-----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, FFOlLLpzaLC5lk9t+UaPL4D8HHY/sKZzkk3vfooosUlphvlln/X2M3uYIEpPQwpx c16STTNfP6f4R6O35sVFIA== 0000950131-96-002498.txt : 19960529 0000950131-96-002498.hdr.sgml : 19960529 ACCESSION NUMBER: 0000950131-96-002498 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960528 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: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-47287 FILM NUMBER: 96573004 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 497 1 497(E)--SUPPLEMENT TO PROSPECTUS The Brinson Funds [LOGO] Brinson Global Bond Fund 209 South LaSalle Street Chicago, IL 60604-1295 PROSPECTUS SEPTEMBER 20, 1995 AS SUPPLEMENTED MAY 28, 1996 THE BRINSON FUNDS (the "Trust") is an open-end management investment compa- ny, 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 Fund and Non-U.S. Bond Fund (each a "Series" and collectively, the "Series"). Each Series has distinct investment objec- tives 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 prospec- tus which may be obtained by calling 1-800-SWISSKEY. This Prospectus pertains only to the Brinson Fund class of the Global Bond Fund (the "Brinson Global Bond Fund" or "Fund"). The Series' investment objec- tive is to maximize total return, consisting of capital appreciation and cur- rent income. The Series seeks to achieve this objective by investing primarily in fixed income securities, both domestic and foreign, that may also provide the potential for capital appreciation. The Series is a global fund and as such, at least 65% of the Series' total assets will be invested in debt secu- rities with an initial maturity of more than one year of issuers in at least three countries, one of which may be the United States. 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 supplemented May 28, 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 num- bers 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 SE- CURITIES 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. GOV- ERNMENT, 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: Fund/Plan Broker Services, Inc. 2 W. Elm Street Conshohocken, PA 19428-0874 (800) 448-2430 ADVISOR: Brinson Partners, Inc. 209 South LaSalle Street Chicago, IL 60604-1295 (800) 448-2430 TABLE OF CONTENTS
PAGE ---- Prospectus Summary......................................................... 1 Table of Fees and Expenses................................................. 3 Financial Highlights....................................................... 4 Investment Objectives and Policies......................................... 4 Other Investment Practices and Risk Factors................................ 10 Management of the Trust.................................................... 13 Purchase of Shares......................................................... 15 Redemption of Shares....................................................... 18 Telephone Transactions..................................................... 19 Dividends, Distributions and Taxes......................................... 19 Shares of Beneficial Interest and Voting Rights............................ 21 Performance Calculations................................................... 22
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. 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 "Se- ries"). 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 Global Bond Fund (previously defined herein as the "Brinson Global Bond Fund" or "Fund"). INVESTMENT OBJECTIVE The Series' investment objective is to maximize total return, consisting of capital appreciation and current income by investing in fixed-income securi- ties, both domestic and foreign. The Series is a global fund. As such, at least 65% of the Series' total assets will be invested in debt securities with an initial maturity of more than one year of issuers in at least three coun- tries, one of which may be the United States. Due to the inherent risks of in- vestments, there can be no assurance that the objective of the Series will be achieved. See "Investment Objectives and Policies" and "Other Investment Prac- tices 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, re- demption 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 or- der 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 de- termined 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 val- ue, 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"), 209 South LaSalle Street, Chicago, IL 60604-1295, the Series' investment advisor, is an investment management firm managing, as of June 30, 1995, approximately $43 billion in assets, primarily for pension and profit sharing institutional ac- counts. 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. 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 1 Series will be able to attain its investment objective. Investors should con- sider the following factors: 1. Investments in non-U.S. securities involve possible risks and opportuni- ties not typically associated with investments in U.S. securities including but not limited to, foreign exchange fluctuations, political risks and the costs of effecting transactions in foreign markets. See "Other Investment Practices and Risk Factors." 2. 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 "Other Investment Practices and Risk Factors." 3. The Series may alter foreign currency exposure or engage in certain hedg- ing techniques through the use of forward currency contracts, currency futures contracts or options on currency futures, or swaps. The Series is also permit- ted to invest in options on securities and options on futures contracts on fixed income indices of both U.S. and non-U.S. markets. Although the Series does not engage in options or futures for speculative purposes, there are cer- tain risks associated with such hedging techniques. See "Forward Foreign Cur- rency Transactions," "Options on Currencies" and "Futures Contracts and Options on Futures Contracts" under "Investment Objectives and Policies." 4. 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 secu- rities. See "Loans of Portfolio Securities" under "Other Investment Practices and Risk Factors." 5. 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." 6. 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." 7. 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. 8. While the Series intends to qualify as a "diversified" investment company under the provisions of Subchapter M of the Internal Revenue Code, it will not be diversified under the Investment Company Act of 1940, as amended (the "Act"). Thus, while at least 50% of the Series' total assets will be repre- sented by cash, cash items and other securities limited in respect of any one issuer to an amount not greater than 5% of the Series' total assets, it will not satisfy the Act's requirement in this respect, which applies that test to 75% of the Series' assets. A non-diversified portfolio is believed to be sub- ject to greater risk because adverse effects on the portfolio's security hold- ings may affect a larger portion of the overall assets. Please see the Statement of Additional Information for further information concerning investment policies and restrictions. 2 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 (after fee waiver).................................... 0.22%/1/ 12b-1 Expenses........................................................ 0.00% Other Expenses........................................................ 0.68% ---- Administration Fees............................................0.07% Other Expenses.................................................0.61% Total Fund Operating Expenses (after fee waiver)................................................... 0.90%/1/ ====
1 3 5 10 EXAMPLE YEAR YEARS YEARS YEARS - ------- ---- ----- ----- ----- You would pay the following expenses on a $1,000 invest- ment, assuming: (1) a 5% annual return; and (2) redemp- tion at the end of each time period.................... $ 9 $29 $50 $111
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 example should not be considered a representation of past or future expenses and actual expenses may be greater or less than those shown. - ----------- /1/Pursuant to the terms of the investment advisory agreement between the Trust and the Advisor, the Advisor is to receive a monthly fee at the annual rate of 0.75% of the Series' average daily net assets. The Advisor has agreed ir- revocably to waive its fees and reimburse expenses so that the Fund's total operating expenses will never exceed 0.90% of the Series' average daily net assets. Had the Advisor not agreed to this waiver, total fund operating ex- penses for the fiscal year ended June 30, 1995, would have been 1.43% /2/The fee payable to the Series' administrator is subject to an annual minimum fee of $10,000. 3 FINANCIAL HIGHLIGHTS The following financial highlights were derived from the Series' financial statements for the fiscal year ended June 30, 1995 and the period ended June 30, 1994, respectively, which were audited by independent auditors, whose un- qualified report thereon may be found in the Trust's Statement of Additional Information. The Trust's Statement of Additional Information may be obtained by shareholders without charge and is incorporated by reference into this Pro- spectus. The Table below sets forth financial data for a share of beneficial interest outstanding throughout the periods presented.
FOR THE FOR THE PERIOD YEAR JULY 30, ENDED 1993/1/ TO JUNE 30, JUNE 30, 1995 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 invest- ments and foreign currency......................... 0.58 (0.52) ------- ------- Total income (loss) from investment operations...... 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 000's)................ $51,863 $36,849 Ratio of expenses to average net assets: Before expense reimbursement........................ 1.43% 1.78%/2/ After expense reimbursement......................... 0.90% 0.90%/2/ Ratio of net investment income to average net as- sets: Before expense reimbursement........................ 5.53% 4.03%/2/ After expense reimbursement......................... 6.06% 4.91%/2/ Portfolio Turnover Rate............................. 199% 189%
- ----------- /1/Commencement of operations. /2/Annualized. INVESTMENT OBJECTIVES AND POLICIES 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. INVESTMENT PROCESS 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 Brothers 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. Governments, governmental entities and supranationals. 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 global fixed income securities market. As a general matter, the Advisor will purchase for the Series only securi- ties contained in the underlying indices relevant to the Benchmark. Brinson Partners will attempt to enhance the long-term return and risk performance of the Series rel- 4 ative to the Benchmark by deviating from the normal Benchmark mix of asset classes and currencies in reaction to discrepancies between current market prices and fundamental values. Active asset allocation strategy for the Series will be defined relative to the Benchmark weights, which represent 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 professionals. In the absence of views as to the relative attractiveness across asset classes, the actual Series weights will be equal to the Benchmark weights. The active management process is intended to produce a superior performance relative to the Bench- mark 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' in- vestment 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. ASSET ALLOCATION MARKET MANAGEMENT The Trust and the Advisor believe that, over the long term, investing across global fixed income markets based upon the Advisor's fundamental value analy- ses may allow the Series to achieve its goal to maximize total return, includ- ing capital appreciation and current income. 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 on comparisons of current market prices to fundamental values. 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%
The "Asset Class Strategy Ranges" indicated above are the ranges within which the Series expects to make its active asset allocations to specific as- set classes. Under all but unusual market conditions, the Series expects to adhere to the strategy ranges set forth above. However, the Series' strategy ranges may be exceeded by the Series under unusual market conditions. FIXED INCOME SECURITIES The Series may invest in a broad range of fixed income securities, including foreign and U.S. Government securities and debt obligations of for- 5 eign and U.S. companies. 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 having an adequate capacity to pay principal and interest, such bonds lack outstanding investment character- istics and, in fact, have speculative characteristics as well. In addition, 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. Securities rated lower than BBB- by S&P and Baa3 by Moody's are classified as non-investment grade securities (commonly re- ferred to as "junk bonds") and carry a higher degree of risk and are consid- ered to be speculative by the major credit rating agencies. The Series may invest in securities rated lower than BBB- by S&P or Baa3 by Moody's. The Se- ries currently intends to limit its investment in non-investment grade debt securities of the U.S. dollar-denominated fixed income portion of its portfo- lio to no more than 10% of its net assets. 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 10% 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 securi- ties. The Series may purchase U.S. dollar-denominated securities that reflect a broad range of investment maturities, qualities and sectors. The fixed income securities in the non-U.S. component of the Series will typically include securities issued by governments, agencies and supranational entities. A supranational entity is an entity established or financially sup- ported by the national governments of one or more countries to promote recon- struction or development. Examples of supranational entities include, among others, the World Bank, the European Economic Community, the European Coal and Steel Community, the European Investment Bank, the Inter-American Development Bank, the Export-Import Bank and the Asian Development Bank. The Series cur- rently intends to limit its investment in non-investment grade debt securities of the non-U.S. fixed income portion of its portfolio to no more than 10% of its net assets. 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-in- vestment grade security so that no more than 10% of its assets will be in- vested in below investment grade 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 which may be denominated in U.S. or non-U.S. cur- rencies. When unusual market conditions warrant, the Series can make substan- tial temporary defensive investments in cash equivalents. Cash equivalent holdings may be denominated in any currency. 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 ac- crued and to distribute the same to shareholders annually, even if no payment is received before the distribution date. 6 MORTGAGE-BACKED SECURITIES 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 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 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 tend to be more sensitive to interest rates than Government-issued CMOs. The Series will not invest in subordinated pri- vately-issued CMOs. For federal income tax purposes, the Series will be re- quired to accrue income on CMOs and REMICs regular interests 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 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 and the level of credit support and/or enhancement pro- vided. 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. 7 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 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 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 To manage exposure to currency fluctuations, the Series may alter fixed in- come or money market exposures (in its 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 its obliga- tions. These techniques are further described below. FORWARD FOREIGN CURRENCY TRANSACTIONS The Series may conduct its foreign currency exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency ex- change 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 controls 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 it may retain the security and terminate its contractual obligation to deliver the foreign cur- rency by purchasing an "offsetting" contract with the same currency trader ob- ligating it to purchase, on the same maturity date, the same amount of the foreign currency. The Series may realize a gain or loss from currency transac- tions. See "Options and Futures" under "Other Investment Practices and Risk Factors." OPTIONS ON CURRENCIES The Series may also 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 8 with its 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 and Futures" under "Other Investment Practices and Risk Factors." FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS The Series may enter into contracts for the future purchase or sale of secu- rities, indices or foreign currencies. 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 incurs a contractual obligation to deliver the securities or foreign currency 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 premi- ums on options and may engage in such transactions to the extent that obliga- tions 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 enters into a futures trans- action, it 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 underlying 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 United States, on foreign exchanges. See "Options and Futures" under "Other Investment Practices and Risk Factors." OPTIONS The Series may purchase and write put and call options on foreign or U.S. 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 it holds in its portfolio). The Series will receive premium income from writing call options, which may offset the cost of pur- chasing put options and may also contribute to the Series' total return. The Series may lose potential market appreciation, however, if the Advisor's judg- ment is incorrect with respect to interest rates, security prices or the move- ment 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 9 that the premiums on all outstanding put options do not exceed 20% of the Se- ries' 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 pro- tected 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 op- tion, 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. 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 de- liver a security it 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 and on recognized foreign ex- changes. 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 Prac- tices 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 vola- tile 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 its options and futures positions are poorly correlated with its other investments, or if it cannot close out its positions because of an il- liquid 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 transac- tions is potentially unlimited. REPURCHASE AGREEMENTS 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 its cash. To the extent that, in the meantime, the value of the security pur- chased had decreased, the Series could experience a loss. No more than 15% of the Series' net assets 10 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 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 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 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 has sold but is obligated to repur- chase 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 its trustee or receiver, whether to enforce the Series' obligation to repurchase the securities. Reverse repurchase agree- ments 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 pur- poses 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 Securities and Exchange Commission may prescribe by rules and regula- tions, 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 se- curity 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 Part- ners, 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 portfo- 11 lio'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 as- sets 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 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% limitation on investments in illiq- uid assets. Generally, an illiquid security is any security that cannot be disposed of within seven days in the ordinary course of business at approxi- mately the amount at which the Series has valued the security. Examples of il- liquid securities are over-the-counter options and certain swaps. The Board of Trustees of the Trust has instructed Brinson Partners to consider the follow- ing 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 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 se- curity, the method of soliciting offers and the mechanics of transfer). Al- though 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 li- quidity. 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. FOREIGN SECURITIES AND CURRENCY CONSIDERATIONS 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 supervi- sion of non-U.S. stock exchanges, brokers and listed companies. Non-U.S. com- panies 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 of comparable U.S. companies. Securities trading practices abroad may offer less protection to investors. Settlement of transactions in some non-U.S. markets 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 taxation, limitations on the removal of securities, 12 property or other assets of the Series, political or social instability, or diplomatic developments which could affect U.S. investments in those coun- tries. Brinson Partners will take these factors into consideration in managing the Series' investments. Because the Series will keep its books and records in U.S. dollars, it 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 applica- ble treasury regulations so that generally any component of a gain or loss at- tributable to the currency fluctuations results in ordinary income or loss and not capital gain or loss. 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 in- tervention 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 it will be able to predict exchange rates accurately. For example, if the Series in- creases its 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 decreases its 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. HIGH YIELD/HIGH RISK SECURITIES Debt securities rated lower than BBB- by S&P or Baa3 by Moody's (commonly referred to as "junk bonds") are considered to be of poor standing and predom- inantly speculative. Investing in lower rated debt securities may involve cer- tain 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 investments, but more sensitive to adverse economic changes or individual corporate developments. Also, during an economic down- turn 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 agen- cies 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. PORTFOLIO TURNOVER As a result of the Series' investment policies, its portfolio turnover rate may exceed 100%. High portfolio turnover rates (over 100%) may involve corre- spondingly greater brokerage commissions and other transaction costs, which will be borne directly by the Series and ultimately by the Series' sharehold- ers. In addition, high portfolio turnover may result in increased short-term capital gains, which, when distributed to shareholders, are treated as ordi- nary income. 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 administer- ing the day-to-day operations of the Series. 13 THE ADVISOR Brinson Partners, a Delaware corporation, is an investment management firm managing, as of June 30, 1995, approximately $43 billion, primarily for pen- sion 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 inter- national 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 invest- ment portfolios (series), Enterprise Accumulation Trust, Enterprise Interna- tional Growth Portfolio, Fort Dearborn Income Securities, Inc., Short-Term World Income Portfolio and Pace Large Company Value Equity Investment. Swiss Bank, with headquarters in Basel, Switzerland, is an internationally diversi- fied 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 0.75% of the Series' average daily net assets for providing investment advi- sory 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 permis- sible 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 in- formation and advice regarding economic factors and trends from its foreign subsidiaries, but it does not generally receive advice or recommendations re- garding 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 pri- marily 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 securi- ties 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 serv- ices 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 Se- ries pay less than $10,000 per year for each multiple class portfolio. Pursu- ant to the agreement with Fund/Plan, maximum administration fees are $400,000 for the initial multiple class portfolio and $60,000 maximum for each subse- quent multiple class portfolio. 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 person- 14 nel to perform administrative and clerical functions for the Series; prepar- ing, filing and distributing proxy materials, periodic reports to sharehold- ers, 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. The Advisor has agreed irrevocably to waive its fees and reimburse expenses so that the Fund's total operating expenses will never exceed 0.90% of the Series' average daily net assets. For the fiscal year ended June 30, 1995, had the Advisor not so agreed, the Fund's ratio of expenses to average daily net assets would have been 1.43%. BROKERAGE ALLOCATION As the Series is exclusively composed of debt (rather than equity) securi- ties, 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. The Series nor- mally trades non-U.S. securities in non-U.S. countries, since the best avail- able market for non-U.S. securities is often on non-U.S. markets. In transactions on non-U.S. exchanges, brokers' fees are generally fixed and are often higher than in the United States where commissions are negotiated. Pur- suant to the investment advisory agreement, Brinson Partners is authorized to utilize the trading department of its foreign subsidiaries to execute foreign securities transactions but monitors selection by such subsidiaries of brokers and dealers used to execute such transactions. While the selection of brokers is made primarily on the basis of their exe- cution 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 re- search and investment strategy capabilities. Brinson Partners may use this re- search 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 trans- fer 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 sus- pend the offering of shares of the Fund or Series. The minimum initial invest- ment 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. 15 At the discretion of the Trust, investors may be permitted to purchase Fund shares by transferring securities to the Series that meet the Series' invest- ment 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 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 dif- ference between the fair market value of the securities and the investors' ba- sis 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 serv- ices 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 accom- panying this Prospectus and mailing it to the transfer agent, together with a check payable to Brinson Global Bond Fund, c/o 2 W. Elm Street, P.O. Box 874, Conshohocken, PA 19428-0874. Subsequent investments in the Brinson Global Bond Fund may be made at any time in minimum amounts of $2,500 by sending a check payable to the Brinson Global Bond Fund, c/o P.O. Box 412797, Kansas City, MO 64141-2797. Please en- close the stub of your account statement and include the amount of the invest- ment, 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 notifica- tion to the transfer agent, federal funds and registration in- 16 structions 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 GLOBAL BOND FUND" "SHAREHOLDER NAME AND ACCOUNT NUMBER" A completed application form with signature(s) of registrant(s) must be filed with the transfer agent immediately subsequent to the initial wire. In- vestors 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 Se- ries 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 ex- change. Any shareholder wishing to make an exchange should first obtain and review a prospectus of the other Series. Requests for telephone exchanges must be received by the transfer agent by the close of regular trading hours (cur- rently 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 consists of the net asset value per share next de- termined 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 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. Portfolio securities for which market quotations are available are priced at market value. Debt securities are priced at fair value by an independent pric- ing 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 val- ued at their fair value as determined in good faith and pursuant to a method approved by the Board of Trustees of the Trust. The Series' portfolio securities from time to time 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 Fund may be significantly af- fected by such trading on days when shareholders have no access to the Series. 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 out- standing share based on the proportionate participation in the Series repre- sented by the value of shares of that 17 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, ex- cept that the Brinson Fund class will not incur any of the expenses under the SwissKey Fund class' 12b-1 Plan. REDEMPTION OF SHARES Shareholders may redeem their shares of the Fund without charge on any busi- ness 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 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 also may be made by wire directly to any bank previously designated by the shareholder in a shareholder account appli- cation. 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 re- demption 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. 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- fected 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 ac- count. 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 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 in- terests 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 Se- ries computes such redemption in-kind, the Series will not recognize gain or loss for federal tax purposes on the securities used to compute the redemp- tion, 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 18 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 re- quest 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 institu- tions include banks, brokers, dealers, credit unions, national securities ex- changes, 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 sup- porting documents for redemptions made by corporations, executors, administra- tors, 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 subse- quently 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. 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 transac- tions 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 moth- er'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 trans- actions 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 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. 19 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 ap- plicable with respect to the SwissKey Fund class shares. Both the SwissKey Fund class and Brinson Fund class shares of the Series will share proportion- ately 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 and distributions 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 cur- rent net asset value and the dividend option may be changed from cash to rein- vest. 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 re- ceived 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 dis- tributions made by the Series including those automatically reinvested. Dis- tributions of net investment income and short-term capital gains, if any, will be taxable to shareholders as ordinary income, whether received in cash or ad- ditional 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 re- quired 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 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 dis- tributions, 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 fed- eral income tax, or to any excise tax, to the extent its earnings are distrib- uted 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 ac- count is subject to back-up withholding. An individual's taxpayer identifica- tion number is his social security number. If more than 50% of the Series' total assets at the close of its taxable year consists of stock or 20 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 shareholders. If this elec- tion 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. How- ever, shareholders will be able to treat their pro-rata shares of foreign taxes as either a deduction (itemized deduction in the case of individuals) or a foreign tax credit (but not both) against U.S. income taxes on their tax re- turn. 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 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 Fund, 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, ex- change, 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 share- holders of the affected Series or class shall be entitled to vote on the mat- ter. 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 re- spect 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. Pursuant to the Act, a control person possesses the ability to control the outcome of matters submitted for shareholder vote. As of August 30, 1995, Munson Williams Proctor Institute of Utica, NY and Baptist Health Systems of Birmingham, AL were control persons of the Fund by nature of their sharehold- ings. 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 21 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, share- holders of the Series may apply to the Series to communicate with other share- holders 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 main- tains 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 Se- ries, 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 share- holders. Performance quotations of the Fund represent the Fund's past perfor- mance 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 analyzing 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 sat- isfy their investment objective, advertisements regarding the Fund 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 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. Fur- ther 22 information about the performance of the Fund is included in the Series' Annual Report for the period ended June 30, 1995, which may be obtained without charge by contacting the Trust at (800) 448-2430. 23 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 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 - ------------------------------------------------------- 209 South LaSalle Street . Chicago, Illinois 60604-1295 Tel: (800) 448-2430 ------------------------- The Brinson Funds Brinson Global Bond Fund Prospectus September 20, 1995 As Supplemented May 28, 1996 [LOGO] Global Investment Management of Institutional Assets ------------------------- -----END PRIVACY-ENHANCED MESSAGE-----