-----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, PinXCDcP8zB0RB8DLNf1fHYGLHoTjTk9SUPPURS4rPaZNPQ8Xre3KITr2/AoIB9q UgFFqgU6EAFNV9z3vx7n/g== 0000950131-96-004225.txt : 19960830 0000950131-96-004225.hdr.sgml : 19960830 ACCESSION NUMBER: 0000950131-96-004225 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 25 FILED AS OF DATE: 19960829 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: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-47287 FILM NUMBER: 96623324 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 485APOS 1 BRINSON FUNDS-POST EFFECTIVE AMEND #17 UNITED STATES FILE NO. 33-47287 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FILE NO. 811-6637 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. | | ------ Post Effective Amendment No. 17 |X| ------ REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X| Amendment No. 18 |X| ------ THE BRINSON FUNDS ================= (Exact name of Registrant as Specified in Charter) 209 South LaSalle Street Chicago, Illinois 60604-1295 - ----------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code 312-220-7100 ------------ The Brinson Funds 209 South LaSalle Street Chicago, Illinois 60604-1295 ---------------------------- (Name and Address of Agent for Service) COPIES TO: Bruce G. Leto, Esq. Stradley, Ronon, Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103-7098 APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICAL AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE: | | IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b) OF RULE 485. | | ON (DATE), PURSUANT TO PARAGRAPH (b). ------ |X| 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(1). | | ON (DATE) PURSUANT TO PARAGRAPH (a) OF RULE 485. ------ | | 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(ii). | | ON (DATE) PURSUANT TO PARAGRAPH (a)(ii) OF RULE 485. ------ IF APPROPRIATE, CHECK THE FOLLOWING BOX: | | THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT. Registrant has previously registered an indefinite number of shares of beneficial interest of The Brinson Funds under the Securities Act of 1933 pursuant to Rule 24f-2 of the Investment Company Act of 1940, as amended. Registrant filed a Notice pursuant to Rule 24f-2 for the fiscal period ended June 30, 1996 on August 28, 1996. ================================================================================ As filed with the U.S. Securities and Exchange TOTAL PAGES: ____ Commission on August 29, 1996 INDEX TO EXHIBITS, PAGE: ____ ---------------
THE BRINSON FUNDS Cross Reference Sheet Pursuant to Rule 481b FORM N-1A ITEM CAPTION IN PROSPECTUS --------------------- PART A INFORMATION REQUIRED IN A PROSPECTUS ------ ------------------------------------ 1. Cover Page Cover Page 2. Synopsis Prospectus Summary; Tables of Fees and Expenses 3. Condensed Financial Information Financial Highlights 4. General Description of Registrant Investment Objectives and Policies; Other Investment Practices and Risk Factors 5. Management of the Fund Management of the Trust 5A. Management's Discussion of Performance Information Fund Performance 6. Capital Stock and Other Securities General Information; Dividends and Taxes; Net Asset Value 7. Purchase of Securities Being Offered Purchase of Shares; Exchange of Shares; Distribution Plan 8. Redemption or Repurchase Redemption of Shares 9. Legal Proceedings * PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION ------ ------------------------------------------------------------- 10. Cover Page Cover Page 11. Table of Contents Table of Contents 12. General Information and History Covered in Part A 13. Investment Objectives and Policies Investment Policies; Investment Restrictions; Portfolio Transactions and Brokerage Commissions 14. Management of the Fund Trustees and Officers 15. Principal Holders of Securities Control Persons and Principal Holders of Securities 16. Investment Advisory and Other Services Investment Advisory and Other Services 17. Brokerage Allocation Portfolio Transactions and Brokerage Commissions ================================================================================================================== PAGE 2
18. Capital Stock and Other Securities Other Information 19. Purchase, Redemption and Pricing of Purchases; Redemptions Securities Being Offered 20. Tax Status Taxes 21. Underwriters Underwriter 22. Calculations of Performance Data Performance Information 23. Financial Statements Audited Financials dated June 30, 1996 PART C OTHER INFORMATION ------ ----------------- Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C to this Registration Statement. ======================================================================================================================== PAGE 3
(LOGO TK) The Brinson Funds BRINSON GLOBAL FUND BRINSON GLOBAL EQUITY FUND BRINSON GLOBAL BOND FUND 209 South LaSalle Street Chicago, IL 60604-1295 PROSPECTUS OCTOBER 28, 1996 THE BRINSON FUNDS (the "Trust") is a no-load, open-end management investment company which currently offers seven distinct investment portfolios or "series." Each series offers two classes of shares: the Brinson Fund class and SwissKey Fund class. This Prospectus pertains only to the Brinson Global Fund, Brinson Global Equity Fund and Brinson Global Bond Fund (each a "Fund" and collectively, the "Funds" or "Global Funds"), which represent the Brinson Fund class shares of the Global Fund, Global Equity Fund and Global Bond Fund series (each a "Series" and collectively, the "Series"). The Brinson Fund class shares have no sales charges or 12b-1 fees. The SwissKey Fund class shares are also offered without sales charges, but impose a 12b-1 fee. Further information relating to the SwissKey Fund class shares may be obtained by calling 1-800-SWISSKEY. This Prospectus sets forth concisely the information a prospective investor should know before investing in any of the Global Funds. Investors should read and retain this Prospectus for future reference. Additional information about the Global Funds, and the other series and classes of shares of the Trust is contained in the Statement of Additional Information dated October 28, 1996, as amended from time to time, which has been filed with the U.S. Securities and Exchange Commission. The Statement of Additional Information is incorporated by reference into this Prospectus and is available upon request and without charge from the Trust, at the addresses and telephone numbers below. AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN ANY OF THE FUNDS IS NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE U.S. SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. UNDERWRITER: Fund/Plan Broker Services, Inc. 3200 Horizon Drive King of Prussia, PA 19406-0903 (800) 448-2430 ADVISOR: Brinson Partners, Inc. 209 South LaSalle Street Chicago, IL 60604-1295 (800) 448-2430 TABLE OF CONTENTS
PAGE ---- Annual Fund Operating Expenses............................................. 1 Financial Highlights....................................................... 2 Description of the Global Funds............................................ 3 Investment Objectives and Policies......................................... 3 Global Fund.............................................................. 3 Global Equity Fund....................................................... 4 Global Bond Fund......................................................... 4 Investment Considerations and Risks........................................ 5 Management of the Trust.................................................... 7 Portfolio Management....................................................... 8 Administration of the Trust................................................ 8 Purchase of Shares......................................................... 9 Account Options............................................................ 10 Redemption of Shares....................................................... 11 Net Asset Value............................................................ 14 Dividends, Distributions and Taxes......................................... 15 General Information........................................................ 17 Performance Information.................................................... 18 Appendix A................................................................. 20
This Prospectus is not an offering of the securities herein described in any jurisdiction or to any person to whom it is unlawful for the Funds to make such an offer or solicitation. No sales representative, dealer, or other person is authorized to give any information or make any representation other than those contained in this Prospectus. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
TOTAL FUND MANAGEMENT FEES OTHER EXPENSES OPERATING EXPENSES (AFTER FEE WAIVER)/1/ (AFTER REIMBURSEMENT)/2/ (AFTER REIMBURSEMENT) --------------------- ------------------------ -------------------- Brinson Global Fund..... 0.80% 0.24% 1.04% Brinson Global Equity Fund.................... 0.03% 0.97% 1.00% Brinson Global Bond Fund.................... 0.00% 0.90% 0.90%
- ---------- /1/The Advisor has irrevocably agreed to waive its fees and reimburse certain expenses so that the total operating expenses of the Brinson Global Fund, Brinson Global Equity Fund and Brinson Global Bond Fund will never exceed 1.10%, 1.00% and 0.90%, respectively. Had the Advisor not irrevocably agreed to waive fees and reimburse expenses, the total fund operating expenses for the fiscal year ended June 30, 1996 for the Brinson Global Equity Fund and Brinson Global Bond Fund would have been 1.77% and 1.65%, respectively. /2/"Other Expenses" include the fee paid to the Administrator, which is calculated on the basis of the total net assets of all portfolios within the Trust and is subject to an annual minimum fee of $75,000 for the initial multiple class portfolio and $10,000 per each additional multiple class portfolio. EXAMPLE: Based on the level of expenses listed above after reimbursement, the total expenses relating to an investment of $1,000 would be as follows, assuming a 5% annual return and redemption at the end of each time period.
NAME OF FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------ ------ ------- ------- -------- Brinson Global Fund............................. $11 $33 $57 $127 Brinson Global Equity Fund...................... $10 $32 $55 $122 Brinson Global Bond Fund........................ $ 9 $29 $50 $111
The foregoing table is designed to assist the investor in understanding the various costs and expenses that a shareholder will bear directly or indirectly. - ------------------------------------------------------------------------------- THE EXAMPLE SHOULD NOT BE CONSIDERED REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, A FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN ACTUAL RETURNS GREATER OR LESS THAN 5%. - ------------------------------------------------------------------------------- 1 FINANCIAL HIGHLIGHTS The selected financial information in the following table has been audited by the Funds' independent auditors, whose unqualified report thereon appears in the Funds' Annual Report to Shareholders dated June 30, 1996. Additional financial data and related notes are contained in the Funds' Annual Report to Shareholders, which is incorporated by reference into the Statement of Additional Information and is available without charge upon request. FINANCIAL HIGHLIGHTS--FISCAL YEARS ENDED JUNE 30 The following table presents financial data relating to a share of beneficial interest outstanding throughout the periods presented. This information has been derived from the Funds' financial statements.
INCOME (LOSS) FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS ------------------------------ ----------------------------- DISTRIBU- TOTAL TIONS DISTRIBU- INCOME FROM AND TIONS NET NET NET (LOSS) IN EXCESS FROM AND ASSET ASSETS, NET ASSET NET REALIZED FROM OF NET IN EXCESS VALUE- TOTAL END OF VALUE- INVEST- AND INVEST- INVEST- OF NET TOTAL END RETURN PERIOD BEGINNING MENT UNREALIZED MENT MENT REALIZED DISTRIBU- OF (NON- (IN YEAR OF PERIOD INCOME GAIN (LOSS) OPERATIONS INCOME GAIN TIONS PERIOD ANNUALIZED) 000S) - ---- --------- ------- ----------- ---------- --------- --------- --------- ------ ----------- -------- BRINSON GLOBAL FUND (Commencement of Operations August 31, 1992) 1993............ $10.00 0.26 0.81 1.07 (0.20) -- (0.20) $10.87 10.76% $191,389 1994............ 10.87 0.33 (0.23) 0.10 (0.27) (0.27) (0.54) 10.43 0.77% $278,859 1995............ 10.43 0.43 0.86 1.29 (0.27) (0.10) (0.37) 11.35 12.57% $365,678 1996............ 11.35 0.44 1.37 1.81 (0.62) (0.32) (0.94) 12.22 16.38% $457,933 BRINSON GLOBAL EQUITY FUND (Commencement of Operations January 28, 1994) 1994............ $10.00 0.07 (0.54) (0.47) (0.04) -- (0.04) $ 9.49 (4.70%) $ 20,642 1995............ 9.49 0.18 0.39 0.57 (0.04) (0.09) (0.13) 9.93 6.06% $ 20,706 1996............ 9.93 0.18 2.29 2.47 (0.14) (0.69) (0.83) 11.57 25.66% $ 27,126 BRINSON GLOBAL BOND FUND (Commencement of Operations July 30, 1993) 1994............ $10.00 0.45 (0.52) (0.07) (0.28) (0.10) (0.38) $ 9.55 (0.79%) $ 36,849 1995............ 9.55 0.50 0.58 1.08 (0.24) -- (0.24) 10.39 11.34% $ 51,863 1996............ 10.39 0.84 0.31 1.15 (1.40) (0.10) (1.50) 10.04 11.50% $ 41,066 RATIOS/SUPPLEMENTAL DATA ------------------------ RATIO OF NET RATIO OF EXPENSES INVESTMENT INCOME TO AVERAGE NET TO AVERAGE NET ASSETS ASSETS --------------------- --------------------- BEFORE AFTER BEFORE AFTER AVERAGE EXPENSE EXPENSE EXPENSE EXPENSE PORTFOLIO COMMISSION REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER RATE PAID YEAR MENT MENT MENT MENT RATE PER SHARE - ---- ---------- ---------- ---------- ---------- --------- ---------- BRINSON GLOBAL FUND (Commencement of Operations August 31, 1992) 1993............ 1.35%/1/ 1.05%/1/ 3.26%/1/ 3.56%/1/ 149% N/A 1994............ 1.14% 1.10% 3.21% 3.25% 231% N/A 1995............ 1.09% N/A 4.27% N/A 238% N/A 1996............ 1.04% N/A 3.69% N/A 142% $0.0291 BRINSON GLOBAL EQUITY FUND (Commencement of Operations January 28, 1994) 1994............ 2.65%/1/ 1.00%/1/ 0.24%/1/ 1.89%/1/ 21% N/A 1995............ 2.06% 1.00% 0.71% 1.77% 36% N/A 1996............ 1.77% 1.00% 0.57% 1.34% 74% $0.0288 BRINSON GLOBAL BOND FUND (Commencement of Operations July 30, 1993) 1994............ 1.78%/1/ 0.90%/1/ 4.03%/1/ 4.91%/1/ 189% N/A 1995............ 1.43% 0.90% 5.53% 6.06% 199% N/A 1996............ 1.65% 0.90% 4.98% 5.73% 184% N/A
- ----- /1/Annualized N/A=Not Applicable 2 DESCRIPTION OF THE GLOBAL FUNDS The Global Fund, Global Equity Fund and Global Bond Fund each have an investment objective to maximize total return, consisting of capital appreciation and current income. In seeking to achieve its investment objective, each Series attempts to control risk. These investment objectives are fundamental and may not be changed without a vote of the holders of the majority of the voting securities of the respective Series. Unless otherwise stated in this Prospectus or the Statement of Additional Information, each Series' investment policies are not fundamental and may be changed without shareholder approval. There can be no assurance that the Series will achieve their investment objectives. The Series do not intend to concentrate their investments in a particular industry. The Series do not intend to issue senior securities, as defined in the Investment Company Act of 1940, as amended (the "Act"), except that each Series may engage in borrowing activities as defined in Appendix A and in the Statement of Additional Information. Each Series' investment objective and its policies concerning portfolio lending, borrowing, the issuance of senior securities and concentration are "fundamental," which means that they may not be changed without the affirmative vote of the holders of a majority of the Series' outstanding voting securities (as defined in the Act). INVESTMENT OBJECTIVES AND POLICIES GLOBAL FUND INVESTMENT OBJECTIVE The Global Fund's investment objective is to maximize total return, consisting of capital appreciation and current income. The Fund will attempt to control risk while seeking to achieve its investment objective. As a global fund, at least 65% of the Series' total assets will be invested in securities of issuers in at least three countries, one of which may be the United States. The Series may utilize a wide range of equity, debt and money market securities in domestic and foreign markets, and the Fund may invest in other open-end investment companies advised by Brinson Partners, Inc. ("Brinson Partners" or the "Advisor"). The Series may enter into repurchase agreements and reverse repurchase agreements, and engage in futures, options and currency transactions for hedging and other permissible purposes, as more fully described in "Investment Considerations and Risks" and Appendix A in this Prospectus and in the Statement of Additional Information. The Series is a diversified portfolio that seeks to achieve its objective by pursuing active asset allocation strategies across global equity and fixed income markets and active security selection within each market. These decisions are undertaken relative to the Global Securities Markets Index (the "Global Benchmark"), which is compiled by Brinson Partners. The Global Benchmark consists of eight distinct asset classes representing the primary wealth-holding public securities markets. These asset classes are U.S. equities, non-U.S. equities, emerging markets equities, U.S. bonds, non- U.S. bonds, emerging markets bonds, high yield bonds and cash equivalents. Each asset class is represented in the Global Benchmark by an index compiled by an independent data provider. In order to compile the Global Benchmark, the Advisor determines current relative market capitalizations in the world markets (U.S. equities, non-U.S. equities, emerging markets equities, U.S. bonds, non-U.S. bonds, emerging markets bonds, high yield bonds and cash) and then weights each relevant index. Based on this weighting, the Advisor determines the return of the relative indices, applies the index weighting and then determines the return of the Global Benchmark. From time to time, the Advisor may substitute an equivalent index within a given asset class when it believes that such index more accurately reflects the relevant global market. 3 Although it may invest anywhere in the world, it is expected that the Series' assets will be primarily invested in equity markets listed in the Morgan Stanley Capital International ("MSCI") World Equity (Free) Index. The Series will primarily invest in fixed income markets listed in the Salomon Brothers World Government Bond Index. The Series may invest up to 10% of its net assets in equity and debt securities of emerging market issuers, or securities with respect to which the return is derived from the equity or debt securities of issuers in emerging markets. GLOBAL EQUITY FUND INVESTMENT OBJECTIVE The Global Equity Fund's investment objective is to maximize total return, consisting of capital appreciation and current income. The Fund will attempt to control risk while seeking to achieve its investment objective. As a global fund, at least 65% of the Series' total assets will be invested in equity securities of issuers in at least three countries, one of which may be the United States. The Series may utilize a wide range of equity securities that are traded on both domestic and foreign stock exchanges or, in the case of domestic stocks, in the over-the-counter market. The Series may enter into repurchase agreements and reverse repurchase agreements, and engage in futures, options and currency transactions for hedging and other permissible purposes, as more fully described in "Investment Considerations and Risks" and Appendix A in this Prospectus, and in the Statement of Additional Information. The Series is a diversified portfolio that seeks to achieve its objective by pursuing an active asset allocation strategy across global equity markets, active management of currency exposures and active security selection within each market. The benchmark for the Series is the MSCI World Equity (Free) Index (the "Global Equity Benchmark"). The Global Equity Benchmark is a market driven broad based index which includes U.S. and non-U.S. equity markets in terms of capitalization and performance. The Global Equity Benchmark is designed to provide a representative total return for all major stock exchanges located inside and outside the United States. Although it may invest anywhere in the world, it is expected that the Series' assets will primarily be invested in equity markets listed in the Global Equity Benchmark. 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 market. GLOBAL BOND FUND INVESTMENT OBJECTIVE The Global Bond Fund's investment objective is to maximize total return, consisting of capital appreciation and current income. The Fund will attempt to control risk while seeking to achieve its investment objective. As a global fund, 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 countries, one of which may be the United States. The Series seeks to achieve this objective by investing primarily in debt securities that may also provide the potential for capital appreciation. The Series may enter into repurchase agreements and reverse repurchase agreements, and may engage in futures, options and currency transactions for hedging and other permissible purposes, as more fully described in "Investment Considerations and Risks" and Appendix A in this Prospectus and in the Statement of Additional Information. The Series is a non-diversified portfolio. The benchmark for the Series is the Salomon Brothers World Government Bond Index (the "Global Bond Benchmark"). The Global Bond 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 4 supranationals. Although it may invest anywhere in the world, it is expected that the Series' assets will be primarily invested in fixed income markets listed in the Global Bond Benchmark. 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. INVESTMENT CONSIDERATIONS AND RISKS The following provides information about the types of instruments in which the Global Funds may invest, strategies employed by Brinson Partners in its attempt to attain each Series' investment objective and a summary of related risks. Shareholders should understand that all investments involve risks and there can be no guarantee against loss resulting from an investment in the Series, nor can there be any assurance that the Series will be able to attain their investment objectives. A complete list of the Series' investment restrictions and more detailed information about the Series' investments are contained in Appendix A in this Prospectus and in the Statement of Additional Information. EQUITY SECURITIES (GLOBAL FUND AND GLOBAL EQUITY FUND)--Equity securities fluctuate in value as a result of various factors, which are often unrelated to the value of the issuer of the securities. These fluctuations may be pronounced. The Global Fund may invest in small market capitalization companies and in equity securities that are considered by the Advisor to be in their post-venture capital stage. These securities may have limited marketablilty, and therefore, may be more volatile. Fluctuations in the value of the Global Fund's and Global Equity Fund's equity investments will affect the value of their shares and thus the Funds' total returns to investors. FIXED INCOME SECURITIES (GLOBAL FUND AND GLOBAL BOND FUND)--All fixed income securities are subject to two types of risks: credit risk and interest rate risk. The credit risk relates to the ability of the issuer to meet interest or principal payments or both as they come due. The interest rate risk refers to the fluctuations in the net asset value of any portfolio of fixed income securities resulting from the inverse relationship between the price and yield of fixed income securities; that is, when the general level of interest rates rises, the prices of outstanding fixed income securities decline, and when interest rates fall, prices rise. FOREIGN SECURITIES AND CURRENCY CONSIDERATIONS (ALL GLOBAL FUNDS)-- Investments in securities of foreign issuers may involve greater risks than those of U.S. issuers. There is generally less information available to the public about non-U.S. companies and less government regulation and supervision of non-U.S. stock exchanges, brokers and listed companies. Non-U.S. companies are not subject to uniform global accounting, auditing and financial reporting standards, practices and requirements. Securities of some non-U.S. companies are less liquid and their prices more volatile than securities 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' portfolios. Additionally, in some non-U.S. countries, there is the possibility of expropriation or confiscatory taxation, limitations on the removal of securities, property or other assets of the Series, political or social instability, or diplomatic developments which could affect U.S. investments in those countries. The Series intend to diversify broadly among countries but reserve the right to invest a substantial portion of their assets in one or more countries if economic and business conditions warrant such investments. Brinson Partners will take these factors into consideration in managing the Series' investments. Because the Series will keep their books and records in U.S. dollars, the Series will be required, for federal income tax purposes, to account for income and losses on all transactions involving foreign currency under Section 988 of the Internal Revenue Code of 1986, as amended, and the applicable U.S. Treasury regulations, so that generally any component of a gain or loss attributable to currency fluctuations results in ordinary income or loss and not capital gain or loss. 5 The U.S. dollar market value of the Series' investments and of dividends and interest earned by the Series may be significantly affected by changes in currency exchange rates. Some currency prices may be volatile, and there is the possibility of governmental controls on currency exchange or governmental intervention in currency markets, which could adversely affect the Series. Although the Series may attempt to manage currency exchange rate risks, there is no assurance that the Series will do so at an appropriate time or that they will be able to predict exchange rates accurately. For example, if the Series increase their exposure to a currency and that currency's price subsequently falls, such currency management may result in increased losses to the Series. Similarly, if the Series decrease their exposure to a currency, and the currency's price rises, the Series will lose the opportunity to participate in the currency's appreciation. Each Series will manage currency exposures relative to the normal currency allocation and will consider return and risk of currency exposures relative to its respective Benchmark. In addition, if the currency in which a security is denominated appreciates against the U.S. dollar, the dollar value of the security will increase. Conversely, a decline in the exchange rate of the currency would adversely affect the value of the security expressed in dollars. There are additional risks inherent in investing in less developed countries which are applicable to the Global Fund. Compared to the United States and other developed countries, emerging market countries may have relatively unstable governments, economies based on only a few industries, and securities markets that trade only a small number of securities and employ settlement procedures different from those used in the United States. Prices on these exchanges tend to be volatile and, in the past, securities in these countries have offered greater potential for gain (as well as loss) than securities of companies located in developed countries. Further, investments by foreign investors are subject to a variety of restrictions in many emerging countries. Emerging markets countries such as those in which the Global Fund may invest have historically experienced and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations or currency depreciation, large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. Additional factors which may influence the ability or willingness to service debt include, but are not limited to, a country's cash flow situation, the availability of sufficient foreign exchange on the date a payment is due, the relative size of its debt service burden to the economy as a whole, its government's policy towards the International Monetary Fund, the World Bank and other international agencies and the political constraints to which a government debtor may be subject. FOREIGN CURRENCY TRANSACTIONS (ALL GLOBAL FUNDS)--To manage exposure to currency fluctuations, the Series may alter fixed income or money market exposures, enter into forward currency exchange contracts, buy or sell options or futures relating to foreign currencies and may purchase securities indexed to currency baskets. The Series will also use these currency exchange techniques in the normal course of business to hedge against adverse changes in exchange rates in connection with purchases and sales of securities. Some of these strategies may require the Series to set aside liquid assets in a segregated custodial account to cover their obligations. FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS (ALL GLOBAL FUNDS)--The Series may attempt to reduce the overall level of investment risk of particular securities and attempt to protect against adverse market movements by investing in futures, options and other derivative instruments. A derivative instrument is commonly defined as a financial instrument whose performance and value are derived, at least in part, from another source, such as the performance of an underlying asset, a specific security or an index of securities. The derivative instruments in which the Series may invest include the purchase and writing of options on securities (including index options) and options on foreign currencies, investing in futures contracts for the purchase or sale of instruments based on financial indices, including interest rate indices or indices of U.S. or foreign government securities, equity or fixed income securities ("futures contracts"), forward contracts and swaps and swap related products such as equity index swaps, interest rate swaps, currency swaps, and related caps, collars and floors. 6 The investment in futures, options, forward contracts, swaps and similar strategies by the Series will depend on Brinson Partners' judgment as to the potential risks and rewards of different types of strategies, and it should be recognized that the use of these instruments exposes the Series to additional investment risks and transaction costs. If the Advisor incorrectly analyzes the market conditions or does not employ the appropriate strategy with respect to these instruments, the Series could be left in a less favorable position. For example, gains and losses on investments in futures depend on the Advisor's ability to predict correctly the direction of security prices, interest rates and other economic factors. Additional risks inherent in the use of futures, options and forward contracts include: adverse movements in the prices of securities or currencies being hedged; the possible absence of a liquid secondary market for any particular instrument at any time; and the possible need to defer closing out certain hedge positions to avoid adverse tax consequences. Options and futures can be volatile instruments and may not perform as expected. A Series could experience losses if the prices of its options and futures positions are poorly correlated with its other investments. If a hedge is applied at an inappropriate time or price trends are judged incorrectly, options and futures strategies may lower a Series' return (i.e., options and futures may fail as hedging techniques in cases where the price movements of the securities underlying the options and futures do not follow the price movements of the portfolio securities subject to the hedge). Options and futures traded on foreign exchanges generally are not regulated by U.S. authorities and may offer less liquidity and less protection to a Series in the event of default by the other party to the contract. The loss from investing in futures transactions is potentially unlimited. A Series does not intend to purchase put and call options that are traded on a national stock exchange in an amount exceeding 5% of its net assets. Each Series may invest in derivatives for hedging purposes, to maintain liquidity, or in anticipation of changes in the composition of its portfolio holdings. No Series will engage in derivative investments purely for speculative purposes. A Series will invest in one or more derivatives only to the extent that the instrument under consideration is judged by the Advisor to be consistent with the Series' overall investment objective and policies. In making such judgment, the potential benefits and risks will be considered in relation to the Series' other portfolio investments. Where not specified, investment limitations with respect to a Series' derivative instruments will be consistent with that Series' existing percentage limitations with respect to its overall investment policies and restrictions. The risks and policies of various types of derivative instruments permitted for the Series, including options, futures, forward contracts and applicable interest rate swaps, are described in greater detail in Appendix A in this Prospectus and in the Statement of Additional Information. NON-DIVERSIFIED STATUS (GLOBAL BOND FUND ONLY)--The Global Bond Fund is classified as a "non-diversified" investment company under the Act, which means that the proportion of the Series' assets that may be invested in the securities of a single issuer is not limited by the Act. Since it may invest a larger portion of its assets in the securities of a single issuer than investment companies that are classified as diversified funds under the Act, an investment in the Global Bond Fund may be subject to greater fluctuations in value than an investment in a diversified fund. MANAGEMENT OF THE TRUST THE BOARD OF TRUSTEES Under Delaware law, the Board of Trustees has overall responsibility for managing the business and affairs of the Trust. The Trustees, in turn, elect the officers of the Trust, who are responsible for administering the day-to- day operations of the Series. 7 THE ADVISOR Brinson Partners, a Delaware corporation, is an investment management firm managing, as of June 30, 1996, approximately $58 billion, primarily for pension and profit sharing institutional accounts. Brinson Partners was organized in 1989 when it acquired the institutional asset management business of The First National Bank of Chicago and First Chicago Investment Advisors, N.A. Brinson Partners and its predecessor entities have managed domestic and international investment assets since 1974 and global investment assets since 1982. Brinson Partners has offices in Basel, London, Melbourne, New York, Paris, Singapore, Sydney and Tokyo, in addition to its principal office at 209 South LaSalle Street, Chicago, IL 60604-1295. Brinson Partners is an indirect wholly-owned subsidiary of Swiss Bank Corporation ("Swiss Bank"). Swiss Bank, with headquarters in Basel, Switzerland, is an internationally diversified organization with operations in many aspects of the financial services industry. Brinson Partners also serves as the investment advisor to seven other investment companies: Brinson Relationship Funds, which includes six investment portfolios (series); Enterprise Accumulation Trust; Enterprise International Growth Portfolio; Fort Dearborn Income Securities, Inc.; Hirtle Callaghan International Trust; John Hancock Variable Series Trust-- International Balanced Portfolio; and Pace Large Company Value Equity Investments. Pursuant to its investment advisory agreements with the Trust on behalf of each Series, Brinson Partners receives a monthly fee at various annual percentage rates of each Series' average daily net assets, as described below, for providing investment advisory services. Brinson Partners is responsible for paying its own expenses and has agreed to waive that portion of its advisory fee equal to the total expenses of a Series for any fiscal year which exceeds the permissible limits applicable to the Series in any state in which its shares are then qualified for sale. Pursuant to its advisory agreements, Brinson Partners is authorized, at its own expense, to obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it does not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. For providing investment advisory services during the fiscal year ended June 30, 1996, the Global Fund and Global Equity Fund paid Brinson Partners a monthly fee at the annual rate of 0.80% of each Series' respective average daily net assets. This fee is higher than the advisory fees paid by most other mutual funds, but is comparable to those of other mutual funds with similar investment objectives. For the fiscal year ended June 30, 1996, the Global Bond Fund paid a monthly fee at the annual rate of 0.75% of its average daily net assets. PORTFOLIO MANAGEMENT Investment decisions for the Series are made by an investment management team at Brinson Partners. No member of the investment management team is primarily responsible for making recommendations for portfolio purchases. ADMINISTRATION OF THE TRUST THE UNDERWRITER Fund/Plan Broker Services, Inc. ("FPBS"), 3200 Horizon Drive, King of Prussia, PA 19406-0903, was engaged pursuant to an agreement dated November 20, 1995, for the limited purpose of acting as underwriter to facilitate the registration of the shares of the Trust under state securities laws and to assist in the sale of shares. The fee for such service is borne by the Advisor. 8 THE ADMINISTRATOR The Trust, on behalf of each Series, has entered into an administrative services agreement with FPS Services, Inc. ("FPS"), 3200 Horizon Drive, King of Prussia, PA 19406-0903, 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. Each Series pays its pro rata portion based upon its average daily net assets, but in no event shall a Series pay less than $75,000 for the initial multiple class portfolio and $10,000 per year for each additional multiple class portfolio. Pursuant to the agreement with FPS, maximum administration fees are $400,000 for the initial multiple class portfolio and $60,000 per year for each subsequent multiple class portfolio. The services FPS provides to the Series include: coordinating and monitoring of any third parties furnishing services to the Series; providing the necessary office space, equipment and personnel to perform administrative and clerical functions for the Series; preparing, filing and distributing proxy materials, periodic reports to shareholders, registration statements and other documents; and responding to shareholder inquiries. THE CUSTODIAN, TRANSFER AGENT AND ACCOUNTING/PRICING AGENT Bankers Trust Company, c/o BTNY Services, Inc., 34 Exchange Place, Jersey City, NJ 07302-1107 is custodian for the securities and cash of each Series. FPS serves as each Series' transfer agent. As transfer agent, it maintains the records of each shareholder's account, answers shareholder inquiries concerning accounts, processes purchases and redemptions of the Funds' shares, acts as dividend and distribution disbursing agent and performs other shareholder service functions. Shareholder inquiries should be made to the transfer agent at (800) 448-2430. FPS also performs certain accounting and pricing services for the Trust, including the daily calculation of the Funds' respective net asset values. PURCHASE OF SHARES Shares of the Global Funds may be purchased directly from the Trust at the net asset value next determined after receipt of the order in proper form by the transfer agent. There is no sales load in connection with the purchase of Fund shares. The Trust reserves the right to reject any purchase order and to suspend the offering of shares of the Funds or the Series. The minimum initial investment for Fund shares is $100,000. Subsequent investments for Fund shares will be accepted in minimum amounts of $2,500. The Trust reserves the right to vary the initial investment minimum and minimums for additional investments in the Funds at any time. In addition, Brinson Partners may waive the minimum initial investment requirement for any investor. Purchase orders for shares of the Global Funds 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 Funds' net asset values per share are calculated, are priced according to the net asset value determined on that day. Purchase orders for shares of the Funds 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 Fund. Shares of the Fund may be purchased through broker-dealers, banks and bank trust departments which may charge the investor a transaction fee or other fee for their services at the time of purchase. Such fees would not otherwise be charged if the shares were purchased directly from the Trust. 9 PURCHASES MAY BE MADE IN ONE OF THE FOLLOWING WAYS:
INITIAL INVESTMENT SUBSEQUENT INVESTMENTS ------------------------------- ------------------------------- MINIMUM $100,000 MINIMUM $2,500 BY MAIL n Complete and sign the Account n Make your check payable Application accompanying this to "Brinson ( ) Fund." Prospectus. 6 n Make you check payable to n Enclose the remittance por- "Brinson ( ) Fund." tion of your account statement and include the amount of in- vestment, the account name and number. n Mail to the address indicated n Mail to the address indicated on the Account Application. on your account statement or enclose in the envelope pro- vided. BY WIRE n Call (800) 448-2430 to ar- range for a wire transaction. n Wire federal funds within 24 n Wire federal funds to: hours UNITED MISSOURI BANK KC NA to: UNITED MISSOURI BANK KC NA ABA # 10-10-00695 ABA # 10-10-00695 FOR: FPS SERVICES, INC. FOR: FPS SERVICES, INC. A/C 98-7037-071-9 A/C 98-7037-071-9 "BRINSON ( ) FUND" AND "BRINSON ( ) FUND" AND INCLUDE YOUR NAME AND ACCOUNT INCLUDE YOUR NAME AND YOUR NEW NUMBER. ACCOUNT NUMBER. n Complete and sign the Account Application and mail to the address indicated immediately following the initial wire transaction. BY TELEPHONE n Call (800) 448-2430 to ar- n Call (800) 448-2430 to ar- range for a telephone transac- range for a telephone transac- tion. tion. = PURCHASING BY EXCHANGES n You may open a new account by n You may purchase additional O making an exchange from an shares by making an exchange existing Brinson Fund class from an existing Brinson Fund account of any other series of class account of any other se- the Trust. Exchanges may be ries of the Trust. Exchanges made by mail or telephone. may be made by mail or tele- Call (800) 448-2430 for assis- phone. Call (800) 448-2430 for tance. assistance. AUTOMATICALLY n Please refer to "Automatic n Please refer to "Automatic Investment Plan" under Investment Plan" under "Account Options" or call "Account Options" or call (800) 448-2430 for assistance. (800) 448-2430 for assistance.
ACCOUNT OPTIONS The following account options are available to shareholders. There are no charges for the programs noted below and an investor may change or terminate these plans at any time by written notice to the Trust. For information about participating in these account options, call the transfer agent at (800) 448- 2430. 10
ACCOUNT OPTIONS INSTRUCTIONS - --------------------- -------------------------------------------------------- AUTOMATIC INVESTMENT n You may have money deducted directly from your PLAN checking, savings or bank money market accounts for investment in the Funds each month or quarter. n Complete the Automatic Investment Plan section on the Account Application accompanying this Prospectus and mail it to the address indicated. n The initial account must be opened first with the initial $100,000 minimum investment, with subsequent minimum investments of $500 pursuant to the Automatic Investment Plan. n The account designated will be debited in the specified amount, on the date indicated, and Fund shares will be purchased. The Trust may alter or terminate the Automatic Investment Plan at any time. SYSTEMATIC WITHDRAWAL n A shareholder with a minimum account of $100,000 PLAN may direct the transfer agent to send the shareholder (or anyone the shareholder designates) regular, monthly, quarterly or semi-annual payments. Each payment under a Systematic Withdrawal Plan ("SWP") must be at least $500. Such payments are drawn from share redemptions. n Shareholders participating in the SWP must elect to have their dividends and distributions automatically reinvested in additional Fund shares. n The Trust may terminate any SWP for an account if the value of the account falls below $50,000 as a result of share redemptions or an exchange of shares of a Fund for Brinson Fund class shares of another series of the Trust. INDIVIDUAL RETIREMENT n An IRA is a tax-deferred retirement savings account ACCOUNTS that may be used by an individual under age 70 1/2 who has compensation or self-employment income and his or her unemployed spouse, or an individual who has received a qualified distribution from his or her employer's retirement plan. n The minimum purchase requirement for IRAs is $2,000.
REDEMPTION OF SHARES Shareholders may redeem shares of the Funds without charge on any business day that the NYSE is open. Redemptions will be effected at the net asset value per share next determined after the receipt by the transfer agent of a redemption request meeting the requirements described below. The Trust normally sends redemption proceeds on the next business day but, in any event, redemption proceeds are sent within five business days of receipt of a redemption request in proper form. Payment also may be made by wire directly to any bank previously designated by the shareholder in an Account Application. There is no charge for redemptions by wire. Please note that the shareholder's bank may impose a fee for wire service. The Trust will honor redemption 11 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 Funds' net asset values per share are calculated are effected that day. Redemption requests received in proper form by the transfer agent after the close of the NYSE are effected as of the time the net asset value per share is next determined. No redemption will be processed until the transfer agent has received a completed application with respect to the account. The Trust will satisfy redemption requests in cash to the fullest extent feasible, so long as such payments would not, in the opinion of Brinson Partners or the Board of Trustees, result in the necessity of a 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 a Series, during any 90 day period for any one shareholder. Payments in excess of this limit will also be made wholly in cash unless the Board of Trustees believes that economic conditions exist which would make such a practice detrimental to the best interests of the Series. Any portfolio securities paid or distributed in-kind would be valued as described under "Net Asset Value." In the event that an in- kind distribution is made, a shareholder may incur additional expenses, such as the payment of brokerage commissions, on the sale or other disposition of the securities received from a Series. In-kind payments need not constitute a cross-section of a Series' portfolio. Where a shareholder has requested redemption of all or a part of the shareholder's investment and where a Series computes such redemption in-kind, the Series will not recognize gain or loss for federal tax purposes on the securities used to compute the redemption, but the shareholder will recognize gain or loss equal to the difference between the fair market value of the securities received and the shareholder's basis in the Fund shares redeemed. SHARES MAY BE REDEEMED IN ONE OF THE FOLLOWING WAYS: BY MAIL n Submit a written request for redemption with: . The Fund's name; 6 . Your Fund account number; . The dollar amount or number of shares to be redeemed; and . Signatures of all persons required to sign for transactions, exactly as their names appear on the Account Application. n A signature guarantee for the signature of each person in whose name the account is registered is required on all written redemption requests over $5,000. n Mail to the address indicated on the Account Application. Questions may be directed to the transfer agent at (800) 448- 2430. BY WIRE n This service must be elected either on the initial application or subsequently in writing. n Shares may be redeemed by instructing the transfer agent by telephone at (800) 448-2430. n Wire redemption requests must be received by the transfer agent before 4:00 p.m. Eastern time for money to be wired the next business day.
12 BY TELEPHONE (800) 448-2430 n This service = must be elected in advance either on the initial application or subsequently arranged in writing. n Shares may be redeemed by instructing the transfer agent by telephone at (800) 448- 2430. n Shares will be sold at the next share price calculated after the order is received and accepted. Share price is normally calculated at 4:00 p.m. Eastern time. AUTOMATICALLY n Please refer to "Systematic Withdrawal Plan" under "Account Options" or call (800) 448-2430 for assistance.
- ---------- NOTE: The Trust reserves the right to refuse a wire or telephone redemption if it is believed advisable to do so. Procedures for redeeming shares of the Global Funds by wire or telephone may be modified or terminated by the Trust at any time. Shares of the Funds 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 redeemed directly from the Trust. TELEPHONE TRANSACTIONS: Shareholders who wish to initiate purchase, exchange or redemption transactions by telephone must elect the option, as described above. With respect to such telephone transactions, the Funds will ensure that reasonable procedures are used to confirm that instructions communicated by telephone are genuine (including verification of the shareholder's social security number or mother's maiden name) and, if they do not, the Funds or the transfer agent may be liable for any losses due to unauthorized or fraudulent transactions. Written confirmation will be provided for all purchase, exchange and redemption transactions initiated by telephone. EXCHANGE OF SHARES: Fund shares may be exchanged for Brinson Fund class shares of any other series within the Trust. Exchanges will not be permitted between the Brinson Fund class shares and the SwissKey Fund class shares of any 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 Account Application. The telephone exchange 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 series' relative net asset values per share. Exchanges may be made only for shares of a series and class then offering its shares for sale in your state of residence and are subject to the minimum initial investment requirement. For federal income tax purposes, an exchange of shares would be treated as if the shareholder had redeemed shares of one series and reinvested in shares of another series. Gains or losses on the shares exchanged are realized by the shareholder at the time of the exchange. Any shareholder wishing to make an exchange should first obtain and review a prospectus of the other series. Requests for telephone exchanges must be received by the transfer agent by the close of regular trading hours (currently 4:00 p.m. Eastern time) on the NYSE on any day that the NYSE is open for regular trading. 13 TRANSFER OF SECURITIES: At the discretion of the Trust, investors may be permitted to purchase Fund shares by transferring securities to a series that meet the series' investment objective and policies. Securities transferred to a 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 a series in exchange for securities will be issued at the net asset value per share of the Fund determined as of the same time. All dividends, interest, subscription, or other rights pertaining to such securities shall become the property of the series and must be delivered to the series by the investor upon receipt from the issuer. Investors who are permitted to transfer such securities will be required to recognize a gain or loss on such transfer and pay tax thereon, if applicable, measured by the difference between the fair market value of the securities and the investors' basis therein. Securities will not be accepted in exchange for shares of a 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. NET ASSET VALUE The net asset value per share for the Brinson Fund class shares and SwissKey Fund class shares is computed by adding, with respect to each class of shares, the value of the Series' investments, cash and other assets attributable to that class, deducting liabilities of the class and dividing the result by the number of shares of that class outstanding. The public offering price of the Brinson Fund class shares and the SwissKey Fund class shares, both of which are sold on a continuous basis, is the net asset value of that class. The valuation of assets for determining the net asset value may be summarized as follows: Securities traded on securities exchanges are valued at the last sale price or, if there has been no sale that day, at the last reported bid price, using prices as of the close of trading on their respective exchanges. Price information on listed securities is generally taken from the closing price on the exchange where the security is primarily traded. Valuations of equity securities may be obtained from a pricing service when such prices are believed to reflect fair value of such securities. Use of a pricing service has been approved by the Board of Trustees. Futures contracts are valued at their daily quoted settlement price. Forward foreign currency contracts are valued daily at forward exchange rates and an unrealized gain or loss is recorded. A Series realizes a gain or loss upon settlement of the contracts. For valuation purposes, foreign securities initially expressed in foreign currency values will be converted into U.S. dollar values using WM/Reuters closing spot rates as of 4:00 p.m. London time. Securities with a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. Redeemable securities issued by open-end investment companies are valued using their respective net asset values for purchase orders placed at the close of the NYSE. Securities (including over-the-counter options) for which market quotations are not readily available and other assets are valued at their fair value as determined in good faith by or under the direction of the Trustees. Securities not traded on any U.S. or recognized international securities exchange will be valued at the most recent bid price where market quotations are readily available. 14 Net asset value is determined on each day that the NYSE is open, as of the close of business of the regular session of the NYSE (currently 4:00 p.m. Eastern time). Investments and requests to exchange or redeem shares received by a Series in proper form before such close of business are effective, and will receive the price determined, on that day. Investment, exchange and redemption requests received after such close of business are effective, and will receive the share price determined, on the next business day. Because of time zone differences, foreign exchanges and securities markets will usually be closed prior to the time of the closing of the NYSE and values of foreign futures and options and foreign securities will be determined as of the earlier closing of such exchanges and securities markets. However, events affecting the values of such foreign securities may occasionally occur between the earlier closings of such exchanges and securities markets and the closing of the NYSE which will not be reflected in the computation of the net asset value of a Series. If an event materially affecting the value of such foreign securities occurs during such period, then such securities will be valued at fair value as determined in good faith by or under the direction of the Board of Trustees. Where a foreign securities market remains open at the time that a Series values its portfolio securities, or closing prices of securities from that market may not be retrieved because of local time differences or other difficulties in obtaining such prices at that time, last sale prices in such market at a point in time most practicable to timely valuation of the Series may be used. 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 Saturday). As a result, the net asset value of a Fund may be significantly affected by such trading on days when shareholders have no access to the Fund. Each of the Series' two classes of shares will bear pro rata all of the common expenses of that Series. The net asset value of all outstanding shares of each class of the Series will be computed on a pro rata basis for each outstanding share based on the proportionate participation in the Series represented by the value of shares of that class. All income earned and expenses incurred by the Series will be borne on a pro rata basis by each outstanding share of a class, based on each class' percentage in the Series represented by the value of the shares of such class, except that the Brinson Fund class will not incur any of the expenses under the SwissKey Fund class' 12b-1 Plan. The different expenses borne by each class of shares will result in different net asset values and dividends. The per share net asset value of the SwissKey Fund class shares will generally be lower than that of the Brinson Fund class shares of a Series because of the higher expenses borne by the SwissKey Fund class shares. It is expected, however, that the net asset value per share of the two classes will tend to converge immediately after the payment of dividends, which will differ by approximately the amount of the service and distribution expense differential between the classes. DIVIDENDS, DISTRIBUTIONS AND TAXES DIVIDENDS The Series will distribute their net investment income semi-annually in June and December. The Series will distribute annually in December substantially all of their 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 their net investment income earned through the end of December and not previously distributed as ordinary (not capital) income. 15 Dividends and other distributions paid by a 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 SwissKey Fund class shares will be lower than the per share dividends on the Brinson Fund class shares of each Series as a result of the distribution and service fees applicable with respect to the SwissKey Fund class shares. Both the SwissKey Fund class and Brinson Fund class shares of a Series will share proportionately in the investment income and expenses of that Series, except that the per share dividends on the SwissKey Fund class shares will be lower than the per share dividends on the Brinson Fund class shares, which will not incur any expenses under a Rule 12b-1 Plan. Income dividends and capital gain distributions are reinvested automatically in additional Fund shares of a Series at net asset value, unless the shareholder has notified the transfer agent, in writing, of the shareholder's election to receive them in cash. Distribution options may be changed at any time by requesting a change in writing. Any check in payment of dividends or other distributions which cannot be delivered by the Post Office or which remains uncashed for a period of more than one year may be reinvested in the shareholder's account at the then current net asset value and the dividend option may be changed from cash to reinvest. Dividends are reinvested on the ex dividend date (the "ex date") at the net asset value determined at the close of business on that date. Please note that shares purchased shortly before the record date for a dividend or distribution may have the effect of returning capital although such dividends and distributions are subject to taxes. TAXES Each Series has qualified, and intends to continue to qualify, for taxation as a "regulated investment company" under the Internal Revenue Code of 1986, as amended ("the Code"). Such qualification relieves a Series of liability for federal income taxes to the extent the Series' earnings are distributed in accordance with the Code. Each Series is treated as a separate corporate entity for federal tax purposes. Distributions of any net investment income and of any net realized short-term capital gains are taxable to shareholders as ordinary income. All distributions may be subject to state and local taxes. Distributions of net capital gain (the excess of net long-term capital gain over net short-term capital loss) are taxable to shareholders as long-term capital gain regardless of how long a shareholder may have held shares of a Series. The tax treatment of distributions of ordinary income or capital gains will be the same whether the shareholder reinvests the distributions or elects to receive them in cash. A distribution will be treated as paid on December 31 of the current calendar year if it is declared in October, November or December with a record date in such a month and paid during January of the following calendar year. Such distributions will be taxable to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received. Shareholders will be advised annually of the source and tax status of all distributions for federal income tax purposes. Further information regarding the tax consequences of investing in the Series is included in the Statement of Additional Information. The above discussion is intended for general information only. Investors should consult their own tax advisors for more specific information on the tax consequences of particular types of distributions. Redemptions of Series shares, and the exchange of shares between two series of the Trust, are taxable events and, accordingly, shareholders may realize capital gains or losses on these transactions. Shareholders may be subject to back-up withholding on reportable dividend and redemption payments ("back-up withholding") if a certified taxpayer identification number is not on file with the Series, or if, to the Series' knowledge, an incorrect number has been furnished, or if the Series has been notified by the Internal Revenue Service that an account is subject to back-up withholding. An individual's taxpayer identification number is the individual's social security number. 16 If more than 50% of a Series' total assets at the close of its taxable year consists of stock or securities in foreign corporations, the Series may elect to "pass-through" to shareholders for foreign tax credit purposes the amount of foreign income taxes paid by the Series with respect to its direct holdings of securities in foreign corporations. A Series will make such an election only if it deems such election to be in the best interests of its shareholders. If this election is made, shareholders of the Series will be required to include in their gross incomes their pro rata shares of foreign taxes paid by the Series. However, shareholders will be able to treat their pro rata shares of foreign taxes as either a deduction (itemized deduction in the case of individuals) or a foreign tax credit (but not both) against U.S. income taxes on their tax returns. GENERAL INFORMATION ORGANIZATION The Brinson Funds is a Delaware business trust organized pursuant to an Agreement and Declaration of Trust, dated December 1, 1993. The Trust was originally organized as a Maryland corporation on April 14, 1992. On December 1, 1993, the Trust reorganized as a Delaware business trust through a merger of the Maryland corporation into the Trust. The Trust is registered under the Act as an open-end management investment company, commonly known as a mutual fund, and consists of seven different investment portfolios or series. The Trustees of the Trust may establish additional series or classes of shares without the approval of shareholders. All of the Series, except the Global Bond Fund, are diversified portfolios. The assets of each Series belong only to that Series, and the liabilities of each Series are borne solely by that Series and no other. DESCRIPTION OF SHARES Each Series is authorized to issue an unlimited number of shares of 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 only unissued shares with respect to such series. Shares of each series represent equal proportionate interests in the assets of that series only and have identical voting, dividend, redemption, liquidation, and other rights, except that only shares of each Series' SwissKey Fund class shall have voting rights with respect to the Rule 12b-1 Plan relating to that class as described below. All shares issued are fully paid and non-assessable, and shareholders have no preemptive or other right to subscribe to any additional shares and no conversion rights. Currently, the Trust offers seven series--Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. Two classes of shares are currently issued by the Trust for each series, the SwissKey Fund class and the Brinson Fund class. VOTING RIGHTS Each issued and outstanding full and fractional share of a Series is entitled to one full and fractional vote in the Series and all shares of each Series participate equally with regard to dividends, distributions, and liquidations with respect to that Series. Shareholders do not have cumulative voting rights. On any matter submitted to a vote of shareholders, shares of each Series will vote separately except when a vote of shareholders in the aggregate is required by law, or when the Trustees have determined that the matter affects the interests of more than one Series, in which case the shareholders of all such Series shall be entitled to vote thereon. Only the SwissKey Fund class shareholders may vote on matters related to the Rule 12b-1 Plan associated with that class. 17 SHAREHOLDER MEETINGS The Trustees of the Trust do not intend to hold annual meetings of shareholders of the Series. The U.S. Securities and Exchange Commission, however, requires the Trustees to promptly call a meeting for the purpose of voting upon the question of removal of any Trustee when requested to do so by not less than 10% of the outstanding shareholders of the respective Series. In addition, subject to certain conditions, shareholders of each Series may apply to the other series of the Trust to communicate with other shareholders to request a shareholders' meeting to vote upon the removal of a Trustee or Trustees. PORTFOLIO TURNOVER (GLOBAL FUND AND GLOBAL BOND FUND) As a result of the Global Fund's and Global Bond Fund's investment policies, their portfolio turnover rates may exceed 100%. High portfolio turnover (over 100%) may involve correspondingly greater brokerage commissions and other transaction costs, which will be borne directly by the effected Series and ultimately, by the Series' shareholders. In addition, high portfolio turnover may result in increased short-term capital gains, which, when distributed to shareholders, are treated as ordinary income. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS The Trust will attempt to obtain the best overall price and most favorable execution of transactions in portfolio securities. However, subject to policies established by the Board of Trustees of the Trust, a Series may pay a broker-dealer a commission for effecting a portfolio transaction for the Series in excess of the amount of commission another broker-dealer would have charged if Brinson Partners determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such broker-dealer, viewed in terms of that particular transaction or such firm's overall responsibilities with respect to the clients, including the Series, as to which it exercises investment discretion. In selecting and monitoring broker-dealers and negotiating commissions, consideration will be given to a broker-dealer's reliability, the quality of its execution services on a continuing basis and its financial condition. SHAREHOLDER REPORTS AND INQUIRIES Shareholders will receive semi-annual reports showing portfolio investments and other information as of December 31 and annual reports audited by independent auditors as of June 30. Shareholders with inquiries should call the Global Funds at (800) 448-2430 or write to The Brinson Funds, 3200 Horizon Drive, King of Prussia, PA 19406-0903. PERFORMANCE INFORMATION From time to time, performance information, such as yield or total return, may be quoted in advertisements or in communications to present or prospective shareholders. Performance quotations represent the Funds' past performance and should not be considered as representative of future results. The current yield will be calculated by dividing the net investment income earned per share by a Fund during the period stated in the advertisement (based on the average daily number of shares entitled to receive dividends outstanding during the period) by the maximum net asset value per share on the last day of the period and annualizing the result on a semi-annual compounded basis. The Funds' 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 a Fund. Aggregate total return reflects the total percentage change over the stated period. 18 To help investors better evaluate how an investment in the Global Funds might satisfy their investment objectives, advertisements regarding the Funds may discuss yield or total return as reported by various financial publications. Advertisements may also compare yield or total return to other investments, indices and averages. The following publications, benchmarks, indices and averages may be used: Lipper Mutual Fund Performance Analysis; Lipper Fixed Income Analysis; Lipper Mutual Fund Indices; Morgan Stanley Indices; Shearson Lehman Hutton Treasury Index; Salomon Brothers Indices; Dow Jones Composite Average or its component indices; Standard & Poor's 500 Stock Index or its component indices; Wilshire Indices; The New York Stock Exchange composite or component indices; CDA Mutual Fund Report; Weisenberger--Mutual Funds Panorama and Investment Companies; Mutual Fund Values and Mutual Fund Service Book, published by Morningstar, Inc.; comparable global portfolios managed by the Advisor; and financial publications such, as Business Week, Kiplinger's Personal Finance, Financial World, Forbes, Fortune, Money Magazine, The Wall Street Journal, Barron's, et al., which rate fund performance over various time periods. The principal value of an investment in the Funds 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 Funds will not be included in the Global Funds' calculations of yield or total return. Further information about the performance of the Funds is included in the Funds' Annual Report dated June 30, 1996, which may be obtained without charge by contacting the Trust at (800) 448-2430. 19 APPENDIX A INVESTMENT POLICIES AND TECHNIQUES EQUITY SECURITIES (GLOBAL FUND AND GLOBAL EQUITY FUND): The Series may invest in a broad range of equity securities of U.S. and non-U.S. issuers, including common stocks of companies or closed-end investment companies, preferred stocks, debt securities convertible into or exchangeable for common stock, securities such as warrants or rights that are convertible into common stock, and sponsored or unsponsored American, European and Global depository receipts ("Depository Receipts"). The issuers of unsponsored Depository Receipts are not obligated to disclose material information in the United States. The Series expects their U.S. equity investments to emphasize large and intermediate capitalization companies. The equity markets in the non-U.S. component of the Series will typically include available shares of larger capitalization companies, although the Global Fund may also invest in small market capitalization equity markets. Capitalization levels are measured relative to specific markets, thus large, intermediate and small capitalization ranges vary country by country. The Global Fund may invest in equity securities of companies considered by the Advisor to be in their post- venture capital stage, or "post-venture capital companies." A post-venture capital company is a company that has received venture capital financing either (a) during the early stages of the company's existence or the early stages of the development of a new product or service, or (b) as part of a restructuring or recapitalization of the company. The Global Fund also may invest in other open-end investment companies advised by Brinson, in equity securities of issuers in emerging markets, and in securities with respect to which the return is derived from the equity securities of issuers in emerging markets. FIXED INCOME SECURITIES (GLOBAL FUND AND GLOBAL BOND FUND): The Series may invest in a broad range of fixed income securities of U.S. and non-U.S. issuers, including governments and governmental entities, supranational issuers as well as corporations and other business organizations. The Series may purchase U.S. dollar denominated securities that reflect a broad range of investment maturities, qualities and sectors. A majority of the fixed income securities in which the Series will invest will possess a minimum rating of BBB- by Standard & Poor's Ratings Group ("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 characteristics and, in fact, have speculative characteristics; and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments than is the case with higher rated bonds. Securities rated lower than BBB- by S&P and Baa3 by Moody's are classified as non-investment grade securities (commonly referred to as "junk bonds") carry a higher degree of risk and are considered to be speculative by the major credit rating agencies. Both Series currently intend to limit their aggregate investments in non- investment grade debt securities of their U.S. and non-U.S. dollar-denominated fixed income assets to no more than 5% of their respective net assets. To the extent that a security held by a Series is downgraded to below investment grade, the Series will dispose of that or another non-investment grade security so that no more than 5% of its assets will be invested in below investment grade securities. Other fixed income securities in which the Series may invest include zero coupon securities, mortgage-backed securities, asset- backed securities and when-issued securities. The non-U.S. fixed income component of the Series will typically be invested in the securities of non-U.S. governments, governmental agencies and supranational issues. A supranational entity is an entity established or financially supported by the national governments of one or more countries to promote reconstruction or development. Examples of supranational entities include, among others: the World Bank, the European Economic Community, the European Coal and Steel Community, the European Investment Bank, the Inter- American Development Bank, the Export-Import Bank and the Asian Development Bank. 20 The Global Fund may invest in fixed income securities of emerging market issuers, including government and government-related entities (including participation in loans between governments and financial institutions), and of entities organized to restructure outstanding debt securities of developing countries' corporate issuers. CASH AND CASH EQUIVALENTS (ALL GLOBAL FUNDS): The Series may invest a portion of their assets in short-term debt securities (including repurchase agreements and reverse repurchase agreements) of corporations, the U.S. government and its agencies and instrumentalities and banks and finance companies, which may be denominated in any currency. When unusual market conditions warrant, a Series may make substantial temporary defensive investments in cash equivalents up to a maximum of 100% of its net assets. Cash equivalent holdings may be in any currency (although such holdings may not constitute "cash or cash equivalents" for tax diversification purposes under the Code). When a Series invests for defensive purposes, it may affect the attainment of the Series' investment objective. ZERO COUPON SECURITIES (GLOBAL FUND AND GLOBAL BOND FUND): Zero coupon securities are debt obligations which do not entitle the holder to any periodic payments of interest prior to maturity or a specified date when the securities begin paying current interest (the "cash payment date") and, therefore, are issued and traded at a discount from their value at maturity or par value. Such bonds carry an additional risk in that, unlike bonds which pay interest throughout the period to maturity, a Series investing in zero coupon securities will realize no cash until the cash payment date and, if the issuer defaults, a Series may obtain no return at all on its investment. The market price of zero coupon securities generally is more volatile than the market price of securities that pay interest periodically and are likely to be more responsive to changes in interest rates than non-zero coupon securities having similar maturities and credit qualities. For federal tax purposes, the Series will be required to include in income daily portions of original issue discount accrued and to distribute the same to shareholders annually, even if no payment is received before the distribution date. MORTGAGE- AND ASSET-BACKED SECURITIES (GLOBAL FUND AND GLOBAL BOND FUND): Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, pools of mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by agencies or instrumentalities of the U.S. government. Other mortgage-backed securities are issued by private issuers, generally originators of and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities (collectively, "private lenders"). Mortgage-backed securities issued by private lenders may be supported by pools of mortgage loans or other mortgage-backed securities that are guaranteed, directly or indirectly, by the U.S. government or one of its agencies or instrumentalities, or they may be issued without any governmental guarantee of the underlying mortgage assets but with some form of non-governmental credit enhancement. Asset-backed securities have structural characteristics similar to mortgage- backed securities. However, the underlying assets are not first-lien mortgage loans or interests therein; rather, they include assets such as motor vehicle installment sales contracts, other installment loan contracts, home equity loans, leases of various types of property and receivables from credit card or other revolving credit arrangements. Payments or distributions of principal and interest on asset-backed securities may be supported by non-governmental credit enhancements similar to those utilized in connection with mortgage- backed securities. The yield characteristics of mortgage- and asset-backed securities differ from those of traditional debt obligations. Among the principal differences are that interest and principal payments are made more frequently on mortgage- and asset-backed securities, usually monthly, and that principal may be prepaid at any time 21 because the underlying mortgage loans or other assets generally may be prepaid at any time. As a result, the rate of return on these securities may be affected by prepayments of principal on the underlying loans, which generally increase as interest rates decline. As a result, if a Series purchases these securities at a premium, a prepayment rate that is faster than expected will reduce yield to maturity, while a prepayment rate that is slower than expected will have the opposite effect of increasing yield to maturity. Conversely, if a Series purchases these securities at a discount, a prepayment rate that is faster than expected will increase the yield to maturity, while a prepayment rate that is slower than expected will reduce the yield to maturity. Accelerated prepayments on securities purchased by a Series at a premium also impose a risk of loss of principal because the premium may not have been fully amortized at the time the principal is prepaid in full. In addition, like other debt securities, the values of mortgage-related securities, including government and government-related mortgage pools, generally will fluctuate in response to market interest rates. The market for privately issued mortgage- and asset-backed securities is smaller and less liquid than the market for government sponsored mortgage-backed securities. WHEN-ISSUED SECURITIES (GLOBAL FUND AND GLOBAL BOND FUND): The Series may purchase securities on a "when-issued" basis for payment and delivery at a later date. The price is generally fixed on the date of commitment to purchase. During the period between purchase and settlement, no interest accrues to a Series. At the time of settlement, the market value of the security may be more or less than the purchase price. A Series will establish a segregated account consisting of cash, U.S. government securities, equity securities and/or investment and non-investment grade debt securities in an amount equal to the amounts of its when-issued securities. The cash, U.S. government securities, equity securities, investment or non-investment grade debt securities and other assets held in any segregated account maintained by the Series with respect to any when-issued securities, options, futures, forward contracts or other derivative transactions shall be liquid, unencumbered and marked-to-market daily (the assets held in a segregated account are referred to in this Prospectus as "Segregated Assets"). FOREIGN CURRENCY TRANSACTIONS (ALL GLOBAL FUNDS): The Series may conduct their foreign currency exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market or through entering into contracts to purchase or sell foreign currencies at a future date (i.e., a "forward foreign currency" contract or "forward" contract). A forward contract involves an obligation to purchase or sell a specific currency amount at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. The Series will convert currency on a spot basis from time to time and investors should be aware that changes in currency exchange rates and exchange control regulations may affect the costs of currency conversion. The Series may enter into forward contracts for hedging purposes as well as non-hedging purposes. For hedging purposes, a Series may enter into contracts to deliver or receive foreign currency it will receive from or require for its normal investment activities. It may also use contracts in a manner intended to protect foreign currency-denominated securities from declines in value due to unfavorable exchange rate movements. A Series may also enter into contracts with the intent of changing the relative exposure of the Series' portfolio of securities to different currencies to take advantage of anticipated changes in exchange rates. When a Series enters into forward contracts for non-hedging purposes, it will establish a segregated account with its custodian bank in which it will maintain Segregated Assets equal in value to its obligations with respect to its forward contracts for non-hedging purposes. At the maturity of a forward contract, a Series may either sell a portfolio security and make delivery of the foreign currency, or it may retain the security and terminate its contractual obligation to deliver the foreign currency by purchasing an "offsetting" contract with the same currency trader, obligating it to purchase, on the 22 same maturity date, the same amount of the foreign currency. A Series may realize a gain or loss from currency transactions. FUTURES CONTRACTS (ALL GLOBAL FUNDS): The Series may enter into contracts for the future purchase or sale of securities, indices or foreign currencies. A financial futures contract is an agreement between two parties to buy or sell a specified debt security at a set price on a future date. An index futures contract is an agreement to take or make delivery of an amount of cash based on the difference between the value of the index at the beginning and at the end of the contract period. A futures contract on a foreign currency is an agreement to buy or sell a specified amount of a currency for a set price on a future date. A Series may enter into futures contracts to the extent that not more than 5% of its assets are required as futures contract margin deposits and its obligations relating to such futures transactions represent not more than 25% of the Series' assets. The Series will enter into such 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. OPTIONS (ALL GLOBAL FUNDS): 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 Series may use options traded on U.S. exchanges and, to the extent permitted by law, options traded over-the-counter and on recognized foreign exchanges. It is the position of the United States Securities and Exchange Commission that over-the-counter options are illiquid. Accordingly, a Series will invest in such options only to the extent consistent with its 15% limit on investment in illiquid securities. REPURCHASE AGREEMENTS (ALL GLOBAL FUNDS): The Series may enter into repurchase agreements with banks or broker-dealers. Repurchase agreements are considered under the Act to be collateralized loans by a Series to the seller secured by the securities transferred to the Series. Repurchase agreements under the Act will be fully collateralized by securities which the Series may invest in directly. Such collateral will be marked-to-market daily. If the seller of the underlying security under the repurchase agreement should default on its obligation to repurchase the underlying security, a Series may experience delay or difficulty in recovering its cash. To the extent that, in the meantime, the value of the security purchased had decreased, the Series could experience a loss. No more than 15% of a Series' net assets will be invested in illiquid securities, including repurchase agreements which have a maturity of longer than seven days. The Series must treat each repurchase agreement as a security for tax diversification purposes and not as cash, a cash equivalent or as a receivable. BORROWING (ALL GLOBAL FUNDS): Each Series is authorized, within specified limits, to borrow money as a temporary defensive measure for extraordinary purposes and to pledge its assets in connection with such borrowings. LOANS OF PORTFOLIO SECURITIES (ALL GLOBAL FUNDS): Each Series may loan its portfolio securities to broker-dealers and other institutional investors pursuant to agreements requiring that the loans be continuously secured by collateral equal at all times in value to at least the market value of the securities loaned. The major risk to which a 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, a Series will only enter into loan arrangements after a review of all pertinent factors by Brinson Partners, subject to overall supervision by the Board of Trustees, including the creditworthiness of the borrowing broker-dealer or institution and then only if the consideration to be received from such loans would justify the risk. Creditworthiness will be monitored on an ongoing basis by Brinson Partners. 23 RULE 144A AND ILLIQUID SECURITIES (ALL GLOBAL FUNDS): Each Series may invest up to 15% of its net assets in illiquid securities. Illiquid securities are those securities that are not readily marketable, including restricted securities and repurchase obligations that mature in more than seven days. Certain restricted securities that may be resold to institutional investors pursuant to Rule 144A under the Securities Act of 1933 may be determined to be liquid under guidelines adopted by the Trust's Board of Trustees. INVESTMENT COMPANY SECURITIES (GLOBAL FUND): The Trust has received an exemptive order (the "Exemptive Order") from the U.S. Securities and Exchange Commission which permits each Series to invest its assets in certain portfolios of Brinson Relationship Funds, another registered investment company advised by Brinson Partners. Currently, only the Global Fund intends to invest in the portfolios of Brinson Relationship Funds and only to the extent consistent with Brinson Partners' investment process of allocating assets to specific asset classes. The Global Fund will invest in the portfolios of Brinson Relationship Funds to obtain exposure to the following asset classes: (1) equity and fixed income securities of issuers located in emerging market countries ("Emerging Market Securities"); (2) equity securities issued by companies with relatively small overall market capitalizations ("Small Cap Securities"); and (3) high yield securities ("High Yield Securities"). The Global Fund will invest in corresponding portfolios of Brinson Relationship Funds only to the extent the Advisor determines that such investments are a more efficient means for the Global Fund to gain exposure to the asset classes identified above than by investing directly in individual securities. Thus, to gain exposure to Emerging Market Securities, the Global Fund will invest in the Brinson Emerging Markets Equity Fund and the Brinson Emerging Markets Debt Fund portfolios of Brinson Relationship Funds. To gain exposure to Small Cap Securities and High Yield Securities, the Global Fund will invest in the Brinson Post-Venture Fund and the Brinson High Yield Fund portfolios, respectively, of Brinson Relationship Funds. Each portfolio of Brinson Relationship Funds in which the Global Fund may invest is permitted to invest in the same securities of a particular asset class in which the Global Fund is permitted to invest directly, and with similar risks. For more detailed descriptions of these investment policies and techniques, please refer to the Statement of Additional Information, which is available without charge upon request by calling (800) 448-2430. 24 The Brinson Funds BRINSON U.S. BALANCED FUND BRINSON U.S. EQUITY FUND BRINSON U.S. BOND FUND 209 South LaSalle Street Chicago, IL 60604-1295 PROSPECTUS OCTOBER 28, 1996 THE BRINSON FUNDS (the "Trust") is a no-load, open-end management investment company which currently offers seven distinct investment portfolios or "series." Each series offers two classes of shares: the Brinson Fund class and SwissKey Fund class. This Prospectus pertains only to the Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund and Brinson U.S. Bond Fund (each a "Fund" and collectively, the "Funds" or "U.S. Funds"), which represent the Brinson Fund class shares of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund series (each a "Series" and collectively, the "Series"). The Brinson Fund class shares have no sales charges or 12b-1 fees. The SwissKey Fund class shares are also offered without sales charges, but impose a 12b-1 fee. Further information relating to the SwissKey Fund class shares may be obtained by calling 1-800-SWISSKEY. This Prospectus sets forth concisely the information a prospective investor should know before investing in any of the U.S. Funds. Investors should read and retain this Prospectus for future reference. Additional information about the U.S. Funds, and the other Series and classes of shares of the Trust is contained in the Statement of Additional Information dated October 28, 1996, as amended from time to time, which has been filed with the U.S. Securities and Exchange Commission. The Statement of Additional Information is incorporated by reference into this Prospectus and is available upon request and without charge from the Trust, at the addresses and telephone numbers below. AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN ANY OF THE FUNDS IS NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE U.S. SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. UNDERWRITER: ADVISOR: Fund/Plan Broker Services, Inc. Brinson Partners, Inc. 3200 Horizon Drive 209 South LaSalle Street King of Prussia, PA 19406-0903 Chicago, IL 60604-1295 (800) 448-2430 (800) 448-2430 TABLE OF CONTENTS
PAGE ---- Annual Fund Operating Expenses............................................. 1 Financial Highlights....................................................... 2 Description of the U.S. Funds.............................................. 3 Investment Objectives and Policies......................................... 3 U.S. Balanced Fund....................................................... 3 U.S. Equity Fund......................................................... 3 U.S. Bond Fund........................................................... 4 Investment Considerations and Risks........................................ 4 Management of the Trust ................................................... 6 Portfolio Management....................................................... 7 Administration of the Trust................................................ 7 Purchase of Shares......................................................... 7 Account Options............................................................ 9 Redemption of Shares....................................................... 10 Net Asset Value............................................................ 12 Dividends, Distributions and Taxes......................................... 13 General Information........................................................ 15 Performance Information.................................................... 16 Appendix A................................................................. 18
This Prospectus is not an offering of the securities herein described in any jurisdiction or to any person to whom it is unlawful for the Funds to make such an offer or solicitation. No sales representative, dealer, or other person is authorized to give any information or make any representation other than those contained in this Prospectus. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
TOTAL FUND MANAGEMENT FEES OTHER EXPENSES OPERATING EXPENSES (AFTER FEE WAIVER)/1/ (AFTER REIMBURSEMENT)/2/ (AFTER REIMBURSEMENT) --------------------- ------------------------ --------------------- Brinson U.S. Balanced Fund................... 0.49% 0.31% 0.80% Brinson U.S. Equity Fund................... 0.36% 0.44% 0.80% Brinson U.S. Bond Fund.. 0.00% 0.60% 0.60%
- ---------- /1The/Advisor has irrevocably agreed to waive its fees and reimburse certain expenses so that total operating expenses of the Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund and Brinson U.S. Bond Fund will never exceed 0.80%, 0.80% and 0.60%, respectively. Had the Advisor not irrevocably agreed to waive fees and reimburse expenses, the total fund operating expenses for the fiscal year ended June 30, 1996 for the Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund and Brinson U.S. Bond Fund would have been 1.01%, 1.14% and 3.63%, respectively. /2"Other/Expenses" include the fee paid to the Administrator, which is calculated on the basis of the total net assets of all portfolios within the Trust and is subject to an annual minimum fee of $75,000 for the initial multiple class portfolio and $10,000 per each additional multiple class portfolio. EXAMPLE: Based on the level of expenses listed above after reimbursement, the total expenses relating to an investment of $1,000 would be as follows, assuming a 5% annual return and redemption at the end of each time period.
NAME OF FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------ ------ ------- ------- -------- Brinson U.S. Balanced Fund...................... $ 8 $26 $44 $99 Brinson U.S. Equity Fund........................ $ 8 $26 $44 $98 Brinson U.S. Bond Fund.......................... $ 6 $19 $33 $75
The foregoing table is designed to assist the investor in understanding the various costs and expenses that a shareholder will bear directly or indirectly. - ------------------------------------------------------------------------------- THE EXAMPLE SHOULD NOT BE CONSIDERED REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, A FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN ACTUAL RETURNS GREATER OR LESS THAN 5%. - ------------------------------------------------------------------------------- 1 FINANCIAL HIGHLIGHTS The selected financial information in the following table has been audited by the Funds' independent auditors, whose unqualified report thereon appears in the Funds' Annual Report to Shareholders dated June 30, 1996. Additional financial data and related notes are contained in the Funds' Annual Report to Shareholders, which is incorporated by reference into the Statement of Additional Information and is available without charge upon request. FINANCIAL HIGHLIGHTS--FISCAL YEARS ENDED JUNE 30 The following table presents financial data relating to a share of beneficial interest outstanding throughout the periods presented. This information has been derived from the Funds' financial statements.
INCOME (LOSS) FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS ------------------------------ ----------------------------- TOTAL DISTRIBU- INCOME DISTRIBU- TIONS NET NET NET (LOSS) TIONS FROM AND ASSET ASSETS NET ASSET NET REALIZED FROM FROM NET IN EXCESS VALUE- TOTAL END OF VALUE- INVEST- AND INVEST- INVEST- OF NET TOTAL END RETURN PERIOD BEGINNING MENT UNREALIZED MENT MENT REALIZED DISTRIBU- OF (NON- (IN YEAR OF PERIOD INCOME GAIN (LOSS) OPERATIONS INCOME GAIN TIONS PERIOD ANNUALIZED) 000S) - ---- --------- ------- ----------- ---------- --------- --------- --------- ------ ----------- -------- BRINSON U.S. BALANCED FUND (Commencement of Operations December 30, 1994) 1995............ $10.00 0.23 1.16 1.39 (0.16) -- (0.16) $11.23 13.91% $157,724 1996............ 11.23 0.44 1.04 1.48 (0.43) (0.57) (1.00) 11.71 13.52% $227,829 BRINSON U.S. EQUITY FUND (Commencement of Operations February 22, 1994) 1994............ $10.00 0.05 (0.36) (0.31) (0.04) -- (0.04) $ 9.65 (3.10%) $ 8,200 1995............ 9.65 0.16 1.89 2.05 (0.14) (0.03) (0.17) 11.53 21.45% $ 42,573 1996............ 11.53 0.17 3.31 3.48 (0.17) (0.25) (0.42) 14.59 30.57% $126,342 BRINSON U.S. BOND FUND (Commencement of Operations August 31, 1995) 1996............ $10.00 0.50 (0.14) 0.36 (0.40) (0.03) (0.43) $ 9.93 3.60% $ 9,047 RATIOS/SUPPLEMENTAL DATA ------------------------ RATIO OF NET RATIO OF EXPENSES INVESTMENT INCOME TO AVERAGE NET TO AVERAGE NET ASSETS ASSETS --------------------- --------------------- AVERAGE BEFORE AFTER BEFORE AFTER COMMIS- EXPENSE EXPENSE EXPENSE EXPENSE PORTFOLIO SION REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER RATE PAID YEAR MENT MENT MENT MENT RATE PER SHARE - ---- ---------- ---------- ---------- ---------- --------- --------- BRINSON U.S. BALANCED FUND (Commencement of Operations December 30, 1994) 1995............ 1.06%/1/ 0.80%/1/ 4.36%/1/ 4.63%/1/ 196% N/A 1996............ 1.01% 0.80% 3.76% 3.97% 240% $0.0481 BRINSON U.S. EQUITY FUND (Commencement of Operations February 22, 1994) 1994............ 5.40%/1/ 0.80%/1/ (2.82)%/1/ 1.78%/1/ 9% N/A 1995............ 1.70% 0.80% 1.09% 1.99% 33% N/A 1996............ 1.14% 0.80% 1.13% 1.47% 36% $0.0457 BRINSON U.S. BOND FUND (Commencement of Operations August 31, 1995) 1996............ 3.63%/1/ 0.60%/1/ 3.00%/1/ 6.03%/1/ 363% N/A
- ----- /1/Annualized N/A=Not Applicable 2 DESCRIPTION OF THE U.S. FUNDS The U.S. Equity Fund and U.S. Bond Fund each have an investment objective to maximize total return, consisting of capital appreciation and current income, while controlling risk. The U.S. Balanced Fund has the investment objective to maximize total return, consisting of capital appreciation and current income. These investment objectives are fundamental and may not be changed without a vote of the holders of the majority of the voting securities of the respective Series. Unless otherwise stated in this Prospectus or in the Statement of Additional Information, each Series' investment policies are not fundamental and may be changed without shareholder approval. There can be no assurance that the Series will achieve their investment objectives. The Series do not intend to concentrate their investments in a particular industry. The Series do not intend to issue senior securities, as defined in the Investment Company Act of 1940, as amended (the "Act"), except that each Series may engage in borrowing activities as defined in Appendix A and in the Statement of Additional Information. Each Series' investment objective and its policies concerning portfolio lending, borrowing, the issuance of senior securities and concentration are "fundamental," which means that they may not be changed without the affirmative vote of the holders of a majority of the Series' outstanding voting securities (as defined in the Act). INVESTMENT OBJECTIVES AND POLICIES U.S. BALANCED FUND INVESTMENT OBJECTIVE The U.S. Balanced Fund's investment objective is to maximize total return, consisting of capital appreciation and current income. In seeking to achieve its investment objective, the Series attempts to control risk. Under normal circumstances, the Series will invest at least 25% of its net assets in fixed income securities. The Series may utilize a wide range of equity, debt and money market securities. The Series may also invest in equity securities, including warrants, preferred stock and securities convertible into equity securities. The Series may enter into repurchase agreements and reverse repurchase agreements, and may engage in futures and options for hedging and other permissible purposes, as more fully described in "Investment Considerations and Risks" and Appendix A in this Prospectus and in the Statement of Additional Information. It is not the policy of the Series to take unreasonable risks to obtain speculative or aggressively high returns. The Series is a diversified portfolio that seeks to achieve its objective by pursuing active asset allocation strategies across U.S. equity and fixed income markets and active security selection within each market. These decisions are undertaken relative to the U.S. Balanced Index (the "Balanced Benchmark"), which is compiled by Brinson Partners, Inc. ("Brinson Partners" or the "Advisor"). The Balanced Benchmark represents a fixed composite of 65% Wilshire 5000 Index, 30% Salomon Brothers Broad Investment Grade Bond Index and 5% 30-day Treasury Bill Index. From time to time, the Advisor may substitute an equivalent index within a given asset class when the Advisor believes that such new index more accurately reflects the relevant U.S. market. U.S. EQUITY FUND INVESTMENT OBJECTIVE The U.S. Equity Fund's investment objective is to maximize total return, consisting of capital appreciation and current income, while controlling risk. Under normal circumstances, at least 65% of the Series' total assets 3 will be invested in equity securities of U.S. companies. The Series is a diversified portfolio that seeks to achieve its objective by investing in a wide range of equity securities of U.S. companies that are traded on major stock exchanges as well as on the over-the-counter markets. The Series may engage in futures and options for hedging and other permissible purposes as more fully described in "Investment Considerations and Risks" and in Appendix A in this Prospectus and in the Statement of Additional Information. The benchmark for the Series is the Wilshire 5000 Index (the "U.S. Equity Benchmark"). The U.S. Equity Benchmark is a broad weighted index which includes all U.S. common stocks. The U.S. Equity Benchmark is designed to provide a representative indication of the capitalization and return for the U.S. equity market. U.S. BOND FUND INVESTMENT OBJECTIVE The U.S. Bond Fund's investment objective is to maximize total return, consisting of capital appreciation and current income, while controlling risk. As a matter of fundamental policy, under normal circumstances, the Series intends to invest at least 65% of its total assets in U.S. debt securities with an initial maturity of more than one year. The Series is a diversified portfolio that seeks to achieve its objective by investing primarily in fixed income securities, which may also provide the potential for capital appreciation. The Series may also engage in futures and options transactions for hedging and other permissible purposes as more fully described in "Investment Considerations and Risks" and Appendix A in this Prospectus and in the Statement of Additional Information. The Series may invest in a broad range of fixed income securities, including debt securities of the U.S. government, together with its agencies and instrumentalities and the debt securities of U.S. corporations. A majority of the fixed income securities in which the Series will invest will posses a minimum rating of BBB- by Standard & Poor's Ratings Group ("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. Other fixed income securities in which the Series may invest include zero coupon securities, mortgage-backed securities, asset-backed securities and when-issued securities. The Series may invest a portion of its assets in short-term debt securities (including repurchase and reverse repurchase agreements) of corporations, the U.S. government or its agencies and instrumentalities and banks and finance companies. The benchmark for the Series is the Salomon Brothers Broad Investment Grade Bond Index (the "U.S. Bond Benchmark"). The U.S. Bond Benchmark is a market driven broad based index which includes U.S. bonds with over one year to maturity. From time to time, the Advisor may substitute securities in an equivalent index when it believes that such securities in the index more accurately reflect the relevant fixed income securities market. INVESTMENT CONSIDERATIONS AND RISKS The following provides information about the types of instruments in which the U.S. Funds may invest, strategies employed by Brinson Partners in its attempt to attain each Series' investment objective and a summary of related risks. Shareholders should understand that all investments involve risks and there can be no guarantee against loss resulting from an investment in the Series, nor can there be any assurance that the Series will be able to attain their investment objectives. A complete list of the Series' investment restrictions and more detailed information about the Series' investments are contained in Appendix A in this Prospectus and in the Statement of Additional Information. 4 EQUITY SECURITIES (U.S. BALANCED FUND AND U.S. EQUITY FUND)--Equity securities fluctuate in value as a result of various factors, which are often unrelated to the value of the issuer of the securities. These fluctuations may be pronounced. Fluctuations in the value of the U.S. Balanced Fund's and U.S. Equity Fund's equity investments will affect the value of their shares and thus the Funds' total returns to investors. FIXED INCOME SECURITIES (U.S. BALANCED FUND AND U.S. BOND FUND)--All fixed income securities are subject to two types of risks: credit risk and interest rate risk. The credit risk relates to the ability of the issuer to meet interest or principal payments or both as they come due. The interest rate risk refers to the fluctuations in the net asset value of any portfolio of fixed income securities resulting from the inverse relationship between the price and yield of fixed income securities; that is, when the general level of interest rates rises, the prices of outstanding fixed income securities declines, and when interest rates fall, prices rise. FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS (ALL U.S. FUNDS)--The Series may attempt to reduce the overall level of investment risk of particular securities and attempt to protect against adverse market movements by investing in futures, options and other derivative instruments. A derivative instrument is commonly defined as a financial instrument whose performance and value are derived, at least in part, from another source, such as the performance of an underlying asset, or a specific security, or an index of securities. The derivative instruments in which the Series may invest include the purchase and writing of options on securities (including index options), investing in futures contracts for the purchase or sale of instruments based on financial indices, including interest rate indices or indices of U.S. securities, equity or fixed income securities ("futures contracts"), forward contracts and swaps and swap related products, such as equity index swaps, interest rate swaps, currency swaps, and related caps, collars and floors. The investment in futures, options, forward contracts, swaps and similar strategies by the Series will depend on Brinson Partners' judgment as to the potential risks and rewards of different types of strategies, and it should be recognized that the use of these instruments exposes the Series to additional investment risks and transaction costs. If the Advisor incorrectly analyzes the market conditions or does not employ the appropriate strategy with respect to these instruments, the Series could be left in a less favorable position. For example, gains and losses on investments in futures depend on the Advisor's ability to predict correctly the direction of security prices, interest rates and other economic factors. Additional risks inherent in the use of futures, options and forward contracts include: adverse movements in the prices of securities or currencies being hedged; the possible absence of a liquid secondary market for any particular instrument at any time; and the possible need to defer closing out certain hedge positions to avoid adverse tax consequences. Options and futures can be volatile instruments and may not perform as expected. A Series could experience losses if the prices of its options and futures positions are poorly correlated with its other investments. If a hedge is applied at an inappropriate time or price trends are judged incorrectly, options and futures strategies may lower a Series' return (i.e., options and futures may fail as hedging techniques in cases where the price movements of the securities underlying the options and futures do not follow the price movements of the portfolio securities subject to the hedge). The loss from investing in futures transactions is potentially unlimited. A Series does not intend to purchase put and call options that are traded on a national stock exchange in an amount exceeding 5% of its net assets. Each Series may invest in derivatives for hedging purposes, to maintain liquidity, or in anticipation of changes in the composition of its portfolio holdings. No Series will engage in derivative investments purely for speculative purposes. A Series will invest in one or more derivatives only to the extent that the instrument under consideration is judged by the Advisor to be consistent with the Series' overall investment objective and policies. In making such judgment, the potential benefits and risks will be considered in relation to the Series' other portfolio investments. 5 Where not specified, investment limitations with respect to a Series' derivative instruments will be consistent with that Series' existing percentage limitations with respect to its overall investment policies and restrictions. The risks and policies of various types of derivative investments permitted for the Series, including options, futures, forward contracts and interest rate swaps, are described in greater detail in Appendix A in this Prospectus and in the Statement of Additional Information. MANAGEMENT OF THE TRUST THE BOARD OF TRUSTEES Under Delaware law, the Board of Trustees has overall responsibility for managing the business and affairs of the Trust. The Trustees, in turn, elect the officers of the Trust, who are responsible for administering the day-to- day operations of the Series. THE ADVISOR Brinson Partners, a Delaware corporation, is an investment management firm managing, as of June 30, 1996, approximately $58 billion, primarily for pension and profit sharing institutional accounts. Brinson Partners was organized in 1989 when it acquired the institutional asset management business of The First National Bank of Chicago and First Chicago Investment Advisors, N.A. Brinson Partners and its predecessor entities have managed domestic and international investment assets since 1974 and global investment assets since 1982. Brinson Partners has offices in Basel, London, Melbourne, New York, Paris, Singapore, Sydney and Tokyo, in addition to its principal office at 209 South LaSalle Street, Chicago, IL 60604-1295. Brinson Partners is an indirect wholly-owned subsidiary of Swiss Bank Corporation ("Swiss Bank"). Swiss Bank, with headquarters in Basel, Switzerland, is an internationally diversified organization with operations in many aspects of the financial services industry. Brinson Partners also serves as the investment advisor to seven other investment companies: Brinson Relationship Funds, which includes six investment portfolios (series); Enterprise Accumulation Trust; Enterprise International Growth Portfolio; Fort Dearborn Income Securities, Inc.; Hirtle Callaghan International Trust; John Hancock Variable Series Trust-- International Balanced Portfolio; and Pace Large Company Value Equity Investments. Pursuant to its investment advisory agreements with the Trust, on behalf of each Series, Brinson Partners receives a monthly fee at various annual percentage rates of each Series' average daily net assets, as described below, for providing investment advisory services. Brinson Partners is responsible for paying its own expenses and has agreed to waive that portion of its advisory fee equal to the total expenses of the Series for any fiscal year which exceeds the permissible limits applicable to a Series in any state in which its shares are then qualified for sale. Pursuant to its advisory agreements, Brinson Partners is authorized, at its own expense, to obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it does not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. For providing investment advisory services during the fiscal year ended June 30, 1996, the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund paid Brinson Partners a monthly fee at the annual rate of 0.70%, 0.70% and 0.50%, respectively, of each Series' respective average daily net assets. 6 PORTFOLIO MANAGEMENT Investment decisions for the Series are made by an investment management team at Brinson Partners. No member of the investment management team is primarily responsible for making recommendations for portfolio purchases. ADMINISTRATION OF THE TRUST THE UNDERWRITER Fund/Plan Broker Services, Inc. ("FPBS"), 3200 Horizon Drive, King of Prussia, PA 19406-0903, was engaged pursuant to an agreement dated November 20, 1995, for the limited purpose of acting as underwriter to facilitate the registration of the shares of the Trust under state securities laws and to assist in the sale of shares. The fee for such service is borne by the Advisor. THE ADMINISTRATOR The Trust, on behalf of each Series, has entered into an administrative services agreement with FPS Services, Inc. ("FPS"), 3200 Horizon Drive, King of Prussia, PA 19406-0903, 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. Each Series pays its pro rata portion based upon its average daily net assets, but in no event shall a Series pay less than $10,000 per year for each multiple class portfolio. Pursuant to the agreement with FPS, maximum administration fees are $400,000 for the initial multiple class portfolio and $60,000 per year for each subsequent multiple class portfolio. The services FPS provides to the Series include: coordinating and monitoring of any third parties furnishing services to the Series; providing the necessary office space, equipment and personnel to perform administrative and clerical functions for the Series; preparing, filing and distributing proxy materials, periodic reports to shareholders, registration statements and other documents; and responding to shareholder inquiries. THE CUSTODIAN, TRANSFER AGENT AND ACCOUNTING/PRICING AGENT Bankers Trust Company, c/o BTNY Services, Inc., 34 Exchange Place, Jersey City, NJ 07302-1107 is custodian for the securities and cash of each Series. FPS serves as each Series' transfer agent. As transfer agent, it maintains the records of each shareholder's account, answers shareholder inquiries concerning accounts, processes purchases and redemptions of the Funds' shares, acts as dividend and distribution disbursing agent and performs other shareholder service functions. Shareholder inquiries should be made to the transfer agent at (800) 448-2430. FPS also performs certain accounting and pricing services for the Trust, including the daily calculation of the Funds' respective net asset values. PURCHASE OF SHARES Shares of the U.S. Funds may be purchased directly from the Trust at the net asset value next determined after receipt of the order in proper form by the transfer agent. There is no sales load in connection with the 7 purchase of Fund shares. The Trust reserves the right to reject any purchase order and to suspend the offering of shares of the Funds or the Series. The minimum initial investment for Fund shares is $100,000. Subsequent investments for Fund shares will be accepted in minimum amounts of $2,500. The Trust reserves the right to vary the initial investment minimum and minimums for additional investments in the Funds at any time. In addition, Brinson Partners may waive the minimum initial investment requirement for any investor. Purchase orders for shares of the U.S. Funds 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 Funds' net asset values per share are calculated, are priced according to the net asset value determined on that day. Purchase orders for shares of the Funds 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 Funds. Shares of the Funds may be purchased through broker-dealers, banks and bank trust departments which may charge the investor a transaction fee or other fee for their services at the time of purchase. Such fees would not otherwise be charged if the shares were purchased directly from the Trust. PURCHASES MAY BE MADE IN ONE OF THE FOLLOWING WAYS:
INITIAL INVESTMENT SUBSEQUENT INVESTMENTS ------------------------------- ------------------------------- MINIMUM $100,000 MINIMUM $2,500 BY MAIL n Complete and sign the Account n Make your check payable 6 Application accompanying this to "Brinson ( ) Fund." Prospectus. n Make you check payable to n Enclose the remittance "Brinson ( ) Fund." portion of your account statement and include the amount of investment, the account name and number. n Mail to the address indicated n Mail to the address indicated on the Account Application. on your account statement or enclose in the envelope provided. BY WIRE n Call (800) 448-2430 to LOGO arrange for a wire transaction. n Wire federal funds within 24 n Wire federal funds to: hours to: UNITED MISSOURI BANK KC NA UNITED MISSOURI BANK KC NA ABA # 10-10-00695 ABA # 10-10-00695 FOR: FPS SERVICES, INC. FOR: FPS SERVICES, INC. A/C 98-7037-071-9 A/C 98-7037-071-9 "BRINSON ( ) FUND" AND "BRINSON ( ) FUND" AND INCLUDE YOUR NAME AND ACCOUNT INCLUDE YOUR NAME AND NEW NUMBER. ACCOUNT NUMBER. n Complete and sign the Account Application and mail to the address indicated immediately following the initial wire transaction.
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INITIAL INVESTMENT SUBSEQUENT INVESTMENTS ------------------------------- ------------------------------- BY TELEPHONE n Call (800) 448-2430 to n Call (800) 448-2430 to = arrange for a telephone arrange for a telephone transaction. transaction. PURCHASING BY EXCHANGES n You may open a new account by n You may purchase additional O making an exchange from an shares by making an exchange existing Brinson Fund class from an existing Brinson Fund account of any other Series of class account of any other the Trust. Exchanges may be Series of the Trust. Exchanges made by mail or telephone. may be made by mail or Call (800) 448-2430 for telephone. Call (800) 448-2430 assistance. for assistance. AUTOMATICALLY n Please refer to "Automatic n Please refer to "Automatic Investment Plan" under Investment Plan" under "Account Options" or call "Account Options" or call (800) 448-2430 for assistance. (800) 448-2430 for assistance.
ACCOUNT OPTIONS The following account options are available to shareholders. There are no charges for the programs noted below and an investor may change or terminate these plans at any time by written notice to the Trust. For information about participating in these account options, call the transfer agent at (800) 448- 2430.
ACCOUNT OPTIONS INSTRUCTIONS -------------------------- --------------------------------------------------- AUTOMATIC INVESTMENT PLAN n You may have money deducted directly from your checking, savings or bank money market accounts for investment in the Funds each month or quarter. n Complete the Automatic Investment Plan section on the Account Application accompanying this Prospectus and mail it to the address indicated. n The initial account must be opened first with the initial $100,000 minimum investment, with subsequent minimum investments of $500 pursuant to the Automatic Investment Plan. n The account designated will be debited in the specified amount, on the date indicated, and Fund shares will be purchased. The Trust may alter or terminate the Automatic Investment Plan at any time. SYSTEMATIC WITHDRAWAL PLAN n A shareholder with a minimum account of $100,000 may direct the transfer agent to send the shareholder (or anyone the shareholder designates) regular, monthly, quarterly or semi-annual payments. Each payment under a Systematic Withdrawal Plan ("SWP") must be at least $500. Such payments are drawn from share redemptions. n Shareholders participating in the SWP must elect to have their dividends and distributions automatically reinvested in additional Fund shares. n The Trust may terminate any SWP for an account if the value of the account falls below $50,000 as a result of share redemptions or an exchange of shares of a Fund for Brinson Fund class shares of another Series of the Trust.
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ACCOUNT OPTIONS INSTRUCTIONS ------------------------------ ---------------------------------------------- INDIVIDUAL RETIREMENT ACCOUNTS n An IRA is a tax-deferred retirement savings account that may be used by an individual under age 70 1/2 who has compensation or self-employment income and his or her unemployed spouse, or an individual who has received a qualified distribution from his or her employer's retirement plan. n The minimum purchase requirement for IRAs is $2,000.
REDEMPTION OF SHARES Shareholders may redeem their shares of the Funds without charge on any business day that the NYSE is open. Redemptions will be effected at the net asset value per share next determined after the receipt by the transfer agent of a redemption request meeting the requirements described below. The Trust normally sends redemption proceeds on the next business day but, in any event, redemption proceeds are sent within five business days of receipt of a redemption request in proper form. Payment also may be made by wire directly to any bank previously designated by the shareholder in an Account Application. There is no charge for redemptions by wire. Please note that the shareholder's bank may impose a fee for wire service. The Trust will honor redemption requests of shareholders who recently purchased shares by check, but will not mail the proceeds until it is reasonably satisfied that the purchase check has cleared, which may take up to fifteen days from the purchase date. 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 Funds' net asset values per share are calculated are effected that day. Redemption requests received in proper form by the transfer agent after the close of the NYSE are effected as of the time the net asset value per share is next determined. No redemption will be processed until the transfer agent has received a completed application with respect to the account. The Trust will satisfy redemption requests in cash to the fullest extent feasible, so long as such payments would not, in the opinion of Brinson Partners or the Board of Trustees, result in the necessity of a 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 a Series, during any 90 day period for any one shareholder. Payments in excess of this limit will also be made wholly in cash unless the Board of Trustees believes that economic conditions exist which would make such a practice detrimental to the best interests of the Series. Any portfolio securities paid or distributed in-kind would be valued as described under "Net Asset Value." In the event that an in- kind distribution is made, a shareholder may incur additional expenses, such as the payment of brokerage commissions, on the sale or other disposition of the securities received from a Series. In-kind payments need not constitute a cross-section of a Series' portfolio. Where a shareholder has requested redemption of all or a part of the shareholder's investment and where a Series computes such redemption in-kind, the Series will not recognize gain or loss for federal tax purposes on the securities used to compute the redemption, but the shareholder will recognize gain or loss equal to the difference between the fair market value of the securities received and the shareholder's basis in the Fund shares redeemed. 10 SHARES MAY BE REDEEMED IN ONE OF THE FOLLOWING WAYS: BY MAIL n Submit a written request for redemption with: 6 . The Fund's name; . Your Fund account number; . The dollar amount or number of shares to be redeemed; and . Signatures of all persons required to sign for transactions, exactly as their names appear on the Account Application. n A signature guarantee for the signature of each person in whose name the account is registered is required on all written redemption requests over $5,000. n Mail to the address indicated on the Account Application. Questions may be directed to the transfer agent at (800) 448-2430. BY WIRE n This service must be elected either on the LOGO initial application or subsequently arranged in writing. n Shares may be redeemed by instructing the transfer agent by telephone at (800) 448-2430. n Wire redemption requests must be received by the transfer agent before 4:00 p.m. Eastern time for money to be wired the next business day. BY TELEPHONE (800) 448-2430 n This service must be elected either on the = initial application or subsequently arranged in writing. n Shares may be redeemed by instructing the transfer agent by telephone at (800) 448-2430. n Shares will be sold at the next share price calculated after the order is received and accepted. Share price is normally calculated at 4:00 p.m. Eastern time. AUTOMATICALLY n Please refer to "Systematic Withdrawal Plan" under "Account Options" or call (800) 448-2430 for assistance.
- ---------- NOTE: The Trust reserves the right to refuse a wire or telephone redemption if it is believed advisable to do so. Procedures for redeeming shares of the U.S. Funds by wire or telephone may be modified or terminated by the Trust at any time. Shares of the Funds 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 redeemed directly from the Trust. TELEPHONE TRANSACTIONS: Shareholders who wish to initiate purchase, exchange or redemption transactions by telephone must elect the option, as described above. With respect to such telephone transactions, the Funds will ensure that reasonable procedures are used to confirm that instructions communicated by telephone are genuine (including verification of the shareholder's social security number or mother's maiden name) and, if they do not, the Funds or the transfer agent may be liable for any losses due to unauthorized or fraudulent transactions. Written confirmation will be provided for all purchase, exchange and redemption transactions initiated by telephone. 11 EXCHANGE OF SHARES: Fund shares may be exchanged for Brinson Fund class shares of any other series within the Trust. Exchanges will not be permitted between the Brinson Fund class shares and the SwissKey Fund class shares of any 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 Account Application. The telephone exchange 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 series' relative net asset values per share. Exchanges may be made only for shares of a series and class then offering its shares for sale in your state of residence and are subject to the minimum initial investment requirement. For federal income tax purposes, an exchange of shares would be treated as if the shareholder had redeemed shares of one series and reinvested in shares of another series. Gains or losses on the shares exchanged are realized by the shareholder at the time of the exchange. Any shareholder wishing to make an exchange should first obtain and review a prospectus of the other series. Requests for telephone exchanges must be received by the transfer agent by the close of regular trading hours (currently 4:00 p.m. Eastern time) on the NYSE on any day that the NYSE is open for regular trading. TRANSFER OF SECURITIES: At the discretion of the Trust, investors may be permitted to purchase Fund shares by transferring securities to the series that meet the series' investment objective 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 a series in exchange for securities will be issued at the net asset value per share of the Fund determined as of the same time. All dividends, interest, subscription, or other rights pertaining to such securities shall become the property of the series and must be delivered to the series by the investor upon receipt from the issuer. Investors who are permitted to transfer such securities will be required to recognize a gain or loss on such transfer and pay tax thereon, if applicable, measured by the difference between the fair market value of the securities and the investors' basis therein. Securities will not be accepted in exchange for shares of a 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. NET ASSET VALUE The net asset value per share for the Brinson Fund class shares and SwissKey Fund class shares is computed by adding, with respect to each class of shares, the value of the Series' investments, cash and other assets attributable to that class, deducting liabilities of the class and dividing the result by the number of shares of that class outstanding. The public offering price of the Brinson Fund class shares and the SwissKey Fund class shares, both of which are sold on a continuous basis, is the net asset value of that class. The valuation of assets for determining the net asset value may be summarized as follows: Securities traded on securities exchanges are valued at the last sale price or, if there has been no sale that day, at the last reported bid price, using prices as of the close of trading on their respective exchanges. 12 Price information on listed securities is generally taken from the closing price on the exchange where the security is primarily traded. Valuations of equity securities may be obtained from a pricing service when such prices are believed to reflect fair value of such securities. Use of a pricing service has been approved by the Board of Trustees. Futures contracts are valued at their daily quoted settlement price. Securities with a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. Redeemable securities issued by open-end investment companies are valued using their respective net asset values for purchase orders placed at the close of the NYSE. Securities (including over-the-counter options) for which market quotations are not readily available and other assets are valued at their fair value as determined in good faith by or under the direction of the Trustees. Net asset value is determined on each day that the NYSE is open, as of the close of business of the regular session of the NYSE (currently 4:00 p.m. Eastern time). Investments and requests to exchange or redeem shares received by a Series in proper form before such close of business are effective, and will receive the price determined, on that day. Investment, exchange and redemption requests received after such close of business are effective, and will receive the share price determined, on the next business day. Each of the Series' two classes of shares will bear pro rata all of the common expenses of that Series. The net asset value of all outstanding shares of each class of the Series will be computed on a pro rata basis for each outstanding share based on the proportionate participation in the Series represented by the value of shares of that class. All income earned and expenses incurred by the Series will be borne on a pro rata basis by each outstanding share of a class, based on each class' percentage in the Series represented by the value of share of such class, except that the Brinson Fund class will not incur any of the expenses under the SwissKey Fund class' 12b-1 Plan. The different expenses borne by each class of shares will result in different net asset values and dividends. The per share net asset value of the SwissKey Fund class shares will generally be lower than that of the Brinson Fund class shares of a Series because of the higher expenses borne by the SwissKey Fund class shares. It is expected, however, that the net asset value per share of the two classes will tend to converge immediately after the payment of dividends, which will differ by approximately the amount of the service and distribution expense differential between the classes. DIVIDENDS, DISTRIBUTIONS AND TAXES DIVIDENDS The Series will distribute their net investment income semi-annually in June and December. The Series will distribute annually in December substantially all of their 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 their net investment income earned through the end of December and not previously distributed as ordinary (not capital) income. Dividends and other distributions paid by a 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 SwissKey Fund class shares will be lower than the per share dividends on the Brinson Fund class shares of each Series as a result of the distribution and service fees applicable with respect to the SwissKey Fund class shares. Both the SwissKey Fund class and Brinson Fund class shares of a Series will share proportionately in the investment income and expenses of that Series, except that the per share dividends on the SwissKey Fund class shares will be lower than the per share dividends on the Brinson Fund class shares, which will not incur any expenses under a Rule 12b-1 Plan. 13 Income dividends and capital gain distributions are reinvested automatically in additional Fund shares of a Series at net asset value, unless the shareholder has notified the transfer agent, in writing, of the shareholder's election to receive them in cash. Distribution options may be changed at any time by requesting a change in writing. Any check in payment of dividends or other distributions which cannot be delivered by the Post Office or which remains uncashed for a period of more than one year may be reinvested in the shareholder's account at the then current net asset value and the dividend option may be changed from cash to reinvest. Dividends are reinvested on the ex dividend date (the "ex date") at the net asset value determined at the close of business on that date. Please note that shares purchased shortly before the record date for a dividend or distribution may have the effect of returning capital although such dividends and distributions are subject to taxes. TAXES Each Series has qualified, and intends to continue to qualify, for taxation as a "regulated investment company" under the Internal Revenue Code of 1986, as amended ("the Code"). Such qualification relieves a Series of liability for federal income taxes to the extent the Series' earnings are distributed in accordance with the Code. Each Series is treated as a separate corporate entity for federal tax purposes. Distributions of any net investment income and of any net realized short-term capital gains are taxable to shareholders as ordinary income. All distributions may be subject to state and local taxes. Distributions of net capital gain (the excess of net long-term capital gain over net short-term capital loss) are taxable to shareholders as long-term capital gain regardless of how long a shareholder may have held shares of a Series. The tax treatment of distributions of ordinary income or capital gains will be the same whether the shareholder reinvests the distributions or elects to receive them in cash. A distribution will be treated as paid on December 31 of the current calendar year if it is declared in October, November or December with a record date in such a month and paid during January of the following calendar year. Such distributions will be taxable to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received. Shareholders will be advised annually of the source and tax status of all distributions for federal income tax purposes. Further information regarding the tax consequences of investing in the Series is included in the Statement of Additional Information. The above discussion is intended for general information only. Investors should consult their own tax advisors for more specific information on the tax consequences of particular types of distributions. Redemptions of Series shares, and the exchange of shares between two series of the Trust, are taxable events and, accordingly, shareholders may realize capital gains or losses on these transactions. Shareholders may be subject to back-up withholding on reportable dividend and redemption payments ("back-up withholding") if a certified taxpayer identification number is not on file with the Series, or if, to the Series' knowledge, an incorrect number has been furnished, or if the Series has been notified by the Internal Revenue Service that an account is subject to back-up withholding. An individual's taxpayer identification number is the individual's social security number. If more than 50% of a Series' total assets at the close of its taxable year consists of stock or securities in foreign corporations, the Series may elect to "pass-through" to shareholders for foreign tax credit purposes the amount of foreign income taxes paid by the Series with respect to its direct holdings of securities in foreign corporations. A Series will make such an election only if it deems such election to be in the best interests of its shareholders. If this election is made, shareholders of the Series will be required to include in their gross incomes their pro rata shares of foreign taxes paid by the Series. However, shareholders will be able to treat their pro rata shares of foreign taxes as either a deduction (itemized deduction in the case of individuals) or a foreign tax credit (but not both) against U.S. income taxes on their tax returns. 14 GENERAL INFORMATION ORGANIZATION The Brinson Funds is a Delaware business trust organized pursuant to an Agreement and Declaration of Trust, dated December 1, 1993. The Trust was originally organized as a Maryland corporation on April 14, 1992. On December 1, 1993, the Trust reorganized as a Delaware business trust through a merger of the Maryland corporation into the Trust. The Trust is registered under the Act as an open-end management investment company, commonly known as a mutual fund, and consists of seven different investment portfolios or series. The Trustees of the Trust may establish additional series or classes of shares without the approval of shareholders. The U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund are each diversified portfolios. The assets of each Series belong only to that Series, and the liabilities of each Series are borne solely by that Series and no other. DESCRIPTION OF SHARES Each Series is authorized to issue an unlimited number of shares of 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 only unissued shares with respect to such Series. Shares of each Series represent equal proportionate interests in the assets of that Series only and have identical voting, dividend, redemption, liquidation, and other rights, except that only shares of each Series' SwissKey Fund class shall have voting rights with respect to the Rule 12b-1 Plan relating to that class as described below. All shares issued are fully paid and non-assessable, and shareholders have no preemptive or other right to subscribe to any additional shares and no conversion rights. Currently, the Trust offers seven investment portfolios or series--Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. Two classes of shares are currently issued by the Trust for each series, the SwissKey Fund class and the Brinson Fund class. VOTING RIGHTS Each issued and outstanding full and fractional share of a Series is entitled to one full and fractional vote in the Series and all shares of each Series participate equally with regard to dividends, distributions, and liquidations with respect to that Series. Shareholders do not have cumulative voting rights. On any matter submitted to a vote of shareholders, shares of each Series will vote separately except when a vote of shareholders in the aggregate is required by law, or when the Trustees have determined that the matter affects the interests of more than one Series, in which case the shareholders of all such Series shall be entitled to vote thereon. Only the SwissKey Fund class shareholders may vote on matters related to the Rule 12b-1 Plan associated with that class. SHAREHOLDER MEETINGS The Trustees of the Trust do not intend to hold annual meetings of shareholders of the Series. The U.S. Securities and Exchange Commission, however, requires the Trustees to promptly call a meeting for the purpose of voting upon the question of removal of any Trustee when requested to do so by not less than 10% of the outstanding shareholders of the respective Series. In addition, subject to certain conditions, shareholders of each Series may apply to other series of the Trust to communicate with other shareholders to request a shareholders' meeting to vote upon the removal of a Trustee or Trustees. 15 PORTFOLIO TURNOVER (U.S. BALANCED FUND AND U.S. BOND FUND) As a result of the U.S. Balanced Fund's and U.S. Bond Fund's investment policies, their portfolio turnover rates may exceed 100%. High portfolio turnover (over 100%) may involve correspondingly greater brokerage commissions and other transaction costs, which will be borne directly by the effected Series and ultimately, by the Series' shareholders. In addition, high portfolio turnover may result in increased short-term capital gains, which, when distributed to shareholders, are treated as ordinary income. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS The Trust will attempt to obtain the best overall price and most favorable execution of transactions in portfolio securities. However, subject to policies established by the Board of Trustees of the Trust, a Series may pay a broker-dealer a commission for effecting a portfolio transaction for the Series in excess of the amount of commission another broker-dealer would have charged if Brinson Partners determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such broker-dealer, viewed in terms of that particular transaction or such firm's overall responsibilities with respect to the clients, including the Series, as to which it exercises investment discretion. In selecting and monitoring broker-dealers and negotiating commissions, consideration will be given to a broker-dealer's reliability, the quality of its execution services on a continuing basis and its financial condition. SHAREHOLDER REPORTS AND INQUIRIES Shareholders will receive semi-annual reports showing portfolio investments and other information as of December 31 and annual reports audited by independent auditors as of June 30. Shareholders with inquiries should call the U.S. Funds at (800) 448-2430 or write to The Brinson Funds, 3200 Horizon Drive, King of Prussia, PA 19406-0903. PERFORMANCE INFORMATION From time to time, performance information, such as yield or total return, may be quoted in advertisements or in communications to present or prospective shareholders. Performance quotations represent the Funds' past performance and should not be considered as representative of future results. The current yield will be calculated by dividing the net investment income earned per share by a Fund during the period stated in the advertisement (based on the average daily number of shares entitled to receive dividends outstanding during the period) by the maximum net asset value per share on the last day of the period and annualizing the result on a semi-annual compounded basis. The Funds' 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 a Fund. Aggregate total return reflects the total percentage change over the stated period. To help investors better evaluate how an investment in the U.S. Funds might satisfy their investment objectives, advertisements regarding the Funds may discuss yield or total return as reported by various financial publications. Advertisements may also compare yield or total return to other investments, indices and averages. The following publications, benchmarks, indices and averages may be used: Lipper Mutual Fund Performance Analysis; Lipper Fixed Income Analysis; Lipper Mutual Fund Indices; Morgan Stanley Indices; Shearson Lehman Hutton Treasury Index; Salomon Brothers Indices; Dow Jones Composite Average or its component indices; Standard & Poor's 500 Stock Index or its component indices; Wilshire Indices; The New York Stock Exchange 16 composite or component indices; CDA Mutual Fund Report; Weisenberger -- Mutual Funds Panorama and Investment Companies; Mutual Fund Values and Mutual Fund Service Book, published by Morningstar, Inc.; comparable 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 Funds 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 Funds will not be included in the U.S. Funds' calculations of yield or total return. Further information about the performance of the Funds is included in the Funds' Annual Report dated June 30, 1996, which may be obtained without charge by contacting the Trust at (800) 448-2430. 17 APPENDIX A INVESTMENT POLICIES AND TECHNIQUES EQUITY SECURITIES (U.S. BALANCED FUND AND U.S. EQUITY FUND): The Series may invest in a broad range of equity securities of U.S. issuers, including common and preferred stocks, debt securities convertible into or exchangeable for common stock and securities such as warrants or rights that are convertible into common stock. The Series expects their U.S. equity investments to emphasize large and intermediate capitalization companies. FIXED INCOME SECURITIES (U.S. BALANCED FUND AND U.S. BOND FUND): The Series may invest in a broad range of fixed income securities of U.S. issuers, including governments and governmental entities, supranational issuers as well as corporations and other business organizations. The Series may purchase U.S. dollar denominated securities that reflect a broad range of investment maturities, qualities and sectors. A majority of the fixed income securities in which the Series will invest will meet a minimum rating of BBB- by S&P or Baa3 by 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 characteristics and, in fact, have speculative characteristics; and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments than is the case with higher rated bonds. Securities rated lower than BBB- by S&P and Baa3 by Moody's are classified as non-investment grade securities (commonly referred to as "junk bonds"), carry a higher degree of risk and are considered to be speculative by the major credit rating agencies. Each Series currently intends to limit its aggregate investment in non-investment grade debt securities of its U.S. dollar denominated fixed income assets to no more than 5% of its net assets. To the extent that a security held by a Series is downgraded to below investment grade, the Series will dispose of that or another non-investment grade security so that no more than 5% of its assets will be invested in below investment grade securities. Other fixed income securities in which the Series may invest include zero coupon securities, mortgage-backed securities, asset- backed securities and when-issued securities. CASH AND CASH EQUIVALENTS (ALL U.S. FUNDS): The Series may invest a portion of their assets in short-term debt securities (including repurchase and reverse repurchase agreements) of corporations, the U.S. government and its agencies and instrumentalities and banks and finance companies. When unusual market conditions warrant, a Series may make substantial temporary defensive investments in cash equivalents up to a maximum of 100% of its net assets. Cash equivalent holdings may be in any currency (although such holdings may not constitute "cash or cash equivalents" for tax diversification purposes under the Code). When a Series invests for defensive purposes, it may affect the attainment of the Series' investment objective. ZERO COUPON SECURITIES (U.S. BALANCED FUND AND U.S. BOND FUND): Zero coupon securities are debt obligations which do not entitle the holder to any periodic payments of interest prior to maturity or a specified date when the securities begin paying current interest (the "cash payment date") and therefore are issued and traded at a discount from their value at maturity or par value. Such bonds carry an additional risk in that, unlike bonds which pay interest throughout the period to maturity, a Series investing in zero coupon securities will realize no cash until the cash payment date and, if the issuer defaults, a Series may obtain no return at all on its investment. The market price of zero coupon securities generally is more volatile than the market price of securities that pay interest periodically and are likely to be more responsive to changes in interest rates than non-zero coupon securities having similar maturities and credit qualities. For federal tax purposes, the Series will be required to include in income daily portions of original issue discount accrued and to distribute the same to shareholders annually, even if no payment is received before the distribution date. 18 MORTGAGE AND ASSET-BACKED SECURITIES (U.S. BALANCED FUND AND U.S. BOND FUND): Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, pools of mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by agencies or instrumentalities of the U.S. government. Other mortgage-backed securities are issued by private issuers, generally originators of and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities (collectively, "private lenders"). Mortgage-backed securities issued by private lenders may be supported by pools of mortgage loans or other mortgage-backed securities that are guaranteed, directly or indirectly, by the U.S. government or one of its agencies or instrumentalities, or they may be issued without any governmental guarantee of the underlying mortgage assets but with some form of non-governmental credit enhancement. Asset-backed securities have structural characteristics similar to mortgage- backed securities. However, the underlying assets are not first-lien mortgage loans or interests therein; rather, they include assets such as motor vehicle installment sales contracts, other installment loan contracts, home equity loans, leases of various types of property and receivables from credit card or other revolving credit arrangements. Payments or distributions of principal and interest on asset-backed securities may be supported by non-governmental credit enhancements similar to those utilized in connection with mortgage- backed securities. The yield characteristics of mortgage- and asset-backed securities differ from those of traditional debt obligations. Among the principal differences are that interest and principal payments are made more frequently on mortgage- and asset-backed securities, usually monthly, and that principal may be prepaid at any time because the underlying mortgage loans or other assets generally may be prepaid at any time. As a result, the rate of return on these securities may be affected by prepayments of principal on the underlying loans, which generally increase as interest rates decline. As a result, if a Series purchases these securities at a premium, a prepayment rate that is faster than expected will reduce yield to maturity, while a prepayment rate that is slower than expected will have the opposite effect of increasing yield to maturity. Conversely, if a Series purchases these securities at a discount, a prepayment rate that is faster than expected will increase the yield to maturity, while a prepayment rate that is slower than expected will reduce the yield to maturity. Accelerated prepayments on securities purchased by a Series at a premium also impose a risk of loss of principal because the premium may not have been fully amortized at the time the principal is prepaid in full. In addition, like other debt securities, the values of mortgage-related securities, including government and government-related mortgage pools, generally will fluctuate in response to market interest rates. The market for privately issued mortgage and asset-backed securities is smaller and less liquid than the market for government sponsored mortgage-backed securities. WHEN-ISSUED SECURITIES (U.S. BALANCED FUND AND U.S. BOND FUND): The Series may purchase securities on a "when-issued" basis for payment and delivery at a later date. The price is generally fixed on the date of commitment to purchase. During the period between purchase and settlement, no interest accrues to the Series. At the time of settlement, the market value of the security may be more or less than the purchase price. The Series will establish a segregated account consisting of cash, U.S. government securities, equity securities and/or investment and non-investment grade debt securities in an amount equal to the amounts of their when-issued securities. The cash, U.S. government securities, equity securities, investment or non-investment grade debt securities and other assets held in any segregated account maintained by the Series with respect to any when-issued securities, options, futures, forward contracts or other derivative transactions shall be liquid, unencumbered and marked-to-market daily (the assets held in a segregated account are referred to in this Prospectus as "Segregated Assets"). 19 FUTURES CONTRACTS (ALL U.S. FUNDS): The Series may enter into contracts for the future purchase or sale of securities or indices. A financial futures contract is an agreement between two parties to buy or sell a specified debt security at a set price on a future date. An index futures contract is an agreement to take or make delivery of an amount of cash based on the difference between the value of the index at the beginning and at the end of the contract period. A Series may enter into futures contracts to the extent that not more than 5% of its assets are required as futures contract margin deposits and its obligations relating to such futures transactions represent not more than 25% of the Series' assets. OPTIONS (ALL U.S. FUNDS): The Series may purchase and write put and call options on U.S. securities and indices and enter into related closing transactions. A Series may use options traded on U.S. exchanges and, to the extent permitted by law, options traded over-the-counter. It is the position of the U.S. Securities and Exchange Commission that over-the-counter options are illiquid. Accordingly, a Series will invest in such options only to the extent consistent with its 15% limit on investment in illiquid securities. REPURCHASE AGREEMENTS (ALL U.S. FUNDS): The Series may enter into repurchase agreements with banks or broker-dealers. Repurchase agreements are considered under the Act to be collateralized loans by a Series to the seller secured by the securities transferred to the Series. Repurchase agreements under the Act will be fully collateralized by securities which the Series may invest in directly. Such collateral will be marked-to-market daily. If the seller of the underlying security under the repurchase agreement should default on its obligation to repurchase the underlying security, the Series may experience delay or difficulty in recovering its cash. To the extent that, in the meantime, the value of the security purchased had decreased, the Series could experience a loss. No more than 15% of a Series' net assets will be invested in illiquid securities, including repurchase agreements which have a maturity of longer than seven days. The Series must treat each repurchase agreement as a security for tax diversification purposes and not as cash, a cash equivalent or as a receivable. BORROWING (ALL U.S. FUNDS): Each Series is authorized, within specified limits, to borrow money as a temporary defensive measure for extraordinary purposes and to pledge its assets in connection with such borrowings. LOANS OF PORTFOLIO SECURITIES (ALL U.S. FUNDS): Each Series may loan its portfolio securities to broker-dealers and other institutional investors pursuant to agreements requiring that the loans be continuously secured by collateral equal at all times in value to at least the market value of the securities loaned. 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, a Series will only enter into loan arrangements after a review of all pertinent factors by Brinson Partners, subject to overall supervision by the Board of Trustees, including the creditworthiness of the borrowing broker-dealer or institution and then only if the consideration to be received from such loans would justify the risk. Creditworthiness will be monitored on an ongoing basis by Brinson Partners. RULE 144A AND ILLIQUID SECURITIES (ALL U.S. FUNDS): Each Series may invest up to 15% of its net assets in illiquid securities. Illiquid securities are those securities that are not readily marketable, including restricted securities and repurchase obligations that mature in more than seven days. Certain restricted securities that may be resold to institutional investors pursuant to Rule 144A under the Securities Act of 1933 may be determined to be liquid under guidelines adopted by the Trust's Board of Trustees. For more detailed descriptions of these investment policies and techniques, please refer to the Statement of Additional Information, which is available without charge upon request by calling (800) 448-2430. 20 (LOGO TK) The Brinson Funds BRINSON NON-U.S. EQUITY FUND 209 South LaSalle Street Chicago, IL 60604-1295 PROSPECTUS OCTOBER 28, 1996 THE BRINSON FUNDS (the "Trust") is a no-load, open-end management investment company which currently offers seven distinct investment portfolios or "series." Each series offers two classes of shares: the Brinson Fund class and SwissKey Fund class. This Prospectus pertains only to the Brinson Non-U.S. Equity Fund (the "Fund"), which represents the Brinson Fund class shares of the Non-U.S. Equity Fund series (the "Series"). The Brinson Fund class shares have no sales charges or 12b-1 fees. The SwissKey Fund class shares are also offered without sales charges, but impose a 12b-1 fee. Further information relating to the SwissKey Fund class shares may be obtained by calling 1-800-SWISSKEY. This Prospectus sets forth concisely the information a prospective investor should know before investing in the Brinson Non-U.S. Equity Fund. Investors should read and retain this Prospectus for future reference. Additional information about the Non-U.S. Equity Fund, and the other series and classes of shares of the Trust is contained in the Statement of Additional Information dated October 28, 1996, as amended from time to time, which has been filed with the U.S. Securities and Exchange Commission. The Statement of Additional Information is incorporated by reference into this Prospectus and is available upon request and without charge from the Trust, at the addresses and telephone numbers below. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE U.S. SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. UNDERWRITER: Fund/Plan Broker Services, Inc. 3200 Horizon Drive King of Prussia, PA 19406-0903 (800) 448-2430 ADVISOR: Brinson Partners, Inc. 209 South LaSalle Street Chicago, IL 60604-1295 (800) 448-2430 TABLE OF CONTENTS
PAGE ---- Annual Fund Operating Expenses............................................. 1 Financial Highlights....................................................... 2 Investment Objective and Policies.......................................... 3 Investment Considerations and Risks........................................ 3 Management of the Trust.................................................... 5 Portfolio Management....................................................... 6 Administration of the Trust................................................ 6 Purchase of Shares......................................................... 7 Account Options............................................................ 9 Redemption of Shares....................................................... 10 Net Asset Value............................................................ 12 Dividends, Distributions and Taxes......................................... 14 General Information........................................................ 15 Performance Information.................................................... 16 Appendix A................................................................. 18
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. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS) Management Fees (after fee waiver)/1/..................................... 0.60% Other Expenses (after reimbursement)/2/................................... 0.40% ----- Total Fund Operating Expenses (after reimbursement)....................... 1.00% =====
- ---------- /1The/Advisor has irrevocably agreed to waive its fees and reimburse certain expenses so that the Fund's total operating expenses will never exceed 1.00%. Had the Advisor not irrevocably agreed to waive fees and reimburse expenses, the total fund operating expenses for the fiscal year ended June 30, 1996 for the Brinson Non-U.S. Equity Fund would have been 1.20%. /2"Other/Expenses" include the fee paid to the Administrator, which is calculated on the basis of the total net assets of all portfolios within the Trust and is subject to an annual minimum fee of $75,000 for the initial multiple class portfolio and $10,000 per each additional multiple class portfolio. EXAMPLE: Based on the level of expenses listed above after reimbursement, the total expenses relating to an investment of $1,000 would be as follows, assuming a 5% annual return and redemption at the end of each time period.
NAME OF FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------ ------ ------- ------- -------- Brinson U.S. Equity Fund........................ $10 $32 $55 $122
The foregoing table is designed to assist the investor in understanding the various costs and expenses that a shareholder will bear directly or indirectly. - ------------------------------------------------------------------------------- THE EXAMPLE SHOULD NOT BE CONSIDERED REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN ACTUAL RETURNS GREATER OR LESS THAN 5%. - ------------------------------------------------------------------------------- 1 FINANCIAL HIGHLIGHTS The selected financial information in the following table has been audited by the Fund's independent auditors, whose unqualified report thereon appears in the Fund's Annual Report to Shareholders dated June 30, 1996. Additional financial data and related notes are contained in the Fund's Annual Report to Shareholders, which is incorporated by reference into the Statement of Additional Information and is available without charge upon request. The following table sets forth financial data for a share of beneficial interest of the Fund outstanding throughout the periods presented.
FOR THE PERIOD FOR THE YEAR FOR THE YEAR AUGUST 31, 1993/1/ ENDED ENDED TO JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 ------------- ------------- ------------------ Net asset value, beginning of period......................... $ 9.68 $ 9.69 $ 10.00 Income from investment opera- tions: Net investment income......... 0.18 0.15 0.10 Net realized and unrealized gain (loss).................. 2.05 (0.16) (0.34) -------- -------- ------- Total income (loss) from in- vestment operations ....... 2.23 (0.01) (0.24) -------- -------- ------- Less distributions: Distributions from net invest- ment income.................. (0.18) -- (0.07) Distributions from and in ex- cess of net realized gain.... (0.56) -- -- -------- -------- ------- Total distributions......... (0.74) -- (0.07) -------- -------- ------- Net asset value, end of peri- od........................... $ 11.17 $ 9.68 $ 9.69 ======== ======== ======= Total Return (non-annualized). 23.64% (0.10%) (2.45%) Ratios/Supplemental Data Net assets, end of period (in 000's)....................... $212,366 $148,319 $71,544 Ratio of expenses to average net assets: Before expense reimburse- ment....................... 1.20% 1.23% 1.60%/2/ After expense reimbursement. 1.00% 1.00% 1.00%/2/ Ratio of net investment income to average net assets: Before expense reimburse- ment....................... 1.67% 1.93% 1.28%/2/ After expense reimbursement. 1.87% 2.16% 1.88%/2/ Portfolio Turnover Rate......... 20% 14% 12% Average commission rate paid per share $ 0.0219 N/A N/A
- ---------- /1/Commencement of investment operations. /2/Annualized. N/A--Not Applicable 2 INVESTMENT OBJECTIVE AND POLICIES INVESTMENT OBJECTIVE The Non-U.S. Equity Fund's investment objective is to maximize total return, consisting of capital appreciation and current income by investing primarily in the equity securities of non-U.S. issuers. The investment objective is fundamental and may not be changed without a vote of the holders of the majority of the voting securities of the Series. Under normal conditions, at least 65% of the Series' total assets will be invested in equity securities of issuers in at least three countries other than the United States. In seeking to achieve its investment objective while controlling risk, the Series may invest in a wide range of equity securities, including: American, European and Global Depository Receipts; common and preferred stock; debt securities convertible into or exchangeable for common stock; and securities such as warrants or rights that are convertible into common stock. Unless otherwise stated in this Prospectus or in the Statement of Additional Information, the Series' investment policies are not fundamental and may be changed without shareholder approval. There can be no assurance that the Series will achieve its investment objective. The Series may engage in futures, options and currency transactions for hedging and other permissible purposes, as more fully described in "Investment Considerations and Risks" and Appendix A in this Prospectus, and in the Statement of Additional Information. The Series is a diversified portfolio that seeks to achieve its objective by investing primarily in the equity securities of non-U.S. issuers. The benchmark for the Series is the Morgan Stanley Capital International ("MSCI") Non-U.S. Equity (Free) Index (the "Benchmark"). The Benchmark is a market driven broad based index which includes non-U.S. equity markets in terms of capitalization and performance. From time to time, Brinson Partners, Inc. ("Brinson Partners" or the "Advisor") may substitute securities in an equivalent index when it believes that such securities in the index more accurately reflect the relevant international market. Although it may invest anywhere in the world, it is expected that the Series' assets will be primarily invested in the equity markets included in the MSCI Non-U.S. Equity (Free) 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 in Appendix A and in the Statement of Additional Information. The Series' investment objective and 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). INVESTMENT CONSIDERATIONS AND RISKS The following provides information about the types of instruments in which the Non-U.S. Equity Fund may invest, strategies employed by Brinson Partners in its attempt to attain the Series' investment objective and a summary of related risks. Shareholders should understand that all investments involve risks and there can be no guarantee against loss resulting from an investment in the Series, nor can there be any assurance that the Series will be able to attain its investment objective. A complete list of the Series' investment restrictions and more detailed information about the Series' investments are contained in Appendix A to this Prospectus and in the Statement of Additional Information. EQUITY SECURITIES--Equity securities fluctuate in value as a result of various factors, which are often unrelated to the value of the issuer of the securities. These fluctuations may be pronounced. Fluctuations in the value of the Non-U.S. Equity Fund's equity investments will affect the value of its shares and thus the Fund's total return to investors. 3 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 supervision of non-U.S. stock exchanges, brokers and listed companies. Non-U.S. companies are not subject to uniform global accounting, auditing and financial reporting standards, practices and requirements. Securities of some non-U.S. companies are less liquid and their prices more volatile than securities 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, property or other assets of the Series, political or social instability, or diplomatic developments which could affect U.S. investments in those countries. Investments will be made primarily in the equity securities of companies domiciled in developed countries. The Series intends to diversify broadly among countries but reserves the right to invest a substantial portion of its assets in one or more countries if economic and business conditions warrant such investments. Brinson Partners will take these factors into consideration in managing the Series' investments. Because the Series will keep its books and records in U.S. dollars, the Series will be required, for federal income tax purposes, to account for income and losses on all transactions involving foreign currency under Section 988 of the Internal Revenue Code of 1986, as amended, and the applicable U.S. Treasury regulations, so that generally any component of a gain or loss attributable to 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 effected by changes in currency exchange rates. Some currency prices may be volatile and there is the possibility of governmental controls on currency exchange or governmental intervention in currency markets, which could adversely affect the Series. Although the Series may attempt to manage currency exchange rate risk, there is no assurance that the Series will do so at an appropriate time or that it will be able to predict 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 relative to the normal currency allocation and will consider return and risks of currency exposures relative to the Benchmark. FOREIGN CURRENCY TRANSACTIONS--To manage exposure to currency fluctuations, the Series may alter fixed income or money market exposures, 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 obligations. FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS--The Series may attempt to reduce the overall level of investment risk of particular securities and attempt to protect against adverse market movements by investing in futures, options and other derivative instruments. A derivative instrument is commonly defined as a financial instrument whose performance and value are derived, at least in part, from another source, such as the performance of an underlying asset, a specific security or an index of securities. The derivative instruments in which the Series may invest include the purchase and writing of options on securities (including index options) and options on foreign currencies, investing in futures contracts for the purchase or sale of instruments based on financial indices, including interest rate indices or indices of U.S. or foreign government securities or equity securities ("futures contracts"), forward contracts, swaps and swap related products such as equity index swaps, interest rate swaps, currency swaps, and related caps, collars and floors. 4 The investment in futures, options, forward contracts, swaps and similar strategies by the Series will depend on Brinson Partners' judgment as to the potential risks and rewards of different types of strategies, and it should be recognized that the use of these instruments exposes the Series to additional investment risks and transaction costs. If the Advisor incorrectly analyzes the market conditions or does not employ the appropriate strategy with respect to these instruments, the Series could be left in a less favorable position. For example, gains and losses on investments in futures depend on the Advisor's ability to predict correctly the direction of security prices, interest rates and other economic factors. Additional risks inherent in the use of futures, options and forward contracts include: adverse movements in the prices of securities or currencies being hedged; the possible absence of a liquid secondary market for any particular instrument at any time; and the possible need to defer closing out certain hedge positions to avoid adverse tax consequences. Options and futures can be volatile instruments and may not perform as expected. The Series could experience losses if the prices of its options and futures positions are poorly correlated with its other investments. If a hedge is applied at an inappropriate time or price trends are judged incorrectly, options and futures strategies may lower the Series' return (i.e., options and futures may fail as hedging techniques in cases where the price movements of the securities underlying the options and futures do not follow the price movements of the portfolio securities subject to the hedge). 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 loss from investing in futures transactions is potentially unlimited. The Series does not intend to purchase put and call options that are traded on a national stock exchange in an amount exceeding 5% of its net assets. The Series may invest in derivatives for hedging purposes, to maintain liquidity, or in anticipation of changes in the composition of its portfolio holdings. The Series will not engage in derivative investments purely for speculative purposes. The Series will invest in one or more derivatives only to the extent that the instrument under consideration is judged by the Advisor to be consistent with the Series' overall investment objective and policies. In making such judgment, the potential benefits and risks will be considered in relation to the Series' other portfolio investments. Where not specified, investment limitations with respect to the Series' derivative instruments will be consistent with the Series' existing percentage limitations with respect to its overall investment policies and restrictions. The risks and policies of various types of derivative investments permitted for the Series, including options, futures and forward contracts, are described in greater detail in Appendix A in this Prospectus and in the Statement of Additional Information. MANAGEMENT OF THE TRUST THE BOARD OF TRUSTEES Under Delaware law, the Board of Trustees has overall responsibility for managing the business and affairs of the Trust. The Trustees, in turn, elect the officers of the Trust, who are responsible for administering the day-to- day operations of the Series. THE ADVISOR Brinson Partners, a Delaware corporation, is an investment management firm managing, as of June 30, 1996, approximately $58 billion, primarily for pension and profit sharing institutional accounts. Brinson Partners was organized in 1989 when it acquired the institutional asset management business of The First National Bank of Chicago and First Chicago Investment Advisors, N.A. Brinson Partners and its predecessor entities have managed 5 domestic and international investment assets since 1974 and global investment assets since 1982. Brinson Partners has offices in Basel, London, Melbourne, New York, Paris, Singapore, Sydney and Tokyo, in addition to its principal office at 209 South LaSalle Street, Chicago, IL 60604-1295. Brinson Partners is an indirect wholly-owned subsidiary of Swiss Bank Corporation ("Swiss Bank"). Swiss Bank, with headquarters in Basel, Switzerland, is an internationally diversified organization with operations in many aspects of the financial services industry. Brinson Partners also serves as the investment advisor to seven other investment companies: Brinson Relationship Funds, which includes six investment portfolios (series); Enterprise Accumulation Trust; Enterprise International Growth Portfolio; Fort Dearborn Income Securities, Inc.; Hirtle Callaghan International Trust; John Hancock Variable Series Trust--International Balanced Portfolio; and Pace Large Company Value Equity Investments. Pursuant to its investment advisory agreement with the Trust, on behalf of the Series, Brinson Partners receives a monthly fee at the annual percentage rate of the Series' average daily net assets, as described below, for providing investment advisory services. Brinson Partners is responsible for paying its own expenses, and has agreed to waive that portion of its advisory fee equal to the total expenses of the Series for any fiscal year which exceeds the permissible limits applicable to the Series in any state in which its shares are then qualified for sale. Pursuant to its advisory agreement, Brinson Partners is authorized, at its own expense, to obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it does not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. For providing investment advisory services during the fiscal year ended June 30, 1996, the Non-U.S. Equity Fund paid Brinson Partners a monthly fee at the annual rate of 0.80% of the Series' average daily net assets. This fee is higher than the advisory fees paid by most other mutual funds, but is comparable to those of other mutual funds with similar investment objectives. PORTFOLIO MANAGEMENT Investment decisions for the Series are made by an investment management team at Brinson Partners. No member of the investment management team is primarily responsible for making recommendations for portfolio purchases. ADMINISTRATION OF THE TRUST THE UNDERWRITER Fund/Plan Broker Services, Inc. ("FPBS"), 3200 Horizon Drive, King of Prussia, PA 19406-0903, was engaged pursuant to an agreement dated November 20, 1995, for the limited purpose of acting as underwriter to facilitate the registration of the shares of the Trust under state securities laws and to assist in the sale of shares. The fee for such service is borne by the Advisor. THE ADMINISTRATOR The Trust, on behalf of the Series, has entered into an administrative services agreement with FPS Services, Inc. ("FPS"), 3200 Horizon Drive, King of Prussia, PA 19406-0903, 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 6 its pro rata portion based upon its average daily net assets, but in no event shall the Series pay less than $10,000 per year for each multiple class portfolio. Pursuant to the agreement with Fund/Plan, maximum administration fees are $400,000 for the initial multiple class portfolio and $60,000 per year for each subsequent multiple class portfolio. The services FPS provides to the Series include: coordinating and monitoring of any third parties furnishing services to the Series; providing the necessary office space, equipment and personnel to perform administrative and clerical functions for the Series; preparing, filing and distributing proxy materials, periodic reports to shareholders, registration statements and other documents; and responding to shareholder inquiries. 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. FPS serves as the Series' transfer agent. As transfer agent, it maintains the records of each shareholder's account, answers shareholder inquiries concerning accounts, processes purchases and redemptions of the Fund's 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. FPS also performs certain accounting and pricing services for the Trust, including the daily calculation of the Fund's net asset value. PURCHASE OF SHARES Shares of the Non-U.S. Equity Fund may be purchased directly from the Trust at the net asset value next determined after receipt of the order in proper form by the transfer agent. There is no sales load in connection with the purchase of Fund shares. The Trust reserves the right to reject any purchase order and to suspend the offering of shares of the Fund or the Series. The minimum initial investment for Fund shares is $100,000. Subsequent investments for Fund shares will be accepted in minimum amounts of $2,500. The Trust reserves the right to vary the initial investment minimum and minimums for additional investments in the Fund at any time. In addition, Brinson Partners may waive the minimum initial investment requirement for any investor. Purchase orders for shares of the Non-U.S. Equity 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 Fund. Shares of the Fund may be purchased through broker-dealers, banks and bank trust departments which may charge the investor a transaction fee or other fee for their services at the time of purchase. Such fees would not otherwise be charged if the shares were purchased directly from the Trust. 7 PURCHASES MAY BE MADE IN ONE OF THE FOLLOWING WAYS:
INITIAL INVESTMENT SUBSEQUENT INVESTMENTS ------------------------------- ------------------------------- MINIMUM $100,000 MINIMUM $2,500 BY MAIL n Complete and sign the Account n Make your check payable 6 Application accompanying this to "Brinson Non-U.S. Equity Prospectus. Fund." n Make your check payable to n Enclose the remittance por- "Brinson Non-U.S. Equity tion of your account statement Fund." and include the amount of in- vestment, the account name and number. n Mail to the address indicated n Mail to the address indicated on on your account statement or the Account Application. enclose in the envelope pro- vided. BY WIRE n Call (800) 448-2430 to ar- range for a wire transaction. n Wire federal funds within 24 n Wire federal funds to: hours to: UNITED MISSOURI BANK KC NA UNITED MISSOURI BANK KC NA ABA # 10-10-00695 ABA # 10-10-00695 FOR: FPS SERVICES, INC. FOR: FPS SERVICES, INC. A/C 98-7037-071-9 A/C 98-7037-071-9 "BRINSON NON-U.S. EQUITY FUND" "BRINSON NON-U.S. EQUITY FUND" AND INCLUDE YOUR NAME AND AND INCLUDE YOUR NAME AND NEW ACCOUNT NUMBER. ACCOUNT NUMBER. n Complete and sign the Account Application and mail to the address indicated immediately follow- ing the initial wire transaction. BY TELEPHONE n Call (800) 448-2430 to ar- n Call (800) 448-2430 to ar- range for a telephone transac- range for a telephone transac- tion. tion. = PURCHASING BY EXCHANGES n You may open a new account by n You may purchase additional O making an exchange from an ex- shares by making an exchange isting Brinson Fund class ac- from an existing Brinson Fund count of any other Series of class account of any other Se- the Trust. Exchanges may be ries of the Trust. Exchanges made by mail or telephone. may be made by mail or tele- Call (800) 448-2430 for assis- phone. Call (800) 448-2430 for tance. assistance. AUTOMATICALLY n Please refer to "Automatic n Please refer to "Automatic Investment Plan" under "Ac- Investment Plan" under "Ac- count Options" or call (800) count Options" or call (800) 448-2430 for assistance. 448-2430 for assistance.
8 ACCOUNT OPTIONS The following account options are available to shareholders. There are no charges for the programs noted below and an investor may change or terminate these plans at any time by written notice to the Trust. For information about participating in these account options, call the transfer agent at (800) 448- 2430.
ACCOUNT OPTIONS INSTRUCTIONS - --------------- -------------------------------------------------------- AUTOMATIC INVESTMENT n You may have money deducted directly from your PLAN checking, savings or bank money market accounts for investment in the Fund each month or quarter. n Complete the Automatic Investment Plan section on the Account Application accompanying this Prospectus and mail it to the address indicated. n The initial account must be opened first with the initial $100,000 minimum investment, with subsequent minimum investments of $500 pursuant to the Automatic Investment Plan. n The account designated will be debited in the specified amount, on the date indicated, and Fund shares will be purchased. The Trust may alter or terminate the Automatic Investment Plan at any time. SYSTEMATIC WITHDRAWAL n A shareholder with a minimum account of $100,000 PLAN may direct the transfer agent to send the shareholder (or anyone the shareholder designates) regular, monthly, quarterly or semi-annual payments. Each payment under a Systematic Withdrawal Plan ("SWP") must be at least $500. Such payments are drawn from share redemptions. n Shareholders participating in the SWP must elect to have their dividends and distributions automatically reinvested in additional Fund shares. n The Trust may terminate any SWP for an account if the value of the account falls below $50,000 as a result of share redemptions or an exchange of shares of a Fund for Brinson Fund class shares of another Series of the Trust. INDIVIDUAL RETIREMENT n An IRA is a tax-deferred retirement savings account ACCOUNTS that may be used by an individual under age 70 1/2 who has compensation or self-employment income and his or her unemployed spouse, or an individual who has received a qualified distribution from his or her employer's retirement plan. n The minimum purchase requirement for IRAs is $2,000.
9 REDEMPTION OF SHARES Shareholders may redeem their shares of the Non-U.S. Equity Fund without charge on any business day that the NYSE is open. Redemptions will be effected at the net asset value per share next determined after the receipt by the transfer agent of a redemption request meeting the requirements described below. The Trust normally sends redemption proceeds on the next business day but, in any event, redemption proceeds are sent within five business days of receipt of a redemption request in proper form. Payment also may be made by wire directly to any bank previously designated by the shareholder in an Account Application. There is no charge for redemptions by wire. Please note that the shareholder's bank may impose a fee for wire service. The Trust will honor redemption requests of shareholders who recently purchased shares by check, but will not mail the proceeds until it is reasonably satisfied that the purchase check has cleared, which may take up to fifteen days from the purchase date. 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 Non-U.S. Equity Fund's net asset value per share is calculated are effected that day. Redemption requests received in proper form by the transfer agent after the close of the NYSE are effected as of the time the net asset value per share is next determined. No redemption will be processed until the transfer agent has received a completed application with respect to the account. The Trust will satisfy redemption requests in cash to the fullest extent feasible, so long as such payments would not, in the opinion of Brinson Partners or the Board of Trustees, result in the necessity of the Series selling assets under disadvantageous conditions and to the detriment of the remaining shareholders of the Series. Pursuant to the Trust's Agreement and Declaration of Trust, payment for shares redeemed may be made either in cash or in-kind, or partly in cash and partly in-kind. However, the Trust has elected, pursuant to Rule 18f-1 under the Act, to redeem its shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Series, during any 90 day period for any one shareholder. Payments in excess of this limit will also be made wholly in cash unless the Board of Trustees believes that economic conditions exist which would make such a practice detrimental to the best interests of the Series. Any portfolio securities paid or distributed in-kind would be valued as described under "Net Asset Value." In the event that an in-kind distribution is made, a shareholder may incur additional expenses, such as the payment of brokerage commissions, on the sale or other disposition of the securities received from the Series. In-kind payments need not constitute a cross-section of the Series' portfolio. Where a shareholder has requested redemption of all or a part of the shareholder's investment and where the Series computes such redemption in-kind, the Series will not recognize gain or loss for federal tax purposes on the securities used to compute the redemption, but the shareholder will recognize gain or loss equal to the difference between the fair market value of the securities received and the shareholder's basis in the Fund shares redeemed. 10 SHARES MAY BE REDEEMED IN ONE OF THE FOLLOWING WAYS: BY MAIL n Submit a written request for redemption with: 6 . The Fund's name; . Your Fund account number; . The dollar amount or number of shares to be redeemed; and . Signatures of all persons required to sign for transactions, exactly as their names appear on the Account Application. n A signature guarantee for the signature of each person in whose name the account is registered is required on all written redemption requests over $5,000. n Mail to the address indicated on the Account Application. Questions may be directed to the transfer agent at (800) 448-2430. BY WIRE n This service must be elected either on the initial application or subsequently arranged in writing. n Shares may be redeemed by instructing the transfer agent by telephone at (800) 448-2430. n Wire redemption requests must be received by the transfer agent before 4:00 p.m. Eastern time for money to be wired the next business day. BY TELEPHONE n This service must be elected either on the initial (800) 448-2430 application or subsequently arranged in writing. = n Shares may be redeemed by instructing the transfer agent by telephone at (800) 448-2430. n Shares will be sold at the next share price calculated after the order is received and accepted. Share price is normally calculated at 4:00 p.m. Eastern time. AUTOMATICALLY n Please refer to "Systematic Withdrawal Plan" under "Account Options" or call (800) 448-2430 for assistance.
- ---------- NOTE: The Trust reserves the right to refuse a wire or telephone redemption if it is believed advisable to do so. Procedures for redeeming shares of the Fund by wire or telephone may be modified or terminated by the Trust at any time. 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 redeemed directly from the Trust. TELEPHONE TRANSACTIONS: Shareholders who wish to initiate purchase, exchange or redemption transactions by telephone must elect the option, as described above. With respect to such telephone transactions, the Fund will ensure that reasonable procedures are used to confirm that instructions communicated by telephone are genuine (including verification of the shareholder's social security number or mother's maiden name) and, if it does not, the Fund or the transfer agent may be liable for any losses due to unauthorized or fraudulent transactions. Written confirmation will be provided for all purchase, exchange and redemption transactions initiated by telephone. EXCHANGE OF SHARES: Fund shares may be exchanged for Brinson Fund class shares of any other series within the Trust. Exchanges will not be permitted between the Brinson Fund class shares and the SwissKey Fund class shares of 11 any 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 Account Application. The telephone exchange 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 series' relative net asset values per share. Exchanges may be made only for shares of a series and class then offering its shares for sale in your state of residence and are subject to the minimum initial investment requirement. For federal income tax purposes, an exchange of shares would be treated as if the shareholder had redeemed shares of one series and reinvested in shares of another series. Gains or losses on the shares exchanged are realized by the shareholder at the time of the exchange. Any shareholder wishing to make an exchange should first obtain and review a prospectus of the other series. Requests for telephone exchanges must be received by the transfer agent by the close of regular trading hours (currently 4:00 p.m. Eastern time) on the NYSE on any day that the NYSE is open for regular trading. TRANSFER OF SECURITIES: At the discretion of the Trust, investors may be permitted to purchase Fund shares by transferring securities to a series that meet the series' investment objective 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 a series in exchange for securities will be issued at the net asset value per share of the Fund determined as of the same time. All dividends, interest, subscription, or other rights pertaining to such securities shall become the property of the series and must be delivered to the series by the investor upon receipt from the issuer. Investors who are permitted to transfer such securities will be required to recognize a gain or loss on such transfer and pay tax thereon, if applicable, measured by the difference between the fair market value of the securities and the investors' basis therein. Securities will not be accepted in exchange for shares of the Fund unless: (1) such securities are, at the time of the exchange, eligible to be included in the series' portfolio and current market quotations are readily available for such securities; (2) the investor represents and warrants that all securities offered to be exchanged are not subject to any restrictions upon their sale by the series under the Securities Act of 1933 or under the laws of the country in which the principal market for such securities exists, or otherwise; and (3) the value of any such security (except U.S. government securities) being exchanged, together with other securities of the same issuer owned by the series, will not exceed 5% of the series' net assets immediately after the transaction. NET ASSET VALUE The net asset value per share for the Brinson Fund class shares and SwissKey Fund class shares is computed by adding, with respect to each class of shares, the value of the Series' investments, cash and other assets attributable to that class, deducting liabilities of the class and dividing the result by the number of shares of that class outstanding. The public offering price of the Brinson Fund class shares and the SwissKey Fund class shares, both of which are sold on a continuous basis, is the net asset value of that class. The valuation of assets for determining the net asset value may be summarized as follows: Securities traded on securities exchanges are valued at the last sale price or, if there has been no sale that day, at the last reported bid price, using prices as of the close of trading on their respective exchanges. Price information on listed securities is generally taken from the closing price on the exchange where the security is primarily traded. Valuations of equity securities may be obtained from a pricing service when such prices are believed to reflect fair value of such securities. Use of a pricing service has been approved 12 by the Board of Trustees. Futures contracts are valued at their daily quoted settlement price. Forward foreign currency contracts are valued daily at forward exchange rates and an unrealized gain or loss is recorded. The Series realizes a gain or loss upon settlement of the contracts. For valuation purposes, foreign securities initially expressed in foreign currency values will be converted into U.S. dollar values using WM/Reuters closing spot rates as of 4:00 p.m. London time. Securities with a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. Redeemable securities issued by open-end investment companies are valued using their respective net asset values for purchase orders placed at the close of the NYSE. Securities (including over-the-counter options) for which market quotations are not readily-available and other assets are valued at their fair value as determined in good faith by or under the direction of the Trustees. Securities not traded on any U.S. or recognized international securities exchange will be valued at the most recent bid price where market quotations are readily available. Net asset value is determined on each day that the NYSE is open, as of the close of business of the regular session of the NYSE (currently 4:00 p.m. Eastern time). Investments and requests to exchange or redeem shares received by the Series in proper form before such close of business are effective, and will receive the price determined, on that day. Investment, exchange and redemption requests received after such close of business are effective, and will receive the share price determined, on the next business day. Because of time zone differences, foreign exchanges and securities markets will usually be closed prior to the time of the closing of the NYSE and values of foreign futures and options and foreign securities will be determined as of the earlier closing of such exchanges and securities markets. However, events affecting the values of such foreign securities may occasionally occur between the earlier closings of such exchanges and securities markets and the closing of the NYSE which will not be reflected in the computation of the net asset value of the Series. If an event materially affecting the value of such foreign securities occurs during such period, then such securities will be valued at fair value as determined in good faith by or under the direction of the Board of Trustees. Where a foreign securities market remains open at the time that the Series values its portfolio securities, or closing prices of securities from that market may not be retrieved because of local time differences or other difficulties in obtaining such prices at that time, last sale prices in such market at a point in time most practicable to timely valuation of the Series may be used. 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 Saturday). As a result, the net asset value of the Fund may be significantly affected by such trading on days when shareholders have no access to the Fund. Each of the Series' two classes of shares will bear pro rata all of the common expenses of the Series. The net asset value of all outstanding shares of each class of the Series will be computed on a pro rata basis for each outstanding share based on the proportionate participation in the Series represented by the value of shares of that class. All income earned and expenses incurred by the Series will be borne on a pro rata basis by each outstanding share of a class, based on each class' percentage in the Series represented by the value of share of such class, except that the Brinson Fund class will not incur any of the expenses under the SwissKey Fund class' 12b-1 Plan. The different expenses borne by each class of shares will result in different net asset values and dividends. The per share net asset value of the SwissKey Fund class shares will generally be lower than that of the Brinson Fund class shares of the Series because of the higher expenses borne by the SwissKey Fund class shares. It is expected, however, that the net asset value per share of the two classes will tend to converge immediately after the payment of dividends, which will differ by approximately the amount of the service and distribution expense differential between the classes. 13 DIVIDENDS, DISTRIBUTIONS AND TAXES DIVIDENDS 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 as ordinary (not capital) income. Dividends and other distributions paid by the Series with respect to its Brinson Fund class and SwissKey Fund class shares are calculated in the same manner and at the same time. The per share dividends on 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 distribution and service fees applicable with respect to the SwissKey Fund class shares. Both the SwissKey Fund class and Brinson Fund class shares of the Series will share proportionately in the investment income and expenses of the Series, except that the per share dividends on the SwissKey Fund class shares will be lower than the per share dividends on the Brinson Fund class shares, which will not incur any expenses under a Rule 12b-1 Plan. Income dividends and capital gain distributions are reinvested automatically in additional Fund shares of the Series at net asset value, unless the shareholder has notified the transfer agent, in writing, of the shareholder's election to receive them in cash. Distribution options may be changed at any time by requesting a change in writing. Any check in payment of dividends or other distributions which cannot be delivered by the Post Office or which remains uncashed for a period of more than one year may be reinvested in the shareholder's account at the then current net asset value and the dividend option may be changed from cash to reinvest. Dividends are reinvested on the ex dividend date (the "ex date") at the net asset value determined at the close of business on that date. Please note that shares purchased shortly before the record date for a dividend or distribution may have the effect of returning capital although such dividends and distributions are subject to taxes. TAXES The Series has qualified, and intends to continue to qualify, for taxation as a "regulated investment company" under the Internal Revenue Code of 1986, as amended ("the Code"). Such qualification relieves the Series of liability for federal income taxes to the extent the Series' earnings are distributed in accordance with the Code. The Series is treated as a separate corporate entity for federal tax purposes. Distributions of any net investment income and of any net realized short-term capital gains are taxable to shareholders as ordinary income, whether received in cash or additional shares. All distributions may be subject to state and local taxes. Distributions of net capital gain (the excess of net long-term capital gain over net short-term capital loss) are taxable to shareholders as long-term capital gain regardless of how long a shareholder may have held shares of the Series. The tax treatment of distributions of ordinary income or capital gains will be the same whether the shareholder reinvests the distributions or elects to receive them in cash. A distribution will be treated as paid on December 31 of the current calendar year if it is declared in October, November or December with a record date in such a month and paid during January of the following calendar year. Such distributions will be taxable to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received. Shareholders will be advised annually of the source and tax status of all distributions for federal income tax purposes. Further information regarding the tax consequences of investing in the Series is included in the 14 Statement of Additional Information. The above discussion is intended for general information only. Investors should consult their own tax advisors for more specific information on the tax consequences of particular types of distributions. Redemptions of Series shares, and the exchange of shares between two series of the Trust, are taxable events and, accordingly, shareholders may realize capital gains or losses on these transactions. Shareholders may be subject to back-up withholding on reportable dividend and redemption payments ("back-up withholding") if a certified taxpayer identification number is not on file with the Series, or if, to the Series' knowledge, an incorrect number has been furnished, or if the Series has been notified by the Internal Revenue Service that an account is subject to back-up withholding. An individual's taxpayer identification number is the individual's social security number. If more than 50% of the Series' total assets at the close of its taxable year consists of stock or securities in foreign corporations, the Series may elect to "pass-through" to shareholders for foreign tax credit purposes the amount of foreign income taxes paid by the Series with respect to its direct holdings of securities in foreign corporations. The Series will make such an election only if it deems such election to be in the best interests of its shareholders. If this election is made, shareholders of the Series will be required to include in their gross incomes their pro rata shares of foreign taxes paid by the Series. However, shareholders will be able to treat their pro rata shares of foreign taxes as either a deduction (itemized deduction in the case of individuals) or a foreign tax credit (but not both) against U.S. income taxes on their tax returns. GENERAL INFORMATION ORGANIZATION The Brinson Funds is a Delaware business trust organized pursuant to an Agreement and Declaration of Trust, dated December 1, 1993. The Trust was originally organized as a Maryland corporation on April 14, 1992. On December 1, 1993, the Trust reorganized as a Delaware business trust through a merger of the Maryland corporation into the Trust. The Trust is registered under the Act as an open-end management investment company, commonly known as a mutual fund and consists of seven different investment portfolios or series. The Trustees of the Trust may establish additional series or classes of shares without the approval of shareholders. The Non-U.S. Equity Fund is a diversified portfolio. The assets of the Series belong only to the Series, and the liabilities of the Series are borne solely by the Series and no other. DESCRIPTION OF SHARES The Series is authorized 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 only unissued shares with respect to such series. Shares of the Series represent equal proportionate interests in the assets of the Series only and have identical voting, dividend, redemption, liquidation, and other rights, except that only shares of the Series' SwissKey Fund class shall have voting rights with respect to the Rule 12b-1 Plan relating to that class as described below. All shares issued are fully paid and non-assessable, and shareholders have no preemptive or other right to subscribe to any additional shares and no conversion rights. Currently, the Trust offers seven investment portfolios or series--Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. Two classes of shares are currently issued by the Trust for each series, the SwissKey Fund class and the Brinson Fund class. 15 VOTING RIGHTS Each issued and outstanding full and fractional share of the Series is entitled to one full and fractional vote in the Series and all shares of the Series participate equally in regard to dividends, distributions, and liquidations with respect to the Series. Shareholders do not have cumulative voting rights. On any matter submitted to a vote of shareholders, shares of the Series will vote separately except when a vote of shareholders in the aggregate is required by law, or when the Trustees have determined that the matter affects the interests of more than one series, in which case the shareholders of all such series shall be entitled to vote thereon. Only the SwissKey Fund class shareholders may vote on matters related to the Rule 12b-1 Plan associated with that class. SHAREHOLDER MEETINGS The Trustees of the Trust do not intend to hold annual meetings of shareholders of the Series. The U.S. Securities and Exchange Commission, however, requires the Trustees to promptly call a meeting for the purpose of voting upon the question of removal of any Trustee when requested to do so by not less than 10% of the outstanding shareholders of the Series. In addition, subject to certain conditions, shareholders of the Series may apply to other series of the Trust to communicate with other shareholders to request a shareholders' meeting to vote upon the removal of a Trustee or Trustees. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS The Trust will attempt to obtain the best overall price and most favorable execution of transactions in portfolio securities. However, subject to policies established by the Board of Trustees of the Trust, the Series may pay a broker-dealer a commission for effecting a portfolio transaction for the Series in excess of the amount of commission another broker-dealer would have charged if Brinson Partners determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such broker-dealer, viewed in terms of that particular transaction or such firm's overall responsibilities with respect to the clients, including the Series, as to which it exercises investment discretion. In selecting and monitoring broker-dealers and negotiating commissions, consideration will be given to a broker-dealer's reliability, the quality of its execution services on a continuing basis and its financial condition. SHAREHOLDER REPORTS AND INQUIRIES Shareholders will receive semi-annual reports showing portfolio investments and other information as of December 31 and annual reports audited by independent auditors as of June 30. Shareholders with inquiries should call the Non-U.S. Equity Fund at (800) 448-2430 or write to The Brinson Funds, 3200 Horizon Drive, King of Prussia, PA 19406-0903. PERFORMANCE INFORMATION From time to time, performance information, such as yield or total return, may be quoted in advertisements or in communications to present or prospective shareholders. Performance quotations represent the Fund's past performance and should not be considered as representative of future results. The current yield will be calculated by dividing the net investment income earned per share by the Fund during the period stated in the advertisement (based on the average daily number of shares entitled to receive dividends outstanding during the period) by the maximum net asset value per share on the last day of the period and annualizing the result on a semi-annual compounded basis. The Fund's total return may be calculated on an annualized and aggregate basis for various periods (which periods will be stated in the advertisement). Average annual return reflects the average percentage change per year in value of an investment in the Fund. Aggregate total return reflects the total percentage change over the stated period. 16 To help investors better evaluate how an investment in the Fund might satisfy their investment objective, advertisements regarding the Fund may discuss yield or total return as reported by various financial publications. Advertisements may also compare yield or total return to other investments, indices and averages. The following publications, benchmarks, indices and averages may be used: Lipper Mutual Fund Performance Analysis; Lipper Fixed Income Analysis; Lipper Mutual Fund Indices; Morgan Stanley Indices; Shearson Lehman Hutton Treasury Index; Salomon Brothers Indices; Dow Jones Composite Average or its component indices; Standard & Poor's 500 Stock Index or its component indices; Wilshire Indices; The New York Stock Exchange composite or component indices; CDA Mutual Fund Report; Weisenberger--Mutual Funds Panorama and Investment Companies; Mutual Fund Values and Mutual Fund Service Book, published by Morningstar, Inc.; comparable 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 Non-U.S. Equity Fund's calculations of yield or total return. Further information about the performance of the Fund is included in the Fund's Annual Report dated June 30, 1996, which may be obtained without charge by contacting the Trust at (800) 448-2430. 17 APPENDIX A INVESTMENT POLICIES AND TECHNIQUES EQUITY SECURITIES: The Series may invest in a broad range of equity securities of non-U.S. issuers, including common and preferred stocks, securities such as warrants or rights that are convertible into common stock and sponsored or unsponsored European and Global depository receipts ("Depository Receipts"). The issuers of unsponsored Depository Receipts are not obligated to disclose material information in the United States. The Series will typically invest in equity securities listed on recognized foreign exchanges, but may also invest in securities traded in over-the-counter markets. The Series expects its investments to emphasize large and intermediate capitalization companies. Capitalization levels are measured relative to specific markets, thus large and intermediate capitalization ranges will vary country by country. CASH AND CASH EQUIVALENTS: The Series may invest a portion of its assets in short-term debt securities (including repurchase agreements and reverse repurchase agreements) which may be denominated in U.S. or non-U.S. currencies, including U.S. Treasury bills and other securities of the U.S. government and its agencies and instrumentalities, bankers' acceptances and certificates of deposit. The Series may also hold foreign currency, time deposits in U.S. and foreign banks, obligations of foreign sovereignties and companies, and Eurodollars. When unusual market conditions warrant, the Series may make substantial temporary defensive investments in cash equivalents up to a maximum of 100%. Cash equivalent holdings may be denominated in any currency (although such holdings may not constitute "cash or cash equivalents" for tax diversification purposes). When the Series invests for defensive purposes, it may affect the attainment of the Series' investment objective. FOREIGN CURRENCY TRANSACTIONS AND OPTIONS ON CURRENCIES: 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 exchange market or through entering into contracts to purchase or sell foreign currencies at a future date (i.e., a "forward foreign currency" contract or "forward" contract). A forward contract involves an obligation to purchase or sell a specific currency amount at a future date, which may be any fixed number of days from the date of the contract, agreed upon by the parties, at a price set at the time of the contract. The Series will convert currency on a spot basis from time to time and investors should be aware that changes in currency exchange rates and exchange control regulations may affect the costs of currency conversion. The Series may enter into forward contracts for hedging purposes as well as non-hedging purposes. For hedging purposes, the Series may enter into contracts to deliver or receive foreign currency it will receive from or require for its normal investment activities. It may also use contracts in a manner intended to protect foreign currency-denominated securities from declines in value due to unfavorable exchange rate movements. The Series may also enter into contracts with the intent of changing the relative exposure of the Series' portfolio of securities to different currencies to take advantage of anticipated changes in exchange rates. When the Series enters into forward contracts for non-hedging purposes, it will establish a segregated account with its custodian bank in which it will maintain cash, U.S. government securities, equity securities and/or investment and non-investment grade debt securities equal in value to its obligations with respect to its forward contracts for non-hedging purposes. Any assets held in any segregated account maintained by the Series with respect to any options, futures or forward contracts shall be liquid, unencumbered and marked-to-market daily (any such assets held in a segregated account are referred to in this Prospectus as "Segregated Assets"). At the maturity of a forward contract, the Series may either sell a portfolio security and make delivery of the foreign currency, or it may retain the security and terminate its contractual obligation to deliver the foreign 18 currency by purchasing an "offsetting" contract with the same currency trader obligating them to purchase, on the same maturity date, the same amount of the foreign currency. The Series may realize a gain or loss from currency transactions. OPTIONS ON CURRENCIES: The Series also may purchase and write put and call options on foreign currencies (traded on U.S. and foreign exchanges or over- the-counter markets) to manage the portfolio's exposure to changes in currency exchange rates. Call options on foreign currency written by the Series will be "covered," which means that the Series will own an equal amount of, or an offsetting position in, the underlying foreign currency. With respect to put options on foreign currency written by the Series, the Series will establish a segregated account with its custodian bank consisting of Segregated Assets equal in value to the amount the Series would be required to deliver upon exercise of the put. FUTURES CONTRACTS: The Series may enter into contracts for the future purchase or sale of securities, indices or foreign currencies. A financial futures contract is an agreement between two parties to buy or sell a specified debt security at a set price on a future date. An index futures contract is an agreement to take or make delivery of an amount of cash based on the difference between the value of the index at the beginning and at the end of the contract period. A futures contract on a foreign currency is an agreement to buy or sell a specified amount of a currency for a set price on a future date. The Series may enter into futures contracts to the extent that not more than 5% of its assets are required as futures contract margin deposits and premiums on options and may engage in such transactions to the extent that obligations relating to such futures transactions represent not more than 25% of its assets. The Series will enter into such 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. 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. The Series may use options traded on U.S. exchanges and to the extent permitted by law, options traded over-the-counter and on recognized foreign exchanges. It is the position of the U.S. 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% limitation on investments in illiquid securities. REPURCHASE AGREEMENTS: The Series may enter into repurchase agreements with banks or broker-dealers. Repurchase agreements are considered under the Act to be collateralized loans by the Series to the seller secured by the securities transferred to the Series. Repurchase agreements under the Act will be fully collateralized by securities which the Series may invest in directly. Such collateral will be marked-to-market daily. If the seller of the underlying security under the repurchase agreement should default on its obligation to repurchase the underlying security, the Series may experience delay or difficulty in recovering its cash. To the extent that, in the meantime, the value of the security purchased had decreased, the Series could experience a loss. No more than 15% of the Series' net assets will be invested in illiquid securities, including repurchase agreements which have a maturity of longer than seven days. The Series must treat each repurchase agreement as a security for tax diversification purposes and not as cash, a cash equivalent or as a receivable. BORROWING: The Series is authorized, within specified limits, to borrow money as a temporary defensive measure for extraordinary purposes and to pledge its assets in connection with such borrowings. 19 LOANS OF PORTFOLIO SECURITIES: The Series may loan its portfolio securities to broker-dealers and other institutional investors pursuant to agreements requiring that the loans be continuously secured by collateral equal at all times in value to at least the market value of the securities loaned. 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 factors by Brinson Partners, subject to overall supervision by the Board of Trustees, including the creditworthiness of the borrowing broker-dealer or institution and then only if the consideration to be received from such loans would justify the risk. Creditworthiness will be monitored on an ongoing basis by Brinson Partners. RULE 144A AND ILLIQUID SECURITIES: The Series may invest up to 15% of its net assets in illiquid securities. Illiquid securities are those securities that are not readily marketable, including restricted securities and repurchase obligations that mature in more than seven days. Certain restricted securities that may be resold to institutional investors pursuant to Rule 144A under the Securities Act of 1933 may be determined to be liquid under guidelines adopted by the Trust's Board of Trustees. For more detailed descriptions of these investment policies and techniques, please refer to the Statement of Additional Information, which is available without charge upon request by calling (800) 448-2430. 20 LOGO 209 South LaSalle Street Chicago, IL 60604-1295 PROSPECTUS OCTOBER 28, 1996 This Prospectus describes the SWISSKEY FUND CLASS of the investment portfolios offered by The Brinson Funds (the "Trust"). The Trust is an open- end management investment company advised by Brinson Partners, Inc., which currently offers seven distinct investment portfolios: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund (each a "Series" and collectively, the "Series"). Each Series offers two separate classes of shares--the SwissKey Fund class and the Brinson Fund class. The SwissKey Fund class of the Series are referred to as the: SwissKey Global Fund, SwissKey Global Equity Fund, SwissKey Global Bond Fund, SwissKey U.S. Balanced Fund, SwissKey U.S. Equity Fund, SwissKey U.S. Bond Fund and SwissKey Non-U.S. Equity Fund (each a "Fund" and collectively, the "SwissKey Funds" or "Funds"). This prospectus pertains only to the SwissKey Fund class shares, which do not have a sales load, but are subject to annual 12b-1 plan expenses. The Brinson Fund class shares, which are designed primarily for institutional investors, do not have a sales load and are not subject to annual 12b-1 plan expenses. Further information relating to the Brinson Fund class shares may be obtained by calling (800) 448-2430. This Prospectus sets forth concisely the information a prospective investor should know before investing in any of the SwissKey Funds. Investors should read and retain this Prospectus for future reference. Additional information about the Funds and the other class of shares of the Trust's investment portfolios is contained in the Statement of Additional Information dated October 28, 1996, as amended from time to time, which has been filed with the U.S. Securities and Exchange Commission and is available upon request and without charge from the Trust at the addresses and telephone numbers below. The Statement of Additional Information is incorporated by reference into this Prospectus. AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN ANY OF THE FUNDS IS NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE U.S. SECURITIES 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. UNDERWRITER: ADVISOR: Fund/Plan Broker Services, Inc. Brinson Partners, Inc. 3200 Horizon Drive 209 South LaSalle Street King of Prussia, PA 19406-0903 Chicago, IL 60604-1295 1-800-SWISSKEY 1-800-SWISSKEY TABLE OF CONTENTS
PAGE ---- Annual Fund Operating Expenses............................................. 3 Financial Highlights....................................................... 5 Description of the Funds................................................... 6 Investment Objectives and Policies......................................... 6 Global Fund.............................................................. 6 Global Equity Fund....................................................... 7 Global Bond Fund......................................................... 7 U.S. Balanced Fund....................................................... 8 U.S. Equity Fund......................................................... 8 U.S. Bond Fund........................................................... 8 Non-U.S. Equity Fund..................................................... 9 Investment Considerations and Risks........................................ 9 Management of the Trust.................................................... 12 Portfolio Management....................................................... 13 Administration of the Trust................................................ 13 Purchase of Shares......................................................... 14 Account Options............................................................ 16 Redemption of Shares....................................................... 17 Net Asset Value............................................................ 20 Distribution Plan.......................................................... 21 Dividends, Distributions and Taxes......................................... 22 General Information........................................................ 23 Performance Information.................................................... 25 Appendix A................................................................. 26
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUNDS TO MAKE SUCH AN OFFER OR SOLICITATION. NO SALES REPRESENTATIVE, DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
TOTAL FUND OPERATING EXPENSES MANAGEMENT FEES 12B-1 OTHER EXPENSES (AFTER FEE WAIVER AND/OR (AFTER FEE WAIVER)/1/ EXPENSES/2/ (AFTER REIMBURSEMENT) EXPENSE REIMBURSEMENT) --------------------- ----------- --------------------- ------------------------ SwissKey Global Fund.... 0.80% 0.65% 0.24% 1.69% SwissKey Global Equity Fund................... 0.03% 0.76% 0.97% 1.76% SwissKey Global Bond Fund................... 0.00% 0.49% 0.90% 1.39% SwissKey U.S. Balanced Fund................... 0.49% 0.50% 0.31% 1.30% SwissKey U.S. Equity Fund................... 0.36% 0.52% 0.44% 1.32% SwissKey U.S. Bond Fund. 0.00% 0.47% 0.60% 1.07% SwissKey Non-U.S. Equity Fund................... 0.60% 0.84% 0.40% 1.84%
- ---------- /1Pursuant/to the terms of the Investment Advisory Agreements between the Trust and the Advisor, the Advisor is to receive a monthly fee at the following annual rates for each of the Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund: 0.80%, 0.80%, 0.75%, 0.70%, 0.70%, 0.50% and 0.80%, respectively. Brinson Partners has agreed irrevocably to waive its fees and reimburse certain expenses so that total operating expenses, with the exception of 12b-1 expenses, of the SwissKey Global Fund, SwissKey Global Equity Fund, SwissKey Global Bond Fund, SwissKey U.S. Balanced Fund, SwissKey U.S. Equity Fund, SwissKey U.S. Bond Fund and SwissKey Non-U.S. Equity Fund will never exceed 1.10%, 1.00%, 0.90%, 0.80%, 0.80%, 0.60% and 1.00%, respectively. Absent these fee waivers and expense reimbursements, the total operating expenses for the SwissKey Fund class shares of the Series for the fiscal year ended June 30, 1996 would have been 1.69%--Global Fund, 2.53%--Global Equity Fund, 2.14%--Global Bond Fund, 1.51%--U.S. Balanced Fund, 1.66%--U.S. Equity Fund, 4.10%--U.S. Bond Fund and 2.04%-- Non-U.S. Equity Fund. /2For/purposes of this Table, "12b-1 Expenses" is comprised of an asset-based sales charge of up to 0.65% of average daily net assets and a service fee of 0.25% of average daily net assets for SwissKey Fund class shares of each Series. See "Distribution Plan." Although the Distribution Plan relating to the SwissKey Funds (the "Plan") provides that the Trust may pay up to an annual rate of 0.65% of the average daily net assets of the SwissKey Fund class shares, plus a 0.25% service fee for each SwissKey Fund class ("distribution fees"), the Trust and the Underwriter have agreed to limit aggregate distribution fees with respect to SwissKey Fund class shares so as not to exceed 0.65%, 0.76%, 0.49%, 0.50%, 0.52%, 0.47% and 0.84% of the average daily net assets of the SwissKey Global Fund, SwissKey Global Equity Fund, SwissKey Global Bond Fund, SwissKey U.S. Balanced Fund, SwissKey U.S. Equity Fund, SwissKey U.S. Bond Fund and SwissKey Non-U.S. Equity Fund, respectively. The SwissKey Fund class shares of the Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, and Non-U.S. Equity Fund Series commenced operations on July 31, 1995. The SwissKey Fund class shares of the U.S. Bond Fund Series commenced operations on August 31, 1995. Pursuant to rules of the National Association of Securities Dealers, Inc. ("NASD"), the aggregate initial sales charges, deferred sales charges and asset-based sales charges on shares of the Funds may not exceed 6.25% of total gross sales, subject to certain exclusions. This 6.25% limitation is imposed on the Fund rather than on a per shareholder basis. Therefore, long-term shareholders of the SwissKey Funds may pay more than the economic equivalent of the maximum front-end sales charges permitted by the NASD. This amount also includes service fees. 3 EXAMPLE: Based on the level of expenses listed above after fee waivers and reimbursements, the total expenses relating to an investment of $1,000 would be as follows assuming a 5% annual return and redemption at the end of each time period.
NAME OF FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------ ------ ------- ------- -------- SwissKey Global Fund............................ $17 $53 $ 92 $200 SwissKey Global Equity Fund..................... $18 $55 $ 95 $207 SwissKey Global Bond Fund....................... $14 $44 $ 76 $167 SwissKey U.S. Balanced Fund..................... $13 $41 $ 71 $157 SwissKey U.S. Equity Fund....................... $13 $42 $ 72 $159 SwissKey U.S. Bond Fund......................... $11 $34 $ 59 $131 SwissKey Non-U.S. Equity Fund................... $19 $58 $100 $216
The foregoing table is designed to assist the investor in understanding the various costs and expenses that a shareholder will bear directly or indirectly. - ------------------------------------------------------------------------------- THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, A FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN ACTUAL RETURNS GREATER OR LESS THAN 5%. - ------------------------------------------------------------------------------- THE TRUST ISSUES TWO CLASSES OF SHARES THAT INVEST IN THE SAME PORTFOLIOS OF SECURITIES. ALTHOUGH SHAREHOLDERS OF BOTH THE SWISSKEY FUND CLASS SHARES AND BRINSON FUND CLASS SHARES DO NOT PAY SALES CHARGES, SHAREHOLDERS OF SWISSKEY FUND CLASS SHARES ARE SUBJECT TO DISTRIBUTION EXPENSES. THEREFORE, EXPENSES, AND ULTIMATELY, PERFORMANCE WILL VARY BETWEEN THE CLASSES. FURTHER INFORMATION ABOUT THE BRINSON FUND CLASS SHARES OF THE TRUST MAY BE OBTAINED BY CALLING (800) 448-2430. 4 FINANCIAL HIGHLIGHTS The selected financial information in the following table has been audited by the Funds' independent auditors, whose unqualified report thereon appears in the Funds' Annual Report to Shareholders dated June 30, 1996. Additional financial data and related notes are contained in the Funds' Annual Report to Shareholders, which is incorporated by reference into the Statement of Additional Information and is available without charge upon request. FINANCIAL HIGHLIGHTS--PERIODS YEARS ENDED JUNE 30 The following table presents financial data relating to a share of beneficial interest outstanding throughout the period presented. This information has been derived from the Funds' financial statements.
INCOME (LOSS) FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS ------------------------------ ----------------------------- DISTRIBU- TIONS DISTRIBU- TOTAL FROM AND TIONS NET NET NET NET INCOME IN EXCESS FROM AND ASSET ASSETS NET ASSET INVEST- REALIZED FROM OF NET IN EXCESS VALUE- TOTAL END OF VALUE- MENT AND INVEST- INVEST- OF NET TOTAL END RETURN PERIOD BEGINNING INCOME UNREALIZED MENT MENT REALIZED DISTRIBU- OF (NON- (IN YEAR OF PERIOD (LOSS) GAIN (LOSS) OPERATIONS INCOME GAIN TIONS PERIOD ANNUALIZED) 000S) - ---- --------- ------- ----------- ---------- --------- --------- --------- ------ ----------- ------- SWISSKEY GLOBAL FUND (Commencement of Operations July 31, 1995) 1996............ $11.60 0.39 1.10 1.49 (0.59) (0.32) (0.91) $12.18 13.24% $14,030 SWISSKEY GLOBAL EQUITY FUND (Commencement of Operations July 31, 1995) 1996............ $10.35 (0.01) 1.93 1.92 (0.01) (0.69) (0.70) $11.57 19.25% $33,012 SWISSKEY GLOBAL BOND FUND (Commencement of Operations July 31, 1995) 1996............ $10.56 0.78 0.15 0.93 (1.37) (0.10) (1.47) $10.02 9.17% $ 3,653 SWISSKEY U.S. BALANCED FUND (Commencement of Operations July 31, 1995) 1996............ $11.38 0.42 0.86 1.28 (0.42) (0.57) (0.99) $11.67 11.54% $ 779 SWISSKEY U.S. EQUITY FUND (Commencement of Operations July 31, 1995) 1996............ $11.94 0.10 2.92 3.02 (0.13) (0.25) (0.38) $14.58 25.70% $ 5,387 SWISSKEY U.S. BOND FUND (Commencement of Operations August 31, 1995) 1996............ $10.00 0.46 (0.13) 0.33 (0.38) (0.03) (0.41) $ 9.92 3.24% $ 636 SWISSKEY NON-U.S. EQUITY FUND (Commencement of Operations July 31, 1995) 1996............ $10.26 0.12 1.45 1.57 (0.15) (0.56) (0.71) $11.12 15.78% $ 1,262 RATIOS/SUPPLEMENTAL DATA ------------------------ RATIO OF NET RATIO OF EXPENSES INVESTMENT INCOME TO AVERAGE NET TO AVERAGE NET ASSETS ASSETS --------------------- --------------------- AVERAGE BEFORE AFTER BEFORE AFTER COMMISS- EXPENSE EXPENSE EXPENSE EXPENSE PORTFOLIO ION REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER RATE PAID YEAR MENT MENT MENT MENT RATE PER SHARE - ---- ---------- ---------- ---------- ---------- --------- --------- SWISSKEY GLOBAL FUND (Commencement of Operations July 31, 1995) 1996............ 1.69%/1/ N/A 3.04%/1/ N/A 142% $0.0291 SWISSKEY GLOBAL EQUITY FUND (Commencement of Operations July 31, 1995) 1996............ 2.53%/1/ 1.76%/1/ (0.19)%/1/ 0.58%/1/ 74% $0.0288 SWISSKEY GLOBAL BOND FUND (Commencement of Operations July 31, 1995) 1996............ 2.14%/1/ 1.39%/1/ 4.49%/1/ 5.24%/1/ 184% N/A SWISSKEY U.S. BALANCED FUND (Commencement of Operations July 31, 1995) 1996............ 1.51%/1/ 1.30%/1/ 3.26%/1/ 3.47%/1/ 240% $0.0481 SWISSKEY U.S. EQUITY FUND (Commencement of Operations July 31, 1995) 1996............ 1.66%/1/ 1.32%/1/ 0.61%/1/ 0.95%/1/ 36% $0.0457 SWISSKEY U.S. BOND FUND (Commencement of Operations August 31, 1995) 1996............ 4.10%/1/ 1.07%/1/ 2.53%/1/ 5.56%/1/ 363% N/A SWISSKEY NON-U.S. EQUITY FUND (Commencement of Operations July 31, 1995) 1996............ 2.04%/1/ 1.84%/1/ 0.83%/1/ 1.03%/1/ 20% $0.0219
- ----- /1/Annualized N/A=Not Applicable 5 DESCRIPTION OF THE FUNDS The investment objective of each Series is fundamental and may not be changed without a vote of the holders of the majority of the voting securities of the Series. Unless otherwise stated in this Prospectus or the Statement of Additional Information, each Series' investment policies are not fundamental and may be changed without shareholder approval. There can be no assurance that the Series will achieve their investment objectives. The Series do not intend to concentrate their investments in a particular industry. The Series do not intend to issue senior securities as defined in the Investment Company Act of 1940, as amended (the "Act"), except that each Series may engage in borrowing activities as defined in Appendix A and in the Statement of Additional Information. Each Series' investment objective and its policies concerning portfolio lending, borrowing, the issuance of senior securities and concentration are "fundamental," which means that they may not be changed without the affirmative vote of the holders of a majority of the Series' outstanding voting securities (as defined in the Act). INVESTMENT OBJECTIVES AND POLICIES GLOBAL FUND INVESTMENT OBJECTIVE The Global Fund's investment objective is to maximize total return, consisting of capital appreciation and current income. The Series will attempt to control risk while seeking to achieve its investment objective. As a global fund, at least 65% of the Series' total assets will be invested in securities of issuers in at least three countries, one of which may be the United States. The Series may utilize a wide range of equity, debt and money market securities in domestic and foreign markets, and the Series may invest in other open-end investment companies advised by Brinson Partners, Inc. ("Brinson Partners" or the "Advisor"). The Series may enter into repurchase agreements and reverse repurchase agreements, and engage in futures, options and currency transactions for hedging and other permissible purposes, as more fully described in "Investment Consideration and Risks" and Appendix A in this Prospectus, and in the Statement of Additional Information. The Series is a diversified portfolio that seeks to achieve its objective by pursuing active asset allocation strategies across global equity and fixed income markets and active security selection within each market. These decisions are undertaken relative to the Global Securities Markets Index (the "Global Benchmark"), which is compiled by Brinson Partners. The Global Benchmark consists of eight distinct asset classes representing the primary wealth-holding public securities markets. These asset classes are U.S. equities, non-U.S. equities, emerging markets equities, U.S. bonds, non-U.S. bonds, emerging markets bonds, high yield bonds and cash equivalents. Each asset class is represented in the Global Benchmark by an index compiled by an independent data provider. In order to compile the Global Benchmark, the Advisor determines current relative market capitalizations in the world markets (U.S. equities, non-U.S. equities, emerging markets equities, U.S. bonds, non-U.S. bonds, emerging markets bonds, high yield bonds and cash) and then weights each relevant index. Based on this weighting, the Advisor determines the return of the relative indices, applies the index weighting and then determines the return of the Global Benchmark. From time to time, the Advisor may substitute an equivalent index within a given asset class when it believes that such index more accurately reflects the relevant global market. Although it may invest anywhere in the world, it is expected that the Series' assets will be primarily invested in equity markets listed in the Morgan Stanley Capital International ("MSCI") World Equity (Free) Index. The 6 Series will primarily invest in fixed income markets listed in the Salomon Brothers World Government Bond Index. The Series may invest up to 10% of its net assets in equity and debt securities of emerging market issuers, or securities with respect to which the return is derived from the equity or debt securities of issuers in emerging markets. GLOBAL EQUITY FUND INVESTMENT OBJECTIVE The Global Equity Fund's investment objective is to maximize total return, consisting of capital appreciation and current income. The Series will attempt to control risk while seeking to achieve its investment objective. As a global fund, at least 65% of the Series' total assets will be invested in equity securities of issuers in at least three countries, one of which may be the United States. The Series may utilize a wide range of equity securities that are traded on both domestic and foreign stock exchanges or, in the case of domestic stocks, in the over-the-counter market. The Series may enter into repurchase agreements and reverse repurchase agreements, and engage in futures, options and currency transactions for hedging and other permissible purposes, as more fully described in "Investment Considerations and Risks" and Appendix A in this Prospectus, and in the Statement of Additional Information. The Series is a diversified portfolio that seeks to achieve its objective by pursuing an active asset allocation strategy across global equity markets, active management of currency exposures and active security selection within each market. The benchmark for the Series is the MSCI World Equity (Free) Index (the "Global Equity Benchmark"). The Global Equity Benchmark is a market driven broad based index which includes U.S. and non-U.S. equity markets in terms of capitalization and performance. The Global Equity Benchmark is designed to provide a representative total return for all major stock exchanges located inside and outside the United States. Although it may invest anywhere in the world, it is expected that the Series' assets will primarily be invested in equity markets listed in the Global Equity Benchmark. 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 market. GLOBAL BOND FUND INVESTMENT OBJECTIVE The Global Bond Fund's investment objective is to maximize total return, consisting of capital appreciation and current income. The Series will attempt to control risk while seeking to achieve its investment objective. As a global fund, 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 countries, one of which may be the United States. The Series seeks to achieve this objective by investing primarily in debt securities that may also provide the potential for capital appreciation. The Series may enter into repurchase agreements and reverse repurchase agreements, and may engage in futures, options and currency transactions for hedging and other permissible purposes, as more fully described in "Investment Considerations and Risks" and Appendix A in this Prospectus, and in the Statement of Additional Information. The Series is a non-diversified portfolio. The benchmark for the Series is the Salomon Brothers World Government Bond Index (the "Global Bond Benchmark"). The Global Bond 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. Although it may invest anywhere in the world, it is expected that the Series' assets will be primarily invested in fixed income markets listed in the Global Bond Benchmark. From time to time, the Advisor 7 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. U.S. BALANCED FUND INVESTMENT OBJECTIVE The U.S. Balanced Fund's investment objective is to maximize total return, consisting of capital appreciation and current income. The Series will attempt to control risk while seeking to achieve its investment objective. Under normal circumstances, the Series will invest at least 25% of its net assets in fixed income securities. The Series may utilize a wide range of equity, debt and money market securities. The Series may also invest in equity securities, including warrants, preferred stock and securities convertible into equity securities. The Series may enter into repurchase agreements and reverse repurchase agreements, and may engage in futures and options for hedging and other permissible purposes, as more fully described in "Investment Considerations and Risks" and Appendix A in this Prospectus, and in the Statement of Additional Information. It is not the policy of the Series to take unreasonable risks to obtain speculative or aggressively high returns. The Series is a diversified portfolio that seeks to achieve its objective by pursuing active asset allocation strategies across U.S. equity and fixed income markets and active security selection within each market. These decisions are undertaken relative to the U.S. Balanced Index (the "U.S. Balanced Benchmark"), which is compiled by Brinson Partners. The U.S. Balanced Benchmark represents a fixed composite of 65% Wilshire 5000 Index, 30% Salomon Brothers Broad Investment Grade Bond Index and 5% 30-day Treasury Bill Index. From time to time, the Advisor may substitute an equivalent index within a given asset class when the Advisor believes that such new index more accurately reflects the relevant U.S. market. U.S. EQUITY FUND INVESTMENT OBJECTIVE The U.S. Equity Fund's investment objective is to maximize total return, consisting of capital appreciation and current income, while controlling risk. Under normal circumstances, at least 65% of the Series' total assets will be invested in equity securities of U.S. companies. The Series is a diversified portfolio that seeks to achieve its objective by investing in a wide range of equity securities of U.S. companies that are traded on major stock exchanges as well as in the over-the-counter market. The Series may engage in futures and options for hedging and other permissible purposes, as more fully described in "Investment Considerations and Risks" and Appendix A in this Prospectus, and in the Statement of Additional Information. The benchmark for the Series is the Wilshire 5000 Index (the "U.S. Equity Benchmark"). The U.S. Equity Benchmark is a broad weighted index which includes all U.S. common stocks. The U.S. Equity Benchmark is designed to provide a representative indication of the capitalization and return for the U.S. equity market. U.S. BOND FUND INVESTMENT OBJECTIVE The U.S. Bond Fund's investment objective is to maximize total return, consisting of capital appreciation and current income, while controlling risk. As a matter of fundamental policy, under normal circumstances, the Series intends to invest at least 65% of its total assets in U.S. debt securities with an initial maturity of more than one year. The Series is a diversified portfolio that seeks to achieve its objective by investing primarily in fixed income securities, which may also provide the potential for capital appreciation. The Series may also engage in 8 futures and options transactions for hedging and other permissible purposes, as more full described in "Investment Considerations and Risks" and Appendix A in this Prospectus, and in the Statement of Additional Information. The Series may invest in a broad range of fixed income securities, including debt securities of the U.S. government, together with its agencies and instrumentalities and the debt securities of U.S. corporations. A majority of the fixed income securities in which the Series will invest will possess a minimum rating of BBB- by Standard & Poor's Ratings Group ("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. Other fixed income securities in which the Series may invest include zero coupon securities, mortgage-backed securities, asset-backed securities and when-issued securities. The Series may invest a portion of its assets in short-term debt securities (including repurchase and reverse repurchase agreements) of corporations, the U.S. government or its agencies or instrumentalities, and banks and finance companies. The benchmark for the Series is the Salomon Brothers Broad Investment Grade Bond Index (the "U.S. Bond Benchmark"). The U.S. Bond Benchmark is a market driven broad based index which includes U.S. bonds with over one year to maturity. From time to time, the Advisor may substitute securities in an equivalent index when it believes that such securities in the index more accurately reflect the relevant fixed income securities market. NON-U.S. EQUITY FUND INVESTMENT OBJECTIVE The Non-U.S. Equity Fund's investment objective is to maximize total return, consisting of capital appreciation and current income, by investing primarily in the equity securities of non-U.S. issuers. Under normal conditions, at least 65% of the Series' total assets will be invested in equity securities of issuers in at least three countries other than the United States. In seeking to achieve its investment objective while also controlling risk, the Series may invest in a wide range of equity securities, including: American, European and Global Depository Receipts, common and preferred stock; debt securities convertible into or exchangeable for common stock; and securities such as warrants or rights that are convertible into common stock. The Series may engage in futures, options and currency transactions for hedging and other permissible purposes, as more fully described in "Investment Considerations and Risks" and Appendix A in this Prospectus, and in the Statement of Additional Information. The Series is a diversified portfolio that seeks to achieve its objective by investing primarily in the equity securities of non-U.S. issuers. The benchmark for the Series is the MSCI Non-U.S. Equity (Free) Index (the "Non- U.S. Equity Benchmark"). The Non-U.S. Equity Benchmark is a market driven broad based index which includes non-U.S. equity markets in terms of capitalization and performance. From time to time, the Advisor may substitute securities in an equivalent index when it believes that such securities in the index more accurately reflect the relevant international market. Although it may invest anywhere in the world, it is expected that the Series' assets will be primarily invested in the equity markets included in the MSCI Non-U.S. Equity (Free) Index. INVESTMENT CONSIDERATIONS AND RISKS The following provides information about the types of instruments in which the Funds may invest, strategies employed by Brinson Partners in its attempt to attain each Series' investment objective and a summary of related risks. Shareholders should understand that all investments involve risks and there can be no guarantee against loss resulting from an investment in the Series, nor can there be any assurance that the Series will be able to 9 attain their investment objectives. A complete list of the Series' investment restrictions and more detailed information about the Series' investments are contained in Appendix A in this Prospectus, and in the Statement of Additional Information. EQUITY SECURITIES (GLOBAL FUND, GLOBAL EQUITY FUND, U. S. BALANCED FUND, U.S. EQUITY FUND AND NON-U.S. EQUITY FUND)--Equity securities fluctuate in value as a result of various factors, which are often unrelated to the value of the issuer of the securities. These fluctuations may be pronounced. The Global Fund may invest in small market capitalization companies and in equity securities that are considered by the Advisor to be in their post-venture capital stage. These securities may have limited marketability, and therefore, may be more volatile. Fluctuations in the value of the Series' equity investments will affect the value of their shares and thus the Funds' total returns to investors. FIXED INCOME SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND AND U.S. BOND FUND)--All fixed income securities are subject to two types of risks: credit risk and interest rate risk. The credit risk relates to the ability of the issuer to meet interest or principal payments or both as they come due. The interest rate risk refers to the fluctuations in the net asset value of any portfolio of fixed income securities resulting from the inverse relationship between the price and yield of fixed income securities; that is, when the general level of interest rates rises, the prices of outstanding fixed income securities decline, and when interest rates fall, prices rise. FOREIGN SECURITIES AND CURRENCY CONSIDERATIONS (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND FUND AND NON-U.S. EQUITY FUND)--Investments in securities of foreign issuers may involve greater risks than those of U.S. issuers. There is generally less information available to the public about non-U.S. companies and less government regulation and supervision of non-U.S. stock exchanges, brokers and listed companies. Non-U.S. companies are not subject to uniform global accounting, auditing and financial reporting standards, practices and requirements. Securities of some non-U.S. companies are less liquid and their prices more volatile than securities 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 portfolios. Additionally, in some non-U.S. countries, there is the possibility of expropriation or confiscatory taxation, limitations on the removal of securities, property or other assets of the Series, political or social instability, or diplomatic developments which could affect U.S. investments in those countries. The Series intend to diversify broadly among countries, but reserve the right to invest a substantial portion of their assets in one or more countries if economic and business conditions warrant such investments. Brinson Partners will take these factors into consideration in managing the Series' investments. Because the Series will keep their books and records in U.S. dollars, the Series will be required, for federal income tax purposes, to account for income and losses on all transactions involving foreign currency under Section 988 of the Internal Revenue Code of 1986, as amended, and the applicable U.S. Treasury Regulations, so that generally any component of a gain or loss attributable to 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 intervention in currency markets, which could adversely affect the Series. Although the Series may attempt to manage currency exchange rate risks, there is no assurance that the Series will do so at an appropriate time or that they will be able to predict exchange rates accurately. For example, if the Series increase their exposure to a currency and that currency's price subsequently falls, such currency management may result in increased losses to the Series. 10 Similarly, if the Series decrease their exposure to a currency, and the currency's price rises, the Series will lose the opportunity to participate in the currency's appreciation. Each Series will manage currency exposures relative to the normal currency allocation and will consider return and risk of currency exposures relative to its respective Benchmark. In addition, if the currency in which a security is denominated appreciates against the U.S. dollar, the dollar value of the security will increase. Conversely, a decline in the exchange rate of the currency would adversely affect the value of the security expressed in dollars. There are additional risks inherent in investing in less developed countries which are applicable to the Global Fund. Compared to the United States and other developed countries, emerging market countries may have relatively unstable governments, economies based on only a few industries, and securities markets that trade only a small number of securities and employ settlement procedures different from those used in the United States. Prices on these exchanges tend to be volatile and, in the past, securities in these countries have offered greater potential for gain (as well as loss) than securities of companies located in developed countries. Further, investments by foreign investors are subject to a variety of restrictions in many emerging countries. Emerging markets countries such as those in which the Global Fund may invest have historically experienced and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations or currency depreciation, large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. Additional factors which may influence the ability or willingness to service debt include, but are not limited to, a country's cash flow situation, the availability of sufficient foreign exchange on the date a payment is due, the relative size of its debt service burden to the economy as a whole, its government's policy towards the International Monetary Fund, the World Bank and other international agencies and the political constraints to which a government debtor may be subject. FOREIGN CURRENCY TRANSACTIONS (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND FUND AND NON-U.S. EQUITY FUND)--To manage exposure to currency fluctuations, the Series may alter fixed income or money market exposures, enter into forward currency exchange contracts, buy or sell options or futures relating to foreign currencies and may purchase securities indexed to currency baskets. The Series will also use these currency exchange techniques in the normal course of business to hedge against adverse changes in exchange rates in connection with purchases and sales of securities. Some of these strategies may require the Series to set aside liquid assets in a segregated custodial account to cover their obligations. FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS (ALL SERIES)--The Series may attempt to reduce the overall level of investment risk of particular securities and attempt to protect against adverse market movements by investing in futures, options and other derivative instruments. A derivative instrument is commonly defined as a financial instrument whose performance and value are derived, at least in part, from another source, such as the performance of an underlying asset, a specific security or an index of securities. The derivative instruments in which the Series may invest include the purchase and writing of options on securities (including index options) and options on foreign currencies, investing in futures contracts for the purchase or sale of instruments based on financial indices, including interest rate indices or indices of U.S. or foreign government securities, equity or fixed income securities ("futures contracts"), forward contracts and swaps and swap related products such as equity index swaps, interest rate swaps, currency swaps, and related caps, collars and floors. The investment in futures, options, forward contracts, swaps and similar strategies by the Series will depend on Brinson Partners' judgment as to the potential risks and rewards of different types of strategies, and it should be recognized that the use of these instruments exposes the Series to additional investment risks and transaction costs. If the Advisor incorrectly analyzes the market conditions or does not employ the appropriate strategy with respect to these instruments, the Series could be left in a less favorable position. For example, gains and losses 11 on investments in futures depend on the Advisor's ability to predict correctly the direction of security prices, interest rates and other economic factors. Additional risks inherent in the use of futures, options and forward contracts include: adverse movements in the prices of securities or currencies being hedged; the possible absence of a liquid secondary market for any particular instrument at any time; and the possible need to defer closing out certain hedge positions to avoid adverse tax consequences. Options and futures can be volatile instruments and may not perform as expected. A Series could experience losses if the prices of its options and futures positions are poorly correlated with its other investments. If a hedge is applied at an inappropriate time or price trends are judged incorrectly, options and futures strategies may lower a Series' return (i.e., options and futures may fail as hedging techniques in cases where the price movements of the securities underlying the options and futures do not follow the price movements of the portfolio securities subject to the hedge). Options and futures traded on foreign exchanges generally are not regulated by U.S. authorities and may offer less liquidity and less protection to a Series in the event of default by the other party to the contract. The loss from investing in futures transactions is potentially unlimited. A Series does not intend to purchase put and call options that are traded on a national stock exchange in an amount exceeding 5% of its net assets. Each Series may invest in derivatives for hedging purposes, to maintain liquidity, or in anticipation of changes in the composition of its portfolio holdings. No Series will engage in derivative investments purely for speculative purposes. A Series will invest in one or more derivatives only to the extent that the instrument under consideration is judged by the Advisor to be consistent with the Series' overall investment objective and policies. In making such judgment, the potential benefits and risks will be considered in relation to the Series' other portfolio investments. Where not specified, investment limitations with respect to a Series' derivative instruments will be consistent with that Series' existing percentage limitations with respect to its overall investment policies and restrictions. The risks and policies of various types of derivative instruments permitted for the Series, including options, futures, forward contracts and applicable interest rate swaps, are described in greater detail in Appendix A in this Prospectus, and in the Statement of Additional Information. NON-DIVERSIFIED STATUS (GLOBAL BOND FUND ONLY)--The Global Bond Fund is classified as a "non-diversified" investment company under the Act, which means that the proportion of the Series' assets that may be invested in the securities of a single issuer is not limited by the Act. Since it may invest a larger portion of its assets in the securities of a single issuer than investment companies that are classified as diversified funds under the Act, an investment in the Global Bond Fund may be subject to greater fluctuations in value than an investment in a diversified fund. MANAGEMENT OF THE TRUST THE BOARD OF TRUSTEES Under Delaware law, the Board of Trustees has overall responsibility for managing the business and affairs of the Trust. The Trustees, in turn, elect the officers of the Trust, who are responsible for administering the day-to- day operations of the Series. THE ADVISOR Brinson Partners, a Delaware corporation, is an investment management firm managing, as of June 30, 1996, approximately $58 billion, primarily for pension and profit sharing institutional accounts. Brinson Partners was organized in 1989 when it acquired the institutional asset management business of The First National Bank of 12 Chicago and First Chicago Investment Advisors, N.A. Brinson Partners and its predecessor entities have managed domestic and international investment assets since 1974 and global investment assets since 1982. Brinson Partners has offices in Basel, London, Melbourne, New York, Paris, Singapore, Sydney and Tokyo in addition to its principal office at 209 South LaSalle Street, Chicago, IL 60604-1295. Brinson Partners is an indirect wholly-owned subsidiary of Swiss Bank Corporation ("Swiss Bank"). Swiss Bank, with headquarters in Basel, Switzerland, is an internationally diversified organization with operations in many aspects of the financial services industry. Brinson Partners also serves as the investment advisor to seven other investment companies: Brinson Relationship Funds, which includes six investment portfolios (series); Enterprise Accumulation Trust; Enterprise International Growth Portfolio; Fort Dearborn Income Securities, Inc.; Hirtle Callaghan International Trust; John Hancock Variable Series Trust-- International Balanced Portfolio; and Pace Large Company Value Equity Investments. Pursuant to its investment advisory agreements with the Trust on behalf of each Series, Brinson Partners receives a monthly fee at various annual percentage rates of each Series' average daily net assets, as described below, for providing investment advisory services. Brinson Partners is responsible for paying its own expenses and has agreed to waive that portion of its advisory fee equal to the total expenses of a Series for any fiscal year which exceeds the permissible limits applicable to the Series in any state in which its shares are then qualified for sale. Pursuant to its advisory agreements, Brinson Partners is authorized, at its own expense, to obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it does not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. For providing investment advisory services during the fiscal year ended June 30, 1996, the Global Fund and Global Equity Fund paid Brinson Partners a monthly fee at the annual rate of 0.80% of each Series' respective average daily net assets. This fee is higher than the advisory fees paid by most other mutual funds, but is comparable to those of other mutual funds with similar investment objectives. For the fiscal year ended June 30, 1996, the Global Bond Fund paid a monthly fee at the annual rate of 0.75%, the U.S. Balanced Fund and U.S. Equity Fund paid a monthly fee at the annual rate of 0.70%, and the U.S. Bond Fund paid a monthly fee at the annual rate of 0.50%, respectively, of their average daily net assets. PORTFOLIO MANAGEMENT Investment decisions for the Series are made by an investment management team at Brinson Partners. No member of the investment management team is primarily responsible for making recommendations for portfolio purchases. ADMINISTRATION OF THE TRUST THE UNDERWRITER Fund/Plan Broker Services, Inc. ("FPBS"), 3200 Horizon Drive, King of Prussia, PA 19406-0903, was engaged pursuant to an agreement dated November 20, 1995, for the limited purpose of acting as underwriter to facilitate the registration of the shares of the Trust under state securities laws and to assist in the sale of shares. The fee for such service is borne by the Advisor. 13 THE ADMINISTRATOR The Trust, on behalf of each Series, has entered into an administrative services agreement with FPS Services, Inc. ("FPS"), 3200 Horizon Drive, King of Prussia, PA 19406-0903, 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. Each Series pays its pro rata portion based upon its average daily net assets, but in no event shall a Series pay less than $75,000 for the initial multiple class portfolio and $10,000 per year for each additional multiple class portfolio. Pursuant to the agreement with FPS, maximum administration fees are $400,000 for the initial multiple class portfolio and $60,000 per year for each subsequent multiple class portfolio. The services FPS provides to the Series include: coordinating and monitoring of any third parties furnishing services to the Series; providing the necessary office space, equipment and personnel to perform administrative and clerical functions for the Series; preparing, filing and distributing proxy materials, periodic reports to shareholders, registration statements and other documents; and responding to shareholder inquiries. THE CUSTODIAN, TRANSFER AGENT AND ACCOUNTING/PRICING AGENT Bankers Trust Company, c/o BTNY Services, Inc., 34 Exchange Place, Jersey City, NJ 07302-1107 is custodian for the securities and cash of each Series. FPS serves as each Series' transfer agent. As transfer agent, it maintains the records of each shareholder's account, answers shareholder inquiries concerning accounts, processes purchases and redemptions of the Funds' shares, acts as dividend and distribution disbursing agent and performs other shareholder service functions. Shareholder inquiries should be made to the transfer agent at 1-800-SWISSKEY. FPS also performs certain accounting and pricing services for the Trust, including the daily calculation of the Funds' respective net asset values. PURCHASE OF SHARES Shares of the Funds may be purchased directly from the Trust at the net asset value next determined after receipt of the order in proper form by the transfer agent. There is no sales load in connection with the purchase of Fund shares. The Trust reserves the right to reject any purchase order and to suspend the offering of shares of the SwissKey Fund class or the Series. The minimum initial investment for Fund shares is $1,000. Subsequent investments for Fund shares will be accepted in minimum amounts of $50. The Trust reserves the right to vary the initial investment minimum and minimums for additional investments in the Funds at any time. In addition, Brinson Partners may waive the minimum initial investment requirement for any investor. The SwissKey Funds will be marketed directly through the offices of the Swiss Bank. Swiss Bank has been providing investment advisory services since its formation in 1872. Through its branches and subsidiaries, Swiss Bank conducts securities research, provides investment advisory services and manages mutual funds in major cities throughout the world, including Amsterdam, Basel, Geneva, Frankfurt, Hong Kong, London, Luxembourg, Monte Carlo, New York, Paris, Singapore, Sydney, Tokyo, Toronto and Zurich. The SwissKey Funds may be purchased through broker-dealers having sales agreements with FPBS, or through financial institutions having agency agreements with FPBS. There is no sales load or charge in connection with the purchase of shares. The SwissKey Fund class shares, however, are subject to annual 12b-1 Plan expenses of up to a maximum of 0.90% (0.25% of which are service fees to be paid by the Funds to FPBS, dealers or others for providing personal service and/or maintaining shareholder accounts) of the Funds' average daily net assets of such shares. 14 Purchase orders for shares of the Funds 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 Funds' net asset values per share are calculated, are priced according to the net asset value determined on that day. Purchase orders for shares of the Funds 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 Fund. Shares of the Funds may be purchased through broker-dealers, banks and bank trust departments which may charge the investor a transaction fee or other fee for their services at the time of purchase. Such fees would not otherwise be charged if the shares were purchased directly from the Trust. The Trust reserves the right to reject any purchase order and to suspend the offering of shares of any Fund. The minimum initial investment is $1,000. Subsequent investments will be accepted in minimum amounts of $50. The minimum initial investment for IRAs is $1,000 and subsequent investments will be accepted in minimum amounts of $50 for each Fund. The Trust reserves the right to vary the initial and additional investment minimums for each Fund. PURCHASES MAY BE MADE IN ONE OF THE FOLLOWING WAYS:
INITIAL INVESTMENT SUBSEQUENT INVESTMENTS ------------------------------- ------------------------------- MINIMUM $1,000 MINIMUM $50 BY MAIL n Complete and sign the Account n Make your check payable 6 Application accompanying this to "SwissKey ( ) Fund." Prospectus. n Make your check payable to n Enclose the remittance "SwissKey ( ) Fund." portion of your account statement and include the amount of investment, the account name and number. n Mail to the address indicated n Mail to the address indicated on on the Account Application. your account statement or enclose in the envelope provided. BY WIRE n Call 1-800-SWISSKEY to arrange for a wire transaction. n Wire federal funds within 24 n Wire federal funds to: hours to: UNITED MISSOURI BANK KC NA UNITED MISSOURI BANK KC NA ABA # 10-10-00695 ABA # 10-10-00695 FOR: FPS SERVICES, INC. FOR: FPS SERVICES, INC. A/C 98-7037-071-9 A/C 98-7037-071-9 FBO "SWISSKEY ( ) FUND" AND FBO "SWISSKEY ( ) FUND" AND INCLUDE YOUR NAME AND ACCOUNT INCLUDE YOUR NAME AND NEW NUMBER. ACCOUNT NUMBER. n Complete and sign the Account Application and mail to the address indicated on the Account Application immediately following the initial wire transaction.
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INITIAL INVESTMENT SUBSEQUENT INVESTMENTS ------------------------------- ------------------------------- BY TELEPHONE n Call 1-800-SWISSKEY to n Call 1-800-SWISSKEY to = arrange for a telephone arrange for a telephone transaction. transaction. PURCHASING BY EXCHANGES n You may open a new account by n You may purchase additional O making an exchange from an shares by making an exchange existing SwissKey Fund class from an existing SwissKey Fund account of any other Series of class account of any other the Trust. Exchanges may be Series of the Trust. Exchanges made by mail or telephone. may be made by mail or Call 1-800-SWISSKEY for telephone. Call 1-800-SWISSKEY assistance. for assistance. AUTOMATICALLY n Please refer to "Automatic n Please refer to "Automatic Investment Plan" under Investment Plan" under "Account Options" or call 1- "Account Options" or call 1- 800-SWISSKEY for assistance. 800-SWISSKEY for assistance.
ACCOUNT OPTIONS The following account options are available to shareholders. There are no charges for the programs noted below and an investor may change or terminate these plans at any time by written notice to the Trust. For information about participating in these account options, call the transfer agent at 1-800- SWISSKEY.
ACCOUNT OPTIONS INSTRUCTIONS -------------------------- --------------------------------------------------- AUTOMATIC INVESTMENT PLAN n You may have money deducted directly from your checking, savings or bank money market accounts for investment in the Funds each month or quarter. n Complete the Automatic Investment Plan section on the Account Application accompanying this Prospectus and mail it to the address indicated. n The account must be opened first with the initial $1,000 minimum investment with subsequent minimum investments of $50 pursuant to the Automatic Investment Plan. n The account designated will be debited in the specified amount, on the date indicated, and Fund shares will be purchased. The Trust may alter or terminate the Automatic Investment Plan at any time. SYSTEMATIC WITHDRAWAL PLAN n A shareholder with a minimum account of $10,000 may direct the transfer agent to send the shareholder (or anyone the shareholder designates) regular, monthly, quarterly or semi-annual payments. Each payment under a Systematic Withdrawal Plan ("SWP") must be at least $100. Such payments are drawn from share redemptions. n Shareholders participating in the SWP must elect to have their dividends and distributions automatically reinvested in additional Fund shares. n The Trust may terminate any SWP for an account if the value of the account falls below $5,000 as a result of share redemptions or an exchange of shares of a Fund for SwissKey Fund class shares of another Series of the Trust.
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ACCOUNT OPTIONS INSTRUCTIONS ------------------------------ ---------------------------------------------- INDIVIDUAL RETIREMENT ACCOUNTS n An IRA is a tax-deferred retirement savings account that may be used by an individual under age 70 1/2 who has compensation or self-employment income and his or her unemployed spouse, or an individual who has received a qualified distribution from his or her employer's retirement plan. n The minimum purchase requirement for IRAs is $1,000.
REDEMPTION OF SHARES Shares of the Funds may be redeemed without charge on any business day that the NYSE is open. Redemptions will be effected at the net asset value per share next determined after the receipt by the transfer agent of a redemption request meeting the requirements described below. The Trust normally sends redemption proceeds on the next business day but, in any event, redemption proceeds are sent within five business days of receipt of a redemption request in proper form. Payment also may be made by wire directly to any bank previously designated by the shareholder in an Account Application. There is a $9 charge for redemptions by wire. Please note that the shareholder's bank may impose a fee for wire service. The Trust will honor redemption requests of shareholders who recently purchased shares by check, but will not mail the proceeds until it is reasonably satisfied that the purchase check has cleared, which may take up to fifteen days from the purchase date. 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 Funds' net asset values per share are calculated are effected that day. Redemption requests received in proper form by the transfer agent after the close of the NYSE are effected as of the time the net asset value per share is next determined. No redemption will be processed until the transfer agent has received a completed application with respect to the account. Shares of the Funds may be redeemed through certain broker-dealers, banks and bank trust departments who may charge the investor a transaction fee or other fee for their services at the time of redemption. Such fees would not otherwise be charged if the shares were redeemed directly from the Trust. The Trust will satisfy redemption requests in cash to the fullest extent feasible, so long as such payments would not, in the opinion of Brinson Partners or the Board of Trustees, result in the necessity of a 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 a Series, during any 90 day period for any one shareholder. Payments in excess of this limit will also be made wholly in cash unless the Board of Trustees believes that economic conditions exist which would make such a practice detrimental to the best interests of the Series. Any portfolio securities paid or distributed in-kind would be valued as described under "Net Asset Value." In the event that an in- kind distribution is made, a shareholder may incur additional expenses, such as the payment of brokerage commissions, on the sale or other disposition of the securities received from a Series. In-kind payments need not constitute a cross-section of a Series' portfolio. Where a shareholder has requested redemption of all or a part of the shareholder's investment and where a Series computes such redemption in-kind, the Series will not recognize gain or loss for federal tax purposes on the securities used to compute the redemption, but the shareholder will recognize gain or loss equal to the difference between the fair market value of the securities received and the shareholder's basis in the Fund shares redeemed. 17 MINIMUM BALANCES Due to the relatively high cost of maintaining smaller accounts, the Trust reserves the right to involuntarily redeem shares in any Fund account for their then current net asset value (which will be promptly paid to the shareholder) if at any time the total investment does not have a value of at least $1,000 as a result of redemptions and not due to changes in the asset value of the Series. The shareholder will be notified that the value of his or her Fund account is less than the required minimum and will be allowed at least 60 days to bring the value of the account up to the minimum before the redemption is processed. SHARES MAY BE REDEEMED IN ONE OF THE FOLLOWING WAYS: BY MAIL n Submit a written request for redemption with: 6 . The Fund's name; . Your Fund account number; . The dollar amount or number of shares to be redeemed; and . Signatures of all persons required to sign for transactions, exactly as their names appear on the Account Application. n A signature guarantee for the signature of each person in whose name the account is registered is required on all written redemption requests over $5,000. n Mail to the address indicated on the Account Application. Questions may be directed to the transfer agent at 1-800-SWISSKEY. BY WIRE n This service must be elected either on the LOGO initial application or subsequently arranged in writing. n Shares may be redeemed by instructing the transfer agent by telephone at 1-800-SWISSKEY. n Wire redemption requests must be received by the transfer agent before 4:00 p.m. Eastern time for money to be wired the next business day. BY TELEPHONE 1-800-SWISSKEY n This service must be elected either on the = initial application or subsequently arranged in writing. n Shares may be redeemed by instructing the transfer agent by telephone at 1-800-SWISSKEY. n Shares will be sold at the next share price calculated after the order is received and accepted. Share price is normally calculated at 4:00 p.m. Eastern time. AUTOMATICALLY n Please refer to "Systematic Withdrawal Plan" under "Account Options" or call 1-800-SWISSKEY for assistance.
- ---------- NOTE: The Trust reserves the right to refuse a wire or telephone redemption if it is believed advisable to do so. Procedures for redeeming shares of the SwissKey Funds by wire or telephone may be modified or terminated at any time by the Trust. TELEPHONE TRANSACTIONS: Shareholders who wish to initiate purchase, exchange or redemption transactions by telephone must elect the option, as described above. With respect to such telephone transactions, the Funds will ensure that 18 reasonable procedures are used to confirm that instructions communicated by telephone are genuine (including verification of the shareholder's social security number or mother's maiden name) and, if they do not, the Funds or the transfer agent may be liable for any losses due to unauthorized or fraudulent transactions. Written confirmation will be provided for all purchase, exchange and redemption transactions initiated by telephone. EXCHANGE OF SHARES: Fund shares may be exchanged for SwissKey Fund class shares of any other Series within the Trust. Exchanges will not be permitted between the SwissKey Fund class shares and the Brinson 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 Account Application. The telephone exchange may be difficult to implement during times of drastic economic or market changes. The Trust reserves the right to restrict the frequency of, or otherwise modify, condition, terminate or impose charges upon the exchange and/or telephone transfer privileges upon 60 days' prior written notice to shareholders. Exchanges will be made on the basis of both Funds' relative net asset values per share. Exchanges may be made only for shares of a Series and class then offering its shares for sale in your state of residence and are subject to the minimum initial investment requirement. For federal income tax purposes, an exchange of shares would be treated as if the shareholder had redeemed shares of one Series and reinvested in shares of another Series. Gains or losses on the shares exchanged are realized by the shareholder at the time of the exchange. Any shareholder wishing to make an exchange should first obtain and review a prospectus of the other Series. Requests for telephone exchanges must be received by the transfer agent by the close of regular trading hours (currently 4:00 p.m. Eastern time) on the NYSE on any day that the NYSE is open for regular trading. TRANSFER OF SECURITIES: At the discretion of the Trust, investors may be permitted to purchase Fund shares by transferring securities to a Series that meet the Series' investment objective and policies. Securities transferred to a 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 a 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 difference between the fair market value of the securities and the investors' basis therein. Securities will not be accepted in exchange for shares of a 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. 19 NET ASSET VALUE The net asset value per share for the SwissKey Fund class shares and Brinson Fund class shares is computed by adding, with respect to each class of shares, the value of a Series' investments, cash and other assets attributable to that class, deducting liabilities of the class and dividing the result by the number of shares of that class outstanding. The public offering price of the SwissKey Fund class shares and the Brinson Fund class shares, both of which are sold on a continuous basis, is the net asset value of that class. The valuation of assets for determining the net asset value may be summarized as follows: Securities traded on securities exchanges are valued at the last sale price or, if there has been no sale that day, at the last reported bid price, using prices as of the close of trading on their respective exchanges. Price information on listed securities is generally taken from the closing price on the exchange where the security is primarily traded. Valuations of equity securities may be obtained from a pricing service when such prices are believed to reflect fair value of such securities. Use of a pricing service has been approved by the Board of Trustees. Futures contracts are valued at their daily quoted settlement price. Forward foreign currency contracts are valued daily at forward exchange rates and an unrealized gain or loss is recorded. The Series realizes a gain or loss upon settlement of the contracts. For valuation purposes, foreign securities initially expressed in foreign currency values will be converted into U.S. dollar values using WM/Reuters closing spot rates as of 4:00 p.m. London time. Securities with a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. Redeemable securities issued by open-end investment companies are valued using their respective net asset values for purchase orders placed at the close of the NYSE. Securities (including over-the-counter options) for which market quotations are not readily available and other assets are valued at their fair value as determined in good faith by or under the direction of the Trustees. Securities not traded on any U.S. or recognized international securities exchange will be valued at the most recent bid price where market quotations are readily available. Net asset value is determined on each day that the NYSE is open, as of the close of business of the regular session of the NYSE (currently 4:00 p.m. Eastern time). Investments and requests to exchange or redeem shares received by the Series in proper form before such close of business are effective, and will receive the price determined, on that day. Investment, exchange and redemption requests received after such close of business are effective, and will receive the share price determined, on the next business day. Because of time zone differences, foreign exchanges and securities markets will usually be closed prior to the time of the closing of the NYSE and values of foreign futures and options and foreign securities will be determined as of the earlier closing of such exchanges and securities markets. However, events affecting the values of such foreign securities may occasionally occur between the earlier closings of such exchanges and securities markets and the closing of the NYSE which will not be reflected in the computation of the net asset value of a Series. If an event materially affecting the value of such foreign securities occurs during such period, then such securities will be valued at fair value as determined in good faith by or under the direction of the Board of Trustees. Where a foreign securities market remains open at the time that a Series values its portfolio securities, or closing prices of securities from that market may not be retrieved because of local time differences or other difficulties in obtaining such prices at that time, last sale prices in such market at a point in time most practicable to timely valuation of the Series may be used. 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 Saturday). As a result, the net asset value of a Fund may be significantly affected by such trading on days when shareholders have no access to the Fund. 20 Each of the Series' two classes of shares will bear pro rata all of the common expenses of that Series. The net asset value of all outstanding shares of each class of the Series will be computed on a pro rata basis for each outstanding share based on the proportionate participation in the Series represented by the value of shares of that class. All income earned and expenses incurred by the Series will be borne on a pro rata basis by each outstanding share of a class, based on each class' percentage in the Series represented by the value of share of such class, except that the Brinson Fund class will not incur any of the expenses under the SwissKey Fund class' 12b-1 Plan. The different expenses borne by each class of shares will result in different net asset values and dividends. The per share net asset value of the SwissKey Fund class shares will generally be lower than that of the Brinson Fund class shares of a Series because of the higher expenses borne by the SwissKey Fund class shares. It is expected, however, that the net asset value per share of the two classes will tend to converge immediately after the payment of dividends, which will differ by approximately the amount of the service and distribution expense differential between the classes. DISTRIBUTION PLAN The Board of Trustees of the Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Act for the SwissKey Fund class shares. The Plan permits each Series to reimburse FPBS, Brinson Partners and others from the assets of the SwissKey Fund class shares a quarterly fee for services and expenses incurred in distributing and promoting sales of the SwissKey Fund class shares. These expenses include, but are not limited to, preparing and distributing advertisements and sales literature, printing prospectuses and reports used for sales purposes, and paying distribution and maintenance fees to brokers, dealers and others in accordance with a selling agreement with the Trust on behalf of the SwissKey Fund class shares or FPBS. In addition, each Series may make payments directly to FPBS for payment to dealers or others, or directly to others, such as banks, who assist in the distribution of the SwissKey Funds or provide services with respect to the SwissKey Funds. Swiss Bank, or one of its affiliates, pursuant to a selected dealer agreement, may provide additional compensation to securities dealers from its own resources in connection with sales of the SwissKey Fund class of shares of the Series. The aggregate distribution fees paid by the Series from the assets of the respective SwissKey Fund class shares to FPBS and others under the Plan may not exceed 0.90% of a Fund's average daily net assets in any year (0.25% of which are service fees to be paid by the Series to FPBS, dealers and others, for providing personal service and/or maintaining shareholder accounts) of a Fund's average daily net assets. The Plan provides, however, that the aggregate distribution fees for each respective Fund shall not exceed the following maximum amounts for the 1997 fiscal year: SwissKey Global Fund-- 0.65%, SwissKey Global Equity Fund--0.76%, SwissKey Global Bond Fund--0.49%, SwissKey U.S. Balanced Fund--0.50%, SwissKey U.S. Equity Fund--0.52%, SwissKey U.S. Bond Fund--0.47% and SwissKey Non-U.S. Equity Fund--0.84%. The Plan does not apply to the Brinson Fund class shares of each Series. Those shares are not included in calculating the Plan's fees and the Plan is not used to assist in the distribution and marketing of each Series' Brinson Fund class shares. The quarterly fees paid to FPBS under the Plan are subject to the review and approval by the Trust's unaffiliated Trustees who may reduce the fees or terminate the Plan at any time. 21 All such payments made by a Series pursuant to the Plan shall be made for the purpose of selling shares issued by the Series. Distribution expenses which are attributable to a particular Fund will be charged against that Fund's assets. Distribution expenses which are attributable to more than one Series will be allocated among the Series, and, consequently, the Funds, in proportion to their relative net assets. DIVIDENDS, DISTRIBUTIONS AND TAXES DIVIDENDS The Series will distribute their net investment income semi-annually in June and December. The Series will distribute annually in December substantially all of their 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 their net investment income earned through the end of December and not previously distributed as ordinary (not capital) income. Dividends and other distributions paid by a Series with respect to its SwissKey Fund class and Brinson Fund class shares are calculated in the same manner and at the same time. The per share dividends on SwissKey Fund class shares will be lower than the per share dividends on the Brinson Fund class shares of each Series as a result of the distribution and service fees applicable with respect to the SwissKey Fund class shares. Both the SwissKey Fund class and Brinson Fund class shares of a Series will share proportionately in the investment income and expenses of that Series, except that the per share dividends on the SwissKey Fund class shares will be lower than the per share dividends on the Brinson Fund class shares, which will not incur any expenses under the Plan. Income dividends and capital gain distributions are reinvested automatically in additional Fund shares of the Series at net asset value, unless the shareholder has notified the transfer agent, in writing, of the shareholder's election to receive them in cash. Distribution options may be changed at any time by requesting a change in writing. Any check in payment of dividends or other distributions which cannot be delivered by the Post Office or which remains uncashed for a period of more than one year may be reinvested in the shareholder's account at the then current net asset value and the dividend option may be changed from cash to reinvest. Dividends are reinvested on the ex dividend date (the "ex date") at the net asset value determined at the close of business on that date. Please note that shares purchased shortly before the record date for a dividend or distribution may have the effect of returning capital although such dividends and distributions are subject to taxes. TAXES Each Series has qualified, and intends to continue to qualify, for taxation as a "regulated investment company" under the Internal Revenue Code of 1986, as amended ("the Code"). Such qualification relieves a Series of liability for federal income taxes to the extent the Series' earnings are distributed in accordance with the Code. Each Series is treated as a separate corporate entity for federal tax purposes. Distributions of any net investment income and of any net realized short-term capital gains are taxable to shareholders as ordinary income. All distributions may be subject to state and local taxes. Distributions of net capital gain (the excess of net long-term capital gain over net short-term capital loss) are taxable to shareholders as long-term capital gain regardless of how long a shareholder may have held shares of a Series. The tax treatment of distributions of ordinary income or capital gains will be the same whether the shareholder reinvests the distributions or elects to receive them in cash. A distribution will be treated as paid on December 31 of the current calendar year if it is declared in October, November or December with a record date in such a month and paid during January of the following calendar year. Such distributions will be taxable to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received. 22 Shareholders will be advised annually of the source and tax status of all distributions for federal income tax purposes. Further information regarding the tax consequences of investing in the Series is included in the Statement of Additional Information. The above discussion is intended for general information only. Investors should consult their own tax advisors for more specific information on the tax consequences of particular types of distributions. Redemptions of Series shares, and the exchange of shares between two Series of the Trust, are taxable events and, accordingly, shareholders may realize capital gains or losses on these transactions. Shareholders may be subject to back-up withholding on reportable dividend and redemption payments ("back-up withholding") if a certified taxpayer identification number is not on file with the Series, or if, to the Series' knowledge, an incorrect number has been furnished, or if the Series has been notified by the Internal Revenue Service that an account is subject to back-up withholding. An individual's taxpayer identification number is the individual's social security number. If more than 50% of a Series' total assets at the close of its taxable year consists of stock or securities in foreign corporations, the Series may elect to "pass-through" to shareholders for foreign tax credit purposes the amount of foreign income taxes paid by the Series with respect to its direct holdings of securities in foreign corporations. A Series will make such an election only if it deems such election to be in the best interests of its shareholders. If this election is made, shareholders of the Series will be required to include in their gross incomes their pro rata shares of foreign taxes paid by the Series. However, shareholders will be able to treat their pro rata shares of foreign taxes as either a deduction (itemized deduction in the case of individuals) or a foreign tax credit (but not both) against U.S. income taxes on their tax returns. GENERAL INFORMATION ORGANIZATION The Brinson Funds is a Delaware business trust organized pursuant to an Agreement and Declaration of Trust, dated December 1, 1993. The Trust was originally organized as a Maryland corporation on April 14, 1992. On December 1, 1993, the Trust reorganized as a Delaware business trust through a merger of the Maryland corporation into the Trust. The Trust is registered under the Act as an open-end management investment company, commonly known as a mutual fund and consists of seven different Series. The Trustees of the Trust may establish additional series or classes of shares without the approval of shareholders. All of the Series, except the Global Bond Fund, are diversified portfolios. The assets of each Series belong only to that Series, and the liabilities of each Series are borne solely by that Series and no other. DESCRIPTION OF SHARES Each Series is authorized to issue an unlimited number of shares of 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 only unissued shares with respect to such series. Shares of each series represent equal proportionate interests in the assets of that series only and have identical voting, dividend, redemption, liquidation, and other rights, except that only shares of each Series' SwissKey Fund class shall have voting rights with respect to the Plan relating to that class as described below. All shares issued are fully paid and non-assessable, and shareholders have no preemptive or other right to subscribe to any additional shares and no conversion rights. Currently, the Trust offers seven investment portfolios or series--Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. Two classes of shares are currently issued by the Trust for each Series, the SwissKey Fund class and the Brinson Fund class. 23 VOTING RIGHTS Each issued and outstanding full and fractional share of a Series is entitled to one full and fractional vote in the Series and all shares of each Series participate equally with regard to dividends, distributions, and liquidations with respect to that Series. Shareholders do not have cumulative voting rights. On any matter submitted to a vote of shareholders, shares of each Series will vote separately except when a vote of shareholders in the aggregate is required by law, or when the Trustees have determined that the matter affects the interests of more than one Series, in which case the shareholders of all such Series shall be entitled to vote thereon. Only the SwissKey Fund class shareholders may vote on matters related to the Plan associated with that class. SHAREHOLDER MEETINGS The Trustees of the Trust do not intend to hold annual meetings of shareholders of the Series. The U.S. Securities and Exchange Commission, however, requires the Trustees to promptly call a meeting for the purpose of voting upon the question of removal of any Trustee when requested to do so by not less than 10% of the outstanding shareholders of the respective Series. In addition, subject to certain conditions, shareholders of each Series may apply to the Series to communicate with other shareholders to request a shareholders' meeting to vote upon the removal of a Trustee or Trustees. PORTFOLIO TURNOVER (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND AND U.S. BOND FUND) As a result of the investment policies of the Global Fund, Global Bond Fund, U.S. Balanced Fund and U.S. Bond Fund, their portfolio turnover rates may exceed 100%. High portfolio turnover (over 100%) may involve correspondingly greater brokerage commissions and other transaction costs, which will be borne directly by the Series and ultimately by the Series' shareholders. In addition, high portfolio turnover may result in increased short-term capital gains, which, when distributed to shareholders, are treated as ordinary income. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS The Trust will attempt to obtain the best overall price and most favorable execution of transactions in portfolio securities. However, subject to policies established by the Board of Trustees of the Trust, a Series may pay a broker-dealer a commission for effecting a portfolio transaction for the Series in excess of the amount of commission another broker-dealer would have charged if Brinson Partners determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such broker-dealer, viewed in terms of that particular transaction or such firm's overall responsibilities with respect to the clients, including the Series, as to which it exercises investment discretion. In selecting and monitoring broker-dealers and negotiating commissions, consideration will be given to a broker-dealer's reliability, the quality of its execution services on a continuing basis and its financial condition. SHAREHOLDER REPORTS AND INQUIRIES Shareholders will receive semi-annual reports showing portfolio investments and other information as of December 31 and annual reports audited by independent auditors as of June 30. Shareholders with inquiries should call the SwissKey Funds at 1-800-SWISSKEY or write to The SwissKey Funds, 3200 Horizon Drive, King of Prussia, PA 19406-0903. 24 PERFORMANCE INFORMATION From time to time, performance information, such as yield or total return, may be quoted in advertisements or in communications to present or prospective shareholders. Performance quotations represent the Funds' past performance and should not be considered as representative of future results. The current yield will be calculated by dividing the net investment income earned per share by a Fund during the period stated in the advertisement (based on the average daily number of shares entitled to receive dividends outstanding during the period) by the maximum net asset value per share on the last day of the period and annualizing the result on a semi-annual compounded basis. The Funds' 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 a Fund. Aggregate total return reflects the total percentage change over the stated period. To help investors better evaluate how an investment in the SwissKey Funds might satisfy their investment objectives, advertisements regarding the Funds may discuss yield or total return as reported by various financial publications. Advertisements may also compare yield or total return to other investments, indices and averages. The following publications, benchmarks, indices and averages may be used: Lipper Mutual Fund Performance Analysis; Lipper Fixed Income Analysis; Lipper Mutual Fund Indices; Morgan Stanley Indices; Shearson Lehman Hutton Treasury Index; Salomon Brothers Indices; Dow Jones Composite Average or its component indices; Standard & Poor's 500 Stock Index or its component indices; Wilshire Indices; The New York Stock Exchange composite or component indices; CDA Mutual Fund Report; Weisenberger--Mutual Funds Panorama and Investment Companies; Mutual Fund Values and Mutual Fund Service Book, published by Morningstar, Inc.; comparable 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 Funds 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 Funds will not be included in the SwissKey Funds' calculations of yield or total return. Further information about the performance of the Funds is included in the Funds' Annual Report dated June 30, 1996, which may be obtained without charge by contacting the Trust at 1-800-SWISSKEY. 25 APPENDIX A INVESTMENT POLICIES AND TECHNIQUES EQUITY SECURITIES (GLOBAL FUND, GLOBAL EQUITY FUND, U.S. BALANCED FUND, U.S. EQUITY FUND AND NON-U.S. EQUITY FUND): The Series may invest in a broad range of equity securities of U.S. and non-U.S. issuers, including common stocks of companies or closed-end investment companies, preferred stocks, debt securities convertible into or exchangeable for common stock, securities such as warrants or rights that are convertible into common stock and sponsored or unsponsored American, European and Global depository receipts ("Depository Receipts"). The issuers of unsponsored Depository Receipts are not obligated to disclose material information in the United States. The Series expect their U.S. equity investments to emphasize large and intermediate capitalization companies, although the Global Fund may also invest in small capitalization equity markets. The equity markets in the non-U.S. component of the Series will typically include available shares of larger capitalization companies. Capitalization levels are measured relative to specific markets, thus large, intermediate and small capitalization ranges vary country by country. The Global Fund may invest in equity securities of companies considered by the Advisor to be in their post-venture capital stage, or "post-venture capital companies." A post-venture capital company is a company that has received venture capital financing either (a) during the early stages of the company's existence or the early stages of the development of a new product or service, or (b) as part of a restructuring or recapitalization of the company. The Global Fund also may invest in open-end investment companies advised by Brinson Partners, in equity securities of issuers in emerging markets and in securities with respect to which the return is derived from the equity securities of issuers in emerging markets. FIXED INCOME SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND AND U.S. BOND FUND): The Series may invest in a broad range of fixed income securities of U.S. and non-U.S. issuers, including governments and governmental entities, supranational issuers as well as corporations and other business organizations. The Series may purchase U.S. dollar denominated securities that reflect a broad range of investment maturities, qualities and sectors. A majority of the fixed income securities in which the Series will invest will possess a minimum rating of BBB- by S&P or Baa3 by 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 characteristics and, in fact, have speculative characteristics; and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments than is the case with higher rated bonds. Securities rated lower than BBB- by S&P and Baa3 by Moody's are classified as non- investment grade securities (commonly referred to as "junk bonds"), carry a higher degree of risk and are considered to be speculative by the major credit rating agencies. Each Series currently intends to limit its aggregate investment in non-investment grade debt securities of its U.S. and non-U.S. dollar denominated fixed income assets to no more than 5% of its net assets. To the extent that a security held by a Series is downgraded to below investment grade, the Series will dispose of that or another non-investment grade security so that no more than 5% of its assets will be invested in below investment grade securities. Other fixed income securities in which the Series may invest include zero coupon securities, mortgage-backed securities, asset- backed securities and when-issued securities. The non-U.S. fixed income component of the Series will typically be invested in the securities of non-U.S. governments, governmental agencies and supranational issues. A supranational entity is an entity established or financially supported by the national governments of one or more countries to promote reconstruction or development. Examples of supranational entities include, among others: the World Bank, the European 26 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 Global Fund may invest in fixed income securities of emerging market issuers, including government and government-related entities (including participation in loans between governments and financial institutions), and of entities organized to restructure outstanding debt securities of developing countries' corporate issuers. CASH AND CASH EQUIVALENTS (ALL SERIES): The Series may invest a portion of their assets in short-term debt securities (including repurchase agreements and reverse repurchase agreements) of corporations, the U.S. government and its agencies and instrumentalities and banks and finance companies, which may be denominated in any currency. When unusual market conditions warrant, a Series may make substantial temporary defensive investments in cash equivalents up to a maximum of 100% of its net assets. Cash equivalent holdings may be in any currency (although such holdings may not constitute "cash or cash equivalents" for tax diversification purposes under the Code). When a Series invests for defensive purposes, it may affect the attainment of the Series' investment objective. ZERO COUPON SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND AND U.S. BOND FUND): Zero coupon securities are debt obligations which do not entitle the holder to any periodic payments of interest prior to maturity or a specified date when the securities begin paying current interest (the "cash payment date") and, therefore, are issued and traded at a discount from their value at maturity or par value. Such bonds carry an additional risk in that, unlike bonds which pay interest throughout the period to maturity, a Series investing in zero coupon securities will realize no cash until the cash payment date and, if the issuer defaults, a Series may obtain no return at all on its investment. The market price of zero coupon securities generally is more volatile than the market price of securities that pay interest periodically and are likely to be more responsive to changes in interest rates than non-zero coupon securities having similar maturities and credit qualities. For federal tax purposes, the Series will be required to include in income daily portions of original issue discount accrued and to distribute the same to shareholders annually, even if no payment is received before the distribution date. MORTGAGE- AND ASSET-BACKED SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED AND U.S. BOND FUND): Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, pools of mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by agencies or instrumentalities of the U.S. government. Other mortgage-backed securities are issued by private issuers, generally originators of and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities (collectively, "private lenders"). Mortgage- backed securities issued by private lenders may be supported by pools of mortgage loans or other mortgage-backed securities that are guaranteed, directly or indirectly, by the U.S. government or one of its agencies or instrumentalities, or they may be issued without any governmental guarantee of the underlying mortgage assets but with some form of non-governmental credit enhancement. Asset-backed securities have structural characteristics similar to mortgage- backed securities. However, the underlying assets are not first-lien mortgage loans or interests therein; rather, they include assets such as motor vehicle installment sales contracts, other installment loan contracts, home equity loans, leases of various types of property and receivables from credit card or other revolving credit arrangements. Payments or distributions of principal and interest on asset-backed securities may be supported by non-governmental credit enhancements similar to those utilized in connection with mortgage- backed securities. 27 The yield characteristics of mortgage- and asset-backed securities differ from those of traditional debt obligations. Among the principal differences are that interest and principal payments are made more frequently on mortgage- and asset-backed securities, usually monthly, and that principal may be prepaid at any time because the underlying mortgage loans or other assets generally may be prepaid at any time. As a result, the rate of return on these securities may be affected by prepayments of principal on the underlying loans, which generally increase as interest rates decline. As a result, if a Series purchases these securities at a premium, a prepayment rate that is faster than expected will reduce yield to maturity, while a prepayment rate that is slower than expected will have the opposite effect of increasing yield to maturity. Conversely, if a Series purchases these securities at a discount, a prepayment rate that is faster than expected will increase yield to maturity, while a prepayment rate that is slower than expected will reduce yield to maturity. Accelerated prepayments on securities purchased by a Series at a premium also impose a risk of loss of principal because the premium may not have been fully amortized at the time the principal is prepaid in full. In addition, like other debt securities, the values of mortgage-related securities, including government and government-related mortgage pools, generally will fluctuate in response to market interest rates. The market for privately issued mortgage- and asset-backed securities is smaller and less liquid than the market for government sponsored mortgage-backed securities. WHEN-ISSUED SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED AND U.S. BOND FUND): The Series may purchase securities on a "when-issued" basis for payment and delivery at a later date. The price is generally fixed on the date of commitment to purchase. During the period between purchase and settlement, no interest accrues to a Series. At the time of settlement, the market value of the security may be more or less than the purchase price. The Series will establish a segregated account consisting of cash, U.S. government securities, equity securities and/or investment and non-investment grade debt securities in an amount equal to the amounts of their when-issued securities. The cash, U.S. government securities, equity securities, investment or non- investment grade debt securities and other assets held in any segregated account maintained by the Series with respect to any when-issued securities, options, futures, forward contracts or other derivative transactions shall be liquid, unencumbered and marked-to-market daily (the assets held in a segregated account are referred to in this Prospectus as "Segregated Assets"). FOREIGN CURRENCY TRANSACTIONS (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND FUND AND NON-U.S. EQUITY FUND): The Series may conduct their foreign currency exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market or through entering into contracts to purchase or sell foreign currencies at a future date (i.e., a "forward foreign currency" contract or "forward" contract). A forward contract involves an obligation to purchase or sell a specific currency amount at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties at a price set at the time of the contract. The Series will convert currency on a spot basis from time to time and investors should be aware that changes in currency exchange rates and exchange control regulations may affect the costs of currency conversion. The Series may enter into forward contracts for hedging purposes as well as non-hedging purposes. For hedging purposes, a Series may enter into contracts to deliver or receive foreign currency it will receive from or require for its normal investment activities. It may also use contracts in a manner intended to protect foreign currency-denominated securities from declines in value due to unfavorable exchange rate movements. A Series may also enter into contracts with the intent of changing the relative exposure of the Series' portfolio of securities to different currencies to take advantage of anticipated changes in exchange rates. When a Series enters into forward contracts for non-hedging purposes, it will establish a segregated account with its custodian bank in which it will maintain Segregated Assets equal in value to its obligations with respect to their forward contracts for non-hedging purposes. 28 At the maturity of a forward contract, a Series may either sell a portfolio security and make delivery of the foreign currency, or it may retain the security and terminate its contractual obligation to deliver the foreign currency by purchasing an "offsetting" contract with the same currency trader, obligating it to purchase, on the same maturity date, the same amount of the foreign currency. A Series may realize a gain or loss from currency transactions. OPTIONS ON CURRENCIES (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND FUND AND NON-U.S. EQUITY FUND): The Series also may purchase and write put and call options on foreign currencies (traded on U.S. and foreign exchanges or over- the-counter markets) to manage the respective portfolio's exposure to changes in currency exchange rates. Call options on foreign currency written by a 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 a Series, the Series will establish a segregated account with its custodian bank consisting of Segregated Assets equal in value to the amount the Series would be required to deliver upon exercise of the put. FUTURES CONTRACTS (ALL SERIES): The Series may enter into contracts for the future purchase or sale of securities and indices. The Global Funds and the Non-U.S. Equity Fund also may enter into contracts for the future purchase or sale of foreign currencies. A financial futures contract is an agreement between two parties to buy or sell a specified debt security at a set price on a future date. An index futures contract is an agreement to take or make delivery of an amount of cash based on the difference between the value of the index at the beginning and at the end of the contract period. A futures contract on a foreign currency is an agreement to buy or sell a specified amount of a currency for a set price on a future date. A Series may enter into a futures contract to the extent that not more than 5% of its assets are required as futures contract margin deposits and its obligations relating to such futures transactions represent not more than 25% of the Series' assets. The Global Fund, Global Equity Fund, Global Bond Fund and Non-U.S. Equity Fund will enter into such 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. OPTIONS (ALL SERIES): 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 Series' may use options traded on U.S. exchanges and, to the extent permitted by law, options traded over-the-counter and recognized foreign exchanges. It is the position of the United States Securities and Exchange Commission that over-the-counter options are illiquid. Accordingly, a Series will invest in such options only to the extent consistent with its 15% limit on investment in illiquid securities. REPURCHASE AGREEMENTS (ALL SERIES): The Series may enter into repurchase agreements with banks or broker-dealers. Repurchase agreements are considered under the Act to be collateralized loans by a Series to the seller secured by the securities transferred to the Series. Repurchase agreements under the Act will be fully collateralized by securities which the Series may invest in directly. Such collateral will be marked-to-market daily. If the seller of the underlying security under the repurchase agreement should default on its obligation to repurchase the underlying security, the Series may experience delay or difficulty in recovering its cash. To the extent that, in the meantime, the value of the security purchased had decreased, the Series could experience a loss. No more than 15% of a Series' net assets will be invested in illiquid securities, including repurchase agreements which have a maturity of longer than seven days. The Series must treat each repurchase agreement as a security for tax diversification purposes and not as cash, a cash equivalent as a receivable. BORROWING (ALL SERIES): Each Series is authorized, within specified limits, to borrow money as a temporary defensive measure for extraordinary purposes and to pledge its assets in connection with such borrowings. 29 LOANS OF PORTFOLIO SECURITIES (ALL SERIES): Each Series may loan its portfolio securities to broker-dealers and other institutional investors pursuant to agreements requiring that the loans be continuously secured by collateral equal at all times in value to at least the market value of the securities loaned. The major risk to which a 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, a Series will only enter into loan arrangements after a review of all pertinent factors by Brinson Partners, subject to overall supervision by the Board of Trustees, including the creditworthiness of the borrowing broker-dealer or institution and then only if the consideration to be received from such loans would justify the risk. Creditworthiness will be monitored on an ongoing basis by Brinson Partners. RULE 144A AND ILLIQUID SECURITIES (ALL SERIES): Each Series may invest up to 15% of its net assets in illiquid securities. Illiquid securities are those securities that are not readily marketable, including restricted securities and repurchase obligations that mature in more than seven days. Certain restricted securities that may be resold to institutional investors pursuant to Rule 144A under the Securities Act of 1933 may be determined to be liquid under guidelines adopted by the Trust's Board of Trustees. INVESTMENT COMPANY SECURITIES (GLOBAL FUND): The Trust has received an exemptive order (the "Exemptive Order") from the U.S. Securities and Exchange Commission which permits each Series to invest its assets in certain portfolios of Brinson Relationship Funds, another registered investment company advised by Brinson Partners. Currently, only the Global Fund intends to invest in the portfolios of Brinson Relationship Funds and only to the extent consistent with Brinson Partners' investment process of allocating assets to specific asset classes. The Global Fund will invest in the portfolios of Brinson Relationship Funds to obtain exposure to the following asset classes: (1) equity and fixed income securities of issuers located in emerging market countries ("Emerging Market Securities"); (2) equity securities issued by companies with relatively small overall market capitalizations ("Small Cap Securities"); and (3) high yield securities ("High Yield Securities"). The Global Fund will invest in corresponding portfolios of Brinson Relationship Funds only to the extent the Advisor determines that such investments are a more efficient means for the Global Fund to gain exposure to the asset classes identified above than by investing directly in individual securities. Thus, to gain exposure to Emerging Market Securities, the Global Fund will invest in the Brinson Emerging Markets Equity Fund and the Brinson Emerging Markets Debt Fund portfolios of Brinson Relationship Funds. To gain exposure to Small Cap Securities and High Yield Securities, the Global Fund will invest in the Brinson Post-Venture Fund and the Brinson High Yield Fund portfolios, respectively, of Brinson Relationship Funds. Each portfolio of Brinson Relationship Funds in which the Global Fund may invest is permitted to invest in the same securities of a particular asset class in which the Global Fund is permitted to invest directly, and with similar risks. For more detailed descriptions of these investment policies and techniques, please refer to the Statement of Additional Information, which is available without charge upon request by calling 1-800-SWISSKEY. 30 THE BRINSON FUNDS [LOGO OF BRINSON FUNDS] GLOBAL FUND U.S. EQUITY FUND GLOBAL EQUITY FUND U.S. BOND FUND GLOBAL BOND FUND NON-U.S. EQUITY FUND U.S. BALANCED FUND STATEMENT OF ADDITIONAL INFORMATION October 28, 1996 The Brinson Funds (the "Trust") currently offers seven separate series, each with its own investment objective and policies. The Trust also offers two classes of shares for each series - the Brinson Fund class and the SwissKey Fund class. Information concerning the Brinson Fund class of each series is provided in the following three separate Prospectuses: the Brinson Global Fund, Brinson Global Equity Fund and Brinson Global Bond Fund Prospectus; the Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund and Brinson U.S. Bond Fund Prospectus; and the Brinson Non-U.S. Equity Fund Prospectus, each dated October 28, 1996. Information concerning the SwissKey Fund class of each series is included in a separate Prospectus for the SwissKey Funds dated October 28, 1996. This Statement of Additional Information is not a Prospectus, but should be read in conjunction with the current Prospectuses of the Trust. Much of the information contained herein expands upon subjects discussed in the Prospectuses. No investment in shares should be made without first reading the applicable Prospectus. A copy of each Prospectus may be obtained without charge from the Trust at the addresses and telephone numbers below. UNDERWRITER: ADVISOR: Fund/Plan Broker Services, Inc. Brinson Partners, Inc. 3200 Horizon Drive 209 South LaSalle Street King of Prussia, PA 19406-0903 Chicago, IL 60604-1295 (800) 448-2430 (Brinson Fund class) (800) 448-2430 (Brinson Fund class) 1-800-SWISSKEY (SwissKey Fund class) 1-800-SWISSKEY (SwissKey Fund class) SAI.CM TABLE OF CONTENTS
PAGE ---- THE BRINSON FUNDS.................................................................................. INVESTMENT STRATEGIES.............................................................................. INVESTMENTS RELATING TO ALL FUNDS................................................................. Repurchase Agreements........................................................................... Reverse Repurchase Agreements.................................................................. Borrowing...................................................................................... Loans of Portfolio Securities.................................................................. Swaps.......................................................................................... Futures........................................................................................ Options........................................................................................ Index Options.................................................................................. Special Risks of Options on Indices............................................................ Rule 144A Securities........................................................................... Other Investments.............................................................................. INVESTMENTS RELATING TO THE GLOBAL FUNDS AND THE NON-U.S. EQUITY FUND.............................. Foreign Securities............................................................................. Forward Foreign Currency Contracts............................................................. Options on Foreign Currencies.................................................................. INVESTMENTS RELATING TO THE GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND AND U.S. BOND FUND... Lower Grade Debt Securities................................................................... Convertible Securities........................................................................ When-Issued Securities........................................................................ Mortgage-Backed Securities and Mortgage Pass-Through Securities............................... Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage......................... Investment Conduits ("REMICs")........................................................... Other Mortgage-Backed Securities.............................................................. Asset-Backed Securities....................................................................... Zero Coupon Securities........................................................................ INVESTMENTS RELATING TO THE GLOBAL FUND............................................................ Emerging Markets Investments.................................................................. Risks of Investing in Emerging Markets........................................................ Investments in Affiliated Investment Companies............................................... INVESTMENT RESTRICTIONS............................................................................ MANAGEMENT OF THE TRUST............................................................................ Trustees and Officers......................................................................... Compensation Table............................................................................ CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES................................................ INVESTMENT ADVISORY AND OTHER SERVICES............................................................. Advisor........................................................................................ Administrator................................................................................... Underwriter..................................................................................... Distribution Plan............................................................................... Code of Ethics.................................................................................. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS................................................... Portfolio Turnover.............................................................................. SHARES OF BENEFICIAL INTEREST...................................................................... PURCHASES.......................................................................................... Exchanges of Shares............................................................................. Net Asset Value................................................................................. REDEMPTIONS........................................................................................ Taxation........................................................................................
PERFORMANCE CALCULATIONS..................................................................... Total Return.............................................................................. Yield..................................................................................... FINANCIAL STATEMENTS......................................................................... CORPORATE DEBT RATINGS --- APPENDIX A........................................................
THE BRINSON FUNDS The Brinson Funds (the "Trust"), 209 South LaSalle Street, Chicago, Illinois 60604-1295, is an open-end management investment company which currently offers shares of seven series representing separate portfolios of investments: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund (collectively referred to as the "Series," or individually as a "Series"). The Global Fund, Global Equity Fund and Global Bond Fund are referred to herein collectively as the "Global Funds" or individually as the "Global Fund;" the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund are referred to herein as the "U.S. Funds;" and the Non-U.S. Equity Fund is referred to herein as the "Non-U.S. Equity Fund." The Trust currently offers two classes of shares for each Series. The Brinson Fund class shares of the Series are as follows: Brinson Global Fund, Brinson Global Equity Fund, Brinson Global Bond Fund, Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund, Brinson U.S. Bond Fund, and Brinson Non-U.S. Equity Fund. The SwissKey Fund class shares of the Series are as follows: SwissKey Global Fund, SwissKey Global Equity Fund, SwissKey Global Bond Fund, SwissKey U.S. Balanced Fund, SwissKey U.S. Equity Fund, SwissKey U.S. Bond Fund and SwissKey Non-U.S. Equity Fund. The Brinson Fund class shares of each Series have no sales charges and are not subject to annual 12b-1 plan expenses. The SwissKey Fund class shares of each Series have no sales charges but are subject to annual 12b-1 expenses to a maximum of 0.90% for the respective Series. INVESTMENT STRATEGIES The following discussion of investment techniques and instruments supplements and should be read in conjunction with the investment objectives and policies set forth in the Prospectuses of the Funds. The investment practices described below, except for the discussion of portfolio loan transactions and borrowing, are not fundamental and may be changed by the Board of Trustees without the approval of the shareholders. INVESTMENTS RELATING TO ALL FUNDS The following discussion applies to all Series. REPURCHASE AGREEMENTS - --------------------- When a Series enters into a repurchase agreement, it purchases securities from a bank or broker-dealer which simultaneously agrees to repurchase the securities at a mutually agreed upon time and price, thereby determining the yield during the term of the agreement. As a result, a repurchase agreement provides a fixed rate of return insulated from market fluctuations during the term of the agreement. The term of a repurchase agreement generally is short, possibly overnight or for a few days, although it may extend over a number of months (up to one year) from the date of delivery. Repurchase agreements will be fully collateralized and the collateral will be marked-to-market daily. A Series may not enter into a repurchase agreement having more than seven days remaining to maturity or invest in any other illiquid securities if, as a result, such agreements, together with any other illiquid securities, would exceed 15% of the value of the net assets of the Series. In the event of bankruptcy or other default by the seller of the security under a repurchase agreement, a Series may suffer time delays and incur costs or possible losses in connection with the disposition of the collateral. In such event, instead of the contractual fixed rate of return, the rate of return to a Series would be dependent upon intervening fluctuations of the market value of the underlying security and the accrued interest on the security. Although a Series would have rights against the seller for breach of contract with respect to any losses arising from market fluctuations following the failure of the seller to perform, the ability of a Series to recover damages from a seller in bankruptcy or otherwise in default would be reduced. Repurchase agreements are securities for purposes of the tax diversification requirements that must be met for pass-through treatment under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, each Series will limit the value of its repurchase agreements on each of the quarterly testing dates to ensure compliance with Subchapter M of the Code. 4 REVERSE REPURCHASE AGREEMENTS - ----------------------------- Reverse repurchase agreements involve sales of portfolio securities of a Series to member banks of the Federal Reserve System or securities dealers believed creditworthy, concurrently with an agreement by the Series to repurchase the same securities at a later date at a fixed price which is generally equal to the original sales price plus interest. A Series retains record ownership and the right to receive interest and principal payments on the portfolio securities involved. In connection with each reverse repurchase transaction, a Series will direct its custodian bank to place cash, U.S. government securities, equity securities and/or investment and non-investment grade debt securities in a segregated account of the Series in an amount equal to the repurchase price. Any assets held in any segregated accounts maintained by a Series with respect to any reverse repurchase agreements, when-issued securities, options, futures, forward contracts or other derivative transactions shall be liquid, unencumbered and marked-to-market daily (any such assets held in a segregated account are referred to in this Statement of Additional Information as "Segregated Assets"). A reverse repurchase agreement involves the risk that the market value of the securities retained by a Series may decline below the price of the securities the Series has sold but is obligated to repurchase under the agreement. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Series' use of the proceeds of the agreement may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Series' obligation to repurchase the securities. Reverse repurchase agreements are considered borrowings by the Series and as such, are subject to the same investment limitations. BORROWING - --------- The Series may borrow money as a temporary measure for extraordinary purposes or to facilitate redemptions. A Series will not borrow money in excess of 33 1/3% of the value of its total assets. A 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%, a Series shall, within three days thereafter (not including Sundays or holidays), or such longer period as the U.S. Securities and Exchange Commission (the "SEC") may prescribe by rules and regulations, reduce the amount of its borrowings to such an extent that the asset coverage of such borrowings shall be at least 300%. A Series will not pledge more than 10% of its net assets, or issue senior securities as defined in the Investment Company Act of 1940, as amended (the "Act"), except for notes to banks and reverse repurchase agreements. Investment securities will not be purchased while a Series has an outstanding borrowing that exceeds 5% of a Series' net assets. LOANS OF PORTFOLIO SECURITIES - ----------------------------- The Series may lend portfolio securities to qualified broker-dealers and financial institutions provided: (1) the loan is secured continuously by collateral marked-to-market daily and maintained in an amount at least equal to the current market value of the securities loaned; (2) a Series may call the loan at any time and receive the securities loaned; (3) a Series will receive any interest or dividends paid on the loaned securities; and (4) the aggregate market value of securities loaned will not at any time exceed 33 1/3% of the total assets of the Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund, respectively. Collateral will consist of U.S. and non-U.S. securities, cash equivalents or irrevocable letters of credit. Loans of securities involve a risk that the borrower may fail to return the securities or may fail to maintain the proper amount of collateral. Therefore, a Series will only enter into portfolio loans after a review of all pertinent factors by Brinson Partners, Inc. ("Brinson Partners" or the "Advisor") under the supervision of the Board of Trustees, including the creditworthiness of the borrower. Creditworthiness will be monitored on an ongoing basis by the Advisor. SWAPS - ----- The Series (except for the Global Equity Fund, U.S. Equity Fund and Non-U.S. Equity Fund) may engage in swaps, including but not limited to interest rate, currency and index swaps and the purchase or sale of related caps, floors, collars and other derivative instruments. The Series expect to enter into these transactions primarily to preserve a return or spread on a particular investment or portion of the portfolio's duration, to protect against any increase in the price of securities the Series anticipates purchasing at a later date, or to gain exposure to certain markets in the most economical way possible. 5 The use of swaps involves investment techniques and risks different from those associated with ordinary portfolio security transactions. If Brinson Partners is incorrect in its forecast of market values, interest rates and other applicable factors, the investment performance of the Series will be less favorable than it would have been if this investment technique was never used. Thus, if the other party to a swap defaults, a 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. FUTURES - ------- The Series may enter into contracts for the purchase or sale for future delivery of securities. The Global Funds and the Non-U.S. Equity Fund may also enter into contracts for the purchase or sale for future delivery of foreign currencies. A purchase of a futures contract means the acquisition of a contractual right to obtain delivery to a 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, a 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. A Series may enter into futures contracts and engage in options transactions related thereto to the extent that not more than 5% of the Series' assets are required as futures contract margin deposits and premiums on options, and may engage in such transactions to the extent that obligations relating to such futures and related options on futures transactions represent not more than 25% of a Series' assets. When a Series enters into a futures transaction, it must deliver to the futures commission merchant selected by a Series an amount referred to as "initial margin." This amount is maintained by the futures commission merchant in a segregated account at the custodian bank. Thereafter, a "variation margin" may be paid by the Series to, or drawn by the Series from, such account in accordance with controls set for such accounts, depending upon changes in the price of the underlying securities subject to the futures contract. The Series will enter into 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. In addition, all of the Series except the Global Bond Fund and U.S. Bond Fund may sell stock index futures in anticipation of or during a market decline to attempt to offset the decrease in market value of their common stocks that might otherwise result; and they may purchase such contracts in order to offset increases in the cost of common stocks that they intend to purchase. Unlike other futures contracts, a stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract. While futures contracts provide for the delivery of securities, deliveries usually do not occur. Contracts are generally terminated by entering into offsetting transactions. The Series may enter into futures contracts to protect against the adverse affects of fluctuations in security prices, interest or foreign exchange rates without actually buying or selling the securities or foreign currency. For example, if interest rates are expected to increase, a Series might enter into futures contracts for the sale of debt securities. Such a sale would have much the same effect as selling an equivalent value of the debt securities owned by the Series. If interest rates did increase, the value of the debt securities in the portfolio would decline, but the value of the futures contracts to the Series would increase at approximately the same rate, thereby keeping the net asset value of the Series from declining as much as it otherwise would have. Similarly, when it is expected that interest rates may decline, futures contracts may be purchased to hedge in anticipation of subsequent purchases of securities at higher prices. Since the fluctuations in the value of futures contracts should be similar to those of debt securities, the Series could take advantage of the anticipated rise in value of debt securities without actually buying them until the market had stabilized. At that time, the futures contracts could be liquidated and the Series could then buy debt securities on the cash market. To the extent that market prices move in an unexpected direction, a Series may not achieve the anticipated benefits of futures contracts or may realize a loss. For example, if a Series is hedged against the possibility of an increase in interest rates which would adversely affect the price of securities held in its portfolio and interest rates decrease instead, the Series would lose part or all of the benefit of the increased value which it has because it would have offsetting losses 6 in its futures position. In addition, in such situations, if the Series had insufficient cash, it may be required to sell securities from its portfolio to meet daily variation margin requirements. Such sales of securities may, but will not necessarily, be at increased prices which reflect the rising market. A Series may be required to sell securities at a time when it may be disadvantageous to do so. OPTIONS - ------- The Series may purchase and write call or put options on securities but will only engage in option strategies for non-speculative purposes. The U.S. Funds may invest in options that are listed on U.S. exchanges or traded over-the-counter and the Global Funds and the Non-U.S. Equity Fund may invest in options that are either listed on U.S. or recognized foreign exchanges or traded over-the-counter. Certain over-the-counter options may be illiquid. Thus, it may not be possible to close options positions and this may have an adverse impact on a Series' ability to effectively hedge its securities. The Series have been notified by the SEC that it considers over-the-counter options to be illiquid. Accordingly, a Series will only invest in such options to the extent consistent with its 15% limit on investments in illiquid securities. PURCHASING CALL OPTIONS - The Series may purchase call options on securities to the extent that premiums paid by a Series do not aggregate more than 20% of the Series' total assets. When a Series purchases a call option, in return for a premium paid by the Series to the writer of the option, the Series obtains the right to buy the security underlying the option at a specified exercise price at any time during the term of the option. The writer of the call option, who receives the premium upon writing the option, has the obligation, upon exercise of the option, to deliver the underlying security against payment of the exercise price. The advantage of purchasing call options is that a Series may alter portfolio characteristics and modify portfolio maturities without incurring the cost associated with transactions. A Series may, following the purchase of a call option, liquidate its position by effecting a closing sale transaction. This is accomplished by selling an option of the same series as the option previously purchased. The Series will realize a profit from a closing sale transaction if the price received on the transaction is more than the premium paid to purchase the original call option; the Series will realize a loss from a closing sale transaction if the price received on the transaction is less than the premium paid to purchase the original call option. Although the Series will generally purchase only those call options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market on an exchange will exist for any particular option, or at any particular time, and for some options no secondary market on an exchange may exist. In such event, it may not be possible to effect closing transactions in particular options, with the result that a Series would have to exercise its options in order to realize any profit and would incur brokerage commissions upon the exercise of such options and upon the subsequent disposition of the underlying securities acquired through the exercise of such options. Further, unless the price of the underlying security changes sufficiently, a call option purchased by a Series may expire without any value to the Series, in which event the Series would realize a capital loss which will be short-term unless the option was held for more than one year. COVERED CALL WRITING - A Series may write covered call options from time to time on such portions of its portfolio, without limit, as Brinson Partners determines is appropriate in seeking to achieve the Series' investment objective. The advantage to a Series of writing covered calls is that the Series receives a premium which is additional income. However, if the security rises in value, the Series may not fully participate in the market appreciation. During the option period, a covered call option the writer may be assigned an exercise notice by the broker-dealer through whom such call option was sold, requiring the writer to deliver the underlying security against payment of the exercise price. This obligation is terminated upon the expiration of the option or upon entering a closing purchase transaction. A closing purchase transaction, in which a Series, as writer of an option, terminates its obligation by purchasing an option of the same series as the option previously written, cannot be effected with respect to an option once the option writer has received an exercise notice for such option. Closing purchase transactions will ordinarily be effected to realize a profit on an outstanding call option, to prevent an underlying security from being called, to permit the sale of the underlying security or to enable a Series to write another 7 call option on the underlying security with either a different exercise price or expiration date or both. A Series may realize a net gain or loss from a closing purchase transaction depending upon whether the net amount of the original premium received on the call option is more or less than the cost of effecting the closing purchase transaction. Any loss incurred in a closing purchase transaction may be partially or entirely offset by the premium received from a sale of a different call option on the same underlying security. Such a loss may also be wholly or partially offset by unrealized appreciation in the market value of the underlying security. Conversely, a gain resulting from a closing purchase transaction could be offset in whole or in part by a decline in the market value of the underlying security. If a call option expires unexercised, the Series will realize a short-term capital gain in the amount of the premium on the option less the commission paid. Such a gain, however, may be offset by depreciation in the market value of the underlying security during the option period. If a call option is exercised, a Series will realize a gain or loss from the sale of the underlying security equal to the difference between the cost of the underlying security and the proceeds of the sale of the security plus the amount of the premium on the option less the commission paid. The Series will write call options only on a covered basis, which means that a Series will own the underlying security subject to a call option at all times during the option period. Unless a closing purchase transaction is effected, a Series would be required to continue to hold a security which it might otherwise wish to sell or deliver a security it would want to hold. The exercise price of a call option may be below, equal to or above the current market value of the underlying security at the time the option is written. PURCHASING PUT OPTIONS - The Series may only purchase put options to the extent that the premiums on all outstanding put options do not exceed 20% of a Series' total assets. A Series will, at all times during which it holds a put option, own the security covered by such option. With regard to the writing of put options, each Series will limit the aggregate value of the obligations underlying such put options to 50% of its total net assets. The purchase of the put on substantially identical securities held will constitute a short sale for tax purposes, the effect of which is to create short-term capital gain on the sale of the security and to suspend running of its holding period (and treat it as commencing on the date of the closing of the short sale) or that of a security acquired to cover the same if, at the time the put was acquired, the security had not been held for more than one year. A put option purchased by a Series gives it the right to sell one of its securities for an agreed price up to an agreed date. The Series intend to purchase put options in order to protect against a decline in the market value of the underlying security below the exercise price less the premium paid for the option ("protective puts"). The ability to purchase put options will allow the Series to protect unrealized gains in an appreciated security in their portfolios without actually selling the security. If the security does not drop in value, a Series will lose the value of the premium paid. A Series may sell a put option which it has previously purchased prior to the sale of the securities underlying such option. Such sale will result in a net gain or loss depending on whether the amount received on the sale is more or less than the premium and other transaction costs paid on the put option which is sold. The Series may sell a put option purchased on individual portfolio securities. Additionally, the Series may enter into closing sale transactions. A closing sale transaction is one in which a Series, when it is the holder of an outstanding option, liquidates its position by selling an option of the same series as the option previously purchased. WRITING PUT OPTIONS - The Series may also write put options on a secured basis which means that a Series will maintain in a segregated account with its custodian Segregated Assets in an amount not less than the exercise price of the option at all times during the option period. The amount of Segregated Assets held in the segregated account will be adjusted on a daily basis to reflect changes in the market value of the securities covered by the put option written by the Series. Secured put options will generally be written in circumstances where Brinson Partners wishes to purchase the underlying security for a Series' portfolio at a price lower than the current market price of the security. In such event, a Series would write a secured put option at an exercise price which, reduced by the premium received on the option, reflects the lower price it is willing to pay. 8 Following the writing of a put option, a Series may wish to terminate the obligation to buy the security underlying the option by effecting a closing purchase transaction. This is accomplished by buying an option of the same series as the option previously written. The Series may not, however, effect such a closing transaction after it has been notified of the exercise of the option. INDEX OPTIONS - ------------- The Series may purchase exchange-listed call options on stock and fixed income indices depending upon whether a Series is an equity or bond series and sell such options in closing sale transactions for hedging purposes. A Series may purchase call options on broad market indices to temporarily achieve market exposure when the Series is not fully invested. A Series may also purchase exchange-listed call options on particular market segment indices to achieve temporary exposure to a specific industry. In addition, the Series may purchase put options on stock and fixed income indices and sell such options in closing sale transactions for hedging purposes. A Series may purchase put options on broad market indices in order to protect its fully invested portfolio from a general market decline. Put options on market segments may be bought to protect a Series from a decline in value of heavily weighted industries in the Series' portfolio. Put options on stock and fixed income indices may also be used to protect a Series' investments in the case of a major redemption. The Series may also write (sell) put and call options on stock and fixed income indices. While the option is open, a Series will maintain a segregated account with its custodian in an amount equal to the market value of the option. Options on indices are similar to regular options except that an option on an index gives the holder the right, upon exercise, to receive an amount of cash if the closing level of the index upon which the option is based is greater than (in the case of a call) or lesser than (in the case of a put) the exercise price of the option. This amount of cash is equal to the difference between the closing price of the index and the exercise price of the option expressed in dollars times a specified multiple (the "multiplier"). The indices on which options are traded include both U.S. and non-U.S. markets. SPECIAL RISKS OF OPTIONS ON INDICES - ----------------------------------- The Series' purchases of options on indices will subject them to the risks described below. Because the value of an index option depends upon movements in the level of the index rather than the price of a particular security, whether a Series will realize gain or loss on the purchase of an option on an index depends upon movements in the level of prices in the market generally or in an industry or market segment rather than movements in the price of a particular security. Accordingly, successful use by a Series of options on indices is subject to Brinson Partners' ability to predict correctly the direction of movements in the market generally or in a particular industry. This requires different skills and techniques than predicting changes in the prices of individual securities. Index prices may be distorted if trading of a substantial number of securities included in the index is interrupted causing the trading of options on that index to be halted. If a trading halt occurred, a Series would not be able to close out options which it had purchased and the Series may incur losses if the underlying index moved adversely before trading resumed. If a trading halt occurred and restrictions prohibiting the exercise of options were imposed through the close of trading on the last day before expiration, exercises on that day would be settled on the basis of a closing index value that may not reflect current price information for securities representing a substantial portion of the value of the index. If a Series holds an index option and exercises it before final determination of the closing index value for that day, it runs the risk that the level of the underlying index may change before closing. If such a change causes the exercised option to fall "out-of-the-money," the Series will be required to pay the difference between the closing index value and the exercise price of the option (times the applicable multiplier) to the assigned writer. Although a Series may be able to minimize this risk by withholding exercise instructions until just before the daily cutoff time or by selling rather than exercising the option when the index level is close to the exercise price, it may not be possible to eliminate this risk entirely because the cutoff times for index options may be earlier than those fixed for other types of options and may occur before definitive closing index values are announced. 9 RULE 144A SECURITIES - -------------------- The Series may invest in securities that are exempt under Rule 144A from the registration requirements of the Securities Act of 1933. Those securities purchased under Rule 144A are traded among qualified institutional investors. The Board of Trustees of the Trust has instructed Brinson Partners to consider the following factors in determining the liquidity of a security purchased under Rule 144A: (i) the frequency of trades and trading volume for the security; (ii) whether at least three dealers are willing to purchase or sell the security and the number of potential purchasers; (iii) whether at least two dealers are making a market in the security; and (iv) the nature of the security and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Although having delegated the day-to-day functions, the Board of Trustees will continue to monitor and periodically review the Advisor's selection of Rule 144A securities, as well as the Advisor's determinations as to their liquidity. Investing in securities under Rule 144A could have the effect of increasing the level of a Series' illiquidity to the extent that qualified institutional buyers become, for a time, uninterested in purchasing these securities. After the purchase of a security under Rule 144A, however, the Board of Trustees and Brinson Partners will continue to monitor the liquidity of that security to ensure that each Series has no more than 15% of its total assets in illiquid securities. The Series will limit investments in securities of issuers which the Series are restricted from selling to the public without registration under the Securities Act of 1933 to no more than 15% of the Series' total assets, excluding restricted securities eligible for resale pursuant to Rule 144A that have been determined to be liquid by the Trust's Board of Trustees. 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 continue to adhere to such limitation, including disposing of illiquid assets which may include such Rule 144A securities. OTHER INVESTMENTS - ----------------- The Board of Trustees may, in the future, authorize a Series to invest in securities other than those listed in this Statement of Additional Information and in the Prospectuses, provided such investment would be consistent with that Series' investment objective and that it would not violate any fundamental investment policies or restrictions applicable to that Series. INVESTMENTS RELATING TO THE GLOBAL FUNDS AND THE NON-U.S. EQUITY FUND The following discussion of strategies, techniques and policies applies only to the Global Fund, Global Equity Fund, Global Bond Fund and the Non-U.S. Equity Fund. FOREIGN SECURITIES - ------------------ Investors should recognize that investing in foreign issuers involves certain considerations, including those set forth in the Series' Prospectuses, which are not typically associated with investing in U.S. issuers. Since the stocks of foreign companies are frequently denominated in foreign currencies, and since the Series may temporarily hold uninvested reserves in bank deposits in foreign currencies, the Series will be affected favorably or unfavorably by changes in currency rates and in exchange control regulations and may incur costs in connection with conversions between various currencies. The investment policies of the Series permit them to enter into forward foreign currency exchange contracts, futures, options and interest rate swaps (in the case of the Global Funds) in order to hedge portfolio holdings and commitments against changes in the level of future currency rates. There has been in the past, and there may be again in the future, an interest equalization tax levied by the United States in connection with the purchase of foreign securities such as those purchased by the Series. Payment of an interest equalization tax, if imposed, would reduce the Series' rates of return on investment. Dividends paid by foreign issuers may be subject to withholding and other foreign taxes which may decrease the net return on such investments as compared to dividends paid to the Series by U.S. corporations. The Series' ability to "pass through" the foreign taxes paid for tax credit or deduction purposes will be determined by the composition of the Series' portfolios. More than 50% 10 of a Series must be invested in stock or securities of foreign corporations for "pass through" to be possible in the first instance. Special rules govern the federal income tax treatment of certain transactions denominated in terms of a currency other than the U.S. dollar or determined by reference to the value of one or more currencies other than the U.S. dollar. The types of transactions covered by the special rules generally include the following: (i) the acquisition of, or becoming the obligor under, a bond or other debt instrument (including, to the extent provided in the Treasury Regulations, preferred stock); (ii) the accruing of certain trade receivables and payables; and (iii) the entering into or acquisition of any forward contract, futures contract and similar financial instruments other than any "regulated futures contract" or "non-equity option" which would be marked-to-market under the rules of Section 1256 of the Code if held at the end of the tax year. The disposition of a currency other than the U.S. dollar by a U.S. taxpayer is also treated as a transaction subject to the special currency rules. However, foreign currency- related regulated futures contracts and non-equity options are generally not subject to these special currency rules. If subject, they are or would be treated as sold for their fair market value at year-end under the marked-to- market rules applicable to other futures contracts, unless an election is made to have such currency rules apply. With respect to transactions covered by the special rules, foreign currency gain or loss is calculated separately from any gain or loss on the underlying transaction and is normally taxable gain or loss. A taxpayer may elect to treat as capital gain or loss foreign currency gain or loss arising from certain identified forward contracts, futures contracts and options that are capital assets in the hands of the taxpayer and which are not part of a straddle. Certain transactions subject to the special currency rules that are part of a "section 988 hedging transaction" (as defined in the Code and the Treasury Regulations) will be integrated and treated as a single transaction or otherwise treated consistently for purposes of the Code. The income tax effects of integrating and treating a transaction as a single transaction are generally to create a synthetic debt instrument that is subject to the original discount provisions. It is anticipated that some of the non-U.S. dollar denominated investments and foreign currency contracts the Series may make or enter into will be subject to the special currency rules described above. FORWARD FOREIGN CURRENCY CONTRACTS - ---------------------------------- The Series may purchase or sell currencies and/or engage in forward foreign currency transactions in order to expedite settlement of portfolio transactions and to manage currency risk. Forward foreign currency contracts are traded in the inter-bank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement and no commissions are charged at any stage for trades. The Series will account for forward contracts by marking-to-market each day at current forward contract values. A Series will only enter into forward contracts to sell, for a fixed amount of U.S. dollars or other appropriate currency, an amount of foreign currency, to the extent that the value of the short forward contract is covered by the underlying value of securities denominated in the currency being sold. Alternatively, when a Series enters into a forward contract to sell an amount of foreign currency, the Series' custodian or sub-custodian will place Segregated Assets in a segregated account of the Series in an amount not less than the value of the Series' total assets committed to the consummation of such forward contracts. If the additional Segregated Assets placed in the segregated account decline, additional cash or securities will be placed in the account on a daily basis so that the value of the account will equal the amount of the Series' commitments with respect to such contracts. OPTIONS ON FOREIGN CURRENCIES - ----------------------------- The Series also may purchase and write put and call options on foreign currencies (traded on U.S. and foreign exchanges or over-the-counter markets) to manage the Series' exposure to changes in currency exchange rates. The Series may purchase and write options on foreign currencies for hedging purposes in a manner similar to that in which futures contracts on foreign currencies, or forward contracts, will be utilized. For example, a decline in the dollar value of a foreign currency in which portfolio securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against such diminutions in the value of portfolio securities, the Series may purchase put options on the foreign currency. If the dollar price of the currency does decline, a Series will have the right to sell such currency for a fixed amount in dollars and will thereby offset, in whole or in part, the adverse effect on its portfolio which otherwise would have resulted. Conversely, where a rise in the dollar value of a currency in which securities to be acquired are denominated is projected, thereby increasing the dollar price of such securities, the Series may purchase call options on such currency. 11 The purchase of such options could offset, at least partially, the effects of the adverse movement in exchange rates. As in the case of other types of options, however, the benefit to the Series to be derived from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, a Series could sustain losses on transactions in foreign currency options which would require it to forego a portion or all of the benefits of advantageous changes in such rates. The Series may write options on foreign currencies for the same types of hedging purposes. For example, where a Series anticipates a decline in the dollar value of foreign currency denominated securities due to adverse fluctuations in exchange rates, it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised, and the diminution in the value of portfolio securities will be offset by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against an anticipated increase in the dollar cost of securities to be acquired, a Series could write a put option on the relevant currency which, if rates move in the manner projected, will expire unexercised and allow the Series to hedge such increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the Series would be required to purchase or sell the underlying currency at a loss which may not be offset by the amount of the premium. Through the writing of options on foreign currencies, a Series also may be required to forego all or a portion of the benefit which might otherwise have been obtained from favorable movements in exchange rates. The Series may write covered call options on foreign currencies. A call option written on a foreign currency by a Series is "covered" if the Series owns the underlying foreign currency covered by the call or has an absolute and immediate right to acquire that foreign currency without additional cash consideration (or for additional cash consideration held in a segregated account by the custodian bank) upon conversion or exchange of other foreign currency held in its portfolio. A call option is also covered if a Series has a call on the same foreign currency and in the same principal amount as the call written where the exercise price of the call held (a) is equal to or less than the exercise price of the call written, or (b) is greater than the exercise price of the call written if the difference is maintained by the Series in Segregated Assets in a segregated account with its custodian bank. With respect to writing put options, at the time the put is written, a Series will establish a segregated account with its custodian bank consisting of Segregated Assets in an amount equal in value to the amount the Series will be required to pay upon exercise of the put. The account will be maintained until the put is exercised, has expired, or the Series has purchased a closing put of the same series as the one previously written. INVESTMENTS RELATING TO THE GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND AND U.S. BOND FUND The following discussion applies to the Global Fund, Global Bond Fund, U.S. Balanced Fund and U.S. Bond Fund. LOWER GRADE DEBT SECURITIES - ---------------------------- Fixed income securities rated lower than Baa3 by Moody's Investors Services, Inc. or BBB- by Standard & Poor's Ratings Group are considered to be of poor standing and predominantly speculative. Such securities are commonly referred to as "junk bonds" and are subject to a substantial degree of credit risk. Medium and low-grade bonds held by the Series, which are those that are rated below Baa3 or BBB-, may be issued as a consequence of corporate restructurings, such as leveraged buy-outs, mergers, acquisitions, debt recapitalizations or similar events. Also, high yield bonds are often issued by smaller, less creditworthy companies or by highly leveraged (indebted) firms, which are generally less able than more financially stable firms to make scheduled payments of interest and principal. The risks posed by bonds issued under such circumstances are substantial. In the past, the high yields from low-grade bonds have more than compensated for the higher default rates on such securities. However, there can be no assurance that diversification will protect the Series from widespread bond defaults 12 brought about by a sustained economic downturn, or that yields will continue to offset default rates on high yield bonds in the future. Issuers of these securities are often highly leveraged, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. In addition, such issuers may not have more traditional methods of financing available to them and may be unable to repay debt at maturity by refinancing. Further, an economic recession may result in default levels with respect to such securities in excess of historic averages. The value of lower-rated debt securities will be influenced not only by changing interest rates, but also by the bond market's perception of credit quality and the outlook for economic growth. When economic conditions appear to be deteriorating, low and medium-rated bonds may decline in market value due to investors' heightened concern over credit quality, regardless of prevailing interest rates. Especially at such times, trading in the secondary market for high yield bonds may become thin and market liquidity may be significantly reduced. Even under normal conditions, the market for high yield bonds may be less liquid than the market for investment grade corporate bonds. There are fewer securities dealers in the high yield market and purchasers of high yield bonds are concentrated among a smaller group of securities dealers and institutional investors. In periods of reduced market liquidity, high yield bond prices may become more volatile. Besides credit and liquidity concerns, prices for high yield bonds may be affected by legislative and regulatory developments. For example, from time to time, Congress has considered legislation to restrict or eliminate the corporate tax deduction for interest payments or to regulate corporate restructurings such as takeovers or mergers. Such legislation may significantly depress the prices of outstanding high yield bonds. A description of various corporate debt ratings appears in Appendix A to this Statement of Additional Information. 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. Convertible securities entitle the holder to exchange the securities for a specified number of shares of common stock, usually of the same company, at specified prices within a certain period of time and to receive interest or dividends until the holder elects to convert. The provisions of any convertible security determine its ranking in a company's capital structure. In the case of subordinated convertible debentures, the holder's claims on assets and earnings are subordinated to the claims of other creditors and are senior to the claims of preferred and common shareholders. In the case of preferred stock and convertible preferred stock, the holder's claim on assets and earnings are subordinated to the claims of all creditors but are senior to the claims of common shareholders. WHEN-ISSUED SECURITIES - ---------------------- The Series may purchase securities offered on a "when-issued" or "forward delivery" basis. When so offered, the price, which is generally expressed in yield terms, is fixed at the time the commitment to purchase is made, but delivery and payment for the when-issued or forward delivery securities take place at a later date. During the period between purchase and settlement, no payment is made by the purchaser to the issuer and no interest on the when- issued or forward delivery security accrues to the purchaser. While when-issued or forward delivery securities may be sold prior to the settlement date, it is intended that a Series will purchase such securities with the purpose of actually acquiring them unless a sale appears desirable for investment reasons. At the time a Series makes the commitment to purchase a security on a when- issued or forward delivery basis, it will record the transaction and reflect the value of the security in determining its net asset value. The market value of when-issued or forward delivery securities may be more or less than the purchase price. The Advisor does not believe that a Series' net asset value or income will be adversely affected by its purchase of securities on a when-issued or forward delivery basis. The Series will establish a segregated account in which it will maintain Segregated Assets equal in value to commitments for when- issued or forward delivery securities. MORTGAGE-BACKED SECURITIES AND MORTGAGE PASS-THROUGH SECURITIES - --------------------------------------------------------------- The Series may also invest in mortgage-backed securities, which are interests in pools of mortgage loans, including mortgage loans made by savings and loan institutions, mortgage bankers, commercial banks and others. Pools of 13 mortgage loans are assembled as securities for sale to investors by various governmental, government-related and private organizations as further described below. The Series may also invest in debt securities which are secured with collateral consisting of mortgage-backed securities (see "Collateralized Mortgage Obligations") and in other types of mortgage-related securities. The timely payment of principal and interest on mortgage-backed securities issued or guaranteed by the Government National Mortgage Association ("GNMA") is backed by GNMA and the full faith and credit of the U.S. government. These guarantees, however, do not apply to the market value of Series shares. Also, securities issued by GNMA and other mortgage-backed securities may be purchased at a premium over the maturity value of the underlying mortgages. This premium is not guaranteed and would be lost if prepayment occurs. Mortgage-backed securities issued by U.S. government agencies or instrumentalities other than GNMA are not "full faith and credit" obligations. Certain obligations, such as those issued by the Federal Home Loan Bank are supported by the issuer's right to borrow from the U.S. Treasury, while others such as those issued by the Federal National Mortgage Association ("FNMA"), are supported only by the credit of the issuer. Unscheduled or early payments on the underlying mortgages may shorten the securities' effective maturities and reduce returns. The Series may agree to purchase or sell these securities with payment and delivery taking place at a future date. A decline in interest rates may lead to a faster rate of repayment of the underlying mortgages and expose the Series to a lower rate of return upon reinvestment. To the extent that such mortgage-backed securities are held by a Series, the prepayment right of mortgagors may limit the increase in net asset value of the Series because the value of the mortgage-backed securities held by the Series may not appreciate as rapidly as the price of noncallable debt securities. A decline in interest rates may lead to a faster rate of repayment of the underlying mortgages and expose a Series to a lower rate of return upon reinvestment. To the extent that such mortgage-backed securities are held by a Series, the prepayment right will tend to limit to some degree the increase in net asset value of the Series because the value of the mortgage-backed securities held by the Series may not appreciate as rapidly as the price of noncallable debt securities. For federal tax purposes other than diversification under Subchapter M, mortgage-backed securities are not considered to be separate securities but rather "grantor trusts" conveying to the holder an individual interest in each of the mortgages constituting the pool. Interests in pools of mortgage-backed securities differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. Instead, these securities provide a monthly payment which consists of both interest and principal payments. In effect, these payments are a "pass-through" of the monthly payments made by the individual borrowers on their mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting from the sale of the underlying property, refinancing or foreclosure, net of fees or costs which may be incurred. Some mortgage-backed securities (such as securities issued by the GNMA) are described as "modified pass-through." These securities entitle the holder to receive all interest and principal payments owed on the mortgage pool, net of certain fees, at the scheduled payments dates regardless of whether or not the mortgagor actually makes the payment. Any discount enjoyed on the purchases of a pass-through type mortgage-backed security will likely constitute market discount. As a Series receives principal payments, it will be required to treat as ordinary income an amount equal to the lesser of the amount of the payment or the "accrued market discount." Market discount is to be accrued either under a constant rate method or a proportional method. Pass-through type mortgage-backed securities purchased at a premium to face will be subject to a similar rule requiring recognition of an offset to ordinary interest income, an amount of premium attributable to the receipt of principal. The amount of premium recovered is to be determined using a method similar to that in place for market discount. A Series may elect to accrue market discount or amortize premium notwithstanding the amount of principal received but such election will apply to all bonds held and thereafter acquired unless permission is granted by the Commissioner of the Internal Revenue Service to change such method. The principal governmental guarantor of mortgage-related securities is GAMA, which is a wholly-owned U. S. government corporation within the Department of Housing and Urban Development. GNMA is authorized to guarantee, with the full faith and credit of the U.S. government, the timely payment of principal and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and mortgage bankers) 14 and backed by pools of mortgages which are insured by the Federal Housing Authority or guaranteed by the Veterans Administration. These guarantees, however, do not apply to the market value or yield of mortgage-backed securities or to the value of Series shares. Also, GNMA securities often are purchased at a premium over the maturity value of the underlying mortgages. This premium is not guaranteed and should be viewed as an economic offset to interest to be earned. If prepayments occur, less interest will be earned and the value of the premium paid will be lost. Government-related guarantors (i.e., not backed by the full faith and credit of the U.S. government) include FNMA and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a government-sponsored corporation owned entirely by private stockholders. It is subject to general regulation of the Secretary of Housing and Urban Development. FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA but are not backed by the full faith and credit of the U.S. government. FHLMC is a corporate instrumentality of the U.S. government and was created by Congress in 1970 for the purpose of increasing the availability of mortgage credit for residential housing. Its stock is owned by the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates ("PCs") which represent interests in conventional mortgages from FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but PCs are not backed by the full faith and credit of the U.S. government. Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass- through pools of conventional mortgage loans. Such issuers may, in addition, be the originators and/or servicers of the underlying mortgage loans as well as the guarantors of the mortgage-related securities. Pools created by such non- governmental issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government or agency guarantees of payments. However, timely payment of interest and principal of these pools may be supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance and letters of credit. The insurance guarantees are issued by governmental entities, private insurers and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage-related security meets a Series' investment quality standards. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee or guarantees, even if through an examination of the loan experience and practices of the originators/servicers and poolers, the Advisor determines that the securities meet the Series' quality standards. Although the market for such securities is becoming increasingly liquid, securities issued by certain private organizations may not be readily marketable. COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") AND REAL ESTATE MORTGAGE INVESTMENT - -------------------------------------------------------------------------------- CONDUITS ("REMICS") - ------------------- A CMO is a debt security on which interest and prepaid principal are paid, in most cases, semi-annually. CMOs may be collateralized by whole mortgage loans but are more typically collateralized by portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or FNMA and their income streams. Privately-issued CMOs tend to be more sensitive to interest rates than Government-issued CMOs. CMOs are structured into multiple classes, each bearing a different stated maturity. Actual maturity and average life will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payments of principal received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes receive principal only after the first class has been retired. An investor is partially guarded against a sooner than desired return of principal because of the sequential payments. In a typical CMO transaction, a corporation issues multiple series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to purchase mortgages or mortgage pass-through certificates ("Collateral"). The Collateral is pledged to a third party trustee as security for the Bonds. Principal and interest payments from the Collateral are used to pay principal on the Bonds in the order A, B, C, Z. The Series A, B and C Bonds all bear current interest. Interest 15 on the Series Z Bond is accrued and added to principal and a like amount is paid as principal on the Series A, B, or C Bond currently being paid off. When the Series A, B and C Bonds are paid in full, interest and principal on the Series Z Bond begins to be paid currently. With some CMOs, the issuer serves as a conduit to allow loan originators (primarily builders or savings and loan associations) to borrow against their loan portfolios. REMICs are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. REMICs are similar to CMOs in that they issue multiple classes of securities. Most if not all newly-issued debt securities backed by pools of real estate mortgages will be issued as regular and residual interests in REMICs because, as of January 1, 1992, new CMOs which do not make REMIC elections will be treated as "taxable mortgage pools," a wholly undesirable tax result. Under certain transition rules, CMOs in existence on December 31, 1991 are unaffected by this change. The Series will purchase only regular interests in REMICs. REMIC regular interests are treated as debt of the REMIC and income/discount thereon must be accounted for on the "catch-up method," using a reasonable prepayment assumption under the original issue discount rules of the Code. CMOs and REMICs issued by private entities are not government securities and are not directly guaranteed by any government agency. They are secured by the underlying collateral of the private issuer. Yields on privately-issued CMOs, as described above, have been historically higher than yields on CMOs issued or guaranteed by U.S. government agencies. However, the risk of loss due to default on such instruments is higher since they are not guaranteed by the U.S. government. Such instruments also tend to be more sensitive to interest rates than U.S. government-issued CMOs. The Series will not invest in subordinated privately-issued CMOs. For federal income tax purposes, the Series will be required to accrue income on CMOs and REMIC regular interests using the "catch- up" method, with an aggregate prepayment assumption. OTHER MORTGAGE-BACKED SECURITIES - -------------------------------- The Advisor expects that governmental, government-related or private entities may create mortgage loan pools and other mortgage-related securities offering mortgage pass-through and mortgage-collateralized investments in addition to those described above. The mortgages underlying these securities may include alternative mortgage instruments, that is, mortgage instruments whose principal or interest payments may vary or whose terms to maturity may differ from customary long-term fixed rate mortgages. As new types of mortgage-related securities are developed and offered to investors, the Advisor will, consistent with a Series' investment objective, policies and quality standards, consider making investments in such new types of mortgage-related securities. The Advisor will not purchase any such other mortgage-backed securities until the Series' Prospectuses and this Statement of Additional Information have been supplemented. ASSET-BACKED SECURITIES - ----------------------- The Series may invest a portion of its assets in debt obligations known as "asset-backed securities." Asset-backed securities are securities that represent a participation in, or are secured by and payable from, a stream of payments generated by particular assets, most often a pool or pools of similar assets (e.g., receivables on home equity and credit loans and receivables regarding automobile, credit card, mobile home and recreational vehicle loans, wholesale dealer floor plans and leases). Such receivables are securitized in either a pass-through or a pay-through structure. Pass-through securities provide investors with an income stream consisting of both principal and interest payments in respect of the receivables in the underlying pool. Pay-through asset-backed securities are debt obligations issued usually by a special purpose entity, which are collateralized by the various receivables and in which the payments on the underlying receivables provide that the Series pay the debt service on the debt obligations issued. The Series may invest in these and other types of asset-backed securities that may be developed in the future. The credit quality of these securities depends primarily upon the quality of the underlying assets and the level of credit support and/or enhancement provided. Such asset-backed securities are subject to the same prepayment risks as mortgage-backed securities. For federal income tax purposes, the Series will be required to accrue income on pay-through asset-backed securities using the "catch-up" method, with an aggregate prepayment assumption. 16 The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit support provided to the securities. The rate of principal payment on asset-backed securities generally depends on the rate of principal payments received on the underlying assets which in turn may be affected by a variety of economic and other factors. As a result, the yield on any asset-backed security is difficult to predict with precision and actual yield to maturity may be more or less than the anticipated yield to maturity. Asset-backed securities may be classified as "pass-through certificates" or "collateralized obligations." Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make payment, such securities may contain elements of credit support. Such credit support falls into two categories: (i) liquidity protection; and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments due on the underlying pool is timely. Protection against losses resulting from ultimate default enhances the likelihood of payments of the obligations on at least some of the assets in the pool. Such protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. The Series will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security. Due to the shorter maturity of the collateral backing such securities, there is less of a risk of substantial prepayment than with mortgage-backed securities. Such asset-backed securities do, however, involve certain risks not associated with mortgage-backed securities, including the risk that security interests cannot be adequately, or in many cases, ever, established. In addition, with respect to credit card receivables, a number of state and federal consumer credit laws give debtors the right to set off certain amounts owed on the credit cards, thereby reducing the outstanding balance. In the case of automobile receivables, there is a risk that the holders may not have either a proper or first security interest in all of the obligations backing such receivables due to the large number of vehicles involved in a typical issuance and technical requirements under state laws. Therefore, recoveries on repossessed collateral may not always be available to support payments on the securities. Examples of credit support arising out of the structure of the transaction include "senior-subordinated securities" (multiple class securities with one or more classes subordinate to other classes as to the payment of principal thereof and interest thereon, with the result that defaults on the underlying assets are borne first by the holders of the subordinated class), creation of "reserve funds" (where cash or investments, sometimes funded from a portion of the payments on the underlying assets, are held in reserve against future losses) and "over collateralization" (where the scheduled payments on, or the principal amount of, the underlying assets exceeds that required to make payments of the securities and pay any servicing or other fees). The degree of credit support provided for each issue is generally based on historical information respecting the level of credit information respecting the level of credit risk associated with the underlying assets. Delinquencies or losses in excess of those anticipated could adversely affect the return on an investment in such issue. ZERO COUPON SECURITIES - ---------------------- The Series may invest in zero coupon securities which pay no cash income and are sold at substantial discounts from their value at maturity. When held to maturity, their entire income, which consists of accretion of discount, comes from the difference between the purchase price and their value at maturity. The discount varies depending on the time remaining until maturity or cash payment date, prevailing interest rates, liquidity of the security and the perceived credit quality of the issuer. The discount, in the absence of financial difficulties of the issuer, decreases as the final maturity or cash payment date of the security approaches. The market prices of zero coupon and delayed interest securities are generally more volatile and more likely to respond to changes in interest rates than the market prices of securities having similar maturities and credit qualities that pay interest periodically. Current federal income tax law requires that a holder of a zero coupon security report as income each year the portion of the original issue discount on such security (other than tax-exempt original issue discount from a zero coupon security) that accrues that year, even though the holder receives no cash payments of interest during the year. The Series will be required to distribute such income to shareholders to comply with Subchapter M of the Code and avoid excise taxes, even though the Series have not received any cash from the issue. 17 Zero coupon securities are subject to greater market value fluctuations from changing interest rates than debt obligations of comparable maturities which make current distributions of interest (cash). Zero coupon convertible securities offer the opportunity for capital appreciation as increases (or decreases) in market value of such securities closely follow the movements in the market value of the underlying common stock. Zero coupon convertible securities generally are expected to be less volatile than the underlying common stocks as they usually are issued with short maturities (15 years or less) and are issued with options and/or redemption features exercisable by the holder of the obligation entitling the holder to redeem the obligation and receive a defined cash payment. Zero coupon securities include securities issued directly by the U.S. Treasury, and U.S. Treasury bonds or notes and their unmatured interest coupons and receipts for their underlying principal ("coupons") which have been separated by their holder, typically a custodian bank or investment brokerage firm. A holder will separate the interest coupons from the underlying principal (the "corpus") of the U.S. Treasury security. A number of securities firms and banks have stripped the interest coupons and receipts and then resold them in custodial receipt programs with a number of different names, including "Treasury Income Growth Receipts" ("TIGRS") and Certificate of Accrual on Treasuries ("CATS"). The underlying U.S. Treasury bonds and notes themselves are held in book-entry form at the Federal Reserve Bank or, in the case of bearer securities (i.e., unregistered securities which are owned ostensibly by the bearer or holder thereof), in trust on behalf of the owners thereof. Counsel to the underwriters of these certificates or other evidences of ownership of the U.S. Treasury securities has stated that for federal tax and securities purposes, in its opinion, purchasers of such certificates, such as the Series, most likely will be deemed the beneficial holder of the underlying U.S. government securities. The Series understand that the staff of the SEC no longer considers such privately stripped obligations to be U.S. government securities, as defined in the Act; therefore, the Series intends to adhere to this staff position and will not treat such privately stripped obligations to be U.S. government securities for the purpose of determining if the Series is "diversified," or for any other purpose, under the Act. The U.S. Treasury has facilitated transfers of ownership of zero coupon securities by accounting separately for the beneficial ownership of particular interest coupon and corpus payments on Treasury securities through the Federal Reserve book-entry record-keeping system. The Federal Reserve program as established by the U.S. Treasury Department is known as "STRIPS" or "Separate Trading of Registered Interest and Principal of Securities." Under the STRIPS program, a Series will be able to have its beneficial ownership of zero coupon securities recorded directly in the book-entry record-keeping system in lieu of having to hold certificates or other evidences of ownership of the underlying U.S. Treasury securities. When U.S. Treasury obligations have been stripped of their unmatured interest coupons by the holder, the principal or corpus is sold at a deep discount because the buyer receives only the right to receive a future fixed payment on the security and does not receive any rights to periodic interest (cash) payments. Once stripped or separated, the corpus and coupons may be sold separately. Typically, the coupons are sold separately or grouped with other coupons with like maturity dates and sold in such bundled form. Purchasers of stripped obligations acquire, in effect, discount obligations that are economically identical to the zero coupon securities that the U.S. Treasury sells itself. These stripped securities are also treated as zero coupon securities with original issue discount for tax purposes. INVESTMENTS RELATING TO THE GLOBAL FUND EMERGING MARKETS INVESTMENTS (Global Fund only). - ---------------------------- The Series may invest up to 10% of its assets in equity and debt securities of emerging market issuers, or securities with respect to which the return is derived from the equity or debt securities of issuers in emerging markets. The Series may invest in equity securities of issuers in emerging markets, or securities with respect to which the return is derived from the equity securities of issuers in emerging markets. The Series also may invest in fixed income securities of emerging market issuers, including government and government-related entities (including participation in loans between governments and financial institutions), and of entities organized to restructure outstanding debt of such issuers. The Series also may invest in debt securities of corporate issuers in developing countries. The Series' investments in emerging market government and government-related securities may consist of (i) debt securities or obligations issued or guaranteed by governments, governmental agencies or instrumentalities and political subdivisions located in emerging countries (including participation in loans between governments and financial 18 institutions), (ii) debt securities or obligations issued by government owned, controlled or sponsored entities located in emerging countries and (iii) interests in issuers organized and operated for the purpose of restructuring the investment characteristics of instruments issued by any of the entities described above. The Series' investments in the fixed income securities of emerging market issuers may include investments in Brady Bonds, Structured Securities, Loan Participation and Assignments (as such capitalized terms are defined below), and certain non-publicly traded securities. Brady Bonds are securities created through the exchange of existing commercial bank loans to public and private entities in certain emerging markets for new bonds in connection with debt restructurings under a debt restructuring plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Bonds may be collateralized or uncollateralized, are issued in various currencies (but primarily the U.S. dollar), and are actively traded in over-the-counter secondary markets. Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate bonds or floating-rate bonds, are generally collateralized in full as to principal by U.S. Treasury zero coupon bonds having the same maturity as the bonds. Structured Securities are issued by entities organized and operated solely for the purpose of restructuring the investment characteristics of sovereign debt obligations. This type of restructuring involves the deposit with, or purchase by, an entity, such as a corporation or trust, of specified instruments (such as commercial bank loans or Brady Bonds) and the issuance by that entity of one or more classes of securities ("Structured Securities") backed by, or representing interests in, the underlying instruments. The Series may invest in fixed rate and floating rate loans ("Loans") arranged through private negotiations between an issuer of sovereign debt obligations and one or more financial institutions ("Lenders"). The Series' investments in Loans are expected in most instances to be in the form of a participation in loans ("Participation") and assignments of all or a portion of Loans ("Assignments") from third parties. The Series will have the right to receive payments of principal, interest and any fees to which they are entitled only from the Lender selling the Participation and only upon receipt by the Lender of the payments from the borrower. In the event of the insolvency of the Lender selling a Participation, the Series may be treated as a general creditor of the Lender and may not benefit from any set-off between the Lender and the borrower. When a Series purchases Assignments from Lenders, it will acquire direct rights against the borrower on the Loan. However, because Assignments are arranged through private negotiations between potential assignees and potential assignors, the rights and obligations acquired by the Series as the purchaser of an Assignment may differ from, and be more limited than, those held by the assigning Lender. The Series also may invest in securities that are neither listed on a stock exchange nor traded over-the-counter, including privately placed securities and limited partnerships. Investing in such unlisted emerging market equity securities, including investments in new and early stage companies, may involve a high degree of business and financial risk that can result in substantial losses. As a result of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. The Series' investments in emerging market securities will at all times be limited by the Series' prohibition on investing more than 15% of its net assets in illiquid securities. RISKS OF INVESTING IN EMERGING MARKETS - -------------------------------------- Compared to the United States and other developed countries, emerging countries may have relatively unstable governments, economies based on only a few industries, and securities markets that trade only a small number of securities and employ settlement procedures different from those used in the United States. Prices on these exchanges tend to be volatile and, in the past, securities in these countries have offered greater potential for gain (as well as loss) than securities of companies located in developed countries. Further, investments by foreign investors are subject to a variety of restrictions in many emerging countries. Countries such as those in which the Series may invest have historically experienced and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations or currency depreciation, large amounts of external debt, balance of payments and trade difficulties and 19 extreme poverty and unemployment. Additional factors which may influence the ability or willingness to service debt include, but are not limited to, a country's cash flow situation, the availability of sufficient foreign exchange on the date a payment is due, the relative size of its debt service burden to the economy as a whole, its government's policy towards the International Monetary Fund, the World Bank and other international agencies and the political constraints to which a government debtor may be subject. The ability of a foreign government or government-related issuer to make timely and ultimate payments on its external debt obligations will be strongly influenced by the issuer's balance of payments, including export performance, its access to international credits and investments, fluctuations in interest rates and the extent of its foreign reserves. A country whose exports are concentrated in a few commodities or whose economy depends on certain strategic imports could be vulnerable to fluctuations in international prices of these commodities or imports. To the extent that a country receives payment for its exports in currencies other than dollars, its ability to make debt payments denominated in dollars could be adversely affected. If a foreign government or government-related issuer cannot generate sufficient earnings from foreign trade to service its external debt, it may need to depend on continuing loans and aid from foreign governments, commercial banks, and multilateral organizations, and inflows of foreign investment. The commitment on the part of these foreign governments, multilateral organizations and others to make such disbursements may be conditioned on the government's implementation of economic reforms and/or economic performance and the timely service of its obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may curtail the willingness of such third parties to lend funds, which may further impair the issuer's ability or willingness to service its debts in a timely manner. The cost of servicing external debt will also generally be adversely affected by rising international interest rates, because many external debt obligations bear interest at rates which are adjusted based upon international interest rates. The ability to service external debt will also depend on the level of the relevant government's international currency reserves and its access to foreign exchange. Currency devaluations may affect the ability of a governmental issuer to obtain sufficient foreign exchange to service its external debt. As a result of the foregoing, a governmental issuer may default on its obligations. If such a default occurs, the Series may have limited effective legal recourse against the issuer and/or guarantor. Remedies must, in some cases, be pursued in the courts of the defaulting country itself, and the ability of the holder of foreign government and government-related debt securities to obtain recourse may be subject to the political climate in the relevant country. In addition, no assurance can be given that the holders of commercial bank debt will not contest payments to the holders of other foreign government and government-related debt obligations in the event of default under their commercial bank loan agreements. The issuers of the government and government-related debt securities in which the Series expects to invest have in the past experienced substantial difficulties in servicing their external debt obligations, which has led to defaults on certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, reducing and rescheduling interest and principal payments by negotiating new or amended credit agreements or converting outstanding principal and unpaid interest to Brady Bonds, and obtaining new credit to finance interest payments. Holders of certain foreign government and government-related debt securities may be requested to participate in the restructuring of such obligations and to extend further loans to their issuers. There can be no assurance that the Brady Bonds and other foreign government and government-related debt securities in which the Series may invest will not be subject to similar defaults or restructuring arrangements which may adversely affect the value of such investments. Furthermore, certain participants in the secondary market for such debt may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants. Payments to holders of the high yield, high risk, foreign debt securities in which the Series may invest may be subject to foreign withholding and other taxes. Although the holders of foreign government and government-related debt securities may be entitled to tax gross-up payments from the issuers of such instruments, there is no assurance that such payments will be made. INVESTMENTS IN AFFILIATED INVESTMENT COMPANIES - ---------------------------------------------- The Series may invest in securities issued by other registered investment companies advised by Brinson Partners 20 pursuant to exemptive relief granted by the SEC. Currently, the Global Fund is the only Series of the Trust that intends to invest in portfolios of Brinson Relationship Funds, another investment company which is advised by Brinson Partners, and only to the extent consistent with the Advisor's investment process of allocating assets to specific asset classes. The Global Fund will invest in corresponding portfolios of Brinson Relationship Funds only to the extent that the Advisor determines that such investments are a more efficient means for the Global Fund to gain exposure to the asset classes referred to below than by investing directly in individual securities. To gain exposure to equity and fixed income securities of issuers located in emerging market countries, the Global Fund may invest that portion of its assets allocated to emerging markets investments in the Brinson Emerging Markets Equity Fund portfolio and the Brinson Emerging Markets Debt Fund portfolio of Brinson Relationship Funds. The investment objective of the Brinson Emerging Markets Equity Fund and the Brinson Emerging Markets Debt Fund is to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. Under normal circumstances, at least 65% of the total assets of the Brinson Emerging Markets Equity Fund is invested in the equity securities of issuers in emerging markets or securities with respect to which the return is derived from the equity securities of issuers in emerging markets. At least 65% of the total assets of the Brinson Emerging Markets Debt Fund is invested in the debt securities issued by governments, government-related entities (including participations in loans between governments and financial institutions), corporations and entities organized to restructure outstanding debt of issuers in emerging markets, or debt securities the return on which is derived primarily from other emerging markets instruments. The Brinson Emerging Markets Equity Fund and Brinson Emerging Markets Debt Fund are permitted to invest in the same types of securities as the Global Fund may invest in directly. In lieu of investing directly in certain high yield, higher risk securities, the Global Fund may invest a portion of its assets in the Brinson High Yield Fund portfolio (the "High Yield Fund") of Brinson Relationship Funds. The investment objective of the High Yield Fund is to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. The High Yield Fund maintains a high yield portfolio and as such, at least 65% of its assets are invested in high yield securities. The Global Fund currently intends to limit its investment in non-investment grade debt securities to no more than 5% of its net assets. Any investment in the High Yield Fund will be considered within this limitation. In lieu of investing directly in equity securities issued by companies with relatively small overall market capitalizations, the Global Fund may invest a portion of its assets in the Brinson Post-Venture Fund (the "Post-Venture Fund") portfolio of Brinson Relationship Funds. The investment objective of the Post- Venture Fund is to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. The Post-Venture Fund invests primarily in publicly- traded companies representing the lower 5% of the Wilshire 5000 Index, and, as such, at least 65% of its assets are invested in small capitalization equity securities. Each portfolio of Brinson Relationship Funds in which the Global Fund may invest is permitted to invest in the same securities of a particular asset class in which the Global Fund is permitted to invest directly, and with similar risks. Pursuant to undertakings with the SEC, the Global Fund will not be subject to the imposition of double management or administration fees with respect to its investments in Brinson Relationship Funds. INVESTMENT RESTRICTIONS The investment restrictions set forth below are fundamental policies and may not be changed as to a Series, without the approval of a majority of the outstanding voting securities (as defined in the Act) of the Series. Unless otherwise indicated, all percentage limitations listed below apply to the Series only at the time of the transaction. Accordingly, if a percentage restriction is adhered to at the time of investment, a later increase or decrease in the percentage which results from a relative change in values or from a change in a Series' total assets will not be considered a violation. Except as set forth under "Investment Objectives and Policies" and "Investment Considerations and Risks" in each Prospectus, or "Investment Strategies" in this Statement of Additional Information, each Series may not: (i) As to 75% of the total assets of each Series, purchase the securities of any one issuer, other than securities issued by the U.S. government or its agencies or instrumentalities, if 21 immediately after such purchase more than 5% of the value of the total assets of a Series would be invested in securities of such issuer (this does not apply to the Global Bond Fund); (ii) Invest in real estate or interests in real estate (This will not prevent a Series from investing in publicly-held real estate investment trusts or marketable securities of companies which may represent indirect interests in real estate.), interests in oil, gas and/or mineral exploration or development programs or leases; (iii) Purchase or sell commodities or commodity contracts, but may enter into futures contracts and options thereon in accordance with its Prospectus. Additionally, each Series may engage in forward foreign currency contracts for hedging and non-hedging purposes; (iv) Make investments in securities for the purpose of exercising control over or management of the issuer; (v) Purchase the securities of any one issuer if, immediately after such purchase, a Series would own more than 10% of the outstanding voting securities of such issuer; (vi) Sell securities short or purchase securities on margin, except such short-term credits as are necessary for the clearance of transactions. For this purpose, the deposit or payment by a Series for initial or maintenance margin in connection with futures contracts is not considered to be the purchase or sale of a security on margin; (vii) Make loans, except that this restriction shall not prohibit (a) the purchase and holding of a portion of an issue of publicly distributed or privately placed debt securities, (b) the lending of portfolio securities, or (c) entry into repurchase agreements with banks or broker-dealers; (viii) Borrow money in excess of 33 1/3% of the value of its assets except as a temporary measure for extraordinary or emergency purposes to facilitate redemptions or issue senior securities. All borrowings will be done from a bank and to the extent that such borrowing exceeds 5% of the value of a Series' assets, asset coverage of at least 300% is required. A Series will not purchase securities when borrowings exceed 5% of that Series' total assets; (ix) Purchase the securities of issuers conducting their principal business activities in the same industry, other than obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, if immediately after such purchase, the value of a Series' investments in such industry would exceed 25% of the value of the total assets of the Series across several countries; (x) Act as an underwriter of securities, except that, in connection with the disposition of a security, a Series may be deemed to be an "underwriter" as that term is defined in the Securities Act of 1933; (xi) Invest in securities of any open-end investment company, except that (i) a Series may purchase securities of money market mutual funds, (ii) the Global Fund and Global Equity Fund may each invest in the securities of closed-end investment companies at customary brokerage commission rates in accordance with the limitations imposed by the Act and the rules thereunder, and (iii) in accordance with any exemptive order obtained from the SEC which permits investment by a Series in other Series or other investment companies or series thereof advised by the Advisor. In addition, each Series may acquire securities of other investment companies if the securities are acquired pursuant to a merger, consolidation, acquisition, plan of reorganization or a SEC approved offer of exchange; (xii) Invest in puts, calls, straddles or combinations thereof except to the extent disclosed in a Series' Prospectus; and 22 (xiii) Invest more than 5% of its total assets in securities of companies less than three years old. Such three year periods shall include the operation of any predecessor company or companies. Although not considered fundamental, in order to comply with certain state "blue sky" restrictions, each Series will not invest: (1) more than 5% of its respective net assets in warrants, including within that amount no more than 2% in warrants which are not listed on the New York or American Stock Exchanges, except warrants acquired as a result of its holdings of common stocks; and (2) purchase or retain the securities of any issuer if, to the knowledge of the Series, any officer or Trustee of the Trust or of its Advisor owns beneficially more than 1/2 of 1% of the outstanding securities of such issuer, and such officers and Trustees of the Trust or of its Advisor who own more than 1/2 of 1%, own in the aggregate, more than 5% of the outstanding securities of such issuer. MANAGEMENT OF THE TRUST TRUSTEES AND OFFICERS
POSITION WITH NAME AND ADDRESS AGE THE TRUST PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - ---------------- --- --------- ------------------------------------------- Walter E. Auch 75 Trustee Retired; formerly Chairman and CEO of Chicago Board of 6001 N. 62nd Place Options Exchange (1979-1986); Trustee of the Trust since Paradise Valley, AZ May, 1994; Trustee, Brinson Relationship Funds since 85253 December, 1994; Director, Thomsen Asset Management Corp. since 1987; Director, Fort Dearborn Income Securities, Inc. since 1987; Director, Geotek Industries, Inc. since 1989; Director, Smith Barney VIP Fund since 1991; Director, SB Advisers since 1992; Director, SB Trak since 1992; Director, Banyan Realty Trust since 1987; Director, Banyan Land Fund II since 1988; Director, Banyan Mortgage Investment Fund since 1989; and Director, Express America Holdings Corp. since 1992. Frank K. Reilly 60 Chairman and Professor, University of Notre Dame since 1981; Trustee College of Business Trustee of the Trust since December, 1993; Trustee, Brinson Administration Relationship Funds since September, 1994; Director of The University of Brinson Funds, Inc. 1992-1993; Trustee, Brinson Trust Notre Dame Company, 1992-July, 1993; Director, Fort Dearborn 208 Hurley Building Income Securities, Inc. since 1993; Director, First Interstate Notre Dame, IN 46556 Bank of Wisconsin from January, 1989 through March, 1990; Director, Discover Financing Corp., from 1990 to 1991; and Director, Greenwood Trust Company since 1993. Edward M. Roob 61 Trustee Retired; prior thereto, Senior Vice President, Daiwa 841 Woodbine Lane Securities America Inc. (1986-1993); Trustee of the Trust Northbrook, IL 60002 since January, 1995; Trustee, Brinson Relationship Funds since January 1995; Director, Fort Dearborn Income Securities, Inc. since 1993; Director, Brinson Trust Company since 1993; Committee Member, Chicago Stock Exchange since 1993; Member of Board of Governors, Midwest Stock Exchange (1987-1991).
23 OTHER OFFICERS
POSITION WITH THE OFFICER NAME AGE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - ---- --- -------- ------- ----------------------------------------------------- E. Thomas McFarlan 52 President 1993 Managing Partner, Brinson Partners, Inc. since 1991; and President and Director of The Brinson Funds, Inc. 1992- Treasurer 1993; Trustee, Brinson Trust Company since 1991; prior thereto, Executive Vice President of Washington Mutual Savings Bank. Bruce G. Leto 34 Secretary 1995 Partner, Stradley, Ronon, Stevens & Young, LLP since 1994; prior thereto, Senior Associate. Thomas J. Digenan 32 Assistant 1993 Partner, Brinson Partners, Inc. since 1993; Assistant Treasurer Secretary The Brinson Funds, Inc. 1993 - 1994; prior thereto, Senior Manager, KPMG Peat Marwick. Debra L. Nichols 30 Assistant 1993 Partner, Brinson Partners, Inc. since 1995; Associate, Secretary Brinson Partners, Inc. since 1991; Assistant Secretary, The Brinson Funds, Inc. 1992-1993; prior thereto, private investor. Catherine E. Macrae 38 Assistant 1995 Associate, Brinson Partners, Inc. since 1992; prior thereto, Secretary Economic Analyst, Chicago Mercantile Exchange. Carolyn M. Burke 29 Assistant 1995 Associate, Brinson Partners, Inc, since 1995; prior thereto, Secretary Financial Analyst, Van Kampen American Capital Investment Advisory Corp. 1992-1995; Senior Accountant, KPMG Peat Marwick 1989-1992.
COMPENSATION TABLE TRUSTEES AND OFFICERS
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM FROM TRUST FOR FISCAL YEAR TRUST AND FUND COMPLEX NAME AND POSITION HELD ENDED JUNE 30, 1996 PAID TO TRUSTEES/1/ - ---------------------- -------------------------- ----------------------- Walter E. Auch, Trustee $12,600 $26,200 6001 N. 62nd Place Paradise Valley, AZ 85253 Frank K. Reilly, Trustee $12,600 $23,700 College of Business Administration University of Notre Dame 208 Hurley Building Notre Dame, IN 46556 Edward M. Roob, Trustee $12,600 $26,200 841 Woodbine Lane Northbrook, IL 60002
/1/ This amount represents the aggregate amount of compensation paid to the Trustees for (a) service on the Board of Trustees for the Trust's most recently completed fiscal year; and (b) service on the Board of Directors of two other investment companies managed by Brinson Partners for the calendar year ending December 31, 1995. 24 No officer or Trustee of the Trust who is also an officer or employee of Brinson Partners receives any compensation from the Trust for services to the Trust. The Trust pays each Trustee who is not affiliated with Brinson Partners a fee of $6,000 per year, plus $300 per Series per meeting, and reimburses each Trustee and officer for out-of-pocket expenses in connection with travel and attendance at Board meetings. The Board of Trustees has an Audit Committee which has the responsibility, among other things, to (i) recommend the selection of the Trust's independent auditors, (ii) review and approve the scope of the independent auditors' audit activity, (iii) review the financial statements which are the subject of the independent auditors' certification, and (iv) review with such independent auditors the adequacy of the Series' basic accounting system and the effectiveness of the Series' internal accounting controls. The Audit Committee met once during the fiscal year ended June 30, 1996. There is no separate nominating or investment committee. Items pertaining to these committees are submitted to the full Board of Trustees. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES As of August 1, 1996, the officers and Trustees, as a group, owned beneficially 96,998.987 outstanding voting shares of the Global Fund, 3,801.710 shares of the Global Bond Fund and 58.181 shares of the U.S. Equity Fund, which in the aggregate amount to 100,858.87 shares of the Trust. As of August 1,1996, the following persons owned of record or beneficially more than 5% of the outstanding voting shares of the Brinson Fund class, SwissKey Fund class or the Series, as applicable: GLOBAL FUND
Percentage of Percentage of Name & Address of Beneficial Owners Class Series - ----------------------------------- ------------- ------------- BRINSON FUND CLASS - ------------------ First Alabama Bank 12.19% 11.82% Mobile, AL Polk Bros. Foundation 8.72% 8.45% Evanston, IL Medical College of Virginia Foundation 8.59% 8.33% Richmond, VA NationsBank of Georgia NA Trustee 7.60% 7.37% Dallas, TX Northern Trust Company 5.72% 5.55% Chicago, IL SWISSKEY FUND CLASS - ------------------- Swiss Bank Corporation* 74.19% ----- New York, NY Hans Frisch and Alfred Frisch JT TEN COMM 7.48% ----- Jacksonville, FL Semper Trust Co. C/F/ IRA 5.85% ----- R/O of William J. Casey St. Helena, CA
25 GLOBAL EQUITY FUND
Percentage of Percentage of Name & Address of Beneficial Owners Class Series - ----------------------------------- ------------- ------------- BRINSON FUND CLASS - ------------------ United States Japan Foundation*+ 88.55% 39.64% New York, NY SWISSKEY FUND CLASS - ------------------- Swiss Bank Corporation*+ 51.03% 28.18% New York, NY Fox & Co. New York, NY 5.19% ----- GLOBAL BOND FUND BRINSON FUND CLASS - ------------------ Baptist Health Systems, Inc.*+ 28.3% 26.06% Birmingham, AL Munson Williams Proctor Institute* 25.08% 23.08% Utica, NY Abell Foundation, Inc. 19.17% 17.64% Baltimore, MD First National Bank of Chicago Chicago, IL 9.30% 8.56% Ripon College 9.00% 8.28% Ripon, WI SWISSKEY FUND CLASS - ------------------- Swiss Bank Corporation* 69.55% 5.56% New York, NY U.S. BALANCED FUND BRINSON FUND CLASS - ------------------ State Street Bank & Trust Co.*+ 71.82% 71.57% Boston, MA MAC & Co. 12.26% 12.22% Pittsburgh, PA Mitra & Co 6.69% 6.67% Milwaukee, WI SWISSKEY FUND CLASS - ------------------- Blush & Co.* New York, NY 62.10% -----
26
Percentage of Percentage of Name & Address of Beneficial Owners Class Series - ----------------------------------- ------------- ------------- SWISSKEY FUND CLASS (CON'T) - ------------------- Swiss Bank Corporation* 33.18% ----- New York, NY U.S. EQUITY FUND BRINSON FUND CLASS - ------------------ Swiss Bank Corporation*+ 38.96% 37.31% Chicago, IL Wachovia Bank of North Carolina 14.47% 13.85% Winston Salem, NC American Institute of Physics 8.37% 8.01% College Park, MD Emma & Co. Springdale, AR 6.36% 6.09% SWISSKEY FUND CLASS - ------------------- Blush & Co. New York, NY* 62.10% ----- Swiss Bank Corporation* 31.29% ----- New York, NY U.S. BOND FUND BRINSON FUND CLASS - ------------------ Swiss Bank Corporation*+ 99.32% 92.70% Chicago, IL SWISSKEY FUND CLASS - ------------------- Swiss Bank Corporation* 96.93% ----- New York, NY NON-U.S. EQUITY FUND BRINSON FUND CLASS - ------------------ Edna McConnell Clark Foundation 7.76% 7.73% New York, NY Northern Trust Company 7.46% 7.43% Chicago, IL Society National Bank 7.14% 7.10% Cleveland, OH
27 NON-U.S. EQUITY FUND
Percentage of Percentage of Name & Address of Beneficial Owners Class Series - ----------------------------------- ------------- ------------- BRINSON FUND CLASS (CON'T) - ------------------ McConnell Foundation 6.84% 6.81% Redding, CA MAC & Co. FBO Sisters of Charity, Inc. 6.28% 6.25% Pittsburgh, PA Fifth Third Bank 5.53% 5.50% Cincinnati, OH MAC & Co. 5.41% 5.38% Pittsburgh, PA Bentley College 5.34% 5.31% Waltham, MA SWISSKEY FUND CLASS - ------------------- Swiss Bank Corporation* 41.14% ----- New York, NY Blush & Co.* 29.10% ----- New York, NY Schweizerischer Bankverein 7.83% ----- Zurich, Switzwerland Fox & Co. 6.76% ----- New York, NY
* Person deemed to control the class within the meaning of the Act. Note that such persons possess the ability to control the outcome of matters submitted for the vote of shareholders of that class. + Person deemed to control the Series within the meaning of the Act. Note that such persons possess the ability to control the outcome of matters submitted for the vote of shareholders of that Series. As of August 1, 1996, the following persons owned of record or beneficially more than 5% of the outstanding voting shares of the Trust: Name & Address of Beneficial Owners Percentage of Trust - ----------------------------------- ------------------- State Street Bank & Trust Co. 14.04% Boston, MA INVESTMENT ADVISORY AND OTHER SERVICES ADVISOR - ------- Brinson Partners, a Delaware corporation, is an investment management firm managing, as of June 30, 1996, approximately $58 billion, primarily for institutional pension and profit sharing funds. Brinson Partners was organized in 1989 when it acquired the institutional asset management business of The First National Bank of Chicago and First 28 Chicago Investment Advisors, N.A. Brinson Partners and its predecessor entities have managed domestic and international investment assets since 1974 and global investment assets since 1982. Brinson Partners has offices in Basel, London, Melbourne, New York, Paris, Singapore, Sydney and Tokyo, in addition to its principal office at 209 South LaSalle Street, Chicago, IL 60604-1295. Brinson Partners is an indirect wholly-owned subsidiary of Swiss Bank Corporation ("Swiss Bank"). Swiss Bank, with headquarters in Basel, Switzerland, is an internationally diversified organization with operations in many aspects of the financial services industry. Brinson Partners also serves as the investment advisor to seven other investment companies: Brinson Relationship Funds, which includes six investment portfolios (series); Enterprise Accumulation Trust; Enterprise International Growth Portfolio; Fort Dearborn Income Securities, Inc.; Hirtle Callaghan International Trust; John Hancock Variable Series Trust - International Balanced Portfolio; and Pace Large Company Value Equity Investments. Pursuant to its investment advisory agreements (the "Agreements") with the Trust, on behalf of each Series, Brinson Partners receives from each Series a monthly fee at an annual rate (as described in each Series' Prospectus and below) multiplied by the average daily net assets of that Series for providing investment advisory services. Brinson Partners is responsible for paying its expenses. Under the Agreements, each Series pays the following expenses: (1) the fees and expenses of the Trust's disinterested Trustees; (2) the salaries and expenses of any of the Trust's officers or employees who are not affiliated with Brinson Partners; (3) interest expenses; (4) taxes and governmental fees; (5) brokerage commissions and other expenses incurred in acquiring or disposing of portfolio securities; (6) the expenses of registering and qualifying shares for sale with the SEC and with various state securities commissions; (7) auditing and legal costs; (8) insurance premiums; (9) fees and expenses of the Trust's custodian, administrative and transfer agent and any related services; (10) expenses of obtaining quotations of the Series' portfolio securities and of pricing the Series' shares; (11) expenses of maintaining the Trust's legal existence and of shareholders' meetings; (12) expenses of preparation and distribution to existing shareholders of reports, proxies and prospectuses; and (13) fees and expenses of membership in industry organizations. The Series pay the Advisor a monthly fee of the respective Series' average daily net assets as follows: annual rates of 0.80% for the Global Fund, Global Equity Fund and Non-U.S. Equity Fund; 0.75% for the Global Bond Fund; 0.70% for the U.S. Balanced Fund and U.S. Equity Fund; and 0.50% for the U.S. Bond Fund. The Advisor has agreed irrevocably to waive its fees and reimburse expenses to the extent that total operating expenses exceed the following rates of the respective Series' average daily net assets as follows, without regard to Rule 12b-1 Plan expenses for the SwissKey Fund classes of each Series: 1.10% for the Global Fund; 1.00% for the Global Equity Fund and the Non-U.S. Equity Fund; 0.90% for the Global Bond Fund; 0.80% for the U.S. Balanced Fund and the U.S. Equity Fund; and 0.60% for the U.S. Bond Fund. Advisory fees accrued to Brinson Partners were as follows:
A. FISCAL YEAR ENDED JUNE 30, 1994* - ------------------------------------------------------------------------------------------- SERIES GROSS ADVISORY FEES NET ADVISORY FEES PAID FUND EXPENSES PAID EARNED BY ADVISOR AFTER FEE WAIVER BY ADVISOR - ------------------------------------------------------------------------------------------- GLOBAL FUND $1,951,309 $1,860,397 $ 30,946 - ------------------------------------------------------------------------------------------- GLOBAL EQUITY FUND $ 68,151 $ 0.00 $ 82,834 - ------------------------------------------------------------------------------------------- GLOBAL BOND FUND $ 189,136 $ 0.00 $149,667 - ------------------------------------------------------------------------------------------- U.S. BALANCED FUND NA NA NA - ------------------------------------------------------------------------------------------- U.S. EQUITY FUND $ 14,819 $ 0.00 $ 63,834 - ------------------------------------------------------------------------------------------- U.S. BOND FUND NA NA NA - ------------------------------------------------------------------------------------------- NON-U.S. EQUITY FUND $ 300,928 $ 74,698 $136,835 - -------------------------------------------------------------------------------------------
* The Global Equity Fund commenced investment operations on January 28, 1994; Global Bond Fund commenced investment operations on July 30, 1993; U.S. Balanced Fund commenced investment operations on December 30, 1994; U.S. Equity Fund commenced investment operations on February 22, 1994; U.S. Bond Fund commenced 29 investment operations on August 31, 1995; and Non-U.S. Equity Fund commenced investment operations on August 31, 1993.
B. FISCAL YEAR ENDED JUNE 30, 1995 - ------------------------------------------------------------------------------------------- SERIES GROSS ADVISORY FEES NET ADVISORY FEES PAID FUND EXPENSES PAID EARNED BY ADVISOR AFTER FEE WAIVER BY ADVISOR - ------------------------------------------------------------------------------------------- GLOBAL FUND $2,681,392 $2,681,392 $ 0.00 - ------------------------------------------------------------------------------------------- GLOBAL EQUITY FUND $ 163,038 $ 0.00 $216,658 - ------------------------------------------------------------------------------------------- GLOBAL BOND FUND $ 329,156 $ 95,216 $233,940 - ------------------------------------------------------------------------------------------- U.S. BALANCED FUND $ 441,419 $ 275,707 $165,712 - ------------------------------------------------------------------------------------------- U.S. EQUITY FUND $ 154,258 $ 0.00 $199,708 - ------------------------------------------------------------------------------------------- U.S. BOND FUND NA NA NA - ------------------------------------------------------------------------------------------- NON-U.S. EQUITY FUND $ 933,521 $ 666,061 $267,460 - -------------------------------------------------------------------------------------------
C. FISCAL YEAR ENDED JUNE 30, 1996 - ------------------------------------------------------------------------------------------- SERIES GROSS ADVISORY FEES NET ADVISORY FEES PAID FUND EXPENSES PAID EARNED BY ADVISOR AFTER FEE WAIVER BY ADVISOR - ------------------------------------------------------------------------------------------- GLOBAL FUND $3,415,057 $3,415,057 $ 0.00 - ------------------------------------------------------------------------------------------- GLOBAL EQUITY FUND $ 390,824 $ 12,198 $378,626 - ------------------------------------------------------------------------------------------- GLOBAL BOND FUND $ 310,066 $ 158 $309,908 - ------------------------------------------------------------------------------------------- U.S. BALANCED FUND $1,465,283 $1,015,531 $449,752 - ------------------------------------------------------------------------------------------- U.S. EQUITY FUND $ 638,063 $ 326,322 $311,741 - ------------------------------------------------------------------------------------------- U.S. BOND FUND $ 37,868 $ 0.00 $230,216 - ------------------------------------------------------------------------------------------- NON-U.S. EQUITY FUND $1,403,109 $1,050,199 $352,910 - -------------------------------------------------------------------------------------------
General expenses of the Trust (such as costs of maintaining corporate existence, legal fees, insurances, etc.) will be allocated among the Series in proportion to their relative net assets. Expenses which relate exclusively to a particular Series, such as certain registration fees, brokerage commissions and other portfolio expenses, will be borne directly by that Series. Brinson Partners has agreed to waive its advisory fee in an amount equal to the total expenses of a Series for any fiscal year which exceeds the permissible limits applicable to that Series in any state in which its shares are then qualified for sale. At the present time, the most restrictive state expense limitation limits a fund's annual expenses (excluding interest, taxes, distribution expense, brokerage commissions and extraordinary expenses and other expenses subject to approval by state securities administrators) to 2.5% of the first $30 million of its average daily net assets, 2.0% of the next $70 million of its average daily net assets and 1.5% of its average daily net assets in excess of $100 million. ADMINISTRATOR - ------------- FPS Services, Inc., 3200 Horizon Drive, King of Prussia, PA 19406-0903 (the "Administrator"), provides certain administrative services to the Trust pursuant to an administration agreement (the "Administration Agreement"). Under the Administration Agreement, the Administrator: (1) coordinates with the custodian and transfer agent and monitors the services they provide to the Series; (2) coordinates with and monitors any other third parties furnishing 30 services to the Series; (3) provides the Series with necessary office space, telephones and other communications facilities and personnel competent to perform administrative and clerical functions; (4) supervises the maintenance by third parties of such books and records of the Series as may be required by applicable federal or state law; (5) prepares or supervises the preparation by third parties of all federal, state and local tax returns and reports of the Series required by applicable law; (6) prepares and, after approval by the Series, files and arranges for the distribution of proxy materials and periodic reports to shareholders of the Series as required by applicable law; (7) prepares and, after approval by the Series, arranges for the filing of such registration statements and other documents with the SEC and other federal and state regulatory authorities as may be required by applicable law; (8) reviews and submits to the officers of the Trust for their approval invoices or other requests for payment of the Series' expenses and instructs the custodian to issue checks in payment thereof; and (9) takes such other action with respect to the Trust or the Series as may be necessary in the opinion of the Administrator to perform its duties under the Administration Agreement. As compensation for services performed under the Administration Agreement, the Administrator receives a fee payable monthly at an annual rate (as described in each Series' Prospectus) multiplied by the average daily net assets of the Trust. Administration fees paid to FPS Services, Inc. were as follows:
- ------------------------------------------------------------------------------- SERIES FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED JUNE 30, 1994 JUNE 30, 1995 JUNE 30, 1996 - ------------------------------------------------------------------------------- GLOBAL FUND $186,897 $211,243 $293,601 - ------------------------------------------------------------------------------- GLOBAL EQUITY FUND $ 6,064 $ 15,062 $ 32,468 - ------------------------------------------------------------------------------- GLOBAL BOND FUND $ 19,968 $ 28,889 $ 29,216 - ------------------------------------------------------------------------------- U.S. BALANCED FUND NA $ 39,523 $140,841 - ------------------------------------------------------------------------------- U.S. EQUITY FUND $ 3,482 $ 15,362 $ 58,286 - ------------------------------------------------------------------------------- U.S. BOND FUND NA NA $ 58,286 - ------------------------------------------------------------------------------- NON-U.S. EQUITY FUND $ 23,597 $ 72,350 $119,433 - -------------------------------------------------------------------------------
UNDERWRITER - ----------- Fund/Plan Broker Services, Inc. ("FPBS"), 3200 Horizon Drive, King of Prussia, PA 19406-0903, acts as an underwriter of the Series' continuous offer of shares for the purpose of facilitating the registration of the shares of the Series under state securities laws and to assist in sales of shares pursuant to an underwriting agreement (the "Underwriting Agreement") approved by the Board of Trustees. In this regard, FPBS has agreed at its own expense to qualify as a broker-dealer under all applicable federal or state laws in those states which the Trust shall from time to time identify to FPBS as states in which it wishes to offer the Series' shares for sale, in order that state registrations may be maintained for the Series. FPBS is a broker-dealer registered with the SEC and a member in good standing of the National Association of Securities Dealers, Inc. For the services to be provided to the Trust under the Underwriting Agreement, FPBS is entitled to receive an annual fixed fee of $7,500 for one Series, plus $2,500 for each additional operational Series or class, payable in advance. These fees are fixed for a one (1) year period from the date of the Underwriting Agreement and may be increased or decreased in future years by an amendment signed by both the Trust and FPBS. The fees for such services are borne entirely by the Advisor. The Trust does not impose any sales loads or redemption fees. Each Series shall continue to bear the expense of all filing or registration fees incurred in connection with the registration of shares under state securities laws. The Underwriting Agreement may be terminated by either party upon sixty (60) days' prior written notice to the other party, and if so terminated, the pro rata portion of the unearned fee will be returned to the Trust. 31 DISTRIBUTION PLAN - ----------------- The Board of Trustees of the Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Act, for each Series' SwissKey Fund class shares. The Plan permits each Series to reimburse FPBS, Brinson Partners and others from the assets of the SwissKey Fund class shares a quarterly fee for services and expenses incurred in distributing and promoting sales of SwissKey Fund class shares. The aggregate fees paid by the SwissKey Fund class shares to FPBS and others under the Plan may not exceed 0.90% of a SwissKey Fund classes' average daily net assets in any year. The Plan does not apply to the Brinson Fund class shares of each Series and those shares are not included in calculating the Plan's fees. Amounts spent on behalf of each SwissKey Fund class pursuant to the Plan during the fiscal year ended June 30, 1996 are set forth below.
- ------------------------------------------------------------------------------------------------------------------------------------ FUND PRINTING DISTRIBUTION COMPENSATION COMPENSATION COMPENSATION TO ADVERTISING OTHER SERVICES TO TO SWISS BANK SALES UNDERWRITERS DEALERS PERSONNEL - ------------------------------------------------------------------------------------------------------------------------------------ SwissKey Global $ 554.54 $857.14 $714.29 $0.00 $ 9,160.75 $685.45 $357.98 Fund - ------------------------------------------------------------------------------------------------------------------------------------ SwissKey Global $8,010.38 $857.14 $714.29 $0.00 $92,602.80 $685.45 $357.98 Equity Fund - ------------------------------------------------------------------------------------------------------------------------------------ SwissKey Global $ 530.12 $857.14 $714.29 $0.00 $ 3,074.92 $685.45 $357.98 Bond Fund - ------------------------------------------------------------------------------------------------------------------------------------ SwissKey U.S. $ 52.56 $857.14 $714.29 $0.00 $ 319.48 $685.45 $357.98 Balanced Fund - ------------------------------------------------------------------------------------------------------------------------------------ SwissKey U.S. $ 66.50 $857.14 $714.29 $0.00 $ 1,498.85 $685.45 $357.98 Equity Fund - ------------------------------------------------------------------------------------------------------------------------------------ SwissKey U.S. $ 41.80 $857.14 $714.29 $0.00 $ 380.59 $685.45 $357.98 Bond Fund - ------------------------------------------------------------------------------------------------------------------------------------ SwissKey Non- $ 88.10 $857.14 $714.29 $0.00 $ 1,399.14 $685.45 $357.98 U.S. Equity Fund - ------------------------------------------------------------------------------------------------------------------------------------
CODE OF ETHICS - -------------- The Trust has adopted a Code of Ethics which establishes standards by which certain access persons of the Trust, which include officers of the Advisor and officers and Trustees of the Trust, must abide relating to personal securities trading conduct. Under the Code of Ethics, access persons are prohibited from engaging in certain conduct, including, but not limited to: 1) investing in companies in which the Series invest unless the securities have a broad public market and are registered on a national securities exchange or are traded in the over-the- counter markets; 2) making or maintaining an investment in any corporation or business with which the Series have business relationships if the investment might create, or give the appearance of creating, a conflict of interest; 3) participating in an initial public offering; 4) entering into a securities transaction when the access person knows or should know that such activity will anticipate, parallel or counter any securities transaction of a Series; 5) entering into any securities transaction, without prior approval, in connection with any security which has been designated as restricted; 6) entering into a net short position with respect to any security held by a Series; 7) entering into any derivative transaction when a direct transaction in the underlying security would be a violation; and 8) engaging in self-dealing or other transactions benefiting the access person at the expense of the Series or its shareholders. In addition, access persons are required to receive advance approval prior to purchasing or selling a restricted security, and may not buy or sell certain prohibited securities. The Advisor will identify for access persons prohibited securities, which include securities that are being considered for purchase or sale by any account or fund managed by the Advisor, 32 and provide a list of such securities to all access persons. Access persons are required to file quarterly reports of security investment transactions. Trustees or officers who are not "interested persons" of the Trust, as defined in the 1940 Act, need only report a transaction in a security if such Trustee or officer, at the time of the transaction, knew or should have known, in the ordinary course of fulfilling his or her official duties as a Trustee or officer, that, during the 15-day period immediately preceding or after the date of the transaction by the Trustee or officer, such security was purchased or sold by a Series, or was being considered for purchase by a Series. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS Brinson Partners is responsible for decisions to buy and sell securities for the Series and for the placement of the Series' portfolio business and the negotiation of commissions, if any, paid on such transactions. Fixed income securities in which the Series invest are traded in the over-the-counter market. These securities are generally traded on a net basis with dealers acting as principal for their own accounts without a stated commission, although the bid/ask spread quoted on securities includes an implicit profit to the dealers. In over-the-counter transactions, orders are placed directly with a principal market-maker unless a better price and execution can be obtained by using a broker. Brokerage commissions are paid on transactions in listed securities, futures contracts and options thereon. Brinson Partners is responsible for effecting portfolio transactions and will do so in a manner deemed fair and reasonable to the Series. Under its advisory agreements with the Global Funds and the Non-U.S. Equity Fund, Brinson Partners is authorized to utilize the trading desk of its foreign subsidiaries to execute foreign securities transactions, but monitors the selection by such subsidiaries of brokers and dealers used to execute transactions for those Series. The primary consideration in all portfolio transactions will be prompt execution of orders in an efficient manner at the most favorable price. In selecting and monitoring broker-dealers and negotiating commissions, Brinson Partners considers the firm's reliability, the quality of its execution services on a continuing basis and its financial condition. When more than one firm is believed to meet these criteria, preference may be given to brokers who provide research or statistical material or other services to the Series or to Brinson Partners. Such services include advice, both directly and in writing, as to the value of the securities; the advisability of investing in, purchasing or selling securities; and the availability of securities, or purchasers or sellers of securities, as well as analyses and reports concerning issues, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts. This allows Brinson Partners to supplement its own investment research activities and obtain the views and information of others prior to making investment decisions. Brinson Partners is of the opinion that, because this material must be analyzed and reviewed by its staff, its receipt and use does not tend to reduce expenses but may benefit the Series by supplementing the Advisor's research. Brinson Partners effects portfolio transactions for other investment companies and advisory accounts. Research services furnished by dealers through whom the Series effect its securities transactions may be used by Brinson Partners in servicing all of its accounts; not all such services may be used in connection with the Series. In the opinion of Brinson Partners, it is not possible to measure separately the benefits from research services to each of the accounts (including the Series). Brinson Partners will attempt to equitably allocate portfolio transactions among the Series and others whenever concurrent decisions are made to purchase or sell securities by the Series and another. In making such allocations between the Series and others, the main factors to be considered are the respective investment objectives, the relative size of portfolio holdings of the same or comparable securities, the availability of cash for investment, the size of investment commitments generally held and the opinions of the persons responsible for recommending investments to the Series and the others. In some cases, this procedure could have an adverse effect on the Series. In the opinion of Brinson Partners, however, the results of such procedures will, on the whole, be in the best interest of each of the clients. The Series incurred brokerage commissions as follows:
- ------------------------------------------------------------------------------- SERIES FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED JUNE 30, 1994 JUNE 30, 1995 JUNE 30, 1996 - ------------------------------------------------------------------------------- GLOBAL FUND $141,430 $196,381 $329,191 - ------------------------------------------------------------------------------- GLOBAL EQUITY FUND $ 45,153 $ 34,283 $123,467 - ------------------------------------------------------------------------------- GLOBAL BOND FUND $ 0.00 $ 0.00 $ 0.00 - -------------------------------------------------------------------------------
33
- ------------------------------------------------------------------------------- SERIES FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED JUNE 30, 1994 JUNE 30, 1995 JUNE 30, 1996 - ------------------------------------------------------------------------------- U.S. BALANCED FUND NA $ 88,904 $ 99,554 - ------------------------------------------------------------------------------- U.S. EQUITY FUND $ 8,431 $ 53,830 $105,887 - ------------------------------------------------------------------------------- U.S. BOND FUND NA $ 0.00 $ 0.00 - ------------------------------------------------------------------------------- NON-U.S. EQUITY FUND $156,842 $172,829 $322,915 - -------------------------------------------------------------------------------
For the fiscal year ended June 30, 1996 the Trust and the Advisor had no agreements or understandings with a broker or otherwise causing brokerage transactions or commissions for research services. PORTFOLIO TURNOVER - ------------------ The Series are free to dispose of their portfolio securities at any time, subject to complying with the Code and the Act, when changes in circumstances or conditions make such a move desirable in light of the respective investment objective. The Series will not attempt to achieve or be limited to a predetermined rate of portfolio turnover, such a turnover always being incidental to transactions undertaken with a view to achieving that Series' investment objective. The Series do not intend to use short-term trading as a primary means of achieving their investment objectives. The rate of portfolio turnover shall be calculated by dividing (a) the lesser of purchases and sales of portfolio securities for the particular fiscal year by (b) the monthly average of the value of the portfolio securities owned by that Series during the particular fiscal year. Such monthly average shall be calculated by totaling the values of the portfolio securities as of the beginning and end of the first month of the particular fiscal year and as of the end of each of the succeeding eleven months and dividing the sum by 13. Under normal circumstances, the portfolio turnover rate for the Global Equity Fund, U.S. Equity Fund, and Non-U.S. Equity Fund is not expected to exceed 100%. The portfolio turnover rates for the Global Fund, Global Bond Fund, U.S. Balanced Fund and U.S. Bond Fund, however, may exceed 100%. High portfolio turnover rates (over 100%) may involve correspondingly greater brokerage commissions and other transaction costs, which will be borne directly by the Series and ultimately by that Series' shareholders. In addition, high portfolio turnover may result in increased short-term capital gains, which, when distributed to shareholders, are treated as ordinary income. With respect to the Global Fund, for the fiscal years ended June 30, 1994, June 30, 1995 and June 30, 1996, respectively, the portfolio turnover rate of the Series was 149%, 231%, 238% and 142%, respectively. With respect to the Global Bond Fund, for the period July 30, 1993 (commencement of operations) to June 30, 1994 and the fiscal years ended June 30, 1995 and June 30, 1996 the portfolio turnover rate of the Series was 189%, 199%, and 184%, respectively. With respect to the U.S. Balanced Fund, for the fiscal year ended June 30, 1996, the portfolio turnover rate of the Series was 240%. With respect to the U.S. Bond Fund, for the period from August 31, 1995 (commencement of operations) to June 30, 1996, the portfolio turnover rate of the Series was 363%. The significant variation in portfolio turnover rates over such periods was due to an increase in the assets of the Series which caused the Series, to reposition their portfolio holdings in order to meet their investment objectives and policies. SHARES OF BENEFICIAL INTEREST The Trust presently offers seven Series of shares of beneficial interest, each of which offers two classes of shares. Each share of beneficial interest represents an equal proportionate interest in the assets and liabilities of the applicable Series and has the same voting and other rights and preferences as the other class of that Series, except that shares of the Brinson Fund class may not vote on any matter affecting only the SwissKey Fund classes' Distribution Plan under Rule 12b-1 and neither class may vote on matters that affect only the other class. Under Delaware law, the Trust does not normally hold annual meetings of shareholders. Shareholders' meetings may be held from time to time to consider certain matters including changes to a Series' fundamental investment objective and fundamental investment policies, changes to the Trust's investment advisory agreement and the election of Trustees when required by the Act. When matters are submitted to shareholders for a vote, shareholders are entitled to one vote per share with proportionate voting 34 for fractional shares. The shares of the Series do not have cumulative voting rights or any preemptive or conversion rights, and the Trustees have authority from time to time to divide or combine the shares of the Series into a greater or lesser number of shares so affected. In the case of a liquidation of a Series, each shareholder of the Series will be entitled to share, based upon the shareholder's percentage share ownership, in the distribution out of assets, net of liabilities, of the Series. No shareholder is liable for further calls or assessment by the Series. On any matters affecting only one Series or class, only the shareholders of that Series or class are entitled to vote. On matters relating to the Trust but affecting the Series differently, separate votes by the Series or class are required. With respect to the submission to shareholder vote of a matter requiring separate voting by a Series, the matter shall have been effectively acted upon with respect to any Series or class if a majority of the outstanding voting securities of that Series votes for the approval of the matter, notwithstanding that: (1) the matter has not been approved by a majority of the outstanding voting securities of any other Series; and (2) the matter has not been approved by a majority of the outstanding voting securities of the Trust. PURCHASES Shares of the Brinson Fund class and the SwissKey Fund class of each Series are sold at the net asset value next determined after the receipt of a purchase application in proper form by the transfer agent. The minimum for initial investments with respect to the Brinson Fund class for each Series is $100,000; subsequent investment minimums are $2,500. The minimum for initial investments with respect to the SwissKey Fund class for each Series is $1,000; subsequent investment minimums are $50. A more detailed description of methods of purchase is included in the Prospectuses. Certificates representing shares purchased are not issued. However, such purchases are confirmed to the investor and credited to the shareholder's account on the books maintained by the transfer agent. The investor will have the same rights of ownership with respect to such shares as if certificates had been issued. EXCHANGES OF SHARES - ------------------- Shares of the Brinson Fund class of a Series may only be exchanged for any other Brinson Fund class of another Series in the Trust. The SwissKey Fund class of a Series may be exchanged for any other SwissKey Fund class of another Series in the Trust. Exchanges will not be permitted between the Brinson Fund class and the SwissKey Fund class. Each qualifying exchange will be made on the basis of both Funds' relative net asset values per share next computed following receipt of the order in proper form by the transfer agent. Exchanges may be made by telephone if the shareholder's Account Application Form includes specific authorization for telephone exchanges. The telephone exchange privilege may be difficult to implement during times of drastic economic or market changes. The transactions described above will result in a taxable gain or loss for federal income tax purposes. Generally, any such taxable gain or loss will be a capital gain or loss (long-term or short-term, depending on the holding period of the shares) in the amount of the difference between the net asset value of the shares surrendered and the shareholder's tax basis for those shares. Each investor should consult his or her tax adviser regarding the tax consequences of an exchange transaction. Any shareholder who wishes to make an exchange should first obtain and review the Prospectus of the Series to be acquired in the exchange. Requests for telephone exchanges must be received prior to the close of regular trading on the New York Stock Exchange ("NYSE") on any day on which the NYSE is open for regular trading. At the discretion of the Trust, this exchange privilege may be terminated or modified at any time for any of the participating Series upon 60 days' prior written notice to shareholders. Contact the transfer agent for details about a particular exchange. NET ASSET VALUE - --------------- The net asset value per share is calculated separately for each class of each Series. The net asset value per share of a Series is computed by dividing the value of the assets of the Series, less its liabilities, by the number of shares of the Series outstanding. 35 Each class of a Series will bear pro rata all of the common expenses of that Series. The net asset values of all outstanding shares of each class of a Series will be computed on a pro rata basis for each outstanding share based on the proportionate participation in the Series represented by the value of shares of that Series. All income earned and expenses incurred by a Series will be borne on a pro rata basis by each outstanding share of a class, based on each class' percentage in the Series represented by the value of such shares of such classes, except that the Brinson Fund class will not incur any of the expenses under the SwissKey Fund classes' 12b-1 Plan. Portfolio securities are valued and net asset value per share is determined as of the close of regular trading on the NYSE which currently is 4:00 p.m. Eastern time on each day the NYSE is open for trading. The NYSE is open for trading on every day except Saturdays, Sundays and the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. Portfolio securities listed on a national or foreign securities exchange and over-the-counter securities carried as NASDAQ National Market Issues are valued on the basis of the last sale on the date the valuation is made. Other portfolio securities which are traded in the over-the-counter market are valued at the last available bid price. Valuations of fixed income and equity securities may be obtained from a pricing service when such prices are believed to reflect the fair value of such securities. Use of a pricing service has been approved by the Board of Trustees. Securities traded on securities exchanges are valued at the last sale price or, if there has been no sale that day, at the last reported bid price, using prices as of the close of trading on their respective exchanges. Price information on listed securities is generally taken from the closing price on the exchange where the security is primarily traded. Futures contracts and options thereon are valued at their daily quoted settlement price. Forward foreign currency contracts are valued daily at forward exchange rates and an unrealized gain or loss is recorded. A Series realizes a gain or loss upon settlement of the contracts. A Series' obligation under a swap agreement will be accrued daily (offset by any amounts owing to the portfolio) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the maintenance of a segregated account consisting of Segregated Assets. For valuation purposes, foreign securities initially expressed in foreign currency values will be converted into U.S. dollar values using WM/Reuters closing spot rates as of 4:00 p.m. London time. Securities with a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. Redeemable securities issued by open-end investment companies are valued using their respective net asset values for purchase orders placed at the close of the NYSE. Securities (including over-the-counter options) for which market quotations are not readily available and other assets are valued at their fair value as determined in good faith by or under the direction of the Trustees. Because of time zone differences, foreign exchanges and securities markets will usually be closed prior to the time of the closing of the NYSE and values of foreign futures and options and foreign securities will be determined as of the earlier closing of such exchanges and securities markets. However, events affecting the values of such foreign securities may occasionally occur between the earlier closings of such exchanges and securities markets and the closing of the NYSE which will not be reflected in the computation of the net asset value of a Series. If an event materially affecting the value of such foreign securities occurs during such period, then such securities will be valued at fair value as determined in good faith by or under the direction of the Board of Trustees. Where a foreign securities market remains open at the time that a Series values its portfolio securities, or closing prices of securities from that market may not be retrieved because of local time differences or other difficulties in obtaining such prices at that time, last sale prices in such market at a point in time most practicable to timely valuation of the Series may be used. REDEMPTIONS Under normal circumstances shareholders may redeem their shares at any time without a fee. The redemption price will be based upon the net asset value per share next determined after receipt of the redemption request, provided it has been submitted in the manner described below. The redemption price may be more or less than the original cost, depending upon the net asset value per share at the time of redemption. Payment for shares tendered for redemption is made by check within five business days after tender in proper form, except that the Trust reserves the right to suspend the right of redemption, or to postpone the date of payment upon redemption beyond five business days, (i) for any period during which the NYSE is closed (other than customary weekend and holiday closings) or during which trading on the NYSE is restricted, (ii) for any period during which an emergency exists as determined by the SEC as a result of which disposal of securities owned by a Series is not reasonably practicable or it is not reasonably practicable for the Series fairly to determine the value of its net assets or 36 (iii) for such other periods as the SEC may by order permit for the protection of shareholders of the Series. Under unusual circumstances, when the Board of Trustees deems it in the best interest of the Series' shareholders, the Trust may make payment for shares repurchased or redeemed in whole or in part in securities of the Series taken at current values. With respect to such redemptions in kind, the Trust has made an election pursuant to Rule 18f-1 under the Act. This will require the Trust to redeem in cash at a shareholder's election in any case where the redemption involves less than $250,000 (or 1% of the Series' net asset value at the beginning of each 90 day period during which such redemptions are in effect, if that amount is less than $250,000). Should payment be made in securities, the redeeming shareholder may incur brokerage costs in converting such securities to cash. TAXATION - -------- Each of the Series has qualified, and intends to continue to qualify each year, as a regulated investment company under Subchapter M of the Code. In order to so qualify, a mutual fund must, among other things, (i) derive at least 90% of its gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale of securities or foreign currencies, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities or currencies; (ii) derive less than 30% of its gross income from the sale or other disposition of stock or securities or certain futures and options thereon held for less than three months ("short-short gains"); (iii) distribute at least 90% of its dividend, interest and certain other taxable income each year; and (iv) at the end of each fiscal quarter maintain at least 50% of the value of its total assets in cash, government securities, securities of other regulated investment companies and other securities of issuers which represent, with respect to each issuer, no more than 5% of the value of a fund's total assets and 10% of the outstanding voting securities of such issuer, and with no more than 25% of its assets invested in the securities (other than those of the government or other regulated investment companies) of any one issuer or of two or more issuers which the fund controls and which are engaged in the same, similar or related trades and businesses. To the extent each of the Series qualifies for treatment as a regulated investment company, they will not be subject to federal income tax on income and net capital gains paid to shareholders in the form of dividends or capital gains distributions. An excise tax at the rate of 4% will be imposed on the excess, if any, of each Series' "required distributions" over actual distributions in any calendar year. Generally, the "required distribution" is 98% of a Series' ordinary income for the calendar year plus 98% of its capital gain net income recognized during the one-year period ending on October 31 plus undistributed amounts from prior years. The Series intend to make distributions sufficient to avoid imposition of the excise tax. Distributions declared by the Series during October, November or December to shareholders of record during such month and paid by January 31 of the following year will be taxable to shareholders in the calendar year in which they are declared, rather than the calendar year in which they are received. Gains or losses attributable to fluctuations in exchange rates which occur between the time a Series accrues interest or other receivables or accrues expenses or liabilities denominated in a foreign currency and the time the Series actually collects such receivables, or pays such liabilities, are generally treated as ordinary income or loss. Similarly, a portion of the gains or losses realized on disposition of debt securities denominated in a foreign currency may also be treated as ordinary gain or loss. These gains, referred to under the Code as "Section 988" gains or losses, may increase or decrease the amount of a Series' investment company taxable income to be distributed to its shareholders, rather than increasing or decreasing the amount of the Series' capital gains or losses. When a Series writes a call, or purchases a put option, an amount equal to the premium received or paid by it is included in the Series' assets and liabilities as an asset and as an equivalent liability. In writing a call, the amount of the liability is subsequently "marked-to- market" to reflect the current market value of the option written. The current market value of a written option is the last sale price on the principal Exchange on which such option is traded or, in the absence of a sale, the mean between the last bid and asked prices. If an option which a Series has written expires on its stipulated expiration date, the Series recognizes a short-term capital gain. If a Series enters into a closing purchase transaction with respect to an option which the Series has written, the Series realizes a short- term gain (or loss if the cost of the closing transaction exceeds the premium received when the option was sold) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a call option which a Series has written is exercised, the Series realizes a capital gain or loss from the 37 sale of the underlying security and the proceeds from such sale are increased by the premium originally received. The premium paid by a Series for the purchase of a put option is recorded in the Series' assets and liabilities as an investment and subsequently adjusted daily to the current market value of the option. For example, if the current market value of the option exceeds the premium paid, the excess would be unrealized appreciation and, conversely, if the premium exceeds the current market value, such excess would be unrealized depreciation. The current market value of a purchased option is the last sale price on the principal Exchange on which such option is traded or, in the absence of a sale, the mean between the last bid and asked prices. If an option which a Series has purchased expires on the stipulated expiration date, the Series realizes a short-term or long-term capital loss for Federal income tax purposes in the amount of the cost of the option. If a Series exercises a put option, it realizes a capital gain or loss (long-term or short-term, depending on the holding period of the underlying security) from the sale which will be decreased by the premium originally paid. Accounting for options on certain stock indices will be in accordance with generally accepted accounting principles. The amount of any realized gain or loss on closing out such a position will result in a realized gain or loss for tax purposes. Such options held by a Series at the end of each fiscal year on a broad-based stock index will be required to be "marked-to-market" for Federal income tax purposes. Sixty percent of any net gain or loss recognized on such deemed sales or on any actual sales will be treated as long-term capital gain or loss and the remainder will be treated as short-term capital gain or loss. Certain options, futures contracts and options on futures contracts utilized by the Series are "Section 1256 contracts." Any gains or losses on Section 1256 contracts held by a Series at the end of each taxable year (and on October 31 of each year for purposes of the 4% excise tax) are "marked-to-market" with the result that unrealized gains or losses are treated as though they were realized and the resulting gain or loss is treated as a 60/40 gain or loss. Shareholders will be subject to federal income taxes on distributions made by the Series whether received in cash or additional shares of the Series. Distributions of net investment income and net short-term capital gains, if any, will be taxable to shareholders as ordinary income. Distributions of net long-term capital gains, if any, will be taxable to shareholders as long-term capital gains, without regard to how long a shareholder has held shares of the Series. A loss on the sale of shares held for twelve months or less will be treated as a long- term capital loss to the extent of any long-term capital gain dividend paid to the shareholder with respect to such shares. Dividends eligible for designation under the dividends received deduction and paid by a Series may qualify in part for the 70% dividends received deduction for corporations provided, however, that those shares have been held for at least 45 days. The Series will notify shareholders each year of the amount of dividends and distributions, including the amount of any distribution of long-term capital gains and the portion of its dividends which may qualify for the 70% deduction. Each class of shares of a Series will share proportionately in the investment income and expenses of that Series, except that the respective SwissKey Fund class for each Series alone will incur distribution fees under their respective 12b-1 Plan. It is expected that certain dividends and interest received by the Global Funds and the Non-U.S. Equity Fund will be subject to foreign withholding taxes. If more than 50% in value of the total assets of a fund at the close of any taxable year consists of stocks or securities of foreign corporations, such fund may elect to treat any foreign taxes paid by it as if paid by its shareholders. These Series will notify shareholders in writing each year whether it has made the election and the amount of foreign taxes it has elected to have treated as paid by the shareholders. If a Series makes the election, its shareholders will be required to include in gross income their proportionate share of the amount of foreign taxes paid by the Series and will be entitled to claim either a credit or deduction for their share of the taxes in computing their U.S. federal income tax subject to certain limitations. No deduction for foreign taxes may be claimed by shareholders who do not itemize deductions. Generally, a credit for foreign taxes is subject to the limitation that it may not exceed the shareholder's U.S. tax attributable to his or her total foreign source taxable income. For this purpose, the source of each Series' income flows through to its shareholders. Gains from the sale of securities will be treated as derived from U.S. sources and certain currency fluctuation gains, including fluctuation gains from foreign currency denominated debt securities, receivables and payables, will be treated income derived from U.S. sources. The limitation on the foreign tax credit is applied separately to foreign source passive income (as defined for purposes of foreign tax credit), such as foreign source passive income received from the respective Series. Because of changes made by the Code, shareholders may be unable to claim a credit for the full amount of their proportionate share of the foreign taxes paid by the Series. 38 The foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury Regulations currently in effect. For the complete provisions, reference should be made to the pertinent Code sections and Regulations. The Code and Regulations are subject to change by legislative or administrative action at any time and retroactively. Dividends and distributions also may be subject to state and local taxes. Shareholders are urged to consult their tax advisers regarding specific questions as to federal, state and local taxes as well as the application of the foreign tax credit. The foregoing discussion relates solely to U.S. federal income tax law. Non-U.S. investors should consult their tax advisers concerning the tax consequences of ownership of shares of the Series, including the possibility that distributions may be subject to a 30% U.S. withholding tax (or a reduced rate of withholding provided by treaty). PERFORMANCE CALCULATIONS Performance information for the SwissKey Fund class and Brinson Fund class shares of each Series will vary due to the effect of expense ratios on the performance calculations. TOTAL RETURN - ------------ Current yield and total return quotations used by the Series (and both classes of shares) are based on standardized methods of computing performance mandated by rules adopted by the SEC. As the following formula indicates, the average annual total return is determined by multiplying a hypothetical initial purchase order of $1,000 by the average annual compound rate of return (including capital appreciation/depreciation and dividends and distributions paid and reinvested) for the stated period less any fees charged to all shareholder accounts and annualizing the result. The calculation assumes that all dividends and distributions are reinvested at the net asset value on the reinvestment dates during the period. The quotation assumes the account was completely redeemed at the end of each period and deduction of all applicable charges and fees. According to the SEC formula: P(1+T)/n/=ERV where: P = a hypothetical initial payment of $1,000, T = average annual total return, n = number of years, ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the 1, 5 or 10 year periods at the end of the 1, 5 or 10 year periods (or fractional portion thereof). Based upon the foregoing calculations, the average annual total return for the Brinson Fund class shares of: (i) the Global Fund for the one and three year periods ended June 30, 1996 and the period August 31, 1992 (commencement of operations) through June 30, 1996 was 16.38%, 9.69% and 10.42%, respectively; (ii) the Global Equity Fund for the one year period ended June 30, 1996 and the period January 28,1994 (commencement of operations) through June 30, 1996 was 25.66% and 10.42%, respectively; (iii) the Global Bond Fund for the one year period ended June 30, 1996 and the period July 30, 1993 (commencement of operations) through June 30, 1996 was 11.50% and 7.40%, respectively; (iv) the U.S. Balanced Fund for the one year period ended June 30, 1996 and the period December 30, 1994 (commencement of operations) through June 30, 1996 was 13.52% and 18.71%, respectively; (v) the U.S. Equity Fund for the one year period ended June 30, 1996 and the period February 22, 1994 (commencement of operations) through June 30, 1996 was 30.57% and 20.23%, respectively; (vi) the U.S. Bond Fund for the period August 31, 1995 (commencement of operations) through June 30, 1996 was 3.60%; (vii); and the Non-U.S. Equity Fund for the one year period ended June 30, 1996 and the period August 31, 1993 (commencement of operations) through June 30, 1996 was 23.64% and 6.80%, respectively. Based upon the foregoing calculations, the average annual total return for the SwissKey Fund class shares of: the Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund and Non U.S. Equity Fund for the period July 31, 1995 (commencement of operations) through June 30, 1996 was 13.24%, 19.25%, 9.17%, 11.54%, 25.70% and 15.78%, respectively; and the U.S. Bond Fund for the period August 31, 1995 (commencement of operations) through June 30, 1996 was 3.24%. 39 YIELD - ----- As indicated below, current yield is determined by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period and annualizing the result. Expenses accrued for the period include any fees charged to all shareholders during the 30-day base periods. According to the SEC formula: Yield = 2[(a-b + 1)/6/ - 1] ------------------- cd where: a = dividends and interest earned during the period. b = expenses accrued for the period (net of reimbursements). c = the average daily number of shares outstanding during the period that were entitled to receive dividends . d = the maximum offering price per share on the last day of the period. The yield of a Series may be calculated by dividing the net investment income per share earned by the particular Series during a 30-day (or one month) period by the net asset value per share on the last day of the period and annualizing the result on a semi-annual basis. A Series' net investment income per share earned during the period is based on the average daily number of shares outstanding during the period entitled to receive dividends and includes dividends and interest earned during the period minus expenses accrued for the period, net of reimbursements. FINANCIAL STATEMENTS The Financial Statements contained in the Series' Annual Report dated June 30, 1996 are incorporated herein by reference. 40 CORPORATE DEBT RATINGS APPENDIX A Moody's Investors Service, Inc. describes classifications of corporate bonds as follows: Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt-edged". Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa - Bonds which are rated Aa are judged to be of high-quality by all standards. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A - Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa - Bonds which are rated Baa are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba - Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B - Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa - Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca - Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C - Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Moody's also supplies numerical indicators 1, 2, and 3 to rating categories. The modifier 1 indicates the security is in the higher end of its rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking toward the lower end of the category. Standard & Poor's Ratings Group describes classifications of corporate bonds as follows: AAA - This is the highest rating assigned by Standard & Poor's Ratings Group to a debt obligation and indicates an extremely strong capacity to pay principal and interest. AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay principal and interest is very strong and in the majority of instances they differ from the AAA issues only in small degree. A - Bonds rated A have a strong capacity to pay principal and interest, although they are somewhat more 41 susceptible to the adverse effects of changes in circumstances and economic conditions. BBB - Bonds rated BBB are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in the A category. BB - Debt rated BB has less near-term vulnerability to default than other speculative grade debt. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lend to inadequate capacity to meet timely interest and principal payments. B - Debt rated B has a greater vulnerability to default but presently has the capacity to meet interest payments and principal repayments. Adverse business, financial or economic conditions would likely impair capacity or willingness to pay interest and repay principal. CCC - Debt rated CCC has a current identifiable vulnerability to default, and is dependent upon favorable business, financial and economic conditions to meet timely payments of interest and repayment of principal. In the event of adverse business, financial or economic conditions, it is not likely to have the capacity to pay interest or repay principal. CC - The rating CC is typically applied to debt subordinated to senior debt which is assigned an actual or implied CCC rating. C - The rating C is typically applied to debt subordinated to senior debt which is assigned an actual or implied CCC rating. CI - The rating CI is reserved for income bonds on which no interest is being paid. D - Debt rated D is in default, or is expected to default upon maturity or payment date. Plus (+) or minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. 42 The Brinson Funds Form N-1A Part C Other Information THE BRINSON FUNDS FORM N-1A PART C. OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS. ---------------------------------- (a) Financial Statements. Included in Part A: Financial Highlights BRINSON GLOBAL FUND, BRINSON GLOBAL EQUITY FUND, BRINSON GLOBAL BOND FUND, BRINSON U.S. EQUITY FUND, BRINSON U.S. BALANCED FUND, BRINSON U.S. BOND FUND, AND BRINSON NON-U.S. EQUITY FUND. SWISSKEY GLOBAL FUND, SWISSKEY GLOBAL EQUITY FUND, SWISSKEY GLOBAL BOND FUND, SWISSKEY U.S. BALANCED FUND, SWISSKEY U.S. EQUITY FUND, SWISSKEY U.S. BOND FUND, SWISSKEY NON-U.S. EQUITY FUND. Included in Part B: GLOBAL FUND ----------- (1) Report of Independent Auditors;/1/ (2) Schedule of Investments as of June 30, 1996 (audited)/1/; (3) Statement of Assets and Liabilities at June 30, 1996 (audited)/1/; (4) Statement of Operations for the year ended June 30, 1996 (audited)/1/; (5) Statements of Changes in Net Assets for the two years ended June 30, 1996 and June 30, 1995 and for the period August 31, 1992 (commencement of operations) to June 30, 1993 (audited)/1/; (6) Financial Highlights for the two years ended June 30, 1996 and June 30, 1995 and for the period August 31, 1992 (commencement of operations) to June 30, 1993 (audited)/1/; (7) Notes to Financial Statements dated June 30, 1996 (audited)/1/. GLOBAL EQUITY FUND ------------------- (1) Report of Independent Auditors/1/; (2) Schedule of Investments as of June 30, 1996 (audited)/1/; (3) Statement of Assets and Liabilities at June 30, 1996 (audited)/1/; (4) Statement of Operations for the year ended June 30, 1996 (audited)/1/; (5) Statements of Changes in Net Assets for the years ended June 30, 1996 and June 30, 1995 and for the period January 28, 1994 (commencement of operations) to June 30, 1994 (audited)/1/; (6) Financial Highlights for the years ended June 30, 1996 and June 30, 1995 and for the period January 28, 1994 (commencement of operations) to June 30, 1994 (audited)/1/; (7) Notes to Financial Statements dated June 30, 1996 (audited)/1/. GLOBAL BOND FUND ----------------- (1) Report of Independent Auditors/1/; (2) Schedule of Investments as of June 30, 1996 (audited)/1/; (3) Statement of Assets and Liabilities at June 30, 1996 (audited)/1/; (4) Statement of Operations for the year ended June 30, 1996 (audited)/1/; (5) Statements of Changes in Net Assets for the years ended June 30, 1996 and June 30, 1995 and for the period July 30, 1993 (commencement of operations) to June 30, 1994 (audited)/1/; (6) Financial Highlights for the years ended June 30, 1996 and June 30, 1995 and for the period July 30, 1993 (commencement of operations) to June 30, 1994 (audited)/1/; (7) Notes to Financial Statements dated June 30, 1996 (audited)/1/. U.S. BALANCED FUND ------------------- (1) Report of Independent Auditors/1/; (2) Schedule of Investments as of June 30, 1996 (audited)/1/; (3) Statement of Assets and Liabilities at June 30, 1996 (audited)/1/; (4) Statement of Operations for the year ended June 30, 1996 (audited)/1/; (5) Statement of Changes in Net Assets for the year ended June 30, 1996, and period December 30, 1994 (commencement of operations) to June 30, 1995 (audited)/1/; (6) Financial Highlights for the year ended June 30, 1996, and period December 30, 1994 commencement of operations) to June 30, 1995 (audited)/1/; (7) Notes to Financial Statements dated June 30, 1996/1/. U.S. EQUITY FUND ----------------- (1) Report of Independent Auditors/1/; (2) Schedule of Investments as of June 30, 1996 (audited)/1/; (3) Statement of Assets and Liabilities at June 30, 1996 (audited)/1/; (4) Statement of Operations for the year ended June 30, 1996 (audited)/1/; (5) Statements of Changes in Net Assets for the years ended June 30, 1996 and June 30, 1995 and for the period February 22, 1994 (commencement of operations) to June 30, 1994 (audited)/1/. (6) Financial Highlights for the years ended June 30, 1996 and June 30, 1995 and for the period February 22, 1994 (commencement of operations) to June 30, 1994 (audited)/1/; (7) Notes to Financial Statements dated June 30, 1996 (audited)/1/. NON-U.S. EQUITY FUND --------------------- (1) Report of Independent Auditors/1/; (2) Schedule of Investments as of June 30, 1996 (audited)/1/; (3) Statement of Assets and Liabilities at June 30, 1996 (audited)/1/; (4) Statement of Operations for the year ended June 30, 1996 (audited)/1/; (5) Statements of Changes in Net Assets for the years ended June 30, 1996 and June 30, 1995 and for the period August 31, 1993 (commencement of operations) to June 30, 1994. (audited)/1/; (6) Financial Highlights for the year ended June 30, 1996, June 30, 1995 and for the period August 31, 1993 (commencement of operations) to June 30, 1994 (audited)/1/; (7) Notes to Financial Statements dated June 30, 1996 (audited)/1/. U.S. BOND FUND --------------- (1) Schedule of Investments as of June 30, 1996 (audited)/1/; (2) Statement of Assets and Liabilities at June 30, 1996 (audited)/1/; (3) Statement of Operations for the period August 31, 1995 (commencement of operations) to June 30, 1996 (audited)/1/; (4) Statement of Changes in Net Assets for the period August 31, 1995 (commencement of operations) to June 30, 1996 (audited)/1/; (5) Financial Highlights for the period August 31, 1995 (commencement of operations) to June 30, 1996 (audited)/1/; (6) Notes to Financial Statements dated June 30, 1996 (audited)/1/; /1/ Incorporated by reference to the Trust's Financial Statements in the Annual Report dated June 30, 1996 and filed electronically on August 29, 1996. (b) Exhibits: Exhibits filed pursuant to Form N-1A: (1) Certificate of Trust and Agreement and Declaration of Trust of The Brinson Funds is filed herewith electronically, previously incorporated by reference to Post-Effective Amendment No. 6 to Registrant's Registration Statement No. 33-47287, Exhibit No. (1) as filed on October 5, 1993. (2) By-Laws of The Brinson Funds is filed herewith electronically, previously incorporated by reference to Post-Effective Amendment No. 6 to Registrant's Registration Statement No. 33-47287, Exhibit No. (2) as filed on October 5, 1993. (3) Not Applicable. (4) Specimen Share Certificate of The Brinson Funds is incorporated herein by reference to Post-Effective Amendment No. 9 to Registrant's Registration Statement No. 33-47287, Exhibit No. (4) as filed on July 21, 1994. (5) (a) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson Global Fund of The Brinson Funds, dated April 25, 1995, is filed herewith electronically, previously incorporated by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No. (5)(a) as filed on September 20, 1995. (b) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson Global Bond Fund of The Brinson Funds, dated April 25, 1995, is filed herewith electronically, previously incorporated by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No.(5)(b) as filed on September 20, 1995. (c) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson Non-U.S. Equity Fund of The Brinson Funds, dated April 25, 1995, is filed herewith electronically, previously incorporated by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No.(5)(c) as filed on September 20, 1995. (d) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson Global Equity Fund of The Brinson Funds, dated April 25, 1995, is filed herewith electronically, previously incorporated by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33- 4787, Exhibit No.(5)(d) as filed on September 20, 1995. (e) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson U.S. Equity Fund of The Brinson Funds, dated April 25, 1995, is filed herewith electronically, previously incorporated by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33- 4787, Exhibit No.(5)(e) as filed on September 20, 1995. (f) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson U.S. Balanced Fund of The Brinson Funds, dated April 25, 1995, is filed herewith electronically, previously incorporated by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33- 4787, Exhibit No.(5)(f) as filed on September 20, 1995. (g) Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Brinson U.S. Bond Fund of The Brinson Funds, dated April 25, 1995, is filed herewith electronically, previously incorporated by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No.(5)(g) as filed on September 20, 1995. (6) (a) Underwriting Agreement between Fund/Plan Broker Services, Inc. and the Registrant on behalf of each of the series of The Brinson Funds dated November 20, 1996 is incorporated herein by reference to Post Effective Amendment No. 16 to Registrant's Registration Statement No. 33-4787, as Exhibit No. (6)(a) to Item 24 as electronically filed on February 15, 1996. (b) Amendment to Underwriting Agreement between Fund/Plan Broker Services, Inc. and the Registrant on behalf of each of the series of The Brinson Funds dated August 21, 1995 is incorporated herein by reference to Post Effective Amendment No. 16 to Registrant's Registration Statement No. 33-4787, as Exhibit No. (6)(b) to Item 24 as electronically filed on February 15, 1996. (c) Underwriting Agreement between Fund/Plan Broker Services, Inc. and the Registrant on behalf of each of the series of The Brinson Funds dated April 25, 1995 is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No. (6)(a) to Item 24 as filed on September 20, 1995 (d) Underwriting Agreement between Fund/Plan Broker Services, Inc. and the Registrant on behalf of each of the series of The Brinson Funds dated September 1, 1994 is incorporated herein by reference to Post-Effective Amendment No. 10 to Registrant's Registration Statement No. 33-47287 Exhibit No. (6)(a) to Item 24 as filed on September 15, 1994. (e) Underwriting Agreement between Fund/Plan Broker Services, Inc. and the Registrant on behalf of each of the series of The Brinson Funds is incorporated herein by reference to Post-Effective Amendment No. 9 to Registrant's Registration Statement No. 33-47287, Exhibit No. (6) as filed on July 21, 1994. (7) Not Applicable. (8) (a) Amendment to the Custodian Agreement between the Registrant and Bankers Trust Company to the Agreement dated June 18, 1992 is incorporated herein by reference to Post-Effective Amendment No. 12 to Registrant's Registration Statement No. 33-47287 as filed on May 31, 1995 as Exhibit (8)(a) to Item 24. (b) Custodian Agreement between the Registrant and Bankers Trust Company is incorporated herein by reference to Post- Effective Amendment No. 9 to Registrant's Registration Statement No. 33-47287, Exhibit No. (8)(a) as filed on July 21, 1994. (c) Amendments to the Custodian Agreement between the Registrant and Bankers Trust Company is incorporated herein by reference to Post-Effective Amendment No. 9 to Registrant's Registration Statement No. 33-47287, Exhibit No. (8)(b) as filed on July 21, 1994. (9)(a)(i) Shareholder Services Agreement between Fund/Plan Services, Inc. and the Registrant dated November 20, 1995 is incorporated herein by reference to Post Effective Amendment No. 16 to Registrant's Registration Statement No. 33-4787, as Exhibit No. (9)(a) to Item 24 as electronically filed on February 15, 1996. (a)(ii) Amendment to the Shareholder Services Agreement between Fund/Plan Services, Inc. and the Registrant dated August 21, 1995 is incorporated herein by reference to Post Effective Amendment No. 16 to Registrant's Registration Statement No. 33-4787, as Exhibit No. (9)(a) to Item 24 as electronically filed on February 15, 1996. (a)(iii) Shareholder Services Agreement between Fund/Plan Services, Inc. and the Registrant dated April 25, 1995 is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No. (9)(a) to Item 24 as filed on September 20, 1995. (a)(iv) Shareholder Services Agreement between the Registrant and Fund/Plan Services, Inc. is incorporated herein by reference to Post-Effective Amendment No. 9 to the Registrant's Registration Statement No. 33-47287, Exhibit No. (9)(a) as filed on July 21, 1994. (b)(i) Administration Agreement between Fund/Plan Services, Inc. and the Registrant dated November 20, 1995 is incorporated herein by reference to Post Effective Amendment No. 16 to Registrant's Registration Statement No. 33-4787, as Exhibit No. (9)(b) to Item 24 as electronically filed on February 15, 1996. (b)(ii) Amendment to the Administrative Services Agreement between Fund/Plan Services, Inc. and the Registrant dated August 21, 1995 is incorporated herein by reference to Post Effective Amendment No. 16 to Registrant's Registration Statement No. 33-4787, as Exhibit No. (9)(b) to Item 24 as electronically filed on February 15, 1996. (b)(iii) Administrative Services Agreement between Fund/Plan Services, Inc. and the Registrant dated April 25, 1995 is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No. (9)(b) to Item 24 as filed on September 20, 1995. (b)(iv) Administrative Services Agreement between the Registrant and Fund/Plan Services, Inc. is incorporated herein by reference to Post-Effective Amendment No. 9 to the Registrant's Registration Statement No. 33- 47287, Exhibit No. (9)(b) as filed on July 21, 1994. (c)(i) Accounting Services Agreement between Fund/Plan Services, Inc. and the Registrant dated November 20, 1995 is incorporated herein by reference to Post Effective Amendment No. 16 to Registrant's Registration Statement No. 33-4787, as Exhibit No. (9)(c) to Item 24 as electronically filed on February 15, 1996. (c)(ii) Amendment to the Accounting Services Agreement between Fund/Plan Services, Inc. and the Registrant dated August 21, 1995 is incorporated herein by reference to Post Effective Amendment No. 16 to Registrant's Registration Statement No. 33-4787, as Exhibit No. (9)(c) to Item 24 as electronically filed on February 15, 1996. (c)(iii) Accounting Services Agreement between Fund/Plan Services, Inc. and the Registrant dated April 25, 1995 is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No. (9)(c) to Item 24 as filed on September 20, 1995. (c)(iv) Accounting Services Agreement between the Registrant and Fund/Plan Services, Inc. is incorporated herein by reference to Post-Effective Amendment No. 9 to the Registrant's Registration Statement No. 33-47287, Exhibit No. (9)(c) as filed on July 21, 1994. (c)(v) Amendment to Accounting Services Agreement between the Registrant and Fund/Plan Services, Inc. is incorporated herein by reference to Post-Effective Amendment No. 9 to Registrant's Registration Statement No. 33-47287, Exhibit No. (9)(d) as filed on July 21, 1994. (10) Opinion and Consent of Counsel. (a) Incorporated herein by reference to Registrant's Notice pursuant to Rule 24f-2 filed with the U.S. Securities and Exchange Commission on August 28, 1996. (11) Other Opinions and Consents. (a) Consent of Ernst & Young LLP, independent auditors to the Trust. Filed herewith electronically as Exhibit (11)(a). (12) Not Applicable. (13) Letter of Understanding relating to initial capital is incorporated herein by reference to Pre-Effective Amendment No. 1 to Registrant's Registration Statement No. 33-47287, Exhibit No. (13) as filed on July 9, 1992. (14) Not Applicable. (15) (a) Distribution Plan relating to the SwissKey Class Shares on behalf of each Series of The Brinson Funds dated November 20, 1995 is incorporated herein by reference to Post Effective Amendment No. 16 to Registrant's Registration Statement No. 33-4787, as Exhibit No. (15)(a) as electronically filed on February 15, 1996. (15) (b) Distribution Plan relating to the SwissKey Class Shares on behalf of each Series of The Brinson Funds dated July 31, 1995 is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No. (15) as filed September 20, 1995. (16) (a) Schedule for Computation of Performance Quotations on behalf of Brinson Global Fund, Brinson Global Equity Fund, Brinson Global Bond Fund, Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund and Brinson Non-U.S. Equity Fund is incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement No. 33-4787, Exhibit No. (16) as filed on September 20, 1995. (16) (b) Schedule for Computation of Performance Quotations on behalf of the U.S. Bond Fund is incorporated herein by reference to Post-Effective Amendment No. 16 to Registrant's Registration Statement No. 33-4787, Exhibit No. (16) as electronically filed on February 15, 1996. (17) Not Applicable. (18) Form of Multiple Class Plan relating to the Brinson Class and Swiss Key Class Shares on behalf of each Series of The Brinson Funds as presented to the Board of Trustees is incorporated herein by reference to Post-Effective No. 12/13 to Registrant's Registration Statement No. 33-47287. (19) Powers of Attorney are incorporated herein by reference to Post- Effective No. 11/12 to Registrants' Registration Statement No. 33-47287, Exhibit No. (18) as filed on March 17, 1995. ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT. -------------------------------------------------------------- None. ----- ITEM 26. NUMBER OF HOLDERS OF SECURITIES. -------------------------------- NUMBER OF RECORD HOLDERS TITLE OF CLASS AS OF AUGUST 1, 1996 -------------- ------------------------ Shares of Beneficial Interest par value $0.001 of: 1280 BRINSON CLASS OF THE BRINSON FUNDS ----------------------------------
Brinson Global Fund 403 Brinson Global Equity Fund 104 Brinson Global Bond Fund 28 Brinson U.S. Balanced Fund 28 Brinson U.S. Equity Fund 111 Brinson U.S. Bond Fund 6 Brinson Non-U.S. Equity Fund 100 SWISSKEY CLASS OF THE BRINSON FUNDS ----------------------------------- SwissKey Global Fund 59 SwissKey Global Equity Fund 367 SwissKey Global Bond Fund 27 SwissKey U.S. Balanced Fund 6 SwissKey U.S. Equity Fund 17 SwissKey U.S. Bond Fund 5 SwissKey Non-U.S. Equity Fund 19
ITEM 27. INDEMNIFICATION. ---------------- Article VII, Sections 2 and 3 of Registrant's Agreement and Declaration of Trust provide: Section 2. Indemnification and Limitation of Liability. The Trustees shall not be responsible or liable in any event for any neglect or wrong-doing of any officer, agent, employee, Manager or Principal Underwriter of the Trust, nor shall any Trustee be responsible for the act or omission of any other Trustee, and, subject to the provisions of the Bylaws, the Trust out of its assets may indemnify and hold harmless each and every Trustee and officer of the Trust from and against any and all claims, demands, costs, losses, expenses, and damages whatsoever arising out of or related to such Trustee's performance of his or her duties as a Trustee or officer of the Trust; provided that nothing herein contained shall indemnify, hold harmless or protect any Trustee or officer from or against any liability to the Trust or any Shareholder to which he or she would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. Every note, bond, contract, instrument, certificate or undertaking and every other act or thing whatsoever issued, executed or done by or on behalf of the Trust or the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been issued, executed or done only in or with respect to their or his or her capacity as Trustees or Trustee, and such Trustees or Trustee shall not be personally liable thereon. Section 3. Trustee's Good Faith Action, Expert Advice, No Bond or Surety. The exercise by the Trustees of their powers hereunder shall be binding upon everyone interested in or dealing with the Trust. A Trustee shall be liable to the Trust and to any Shareholder solely for his or her own wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee and shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust and shall be under no liability for any act or omission in accordance with such advice nor for failing to follow such advice. The Trustees shall not be required to give any bond as such, nor any surety if a bond is required. Section 4. Insurance. The Trustees shall be entitled and empowered to the fullest extent permitted by law to purchase with Trust assets insurance for liability and for all expenses, reasonably incurred or paid or expected to be paid by a Trustee or officer in connection with any claim, action, suit or proceeding in which he or she becomes involved by virtue of his or her capacity or former capacity with the Trust, whether or not the Trust would have the power to indemnify him or her against such liability under the provisions of this Article. Indemnification of Registrant's custodian, transfer agent, accounting services provider and administrator against certain stated liabilities is provided for in the following documents: (a) Section 12 of Accounting Services Agreement, between the Registrant and Fund/Plan Services, Inc., incorporated herein by reference to Post Effective No. 16 to Registrant's Registration Statement No. 33-47287, Exhibit 9(c) as filed on February 15, 1996 (b) Section 8 of Administration Agreement between the Registrant and Fund/Plan Services, Inc., incorporated herein by reference to Post Effective No. 16 to Registrant's Registration Statement No. 33-47287, Exhibit 9(b) as filed on February 15, 1996 (c) Section 14 of Custodian Agreement between the Registrant and Bankers Trust Company, incorporated herein by reference to Post Effective No. 13 to Registrant's Registration No. 33- 47287, Exhibit Nos. 8(a) and 8(b) as filed on September 20, 1995 (d) Section 19 of Shareholder Services Agreement between Registrant and Fund/Plan Services, Inc., incorporated herein by reference to Post Effective No. 16 to Registrant's Registration Statement No. 33-47287, Exhibit 9(a) as filed on February 15, 1996. (e) Section 8 of the Underwriting Agreement between Registrant and Fund/Plan Broker Services, Inc. are incorporated herein by reference to Post Effective No. 16 to Registrant's Registration Statement No. 33-47287, Exhibit No. (6) as filed on February 15, 1996. ITEM 28. BUSINESS AND OTHER CONNECTIONS OF ADVISOR. ------------------------------------------ Brinson Partners, Inc. provides investment advisory services consisting of portfolio management for a variety of individuals and institutions and as of June 30, 1996 had approximately $58 billion in assets under management. It presently acts as investment advisor to seven other investment companies, Brinson Relationship Funds, which includes six investment portfolios (series); Enterprise Accumulation Trust; Enterprise International Growth Portfolio; Fort Dearborn Income Securities, Inc.; Hirtle Callaghan International Trust; John Hancock Variable Series Trust - International Balanced Portfolio; and Pace Large Company Value Equity Investments. For information as to any other business, vocation or employment of a substantial nature in which each Trustee or officer of the Registrant's investment advisor is or has been engaged for his own account or in the capacity of Trustee, officer, employee, partner or trustee, reference is made to the Form ADV (File #34910) filed by it under the Investment Advisers Act of 1940, as amended. ITEM 29. PRINCIPAL UNDERWRITER. ---------------------- (a) Fund/Plan Broker Services, Inc. ("FPBS"), the principal underwriter for the Registrant's securities, currently acts as principal underwriter for the following entities: CT&T Funds Fairport Funds Farrell Alpha Strategies First Mutual Funds Focus Trust, Inc. The Home State PA Growth Fund IAA Trust Mutual Funds Matthews International Funds McM Funds Polynous Trust Sage/Tso Trust Smith Breeden Series Fund Smith Breeden Short Duration U.S. Government Fund Smith Breeden Trust The Stratton Funds, Inc. Stratton Growth Fund, Inc. Stratton Monthly Dividend Shares, Inc. The Timothy Plan (b) The table below sets forth certain information as to the underwriter's Directors, Officers and Control Persons and officers of the Registrant holding position with the Underwriter:
POSITION POSITION AND NAME AND PRINCIPAL AND OFFICES OFFICES WITH BUSINESS ADDRESS WITH UNDERWRITER REGISTRANT ------------------------------ ------------------- ------------ Kenneth J. Kempf Director, President None 2 West Elm Street and Principal Conshohocken, PA 19428-0874 Lynne M. Cannon Vice President and None 2 West Elm Street Principal Conshohocken, PA 19428-0874 Rocco J. Cavalieri Director and None 2 W. Elm Street Vice President Conshohocken, PA 19428-0874
Gerald J. Holland Director, None 2 West Elm Street Vice President Conshohocken, PA 19428-0874 and Principal Joseph M. O'Donnell, Esq. Director and None 2 W. Elm Street Vice President Conshohocken, PA 19428-0874 Sandra L. Adams Principal None 2 W. Elm Street Conshohocken, PA 19428-0874 Mary P. Efstration Secretary None 2 W. Elm Street Conshohocken, PA 19428-0874 John H. Leven Treasurer None 2 W. Elm Street Conshohocken, PA 19428-0874
James W. Stratton may be considered a control person of the Underwriter due to his direct or indirect ownership of Fund/Plan Services, Inc., the parent of the Underwriter. (c) Inapplicable. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS. --------------------------------- All records described in Section 31(a) of the 1940 Act and the Rules 17 CFR 270.31a-1 to 31a-31 promulgated thereunder, are maintained by the Trust's Investment Advisor, Brinson Partners, Inc., 209 South LaSalle Street, Chicago, IL 60604-1295, except for those maintained by the Fund's Custodian, Bankers Trust Company, c/o BTNY Services, Inc., 34 Exchange Place, Jersey City, NJ 07302 and the Fund's Administrator, Transfer, Redemption, Dividend Disbursing and Accounting Agent, Fund/Plan Services Inc., 2 W. Elm Street, Conshohocken, PA 19428. ITEM 31. MANAGEMENT SERVICES. -------------------- There are no management-related service contracts not discussed in Part A or Part B. ITEM 32. UNDERTAKINGS. ------------- (a) Inapplicable. (b) The Registrant, on behalf of Brinson U.S. Cash Management Fund and Brinson Short-Term Global Income Fund, undertakes to file a post-effective amendment to Registrant's Registration Statement under the Securities Act of 1933 within four to six months from the commencement of operations of such series. Registrant understands that such post-effective amendment will contain reasonably current financial statements which are not certified by independent public accountants. (c) The Registrant hereby undertakes to furnish each person to whom a Prospectus for one or more series of the Registrant is delivered with a copy of the relevant latest annual report to shareholders, upon request and without charge. (d) The Registrant hereby undertakes to promptly call a meeting of shareholders for the purpose of voting upon the question of removal of any Trustee when requested in writing to do so by the record holders of not less than 10 percent of the Registrant's outstanding shares and to assist its shareholders in accordance with the requirements of Section 16(c) of the Investment Company Act of 1940, as amended, relating to shareholder communications. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the requirements for effectiveness of this registration statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Post- Effective Amendment No. 17 to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Conshohocken and the Commonwealth of Pennsylvania, on the 29th day of August, 1996. THE BRINSON FUNDS By: E. Thomas McFarlan* President, Treasurer, and Principal Accounting Officer* Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 17 to Registrant's Registration Statement has been signed below by the following persons in the capacities and on the date(s) indicated.
E. THOMAS MCFARLAN* E. Thomas McFarlan August 29, 1996 President, Treasurer, Principal Accounting Officer WALTER E. AUCH* Walter E. Auch August 29, 1996 Trustee EDWARD M. ROOB* Edward M. Roob August 29, 1996 Trustee FRANK K. REILLY* Frank K. Reilly August 29, 1996 Trustee
- -------------------------- *By: /s/ Carolyn F. Mead, -------------------- as Attorney-in-Fact and Agent pursuant to Power of Attorney REGISTRATION NO. 33-47287 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 16 TO THE REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 AND THE SECURITIES ACT OF 1933 ON FORM N-1A THE BRINSON FUNDS THE BRINSON FUNDS & INDEX TO EXHIBITS TO FORM N-1A Exhibit Description of Sequentially Number Exhibit Numbered Page (99.B1) Certificate of Trust and Agreement and Declaration of Trust........................................... (99.B2) By-Laws............................................ (99.B5)(a-g) Investment Advisory Agreements on behalf of each Series of the Trust................................ (99.B11) Consent of Ernst & Young LLP....................... (99.B27) Financial Data Schedules on behalf of each Series and Class of the Trust............................. EX-99.B.1 2 CERTIFICATE OF TRUST OF THE BRINSON FUNDS Exhibit (99.B1) CERTIFICATE OF TRUST OF THE BRINSON FUNDS a Delaware Business Trust THIS Certificate of Trust of THE BRINSON FUNDS (the "Trust"), dated as of this 9th day of August, 1993, is being duly executed and filed, in order to form a business trust pursuant to the Delaware Business Trust Act (the "Act"), Del. Code Ann. tit. 12, (S)(S)3801-3819. 1. NAME. The name of the business trust formed hereby is "THE BRINSON FUNDS." 2. REGISTERED OFFICE AND REGISTERED AGENT. The Trust will become, prior to the issuance of beneficial interests, a registered investment company under the Investment Company Act of 1940, as amended. Therefore, in accordance with section 3807(b) of the Act, the Trust has and shall maintain in the State of Delaware a registered office and a registered agent for service of process. (a) REGISTERED OFFICE. The registered office of the Trust in Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801. (b) REGISTERED AGENT. The registered agent for service of process on the Trust in Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801. 3. LIMITATION OF LIABILITY. Pursuant to section 3804(a) of the Act, in the event that the Trust's governing instrument, as defined in section 3801(f) of the Act, creates one or more series as provided in section 3806(b)(2) of the Act, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series of the Trust shall be enforceable against the assets of such series only, and not against the assets of the Trust generally. IN WITNESS WHEREOF, the Trustees named below do hereby execute this Certificate of Trust as of the date first-above written. - --------------------------------- Gary P. Brinson 209 South LaSalle Street Chicago, IL 60604 - ---------------------------------- E. Thomas McFarlan 209 South LaSalle Street Chicago, IL 60604 - ---------------------------------- Edward C. Hamill 209 South LaSalle Street Chicago, IL 60604 - ---------------------------------- C. Roderick O'Neil P.O. Box 6728 Hartford, CT 06106 - ---------------------------------- Frank K. Reilly College of Business Administration University of Notre Dame Notre Dame, IN 46556 Exhibit (99.B1) con't Effective as of August 9, 1993 AGREEMENT AND DECLARATION OF TRUST of THE BRINSON FUNDS a Delaware Business Trust Principal Place of Business: 209 South LaSalle Street Chicago, Illinois 60604-1295
TABLE OF CONTENTS Page ARTICLE I................................................................... Name and Definitions................................................... Section 1. Name................................................... Section 2. Definitions............................................ (a) Trust............................................... (b) Trust Property...................................... (c) Trustees............................................ (d) Shares.............................................. (e) Shareholder......................................... (f) Person.............................................. (g) 1940 Act............................................ (h) Commission and Principal Underwriter................ (i) Declaration of Trust................................ (j) By-Laws............................................. (k) Interested Person................................... (1) Investment Manager.................................. (m) Series.............................................. ARTICLE II.................................................................. Purpose of Trust....................................................... ARTICLE III................................................................. Shares................................................................. Section 1. Division of Beneficial Interest........................ Section 2. Ownership of Shares.................................... Section 3. Investments in the Trust............................... Section 4. Status of Shares and Limitation of Personal Liability.............................................. Section 5. Power of Board of Trustees to Change Provisions Relating to Shares..................................... Section 6. Establishment and Designation of Shares................ (a) Assets Held with Respect to a Particular Series.............................................. (b) Liabilities Held with Respect to a Particular Series.............................................. (c) Dividends, Distributions, Redemptions, and Repurchases..................................... (d) Voting.............................................. (e) Equality............................................ (f) Fractions........................................... (g) Exchange Privilege.................................. (h) Combination of Series............................... (i) Elimination of Series...............................
Page ARTICLE IV.................................................................. The Board of Trustees.................................................. Section 1. Number, Election and Tenure............................ Section 2. Effect of Death, Resignation, etc. of a Trustee........ Section 3. Powers................................................. Section 4. Payment of Expenses by the Trust....................... Section 5. Ownership of Assets of the Trust....................... Section 6. Service Contracts...................................... ARTICLE V................................................................... Shareholders' Voting Powers and Meetings............................... Section 1. Voting Powers.......................................... Section 2. Voting Power and Meetings.............................. Section 3. Quorum and Required Vote............................... Section 4. Action by Written Consent.............................. Section 5. Record Dates........................................... ARTICLE VI.................................................................. Net Asset Value, Distributions, and Redemptions....................... Section 1. Determination of Net Asset Value, Net Income, and Distributions.......................... Section 2. Redemptions and Repurchases............................ Section 3. Redemptions at the Option of the Trust................. Section 4. Transfer of Shares..................................... ARTICLE VII................................................................. Compensation and Limitation of Liability............................... Section 1. Compensation of Trustees............................... Section 2. Indemnification and Limitation of Liability............ Section 3. Trustee's Good Faith Action, Expert Advice, No Bond or Surety...................................... Section 4. Insurance.............................................. ARTICLE VIII................................................................ Miscellaneous.......................................................... Section 1. Liability of Third Persons Dealing with Trustees.......................................... Section 2. Termination of Trust or Series......................... Section 3. Merger and Consolidation............................... Section 4. Amendments............................................. Section 5. Filing of Copies, References, Headings.................
Page Section 6. Applicable Law......................................... Section 7. Provisions in Conflict with Law or Regulations......... Section 8. Business Trust Only.................................... Section 9. Use of the Name "Brinson"..............................
AGREEMENT AND DECLARATION OF TRUST ================================== OF THE BRINSON FUNDS WHEREAS, this AGREEMENT AND DECLARATION OF TRUST is made and entered into as of the date set forth below by the Trustees named hereunder for the purpose of forming a Delaware business trust in accordance with the provisions hereinafter set forth, NOW, THEREFORE, the Trustees hereby direct that a Certificate of Trust be filed with the Office of the Secretary of State of the State of Delaware and do hereby declare that the Trustees will hold IN TRUST all cash, securities and other assets which the Trust now possesses or may hereafter acquire from time to time in any manner and manage and dispose of the same upon the following terms and conditions for the pro rata benefit of the holders of Shares in this Trust. ARTICLE I. Name and Definitions Section 1. Name. This trust shall be known as "THE BRINSON FUNDS" and the Trustees shall conduct the business of the Trust under that name or any other name as they may from time to time determine. Section 2. Definitions. Whenever used herein, unless otherwise required by the context or specifically provided: (a) The "Trust" refers to the Delaware business trust established by this Agreement and Declaration of Trust, as amended from time to time; (b) The "Trust Property" means any and all property, real or personal, tangible or intangible, which is owned or held by or for the account of the Trust; (c) "Trustees" refers to the persons who have signed this Agreement and Declaration of Trust, so long as they continue in office in accordance with the terms hereof, and all other persons who may from time to time be duly elected or appointed to serve on the Board of Trustees in accordance with the provisions hereof, and reference herein to a Trustee or the Trustees shall refer to such person or persons in their capacity as trustees hereunder; (d) "Shares" means the shares of beneficial interest into which the beneficial interest in the Trust shall be divided from time to time and includes fractions of Shares as well as whole Shares; (e) "Shareholder" means a record owner of outstanding Shares; (f) "Person" means and includes individuals, corporations, partnerships, trusts, foundations, plans, associations, joint ventures, estates and other entities, whether or not legal entities, and governments and agencies and political subdivisions thereof, whether domestic or foreign; (g) The "1940 Act" refers to the Investment Company Act of 1940 and the Rules and Regulations thereunder, all as amended from time to time. References herein to specific sections of the 1940 Act shall be deemed to include such Rules and Regulations as are applicable to such sections as determined by the Trustees or their designees; (h) The terms "Commission" and "Principal Underwriter" shall have the respective meanings given them in Section 2(a)(7) and Section (2)(a)(29) of the 1940 Act; (i) "Declaration of Trust" shall mean this Agreement and Declaration of Trust, as amended or restated from time to time; (j) "By-Laws" shall mean the By-Laws of the Trust as amended from time to time; (k) The term "Interested Person" has the meaning given it in Section 2(a)(19) of the 1940 Act; (l) "Investment Manager" or "Manager" means a party furnishing services to the Trust pursuant to any contract described in Article IV, Section 7(a) hereof; (m) "Series" refers to each Series of Shares established and designated under or in accordance with the provisions of Article III. ARTICLE II. Purpose of Trust The purpose of the Trust is to conduct, operate and carry on the business of a management investment company registered under the 1940 Act through one or more Series investing primarily in securities. ARTICLE III. Shares Section 1. Division of Beneficial Interest. The beneficial interest in the Trust shall at all times be divided into an unlimited number of Shares, with a par value of $ .001 per Share. The Trustees may authorize the division of Shares into separate Series and the division of Series into separate classes of Shares. The different Series shall be established and designated, and the variations in the relative rights and preferences as between the different Series shall be fixed and determined, by the Trustees. If only one Series shall be established, the Shares shall have the rights and preferences provided for herein and in Article III, Section 6 hereof to the extent relevant and not otherwise provided for herein. Subject to the provisions of Section 6 of this Article III, each Share shall have voting rights as provided in Article V hereof, and holders of the Shares of any Series shall be entitled to receive dividends, when, if and as declared with respect thereto in the manner provided in Article VI, Section 1 hereof. No Share shall have any priority or preference over any other Share of the same Series with respect to dividends or distributions of the Trust or otherwise. All dividends and distributions shall be made ratably among all Shareholders of a Series (or class) from the assets held with respect to such Series according to the number of Shares of such Series (or class) held of record by such Shareholders on the record date for any dividend or distribution or on the date of termination of the Trust, as the case may be. Shareholders shall have no preemptive or other right to subscribe to any additional Shares or other securities issued by the Trust or any Series. The Trustees may from time to time divide or combine the Shares of a Series into a greater or lesser number of Shares of such Series without thereby materially changing the proportionate beneficial interest of such Shares in the assets held with respect to that Series or materially affecting the rights of Shares of any other Series. Section 2. Ownership of Shares. The ownership of Shares shall be recorded on the books of the Trust or a transfer or similar agent for the Trust, which books shall be maintained separately for the Shares of each Series. No certificates evidencing the ownership of Shares shall be issued except as the Board of Trustees may otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the transfer of Shares of each Series (or class) and similar matters. The record books of the Trust as kept by the Trust or any transfer or similar agent, as the case may be, shall be conclusive as to the identity of the Shareholders of each Series and as to the number of Shares of each Series held from time to time by each Shareholder. Section 3. Investments in the Trust. Investments may be accepted by the Trust from such Persons, at such times, on such terms, and for such consideration as the Trustees from time to time may authorize. Each investment shall be credited to the Shareholder's account in the form of full and fractional Shares of the Trust, in such Series (or class) as the purchaser shall select, at the net asset value per Share next determined for such Series (or class) after receipt of the investment; provided, however, that the Trustees may, in their sole discretion, impose a sales charge or reimbursement fee upon investments in the Trust. Section 4. Status of Shares and Limitation of Personal Liability. Shares shall be deemed to be personal property giving only the rights provided in this instrument and the By-Laws of the Trust. Every Shareholder by virtue of having become a Shareholder shall be held to have expressly assented and agreed to the terms hereof. The death of a Shareholder during the existence of the Trust shall not operate to terminate the Trust, nor entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but shall entitle such representative only to the rights of said deceased Shareholder under this Declaration of Trust. Ownership of Shares shall not entitle a Shareholder to any title in or to the whole or any part of the Trust Property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders as partners or joint venturers. Neither the Trust nor the Trustees, nor any officer, employee or agent of the Trust shall have any power to bind personally any Shareholder, or to call upon any Shareholder for the payment of any sum of money or assessment whatsoever other than such as the Shareholder may at any time agree to pay. Section 5. Power of Board of Trustees to Change Provisions Relating to Shares. Notwithstanding any other provision of this Declaration of Trust to the contrary, and without limiting the power of the Board of Trustees to amend the Declaration of Trust as provided elsewhere herein, the Board of Trustees shall have the power to amend this Declaration of Trust, at any time and from time to time, in such manner as the Board of Trustees may determine in their sole discretion, without the need for Shareholder action, so as to add to, delete, replace or otherwise modify any provisions relating to the Shares contained in this Declaration of Trust, provided that before adopting any such amendment without Shareholder approval the Board of Trustees shall determine that it is consistent with the fair and equitable treatment of all Shareholders and that Shareholder approval is not required by the 1940 Act or other applicable law. If Shares have been issued, Shareholder approval shall be required to adopt any amendments to this Declaration of Trust which would adversely affect to a material degree the rights and preferences of the Shares of any Series (or class) or to increase or decrease the par value of the Shares of any Series (or class). Section 6. Establishment and Designation of Shares. The establishment and designation of any Series (or class) of Shares shall be effective upon the adoption by a majority of the Trustees, of a resolution which sets forth such establishment and designation and the relative rights and preferences of such Series (or class). Each such resolution shall be incorporated herein by reference upon adoption. Shares of each Series (or class) established pursuant to this Section 6, unless otherwise provided in the resolution establishing such Series, shall have the following relative rights and preferences: (a) Assets Held with Respect to a Particular Series. All consideration received by the Trust for the issue or sale of Shares of a Series, including dividends and distributions paid by, and reinvested in, such Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof from whatever source derived, including, without limitation, any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably be held with respect to that Series for all purposes, subject only to the rights of creditors, and shall be so recorded upon the books of account of the Trust. Such consideration, assets, income, earnings, profits and proceeds thereof, from whatever source derived, including, without limitation, any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds, in whatever form the same may be, are herein referred to as "assets held with respect to" that Series. In the event that there are any assets, income, earnings, profits and proceeds thereof, funds or payments which are not readily identifiable as assets held with respect to any particular Series (collectively "General Assets"), the Trustees shall allocate such General Assets to, between or among any one or more of the Series in such manner and on such basis as the Trustees, in their sole discretion, deem fair and equitable, and any General Asset so allocated to a particular Series shall be held with respect to that Series. Each such allocation by the Trustees shall be conclusive and binding upon the Shareholders of all Series for all purposes in absence of manifest error. (b) Liabilities Held with Respect to a Particular Series. The assets of the Trust held with respect to each Series shall be charged with the liabilities of the Trust with respect to such Series and all expenses, costs, charges and reserves attributable to such Series, and any general liabilities of the Trust which are not readily identifiable as being held in respect of a Series shall be allocated and charged by the Trustees to and among any one or more Series in such manner and on such basis as the Trustees in their sole discretion deem fair and equitable. The liabilities, expenses, costs, charges, and reserves so charged to a Series are herein referred to as "liabilities held with respect to" that Series. Each allocation of liabilities, expenses, costs, charges and reserves by the Trustees shall be conclusive and binding upon the holders of all Series for all purposes in absence of manifest error. All Persons who have extended credit which has been allocated to a particular Series, or who have a claim or contract which has been allocated to a Series, shall look exclusively to the assets held with respect to such Series for payment of such credit, claim, or contract. In the absence of an express agreement so limiting the claims of such creditors, claimants and contracting parties, each creditor, claimant and contracting party shall be deemed nevertheless to have agreed to such limitation unless an express provision to the contrary has been incorporated in the written contract or other document establishing the contractual relationship. (c) Dividends Distributions. Redemptions and Repurchases. No dividend or distribution including, without limitation, any distribution paid upon termination of the Trust or of any Series (or class) with respect to, or any redemption or repurchase of, the Shares of any Series (or class) shall be effected by the Trust other than from the assets held with respect to such Series, nor shall any Shareholder of any Series otherwise have any right or claim against the assets held with respect to any other Series except to the extent that such Shareholder has such a right or claim hereunder as a Shareholder of such other Series. The Trustees shall have full discretion to determine which items shall be treated as income and which items as capital; and each such determination and allocation shall be conclusive and binding upon the Shareholders in absence of manifest error. (d) Voting. All Shares of the Trust entitled to vote on a matter shall vote without differentiation between the separate Series on a one-vote- per-Share basis; provided however, if a matter to be voted on affects only the interests of not all Series (or class of a Series), then only the Shareholders of such affected Series (or class) shall be entitled to vote on the matter. (e) Equality. All the Shares of each Series shall represent an equal proportionate undivided interest in the assets held with respect to such Series (subject to the liabilities of such Series and such rights and preferences as may have been established and designated with respect to classes of Shares within such Series), and each Share of a Series shall be equal to each other Share of such Series. (f) Fractions. Any fractional Share of a Series shall have proportionately all the rights and obligations of a whole share of such Series, including rights with respect to voting, receipt of dividends and distributions and redemption of Shares. (g) Exchange Privilege. The Trustees shall have the authority to provide that the holders of Shares of any Series shall have the right to exchange such Shares for Shares of one or more other Series in accordance with such requirements and procedures as may be established by the Trustees. (h) Combination of Series. The Trustees shall have the authority, without the approval of the Shareholders of any Series unless otherwise required by applicable law, to combine the assets and liabilities held with respect to any two or more Series into assets and liabilities held with respect to a single Series. (i) Elimination of Series. At any time that there are no Shares outstanding of a Series (or class), the Trustees may abolish such Series (or class). ARTICLE IV. The Board of Trustees Section 1. Number Election and Tenure. The number of Trustees constituting the Board of Trustees shall be fixed from time to time by a written instrument signed, or by resolution approved at a duly constituted meeting, by a majority of the Board of Trustees, provided, however, that the number of Trustees shall in no event be less than one (1) nor more than fifteen (15). Subject to the requirements of Section 16(a) of the 1940 Act, the Board of Trustees, by action of a majority of the then Trustees at a duly constituted meeting, may fill vacancies in the Board of Trustees and remove Trustees with or without cause. Each Trustee shall serve during the continued lifetime of the Trust until he or she dies, resigns, is declared bankrupt or incompetent by a court of competent jurisdiction, or is removed. Any Trustee may resign at any time by written instrument signed by him and delivered to any officer of the Trust or to a meeting of the Trustees. Such resignation shall be effective upon receipt unless specified to be effective at some other time. Except to the extent expressly provided in a written agreement with the Trust, no Trustee resigning and no Trustee removed shall have any right to any compensation for any period following his or her resignation or removal, or any right to damages or other payment on account of such removal. Any Trustee may be removed at any meeting of Shareholders by a vote of two-thirds of the outstanding Shares of the Trust. A meeting of Shareholders for the purpose of electing or removing one or more Trustees may be called (i) by the Trustees upon their own vote, or (ii) upon the demand of Shareholders owning 10% or more of the Shares of the Trust in the aggregate. Section 2. Effect of Death Resignation etc. of a Trustee. The death, declination, resignation, retirement, removal, or incapacity of one or more Trustees, or all of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Declaration of Trust. Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is filled as provided in Article IV, Section 1, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration of Trust. Section 3. Powers. Subject to the provisions of this Declaration of Trust, the business of the Trust shall be managed by the Board of Trustees, and such Board shall have all powers necessary or convenient to carry out that responsibility including the power to engage in transactions of all kinds on behalf of the Trust. Trustees, in all instances, shall act as principals and are and shall be free from the control of the Shareholders. The Trustees shall have full power and authority to do any and all acts and to make and execute any and all contracts, documents and instruments that they may consider desirable, necessary or appropriate in connection with the administration of the Trust. Without limiting the foregoing, the Trustees may: adopt, amend and repeal By-Laws not inconsistent with this Declaration of Trust providing for the regulation and management of the affairs of the Trust; elect and remove such officers and appoint and terminate such agents as they consider appropriate; appoint from their own number and establish and terminate one or more committees consisting of two or more Trustees who may exercise the powers and authority of the Board of Trustees to the extent that the Trustees determine; employ one or more custodians of the assets of the Trust and may authorize such custodians to employ subcustodians and to deposit all or any part of such assets in a system or systems for the central handling of securities or with a Federal Reserve Bank, retain a transfer agent or a shareholder servicing agent, or both; provide for the issuance and distribution of Shares by the Trust directly or through one or more Principal Underwriters or otherwise; redeem, repurchase and transfer Shares pursuant to applicable law; set record dates for the determination of Shareholders with respect to various matters; declare and pay dividends and distributions to Shareholders of each Series from the assets of such Series; establish from time to time, in accordance with the provisions of Article III, Section 6 hereof, any Series of Shares, each such Series to operate as a separate and distinct investment medium and with separately defined investment objectives and policies and distinct investment purpose; and in general delegate such authority as they consider desirable to any officer of the Trust, to any committee of the Trustees and to any agent or employee of the Trust or to any such custodian, transfer or shareholder servicing agent, Investment Manager or Principal Underwriter. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of this Declaration of Trust, the presumption shall be in favor of a grant of power to the Trustees and unless otherwise specified herein or required by the 1940 Act or other applicable law, any action by the Board of Trustees shall be deemed effective if approved or taken by a majority of the Trustees then in office or a majority of any duly constituted committee of Trustees. Any action required or permitted to be taken at any meeting of the Board of Trustees, or any committee thereof, may be taken without a meeting if all members of the Board of Trustees or committee tas the case may be consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board of Trustees, or committee, except as otherwise provided in the 1940 Act. Without limiting the foregoing, the Trust shall have power and authority: (a) To invest and reinvest cash and cash items, to hold cash uninvested, and to subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold, pledge, sell, assign, transfer, exchange, distribute, write options on, lend or otherwise deal in or dispose of contracts for the future acquisition or delivery of all types of securities, futures contracts and options thereon, and forward currency contracts of every nature and kind, including, without limitation, all types of bonds, debentures, stocks, preferred stocks, negotiable or non-negotiable instruments, obligations, evidences of indebtedness, certificates of deposit or indebtedness, commercial paper, repurchase agreements, bankers' acceptances, and other securities of any kind, issued, created, guaranteed, or sponsored by any and all Persons, including, without limitation, states, territories, and possessions of the United States and the District of Columbia and any political subdivision, agency, or instrumentality thereof, any foreign government or any political subdivision of the U.S. Government or any foreign government, or any international instrumentality or organization, or by any bank or savings institution, or by any corporation or organization organized under the laws of the United States or of any state, territory, or possession thereof, or by any corporation or organization organized under any foreign law, or in "when issued" contracts for any such securities, futures contracts and options thereon, and forward currency contracts, to change the investments of the assets of the Trust; and to exercise any and all rights, powers, and privileges of ownership or interest in respect of any and all such investments of every kind and description, including, without limitation, the right to consent and otherwise act with respect thereto, with power to designate one or more Persons, to exercise any of said rights, powers, and privileges in respect of any of said instruments; (b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or write options with respect to or otherwise deal in any property rights relating to any or all of the assets of the Trust or any Series; (c) To vote or give assent, or exercise any rights of ownership, with respect to stock or other securities or property; and to execute and deliver proxies or powers of attorney to such person or persons as the Trustees shall deem proper, granting to such person or persons such power and discretion with relation to securities or property as the Trustees shall deem proper; (d) To exercise powers and right of subscription or otherwise which in any manner arise out of ownership of securities; (e) To hold any security or property in a form not indicating that it is trust property, whether in bearer, unregistered or other negotiable form, or in its own name or in the name of a custodian or subcustodian or a nominee or nominees or otherwise or to authorize the custodian or a subcustodian or a nominee or nominees to deposit the same in a securities depository, subject in each case to the applicable provisions of the 1940 Act; (f) To consent to, or participate in, any plan for the reorganlzatlon, consolidation or merger of any corporation or issuer of any security which is held in the Trust; to consent to any contract, lease, mortgage, purchase or sale of property by such corporation or issuer; and to pay calls or subscriptions with respect to any security held in the Trust; (g) To join with other security holders in acting through a committee, depositary, voting trustee or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depositary or trustee as the Trustees shall deem proper; (h) To litigate, compromise, arbitrate, settle or otherwise adjust, claims in favor of or against the Trust or a Series, or any matter in controversy, including but not limited to claims for taxes; (i) To enter into joint ventures, general or limited partnerships and any other combinations or associations; (j) To borrow funds or other property in the name of the Trust or Series exclusively for Trust purposes; (k) To endorse or guarantee the payment of any notes or other obligations of any Person; to make contracts of guaranty or suretyship, or otherwise assume liability for payment thereof; (l) To purchase and pay for entirely out of Trust Property such insurance as the Trustees may deem necessary, desirable or appropriate for the conduct of the business, including, without limitation, insurance policies insuring the assets of the Trust or payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, Investment Manager, principal underwriters, or independent contractors of the Trust, individually against all claims and liabilities of every nature arising by reason of holding Shares, holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such Person as Trustee, officer, employee, agent, Investment Manager, Principal Underwriter, or independent contractor, including any action taken or omitted that may be determined to constitute negligence, whether or not the Trust would have the power to indemnify such Person against liability; and (m) To adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust. The Trust shall not be limited to investing in obligations maturing before the possible termination of the Trust or one or more of its Series. The Trust shall not in any way be bound or limited by any present or future law or custom in regard to investment by fiduciaries. The Trust shall not be required to obtain any court order to deal with any assets of the Trust or take any other action hereunder. Section 4. Payment of Expenses by the Trust. Subject to the provisions of Article III, Section 6(b), the Trustees are authorized to pay or cause to be paid out of the principal or income of the Trust or Series, or partly out of the principal and partly out of income, and to charge or allocate the same to, between or among such one or more of the Series that may be established or designated pursuant to Article III, Section 6, all expenses, fees, charges, taxes and liabilities incurred or arising in connection with the Trust or Series, or in connection with the management thereof, including, but not limited to, the Trustees' compensation and such expenses and charges for the services of the Trust's officers, employees, Investment Manager, Principal Underwriter, auditors, counsel, custodian, transfer agent, Shareholder servicing agent, and such other agents or independent contractors and such other expenses and charges as the Trustees may deem necessary or proper to incur. Section 5. Ownership of Assets of the Trust. Title to all of the assets of the Trust shall at all times be considered as vested in the Trust, except that the Trustees shall have power to cause legal title to any Trust Property to be held by or in the name of one or more of the Trustees, or in the name of the Trust, or in the name of any other Person as nominee, on such terms as the Trustees may determine. Upon the resignation, incompetency, bankruptcy, removal, or death of a Trustee he or she shall automatically cease to have any such title in any of the Trust Property, and the title of such Trustee in the Trust Property shall vest automatically in the remaining Trustees. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered. The Trustees may determine that the Trust or the Trustees, acting for and on behalf of the Trust, shall be deemed to hold beneficial ownership of any income earned on the securities owned by the Trust, whether domestic or foreign. Section 6. Service Contracts. (a) The Trustees may, at any time and from time to time, contract for exclusive or nonexclusive advisory, management and/or administrative services for the Trust or for any Series with any Person; and any such contract may contain such other terms as the Trustees may determine, including without limitation, authority for the Investment Manager to determine from time to time without prior consultation with the Trustees what investments shall be purchased, held, sold or exchanged and what portion, if any, of the assets of the Trust shall be held uninvested and to make changes in the Trust's investments, and such other responsibilities as may specifically be delegated to such Person. (b) The Trustees may also, at any time and from time to time, contract with any Persons, appointing such Persons exclusive or nonexclusive distributor or Principal Underwriter for the Shares of one or more of the Series or other securities to be issued by the Trust. Every such contract may contain such other terms as the Trustees may determine. (c) The Trustees are also empowered, at any time and from time to time, to contract with any Persons, appointing such Person(s) to serve as custodian(s), transfer agent and/or shareholder servicing agent for the Trust or one or more of its Series. Every such contract shall comply with such terms as may be required by the Trustees. (d) The Trustees are further empowered, at any time and from time to time, to contract with any Persons to provide such other services to the Trust or one or more of the Series, as the Trustees determine to be in the best interests of the Trust and the applicable Series. (e) The fact that: (i) any of the Shareholders, Trustees, or officers of the Trust is a shareholder, director, officer, partner, trustee, employee, Manager, adviser, Principal Underwriter, distributor, or affiliate or agent of or for any Person with which an advisory, management or administration contract, or Principal Underwriter's or distributor's contract, or transfer, shareholder servicing or other type of service contract may be made, or that (ii) any Person with which an advisory, management or administration contract or Principal Underwriter's or distributor's contract, or transfer, shareholder servicing or other type of service contract may be made also has an advisory, management or administration contract, or principal underwriter's or distributor's contract, or transfer, shareholder servicing or other service contract, or has other business or interests with any other Person, shall not affect the validity of any such contract or disqualify any Shareholder, Trustee or officer of the Trust from voting upon or executing the same, or create any liability or accountability to the Trust or its Shareholders, provided approval of each such contract is made pursuant to the applicable requirements of the 1940 Act. ARTICLE V. Shareholders' Voting Powers and Meetings Section 1. Voting Powers. Subject to the provisions of Article III, Sections 5 and 6(d), the Shareholders shall have right to vote only (i) for the election or removal of Trustees as provided in Article IV, Section 1, and (ii) with respect to such additional matters relating to the Trust as may be required by the applicable provisions of the 1940 Act, including Section 16(a) thereof, and (iii) on such other matters as the Trustees may consider necessary or desirable. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. Section 2. Voting Power and Meetings. Meetings of the Shareholders may be called by the Trustees for the purposes described in Section 1 of this Article V. A meeting of Shareholders may be held at any place designated by the Trustees. Written notice of any meeting of Shareholders shall be given or caused to be given by the Trustees by delivering personally or mailing such notice not more than ninety (90), nor less than ten (10) days before such meeting, postage prepaid, stating the time and place of the meeting, to each Shareholder at the Shareholder's address as it appears on the records of the Trust. Whenever notice of a meeting is required to be given to a Shareholder under this Declaration of Trust, a written waiver thereof, executed before or after the meeting by such Shareholder or his or her attorney "hereunto authorized and filed with the records of the meeting, or actual attendance at the meeting of Shareholders in person or by proxy, shall be deemed equivalent to such notice. Section 3. Quorum and Required Vote. Except when a larger quorum is required by the applicable provisions of the 1940 Act, the presence in person or by proxy of a majority of the Shares entitled to vote on a matter shall constitute a quorum at a Shareholders' meeting. Any meeting of Shareholders may be adjourned from time to time by a majority of the votes properly cast upon the question of adjourning a meeting to another date and time, whether or not a quorum is present, and the meeting may be held as adjourned within a reasonable time after the date set for the original meeting without further notice. Subject to the provisions of Article III, Section 6(d) and the applicable provisions of the 1940 Act, when a quorum is present at any meeting, a majority of the Shares voted shall decide any questions except only a plurality vote shall be necessary to elect Trustees. Section 4. Action by Written Consent. Any action taken by Shareholders may be taken without a meeting if all the holders of Shares entitled to vote on the matter are provided with not less than 7 days written notice thereof and written consent to the action is filed with the records of the meetings of Shareholders by the holders of the number of shares that would be required to approve the matter as provided in Article V, Section 3. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders. Section 5. Record Dates. For the purpose of determining the Shareholders who are entitled to vote or act at any meeting or any adjournment thereof, the Trustees may fix a time, which shall be not more than ninety (90) nor less than ten (10) days before the date of any meeting of Shareholders, as the record date for determining the Shareholders having the right to notice of and to vote at such meeting and any adjournment thereof, and in such case only Shareholders of record on such record date shall have such right, notwithstanding any transfer of shares on the books of the Trust after the record date. For the purpose of determining the Shareholders who are entitled to receive payment of any dividend or of any other distribution, the Trustees may fix a date, which shall be before the date for the payment of such dividend or distribution, as the record date for determining the Shareholders having the right to receive such dividend or distribution. Nothing in this Section shall be construed as precluding the Trustees from setting different record dates for different Series. ARTICLE VI. Net Asset Value, Distributions, and Redemptions Section 1. Determination of Net Asset Value Net Income and Distributions. Subject to Article III, Section 6 hereof, the Trustees, in their absolute discretion, may prescribe and shall set forth in the By-laws or in a duly adopted resolution of the Trustees such bases and time for determining the per Share net asset value of the Shares of any Series and the declaration and payment of dividends and distributions on the Shares of any Series, as they may deem necessary or desirable. Section 2. Redemptions and Repurchases. The Trust shall purchase such Shares as are offered by any Shareholder for redemption, upon receipt by the Trust or a Person designated by the Trust that the Trust redeem such Shares or in accordance with such procedures for redemption as the Trustees may from time to time authorize; and the Trust will pay therefor the net asset value thereof, in accordance with the By-Laws and the applicable provisions of the 1940 Act. Payment for said Shares shall be made by the Trust to the Shareholder within seven days after the date on which the request for redemption is received in proper form. The obligation set forth in this Section 2 is subject to the provision that in the event that any time the New York Stock Exchange (the "Exchange") is closed for other than weekends or holidays, or if permitted by the Rules of the Commission during periods when trading on the Exchange is restricted or during any emergency which makes it impracticable for the Trust to dispose of the investments of the applicable Series or to determine fairly the value of the net assets held with respect to such Series or during any other period permitted by order of the Commission for the protection of investors, such obligations may be suspended or postponed by the Trustees. The redemption price may in any case or cases be paid in cash or wholly or partly in kind in accordance with Rule 18f-1under the 1940 Act if the Trustees determine that such payment is advisable in the interest of the remaining Shareholders of the Series of which the Shares are being redeemed. Subject to the foregoing, the selection and quantity of securities or other property so paid or delivered as all or part of the redemption price shall be determined by or under authority of the Trustees. In no case shall the Trust be liable for any delay of any corporation or other Person in transferring securities selected for delivery as all or part of any payment in kind. Section 3. Redemptions at the Option of the Trust. The Trust shall have the right, at its option, upon 60 days notice to the affected Shareholder at any time to redeem Shares of any Shareholder at the net asset value thereof as described in Section 1 of this Article VI: (i) if at such time such Shareholder owns Shares of any Series having an aggregate net asset value of less than a minimum value determined from time to time by the Trustees; or (ii) to the extent that such Shareholder owns Shares of a Series equal to or in excess of a maximum percentage of the outstanding Shares of such Series determined from time to time by the Trustees; or (iii) to the extent that such Shareholder owns Shares equal to or in excess of a maximum percentage, determined from time to time by the Trustees, of the outstanding Shares of the Trust. Section 4. Transfer of Shares. The Trust shall transfer shares held of record by any Person to any other Person upon receipt by the Trust or a Person designated by the Trust of a written request therefore in such form and pursuant to such procedures as may be approved by the Trustees. ARTICLE VII. Compensation and Limitation of Liability Section 1. Compensation of Trustees. The Trustees as such shall be entitled to reasonable compensation from the Trust, and they may fix the amount of such compensation from time to time. Nothing herein shall in any way prevent the employment of any Trustee to provide advisory, management, legal, accounting, investment banking or other services to the Trust and to be specially compensated for such services by the Trust. Section 2. Indemnification and Limitation of Liability. The Trustees shall not be responsible or liable in any event for any neglect or wrong-doing of any officer, agent, employee, Manager or Principal Underwriter of the Trust, nor shall any Trustee be responsible for the act or omission of any other Trustee, and, subject to the provisions of the Bylaws, the Trust out of its assets may indemnify and hold harmless each and every Trustee and officer of the Trust from and against any and all claims, demands, costs, losses, expenses, and damages whatsoever arising out of or related to such Trustee's performance of his or her duties as a Trustee or officer of the Trust; provided that nothing herein contained shall indemnify, hold harmless or protect any Trustee or officer from or against any liability to the Trust or any Shareholder to which he or she would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. Every note, bond, contract, instrument, certificate or undertaking and every other act or thing whatsoever issued, executed or done by or on behalf of the Trust or the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been issued, executed or done only in or with respect to their or his or her capacity as Trustees or Trustee, and such Trustees or Trustee shall not be personally liable thereon. Section 3. Trustee's Good Faith Action Expert Advice. No Bond or Surety. The exercise by the Trustees of their powers hereunder shall be binding upon everyone interested in or dealing with the Trust. A Trustee shall be liable to the Trust and to any Shareholder solely for his or her own wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee, and shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust, and shall be under no liability for any act or omission in accordance with such advice nor for failing to follow such advice. The Trustees shall not be required to give any bond as such, nor any surety if a bond is required. Section 4. Insurance. The Trustees shall be entitled and empowered to the fullest extent permitted by law to purchase with Trust assets insurance for liability and for all expenses reasonably incurred or paid or expected to be paid by a Trustee or officer in connection with any claim, action, suit or proceeding in which he or she becomes involved by virtue of his or her capacity or former capacity with the Trust, whether or not the Trust would have the power to indemnify him or her against such liability under the provisions of this Article. ARTICLE VIII. Miscellaneous Section 1. Liability of Third Persons Dealing with Trustees. No Person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees or to see to the application of any payments made or property transferred to the Trust or upon its order. Section 2. Termination of Trust or Series. Unless terminated as provided herein, the Trust shall continue without limitation of time. The Trust may be terminated at any time by the Trustees upon 60 days prior written notice to the Shareholders. Any Series may be terminated at any time by the Trustees upon 60 days prior written notice to the Shareholders of that Series. Upon termination of the Trust (or any Series, as the case may be), after paying or otherwise providing for all charges, taxes, expenses and liabilities held, severally, with respect to each Series (or the applicable Series, as the case may be), whether due or accrued or anticipated as may be determined by the Trustees, the Trust shall, in accordance with such procedures as the Trustees consider appropriate, reduce the remaining assets held, severally, with respect to each Series (or the applicable Series, as the case may be), to distributable form in cash or shares or other securities, and any combination thereof, and distribute the proceeds held with respect to each Series (or the applicable Series, as the case may be), to the Shareholders of that Series, as a Series, ratably according to the number of Shares of that Series held by the several Shareholders on the date of termination. Section 3. Merger and Consolidation. The Trustees may cause (i) the Trust or one or more of its Series to the extent consistent with applicable law to be merged into or consolidated with another Trust, series or Person, (ii) the Shares of the Trust or any Series to be converted into beneficial interests in another business trust (or series thereof), (iii) the Shares to be exchanged for assets or property under or pursuant to any state or federal statute to the extent permitted by law or (iv) a sale of assets of the Trust or one or more of its Series. Such merger or consolidation, Share conversion, Share exchange or sale of assets must be authorized by vote as provided in Article V, Section 3 herein; provided that in all respects not governed by statute or applicable law, the Trustees shall have power to prescribe the procedure necessary or appropriate to accomplish a sale of assets, Share exchange, merger or consolidation including the power to create one or more separate business trusts to which all or any part of the assets, liabilities, profits or losses of the Trust may be transferred and to provide for the conversion of Shares of the Trust or any Series into beneficial interests in such separate business trust or trusts (or series thereof). Section 4. Amendments. This Declaration of Trust may be restated and/or amended at any time by an instrument in writing signed by a majority of the Trustees then holding office. Any such restatement and/or amendment hereto shall be effective immediately upon execution and approval. The Certificate of Trust of the Trust may be restated and/or amended by a similar procedure, and any such restatement and/or amendment shall be effective immediately upon filing with the Office of the Secretary of State of the State of Delaware or upon such future date as may be stated therein. Section 5. Filing of copies' References, Headings. The original or a copy of this instrument and of each restatement and/or amendment hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. Anyone dealing with the Trust may rely on a certificate by an officer of the Trust as to whether or not any such restatements and/or amendments have been made and as to any matters in connection with the Trust hereunder; and, with the same effect as if it were the original, may rely on a copy certified by an officer of the Trust to be a copy of this instrument or of any such restatements and/or amendments. In this instrument and in any such restatements and/or amendment, references to this instrument, and all expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to this instrument as amended or affected by any such restatements and/or amendments. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or effect of this instrument. Whenever the singular number is used herein, the same shall include the plural; and the neuter, masculine and feminine genders shall include each other, as applicable. This instrument may be executed in any number of counterparts each of which shall be deemed an original. Section 6. Applicable Law. This Agreement and Declaration of Trust is created under and is to be governed by and construed and administered according to the laws of the State of Delaware and the Delaware Business Trust Act, as amended from time to time (the "Act"). The Trust shall be a Delaware business trust pursuant to such Act, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a business trust. Section 7. Provisions in Conflict with Law or Regulations. (a) The provisions of the Declaration of Trust are severable, and if the Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with the 1940 Act, the regulated investment company provisions of the Internal Revenue Code or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of the Declaration of Trust; provided, however, that such determination shall not affect any of the remaining provisions of the Declaration of Trust or render invalid or improper any action taken or omitted prior to such determination. (b) If any provision of the Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of the Declaration of Trust in any jurisdiction. Section 8. Business Trust Only. It is the intention of the Trustees to create a business trust pursuant to the Act, and thereby to create only the relationship of trustee and beneficial owners within the meaning of such Act between the Trustees and each Shareholder. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, bailment, joint venture, or any form of legal relationship other than a business trust pursuant to such Act. Nothing in this Declaration of Trust shall be construed to make the Shareholders, either by themselves or with the Trustees, partners or members of a joint stock association. Section 9. Use of the Name "Brinson." The name "Brinson" and all rights to the use of the name "Brinson" belongs to Brinson Partners Inc. ("Brinson"), the Manager of the Trust. Brinson has consented to the use by the Trust of the identifying word "Brinson" and has granted to the Trust a non- exclusive license to use the name "Brinson" as part of the name of the Trust and the name of any Series of Shares. In the event Brinson or an affiliate of Brinson is not appointed as Manager or ceases to be the Manager of the Trust or of any Series using such names, the non-exclusive license granted herein may be revoked by Brinson and the Trust promptly shall cease using the name "Brinson" as part of its name or the name of any Series of Shares, upon receipt of the written request therefore by Brinson or any successor to its interests in such name. IN WITNESS WHEREOF, the Trustees named below do hereby make and enter into this Declaration of Trust as of the 9th day of August, 1993. - ------------------------ ------------------------ Gary P. Brinson Edward C. Hamill 209 South LaSalle Street 209 South LaSalle Street Chicago, IL 60604 Chicago, IL 60604 - ------------------------ ------------------------ E. Thomas McFarlan C. Roderick O'Neil 209 South LaSalle Street P. O. Box 6728 Chicago, IL 60604 Hartford, CT 06106 - ------------------------ Frank K. Reilly College of Business Administration University of Notre Dame Notre Dame, IN 46556 THE PRINCIPAL PLACE OF BUSINESS OF THE TRUST IS 209 South LaSalle Street Chicago, IL 60604-1295 EX-99.B.2 3 BY LAWS OF THE BRINSON FUNDS Exhibit (99.B2) BY-LAWS OF THE BRINSON FUNDS ARTICLE I FISCAL YEAR AND OFFICES SECTION 1. FISCAL YEAR. Unless otherwise provided by resolution of the Board of Trustees, the fiscal year of the Trust shall begin on the 1st day of July and end on the last day of June. SECTION 2. DELAWARE OFFICE. The Board of Trustees shall establish a registered office in the State of Delaware and shall appoint as the Trust's registered agent for service of process in the State of Delaware an individual resident of the State of Delaware or a Delaware corporation or a foreign corporation authorizes to transact business in the State of Delaware; in each case the business office of such registered agent for services of process shall be identical with the registered Delaware office of the Trust. SECTION 3. OTHER OFFICES. The Board of Trustees may at any time establish branch or subordinate offices at any place or places where the Trust intends to do business. ARTICLE II MEETINGS OF SHAREHOLDERS SECTION 1. PLACE OF MEETING. Meetings of the shareholders for the election of trustees shall be held in such place as shall be fixed by resolution of the Board of Trustees and stated in the notice of the meeting. SECTION 2. ANNUAL MEETINGS. An Annual Meeting of shareholders will not be held unless the Investment Company Act requires the election of trustees to be acted upon. SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders may be called at any time by the President, or by a majority of the Board of Trustees, and shall be called by the Secretary upon written request of the holders of shares entitled to cast not less than ten percent of all the votes entitled to be cast at such meeting provided that (a) such request shall state the purposes of such meeting and the matters proposed to be acted on and (b) the shareholders requesting such meeting shall have paid to the trust the reasonable estimated costs of preparing and mailing the notice thereof, which the Secretary shall determine and specify to such shareholders. No special meeting need be called upon the request of shareholders entitled to cast less than a majority of all votes entitled to be cast at such meeting to consider any matter which is substantially the same as a matter voted on at any meeting of the shareholders held during the preceding twelve months. The foregoing provisions of this section 3 notwithstanding a special meeting of shareholders shall be called upon the request of the holders of at least ten percent of the shares entitled to vote for the purpose of considering removal of a director from office as provided in section 16(c) of the Investment Company Act of 1940. SECTION 4. NOTICE. Not less than ten, nor more than ninety days before the date of every Annual or Special Shareholders Meeting, the Secretary shall cause to be mailed to each shareholder entitled to vote at such meeting at his (her) address (as it appears on the records of the Trust at the time of mailing) written notice stating the time and place of the meeting and, in the case of a Special Meeting of Shareholders shall be limited to the purposes stated in the notice. Notice of adjournment of a shareholders meeting to another time or place need not be given, if such time and place are announced at the meeting. SECTION 5. RECORD DATE FOR MEETINGS. Subject to the provisions of the Declaration of Trust, the Board of Trustees may fix in advance a date not more than ninety, nor less than ten days, prior to the date of any annual or special meeting of the shareholders as a record date for the determination of the shareholders entitled to receive notice of, and to vote at any meeting and any adjournment thereof; and in such case such shareholders and only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to receive notice of and to vote at such meeting and any adjournment thereof as the case may be, notwithstanding any transfer of any stock on the books of the Trust after any such record date fixed as aforesaid. SECTION 6. QUORUM. At any meeting of shareholders, the presence in person or by proxy of the holders of record of a majority of the shares issued and outstanding and entitled to vote there shall constitute a quorum for the transaction of any business at the meeting, except as otherwise provided by the Investment Company Act of 1940 or in the Trust's Declaration of Trust. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the holders of a majority of the shares present or in person or by proxy shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented to a date not more than 120 days after the original record date. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. SECTION 7. VOTING. Each shareholder shall have one vote for each full share and a fractional vote for each fractional share of stock having voting power held by such shareholder on the record date set pursuant to Section 5 on each matter submitted to a vote at a meeting of shareholders. Such vote may be made in person or by proxy. At all meetings of the shareholders, a quorum being present, all matters shall be decided by majority vote of the shares of beneficial interest entitled to vote held by shareholders present in person or by proxy, unless the question is one for which by express provision of the laws of the State of Delaware, the Investment Company Act of 1940, as from time to time amended, or the Declaration of Trust, a different vote is required, in which case such express provision shall control the decision of such question. At all meetings of shareholders, unless the voting is conducted by inspectors, all questions relating to the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided by the Chairman of the meeting. SECTION 8. INSPECTORS. At any election of trustees, the Board of Trustees prior thereto may, or, if they have not so acted, the Chairman of the meeting may appoint one or more inspectors of election who shall first subscribe an oath of affirmation to execute faithfully the duties of inspectors at such election with strict impartiality and according to the best of their ability, and shall after the election make a certificate of the result of the vote taken. SECTION 9. STOCK LEDGER AND LIST OF SHAREHOLDERS. It shall be the duty of the Secretary or Assistant Secretary of the Trust to cause an original or duplicate share ledger to be maintained at the office of the Trust's transfer agent. Such share ledger may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection. SECTION 10. ACTION WITHOUT MEETING. Any action to be taken by shareholders may be taken without a meeting if (a) all shareholders entitled to vote on the matter consent to the action in writing, and (b) all shareholders entitled to notice of the meeting but not entitled to vote at it sign a written waiver of any right to dissent, and (c) the written consents are filed with the records of the meetings of shareholders. Such consent shall be treated for all purposes as a vote at a meeting. ARTICLE III TRUSTEES SECTION 1. GENERAL POWERS. The business of the Trust shall be managed under the direction of its Board of Trustees, which may exercise all powers of the Trust, except such as are by statute, or the Declaration of Trust, or by these ByLaws conferred upon or reserved to the shareholders. SECTION 2. NUMBER AND TERM OF OFFICE. The number of trustees which shall constitute the whole Board shall be determined from time to time by the Board of Trustees, but shall not be fewer than the minimum number permitted by applicable laws, nor more than fifteen. Each trustee elected shall hold office until his successor is elected and qualified. Trustees need not be shareholders. SECTION 3. ELECTIONS. Provided a quorum is present, the trustees shall be elected by the vote of a plurality of the shares present in person or by proxy, except that any vacancy on the Board of Trustees may be filled by a majority vote of the Board of Trustees, although less than a quorum, subject to the requirements of Section 16(a) of the Investment Company Act of 1940. SECTION 4. PLACE OF MEETING. Meetings of the Board of Trustees, regular or special, may be held at any place as the Board may from time to time determine. SECTION 5. QUORUM. At all meetings of the Board of Trustees, one-third of the entire Board of Trustees shall constitute a quorum for the transaction of business provided that in no case may a quorum be less than two persons. The action of a majority of the trustees present at any meeting at which a quorum is present shall be the action of the Board of Trustees unless the concurrence of a greater proportion is required for such action by the Investment Company Act of 1940, these By-Laws or the Declaration of Trust. If a quorum shall not be present at any meeting of trustees, the trustees present thereat may by a majority vote adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present. SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Trustees may be held without additional notice at such time and place as shall from time to time be determined by the Board of Trustees provided that notice of any change in the time or place of such meetings shall be sent promptly to each director not present at the meeting at which such change was made in the manner provided for notice of special meetings. SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Trustees may be called by the President on one day's notice to each trustee; Special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two trustees. SECTION 8. TELEPHONE MEETING. Members of the Board of Trustees or a committee of the Board of Trustees may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. SECTION 9. INFORMAL ACTIONS. Any action required or permitted to be taken at any meeting of the Board of Trustees or of any committee thereof may be taken without a meeting, if a written consent to such action is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee. SECTION 10. COMMITTEES. The Board of Trustees may by resolution passed by a majority of the entire Board appoint from among its members an Executive Committee and other committees composed of two or more trustees, and may delegate to such committees, in the intervals between meetings of the Board of Trustees, any or all of the powers of the Board of Trustees in the management of the business and affairs of the Trust. SECTION 11. ACTION OF COMMITTEES. In the absence of an appropriate resolution of the Board of Trustees, each committee may adopt such rules and regulations governing its proceedings, quorum and manner of acting as it shall deem proper and desirable, provided that the quorum shall not be less than two trustees. The committees shall keep minutes of their proceedings and shall report the same to the Board of Trustees at the meeting next succeeding, and any action by the committee shall be subject to revision and alteration by the Board of Trustees, provided that no rights of third persons shall be affected by any such revision or alteration. In the absence of any member of such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint a member of the Board of Trustees to act in the place of such absent member. SECTION 12. COMPENSATION. Any trustee, whether or not he is a salaried officer or employee of the Trust, may be compensated for his services as trustee or as a member of a committee of trustees, or as Chairman of the Board or chairman of a committee by fixed periodic payments or by fees for attendance at meetings or by both, and in addition may be reimbursed for transportation and other expenses, all in such manner and amounts as the Board of Trustees may from time to time determine. ARTICLE IV NOTICES SECTION 1. FORM. Notices to shareholders shall be in writing and delivered personally or mailed to the shareholders at their addresses appearing on the books of the Trust. Notices to trustees shall be oral or by telephone or telegram or in writing delivered personally or mailed to the trustees at their addresses appearing on the books of the Trust. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Subject to the provisions of the Investment Company Act of 1940, notice to trustees need not state the purpose of a regular or special meeting. SECTION 2. WAIVER. Whenever any notice of the time, place or purpose of any meeting of shareholders, trustees or a committee is required to be given under the provisions of the Declaration of Trust or these By- Laws, a waiver thereof in writing, signed by the person or persons entitled to such notice and filed with the records of the meeting, whether before or after the holding thereof, or actual attendance at the meeting of shareholders in person or by proxy, or at the meeting of Trustees or a committee in person, shall be deemed equivalent to the giving of such notice to such persons. ARTICLE V OFFICERS SECTION 1. EXECUTIVE OFFICERS. The officers of the Trust shall be chosen by the Board of Trustees and shall include a President, a Secretary and a Treasurer. The Board of Trustees may, from time to time, elect or appoint a Controller, one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers. The Board of Trustees, at its discretion, may also appoint a trustee as Chairman of the Board who shall perform and execute such executive and administrative duties and powers as the Board of Trustees shall from time to time prescribe. The same person may hold two or more offices, except that no person shall be both President and Vice-President and no officer shall execute, acknowledge or verify any instrument in more than one capacity, if such instrument is required by law, the Declaration of Trust or these By-Laws to be executed, acknowledged or verified by two or more officers. SECTION 2. ELECTION. The Board of Trustees shall choose a President, a Secretary and a Treasurer. SECTION 3. OTHER OFFICERS. The Board of Trustees from time to time may appoint such other officers and agents as it shall deem advisable, who shall hold their offices for such terms and shall exercise powers and perform such duties as shall be determined from time to time by the Board. The Board of Trustees from time to time may delegate to one or more officers or agents the power to appoint any such subordinate officers or agents and to prescribe their respective rights, terms of office, authorities and duties. SECTION 4. COMPENSATION. The salaries or other compensation of all officers and agents of the Trust shall be fixed by the Board of Trustees, except that the Board of Trustees may delegate to any person or group of persons the power to fix the salary or other compensation of any subordinate officers or agents appointed pursuant to Section 3 of this Article V. SECTION 5. TENURE. The officers of the Trust shall serve at the pleasure of the Board of Trustees. Any officer or agent may be removed by the affirmative vote of a majority of the Board of Trustees whenever, in its judgment, the best interests of the Trust will be served thereby. In addition, any officer or agent appointed pursuant to Section 3 may be removed, either with or without cause, by any officer upon whom such power of removal shall have been conferred by the Board of Trustees. Any vacancy occurring in any office of the trust by death, resignation, removal or otherwise shall be filled by the Board of Trustees, unless pursuant to Section 3 the power of appointment has been conferred by the Board of Trustees on any other officer. SECTION 6. PRESIDENT. The President shall be the Chief Executive Officer of the Trust and shall see that all orders and resolutions of the Board are carried into effect. The President shall also be the Chief Administrative Officer of the Trust and shall perform such other duties and have such other powers as the Board of Trustees may from time to time prescribe. SECTION 7. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one shall be chosen, shall perform and execute such executive duties and administrative powers as the Board of Trustees shall from time to time prescribe. SECTION 8. VICE-PRESIDENT. The Vice-Presidents, in order of their seniority, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President and shall perform such other duties as the Board of Trustees or the President may from time to time prescribe. SECTION 9. SECRETARY. The Secretary shall attend all meetings of the Board of Trustees and all meetings of the shareholders and record all the proceedings thereof and shall perform like duties for any committee when required. He shall give, or cause to be given, notice of meetings of the shareholders and of the Board of Trustees, shall have charge of the records of the trust, including the stock books, and shall perform such other duties as may be prescribed by the Board of Trustees or Chief Executive Officer, under whose supervision he shall be. He shall keep in safe custody the seal of the Trust and, when authorized by the Board of Trustees, shall affix and attest the same to any instrument requiring it. The Board of Trustees may give general authority to any other officer to affix the seal of the trust and to attest the affixing by his signature. SECTION 10. ASSISTANT SECRETARIES. The Assistant Secretaries in order of their seniority, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the Board of Trustees shall prescribe. SECTION 11. TREASURER. The Treasurer, unless another officer has been so designated, shall be the Chief Financial Officer of the Trust. He shall have general charge of the finances and books of account of the Trust. Except as otherwise provided by the Board of Trustees, he shall have general supervision of the funds and property of the Trust and of the performance by the custodian of its duties with respect thereto. He shall render to the Board of Trustees, whenever directed by the Board, an account of the financial condition of the Trust and of all his transactions as Treasurer. He shall cause to be prepared annually a full and correct statement of the affairs of the Trust, including a balance sheet and a statement of operations for the preceding fiscal year. He shall perform all the acts incidental to the office of Treasurer, subject to the control of the Board of Trustees. SECTION 12. ASSISTANT TREASURER. The Assistant Treasurer shall in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Trustees may from time to time prescribe. ARTICLE VI INDEMNIFICATION AND INSURANCE SECTION 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this Article, "agent" means any person who is or was a Trustee or officer of this Trust and any person who, while a trustee or officer of this Trust, is or was serving at the request of this Trust as a Trustee, director, officer, partner, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise; "Trust" includes any domestic or foreign predecessor entity of this Trust in a merger, consolidation, or other transaction in which the predecessor's existence ceased upon consummation of the transaction; "proceeding" menas any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative; and "expenses" includes without limitation attorney's fees and any expenses of establishing a right to indemnification under this Article. SECTION 2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of this Trust) by reason of the fact that such person is or was an agent of this Trust, against expenses, judgments, fines, settlements and other amounts actually and reasonable incurred in connection with such proceeding, if it is determined that person acted in good faith and reasonable believed: (a) in the case of conduct in his official capacity as an agent of the Trust, that his conduct was in the Trust's best interest and (b) in all other cases, that his conduct was at least not opposed to the Trust's best interests and (c) in the case of a criminal proceeding, that he had no reasonable cause to believe the conduct of that person was unlawful. The termination of any proceeding by judgement, order or settlement shall not of itself create a presumption that the person did not meet the requisite standard of conduct set forth in this Section. The termination of any proceeding by conviction, or a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the person did not meet the requisite standard of conduct set forth in this Section. SECTION 3. ACTIONS OF THE TRUST. This Trust shall indemnify any person who was or is a party or is threatened to be made a party to any proceeding by or in the right of this Trust to procure a judgment in its favor by reason of the fact that that person is or was a agent of this Trust, against expenses actually and reasonably incurred by that person in connection with the defense or settlement of that action if that person acted in good faith, in a manner that person believed to be in the best interest of this Trust an with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. SECTION 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision to the contrary contained herein, there shall be no right to indemnification for any liability arising by reason of willful misfeasance, bad faith, gross negligence, or the reckless disregard of the duties involved in the conduct of the agent's office with this Trust. No indemnification shall be made under Sections 2 or 3 of this Article: (a) In respect of any proceeding as to which that person shall have been adjudged to be liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an action taken in the person's official capacity; or (b) In respect of any proceeding as to which that person shall have been adjudged to be liable in the performance of that person's duty to this Trust, unless and only to the extent that the court in which that action was brought shall determine upon application that in view of all the relevant circumstances of the case, that person is fairly and reasonably entitled to indemnity for the expenses which the court shall determine; however, in such case, indemnification with respect to any proceeding by or in the right of the Trust or in which liability shall have been adjudged by reason of the disabling conduct set forth in the preceding paragraph shall be limited to expenses; or (c) Of amounts paid in settling or otherwise disposing of a proceeding, with or without court approval, or of expenses incurred in defending a proceeding which is settled or otherwise disposed of without court approval, unless the required approval set forth in Section 6 of this Article is obtained. SECTION 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of this Trust has been successful, on the merits or otherwise, in the defense of any proceeding referred to in Sections 2 or 3 of this Article before the court or other body before whom the proceeding was brought, the agent shall be indemnified against expenses actually and reasonable incurred by the agent in connection therewith, provided that the Board of Trustees, including a majority who are disinterested, non-party Trustees, also determines that based upon a review of the facts, the agent was not liable by reason of the disabling conduct referred to in Section 4 of the Article. SECTION 6. REQUIRED APPROVAL. Except as provided in Section 5 of this Article, any indemnification under this Article shall be made by this Trust only if authorized in the specific case on a determination that indemnification of the agent is proper in the circumstances because the agent has met the applicable standard of conduct set forth in Sections 2 or 3 of this Article and is not prohibited from indemnification because of the disabling conduct set forth in Section 4 of this Article, by: (a) A majority vote of a quorum consisting of Trustees who are not parties to the proceeding and are not interest persons of the Trust (as defined in the Investment Company Act of 1940); (b) A written opinion by an independent legal counsel; or (c) The shareholders; however, shares held by agents who are parties to the proceeding may not be voted on the subject matter under this Sub-Section. SECTION 7. ADVANCE OF EXPENSES. Expenses incurred in defending any proceedings may be advanced by this Trust before the final disposition of the proceeding if (a) receipt of a written affirmation by the agent of his good faith belief that he has met the standard of conduct necessary for indemnification under the Article and a written undertaking by or on behalf of the agent, such undertaking being an unlimited general obligation to repay the amount of the advance if it is ultimately determined that he has not met those requirements, and (b) a determination that the facts then known to those making the determination would not preclude indemnification under this Article. Determinations and authorizations of payments under this Section must be made in the manner specified in Section 6 of this Article for determining that the indemnification is permissible. SECTION 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article shall affect any right to indemnification to which persons other than Trustees and officers of this Trust or any subsidiary hereof may be entitled by contract or otherwise. SECTION 9. LIMITATIONS. No indemnification or advance shall be made under this Article, except as provided in Sections 5 or 6 in any circumstances where it appears: (a) That it would be inconsistent with a provision of the Agreement and Declaration of Trust of the Trust, a resolution of the shareholders, or an agreement in effect at the time of actual of the alleged cause of action asserted in the proceeding in which the expenses were incurred or other amounts were paid which prohibits or otherwise limits indemnification; or (b) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement. SECTION 10. INSURANCE. Upon and in the event of a determination by the Board of Trustees of this Trust to purchase such insurance, this Trust shall purchase and maintain insurance on behalf of any agent or employee of this Trust against any liability asserted against or incurred by the agent or employee in such capacity or arising out of the agent's or employee's status as such to the fullest extent permitted by law. SECTION 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not apply to any proceeding against any Trustee, investment manager or other fiduciary of any employee benefit plan in that person's capacity as such, even though that person may also be an agent of this Trust as defined in Section 1 of this Article. Nothing contained in this Article shall limit any right to indemnification to which such a Trustee, investment manager, or other fiduciary may be entitled by contract or otherwise which shall be enforceable to the extent permitted by applicable law other than this Article. ARTICLE VII SHARES OF BENEFICIAL INTEREST SECTION 1. CERTIFICATES. Each shareholder shall be entitled, upon written request, to a certificate or certificates in form approved by the Board of Trustees representing and certifying the class and the full, but not fractional number of shares owned by him in the Trust. Each certificate shall be signed by facsimile signature or otherwise by the President or a Vice-President and counter-signed by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer. SECTION 2. SIGNATURE. In case any officer who has signed any certificate ceases to be an officer of the Trust before the certificate is issued, the certificate may nevertheless be issued by the Trust with the same effect as if the officer had not ceased to be such officer as of the date of its issue. SECTION 3. RECORDING AND TRANSFER WITHOUT CERTIFICATES. Notwithstanding the foregoing provisions of this Article VII, the Trust shall have the full power to participate in any program approved by the Board of Trustees providing for the recording and transfer of ownership of shares of the Trust's shares by electronic or other means without the issuance of certificates. SECTION 4. LOST CERTIFICATES. The Board of Trustees may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Trust alleged to have been stolen, lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to have been stolen, lost or destroyed, or upon other satisfactory evidence of such theft, loss or destruction and may in its discretion and as a condition precedent to the issuance thereof, require the owner of such stolen, lost or destroyed certificate or certificates, or his legal representative, to give the Trust a bond with sufficient surety, to the Trust to indemnify it against any loss or claim that may be made by reason of the issuance of a new certificate. SECTION 5. TRANSFER OF SHARES. Transfers of shares of beneficial interest of the Trust shall be made on the books of the Trust by the holder of record thereof (in person or by his attorney thereunto duly authorized by a power of attorney duly executed in writing and filed with the Secretary of the Trust) (i) if a certificate or certificates have been issued, upon the surrender of the certificate or certificates, properly endorsed or accompanied by proper instruments of transfer, representing such shares, or (ii) as otherwise prescribed by the Board of Trustees. Every certificate exchanged, surrendered for redemption or otherwise returned to the Trust shall be marked "Canceled" with the date of cancellation. SECTION 6. REGISTERED SHAREHOLDERS. The Trust shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by applicable law or the Declaration of Trust. SECTION 7. TRANSFER AGENTS AND REGISTRARS. The Board of Trustees may, from time to time, appoint or remove transfer agents and or registrars of the Trust, and they may appoint the same person as both transfer agent and registrar. Upon any such appointment being made, all certificates representing shares of stock thereafter issued shall be countersigned by such transfer agent and shall not be valid unless so countersigned. SECTION 8. STOCK LEDGER. The Trust shall maintain an original stock ledger containing the names and addresses of all shareholders and the number and class of shares held by each shareholder. Such stock ledger may be in written form or any other form capable of being converted into written form within reasonable time for visual inspection. ARTICLE VIII GENERAL PROVISIONS SECTION 1. CUSTODIANSHIP. Except as otherwise provided by resolution of the Board of Trustees, the Trust shall place and at all times maintain in the custody of a custodian (including any sub-custodian for the custodian) all funds, securities and similar investments owned by the Trust. Subject to the approval of the Board of Trustees, the custodian may enter into arrangements with securities depositories, provided such arrangements comply with the provisions of the Investment Company Act of 1940 and the rules and regulations promulgated thereunder. SECTION 2. EXECUTION OF INSTRUMENTS. All deeds, documents, transfers, contracts, agreements and other instruments requiring execution by the Trust shall be signed by the President or a Vice President. SECTION 3. NET ASSET VALUE. The net asset value per share shall be determined separately as to each class of the Trust's shares, by dividing the sum of the total market value of the class's investments and other assets, less any liabilities, by the total outstanding shares of such class, subject to the Investment Company Act of 1940 and any other applicable Federal securities law or rule or regulation currently in effect. ARTICLE IX AMENDMENTS The Board of Trustees shall have the power to make, alter and repeal the By-Laws of the Trust. EX-99.B.5.A 4 INVESTMENT ADVISORY AGREEMENT EXHIBIT (99.B5)(a) INVESTMENT ADVISORY AGREEMENT AGREEMENT made this 25 day of APRIL , 1995 by and between THE BRINSON FUNDS, a Delaware Business Trust (the "Trust") and BRINSON PARTNERS, INC., a Delaware corporation (the "Advisor"). 1. DUTIES OF ADVISOR. The Trust hereby appoints the Advisor to act as investment advisor to the BRINSON GLOBAL FUND (the "Series") for the period and on such terms set forth in this Agreement. The Trust employs the Advisor to manage the investment and reinvestment of the assets of the Series, to continuously review, supervise and administer the investment program of the Series, to determine in its discretion the assets to be held uninvested, to provide the Trust with records concerning the Advisor's activities which the Trust is required to maintain, and to render regular reports to the Trust's officers and Board of Trustees concerning the Advisor's discharge of the foregoing responsibilities. The Advisor shall discharge the foregoing responsibilities subject to the control of the officers and the Board of Trustees of the Trust, and in compliance with the objectives, policies and limitations set forth in the Trust's Prospectus and Statement of Additional Information. The Advisor accepts such employment and agrees to render the services and to provide, at its own expense, the office space, furnishings, equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. With respect to foreign securities, at its own expense, the Advisor may obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it may not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. 2. PORTFOLIO TRANSACTIONS. The Advisor shall provide the Series with a trading department and with respect to foreign securities, the Advisor is authorized to utilize the trading department of its foreign subsidiaries. The Advisor shall select, and with respect to its foreign subsidiaries, shall monitor the selection of, the brokers or dealers that will execute the purchases and sales of securities for the Series and is directed to use its best efforts to ensure that the best available price and most favorable execution of securities transactions for the Series are obtained. Subject to policies established by the Board of Trustees of the Trust and communicated to the Advisor, it is understood that the Advisor will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Trust or in respect of the Series, or be in breach of any obligation owing to the Trust or in respect of the Series under this Agreement, or otherwise, solely by reason of its having caused the Series to pay a member of a securities exchange, a broker or a dealer a commission for effecting a securities transaction for the Series in excess of the amount of commission another member of an exchange, broker or dealer would have charged if the Advisor determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such member, broker or dealer, viewed in terms of that particular transaction or the Advisor's overall responsibilities with respect to the accounts, including the Series, as to which it exercises investment discretion. The Advisor will promptly communicate to the officers and directors of the Trust such information relating to Series transactions as they may reasonably request. 3. COMPENSATION OF THE ADVISOR. For the services to be rendered by the Advisor as provided in Section 1 and 2 of this Agreement, the Series shall pay to the Advisor within five business days after the end of each calendar month, a monthly fee of one twelfth of 0.80% of the Series' average daily net assets for the month. In the event of termination of this Agreement, the fee provided in this Section 3 shall be paid on a pro rata basis, based on the number of days when this Agreement was in effect. 4. REPORTS. The Series and the Advisor agree to furnish to each other such information regarding their operations with regard to their affairs as each may reasonably request. 5. STATUS OF ADVISOR. The services of the Advisor to the Series are not to be deemed exclusive, and the Advisor shall be free to render similar services to others so long as its services to the Series are not impaired thereby. 6. LIABILITY OF ADVISOR. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard by the Advisor of its obligations and duties hereunder, the Advisor shall not be subject to any liability whatsoever to the Series, or to any shareholder of the Series, for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Series. 7. DURATION AND TERMINATION. This Agreement shall become effective on APRIL 25, 1995 provided that first it is approved by the Board of Trustees of the Trust, including a majority of those trustees who are not parties to this Agreement or interested persons of any party hereto, in the manner provided in section 15(c) of the Investment Company Act of 1940, and by the holders of a majority of the outstanding voting securities of the Series; and shall continue in effect until APRIL 25, 1997. Thereafter, this Agreement may continue in effect only if such continuance is approved at least annually by: (i) the Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding voting securities of the Series; and in either event by a vote of a majority of those trustees of the Trust who are not parties to this Agreement or interested persons of any such party in the manner provided in section 15(c) of the Investment Company Act of 1940. This Agreement may be terminated by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of the Series on 60 days' written notice to the Advisor. This Agreement may be terminated by the Advisor at any time, without the payment of any penalty, upon 60 days' written notice to the Trust. This Agreement will automatically terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered or mailed postpaid, to the other party at the principal office of such party. As used in this Section 8, the terms "assignment", "interested person", and "a vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder. 8. NAME OF ADVISOR. The parties agree that the Advisor has a proprietary interest in the name "Brinson," and the Trust agrees to promptly take such action as may be necessary to delete from its corporate name and/or the name of the Series any reference to the name of the Advisor promptly after receipt from the Advisor of a written request therefore. 9. SEVERABILITY. If any provisions of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of this 25 day of APRIL, 1995. ---- ------- ---- ATTEST: THE BRINSON FUNDS By: - ---------------------------- ------------------------------ Bruce G. Leto E. Thomas McFarlan Secretary President ATTEST BRINSON PARTNERS, INC. By: - ---------------------------- ------------------------------ Michael J. Jacobs Secretary EX-99.B.5.B 5 INVESTMENT ADVISORY AGMT. BRINSON GLOBAL BOND FUND EXHIBIT (99.B5)(b) INVESTMENT ADVISORY AGREEMENT AGREEMENT made this 25 day of APRIL, 1995 by and between THE BRINSON FUNDS, a Delaware Business Trust (the "Trust") and BRINSON PARTNERS, INC., a Delaware corporation (the "Advisor"). 1. DUTIES OF ADVISOR. The Trust hereby appoints the Advisor to act as investment advisor to the BRINSON GLOBAL BOND FUND (the "Series") for the period and on such terms set forth in this Agreement. The Trust employs the Advisor to manage the investment and reinvestment of the assets of the Series, to continuously review, supervise and administer the investment program of the Series, to determine in its discretion the assets to be held uninvested, to provide the Trust with records concerning the Advisor's activities which the Trust is required to maintain, and to render regular reports to the Trust's officers and Board of Trustees concerning the Advisor's discharge of the foregoing responsibilities. The Advisor shall discharge the foregoing responsibilities subject to the control of the officers and the Board of Trustees of the Trust, and in compliance with the objectives, policies and limitations set forth in the Trust's Prospectus and Statement of Additional Information. The Advisor accepts such employment and agrees to render the services and to provide, at its own expense, the office space, furnishings, equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. With respect to foreign securities, at its own expense, the Advisor may obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it may not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. 2. PORTFOLIO TRANSACTIONS. The Advisor shall provide the Series with a trading department and with respect to foreign securities, the Advisor is authorized to utilize the trading department of its foreign subsidiaries. The Advisor shall select, and with respect to its foreign subsidiaries, shall monitor the selection of, the brokers or dealers that will execute the purchases and sales of securities for the Series and is directed to use its best efforts to ensure that the best available price and most favorable execution of securities transactions for the Series are obtained. Subject to policies established by the Board of Trustees of the Trust and communicated to the Advisor, it is understood that the Advisor will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Trust or in respect of the Series, or be in breach of any obligation owing to the Trust or in respect of the Series under this Agreement, or otherwise, solely by reason of its having caused the Series to pay a member of a securities exchange, a broker or a dealer a commission for effecting a securities transaction for the Series in excess of the amount of commission another member of an exchange, broker or dealer would have charged if the Advisor determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such member, broker or dealer, viewed in terms of that particular transaction or the Advisor's overall responsibilities with respect to the accounts, including the Series, as to which it exercises investment discretion. The Advisor will promptly communicate to the officers and directors of the Trust such information relating to Series transactions as they may reasonably request. 3. COMPENSATION OF THE ADVISOR. For the services to be rendered by the Advisor as provided in Section 1 and 2 of this Agreement, the Series shall pay to the Advisor within five business days after the end of each calendar month, a monthly fee of one twelfth of 0.75% of the Series' average daily net assets for the month. In the event of termination of this Agreement, the fee provided in this Section 3 shall be paid on a pro rata basis, based on the number of days when this Agreement was in effect. 4. REPORTS. The Series and the Advisor agree to furnish to each other such information regarding their operations with regard to their affairs as each may reasonably request. 5. STATUS OF ADVISOR. The services of the Advisor to the Series are not to be deemed exclusive, and the Advisor shall be free to render similar services to others so long as its services to the Series are not impaired thereby. 6. LIABILITY OF ADVISOR. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard by the Advisor of its obligations and duties hereunder, the Advisor shall not be subject to any liability whatsoever to the Series, or to any shareholder of the Series, for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Series. 7. DURATION AND TERMINATION. This Agreement shall become effective on APRIL 25, 1995 provided that first it is approved by the Board of Trustees of the Trust, including a majority of those trustees who are not parties to this Agreement or interested persons of any party hereto, in the manner provided in section 15(c) of the Investment Company Act of 1940, and by the holders of a majority of the outstanding voting securities of the Series; and shall continue in effect until APRIL 25, 1997. Thereafter, this Agreement may continue in effect only if such continuance is approved at least annually by: (i) the Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding voting securities of the Series; and in either event by a vote of a majority of those trustees of the Trust who are not parties to this Agreement or interested persons of any such party in the manner provided in section 15(c) of the Investment Company Act of 1940. This Agreement may be terminated by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of the Series on 60 days' written notice to the Advisor. This Agreement may be terminated by the Advisor at any time, without the payment of any penalty, upon 60 days' written notice to the Trust. This Agreement will automatically terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered or mailed postpaid, to the other party at the principal office of such party. As used in this Section 8, the terms "assignment", "interested person", and "a vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder. 8. NAME OF ADVISOR. The parties agree that the Advisor has a proprietary interest in the name "Brinson," and the Trust agrees to promptly take such action as may be necessary to delete from its corporate name and/or the name of the Series any reference to the name of the Advisor promptly after receipt from the Advisor of a written request therefore. 9. SEVERABILITY. If any provisions of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of this 25 day of APRIL, 1995. ---- ------- ---- ATTEST: THE BRINSON FUNDS By: - ---------------------------- ----------------------------- Bruce G. Leto E. Thomas McFarlan Secretary President ATTEST BRINSON PARTNERS, INC. By: - ---------------------------- ----------------------------- Michael J. Jacobs Gary P. Brinson Secretary President EX-99.B.5.C 6 INVESTMENT ADVIS. AGMT. BRINSON NON-US EQUITY FUND EXHIBIT (99.B5)(c) INVESTMENT ADVISORY AGREEMENT AGREEMENT made this 25 day of APRIL, 1995 by and between THE BRINSON FUNDS, a Delaware Business Trust (the "Trust") and BRINSON PARTNERS, INC., a Delaware corporation (the "Advisor"). 1. DUTIES OF ADVISOR. The Trust hereby appoints the Advisor to act as investment advisor to the BRINSON NON-U.S. EQUITY FUND (the "Series") for the period and on such terms set forth in this Agreement. The Trust employs the Advisor to manage the investment and reinvestment of the assets of the Series, to continuously review, supervise and administer the investment program of the Series, to determine in its discretion the assets to be held uninvested, to provide the Trust with records concerning the Advisor's activities which the Trust is required to maintain, and to render regular reports to the Trust's officers and Board of Trustees concerning the Advisor's discharge of the foregoing responsibilities. The Advisor shall discharge the foregoing responsibilities subject to the control of the officers and the Board of Trustees of the Trust, and in compliance with the objectives, policies and limitations set forth in the Trust's Prospectus and Statement of Additional Information. The Advisor accepts such employment and agrees to render the services and to provide, at its own expense, the office space, furnishings, equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. With respect to foreign securities, at its own expense, the Advisor may obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it may not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. 2. PORTFOLIO TRANSACTIONS. The Advisor shall provide the Series with a trading department and with respect to foreign securities, the Advisor is authorized to utilize the trading department of its foreign subsidiaries. The Advisor shall select, and with respect to its foreign subsidiaries, shall monitor the selection of, the brokers or dealers that will execute the purchases and sales of securities for the Series and is directed to use its best efforts to ensure that the best available price and most favorable execution of securities transactions for the Series are obtained. Subject to policies established by the Board of Trustees of the Trust and communicated to the Advisor, it is understood that the Advisor will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Trust or in respect of the Series, or be in breach of any obligation owing to the Trust or in respect of the Series under this Agreement, or otherwise, solely by reason of its having caused the Series to pay a member of a securities exchange, a broker or a dealer a commission for effecting a securities transaction for the Series in excess of the amount of commission another member of an exchange, broker or dealer would have charged if the Advisor determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such member, broker or dealer, viewed in terms of that particular transaction or the Advisor's overall responsibilities with respect to the accounts, including the Series, as to which it exercises investment discretion. The Advisor will promptly communicate to the officers and directors of the Trust such information relating to Series transactions as they may reasonably request. 3. COMPENSATION OF THE ADVISOR. For the services to be rendered by the Advisor as provided in Section 1 and 2 of this Agreement, the Series shall pay to the Advisor within five business days after the end of each calendar month, a monthly fee of one twelfth of 0.80% of the Series' average daily net assets for the month. In the event of termination of this Agreement, the fee provided in this Section 3 shall be paid on a pro rata basis, based on the number of days when this Agreement was in effect. 4. REPORTS. The Series and the Advisor agree to furnish to each other such information regarding their operations with regard to their affairs as each may reasonably request. 5. STATUS OF ADVISOR. The services of the Advisor to the Series are not to be deemed exclusive, and the Advisor shall be free to render similar services to others so long as its services to the Series are not impaired thereby. 6. LIABILITY OF ADVISOR. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard by the Advisor of its obligations and duties hereunder, the Advisor shall not be subject to any liability whatsoever to the Series, or to any shareholder of the Series, for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Series. 7. DURATION AND TERMINATION. This Agreement shall become effective on APRIL 25, 1995 provided that first it is approved by the Board of Trustees of the Trust, including a majority of those trustees who are not parties to this Agreement or interested persons of any party hereto, in the manner provided in section 15(c) of the Investment Company Act of 1940, and by the holders of a majority of the outstanding voting securities of the Series; and shall continue in effect until APRIL 25, 1997. Thereafter, this Agreement may continue in effect only if such continuance is approved at least annually by: (i) the Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding voting securities of the Series; and in either event by a vote of a majority of those trustees of the Trust who are not parties to this Agreement or interested persons of any such party in the manner provided in section 15(c) of the Investment Company Act of 1940. This Agreement may be terminated by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of the Series on 60 days' written notice to the Advisor. This Agreement may be terminated by the Advisor at any time, without the payment of any penalty, upon 60 days' written notice to the Trust. This Agreement will automatically terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered or mailed postpaid, to the other party at the principal office of such party. As used in this Section 8, the terms "assignment", "interested person", and "a vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder. 8. NAME OF ADVISOR. The parties agree that the Advisor has a proprietary interest in the name "Brinson," and the Trust agrees to promptly take such action as may be necessary to delete from its corporate name and/or the name of the Series any reference to the name of the Advisor promptly after receipt from the Advisor of a written request therefore. 9. SEVERABILITY. If any provisions of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of this 25 day of APRIL, 1995. ATTEST: THE BRINSON FUNDS By: - ------------- ------------------ Bruce G. Leto E. Thomas McFarlan Secretary President ATTEST BRINSON PARTNERS, INC. By: - ----------------- --------------- Michael J. Jacobs Gary P. Brinson Secretary President EX-99.B.5.D 7 INVESTMENT ADVIS. AGMT. BRINSON GLOBAL EQUITY FUND EXHIBIT (99.B5)(d) INVESTMENT ADVISORY AGREEMENT AGREEMENT made this 25 day of APRIL, 1995 by and between THE BRINSON FUNDS, a Delaware Business Trust (the "Trust") and BRINSON PARTNERS, INC., a Delaware corporation (the "Advisor"). 1. DUTIES OF ADVISOR. The Trust hereby appoints the Advisor to act as investment advisor to the BRINSON GLOBAL EQUITY FUND (the "Series") for the period and on such terms set forth in this Agreement. The Trust employs the Advisor to manage the investment and reinvestment of the assets of the Series, to continuously review, supervise and administer the investment program of the Series, to determine in its discretion the assets to be held uninvested, to provide the Trust with records concerning the Advisor's activities which the Trust is required to maintain, and to render regular reports to the Trust's officers and Board of Trustees concerning the Advisor's discharge of the foregoing responsibilities. The Advisor shall discharge the foregoing responsibilities subject to the control of the officers and the Board of Trustees of the Trust, and in compliance with the objectives, policies and limitations set forth in the Trust's Prospectus and Statement of Additional Information. The Advisor accepts such employment and agrees to render the services and to provide, at its own expense, the office space, furnishings, equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. With respect to foreign securities, at its own expense, the Advisor may obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it may not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. 2. PORTFOLIO TRANSACTIONS. The Advisor shall provide the Series with a trading department and with respect to foreign securities, the Advisor is authorized to utilize the trading department of its foreign subsidiaries. The Advisor shall select, and with respect to its foreign subsidiaries, shall monitor the selection of, the brokers or dealers that will execute the purchases and sales of securities for the Series and is directed to use its best efforts to ensure that the best available price and most favorable execution of securities transactions for the Series are obtained. Subject to policies established by the Board of Trustees of the Trust and communicated to the Advisor, it is understood that the Advisor will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Trust or in respect of the Series, or be in breach of any obligation owing to the Trust or in respect of the Series under this Agreement, or otherwise, solely by reason of its having caused the Series to pay a member of a securities exchange, a broker or a dealer a commission for effecting a securities transaction for the Series in excess of the amount of commission another member of an exchange, broker or dealer would have charged if the Advisor determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such member, broker or dealer, viewed in terms of that particular transaction or the Advisor's overall responsibilities with respect to the accounts, including the Series, as to which it exercises investment discretion. The Advisor will promptly communicate to the officers and directors of the Trust such information relating to Series transactions as they may reasonably request. 3. COMPENSATION OF THE ADVISOR. For the services to be rendered by the Advisor as provided in Section 1 and 2 of this Agreement, the Series shall pay to the Advisor within five business days after the end of each calendar month, a monthly fee of one twelfth of 0.80% of the Series' average daily net assets for the month. In the event of termination of this Agreement, the fee provided in this Section 3 shall be paid on a pro rata basis, based on the number of days when this Agreement was in effect. 4. REPORTS. The Series and the Advisor agree to furnish to each other such information regarding their operations with regard to their affairs as each may reasonably request. 5. STATUS OF ADVISOR. The services of the Advisor to the Series are not to be deemed exclusive, and the Advisor shall be free to render similar services to others so long as its services to the Series are not impaired thereby. 6. LIABILITY OF ADVISOR. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard by the Advisor of its obligations and duties hereunder, the Advisor shall not be subject to any liability whatsoever to the Series, or to any shareholder of the Series, for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Series. 7. DURATION AND TERMINATION. This Agreement shall become effective on APRIL 25, 1995 provided that first it is approved by the Board of Trustees of the Trust, including a majority of those trustees who are not parties to this Agreement or interested persons of any party hereto, in the manner provided in section 15(c) of the Investment Company Act of 1940, and by the holders of a majority of the outstanding voting securities of the Series; and shall continue in effect until APRIL 25, 1997 . Thereafter, this Agreement may continue in effect only if such continuance is approved at least annually by: (i) the Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding voting securities of the Series; and in either event by a vote of a majority of those trustees of the Trust who are not parties to this Agreement or interested persons of any such party in the manner provided in section 15(c) of the Investment Company Act of 1940. This Agreement may be terminated by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of the Series on 60 days' written notice to the Advisor. This Agreement may be terminated by the Advisor at any time, without the payment of any penalty, upon 60 days' written notice to the Trust. This Agreement will automatically terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered or mailed postpaid, to the other party at the principal office of such party. As used in this Section 8, the terms "assignment", "interested person", and "a vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder. 8. NAME OF ADVISOR. The parties agree that the Advisor has a proprietary interest in the name "Brinson," and the Trust agrees to promptly take such action as may be necessary to delete from its corporate name and/or the name of the Series any reference to the name of the Advisor promptly after receipt from the Advisor of a written request therefore. 9. SEVERABILITY. If any provisions of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of this 25 day of APRIL, 1995. ATTEST: THE BRINSON FUNDS By: - ------------ --------------------- Bruce G. Leto E. Thomas McFarlan Secretary President ATTEST BRINSON PARTNERS, INC. By: - ----------------- --------------------- Michael J. Jacobs Secretary EX-99.B.5.E 8 INVESTMENT ADVIS. AGMT. BRINSON US EQUITY FUND EXHIBIT (99.B5)(E) INVESTMENT ADVISORY AGREEMENT AGREEMENT made this 25 day of APRIL, 1995 by and between THE BRINSON FUNDS, a Delaware Business Trust (the "Trust") and BRINSON PARTNERS, INC., a Delaware corporation (the "Advisor"). 1. DUTIES OF ADVISOR. The Trust hereby appoints the Advisor to act as investment advisor to the BRINSON U.S. EQUITY FUND (the "Series") for the period and on such terms set forth in this Agreement. The Trust employs the Advisor to manage the investment and reinvestment of the assets of the Series, to continuously review, supervise and administer the investment program of the Series, to determine in its discretion the assets to be held uninvested, to provide the Trust with records concerning the Advisor's activities which the Trust is required to maintain, and to render regular reports to the Trust's officers and Board of Trustees concerning the Advisor's discharge of the foregoing responsibilities. The Advisor shall discharge the foregoing responsibilities subject to the control of the officers and the Board of Trustees of the Trust, and in compliance with the objectives, policies and limitations set forth in the Trust's Prospectus and Statement of Additional Information. The Advisor accepts such employment and agrees to render the services and to provide, at its own expense, the office space, furnishings, equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. With respect to foreign securities, at its own expense, the Advisor may obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it may not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. 2. PORTFOLIO TRANSACTIONS. The Advisor shall provide the Series with a trading department and with respect to foreign securities, the Advisor is authorized to utilize the trading department of its foreign subsidiaries. The Advisor shall select, and with respect to its foreign subsidiaries, shall monitor the selection of, the brokers or dealers that will execute the purchases and sales of securities for the Series and is directed to use its best efforts to ensure that the best available price and most favorable execution of securities transactions for the Series are obtained. Subject to policies established by the Board of Trustees of the Trust and communicated to the Advisor, it is understood that the Advisor will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Trust or in respect of the Series, or be in breach of any obligation owing to the Trust or in respect of the Series under this Agreement, or otherwise, solely by reason of its having caused the Series to pay a member of a securities exchange, a broker or a dealer a commission for effecting a securities transaction for the Series in excess of the amount of commission another member of an exchange, broker or dealer would have charged if the Advisor determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such member, broker or dealer, viewed in terms of that particular transaction or the Advisor's overall responsibilities with respect to the accounts, including the Series, as to which it exercises investment discretion. The Advisor will promptly communicate to the officers and directors of the Trust such information relating to Series transactions as they may reasonably request. 3. COMPENSATION OF THE ADVISOR. For the services to be rendered by the Advisor as provided in Section 1 and 2 of this Agreement, the Series shall pay to the Advisor within five business days after the end of each calendar month, a monthly fee of one twelfth of 0.70% of the Series' average daily net assets for the month. In the event of termination of this Agreement, the fee provided in this Section 3 shall be paid on a pro rata basis, based on the number of days when this Agreement was in effect. 4. REPORTS. The Series and the Advisor agree to furnish to each other such information regarding their operations with regard to their affairs as each may reasonably request. 5. STATUS OF ADVISOR. The services of the Advisor to the Series are not to be deemed exclusive, and the Advisor shall be free to render similar services to others so long as its services to the Series are not impaired thereby. 6. LIABILITY OF ADVISOR. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard by the Advisor of its obligations and duties hereunder, the Advisor shall not be subject to any liability whatsoever to the Series, or to any shareholder of the Series, for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Series. 7. DURATION AND TERMINATION. This Agreement shall become effective on APRIL 25, 1995 provided that first it is approved by the Board of Trustees of the Trust, including a majority of those trustees who are not parties to this Agreement or interested persons of any party hereto, in the manner provided in section 15(c) of the Investment Company Act of 1940, and by the holders of a majority of the outstanding voting securities of the Series; and shall continue in effect until APRIL 25, 1997 . Thereafter, this Agreement may continue in effect only if such continuance is approved at least annually by: (i) the Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding voting securities of the Series; and in either event by a vote of a majority of those trustees of the Trust who are not parties to this Agreement or interested persons of any such party in the manner provided in section 15(c) of the Investment Company Act of 1940. This Agreement may be terminated by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of the Series on 60 days' written notice to the Advisor. This Agreement may be terminated by the Advisor at any time, without the payment of any penalty, upon 60 days' written notice to the Trust. This Agreement will automatically terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered or mailed postpaid, to the other party at the principal office of such party. As used in this Section 8, the terms "assignment", "interested person", and "a vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder. 8. NAME OF ADVISOR. The parties agree that the Advisor has a proprietary interest in the name "Brinson," and the Trust agrees to promptly take such action as may be necessary to delete from its corporate name and/or the name of the Series any reference to the name of the Advisor promptly after receipt from the Advisor of a written request therefore. 9. SEVERABILITY. If any provisions of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of this 25 day of APRIL, 1995. ATTEST: THE BRINSON FUNDS By: - ------------ ------------------ Bruce G. Leto E. Thomas McFarlan Secretary President ATTEST BRINSON PARTNERS, INC. By: - ----------------- --------------- Michael J. Jacobs Gary P. Brinson Secretary President EX-99.B.5.F 9 INVESTMENT ADVIS. AGMT. BRINSON US BALANCED FUND Exhibit (99.B5)(f) INVESTMENT ADVISORY AGREEMENT AGREEMENT made this 25 day of APRIL, 1995 by and between THE BRINSON FUNDS, a Delaware Business Trust (the "Trust") and BRINSON PARTNERS, INC., a Delaware corporation (the "Advisor"). 1. DUTIES OF ADVISOR. The Trust hereby appoints the Advisor to act as investment advisor to the BRINSON U.S. BALANCED FUND (the "Series") for the period and on such terms set forth in this Agreement. The Trust employs the Advisor to manage the investment and reinvestment of the assets of the Series, to continuously review, supervise and administer the investment program of the Series, to determine in its discretion the assets to be held uninvested, to provide the Trust with records concerning the Advisor's activities which the Trust is required to maintain, and to render regular reports to the Trust's officers and Board of Trustees concerning the Advisor's discharge of the foregoing responsibilities. The Advisor shall discharge the foregoing responsibilities subject to the control of the officers and the Board of Trustees of the Trust, and in compliance with the objectives, policies and limitations set forth in the Trust's Prospectus and Statement of Additional Information. The Advisor accepts such employment and agrees to render the services and to provide, at its own expense, the office space, furnishings, equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. With respect to foreign securities, at its own expense, the Advisor may obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it may not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. 2. PORTFOLIO TRANSACTIONS. The Advisor shall provide the Series with a trading department and with respect to foreign securities, the Advisor is authorized to utilize the trading department of its foreign subsidiaries. The Advisor shall select, and with respect to its foreign subsidiaries, shall monitor the selection of, the brokers or dealers that will execute the purchases and sales of securities for the Series and is directed to use its best efforts to ensure that the best available price and most favorable execution of securities transactions for the Series are obtained. Subject to policies established by the Board of Trustees of the Trust and communicated to the Advisor, it is understood that the Advisor will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Trust or in respect of the Series, or be in breach of any obligation owing to the Trust or in respect of the Series under this Agreement, or otherwise, solely by reason of its having caused the Series to pay a member of a securities exchange, a broker or a dealer a commission for effecting a securities transaction for the Series in excess of the amount of commission another member of an exchange, broker or dealer would have charged if the Advisor determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such member, broker or dealer, viewed in terms of that particular transaction or the Advisor's overall responsibilities with respect to the accounts, including the Series, as to which it exercises investment discretion. The Advisor will promptly communicate to the officers and directors of the Trust such information relating to Series transactions as they may reasonably request. 3. COMPENSATION OF THE ADVISOR. For the services to be rendered by the Advisor as provided in Section 1 and 2 of this Agreement, the Series shall pay to the Advisor within five business days after the end of each calendar month, a monthly fee of one twelfth of 0.70% of the Series' average daily net assets for the month. In the event of termination of this Agreement, the fee provided in this Section 3 shall be paid on a pro rata basis, based on the number of days when this Agreement was in effect. 4. REPORTS. The Series and the Advisor agree to furnish to each other such information regarding their operations with regard to their affairs as each may reasonably request. 5. STATUS OF ADVISOR. The services of the Advisor to the Series are not to be deemed exclusive, and the Advisor shall be free to render similar services to others so long as its services to the Series are not impaired thereby. 6. LIABILITY OF ADVISOR. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard by the Advisor of its obligations and duties hereunder, the Advisor shall not be subject to any liability whatsoever to the Series, or to any shareholder of the Series, for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Series. 7. DURATION AND TERMINATION. This Agreement shall become effective on APRIL 25, 1995 provided that first it is approved by the Board of Trustees of the Trust, including a majority of those trustees who are not parties to this Agreement or interested persons of any party hereto, in the manner provided in section 15(c) of the Investment Company Act of 1940, and by the holders of a majority of the outstanding voting securities of the Series; and shall continue in effect until APRIL 25, 1997. Thereafter, this Agreement may continue in effect only if such continuance is approved at least annually by: (i) the Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding voting securities of the Series; and in either event by a vote of a majority of those trustees of the Trust who are not parties to this Agreement or interested persons of any such party in the manner provided in section 15(c) of the Investment Company Act of 1940. This Agreement may be terminated by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of the Series on 60 days' written notice to the Advisor. This Agreement may be terminated by the Advisor at any time, without the payment of any penalty, upon 60 days' written notice to the Trust. This Agreement will automatically terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered or mailed postpaid, to the other party at the principal office of such party. As used in this Section 8, the terms "assignment", "interested person", and "a vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder. 8. NAME OF ADVISOR. The parties agree that the Advisor has a proprietary interest in the name "Brinson," and the Trust agrees to promptly take such action as may be necessary to delete from its corporate name and/or the name of the Series any reference to the name of the Advisor promptly after receipt from the Advisor of a written request therefore. 9. SEVERABILITY. If any provisions of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of this 25 day of APRIL, 1995. ATTEST: THE BRINSON FUNDS By: - ------------------------------- ------------------------- Bruce G. Leto E. Thomas McFarlan Secretary President ATTEST BRINSON PARTNERS, INC. By: - ------------------------------- ------------------------- Michael J. Jacobs Gary P. Brinson Secretary President EX-99.B.5.G 10 INVESTMENT ADVISORY AGMT. BRINSON US BOND FUND Exhibit (99.B5)(g) INVESTMENT ADVISORY AGREEMENT AGREEMENT made this 25 day of APRIL , 1995 by and between THE BRINSON FUNDS, a Delaware Business Trust (the "Trust") and BRINSON PARTNERS, INC., a Delaware corporation (the "Advisor"). 1. DUTIES OF ADVISOR. The Trust hereby appoints the Advisor to act as investment advisor to the BRINSON U.S. BOND FUND (the "Series") for the period and on such terms set forth in this Agreement. The Trust employs the Advisor to manage the investment and reinvestment of the assets of the Series, to continuously review, supervise and administer the investment program of the Series, to determine in its discretion the assets to be held uninvested, to provide the Trust with records concerning the Advisor's activities which the Trust is required to maintain, and to render regular reports to the Trust's officers and Board of Trustees concerning the Advisor's discharge of the foregoing responsibilities. The Advisor shall discharge the foregoing responsibilities subject to the control of the officers and the Board of Trustees of the Trust, and in compliance with the objectives, policies and limitations set forth in the Trust's Prospectus and Statement of Additional Information. The Advisor accepts such employment and agrees to render the services and to provide, at its own expense, the office space, furnishings, equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. With respect to foreign securities, at its own expense, the Advisor may obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it may not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. 2. PORTFOLIO TRANSACTIONS. The Advisor shall provide the Series with a trading department and with respect to foreign securities, the Advisor is authorized to utilize the trading department of its foreign subsidiaries. The Advisor shall select, and with respect to its foreign subsidiaries, shall monitor the selection of, the brokers or dealers that will execute the purchases and sales of securities for the Series and is directed to use its best efforts to ensure that the best available price and most favorable execution of securities transactions for the Series are obtained. Subject to policies established by the Board of Trustees of the Trust and communicated to the Advisor, it is understood that the Advisor will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Trust or in respect of the Series, or be in breach of any obligation owing to the Trust or in respect of the Series under this Agreement, or otherwise, solely by reason of its having caused the Series to pay a member of a securities exchange, a broker or a dealer a commission for effecting a securities transaction for the Series in excess of the amount of commission another member of an exchange, broker or dealer would have charged if the Advisor determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such member, broker or dealer, viewed in terms of that particular transaction or the Advisor's overall responsibilities with respect to the accounts, including the Series, as to which it exercises investment discretion. The Advisor will promptly communicate to the officers and directors of the Trust such information relating to Series transactions as they may reasonably request. 3. COMPENSATION OF THE ADVISOR. For the services to be rendered by the Advisor as provided in Section 1 and 2 of this Agreement, the Series shall pay to the Advisor within five business days after the end of each calendar month, a monthly fee of one twelfth of 0.50% of the Series' average daily net assets for the month. In the event of termination of this Agreement, the fee provided in this Section 3 shall be paid on a pro rata basis, based on the number of days when this Agreement was in effect. 4. REPORTS. The Series and the Advisor agree to furnish to each other such information regarding their operations with regard to their affairs as each may reasonably request. 5. STATUS OF ADVISOR. The services of the Advisor to the Series are not to be deemed exclusive, and the Advisor shall be free to render similar services to others so long as its services to the Series are not impaired thereby. 6. LIABILITY OF ADVISOR. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard by the Advisor of its obligations and duties hereunder, the Advisor shall not be subject to any liability whatsoever to the Series, or to any shareholder of the Series, for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Series. 7. DURATION AND TERMINATION. This Agreement shall become effective on APRIL 25, 1995 provided that first it is approved by the Board of Trustees of the Trust, including a majority of those trustees who are not parties to this Agreement or interested persons of any party hereto, in the manner provided in section 15(c) of the Investment Company Act of 1940, and by the holders of a majority of the outstanding voting securities of the Series; and shall continue in effect until APRIL 25, 1997. Thereafter, this Agreement may continue in effect only if such continuance is approved at least annually by: (i) the Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding voting securities of the Series; and in either event by a vote of a majority of those trustees of the Trust who are not parties to this Agreement or interested persons of any such party in the manner provided in section 15(c) of the Investment Company Act of 1940. This Agreement may be terminated by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of the Series on 60 days' written notice to the Advisor. This Agreement may be terminated by the Advisor at any time, without the payment of any penalty, upon 60 days' written notice to the Trust. This Agreement will automatically terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered or mailed postpaid, to the other party at the principal office of such party. As used in this Section 8, the terms "assignment", "interested person", and "a vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder. 8. NAME OF ADVISOR. The parties agree that the Advisor has a proprietary interest in the name "Brinson," and the Trust agrees to promptly take such action as may be necessary to delete from its corporate name and/or the name of the Series any reference to the name of the Advisor promptly after receipt from the Advisor of a written request therefore. 9. SEVERABILITY. If any provisions of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of this 25 day of APRIL, 1995. ATTEST: THE BRINSON FUNDS By: - -------------------- -------------------- Bruce G. Leto E. Thomas McFarlan Secretary President ATTEST BRINSON PARTNERS, INC. By: - -------------------- -------------------- Michael J. Jacobs Gary P. Brinson Secretary President EX-99.B.11 11 CONSENT OF ERNST & YOUNG Exhibit (99.B11) CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Financial Highlights" and to the incorporation by reference of our reports dated August 9, 1996, in the Registration Statement (Form N-1A) and related Prospectus of The Brinson Funds, filed with the Securities and Exchange Commission in this Post-Effective Amendment No. 17 to the Registration Statement under the Securities Act of 1933 (Registration No. 33-47287) and in this Amendment No. 18 to the Registration Statement under the Investment Act of 1940 (Registration No. 811-6637). /s/ Ernst & Young LLP --------------------- Ernst & Young LLP Chicago, Illinois August 28, 1996 EX-27.1 12 FINANCIAL DATA SCHEDULE GLOBAL FUND
6 0000886244 THE BRINSON FUNDS 1 BRINSON GLOBAL FUND 1 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 435368559 469490835 9267248 17720 2961751 481737554 8505363 0 1269055 9774418 0 414032614 37481925 32208149 9848069 0 14638128 0 33444325 471963136 4265925 15935899 0 4482882 15718942 33576934 13188606 62484482 0 21444413 10892522 0 7972013 5330521 2632284 106285211 4495172 3277834 0 275888 3415057 0 4482882 426645917 11.35 .44 1.37 .62 .32 0 12.22 1.04 0 0
EX-27.2 13 FINANCIAL DATA SCHEDULE-GLOBAL BOND FUND
6 0000886244 THE BRINSON FUNDS 2 BRINSON GLOBAL BOND FUND 1 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 43593397 44083699 1534427 5848 1140560 46764534 1809805 0 235724 2045529 0 43137444 4091541 4991549 1052943 0 198256 0 330362 44719005 0 2733764 0 381954 2351810 4022906 (1992544) 4382172 0 4734956 338786 0 1094889 2369683 374786 (7143513) 1095344 (882418) 0 0 310066 0 381954 41242097 10.39 .84 .31 1.40 .10 0 10.04 .90 0 0
EX-27.3 14 FINANCIAL DATA SCHEDULE-GLOBAL EQUITY FUND
6 0000886244 THE BRINSON FUNDS 3 BRINSON GLOBAL EQUITY FUND 1 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 54150527 60005593 372337 6965 609684 60994579 663419 0 193078 856497 0 49837041 2343988 2085106 90547 0 4320936 0 5889558 60138082 1003890 139095 0 680381 462604 8259766 1258707 9981077 0 295340 1399995 0 285419 186600 160063 39432517 59734 (1011998) 0 198395 390824 0 1059007 48939901 9.93 .18 2.29 .14 .69 0 11.57 1.00 0 0
EX-27.4 15 FINANCIAL DATA SCHEDULE-NON US EQUITY FUND
6 0000886244 THE BRINSON FUNDS 4 BRINSON NON-U.S. EQUITY FUND 1 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 196010918 209275939 1457845 53522 3975549 214762855 853302 0 281224 1134525 0 189936001 19010079 15314850 785599 0 7570744 0 15335985 213628329 3856097 1167297 0 1757430 3265964 22260813 10918989 36445766 0 3057609 8632717 0 8044119 5347882 998992 65309793 632906 (6089654) 0 0 1403109 0 2110340 175304016 9.68 .18 2.05 .18 .56 0 11.17 1.00 0 0
EX-27.5 16 FINANCIAL DATA SCHEDULE-US EQUITY FUND
6 0000886244 THE BRINSON FUNDS 6 BRINSON U.S. EQUITY FUND 1 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 112752165 130372201 1587909 53198 279476 132292784 472332 0 91707 564039 0 107348442 8659822 3692314 216006 0 6547036 0 17617261 131728745 1833948 234616 0 735393 1333171 7826393 13357238 22516802 0 1233245 1764213 0 5125613 380602 222497 89155284 133889 487467 0 0 638063 0 1047134 91305269 11.53 .17 3.31 .17 .25 0 14.59 .80 0 0
EX-27.6 17 FINANCIAL DATA SCHEDULE-US BALANCED FUND
6 0000886244 THE BRINSON FUNDS 7 BRINSON U.S. BALANCED FUND 1 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 221129000 237403692 11411132 54849 0 248869673 19680997 0 580383 20261380 0 206237387 19452253 14040134 1459205 0 4572865 0 16338836 228608293 1870968 8113714 0 1675812 8308870 8233205 8676412 25218487 0 7711341 9885505 0 6944846 3073501 1540774 70884465 942216 6155398 0 0 1465283 0 2125564 209337697 11.23 .44 1.04 .43 .57 0 11.71 .80 0 0
EX-27.7 18 FINANCIAL DATA SCHEDULE-US BOND FUND
6 0000886244 THE BRINSON FUNDS 8 BRINSON U.S. BOND FUND 1 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 10571434 10425171 570432 15501 46542 11057646 1311852 0 63260 1375110 0 9770407 911170 0 90190 0 (31800) 0 (146263) 9682534 0 503035 0 46804 456231 (11035) (146263) 298933 0 350335 23071 0 953454 84593 37309 9631534 0 0 0 0 37868 0 277020 9108927 10.00 .50 (.14) .40 .03 0 9.93 .60 0 0
EX-27.8 19 FINANCIAL DATA SCHEDULE
6 0000886244 THE BRINSON FUNDS 11 SWISSKEY GLOBAL FUND 1 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 435368559 469490835 9267248 17720 2961751 481737554 8505363 0 1269055 9774418 0 414032614 1151524 0 9848069 0 14638128 0 33444325 471963136 4265925 15935899 0 4482882 15718942 33576934 13188606 62484482 0 200446 45304 0 1155619 24583 20488 106285211 4495172 3277834 0 275888 3415057 0 4482882 426645917 11.60 .39 1.10 .59 .32 0 12.18 1.69 0 0
EX-27.9 20 FINANCIAL DATA SCHEDULE-SWISSKEY GLOBAL FUND
6 0000886244 THE BRINSON FUNDS 12 SWISSKEY GLOBAL BOND FUND 1 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 43593397 44083699 1534427 5848 1140560 46764534 1809805 0 235724 2045529 0 43137444 364428 0 1052943 0 198256 0 330362 44719005 0 2733764 0 381954 2351810 4022906 (1992544) 4382172 0 246430 16271 0 345211 4197 23414 (7143513) 1095344 (882418) 0 0 310066 0 381954 41242097 10.56 .78 .15 1.37 .10 0 10.02 1.39 0 0
EX-27.10 21 FIN. DATA SCHEDULE-SWISSKEY GLOBAL EQUITY FUND
6 0000886244 THE BRINSON FUNDS 13 SWISSKEY GLOBAL EQUITY FUND 1 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 54150527 60005593 372337 6965 609684 60994579 663419 0 193078 856497 0 49837041 2852778 0 90547 0 4320936 0 5889558 60138082 1003890 139095 0 680381 462604 8259766 1258707 9981077 0 41698 1621590 0 3220462 523404 155720 39432517 59734 (1011998) 0 198395 390824 0 1059007 48939901 10.35 (.01) 1.93 .01 .69 0 11.57 1.76 0 0
EX-27.11 22 FIN. DATA SCHEDULE-SWISSKEY NON-US EQUITY FUND
6 0000886244 THE BRINSON FUNDS 14 SWISSKEY NON-U.S. EQUITY FUND 1 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 196010918 209275939 1457845 53522 3975549 214762855 853302 0 281224 1134526 0 189936001 113519 0 785599 0 7570744 0 15335985 213628329 3856097 1167297 0 1757430 3265964 22260813 10918989 36445766 0 8629 14731 0 125829 14352 2042 65309793 632906 (6089654) 0 0 1403109 0 2110340 175304016 10.26 .12 1.45 .15 .56 0 11.12 1.84 0 0
EX-27.12 23 FIN. DATA SCHEDULE-SWISSKEY US EQUITY FUND
6 0000886244 THE BRINSON FUNDS 16 SWISSKEY U.S. EQUITY FUND 1 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 112752165 130372201 1587909 53198 279476 132292784 472332 0 91707 564039 0 107348442 369425 0 216006 0 6547036 0 17617261 131728745 1833948 234616 0 735393 1333171 7826393 13357238 22516802 0 17809 2611 0 375655 6874 644 89155284 133889 487467 0 0 638063 0 1047134 91305269 11.94 .10 2.92 .13 .25 0 14.58 1.32 0 0
EX-27.13 24 FIN. DATA SCHEDULE-SWISSKEY US BALANCED FUND
6 0000886244 THE BRINSON FUNDS 17 SWISSKEY US BALANCED FUND 1 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 221129000 237403692 11411132 54849 0 248869673 19680997 0 580383 20261380 0 206237387 66755 0 1459205 0 4572865 0 16338836 228608293 1870968 8113714 0 1675812 8308870 8233205 8676412 25218487 0 9781 992 0 67290 957 422 70884465 942216 6155398 0 0 1465283 0 2125564 209337697 11.38 .42 .86 .42 .57 0 11.67 1.30 0 0
EX-27.14 25 FINANCIAL DATA SCHEDULE-US BOND FUND
6 0000886244 THE BRINSON FUNDS 18 SWISSKEY U.S. BOND FUND 1 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 10571434 10425171 570432 15501 46542 11057646 1311852 0 63260 1375110 0 9770407 64124 0 90190 0 (31800) 0 (146263) 9682534 0 503035 0 46804 456231 (11035) (146263) 298933 0 13132 268 0 63717 1055 1362 9631534 0 0 0 0 37868 0 277020 9108927 10.00 .46 (.13) .38 .03 0 9.92 1.07 0 0
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