-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OsyMJWoDn2ILCPfzvO5V3trskNgOMpZy2LpaLCXN8MBioouyN+oO4EX6LLyr35a4 nMACiFXCFVBjooZnrndfww== 0000950131-96-000507.txt : 19960216 0000950131-96-000507.hdr.sgml : 19960216 ACCESSION NUMBER: 0000950131-96-000507 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19960215 EFFECTIVENESS DATE: 19960215 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRINSON FUNDS INC CENTRAL INDEX KEY: 0000886244 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-47287 FILM NUMBER: 96520854 BUSINESS ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 BUSINESS PHONE: 8001482430 MAIL ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 485BPOS 1 BRINSON FUNDS - POST EFFECTIVE AMEND #16 UNITED STATES FILE NO. 33-47287 SECURITIES AND EXCHANGE COMMISSION ------------------ WASHINGTON, D.C. 20549 FILE NO. 811-6637 ------------------ FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-Effective Amendment No. _______ [_] Post Effective Amendment No. 16 [X] -------- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. 17 [X] ------ THE BRINSON FUNDS ================= (Exact name of Registrant as Specified in Charter) 209 South LaSalle Street Chicago, Illinois 60604-1295 - ----------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code 312-220-7100 ------------ The Brinson Funds 209 South LaSalle Street Chicago, Illinois 60604-1295 --------------------------------- (Name and Address of Agent for Service) COPIES TO: Bruce G. Leto, Esq. Stradley, Ronon, Stevens & Young 2600 One Commerce Square Philadelphia, PA 19103-7098 APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICAL AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE: [X] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485. [_] ON (DATE), PURSUANT TO PARAGRAPH (B). ------ [_] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1). [_] ON (DATE) PURSUANT TO PARAGRAPH (A) OF RULE 485. ------ [_] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(II). [_] ON (DATE) PURSUANT TO PARAGRAPH (A)(II) OF RULE 485. ------ IF APPROPRIATE, CHECK THE FOLLOWING BOX: [_] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT. Registrant has previously registered an indefinite number of shares of beneficial interest of The Brinson Funds under the Securities Act of 1933 pursuant to Rule 24f-2 of the Investment Company Act of 1940, as amended. Registrant filed a Notice pursuant to Rule 24f-2 for the fiscal period ended June 30, 1995 on August 29, 1995. ============================================================================= As filed with the U.S. Securities and Exchange TOTAL PAGES: ____ Commission on February 15, 1996 INDEX TO EXHIBITS, PAGE: ____ ----------------- THE BRINSON FUNDS Cross Reference Sheet Pursuant to Rule 481b
FORM N-1A ITEM CAPTION IN PROSPECTUS --------------------- - --------------------------------------- PART A INFORMATION REQUIRED IN A PROSPECTUS ------ ------------------------------------ 1. Cover Page Cover Page 2. Synopsis Prospectus Summary; Tables of Fees and Expenses 3. Condensed Financial Information Financial Highlights 4. General Description of Registrant I Investment Objectives and Policies; Other Investment Practices and Risk Factors 5. Management of the Fund Management of the Trust 5A. Management's Discussion of Performance Information Fund Performance 6. Capital Stock and Other Securities General Information; Dividends and Taxes; Net Asset Value 7. Purchase of Securities Being Offered Purchase of Shares; Exchange of Shares; Distribution Plan 8. Redemption or Repurchase Redemption of Shares 9. Legal Proceedings * PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION 10. Cover Page Cover Page 11. Table of Contents Table of Contents 12. General Information and History Covered in Part A 13. Investment Objectives and Policies Investment Policies; Investment Restrictions; Portfolio Transactions and Brokerage Commissions 14. Management of the Fund Trustees and Officers 15. Principal Holders of Securities Control Persons and Principal Holders of Securities 16. Investment Advisory and Other Investment Advisory and Other Services Services 17. Brokerage Allocation Portfolio Transactions and Brokerage Commissions 18. Capital Stock and Other Other Information Securities
============================================================================ The Brinson Funds Post-Effective No. 16/17 Page 2
19. Purchase, Redemption and Pricing Purchases; Redemptions of Securities Being Offered 20. Tax Status Taxes 21. Underwriters Underwriter 22. Calculations of Performance Data Performance Information 23. Financial Statements Audited Financials dated June 30, 1995 Unaudited Financials dated December 31, 1995
PART C OTHER INFORMATION - ------------------------- Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C to this Registration Statement. ============================================================================== The Brinson Funds Post-Effective No. 16/17 Page 3 THE BRINSON FUNDS LOGO Brinson U.S. Bond Fund 209 South LaSalle Street Chicago, IL 60604-1295 PROSPECTUS February 15, 1996 The Brinson Funds (the "Trust") is an open-end management investment company, advised by Brinson Partners, Inc., which currently offers shares of ten series: Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non-U.S. Equity and Non-U.S. Bond Fund (each a "Series" and collectively, the "Series"). Each Series has distinct investment objectives and policies. The Trust currently offers two classes of shares for each Series: the Brinson Fund class and the SwissKey Fund class. Brinson Fund class shares have no sales charges and are not subject to annual 12b-1 plan expenses. SwissKey Fund class shares have no sales charges but are subject to annual 12b-1 plan expenses. Each Series offers SwissKey Fund class shares in a separate prospectus which may be obtained by calling 1-800-SWISSKEY. This Prospectus pertains only to the Brinson Fund class of the U.S. Bond Fund (the "Brinson U.S. Bond Fund" or "Fund"). The Series' investment objective is to maximize total return, consisting of capital appreciation and current income, while controlling risk. The Series seeks to achieve this objective by investing primarily in fixed income securities, which may also provide the potential for capital appreciation. Under normal circumstances, at least 65% of the Series' total assets will be invested in U.S. debt securities with an initial maturity of more than one year. This Prospectus sets forth concisely the information a prospective investor should know before investing in the Series. Additional information about the Fund, the Series and the other Series and classes of shares of the Trust, is contained in the Trust's Statement of Additional Information, dated February 15, 1996, as amended from time to time, which has been filed with the Securities and Exchange Commission and is available upon request and without charge from the Trust, at the addresses and telephone numbers below. The Trust's Statement of Additional Information is incorporated by reference into this Prospectus. Investors should read and retain this Prospectus for future reference. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. UNDERWRITER: ADVISOR: Fund/Plan Broker Services, Inc. Brinson Partners, Inc. 2 W. Elm Street 209 South LaSalle Street Conshohocken, PA 19428-0874 Chicago, IL 60604-1295 (800) 448-2430 (800) 448-2430 TABLE OF CONTENTS
PAGE ---- Prospectus Summary......................................................... 3 Table of Fees and Expenses................................................. 5 Financial Highlights....................................................... 6 Investment Objectives and Policies......................................... 6 Other Investment Practices and Risk Factors................................ 10 Management of the Trust.................................................... 13 Purchase of Shares......................................................... 14 Redemption of Shares....................................................... 16 Telephone Transactions..................................................... 18 Dividends, Distributions and Taxes......................................... 18 Shares of Beneficial Interest and Voting Rights............................ 19 Performance Calculations................................................... 20
This Prospectus is not an offering of the securities herein described in any jurisdiction or to any person to whom it is unlawful for the Fund to make such an offer or solicitation. No sales representative, dealer, or other person is authorized to give any information or make any representation other than those contained in this Prospectus. 2 PROSPECTUS SUMMARY THE TRUST The Trust is an open-end management investment company commonly known as a mutual fund. The Trust was originally established as a Maryland corporation on April 14, 1992, and was reorganized as a Delaware business trust on December 1, 1993. The Trust currently offers ten series of shares: Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund (each a "Series" and collectively, the "Series"). The Trust offers two classes of shares for each Series: the Brinson Fund class and SwissKey Fund class. This Prospectus pertains only to the Brinson Fund class of the U.S. Bond Fund (previously defined herein as the "Brinson U.S. Bond Fund" or "Fund"). INVESTMENT OBJECTIVE The Series' investment objective is to maximize total return, consisting of capital appreciation and current income, while controlling risk by investing in domestic fixed-income securities. Under normal circumstances, at least 65% of the Series' total assets will be invested in U.S. debt securities with an initial maturity of more than one year. Due to the inherent risks of investments, there can be no assurance that the objective of the Series will be achieved. See "Investment Objectives and Policies" and "Other Investment Practices and Risk Factors." HOW TO PURCHASE SHARES The minimum initial single purchase for the Fund is $100,000 and the minimum additional investment is $2,500. The Fund does not impose any sales load, redemption or exchange fees, nor does it bear any fees pursuant to a Rule 12b- 1 Plan. The public offering price of shares of the Fund is the net asset value per share next determined after the receipt and acceptance of the purchase order at the transfer agent in proper form with accompanying check or other bank wire arrangements. See "Purchase of Shares." HOW TO REDEEM SHARES Shares may be redeemed at the net asset value per share of the Fund next determined after receipt by the transfer agent of a redemption request in proper form. Signature guarantees may be required. See "Redemption of Shares." DIVIDEND REINVESTMENT The Fund intends to pay semi-annual dividends from its net investment income and may pay net capital gains, if any, annually. Any dividends and distribution payments will be reinvested at net asset value, in additional full and fractional shares of the Fund unless and until the shareholder notifies the transfer agent, in writing, requesting payments in cash. Provisions of the Tax Reform Act of 1986 may result in additional net investment income and/or capital gain distributions at the end of the calendar year. See "Dividends, Distributions and Taxes." INVESTMENT MANAGEMENT, UNDERWRITER AND SERVICING AGENTS Brinson Partners, Inc. ("Brinson Partners" or the "Advisor"), the Series' investment advisor, is an investment management firm managing, as of December 31, 1995, approximately $53 billion in assets, primarily for pension and profit sharing institutional accounts. Brinson Partners has offices in London, Melbourne, New York, Paris, Singapore, Sydney and Tokyo, in addition to its principal office at 209 South LaSalle Street, Chicago, IL 60604-1295. Fund/Plan Broker Services, Inc., 2 W. Elm Street, Conshohocken, PA 19428-0874, serves as the Series' underwriter. Bankers Trust Company, c/o BTNY Services, Inc., 34 Exchange Place, Jersey City, NJ 07302-1107, serves as the custodian of the Series' assets. Fund/Plan Services, Inc., 2 W. Elm Street, Conshohocken, PA 19428-0874, serves as the Series' administrator, accounting/pricing agent and transfer agent. 3 RISK FACTORS Shareholders should understand that all investment involve risks and there can be no guarantee against loss resulting from an investment in the Series, nor can there be any assurance that the Series will be able to attain its investment objective. Investors should consider the following factors: 1. The Series may enter into contracts for the purchase or sale of securities, including index contracts and purchase and write options to buy or sell futures contracts. The Series may also purchase and write put and call options on U.S. securities and indices and enter into related closing transactions. Although the Series does not engage in options or futures for speculative purposes, there are certain risks associated with such hedging techniques. See "Futures Contracts and Options on Futures Contracts" and "Options" under "Investment Objectives and Policies." 2. The Series may lend portfolio securities to creditworthy institutions; the principal risk to the Series is the risk that the borrower fails to return the borrowed security. The Series will require collateral before lending securities. See "Loans of Portfolio Securities" under "Other Investment Practices and Risk Factors." 3. The Series may invest in repurchase agreements (which involve risk of loss if a seller defaults on its obligations under the agreement) and reverse repurchase agreements (which involve risk of loss if a purchaser defaults on its obligation to return securities to the Series). See "Repurchase Agreements" and "Reverse Repurchase Agreements" under "Other Investment Practices and Risk Factors." 4. The Series may invest in swaps for hedging and other permissible purposes, which could subject the Series to increased risks. See "Swaps" under "Other Investment Practices and Risk Factors." 5. The Series may invest in lower quality, higher yielding securities (commonly referred to as "junk bonds"). See "Fixed Income Securities" under "Investment Objectives and Policies," and "High Yield/High Risk Securities" under "Other Investment Practices and Risk Factors;" and Appendix A in the Trust's Statement of Additional Information. Please see the Statement of Additional Information for further information concerning investment policies and restrictions. 4 TABLE OF FEES AND EXPENSES SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)............................... 0.00% Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price)............................... 0.00% Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable).......................................... 0.00% Redemption Fee (as a percentage of amount redeemed, if applicable)............... 0.00% Fee for Wire Transfer of Redemption Proceeds....................... $0.00 ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets) Management Fees.................................................... 0.50%/1/ 12b-1 Expenses..................................................... 0.00% Other Expenses..................................................... 0.10% ----- Administration Fees.................................... 0.011%/2/ Other Expenses........................................... 0.089% Total Fund Operating Expenses (after fee waiver and/or expense reimbursement)................... 0.60%/1/ =====
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- EXAMPLE You would pay the following expenses on a $1,000 investment, assuming: (1) a 5% annual return; and (2) redemption at the end of each time period:................................... $6 $19 $33 $74 === === === ===
The purpose of these tables is to assist the investor in understanding the various direct and indirect costs and expenses that an investor in the Fund will bear. While the example assumes a 5% annual return, the Fund's actual performance will vary and may result in an actual return greater or less than 5%. The amount shown as "Other Expenses" is based on estimated amounts for the current fiscal year. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. - -------- /1/The Advisor has agreed irrevocably to waive its fees and reimburse expenses so that the Fund's total operating expenses will never exceed 0.60% of the Series' average daily net assets. Absent this fee waiver and expense reimbursement, the total fund operating expenses for the fiscal year ending June 30, 1996, are estimated to be 4.69%. /2/The fee payable to the Series' administrator is subject to an annual minimum fee of $10,000. 5 FINANCIAL HIGHLIGHTS The following financial highlights are part of the unaudited, interim financial statements for the Brinson Fund class of the U.S. Bond Fund, which commenced investment operations on August 31, 1995. The period presented is from August 31, 1995 through December 31, 1995. The following table should be read in conjunction with the unaudited financial statements and related notes in the Statement of Additional Information.
FOR THE PERIOD AUGUST 31, 1995/1/ TO DECEMBER 31, 1995 (UNAUDITED) ----------------- Net asset value, beginning of period....................... $10.00 Income from investment operations: Net investment income..... 0.20 Net realized and unrealized gain on investments.............. 0.35 ------ Total gain from investment operations.. 0.55 ------ Less distributions: Distributions from net investment income........ (0.20) Distributions from net realized gain............ (0.03) ------ Total distributions..... (0.24) ------ Net asset value, end of period....................... $10.31 ====== Total Return.................. 5.49%/3/ Ratios/Supplemental Data Net assets, end of period (in 000s).................. $9,249 Ratio of expenses to average net assets: Before expense reimbursement............ 4.69%/2/ After expense reimbursement............ 0.60%/2/ Ratio of net investment income to average net assets: Before expense reimbursement............ 2.17%/2/ After expense reimbursement............ 6.26%/2/ Portfolio turnover rate..... 212%
- -------- /1/Commencement of operations. /2/Annualized. INVESTMENT OBJECTIVES AND POLICIES /3/Not annualized. The Series' investment objective is to maximize total return, consisting of capital appreciation and current income, while controlling risk. The Series seeks to achieve this objective by investing primarily in fixed income securities, which may also provide the potential for capital appreciation. As a matter of fundamental policy, under normal circumstances, the Series intends to invest at least 65% of its total assets in U.S. debt securities with an initial maturity of more than one year. The Series may also engage in futures and options transactions for hedging and other permissible purposes as more fully described in this Prospectus. The Series is a diversified portfolio. INVESTMENT PROCESS Brinson Partners is an active manager of fixed income securities. The Advisor believes that markets do not always efficiently price fixed income securities and that a fundamental value-based investment process can increase portfolio returns. Brinson Partners' fixed income strategies consider many factors in addition to maturity and current yield in the evaluation of fixed income securities. These factors include interest rate sensitivity, quality, yield curve analysis and individual issue selection. Accordingly, Brinson Partners will pursue the Series' objective by investing its assets in debt securities which are believed to be undervalued. The Advisor's proprietary valuation model determines which securities are potential candidates for inclusion in the portfolio. 6 The benchmark for the Series is the Salomon Brothers Broad Investment Grade Bond Index (the "Benchmark"). The Benchmark is a market driven broad based index which includes U.S. bonds with over one year to maturity. The Benchmark is designed to provide a representative indication of the performance of U.S. investment grade fixed income securities in the United States. From time to time, the Advisor may substitute securities in an equivalent index when it believes that such securities in the index more accurately reflect the relevant fixed income securities market. Brinson Partners will attempt to enhance the long-term return and risk performance of the Series relative to the Benchmark by deviating from the normal Benchmark mix in reaction to discrepancies between current market prices and fundamental values. The active management process is intended by the Advisor to produce a superior performance relative to the Benchmark index. The Series does not intend to concentrate its investments in a particular industry. The Series does not intend to issue senior securities as defined in the Investment Company Act of 1940, as amended (the "Act"), except that the Series may engage in borrowing activities as defined below. The Series' investment objective and its policies concerning portfolio lending, borrowing, the issuance of senior securities and concentration, are "fundamental," which means that they may not be changed without the affirmative vote of the holders of a majority of the Series' outstanding voting securities (as defined in the Act). No assurance can be given that the Series' investment objective will be achieved. FIXED INCOME SECURITIES The Series may invest in a broad range of fixed income securities, including debt securities of the U.S. government together with its agencies and instrumentalities and the debt securities of U.S. corporations. A majority of the fixed income securities in which the Series will invest will meet a minimum rating of BBB- by Standard and Poor's Corporation ("S&P") or Baa3 by Moody's Investors Services, Inc. ("Moody's") or, if unrated, will be determined to be of comparable quality by Brinson Partners. Such securities are considered to be investment grade. While securities rated BBB or Baa are regarded as having an adequate capacity to pay principal and interest, such bonds lack outstanding investment characteristics and, in fact, have speculative characteristics and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments than is the case with higher rated bonds. The Series may invest up to 30% of its total assets in securities rated lower than BBB- by S&P and Baa3 by Moody's (commonly referred to as "junk bonds"). Securities rated lower than BBB- by S&P and Baa3 by Moody's are classified as non-investment grade securities and carry a higher degree of risk and are considered to be of poor standing and predominately speculative by the major credit rating agencies (see "High Yield/High Risk Securities" under "Other Investment Practices and Risk Factors" below). To the extent that a security held by the Series is downgraded to below investment grade, the Series will dispose of that or another non-investment grade security so that no more than 30% of its assets will be invested in below investment grade securities. Other fixed income securities in which the Series may invest include zero coupon bonds, mortgage-backed securities, asset-backed securities and when-issued securities. The Series may invest a portion of its assets in short-term debt securities (including repurchase agreements) of corporations, governments or agencies and banks and finance companies. When unusual market conditions warrant, the Series can make substantial temporary defensive investments in cash equivalents. ZERO COUPON SECURITIES Zero coupon securities are debt obligations which do not entitle the holder to any periodic payments of interest prior to maturity or a specified date when the securities begin paying current interest (the "cash payment date") and therefore are issued and traded at a discount from their face amounts or par value. Such bonds carry an additional risk in that, unlike bonds which pay interest throughout the period to maturity, the Series will realize no cash until the cash payment date and, if the issuer defaults, the Series may obtain no return at all on its investment. For federal tax purposes, the Series will be required to include in income daily portions of original issue discount accrued and to distribute the same to shareholders annually, even if no payment is received before the distribution date. 7 MORTGAGE-BACKED SECURITIES The Series may invest in mortgage-backed securities, representing interests in pools of mortgage loans. These securities provide shareholders with payments consisting of both interest and principal as the mortgages in the underlying mortgage pools are paid off. The Series may invest in mortgage-backed securities issued or guaranteed by an agency or instrumentality of the U.S. government, and also in privately-issued mortgage-backed securities issued by certain private, non-government corporations, such as financial institutions. The Series may also invest in Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage Investment Conduits ("REMICs"). CMOs are debt securities issued by U.S. government agencies or by financial institutions and other mortgage lenders and collateralized by a pool of mortgages held under an indenture. CMOs are issued in a number of classes or series with different maturities. The classes or series are retired in sequence as the underlying mortgages are repaid. Prepayment may shorten the stated maturity of the obligation and can result in a loss of premium, if any has been paid. Certain of these securities may have variable or floating interest rates and others may be stripped (securities which provide only the principal or interest feature of the underlying security). REMICs are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. REMICs are similar to CMOs in that they issue multiple classes of securities. CMOs and REMICs issued by private entities are not government securities and are not directly guaranteed by any government agency. They are secured by the underlying collateral of the private issuer. Yields on privately-issued CMOs as described above have been historically higher than yields on CMOs issued or guaranteed by U.S. government agencies. However, the risk of loss due to default on such instruments is higher since they are not guaranteed by the U.S. government. Such instruments also tend to be more sensitive to interest rates than Government-issued CMOs. The Series will not invest in subordinated privately-issued CMOs. For federal income tax purposes, the Series will be required to accrue income arising from regular interest on CMOs and REMICs using the "catch-up" method, with an aggregate pre-payment assumption. ASSET-BACKED SECURITIES Asset-backed securities are securities that represent a participation in, or are secured by and payable from, a stream of payments generated by particular assets, most often a pool or pools of similar assets (e.g., receivables on home equity and credit loans and receivables regarding automobile, credit card, mobile home and recreational vehicle loans, wholesale dealer floor plans and leases). Such receivables are securitized in either a pass-through or a pay-through structure. Pass-through securities provide investors with an income stream consisting of both principal and interest payments in respect of the receivables in the underlying pool. Pay-through asset-backed securities are debt obligations issued usually by a special purpose entity, which are collateralized by the various receivables and in which the payments on the underlying receivables provide the funds to pay the debt service on the debt obligations issued. The Series may invest in these and other types of asset- backed securities that may be developed in the future. The credit quality of these securities depends primarily upon the quality of the underlying assets and the level of credit support and/or enhancement provided. Such asset-backed securities are subject to the same prepayment risks as mortgage-backed securities. For federal income tax purposes, the Series will be required to accrue income on pay-through asset-backed securities using the "catch-up" method, with an aggregate prepayment assumption. WHEN-ISSUED SECURITIES The Series may purchase securities on a "when-issued" basis for payment and delivery at a later date. The price is generally fixed on the date of commitment to purchase. During the period between purchase and settlement, no interest accrues to the Series. At the time of settlement, the market value of the security may be more or less than the purchase price. 8 CONVERTIBLE SECURITIES The Series may invest in convertible securities which generally offer lower interest or dividend yields than non-convertible debt securities of similar quality. The value of convertible securities may reflect changes in the value of the underlying common stock. Convertible securities entail less credit risk than the issuer's common stock because they rank senior to common stock. FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS The Series may enter into contracts for the future purchase or sale of securities or indices. A purchase of a futures contract means the acquisition of a contractual right to obtain delivery to the Series of the securities called for by the contract at a specified price during a specified future month. When a futures contract is sold, the Series incurs a contractual obligation to deliver the securities underlying the contract at a specified price on a specified date during a specified future month. The Series may enter into futures contracts and engage in options transactions related thereto to the extent that not more than 5% of the Series' assets are required as futures contract margin deposits and premiums on options and may engage in such transactions to the extent that obligations relating to such futures and related options on futures transactions represent not more than 25% of the Series' assets. The Series may also purchase and write options to buy or sell futures contracts. Options on futures are similar to options on securities except that options on futures give the purchaser the right, in return for the premium paid, to assume a position in a futures contract, rather than actually to purchase or sell the futures contract, at a specified exercise price at any time during the period of the option. When the Series enters into a futures transaction, it must deliver to the futures commission merchant selected by the Series, an amount referred to as "initial margin." This amount is maintained by the futures commission merchant in a segregated account at the custodian bank. Thereafter, a "variation margin" may be paid by the Series to, or drawn by the Series from, such account in accordance with controls set for such accounts, depending upon changes in the price of the underlying securities subject to the futures contract. See "Options and Futures" under "Other Investment Practices and Risk Factors." OPTIONS The Series may purchase and write put and call options on U.S. securities and indices and enter into related closing transactions. A call option enables the purchaser, in return for the premium paid, to purchase securities from the writer of the option at an agreed price up to an agreed date. The advantage is that the purchaser may hedge against an increase in the price of securities it ultimately wishes to buy or may take advantage of a rise in a particular index. The Series will only purchase call options to the extent premiums paid on all outstanding call options do not exceed 20% of the Series' total assets. The Series will only write call options on a covered basis (e.g., on securities it holds in its portfolio). The Series will receive premium income from writing call options, which may offset the cost of purchasing put options and may also contribute to the Series' total return. The Series may lose potential market appreciation, however, if the Advisor's judgment is incorrect with respect to interest rates, security prices or the movement of indices. A put option enables the purchaser of the option, in return for the premium paid, to sell the security underlying the option to the writer at the exercise price during the option period, and the writer of the option has the obligation to purchase the security from the purchaser of the option. The Series will only purchase put options to the extent that the premiums on all outstanding put options do not exceed 20% of the Series' total assets. With regard to purchasing put options, the Series will limit the aggregate value of the obligations underlying such put options to 50% of its total net assets. The advantage is that the purchaser can be protected should the market value of the security decline or should a particular index decline. The Series will, at all times during which it holds a put option, own the security underlying such option. The Series will receive premium income from writing put options, although it may be required, when the put is exercised, to purchase securities at higher prices than the current market price. 9 An option on a securities index gives the purchaser of the option, in return for the premium paid, the right to receive from the seller cash equal to the difference between the closing price of the index and the exercise price of the option. Closing transactions essentially let the Series offset put options or call options prior to exercise or expiration. If the Series cannot effect closing transactions, it may have to hold a security it would otherwise sell or deliver a security it might want to hold. The Series may use options traded on U.S. exchanges and to the extent permitted by law, options traded over-the-counter. It is the position of the Securities and Exchange Commission that over-the-counter options are illiquid. Accordingly, the Series will invest in such options only to the extent consistent with its 15% limit on investment in illiquid securities. See "Options and Futures" under "Other Investment Practices and Risk Factors" below. OTHER INVESTMENT PRACTICES AND RISK FACTORS Shareholders should understand that all investments involve risk and there can be no guarantee against loss resulting from an investment in the Series, nor can there be any assurance that the Series' investment objective will be attained. OPTIONS AND FUTURES The Series' investments in options, futures contracts or options on futures contracts will depend on Brinson Partners' judgment as to the potential risks and rewards of different types of strategies. Options and futures can be volatile investments and may not perform as expected. If a hedge is applied at an inappropriate time or price trends are judged incorrectly, options and futures strategies may lower the Series' return. The Series could also experience losses if the prices of its options and futures positions are poorly correlated with its other investments, or if it cannot close out its positions because of an illiquid secondary market. Gains and losses on investments in options and futures depends on the Advisor's ability to predict correctly the direction of security prices, interest rates and other economic factors. Where a liquid secondary market does not exist, the Series will likely be unable to control losses by closing its position. The loss from investing in futures transactions is potentially unlimited. REPURCHASE AGREEMENTS The Series may enter into repurchase agreements with banks or broker-dealers. Repurchase agreements are considered under the Act to be collateralized loans by the Series to the seller secured by the securities transferred to the Series. Repurchase agreements under the Act will be fully collateralized by securities which the Series may invest in directly. Such collateral will be marked-to-market daily. If the seller of the underlying security under the repurchase agreement should default on its obligation to repurchase the underlying security, the Series may experience delay or difficulty in recovering its cash. To the extent that, in the meantime, the value of the security purchased had decreased, the Series could experience a loss. No more than 15% of the Series' net assets will be invested in illiquid securities, including repurchase agreements which have a maturity of longer than seven days. The Series must treat each repurchase agreement as a security for tax diversification purposes and not as cash, a cash equivalent, or receivable. REVERSE REPURCHASE AGREEMENTS The Series may enter into reverse repurchase agreements with banks and broker- dealers. Reverse repurchase agreements involve sales by the Series of portfolio assets concurrently with an agreement by the Series to repurchase the same assets at a later date at a fixed price. During the reverse repurchase agreement period, the Series continues to receive principal and interest payments on these securities. The Series will establish a segregated account with its custodian bank in which it will maintain cash, U.S. government securities or other liquid high grade debt obligations equal in value to its obligations with respect to reverse repurchase agreements. Reverse repurchase agreements involve the risk that the market value of the securities retained by the Series may decline below the price of the securities the Series has sold but is obligated to repurchase under the agreement. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Series' use of the proceeds of the agreement may be restricted 10 pending a determination by the other party, or its trustee or receiver, whether to enforce the Series' obligation to repurchase the securities. Reverse repurchase agreements are considered borrowings by the Series and as such are subject to the investment limitations discussed below in the section entitled "Borrowing." BORROWING The Series may borrow money as a temporary measure for extraordinary purposes or to facilitate redemptions. The Series will not borrow money in excess of 33 1/3% of the value of its total assets. The Series has no intention of increasing its net income through borrowing. Any borrowing will be done from a bank with the required asset coverage of at least 300%. In the event that such asset coverage shall at any time fall below 300%, the Series shall, within three days thereafter (not including Sunday or holidays) or such longer period as the United States Securities and Exchange Commission may prescribe by rules and regulations, reduce the amount of its borrowings to such an extent that the asset coverage of such borrowings shall be at least 300%. The Series will not pledge more than 10% of its net assets, or issue senior securities as defined in the Act, except for notes to banks and reverse repurchase agreements. Investment securities will not be purchased while the Series has an outstanding borrowing that exceeds 5% of the Series' net assets. LOANS OF PORTFOLIO SECURITIES The Series may loan up to 33 1/3% of its assets to qualified broker-dealers or institutional investors for their use relating to short sales or other security transactions. The major risk to which the Series would be exposed on a loan transaction is the risk that the borrower would become bankrupt at a time when the value of the security goes up. Therefore, the Series will only enter into loan arrangements after a review of all pertinent facts by Brinson Partners, subject to overall supervision by the Board of Trustees, including the creditworthiness of the borrowing broker-dealer or institution and then only if the consideration to be received from such loans would justify the risk. Creditworthiness will be monitored on an ongoing basis by Brinson Partners. SWAPS The Series may engage in swaps, including but not limited to interest rate, currency and index swaps and the purchase or sale of related caps, floors and collars and other derivative instruments. The Series expects to enter into these transactions primarily to preserve a return or spread on a particular investment or portion of the portfolio's duration, to protect against any increase in the price of securities the Series anticipates purchasing at a later date, or to gain exposure to certain markets in the most economical way possible. The use of swaps involves investment techniques and risks different from those associated with ordinary portfolio security transactions. If Brinson Partners is incorrect in its forecasts of market values, interest rates and other applicable factors, the investment performance of the Series will be less favorable than it would have been if this investment technique was never used. Swaps do not involve the delivery of securities or other underlying assets or principal. Thus, if the other party to a swap defaults, the Series' risk of loss consists of the net amount of interest payments that the Series is contractually entitled to receive. Under Internal Revenue Service rules, any lump sum payment received or due under the notional principal contract must be amortized over the life of the contract. RULE 144A SECURITIES While maintaining oversight, the Board of Trustees has delegated to the Advisor the day-to-day functions of determining whether or not individual securities purchased under Rule 144A of the Securities Act of 1933, as amended, are liquid for purposes of the Series' 15% limitation on investments in illiquid assets. Generally, an illiquid security is any security that cannot be disposed of within seven days in the ordinary course of business at approximately the amount at which the Series has valued the security. Examples of illiquid securities are over-the-counter options and certain swaps. The Board of Trustees of the Trust has instructed Brinson Partners to consider the following factors in determining the liquidity of a security purchased under Rule 144A: (i) the 11 frequency of trades and trading volume for the security; (ii) whether at least three dealers are willing to purchase or sell the security and the number of potential purchasers; (iii) whether at least two dealers are making a market in the security; and (iv) the nature of the security and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Although having delegated the day-to-day functions, the Board of Trustees will continue to monitor and will periodically review the Advisor's selection of Rule 144A securities as well as the Advisor's determinations as to their liquidity. Investing in Rule 144A securities could have the effect of increasing the level of Series illiquidity to the extent that qualified institutional buyers become, for a time, uninterested in purchasing these securities. If Brinson Partners determines that a security purchased in reliance on Rule 144A, which was previously determined to be liquid, is no longer liquid and as a result, the Series' holdings of illiquid securities exceed the Series' 15% limit on investment in such securities, Brinson Partners will determine what action shall be taken to ensure that the Series continues to adhere to such limitation including disposing of illiquid assets which may include such Rule 144A securities. MORTGAGE-BACKED SECURITIES The Series may invest in pass-through certificates issued by non-governmental issuers. Pools of conventional residential mortgage loans created by such issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect governmental guarantees of payment. Timely payment of interest and principal of these pools is, however, generally supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance. Insurance and guarantees are issued by governmental entities, private insurance companies and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers will be considered in determining whether a mortgage-related security meets the Series' quality standards. The Series may buy mortgage- backed securities without insurance or guarantees if, through an examination of the loan experience and practices of the poolers, the Advisor determines that the securities meet the Series' quality standards. The Series expects that governmental, government-related or private entities may create mortgage loan pools offering pass-through investments in addition to those described above. The mortgages underlying these securities may be alternative mortgage investments, that is, mortgage investments whose principal or interest payments may vary or whose terms to maturity may differ from customary long-term fixed rate mortgages. As new types of mortgage-related securities are developed and offered to investors, the Advisor will, consistent with the Series' objectives, consider making investments in such new types of securities. HIGH YIELD/HIGH RISK SECURITIES Debt securities rated lower than BBB- by S&P's or Baa3 by Moody's (commonly referred to as "junk bonds") are considered to be of poor standing and predominantly speculative. Investing in lower-rated debt securities may involve certain risks not typically associated with higher rated securities. Prices have been found to be less sensitive to interest rate changes than higher rated investments, but more sensitive to adverse economic changes or individual corporate developments. Also, during an economic downturn or substantial period of rising interest rates, highly leveraged issuers may experience financial stress which would adversely affect their ability to service principal and interest payment obligations, to meet projected business goals and to obtain additional financing. Changes by recognized rating agencies in their rating of any security and in the ability of an issuer to make payments of interest and principal will also ordinarily have a more dramatic effect on the values of these investments than on the values of higher-rated securities. Such changes in value will not affect cash income derived from these securities, unless the issuers fail to pay interest or dividends when due. Such changes will, however, affect the Series' net asset value per share. 12 MANAGEMENT OF THE TRUST THE BOARD OF TRUSTEES Under Delaware law, the Board of Trustees has overall responsibility for managing the business and affairs of the Trust and the Series. The Trustees, in turn, elect the officers of the Trust, who are responsible for administering the day-to-day operations of the Series. THE ADVISOR Brinson Partners, a Delaware corporation, is an investment management firm managing, as of December 31, 1995, approximately $53 billion, primarily for pension and profit sharing institutional accounts. Brinson Partners was organized in 1989 when it acquired the institutional asset management business of The First National Bank of Chicago and First Chicago Investment Advisors, N.A. Brinson Partners and its predecessor entities have managed domestic and international investment assets since 1974 and global investment assets since 1982. Brinson Partners has offices in London and Tokyo in addition to its principal office at 209 South LaSalle Street, Chicago, IL 60604-1295. Brinson Partners is an indirect wholly-owned subsidiary of Swiss Bank Corporation ("Swiss Bank"). Brinson Partners also serves as the investment advisor to six other investment companies, Brinson Relationship Funds which includes six investment portfolios (series), Enterprise Accumulation Trust, Enterprise International Growth Portfolio, Fort Dearborn Income Securities, Inc., Short- Term World Income Portfolio and Pace Large Company Value Equity Investments. Swiss Bank, with headquarters in Basel, Switzerland, is an internationally diversified organization with operations in many aspects of the financial services industry. Pursuant to an investment advisory agreement with the Trust, on behalf of the Series, Brinson Partners receives a monthly fee at the annual rate of 0.50% of the Series' average daily net assets for providing investment advisory services and Brinson Partners is responsible for paying its own expenses. Brinson Partners has agreed to waive that portion of its advisory fee equal to the total expenses of the Series for any fiscal year which exceeds the permissible limits applicable to the Series in any state in which its shares are then qualified for sale. Pursuant to its advisory agreement, Brinson Partners is authorized, at its own expense, to obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it does not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. PORTFOLIO MANAGEMENT Investment decisions for the Series are made by an investment management team at Brinson Partners. No member of the investment management team is primarily responsible for making recommendations for portfolio purchases. THE UNDERWRITER Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken, PA 19428-0874, was engaged pursuant to an agreement dated April 25, 1995, for the limited purpose of acting as underwriter to facilitate the registration of shares of the Series and of the other Series of the Trust under state securities laws and to assist in the sale of shares. The fee for such service is borne by the Advisor. THE ADMINISTRATOR The Trust, on behalf of the Series, has entered into an administrative services agreement with Fund/Plan Services, Inc. ("Fund/Plan"), 2 W. Elm Street, Conshohocken, PA 19428-0874, pursuant to which the administrator receives a fee at the annual rate of 0.15% of the average daily net assets of the Trust on the first $75 million; 0.10% on the next $75 million; 0.075% on the next $350 million; and 0.05% on the next $500 million. The Series pays its pro rata portion based upon its average daily net assets but in no event shall the Series pay less than $10,000 per year for each multiple class portfolio. Pursuant to the agreement with Fund/Plan, maximum administration fees are $400,000 for the initial multiple class portfolio and $60,000 maximum for each subsequent multiple class portfolio. 13 The services Fund/Plan provides to the Series include: coordinating and monitoring of any third parties furnishing services to the Series; providing the necessary office space, equipment and personnel to perform administrative and clerical functions for the Series; preparing, filing and distributing proxy materials, periodic reports to shareholders, registration statements and other documents; and responding to shareholder inquiries. EXPENSES The Series is responsible for all of its own expenses other than those borne by Brinson Partners pursuant to the investment advisory agreement. Such expenses may include, but are not limited to, management fees, legal expenses, audit fees, printing costs (e.g., cost of printing annual reports, semi-annual reports and prospectuses which are distributed to existing shareholders), brokerage commissions, the expenses of registering and qualifying the Series' shares for sale with the Securities and Exchange Commission and with various state securities commissions, fees and expenses of the Series' custodian, administrator and transfer agent and the expenses of obtaining quotations of portfolio securities and of pricing the Series' shares. General expenses which are not associated directly with any particular Series within the Trust (e.g., insurance premiums, trustees' fees, expenses of maintaining the Trust's legal existence and of shareholders' meetings and fees and expenses of industry organizations) are allocated between the various Series and classes based upon an equitable basis. BROKERAGE ALLOCATION As the Series is exclusively composed of debt (rather than equity) securities, most of the Series' portfolio transactions are effected with dealers without the payment of brokerage commissions, but at net prices which usually include a spread or a markup. In determining the brokers through whom, and other transaction costs at which, securities transactions for the Series are to be executed, except as discussed below, Brinson Partners seeks to negotiate a combination of the most favorable execution and the best price obtainable on each transaction. Consequently, Brinson Partners selects brokers primarily on the basis of their execution capability and trading expertise. While the selection of brokers is made primarily on the basis of their execution capabilities, the direction of transactions to such brokers may also be based on the quality and amount of the research and research-related services which they provide to Brinson Partners and indirectly to its clients. These services are of the type described in Section 28(e) of the Securities Exchange Act of 1934 and are designed to augment Brinson Partners' own internal research and investment strategy capabilities. Brinson Partners may use this research information in managing the Series' assets, as well as the assets of other clients. PURCHASE OF SHARES Shares of the Fund may be purchased directly from the Trust at the net asset value next determined after receipt of the order in proper form by the transfer agent. There is no sales load in connection with the purchase of Fund shares. The Trust reserves the right to reject any purchase order and to suspend the offering of shares of the Fund or Series. The minimum initial investment for Fund shares is $100,000. Subsequent investments for Fund shares will be accepted in minimum amounts of $2,500. The Trust reserves the right to vary the initial investment minimum and minimums for additional investments of the Fund at any time. In addition, Brinson Partners may waive the minimum initial investment requirement for any investor of the Fund. In addition to offering shares of the Fund and of each Series of the Trust, the Trust also offers the SwissKey Fund class shares of the Series and of each other Series of the Trust. A description of the SwissKey Fund class shares is contained in a separate prospectus relating only to those shares. The SwissKey Fund class shares may also be purchased without a sales load directly from the respective Series, but the SwissKey Fund class shares are subject to annual 12b-1 plan expenses and, consequently, such expenses may cause performance to differ from the performance of the corresponding Brinson Fund class. 14 At the discretion of the Trust, investors may be permitted to purchase Fund shares by transferring securities to the Series that meet the Series' investment objectives and policies. Securities transferred to the Series will be valued in accordance with the same procedures used to determine the Fund's net asset value at the time of the next determination of net asset value after such acceptance. Shares issued by the Series in exchange for securities will be issued at the net asset value per share of the Fund determined as of the same time. All dividends, interest, subscription, or other rights pertaining to such securities shall become the property of the Series and must be delivered to the Series by the investor upon receipt from the issuer. Investors who are permitted to transfer such securities will be required to recognize a gain or loss on such transfer and pay tax thereon, if applicable, measured by the difference between the fair market value of the securities and the investors' basis therein. Securities will not be accepted in exchange for shares of the Fund unless: (1) such securities are, at the time of the exchange, eligible to be included in the Series' portfolio and current market quotations are readily available for such securities; (2) the investor represents and warrants that all securities offered to be exchanged are not subject to any restrictions upon their sale by the Series under the Securities Act of 1933 or under the laws of the country in which the principal market for such securities exists, or otherwise; and (3) the value of any such security (except U.S. government securities) being exchanged together with other securities of the same issuer owned by the Series will not exceed 5% of the Series' net assets immediately after the transaction. Purchase orders for shares of the Fund which are received by the transfer agent in proper form prior to the close of regular trading hours (currently 4:00 p.m. Eastern time) on the New York Stock Exchange (the "NYSE") on any day that the Fund's net asset value per share is calculated, are priced according to the net asset value determined on that day. Purchase orders for shares of the Fund received after the close of the NYSE on a particular day are priced as of the time the net asset value per share is next determined. The Trust may accept telephone orders for Fund shares from broker-dealers or service organizations which have been previously approved by the Trust. It is the responsibility of such broker-dealers or service organizations to promptly forward purchase orders and payments for the same to the Series. Shares of the Fund may be purchased through broker-dealers, banks and bank trust departments which may charge the investor a transaction fee or other fee for their services at the time of purchase. Such fees would not otherwise be charged if the shares were purchased directly from the Trust. Purchases may be made in one of the following ways: PURCHASES BY MAIL Shares may be purchased initially by completing the application form accompanying this Prospectus and mailing it to the transfer agent, together with a check payable to Brinson U.S. Bond Fund, c/o 2 W. Elm Street, P.O. Box 874, Conshohocken, PA 19428-0874. Subsequent investments in the Brinson U.S. Bond Fund may be made at any time in minimum amounts of $2,500 by sending a check payable to the Brinson U.S. Bond Fund, c/o P.O. Box 412797, Kansas City, MO 64141-2797. Please enclose the stub of your account statement and include the amount of the investment, the name of the account for which the investment is to be made and the account number. PURCHASES BY WIRE To order shares for purchase by wiring federal funds, the transfer agent first must be notified by calling (800) 448-2430 to request an account number and furnish the Fund with your tax identification number. Following notification to the transfer agent, federal funds and registration instructions should be wired through the Federal Reserve System to: UNITED MISSOURI BANK KC NA ABA # 10-10-00695 FOR: FUND/PLAN SERVICES, INC. A/C 98-7037-071-9 FBO "BRINSON U.S. BOND FUND" "SHAREHOLDER NAME AND ACCOUNT NUMBER" 15 A completed application form with signature(s) of registrant(s) must be filed with the transfer agent immediately subsequent to the initial wire. Investors should be aware that some banks may impose a wire service fee. EXCHANGES OF SHARES Fund shares may be exchanged for Brinson Fund class shares of any other Series within the Trust. Exchanges will not be permitted between the Brinson Fund class shares and the SwissKey Fund class shares of a Series of the Trust. Fund shares may be exchanged by written request or by telephone if the shareholder has previously signed a telephone authorization on the application form. The telephone exchange privilege may be difficult to implement during times of drastic economic or market changes. The Trust reserves the right to restrict the frequency of, or otherwise modify, condition, terminate or impose charges upon the exchange and/or telephone transfer privileges upon 60 days' prior written notice to shareholders. Exchanges will be made on the basis of both Funds' relative net asset values per share. Exchanges may be made only for shares of a Series and class then offering its shares for sale in your state of residence and are subject to the minimum initial investment requirement. For federal income tax purposes, an exchange of shares would be treated as if the shareholder had redeemed shares of one Series and reinvested in shares of another Series. Gains or losses on the shares exchanged are realized by the shareholder at the time of the exchange. Any shareholder wishing to make an exchange should first obtain and review a prospectus of the other Series. Requests for telephone exchange must be received by the transfer agent by the close of regular trading hours (currently 4:00 p.m. Eastern time) on the NYSE on any day that the NYSE is open for regular trading. NET ASSET VALUE The Fund's offering price per share consists of the net asset value per share next determined after receipt of the purchase order by the transfer agent in proper form. The net asset value is computed as of the close of regular trading on the NYSE, on days when such exchange is open. The net asset value per share is computed by adding the value of all securities and other assets in the portfolio, deducting any liabilities (expenses and fees are accrued daily) and dividing by the number of shares outstanding. Portfolio securities for which market quotations are available are priced at market value. Debt securities are priced at fair value by an independent pricing service using methods approved by the Board of Trustees of the Trust. Short- term investments having a maturity of less than 60 days are valued at amortized cost, which approximates market value. All other securities are valued at their fair value as determined in good faith and pursuant to a method approved by the Board of Trustees of the Trust. Each of the Series' two classes of shares will bear, pro rata, all of the common expenses of the Series. The net asset value of all outstanding shares of each class of the Series will be computed on a pro rata basis for each outstanding share based on the proportionate participation in the Series represented by the value of shares of that class. All income earned and expenses incurred by the Series, will be borne on a pro rata basis by each outstanding share of a class, based on each class' percentage in the Series represented by the value of shares of such class, except that the Brinson Fund class will not incur any of the expenses under the SwissKey Fund class' Rule 12b-1 Plan. REDEMPTION OF SHARES Shareholders may redeem their shares of the Fund without charge on any business day that the NYSE is open. Redemptions will be effected at the net asset value per share next determined after the receipt by the transfer agent of a redemption request meeting the requirements described below. The Trust normally sends redemption proceeds on the next business day but, in any event, redemption proceeds are sent within five business days of receipt of a redemption request in proper form. Payment also may be made by wire directly to any bank previously designated by the shareholder in a shareholder account application. There is no charge for redemptions by wire. Please note that the shareholder's bank may impose a fee for wire service. The Trust will honor redemption requests of shareholders who recently purchased shares by check, but will not mail the proceeds until it is reasonably satisfied that the purchase check has cleared, which may take up to fifteen days from the purchase date. 16 Except as noted below, redemption requests received in proper form by the transfer agent prior to the close of regular trading hours on the NYSE on any business day that the Fund's net asset value per share is calculated are effected that day. Redemption requests received in proper form by the transfer agent after the close of the NYSE are effected as of the time the net asset value per share is next determined. No redemption will be processed until the transfer agent has received a completed application with respect to the account. The Trust will satisfy redemption requests in cash to the fullest extent feasible, so long as such payments would not, in the opinion of Brinson Partners or the Board of Trustees, result in the necessity of the Series selling assets under disadvantageous conditions and to the detriment of the remaining shareholders of the Series. Pursuant to the Trust's Agreement and Declaration of Trust, payment for shares redeemed may be made either in cash or in-kind, or partly in cash and partly in-kind. However, the Trust has elected, pursuant to Rule 18f-1 under the Act, to redeem its shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Series, during any 90 day period for any one shareholder. Payments in excess of this limit will also be made wholly in cash unless the Board of Trustees believes that economic conditions exist which would make such a practice detrimental to the best interests of the Series. Any portfolio securities paid or distributed in-kind would be valued as described under "Net Asset Value." In the event that an in- kind distribution is made, a shareholder may incur additional expenses, such as the payment of brokerage commissions, on the sale or other disposition of the securities received from the Series. In-kind payments need not constitute a cross-section of the Series' portfolio. Where a shareholder has requested redemption of all or a part of the shareholder's investment, and where the Series computes such redemption in-kind, the Series will not recognize gain or loss for federal tax purposes on the securities used to compute the redemption, but the shareholder will recognize gain or loss equal to the difference between the fair market value of the securities received and the shareholder's basis in the Fund shares redeemed. Shares may be redeemed in one of the following ways: REDEMPTIONS BY MAIL Shares may be redeemed by submitting a written request for redemption to the transfer agent at 2 W. Elm Street, P.O. Box 874, Conshohocken, PA 19428-0874. A written redemption request to the transfer agent must: (i) identify the shareholder's account name; (ii) state the number of shares to be redeemed; and (iii) be signed by each registered owner exactly as the shares are registered. A redemption request for any amount must be accompanied by signature guarantees. Signatures must be guaranteed by an "eligible guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible guarantor institutions include banks, brokers, dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations. Broker-dealers guaranteeing signatures must be members of a clearing corporation or maintain net capital of at least $100,000. Credit unions must be authorized to issue signature guarantees. Signature guarantees will be accepted from any eligible guarantor institution which participates in a signature guarantee program. The transfer agent may require additional supporting documents for redemptions made by corporations, executors, administrators, trustees and guardians. A redemption request will not be deemed to be properly received until the transfer agent receives all required documents in proper form. Questions with respect to the proper form for redemption requests should be directed to the transfer agent at (800) 448-2430. REDEMPTIONS BY TELEPHONE Shareholders who have so indicated on the application form, or have subsequently arranged in writing to do so, may redeem shares by instructing the transfer agent by telephone at (800) 448-2430. In order to arrange for redemption by wire or telephone after an account has been opened, or to change the bank or account designated to receive redemption proceeds, a written request must be sent to the transfer agent at the address listed above. 17 The Trust reserves the right to refuse a wire or telephone redemption if it is believed advisable to do so. Procedures for redeeming Fund shares by wire or telephone may be modified or terminated at any time by the Trust. Shares of the Fund may be redeemed through certain broker-dealers, banks and bank trust departments which may charge the investor a transaction fee or other fee for their services at the time of redemption. Such fees would not otherwise be charged if the shares were purchased from the Trust. TELEPHONE TRANSACTIONS Shareholders who wish to initiate purchase, exchange or redemption transactions by telephone must elect the option, as described above. With respect to such telephone transactions, the Trust will ensure that reasonable procedures are used to confirm that instructions communicated by telephone are genuine (including verification of the shareholder's social security number or mother's maiden name) and, if it does not, the Trust or the transfer agent may be liable for any losses due to unauthorized or fraudulent transactions. Written confirmation will be provided for all purchase, exchange and redemption transactions initiated by telephone. DIVIDENDS, DISTRIBUTIONS AND TAXES The Series will distribute its net investment income semi-annually in June and December. The Series will distribute annually in December substantially all of its net long-term capital gains and any undistributed net short-term capital gains realized during the one year period commencing November 1 (or the date of the creation of the Series, if later) and ending October 31, and at the same time, will distribute all of its net investment income earned through the end of December and not previously distributed. Any net realized short-term capital gain will be distributed as ordinary (not capital) income. Dividends and other distributions paid by the Series with respect to its Brinson Fund class and SwissKey Fund class shares are calculated in the same manner and at the same time. The per share dividends on the SwissKey Fund class shares will be lower than the per share dividends on the Brinson Fund class shares of the Series as a result of the 12b-1 distribution expense applicable with respect to the SwissKey Fund class shares. Both the SwissKey Fund class and Brinson Fund class shares of the Series will share proportionately in the investment income and expenses of the Series, except that the per share dividends and distributions on the SwissKey Fund class shares will be lower than the per share dividends on the Brinson Fund class shares, which will not incur any expenses under a Rule 12b-1 Plan. Dividends and distributions are automatically reinvested in additional Fund shares of the Series unless the shareholder has notified the transfer agent, in writing, of his election to receive such dividends and distributions in cash. Any check in payment of dividends or other distributions which cannot be delivered by the Post Office or which remains uncashed for a period of more than one year may be reinvested in the shareholder's account at the then current net asset value and the dividend option may be changed from cash to reinvest. Dividends are reinvested on the ex dividend date (the "ex date") at the net asset value per share determined at the close of business on that date. Dividends and distributions are treated the same for tax purposes whether received in cash or reinvested in additional shares. Please note that shares purchased shortly before the record date for a dividend or distribution may have the effect of returning capital although such dividends and distributions are subject to taxes. Shareholders will be subject to federal income taxes on dividends and distributions made by the Series, including those automatically reinvested. Distributions of net investment income and short-term capital gains, if any, will be taxable to shareholders as ordinary income, whether received in cash or additional shares. Distributions of net long-term capital gains, if any, will be taxable to shareholders as long-term capital gains, whether received in cash or Fund shares and without regard to how long a shareholder has held shares of the Series. Shareholders not subject to tax on their income will not be required to pay tax on amounts distributed to them. The Series does not actively seek to realize any particular amount of capital gains during a year; rather, realized gains are a 18 by product of Series investment management activities. Dividends and distributions may also be subject to state and local taxes. The Series will notify shareholders each year of the amount of dividends and distributions, including the amount of any distribution of long-term capital gains. Redemptions of Fund shares and the exchange of shares between two Series, are taxable events and, accordingly, shareholders may realize capital gains or losses on these transactions. The Series has qualified, and intends to continue to qualify for taxation as a "regulated investment company" under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), so that it will not be subject to federal income tax, or to any excise tax, to the extent its earnings are distributed to shareholders as provided in the Code. The Series will therefore be treated as a separate entity for the purpose of computing investment company taxable income and net realized capital gains and losses for federal income tax purposes and for purposes of qualifying under the diversification, income and distribution tests of Subchapter M. Shareholders may be subject to 31% withholding on reportable dividend and redemption payments ("back-up withholding"). Generally, back-up withholding will apply to shareholders for whom a certified taxpayer identification number is not on file with the Series, who, to the Series' knowledge, have furnished an incorrect number, or if the Series has been notified by the IRS that an account is subject to back-up withholding. An individual's taxpayer identification number is his social security number. The tax discussion set forth above is included for general information only. Prospective investors should consult their own tax advisers concerning the tax consequences of an investment in the Series. SHARES OF BENEFICIAL INTEREST AND VOTING RIGHTS The Trust was originally organized as a Maryland corporation on April 14, 1992. On December 1, 1993, the Trust reorganized as a Delaware business trust through a merger of the Maryland corporation into the Trust. The Trust's Agreement and Declaration of Trust permit the Trustees to issue an unlimited number of shares of beneficial interest with a $0.001 par value per share. The Board of Trustees has the power to designate one or more Series or sub-series/classes of shares of beneficial interest and to classify or reclassify any unissued shares with respect to such Series. Currently, the Trust is offering shares of ten series: Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash Management, Non-U.S. Equity Fund and Non-U.S. Bond Fund. The shares of the Trust, when issued, will be fully paid and non-assessable and within each Series or class, have no preference as to conversion, exchange, dividends, retirement or other features. The shares of the Trust which the Trustees may, from time to time, establish, shall have no preemptive rights. The shares of the Trust have non-cumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of Trustees can elect 100% of the Trustees if they choose to do so. A shareholder is entitled to one vote for each full share held (and a fractional vote for each fractional share held), then standing in his name on the books of the Trust. On any matter submitted to a vote of shareholders, all shares of the Trust then issued and outstanding and entitled to vote on a matter shall vote without differentiation between separate Series or class on a one-vote-per-share basis. Each whole share is entitled to one vote and each fractional share is entitled to a proportionate fractional vote. If a matter to be voted on does not affect the interests of all Series or classes, then only the shareholders of the affected Series or class shall be entitled to vote on the matter. The Trust's Agreement and Declaration of Trust also gives shareholders the right to vote (i) for the election or removal of Trustees; (ii) with respect to additional matters relating to the Trust as required by the Act; and (iii) on such other matters as the Trustees consider necessary or desirable. As of January 17, 1996, Swiss Bank Corporation of New York, New York was a control person of the Fund by nature of its shareholdings. Under the Investment Company Act, a control person possesses the ability to control the outcome of matters submitted for shareholder vote. 19 SHAREHOLDER MEETINGS Pursuant to Delaware law and the Trust's Agreement and Declaration of Trust, the Trust does not intend to hold shareholder meetings except when required to elect Trustees, or with respect to additional matters relating to the Trust, as required under the Act. The Securities and Exchange Commission requires the Trustees to promptly call a meeting for the purpose of voting upon the question of removal of any trustee when requested to do so by not less than 10% of the outstanding shareholders of the Series. In addition, subject to certain conditions, shareholders of the Series may apply to the Series to communicate with other shareholders to request a shareholders' meeting to vote upon the removal of a Trustee or Trustees. THE CUSTODIAN, TRANSFER AGENT AND ACCOUNTING/PRICING AGENT Bankers Trust Company, c/o BTNY Services, Inc., 34 Exchange Place, Jersey City, NJ 07302-1107, is custodian for the securities and cash of the Series. Fund/Plan serves as the Series' transfer agent. As transfer agent, it maintains the records of each shareholder's account, answers shareholder inquiries concerning accounts, processes purchases and redemptions of the Series' shares, acts as dividend and distribution disbursing agent and performs other shareholder service functions. Shareholder inquiries should be addressed to the transfer agent at (800) 448-2430. Fund/Plan also performs certain accounting and pricing services for the Series, including the daily calculation of the Fund's net asset value per share. PERFORMANCE CALCULATIONS From time to time, performance information, such as yield or total return for the Fund, may be quoted in advertisements or in communications to shareholders. Performance quotations of the Fund represent the Fund's past performance and should not be considered as representative of future results. The current yield will be calculated by dividing the net investment income earned per share by the Fund during the period stated in the advertisement (based on the average daily number of shares entitled to receive dividends outstanding during the period) by the maximum net asset value per share on the last day of the period and annualizing the result on a semi-annual compounded basis. The Fund's total return may be calculated on an annualized and aggregate basis for various periods (which periods will be stated in the advertisement). Average annual return reflects the average percentage change per year in value of an investment in the Fund. Aggregate total return reflects the total percentage change over the stated period. To help investors better evaluate how an investment in the Fund might satisfy their investment objective, advertisements regarding the Fund may discuss yield or total return as reported by various financial publications. Advertisements may also compare yield or total return to other investments, indices and averages. The following publications, benchmarks, indices and averages may be used: Lipper Mutual Fund Performance Analysis; Lipper Fixed Income Analysis; Lipper Mutual Fund Indices; Morgan Stanley Indices; Shearson Lehman Hutton Treasury Index; Salomon Brothers Indices; Dow Jones Composite Average or its component indices; Standard & Poor's 500 Stock Index or its component indices; Wilshire Indices; The New York Stock Exchange composite or component indices; CDA Mutual Fund Report; Weisenberger -- Mutual Funds Panorama and Investment Companies; Mutual Fund Values and Mutual Fund Service Book, published by Morningstar, Inc.; comparable global portfolios managed by the Advisor; and financial publications such as Business Week, Kiplinger's Personal Finance, Financial World, Forbes, Fortune, Money Magazine, The Wall Street Journal and Barron's, et al., which rate fund performance over various time periods. The principal value of an investment in the Fund will fluctuate so that an investor's shares when redeemed may be worth more or less than their original cost. Any fees charged by banks or other institutional investors directly to their customer accounts in connection with investments in shares of the Fund will not be included in the Fund's calculations of yield or total return. Further information about the performance of the Fund may be obtained without charge by contacting the Trust at (800) 448-2430. 20 ADVISOR Brinson Partners, Inc. 209 South LaSalle Street Chicago, IL 60604-1295 UNDERWRITER Fund/Plan Broker Services, Inc. 2 W. Elm Street Conshohocken, PA 19428-0874 SHAREHOLDER SERVICES Fund/Plan Services, Inc. 2 W. Elm Street P.O. Box 874 Conshohocken, PA 19428-0874 CUSTODIAN Bankers Trust Company 34 Exchange Place Jersey City, NJ 07302-1107 LEGAL COUNSEL Stradley, Ronon, Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103-7098 INDEPENDENT AUDITORS Ernst & Young LLP Sears Tower 233 South Wacker Drive Chicago, IL 60606-6301 THE BRINSON FUNDS LOGO Brinson U.S. Bond Fund 209 South LaSalle Street Chicago, IL 60604-1295 21 LOGO 209 South LaSalle Street Chicago, IL 60604-1295 PROSPECTUS FEBRUARY 15, 1996 THE SWISSKEY FUNDS represent a separate class of shares of ten different in- vestment portfolios, offered by The Brinson Funds (the "Trust"). The Trust is an open-end management investment company advised by Brinson Partners, Inc. Each investment portfolio, a series, offers two separate classes of shares-- the SwissKey Fund class and the Brinson Fund class. The SwissKey Funds, which represent the SwissKey Fund class of each investment portfolio, are: SwissKey Global Fund, SwissKey Global Equity Fund, SwissKey Global Bond Fund, SwissKey Short-Term Global Income Fund, SwissKey U.S. Balanced Fund, SwissKey U.S. Eq- uity Fund, SwissKey U.S. Bond Fund, SwissKey U.S. Cash Management Fund, SwissKey Non-U.S. Equity Fund and SwissKey Non-U.S. Bond Fund (each a "Fund" and collectively, the "SwissKey Funds" or "Funds"). The Funds are designed to offer investors a variety of investment opportunities. Each Fund has distinct investment objectives and policies. This prospectus pertains only to the SwissKey Fund class shares, which do not have a sales load, but are subject to annual 12b-1 plan expenses. The Brinson Fund class shares, which are designed primarily for institutional investors, do not have a sales load and are not subject to annual 12b-1 plan expenses. Further information relating to the Brinson Fund class shares may be obtained by calling (800) 448-2430. This Prospectus sets forth concisely the information a prospective investor should know before investing in any of the SwissKey Funds. Investors should read and retain this Prospectus for future reference. Additional information about the Funds and the other class of shares of the Trust's investment port- folios is contained in the Statement of Additional Information dated February 15, 1996, as amended from time to time, which has been filed with the Securi- ties and Exchange Commission and is available upon request and without charge from the Trust, at the addresses and telephone numbers below. The Statement of Additional Information is incorporated by reference into this Prospectus. AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN ANY OF THE FUNDS IS NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. FURTHER, THERE CAN BE NO ASSURANCE THAT THE SWISSKEY U.S. CASH MANAGEMENT FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC- CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. UNDERWRITER: Fund/Plan Broker Services, Inc. 2 W. Elm Street Conshohocken, PA 19428-0874 1-800-SWISSKEY ADVISOR: Brinson Partners, Inc. 209 South LaSalle Street Chicago, IL 60604-1295 1-800-SWISSKEY TABLE OF CONTENTS
PAGE ---- Prospectus Summary......................................................... 1 Expense Information........................................................ 5 Financial Highlights..................................................... 7 Investment Objectives and Policies......................................... 8 Global Fund.............................................................. 9 Global Equity Fund....................................................... 10 Global Bond Fund......................................................... 11 Short-Term Global Income Fund............................................ 11 U.S. Balanced Fund....................................................... 12 U.S. Equity Fund......................................................... 13 U.S. Bond Fund........................................................... 14 U.S. Cash Management Fund................................................ 15 Non-U.S. Equity Fund..................................................... 17 Non-U.S. Bond Fund....................................................... 17 Investment Policies........................................................ 19 Other Investment Practices and Risk Factors................................ 24 Management of the Trust.................................................... 29 Portfolio Management....................................................... 29 Administration of the Trust................................................ 29 Purchase of Shares......................................................... 31 Exchange of Shares......................................................... 33 Redemption of Shares....................................................... 33 Account Options............................................................ 36 Distribution Plan.......................................................... 36 Net Asset Value............................................................ 37 Dividends and Taxes........................................................ 38 Performance Information.................................................... 39 General Information........................................................ 41
This Prospectus is not an offering of the securities herein described in any jurisdiction or to any person to whom it is unlawful for the Funds to make such an offer or solicitation. No sales representative, dealer, or other person is authorized to give any information or make any representation other than those contained in this Prospectus. PROSPECTUS SUMMARY THE TRUST The Trust is an open-end management investment company commonly known as a mutual fund. The Trust was established as a Maryland corporation on April 14, 1992, and was reorganized as a Delaware business trust on December 1, 1993. The Trust currently offers ten different investment portfolios: Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, U.S. Bal- anced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non- U.S. Equity Fund and Non-U.S. Bond Fund (each a "Series" and collectively, the "Series"). The Trust offers two classes of shares for each Series: the Brinson Fund class and SwissKey Fund class. This prospectus pertains only to the SwissKey Fund class shares of each Series. INVESTMENT OBJECTIVES OF THE FUNDS: GLOBAL FUND seeks to maximize total return, consisting of capital apprecia- tion and current income. As a global fund, at least 65% of the Series' assets will be invested in securities of issuers in at least three countries, one of which may be the United States. GLOBAL EQUITY FUND seeks to maximize total return, consisting of capital ap- preciation and current income by investing in equity securities, both domestic and foreign. As a global fund, at least 65% of the Series' assets will be in- vested in equity securities of issuers in at least three countries, one of which may be the United States. GLOBAL BOND FUND seeks to maximize total return, consisting of capital ap- preciation and current income by investing in fixed-income securities, both domestic and foreign. As a global fund, at least 65% of the Series' total as- sets will be invested in debt securities with an initial maturity of more than one year of issuers in at least three countries, one of which may be the United States. SHORT-TERM GLOBAL INCOME FUND seeks a high level of current income consis- tent with preservation of capital, by investing primarily in fixed income se- curities, both domestic and foreign. As a global fund, at least 65% of the Series' total assets will be invested in debt securities having a dollar- weighted average maturity of not more than three years of issuers in at least three countries, one of which may be the United States. U.S. BALANCED FUND seeks to maximize total return, consisting of capital ap- preciation and current income, by investing in a wide range of U.S. equity, debt and money market securities, having the potential to realize both long- term growth and income. As a balanced fund, at least 25% of its assets will normally be invested in fixed income securities. U.S. EQUITY FUND seeks to maximize total return, consisting of capital ap- preciation and current income, while controlling risk by investing in equity securities of U.S. companies. Under normal circumstances, at least 65% of the Series' total assets will be invested in equity securities of U.S. companies. U.S. BOND FUND seeks to maximize total return, consisting of capital appre- ciation and current income, while controlling risk by investing in domestic fixed income securities. Under normal circumstances, at least 65% of the Se- ries' total assets will be invested in U.S. debt securities with an initial maturity of more than one year. U.S. CASH MANAGEMENT FUND seeks to maximize current income consistent with preservation of capital by investing exclusively in U.S. dollar-denominated money market instruments that mature in twelve months or less. NON-U.S. EQUITY FUND seeks to maximize total return, consisting of capital appreciation and current income by investing primarily in the equity securi- ties of non-U.S. issuers. Under normal conditions, at least 65% of the Series' total assets will be invested in equity securities of issuers in at least three countires other than the United States. NON-U.S. BOND FUND seeks to maximize total return, consisting of capital ap- preciation and 1 current income, while controlling risk, by investing primarily in fixed income securities which are not denominated in U.S. dollars and that may also provide the potential for capital appreciation. Under normal conditions, at least 65% of the Series' total assets will be invested in debt securities with an ini- tial maturity of more than one year from at least three countries other than the United States. HOW TO PURCHASE SHARES The minimum initial investment is $1,000 for each Fund. The minimum for ad- ditional investments is $50 for each Fund. The Funds do not impose any sales load, redemption or exchange fees. All of the Funds have adopted Distribution Plans pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Act"), and are subject to annual 12b-1 expenses. See "Distribu- tion Plan." The public offering price for shares of each of the Funds is the net asset value per share next determined after receipt and acceptance of a purchase order at the transfer agent in proper form with accompanying check or other bank wire arrangements. See "Purchase of Shares." HOW TO REDEEM SHARES Shares of each Fund may be redeemed at the net asset value per share of the Fund next determined after receipt by the transfer agent of a redemption re- quest in proper form. Signature guarantees may be required. See "Redemption of Shares." DIVIDENDS Each Fund intends to distribute substantially all of its net investment in- come and net realized capital gains, if any, to shareholders. Distributions of net capital gains, if any, will be made annually. All distributions are rein- vested at net asset value, in additional full and fractional shares of the same class of the respective Series unless and until the shareholder notifies the transfer agent in writing requesting payments in cash. The Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund declare and pay dividends on net investment income, if any, semi-annually. The Short-Term Global Income Fund's and U.S. Cash Management Fund's net investment income is declared daily and paid monthly as a dividend to shareholders of record at the close of business on the day of declaration. See "Dividends and Taxes." MANAGEMENT OF THE TRUST Brinson Partners, Inc. ("Brinson Partners" or the "Advisor"), the Series' investment advisor, is an investment management firm managing, as of December 31, 1995, approximately $53 billion in assets, primarily for pension and profit sharing institutional accounts. Brinson Partners has offices in London, Melbourne, New York, Paris, Singapore, Sydney and Tokyo, in addition to its principal office at 209 South LaSalle Street, Chicago, IL 60604-1295. Fund/Plan Broker Services, Inc., 2 W. Elm Street, Conshohocken, PA 19428- 0874 serves as the Funds' underwriter. Bankers Trust Company, c/o BTNY Servic- es, Inc., 34 Exchange Place, Jersey City, NJ 07302-1107, serves as the custodian of the Series' assets. Fund/Plan Services, Inc., P.O. Box 874, 2 W. Elm Street, Conshohocken, PA 19428-0874 serves as the Series' administrator, accounting/pricing agent and transfer agent. RISK FACTORS Shareholders should understand that all investments involve risks and there can be no guarantee against loss resulting from an investment in the Series, nor can there be any assurance that the Series will be able to attain their investment objectives. ALL SERIES: 1. The Series may lend portfolio securities to creditworthy institutions; the principal risk to the 2 Series is the risk that the borrower fails to return the borrowed security. The Series will require collateral before lending securities. See "Loans of Portfolio Securities" under "Other Investment Practices and Risk Factors." 2. The Series may invest in repurchase agreements (which involve risk of loss if a seller defaults on its obligations under the agreement) and reverse repurchase agreements (which involve risk of loss if a purchaser defaults on its obligation to return securities to the Series). See "Repurchase Agree- ments" and "Reverse Repurchase Agreements" under "Other Investment Practices and Risk Factors." ALL SERIES, EXCEPT U.S. CASH MANAGEMENT FUND: 3. The Series may enter into contracts for the future purchase or sale of securities, including index contracts, and purchase and write options to buy or sell futures contracts. The Series may also purchase and write put and call options on securities or indices and enter into related closing transactions. While the Series do not engage in options or futures for speculative purposes, there are certain risks associated with such hedging techniques. See "Futures Contracts and Options on Futures Contracts" and "Options" under "Other Invest- ment Practices and Risk Factors." GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, U.S. BALANCED FUND, U.S. BOND FUND AND NON-U.S. BOND FUND: 4. The Series may invest in swaps for hedging and other permissible purpos- es, which could subject the Series to increased risks. See "Swaps" under "Other Investment Practices and Risk Factors." GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, NON-U.S. EQUITY FUND AND NON-U.S. BOND FUND: 5. Investments in non-U.S. securities could involve possible risks and op- portunities not typically associated with investments in U.S. securities, in- cluding, but not limited to, foreign exchange fluctuations, political risks and the costs of effecting transactions in foreign markets. See "Foreign Secu- rities and Currency Considerations" under "Other Investment Practices and Risk Factors." 6. The value of securities denominated in currencies other than the U.S. dollar, when expressed in U.S. dollars, will fluctuate in response to changes in exchange rates between the U.S. dollar and the currencies in which the in- struments are denominated. The net asset value can therefore fluctuate in re- sponse to such changes in exchange rates, in addition to changes in the value of portfolio securities which are unrelated to changes in currency exchange rates. See "Foreign Securities and Currency Considerations" under "Other In- vestment Practices and Risk Factors." 7. The Series may alter foreign currency exposure or engage in certain hedg- ing techniques through the use of forward currency contracts, currency futures contracts, options on currency futures, or swaps. The Series are also permit- ted to invest in options on securities, futures contracts and indices of both U.S. and non-U.S. markets. While the Series do not engage in options or futures for speculative purposes, there are certain risks associated with such hedging techniques. See "Forward Foreign Currency Transaction," "Options on Currencies" and "Futures Contracts and Options on Futures Contracts" under "Other Investment Practices and Risk Factors." GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND AND U.S. BOND FUND: 8. The Series may invest in lower quality, higher yielding securities (com- monly referred to as "junk bonds"). See "Fixed Income Securities" under "In- vestment Objectives and Policies," "High Yield/High Risk Securities" under "Other Investment Practices and Risk Factors" and Appendix A in the Trust's Statement of Additional Information. 3 GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND AND NON-U.S. BOND FUND: 9. While the Global Bond Fund, Short-Term Global Income Fund and Non-U.S. Bond Fund each intend to qualify as "diversified" investment companies under the provisions of Subchapter M of the Internal Revenue Code, they will not be diversified under the Act. Thus, while at least 50% of each Series' total as- sets will be represented by cash, cash items, and other securities limited in respect of any one issuer to an amount not greater than 5% of such Series' to- tal assets, the Series will not satisfy the Act's requirement in this respect, which applies that test to 75% of each Series' assets. A non-diversified port- folio is believed to be subject to greater risk because adverse effects on the portfolio's security holdings may affect a larger portion of the overall as- sets. Please see the Statement of Additional Information for further information concerning investment policies and restrictions. 4 EXPENSE INFORMATION SHAREHOLDER TRANSACTION EXPENSES FOR EACH FUND: Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................................................................. 0.00% Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)........................................................ 0.00% Deferred Sales Load (as a percentage of original purchase price)........ 0.00% Redemption Fees (as a percentage of amount redeemed).................... 0.00% Exchange Fees (as a percentage of amount exchanged)..................... 0.00%
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
TOTAL FUND EXPENSES OTHER (AFTER FEE ESTIMATED WAIVER EXPENSES AND/OR MANAGEMENT/1/ (AFTER EXPENSE FEES (AFTER 12B-1 REIMBURSE- REIMBURSE- FEE WAIVER) EXPENSES/2/ MENT) MENT) ------------- ----------- ---------- ---------- SwissKey Global Fund........... 0.80% 0.65% 0.29% 1.74% SwissKey Global Equity Fund.... 0.00% 0.76% 1.00% 1.76% SwissKey Global Bond Fund...... 0.22% 0.49% 0.68% 1.39% SwissKey Short-Term Global Income Fund................... 0.60% 0.52% 0.15% 1.27% SwissKey U.S. Balanced Fund.... 0.43% 0.50% 0.37% 1.30% SwissKey U.S. Equity Fund...... 0.00% 0.52% 0.80% 1.32% SwissKey U.S. Bond Fund........ 0.50% 0.47% 0.10% 1.07% SwissKey U.S. Cash Management Fund.......................... 0.30% 0.47% 0.10% 0.87% SwissKey Non-U.S. Equity Fund.. 0.56% 0.84% 0.44% 1.84% SwissKey Non-U.S. Bond Fund.... 0.75% 0.52% 0.15% 1.42%
The SwissKey Fund class shares of the Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund and Non U.S. Equity Fund Series commenced operations on July 31, 1995. The SwissKey Fund class shares of the U.S. Bond Fund Series commenced operations on August 31, 1995. - ----------- /1Pursuant/to the terms of the Investment Advisory Agreements between the Trust and the Advisor, the Advisor is to receive a monthly fee at the fol- lowing annual rates for each of the Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non-U.S. Equity Fund and Non U.S. Bond Fund: 0.80%, 0.80%, 0.75%, 0.60%, 0.70%, 0.70%, 0.50%, 0.30%, 0.80% and 0.75%, respectively. Brinson Partners has agreed irrevocably to waive its fees and reimburse expenses so that all of the expenses, with the exception of 12b-1 expenses, of the SwissKey Global Fund, SwissKey Global Equity Fund, SwissKey Global Bond Fund, SwissKey Short-Term Global Income Fund, SwissKey U.S. Balanced Fund, SwissKey U.S. Equity Fund, SwissKey U.S. Bond Fund, SwissKey U.S. Cash Management Fund, SwissKey Non-U.S. Equity Fund and SwissKey Non-U.S. Bond Fund do not exceed 1.10%, 1.00%, 0.90%, 0.75%, 0.80%, 0.80%, 0.60%, 0.40%, 1.00% and 0.90%, respectively. Management fees (after fee waivers) and Other Estimated Expenses (after reimbursement) for the SwissKey Global Fund, SwissKey Global Equity Fund, SwissKey Global Bond Fund, SwissKey U.S. Balanced Fund, SwissKey U.S. Equity Fund and SwissKey Non-U.S. Equity Fund are based on the operating expenses for Brinson Fund class shares of the relevant Series for the previous fiscal year. Management fees (after fee waivers) and Other Estimated Expenses (after reimbursement) for the SwissKey Short-Term Global Income Fund, SwissKey U.S. Bond Fund, SwissKey U.S. Cash Management Fund and SwissKey Non-U.S. Bond Fund are based on estimated amounts for the current fiscal year. Absent these fee waivers and expense reimbursements, the total operating expenses for the SwissKey Fund shares of the Series that have commenced operations to date are esti- mated to be 1.74%--Global Fund, 2.82%--Global Equity Fund, 1.92%--Global 5 Bond Fund, 1.56%--U.S. Balanced Fund, 2.22%--U.S. Equity Fund, 5.15%--U.S. Bond Fund and 2.07%--Non-U.S. Equity Fund. /2For/purposes of this Table, "12b-1 Expenses" is comprised of an asset-based sales charge of up to 0.65% of average daily net assets and a service fee of 0.25% of average daily net assets for SwissKey Fund class shares of each Se- ries. Pursuant to rules of the National Association of Securities Dealers, Inc. ("NASD"), the aggregate initial sales charges, deferred sales charges and asset-based sales charges on shares of the Funds may not exceed 6.25% of total gross sales, subject to certain exclusions. This 6.25% limitation is imposed on the Fund rather than on a per shareholder basis. Therefore, long- term shareholders of the SwissKey Funds may pay more than the economic equivalent of the maximum front-end sales charges permitted by the NASD. This amount also includes service fees. Although the Distribution Plan relating to the SwissKey Funds (the "Plan") provides that the Trust may pay up to an annual rate of 0.65% of the average daily net assets of the SwissKey Fund class shares, plus a 0.25% service fee for each SwissKey Fund class ("distribution fees"), the Trust and the Under- writer have agreed to limit aggregate distribution fees with respect to SwissKey Fund class shares so as not to exceed 0.65%, 0.76%, 0.49%, 0.52%, 0.50%, 0.52%, 0.47%, 0.47%, 0.84% and 0.52% of the average daily net assets of the SwissKey Global Fund, SwissKey Global Equity Fund, SwissKey Global Bond Fund, SwissKey Short-Term Global Income Fund, SwissKey U.S. Balanced Fund, SwissKey U.S. Equity Fund, SwissKey U.S. Bond Fund, SwissKey U.S. Cash Manage- ment Fund, SwissKey Non-U.S. Equity Fund and SwissKey Non-U.S. Bond Fund, re- spectively. EXAMPLE: Based on the level of expenses listed above after fee waivers and reimburse- ments, the total expenses relating to an investment of $1,000 would be as fol- lows assuming a 5% annual return and redemption at the end of each time period.
NAME OF FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------ ------ ------- ------- -------- SwissKey Global Fund............................ $18 $55 $94 $206 SwissKey Global Equity Fund..................... $18 $55 $95 $207 SwissKey Global Bond Fund....................... $14 $44 $76 $167 SwissKey Short-Term Global Income Fund.......... $13 $40 $70 $153 SwissKey U.S. Balanced Fund..................... $13 $41 $71 $157 SwissKey U.S. Equity Fund....................... $13 $42 $72 $159 SwissKey U.S. Bond Fund......................... $11 $34 $59 $131 SwissKey U.S. Cash Management Fund.............. $ 9 $27 $48 $107 SwissKey Non-U.S. Equity Fund................... $19 $58 $99 $216 SwissKey Non-U.S. Bond Fund..................... $14 $45 $78 $170
The foregoing tables are designed to assist the investor in understanding the various costs and expenses that a shareholder will bear directly or indi- rectly. While the example assumes a 5% annual return, a Fund's actual perfor- mance will vary and may result in actual returns greater or less than 5%. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX- PENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE TRUST ISSUES TWO CLASSES OF SHARES THAT INVEST IN THE SAME PORTFOLIOS OF SECURITIES. ALTHOUGH SHAREHOLDERS OF BOTH THE BRINSON FUND CLASS SHARES AND SWISSKEY FUND CLASS SHARES DO NOT PAY SALES CHARGES, SHAREHOLDERS OF SWISSKEY FUND CLASS SHARES ARE SUBJECT TO DISTRIBUTION EXPENSES. THEREFORE, EXPENSES, AND ULTIMATELY, PERFORMANCE WILL VARY BETWEEN THE CLASSES. FURTHER INFORMATION ABOUT THE BRINSON FUND CLASS SHARES OF THE TRUST MAY BE OBTAINED BY CALLING (800) 448-2430. 6 FINANCIAL HIGHLIGHTS The following financial highlights are part of the unaudited, interim finan- cial statements for the SwissKey Fund class of the U.S. Bond Fund which com- menced investment operations on August 31, 1995. The period presented is from August 31, 1995 through December 31, 1995. The following table should be read in conjunction with the unaudited financial statements and related notes also included in the Statement of Additional Information. SWISSKEY U.S. BOND FUND
FOR THE PERIOD AUGUST 31, 1995/1/ TO DECEMBER 31, 1995 ----------------- Net asset value, beginning of period......................... $10.00 Income from investment operations: Net investment income....................................... 0.20 Net realized and unrealized gain on Investments............. 0.34 ------ Total gain from investment operations...................... 0.54 ------ Less distributions: Distributions from net investment income.................... (0.20) Distributions from net realized gain........................ (0.03) ------ Total distributions........................................ (0.23) ------ Net asset value, end of period.............................. $10.30 ====== Total Return................................................. 5.29%/3/ Ratios/Supplemental Data Net assets, end of period (in 000s)......................... $9,249 Ratio of expenses to average net assets: Before expense reimbursement................................ 5.15%/2/ After expense reimbursement................................. 1.07%/2/ Ratio of net investment income to average net assets: Before expense reimbursement................................ 1.71%/2/ After expense reimbursement................................. 5.80%/2/ Portfolio turnover rate..................................... 212%
- ----------- /1/ Commencement of operations. /2/ Annualized. /3/ Not Annualized. 7 INVESTMENT OBJECTIVES AND POLICIES The investment objective of each Series is fundamental and may not be changed without a vote of the holders of the majority of the voting securities of the Series. Unless otherwise stated in this Prospectus or the Statement of Additional Information, each Series' investment policies are not fundamental and may be changed without shareholder approval. While a non-fundamental pol- icy or restriction may be changed by the Trustees of the Trust without share- holder approval, the Series intend to notify shareholders before making any material change in any such policy or restriction. Fundamental policies may not be changed without shareholder approval. The Series strive to attain their investment objectives, but there can be no assurance that they will do so. Additional investment policies and restrictions are described in the State- ment of Additional Information, dated February 15, 1996. THE INVESTMENT PROCESS The Advisor's investment perspective for the Series is to determine funda- mental value based on sustainable future cash flows associated with given as- set classes and securities. Defining future cash flows associated with a particular security or asset class allows the Advisor to determine fundamental values (i.e., whether an investment is fairly priced). The successful identi- fication of mispricing opportunities should result in enhanced total return performance. Brinson Partners will focus on comparing current market prices to fundamental values, rather than on either forecasts of future price changes or extrapolations of historical price relationships. As a general matter, the Advisor will purchase for the Series only securi- ties contained in the underlying indices relevant to the Benchmarks. Brinson Partners will attempt to enhance the long-term return and risk performance of the Series relative to the Benchmarks by deviating from the normal Benchmark mix of asset classes and currencies in reaction to discrepancies between cur- rent market prices and fundamental values. Active asset allocation strategy for the Series will be defined relative to the Benchmark weights, which repre- sent the Series' normal mix. Decisions to deviate from the normal mix are a blend of rigorous quantitative analysis, an understanding of the fundamental relationships among global markets and the expertise of investment profession- als. In the absence of views as to the relative attractiveness across asset classes, the actual fund weights will be equal to the Benchmark weights. The active management process is intended to produce a superior performance rela- tive to the Benchmark index. The Series do not intend to concentrate their investments in a particular industry. The Series do not intend to issue senior securities as defined in the Act, except that all of the Series may engage in borrowing activities as defined below. Each Series' investment objectives and its policies concerning portfolio lending, borrowing, the issuance of senior securities and concentra- tion, are "fundamental," which means that they may not be changed without the affirmative vote of the holders of a majority of the Series' outstanding vot- ing securities (as defined in the Act). The Series and the Advisor believe that, over the long term, investing across global equity and fixed income markets based upon discrepancies between market prices and fundamental values may achieve enhanced return and risk characteristics relative to the Benchmark. Fundamental value is considered to be the current value of long-term, sus- tainable future cash flows derived from a given asset class or security. In determining fundamental value, the Advisor takes into consideration broadly based indices representing asset classes or markets and various economic vari- ables such as productivity, inflation and global competitiveness. The valua- tion of asset classes reflects an integrated, fundamental analysis of global markets. Investment decisions are based 8 on comparisons of current market prices to fundamental values. The "asset class strategy ranges" indicated on the following pages are the ranges within which each Series expects to make its active asset allocations to specific asset classes. Under all but unusual market conditions, each Se- ries expects to adhere to the strategy ranges set forth. However, each Series' strategy ranges may be exceeded by the Series under unusual market conditions. GLOBAL FUND INVESTMENT OBJECTIVE The Series' investment objective is to maximize total U.S. dollar return, consisting of capital appreciation and current income. The Series is a diver- sified portfolio that seeks to achieve its objective by pursuing active asset allocation strategies across global equity and fixed income markets and active security selection within each market. These decisions are undertaken relative to the Global Securities Markets Index (the "Benchmark"), which is compiled by Brinson Partners. The Series seeks to achieve its investment objective by utilizing a wide range of equity, debt and money market securities in domestic and foreign markets. The Series may engage in futures, options and currency transactions for hedging as more fully described below. ASSET ALLOCATION The Benchmark consists of five distinct asset classes representing the pri- mary wealth-holding public securities markets. These asset classes are U.S. equities, non-U.S. equities, U.S. bonds, non-U.S. bonds and cash equivalents. Each asset class is represented in the Benchmark by an index compiled by an independent data provider. The index relating to U.S. equities is the Wilshire 5000 Index; the index relating to non-U.S. equities is the Morgan Stanley Cap- ital International Non-U.S. Equity (Free) Index; the index relating to U.S. bonds is a composite of the Salomon Brothers Broad Investment Grade Bond Index and the Merrill Lynch Euro-Bond indices; the index for non-U.S. bonds is the Salomon Non-U.S. Government Bond Index; and the index relevant to the cash equivalent portion of the Benchmark is the 30-day U.S. Treasury Bill rate (calculated from the average of bid and ask). In order to compile the Bench- mark, the Advisor determines current relative market capitalizations in the world markets (U.S. equities, non-U.S. equities, U.S. bonds, non-U.S. bonds and cash) and then weights each relevant index. Based on this weighting, the Advisor determines the return of the relative indices, applies the index weighting and then determines the return of the Benchmark. From time to time, the Advisor may substitute an equivalent index within a given asset class when it believes that such index more accurately reflects the relevant global mar- ket. Although it may invest anywhere in the world, it is expected that the Se- ries' assets will be primarily invested in equity markets listed in the Morgan Stanley Capital International World Equity Index which, in addition to the United States, currently includes: Japan, the United Kingdom, Germany, France, Canada, the Netherlands, Australia, Switzerland and Denmark. Also, the Series will primarily invest in fixed income markets listed in the Salomon World Gov- ernment Bond Index which, in addition to the United States, currently includes Japan, the United Kingdom, Germany, France, Canada, the Netherlands, Austra- lia, Belgium, Italy, Spain, Sweden and Denmark. The Series may invest up to 5% of its total net assets in equity and debt securities of emerging market issuers, or securities with respect to which the return is derived from the equity or debt securities of issuers in emerging markets. The Series may invest in the more broadly defined asset classes identified by the Benchmark. The "Normal Asset Allocation Mix," set forth below, repre- sents the asset allocation that the Series would expect to maintain when global capital markets are fairly priced relative to each other and relative to the associated risks. 9 GLOBAL SECURITIES MARKETS INDEX NORMAL ASSET ALLOCATION MIX
NORMAL ASSET ASSET CLASS ALLOCATION STRATEGY ASSET CLASS MIX RANGES - ----------- ---------- -------- Global Equities............................................. 67% U.S........................................................ 50% 15-80% Non-U.S.................................................... 17% 5-30% Global Bonds................................................ 28% U.S........................................................ 20% 5-50% Non-U.S.................................................... 8% 2-15% Cash and Cash Equivalents................................... 5% 0-45% ---- 100%
GLOBAL EQUITY FUND INVESTMENT OBJECTIVE The Series' investment objective is to maximize total return, consisting of capital appreciation and current income. The Series seeks to achieve its in- vestment objective by investing in a wide range of equity securities that are traded on both domestic and foreign stock exchanges or, in the case of domes- tic stocks, in the over-the-counter market. The Series may engage in futures, options and currency transactions for hedging as more fully described below. The Series is a diversified portfolio that seeks to achieve its objective by pursuing an active asset allocation strategy across global equity markets, ac- tive management of currency exposures and active security selection within each market. ASSET ALLOCATION The benchmark for the Series is the Morgan Stanley Capital International ("MSCI") World Equity (Free) Index (the "Benchmark"). The Benchmark is a mar- ket driven broad based index which includes U.S. and non-U.S. equity markets in terms of capitalization and performance. The Benchmark is designed to pro- vide a representative total return for all major stock market exchanges lo- cated in and outside the United States. From time to time, the Advisor may substitute securities in an equivalent index when it believes that such secu- rities in the index more accurately reflect the relevant global market. The Advisor's investment perspective for the Series is to rank worldwide stock markets in terms of their relative price/value attractiveness based on proprietary valuation models and the judgments of investment professionals. Inputs to the valuation models include forecasts of growth, inflation, risk premiums and foreign exchange movements. The Advisor develops industry strate- gies within, and sometimes across, individual equity markets with reference to the industry composition of the Series' benchmark index on a country-by-coun- try basis. The security selection of individual companies within each equity market is based on fundamental valuation and portfolio risk strategies. The Advisor's proprietary valuation model determines which securities are poten- tial candidates for inclusion in the portfolio. Although it may invest anywhere in the world, it is expected that the Se- ries' assets will be invested primarily in equity markets listed in the Bench- mark which, in addition to the United States, currently includes: Japan, the United Kingdom, Germany, France, Canada, the Netherlands, Australia, Switzer- land, Denmark, Austria, Belgium, Hong Kong, New Zealand, Finland, Italy, Nor- way, Singapore, Malaysia, Spain, Sweden and Ireland. The composition of this Index may change over time, according to criteria established by Morgan Stan- ley. The "Normal Market Capitalization Allocation Mix," set forth below, repre- sents the asset allocation mix based on the Benchmark, and may shift over time as the Index weights change.
NORMAL MARKET ASSET CLASS CAPITALIZATION STRATEGY ALLOCATION MIX RANGES -------------- ----------- U.S. Equities........................................ 36% 15-70% Non-U.S. Equities.................................... 64% 30-85% Cash and Cash Equivalents............................ 0% 0-35% ---- 100%
10 GLOBAL BOND FUND INVESTMENT OBJECTIVE The Series investment objective is to maximize total return, consisting of capital appreciation and current income. The Series seeks to achieve this ob- jective by investing primarily in debt securities that may also provide the potential for capital appreciation. The Series may engage in futures, options and currency transactions for hedging as more fully described below. The Se- ries is a non-diversified portfolio. ASSET ALLOCATION The Advisor's investment process incorporates assessments of country bond exposures, interest rate sensitivity and currency exposure. The primary in- vestment decision is that of country allocation, since, in the Advisor's judg- ment, country and currency selection are expected to account for the majority of long-term fixed income returns in the global markets. This decision is made with reference to the Series' benchmark index on the basis of Brinson Part- ners' analysis of local market and currency returns for each country. Dura- tions, maturity and individual security selection are then considered market- by-market as dictated by the economic fundamentals of each market. The Advisor's proprietary valuation model determines which securities are poten- tial candidates for inclusion in the portfolio. The benchmark for the Series is the Salomon World Government Bond Index (the "Benchmark"). The Benchmark is a market driven index which measures the broad global fixed income markets invested in debt issues of U.S. and non-U.S. Gov- ernments, governmental entities and supranationals. From time to time, the Ad- visor may substitute securities in an equivalent index when it believes that such securities in the index more accurately reflect the relevant global fixed income securities market. Although it may invest anywhere in the world, it is expected that the Se- ries' assets will be primarily invested in fixed income markets listed in the Benchmark which, in addition to the United States, currently includes: Japan, the United Kingdom, Germany, France, Canada, the Netherlands, Australia, Bel- gium, Italy, Spain, Sweden, Denmark and Austria. The composition of this index may change over time, according to criteria established by Salomon Brothers. The "Normal Market Capitalization Allocation Mix," set forth below, repre- sents the asset allocation mix based on the Benchmark, and may shift over time as the index weights change.
ASSET NORMAL MARKET CLASS CAPITALIZATION STRATEGY ASSET CLASS ALLOCATION MIX RANGES - ----------- -------------- -------- U.S. Bonds.............................................. 39% 20-80% Non-U.S. Bonds.......................................... 61% 20-80% --- 100%
SHORT-TERM GLOBAL INCOME FUND INVESTMENT OBJECTIVE The Series' investment objective is to seek a high level of current income consistent with preservation of capital and reasonable investment risk. The Series seeks to achieve this objective by investing primarily in debt securi- ties having a dollar-weighted average maturity of not more than three years. The Series may engage in futures, options and currency transactions for hedg- ing as more fully described below. The Series is a non-diversified portfolio. INVESTMENT PROCESS The Advisor's investment process incorporates assessments of country, fixed income, money market exposures, interest rate sensitivity, yield curve and currency exposure. The primary investment decision is that of country alloca- tion, since, in the Advisor's judgment, country and currency selection are ex- pected to account for the majority 11 of short-term fixed income returns in the global markets. This decision is made with reference to the Series' benchmark index on the basis of Brinson Partners' analysis of local market and currency returns for each country. Du- rations, maturity and individual security selection are then considered mar- ket-by-market as dictated by the economic fundamentals of each market. The Advisor's proprietary valuation model determines which securities are poten- tial candidates for inclusion in the portfolio. ASSET ALLOCATION The benchmark for the Series is the Lehman Brothers 1-3 Year Government In- dex (the "Benchmark"). The Benchmark is comprised of U.S. Government Treasury and Agency Securities with maturities of 1-3 years. Although the securities to be held in the Series' portfolio do not directly correspond to the securities included in the Benchmark, Brinson Partners will attempt to enhance the long- term return and risk performance of the Series relative to the Benchmark by identifying discrepancies between current market prices and fundamental val- ues. The active management process is intended to produce a superior perfor- mance relative to the Benchmark index. HIGH QUALITY FIXED INCOME SECURITIES The Series seeks to minimize investment risk by limiting its portfolio in- vestments to high quality fixed income securities. Accordingly, the Series' investment portfolio consists only of: (i) debt securities issued or guaran- teed by the U.S. Government, its agencies or instrumentalities ("U.S. Govern- ment Securities"); (ii) obligations issued or guaranteed by a foreign government or any of its political subdivisions, authorities, agencies or in- strumentalities, or by supranational entities, all of which are rated AAA or AA by Standard & Poor's Corporation ("S&P") or Aaa or Aa by Moody's Investors Services, Inc. ("Moody's") ("High Quality Ratings") or, if unrated, determined by the Advisor to be of equivalent quality; (iii) corporate debt securities having at least one High Quality Rating or, if unrated, determined by the Ad- visor to be of equivalent quality; (iv) certificates of deposit and bankers acceptances issued or guaranteed by, or time deposits maintained at, banks (including foreign branches of U.S. banks or U.S. or foreign branches of for- eign banks) having total assets of more than $500 million and determined by the Advisor to be of high quality; and (v) commercial paper rated A1 or A2 by S&P, Prime-1 or Prime-2 by Moody's, Fitch-1 or Fitch-2 by Fitch Investors Service, Inc., or Duff 1 or Duff 2 by Duff and Phelps Inc. or, if not rated, issued by U.S. or foreign companies having outstanding debt securities rated AAA or AA by S&P, or Aaa or Aa by Moody's and determined by the Advisor to be of high quality. Other fixed income securities in which the Series may invest include zero coupon bonds, mortgage-backed securities, asset-backed securities and when-issued securities. The Series may purchase U.S. dollar-denominated securities that reflect a broad range of investment maturities and sectors. The fixed income securities in the non-U.S. component of the Series may in- clude securities issued by supranational entities. A supranational entity is an entity established or financially supported by the national governments of one or more countries to promote reconstruction or development. Examples of supranational entities include, among others, the World Bank, the European Economic Community, the European Coal and Steel Community, the European In- vestment Bank, the Inter-American Development Bank, the Export-Import Bank and the Asian Development Bank. U.S. BALANCED FUND INVESTMENT OBJECTIVE The investment objective of the Series is to maximize total return, consist- ing of capital appreciation and current income, while controlling risk. The Series is a diversified portfolio that seeks to 12 achieve its objective by pursuing active asset allocation strategies across U.S. equity and fixed income markets and active security selection within each market. These decisions are undertaken relative to the U.S. Balanced Index (the "Benchmark"), which is compiled by Brinson Partners. The Series seeks to achieve its investment objective by utilizing a wide range of equity, debt and money market securities. ASSET ALLOCATION MARKET MANAGEMENT The Benchmark for the Series is compiled by the Advisor. The Benchmark rep- resents a fixed composite of 65% Wilshire 5000 Index, 30% Salomon Brothers Broad Investment Grade Bond Index and 5% 30-day Treasury Bill Index. From time to time, the Advisor may substitute an equivalent index within a given asset class when the Advisor believes that such new index more accurately reflects the relevant U.S. market. The Series will, under normal circumstances, invest at least 25% of its net assets in fixed income senior securities. The Series will also invest in eq- uity securities, including warrants, preferred stock and securities convert- ible into equity securities. For temporary defensive purposes, up to 50% of the Series' total assets may be invested in cash and cash equivalents includ- ing money market and short-term instruments. The weighting in the Series of equity, fixed income and money market securi- ties will be adjusted in response to variations in perceived return potential as estimated by Brinson Partners on the basis of fundamental analysis. It is not the policy of the Series to take unreasonable risks to obtain speculative or aggressively high returns. The "normal asset allocation mix," set forth below, represents the asset al- location that the Series would expect to maintain when the financial markets are fairly priced relative to each other and to the associated risks in such markets. This is the U.S. Balanced Index which will serve as the performance benchmark.
NORMAL ASSET ASSET CLASS ALLOCATION STRATEGY MIX RANGES ---------- -------- U.S. Equity................................................. 65% 30-75% Large Capitalization Stocks................................ 45% Intermediate/Small Capitalization Stocks................... 20% U.S. Bonds.................................................. 30% 25-70% Cash........................................................ 5% 0-50% ---- ------ 100%
U.S. EQUITY FUND INVESTMENT OBJECTIVE The Series' investment objective is to maximize total return, consisting of capital appreciation and current income, while controlling risk. The Series is a diversified portfolio that seeks to achieve its objective by investing in a wide range of equity securities of U.S. companies that are traded on major stock exchanges as well as on the over-the-counter market. Under normal cir- cumstances, at least 65% of the Series' total assets will be invested in eq- uity securities of U.S. companies. The Series may engage in futures and options for hedging as more fully described below. INVESTMENT PROCESS The Advisor's approach to investing for the Series is to invest in the eq- uity securities of U.S. companies believed to be undervalued based upon inter- nal research and proprietary valuation systems. Investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. The Advisor's research focuses on several levels of analysis; first, on understanding wealth shifts that occur within the equity market, and sec- ond, on individual company research. At the company level, the Advisor quanti- fies expectations of a company's ability to generate profit and to grow business into the future. For each stock under analysis, the Advisor discounts to the present all of the future cash 13 flows that it believes will accrue to the Series from the investment in order to calculate a present or intrinsic value. This value estimate generated by the Advisor's proprietary valuation model is compared to observed market price and ranked against other stocks accordingly. The rankings, in combination with the Advisor's investment judgment, determine which securities are included in the portfolio. The Benchmark for the Series is the Wilshire 5000 Index (the "Benchmark"). The Benchmark is a broad weighted index which includes all U.S. common stocks. The Benchmark is designed to provide a representative indication of the capi- talization and return for the U.S. equity market. U.S. BOND FUND INVESTMENT OBJECTIVE The Series' investment objective is to maximize total return, consisting of capital appreciation and current income, while controlling risk. The Series seeks to achieve this objective by investing primarily in fixed income securi- ties, which may also provide the potential for capital appreciation. As a mat- ter of fundamental policy, under normal circumstances, the Series intends to invest at least 65% of its total assets in U.S. debt securities with an ini- tial maturity of more than one year. The Series may also engage in futures and options transactions for hedging as more fully described below. The Series is a diversified portfolio. INVESTMENT PROCESS Brinson Partners is an active manager of fixed income securities. The Advi- sor believes that markets do not always efficiently price fixed income securi- ties and that a fundamental value-based investment process can increase portfolio returns. Brinson Partners' fixed income strategies consider many factors in addition to maturity and current yield in the evaluation of fixed income securities. These factors include interest rate sensitivity, quality, yield curve analysis and individual issue selection. Accordingly, Brinson Partners will pursue the Series' objective by investing its assets in debt se- curities which are believed to be undervalued. The Advisor's proprietary valu- ation model determines which securities are potential candidates for inclusion in the portfolio. The benchmark for the Series is the Salomon Brothers Broad Investment Grade Bond Index (the "Benchmark"). The Benchmark is a market driven broad based in- dex which includes U.S. bonds with over one year to maturity. The Benchmark is designed to provide a representative indication of the performance of U.S. in- vestment grade fixed income securities in the United States. From time to time, the Advisor may substitute securities in an equivalent index when it be- lieves that such securities in the index more accurately reflect the relevant fixed income securities market. FIXED INCOME SECURITIES The Series may invest in a broad range of fixed income securities, including debt securities of the U.S. Government together with its agencies and instru- mentalities and the debt securities of U.S. corporations. A majority of the fixed income securities in which the Series will invest will meet a minimum rating of BBB- by Standard and Poor's Corporation ("S&P") or Baa3 by Moody's Investors Services, Inc. ("Moody's") or, if unrated, will be determined to be of comparable quality by Brinson Partners. Such securities are considered to be investment grade. While securities rated BBB- or Baa3 are regarded as hav- ing an adequate capacity to pay principal and interest, such bonds lack out- standing investment characteristics and, in fact, have speculative characteristics and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest pay- ments than is the case with higher rated bonds. The Series may invest up to 30% of its total assets in securities rated lower than BBB- by S&P and Baa3 by Moody's (commonly referred to as "junk bonds"). Securities rated lower than BBB- by S&P and Baa3 by Moody's are classified as non-investment grade se- 14 curities and carry a higher degree of risk and are considered to be specula- tive by the major credit rating agencies (see "High Yield/High Risk Securi- ties" under "Other Investment Practices and Risk Factors"). Other fixed income securities in which the Series may invest include zero coupon bonds, mortgage- backed securities, asset-backed securities and when-issued securities. The Se- ries may invest a portion of its assets in short-term debt securities (including repurchase agreements) of corporations, governments or agencies and banks and finance companies. When unusual market conditions warrant, the Se- ries can make substantial temporary defensive investments in cash equivalents. U.S. CASH MANAGEMENT FUND INVESTMENT OBJECTIVE The Series' investment objective is to maximize current income consistent with preservation of capital. The Series is a diversified portfolio. INVESTMENT PROCESS In accordance with procedures adopted pursuant to Rule 2a-7 under the Act, the Series limits its investments to those U.S. dollar-denominated instruments which the Board of Trustees of the Trust determines present minimal credit risks and which are, as required by the federal securities laws, rated in one of the two highest rating categories as determined by nationally recognized statistical rating organizations ("NRSROs"), or which are unrated and of com- parable quality, with remaining maturities of 397 calendar days or less ("Eli- gible Securities"). The Series maintains a dollar weighted average maturity of the securities in its portfolio of 90 days or less. The Series will not invest more than 5% of its total assets in Eligible Securities of a single issuer, other than U.S. Government securities, rated in the highest category by the requisite number of NRSROs, except that the Series may exceed that limit as permitted by Rule 2a-7 for a period of up to three business days; and the Se- ries will not invest (a) the greater of 1% of the Series' total assets or $1 million in Eligible Securities issued by a single issuer rated in the second highest category and (b) more than 5% of its total assets in Eligible Securi- ties of all issuers rated in the second highest category. These procedures are not fundamental policies of the Series. Because the Series limits its investments to high quality securities, the Series' portfolio, and thus the Series' shareholders, will generally earn lower yields than if the Series purchased securities with a lower rating and correspondingly greater risk. U.S. GOVERNMENT SECURITIES The Series may invest in U.S. Government securities, which consist of mar- ketable fixed, floating and variable rate securities issued or guaranteed by the U.S. Government, its agencies, or by various instrumentalities which have been established or sponsored by the U.S. Government ("U.S. Government securi- ties"). Certain of these obligations, including U.S. Treasury bills, notes and bonds and securities of the Government National Mortgage Association (popu- larly called "GNMAs" or "Ginnie Maes") and the Federal Housing Administration, are issued or guaranteed by the U.S. Government and supported by the full faith and credit of the U.S. Government. Other U.S. Government securities are issued or guaranteed by federal agencies or government-sponsored enterprises and are not direct obligations of the U.S. Government, but involve sponsorship or guarantees by government agencies or enterprises. These obligations include securities that are supported by the right of the issuer to borrow from the U.S. Treasury, such as obligations of Federal Home Loan Banks, and securities that are supported by the credit of the instrumentality, such as Federal Na- tional Mortgage Association ("FNMA") bonds. BANK OBLIGATIONS The Series may also invest in bank obligations or instruments secured by bank obligations. 15 Such instruments consist of fixed, floating or variable rate certificates of deposit, letters of credit, time deposits, and banker's acceptances issued by banks and savings institutions with assets of at least one billion dollars. Bank obligations may be obligations of U.S. banks, foreign branches of U.S. banks (referred to as "Eurodollar Investments"), U.S. branches of foreign banks (referred to as "Yankee Dollar Investments") and foreign branches of foreign banks ("Foreign Bank Investments"). When investing in a bank obliga- tion issued by a branch, the parent bank must have assets of at least five billion dollars. The Series may invest only up to 25% of its assets in Eurodollar invest- ments. Yankee Dollar investments, which are considered investments in domestic banks, may only be made if such branches have a federal or state charter to do business in the U.S. and are subject to U.S. regulatory authorities. Time Deposits are non-negotiable deposits maintained in a foreign branch of a U.S. or foreign banking institution for a specified period of time at a stated interest rate. The Series may not invest more than 10% of its assets in time deposits with maturities in excess of seven calendar days. COMMERCIAL PAPER The Series may also invest in commercial paper of domestic or foreign is- suers which is considered by the Series to present minimal credit risks and which is rated within the two highest rating categories by NRSROs or, if unrated, has been determined by the Advisor to be of comparable quality to in- struments that are Eligible Securities pursuant to procedures approved by the Trust's Board of Trustees. CORPORATE OBLIGATIONS The corporate obligations which the Series may purchase are fixed, floating or variable rate bonds, debentures or notes which are considered by the Series to present minimal credit risks and which are rated within the two highest rating categories by NRSROs, or if unrated, have been determined by the Advi- sor to be of comparable quality to instruments which are Eligible Securities pursuant to procedures approved by the Trust's Board of Trustees. Such obliga- tions must mature in 397 calendar days or less. Generally, the higher an in- strument is rated, the greater its safety and the lower its yield. (For informational purposes, included in the Statement of Additional Infor- mation is an explanation of ratings by two NRSROs, Standard & Poor's Corpora- tion and Moody's Investors Service.) OTHER POLICIES Depending on its view of market conditions and cash requirements, the Series may or may not hold securities purchased until maturity. The yield on certain instruments held by the Series may decline if sold prior to maturity. Whenever the Series' Advisor believes market conditions are such that yield could be increased by actively trading the portfolio securities to take advan- tage of short-term market variations, the Series may do so without restriction or limitation. The Series may not invest in securities other than the types of securities listed above and is subject to other specific investment restric- tions as detailed in the Statement of Additional Information. The Series may lend its portfolio securities to qualified securities dealers or other institutional investors, provided that such loans do not exceed 10% of the value of the Series' total assets at the time of the most recent loan, and further provided that the borrower deposits and maintains 102% cash col- lateral for the benefit of the Series. Any of the Series' Eurodollar Invest- ments, Foreign Bank Investments or investments in commercial paper of foreign issuers will involve risks that are different from investments in obligations of domestic entities. These risks may include future unfavorable political and economic developments, possible withholding taxes, seizure of foreign depos- its, 16 currency controls, interest limitations, or other governmental restrictions which affect the payment of principal or interest on securities the Series holds. In addition, there may be less publicly available information regarding such foreign banks or foreign issuers of commercial paper. NON-U.S. EQUITY FUND INVESTMENT OBJECTIVE The Series' investment objective is to maximize total return, consisting of capital appreciation and current income. The Series is a diversified portfolio that seeks to achieve its objective by investing primarily in the equity secu- rities of non-U.S. issuers. The Series may engage in futures, options and cur- rency transactions for hedging and other permissible purposes as more fully described below. ASSET ALLOCATION MARKET MANAGEMENT The benchmark for the Series is the Morgan Stanley Capital International ("MSCI") Non-U.S. Equity (Free) Index (the "Benchmark"). The Benchmark is a market driven broad based index which includes non-U.S. equity markets in terms of capitalization and performance. The Benchmark is designed to provide a representative total return for all major stock exchanges located outside the United States. From time to time, the Advisor may substitute securities in an equivalent index when it believes that such securities in the index more accurately reflect the relevant international market. The Advisor's investment perspective for the Series is to invest in the eq- uity securities of non-U.S. markets and companies which are believed to be un- dervalued based upon internal research and proprietary valuation systems. This international equity strategy reflects Brinson Partners' decisions concerning the relative attractiveness of asset classes, the individual international eq- uity markets, industries across and within those markets, other common risk factors within those markets and individual international companies. The Advi- sor initially identifies those securities which it believes to be undervalued in relation to the issuer's assets, cash flow, earnings and revenues. The rel- ative performance of foreign currencies is an important factor in the Series' performance. Brinson Partners may manage the Series' exposure to various cur- rencies to take advantage of different yield, risk and return characteristics. The Advisor's proprietary valuation model determines which securities are po- tential candidates for inclusion in the portfolio. Although it may invest anywhere in the world, it is expected that the Se- ries' assets will be primarily invested in the equity markets included in the Morgan Stanley Capital International Non-U.S. Equity (Free) Index which cur- rently are: Japan, the United Kingdom, Germany, France, Canada, Italy, the Netherlands, Australia, Switzerland, Spain, Hong Kong, Belgium, Singapore, Ma- laysia, Sweden, Denmark, Norway, New Zealand, Austria, Finland and Ireland. The composition of this Index may change over time, according to criteria es- tablished by Morgan Stanley. The "Normal Asset Class Allocation Mix," set forth below, represents the as- set allocation mix based on the Benchmark, and may shift over time as the Benchmark index weights change.
NORMAL ASSET CLASS ASSET ALLOCATION STRATEGY ASSET CLASS MIX RANGES ----------- ----------- -------- Non-U.S. Equities.......................................... 100% 65-100% Cash and Cash Equivalents.................................. 0% 0-35% ---- 100%
NON-U.S. BOND FUND INVESTMENT OBJECTIVE The Series' investment objective is to maximize total return, consisting of capital appreciation and current income while controlling risk. The Series seeks to achieve this objective by in- 17 vesting primarily in fixed income securities, which are not denominated in U.S. dollars and that may also provide the potential for capital appreciation. As a matter of fundamental policy, under normal circumstances, the Series in- tends to invest at least 65% of its total assets in debt securities with an initial maturity of more than one year from at least three countries other than the United States. The Series may engage in futures, options and currency transactions for hedging as more fully described below. The Series is a non- diversified portfolio. ASSET ALLOCATION MARKET MANAGEMENT Brinson Partners will pursue the Series' objective by investing its assets in non-dollar-denominated debt securities which are believed to be undervalued based upon its fundamental research and proprietary valuation systems. The Ad- visor's primary investment decisions are those of market allocation and cur- rency allocation based upon forecasts of local market and currency returns for each country. These decisions are made with reference to the Series' benchmark index which is defined below. Durations, maturity and individual security se- lection are then considered market-by-market as dictated by the economic fun- damentals of each market. The benchmark for the Series is the Salomon Brothers Non-U.S. Government Bond Index (the "Benchmark"). The Benchmark is a capitalization-weighted index which measures the broad non-U.S. dollar markets invested in debt issues of non-U.S. Governments, governmental entities and supranationals. From time to time, the Advisor may substitute other equivalent indices, in whole or in part, when it believes that such indices more accurately provide opportunities within the fixed income securities markets. Although it may invest anywhere in the world, it is expected that the the Series' assets will be invested primarily in fixed income markets listed in the Benchmark, which currently includes: Japan, the United Kingdom, Germany, France, Canada, the Netherlands, Australia, Belgium, Italy, Spain, Sweden, Denmark and Austria. The composition of this Index may change over time ac- cording to criteria established by Salomon Brothers. FIXED INCOME SECURITIES The Series may invest in a broad range of fixed income securities (debt se- curities with an initial maturity of more than one year), including foreign government securities and debt obligations of foreign companies. All fixed in- come securities in which the Series will invest will meet a minimum rating of BBB- by Standard and Poor's Corporation ("S&P") or Baa3 by Moody's Investors Services, Inc. ("Moody's") or, if unrated, will be determined to be of compa- rable quality by Brinson Partners. Such securities are considered to be in- vestment grade. While securities rated BBB- or Baa3 are regarded as having an adequate capacity to pay principal and interest, such bonds lack outstanding investment characteristics and, in fact, have speculative characteristics and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments than is the case with higher rated bonds. The fixed income securities in the Series will typically include securities issued by foreign governments, agencies and supranational entities. A suprana- tional entity is an entity established or financially supported by the na- tional governments of one or more countries to promote reconstruction or development. Examples of supranational entities include, among others, the World Bank, the European Economic Community, the European Coal and Steel Com- munity, the European Investment Bank, the Inter-American-Development Bank, the Export-Import Bank and the Asian Development Bank. The Series may invest a portion of its assets in short-term debt securities (including repurchase agreements) of corporations, governments or agencies, banks and finance companies which may 18 be denominated in non-U.S. or U.S. currency. When unusual market conditions warrant, the Series can make substantial temporary defensive investments in cash equivalents. Cash equivalent holdings may be denominated in any currency. INVESTMENT POLICIES EQUITY SECURITIES (GLOBAL FUND, GLOBAL EQUITY FUND, U.S. BALANCED FUND, U.S. EQUITY FUND AND NON-U.S. EQUITY FUND): The Series may invest in a broad range of equity securities of U.S. issuers, including common and preferred stocks, debt securities convertible into or ex- changeable for common stock, securities such as warrants or rights that are convertible into common stock. The Series expect their U.S. equity investments to emphasize both large and intermediate capitalization companies. The Global Fund, Global Equity Fund and Non-U.S. Equity Fund may also invest in a broad range of equity issuers of non-U.S. issuers, including common stocks of companies or closed-end investment companies, preferred stocks, debt securities convertible into or exchangeable for common stock, securities or warrants or rights that are convertible into common stock and sponsored or unsponsored American and European depository receipts for those securities. The issuers of unsponsored American and European depository receipts are not obligated to disclose material information in the United States. The equity markets in the non-U.S. component of the Global Fund, Global Eq- uity Fund and Non-U.S. Equity Fund will typically include available shares of larger capitalization companies. Capitalization levels are measured relative to specific markets, thus large and intermediate capitalization ranges vary country-by-country. The Global Fund may invest in equities of issuers in emerging markets, or securities with respect to which the return is derived from the equity securi- ties of issuers in emerging markets. CASH AND CASH EQUIVALENTS (GLOBAL FUND, GLOBAL EQUITY FUND, U.S. BALANCED FUND, U.S. EQUITY FUND AND NON-U.S. EQUITY FUND): The Series may invest a portion of their assets in short-term debt securi- ties (including repurchase agreements) of corporations, U.S. Government and its agencies and banks and finance companies. The Global Fund, Global Equity Fund and Non-U.S. Equity Fund also may invest a portion of their assets in short-term debt securities (including repurchase agreements) of corporations, governments or their agencies and banks and finance companies which may be de- nominated in non-U.S. currencies. When unusual market conditions warrant, the Series may make substantial temporary defensive investments in cash equiva- lents up to a maximum exposure that usually will not exceed 50% for U.S. Bal- anced Fund, 45% for Global Fund and 35% for Global Equity Fund, U.S. Equity Fund and Non-U.S. Equity Fund. When the Series invest for defensive purposes, they may affect the attainment of the Series' investment objective. Cash equivalent holdings may be denominated in any currency (although such holdings may not constitute "cash or cash equivalents" for tax diversification purpos- es). ZERO COUPON SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, U.S. BALANCED FUND AND U.S. BOND FUND): Zero coupon securities are debt obligations which do not entitle the holder to any periodic payments of interest prior to maturity or a specified date when the securities begin paying current interest (the "cash payment date") and therefore are issued and traded at a discount from their face amounts or par value. Such bonds carry an additional risk in that, unlike bonds which pay interest throughout the period to maturity, the Series investing in zero cou- pon securities will realize no cash until the cash payment date and, if the issuer defaults, the Series may obtain no return at all on its investment. For federal tax purposes, the Series will be required to include in income daily portions of original issue discount accrued and to dis- 19 tribute the same to shareholders annually, even if no payment is received be- fore the distribution date. MORTGAGE-BACKED SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, U.S. BALANCED FUND AND U.S. BOND FUND): The Series may invest in mortgage-backed securities, representing interests in pools of mortgage loans. These securities provide shareholders with pay- ments consisting of both interest and principal as the mortgages in the under- lying mortgage pools are paid off. The Series may invest in mortgage-backed securities issued or guaranteed by an agency or instrumentality of the U.S. Government. The Series may also invest in privately-issued mortgage-backed se- curities issued by certain private, non-government corporations, such as fi- nancial institutions. The Series may also invest in Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage Investment Conduits ("REMICs"). CMOs are debt securi- ties issued by U.S. Government agencies or by financial institutions and other mortgage lenders and collateralized by a pool of mortgages held under an in- denture. CMOs are issued in a number of classes or series with different matu- rities. The classes or series are retired in sequence as the underlying mortgages are repaid. Prepayment may shorten the stated maturity of the obli- gation and can result in a loss of premium, if any has been paid. Certain of these securities may have variable or floating interest rates and others may be stripped (securities which provide only the principal or interest feature of the underlying security). REMICs are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. REMICs are similar to CMOs in that they issue multiple classes of securities. CMOs and REMICs issued by private entities are not government securities and are not directly guaranteed by any government agency. They are secured by the underlying collateral of the private issuer. Yields on privately-issued CMOs, as described above, have been historically higher than yields on CMOs issued or guaranteed by U.S. Government agencies. However, the risk of loss due to default on such instruments is higher since they are not guaranteed by the U.S. Government. Such instruments also tend to be more sensitive to interest rates than Government-issued CMOs. The Series will not invest in subordinated privately-issued CMOs. For federal income tax purposes, the Series will be re- quired to accrue income on CMOs and REMIC regular interests using the "catch- up" method, with an aggregate pre-payment assumption. ASSET-BACKED SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, U.S. BALANCED FUND AND U.S. BOND FUND): Asset-backed securities are securities that represent a participation in, or are secured by and payable from, a stream of payments generated by particular assets, most often a pool or pools of similar assets (e.g., receivables on home equity and credit loans and receivables regarding automobile, credit card, mobile home and recreational vehicle loans, wholesale dealer floor plans and leases). Such receivables are securitized in either a pass-through or a pay-through structure. Pass-through securities provide investors with an income stream consisting of both principal and interest payments in respect of the receiv- ables in the underlying pool. Pay-through asset-backed securities are debt ob- ligations issued usually by a special purpose entity, which are collateralized by the various receivables and in which the payments on the underlying receiv- ables provide that the Series pay the debt service on the debt obligations is- sued. The Series may invest in these and other types of asset-backed securities that may be developed in the future. The credit quality of these securities depends primarily upon the quality of the underlying assets 20 and the level of credit support and/or enhancement provided. Such asset-backed securities are subject to the same prepayment risks as mortgage-backed securi- ties. For federal income tax purposes, the Series will be required to accrue income on pay-through asset-backed securities using the "catch-up" method, with an aggregate prepayment assumption. WHEN-ISSUED SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, U.S. BALANCED FUND AND U.S. BOND FUND): The Series may purchase securities on a "when-issued" basis for payment and delivery at a later date. The price is generally fixed on the date of commit- ment to purchase. During the period between purchase and settlement, no inter- est accrues to the Series. At the time of settlement, the market value of the security may be more or less than the purchase price. CONVERTIBLE SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, U.S. BALANCED FUND AND U.S. BOND FUND): The Series may invest in convertible securities which generally offer lower interest or dividend yields than non-convertible debt securities of similar quality. The value of convertible securities may reflect changes in the value of the underlying common stock. Convertible securities entail less credit risk than the issuer's common stock because they rank senior to common stock. CURRENCY MANAGEMENT (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND FUND, SHORT- TERM GLOBAL INCOME FUND, NON-U.S. EQUITY FUND AND NON-U.S. BOND FUND): To manage exposure to currency fluctuations, the Series may alter fixed in- come or money market exposures (in their normal asset allocation mix as previ- ously identified), enter into forward currency exchange contracts, buy or sell options, futures or options on futures relating to foreign currencies and may purchase securities indexed to currency baskets. The Series will also use these currency exchange techniques in the normal course of business to hedge against adverse changes in exchange rates in connection with purchases and sales of securities. Some of these strategies may require the Series to set aside liquid assets in a segregated custodial account to cover their obliga- tions. These techniques are further described below. FORWARD FOREIGN CURRENCY TRANSACTIONS (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, NON-U.S. EQUITY FUND AND NON-U.S. BOND FUND): The Series may conduct their foreign currency exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market or through entering into contracts to purchase or sell foreign currencies at a future date (i.e., a "forward foreign currency" contract or "forward" contract). A forward contract involves an obligation to purchase or sell a specific currency amount at a future date, which may be any fixed num- ber of days from the date of the contract, agreed upon by the parties, at a price set at the time of the contract. The Series will convert currency on a spot basis from time to time and investors should be aware that changes in currency exchange rates and exchange control regulations may affect the costs of currency conversion. When the Advisor believes that the currency of a particular country may suf- fer a significant decline against the U.S. dollar or against another currency, the Series may enter into a currency contract to sell, for a fixed amount of U.S. dollars or other appropriate currency, the amount of foreign currency ap- proximating the value of some or all of the Series securities denominated in such foreign currency. At the maturity of a forward contract, the Series may either sell a portfo- lio security and make delivery of the foreign currency, or they may retain the security and terminate their contractual 21 obligation to deliver the foreign currency by purchasing an "offsetting" con- tract with the same currency trader obligating them to purchase, on the same maturity date, the same amount of the foreign currency. The Series may realize a gain or loss from currency transactions. See "Options, Futures and Forward Contracts" under "Other Investment Practices and Risk Factors." OPTIONS ON CURRENCIES (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, NON-U.S. EQUITY FUND AND NON-U.S. BOND FUND): The Series also may purchase and write put and call options on foreign cur- rencies (traded on U.S. and foreign exchanges or over-the-counter markets) to manage the portfolio's exposure to changes in currency exchange rates. Call options on foreign currency written by the Series will be "covered," which means that the Series will own an equal amount of, or an offsetting position in, the underlying foreign currency. With respect to put options on foreign currency written by the Series, the Series will establish a segregated account with their custodian bank consisting of cash, U.S. Government securities or other high grade liquid debt securities in an amount equal to the amount the Series would be required to deliver upon exercise of the put. See "Options, Futures and Forward Contracts" under "Other Investment Practices and Risk Fac- tors." FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS (ALL SERIES, EXCEPT U.S. CASH MANAGEMENT FUND): The Series may enter into contracts for the purchase or sale of securities, including index contracts. The Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund also may enter into contracts for the purchase or sale of foreign curren- cies. A purchase of a futures contract means the acquisition of a contractual right to obtain delivery to the Series of the securities or foreign currency called for by the contract at a specified price during a specified future month. When a futures contract is sold, the Series incur a contractual obliga- tion to deliver the securities or foreign currency underlying the contract at a specified price on a specified date during a specified future month. The Se- ries may enter into futures contracts and engage in options transactions re- lated thereto to the extent that not more than 5% of the Series' assets are required as futures contract margin deposits and premiums on options and may engage in such transactions to the extent that obligations relating to such futures and related options on futures transactions represent not more than 25% of the Series' assets. The Series may also purchase and write options to buy or sell futures con- tracts. Options on futures are similar to options on securities except that options on futures give the purchaser the right, in return for the premium paid, to assume a position in a futures contract, rather than actually to pur- chase or sell the futures contract, at a specified exercise price at any time during the period of the option. When the Series enter into a futures transac- tion, they must deliver to the futures commission merchant selected by the Se- ries an amount referred to as "initial margin." This amount is maintained by the futures commission merchant in a segregated account at the custodian bank. Thereafter, a "variation margin" may be paid by the Series to, or drawn by the Series from, such account in accordance with controls set for such accounts, depending upon changes in the price of the un- derlying securities subject to the futures contract. The Series will enter into such futures and options on futures transactions on domestic exchanges and, to the extent such transactions have been approved by the Commodity Futures Trading Commission for sale to customers in the U.S., on foreign exchanges. See "Options, Futures and Forward Contracts" under "Other Investment Practices and Risk Factors." In addition, the U.S. Balanced Fund and the U.S. Equity Fund may sell stock index futures in 22 anticipation of or during a market decline to attempt to offset the decrease in market value of their common stocks that might otherwise result; and they may purchase such contracts in order to offset increases in the cost of common stocks that they intend to purchase. Unlike other futures contracts, a stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract. OPTIONS (ALL SERIES, EXCEPT U.S. CASH MANAGEMENT FUND) The Series may purchase and write put and call options on U.S. securities and indices and enter into related closing transactions. In addition, the Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund may purchase and write put and call options on foreign securities and indices and enter into related closing transactions. A call option enables the purchaser, in return for the premium paid, to pur- chase securities from the writer of the option at an agreed price up to an agreed date. The advantage is that the purchaser may hedge against an increase in the price of securities it ultimately wishes to buy or may take advantage of a rise in a particular index. The Series will only purchase call options to the extent premiums paid on all outstanding call options do not exceed 20% of the Series' total assets. The Series will only write call options on a covered basis (e.g., on securities they hold in their portfolio). The Series will re- ceive premium income from writing call options, which may offset the cost of purchasing put options and may also contribute to the Series' total return. The Series may lose potential market appreciation, however, if the Advisor's judgment is incorrect with respect to interest rates, security prices or the movement of indices. A put option enables the purchaser of the option, in return for the premium paid, to sell the security underlying the option to the writer at the exercise price during the option period and the writer of the option has the obligation to purchase the security from the purchaser of the option. The Series will only purchase put options to the extent that the premiums on all outstanding put options do not exceed 20% of the Series total assets. With regard to pur- chasing put options, each Series will limit the aggregate value of the obliga- tions underlying such put options to 50% of its total net assets. The advantage is that the purchaser can be protected should the market value of the security decline or should a particular index decline. The Series will, at all times during which they hold a put option, own the security underlying such option. The Series will receive premium income from writing put options, although they may be required, when the put is exercised, to purchase securi- ties at higher prices than the current market price. An option on a securities index gives the purchaser of the option, in return for the premium paid, the right to receive from the seller cash equal to the difference between the closing price of the index and the exercise price of the option. Closing transactions essentially let the Series offset put options or call options prior to exercise or expiration. If the Series cannot effect closing transactions, they may have to hold a security they would otherwise sell or deliver a security they might want to hold. The Series may use options traded on U.S. exchanges and, to the extent per- mitted by law, options traded over-the-counter. The Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund may use options traded on recognized foreign exchanges to the extent permitted by law. It is the position of the Securities and Ex- change Commission that over-the-counter options are illiquid. Accordingly, the Series will invest in such options only to the extent consistent with their 15% limit on investment in illiquid securities. See "Options, Futures and For- ward Contracts" under "Other Investment Practices and Risk Factors" below. 23 OTHER INVESTMENT PRACTICES AND RISK FACTORS DERIVATIVE INVESTMENTS The term "derivatives" has been used to identify a range and variety of fi- nancial instruments. In general, a derivative is commonly defined as a finan- cial instrument whose performance and value are derived, at least in part, from another source, such as the performance of an underlying asset, or a spe- cific security, or an index of securities. As is the case with other types of investments, a Series' derivative instruments may entail various types and de- grees of risk, depending upon the characteristics of the derivative instrument and the Series' overall portfolio. Each Series permitted the use of derivatives may engage in such practices for hedging purposes, or to maintain liquidity, or in anticipation of changes in the composition of its portfolio holdings. No Series will engage in deriva- tive investments purely for speculative purposes. A Series will invest in one or more derivatives only to the extent that the instrument under consideration is judged by the Advisor to be consistent with the Series' overall investment objectives and policies. In making such judgment, the potential benefits and risks will be considered in relation to the Series' other portfolio invest- ments. Where not specified, investment limitations with respect to a Series' deriv- ative instruments will be consistent with such Series' existing percentage limitations with respect to its overall investment policies and restrictions. The risks and policies of various types of derivative investments permitted for certain Series, including options, futures, forward contracts and interest rate swaps, are described in greater detail below. OPTIONS AND FUTURES (ALL SERIES, EXCEPT U.S. CASH MANAGEMENT FUND) The Series' investments in options and futures and similar strategies will depend on Brinson Partners' judgment as to the potential risks and rewards of different types of strategies. Options and futures can be volatile investments and may not perform as expected. If a hedge is applied at an inappropriate time or price trends are judged incorrectly, options and futures strategies may lower the Series' return. Options and futures traded on foreign exchanges generally are not regulated by U.S. authorities and may offer less liquidity and less protection to the Series in the event of default by the other party to the contract. The Series could also experience losses if the prices of their options and futures positions are poorly correlated with their other in- vestments, or if they cannot close out their positions because of an illiquid secondary market. Gains and losses on investments in options and futures de- pends on the Advisor's ability to predict correctly the direction of security prices, interest rates and other economic factors. Where a liquid secondary market does not exist, the Series will likely be unable to control losses by closing their positions. The loss from investing in futures transactions is potentially unlimited. SWAPS (ALL SERIES, EXCEPT GLOBAL EQUITY FUND, U.S. EQUITY FUND, U.S. CASH MANAGEMENT FUND AND NON-U.S. EQUITY FUND) The Series may engage in swaps, including but not limited to interest rate, currency and index swaps and the purchase or sale of related caps, floors and collars and other derivative instruments. Each Series expects to enter into these transactions primarily to preserve a return or spread on a particular investment or portion of the portfolio's duration, to protect against any in- crease in the price of securities the Series anticipates purchasing at a later date, or to gain exposure to certain markets in the most economical way possi- ble. The use of swaps involves investment techniques and risks different from those associated with ordinary portfolio security transactions. If Brinson Partners is incorrect in its forecasts of market values, interest rates and other applicable factors, the investment performance of the Series will be less favorable than they would have been 24 if this investment technique was never used. Swaps do not involve the delivery of securities or other underlying assets or principal. Thus, if the other party to swap defaults, the Series' risk of loss consists of the net amount of interest payments that the Series are contractually entitled to receive. Under Internal Revenue Service rules, any lump sum payment received or due under the notional principal contract must be amortized over the life of the contract. REPURCHASE AGREEMENTS (ALL SERIES) The Series may enter into repurchase agreements with banks or broker-deal- ers. Repurchase agreements are considered under the Act to be collateralized loans by the Series to the seller secured by the securities transferred to the Series. Repurchase agreements under the Act will be fully collateralized by securities which the Series may invest in directly. Such collateral will be marked-to-market daily. If the seller of the underlying security under the re- purchase agreement should default on its obligation to repurchase the under- lying security, the Series may experience delay or difficulty in recovering their cash. To the extent that, in the meantime, the value of the security purchased had decreased, the Series could experience a loss. No more than 15% (10% in the case of the U.S. Cash Management Fund) of the Series' net assets will be invested in illiquid securities, including repurchase agreements which have a maturity of longer than seven days. The Series must treat each repur- chase agreement as a security for tax diversification purposes and not as cash, a cash equivalent or receivable. REVERSE REPURCHASE AGREEMENTS (ALL SERIES) The Series may enter into reverse repurchase agreements with banks and bro- ker-dealers. Reverse repurchase agreements involve sales by the Series of portfolio assets concurrently with an agreement by the Series to repurchase the same assets at a later date at a fixed price. During the reverse repur- chase agreement period, the Series continue to receive principal and interest payments on these securities. The Series will establish a segregated account with their custodian bank in which they will maintain cash, U.S. Government securities or other liquid high grade debt obligations equal in value to their obligations with respect to re- verse repurchase agreements. Reverse repurchase agreements involve the risk that the market value of the securities retained by the Series may decline be- low the price of the securities the Series have sold but is obligated to re- purchase under the agreement. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Series' use of the proceeds of the agreement may be restricted pending a de- termination by the other party, or their trustee or receiver, whether to en- force the Series' obligation to repurchase the securities. Reverse repurchase agreements are considered borrowings by the Series and as such, are subject to the investment limitations discussed below in the section entitled "Borrow- ing." BORROWING (ALL SERIES) The Series may borrow money as a temporary measure for extraordinary pur- poses or to facilitate redemptions. The Series will not borrow money in excess of 33 1/3% (10% in the case of the U.S. Cash Management Fund) of the value of their total assets. The Series have no intention of increasing their net in- come through borrowing. Any borrowing will be done from a bank with the re- quired asset coverage of at least 300%. In the event that such asset coverage shall at any time fall below 300%, the Series shall, within three days there- after (not including Sunday or holidays) or such longer period as the Securi- ties and Exchange Commission may prescribe by rules and regulations, reduce the amount of their borrowings to such an extent that the asset coverage of such borrowings shall be at least 300%. The Series will not pledge more than 10% of their net assets, or issue senior securities as defined in the Act, ex- cept for notes to banks and reverse repurchase agreements. Investment securi- ties will not be purchased while the Series have an outstanding borrowing that exceeds 5% of the Series' net assets. 25 LOANS OF PORTFOLIO SECURITIES (ALL SERIES) The Global Equity Fund, Short-Term Global Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Bond Fund may loan up to 33 1/3% of their assets; Global Fund, Global Bond Fund and Non-U.S. Equity Fund may loan up to 25% of their assets; and the U.S. Cash Management Fund may loan up to 10% of its assets to qualified broker-dealers or institutional investors for their use relating to short sales or other security transactions. The ma- jor risk to which the Series would be exposed on a loan transaction is the risk that the borrower would become bankrupt at a time when the value of the security goes up. Therefore, the Series will only enter into loan arrangements after a review of all pertinent facts by Brinson Partners, subject to overall supervision by the Board of Trustees, including the creditworthiness of the borrowing broker-dealer or institution and then only if the consideration to be received from such loans would justify the risk. Creditworthiness will be monitored on an ongoing basis by Brinson Partners. RULE 144A SECURITIES (ALL SERIES) While maintaining oversight, the Board of Trustees has delegated to the Ad- visor the day-to-day functions of determining whether or not individual secu- rities purchased under Rule 144A of the Securities Act of 1933, as amended, are liquid for purposes of the Series' 15% (10% in the case of the U.S. Cash Management Fund) limitation on investments in illiquid assets. Generally, an illiquid security is any security that cannot be disposed of within seven days in the ordinary course of business at approximately the amount at which a Se- ries has valued the security. Examples of illiquid securities are over-the- counter options and certain swaps. The Board of Trustees of the Trust has instructed Brinson Partners to consider the following factors in determining the liquidity of a security purchased under Rule 144A: (i) the frequency of trades and trading volume for the security; (ii) whether at least three deal- ers are willing to purchase or sell the security and the number of potential purchasers; (iii) whether at least two dealers are making a market in the se- curity; and (iv) the nature of the security and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of solic- iting offers and the mechanics of transfer). Although having delegated the day-to-day functions, the Board of Trustees will continue to monitor and peri- odically review the Advisor's selection of Rule 144A securities, as well as the Advisor's determinations as to their liquidity. Investing in Rule 144A se- curities could have the effect of increasing the level of Series illiquidity to the extent that qualified institutional buyers become, for a time, uninter- ested in purchasing these securities. If Brinson Partners determines that a security purchased in reliance on Rule 144A which was previously determined to be liquid, is no longer liquid and, as a result, the Series' holdings of illiquid securities exceed the Series' 15% (10% in the case of the U.S. Cash Management Fund) limit on investment in such securities, Brinson Partners will determine what action shall be taken to en- sure that the Series continue to adhere to such limitation including disposing of illiquid assets which may include such Rule 144A securities. FOREIGN SECURITIES AND CURRENCY CONSIDERATIONS (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, NON-U.S. EQUITY FUND AND NON-U.S. BOND FUND) Investments in securities of foreign issuers may involve greater risks than those of U.S. issuers. There is generally less information available to the public about non-U.S. companies and less government regulation and supervision of non-U.S. stock exchanges, brokers and listed companies. Non-U.S. companies are not subject to uniform global accounting, auditing and financial reporting standards, practices and requirements. Securities of some non-U.S. companies are less liquid and their prices more volatile than securities 26 of comparable U.S. companies. Securities trading practices abroad may offer less protection to investors. Settlement of transactions in some non-U.S. mar- kets may be delayed or may be less frequent than in the United States, which could affect the liquidity of the Series portfolio. Additionally, in some non- U.S. countries, there is the possibility of expropriation or confiscatory tax- ation, limitations on the removal of securities, property or other assets of the Series, political or social instability, or diplomatic developments which could affect U.S. investments in those countries. With respect to the Global Fund, Global Equity Fund and Non-U.S. Equity Fund, investments will be made primarily in the equity securities of companies domiciled in developed coun- tries. These Series intend to diversify broadly among countries but reserve the right to invest a substantial portion of their assets in one or more coun- tries if economic and business conditions warrant such investments. Brinson Partners will take these factors into consideration in managing the Series' investments. Because the Series will keep their books and records in U.S. dol- lars, they will be required, for federal income tax purposes, to account for income and losses on all transactions involving foreign currency under Section 988 of the Internal Revenue Code of 1986, as amended, and the applicable U.S. Treasury regulations so that generally any component of a gain or loss attrib- utable to currency fluctuations results in ordinary income or loss and not capital gain or loss. Compared to the United States and other developed countries, emerging coun- tries may have relatively unstable governments, economies based on only a few industries, and securities markets that trade only a small number of securi- ties and employ settlement procedures different from those used in the United States. Prices on these exchanges tend to be volatile and, in the past, secu- rities in these countries have offered greater potential for gain (as well as loss) than securities of companies located in developed countries. Further, investments by foreign investors are subject to a variety of restrictions in many emerging countries. Countries such as those in which the Series may invest have historically ex- perienced and may continue to experience, high rates of inflation, high inter- est rates, exchange rate fluctuations or currency depreciation, large amounts of external debt, balance of payments and trade difficulties and extreme pov- erty and unemployment. Additional factors which may influence the ability or willingness to service debt include, but are not limited to, a country's cash flow situation, the availability of sufficient foreign exchange on the date a payment is due, the relative size of its debt service burden to the economy as a whole, its government's policy towards the International Monetary Fund, the World Bank and other international agencies and the political constraints to which a government debtor may be subject. The U.S. dollar market value of the Series' investments and of dividends and interest earned by the Series, may be significantly affected by changes in currency exchange rates. Some currency prices may be volatile, and there is the possibility of governmental controls on currency exchange or governmental intervention in currency markets, which could adversely affect the Series. Al- though the Series may attempt to manage currency exchange rate risks, there is no assurance that the Series will do so at an appropriate time or that they will be able to predict exchange rates accurately. For example, if the Series increase their exposure to a currency and that currency's price subsequently falls, such currency management may result in increased losses to the Series. Similarly, if the Series decrease their exposure to a currency, and the currency's price rises, the Series will lose the opportunity to participate in the currency's appreciation. The Series will manage currency exposures rela- tive to the normal currency allocation and will consider return and risk of currency exposures relative to the Benchmark. Payments to holders of the high yield, high risk, foreign debt securities in which the Funds may invest may be subject to foreign withholding and other taxes. Although the holders of foreign government and government-related debt securities may be entitled to tax gross-up payments from 27 the issuers of such instruments, there is no assurance that such payments will be made. RISKS ASSOCIATED WITH FIXED INCOME SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, U.S. BALANCED FUND, U.S. BOND FUND AND NON-U.S. BOND FUND) All fixed-income securities are subject to two types of risks: credit risk and interest rate risk. The credit risk relates to the ability of the issuer to meet interest or principal payments or both as they come due. The interest rate risk refers to the fluctuations in the net asset value of any portfolio of fixed-income securities resulting from the inverse relationship between price and yield of fixed-income securities; that is, when the general level of interest rates rises, the prices of outstanding fixed-income securities de- clines, and when interest rates fall, prices rise. In addition, if the currency in which a security is denominated appreciates against the U.S. dollar, the dollar value of the security will increase. Con- versely, a rise in interest rates or a decline in the exchange rate of the currency would adversely affect the value of the security expressed in dol- lars. HIGH YIELD/HIGH RISK SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND AND U.S. BOND FUND) Debt securities rated lower than BBB- by S&P or Baa3 by Moody's are consid- ered to be of poor standing and predominantly speculative. Investing in lower rated debt securities may involve certain risks not typically associated with higher rated securities. The economy and interest rates affect these lower rated debt securities differently from other securities. Prices have been found to be less sensitive to interest rate changes than higher rated invest- ments, but more sensitive to adverse economic changes or individual corporate developments. Also, during an economic downturn or substantial period of ris- ing interest rates, highly leveraged issuers may experience financial stress which would adversely affect their ability to service principal and interest payment obligations, to meet projected business goals and to obtain additional financing. Changes by recognized rating agencies in their rating of any secu- rity and in the ability of an issuer to make payments of interest and princi- pal will also ordinarily have a more dramatic effect on the values of these investments than on the values of higher rated securities. Such changes in value will not affect cash income derived from these securities, unless the issuers fail to pay interest or dividends when due. Such changes will, howev- er, affect the Series' net asset value per share. The Global Fund and Global Bond Fund intend to limit their investment in non-investment grade debt secu- rities of U.S. dollar-denominated fixed income assets and non-U.S. fixed in- come assets, respectively, to no more than 10% of their net assets. The U.S. Balanced Fund and the U.S. Bond Fund intend to limit their investments in non- investment grade debt securities to no more than 10% and 30% of net assets, respectively. Investment in foreign commercial banks are subject to additional risks due to the securities trading and underwriting activities of such banks. Since it is common for foreign banks to acquire equity participations in other compa- nies, such banks are more likely than U.S. banks to have substantial invest- ments in equity securities. As a result, a general decline in the market for equity securities may require such banks to raise additional capital or cur- tail some of their activities. On the other hand, foreign banks tend to be less leveraged than U.S. institutions. In addition, because the banking indus- try in most countries is more concentrated and has fewer participants than in the United States, a foreign bank is more likely to have a dominant position in its home country's banking market. Please see the Statement of Additional Information for further information concerning investment policies and restrictions. 28 MANAGEMENT OF THE TRUST THE BOARD OF TRUSTEES Under Delaware law, the Board of Trustees has overall responsibility for managing the business and affairs of the Trust. The Trustees, in turn, elect the officers of the Trust, who are responsible for administering the day-to- day operations of the Series. THE ADVISOR Brinson Partners, a Delaware corporation, is an investment management firm managing, as of December 31, 1995, approximately $53 billion, primarily for institutional pension and profit sharing accounts. Brinson Partners was orga- nized in 1989 when it acquired the institutional asset management business of The First National Bank of Chicago and First Chicago Investment Advisors, N.A. Brinson Partners and its predecessor entities have managed domestic and inter- national investment assets since 1974 and global investment assets since 1982. Brinson Partners has offices in London, Melbourne, New York, Paris, Singapore, Sydney and Tokyo in addition to its principal office at 209 South LaSalle Street, Chicago, IL 60604-1295. Brinson Partners is an indirect wholly-owned subsidiary of Swiss Bank Corporation ("Swiss Bank"). Brinson Partners also serves as the investment advisor to six other investment companies, Brinson Relationship Funds, which includes six investment portfolios (series), Enter- prise Accumulation Trust, Enterprise International Growth Portfolio, Fort Dearborn Income Securities, Inc., Short-Term World Income Portfolio and Pace Large Company Value Equity Investments. Swiss Bank, with headquarters in Ba- sel, Switzerland, is an internationally diversified organization with opera- tions in many aspects of the financial services industry. Pursuant to its investment advisory agreements with the Trust, on behalf of each Series, Brinson Partners receives a monthly fee at various annual per- centage rates of each Series' average daily net assets, as described below, for providing investment advisory services and Brinson Partners is responsible for paying its own expenses. Brinson Partners has agreed to waive that portion of its advisory fee equal to the total expenses of the Series for any fiscal year which exceeds the permissible limits applicable to the Series in any state in which its shares are then qualified for sale. Pursuant to its advi- sory agreements, Brinson Partners is authorized, at its own expense, to obtain statistical and other factual information and advice regarding economic fac- tors and trends from its foreign subsidiaries, but it does not generally re- ceive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. For providing investment advisory services, the following Series pay Brinson Partners a monthly fee at the following annual rates based on their respective average daily net assets. Global Fund, Global Equity Fund and Non-U.S. Equity Fund pay 0.80%, which is higher than the advisory fees paid by most other mu- tual funds; however, this fee is comparable with those of other mutual funds with similar investment objectives. Global Bond Fund and Non-U.S. Bond Fund pay 0.75%. U.S. Balanced Fund and U.S. Equity Fund pay 0.70%; U.S. Bond Fund pays 0.50%; Short-Term Global Income Fund pays 0.60%; and U.S. Cash Management Fund pays 0.30%. PORTFOLIO MANAGEMENT Investment decisions for the Series are made by an investment management team at Brinson Partners. No member of the investment management team is pri- marily responsible for making recommendations for portfolio purchases. ADMINISTRATION OF THE TRUST THE UNDERWRITER Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken, PA 19428-0874, was engaged pursuant to an agreement dated April 25, 1995, for the limited purpose of acting as un- 29 derwriter to facilitate the registration of the SwissKey Fund class shares of the Trust under state securities laws and to assist in the sale of shares. The fee for such service is borne by the Advisor. FPBS may pay expenses, including trail commissions and account servicing fees, to brokers who have selling agreements pursuant to Rule 12b-1 Distribu- tion Plans adopted by the Trust on behalf of each Series. These commissions and servicing fees will not exceed 0.90% of the average net assets of a Se- ries' shares. THE ADMINISTRATOR The Trust, on behalf of each Series, has entered into an administrative services agreement with Fund/Plan Services, Inc. ("Fund/Plan"), 2 W. Elm Street, Conshohocken, PA 19428-0874, pursuant to which the administrator re- ceives a fee at the annual rate of 0.15% of the average daily net assets of the Trust on the first $75 million; 0.10% on the next $75 million; 0.075% on the next $350 million; and 0.05% of its average daily net assets in excess of $500 million. Each Series pays its pro rata portion based upon its average daily net assets, but in no event shall a Series pay less than $10,000 per year for each multiple class portfolio. Pursuant to the agreement with Fund/Plan, maximum administration fees are $400,000 for the initial multiple class portfolio and $60,000 per year for each subsequent multiple class port- folio. The services Fund/Plan provides to the Series include: coordinating and mon- itoring of any third parties furnishing services to the Series; providing the necessary office space, equipment and personnel to perform administrative and clerical functions for the Series; preparing, filing and distributing proxy materials, periodic reports to shareholders, registration statements and other documents; and responding to shareholder inquiries. THE CUSTODIAN, TRANSFER AGENT AND ACCOUNTING/PRICING AGENT Bankers Trust Company, c/o BTNY Services, Inc., 34 Exchange Place, Jersey City, NJ 07302-1107 is custodian for the securities and cash of each Series. Fund/Plan serves as each Series' transfer agent. As transfer agent, it main- tains the records of each shareholder's account, answers shareholder inquiries concerning accounts, processes purchases and redemptions of the Funds' shares, acts as dividend and distribution disbursing agent and performs other share- holder service functions. Shareholder inquiries should be addressed to the transfer agent at 1-800-SWISSKEY. Fund/Plan also performs certain accounting and pricing services for the Trust, including the daily calculation of the Funds' respective net asset val- ues. EXPENSES Each class of shares of a Series' will bear, pro rata, all of the common ex- penses of that Series. Such expenses may include, but are not limited to, man- agement fees, legal expenses, audit fees, printing costs (e.g., cost of printing annual reports, semi-annual reports and prospectuses which are dis- tributed to existing shareholders), brokerage commissions, the expenses of registering and qualifying the Series shares for sale with the Securities and Exchange Commission and with various state securities commissions, fees and expenses of the Series custodian, administrator and transfer agent, the ex- penses of obtaining quotations of portfolio securities and of pricing the Se- ries' shares. General expenses which are not associated directly with any particular Series within the Trust (e.g., insurance premiums, trustees' fees, expenses of maintaining the Trust's legal existence and of shareholders' meet- ings, and fees and expenses of industry organizations) are allocated between the various Series and classes based upon an equitable basis. All expenses in- curred by a Series, will be borne on a pro rata basis by each outstanding share of a class, based on each class' percentage in the Series represented by the value of shares of such classes, except that the Brinson Fund classes will not incur any of the expenses under the SwissKey Fund classes' 12b-1 Plan. Due to the 30 specific distribution expenses and other costs that will be allocable to each class, the net asset value of and dividends paid to each class of a Series will vary. Brinson Partners has agreed irrevocably to waive its fees and reimburse ex- penses so that total operating expenses, with the exception of 12b-1 expenses, of the SwissKey Global Fund, SwissKey Global Equity Fund, SwissKey Global Bond Fund, SwissKey Short-Term Global Income Fund, SwissKey U.S. Balanced Fund, SwissKey U.S. Equity Fund, SwissKey U.S. Bond Fund, SwissKey U.S. Cash Manage- ment Fund, SwissKey Non-U.S. Equity Fund and SwissKey Non-U.S. Bond Fund, do not exceed 1.10%, 1.00%, 0.90%, 0.75%, 0.80%, 0.80%, 0.60%, 0.40%, 1.00% and 0.90%, respectively. Had the Advisor not agreed irrevocably to waive its fees and reimburse expenses, the Total Fund Expense ratio for the SwissKey Fund class shares of the Series that have commenced operations would have been es- timated at 1.79%--Global Fund, 3.41%--Global Equity Fund, 2.27%--Global Bond Fund, 1.45%--U.S. Balanced Fund, 5.92%--U.S. Equity Fund, 5.15%--U.S. Bond Fund, and 2.44%--Non-U.S. Equity Fund, respectively. PURCHASE OF SHARES At the discretion of the Trust, investors may be permitted to purchase Fund shares by transferring securities to the Fund that meet the Series' investment objectives and policies. Securities transferred to the Fund will be valued in accordance with the same procedures used to determine the Funds' net asset value at the time of the next determination of net asset value determined as of the same time. All dividends, interest, subscription, or their rights per- taining to such securities shall become the property of the Series and must be delivered to the Series by the investor upon receipt from the issuer. Invest- ors who are permitted to transfer such securities will be required to recog- nize a gain or loss on such transfer and pay tax thereon, if applicable, measured by the difference between the fair market value of the securities and the investors' basis therein. Securities will not be accepted in exchange for shares of the Fund unless: (1) such securities are, at the time of the ex- change, eligible to be included in the Series' portfolio and current market quotations are readily available for such securities; (2) the investor repre- sents and warrants that all securities offered to be exchanged are not subject to any restrictions upon their sale by the Fund under the Securities Act of 1933 or under the laws of the country in which the principal market for such securities exists, or otherwise; and (3) the value of any such security (ex- cept U.S. Government securities) being exchanged together with other securi- ties of the same issuer owned by the Series, will not exceed 5% of the Series' net assets immediately after the transaction. Purchase orders for shares of a Fund which are received by Fund/Plan in proper form, including money order, check or bank draft, by 4:00 p.m. Eastern Time on any day that the New York Stock Exchange ("NYSE") is open for trading will be purchased at such Fund's net asset value determined that day, except that orders and payment for the SwissKey U.S. Cash Management Fund must be re- ceived by 12:00 p.m. Eastern Time. For the U.S. Cash Management Fund, pur- chases will be processed at the net asset value calculated after your investment has been converted to federal funds, e.g., monies credited to the Series' custodian bank by a Federal Reserve Bank. Upon conversion to federal funds, your purchase will be deemed effective and be entitled to dividends. If you wire money in the form of federal funds, your money will be invested at the share price next determined after receipt of the wire. For the U.S. Cash Management Fund, if you invest by check or non-federal funds wire, allow one business day after receipt for conversion into federal funds. Except for the U.S. Cash Management Fund, purchase orders for shares received in proper form after 4:00 p.m. Eastern time will be priced at the net asset value determined on the next day that the NYSE is open for trading. The Trust may accept telephone orders for Fund shares from broker-dealers or service organizations which have been previously approved by 31 the Trust. It is the responsibility of such broker-dealers or service organi- zations to promptly forward purchase orders and payments for same to the Trust. Shares of a Fund may be purchased through broker-dealers, banks, and bank trust departments which may charge the investor a transaction fee or other fee for their services at the time of purchase. Such fees would not oth- erwise be charged if the shares were purchased directly from the Trust. THE SWISSKEY FUND CLASS SHARES The SwissKey Funds will be marketed directly through the offices of the Swiss Bank Corporation. Swiss Bank Corporation has been providing investment advisory services since its formation in 1872. Through its branches and sub- sidiaries, Swiss Bank Corporation conducts securities research, provides in- vestment advisory services and manages mutual funds in major cities throughout the world including Amsterdam, Basel, Geneva, Frankfurt, Hong Kong, London, Luxembourg, Monte Carlo, New York, Paris, Singapore, Sydney, Tokyo, Toronto and Zurich. The SwissKey Funds may be purchased, through broker-dealers having sales agreements with FPBS, or through financial institutions having agency agree- ments with FPBS. There is no sales load or charge in connection with the pur- chase of shares. The SwissKey Fund class shares, however are subject to annual 12b-1 Plan expenses of up to a maximum of 0.90% (0.25% of which are service fees to be paid by the Fund to FPBS, dealers or others for providing personal service and/or maintaining shareholder accounts) of the Funds' average daily net assets of such shares. The Trust reserves the right to reject any purchase order and to suspend the offering of shares of any Fund. The minimum initial investment is $1,000. Sub- sequent investments will be accepted in minimum amounts of $50. The minimum initial investment for IRAs is $1,000 and subsequent investments will be ac- cepted in minimum amounts of $50 for each Fund. The Trust reserves the right to vary the initial and additional investment minimums for each Fund. BRINSON FUND CLASS SHARES In addition to offering the SwissKey Fund class shares of each Series, the Trust offers the Brinson Fund class shares of each Series, which are described in separate prospectuses relating to those classes of shares. As described in the prospectus relating to the Brinson Fund class shares, Brinson Fund class shares generally are distributed directly by FPBS and do not have a sales load or a 12b-1 fee. Both classes of a Series have a proportionate interest in the underlying portfolio of securities of that Series. To obtain a prospectus which describes the Brinson Fund class shares of a particular Series, contact FPBS at (800) 448-2430. Purchases may be made in one of the following ways: INITIAL PURCHASES BY MAIL Shares of each Fund may be purchased initially by completing the application or having your broker-dealer or financial institution complete the application accompanying this Prospectus together with a check payable to "SwissKey (Name of Series)" and mailing it to "The SwissKey Funds," c/o Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box 874, Conshohocken, PA 19428-0874. INITIAL PURCHASES BY WIRE An investor desiring to purchase shares of any Fund by wire should call Fund/Plan or have their broker-dealer or financial institution call Fund/Plan first at 1-800-SWISSKEY and request an account number and furnish the Fund with your tax identification number. Following such notification to Fund/Plan, federal funds and registration instructions should be wired through the Fed- eral Reserve System to: UNITED MISSOURI BANK KC NA ABA # 10-10-00695 FOR: FUND/PLAN SERVICES, INC. A/C 98-7037-071-9 FBO "SWISSKEY (Name of Series)" "SHAREHOLDER NAME AND ACCOUNT NUMBER" 32 A completed application with signature(s) of registrant(s) must be filed with the transfer agent immediately subsequent to the initial wire. Investors should be aware that some banks may impose a wire service fee. SUBSEQUENT INVESTMENTS Once an account has been opened, subsequent purchases in the minimum amounts specified above may be made by mail, bank wire or exchange. When making addi- tional investments by mail, simply return the remittance portion of a previous confirmation with your investment in the envelope provided. Your check should be made payable to "SwissKey (Name of Series)" and mailed to The SwissKey Funds c/o Fund/Plan Services, Inc., P.O. Box 412797, Kansas City, MO 64141- 2797. All investments must be made in U.S. dollars, and, to avoid fees and delays, checks must be drawn only on banks located in the United States. A charge ($20 minimum) will be imposed if any check used for the purchase of shares is re- turned. The Trust and Fund/Plan each reserve the right to reject any purchase order in whole or in part. EXCHANGE OF SHARES Shares of any of the SwissKey Funds within the Trust may be exchanged for shares of any of the other SwissKey Funds within the Trust. Exchanges will not be permitted between Brinson Fund class shares and SwissKey Fund class shares of a Series. Additional information about this exchange privilege and a pro- spectus for the SBC Short-Term World Income Fund may be obtained by calling 1- 800-SWISSKEY. The exchange privilege is a convenient way to respond to changes in your in- vestment goals or in market conditions. This privilege is not designed for frequent trading in response to short-term market fluctuations. You may make exchanges by mail or by telephone if you have previously elected the telephone authorization privilege on the Account Application. The telephone exchange privilege may be difficult to implement during times of drastic economic or market changes. The purchase of shares for any Fund through an exchange trans- action is accepted immediately. You should keep in mind that for tax purposes an exchange is treated as a redemption and a new purchase, each at the appro- priate Fund's net asset value. The Trust and Fund/Plan reserve the right to limit, amend, impose charges upon, terminate or otherwise modify the exchange privilege on 60 days' prior written notice to shareholders. Exchanges will be made on the basis of both Funds' relative net asset values per share. Exchanges may be made only for shares of a Fund then offering its shares for sale in your state of residence and are subject to the minimum ini- tial investment requirement. Requests for telephone exchanges must be received by Fund/Plan by the close of regular trading on the NYSE (currently 4:00 p.m. Eastern Time) on any day that the NYSE is open for regular trading, except that requests for exchanges into the U.S. Cash Management Fund must be re- ceived by 12:00 p.m. Eastern Time, for the exchange to occur that day. REDEMPTION OF SHARES Shares of each Fund may be redeemed without charge on any business day that the NYSE is open for business. Redemptions will be effective at the net asset value per share next determined after the receipt by the transfer agent of a redemption request meeting the requirements described below. The Trust nor- mally sends redemption proceeds on the next business day, but in any event, redemption proceeds are sent within five business days of receipt of a redemp- tion request in proper form. Payment may also be made by wire directly to any bank previously designated by the shareholder in a shareholder account appli- cation. There is a $9 charge for redemptions by wire. Also, please note that the shareholder's bank may impose a fee for this wire service. The Trust will honor redemption requests of shareholders who 33 recently purchased shares by check, but will not mail the proceeds until it is reasonably satisfied that the purchase check has cleared, which may take up to fifteen days from the purchase date. Except as noted below, redemption requests received in proper form by the transfer agent prior to the close of regular trading hours on the NYSE on any business day that the Fund's net asset value per share is calculated are ef- fective that day. Redemption requests received after the close of the NYSE are effective as of the time the Fund's net asset value per share is next determined. No redemp- tion will be processed until the transfer agent has received a completed ap- plication with respect to the account. The Trust will satisfy redemption requests in cash to the fullest extent feasible, so long as such payments would not, in the opinion of Brinson Part- ners or the Board of Trustees, result in the necessity of a Series to sell as- sets under disadvantageous conditions or to the detriment of the remaining shareholders of the Series. Pursuant to the Trust's Agreement and Declaration of Trust, payment for shares redeemed may be made either in cash or in kind, or partly in cash and partly in kind. However, the Trust has elected pursuant to Rule 18f-1 under the Act to redeem its shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Series, during any 90 day period for any one shareholder. Payments in excess of this limit by any of the Fund will also be made wholly in cash unless the Board of Trustees be- lieves that economic conditions exist which would make such a practice detri- mental to the best interests of the Series. Any portfolio securities paid or distributed in-kind would be valued as described under "Net Asset Value." In the event that an in-kind distribution is made, a shareholder may incur addi- tional expenses, such as the payment of brokerage commissions, on the sale or other disposition of the securities received from the Series. In-kind payments need not constitute a cross-section of the Series' portfolio. MINIMUM BALANCES Due to the relatively high cost of maintaining smaller accounts, the Trust reserves the right to involuntarily redeem shares in any Fund account for their then current net asset value (which will be promptly paid to the share- holder) if at any time the total investment does not have a value of at least $1,000 as a result of redemptions and not due to changes in the asset value of the Series. The shareholder will be notified that the value of his Fund ac- count is less than the required minimum and will be allowed at least 60 days to bring the value of the account up to the minimum before the redemption is processed. Shares may be redeemed in one of the following ways: REDEMPTION BY MAIL Shareholders may submit a written request for redemption to: The SwissKey Funds, c/o Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box 874, Consho- hocken, PA 19428-0874. The request must be in good order which means that it must (i) identify the shareholder's account name and account number, (ii) state the Fund name, (iii) state the number of shares to be redeemed, and (iv) be signed by each registered owner exactly as the shares are registered. To prevent fraudulent redemptions, a signature guarantee for the signature of each person in whose name the account is registered is required on all written redemption requests over $5,000. A guarantee may be obtained from any commer- cial bank, trust company, savings and loan association, federal savings bank, a member firm of a national securities exchange or other eligible financial institution. Credit unions must be authorized to issue signature guarantees; notary public endorsements will not be accepted. The transfer agent may re- quire additional supporting documents for redemptions made by corporations, executors, administrators, trustees, guardians and retirement plans. A redemption request will not be deemed to be properly received until the transfer agent receives all required documents in proper form. 34 Questions with respect to the proper form for redemption requests should be directed to the transfer agent at 1-800-SWISSKEY. REDEMPTION BY TELEPHONE Shareholders who have so indicated on the application, or have subsequently arranged in writing to do so, may redeem shares by instructing the transfer agent by telephone at 1-800-SWISSKEY. In order to arrange for redemption by wire or telephone after an account has been opened, or to change the bank or account designated to receive redemption proceeds, a written request must be sent to the transfer agent at the address listed under "Redemption by Mail," above. Such requests must be signed by the shareholder, with signatures guaranteed (see "Redemption by Mail" for details regarding signature guarantees). Further documentation may be requested from corporations, executors, administrators, trustees or guardians. The Trust reserves the right to refuse a wire or telephone redemption if it is believed advisable to do so. Procedures for redeeming Fund shares by wire or telephone may be modified or terminated at any time by the Trust. Neither the Trust nor any of its service contractors will be liable for any loss or expense in acting upon telephone instructions that are reasonably believed to be genuine. In attempting to confirm that telephone instructions are genuine, the Funds will use such procedures as are considered reasonable, including re- questing a shareholder to correctly state his or her Fund account number, the name in which his or her account is registered, his or her social security number, banking institution, bank account number and the name in which his or her bank account is registered. To the extent that the Trust fails to use rea- sonable procedures to verify the genuineness of telephone instructions, they and/or their service contractors may be liable for any such instructions that prove to be fraudulent or unauthorized. Shares of the Funds may be redeemed through certain broker-dealers, banks and bank trust departments who may charge the investor a transaction fee or other fee for their services at the time of redemption. Such fees would not otherwise be charged if the shares were redeemed from the Trust. REDEMPTION BY CHECK (SWISSKEY U.S. CASH MANAGEMENT FUND ONLY) If you are a shareholder of the SwissKey U.S. Cash Management Fund and have elected the free checkwriting option on the account application form, you will receive checks that you may use to make payments to any person or business. There is no limit on the number of checks you may write, but each check must be for at least $500 and not more than $100,000. You will continue to earn dividends on shares redeemed until the checks are presented to Fund/Plan for payment. An account cannot be closed using the checkwriting privilege. There is currently no charge to shareholders for checkwriting, but the Trust re- serves the right to impose a charge in the future. There is a $15 charge for checks written when insufficient funds are available. Checkwriting may be sus- pended or terminated at any time upon notice to investors. REPURCHASES If a shareholder desires to sell his shares at net asset value through a broker-dealer or financial institution (a repurchase), the shareholder can place a repurchase order with the broker-dealer or financial institution, which may charge the shareholder a fee. The shareholder will receive the net asset value calculated on the day he places the order and submits Federal funds if such broker-dealer or financial institution receives the sharehold- er's order prior to the close of the NYSE (or 12:00 p.m. Eastern Time for the SwissKey U.S. Cash Management Fund) and fulfills its responsibility to commu- nicate it with Fund/Plan on the same day. 35 ACCOUNT OPTIONS IN GENERAL The following account options are available to shareholders. There are no charges for the programs noted below and an investor may change or terminate these plans at any time by written notice to the Trust. For information about participating in these account options, call Fund/Plan Services, Inc. at 1- 800-SWISSKEY. AUTOMATIC INVESTMENT PLAN Shares of any of the SwissKey Funds may be purchased through an Automatic Investment Plan. The Automatic Investment Plan provides a convenient method by which investors may have monies deducted directly from their checking, savings or bank money market accounts for investment in the Funds each month or quar- ter. The minimum investment pursuant to the Automatic Investment Plan is $50. The initial account must be opened first with the $1,000 minimum prior to par- ticipation in the plan. If you desire to take advantage of this plan, simply complete the Automatic Investment Plan section on the Account Application, which is available from the transfer agent. The account designated will be debited in the specified amount, on the date indicated, and Fund shares will be purchased. The Trust may alter or terminate the Automatic Investment Plan at any time. SYSTEMATIC WITHDRAWAL PLAN A shareholder with a minimum account balance of $10,000 may direct the transfer agent to send to him (or anyone he designates) regular monthly, quar- terly or semi-annual payments. Each payment under a Systematic Withdrawal Plan ("SWP") must be at least $100. Such payments are drawn from share redemptions. If redemptions continue, the shareholder's account may eventually be exhaust- ed. Shareholders participating in the SWP must elect to have their dividends and distributions automatically reinvested in additional Fund shares and must hold their shares in uncertificated form. The Trust may terminate any SWP for an account if the value of the account falls below $5,000 as a result of share redemptions or an exchange of shares of the Fund for shares of another Fund in the Trust. INDIVIDUAL RETIREMENT ACCOUNTS An IRA is a tax-deferred retirement savings account that may be used by an individual under age 70 1/2 who has compensation or self-employment income and his or her unemployed spouse, or an individual who has received a qualified distribution from his or her employer's retirement plan. The minimum purchase requirement for IRAs is $1,000 for each Fund. DISTRIBUTION PLAN The Board of Trustees of the Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Act for the SwissKey Fund class shares. The Plan permits each Series to reimburse FPBS, Brinson Partners and others from the assets of the SwissKey Fund class shares a quarterly fee for services and expenses incurred in distributing and promoting sales of the SwissKey Fund class shares. These expenses include, but are not limited to, preparing and distributing advertisements and sales literature, printing pro- spectuses and reports used for sales purposes, and paying distribution and maintenance fees to brokers, dealers and others in accordance with a selling agreement with the Trust on behalf of the SwissKey Fund class shares or FPBS. In addition, each Series may make payments directly to FPBS for payment to dealers or others, or directly to others, such as banks, who assist in the distribution of the SwissKey Funds or provide services with respect to the SwissKey Funds. The aggregate distribution fees paid by the Series from the assets of the respective SwissKey Fund class shares to FPBS and others under the Plan may not exceed 0.90% of a Fund's average daily net assets in any year (0.25% of which are service fees to be paid by the Series to FPBS, dealers and others, for providing personal service 36 and/or maintaining shareholder accounts) of a Fund's average daily net assets. The Plan provides, however, that the aggregate distribution fees for each re- spective Fund shall not exceed the following maximum amounts for the 1996 fis- cal year : SwissKey Global Fund--0.65%, SwissKey Global Equity Fund--0.76%, SwissKey Global Bond Fund--0.49%, SwissKey Short-Term Global Income Fund-- 0.52%, SwissKey U.S. Balanced Fund--0.50%, SwissKey U.S. Equity Fund--0.52%, SwissKey U.S. Bond Fund--0.47%, SwissKey U.S. Cash Management Fund--0.47%, SwissKey Non-U.S. Equity Fund--0.84% and SwissKey Non-U.S. Bond Fund--0.52%. The Plan does not apply to the Brinson Fund class shares of each Series. Those shares are not included in calculating the Plan's fees and the Plan is not used to assist in the distribution and marketing of each Series' Brinson Fund class shares. The quarterly fees paid to FPBS under the Plan are subject to the review and approval by the Trust's unaffiliated Trustees who may reduce the fees or ter- minate the Plan at any time. All such payments made by a Series pursuant to the Plan shall be made for the purpose of selling shares issued by the Series. Distribution expenses which are attributable to a particular Fund will be charged against that Fund's assets. Distribution expenses which are attributable to more than one Series will be allocated among the Series, and, consequently, the Funds, in proportion to their relative net assets. NET ASSET VALUE The net asset value per share of each Fund is computed as of the close of regular trading on the NYSE. The NYSE is closed on New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas. The net asset values of all outstanding shares of each class of shares of a Series will be computed on a pro rata basis for each outstanding share based on the proportionate participation in that Series represented by the value of shares of that class. The net asset value per share is computed by adding the value of all securi- ties and other assets in the portfolio, deducting any liabilities (expenses and fees are accrued daily) and dividing by the number of shares outstanding. The portfolio securities of each Series listed or traded on a stock exchange are valued at the latest sale price. If no sale price is reported, the mean of the latest bid and asked prices is used. Securities traded over-the-counter are priced at the mean of the latest bid and asked prices. When market quota- tions are not readily available, securities and other assets are valued at fair value as determined in good faith by the Board of Trustees. Bonds are valued through valuations obtained from a commercial pricing serv- ice or at the most recent mean of the bid and asked prices provided by invest- ment dealers in accordance with procedures established by the Board of Trustees. Options, futures and options on futures are valued at the settlement price as determined by the appropriate clearing corporation. The securities held in the portfolio of the U.S. Cash Management Fund, and the debt securities with maturities of 60 days or less held by other Series, are valued at amortized cost. When a security is valued at amortized cost, it is valued at its cost when purchased, and thereafter by assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. From time to time, portfolio securities of a Series may be listed primarily on foreign exchanges which trade on days when the NYSE is closed (such as Sat- urday). As a result, the net asset value of the Funds may be significantly af- fected by such trading on days when shareholders have no access to the Funds. 37 The different expenses borne by each class of shares will result in differ- ent net asset values and dividends. The per share net asset value of the SwissKey Fund class shares will generally be lower than that of the Brinson Fund class shares of a Series because of the higher expenses borne by the SwissKey Fund class shares. It is expected, however, that the net asset value per share of the two classes will tend to converge immediately after the pay- ment of dividends, which will differ by approximately the amount of the serv- ice and distribution expense differential between the classes. DIVIDENDS AND TAXES DIVIDENDS The Short-Term Global Income Fund's and the U.S. Cash Management Fund's net investment income is declared daily and paid monthly as a dividend to share- holders of record at the close of business on the day of declaration. In order to receive the dividend for that day, the shareholder's purchase of shares must be effective as of 4:00 p.m. Eastern Time, except that purchases of shares for the U.S. Cash Management Fund must be effective as of 12:00 p.m. Eastern Time. Income dividends, when available, are declared and paid semi-an- nually in June and December for the Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, Non-U.S. Eq- uity Fund and Non-U.S. Bond Fund. Any aggregate net profits realized from the sale of portfolio securities are distributed at least once each year unless they are used to offset losses carried forward from prior years, in which case no such gain will be distributed. Dividends paid by a Series with respect to its SwissKey Fund class and Brinson Fund class shares are calculated in the same manner and at the same time. The per share dividends on SwissKey Fund class shares will be lower than the per share dividends on the Brinson Fund class shares of each Series as a result of the distribution and service fees applicable with respect to the SwissKey Fund class shares. Both the SwissKey Fund class and Brinson Fund class shares of a Series will share proportionately in the investment income and expenses of that Series, except that the per share dividends on the SwissKey Fund class shares will be lower that the per share dividends on the Brinson Fund class shares, which will not incur any expenses under a Rule 12b- 1 Plan. Income dividends and capital gain distributions are reinvested automatically in additional shares at net asset value, unless you elect to receive them in cash. Distribution options may be changed at any time by requesting a change in writing. Any check in payment of dividends or other distributions which cannot be delivered by the Post Office or which remains uncashed for a period of more than one year may be reinvested in the shareholder's account at the then current net asset value and the dividend option may be changed from cash to reinvest. Dividends are reinvested on the ex dividend date (the "ex date") at the net asset value determined at the close of business on that date. Please note that shares purchased shortly before the record date for a divi- dend or distribution may have the effect of returning capital although such dividends and distributions are subject to taxes. TAXES Each Series intends to qualify as a "regulated investment company" under the Internal Revenue Code ("the Code"). Such qualification relieves a Series of liability for Federal income taxes to the extent the Series' earnings are dis- tributed in accordance with the Code. Each Series is treated as a separate corporate entity for Federal tax purposes. Distributions of any net investment income and of any net realized short-term capital gains are taxable to share- holders as ordinary income. All distributions may be subject to state and lo- cal taxes. Distributions of net capital gain (the excess of net long-term capital gain over net short-term capital loss) are taxable to shareholders as long-term capital gain regardless of how long a shareholder may have held shares of a Series. The tax treatment of 38 distributions of ordinary income or capital gains will be the same whether the shareholder reinvests the distributions or elects to receive them in cash. A distribution will be treated as paid on December 31 of the current calendar year if it is declared in October, November or December with a record date in such a month and paid during January of the following calendar year. Such dis- tributions will be taxable to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distri- butions are received. Shareholders will be advised annually of the source and tax status of all distributions for Federal income tax purposes. Further information regarding the tax consequences of investing in the Series is included in the Statement of Additional Information. The above discussion is intended for general infor- mation only. Investors should consult their own tax advisors for more specific information on the tax consequences of particular types of distributions. Redemptions of Series shares, and the exchange of shares between two Series of the Trust, are taxable events and, accordingly, shareholders may realize capital gains or losses on these transactions. Shareholders may be subject to back-up withholding on reportable dividend and redemption payments ("back-up withholding") if a certified taxpayer iden- tification number is not on file with the Series, if, to the Series' knowl- edge, an incorrect number has been furnished, or if, the Series has been notified by the IRS that an account is subject to back-up withholding. An in- dividual's taxpayer identification number is his/her social security number. If more than 50% of the Series total assets at the close of its taxable year consists of stock or securities in foreign corporations, the Series may elect to "pass-through" to shareholders for foreign tax credit purposes the amount of foreign income taxes paid by the Series with respect to its direct holdings of securities in foreign corporations. The Series will make such an election only if it deems such election to be in the best interests of its sharehold- ers. If this election is made, shareholders of the Series will be required to include in their gross incomes their pro rata shares of foreign taxes paid by the Series. However, shareholders will be able to treat their pro-rata shares of foreign taxes as either a deduction (itemized deduction in the case of in- dividuals) or a foreign tax credit (but not both) against U.S. income taxes on their tax return. PERFORMANCE INFORMATION From time to time, performance information, such as "yield," "effective yield," "total return" or "average annual total return" may be quoted in ad- vertisements or in communications to present or prospective shareholders. The figures are based on historical performance and should not be considered rep- resentative of future results. The value of an investment in a Fund will fluc- tuate and an investor's shares, when redeemed, may be worth more or less than their original cost. Performance information for a Fund may be compared to various unmanaged indices and averages, and to the performance of other mutual funds tracked by mutual fund rating services. Any fees charged by banks or their institutional investors directly to their customer accounts in connec- tion with investments in the SwissKey Fund class shares of the Series will not be included in the Funds' calculations of yield or total return. The current yield will be calculated by dividing the net asset income earned per share by the Fund during the period stated in the advertisement (based on the average daily number of shares entitled to receive dividends outstanding during the period) by the maximum net asset value per share on the last day of the period and annualizing the result on a semi-annual compounded basis. The Fund's total return may be calculated on an annualized and aggregate basis for various periods 39 (which periods will be stated in the advertisement). Average annual return re- flects the average percentage change per year in value of an investment in the Fund. Aggregate total return reflects the total percentage change over the stated period. To help investors better evaluate how an investment in a Fund might satisfy their investment objective, advertisements regarding the Funds may discuss yield or total return as reported by various financial publications. Adver- tisements may also compare yield or total return to other investments, indices and averages. The following publications, benchmarks, indices and averages may be used: Lipper Mutual Fund Performance Analysis; Lipper Fixed Income Analy- sis; Lipper Mutual Fund Indices; Morgan Stanley Indices; Shearson Lehman Hut- ton Treasury Index; Salomon Brothers Indices; Dow Jones Composite Average or its component indices; Standard & Poor's 500 Stock Index or its component in- dices; Wilshire Indices; The New York Stock Exchange composite or component indices; CDA Mutual Fund Report; Weisenberger -- Mutual Funds Panorama and In- vestment Companies; Mutual Fund Values and Mutual Fund Service Book, published by Morningstar, Inc.; comparable global portfolios managed by the Advisor; and financial publications such as Business Week, Kiplinger's Personal Finance, Financial World, Forbes, Fortune, Money Magazine, The Wall Street Journal, Barron's, et al., which rate fund performance over various time periods. The performance of the SwissKey U.S. Cash Management Fund may be compared to other comparable money market funds as reported by IBC/Donoghue's Money Fund Report or Money Fund Insight, reporting services on money market funds. In- vestors may want to compare the Fund's performance to that of various bank products as reported by BANK RATE MONITOR, a financial reporting service that weekly publishes average rates of bank and thrift institution money market de- posit accounts and interest bearing checking accounts or various certificate of deposit indices. The performance of the Fund also may be compared to that of U.S. Treasury bills and notes. Certain of these alternative investments may offer fixed rates of return and guaranteed principal and may be insured. In addition, investors may want to compare the Fund's performance in the Consumer Price Index either directly or by calculating its "real rate of return," which is adjusted for the effects of inflation. Further information about the performance of the Funds is included in the Statement of Additional Information, which may be obtained without charge by contacting the Trust at 1-800-SWISSKEY. TOTAL RETURN Total Return is defined as the change in value of an investment in a Fund over a particular period, assuming that all distributions have been reinvest- ed. Thus, total return reflects not only income earned, but also variations in share prices at the beginning and end of the period. Average annual total re- turn is determined by computing the annual compound return over a stated pe- riod of time that would have produced a Fund's cumulative total return over the same period if the Fund's performance had remained constant throughout. Aggregate total return reflects the total percentage change over the stated period. YIELD Yield refers to net income generated by an investment over a particular pe- riod of time, which is annualized (assumed to have been generated for one year) and expressed as an annual percentage rate. Effective yield is yield as- suming that all distributions are reinvested. Effective yield will be slightly higher than the yield because of the compounding effect of the assumed invest- ment. Yield for the U.S. Cash Management Fund over a seven-day period is called current yield. 40 GENERAL INFORMATION ORGANIZATION The Brinson Funds is a Delaware business trust organized pursuant to an Agreement and Declaration of Trust, dated December 1, 1993. The Trust was originally organized as a Maryland Corporation on April 14, 1992. On December 1, 1993, the Trust reorganized as a Delaware business trust through a merger of the Maryland corporation into the Trust. The Trust is registered under the Act as an open-end management investment company, commonly known as a mutual fund and consists of ten different Series. The Trustees of the Trust may es- tablish additional series or classes of shares without the approval of share- holders. All of the Series, except the Global Bond Fund, Short-Term Global Income Fund and Non-U.S. Bond Fund, are diversified portfolios. The assets of each Series belong only to that Series, and the liabilities of each Series are borne solely by that Series and no other. DESCRIPTION OF SHARES Each Series is authorized to issue an unlimited number of shares of benefi- cial interest with a $0.001 par value per share. The Board of Trustees has the power to designate one or more series or sub-series/classes of shares of bene- ficial interest and to classify or reclassify only unissued shares with re- spect to such Series. Shares of each Series represent equal proportionate interests in the assets of that Series only and have identical voting, divi- dend, redemption, liquidation, and other rights, except that only shares of each Series' SwissKey Fund class shall have voting rights with respect to the Rule 12b-1 Plan relating to that class as described below. All shares issued are fully paid and non-assessable, and shareholders have no preemptive or other right to subscribe to any additional shares and no conversion rights. Currently, the Trust offers ten Series--Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, U.S. Balanced Fund, U.S. Eq- uity Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund. Two classes of shares are currently issued by the Trust for each Series, the SwissKey Fund class and the Brinson Fund class. VOTING RIGHTS Each issued and outstanding full and fractional share of a Series is enti- tled to one full and fractional vote in the Series and all shares of each Se- ries participate equally in regard to dividends, distributions, and liquidations with respect to that Series. Shareholders do not have cumulative voting rights. On any matter submitted to a vote of shareholders, shares of each Series will vote separately except when a vote of shareholders in the ag- gregate is required by law, or when the Trustees have determined that the mat- ter affects the interests of more than one Series, in which case the shareholders of all such Series shall be entitled to vote thereon. Only the SwissKey Fund class shareholders may vote on matters related to the Rule 12b-1 Plan associated with that class. As of January 17, 1996, Swiss Bank Corporation of New York, New York was a control person of the SwissKey Fund class of each Series of the Trust by na- ture of its shareholdings of such classes. Under the Investment Company Act, a control person possesses the ability to control the outcome of matters submit- ted for shareholder vote. SHAREHOLDER MEETINGS The Trustees of the Trust do not intend to hold annual meetings of share- holders of the Series. The Securities and Exchange Commission, however, re- quires the Trustees to promptly call a meeting for the purpose of voting upon the question of removal of any Trustee when requested to do so by not less than 10% of the outstanding shareholders of the respective Series. In addi- tion, subject to certain conditions, shareholders of each Series may apply to the Series to communicate with other shareholders to request a shareholders' meeting to vote upon the removal of a Trustee or Trustees. 41 PORTFOLIO TURNOVER (GLOBAL FUND, GLOBAL BOND FUND AND SHORT-TERM GLOBAL INCOME FUND) As a result of a Series' investment policies, its portfolio turnover rate may exceed 100%. High portfolio turnover (over 100%) may involve correspondingly greater brokerage commissions and other transaction costs, which will be borne directly by the Series and ultimately by the Series' shareholders. In addition, high portfolio turnover may result in increased short-term capital gains, which, when distributed to shareholders, are treated as ordinary income. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS The Trust will attempt to obtain the best overall price and most favorable execution of transactions in portfolio securities. However, subject to policies established by the Board of Trustees of the Trust, a Series may pay a broker- dealer a commission for effecting a portfolio transaction for a Series in ex- cess of the amount of commission another broker-dealer would have charged if Brinson Partners determines in good faith that the commission paid was reason- able in relation to the brokerage or research services provided by such broker- dealer, viewed in terms of that particular transaction or such firm's overall responsibilities with respect to the clients, including the Series, as to which it exercises investment discretion. In selecting and monitoring broker-dealers and negotiating commissions, consideration will be given to a broker-dealer's reliability, the quality of its execution services on a continuing basis and its financial condition. SHAREHOLDER REPORTS AND INQUIRIES Shareholders will receive semi-annual reports showing portfolio investments and other information as of December 31 and annual reports audited by indepen- dent auditors as of June 30. Shareholders with inquiries should call the Funds at 1-800-SWISSKEY or write to The SwissKey Funds, P.O. Box 874, Conshohocken, PA 19428-0874. 42 ADVISOR Brinson Partners, Inc. 209 South LaSalle Street Chicago, IL 60604-1295 UNDERWRITER Fund/Plan Broker Services, Inc. 2 W. Elm Street Conshohocken, PA 19428-0874 SHAREHOLDER SERVICES Fund/Plan Services, Inc. 2 W. Elm Street P.O. Box 874 Conshohocken, PA 19428-0874 CUSTODIAN Bankers Trust Company 34 Exchange Place Jersey City, NJ 07302-1107 LEGAL COUNSEL Stradley, Ronon, Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103-7098 INDEPENDENT AUDITORS Ernst & Young LLP Sears Tower 233 South Wacker Drive Chicago, IL 60606-1295 LOGO FOR ADDITIONAL INFORMATION ABOUT THE SWISSKEY FUNDS, CALL: 1-800-SWISSKEY LOGO PROSPECTUS FEBRUARY 15, 1996 SWISSKEY GLOBAL FUND SWISSKEY GLOBAL EQUITY FUND SWISSKEY GLOBAL BOND FUND SWISSKEY SHORT-TERM GLOBAL INCOME FUND SWISSKEY U.S. BALANCED FUND SWISSKEY U.S. EQUITY FUND SWISSKEY U.S. BOND FUND SWISSKEY U.S. CASH MANAGEMENT FUND SWISSKEY NON-U.S. EQUITY FUND SWISSKEY NON-U.S. BOND FUND THE BRINSON FUNDS LOGO Global Fund U.S. Equity Fund Global Equity Fund U.S. Bond Fund Global Bond Fund U.S. Cash Management Fund Short-Term Global Income Fund Non-U.S. Equity Fund U.S. Balanced Fund Non-U.S. Bond Fund STATEMENT OF ADDITIONAL INFORMATION February 15, 1996 The Brinson Funds (the "Trust") currently offers ten separate series, each with its own investment objectives and policies. The Trust also offers two classes of shares for each series--the Brinson Fund class and the SwissKey Fund class. Information concerning the Brinson Fund class of each series is provided in the following separate Prospectuses: the Brinson Global Fund, Brinson Global Equity Fund, Brinson Global Bond Fund, Brinson Short-Term Global Income Fund, Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund, Brinson U.S. Cash Management Fund, Brinson Non-U.S. Equity Fund and Brinson Non-U.S. Bond Fund each dated September 20, 1995; and the Brinson U.S. Bond Fund dated February 15, 1996. Information concerning the SwissKey Fund class of each series is included in a separate Prospectus for the SwissKey Funds, dated February 15, 1996. This Statement of Additional Information is not a Prospectus, but should be read in conjunction with the current Prospectuses of the Trust. Much of the information contained herein expands upon subjects discussed in the Prospectuses. No investment in shares should be made without first reading the applicable Prospectus. A copy of each Prospectus may be obtained without charge from the Trust at the addresses and telephone numbers below. UNDERWRITER: ADVISOR: Fund/Plan Broker Services, Inc. Brinson Partners, Inc. 2 W. Elm Street 209 South LaSalle Street Conshohocken, PA 19428-0874 Chicago, IL 60604-1295 (800) 448-2430 (Brinson Fund class) (800) 448-2430 (Brinson Fund class) 1-800-SWISSKEY (SwissKey Fund class) 1-800-SWISSKEY (SwissKey Fund class) S-1 TABLE OF CONTENTS
PAGE ---- THE BRINSON FUNDS......................................................... S-3 INVESTMENT STRATEGIES..................................................... S-3 INVESTMENTS RELATING TO GLOBAL, U.S. AND NON-U.S. FUNDS................... S-3 Repurchase Agreements................................................... S-3 Reverse Repurchase Agreements........................................... S-4 Loans of Portfolio Securities........................................... S-4 Swaps................................................................... S-4 Index Options........................................................... S-4 Special Risks of Options on Indices..................................... S-5 Futures................................................................. S-5 Options................................................................. S-7 Rule 144A Securities.................................................... S-9 Other Investments....................................................... S-9 INVESTMENTS RELATING TO GLOBAL AND NON-U.S. FUNDS......................... S-9 Foreign Securities...................................................... S-9 Forward Foreign Currency Contracts...................................... S-10 Options on Foreign Currencies........................................... S-10 INVESTMENTS RELATING TO GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, U.S. BALANCED FUND AND U.S. BOND FUND....................... S-12 Lower Grade Debt Securities............................................. S-12 Convertible Securities.................................................. S-12 When-Issued Securities.................................................. S-13 Mortgage-Backed Securities and Mortgage Pass-Through Securities......... S-13 Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage... Investment Conduits ("REMICs")......................................... S-15 Other Mortgage-Backed Securities........................................ S-15 Asset-Backed Securities................................................. S-16 Zero Coupon Securities.................................................. S-17 INVESTMENTS RELATING TO GLOBAL FUND....................................... S-18 Emerging Markets Investments............................................ S-18 Risks of Investing in Emerging Markets.................................. S-19 INVESTMENT RESTRICTIONS................................................... S-20 MANAGEMENT OF THE TRUST................................................... S-22 Trustees and Officers................................................... S-22 Compensation Table...................................................... S-23 CONTROL PERSONS & PRINCIPAL HOLDERS OF SECURITIES......................... S-24 INVESTMENT ADVISORY AND OTHER SERVICES.................................... S-27 Administrator........................................................... S-29 Underwriter............................................................. S-29 Distribution Plan....................................................... S-30 Code of Ethics.......................................................... S-30 PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS.......................... S-31 Portfolio Turnover...................................................... S-31 Shares of Beneficial Interest........................................... S-32 PURCHASES................................................................. S-32 Exchanges of Shares..................................................... S-33 Net Asset Value......................................................... S-33 REDEMPTIONS............................................................... S-34 Taxation................................................................ S-34 PERFORMANCE CALCULATIONS.................................................. S-37 Total Return............................................................ S-37 Yield of U.S. Cash Management Fund...................................... S-38 CORPORATE DEBT RATINGS--APPENDIX A........................................ S-39 FINANCIAL STATEMENTS......................................................
S-2 THE BRINSON FUNDS The Brinson Funds (the "Trust"), 209 South LaSalle Street, Chicago, Illinois 60604-1295, is an open-end management investment company which currently offers shares of ten series representing separate portfolios of investments: Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund (collectively referred to as the "Series" or individually as a "Series"). The Global Fund, Global Equity Fund, Global Bond Fund and Short-Term Global Income Fund are referred to herein collectively as the "Global Funds" or individually as a "Global Fund;" U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and U.S. Cash Management Fund are referred to herein as "U.S. Funds;" Non-U.S. Equity Fund and Non-U.S. Bond Fund are referred to herein as "Non-U.S. Funds." The Trust currently offers two classes of shares for each Series. The Brinson Fund class shares of the Series are as follows: Brinson Global Fund, Brinson Global Equity Fund, Brinson Global Bond Fund, Brinson Short-Term Global Income Fund, Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund, Brinson U.S. Bond Fund, Brinson U.S. Cash Management Fund, Brinson Non-U.S. Equity Fund and Brinson Non-U.S. Bond Fund. The SwissKey Fund class shares of the Series are as follows: SwissKey Global Fund, SwissKey Global Equity Fund, SwissKey Global Bond Fund, SwissKey Short-Term Global Income Fund, SwissKey U.S. Balanced Fund, SwissKey U.S. Equity Fund, SwissKey U.S. Bond Fund, SwissKey U.S. Cash Management Fund, SwissKey Non-U.S. Equity Fund and SwissKey Non-U.S. Bond Fund. The Brinson Fund class shares of each Series have no sales charges and are not subject to annual 12b-1 plan expenses. The SwissKey Fund class shares of each Series have no sales charges but are subject to annual 12b-1 expenses to a maximum of 0.90% for the respective Series. INVESTMENT STRATEGIES The following discussion of investment techniques and instruments should be read in conjunction with the "Investment Objectives" and "Other Investment Practices and Risk Factors" sections of the Prospectuses of the Series. The investment practices described below, except for the discussion of portfolio loan transactions, are not fundamental and may be changed by the Board of Trustees without the approval of the shareholders. INVESTMENTS RELATING TO GLOBAL, U.S. AND NON-U.S. FUNDS The following discussion applies to all of the Series. REPURCHASE AGREEMENTS When a Series enters into a repurchase agreement, it purchases securities from a bank or broker-dealer which simultaneously agrees to repurchase the securities at a mutually agreed upon time and price, thereby determining the yield during the term of the agreement. As a result, a repurchase agreement provides a fixed rate of return insulated from market fluctuations during the term of the agreement. The term of a repurchase agreement generally is short, possibly overnight or for a few days, although it may extend over a number of months (up to one year) from the date of delivery. Repurchase agreements will be fully collateralized and the collateral will be marked-to-market daily. A Series may not enter into a repurchase agreement or invest in any other illiquid securities having more than seven days remaining to maturity if, as a result, such agreements, together with any other illiquid securities, would exceed 15% (10% in the case of the U.S. Cash Management Fund) of the value of the net assets of the Series. In the event of bankruptcy or other default by the seller of the security under a repurchase agreement, a Series may suffer time delays and incur costs or possible losses in connection with the disposition of the collateral. In such event, instead of the contractual fixed rate of return, the rate of return to a Series would be dependent upon intervening fluctuations of the market value of the underlying security and the accrued interest on the security. Although a Series would have rights against the seller for breach of contract with respect to any losses arising from market fluctuations following the failure of the seller to perform, the ability of a Series to recover damages from a seller in bankruptcy or otherwise in default would be reduced. S-3 Repurchase agreements are securities for purposes of the tax diversification requirements, for pass-through treatment under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, each Series will limit the value of its repurchase agreements on each of the quarterly testing dates to ensure compliance with Subchapter M of the Code. REVERSE REPURCHASE AGREEMENTS Reverse repurchase agreements involve sales of portfolio securities of a Series to member banks of the Federal Reserve System or securities dealers believed creditworthy, concurrently with an agreement by the Series to repurchase the same securities at a later date at a fixed price which is generally equal to the original sales price plus interest. A Series retains record ownership and the right to receive interest and principal payments on the portfolio security involved. In connection with each reverse repurchase transaction, a Series will direct its custodian bank to place cash, U.S. government securities, or other liquid high grade debt obligations in a segregated account of the Series in an amount equal to the repurchase price. Reverse repurchase agreements have the same characteristics as borrowing transactions by a Series. LOANS OF PORTFOLIO SECURITIES The Series may lend portfolio securities to broker-dealers and financial institutions provided: (1) the loan is secured continuously by collateral marked-to-market daily and maintained in an amount at least equal to the current market value of the securities loaned; (2) a Series may call the loan at any time and receive the securities loaned; (3) a Series will receive any interest or dividends paid on the loaned securities; and (4) the aggregate market value of securities loaned will not at any time exceed 33 1/3% of the total assets of the Global Equity Fund, Short-Term Global Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Bond Fund; 25% of the total assets of the Global Fund, Global Bond Fund and Non-U.S. Equity Fund; or 10% of the total assets of the U.S. Cash Management Fund, respectively. Collateral will consist of U.S. and non-U.S. securities, cash equivalents or irrevocable letters of credit. Loans of securities involve a risk that the borrower may fail to return the securities or may fail to maintain the proper amount of collateral. Therefore, a Series will only enter into portfolio loans after a review of all pertinent facts by the Advisor, under the supervision of the Board of Trustees, including the creditworthiness of the borrower. Such reviews will be monitored on an ongoing basis. SWAPS The Series (except for the Global Equity Fund, U.S. Equity Fund, U.S. Cash Management Fund, and Non-U.S. Equity Fund) may engage in swaps, including but not limited to interest rate, currency and index swaps and the purchase or sale of related caps, floors and collars and other derivative instruments. The Series expect to enter into these transactions primarily to preserve a return or spread on a particular investment or portion of the portfolio's duration, to protect against any increase in the price of securities the Series anticipates purchasing at a later date, or to gain exposure to certain markets in the most economical way possible. The use of swaps involves investment techniques and risks different from those associated with ordinary portfolio security transactions. If Brinson Partners is incorrect in its forecast of market values, interest rates and other applicable factors, the investment performance of the Series will be less favorable than it would have been if this investment technique was never used. Thus, if the other party to a swap defaults, the Series' risk of loss consists of the net amount of interest payments that the Series is contractually entitled to receive. Under Internal Revenue Service rules, any lump sum payment received or due under the notional principal contract must be amortized over the life of the contract. INDEX OPTIONS The Series (except for the U.S. Cash Management Fund) may purchase exchange- listed call options on stock and fixed income indices depending upon whether the Series is an equity or bond series and sell such options in closing sale transactions for hedging purposes. A Series may purchase call options on broad market indices to temporarily achieve market exposure when the Series is not fully invested. A Series may also purchase exchange-listed call options on particular market segment indices to achieve temporary exposure to a specific industry. S-4 In addition, the Series may purchase put options on stock and fixed income indices and sell such options in closing sale transactions for hedging purposes. A Series may purchase put options on broad market indices in order to protect its fully invested portfolio from a general market decline. Put options on market segments may be bought to protect a Series from a decline in value of heavily weighted industries in the Series' portfolio. Put options on stock and fixed income indices may also be used to protect a Series' investments in the case of a major redemption. The Series may also write (sell) put and call options on stock and fixed income indices. While the option is open, a Series will maintain a segregated account with its custodian in an amount equal to the market value of the option. Options on indices are similar to regular options except that an option on an index gives the holder the right, upon exercise, to receive an amount of cash if the closing level of the index upon which the option is based is greater than (in the case of a call) or lesser than (in the case of a put) the exercise price of the option. This amount of cash is equal to the difference between the closing price of the index and the exercise price of the option expressed in dollars times a specified multiple (the "multiplier"). The indices on which options are traded include both U.S. and non-U.S. markets. SPECIAL RISKS OF OPTIONS ON INDICES The Series' purchases of options on indices will subject them to the risks described below. Because the value of an index option depends upon movements in the level of the index rather than the price of a particular security, whether a Series will realize gain or loss on the purchase of an option on an index depends upon movements in the level of prices in the market generally or in an industry or market segment rather than movements in the price of a particular security. Accordingly, successful use by a Series of options on indices is subject to Brinson Partners' ability to predict correctly the direction of movements in the market generally or in a particular industry. This requires different skills and techniques than predicting changes in the prices of individual securities. Index prices may be distorted if trading of a substantial number of securities included in the index is interrupted causing the trading of options on that index to be halted. If a trading halt occurred, a Series would not be able to close out options which it had purchased and the Series may incur losses if the underlying index moved adversely before trading resumed. If a trading halt occurred and restrictions prohibiting the exercise of options were imposed through the close of trading on the last day before expiration, exercises on that day would be settled on the basis of a closing index value that may not reflect current price information for securities representing a substantial portion of the value of the index. If a Series holds an index option and exercises it before final determination of the closing index value for that day, it runs the risk that the level of the underlying index may change before closing. If such a change causes the exercised option to fall "out-of-the-money," the Series will be required to pay the difference between the closing index value and the exercise price of the option (times the applicable multiplier) to the assigned writer. Although a Series may be able to minimize this risk by withholding exercise instructions until just before the daily cutoff time or by selling rather than exercising the option when the index level is close to the exercise price, it may not be possible to eliminate this risk entirely because the cutoff times for index options may be earlier than those fixed for other types of options and may occur before definitive closing index values are announced. FUTURES The Series (except the U.S. Cash Management Fund) may enter into contracts for the purchase or sale for future delivery of securities, including index contracts, or foreign currencies (Global and Non-U.S. Funds only). While futures contracts provide for the delivery of securities, deliveries usually do not occur. Contracts are generally terminated by entering into offsetting transactions. S-5 The Series may enter into such futures contracts to protect against the adverse affects of fluctuations in security prices, interest or foreign exchange rates without actually buying or selling the securities or foreign currency. For example, if interest rates are expected to increase, a Series might enter into futures contracts for the sale of debt securities. Such a sale would have much the same effect as selling an equivalent value of the debt securities owned by the Series. If interest rates did increase, the value of the debt securities in the portfolio would decline, but the value of the futures contracts to the Series would increase at approximately the same rate, thereby keeping the net asset value of the Series from declining as much as it otherwise would have. Similarly, when it is expected that interest rates may decline, futures contracts may be purchased to hedge in anticipation of subsequent purchases of securities at higher prices. Since the fluctuations in the value of futures contracts should be similar to those of debt securities, the Series could take advantage of the anticipated rise in value of debt securities without actually buying them until the market had stabilized. At that time, the futures contracts could be liquidated and the Series could then buy debt securities on the cash market. A stock index futures contract obligates the seller to deliver (and the purchaser to take) an amount of cash equal to a specific dollar amount times the difference between the value of a specific stock index at the close of the last trading day of the contract and the price at which the agreement was made. Open futures contracts are valued on a daily basis and a Series may be obligated to provide or receive cash reflecting any decline or increase in the contract's value. No physical delivery of the underlying stocks in the index is made in the future. With respect to options on futures contracts, when a Series is temporarily not fully invested, it may purchase a call option on a futures contract to hedge against a market advance due to declining interest rates. The purchase of a call option on a futures contract is similar in some respects to the purchase of a call option on an individual security. Depending on the pricing of the option compared to either the price of the futures contract upon which it is based, or the price of the underlying debt securities, it may or may not be less risky than ownership of the futures contract or underlying debt securities. As with the purchase of futures contracts, when a Series is not fully invested, it may purchase a call option on a futures contract to hedge against a market advance. The writing of a call option on a futures contract constitutes a partial hedge against the declining price of the security or foreign currency which is deliverable upon exercise of the futures contract. If the futures price at the expiration of the option is below the exercise price, the Series will retain the full amount of the option premium which provides a partial hedge against any decline that may have occurred in the value of the Series' portfolio holdings. The writing of a put option on a futures contract constitutes a partial hedge against the increasing price of the security or foreign currency which is deliverable upon exercise of the futures contract. If the futures price at the expiration of the option is higher than the exercise price, the Series will retain the full amount of the option premium which provides a partial hedge against any increase in the price of securities which the Series intends to purchase. Call and put options on stock index futures are similar to options on securities except that, rather than the right to purchase or sell stock at a specified price, options on a stock index future give the holder the right to receive cash. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's futures margin account which represents the amount by which the market price of the futures contract, at exercise, exceeds, in the case of a call, or is less than, in the case of a put, the exercise price of the futures contract. If an option is exercised on the last trading day prior to the expiration date of the option, the settlement will be made entirely in cash equal to the difference between the exercise price of the option and the closing price of the futures contract on the expiration date. If a put or call option which a Series has written is exercised, the Series may incur a loss which will be reduced by the amount of the premium it received. Depending on the degree of correlation between changes in the value of its portfolio securities and changes in the value of its options positions, the Series' losses from existing options on futures may, to some extent, be reduced or increased by changes in the value of portfolio securities. The purchase of a put option on a futures contract is similar in some respects to the purchase of protective puts on portfolio securities and for federal tax purposes, will be considered a "short sale." For example, a Series will purchase a put option on a futures contract to hedge the Series' portfolio against the risk of rising interest rates. S-6 To the extent that market prices move in an unexpected direction, a Series may not achieve the anticipated benefits of futures contracts or options on futures contracts or may realize a loss. For example, if the Series is hedged against the possibility of an increase in interest rates which would adversely affect the price of securities held in its portfolio and interest rates decrease instead, the Series would lose part or all of the benefit of the increased value which it has because it would have offsetting losses in its futures position. In addition, in such situations, if the Series had insufficient cash, it may be required to sell securities from its portfolio to meet daily variation margin requirements. Such sales of securities may, but will not necessarily, be at increased prices which reflect the rising market. A Series may be required to sell securities at a time when it may be disadvantageous to do so. Further, with respect to options on futures contracts, a Series may seek to close out an option position by writing or buying an offsetting position covering the same securities or contracts and have the same exercise price and expiration date. The ability to establish and close out positions on options will be subject to the maintenance of a liquid secondary market, which cannot be assured. OPTIONS The Series (except the U.S. Cash Management Fund) may purchase and write call or put options on securities but will only engage in option strategies for non- speculative purposes. The U.S. Funds may invest in options that are listed on U.S. exchanges or traded over the counter and the Global Funds and Non-U.S. Funds may invest in options that are either listed on U.S. or recognized foreign exchanges or traded over-the-counter. Certain over-the-counter options may be illiquid. Thus, it may not be possible to close options positions and this may have an adverse impact on a Series' ability to effectively hedge its securities. The Series have been notified by the Securities and Exchange Commission that it considers over-the-counter options to be illiquid. Accordingly, the Series will only invest in such options to the extent consistent with the 15% limit on investments in illiquid securities. PURCHASING CALL OPTIONS--The Series may purchase call options on securities to the extent that premiums paid by a Series do not aggregate more than 20% of the Series' total assets. When a Series purchases a call option, in return for a premium paid by the Series to the writer of the option, the Series obtains the right to buy the security underlying the option at a specified exercise price at any time during the term of the option. The writer of the call option, who receives the premium upon writing the option, has the obligation, upon exercise of the option, to deliver the underlying security against payment of the exercise price. The advantage of purchasing call options is that a Series may alter portfolio characteristics and modify portfolio maturities without incurring the cost associated with transactions. A Series may, following the purchase of a call option, liquidate its position by effecting a closing sale transaction. This is accomplished by selling an option of the same series as the option previously purchased. The Series will realize a profit from a closing sale transaction if the price received on the transaction is more than the premium paid to purchase the original call option; the Series will realize a loss from a closing sale transaction if the price received on the transaction is less than the premium paid to purchase the original call option. Although the Series will generally purchase only those call options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market on an Exchange will exist for any particular option, or at any particular time, and for some options no secondary market on an Exchange may exist. In such event, it may not be possible to effect closing transactions in particular options, with the result that a Series would have to exercise its options in order to realize any profit and would incur brokerage commissions upon the exercise of such options and upon the subsequent disposition of the underlying securities acquired through the exercise of such options. Further, unless the price of the underlying security changes sufficiently, a call option purchased by a Series may expire without any value to the Series, in which event the Series would realize a capital loss which will be short-term unless the option was held for more than one year. COVERED CALL WRITING--The Series may write covered call options from time to time on such portions of their portfolios, without limit, as Brinson Partners determines is appropriate in seeking to obtain a Series' investment objective. The advantage to a Series of writing covered calls is that the Series receives a premium which is additional income. However, if the security rises in value, the Series may not fully participate in the market appreciation. S-7 During the option period, a covered call option writer may be assigned an exercise notice by the broker-dealer through whom such call option was sold, requiring the writer to deliver the underlying security against payment of the exercise price. This obligation is terminated upon the expiration of the option or upon entering a closing purchase transaction. A closing purchase transaction, in which a Series, as writer of an option, terminates its obligation by purchasing an option of the same series as the option previously written, cannot be effected with respect to an option once the option writer has received an exercise notice for such option. Closing purchase transactions will ordinarily be effected to realize a profit on an outstanding call option, to prevent an underlying security from being called, to permit the sale of the underlying security or to enable a Series to write another call option on the underlying security with either a different exercise price or expiration date or both. A Series may realize a net gain or loss from a closing purchase transaction depending upon whether the net amount of the original premium received on the call option is more or less than the cost of effecting the closing purchase transaction. Any loss incurred in a closing purchase transaction may be partially or entirely offset by the premium received from a sale of a different call option on the same underlying security. Such a loss may also be wholly or partially offset by unrealized appreciation in the market value of the underlying security. Conversely, a gain resulting from a closing purchase transaction could be offset in whole or in part by a decline in the market value of the underlying security. If a call option expires unexercised, the Series will realize a short-term capital gain in the amount of the premium on the option less the commission paid. Such a gain, however, may be offset by depreciation in the market value of the underlying security during the option period. If a call option is exercised, a Series will realize a gain or loss from the sale of the underlying security equal to the difference between the cost of the underlying security and the proceeds of the sale of the security plus the amount of the premium on the option less the commission paid. The Series will write call options only on a covered basis, which means that a Series will own the underlying security subject to a call option at all times during the option period. Unless a closing purchase transaction is effected, a Series would be required to continue to hold a security which it might otherwise wish to sell or deliver a security it would want to hold. The exercise price of a call option may be below, equal to or above the current market value of the underlying security at the time the option is written. PURCHASING PUT OPTIONS--The Series may only purchase put options to the extent that the premiums on all outstanding put options do not exceed 20% of a Series' total assets. A Series will, at all times during which it holds a put option, own the security covered by such option. With regard to the writing of put options, each Series will limit the aggregate value of the obligations underlying such put options to 50% of its total net assets. The purchase of the put on substantially identical securities held will constitute a short sale for tax purposes, the effect of which is to create short-term capital gain on the sale of the security and to suspend running of its holding period (and treat it as commencing on the date of the closing of the short sale) or that of a security acquired to cover the same if, at the time the put was acquired, the security had not been held for more than one year. A put option purchased by a Series gives it the right to sell one of its securities for an agreed price up to an agreed date. The Series intend to purchase put options in order to protect against a decline in the market value of the underlying security below the exercise price less the premium paid for the option ("protective puts"). The ability to purchase put options will allow the Series to protect unrealized gains in an appreciated security in their portfolios without actually selling the security. If the security does not drop in value, a Series will lose the value of the premium paid. A Series may sell a put option which it has previously purchased prior to the sale of the securities underlying such option. Such sale will result in a net gain or loss depending on whether the amount received on the sale is more or less than the premium and other transaction costs paid on the put option which is sold. The Series may sell a put option purchased on individual portfolio securities. Additionally, the Series may enter into closing sale transactions. A closing sale transaction is one in which a Series, when it is the holder of an outstanding option, liquidates its position by selling an option of the same series as the option previously purchased. S-8 WRITING PUT OPTIONS--The Series may also write put options on a secured basis which means that a Series will maintain in a segregated account with its custodian, cash or U.S. government securities in an amount not less than the exercise price of the option at all times during the option period. The amount of cash or U.S. government securities held in the segregated account will be adjusted on a daily basis to reflect changes in the market value of the securities covered by the put option written by the Series. Secured put options will generally be written in circumstances where Brinson Partners wishes to purchase the underlying security for a Series' portfolio at a price lower than the current market price of the security. In such event, that Series would write a secured put option at an exercise price which, reduced by the premium received on the option, reflects the lower price it is willing to pay. Following the writing of a put option, a Series may wish to terminate the obligation to buy the security underlying the option by effecting a closing purchase transaction. This is accomplished by buying an option of the same series as the option previously written. The Series may not, however, effect such a closing transaction after it has been notified of the exercise of the option. RULE 144A SECURITIES The Series may invest in securities that are exempt under Rule 144A from the registration requirements of the Securities Act of 1933. Those securities purchased under Rule 144A are traded among qualified institutional investors. Investing in securities under Rule 144A could have the effect of increasing the levels of Series illiquidity to the extent that qualified institutional buyers become, for a time, uninterested in purchasing these securities. After the purchase of a security under Rule 144A, however, the Board of Trustees and Brinson Partners, Inc. ("Brinson Partners" or the "Advisor") will continue to monitor the liquidity of that security to ensure that each Series has no more than 15% (10% in the case of the U.S. Cash Management Series) of its total assets in illiquid securities. The Series will limit investments in securities of issuers which the Series are restricted from selling to the public without registration under the Securities Act of 1933 to no more than 15% (10% in the case of U.S. Cash Management Fund) of the Series' total assets, excluding restricted securities eligible for resale pursuant to Rule 144A that have been determined to be liquid by the Trust's Board of Trustees. OTHER INVESTMENTS The Board of Trustees may, in the future, authorize a Series to invest in securities other than those listed here and in the Prospectuses, provided such investment would be consistent with that Series' investment objective and that it would not violate any fundamental investment policies or restrictions applicable to that Series. INVESTMENTS RELATING TO GLOBAL AND NON-U.S. FUNDS The following discussion of strategies, techniques and policies applies only to Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund. FOREIGN SECURITIES Investors should recognize that investing in foreign issuers involves certain considerations, including those set forth in the Series' Prospectuses, which are not typically associated with investing in United States issuers. Since the stocks of foreign companies are frequently denominated in foreign currencies, and since the Series may temporarily hold uninvested reserves in bank deposits in foreign currencies, the Series will be affected favorably or unfavorably by changes in currency rates and in exchange control regulations and may incur costs in connection with conversions between various currencies. The investment policies of the Series permit them to enter into forward foreign currency exchange contracts, futures, options and interest rate swaps in order to hedge portfolio holdings and commitments against changes in the level of future currency rates. S-9 There has been in the past, and there may be again in the future, an interest equalization tax levied by the United States in connection with the purchase of foreign securities such as those purchased by the Series. Payment of such interest equalization tax, if imposed, would reduce the Series' rates of return on investment. Dividends paid by foreign issuers may be subject to withholding and other foreign taxes which may decrease the net return on such investments as compared to dividends paid to the Series by United States corporations. The Series' ability to "pass through" the foreign taxes paid for tax credit or deduction purposes will be determined by the composition of the Series' portfolios. More than 50% of a Series must be invested in stock or securities of foreign corporations for "pass through" to be possible in the first instance. Special rules govern the federal income tax treatment of certain transactions denominated in terms of a currency other than the U.S. dollar or determined by reference to the value of one or more currencies other than the U.S. dollar. The types of transactions covered by the special rules generally include the following: (i) the acquisition of, or becoming the obligor under, a bond or other debt instrument (including, to the extent provided in Treasury Regulations, preferred stock); (ii) the accruing of certain trade receivables and payables; and (iii) the entering into or acquisition of any forward contract, futures contract and similar financial instruments other than any "regulated futures contract" or "non-equity option" which would be marked-to- market under the rules of Section 1256 of the Code if held at the end of the tax year. The disposition of a currency other than the U.S. dollar by a U.S. taxpayer is also treated as a transaction subject to the special currency rules. However, foreign currency-related regulated futures contracts and non- equity options are generally not subject to these special currency rules. If subject, they are or would be treated as sold for their fair market value at year-end under the marked-to-market rules applicable to other futures contracts, unless an election is made to have such currency rules apply. With respect to transactions covered by the special rules, foreign currency gain or loss is calculated separately from any gain or loss on the underlying transaction and is normally taxable gain or loss. A taxpayer may elect to treat as capital gain or loss foreign currency gain or loss arising from certain identified forward contracts, futures contracts and options that are capital assets in the hands of the taxpayer and which are not part of a straddle. Certain transactions subject to the special currency rules that are part of a "section 988 hedging transaction" (as defined in the Code and the Treasury Regulations) will be integrated and treated as a single transaction or otherwise treated consistently for purposes of the Code. The income tax effects of integrating and treating a transaction as a single transaction are generally to create a synthetic debt instrument that is subject to the original discount provisions. It is anticipated that some of the non-U.S. dollar denominated investments and foreign currency contracts the Series may make or enter into will be subject to the special currency rules described above. FORWARD FOREIGN CURRENCY CONTRACTS The Series may purchase or sell currencies and/or engage in forward foreign currency transactions in order to expedite settlement of portfolio transactions and to manage currency risk. Forward foreign currency contracts are traded in the inter-bank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement and no commissions are charged at any stage for trades. The Series will account for forward contracts by marked-to-market each day at current forward values. When a Series enters into a forward contract to sell, for a fixed amount of U.S. dollars or other appropriate currency, an amount of foreign currency, the Series' custodian or sub-custodian will place cash or liquid high grade debt securities in a segregated account of the Series in an amount not less than the value of the Series' total assets committed to the consummation of such forward contracts. If the additional cash or securities placed in the segregated account declines, additional cash or securities will be placed in the account on a daily basis so that the value of the account will equal the amount of the Series' commitments with respect to such contracts. OPTIONS ON FOREIGN CURRENCIES The Series may purchase and write options on foreign currencies for hedging purposes in a manner similar to that in which futures contracts on foreign currencies, or forward contracts, will be utilized. For example, a decline S-10 in the dollar value of a foreign currency in which portfolio securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against such diminutions in the value of portfolio securities, the Series may purchase put options on the foreign currency. If the dollar price of the currency does decline, a Series will have the right to sell such currency for a fixed amount in dollars and will thereby offset, in whole or in part, the adverse effect on its portfolio which otherwise would have resulted. Conversely, where a rise in the dollar value of a currency in which securities to be acquired are denominated is projected, thereby increasing the dollar price of such securities, the Series may purchase call options on such currency. The purchase of such options could offset, at least partially, the effects of the adverse movement in exchange rates. As in the case of other types of options, however, the benefit to the Series to be derived from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, a Series could sustain losses on transactions in foreign currency options which would require it to forego a portion or all of the benefits of advantageous changes in such rates. The Series may write options on foreign currencies for the same types of hedging purposes. For example, where a Series anticipates a decline in the dollar value of foreign currency denominated securities due to adverse fluctuations in exchange rates, it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised, and the diminution in the value of portfolio securities will be offset by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against an anticipated increase in the dollar cost of securities to be acquired, a Series could write a put option on the relevant currency which, if rates move in the manner projected, will expire unexercised and allow the Series to hedge such increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the Series would be required to purchase or sell the underlying currency at a loss which may not be offset by the amount of the premium. Through the writing of options on foreign currencies, a Series also may be required to forego all or a portion of the benefit which might otherwise have been obtained from favorable movements in exchange rates. The Series may write covered call options on foreign currencies. A call option written on a foreign currency by a Series is "covered" if the Series owns the underlying foreign currency covered by the call or has an absolute and immediate right to acquire that foreign currency without additional cash consideration (or for additional cash consideration held in a segregated account by the custodian bank) upon conversion or exchange of other foreign currency held in its portfolio. A call option is also covered if a Series has a call on the same foreign currency and in the same principal amount as the call written where the exercise price of the call held (a) is equal to or less than the exercise price of the call written, or (b) is greater than the exercise price of the call written if the difference is maintained by the Series in cash, U.S. government securities or other high-grade liquid debt securities in a segregated account with its custodian bank. With respect to writing put options, at the time the put is written, a Series will establish a segregated account with its custodian bank consisting of cash, U.S. government securities or other high-grade liquid debt securities in an amount equal in value to the amount the Series will be required to pay upon exercise of the put. The account will be maintained until the put is exercised, has expired, or the Series has purchased a closing put of the same series as the one previously written. S-11 INVESTMENTS RELATING TO GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, U.S. BALANCED FUND, AND U.S. BOND FUND The following discussion applies to the Global Fund, Global Bond Fund, Short- Term Global Income Fund, U.S. Balanced Fund and U.S. Bond Fund. LOWER GRADE DEBT SECURITIES (not applicable to the Short-Term Global Income Fund) Fixed income securities rated lower than Baa3 by Moody's or BBB- by Standard & Poor's are considered to be of poor standing and predominantly speculative. Such securities are commonly referred to as "junk bonds" and are subject to a substantial degree of credit risk. Medium and low-grade bonds held by the Series, which are those that are rated below Baa3 or BBB-, may be issued as a consequence of corporate restructurings, such as leveraged buy-outs, mergers, acquisitions, debt recapitalizations or similar events. Also, high yield bonds are often issued by smaller less creditworthy companies or by highly leveraged (indebted) firms, which are generally less able than more financially stable firms to make scheduled payments of interest and principal. The risks posed by bonds issued under such circumstances are substantial. In the past, the high yields from low-grade bonds have more than compensated for the higher default rates on such securities. However, there can be no assurance that diversification will protect the Series from widespread bond defaults brought about by a sustained economic downturn, or that yields will continue to offset default rates on high yield bonds in the future. Issuers of these securities are often highly leveraged, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. In addition, such issuers may not have more traditional methods of financing available to them and may be unable to repay debt at maturity by refinancing. Further, an economic recession may result in default levels with respect to such securities in excess of historic averages. The value of lower-rated debt securities will be influenced not only by changing interest rates, but also by the bond market's perception of credit quality and the outlook for economic growth. When economic conditions appear to be deteriorating, low and medium-rated bonds may decline in market value due to investors' heightened concern over credit quality, regardless of prevailing interest rates. Especially at such times, trading in the secondary market for high yield bonds may become thin and market liquidity may be significantly reduced. Even under normal conditions, the market for high yield bonds may be less liquid than the market for investment grade corporate bonds. There are fewer securities dealers in the high yield market and purchasers of high yield bonds are concentrated among a smaller group of securities dealers and institutional investors. In periods of reduced market liquidity, high yield bond prices may become more volatile. Besides credit and liquidity concerns, prices for high yield bonds may be affected by legislative and regulatory developments. For example, from time to time, Congress has considered legislation to restrict or eliminate the corporate tax deduction for interest payments or to regulate corporate restructurings such as takeovers or mergers. Such legislation may significantly depress the prices of outstanding high yield bonds. A description of various bond ratings appears in Appendix A. CONVERTIBLE SECURITIES Common stock occupies the most junior position in a company's capital structure. Convertible securities entitle the holder to exchange the securities for a specified number of shares of common stock, usually of the same company, at specified prices within a certain period of time and to receive interest or dividends until the holder elects to convert. The provisions of any convertible security determine its ranking in a company's capital structure. In the case of subordinated convertible debentures, the holder's claims on assets and earnings are subordinated to the claims of other creditors and are senior to the claims of preferred and common shareholders. In the case of preferred stock and convertible preferred stock, the holder's claim on assets and earnings are subordinated to the claims of all creditors but are senior to the claims of common shareholders. S-12 WHEN-ISSUED SECURITIES The Series may purchase securities offered on a "when-issued" or "forward delivery" basis. When so offered, the price, which is generally expressed in yield terms, is fixed at the time the commitment to purchase is made, but delivery and payment for the when-issued or forward delivery securities take place at a later date. During the period between purchase and settlement, no payment is made by the purchaser to the issuer and no interest on the when- issued or forward delivery security accrues to the purchaser. While when-issued or forward delivery securities may be sold prior to the settlement date, it is intended that a Series will purchase such securities with the purpose of actually acquiring them unless a sale appears desirable for investment reasons. At the time a Series makes the commitment to purchase a security on a when- issued or forward delivery basis, it will record the transaction and reflect the value of the security in determining its net asset value. The market value of when-issued or forward delivery securities may be more or less than the purchase price. The Advisor does not believe that the Series' net asset value or income will be adversely affected by its purchase of securities on a when- issued or forward delivery basis. The Series will establish a segregated account in which it will maintain cash, U.S. government securities and high- grade debt obligations equal in value to commitments for when-issued or forward delivery securities. MORTGAGE-BACKED SECURITIES AND MORTGAGE PASS-THROUGH SECURITIES The Series may also invest in mortgage-backed securities, which are interests in pools of mortgage loans, including mortgage loans made by savings and loan institutions, mortgage bankers, commercial banks and others. Pools of mortgage loans are assembled as securities for sale to investors by various governmental, government-related and private organizations as further described below. The Series may also invest in debt securities which are secured with collateral consisting of mortgage-backed securities (see "Collateralized Mortgage Obligations") and in other types of mortgage-related securities. The timely payment of principal and interest on mortgage-backed securities issued or guaranteed by the Government National Mortgage Association ("GNMA") is backed by GNMA and the full faith and credit of the U.S. government. These guarantees, however, do not apply to the market value of Series shares. Also, securities issued by GNMA and other mortgage-backed securities may be purchased at a premium over the maturity value of the underlying mortgages. This premium is not guaranteed and would be lost if prepayment occurs. Mortgage-backed securities issued by U.S. government agencies or instrumentalities other than GNMA are not "full faith and credit" obligations. Certain obligations, such as those issued by the Federal Home Loan Bank are supported by the issuer's right to borrow from the U.S. Treasury, while others such as those issued by the Federal National Mortgage Association, are supported only by the credit of the issuer. Unscheduled or early payments on the underlying mortgage may shorten the securities' effective maturities and reduce returns. The Series may agree to purchase or sell these securities with payment and delivery taking place at a future date. A decline in interest rates may lead to a faster rate of repayment of the underlying mortgages and expose the Series to a lower rate of return upon reinvestment. To the extent that such mortgage-backed securities are held by the Series, the prepayment right of mortgagors may limit the increase in net asset value of the Series because the value of the mortgage- backed securities held by the Series may not appreciate as rapidly as the price of noncallable debt securities. A decline in interest rates may lead to a faster rate of repayment of the underlying mortgages and expose the Series to a lower rate of return upon reinvestment. To the extent that such mortgage-backed securities are held by the Series, the prepayment right will tend to limit to some degree the increase in net asset value of the Series because the value of the mortgage-backed securities held by the Series may not appreciate as rapidly as the price of noncallable debt securities. For federal tax purposes other than diversification under Subchapter M, mortgage-backed securities are not considered to be separate securities but rather "grantor trusts" conveying to the holder an individual interest in each of the mortgages constituting the pool. S-13 Interests in pools of mortgage-backed securities differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. Instead, these securities provide a monthly payment which consists of both interest and principal payments. In effect, these payments are a "pass-through" of the monthly payments made by the individual borrowers on their mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting from the sale of the underlying property, refinancing or foreclosure, net of fees or costs which may be incurred. Some mortgage-backed securities (such as securities issued by the Government National Mortgage Association) are described as "modified pass-through." These securities entitle the holder to receive all interest and principal payments owed on the mortgage pool, net of certain fees, at the scheduled payments dates regardless of whether or not the mortgagor actually makes the payment. Any discount enjoyed on the purchases of a "pass-through" type mortgage-backed security will likely constitute market discount. As the Series receive principal payments, it will be required to treat as ordinary income an amount equal to the lesser of the amount of the payment or the "accrued market discount." Market discount is to be accrued either under a constant rate method or a proportional method. Pass-through type mortgage-backed securities purchased at a premium to face will be subject to a similar rule requiring recognition of an offset to ordinary interest income, an amount of premium attributable to the receipt of principal. The amount of premium recovered is to be determined using a method similar to that in place for market discount. A Series may elect to accrue market discount or amortize premium notwithstanding the amount of principal received but such election will apply to all bonds held and thereafter acquired unless permission is granted by the Commissioner of the Internal Revenue Service to change such method. The principal governmental guarantor of mortgage-related securities is the Government National Mortgage Association ("GNMA"). GNMA is a wholly-owned United States government corporation within the Department of Housing and Urban Development. GNMA is authorized to guarantee, with the full faith and credit of the U.S. government, the timely payment of principal and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of FHA-insured or VA-guaranteed mortgages. These guarantees, however, do not apply to the market value or yield of mortgage-backed securities or to the value of Series shares. Also, GNMA securities often are purchased at a premium over the maturity value of the underlying mortgages. This premium is not guaranteed and should be viewed as an economic offset to interest to be earned. If prepayments occur, less interest will be earned and the value of the premium paid will be lost. Government-related guarantors (i.e., not backed by the full faith and credit of the U.S. government) include the Federal National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a government- sponsored corporation owned entirely by private stockholders. It is subject to general regulation of the Secretary of Housing and Urban Development. FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA but are not backed by the full faith and credit of the U.S. government. FHLMC is a corporate instrumentality of the U.S. government and was created by Congress in 1970 for the purpose of increasing the availability of mortgage credit for residential housing. Its stock is owned by the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates ("PCs") which represent interests in conventional mortgages from FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but PCs are not backed by the full faith and credit of the U.S. government. Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass-through pools of conventional mortgage loans. Such issuers may, in addition, be the originators and/or servicers of the underlying mortgage loans as well as the guarantors of the S-14 mortgage-related securities. Pools created by such non-governmental issuers generally offer a higher rate of interest than government and government- related pools because there are no direct or indirect government or agency guarantees of payments. However, timely payment of interest and principal of these pools may be supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance and letters of credit. The insurance guarantees are issued by governmental entities, private insurers and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage-related security meets a Series' investment quality standards. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee or guarantees, even if through an examination of the loan experience and practices of the originators/servicers and poolers, the Advisor determines that the securities meet the Series' quality standards. Although the market for such securities is becoming increasingly liquid, securities issued by certain private organizations may not be readily marketable. COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") AND REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS") A CMO is a debt security on which interest and prepaid principal are paid, in most cases, semi-annually. CMOs may be collateralized by whole mortgage loans but are more typically collateralized by portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or FNMA and their income streams. Privately-issued CMOs tend to be more sensitive to interest rates than Government-issued CMOs. CMOs are structured into multiple classes, each bearing a different stated maturity. Actual maturity and average life will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payments of principal received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes receive principal only after the first class has been retired. An investor is partially guarded against a sooner than desired return of principal because of the sequential payments. In a typical CMO transaction, a corporation issues multiple series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to purchase mortgages or mortgage pass-through certificates ("Collateral"). The Collateral is pledged to a third party trustee as security for the Bonds. Principal and interest payments from the Collateral are used to pay principal on the Bonds in the order A, B, C, Z. The Series A, B and C Bonds all bear current interest. Interest on the Series Z Bond is accrued and added to principal and a like amount is paid as principal on the Series A, B, or C Bond currently being paid off. When the Series, A, B and C Bonds are paid in full, interest and principal on the Series Z Bond begins to be paid currently. With some CMOs, the issuer serves as a conduit to allow loan originators (primarily builders or savings and loan associations) to borrow against their loan portfolios. REMICs are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. REMICs are similar to CMOs in that they issue multiple classes of securities. Most if not all newly-issued debt securities backed by pools of real estate mortgages will be issued as regular and residual interests in REMICs because, as of January 1, 1992, new CMOs which do not make REMIC elections will be treated as "taxable mortgage pools," a wholly undesirable tax result. Under certain transition rules, CMOs in existence on December 31, 1991 are unaffected by this change. The Series will purchase only regular interests in REMICs. REMIC regular interests are treated as debt of the REMIC and income/discount thereon must be accounted for on the "catch-up method," using a reasonable prepayment assumption under the original issue discount rules of the Code. OTHER MORTGAGE-BACKED SECURITIES The Advisor expects that governmental, government-related or private entities may create mortgage loan pools and other mortgage-related securities offering mortgage pass-through and mortgage-collateralized investments in S-15 addition to those described above. The mortgages underlying these securities may include alternative mortgage instruments that is, mortgage instruments whose principal or interest payments may vary or whose terms to maturity may differ from customary long-term fixed rate mortgages. As new types of mortgage- related securities are developed and offered to investors, the Advisor will, consistent with a Series' investment objective, policies and quality standards, consider making investments in such new types of mortgage-related securities. The Advisor will not purchase any such other mortgage-backed securities until the Series' Prospectus and this Statement of Additional Information have been supplemented. ASSET-BACKED SECURITIES The Series may invest a portion of its assets in debt obligations known as "asset-backed securities." The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit support provided to the securities. The rate of principal payment on asset-backed securities generally depends on the rate of principal payments received on the underlying assets which in turn may be affected by a variety of economic and other factors. As a result, the yield on any asset-backed security is difficult to predict with precision and actual yield to maturity may be more or less than the anticipated yield to maturity. Asset-backed securities may be classified as "pass-through certificates" or "collateralized obligations." Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make payment, such securities may contain elements of credit support. Such credit support falls into two categories: (i) liquidity protection; and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments due on the underlying pool is timely. Protection against losses resulting from ultimate default enhances the likelihood of payments of the obligations on at least some of the assets in the pool. Such protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. The Series will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security. Due to the shorter maturity of the collateral backing such securities, there is less of a risk of substantial prepayment than with mortgage-backed securities. Such asset-backed securities do, however, involve certain risks not associated with mortgage-backed securities, including the risk that security interests cannot be adequately, or in many cases, ever, established. In addition, with respect to credit card receivables, a number of state and federal consumer credit laws give debtors the right to set off certain amounts owed on the credit cards, thereby reducing the outstanding balance. In the case of automobile receivables, there is a risk that the holders may not have either a proper or first security interest in all of the obligations backing such receivables due to the large number of vehicles involved in a typical issuance and technical requirements under state laws. Therefore, recoveries on repossessed collateral may not always be available to support payments on the securities. Examples of credit support arising out of the structure of the transaction include "senior-subordinated securities" (multiple class securities with one or more classes subordinate to other classes as to the payment of principal thereof and interest thereon, with the result that defaults on the underlying assets are borne first by the holders of the subordinated class), creation of "reserve funds" (where cash or investments, sometimes funded from a portion of the payments on the underlying assets, are held in reserve against future losses) and "over collateralization" (where the scheduled payments on, or the principal amount of, the underlying assets exceeds that required to make payments of the securities and pay any servicing or other fees). The degree of credit support provided for each issue is generally based on historical information respecting the level of credit information respecting the level of credit risk associated with the underlying assets. Delinquencies or losses in excess of those anticipated could adversely affect the return on an investment in such issue. S-16 ZERO COUPON SECURITIES The Series may invest in zero coupon securities which pay no cash income and are sold at substantial discounts from their value at maturity. When held to maturity, their entire income, which consists of accretion of discount, comes from the difference between the purchase price and their value at maturity. The discount varies depending on the time remaining until maturity or cash payment date, prevailing interest rates, liquidity of the security and the perceived credit quality of the issuer. The discount, in the absence of financial difficulties of the issuer, decreases as the final maturity or cash payment date of the security approaches. The market prices of zero coupon and delayed interest securities are generally more volatile and more likely to respond to changes in interest rates than the market prices of securities having similar maturities and credit quality that pay interest periodically. Current federal income tax law requires that a holder of a zero coupon security report as income each year the portion of the original issue discount on such security (other than tax-exempt original issue discount from a zero coupon security) that accrues that year, even though the holder receives no cash payments of interest during the year. The Series will be required to distribute such income to shareholders to comply with Subchapter M of the Code and avoid excise taxes, even though the Series have not received any cash from the issue. Zero coupon securities are subject to greater market value fluctuations from changing interest rates than debt obligations of comparable maturities which make current distributions of interest (cash). Zero coupon convertible securities offer the opportunity for capital appreciation as increases (or decreases) in market value of such securities closely follow the movements in the market value of the underlying common stock. Zero coupon convertible securities generally are expected to be less volatile than the underlying common stocks as they usually are issued with short maturities (15 years or less) and are issued with options and/or redemption features exercisable by the holder of the obligation entitling the holder to redeem the obligation and receive a defined cash payment. Zero coupon securities include securities issued directly by the U.S. Treasury, and U.S. Treasury bonds or notes and their unmatured interest coupons and receipts for their underlying principal ("coupons") which have been separated by their holder, typically a custodian bank or investment brokerage firm. A holder will separate the interest coupons from the underlying principal (the "corpus") of the U.S. Treasury security. A number of securities firms and banks have stripped the interest coupons and receipts and then resold them in custodial receipt programs with a number of different names, including "Treasury Income Growth Receipts" ("TIGRS") and Certificate of Accrual on Treasuries ("CATS"). The underlying U.S. Treasury bonds and notes themselves are held in book-entry form at the Federal Reserve Bank or, in the case of bearer securities (i.e., unregistered securities which are owned ostensibly by the bearer or holder thereof), in trust on behalf of the owners thereof. Counsel to the underwriters of these certificates or other evidences of ownership of the U.S. Treasury securities has stated that for federal tax and securities purposes, in its opinion purchasers of such certificates, such as the Series, most likely will be deemed the beneficial holder of the underlying U.S. government securities. The Series understand that the staff of the Securities and Exchange Commission no longer considers such privately stripped obligations to be U.S. government securities, as defined in the Investment Company Act of 1940, as amended (the "Act"); therefore, the Series intends to adhere to this staff position and will not treat such privately stripped obligations to be U.S. government securities for the purpose of determining if the Series is "diversified," or for any other purpose, under the Act. The U.S. Treasury has facilitated transfers of ownership of zero coupon securities by accounting separately for the beneficial ownership of particular interest coupon and corpus payments on Treasury securities through the Federal Reserve book-entry record-keeping system. The Federal Reserve program as established by the U.S. Treasury Department is known as "STRIPS" or "Separate Trading of Registered Interest and Principal of Securities." Under the STRIPS program, the Series will be able to have its beneficial ownership of zero coupon securities recorded directly in the book-entry record-keeping system in lieu of having to hold certificates or other evidences of ownership of the underlying U.S. Treasury securities. When U.S. Treasury obligations have been stripped of their unmatured interest coupons by the holder, the principal or corpus is sold at a deep discount because the buyer receives only the right to receive a future fixed S-17 payment on the security and does not receive any rights to periodic interest (cash) payments. Once stripped or separated, the corpus and coupons may be sold separately. Typically, the coupons are sold separately or grouped with other coupons with like maturity dates and sold in such bundled form. Purchasers of stripped obligations acquire, in effect, discount obligations that are economically identical to the zero coupon securities that the U.S. Treasury sells itself. These stripped securities are also treated as zero coupon securities with original issue discount for tax purposes. INVESTMENTS RELATING TO GLOBAL FUND EMERGING MARKETS INVESTMENTS (Global Fund only). The Series may invest up to 5% of its assets in equity and debt securities of emerging market issuers, or securities with respect to which the return is derived from the equity or debt securities of issuers in emerging markets. The Series may invest in equity securities of issuers in emerging markets, or securities with respect to which the return is derived from the equity securities of issuers in emerging markets. The Series also may invest in fixed income securities of emerging market issuers, including government and governmental-related entities (including participation in loans between governments and financial institutions), and of entities organized to restructure outstanding debt of such issuers. The Series also may invest in debt securities of developing countries' corporate issuers. The Series' investments in emerging market government and government-related securities may consist of (i) debt securities or obligations issued or guaranteed by governments, governmental agencies or instrumentalities and political subdivisions located in emerging countries (including participation in loans between governments and financial institutions), (ii) debt securities or obligations issued by government owned, controlled or sponsored entities located in emerging countries and (iii) interests in issuers organized and operated for the purpose of restructuring the investment characteristics of instruments issued by any of the entities described above. The Series' investments in the fixed income securities of emerging market issuers may include investments in Brady Bonds, Structured Securities, Loan Participation and Assignments, and certain non-publicly traded securities. Brady Bonds are securities created through the exchange of existing commercial bank loans to public and private entities in certain emerging markets for new bonds in connection with debt restructurings under a debt restructuring plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Bonds may be collateralized or uncollateralized, are issued in various currencies (but primarily the U.S. dollar), and are actively traded in over-the-counter secondary markets. Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate bonds or floating-rate bonds, are generally collateralized in full as to principal by U.S. Treasury zero coupon bonds having the same maturity as the bonds. Structured Securities are issued by entities organized and operated solely for the purpose of restructuring the investment characteristics of sovereign debt obligations. This type of restructuring involves the deposit with, or purchase by, an entity, such as a corporation or trust, of specified instruments (such as commercial bank loans or Brady Bonds) and the issuance by that entity of one or more classes of securities ("Structured Securities") backed by, or representing interests in, the underlying instruments. The Series may invest in fixed rate and floating rate loans ("Loans") arranged through private negotiations between an issuer of sovereign debt obligations and one or more financial institutions ("Lenders"). The Series' investments in Loans are expected in most instances to be in the form of participation in loans ("Participation") and assignments of all or a portion of Loans ("Assignments") from third parties. The Series will have the right to receive payments of principal, interest and any fees to which they are entitled only from the Lender selling the Participation and only upon receipt by the Lender of the payments from the borrower. In the event of the insolvency of the Lender selling a Participation, the Series may be treated as a general creditor of the Lender and may not benefit from any set-off between the Lender and the borrower. S-18 When a Series purchases Assignments from Lenders, it will acquire direct rights against the borrower on the Loan. However, because Assignments are arranged through private negotiations between potential assignees and potential assignors, the rights and obligations acquired by the Series as the purchaser of an Assignment may differ from, and be more limited than, those held by the assigning Lender. The Series also may invest in securities that are neither listed on a stock exchange nor traded over-the-counter, including privately placed securities and limited partnerships. Investing in such unlisted emerging country equity securities, including investments in new and early stage companies, may involve a high degree of business and financial risk that can result in substantial losses. As a result of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. The Series' investments in emerging market securities will at all times be limited by the Series' prohibition on investing more than 15% of its net assets in illiquid securities. RISKS OF INVESTING IN EMERGING MARKETS Compared to the United States and other developed countries, emerging countries may have relatively unstable governments, economies based on only a few industries, and securities markets that trade only a small number of securities and employ settlement procedures different from those used in the United States. Prices on these exchanges tend to be volatile and, in the past, securities in these countries have offered greater potential for gain (as well as loss) than securities of companies located in developed countries. Further, investments by foreign investors are subject to a variety of restrictions in many emerging countries. Countries such as those in which the Series may invest have historically experienced and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations or currency depreciation, large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. Additional factors which may influence the ability or willingness to service debt include, but are not limited to, a country's cash flow situation, the availability of sufficient foreign exchange on the date a payment is due, the relative size of its debt service burden to the economy as a whole, its government's policy towards the International Monetary Fund, the World Bank and other international agencies and the political constraints to which a government debtor may be subject. The ability of a foreign government or government-related issuer to make timely and ultimate payments on its external debt obligations will be strongly influenced by the issuer's balance of payments, including export performance, its access to international credits and investments, fluctuations in interest rates and the extent of its foreign reserves. A country whose exports are concentrated in a few commodities or whose economy depends on certain strategic imports could be vulnerable to fluctuations in international prices of these commodities or imports. To the extent that a country receives payment for its exports in currencies other than dollars, its ability to make debt payments denominated in dollars could be adversely affected. If a foreign government or government-related issuer cannot generate sufficient earnings from foreign trade to service its external debt, it may need to depend on continuing loans and aid from foreign governments, commercial banks, and multilateral organizations, and inflows of foreign investment. The commitment on the part of these foreign governments, multilateral organizations and others to make such disbursements may be conditioned on the government's implementation of economic reforms and/or economic performance and the timely service of its obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may curtail the willingness of such third parties to lend funds, which may further impair the issuer's ability or willingness to service its debts in a timely manner. The cost of servicing external debt will also generally be adversely affected by rising international interest rates, because many external debt obligations bear interest at rates which are adjusted based upon international interest rates. The ability to service external debt will also depend on the level of the relevant government's international currency reserves and its access to foreign exchange. Currency devaluations may affect the ability of a governmental issuer to obtain sufficient foreign exchange to service its external debt. S-19 As a result of the foregoing, a governmental issuer may default on its obligations. If such a default occurs, the Series may have limited effective legal recourse against the issuer and/or guarantor. Remedies must, in some cases, be pursued in the courts of the defaulting country itself, and the ability of the holder of foreign government and government-related debt securities to obtain recourse may be subject to the political climate in the relevant country. In addition, no assurance can be given that the holders of commercial bank debt will not contest payments to the holders of other foreign government and government-related debt obligations in the event of default under their commercial bank loan agreements. The issuers of the government and government-related debt securities in which the Series expects to invest have in the past experienced substantial difficulties in servicing their external debt obligations, which has led to defaults on certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, reducing and rescheduling interest and principal payments by negotiating new or amended credit agreements or converting outstanding principal and unpaid interest to Brady Bonds, and obtaining new credit to finance interest payments. Holders of certain foreign government and government-related debt securities may be requested to participate in the restructuring of such obligations and to extend further loans to their issuers. There can be no assurance that the Brady Bonds and other foreign government and government-related debt securities in which the Series may invest will not be subject to similar defaults or restructuring arrangements which may adversely affect the value of such investments. Furthermore, certain participants in the secondary market for such debt may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants. Payments to holders of the high yield, high risk, foreign debt securities in which the Series may invest may be subject to foreign withholding and other taxes. Although the holders of foreign government and government-related debt securities may be entitled to tax gross-up payments from the issuers of such instruments, there is no assurance that such payments will be made. INVESTMENT RESTRICTIONS The investment restrictions set forth below are fundamental policies and may not be changed as to a Series, without the approval of a majority of the outstanding voting securities (as defined in the Act) of the Series. Unless otherwise indicated, all percentage limitations listed below apply to the Series only at the time of the transaction. Accordingly, if a percentage restriction is adhered to at the time of investment, a later increase or decrease in the percentage which results from a relative change in values or from a change in a Series' total assets will not be considered a violation. Except as set forth under "Investment Objectives" and "Other Investment Practices and Risk Factors" in each Prospectus, or "Investment Strategies" in the Trust's Statement of Additional Information, each Series may not: (i) As to 75% of the total assets of each Series, purchase the securities of any one issuer, other than securities issued by the U.S. government or its agencies or instrumentalities, if immediately after such purchase more than 5% of the value of the total assets of a Series would be invested in securities of such issuer (this does not apply to the Global Bond Fund, Short-Term Global Income Fund or Non-U.S. Bond Fund); (ii) Invest in real estate or interests in real estate (This will not prevent a Series from investing in publicly-held real estate investment trusts or marketable securities of companies which may represent indirect interests in real estate.), interests in oil, gas and/or mineral exploration or development programs or leases; (iii) Purchase or sell commodities or commodity contracts, but may enter into futures contracts and options thereon in accordance with its Prospectus. Additionally, each Series (except the U.S. Cash Management Fund) may engage in forward foreign currency contracts for hedging purposes only; (iv) Make investments in securities for the purpose of exercising control over or management of the issuer; (v) Purchase the securities of any one issuer if, immediately after such purchase, a Series would own more than 10% of the outstanding voting securities of such issuer; S-20 (vi) Sell securities short or purchase securities on margin, except such short-term credits as are necessary for the clearance of transactions. For this purpose, the deposit or payment by a Series for initial or maintenance margin in connection with futures contracts is not considered to be the purchase or sale of a security on margin; (vii) Make loans, except that this restriction shall not prohibit (a) the purchase and holding of a portion of an issue of publicly distributed or privately placed debt securities, (b) the lending of portfolio securities, or (c) entry into repurchase agreements with banks or broker-dealers; (viii) Borrow money in excess of 33 1/3% (10% with respect to the U.S. Cash Management Fund) of the value of its assets except as a temporary measure for extraordinary or emergency purposes to facilitate redemptions or issue senior securities. All borrowings will be done from a bank and to the extent that such borrowing exceeds 5% of the value of a Series' assets, asset coverage of at least 300% is required. A Series will not purchase securities when borrowings exceed 5% of that Series' total assets; (ix) Purchase the securities of issuers conducting their principal business activities in the same industry other than obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, if immediately after such purchase the value of a Series' investments in such industry would exceed 25% of the value of the total assets of the Series across several countries; (x) Act as an underwriter of securities, except that, in connection with the disposition of a security, a Series may be deemed to be an "underwriter" as that term is defined in the Securities Act of 1933; (xi) Invest in securities of any open-end investment company, except that a Series may purchase securities of money market mutual funds, and the Global Fund and Global Equity Fund may each invest in the securities of closed-end investment companies at customary brokerage commission rates, but such investments in money market mutual funds or closed-end investment companies may only be made in accordance with the limitations imposed by the Act and the rules thereunder. Each Series may acquire securities of other investment companies if they are acquired pursuant to a merger, consolidation, acquisition, plan of reorganization or a Securities and Exchange Commission approved offer of exchange; (xii) Invest in puts, calls, straddles or combinations thereof except to the extent disclosed in a Series' Prospectus; and (xiii) Invest more than 5% of its total assets in securities of companies less than three years old. Such three year periods shall include the operation of any predecessor company or companies. Although not considered fundamental, in order to comply with certain state "blue sky" restrictions, each Series will not invest: (1) more than 5% of their respective net assets in warrants, including within that amount no more than 2% in warrants which are not listed on the New York or American Stock Exchanges, except warrants acquired as a result of its holdings of common stocks; and (2) purchase or retain the securities of any issuer if, to the knowledge of the Series, any officer or Trustee of the Series or of its investment manager owns beneficially more than 1/2 of 1% of the outstanding securities of such issuer, and such officers and Trustees of the Series or of its investment manager who own more than 1/2 of 1%, own in the aggregate, more than 5% of the outstanding securities of such issuer. S-21 MANAGEMENT OF THE TRUST TRUSTEES AND OFFICERS
PRINCIPAL OCCUPATION(S) NAME AND ADDRESS AGE POSITION DURING PAST 5 YEARS ---------------- --- ------------ -------------------------- Walter E. Auch 74 Trustee Retired; formerly Chairman 6001 N. 62nd Place and CEO of Chicago Board Paradise Valley, AZ 85253 of Options Exchange (1979- 1986); Trustee of the Trust since May, 1994; Trustee, Brinson Relationship Funds since December, 1994; Director, Thomsen Asset Management Corp. since 1987; Fort Dearborn Income Securities, Inc. since 1987, Geotek Industries, Inc. since 1989, Smith Barney VIP Fund since 1991, SB Advisers since 1992, SB Trak since 1992, Banyan Realty Trust since 1987, Banyan Land Fund II since 1988, Banyan Mortgage Investment Fund since 1989 and Express America Holdings Corp. since 1992. Frank K. Reilly 60 Chairman and Professor, University of College of Business Administration Trustee Notre Dame since 1981; University of Notre Dame Trustee of the Trust since 208 Hurley Building December 1993; Trustee, Notre Dame, IN 46556 Brinson Relationship Funds since September, 1994; Director of The Brinson Funds, Inc. 1992-1993; Trustee, Brinson Trust Company, 1992-July, 1993; Director, Fort Dearborn Income Securities, Inc. since 1993; Director, First Interstate Bank of Wisconsin from January, 1989 through March, 1990; Director, Discover Financing Corp., from 1990 to 1991; and Director, Greenwood Trust Company since 1993. Edward M. Roob 61 Trustee Retired; prior thereto, 841 Woodbine Lane Senior Vice President, Northbrook, IL 60002 Daiwa Securities America Inc. (1986-1993); Trustee of the Trust since January 1995; Trustee, Brinson Relationship Funds since January 1995; Director, Fort Dearborn Income Securities, Inc. since 1993; Director, Brinson Trust Company since 1993; Committee Member, Chicago Stock Exchange, since 1993; Member of Board of Governors, Midwest Stock Exchange (1987-1991).
OTHER OFFICERS
POSITION WITH OFFICER PRINCIPAL OCCUPATION(S) NAME AGE THE TRUST SINCE DURING PAST 5 YEARS ---- --- ----------------------- ------- ----------------------- E. Thomas McFarlan 51 President and Treasurer 1993 Managing Partner, Brinson Partners, Inc. since 1991; President and Director of The Brinson Funds, Inc. 1992-1993; Trustee, Brinson Trust Company since 1991; prior thereto, Executive Vice President of Washington Mutual Savings Bank. Bruce G. Leto 33 Secretary 1995 Partner, Stradley, Ronon, Stevens & Young since 1994; prior thereto, Senior Associate.
S-22
POSITION WITH OFFICER PRINCIPAL OCCUPATION(S) NAME AGE THE TRUST SINCE DURING PAST 5 YEARS ---- --- ------------------- ------- -------------------------- Thomas J. Digenan 31 Assistant Treasurer 1993 Partner, Brinson Partners, Inc. since 1993; Assistant Secretary, The Brinson Funds, Inc. 1993-1994; prior thereto, Senior Manager, KPMG Peat Marwick. Debra L. Nichols 29 Assistant Secretary 1993 Partner, Brinson Partners, Inc. since 1995; Associate, Brinson Partners, Inc. since 1991; Assistant Secretary, The Brinson Funds, Inc. 1992- 1993; prior thereto, private investor. Catherine E. Macrae 38 Assistant Secretary 1995 Associate, Brinson Partners, Inc. since 1992; prior thereto, Economic Analyst, Chicago Mercantile Exchange. Carolyn B. Tretter 29 Assistant Secretary 1995 Associate, Brinson Partners, Inc, since 1995; prior thereto, Financial Analyst, Van Kampen American Capital Investment Advisory Corp. 1992-1995; Senior Accountant, KPMG Peat Marwick 1989-1992.
COMPENSATION TABLE TRUSTEES AND OFFICERS
AGGREGATE PENSION OR TOTAL COMPENSATION RETIREMENT COMPENSATION FROM TRUST BENEFITS ESTIMATED FROM TRUST FOR FISCAL ACCRUED AS ANNUAL AND FUND YEAR ENDED PART OF BENEFITS COMPLEX PAID JUNE 30, FUND UPON TO NAME AND POSITION HELD 1995 EXPENSES RETIREMENT TRUSTEES/1/ ---------------------- ------------ ---------- ---------- ------------ Walter E. Auch, Trustee $12,600 N/A N/A $18,750 6001 N. 62nd Place Paradise Valley, AZ 85253 Frank K. Reilly, Trustee $10,800 N/A N/A $18,000 College of Business Administration University of Notre Dame 208 Hurley Building Notre Dame, IN 46556 Edward M. Roob, Trustee $ 6,600 N/A N/A $18,750 841 Woodbine Lane Northbrook, IL 60002
- -------- /1/This amount represents the aggregate amount of compensation paid to the Trustees for (a) service on the Board of Trustees for the Trust's most recently completed fiscal year; and (b) service on the Board of Directors of two other investment companies managed by Brinson Partners, Inc. for the calendar year ending December 31, 1995. No officer or Trustee of the Trust who is also an officer or employee of Brinson Partners receives any compensation from the Trust for services to the Trust. The Trust pays each Trustee who is not affiliated with Brinson Partners a fee of $6,000 per year, plus $300 per Series per meeting and reimburses each Trustee and officer for out-of-pocket expenses in connection with travel and attendance at Board meetings. The Trust has an Audit Committee which has the responsibility, among other things, to (i) recommend the selection of the Trust's independent auditors, (ii) review and approve the scope of the independent auditors' audit S-23 activity, (iii) review the financial statements which are the subject of the independent auditors' certification, and (iv) review with such independent auditors the adequacy of the Series' basic accounting system and the effectiveness of the Series' internal accounting controls. The Audit Committee met twice during the fiscal year ended June 30, 1995. There is no separate Nominating or Investment Committee. Items pertaining to these Committees are submitted to the full Board of Trustees. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES As of January 17, 1996, the officers and Trustees, individually and as a group, owned beneficially less than 1% of the Brinson Fund class, SwissKey Fund class, Series and Trust, respectively. As of January 17, 1996, the following persons owned of record or beneficially more than 5% of the outstanding voting shares of the Brinson Fund class or SwissKey Fund class, as applicable: GLOBAL FUND
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE - ----------------------------------- ---------------- ---------- BRINSON FUND CLASS First Alabama Bank 4,547,562.874 12.43% Mobile, AL Polk Bros. Foundation 3,253,509.113 8.89% Evanston, IL Medical College of Virginia Foundation 3,206,795.392 8.76% Richmond, VA Nations Bank of Georgia NA Trustee 2,850,134.429 7.79% Dallas, TX Northern Trust Company 2,120,722.018 5.79% Chicago, IL SWISSKEY FUND CLASS Swiss Bank Corporation* 255,344.056 85.68% New York, NY Ann Bolan & Ernest Bolan JT TEN 17,867.739 5.99% New York, NY GLOBAL EQUITY FUND NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE - ----------------------------------- ---------------- ---------- BRINSON FUND CLASS United States Japan Foundation* 2,122,270.478 97.42% New York, NY SWISSKEY FUND CLASS Swiss Bank Corporation* 1,224,393.243 49.85% New York, NY
S-24 GLOBAL BOND FUND
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE - ----------------------------------- ---------------- ---------- BRINSON FUND CLASS Baptist Health Systems, Inc.* 1,391,388.328 38.57% Birmingham, AL Munson Williams Proctor Institute* 1,150,385.194 31.89% Utica, NY Abell Foundation, Inc. 467,014.628 12.94% Baltimore, MD Ripon College 371,505.321 10.29% Ripon, WI SWISSKEY FUND CLASS Swiss Bank Corporation* 146,398.910 71.75% New York, NY Semper Trust Co. C/F IRA of Jack Ferman 15,672.395 7.68% Van Nuys, CA Semper Trust Co. C/F IRA of Abraham Freeman 14,149.913 6.93% Van Nuys, CA U.S. BALANCED FUND NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE - ----------------------------------- ---------------- ---------- BRINSON FUND CLASS State Street Bank & Trust Co.* 14,049,196.811 72.02% Boston, MA MAC & Co. 2,323,263.264 11.91% Pittsburgh, PA Mitra & Co 1,369,712.175 7.02% Milwaukee, WI Harris Trust and Savings Bank 1,007,004.065 5.16% Chicago, IL SWISSKEY FUND CLASS Swiss Bank Corporation* 21,887.803 92.52% New York, NY Martha S. Weber and Heinrich G. Weber 1,767.505 7.47% Palos Verdes Estates, CA
S-25 U.S. EQUITY FUND
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE - ----------------------------------- ---------------- ---------- BRINSON FUND CLASS Swiss Bank Corporation* 3,216,007.675 45.19% New York, NY Wachovia Bank of North Carolina* 1,139,850.775 16.01% Winston Salem, NC American Institute of Physics 733,225.650 10.30% College Park, MD Central New York Community Foundation, Inc. 381,671.332 5.36% Syracuse, NY Augustana College 357,463.738 5.02% Rock Island, IL SWISSKEY FUND CLASS Swiss Bank Corporation* 8,624.763 81.85% New York, NY Elias H., Charles E. & Margaerite E. Gellad 1,911.428 18.13% Falls Church, VA U.S. BOND FUND NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE - ----------------------------------- ---------------- ---------- BRINSON FUND CLASS Swiss Bank Corporation* 876,545.198 99.41% New York, New York SWISSKEY FUND CLASS Swiss Bank Corporation 41,130.512 95.78% New York, NY NON-U.S. EQUITY FUND NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE - ----------------------------------- ---------------- ---------- BRINSON FUND CLASS McConnell Trust Foundation 1,383,089.770 8.44% Redding, CA Edna McConnell Clark Foundation 1,333,018.144 8.13% New York, NY MAC & Co. 1,227,841.069 7.49% Pittsburgh, PA Society National Bank 1,157,920.887 7.07% Cleveland, OH Fifth Third Bank 1,110,517.679 6.78% Cincinnati, OH Northern Trust 1,102,517.484 6.73% Chicago, IL Bentley College 1,071,458.233 6.54% Waltham, MA MAC & Company 1,001,261.090 6.11% Pittsburgh, PA
S-26
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE - ----------------------------------- ---------------- ---------- SWISSKEY FUND CLASS Swiss Bank Corporation* 28,981.058 74.96% New York, NY Salim F. Abufadil & Joyce Abufadil 3,674.645 9.50% Rolling Hill Estates, CA Salim F. Abufadil 2,576.066 6.66% Cust. Alexander Abufadil Rolling Hill Estates, CA
- -------- * Person deemed to control the class within the meaning of the Act. Note that such persons possess the ability to control the outcome of matters submitted for the vote of shareholders of that class. As of January 17, 1996, the following persons owned of record or beneficially more than 5% of the outstanding voting shares of the Trust:
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE - ----------------------------------- ---------------- ---------- State Street Bank & Trust Co. Boston, MA 14,049,196.811 15.73% First Alabama Bank Mobile, AL 4,547,562.874 5.09%
INVESTMENT ADVISORY AND OTHER SERVICES Brinson Partners, a Delaware corporation, is an investment management firm managing, as of December 31, 1995, approximately $53 billion, primarily for institutional pension and profit sharing funds. Brinson Partners was organized in 1989 when it acquired the institutional asset management business of The First National Bank of Chicago and First Chicago Investment Advisors, N.A. Brinson Partners and its predecessor entities have managed domestic and international investment assets since 1974 and global investment assets since 1982. Brinson Partners has offices in London and Tokyo in addition to its principal office at 209 South LaSalle Street, Chicago, IL 60604. Brinson Partners is an indirect wholly-owned subsidiary of Swiss Bank Corporation ("Swiss Bank"). Brinson Partners also serves as the investment advisor to six other investment companies, Brinson Relationship Funds, which includes six investment portfolios (series), Enterprise Accumulation Trust, Enterprise International Growth Portfolio, Fort Dearborn Income Securities, Inc., Short- Term World Income Portfolio and Pace Large Company Value Equity Investments. Swiss Bank, with headquarters in Basel, Switzerland, is an internationally diversified organization with operations in many aspects of the financial services industry. Brinson Partners receives from each Series a monthly fee at an annual rate (as described in each Series' Prospectus and below) multiplied by the average daily net assets of that Series for providing investment advisory services and is responsible for paying its expenses. Under the Agreement, each Series pays the following expenses: (1) the fees and expenses of the Trust's disinterested Trustees; (2) the salaries and expenses of any of the Trust's officers or employees who are not affiliated with Brinson Partners; (3) interest expenses; (4) taxes and governmental fees; (5) brokerage commissions and other expenses incurred in acquiring or disposing of portfolio securities; (6) the expenses of registering and qualifying shares for sale with the Securities and Exchange Commission and with various state securities commissions; (7) accounting and legal costs; (8) insurance premiums; (9) fees and expenses of the Trust's Custodian, Administrative and Transfer Agent and any related services; (10) expenses of obtaining quotations of the Series' portfolio securities and of pricing the Series' shares; (11) expenses of maintaining the Trust's legal existence and of shareholders' meetings; (12) expenses of preparation and distribution to existing shareholders of reports, proxies and prospectuses; and (13) fees and expenses of membership in industry organizations. S-27 The Series pay the Advisor a monthly fee of the respective Series' average daily net assets as follows: annual rates of 0.80% for the Global Fund, Global Equity Fund and Non-U.S. Equity Fund, 0.75% for the Global Bond Fund and Non- U.S. Bond Fund, 0.70% for the U.S. Balanced Fund and the U.S. Equity Fund, 0.60% for the Short-Term Global Income Fund, 0.50% for the U.S. Bond Fund and 0.30% of the U.S. Cash Management Fund. The Advisor has agreed irrevocably to waive its fees and reimburse expenses to the extent that total operating expenses exceed the following rates of the respective Series' average daily net assets as follows, without regard to Rule 12b-1 Plan expenses for the SwissKey Fund classes of each Series: 1.10% for the Global Fund, 1.00% for the Global Equity Fund and the Non-U.S. Equity Fund, 0.90% for the Global Bond Fund and Non-U.S. Bond Fund, 0.80% for the U.S. Balanced Fund and the U.S. Equity Fund, 0.75% for the Short-Term Global Income Fund, 0.60% for the U.S. Bond Fund, and 0.40% for the U.S. Cash Management Fund. Advisory Fees paid to Brinson Partners were as follows: With respect to the Global Fund, for the period August 31, 1992 (commencement of operations) through June 30, 1993, and the fiscal years ended June 30, 1994 and June 30, 1995, advisory fees of $759,098, $1,951,309 and $2,681,392, respectively, were accrued by the Series and the Series paid to the Advisor $472,812, $1,860,397 and $2,681,392, respectively; with respect to the Global Equity Fund for the period January 28, 1994 (commencement of operations) through June 30, 1994 and the fiscal year ended June 30, 1995, advisory fees of $68,151 and $163,038, respectively, were accrued by the Series and the Series paid to the Advisor $0.00 for both 1994 and 1995; with respect to the Global Bond Fund, for the period July 30, 1993 (commencement of operations) through June 30, 1994 and the fiscal year ended June 30, 1995, advisory fees of $189,136 and $329,156, respectively, were accrued by the Series and the Series paid to the Advisor $0.00 and $95,216, respectively; with respect to the U.S. Balanced Fund, for the period December 30, 1994 (commencement of operations) through June 30, 1995, advisory fees of $441,419 were accrued by the Series and the Series paid to the Advisor $275,707; with respect to the U.S. Equity Fund, for the period February 22, 1994 (commencement of operations) through June 30, 1994 and the fiscal year ended June 30, 1995, advisory fees of $14,819 and $154,258, respectively, were accrued by the Series and the Series paid to the Advisor $0.00 for both 1994 and 1995; and, with respect to the Non-U.S. Equity Fund, for the period August 31, 1993 (commencement of operations) through June 30, 1994 and the fiscal year ended June 30, 1995, advisory fees of $300,928 and $933,521, respectively, were accrued by the Series and the Series paid to the Advisor $74,698 and $666,061, respectively. In addition, with respect to the Global Fund, for the period August 31, 1992 (commencement of operations) through June 30, 1993, and the fiscal years ended June 30, 1994 and June 30, 1995, the Advisor paid expenses of $141,040, $30,946 and $0.00, respectively; with respect to the Global Equity Fund for the period January 28, 1994 (commencement of operations) through June 30, 1994 and the fiscal year ended June 30, 1995, the Advisor paid expenses of $82,834 and $216,658; with respect to the Global Bond Fund, for the period July 30, 1993 (commencement of operations) through June 30, 1994 and the fiscal year ended June 30, 1995, the Advisor paid expenses of $149,667 and $233,940, respectively; with respect to the U.S. Balanced Fund, for the period December 30, 1994 (commencement of operations) through June 30, 1995, the Advisor paid expenses of $165,712; with respect to the U.S. Equity Fund, for the period February 22, 1994 (commencement of operations) through June 30, 1994 and the fiscal year ended June 30, 1995, the Advisor paid expenses of $63,834 and $199,708, respectively; and with respect to the Non-U.S. Equity Fund, for the period August 31, 1993 (commencement of operations) through June 30, 1994 and the fiscal year ended June 30, 1995, the Advisor paid expenses of $136,835 and $267,460, respectively. General expenses of the Trust (such as costs of maintaining corporate existence, legal fees, insurances, etc.) will be allocated among the Series in proportion to their relative net assets. Expenses which relate exclusively to a particular Series, such as certain registration fees, brokerage commissions and other portfolio expenses, will be borne directly by that Series. S-28 Brinson Partners has agreed to waive its advisory fee in an amount equal to the total expenses of a Series for any fiscal year which exceeds the permissible limits applicable to that Series in any state in which its shares are then qualified for sale. At the present time, the most restrictive state expense limitation limits a fund's annual expenses (excluding interest, taxes, distribution expense, brokerage commissions and extraordinary expenses and other expenses subject to approval by state securities administrators) to 2.5% of the first $30 million of its average daily net assets, 2.0% of the next $70 million of its average daily net assets and 1.5% of its average daily net assets in excess of $100 million. ADMINISTRATOR Fund/Plan Services, Inc., 2 W. Elm Street, Conshohocken, PA 19428-0874 (the "Administrator"), provides certain administrative services to the Trust pursuant to an Administrative Services Agreement. Under the Administrative Services Agreement, the Administrator: (1) coordinates with the Custodian and Transfer Agent and monitors the services they provide to the Series; (2) coordinates with and monitors any other third parties furnishing services to the Series; (3) provides the Series with necessary office space, telephones and other communications facilities and personnel competent to perform administrative and clerical functions; (4) supervises the maintenance by third parties of such books and records of the Series as may be required by applicable federal or state law; (5) prepares or supervises the preparation by third parties of all federal, state and local tax returns and reports of the Series required by applicable law; (6) prepares and, after approval by the Series, files and arranges for the distribution of proxy materials and periodic reports to shareholders of the Series as required by applicable law; (7) prepares and, after approval by the Series, arranges for the filing of such registration statements and other documents with the Securities and Exchange Commission and other federal and state regulatory authorities as may be required by applicable law; (8) reviews and submits to the officers of the Trust for their approval invoices or other requests for payment of the Series' expenses and instructs the Custodian to issue checks in payment thereof; and (9) takes such other action with respect to the Trust or the Series as may be necessary in the opinion of the Administrator to perform its duties under the Agreement. As compensation for services performed under the Administrative Services Agreement, the Administrator receives a fee payable monthly at an annual rate (as described in each Series' Prospectus) multiplied by the average daily net assets of the Trust. Administration Fees paid to Fund/Plan Services, Inc. were as follows: With respect to the Global Fund, for the period August 31, 1992 (commencement of operations) through June 30, 1993, the fiscal years ended June 30, 1994, and June 30, 1995, $96,797, $186,897 and $211,243, respectively; with respect to the Global Equity Fund, for the period January 28, 1994 (commencement of operations) through June 30, 1994, and the fiscal year ended June 30, 1995, $6,064 and $15,062, respectively; with respect to the Global Bond Fund, for the period July 30, 1993 (commencement of operations) through June 30, 1994 and the fiscal year ended June 30, 1995, $19,968 and $28,889, respectively; with respect to the U.S. Balanced Fund, for the period December 30, 1994 (commencement of operations) through June 30, 1995, $39,523; with respect to the U.S. Equity Fund, for the period February 22, 1994 (commencement of operations) through June 30, 1994, and the fiscal year ended June 30, 1995, $3,482 and $15,362, respectively; and with respect to the Non-U.S. Equity Fund, for the period August 31, 1993 (commencement of operations) through June 30, 1994, and the fiscal year ended June 30, 1995, $23,597 and $72,350, respectively. UNDERWRITER Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken, PA 19428, acts as an underwriter of the Series' continuous offer of shares for the purpose of facilitating the registration of the shares of the Series under state securities laws and to assist in sales of shares pursuant to an underwriting agreement (the "Underwriting Agreement") approved by the Board of Trustees. In this regard, FPBS has agreed at its own expense to qualify as a broker-dealer under all applicable federal or state laws in those states which the Trust shall from time to time identify to FPBS as states in which it wishes to offer its shares for sale, in order that state registrations may be maintained for the Series. S-29 FPBS is a broker-dealer registered with the Securities and Exchange Commission and a member in good standing of the National Association of Securities Dealers, Inc. For the services to be provided to the Trust under the Underwriting Agreement, FPBS is entitled to receive an annual fixed fee of $7,500 for one series, plus $2,500 for each additional operational series or class, payable in advance. These fees are fixed for a one (1) year period from the date of the Agreement and may be increased or decreased in future years by an amendment signed by both the Trust and FPBS. The fees for such services are borne entirely by the Advisor. The Trust does not impose any sales loads or redemption fees, nor does it bear any fees pursuant to a Rule 12b-1 Plan. Each Series shall continue to bear the expense of all filing or registration fees incurred in connection with the registration of shares under state securities laws. The Underwriting Agreement may be terminated by either party upon sixty (60) days' prior written notice to the other party, and if so terminated, the pro rata portion of the unearned fee will be returned to the Trust. DISTRIBUTION PLAN The Board of Trustees of the Trust has adopted a distribution plan pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Plan") for each Series' SwissKey Fund class shares. The Plan permits each Series to reimburse FPBS, Brinson Partners and others from the assets of the SwissKey Fund class shares a quarterly fee for services and expenses incurred in distributing and promoting sales of SwissKey Fund class shares. The aggregate fees paid by the SwissKey Fund class shares to FPBS and others under the Plan may not exceed 0.90% of a SwissKey Fund classes' average daily net assets in any year. The Plan does not apply to the Brinson Fund class shares of each Series and those shares are not included in calculating the Plan's fees. CODE OF ETHICS The Trust has adopted a Code of Ethics which establishes standards by which certain access persons of the Trust, which include officers of the Advisor and officers and Trustees of the Trust, must abide relating to personal securities trading conduct. Under the Code, access persons are prohibited from engaging in certain conduct, including, but not limited to: 1) investing in companies in which the Series invest unless the securities have a broad public market and are registered on a national securities exchange or are traded in the over-the-counter markets; 2) making or maintaining an investment in any corporation or business with which the Series which have business relationships if the investment might create, or give the appearance of creating a conflict of interest; 3) participating in an initial public offering; 4) entering into a securities transaction when the access person knows or should know that such activity will anticipate, parallel or counter any securities transaction of a Series; 5) entering into any securities transaction, without prior approval, in connection with any security which has been designated as restricted; 6) entering into a net short position with respect to any security held by a Series; 7) entering into any derivative transaction when a direct transaction in the underlying security would be a violation; and 8) engaging in self-dealing or other transactions benefiting the access person at the expense of the Series or its shareholders. In addition, access persons are required to receive advance approval prior to purchasing or selling a restricted security, and may not buy or sell certain prohibited securities. The Advisor will identify for access persons prohibited securities, which include securities that are being considered for purchase or sale by any account or fund managed by the Advisor, and provide a list of such securities to all access persons. Access persons are required to file quarterly reports of security investment transactions. Trustees or officers who are not "interested persons" of the Trust, as defined in the 1940 Act, need only report a transaction in a security if such trustee or officer, at the time of the transaction, knew or should have know, in the ordinary course of fulfilling his official duties as a trustee or officer, that, during the 15-day period immediately preceding or after the date of the transaction by the trustee, such security was purchased or sold by a Series, or was being considered for purchase by a Series. S-30 PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS Brinson Partners is responsible for decisions to buy and sell securities for the Series and for the placement of its portfolio business and the negotiation of commissions, if any, paid on such transactions. Fixed income securities in which the Series invest are traded in the over-the-counter market. These securities are generally traded on a net basis with dealers acting as principal for their own accounts without a stated commission, although the bid/ask spread quoted on securities includes an implicit profit to the dealers. In over-the-counter transactions, orders are placed directly with a principal market-maker unless a better price and execution can be obtained by using a broker. Brokerage commissions are paid on transactions in listed securities, futures contracts and options thereon. Brinson Partners is responsible for effecting portfolio transactions and will do so in a manner deemed fair and reasonable to the Series. Under its advisory agreement with the Global Funds and Non-U.S. Funds, Brinson Partners is authorized to utilize the trading desk of its foreign subsidiaries to execute foreign securities transactions, but monitors the selection by such subsidiaries of brokers and dealers used to execute transactions for those Series. The primary consideration in all portfolio transactions will be prompt execution of orders in an efficient manner at the most favorable price. In selecting and monitoring broker-dealers and negotiating commissions, Brinson Partners considers the firm's reliability, the quality of its execution services on a continuing basis and its financial condition. When more than one firm is believed to meet these criteria, preference may be given to brokers who provide research or statistical material or other services to the Series or to Brinson Partners. Such services include advice, both directly and in writing, as to the value of the securities; the advisability of investing in, purchasing or selling securities; and the availability of securities, or purchasers or sellers of securities, as well as analyses and reports concerning issues, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts. This allows Brinson Partners to supplement its own investment research activities and obtain the views and information of others prior to making investment decisions. Brinson Partners is of the opinion that, because this material must be analyzed and reviewed by its staff, its receipt and use does not tend to reduce expenses but may benefit the Series by supplementing the Advisor's research. Brinson Partners effects portfolio transactions for other investment companies and advisory accounts. Research services furnished by dealers through whom the Series effect its securities transactions may be used by Brinson Partners in servicing all of its accounts; not all such services may be used in connection with the Series. In the opinion of Brinson Partners, it is not possible to measure separately the benefits from research services to each of the accounts (including the Series). Brinson Partners will attempt to equitably allocate portfolio transactions among the Series and others whenever concurrent decisions are made to purchase or sell securities by the Series and another. In making such allocations between the Series and others, the main factors to be considered are the respective investment objectives, the relative size of portfolio holdings of the same or comparable securities, the availability of cash for investment, the size of investment commitments generally held and the opinions of the persons responsible for recommending investments to the Series and the others. In some cases, this procedure could have an adverse effect on the Series. In the opinion of Brinson Partners, however, the results of such procedures will, on the whole, be in the best interest of each of the clients. The Series incurred brokerage commissions as follows: (i) for the fiscal year ended June 30, 1993--Global Fund -$70,000; (ii) for the fiscal year ended June 30, 1994, Global Fund--$141,430; Global Equity Fund--$45,153; Global Bond Fund--$0.00; U.S. Equity Fund--$8,431; and Non-U.S. Equity Fund--$156,842, respectively; (iii) for the fiscal year ended June 30, 1995, Global Fund-- $196,831; Global Equity Fund--$34,283; Global Bond Fund--$0; U.S. Balanced Fund--$88,904; U.S. Equity Fund--$53,830; and Non-U.S. Equity Fund--$172,829, respectively. For the fiscal year ended June 30, 1995, the Trust and the Advisor had no agreements or understandings with a broker or otherwise causing brokerage transactions or commissions for research services. PORTFOLIO TURNOVER The Series are free to dispose of their portfolio securities at any time, subject to complying with the Internal Revenue Code and the Act, when changes in circumstances or conditions make such a move desirable in light of the investment objective. The Series will not attempt to achieve or be limited to a predetermined rate of portfolio turnover, such a turnover always being incidental to transactions undertaken with a view to achieving that Series' investment objective. S-31 The Series do not intend to use short-term trading as a primary means of achieving their investment objectives. The rate of portfolio turnover shall be calculated by dividing (a) the lesser of purchases and sales of portfolio securities for the particular fiscal year by (b) the monthly average of the value of the portfolio securities owned by that Series during the particular fiscal year. Such monthly average shall be calculated by totaling the values of the portfolio securities as of the beginning and end of the first month of the particular fiscal year and as of the end of each of the succeeding eleven months and dividing the sum by 13. Under normal circumstances, the portfolio turnover rate for the Global Equity Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund is not expected to exceed 100%. The portfolio turnover rates for the Global Fund, Global Bond Fund, and Short-Term Global Income Fund, however, may exceed 100%. High portfolio turnover rates (over 100%) may involve correspondingly greater brokerage commissions and other transaction costs, which will be borne directly by the Series and ultimately by that Series' shareholders. In addition, high portfolio turnover may result in increased short-term capital gains, which, when distributed to shareholders, are treated as ordinary income. With respect to the Global Fund, for the period from August 31, 1992 (commencement of operations) to June 30, 1993, and for the fiscal years ended June 30, 1994 and June 30, 1995, respectively, the portfolio turnover rate of the Series was 149%, 231% and 238%, respectively. With respect to the Global Bond Fund, for the period July 30, 1993 (commencement of operations) to June 30, 1994 and the fiscal year ended June 30, 1995, the portfolio turnover rate of the Series was 189% and 199%, respectively. The significant variation in portfolio turnover rates over such periods was due to an increase in the assets of the Series which caused the Series to reposition their portfolio holdings in order to meet their investment objectives and policies. SHARES OF BENEFICIAL INTEREST The Trust presently offers ten Series of shares of beneficial interest, which offer two classes of shares. Each representing an equal proportionate interest in the assets and liabilities of the applicable Series and each having the same voting and other rights and preferences as the other class of that Series, except that shares of the Brinson Fund class may not vote on any matter affecting only the SwissKey Fund classes' Distribution Plan under Rule 12b-1 and neither class may vote on matters that affect only the other class. Under Delaware law, the Trust does not normally hold annual meetings of shareholders. Shareholders' meetings may be held from time to time to consider certain matters including changes to a Series' fundamental investment objective and fundamental investment policies, changes to the Trust's investment advisory agreement and the election of Trustees when required by the Act. When matters are submitted to shareholders for a vote, shareholders are entitled to one vote per share with proportionate voting for fractional shares. The shares of the Series do not have cumulative voting rights or any preemptive or conversion rights, and the Trustees have authority from time to time to divide or combine the shares of the Series into a greater or lesser number of shares so affected. In the case of a liquidation of a Series, each shareholder of the Series will be entitled to share, based upon his percentage share ownership, in the distribution out of assets, net of liabilities, of the Series. No shareholder is liable for further calls or assessment by the Series. On any matters affecting only one Series or class, only the shareholders of that Series or class are entitled to vote. On matters relating to the Trust but affecting the Series differently, separate votes by the Series or class are required. With respect to the submission to shareholder vote of a matter requiring separate voting by a Series, the matter shall have been effectively acted upon with respect to any Series or class if a majority of the outstanding voting securities of that Series votes for the approval of the matter, notwithstanding that: (1) the matter has not been approved by a majority of the outstanding voting securities of any other Series; and (2) the matter has not been approved by a majority of the outstanding voting securities of the Trust. PURCHASES Shares of the Brinson Fund class and the SwissKey Fund class of each Series are sold at the net asset value next determined after the receipt of a purchase application in proper form by the Transfer Agent. The minimum for initial investments with respect to the Brinson Fund class for each Series is $100,000; subsequent investment minimums are $2,500. The minimum for initial investments with respect to the SwissKey Fund class for each Series is $1,000; subsequent investment minimums are $50. A more detailed description of methods of purchase is included in the Prospectuses. S-32 Certificates representing shares purchased are not issued. However, such purchases are confirmed to the investor and credited to the shareholder's account on the books maintained by the Transfer Agent. The investor will have the same rights of ownership with respect to such shares as if certificates had been issued. EXCHANGES OF SHARES Shares of the Brinson Fund class of a Series may only be exchanged for any other Brinson Fund class of another Series in the Trust. The SwissKey Fund class of a Series may be exchanged for any other SwissKey Fund class of another Series in the Trust. Exchanges will not be permitted between the Brinson Fund class and the SwissKey Fund class. The SwissKey Fund class of a Series also may be exchanged for shares of the SBC Short-Term World Income Fund, a non-diversified, open-end management investment company advised by Brinson Partners, Inc. Each qualifying exchange will be made on the basis of both Funds' relative net asset values per share next computed following receipt of the order in proper form by the Transfer Agent. Exchanges may be made by telephone if the shareholder's Account Application Form includes specific authorization for telephone exchanges. The telephone exchange privilege may be difficult to implement during times of drastic economic or market changes. The transactions described above will result in a taxable gain or loss for federal income tax purposes. Generally, any such taxable gain or loss will be a capital gain or loss (long-term or short-term, depending on the holding period of the shares) in the amount of the difference between the net asset value of the shares surrendered and the shareholder's tax basis for those shares. Each investor should consult his or her tax adviser regarding the tax consequences of an exchange transaction. Any shareholder who wishes to make an exchange should first obtain and review a prospectus of the Series to be acquired in the exchange. Requests for telephone exchanges must be received prior to the close of regular trading on the New York Stock Exchange ("NYSE") on any day on which such exchange is open for regular trading. At the discretion of the Trust, this exchange privilege may be terminated or modified at any time for any of the participating Series upon 60 days' prior written notice to shareholders. Contact the Transfer Agent for details about a particular exchange. NET ASSET VALUE The net asset value per share is calculated separately for each class of each Series. The net asset value per share of a Series is computed by dividing the value of the assets of the Series, less its liabilities, by the number of shares of the Series outstanding. Each class of a Series will bear pro rata all of the common expenses of that Series. The net asset values of all outstanding shares of each class of a Series will be computed on a pro rata basis for each outstanding share based on the proportionate participation in the Series represented by the value of shares of that Series. All income earned and expenses incurred by a Series, will be borne on a pro rata basis by each outstanding share of a class, based on each class' percentage in the Series represented by the value of such shares of such classes, except that the Brinson Fund class will not incur any of the expenses under the SwissKey Fund classes' 12b-1 Plan. Portfolio securities are valued and net asset value per share is determined as of the close of regular trading on the NYSE which currently is 4:00 p.m. Eastern time, except that orders and payment for the U.S. Cash Management Series must be received by 12:00 p.m. Eastern time, on each day the NYSE is open for trading. The NYSE is open for trading on every day except Saturdays, Sundays and the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. S-33 Portfolio securities listed on a national or foreign securities exchange and over-the-counter securities carried as NASDAQ National Market Issues are valued on the basis of the last sale on the date the valuation is made. If there has been no sale that day, securities traded on exchanges or over NASDAQ are valued at the last reported bid price, using prices as of the close of trading on that exchange. Other portfolio securities which are traded in the over-the-counter market are valued at the last available bid price. Valuations of fixed income securities may be obtained from a pricing service when such prices are believed to reflect the fair value of such securities. Use of a pricing service has been approved by the Board of Trustees. Futures contracts and options thereon are valued at their daily quoted settlement price. For valuation purposes, foreign securities initially expressed in foreign currency values will be converted into U.S. dollar values at the mean between the bid and offered quotations of such currencies against U.S. dollars as last quoted by any recognized dealer or major bank which is a regular participant in the institutional foreign exchange markets. Securities with a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. Securities (including over- the-counter options) for which market quotations are not readily-available and other assets are valued at their fair value as determined in good faith by or under the direction of the Trustees. REDEMPTIONS Under normal circumstances shareholders may redeem their shares at any time without a fee. The redemption price will be based upon the net asset value per share next determined after receipt of the redemption request, provided it has been submitted in the manner described below. The redemption price may be more or less than their cost, depending upon the net asset value per share at the time of redemption. Payment for shares tendered for redemption is made by check within five business days after tender in proper form, except that the Trust reserves the right to suspend the right of redemption, or to postpone the date of payment upon redemption beyond five business days, (I) for any period during which the NYSE is closed (other than customary weekend and holiday closings) or during which trading on the NYSE is restricted, (ii) for any period during which an emergency exists as determined by the Securities and Exchange Commission as a result of which disposal of securities owned by a Series is not reasonably practicable or it is not reasonably practicable for the Series fairly to determine the value of its net assets or (iii) for such other periods as the Securities and Exchange Commission may by order permit for the protection of shareholders of the Series. Under unusual circumstances, when the Board of Trustees deems it in the best interest of the Series' shareholders, the Trust may make payment for shares repurchased or redeemed in whole or in part in securities of the Series taken at current values. With respect to such redemptions in kind, the Trust has made an election pursuant to Rule 18f-1 under the Act. This will require the Trust to redeem in cash at a shareholder's election in any case where the redemption involves less than $250,000 (or 1% of the Series' net asset value at the beginning of each 90 day period during which such redemptions are in effect, if that amount is less than $250,000). Should payment be made in securities, the redeeming shareholder may incur brokerage costs in converting such securities to cash. TAXATION Each of the Series has qualified, and intends to continue to qualify each year, as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). In order to so qualify, a mutual fund must, among other things, (I) derive at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale of securities or foreign currencies, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities or currencies; (ii) derive less than 30% of its gross income from the sale or other disposition of stock or securities or certain futures and options thereon held for less than three months ("short-short gains"); (iii) distribute at least 90% of its dividend, interest and certain other taxable income each year; and (iv) at the end of each fiscal quarter maintain at least 50% of the value of its total assets in cash, government securities, securities of other regulated investment companies and other securities of issuers which represent, with respect to each issuer, no more than 5% of the value of a fund's total assets and 10% of the outstanding voting securities of such issuer, and with no more than 25% of its assets invested in the securities (other than those of the government or other regulated investment companies) of any one issuer or of two or more issuers which the fund controls and which are engaged in the same, similar or related trades and businesses. S-34 To the extent each of the Series qualifies for treatment as a regulated investment company, they will not be subject to federal income tax on income and net capital gains paid to shareholders in the form of dividends or capital gains distributions. An excise tax at the rate of 4% will be imposed on the excess, if any, of each Series' "required distributions" over actual distributions in any calendar year. Generally, the "required distribution" is 98% of a Series' ordinary income for the calendar year plus 98% of its capital gain net income recognized during the one-year period ending on October 31 plus undistributed amounts from prior years. The Series intend to make distributions sufficient to avoid imposition of the excise tax. Distributions declared by the Series during October, November or December to shareholders of record during such month and paid by January 31 of the following year will be taxable to shareholders in the calendar year in which they are declared, rather than the calendar year in which they are received. Gains or losses attributable to fluctuations in exchange rates which occur between the time a Series accrues interest or other receivables or accrues expenses or liabilities denominated in a foreign currency and the time the Series actually collects such receivables, or pays such liabilities, are generally treated as ordinary income or loss. Similarly, a portion of the gains or losses realized on disposition of debt securities denominated in a foreign currency may also be treated as ordinary gain or loss. These gains, referred to under the Code as "Section 988" gains or losses, may increase or decrease the amount of a Series' investment company taxable income to be distributed to its shareholders, rather than increasing or decreasing the amount of the Series' capital gains or losses. When a Series writes a call, or purchases a put option, an amount equal to the premium received or paid by it is included in the Series' assets and liabilities as an asset and as an equivalent liability. In writing a call, the amount of the liability is subsequently "marked-to- market" to reflect the current market value of the option written. The current market value of a written option is the last sale price on the principal Exchange on which such option is traded or, in the absence of a sale, the mean between the last bid and asked prices. If an option which a Series has written expires on its stipulated expiration date, the Series recognizes a short-term capital gain. If a Series enters into a closing purchase transaction with respect to an option which the Series has written, the Series realizes a short- term gain (or loss if the cost of the closing transaction exceeds the premium received when the option was sold) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a call option which a Series has written is exercised, the Series realizes a capital gain or loss from the sale of the underlying security and the proceeds from such sale are increased by the premium originally received. The premium paid by a Series for the purchase of a put option is recorded in the Series' assets and liabilities as an investment and subsequently adjusted daily to the current market value of the option. For example, if the current market value of the option exceeds the premium paid, the excess would be unrealized appreciation and, conversely, if the premium exceeds the current market value, such excess would be unrealized depreciation. The current market value of a purchased option is the last sale price on the principal Exchange on which such option is traded or, in the absence of a sale, the mean between the last bid and asked prices. If an option which a Series has purchased expires on the stipulated expiration date, the Series realizes a short-term or long-term capital loss for Federal income tax purposes in the amount of the cost of the option. If a Series exercises a put option, it realizes a capital gain or loss (long-term or short-term, depending on the holding period of the underlying security) from the sale which will be decreased by the premium originally paid. Accounting for options on certain stock indices will be in accordance with generally accepted accounting principles. The amount of any realized gain or loss on closing out such a position will result in a realized gain or loss for tax purposes. Such options held by a Series at the end of each fiscal year on a broad-based stock index will be required to be "marked-to-market" for Federal income tax purposes. Sixty percent of any net gain or loss recognized on such deemed sales or on any actual sales will be treated as long-term capital gain or loss and the remainder will be treated as short-term capital gain or loss. Certain options, futures contracts and options on S-35 futures contracts utilized by the Series are "Section 1256 contracts." Any gains or losses on Section 1256 contracts held by a Series at the end of each taxable year (and on October 31 of each year for purposes of the 4% excise tax) are "marked-to-market" with the result that unrealized gains or losses are treated as though they were realized and the resulting gain or loss is treated as a 60/40 gain or loss. Shareholders will be subject to federal income taxes on distributions made by the Series whether received in cash or additional shares of the Series. Distributions of net investment income and net short-term capital gains, if any, will be taxable to shareholders as ordinary income. Distributions of net long-term capital gains, if any, will be taxable to shareholders as long-term capital gains, without regard to how long a shareholder has held shares of the Series. A loss on the sale of shares held for twelve months or less will be treated as a long-term capital loss to the extent of any long-term capital gain dividend paid to the shareholder with respect to such shares. Dividends eligible for designation under the dividends received deduction and paid by a Series may qualify in part for the 70% dividends received deduction for corporations provided, however, that those shares have been held for at least 45 days. The Series will notify shareholders each year of the amount of dividends and distributions, including the amount of any distribution of long-term capital gains and the portion of its dividends which may qualify for the 70% deduction. Each class of shares of a Series will share proportionately in the investment income and expenses of that Series, except that the respective SwissKey Fund class for each Series alone will incur distribution fees under their respective 12b-1 Plans. It is expected that certain dividends and interest received by the Global Funds and Non-U.S. Funds will be subject to foreign withholding taxes. If more than 50% in value of the total assets of a fund at the close of any taxable year consists of stocks or securities of foreign corporations, such fund may elect to treat any foreign taxes paid by it as if paid by its shareholders. These Series will notify shareholders in writing each year whether it has made the election and the amount of foreign taxes it has elected to have treated as paid by the shareholders. If the Series make the election, its shareholders will be required to include in gross income their proportionate share of the amount of foreign taxes paid by the Series and will be entitled to claim either a credit or deduction for their share of the taxes in computing their U.S. federal income tax subject to certain limitations. No deduction for foreign taxes may be claimed by shareholders who do not itemize deductions. Generally, a credit for foreign taxes is subject to the limitation that it may not exceed the shareowner's U.S. tax attributable to his or her total foreign source taxable income. For this purpose, the source of each Series' income flows through to its shareholders. Gains from the sale of securities will be treated as derived from U.S. sources and certain currency fluctuation gains, including fluctuation gains from foreign currency denominated debt securities, receivables and payables, will be treated income derived from U.S. sources. The limitation on the foreign tax credit is applied separately to foreign source passive income, (as defined for purposes of foreign tax credit) such as foreign source passive income received from the respective Series. Because of changes made by the Code, shareholders may be unable to claim a credit for the full amount of their proportionate share of the foreign taxes paid by the Series. The foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury regulations currently in effect. For the complete provisions, reference should be made to the pertinent Code sections and regulations. The Code and regulations are subject to change by legislative or administrative action at any time and retroactively. Dividends and distributions also may be subject to state and local taxes. Shareholders are urged to consult their tax advisors regarding specific questions as to federal, state and local taxes as well as the application of the foreign tax credit. The foregoing discussion relates solely to U.S. federal income tax law. Non- U.S. investors should consult their tax advisors concerning the tax consequences of ownership of shares of the Series, including the possibility that distributions may be subject to a 30% U.S. withholding tax (or a reduced rate of withholding provided by treaty). S-36 PERFORMANCE CALCULATIONS Performance information for the SwissKey Fund class and Brinson Fund class shares of each Series will vary due to the effect of expense ratios on the performance calculations. TOTAL RETURN Current yield and total return quotations used by the Series (and both classes of shares) are based on standardized methods of computing performance mandated by SEC Rules. As the following formula indicates, the average annual total return is determined by multiplying a hypothetical initial purchase order of $1,000 by the average annual compound rate of return (including capital appreciation/depreciation and dividends and distributions paid and reinvested) for the stated period less any fees charged to all shareholder accounts and annualizing the result. The calculation assumes that all dividends and distributions are reinvested at the et asset value on the reinvestment dates during the period. The quotation assumes the account was completely redeemed at the end of each period and deduction of all applicable charges and fees. According to the Commission formula: P(1+T)n=ERV where: P= a hypothetical initial payment of $1,000. T= average annual total return n= number of years ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the 1, 5 or 10 year periods at the end of the 1, 5 or 10 year periods (or fractional portion thereof). Based upon the foregoing calculations, the average annual total return for: (i) the Global Fund for the period August 31, 1992 (commencement of operations) through June 30, 1995 and the fiscal year ended June 30, 1995, was 25.64% and 8.40%, respectively; (ii) the Global Equity Fund for the period January 28,1994 (commencement of operations) through June 30, 1995 and the fiscal year ended June 30, 1995 was 1.08% and 0.76%, respectively; (iii) the Global Bond Fund for the period July 30, 1993 (commencement of operations) through June 30, 1995 and the fiscal year ended June 30, 1995 was 10.46% and 5.33%, respectively; (iv) the U.S. Balanced Fund for the period December 30, 1994 (commencement of operations) through June 30, 1995 was 13.91%; (v) the U.S. Equity Fund for the period February 22, 1994 (commencement of operations) through June 30, 1995 and the fiscal year ended June 30, 1995 was 17.80% and 13.07%, respectively; (vi) the Brinson U.S. Bond Fund for the period August 31, 1995 (commencement of operations) through December 31, 1995 was 5.49%; (vii) the SwissKey U.S. Bond Fund for the period August 31, 1995 (commencement of operations) through December 31, 1995 was 5.29%; and (viii) the Non-U.S. Equity Fund for the period August 31, 1993 (commencement of operations) through June 30, 1995 and the fiscal year ended June 30, 1995 was 2.55% and 1.40%, respectively. YIELD As indicated below, current yield is determined by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period and annualizing the result. Expenses accrued for the period include any fees charged to all shareholders during the 30-day base periods. According to the SEC formula: Yield = 2[(a-b + 1)/6/-1] ----------- cd where: a = dividends and interest earned during the period. b = expenses accrued for the period (net of reimbursements). c = the average daily number of shares outstanding during the period that were entitled to receive dividends. d = the maximum offering price per share on the last day of the period. S-37 The yield of the Series may be calculated by dividing the net investment income per share earned by the particular Series during a 30-day (or one month) period by the net asset value per share on the last day of the period and annualizing the result on a semi-annual basis. A Series' net investment income per share earned during the period is based on the average daily number of shares outstanding during the period entitled to receive dividends and includes dividends and interest earned during the period minus expenses accrued for the period, net of reimbursements. YIELD OF U.S. CASH MANAGEMENT FUND As summarized in the Prospectus, the yield of the SwissKey Fund class and Brinson Fund class of the U.S. Cash Management Fund for a seven-day period (the "base period") will be computed by determining the net change in value (calculated as set forth below) of a hypothetical account having a balance of one share at the beginning of the period, dividing the net change in account value by the value of the account at the beginning of the base period to obtain the base period return, and multiplying the base period return by 365/7 with the resulting yield figure carried to the nearest hundredth of one percent. Net changes in value of a hypothetical account will include the value of additional shares purchased with dividends from the original share and dividends declared on both the original share and any such additional shares, but will not include realized gains or losses or unrealized appreciation or depreciation on portfolio investments. Yield may also be calculated on a compound basis (the "effective yield"), which assumes that net income is reinvested in shares of the Series at the same rate as net income is earned for the base period. The yield and effective yield of the U.S. Cash Management Fund will vary in response to fluctuations in interest rates and in the expenses of the Series. For comparative purposes the current and effective yields should be compared to current and effective yields offered by competing financial institutions for the same base period and calculated by the methods described above. S-38 CORPORATE DEBT RATINGS APPENDIX A Moody's Investors Service, Inc. describes classifications of corporate bonds as follows: AAA--Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt-edged". Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. AA--Bonds which are rated Aa are judged to be of high-quality by all standards. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A--Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. BAA--Bonds which are rated Baa are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. BA--Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B--Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. CAA--Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. CA--Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C--Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Moody's also supplies numerical indicators 1, 2, and 3 to rating categories. The modifier 1 indicates the security is in the higher end of its rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking toward the lower end of the category. Standard & Poor's Corporation describes classifications of corporate bonds as follows: AAA--This is the highest rating assigned by Standard & Poor's to a debt obligation and indicates an extremely strong capacity to pay principal and interest. AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay principal and interest is very strong and in the majority of instances they differ from the AAA issues only in small degree. A--Bonds rated A have a strong capacity to pay principal and interest, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions. BBB--Bonds rated BBB are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in the A category. S-39 BB, B, CCC, CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation and CC the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. Plus (+) or minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. S-40 BRINSON GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
MARKET SHARES VALUE ------- ----------- Equities -- 35.97% U.S. EQUITIES -- 28.77% Aetna Life & Casualty................................ 22,200 $ 1,395,825 Air & Water Technologies Corp. (c)................... 24,800 148,800 Allergan, Inc........................................ 58,600 1,589,525 Alza Corp. (c)....................................... 46,400 1,084,600 American Mobile Satellite (c)........................ 8,700 228,375 AON Corp............................................. 71,300 2,655,925 AST Research Corp. (c)............................... 30,300 469,650 Automatic Data Processing, Inc....................... 33,500 2,106,313 Ball Corp............................................ 11,500 401,062 Bard (C.R.), Inc..................................... 35,500 1,065,000 Beckman Instruments, Inc............................. 23,000 641,125 Biogen, Inc. (c)..................................... 5,300 235,850 Birmingham Steel..................................... 23,200 429,200 Boeing, Inc.......................................... 31,300 1,960,163 Burlington Northern, Inc............................. 54,000 3,422,250 Campbell Soup Co..................................... 17,900 877,100 Centerior Energy Co.................................. 41,200 396,550 Chubb Corp........................................... 6,600 528,825 CIGNA Corp........................................... 43,000 3,337,875 Citicorp............................................. 97,800 5,660,175 CMS Energy Corp...................................... 54,300 1,337,137 Coca-Cola Enterprises, Inc........................... 90,800 1,986,250 Comerica, Inc........................................ 15,800 507,575 Computer Sciences Corp. (c).......................... 7,700 437,938 Cooper Industries, Inc............................... 68,600 2,709,700 Enron Corp........................................... 32,300 1,134,537 Entergy Corp......................................... 63,000 1,519,875 Federated Department Stores (c)...................... 41,200 1,060,900 FHP International Corp. (c).......................... 15,500 356,500 First Financial Management Corp...................... 30,900 2,641,950 Ford Motor Co........................................ 50,200 1,493,450 Forest Laboratories, Inc. (c)........................ 35,100 1,557,562 Genzyme Corp. (c).................................... 7,500 300,000 Goodyear Tire and Rubber............................. 41,700 1,720,125 Grand Metro.......................................... 60,000 1,665,000 Harnischfeger Industries, Inc........................ 8,000 277,000 Hillenbrand Industries, Inc.......................... 14,600 454,425 Honeywell, Inc....................................... 101,200 4,364,250 Illinova Holdings Corp............................... 31,900 809,463 Inland Steel......................................... 34,000 1,037,000 Interpublic Group of Companies....................... 23,000 862,500 Kimberly-Clark Corp.................................. 43,000 2,574,625 Kroger Co. (c)....................................... 33,100 889,562 Liz Claiborne........................................ 17,400 369,750 Lockheed Martin Corp................................. 73,300 4,627,063 LTV Corp............................................. 33,600 491,400 Lyondell Petrochemical Co............................ 56,000 1,435,000 Magna Group, Inc..................................... 11,500 253,000 Manor Care, Inc...................................... 37,150 1,081,994 Mattel............................................... 77,700 2,020,200 Melville Corp........................................ 58,500 2,003,625 National Semiconductor Corp. (c)..................... 36,100 1,001,775 Nextel Communications, Inc. (c)...................... 31,500 444,937 Occidental Petroleum Corp............................ 3,300 75,488
MARKET SHARES VALUE ------- ----------- Old Republic International Corp...................... 22,200 $ 579,975 Owens Illinois, Inc. (c)............................. 65,200 847,600 Pentair, Inc......................................... 13,400 582,900 Pfizer, Inc.......................................... 27,100 2,503,362 Philip Morris Companies, Inc......................... 17,000 1,264,375 Raychem Corp......................................... 20,500 786,688 RJR Nabisco Convertible Preferred "C"................ 186,500 1,142,313 RJR Nabisco Holdings Corp............................ 56,340 1,570,478 Schering Plough Corp................................. 88,300 3,896,237 Schlumberger Ltd..................................... 35,300 2,193,013 Seagate Technology (c)............................... 31,300 1,228,525 Sprint Corp.......................................... 84,100 2,827,862 State Street Boston Corp............................. 25,100 925,563 Stone Container Corp. (c)............................ 16,796 356,915 Tenneco, Inc......................................... 37,100 1,706,600 Timken Co............................................ 24,100 1,111,612 TJX Cos.............................................. 36,300 480,975 Tosco Corp........................................... 10,300 328,312 Transamerica Corp.................................... 33,000 1,922,250 Ultramar Corp........................................ 17,100 431,775 US Bancorp........................................... 39,000 938,437 USF&G Corp........................................... 55,700 905,125 Walgreen Co.......................................... 35,100 1,759,388 Wellman, Inc......................................... 7,300 199,837 Westvaco Corp........................................ 13,200 584,100 ------------ Total U.S. Equities.................................. 105,209,961 ------------ NON-U.S. EQUITIES -- 7.20% AUSTRALIA -- 0.35% Amcor Ltd............................................ 7,000 51,506 ANZ Banking Group.................................... 11,953 42,366 Broken Hill Proprietary.............................. 26,180 321,427 BTR Nylex Ltd........................................ 29,976 57,160 Burns Philp Co....................................... 15,000 31,261 Coles Myer Ltd....................................... 17,000 53,144 CRA Ltd.............................................. 8,300 112,612 Lend Lease........................................... 3,491 44,494 National Australia Bank.............................. 18,547 146,199 News Corp............................................ 13,500 75,218 News Corp. Preferred................................. 4,750 23,469 Pacific Dunlop Ltd................................... 39,200 82,251 Santos............................................... 13,800 33,065 Southcorp Holdings................................... 31,041 61,831 Western Mining Corp.................................. 8,100 44,384 Westpac Bank Corp.................................... 29,638 106,938 ------------ 1,287,325 ------------ BELGIUM -- 0.15% Electrabel........................................... 650 137,275 Fortis AG............................................ 497 52,569 Groupe Bruxelles Lambert............................. 330 44,182 Kredietbank.......................................... 310 73,313 Petrofina............................................ 210 63,390
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MARKET SHARES VALUE ------ ------------ BELGIUM (CONTINUED) Petrofina Warrants (c)............................... 13 $ 181 Societe Gen De Belgique.............................. 533 38,771 Solvay............................................... 100 55,345 Tractebel............................................ 165 59,866 Union Mineire........................................ 350 22,876 ------------ 547,768 ------------ CANADA -- 0.36% Alcan Aluminum Ltd................................... 3,500 105,728 Bank of Montreal..................................... 7,500 156,955 Barrick Gold Corp.................................... 2,700 68,296 Canadian Pacific Ltd................................. 9,000 154,771 Imperial Oil Canada Ltd.............................. 3,800 141,069 Noranda Inc.......................................... 3,200 62,891 Norcen Energy........................................ 2,000 26,933 Northern Telecom Ltd................................. 1,800 65,184 Nova Corporation of Alberta.......................... 5,600 47,387 Oshawa Group Ltd. "A"................................ 2,200 34,030 Royal Bank of Canada................................. 6,000 134,299 Seagram Co Ltd....................................... 4,700 161,650 Thomson Corp......................................... 7,600 103,727 TransCanada Pipeline................................. 4,700 62,864 ------------ 1,325,784 ------------ FRANCE -- 0.41% Alcatel Alsthom...................................... 715 64,427 Banque Nat'l Paris................................... 2,100 101,372 Carnaud Metal Box.................................... 1,500 67,086 Cie Bancaire......................................... 533 63,773 Cie de Saint Gobain.................................. 844 102,029 Cie Fin de Suez...................................... 1,289 71,769 Colas................................................ 214 39,688 Credit Local de France............................... 900 83,548 GAN.................................................. 300 9,525 Generale des Eaux.................................... 1,066 118,750 Groupe de la Cite.................................... 250 44,353 LVMH................................................. 719 129,487 Michelin Class B (c)................................. 700 31,032 Pechiney Cert D'Invest............................... 650 37,505 Peugeot.............................................. 600 83,301 Sanofi............................................... 800 44,311 Societe Generale..................................... 1,014 118,605 Societe Nationale Elf Aquitaine...................... 1,441 106,570 Total Co. "B"........................................ 2,182 131,438 UAP.................................................. 1,500 39,360 ------------ 1,487,929 ------------ GERMANY -- 0.36% Allianz.............................................. 82 146,867 Allianz Rights....................................... 82 6,221 BASF................................................. 290 61,851 Bayer................................................ 304 75,489 Bayer Motoren Werken................................. 130 71,288 Bayer Vereinsbank.................................... 185 56,004
MARKET SHARES VALUE ------ ------------ Commerzbank.......................................... 270 $ 64,667 Daimler-Benz......................................... 100 45,987 Deutsche Bank........................................ 4,100 199,357 Hoechst.............................................. 300 64,699 Kaufhof Holdings..................................... 250 89,769 Mannesmann........................................... 210 64,103 Munchener Ruck (c)................................... 48 105,079 Munchener Ruck Warrants '98 (c)...................... 2 263 Preussag............................................. 225 67,300 Schering............................................. 590 41,220 Veba................................................. 385 151,040 ------------ 1,311,204 ------------ HONG KONG -- 0.14% China Light & Power.................................. 19,600 100,818 Hang Seng Bank....................................... 5,200 39,651 Hong Kong Land Holdings.............................. 26,000 47,320 Hong Kong Telecommunications......................... 14,000 27,684 Hutchison Whampoa.................................... 23,000 111,173 Jardine Matheson Holdings............................ 8,000 58,800 Swire Pacific "A".................................... 11,000 83,877 Wharf Holdings....................................... 13,000 42,423 ------------ 511,746 ------------ ITALY -- 0.10% Assic Gererali....................................... 3,300 77,511 Fiat Spa Priv (c).................................... 20,000 43,494 Instituto Mobilaire Italiano......................... 9,000 55,034 Italgas.............................................. 9,000 23,366 Mediobanca........................................... 2,000 14,521 Montedison (c)....................................... 32,000 22,891 La Rinascente Savings................................ 8,000 20,917 Sai Di Risp.......................................... 5,000 21,350 Sip Di Risp.......................................... 38,000 80,318 ------------ 359,402 ------------ JAPAN -- 3.45% Amada................................................ 21,000 179,350 Asahi Glass Co....................................... 25,000 275,651 Bank of Tokyo........................................ 12,000 192,249 Canon, Inc........................................... 19,000 308,870 Canon Sales.......................................... 6,000 166,097 Citizen Watch Co..................................... 19,000 117,505 Dai Nippon Printing.................................. 20,000 318,059 Daikin Kogyo Co...................................... 24,000 192,814 Daiwa Bank........................................... 16,000 144,187 Daiwa House Industries............................... 11,000 168,453 Fanuc Co............................................. 5,300 228,507 Fujitsu.............................................. 36,000 358,346 Hitachi Ltd.......................................... 63,000 627,106 Honda Motor Co....................................... 12,000 183,767 Inax................................................. 20,000 192,484 Isetan............................................... 8,000 108,376 Ito Yokado Co........................................ 11,000 579,220 Keio Teito Electric Railway.......................... 25,000 146,072
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MARKET SHARES VALUE ------ ------------ JAPAN (CONTINUED) Kintetsu............................................. 25,000 $ 219,107 Kuraray Co. Ltd...................................... 13,000 141,041 Maeda Road Construction.............................. 5,000 96,596 Marui Co............................................. 6,000 93,940 Matsushita Electric Industrial....................... 35,000 544,234 Mitsubishi Bank...................................... 9,000 194,016 Mitsubishi Paper..................................... 25,000 131,346 NGK Insulators....................................... 36,000 326,116 Nichii Co............................................ 16,000 173,589 Nintendo............................................. 1,900 109,000 Nippon Denso Co...................................... 14,000 253,976 Nippon Meat Packers.................................. 13,000 189,893 Nippon Steel Corp.................................... 18,000 58,523 Orix Corp............................................ 2,000 66,439 Osaka Gas Corp....................................... 91,000 335,528 Pioneer Electronics.................................. 10,000 169,631 Sankyo Co............................................ 15,700 364,342 Secom Co............................................. 5,000 313,936 Seino Transportation................................. 7,000 117,917 Sekisui House........................................ 43,000 531,865 Shinmaywa Industries................................. 12,000 100,507 Sony Corp............................................ 7,000 335,611 Sumitomo Bank........................................ 23,000 398,280 Sumitomo Electric Industries......................... 17,000 202,262 Takeda Chemical Industries........................... 25,000 329,838 TDK Corp............................................. 7,000 318,294 Tokio Marine & Fire.................................. 19,000 217,552 Tokyo Electric Power................................. 8,900 272,588 Tokyo Steel Mfg...................................... 16,000 273,295 Tonen Corp........................................... 12,000 186,594 Toray Industries, Inc................................ 71,000 440,770 Toshiba Corp......................................... 69,000 436,483 Toyo Suisan Kaisha................................... 5,000 50,477 Toyota Motor Corp.................................... 7,000 138,532 ------------ 12,619,231 ------------ MALAYSIA -- 0.03% Genting.............................................. 1,000 9,886 Hume Industries...................................... 1,000 5,456 Kuala Lumpur Kepong.................................. 2,000 6,358 Malayan Bank......................................... 3,000 23,750 Nestle Malaysia...................................... 1,000 7,670 Sime Darby........................................... 7,000 19,525 Telekom Malaysia..................................... 2,000 15,177 Tenaga Nasional...................................... 3,000 12,244 ------------ 100,066 ------------ NETHERLANDS -- 0.39% ABN-AMRO Holdings.................................... 4,302 165,920 ABN-AMRO Holdings Coupon............................. 4,302 4,828 D.S.M................................................ 570 49,078 Elsevier............................................. 6,500 76,717 Internationale Nederlanden Grp....................... 3,776 208,709 Internationale Nederlanden Grp Coupon................ 3,776 5,236 KPN.................................................. 1,500 53,886
MARKET SHARES VALUE ------ ------------ KPN Coupon........................................... 1,500 $ 1,451 Philips Electronics.................................. 1,300 55,002 Royal Dutch Petroleum................................ 1,400 170,835 Royal Dutch Petroleum ADS (a)........................ 3,300 402,187 Unilever............................................. 1,710 222,338 ------------ 1,416,187 ------------ NEW ZEALAND -- 0.11% Brierly Investment................................... 98,000 74,004 Carter Holt Harvey................................... 46,000 112,510 Fletcher Challenge Ltd............................... 42,000 117,883 New Zealand Telecom ADS (a).......................... 1,900 115,188 ------------ 419,585 ------------ SPAIN -- 0.13% Banco Bilbao-Vizcaya................................. 900 25,977 Banco Intercontinental............................... 430 38,707 Banco Popular........................................ 240 35,676 Banco Santander...................................... 1,400 55,207 Empresa NAC Electric................................. 1,000 49,385 Hidro Iberdrola...................................... 10,100 76,069 Repsol ADR (a)....................................... 2,000 63,250 Sevillana De Electric................................ 3,000 18,457 Telefonica De Espana................................. 8,100 104,352 Viscofan............................................. 1,400 20,695 ------------ 487,775 ------------ SWITZERLAND -- 0.19% BBC Brown Boverie (Br)............................... 40 41,389 Ciba-Geigy (Reg.).................................... 55 40,295 CS Holdings.......................................... 1,300 119,054 Nestle (Reg)......................................... 197 205,037 Roche Holdings Gen................................... 25 161,024 Societe Generale Surveillance (Br)................... 30 52,083 Zurich Insurance..................................... 46 57,780 ------------ 676,662 ------------ UNITED KINGDOM -- 1.03% Asda Group........................................... 30,000 45,346 Bass................................................. 9,300 89,005 BAT Industries....................................... 13,084 100,134 BET.................................................. 19,000 37,184 Booker PLC........................................... 6,700 44,134 British Gas.......................................... 49,300 227,086 British Petroleum.................................... 28,966 207,624 British Telecommunications........................... 50,500 314,972 Charter Group........................................ 6,175 89,211 Coats Viyella........................................ 22,000 65,107 FKI.................................................. 18,000 45,537 General Electric PLC................................. 46,500 227,136 Glaxo Holdings....................................... 12,900 158,351 Grand Metropolitan................................... 25,000 153,341 Guinness............................................. 14,000 105,362 Hanson............................................... 18,000 63,007 Hillsdown Holdings................................... 32,000 91,647 House of Fraser...................................... 36,500 73,755 HSBC Holdings........................................ 3,400 43,900
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MARKET SHARES VALUE ------ ------------ UNITED KINGDOM (CONTINUED) Legal and General.................................... 6,500 $ 55,020 Lloyds Abbey Life.................................... 8,500 52,880 Lloyds Bank.......................................... 24,700 245,231 Lucas Industries..................................... 10,351 31,045 Marks & Spencer...................................... 12,800 82,380 MFI Furniture Group.................................. 16,300 30,214 Mirror Group......................................... 12,000 25,394 National Power....................................... 8,000 56,706 National Westminster Bank............................ 15,200 132,048 Ocean Group.......................................... 15,000 74,224 P & O................................................ 5,000 46,062 Reckitt & Coleman.................................... 7,625 80,436 Redland.............................................. 4,000 26,221 Rolls Royce.......................................... 13,000 36,094 Royal Insurance...................................... 9,666 47,523 Sears PLC............................................ 43,700 69,183 Sedgwick Group....................................... 5,600 12,296 SmithKline Beecham Units............................. 21,400 189,995 Tesco................................................ 32,900 151,806 Thames Water......................................... 8,700 65,890 Unilever Ord 5p...................................... 2,400 48,592 W.H. Smith Group A................................... 7,000 36,532 ------------ 3,777,611 ------------ Total Non-U.S. Equities.............................. 26,328,275 ------------ Total Equities (Cost $116,606,518)................... 131,538,236 ------------
FACE AMOUNT MARKET VALUE ------------ ------------ Bonds -- 50.29% U.S. BONDS -- 31.64% U.S. CORPORATE BONDS -- 10.38% BellSouth Corp. ESOP 9.125%, due 07/01/03................................ $ 228,721 $ 248,300 Chemical Bank 6.500%, due 01/15/09................................ 1,050,000 969,686 Chrysler Auto Receivable 7.875%, due 07/15/99................................ 200,000 206,092 Chrysler Financial 8.100%, due 02/03/97................................ 165,000 169,099 Citicorp 9.750%, due 08/01/99................................ 150,000 166,385 First of America 6.187%, due 02/15/02................................ 2,350,000 2,350,000 Ford Auto Loan Trust 92-3A3 5.625%, due 10/15/97................................ 1,200,000 1,201,140 Ford Motor Credit 6.450%, due 11/03/97................................ 3,000,000 2,996,250 GMAC 6.700%, due 04/21/97................................ 1,350,000 1,356,696 Green Tree Acceptance Corp. 94-A 6.900%, due 02/15/04................................ 620,701 621,887 Green Tree Financial 94-2 8.300%, due 05/15/19................................ 435,000 464,675
FACE AMOUNT MARKET VALUE ------------- ------------ Household Affinity 6.295%, due 03/15/99................................ $ 2,500,000 $ 2,502,325 MBNA Master Trust 6.275%, due 09/15/99................................ 3,150,000 3,153,654 News America Corp. 7.750%, due 01/20/24................................ 1,755,000 1,701,781 Premier Auto 95-1 8.050%, due 04/04/00................................ 500,000 523,405 Premier Auto Trust 4.220%, due 03/02/99................................ 88,270 86,171 Ralston Purina 7.875%, due 06/15/25................................ 450,000 450,604 Republic Bank of New York Corp. FRN 6.025%, due 12/29/02................................ 1,000,000 995,771 RJR Nabisco Inc. 8.625%, due 12/01/02................................ 2,100,000 2,164,978 Salomon, Inc. 5.340%, due 12/17/96................................ 585,000 572,177 Shearson Lehman Holdings 4.600%, due 07/22/96................................ 1,960,000 1,891,400 Signet Credit Card 1993-4A FRN 6.375%, due 05/15/02................................ 2,000,000 2,008,600 Standard Credit Card 95-1 8.250%, due 01/07/05................................ 500,000 547,615 Standard Credit Card Trust 95-1 8.500%, due 08/07/97................................ 805,000 823,515 Standard Credit Card Trust 94-1 4.650%, due 02/07/97................................ 1,065,000 1,042,635 Tele-Communications, Inc. 7.250%, due 08/01/05................................ 800,000 769,217 Thrift Financial Corp. 11.250%, due 01/01/16............................... 49,641 54,265 Time Warner, Inc. 9.125%, due 01/15/13................................ 2,250,000 2,353,662 US West Communications 6.875%, due 09/15/33................................ 110,000 99,963 US West Communications 7.125%, due 11/15/43................................ 155,000 144,773 USX Corp. 7.200%, due 02/15/04................................ 2,980,000 2,895,979 Wal Mart Stores, Inc. 10.875%, due 08/15/00............................... 75,000 77,476 Woolworth Corp. 7.000%, due 06/01/00................................ 1,100,000 1,092,443 WR Grace & Co. 8.000%, due 08/15/04................................ 1,195,000 1,266,383 ------------ 37,969,002 ------------
- -------------------------------------------------------------------------------- 13 BRINSON GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
FACE MARKET AMOUNT VALUE ------------- ------------ INTERNATIONAL DOLLAR BONDS -- 2.81% Belgian National Railway (SNCB) 8.875%, due 12/01/24.............................. $ 942,000 $ 1,092,245 City of Oslo 7.875%, due 02/03/97.............................. 1,200,000 1,230,750 Eli Lilly & Co. 8.375%, due 02/07/05.............................. 750,000 828,986 European Investment Bank 9.250%, due 11/15/97.............................. 1,100,000 1,174,250 GMAC Euro 7.250%, due 10/17/97.............................. 325,000 330,078 Hong Kong Shanghai Perpetual FRN 6.500%, due 07/30/49.............................. 1,700,000 1,315,375 International Bank for Reconstruction and Develop- ment 9.875%, due 10/01/97.............................. 175,000 189,203 Japanese Development Bank 8.375%, due 02/15/01.............................. 1,000,000 1,090,000 Republic of Italy 6.875%, due 09/27/23.............................. 150,000 133,619 Republic of South Africa 9.625%, due 12/15/99.............................. 1,000,000 1,037,500 Royal Bank of Scotland Perpetual FRN 7.125%, due 12/31/49.............................. 1,000,000 836,900 Tenaga Nasional 7.875%, due 06/15/04.............................. 950,000 1,003,851 ------------ 10,262,757 ------------ U.S. GOVERNMENT AGENCIES -- 9.49% Federal Home Loan Mortgage Corp. 9.200%, due 08/25/97.............................. 200,000 213,211 7.000%, due 11/15/07.............................. 530,000 531,855 7.000%, due 12/15/07.............................. 1,480,000 1,485,328 9.000%, due 03/01/17.............................. 568,436 597,256 8.500%, due 07/15/21.............................. 1,957,720 2,061,890 Federal Home Loan Mortgage Corp. Gold 9.500%, due 10/01/20.............................. 775,747 820,414 9.000%, due 05/01/24.............................. 1,573,901 1,652,124 Federal National Mortgage Association 7.600%, due 01/10/97.............................. 200,000 205,219 5.000%, due 06/01/01.............................. 1,900,314 1,800,300 0.000%, due 11/01/01.............................. 225,000 207,717 10.000%, due 06/01/14.............................. 991,054 1,076,305 6.500%, due 02/25/19.............................. 1,935,000 1,911,258 10.000%, due 06/25/19.............................. 472,930 523,552 9.000%, due 08/01/21.............................. 446,287 469,404 8.200%, due 08/25/21.............................. 82,894 84,463 6.750%, due 10/25/21.............................. 1,870,000 1,787,720 8.000%, due 05/01/22.............................. 251,492 255,926 8.500%, due 07/01/22.............................. 1,054,558 1,096,814 6.310%, due 01/01/23.............................. 1,920,000 1,934,400 6.500%, due 01/25/23.............................. 170,000 164,242 6.000%, due 11/01/23.............................. 1,426,298 1,337,611 6.500%, due 02/01/24.............................. 2,980,000 2,864,525 8.000%, due 06/01/24.............................. 1,795,000 1,828,087 7.000%, due 05/01/25.............................. 115,000 112,897 8.500%, due 05/01/25.............................. 550,273 567,467 Government National Mortgage 11.000%, due 09/15/15.............................. 342,424 380,090 9.000%, due 12/15/17.............................. 3,075,204 3,228,949
FACE MARKET AMOUNT VALUE ------------- ------------ 8.500%, due 05/15/21............................... $ 89,688 $ 93,079 8.500%, due 04/15/25............................... 780,000 809,490 6.000%, due 05/15/25............................... 1,890,000 1,895,315 7.000%, due 09/15/28............................... 494,164 474,861 Refcorp Principal Strip 0.000%, due 10/15/20............................... 12,215,000 2,087,934 Tennessee Valley Authority 6.875%, due 12/15/43............................... 170,000 156,019 ------------ 34,715,722 ------------ U.S. GOVERNMENT OBLIGATIONS -- 8.96% U.S. Treasury Bonds 8.125%, due 05/15/21............................... 7,370,000 8,620,593 U.S. Treasury Notes 7.875%, due 04/15/98............................... 2,000,000 2,100,624 8.875%, due 02/15/99............................... 2,130,000 2,334,346 5.875%, due 03/31/99............................... 5,930,000 5,917,031 6.875%, due 08/31/99............................... 8,475,000 8,747,785 7.500%, due 11/15/01............................... 410,000 439,853 7.250%, due 05/15/04............................... 4,000,000 4,268,748 U.S. Treasury Strips 0.000%, due 02/15/03............................... 225,000 140,679 0.000%, due 05/15/21............................... 1,000,000 169,110 ------------ 32,738,769 ------------ Total U.S. Bonds................................... 115,686,250 ------------ Non-U.S. Bonds -- 18.65% AUSTRALIA -- 0.86% Government of Australia 12.000%, due 11/15/01.............................. AUD 3,300,000 2,693,780 9.500%, due 08/15/03............................... 600,000 435,103 ------------ 3,128,883 ------------ BELGIUM -- 0.80% Kingdom of Belgium 8.250%, due 06/01/99............................... BEF 24,000,000 892,703 8.750%, due 06/25/02............................... 7,000,000 266,841 9.000%, due 03/28/03............................... 24,000,000 925,425 8.500%, due 10/01/07............................... 23,000,000 847,829 ------------ 2,932,798 ------------ DENMARK -- 2.39% Kingdom of Denmark 9.000%, due 11/15/98............................... DKR 4,500,000 862,523 9.000%, due 11/15/00............................... 14,600,000 2,805,436 8.000%, due 05/15/03............................... 12,000,000 2,159,196 7.000%, due 12/15/04............................... 17,500,000 2,921,365 ------------ 8,748,520 ------------ FRANCE -- 2.12% Government of France (OAT) 8.500%, due 03/28/00............................... FRF 3,300,000 716,844 9.500%, due 01/25/01............................... 11,100,000 2,520,427 8.500%, due 04/25/03............................... 6,500,000 1,419,340 8.250%, due 02/27/04............................... 1,900,000 409,083 8.500%, due 12/26/12............................... 12,500,000 2,703,971 ------------ 7,769,665 ------------
- -------------------------------------------------------------------------------- 14 BRINSON GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
FACE MARKET AMOUNT VALUE ----------------- ------------ GERMANY -- 3.25% Bundesrepublik Deutscheland 6.250%, due 02/20/98........................... DEM 1,360,000 $ 996,148 7.000%, due 09/20/99........................... 1,000,000 743,805 8.500%, due 08/21/00........................... 2,600,000 2,044,722 8.000%, due 07/22/02........................... 1,950,000 1,495,643 6.500%, due 07/15/03........................... 7,600,000 5,322,361 Treuhandanstalt 7.750%, due 10/01/02........................... 1,650,000 1,246,947 ------------ 11,849,626 ------------ ITALY -- 1.82% Republic of Italy BTP 9.000%, due 10/01/96........................... ITL 2,100,000,000 1,251,541 9.000%, due 10/01/98........................... 1,700,000,000 961,955 8.500%, due 01/01/99........................... 3,100,000,000 1,708,703 9.000%, due 10/01/03........................... 5,400,000,000 2,743,889 ------------ 6,666,088 ------------ JAPAN -- 0.63% Government of Japan No.129 6.400%, due 03/20/00........................... JPY 85,000,000 1,196,148 Government of Japan No.156 4.200%, due 03/20/03........................... 85,000,000 1,101,425 ------------ 2,297,573 ------------ NETHERLANDS -- 2.27% Government of Nederlands 6.250%, due 07/15/98........................... NLG 1,400,000 915,214 8.500%, due 03/15/01........................... 2,500,000 1,763,947 6.500%, due 04/15/03........................... 1,000,000 631,732 8.500%, due 06/01/06........................... 7,050,000 5,008,433 ------------ 8,319,326 ------------ SPAIN -- 1.99% Government of Spain 7.400%, due 07/30/99........................... SPN 625,000,000 4,482,719 10.300%, due 06/15/02........................... 200,000,000 1,537,369 8.000%, due 05/30/04........................... 190,000,000 1,256,787 ------------ 7,276,875 ------------ UNITED KINGDOM--2.52% UK Treasury 7.000%, due 11/06/01........................... GBP 2,505,000 3,720,384 8.000%, due 06/10/03........................... 1,640,000 2,542,522 UK Treasury Index-Linked (b) 2.500%, due 04/16/20........................... 404,000 893,693 4.125%, due 07/22/30........................... 1,140,000 2,077,416 ------------ 9,234,015 ------------ Total Non-U.S. Bonds............................ 68,223,369 ------------ Total Bonds (Cost $176,753,391)............................ 183,909,619 ------------
FACE MARKET AMOUNT VALUE ------------- ------------- Short-Term Investments -- 9.41% U.S. CORPORATE BOND -- 0.10% U.S. West Financial Services, Inc. FRN 3.700%, due 09/05/95.......................................... $ 375,000 $ 375,000 ------------- COMMERCIAL PAPER -- 9.19% Capital Access Trust, Inc. (Caterpillar) 6.150%, due 07/05/95.............................. 1,000,000 999,317 Columbia /HCA Healthcare 6.100%, due 07/11/95.............................. 7,480,000 7,467,325 Conagra Australia, Inc. 6.090%, due 07/05/95.............................. 2,000,000 1,998,647 6.050%, due 07/12/95.............................. 1,000,000 998,151 Crown Cork & Seal Co., Inc. 6.120%, due 07/05/95.............................. 4,000,000 3,997,280 6.050%, due 07/07/95.............................. 1,000,000 998,992 Ingersoll-Rand 6.130%, due 07/11/95.............................. 2,000,000 1,996,594 Maytag Corp. 6.200%, due 07/03/95.............................. 3,000,000 2,998,967 Sunstrand Corp. 6.400%, due 07/03/95.............................. 2,266,000 2,265,194 Texas Utilities Electric Co. 6.500%, due 07/03/95.............................. 4,908,000 4,906,228 Union Oil Company of California 6.110%, due 07/19/95.............................. 5,000,000 4,984,725 ------------- 33,611,420 ------------- FOREIGN TIME DEPOSIT -- 0.12% Bankers Trust Japanese Yen 1.125%, due 07/03/95.............................. JPY 36,604,118 431,195 ------------- Total Short-Term Investments (Cost $34,374,741)................................ 34,417,615 ------------- Total Investments (Cost $327,734,650) -- 95.67% (d) 349,865,470 ------------- Cash and other assets, less liabilities 4.33%...... 15,812,455 ------------- Net Assets -- 100%................................. $ 365,677,925 =============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 15 BRINSON GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Denominated in U.S. dollars. (b)Linked to Britain's retail price index. Reset semi-annually. (c)Non-income producing security. (d)Aggregate cost for federal income tax purposes was $327,734,650; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $25,905,748 Gross unrealized depreciation................................ (3,774,928) ----------- Net unrealized appreciation.............................. $22,130,820 ===========
FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1995. FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Brinson Global Fund had the following open forward foreign currency contracts as of June 30, 1995:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ----------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar........... 12/01/95 3,500,000 $ 2,472,822 $ (55,315) Canadian Dollar............. 12/01/95 22,000,000 15,957,336 (19,425) Swedish Krone............... 12/01/95 29,000,000 3,926,351 47,790 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar........... 12/01/95 3,500,000 2,472,822 16,727 Belgian Franc............... 12/01/95 100,000,000 3,530,605 (137,208) British Pound............... 12/01/95 4,000,000 6,297,164 (29,564) Danish Kroner............... 12/01/95 15,500,000 2,858,872 (112,106) Dutch Guilder............... 12/01/95 15,000,000 9,737,077 (346,230) French Franc................ 12/01/95 45,000,000 9,250,426 (460,333) German Mark................. 12/01/95 19,000,000 13,803,247 (486,735) Japanese Yen................ 12/01/95 1,250,000,000 15,024,816 (368,936) Spanish Peseta.............. 12/01/95 446,000,000 3,631,323 ( 33,678) ----------- Total..................... $(1,985,013) ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 BRINSON GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 ASSETS: Investments, at market value (Cost $327,734,650) (Note 1)........ $349,865,470 Cash............................................................. 1,460,086 Foreign currency, at market value (Cost $1,353,404).............. 1,381,478 Receivables: Investment securities sold...................................... 45,064,677 Dividends....................................................... 272,101 Interest........................................................ 3,751,235 Fund shares sold................................................ 2,409 Deferred organization costs, net of amortization (Note 1)........ 33,113 Other assets..................................................... 77,146 ------------ TOTAL ASSETS.................................................. 401,907,715 ------------ LIABILITIES: Payables: Investment securities purchased................................. 33,770,831 Net unrealized depreciation on forward foreign currency con- tracts......................................................... 1,985,013 Fund shares redeemed............................................ 57,875 Investment advisory fees (Note 2)............................... 239,764 Accrued expenses................................................ 176,307 ------------ TOTAL LIABILITIES............................................. 36,229,790 ------------ NET ASSETS: Applicable to 32,208,149 shares; par value of $0.001 per share; unlimited shares authorized..................................... $365,677,925 ============ Net asset value, offering price and redemption price per share ($365,677,925 / 32,208,149 shares).............................. $ 11.35 ============ NET ASSETS CONSIST OF: Paid in capital.................................................. $337,649,200 Accumulated undistributed net investment income.................. 4,495,172 Accumulated net realized gain on investments and foreign curren- cy.............................................................. 3,277,834 Net unrealized appreciation on investments and foreign currency.. 20,255,719 ------------ NET ASSETS.................................................... $365,677,925 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 BRINSON GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995 INVESTMENT INCOME: Interest......................................................... $15,154,558 Dividends (net of $56,977 for foreign taxes withheld)............ 2,905,675 ----------- TOTAL INCOME.................................................. 18,060,233 ----------- EXPENSES: Advisory fees (Note 2)........................................... 2,681,392 Custodian fees................................................... 218,400 Administration fees.............................................. 211,243 Accounting fees.................................................. 191,226 Amortization of organization costs (Note 1)...................... 15,394 Other............................................................ 353,816 ----------- TOTAL EXPENSES................................................ 3,671,471 ----------- NET INVESTMENT INCOME ........................................ 14,388,762 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain (loss) on: Investments..................................................... 6,415,749 Futures contracts............................................... (646,404) Foreign currency transactions................................... (3,202,315) ----------- Net realized gain on investments and foreign currency......... 2,567,030 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................ 24,593,518 Futures contracts............................................... 1,105,130 Forward contracts............................................... (1,939,293) Translation of other assets and liabilities denominated in for- eign currency.................................................. 20,390 ----------- Change in net unrealized appreciation or depreciation on in- vestments and foreign currency............................... 23,779,745 ----------- Net realized and unrealized gain on investments and foreign cur- rency........................................................... 26,346,775 ----------- Net increase in net assets resulting from operations............. $40,735,537 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 BRINSON GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE 30, 1995 JUNE 30, 1994 ------------- ------------- OPERATIONS: Net investment income............................. $ 14,388,762 $ 7,929,618 Net realized gain on investments and foreign cur- rency............................................ 2,567,030 2,743,471 Change in net unrealized appreciation or deprecia- tion on investments and foreign currency............................. 23,779,745 (9,848,878) ------------ ------------ Net increase in net assets resulting from opera- tions............................................ 40,735,537 824,211 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income.......... (8,427,640) (5,998,877) Distributions from net realized gain.............. (2,567,030) (2,743,471) Distributions in excess of net realized gain...... (275,888) (3,596,618) ------------ ------------ Total distributions to shareholders............... (11,270,558) (12,338,966) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold....................................... 124,484,442 120,367,037 Shares issued on reinvestment of distributions.... 10,276,565 11,234,195 Shares redeemed................................... (77,406,972) (32,616,854) ------------ ------------ Net increase in net assets resulting from capital share transactions (a)........................... 57,354,035 98,984,378 ------------ ------------ TOTAL INCREASE IN NET ASSETS................... 86,819,014 87,469,623 NET ASSETS: Beginning of year................................. 278,858,911 191,389,288 ------------ ------------ End of year (including accumulated undistributed net investment income of $4,495,172 and $4,174,833, respectively)......... $365,677,925 $278,858,911 ============ ============
(a) A summary of capital share transactions follows:
SHARES SHARES ------------ ------------ Shares sold........................................ 11,726,672 11,094,031 Shares issued on reinvestment of distributions..... 960,415 1,042,275 Shares redeemed.................................... (7,205,445) (3,012,247) ------------ ------------ Net increase in shares outstanding................ 5,481,642 9,124,059 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 BRINSON GLOBAL FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR YEAR PERIOD ENDED ENDED ENDED JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1993* ------------- ------------- -------------- Net asset value, beginning of peri- od................................. $ 10.43 $ 10.87 $ 10.00 -------- -------- -------- Income from investment operations: Net investment income.............. 0.43 0.33 0.26 Net realized and unrealized gain (loss) on investments and foreign currency.................. 0.86 (0.23) 0.81 -------- -------- -------- Total income from investment op- erations....................... 1.29 0.10 1.07 -------- -------- -------- Less distributions: Distributions from net investment income............................ (0.27) (0.27) (0.20) Distributions from net realized gain.............................. (0.09) (0.12) -- Distributions in excess of net re- alized gain....................... (0.01) (0.15) -- -------- -------- -------- Total distributions............. (0.37) (0.54) (0.20) -------- -------- -------- Net asset value, end of period...... $ 11.35 $ 10.43 $ 10.87 ======== ======== ======== Total return........................ 12.57% 0.77% 10.76% Ratios/Supplemental data Net assets, end of period (in 000s)............................. $365,678 $278,859 $191,389 Ratio of expenses to average net assets: Before expense reimbursement...... 1.09% 1.14% 1.35%** After expense reimbursement....... N/A 1.10% 1.05%** Ratio of net investment income to average net assets: Before expense reimbursement...... 4.27% 3.21% 3.26%** After expense reimbursement....... N/A 3.25% 3.56%** Portfolio turnover rate............ 238% 231% 149%
* The Fund commenced operations on August 31, 1992 ** Annualized N/A = Not Applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 BRINSON GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
MARKET SHARES VALUE ------ ----------- Equities -- 92.41% U.S. EQUITIES -- 42.99% Aetna Life & Casualty Co.................................. 1,900 $ 119,463 Air & Water Technologies Corp. (b)........................ 2,600 15,600 Allergan, Inc............................................. 5,000 135,625 Alza Corp. (b)............................................ 3,900 91,162 American Mobile Satellite (b)............................. 700 18,375 AON Corp.................................................. 6,100 227,225 AST Research Corp. (b).................................... 2,400 37,200 Automatic Data Processing, Inc............................ 2,900 182,337 Ball Corp................................................. 1,000 34,875 Bard (C.R.), Inc.......................................... 3,000 90,000 Beckman Instruments, Inc.................................. 2,000 55,750 Biogen, Inc. (b).......................................... 400 17,800 Birmingham Steel.......................................... 2,000 37,000 Boeing.................................................... 2,700 169,088 Burlington Northern, Inc.................................. 4,600 291,525 Campbell Soup Co.......................................... 1,500 73,500 Centerior Energy Co....................................... 3,500 33,687 Chubb Corp................................................ 1,100 88,138 CIGNA Corp................................................ 3,700 287,212 Citicorp.................................................. 8,300 480,362 CMS Energy Corp........................................... 4,600 113,275 Coca-Cola Enterprises, Inc................................ 7,700 168,437 Comerica, Inc............................................. 1,300 41,762 Computer Sciences Corp. (b)............................... 700 39,813 Cooper Industries, Inc.................................... 6,600 260,700 Enron Corp................................................ 2,200 77,275 Entergy Corp.............................................. 5,400 130,275 Federal Department Stores (b)............................. 3,500 90,125 FHP International Corp. (b)............................... 1,300 29,900 First Financial Management Corp........................... 2,600 222,300 Ford Motor Co............................................. 4,300 127,925 Forest Laboratories, Inc. (b)............................. 3,000 133,125 Genzyme Corp. (b)......................................... 600 24,000 Goodyear Tire & Rubber.................................... 3,500 144,375 Harnischfeger Industries, Inc............................. 700 24,238 Hillenbrand Industries, Inc............................... 1,500 46,687 Honeywell, Inc............................................ 8,600 370,875 Illinova Corp. Holding.................................... 2,700 68,513 Inland Steel.............................................. 2,900 88,450 Interpublic Group of Companies............................ 2,000 75,000 Kimberly-Clark Corp....................................... 3,700 221,538 Kroger Co. (b)............................................ 2,800 75,250 Liz Claiborne, Inc........................................ 2,300 48,875 Lockheed Martin Corp...................................... 6,200 391,375 LTV Corp.................................................. 2,900 42,412 Lyondell Petrochemical Co................................. 4,800 123,000 Magna Group Inc........................................... 1,000 22,000 Manor Care, Inc........................................... 3,200 93,200 Mattel.................................................... 6,600 171,600 Melville Corp............................................. 5,000 171,250 National Semiconductor Corp. (b).......................... 3,100 86,025 Nextel Communications, Inc. (b)........................... 2,700 38,138 Occidental Petroleum Corp................................. 600 13,725 Old Republic International Corp........................... 1,900 49,638
MARKET SHARES VALUE ------ ----------- Owens Illinois, Inc. (b)................................... 5,600 $ 72,800 Pentair, Inc............................................... 1,100 47,850 Pfizer, Inc................................................ 2,300 212,462 Philip Morris Companies, Inc............................... 1,400 104,125 Raychem Corp............................................... 1,700 65,238 RJR Nabisco Convertible Preferred "C"...................... 15,900 97,388 RJR Nabisco Holdings Corp.................................. 4,800 133,800 Schering Plough Corp....................................... 7,500 330,937 Schlumberger Ltd........................................... 3,000 186,375 Seagate Technology (b)..................................... 2,700 105,975 Sprint Corp................................................ 7,200 242,100 State Street Boston Corp................................... 1,900 70,063 Stone Container Corp. (b).................................. 1,400 29,750 Tenneco, Inc............................................... 3,200 147,200 Timken Co.................................................. 2,000 92,250 TJX Cos.................................................... 3,900 51,675 Tosco Corp................................................. 900 28,687 Transamerica Corp.......................................... 2,800 163,100 Ultramar Corp.............................................. 1,500 37,875 US Bancorp................................................. 3,300 79,406 USF&G Corp................................................. 4,700 76,375 Walgreen Co................................................ 3,000 150,375 Wellman, Inc............................................... 600 16,425 Westvaco Corp.............................................. 1,100 48,675 ----------- Total U.S. Equity.......................................... 8,901,906 ----------- NON-U.S. EQUITIES -- 49.42% AUSTRALIA -- 3.35% Amcor Ltd. ................................................ 6,000 44,148 ANZ Banking Group.......................................... 8,947 31,711 Broken Hill Proprietary.................................... 11,550 141,806 BTR Nylex Ltd.............................................. 20,000 38,137 Coles Myer Ltd............................................. 9,000 28,135 CRA Ltd.................................................... 7,500 101,758 Lend Lease................................................. 2,500 31,864 National Australia Bank.................................... 8,275 65,229 News Corp.................................................. 7,000 39,002 News Corp. Preferred....................................... 3,500 17,293 Pacific Dunlop Ltd......................................... 14,000 29,376 Santos Ltd................................................. 7,500 17,969 Southcorp Holdings......................................... 13,748 27,385 Western Mining Corp........................................ 5,000 27,398 Westpac Banking Corp....................................... 14,545 52,480 ----------- 693,691 ----------- BELGIUM -- 1.39% Electrabel................................................. 300 63,358 Fortis AG.................................................. 300 31,732 Kredietbank................................................ 175 41,387 Petrofina.................................................. 150 45,278 Petrofina Warrants (b)..................................... 10 139 Solvay..................................................... 60 33,207 Tractebel.................................................. 200 72,565 ----------- 287,666 -----------
- -------------------------------------------------------------------------------- 25 BRINSON GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
MARKET SHARES VALUE ------ ----------- CANADA -- 3.02% Alcan Aluminium Ltd....................................... 1,700 $ 51,354 Bank of Montreal.......................................... 3,500 73,246 Barrick Gold Corp......................................... 1,300 32,883 Canadian Pacific Ltd...................................... 4,700 80,825 Imperial Oil Canada Ltd................................... 1,800 66,822 Norcen Energy............................................. 1,000 13,466 Northern Telecom Ltd...................................... 800 28,971 Nova Corporation of Alberta............................... 2,600 22,001 Oshawa Group Ltd. "A"..................................... 1,400 21,655 Royal Bank of Canada...................................... 2,800 62,673 Seagram Co Ltd............................................ 2,400 82,545 Thomson Corp.............................................. 3,900 53,228 TransCanada Pipeline...................................... 2,600 34,776 ----------- 624,445 ----------- FRANCE -- 3.33% Alcatel Alsthom........................................... 411 37,035 Banque Nat'l de Paris..................................... 800 38,618 Cie Bancaire.............................................. 280 33,502 Cie de Saint Gobain....................................... 370 44,728 Cie de Suez............................................... 700 38,974 Credit Local de France.................................... 413 38,340 GAN....................................................... 300 9,525 Generale des Eaux......................................... 612 68,175 Groupe de la Cite......................................... 200 35,482 LVMH...................................................... 330 59,431 Michelin Class B (b)...................................... 500 22,166 Pechiney Cert D'Invest.................................... 400 23,079 Peuegot SA (b)............................................ 250 34,709 Sanofi.................................................... 600 33,234 Societe Generale.......................................... 732 85,620 Total Co. "B"............................................. 1,100 66,261 UAP....................................................... 800 20,992 ----------- 689,871 ----------- GERMANY -- 2.97% Allianz................................................... 38 68,060 Allianz Rights............................................ 38 2,883 BASF AG................................................... 140 29,859 Bayer..................................................... 140 34,765 Bayer Motoren Worken...................................... 60 32,902 Bayer Vereinsbank......................................... 90 27,245 Commerzbank............................................... 130 31,136 Daimler-Benz.............................................. 50 22,993 Deutsche Bank............................................. 1,900 92,385 Hoechst................................................... 140 30,193 Kaufhof Holdings.......................................... 115 41,294 Mannesmann................................................ 100 30,525 Munchener Ruck............................................ 23 50,351 Munchener Ruck Warrants '98 (b)........................... 3 395 Preussag.................................................. 110 32,902 Schering.................................................. 250 17,466 Veba...................................................... 180 70,616 ----------- 615,970 -----------
MARKET SHARES VALUE ------ ----------- HONG KONG -- 1.13% China Light & Power....................................... 12,000 $ 61,725 Hang Seng Bank............................................ 2,000 15,251 Hong Kong Land Holdings................................... 6,000 10,920 Hutchison Whampoa......................................... 15,000 72,504 Jardine Matheson.......................................... 1,000 7,350 Swire Pacific "A"......................................... 6,000 45,751 Wharf Holdings............................................ 6,000 19,580 ----------- 233,081 ----------- ITALY -- 1.09% Assic Generali............................................ 2,200 51,674 Fiat Spa Priv (b)......................................... 14,000 30,446 Instituto Mobilaire Italiano.............................. 6,000 36,689 Italgas................................................... 6,000 15,578 La Rinascente Savings..................................... 6,000 15,687 Mediobanca................................................ 1,000 7,260 Montedison (b)............................................ 20,000 14,307 Sai Di Risp............................................... 2,000 8,540 Telecom Italia Savings.................................... 21,000 44,387 ----------- 224,568 ----------- JAPAN -- 17.19% Amada..................................................... 10,000 85,405 Asahi Glass Co. .......................................... 7,000 77,182 Bank of Tokyo............................................. 4,000 64,083 Canon, Inc. .............................................. 5,000 81,282 Canon Sales............................................... 2,000 55,366 Citizen Watch Co. ........................................ 5,000 30,922 Dai Nippon Printing....................................... 8,000 127,224 Daikin Kogyo Co. ......................................... 3,000 24,101 Daiwa Bank................................................ 4,000 36,046 Daiwa House Industries.................................... 4,000 61,256 Fanuc Co. ................................................ 1,400 60,361 Fujitsu................................................... 9,000 89,587 Hitachi Ltd. ............................................. 17,000 169,219 Honda Motor Co. .......................................... 3,000 45,942 Inax...................................................... 6,000 57,745 Isetan.................................................... 2,000 27,094 Ito Yokado Co. ........................................... 3,000 157,969 Keio Teito Electric Railway .............................. 6,000 35,057 Kinki Nippon Railway ..................................... 6,000 52,586 Kuraray Co. Ltd. ......................................... 3,000 32,548 Maeda Road Construction................................... 1,000 19,319 Matsushita Electric Industrial............................ 9,000 139,946 Mitsubishi Bank........................................... 3,000 64,672 Mitsubishi Paper.......................................... 7,000 36,777 NGK Insulators............................................ 9,000 81,529 Nichii Co. ............................................... 5,000 54,247 Nintendo.................................................. 500 28,684 Nippon Denso Co. ......................................... 4,000 72,565 Nippon Meat Packers....................................... 3,000 43,821 Nippon Steel Corp. ....................................... 5,000 16,256 Orix Corp. ............................................... 1,000 33,220 Osaka Gas Corp. .......................................... 36,000 132,737
- -------------------------------------------------------------------------------- 26 BRINSON GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
MARKET JAPAN (CONTINUED) SHARES VALUE ------ ----------- Pioneer Electronic........................................ 3,000 $ 50,889 Sankyo Co. ............................................... 4,400 102,109 Secom Co. ................................................ 1,000 62,787 Seino Transport........................................... 2,000 33,690 Sekisui House............................................. 12,000 148,427 Sony Corp. ............................................... 2,100 100,683 Suisan Kaisah ............................................ 1,000 10,095 Sumitomo Bank ............................................ 6,000 103,899 Sumitomo Electric Industries.............................. 6,000 71,386 Takeda Chemical Industries................................ 7,000 92,355 TDK Corp. ................................................ 2,000 90,941 Tokio Marine & Fire ...................................... 5,000 57,251 Tokyo Electric Power ..................................... 2,100 64,318 Tokyo Steel Mfg. ......................................... 5,000 85,405 Tonen Corp. .............................................. 3,000 46,649 Toray Industries, Inc. ................................... 20,000 124,161 Toshiba Corp. ............................................ 19,000 120,191 Toyota Motor Corp. ....................................... 5,000 98,951 ----------- 3,558,935 ----------- MALAYSIA -- 0.28 % Genting................................................... 1,000 9,886 Hume Industries........................................... 1,000 5,456 Kuala Lumpur Kepong....................................... 1,000 3,179 Malayan Bank.............................................. 2,000 15,833 Sime Darby................................................ 4,000 11,157 Telekom Malaysia.......................................... 1,000 7,588 Tenaga Nasional........................................... 1,000 4,081 ----------- 57,180 ----------- NETHERLANDS -- 2.99% ABN-AMRO Holdings......................................... 2,104 81,148 ABN-AMRO Holdings Coupon.................................. 2,104 2,348 D.S.M..................................................... 350 30,135 Elsevier.................................................. 3,500 41,309 Internationale Nederlanden Grp............................ 1,845 101,978 Internationale Nederlanden Grp Coupon..................... 1,845 2,582 Philips Electronics....................................... 600 25,385 Royal Dutch Petroleum..................................... 800 97,620 Royal Dutch Petroleum ADS (a)............................. 1,200 146,250 Unilever.................................................. 700 91,016 ----------- 619,771 ----------- NEW ZEALAND -- 1.28% Brierley Investment....................................... 51,000 38,512 Carter Holt Harvey........................................ 37,500 91,720 Fletcher Challenge Ltd.................................... 24,000 67,362 New Zealand Telecom ADS................................... 1,100 66,688 ----------- 264,282 ----------- SPAIN -- 1.02% Banco Bilbao-Vizcaya...................................... 800 23,090 Banco Popular............................................. 100 14,865 Banco Santander........................................... 600 23,660 Empresa Nac Electric...................................... 450 22,223
MARKET SHARES VALUE ------ ----------- Iberorola SA Ord.......................................... 5,100 $ 38,411 Sevillana De Electric..................................... 3,000 18,457 Telefonica De Espana...................................... 4,500 57,974 Viscofan.................................................. 900 13,304 ----------- 211,984 ----------- SWITZERLAND -- 1.78% BBC Brown Boverie (Br).................................... 25 25,868 Ciba Geigy (Reg.)......................................... 50 36,632 CS Holdings............................................... 800 73,264 Nestle (Reg.)............................................. 100 104,080 Roche Holdings Gen........................................ 15 96,614 Zurich Insurance.......................................... 25 31,402 ----------- 367,860 ----------- UNITED KINGDOM -- 8.60% Bass...................................................... 5,100 48,809 BAT Industries............................................ 7,000 53,572 BET....................................................... 10,000 19,570 British Gas............................................... 22,500 103,640 British Petroleum......................................... 12,852 92,121 British Telecommunications................................ 22,000 137,216 Charter Group............................................. 3,750 54,177 Coats Viyella............................................. 13,000 38,472 FKI....................................................... 9,500 24,033 FKI Rights................................................ 2,375 1,266 General Electric PLC...................................... 22,000 107,462 Glaxo Holdings............................................ 6,500 79,789 Grand Metropolitan........................................ 14,000 85,871 Guinness.................................................. 8,500 63,969 Hanson.................................................... 8,000 28,003 Hillsdown Holdings........................................ 16,000 45,823 House of Fraser........................................... 20,000 40,414 Legal and General......................................... 4,500 38,091 Lloyds Abbey Life......................................... 7,000 43,548 Lloyds Bank............................................... 14,600 144,955 Lucas Industries.......................................... 5,500 16,496 Marks & Spencer........................................... 5,000 32,180 Mirror Group.............................................. 10,000 21,162 National Power............................................ 3,000 21,265 National Westminster Bank................................. 5,000 43,437 Ocean Group............................................... 7,000 34,638 P & O..................................................... 2,000 18,425 Reckitt & Colman.......................................... 3,500 36,921 Redland................................................... 2,500 16,388 Rolls Royce............................................... 12,000 33,318 Sears PLC................................................. 20,000 31,663 SmithKline Beecham Units.................................. 8,000 71,026 Tesco..................................................... 20,000 92,283 Thames Water.............................................. 4,000 30,294 W.H. Smith Group A........................................ 6,000 31,313 ----------- 1,781,610 ----------- Total Non-U.S. Equities................................... 10,230,914 ----------- Total Equities (Cost $18,277,315)....................................... 19,132,820 -----------
- -------------------------------------------------------------------------------- 27 BRINSON GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
FACE MARKET AMOUNT VALUE ----------- ----------- Short-Term Investments -- 2.30% U.S. GOVERNMENT OBLIGATIONS -- 1.18% U.S. Treasury Bills 5.710%, due 11/16/95................ $ 250,000 $ 244,815 ----------- COMMERCIAL PAPER -- 1.12% Texas Utilities Electric Co. 6.500%, due 07/03/95................................... 233,000 232,916 ----------- Total Short-Term Investments (Cost $477,530)........................................ 477,731 ----------- Total Investments (Cost $18,754,845) -- 94.71% (c)....................... 19,610,551 ----------- Cash and other assets, less liabilities -- 5.29%........ 1,095,014 ----------- Net Assets -- 100%...................................... $20,705,565 ===========
See accompanying notes to schedules of investments. - -------------------------------------------------------------------------------- 28 BRINSON GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Denominated in U.S. dollars (b)Non-income producing security (c)Aggregate cost for federal income tax purposes was $18,754,845; and net unrealized appreciation consisted of: Gross unrealized appreciation................................. $1,785,640 Gross unrealized depreciation................................. (929,934) ---------- Net unrealized appreciation............................... $ 855,706 ==========
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Brinson Global Equity Fund had the following open forward foreign currency contracts as of June 30, 1995:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ----------- ---------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar............... 12/01/95 4,000,000 $2,901,334 $ (5,432) Italian Lira.................. 12/01/95 650,000,000 387,090 31 Swedish Krone................. 12/01/95 3,000,000 406,174 (1,545) FORWARD FOREIGN CURRENCY SALE CONTRACTS Belgian Franc................. 12/01/95 8,000,000 282,448 (7,818) British Pound................. 12/01/95 420,000 661,202 9,475 Dutch Guilder................. 12/01/95 950,000 616,682 (9,614) French Franc.................. 12/01/95 3,400,000 698,348 (22,574) German Mark................... 12/01/95 800,000 581,271 (7,918) Japanese Yen.................. 12/01/95 290,000,000 3,485,757 (599) Swiss Franc................... 12/01/95 400,000 351,141 (3,224) -------- Total..................... $(49,218) ========
FUTURES CONTRACTS (NOTE 5) INDEX FUTURES CONTRACTS: The Brinson Global Equity Fund had the following open index futures contracts as of June 30, 1995:
SETTLEMENT CURRENT UNREALIZED DATE VALUE LOSS ---------- ---------- ---------- INDEX FUTURES SALES CONTRACTS Standard & Poor's 500, 8 contracts............ Sept. 1995 $2,188,600 $(26,900) ========
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1995 was $244,815. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 29 BRINSON GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 ASSETS: Investments, at market value (Cost $18,754,845) (Note 1)......... $19,610,551 Cash............................................................. 15,262 Foreign currency, at market value (Cost $79,228)................. 80,365 Receivables: Investment securities sold...................................... 961,722 Dividends....................................................... 93,041 Due From Advisor (Note 2)....................................... 75,276 Unrealized appreciation on futures contracts.................... 5,178 Deferred organization costs, net of amortization (Note 1)........ 9,758 Other assets..................................................... 1,438 ----------- TOTAL ASSETS.................................................. 20,852,591 ----------- LIABILITIES: Payables: Investment securities purchased................................. 30,964 Net unrealized depreciation forward foreign currency contracts.. 49,218 Investment advisory fees (Note 2)............................... 13,602 Accrued expenses................................................ 53,242 ----------- TOTAL LIABILITIES............................................. 147,026 ----------- NET ASSETS: Applicable to 2,085,106 shares; par value of $0.001 per share; unlimited shares authorized..................................... $20,705,565 =========== Net asset value, offering price and redemption price per share ($20,705,565 / 2,085,106 shares)................................ $ 9.93 =========== NET ASSETS CONSIST OF: Paid in capital.................................................. $20,875,263 Accumulated undistributed net investment income.................. 59,734 Accumulated net realized loss on investments and foreign curren- cy.............................................................. (1,011,998) Net unrealized appreciation on investments and foreign currency.. 782,566 ----------- NET ASSETS.................................................... $20,705,565 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 30 BRINSON GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995 INVESTMENT INCOME: Dividends (net of $33,844 for foreign taxes withheld)............. $ 516,668 Interest.......................................................... 48,658 ---------- TOTAL INCOME................................................... 565,326 ---------- EXPENSES: Advisory fees (Note 2)............................................ 163,038 Accounting fees................................................... 68,248 Professional fees................................................. 56,633 Custodian fees.................................................... 49,370 Registration fees................................................. 39,388 Amortization of organization costs (Note 1)....................... 2,785 Other............................................................. 40,993 ---------- TOTAL EXPENSES................................................. 420,455 Expenses waived and reimbursed by Advisor (Note 2)............. (216,658) ---------- NET EXPENSES................................................... 203,797 ---------- NET INVESTMENT INCOME ......................................... 361,529 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain (loss) on: Investments...................................................... 116,399 Futures contracts................................................ (493,853) Foreign currency transactions.................................... (570,048) ---------- Net realized loss on investments and foreign currency.......... (947,502) ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................. 1,882,834 Futures contracts................................................ (137,150) Forward contracts................................................ 31,614 Translation of other assets and liabilities denominated in for- eign currency................................................... 1,504 ---------- Change in net unrealized appreciation or depreciation on in- vestments and foreign currency................................ 1,778,802 ---------- Net realized and unrealized gain on investments and foreign curren- cy................................................................ 831,300 ---------- Net increase in net assets resulting from operations............... $1,192,829 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 31 BRINSON GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED PERIOD JUNE 30, ENDED 1995 JUNE 30, 1994* ----------- -------------- OPERATIONS: Net investment income............................. $ 361,529 $ 161,189 Net realized loss on investments and foreign cur- rency............................................ (947,502) (169,840) Change in net unrealized appreciation or deprecia- tion on investments and foreign currency......... 1,778,802 (996,236) ----------- ----------- Net increase (decrease) in net assets resulting from operations.................................. 1,192,829 (1,004,887) ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income.......... (72,633) (86,612) Distributions in excess of net realized gain...... (198,395) -- ----------- ----------- Total distributions to shareholders............... (271,028) (86,612) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold....................................... 133,064 21,797,084 Shares issued on reinvestment of distributions.... 271,028 86,613 Shares redeemed................................... (1,262,526) (200,000) ----------- ----------- Net increase (decrease) in net assets resulting from capital share transactions (a)................................. (858,434) 21,683,697 ----------- ----------- TOTAL INCREASE IN NET ASSETS................... 63,367 20,592,198 ----------- ----------- NET ASSETS: Beginning of period............................... 20,642,198 50,000 ----------- ----------- End of period (including accumulated undistributed net investment income of $59,734 and $74,577, re- spectively)...................................... $20,705,565 $20,642,198 =========== =========== (a) A summary of capital share transactions fol- lows: SHARES SHARES ----------- -------------- Shares sold....................................... 13,700 2,181,168 Shares issued on reinvestment of distributions.... 28,495 9,185 Shares redeemed................................... (131,587) (20,855) ----------- ----------- Net increase (decrease) in shares outstanding.... (89,392) 2,169,498 =========== ===========
* The Fund commenced operations on January 28, 1994 See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 32 BRINSON GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR PERIOD ENDED ENDED JUNE 30, 1995 JUNE 30, 1994* ------------- -------------- Net asset value, beginning of period.............. $ 9.49 $ 10.00 ------- ------- Income from investment operations: Net investment income............................ 0.18 0.07 Net realized and unrealized gain (loss) on in- vestments and foreign currency.................. 0.39 (0.54) ------- ------- Total gain (loss) from investment operations.. 0.57 (0.47) ------- ------- Less distributions: Distributions from net investment income......... (0.04) (0.04) Distributions in excess of net realized gain..... (0.09) -- ------- ------- Total distributions........................... (0.13) (0.04) ------- ------- Net asset value, end of period.................... $ 9.93 $ 9.49 ======= ======= Total return...................................... 6.06% (4.70%) Ratios/Supplemental data Net assets, end of period (in 000s).............. $20,706 $20,642 Ratio of expenses to average net assets: Before expense reimbursement.................... 2.06% 2.65%** After expense reimbursement..................... 1.00% 1.00%** Ratio of net investment income to average net as- sets: Before expense reimbursement.................... 0.71% 0.24%** After expense reimbursement..................... 1.77% 1.89%** Portfolio turnover rate.......................... 36% 21%
* The Fund commenced operations on January 28, 1994 ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 BRINSON GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
FACE MARKET AMOUNT VALUE ----------- ----------- Bonds -- 87.39% U.S. BONDS -- 25.44% U.S. CORPORATE BONDS -- 6.49% Chemical Bank 6.500%, due 01/15/09.................................. $ 150,000 $ 138,527 Chrysler Auto Receivable 7.875%, due 07/15/99.................................. 105,000 108,198 Chrysler Financial 8.100%, due 02/03/97.................................. 165,000 169,099 Cox Communications 6.375%, due 06/15/00.................................. 225,000 222,763 Farmers Insurance Exchange 144-A 8.625%. due 05/01/24.................................. 250,000 240,105 Ford Credit Auto Lease Trust 95-1A2 6.350%, due 10/15/98.................................. 200,000 200,598 Ford Motor Credit 6.388%, due 11/03/97.................................. 300,000 299,625 GMAC MTN 5.650%, due 12/15/97.................................. 200,000 196,278 Green Tree Acceptance Corp. 94-A 6.900%, due 02/15/04.................................. 44,336 44,421 Green Tree Financial 94-2 8.300%, due 05/15/19.................................. 25,000 26,706 News America Corp. 7.750%, due 01/20/24.................................. 275,000 266,661 Republic Bank of New York Corp. FRN 6.025%, due 12/29/02.............................................. 255,000 243,525 RJR Nabisco, Inc. 8.625%, due 12/01/02.................................. 250,000 257,735 Standard Credit Card 94-1 4.650%, due 02/07/97.................................. 250,000 244,750 The Money Store 94-A3 5.525%, due 05/15/97.................................. 105,000 101,571 Time Warner, Inc. 9.125%, due 01/15/13.................................. 210,000 219,675 USX Corp. 7.200%, due 02/15/04.................................. 280,000 272,105 Woolworth Corporation 7.000%, due 06/01/00.................................. 115,000 114,210 ----------- 3,366,552 ----------- INTERNATIONAL DOLLAR BONDS -- .25% Republic of South Africa 9.625%, due 12/15/99.................................. 125,000 129,688 ----------- U.S. GOVERNMENT AGENCIES -- 8.44% Federal Home Loan Mortgage Corp. 7.000%, due 04/15/07.................................. 174,629 172,913 7.000%, due 11/15/07.................................. 140,000 140,490 7.000%, due 12/15/07.................................. 150,000 150,540 8.500%, due 07/15/21.................................. 97,538 102,728 Federal Home Loan Mortgage Corp. Gold 9.000%, due 05/01/24.................................. 446,669 468,869 8.500%, due 08/01/24.................................. 244,194 251,824 Federal National Mortgage Association 6.240%, due 01/28/04.................................. 75,000 71,411
FACE MARKET AMOUNT VALUE ----------- ----------- 7.400%, due 07/01/04............................... $ 305,000 $ 324,327 6.500%, due 02/25/19............................... 390,000 385,215 9.000%, due 08/01/21............................... 44,628 46,939 8.500%, due 07/01/22............................... 30,925 32,165 6.500%, due 02/01/24............................... 280,000 269,150 8.000%, due 06/01/24............................... 320,000 325,899 7.000%, due 05/01/25............................... 275,000 269,973 8.500%, due 05/02/25............................... 113,003 116,533 Government National Mortgage Association 9.000%, due 12/15/17............................... 310,386 325,903 7.000%, due 05/15/24............................... 90,000 88,509 8.500%, due 04/15/25............................... 505,000 524,093 6.000%, due 05/15/25............................... 250,000 250,625 Tennessee Valley Authority 6.875%, due 12/15/43............................... 65,000 59,654 ----------- 4,377,760 ----------- U.S GOVERNMENT OBLIGATIONS -- 10.26% U.S. Treasury Bonds 8.125%, due 05/15/21............................... 585,000 684,267 U.S. Treasury Coupon Strips 0.000%, due 11/15/19............................... 1,600,000 297,136 U.S. Treasury Notes 6.125%, due 07/31/96............................... 1,000,000 1,003,437 U.S. Treasury Notes 7.875%, due 04/15/98............................... 365,000 383,364 U.S. Treasury Notes 8.875%, due 02/15/99............................... 150,000 164,390 U.S. Treasury Notes 5.875%, due 03/31/99............................... 380,000 379,169 U.S. Treasury Notes 6.875%, due 08/31/99............................... 1,400,000 1,445,062 U.S. Treasury Notes 7.250%, due 05/15/04............................... 900,000 960,468 ----------- 5,317,293 ----------- Total U.S. Bonds.................................... 13,191,293 ----------- NON-U.S. BONDS -- 61.95% AUSTRALIA -- 2.65% Government of Australia 12.000%, due 11/15/01.............................. AUD 220,000 179,585 9.500%, due 08/15/03............................... 1,650,000 1,196,534 ----------- 1,376,119 ----------- BELGIUM -- 2.66% Kingdom of Belgium 8.750%, due 06/25/02............................... BEF 23,000,000 876,763 9.000%, due 03/28/03............................... 13,000,000 501,272 ----------- 1,378,035 ----------- DENMARK -- 5.83% Kingdom of Denmark 9.000%, due 11/15/00............................... DKR 7,000,000 1,345,072 Great Belt 7.000%, due 09/02/03............................... 9,900,000 1,677,221 ----------- 3,022,293 -----------
- -------------------------------------------------------------------------------- 37 BRINSON GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
FACE MARKET AMOUNT VALUE ----------- ------------ FRANCE -- 6.33% Eurofima 8.625%, due 09/01/99............................ FRF 5,100,000 $ 1,107,323 Government of France (OAT) 9.500%, due 06/25/98............................ 1,200,000 265,374 8.250%, due 02/27/04............................ 600,000 129,184 8.500%, due 12/26/12............................ 4,300,000 930,166 8.500%, due 04/25/23............................ 2,400,000 512,231 KFW International Finance 7.750%, due 02/17/98............................ 1,600,000 336,875 ------------ 3,281,153 ------------ GERMANY -- 9.80% Bundesrepublik Deutscheland 8.375%, due 05/21/01............................ DEM 650,000 507,799 8.000%, due 07/22/02............................ 700,000 536,898 6.250%, due 01/04/24............................ 700,000 428,365 Deutsche Bundesbahn 9.000%, due 12/01/00............................ 900,000 721,118 6.125%, due 10/28/03............................ 1,500,000 1,012,752 European Economic Community 6.500%, due 03/10/00............................ 750,000 546,745 Kingdom of Norway 6.125%, due 05/05/98............................ 1,040,000 761,535 LKB Baden-Wurt Finance 6.500%, due 09/15/08............................ 850,000 568,059 ------------ 5,083,271 ------------ ITALY -- 5.76% Deutschebank 11.750%, due 02/23/98........................... ITL1,500,000,000 930,061 European Investment Bank 12.750%, due 02/15/00........................... 580,000,000 370,695 Nordic Investment Bank 10.800%, due 05/24/03........................... 600,000,000 349,574 Republic of Italy BTP 9.000%, due 10/01/96............................ 500,000,000 297,986 8.500%, due 01/01/99............................ 600,000,000 330,717 8.500%, due 01/01/04............................ 1,450,000,000 710,832 ------------ 2,989,865 ------------ JAPAN -- 8.16% Government of Japan No.130 6.700%, due 06/20/00............................ JPY 110,000,000 1,572,576 Government of Japan No.140 6.600%, due 06/20/01............................ 24,000,000 347,829 Government of Japan No.145 5.500%, due 03/20/02............................ 15,000,000 207,851 International Bank of Reconstruction & Develop- ment 4.750%, due 12/20/04............................ 104,000,000 1,420,368 Republic of Italy 3.500%, due 06/20/01............................ 56,000,000 684,003 ------------ 4,232,627 ------------
FACE MARKET AMOUNT VALUE ---------- ------------- NETHERLANDS -- 6.90% Government of Nederlands 6.500%, due 04/15/03........................... NLG 750,000 $ 473,799 8.500%, due 06/01/06........................... 900,000 639,374 8.250%, due 09/15/07........................... 1,220,000 849,790 Rabobank 6.750%, due 06/25/03........................... 1,350,000 856,756 Republic of Austria 6.500%, due 05/07/99........................... 1,150,000 760,239 ------------- 3,579,958 ------------- SPAIN -- 5.93% European Investment Bank 11.250%, due 03/15/00.......................... SPN 185,000,000 1,507,737 Kingdom of Spain 7.400%, due 07/30/99........................... 140,000,000 1,004,707 8.000%, due 05/30/04........................... 85,000,000 563,321 ------------- 3,075,765 ------------- UNITED KINGDOM -- 7.93% British Gas PLC 8.125%, due 03/31/03........................... GBP 450,000 687,351 UK Treasury 7.000%, due 11/06/01........................... 450,000 668,332 8.000%, due 06/10/03........................... 750,000 1,162,739 UK Treasury Index-Linked (a) 2.500%, due 04/16/20........................... 391,000 864,936 4.125%, due 07/22/30........................... 400,000 728,918 ------------- 4,112,276 ------------- Total Non-U.S. Bonds............................ 32,131,362 ------------- Total Bonds (Cost $42,343,595).................. 45,322,655 ------------- Short-Term Investments -- 8.83% FOREIGN TIME DEPOSITS -- 3.68% Bankers Trust Japanese Yen -- 3.68% 4.50%, due 07/05/95............................ JPY 161,510,385 1,906,880 ------------- COMMERCIAL PAPER -- 5.15% Conagra Australia, Inc. 6.320%, due 07/03/95........................... $ 1,375,000 1,374,517 Texas Utilities Electric Co. 6.500%, due 07/03/95........................... 1,300,000 1,299,531 ------------- Total Commercial Paper.......................... 2,674,048 ------------- Total Short-Term Investments (Cost $4,524,401).............................. 4,580,928 ------------- Total Investments (Cost $46,867,996) -- 96.22% (b) 49,903,583 ------------- Cash and other assets, less liabilities -- 3.78%...................... 1,958,935 ------------- Net Assets -- 100%.............................. $ 51,862,518 =============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 38 BRINSON GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Linked to Britain's retail price index. Reset semi-annually. (b)Aggregate cost for federal income tax purposes was $46,867,996; and net unrealized appreciation consisted of: Gross unrealized appreciation................................. $3,233,019 Gross unrealized depreciation................................. (197,432) ---------- Net unrealized appreciation............................... $3,035,587 ==========
FRN: Floating Rate Note--The rate disclosed is that in effect at June 30, 1995. MTN: Medium Term Note FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Brinson Global Bond Fund had the following open forward foreign currency contracts as of June 30, 1995:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ---------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Australian Dollar............. 12/01/95 1,600,000 $1,130,433 $ (24,287) Canadian Dollar............... 12/01/95 10,000,000 7,253,335 (8,829) Italian Lira.................. 12/01/95 1,000,000,000 595,569 19,233 Swedish Krone................. 12/01/95 9,700,000 1,313,297 15,985 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar............. 12/01/95 1,600,000 1,130,433 7,647 Belgian Franc................. 12/01/95 38,000,000 1,341,630 (52,139) British Pound................. 12/01/95 2,170,000 3,416,212 (11,891) Danish Kroner................. 12/01/95 7,000,000 1,291,103 (50,628) Dutch Guilder................. 12/01/95 5,500,000 3,570,262 (126,951) French Franc.................. 12/01/95 16,000,000 3,289,366 (163,674) German Mark................... 12/01/95 7,000,000 5,085,407 (179,324) Japanese Yen.................. 12/01/95 500,000,000 6,009,926 (147,574) Spanish Peseta................ 12/01/95 195,000,000 1,587,686 (16,626) --------- Total..................... $(739,058) =========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 39 BRINSON GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 ASSETS: Investments, at market value (Cost $46,867,996) (Note 1)......... $49,903,583 Cash............................................................. 23,830 Foreign currency, at market value (Cost $1,073,684).............. 1,076,122 Receivables: Investment securities sold...................................... 5,788,908 Interest........................................................ 1,107,213 Fund shares sold................................................ 1,300,000 Due from Advisor (Note 2)....................................... 59,120 Deferred organization costs, net of amortization (Note 1)........ 8,659 Other assets..................................................... 24,050 ----------- TOTAL ASSETS.................................................. 59,291,485 ----------- LIABILITIES: Payables: Investment securities purchased................................. 6,602,968 Net unrealized depreciation on forward foreign currency con- tracts......................................................... 739,058 Investment advisory fees (Note 2)............................... 31,183 Accrued expenses................................................ 55,758 ----------- TOTAL LIABILITIES............................................. 7,428,967 ----------- NET ASSETS: Applicable to 4,991,549 shares; par value of $0.001 per share; unlimited shares authorized..................................... $51,862,518 =========== Net asset value, offering price and redemption price per share ($51,862,518 / 4,991,549 shares)................................ $ 10.39 =========== NET ASSETS CONSIST OF: Paid in capital.................................................. $49,326,686 Accumulated undistributed net investment income.................. 1,095,344 Accumulated net realized loss on investments and foreign curren- cy.............................................................. (882,418) Net unrealized appreciation on investments and foreign currency.. 2,322,906 ----------- NET ASSETS.................................................... $51,862,518 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 40 BRINSON GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995 INVESTMENT INCOME: Interest.......................................................... $3,058,914 ---------- TOTAL INCOME................................................... 3,058,914 ---------- EXPENSES: Advisory fees (Note 2)............................................ 329,156 Accounting fees................................................... 79,439 Professional fees................................................. 60,034 Custodian fees.................................................... 54,952 Registration fees................................................. 44,378 Amortization of organization costs (Note 1)....................... 2,803 Other............................................................. 58,165 ---------- TOTAL EXPENSES................................................. 628,927 Expenses waived by Advisor (Note 2)............................ (233,940) ---------- NET EXPENSES................................................... 394,987 ---------- NET INVESTMENT INCOME.......................................... 2,663,927 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain (loss) on: Investments...................................................... 1,053,431 Futures contracts................................................ 49,353 Foreign currency transactions.................................... (1,570,195) ---------- Net realized loss on investments and foreign currency........... (467,411) ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................. 3,403,211 Futures contracts................................................ 98,640 Forward contracts................................................ (619,044) Translation of other assets and liabilities denominated in for- eign currency................................................... (3,364) ---------- Change in net unrealized appreciation or depreciation on invest- ments and foreign currency..................................... 2,879,443 ---------- Net realized and unrealized gain on investments and foreign cur- rency............................................................ 2,412,032 ---------- Net increase in net assets resulting from operations.............. $5,075,959 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 41 BRINSON GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED PERIOD JUNE 30, ENDED 1995 JUNE 30, 1994* ----------- -------------- OPERATIONS: Net investment income............................. $ 2,663,927 $ 1,238,505 Net realized loss on investments and foreign cur- rency............................................ (467,411) (984,858) Change in net unrealized appreciation or deprecia- tion on investments and foreign currency......... 2,879,443 (556,537) ----------- ----------- Net increase (decrease) in net assets resulting from operations.................................. 5,075,959 (302,890) ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income.......... (1,146,710) (835,923) Distributions in excess of net realized gain...... -- (254,604) ----------- ----------- Total distributions to shareholders............... (1,146,710) (1,090,527) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold....................................... 15,734,111 38,643,595 Shares issued on reinvestment of distributions.... 824,053 259,281 Shares redeemed................................... (5,474,354) (710,000) ----------- ----------- Net increase in net assets resulting from capital share transactions (a)........................... 11,083,810 38,192,876 ----------- ----------- TOTAL INCREASE IN NET ASSETS................... 15,013,059 36,799,459 ----------- ----------- NET ASSETS: Beginning of period............................... 36,849,459 50,000 ----------- ----------- End of period (including accumulated undistributed net investment income of $1,095,344 and $664,039, respectively).................................... $51,862,518 $36,849,459 =========== =========== (a) A summary of capital share transactions follows: SHARES SHARES ----------- -------------- Shares sold....................................... 1,615,817 3,902,459 Shares issued on reinvestment of distributions.... 80,422 25,790 Shares redeemed................................... (564,413) (73,526) ----------- ----------- Net increase in shares outstanding............... 1,131,826 3,854,723 =========== ===========
* The Fund commenced operations on July 30, 1993 See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 42 BRINSON GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR PERIOD ENDED ENDED JUNE 30, 1995 JUNE 30, 1994* ------------- -------------- Net asset value, beginning of period.............. $ 9.55 $ 10.00 ------- ------- Income (loss) from investment operations: Net investment income ........................... 0.50 0.45 Net realized and unrealized gain (loss) on in- vestments and foreign currency.................. 0.58 (0.52) ------- ------- Total income (loss) from investment opera- tions........................................ 1.08 (0.07) ------- ------- Less distributions: Distributions from net investment income......... (0.24) (0.28) Distributions in excess of net realized gain..... -- (0.10) ------- ------- Total distributions........................... (0.24) (0.38) ------- ------- Net asset value, end of period.................... $ 10.39 $ 9.55 ======= ======= Total return...................................... 11.34% (0.79%) Ratios/Supplemental data Net assets, end of period (in 000s).............. $51,863 $36,849 Ratio of expenses to average net assets: Before expense reimbursement.................... 1.43% 1.78%** After expense reimbursement..................... 0.90% 0.90%** Ratio of net investment income to average net as- sets: Before expense reimbursement.................... 5.53% 4.03%** After expense reimbursement..................... 6.06% 4.91%** Portfolio turnover rate.......................... 199% 189%
* The Fund commenced operations on July 30, 1993 ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 43 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1.SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is a no-load, 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 ten series: Brinson Global Fund, Brinson Global Equity Fund, Brinson Global Bond Fund, Brinson Short-Term Global Income Fund, Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund, Brinson U.S. Bond Fund, Brinson U.S. Cash Management Fund, Brinson Non-U.S. Equity Fund and Brinson Non-U.S. Bond Fund. The following is a summary of significant accounting policies consistently followed by the Brinson Global Fund, the Brinson Global Equity Fund and the Brinson Global Bond Fund (each a "Fund" and collectively, the "Funds") in the preparation of their financial statements. A.INVESTMENT VALUATION: Securities for which market quotations are readily available are valued at the last available sales price, or lacking any sales, at the last available bid price in the principal market in which such securities are normally 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. Fixed income/debt securities are valued by using market quotations or independent services that use prices provided by market makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. 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 at the bid prices of such currencies against the U.S. dollar as of the date of valuation. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts, income receipts and expense accruals are translated at the prevailing exchange rate on the date of each transaction. Realized and unrealized foreign exchange gain or loss on investments are included as a component of net realized and unrealized gain or loss on investments and foreign currency 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. 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, 1995, therefore, no federal income tax provision was required. At June 30, 1995, the Brinson Global Equity Fund had a capital loss carryforward of approximately $1,069,000, of which $251,000 will expire on June 30, 2003 and $818,000 will expire on June 30, 2004 and the Brinson Global Bond Fund had a capital loss carryforward of approximately $55,000 which will expire on June 30, 2004. F.ORGANIZATION COSTS: Organization costs are being amortized on a straight-line basis over five years from each Fund's respective commencement of operations. G.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. Amounts equal to 13.27% and 100.00% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the Brinson Global Fund and the Brinson Global Equity Fund, respectively. - -------------------------------------------------------------------------------- 44 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, the Funds pay the Advisor a monthly fee based on each Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates for the year ended June 30, 1995, were as follows:
FEES ADVISORY EXPENSE ADVISORY WAIVED OR DUE FROM FEE CAP FEES REIMBURSED ADVISOR -------- ------- ---------- ---------- -------- Brinson Global Fund............. 0.80% 1.10% $2,681,392 $ -- $ -- Brinson Global Equity Fund...... 0.80 1.00 163,038 216,658 75,276 Brinson Global Bond Fund........ 0.75 0.90 329,156 233,940 59,120
Certain officers of the Funds are also officers of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees were $11,459, $3,229 and $3,789 for the Brinson Global Fund, Brinson Global Equity Fund and Brinson Global Bond Fund, respectively. 3.INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1995, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ Brinson Global Fund.................................. $760,872,295 $731,189,159 Brinson Global Equity Fund........................... 6,970,730 9,366,502 Brinson Global Bond Fund............................. 86,825,266 80,493,086
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. 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 contracts are valued daily at forward exchange rates and an unrealized gain or loss is recorded. The Funds realize a gain or loss upon settlement of the contracts. The statement of operations reflects realized and unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts at June 30, 1995 was the Funds' custodian. 5.FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market and 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 in an amount (initial margin) based on the number of open contracts. Subsequent payments (variation margin) are made or received by the Funds each day. 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 realized and unrealized gains and losses on these contracts. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. - -------------------------------------------------------------------------------- 45 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6.SUBSEQUENT EVENTS The Trust's Board of Trustees has approved the authorization of a second class of shares, the "SwissKey Fund Shares," in addition to the existing class of shares, the "Brinson Fund Shares." The new class pays a distribution services fee and is offered only to customers of Swiss Bank Corporation, the ultimate parent of the Advisor. As of July 28, 1995 the Trust renamed the ten series it currently offers as follows: Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund. The Trust also entered into an Agreement and Plan of Reorganization dated June 16, 1995 (the "Plan of Reorganization"), with SwissKey Funds. As of July 28, 1995, and pursuant to the Plan of Reorganization, the Trust acquired all of the net assets of the SBC World Growth Fund of the SwissKey Funds in exchange solely for the SwissKey Fund shares of the Trust's Global Equity Fund. The SwissKey Fund shares were then distributed to shareholders of the SBC World Growth Fund according to their respective interests, and the SBC World Growth Fund was dissolved. - -------------------------------------------------------------------------------- 46 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders of Brinson Global Fund Brinson Global Equity Fund Brinson Global Bond Fund We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Brinson Global Fund, Brinson Global Equity Fund, and Brinson Global Bond Fund as of June 30, 1995, the related statements of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the year then ended and for the year ended June 30, 1994 for Brinson Global Fund, for the period January 28, 1994 (commencement of operations) to June 30, 1994 for Brinson Global Equity Fund and for the period July 30, 1993 (commencement of operations) to June 30, 1994 for Brinson Global Bond Fund. 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 for the period August 31, 1992 (commencement of operations) to June 30, 1993 for the Brinson Global Fund were audited by other auditors whose report dated August 19, 1993 expressed an unqualified opinion. 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 confirmations of securities owned as of June 30, 1995, 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 Brinson Global Fund, Brinson Global Equity Fund and Brinson Global Bond Fund at June 30, 1995, the results of their operations for the year then ended, the changes in their net assets and the financial highlights for the year then ended and for the year ended June 30, 1994 for Brinson Global Fund, for the period January 28, 1994 to June 30, 1994 for Brinson Global Equity Fund and for the period July 30, 1993 to June 30, 1994 for Brinson Global Bond Fund, in conformity with generally accepted accounting principles. [LOGO OF ERNST & YOUNG LLP] Chicago, Illinois August 4, 1995 - -------------------------------------------------------------------------------- 47 SPECIAL MEETING OF SHAREHOLDERS - -------------------------------------------------------------------------------- SPECIAL MEETING OF SHAREHOLDERS A Special Meeting of Shareholders was held on February 17, 1995 in connection with the combination of Brinson Holdings, Inc., the direct parent of the Advisor, and Swiss Bank Corporation. At the Meeting, shareholders voted (i) to elect Messrs. Frank K. Reilly, Walter E. Auch (both of whom were incumbents) and Edward M. Roob (who was newly elected) as Trustees; (ii) to approve new investment advisory agreements between the Advisor and the Trust on behalf of the Brinson Global Fund, Brinson Global Equity Fund and Brinson Global Bond Fund, with substantially the same terms as the previously approved investment advisory agreements; and (iii) to ratify the selection of Ernst & Young LLP as the Trust's independent auditors for the fiscal year ending June 30, 1995. The results of all matters voted on by shareholders at the Special Meeting held on February 17, 1995 were as follows: A.ELECTION OF TRUSTEES:
WITHHOLD FOR AUTHORITY ---------- --------- Frank K. Reilly Brinson Global Fund................................. 24,696,341 14,717 Brinson Global Equity Fund.......................... 2,114,671 -0- Brinson Global Bond Fund............................ 3,754,236 -0- Walter E. Auch Brinson Global Fund................................. 24,687,614 23,444 Brinson Global Equity Fund.......................... 2,114,671 -0- Brinson Global Bond Fund............................ 3,754,236 -0- Edward M. Roob Brinson Global Fund................................. 24,696,341 14,717 Brinson Global Equity Fund.......................... 2,114,671 -0- Brinson Global Bond Fund............................ 3,754,236 -0-
B.APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENTS BETWEEN BRINSON PARTNERS, INC. AND THE TRUST ON BEHALF OF EACH FUND:
FOR AGAINST ABSTAIN ---------- ------- ------- Brinson Global Fund............................ 24,692,033 2,135 16,890 Brinson Global Equity Fund..................... 2,114,671 -0- -0- Brinson Global Bond Fund....................... 3,754,236 -0- -0-
C.RATIFICATION OF ERNST & YOUNG LLP AS THE TRUST'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 1995:
FOR AGAINST ABSTAIN ---------- ------- ------- Brinson Global Fund............................ 24,688,545 2,135 20,378 Brinson Global Equity Fund..................... 2,114,671 -0- -0- Brinson Global Bond Fund....................... 3,754,236 -0- 0-
- -------------------------------------------------------------------------------- 48 BRINSON U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
SHARES MARKET VALUE ------- ------------ U.S. EQUITIES -- 41.16% Aetna Life & Casualty Co................................... 13,800 $ 867,675 Air & Water Technologies Corp. (a)......................... 11,000 66,000 Allergan, Inc.............................................. 36,300 984,638 Alza Corp. (a)............................................. 28,800 673,200 American Mobile Satellite (a).............................. 4,500 118,125 AON Corp................................................... 44,200 1,646,450 AST Research Corp. (a)..................................... 17,700 274,350 Automatic Data Processing, Inc............................. 20,800 1,307,800 Ball Corp.................................................. 7,100 247,612 Bard (C.R.), Inc........................................... 22,000 660,000 Beckman Instruments, Inc................................... 14,300 398,612 Biogen, Inc. (a)........................................... 3,300 146,850 Birmingham Steel........................................... 14,400 266,400 Boeing, Inc................................................ 19,400 1,214,925 Burlington Northern, Inc................................... 33,500 2,123,063 Campbell Soup Co........................................... 11,100 543,900 Centerior Energy Co........................................ 25,500 245,437 Chubb Corp................................................. 3,200 256,400 CIGNA Corp................................................. 26,700 2,072,588 Citicorp................................................... 60,600 3,507,225 CMS Energy Corp............................................ 33,700 829,862 Coca-Cola Enterprises, Inc................................. 56,300 1,231,562 Comerica, Inc.............................................. 9,800 314,825 Computer Sciences Corp. (a)................................ 4,800 273,000 Cooper Industries, Inc..................................... 39,600 1,564,200 Enron Corp................................................. 18,300 642,788 Entergy Corp............................................... 39,100 943,288 Federated Department Stores (a)............................ 25,500 656,625 FHP International Corp. (a)................................ 9,600 220,800 First Financial Management Corp............................ 19,200 1,641,600 Ford Motor Co. (Del.)...................................... 31,100 925,225 Forest Laboratories, Inc. (a).............................. 21,800 967,375 Genzyme Corp. (a).......................................... 4,700 188,000 Goodyear Tire and Rubber................................... 25,800 1,064,250 Grand Metro................................................ 50,000 1,387,500 Harnischfeger Industries, Inc.............................. 5,000 173,125 Hillenbrand Industries, Inc................................ 9,200 286,350 Honeywell, Inc............................................. 62,700 2,703,938 Illinova Corp. ............................................ 19,800 502,425 Inland Steel............................................... 21,100 643,550 Interpublic Group of Companies............................. 14,200 532,500 Kimberly-Clark Corp........................................ 26,700 1,598,662 Kroger Co. (a)............................................. 20,500 550,937 Liz Claiborne.............................................. 8,300 176,375 Lockheed Martin Corp....................................... 45,500 2,872,187 LTV Corp................................................... 20,900 305,662 Lyondell Petrochemical Co.................................. 34,700 889,188 Magna Group, Inc........................................... 7,100 156,200 Manor Care, Inc............................................ 19,500 567,938 Mattel, Inc................................................ 45,100 1,172,600 Melville Corp.............................................. 36,300 1,243,275 National Semiconductor Corp. (a)........................... 22,400 621,600 Nextel Communications, Inc. (a)............................ 19,500 275,437 Occidental Petroleum Corp.................................. 3,200 73,200
SHARES MARKET VALUE ------- ------------ Old Republic International Corp............................ 13,700 $ 357,912 Owens Illinois, Inc. (a)................................... 40,500 526,500 Pentair, Inc............................................... 6,600 287,100 Pfizer, Inc................................................ 16,800 1,551,900 Philip Morris Companies, Inc............................... 10,500 780,937 Raychem Corp............................................... 12,700 487,363 RJR Nabisco Convertible Preferred "C"...................... 115,700 708,663 RJR Nabisco Holdings Corp.................................. 34,940 973,953 Schering Plough Corp....................................... 54,800 2,418,050 Schlumberger Ltd........................................... 21,900 1,360,537 Seagate Technology (a)..................................... 19,400 761,450 Sprint Corp................................................ 52,200 1,755,225 State Street Boston Corp................................... 14,500 534,688 Stone Container Corp. (a).................................. 10,400 221,000 Tenneco, Inc............................................... 23,000 1,058,000 Timken Co.................................................. 14,900 687,263 TJX Cos.................................................... 19,300 255,725 Tosco Corp................................................. 6,400 204,000 Transamerica Corp.......................................... 20,400 1,188,300 Ultramar Corp.............................................. 10,600 267,650 U.S. Bancorp............................................... 24,200 582,313 USF&G Corp................................................. 34,600 562,250 Walgreen Co................................................ 21,800 1,092,725 Wellman, Inc............................................... 4,500 123,187 Westvaco Corp.............................................. 8,200 362,850 ------------ Total U.S. Equities (Cost $60,128,086)..................... 64,926,840 ------------
FACE AMOUNT MARKET VALUE ---------- ------------ BONDS -- 51.05% U.S. CORPORATE BONDS -- 14.21% Beneficial Home Equity 95-1A FRN 6.280%, due 03/28/25................................... $ 605,637 $ 605,736 Chrysler Financial Corp. 8.100%, due 02/03/97................................... 1,000,000 1,024,840 Dean Witter & Co. FRN 6.245%, due 03/21/97................................... 1,250,000 1,248,438 First of America FRN 95-1A 6.187%, due 02/15/02................................... 1,500,000 1,500,000 Ford Motor Credit Corp. 6.450%, due 11/03/97 FRN............................... 1,500,000 1,498,125 5.370%, due 09/08/98................................... 945,000 914,599 General Motors Acceptance Corp. MTN 8.250%, due 01/23/98................................... 1,000,000 1,040,930 Grace W.R. & Co. 8.000%, due 08/15/04................................... 1,150,000 1,218,695 Household Affinity FRN 6.232%, due 03/15/99................................... 1,500,000 1,501,395 MBNA Master Trust FRN 6.212%, due 03/15/01................................... 1,500,000 1,501,740 Midland Bank PLC 7.650%, due 05/01/25................................... 1,000,000 1,065,042 Nationwide CSN Trust FRN 9.875%, due 02/15/25................................... 1,000,000 1,125,000 News America Corp. 7.750%, due 01/20/24................................... 1,000,000 969,676
- -------------------------------------------------------------------------------- 9 BRINSON U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
FACE AMOUNT MARKET VALUE ----------- ------------ U.S. CORPORATE BONDS (CONTINUED) Republic Bank of New York FRN 6.025%, due 12/29/02.................................. $ 1,065,000 $ 1,017,075 RJR Nabisco Inc. 8.625%, due 12/01/02.................................. 1,500,000 1,546,413 Signet Credit Card 1993-4A FRN 6.312%, due 05/15/02.................................. 1,500,000 1,506,450 Time Warner Inc. 9.125%, due 01/15/13.................................. 1,000,000 1,046,072 Woolworth Corp 7.000%, due 06/01/00.................................. 2,100,000 2,085,573 ------------ 22,415,799 ------------ INTERNATIONAL DOLLAR BONDS -- 0.49% Hong Kong Shanghai Perpetual FRN 6.375%, due 07/30/49.................................. 1,000,000 773,750 ------------ U.S. GOVERNMENT AGENCIES -- 13.35% Federal Home Loan Mortgage Association 9.250%, due 07/15/21.................................. 2,210,204 2,360,012 8.500%, due 04/15/24.................................. 1,130,000 1,205,156 Federal Home Loan Mortgage Corp. Gold 6.000%, due 09/01/09.................................. 482,079 468,590 9.500%, due 10/01/16.................................. 359,615 380,325 Federal National Mortgage Association 6.500%, due 02/25/19.................................. 1,500,000 1,481,595 6.310%, due 01/01/23.................................. 1,810,000 1,823,575 6.500%, due 02/01/24.................................. 2,500,000 2,403,125 8.000%, due 06/01/24.................................. 379,784 386,784 8.000%, due 07/01/24.................................. 25,060 25,522 8.000%, due 08/01/24.................................. 62,289 63,437 8.000%, due 11/01/24.................................. 26,978 27,476 8.000%, due 03/01/25.................................. 276,579 281,677 8.000%, due 04/01/25.................................. 1,049,179 1,068,520 8.000%, due 05/01/25.................................. 2,097,049 2,135,704 8.000%, due 06/01/25.................................. 1,840,585 1,873,946 Government National Mortgage Association 11.000%, due 09/15/15................................. 482,554 535,635 9.000%, due 12/15/17.................................. 539,593 566,570 7.000%, due 06/15/23.................................. 467,535 459,792 7.000%, due 07/15/23.................................. 507,189 498,788 7.000%, due 09/15/23.................................. 108,177 106,385 9.000%, due 07/15/24.................................. 244,840 257,081 8.500%, due 11/15/24.................................. 271,825 282,102 8.500%, due 01/15/25.................................. 605,330 628,217 9.000%, due 05/15/25.................................. 731,180 767,735 Refcorp Principal Strip 0.000%, due 10/15/20.................................. 5,585,000 954,655 ------------ 21,042,404 ------------
FACE AMOUNT MARKET VALUE ----------- ------------ U.S. GOVERNMENT OBLIGATIONS -- 23.00% U.S. Treasury Coupon Strips 0.000%, due 05/15/04.............................. $22,670,000 $ 13,001,018 0.000%, due 05/15/18.............................. 1,420,000 292,506 U.S. Treasury Notes and Bonds 6.125%, due 07/31/96.............................. 5,000,000 5,017,185 5.875%, due 03/31/99.............................. 2,600,000 2,594,314 7.125%, due 02/29/00.............................. 7,930,000 8,284,368 7.250%, due 05/15/04.............................. 4,970,000 5,303,919 8.125%, due 05/15/21.............................. 1,525,000 1,783,773 ------------ 36,277,083 ------------ Total U.S. Bonds (Cost $77,649,111)................ 80,509,036 ------------ SHORT-TERM INVESTMENTS -- 12.92% U.S. CORPORATE BOND -- 0.96% Associates Corp. 9.000%, due 12/15/95.............................. 1,500,000 1,518,945 ------------ COMMERCIAL PAPER -- 11.96% Capital Access Trust, Inc. (Caterpillar) 6.150%, due 07/05/95.............................. 1,500,000 1,498,975 Conagra Australia, Inc. 6.320%, due 07/03/95.............................. 2,141,000 2,140,248 6.050%, due 07/12/95.............................. 1,000,000 998,152 Columbia/HCA Healthcare 6.100%, due 07/11/95.............................. 2,000,000 1,996,611 Crown Cork & Seal Co, Inc. 6.120%, due 07/05/95.............................. 2,000,000 1,998,640 Ingersoll-Rand 6.130%, due 07/11/95.............................. 1,500,000 1,497,446 Maytag Corp. 6.200%, due 07/03/95.............................. 2,000,000 1,999,311 Sunstrand Corp. 6.400%, due 07/03/95.............................. 3,734,000 3,732,672 Union Oil Company of California 6.110%, due 07/19/95.............................. 3,000,000 2,990,835 ------------ Total Commercial Paper............................. 18,852,890 ------------ Total Short-Term Investments (Cost $20,370,665)................................ 20,371,835 ------------ Total Investments (Cost $158,147,862) -- 105.13% (b) .............................................. 165,807,711 ------------ Liabilities, less cash and other assets --(5.13%) . (8,083,883) ------------ Net Assets -- 100%................................. $157,723,828 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 10 BRINSON U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Non-income producing security (b)Aggregate cost for federal income tax purposes was $158,147,862; net unrealized appreciation consisted of: Gross unrealized appreciation.............................. $8,037,918 Gross unrealized depreciation.............................. (378,069) ---------- Net unrealized appreciation............................... $7,659,849 ==========
FRN: FLOATING RATE NOTE--THE RATE DISCLOSED IS THAT IN EFFECT AT JUNE 30, 1995. MTN: MEDIUM TERM NOTE FUTURES CONTRACTS (NOTE 4) INDEX FUTURES CONTRACTS: The Brinson U.S. Balanced Fund had the following open index futures contract as of June 30, 1995:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE GAIN ---------- -------- -------- ---------- INDEX FUTURES BUY CONTRACTS Standard & Poors 500, 1 con- tract......................... Sept. 1995 $271,000 $273,575 $2,575 ======
The segregated cash pledged to cover margin requirements for the open position at June 30, 1995 was $10,000. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 11 BRINSON U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 ASSETS: Investments, at market value (Cost $158,147,862) (Note 1)........ $165,807,711 Cash............................................................. 152,873 Receivables: Investment securities sold...................................... 5,905,777 Dividends....................................................... 103,229 Interest........................................................ 822,993 Due from Advisor (Note 2)....................................... 52,411 Deferred organization costs, net of amortization (Note 1)........ 12,645 ------------ TOTAL ASSETS.................................................. 172,857,639 ------------ LIABILITIES: Payables: Fund shares redeemed............................................ 1,107,112 Investment securities purchased................................. 13,882,252 Investment advisory fees (Note 2)............................... 83,945 Accrued expenses................................................ 60,502 ------------ TOTAL LIABILITIES............................................. 15,133,811 ------------ NET ASSETS: Applicable to 14,040,134 shares; par value of $0.001 per share; unlimited shares authorized..................................... $157,723,828 ============ Net asset value, offering price and redemption price per share ($157,723,828 / 14,040,134 shares).............................. $ 11.23 ============ NET ASSETS CONSIST OF: Paid in capital.................................................. $142,963,790 Accumulated undistributed net investment income.................. 942,216 Accumulated net realized gain on investments..................... 6,155,398 Net unrealized appreciation on investments....................... 7,662,424 ------------ NET ASSETS.................................................... $157,723,828 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 12 BRINSON U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE PERIOD DECEMBER 30, 1994* TO JUNE 30, 1995 INVESTMENT INCOME Interest.......................................................... $ 2,771,036 Dividends......................................................... 669,123 ----------- TOTAL INCOME................................................... 3,440,159 ----------- EXPENSES: Advisory fees (Note 2)............................................ 441,419 Registration fees................................................. 55,170 Administration fees............................................... 39,523 Custodian fees.................................................... 37,674 Professional fees................................................. 34,145 Amortization of organization costs (Note 1)....................... 1,291 Other............................................................. 60,970 ----------- TOTAL EXPENSES................................................. 670,192 Expenses waived by Advisor (Note 2)............................ (165,712) ----------- NET EXPENSES................................................... 504,480 ----------- NET INVESTMENT INCOME ......................................... 2,935,679 ----------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain on: Investments...................................................... 6,022,618 Futures contracts................................................ 132,780 ----------- Net realized gain on investments .............................. 6,155,398 ----------- Change in net unrealized appreciation on: Investments ..................................................... 7,659,849 Futures contracts................................................ 2,575 ----------- Change in net unrealized appreciation on investments........... 7,662,424 ----------- Net realized and unrealized gain on investments .................. 13,817,822 ----------- Net increase in net assets resulting from operations.............. $16,753,501 ===========
*Commencement of operations See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 BRINSON U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD DECEMBER 30, 1994* TO JUNE 30, 1995 OPERATIONS: Net investment income........................................... $ 2,935,679 Net realized gain on investments ............................... 6,155,398 Change in net unrealized appreciation on investments ........... 7,662,424 ------------ Net increase in net assets resulting from operations............ 16,753,501 ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income........................ (1,993,463) Distributions from net realized gain............................ -- ------------ Total distributions to shareholders............................. (1,993,463) ------------ CAPITAL SHARE TRANSACTIONS: Shares sold..................................................... 154,231,504 Shares issued on reinvestment of distributions.................. 1,991,226 Shares redeemed................................................. (13,268,940) ------------ Net increase in net assets resulting from capital share transac- tions (a)...................................................... 142,953,790 ------------ TOTAL INCREASE IN NET ASSETS................................. 157,713,828 ------------ NET ASSETS: Beginning of period............................................. 10,000 ------------ End of period (including accumulated undistributed net invest- ment income of $942,216)....................................... $157,723,828 ============ (a) A summary of capital share transactions follows:
SHARES ------------ Shares sold..................................................... 15,121,050 Shares issued on reinvestment of distributions.................. 178,265 Shares redeemed................................................. (1,260,181) ------------ Net increase in shares outstanding............................. 14,039,134 ============
* Commencement of operations See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 BRINSON U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period.
PERIOD ENDED JUNE 30, 1995* -------------- Net asset value, beginning of period............................. $ 10.00 -------- Income from investment operations: Net investment income.......................................... 0.23 Net realized and unrealized gain on investments................ 1.16 -------- Total gain from investment operations........................ 1.39 -------- Less distributions: Distributions from net investment income....................... (0.16) Distributions from net realized gain........................... -- -------- Total distributions.......................................... (0.16) -------- Net asset value, end of period................................... $ 11.23 ======== Total return..................................................... 13.91% Ratios/Supplemental data Net assets, end of period (in 000s)............................. $157,724 Ratio of expenses to average net assets: Before expense reimbursement................................... 1.06%** After expense reimbursement.................................... 0.80%** Ratio of net investment income to average net assets: Before expense reimbursement................................... 4.36%** After expense reimbursement.................................... 4.63%** Portfolio turnover rate......................................... 196%
*The Fund commenced operations on December 30, 1994 **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 BRINSON U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
MARKET SHARES VALUE ---------- ----------- U.S. EQUITIES -- 94.34% Aetna Life & Casualty Co................................. 8,700 $ 547,013 Air & Water Technologies Corp. (a)....................... 4,000 24,000 Allergan, Inc............................................ 22,900 621,163 Alza Corp. (a)........................................... 18,100 423,088 American Mobile Satellite (a)............................ 3,400 89,250 AON Corp................................................. 27,800 1,035,550 AST Research Corp. (a)................................... 11,900 184,450 Automatic Data Processing, Inc........................... 13,100 823,663 Ball Corp................................................ 4,500 156,938 Bard (C.R.), Inc......................................... 13,800 414,000 Beckman Instruments, Inc................................. 8,900 248,088 Biogen, Inc. (a)......................................... 2,100 93,450 Birmingham Steel......................................... 8,800 162,800 Boeing................................................... 12,200 764,025 Burlington Northern, Inc................................. 21,100 1,337,213 Campbell Soup Co......................................... 7,000 343,000 Centerior Energy Co...................................... 16,000 154,000 Chubb Corp............................................... 1,900 152,238 CIGNA Corp............................................... 16,800 1,304,100 Citicorp................................................. 38,100 2,205,038 CMS Energy Corp.......................................... 21,100 519,587 Coca-Cola Enterprises, Inc............................... 35,500 776,562 Comerica, Inc............................................ 6,100 195,963 Computer Sciences Corp. (a).............................. 3,000 170,625 Cooper Industries, Inc................................... 26,500 1,046,750 Enron Corp............................................... 12,400 435,550 Entergy Corp............................................. 24,600 593,475 Federated Department Stores (a).......................... 16,000 412,000 FHP International Corp. (a).............................. 6,000 138,000 First Financial Management Corp.......................... 12,100 1,034,550 Ford Motor Co............................................ 19,500 580,125 Forest Laboratories, Inc. (a)............................ 13,600 603,500 Genzyme Corp. (a)........................................ 2,900 116,000 Goodyear Tire & Rubber................................... 16,200 668,250 Harnischfeger Industries, Inc............................ 3,100 107,337 Hillenbrand Industries, Inc.............................. 5,600 174,300 Honeywell, Inc........................................... 39,500 1,703,437 Illinova Corp............................................ 12,300 312,113 Inland Steel............................................. 13,300 405,650 Interpublic Group of Companies........................... 8,900 333,750 Kimberly-Clark Corp...................................... 16,800 1,005,900 Kroger Co. (a)........................................... 12,900 346,687 Liz Claiborne, Inc....................................... 6,200 131,750 Lockheed Martin Corp..................................... 28,600 1,805,375 LTV Corp................................................. 12,900 188,662 Lyondell Petrochemical Co................................ 21,800 558,625 Magna Group, Inc......................................... 4,400 96,800 Manor Care, Inc.......................................... 13,600 396,100
MARKET SHARES VALUE ---------- ----------- Mattel, Inc.............................................. 30,200 $ 785,200 Melville Corp............................................ 22,800 780,900 National Semiconductor Corp. (a)......................... 14,200 394,050 Nabisco Holdings Corp.................................... 2,700 75,263 Nextel Communications, Inc. (a).......................... 12,400 175,150 Old Republic International Corp.......................... 8,600 224,675 Owens Illinois, Inc. (a)................................. 25,300 328,900 Pentair, Inc............................................. 5,200 226,200 Pfizer, Inc.............................................. 10,500 969,937 Philip Morris Companies, Inc............................. 6,600 490,875 Raychem Corp............................................. 8,000 307,000 RJR Nabisco Convertible Preferred "C".................... 72,600 444,675 RJR Nabisco Holdings Corp................................ 19,340 539,102 Schering Plough Corp..................................... 34,500 1,522,312 Schlumberger Ltd......................................... 13,800 857,325 Seagate Technology (a)................................... 12,100 474,925 Sprint Corp.............................................. 32,800 1,102,900 State Street Boston Corp................................. 9,700 357,687 Stone Container Corp. (a)................................ 6,600 140,250 Tenneco, Inc............................................. 14,500 667,000 Timken Co................................................ 9,400 433,575 TJX Cos.................................................. 12,600 166,950 Tosco Corp............................................... 4,000 127,500 Transamerica Corp........................................ 12,900 751,425 Ultramar Corp............................................ 6,600 166,650 U.S. Bancorp............................................. 15,200 365,750 USF&G Corp............................................... 21,800 354,250 Walgreen Co.............................................. 13,700 686,712 Wellman, Inc............................................. 2,700 73,912 Westvaco Corp............................................ 5,200 230,100 ----------- Total U.S. Equities (Cost $35,923,442)................... 40,161,640 ----------- FACE MARKET AMOUNT VALUE ---------- ----------- COMMERCIAL PAPER -- 5.49% Ingersoll-Rand 6.130%, due 07/11/95.................................... $1,000,000 $ 998,297 Texas Utilities Electric Co. 6.500%, due 07/03/95.................................... 1,341,000 1,340,516 ----------- Total Short-Term Investments (Cost $2,338,813)....................................... 2,338,813 ----------- Total Investments (Cost $38,262,255) -- 99.83% (b) ...... 42,500,453 ----------- Cash and other assets, less liabilities --0.17%.......... 73,008 ----------- Net Assets -- 100%....................................... $42,573,461 ===========
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 19 BRINSON U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Non-income producing security (b) Aggregate cost for federal income tax purposes was $38,262,255; net unrealized appreciation consisted of: Gross unrealized appreciation.............................. $4,614,914 Gross unrealized depreciation.............................. (376,716) ---------- Net unrealized appreciation............................... $4,238,198 ==========
FUTURES CONTRACTS (NOTE 4) INDEX FUTURES CONTRACTS: The Brinson U.S. Equity Fund had the following open index futures contracts as of June 30, 1995:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE GAIN ---------- ---------- ---------- ---------- INDEX FUTURES BUY CON- TRACTS Standard & Poors 500, 9 contracts Sept. 1995 $2,440,350 $2,462,175 $21,825 =======
The segregated cash pledged to cover margin requirements for the open positions at June 30, 1995 was $90,000. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 BRINSON U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 ASSETS: Investments, at market value (Cost $38,262,255) (Note 1) ......... $42,500,453 Cash.............................................................. 116,071 Receivables: Investment securities sold....................................... 78,401 Dividends........................................................ 70,012 Due from Advisor (Note 2)........................................ 69,310 Deferred organization costs, net of amortization (Note 1)......... 9,990 ----------- TOTAL ASSETS................................................... 42,844,237 ----------- LIABILITIES: Payables: Investment securities purchased.................................. 189,741 Investment advisory fees (Note 2)................................ 22,613 Net unrealized depreciation on futures contracts................. 5,850 Accrued expenses................................................. 52,572 ----------- TOTAL LIABILITIES.............................................. 270,776 ----------- NET ASSETS: Applicable to 3,692,314 shares; par value of $0.001 per share; un- limited shares authorized........................................ $42,573,461 =========== Net asset value, offering price and redemption price per share ($42,573,461 / 3,692,314 shares)................................. $ 11.53 =========== NET ASSETS CONSIST OF: Paid in capital................................................... $37,692,082 Accumulated undistributed net investment income................... 133,889 Accumulated net realized gain on investments...................... 487,467 Net unrealized appreciation on investments........................ 4,260,023 ----------- NET ASSETS..................................................... $42,573,461 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 BRINSON U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995 INVESTMENT INCOME: Dividends......................................................... $ 538,253 Interest.......................................................... 78,065 ---------- TOTAL INCOME................................................... 616,318 ---------- EXPENSES: Advisory fees (Note 2)............................................ 154,258 Professional fees................................................. 52,351 Custodian fees.................................................... 35,092 Accounting fees................................................... 35,068 Registration fees................................................. 31,897 Printing fees..................................................... 25,560 Transfer agent fees............................................... 19,725 Amortization of organization costs (Note 1)....................... 2,785 Other............................................................. 19,267 ---------- TOTAL EXPENSES................................................. 376,003 Expenses waived and reimbursed by Advisor (Note 2)............. (199,708) ---------- NET EXPENSES................................................... 176,295 ---------- NET INVESTMENT INCOME.......................................... 440,023 ---------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on: Investments...................................................... 362,477 Futures contracts................................................ 190,345 ---------- Net realized gain on investments .............................. 552,822 ---------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 4,447,876 Futures contracts ............................................... 28,475 ---------- Change in net unrealized appreciation or depreciation on in- vestments..................................................... 4,476,351 ---------- Net realized and unrealized gain on investments .................. 5,029,173 ---------- Net increase in net assets resulting from operations.............. $5,469,196 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 BRINSON U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR PERIOD ENDED ENDED JUNE 30, 1995 JUNE 30, 1994* ------------- -------------- OPERATIONS: Net investment income............................ $ 440,023 $ 37,786 Net realized gain (loss) on investments ......... 552,822 (17,425) Change in net unrealized appreciation or depreci- ation on investments ........................... 4,476,351 (216,328) ----------- ---------- Net increase (decrease) in net assets resulting from operations................................. 5,469,196 (195,967) ----------- ---------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income......... (318,699) (25,221) Distributions from net realized gain............. (47,930) -- ----------- ---------- Total distributions to shareholders.............. (366,629) (25,221) ----------- ---------- CAPITAL SHARE TRANSACTIONS: Shares sold...................................... 30,972,427 8,346,164 Shares issued on reinvestment of distributions... 349,100 25,221 Shares redeemed.................................. (2,050,830) -- ----------- ---------- Net increase in net assets resulting from capital share transactions (a).......................... 29,270,697 8,371,385 ----------- ---------- TOTAL INCREASE IN NET ASSETS.................. 34,373,264 8,150,197 ----------- ---------- NET ASSETS: Beginning of period.............................. 8,200,197 50,000 ----------- ---------- End of period (including accumulated undistrib- uted net investment income of $133,889 and $12,565, respectively).......................... $42,573,461 $8,200,197 =========== ========== (a) A summary of capital share transactions fol- lows: SHARES SHARES ------------- -------------- Shares sold...................................... 3,011,049 842,283 Shares issued on reinvestment of distributions... 33,507 2,635 Shares redeemed.................................. (202,160) -- ----------- ---------- Net increase in shares outstanding.............. 2,842,396 844,918 =========== ==========
* The Fund commenced operations on February 22, 1994 See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 BRINSON U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR PERIOD ENDED ENDED JUNE 30, 1995 JUNE 30, 1994* ------------- -------------- Net asset value, beginning of period.............. $ 9.65 $10.00 ------- ------ Income from investment operations: Net investment income............................ 0.16 0.05 Net realized and unrealized gain (loss) on in- vestments....................................... 1.89 (0.36) ------- ------ Total gain (loss) from investment operations.. 2.05 (0.31) ------- ------ Less distributions: Distributions from net investment income......... (0.14) (0.04) Distributions from net realized gain............. (0.03) -- ------- ------ Total distributions........................... (0.17) (0.04) ------- ------ Net asset value, end of period.................... $ 11.53 $ 9.65 ======= ====== Total return...................................... 21.45% (3.10%) Ratios/Supplemental data Net assets, end of period (in 000s).............. $42,573 $8,200 Ratio of expenses to average net assets: Before expense reimbursement.................... 1.70% 5.40% ** After expense reimbursement..................... 0.80% 0.80% ** Ratio of net investment income to average net as- sets: Before expense reimbursement.................... 1.09% (2.82%)** After expense reimbursement..................... 1.99% 1.78% ** Portfolio turnover rate.......................... 33% 9%
*The Fund commenced operations on February 22, 1994 **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1.SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is a no-load, 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 ten series: Brinson Global Fund, Brinson Global Equity Fund, Brinson Global Bond Fund, Brinson Short-Term Global Income Fund, Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund, Brinson U.S. Bond Fund, Brinson U.S. Cash Management Fund, Brinson Non-U.S. Equity Fund and Brinson Non-U.S. Bond Fund. The following is a summary of significant accounting policies consistently followed by the Brinson U.S. Balanced Fund and the Brinson U.S. Equity Fund (each a "Fund," collectively the "Funds") in the preparation of their financial statements. A.INVESTMENT VALUATION: Securities for which market quotations are readily available are valued at the last available sales price, or lacking any sales, at the last available bid price in the principal market in which such securities are normally 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. Fixed income/debt securities are valued using market quotations or independent services that use prices provided by market makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. C.INVESTMENT INCOME: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. D.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the period ended June 30, 1995, therefore, no federal income tax provision was required. E.ORGANIZATION COSTS: Organization costs are being amortized on a straight-line basis over five years from each Fund's respective commencement of operations. F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and 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. Amounts equal to 7.21% and 68.68% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the Brinson U.S. Balanced Fund and the Brinson U.S. Equity Fund, respectively. - -------------------------------------------------------------------------------- 25 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on the Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates for the year ended June 30, 1995, were as follows:
ADVISORY EXPENSE ADVISORY FEES WAIVED DUE FROM FEE CAP FEES OR REIMBURSED ADVISOR -------- ------- -------- ------------- -------- Brinson U.S. Balanced Fund..... 0.70% 0.80% $441,419 $165,712 $52,411 Brinson U.S. Equity Fund....... 0.70 0.80 154,258 199,708 69,310
Certain officers of the Funds are also officers of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees were $3,100 and $3,236 for the Brinson U.S. Balanced Fund and Brinson U.S. Equity Fund, respectively. 3.INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1995, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ Brinson U.S. Balanced Fund........................... $371,055,027 $239,300,448 Brinson U.S. Equity Fund............................. 36,321,913 6,800,501
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 and 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 in an amount (initial margin) based on the number of open contracts. Subsequent payments (variation margin) are made or received by the Funds each day. 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 realized and unrealized gains and losses on these contracts. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. 5.SUBSEQUENT EVENTS The Trust's Board of Trustees has approved the authorization of a second class of shares, the "SwissKey Fund Shares," in addition to the existing class of shares, the "Brinson Fund Shares." The new class, pays a distribution services fee and is offered only to customers of Swiss Bank Corporation, the ultimate parent of the Advisor. As of July 28, 1995, the Trust renamed the ten series it currently offers as follows: Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund. - -------------------------------------------------------------------------------- 26 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders of Brinson U.S. Balanced Fund Brinson U.S. Equity Fund We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Brinson U.S. Balanced Fund and Brinson U.S. Equity Fund as of June 30, 1995, 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. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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, 1995, 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 Brinson U.S. Balanced Fund and Brinson U.S. Equity Fund at June 30, 1995, the results of their operations and the changes in their net assets and the financial highlights for the periods indicated therein, in conformity with generally accepted accounting principles. [LOGO OF ERNST & YOUNG LLP] Chicago, Illinois August 4, 1995 - -------------------------------------------------------------------------------- 27 SPECIAL MEETING OF SHAREHOLDERS - -------------------------------------------------------------------------------- SPECIAL MEETING OF SHAREHOLDERS A Special Meeting of Shareholders was held on February 17, 1995 in connection with the combination of Brinson Holdings, Inc., the direct parent of the Advisor, and Swiss Bank Corporation. At the Meeting, shareholders of the Brinson U.S. Equity Fund voted (i) to elect Messrs. Frank K. Reilly, Walter E. Auch (both of whom were incumbents) and Edward M. Roob (who was newly elected) as Trustees; (ii) to approve a new investment advisory agreement between the Advisor and the Trust on behalf of the Brinson U.S. Equity Fund, with substantially the same terms as the previously approved investment advisory agreements; and (iii) to ratify the selection of Ernst & Young LLP as the Trust's independent auditors for the fiscal year ending June 30, 1995. The results of all matters voted on by shareholders at the Special Meeting held on February 17, 1995 were as follows: A.ELECTION OF TRUSTEES:
WITHHOLD FOR AUTHORITY --------- --------- Frank K. Reilly Brinson U.S. Equity Fund............................. 1,359,090 -0- Walter E. Auch Brinson U.S. Equity Fund............................. 1,359,090 -0- Edward M. Roob Brinson U.S. Equity Fund............................. 1,359,090 -0-
B.APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT BETWEEN BRINSON PARTNERS, INC. AND THE TRUST ON BEHALF OF THE FUND:
FOR AGAINST ABSTAIN --------- ------- ------- Brinson U.S. Equity Fund........................ 1,359,090 -0- -0-
C.RATIFICATION OF ERNST & YOUNG LLP AS THE TRUST'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 1995:
FOR AGAINST ABSTAIN --------- ------- ------- Brinson U.S. Equity Fund........................ 1,359,090 -0- -0-
- -------------------------------------------------------------------------------- 28 BRINSON NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
SHARES MARKET VALUE ------- ------------ Non-U.S. Equities -- 92.08% AUSTRALIA -- 5.86% Amcor Ltd................................................. 60,200 $ 442,955 ANZ Banking Group......................................... 101,919 361,236 Broken Hill Proprietary................................... 170,470 2,092,961 BTR Nylex Ltd............................................. 231,802 442,013 Burns Philp............................................... 88,570 184,586 Coles Myer Ltd............................................ 90,700 283,538 CRA Ltd................................................... 53,800 729,944 Lend Lease Corp........................................... 37,365 476,234 National Australia Bank................................... 114,648 903,726 News Corp................................................. 90,000 501,453 News Corp. Preferred...................................... 21,500 106,227 Pacific Dunlop Ltd........................................ 239,300 502,111 Santos Ltd................................................ 100,500 240,795 Southcorp Holdings........................................ 213,073 424,424 Western Mining Corp....................................... 64,700 354,527 Westpac Banking Corp...................................... 177,151 639,185 ------------ 8,685,915 ------------ BELGIUM -- 2.44% Electrabel................................................ 4,295 907,073 Fortis AG................................................. 3,270 345,875 Groupe Bruxelles Lambert.................................. 2,150 287,851 Kredietbank............................................... 2,020 477,718 Petrofina................................................. 1,655 499,570 Petrofina Warrants (b).................................... 57 793 Societe Generale De Belgique.............................. 3,048 221,712 Solvay.................................................... 655 362,516 Tractebel................................................. 990 359,195 Union Mineire............................................. 2,450 160,134 ------------ 3,622,437 ------------ CANADA -- 5.73% Alcan Aluminium Ltd....................................... 23,800 718,955 Bank of Montreal.......................................... 48,500 1,014,977 Barrick Gold Corp......................................... 16,800 424,953 Canadian Pacific Ltd...................................... 58,300 1,002,575 Imperial Oil Canada Ltd................................... 24,500 909,521 Noranda, Inc.............................................. 19,700 387,174 Norcen Energy............................................. 14,000 188,528 Northern Telecom Ltd...................................... 11,100 401,969 Nova Corporation of Alberta............................... 34,300 290,244 Oshawa Group Ltd. "A"..................................... 13,600 210,365 Royal Bank of Canada...................................... 38,800 868,467 Seagram Co Ltd............................................ 30,300 1,042,128 Thomson Corp.............................................. 49,600 676,955 TransCanada Pipeline...................................... 27,000 361,133 ------------ 8,497,944 ------------ FRANCE -- 6.73% Alcatel Alsthom........................................... 5,013 451,713 Banque Nat'l Paris........................................ 12,640 610,162 Carnaud Metal Box......................................... 9,300 415,934 Cie Bancaire.............................................. 3,847 460,291 Cie de Saint Gobain....................................... 5,049 610,359 Cie Fin de Suez........................................... 8,850 492,752
SHARES MARKET VALUE ------- ------------ Colas..................................................... 1,357 $ 251,664 Credit Local de France.................................... 5,980 555,131 GAN....................................................... 3,350 106,357 Generale des Eaux......................................... 7,159 797,496 Groupe de la Cite......................................... 2,360 418,690 LVMH...................................................... 4,305 775,300 Michelin Class B.......................................... 5,700 252,693 Pechiney Cert D'Invest.................................... 5,190 299,462 Peugeot................................................... 3,750 520,629 Sanofi.................................................... 5,700 315,719 Societe Generale.......................................... 7,056 825,323 Societe Nationale Elf Aquitaine........................... 9,534 705,093 Total Co. "B"............................................. 13,400 807,179 UAP....................................................... 11,650 305,700 ------------ 9,977,647 ------------ GERMANY -- 5.71% Allianz................................................... 550 985,081 Allianz Rights............................................ 550 41,724 BASF AG................................................... 1,790 381,770 Bayer..................................................... 2,100 521,472 Bayer Motoren Werken...................................... 865 474,341 Bayer Vereinsbank......................................... 1,125 340,564 Commerzbank............................................... 1,706 408,597 Daimler-Benz.............................................. 645 296,613 Deutsche Bank............................................. 26,500 1,288,527 Hoechst................................................... 1,880 405,448 Kaufhof Holdings.......................................... 1,575 565,548 Mannesmann................................................ 1,400 427,353 Munchener Ruck (b)........................................ 307 672,068 Munchener Ruck Warrants '98 (b)........................... 12 1,578 Preussag.................................................. 1,390 415,765 Schering.................................................. 3,550 248,020 Veba...................................................... 2,525 990,590 ------------ 8,465,059 ------------ HONG KONG -- 2.09% China Light & Power....................................... 125,800 647,088 Hang Seng Bank............................................ 27,400 208,931 Hong Kong Land Holdings................................... 156,000 283,920 Hong Kong Telecommunications.............................. 90,000 177,964 Hutchison Whampoa......................................... 143,000 691,205 Jardine Matheson.......................................... 42,000 308,700 Swire Pacific "A"......................................... 67,000 510,888 Wharf Holdings............................................ 82,000 267,593 ------------ 3,096,289 ------------ ITALY -- 1.98% Assic Generali............................................ 26,600 624,787 Fiat Spa Priv (b)......................................... 195,000 424,071 Instituto Mobilaire Italiano.............................. 68,000 415,812 Italgas................................................... 72,000 186,929 La Rinascente Ordinary.................................... 28,000 158,987 La Rinascente Savings..................................... 24,000 62,749 Mediobanca................................................ 14,000 101,644 Montedison (b)............................................ 235,000 168,104 Sai Di Risp............................................... 36,000 153,721 Telecom Italia Savings.................................... 305,000 644,659 ------------ 2,941,463 ------------
- -------------------------------------------------------------------------------- 9 BRINSON NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
SHARES MARKET VALUE ------- ------------ JAPAN -- 30.46% Amada..................................................... 79,000 $ 674,697 Asahi Glass Co............................................ 92,000 1,014,395 Bank of Tokyo............................................. 46,000 736,954 Canon, Inc................................................ 66,000 1,072,918 Canon Sales............................................... 23,000 636,706 Citizen Watch Co.......................................... 71,000 439,098 Dai Nippon Printing....................................... 70,000 1,113,205 Daikin Kogyo Co........................................... 76,000 610,578 Daiwa Bank................................................ 55,000 495,641 Daiwa House Industries.................................... 38,000 581,930 Fanuc Co.................................................. 19,600 845,047 Fujitsu................................................... 121,000 1,204,441 Hitachi Ltd............................................... 232,000 2,309,340 Honda Motor Co............................................ 45,000 689,127 Inax...................................................... 74,000 712,192 Isetan.................................................... 24,000 325,127 Ito Yokado Co............................................. 39,000 2,053,599 Keio Teito Electric Railway............................... 87,000 508,328 Kintetsu.................................................. 86,000 753,728 Kuraray Co. Ltd........................................... 42,000 455,672 Maeda Road Construction................................... 18,000 347,744 Matsushita Electric Industrial............................ 127,000 1,974,791 Mitsubishi Bank........................................... 32,000 689,834 Mitsubishi Paper.......................................... 95,000 499,116 Mitsui Fudosan............................................ 21,000 240,205 NGK Insulators............................................ 126,000 1,141,407 Nichii Co................................................. 61,000 661,809 Nintendo.................................................. 7,000 401,579 Nippon Denso Co........................................... 52,000 943,338 Nippon Meat Packers....................................... 46,000 671,928 Nippon Steel Corp......................................... 59,000 191,825 Orix Corp................................................. 8,000 265,756 Osaka Gas Corp............................................ 340,000 1,253,622 Pioneer Electronics....................................... 34,000 576,746 Sankyo Co. ............................................... 59,500 1,380,787 Secom Co.................................................. 18,000 1,130,168 Seino Transportation...................................... 26,000 437,979 Sekisui House............................................. 155,000 1,917,187 Shinmaywa Industries...................................... 46,000 385,275 Sony Corp................................................. 25,800 1,236,965 Sumitomo Bank............................................. 85,000 1,471,905 Sumitomo Electric Industries.............................. 64,000 761,456 Takeda Chemical Industries................................ 86,000 1,134,645 TDK Corp.................................................. 23,000 1,045,824 Tokio Marine & Fire....................................... 70,000 801,508 Tokyo Electric Power...................................... 34,000 1,041,348 Tokyo Steel Mfg........................................... 56,700 968,489 Tonen Corp................................................ 40,000 621,981 Toray Industries, Inc..................................... 255,000 1,583,049 Toshiba Corp.............................................. 239,000 1,511,874 Toyo Suisan Kaisha........................................ 18,000 181,718 Toyota Motor Corp......................................... 24,000 474,968 ------------ 45,179,549 ------------
SHARES MARKET VALUE ------- ------------ MALAYSIA -- 0.44% Genting........................................ 2,000 $ 19,771 Hume Industries................................ 7,000 38,189 Kuala Lumpur Kepong............................ 9,000 28,611 Land & General Holdings........................ 7,500 25,073 Malayan Bank................................... 21,000 166,250 Nestle' Malaysia............................... 11,000 84,376 Sime Darby..................................... 48,000 133,886 Telekom Malaysia............................... 12,000 91,062 Tenaga Nasional................................ 17,000 69,382 ------------ 656,600 ------------ NETHERLANDS -- 5.95% ABN-AMRO Coupons............................... 25,955 28,960 ABN-AMRO Holdings.............................. 25,955 1,001,038 D.S.M.......................................... 3,900 335,795 Elsevier....................................... 48,300 570,068 Internationale Nederlanden Grp................. 22,291 1,232,079 Internationale Nederlanden Grp. Coupon......... 22,291 31,485 KPN............................................ 10,400 373,609 KPN Coupon..................................... 10,400 9,860 Philips Electronics............................ 9,650 408,281 Royal Dutch Petroleum ADS (a).................... 3,300 402,187 Royal Dutch Petroleum.......................... 25,400 3,099,439 Unilever....................................... 10,200 1,326,230 ------------ 8,819,031 ------------ NEW ZEALAND -- 2.01% Brierley Investment............................ 772,000 582,973 Carter Holt Harvey............................. 324,000 792,462 Fletcher Challenge Ltd......................... 299,000 839,214 New Zealand Telecom ADS (a).................... 12,700 769,937 ------------ 2,984,586 ------------ SPAIN -- 2.50% Banco Bilbao-Vizcaya........................... 9,600 277,083 Banco Intercontinental......................... 3,320 298,852 Banco Popular.................................. 1,880 279,461 Banco Santander................................ 8,100 319,411 Empresa Nac Electric........................... 7,000 345,693 Hidro Iberdrola................................ 91,100 686,128 Repsol ADR (a)................................. 13,600 430,100 Sevillana De Electric.......................... 17,000 104,592 Telefonica De Espana........................... 62,100 800,033 Viscofan....................................... 11,100 164,085 ------------ 3,705,438 ------------ SWITZERLAND -- 3.40% BBC Brown Boverie (Br)........................... 288 298,000 Ciba Geigy (Reg.).............................. 507 371,448 CS Holdings.................................... 9,400 860,851 Nestle (Reg.).................................. 1,395 1,451,914
- -------------------------------------------------------------------------------- 10 BRINSON NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - --------------------------------------------------------------------------------
SHARES MARKET VALUE ------- ------------ SWITZERLAND (CONTINUED) Roche Holdings Gen........................................ 188 $ 1,210,903 Societe Generale Surveillance (Br)........................ 255 442,708 Zurich Insurance.......................................... 326 409,481 ------------ 5,045,305 ------------ UNITED KINGDOM -- 16.78% Asda Group................................................ 226,000 341,607 Bass...................................................... 67,400 645,045 BAT Industries............................................ 89,300 683,426 BET....................................................... 134,000 262,243 Booker PLC................................................ 40,600 267,437 British Gas............................................... 292,800 1,348,697 British Petroleum......................................... 163,906 1,174,855 British Telecommunications................................ 270,600 1,687,752 Charter Group............................................. 39,625 572,466 Coats Viyella............................................. 137,500 406,921 FKI....................................................... 120,500 304,845 FKI Rights................................................ 30,125 16,057 General Electric PLC...................................... 275,000 1,343,278 Glaxo Holdings............................................ 76,800 942,740 Grand Metropolitan........................................ 197,600 1,212,009 Guinness.................................................. 112,000 842,896 Hanson.................................................... 150,900 528,210 Hillsdown Holdings........................................ 182,000 521,241 House of Fraser........................................... 239,000 482,943 HSBC Holdings............................................. 20,000 258,234 Legal and General......................................... 42,400 358,899 Lloyds Abbey Life......................................... 64,700 402,509 Lloyds Bank............................................... 155,900 1,547,838 Lucas Industries.......................................... 119,883 359,554 Marks & Spencer........................................... 87,000 559,928 MFI Furniture Group....................................... 86,500 160,338 Mirror Group.............................................. 67,600 143,052 National Power............................................ 69,000 489,093 National Westminster Bank................................. 95,000 825,298 Ocean Group............................................... 89,500 442,872 P & O..................................................... 66,000 608,019 Reckitt & Colman.......................................... 52,375 552,500 Redland................................................... 49,500 324,487 Rolls Royce............................................... 130,000 360,939 Royal Insurance........................................... 65,300 321,045 Sears PLC................................................. 271,400 429,663 Sedgwick Group............................................ 52,700 115,714 SmithKline Beecham Unit................................... 126,100 1,119,551 Tesco..................................................... 196,500 906,682 Thames Water.............................................. 56,200 425,636 Unilever Ord 5p........................................... 16,000 323,946 W.H. Smith Group "A"...................................... 52,500 273,986 ------------ 24,894,451 ------------ Total Non-U.S. Equities (Cost $132,758,689)............... 136,571,714 ------------
FACE AMOUNT MARKET VALUE -------------- ------------ Short-Term Investments -- 6.18% FOREIGN TIME DEPOSITS -- 3.34% Bankers Trust Swedish Krona -- 3.34% 8.25%, due 07/05/95................................ SEK 36,030,158 $ 4,948,110 ------------ COMMERCIAL PAPER -- 2.84% Conagra Australia Inc. 6.09%, due 07/05/95................................ $ 1,000,000 999,323 6.05%, due 07/12/95................................ 1,000,000 998,152 Texas Utilities Electric Co. 6.50%, due 07/03/95................................ 2,218,000 2,217,199 ------------ 4,214,674 ------------ Total Short-Term Investments (Cost $9,198,096)...... 9,162,784 ------------ Total Investments (Cost $141,956,785)--98.26% (c)... 145,734,498 ------------ Cash and other assets, less liabilities--1.74%...... 2,584,038 ------------ Net Assets -- 100%.................................. $148,318,536 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 11 BRINSON NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1995 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Denominated in U.S. dollars (b) Non-income producing security (c) Aggregate cost for federal income tax purposes was $141,956,785; net unrealized appreciation consisted of: Gross unrealized appreciation................................ $ 8,981,279 Gross unrealized depreciation................................ (5,203,566) ----------- Net unrealized appreciation................................ $ 3,777,713 ===========
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Brinson Non-U.S. Equity Fund had the following open forward foreign currency contracts as of June 30, 1995:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ----------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar......... 10/20/95 27,205,770 $19,752,210 $ 49,991 Italian Lira............ 10/20/95 8,400,000,000 5,034,349 (19,651) FORWARD FOREIGN CURRENCY SALE CONTRACTS Belgian Franc........... 10/20/95 83,000,000 2,927,476 (10,897) British Pound........... 10/20/95 4,600,000 7,269,428 98,484 Dutch Guilder........... 10/20/95 10,200,000 6,611,415 (31,725) French Franc............ 10/20/95 42,500,000 8,743,562 (75,704) German Mark............. 10/20/95 7,100,000 5,150,882 (25,453) Japanese Yen............ 10/20/95 3,680,000,000 43,983,955 640,990 Swiss Franc............. 10/20/95 3,400,000 2,976,203 (2,420) -------- Total................. $623,615 ========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 12 BRINSON NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1995 ASSETS: Investments, at market value (Cost $141,956,785) (Note 1)....... $145,734,498 Cash............................................................ 50,540 Foreign currency, at market value (Cost $776,906)............... 785,707 Receivables: Investment securities sold..................................... 188,790 Dividends...................................................... 667,187 Interest ...................................................... 3,416 Fund shares sold............................................... 644,117 Due from Advisor (Note 2)...................................... 129,117 Net unrealized appreciation on forward foreign currency con- tracts......................................................... 623,615 Deferred organization costs, net of amortization (Note 1)....... 8,882 Other assets.................................................... 6,463 ------------ TOTAL ASSETS................................................. 148,842,332 ------------ LIABILITIES: Payables: Investment securities purchased................................ 265,850 Fund shares redeemed........................................... 57,027 Investment advisory fees (Note 2).............................. 96,778 Accrued expenses............................................... 104,141 ------------ TOTAL LIABILITIES............................................ 523,796 ------------ NET ASSETS: Applicable to 15,314,850 shares; par value of $0.001 per share; unlimited shares authorized.................................... $148,318,536 ============ Net asset value, offering price and redemption price per share ($148,318,536 / 15,314,850 shares)............................. $ 9.68 ============ NET ASSETS CONSIST OF: Paid in capital................................................. $149,358,288 Accumulated undistributed net investment income................. 632,906 Accumulated net realized loss on investments and foreign curren- cy............................................................. (6,089,654) Net unrealized appreciation on investments and foreign currency. 4,416,996 ------------ NET ASSETS................................................... $148,318,536 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 BRINSON NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1995 INVESTMENT INCOME: Dividends (net of $368,832 for foreign taxes withheld)............ $2,788,292 Interest.......................................................... 897,165 ---------- TOTAL INCOME................................................... 3,685,457 ---------- EXPENSES: Advisory fees (Note 2)............................................ 933,521 Custodian fees.................................................... 144,417 Accounting fees................................................... 91,827 Administration fees............................................... 72,350 Amortization of organization costs (Note 1)....................... 2,800 Other............................................................. 189,446 ---------- TOTAL EXPENSES................................................. 1,434,361 Expenses waived by Advisor (Note 2)............................ (267,460) ---------- NET EXPENSES................................................... 1,166,901 ---------- NET INVESTMENT INCOME ......................................... 2,518,556 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain (loss) on: Investments...................................................... 759,672 Futures contracts................................................ (195,443) Foreign currency transactions.................................... (5,614,993) ---------- Net realized loss on investments and foreign currency.......... (5,050,764) ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency ................................ 892,678 Futures contracts ............................................... 176,000 Forward contracts................................................ 971,960 Translation of other assets and liabilities denominated in for- eign currency................................................... (1,276) ---------- Change in net unrealized appreciation or depreciation on in- vestments and foreign currency................................ 2,039,362 ---------- Net realized and unrealized loss on investments and foreign curren- cy................................................................ (3,011,402) ---------- Net decrease in net assets resulting from operations............... $ (492,846) ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 BRINSON NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR PERIOD ENDED ENDED JUNE 30, 1995 JUNE 30, 1994* ------------- -------------- OPERATIONS: Net investment income............................ $ 2,518,556 $ 712,302 Net realized loss on investments and foreign cur- rency........................................... (5,050,764) (3,168,393) Change in net unrealized appreciation or depreci- ation on investments and foreign currency................................ 2,039,362 2,377,634 ------------ ----------- Net decrease in net assets resulting from opera- tions........................................... (492,846) (78,457) ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income......... -- (468,449) Distributions from net realized gain............. -- -- ------------ ----------- Total distributions to shareholders.............. -- (468,449) ------------ ----------- CAPITAL SHARE TRANSACTIONS: Shares sold...................................... 110,628,882 75,351,181 Shares issued on reinvestment of distributions... -- 367,668 Shares redeemed.................................. (33,361,344) (3,678,099) ------------ ----------- Net increase in net assets resulting from capital share transactions (a).......................... 77,267,538 72,040,750 ------------ ----------- TOTAL INCREASE IN NET ASSETS................... 76,774,692 71,493,844 ------------ ----------- NET ASSETS: Beginning of period.............................. 71,543,844 50,000 ------------ ----------- End of period (including accumulated undistrib- uted net investment income of $632,906 and $253,630, respectively)......................... $148,318,536 $71,543,844 ============ =========== (a) A summary of capital share transactions fol- lows: SHARES SHARES ------------- -------------- Shares sold...................................... 11,370,317 7,717,774 Shares issued on reinvestment of distributions... -- 38,173 Shares redeemed.................................. (3,435,839) (380,575) ------------ ----------- Net increase in shares outstanding.............. 7,934,478 7,375,372 ============ ===========
* The Fund commenced operations on August 31, 1993 See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 BRINSON NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR PERIOD ENDED ENDED JUNE 30, 1995 JUNE 30, 1994* ------------- -------------- Net asset value, beginning of period.............. $ 9.69 $ 10.00 -------- ------- Income from investment operations: Net investment income............................ 0.15 0.10 Net realized and unrealized loss on investments and foreign currency............................ (0.16) (0.34) -------- ------- Total loss from investment operations......... (0.01) (0.24) -------- ------- Less distributions: Distributions from net investment income......... -- (0.07) Distributions from net realized gain............. -- -- -------- ------- Total distributions........................... -- (0.07) -------- ------- Net asset value, end of period.................... $ 9.68 $ 9.69 ======== ======= Total return...................................... (0.10%) (2.45%) Ratios/Supplemental data Net assets, end of period (in 000s).............. $148,319 $71,544 Ratio of expenses to average net assets: Before expense reimbursement.................... 1.23% 1.60%** After expense reimbursement..................... 1.00% 1.00%** Ratio of net investment income to average net as- sets: Before expense reimbursement.................... 1.93% 1.28%** After expense reimbursement..................... 2.16% 1.88%** Portfolio turnover rate.......................... 14% 12%
* The Fund commenced operations on August 31, 1993 ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 BRINSON NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is a no-load, 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 ten series: Brinson Global Fund, Brinson Global Equity Fund, Brinson Global Bond Fund, Brinson Short-Term Global Income Fund, Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund, Brinson U.S. Bond Fund, Brinson U.S. Cash Management Fund, Brinson Non-U.S. Equity Fund and Brinson Non-U.S. Bond Fund. The following is a summary of significant accounting policies consistently followed by the Brinson Non-U.S. Equity Fund (the "Fund") in the preparation of its financial statements. A. INVESTMENT VALUATION: Securities for which market quotations are readily available are valued at the last available sales price, or lacking any sales, at the last available bid price in the principal market in which such securities are normally 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. 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 at the bid prices of such currencies against the U.S. dollar as of the date of valuation. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts, income receipts and expense accruals 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 and foreign currency 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 is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. 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, 1995, therefore, no federal income tax provision was required. At June 30, 1995, the Fund had a capital loss carryforward of approximately $5,400,000, of which $260,000, $1,180,000 and $3,960,000 will expire on June 30, 2002, June 30, 2003 and June 30, 2004, respectively. F. ORGANIZATION COSTS: Organization costs are being amortized on a straight-line basis over five years from the commencement of operations. G. 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 treatments for foreign currency transactions. - -------------------------------------------------------------------------------- 17 BRINSON NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Fund with investment management services. As compensation for these services, the Fund pays the Advisor a monthly fee based on the Fund's average daily net assets. The Advisor has agreed to waive its fees and reimburse the Fund to the extent total annualized expenses exceed a specified percentage of the Fund's average daily net assets. Investment advisory fees and other transactions with affiliates for the year ended June 30, 1995, were as follows:
ADVISORY EXPENSE ADVISORY FEES DUE FROM FEE CAP FEES WAIVED ADVISOR -------- ------- -------- -------- -------- Brinson Non-U.S. Equity Fund........ 0.80% 1.00% $933,521 $267,460 $129,117
Certain officers of the Fund are also officers of the Advisor. All officers serve without direct compensation from the Fund. Trustees' fees paid to unaffiliated trustees were $5,572. 3. INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1995, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ----------- ----------- Brinson Non-U.S. Equity Fund............................ $82,404,161 $14,668,115
4. FORWARD FOREIGN CURRENCY CONTRACTS The Fund 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. 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 contracts are valued daily at forward exchange rates and an unrealized gain or loss is recorded. The Fund realizes a gain or loss upon settlement of the contracts. The statement of operations reflects realized and unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts at June 30, 1995 was the Fund's custodian. 5. FUTURES CONTRACTS The Fund may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Fund to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Fund enters into such contracts to hedge a portion of its portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market and 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 in an amount (initial margin) based on the number of open contracts. Subsequent payments (variation margin) are made or received by the Fund each day. 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 realized and unrealized gains and losses on these contracts. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. 6. SUBSEQUENT EVENTS The Trust's Board of Trustees has approved the authorization of a second class of shares, the "SwissKey Fund Shares," in addition to the existing class of shares, the "Brinson Fund Shares." The new class pays a distribution services fee and is offered only to customers of Swiss Bank Corporation, the ultimate parent of the Advisor. As of July 28, 1995, the Trust renamed the ten series it currently offers as follows: Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund. - -------------------------------------------------------------------------------- 18 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders of Brinson Non-U.S. Equity Fund We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Brinson Non-U.S. Equity Fund as of June 30, 1995, 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, 1995, 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 Brinson Non-U.S. Equity Fund at June 30, 1995, 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. [LOGO OF ERNST & YOUNG] Chicago, Illinois August 4, 1995 - -------------------------------------------------------------------------------- 19 SPECIAL MEETING OF SHAREHOLDERS - -------------------------------------------------------------------------------- SPECIAL MEETING OF SHAREHOLDERS A Special Meeting of Shareholders was held on February 17, 1995 in connection with the combination of Brinson Holdings, Inc., the direct parent of the Advisor, and Swiss Bank Corporation. At the Meeting, shareholders voted (i) to elect Messrs. Frank K. Reilly, Walter E. Auch (both of whom were incumbents) and Edward M. Roob (who was newly elected) as Trustees; (ii) to approve a new investment advisory agreement between the Advisor and the Trust on behalf of the Brinson Non-U.S. Equity Fund, with substantially the same terms as the previously approved investment advisory agreements; and (iii) to ratify the selection of Ernst & Young LLP as the Trust's independent auditors for the fiscal year ending June 30, 1995. The results of all matters voted on by shareholders at the Special Meeting held on February 17, 1995 were as follows: A. ELECTION OF TRUSTEES:
WITHHOLD FOR AUTHORITY --------- --------- Frank K. Reilly Brinson Non-U.S. Equity Fund... 7,530,756 -0- Walter E. Auch Brinson Non-U.S. Equity Fund... 7,530,756 -0- Edward M. Roob Brinson Non-U.S. Equity Fund... 7,530,756 -0-
B. APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT BETWEEN BRINSON PARTNERS, INC. AND THE TRUST ON BEHALF OF THE FUND:
FOR AGAINST ABSTAIN --------- ------- ------- Brinson Non-U.S. Equity Fund.................. 7,530,756 -0- -0-
C. RATIFICATION OF ERNST & YOUNG LLP AS THE TRUST'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 1995:
FOR AGAINST ABSTAIN --------- ------- ------- Brinson Non-U.S. Equity Fund.................. 7,530,756 -0- -0-
- -------------------------------------------------------------------------------- 20
U.S. BOND FUND SCHEDULE OF INVESTMENTS ==================================================================================================== December 31, 1995 (Unaudited) Face Amount Value ---------- ----------- Bonds - 94.45% U.S. Corporate Bonds - 32.89% Capital One Bank 8.625%, due 01/15/97 ............................. $ 250,000 $ 257,353 Citicorp Mortgage Securities 5.750%, due 06/25/09 ................. 84,462 75,898 Countrywide Funding FRN 6.480%, due 12/01/03 ...................... 250,000 238,413 Dayton Hudson Credit Card Trust 95-1A 6.100%, due 02/25/02 ........ 100,000 101,605 GMAC MTN 7.450%, due 06/05/97 ..................................... 250,000 256,280 Green Tree Financial 94-2 8.300%, due 05/15/19 .................... 160,000 176,950 Hanson PLC Notes 6.750%, due 09/15/05 ............................. 100,000 103,509 IBM Corp. 7.000%, due 10/30/25 .................................... 325,000 334,482 Lehman Brothers Holdings, Inc. MTN 6.650%, due 07/14/98 ........... 250,000 253,535 News America Corp. 7.750%, due 01/20/24 ........................... 250,000 259,331 Republic Bank of New York Corp. FRN 6.025%, due 12/29/02 .......... 250,000 242,500 RJR Nabisco, Inc. 8.750%, due 04/15/04 ............................ 250,000 256,590 Standard Credit Card Trust 94-1A 4.650%, due 02/07/97 ............. 250,000 247,920 USX Corp. 9.800%, due 07/01/01 ........................................... 130,000 149,997 8.500%, due 03/01/23 ........................................... 80,000 87,809 ------------ 3,042,172 ------------ International Dollar Bonds - 5.08% Republic of Italy 6.875%, due 09/27/23 ............................ 250,000 244,375 Standard Credit Card Trust 91-3 8.875%, due 09/07/99 ............. 210,000 225,292 ------------ 469,667 ------------ U.S. Government Agencies - 27.54% Federal Home Loan Mortgage Corp. 7.000%, due 12/15/06 ........................................... 220,000 225,353 7.000%, due 10/15/21 ........................................... 60,000 60,923 7.500%, due 07/15/22 ........................................... 250,000 262,428 Federal National Mortgage Association 6.500%, due 09/01/24 ........................................... 220,000 217,388 7.000%, due 09/01/24 ........................................... 245,000 246,914 7.500%, due 05/01/25 ........................................... 232,592 238,262 Federal National Mortgage Association Dwarf 7.000%, due 12/01/09 .. 250,000 254,531 Government National Mortgage Association 9.000%, due 12/15/09 ........................................... 72,145 76,400 9.000%, due 12/15/17 ........................................... 214,071 227,904 7.500%, due 12/15/22 ........................................... 463,088 476,740 8.000%, due 09/15/24 ........................................... 100,000 104,125 Government National Mortgage Association ARM 5.500%, due 10/20/25 156,576 156,623 ------------ 2,547,591 ------------ U.S. Government Obligations - 28.94% U.S. Treasury Coupon Strips 0.000%, due 11/15/19 .................. 480,000 108,960 U.S. Treasury Notes and Bonds 6.625%, due 03/31/97 ........................................... 835,000 849,352 5.500%, due 11/15/98 ........................................... 350,000 352,515 6.250%, due 08/31/00 ........................................... 185,000 191,475 7.250%, due 05/15/04 ........................................... 740,000 823,250 8.125%, due 05/15/21 ........................................... 250,000 316,406 U.S. Treasury Principal Strips 0.000%, due 05/15/20 ............... 155,000 34,351 ------------ 2,676,309 ------------ Total U.S. Bonds (Cost $8,554,756) ................................ 8,735,739 ------------
U.S. BOND FUND SCHEDULE OF INVESTMENTS - -------------------------------------------------------------------------------------------------------- December 31, 1995 (Unaudited) Face Amount Value ----------- ------------ Short-Term Investments - 12.44% Commercial Paper - 12.44% Baxter International, Inc. 6.050%, due 01/02/96............. $ 451,000 $ 450,924 General American Transportation Corp. 6.200%, due 01/18/96.. 200,000 199,415 Whitman Corp. 5.950%, due 01/02/96.......................... 500,000 499,917 ------------ Total Short-Term Investments (Cost $1,150,256)....................................... 1,150,256 ------------ Total Investments (Cost $9,705,012) - 106.89%.............................. 9,885,995 ------------ Liabilities, less cash and other assets - (6.89%) (a).................................... (636,965) ------------ Net Assets - 100%........................................... $ 9,249,030 ============
(a) Aggregate cost for federal income tax purposes was $9,705,011; and net unrealized appreciation consisted of: Gross unrealized appreciation..... $181,935 Gross unrealized depreciation..... (952) --------- $180,983 ========= FRN: Floating rate note - The rate disclosed is that in effect at December 31, 1995. MTN: Medium Term Note
U.S. BOND - FINANCIAL STATEMENTS ================================================================================================================ STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995 (Unaudited) ASSETS: Investments, at value (Cost $9,705,012) (Note 1)........................................... $ 9,885,995 Cash....................................................................................... 40,223 Receivables: Investment securities sold.............................................................. 253,203 Interest................................................................................ 117,792 Due from Advisor (Note 2)............................................................... 102,931 Deferred organization costs, net of amortization (Note 1).................................. 13,004 Other assets............................................................................... 15,935 ----------- TOTAL ASSETS..................................................................... 10,429,083 ----------- LIABILITIES: Payables: Investment securities purchased......................................................... 1,071,068 Investment advisory fees (Note 2)....................................................... 3,845 Accrued expenses........................................................................ 105,140 ----------- TOTAL LIABILITIES................................................................ 1,180,053 ----------- NET ASSETS: Applicable to 897,145 shares; par value of $0.001 per share; unlimited shares authorized... $ 9,249,030 =========== Brinson Class: $9,074,299/880,184 shares ................................................ $ 10.31 =========== SwissKey Class: $174,731/16,961 shares ................................................... $ 10.30 =========== NET ASSETS CONSIST OF: Paid in capital............................................................................ $ 8,985,395 Accumulated undistributed (distributions in excess of) net investment income............... (7,906) Accumulated net realized gain on investments............................................... 90,558 Net unrealized appreciation on investments................................................. 180,983 ----------- NET ASSETS....................................................................... $ 9,249,030 ===========
See accompanying notes to financial statements.
U.S. BOND - FINANCIAL STATEMENTS ========================================================================================== STATEMENT OF OPERATIONS FOR THE PERIOD AUGUST 31, 1995* TO DECEMBER 31, 1995 (Unaudited) INVESTMENT INCOME Interest................................................................... $ 190,503 --------- TOTAL INCOME..................................................... 190,503 --------- EXPENSES: Professional fees.......................................................... 28,675 Custodian fees............................................................. 21,000 Registration fees.......................................................... 17,605 Transfer Agent Fees........................................................ 16,060 Advisory fees (Note 2)..................................................... 14,076 Accounting fees............................................................ 13,585 Printing fees.............................................................. 11,358 Amortization of organization costs (Note 1)................................ 932 Distribution fees (Note 5)................................................. 89 Other...................................................................... 6,897 --------- TOTAL EXPENSES................................................... 130,277 Expenses waived by Advisor (Note 2)............................. (113,298) --------- NET EXPENSES..................................................... 16,979 --------- NET INVESTMENT INCOME ........................................... 173,524 --------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain on investments........................................... 113,897 Change in net unrealized appreciation on investments ...................... 180,983 --------- Net realized and unrealized gain on investments ........................... 294,880 --------- Net increase in net assets resulting from operations....................... $ 468,404 =========
* Commencement of operations See accompanying notes to financial statements.
U.S. BOND - FINANCIAL STATEMENTS =================================================================================================== STATEMENTS OF CHANGES IN NET ASSETS FOR THE PERIOD AUGUST 31, 1995** TO DECEMBER 31, 1995 (Unaudited) OPERATIONS: Net investment income.......................................................... $ 173,524 Net realized gain on investments .............................................. 113,897 Change in net unrealized appreciation on investments .......................... 180,983 ------------ Net increase in net assets resulting from operations........................... 468,404 ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income*...................................... (173,524) Distributions from net realized gain*.......................................... (23,339) Distributions in excess of net investment income*.............................. (7,906) ------------ Total distributions to shareholders*........................................... (204,769) ------------ CAPITAL SHARE TRANSACTIONS: Shares sold.................................................................... 8,861,189 Shares issued on reinvestment of distributions................................. 204,770 Shares redeemed................................................................ (131,564) ------------ Net increase in net assets resulting from capital share transactions (Note 6).. 8,934,395 ------------ TOTAL INCREASE IN NET ASSETS........................................... 9,198,030 ------------ NET ASSETS: Beginning of period............................................................ 51,000 ------------ End of period (including distributions in excess of net investment income)..... $ 9,249,030 ============ * Distributions by Class: Distributions from and in Excess of Net Investment Income: Brinson Class............................................................... $ 179,445 SwissKey Class.............................................................. 1,984 Distributions from Net Realized Gain: Brinson Class............................................................... 23,072 SwissKey Class.............................................................. 268 ------------ $ 204,769 ============
** Commencement of operations See accompanying notes to financial statements.
U.S. BOND FUND - (Brinson Class) FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented. Period Ended December 31, 1995* (Unaudited) ----------- Net asset value, beginning of period.............................. $10.00 ------ Income from investment operations: Net investment income.......................................... 0.20 Net realized and unrealized gain on investments................ 0.35 ------ Total gain from investment operations..................... 0.55 ------ Less distributions: Distributions from net investment income....................... (0.20) Distributions from net realized gain........................... (0.03) Distributions in excess of net investment income............... (0.01) ------ Total distributions....................................... (0.24) ------ Net asset value, end of period.................................... $10.31 ====== Total return...................................................... 5.49% Ratios/Supplemental data Net assets, end of period (in 000s)............................ $9,249 Ratio of expenses to average net assets: Before expense reimbursement.............................. 4.69% ** After expense reimbursement............................... 0.60% ** Ratio of net investment income to average net assets: Before expense reimbursement.............................. 2.17% ** After expense reimbursement............................... 6.26% ** Portfolio turnover rate........................................ 212%
* The Fund commenced operations on August 31, 1995 ** Annualized Total return has not been annualized See accompanying notes to financial statements.
U.S. BOND FUND - (SwissKey Class) FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented. Period Ended December 31, 1995* (Unaudited) ----------- Net asset value, beginning of period.......................................... $10.00 ------ Income from investment operations: Net investment income...................................................... 0.20 Net realized and unrealized gain on investments............................ 0.34 ------ Total gain from investment operations................................. 0.54 ------ Less distributions: Distributions from net investment income................................... (0.20) Distributions from net realized gain....................................... (0.03) Distributions in excess of net investment income........................... (0.01) ------ Total distributions................................................... (0.24) ------ Net asset value, end of period................................................ $10.30 ====== Total return.................................................................. 5.29% Ratios/Supplemental data Net assets, end of period (in 000s)........................................ $9,249 Ratio of expenses to average net assets: Before expense reimbursement.......................................... 5.16% ** After expense reimbursement........................................... 1.07% ** Ratio of net investment income to average net assets: Before expense reimbursement.......................................... 1.70% ** After expense reimbursement........................................... 5.79% ** Portfolio turnover rate.................................................... 212%
* The Fund commenced operations on August 31, 1995 ** Annualized Total return has not been annualized See accompanying notes to financial statements. THE BRINSON FUNDS - NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is a no-load, 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 ten series: Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund (each a "Fund" collectively, the "Funds"). The following is a summary of significant accounting policies consistently followed by the U.S. Balanced Fund, the U.S. Equity Fund and the U.S. Bond Fund in the preparation of their financial statements. A. INVESTMENT VALUATION: Securities for which quotations are readily available are valued at the last available sales price, or lacking any sales, at the last available bid price in the principal market in which such securities are normally 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. Fixed income/debt securities are valued using market quotations or independent services that use prices provided by market makers or estimates of market values obtained from yield data relating to instruments of securities with similar characteristics. 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: Security transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. C. INVESTMENT INCOME: Interest income, which includes amortization of premiums and discounts is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. D. FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the six months ended December 31, 1995. Therefore, no federal income tax provision was required. E. ORGANIZATION COSTS: Organization costs are being amortized on a straight- line basis over five years from each Fund's respective commencement of operations. 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 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. Amounts equal to 22.86% and 100.00% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the U.S. Balanced Fund and the U.S. Equity Fund. - -------------------------------------------------------------------------------- THE BRINSON FUNDS - NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on the Funds' respective average daily net assets. The Advisor has agreed to waive its fees and reimburse the Funds' to the extent total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates, for the period ended December 31, 1995, were as follows:
Advisory Expense Advisory Fees Due from Fee Cap Fees Waived Advisor --------- -------- -------- -------- -------- U.S. Balanced Fund.. 0.70% 0.80% $660,274 $303,042 $171,454 U.S. Equity Fund.... 0.70% 0.80% 254,154 199,769 129,498 U.S. Bond Fund...... 0.50% 0.60% 14,076 113,298 102,931
Certain officers of the Funds are also officers and directors of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees were $3,623, $2,451 and $942 for the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund, respectively. 3. INVESTMENT TRANSACTIONS Investment transactions for the period ended December 31, 1995, excluding short- term investments, were as follows:
Purchases Proceeds from sales ------------- ------------------- U.S. Balanced Fund............... $255,669,041 $220,420,733 U.S. Equity Fund................. 51,092,420 11,182,406 U.S. Bond Fund................... 26,005,847 17,524,350
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 and 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 in an amount (initial margin) based on the number of open contracts. Subsequent payments (variation margin) are made or received by the Funds each day. 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 realized and net unrealized gains and losses on these contracts. - -------------------------------------------------------------------------------- THE BRINSON FUNDS - NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 5. DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") for SwissKey class shares. Under the Plan, the Funds reimburse Brinson Partners, Fund/Plan Broker Services or others for expenses incurred in the promotion and distribution of SwissKey class shares. Distribution fees for the period ended December 31, 1995, were as follows:
12b-1 Fee 12b-1 Fees Paid ---------- --------------- SwissKey U.S. Balanced Fund..... 0.50% $ 8 SwissKey U.S. Equity Fund....... 0.52% 208 SwissKey U.S. Bond Fund......... 0.47% 89
6. CAPITAL TRANSACTIONS The Funds have outstanding two classes of common shares, Brinson Class and SwissKey class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Paid in surplus was as follows:
Period Ended Period Ended December 31, 1995 June 30, 1995 ----------------- ------------- Brinson Class SwissKey Class Brinson Class SwissKey Class ------------- -------------- ------------- -------------- U.S. Balanced Fund*.. $52,928,402 $221,407 142,953,790 - U.S. Equity Fund..... 42,237,565 129,602 29,270,697 - U.S. Bond Fund**..... 8,812,112 173,283 - -
* The Fund commenced operations on December 30,1994 ** The Fund commenced operations on August 31, 1995 - -------------------------------------------------------------------------------- THE BRINSON FUNDS - NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
Capital stock transactions were as follows: U.S. BALANCED FUND Six Months Ended Period Ended December 31, 1995 June 30, 1995 ------------------ ------------- Shares Value Shares Value ------ ----- ------ ----- Sales: Brinson Class................ 3,945,476 $45,936,887 15,121,050 $154,231,504 SwissKey Class............... 19,216 221,011 - - --------- ----------- ---------- ------------ Total Sales................... 3,964,692 $46,157,898 15,121,050 $154,231,504 ========= =========== ========== ============ Dividend Reinvestment: Brinson Class................ 1,291,889 $14,701,695 178,265 $ 1,991,226 SwissKey Class............... 123 1,394 - - --------- ----------- ---------- ------------ Total Dividend Reinvestment... 1,292,012 $14,703,089 178,265 $ 1,991,226 ========= =========== ========== ============ Repurchase: Brinson Class................ 657,649 $ 7,710,180 1,260,181 $ 13,268,940 SwissKey Class............... 88 998 - - --------- ----------- ---------- ------------ Total Repurchases............. 657,737 $ 7,711,178 1,260,181 $ 13,268,940 ========= =========== ========== ============ U.S. EQUITY FUND Six Months Ended Period Ended December 31, 1995 June 30, 1995 ------------------ ------------- Shares Value Shares Value ------ ----- ------ ----- Sales: Brinson Class................ 3,374,176 $41,373,607 3,011,049 $ 30,972,427 SwissKey Class............... 10,353 127,133 - - --------- ----------- ---------- ------------ Total Sales................... 3,384,529 $41,500,740 3,011,049 $ 30,972,427 ========= =========== ========== ============ Dividend Reinvestment: Brinson Class................ 189,516 $ 2,456,129 33,507 $ 349,100 SwissKey Class............... 268 3,473 - - --------- ----------- ---------- ------------ Total Dividend Reinvestment... 189,784 $ 2,459,602 33,507 $ 349,100 ========= =========== ========== ============ Repurchases: Brinson Class................ 125,891 $ 1,592,171 202,160 $ 2,050,830 SwissKey Class............... 84 1,004 - - --------- ----------- ---------- ------------ Total Repurchases............. 125,975 $ 1,593,175 202,160 $ 2,050,830 ========= =========== ========== ============ U.S. BOND FUND Period Ended December 31, 1995 ------------ Shares Value ------- ---------- Sales: Brinson Class................ 867,974 $8,691,149 SwissKey Class............... 16,640 170,032 ------- ---------- Total Sales................... 884,614 $8,861,181 ======= ========== Dividend Reinvestment: Brinson Class................ 19,835 $ 202,518 SwissKey Class............... 221 2,251 ------- ---------- Total Dividend Reinvestment... 20,056 $ 204,769 ======= ========== Repurchases: Brinson Class................ 12,625 $ 131,555 SwissKey Class............... - - ------- ---------- Total Repurchases............. 12,625 $ 131,555 ======= ==========
- -------------------------------------------------------------------------------- DISTRIBUTED BY: FUND/PLAN BROKER SERVICES, INC. 2 ELM STREET CONSHOHOCKEN, PA 19428 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 each Funds' objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- The Brinson Funds Form N-1A Part C Other Information THE BRINSON FUNDS FORM N-1A PART C. OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS. ---------------------------------- (a) Financial Statements. Included in Part A: Financial Highlights BRINSON GLOBAL FUND, BRINSON GLOBAL EQUITY FUND, BRINSON GLOBAL BOND FUND, BRINSON U.S. EQUITY FUND, BRINSON U.S. BALANCED FUND, BRINSON U.S. BOND FUND, AND BRINSON NON-U.S. EQUITY FUND. BRINSON SHORT-TERM GLOBAL INCOME FUND, BRINSON U.S. CASH MANAGEMENT FUND AND BRINSON NON-U.S. BOND FUND: NOT APPLICABLE. SWISSKEY U.S. BOND FUND. SWISSKEY GLOBAL FUND, SWISSKEY GLOBAL EQUITY FUND, SWISSKEY GLOBAL BOND FUND, SWISSKEY SHORT-TERM GLOBAL INCOME FUND, SWISSKEY U.S. BALANCED FUND, SWISSKEY U.S. EQUITY FUND, SWISSKEY U.S. CASH MANAGEMENT FUND AND SWISSKEY NON-U.S. BOND FUND: NOT APPLICABLE. Included in Part B: GLOBAL FUND ----------- (1) Report of Independent Auditors; (2) Schedule of Investments as of June 30, 1995 (audited); (3) Statement of Assets and Liabilities at June 30, 1995 (audited); (4) Statement of Operations for the year ended June 30, 1995 (audited); (5) Statements of Changes in Net Assets for the two years in the period ended June 30, 1995, and for the period August 31, 1992 (commencement of operations) to June 30, 1993 (audited); (6) Financial Highlights for the two years in the period ended June 30, 1995, and for the period August 31, 1992 (commencement of operations) to June 30, 1993 (audited); (7) Notes to Financial Statements dated June 30, 1995 (audited). GLOBAL EQUITY FUND ------------------ (1) Report of Independent Auditors; (2) Schedule of Investments as of June 30, 1995 (audited); (3) Statement of Assets and Liabilities at June 30, 1995 (audited); (4) Statement of Operations for the year ended June 30, 1995 and for the period January 28, 1994 (commencement of operation) to June 30, 1994 (audited); (5) Statements of Changes in Net Assets for the year ended June 30, 1995, and for the period January 28, 1994 (commencement of operations) to June 30, 1994 (audited); (6) Financial Highlights for the year ended June 30, 1995, and for the period January 28, 1994 (commencement of operations) to June 30, 1994 (audited); (7) Notes to Financial Statements dated June 30, 1995 (audited). GLOBAL BOND FUND ---------------- (1) Report of Independent Auditors; (2) Schedule of Investments as of June 30, 1995 (audited); (3) Statement of Assets and Liabilities at June 30, 1995 (audited); (4) Statement of Operations for the year ended June 30, 1995 (audited); (5) Statements of Changes in Net Assets for the year ended June 30, 1995, and for the period July 30, 1993 (commencement of operations) to June 30, 1994 (audited); (6) Financial Highlights for the year ended June 30, 1995, and for the period July 30, 1993 (commencement of operations) to June 30, 1994 (audited); (7) Notes to Financial Statements dated June 30, 1995 (audited). U.S. BALANCED FUND ------------------ (1) Report of Independent Auditors; (2) Schedule of Investments as of June 30, 1995 (audited); (3) Statement of Assets and Liabilities at June 30, 1995 (audited); (4) Statement of Operations for the period December 30, 1994 (commencement of operations) to June 30, 1995 (audited); (5) Statement of Changes in Net Assets for the period December 30, 1994 (commencement of operations) to June 30, 1995 (audited); (6) Financial Highlights for the period December 30, 1994 (commencement of operations) to June 30, 1995 (audited); (7) Notes to Financial Statements dated June 30, 1995 (audited). U.S. EQUITY FUND ---------------- (1) Report of Independent Auditors; (2) Schedule of Investments as of June 30, 1995 (audited); (3) Statement of Assets and Liabilities at June 30, 1995 (audited); (4) Statement of Operations for the year ended June 30, 1995 (audited); (5) Statements of Changes in Net Assets for the year ended June 30, 1995, and for the period February 22, 1994 (commencement of operations) to June 30, 1994 (audited). (6) Financial Highlights for the year ended June 30, 1995, and for the period February 22, 1994 (commencement of operations) to June 30, 1994 (audited); (7) Notes to Financial Statements dated June 30, 1995 (audited). NON-U.S. EQUITY FUND -------------------- (1) Report of Independent Auditors; (2) Schedule of Investments as of June 30, 1995 (audited); (3) Statement of Assets and Liabilities at June 30, 1995 (audited); (4) Statement of Operations for the year ended June 30, 1995 (audited); (5) Statements of Changes in Net Assets for the year ended June 30, 1995, and for the period August 31, 1993 (commencement of operations) to June 30, 1994 (audited). (6) Financial Highlights for the year ended June 30, 1995, and for the period August 31, 1993 (commencement of operations) to June 30, 1994 (audited); (7) Notes to Financial Statements dated June 30, 1995 (audited). U.S. BOND FUND -------------- (1) Schedule of Investments as of December 31, 1995 (unaudited); (2) Statement of Assets and Liabilities at December 31, 1995 (unaudited); (3) Statement of Operations for the period August 31, 1995 (commencement of operations) to December 31, 1995 (unaudited); (4) Statement of Changes in Net Assets for the period August 31, 1995 (commencement of operations) to December 31, 1995 (unaudited); (5) Financial Highlights for the period August 31, 1995 (commencement of operations) to December 31, 1995 (unaudited); (6) Notes to Financial Statements dated December 31, 1995 (unaudited). (b) Exhibits: Exhibits filed pursuant to Form N-1A: (1) Certificate of Trust and Agreement and Declaration of Trust of The Brinson Funds is incorporated herein by reference to Post-Effective Amendment No. 6 to Registrant's Registration Statement No. 33-47287, Exhibit No. (1) as filed on October 5, 1993. (2) By-Laws of The Brinson Funds is incorporated herein by reference to Post-Effective Amendment No. 6 to Registrant's Registration Statement No. 33-47287, Exhibit No. (2) as filed on October 5, 1993. (3) Not Applicable. (4) Specimen Share Certificate of The Brinson Funds is incorporated herein by reference to Post-Effective Amendment No. 9 to Registrant's Registration Statement No. 33-47287, Exhibit No. (4) as filed on July 21, 1994. (5) (a) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson Global Fund of The Brinson Funds, dated April 25, 1995, is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No. (5)(a) as filed on September 20, 1995. (b) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson Global Bond Fund of The Brinson Funds, dated April 25, 1995, is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No.(5)(b) as filed on September 20, 1995. (c) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson Non-U.S. Equity Fund of The Brinson Funds, dated April 25, 1995, is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No.(5)(c) as filed on September 20, 1995. (d) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson Global Equity Fund of The Brinson Funds, dated April 25, 1995, is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No.(5)(d) as filed on September 20, 1995. (e) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson U.S. Equity Fund of The Brinson Funds, dated April 25, 1995, is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No.(5)(e) as filed on September 20, 1995. (f) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson U.S. Balanced Fund of The Brinson Funds, dated April 25, 1995, is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No.(5)(f) as filed on September 20, 1995. (g) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson U.S. Bond Fund of The Brinson Funds, dated April 25, 1995, is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No.(5)(g) as filed on September 20, 1995. (h) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson Non U.S. Bond Fund of The Brinson Funds, dated April 25, 1995, is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No.(5)(h) as filed on September 20, 1995. (i) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson Short-Term Global Income Fund of The Brinson Funds, dated April 25, 1995, is incorporated herein by reference to Post- Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No.(5)(I) as filed on September 20, 1995. (j) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson U.S. Cash Management Fund of The Brinson Funds, dated April 25, 1995, is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No.(5)(j) as filed on September 20, 1995. (6) (a) Underwriting Agreement between Fund/Plan Broker Services, Inc. and the Registrant on behalf of each of the series of The Brinson Funds dated November 20, 1995 is attached as Exhibit No. (6)(a) to Item 24. (b) Amendment to Underwriting Agreement between Fund/Plan Broker Services, Inc. and the Registrant on behalf of each of the series of The Brinson Funds dated August 21, 1995 is attached as Exhibit No. (6)(b) to Item 24. (c) Underwriting Agreement between Fund/Plan Broker Services, Inc. and the Registrant on behalf of each of the series of The Brinson Funds dated April 25, 1995 is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No. (6)(a) to Item 24 as filed on September 20, 1995. (d) Underwriting Agreement between Fund/Plan Broker Services, Inc. and the Registrant on behalf of each of the series of The Brinson Funds dated September 1, 1994 is incorporated herein by reference to Post-Effective Amendment No. 10 to Registrant's Registration Statement No. 33-47287 Exhibit No. (6)(a) to Item 24 as filed on September 15, 1994. (e) Underwriting Agreement between Fund/Plan Broker Services, Inc. and the Registrant on behalf of each of the series of The Brinson Funds is incorporated herein by reference to Post-Effective Amendment No. 9 to Registrant's Registration Statement No. 33-47287, Exhibit No. (6) as filed on July 21, 1994. (7) Not Applicable. (8) (a) Amendment to the Custodian Agreement between the Registrant and Bankers Trust Company to the Agreement dated June 18, 1992 is incorporated herein by reference to Post-Effective Amendment No. 12 to Registrant's Registration Statement No. 33-47287 as filed on May 31, 1995 as Exhibit (8)(a) to Item 24. (b) Custodian Agreement between the Registrant and Bankers Trust Company is incorporated herein by reference to Post- Effective Amendment No. 9 to Registrant's Registration Statement No. 33-47287, Exhibit No. (8)(a) as filed on July 21, 1994. (c) Amendments to the Custodian Agreement between the Registrant and Bankers Trust Company is incorporated herein by reference to Post-Effective Amendment No.9 to Registrant's Registration Statement No. 33-47287, Exhibit No. (8)(b) as filed on July 21, 1994. (9)(a)(i) Shareholder Services Agreement between Fund/Plan Services, Inc. and the Registrant dated November 20, 1995 is attached as Exhibit No. (9)(a) to Item 24. (a)(ii) Amendment to the Shareholder Services Agreement between Fund/Plan Services, Inc. and the Registrant dated August 21, 1995 is attached as Exhibit No. (9)(a) to Item 24. (a)(iii) Shareholder Services Agreement between Fund/Plan Services, Inc. and the Registrant dated April 25, 1995 is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No. (9)(a) to Item 24 as filed on September 20, 1995. (a)(iv) Shareholder Services Agreement between the Registrant and Fund/Plan Services, Inc. is incorporated herein by reference to Post-Effective Amendment No. 9 to the Registrant's Registration Statement No. 33-47287, Exhibit No.(9)(a) as filed on July 21, 1994. (b)(i) Administration Agreement between Fund/Plan Services, Inc. and the Registrant dated November 20, 1995 is attached as Exhibit No. (9)(b) to Item 24. (b)(ii) Amendment to the Administrative Services Agreement between Fund/Plan Services, Inc. and the Registrant dated August 21, 1995 is attached as Exhibit No. (9)(b) to Item 24. (b)(iii) Administrative Services Agreement between Fund/Plan Services, Inc. and the Registrant dated April 25, 1995 is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No. (9)(b) to Item 24 as filed on September 20, 1995. (b)(iv) Administrative Services Agreement between the Registrant and Fund/Plan Services, Inc. is incorporated herein by reference to Post-Effective Amendment No. 9 to the Registrant's Registration Statement No. 33-47287, Exhibit No. (9)(b) as filed on July 21, 1994. (c)(i) Accounting Services Agreement between Fund/Plan Services, Inc. and the Registrant dated November 20, 1995 is attached as Exhibit No. (9)(c) to Item 24. (c)(ii) Amendment to the Accounting Services Agreement between Fund/Plan Services, Inc. and the Registrant dated August 21, 1995 is attached as Exhibit No. (9)(c) to Item 24. (c)(iii) Accounting Services Agreement between Fund/Plan Services, Inc. and the Registrant dated April 25, 1995 is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No. (9)(c) to Item 24 as filed on September 20, 1995. (c)(iv) Accounting Services Agreement between the Registrant and Fund/Plan Services, Inc. is incorporated herein by reference to Post-Effective Amendment No. 9 to the Registrant's Registration Statement No. 33-47287, Exhibit No.(9)(c) as filed on July 21, 1994. (c)(v) Amendment to Accounting Services Agreement between the Registrant and Fund/Plan Services, Inc. is incorporated herein by reference to Post-Effective Amendment No. 9 to Registrant's Registration Statement No. 33-47287, Exhibit No. (9)(d) as filed on July 21, 1994. (10) Opinion and Consent of Counsel. (a) Incorporated herein by reference to Registrant's Notice pursuant to Rule 24f-2 filed with the U.S. Securities and Exchange Commission on August 25, 1995. (b) Consent of Stradley Ronon Stevens and Young, LLP Counsel to the Trust. Attached hereto as Exhibit (10)(b). (11) Other Opinions and Consents. (a) Consent of Ernst & Young LLP, independent auditors to the Trust. Attached hereto as Exhibit (11)(a). (12) Not Applicable. (13) Letter of Understanding relating to initial capital is incorporated herein by reference to Pre-Effective Amendment No. 1 to Registrant's Registration Statement No. 33-47287, Exhibit No. (13) as filed on July 9, 1992. (14) Not Applicable. (15) (a) Distribution Plan relating to the SwissKey Class Shares on behalf of each Series of The Brinson Funds dated November 20, 1995 is attached as Exhibit No. (15)(a). (15) (b) Distribution Plan relating to the SwissKey Class Shares on behalf of each Series of The Brinson Funds dated July 31, 1995 is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No. (15) as filed September 20, 1995. (16) (a) Schedule for Computation of Performance Quotations on behalf of Brinson Global Fund, Brinson Global Equity Fund, Brinson Global Bond Fund, Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund and Brinson Non-U.S. Equity Fund is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No. (16) as filed on September 20, 1995. (16) (b) Schedule for Computation of Performance Quotations on behalf of the U.S. Bond Fund is attached as Exhibit No. (16)(b). (17) Not Applicable. (18) Form of Multiple Class Plan relating to the Brinson Class and Swiss Key Class Shares on behalf of each Series of The Brinson Funds as presented to the Board of Trustees is incorporated herein by reference to Post-Effective No. 12/13 to Registrant's Registration Statement No. 33-47287. (19) Powers of Attorney are incorporated herein by reference to Post- Effective No. 11/12 to Registrants' Registration Statement No. 33-47287, Exhibit No. (18) as filed on March 17, 1995. ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT. -------------------------------------------------------------- None. ITEM 26. NUMBER OF HOLDERS OF SECURITIES. -------------------------------- NUMBER OF RECORD HOLDERS TITLE OF CLASS AS OF JANUARY 17, 1996 -------------- ---------------------- Shares of Beneficial Interest 1009 par value $0.001 of: BRINSON CLASS OF THE BRINSON FUNDS ---------------------------------- Brinson Global Fund 363 Brinson Global Equity Fund 80 Brinson Global Bond Fund 17 Brinson Short-Term Global Income Fund 0 Brinson U.S. Balanced Fund 17 Brinson U.S. Equity Fund 61 Brinson U.S. Bond Fund 3 Brinson U.S. Cash Management Fund 0 Brinson Non-U.S. Equity Fund 91 Brinson Non-U.S. Bond Fund 0 SWISSKEY CLASS OF THE BRINSON FUNDS ----------------------------------- SwissKey Global Fund 10 SwissKey Global Equity Fund 342 SwissKey Global Bond Fund 10 SwissKey Short-Term Global Income Fund 0 SwissKey U.S. Balanced Fund 3 SwissKey U.S. Equity Fund 3 SwissKey U.S. Bond Fund 3 SwissKey U.S. Cash Management Fund 0 SwissKey Non-U.S. Equity Fund 6 SwissKey Non-U.S. Bond Fund 0 ITEM 27. INDEMNIFICATION. ---------------- Article VII, Sections 2 and 3 of Registrant's Agreement and Declaration of Trust provide: Section 2. Indemnification and Limitation of Liability. The Trustees shall not be responsible or liable in any event for any neglect or wrong-doing of any officer, agent, employee, Manager or Principal Underwriter of the Trust, nor shall any Trustee be responsible for the act or omission of any other Trustee, and, subject to the provisions of the Bylaws, the Trust out of its assets may indemnify and hold harmless each and every Trustee and officer of the Trust from and against any and all claims, demands, costs, losses, expenses, and damages whatsoever arising out of or related to such Trustee's performance of his or her duties as a Trustee or officer of the Trust; provided that nothing herein contained shall indemnify, hold harmless or protect any Trustee or officer from or against any liability to the Trust or any Shareholder to which he or she would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. Every note, bond, contract, instrument, certificate or undertaking and every other act or thing whatsoever issued, executed or done by or on behalf of the Trust or the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been issued, executed or done only in or with respect to their or his or her capacity as Trustees or Trustee, and such Trustees or Trustee shall not be personally liable thereon. Section 3. Trustee's Good Faith Action, Expert Advice, No Bond or Surety. The exercise by the Trustees of their powers hereunder shall be binding upon everyone interested in or dealing with the Trust. A Trustee shall be liable to the Trust and to any Shareholder solely for his or her own wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee and shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust and shall be under no liability for any act or omission in accordance with such advice nor for failing to follow such advice. The Trustees shall not be required to give any bond as such, nor any surety if a bond is required. Section 4. Insurance. The Trustees shall be entitled and empowered to the fullest extent permitted by law to purchase with Trust assets insurance for liability and for all expenses, reasonably incurred or paid or expected to be paid by a Trustee or officer in connection with any claim, action, suit or proceeding in which he or she becomes involved by virtue of his or her capacity or former capacity with the Trust, whether or not the Trust would have the power to indemnify him or her against such liability under the provisions of this Article. Indemnification of Registrant's custodian, transfer agent, accounting services provider and administrator against certain stated liabilities is provided for in the following documents: (a) Section 12 of Accounting Services Agreement, between the Registrant and Fund/Plan Services, Inc., incorporated herein by reference to Post Effective No. 16 to Registrant's Registration Statement No. 33-47287, Exhibit 9 (C) as filed on February 15, 1996. (b) Section 8 of Administration Agreement between the Registrant and Fund/Plan Services, Inc., incorporated herein by reference to Post Effective No. 16 to Registrant's Registration Statement No. 33-47287, Exhibit 9 (b) as filed on February 15, 1996. (c) Section 14 of Custodian Agreement between the Registrant and Bankers Trust Company, incorporated herein by reference to Post Effective No. 13 to Registrant's Registration No. 33- 47287, Exhibit Nos. 8(a) and 8(b) as filed on September 20, 1995. (d) Section 19 of Shareholder Services Agreement between Registrant and Fund/Plan Services, Inc., incorporated herein by reference to Post Effective No. 16 to Registrant's Registration Statement No. 33-47287, Exhibit 9 (a) as filed on February 15, 1996. (e) Sections 8 of the Underwriting Agreement between Registrant and Fund/Plan Broker Services, Inc. are incorporated herein by reference to Post Effective No. 16 to Registrant's Registration Statement No. 33-47287, Exhibit No.(6) as filed on February 15, 1996. ITEM 28. BUSINESS AND OTHER CONNECTIONS OF ADVISOR. ------------------------------------------ Brinson Partners, Inc. provides investment advisory services consisting of portfolio management for a variety of individuals and institutions and as of December 31, 1995 had approximately $53 billion in assets under management. It presently acts as investment advisor to six other investment companies, Brinson Relationship Funds, which includes six investment portfolios (series), Enterprise Accumulation Trust, Enterprise International Growth Portfolio, Fort Dearborn Income Securities, Inc., and PACE Large Company Value Equity Investments. For information as to any other business, vocation or employment of a substantial nature in which each Trustee or officer of the Registrant's investment advisor is or has been engaged for his own account or in the capacity of Trustee, officer, employee, partner or trustee, reference is made to the Form ADV (File #34910) filed by it under the Investment Advisers Act of 1940, as amended. ITEM 29. PRINCIPAL UNDERWRITER. ---------------------- (a) Fund/Plan Broker Services, Inc. ("FPBS"), the principal underwriter for the Registrant's securities, currently acts as principal underwriter for the following entities: CT & T Funds Farrell Alpha Strategies First Mutual Fund, Inc. Focus Trust, Inc. The Home State PA Growth Fund IAA Trust Mutual Funds Matthews International Funds McM Funds Roulston Family of Funds Smith Breeden Series Fund Smith Breeden Short Duration U.S. Government Fund Smith Breeden Trust The Stratton Funds, Inc. Stratton Growth Fund, Inc. Stratton Monthly Dividend Shares, Inc. The Timothy Plan (b) The table below sets forth certain information as to the underwriter's Directors, Officers and Control Persons and officers of the Registrant holding position with the Underwriter: POSITION POSITION AND NAME AND PRINCIPAL AND OFFICES OFFICES WITH BUSINESS ADDRESS WITH UNDERWRITER REGISTRANT - ---------------- ---------------- ---------- Kenneth J. Kempf Director, President None 2 West Elm Street and Principal Conshohocken, PA 19428-0874 Lynne M. Cannon Vice President and None 2 West Elm Street Principal Conshohocken, PA 19428-0874 Rocco J. Cavalieri Director and None 2 W. Elm Street Vice President Conshohocken, PA 19428-0874 Gerald J. Holland Director, None 2 West Elm Street Vice President Conshohocken, PA 19428-0874 and Principal Joseph M. O'Donnell, Esq. Director and None 2 W. Elm Street Vice President Conshohocken, PA 19428-0874 Sandra L. Adams Principal None 2 W. Elm Street Conshohocken, PA 19428-0874 Mary P. Efstration Secretary None 2 W. Elm Street Conshohocken, PA 19428-0874 John H. Leven Treasurer None 2 W. Elm Street Conshohocken, PA 19428-0874 James W. Stratton may be considered a control person of the Underwriter due to his direct or indirect ownership of Fund/Plan Services, Inc., the parent of the Underwriter. (c) Inapplicable. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS. --------------------------------- All records described in Section 31(a) of the 1940 Act and the Rules 17 CFR 270.31a-1 to 31a-31 promulgated thereunder, are maintained by the Trust's Investment Advisor, Brinson Partners, Inc., 209 South LaSalle Street, Chicago, IL 60604-1295, except for those maintained by the Fund's Custodian, Bankers Trust Company, c/o BTNY Services, Inc., 34 Exchange Place, Jersey City, NJ 07302 and the Fund's Administrator, Transfer, Redemption, Dividend Disbursing and Accounting Agent, Fund/Plan Services Inc., 2 W. Elm Street, Conshohocken, PA 19428. ITEM 31. MANAGEMENT SERVICES. -------------------- There are no management-related service contracts not discussed in Part A or Part B. ITEM 32. UNDERTAKINGS. ------------- (a) Inapplicable. (b) The Registrant, on behalf of Brinson U.S. Cash Management Fund and Brinson Short-Term Global Income Fund, undertakes to file a post-effective amendment to Registrant's Registration Statement under the Securities Act of 1933 within four to six months from the commencement of operations of such series. Registrant understands that such post-effective amendment will contain reasonably current financial statements which are not certified by independent public accountants. (c) The Registrant hereby undertakes to furnish each person to whom a Prospectus for one or more series of the Registrant is delivered with a copy of the relevant latest annual report to shareholders, upon request and without charge. (d) The Registrant hereby undertakes to promptly call a meeting of shareholders for the purpose of voting upon the question of removal of any Trustee when requested in writing to do so by the record holders of not less than 10 percent of the Registrant's outstanding shares and to assist its shareholders in accordance with the requirements of Section 16(c) of the Investment Company Act of 1940, as amended, relating to shareholder communications. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the requirements for effectiveness of this registration statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post- Effective Amendment No. 16 to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Conshohocken and the Commonwealth of Pennsylvania, on the 15th day of February, 1996. THE BRINSON FUNDS By: E. Thomas McFarlan* President, Treasurer, and Principal Accounting Officer* Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 16 to Registrant's Registration Statement has been signed below by the following persons in the capacities and on the date(s) indicated. E. THOMAS MCFARLAN* - ------------------- E. Thomas McFarlan February 15, 1996 President, Treasurer, Principal Accounting Officer WALTER E. AUCH* February 15, 1996 - --------------- Walter E. Auch Trustee EDWARD M. ROOB* February 15, 1996 - --------------- Edward M. Roob Trustee FRANK K. REILLY* February 15, 1996 - ---------------- Frank K. Reilly Trustee - -------------------------------- *By: /s/ Carolyn F. Mead, -------------------- as Attorney-in-Fact and Agent pursuant to Power of Attorney THE BRINSON FUNDS & INDEX TO EXHIBITS TO FORM N-1A Exhibit Description of Sequentially Number Exhibit Numbered Page 6(a) Underwriting Agreement 6(b) Amendment to Underwriting Agreement 9(a)(i) Shareholder Services Agreement 9(a)(ii) Amendment to Shareholder Services Agreement 9(b)(i) Administration Agreement 9(b)(ii) Amendment to Administrative Services Agreement 9(c)(i) Accounting Services Agreement 9(c)(ii) Amendment to Accounting Services Agreement 10(b) Consent and Opinion of Counsel 11(a) Consent of Ernst & Young LLP 15(a) Distribution Plan 16 Schedule of Performance Computatio 27 Financial Data Schedule EX-99.6.A 2 UNDERWRITING AGREEMENT Exhibit to Form N-1A Exhibit (6)(a) Underwriting Agreement UNDERWRITING AGREEMENT ---------------------- THIS AGREEMENT, dated as of the __________ day of _________________, 1995 by and between The Brinson Funds (the "Trust"), including any future series or classes that may be subsequently created, and Fund/Plan Broker Services, Inc. ("FPBS"). WHEREAS, the Trust is an investment company registered under the Investment Company Act of 1940, as amended (the "Act"); and WHEREAS, the Trust is authorized to issue separate series of shares representing interests in separate investment portfolios (the "Series"), which Series are identified on Schedule "B" attached hereto, and which Schedule "B" may be amended from time to time by mutual agreement of the Trust and FPBS; and WHEREAS, FPBS is a broker-dealer registered with the Securities and Exchange Commission and a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"); and WHEREAS, the Trust and FPBS are desirous of entering into an agreement providing for the Underwriting and Marketing Support Services by FPBS of shares of the Trust (the "Shares"); NOW, THEREFORE, in consideration of the promises and agreements of the parties contained herein, the parties agree as follows: 1. APPOINTMENT. ----------- The Trust hereby appoints FPBS as its exclusive agent for the distribution of the Shares, and FPBS hereby accepts such appointment under the terms of this Agreement. The Trust agrees that it will not sell any shares to any person except to fill orders for the shares received through FPBS; provided, however, that the foregoing exclusive right shall not apply: (a) to shares issued or sold in connection with the merger or consolidation of any other investment company with the Trust or the acquisition by purchase or otherwise of all or substantially all of the assets of any investment company or substantially all of the outstanding shares of any such company by the Trust; (b) to shares which may be offered by the Trust to its stockholders for reinvestment of cash distributed from capital gains or net investment income of the Trust; or (c) to shares which may be issued to shareholders of other funds who exercise any exchange privilege set forth in each Series' Prospectus. Notwithstanding any other provision hereof, the Trust may terminate, suspend, or withdraw the offering of the Shares whenever, in its sole discretion, it deems such action to be desirable. 2. SALE AND REPURCHASE OF SHARES. ----------------------------- (a) FPBS will have the right, as agent for the Trust, to sell Shares to the public against orders therefor at the public offering price (as defined in sub-paragraph 2(d) hereof). (b) FPBS will also have the right, as agent for the Trust, to sell Shares at their net asset value to such persons as may be approved by the Board of Trustees of the Trust, all such sales to comply with the provisions of the Act, the Securities Act of 1933 and the rules and regulations of the Securities and Exchange Commission promulgated thereunder. (c) FPBS will also have the right to take, as agent for the Trust, all actions which, in FPBS's judgment, are necessary to carry into effect the distribution of the Shares. (d) The public offering price shall be the net asset value of Shares then in effect plus any applicable sales charge set forth in the Series' prospectuses. (e) The net asset value of the Shares shall be determined in the manner provided in the then current Prospectus and Statement of Additional information relating to the Shares (the "Prospectus"), and when determined shall be applicable to transactions as provided for in the Prospectus. The net asset value of the Shares shall be calculated by the Trust or by another entity on behalf of the Trust. FPBS shall have no duty to inquire into or liability for the accuracy of the net asset value per Share as calculated. (f) On every sale, the Trust shall receive the applicable net asset value of the Shares promptly. (g) Upon receipt of purchase instructions, FPBS will transmit such instructions to the Trust or its transfer agent for registration of the Shares purchased. (h) Nothing in this Agreement shall prevent FPBS or any affiliated person (as defined in the Act) of FPBS from acting as underwriter or distributor for any other person, firm or corporation (including other investment companies) or in any way limit or restrict FPBS or such affiliated person from buying, selling or trading any securities for its or their own account or for the accounts of others for whom it or they may be acting; provided, however, that FPBS expressly agrees that it will not for its own account purchase any shares of the Trust except for investment purposes and that it will not for its own account sell any such shares except by redemption of such shares by the Trust, and that it will undertake no activities which, in its judgment, will adversely affect the performance of its obligations to the Trust under this Agreement. (i) FPBS may repurchase Shares at such prices and upon such terms and conditions as shall be specified in the Prospectus. 3. RULES OF SALE OF SHARES. ----------------------- FPBS does not agree to sell any specific number of Shares. FPBS, as agent for the Trust, undertakes to sell Shares on a best efforts basis only against orders therefor. The Trust reserves the right to refuse at any time or times to sell any of its Shares for any reason deemed adequate by it. 4. RULES OF NASD, ETC. ------------------ (a) FPBS will conform to the Rules of Fair Practice of the NASD and the securities laws of any jurisdiction in which it sells, directly or indirectly, any Shares. (b) FPBS will require each dealer with whom FPBS has a selling agreement to conform to the applicable provisions of the Prospectus, with respect to the public offering price of the Shares, and FPBS shall not cause the Trust to withhold the placing of purchase orders so as to make a profit thereby. (c) The Trust agrees to furnish to FPBS sufficient copies of any agreements, plans or other materials it intends to use in connection with any sales of Shares in adequate time for FPBS to file and clear them with the proper authorities before they are put in use, and not to use them until so filed and cleared. (d) FPBS, at its own expense, will qualify as a dealer or broker, or otherwise, under all applicable state or federal laws required in order that the Shares may be sold in such states as may be mutually agreed upon by the parties. (e) FPBS shall not make, or authorize any representative, Service Organization, broker or dealer to make, in connection with any sale or solicitation of a sale of the Shares, any representations concerning the Shares except those contained in the Prospectus covering the Shares and in sales materials approved by FPBS and the Trust as information supplemental to such Prospectus. Copies of the Prospectus will be supplied by the Trust to FPBS in reasonable quantities upon request. (f) FPBS shall not act as a conduit by paying any asset based sales charge to any member in excess of NASD Rules (currently 0.75%). 5. RECORDS TO BE SUPPLIED BY THE TRUST. ----------------------------------- The Trust shall furnish to FPBS copies of all information, financial statements and other papers which FPBS may reasonably request for use in connection with the distribution of the Shares, and this shall include, but shall not be limited to, one certified copy, upon request by FPBS, of all financial statements prepared for the Trust by independent public accountants. 6. EXPENSES. -------- (a) The Trust will bear the following expenses: (i) preparation, setting in type, and printing of sufficient copies of the prospectuses and statements of additional information for distribution to shareholders, and the distribution of same to the shareholders; (ii) preparation, printing and distribution of reports and other communications to shareholders; (iii) registration of the Shares under the federal securities laws; (iv) qualification of the Shares for sale in the jurisdictions mutually agreed upon by the Trust and the FPBS; (v) maintaining facilities for the issue and transfer of the Shares; (vi) supplying information, prices and other data to be furnished by the Trust under this Agreement; and (vii) any original issue taxes, transfer taxes and professional privilege taxes applicable to the sale or delivery of the Shares or certificates therefor. (b) Brinson Partners, Inc. will pay all other expenses incident to the sale and distribution of the Shares sold hereunder. 7. FEE. --- For its services under this Agreement, FPBS shall be entitled to the fees contained in Schedule "A" attached hereto, as amended from time to time. All such fees will be paid by Brinson Partners, Inc. The services provided include acting as primary underwriter/distributor of the Trust and licensing/regulatory agent for personnel who are registered as FPBS representatives. These fees will include the renewal of the NASD license and the State Securities licenses for representatives in states requested by the Trust. These fees will also cover the expenses and personnel required to maintain the regulatory books and records of FPBS in connection with this agreement on behalf of the Trust. (a) Brinson Partners, Inc. will indemnify FPBS for the actions of its employees registered with the NASD as FPBS representatives and will undertake to see that the rules and regulations are followed with any and all sales presentations by such employees. 8. DUTIES AND OBLIGATIONS OF FPBS. ------------------------------ (a) Subject to the succeeding provisions of this section and Schedule "B", FPBS shall: 1. Provide its own office space, facilities, equipment and personnel for the performance of duties under this Agreement. 2. Maintain records as the distributor as requested and as mutually agreed upon. 3. Respond to all inquiries or other communications of shareholders of the Fund and its representatives. 4. Attend marketing strategy and Board of Trustees meetings as requested. 9. LIABILITY OF FPBS. ----------------- (a) FPBS, its directors, officers, employees, shareholders and agents shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the performance of this Agreement, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or negligence on the part of FPBS in the performance of its obligations and duties or by reason of its reckless disregard of its obligations and duties under this Agreement. The Trust agrees to indemnify and hold harmless FPBS against any and all liability, loss, damages, costs or expenses (including counsel fees) which FPBS may incur or be required to pay hereafter, in connection with any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which FPBS may be involved as a party or otherwise or with which FPBS may be threatened, by reason of the offer or sale of the Trust shares prior to the execution of this Agreement which is not due to FPBS's lack of reasonable care. (b) Any person, even though also a director, officer, employee, shareholder or agent of FPBS, who may be or become an officer, trustee, employee or agent of the Trust, shall be deemed, when rendering services to the Trust or acting on any business of the Trust (other than services or business in connection with FPBS's duties hereunder), to be rendering such services to or acting solely for the Trust and not as a trustee, officer, employee, shareholder or agent, or one under the control or direction of FPBS even though paid by it. (c) The Trust agrees to indemnify and hold harmless FPBS, and each person, if any, who controls FPBS within the meaning of Section 15 of the Securities Act of 1933 (the "Securities Act") or Section 20 of the Securities Exchange Act of 1934 (the "Exchange Act") against any and all losses, claims, damages and liabilities, joint or several (including any reasonable investigative, legal and other expenses incurred in connection therewith) to which they, or any of them, may become subject under the 1940 Act, the Securities Act, the Exchange Act or other federal or state law or regulation, at common law or otherwise insofar as such losses, claims, damages or liabilities (or actions, suits or proceedings in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Prospectus, Statement of Additional Information, supplement thereto, sales literature or other written information prepared by the Trust and furnished by it to FPBS for FPBS's use hereunder, disseminated by the Trust or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading. Such indemnity shall not, however, inure to the benefit of FPBS (or any person controlling FPBS) on account of any losses, claims, damages or liabilities (or actions, suits or proceedings in respect thereof) arising from the sale of the shares of the Trust to any person by FPBS (i) if such untrue statement or omission or alleged untrue statement or omission was made in the Prospectus, Statement of Additional Information, or supplement, sales or other literature, in reliance upon and in conformity with information furnished in writing to the Trust by FPBS specifically for use therein or (ii) if such losses, claims, damages or liabilities arise out of or are based upon an untrue statement or omission or alleged untrue statement or omission in the Prospectus, Statement of Additional Information, or supplement, sales or other literature, if the Trust shall correct the untrue statement or omission or the alleged untrue statement or omission which is the basis of the loss, claim, damage or liability for which indemnification is sought and a copy of the Prospectus was not sent or given to such person at or before the confirmation of the sale to such person, unless such failure to deliver the Prospectus was a result of noncompliance by the Trust with the obligation to furnish copies of the Prospectus and any supplements thereto. (d) FPBS agrees to indemnify and hold harmless the Trust, each person, if any, who controls the Trust within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, insofar as such losses, claims, damages or liabilities arise out of or are based upon any untrue statement or omission or alleged untrue statement of a material fact contained in a Prospectus or Statement of Additional Information or any supplement thereto, or arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if based upon information furnished in writing to the Trust by FPBS specifically for use therein. 10. MAINTENANCE OF INSURANCE COVERAGE. --------------------------------- FPBS shall, at its option, be a named insured party on the Trust's Errors & Omissions policy and the Trust's Fidelity bond, both of which shall, at FPBS's option, include coverage of FPBS's officers and employees. FPBS shall pay its allocable share of the cost of such policies in accordance with the provisions of the Act. The scope of coverage and amount of insurance limits applicable to the Trust on such policies shall also be made applicable to FPBS. 11. TERMINATION OF THIS AGREEMENT. ----------------------------- This Agreement shall automatically terminate in the event of its assignment. This Agreement may be terminated with respect to the Trust at any time, without payment of any penalty, by vote of a majority of the members of the Board of Trustees of the Trust who are not interested persons of the Trust or by vote of a majority of the outstanding voting securities of the Trust or by FPBS on one hundred and eighty (180) days written notice to the other party. 12. EFFECTIVE PERIOD OF THIS AGREEMENT. ---------------------------------- This Agreement shall be effective on the date noted above and shall remain in full force and effect until October 31, 1996 (unless terminated as set forth in Paragraph 11), and from year to year thereafter, but only so long as such continuance is specifically approved at least annually by: (i) the Board of Trustees of the Trust or by a majority of the outstanding voting securities of the Trust; and (ii) by a majority of the Trustees of the Trust who are not parties to this Agreement or interested persons of any such party by vote cast in person at a meeting called for the purpose of voting on such approval. The provisions of paragraph 8 hereof shall survive the termination of this Agreement. 13. AMENDMENTS. ---------- No amendments to this Agreement shall be executed or become effective unless its terms have been approved: (a) by a majority of the Trustees of the Trust or by the vote of a majority of the outstanding voting securities of the Trust; and (b) by a majority of those trustees who are not interested persons of the Trust or of any party to this Agreement. 14. REPORTS. ------- FPBS shall prepare reports for the Board of Trustees of the Trust on a quarterly basis showing such information as from time to time shall be reasonably requested by such Board. 15. SEVERABILITY. ------------ In the event any provision of this Agreement is determined to be void or unenforceable, such determination shall not affect the remainder of the Agreement, which shall continue to be in force. 16. GOVERNING LAW. ------------- This Agreement shall be governed by the laws of the Commonwealth of Pennsylvania. IN WITNESS WHEREOF, the Trust and FPBS have each caused this Agreement to be signed in duplicate, as of the day and year first above written. The Brinson Funds Fund/Plan Broker Services, Inc. - ----------------- --------------------------------- - --------------------------------- --------------------------------- By: E. Thomas McFarlan, President Kenneth J. Kempf, President - -------------------------------- --------------------------------- Attest: Bruce G. Leto, Secretary Attest: Janet F. Davis, Secretary (SEAL) (SEAL) Brinson Partners, Inc. - ---------------------- - -------------------------------------- By: Samuel W. Anderson, Vice President - ------------------------------------ Attest: Michael J. Jacobs, Secretary (SEAL) SCHEDULE "A" FUND/PLAN BROKER SERVICES, INC. MULTIPLE CLASS FEE SCHEDULE FOR THE BRINSON FUNDS - -------------------------------------------------------------------------------- The following is Fund/Plan Broker Services, Inc.'s schedule for Underwriter/Distributor services provided to The Brinson Funds and as Licensing/Regulatory Agent for Brinson Partners, Inc. personnel including employees who are registered as Fund/Plan Broker Services, Inc. representatives. These fees will also cover the expenses and personnel required to maintain the regulatory books and records of Fund/Plan Broker Services, Inc. in connection with the Underwriting Agreement on behalf of the Trust. All fees for the Brinson Classes to be paid by Brinson Partners, Inc. . $7,500 Per Year Per Company with one Fund (Initial Series) . $2,500 Additional Per Year for Each Additional Series or Class . $1,000 Per Year Per Licensed Representative in 1-2 States . or $2,500 Per Year Per Licensed Representative up to 30 States . or $3,500 Per Year Per Licensed Representative in 50 States & DC . Additional $300 Per Year Per Licensed Representative in Puerto Rico MARKETING SUPPORT SERVICES - -------------------------- $2.00 per call includes both Inbound Telemarketing Services and Literature Fulfillment. Minimum $2,000 per month. OUT-OF-POCKET EXPENSES - ---------------------- Fund/Plan Broker Services, Inc. will be reimbursed monthly for all reasonable out-of-pocket expenses, including telephone, postage, telecommunications, special reports, continuing education requirements, record retention, special transportation costs as incurred, and unusual expenses incurred. ADDITIONAL SERVICES - ------------------- Activities of a non-recurring nature such as fund consolidations, mergers or reorganizations will be subject to negotiation. Any additional/enhanced services or reports will be quoted upon request. SCHEDULE "B" IDENTIFICATION OF SERIES ------------------------ Below are listed the Series and Classes of Shares to which services under this Agreement are to be performed as of the Effective Date of this Agreement: SERIES Global Fund Global Equity Fund Global Bond Fund Short-Term Global Income Fund* U.S. Balanced Fund U.S. Equity Fund U.S. Bond Fund U.S. Cash Management Fund Non-U.S. Equity Fund Non-U.S. Bond Fund CLASSES Brinson Fund class SwissKey Fund class * Fee and procedures subject to change/review pending definitive structure of Fund. This Schedule "B" may be amended from time to time by agreement of the Parties. EX-99.6.B 3 AMENDMENT TO UNDERWRITING AGREEMENT Exhibit to Form N-1A Exhibit (6)(b) Amendment to Underwriting Agreement AMENDMENT TO UNDERWRITING AGREEMENT This AGREEMENT, dated as of the ________ day of August, 1995 made by and between The Brinson Funds, a Delaware business trust (the "Trust") and Fund/Plan Broker Services, Inc. ("FPBS"), a corporation duly organized and existing under the laws of the State of Delaware (collectively, the "Parties"). WITNESSETH THAT: WHEREAS, the Trust and FPBS have entered into an agreement dated April 25, 1995, wherein FPBS has agreed to provide certain Underwriting and Market Support services to the Trust ("Underwriting Agreement"); and WHEREAS, the Parties wish to amend the Underwriting Agreement to reflect the creation of a multiple class structure for each Series of the Trust; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the Parties hereto, intending to be legally bound, do hereby agree: 1. To amend Schedule "A" to the Underwriting Agreement in the form attached hereto as Schedule "A". 2. This Amendment's Effective Date, as defined in the Underwriting Agreement, shall be July 31, 1995. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement consisting of one type written page, together with Schedule "A" to be signed by their duly authorized officers and their corporate seals hereunto duly affixed as of the day and year first above written. The Brinson Funds Fund/Plan Broker Services, Inc. - ----------------- ------------------------------- By:_____________________________ By:____________________________ E. Thomas McFarlan, President Kenneth J. Kempf, President SCHEDULE "A" FUND/PLAN BROKER SERVICES, INC. MULTIPLE CLASS FEE SCHEDULE FOR THE BRINSON FUNDS ________________________________________________________________________________ The following is Fund/Plan Broker Services, Inc.'s schedule for Underwriter/Distributor services provided to The Brinson Funds and as Licensing/Regulatory Agent for Brinson Partners, Inc. personnel including employees who are registered as Fund/Plan Broker Services, Inc. representatives. These fees will also cover the expenses and personnel required to maintain the regulatory books and records of Fund/Plan Broker Services, Inc. in connection with the Underwriting Agreement on behalf of the Trust. All fees for the Brinson Classes to be paid by Brinson Partners, Inc. . $7,500 Per Year Per Company with one Fund (Initial Series) . $2,500 Additional Per Year for Each Additional Series or Class . $1,000 Per Year Per Licensed Representative in 1-2 States . or $2,500 Per Year Per Licensed Representative up to 30 States . or $3,500 Per Year Per Licensed Representative in 50 States & DC . Additional $300 Per Year Per Licensed Representative in Puerto Rico MARKETING SUPPORT SERVICES - -------------------------- $2.00 per call includes both Inbound Telemarketing Services and Literature Fulfillment. Minimum $2,000 per month. OUT-OF-POCKET EXPENSES - ---------------------- Fund/Plan Broker Services, Inc. will be reimbursed monthly for all reasonable out-of-pocket expenses, including telephone, postage, telecommunciations, special reports, continuing education requirements, record retention, special transportation costs as incurred, and unusual expenses incurred. ADDITIONAL SERVICES - ------------------- Activities of a non-recurring nature such as fund consolidations, mergers or reorganizations will be subject to negotiation. Any additional/enhanced services or reports will be quoted upon request. EX-99.9.A.I 4 SHAREHOLDERS SERVICES AGREEMENT Exhibit to Form N-1A Exhibit (9)(a)(i) Shareholder Services Agreement SHAREHOLDER SERVICES AGREEMENT ------------------------------ THIS AGREEMENT, dated as of the ________ day of ______________, 1995, made by and between The Brinson Funds, a Delaware Business Trust (the "Trust") operating as an open-end management investment company and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly organized and existing under the laws of the State of Delaware. W I T N E S S E T H T H A T: ----------------------------- WHEREAS, the Trust is an investment company registered under the Investment Company Act of 1940, as amended (the "Act"); and WHEREAS, the Trust is authorized by its Agreement and Declaration of Trust to issue separate series of shares representing interests in separate investment portfolios (the "Series"), which Series are identified on Schedule "C" attached hereto, and which Schedule "C" may be amended from time to time by mutual agreement of the Trust and Fund/Plan; and WHEREAS, the Trust desires to appoint Fund/Plan as its Transfer, Redemption and Dividend Disbursing Agent as set forth in this Agreement and to perform certain other functions in connection with these duties; and WHEREAS, Fund/Plan is willing to perform such functions upon the terms and conditions set forth below; and WHEREAS, the Trust will cause to be provided certain information to Fund/Plan as set forth below; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto, intending to be legally bound, do hereby agree as follows: SECTION 1. The terms as defined in this Section wherever used in this Agreement, or in any amendment or supplement hereto, shall have the meanings herein specified unless the context otherwise requires. Series: The term Series shall mean any separate series of shares issued from time to time by the authority of the Board of Trustees. Shareholders: The term Shareholders shall mean the registered owners from time to time of the Shares of the Trust in accordance with the share registry records of the Trust. Shares: The term Shares shall mean the issued and outstanding shares of the Trust. Oral Instruction: The term Oral Instruction shall mean an authorization, instruction, approval, item or set of data, or information of any kind transmitted to Fund/Plan in person or by telephone, telegram, telecopy or other mechanical or documentary means lacking original signature, by a person or persons believed in good faith by Fund/Plan to be a person or persons authorized by a resolution of the Board of Trustees of the Trust, to give Oral Instructions on behalf of the Trust. Written Instruction: The term Written Instruction shall mean an authorization, instruction, approval, item or set of data or information of any kind transmitted to Fund/Plan in original writing containing original signatures or a copy of such document transmitted by telecopy including transmission of such signature believed in good faith by Fund/Plan to be the signature of a person authorized by a resolution of the Board of Trustees of the Trust to give Written Instructions on behalf of the Trust. TRANSFER AGENCY SECTION 2. Fund/Plan as Transfer Agent, shall make original issues of Shares in accordance with Section 14 and 15 below and with the Trust's Prospectus and Statement of Additional Information upon the written request of the Trust and upon being furnished with (i) a certified copy of a resolution or resolutions of the Board of Trustees of the Trust authorizing such issue; (ii) an opinion of counsel as to the validity of such additional Shares which may be a copy of the opinion rendered in connection with the Trust's Rule 24(f)(2) notice; and (iii) necessary funds for the payment of any original issue tax applicable to such additional Shares. SECTION 3. Transfers of Shares shall be registered and new Shares issued by Fund/Plan upon redemption of outstanding Shares, (i) in form deemed by Fund/Plan to be properly endorsed for transfer, (ii) with all necessary endorser's signatures guaranteed as permitted by Rule 17(A)(d)-15 under the Securities Exchange Act of 1934, accompanied by, (iii) such assurances as Fund/Plan shall deem necessary or appropriate to evidence the genuineness and effectiveness of each necessary endorsement, and (iv) satisfactory evidence of compliance with all applicable laws relating to the payment or collection of taxes. SECTION 4. When mail is used for delivery of Share Certificates, Fund/Plan shall forward Share Certificates in "non-negotiable" form by first- class mail, and Share Certificates in "negotiable" form by registered mail, all mail deliveries to be covered while in transit to the addressee by insurance arranged for by Fund/Plan. SECTION 5. In registering transfers Fund/Plan as Transfer Agent may rely upon the Uniform Commercial Code or any other statutes which, in the opinion of counsel, protect Fund/Plan and the Trust in not requiring complete documentation, in registering transfer without inquiry into adverse claims, in delaying registration for purposes of such inquiry, or in refusing registration where in its judgment an adverse claim requires such refusal. SECTION 6. With respect to confirmed trades received by Fund/Plan as Transfer Agent for the Trust, Fund/Plan shall periodically notify the Trust of the current status of outstanding confirmed trades. Fund/Plan is authorized to cancel confirmed trades which have been outstanding for thirty (30) days. Upon such cancellation, the Transfer Agent shall instruct the Trust's Accounting Agent to adjust the books of the Trust accordingly. SECTION 7. Fund/Plan will maintain stock registry records in the usual form in which it will note the issuance, transfer and redemption of Shares. Fund/Plan is responsible to provide the Trust reports of Share purchases, redemptions, and total Shares outstanding on the next business day after each net asset valuation. Fund/Plan is authorized to keep records, which will be part of the stock transfer records, in which it will note the names and registered address of Shareholders and the number of Shares and fractions thereof owned by them. SECTION 8. In case of any request or demand for the inspection of the Share records of the Trust, Fund/Plan as Transfer Agent, shall notify the Trust and secure instructions as to permitting or refusing such inspection. However, Fund/Plan may exhibit such records to any person in any case where it is advised by its counsel that it may be held liable for failure to do so. ISSUANCE OF SHARES SECTION 9. Prior to the daily determination of net asset value in accordance with the Trust's Prospectus, Fund/Plan shall process all purchase orders received since the last determination of the Trust's net asset value. Fund/Plan shall calculate daily the amount available for investment in Shares at the net asset value determined by Fund/Plan as pricing agent (see Accounting Services Agreement) as of the close of trading on the New York Stock Exchange, the number of Shares and fractional Shares to be purchased and the net asset value to be deposited with the Custodian. Fund/Plan as agent for the Shareholders, shall place a purchase order daily with the Trust for the proper number of Shares and fractional Shares to be purchased and confirm such number to the Trust in writing. SECTION 10. The proper number of Shares and fractional Shares shall then be issued daily and credited by Fund/Plan to the Shareholder Registration Records. The Shares and fractional Shares purchased for each Shareholder will be credited by Fund/Plan to that Shareholder's separate account. Fund/Plan shall mail to each Shareholder a confirmation of each purchase, with copies to the Trust if requested. Such confirmations will show the prior Share balance, the new Share balance, the amount invested and the price paid for the newly purchased Shares. REDEMPTIONS SECTION 11. Fund/Plan shall, prior to the daily determination of net asset value in accordance with the Trust's Prospectus and Statement of Additional Information, process all requests from Shareholders to redeem Shares and determine the number of Shares required to be redeemed to make monthly payments, automatic payments or the like. Thereupon, Fund/Plan shall advise the Trust of the total number of Shares available for redemption and the number of Shares and fractional Shares requested to be redeemed. Fund/Plan as Pricing Agent shall then determine the applicable net asset value, whereupon Fund/Plan shall furnish the Trust with an appropriate confirmation of the redemption and process the redemption by filing with the Custodian an appropriate statement and making the proper distribution and application of the redemption proceeds in accordance with the Trust's Prospectus and Statement of Additional Information. The stock registry books recording outstanding Shares, the Unissued Certificate Account and the individual account of the Shareholder shall be properly debited. SECTION 12. The proceeds of redemption shall be remitted by Fund/Plan in accordance with the Trust's Prospectus by check mailed to the Shareholder at his registered address or by wire transfer to an authorized bank account. The signature of the Shareholder on the redemption request must be guaranteed as required by Rule 1F(A)(d)- 15 of the Securities Exchange Act of 1934. The Trust may authorize Fund/Plan to waive the signature guarantee in certain cases by Written Instructions. For the purposes of redemption of Shares which have been purchased within 15 days of a redemption request, the Trust shall provide Fund/Plan, from time to time, with Written Instructions concerning the time within which such requests may be honored. DIVIDENDS SECTION 13. Upon the declaration of each dividend and each capital gains distribution by the Board of Trustees of the Trust, the Trust shall notify Fund/Plan of the date of such declaration, the amount payable per share, the record date for determining the shareholders entitled to payment, the payment, and the reinvestment date price. SECTION 14. On or before each payment date the Trust will transfer, or cause the Custodian to transfer, to Fund/Plan in its capacity as Dividend Disbursing Agent, the total amount of the dividend or distribution currently payable. Fund/Plan will, on the designated payment date, automatically reinvest all dividends in additional Shares except in cases where Shareholders have elected to receive distribution in cash, in which case Fund/Plan will mail distributions checks to the Shareholders for the proper amounts payable to them. GENERAL PROVISIONS SECTION 15. Fund/Plan shall maintain records (which may be part of the stock transfer records) in connection with the issuance and redemption of Shares, and the disbursement of dividends and dividend reinvestments, in which will be noted the transactions effected for each Shareholder and the number of Shares and fractional Shares owned by each. Fund/Plan agrees to make available upon request and to preserve for the periods prescribed in Rule 31a-2 under the Investment Company Act of 1940 any records relating to services provided under this Agreement which are required to be maintained by Rule 31a-1 under the Act. SECTION 16. In addition to the services as Transfer Agent and Dividend Disbursing Agent as above set forth, Fund/Plan will perform other services for the Trust as agreed from time to time, including but not limited to, preparation of and mailing Federal Tax Information Forms, mailing semi-annual reports of the Trust, preparation of one annual list of Shareholders, and mailing notices of Shareholders' meetings, proxies and proxy statements. SECTION 17. Nothing contained in this Agreement is intended to or shall require Fund/Plan in any capacity hereunder, to perform any functions or duties on any holiday, day of special observance or any other day on which the Custodian or the New York Stock Exchange are closed. Functions or duties normally scheduled to be performed on such days shall be performed on, and as of, the next business day on which both the New York Stock Exchange and the Custodian are open. SECTION 18. The Trust agrees to pay Fund/Plan compensation for its services and to reimburse it for expenses, as set forth in Schedule A attached hereto, or as shall be set forth in amendments to such Schedule. The Trust authorizes Fund/Plan to debit the Trust's custody account for invoices which are rendered for the services performed for the applicable function. The invoices for the service will be sent to the Trust after the debiting with the indication that payment has been made. SECTION 19. (a) Fund/Plan, its directors, officers, employees, shareholders and agents shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the performance of this Agreement, except a loss resulting from willful misfeasance, bad faith or negligence on the part of Fund/Plan in the performance of its obligations and duties under this Agreement. (b) Any person, even though also a director/trustee, officer, employee, shareholder or agent of Fund/Plan, who may be or become an officer, trustee, employee, or agent of the Trust, shall be deemed, when rendering services to the Trust or acting on any business of the Trust (other than services or business in connection with Fund/Plan's duties hereunder), to be rendering such services to or acting solely for the Trust and not as a trustee, officer, employee, shareholder or agent of, or one under the control or direction of Fund/Plan even though paid by it. (c) Notwithstanding any other provision of this Agreement, the Trust shall indemnify and hold harmless Fund/Plan, its directors, officers, employees, shareholders and agents from and against any and all claims, demands, expenses and liabilities (whether with or without basis in fact or law) of any and every nature which Fund/Plan may sustain or incur or which may be asserted against Fund/Plan by any person by reason of, or as a result of: (i) any action taken or omitted to be taken by Fund/Plan in good faith hereunder; (ii) in reliance upon any certificate, instrument, order, or stock certificate or other document reasonably believed by it to be genuine and to be signed, countersigned or executed by any duly authorized person, upon the Oral Instructions or Written Instructions of an authorized person of the Trust or upon the opinion of legal counsel for the Trust or its own counsel; or (iii) any action taken or omitted to be taken by Fund/Plan in connection with its appointment in good faith in reliance upon any law, act, regulation or interpretation of the same even though the same may thereafter have been altered, changed, amended, or repealed. However, indemnification under this subparagraph shall not apply to actions or omissions of Fund/Plan or its directors, officers, employees, shareholders, or agents in cases of its or their own negligence, willful misconduct, bad faith, or reckless disregard of its or their own duties hereunder. (d) Fund/Plan shall give written notice to the Trust within ten (10) business days of receipt by Fund/Plan of a written assertion or claim of any threatened or pending legal proceeding which may be subject to this indemnification. However, the failure to notify the Trust of such written assertion or claim shall not operate in any manner whatsoever to relieve the Trust of any liability arising from this Section or otherwise. (e) For any legal proceeding giving rise to this indemnification, the Trust shall be entitled to defend or prosecute any claim in the name of Fund/Plan at its own expense and through counsel of its own choosing if it gives written notice to Fund/Plan within ten (10) business days of receiving notice of such claim. Notwithstanding the foregoing, Fund/Plan may participate in the litigation at its own expense through counsel of its own choosing. If the Trust does choose to defend or prosecute such claim, then the parties shall cooperate in the defense or prosecution thereof and shall furnish such records and other information as are reasonably necessary. (f) The Trust shall not settle any claim without Fund/Plan's express written consent which shall not be unreasonably withheld. Fund/Plan shall not settle any claim without the Trust's express written consent which shall not be unreasonably withheld. SECTION 20. Fund/Plan is authorized, upon receipt of Written Instructions from the Trust or as provided in the Trust's Prospectus, to make payment upon redemption of Shares without a signature guarantee. The Trust hereby agrees to indemnify and hold Fund/Plan, its successors and assigns, harmless of and from any and all expenses, damages, claims, suits, liabilities, actions, demands, losses whatsoever arising out of or in connection with a payment by Fund/Plan upon redemption of Shares without a signature guarantee which is not due to Fund/Plan's lack of reasonable care and upon the request of Fund/Plan the Trust shall assume the entire defense of any action, suit or claim subject to the foregoing indemnity. Fund/Plan shall notify the Trust of any such action, suit or claim within thirty (30) days after receipt by Fund/Plan of notice thereof. SECTION 21. (a) This Agreement shall go into effect as of the day and year first written above (the"Effective Date"), and shall continue in effect until October 31, 1996. This Agreement shall continue in force from year to year thereafter, but only so long as such continuance is approved, (1) by Fund/Plan, (2) by vote, cast in person at a meeting called for the purpose, of a majority of the Trust's Trustees who are not parties to this Agreement or interested persons (as defined in the Act) of any such party, and (3) by vote of a majority of the Trust's Board of Trustees or a majority of the Trust's outstanding voting securities. (b) The Fee Schedule is fixed for the initial term of this Agreement, with a fee increase in the second year not to exceed 10%. (c) The Trust or Fund/Plan may give written notice to the other of the termination of this Agreement, such termination to take effect at the time specified in the notice, not less than one hundred eighty (180) days after the giving of the notice. Upon the effective termination date, the Trust shall pay to Fund/Plan such compensation as may be due as of the date of termination and shall likewise reimburse Fund/Plan for any out- of-pocket expenses and disbursements reasonably incurred by Fund/Plan to such date. (d) In the event that in connection with termination of this Agreement a successor to any of Fund/Plan's duties or responsibilities under this Agreement is designated by the Trust by written notice to Fund/Plan, Fund/Plan shall, promptly upon such termination and at the expense of the Trust, transfer all Required Records and shall cooperate in the transfer of such duties and responsibilities. (e) The Trust acknowledges that in order for Fund/Plan to perform the services contemplated hereunder, Fund/Plan has made and will make significant investments of time and money. If this Agreement is terminated for reasons other than a material breach by Fund/Plan prior to the expiration of the initial term of this contract, the Trust will pay Fund/Plan twenty percent (20%) of the minimum fees remaining for the unexpired term of the Agreement. SECTION 22. The Trust shall file with Fund/Plan a certified copy of each resolution of its Board of Trustees authorizing the execution of Written Instructions or the transmittal of Oral Instructions, as provided in Section 1 of this Agreement. SECTION 23. This Agreement may be amended from time to time by a supplemental agreement executed by the Trust and Fund/Plan. SECTION 24. Any notice or other communication required by or permitted to be given in connection with this Agreement shall be in writing, and shall be delivered in person or sent by first class mail, postage prepaid, to the respective parties as follows: If to the Trust: The Brinson Funds 209 S. LaSalle St. Chicago, IL 60604-1295 Attention: E. Thomas McFarlan, President If to Fund/Plan: Fund/Plan Services, Inc. P.O. Box 874 Conshohocken, PA 19428 Attention: Kenneth J. Kempf, President SECTION 25. The Trust represents and warrants to Fund/Plan that the execution and delivery of this Shareholder Services Agreement by the undersigned officers of the Trust has been duly and validly authorized by resolution of the Board of Trustees of the Trust. SECTION 26. This Agreement may be executed in two or more counterparts, each of which when so executed shall be deemed to be an original, but such counterparts shall together constitute but one and the same instrument. SECTION 27. This Agreement shall extend to and shall be binding upon the parties hereto and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Trust without the written consent of Fund/Plan or by Fund/Plan without the written consent of the Trust, authorized or approved by a resolution of its Board of Trustees. SECTION 28. This Agreement shall be construed in accordance with the laws of the Commonwealth of Pennsylvania. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their duly authorized officers and their corporate seals hereunto duly affixed and attested, as of the day and year first above written. The Brinson Funds Fund/Plan Services, Inc. _________________ ------------------------ _________________________________ _________________________________ By: E. Thomas McFarlan, President By: Kenneth J. Kempf, President _________________________________ _________________________________ Attest: Debra L. Nichols Attest: Janet F. Davis, Secretary Assistant Secretary (SEAL) (SEAL) SCHEDULE "A" ------------ MULTIPLE CLASS FEE SCHEDULE FOR THE BRINSON FUNDS Global Fund Global Equity Fund Global Bond Fund Short-Term Global Income Fund U.S. Balanced Fund U.S. Equity Fund U.S. Bond Fund U.S. Cash Management Fund Non-U.S. Equity Fund Non-U.S. Bond Fund TRANSFER AGENCY - ANNUAL FEES (1/12 PAYABLE MONTHLY) - ---------------------------------------------------- $17,000 per each portfolio of the "Brinson Class" (includes $5,000 for special 401(k) communication and reporting); plus $18 per account (minimum $27,000) for each portfolio of the "SwissKey Class;" Fees are aggregated at the portfolio level and then allocated to each Class based on their respective net assets. OUT-OF-POCKET EXPENSES - ----------------------- The Trust will reimburse Fund/Plan Services, Inc. monthly for all reasonable out-of-pocket expenses, including telephone, postage, telecommunications, special reports, record retention, special transportation costs as incurred, and unusual expenses incurred while establishing viable agreements between the Trust and Fund/Plan Services, Inc. The cost of copying and sending materials to auditors for off-site audits will be an additional expense. ADDITIONAL SERVICES - ------------------- Activities of a non-recurring nature such as fund consolidations, mergers or reorganizations will be subject to negotiation. Any additional/enhanced services or reports will be quoted upon request. The Schedules will be amended as necessary to reflect the addition of other services for additional classes or portfolios of the Trust. SCHEDULE "B" ------------ TRANSFER AGENCY STANDARD SERVICES I - SHAREHOLDER FILE 1. Establish new accounts and enter demographic data into shareholder base. Includes review and file maintenance for all NSCC originated registrations and data changes for FundServ, Networking and ACTS accounts for compliance with Investar customer file requirements. 2. Create Customer Information File (CIF) to link accounts within the Fund and across funds within the Fund Group. Facilitates account maintenance, lead tracking, quality control, household mailings and combined statements. 3. 100% quality control of new account information, including verification of initial investment. * 4. Systematic linkage of shareholder accounts with exact matches on SSN and address for the purpose of consolidated account history reporting. Periodic production of laser printed combined statements. * 5. Production of household mailing labels which enable the Fund to do special mailings to each address in the Fund Group rather than each account. 6. Maintain account and customer file records based on shareholder request and routine quality review. 7. Maintain tax ID certification and NRA records for each account, including backup withholding. 8. Provide written confirmation of address changes. 9. Produce shareholder statements for daily activity, dividends, on- request, third party and periodic mailings. * 10. Produce shareholder lists, labels and ad hoc reports to Fund management as requested. 11. Automated processing of dividends and capital gains with daily, monthly, quarterly or annual distributions. Payment options include reinvestment, directed payment to another fund, cash via mail, Fed wire or ACH. II - SHAREHOLDER SERVICES 1. Provide quality service through a staff of highly trained NASD licensed customer service personnel, including phone, research and correspondence representatives. 2. Answer shareholder calls: provide routine account information, transaction details including direct and wire purchases, redemptions, exchanges, systematic withdrawals, pre-authorized drafts, Fund SERV and wire order trades, problem solving and process telephone transactions. 3. Customized recording of fund prices daily after regular business hours for shareholder access. 4. Silent monitoring of shareholder calls by the phone supervisor to ensure exceptional customer service. 5. Record and maintain tape recordings of all shareholder calls for a six month period. SCHEDULE "B" ------------ 6. Phone Supervisor produces daily management reports of shareholder calls which track volumes, length of calls, average wait time and abandoned call rates to ensure quality service. 7. Phone representatives are thoroughly trained through in house training programs on the techniques of providing exceptional customer service. 8. Customer inquiries received by letter or telephone are thoroughly researched by a correspondence team member. These inquires include such items as, account/customer file information, complete historical account information, stop payments on checks, transaction details and lost certificates. III - INVESTMENT PROCESSING 1. Initial investment (checks or Fed wires). 2. Subsequent investments (checks or Fed wires) processed through lock box. 3. Pre-authorized investments (PAD) through ACH system. 4. Government allotments through ACH system. 5. Prepare and process daily bank deposit of shareholder investments. * 6. NSCC - FundSERV trades. IV - REDEMPTION PROCESSING 1. Process letter redemption requests. 2. Process telephone redemption transactions. 3. Establish Systematic Withdrawal File and process automated transactions on monthly basis. 4. Issue checkbooks and process checkbook redemptions through agent bank. 5. Redemption proceeds distributed to shareholder by check, Fed wire or ACH processing. * 6. Provide NSCC - FundSERV trade processing. V - EXCHANGE & TRANSFER PROCESSING 1. Process legal transfers. 2. Issue and cancel certificates. 3. Replace certificates through surety bonds (separate charge to shareholder). 4. Process exchange transactions (letter and telephone request). 5. Process ACATS transfers. SCHEDULE "B" ------------ VI - RETIREMENT PLANS 1. Fund sponsored IRAs offered using Semper Trust Company as custodian. Services include: a. Contribution processing b. Distribution processing c. Apply rollover transactions d. Process Transfer of Assets e. Letters of Acceptance to prior custodians f. Notify IRA holders of 70 1/2 requirements g. Calculate Required Minimum Distributions h. Maintain beneficiary information file i. Solicit birth date information 2. Fund sponsored SEP-IRA plans offered using Semper Trust Company as custodian. Services include those listed under IRAs and: a. Identification of employer contributions 3. Fund sponsored Qualified plans offered. a. Plan document available b. Omnibus/master account processing only c. Produce annual statements d. Process contributions e. Process distributions f. Process rollover and Transfer of Assets transactions VII - SETTLEMENT & CONTROL 1. Daily review of processed shareholder transactions to assure input was processed correctly. Accurate trade activity figures passed to Fund's Accounting Agent by 10:00am EST. 2. Preparation of daily cash movement information to be passed to the Fund's Accounting Agent and Custodian Bank by 10:00am EST for use in determining Fund's daily cash availability. 3. Prepare a daily share reconcilement which balances the shares on the Transfer Agent system to those on the books of the Fund. 4. Resolve any outstanding share or cash issues that are not cleared by trade date + 2. 5. Process shareholder adjustments to include the proper notification of any booking entries needed, as well as any necessary cash movement. 6. Settlement and review of Fund's declared dividends and capital gains to include the following: a. Review record date report for accuracy of shares. b. Preparation of dividend settlement report after dividend is posted. Verify the posting date shares, the rate used and the NAV price of reinvest date to ensure dividend was posted properly. c. Distribute copies to the Fund's Accounting Agent. d. Preparation of the checks prior to being mailed. e. Sending of any dividends via wires if requested. f. Preparation of cash movement information for the cash portion of the dividend payout on payable date. 7. Placement of stop payments on dividend and liquidation checks as well as the issuance of their replacements. 8. Maintain inventory control for stock certificates and dividend check form. SCHEDULE "B" ------------ 9. Aggregate tax filings for all Fund/Plan clients. Monthly deposits to the IRS of all taxes withheld from shareholder disbursements, distributions and foreign account distributions. Correspond with the IRS concerning any of the above issues. 10. Timely settlement and cash movement for all NSCC/FundSERV activity. VIII - YEAR END PROCESSING 1. Maintain shareholder records in accordance with IRS notices for under- reporting and invalid Tax IDs. This includes initiating 31% backup withholding and notifying shareholders of their tax status and the corrective action which is needed. 2. Conduct annual W-9 solicitation of all uncertified accounts. Update account tax status to reflect backup withholding or certified status depending upon responses. 3. Conduct periodic W-8 solicitation of all non-resident alien shareholder accounts. Update account tax status with updated shareholder information and treaty rates for NRA tax. 4. Review IRS Revenue Procedures for changes in transaction and distribution reporting and specifications for the production of forms to ensure compliance. 5. Coordinate year end activity with client. Activities include producing year end statements, scheduling record dates for year dividends and capital gains, production of combined statements, printing of inserts to be mailed with tax forms. 6. Distribute Dividend Letter to funds for them to sign off on all distributions paid year to date. Dates and rates must be authorized so that they can be used for reporting to the IRS. 7. Coordinate the ordering of form stock and envelopes from vendor in preparation of tax reporting. Review against IRS requirements to ensure accuracy. 8. Prepare form flashes for the microfiche vendor. Test and oversee the production of fiche for year end statements and tax forms. 9. Match and settle tax reporting totals to fund records and on-line date from Investar. 10. Produce forms 1099R, 1099B, 1099Div, 5498, 1042S and year end valuations. Quality assure forms before mailing to shareholders. 11. Monitor IRS deadlines and special events such as cross over dividends and prior year IRA contributions. 12. Prepare IRS magnetic tapes and appropriate forms for the filing of all reportable activity to the Internal Revenue Service. IX - CLIENT SERVICES 1. An Account Manager is assigned to each relationship. The Account Manager acts as the liaison between the Fund and the Transfer Agency staff. Responsibilities include scheduling of events, system enhancement implementation, special promotion/event implementation and follow-up, and constant fund interaction on daily operational issues. Specifically: a. Scheduling of dividends, proxies, report mailing and special mailings. b. Coordinate with the Fund the shipment of materials for scheduled mailings. SCHEDULE "B" ------------ c. Liaison between the Fund and support services for preparation of proofs and eventual printing of statement forms, certificates, proxy cards, envelopes. d. Handle all notification regarding proxy tabulation through the meeting. Coordinate scheduling of materials, including voted cards, tabulation letters, and shareholder list, to be available for the meeting. e. Order special reports, tapes, discs for special systems requests received. f. Implement new operational procedures, e.g., check writing feature, load discounts, minimum waivers, sweeps, telephone options, PAD promotions. g. Coordinate with systems, services and operations on special events, e.g., mergers, new fund start ups, small account liquidations, combined statements, household mailings, additional mail files. h. Prepare standard operating procedures and review prospectus for new funds and our current client base. Coordinate implementation of suggested changes with the Fund. i. Liaison between the Fund and the transfer agency staff regarding all service and operational issues. 2. Proxy Processing (Currently one free per year) a. Coordinate printing of cards with vendor. b. Coordinate mailing of cards with Account Manager and mailroom. c. Provide daily report totals to Account Manager for client notification. d. Preparation of affidavit of mailing documents. e. Provide one shareholder list. f. Prepare final tabulation letter. 3. Blue Sky Processing a. Maintain file with additions, deletions, changes and updates at the Fund's direction. b. Provide daily and monthly reports to enable the Fund to do necessary state filings. IDENTIFICATION OF SERIES ------------------------ Below are listed the Series and Classes of Shares to which services under this Agreement are to be performed as of the Effective Date of this Agreement: SERIES Global Fund Global Equity Fund Global Bond Fund Short-Term Global Income Fund* U.S. Balanced Fund U.S. Equity Fund U.S. Bond Fund U.S. Cash Management Fund Non-U.S. Equity Fund Non-U.S. Bond Fund CLASSES Brinson Fund class SwissKey Fund class * Fee and procedures subject to change/review pending definitive structure of Fund. This Schedule "C" may be amended from time to time by agreement of the Parties. EX-99.A.II 5 AMENDMENT TO SHAREHOLDERS SERVICES AGREEMENT Exhibit to Form N-1A Exhibit (9)(a)(ii) Amendment to Shareholder Services Agreement AMENDMENT TO SHAREHOLDER SERVICES AGREEMENT This AGREEMENT, dated as of the ________ day of August, 1995 made by and between The Brinson Funds, a Delaware business trust (the "Trust") and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly organized and existing under the laws of the State of Delaware (collectively, the "Parties"). WITNESSETH THAT: WHEREAS, the Trust and Fund/Plan have entered into an agreement dated April 25, 1995, wherein Fund/Plan has agreed to serve as Transfer, Redemption and Dividend Disbursing Agent to the Trust and to perform certain other functions in connection with these duties ("Shareholder Services Agreement"); and WHEREAS, the Parties wish to amend the Shareholder Services Agreement to reflect the creation of a multiple class structure for each Series of the Trust; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the Parties hereto, intending to be legally bound, do hereby agree: 1. To amend Schedule "A" to the Shareholder Services Agreement in the form attached hereto as Schedule "A". 2. To replace Schedule "B" to the Shareholder Services Agreement with the form attached hereto as Schedule "B". 3. This Amendment's Effective Date shall be July 31, 1995. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement consisting of one typewritten page, together with Schedules "A" and "B", to be signed by their duly authorized officers and their corporate seals hereunto duly affixed as of the day and year first above written. The Brinson Funds Fund/Plan Services, Inc. - ----------------- ------------------------ By:______________________________ By:________________________________ E. Thomas McFarlan, President Kenneth J. Kempf, President SCHEDULE "A" MULTIPLE CLASS FEE SCHEDULE FOR THE BRINSON FUNDS TRANSFER AGENCY - ANNUAL FEES (1/12 PAYABLE MONTHLY) - ---------------------------------------------------- $17,000 per each portfolio of the "Brinson Class" (includes $5,000 for special 401(k) communication and reporting); plus $18 per account (minimum $27,000) for each portfolio of the "SwissKey Class;" plus $18 per account for each additional portfolio of an additional class (minimum $24,000). OUT-OF-POCKET EXPENSES - ----------------------- The Trust will reimburse Fund/Plan Services, Inc. monthly for all reasonable out-of-pocket expenses, including telephone, postage, telecommunications, special reports, record retention, special transportation costs as incurred, and unusual expenses incurred while establishing viable agreements between the Trust and Fund/Plan Services, Inc. The cost of copying and sending materials to auditors for off-site audits will be an additional expense. ADDITIONAL SERVICES - ------------------- Activities of a non-recurring nature such as fund consolidations, mergers or reorganizations will be subject to negotiation. Any additional/enhanced services or reports will be quoted upon request. The Schedules will be amended as necessary to reflect the addition of other services for additional classes or portfolios of the Trust. SCHEDULE "B" TRANSFER AGENT/SHAREHOLDER SERVICES FOR THE BRINSON FUNDS - ------------------------------------------------------------------------------- TRANSFER AGENCY SERVICES: EACH OF THE FOLLOWING SERVICES WOULD APPLY SEPARATELY TO EACH CLASS. . Opening new accounts and entering demographic data into shareholder base. . Real-time Customer Information File (CIF) to link accounts within the Fund and across Funds. Facilitate account maintenance, lead tracking, quality control, household mailings and combined statements. . 100% Quality Control of new accounts opened on a same-day basis. All of the above information is checked by a separate unit. . Account maintenance with quality control. . Processing investments to include: - initial investments - subsequent investments through lock box computer interface - pre-authorized investments through ACH - government allotments through ACH - wire trades. . Establishing and maintaining Rights of Accumulation and Letters of Intent with escrow handling as needed. . Processing tax ID certifications and NRA processing and handling back-up withholding. . Processing regular and legal transfers of accounts. . Exchange processing via automated exchange system. Calls will be automatically recorded. . Responding to shareholder calls and written inquiries. . Processing reinvestment of dividends of one fund into another fund. . Processing sweep purchases and redemptions for brokerage, bank, or other accounts via tape or transmission. . Generating account statements with copies to appropriate interested parties. . Generating trade confirmations with copies to dealers, representatives and fund. . Redemption processing to include: - complete and partial redemptions - check redemption processing* - selected group redemptions - wire trade redemptions TRANSFER AGENT/SHAREHOLDER SERVICES - #2 - ------------------------------------------------------------------------------- . Interface withFund/SERV System. . Maintain dealer file by fund group to include dealer, branch, representative number and name. . Commission processing with up to four commission tables. . Contingent Deferred Sales Charge System. . 12(b)1 trailing commissions system.* . Issuing and canceling of certificates. . Replacement of certificates through surety bonds (premium to be paid by shareholder). . Processing dividends from annual to daily dividend with monthly payments. . Maintain Blue Sky reporting and produce daily and monthly reports. Daily reports reflect a "warning system" that informs the Fund when it is within a certain percentage of shares registered in a state, or within a certain time period for permit renewal. . Producing daily, monthly or periodic reports of shareholder activity. . Producing shareholder lists, labels, ad hoc reports to management, etc.* . Addressing, mailing, and tabulation of annual proxy cards, as necessary. . Preparation of federal tax information forms to include 1099-DIV's, 1099-B's, 1042's, etc to shareholders with tape to IRS. . Microfilming and indexing in PC system of all application, correspondence and other pertinent shareholder documents to provide automated location of these records. Also, all checks presented for payment or check redemptions are microfilmed. . System access by PC dial-up or by dedicated line.* . Automatic Shareholder Control (ASC)* - Rate - Price/Yield - Account Balances - Last Transaction - Marketing Message - Shareholder Survey - Exchanges/Fulfillment . Retirement Plan processing.* * SEPARATE FEES WILL APPLY FOR THESE SERVICES. EX-99.9.B.I 6 ADMINISTRATION AGREEMENT Exhibit to Form N-1A Exhibit (9)(b)(i) Administration Agreement ADMINISTRATION AGREEMENT ------------------------ THIS AGREEMENT, dated as of the ___________ day of ______________________, 1995, made by and between The Brinson Funds, a Delaware business trust (the "Trust") operating as a registered investment company under the Investment Company Act of 1940, as amended (the "Act"), duly organized and existing under the laws of the State of Delaware and FUND/PLAN SERVICES, INC. ("Fund/Plan"), a corporation duly organized and existing under the laws of the State of Delaware (collectively, the "Parties"). W I T N E S S E T H T H A T: ----------------------------- WHEREAS, the Trust is an investment company registered under the Investment Company Act of 1940, as amended (the "Act"); and WHEREAS, the Trust is authorized by its Agreement and Declaration of Trust to issue separate series of shares representing interests in separate investment portfolios (the "Series"), which Series are identified on Schedule "C" attached hereto, and which Schedule "C" may be amended from time to time by mutual agreement of the Trust and Fund/Plan; and WHEREAS, the Parties desire to enter into an agreement whereby Fund/Plan will provide certain administration services to the Trust on the terms and conditions set forth in this Agreement; and WHEREAS, Fund/Plan is willing to serve in such capacity and perform such administrative services under the terms and conditions set forth below; and WHEREAS, the Trust will provide all necessary information to Fund/Plan concerning the Series so that Fund/Plan may appropriately execute its responsibilities hereunder; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and in exchange of good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, the Parties hereto, intending to be legally bound, do hereby agree as follows: SECTION 1. APPOINTMENT. The Trust hereby appoints Fund/Plan as administrator and Fund/Plan hereby accepts such appointment. All portfolios added to the Trust in the future and all current portfolios of the Trust are included under this Agreement. SECTION 2. DUTIES AND OBLIGATIONS OF FUND/PLAN. (a) Subject to the succeeding provisions of this section and subject to the direction and control of the Board of Trustees of the Trust, Fund/Plan shall provide to each of the Series all administrative services set forth in Schedule "A" attached hereto, which Schedule is incorporated by reference in its entirety into this Agreement. In addition to the obligations set forth in Schedule "A", Fund/Plan shall (i) provide its own office space, facilities, equipment and personnel for the performance of its duties under this Agreement; and (ii) take all actions it deems necessary to properly execute the administrative responsibilities of the Trust. (b) So that Fund/Plan may perform its duties under the terms of this Agreement, the Board of Trustees of the Trust shall direct the officers, investment advisor, distributor, legal counsel, independent accountants and custodian of the Trust to cooperate fully with Fund/Plan and to provide such information, documents and advice relating to the Trust as is within the possession or knowledge of such persons provided that no such person need provide any information to Fund/Plan if to do so would, in the reasoned opinion of counsel to the Trust, result in the loss of any privilege or confidential treatment with respect to such information. In connection with its duties, Fund/Plan shall be entitled to rely, and shall be held harmless by the Trust when acting in reasonable reliance upon the instruction, advice or any documents provided by the Trust to Fund/Plan by any of the aforementioned persons. All fees charged by any such persons shall be deemed an expense of the Trust. (c) Any activities performed by Fund/Plan under this Agreement shall conform to the requirements of: (1) the provisions of the Investment Company Act of 1940, as amended (the "Act") and the Securities Act of 1933, as amended, and of any rules or regulations in force thereunder; (2) any other applicable provision of state and federal law; (3) the provisions of the Trust Instrument of the Trust and By-laws of the Trust, as amended from time to time; (4) any policies and determinations of the Board of Trustees of the Trust; and (5) the fundamental policies of the Trust as reflected in its registration statement filed pursuant to the Act. Fund/Plan acknowledges that all records that it maintains for the Trust are the property of the Trust and will be surrendered promptly to the Trust upon written request. Fund/Plan will preserve, for the periods prescribed under Rule 31a-2 under the Act, all such records required to be maintained under Rule 31a-1 of the Act. (d) Nothing in this Agreement shall prevent Fund/Plan or any officer thereof from acting as administrator for any other person, firm or corporation. While the administrative services supplied to the Trust may be different than those supplied to other persons, firms or corporations, Fund/Plan shall provide the Trust equitable treatment in supplying services. The Trust recognizes that it will not receive preferential treatment from Fund/Plan as compared with the treatment provided to other Fund/Plan clients. Fund/Plan agrees to maintain the records and all other information of the Trust in a confidential manner and shall not use such information for any purpose other than the performance of Fund/Plan's duties under this Agreement. SECTION 3. ALLOCATION OF EXPENSES All costs and expenses of the Trust shall be paid by the Trust including, but not limited to: (a) fees paid to an investment advisor (the "Advisor"); (b) interest and taxes; (c) brokerage fees and commissions; (d) insurance premiums; (e) compensation and expenses of its Trustees who are not affiliated persons of the Advisor; (f) legal, accounting and audit expenses; (g) custodian and transfer agent, or shareholder servicing agent, fees and expenses; (h) fees and expenses incident to the registration of the shares of the Trust under Federal or state securities laws; (i) expenses related to preparing, setting in type, printing and mailing prospectuses, statements of additional information, reports and notices and proxy material to shareholders of the Trust; (j) all expenses incidental to holding meetings of shareholders and Trustees of the Trust; (k) such extraordinary expenses as may arise, including litigation, affecting the Trust and the legal obligations which the Trust may have regarding indemnification of its officers and Trustees; and (l) fees and out-of-pocket expenses paid on behalf of the Trust by Fund/Plan. SECTION 4. COMPENSATION OF FUND/PLAN. (a) The Trust agrees to pay Fund/Plan, and Fund/Plan agrees to accept as full compensation for all services rendered hereunder, an annual fee payable monthly and computed on the average daily net assets of the Trust at the end of each business day at the annual rate as set forth in Schedule "B" to this Agreement and reasonable out-of-pocket expenses incurred by Fund/Plan in the performance of services hereunder. Except as hereinafter set forth, compensation under this Agreement shall be calculated and accrued daily and the amounts of the daily accruals shall be paid monthly. The minimum fee to be paid by the Trust as constituted this date shall be $75,000 annually. New multiple class portfolios added to the Trust shall bear a minimum annual fee of $10,000. The Fee Schedule shall be fixed for the initial term of the Agreement, as described below, with a fee increase thereafter not to exceed 10%. Out-of-pocket expenses shall include telecommunication charges, postage and delivery charges, record retention costs, reproduction charges and transportation and lodging costs. The Trust authorizes Fund/Plan to debit the Trust's custody account for invoices which are rendered for the services performed hereunder. The invoices for the services will be sent to the Trust after the debiting with indication that payment has been made. Invoices for out-of-pocket expenses shall be reviewed by the Trust promptly upon receipt and Fund/Plan shall be authorized to debit the Trust's custody account upon approval of the invoices by the Trust. Upon any termination of this Agreement before the end of any month, the fee for such part of a month shall be prorated according to the proportion which such period bears to the full monthly period and shall be payable upon the date of termination of this Agreement. Should the Trust be liquidated, merged or acquired by another fund, any deferred fees would be immediately payable. For the purpose of determining fees payable to Administrator, the value of the Trust's net assets shall be computed at the times and in the manner specified in the Trust's Prospectus and Statement of Additional Information as from time to time in effect. (b) Should additional or fewer services or functions beyond those outlined in Section 2 above, or in Schedule "A" attached, be desired or required of Fund/Plan during the time that this contract is in effect, a written amendment to this Administration Agreement reflecting such shall be signed by both Fund/Plan and the Trust, and the compensation stated in Schedule "B" may be increased or decreased accordingly. SECTION 5. DURATION AND TERMINATION. (a) This Agreement shall go into effect as of the date and year first written above ("Effective Date") and shall continue in effect until October 31, 1996. This Agreement shall continue in force from year to year thereafter, but only so long as such continuance is approved: (1) by Fund/Plan; (2) by vote, cast in person at a meeting called for the purpose, of a majority of the Trust's Trustees who are not parties to this Agreement or interested persons (as defined in the Act) of any such party; and (3) by vote of a majority of the Trust's Board of Trustees or a majority of the fund's outstanding voting securities. (b) The Trust acknowledges that in order for Fund/Plan to perform the services set forth herein, Fund/Plan has made and will make significant investments of time and money for equipment, computer hardware and software, training of personnel and initialization of the Trust's records, data and information. In the event the Trust is liquidated, merged or acquired by another Fund, or if it terminates its contract with Fund/Plan within the initial term of this contract for any reason other than a material breach of this agreement, the Trust agrees to pay Fund/Plan within thirty (30) days of such termination the equivalent of 20% of the minimum fees remaining for the unexpired term of the Agreement. (c) Subject to the terms of the preceding paragraph, this Agreement may be terminated by Fund/Plan at any time without penalty upon giving the Trust one hundred eighty (180) days written notice (which notice may be waived in writing by the Trust) and may be terminated by the Trust at any time upon giving Fund/Plan one hundred twenty (120) days written notice (which notice may be waived in writing by Fund/Plan) provided that such termination by the Trust shall be directed or approved by the vote of a majority of its Trustees. (d) This Agreement shall automatically terminate in the event of its assignment. Termination shall not affect the rights of the parties which have accrued prior thereto. SECTION 6. AMENDMENT. The terms of this Agreement shall not be waived, altered, modified, amended or supplemented in any manner whatsoever except by a written instrument signed by Fund/Plan and the Trust. SECTION 7. APPLICABLE LAW. This Agreement shall be construed in accordance with the laws of the Commonwealth of Pennsylvania. SECTION 8. LIMITATION OF LIABILITY. (a) The execution and delivery of this contract have been duly authorized by the Board of Trustees of the Trust and executed on behalf of the Trust by the undersigned officer of the Trust in his capacity as an officer of the Trust. The obligations of this Agreement shall be binding upon the assets and property of the Trust only and shall not be binding upon any Trustee, officer or shareholder of the Trust individually. (b) Fund/Plan, its directors, officers, employees, shareholders and agents shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the performance of this Agreement, except a loss resulting from willful misfeasance, bad faith or negligence on the part of Fund/Plan in the performance of its obligations and duties under this Agreement. (c) Any person, even though also a director, officer, employee, shareholder or agent of Fund/Plan, who may be or become an officer, trustee, employee or agent of the Trust, shall be deemed, when rendering services to the Trust or acting on any business of the Trust (other than services or business in connection with Fund/Plan's duties hereunder), to be rendering such services to or acting solely for the Trust and not as a trustee, officer, employee, shareholder or agent of, or one under the control or direction of Fund/Plan even though paid by it. (d) Notwithstanding any other provision of this Agreement, the Trust shall indemnify and hold harmless Fund/Plan, its directors, officers, employees, shareholders and agents from and against any and all claims, demands, expenses and liabilities (whether with or without basis in fact or law) of any and every nature which Fund/Plan may sustain or incur or which may be asserted against Fund/Plan by any person by reason of, or as a result of: (1) any action taken or omitted to be taken by Fund/Plan in good faith hereunder; (2) in reliance upon any certificate, instrument, order or stock certificate or other document reasonably believed by it to be genuine and to be signed, countersigned or executed by any duly authorized person, upon the oral instructions or written instruction of an authorized person of the Trust or upon the opinion of legal counsel for the Trust; or (3) any action taken or omitted to be taken by Fund/Plan in connection with its appointment in good faith in reliance upon any law, act, regulation or interpretation of the same even though the same may thereafter have been altered, changed, amended or repealed. However, indemnification under this subparagraph shall not apply to action or omissions of Fund/Plan or its directors, officers, employees, shareholders or agents in cases of its or their own negligence, willful misconduct, bad faith, or reckless disregard of its or their own duties hereunder. (e) Fund/Plan shall give written notice to the Trust within ten (10) business days of receipt by Fund/Plan of a written assertion or claim of any threatened or pending legal proceeding which may be subject to this indemnification. However, the failure to notify the Trust of such written assertion or claim shall not operate in any manner whatsoever to relieve the Trust of any liability arising from this Section or otherwise, unless such failure prejudices the Trust. (f) For any legal proceeding giving rise to this indemnification, the Trust shall be entitled to defend or prosecute any claim in the name of Fund/Plan at its own expense and through counsel of its own choosing if it gives written notice to Fund/Plan within ten (10) business days of receiving notice of such claim. Notwithstanding the foregoing, Fund/Plan may participate in the litigation at its own expense through counsel of its own choosing. If the Trust does choose to defend or prosecute such claim, then the parties shall cooperate in the defense or prosecution thereof and shall furnish such records and other information as are reasonably necessary. (g) The terms of Section 8 shall survive the termination of this Agreement. SECTION 9. NOTICES. All notices, requests, consents and other communications pursuant to this Agreement shall be in writing and shall be deemed to have been given when sent by registered or certified mail, return receipt requested, or by personal delivery. (a) Notice to Administrator shall be directed to the following address: Fund/Plan Services, Inc. 2 W. Elm Street Conshohocken, Pennsylvania 19428 Attention: Kenneth J. Kempf, President (b) Notices to the Trust shall be directed to the following address: The Brinson Funds 209 S. LaSalle St. Chicago, IL 60604 Attention: E. Thomas McFarlan, President SECTION 10. INVALIDITY. Any provision of this Agreement which may be determined by competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 11. SECTION HEADINGS. Section and Paragraph headings are for convenience only and shall not be construed as part of this Agreement. SECTION 12. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement of the parties hereto. SECTION 13. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original agreement but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument to be executed by their duly authorized officers and their seals to be hereunto affixed, all as of the day and year first above written. THE BRINSON FUNDS FUND/PLAN SERVICES, INC. - ----------------- ----------------------- - ---------------------------------- ---------------------------------- By: E. Thomas McFarlan, President By: Kenneth J. Kempf, President - ---------------------------------- ---------------------------------- Attest: Debra L. Nichols Attest: Janet F. Davis, Secretary Assistant Secretary (SEAL) (SEAL) SCHEDULE "A" ------------ FUND ADMINISTRATION SERVICES FOR THE BRINSON FUNDS I. REGULATORY COMPLIANCE --------------------- A. Compliance - Federal Investment Company Act of 1940 1. Review, report and present for renewal a. Investment advisory contracts b. Fidelity bond c. Underwriting contract d. Distribution (12b-1) plan (class specific) e. Administration contract f. Accounting contract g. Custody contract h. Transfer agent and shareholder services contract 2. Filings a. N-SAR (semi-annual and annual report) (series and class specific) b. Initial registration statement on Form N1-A, post-effective amendments on Form N-1A, and supplements ("stickers") c. Notice pursuant to Rule 24f-2 (registration of indefinite number of shares) d. Filing fidelity bond under Rule 17g-1 e. Filing shareholder reports under Rule 30b2-1 f. Proxy statement, when applicable 3. Annual updates of biographical information and questionnaires for Trustees and Officers. B. Compliance - State "Blue Sky" (classes deemed separate funds for filing purposes) 1. Blue Sky (state registration) a. Registration of shares (initial/renewal) b. Monitor sale of shares c. Report shares sold d. Filing of federal prospectus and contracts e. Filing annual and semi-annual reports with states C. Compliance - Prospectus 1. Analyze and review portfolio reports from Advisor regarding: a. compliance with investment objectives b. maximum investment by company/industry size SCHEDULE "A" ------------ II. CORPORATE BUSINESS AND SHAREHOLDER/PUBLIC INFORMATION ----------------------------------------------------- A. Trustees/Management 1. Preparation of Board meetings a. agendas and resolutions - all necessary items of compliance b. compile and distribute Board materials c. attend and record minutes of meetings d. keep attendance records e. maintain corporate records/minute book 2. Preparation and distribution of periodic operation reports to management B. Coordinate Proposals 1. Printers 2. Auditors 3. Literature fulfillment 4. Insurance 5. Underwriters C. Maintain Corporate Calendars and Files 1. General 2. Blue sky D. Release Corporate Information 1. To shareholders 2. To financial and general press 3. To industry publications a. distributions (dividends and capital gains) b. tax information c. changes to prospectus d. letters from management e. performance information (class specific) 4. Respond to: a. financial press, as authorized b. miscellaneous shareholder inquiries c. industry questionnaires 5. Prepare, maintain and update monthly information manual E. Communications to Shareholders 1. Coordinate printing and distribution of annual and semi-annual reports, proxy statements when applicable and prospectuses SCHEDULE "A" ------------ F. Shareholder Meetings 1. Preparation of proxy (matters to be voted on may be class specific) 2. Solicitation of proxies 3. Preparation of minutes and record ballot results III. FINANCIAL AND MANAGEMENT REPORTING ---------------------------------- A. Income and Expenses (class specific when applicable) 1. Preparation of monthly expense analysis (class specific) 2. Expense figures calculated and accrual levels set (class specific) 3. Monitoring of expenses paid and expense caps (monthly) 4. Approve and prepare authorization for the payment of expenses 5. Checking Account Reconciliation (monthly) 6. Write checks to pay vendors 7. Calculation and payment of advisory fees B. Distributions to Shareholders (if applicable) (class specific) 1. Projections of distribution amounts - (semi-annually) a. compliance with Sub-Chapter M income tax provisions b. compliance with excise tax provisions - schedules prepared c. compliance with Investment Company Act of 1940 2. Compilation of distributions for tax reporting for shareholders' 1099 Form C. Financial Reporting 1. Liaison between fund management and auditors 2. Preparation of unaudited and audited financial statements to shareholders (semi-annually) (class specific, when applicable) - Statement of Assets and Liabilities - shares, TNA and NAV @ class level - Statement of Operations - prepared at fund level - Statement of Changes in Net Assets - distributions and capital stock at class level - Financial Highlights (class specific) - per share data/analysis - Footnotes - Schedule of Investments 3. 60 day delivery to SEC and shareholders 4. Preparation of semi-annual and annual N-SARs and Financial Data Sheet (Financial Information) 5. Preparation of Post-effective financial statements (if applicable) D. Other Financial Analyses 1. Sales information, portfolio turnover (monthly) 2. Performance Calculations (monthly) (class specific) 3. 1099 Miscellaneous - prepared for Directors/Trustees (annually) 4. 1099 Dividend insert card prepared - coordinate printing and mailing (annually) 5. 1099-DIV Form - validate per share amounts and tax status (annually) E. Review and Monitoring Functions SCHEDULE "A" ------------ 1. Review accruals and reclassification entries (class specific) 2. Review Financial Reporting generated entries to ensure proper update by accounting, ensure proper money movement by reviewing daily bank statements, expense analysis. Review capital stock reconciliations 3. Asset Diversification and Income Qualification Tests - (1940 Act) 4. Analyze asset/liability accounts daily F. Preparation and distribution of monthly operational reports to management by 10th business day 1. Management Statistics (Recap) (per class) - when applicable a. portfolio b. book gains/losses/per share c. net income, book income/per share d. share/shareholders e. distributions 2. Performance Analysis (per class) a. total return b. monthly, quarterly, year to date, average annually 3. Short-Short Analysis a. short-short income b. gross income (components) 4. Portfolio Turnover a. market value b. cost of purchases c. net proceeds of sales d. average market value 5. Asset Diversification Test a. gross assets b. non-qualifying assets c. 5% issuers 6. Activity Summary (per class) a. shares sold, redeemed and reinvested b. change in investment c. change in price per share d. net sales 7. Expense Ratios - (per class) a. per quarter b. semi-annual c. annual G. Provide rating agencies statistical data on a monthly and quarterly basis H. For Money Market Funds - weekly Mark-to-Market review - 5% test - NAV variance I. Board Package material (quarterly) - financial highlights (class specific) - expense ratios (class specific) - other schedules can be provided (additional fees may apply) SCHEDULE "A" ------------ IV. SPECIAL ISSUES RELATED TO FOREIGN INVESTMENTS --------------------------------------------- A. Financial Reporting 1. Monitor and review tax reclaims chronologically, by country and type, report on same to Fund management 2. Review and monitor treatment of currency gain/loss and capital gain/loss a. section 988 transactions b. section 1256 contracts c. section 1092 deferrals d. maintain reconciliation of portfolio forward realized gains/losses B. Tax Reporting (work closely with the Funds' independent audit firm) 1. Determine tax treatment of foreign investments and their impact on taxable income and capital gains 2. Calculate distributions to shareholders (if applicable) a. monitor character and impact of realized currency gain/loss on distribution amount b. adherence to 988(a)(1)(b) election (if applicable) c. identify and compute book/tax difference d. preparation of distribution worksheet 3. Calculate income (reclaims) and expenses (tax withheld) by country in order to determine foreign tax credit available to shareholders (if appropriate) 4. Work with the advisor and independent audit firm in the identification of Passive Foreign Investment Companies (if appropriate) 5. Calculate Dividend Received Deduction available to corporate shareholders -analyze domestic equity security holding periods 6. Preparation and maintenance of straddle schedules 7. Preparation and maintenance of foreign bond netting schedules 8. Identification and compliance with the mark-to market rules 9. Prepare return of capital worksheet for financial statement presentation with auditor review/discussion 10. Provide schedules to auditors for audit/tax review to enable the audit firm to prepare and file the necessary tax forms (1120, 8613, K-1, etc.) SCHEDULE "B" ------------ ADMINISTRATION SERVICES FEE SCHEDULE FOR THE BRINSON FUNDS I. Base Fee (calculated using average monthly total net assets of the Trust at month end and payable monthly): .0015 On the First $ 75 Million of Average Net Assets; .0010 On the Next $ 75 Million of Average Net Assets; .00075 On the Next $350 Million of Average Net Assets; and .0005 Over $500 Million of Average Net Assets The above fee schedule is applicable to total net assets of all portfolios within the Trust. Minimum fees are $75,000 per year for the initial multiple class portfolio, and $10,000 for each additional multiple class portfolio. Maximum Administration Fees are $400,000 for the initial multiple class portfolio, plus an additional $60,000 for each subsequent multiple class portfolio, per annum. Fees are totaled for the Trust and then allocated on the basis of each Series' net assets. II. Out-of-Pocket Expenses: The Trust will reimburse Fund/Plan Services monthly for all out-of-pocket expenses, including postage, telecommunications (telephone and fax), special reports, cost of Edgar filings, Board Meeting materials, record retention approved, transportation costs as incurred and copying and sending materials to independent auditors for off-site audits. III. Additional Services: Activities of a non-recurring nature including but not limited to fund consolidations, mergers, acquisitions, reorganizations, the addition or deletion of a series, and shareholder meetings/proxies, are not included herein, and will be subject to negotiation. Any additional/enhanced services or reports will be quoted upon request. IDENTIFICATION OF SERIES ------------------------ Below are listed the Series and Classes of Shares to which services under this Agreement are to be performed as of the Effective Date of this Agreement: SERIES: Global Fund Global Equity Fund Global Bond Fund Short-Term Global Income Fund* U.S. Balanced Fund U.S. Equity Fund U.S. Bond Fund U.S. Cash Management Fund Non-U.S. Equity Fund Non-U.S. Bond Fund CLASSES: Brinson Fund class SwissKey Fund class * Fee and procedures subject to change/review pending definitive structure of Fund. This Schedule "C" may be amended from time to time by agreement of the Parties EX-99.9.B.II 7 AMEND TO ADMINISTRATIVE SERVICES AGREEMENT Exhibit to Form N-1A Exhibit (9)(b)(ii) Amendment to Administrative Services Agreement AMENDMENT TO ADMINISTRATIVE SERVICES AGREEMENT This AGREEMENT, dated as of the ________ day of August, 1995 made by and between The Brinson Funds, a Delaware business trust (the "Trust") and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly organized and existing under the laws of the State of Delaware (collectively, the "Parties"). WITNESSETH THAT: WHEREAS, the Trust and Fund/Plan have entered into an agreement dated April 25, 1995, wherein Fund/Plan has agreed to provide certain administrative services to the Trust ("Administrative Services Agreement"); and WHEREAS, the Parties wish to amend the Administrative Services Agreement to reflect the creation of a multiple class structure for each Series of the Trust; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the Parties hereto, intending to be legally bound, do hereby agree: 1. To amend Schedules "B" and "C" to the Administrative Services Agreement in the form attached hereto as Schedules "B" and "C". 2. This Amendment's Effective Date shall be July 31, 1995. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement consisting of one type written page, together with Schedules "B" and "C", to be signed by their duly authorized officers and their corporate seals hereunto duly affixed as of the day and year first above written. The Brinson Funds Fund/Plan Services, Inc. - ----------------- ------------------------ By:_______________________________ By:________________________________ E. Thomas McFarlan, President Kenneth J. Kempf, President SCHEDULE "B" ------------ MULTIPLE CLASS FEE SCHEDULE FOR THE BRINSON FUNDS ADMINISTRATION EXPENSE - ---------------------- .0015 On the First $75 Million of Average Net Assets .0010 On the Next $75 Million of Average Net Assets .00075 On the Next $350 Million of Average Net Assets .0005 On the Next $500 Million of Average Net Assets The above fee schedule is applicable to total net assets of all portfolios within the Trust. Minimum fees are $75,000 per year for the initial multiple class portfolio, and $10,000 per additional multiple class portfolio. Maximum Administration Fees are $400,000 for the initial multiple class portfolio, plus an additional $60,000 for each subsequent multiple class portfolio, per annum. OUT-OF-POCKET EXPENSES - ---------------------- The Trust will reimburse Fund/Plan Services, Inc. monthly for all reasonable out-of-pocket expenses, including telephone, postage, telecommunications, EDGAR filing fees (if applicable), special reports, record retention, special transportation costs as incurred, and unusual expenses incurred while establishing viable agreements between the Trust and Fund/Plan Services, Inc. The cost of copying and sending materials to auditors for off-site audits will be an additional expense. ADDITIONAL SERVICES - ------------------- Activities of a non-recurring nature such as fund consolidations, mergers or reorganizations will be subject to negotiation. Any additional/enhanced services or reports will be quoted upon request. The Schedules will be amended as necessary to reflect the addition of other services for additional portfolios or classes of the Trust. SCHEDULE C FUND ADMINISTRATION OUTLINE FOR THE BRINSON FUNDS
Additional Tasks Required when Multiple Class ---------------------------- I. REGULATORY COMPLIANCE --------------------- A. Compliance - Federal Investment Company Act of 1940 1. Review, report and renew a. investment advisory contracts b. fidelity bond c. underwriting contracts............................. additional liability d. distribution (12(b)-1) plans (if applicable)....... separate on certain classes only e. administration contracts f. accounting contracts g. custody contracts h. transfer agent and shareholder services contracts 2. Filings a. N-SAR (semi-annual report)......................... will require some additional reporting for cap stock and financial information b. N-1A (prospectus), post effective amendments and supplements ("stickers") c. proxy statement (when necessary)................... separate per class d. 24f-2 indefinite registration of shares e. filing fidelity bond under 17g-1 f. filing shareholder reports under 30b2-1 3. Annual up-dates of biographical information and questionnaires for Trustees and Officers 4. Monitor money market funds under Rule 2a-7 B. Compliance - State "Blue Sky".................................. Additional filings; states view separate class as separate funds 1. Blue Sky (state registration) a. registration shares (initial/renewal) b. registration issuer/dealer/agent (no loads)
c. monitor sale shares over/under d. report shares sold e. filing of federal prospectus and contracts f. filing annual and semi-annual reports with states C. Compliance - Prospectus 1. Analyze and review portfolio reports from Advisor re: a. compliance with investment objectives b. maximum investment by company/industry size D. Compliance - Other 1. Proxy when necessary................................... separate per class - separate votes on some issues 2. Applicable stock exchange rules 3. Applicable state tax laws II. CORPORATE BUSINESS AND SHAREHOLDER/PUBLIC INFORMATION ----------------------------------------------------- A. Trustees/Management 1. Preparation of meetings a. agendas - all necessary items of compliance...... separate special reports on 12b-1 income and expenditures b. arrange and conduct meetings c. prepare minutes of same d. keep attendance records e. maintain corporate records/minute book 2. Preparation and distribution of periodic operation reports to management.................................. additional information for each class B. Coordinate Proposals 1. Printers 2. Auditors 3. Literature fulfillment 4. Insurance 5. Underwriters C. Maintain Corporate Calendars and Files....................... need to be expanded re separate class 1. General 2. Blue sky D. Shareholder Meetings......................................... (see above)
1. Preparation of proxy 2. Conduct meeting 3. Preparation of minutes and record ballot results E. Release Corporate Information 1. To shareholders 2. To financial and general press 3. To industry publications............................... additional questionnaires/announcements pertinent to only a certain class a. distributions (dividends and capital gains)...... separate calculation for each class b. tax information.................................. separate for each class c. changes to prospectus d. letters from management e. Funds' performance............................... separate performance by class 4. Respond to: a. financial press b. miscellaneous shareholders inquiries c. industry questionnaires 5. Prepare, maintain and update monthly information manual F. Communications to Shareholders............................... amendments to financial highlights table and notes only 1. Coordinate printing and distribution of annual, semi-annual reports and prospectus III. FINANCIAL AND MANAGEMENT REPORTING ---------------------------------- A. Income and Expenses 1. Preparation of budgets................................. separate budgets per class 2. Expense figures calculated and accrual levels set...... two levels 3. Monitoring of expenses................................. two levels 4. Approve and authorize payment of expenses.............. allocation and prorating between classes 5. Projection of Income B. Distributions to Shareholders 1. Projections of distribution amounts.................... two separate dividend amounts a. compliance with income tax provisions............ will require additional calculations b. compliance with excise tax provisions c. compliance with Investment Company Act of 1940... will require additional calculations 2. Compilation of year end tax reporting to shareholders.. separate reports per class
C. Financial Reporting.......................................... will require additional disclosure and reporting (notes & highlights, etc.) 1. Liaison between Fund management and auditors 2. Preparation of unaudited and audited reports to shareholders 3. 60 day delivery to SEC and shareholders D. Subchapter M Compliance (will be run quarterly) 1. Asset diversification test 2. Short/short test (can be performed more frequently upon request) 3. Income qualification test E. Other Financial Analyses 1. Upon request from Fund management, other budgeting..... will have some impact and analyses can be constructed to meet a Fund's specific needs F. Review and Monitoring Functions 1. Review NAV calculations................................ double review 2. Coordinate and review transfer agent, accounting and custody functions 3. Review 12b-1, accruals, expenditures and payment of.... review of 12b-1 accruals separately trail commissions where applicable IV. SPECIAL ISSUES RELATED TO FOREIGN INVESTMENTS --------------------------------------------- A. Regulatory Compliance 1. Obtain Custodian's 17f-5 package for the Fund's Board regarding sub-custodian and selected countries for investment 2. Coordinate Board approval of selected countries and subsequent completion of sub-custodial documents B. Financial Reporting 1. Monitor and review tax reclaims chronologically, by country and type; report on same to Fund management a. File/complete tax withholding documents, as supplied by the Custodian 2. Monitor procedures for timely and accurate pricing a. Oversee establishment of a Pricing Committee to determine fair value pricing b. Obtain independent quote verifications as needed, or randomly as appropriate c. Report on any action taken by the Committee to the Board
3. Review and monitor treatment of currency gain/loss and capital gain/loss a. Section 988 transactions b. Section 1256 contracts C. Tax Reporting 1. Determine tax treatment of foreign investments and their impact on a. Subchapter M tests -- e.g. diversification, qualified income, 30% tests b. Taxable income and capital gains 2. Calculate distributions to shareholder................. separate per class a. Monitor character and impact of realized currency gain/loss on distribution amount 3. Calculate income and expenses by country in order to determine foreign tax credit available to shareholders
EX-99.9.C.I 8 ACCOUNTING SERVICES AGREEMENT Exhibit to Form N-1A Exhibit (9)(c)(i) Accounting Services Agreement ACCOUNTING SERVICES AGREEMENT ----------------------------- THIS AGREEMENT, dated as of the ____ day of , 1995 (the "Effective Date") by and between The Brinson Funds, a Delaware Business Trust (the "Trust") operating as an open-end management investment company, and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly organized and existing under the laws of the State of Delaware. W I T N E S S E T H T H A T: ------------------------------ WHEREAS, the Trust is an investment company registered under the Investment Company Act of 1940, as amended (the "Act"); and WHEREAS, the Trust is authorized by its Agreement and Declaration of Trust to issue separate series of shares representing interests in separate investment portfolios (the "Series"), which Series are identified on Schedule "C" attached hereto, and which Schedule "C" may be amended from time to time by mutual agreement of the Trust and Fund/Plan; and WHEREAS, the Trust desires to appoint Fund/Plan as its Accounting Services Agent to maintain and keep current the books, accounts, records, journals or other records of original entry relating to the business of the Series as set forth in Section 2 of this Agreement (the "Accounts and Records") and to perform certain other functions in connection with such accounts and records; and WHEREAS, Fund/Plan is willing to perform such functions upon the terms and conditions set forth below; and WHEREAS, the Trust will cause to be provided certain information to Fund/Plan as set forth below; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto, intending to be legally bound, do hereby agree as follows: SECTION 1. APPOINTMENT The Trust hereby appoints Fund/Plan as Accounting Services Agent and Fund/Plan hereby accepts such appointment. Also, the Trust agrees to appoint Fund/Plan as Accounting Services Agent for any additional Series which, from time to time, may be added to the Trust. SECTION 2. DEFINITIONS. For purposes of this Agreement, the terms Oral Instructions and Written Instructions shall mean: ORAL INSTRUCTIONS: The term Oral Instruction shall mean an authorization, instruction, approval, item or set of data, or information of any kind transmitted to Fund/Plan in person or by telephone, telegram, telecopy, or other mechanical or documentary means lacking a signature, by a person or persons believed in good faith by Fund/Plan to be a person or persons authorized by a resolution of the Board of Trustees of the Trust, to give Oral Instructions on behalf of the Series. WRITTEN INSTRUCTIONS: The term Written Instruction shall mean an authorization, instruction, approval, item or set of data or information of any kind transmitted to Fund/Plan in original writing containing original signatures or a copy of such document transmitted by telecopy including transmission of such signature believed in good faith by Fund/Plan to be the signature of a person authorized by a resolution of the Board of Trustees of the Trust to give Written Instructions on behalf of the Series. The Trust shall file with Fund/Plan a certified copy of each resolution of its Board of Trustees authorizing execution of Written Instructions or the transmittal of Oral Instructions as provided above. SECTION 3. To the extent Fund/Plan receives the necessary information from the Trust or its agents by Written or Oral Instructions, Fund/Plan shall maintain and keep current the following Accounts and Records and any other records required to be kept pursuant to Rule 31a-1 of the Investment Company Act relating to the business of the Trust in such form as may be mutually agreed upon between the Trust and Fund/Plan: (a) Net Asset Value Calculation Reports; (b) Cash Receipts Journal; (c) Cash Disbursements Journal; (d) Dividends Paid and Payable Schedule; (e) Purchase and Sales Journals - Portfolio Securities; (f) Subscription and Redemption Journals; (g) Security Ledgers - Transaction Report and Tax Lot Holdings Report; (h) Broker Ledger - Commission Report; (I) Daily Expense Accruals; (j) Daily Interest Accruals; (k) Daily Trial Balance; (l) Portfolio Interest Receivable and Income Journal; (m) Portfolio Dividend Receivable and Income Register; (n) Listing of Portfolio Holdings - showing cost, market value and percentage of portfolio comprised of each security; and (o) Average Daily Net Assets provided on a monthly basis. The necessary information to perform the above functions and the calculation of the respective net asset values of the Series is to be furnished by Written or Oral Instructions to Fund/Plan daily (in accordance with the time frame identified in Section 7) prior to the close of trading on the New York Stock Exchange. SECTION 4. Fund/Plan shall perform the ministerial calculations necessary to calculate the respective net asset values daily for the Series, in accordance with their respective current Prospectus and utilizing the information described in this Section. Portfolio items for which market quotations are available by Fund/Plan's use of automated financial information service (the "Service") shall be based on the closing prices of the Service, except where the Trust has given or caused to be given specific Written or Oral Instructions to utilize a different value. All of the portfolio securities shall be given such values as the Trust provides by Written or Oral Instructions including all restricted securities and other securities requiring valuation not readily ascertainable solely by the Service. Fund/Plan shall have no responsibility or liability for the accuracy of prices quoted or corporate action information supplied by the Service; for the accuracy of the information supplied by the Trust; or for any loss, liability, damage, or cost arising out of any inaccuracy of such data. Fund/Plan shall have no responsibility or duty to include information or valuations to be provided by the Trust, on behalf of the Series, in any computation unless and until it is timely supplied to Fund/Plan in usable form. Fund/Plan shall record corporate action (including but not limited to dividends, record date, rights issues, stock dividends, stock splits, and tender offers) information as received from the Custodian, the Service, the Trust or its advisors as received. Fund/Plan shall have no duty to gather or record corporate action information not supplied by these sources. Fund/Plan will assume no liability for price changes caused by: the investment advisor(s), custodian, suppliers of security prices and corporate action and dividend information, or any party other than Fund/Plan itself. In the event an error is made by Fund/Plan which creates a price change, consideration must be given to the effect of the price change as described below. Notwithstanding the provisions of Section 12, the following provisions govern Fund/Plan's liability for errors in calculating the NAV of the Series: If the NAV should have been higher for a date or dates in the past, the error would have the effect of having given more shares to subscribers and less money to redeemers to which they were entitled. Conversely, if the NAV should have been lower, the error would have the effect of having given less shares to subscribers and overpaying redeemers. If the error affects the prior business day's NAV only, and if Fund/Plan can rerun the prior day's work before shareholder statements and checks are mailed, the Trust hereby accepts this manner of correcting the error. If the error spans five (5) business days or less, Fund/Plan shall reprocess shareholder purchases and redemptions where redeeming shareholders have been underpaid. Fund/Plan shall assume liability to the Trust for overpayments to shareholders who have fully redeemed. If the error spans more than five (5) business days, Fund/Plan would bear the liability to the Trust for, 1) paying for the excess shares given to shareholders if the NAV should have been higher, or, 2) funding overpayments to shareholders who have redeemed if the NAV should have been lower. The cost of any reprocessing required for shareholders who have been credited with fewer shares than appropriate, or for redeeming shareholders who are due additional amounts of money will also be borne by Fund/Plan. SECTION 5. For all purposes under this Agreement, Fund/Plan is authorized to act upon receipt of the first of any Written or Oral Instruction it receives from the Trust or its agents on behalf of the Series of the Trust. In cases where the first instruction is an Oral Instruction that is not in the form of a document or written record, a confirmatory Written Instruction or Oral Instruction in the form of a document or written record shall be delivered, on behalf of the Series, and in cases where Fund/Plan receives an Instruction, whether Written or Oral, to enter a portfolio transaction on the records, the Trust shall cause the broker/dealer executing such transaction to send a written confirmation to the Custodian. Fund/Plan shall be entitled to rely on the first Instruction received, and for any act or omission undertaken in compliance therewith shall be free of liability and fully indemnified and held harmless by the Trust, provided however, that in the event a Written or Oral Instruction received by Fund/Plan is countermanded by a timely later Written or Oral Instruction received by Fund/Plan prior to acting upon such countermanded Instruction, Fund/Plan shall act upon such later Written or Oral Instruction. The sole obligation of Fund/Plan with respect to any follow-up or confirmatory Written Instruction, Oral Instruction in documentary or written form, or broker/dealer written confirmation shall be to make reasonable efforts to detect any such discrepancy between the original Instruction and such confirmation and to report such discrepancy to the Trust. The Trust shall be responsible, at the Trust's expense, for taking any action, including any reprocessing, necessary to correct any discrepancy or error, and to the extent such action requires Fund/Plan to act, the Trust shall give Fund/Plan specific Written Instruction as to the action required. SECTION 6. The Trust shall cause the Trust's Custodian, on behalf of the Series, to forward to Fund/Plan: (i) a daily statement of cash and portfolio transactions based upon the prior business day; and (ii) at the end of each month, to forward to Fund/Plan a monthly statement of portfolio transactions, which will be reconciled with Fund/Plan's Accounts and Records maintained for the Series of the Trust. Fund/Plan will report any discrepancies to the Custodian, and report any unreconciled items to the Trust. SECTION 7. Fund/Plan shall promptly supply daily and periodic reports of the Trust, on behalf of the Series, as requested by the Trust and agreed upon by Fund/Plan. SECTION 8. The Trust, on behalf of the Series, shall provide and shall require each of its agents (including without limitation its Transfer Agent and its Custodian), to provide Fund/Plan as of the close of each business day, or on such other schedule as the Trust determines is necessary, with Written or Oral Instructions (to be delivered to Fund/Plan by 11:00 AM Eastern Time the next following business day) containing all data and information necessary for Fund/Plan to maintain the Trust's Accounts and Records and Fund/Plan may conclusively assume that the information it receives by Written or Oral Instructions is complete and accurate. The Trust, on behalf of the Series, is responsible to provide or cause to be provided to Fund/Plan reports of share purchases, redemptions, and total shares outstanding on the next business day after each net asset valuation. SECTION 9. The Accounts and Records, in the agreed upon format, maintained by Fund/Plan shall be the property of the Trust, and shall be made available to the Trust promptly upon request and shall be maintained for the periods prescribed in Rule 31a-2 under the Act. Fund/Plan shall assist the Trust's independent auditors, or upon approval of the Trust, or upon demand, any regulatory body, in any requested review of the Trust's Accounts and Records but shall be reimbursed for all expenses and employee time invested in any such review of the Trust's Accounts and Records outside of routine and normal periodic review and audits. Upon receipt from the Trust of the necessary information, Fund/Plan shall supply the necessary data for the Trust or the auditor's completion of any necessary tax returns, questionnaires, periodic reports to Shareholders and such other reports and information requests as the Trust and Fund/Plan shall agree upon from time to time. SECTION 10. In case of any request or demand for the inspection of the Share records of the Trust, Fund/Plan, as Accounting Services Agent, shall endeavor to notify the Trust and to secure instructions as to permitting or refusing such inspection. However, Fund/Plan may exhibit such records to any person in any case where it is advised by its counsel that it may be held liable for failure to do so. SECTION 11. Fund/Plan and the Trust may from time to time adopt such procedures as they agree upon in writing, and Fund/Plan may conclusively assume that any procedure approved by the Trust or directed by the Trust, does not conflict with or violate any requirements of the Series' Prospectuses, Agreement and Declaration of Trust or By-Laws. The Trust shall be responsible for notifying Fund/Plan of any changes in regulations or rules which might necessitate changes in Fund/Plan's procedures, and for working out with Fund/Plan such changes. SECTION 12. (a) Fund/Plan, its directors, officers, employees, shareholders and agents shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the performance of this Agreement, except losses resulting from willful misfeasance, bad faith or negligence on the part of Fund/Plan in the performance of its obligations and duties under this Agreement. (b) Any person, even though also a director, officer, employee, shareholder or agent of Fund/Plan, who may be or become a(n) trustee, officer, employee or agent of the Trust, shall be deemed, when rendering services to the Trust or acting on any business of the Trust (other than services or business in connection with Fund/Plan's duties hereunder), to be rendering such services to or acting solely for the Trust and not as a(n) trustee, officer, employee, shareholder or agent of, or one under the control or direction of Fund/Plan even though paid by it. (c) Notwithstanding any other provision of this Agreement, the Trust shall indemnify and hold harmless Fund/Plan, its directors, officers, employees, shareholders and agents from and against any and all claims, demands, expenses and liabilities (whether with or without basis in fact or law) of any and every nature which Fund/Plan may sustain or incur or which may be asserted against Fund/Plan by any person by reason of, or as a result of: (i) any action taken or omitted to be taken by Fund/Plan in good faith hereunder; (ii) in reliance upon any certificate, instrument, order or stock certificate or other document reasonably believed by it to be genuine and to be signed, countersigned or executed by any duly authorized person, upon the Oral Instructions or Written Instructions of an authorized person of the Trust or upon the opinion of legal counsel for the Trust or its own counsel; or (iii) any action taken or omitted to be taken by Fund/Plan in connection with its appointment in good faith in reliance upon any law, act, regulation or interpretation of the same even though the same may thereafter have been altered, changed, amended or repealed. However, indemnification under this subparagraph shall not apply to actions or omissions of Fund/Plan or its directors, officers, employees, shareholders, or agents in cases of its or their own negligence, willful misconduct, bad faith, or reckless disregard of its or their own duties hereunder. (d) Fund/Plan shall give written notice to the Trust within fifteen (15) business days of receipt by Fund/Plan of a written assertion or claim of any threatened or pending legal proceeding which may be subject to this indemnification. However, the failure to notify the Trust of such written assertion or claim shall not operate in any manner whatsoever to relieve the Trust of any liability arising from this Section or otherwise. (e) For any legal proceeding giving rise to this indemnification, the Trust shall be entitled to defend or prosecute any claim in the name of Fund/Plan at its own expense and through counsel of its own choosing if it gives written notice to Fund/Plan within ten (10) business days of receiving notice of such claim. Notwithstanding the foregoing, Fund/Plan may participate in the litigation at its own expense through counsel of its own choosing. If the Trust does choose to defend or prosecute such claim, then the parties shall cooperate in the defense or prosecution thereof and shall furnish such records and other information as are reasonably necessary. (f) The Trust shall not settle any claim without Fund/Plan's express written consent which shall not be unreasonably withheld. Fund/Plan shall not settle any claim without the Trust's express written consent which shall not be unreasonably withheld. SECTION 13. All financial data provided to, processed by, and reported by Fund/Plan under this Agreement shall be stated in United States dollars. Fund/Plan's obligation to convert, equate or deal in foreign currencies or values extends only to the accurate transposition of information received from the various pricing and informational services into Fund/Plan's Investment Accounting System. SECTION 14. The Trust agrees to pay Fund/Plan compensation for its services and to reimburse it for expenses, at the rates and amounts as set forth in Schedule "B" attached hereto, and as shall be set forth in any amendments to such Schedule "B" approved by the Trust and Fund/Plan. The Trust agrees and understands that Fund/Plan's compensation be comprised of two components and payable on a monthly basis as follows: (i) a combined asset based fee, subject to a minimum fee, and an additional minimum fee for subsequent classes of shares for each Series of the Trust, which fees are to be paid by the Trust within ten calendar days of receipt of an invoice from Fund/Plan after the end of each month. Such asset based fee is calculated by using that month's combined classes' average daily net assets of the Trust; and (ii) reimbursement of any reasonable out-of-pocket expenses paid by Fund/Plan on behalf of the Trust, which out-of- pocket expenses will be billed to the Trust within the first ten calendar days of the month following the month in which such out-of-pocket expenses were incurred. The Trust agrees to reimburse Fund/Plan for such expenses within ten calendar days of receipt of such bill. For the purpose of determining fees payable to Fund/Plan, the value of the Series' net assets shall be computed at the times and in the manner specified in each Series' Prospectuses and Statement of Additional Information then in effect. During the term of this Agreement, should the Trust seek services or functions in addition to those outlined above or in Schedule "A" attached, a written amendment to this Agreement specifying the additional services and corresponding compensation shall be executed by both Fund/Plan and the Trust. SECTION 15. Nothing contained in this Agreement is intended to or shall require Fund/Plan, in any capacity hereunder, to perform any functions or duties on any holiday, day of special observance or any other day on which the New York Stock Exchange is closed. Functions or duties normally scheduled to be performed on such days shall be performed on, and as of, the next succeeding business day on which the New York Stock Exchange is open. Not withstanding the foregoing, Fund/Plan shall compute the net asset values of the Series on each day required pursuant to Rule 22c-1 promulgated under the Investment Act of 1940, as amended and as described in the Series' respective Prospectuses. SECTION 16. (a) This Agreement shall go into effect on the Effective Date and shall continue in effect until October 31, 1996. This Agreement shall continue in force from year to year thereafter, but only so long as such continuance is approved: (1) by Fund/Plan; (2) by vote, cast in person at a meeting called for the purpose, of a majority of the Trust's Trustees who are not parties to this Agreement or interested persons (as defined in the Act) of any such party; and (3) by vote of a majority of the Trust's Board of Trustees or a majority of the Trust's outstanding voting securities. (b) The Fee Schedule shall be fixed for the initial term of this Agreement, with a fee increase thereafter not to exceed 10%. (c) The Trust or Fund/Plan may give written notice to the other of the termination of this Agreement, such termination to take effect at the time specified in the notice, not less than one hundred and eighty (180) days after the giving of the notice. Upon the effective termination date, the Trust shall pay to Fund/Plan such compensation as may be due as of the date of termination and shall likewise reimburse Fund/Plan for any reasonable out-of-pocket expenses and disbursements reasonably incurred by Fund/Plan to such date. (d) In the event that in connection with termination of this Agreement a successor to any of Fund/Plan's duties or responsibilities under this Agreement is designated by the Trust by written notice to Fund/Plan, Fund/Plan shall, promptly upon such termination and at the expense of the Trust, transfer all Required Records and shall cooperate in the transfer of such duties and responsibilities. (e) The Trust acknowledges that in order for Fund/Plan to perform the services contemplated hereunder, Fund/Plan has made and will make significant investments of time and money. If this Agreement is terminated for reasons other than a material breach by Fund/Plan prior to the expiration of the initial term of this contract, the Trust will pay Fund/Plan twenty percent (20%) of the minimum fees remaining for the unexpired term of the Agreement. SECTION 17. Any notice or other communication required by or permitted to be given in connection with this Agreement shall be in writing, and shall be delivered in person or sent by first class mail, postage prepaid to the respective parties as follows: If to the Trust: The Brinson Funds 209 S. LaSalle St. Chicago, IL 60604 Attention: E. Thomas McFarlan, President If to Fund/Plan: Fund/Plan Services, Inc. P.O. Box 874 Conshohocken, PA 19428 Attention: Kenneth J. Kempf, President SECTION 18. This Agreement may be amended from time to time by supplemental agreement executed by the Trust and Fund/Plan and the compensation stated in Schedule "B" attached hereto may be adjusted accordingly as mutually agreed upon. SECTION 19. This Agreement shall be construed according to the laws of the Commonwealth of Pennsylvania. SECTION 20. This contract sets forth the entire understanding of the parties with respect to the provisions contemplated hereby, and supersedes any and all prior agreements, arrangements and understandings relating to such services. SECTION 21. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original agreement but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement consisting of ten typewritten pages, together with Schedules "A", "B" and "C", to be signed by their duly authorized officers and their seals hereunto duly affixed and attested, as of the day and year first above written. THE BRINSON FUNDS ____________________________________ By: E. Thomas McFarlan, President ____________________________________ Attest: Debra L. Nichols, Assistant Secretary (SEAL) FUND/PLAN SERVICES, INC. ____________________________________ By: Kenneth J.Kempf, President ____________________________________ Attest: Janet F. Davis, Secretary (SEAL) SCHEDULE "A" ------------ ACCOUNTING & PORTFOLIO VALUATION FOR THE BRINSON FUNDS The Accounting Services Unit (ASU) is pleased to provide a comprehensive level of service to The Brinson Funds. You may expect services as follows with respect to Series and their Multiple Classes of Shares (additional services may be completed upon request): DAILY ACCOUNTING SERVICES ------------------------- 1) Calculate Net Asset Value (and Offering Price) Per Share: Series Level . Update the daily market value of securities held by the Series using Fund/Plan Services' standard agents for pricing domestic equity, bond and foreign securities. The domestic equity pricing services are Reuters, Inc., Muller Data Corporation and Interactive Data Corporation (IDC). Muller Data Corporation/Extel Financial, Telerate, Bloomberg and IDC are used for bond and foreign prices/exchange rates. . Enter manual prices supplied by client and/or broker. . Review variance reporting on-line and in hard copy for price changes in individual securities using variance levels established by client. Verify US dollar security prices exceeding variance levels by notifying client and pricing sources of noted variances. . Complete daily variance analysis on foreign exchange rates and local foreign prices. Notify client of changes exceeding established levels for the client's verification. . Review for ex-dividend items indicated by pricing sources; trace to Series' general ledger for agreement. Series and Each class . Allocate daily unrealized Series appreciation/depreciation, unrealized currency gains/losses, and unrealized gains/losses on futures and forwards to classes based upon value of outstanding class shares. . Prepare NAV proof sheets. Review components of change in NAV for reasonableness. (Complete fund and class control proofs). . Communicate required pricing information (NAV) to client, transfer agent and, electronically, to NASDAQ. 2) Determine and Report Cash Availability to Series by 9:30 AM Eastern Time: Series Level . Receive daily cash and transaction statements from the custodian by 8:30 AM Eastern time. . Receive previous day shareholder activity reports from the Series' transfer agent by 8:30 AM Eastern time. Class level shareholder activity will be accumulated into the Series' available cash balances. . Fax hard copy Cash Availability calculations with all details to client. . Supply client with 5-day cash projection report. . For the Series, prepare and complete daily bank cash reconciliations including documentation of any reconciling items and notify the custodian/client. 3) Reconcile and Record All Daily Expense Accruals: Series Level . Accrue expenses based on client supplied budget either as percentage of Series' net assets or specific dollar amounts. . Monitor expense limitations established by client. . Accrue daily amortization of Organizational Expense. Series and Each Class . Class specific accruals completed such as daily accrual of 12b-1 expenses. . Allocate Series expenses to classes based upon value of outstanding class shares. 4) Verify and Record All Daily Income Accruals for Debt Issues: Series Level . Review and verify all system generated Interest and Amortization reports. . Establish unique security codes for bond issues to permit segregated Trial Balance income reporting. SCHEDULE "A" ------------ Series and Each Class . Allocate Series income to classes based upon value of outstanding class shares. 5) Monitor Domestic Securities Held for Cash Dividends, corporate actions and capital changes such as splits, mergers, spinoffs, etc. and process appropriately. Series Level . Monitor electronically received information from Muller Data Corporation for all domestic securities. . Review current daily security trades for dividend activity. . Interface with custodian to monitor timely collection and postings of corporate actions, dividends and interest. . Process international dividend and capital change information received from the custodian and advisor. Back-up information on foreign dividends and corporate actions may also be obtained from Muller Data Corporation/Extel Financial, Telerate, Bloomberg and IDC (as pricing agents for the Series). . Provide mark-to-market analysis for currency exchange rate fluctuations on unsettled dividends and interest. Series and Each Class . Allocate Series dividend income and unrealized currency gains/losses on dividends/interest to classes based upon value of outstanding class shares. 6) Enter All Security Trades on Investment Accounting System (IAS) based on written instructions from the client. Series Level . Review system verification of trade and interest calculations. . Verify settlement through the custodian statements. . Maintain security ledger transaction reporting. . Maintain tax lot holdings. . Determine realized gains or losses on security trades. . Provide complete broker commission reporting. . Provide foreign currency exchange rate realized and unrealized gains/losses detail. . Determine realized gains or losses on security trades. Series and Each Class . Allocate all realized and unrealized capital and currency gains/losses to classes based upon value of class outstanding shares. 7) Enter All Series Share Transactions on IAS: Each Class . Process activity identified on the transfer agent reports. . Verify settlement through the Series' custodian statements. . Reconcile to the Fund/Plan Services' transfer agent report balances. . Roll each classes' capital share values into each Series and determine allocation percentages based upon the value of each classes' outstanding shares to the Series total. 8) Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance (listing all asset, liability, equity, income and expense accounts) Series Level . Post manual entries to the general ledger. . Post custodian bank activity. . Post security transactions. . Post and verify system generated activity, i.e., income and expense accruals. . Segregate foreign tax expense. . Prepare daily mark-to-market analysis for all unrealized foreign currency exchange rate gains/losses by asset/liability category. Series and Each Class . Prepare Series general ledger net cash proof used in NAV calculation. . Post class specific shareholder activity and roll values into each Series. . Allocate all Series level net cash accounts on the Series Trial Balance to each SCHEDULE "A" ------------ specific class based upon value of class outstanding shares. . Maintain allocated Trial Balance accounts on class specific Allocation Report. . Maintain class-specific expense accounts. . Prepare class-specific proof/control reports to ensure accuracy of allocations. 9) Review and Reconcile with Custodian Statements: Series Level . Verify all posted interest, dividends, expenses, and shareholder and security payments/receipts, etc. (Discrepancies will be reported to and resolved by the Custodian.) . Post all cash settlement activity to the Trial Balance. . Reconcile to ending cash balance accounts. . Clear IAS subsidiary reports with settled amounts. . Track status of past due items and failed trades handled by the Custodian. 10) Submission of Daily Accounting Reports to Client: (Additional reports readily available.) Series Level . Portfolio Valuation (listing inclusive of holdings, costs, market values, unrealized appreciation/depreciation and percentage of portfolio comprised of each security sorted according to Brinson's categories - stocks (foreign), stocks (domestic), bonds (foreign), bonds (domestic), currency (foreign), money market (domestic). . Cash availability. . 3-Day Cash Projection Report Series and Each Class . Trial Balance and Class Allocation Report . NAV Calculation Report MONTHLY ACCOUNTING SERVICES --------------------------- 1) For the Series, full Financial Statement Preparation (automated Statements of Assets and Liabilities, of Operations and of Changes in Net Assets) and submission to Client by 10th business day. . Class specific capital share activity and expenses will be disclosed also. 2) Submission of Monthly Automated IAS Reports to Fund/Client: Series Level . Security Purchase/Sales Journal . Interest and Maturity Report . Brokers Ledger (Commission Report) . Security Ledger Transaction Report with Realized Gains/Losses . Security Ledger Tax Lot Holdings Report . Additional reports available upon request 3) Reconcile Accounting Asset Listing to Custodian Asset Listing: Series Level . Report any security balance discrepancies to the custodian/client. 4) Provide Monthly Analysis and Reconciliation of Additional Trial Balance Accounts, such as: Series Level . Security cost and realized gains/losses . Interest/dividend receivable and income . Payable/receivable for securities purchased and sold . Unrealized and realized currency gains/losses Series and Each Class . Payable/receivable for Fund shares; issued and redeemed . Expense payments and accruals analysis 5) If Appropriate, Prepare and Submit to Client: Series Level . Income by state reporting . Standard Industry Code Valuation Report . Alternative Minimum Tax Income segregation schedule SCHEDULE "A" ------------ ANNUAL (AND SEMI-ANNUAL) ACCOUNTING SERVICES -------------------------------------------- 1) Assist and supply auditors with schedules supporting securities and shareholder transactions, income and expense accruals, etc. for the Series and each Class during the year in accordance with standard audit assistance requirements. 2) Provide NSAR Reporting (Accounting Questions): --------------------------------------------- If applicable for the Series and Classes, answer the following items: 2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55, 62, 63, 64B, 71, 72, 73, 74, 75, 76 SCHEDULE "A" ------------ ACCOUNTING SERVICES UNIT BASIC ASSUMPTIONS FOR THE BRINSON FUNDS - -------------------------------------------------------------------------------- BASIC ASSUMPTIONS: - ----------------- 1) The Trust's Administrator, on behalf of the Series, will complete all necessary compliance reports (Sub-Chapter "M"), as well as monitoring of the various limitations and restrictions. 2) The portfolio asset composition of the Series will be comparable as described in the Profile Document prepared by Brinson Partners, Inc. Trading activity is expected to approximate 270 transactions per month inclusive of equity, debt, currency and money market transactions. 3) The Trust has a tax year-end which coincides with its fiscal year-end. No additional accounting requirements are necessary to identify or maintain book-tax differences. To the extent tax accounting, on behalf of the Series (as applicable), for certain securities differs from the book accounting, it will be done by the Trust's Administrator or the Trust's independent accountants. The Accounting Services Unit will supply segregated Trial Balance account details to assist the Administrator, on behalf of the Series (as applicable), in proper identification by category of all appropriate realized and unrealized currency gains/losses. 4) The Trust, on behalf of the Series (as applicable) foresees no difficulty in using Fund/Plan's standard pricing agents for domestic equity, bond, ADR and foreign securities. Fund/Plan currently uses Reuters, Inc., Muller Data and Interactive Data (IDC) for domestic equities and listed ADR's. IDC, Telerate, Bloomberg and Muller Data Corporation for bonds, synthetic ADR's and foreign issues. Muller Data Corporation/Extel Financial and IDC are the primary foreign security pricing vendors for the Trust, on behalf of the Series (as applicable) and supply ASU with daily (spot) foreign exchange rates to be used in market value calculations of non-US dollar denominated securities and currency mark-to-market requirements. To the extent IDC or Muller Data are unable to supply certain foreign security prices, they will be provided by Brinson Partners or a Brinson Partners' recommended pricing source. Telerate Systems, Inc. is used for daily forward currency contract prices. The Accounting Unit will work closely with Brinson Partners to ensure the accuracy of the Series' NAVs and to obtain the most satisfactory pricing sources and specific methodologies. 5) To the extent the Series require daily security prices from specific brokers for domestic or foreign securities, these manual prices will be obtained by Brinson Partners (or brokers) and faxed to the ASU by approximately 4:00 PM Eastern time for inclusion in the NAV calculations. Brinson Partners will supply ASU with the appropriate pricing contacts for these manual quotes. 6) To the extent the Series should ever purchase/hold open-end registered investment companies (RICs), procedural discussions should take place between ASU and Brinson Partners clarifying the appropriate pricing and dividend rate sources. Depending on the methodologies selected by the Trust, additional fees may apply. 7) ASU will supply daily Portfolio Valuation Reports on behalf of the Series (as applicable), to Brinson Partners identifying current security positions, original/amortized cost, security market values and changes in unrealized appreciation/depreciation. It will be the responsibility of Brinson Partners to review these reports and to promptly notify ASU of any possible problems, trade discrepancies, incorrect security prices, corporate action/capital change information or exchange rate discrepancies that could result in a misstated NAV. 8) All foreign currency will be held within the Custodian and sub-custodian network on behalf of the Series (as applicable). Time deposits and interest bearing currency accounts will all be reflected on the Custodian asset listings. The Trust or Custodian will supply ASU with appropriate and timely information for any trades/changes in the currency accounts, as well as interest rates to ensure income accrual accuracy for the debt issues, time deposits and currency accounts. Income accrual adjustments (expected to be immaterial) will be completed when the interest is actually collected and posted on the Custodian's statements. SCHEDULE "A" ------------ 9) On behalf of the Series (as applicable), it is assumed for all debt issues that Brinson Partners will supply the Accounting Unit with critical income information such as accrual methods, interest payment frequency details, coupon payment dates, floating rate reset dates, and complete security descriptions with issue types and sedol/cusip numbers. 10) On behalf of the Series (as applicable), the Custodian will provide the Accounting Unit with daily custodian statements (or on-line access to the custody system) reflecting all prior day cash activity by 8:30 AM Eastern time. Complete and clear descriptions of any postings, inclusive of sedol/cusip numbers, interest/dividend payment dates, capital stock details, expense authorizations, beginning/ending balances, etc. will be provided by the Custodian's reports or system. 11) On behalf of the Series (as applicable), the Custodian will be responsible for supplying the foreign dividend, capital change information, and interest rate changes to Accounting in a timely manner. Brinson Partners will supplement and support as appropriate. If selected by the Trust, ASU can receive supplemental capital change and dividend information on foreign positions from IDC and Muller Data as the pricing vendors for the Trust's foreign securities. 12) On behalf of the Series (as applicable), the Custodian will handle and report on all settlement problems, failed trades and unsettled dividends/interest and capital changes. Additionally, the Custodian will process all applicable capital change and foreign reclaim paperwork based upon advice from Brinson Partners. ASU will supply segregated Trial Balance reporting and supplemental reports to assist in this process. 13) On behalf of the Series (as applicable): a) ASU will maintain US Dollar denominated futures, qualified covered call options and index options reporting on the daily Trial Balance and value the respective options and underlying positions daily. b) To the extent tax classifications are required, they will be computed by the Trust's Administrator or independent accountant. c) The Trust does not currently expect to invest in domestic futures, options or designated hedges. Advance notice is requested should the Series commence trading in the above investments to clarify operational procedures between ASU and Brinson Partners. 14) On behalf of the Series (as applicable), should Lines of Credit in segregated accounts with the Custodian be established for temporary administrative purposes, and/or leveraging/hedging a portfolio, Brinson Partners will complete the appropriate paperwork/monitoring for segregation of assets and adequacy of collateral. Accounting will reflect appropriate Trial Balance account entries and interest expense accrual charges on the daily Trial Balance, adjusting as necessary at month-end. 15) On behalf of the Series (as applicable), participation in Securities Lending, Interest Rate Swaps, Leveraging, Precious Metals, Short Sales or Foreign Currency (non-US dollar denominated) Futures and Options within portfolio securities is not currently expected. To the extent such techniques are utilized in the future, additional fees will apply. Forward Currency Contracts that are directly related to payables/receivables on trades and/or dividends/interest are included in Accounting Services and are not to be considered an extra expense. 16) On behalf of the Series (as applicable), Brinson Partners or the Administrator will supply ASU specific expense accrual procedures and monitor the expense accrual balances for adequacy based on outstanding liabilities monthly. The Trust's Administrator will promptly communicate to the ASU any adjustments needed. 17) On behalf of the Series (as applicable): a) Specific deadlines and complete information supplied will be identified for all security trades in order to minimize any settlement problems, NAV miscalculations or distribution rate adjustments. b) Trade Authorization Forms, with the appropriate officer's signature, should be faxed to ASU on all security trades placed by the Fund no later than settlement/value date by 11:00 AM Eastern time for money market and currency issues (it is assumed trade date equals settlement date for money market/currency issues) and by 11:30 a.m. Eastern time on trade date plus one for non- SCHEDULE "A" ------------ money market securities. Receipt of trade information within these identified deadlines may be via telex, fax or on-line system access. Brinson Partners will also communicate all trade information directly to the Fund's Custodian. c) Foreign exchange contracts will be completed by the Trust's Custodian or Brinson Partners and communicated to the Accounting Unit in a timely manner, i.e., the earlier of trade date plus one or value date. For security trade information called in after the above stated deadlines, there is no assurance it can be included in that day's work. d) Cusip numbers and/or ticker symbols for all US Dollar denominated trades and sedol numbers for all foreign trades will be supplied by Brinson Partners via the Trade Authorization, telex or on-line support. The ASU will not responsible for NAV changes or distribution rate adjustments that result from incomplete information about a trade. 18) On behalf of the Series (as applicable), the Trust's Administrator will complete the applicable performance and rate of return calculations as required by the SEC. 19) On behalf of the Series (as applicable): a) We would establish mutually agreed upon amortization and accretion requirements for debt issues held by the Series. It is extremely important that requirements and proper amortization procedures be clarified prior to SEC effectiveness of additional series. b) Any issues with Original Issue Discounts ("OID") are not intended to be held. It is Fund/Plan's position that OID is a tax requirement and, as such, is not necessarily reflected on the books. To the extent that securities with OID are owned in the future, it is expected that the Trust's auditors will complete the necessary OID adjustments for financial statements and/or tax reporting. 20) The percentage/margin of error for the Trust is determined in accordance with the Pricing Procedures as approved by the Board of Trustees of the Trust, as amended from time to time. Fund/Plan has access to this information as part of their responsibilities as Administrator under this Agreement. Each individual NAV change is reviewed and the necessary corrective actions are taken on a case by case basis. if Partner reprocessing is required or actions needed to "make the Fund whole," it would be expected that the party who contributed to the error, would compensate the Trust as necessary. If Fund/Plan caused the error, then it would be its responsibility to analyze the events, work with the Adviser to ensure that proper controls and procedures were in place to prevent it from occurring again, and compensate the Trust as appropriate. SCHEDULE "B" ------------ MULTIPLE CLASS FEE SCHEDULE FOR THE BRINSON FUNDS - -------------------------------------------------------------------------------- FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES - ------------------------------------------------ I. ANNUAL FEE SCHEDULE PER GLOBAL AND NON-US PORTFOLIO WITH MULTIPLE CLASSES OF SHARES: (1/12th payable monthly) Single Class Fees ----------------- $45,000 On the First $10 Million of all Classes' Combined Average Net Assets .0004 On the Next $40 Million of all Classes' Combined Average Net Assets .0003 On the Next $50 Million of all Classes' Combined Average Net Assets .0001 On the Next $900 Million of all Classes' Combined Average Net Assets .00005 Over $1 Billion of all Classes' Combined Average Net Assets Fees with Multiple Classes -------------------------- $15,000 Additional Per Class II. ANNUAL FEE SCHEDULE PER DOMESTIC PORTFOLIO WITH MULTIPLE CLASSES OF SHARES: (1/12th payable monthly) Single Class Fees ----------------- $30,000 On the First $10 Million of all Classes' Combined Average Net Assets .0004 On the Next $40 Million of all Classes' Combined Average Net Assets .0003 On the Next $50 Million of all Classes' Combined Average Net Assets .0001 On the Next $900 Million of all Classes' Combined Average Net Assets .00005 Over $1 Billion of all Classes' Combined Average Net Assets Fees with Multiple Classes -------------------------- $10,000 Additional Per Class III. PRICING SERVICE FEES: (Based on individual CUSIP/SEDOL or security identification number) Specific costs will be identified based upon options selected by the client and will be billed monthly. A) MULLER DATA CORPORATION* (if applicable) *Based on current vendor costs, subject to change Government/Mortgage Backed/Corporate Short and Long Term Quotes $ .50 per Quote per Issue Tax-Exempt Short & Long Term Quotes $ .55 per Quote per Issue CMOs/ARMs/ABS $1.00 per Quote per Issue Foreign Security Quotes $ .50 per Quote per Issue Foreign Security Supplemental Corporation Actions, Dividends & Capital Changes $2.00 per Issue per Month Mortgage Backed Factors $1.00 per Issue per Month MINIMUM WEEKLY FILE TRANSMISSION IS ASSUMED SCHEDULE "B" ------------ Fund/Plan does not currently pass along charges for the domestic equity security prices, dividend and capital change information transmitted daily to Fund/Plan Services, Inc. from Muller Data Corporation. B) FUTURES AND CURRENCY FORWARD CONTRACTS $2.00 per Issue per Day C) TELERATE SYSTEMS, INC.* (if applicable) *Based on current vendor costs, subject to change Specific costs will be identified based upon options selected by the client and will be billed monthly. Fund/Plan does not currently pass along these charges to The Brinson Funds. C) REUTERS, INC.* *Based on current vendor costs, subject to change Fund/Plan does not currently pass along the charges for the domestic security prices supplied by Reuters, Inc. D) INTERACTIVE DATA CORP.* (if applicable) * Based on current vendor costs, subject to change. Domestic Equities and Options $ .15 per Quote per Issue Corporate/Government/Agency Bonds including Mortgage-Backed Securities (evaluated, seasoned, and/or closing) $ .50 per Quote per Issue US Municipal Bonds and Collateralized Mortgage Obligations $ .80 per Quote per Issue International Equities and Bonds $ .50 per Quote per Issue Domestic Dividends and Capitalization Changes $3.50 per Month per Holding International Dividends and Capital Changes $4.00 per Month per Holding Interactive Data also charges monthly transmission costs and disk storage charges. F) KENNY S&P* *Based on current vendor costs, subject to change High Yield Corporate Bonds $1.00 per Quote per Issue ($35/day minimum) U.S. Municipal Bonds $ .50 per Quote per Issue ($25/day minimum) Corporate/Government Bonds $ .25 per Quote per Issue ($35/day minimum) CMO,ARM and ABS/Convertible $1.00 per Quote per Issue Corporate Bonds ($35/day minimum) Set up Fees $ .25 per Item ($1.00 if no CUSIP) All Added Items $ .25 per Item ($1.00 if no CUSIP) SCHEDULE "B" ------------ OUT-OF-POCKET EXPENSES - ---------------------- The Trust will reimburse Fund/Plan Services, Inc. monthly for all reasonable out-of-pocket expenses, including telephone, postage, telecommunications, special reports, record retention, special transportation costs as incurred, and unusual expenses incurred while establishing viable agreements between the Trust and Fund/Plan Services, Inc. The cost of copying and sending materials to auditors for audits will be an additional expense. ADDITIONAL SERVICES - ------------------- To the extent the Trust commences using investment techniques such as Securities Lending, Interest Rate Swaps, Leveraging, Short Sales, Precious Metals, or non- US Dollar denominated Futures and Options on securities and currency, additional fees may apply. Activities of a non-recurring nature such as consolidations, mergers or reorganizations will be subject to negotiation. Any additional/enhanced services or reports will be quoted upon request. The Schedules will be amended as necessary to reflect the addition of other services for additional portfolios or classes of the Trust. IDENTIFICATION OF SERIES ------------------------ Below are listed the Series and Classes of Shares to which services under this Agreement are to be performed as of the Effective Date of this Agreement: SERIES Global Fund Global Equity Fund Global Bond Fund Short-Term Global Income Fund* U.S. Balanced Fund U.S. Equity Fund U.S. Bond Fund U.S. Cash Management Fund Non-U.S. Equity Fund Non-U.S. Bond Fund CLASSES Brinson Fund class SwissKey Fund class * Fee and procedures subject to change/review pending definitive structure of Fund. This Schedule "C" may be amended from time to time by agreement of the Parties. EX-99.9.C.II 9 AMEND ACCOUNTING SERVICES AGREEMENT Exhibit to Form N-1A Exhibit (9)(c)(ii) Amendment to Accounting Services Agreement AMENDMENT TO ACCOUNTING SERVICES AGREEMENT This AGREEMENT, dated as of the ________ day of August, 1995 made by and between The Brinson Funds, a Delaware business trust (the "Trust") and Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly organized and existing under the laws of the State of Delaware (collectively, the "Parties"). WITNESSETH THAT: WHEREAS, the Trust and Fund/Plan have entered into an agreement dated April 25, 1995, wherein Fund/Plan has agreed to serve as accounting services agent to maintain and keep current the accounts and records of the Trust and to perform certain other functions in connection with such accounts and records ("Accounting Services Agreement"); and WHEREAS, the Parties wish to amend the Accounting Services Agreement to reflect the creation of a multiple class structure for each Series of the Trust; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the Parties hereto, intending to be legally bound, do hereby agree: 1. To amend Schedules "B" and "C" to the Accounting Services Agreement in the form attached hereto as Schedules "B" and "C". 2. This Amendment's Effective Date shall be July 31, 1995. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement consisting of one type written page, together with Schedules "B" and "C", to be signed by their duly authorized officers and their corporate seals hereunto duly affixed as of the day and year first above written. The Brinson Funds Fund/Plan Services, Inc. - ----------------- ------------------------ By: By: ------------------------- ----------------------- E. Thomas McFarlan, President Kenneth J. Kempf, President SCHEDULE "B" MULTIPLE CLASS FEE SCHEDULE FOR THE BRINSON FUNDS - -------------------------------------------------------------------------------- FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES - ------------------------------------------------ I. ANNUAL FEE SCHEDULE PER GLOBAL AND NON-US PORTFOLIO WITH MULTIPLE CLASSES OF SHARES: (1/12th payable monthly) Present Fees ------------ $45,000 On the First $10 Million of all Classes' Combined Average Net Assets .0004 On the Next $40 Million of all Classes' Combined Average Net Assets .0003 On the Next $50 Million of all Classes' Combined Average Net Assets .0001 On the Next $900 Million of all Classes' Combined Average Net Assets .00005 Over $1 Billion of all Classes' Combined Average Net Assets Fees with Multiple Classes -------------------------- $15,000 Additional Per Class II. ANNUAL FEE SCHEDULE PER DOMESTIC PORTFOLIO WITH MULTIPLE CLASSES OF SHARES: (1/12th payable monthly) Present Fees ------------ $30,000 On the First $10 Million of all Classes' Combined Average Net Assets .0004 On the Next $40 Million of all Classes' Combined Average Net Assets .0003 On the Next $50 Million of all Classes' Combined Average Net Assets .0001 On the Next $900 Million of all Classes' Combined Average Net Assets .00005 Over $1 Billion of all Classes' Combined Average Net Assets Fees with Multiple Classes -------------------------- $10,000 Additional Per Class III. PRICING SERVICE FEES: (Based on individual CUSIP/SEDOL or security identification number) Specific costs will be identified based upon options selected by the client and will be billed monthly. A) MULLER DATA CORPORATION* (if applicable) *Based on current vendor costs, subject to change Government/Mortgage Backed/Corporate Short and Long Term Quotes $ .50 per Quote per Issue Tax-Exempt Short & Long Term Quotes $ .55 per Quote per Issue CMOs/ARMs/ABS $1.00 per Quote per Issue Foreign Security Quotes $ .50 per Quote per Issue Foreign Security Supplemental Corporation Actions, Dividends & Capital Changes $2.00 per Issue per Month Mortgage Backed Factors $1.00 per Issue per Month MINIMUM WEEKLY FILE TRANSMISSION IS ASSUMED Fund/Plan does not currently pass along charges for the domestic equity security prices, dividend and capital change information transmitted daily to Fund/Plan Services, Inc. from Muller Data Corporation. B) FUTURES AND CURRENCY FORWARD CONTRACTS $2.00 per Issue per Day C) TELERATE SYSTEMS, INC.* (if applicable) *Based on current vendor costs, subject to change Specific costs will be identified based upon options selected by the client and will be billed monthly. Fund/Plan does not currently pass along these charges to The Brinson Funds. C) REUTERS, INC.* *Based on current vendor costs, subject to change Fund/Plan does not currently pass along the charges for the domestic security prices supplied by Reuters, Inc. D) INTERACTIVE DATA CORP.* (if applicable) *Based on current vendor costs, subject to change. Domestic Equities and Options $ .15 per Quote per Issue Corporate/Government/Agency Bonds including Mortgage-Backed Securities (evaluated, seasoned, and/or closing) $ .50 per Quote per Issue US Municipal Bonds and Collateralized Mortgage Obligations $ .80 per Quote per Issue International Equities and Bonds $ .50 per Quote per Issue Domestic Dividends and Capitalization Changes $3.50 per Month per Holding International Dividends and Capital Changes $4.00 per Month per Holding Interactive Data also charges monthly transmission costs and disk storage charges. F) KENNY S&P* *Based on current vendor costs, subject to change High Yield Corporate Bonds $1.00 per Quote per Issue ($35/day minimum) U.S. Municipal Bonds $ .50 per Quote per Issue ($25/day minimum) Corporate/Government Bonds $ .50 per Quote per Issue ($35/day minimum) CMO,ARM and ABS/Convertible $1.00 per Quote per Issue Corporate Bonds ($35/day minimum) Set up Fees $ .25 per Item ($1.00 if no CUSIP) All Added Items $ .25 per Item ($1.00 if no CUSIP) OUT-OF-POCKET EXPENSES - ---------------------- The Trust will reimburse Fund/Plan Services, Inc. monthly for all reasonable out-of-pocket expenses, including telephone, postage, telecommunications, special reports, record retention, special transportation costs as incurred, and unusual expenses incurred while establishing viable agreements between the Trust and Fund/Plan Services, Inc. The cost of copying and sending materials to auditors for audits will be an additional expense. ADDITIONAL SERVICES - ------------------- To the extent the Trust commences using investment techniques such as Securities Lending, Interest Rate Swaps, Leveraging, Short Sales, Precious Metals, or non-US Dollar denominated Futures and Options on securities and currency, additional fees may apply. Activities of a non-recurring nature such as consolidations, mergers or reorganizations will be subject to negotiation. Any additional/enhanced services or reports will be quoted upon request. The Schedules will be amended as necessary to reflect the addition of other services for additional portfolios or classes of the Trust. SCHEDULE "C" ACCOUNTING SERVICES UNIT BASIC ASSUMPTIONS FOR - -------------------------------------------------------------------------------- THE BRINSON FUNDS BASIC ASSUMPTIONS: - ----------------- 1) The Trust's Administrator, on behalf of the Series, will complete all necessary compliance reports (Sub-Chapter "M"), as well as monitoring of the various limitations and restrictions. 2) The portfolio asset composition of the Series will be comparable as described in the Profile Document prepared by Brinson Partners, Inc. Trading activity is expected to approximate 270 transactions per month inclusive of equity, debt, currency and money market transactions. 3) The Trust has a tax year-end which coincides with its fiscal year-end. No additional accounting requirements are necessary to identify or maintain book-tax differences. To the extent tax accounting, on behalf of the Series (as applicable), for certain securities differs from the book accounting, it will be done by the Trust's Administrator or the Trust's independent accountants. The Accounting Services Unit will supply segregated Trial Balance account details to assist the Administrator, on behalf of the Series (as applicable), in proper identification by category of all appropriate realized and unrealized currency gains/losses. 4) The Trust, on behalf of the Series (as applicable) foresees no difficulty in using Fund/Plan's standard pricing agents for domestic equity, bond, ADR and foreign securities. Fund/Plan currently uses Reuters, Inc., Muller Data and Interactive Data (IDC) for domestic equities and listed ADR's, and IDC, Telerate, Bloomberg and Muller Data Corporation for bonds, synthetic ADR's and foreign issues. Muller Data Corporation/Extel Financial and IDC are the primary foreign security pricing vendors for the Trust, on behalf of the Series (as applicable) and supply ASU with daily (spot) foreign exchange rates to be used in market value calculations of non-US dollar denominated securities and currency mark-to-market requirements. To the extent IDC or Muller Data are unable to supply certain foreign security prices, they will be provided by Brinson Partners or a Brinson Partners' recommended pricing source. Telerate Systems, Inc. is used for daily forward currency contract prices. The Accounting Unit will work closely with Brinson Partners to ensure the accuracy of the Series' NAVs and to obtain the most satisfactory pricing sources and specific methodologies. 5) To the extent the Series require daily security prices from specific brokers for domestic or foreign securities, these manual prices will be obtained by Brinson Partners (or brokers) and faxed to the ASU by approximately 4:00 PM Eastern time for inclusion in the NAV calculations. Brinson Partners will supply ASU with the appropriate pricing contacts for these manual quotes. 6) To the extent the Series should ever purchase/hold open-end registered investment companies (RICs), procedural discussions should take place between ASU and Brinson Partners clarifying the appropriate pricing and dividend rate sources. Depending on the methodologies selected by the Trust, additional fees may apply. 7) ASU will supply daily Portfolio Valuation Reports on behalf of the Series (as applicable), to Brinson Partners identifying current security positions, original/amortized cost, security market values and changes in unrealized appreciation/depreciation. It will be the responsibility of Brinson Partners to review these reports and to promptly notify ASU of any possible problems, trade discrepancies, incorrect security prices, corporate action/capital change information or exchange rate discrepancies that could result in a misstated NAV. 8) All foreign currency will be held within the Custodian and sub-custodian network on behalf of the Series (as applicable). Time deposits and interest bearing currency accounts will all be reflected on the Custodian asset listings. The Trust or Custodian will supply ASU with appropriate and timely information for any trades/changes in the currency accounts, as well as interest rates to ensure income accrual accuracy for the debt issues, time deposits and currency accounts. Income accrual adjustments (expected to be immaterial) will be completed when the interest is actually collected and posted on the Custodian's statements. 9) On behalf of the Series (as applicable), it is assumed for all debt issues that Brinson Partners will supply the Accounting Unit with critical income information such as accrual methods, interest payment frequency details, coupon payment dates, floating rate reset dates, and complete security descriptions with issue types and sedol/cusip numbers. 10) On behalf of the Series (as applicable), the Custodian will provide the Accounting Unit with daily custodian statements (or on-line access to the custody system) reflecting all prior day cash activity by 8:30 AM Eastern time. Complete and clear descriptions of any postings, inclusive of sedol/cusip numbers, interest/dividend payment dates, capital stock details, expense authorizations, beginning/ending balances, etc. will be provided by the Custodian's reports or system. 11) On behalf of the Series (as applicable), the Custodian will be responsible for supplying the foreign dividend, capital change information, and interest rate changes to Accounting in a timely manner. Brinson Partners will supplement and support as appropriate. If selected by the Trust, ASU can receive supplemental capital change and dividend information on foreign positions from IDC and Muller Data as the pricing vendors for the Trust's foreign securities. 12) On behalf of the Series (as applicable), the Custodian will handle and report on all settlement problems, failed trades and unsettled dividends/interest and capital changes. Additionally, the Custodian will process all applicable capital change and foreign reclaim paperwork based upon advice from Brinson Partners. ASU will supply segregated Trial Balance reporting and supplemental reports to assist in this process. 13) On behalf of the Series (as applicable): a) ASU will maintain US Dollar denominated futures, qualified covered call options and index options reporting on the daily Trial Balance and value the respective options and underlying positions daily. b) To the extent tax classifications are required, they will be computed by the Trust's Administrator or independent accountant. c) The Trust does not currently expect to invest in domestic futures, options or designated hedges. Advance notice is requested should the Series commence trading in the above investments to clarify operational procedures between ASU and Brinson Partners. 14) On behalf of the Series (as applicable), should Lines of Credit in segregated accounts with the Custodian be established for temporary administrative purposes, and/or leveraging/hedging a portfolio, Brinson Partners will complete the appropriate paperwork/monitoring for segregation of assets and adequacy of collateral. Accounting will reflect appropriate Trial Balance account entries and interest expense accrual charges on the daily Trial Balance, adjusting as necessary at month-end. 15) On behalf of the Series (as applicable), participation in Securities Lending, Interest Rate Swaps, Leveraging, Precious Metals, Short Sales or Foreign Currency (non-US dollar denominated) Futures and Options within portfolio securities is not currently expected. To the extent such techniques are utilized in the future, additional fees will apply. Forward Currency Contracts that are directly related to payable/receivables on trades and/or dividends/interest are included in Accounting Services and are not to be considered an extra expense. 16) On behalf of the Series (as applicable), Brinson Partners or the Administrator will supply ASU specific expense accrual procedures and monitor the expense accrual balances for adequacy based on outstanding liabilities monthly. The Trust's Administrator will promptly communicate to the ASU any adjustments needed. 17) On behalf of the Series (as applicable): a) Specific deadlines and complete information supplied will be identified for all security trades in order to minimize any settlement problems, NAV miscalculations or distribution rate adjustments. b) Trade Authorization Forms, with the appropriate officer's signature, should be faxed to ASU on all security trades placed by the Fund no later than settlement/value date by 11:30 AM Eastern time for money market and currency issues (it is assumed trade date equals settlement date for money market/currency issues) and by 11:30 AM Eastern time on trade date plus one for non-money market securities. Receipt of trade information within these identified deadlines may be via telex, fax or on-line system access. Brinson Partners will also communicate all trade information directly to the Fund's Custodian. c) Foreign exchange contracts will be completed by the Trust's Custodian or Brinson Partners and communicated to the Accounting Unit in a timely manner, i.e., the earlier of trade date plus one or value date. For security trade information called in after the above stated deadlines, there is no assurance it can be included in that day's work. d) CUSIP numbers and/or ticker symbols for all US Dollar denominated trades and SEDOL numbers for all foreign trades will be supplied by Brinson Partners via the Trade Authorization, telex or on-line support. The ASU will not responsible for NAV changes or distribution rate adjustments that result from incomplete information about a trade. 18) On behalf of the Series (as applicable), the Trust's Administrator will complete the applicable yield, performance and rate of return calculations as required by the SEC. 19) On behalf of the Series (as applicable): a) We would establish mutually agreed upon annualization and accretion requirements for debt issues held by the Series. It is extremely important that requirements and proper amortization procedures be clarified prior to SEC effectiveness of additional series. b) Any issues with Original Issue Discounts ("OID") are not intended to be held. It is Fund/Plan's position that OID is a tax requirement and, as such, is not necessarily reflected on the books. To the extent that securities with OID are owned in the future, it is expected that the Trust's auditors will complete the necessary OID adjustments for financial statements and/or tax reporting. SCHEDULE "C" ACCOUNTING & PORTFOLIO VALUATION FOR THE BRINSON FUNDS The Accounting Services Unit (ASU) is pleased to provide a comprehensive level of service to The Brinson Funds. You may expect services as follows with respect to Series and their Multiple Classes of Shares (additional services may be completed upon request): DAILY ACCOUNTING SERVICES ------------------------- 1) Calculate Net Asset Value (and Offering Price) Per Share: Series Level . Update the daily market value of securities held by the Series using Fund/Plan Services' standard agents for pricing domestic equity, bond and foreign securities. The domestic equity pricing services are Reuters, Inc., Muller Data Corporation and Interactive Data Corporation (IDC). Muller Data Corporation/Extel Financial, telerate, Bloomberg and IDC are used for bond and foreign prices/exchange rates. . Enter manual prices supplied by client and/or broker. . Review variance reporting on-line and in hard copy for price changes in individual securities using variance levels established by client. Verify US dollar security prices exceeding variance levels by notifying client and pricing sources of noted variances. . Complete daily variance analysis on foreign exchange rates and local foreign prices. Notify client of changes exceeding established levels for the client's verification. . Review for ex-dividend items indicated by pricing sources; trace to Series' general ledger for agreement. Series and Each class . Allocate daily unrealized Series appreciation/depreciation, unrealized currency gains/losses, and unrealized gains/losses on futures and forwards to classes based upon value of outstanding class shares. . Prepare NAV proof sheets. Review components of change in NAV for reasonableness. (Complete fund and class control proofs). . Communicate required pricing information (NAV) to client, transfer agent and, electronically, to NASDAQ. 2) Determine and Report Cash Availability to Series by 9:30 AM Eastern Time: Series Level . Receive daily cash and transaction statements from the custodian by 8:30 AM Eastern time. . Receive previous day shareholder activity reports from the Series' transfer agent by 8:30 AM Eastern time. Class level shareholder activity will be accumulated into the Series' available cash balances. . Fax hard copy Cash Availability calculations with all details to client. . Supply client with 5-day cash projection report. . For the Series, prepare and complete daily bank cash reconciliations including documentation of any reconciling items and notify the custodian/client. 3) Reconcile and Record All Daily Expense Accruals: Series Level . Accrue expenses based on client supplied budget either as percentage of Series' net assets or specific dollar amounts. . Monitor expense limitations established by client. . Accrue daily amortization of Organizational Expense. Series and Each Class . Class specific accruals completed such as daily accrual of 12b-1 expenses. . Allocate Series expenses to classes based upon value of outstanding class shares. 4) Verify and Record All Daily Income Accruals for Debt Issues: Series Level . Review and verify all system generated Interest and Amortization reports. . Establish unique security codes for bond issues to permit segregated Trial Balance income reporting. Series and Each Class . Allocate Series income to classes based upon value of outstanding class shares. 5) Monitor Domestic Securities Held for Cash Dividends, corporate actions and capital changes such as splits, mergers, spinoffs, etc. and process appropriately. Series Level . Monitor electronically received information from Muller Data Corporation for all domestic securities. . Review current daily security trades for dividend activity. . Interface with custodian to monitor timely collection and postings of corporate actions, dividends and interest. . Process international dividend and capital change information received from the custodian and advisor. Back-up information on foreign dividends and corporate actions may also be obtained from Muller Data Corporation/Extel Financial and IDC (as pricing agents for the Series). . Provide mark-to-market analysis for currency exchange rate fluctuations on unsettled dividends and interest. Series and Each Class . Allocate Series dividend income and unrealized currency gains/losses on dividends/interest to classes based upon value of outstanding class shares. 6) Enter All Security Trades on Investment Accounting System (IAS) based on written instructions from the client. Series Level . Review system verification of trade and interest calculations. . Verify settlement through the custodian statements. . Maintain security ledger transaction reporting. . Maintain tax lot holdings. . Determine realized gains or losses on security trades. . Provide complete broker commission reporting. . Provide foreign currency exchange rate realized and unrealized gains/losses detail. . Determine realized gains or losses on security trades. Series and Each Class . Allocate all realized and unrealized capital and currency gains/losses to classes based upon value of class outstanding shares. 7) Enter All Series Share Transactions on IAS: Each Class . Process activity identified on the transfer agent reports. . Verify settlement through the Series' custodian statements. . Reconcile to the Fund/Plan Services' transfer agent report balances. . Roll each classes' capital share values into each Series and determine allocation percentages based upon the value of each classes' outstanding shares to the Series total. 8) Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance (listing all asset, liability, equity, income and expense accounts) Series Level . Post manual entries to the general ledger. . Post custodian bank activity. . Post security transactions. . Post and verify system generated activity, i.e., income and expense accruals. . Segregate foreign tax expense. . Prepare daily mark-to-market analysis for all unrealized foreign currency exchange rate gains/losses by asset/liability category. Series and Each Class . Prepare Series general ledger net cash proof used in NAV calculation. . Post class specific shareholder activity and roll values into each Series. . Allocate all Series level net cash accounts on the Series Trial Balance to each specific class based upon value of class outstanding shares. . Maintain allocated Trial Balance accounts on class specific Allocation Report. . Maintain class-specific expense accounts. . Prepare class-specific proof/control reports to ensure accuracy of allocations. 9) Review and Reconcile with Custodian Statements: Series Level . Verify all posted interest, dividends, expenses, and shareholder and security payments/receipts, etc. (Discrepancies will be reported to and resolved by the Custodian.) . Post all cash settlement activity to the Trial Balance. . Reconcile to ending cash balance accounts. . Clear IAS subsidiary reports with settled amounts. . Track status of past due items and failed trades handled by the Custodian. 10) Submission of Daily Accounting Reports to Client: (Additional reports readily available.) Series Level . Portfolio Valuation (listing inclusive of holdings, costs, market values, unrealized appreciation/depreciation and percentage of portfolio comprised of each security sorted according to Brinson's categories - stocks (foreign), stocks (domestic), bonds (foreign), bonds (domestic), currency (foreign), money market (domestic). . Cash availability. . 3-Day Cash Projection Report Series and Each Class . Trial Balance and Class Allocation Report . NAV Calculation Report MONTHLY ACCOUNTING SERVICES --------------------------- 1) For the Series, full Financial Statement Preparation (automated Statements of Assets and Liabilities, of Operations and of Changes in Net Assets) and submission to Client by 10th business day. . Class specific capital share activity and expenses will be disclosed also. 2) Submission of Monthly Automated IAS Reports to Fund/Client: Series Level . Security Purchase/Sales Journal . Interest and Maturity Report . Brokers Ledger (Commission Report) . Security Ledger Transaction Report with Realized Gains/Losses . Security Ledger Tax Lot Holdings Report . Additional reports available upon request 3) Reconcile Accounting Asset Listing to Custodian Asset Listing: Series Level . Report any security balance discrepancies to the custodian/client. 4) Provide Monthly Analysis and Reconciliation of Additional Trial Balance Accounts, such as: Series Level . Security cost and realized gains/losses . Interest/dividend receivable and income . Payable/receivable for securities purchased and sold . Unrealized and realized currency gains/losses Series and Each Class . Payable/receivable for Fund shares; issued and redeemed . Expense payments and accruals analysis 5) If Appropriate, Prepare and Submit to Client: Series Level . Income by state reporting . Standard Industry Code Valuation Report . Alternative Minimum Tax Income segregation schedule ANNUAL (AND SEMI-ANNUAL) ACCOUNTING SERVICES -------------------------------------------- 1) Assist and supply auditors with schedules supporting securities and shareholder transactions, income and expense accruals, etc. for the Series and each Class during the year in accordance with standard audit assistance requirements. 2) Provide NSAR Reporting (Accounting Questions): If applicable for the Series and Classes, answer the following items: 2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55, 62, 63, 64B, 71, 72, 73, 74, 75, 76 EX-99.10.B 10 CONSENT OF STRADLEY RONON STEVENS & YOUNG Exhibit to Form N-1A Exhibit (10)(b) - Consent opinion of Stradley Ronon Stevens & Young, LLP, Counsel to the Trust. Exhibit 10(b) [LETTERHEAD OF STRADLEY RONON STEVENS & YOUNG, LLP] Direct Dial: (215) 564-8115 February 8, 1996 U.S. Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: The Brinson Funds File Nos. 33-47287 and 811-6637 ------------------------------- Gentlemen: We are counsel to The Brinson Funds. As such, we have reviewed Post- Effective Amendment No. 16 to the Registration Statement of The Brinson Funds to be filed pursuant to paragraph (b) of Rule 485 promulgated under the Securities Act of 1933. In our judgment, Post-Effective Amendment No. 16 to the Registration Statement of The Brinson Funds does not contain disclosures which would render it ineligible to become effective pursuant to paragraph (b) of Rule 485. We consent to the inclusion of this written representation as an Exhibit to Post-Effective Amendment No. 16 to the Registration Statement of The Brinson Funds. Very truly yours, /s/ Bruce G. Leto Bruce G. Leto BGL:jas EX-99.11.A 11 CONSENT OF ERNST & YOUNG LLP Exhibit to Form N-1A Exhibit (11)(a) - Consent of Ernst & Young LLP, independent auditors CONSENT OF INDEPENDENT AUDITORS We consent to the use of our reports dated August 4, 1995, in the Registration Statement (Form N-1A) and related Prospectus of The Brinson Funds, filed with the Securities and Exchange Commission in this Post-Effective Amendment No. 16 to the Registration Statement under the Securities Act of 1933 (Registration No. 33-47287) and in this Amendment No. 17 to the Registration Statement under the Investment Company Act of 1940 (Registration No. 811-6637). /s/ Ernst & Young LLP ERNST & YOUNG LLP Chicago, Illinois February 12, 1996 EX-99.15.A 12 DISTRIBUTION PLAN Exhibit to Form N-1A Exhibit (15) - Distribution Plan Distribution Plan Relating to the SwissKey Fund Class Shares of The Brinson Funds The following Distribution Plan (the "Plan") has been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by The Brinson Funds (the "Trust") for the SwissKey Fund class shares (each individually a "Class" and collectively the "Classes") of each of the Global Fund series, Global Equity Fund series, Global Bond Fund series, Short-Term Global Income Fund series, U.S. Balanced Fund series, U.S. Equity Fund series, U.S. Bond Fund series, U.S. Cash Management Fund series, Non-U.S. Equity Fund series and Non-U.S. Bond Fund series (individually a "Fund" or collectively the "Funds"), for the use of SwissKey Fund class shares of a Fund and any SwissKey Fund class shares of separate series of the Trust hereinafter organized. The Plan has been approved by a majority of the Board of Trustees of the Trust (the "Board of Trustees"), including a majority of the trustees who are not interested persons of the Trust and who have no direct, or indirect financial interest in the operation of the Plan or in any agreement related to the Plan (the "non-interested trustees"), cast in person at a meeting called for the purpose of voting on such Plan. In reviewing the Plan, the Board of Trustees determined that adoption of the Plan would be prudent and in the best interests of each Fund and its shareholders. Such approval included a determination that in the exercise of its reasonable business judgment and in light of its fiduciary duties, there is a reasonable likelihood that the Plan will benefit the Fund and its shareholders. The provisions of the Plan are: 1. (a) Each Class shall reimburse Brinson Partners, Inc. (the "Manager"), Fund/Plan Broker Services, Inc. (the "Distributor") or others for all expenses incurred by such parties in the promotion and distribution of the shares of the Class, including but not limited to, the printing of prospectuses and reports used for sales purposes, expenses of preparing and distributing sales literature and advertisements and other distribution-related expenses, as well as payments to securities dealers or others for assistance in selling shares of the Class in accordance with a selling agreement with the Trust on behalf of a Fund's Class or the Distributor, which form of agreement has been approved from time to time by the Trustees, including the non-interested trustees. The maximum aggregate amount which may be reimbursed by a Class to such parties in accordance with this paragraph shall be 0.65% per annum of the average daily net assets of the Class. The parties hereto may, however, agree from time to time to limit the reimbursement called for by this paragraph to amounts less than 0.65% with respect to a Fund. The current agreement between the parties for maximum reimbursement with respect to each Fund is attached hereto as Schedule A, which schedule may be amended from time to time by the parties hereto. (b) In addition to the amounts described in (a) above, the Fund shall pay (i) to the Distributor for payment to dealers or others, or (ii) directly to others, an amount not to exceed 0.25% per annum of the Class' average daily net assets represented by shares of the Class from time to time, as a service fee. The monies to be paid pursuant to this paragraph 1(b) shall be used to pay dealers or others for, among other things, furnishing personal services and maintaining shareholder accounts, which services include, among other things, assisting in establishing and maintaining customer accounts and records; assisting with the purchase and redemption requests; arranging for bank wires; monitoring dividend payments from the Fund on behalf of customers; forwarding certain shareholder communications from the Fund to customers; receiving and answering correspondence; and aiding in maintaining the investment of their respective customers in the Class. Any amounts paid under this paragraph 1(b) shall be paid pursuant to a servicing or other agreement, which form of agreement has been approved from time to time by the Trustees, including a majority of the non-interested trustees. 2. All payments in connection with this Plan shall be made quarterly by each Class to the appropriate parties, or more or less frequently upon mutual agreement of the parties. 3. The Manager and the Distributor shall collect and monitor the documentation of payments made under paragraph 1 above, and shall furnish to the Board of Trustees of the Trust, for its review, on a quarterly basis, a written report of the monies reimbursed to the Manager, the Distributor and others under the Plan as to a Fund's Class, and shall furnish the Board of Trustees of the Trust with such other information as the Board may reasonably request in connection with the payments made under the Plan as to a Fund's Class in order to enable the Board to make an informed determination of whether the Plan should be continued for each Class. 4. The Plan shall continue in effect for each Class for a period of more than one year only so long as such continuance is specifically approved at least annually by the Trust's Board of Trustees, including the non-interested trustees, cast in person at a meeting called for the purpose of voting on the Plan. 5. The Plan, or any agreements entered into pursuant to this Plan, may be terminated at any time, without penalty, by vote of a majority of the outstanding voting securities of a Class with respect to that Class, or by vote of a majority of the non-interested Trustees, on not more than sixty (60) days' written notice, and shall terminate automatically in the event of any act that constitutes an assignment of the management agreement between the Trust on behalf of the relevant series of the Trust and the Manager. 6. The Plan and any agreements entered into pursuant to this Plan may not be amended to increase materially the amount to be spent by a Class for distribution pursuant to Paragraph 1 hereof without approval by a majority of a Class' outstanding voting securities. 7. All material amendments to the Plan, or any agreements entered into pursuant to this Plan, shall be approved by the non-interested trustees cast in person at a meeting called for the purpose of voting on any such amendment. 8. So long as the Plan is in effect, the selection and nomination of the Trust's non-interested trustees shall be committed to the discretion of such non-interested trustees. 9. This plan shall take effect on the ____ day of __________ 199_. This Plan and the terms and provisions thereof are hereby accepted and agreed to by the Trust, the Manager and the Distributor as evidenced by their execution hereof. THE BRINSON FUNDS By: ------------------------------- BRINSON PARTNERS, INC. By: ------------------------------- FUND/PLAN BROKER SERVICES, INC. By: ------------------------------- SCHEDULE A ---------- The Brinson Funds (the "Trust"), Brinson Partners, Inc. (the "Manager") and Fund/Plan Broker Services, Inc. (the "Distributor") hereby agree that the maximum amount which the Manager or the Distributor shall seek reimbursement for in accordance with the Rule 12b-1 Plan relating to SwissKey Fund class shares of the Trust, is as follows: Fund Amount ---- ------ SwissKey Global Fund 0.40% SwissKey Global Equity Fund 0.51% SwissKey Global Bond Fund 0.24% SwissKey Short-Term Global Income Fund 0.27% SwissKey U.S. Balanced Fund 0.25% SwissKey U.S. Equity Fund 0.27% SwissKey U.S. Bond Fund 0.22% SwissKey U.S. Cash Management Fund 0.22% SwissKey Non-U.S. Equity Fund 0.59% SwissKey Non-U.S. Bond Fund 0.27% THE BRINSON FUNDS ------------------------------- BRINSON PARTNERS, INC. ------------------------------- FUND/PLAN BROKER SERVICES, INC. ------------------------------- EX-99.16 13 SCHEDULE OF PERFORMANCE COMPUTATION Exhibit to Form N-1A Exhibit (16) - Schedule of Performance EXHIBIT 16 ---------- TOTAL RETURN FORMULA -------------------- ERV = P(1 + T)/N/ WHERE: P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000 T = AVERAGE ANNUAL TOTAL RETURN N = NUMBER OF YEARS ERV = ENDING REDEEMABLE VALUE OF AT THE END OF THE PERIOD OF A HYPOTHETICAL $1,000 PAYMENT ("P") MADE AT THE BEGINNING OF THAT PERIOD OR FRACTIONAL PORTION THEREOF. BRINSON U.S. BOND - ----------------- 08/31/95 to 12/31/95 - -------------------- ERV = $1,018.03 T = 5.49% N = .334247 years SWISSKEY U.S. BOND FUND - ----------------------- 08/31/95 to 12/31/95 - -------------------- ERV = $1,017.38 T = 5.29% N = .334247 years
THE BRINSON FUNDS THE SWISSKEY U.S. BOND FUND TOTAL RETURN PERFORMANCE STATISTICS - -------------------------------------------------------------------------------- Aggregate Total Return ---------------------------------------------------------------------- Previous Calendar One Since Date Monthly 3 Months YTD Year Inception - -------------------------------------------------------------------------------- 09/30/95 0.80% - - - 0.80% - -------------------------------------------------------------------------------- 10/31/95 1.49% - - - 2.30% - -------------------------------------------------------------------------------- 11/30/95 1.56% 3.90% - - 3.90% - -------------------------------------------------------------------------------- 12/31/95 1.34% 4.46% - - 5.29% - --------------------------------------------------------------------------------
THE BRINSON FUNDS SWISSKEY U.S. BOND FUND TOTAL RETURN PERFORMANCE STATISTICS - --------------------------- ----------------------------------- --------------------------------------------------------- PRINCIPAL DIVIDENDS ----------------------------------- --------------------------------------------------------- Date N.A.V. Desc. Invstmnt # Shares Value Div/Sh Total $ Cuml $ Sh Reinv Cuml Sh Value Sh - --------------------------- ----------------------------------- --------------------------------------------------------- 08/31/95 $10.00 $10,000 1,000.000 $10,000.00 $0.00 0.000 $0.00 09/30/95 $10.08 $0 1,000.000 $10,080.00 $0.00 0.000 $0.00 10/31/95 $10.23 $0 1,000.000 $10,230.00 $0.00 0.000 $0.00 11/30/95 $10.39 $0 1,000.000 $10,390.00 $0.00 0.000 $0.00 12/21/95 $10.20 Div. $0 1,000.000 $10,200.00 $0.200 $200.00 $200.00 19.608 19.608 $200.00 12/31/95 $10.30 $0 1,000.000 $10,300.00 $200.00 19.608 $201.96 ---------------------------------------------------------- ----------------------- CAPITAL GAINS TOTALS ---------------------------------------------------------- ----------------------- CG/Sh Total $ Cuml $ Sh Reinv Cuml Sh Value Sh Shares Value ---------------------------------------------------------- ----------------------- $0.00 0.000 $0.00 1,000.000 $10,000.00 $0.00 0.000 $0.00 1,000.000 $10,080.00 $0.00 0.000 $0.00 1,000.000 $10,230.00 $0.00 0.000 $0.00 1,000.000 $10,390.00 $0.027 $27.00 $27.00 2.647 2.647 $27.00 1,022.255 $10,427.00 $27.00 2.647 $27.26 1,022.255 $10,529.23
THE BRINSON FUNDS THE BRINSON U.S. BOND FUND TOTAL RETURN PERFORMANCE STATISTICS - -------------------------------------------------------------------------- Aggregate Total Return - -------------------------------------------------------------------------- Previous Calendar One Since Monthly 3 Months YTD Year Inception - -------------------------------------------------------------------------- 0.90% -- -- -- 0.90% - -------------------------------------------------------------------------- 1.49% -- -- -- 2.40% - -------------------------------------------------------------------------- 1.56% 4.00% -- -- 4.00% - -------------------------------------------------------------------------- 1.44% 4.55% -- -- 5.49% - --------------------------------------------------------------------------
THE BRINSON FUNDS BRINSON U.S. BOND FUND TOTAL RETURN PERFORMANCE STATISTICS - ------------------------- ------------------------------------- ------------------------------------------------------------- PRINCIPAL DIVIDENDS ------------------------------------- ------------------------------------------------------------- Date N.A.V. Desc. Invstmnt # Shares Value Div/Sh Total $ Cuml $ Sh Reinv Cuml Sh Value Sh - ------------------------- ------------------------------------- ------------------------------------------------------------- 08/31/95 $10.00 $100,000 10,000.000 $100,000.00 $0.00 0.000 $0.00 09/30/95 $10.09 $0 10,000.000 $100,900.00 $0.00 0.000 $0.00 10/31/95 $10.24 $0 10,000.000 $102,400.00 $0.00 0.000 $0.00 11/30/95 $10.40 $0 10,000.000 $104,000.00 $0.00 0.000 $0.00 12/21/95 $10.21 Div $0 10,000.000 $102,100.00 $0.210 $2,100.00 $2,100.00 205.681 205.681 $2,100.00 12/31/95 $10.31 $0 10,000.000 $103,100.00 $2,100.00 205.681 $2,120.57 -------------------------------------------------------------- ----------------------- CAPITAL GAINS TOTALS -------------------------------------------------------------- ----------------------- CG/Sh Total $ Cuml $ Sh Reinv Cuml Sh Value Sh Shares Value -------------------------------------------------------------- ----------------------- $0.00 0.000 $0.00 10,000.000 $100,000.00 $0.00 0.000 $0.00 10,000.000 $100,900.00 $0.00 0.000 $0.00 10,000.000 $102,400.00 $0.00 0.000 $0.00 10,000.000 $104,000.00 $0.027 $270.00 $270.00 26.445 26.445 $270.00 10,232.125 $104,470.00 $270.00 26.445 $272.64 10,232.125 $105,493.21
EX-27.1 14 FINANCIAL DATA SCHEDULE
6 9 BRINSON U.S. BOND FUND 1 4-MOS JUN-30-1996 AUG-31-1995 DEC-31-1995 9,705,012 9,885,995 473,926 69,162 0 10,429,083 1,180,053 0 0 1,180,053 0 8,985,395 880,184 0 0 7,906 90,558 0 180,983 9,249,030 0 190,503 0 16,979 173,524 113,897 180,983 468,404 0 173,524 23,339 7,906 867,974 12,625 19,835 9,198,030 0 0 0 0 14,076 0 130,277 8,428,340 10.00 .20 .35 .21 .03 0 10.31 .60 0 0
EX-27.2 15 FINANCIAL DATA SCHEDULE
6 18 SWISSKEY U.S. BOND FUND 1 4-MOS JUN-30-1996 AUG-31-1995 DEC-31-1995 9,705,012 9,885,995 473,926 69,162 0 10,429,083 1,180,053 0 0 1,180,053 0 8,985,395 16,961 0 0 7,906 90,558 0 180,983 9,249,030 0 190,503 0 16,979 173,524 113,897 180,983 468,404 0 173,524 23,339 7,906 16,640 0 221 9,198,030 0 0 0 0 14,076 0 130,277 8,428,340 10.00 .20 .34 .21 .03 0 10.30 1.07 0 0
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