets
As of June 30, 1999
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
U.S. BONDS
Corporate Bonds
Airlines......................................... 0.07%
Asset-Backed..................................... 7.08
Banks............................................ 0.98
CMO.............................................. 4.98
Consumer......................................... 2.40
Energy........................................... 0.27
Financial Services............................... 4.78
Industrial Components............................ 0.45
Services/Miscellaneous........................... 2.43
Utilities........................................ 3.50
--------
Total U.S. Corporate Bonds............... 26.94
International Dollar Bonds............................... 9.14
Mortgage-Backed Securities............................... 8.72
U.S. Government Agencies................................. 32.62
U.S. Government Obligations.............................. 16.46
--------
Total U.S. Bonds......................... 93.88
SHORT-TERM INVESTMENTS................................... 5.61
--------
TOTAL INVESTMENTS........................ 99.49
CASH AND OTHER ASSETS, LESS LIABILITIES.................. 0.51
--------
NET ASSETS............................................... 100.00%
======
</TABLE>
- -------------------------------------------------------------------------------
51
<PAGE>
U.S. Bond Fund -- Schedule of Investments
<TABLE>
<CAPTION>
June 30, 1999
- -------------------------------------------------------------------------------
Face
Amount Value
------------- ------------
<S> <C> <C>
Bonds -- 93.88%
U.S. Corporate Bonds -- 26.94%
ABN Amro Mortgage Corp., 99-2 IA2,
6.300%, due 04/25/29..................... $ 2,100,000 $ 2,040,612
ABN Amro Mortgage Corp., 99-3, Class A2,
6.300%, due 05/25/29..................... 1,000,000 972,050
Cendant Corp., 7.750%, due 12/01/03........ 1,060,000 1,070,622
Centaur Funding Corp., 144A, (b)
0.000%, due 04/21/20..................... 1,355 209,348
9.080%, due 04/21/20..................... 715 767,284
Chase Mortgage Finance Corp., 93-J1,
Class 1A5, 6.625%, due 08/25/09............ 60,423 58,912
Ches Pot Tel MD, 8.000%, due 10/15/29...... 87,000 95,466
Chrysler Financial Corp.,
7.400%, due 08/01/97..................... 100,000 97,942
Continental Airlines, Inc., 98-1B,
6.748%, due 09/15/18..................... 71,387 67,966
Countrywide Funding Corp. FRN,
5.420%, due 12/01/03..................... 250,000 237,500
Farmers Exchange Capital, 144A,
7.050%, due 07/15/28..................... 1,090,000 985,126
First Bank Corporate Card Master Trust, 97-1,
Class A, 6.400%, due 02/15/03............ 980,000 982,852
General Motors Acceptance Corp.,
9.625%, due 12/15/01..................... 294,000 315,322
Heller Financial Commercial Mortgage Assets,
99-PH1 A1, 6.500%, due 05/15/61.......... 1,244,122 1,232,775
Illinois Power Special Purpose Trust, 98-1,
5.650%, due 12/25/10..................... 1,565,000 1,445,590
LB Commercial Conduit Mortgage Trust,
99-C1 A1, 6.410%, due 10/15/30........... 705,000 695,673
Lehman Brothers, Inc., Senior Note
7.250%, due 04/15/03..................... 225,000 225,783
MBNA Global Capital Securities FRN,
5.795%, due 02/01/27..................... 90,000 78,038
Merrill Lynch & Co., Inc.,
6.000%, due 02/17/09..................... 1,000,000 921,990
Mid-America Energy,
6.375%, due 06/15/06..................... 275,000 261,566
Monsanto Co., 144A,
6.600%, due 12/01/28..................... 1,250,000 1,110,850
Morgan Stanley Dean Witter, MTN,
5.625%, due 01/20/04..................... 1,000,000 960,268
News America Holdings,
7.750%, due 12/01/45..................... 358,000 339,350
Norwest Asset Securities Corp., 98-25,
Class A5, 6.000%, due 12/25/28........... 2,400,000 2,306,280
PanAmSat Corp.,
6.000%, due 01/15/03..................... 375,000 367,057
6.375%, due 01/15/08..................... 500,000 472,114
Peco Energy Transition Trust,
6.130%, due 03/01/09..................... 1,135,000 1,076,173
Premier Auto Trust 96-4A, Class A4,
6.400%, due 10/06/01..................... 350,000 351,421
Rite Aid Corp., 144A,
6.125%, due 12/15/08..................... 890,000 806,115
Salomon, Inc., 6.750%, due 02/15/03........ 300,000 300,693
Service Corp., International,
6.000%, due 12/15/05..................... 750,000 689,197
Sprint Capital Corp.,
6.875%, due 11/15/28..................... 1,000,000 910,531
Tele-Communications, Inc,
9.800%, due 02/01/12..................... 950,000 1,160,336
Texas Utilities, 5.940%, due 10/15/11...... 420,000 416,947
Thrift Financial Corp.,
11.250%, due 01/01/16.................... 34,157 35,681
Time Warner Entertainment, Inc.,
Debenture 8.375%, due 03/15/23...........
Pool #298198............................. 94,000 101,723
Time Warner, Inc., 7.570%, due 02/01/24.... 340,000 338,600
U.S.A. Waste Services,
6.500%, due 12/15/02..................... 400,000 396,660
Vendee Mortgage Trust, 92-1, Class 2Z,
7.750%, due 05/15/22..................... 532,364 548,565
Westdeutsche Landesbank NY,
6.050%, due 01/15/09..................... 1,035,000 957,835
-----------
26,408,813
-----------
Mortgage-Backed Securities -- 8.72%
Chemical Mortgage Securities Inc. 93-1
Class A5, 7.450%, due 02/25/23........... 327,646 329,661
Citicorp Mortgage Securities, Inc. 94-9
Class A8, 5.750%, due 06/25/09........... 1,069,783 1,000,065
GE Capital Mortgage Services, Inc., 97-HE4,
Class A7, 6.735%, due 12/25/28........... 410,000 408,930
GreenTree Financial Corp., 94-5, Class A5,
8.300%, due 11/15/19..................... 320,000 335,797
PNC Mortgage Securities Corp., 94-3,
Class A8, 7.500%, due 07/25/24........... 215,000 212,766
Prudential Home Mortgage Securities, 93-43,
Class A9, 6.750%, due 10/25/23........... 275,025 268,757
Prudential Home Mortgage Securities, 94-3,
Class A10, 97-HE4 A76.500%,
due 02/25/24............................. 170,000 164,492
Residential Accredit Loans, Inc., 96-QS4,
Class Al10, 7.900%, due 08/25/26......... 275,000 279,570
Residential Accredit Loans, Inc., 98-QS4,
Class AI5, 7.000%, due 03/25/28.......... 2,850,000 2,842,296
Residential Asset Securitization Trust, 97-A10,
Class A1, 7.250%, due 12/25/27........... 490,952 493,417
Residential Funding Mortgage, Series 95-S6,
Class A7, 7.500%, due 11/25/25........... 955,358 961,730
SASCO LLC., 98-RF1, Class A, 7.900%,
144A, due 10/15/28....................... 517,811 530,109
Structured Asset Securities Corp., 98-RF1,
Class A, 8.712%, due 03/15/27............ 434,456 455,093
Structured Asset Securities Corp., 98-RF2,
8.582%, due 07/15/27..................... 152,810 159,687
</TABLE>
- -------------------------------------------------------------------------------
52
<PAGE>
U.S. Bond Fund -- Schedule of Investments
<TABLE>
<CAPTION>
June 30, 1999
- -------------------------------------------------------------------------------
Face
Amount Value
---------- -----------
<S> <C> <C>
Mortgage-Backed Securities -- (Continued)
UCFC Home Equity Loan 97-C, Class A8,
FRN, 5.069%, due 09/15/27................. $ 106,786 $ 106,529
-----------
8,548,899
-----------
International Dollar Bonds -- 9.14%
Banco Santiago S.A., 7.000%,
due 07/18/07.............................. 380,000 333,217
Banque Paribas, Sub. Notes,
6.875%, due 03/01/09...................... 700,000 675,146
British Sky Broadcasting Group plc,
6.875%, due 02/23/09...................... 820,000 747,771
Credit Suisse-London, 144A,
Resettable Perpetual Preferred,
7.90%, due 05/01/07....................... 500,000 486,783
Empresa Nacional de Electricidad S.A.,
7.875%, due 02/01/27...................... 594,000 502,946
Interamer Development Bank, 6.80%,
due 10/15/25.............................. 100,000 100,188
Korea Development Bank, 7.125%,
due 09/17/01.............................. 500,000 498,573
Pemex Finance Ltd., 2A-B1, 8.450%,
due 02/15/07, 144A........................ 940,000 942,406
Petroliam Nasional Berhad, 144A,
7.625%, due 10/15/26...................... 430,000 344,523
Ras Laffan Liquified Natural Gas Co., Ltd.,
144A, 8.294%, due 03/15/14................ 450,000 415,274
Repsol International Finance,
7.000%, due 08/01/05...................... 200,000 198,779
Republic of South Africa,
9.625%, due 12/15/99...................... 71,000 71,710
Royal Bank of Scotland, Resettable
Perpetual Preferred, 7.375%,
due 04/29/49.............................. 80,000 77,767
Skandinaviska Enskilda Banken, 144A,
6.625%, due 03/29/49...................... 960,000 949,317
Skandinaviska Enskilda Banken, 144A,
Resettable Perpetual Preferred,
6.500%, due 12/29/49...................... 305,000 290,079
Southern Investments UK, 6.800%,
due 12/01/06.............................. 1,345,000 1,296,974
Tyco International Group, S.A.,
5.875%, due 11/01/04...................... 595,000 574,186
7.000%, due 06/15/28...................... 500,000 463,137
-----------
8,968,776
-----------
U.S. Government Agencies -- 32.62%
Aid-Israel, Series 10-Z, 0.000%,
due 02/15/03 (b).......................... 805,000 650,286
Fannie Mae Whole Loan, Series 95-W3,
Class A, 9.000%, due 04/25/25............. 138,477 144,700
Federal Home Loan Mortgage Corp.,
7.000%, due 10/15/13...................... 492,125 486,244
7.238%, due 05/01/26...................... 15,110 15,224
Federal Home Loan Mortgage Corp. Gold,
8.000%, due 11/01/22...................... 99,552 102,604
9.000%, due 03/01/24...................... 76,257 81,179
Federal National Mortgage Association
5.625%, due 03/15/01...................... 5,080,000 5,068,458
6.500%, due 03/01/19...................... 488,377 475,426
6.000%, due 03/01/28...................... 689,567 649,320
6.000%, due 01/01/29...................... 1,624,551 1,528,964
6.000%, due 02/01/29...................... 3,480,663 3,277,511
6.500%, due 06/01/28...................... 750,168 726,093
6.500%, due 09/01/28...................... 241,593 233,840
6.500%, due 11/01/28...................... 1,965,912 1,901,493
6.500%, due 11/01/28...................... 3,407,597 3,298,235
6.500%, due 02/01/29...................... 512,629 495,832
7.000%, due 12/01/24...................... 2,790,375 2,762,223
7.000%, due 03/01/29...................... 47,731 47,275
7.500%, due 12/01/23...................... 523,038 528,969
7.500%, due 01/01/28...................... 285,300 288,975
8.000%, due 08/01/08...................... 637,337 656,714
8.000%, due 12/18/11...................... 100,000 104,443
8.000%, due 05/25/21...................... 2,260,000 2,301,753
8.500%, due 07/01/22...................... 11,754 12,362
8.500%, due 07/15/21...................... 61,292 63,438
9.500%, due 08/01/22...................... 72,528 77,376
Federal National Mortgage Assoc.,
Series 97-72, Class EG, 0.000%,
due 09/25/22.............................. 344,151 306,473
Federal National Mortgage Assoc. Strips,
8.000%, due 08/01/23...................... 333,287 85,297
0.000%, due 02/01/28 (b).................. 239,536 168,071
Federal National Mortgage Assoc. TBA
N12L8, 0.000%............................. 1,090,000 1,025,281
Federal National Mortgage Association,
FNCI, 8.000%, due 02/01/13................ 200,460 206,555
Freddie Mac, 5.750%, due 06/15/01........... 1,000,000 998,241
Government National Mortgage Association
Class L SEQ, 7.000%, due 02/16/24......... 150,000 149,410
Government National Mortgage Association,
7.000%, due 07/15/25...................... 91,342 90,490
7.500%, due 12/15/22...................... 226,748 229,914
7.500%, due 12/15/23...................... 949,000 962,014
7.500%, due 01/15/24...................... 64,928 65,779
7.500%, due 06/15/25...................... 79,422 80,486
8.000%, due 08/15/22...................... 45,546 46,960
9.000%, due 11/15/04...................... 7,671 8,079
9.000%, due 11/15/04...................... 3,126 3,292
9.000%, due 12/15/17...................... 32,630 34,783
10.000%, due 09/15/00..................... 1,306 1,392
10.000%, due 05/15/01..................... 1,527 1,628
Jordan Aid, 8.750%, due 09/01/19............ 1,357,589 1,542,248
-----------
31,985,330
-----------
</TABLE>
- --------------------------------------------------------------------------------
53
<PAGE>
U.S. Bond Fund -- Schedule of Investments
<TABLE>
<CAPTION>
June 30, 1999
- -------------------------------------------------------------------------------
Face
Amount Value
--------- -----------
<S> <C> <C>
U.S. Government Obligations -- 16.46%
U.S. Treasury Bond,
8.000%, due 11/15/21....................... $7,985,000 $ 9,606,953
U.S. Treasury Inflation Indexed Note,
3.625%, due 04/15/28....................... 1,770,000 1,717,227
U.S. Treasury Note,
5.000%, due 04/30/01....................... 3,400,000 3,370,250
5.625%, due 05/15/08....................... 1,470,000 1,439,681
-----------
16,134,111
-----------
Total Bonds (Cost $94,549,344)............... 92,045,929
-----------
Shares
----------
Short-Term Investments -- 5.61%
Investment Companies -- 5.61%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund
(Cost $5,504,377).......................... 5,504,377 5,504,377
-----------
Total Investments
(Cost $100,053,721) -- 99.49% (a).......... 97,550,306
Cash and other assets, less
liabilities -- 0.51%....................... 495,277
-----------
Net Assets -- 100%........................... $98,045,583
===========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $100,053,721; and net
unrealized depreciation consisted of:
Gross unrealized appreciation ............... $ 342,432
Gross unrealized depreciation ............... (2,845,847)
-----------
Net unrealized depreciation ............... $(2,503,415)
===========
FRN: Floating rate note -- The rate disclosed is that in effect at
June 30, 1999.
TBA: Security is subject to delayed delivery.
144A: Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30,
1999, the value of these securities amounted to $7,837,214, or 7.99% 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.
- -------------------------------------------------------------------------------
54
<PAGE>
U.S. Bond Fund -- Financial Statements
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
ASSETS:
<S> <C>
Investments, at value:
Unaffiliated issuers (Cost $94,549,344).............. $ 92,045,929
Affiliated issuers (Cost $5,504,377)................. 5,504,377
Receivables:
Investment securities sold........................... 299
Fund shares sold..................................... 757,363
Interest............................................. 930,662
Other assets........................................... 3,248
-------------
TOTAL ASSETS....................................... 99,241,878
-------------
LIABILITIES:
Payables:
Investment securities purchased...................... 1,022,193
Fund shares redeemed................................. 102,892
Investment advisory fees............................. 39,926
Accrued expenses..................................... 31,284
-------------
TOTAL LIABILITIES.................................. 1,196,295
-------------
NET ASSETS.............................................. $ 98,045,583
=============
NET ASSETS CONSIST OF:
Paid in capital........................................ $ 100,639,632
Accumulated undistributed net investment income........ 961,121
Distributions in excess of net realized gain........... (1,051,755)
Net unrealized depreciation............................ (2,503,415)
-------------
NET ASSETS......................................... $ 98,045,583
=============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and
redemption price per share (Based
on net assets of $92,029,678 and
8,955,888 shares issued and outstanding)........... $ 10.28
=============
Brinson Class N:
Net asset value, offering price and
redemption price per share (Based on
net assets of $1,133 and 110 shares
issued and outstanding)............................ $ 10.30
=============
UBS Investment Funds Class:
Net asset value, offering price and
redemption price per share (Based
on net assets of $6,014,772 and
587,717 shares issued and outstanding)............. $ 10.23
=============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
55
<PAGE>
U.S. Bond Fund -- Financial Statements
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<S> <C>
INVESTMENT INCOME:
Dividends............................................. $ 29,756
Interest.............................................. 5,014,331
----------
TOTAL INCOME..................................... 5,044,087
EXPENSES:
Advisory.............................................. 418,445
Registration.......................................... 36,405
Professional.......................................... 27,870
Distribution.......................................... 25,254
Other................................................. 30,338
----------
TOTAL EXPENSES................................... 538,312
Expenses waived by Advisor....................... (11,372)
----------
NET EXPENSES..................................... 526,940
----------
NET INVESTMENT INCOME............................ 4,517,147
----------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss..................................... (338,906)
Change in net unrealized appreciation or depreciation. (3,036,340)
Net realized and unrealized loss...................... (3,375,246)
Net increase in net assets resulting from operations.. $ 1,141,901
===========
</TABLE>
See accompanying notes to financial statements.
===============================================================================
56
<PAGE>
U.S. Bond Fund -- Financial Statements
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income.............................................................. $ 4,517,147 $ 1,638,048
Net realized gain (loss)........................................................... (338,906) 801,133
Change in net unrealized appreciation or depreciation.............................. (3,036,340) 335,673
------------- -------------
Net increase in net assets resulting from operations............................... 1,141,901 2,774,854
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income........................................... (3,812,376) (1,629,719)
Distributions from net realized gain............................................... (55,782) (361,568)
Distributions in excess of net realized gain....................................... (1,051,755) --
------------- -------------
Total distributions to shareholders*............................................... (4,919,913) (1,991,287)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................................................ 156,386,946 21,794,978
Shares issued in connection with the acquisition of UBS Bond Fund.................. 15,177,263 --
Shares issued on reinvestment of distributions..................................... 4,271,987 1,174,894
Shares redeemed.................................................................... (115,331,025) (6,255,720)
------------- -------------
Net increase in net assets resulting from capital share transactions............... 60,505,171 16,714,152
------------- -------------
TOTAL INCREASE IN NET ASSETS.................................................. 56,727,159 17,497,719
------------- -------------
NET ASSETS:
Beginning of period............................................................. 41,318,424 23,820,705
------------- -------------
End of period (including accumulated undistributed net investment income of
$961,121 and $300,973, respectively).......................................... $98,045,583 $41,318,424
============= =============
*DISTRIBUTIONS BY CLASS:
Distributions from net investment income:
Brinson Class I............................................................... (3,583,162) (1,526,152)
Brinson Class N............................................................... (46) (54)
UBS Investment Funds Class.................................................... (229,168) (103,513)
Distributions from and in excess of 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............................................. (4,919,913) (1,991,287)
------------- -------------
</TABLE>
See accompanying notes to financial statements.
===============================================================================
57
<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>
Year Ended June 30, August 31, 1995*
-------------------------- Through
UBS Investment Funds Class 1999 1998 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......................... 0.52** 0.50 0.46** 0.46
Net realized and unrealized gain (loss)....... (0.26) 0.49 0.32 (0.13)
------ ------ ------ ------
Total income from investment operations... 0.26 0.99 0.78 0.33
------ ------ ------ ------
Less distributions:
Distributions from net investment income...... (0.42) (0.53) (0.48) (0.38)
Distributions in excess of net realized gain.. (0.15) (0.14) -- (0.03)
Total distributions....................... (0.57) (0.67) (0.48) (0.41)
Net asset value, end of period.................... $10.23 $10.54 $10.22 $ 9.92
====== ====== ====== ======
Total return (non-annualized)..................... 2.45% 9.97% 7.91% 3.24%
Ratios/Supplemental data:
Net assets, end of period (in 000s)............. $6,015 $2,444 $1,399 $ 636
Ratio of expenses to average net assets:
Before expense reimbursement.................. 1.08% 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.................. 4.95% 5.14% 4.67% 2.53%***
After expense reimbursement................... 4.96% 5.38% 5.72% 5.56%***
Portfolio turnover rate......................... 260% 198% 410% 363%
</TABLE>
*Commencement of investment operations
**The net investment income per share data was determined by using average
shares outstanding throughout the period.
***Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
58
<PAGE>
High Yield Fund
- --------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
In selecting issues for the High Yield Fund, we incorporate our analysis of
interest rate sensitivity, maturity mix, sector valuation, as well as security
specific research compiled by our fixed income and equity research teams.
Successful high yield fixed income investing involves capturing the market's
high total return potential while minimizing losses due to credit deterioration
or default. We believe that many high yield managers sacrifice safety while
reaching for high current income. In contrast, at the forefront of our
philosophy is a focus on asset coverage and preservation of principal. Our
disciplined process avoids taking large risks solely for the sake of a high
indicated yield.
Our investment process consists of four stages:
. Identify high quality issuers with substantial asset coverage.
. Identify issuers generating free cash flow with a focus on deleveraging their
balance sheet.
. Consider relative value: does expected return from the investment adequately
compensate for risk?
. Diversify holdings by issuer and industry.
Since its inception on December 31, 1998, the UBS Investment Fund -- High Yield
has returned 2.61% compared to 1.76% for its benchmark, the Merrill Lynch High
Yield Master Index.
Rising U.S. Treasury yields, above-trend GDP growth and a more benign global
economic outlook resulted in tighter high yield bond spreads in the first half
of 1999. Prices of high yield bonds increased relative to U.S. treasuries,
bringing forward-looking "risky" bond yields closer to those of "riskless"
government-backed treasury bonds. Spreads over treasuries tightened
significantly from 5.55% at December 31, 1998 to 4.51% at June 30, 1999. Lower
rated high yield bonds have generally outperformed their higher quality
counterparts thus far in 1999, as investors have, to some degree, reversed the
flight-to-quality which occurred during the second half of 1998. We continue to
believe that additional spread tightening is warranted at current levels.
Our valuation model indicates that the high yield bond market is expected to
generate an annualized total return of approximately 10.5% over the course of
the next 3 years. We continue to believe that issue selection remains paramount
in generating solid returns from a high yield portfolio, and our focus remains
on single-B rated companies that we expect will demonstrate improving credit
quality over a 12 to 18 month horizon. Specifically, we have reduced our
underweight in cyclical industries which performed well during the first half of
the year, including paper and energy, and modestly reduced our overweight in
cable television and broadcasting.
- --------------------------------------------------------------------------------
59
<PAGE>
High Yield Fund
- --------------------------------------------------------------------------------
[LOGO] UBS
Investment Funds
Total Return
12/31/98*
to
6/30/99
- --------------------------------------------------------------------------------
UBS Investment Fund -- High Yield 2.61%
- --------------------------------------------------------------------------------
Merrill Lynch High Yield Master Index 1.76
- --------------------------------------------------------------------------------
* Inception date of the UBS Investment Fund -- High Yield.
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 -- High Yield and the Merrill Lynch High Yield Master Index if you had
invested $10,000 on December 31, 1998, and had reinvested all your income
dividends and capital gain distributions through June 30, 1999. 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 -- High Yield
vs. Merrill Lynch High Yield Master Index
Wealth Value with Dividends Reinvested
[Graph appears here]
$10,261 -- UBS Investment Fund -- High Yield
12/31/98 10,000
1/31/99 10,240
2/28/99 10,281
3/31/99 10,391
4/30/99 10,541
5/31/99 10,311
6/30/99 10,261
$10,176 -- Merrill Lynch High Yield Master Index
12/31/98 10,000
1/31/99 10,099
2/28/99 10,022
3/31/99 10,108
4/30/99 10,266
5/31/99 10,195
6/30/99 10,176
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.
- --------------------------------------------------------------------------------
60
<PAGE>
High Yield Fund
- --------------------------------------------------------------------------------
[LOGO]UBS Industry Diversification
Investment Funds
As a Percent of Net Assets
As of June 30, 1999
---------------------------------------------------------
<TABLE>
<CAPTION>
U.S. BONDS
Corporate Bonds
<S> <C>
Auto................................... 2.51%
Business & Public Service.............. 3.29
Chemicals.............................. 3.23
Construction........................... 2.19
Consumer............................... 3.59
Electronics and Electric Components.... 1.10
Energy................................. 0.68
Financial Services..................... 1.13
Food & House Products.................. 5.83
Health................................. 6.39
Industrial............................. 0.41
Multi-Industry......................... 0.59
Radio Broadcasting..................... 3.75
Real Estate............................ 0.76
Recreation............................. 8.53
Retail................................. 4.81
Services/Miscellaneous................. 19.24
Telecommunications..................... 12.22
Television Broadcasting................ 13.21
------
Total U.S. Corporate Bonds........ 93.46
International Dollar Bonds............. 1.69
------
Total U.S. Bonds.................. 95.15
SHORT-TERM INVESTMENTS................. 3.39
------
TOTAL INVESTMENTS................. 98.54
CASH AND OTHER ASSETS,
LESS LIABILITIES..................... 1.46
------
NET ASSETS............................. 100.00%
======
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Top Ten U.S. Bond Holdings
As of June 30, 1999
Percent of
Net Assets
---------------------------------------------------------
<S> <C>
1. Phoenix Color Corp. 1.48%
2. Mediacomm LLC. 1.42
3. Mail Well Corp. 1.32
4. Waterford Gaming LLC. 1.27
5. Outdoor Communications, Inc. 1.27
6. Scotts Co. 1.26
7. Group Maintenance America 1.26
8. Dobson/Sygnet Communications 1.25
9. Eagle Family Foods, Inc. 1.20
10. Cumulus Media, Inc. 1.20
</TABLE>
---------------------------------------------------------
61
<PAGE>
High Yield Fund -- Schedule of Investments
June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
----------- ----------
<S> <C> <C>
U.S. Bonds -- 95.15%
U.S. Corporate Bonds -- 93.46%
Ackerley Group, Inc. Series B,
9.000%, due 01/15/09....................... $675,000 $666,562
Adams Outdoor Advertising,
10.750%, due 03/15/06...................... 550,000 585,750
Allbritton Communications Co., Series B,
8.875%, due 02/01/08....................... 550,000 529,375
Alliance Laundry Systems, 144A,
9.625%, due 05/01/08....................... 425,000 389,938
American Plumbing & Mechanic, Inc., 144A,
11.625%, due 11/15/08...................... 650,000 627,250
Aurora Foods, Inc., Series B,
9.875%, due 02/15/07....................... 700,000 724,500
Avalon Cable Holdings, 144A,
9.375%, due 12/01/08....................... 600,000 609,750
Bally Total Fitness Corp., Series B,
9.875%, due 10/15/07....................... 750,000 727,500
BGF Industries, Inc. 144A,
10.250%, due 01/15/09...................... 300,000 273,000
Big City Radio, Inc., (c)
0.000%, due 03/15/05....................... 1,100,000 781,000
Big Flower Holdings, Inc.,
8.625%, due 12/01/08....................... 800,000 736,000
Bresnan Communications Group, 144A, (d)
0.000%, due 02/01/09....................... 500,000 325,000
Budget Group, Inc.,
9.125%, due 04/01/06....................... 500,000 465,000
Capstar Broadcasting Partners, Inc., (e)
0.000%, due 02/01/09....................... 500,000 422,500
CB Richard Ellis Services, Inc.,
8.875%, due 06/01/06....................... 525,000 506,625
Centennial Cellular, 144A,
10.750%, due 12/15/08...................... 750,000 774,375
Century Communications Corp.,
0.000%, due 01/15/08....................... 425,000 189,125
Century Communications Corp.,
8.375%, due 11/15/17....................... 300,000 276,375
Collins & Alkman Corp.,
11.500%, due 04/15/06...................... 700,000 703,500
CSC Holdings, Inc.,
7.625%, due 07/15/18....................... 600,000 555,750
Cumulus Media, Inc.,
10.375%, due 07/01/08...................... 750,000 795,000
Dan River, Inc., Snr-Sub-Nts,
10.125%, due 12/15/03...................... 500,000 510,000
Diamond Triumph Autoglass, Inc., 144A,
9.250%, due 04/01/08,...................... 700,000 679,000
Digital Television Services, Series B,
12.500%, due 08/01/07...................... 550,000 604,312
Dobson Sygnet Communications, Inc.,
12.250%, due 12/15/08...................... 800,000 832,000
Eagle Family Foods, Series B,
8.750%, due 01/15/08....................... 890,000 796,550
Echostar DBS Corp. 144A,
9.375%, due 02/01/09....................... 250,000 254,375
Exodus Communications, Inc., 144A,
11.250%, due 07/01/08...................... 500,000 525,000
Exodus Communications, Inc.,
11.250%, due 07/01/08...................... 250,000 262,500
Falcon Holding Group, Series B, (f)
0.000%, due 04/15/10....................... 750,000 525,000
Fedders North America,
9.375%, due 08/15/07....................... 500,000 505,000
Federal-Mogul Corp. 144A,
7.500%, due 01/15/09....................... 500,000 460,813
Florida Panthers Corp.,
9.875%, due 04/15/09....................... 750,000 701,250
Fox/Liberty Networks, Step,
0.000%, due 08/15/07....................... 500,000 390,000
Global Imaging Systems, Inc. 144A,
10.750%, due 02/15/07...................... 500,000 490,000
Golden Sky DBS, Inc., 144A, (g)
0.000%, due 03/01/07....................... 375,000 223,125
Golden Sky Systems, Inc., Series B, (h)
12.375%, due 08/01/06...................... 700,000 784,000
Granite Broadcasting Corp.,
10.375%, due 05/15/05...................... 400,000 404,000
Group Maintenance America Corp., 144A,
9.750%, due 01/15/09....................... 850,000 834,062
Harvey Casinos Resorts,
10.625%, due 06/01/06...................... 450,000 468,000
Hollinger International Publishing Corp.,
9.250%, due 02/01/06....................... 750,000 765,937
ICG Holdings, Inc., (i)
0.000%, due 05/01/06....................... 750,000 585,000
Integrated Electrical Services, Inc., 144A,
9.375%, due 02/01/09....................... 750,000 738,750
Interep National Radio Sales, Series B,
10.000%, due 07/01/08...................... 650,000 664,625
Intermedia Communications, Series B, (j)
8.600%, due 06/01/08....................... 250,000 230,000
Intermedia Communications, Inc.,
Series B, 0.000%, due 07/15/07............. 550,000 391,875
Iron Mountain, Inc.,
10.125%, due 10/01/06...................... 200,000 207,000
Iron Mountain, Inc.,
8.750%, due 09/30/09....................... 500,000 485,000
Isle of Capri Casinos, Inc., 144A,
8.750%, due 04/15/09....................... 500,000 468,750
ISP Holdings Inc., Series B,
9.000%, due 10/15/03....................... 415,000 412,925
J.H. Heafner Co., 144A,
10.000%, due 05/15/08...................... 425,000 422,875
J.H. Heafner Co., Inc.,
10.000%, due 05/15/08...................... 100,000 99,500
JCAC, Inc.,
10.125%, due 06/15/06...................... 450,000 487,688
</TABLE>
- -------------------------------------------------------------------------------
62
<PAGE>
High Yield Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
------------ ---------
<S> <C> <C>
Level 3 Communications, Inc., (k)
0.000%, due 12/01/08..................... $1,250,000 $768,750
Liberty Group Operating,
9.375%, due 02/01/08..................... 800,000 752,000
Lifepoint Hospitals Holdings, 144A,
10.750%, due 05/15/09.................... 650,000 661,375
LIN Holdings Corp., Step, (l)
0.000%, due 03/01/08..................... 1,000,000 660,000
Lyondell Chemical Co.,144A,
9.875%, due 05/01/07..................... 750,000 766,875
Mail Well Corp.,
8.750%, due 12/15/08..................... 900,000 873,000
Mediacom LLC., Series B,
8.500%, due 04/15/08..................... 1,000,000 940,000
Mohegan Tribal Gaming Authority,
8.750%, due 01/01/09..................... 600,000 594,000
MTS, Inc.,
9.375%, due 05/01/05..................... 750,000 570,000
NationsRent, Inc.,
10.375%, due 12/15/08.................... 675,000 668,250
NBTY, Inc., Series B,
8.625%, due 09/15/07..................... 550,000 473,000
New World Pasta Co., 144A,
9.250%, due 02/15/09..................... 795,000 773,137
Newpark Resources, Inc., Series B,
8.625%, due 12/15/07..................... 500,000 482,500
Nextel Communications, Inc., (n)
0.000%, due 02/15/08..................... 250,000 171,250
Nextel Communications, Inc.,
Step, 144A, (o) 0.000%, due 09/15/07..... 800,000 582,000
Nortek, Inc, 144A,
8.875%, due 08/01/08..................... 375,000 367,500
Nortex, Inc.,
9.875%, due 03/01/04..................... 450,000 454,500
NTL Communications Corp., Series B,
Step, (p) 0.000%, due 10/01/08........... 900,000 614,250
Outdoor Communications, Inc.,
Snr-Sub-Nts, 9.250%, due 08/15/07........ 800,000 842,000
Packaging Corp. of America, 144A,
9.625%, due 04/01/09..................... 500,000 507,500
Paxson Communications Corp., (b)
0.000%, due 10/31/06..................... 750 684,375
Pegasus Communications Corp., Series B,
9.625%, due 10/15/05..................... 750,000 735,000
Pegasus Communications Corp., Series B,
9.750%, due 12/01/06..................... 150,000 150,000
Supreme International Corp., 144A,
12.250%, due 04/01/06.................... 650,000 656,500
Phoenix Color, Inc.,
10.375%, due 02/01/09.................... 1,000,000 980,000
Pilgrim's Pride Corp., Snr-Sub-Nts,
10.875%, due 08/01/03.................... 200,000 204,000
Premier Parks, Inc., Step, (q)
0.000%, due 04/01/08..................... 1,100,000 731,500
Protection One Alarm, Inc., (r)
13.625%, due 06/30/05.................... 250,000 279,688
PSINet Inc.,
11.500%, due 11/01/08.................... 700,000 738,500
Quest Diagnostic, 144A,
9.875%, due 07/01/09..................... 500,000 506,250
Qwest Communications International, Inc.,
(s) 0.000%, due 10/15/07................. 500,000 390,000
R. H. Donnelly, Inc.,
9.125%, due 06/01/08..................... 750,000 751,875
Range Resources Corp.,
8.750%, due 01/15/07..................... 500,000 450,000
Rayovac Corp., Series B,
10.250%, due 11/01/06.................... 500,000 535,000
RCN Corp., Step, (t)
0.000%, due 10/15/07..................... 450,000 302,625
Revlon Consumer Products,
8.625%, due 02/01/08..................... 650,000 607,750
Scotts Co., 144A,
8.625%, due 01/15/09..................... 850,000 837,250
SFX Entertainment, Inc., Series B,
9.125%, due 02/01/08..................... 800,000 784,000
Simmons Co., 144A,
10.250%, due 03/15/09.................... 700,000 710,500
Sinclair Broadcast Group,
10.000%, due 09/30/05.................... 250,000 255,625
Sinclair Broadcast Group,
8.750%, due 12/15/07..................... 425,000 412,250
Sleepmaster Corp., 144A,
11.000%, due 05/15/09.................... 650,000 661,375
Speedway Motorsports, Inc.,
8.500%, due 08/15/07..................... 600,000 606,000
Speedway Motorsports, Inc., 144A,
8.500%, due 08/15/07..................... 250,000 252,500
T/SF Communications Corp., Series B,
10.375%, due 11/01/07.................... 550,000 550,000
Telecorp PCS Inc., 144A, (u)
0.000%, due 04/15/09..................... 500,000 276,250
TeleWest Communications PLC,144A,
0.000%, due 04/15/09..................... 500,000 333,125
Tenet Healthcare Corp.,
8.625%, due 01/15/07..................... 750,000 738,750
Trans-Resources, Inc., Series B, (v)
0.000%, due 03/15/08..................... 650,000 328,250
TransWestern Publishing Co.,
9.625%, due 11/15/07..................... 625,000 614,844
</TABLE>
- --------------------------------------------------------------------------------
63
<PAGE>
High Yield Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
---------- -----------
<S> <C> <C>
Triton PCS, Inc., (w)
0.000%, due 05/01/08....................... $1,000,000 $ 642,500
Twin Labs, Inc.,
10.250%, due 05/15/06...................... 500,000 525,000
Unisys Corp.,
11.750%, due 10/15/04...................... 450,000 499,500
United Artists Theatre Circuit, Inc.,
Series B, 9.750%, due 04/15/08............. 150,000 106,500
United Artists Theatre Circuit, Inc.,
Series B, Snr-Sub-Nts, 9.375%,
due 10/15/07............................... 125,000 98,750
United Industries Corp., 144A,
9.875%, due 04/01/09....................... 700,000 637,000
United Rentals, Inc., Series B,
9.500%, due 06/01/08....................... 625,000 628,125
United Rentals, Inc., Series B,
9.250%, due 01/15/09....................... 250,000 246,250
Verio Inc.,
13.500%, due 06/15/04...................... 550,000 616,000
Waterford Gaming, 144A,
9.500%, due 03/15/10....................... 850,000 843,625
Wesco Distribution, Inc., Series B,
9.125%, due 06/01/08....................... 250,000 241,875
Young Broadcasting, Inc., Series B,
8.750%, due 06/15/07....................... 475,000 460,750
-----------
62,004,331
-----------
International Dollar Bonds -- 1.69%
Energis plc, Series 144A,
9.750%, due 06/15/09....................... 250,000 253,125
Imax, Corp.,
7.875%, due 12/01/05....................... 500,000 470,625
Microcell Telecommunications, Inc.,
Series B, (m) 0.000%, due 06/01/06......... 490,000 395,675
-----------
1,119,425
-----------
Total U.S. Bonds (Cost $65,268,225).......... 63,123,756
-----------
Shares
------------
Short-Term Investments -- 3.39%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund,
(Cost $2,246,149).......................... 2,246,149 2,246,149
-----------
Total Investments
(Cost $67,514,374) -- 98.54% (a)........... 65,369,905
-----------
Cash and other assets,
less liabilities -- 1.46%.................. 967,242
-----------
Net Assets -- 100%........................... $66,337,147
===========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purpose was $67,514,374;
and net unrealized depreciation consisted of:
Gross unrealized appreciation....... $ 239,974
Gross unrealized depreciation....... (2,384,443)
-----------
Net unrealized depreciation......... $(2,144,469)
===========
(b) Non-income producing security
(c) Interest rate 0.000% until 03/15/01, then 11.125% to maturity
(d) Interest rate 0.000% until 02/01/04, then 9.25% to maturity
(e) Interest rate 0.000% until 02/01/02, then 12.750% to maturity
(f) Interest rate 0.000% until 04/15/03, then 9.285% to maturity
(g) Interest rate 0.000% until 03/01/04, then 13.50% to maturity
(h) Interest rate 12.875% until 03/22/99, then 12.375% to maturity
(i) Interest rate 0.000% until 05/01/01, then 12.50% to maturity
(j) Interest rate 0.000% until 07/15/02, then 11.250% to maturity
(k) Interest rate 0.000% until 12/01/03, then 10.50% to maturity
(l) Interest rate 0.000% until 03/01/03, then 10.00% to maturity
(m) Interest rate 0.000% until 12/01/01, then 14.00% to maturity
(n) Interest rate 0.000% until 10/01/03, then 12.375% to maturity
(o) Interest rate 0.000% until 10/15/02, then 11.125% to maturity
(p) Interest rate 0.000% until 10/01/03, then 12.375% to maturity
(q) Interest rate 0.000% until 04/01/03, then 10.000% to maturity
(r) Interest rate 0.000% until 06/30/98, then 13.625% to maturity
(s) Interest rate 0.000% until 10/15/02, then 9.47% to maturity
(t) Interest rate 0.000% until 10/15/02, then 11.125% to maturity
(u) Interest rate 0.000% until 04/15/01, then 11.625% to maturity
(v) Interest rate 0.000% until 03/15/08, then 12.00% to maturity
(w) Interest rate 0.000% until 05/01/03, then 11.00% 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 June 30,
1999, the value of these securities amounted to $17,139,950 or 25.84% of
net assets.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
64
<PAGE>
High Yield Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value:
Unaffiliated issuers (Cost $65,268,225)..................... $63,123,756
Affiliated issuers (Cost $2,246,149)........................ 2,246,149
Cash.......................................................... 170
Receivables:
Investment securities sold.................................. 77,562
Interest.................................................... 1,328,077
Fund shares sold............................................ 496,649
Other assets.................................................. 18,638
-----------
Total Assets.............................................. 67,291,001
-----------
LIABILITIES:
Payables:
Fund shares redeemed........................................ 5,281
Investment securities purchased............................. 893,623
Investment advisory fees.................................... 8,858
Accrued expenses............................................ 46,092
-----------
TOTAL LIABILITIES......................................... 953,854
-----------
NET ASSETS...................................................... $66,337,147
===========
NET ASSETS CONSIST OF:
Paid in capital............................................... $67,513,756
Accumulated undistributed net investment income............... 611,744
Accumulated net realized gain................................. 356,116
Net unrealized depreciation................................... (2,144,469)
----------
NET ASSETS...................................................... $66,337,147
===========
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share
(Based on net assets of $60,043,677 and 6,029,168 shares
issued and outstanding)...................................... $ 9.96
===========
Brinson Class N:
Net asset value, offering price and redemption price per share
(Based on net assets of $1,025 and 103 shares issued
and outstanding)........................................... $ 9.95
===========
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share
(Based on net assets of $6,292,445 and 632,435 shares
issued and outstanding)..................................... $ 9.95
===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
65
<PAGE>
High Yield Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest........................................................ $2,705,081
----------
TOTAL INCOME................................................. 2,705,081
----------
EXPENSES:
Advisory........................................................ 173,302
Professional.................................................... 27,506
Registration.................................................... 22,303
Distribution.................................................... 15,676
Other........................................................... 15,372
----------
TOTAL EXPENSES............................................... 254,159
Expenses waived by Advisor................................... (36,263)
----------
NET EXPENSES................................................. 217,896
----------
NET INVESTMENT INCOME........................................ 2,487,185
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investments................................ 420,129
Change in net unrealized appreciation or depreciation........... (1,916,114)
----------
Net realized and unrealized loss................................ (1,495,985)
----------
Net increase in net assets resulting from operations............ $ 991,200
==========
</TABLE>
See accompanying notes to financial statements.
================================================================================
66
<PAGE>
High Yield Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period Ended Year Ended
June 30, 1999 December 31, 1998
--------------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment income................................................................... $ 2,487,185 $ 1,385,364
Net realized gain....................................................................... 420,129 261,744
Change in net unrealized appreciation or depreciation................................... (1,916,114) (260,233)
----------- -----------
Net increase in net assets resulting from operations.................................... 991,200 1,386,875
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I....................................................................... (1,845,754) (1,395,944)
Brinson Class N....................................................................... (30) --
UBS Investment Funds Class............................................................ (167,575) --
Distributions from net realized gain:
Brinson Class I....................................................................... -- (196,916)
----------- -----------
Total distributions to shareholders..................................................... (2,013,359) (1,592,860)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................................. 52,695,849 29,258,184
Shares issued on reinvestment of distributions.......................................... 1,797,826 1,381,731
Shares redeemed......................................................................... (22,036,291) (3,393,269)
----------- -----------
Net increase in net assets resulting from capital share transactions.................... 32,457,384 27,246,646
----------- -----------
TOTAL INCREASE IN NET ASSETS...................................................... 31,435,225 27,040,661
----------- -----------
NET ASSETS:
Beginning of period..................................................................... 34,901,922 7,861,261
----------- -----------
End of period (including accumulated undistributed net investment
income of $611,744 and $0, respectively).............................................. $66,337,147 $34,901,922
=========== ===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
67
<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>
Period Ended
UBS Investment Funds Class June 30, 1999*
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period........................... $ 9.98
------
Income from investment operations:
Net investment income...................................... 0.41**
Net realized and unrealized loss........................... (0.15)
------
Total income from investment operations................ 0.26
------
Less distributions:
Distributions from net investment income................... (0.29)
------
Total distributions.................................... (0.29)
------
Net asset value, end of period................................. $ 9.95
------
Total return (non-annualized).................................. 2.61%
Ratios/Supplemental data:
Net assets, end of period (in 000s).......................... $6,292
Ratio of expenses to average net assets:
Before expense reimbursement............................... 1.68%***
After expense reimbursement................................ 1.55%***
Ratio of net investment income to average net assets:
Before expense reimbursement............................... 7.69%***
After expense reimbursement................................ 7.82%***
Portfolio turnover rate...................................... 77%
</TABLE>
* Commencement of UBS Investment Funds Class was December 31, 1998.
** The net investment income per share data was determined by using average
shares outstanding throughout the period.
*** Annualized
See accompanying notes to financial statements.
================================================================================
68
<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. The financial highlights of
the Brinson Class I and the Brinson Class N are presented separately.
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.
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 a tax-
free 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
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 U.S. Bond Fund immediately
before the mergers were $729,679,727 and $80,523,890, respectively.
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. The U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund and High Yield Fund have each changed its fiscal
year-end from December 31 to June 30.
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 respective fund. Debt securities are valued at
the most recent bid price by using market quotations or independent pricing
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.
- --------------------------------------------------------------------------------
69
<PAGE>
The UBS Investment Funds -- Notes To Financial Statements
- --------------------------------------------------------------------------------
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 June 30, 1999,
therefore, no federal income tax provision was required.
E. Distributions to Shareholders: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Differences in dividends per share between the classes
are due to distribution expenses. Amounts equal to 10.26%, 44.82%, 34.64%, and
0.49% of the amount taxable as ordinary income qualify for the dividends
received deduction available to corporate shareholders for the U.S. Balanced
Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, and U.S. Bond
Fund, respectively. At June 30, 1999, the U.S. Small Capitalization Growth Fund
had a capital loss carry forward for Federal income tax purposes of
approximately $4,242,000 available to offset future net capital gains, of which
$1,768,000 expires on December 31, 2006 and $2,474,000 expires on June 30, 2007.
F. Income and Expense Allocations: 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.
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 each Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions for the year ended June 30,
1999, 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 Waived
-------- --------------- --------------- -------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Balanced Fund..................... 0.70% 0.80% 1.05% 1.30% $ 347,297 $79,286
U.S. Equity Fund....................... 0.70 0.80 1.05 1.32 5,047,492 --
U.S. Large Capitalization Equity Fund.. 0.70 0.80 1.05 1.32 137,200 97,158
U.S. Bond Fund......................... 0.50 0.60 0.85 1.07 418,445 11,372
</TABLE>
Investment advisory fees and other transactions for the period ended June 30,
1999, were as follows:
<TABLE>
<CAPTION>
UBS Investment Fee 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% $ 18,582 $ 42,136
U.S. Small Capitalization Growth Fund.. 1.00 1.15 1.40 1.92 148,873 25,786
High Yield Fund........................ 0.60 0.70 0.95 1.55 173,302 36,263
</TABLE>
Certain officers of the Funds are also officers of the Advisor. All officers
serve without direct compensation from the Funds. Trustees' fees paid to
unaffiliated trustees for the year ended June 30, 1999 were $7,665, $6,205,
$3,665 and $4,015 for the U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund and U.S. Bond Fund, respectively. For the six months
ended June 30, 1999, Trustees' fees paid to unaffiliated trustees were $1,955,
$1,877 and $1,949 for the U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund and High Yield Fund, respectively.
================================================================================
70
<PAGE>
THE UBS INVESTMENT FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 charges no management fees. Distributions received from the
Supplementary Trust are reflected as interest income on the statement of
operations. Amounts relating to those investments at June 30, 1999 and for the
period then ended, were as follows:
<TABLE>
<CAPTION>
% of
Sales Interest Net
Fund Purchases Proceeds Income Value Assets
- ---- ------------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C> <C>
U.S. Balanced Fund................................ $ 12,954,575 $ 12,718,496 $ 24,984 $ 236,079 0.60%
U.S. Equity Fund.................................. 149,752,656 112,067,672 496,321 37,684,984 4.77
U.S. Large Capitalization Equity Fund............. 17,583,562 16,050,557 33,979 1,533,005 5.80
U.S. Large Capitalization Growth Fund............. 3,645,460 3,777,151 7,359 -- --
U.S. Small Capitalization Growth Fund............. 26,063,602 24,888,256 47,338 2,134,217 5.95
U.S. Bond Fund.................................... 110,752,960 105,248,583 190,546 5,504,377 5.61
High Yield Fund................................... 49,314,348 48,413,642 84,390 2,246,149 3.39
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1999, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION> Proceeds
Purchases From Sales
-------------- --------------
<S> <C> <C>
U.S. Balanced Fund........................................................................ $ 52,357,150 $ 87,129,265
U.S. Equity Fund.......................................................................... 344,235,845 337,180,719
U.S. Large Capitalization Equity Fund..................................................... 23,604,030 16,716,289
U.S. Bond Fund............................................................................ 252,784,699 204,053,072
</TABLE>
Investment transactions for the period ended June 30, 1999, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION> Proceeds
Purchases From Sales
-------------- --------------
<S> <C> <C>
U.S. Large Capitalization Growth Fund..................................................... $ 5,470,029 $ 2,638,632
U.S. Small Capitalization Growth Fund..................................................... 29,120,655 19,843,223
High Yield Fund........................................................................... 72,095,801 41,178,328
</TABLE>
4. FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date at
a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market or that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities (initial margin). Subsequent payments
(variation margin) are made or received by the Funds, generally on a daily
basis. The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed or expires. The
statement of operations reflects net realized and net unrealized gains and
losses on these contracts.
5. DISTRIBUTION PLANS
The Trust has adopted distribution plans (the "Plans") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, for the Brinson Class N
and the 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.
================================================================================
71
<PAGE>
The UBS Investment Funds -- Notes To Financial Statements
- --------------------------------------------------------------------------------
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 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 June 30, 1999, the Funds had no borrowings under the agreement.
7. CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
U.S. Balanced Fund
---------------------------------------------------------
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------------------ --------------------------
Shares Value Shares Value
--------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.............................................. 1,174,303 $12,704,822 4,720,912 $ 58,173,143
Brinson Class N.............................................. 1,652 15,306 -- --
UBS Investment Funds Class................................... 135,474 1,464,212 49,659 624,713
--------- ----------- --------- ------------
Total Sales........................................ 1,311,429 $14,184,340 4,770,571 $ 58,797,856
========= =========== ========= ============
Dividend Reinvestment:
Brinson Class I.............................................. 1,235,079 $11,512,192 2,662,862 $ 31,359,575
Brinson Class N.............................................. 33 311 11 136
UBS Investment Funds Class................................... 56,474 523,561 14,933 175,706
--------- ----------- --------- ------------
Total Dividend Reinvestment........................ 1,291,586 $12,036,064 2,677,806 $ 31,535,417
========= =========== ========= ============
Redemptions:
Brinson Class I.............................................. 4,977,791 $56,107,946 23,388,425 $293,534,522
Brinson Class N.............................................. 1,641 15,210 -- --
UBS Investment Funds Class................................... 154,266 1,558,776 42,682 540,673
--------- ----------- ---------- ------------
Total Redemptions.................................. 5,133,698 $57,681,932 23,431,107 $294,075,195
========= =========== ========== ============
</TABLE>
================================================================================
72
<PAGE>
The UBS Investment Funds -- Notes To Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Equity Fund
-----------------------------------------------------
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------------------- -------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I*............... 14,157,093 $272,587,287 16,875,765 $314,205,812
Brinson Class N................ 417,980 8,022,220 13,398 269,368
UBS Investment Funds Class..... 1,317,474 26,390,598 1,697,355 31,606,780
---------- ------------ ---------- ------------
Total Sales.................. 15,892,547 $307,000,105 18,586,518 $346,081,960
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I................ 2,164,601 $ 40,726,871 1,861,660 $ 32,092,717
Brinson Class N................ 12,904 239,980 47 896
UBS Investment Funds Class..... 89,839 1,678,518 110,158 1,887,716
---------- ------------ ---------- ------------
Total Dividend Reinvestment.. 2,267,344 $ 42,645,369 1,971,865 $ 33,981,329
========== ============ ========== ============
Redemptions:
Brinson Class I................ 13,543,224 $265,910,621 7,470,182 $144,565,891
Brinson Class N................ 90,831 1,768,705 5 100
UBS Investment Funds Class..... 950,265 18,175,221 1,023,014 19,298,428
---------- ------------ ---------- ------------
Total Redemptions............ 14,584,320 $285,854,547 8,493,201 $163,864,419
========== ============ ========== ============
</TABLE>
*Includes shares issued in connection with the acquisition of the UBS Value
Equity Fund.
<TABLE>
<CAPTION>
U.S. Large Capitalization Equity Fund
-----------------------------------------------------
Year Ended Period Ended
June 30, 1999 June 30, 1998**
------------------------- -------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................ 2,384,176 $ 24,164,112 16,662 $ 163,328
Brinson Class N................ 61,091 684,700 1,688,092 16,758,163
UBS Investment Funds Class..... 427 4,617 104 1,000
---------- ------------ ---------- ------------
Total Sales.................. 2,445,694 $ 24,853,429 1,704,858 $ 16,922,491
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I................ 7,506 $ 77,433 18 $ 168
Brinson Class N................ 7,094 69,880 2,204 20,606
UBS Investment Funds Class..... 1 11 -- 1
---------- ------------ ---------- ------------
Total Dividend Reinvestment.. 14,601 $ 147,324 2,222 $ 20,775
========== ============ ========== ============
Redemptions:
Brinson Class I................ 370,824 $ 3,862,037 1,015 $ 9,875
Brinson Class N................ 1,369,240 13,638,399 51,661 509,678
UBS Investment Funds Class..... -- -- -- --
---------- ------------ ---------- ------------
Total Redemptions............ 1,740,064 $ 17,500,436 52,676 $ 519,553
========== ============ ========== ============
</TABLE>
**The Fund commenced operations on April 6, 1998.
- --------------------------------------------------------------------------------
73
<PAGE>
The UBS Investment Funds -- Notes To Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Large Capitalization Growth Fund
----------------------------------------------------
Year Ended Year Ended
June 30, 1999 December 31, 1998
------------------------ ------------------------
Shares Value Shares Value
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I*........................ 35,111 $ 451,776 349,475 $ 4,971,380
Brinson Class N......................... -- -- 84 1,000
UBS Investment Funds Class.............. 372,727 4,781,902 84 1,000
--------- ----------- --------- -----------
Total Sales......................... 407,838 $ 5,233,678 349,643 $ 4,973,380
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Class I......................... -- -- 15,430 $ 170,881
Brinson Class N......................... -- -- -- --
UBS Investment Funds Class.............. -- -- -- --
--------- ----------- --------- -----------
Total Dividend Reinvestment......... -- $ -- 15,430 $ 170,881
========= =========== ========= ===========
Redemptions:
Brinson Class I......................... 173,449 $ 2,143,629 56,390 $ 5,974,601
Brinson Class N......................... -- -- -- --
UBS Investment Funds Class.............. 1,853 26,217 -- --
--------- ----------- --------- -----------
Total Redemptions................... 175,302 $ 2,169,846 56,390 $ 5,974,601
========= =========== ========= ===========
</TABLE>
*Includes 298,108 shares issued in 10 for 1 share split.
<TABLE>
<CAPTION>
U.S. Small Capitalization Growth Fund
----------------------------------------------------
Year Ended Year Ended
June 30, 1999 December 31, 1998
------------------------ ------------------------
Shares Value Shares Value
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I**...................... 2,641,837 $22,702,120 2,571,818 $18,350,730
Brinson Class N........................ -- -- 114 1,000
UBS Investment Funds Class............. 99,579 858,153 114 1,000
---------- ----------- --------- -----------
Total Sales........................ 2,741,416 $23,560,273 2,572,046 $18,352,730
========== =========== ========= ===========
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........................ 1,375,470 $11,346,801 128,744 $ 6,727,395
Brinson Class N........................ -- -- -- --
UBS Investment Funds Class............. 29,703 240,000 -- --
--------- ----------- --------- -----------
Total Redemptions.................. 1,405,173 $11,586,801 128,744 $ 6,727,395
========= ============ ========= ===========
</TABLE>
**Includes 2,227,053 shares issued in 10 for 1 share split.
================================================================================
74
<PAGE>
The UBS Investment Funds -- Notes To Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Bond Fund
----------------------------------------------------
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------------------- -----------------------
Shares Value Shares Value
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I*..................................................... 15,463,879 $165,316,122 1,926,960 $20,378,131
Brinson Class N...................................................... 2,379 25,964 -- --
UBS Investment Funds Class........................................... 582,475 6,222,123 134,362 1,416,847
---------- ------------ --------- -----------
Total Sales................................................ 16,048,733 $171,564,209 2,061,322 $21,794,978
========== ============ ========= ===========
Dividend Reinvestment:
Brinson Class I...................................................... 386,462 $ 4,042,561 107,565 $ 1,114,591
Brinson Class N...................................................... 6 62 6 68
UBS Investment Funds Class........................................... 22,041 229,364 5,825 60,235
---------- ------------ --------- -----------
Total Dividend Reinvestment................................ 408,509 $ 4,271,987 113,396 $ 1,174,894
========== ============ ========= ===========
Redemptions:
Brinson Class I...................................................... 10,568,875 $112,692,202 549,381 $ 5,780,080
Brinson Class N...................................................... 2,379 25,905 -- --
UBS Investment Funds Class........................................... 248,522 2,612,918 45,413 475,640
---------- ------------ --------- -----------
Total Redemptions.......................................... 10,819,776 $115,331,025 594,794 $ 6,255,720
========== ============ ========= ===========
</TABLE>
*Includes shares issued in connection with the acquisition of the UBS Bond Fund.
<TABLE>
<CAPTION>
High Yield Fund
----------------------------------------------------
Year Ended Year Ended
June 30, 1999 December 31, 1998
----------------------- -------------------------
Shares Value Shares Value
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I**.................................................... 4,509,034 $46,327,741 3,412,082 $29,256,184
Brinson Class N...................................................... -- -- 100 1,000
UBS Investment Funds Class........................................... 620,093 6,368,108 100 1,000
--------- ----------- --------- -----------
Total Sales................................................ 5,129,127 $52,695,849 3,412,282 $29,258,184
========= =========== ========= ===========
Dividend Reinvestment:
Brinson Class I...................................................... 166,520 $ 1,658,538 47,240 $ 1,381,731
Brinson Class N...................................................... 3 30 -- --
UBS Investment Funds Class........................................... 13,996 139,258 -- --
--------- ----------- --------- -----------
Total Dividend Reinvestment................................ 180,519 $ 1,797,826 47,240 $ 1,381,731
========= =========== ========= ===========
Redemptions:
Brinson Class I...................................................... 2,144,630 $22,018,291 39,259 $ 3,393,269
Brinson Class N...................................................... -- -- -- --
UBS Investment Funds Class........................................... 1,754 18,000 -- --
--------- ----------- --------- -----------
Total Redemptions......................................... 2,146,384 $22,036,291 39,259 $ 3,393,269
========= =========== ========= ===========
</TABLE>
**Includes 2,898,051 shares issued in 10 for 1 share split.
================================================================================
75
<PAGE>
Report of Independent Auditors
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds --
U.S. Balanced Fund
U.S. Equity Fund
U.S. Large Capitalization Equity Fund
U.S. Large Capitalization Growth Fund
U.S. Small Capitalization Growth Fund
U.S. Bond 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. 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 as of June 30, 1999, and the related statements of operations and
changes in net assets and the financial highlights for the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The 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 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 June 30, 1999, 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. 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 at June 30, 1999, the results of
their operations, the changes in their net assets and the financial highlights
for the periods indicated therein in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
August 11, 1999
================================================================================
76
<PAGE>
Distributed by:
Funds Distributor, Inc.
60 State Street
Boston, MA 02109
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which includes
details regarding the Funds' objectives, policies, expenses and other
information.
================================================================================
<PAGE>
[LOGO FOR UBS INVESTMENT FUNDS APPEARS HERE]
P.O. Box 2798, Boston, Massachusetts 02208-9915 . (800) 794-7753
<PAGE>
[UBS LOGO APPEARS HERE]
Global Fund
Global Equity Fund
Global Bond Fund
Annual Report
June 30, 1999
<PAGE>
Trustees and Officers
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA
Chairman of the Board
E. Thomas McFarlan
President
Thomas J. Digenan, CFA, CPA
Vice President
Debra L. Nichols
Vice President
Carolyn M. Burke, CPA
Secretary and Treasurer
David E. Floyd, CPA
Assistant Secretary
Mark F. Kemper
Assistant Secretary
================================================================================
1
<PAGE>
The Funds' Advisor -- Brinson Partners, Inc.
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
Since the entrepreneurial founding of our organization nearly twenty years
ago, we have focused our collective energy on two goals: creating meaningful
value-added investment performance; and providing our clients with unrivaled,
custom-tailored service of the highest quality.
Now, in 1999, more than 1,100 employees located in 11 countries around the
world continue to deliver investment strategies that meet our clients' needs.
With an unrelenting focus on our goals, we have grown into one of the world's
premier investment management organizations, with approximately USD 280
billion in assets under management, and industry recognition as a global
thought leader. In North America, we make our services available to
institutions and individual investors through the Brinson Family of Funds. The
Brinson Funds are diversified, institutionally priced mutual funds that
provide investors convenient access to our global investment expertise and
services.
Within a framework of integrated capital markets, we select portfolio
investments by focusing on long-term investment fundamentals. Investment
performance for our clients is maximized within and across asset classes
through a comprehensive understanding of global investment markets and their
interrelationships. We apply a systematic, disciplined approach to valuing
investments and combine the seasoned judgement of our global investment teams
to construct optimal portfolios--balancing considerations for both risk and
return.
Brinson Partners, Inc. is a member of the UBS Brinson Division, the
institutional asset management division of UBS AG.
================================================================================
2
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
<TABLE>
<S> <C>
Shareholder Letter.......................................................................... 4
Global Economic and Market Highlights....................................................... 5
Global Fund................................................................................. 6
Schedule of Investments................................................................. 10
Financial Statements.................................................................... 17
Financial Highlights.................................................................... 21
Global Equity Fund.......................................................................... 22
Schedule of Investments................................................................. 26
Financial Statements.................................................................... 30
Financial Highlights.................................................................... 33
Global Bond Fund............................................................................ 34
Schedule of Investments................................................................. 37
Financial Statements.................................................................... 40
Financial Highlights.................................................................... 43
The Brinson Funds--Notes to Financial Statements............................................ 44
Report of Independent Auditors.............................................................. 49
</TABLE>
================================================================================
3
<PAGE>
Shareholder Letter
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
July 26, 1999
Dear Shareholder:
We are pleased to present the Annual Report for the UBS Investment Funds
covering the year ended June 30, 1999. This report focuses on the 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.
We would also like to take this opportunity to discuss a new theme that we
will call, "The Industrial Evolution." Accelerating globalization of business
enterprise and integration of capital markets is altering the equity
investment environment. In prior decades, equity investing typically focused
on a collection of separate country-defined markets with foreign countries
considered as diversifying alternatives to an investor's domestic equity
market. Within this framework, individuals and advisors typically structured
their equity portfolios into separate domestic and foreign allocations. Today,
investors confront a global equity market in which the country-level
distinction is but one of several important determinants on equity returns.
The home country of a company is declining in relative importance, and the
industry classification is becoming increasingly important. Consequently,
relative comparisons of stock prices within global industries should become a
more prominent feature of active portfolio management. As such, individuals
will likely reconsider the separation of their equity portfolios into domestic
and foreign components.
Today, an allocation to Global Equity is likely to lead to a more efficient
portfolio, maximizing the return/risk relationship, than separate allocation
to domestic and foreign equities. We believe the UBS Investment Funds provide
you with optimal access to the global capital markets and desirable
configurations of global assets.
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. 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 focused upon both risk and return
considerations in the context of full investment cycles.
Our independent team investment approach allows for rapid responses to market
changes, while providing each investor with the benefit of our talent and the
flexibility to deliver portfolios that produce returns appropriate to a
client's risk tolerance. 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, and look forward to a long lasting,
quality relationship.
Sincerely,
/s/ Hanspeter A. Walder /s/ Raymond Simon
Hanspeter A. Walder Raymond Simon
Executive Director Managing Director
Private Banking Private Banking
================================================================================
4
<PAGE>
Global Economic and Market Highlights
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
Thanks to a weaker euro and better prospects for the world economy, growth in
Euroland is picking up steam after having experienced a slowdown in the first
half of 1999. Business confidence is supported by ever stronger commitments of
the European governments to implement structural reforms. This should
eventually create a better environment for the labor market, boost employment
and lift consumers' confidence. Due to divergence of inflation and GDP growth
rates, the ECB is still facing a very heterogeneous situation, ranging from
above average growth and below average inflation (as in France) to below
average growth and above average inflation (as in Italy). No signs of strain
have emerged from this situation so far.
In Japan, first quarter growth (at 7.9% QI/99 over QIV/98 annualized rate)
caught market attention. The positive expectations shared by many market
participants depend heavily on the government's massive injection of public
funds rather than on increased productivity resulting from structural reforms
undertaken in the private sector. Only the latter would allow the Japanese
economy to move toward a sustainable long-term growth path. The Bank of Japan
continues its policy of zero overnight call rates, which it sees as an
alternative for full-fledged money supply targeting.
Growing current account imbalances are emerging. A healthy American economy is
attracting capital from all over the world, but at the same time private
savings are falling in the U.S. (and this is only partly compensated by higher
public savings). The result is a widening current account deficit. With growth
picking up in the rest of the world, capital flows are likely to be rerouted.
This should alleviate the current account problem and weaken the USD.
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 6/30/99 6/30/99 6/30/99 6/30/99
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Equity 11.87% 19.59% 25.84% 25.26%
Global (Ex-U.S.) Equities (currency unhedged) 4.34 7.18 8.90 8.64
Global (Ex-U.S.) Equities (currency hedged) 14.26 9.72 16.34 18.18
U.S. Bonds -1.39 3.12 7.24 6.87
Global (Ex-U.S.) Bonds (currency unhedged) -9.12 4.86 2.62 1.43
Global (Ex-U.S.) Bonds (currency hedged) 1.20 7.06 10.62 10.76
U.S. Cash Equivalents 2.46 5.32 5.57 5.62
- ------------------------------------------------------------------------------------------------
<CAPTION>
6 months 1 year 3 years 7/31/95*
Major Currencies ended ended ended to
Percent Change Relative to U.S. Dollars 6/30/99 6/30/99 6/30/99 6/30/99
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Yen -6.81% 14.66% -3.23% -7.81%
Pound -5.26 -5.53 0.48 -0.38
Euro** -12.18 -4.83 -7.07 -7.79
Canadian Dollar 3.78 -0.64 -2.65 -1.91
- ------------------------------------------------------------------------------------------------
</TABLE>
* Inception date of the UBS Investment Fund -- Global
**Deutschemark prior to 1/1/99
All total returns in excess of 1 year are average annualized returns.
================================================================================
5
<PAGE>
Global Fund
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
The Global Fund provides investors with a single investment vehicle for
comprehensive diversification across global markets and asset classes. It is a
long-term, value-driven investment option designed to maximize total U.S. dollar
return without assuming unnecessary risk. Its benchmark is the Global Securities
Markets Mutual Fund Index.
In selecting securities for the Global Fund, we seek out price/value
discrepancies across capital markets at the asset class, country and currency
levels, and within capital markets through sector, sub-sector and individual
security selection. The Fund is monitored on an ongoing basis, and rebalanced
with both risk and return considerations in mind. Our value estimates and
investment decisions are based on comprehensive analysis of forward-looking
investment fundamentals, drawing on the collective judgment of our global
investment teams.
Since its inception on July 31, 1995, the UBSInvestment Fund -- Global has
produced an annualized return of 10.83%, compared to the 14.35% return of its
benchmark. This performance record was achieved with significantly less risk or
volatility than the benchmark; 7.80% versus 10.03%, respectively. The lower risk
level implies that the Fund has generated a much more constant return stream
over time, protecting its investors from unwanted fluctuations in the Fund's
value. For the year-to-date period, the Fund has returned 2.30% versus the
benchmark return of 5.83%.
The greatest reason for the Fund's underperformance relative to the benchmark is
its underweight of what we consider to be overvalued global equity markets. Our
analysis indicates that the current overvaluation of the U.S. market exceeds
that seen prior to the "crash" in 1987. Other major equity markets throughout
the world are significantly overvalued but not to the same extent as the U.S.
However, these markets would be expected to suffer in the wake of a setback in
the U.S., and as a consequence, equity allocation for the Fund is at its minimum
limit.
Offsetting the Fund's equity underweight is a general overweight to global bond
markets. The largest of these overweights is to the U.S. market (+20%), of which
15.5% is in Treasury Inflation Protected Securities (TIPS). The next largest
overweight in the Fund is to Australian bonds (+9.7%), which we believe are
undervalued at current levels. Emerging market debt offers the best valuation
among all asset classes. The returns from the still very high spreads to
Treasuries outweigh the probabilities of loss due to default risk and the
required risk premium that is related to the high volatility of these
securities. As a result, the Fund holds a 3% overweight position in emerging
market debt.
The Fund's largest currency overweight positions are in the euro, Swedish krona
and Australian dollars. The Australian dollar has benefited from slightly firmer
commodities prices and robust domestic growth, but we estimate that it is still
undervalued against the U.S. dollar. The krona has strengthened this year
against the euro, and has appreciated to a level closer to fundamental value.
Due to pessimism regarding economies and policy-setting within the EMU currency
area, the euro was one of the weakest currencies over the last quarter. However,
a cyclical strengthening seems to be underway, and we maintain our overweight
position.
================================================================================
6
<PAGE>
Global Fund
- -----------
[UBS LOGO APPEARS HERE]
Total Return
- ------------
<TABLE>
<CAPTION>
6 months 1 year 3 years 7/31/95*
ended ended ended to
6/30/99 6/30/99 6/30/99 6/30/99
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UBS Investment Fund -- Global 2.30% 3.92% 9.72% 10.83%
- -----------------------------------------------------------------------------------------------
GSMI Mutual Fund Index** 5.83 11.87 14.52 14.35
- -----------------------------------------------------------------------------------------------
MSCI World Equity (Free) Index 8.57 15.87 18.53 17.58
- -----------------------------------------------------------------------------------------------
Salomon Smith Barney World Gov't. Bond Index -7.17 4.13 4.11 3.17
- -----------------------------------------------------------------------------------------------
</TABLE>
* 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% MSCI Emerging Markets Free 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 UBSInvestment
Fund -- Global, the GSMI Mutual Fund Index, the MSCI World Equity (Free) Index
and the Salomon Smith Barney World Govt. Bond Index if you had invested $10,000
on July 31, 1995, and had reinvested all your income dividends and capital gain
distributions through June 30, 1999. 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 UBS Investment Fund -- Global vs. GSMI Mutual Fund Index,
MSCI World Equity (Free) Index and Salomon Smith Barney World Govt. Bond Index
Wealth Value with Dividends Reinvested
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Date UBS Investment Fund-Global GSMI Mutual Fund Index MCSI World Equity (Free) Saloman World Govt. Bond
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 $10,068 $ 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 $10,558 $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 $11,258 $ 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
2/28/98 $14,230 $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
31-Jan-99 14,647 16,196 17,752 12,059
28-Feb-99 14,274 15,766 17,280 11,672
31-Mar-99 14,498 16,264 17,997 11,701
30-Apr-99 15,083 16,830 18,709 11,697
31-May-99 14,796 16,404 18,020 11,500
6/30/99 14,958 16,906 18,858 11,299
</TABLE>
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
================================================================================
7
<PAGE>
Global Fund
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
Asset Allocation
As of June 30, 1999
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- ----------------------------------------------------------------
<S> <C> <C>
U.S. Equities 40.0% 17.0%
Global (Ex-U.S.) Equities 22.0 15.0
Emerging Markets Equities 3.0 3.0
Dollar Bonds 21.0 41.0
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 June 30, 1999
<CAPTION>
Percent of
Net Assets
- ----------------------------------------------------------------
<S> <C>
1. Xerox Corp. 1.39%
2. FDX Corp. 0.94
3. Burlington Northern Santa Fe Corp. 0.88
4. Raytheon Co., Class B 0.81
5. Electronic Data Systems Corp. 0.80
6. Corning, Inc. 0.78
7. Aetna, Inc. 0.76
8. Lockheed Martin Corp. 0.67
9. CIGNA Corp. 0.62
10. General Instrument Corp. 0.61
- ----------------------------------------------------------------
Currency Allocation
As of June 30, 1999
<CAPTION>
Current
Benchmark Strategy
- ---------------------------------------------------------------------------
<S> <C> <C>
U.S. 66.0% 62.5%
Japan 7.8 0.0
U.K. 5.5 0.0
Euro 12.4 19.7
Other Europe 2.6 6.6
Canada 1.3 1.3
Emerging Markets 3.0 3.0
Other 1.4 6.9
- ---------------------------------------------------------------------------
100.0% 100.0%
Top Ten Global (Ex-U.S.) Equity Holdings
As of June 30, 1999
<CAPTION>
Percent of
Net Assets
- ----------------------------------------------------------------------------------------
<S> <C>
1. BP Amoco PLC 0.25%
2. Veba AG 0.24
3. ING Groep NV 0.22
4. Lloyds TSB Group PLC 0.20
5. Nippon Telegraph & Telephone Corp. 0.19
6. Nestle S.A. (Reg.) 0.19
7. General Electric Co. PLC 0.18
8. Glaxo Wellcome PLC 0.18
9. Marks & Spencer PLC 0.18
10. Siemens AG 0.17
- ----------------------------------------------------------------------------------------
</TABLE>
================================================================================
8
<PAGE>
Global Fund
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
Industry Diversification
<TABLE>
<CAPTION>
As a Percent of Net Assets
As of June 30, 1999
- --------------------------------------------------------------------------------
<S> <C>
U.S. Equities
Energy..................................... 0.17%
Capital Investment.........................
Capital Goods............................. 2.41
Technology 3.50
-----
5.91
Basic Industries
Chemicals................................. 1.01
Housing/Paper............................. 1.93
Metals.................................... 0.75
-----
3.69
Consumer
Non-Durables.............................. 0.74
Retail/Apparel............................ 1.37
Autos/Durables............................ 0.95
Health: Drugs............................. 1.09
Health: Non-Drugs......................... 1.26
------
5.41
Financial
Banks..................................... 2.37
Non-Banks................................. 2.27
------
4.64
Utilities
Electric.................................. 0.99
Telephone................................. 0.40
------
1.39
Transportation............................. 2.15
Services/Misc.............................. 1.48
Post Venture............................... 1.55
------
Total U.S. Equities................... 26.39*
GLOBAL (EX-U.S.) EQUITIES
Aerospace & Military....................... 0.16
Airlines................................... 0.12
Appliances & Household..................... 0.20
Autos/Durables............................. 0.37
Banking.................................... 1.57
Beverages & Tobacco........................ 0.44
Broadcasting & Publishing.................. 0.67
Building Materials......................... 0.14
Business & Public Service.................. 0.63
Chemicals.................................. 0.61
Construction............................... 0.10
Data Processing............................ 0.21
Electric Components........................ 0.18
Electronics................................ 0.84
Energy..................................... 0.81
Financial Services......................... 0.36
Food & House Products...................... 0.57
Forest Products............................ 0.17
Health: Drugs.............................. 0.93
Industrial Components...................... 0.35
Insurance.................................. 0.76%
Leisure & Tourism.......................... 0.05
Machinery & Engineering.................... 0.12
Merchandising.............................. 0.69
Metals--Steel.............................. 0.06
Multi-Industry............................. 0.23
Non-Ferrous Metals......................... 0.40
Real Estate................................ 0.12
Recreation................................. 0.14
Telecommunications......................... 1.30
Textiles & Apparel......................... 0.03
Transportation............................. 0.23
Utilities.................................. 0.75
Wholesale & International Trade............ 0.08
------
Total Global (Ex-U.S.) Equities....... 14.39
Emerging Markets Equities.................. 3.56
------
Total Equities............................. 44.34
U.S. Bonds
Corporate Bonds
Aerospace & Military...................... 0.61
Airlines.................................. 0.03
Asset-Backed.............................. 0.72
Banks..................................... 0.03
CMO....................................... 0.10
Consumer.................................. 0.44
Energy.................................... 0.32
Financial Services........................ 0.44
Food and Housing Products................. 0.41
Services and Miscellaneous................ 0.96
Telecommunications........................ 0.48
Transportation............................ 0.31
------
4.85
International Dollar Bonds................. 1.96
Mortgage-Backed Securities................. 1.86
U.S. Government Agencies................... 5.08
U.S. Government Obligations................ 15.43
------
Total U.S. Bonds...................... 29.18*
High Yield Bonds........................... 2.89
Global (Ex-U.S.) Bonds
Foreign Financial Bonds.................... 1.62
Foreign Government Bonds................... 13.57
------
Total Global (Ex-U.S.) Bonds.......... 15.19
Emerging Markets Debt 5.02
Short-Term Investments..................... 25.10*
------
Total Investments...................... 121.72
Liabilities, Less Cash and
Other Assets.............................. (21.72)
------
Net Assets............................ 100.00%
======
</TABLE>
- --------------------------------------------------------------------------------
* The Fund held a long position in U.S. Treasury futures on June 30, 1999 which
increased U.S. Bond exposure from 29.18% to 39.37%.
* The Fund held a short position in stock index futures on June 30, 1999 which
reduced U.S. Equity exposure from 26.
================================================================================
9
<PAGE>
Global Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------- ------------
<S> <C> <C>
Equities -- 44.34%
U.S. Equities -- 26.39%
Advanced Micro Devices, Inc. (b)............ 62,700 $ 1,132,519
Aetna, Inc.................................. 41,700 3,729,544
Allergan, Inc............................... 13,300 1,476,300
Alza Corp. (b).............................. 55,100 2,803,212
American Standard Companies, Inc. (b)....... 28,900 1,387,200
Aon Corp.................................... 70,947 2,926,564
Armstrong World Industries, Inc............. 7,700 445,156
BankBoston Corp............................. 15,300 782,213
Baxter International, Inc................... 30,700 1,861,187
Brinson Post-Venture Fund (b)............... 397,192 7,660,445
Burlington Northern Santa Fe Corp........... 140,400 4,352,400
Champion Enterprises, Inc. (b).............. 24,700 460,038
Champion International Corp................. 8,700 416,513
Chase Manhattan Corp........................ 24,300 2,104,987
CIGNA Corp.................................. 34,100 3,034,900
Circuit City Stores-Circuit City Group...... 25,800 2,399,400
CMS Energy Corp............................. 25,900 1,084,562
CommScope, Inc. (b)......................... 22,133 680,590
Compaq Computer Corp........................ 7,800 184,763
Computer Sciences Corp. (b)................. 14,600 1,010,137
Compuware Corp. (b)......................... 29,000 922,563
Comverse Technology, Inc. (b)............... 8,540 644,770
Consolidated Stores Corp. (b)............... 34,900 942,300
Corning, Inc................................ 55,000 3,856,875
Covance, Inc. (b)........................... 22,072 528,349
Delphi Automotive Systems Corp.............. 50,600 939,262
Dial Corp................................... 14,500 539,219
Dominion Resources Inc...................... 7,000 303,188
Eastman Chemical Co......................... 15,500 802,125
Electronic Data Systems Corp................ 69,700 3,942,406
Eli Lilly and Co............................ 15,200 1,088,700
Entergy Corp................................ 73,500 2,296,875
FDX Corp. (b)............................... 85,700 4,649,225
Federal-Mogul Corp.......................... 14,100 733,200
First American Corp. of Tennessee........... 7,300 303,406
First Data Corp............................. 56,230 2,751,756
First Security Corp......................... 13,875 378,094
First Union Corp............................ 23,300 1,095,100
Fleet Financial Group, Inc.................. 35,200 1,562,000
Fleetwood Enterprises, Inc.................. 16,300 430,931
Food Lion Inc., Class A..................... 82,700 982,062
Fort James Corp............................. 48,600 1,840,725
GATX Corp................................... 4,000 152,250
General Instrument Corp. (b)................ 71,200 3,026,000
Genzyme Corp. (b)........................... 11,300 548,050
Genzyme Surgical Products Division (b)...... 2,023 8,913
Geon Co..................................... 4,500 145,125
GreenPoint Financial Corp................... 45,400 1,489,687
Hibernia Corp............................... 34,800 545,925
Household International, Inc................ 45,400 2,150,825
Illinois Tool Works, Inc.................... 8,300 680,600
IMC Global Inc.............................. 50,800 895,350
Johnson Controls, Inc....................... 13,300 921,856
Kimberly-Clark Corp......................... 28,200 1,607,400
Lafarge Corp................................ 15,200 538,650
Lear Corp. (b).............................. 33,600 1,671,600
Lockheed Martin Corp........................ 89,046 3,316,963
Lyondell Chemical Company................... 40,400 833,250
Martin Marietta Materials, Inc.............. 8,184 $ 482,856
Masco Corp.................................. 87,600 2,529,450
Mattel, Inc................................. 40,700 1,076,006
MCN Energy Group, Inc....................... 10,700 222,025
Nabisco Holdings Corp....................... 3,100 134,075
National Service Industries, Inc............ 13,800 496,800
New York Times Co........................... 16,200 596,363
Newell Rubbermaid, Inc...................... 28,800 1,339,200
Nextel Communications, Inc.................. 39,200 1,967,350
Norfolk Southern Corp....................... 48,100 1,449,012
Peco Energy Co.............................. 28,100 1,176,687
Pentair, Inc................................ 14,896 681,492
Philip Morris Companies, Inc................ 44,500 1,788,344
PNC Bank Corp............................... 22,800 1,313,850
Praxair, Inc................................ 24,100 1,179,394
Raytheon Co., Class B....................... 56,800 3,997,300
Regions Financial Corp...................... 7,200 276,750
Southdown, Inc.............................. 16,136 1,036,738
St. Jude Medical, Inc. (b).................. 39,600 1,410,750
Tyson Foods, Inc............................ 52,198 1,174,455
U.S. Bancorp................................ 35,980 1,223,320
Ultramar Diamond Shamrock Corp.............. 28,902 630,425
United Healthcare Corp...................... 28,100 1,759,762
USG Corp.................................... 12,600 705,600
Vencor, Inc. (b)............................ 28,100 4,215
Ventas, Inc................................. 19,200 103,200
Viad Corp................................... 27,600 853,875
W.W. Grainger, Inc.......................... 7,500 403,594
Wells Fargo and Co.......................... 49,000 2,094,750
Westvaco Corp............................... 11,400 330,600
Xerox Corp.................................. 115,900 6,845,344
York International Corp..................... 17,500 749,219
-----------
Total U.S. Equities......................... 130,031,006
-----------
Global (Ex-U.S.) Equities -- 14.39%
Australia -- 1.17%
Amcor Ltd................................... 16,420 91,273
Amp Limited................................. 23,100 252,528
Brambles Industries Ltd..................... 9,570 252,109
Broken Hill Proprietary Co., Ltd............ 49,610 574,646
CSR Ltd..................................... 62,270 178,056
David Jones Ltd............................. 73,830 72,325
Lend Lease Corp., Ltd....................... 16,432 225,608
National Australia Bank Ltd................. 49,427 817,894
News Corp. Ltd.............................. 74,389 634,680
News Corp. Ltd., Preferred.................. 20,436 155,691
Orica Ltd................................... 10,350 56,525
Pacific Dunlop Ltd.......................... 10,610 15,310
Qantas Airways Ltd.......................... 95,837 316,539
QBE Insurance Group Ltd..................... 37,683 143,419
Rio Tinto Ltd............................... 16,945 277,840
Santos Ltd.................................. 39,790 130,368
Telstra Corp., Ltd.......................... 131,300 752,359
Westpac Banking Corp., Ltd.................. 82,028 532,085
WMC Ltd..................................... 39,840 171,142
Woolworth's Ltd............................. 40,060 133,242
---------
5,783,639
---------
Austria -- 0.02%
Austria Tabakwerke AG....................... 1,800 104,883
---------
</TABLE>
================================================================================
10
<PAGE>
Global Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ ------------
<S>......................................... <C> <C>
Belgium -- 0.17%
Fortis (B).................................. 20,367 $ 639,587
KBC Bancassurance Holding................... 3,490 206,956
------------
846,543
------------
Canada -- 0.35%
Agrium, Inc................................. 9,940 86,633
Alcan Aluminum Ltd.......................... 3,720 117,499
Bank of Montreal............................ 2,320 83,859
Canadian National Railway Co................ 2,260 151,013
Canadian Pacific Ltd........................ 6,873 162,526
Hudson's Bay Co............................. 7,210 80,376
Imasco, Ltd................................. 3,690 98,975
Imperial Oil Ltd............................ 5,710 108,020
Magna International, Inc., Class A.......... 1,360 76,587
Newbridge Networks Corp. (b)................ 4,060 115,208
Nova Chemicals Corp. NPV.................... 4,204 97,992
Potash Corporation of Saskatchewan, Inc..... 960 49,391
Royal Bank of Canada........................ 3,170 139,214
Seagram Co., Ltd............................ 1,250 61,947
Shaw Communications, Inc., Class B.......... 4,580 180,403
TransCanada Pipelines Ltd................... 5,490 76,966
Westcoast Energy, Inc....................... 2,050 40,028
------------
1,726,637
------------
Denmark -- 0.05%
Tele Danmark A/S............................ 4,920 242,169
------------
Finland -- 0.26%
Merita PLC, Class A......................... 47,730 271,224
Nokia Oyj................................... 7,160 627,649
UPM-Kymmene Corp............................ 13,670 391,921
------------
1,290,794
------------
France -- 1.24%
Aerospatiale Matra.......................... 9,160 211,134
Air Liquide................................. 2,205 346,787
Banque Nationale de Paris................... 3,899 324,900
Carrefour S.A............................... 1,920 282,164
Cie de Saint Gobain......................... 1,597 254,459
Elf Aquitaine S.A........................... 3,734 547,979
France Telecom S.A.......................... 6,070 458,544
Groupe Air France (b)....................... 13,060 233,010
Groupe Danone............................... 1,620 417,676
Michelin, Class B........................... 4,239 173,425
Rhone-Poulenc, Class A...................... 6,094 278,477
SEITA....................................... 11,830 683,216
Societe Generale............................ 1,705 300,505
Suez Lyonnaise des Eaux S.A................. 2,261 407,826
Thomson CSF................................. 14,210 493,866
Total Fina S.A., Class B.................... 3,016 389,111
Vivendi..................................... 4,040 327,275
------------
6,130,354
------------
Germany -- 1.43%
Allianz AG.................................. 2,030 567,349
Bayer AG.................................... 19,880 827,266
Continental AG.............................. 12,200 291,899
DaimlerChrysler AG.......................... 6,456 563,939
Deutsche Bank AG............................ 11,740 $ 715,551
Deutsche Telekom AG......................... 13,260 557,258
Deutsche Telekom AG, Rights (b)............. 13,260 2,598
Dresdner Bank AG............................ 11,670 453,730
Mannesmann AG............................... 4,530 677,409
SAP AG...................................... 570 195,457
Siemens AG.................................. 10,750 829,268
Veba AG..................................... 20,089 1,185,057
Volkswagen AG............................... 2,970 191,650
------------
7,058,431
------------
Italy -- 0.37%
Assicurazioni Generali...................... 12,800 443,542
ENI Spa..................................... 83,000 495,612
ENI Spa ADR................................. 3,070 184,200
La Rinascente Spa........................... 29,740 225,124
Montedison Spa.............................. 119,964 195,476
San Paolo-imi Spa........................... 19,511 265,606
------------
1,809,560
------------
Japan -- 3.31%
Acom Co., Ltd............................... 3,800 328,073
Amada Co., Ltd.............................. 19,000 134,212
Bank of Tokyo-Mitsubushi, Ltd............... 31,000 441,284
Bridgestone Corp............................ 10,000 302,379
Canon, Inc.................................. 15,000 431,262
Citizen Watch Co., Ltd...................... 18,000 156,147
Dai Nippon Printing Co., Ltd................ 17,000 271,770
Daiichi Pharmaceutical Co., Ltd............. 15,000 232,733
Daikin Industries Ltd....................... 38,000 441,094
Daiwa House Industry Co., Ltd............... 9,000 94,655
East Japan Railway Co....................... 53 284,617
Fanuc....................................... 7,400 397,389
Fuji Photo Film............................. 5,000 189,194
Fujitsu..................................... 31,000 623,637
Honda Motor Co.............................. 13,000 550,975
Hoya Corp................................... 4,000 225,710
Ito Yokado Co., Ltd......................... 9,000 602,280
Kaneka Corp................................. 19,000 178,949
Kao Corp.................................... 12,000 337,079
Kirin Brewery Co., Ltd...................... 20,000 239,590
Kokuyo...................................... 6,000 96,662
Kuraray Co., Ltd............................ 22,000 264,640
Marui Co., Ltd.............................. 10,000 165,235
Matsushita Electric Industrial Co........... 22,000 427,132
Mitsubishi Estate Co., Ltd.................. 35,000 341,499
Mitsubishi Corp............................. 60,000 406,477
NGK Insulators.............................. 30,000 313,285
Nintendo Corp., Ltd......................... 2,200 309,171
Nippon Denso Co., Ltd....................... 16,000 325,182
Nippon Meat Packers, Inc.................... 14,000 182,749
Nippon Steel Co............................. 127,000 294,836
Nippon Telegraph & Telephone Corp........... 80 931,923
Nomura Securities Co., Ltd.................. 32,000 374,620
Obayashi Corp............................... 32,000 161,005
Osaka Gas Co................................ 90,000 305,601
Sankyo Co., Ltd............................. 13,000 327,578
Sanwa Bank Ltd.............................. 21,000 206,634
Secom Co., Ltd.............................. 4,000 416,391
Sega Enterprises Ltd........................ 2,400 31,745
</TABLE>
================================================================================
11
<PAGE>
Global Fund -- Schedule Of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----------
<S> <C> <C>
Sekisui House Ltd........................ 20,000 $ 215,796
Shin-Etsu Chemical Co., Ltd.............. 4,000 133,840
Sony Corp................................ 4,200 452,826
Sumitomo Bank............................ 23,000 285,220
Sumitomo Chemical Co..................... 51,000 233,848
Sumitomo Electric Industries............. 20,000 227,363
Takeda Chemical Industries............... 11,000 509,831
TDK Corp................................. 3,000 274,372
Tokio Marine & Fire...................... 18,000 195,555
Tokyo Electric Power..................... 19,000 401,066
Toshiba Corp............................. 45,000 320,844
Toyota Motor Corp........................ 17,000 537,921
Yamato Transport Co., Ltd................ 11,000 191,755
-----------
16,325,631
-----------
Netherlands -- 0.67%
Elsevier NV.............................. 41,570 482,300
Heineken NV.............................. 3,152 161,395
ING Groep NV............................. 19,727 1,068,084
Koninklijke KPN NV....................... 11,276 529,117
Royal Dutch Petroleum Co................. 11,090 649,628
Unilever NV.............................. 5,723 385,704
-----------
3,276,228
-----------
New Zealand -- 0.25%
Auckland International Airport Ltd....... 62,150 95,507
Carter Holt Harvey Ltd................... 70,640 84,597
Fletcher Challenge Paper................. 138,030 103,130
Lion Nathan Ltd.......................... 53,920 129,146
Telecom Corp. of New Zealand Ltd......... 189,010 811,266
-----------
1,223,646
-----------
Norway -- 0.06%
Norsk Hydro ASA.......................... 3,190 120,347
Norske Skogindustrier ASA................ 4,550 167,608
-----------
287,955
-----------
Portugal -- 0.06%
EDP Electricidade de Portugal S.A........ 15,300 275,499
-----------
Singapore -- 0.20%
Singapore Press Holdings Ltd............. 39,820 678,285
United Overseas Bank Ltd. (Frgn.)........ 44,360 310,064
-----------
988,349
-----------
Spain -- 0.31%
Banco Popular............................ 4,329 311,399
Banco Santander Central Hispano SA....... 42,398 441,623
Endesa S.A............................... 14,323 305,470
Telefonica S.A. (b)...................... 9,278 446,940
-----------
1,505,432
-----------
Sweden -- 0.35%
Electrolux AB, B Shares................. 25,740 538,899
Investor AB - B Shares................... 24,400 272,642
Nordbanken Holding AB.................... 32,110 187,705
Swedish Match AB......................... 92,620 330,085
Telefonaktiebolaget LM Ericsson, B Shares 12,940 414,744
-----------
1,744,075
-----------
Switzerland -- 0.71%
Adecco S.A............................... 289 154,855
Holderbank Financiere Glarus AG, B Shares 234 $ 276,206
Nestle S.A. (Reg.)....................... 515 927,901
Novartis AG (Reg.)....................... 543 792,879
Roche Holding AG (Gen.).................. 69 709,263
Swiss Reinsurance Co. (Reg.)............. 46 87,585
Swisscom AG (Reg.)....................... 1,416 532,844
-----------
3,481,533
-----------
United Kingdom -- 3.41%
Allied Zurich PLC........................ 31,052 390,352
AstraZeneca Group PLC.................... 12,002 464,264
Barclays PLC............................. 16,050 467,029
BOC Group PLC............................ 38,350 749,590
Boots Company PLC........................ 26,230 311,543
British Aerospace PLC.................... 10,000 64,904
British Airways PLC...................... 40,000 276,009
BP Amoco PLC............................. 69,473 1,245,126
British Telecommunications PLC........... 29,000 485,924
Charter PLC.............................. 69,676 408,567
Coats Viyella PLC........................ 181,970 146,287
Diageo PLC............................... 44,209 461,672
FKI PLC.................................. 165,040 512,654
General Electric Co. PLC................. 88,360 901,149
Glaxo Wellcome PLC....................... 32,260 896,507
Greenalls Group PLC...................... 42,358 237,028
House of Fraser PLC...................... 82,780 114,175
Lloyds TSB Group PLC..................... 71,969 975,620
Marks & Spencer PLC...................... 153,060 885,451
Mirror Group PLC......................... 101,390 393,765
National Power PLC....................... 63,500 462,437
Nycomed Amersham PLC..................... 54,844 381,245
Peninsular & Oriental Steam Navigation Co. 18,540 278,363
Prudential Corp. PLC..................... 55,540 817,692
Reckitt & Colman PLC..................... 26,000 271,106
Reed International PLC................... 47,010 313,635
Rio Tinto Ltd............................ 48,190 807,851
RJB Mining PLC........................... 66,590 55,107
Royal & Sun Alliance Insurance Group PLC 21,884 196,280
Sainsbury (J.) PLC....................... 19,300 121,690
Scottish Hydro-Electric PLC.............. 67,880 694,422
Tesco PLC................................ 259,190 666,973
Thames Water PLC......................... 20,997 332,960
Unilever PLC............................. 34,000 302,538
United News & Media PLC.................. 48,490 466,250
Yorkshire Water PLC...................... 37,080 257,760
-----------
16,813,925
-----------
Total Global (Ex-U.S.) Equities 70,915,283
-----------
Emerging Markets Equities -- 3.56%
Brinson Emerging Markets Equity
Fund (b)............................... 1,868,295 17,543,286
-----------
Total Equities (Cost $193,689,005) 218,489,575
-----------
</TABLE>
================================================================================
12
<PAGE>
Global Fund -- Schedule Of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
------ ----------
<S> <C> <C>
Bonds -- 52.28%
U.S. Bonds -- 29.18%
U.S. Corporate Bonds -- 4.85%
Banque Paribas, Sub. Notes, 6.875%,
due 03/01/09.............................. $ 175,000 $ 168,787
Bell Atlantic Corp., 8.000%, due 10/15/29... 78,000 85,590
Cendant Corp., 7.750%, due 12/01/03......... 640,000 646,414
Centaur Funding Corp., 144A................. 750 804,844
Centaur Funding Corp., 144A (b)............. 1,430 220,935
Chase Manhattan Auto Owner Trust, 96-C,
Class A4, 6.150%, due 03/15/02............ 730,000 733,570
Chemical Master Credit Card Trust, 95-Z,
Class A, 6.230%, due 06/15/03............. 1,055,000 1,061,193
Continental Airlines, Inc., 98-1B, 6.748%,
due 09/15/18.............................. 166,569 158,588
First Bank Corporate Card Master Trust, 97-1,
Class A, 6.400%, due 02/15/03............. 1,055,000 1,058,070
GATX Capital Corp., 6.500%, due 11/01/00 1,500,000 1,510,387
General Motors Acceptance Corp., 9.625%,
due 12/15/01.............................. 241,000 258,478
Hertz Corp., 6.625%, due 07/15/00........... 2,500,000 2,525,184
International Telecom Satelite, 8.125%,
due 02/28/05.............................. 245,000 258,423
Lehman Brothers, Inc., 7.250%,
due 04/15/03.............................. 510,000 511,775
MBNA Global Capital Securities FRN,
5.795%, due 02/01/27...................... 810,000 702,346
Monsanto Co., 144A, 6.600%, due 12/01/28 545,000 484,331
Morgan Stanley Dean Witter, Series MTN,
5.625%, due 01/20/04...................... 355,000 340,895
Noram Energy Corp., 6.375%, due 11/01/03 615,000 601,222
Norwest Asset Securities Corp., 96-2,
Class A9, 7.000%, due 09/25/11............ 435,000 430,167
PanAmSat Corp...............................
6.000%, due 01/15/03...................... 225,000 220,234
6.375%, due 01/15/08...................... 1,000,000 944,227
Raytheon Co., 6.300%, due 08/15/00.......... 3,000,000 3,027,356
Rohm & Haas Co., 144A, 7.400%,
due 07/15/09.............................. 750,000 749,820
Safeway, Inc., 5.750%, due 11/15/00......... 1,000,000 998,792
Service Corp., International, 6.000%,
due 12/15/05.............................. 1,000,000 918,929
Sprint Capital Corp., 6.875%, due 11/15/28 750,000 682,898
Supervalu Stores, Inc., Series A, MTN
6.500%, due 10/06/00...................... 1,000,000 1,008,079
Telecommunicaciones de Puerto Rico Inc.,
144A, 6.150%, due 05/15/02................ 200,000 197,923
Thrift Financial Corp., 11.250%, due 01/01/16 59,949 62,625
Time Warner Entertainment, Inc., 8.375%,
due 03/15/23.............................. 386,000 417,715
Time Warner, Inc., 6.625%, due 05/15/29..... 550,000 484,490
Waste Management, Inc., 6.875%, 144A,
due 05/15/09.............................. 640,000 623,763
Western Resources, Inc., 6.875%,
due 08/01/04.............................. 975,000 972,777
----------
23,870,827
----------
Mortgage-Backed Securities -- 1.86%
Asset Securitization Corp., 96-D,
Class A1B, 7.210%, due 10/13/26........... $1,695,000 $1,730,612
Prudential Home Mortgage Securities, 94-3,
Class A10, 6.500%, due 02/25/24........... 730,000 706,348
Residential Asset Securitization Trust,
97-A11, Class A2, 7.000%, due 01/25/28 60,229 60,382
97-A7, Class A1, 7.500%, due 09/25/27..... 324,501 327,143
97-A7, Class A1, 7.250%, due 12/25/27..... 1,080,000 1,060,106
Structured Asset Securities Corp.,
98-RF1, Class A, 8.712%, due 03/15/27..... 1,125,637 1,179,105
98-RF2, 144A, 8.582%, due 07/15/27........ 1,433,113 1,497,603
UCFC Home Equity Loan 97-C,
Class A8, FRN, 5.069%, due 09/15/27....... 904,870 902,689
Vendee Mortgage Trust, 98-2,
Class 1G, 6.750%, due 06/15/28............ 1,760,000 1,700,459
----------
9,164,447
----------
International Dollar Bonds -- 1.96%
Abbey National PLC, Resettable
Perpetual Preferred, 6.700%, due 06/29/49 1,075,000 997,001
Amvescap PLC, 6.600%,
due 05/15/05................................ 870,000 822,067
Banco Santiago S.A., 7.000%, due 07/18/07 650,000 569,976
Banque Centrale de Tunisie, 8.250%,
due 09/19/27................................ 785,000 651,550
British Sky Broadcasting Group PLC, 6.875%,
due 02/23/09................................ 135,000 123,109
Credit Suisse-London, 144A, Resettable
Perpetual Preferred, 7.900%, due 05/01/07 600,000 584,139
Empresa Nacional de Electricidad S.A.,
7.875%, due 02/01/27........................ 166,000 140,554
Government of Malaysia, 8.750%,
due 06/01/09................................ 690,000 695,175
Korea Development Bank, 7.125%,
due 09/17/01................................ 180,000 179,487
National Australia Bank, FRN, 6.400%,
due 12/10/07................................ 700,000 690,468
Pan Pacific Industry PLC 144A, 0.000%,
due 04/28/07................................ 1,565,000 759,025
Ras Laffan Liquified Natural Gas Co., Ltd.,
144A, 8.294%, due 03/15/14.................. 1,000,000 922,830
Repsol International Finance, 7.000%,
due 08/01/05................................ 575,000 571,491
Republic of South Africa, 9.625%,
due 12/15/99................................ 794,000 801,940
Royal Bank of Scotland, Resettable
Perpetual Preferred, 7.375%, due 04/29/49 505,000 490,902
Skandinaviska Enskilda Banken, 144A, 6.625%,
due 03/29/49................................ 285,000 281,829
144A, Resettable Perpetual Preferred, 6.500%,
due 12/29/49................................ 415,000 394,697
---------
9,676,240
---------
</TABLE>
================================================================================
13
<PAGE>
Global Fund -- Schedule of Investments
June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
------------- ------------
<S> <C> <C>
U.S. Government Agencies -- 5.08%
Aid-Israel, Series 10-Z, 0.000%,
due 02/15/03............................... $ 4,935,000 $ 3,986,537
Fannie Mae Whole Loan, Series 95-W3,
Class A, 9.000%, due 04/25/25............... 22,488 23,498
Federal Home Loan Mortgage Corp.
6.200%, due 08/15/07....................... 446,183 440,013
7.238%, due 05/01/26....................... 125,917 126,868
Federal Home Loan Mortgage Corp. Gold
8.000%, due 11/01/22....................... 75,066 77,367
8.000%, due 05/01/23....................... 806,381 831,105
9.000%, due 03/01/24....................... 543,328 578,400
Federal National Mortgage Association
5.625%, due 05/14/04....................... 1,790,000 1,746,852
8.000%, due 02/25/07....................... 1,045,657 1,066,888
6.500%, due 03/01/19....................... 286,120 278,532
8.000%, due 05/25/21....................... 1,300,000 1,324,018
8.500%, due 07/15/21....................... 498,509 515,960
8.000%, due 05/01/22....................... 63,828 65,501
8.500%, due 07/01/22....................... 352,813 371,076
7.500%, due 07/25/22....................... 2,425,413 2,424,210
7.000%, due 10/01/28....................... 979,919 970,033
6.500%, due 02/01/29....................... 1,523,101 1,473,192
7.000%, due 03/01/29....................... 272,067 269,468
Federal National Mortgage Association Strips
8.000%, due 08/01/23....................... 1,417,412 362,753
0.000%, due 02/01/28....................... 1,017,105 713,655
FGGI, 7.500%, due 10/01/11.................. 795,665 809,113
FNCI, 8.000%, due 02/01/13.................. 589,589 607,514
Freddie Mac Series
194 Class PO, 0.000%, due 04/01/28......... 745,014 491,765
2121 Class H, 5.500%, due 02/15/14......... 2,302,392 2,153,174
Government National Mortgage Association
10.000%, due 09/15/00...................... 1,482 1,579
10.000%, due 05/15/01...................... 1,735 1,849
9.000%, due 11/15/04....................... 8,714 9,177
9.000%, due 11/15/04....................... 3,532 3,720
8.000%, due 08/15/22....................... 304,236 313,678
8.000%, due 11/15/22....................... 231,255 238,750
TBA, 7.000%, due 06/15/29.................. 2,780,000 2,745,250
------------
25,021,495
------------
U.S. Government Obligations -- 15.43%
U.S. Treasury Bond, 8.000%,
due 11/15/21............................... 7,200,000 8,662,500
U.S. Treasury Inflation Indexed Note
3.625%, due 01/15/08....................... 6,945,000 6,942,105
3.625%, due 04/15/28....................... 45,590,000 44,230,725
3.875%, due 04/15/29....................... 15,000,000 14,962,259
U.S. Treasury Note
4.875%, due 03/31/01....................... 970,000 959,997
5.625%, due 05/15/08....................... 290,000 284,019
------------
76,041,605
------------
Total U.S. Bonds............................ 143,774,614
------------
<CAPTION>
Shares
-------------
<S> <C>
High Yield Bonds -- 2.89%
Brinson High Yield Fund (b)................. 1,058,868 14,221,334
------------
<CAPTION>
Face
Amount Value
------------- ------------
<S> <C> <C>
Global (Ex-U.S.) Bonds -- 15.19%
Australia -- 1.48%
Queensland Treasury Corp., Series 05-G,
6.500%, due 06/14/05....................AUD 10,900,000 $ 7,303,822
------------
Canada -- 1.48%
Government of Canada
7.000%, due 12/01/06.....................CAD 2,640,000 1,943,141
6.000%, due 06/01/08....................... 1,600,000 1,108,574
4.250%, due 12/01/21....................... 5,440,000 4,227,844
------------
7,279,559
------------
Denmark -- 1.12%
Kingdom of Denmark
9.000%, due 11/15/00....................DKK 11,100,000 1,654,505
7.000%, due 12/15/04....................... 7,980,000 1,248,484
8.000%, due 03/15/06....................... 12,100,000 2,008,479
7.000%, due 11/10/24....................... 3,850,000 624,072
------------
5,535,540
------------
France -- 2.31%
Government of France (BTAN),
5.750%, due 03/12/01....................EUR 990,000 1,064,481
Government of France (OAT)
9.500%, due 01/25/01....................... 3,200,000 3,607,405
7.500%, due 04/25/05....................... 850,000 1,026,943
8.500%, due 12/26/12....................... 3,499,999 4,950,496
5.500%, due 04/25/29....................... 700,000 728,407
------------
11,377,732
------------
Germany -- 1.95%
Bundesrepublik Deutscheland
8.375%, due 05/21/01....................... 3,500,000 3,944,516
6.250%, due 01/04/24....................... 2,000,000 2,309,699
DePfa Deutsche Pfandbriefbank AG,
4.750%, due 03/20/03....................... 1,080,000 1,144,879
Treuhandanstalt, 6.250%, due 03/04/04....... 1,950,000 2,205,502
------------
9,604,596
------------
Italy -- 0.60%
Buoni Poliennali Del Tes,
5.000%, due 05/01/08....................... 1,700,000 1,784,066
Republic of Italy (BTP)
12.000%, due 09/01/02....................... 900,000 1,152,416
8.500%, due 04/01/04....................... 1 1
------------
2,936,483
------------
Netherlands -- 1.51%
Government of Netherlands
8.250%, due 02/15/02....................... 3,700,000 4,258,444
5.500%, due 01/15/28....................... 1,600,000 1,664,931
Koninklijke KPN NV.......................... 550,000 557,686
LBW Finance NV, 5.125%, due 03/05/04........ 900,000 964,879
------------
7,445,940
------------
Spain -- 0.77%
Government of Spain
8.000%, due 05/30/04....................... 1,352,277 1,633,196
6.150%, due 01/31/13....................... 1,900,001 2,161,341
------------
3,794,537
------------
</TABLE>
================================================================================
14
<PAGE>
Global Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
------------- ------------
<S> <C> <C>
Sweden -- 1.08%
Government of Sweden
10.250%, due 05/05/03....................SEK 29,700,000 $ 4,199,664
6.750%, due 05/05/14....................... 8,400,000 1,117,057
-------------
5,316,721
-------------
United Kingdom -- 2.89%
Halifax PLC, Series E, MTN, 8.75%
due 07/10/06............................GBP 2,980,000 5,302,925
UK Treasury
7.250%, due 12/07/07....................... 4,450,000 7,929,894
8.750%, due 08/25/17....................... 440,000 1,012,610
-------------
14,245,429
-------------
Total Global (Ex-U.S.) Bonds................ 74,840,359
-------------
Shares
----------
Emerging Markets Debt -- 5.02%
Brinson Emerging Markets Debt Fund (b)...... 1,240,578 24,713,550
-------------
Total Bonds (Cost $256,399,033)............. 257,549,857
-------------
Short-Term Investments -- 25.10%
Investment Companies -- 6.51%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund...................... 32,094,680 32,094,680
-------------
Face
Amount
-------------
U.S. Corporate Bonds -- 10.08%
Burlington Resources,
6.875%, due 08/01/99........................ $ 2,000,000 2,001,755
Centex Corp., Series A, MTN
5.828%, due 06/30/00....................... 5,000,000 5,000,000
Enron Corp., 5.778%, due 03/30/00........... 5,000,000 5,000,000
General Motors Corporate Notes,
9.375%, due 04/01/00........................ 2,000,000 2,058,750
James River Corp., 6.750%, due 10/01/99..... 1,000,000 1,002,560
Lehman Brothers, Inc., Series A, MTN
6.920%, due 10/04/99........................ 3,000,000 3,007,690
Lehman Brothers, Inc., Series E, MTN
6.300%, due 08/11/99....................... 2,000,000 2,001,016
MCI Communications Corp.,
7.125%, due 01/20/00........................ 1,200,000 1,210,857
MCI Communications Corp., Series A, MTN
6.260%, due 03/03/00....................... 2,000,000 2,011,325
Nabisco Inc., 6.300%, due 08/26/99.......... 1,000,000 1,000,786
Occidental Petroleum, Inc., Series B, MTN
6.080%, due 11/26/99....................... 3,000,000 3,005,074
Philadelphia Electric Co.,
9.250%, due 10/01/99........................ 1,000,000 1,009,845
Quaker Oats, Inc., Series B, MTN
9.100%, due 08/31/99....................... 1,800,000 1,811,690
Sonat, Inc.
9.500%, due 08/15/99....................... 2,000,000 2,008,509
Supervalu Stores, Inc.
7.250%, due 07/15/99........................ $ 2,000,000 $ 2,001,026
Texas Utilities, Inc.
7.375%, due 11/01/99....................... 3,500,000 3,520,893
Textron Financial Corp., Series C, MTN
5.299%, due 12/20/99....................... 3,000,000 3,000,307
Ultramar Corp., 8.250%, due 07/01/99........ 1,500,000 1,500,000
Union Carbide, Inc., 7.000%, due 08/01/99... 5,000,000 5,004,598
Vastar Resources, Inc.
6.000%, due 04/20/00....................... 2,500,000 2,508,589
-------------
49,665,270
-------------
U.S. Government Obligations -- 0.65%
U.S. Treasury Bill, 0.000%, due 08/05/99.... 3,200,000 3,186,310
-------------
Commercial Paper -- 7.86%
FMC Corp., 6.25%, due 07/01/99.............. 5,000,000 5,000,000
GPU Australia, 5.15%, due 07/07/99.......... 5,000,000 4,995,708
Kroger Corp., 6.40%, due 07/01/99........... 3,560,000 3,560,000
Phillips Petroleum Co.,
5.22%, due 07/15/99......................... 5,236,000 5,225,368
Rohm & Haas Co., 6.30%, due 07/01/99........ 5,000,000 5,000,000
Tyco International Corp.,
5.12%, due 07/30/99......................... 5,000,000 4,979,378
U.S. Generating LLC,
6.30%, due 07/01/99......................... 5,000,000 5,000,000
Union Pacific Corp., 5.30%, due 07/30/99.... 5,000,000 4,978,653
-------------
38,739,107
-------------
Total Short-Term Investments
(Cost $123,682,048)......................... 123,685,367
-------------
Total Investments
(Cost $573,770,086) -- 121.72% (a)......... 599,724,799
Liabilities, less cash and
other assets -- (21.72%)................... (107,008,544)
-------------
Net Assets -- 100%......................... $ 492,716,255
=============
</TABLE>
================================================================================
15
<PAGE>
Global Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $573,770,086; and net
unrealized appreciation consisted of:
Gross unrealized appreciation....................... $ 42,244,574
Gross unrealized depreciation....................... (16,289,861)
------------
Net unrealized appreciation....................... $ 25,954,713
============
(b) Non-income producing security.
FRN: Floating Rate Note -- The rate disclosed is that in effect at June 30,
1999
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 buyers. At June 30, 1999, the value of
these securities amounted to $7,521,739 or 1.53% of net assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FORWARD FOREIGN CURRENCY CONTRACTS
The Global Fund had the following open forward foreign currency contracts as of
June 30, 1999:
<TABLE>
<CAPTION>
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
---------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Forward Foreign Currency Buy Contracts
Australian Dollar....................................... 8/6/99 33,200,000 $ 21,984,134 $ 1,052,514
British Pound........................................... 8/6/99 3,200,000 5,045,488 (80,133)
Canadian Dollar......................................... 8/6/99 26,100,000 17,643,122 454,542
Danish Kroner........................................... 8/6/99 7,600,000 1,059,269 (65,191)
Euro.................................................... 8/6/99 22,200,000 22,959,263 (1,244,933)
Japanese Yen............................................ 8/6/99 200,000,000 1,661,403 (9,986)
Swedish Krona........................................... 8/6/99 114,000,000 13,439,371 (1,470,093)
Swiss Franc............................................. 8/6/99 4,400,000 2,842,616 (315,581)
Forward Foreign Currency Sale Contracts
Australian Dollar....................................... 8/6/99 2,500,000 1,655,432 (102,182)
British Pound........................................... 8/6/99 18,700,000 29,484,572 1,319,939
Danish Kroner........................................... 8/6/99 42,800,000 5,965,356 742,414
Euro.................................................... 8/6/99 6,500,000 6,722,307 878,273
Japanese Yen............................................ 8/6/99 1,950,000,000 16,198,681 248,437
------------
Total................................................. $ 1,408,020
============
</TABLE>
FUTURES CONTRACTS
The Global Fund had the following open futures contracts as of June 30, 1999:
<TABLE>
<CAPTION>
Settlement Cost/ Current Unrealized
Date Proceeds Value Loss
-------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
U.S. Interest Rate Futures Buy Contracts
5 year U.S. Treasury Notes, 297 contracts............. September 1999 $ 32,600,149 $ 32,373,000 $ (227,149)
10 year U.S. Treasury Notes, 72 contracts............. September 1999 8,097,692 8,005,500 (92,192)
30 year U.S. Treasury Bonds, 85 contracts............. September 1999 9,977,704 9,852,031 (125,673)
Index Futures Sales Contracts
Standard & Poor's 500, 142 contracts.................. September 1999 46,854,992 49,050,350 (2,195,358)
------------
Total................................................ $ (2,640,372)
============
</TABLE>
The segregated cash and aggregate market value of investments pledged to cover
margin requirements for the open positions at June 30, 1999 were $291,353 and
$3,186,310, respectively.
See accompanying notes to financial statements.
================================================================================
16
<PAGE>
Global Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $480,775,779)....................................................... $503,491,504
Affiliated issuers (Cost $92,994,307).......................................................... 96,233,295
Cash............................................................................................ 1,791,353
Foreign currency, at value (Cost $2,375,814).................................................... 2,369,487
Receivables:
Investment securities sold..................................................................... 8,893,781
Dividends...................................................................................... 343,049
Interest....................................................................................... 2,891,212
Fund shares sold............................................................................... 5,680,357
Net unrealized appreciation on forward foreign currency contracts............................... 1,408,020
Other assets.................................................................................... 1,548
------------
TOTAL ASSETS................................................................................ 623,103,606
------------
LIABILITIES:
Payables:
Securities loaned.............................................................................. 97,474,174
Investment securities purchased................................................................ 25,213,162
Investment advisory fees....................................................................... 321,311
Fund shares redeemed........................................................................... 6,648,047
Variation margin............................................................................... 525,125
Accrued expenses............................................................................... 205,532
------------
TOTAL LIABILITIES........................................................................... 130,387,351
------------
NET ASSETS....................................................................................... $492,716,255
============
NET ASSETS CONSIST OF:
Paid in capital................................................................................. $456,511,413
Accumulated undistributed net investment income................................................. 753,116
Accumulated net realized gain................................................................... 10,789,381
Net unrealized appreciation..................................................................... 24,662,345
------------
NET ASSETS.................................................................................. $492,716,255
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based on net assets of
$469,080,017 and 39,038,154 shares issued and outstanding)..................................... $ 12.02
============
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on net assets of
$1,576,267 and 131,510 shares issued and outstanding).......................................... $ 11.99
============
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share (Based on net assets of
$22,059,971 and 1,845,252 shares issued and outstanding)....................................... $ 11.95
============
</TABLE>
See accompanying notes to financial statements.
================================================================================
17
<PAGE>
Global Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $15,418 for foreign taxes withheld; including securities lending income of $442,842)...... $ 13,551,311
Dividends (net of $201,714 for foreign taxes withheld)..................................................... 4,051,102
------------
TOTAL INCOME............................................................................................ 17,602,413
------------
EXPENSES:
Advisory................................................................................................... 4,403,642
Administration............................................................................................. 381,250
Professional............................................................................................... 173,750
Distribution............................................................................................... 173,246
Printing................................................................................................... 116,160
Custodian.................................................................................................. 98,852
Other...................................................................................................... 146,069
------------
TOTAL EXPENSES......................................................................................... 5,492,969
------------
NET INVESTMENT INCOME.................................................................................... 12,109,444
------------
net realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments............................................................................................... 54,822,140
Futures contracts......................................................................................... (5,993,590)
Foreign currency transactions............................................................................. (4,134,930)
------------
Net realized gain...................................................................................... 44,693,620
------------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency.......................................................................... (41,176,138)
Futures contracts......................................................................................... (1,693,063)
Forward contracts......................................................................................... 4,947,447
Translation of other assets and liabilities denominated in foreign currency............................... (71,293)
------------
Change in net unrealized appreciation or depreciation.................................................. (37,993,047)
------------
Net realized and unrealized gain........................................................................... 6,700,573
------------
Net increase in net assets resulting from operations....................................................... $ 18,810,017
============
</TABLE>
See accompanying notes to financial statements.
================================================================================
18
<PAGE>
Global Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations........................................ $ 18,810,017
Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by operating activites:
Net realized and unrealized gain on investments............................................ (6,700,573)
Decrease in receivable for investment securities sold...................................... 8,618,236
Decrease in dividends and interest receivable.............................................. 2,683,034
Decrease in other assets................................................................... 55,119
Increase in payable for securities purchased............................................... 1,976,692
Decrease in payable for investment advisory fee............................................ (139,904)
Decrease in accrued expenses............................................................... (4,070)
Increase in variation margin............................................................... 967,434
Net amortization of premium................................................................ 716,822
---------------
Net cash provided by operating activities................................................. 26,982,807
---------------
CASH FLOWS USEDFOR FINANCING ACTIVITIES:
Purchases of investments.................................................................... (2,072,240,772)
Proceeds from sales of investments.......................................................... 2,290,447,040
Net realized loss on futures contracts...................................................... (5,993,590)
Net realized loss on foreign currency transactions.......................................... (4,134,930)
Change in net unrealized appreciaton or depreciation on futures contracts................... (1,693,063)
Change in net unrealized appreciation or depreciation on other assets and liabilities....... (71,293)
Net decrease in foreign currency............................................................ 312,488
---------------
Net cash provided by investing activities................................................. 206,625,880
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net capital shares transactions............................................................. (220,959,157)
Net decrease from securities lending........................................................ (7,471,870)
Dividends and capital gain distributions paid............................................... (3,401,660)
---------------
Net cash used for financing activities.................................................... (231,832,687)
---------------
Net increase in cash......................................................................... 1,776,000
CASH AT BEGINNING OF YEAR.................................................................... 15,353
---------------
CASH AT END OF YEAR.......................................................................... $ 1,791,353
===============
</TABLE>
See accompanying notes to financial statements.
================================================================================
19
<PAGE>
Global Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION> Year Ended Year Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income........................................................... $ 12,109,444 $ 17,956,852
Net realized gain............................................................... 44,693,620 39,774,075
Change in net unrealized appreciation or depreciation........................... (37,993,047) (6,545,821)
------------- -------------
Net increase in net assets resulting from operations............................ 18,810,017 51,185,106
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income......................................... (12,109,444) (28,265,915)
Distributions in excess of net investment income................................. (6,197,274) (5,070,122)
Distributions from net realized gain............................................. (33,009,121) (35,465,456)
------------- -------------
Total distributions to shareholders*............................................ (51,315,839) (68,801,493)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold..................................................................... 410,521,495 256,422,880
Shares issued on reinvestment of distributions.................................. 47,914,179 64,950,197
Shares redeemed................................................................. (632,556,320) (217,384,769)
------------- -------------
Net increase (decrease) in net assets resulting from capital share
transactions................................................................... (174,120,646) 103,988,308
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS...................................... (206,626,468) 86,371,921
------------- -------------
NET ASSETS:
Beginning of year............................................................... 699,342,723 612,970,802
------------- -------------
End of year (including undistributed net investment
income of $753,116 and ($845,490), respectively)............................... $ 492,716,255 $ 699,342,723
============= =============
*DISTRIBUTIONS BY CLASS:
Distributions from and in excess of net investment income:
Brinson Class I................................................................. (17,500,696) (32,129,657)
Brinson Class N................................................................. (753,377) (9,572)
UBS Investment Funds Class...................................................... (52,645) (1,196,808)
Distributions from net realized gain:
Brinson Class I................................................................. (31,201,392) (33,973,096)
Brinson Class N................................................................. (1,710,286) (53)
UBS Investment Funds Class...................................................... (97,443) (1,492,307)
------------- -------------
Total distributions to shareholders.............................................. (51,315,839) (68,801,493)
============= =============
</TABLE>
See accompanying notes to financial statements.
===============================================================================
20
<PAGE>
Global Fund -- Financial Highlights
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Year Ended June 30, July 31, 1995*
------------------------------------------- Through
UBS Investment Funds Class 1999 1998 1997 June 30, 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year..................... $ 12.71 $ 13.05 $ 12.18 $ 11.60
Income from investment operations:.................... ---------- ------- ------- --------
Net investment income................................ 0.20 0.30 0.34 0.39
Net realized and unrealized gain..................... 0.25 0.61 1.75 1.10
---------- ------- ------- --------
Total income from investment operations.......... 0.45 0.91 2.09 1.49
---------- ------- ------- --------
Less distributions:
Distributions from and in excess of net
investment income................................... (0.37) (0.55) (0.57) (0.59)
Distributions from net realized gain................. (0.84) (0.70) (0.65) (0.32)
---------- ------- ------- --------
Total distributions............................... (1.21) (1.25) (1.22) (0.91)
---------- ------- ------- --------
Net asset value, end of year........................... $ 11.95 $ 12.71 $ 13.05 $ 12.18
========== ======= ======= ========
Total return (non-annualized).......................... 3.92% 7.60% 18.13% 13.24%
Ratios/Supplemental data:
Net assets, end of year (in 000s).................... $22,060 $30,436 $26,303 $ 14,030
Ratio of expenses to average net assets.............. 1.61% 1.59% 1.64% 1.69%**
Ratio of net investment income to average
net assets......................................... 1.58% 2.05% 2.38% 3.04%**
Portfolio turnover rate.............................. 105% 88% 150% 142%
</TABLE>
* Commencement of UBS Investment Funds Class
** Annualized
See accompanying notes to financial statements.
================================================================================
21
<PAGE>
Global Bond Fund
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
In managing the Global Equity Fund, our investment research focuses on
identifying discrepancies between a security's fundamental value and its
observed market price -- both across and within global equity markets. We
exploit these discrepancies using a disciplined fundamental approach. Our
research teams evaluate companies in their markets around the world and assign
relative price/value rankings based on the present value of each company's
expected future cash flows. Industry and factor teams, in cooperation with the
dedicated country strategy team, use our global network of resources to
systematically develop portfolio strategy in the context of integrated global
capital markets. Currency strategies are separately developed and coordinated
with country allocations.
The UBS Investment Fund -- Global Equity has provided an annualized return of
14.44% since its inception, July 31, 1995. Its benchmark, the MSCI World Equity
(Free) Index has returned 17.58% over the same period. The Fund achieved these
results while maintaining a risk or volatility level much lower than the
benchmark at 11.50% versus 13.76%. The lower risk level implies that the Fund
has generated a relatively constant return stream over time, protecting its
investors from unwanted fluctuations in the Fund's value. For the year-to-date
period, the Fund has returned 6.68% versus the benchmark return of 8.57%.
For the year-to-date period, security selection was the largest cause of the
Fund's underperformance relative to the index. More specifically, our
underweights of large growth-oriented stocks and internet-related technology
stocks in the U.S. detracted from performance. While a shift toward value-
oriented cyclicals boosted Fund performance in the second quarter, earlier
influences dominate year-to-date results. We continue to believe that the U.S.
equity market is overvalued by a wide margin, and maintain our underweight.
Security selection in Japan also hampered performance as some of the financially
risky stocks (which we have steered away from) provided strong returns during
the first part of the year, as expectations for some strengthening in the
Japanese economy were increased. Currency allocation provided the largest
positive contribution, mainly due to the Fund's overweights in the Australian
dollar and Swedish krona, two of the strongest performing currencies for the
year.
Equity prices in Australia/New Zealand are still depressed, having been
disproportionately impacted by their geographic proximity to Asia and the
related cyclical downturn in basic material prices. In the case of Japan, long-
term fundamental valuation of the equity market is critically dependent upon
expectations of government reform of the domestic microeconomic environment, and
the nature and timing of overdue corporate restructuring. While we believe that
restructuring may raise profit margins in Japan to levels of a decade ago, it is
unlikely that they will reach levels similar to those found in Continental
Europe or the U.K. The implications for employment, bankruptcy and social stress
are too severe. As a result, we maintain our neutral exposure to Japan at the
present time.
The current set of socialist-oriented governments in core Europe seems to have
slowed previous reform momentum there. While we continue to expect a policy that
is more favorable to capital returns over the long run (driven by a combination
of demographic pressure and globalization of capital markets), near term
prospects have dimmed. As a result, we favor U.K. equities over those of
Continental Europe.
================================================================================
22
<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
6/30/99 6/30/99 6/30/99 6/30/99
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
UBS Investment Fund -- Global Equity 6.68% 9.28% 12.46% 14.44%
- -------------------------------------------------------------------------------------------------------------------------------
MSCI World Equity (Free) Index 8.57 15.87 18.53 17.58
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*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 June 30, 1999. 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
<TABLE>
<CAPTION>
- ---------------------------------
Date Brinson MSCI Index
- ---------------------------------
<S> <C> <C>
7/31/95 $10,000 $10,000
8/31/95 $10,155 $ 9,777
9/30/95 $10,329 $10,066
10/31/95 $10,300 $ 9,909
11/30/95 $10,667 $10,255
12/31/95 $10,993 $10,556
1/31/96 $11,312 $10,753
2/29/96 $11,354 $10,818
3/31/96 $11,539 $10,998
4/30/96 $11,858 $11,256
5/31/96 $11,889 $11,265
6/30/96 $11,925 $11,325
7/31/96 $11,544 $10,925
8/31/96 $11,739 $11,054
9/30/96 $12,110 $11,488
10/31/96 $12,152 $11,567
11/30/96 $12,760 $12,219
12/31/96 $12,787 $12,025
1/31/97 $12,899 $12,172
2/28/97 $13,067 $12,311
3/31/97 $13,011 $12,064
4/30/97 $13,067 $12,460
5/31/97 $13,832 $13,231
6/30/97 $14,351 $13,889
7/31/97 $14,813 $14,531
8/31/97 $14,125 $13,547
9/30/97 $14,711 $14,284
10/31/97 $13,900 $13,534
11/30/97 $13,888 $13,771
12/31/97 $14,048 $13,939
1/31/98 $14,271 $14,330
2/28/98 $15,138 $15,299
3/31/98 $15,757 $15,943
4/30/98 $15,720 $16,099
5/31/98 $15,658 $15,904
6/30/98 $15,520 $16,276
7/31/98 $15,433 $16,251
8/31/98 $13,734 $14,085
9/30/98 $13,932 $14,335
10/31/98 $14,850 $15,634
11/30/98 $15,408 $16,565
12/31/98 $15,897 $17,370
1/31/99 $15,897 $17,752
2/28/99 $15,404 $17,280
3/31/99 $15,885 $17,997
4/30/99 $16,960 $18,709
5/31/99 $16,340 $18,020
6/30/99 $16,960 $18,858
</TABLE>
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
================================================================================
23
<PAGE>
Global Equity Fund
- -----------------------------------------------------------------
[UBS LOGO APPEARS HERE]
Market Allocation
As of June 30, 1999
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- -----------------------------------------------------------------
<S> <C> <C>
U.S. 52.0% 43.0%
Australia 1.3 5.1
Austria 0.1 0.1
Belgium 0.6 0.7
Canada 2.0 1.7
Denmark 0.4 0.2
Finland 0.9 1.1
France 4.5 5.2
Germany 4.5 6.0
Hong Kong 1.2 0.0
Ireland 0.2 0.0
Italy 2.0 1.5
Japan 11.0 11.0
Netherlands 2.6 2.7
New Zealand 0.1 0.6
Norway 0.2 0.1
Portugual 0.2 0.2
Singapore 0.4 0.8
Spain 1.4 1.3
Sweden 1.1 1.5
Switzerland 3.1 3.0
United Kingdom 10.2 14.2
Cash Reserves 0.0 0.0
- -----------------------------------------------------------------
100.0% 100.0%
</TABLE>
Top Ten U.S. Equity Holdings
As of June 30, 1999
<TABLE>
<CAPTION>
Percent of
Net Assets
- -----------------------------------------------------------------
<S> <C>
1. Xerox Corp. 2.33%
2. FDX Corp. 1.58
3. Burlington Northern Santa Fe Corp. 1.48
4. Raytheon Co., Class B 1.36
5. Electronic Data Systems Corp. 1.34
6. Corning, Inc. 1.32
7. Aetna, Inc. 1.27
8. Lockheed Martin Corp. 1.13
9. General Instrument Corp. 1.04
10. CIGNA Corp. 1.03
- -----------------------------------------------------------------
</TABLE>
Currency Allocation
As of June 30, 1999
<TABLE>
<CAPTION>
Current
Benchmark Strategy
- --------------------------------------------
<S> <C> <C>
U.S. 52.0% 49.2%
Australia 1.3 6.8
Canada 2.0 2.0
Denmark 0.4 0.4
Euro 17.0 27.0
Hong Kong 1.2 0.0
Japan 11.0 3.0
New Zealand 0.1 0.6
Norway 0.2 0.2
Singapore 0.4 0.4
Sweden 1.1 5.1
Switzerland 3.1 3.1
United Kingdom 10.2 2.2
- --------------------------------------------
100.0% 100.0%
</TABLE>
Top Ten Global (Ex-U.S.) Equity Holdings
As of June 30, 1999
<TABLE>
<CAPTION>
Percent of
Net Assets
- -----------------------------------------------------------------------
<S> <C>
1. BP Amoco PLC 1.08%
2. Veba AG 1.01
3. ING Groep NV 0.86
4. Nestle S.A. (Reg.) 0.84
5. Lloyds TSB Group PLC 0.80
6. Glaxo Wellcome PLC 0.79
7. Marks & Spencer PLC 0.78
8. General Electric Co. PLC 0.73
9. Bayer AG 0.72
10. Siemens AG 0.72
- -----------------------------------------------------------------------
</TABLE>
=======================================================================
24
<PAGE>
Global Equity Fund
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
Industry Diversification
As a Percent of Net Assets
As of June 30, 1999
<TABLE>
- ---------------------------------------------------------------------------------------
<S> <C>
U.S. EQUITIES
Energy...................................................................... 0.28%
Capital Investment
Capital Goods............................................................ 4.46
Technology............................................................... 5.88
------
10.34
Basic Industries
Chemicals................................................................ 1.69
Housing/Paper............................................................ 3.09
Metals................................................................... 1.17
------
5.95
Consumer
Non-Durables............................................................. 1.28
Retail/Apparel........................................................... 2.29
Autos/Durables........................................................... 1.56
Health: Drugs............................................................ 1.83
Health: Non-Drugs........................................................ 2.12
------
9.08
Financial
Banks.................................................................... 4.41
Non-Banks................................................................ 3.30
------
7.71
Utilities
Electric................................................................. 1.66
Telephone................................................................ 0.67
------
2.33
Transportation.............................................................. 3.61
Services/Misc............................................................... 2.49
------
Total U.S. Equities............................................. 41.79
GLOBAL (EX-U.S.) EQUITIES
Aerospace & Military........................................................ 0.65
Airlines.................................................................... 0.73
Appliances &Household....................................................... 1.04
Autos/Durables.............................................................. 1.38
Banking..................................................................... 6.25
Beverages and Tobacco....................................................... 1.80
Broadcasting & Publishing................................................... 2.69
Building Materials.......................................................... 0.64
Business & Public Service................................................... 2.31
Chemicals................................................................... 2.38
Construction................................................................ 0.31%
Data Processing............................................................. 0.72
Electric Components......................................................... 0.61
Electronics................................................................. 3.08
Energy...................................................................... 3.88
Financial Services.......................................................... 1.31
Food & House Products....................................................... 2.35
Forest Products............................................................. 0.70
Health & Personal Care...................................................... 3.76
Industrial Components....................................................... 1.22
Insurance................................................................... 3.13
Leisure & Tourism........................................................... 0.22
Machinery & Engineering..................................................... 0.39
Merchandising............................................................... 2.99
Metals--Steel............................................................... 0.20
Multi-Industry.............................................................. 0.92
Non-Ferrous Metals.......................................................... 1.19
Real Estate................................................................. 0.44
Recreation.................................................................. 0.43
Telecommunications.......................................................... 5.21
Textiles & Apparel.......................................................... 0.12
Transportation.............................................................. 0.66
Utilities................................................................... 3.07
Wholesale & International Trade............................................. 0.27
------
Total Global (Ex-U.S.) Equities................................. 57.05
------
SHORT-TERM INVESTMENTS...................................................... 1.18
------
TOTAL INVESTMENTS............................................... 100.02
------
LIABILITIES, LESS CASH
AND OTHER ASSETS........................................................... (0.02)
------
NET ASSETS...................................................... 100.00%
======
- ---------------------------------------------------------------------------------------
</TABLE>
================================================================================
25
<PAGE>
Global Equity Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- --------------
<S> <C> <C>
Equities--98.84%
U.S. Equities--41.79%
Advanced Micro Devices, Inc. (b).......................... 17,800 $ 321,513
Aetna, Inc................................................ 12,300 1,100,081
Allergan, Inc............................................. 3,900 432,900
Alza Corp. (b)............................................ 16,200 824,175
American Standard Companies, Inc. (b)..................... 8,500 408,000
Aon Corp.................................................. 20,925 863,156
Armstrong World Industries, Inc........................... 2,200 127,188
BankBoston Corp........................................... 4,500 230,063
Baxter International, Inc................................. 9,000 545,625
Burlington Northern Santa Fe Corp......................... 41,300 1,280,300
Champion Enterprises, Inc. (b)............................ 6,700 124,788
Champion International Corp............................... 2,600 124,475
Chase Manhattan Corp...................................... 7,100 615,037
CIGNA Corp................................................ 10,000 890,000
Circuit City Stores-Circuit City Group.................... 7,600 706,800
CMS Energy Corp........................................... 7,600 318,250
CommScope, Inc. (b)....................................... 7,133 219,340
Compaq Computer Corp...................................... 2,400 56,850
Computer Sciences Corp. (b)............................... 3,700 255,994
Compuware Corp. (b)....................................... 8,600 273,588
Comverse Technology, Inc. (b)............................. 2,637 199,094
Consolidated Stores Corp. (b)............................. 10,500 283,500
Corning, Inc.............................................. 16,200 1,136,025
Covance, Inc. (b)......................................... 6,500 155,594
Crown Cork & Seal Co., Inc................................ 2,100 59,850
Delphi Automotive Systems Corp............................ 14,900 276,581
Dial Corp................................................. 4,300 159,906
Dominion Resources, Inc................................... 2,000 86,625
Eastman Chemical Co....................................... 4,600 238,050
Electronic Data Systems Corp.............................. 20,500 1,159,531
Eli Lilly and Co.......................................... 4,500 322,312
Entergy Corp.............................................. 21,600 675,000
FDX Corp. (b)............................................. 25,200 1,367,100
Federal-Mogul Corp........................................ 4,100 213,200
First American Corp. of Tennessee......................... 2,200 91,438
First Data Corp........................................... 17,304 846,814
First Security Corp....................................... 4,050 110,363
First Union Corp.......................................... 6,900 324,300
Fleet Financial Group, Inc................................ 10,300 457,062
Fleetwood Enterprises, Inc................................ 5,300 140,119
Food Lion Inc., Class A................................... 24,100 286,188
Fort James Corp........................................... 14,300 541,612
GATX Corp................................................. 1,100 41,869
General Instrument Corp. (b).............................. 21,100 896,750
Genzyme Corp. (b)......................................... 3,300 160,050
Genzyme Surgical Products Division (b).................... 591 2,603
Geon Co................................................... 1,400 45,150
GreenPoint Financial Corp................................. 12,400 406,875
Hibernia Corp............................................. 8,700 136,481
Household International, Inc.............................. 13,400 634,825
Illinois Tool Works, Inc.................................. 2,500 205,000
IMC Global, Inc........................................... 15,000 264,375
Johnson Controls, Inc..................................... 3,900 270,319
Kimberly-Clark Corp....................................... 9,600 547,200
Lafarge Corp.............................................. 4,500 159,469
Lear Corp. (b)............................................ 9,900 $ 492,525
Lockheed Martin Corp...................................... 26,202 976,024
Lyondell Chemical Company................................. 11,900 245,438
Martin Marietta Materials, Inc............................ 2,435 143,665
Masco Corp................................................ 25,800 744,975
Mattel, Inc............................................... 11,700 309,319
MCN Energy Group, Inc..................................... 2,800 58,100
Nabisco Holdings Corp..................................... 1,600 69,200
National Service Industries, Inc.......................... 3,600 129,600
New York Times Co......................................... 4,400 161,975
Newell Rubbermaid, Inc.................................... 8,500 395,250
Nextel Communications, Inc. (b)........................... 11,500 577,156
Norfolk Southern Corp..................................... 14,200 427,775
Peco Energy Co............................................ 8,510 356,356
Pentair, Inc.............................................. 4,400 201,300
Philip Morris Companies, Inc.............................. 13,100 526,456
PNC Bank Corp............................................. 6,700 386,087
Praxair, Inc.............................................. 7,000 342,562
Raytheon Co., Class B..................................... 16,700 1,175,263
Regions Financial Corp.................................... 2,100 80,719
Southdown, Inc............................................ 4,776 306,858
St. Jude Medical, Inc. (b)................................ 11,700 416,812
Tyson Foods, Inc.......................................... 15,400 346,500
U.S. Bancorp.............................................. 10,563 359,142
Ultramar Diamond Shamrock Corp............................ 8,552 186,541
United Healthcare Corp.................................... 8,300 519,787
USG Corp.................................................. 3,800 212,800
Vencor, Inc. (b).......................................... 9,100 1,365
Ventas, Inc............................................... 5,600 30,100
Viad Corp................................................. 8,100 250,594
W.W. Grainger, Inc........................................ 1,700 91,481
Wells Fargo and Co........................................ 14,400 615,600
Westvaco Corp............................................. 3,600 104,400
Xerox Corp................................................ 34,100 2,014,031
York International Corp................................... 5,100 218,344
-----------
Total U.S. Equities....................................... 36,093,454
-----------
Global (Ex-U.S.) Equities--57.05%
Australia--5.04%
Amcor Ltd................................................. 14,200 78,933
Amp Ltd................................................... 17,300 189,123
Brambles Industries Ltd................................... 6,900 181,771
Broken Hill Proprietary Co., Ltd.......................... 39,350 455,802
CSR Ltd................................................... 54,400 155,552
David Jones Ltd........................................... 48,400 47,413
Lend Lease Corp., Ltd..................................... 13,194 181,151
National Australia Bank Ltd............................... 34,875 577,095
News Corp., Ltd........................................... 58,540 499,458
News Corp., Ltd., Preferred............................... 13,300 101,326
Orica Ltd................................................. 4,000 21,845
Qantas Airways Ltd........................................ 73,977 244,338
QBE Insurance Group Ltd................................... 25,042 95,308
Rio Tinto Ltd............................................. 14,363 235,504
Santos Ltd................................................ 26,000 85,187
Telstra Corp., Ltd........................................ 98,400 563,839
Westpac Banking Corp., Ltd................................ 57,945 375,868
</TABLE>
================================================================================
26
<PAGE>
Global Equity Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ ----------
<S> <C> <C>
WMC Ltd.................................. 30,800 $ 132,309
Woolworth's Ltd.......................... 39,900 132,709
----------
4,354,531
----------
Austria -- 0.06%
Austria Tabakwerke AG.................... 900 52,442
----------
Belgium -- 0.75%
Fortis (B)............................... 15,562 488,695
KBC Bancassurance Holding................ 2,620 155,365
----------
644,060
----------
Canada -- 1.19%
Agrium, Inc.............................. 6,200 54,037
Alcan Aluminum Ltd....................... 2,300 72,647
Bank of Montreal......................... 1,400 50,605
Canadian National Railway Co............. 1,400 93,548
Canadian Pacific Ltd..................... 4,116 97,331
Hudson's Bay Co.......................... 4,300 47,936
Imasco Ltd............................... 2,300 61,692
Imperial Oil Ltd......................... 3,600 68,103
Magna International, Inc., Class A....... 600 33,788
Newbridge Networks Corp. (b)............. 1,900 53,915
NOVA Chemicals Corp...................... 2,597 60,534
Potash Corporation of Saskatchewan, Inc.. 600 30,870
Royal Bank of Canada..................... 1,600 70,265
Seagram Co., Ltd......................... 700 34,690
Shaw Communications, Inc., Class B....... 3,000 118,168
TransCanada Pipelines Ltd................ 3,988 55,909
Westcoast Energy, Inc.................... 1,000 19,526
----------
1,023,564
----------
Denmark -- 0.22%
Tele Danmark A/S......................... 3,800 187,041
----------
Finland -- 1.14%
Merita Ltd., Class A..................... 36,700 208,546
Nokia Oyj................................ 5,400 473,367
UPM-Kymmene Corp......................... 10,700 306,770
----------
988,683
----------
France -- 5.30%
Aerospatiale Matra....................... 7,180 165,496
Air Liquide.............................. 1,638 257,614
Banque Nationale de Paris................ 2,922 243,487
Carrefour S.A............................ 1,500 220,440
Cie de Saint Gobain...................... 1,136 181,005
Elf Aquitaine S.A........................ 2,832 415,607
France Telecom S.A....................... 4,540 342,964
Air France (b)........................... 9,780 174,490
Groupe Danone............................ 1,230 317,125
Michelin, Class B........................ 3,031 124,003
Rhone-Poulenc, Class A................... 4,550 207,921
SEITA.................................... 9,070 523,818
Societe Generale......................... 1,223 215,553
Suez Lyonnaise des Eaux S.A.............. 1,687 $ 304,292
Thomson CSF.............................. 10,045 349,112
Total Fina S.A., Class B................. 2,249 290,156
Vivendi.................................. 3,009 243,755
----------
4,576,838
----------
Germany -- 6.01%
Allianz AG............................... 1,463 408,882
Bayer AG................................. 14,890 619,617
Continental AG........................... 9,100 217,728
DaimlerChrysler AG....................... 4,625 403,999
Deutsche Bank AG......................... 8,811 537,029
Deutsche Telekom AG...................... 9,960 418,574
Deutsche Telekom AG, Rights (b).......... 9,960 1,951
Dresdner Bank AG......................... 8,400 326,592
Mannesmann AG............................ 3,250 486,000
SAP AG................................... 400 137,163
Siemens AG............................... 8,020 618,673
Veba AG.................................. 14,810 873,647
Volkswagen AG............................ 2,140 138,091
----------
5,187,946
----------
Italy -- 1.53%
Assicurazioni Generali................... 9,700 336,121
ENI Spa.................................. 66,000 394,101
ENI Spa ADR.............................. 1,700 102,000
La Rinascente Spa........................ 20,875 158,018
Montedison Spa........................... 86,091 140,282
San Paolo-imi, Spa....................... 13,911 189,373
----------
1,319,895
----------
Japan -- 10.99%
Acom Co., Ltd............................ 2,100 181,304
Amada Co., Ltd........................... 11,000 77,702
Bank of Tokyo-Mitsubushi Ltd............. 18,000 256,229
Bridgestone Corp......................... 6,000 181,428
Canon, Inc............................... 9,000 258,757
Citizen Watch Co., Ltd................... 10,000 86,748
Dai Nippon Printing Co., Ltd............. 10,000 159,864
Daiichi Pharmaceutical Co., Ltd.......... 9,000 139,640
Daikin Industries Ltd.................... 22,000 255,370
Daiwa House Industry Co., Ltd............ 5,000 52,586
Denso Corp., Ltd......................... 9,000 182,915
East Japan Railway Co.................... 31 166,474
Fanuc.................................... 4,300 230,915
Fuji Photo Film.......................... 3,000 113,516
Fujitsu.................................. 18,000 362,112
Honda Motor Co........................... 8,000 339,061
Hoya Corp................................ 2,000 112,855
Ito Yokado Co., Ltd...................... 5,000 334,600
Kaneka Corp.............................. 11,000 103,602
Kao Corp................................. 7,000 196,629
Kirin Brewery Co., Ltd................... 12,000 143,754
Kokuyo................................... 3,000 48,331
Kuraray Co., Ltd......................... 13,000 156,378
Marui Co., Ltd........................... 6,000 99,141
Matsushita Electric Industrial Co........ 13,000 252,396
</TABLE>
================================================================================
27
27
<PAGE>
Global Equity Fund--Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----------
<S> <C> <C>
Mitsubishi Estate Co., Ltd...................... 20,000 $ 195,142
Mitsubishi Corp................................. 35,000 237,112
NGK Insulators.................................. 17,000 177,528
Nintendo Corp., Ltd............................. 1,100 154,585
Nippon Meat Packers, Inc........................ 8,000 104,428
Nippon Steel Co................................. 73,000 169,473
Nippon Telegraph & Telephone Corp............... 46 535,856
Nomura Securities Co., Ltd...................... 18,000 210,724
Obayashi Corp................................... 17,000 85,534
Osaka Gas Co.................................... 52,000 176,570
Sankyo Co., Ltd................................. 8,000 201,586
Sanwa Bank Ltd.................................. 12,000 118,077
Secom Co., Ltd.................................. 3,000 312,293
Sega Enterprises Ltd............................ 1,000 13,227
Sekisui House Ltd............................... 12,000 129,478
Shin-Etsu Chemical Co., Ltd..................... 2,000 66,920
Sony Corp....................................... 2,300 247,976
Sumitomo Bank................................... 13,000 161,211
Sumitomo Chemical Co............................ 26,000 119,217
Sumitomo Electric Industries.................... 12,000 136,418
Takeda Chemical Industries...................... 7,000 324,438
TDK Corp........................................ 2,000 182,915
Tokio Marine & Fire Insurance Co................ 10,000 108,642
Tokyo Electric Power............................ 11,000 232,196
Toshiba Corp.................................... 25,000 178,247
Toyota Motor Corp............................... 10,000 316,424
Yamato Transport Co., Ltd....................... 6,000 104,594
-----------
9,493,118
-----------
Netherlands - 2.78%
Elsevier NV..................................... 31,100 360,826
Heineken NV..................................... 2,393 122,531
ING Groep NV.................................... 13,762 745,120
Koninklijke KPN NV.............................. 8,644 405,612
Royal Dutch Petroleum Co........................ 8,275 484,732
Unilever NV..................................... 4,236 285,487
-----------
2,404,308
-----------
New Zealand - 0.84%
Auckland International Airport Ltd.............. 32,000 49,175
Carter Holt Harvey Ltd.......................... 48,000 57,483
Fletcher Challenge Paper........................ 73,100 54,617
Lion Nathan Ltd................................. 36,000 86,225
Telecom Corp. of New Zealand Ltd................ 111,400 478,150
-----------
725,650
-----------
Norway - 0.22%
Norsk Hydro ASA................................. 2,100 79,225
Norske Skogindustrier ASA....................... 3,000 110,511
-----------
189,736
-----------
Portugal - 0.24%
EDP Electricidade de Portugal S.A............... 11,500 207,075
-----------
Singapore - 0.69%
Singapore Press Holdings Ltd.................... 24,046 409,594
United Overseas Bank Ltd. (Frgn.)............... 27,000 188,723
-----------
598,317
-----------
Spain - 1.28%
Banco Popular S.A............................... 2,883 $ 207,383
Banco Santander Central Hispano, S.A............ 32,134 334,712
Endesa, S.A..................................... 10,383 221,441
Telefonica, S.A. (b)............................ 7,090 341,540
-----------
1,105,076
-----------
Sweden - 1.52%
Electrolux AB, B Shares........................ 19,060 399,045
Ericsson LM, B Shares........................... 10,080 323,077
Investor AB, B Shares........................... 18,240 203,811
Nordbanken Holding AB........................... 23,910 139,770
Swedish Match AB................................ 69,250 246,798
-----------
1,312,501
-----------
Switzerland - 3.10%
Adecco S.A...................................... 220 117,882
Holderbank Financiere Glarus AG, B Shares....... 180 212,466
Holderbank Financiere Glarus AG, Rights......... 24 352
Nestle S.A. (Reg.).............................. 402 724,303
Novartis AG (Reg.).............................. 415 605,976
Roche Holding AG (Gen.)......................... 53 544,796
Swiss Reinsurance Co. (Reg.).................... 35 66,641
Swisscom AG (Reg.).............................. 1,083 407,536
-----------
2,679,952
-----------
United Kingdom - 14.15%
Allied Zurich PLC............................... 23,375 293,846
AstraZeneca PLC................................. 6,639 256,811
Barclays PLC.................................... 12,000 349,180
BOC Group PLC................................... 29,000 566,834
Boots Company PLC............................... 19,500 231,609
British Aerospace PLC........................... 7,000 45,433
British Airways PLC............................. 31,000 213,907
BP Amoco PLC.................................... 51,904 930,247
British Telecommunications PLC.................. 20,000 335,120
Charter PLC..................................... 49,922 292,733
Coats Viyella PLC............................... 128,250 103,101
Diageo PLC...................................... 32,630 340,753
FKI PLC......................................... 122,405 380,220
General Electric Co. PLC........................ 61,820 630,478
Glaxo Wellcome PLC.............................. 24,620 684,191
Greenalls Group PLC............................. 33,500 187,461
House of Fraser PLC............................. 45,250 62,411
Lloyds TSB Group PLC............................ 51,220 694,344
Marks & Spencer PLC............................. 116,120 671,753
Mirror Group PLC................................ 66,000 256,322
National Power PLC.............................. 49,500 360,482
Nycomed Amersham PLC............................ 41,000 285,009
Peninsular & Oriental Steam Navigation Co....... 13,475 202,316
Prudential Corp. PLC............................ 39,000 574,180
Reckitt & Colman PLC............................ 18,000 187,689
Reed International PLC.......................... 35,000 233,508
Rio Tinto Ltd................................... 35,020 587,071
RJB Mining PLC.................................. 52,500 43,447
Royal & Sun Alliance Insurance Group PLC........ 16,162 144,959
Sainsbury (J.) PLC.............................. 13,500 85,120
</TABLE>
================================================================================
28
<PAGE>
Global Equity Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
---------- -----------
<S> <C> <C>
Scottish Southern Energy PLC................ 49,650 $ 507,926
Tesco PLC................................... 190,250 489,570
Thames Water PLC............................ 15,458 245,125
Unilever PLC................................ 24,000 213,556
United News & Media PLC..................... 36,000 346,154
Yorkshire Water PLC......................... 27,500 191,165
-----------
12,224,031
-----------
Total Global (Ex-U.S.) Equities............. 49,274,764
-----------
Total Equities (Cost $69,139,277)........... 85,368,218
-----------
Short-Term Investments - 1.18%
Investment Companies - 1.18%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund
(Cost $1,022,188)......................... 1,022,188 $ 1,022,188
-----------
Total Investments
(Cost $70,161,465) - 100.02% (a).......... 86,390,406
Liabilities, less cash and other
assets - (0.02%).......................... (22,199)
-----------
Net Assets - 100%........................... $86,368,207
===========
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $70,161,465; and net
unrealized appreciation consisted of:
Gross unrealized appreciation............. $ 18,488,893
Gross unrealized depreciation............. (2,259,952)
------------
Net unrealized appreciation.......... $ 16,228,941
============
(b) Non-income producing security
FORWARD FOREIGN CURRENCY CONTRACTS
The Global Equity Fund had the following open forward foreign currency contracts
as of June 30, 1999:
<TABLE>
<CAPTION>
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
---------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Forward Foreign Currency Buy Contracts
Australian Dollar......................... 12/3/99 2,300,000 $ 1,525,877 $ 21,010
Canadian Dollar........................... 12/3/99 5,500,000 3,723,714 (7,123)
Euro...................................... 12/3/99 3,400,000 3,549,505 (57,895)
Swedish Krona............................. 12/3/99 26,600,000 3,161,221 30,520
Forward Foreign Currency Sale Contracts
British Pound............................. 12/3/99 6,500,000 10,344,610 130,813
Japanese Yen.............................. 12/3/99 818,000,000 6,923,483 13,424
----------
Total..................................... $ 130,749
==========
</TABLE>
See accompanying notes to financial statements.
================================================================================
29
<PAGE>
Global Equity Fund -- Financial Statements
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<TABLE>
ASSETS:
<S> <C>
Investments, at value:
Unaffiliated issuers (Cost $69,139,277)....................................................................... $ 85,368,218
Affiliated issuers (Cost $1,022,188).......................................................................... 1,022,188
Foreign currency, at value (Cost $517,126)...................................................................... 518,741
Receivables:
Investment securities sold..................................................................................... 351,137
Dividends...................................................................................................... 183,865
Interest....................................................................................................... 2,812
Fund shares sold............................................................................................... 134,588
Net unrealized appreciation on forward foreign currency contracts............................................... 130,749
Other assets.................................................................................................... 2,450
------------
TOTAL ASSETS................................................................................................ 87,714,748
------------
LIABILITIES:
Payables:
Investment securities purchased................................................................................ 782,515
Fund shares redeemed........................................................................................... 423,872
Investment advisory fees....................................................................................... 53,551
Accrued expenses............................................................................................... 86,603
------------
TOTAL LIABILITIES........................................................................................... 1,346,541
------------
NET ASSETS....................................................................................................... $ 86,368,207
============
NET ASSETS CONSIST OF:
Paid in capital................................................................................................. $ 65,256,033
Accumulated undistributed net investment income................................................................. 302,311
Accumulated net realized gain................................................................................... 4,451,473
Net unrealized appreciation..................................................................................... 16,358,390
------------
NET ASSETS.................................................................................................. $ 86,368,207
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based on net assets of
$42,106,094 and 3,136,505 shares issued and outstanding)...................................................... $ 13.42
============
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on net assets of
$220,133 and 16,424 shares issued and outstanding)............................................................ $ 13.40
============
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share (Based on net assets of
$44,041,980 and 3,285,531 shares issued and outstanding)...................................................... $ 13.40
============
</TABLE>
See accompanying notes to financial statements.
================================================================================
30
<PAGE>
Global Equity Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
INVESTMENT INCOME:
<S> <C>
Dividends (net of $122,328 for foreign taxes withheld).......................................................... $1,543,814
Interest........................................................................................................ 103,965
----------
TOTAL INCOME................................................................................................ 1,647,779
----------
EXPENSES:
Advisory........................................................................................................ 628,067
Distribution.................................................................................................... 362,686
Printing........................................................................................................ 66,751
Professional.................................................................................................... 44,351
Custodian....................................................................................................... 26,931
Other........................................................................................................... 58,844
----------
TOTAL EXPENSES.............................................................................................. 1,187,630
----------
Expenses waived by Advisor.................................................................................. (36,960)
----------
NET EXPENSES................................................................................................ 1,150,670
----------
NET INVESTMENT INCOME....................................................................................... 497,109
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.................................................................................................... 5,304,186
Futures contracts.............................................................................................. (511,514)
Foreign currency transactions.................................................................................. 804,005
----------
Net realized gain........................................................................................... 5,596,677
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency............................................................................... 346,586
Futures contracts.............................................................................................. 575,614
Forward contracts.............................................................................................. 214,544
Translation of other assets and liabilities denominated in foreign currency.................................... (4,441)
----------
Change in net unrealized appreciation or depreciation....................................................... 1,132,303
----------
Net realized and unrealized gain................................................................................ 6,728,980
----------
Net increase in net assets resulting from operations............................................................ $7,226,089
==========
</TABLE>
See accompanying notes to financial statements.
================================================================================
31
<PAGE>
Global Equity Fund -- Financial Statements
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------- -------------
OPERATIONS:
<S> <C> <C>
Net investment income............................................................................ $ 497,109 $ 677,369
Net realized gain................................................................................ 5,596,677 6,903,703
Change in net unrealized appreciation or depreciation............................................ 1,132,303 (1,282,988)
------------- -------------
Net increase in net assets resulting from operations............................................. 7,226,089 6,298,084
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I................................................................................. (384,423) (242,673)
Brinson Class N................................................................................. (2,181) (11)
UBSInvestment Funds Class....................................................................... (219,326) (397,017)
Distributions from net realized gain:
Brinson Class I................................................................................. (352,100) (1,266,777)
Brinson Class N................................................................................. (2,950) (82)
UBSInvestment Funds Class....................................................................... (713,059) (5,307,194)
------------- -------------
Total distributions to shareholders............................................................. (1,674,039) (7,213,754)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold...................................................................................... 34,808,631 40,216,740
Shares issued on reinvestment of distributions................................................... 1,462,446 6,378,677
Shares redeemed.................................................................................. (37,326,928) (73,542,587)
------------- -------------
Net decrease in net assets resulting from capital share transactions............................. (1,055,851) (26,947,170)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS...................................................... 4,496,199 (27,862,840)
------------- -------------
NET ASSETS:
Beginning of year................................................................................ 81,872,008 109,734,848
------------- -------------
End of year (including accumulated undistributed net investment income of
$302,311 and $377,184, respectively)............................................................ $ 86,368,207 $ 81,872,008
============= =============
</TABLE>
See accompany notes to financial statements
================================================================================
32
<PAGE>
Global Equity Fund -- Financial Highlights
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Year Ended June 30, July 31, 1995*
------------------------------------------ Through
UBS Investment Funds Class 1999 1998 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)................................. 0.04** 0.07 0.08 (0.01)
Net realized and unrealized gain............................. 1.09 0.83 2.13 1.93
------- ------- ------- -------
Total income from investment operations.................. 1.13 0.90 2.21 1.92
Less distributions:........................................... ------- ------- ------- -------
Distributions from net investment income.................... (0.06) (0.07) (0.06) (0.01)
Distributions from net realized gain........................ (0.18) (1.05) (0.99) (0.69)
------- ------- ------- -------
Total distributions...................................... (0.24) (1.12) (1.05) (0.70)
------- ------- ------- -------
Net asset value, end of period................................. $ 13.40 $ 12.51 $ 12.73 $ 11.57
======= ======= ======= =======
Total return (non-annualized).................................. 9.28% 8.15% 20.34% 19.25%
Ratios/Supplemental data:
Net assets, end of period (in 000s)........................... $44,042 $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................................ 0.29% 0.53% 0.60% (0.19)%***
After expense reimbursement................................. 0.34% 0.55% 0.85% 0.58%***
Portfolio turnover rate....................................... 86% 46% 32% 74%
* Commencement of UBSInvestment Funds Class
** The net investment income per share data was determined by using average shares outstanding throughout the period.
***Annualized
</TABLE>
See accompanying notes to financial statements
================================================================================
33
<PAGE>
Global Bond Fund
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
Our Global Bond Fund strategy is the result of several key investment decisions.
We determine optimal country and currency weightings based on our assessments of
global macroeconomic and political landscapes. We choose a maturity mix that
provides opportunity for appreciation while also limiting interest rate risks.
And importantly, we analyze and select the very best issues within each country
or market. All of these decisions are made in a global asset allocation
framework. They are interactive and synthesize the ideas of our fixed income
professionals around the world.
Since its inception on July 31, 1995, the UBS Investment Fund -- Global Bond has
produced an annualized return of 5.38% compared to the 3.17% return of its
benchmark, the Salomon Smith Barney World Government Bond Index. The annualized
volatility of the Fund was lower than that of the benchmark at 4.92% and 5.83%
respectively. During the first half of 1999, the Fund was down 6.67% while the
benchmark was down 7.17%.
The first half of 1999 was very difficult for global bond markets with two
consecutive quarters of negative returns. Yield increases have been spurred by
increasing volatility and strong economic activity that is causing market
participants to worry increasingly about future inflation rates.
Bond markets were characterized by a high level of volatility in the first
quarter of 1999. After a fairly stable January, February turned in the worst
one-month performance record for U.S. Treasury securities in 18 years. The
largest changes took place among securities with longer terms to maturity, while
shorter-term treasury bills were relatively stable.
This volatility was spurred somewhat by Federal Reserve (Fed) chairman Alan
Greenspan's testimony to Congress in February. He stated that the Fed expects
stronger growth and higher inflation in the U.S. than was originally called for
in the fall of 1998. Even though these adjustments were modest, they were
sufficient enough to disappoint investors.
U.S. bond yields in the second quarter were driven well above our estimates of
fair value by market expectations of higher inflation and anticipation of the 25
basis point rate hike by the Fed which occurred on June 30. As a result, we have
set representative duration strategies longer than the benchmark in the U.S.
component of the Fund at 1.05 times the benchmark.
Interest rates were cut in the U.K. and EMU during the second quarter. While
these rate cuts might ordinarily be seen as bullish developments, easier
monetary policy in the context of improving economic prospects has led instead
to steeper yield curves providing further evidence that market participants are
concerned about the longer-term inflation outlook.
Downward movement in bond yields in Japan during the quarter took this already
overvalued market to extremes not seen since last summer, and prompted us to
eliminate our small exposure to Japan. Proceeds were invested in the U.K.,
taking it to an overweight position. Our strategies elsewhere continue to
emphasize the higher yielding market of the U.S. (our largest country
overweight), Australia and Canada.
================================================================================
34
<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
6/30/99 6/30/99 6/30/99 6/30/99
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UBS Investment Fund - Global Bond -6.67% 2.58% 4.00% 5.38%
- --------------------------------------------------------------------------------------------------------
Salomon Smith Barney World Gov't Bond Index -7.17 4.13 4.11 3.17
- --------------------------------------------------------------------------------------------------------
*Inception date of the UBS Investment Fund - Global Bond.
</TABLE>
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 Smith Barney World Government Bond Index if
you had invested $10,000 on July 31, 1995, and had reinvested all your income
dividends and capital gain distributions through June 30, 1999. 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 Smith Barney World Government Bond Index
Wealth Value with Dividends Reinvested
UBS Investment Fund Global Bond Salomon Smith Barney World Govt Bond Index
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Date UBS Investment Fund Global Bond Salomon Smith Barney World Govt Bond Index
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
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
1/31/99 $13,130 $12,059
2/28/99 $12,717 $11,672
3/31/99 $12,691 $11,701
4/30/99 $12,717 $11,697
5/31/99 $12,478 $11,500
6/30/99 $12,278 $11,299
</TABLE>
Fund returns are net of all fees and costs, while the Index returns are based
solely on market returns without deduction for fees or transaction costs for
rebalancing.
================================================================================
35
<PAGE>
Global Bond Fund
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
<TABLE>
<CAPTION>
Asset Allocation
As of June 30, 1999
Current
Benchmark Strategy
- ------------------------------------------
U.S. 29.5% 39.5%
Australia 0.7 5.7
Austria 0.9 0.0
Belgium 2.7 0.0
Canada 3.0 5.8
Denmark 1.5 4.5
Finland 0.7 0.0
France 8.1 9.2
Germany 8.5 6.7
Ireland 0.3 0.0
Italy 8.4 2.4
Japan 21.3 0.0
Netherlands 2.8 4.8
Portugal 0.4 0.0
Spain 3.3 3.1
Sweden 1.2 6.8
Switzerland 0.5 0.0
U.K. 6.2 9.2
Euro 0.0 2.3
- ------------------------------------------
100.0% 100.0%
<CAPTION>
Currency Allocation
As of June 30, 1999
Current
Benchmark Strategy
- ------------------------------------------
U.S. 29.5% 25.5%
Australia 0.7 6.7
Canada 3.0 3.0
Denmark 1.5 1.5
Euro 36.0 44.3
Japan 21.3 13.3
Sweden 1.3 5.2
Switzerland 0.5 0.5
U.K. 6.2 0.0
100.0% 100.0%
<CAPTION>
Industry Diversification
As a Percent of Net Assets
As of June 30, 1999
- ------------------------------------------------
<S> <C>
U.S. BONDS
Corporate Bonds
Airlines......................... 0.72%
Asset-Backed..................... 2.05
CMO.............................. 1.38
Consumer......................... 0.57
Financial Services............... 1.28
Food and Housing Products........ 0.51
Industrial Components............ 0.55
Services/Miscellaneous........... 0.82
Utilities........................ 0.24
-----
8.12
-----
International Dollar Bonds....... 3.95
Mortgage-Backed Securities....... 6.08
U.S. Government Agencies......... 10.74
U.S. Government Obligations...... 7.91
-----
28.68
-----
Total U.S. Bonds.............. 36.80
-----
GLOBAL (EX-U.S.) BONDS
Foreign Financial Bonds........... 8.52
Foreign Government Bonds.......... 70.21
-----
Total Global (Ex-U.S.) Bonds.. 78.73
SHORT-TERM INVESTMENTS............ 6.24
-----
TOTAL INVESTMENTS............. 121.77
LIABILITIES, LESS CASH
AND OTHER ASSETS................. (21.77)
-----
NET ASSETS.................... 100.00%
======
</TABLE>
================================================================================
36
<PAGE>
Global Bond Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
------ -----
<S> <C> <C>
Bonds -- 115.53%
U.S. Bonds -- 36.80%
U.S. Corporate Bonds -- 8.12%
ABN Amro Mortgage Corp., Series
99-2 IA2, 6.300%, due 04/25/29.................. $ 345,000 $ 335,243
Bear Stearns Mortgage Securities, Inc.,
96-7A4 6.000%, due 01/28/09...................... 200,000 193,000
Cendant Corp., 7.750%, due 12/01/03............... 500,000 505,011
Centaur Funding Corp., 144A, 0.000%,
due 04/21/20 (b)................................ 750 115,875
Centaur Funding Corp., 144A, 9.080%,
due 04/21/20.................................... 390 418,519
Chase Manhattan Auto Owner Trust, 96-C,
Class A4, 6.150%, due 03/15/02.................. 125,000 125,611
Citigroup Inc., 5.800%, due 03/15/04.............. 500,000 484,932
Comed Transitional Funding Trust, 98-1,
Class A7, 5.740%, due 12/25/10.................. 370,000 345,081
Continental Airlines, Inc., 99-2, 7.056%,
due 09/15/09.................................... 710,000 712,577
Countrywide Capital, Inc., 8.000%, due 12/15/26... 250,000 238,167
First Bank Corporate Card Master Trust, 97-1,
Class A, 6.400%, due 02/15/03................... 240,000 240,698
First Union Lehman Brothers, 97-C2,
Class A2, 6.600%, due 05/18/07.................. 240,000 235,702
Kroger Co., 6.000%, due 07/01/00.................. 500,000 499,475
News America Holdings, 7.750%, due 12/01/45....... 575,000 545,045
Noram Energy Corp., 6.375%, due 11/01/03.......... 75,000 73,320
Norwest Asset Securities Corp., 98-25,
Class A5, 6.000%, due 12/25/28.................. 965,000 927,317
Peco Energy Transition Trust, 6.130%,
due 03/01/09.................................... 540,000 512,012
Premier Auto Trust, 96-3, Class A4,
96-3A 6.750%, due 11/06/00...................... 400,365 402,183
The Money Store, 98-B, Class AF2,
6.115%, due 05/15/10............................ 56,335 56,272
Time Warner, Inc., 7.570%, due 02/01/04........... 560,000 557,693
USA Waste Services, 7.000%, due 10/01/04.......... 300,000 302,797
Western Resources, Inc., 6.875%, due 08/01/04..... 160,000 159,635
---------
7,986,165
---------
Mortgage-Backed Securities -- 6.08%
GE Capital Mortgage Services, Inc., 93-7F,
Class FA3, 6.500%, due 09/25/08.................. 194,457 194,429
Heller Financial Commercial Mortgage Assets,
Series 99-PH1 A1, 6.500%, due 05/15/31........... 413,048 409,281
LB Commercial Conduit Mortgage Trust,
Series 99-C1 A1, 6.410%, due 10/15/30............ 560,000 552,591
PNC Mortgage Securities Corp., 94-3,
Class A8, 7.500%, due 07/25/24................... 190,000 188,026
Prudential Home Mortgage Securities
93-43, Class A9, 6.750%, due 10/25/23............ 206,269 201,568
96-7, Class A4, 6.750%, due 06/25/11............. 150,000 148,257
Residential Accredit Loans, Inc.
96-QS4, Class Al10, 7.900%, due 08/25/26......... 625,000 635,387
98-QS4, Class AI5, 7.000%, due 03/25/28.......... 400,000 398,919
Residential Asset Securitization Trust
97-A11, Class A2, 7.000%, due 01/25/28........... 86,997 87,218
97-A11, Class A6, 7.000%, due 01/25/28........... 430,000 418,515
97-A7, Class A1, 7.250%, due 12/25/27............ $ 335,000 $ 328,829
97-A7, Class A1, 7.500%, due 09/25/27............ 99,847 100,659
98-A1, Class A1, 7.000%, due 03/25/28............ 92,018 92,036
Structured Asset Securities Corp.
98-RF1, Class A, 8.712%, due 03/15/27............ 233,027 244,096
98-RF2, 144A, 8.582%, due 07/15/27............... 351,051 366,848
Structured Mortgage Asset Residential Trust,
96-5C, Class CI, 7.150%, due 03/25/23............ 925,000 917,563
UCFC Home Equity Loan 97-C,
Class A8, FRN, 5.069%, due 09/15/27.............. 98,356 98,119
Vanderbilt Mortgage Finance, 98-B,
Class 1A2, 6.120%, due 05/07/09.................. 600,000 599,892
---------
5,982,233
---------
International Dollar Bonds -- 3.95%
Banco Santiago S.A., 7.000%, due 07/18/07......... 400,000 350,754
Banque Centrale de Tunisie, 8.250%,
due 09/19/27.................................... 400,000 332,000
British Sky Broadcasting Group plc,
6.875%, due 02/23/09............................ 130,000 118,549
Credit Suisse-London, 144A, Resettable
Perpetual Preferred, 7.900%, due 05/01/07....... 500,000 486,783
Empresa National Electric, 7.875%,
due 10/01/97.................................... 500,000 398,826
Korea Development Bank, 7.125%,
due 09/17/01.................................... 300,000 299,144
National Australia Bank, FRN, 6.400%,
due 12/10/07.................................... 640,000 631,285
Pan Pacific Industry PLC 144A, 0.000%,
due 04/28/07.................................... 715,000 346,775
PDVSA Fin. LTD 1999-F, 144A, 8.750%,
due 02/15/04.................................... 500,000 501,370
Republic of South Africa, 9.625%,
due 12/15/99.................................... 125,000 126,250
Royal Bank of Scotland, Resettable Perpetual
Preferred, 7.375%, due 04/29/49................. 300,000 291,625
---------
3,883,361
---------
U.S. Government Agencies -- 10.74%
Fannie Mae Whole Loan, Series 95-W3,
Class A, 9.000%, due 04/25/25................... 10,652 11,131
Federal Home Loan Mortgage Corp.
7.000%, due 10/15/13............................ 68,215 67,400
7.238%, due 05/01/26............................ 21,406 21,567
9.000%, due 01/01/29............................ 824,897 873,102
Federal Home Loan Mortgage Corp. Gold
8.000%, due 05/01/23............................ 50,238 51,778
9.000%, due 03/01/24............................ 136,173 144,963
Federal National Mortgage Assoc.
6.000%, due 01/01/29............................ 157,532 148,263
6.500%, due 04/29/09............................ 1,170,000 1,127,039
6.500%, due 03/01/19............................ 123,327 120,057
6.500%, due 09/01/28............................ 1,236,954 1,197,256
6.500%, due 02/01/29............................ 611,212 591,184
7.000%, due 12/01/24............................ 435,297 430,905
7.000%, due 03/01/29............................ 28,639 28,365
7.500%, due 07/01/10............................ 852,730 866,802
</TABLE>
================================================================================
37
<PAGE>
Global Bond Fund - Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
---------- -----------
<S> <C> <C>
U.S. Government Agencies -- Continued $ 348,692 $ 352,646
7.500%, due 12/01/23..................... 250,000 251,937
7.500%, due 05/18/25..................... 675,821 683,484
7.500%, due 12/01/27..................... 213,724 218,950
7.890%, due 04/01/26..................... 79,069 81,473
8.000%, due 03/01/11..................... 9,961 10,476
8.500%, due 07/01/22.....................
Federal National Mortgage Assoc. Strips 151,092 106,014
0.000%, due 02/01/28..................... 210,034 53,753
8.000%, due 08/01/23..................... 85,491 88,090
FNCI, 8.000%, due 02/01/13
Freddie Mac 32,399 30,299
5.500%, due 02/15/14..................... 1,300,000 1,297,713
5.750%, due 06/15/01..................... 9,180 8,858
6.000%, due 09/15/25.....................
Government National Mortgage Assoc. 382,338 378,923
7.000%, due 08/15/24..................... 53,545 53,046
7.000%, due 07/15/25..................... 67,926 68,830
7.500%, due 08/15/23..................... 103,588 105,009
7.500%, due 12/15/23..................... 74,547 75,524
7.500%, due 01/15/24..................... 452,530 514,083
Jordan Aid, 8.750%, due 09/01/19
Tennesse Valley Authority, 6.375%, 500,000 501,468
due 06/15/05............................. ----------
10,560,388
----------
U.S. Government Obligations -- 7.91% 4,505,000 5,420,078
U.S. Treasury Bond, 8.000%, due 11/15/21
U.S. Treasury Inflation Indexed Note, 570,000 553,005
3.625%, due 04/15/28.....................
U.S. Treasury Notes and Bonds, 6.625%, 1,765,000 1,801,956
due 07/31/01............................. ----------
7,775,039
----------
36,187,186
Total U.S. ................................ ----------
Global (Ex-U.S.) Bonds -- 78.73%
Australia -- 7.79%
Queensland Treasury Corp.-Global Note AUD 5,230,000 3,504,495
6.500%, due 06/14/05..................... 3,000,000 2,124,206
8.000%, due 05/14/03..................... 2,800,000 2,033,493
8.000%, due 09/14/07..................... ----------
7,662,194
----------
Austria -- 2.19%
Republic of Austria, 5.500%, EUR 1,951,347 2,152,590
due 01/18/04............................. ----------
Canada -- 7.94%
Government of Canada CAD 5,550,000 4,313,333
4.250%, due 12/01/21..................... 2,800,000 1,951,558
6.000%, due 06/01/08.....................
Province of Ontario, 7.500%, 2,100,000 1,548,858
due 01/19/06 ----------
7,813,749
----------
Denmark -- 5.77%
City of Copenhagen, 6.250%, DKK 2,400,000 346,368
due 03/15/01............................. 3,650,000 553,006
Great Belt, 7.000%, due 09/02/03...........
Kingdom of Denmark
7.000%, due 12/15/04....................... DKK 12,200,000 $ 1,908,710
7.000%, due 11/15/07....................... 1,400,000 224,230
7.000%, due 11/10/24....................... 5,200,000 842,903
8.000%, due 11/15/01....................... 11,800,000 1,797,400
-----------
5,672,617
-----------
Finland -- 1.37%
Republic of Finland, 9.000%,
due 08/13/03............................... EUR 1,097,633 1,345,029
France -- 7.33%
Government of France (BTAN), 7.750%,
due 04/12/00............................... 609,796 652,654
Government of France (OAT)
6.000%, due 10/25/25....................... 950,000 1,056,154
7.500%, due 04/25/05....................... 2,000,000 2,416,337
8.500%, due 04/25/23....................... 1,350,000 1,971,433
9.500%, due 01/25/01....................... 990,000 1,116,041
----------
7,212,619
----------
Germany -- 8.72%
Bundesrepublik Deutschland
5.250%, due 01/04/08....................... 900,000 973,465
5.625%, due 01/04/28....................... 1,000,000 1,063,064
6.250%, due 01/04/24....................... 357,904 413,326
European Economic Community, 6.500%,
due 03/10/00............................... 567,534 599,286
International Bank of Recon & Dev,
7.125%, due 04/12/05....................... 2,019,603 2,372,536
KFW International Finance, 6.625%,
due 04/15/03............................... 2,800,000 3,154,891
----------
8,576,568
----------
Ireland -- 1.73%
Republic of Ireland, 7.250%,
due 03/18/03............................... 1,482,746 1,700,881
----------
Italy -- 2.73%
Republic of Italy (BTP)
7.750%, due 11/01/06....................... 1,800,000 2,203,537
9.000%, due 10/01/03....................... 387,849 477,026
----------
2,680,563
----------
Netherlands -- 7.32%
LKB Baden-Wuerttemberg Finance,
6.500%, due 09/15/08....................... 818,067 942,382
Netherlands Government
5.500%, due 01/15/28....................... 1,700,000 1,768,989
8.250%, due 02/15/02....................... 3,900,000 4,490,283
----------
7,201,654
----------
Portugal -- 1.19%
Republic of Portugal, 5.625%,
due 04/03/07............................... 1,067,143 1,173,731
----------
Spain -- 4.00%
Kingdom of Spain
7.350%, due 03/31/07....................... 2,150,000 2,597,162
10.000%, due 02/28/05...................... 1,000,000 1,332,773
----------
3,929,935
----------
</TABLE>
===============================================================================
38
<PAGE>
Global Bond Fund -- Schedule of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Value
---------- ------------
<S> <C> <C>
Sweden -- 5.69%
Government of Sweden
6.000%, due 02/09/05..................SEK 15,000,000 $ 1,876,937
6.750%, due 05/05/14.................. 6,900,000 917,582
10.250%, due 05/05/03................. 19,800,000 2,799,777
------------
5,594,296
------------
United Kingdom -- 14.96%
Abbey National Treasury Service,
6.500%, due 03/05/04..................GBP 850,000 1,346,816
British Gas PLC, 8.125%, due 03/31/03 795,000 1,316,248
European Investment Bank, 7.625%,
due 12/07/06.......................... 1,400,000 2,414,029
UK Treasury
7.250%, due 12/07/07.................. 4,800,000 8,553,594
8.000%, due 09/27/13.................. 530,000 1,082,724
------------
14,713,411
------------
Total Global (Ex-U.S.) Bonds............ 77,429,837
------------
Total Bonds (Cost $118,625,590)......... 113,617,023
------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
--------- ------------
<S> <C> <C>
Short-Term Investments -- 6.24%
Investment Companies -- 6.24%
Brinson Supplementary Trust U.S. Cash
Management Prime Fund,
(Cost $6,139,233)................... 6,139,233 $ 6,139,233
------------
Total Investments
(Cost $124,764,823) -- 121.77% (a).. 119,756,256
Liabilities, less cash and
other assets-- (21.77%)............. (21,410,524)
------------
Net Assets-- 100%..................... $ 98,345,732
============
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $124,764,823; and net
unrealized depreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation..................................... $ 503,056
Gross unrealized depreciation..................................... (5,511,623)
------------
Net unrealized depreciation........................... ($ 5,008,567)
============
</TABLE>
(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 June 30,
1999, the value of these securities amounted to $2,236,170 or 2.27% of net
assets.
Resettable Perpetual Preferred: A bond with either no maturity date or a
maturity date that is so far in the future that the bond will pay interest
indefinitely. The issuer generally retains the right to call such a bond.
FORWARD FOREIGN CURRENCY CONTRACTS
The Global Bond Fund had the following open forward foreign currency contracts
as of June 30, 1999:
<TABLE>
<CAPTION>
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
---------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Forward Foreign Currency Buy Contracts
Australian Dollar............................................ 9/1/99 2,500,000 $ 1,655,936 $ 63,936
British Pound................................................ 9/1/99 1,700,000 2,681,177 (25,427)
Canadian Dollar.............................................. 9/1/99 3,100,000 2,096,351 14,976
Danish Kroner................................................ 9/1/99 3,900,000 544,495 676
Euro......................................................... 9/1/99 22,100,000 22,902,978 (1,856,372)
Japanese Yen................................................. 9/1/99 2,510,000,000 20,934,897 (356,029)
Swedish Krona................................................ 9/1/99 18,200,000 2,149,237 (162,901)
Forward Foreign Currency Sale Contracts
British Pound................................................ 9/1/99 11,100,000 17,506,506 344,192
Canadian Dollar.............................................. 9/1/99 1,000,000 676,242 8,896
Danish Kroner................................................ 9/1/99 32,400,000 4,523,497 351,852
Euro......................................................... 9/1/99 5,400,000 5,596,203 247,654
Japanese Yen................................................. 9/1/99 310,000,000 2,585,585 28,750
Swedish Krona................................................ 9/1/99 3,300,000 389,697 14,888
-----------
Total.............................................. ($1,324,909)
===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
39
<PAGE>
Global Bond Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $118,625,590)........................................................ $113,617,023
Affiliated issuers (Cost $6,139,233)............................................................ 6,139,233
Foreign currency, at value (Cost $64,733)......................................................... 65,260
Receivables:
Investment securities sold...................................................................... 15,848,438
Interest........................................................................................ 1,940,121
Fund shares sold................................................................................ 3,474,923
Other assets...................................................................................... 17,566
------------
TOTAL ASSETS............................................................................... 141,102,564
------------
LIABILITIES:
Payables:
Investment securities purchased................................................................. 637,698
Fund shares redeemed............................................................................ 39,306,083
Investment advisory fees........................................................................ 89,477
Accrued expenses................................................................................ 34,638
Due to custodian bank........................................................................... 1,364,027
Net unrealized depreciation on forward foreign currency contracts................................. 1,324,909
------------
TOTAL LIABILITIES.......................................................................... 42,756,832
------------
NET ASSETS........................................................................................... $ 98,345,732
============
NET ASSETS CONSIST OF:
Paid in capital................................................................................... $105,466,609
Accumulated undistributed net investment income................................................... 1,161,994
Distribution in excess of net realized gain....................................................... (1,902,730)
Net unrealized depreciation....................................................................... (6,380,141)
------------
NET ASSETS................................................................................. $ 98,345,732
------------
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based
on net assets of $92,832,427 and 10,117,968 shares issued and outstanding)..................... $ 9.18
============
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on
net assets of $1,084,713 and 118,464 shares issued and outstanding)............................ $ 9.16
============
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share (Based on net assets of
$4,428,592 and 483,424 shares issued and outstanding).......................................... $ 9.16
============
</TABLE>
See accompanying notes to financial statements.
================================================================================
40
<PAGE>
Global Bond Fund -- Financial Statements
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of $13,362 for foreign taxes withheld)............................ $ 6,294,138
Dividends....................................................................... 16,230
----------------
TOTAL INCOME................................................................. 6,310,368
----------------
EXPENSES:
Advisory........................................................................ 957,176
Professional.................................................................... 38,814
Distribution.................................................................... 21,834
Administration.................................................................. 15,889
Other........................................................................... 136,719
----------------
TOTAL EXPENSES............................................................... 1,170,432
----------------
NET INVESTMENT INCOME........................................................ 5,139,936
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on:
Investments.................................................................... 435,436
Foreign currency transactions.................................................. 1,064,191
----------------
Net realized gain............................................................. 1,499,627
----------------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency............................................... (5,039,115)
Forward contracts.............................................................. (968,525)
Translation of other assets and liabilities denominated in foreign currency.... (44,778)
----------------
Change in net unrealized appreciation or depreciation......................... (6,052,418)
----------------
Net realized and unrealized loss................................................ (4,552,791)
----------------
Net increase in net assets resulting from operations............................ $ 587,145
================
</TABLE>
See accompanying notes to financial statements.
================================================================================
41
<PAGE>
Global Bond Fund -- Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income................................................................... $ 5,139,936 $ 3,009,836
Net realized gain (loss)................................................................ 1,499,627 (1,114,801)
Change in net unrealized appreciation or depreciation................................... (6,052,418) (276,626)
------------- -------------
Net increase in net assets resulting from operations.................................... 587,145 1,618,409
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I....................................................................... (5,705,972) (2,070,571)
Brinson Class N....................................................................... (13,166) (98)
UBS Investment Funds Class............................................................ (180,397) (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..................................................... (6,860,802) (3,225,197)
------------- -------------
Capital share transactions:
Shares sold............................................................................. 115,882,090 46,034,839
Shares issued on reinvestment of distributions.......................................... 4,872,310 2,230,731
Shares redeemed......................................................................... (111,795,220) (9,266,587)
------------- -------------
Net increase in net assets resulting from capital share transactions.................... 8,959,180 38,998,983
------------- -------------
TOTAL INCREASE IN NET ASSETS....................................................... 2,685,523 37,392,195
------------- -------------
NET ASSETS:
Beginning of year....................................................................... 95,660,209 58,268,014
------------- -------------
End of year (including accumulated undistributed net investment income of
$1,161,994 and $1,003,399, respectively)............................................... $ 98,345,732 $ 95,660,209
============= =============
</TABLE>
See accompanying notes to financial statements.
================================================================================
42
<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>
July 31, 1995*
Year Ended June 30, Through
-------------------------------
UBS Investment Funds Class 1999 1998 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................................................... 0.34** 0.38** 0.62 0.78
Net realized and unrealized gain (loss)................................. (0.07) (0.18) 0.10 0.15
------- -------- ------- --------
Total income from investment operations............................... 0.27 0.20 0.72 0.93
------- -------- ------- --------
Less distributions:
Distributions from and in excess of net investment income............... (0.42) (0.25) (0.94) (1.37)
Distributions from net realized gain.................................... (0.08) (0.17) (0.19) (0.10)
------- -------- ------- --------
Total distributions................................................... (0.50) (0.42) (1.13) (1.47)
------- -------- ------- --------
Net asset value, end of period............................................ $ 9.16 $ 9.39 $ 9.61 $ 10.02
======= ======== ======= ========
Total return (non-annualized)............................................. 2.58% 2.28% 7.20% 9.17%
Ratios/Supplemental data:
Net assets, end of period (in 000s)..................................... $ 4,429 $ 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............................................ 3.56% 3.98% 4.41% 4.49%***
After expense reimbursement............................................. N/A 4.04% 4.83% 5.24%***
Portfolio turnover rate................................................. 138% 151% 235% 184%
</TABLE>
* Commencement of investment operations
** The net investment income per share data was determined by using average
shares outstanding throughout the period.
*** Annualized
N/A = Not Applicable
See accompanying notes to financial statements.
================================================================================
43
<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 financial highlights of the Brinson Class
I and the Brinson Class N are presented separately. 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 respective fund. Debt securities are valued at the most
recent bid price by using market quotations or independent pricing 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 year ended June 30, 1999,
therefore, no federal income tax provision was required.
F. Distributions To Shareholders: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions. Differences in dividends per share
between the classes are due to distribution expenses. Amounts equal to 14.04%
and 58.92% of the amount taxable as ordinary income qualify for the dividends
received deduction available to corporate shareholders for the Global Fund and
Global Equity Fund, respectively.
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.
===============================================================================
44
<PAGE>
The UBS Investment Funds -- Notes To Financial Statements
- -------------------------------------------------------------------------------
H. Use Of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimates.
2. Investment Advisory Fees And Other Transactions With Affiliates
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, each Fund pays 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 year ended June 30,
1999, 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% $4,403,642 $ --
Global Equity Fund... 0.80 1.00 1.25 1.76 628,067 36,960
Global Bond Fund..... 0.75 0.90 1.15 1.39 957,176 --
</TABLE>
Certain officers of the Funds are also officers and directors of the Advisor.
All officers serve without direct compensation from the Funds. Trustees' fees
paid to unaffiliated trustees for the year ended June 30, 1999 were $11,680,
$4,993 and $4,380 for the Global Fund, Global Equity Fund and Global Bond Fund,
respectively.
The Global Fund invests in shares of certain affiliated investment companies
also sponsored by the Advisor. These investments represented 19.53% of the
Fund's total net assets at June 30, 1999. Activity for the year ended June 30,
1999 was as follows:
<TABLE>
<CAPTION>
Net Change In
Sales Realized Net Unrealized Interest
Affiliates Purchases Proceeds Gain/(loss) Gain/(loss) Income Value
- ---------- ------------ ------------ ----------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Brinson Post-Venture Fund.............. $ 1,500,000 $ 1,949,866 $ 448,329 $ (850,533) $ -- $ 7,660,445
Brinson High Yield Fund................ 3,900,000 6,400,682 1,016,827 (840,129) -- 14,221,334
Brinson Emerging Markets Equity Fund... -- 7,602,574 3,701,103 1,483,000 -- 17,543,286
Brinson Emerging Markets Debt Fund..... 6,400,000 15,503,323 4,019,383 (699,055) -- 24,713,550
Brinson Supplementary Trust U.S. Cash
Management Prime Fund.................. 319,658,653 287,563,973 -- -- 500,538 32,094,680
</TABLE>
The Global Equity Fund and Global Bond Fund also 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 charges no management fees.
Distributions received from the Supplementary Trust are reflected as interest
income in the statement of operations. Amounts relating to those investments at
June 30, 1999 and for the year then ended were as follows:
<TABLE>
<CAPTION>
% of
Sales Interest Net
Affiliates Purchases Proceeds Income Value Assets
- ---------- ------------ ----------- -------- ----------- ------
<S> <C> <C> <C> <C> <C>
Global Equity Fund........................................ $26,901,425 $25,879,238 $ 43,064 $ 1,022,188 1.18%
Global Bond Fund.......................................... 77,341,746 71,202,513 276,943 6,139,233 6.24%
</TABLE>
3. Investment Transactions
Investment transactions for the year ended June 30, 1999, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
Proceeds
Purchases From Sales
------------ ------------
<S> <C> <C>
Global Fund.......................................................................................... $555,636,189 $775,205,447
Global Equity Fund................................................................................... 68,882,280 65,637,189
Global Bond Fund..................................................................................... 194,378,936 160,439,778
</TABLE>
===============================================================================
45
<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 year ended June 30, 1999, 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 June 30, 1999 were as follows:
Value of Loaned Cash Collateral
Securities Received
--------------- ---------------
Global Fund................................. $90,987,855 $97,474,174
=============== ===============
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 each
of the Funds. 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 balance of the line of credit. During the
year ended June 30, 1999, the Global Equity and Global Bond Funds had no
borrowings under the agreement. During the year ended June 30, 1999, the Global
Fund had borrowings of $33,900,000, $62,000,000 and $47,400,000 outstanding for
1 day each under the agreement.
================================================================================
46
<PAGE>
The Ubs Investment Funds -- Notes To Financial Statements
- --------------------------------------------------------------------------------
9. CAPITAL TRANSACTIONS
Capital stock transactions were as follows:
<TABLE>
<CAPTION>
Global Fund
-------------------------------------------------------------
Year Ended Year Ended
June 30, 1999 June 30, 1998
-------------------------------------------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................................... 33,634,272 $404,497,836 18,850,057 $244,898,004
Brinson Class N................................... 31,878 401,372 90,370 1,177,290
UBS Investment Funds Class........................ 469,115 5,622,287 803,666 10,347,586
---------- ------------ ---------- ------------
Total Sales.................................. 34,135,265 $410,521,495 19,744,093 $256,422,880
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I................................... 3,914,936 $ 45,438,730 5,179,618 $ 62,332,662
Brinson Class N................................... 12,826 148,599 769 9,625
UBS Investment Funds Class........................ 201,293 2,326,850 217,810 2,607,910
---------- ------------ ---------- ------------
Total Dividend Reinvestment.................. 4,129,055 $ 47,914,179 5,398,197 $ 64,950,197
========== ============ ========== ============
Redemptions:
Brinson Class I................................... 50,809,625 $617,784,220 16,402,396 $209,137,318
Brinson Class N................................... 4,388 53,226 21 276
UBS Investment Funds Class........................ 1,220,493 14,718,874 641,736 8,247,175
---------- ------------ ---------- ------------
Total Redemptions............................ 52,034,506 $632,556,320 17,044,153 $217,384,769
========== ============ ========== ============
Global Equity Fund
-------------------------------------------------------------
Year Ended Year Ended
June 30, 1999 June 30, 1998
-------------------------------------------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I................................... 2,413,314 $ 30,206,170 1,466,054 $ 17,934,645
Brinson Class N................................... 15,911 200,000 -- --
UBS Investment Funds Class........................ 352,164 4,402,461 1,779,376 22,282,095
--------- ------------ --------- ------------
Total Sales.................................. 2,781,389 $ 34,808,631 3,245,430 $ 40,216,740
========= ============ ========= ============
Dividend Reinvestment:
Brinson Class I................................... 54,126 $ 661,376 126,859 $ 1,426,171
Brinson Class N................................... 426 5,130 9 93
UBS Investment Funds Class........................ 66,261 795,940 442,472 4,952,413
--------- ------------ --------- ------------
Total Dividend Reinvestment.................. 120,813 $ 1,462,446 569,340 $ 6,378,677
========== ============ ========= ============
Redemptions:
Brinson Class I................................... 1,142,595 $ 14,484,716 3,546,702 $ 44,596,092
Brinson Class N................................... -- -- -- --
UBS Investment Funds Class........................ 1,860,700 22,842,212 2,339,080 28,946,495
---------- ------------ --------- ------------
Total Redemptions............................ 3,003,295 $ 37,326,928 5,885,782 $ 73,542,587
========== ============ ========= ============
</TABLE>
================================================================================
47
<PAGE>
The UBS Investment Funds -- Notes To Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Global Bond Fund
-------------------------------------------------------------------
Year Ended Year Ended
June 30, 1999 June 30, 1998
-------------------------------------------------------------------
Shares Value Shares Value
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I.................. 11,338,295 $110,539,879 4,561,105 $43,233,367
Brinson Class N.................. 117,021 1,120,104 860 8,169
UBS Investment Funds Class....... 432,357 4,222,107 293,533 2,793,303
------------- -------------- -------------- --------------
Total Sales.................. 11,887,673 $115,882,090 4,855,498 $46,034,839
============= ============== ============== ==============
Dividend Reinvestment:
Brinson Class I.................. 484,490 $ 4,679,150 220,347 $ 2,058,040
Brinson Class N.................. 579 5,581 12 115
UBS Investment Funds Class....... 19,366 187,579 18,525 172,576
------------- -------------- --------------- --------------
Total Dividend Reinvestment.. 504,435 $ 4,872,310 238,884 $ 2,230,731
============= ============== =============== ==============
Redemptions:
Brinson Class I.................. 11,403,020 $107,591,860 699,882 $ 6,667,104
Brinson Class N.................. 90 871 22 210
UBS Investment Funds Class....... 434,492 4,202,489 273,680 2,599,273
-------------------------------------------------------------------
Total Redemptions............ 11,837,602 $111,795,220 973,584 $ 9,266,587
===================================================================
</TABLE>
================================================================================
48
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds--
Global Fund
Global Equity Fund
Global Bond Fund
We have audited the accompanying statements of assets and liabilities, including
the schedule of investments, of The Brinson Funds--Global Fund, Global Equity
Fund and Global Bond Fund as of June 30, 1999, the related statements of
operations and cash flows (Global Fund only) for the year then ended and changes
in net assets and the financial highlights for the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--Global Fund, Global Equity Fund and Global Bond Fund at June 30,
1999, the results of their operations and cash flows (Global Fund only) for the
year then ended and the changes in their net assets and the financial highlights
for the periods indicated therein in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
August 11, 1999
================================================================================
49
<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 (Ex-U.S.) Equity Fund
Annual Report
June 30, 1999
<PAGE>
Trustees And Officers
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
Trustees
Walter E. Auch
Frank K. Reilly, CFA
Edward M. Roob
Officers
Frank K. Reilly, CFA Carolyn M. Burke, CPA
Chairman of the Board Secretary and Treasurer
E. Thomas McFarlan David E. Floyd, CPA
President Assistant Secretary
Thomas J. Digenan, CFA, CPA Mark F. Kemper
Vice President Assistant Secretary
Debra L. Nichols
Vice President
=================================================================
1
<PAGE>
The Fund's Advisor -- Brinson Partners, Inc.
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
Since the entrepreneurial founding of our organization nearly
twenty years ago, we have focused our collective energy on two
goals: creating meaningful value-added investment performance;
and providing our clients with unrivaled, custom-tailored service
of the highest quality.
Now, in 1999, more than 1,100 employees located in 11 countries
around the world continue to deliver investment strategies that
meet our clients' needs. With an unrelenting focus on our goals,
we have grown into one of the world's premier investment
management organizations, with approximately
USD 280 billion in assets under management, and industry
recognition as a global thought leader. In North America, we make
our services available to institutions and individual investors
through the Brinson Family of Funds. The Brinson Funds are
diversified, institutionally priced mutual funds that provide
investors convenient access to our global investment expertise
and services.
Within a framework of integrated capital markets, we select
portfolio investments by focusing on long-term investment
fundamentals. Investment performance for our clients is maximized
within and across asset classes through a comprehensive
understanding of global investment markets and their
interrelationships. We apply a systematic, disciplined approach
to valuing investments and combine the seasoned judgement of our
global investment teams to construct optimal portfolios--
balancing considerations for both risk and return.
Brinson Partners, Inc. is a member of the UBS Brinson Division,
the institutional asset management division of UBS AG.
=================================================================
2
<PAGE>
Table Of Contents
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
<TABLE>
<S> <C>
Shareholder Letter......................................... 4
Global Economic and Market Highlights...................... 5
Global (Ex-U.S.) Equity Fund............................... 6
Schedule of Investments.................................... 9
Financial Statements....................................... 13
Financial Highlights....................................... 16
Notes to Financial Statements.............................. 17
Report of Independent Auditors............................. 20
</TABLE>
=================================================================
3
<PAGE>
Shareholder Letter
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
July 26, 1999
Dear Shareholder:
We are pleased to present the Annual Report for the Global (Ex-
U.S.) Equity Fund covering the year ended June 30, 1999. This
report focuses on the current international economic outlook as
well as our current strategy and performance update.
Global Capital markets are becoming more integrated and global
industries more homogenous. These trends have important
implications for the management of both Global Equities and
Global (Ex-U.S.) Equities. Allocation to, and the management of,
industry exposure are increasing in relative importance,
providing investors with important investment characteristics
that require thoughtful attention.
The accelerating globalization of business enterprise and
integration of capital markets will also create a change in
active equity portfolio management. During the coming years,
capital market integration will reduce the market inefficiency
produced by country segmentation. The period during which this
inefficiency is reduced presents a compelling active management
opportunity. To fully capture this opportunity for excess
returns, portfolio mandates must be structured to allow active
industry management across countries and active stock selection
across the domestic/foreign boundary.
The Global (Ex-U.S) Equity Fund is an actively managed fund that
provides integrated asset management across and within security
markets. The Global (Ex-U.S.) Equity Fund employs a value-
oriented investment philosophy. The Fund also uses the resources
of our entire worldwide research team. All of our analysts apply
the same value philosophy to their work. All of our portfolios
are structured to specific objectives and focused upon both risk
and return considerations in the context of full investment
cycles. The enclosed report highlights the investment
characteristics and the performance of the Fund.
We very much appreciate your continued trust and the confidence
you have placed in the UBS Investment Funds, and look forward to
a long lasting, quality relationship.
Sincerely,
/s/ Hanspeter A. Walder /s/ Raymond Simon
----------------------- ------------------
Hanspeter A. Walder Raymond Simon
Executive Director Managing Director
Private Banking Private Banking
=================================================================
4
<PAGE>
Global Economcic And Market Highlights
- -------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
Thanks to a weaker euro and better prospects for the world
economy, growth in Euroland is picking up steam after having
experienced a slowdown in the first half of 1999. Business
confidence is supported by ever stronger commitments of the
European governments to implement structural reforms. This should
eventually create a better environment for the labor market,
boost employment and lift consumers' confidence. Due to
divergence of inflation and GDP growth rates, the ECB is still
facing a very heterogeneous situation, ranging from above average
growth and below average inflation (as in France) to below
average growth and above average inflation (as in Italy). No
signs of strain have emerged from this situation so far.
In Japan, first quarter growth (at 7.9% QI/99 over QIV/98
annualized rate) caught market attention. The positive
expectations shared by many market participants depend heavily on
the government's massive injection of public funds rather than on
increased productivity resulting from structural reforms
undertaken in the private sector. Only the latter would allow the
Japanese economy to move toward a sustainable long-term growth
path. The Bank of Japan continues its policy of zero overnight
call rates, which it sees as an alternative for full-fledged
money supply targeting.
Growing current account imbalances are emerging. A healthy
American economy is attracting capital from all over the world,
but at the same time private savings are falling in the U.S. (and
this is only partly compensated by higher public savings). The
result is a widening current account deficit. With growth picking
up in the rest of the world, capital flows are likely to be
rerouted. This should alleviate the current account problem and
weaken the USD.
Global (Ex-U.S.) Equity Environment
<TABLE>
<CAPTION>
6 months 1 year 3 years 7/31/95*
Major Markets ended ended ended to
Total Return in U.S. Dollar Hedged Terms 6/30/99 6/30/99 6/30/99 6/30/99
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MSCI World Ex USA (Free) Index 14.26% 9.72% 16.34% 18.18%
Europe Ex U.K. 9.08 3.60 31.73 29.19
U.K. 7.64 8.50 20.34 17.80
Canada 14.41 3.08 18.60 17.38
Japan 32.60 19.51 1.42 9.03
Asia Ex Japan 33.51 68.29 -4.08 0.13
------------------------------------------------------------------------------------------------------------------
<CAPTION>
6 months 1 year 3 years 7/31/95*
Major Currencies ended ended ended to
Percent Change Relative to U.S. Dollars 6/30/99 6/30/99 6/30/99 6/30/99
------------------------------------------------------------------------------------------------------------------
Yen -6.81% 14.66% -3.23% -7.81%
Pound -5.26 -5.53 0.48 -0.38
Euro** -12.18 -4.83 -7.07 -7.79
Canadian Dollar 3.78 -0.64 -2.65 -1.91
------------------------------------------------------------------------------------------------------------------
</TABLE>
*Performance inception date of the UBS Investment Fund -- Global
(Ex-U.S.) Equity
**Deutschemark prior to 1/1/99
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]
In managing the Global (Ex-U.S.) Equity Fund, we apply our
fundamental price/value philosophy with an integrated view of
global capital markets. We add value by focusing on four key
portfolio management activities. We select the best securities,
focus on industries that have the best earnings prospects,
concentrate investments in countries with above average political
and structural environments, and control exposure to various
global currencies. We manage the portfolio within predefined
ranges (relative to the benchmark) and use both qualitative and
quantitative techniques to control portfolio risk.
Since its inception on July 31, 1995, the UBSInvestment Fund--
Global (Ex-U.S.) Equity has produced an annualized return of
10.43% compared to the 8.64% return of its benchmark, the MSCI
World Ex USA (Free) Index. These results were achieved at a risk
level or volatility well below that of the benchmark at 13.07%
versus 14.43% respectively. For the most recent six months, the
Fund has returned 2.00% versus the benchmark return of 4.34%.
The main driver of the Fund's relative underperformance on a
year-to-date basis was unfavorable security selection decisions.
We continued to underweight many of the high-flying internet
stocks and stocks in the growth sector of the market. While these
stocks are overvalued in our opinion, and we did see some
correction in favor of value stocks in the second quarter, growth
stocks continued to drive the overall markets higher during the
first half of 1999.
Most European equity markets were very strong in the first
quarter, and we took that strength as an opportunity to reduce
our overweight position in Europe. Proceeds from the sales were
deployed in Japan, where recent macroeconomic policy moves have
recently served to support higher asset prices. The Japan equity
position is now approximately equal to the benchmark weighting.
During the first quarter we also increased the Fund's currency
exposure to the euro, while decreasing exposure to the U.K.
sterling and Japanese yen.
Renewed investor confidence in global growth boosted economically
sensitive stocks during the second quarter. Value stocks
outperformed growth by a wide margin opposing a long-running
trend of overperformance by growth issues. An improving economic
picture coupled with increased profitability for value stocks
suggests that there is scope for continued outperformance of
growth stocks in the coming months. Our work continues to suggest
that many large capitalization growth stocks remain significantly
overvalued.
As a result, the Fund's largest industry overweights (relative to
the benchmark) are to producer goods, basic materials and
consumer stocks. The largest underweights are maintained in
financials, telecommunication services & equipment and
information technology. With respect to country strategy, the
Fund's largest overweights are to Australia/New Zealand, the U.K.
and Germany, with the largest underweights in Hong Kong, Canada
and Switzerland.
Strong price increases among the European cyclicals prompted us
to pare back on certain positions near the end of the second
quarter. The unexciting outlook for the British steel industry
prompted us to eliminate our position in British Steel after
taking advantage of a recent rebound in the stock price. We
maintain an overweight in cyclicals however, due to some strong
value opportunities in Australia and New Zealand, a new position
in the German tire manufacturer, Continental, and a position in
Swiss construction and building group, Holderbank.
================================================================================
6
<PAGE>
Global (Ex-U.S.) Equity Fund
- --------------------------------------------------------------------------------
[UBS LOGO APPEARS HERE]
<TABLE>
<CAPTION>
TOTAL RETURN
6 months 1 year 3 years 7/31/95*
ended ended ended to
6/30/99 6/30/99 6/30/99 6/30/99
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UBS INVESTMENT FUND -- GLOBAL (EX-U.S.) EQUITY 2.00% 2.78% 8.41% 10.43%
------------------------------------------------------------------------------------------------------------------
MSCI World Ex USA (Free) Index 4.34 7.18 8.90 8.64
------------------------------------------------------------------------------------------------------------------
</TABLE>
*Inception date of the UBS Investment Fund -- Global (Ex-U.S.)
Equity 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 June 30, 1999. 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
-------------------------------------------------
UBS Fund MSCI 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
-------------------------------------------------
1/31/99 14,415 13,257
-------------------------------------------------
2/28/99 13,945 12,924
-------------------------------------------------
3/31/99 14,331 13,458
-------------------------------------------------
4/30/99 14,994 14,039
-------------------------------------------------
5/31/99 14,198 13,321
-------------------------------------------------
6/30/99 14,752 13,835
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
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]
<TABLE>
<CAPTION>
INDUSTRY DIVERSIFICATION
As a Percent of Net Assets
As of June 30, 1999
- ---------------------------------------------------------
<S> <C>
GLOBAL (Ex-U.S.) EQUITIES
Aerospace & Military......................... 1.05%
Airlines..................................... 1.03
Appliances &Households....................... 2.01
Autos/Durables............................... 2.69
Banking...................................... 10.06
Beverages &Tobacco........................... 2.98
Broadcasting & Publishing.................... 4.06
Building Materials........................... 0.98
Business & Public Service.................... 3.73
Chemicals.................................... 4.26
Construction................................. 0.64
Data Processing.............................. 1.45
Electric Components.......................... 1.27
Electronics.................................. 5.17
Energy....................................... 6.05
Financial Services........................... 2.39
Food & House Products........................ 4.00
Forest Products.............................. 1.06
Health &Personal Care........................ 6.36
Industrial Components........................ 2.37
Insurance.................................... 5.14
Leisure & Tourism............................ 0.32
Machinery &Engineering....................... 0.75
Merchandising................................ 4.85
Metals-Steel................................. 0.40
Multi-Industry............................... 1.67
Non-Ferrous Metals........................... 1.76
Real Estate.................................. 0.72
Recreation................................... 0.92
Telecommunications........................... 8.39
Textiles & Apparel........................... 0.19
Transportation............................... 1.28
Utilities.................................... 5.15
Wholesale & International Trade.............. 0.56
------
Total Global (Ex-U.S.) Equities........... 95.71
CONVERTIBLEBONDS............................. 0.03
SHORT-TERM INVESTMENTS....................... 0.87
------
TOTAL INVESTMENTS......................... 96.61
CASH AND OTHER ASSETS,
LESS LIABILITIES.......................... 3.39
------
NET ASSETS................................... 100.00%
======
</TABLE>
MARKET AND CURRENCY STRATEGY
As of June 30, 1999
<TABLE>
<CAPTION>
Fund
-------------------
Market Currency
Strategy Strategy Index
- --------------------------------------------------
<S> <C> <C> <C>
Australia 5.74% 8.24% 2.75%
Austria 0.16 0.00 0.00
Belgium 1.30 0.00 0.00
Canada 2.91 4.18 4.18
Denmark 0.38 0.73 0.73
Euro 0.00 43.79 35.36
Finland 1.94 0.00 0.00
France 9.50 0.00 0.00
Germany 10.80 0.00 0.00
Hong Kong 0.00 0.00 2.43
Italy 2.70 0.00 0.00
Japan 23.01 15.01 23.01
Netherlands 4.94 0.00 0.00
New Zealand 0.70 0.70 0.19
Norway 0.23 0.40 0.40
Portugal 0.42 0.00 0.00
Singapore 0.92 0.92 0.92
Spain 2.26 0.00 0.00
Sweden 2.75 6.19 2.19
Switzerland 5.49 6.49 6.49
U.K. 23.85 13.35 21.35
- --------------------------------------------------
100.00% 100.00% 100.00%
</TABLE>
Top Ten Global (Ex-U.S.) Equity Holdings
As Of June 30, 1999
<TABLE>
<CAPTION>
Percent of
Net Assets
- ---------------------------------------------------
<S> <C>
1. BPAmoco PLC 1.67%
2. Veba AG 1.65
3. ING Groep NV 1.46
4. Nestle S.A. (Reg.) 1.40
5. Nippon Telegraph & Telephone Corp. 1.27
6. Lloyds TSB Group PLC 1.24
7. Bayer AG 1.24
8. Siemens AG 1.24
9. Glaxo Wellcome PLC 1.20
10. Novartis AG (Reg.) 1.20
- ---------------------------------------------------
</TABLE>
================================================================================
8
<PAGE>
Global (Ex-U.S.) Equity Fund -- Schedule of Investments
June 30, 1999
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- ----------
<S> <C> <C>
Global (Ex-U.S.) Equities -- 95.71%
Australia -- 5.79%
Amcor Ltd................................. 85,740 $ 476,598
Amp Limited............................... 116,500 1,273,573
Brambles Industries Ltd................... 37,040 975,769
Broken Hill Proprietary Co., Ltd.......... 244,720 2,834,657
CSR Ltd................................... 350,590 1,002,481
David Jones Ltd........................... 334,200 327,387
Lend Lease Corp., Ltd..................... 92,296 1,267,207
National Australia Bank Ltd............... 221,648 3,667,726
News Corp. Ltd............................ 373,588 3,187,417
News Corp. Ltd., Preferred................ 157,179 1,197,465
Orica Ltd................................. 54,020 295,022
Qantas Airways Ltd........................ 473,538 1,564,042
QBE Insurance Group Ltd................... 211,823 806,184
Rio Tinto Ltd............................. 97,060 1,591,455
Santos Ltd................................ 241,340 790,729
Telstra Corp. Ltd......................... 632,310 3,623,185
Westpac Banking Corp., Ltd................ 373,841 2,424,968
WMC Ltd................................... 187,070 803,603
Woolworth's Ltd........................... 200,960 668,403
----------
28,777,871
----------
Austria -- 0.14%
Austria Tabakwerke AG..................... 12,300 716,702
----------
Belgium -- 1.25%
Fortis (B)................................ 149,047 4,680,535
KBC Bancassurance Holding................. 25,510 1,512,737
----------
6,193,272
----------
Canada -- 2.79%
Agrium, Inc............................... 74,680 650,883
Alcan Aluminum Ltd........................ 31,240 986,737
Bank of Montreal.......................... 19,210 694,369
Canadian National Railway Co.............. 19,190 1,282,272
Canadian Pacific Ltd...................... 57,614 1,362,401
Hudson's Bay Co........................... 60,120 670,211
Imasco, Ltd............................... 31,200 836,862
Imperial Oil Ltd.......................... 47,960 907,290
Magna International, Inc., Class A........ 9,860 555,254
Newbridge Networks Corp. (b).............. 30,610 868,604
NOVA Chemicals Corp....................... 8,800 205,121
NOVA Corp................................. 26,521 618,184
Potash Corporation of Saskatchewan, Inc... 7,660 394,101
Royal Bank of Canada...................... 24,620 1,081,211
Seagram Co., Ltd.......................... 8,300 411,327
Shaw Communications, Inc., Class B........ 35,580 1,401,469
TransCanada Pipelines Ltd................. 42,876 601,093
Westcoast Energy, Inc..................... 17,120 334,280
----------
13,861,669
----------
Denmark -- 0.37%..........................
Tele Danmark A/S.......................... 36,800 1,811,346
----------
Finland -- 1.86%
Merita Ltd., Class A...................... 357,400 2,030,912
Nokia Oyj................................. 49,060 4,300,624
UPM-Kymmene Corp.......................... 102,200 2,930,088
---------
9,261,624
---------
France -- 8.68%
Aerospatiale Matra........................ 63,150 $1,455,579
Air Liquide............................... 15,632 2,458,495
Banque Nationale de Paris................. 27,686 2,307,048
Carrefour S.A............................. 13,970 2,053,035
Cie de Saint Gobain....................... 10,813 1,722,898
Elf Aquitaine S.A......................... 26,244 3,851,412
France Telecom S.A........................ 44,530 3,363,917
Air France (b)............................ 95,890 1,710,820
Groupe Danone............................. 11,360 2,928,892
Michelin, Class B......................... 28,783 1,177,561
Rhone-Poulenc, Class A.................... 43,280 1,977,762
SEITA..................................... 83,099 4,799,200
Societe Generale.......................... 11,593 2,043,256
Suez Lyonnaise des Eaux S.A............... 16,052 2,895,369
Thomson CSF............................... 95,800 3,329,511
Total S.A., Class B....................... 21,443 2,766,482
Vivendi................................... 28,195 2,284,038
----------
43,125,275
----------
Germany -- 10.55%
Allianz AG................................ 15,308 4,278,315
Bayer AG.................................. 148,206 6,167,289
Continental AG............................ 90,800 2,172,495
DaimlerChrysler AG........................ 49,513 4,325,015
Deutsche Bank AG.......................... 87,591 5,338,656
Deutsche Telekom AG....................... 98,910 4,156,740
Deutsche Telekom AG, Rights (b)........... 100,610 19,714
Dresdner Bank AG.......................... 88,030 3,422,607
Mannesmann AG............................. 34,250 5,121,694
SAP AG.................................... 4,280 1,467,643
Siemens AG................................ 79,940 6,166,671
Veba AG................................... 138,638 8,178,305
Volkswagen AG............................. 25,506 1,645,862
----------
52,461,006
----------
Italy -- 2.60%
Assicurazioni Generali.................... 94,446 3,272,712
ENI Spa................................... 688,000 4,108,204
ENI Spa ADR............................... 11,080 664,800
La Rinascente Spa......................... 208,140 1,575,566
Montedison Spa............................ 849,305 1,383,903
San Paolo-imi, Spa........................ 141,610 1,927,760
----------
12,932,945
----------
Japan -- 22.25%
Acom Co., Ltd............................. 24,400 2,106,576
Amada Co., Ltd............................ 127,000 897,100
Bank of Tokyo-Mitsubushi, Ltd............ 208,000 2,960,872
Bridgestone Corp.......................... 65,000 1,965,466
Canon, Inc............................... 102,000 2,932,584
Citizen Watch Co., Ltd.................... 117,000 1,014,954
Dai Nippon Printing Co., Ltd.............. 117,000 1,870,415
Daiichi Pharmaceutical Co., Ltd........... 103,000 1,598,100
Daikin Industries Ltd..................... 245,000 2,843,895
Daiwa House Industry Co., Ltd............. 61,000 641,548
East Japan Railway Co..................... 361 1,938,615
Fanuc..................................... 50,700 2,722,654
Fuji Photo Film........................... 34,000 1,286,517
Fujitsu................................... 213,000 4,284,988
Honda Motor Co............................ 88,000 3,729,676
</TABLE>
================================================================================
9
<PAGE>
Global (Ex-U.S.) Equity Fund -- Schedule of Investments
June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- -----------
<S> <C> <C>
Japan -- continued
Hoya Corp................................. 28,000 $1,579,974
Ito Yokado Co., Ltd....................... 60,000 4,015,202
Kaneka Corp............................... 125,000 1,177,297
Kao Corp.................................. 81,000 2,275,281
Kirin Brewery Co., Ltd.................... 137,000 1,641,193
Kokuyo.................................... 41,000 660,525
Kuraray Co., Ltd.......................... 154,000 1,852,479
Marui Co., Ltd............................ 66,000 1,090,549
Matsushita Electric Industrial Co......... 149,000 2,892,845
Mitsubishi Estate Co., Ltd................ 238,000 2,322,191
Mitsubishi Corp........................... 410,000 2,777,594
NGK Insulators............................ 205,000 2,140,780
Nintendo Corp., Ltd....................... 14,500 2,037,715
Nippon Denso Co., Ltd..................... 106,000 2,154,329
Nippon Meat Packers, Inc................. 98,000 1,279,247
Nippon Steel Co........................... 865,000 2,008,138
Nippon Telegraph & Telephone Corp......... 544 6,337,079
Nomura Securities Co., Ltd................ 217,000 2,540,392
Obayashi Corp............................. 209,000 1,051,561
Osaka Gas Co.............................. 578,000 1,962,640
Sankyo Co., Ltd........................... 91,000 2,293,044
Sanwa Bank Ltd............................ 146,000 1,436,600
Secom Co., Ltd............................ 29,000 3,018,837
Sega Enterprises Ltd...................... 16,100 212,955
Sekisui House Ltd......................... 138,000 1,488,995
Shin-Etsu Chemical Co., Ltd.............. 25,000 836,500
Sony Corp................................. 28,800 3,105,089
Sumitomo Bank............................. 148,000 1,835,327
Sumitomo Chemical Co...................... 329,000 1,508,551
Sumitomo Electric Industries.............. 140,000 1,591,540
Taiheiyo Cement Corp...................... 600 1,720
Takeda Chemical Industries................ 77,000 3,568,820
TDK Corp.................................. 22,000 2,012,062
Tokio Marine & Fire Insurance Co.......... 115,000 1,249,380
Tokyo Electric Power...................... 129,400 2,731,469
Toshiba Corp.............................. 295,000 2,103,313
Toyota Motor Corp......................... 116,000 3,670,522
Yamato Transport Co., Ltd................ 76,000 1,324,851
-----------
110,580,546
-----------
Netherlands -- 4.70%
Elsevier NV............................... 301,170 3,494,212
Heineken NV............................... 23,602 1,208,518
ING Groep NV.............................. 134,000 7,255,195
Koninklijke KPN NV........................ 84,012 3,942,192
Royal Dutch Petroleum Co.................. 80,180 4,696,771
Unilever NV............................... 41,143 2,772,851
-----------
23,369,739
-----------
New Zealand -- 0.92%
Auckland International Airport Ltd........ 223,210 343,009
Carter Holt Harvey Ltd.................... 325,940 390,337
Fletcher Challenge Paper.................. 500,840 374,207
Lion Nathan Ltd........................... 251,670 602,786
Telecom Corp. of New Zealand Ltd.......... 670,890 2,879,585
-----------
4,589,924
-----------
Norway -- 0.37%
Norsk Hydro ASA........................... 20,510 $ 773,766
Norske Skogindustrier ASA................. 29,150 1,073,801
----------
1,847,567
----------
Portugal -- 0.40%
EDP Electricidade de Portugal S.A......... 111,000 1,998,721
----------
Singapore -- 0.91%
Singapore Press Holdings Ltd.............. 181,975 3,099,721
United Overseas Bank Ltd. (Frgn.)......... 203,000 1,418,913
----------
4,518,634
----------
Spain -- 2.17%
Banco Popular Espanol S.A................. 27,615 1,986,435
Banco Santander Central Hispano, S.A...... 317,557 3,307,715
Endesa S.A................................ 100,186 2,136,695
Telefonica S.A. (b)....................... 69,915 3,367,947
----------
10,798,792
----------
Sweden -- 2.58%
Electrolux AB, B Shares.................. 191,870 4,017,038
Investor AB, B Shares..................... 179,480 2,005,481
Nordbanken Holding AB..................... 231,960 1,355,965
Swedish Match AB.......................... 655,980 2,337,826
Ericsson LM, B Shares..................... 96,600 3,096,154
----------
12,812,464
----------
Switzerland -- 5.24%
Adecco S.A................................ 2,036 1,090,948
Holderbank Financiere Glarus AG, B Shares. 1,795 2,118,760
Holderbank Financiere Glarus AG, Rights... 1 15
Nestle S.A. (Reg.)........................ 3,854 6,943,943
Novartis AG (Reg.)........................ 4,093 5,976,528
Roche Holding AG (Gen.)................... 512 5,262,936
Swiss Reinsurance Co. (Reg.).............. 341 649,273
Swisscom AG (Reg.)........................ 10,674 4,016,654
----------
26,059,057
----------
United Kingdom -- 22.14%
Allied Zurich PLC......................... 210,252 2,643,064
AstraZeneca Group PLC..................... 62,234 2,407,349
Barclays PLC.............................. 105,230 3,062,021
BOC Group PLC............................. 256,450 5,012,579
Boots Company PLC......................... 176,340 2,094,454
British Aerospace PLC..................... 66,000 428,365
British Airways PLC....................... 268,000 1,849,259
BP Amoco PLC.............................. 463,475 8,306,606
British Telecommunications PLC............ 183,000 3,066,346
Charter PLC............................... 461,988 2,709,009
Coats Viyella PLC......................... 1,154,489 928,104
Diageo PLC................................ 297,935 3,111,317
FKI PLC................................... 1,103,225 3,426,884
General Electric Co. PLC.................. 561,240 5,723,869
Glaxo Wellcome PLC........................ 215,260 5,982,084
Greenalls Group PLC....................... 283,375 1,585,721
House of Fraser PLC....................... 555,090 765,611
John Mansfield Group PLC.................. 108,500 13,682
Lloyds TSB Group PLC...................... 456,545 6,188,977
Marks & Spencer PLC....................... 1,013,550 5,863,380
Mirror Group PLC.......................... 650,240 2,525,317
National Power PLC........................ 423,000 3,080,486
</TABLE>
================================================================================
10
<PAGE>
GLobal (Ex-U.S.) Equity Fund -- Schedule Of Investments
June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
-------- ----------
<S> <C> <C>
UNITED KINGDOM -- continued
Nycomed Amersham PLC........................................ 363,090 $ 2,524,002
Peninsular & Oriental Steam Navigation Co................... 121,986 1,831,521
Pennon Group PLC............................................ 177 2,963
Prudential Corp. PLC........................................ 354,820 5,223,863
Reckitt & Colman PLC........................................ 168,000 1,751,765
Reed International PLC...................................... 316,190 2,109,512
Rio Tinto Ltd............................................... 318,890 5,345,831
RJB Mining PLC.............................................. 476,840 394,611
Royal & Sun Alliance Insurance Group PLC.................... 163,794 1,469,086
Sainsbury (J.) PLC.......................................... 120,950 762,610
Scottish & Southern Energy PLC.............................. 448,720 4,590,468
Tesco PLC................................................... 1,647,830 4,240,357
Thames Water PLC............................................ 139,589 2,213,533
Unilever PLC................................................ 217,000 1,930,903
United News & Media PLC..................................... 327,580 3,149,808
Yorkshire Water PLC......................................... 249,000 1,730,911
------------
110,046,228
------------
Total Global (Ex-U.S.) Equities
(Cost $398,136,572)................................. 475,763,382
------------
<CAPTION>
Face
Amount
------
<S> <C> <C>
Convertible Bonds -- 0.03%
AUSTRALIA -- 0.03%
Burns, Philp Treasury, 7.50%,
due 08/14/03.............................................AUD 1,228,664 162,651
Burns, Philp & Co., Ltd., Warrants (b)...................... 1,228,664 --
-----------
Total Convertible Bonds (Cost $147,071)..................... 162,651
-----------
<CAPTION>
Shares Value
-------- ----------
<S> <C> <C>
Short-Term Investments Companies -- 0.87%
Short-Term Investments Companies -- 0.87%
Brinson Supplementary Trust U.S.
Cash Management Prime Fund
(Cost $4,300,836).......................................... 4,300,836 $ 4,300,836
------------
Total Investments
(Cost $402,584,479) -- 96.61% (a).......................... 480,226,869
Cash and other assets, less liabilities -- 3.39%............ 16,850,002
------------
Net Assets -- 100%.......................................... $497,076,871
============
</TABLE>
See accompanying notes to schedule of investments.
================================================================================
11
<PAGE>
GLobal (Ex-U.S.) Equity Fund -- Schedule Of Investments
June 30, 1999
- -------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Aggregate cost for federal income tax purposes was $402,584,479; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation....................................... $ 92,641,130
Gross unrealized depreciation....................................... (14,998,740)
------------
Net unrealized appreciation.................................... $ 77,642,390
------------
</TABLE>
(b) Non-income producing security
FORWARD FOREIGN CURRENCY CONTRACTS
The Global (Ex-U.S.) Equity Fund had the following open forward foreign
currency contracts as of June 30, 1999:
<TABLE>
<CAPTION>
Settlement Local Current Unrealized
Date Currency Value Gain/(Loss)
---------- -------- ------- ----------
<S> <C> <C> <C> <C>
Forward Foreign Currency Buy Contracts
Australian Dollar.......................................................... 8/19/99 38,300,000 $25,364,742 $ 617,401
British Pound.............................................................. 8/19/99 7,800,000 12,299,541 (167,910)
Canadian Dollar............................................................ 8/19/99 11,800,000 7,978,040 48,838
Euro....................................................................... 8/19/99 39,350,000 40,735,833 (2,280,810)
Swedish Krona.............................................................. 8/19/99 142,600,000 16,824,549 (1,213,556)
Swiss Franc................................................................ 8/19/99 7,500,000 4,852,767 (364,721)
Forward Foreign Currency Sale Contracts
Australian Dollar.......................................................... 8/19/99 3,100,000 2,053,021 2,589
British Pound.............................................................. 8/19/99 36,500,000 57,555,545 1,797,020
Euro....................................................................... 8/19/99 3,150,000 3,260,937 76,803
Japanese Yen............................................................... 8/19/99 4,740,000,000 39,451,235 1,003,056
-----------
Total................................................................. $ (481,290)
===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
12
<PAGE>
GLOBAL (EX-U.S.) EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
<S> <C>
ASSETS:
Investments, at value:
Unaffiliated issuers (Cost $398,283,643)......................................................... $475,926,033
Affiliated issuers (Cost $4,300,836)............................................................. 4,300,836
Foreign currency, at value (Cost $1,015,491)...................................................... 1,049,683
Cash.............................................................................................. 17,112,328
Receivables:
Investment securities sold....................................................................... 13,832,745
Dividends........................................................................................ 1,240,203
Interest......................................................................................... 73,124
Fund shares sold................................................................................. 8,440,505
Variation margin.................................................................................. 575,931
------------
TOTAL ASSETS.................................................................................. 522,551,388
------------
LIABILITIES:
Payables:
Investment securities purchased.................................................................. 2,012,851
Fund shares redeemed............................................................................. 22,339,144
Investment advisory fees......................................................................... 360,906
Accrued expenses................................................................................. 280,326
Net unrealized depreciation on forward foreign currency contracts................................. 481,290
------------
TOTAL LIABILITIES............................................................................. 25,474,517
------------
NET ASSETS......................................................................................... $497,076,871
============
NET ASSETS CONSIST OF:
Paid in capital................................................................................... $416,353,774
Accumulated undistributed net investment income................................................... 2,738,174
Accumulated net realized gain..................................................................... 823,091
Net unrealized appreciation....................................................................... 77,161,832
------------
NET ASSETS.................................................................................... $497,076,871
============
OFFERING PRICE PER SHARE:
Brinson Class I:
Net asset value, offering price and redemption price per share (Based on net assets of
$490,322,498 and 39,737,271 shares issued and outstanding)...................................... $ 12.34
============
Brinson Class N:
Net asset value, offering price and redemption price per share (Based on net assets of
$15,148 and 1,232 shares issued and outstanding)................................................ $ 12.30
============
UBS Investment Funds Class:
Net asset value, offering price and redemption price per share (Based on net assets of
$6,739,225 and 552,223 shares issued and outstanding)........................................... $ 12.20
============
</TABLE>
See accompanying notes to financial statements.
================================================================================
13
<PAGE>
GLOBAL (EX-U.S.) EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,179,337 for foreign taxes withheld)........................ $ 9,985,856
Interest (including securities lending income of $148,237)...................... 882,438
------------
TOTAL INCOME................................................................ 10,868,294
------------
EXPENSES:
Advisory........................................................................ 3,713,448
Administration.................................................................. 347,175
Custodian....................................................................... 200,713
Distribution.................................................................... 43,892
Other........................................................................... 354,845
------------
TOTAL EXPENSES.............................................................. 4,660,073
------------
NET INVESTMENT INCOME....................................................... 6,208,221
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.................................................................... (2,681,583)
Futures contracts.............................................................. 575,931
Foreign currency transactions.................................................. 188,730
------------
Net realized loss............................................................ (1,916,922)
------------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency............................................... 17,631,875
Forward contracts.............................................................. 1,988,204
Translation of other assets and liabilities denominated in foreign currency.... (61,073)
------------
Change in net unrealized appreciation or depreciation........................ 19,559,006
------------
Net realized and unrealized gain................................................ 17,642,084
------------
Net increase in net assets resulting from operations............................ $ 23,850,305
============
</TABLE>
See accompanying notes to financial statements.
================================================================================
14
<PAGE>
GLOBAL (EX-U.S.) EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income................................................................ $ 6,208,221 $ 6,539,098
Net realized gain (loss)............................................................. (1,916,922) 12,223,856
Change in net unrealized appreciation or depreciation................................ 19,559,006 6,875,111
------------- -------------
Net increase in net assets resulting from operations................................. 23,850,305 25,638,065
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Brinson Class I..................................................................... (4,564,403) (6,380,973)
Brinson Class N..................................................................... (121) (58)
UBS Investment Funds Class.......................................................... (23,356) (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.................................................. (9,139,174) (32,242,400)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold.......................................................................... 842,598,303 317,039,181
Shares issued in connection with acquisition of UBS International Equity Fund........ 21,515,034 --
Shares issued on reinvestment of distributions....................................... 8,583,385 31,189,854
Shares redeemed...................................................................... (834,980,130) (325,627,875)
------------- -------------
Net increase in net assets resulting from capital share transactions................. 37,716,592 22,601,160
------------- -------------
TOTAL INCREASE IN NET ASSETS..................................................... 52,427,723 15,996,825
------------- -------------
NET ASSETS:
Beginning of year.................................................................... 444,649,148 428,652,323
------------- -------------
End of year (including accumulated undistributed net investment income of
$2,738,174 and $1,437,308, respectively)............................................ $ 497,076,871 $ 444,649,148
============= =============
</TABLE>
See accompany notes to financial statements
================================================================================
15
<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>
Year Ended June 30, July 31, 1995*
-------------------------------------------------
Through
UBS Investment Funds Class 1999 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................................. 0.05 0.08 0.11 0.12
Net realized and unrealized gain...................... 0.27 0.30 1.93 1.45
------------- ------------ ------------ -------------
Total income from investment operations............ 0.32 0.38 2.04 1.57
------------- ------------ ------------ -------------
Less distributions:
Distributions from investment income.................. (0.05) (0.08) (0.11) (0.15)
Distributions from net realized gain.................. (0.12) (0.74) (0.56) (0.56)
------------- ------------ ------------ -------------
Total distributions................................ (0.17) (0.82) (0.67) (0.71)
------------- ------------ ------------ -------------
Net asset value, end of period........................... $ 12.20 $ 12.05 $ 12.49 $ 11.12
============= ============ ============ =============
Total return (non-annualized)............................ 2.78% 3.90% 19.32% 15.78%
Ratios/Supplemental data:
Net assets, end of period (in 000s)..................... $ 6,739 $ 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.......................... 0.51% 0.68% 1.02% 0.83%**
After expense reimbursement........................... N/A N/A N/A 1.03%**
Portfolio turnover rate................................. 74% 49% 25% 20%
* Commencement of UBS Investment Funds Class
** Annualized
N/A = Not Applicable
</TABLE>
See accompanying notes to financial statements.
================================================================================
16
<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. The financial highlights of the Brinson Class
I and the Brinson Class N are presented separately.
On December 19, 1998, the Global (Ex-U.S.) Equity Fund (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 Brinson Class I 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 net 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 merger 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
respective fund. Debt securities are valued at the most recent bid price by
using market quotations or independent pricing services. Futures contracts are
valued at the settlement price established each day on the exchange on which
they are traded. Forward foreign currency contracts are valued daily using
quoted forward exchange rates. Short-term obligations with a maturity of 60 days
or less are valued at amortized cost, which approximates market value.
B. FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
using the WM/Reuters closing spot rates as of 4:00 p.m. London time. Purchases
and sales of portfolio securities, commitments under forward foreign currency
contracts and income receipts are translated at the prevailing exchange rate on
the date of each transaction. Realized and unrealized foreign exchange gains or
losses on investments are included as a component of net realized and unrealized
gain or loss on investments in the statement of operations.
C. INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a
trade date basis. Gains and losses on securities sold are determined on an
identified cost basis.
D. INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as the information becomes available.
E. FEDERAL INCOME TAXES: It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of its taxable income
to its shareholders. The Fund has met the requirements of the Code applicable to
regulated investment companies for the year ended June 30, 1999, 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.
================================================================================
17
<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 year
ended June 30, 1999, were as follows:
Advisory Advisory
Fee Fees
---------- ----------
Global (Ex-U.S.) Equity Fund........................ 0.80% $3,713,448
Certain officers of the Fund are also officers of the Advisor. All officers
serve without direct compensation from the Fund. Trustees' fees paid to
unaffiliated trustees for the year ended June 30, 1999 were $6,792.
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 charges no management fees. Distributions received from the
Supplementary Trust are reflected as interest income on the statement of
operations. Amounts relating to those investments at June 30, 1999 and for the
year then ended, were 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......... $424,308,794 $420,007,958 $331,042 $4,300,836 0.87%
</TABLE>
3. INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1999, excluding short-term
investments, were as follows:
Proceeds
Purchases From Sales
------------ ------------
Global (Ex-U.S.) Equity Fund................... $358,514,001 $333,571,232
4. FORWARD FOREIGN CURRENCY CONTRACTS
The Fund engages in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. Forward foreign currency contracts are also used to achieve
currency allocation strategies. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. Risks associated with such contracts include movement
in the value of the foreign currency relative to the U.S. dollar and the ability
of the counterparty to perform. The unrealized gain, if any, represents the
credit risk to the Fund on a forward foreign currency contract. Fluctuations in
the value of forward foreign currency contracts are recorded daily as net
unrealized gains or losses. The Fund realizes a gain or loss upon settlement of
the contracts. The statement of operations reflects net realized and net
unrealized gains and losses on these contracts. The counterparty to all forward
foreign currency contracts at and for the year ended June 30, 1999, 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
================================================================================
18
<PAGE>
Global (Ex-U.S.) Equity Fund--Notes To Finacial 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
June 30, 1999 was $19,889,426 and $21,802,826, 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 balance of the line of credit. During
the year ended June 30, 1999, 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>
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------------------ ----------------------
Shares Value Shares Value
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Sales:
Brinson Class I*........................................... 72,650,740 $857,199,838 26,268,807 $312,436,986
Brinson Class N............................................ 365 4,263 798 9,817
UBS Investment Funds Class................................. 587,229 6,909,236 387,174 4,592,378
---------- ------------ ---------- ------------
Total Sales............................................. 73,238,334 $864,113,337 26,656,779 $317,039,181
========== ============ ========== ============
Dividend Reinvestment:
Brinson Class I............................................ 726,832 $ 8,514,975 2,849,536 $ 30,664,100
Brinson Class N............................................ 21 247 10 117
UBS Investment Funds Class................................. 5,917 68,163 49,433 525,637
---------- ------------ ---------- ------------
Total Dividend Reinvestment............................. 732,770 $ 8,583,385 2,898,979 $ 31,189,854
========== ============ ========== ============
Redemptions:
Brinson Class I............................................ 69,803,887 $829,422,705 26,391,131 $318,236,785
Brinson Class N............................................ 41 487 -- --
UBS Investment Funds Class................................. 481,376 5,556,938 620,542 7,391,090
---------- ------------ ---------- ------------
Total Redemptions....................................... 70,285,304 $834,980,130 27,011,673 $325,627,875
========== ============ ========== ============
</TABLE>
* Includes shares issued in connection with acquisition of UBS International
Equity Fund.
================================================================================
19
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders
The Brinson Funds--Global (Ex-U.S.) Equity
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Brinson Funds--Global (Ex-U.S.) Equity Fund
(formerly Non-U.S. Equity Fund) as of June 30, 1999, the related statements of
operations for the year then ended and changes in net assets and the financial
highlights for the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Brinson Funds--Global (Ex-U.S.) Equity Fund at June 30, 1999, the results of its
operations for the year then ended and the changes in its net assets and the
financial highlights for the periods indicated therein in conformity with
generally accepted accounting principles.
/s/ Ernest & Young LLP
Chicago, Illinois
August 11, 1999
================================================================================
20
<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]
