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UNITED STATES FILE NO. 33-47287
SECURITIES AND EXCHANGE COMMISSION ------------------
WASHINGTON, D.C. 20549 FILE NO. 811-6637
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _______ [_]
Post Effective Amendment No. 16 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 17 [X]
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THE BRINSON FUNDS
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(Exact name of Registrant as Specified in Charter)
209 South LaSalle Street
Chicago, Illinois 60604-1295
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code 312-220-7100
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The Brinson Funds
209 South LaSalle Street
Chicago, Illinois 60604-1295
---------------------------------
(Name and Address of Agent for Service)
COPIES TO: Bruce G. Leto, Esq.
Stradley, Ronon, Stevens & Young
2600 One Commerce Square
Philadelphia, PA 19103-7098
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICAL AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE:
[X] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485.
[_] ON (DATE), PURSUANT TO PARAGRAPH (B).
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[_] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1).
[_] ON (DATE) PURSUANT TO PARAGRAPH (A) OF RULE 485.
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[_] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(II).
[_] ON (DATE) PURSUANT TO PARAGRAPH (A)(II) OF RULE 485.
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IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[_] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR
A PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
Registrant has previously registered an indefinite number of shares of
beneficial interest of The Brinson Funds under the Securities Act of 1933
pursuant to Rule 24f-2 of the Investment Company Act of 1940, as amended.
Registrant filed a Notice pursuant to Rule 24f-2 for the fiscal period
ended June 30, 1995 on August 29, 1995.
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As filed with the U.S. Securities and Exchange TOTAL PAGES: ____
Commission on February 15, 1996 INDEX TO EXHIBITS, PAGE: ____
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<PAGE>
THE BRINSON FUNDS
Cross Reference Sheet Pursuant to Rule 481b
<TABLE>
<CAPTION>
FORM N-1A ITEM CAPTION IN PROSPECTUS
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PART A INFORMATION REQUIRED IN A PROSPECTUS
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<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Prospectus Summary; Tables of
Fees and Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant I Investment Objectives and
Policies; Other Investment
Practices and Risk Factors
5. Management of the Fund Management of the Trust
5A. Management's Discussion of Performance Information
Fund Performance
6. Capital Stock and Other Securities General Information; Dividends
and Taxes; Net Asset Value
7. Purchase of Securities Being Offered Purchase of Shares; Exchange
of Shares; Distribution Plan
8. Redemption or Repurchase Redemption of Shares
9. Legal Proceedings *
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Covered in Part A
13. Investment Objectives and Policies Investment Policies;
Investment Restrictions;
Portfolio Transactions and
Brokerage Commissions
14. Management of the Fund Trustees and Officers
15. Principal Holders of Securities Control Persons and Principal
Holders of Securities
16. Investment Advisory and Other Investment Advisory and Other
Services Services
17. Brokerage Allocation Portfolio Transactions and
Brokerage Commissions
18. Capital Stock and Other Other Information
Securities
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The Brinson Funds Post-Effective No. 16/17 Page 2
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<TABLE>
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<S> <C> <C>
19. Purchase, Redemption and Pricing Purchases; Redemptions
of Securities Being Offered
20. Tax Status Taxes
21. Underwriters Underwriter
22. Calculations of Performance Data Performance Information
23. Financial Statements Audited Financials dated
June 30, 1995
Unaudited Financials dated
December 31, 1995
</TABLE>
PART C OTHER INFORMATION
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Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration
Statement.
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The Brinson Funds Post-Effective No. 16/17 Page 3
<PAGE>
THE BRINSON FUNDS
LOGO
Brinson U.S. Bond Fund
209 South LaSalle Street
Chicago, IL 60604-1295
PROSPECTUS
February 15, 1996
The Brinson Funds (the "Trust") is an open-end management investment company,
advised by Brinson Partners, Inc., which currently offers shares of ten
series: Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global
Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash
Management Fund, Non-U.S. Equity and Non-U.S. Bond Fund (each a "Series" and
collectively, the "Series"). Each Series has distinct investment objectives
and policies.
The Trust currently offers two classes of shares for each Series: the Brinson
Fund class and the SwissKey Fund class. Brinson Fund class shares have no
sales charges and are not subject to annual 12b-1 plan expenses. SwissKey Fund
class shares have no sales charges but are subject to annual 12b-1 plan
expenses. Each Series offers SwissKey Fund class shares in a separate
prospectus which may be obtained by calling 1-800-SWISSKEY.
This Prospectus pertains only to the Brinson Fund class of the U.S. Bond Fund
(the "Brinson U.S. Bond Fund" or "Fund"). The Series' investment objective is
to maximize total return, consisting of capital appreciation and current
income, while controlling risk. The Series seeks to achieve this objective by
investing primarily in fixed income securities, which may also provide the
potential for capital appreciation. Under normal circumstances, at least 65%
of the Series' total assets will be invested in U.S. debt securities with an
initial maturity of more than one year.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Series. Additional information about the
Fund, the Series and the other Series and classes of shares of the Trust, is
contained in the Trust's Statement of Additional Information, dated February
15, 1996, as amended from time to time, which has been filed with the
Securities and Exchange Commission and is available upon request and without
charge from the Trust, at the addresses and telephone numbers below. The
Trust's Statement of Additional Information is incorporated by reference into
this Prospectus.
Investors should read and retain this Prospectus for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR
OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK.
UNDERWRITER: ADVISOR:
Fund/Plan Broker Services, Inc. Brinson Partners, Inc.
2 W. Elm Street 209 South LaSalle Street
Conshohocken, PA 19428-0874 Chicago, IL 60604-1295
(800) 448-2430 (800) 448-2430
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary......................................................... 3
Table of Fees and Expenses................................................. 5
Financial Highlights....................................................... 6
Investment Objectives and Policies......................................... 6
Other Investment Practices and Risk Factors................................ 10
Management of the Trust.................................................... 13
Purchase of Shares......................................................... 14
Redemption of Shares....................................................... 16
Telephone Transactions..................................................... 18
Dividends, Distributions and Taxes......................................... 18
Shares of Beneficial Interest and Voting Rights............................ 19
Performance Calculations................................................... 20
</TABLE>
This Prospectus is not an offering of the securities herein described in any
jurisdiction or to any person to whom it is unlawful for the Fund to make such
an offer or solicitation. No sales representative, dealer, or other person is
authorized to give any information or make any representation other than those
contained in this Prospectus.
2
<PAGE>
PROSPECTUS SUMMARY
THE TRUST
The Trust is an open-end management investment company commonly known as a
mutual fund. The Trust was originally established as a Maryland corporation on
April 14, 1992, and was reorganized as a Delaware business trust on December
1, 1993. The Trust currently offers ten series of shares: Global Fund, Global
Equity Fund, Global Bond Fund, Short-Term Global Income Fund, U.S. Balanced
Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non-U.S.
Equity Fund and Non-U.S. Bond Fund (each a "Series" and collectively, the
"Series"). The Trust offers two classes of shares for each Series: the Brinson
Fund class and SwissKey Fund class. This Prospectus pertains only to the
Brinson Fund class of the U.S. Bond Fund (previously defined herein as the
"Brinson U.S. Bond Fund" or "Fund").
INVESTMENT OBJECTIVE
The Series' investment objective is to maximize total return, consisting of
capital appreciation and current income, while controlling risk by investing
in domestic fixed-income securities. Under normal circumstances, at least 65%
of the Series' total assets will be invested in U.S. debt securities with an
initial maturity of more than one year. Due to the inherent risks of
investments, there can be no assurance that the objective of the Series will
be achieved. See "Investment Objectives and Policies" and "Other Investment
Practices and Risk Factors."
HOW TO PURCHASE SHARES
The minimum initial single purchase for the Fund is $100,000 and the minimum
additional investment is $2,500. The Fund does not impose any sales load,
redemption or exchange fees, nor does it bear any fees pursuant to a Rule 12b-
1 Plan. The public offering price of shares of the Fund is the net asset value
per share next determined after the receipt and acceptance of the purchase
order at the transfer agent in proper form with accompanying check or other
bank wire arrangements. See "Purchase of Shares."
HOW TO REDEEM SHARES
Shares may be redeemed at the net asset value per share of the Fund next
determined after receipt by the transfer agent of a redemption request in
proper form. Signature guarantees may be required. See "Redemption of Shares."
DIVIDEND REINVESTMENT
The Fund intends to pay semi-annual dividends from its net investment income
and may pay net capital gains, if any, annually.
Any dividends and distribution payments will be reinvested at net asset value,
in additional full and fractional shares of the Fund unless and until the
shareholder notifies the transfer agent, in writing, requesting payments in
cash. Provisions of the Tax Reform Act of 1986 may result in additional net
investment income and/or capital gain distributions at the end of the calendar
year. See "Dividends, Distributions and Taxes."
INVESTMENT MANAGEMENT, UNDERWRITER AND SERVICING AGENTS
Brinson Partners, Inc. ("Brinson Partners" or the "Advisor"), the Series'
investment advisor, is an investment management firm managing, as of December
31, 1995, approximately $53 billion in assets, primarily for pension and
profit sharing institutional accounts. Brinson Partners has offices in London,
Melbourne, New York, Paris, Singapore, Sydney and Tokyo, in addition to its
principal office at 209 South LaSalle Street, Chicago, IL 60604-1295.
Fund/Plan Broker Services, Inc., 2 W. Elm Street, Conshohocken, PA 19428-0874,
serves as the Series' underwriter. Bankers Trust Company, c/o BTNY Services,
Inc., 34 Exchange Place, Jersey City, NJ 07302-1107, serves as the custodian
of the Series' assets. Fund/Plan Services, Inc., 2 W. Elm Street,
Conshohocken, PA 19428-0874, serves as the Series' administrator,
accounting/pricing agent and transfer agent.
3
<PAGE>
RISK FACTORS
Shareholders should understand that all investment involve risks and there can
be no guarantee against loss resulting from an investment in the Series, nor
can there be any assurance that the Series will be able to attain its
investment objective. Investors should consider the following factors:
1. The Series may enter into contracts for the purchase or sale of
securities, including index contracts and purchase and write options to buy
or sell futures contracts. The Series may also purchase and write put and
call options on U.S. securities and indices and enter into related closing
transactions. Although the Series does not engage in options or futures for
speculative purposes, there are certain risks associated with such hedging
techniques. See "Futures Contracts and Options on Futures Contracts" and
"Options" under "Investment Objectives and Policies."
2. The Series may lend portfolio securities to creditworthy institutions;
the principal risk to the Series is the risk that the borrower fails to
return the borrowed security. The Series will require collateral before
lending securities. See "Loans of Portfolio Securities" under "Other
Investment Practices and Risk Factors."
3. The Series may invest in repurchase agreements (which involve risk of
loss if a seller defaults on its obligations under the agreement) and
reverse repurchase agreements (which involve risk of loss if a purchaser
defaults on its obligation to return securities to the Series). See
"Repurchase Agreements" and "Reverse Repurchase Agreements" under "Other
Investment Practices and Risk Factors."
4. The Series may invest in swaps for hedging and other permissible
purposes, which could subject the Series to increased risks. See "Swaps"
under "Other Investment Practices and Risk Factors."
5. The Series may invest in lower quality, higher yielding securities
(commonly referred to as "junk bonds"). See "Fixed Income Securities" under
"Investment Objectives and Policies," and "High Yield/High Risk Securities"
under "Other Investment Practices and Risk Factors;" and Appendix A in the
Trust's Statement of Additional Information.
Please see the Statement of Additional Information for further information
concerning investment policies and restrictions.
4
<PAGE>
TABLE OF FEES AND EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)............................... 0.00%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)............................... 0.00%
Deferred Sales Charge
(as a percentage of original purchase price or redemption
proceeds, as applicable).......................................... 0.00%
Redemption Fee
(as a percentage of amount redeemed, if applicable)............... 0.00%
Fee for Wire Transfer of Redemption Proceeds....................... $0.00
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees.................................................... 0.50%/1/
12b-1 Expenses..................................................... 0.00%
Other Expenses..................................................... 0.10%
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Administration Fees.................................... 0.011%/2/
Other Expenses........................................... 0.089%
Total Fund Operating Expenses
(after fee waiver and/or expense reimbursement)................... 0.60%/1/
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</TABLE>
<TABLE>
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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EXAMPLE
You would pay the following expenses on a
$1,000 investment, assuming: (1) a 5% annual
return; and (2) redemption at the end of each
time period:................................... $6 $19 $33 $74
=== === === ===
</TABLE>
The purpose of these tables is to assist the investor in understanding the
various direct and indirect costs and expenses that an investor in the Fund
will bear. While the example assumes a 5% annual return, the Fund's actual
performance will vary and may result in an actual return greater or less than
5%. The amount shown as "Other Expenses" is based on estimated amounts for the
current fiscal year. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
- --------
/1/The Advisor has agreed irrevocably to waive its fees and reimburse
expenses so that the Fund's total operating expenses will never exceed 0.60%
of the Series' average daily net assets. Absent this fee waiver and expense
reimbursement, the total fund operating expenses for the fiscal year ending
June 30, 1996, are estimated to be 4.69%.
/2/The fee payable to the Series' administrator is subject to an annual
minimum fee of $10,000.
5
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights are part of the unaudited, interim
financial statements for the Brinson Fund class of the U.S. Bond Fund, which
commenced investment operations on August 31, 1995. The period presented is
from August 31, 1995 through December 31, 1995. The following table should be
read in conjunction with the unaudited financial statements and related notes
in the Statement of Additional Information.
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 31,
1995/1/ TO
DECEMBER 31, 1995
(UNAUDITED)
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<S> <C>
Net asset value, beginning of
period....................... $10.00
Income from investment
operations:
Net investment income..... 0.20
Net realized and
unrealized gain on
investments.............. 0.35
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Total gain from
investment operations.. 0.55
------
Less distributions:
Distributions from net
investment income........ (0.20)
Distributions from net
realized gain............ (0.03)
------
Total distributions..... (0.24)
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Net asset value, end of
period....................... $10.31
======
Total Return.................. 5.49%/3/
Ratios/Supplemental Data
Net assets, end of period
(in 000s).................. $9,249
Ratio of expenses to average
net assets:
Before expense
reimbursement............ 4.69%/2/
After expense
reimbursement............ 0.60%/2/
Ratio of net investment
income to average net
assets:
Before expense
reimbursement............ 2.17%/2/
After expense
reimbursement............ 6.26%/2/
Portfolio turnover rate..... 212%
</TABLE>
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/1/Commencement of operations.
/2/Annualized.
INVESTMENT OBJECTIVES AND POLICIES
/3/Not annualized.
The Series' investment objective is to maximize total return, consisting of
capital appreciation and current income, while controlling risk. The Series
seeks to achieve this objective by investing primarily in fixed income
securities, which may also provide the potential for capital appreciation. As
a matter of fundamental policy, under normal circumstances, the Series intends
to invest at least 65% of its total assets in U.S. debt securities with an
initial maturity of more than one year. The Series may also engage in futures
and options transactions for hedging and other permissible purposes as more
fully described in this Prospectus. The Series is a diversified portfolio.
INVESTMENT PROCESS
Brinson Partners is an active manager of fixed income securities. The Advisor
believes that markets do not always efficiently price fixed income securities
and that a fundamental value-based investment process can increase portfolio
returns. Brinson Partners' fixed income strategies consider many factors in
addition to maturity and current yield in the evaluation of fixed income
securities. These factors include interest rate sensitivity, quality, yield
curve analysis and individual issue selection. Accordingly, Brinson Partners
will pursue the Series' objective by investing its assets in debt securities
which are believed to be undervalued. The Advisor's proprietary valuation
model determines which securities are potential candidates for inclusion in
the portfolio.
6
<PAGE>
The benchmark for the Series is the Salomon Brothers Broad Investment Grade
Bond Index (the "Benchmark"). The Benchmark is a market driven broad based
index which includes U.S. bonds with over one year to maturity. The Benchmark
is designed to provide a representative indication of the performance of U.S.
investment grade fixed income securities in the United States. From time to
time, the Advisor may substitute securities in an equivalent index when it
believes that such securities in the index more accurately reflect the relevant
fixed income securities market.
Brinson Partners will attempt to enhance the long-term return and risk
performance of the Series relative to the Benchmark by deviating from the
normal Benchmark mix in reaction to discrepancies between current market prices
and fundamental values. The active management process is intended by the
Advisor to produce a superior performance relative to the Benchmark index.
The Series does not intend to concentrate its investments in a particular
industry. The Series does not intend to issue senior securities as defined in
the Investment Company Act of 1940, as amended (the "Act"), except that the
Series may engage in borrowing activities as defined below. The Series'
investment objective and its policies concerning portfolio lending, borrowing,
the issuance of senior securities and concentration, are "fundamental," which
means that they may not be changed without the affirmative vote of the holders
of a majority of the Series' outstanding voting securities (as defined in the
Act). No assurance can be given that the Series' investment objective will be
achieved.
FIXED INCOME SECURITIES
The Series may invest in a broad range of fixed income securities, including
debt securities of the U.S. government together with its agencies and
instrumentalities and the debt securities of U.S. corporations. A majority of
the fixed income securities in which the Series will invest will meet a minimum
rating of BBB- by Standard and Poor's Corporation ("S&P") or Baa3 by Moody's
Investors Services, Inc. ("Moody's") or, if unrated, will be determined to be
of comparable quality by Brinson Partners. Such securities are considered to be
investment grade. While securities rated BBB or Baa are regarded as having an
adequate capacity to pay principal and interest, such bonds lack outstanding
investment characteristics and, in fact, have speculative characteristics and
changes in economic conditions or other circumstances are more likely to lead
to a weakened capacity to make principal and interest payments than is the case
with higher rated bonds. The Series may invest up to 30% of its total assets in
securities rated lower than BBB- by S&P and Baa3 by Moody's (commonly referred
to as "junk bonds"). Securities rated lower than BBB- by S&P and Baa3 by
Moody's are classified as non-investment grade securities and carry a higher
degree of risk and are considered to be of poor standing and predominately
speculative by the major credit rating agencies (see "High Yield/High Risk
Securities" under "Other Investment Practices and Risk Factors" below). To the
extent that a security held by the Series is downgraded to below investment
grade, the Series will dispose of that or another non-investment grade security
so that no more than 30% of its assets will be invested in below investment
grade securities. Other fixed income securities in which the Series may invest
include zero coupon bonds, mortgage-backed securities, asset-backed securities
and when-issued securities. The Series may invest a portion of its assets in
short-term debt securities (including repurchase agreements) of corporations,
governments or agencies and banks and finance companies. When unusual market
conditions warrant, the Series can make substantial temporary defensive
investments in cash equivalents.
ZERO COUPON SECURITIES
Zero coupon securities are debt obligations which do not entitle the holder to
any periodic payments of interest prior to maturity or a specified date when
the securities begin paying current interest (the "cash payment date") and
therefore are issued and traded at a discount from their face amounts or par
value. Such bonds carry an additional risk in that, unlike bonds which pay
interest throughout the period to maturity, the Series will realize no cash
until the cash payment date and, if the issuer defaults, the Series may obtain
no return at all on its investment. For federal tax purposes, the Series will
be required to include in income daily portions of original issue discount
accrued and to distribute the same to shareholders annually, even if no payment
is received before the distribution date.
7
<PAGE>
MORTGAGE-BACKED SECURITIES
The Series may invest in mortgage-backed securities, representing interests in
pools of mortgage loans. These securities provide shareholders with payments
consisting of both interest and principal as the mortgages in the underlying
mortgage pools are paid off. The Series may invest in mortgage-backed
securities issued or guaranteed by an agency or instrumentality of the U.S.
government, and also in privately-issued mortgage-backed securities issued by
certain private, non-government corporations, such as financial institutions.
The Series may also invest in Collateralized Mortgage Obligations ("CMOs") and
Real Estate Mortgage Investment Conduits ("REMICs"). CMOs are debt securities
issued by U.S. government agencies or by financial institutions and other
mortgage lenders and collateralized by a pool of mortgages held under an
indenture. CMOs are issued in a number of classes or series with different
maturities. The classes or series are retired in sequence as the underlying
mortgages are repaid. Prepayment may shorten the stated maturity of the
obligation and can result in a loss of premium, if any has been paid. Certain
of these securities may have variable or floating interest rates and others may
be stripped (securities which provide only the principal or interest feature of
the underlying security).
REMICs are private entities formed for the purpose of holding a fixed pool of
mortgages secured by an interest in real property. REMICs are similar to CMOs
in that they issue multiple classes of securities.
CMOs and REMICs issued by private entities are not government securities and
are not directly guaranteed by any government agency. They are secured by the
underlying collateral of the private issuer. Yields on privately-issued CMOs as
described above have been historically higher than yields on CMOs issued or
guaranteed by U.S. government agencies. However, the risk of loss due to
default on such instruments is higher since they are not guaranteed by the U.S.
government. Such instruments also tend to be more sensitive to interest rates
than Government-issued CMOs. The Series will not invest in subordinated
privately-issued CMOs. For federal income tax purposes, the Series will be
required to accrue income arising from regular interest on CMOs and REMICs
using the "catch-up" method, with an aggregate pre-payment assumption.
ASSET-BACKED SECURITIES
Asset-backed securities are securities that represent a participation in, or
are secured by and payable from, a stream of payments generated by particular
assets, most often a pool or pools of similar assets (e.g., receivables on home
equity and credit loans and receivables regarding automobile, credit card,
mobile home and recreational vehicle loans, wholesale dealer floor plans and
leases).
Such receivables are securitized in either a pass-through or a pay-through
structure. Pass-through securities provide investors with an income stream
consisting of both principal and interest payments in respect of the
receivables in the underlying pool. Pay-through asset-backed securities are
debt obligations issued usually by a special purpose entity, which are
collateralized by the various receivables and in which the payments on the
underlying receivables provide the funds to pay the debt service on the debt
obligations issued. The Series may invest in these and other types of asset-
backed securities that may be developed in the future.
The credit quality of these securities depends primarily upon the quality of
the underlying assets and the level of credit support and/or enhancement
provided. Such asset-backed securities are subject to the same prepayment risks
as mortgage-backed securities. For federal income tax purposes, the Series will
be required to accrue income on pay-through asset-backed securities using the
"catch-up" method, with an aggregate prepayment assumption.
WHEN-ISSUED SECURITIES
The Series may purchase securities on a "when-issued" basis for payment and
delivery at a later date. The price is generally fixed on the date of
commitment to purchase. During the period between purchase and settlement, no
interest accrues to the Series. At the time of settlement, the market value of
the security may be more or less than the purchase price.
8
<PAGE>
CONVERTIBLE SECURITIES
The Series may invest in convertible securities which generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality. The value of convertible securities may reflect changes in the value
of the underlying common stock. Convertible securities entail less credit risk
than the issuer's common stock because they rank senior to common stock.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Series may enter into contracts for the future purchase or sale of
securities or indices. A purchase of a futures contract means the acquisition
of a contractual right to obtain delivery to the Series of the securities
called for by the contract at a specified price during a specified future
month. When a futures contract is sold, the Series incurs a contractual
obligation to deliver the securities underlying the contract at a specified
price on a specified date during a specified future month. The Series may enter
into futures contracts and engage in options transactions related thereto to
the extent that not more than 5% of the Series' assets are required as futures
contract margin deposits and premiums on options and may engage in such
transactions to the extent that obligations relating to such futures and
related options on futures transactions represent not more than 25% of the
Series' assets.
The Series may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities except that
options on futures give the purchaser the right, in return for the premium
paid, to assume a position in a futures contract, rather than actually to
purchase or sell the futures contract, at a specified exercise price at any
time during the period of the option. When the Series enters into a futures
transaction, it must deliver to the futures commission merchant selected by the
Series, an amount referred to as "initial margin." This amount is maintained by
the futures commission merchant in a segregated account at the custodian bank.
Thereafter, a "variation margin" may be paid by the Series to, or drawn by the
Series from, such account in accordance with controls set for such accounts,
depending upon changes in the price of the underlying securities subject to the
futures contract. See "Options and Futures" under "Other Investment Practices
and Risk Factors."
OPTIONS
The Series may purchase and write put and call options on U.S. securities and
indices and enter into related closing transactions.
A call option enables the purchaser, in return for the premium paid, to
purchase securities from the writer of the option at an agreed price up to an
agreed date. The advantage is that the purchaser may hedge against an increase
in the price of securities it ultimately wishes to buy or may take advantage of
a rise in a particular index. The Series will only purchase call options to the
extent premiums paid on all outstanding call options do not exceed 20% of the
Series' total assets. The Series will only write call options on a covered
basis (e.g., on securities it holds in its portfolio). The Series will receive
premium income from writing call options, which may offset the cost of
purchasing put options and may also contribute to the Series' total return. The
Series may lose potential market appreciation, however, if the Advisor's
judgment is incorrect with respect to interest rates, security prices or the
movement of indices.
A put option enables the purchaser of the option, in return for the premium
paid, to sell the security underlying the option to the writer at the exercise
price during the option period, and the writer of the option has the obligation
to purchase the security from the purchaser of the option. The Series will only
purchase put options to the extent that the premiums on all outstanding put
options do not exceed 20% of the Series' total assets. With regard to
purchasing put options, the Series will limit the aggregate value of the
obligations underlying such put options to 50% of its total net assets. The
advantage is that the purchaser can be protected should the market value of the
security decline or should a particular index decline. The Series will, at all
times during which it holds a put option, own the security underlying such
option. The Series will receive premium income from writing put options,
although it may be required, when the put is exercised, to purchase securities
at higher prices than the current market price.
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An option on a securities index gives the purchaser of the option, in return
for the premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of the
option. Closing transactions essentially let the Series offset put options or
call options prior to exercise or expiration. If the Series cannot effect
closing transactions, it may have to hold a security it would otherwise sell or
deliver a security it might want to hold.
The Series may use options traded on U.S. exchanges and to the extent permitted
by law, options traded over-the-counter. It is the position of the Securities
and Exchange Commission that over-the-counter options are illiquid.
Accordingly, the Series will invest in such options only to the extent
consistent with its 15% limit on investment in illiquid securities. See
"Options and Futures" under "Other Investment Practices and Risk Factors"
below.
OTHER INVESTMENT PRACTICES AND RISK FACTORS
Shareholders should understand that all investments involve risk and there can
be no guarantee against loss resulting from an investment in the Series, nor
can there be any assurance that the Series' investment objective will be
attained.
OPTIONS AND FUTURES
The Series' investments in options, futures contracts or options on futures
contracts will depend on Brinson Partners' judgment as to the potential risks
and rewards of different types of strategies. Options and futures can be
volatile investments and may not perform as expected. If a hedge is applied at
an inappropriate time or price trends are judged incorrectly, options and
futures strategies may lower the Series' return. The Series could also
experience losses if the prices of its options and futures positions are poorly
correlated with its other investments, or if it cannot close out its positions
because of an illiquid secondary market. Gains and losses on investments in
options and futures depends on the Advisor's ability to predict correctly the
direction of security prices, interest rates and other economic factors. Where
a liquid secondary market does not exist, the Series will likely be unable to
control losses by closing its position. The loss from investing in futures
transactions is potentially unlimited.
REPURCHASE AGREEMENTS
The Series may enter into repurchase agreements with banks or broker-dealers.
Repurchase agreements are considered under the Act to be collateralized loans
by the Series to the seller secured by the securities transferred to the
Series. Repurchase agreements under the Act will be fully collateralized by
securities which the Series may invest in directly. Such collateral will be
marked-to-market daily. If the seller of the underlying security under the
repurchase agreement should default on its obligation to repurchase the
underlying security, the Series may experience delay or difficulty in
recovering its cash. To the extent that, in the meantime, the value of the
security purchased had decreased, the Series could experience a loss. No more
than 15% of the Series' net assets will be invested in illiquid securities,
including repurchase agreements which have a maturity of longer than seven
days. The Series must treat each repurchase agreement as a security for tax
diversification purposes and not as cash, a cash equivalent, or receivable.
REVERSE REPURCHASE AGREEMENTS
The Series may enter into reverse repurchase agreements with banks and broker-
dealers. Reverse repurchase agreements involve sales by the Series of portfolio
assets concurrently with an agreement by the Series to repurchase the same
assets at a later date at a fixed price. During the reverse repurchase
agreement period, the Series continues to receive principal and interest
payments on these securities.
The Series will establish a segregated account with its custodian bank in which
it will maintain cash, U.S. government securities or other liquid high grade
debt obligations equal in value to its obligations with respect to reverse
repurchase agreements. Reverse repurchase agreements involve the risk that the
market value of the securities retained by the Series may decline below the
price of the securities the Series has sold but is obligated to repurchase
under the agreement. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Series' use
of the proceeds of the agreement may be restricted
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pending a determination by the other party, or its trustee or receiver,
whether to enforce the Series' obligation to repurchase the securities.
Reverse repurchase agreements are considered borrowings by the Series and as
such are subject to the investment limitations discussed below in the section
entitled "Borrowing."
BORROWING
The Series may borrow money as a temporary measure for extraordinary purposes
or to facilitate redemptions. The Series will not borrow money in excess of 33
1/3% of the value of its total assets. The Series has no intention of
increasing its net income through borrowing. Any borrowing will be done from a
bank with the required asset coverage of at least 300%. In the event that such
asset coverage shall at any time fall below 300%, the Series shall, within
three days thereafter (not including Sunday or holidays) or such longer period
as the United States Securities and Exchange Commission may prescribe by rules
and regulations, reduce the amount of its borrowings to such an extent that
the asset coverage of such borrowings shall be at least 300%. The Series will
not pledge more than 10% of its net assets, or issue senior securities as
defined in the Act, except for notes to banks and reverse repurchase
agreements. Investment securities will not be purchased while the Series has
an outstanding borrowing that exceeds 5% of the Series' net assets.
LOANS OF PORTFOLIO SECURITIES
The Series may loan up to 33 1/3% of its assets to qualified broker-dealers or
institutional investors for their use relating to short sales or other
security transactions. The major risk to which the Series would be exposed on
a loan transaction is the risk that the borrower would become bankrupt at a
time when the value of the security goes up. Therefore, the Series will only
enter into loan arrangements after a review of all pertinent facts by Brinson
Partners, subject to overall supervision by the Board of Trustees, including
the creditworthiness of the borrowing broker-dealer or institution and then
only if the consideration to be received from such loans would justify the
risk. Creditworthiness will be monitored on an ongoing basis by Brinson
Partners.
SWAPS
The Series may engage in swaps, including but not limited to interest rate,
currency and index swaps and the purchase or sale of related caps, floors and
collars and other derivative instruments. The Series expects to enter into
these transactions primarily to preserve a return or spread on a particular
investment or portion of the portfolio's duration, to protect against any
increase in the price of securities the Series anticipates purchasing at a
later date, or to gain exposure to certain markets in the most economical way
possible.
The use of swaps involves investment techniques and risks different from those
associated with ordinary portfolio security transactions. If Brinson Partners
is incorrect in its forecasts of market values, interest rates and other
applicable factors, the investment performance of the Series will be less
favorable than it would have been if this investment technique was never used.
Swaps do not involve the delivery of securities or other underlying assets or
principal. Thus, if the other party to a swap defaults, the Series' risk of
loss consists of the net amount of interest payments that the Series is
contractually entitled to receive. Under Internal Revenue Service rules, any
lump sum payment received or due under the notional principal contract must be
amortized over the life of the contract.
RULE 144A SECURITIES
While maintaining oversight, the Board of Trustees has delegated to the
Advisor the day-to-day functions of determining whether or not individual
securities purchased under Rule 144A of the Securities Act of 1933, as
amended, are liquid for purposes of the Series' 15% limitation on investments
in illiquid assets. Generally, an illiquid security is any security that
cannot be disposed of within seven days in the ordinary course of business at
approximately the amount at which the Series has valued the security. Examples
of illiquid securities are over-the-counter options and certain swaps. The
Board of Trustees of the Trust has instructed Brinson Partners to consider the
following factors in determining the liquidity of a security purchased under
Rule 144A: (i) the
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frequency of trades and trading volume for the security; (ii) whether at least
three dealers are willing to purchase or sell the security and the number of
potential purchasers; (iii) whether at least two dealers are making a market in
the security; and (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). Although having
delegated the day-to-day functions, the Board of Trustees will continue to
monitor and will periodically review the Advisor's selection of Rule 144A
securities as well as the Advisor's determinations as to their liquidity.
Investing in Rule 144A securities could have the effect of increasing the level
of Series illiquidity to the extent that qualified institutional buyers become,
for a time, uninterested in purchasing these securities.
If Brinson Partners determines that a security purchased in reliance on Rule
144A, which was previously determined to be liquid, is no longer liquid and as
a result, the Series' holdings of illiquid securities exceed the Series' 15%
limit on investment in such securities, Brinson Partners will determine what
action shall be taken to ensure that the Series continues to adhere to such
limitation including disposing of illiquid assets which may include such Rule
144A securities.
MORTGAGE-BACKED SECURITIES
The Series may invest in pass-through certificates issued by non-governmental
issuers. Pools of conventional residential mortgage loans created by such
issuers generally offer a higher rate of interest than government and
government-related pools because there are no direct or indirect governmental
guarantees of payment. Timely payment of interest and principal of these pools
is, however, generally supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance. Insurance and
guarantees are issued by governmental entities, private insurance companies and
the mortgage poolers. Such insurance and guarantees and the creditworthiness of
the issuers will be considered in determining whether a mortgage-related
security meets the Series' quality standards. The Series may buy mortgage-
backed securities without insurance or guarantees if, through an examination of
the loan experience and practices of the poolers, the Advisor determines that
the securities meet the Series' quality standards.
The Series expects that governmental, government-related or private entities
may create mortgage loan pools offering pass-through investments in addition to
those described above. The mortgages underlying these securities may be
alternative mortgage investments, that is, mortgage investments whose principal
or interest payments may vary or whose terms to maturity may differ from
customary long-term fixed rate mortgages. As new types of mortgage-related
securities are developed and offered to investors, the Advisor will, consistent
with the Series' objectives, consider making investments in such new types of
securities.
HIGH YIELD/HIGH RISK SECURITIES
Debt securities rated lower than BBB- by S&P's or Baa3 by Moody's (commonly
referred to as "junk bonds") are considered to be of poor standing and
predominantly speculative. Investing in lower-rated debt securities may involve
certain risks not typically associated with higher rated securities. Prices
have been found to be less sensitive to interest rate changes than higher rated
investments, but more sensitive to adverse economic changes or individual
corporate developments. Also, during an economic downturn or substantial period
of rising interest rates, highly leveraged issuers may experience financial
stress which would adversely affect their ability to service principal and
interest payment obligations, to meet projected business goals and to obtain
additional financing. Changes by recognized rating agencies in their rating of
any security and in the ability of an issuer to make payments of interest and
principal will also ordinarily have a more dramatic effect on the values of
these investments than on the values of higher-rated securities. Such changes
in value will not affect cash income derived from these securities, unless the
issuers fail to pay interest or dividends when due. Such changes will, however,
affect the Series' net asset value per share.
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MANAGEMENT OF THE TRUST
THE BOARD OF TRUSTEES
Under Delaware law, the Board of Trustees has overall responsibility for
managing the business and affairs of the Trust and the Series. The Trustees, in
turn, elect the officers of the Trust, who are responsible for administering
the day-to-day operations of the Series.
THE ADVISOR
Brinson Partners, a Delaware corporation, is an investment management firm
managing, as of December 31, 1995, approximately $53 billion, primarily for
pension and profit sharing institutional accounts. Brinson Partners was
organized in 1989 when it acquired the institutional asset management business
of The First National Bank of Chicago and First Chicago Investment Advisors,
N.A. Brinson Partners and its predecessor entities have managed domestic and
international investment assets since 1974 and global investment assets since
1982. Brinson Partners has offices in London and Tokyo in addition to its
principal office at 209 South LaSalle Street, Chicago, IL 60604-1295. Brinson
Partners is an indirect wholly-owned subsidiary of Swiss Bank Corporation
("Swiss Bank"). Brinson Partners also serves as the investment advisor to six
other investment companies, Brinson Relationship Funds which includes six
investment portfolios (series), Enterprise Accumulation Trust, Enterprise
International Growth Portfolio, Fort Dearborn Income Securities, Inc., Short-
Term World Income Portfolio and Pace Large Company Value Equity Investments.
Swiss Bank, with headquarters in Basel, Switzerland, is an internationally
diversified organization with operations in many aspects of the financial
services industry.
Pursuant to an investment advisory agreement with the Trust, on behalf of the
Series, Brinson Partners receives a monthly fee at the annual rate of 0.50% of
the Series' average daily net assets for providing investment advisory services
and Brinson Partners is responsible for paying its own expenses. Brinson
Partners has agreed to waive that portion of its advisory fee equal to the
total expenses of the Series for any fiscal year which exceeds the permissible
limits applicable to the Series in any state in which its shares are then
qualified for sale. Pursuant to its advisory agreement, Brinson Partners is
authorized, at its own expense, to obtain statistical and other factual
information and advice regarding economic factors and trends from its foreign
subsidiaries, but it does not generally receive advice or recommendations
regarding the purchase or sale of securities from such subsidiaries.
PORTFOLIO MANAGEMENT
Investment decisions for the Series are made by an investment management team
at Brinson Partners. No member of the investment management team is primarily
responsible for making recommendations for portfolio purchases.
THE UNDERWRITER
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken, PA
19428-0874, was engaged pursuant to an agreement dated April 25, 1995, for the
limited purpose of acting as underwriter to facilitate the registration of
shares of the Series and of the other Series of the Trust under state
securities laws and to assist in the sale of shares. The fee for such service
is borne by the Advisor.
THE ADMINISTRATOR
The Trust, on behalf of the Series, has entered into an administrative services
agreement with Fund/Plan Services, Inc. ("Fund/Plan"), 2 W. Elm Street,
Conshohocken, PA 19428-0874, pursuant to which the administrator receives a fee
at the annual rate of 0.15% of the average daily net assets of the Trust on the
first $75 million; 0.10% on the next $75 million; 0.075% on the next $350
million; and 0.05% on the next $500 million. The Series pays its pro rata
portion based upon its average daily net assets but in no event shall the
Series pay less than $10,000 per year for each multiple class portfolio.
Pursuant to the agreement with Fund/Plan, maximum administration fees are
$400,000 for the initial multiple class portfolio and $60,000 maximum for each
subsequent multiple class portfolio.
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The services Fund/Plan provides to the Series include: coordinating and
monitoring of any third parties furnishing services to the Series; providing
the necessary office space, equipment and personnel to perform administrative
and clerical functions for the Series; preparing, filing and distributing proxy
materials, periodic reports to shareholders, registration statements and other
documents; and responding to shareholder inquiries.
EXPENSES
The Series is responsible for all of its own expenses other than those borne by
Brinson Partners pursuant to the investment advisory agreement. Such expenses
may include, but are not limited to, management fees, legal expenses, audit
fees, printing costs (e.g., cost of printing annual reports, semi-annual
reports and prospectuses which are distributed to existing shareholders),
brokerage commissions, the expenses of registering and qualifying the Series'
shares for sale with the Securities and Exchange Commission and with various
state securities commissions, fees and expenses of the Series' custodian,
administrator and transfer agent and the expenses of obtaining quotations of
portfolio securities and of pricing the Series' shares. General expenses which
are not associated directly with any particular Series within the Trust (e.g.,
insurance premiums, trustees' fees, expenses of maintaining the Trust's legal
existence and of shareholders' meetings and fees and expenses of industry
organizations) are allocated between the various Series and classes based upon
an equitable basis.
BROKERAGE ALLOCATION
As the Series is exclusively composed of debt (rather than equity) securities,
most of the Series' portfolio transactions are effected with dealers without
the payment of brokerage commissions, but at net prices which usually include a
spread or a markup. In determining the brokers through whom, and other
transaction costs at which, securities transactions for the Series are to be
executed, except as discussed below, Brinson Partners seeks to negotiate a
combination of the most favorable execution and the best price obtainable on
each transaction. Consequently, Brinson Partners selects brokers primarily on
the basis of their execution capability and trading expertise.
While the selection of brokers is made primarily on the basis of their
execution capabilities, the direction of transactions to such brokers may also
be based on the quality and amount of the research and research-related
services which they provide to Brinson Partners and indirectly to its clients.
These services are of the type described in Section 28(e) of the Securities
Exchange Act of 1934 and are designed to augment Brinson Partners' own internal
research and investment strategy capabilities. Brinson Partners may use this
research information in managing the Series' assets, as well as the assets of
other clients.
PURCHASE OF SHARES
Shares of the Fund may be purchased directly from the Trust at the net asset
value next determined after receipt of the order in proper form by the transfer
agent. There is no sales load in connection with the purchase of Fund shares.
The Trust reserves the right to reject any purchase order and to suspend the
offering of shares of the Fund or Series. The minimum initial investment for
Fund shares is $100,000. Subsequent investments for Fund shares will be
accepted in minimum amounts of $2,500. The Trust reserves the right to vary the
initial investment minimum and minimums for additional investments of the Fund
at any time. In addition, Brinson Partners may waive the minimum initial
investment requirement for any investor of the Fund.
In addition to offering shares of the Fund and of each Series of the Trust, the
Trust also offers the SwissKey Fund class shares of the Series and of each
other Series of the Trust. A description of the SwissKey Fund class shares is
contained in a separate prospectus relating only to those shares. The SwissKey
Fund class shares may also be purchased without a sales load directly from the
respective Series, but the SwissKey Fund class shares are subject to annual
12b-1 plan expenses and, consequently, such expenses may cause performance to
differ from the performance of the corresponding Brinson Fund class.
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At the discretion of the Trust, investors may be permitted to purchase Fund
shares by transferring securities to the Series that meet the Series'
investment objectives and policies. Securities transferred to the Series will
be valued in accordance with the same procedures used to determine the Fund's
net asset value at the time of the next determination of net asset value after
such acceptance. Shares issued by the Series in exchange for securities will
be issued at the net asset value per share of the Fund determined as of the
same time. All dividends, interest, subscription, or other rights pertaining
to such securities shall become the property of the Series and must be
delivered to the Series by the investor upon receipt from the issuer.
Investors who are permitted to transfer such securities will be required to
recognize a gain or loss on such transfer and pay tax thereon, if applicable,
measured by the difference between the fair market value of the securities and
the investors' basis therein. Securities will not be accepted in exchange for
shares of the Fund unless: (1) such securities are, at the time of the
exchange, eligible to be included in the Series' portfolio and current market
quotations are readily available for such securities; (2) the investor
represents and warrants that all securities offered to be exchanged are not
subject to any restrictions upon their sale by the Series under the Securities
Act of 1933 or under the laws of the country in which the principal market for
such securities exists, or otherwise; and (3) the value of any such security
(except U.S. government securities) being exchanged together with other
securities of the same issuer owned by the Series will not exceed 5% of the
Series' net assets immediately after the transaction.
Purchase orders for shares of the Fund which are received by the transfer
agent in proper form prior to the close of regular trading hours (currently
4:00 p.m. Eastern time) on the New York Stock Exchange (the "NYSE") on any day
that the Fund's net asset value per share is calculated, are priced according
to the net asset value determined on that day. Purchase orders for shares of
the Fund received after the close of the NYSE on a particular day are priced
as of the time the net asset value per share is next determined.
The Trust may accept telephone orders for Fund shares from broker-dealers or
service organizations which have been previously approved by the Trust. It is
the responsibility of such broker-dealers or service organizations to promptly
forward purchase orders and payments for the same to the Series. Shares of the
Fund may be purchased through broker-dealers, banks and bank trust departments
which may charge the investor a transaction fee or other fee for their
services at the time of purchase. Such fees would not otherwise be charged if
the shares were purchased directly from the Trust.
Purchases may be made in one of the following ways:
PURCHASES BY MAIL
Shares may be purchased initially by completing the application form
accompanying this Prospectus and mailing it to the transfer agent, together
with a check payable to Brinson U.S. Bond Fund, c/o 2 W. Elm Street, P.O. Box
874, Conshohocken, PA 19428-0874.
Subsequent investments in the Brinson U.S. Bond Fund may be made at any time
in minimum amounts of $2,500 by sending a check payable to the Brinson U.S.
Bond Fund, c/o P.O. Box 412797, Kansas City, MO 64141-2797. Please enclose the
stub of your account statement and include the amount of the investment, the
name of the account for which the investment is to be made and the account
number.
PURCHASES BY WIRE
To order shares for purchase by wiring federal funds, the transfer agent first
must be notified by calling (800) 448-2430 to request an account number and
furnish the Fund with your tax identification number. Following notification
to the transfer agent, federal funds and registration instructions should be
wired through the Federal Reserve System to:
UNITED MISSOURI BANK KC NA
ABA # 10-10-00695
FOR: FUND/PLAN SERVICES, INC.
A/C 98-7037-071-9
FBO "BRINSON U.S. BOND FUND"
"SHAREHOLDER NAME AND ACCOUNT NUMBER"
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A completed application form with signature(s) of registrant(s) must be filed
with the transfer agent immediately subsequent to the initial wire. Investors
should be aware that some banks may impose a wire service fee.
EXCHANGES OF SHARES
Fund shares may be exchanged for Brinson Fund class shares of any other Series
within the Trust. Exchanges will not be permitted between the Brinson Fund
class shares and the SwissKey Fund class shares of a Series of the Trust. Fund
shares may be exchanged by written request or by telephone if the shareholder
has previously signed a telephone authorization on the application form. The
telephone exchange privilege may be difficult to implement during times of
drastic economic or market changes. The Trust reserves the right to restrict
the frequency of, or otherwise modify, condition, terminate or impose charges
upon the exchange and/or telephone transfer privileges upon 60 days' prior
written notice to shareholders.
Exchanges will be made on the basis of both Funds' relative net asset values
per share. Exchanges may be made only for shares of a Series and class then
offering its shares for sale in your state of residence and are subject to the
minimum initial investment requirement. For federal income tax purposes, an
exchange of shares would be treated as if the shareholder had redeemed shares
of one Series and reinvested in shares of another Series. Gains or losses on
the shares exchanged are realized by the shareholder at the time of the
exchange. Any shareholder wishing to make an exchange should first obtain and
review a prospectus of the other Series. Requests for telephone exchange must
be received by the transfer agent by the close of regular trading hours
(currently 4:00 p.m. Eastern time) on the NYSE on any day that the NYSE is open
for regular trading.
NET ASSET VALUE
The Fund's offering price per share consists of the net asset value per share
next determined after receipt of the purchase order by the transfer agent in
proper form. The net asset value is computed as of the close of regular trading
on the NYSE, on days when such exchange is open.
The net asset value per share is computed by adding the value of all securities
and other assets in the portfolio, deducting any liabilities (expenses and fees
are accrued daily) and dividing by the number of shares outstanding. Portfolio
securities for which market quotations are available are priced at market
value. Debt securities are priced at fair value by an independent pricing
service using methods approved by the Board of Trustees of the Trust. Short-
term investments having a maturity of less than 60 days are valued at amortized
cost, which approximates market value. All other securities are valued at their
fair value as determined in good faith and pursuant to a method approved by the
Board of Trustees of the Trust.
Each of the Series' two classes of shares will bear, pro rata, all of the
common expenses of the Series. The net asset value of all outstanding shares of
each class of the Series will be computed on a pro rata basis for each
outstanding share based on the proportionate participation in the Series
represented by the value of shares of that class. All income earned and
expenses incurred by the Series, will be borne on a pro rata basis by each
outstanding share of a class, based on each class' percentage in the Series
represented by the value of shares of such class, except that the Brinson Fund
class will not incur any of the expenses under the SwissKey Fund class' Rule
12b-1 Plan.
REDEMPTION OF SHARES
Shareholders may redeem their shares of the Fund without charge on any business
day that the NYSE is open. Redemptions will be effected at the net asset value
per share next determined after the receipt by the transfer agent of a
redemption request meeting the requirements described below. The Trust normally
sends redemption proceeds on the next business day but, in any event,
redemption proceeds are sent within five business days of receipt of a
redemption request in proper form. Payment also may be made by wire directly to
any bank previously designated by the shareholder in a shareholder account
application. There is no charge for redemptions by wire. Please note that the
shareholder's bank may impose a fee for wire service. The Trust will honor
redemption requests of shareholders who recently purchased shares by check, but
will not mail the proceeds until it is reasonably satisfied that the purchase
check has cleared, which may take up to fifteen days from the purchase date.
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Except as noted below, redemption requests received in proper form by the
transfer agent prior to the close of regular trading hours on the NYSE on any
business day that the Fund's net asset value per share is calculated are
effected that day. Redemption requests received in proper form by the transfer
agent after the close of the NYSE are effected as of the time the net asset
value per share is next determined. No redemption will be processed until the
transfer agent has received a completed application with respect to the
account.
The Trust will satisfy redemption requests in cash to the fullest extent
feasible, so long as such payments would not, in the opinion of Brinson
Partners or the Board of Trustees, result in the necessity of the Series
selling assets under disadvantageous conditions and to the detriment of the
remaining shareholders of the Series. Pursuant to the Trust's Agreement and
Declaration of Trust, payment for shares redeemed may be made either in cash or
in-kind, or partly in cash and partly in-kind. However, the Trust has elected,
pursuant to Rule 18f-1 under the Act, to redeem its shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of the Series, during any
90 day period for any one shareholder. Payments in excess of this limit will
also be made wholly in cash unless the Board of Trustees believes that economic
conditions exist which would make such a practice detrimental to the best
interests of the Series. Any portfolio securities paid or distributed in-kind
would be valued as described under "Net Asset Value." In the event that an in-
kind distribution is made, a shareholder may incur additional expenses, such as
the payment of brokerage commissions, on the sale or other disposition of the
securities received from the Series. In-kind payments need not constitute a
cross-section of the Series' portfolio. Where a shareholder has requested
redemption of all or a part of the shareholder's investment, and where the
Series computes such redemption in-kind, the Series will not recognize gain or
loss for federal tax purposes on the securities used to compute the redemption,
but the shareholder will recognize gain or loss equal to the difference between
the fair market value of the securities received and the shareholder's basis in
the Fund shares redeemed.
Shares may be redeemed in one of the following ways:
REDEMPTIONS BY MAIL
Shares may be redeemed by submitting a written request for redemption to the
transfer agent at 2 W. Elm Street, P.O. Box 874, Conshohocken, PA 19428-0874.
A written redemption request to the transfer agent must: (i) identify the
shareholder's account name; (ii) state the number of shares to be redeemed; and
(iii) be signed by each registered owner exactly as the shares are registered.
A redemption request for any amount must be accompanied by signature
guarantees. Signatures must be guaranteed by an "eligible guarantor
institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of
1934. Eligible guarantor institutions include banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations. Broker-dealers guaranteeing
signatures must be members of a clearing corporation or maintain net capital of
at least $100,000. Credit unions must be authorized to issue signature
guarantees. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program. The transfer
agent may require additional supporting documents for redemptions made by
corporations, executors, administrators, trustees and guardians.
A redemption request will not be deemed to be properly received until the
transfer agent receives all required documents in proper form. Questions with
respect to the proper form for redemption requests should be directed to the
transfer agent at (800) 448-2430.
REDEMPTIONS BY TELEPHONE
Shareholders who have so indicated on the application form, or have
subsequently arranged in writing to do so, may redeem shares by instructing the
transfer agent by telephone at (800) 448-2430.
In order to arrange for redemption by wire or telephone after an account has
been opened, or to change the bank or account designated to receive redemption
proceeds, a written request must be sent to the transfer agent at the address
listed above.
17
<PAGE>
The Trust reserves the right to refuse a wire or telephone redemption if it is
believed advisable to do so. Procedures for redeeming Fund shares by wire or
telephone may be modified or terminated at any time by the Trust.
Shares of the Fund may be redeemed through certain broker-dealers, banks and
bank trust departments which may charge the investor a transaction fee or other
fee for their services at the time of redemption. Such fees would not otherwise
be charged if the shares were purchased from the Trust.
TELEPHONE TRANSACTIONS
Shareholders who wish to initiate purchase, exchange or redemption transactions
by telephone must elect the option, as described above. With respect to such
telephone transactions, the Trust will ensure that reasonable procedures are
used to confirm that instructions communicated by telephone are genuine
(including verification of the shareholder's social security number or mother's
maiden name) and, if it does not, the Trust or the transfer agent may be liable
for any losses due to unauthorized or fraudulent transactions. Written
confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Series will distribute its net investment income semi-annually in June and
December. The Series will distribute annually in December substantially all of
its net long-term capital gains and any undistributed net short-term capital
gains realized during the one year period commencing November 1 (or the date of
the creation of the Series, if later) and ending October 31, and at the same
time, will distribute all of its net investment income earned through the end
of December and not previously distributed. Any net realized short-term capital
gain will be distributed as ordinary (not capital) income.
Dividends and other distributions paid by the Series with respect to its
Brinson Fund class and SwissKey Fund class shares are calculated in the same
manner and at the same time. The per share dividends on the SwissKey Fund class
shares will be lower than the per share dividends on the Brinson Fund class
shares of the Series as a result of the 12b-1 distribution expense applicable
with respect to the SwissKey Fund class shares. Both the SwissKey Fund class
and Brinson Fund class shares of the Series will share proportionately in the
investment income and expenses of the Series, except that the per share
dividends and distributions on the SwissKey Fund class shares will be lower
than the per share dividends on the Brinson Fund class shares, which will not
incur any expenses under a Rule 12b-1 Plan.
Dividends and distributions are automatically reinvested in additional Fund
shares of the Series unless the shareholder has notified the transfer agent, in
writing, of his election to receive such dividends and distributions in cash.
Any check in payment of dividends or other distributions which cannot be
delivered by the Post Office or which remains uncashed for a period of more
than one year may be reinvested in the shareholder's account at the then
current net asset value and the dividend option may be changed from cash to
reinvest. Dividends are reinvested on the ex dividend date (the "ex date") at
the net asset value per share determined at the close of business on that date.
Dividends and distributions are treated the same for tax purposes whether
received in cash or reinvested in additional shares. Please note that shares
purchased shortly before the record date for a dividend or distribution may
have the effect of returning capital although such dividends and distributions
are subject to taxes.
Shareholders will be subject to federal income taxes on dividends and
distributions made by the Series, including those automatically reinvested.
Distributions of net investment income and short-term capital gains, if any,
will be taxable to shareholders as ordinary income, whether received in cash or
additional shares. Distributions of net long-term capital gains, if any, will
be taxable to shareholders as long-term capital gains, whether received in cash
or Fund shares and without regard to how long a shareholder has held shares of
the Series. Shareholders not subject to tax on their income will not be
required to pay tax on amounts distributed to them. The Series does not
actively seek to realize any particular amount of capital gains during a year;
rather, realized gains are a
18
<PAGE>
by product of Series investment management activities. Dividends and
distributions may also be subject to state and local taxes. The Series will
notify shareholders each year of the amount of dividends and distributions,
including the amount of any distribution of long-term capital gains.
Redemptions of Fund shares and the exchange of shares between two Series, are
taxable events and, accordingly, shareholders may realize capital gains or
losses on these transactions.
The Series has qualified, and intends to continue to qualify for taxation as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), so that it will not be subject to federal
income tax, or to any excise tax, to the extent its earnings are distributed to
shareholders as provided in the Code. The Series will therefore be treated as a
separate entity for the purpose of computing investment company taxable income
and net realized capital gains and losses for federal income tax purposes and
for purposes of qualifying under the diversification, income and distribution
tests of Subchapter M.
Shareholders may be subject to 31% withholding on reportable dividend and
redemption payments ("back-up withholding"). Generally, back-up withholding
will apply to shareholders for whom a certified taxpayer identification number
is not on file with the Series, who, to the Series' knowledge, have furnished
an incorrect number, or if the Series has been notified by the IRS that an
account is subject to back-up withholding. An individual's taxpayer
identification number is his social security number.
The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax advisers concerning the tax
consequences of an investment in the Series.
SHARES OF BENEFICIAL INTEREST AND VOTING RIGHTS
The Trust was originally organized as a Maryland corporation on April 14, 1992.
On December 1, 1993, the Trust reorganized as a Delaware business trust through
a merger of the Maryland corporation into the Trust. The Trust's Agreement and
Declaration of Trust permit the Trustees to issue an unlimited number of shares
of beneficial interest with a $0.001 par value per share. The Board of Trustees
has the power to designate one or more Series or sub-series/classes of shares
of beneficial interest and to classify or reclassify any unissued shares with
respect to such Series. Currently, the Trust is offering shares of ten series:
Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income
Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash
Management, Non-U.S. Equity Fund and Non-U.S. Bond Fund.
The shares of the Trust, when issued, will be fully paid and non-assessable and
within each Series or class, have no preference as to conversion, exchange,
dividends, retirement or other features. The shares of the Trust which the
Trustees may, from time to time, establish, shall have no preemptive rights.
The shares of the Trust have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Trustees can
elect 100% of the Trustees if they choose to do so. A shareholder is entitled
to one vote for each full share held (and a fractional vote for each fractional
share held), then standing in his name on the books of the Trust. On any matter
submitted to a vote of shareholders, all shares of the Trust then issued and
outstanding and entitled to vote on a matter shall vote without differentiation
between separate Series or class on a one-vote-per-share basis. Each whole
share is entitled to one vote and each fractional share is entitled to a
proportionate fractional vote. If a matter to be voted on does not affect the
interests of all Series or classes, then only the shareholders of the affected
Series or class shall be entitled to vote on the matter. The Trust's Agreement
and Declaration of Trust also gives shareholders the right to vote (i) for the
election or removal of Trustees; (ii) with respect to additional matters
relating to the Trust as required by the Act; and (iii) on such other matters
as the Trustees consider necessary or desirable.
As of January 17, 1996, Swiss Bank Corporation of New York, New York was a
control person of the Fund by nature of its shareholdings. Under the Investment
Company Act, a control person possesses the ability to control the outcome of
matters submitted for shareholder vote.
19
<PAGE>
SHAREHOLDER MEETINGS
Pursuant to Delaware law and the Trust's Agreement and Declaration of Trust,
the Trust does not intend to hold shareholder meetings except when required to
elect Trustees, or with respect to additional matters relating to the Trust, as
required under the Act. The Securities and Exchange Commission requires the
Trustees to promptly call a meeting for the purpose of voting upon the question
of removal of any trustee when requested to do so by not less than 10% of the
outstanding shareholders of the Series. In addition, subject to certain
conditions, shareholders of the Series may apply to the Series to communicate
with other shareholders to request a shareholders' meeting to vote upon the
removal of a Trustee or Trustees.
THE CUSTODIAN, TRANSFER AGENT AND ACCOUNTING/PRICING AGENT
Bankers Trust Company, c/o BTNY Services, Inc., 34 Exchange Place, Jersey City,
NJ 07302-1107, is custodian for the securities and cash of the Series.
Fund/Plan serves as the Series' transfer agent. As transfer agent, it maintains
the records of each shareholder's account, answers shareholder inquiries
concerning accounts, processes purchases and redemptions of the Series' shares,
acts as dividend and distribution disbursing agent and performs other
shareholder service functions. Shareholder inquiries should be addressed to the
transfer agent at (800) 448-2430.
Fund/Plan also performs certain accounting and pricing services for the Series,
including the daily calculation of the Fund's net asset value per share.
PERFORMANCE CALCULATIONS
From time to time, performance information, such as yield or total return for
the Fund, may be quoted in advertisements or in communications to shareholders.
Performance quotations of the Fund represent the Fund's past performance and
should not be considered as representative of future results. The current yield
will be calculated by dividing the net investment income earned per share by
the Fund during the period stated in the advertisement (based on the average
daily number of shares entitled to receive dividends outstanding during the
period) by the maximum net asset value per share on the last day of the period
and annualizing the result on a semi-annual compounded basis. The Fund's total
return may be calculated on an annualized and aggregate basis for various
periods (which periods will be stated in the advertisement). Average annual
return reflects the average percentage change per year in value of an
investment in the Fund. Aggregate total return reflects the total percentage
change over the stated period.
To help investors better evaluate how an investment in the Fund might satisfy
their investment objective, advertisements regarding the Fund may discuss yield
or total return as reported by various financial publications. Advertisements
may also compare yield or total return to other investments, indices and
averages. The following publications, benchmarks, indices and averages may be
used: Lipper Mutual Fund Performance Analysis; Lipper Fixed Income Analysis;
Lipper Mutual Fund Indices; Morgan Stanley Indices; Shearson Lehman Hutton
Treasury Index; Salomon Brothers Indices; Dow Jones Composite Average or its
component indices; Standard & Poor's 500 Stock Index or its component indices;
Wilshire Indices; The New York Stock Exchange composite or component indices;
CDA Mutual Fund Report; Weisenberger -- Mutual Funds Panorama and Investment
Companies; Mutual Fund Values and Mutual Fund Service Book, published by
Morningstar, Inc.; comparable global portfolios managed by the Advisor; and
financial publications such as Business Week, Kiplinger's Personal Finance,
Financial World, Forbes, Fortune, Money Magazine, The Wall Street Journal and
Barron's, et al., which rate fund performance over various time periods.
The principal value of an investment in the Fund will fluctuate so that an
investor's shares when redeemed may be worth more or less than their original
cost. Any fees charged by banks or other institutional investors directly to
their customer accounts in connection with investments in shares of the Fund
will not be included in the Fund's calculations of yield or total return.
Further information about the performance of the Fund may be obtained without
charge by contacting the Trust at (800) 448-2430.
20
<PAGE>
ADVISOR
Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
UNDERWRITER
Fund/Plan Broker Services, Inc.
2 W. Elm Street
Conshohocken, PA 19428-0874
SHAREHOLDER SERVICES
Fund/Plan Services, Inc.
2 W. Elm Street
P.O. Box 874
Conshohocken, PA 19428-0874
CUSTODIAN
Bankers Trust Company
34 Exchange Place
Jersey City, NJ 07302-1107
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
INDEPENDENT AUDITORS
Ernst & Young LLP
Sears Tower
233 South Wacker Drive
Chicago, IL 60606-6301
THE BRINSON FUNDS
LOGO
Brinson U.S. Bond Fund
209 South LaSalle Street
Chicago, IL 60604-1295
21
<PAGE>
LOGO
209 South LaSalle Street
Chicago, IL 60604-1295
PROSPECTUS
FEBRUARY 15, 1996
THE SWISSKEY FUNDS represent a separate class of shares of ten different in-
vestment portfolios, offered by The Brinson Funds (the "Trust"). The Trust is
an open-end management investment company advised by Brinson Partners, Inc.
Each investment portfolio, a series, offers two separate classes of shares--
the SwissKey Fund class and the Brinson Fund class. The SwissKey Funds, which
represent the SwissKey Fund class of each investment portfolio, are: SwissKey
Global Fund, SwissKey Global Equity Fund, SwissKey Global Bond Fund, SwissKey
Short-Term Global Income Fund, SwissKey U.S. Balanced Fund, SwissKey U.S. Eq-
uity Fund, SwissKey U.S. Bond Fund, SwissKey U.S. Cash Management Fund,
SwissKey Non-U.S. Equity Fund and SwissKey Non-U.S. Bond Fund (each a "Fund"
and collectively, the "SwissKey Funds" or "Funds"). The Funds are designed to
offer investors a variety of investment opportunities. Each Fund has distinct
investment objectives and policies. This prospectus pertains only to the
SwissKey Fund class shares, which do not have a sales load, but are subject to
annual 12b-1 plan expenses. The Brinson Fund class shares, which are designed
primarily for institutional investors, do not have a sales load and are not
subject to annual 12b-1 plan expenses. Further information relating to the
Brinson Fund class shares may be obtained by calling (800) 448-2430.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in any of the SwissKey Funds. Investors should
read and retain this Prospectus for future reference. Additional information
about the Funds and the other class of shares of the Trust's investment port-
folios is contained in the Statement of Additional Information dated February
15, 1996, as amended from time to time, which has been filed with the Securi-
ties and Exchange Commission and is available upon request and without charge
from the Trust, at the addresses and telephone numbers below. The Statement of
Additional Information is incorporated by reference into this Prospectus.
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN ANY OF THE FUNDS IS NOT A DEPOSIT
OR OTHER OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. FURTHER, THERE
CAN BE NO ASSURANCE THAT THE SWISSKEY U.S. CASH MANAGEMENT FUND WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
UNDERWRITER:
Fund/Plan Broker Services, Inc.
2 W. Elm Street
Conshohocken, PA 19428-0874
1-800-SWISSKEY
ADVISOR:
Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
1-800-SWISSKEY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary......................................................... 1
Expense Information........................................................ 5
Financial Highlights..................................................... 7
Investment Objectives and Policies......................................... 8
Global Fund.............................................................. 9
Global Equity Fund....................................................... 10
Global Bond Fund......................................................... 11
Short-Term Global Income Fund............................................ 11
U.S. Balanced Fund....................................................... 12
U.S. Equity Fund......................................................... 13
U.S. Bond Fund........................................................... 14
U.S. Cash Management Fund................................................ 15
Non-U.S. Equity Fund..................................................... 17
Non-U.S. Bond Fund....................................................... 17
Investment Policies........................................................ 19
Other Investment Practices and Risk Factors................................ 24
Management of the Trust.................................................... 29
Portfolio Management....................................................... 29
Administration of the Trust................................................ 29
Purchase of Shares......................................................... 31
Exchange of Shares......................................................... 33
Redemption of Shares....................................................... 33
Account Options............................................................ 36
Distribution Plan.......................................................... 36
Net Asset Value............................................................ 37
Dividends and Taxes........................................................ 38
Performance Information.................................................... 39
General Information........................................................ 41
</TABLE>
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.
<PAGE>
PROSPECTUS SUMMARY
THE TRUST
The Trust is an open-end management investment company commonly known as a
mutual fund. The Trust was established as a Maryland corporation on April 14,
1992, and was reorganized as a Delaware business trust on December 1, 1993.
The Trust currently offers ten different investment portfolios: Global Fund,
Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, U.S. Bal-
anced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non-
U.S. Equity Fund and Non-U.S. Bond Fund (each a "Series" and collectively, the
"Series"). The Trust offers two classes of shares for each Series: the Brinson
Fund class and SwissKey Fund class. This prospectus pertains only to the
SwissKey Fund class shares of each Series.
INVESTMENT OBJECTIVES OF THE FUNDS:
GLOBAL FUND seeks to maximize total return, consisting of capital apprecia-
tion and current income. As a global fund, at least 65% of the Series' assets
will be invested in securities of issuers in at least three countries, one of
which may be the United States.
GLOBAL EQUITY FUND seeks to maximize total return, consisting of capital ap-
preciation and current income by investing in equity securities, both domestic
and foreign. As a global fund, at least 65% of the Series' assets will be in-
vested in equity securities of issuers in at least three countries, one of
which may be the United States.
GLOBAL BOND FUND seeks to maximize total return, consisting of capital ap-
preciation and current income by investing in fixed-income securities, both
domestic and foreign. As a global fund, at least 65% of the Series' total as-
sets will be invested in debt securities with an initial maturity of more than
one year of issuers in at least three countries, one of which may be the
United States.
SHORT-TERM GLOBAL INCOME FUND seeks a high level of current income consis-
tent with preservation of capital, by investing primarily in fixed income se-
curities, both domestic and foreign. As a global fund, at least 65% of the
Series' total assets will be invested in debt securities having a dollar-
weighted average maturity of not more than three years of issuers in at least
three countries, one of which may be the United States.
U.S. BALANCED FUND seeks to maximize total return, consisting of capital ap-
preciation and current income, by investing in a wide range of U.S. equity,
debt and money market securities, having the potential to realize both long-
term growth and income. As a balanced fund, at least 25% of its assets will
normally be invested in fixed income securities.
U.S. EQUITY FUND seeks to maximize total return, consisting of capital ap-
preciation and current income, while controlling risk by investing in equity
securities of U.S. companies. Under normal circumstances, at least 65% of the
Series' total assets will be invested in equity securities of U.S. companies.
U.S. BOND FUND seeks to maximize total return, consisting of capital appre-
ciation and current income, while controlling risk by investing in domestic
fixed income securities. Under normal circumstances, at least 65% of the Se-
ries' total assets will be invested in U.S. debt securities with an initial
maturity of more than one year.
U.S. CASH MANAGEMENT FUND seeks to maximize current income consistent with
preservation of capital by investing exclusively in U.S. dollar-denominated
money market instruments that mature in twelve months or less.
NON-U.S. EQUITY FUND seeks to maximize total return, consisting of capital
appreciation and current income by investing primarily in the equity securi-
ties of non-U.S. issuers. Under normal conditions, at least 65% of the Series'
total assets will be invested in equity securities of issuers in at least
three countires other than the United States.
NON-U.S. BOND FUND seeks to maximize total return, consisting of capital ap-
preciation and
1
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current income, while controlling risk, by investing primarily in fixed income
securities which are not denominated in U.S. dollars and that may also provide
the potential for capital appreciation. Under normal conditions, at least 65%
of the Series' total assets will be invested in debt securities with an ini-
tial maturity of more than one year from at least three countries other than
the United States.
HOW TO PURCHASE SHARES
The minimum initial investment is $1,000 for each Fund. The minimum for ad-
ditional investments is $50 for each Fund. The Funds do not impose any sales
load, redemption or exchange fees. All of the Funds have adopted Distribution
Plans pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "Act"), and are subject to annual 12b-1 expenses. See "Distribu-
tion Plan." The public offering price for shares of each of the Funds is the
net asset value per share next determined after receipt and acceptance of a
purchase order at the transfer agent in proper form with accompanying check or
other bank wire arrangements. See "Purchase of Shares."
HOW TO REDEEM SHARES
Shares of each Fund may be redeemed at the net asset value per share of the
Fund next determined after receipt by the transfer agent of a redemption re-
quest in proper form. Signature guarantees may be required. See "Redemption of
Shares."
DIVIDENDS
Each Fund intends to distribute substantially all of its net investment in-
come and net realized capital gains, if any, to shareholders. Distributions of
net capital gains, if any, will be made annually. All distributions are rein-
vested at net asset value, in additional full and fractional shares of the
same class of the respective Series unless and until the shareholder notifies
the transfer agent in writing requesting payments in cash.
The Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund,
U.S. Equity Fund, U.S. Bond Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund
declare and pay dividends on net investment income, if any, semi-annually. The
Short-Term Global Income Fund's and U.S. Cash Management Fund's net investment
income is declared daily and paid monthly as a dividend to shareholders of
record at the close of business on the day of declaration. See "Dividends and
Taxes."
MANAGEMENT OF THE TRUST
Brinson Partners, Inc. ("Brinson Partners" or the "Advisor"), the Series'
investment advisor, is an investment management firm managing, as of December
31, 1995, approximately $53 billion in assets, primarily for pension and
profit sharing institutional accounts. Brinson Partners has offices in London,
Melbourne, New York, Paris, Singapore, Sydney and Tokyo, in addition to its
principal office at 209 South LaSalle Street, Chicago, IL 60604-1295.
Fund/Plan Broker Services, Inc., 2 W. Elm Street, Conshohocken, PA 19428-
0874 serves as the Funds' underwriter. Bankers Trust Company, c/o BTNY Servic-
es, Inc., 34 Exchange Place, Jersey City, NJ 07302-1107, serves as the
custodian of the Series' assets. Fund/Plan Services, Inc., P.O. Box 874, 2 W.
Elm Street, Conshohocken, PA 19428-0874 serves as the Series' administrator,
accounting/pricing agent and transfer agent.
RISK FACTORS
Shareholders should understand that all investments involve risks and there
can be no guarantee against loss resulting from an investment in the Series,
nor can there be any assurance that the Series will be able to attain their
investment objectives.
ALL SERIES:
1. The Series may lend portfolio securities to creditworthy institutions;
the principal risk to the
2
<PAGE>
Series is the risk that the borrower fails to return the borrowed security.
The Series will require collateral before lending securities. See "Loans of
Portfolio Securities" under "Other Investment Practices and Risk Factors."
2. The Series may invest in repurchase agreements (which involve risk of
loss if a seller defaults on its obligations under the agreement) and reverse
repurchase agreements (which involve risk of loss if a purchaser defaults on
its obligation to return securities to the Series). See "Repurchase Agree-
ments" and "Reverse Repurchase Agreements" under "Other Investment Practices
and Risk Factors."
ALL SERIES, EXCEPT U.S. CASH MANAGEMENT FUND:
3. The Series may enter into contracts for the future purchase or sale of
securities, including index contracts, and purchase and write options to buy
or sell futures contracts. The Series may also purchase and write put and call
options on securities or indices and enter into related closing transactions.
While the Series do not engage in options or futures for speculative purposes,
there are certain risks associated with such hedging techniques. See "Futures
Contracts and Options on Futures Contracts" and "Options" under "Other Invest-
ment Practices and Risk Factors."
GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, U.S. BALANCED
FUND, U.S. BOND FUND AND NON-U.S. BOND FUND:
4. The Series may invest in swaps for hedging and other permissible purpos-
es, which could subject the Series to increased risks. See "Swaps" under
"Other Investment Practices and Risk Factors."
GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME
FUND, NON-U.S. EQUITY FUND AND NON-U.S. BOND FUND:
5. Investments in non-U.S. securities could involve possible risks and op-
portunities not typically associated with investments in U.S. securities, in-
cluding, but not limited to, foreign exchange fluctuations, political risks
and the costs of effecting transactions in foreign markets. See "Foreign Secu-
rities and Currency Considerations" under "Other Investment Practices and Risk
Factors."
6. The value of securities denominated in currencies other than the U.S.
dollar, when expressed in U.S. dollars, will fluctuate in response to changes
in exchange rates between the U.S. dollar and the currencies in which the in-
struments are denominated. The net asset value can therefore fluctuate in re-
sponse to such changes in exchange rates, in addition to changes in the value
of portfolio securities which are unrelated to changes in currency exchange
rates. See "Foreign Securities and Currency Considerations" under "Other In-
vestment Practices and Risk Factors."
7. The Series may alter foreign currency exposure or engage in certain hedg-
ing techniques through the use of forward currency contracts, currency futures
contracts, options on currency futures, or swaps. The Series are also permit-
ted to invest in options on securities, futures contracts and indices of both
U.S. and non-U.S. markets. While the Series do not engage in options or
futures for speculative purposes, there are certain risks associated with such
hedging techniques. See "Forward Foreign Currency Transaction," "Options on
Currencies" and "Futures Contracts and Options on Futures Contracts" under
"Other Investment Practices and Risk Factors."
GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND AND U.S. BOND FUND:
8. The Series may invest in lower quality, higher yielding securities (com-
monly referred to as "junk bonds"). See "Fixed Income Securities" under "In-
vestment Objectives and Policies," "High Yield/High Risk Securities" under
"Other Investment Practices and Risk Factors" and Appendix A in the Trust's
Statement of Additional Information.
3
<PAGE>
GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND AND NON-U.S. BOND FUND:
9. While the Global Bond Fund, Short-Term Global Income Fund and Non-U.S.
Bond Fund each intend to qualify as "diversified" investment companies under
the provisions of Subchapter M of the Internal Revenue Code, they will not be
diversified under the Act. Thus, while at least 50% of each Series' total as-
sets will be represented by cash, cash items, and other securities limited in
respect of any one issuer to an amount not greater than 5% of such Series' to-
tal assets, the Series will not satisfy the Act's requirement in this respect,
which applies that test to 75% of each Series' assets. A non-diversified port-
folio is believed to be subject to greater risk because adverse effects on the
portfolio's security holdings may affect a larger portion of the overall as-
sets.
Please see the Statement of Additional Information for further information
concerning investment policies and restrictions.
4
<PAGE>
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES FOR EACH FUND:
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................. 0.00%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)........................................................ 0.00%
Deferred Sales Load (as a percentage of original purchase price)........ 0.00%
Redemption Fees (as a percentage of amount redeemed).................... 0.00%
Exchange Fees (as a percentage of amount exchanged)..................... 0.00%
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
TOTAL FUND
EXPENSES
OTHER (AFTER FEE
ESTIMATED WAIVER
EXPENSES AND/OR
MANAGEMENT/1/ (AFTER EXPENSE
FEES (AFTER 12B-1 REIMBURSE- REIMBURSE-
FEE WAIVER) EXPENSES/2/ MENT) MENT)
------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
SwissKey Global Fund........... 0.80% 0.65% 0.29% 1.74%
SwissKey Global Equity Fund.... 0.00% 0.76% 1.00% 1.76%
SwissKey Global Bond Fund...... 0.22% 0.49% 0.68% 1.39%
SwissKey Short-Term Global
Income Fund................... 0.60% 0.52% 0.15% 1.27%
SwissKey U.S. Balanced Fund.... 0.43% 0.50% 0.37% 1.30%
SwissKey U.S. Equity Fund...... 0.00% 0.52% 0.80% 1.32%
SwissKey U.S. Bond Fund........ 0.50% 0.47% 0.10% 1.07%
SwissKey U.S. Cash Management
Fund.......................... 0.30% 0.47% 0.10% 0.87%
SwissKey Non-U.S. Equity Fund.. 0.56% 0.84% 0.44% 1.84%
SwissKey Non-U.S. Bond Fund.... 0.75% 0.52% 0.15% 1.42%
</TABLE>
The SwissKey Fund class shares of the Global Fund, Global Equity Fund,
Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund and Non U.S. Equity
Fund Series commenced operations on July 31, 1995. The SwissKey Fund class
shares of the U.S. Bond Fund Series commenced operations on August 31, 1995.
- -----------
/1Pursuant/to the terms of the Investment Advisory Agreements between the
Trust and the Advisor, the Advisor is to receive a monthly fee at the fol-
lowing annual rates for each of the Global Fund, Global Equity Fund, Global
Bond Fund, Short-Term Global Income Fund, U.S. Balanced Fund, U.S. Equity
Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non-U.S. Equity Fund and
Non U.S. Bond Fund: 0.80%, 0.80%, 0.75%, 0.60%, 0.70%, 0.70%, 0.50%, 0.30%,
0.80% and 0.75%, respectively. Brinson Partners has agreed irrevocably to
waive its fees and reimburse expenses so that all of the expenses, with the
exception of 12b-1 expenses, of the SwissKey Global Fund, SwissKey Global
Equity Fund, SwissKey Global Bond Fund, SwissKey Short-Term Global Income
Fund, SwissKey U.S. Balanced Fund, SwissKey U.S. Equity Fund, SwissKey U.S.
Bond Fund, SwissKey U.S. Cash Management Fund, SwissKey Non-U.S. Equity Fund
and SwissKey Non-U.S. Bond Fund do not exceed 1.10%, 1.00%, 0.90%, 0.75%,
0.80%, 0.80%, 0.60%, 0.40%, 1.00% and 0.90%, respectively. Management fees
(after fee waivers) and Other Estimated Expenses (after reimbursement) for
the SwissKey Global Fund, SwissKey Global Equity Fund, SwissKey Global Bond
Fund, SwissKey U.S. Balanced Fund, SwissKey U.S. Equity Fund and SwissKey
Non-U.S. Equity Fund are based on the operating expenses for Brinson Fund
class shares of the relevant Series for the previous fiscal year. Management
fees (after fee waivers) and Other Estimated Expenses (after reimbursement)
for the SwissKey Short-Term Global Income Fund, SwissKey U.S. Bond Fund,
SwissKey U.S. Cash Management Fund and SwissKey Non-U.S. Bond Fund are based
on estimated amounts for the current fiscal year. Absent these fee waivers
and expense reimbursements, the total operating expenses for the SwissKey
Fund shares of the Series that have commenced operations to date are esti-
mated to be 1.74%--Global Fund, 2.82%--Global Equity Fund, 1.92%--Global
5
<PAGE>
Bond Fund, 1.56%--U.S. Balanced Fund, 2.22%--U.S. Equity Fund, 5.15%--U.S.
Bond Fund and 2.07%--Non-U.S. Equity Fund.
/2For/purposes of this Table, "12b-1 Expenses" is comprised of an asset-based
sales charge of up to 0.65% of average daily net assets and a service fee of
0.25% of average daily net assets for SwissKey Fund class shares of each Se-
ries. Pursuant to rules of the National Association of Securities Dealers,
Inc. ("NASD"), the aggregate initial sales charges, deferred sales charges
and asset-based sales charges on shares of the Funds may not exceed 6.25% of
total gross sales, subject to certain exclusions. This 6.25% limitation is
imposed on the Fund rather than on a per shareholder basis. Therefore, long-
term shareholders of the SwissKey Funds may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the NASD.
This amount also includes service fees.
Although the Distribution Plan relating to the SwissKey Funds (the "Plan")
provides that the Trust may pay up to an annual rate of 0.65% of the average
daily net assets of the SwissKey Fund class shares, plus a 0.25% service fee
for each SwissKey Fund class ("distribution fees"), the Trust and the Under-
writer have agreed to limit aggregate distribution fees with respect to
SwissKey Fund class shares so as not to exceed 0.65%, 0.76%, 0.49%, 0.52%,
0.50%, 0.52%, 0.47%, 0.47%, 0.84% and 0.52% of the average daily net assets of
the SwissKey Global Fund, SwissKey Global Equity Fund, SwissKey Global Bond
Fund, SwissKey Short-Term Global Income Fund, SwissKey U.S. Balanced Fund,
SwissKey U.S. Equity Fund, SwissKey U.S. Bond Fund, SwissKey U.S. Cash Manage-
ment Fund, SwissKey Non-U.S. Equity Fund and SwissKey Non-U.S. Bond Fund, re-
spectively.
EXAMPLE:
Based on the level of expenses listed above after fee waivers and reimburse-
ments, the total expenses relating to an investment of $1,000 would be as fol-
lows assuming a 5% annual return and redemption at the end of each time
period.
<TABLE>
<CAPTION>
NAME OF FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
SwissKey Global Fund............................ $18 $55 $94 $206
SwissKey Global Equity Fund..................... $18 $55 $95 $207
SwissKey Global Bond Fund....................... $14 $44 $76 $167
SwissKey Short-Term Global Income Fund.......... $13 $40 $70 $153
SwissKey U.S. Balanced Fund..................... $13 $41 $71 $157
SwissKey U.S. Equity Fund....................... $13 $42 $72 $159
SwissKey U.S. Bond Fund......................... $11 $34 $59 $131
SwissKey U.S. Cash Management Fund.............. $ 9 $27 $48 $107
SwissKey Non-U.S. Equity Fund................... $19 $58 $99 $216
SwissKey Non-U.S. Bond Fund..................... $14 $45 $78 $170
</TABLE>
The foregoing tables are designed to assist the investor in understanding
the various costs and expenses that a shareholder will bear directly or indi-
rectly. While the example assumes a 5% annual return, a Fund's actual perfor-
mance will vary and may result in actual returns greater or less than 5%.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
THE TRUST ISSUES TWO CLASSES OF SHARES THAT INVEST IN THE SAME PORTFOLIOS OF
SECURITIES. ALTHOUGH SHAREHOLDERS OF BOTH THE BRINSON FUND CLASS SHARES AND
SWISSKEY FUND CLASS SHARES DO NOT PAY SALES CHARGES, SHAREHOLDERS OF SWISSKEY
FUND CLASS SHARES ARE SUBJECT TO DISTRIBUTION EXPENSES. THEREFORE, EXPENSES,
AND ULTIMATELY, PERFORMANCE WILL VARY BETWEEN THE CLASSES. FURTHER INFORMATION
ABOUT THE BRINSON FUND CLASS SHARES OF THE TRUST MAY BE OBTAINED BY CALLING
(800) 448-2430.
6
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights are part of the unaudited, interim finan-
cial statements for the SwissKey Fund class of the U.S. Bond Fund which com-
menced investment operations on August 31, 1995. The period presented is from
August 31, 1995 through December 31, 1995. The following table should be read
in conjunction with the unaudited financial statements and related notes also
included in the Statement of Additional Information.
SWISSKEY U.S. BOND FUND
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 31,
1995/1/ TO
DECEMBER 31, 1995
-----------------
<S> <C>
Net asset value, beginning of period......................... $10.00
Income from investment operations:
Net investment income....................................... 0.20
Net realized and unrealized gain on Investments............. 0.34
------
Total gain from investment operations...................... 0.54
------
Less distributions:
Distributions from net investment income.................... (0.20)
Distributions from net realized gain........................ (0.03)
------
Total distributions........................................ (0.23)
------
Net asset value, end of period.............................. $10.30
======
Total Return................................................. 5.29%/3/
Ratios/Supplemental Data
Net assets, end of period (in 000s)......................... $9,249
Ratio of expenses to average net assets:
Before expense reimbursement................................ 5.15%/2/
After expense reimbursement................................. 1.07%/2/
Ratio of net investment income to average net assets:
Before expense reimbursement................................ 1.71%/2/
After expense reimbursement................................. 5.80%/2/
Portfolio turnover rate..................................... 212%
</TABLE>
- -----------
/1/ Commencement of operations.
/2/ Annualized.
/3/ Not Annualized.
7
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Series is fundamental and may not be
changed without a vote of the holders of the majority of the voting securities
of the Series. Unless otherwise stated in this Prospectus or the Statement of
Additional Information, each Series' investment policies are not fundamental
and may be changed without shareholder approval. While a non-fundamental pol-
icy or restriction may be changed by the Trustees of the Trust without share-
holder approval, the Series intend to notify shareholders before making any
material change in any such policy or restriction. Fundamental policies may
not be changed without shareholder approval.
The Series strive to attain their investment objectives, but there can be no
assurance that they will do so.
Additional investment policies and restrictions are described in the State-
ment of Additional Information, dated February 15, 1996.
THE INVESTMENT PROCESS
The Advisor's investment perspective for the Series is to determine funda-
mental value based on sustainable future cash flows associated with given as-
set classes and securities. Defining future cash flows associated with a
particular security or asset class allows the Advisor to determine fundamental
values (i.e., whether an investment is fairly priced). The successful identi-
fication of mispricing opportunities should result in enhanced total return
performance. Brinson Partners will focus on comparing current market prices to
fundamental values, rather than on either forecasts of future price changes or
extrapolations of historical price relationships.
As a general matter, the Advisor will purchase for the Series only securi-
ties contained in the underlying indices relevant to the Benchmarks. Brinson
Partners will attempt to enhance the long-term return and risk performance of
the Series relative to the Benchmarks by deviating from the normal Benchmark
mix of asset classes and currencies in reaction to discrepancies between cur-
rent market prices and fundamental values. Active asset allocation strategy
for the Series will be defined relative to the Benchmark weights, which repre-
sent the Series' normal mix. Decisions to deviate from the normal mix are a
blend of rigorous quantitative analysis, an understanding of the fundamental
relationships among global markets and the expertise of investment profession-
als. In the absence of views as to the relative attractiveness across asset
classes, the actual fund weights will be equal to the Benchmark weights. The
active management process is intended to produce a superior performance rela-
tive to the Benchmark index.
The Series do not intend to concentrate their investments in a particular
industry. The Series do not intend to issue senior securities as defined in
the Act, except that all of the Series may engage in borrowing activities as
defined below. Each Series' investment objectives and its policies concerning
portfolio lending, borrowing, the issuance of senior securities and concentra-
tion, are "fundamental," which means that they may not be changed without the
affirmative vote of the holders of a majority of the Series' outstanding vot-
ing securities (as defined in the Act).
The Series and the Advisor believe that, over the long term, investing
across global equity and fixed income markets based upon discrepancies between
market prices and fundamental values may achieve enhanced return and risk
characteristics relative to the Benchmark.
Fundamental value is considered to be the current value of long-term, sus-
tainable future cash flows derived from a given asset class or security. In
determining fundamental value, the Advisor takes into consideration broadly
based indices representing asset classes or markets and various economic vari-
ables such as productivity, inflation and global competitiveness. The valua-
tion of asset classes reflects an integrated, fundamental analysis of global
markets. Investment decisions are based
8
<PAGE>
on comparisons of current market prices to fundamental values.
The "asset class strategy ranges" indicated on the following pages are the
ranges within which each Series expects to make its active asset allocations
to specific asset classes. Under all but unusual market conditions, each Se-
ries expects to adhere to the strategy ranges set forth. However, each Series'
strategy ranges may be exceeded by the Series under unusual market conditions.
GLOBAL FUND
INVESTMENT OBJECTIVE
The Series' investment objective is to maximize total U.S. dollar return,
consisting of capital appreciation and current income. The Series is a diver-
sified portfolio that seeks to achieve its objective by pursuing active asset
allocation strategies across global equity and fixed income markets and active
security selection within each market. These decisions are undertaken relative
to the Global Securities Markets Index (the "Benchmark"), which is compiled by
Brinson Partners. The Series seeks to achieve its investment objective by
utilizing a wide range of equity, debt and money market securities in domestic
and foreign markets. The Series may engage in futures, options and currency
transactions for hedging as more fully described below.
ASSET ALLOCATION
The Benchmark consists of five distinct asset classes representing the pri-
mary wealth-holding public securities markets. These asset classes are U.S.
equities, non-U.S. equities, U.S. bonds, non-U.S. bonds and cash equivalents.
Each asset class is represented in the Benchmark by an index compiled by an
independent data provider. The index relating to U.S. equities is the Wilshire
5000 Index; the index relating to non-U.S. equities is the Morgan Stanley Cap-
ital International Non-U.S. Equity (Free) Index; the index relating to U.S.
bonds is a composite of the Salomon Brothers Broad Investment Grade Bond Index
and the Merrill Lynch Euro-Bond indices; the index for non-U.S. bonds is the
Salomon Non-U.S. Government Bond Index; and the index relevant to the cash
equivalent portion of the Benchmark is the 30-day U.S. Treasury Bill rate
(calculated from the average of bid and ask). In order to compile the Bench-
mark, the Advisor determines current relative market capitalizations in the
world markets (U.S. equities, non-U.S. equities, U.S. bonds, non-U.S. bonds
and cash) and then weights each relevant index. Based on this weighting, the
Advisor determines the return of the relative indices, applies the index
weighting and then determines the return of the Benchmark. From time to time,
the Advisor may substitute an equivalent index within a given asset class when
it believes that such index more accurately reflects the relevant global mar-
ket.
Although it may invest anywhere in the world, it is expected that the Se-
ries' assets will be primarily invested in equity markets listed in the Morgan
Stanley Capital International World Equity Index which, in addition to the
United States, currently includes: Japan, the United Kingdom, Germany, France,
Canada, the Netherlands, Australia, Switzerland and Denmark. Also, the Series
will primarily invest in fixed income markets listed in the Salomon World Gov-
ernment Bond Index which, in addition to the United States, currently includes
Japan, the United Kingdom, Germany, France, Canada, the Netherlands, Austra-
lia, Belgium, Italy, Spain, Sweden and Denmark.
The Series may invest up to 5% of its total net assets in equity and debt
securities of emerging market issuers, or securities with respect to which the
return is derived from the equity or debt securities of issuers in emerging
markets.
The Series may invest in the more broadly defined asset classes identified
by the Benchmark. The "Normal Asset Allocation Mix," set forth below, repre-
sents the asset allocation that the Series would expect to maintain when
global capital markets are fairly priced relative to each other and relative
to the associated risks.
9
<PAGE>
GLOBAL SECURITIES MARKETS INDEX
NORMAL ASSET ALLOCATION MIX
<TABLE>
<CAPTION>
NORMAL ASSET
ASSET CLASS
ALLOCATION STRATEGY
ASSET CLASS MIX RANGES
- ----------- ---------- --------
<S> <C> <C>
Global Equities............................................. 67%
U.S........................................................ 50% 15-80%
Non-U.S.................................................... 17% 5-30%
Global Bonds................................................ 28%
U.S........................................................ 20% 5-50%
Non-U.S.................................................... 8% 2-15%
Cash and Cash Equivalents................................... 5% 0-45%
----
100%
</TABLE>
GLOBAL EQUITY FUND
INVESTMENT OBJECTIVE
The Series' investment objective is to maximize total return, consisting of
capital appreciation and current income. The Series seeks to achieve its in-
vestment objective by investing in a wide range of equity securities that are
traded on both domestic and foreign stock exchanges or, in the case of domes-
tic stocks, in the over-the-counter market. The Series may engage in futures,
options and currency transactions for hedging as more fully described below.
The Series is a diversified portfolio that seeks to achieve its objective by
pursuing an active asset allocation strategy across global equity markets, ac-
tive management of currency exposures and active security selection within
each market.
ASSET ALLOCATION
The benchmark for the Series is the Morgan Stanley Capital International
("MSCI") World Equity (Free) Index (the "Benchmark"). The Benchmark is a mar-
ket driven broad based index which includes U.S. and non-U.S. equity markets
in terms of capitalization and performance. The Benchmark is designed to pro-
vide a representative total return for all major stock market exchanges lo-
cated in and outside the United States. From time to time, the Advisor may
substitute securities in an equivalent index when it believes that such secu-
rities in the index more accurately reflect the relevant global market.
The Advisor's investment perspective for the Series is to rank worldwide
stock markets in terms of their relative price/value attractiveness based on
proprietary valuation models and the judgments of investment professionals.
Inputs to the valuation models include forecasts of growth, inflation, risk
premiums and foreign exchange movements. The Advisor develops industry strate-
gies within, and sometimes across, individual equity markets with reference to
the industry composition of the Series' benchmark index on a country-by-coun-
try basis. The security selection of individual companies within each equity
market is based on fundamental valuation and portfolio risk strategies. The
Advisor's proprietary valuation model determines which securities are poten-
tial candidates for inclusion in the portfolio.
Although it may invest anywhere in the world, it is expected that the Se-
ries' assets will be invested primarily in equity markets listed in the Bench-
mark which, in addition to the United States, currently includes: Japan, the
United Kingdom, Germany, France, Canada, the Netherlands, Australia, Switzer-
land, Denmark, Austria, Belgium, Hong Kong, New Zealand, Finland, Italy, Nor-
way, Singapore, Malaysia, Spain, Sweden and Ireland. The composition of this
Index may change over time, according to criteria established by Morgan Stan-
ley.
The "Normal Market Capitalization Allocation Mix," set forth below, repre-
sents the asset allocation mix based on the Benchmark, and may shift over time
as the Index weights change.
<TABLE>
<CAPTION>
NORMAL MARKET ASSET CLASS
CAPITALIZATION STRATEGY
ALLOCATION MIX RANGES
-------------- -----------
<S> <C> <C>
U.S. Equities........................................ 36% 15-70%
Non-U.S. Equities.................................... 64% 30-85%
Cash and Cash Equivalents............................ 0% 0-35%
----
100%
</TABLE>
10
<PAGE>
GLOBAL BOND FUND
INVESTMENT OBJECTIVE
The Series investment objective is to maximize total return, consisting of
capital appreciation and current income. The Series seeks to achieve this ob-
jective by investing primarily in debt securities that may also provide the
potential for capital appreciation. The Series may engage in futures, options
and currency transactions for hedging as more fully described below. The Se-
ries is a non-diversified portfolio.
ASSET ALLOCATION
The Advisor's investment process incorporates assessments of country bond
exposures, interest rate sensitivity and currency exposure. The primary in-
vestment decision is that of country allocation, since, in the Advisor's judg-
ment, country and currency selection are expected to account for the majority
of long-term fixed income returns in the global markets. This decision is made
with reference to the Series' benchmark index on the basis of Brinson Part-
ners' analysis of local market and currency returns for each country. Dura-
tions, maturity and individual security selection are then considered market-
by-market as dictated by the economic fundamentals of each market. The
Advisor's proprietary valuation model determines which securities are poten-
tial candidates for inclusion in the portfolio.
The benchmark for the Series is the Salomon World Government Bond Index (the
"Benchmark"). The Benchmark is a market driven index which measures the broad
global fixed income markets invested in debt issues of U.S. and non-U.S. Gov-
ernments, governmental entities and supranationals. From time to time, the Ad-
visor may substitute securities in an equivalent index when it believes that
such securities in the index more accurately reflect the relevant global fixed
income securities market.
Although it may invest anywhere in the world, it is expected that the Se-
ries' assets will be primarily invested in fixed income markets listed in the
Benchmark which, in addition to the United States, currently includes: Japan,
the United Kingdom, Germany, France, Canada, the Netherlands, Australia, Bel-
gium, Italy, Spain, Sweden, Denmark and Austria. The composition of this index
may change over time, according to criteria established by Salomon Brothers.
The "Normal Market Capitalization Allocation Mix," set forth below, repre-
sents the asset allocation mix based on the Benchmark, and may shift over time
as the index weights change.
<TABLE>
<CAPTION>
ASSET
NORMAL MARKET CLASS
CAPITALIZATION STRATEGY
ASSET CLASS ALLOCATION MIX RANGES
- ----------- -------------- --------
<S> <C> <C>
U.S. Bonds.............................................. 39% 20-80%
Non-U.S. Bonds.......................................... 61% 20-80%
---
100%
</TABLE>
SHORT-TERM GLOBAL INCOME FUND
INVESTMENT OBJECTIVE
The Series' investment objective is to seek a high level of current income
consistent with preservation of capital and reasonable investment risk. The
Series seeks to achieve this objective by investing primarily in debt securi-
ties having a dollar-weighted average maturity of not more than three years.
The Series may engage in futures, options and currency transactions for hedg-
ing as more fully described below. The Series is a non-diversified portfolio.
INVESTMENT PROCESS
The Advisor's investment process incorporates assessments of country, fixed
income, money market exposures, interest rate sensitivity, yield curve and
currency exposure. The primary investment decision is that of country alloca-
tion, since, in the Advisor's judgment, country and currency selection are ex-
pected to account for the majority
11
<PAGE>
of short-term fixed income returns in the global markets. This decision is
made with reference to the Series' benchmark index on the basis of Brinson
Partners' analysis of local market and currency returns for each country. Du-
rations, maturity and individual security selection are then considered mar-
ket-by-market as dictated by the economic fundamentals of each market. The
Advisor's proprietary valuation model determines which securities are poten-
tial candidates for inclusion in the portfolio.
ASSET ALLOCATION
The benchmark for the Series is the Lehman Brothers 1-3 Year Government In-
dex (the "Benchmark"). The Benchmark is comprised of U.S. Government Treasury
and Agency Securities with maturities of 1-3 years. Although the securities to
be held in the Series' portfolio do not directly correspond to the securities
included in the Benchmark, Brinson Partners will attempt to enhance the long-
term return and risk performance of the Series relative to the Benchmark by
identifying discrepancies between current market prices and fundamental val-
ues. The active management process is intended to produce a superior perfor-
mance relative to the Benchmark index.
HIGH QUALITY FIXED INCOME SECURITIES
The Series seeks to minimize investment risk by limiting its portfolio in-
vestments to high quality fixed income securities. Accordingly, the Series'
investment portfolio consists only of: (i) debt securities issued or guaran-
teed by the U.S. Government, its agencies or instrumentalities ("U.S. Govern-
ment Securities"); (ii) obligations issued or guaranteed by a foreign
government or any of its political subdivisions, authorities, agencies or in-
strumentalities, or by supranational entities, all of which are rated AAA or
AA by Standard & Poor's Corporation ("S&P") or Aaa or Aa by Moody's Investors
Services, Inc. ("Moody's") ("High Quality Ratings") or, if unrated, determined
by the Advisor to be of equivalent quality; (iii) corporate debt securities
having at least one High Quality Rating or, if unrated, determined by the Ad-
visor to be of equivalent quality; (iv) certificates of deposit and bankers
acceptances issued or guaranteed by, or time deposits maintained at, banks
(including foreign branches of U.S. banks or U.S. or foreign branches of for-
eign banks) having total assets of more than $500 million and determined by
the Advisor to be of high quality; and (v) commercial paper rated A1 or A2 by
S&P, Prime-1 or Prime-2 by Moody's, Fitch-1 or Fitch-2 by Fitch Investors
Service, Inc., or Duff 1 or Duff 2 by Duff and Phelps Inc. or, if not rated,
issued by U.S. or foreign companies having outstanding debt securities rated
AAA or AA by S&P, or Aaa or Aa by Moody's and determined by the Advisor to be
of high quality. Other fixed income securities in which the Series may invest
include zero coupon bonds, mortgage-backed securities, asset-backed securities
and when-issued securities. The Series may purchase U.S. dollar-denominated
securities that reflect a broad range of investment maturities and sectors.
The fixed income securities in the non-U.S. component of the Series may in-
clude securities issued by supranational entities. A supranational entity is
an entity established or financially supported by the national governments of
one or more countries to promote reconstruction or development. Examples of
supranational entities include, among others, the World Bank, the European
Economic Community, the European Coal and Steel Community, the European In-
vestment Bank, the Inter-American Development Bank, the Export-Import Bank and
the Asian Development Bank.
U.S. BALANCED FUND
INVESTMENT OBJECTIVE
The investment objective of the Series is to maximize total return, consist-
ing of capital appreciation and current income, while controlling risk. The
Series is a diversified portfolio that seeks to
12
<PAGE>
achieve its objective by pursuing active asset allocation strategies across
U.S. equity and fixed income markets and active security selection within each
market. These decisions are undertaken relative to the U.S. Balanced Index
(the "Benchmark"), which is compiled by Brinson Partners. The Series seeks to
achieve its investment objective by utilizing a wide range of equity, debt and
money market securities.
ASSET ALLOCATION MARKET MANAGEMENT
The Benchmark for the Series is compiled by the Advisor. The Benchmark rep-
resents a fixed composite of 65% Wilshire 5000 Index, 30% Salomon Brothers
Broad Investment Grade Bond Index and 5% 30-day Treasury Bill Index. From time
to time, the Advisor may substitute an equivalent index within a given asset
class when the Advisor believes that such new index more accurately reflects
the relevant U.S. market.
The Series will, under normal circumstances, invest at least 25% of its net
assets in fixed income senior securities. The Series will also invest in eq-
uity securities, including warrants, preferred stock and securities convert-
ible into equity securities. For temporary defensive purposes, up to 50% of
the Series' total assets may be invested in cash and cash equivalents includ-
ing money market and short-term instruments.
The weighting in the Series of equity, fixed income and money market securi-
ties will be adjusted in response to variations in perceived return potential
as estimated by Brinson Partners on the basis of fundamental analysis. It is
not the policy of the Series to take unreasonable risks to obtain speculative
or aggressively high returns.
The "normal asset allocation mix," set forth below, represents the asset al-
location that the Series would expect to maintain when the financial markets
are fairly priced relative to each other and to the associated risks in such
markets. This is the U.S. Balanced Index which will serve as the performance
benchmark.
<TABLE>
<CAPTION>
NORMAL ASSET
ASSET CLASS
ALLOCATION STRATEGY
MIX RANGES
---------- --------
<S> <C> <C>
U.S. Equity................................................. 65% 30-75%
Large Capitalization Stocks................................ 45%
Intermediate/Small Capitalization Stocks................... 20%
U.S. Bonds.................................................. 30% 25-70%
Cash........................................................ 5% 0-50%
---- ------
100%
</TABLE>
U.S. EQUITY FUND
INVESTMENT OBJECTIVE
The Series' investment objective is to maximize total return, consisting of
capital appreciation and current income, while controlling risk. The Series is
a diversified portfolio that seeks to achieve its objective by investing in a
wide range of equity securities of U.S. companies that are traded on major
stock exchanges as well as on the over-the-counter market. Under normal cir-
cumstances, at least 65% of the Series' total assets will be invested in eq-
uity securities of U.S. companies. The Series may engage in futures and
options for hedging as more fully described below.
INVESTMENT PROCESS
The Advisor's approach to investing for the Series is to invest in the eq-
uity securities of U.S. companies believed to be undervalued based upon inter-
nal research and proprietary valuation systems. Investment decisions are based
on fundamental research, internally developed valuation systems and seasoned
judgment. The Advisor's research focuses on several levels of analysis; first,
on understanding wealth shifts that occur within the equity market, and sec-
ond, on individual company research. At the company level, the Advisor quanti-
fies expectations of a company's ability to generate profit and to grow
business into the future.
For each stock under analysis, the Advisor discounts to the present all of
the future cash
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<PAGE>
flows that it believes will accrue to the Series from the investment in order
to calculate a present or intrinsic value. This value estimate generated by
the Advisor's proprietary valuation model is compared to observed market price
and ranked against other stocks accordingly. The rankings, in combination with
the Advisor's investment judgment, determine which securities are included in
the portfolio.
The Benchmark for the Series is the Wilshire 5000 Index (the "Benchmark").
The Benchmark is a broad weighted index which includes all U.S. common stocks.
The Benchmark is designed to provide a representative indication of the capi-
talization and return for the U.S. equity market.
U.S. BOND FUND
INVESTMENT OBJECTIVE
The Series' investment objective is to maximize total return, consisting of
capital appreciation and current income, while controlling risk. The Series
seeks to achieve this objective by investing primarily in fixed income securi-
ties, which may also provide the potential for capital appreciation. As a mat-
ter of fundamental policy, under normal circumstances, the Series intends to
invest at least 65% of its total assets in U.S. debt securities with an ini-
tial maturity of more than one year. The Series may also engage in futures and
options transactions for hedging as more fully described below. The Series is
a diversified portfolio.
INVESTMENT PROCESS
Brinson Partners is an active manager of fixed income securities. The Advi-
sor believes that markets do not always efficiently price fixed income securi-
ties and that a fundamental value-based investment process can increase
portfolio returns. Brinson Partners' fixed income strategies consider many
factors in addition to maturity and current yield in the evaluation of fixed
income securities. These factors include interest rate sensitivity, quality,
yield curve analysis and individual issue selection. Accordingly, Brinson
Partners will pursue the Series' objective by investing its assets in debt se-
curities which are believed to be undervalued. The Advisor's proprietary valu-
ation model determines which securities are potential candidates for inclusion
in the portfolio.
The benchmark for the Series is the Salomon Brothers Broad Investment Grade
Bond Index (the "Benchmark"). The Benchmark is a market driven broad based in-
dex which includes U.S. bonds with over one year to maturity. The Benchmark is
designed to provide a representative indication of the performance of U.S. in-
vestment grade fixed income securities in the United States. From time to
time, the Advisor may substitute securities in an equivalent index when it be-
lieves that such securities in the index more accurately reflect the relevant
fixed income securities market.
FIXED INCOME SECURITIES
The Series may invest in a broad range of fixed income securities, including
debt securities of the U.S. Government together with its agencies and instru-
mentalities and the debt securities of U.S. corporations. A majority of the
fixed income securities in which the Series will invest will meet a minimum
rating of BBB- by Standard and Poor's Corporation ("S&P") or Baa3 by Moody's
Investors Services, Inc. ("Moody's") or, if unrated, will be determined to be
of comparable quality by Brinson Partners. Such securities are considered to
be investment grade. While securities rated BBB- or Baa3 are regarded as hav-
ing an adequate capacity to pay principal and interest, such bonds lack out-
standing investment characteristics and, in fact, have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest pay-
ments than is the case with higher rated bonds. The Series may invest up to
30% of its total assets in securities rated lower than BBB- by S&P and Baa3 by
Moody's (commonly referred to as "junk bonds"). Securities rated lower than
BBB- by S&P and Baa3 by Moody's are classified as non-investment grade se-
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<PAGE>
curities and carry a higher degree of risk and are considered to be specula-
tive by the major credit rating agencies (see "High Yield/High Risk Securi-
ties" under "Other Investment Practices and Risk Factors"). Other fixed income
securities in which the Series may invest include zero coupon bonds, mortgage-
backed securities, asset-backed securities and when-issued securities. The Se-
ries may invest a portion of its assets in short-term debt securities
(including repurchase agreements) of corporations, governments or agencies and
banks and finance companies. When unusual market conditions warrant, the Se-
ries can make substantial temporary defensive investments in cash equivalents.
U.S. CASH MANAGEMENT FUND
INVESTMENT OBJECTIVE
The Series' investment objective is to maximize current income consistent
with preservation of capital. The Series is a diversified portfolio.
INVESTMENT PROCESS
In accordance with procedures adopted pursuant to Rule 2a-7 under the Act,
the Series limits its investments to those U.S. dollar-denominated instruments
which the Board of Trustees of the Trust determines present minimal credit
risks and which are, as required by the federal securities laws, rated in one
of the two highest rating categories as determined by nationally recognized
statistical rating organizations ("NRSROs"), or which are unrated and of com-
parable quality, with remaining maturities of 397 calendar days or less ("Eli-
gible Securities"). The Series maintains a dollar weighted average maturity of
the securities in its portfolio of 90 days or less. The Series will not invest
more than 5% of its total assets in Eligible Securities of a single issuer,
other than U.S. Government securities, rated in the highest category by the
requisite number of NRSROs, except that the Series may exceed that limit as
permitted by Rule 2a-7 for a period of up to three business days; and the Se-
ries will not invest (a) the greater of 1% of the Series' total assets or $1
million in Eligible Securities issued by a single issuer rated in the second
highest category and (b) more than 5% of its total assets in Eligible Securi-
ties of all issuers rated in the second highest category. These procedures are
not fundamental policies of the Series.
Because the Series limits its investments to high quality securities, the
Series' portfolio, and thus the Series' shareholders, will generally earn
lower yields than if the Series purchased securities with a lower rating and
correspondingly greater risk.
U.S. GOVERNMENT SECURITIES
The Series may invest in U.S. Government securities, which consist of mar-
ketable fixed, floating and variable rate securities issued or guaranteed by
the U.S. Government, its agencies, or by various instrumentalities which have
been established or sponsored by the U.S. Government ("U.S. Government securi-
ties"). Certain of these obligations, including U.S. Treasury bills, notes and
bonds and securities of the Government National Mortgage Association (popu-
larly called "GNMAs" or "Ginnie Maes") and the Federal Housing Administration,
are issued or guaranteed by the U.S. Government and supported by the full
faith and credit of the U.S. Government. Other U.S. Government securities are
issued or guaranteed by federal agencies or government-sponsored enterprises
and are not direct obligations of the U.S. Government, but involve sponsorship
or guarantees by government agencies or enterprises. These obligations include
securities that are supported by the right of the issuer to borrow from the
U.S. Treasury, such as obligations of Federal Home Loan Banks, and securities
that are supported by the credit of the instrumentality, such as Federal Na-
tional Mortgage Association ("FNMA") bonds.
BANK OBLIGATIONS
The Series may also invest in bank obligations or instruments secured by
bank obligations.
15
<PAGE>
Such instruments consist of fixed, floating or variable rate certificates of
deposit, letters of credit, time deposits, and banker's acceptances issued by
banks and savings institutions with assets of at least one billion dollars.
Bank obligations may be obligations of U.S. banks, foreign branches of U.S.
banks (referred to as "Eurodollar Investments"), U.S. branches of foreign
banks (referred to as "Yankee Dollar Investments") and foreign branches of
foreign banks ("Foreign Bank Investments"). When investing in a bank obliga-
tion issued by a branch, the parent bank must have assets of at least five
billion dollars.
The Series may invest only up to 25% of its assets in Eurodollar invest-
ments. Yankee Dollar investments, which are considered investments in domestic
banks, may only be made if such branches have a federal or state charter to do
business in the U.S. and are subject to U.S. regulatory authorities.
Time Deposits are non-negotiable deposits maintained in a foreign branch of
a U.S. or foreign banking institution for a specified period of time at a
stated interest rate. The Series may not invest more than 10% of its assets in
time deposits with maturities in excess of seven calendar days.
COMMERCIAL PAPER
The Series may also invest in commercial paper of domestic or foreign is-
suers which is considered by the Series to present minimal credit risks and
which is rated within the two highest rating categories by NRSROs or, if
unrated, has been determined by the Advisor to be of comparable quality to in-
struments that are Eligible Securities pursuant to procedures approved by the
Trust's Board of Trustees.
CORPORATE OBLIGATIONS
The corporate obligations which the Series may purchase are fixed, floating
or variable rate bonds, debentures or notes which are considered by the Series
to present minimal credit risks and which are rated within the two highest
rating categories by NRSROs, or if unrated, have been determined by the Advi-
sor to be of comparable quality to instruments which are Eligible Securities
pursuant to procedures approved by the Trust's Board of Trustees. Such obliga-
tions must mature in 397 calendar days or less. Generally, the higher an in-
strument is rated, the greater its safety and the lower its yield.
(For informational purposes, included in the Statement of Additional Infor-
mation is an explanation of ratings by two NRSROs, Standard & Poor's Corpora-
tion and Moody's Investors Service.)
OTHER POLICIES
Depending on its view of market conditions and cash requirements, the Series
may or may not hold securities purchased until maturity. The yield on certain
instruments held by the Series may decline if sold prior to maturity.
Whenever the Series' Advisor believes market conditions are such that yield
could be increased by actively trading the portfolio securities to take advan-
tage of short-term market variations, the Series may do so without restriction
or limitation. The Series may not invest in securities other than the types of
securities listed above and is subject to other specific investment restric-
tions as detailed in the Statement of Additional Information.
The Series may lend its portfolio securities to qualified securities dealers
or other institutional investors, provided that such loans do not exceed 10%
of the value of the Series' total assets at the time of the most recent loan,
and further provided that the borrower deposits and maintains 102% cash col-
lateral for the benefit of the Series. Any of the Series' Eurodollar Invest-
ments, Foreign Bank Investments or investments in commercial paper of foreign
issuers will involve risks that are different from investments in obligations
of domestic entities. These risks may include future unfavorable political and
economic developments, possible withholding taxes, seizure of foreign depos-
its,
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<PAGE>
currency controls, interest limitations, or other governmental restrictions
which affect the payment of principal or interest on securities the Series
holds. In addition, there may be less publicly available information regarding
such foreign banks or foreign issuers of commercial paper.
NON-U.S. EQUITY FUND
INVESTMENT OBJECTIVE
The Series' investment objective is to maximize total return, consisting of
capital appreciation and current income. The Series is a diversified portfolio
that seeks to achieve its objective by investing primarily in the equity secu-
rities of non-U.S. issuers. The Series may engage in futures, options and cur-
rency transactions for hedging and other permissible purposes as more fully
described below.
ASSET ALLOCATION MARKET MANAGEMENT
The benchmark for the Series is the Morgan Stanley Capital International
("MSCI") Non-U.S. Equity (Free) Index (the "Benchmark"). The Benchmark is a
market driven broad based index which includes non-U.S. equity markets in
terms of capitalization and performance. The Benchmark is designed to provide
a representative total return for all major stock exchanges located outside
the United States. From time to time, the Advisor may substitute securities in
an equivalent index when it believes that such securities in the index more
accurately reflect the relevant international market.
The Advisor's investment perspective for the Series is to invest in the eq-
uity securities of non-U.S. markets and companies which are believed to be un-
dervalued based upon internal research and proprietary valuation systems. This
international equity strategy reflects Brinson Partners' decisions concerning
the relative attractiveness of asset classes, the individual international eq-
uity markets, industries across and within those markets, other common risk
factors within those markets and individual international companies. The Advi-
sor initially identifies those securities which it believes to be undervalued
in relation to the issuer's assets, cash flow, earnings and revenues. The rel-
ative performance of foreign currencies is an important factor in the Series'
performance. Brinson Partners may manage the Series' exposure to various cur-
rencies to take advantage of different yield, risk and return characteristics.
The Advisor's proprietary valuation model determines which securities are po-
tential candidates for inclusion in the portfolio.
Although it may invest anywhere in the world, it is expected that the Se-
ries' assets will be primarily invested in the equity markets included in the
Morgan Stanley Capital International Non-U.S. Equity (Free) Index which cur-
rently are: Japan, the United Kingdom, Germany, France, Canada, Italy, the
Netherlands, Australia, Switzerland, Spain, Hong Kong, Belgium, Singapore, Ma-
laysia, Sweden, Denmark, Norway, New Zealand, Austria, Finland and Ireland.
The composition of this Index may change over time, according to criteria es-
tablished by Morgan Stanley.
The "Normal Asset Class Allocation Mix," set forth below, represents the as-
set allocation mix based on the Benchmark, and may shift over time as the
Benchmark index weights change.
<TABLE>
<CAPTION>
NORMAL
ASSET CLASS ASSET
ALLOCATION STRATEGY
ASSET CLASS MIX RANGES
----------- ----------- --------
<S> <C> <C>
Non-U.S. Equities.......................................... 100% 65-100%
Cash and Cash Equivalents.................................. 0% 0-35%
----
100%
</TABLE>
NON-U.S. BOND FUND
INVESTMENT OBJECTIVE
The Series' investment objective is to maximize total return, consisting of
capital appreciation and current income while controlling risk. The Series
seeks to achieve this objective by in-
17
<PAGE>
vesting primarily in fixed income securities, which are not denominated in
U.S. dollars and that may also provide the potential for capital appreciation.
As a matter of fundamental policy, under normal circumstances, the Series in-
tends to invest at least 65% of its total assets in debt securities with an
initial maturity of more than one year from at least three countries other
than the United States. The Series may engage in futures, options and currency
transactions for hedging as more fully described below. The Series is a non-
diversified portfolio.
ASSET ALLOCATION MARKET MANAGEMENT
Brinson Partners will pursue the Series' objective by investing its assets
in non-dollar-denominated debt securities which are believed to be undervalued
based upon its fundamental research and proprietary valuation systems. The Ad-
visor's primary investment decisions are those of market allocation and cur-
rency allocation based upon forecasts of local market and currency returns for
each country. These decisions are made with reference to the Series' benchmark
index which is defined below. Durations, maturity and individual security se-
lection are then considered market-by-market as dictated by the economic fun-
damentals of each market.
The benchmark for the Series is the Salomon Brothers Non-U.S. Government
Bond Index (the "Benchmark"). The Benchmark is a capitalization-weighted index
which measures the broad non-U.S. dollar markets invested in debt issues of
non-U.S. Governments, governmental entities and supranationals. From time to
time, the Advisor may substitute other equivalent indices, in whole or in
part, when it believes that such indices more accurately provide opportunities
within the fixed income securities markets.
Although it may invest anywhere in the world, it is expected that the the
Series' assets will be invested primarily in fixed income markets listed in
the Benchmark, which currently includes: Japan, the United Kingdom, Germany,
France, Canada, the Netherlands, Australia, Belgium, Italy, Spain, Sweden,
Denmark and Austria. The composition of this Index may change over time ac-
cording to criteria established by Salomon Brothers.
FIXED INCOME SECURITIES
The Series may invest in a broad range of fixed income securities (debt se-
curities with an initial maturity of more than one year), including foreign
government securities and debt obligations of foreign companies. All fixed in-
come securities in which the Series will invest will meet a minimum rating of
BBB- by Standard and Poor's Corporation ("S&P") or Baa3 by Moody's Investors
Services, Inc. ("Moody's") or, if unrated, will be determined to be of compa-
rable quality by Brinson Partners. Such securities are considered to be in-
vestment grade. While securities rated BBB- or Baa3 are regarded as having an
adequate capacity to pay principal and interest, such bonds lack outstanding
investment characteristics and, in fact, have speculative characteristics and
changes in economic conditions or other circumstances are more likely to lead
to a weakened capacity to make principal and interest payments than is the
case with higher rated bonds.
The fixed income securities in the Series will typically include securities
issued by foreign governments, agencies and supranational entities. A suprana-
tional entity is an entity established or financially supported by the na-
tional governments of one or more countries to promote reconstruction or
development. Examples of supranational entities include, among others, the
World Bank, the European Economic Community, the European Coal and Steel Com-
munity, the European Investment Bank, the Inter-American-Development Bank, the
Export-Import Bank and the Asian Development Bank.
The Series may invest a portion of its assets in short-term debt securities
(including repurchase agreements) of corporations, governments or agencies,
banks and finance companies which may
18
<PAGE>
be denominated in non-U.S. or U.S. currency. When unusual market conditions
warrant, the Series can make substantial temporary defensive investments in
cash equivalents. Cash equivalent holdings may be denominated in any currency.
INVESTMENT POLICIES
EQUITY SECURITIES (GLOBAL FUND, GLOBAL EQUITY FUND, U.S. BALANCED FUND, U.S.
EQUITY FUND AND NON-U.S. EQUITY FUND):
The Series may invest in a broad range of equity securities of U.S. issuers,
including common and preferred stocks, debt securities convertible into or ex-
changeable for common stock, securities such as warrants or rights that are
convertible into common stock. The Series expect their U.S. equity investments
to emphasize both large and intermediate capitalization companies.
The Global Fund, Global Equity Fund and Non-U.S. Equity Fund may also invest
in a broad range of equity issuers of non-U.S. issuers, including common
stocks of companies or closed-end investment companies, preferred stocks, debt
securities convertible into or exchangeable for common stock, securities or
warrants or rights that are convertible into common stock and sponsored or
unsponsored American and European depository receipts for those securities.
The issuers of unsponsored American and European depository receipts are not
obligated to disclose material information in the United States.
The equity markets in the non-U.S. component of the Global Fund, Global Eq-
uity Fund and Non-U.S. Equity Fund will typically include available shares of
larger capitalization companies. Capitalization levels are measured relative
to specific markets, thus large and intermediate capitalization ranges vary
country-by-country.
The Global Fund may invest in equities of issuers in emerging markets, or
securities with respect to which the return is derived from the equity securi-
ties of issuers in emerging markets.
CASH AND CASH EQUIVALENTS (GLOBAL FUND, GLOBAL EQUITY FUND, U.S. BALANCED
FUND, U.S. EQUITY FUND AND NON-U.S. EQUITY FUND):
The Series may invest a portion of their assets in short-term debt securi-
ties (including repurchase agreements) of corporations, U.S. Government and
its agencies and banks and finance companies. The Global Fund, Global Equity
Fund and Non-U.S. Equity Fund also may invest a portion of their assets in
short-term debt securities (including repurchase agreements) of corporations,
governments or their agencies and banks and finance companies which may be de-
nominated in non-U.S. currencies. When unusual market conditions warrant, the
Series may make substantial temporary defensive investments in cash equiva-
lents up to a maximum exposure that usually will not exceed 50% for U.S. Bal-
anced Fund, 45% for Global Fund and 35% for Global Equity Fund, U.S. Equity
Fund and Non-U.S. Equity Fund. When the Series invest for defensive purposes,
they may affect the attainment of the Series' investment objective. Cash
equivalent holdings may be denominated in any currency (although such holdings
may not constitute "cash or cash equivalents" for tax diversification purpos-
es).
ZERO COUPON SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL
INCOME FUND, U.S. BALANCED FUND AND U.S. BOND FUND):
Zero coupon securities are debt obligations which do not entitle the holder
to any periodic payments of interest prior to maturity or a specified date
when the securities begin paying current interest (the "cash payment date")
and therefore are issued and traded at a discount from their face amounts or
par value. Such bonds carry an additional risk in that, unlike bonds which pay
interest throughout the period to maturity, the Series investing in zero cou-
pon securities will realize no cash until the cash payment date and, if the
issuer defaults, the Series may obtain no return at all on its investment. For
federal tax purposes, the Series will be required to include in income daily
portions of original issue discount accrued and to dis-
19
<PAGE>
tribute the same to shareholders annually, even if no payment is received be-
fore the distribution date.
MORTGAGE-BACKED SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL
INCOME FUND, U.S. BALANCED FUND AND U.S. BOND FUND):
The Series may invest in mortgage-backed securities, representing interests
in pools of mortgage loans. These securities provide shareholders with pay-
ments consisting of both interest and principal as the mortgages in the under-
lying mortgage pools are paid off. The Series may invest in mortgage-backed
securities issued or guaranteed by an agency or instrumentality of the U.S.
Government. The Series may also invest in privately-issued mortgage-backed se-
curities issued by certain private, non-government corporations, such as fi-
nancial institutions.
The Series may also invest in Collateralized Mortgage Obligations ("CMOs")
and Real Estate Mortgage Investment Conduits ("REMICs"). CMOs are debt securi-
ties issued by U.S. Government agencies or by financial institutions and other
mortgage lenders and collateralized by a pool of mortgages held under an in-
denture. CMOs are issued in a number of classes or series with different matu-
rities. The classes or series are retired in sequence as the underlying
mortgages are repaid. Prepayment may shorten the stated maturity of the obli-
gation and can result in a loss of premium, if any has been paid. Certain of
these securities may have variable or floating interest rates and others may
be stripped (securities which provide only the principal or interest feature
of the underlying security).
REMICs are private entities formed for the purpose of holding a fixed pool
of mortgages secured by an interest in real property. REMICs are similar to
CMOs in that they issue multiple classes of securities.
CMOs and REMICs issued by private entities are not government securities and
are not directly guaranteed by any government agency. They are secured by the
underlying collateral of the private issuer. Yields on privately-issued CMOs,
as described above, have been historically higher than yields on CMOs issued
or guaranteed by U.S. Government agencies. However, the risk of loss due to
default on such instruments is higher since they are not guaranteed by the
U.S. Government. Such instruments also tend to be more sensitive to interest
rates than Government-issued CMOs. The Series will not invest in subordinated
privately-issued CMOs. For federal income tax purposes, the Series will be re-
quired to accrue income on CMOs and REMIC regular interests using the "catch-
up" method, with an aggregate pre-payment assumption.
ASSET-BACKED SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL
INCOME FUND, U.S. BALANCED FUND AND U.S. BOND FUND):
Asset-backed securities are securities that represent a participation in, or
are secured by and payable from, a stream of payments generated by particular
assets, most often a pool or pools of similar assets (e.g., receivables on
home equity and credit loans and receivables regarding automobile, credit
card, mobile home and recreational vehicle loans, wholesale dealer floor plans
and leases).
Such receivables are securitized in either a pass-through or a pay-through
structure. Pass-through securities provide investors with an income stream
consisting of both principal and interest payments in respect of the receiv-
ables in the underlying pool. Pay-through asset-backed securities are debt ob-
ligations issued usually by a special purpose entity, which are collateralized
by the various receivables and in which the payments on the underlying receiv-
ables provide that the Series pay the debt service on the debt obligations is-
sued. The Series may invest in these and other types of asset-backed
securities that may be developed in the future.
The credit quality of these securities depends primarily upon the quality of
the underlying assets
20
<PAGE>
and the level of credit support and/or enhancement provided. Such asset-backed
securities are subject to the same prepayment risks as mortgage-backed securi-
ties. For federal income tax purposes, the Series will be required to accrue
income on pay-through asset-backed securities using the "catch-up" method,
with an aggregate prepayment assumption.
WHEN-ISSUED SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL
INCOME FUND, U.S. BALANCED FUND AND U.S. BOND FUND):
The Series may purchase securities on a "when-issued" basis for payment and
delivery at a later date. The price is generally fixed on the date of commit-
ment to purchase. During the period between purchase and settlement, no inter-
est accrues to the Series. At the time of settlement, the market value of the
security may be more or less than the purchase price.
CONVERTIBLE SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL
INCOME FUND, U.S. BALANCED FUND AND U.S. BOND FUND):
The Series may invest in convertible securities which generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality. The value of convertible securities may reflect changes in the value
of the underlying common stock. Convertible securities entail less credit risk
than the issuer's common stock because they rank senior to common stock.
CURRENCY MANAGEMENT (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND FUND, SHORT-
TERM GLOBAL INCOME FUND, NON-U.S. EQUITY FUND AND NON-U.S. BOND FUND):
To manage exposure to currency fluctuations, the Series may alter fixed in-
come or money market exposures (in their normal asset allocation mix as previ-
ously identified), enter into forward currency exchange contracts, buy or sell
options, futures or options on futures relating to foreign currencies and may
purchase securities indexed to currency baskets. The Series will also use
these currency exchange techniques in the normal course of business to hedge
against adverse changes in exchange rates in connection with purchases and
sales of securities. Some of these strategies may require the Series to set
aside liquid assets in a segregated custodial account to cover their obliga-
tions. These techniques are further described below.
FORWARD FOREIGN CURRENCY TRANSACTIONS (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL
BOND FUND, SHORT-TERM GLOBAL INCOME FUND, NON-U.S. EQUITY FUND AND NON-U.S.
BOND FUND):
The Series may conduct their foreign currency exchange transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through entering into contracts to purchase or sell foreign
currencies at a future date (i.e., a "forward foreign currency" contract or
"forward" contract). A forward contract involves an obligation to purchase or
sell a specific currency amount at a future date, which may be any fixed num-
ber of days from the date of the contract, agreed upon by the parties, at a
price set at the time of the contract. The Series will convert currency on a
spot basis from time to time and investors should be aware that changes in
currency exchange rates and exchange control regulations may affect the costs
of currency conversion.
When the Advisor believes that the currency of a particular country may suf-
fer a significant decline against the U.S. dollar or against another currency,
the Series may enter into a currency contract to sell, for a fixed amount of
U.S. dollars or other appropriate currency, the amount of foreign currency ap-
proximating the value of some or all of the Series securities denominated in
such foreign currency.
At the maturity of a forward contract, the Series may either sell a portfo-
lio security and make delivery of the foreign currency, or they may retain the
security and terminate their contractual
21
<PAGE>
obligation to deliver the foreign currency by purchasing an "offsetting" con-
tract with the same currency trader obligating them to purchase, on the same
maturity date, the same amount of the foreign currency. The Series may realize
a gain or loss from currency transactions. See "Options, Futures and Forward
Contracts" under "Other Investment Practices and Risk Factors."
OPTIONS ON CURRENCIES (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND FUND,
SHORT-TERM GLOBAL INCOME FUND, NON-U.S. EQUITY FUND AND NON-U.S. BOND FUND):
The Series also may purchase and write put and call options on foreign cur-
rencies (traded on U.S. and foreign exchanges or over-the-counter markets) to
manage the portfolio's exposure to changes in currency exchange rates. Call
options on foreign currency written by the Series will be "covered," which
means that the Series will own an equal amount of, or an offsetting position
in, the underlying foreign currency. With respect to put options on foreign
currency written by the Series, the Series will establish a segregated account
with their custodian bank consisting of cash, U.S. Government securities or
other high grade liquid debt securities in an amount equal to the amount the
Series would be required to deliver upon exercise of the put. See "Options,
Futures and Forward Contracts" under "Other Investment Practices and Risk Fac-
tors."
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS (ALL SERIES, EXCEPT U.S.
CASH MANAGEMENT FUND):
The Series may enter into contracts for the purchase or sale of securities,
including index contracts. The Global Fund, Global Equity Fund, Global Bond
Fund, Short-Term Global Income Fund, Non-U.S. Equity Fund and Non-U.S. Bond
Fund also may enter into contracts for the purchase or sale of foreign curren-
cies. A purchase of a futures contract means the acquisition of a contractual
right to obtain delivery to the Series of the securities or foreign currency
called for by the contract at a specified price during a specified future
month. When a futures contract is sold, the Series incur a contractual obliga-
tion to deliver the securities or foreign currency underlying the contract at
a specified price on a specified date during a specified future month. The Se-
ries may enter into futures contracts and engage in options transactions re-
lated thereto to the extent that not more than 5% of the Series' assets are
required as futures contract margin deposits and premiums on options and may
engage in such transactions to the extent that obligations relating to such
futures and related options on futures transactions represent not more than
25% of the Series' assets.
The Series may also purchase and write options to buy or sell futures con-
tracts. Options on futures are similar to options on securities except that
options on futures give the purchaser the right, in return for the premium
paid, to assume a position in a futures contract, rather than actually to pur-
chase or sell the futures contract, at a specified exercise price at any time
during the period of the option. When the Series enter into a futures transac-
tion, they must deliver to the futures commission merchant selected by the Se-
ries an amount referred to as "initial margin."
This amount is maintained by the futures commission merchant in a segregated
account at the custodian bank. Thereafter, a "variation margin" may be paid by
the Series to, or drawn by the Series from, such account in accordance with
controls set for such accounts, depending upon changes in the price of the un-
derlying securities subject to the futures contract.
The Series will enter into such futures and options on futures transactions
on domestic exchanges and, to the extent such transactions have been approved
by the Commodity Futures Trading Commission for sale to customers in the U.S.,
on foreign exchanges. See "Options, Futures and Forward Contracts" under
"Other Investment Practices and Risk Factors."
In addition, the U.S. Balanced Fund and the U.S. Equity Fund may sell stock
index futures in
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anticipation of or during a market decline to attempt to offset the decrease
in market value of their common stocks that might otherwise result; and they
may purchase such contracts in order to offset increases in the cost of common
stocks that they intend to purchase. Unlike other futures contracts, a stock
index futures contract specifies that no delivery of the actual stocks making
up the index will take place. Instead, settlement in cash must occur upon the
termination of the contract.
OPTIONS (ALL SERIES, EXCEPT U.S. CASH MANAGEMENT FUND)
The Series may purchase and write put and call options on U.S. securities
and indices and enter into related closing transactions. In addition, the
Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income
Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund may purchase and write put
and call options on foreign securities and indices and enter into related
closing transactions.
A call option enables the purchaser, in return for the premium paid, to pur-
chase securities from the writer of the option at an agreed price up to an
agreed date. The advantage is that the purchaser may hedge against an increase
in the price of securities it ultimately wishes to buy or may take advantage
of a rise in a particular index. The Series will only purchase call options to
the extent premiums paid on all outstanding call options do not exceed 20% of
the Series' total assets. The Series will only write call options on a covered
basis (e.g., on securities they hold in their portfolio). The Series will re-
ceive premium income from writing call options, which may offset the cost of
purchasing put options and may also contribute to the Series' total return.
The Series may lose potential market appreciation, however, if the Advisor's
judgment is incorrect with respect to interest rates, security prices or the
movement of indices.
A put option enables the purchaser of the option, in return for the premium
paid, to sell the security underlying the option to the writer at the exercise
price during the option period and the writer of the option has the obligation
to purchase the security from the purchaser of the option. The Series will
only purchase put options to the extent that the premiums on all outstanding
put options do not exceed 20% of the Series total assets. With regard to pur-
chasing put options, each Series will limit the aggregate value of the obliga-
tions underlying such put options to 50% of its total net assets. The
advantage is that the purchaser can be protected should the market value of
the security decline or should a particular index decline. The Series will, at
all times during which they hold a put option, own the security underlying
such option. The Series will receive premium income from writing put options,
although they may be required, when the put is exercised, to purchase securi-
ties at higher prices than the current market price.
An option on a securities index gives the purchaser of the option, in return
for the premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of
the option.
Closing transactions essentially let the Series offset put options or call
options prior to exercise or expiration. If the Series cannot effect closing
transactions, they may have to hold a security they would otherwise sell or
deliver a security they might want to hold.
The Series may use options traded on U.S. exchanges and, to the extent per-
mitted by law, options traded over-the-counter. The Global Fund, Global Equity
Fund, Global Bond Fund, Short-Term Global Income Fund, Non-U.S. Equity Fund
and Non-U.S. Bond Fund may use options traded on recognized foreign exchanges
to the extent permitted by law. It is the position of the Securities and Ex-
change Commission that over-the-counter options are illiquid. Accordingly, the
Series will invest in such options only to the extent consistent with their
15% limit on investment in illiquid securities. See "Options, Futures and For-
ward Contracts" under "Other Investment Practices and Risk Factors" below.
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OTHER INVESTMENT PRACTICES AND RISK FACTORS
DERIVATIVE INVESTMENTS
The term "derivatives" has been used to identify a range and variety of fi-
nancial instruments. In general, a derivative is commonly defined as a finan-
cial instrument whose performance and value are derived, at least in part,
from another source, such as the performance of an underlying asset, or a spe-
cific security, or an index of securities. As is the case with other types of
investments, a Series' derivative instruments may entail various types and de-
grees of risk, depending upon the characteristics of the derivative instrument
and the Series' overall portfolio.
Each Series permitted the use of derivatives may engage in such practices
for hedging purposes, or to maintain liquidity, or in anticipation of changes
in the composition of its portfolio holdings. No Series will engage in deriva-
tive investments purely for speculative purposes. A Series will invest in one
or more derivatives only to the extent that the instrument under consideration
is judged by the Advisor to be consistent with the Series' overall investment
objectives and policies. In making such judgment, the potential benefits and
risks will be considered in relation to the Series' other portfolio invest-
ments.
Where not specified, investment limitations with respect to a Series' deriv-
ative instruments will be consistent with such Series' existing percentage
limitations with respect to its overall investment policies and restrictions.
The risks and policies of various types of derivative investments permitted
for certain Series, including options, futures, forward contracts and interest
rate swaps, are described in greater detail below.
OPTIONS AND FUTURES (ALL SERIES, EXCEPT U.S. CASH MANAGEMENT FUND)
The Series' investments in options and futures and similar strategies will
depend on Brinson Partners' judgment as to the potential risks and rewards of
different types of strategies. Options and futures can be volatile investments
and may not perform as expected. If a hedge is applied at an inappropriate
time or price trends are judged incorrectly, options and futures strategies
may lower the Series' return. Options and futures traded on foreign exchanges
generally are not regulated by U.S. authorities and may offer less liquidity
and less protection to the Series in the event of default by the other party
to the contract. The Series could also experience losses if the prices of
their options and futures positions are poorly correlated with their other in-
vestments, or if they cannot close out their positions because of an illiquid
secondary market. Gains and losses on investments in options and futures de-
pends on the Advisor's ability to predict correctly the direction of security
prices, interest rates and other economic factors. Where a liquid secondary
market does not exist, the Series will likely be unable to control losses by
closing their positions. The loss from investing in futures transactions is
potentially unlimited.
SWAPS (ALL SERIES, EXCEPT GLOBAL EQUITY FUND, U.S. EQUITY FUND, U.S. CASH
MANAGEMENT FUND AND NON-U.S. EQUITY FUND)
The Series may engage in swaps, including but not limited to interest rate,
currency and index swaps and the purchase or sale of related caps, floors and
collars and other derivative instruments. Each Series expects to enter into
these transactions primarily to preserve a return or spread on a particular
investment or portion of the portfolio's duration, to protect against any in-
crease in the price of securities the Series anticipates purchasing at a later
date, or to gain exposure to certain markets in the most economical way possi-
ble.
The use of swaps involves investment techniques and risks different from
those associated with ordinary portfolio security transactions. If Brinson
Partners is incorrect in its forecasts of market values, interest rates and
other applicable factors, the investment performance of the Series will be
less favorable than they would have been
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if this investment technique was never used. Swaps do not involve the delivery
of securities or other underlying assets or principal. Thus, if the other
party to swap defaults, the Series' risk of loss consists of the net amount of
interest payments that the Series are contractually entitled to receive. Under
Internal Revenue Service rules, any lump sum payment received or due under the
notional principal contract must be amortized over the life of the contract.
REPURCHASE AGREEMENTS (ALL SERIES)
The Series may enter into repurchase agreements with banks or broker-deal-
ers. Repurchase agreements are considered under the Act to be collateralized
loans by the Series to the seller secured by the securities transferred to the
Series. Repurchase agreements under the Act will be fully collateralized by
securities which the Series may invest in directly. Such collateral will be
marked-to-market daily. If the seller of the underlying security under the re-
purchase agreement should default on its obligation to repurchase the under-
lying security, the Series may experience delay or difficulty in recovering
their cash. To the extent that, in the meantime, the value of the security
purchased had decreased, the Series could experience a loss. No more than 15%
(10% in the case of the U.S. Cash Management Fund) of the Series' net assets
will be invested in illiquid securities, including repurchase agreements which
have a maturity of longer than seven days. The Series must treat each repur-
chase agreement as a security for tax diversification purposes and not as
cash, a cash equivalent or receivable.
REVERSE REPURCHASE AGREEMENTS (ALL SERIES)
The Series may enter into reverse repurchase agreements with banks and bro-
ker-dealers. Reverse repurchase agreements involve sales by the Series of
portfolio assets concurrently with an agreement by the Series to repurchase
the same assets at a later date at a fixed price. During the reverse repur-
chase agreement period, the Series continue to receive principal and interest
payments on these securities.
The Series will establish a segregated account with their custodian bank in
which they will maintain cash, U.S. Government securities or other liquid high
grade debt obligations equal in value to their obligations with respect to re-
verse repurchase agreements. Reverse repurchase agreements involve the risk
that the market value of the securities retained by the Series may decline be-
low the price of the securities the Series have sold but is obligated to re-
purchase under the agreement. In the event the buyer of securities under a
reverse repurchase agreement files for bankruptcy or becomes insolvent, the
Series' use of the proceeds of the agreement may be restricted pending a de-
termination by the other party, or their trustee or receiver, whether to en-
force the Series' obligation to repurchase the securities. Reverse repurchase
agreements are considered borrowings by the Series and as such, are subject to
the investment limitations discussed below in the section entitled "Borrow-
ing."
BORROWING (ALL SERIES)
The Series may borrow money as a temporary measure for extraordinary pur-
poses or to facilitate redemptions. The Series will not borrow money in excess
of 33 1/3% (10% in the case of the U.S. Cash Management Fund) of the value of
their total assets. The Series have no intention of increasing their net in-
come through borrowing. Any borrowing will be done from a bank with the re-
quired asset coverage of at least 300%. In the event that such asset coverage
shall at any time fall below 300%, the Series shall, within three days there-
after (not including Sunday or holidays) or such longer period as the Securi-
ties and Exchange Commission may prescribe by rules and regulations, reduce
the amount of their borrowings to such an extent that the asset coverage of
such borrowings shall be at least 300%. The Series will not pledge more than
10% of their net assets, or issue senior securities as defined in the Act, ex-
cept for notes to banks and reverse repurchase agreements. Investment securi-
ties will not be purchased while the Series have an outstanding borrowing that
exceeds 5% of the Series' net assets.
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LOANS OF PORTFOLIO SECURITIES (ALL SERIES)
The Global Equity Fund, Short-Term Global Income Fund, U.S. Balanced Fund,
U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Bond Fund may loan up to 33 1/3%
of their assets; Global Fund, Global Bond Fund and Non-U.S. Equity Fund may
loan up to 25% of their assets; and the U.S. Cash Management Fund may loan up
to 10% of its assets to qualified broker-dealers or institutional investors
for their use relating to short sales or other security transactions. The ma-
jor risk to which the Series would be exposed on a loan transaction is the
risk that the borrower would become bankrupt at a time when the value of the
security goes up. Therefore, the Series will only enter into loan arrangements
after a review of all pertinent facts by Brinson Partners, subject to overall
supervision by the Board of Trustees, including the creditworthiness of the
borrowing broker-dealer or institution and then only if the consideration to
be received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by Brinson Partners.
RULE 144A SECURITIES (ALL SERIES)
While maintaining oversight, the Board of Trustees has delegated to the Ad-
visor the day-to-day functions of determining whether or not individual secu-
rities purchased under Rule 144A of the Securities Act of 1933, as amended,
are liquid for purposes of the Series' 15% (10% in the case of the U.S. Cash
Management Fund) limitation on investments in illiquid assets. Generally, an
illiquid security is any security that cannot be disposed of within seven days
in the ordinary course of business at approximately the amount at which a Se-
ries has valued the security. Examples of illiquid securities are over-the-
counter options and certain swaps. The Board of Trustees of the Trust has
instructed Brinson Partners to consider the following factors in determining
the liquidity of a security purchased under Rule 144A: (i) the frequency of
trades and trading volume for the security; (ii) whether at least three deal-
ers are willing to purchase or sell the security and the number of potential
purchasers; (iii) whether at least two dealers are making a market in the se-
curity; and (iv) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of solic-
iting offers and the mechanics of transfer). Although having delegated the
day-to-day functions, the Board of Trustees will continue to monitor and peri-
odically review the Advisor's selection of Rule 144A securities, as well as
the Advisor's determinations as to their liquidity. Investing in Rule 144A se-
curities could have the effect of increasing the level of Series illiquidity
to the extent that qualified institutional buyers become, for a time, uninter-
ested in purchasing these securities.
If Brinson Partners determines that a security purchased in reliance on Rule
144A which was previously determined to be liquid, is no longer liquid and, as
a result, the Series' holdings of illiquid securities exceed the Series' 15%
(10% in the case of the U.S. Cash Management Fund) limit on investment in such
securities, Brinson Partners will determine what action shall be taken to en-
sure that the Series continue to adhere to such limitation including disposing
of illiquid assets which may include such Rule 144A securities.
FOREIGN SECURITIES AND CURRENCY CONSIDERATIONS (GLOBAL FUND, GLOBAL EQUITY
FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME FUND, NON-U.S. EQUITY FUND
AND NON-U.S. BOND FUND)
Investments in securities of foreign issuers may involve greater risks than
those of U.S. issuers. There is generally less information available to the
public about non-U.S. companies and less government regulation and supervision
of non-U.S. stock exchanges, brokers and listed companies. Non-U.S. companies
are not subject to uniform global accounting, auditing and financial reporting
standards, practices and requirements. Securities of some non-U.S. companies
are less liquid and their prices more volatile than securities
26
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of comparable U.S. companies. Securities trading practices abroad may offer
less protection to investors. Settlement of transactions in some non-U.S. mar-
kets may be delayed or may be less frequent than in the United States, which
could affect the liquidity of the Series portfolio. Additionally, in some non-
U.S. countries, there is the possibility of expropriation or confiscatory tax-
ation, limitations on the removal of securities, property or other assets of
the Series, political or social instability, or diplomatic developments which
could affect U.S. investments in those countries. With respect to the Global
Fund, Global Equity Fund and Non-U.S. Equity Fund, investments will be made
primarily in the equity securities of companies domiciled in developed coun-
tries. These Series intend to diversify broadly among countries but reserve
the right to invest a substantial portion of their assets in one or more coun-
tries if economic and business conditions warrant such investments. Brinson
Partners will take these factors into consideration in managing the Series'
investments. Because the Series will keep their books and records in U.S. dol-
lars, they will be required, for federal income tax purposes, to account for
income and losses on all transactions involving foreign currency under Section
988 of the Internal Revenue Code of 1986, as amended, and the applicable U.S.
Treasury regulations so that generally any component of a gain or loss attrib-
utable to currency fluctuations results in ordinary income or loss and not
capital gain or loss.
Compared to the United States and other developed countries, emerging coun-
tries may have relatively unstable governments, economies based on only a few
industries, and securities markets that trade only a small number of securi-
ties and employ settlement procedures different from those used in the United
States. Prices on these exchanges tend to be volatile and, in the past, secu-
rities in these countries have offered greater potential for gain (as well as
loss) than securities of companies located in developed countries. Further,
investments by foreign investors are subject to a variety of restrictions in
many emerging countries.
Countries such as those in which the Series may invest have historically ex-
perienced and may continue to experience, high rates of inflation, high inter-
est rates, exchange rate fluctuations or currency depreciation, large amounts
of external debt, balance of payments and trade difficulties and extreme pov-
erty and unemployment. Additional factors which may influence the ability or
willingness to service debt include, but are not limited to, a country's cash
flow situation, the availability of sufficient foreign exchange on the date a
payment is due, the relative size of its debt service burden to the economy as
a whole, its government's policy towards the International Monetary Fund, the
World Bank and other international agencies and the political constraints to
which a government debtor may be subject.
The U.S. dollar market value of the Series' investments and of dividends and
interest earned by the Series, may be significantly affected by changes in
currency exchange rates. Some currency prices may be volatile, and there is
the possibility of governmental controls on currency exchange or governmental
intervention in currency markets, which could adversely affect the Series. Al-
though the Series may attempt to manage currency exchange rate risks, there is
no assurance that the Series will do so at an appropriate time or that they
will be able to predict exchange rates accurately. For example, if the Series
increase their exposure to a currency and that currency's price subsequently
falls, such currency management may result in increased losses to the Series.
Similarly, if the Series decrease their exposure to a currency, and the
currency's price rises, the Series will lose the opportunity to participate in
the currency's appreciation. The Series will manage currency exposures rela-
tive to the normal currency allocation and will consider return and risk of
currency exposures relative to the Benchmark.
Payments to holders of the high yield, high risk, foreign debt securities in
which the Funds may invest may be subject to foreign withholding and other
taxes. Although the holders of foreign government and government-related debt
securities may be entitled to tax gross-up payments from
27
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the issuers of such instruments, there is no assurance that such payments will
be made.
RISKS ASSOCIATED WITH FIXED INCOME SECURITIES (GLOBAL FUND, GLOBAL BOND FUND,
SHORT-TERM GLOBAL INCOME FUND, U.S. BALANCED FUND, U.S. BOND FUND AND NON-U.S.
BOND FUND)
All fixed-income securities are subject to two types of risks: credit risk
and interest rate risk. The credit risk relates to the ability of the issuer
to meet interest or principal payments or both as they come due. The interest
rate risk refers to the fluctuations in the net asset value of any portfolio
of fixed-income securities resulting from the inverse relationship between
price and yield of fixed-income securities; that is, when the general level of
interest rates rises, the prices of outstanding fixed-income securities de-
clines, and when interest rates fall, prices rise.
In addition, if the currency in which a security is denominated appreciates
against the U.S. dollar, the dollar value of the security will increase. Con-
versely, a rise in interest rates or a decline in the exchange rate of the
currency would adversely affect the value of the security expressed in dol-
lars.
HIGH YIELD/HIGH RISK SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED
FUND AND U.S. BOND FUND)
Debt securities rated lower than BBB- by S&P or Baa3 by Moody's are consid-
ered to be of poor standing and predominantly speculative. Investing in lower
rated debt securities may involve certain risks not typically associated with
higher rated securities. The economy and interest rates affect these lower
rated debt securities differently from other securities. Prices have been
found to be less sensitive to interest rate changes than higher rated invest-
ments, but more sensitive to adverse economic changes or individual corporate
developments. Also, during an economic downturn or substantial period of ris-
ing interest rates, highly leveraged issuers may experience financial stress
which would adversely affect their ability to service principal and interest
payment obligations, to meet projected business goals and to obtain additional
financing. Changes by recognized rating agencies in their rating of any secu-
rity and in the ability of an issuer to make payments of interest and princi-
pal will also ordinarily have a more dramatic effect on the values of these
investments than on the values of higher rated securities. Such changes in
value will not affect cash income derived from these securities, unless the
issuers fail to pay interest or dividends when due. Such changes will, howev-
er, affect the Series' net asset value per share. The Global Fund and Global
Bond Fund intend to limit their investment in non-investment grade debt secu-
rities of U.S. dollar-denominated fixed income assets and non-U.S. fixed in-
come assets, respectively, to no more than 10% of their net assets. The U.S.
Balanced Fund and the U.S. Bond Fund intend to limit their investments in non-
investment grade debt securities to no more than 10% and 30% of net assets,
respectively.
Investment in foreign commercial banks are subject to additional risks due
to the securities trading and underwriting activities of such banks. Since it
is common for foreign banks to acquire equity participations in other compa-
nies, such banks are more likely than U.S. banks to have substantial invest-
ments in equity securities. As a result, a general decline in the market for
equity securities may require such banks to raise additional capital or cur-
tail some of their activities. On the other hand, foreign banks tend to be
less leveraged than U.S. institutions. In addition, because the banking indus-
try in most countries is more concentrated and has fewer participants than in
the United States, a foreign bank is more likely to have a dominant position
in its home country's banking market.
Please see the Statement of Additional Information for further information
concerning investment policies and restrictions.
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MANAGEMENT OF THE TRUST
THE BOARD OF TRUSTEES
Under Delaware law, the Board of Trustees has overall responsibility for
managing the business and affairs of the Trust. The Trustees, in turn, elect
the officers of the Trust, who are responsible for administering the day-to-
day operations of the Series.
THE ADVISOR
Brinson Partners, a Delaware corporation, is an investment management firm
managing, as of December 31, 1995, approximately $53 billion, primarily for
institutional pension and profit sharing accounts. Brinson Partners was orga-
nized in 1989 when it acquired the institutional asset management business of
The First National Bank of Chicago and First Chicago Investment Advisors, N.A.
Brinson Partners and its predecessor entities have managed domestic and inter-
national investment assets since 1974 and global investment assets since 1982.
Brinson Partners has offices in London, Melbourne, New York, Paris, Singapore,
Sydney and Tokyo in addition to its principal office at 209 South LaSalle
Street, Chicago, IL 60604-1295. Brinson Partners is an indirect wholly-owned
subsidiary of Swiss Bank Corporation ("Swiss Bank"). Brinson Partners also
serves as the investment advisor to six other investment companies, Brinson
Relationship Funds, which includes six investment portfolios (series), Enter-
prise Accumulation Trust, Enterprise International Growth Portfolio, Fort
Dearborn Income Securities, Inc., Short-Term World Income Portfolio and Pace
Large Company Value Equity Investments. Swiss Bank, with headquarters in Ba-
sel, Switzerland, is an internationally diversified organization with opera-
tions in many aspects of the financial services industry.
Pursuant to its investment advisory agreements with the Trust, on behalf of
each Series, Brinson Partners receives a monthly fee at various annual per-
centage rates of each Series' average daily net assets, as described below,
for providing investment advisory services and Brinson Partners is responsible
for paying its own expenses. Brinson Partners has agreed to waive that portion
of its advisory fee equal to the total expenses of the Series for any fiscal
year which exceeds the permissible limits applicable to the Series in any
state in which its shares are then qualified for sale. Pursuant to its advi-
sory agreements, Brinson Partners is authorized, at its own expense, to obtain
statistical and other factual information and advice regarding economic fac-
tors and trends from its foreign subsidiaries, but it does not generally re-
ceive advice or recommendations regarding the purchase or sale of securities
from such subsidiaries.
For providing investment advisory services, the following Series pay Brinson
Partners a monthly fee at the following annual rates based on their respective
average daily net assets. Global Fund, Global Equity Fund and Non-U.S. Equity
Fund pay 0.80%, which is higher than the advisory fees paid by most other mu-
tual funds; however, this fee is comparable with those of other mutual funds
with similar investment objectives. Global Bond Fund and Non-U.S. Bond Fund
pay 0.75%. U.S. Balanced Fund and U.S. Equity Fund pay 0.70%; U.S. Bond Fund
pays 0.50%; Short-Term Global Income Fund pays 0.60%; and U.S. Cash Management
Fund pays 0.30%.
PORTFOLIO MANAGEMENT
Investment decisions for the Series are made by an investment management
team at Brinson Partners. No member of the investment management team is pri-
marily responsible for making recommendations for portfolio purchases.
ADMINISTRATION OF THE TRUST
THE UNDERWRITER
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken, PA
19428-0874, was engaged pursuant to an agreement dated April 25, 1995, for the
limited purpose of acting as un-
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derwriter to facilitate the registration of the SwissKey Fund class shares of
the Trust under state securities laws and to assist in the sale of shares. The
fee for such service is borne by the Advisor.
FPBS may pay expenses, including trail commissions and account servicing
fees, to brokers who have selling agreements pursuant to Rule 12b-1 Distribu-
tion Plans adopted by the Trust on behalf of each Series. These commissions
and servicing fees will not exceed 0.90% of the average net assets of a Se-
ries' shares.
THE ADMINISTRATOR
The Trust, on behalf of each Series, has entered into an administrative
services agreement with Fund/Plan Services, Inc. ("Fund/Plan"), 2 W. Elm
Street, Conshohocken, PA 19428-0874, pursuant to which the administrator re-
ceives a fee at the annual rate of 0.15% of the average daily net assets of
the Trust on the first $75 million; 0.10% on the next $75 million; 0.075% on
the next $350 million; and 0.05% of its average daily net assets in excess of
$500 million. Each Series pays its pro rata portion based upon its average
daily net assets, but in no event shall a Series pay less than $10,000 per
year for each multiple class portfolio. Pursuant to the agreement with
Fund/Plan, maximum administration fees are $400,000 for the initial multiple
class portfolio and $60,000 per year for each subsequent multiple class port-
folio.
The services Fund/Plan provides to the Series include: coordinating and mon-
itoring of any third parties furnishing services to the Series; providing the
necessary office space, equipment and personnel to perform administrative and
clerical functions for the Series; preparing, filing and distributing proxy
materials, periodic reports to shareholders, registration statements and other
documents; and responding to shareholder inquiries.
THE CUSTODIAN, TRANSFER AGENT AND ACCOUNTING/PRICING AGENT
Bankers Trust Company, c/o BTNY Services, Inc., 34 Exchange Place, Jersey
City, NJ 07302-1107 is custodian for the securities and cash of each Series.
Fund/Plan serves as each Series' transfer agent. As transfer agent, it main-
tains the records of each shareholder's account, answers shareholder inquiries
concerning accounts, processes purchases and redemptions of the Funds' shares,
acts as dividend and distribution disbursing agent and performs other share-
holder service functions. Shareholder inquiries should be addressed to the
transfer agent at 1-800-SWISSKEY.
Fund/Plan also performs certain accounting and pricing services for the
Trust, including the daily calculation of the Funds' respective net asset val-
ues.
EXPENSES
Each class of shares of a Series' will bear, pro rata, all of the common ex-
penses of that Series. Such expenses may include, but are not limited to, man-
agement fees, legal expenses, audit fees, printing costs (e.g., cost of
printing annual reports, semi-annual reports and prospectuses which are dis-
tributed to existing shareholders), brokerage commissions, the expenses of
registering and qualifying the Series shares for sale with the Securities and
Exchange Commission and with various state securities commissions, fees and
expenses of the Series custodian, administrator and transfer agent, the ex-
penses of obtaining quotations of portfolio securities and of pricing the Se-
ries' shares. General expenses which are not associated directly with any
particular Series within the Trust (e.g., insurance premiums, trustees' fees,
expenses of maintaining the Trust's legal existence and of shareholders' meet-
ings, and fees and expenses of industry organizations) are allocated between
the various Series and classes based upon an equitable basis. All expenses in-
curred by a Series, will be borne on a pro rata basis by each outstanding
share of a class, based on each class' percentage in the Series represented by
the value of shares of such classes, except that the Brinson Fund classes will
not incur any of the expenses under the SwissKey Fund classes' 12b-1 Plan. Due
to the
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specific distribution expenses and other costs that will be allocable to each
class, the net asset value of and dividends paid to each class of a Series
will vary.
Brinson Partners has agreed irrevocably to waive its fees and reimburse ex-
penses so that total operating expenses, with the exception of 12b-1 expenses,
of the SwissKey Global Fund, SwissKey Global Equity Fund, SwissKey Global Bond
Fund, SwissKey Short-Term Global Income Fund, SwissKey U.S. Balanced Fund,
SwissKey U.S. Equity Fund, SwissKey U.S. Bond Fund, SwissKey U.S. Cash Manage-
ment Fund, SwissKey Non-U.S. Equity Fund and SwissKey Non-U.S. Bond Fund, do
not exceed 1.10%, 1.00%, 0.90%, 0.75%, 0.80%, 0.80%, 0.60%, 0.40%, 1.00% and
0.90%, respectively. Had the Advisor not agreed irrevocably to waive its fees
and reimburse expenses, the Total Fund Expense ratio for the SwissKey Fund
class shares of the Series that have commenced operations would have been es-
timated at 1.79%--Global Fund, 3.41%--Global Equity Fund, 2.27%--Global Bond
Fund, 1.45%--U.S. Balanced Fund, 5.92%--U.S. Equity Fund, 5.15%--U.S. Bond
Fund, and 2.44%--Non-U.S. Equity Fund, respectively.
PURCHASE OF SHARES
At the discretion of the Trust, investors may be permitted to purchase Fund
shares by transferring securities to the Fund that meet the Series' investment
objectives and policies. Securities transferred to the Fund will be valued in
accordance with the same procedures used to determine the Funds' net asset
value at the time of the next determination of net asset value determined as
of the same time. All dividends, interest, subscription, or their rights per-
taining to such securities shall become the property of the Series and must be
delivered to the Series by the investor upon receipt from the issuer. Invest-
ors who are permitted to transfer such securities will be required to recog-
nize a gain or loss on such transfer and pay tax thereon, if applicable,
measured by the difference between the fair market value of the securities and
the investors' basis therein. Securities will not be accepted in exchange for
shares of the Fund unless: (1) such securities are, at the time of the ex-
change, eligible to be included in the Series' portfolio and current market
quotations are readily available for such securities; (2) the investor repre-
sents and warrants that all securities offered to be exchanged are not subject
to any restrictions upon their sale by the Fund under the Securities Act of
1933 or under the laws of the country in which the principal market for such
securities exists, or otherwise; and (3) the value of any such security (ex-
cept U.S. Government securities) being exchanged together with other securi-
ties of the same issuer owned by the Series, will not exceed 5% of the Series'
net assets immediately after the transaction.
Purchase orders for shares of a Fund which are received by Fund/Plan in
proper form, including money order, check or bank draft, by 4:00 p.m. Eastern
Time on any day that the New York Stock Exchange ("NYSE") is open for trading
will be purchased at such Fund's net asset value determined that day, except
that orders and payment for the SwissKey U.S. Cash Management Fund must be re-
ceived by 12:00 p.m. Eastern Time. For the U.S. Cash Management Fund, pur-
chases will be processed at the net asset value calculated after your
investment has been converted to federal funds, e.g., monies credited to the
Series' custodian bank by a Federal Reserve Bank. Upon conversion to federal
funds, your purchase will be deemed effective and be entitled to dividends. If
you wire money in the form of federal funds, your money will be invested at
the share price next determined after receipt of the wire. For the U.S. Cash
Management Fund, if you invest by check or non-federal funds wire, allow one
business day after receipt for conversion into federal funds. Except for the
U.S. Cash Management Fund, purchase orders for shares received in proper form
after 4:00 p.m. Eastern time will be priced at the net asset value determined
on the next day that the NYSE is open for trading.
The Trust may accept telephone orders for Fund shares from broker-dealers or
service organizations which have been previously approved by
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the Trust. It is the responsibility of such broker-dealers or service organi-
zations to promptly forward purchase orders and payments for same to the
Trust. Shares of a Fund may be purchased through broker-dealers, banks, and
bank trust departments which may charge the investor a transaction fee or
other fee for their services at the time of purchase. Such fees would not oth-
erwise be charged if the shares were purchased directly from the Trust.
THE SWISSKEY FUND CLASS SHARES
The SwissKey Funds will be marketed directly through the offices of the
Swiss Bank Corporation. Swiss Bank Corporation has been providing investment
advisory services since its formation in 1872. Through its branches and sub-
sidiaries, Swiss Bank Corporation conducts securities research, provides in-
vestment advisory services and manages mutual funds in major cities throughout
the world including Amsterdam, Basel, Geneva, Frankfurt, Hong Kong, London,
Luxembourg, Monte Carlo, New York, Paris, Singapore, Sydney, Tokyo, Toronto
and Zurich.
The SwissKey Funds may be purchased, through broker-dealers having sales
agreements with FPBS, or through financial institutions having agency agree-
ments with FPBS. There is no sales load or charge in connection with the pur-
chase of shares. The SwissKey Fund class shares, however are subject to annual
12b-1 Plan expenses of up to a maximum of 0.90% (0.25% of which are service
fees to be paid by the Fund to FPBS, dealers or others for providing personal
service and/or maintaining shareholder accounts) of the Funds' average daily
net assets of such shares.
The Trust reserves the right to reject any purchase order and to suspend the
offering of shares of any Fund. The minimum initial investment is $1,000. Sub-
sequent investments will be accepted in minimum amounts of $50. The minimum
initial investment for IRAs is $1,000 and subsequent investments will be ac-
cepted in minimum amounts of $50 for each Fund. The Trust reserves the right
to vary the initial and additional investment minimums for each Fund.
BRINSON FUND CLASS SHARES
In addition to offering the SwissKey Fund class shares of each Series, the
Trust offers the Brinson Fund class shares of each Series, which are described
in separate prospectuses relating to those classes of shares. As described in
the prospectus relating to the Brinson Fund class shares, Brinson Fund class
shares generally are distributed directly by FPBS and do not have a sales load
or a 12b-1 fee. Both classes of a Series have a proportionate interest in the
underlying portfolio of securities of that Series. To obtain a prospectus
which describes the Brinson Fund class shares of a particular Series, contact
FPBS at (800) 448-2430.
Purchases may be made in one of the following ways:
INITIAL PURCHASES BY MAIL
Shares of each Fund may be purchased initially by completing the application
or having your broker-dealer or financial institution complete the application
accompanying this Prospectus together with a check payable to "SwissKey (Name
of Series)" and mailing it to "The SwissKey Funds," c/o Fund/Plan Services,
Inc., 2 W. Elm Street, P.O. Box 874, Conshohocken, PA 19428-0874.
INITIAL PURCHASES BY WIRE
An investor desiring to purchase shares of any Fund by wire should call
Fund/Plan or have their broker-dealer or financial institution call Fund/Plan
first at 1-800-SWISSKEY and request an account number and furnish the Fund
with your tax identification number. Following such notification to Fund/Plan,
federal funds and registration instructions should be wired through the Fed-
eral Reserve System to:
UNITED MISSOURI BANK KC NA
ABA # 10-10-00695
FOR: FUND/PLAN SERVICES, INC.
A/C 98-7037-071-9
FBO "SWISSKEY (Name of Series)"
"SHAREHOLDER NAME AND ACCOUNT NUMBER"
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A completed application with signature(s) of registrant(s) must be filed
with the transfer agent immediately subsequent to the initial wire. Investors
should be aware that some banks may impose a wire service fee.
SUBSEQUENT INVESTMENTS
Once an account has been opened, subsequent purchases in the minimum amounts
specified above may be made by mail, bank wire or exchange. When making addi-
tional investments by mail, simply return the remittance portion of a previous
confirmation with your investment in the envelope provided. Your check should
be made payable to "SwissKey (Name of Series)" and mailed to The SwissKey
Funds c/o Fund/Plan Services, Inc., P.O. Box 412797, Kansas City, MO 64141-
2797.
All investments must be made in U.S. dollars, and, to avoid fees and delays,
checks must be drawn only on banks located in the United States. A charge ($20
minimum) will be imposed if any check used for the purchase of shares is re-
turned. The Trust and Fund/Plan each reserve the right to reject any purchase
order in whole or in part.
EXCHANGE OF SHARES
Shares of any of the SwissKey Funds within the Trust may be exchanged for
shares of any of the other SwissKey Funds within the Trust. Exchanges will not
be permitted between Brinson Fund class shares and SwissKey Fund class shares
of a Series. Additional information about this exchange privilege and a pro-
spectus for the SBC Short-Term World Income Fund may be obtained by calling 1-
800-SWISSKEY.
The exchange privilege is a convenient way to respond to changes in your in-
vestment goals or in market conditions. This privilege is not designed for
frequent trading in response to short-term market fluctuations. You may make
exchanges by mail or by telephone if you have previously elected the telephone
authorization privilege on the Account Application. The telephone exchange
privilege may be difficult to implement during times of drastic economic or
market changes. The purchase of shares for any Fund through an exchange trans-
action is accepted immediately. You should keep in mind that for tax purposes
an exchange is treated as a redemption and a new purchase, each at the appro-
priate Fund's net asset value. The Trust and Fund/Plan reserve the right to
limit, amend, impose charges upon, terminate or otherwise modify the exchange
privilege on 60 days' prior written notice to shareholders.
Exchanges will be made on the basis of both Funds' relative net asset values
per share. Exchanges may be made only for shares of a Fund then offering its
shares for sale in your state of residence and are subject to the minimum ini-
tial investment requirement. Requests for telephone exchanges must be received
by Fund/Plan by the close of regular trading on the NYSE (currently 4:00 p.m.
Eastern Time) on any day that the NYSE is open for regular trading, except
that requests for exchanges into the U.S. Cash Management Fund must be re-
ceived by 12:00 p.m. Eastern Time, for the exchange to occur that day.
REDEMPTION OF SHARES
Shares of each Fund may be redeemed without charge on any business day that
the NYSE is open for business. Redemptions will be effective at the net asset
value per share next determined after the receipt by the transfer agent of a
redemption request meeting the requirements described below. The Trust nor-
mally sends redemption proceeds on the next business day, but in any event,
redemption proceeds are sent within five business days of receipt of a redemp-
tion request in proper form. Payment may also be made by wire directly to any
bank previously designated by the shareholder in a shareholder account appli-
cation. There is a $9 charge for redemptions by wire. Also, please note that
the shareholder's bank may impose a fee for this wire service. The Trust will
honor redemption requests of shareholders who
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<PAGE>
recently purchased shares by check, but will not mail the proceeds until it is
reasonably satisfied that the purchase check has cleared, which may take up to
fifteen days from the purchase date.
Except as noted below, redemption requests received in proper form by the
transfer agent prior to the close of regular trading hours on the NYSE on any
business day that the Fund's net asset value per share is calculated are ef-
fective that day.
Redemption requests received after the close of the NYSE are effective as of
the time the Fund's net asset value per share is next determined. No redemp-
tion will be processed until the transfer agent has received a completed ap-
plication with respect to the account.
The Trust will satisfy redemption requests in cash to the fullest extent
feasible, so long as such payments would not, in the opinion of Brinson Part-
ners or the Board of Trustees, result in the necessity of a Series to sell as-
sets under disadvantageous conditions or to the detriment of the remaining
shareholders of the Series. Pursuant to the Trust's Agreement and Declaration
of Trust, payment for shares redeemed may be made either in cash or in kind,
or partly in cash and partly in kind. However, the Trust has elected pursuant
to Rule 18f-1 under the Act to redeem its shares solely in cash up to the
lesser of $250,000 or 1% of the net asset value of the Series, during any 90
day period for any one shareholder. Payments in excess of this limit by any of
the Fund will also be made wholly in cash unless the Board of Trustees be-
lieves that economic conditions exist which would make such a practice detri-
mental to the best interests of the Series. Any portfolio securities paid or
distributed in-kind would be valued as described under "Net Asset Value." In
the event that an in-kind distribution is made, a shareholder may incur addi-
tional expenses, such as the payment of brokerage commissions, on the sale or
other disposition of the securities received from the Series. In-kind payments
need not constitute a cross-section of the Series' portfolio.
MINIMUM BALANCES
Due to the relatively high cost of maintaining smaller accounts, the Trust
reserves the right to involuntarily redeem shares in any Fund account for
their then current net asset value (which will be promptly paid to the share-
holder) if at any time the total investment does not have a value of at least
$1,000 as a result of redemptions and not due to changes in the asset value of
the Series. The shareholder will be notified that the value of his Fund ac-
count is less than the required minimum and will be allowed at least 60 days
to bring the value of the account up to the minimum before the redemption is
processed.
Shares may be redeemed in one of the following ways:
REDEMPTION BY MAIL
Shareholders may submit a written request for redemption to: The SwissKey
Funds, c/o Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box 874, Consho-
hocken, PA 19428-0874. The request must be in good order which means that it
must (i) identify the shareholder's account name and account number, (ii)
state the Fund name, (iii) state the number of shares to be redeemed, and (iv)
be signed by each registered owner exactly as the shares are registered. To
prevent fraudulent redemptions, a signature guarantee for the signature of
each person in whose name the account is registered is required on all written
redemption requests over $5,000. A guarantee may be obtained from any commer-
cial bank, trust company, savings and loan association, federal savings bank,
a member firm of a national securities exchange or other eligible financial
institution. Credit unions must be authorized to issue signature guarantees;
notary public endorsements will not be accepted. The transfer agent may re-
quire additional supporting documents for redemptions made by corporations,
executors, administrators, trustees, guardians and retirement plans.
A redemption request will not be deemed to be properly received until the
transfer agent receives all required documents in proper form.
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<PAGE>
Questions with respect to the proper form for redemption requests should be
directed to the transfer agent at 1-800-SWISSKEY.
REDEMPTION BY TELEPHONE
Shareholders who have so indicated on the application, or have subsequently
arranged in writing to do so, may redeem shares by instructing the transfer
agent by telephone at 1-800-SWISSKEY.
In order to arrange for redemption by wire or telephone after an account has
been opened, or to change the bank or account designated to receive redemption
proceeds, a written request must be sent to the transfer agent at the address
listed under "Redemption by Mail," above. Such requests must be signed by the
shareholder, with signatures guaranteed (see "Redemption by Mail" for details
regarding signature guarantees). Further documentation may be requested from
corporations, executors, administrators, trustees or guardians.
The Trust reserves the right to refuse a wire or telephone redemption if it
is believed advisable to do so. Procedures for redeeming Fund shares by wire
or telephone may be modified or terminated at any time by the Trust. Neither
the Trust nor any of its service contractors will be liable for any loss or
expense in acting upon telephone instructions that are reasonably believed to
be genuine. In attempting to confirm that telephone instructions are genuine,
the Funds will use such procedures as are considered reasonable, including re-
questing a shareholder to correctly state his or her Fund account number, the
name in which his or her account is registered, his or her social security
number, banking institution, bank account number and the name in which his or
her bank account is registered. To the extent that the Trust fails to use rea-
sonable procedures to verify the genuineness of telephone instructions, they
and/or their service contractors may be liable for any such instructions that
prove to be fraudulent or unauthorized.
Shares of the Funds may be redeemed through certain broker-dealers, banks
and bank trust departments who may charge the investor a transaction fee or
other fee for their services at the time of redemption. Such fees would not
otherwise be charged if the shares were redeemed from the Trust.
REDEMPTION BY CHECK (SWISSKEY U.S. CASH MANAGEMENT FUND ONLY)
If you are a shareholder of the SwissKey U.S. Cash Management Fund and have
elected the free checkwriting option on the account application form, you will
receive checks that you may use to make payments to any person or business.
There is no limit on the number of checks you may write, but each check must
be for at least $500 and not more than $100,000. You will continue to earn
dividends on shares redeemed until the checks are presented to Fund/Plan for
payment. An account cannot be closed using the checkwriting privilege. There
is currently no charge to shareholders for checkwriting, but the Trust re-
serves the right to impose a charge in the future. There is a $15 charge for
checks written when insufficient funds are available. Checkwriting may be sus-
pended or terminated at any time upon notice to investors.
REPURCHASES
If a shareholder desires to sell his shares at net asset value through a
broker-dealer or financial institution (a repurchase), the shareholder can
place a repurchase order with the broker-dealer or financial institution,
which may charge the shareholder a fee. The shareholder will receive the net
asset value calculated on the day he places the order and submits Federal
funds if such broker-dealer or financial institution receives the sharehold-
er's order prior to the close of the NYSE (or 12:00 p.m. Eastern Time for the
SwissKey U.S. Cash Management Fund) and fulfills its responsibility to commu-
nicate it with Fund/Plan on the same day.
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<PAGE>
ACCOUNT OPTIONS
IN GENERAL
The following account options are available to shareholders. There are no
charges for the programs noted below and an investor may change or terminate
these plans at any time by written notice to the Trust. For information about
participating in these account options, call Fund/Plan Services, Inc. at 1-
800-SWISSKEY.
AUTOMATIC INVESTMENT PLAN
Shares of any of the SwissKey Funds may be purchased through an Automatic
Investment Plan. The Automatic Investment Plan provides a convenient method by
which investors may have monies deducted directly from their checking, savings
or bank money market accounts for investment in the Funds each month or quar-
ter. The minimum investment pursuant to the Automatic Investment Plan is $50.
The initial account must be opened first with the $1,000 minimum prior to par-
ticipation in the plan. If you desire to take advantage of this plan, simply
complete the Automatic Investment Plan section on the Account Application,
which is available from the transfer agent. The account designated will be
debited in the specified amount, on the date indicated, and Fund shares will
be purchased. The Trust may alter or terminate the Automatic Investment Plan
at any time.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder with a minimum account balance of $10,000 may direct the
transfer agent to send to him (or anyone he designates) regular monthly, quar-
terly or semi-annual payments. Each payment under a Systematic Withdrawal Plan
("SWP") must be at least $100. Such payments are drawn from share redemptions.
If redemptions continue, the shareholder's account may eventually be exhaust-
ed. Shareholders participating in the SWP must elect to have their dividends
and distributions automatically reinvested in additional Fund shares and must
hold their shares in uncertificated form. The Trust may terminate any SWP for
an account if the value of the account falls below $5,000 as a result of share
redemptions or an exchange of shares of the Fund for shares of another Fund in
the Trust.
INDIVIDUAL RETIREMENT ACCOUNTS
An IRA is a tax-deferred retirement savings account that may be used by an
individual under age 70 1/2 who has compensation or self-employment income and
his or her unemployed spouse, or an individual who has received a qualified
distribution from his or her employer's retirement plan. The minimum purchase
requirement for IRAs is $1,000 for each Fund.
DISTRIBUTION PLAN
The Board of Trustees of the Trust has adopted a distribution plan (the
"Plan") pursuant to Rule 12b-1 under the Act for the SwissKey Fund class
shares. The Plan permits each Series to reimburse FPBS, Brinson Partners and
others from the assets of the SwissKey Fund class shares a quarterly fee for
services and expenses incurred in distributing and promoting sales of the
SwissKey Fund class shares. These expenses include, but are not limited to,
preparing and distributing advertisements and sales literature, printing pro-
spectuses and reports used for sales purposes, and paying distribution and
maintenance fees to brokers, dealers and others in accordance with a selling
agreement with the Trust on behalf of the SwissKey Fund class shares or FPBS.
In addition, each Series may make payments directly to FPBS for payment to
dealers or others, or directly to others, such as banks, who assist in the
distribution of the SwissKey Funds or provide services with respect to the
SwissKey Funds.
The aggregate distribution fees paid by the Series from the assets of the
respective SwissKey Fund class shares to FPBS and others under the Plan may
not exceed 0.90% of a Fund's average daily net assets in any year (0.25% of
which are service fees to be paid by the Series to FPBS, dealers and others,
for providing personal service
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<PAGE>
and/or maintaining shareholder accounts) of a Fund's average daily net assets.
The Plan provides, however, that the aggregate distribution fees for each re-
spective Fund shall not exceed the following maximum amounts for the 1996 fis-
cal year : SwissKey Global Fund--0.65%, SwissKey Global Equity Fund--0.76%,
SwissKey Global Bond Fund--0.49%, SwissKey Short-Term Global Income Fund--
0.52%, SwissKey U.S. Balanced Fund--0.50%, SwissKey U.S. Equity Fund--0.52%,
SwissKey U.S. Bond Fund--0.47%, SwissKey U.S. Cash Management Fund--0.47%,
SwissKey Non-U.S. Equity Fund--0.84% and SwissKey Non-U.S. Bond Fund--0.52%.
The Plan does not apply to the Brinson Fund class shares of each Series.
Those shares are not included in calculating the Plan's fees and the Plan is
not used to assist in the distribution and marketing of each Series' Brinson
Fund class shares.
The quarterly fees paid to FPBS under the Plan are subject to the review and
approval by the Trust's unaffiliated Trustees who may reduce the fees or ter-
minate the Plan at any time.
All such payments made by a Series pursuant to the Plan shall be made for
the purpose of selling shares issued by the Series. Distribution expenses
which are attributable to a particular Fund will be charged against that
Fund's assets. Distribution expenses which are attributable to more than one
Series will be allocated among the Series, and, consequently, the Funds, in
proportion to their relative net assets.
NET ASSET VALUE
The net asset value per share of each Fund is computed as of the close of
regular trading on the NYSE. The NYSE is closed on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas. The net asset values of all outstanding shares of each class of
shares of a Series will be computed on a pro rata basis for each outstanding
share based on the proportionate participation in that Series represented by
the value of shares of that class.
The net asset value per share is computed by adding the value of all securi-
ties and other assets in the portfolio, deducting any liabilities (expenses
and fees are accrued daily) and dividing by the number of shares outstanding.
The portfolio securities of each Series listed or traded on a stock exchange
are valued at the latest sale price. If no sale price is reported, the mean of
the latest bid and asked prices is used. Securities traded over-the-counter
are priced at the mean of the latest bid and asked prices. When market quota-
tions are not readily available, securities and other assets are valued at
fair value as determined in good faith by the Board of Trustees.
Bonds are valued through valuations obtained from a commercial pricing serv-
ice or at the most recent mean of the bid and asked prices provided by invest-
ment dealers in accordance with procedures established by the Board of
Trustees. Options, futures and options on futures are valued at the settlement
price as determined by the appropriate clearing corporation.
The securities held in the portfolio of the U.S. Cash Management Fund, and
the debt securities with maturities of 60 days or less held by other Series,
are valued at amortized cost. When a security is valued at amortized cost, it
is valued at its cost when purchased, and thereafter by assuming a constant
amortization to maturity of any discount or premium, regardless of the impact
of fluctuating interest rates on the market value of the instrument.
From time to time, portfolio securities of a Series may be listed primarily
on foreign exchanges which trade on days when the NYSE is closed (such as Sat-
urday). As a result, the net asset value of the Funds may be significantly af-
fected by such trading on days when shareholders have no access to the Funds.
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<PAGE>
The different expenses borne by each class of shares will result in differ-
ent net asset values and dividends. The per share net asset value of the
SwissKey Fund class shares will generally be lower than that of the Brinson
Fund class shares of a Series because of the higher expenses borne by the
SwissKey Fund class shares. It is expected, however, that the net asset value
per share of the two classes will tend to converge immediately after the pay-
ment of dividends, which will differ by approximately the amount of the serv-
ice and distribution expense differential between the classes.
DIVIDENDS AND TAXES
DIVIDENDS
The Short-Term Global Income Fund's and the U.S. Cash Management Fund's net
investment income is declared daily and paid monthly as a dividend to share-
holders of record at the close of business on the day of declaration. In order
to receive the dividend for that day, the shareholder's purchase of shares
must be effective as of 4:00 p.m. Eastern Time, except that purchases of
shares for the U.S. Cash Management Fund must be effective as of 12:00 p.m.
Eastern Time. Income dividends, when available, are declared and paid semi-an-
nually in June and December for the Global Fund, Global Equity Fund, Global
Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, Non-U.S. Eq-
uity Fund and Non-U.S. Bond Fund. Any aggregate net profits realized from the
sale of portfolio securities are distributed at least once each year unless
they are used to offset losses carried forward from prior years, in which case
no such gain will be distributed.
Dividends paid by a Series with respect to its SwissKey Fund class and
Brinson Fund class shares are calculated in the same manner and at the same
time. The per share dividends on SwissKey Fund class shares will be lower than
the per share dividends on the Brinson Fund class shares of each Series as a
result of the distribution and service fees applicable with respect to the
SwissKey Fund class shares. Both the SwissKey Fund class and Brinson Fund
class shares of a Series will share proportionately in the investment income
and expenses of that Series, except that the per share dividends on the
SwissKey Fund class shares will be lower that the per share dividends on the
Brinson Fund class shares, which will not incur any expenses under a Rule 12b-
1 Plan.
Income dividends and capital gain distributions are reinvested automatically
in additional shares at net asset value, unless you elect to receive them in
cash. Distribution options may be changed at any time by requesting a change
in writing. Any check in payment of dividends or other distributions which
cannot be delivered by the Post Office or which remains uncashed for a period
of more than one year may be reinvested in the shareholder's account at the
then current net asset value and the dividend option may be changed from cash
to reinvest. Dividends are reinvested on the ex dividend date (the "ex date")
at the net asset value determined at the close of business on that date.
Please note that shares purchased shortly before the record date for a divi-
dend or distribution may have the effect of returning capital although such
dividends and distributions are subject to taxes.
TAXES
Each Series intends to qualify as a "regulated investment company" under the
Internal Revenue Code ("the Code"). Such qualification relieves a Series of
liability for Federal income taxes to the extent the Series' earnings are dis-
tributed in accordance with the Code. Each Series is treated as a separate
corporate entity for Federal tax purposes. Distributions of any net investment
income and of any net realized short-term capital gains are taxable to share-
holders as ordinary income. All distributions may be subject to state and lo-
cal taxes. Distributions of net capital gain (the excess of net long-term
capital gain over net short-term capital loss) are taxable to shareholders as
long-term capital gain regardless of how long a shareholder may have held
shares of a Series. The tax treatment of
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distributions of ordinary income or capital gains will be the same whether the
shareholder reinvests the distributions or elects to receive them in cash. A
distribution will be treated as paid on December 31 of the current calendar
year if it is declared in October, November or December with a record date in
such a month and paid during January of the following calendar year. Such dis-
tributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the distri-
butions are received.
Shareholders will be advised annually of the source and tax status of all
distributions for Federal income tax purposes. Further information regarding
the tax consequences of investing in the Series is included in the Statement
of Additional Information. The above discussion is intended for general infor-
mation only. Investors should consult their own tax advisors for more specific
information on the tax consequences of particular types of distributions.
Redemptions of Series shares, and the exchange of shares between two Series
of the Trust, are taxable events and, accordingly, shareholders may realize
capital gains or losses on these transactions.
Shareholders may be subject to back-up withholding on reportable dividend
and redemption payments ("back-up withholding") if a certified taxpayer iden-
tification number is not on file with the Series, if, to the Series' knowl-
edge, an incorrect number has been furnished, or if, the Series has been
notified by the IRS that an account is subject to back-up withholding. An in-
dividual's taxpayer identification number is his/her social security number.
If more than 50% of the Series total assets at the close of its taxable year
consists of stock or securities in foreign corporations, the Series may elect
to "pass-through" to shareholders for foreign tax credit purposes the amount
of foreign income taxes paid by the Series with respect to its direct holdings
of securities in foreign corporations. The Series will make such an election
only if it deems such election to be in the best interests of its sharehold-
ers. If this election is made, shareholders of the Series will be required to
include in their gross incomes their pro rata shares of foreign taxes paid by
the Series. However, shareholders will be able to treat their pro-rata shares
of foreign taxes as either a deduction (itemized deduction in the case of in-
dividuals) or a foreign tax credit (but not both) against U.S. income taxes on
their tax return.
PERFORMANCE INFORMATION
From time to time, performance information, such as "yield," "effective
yield," "total return" or "average annual total return" may be quoted in ad-
vertisements or in communications to present or prospective shareholders. The
figures are based on historical performance and should not be considered rep-
resentative of future results. The value of an investment in a Fund will fluc-
tuate and an investor's shares, when redeemed, may be worth more or less than
their original cost. Performance information for a Fund may be compared to
various unmanaged indices and averages, and to the performance of other mutual
funds tracked by mutual fund rating services. Any fees charged by banks or
their institutional investors directly to their customer accounts in connec-
tion with investments in the SwissKey Fund class shares of the Series will not
be included in the Funds' calculations of yield or total return.
The current yield will be calculated by dividing the net asset income earned
per share by the Fund during the period stated in the advertisement (based on
the average daily number of shares entitled to receive dividends outstanding
during the period) by the maximum net asset value per share on the last day of
the period and annualizing the result on a semi-annual compounded basis. The
Fund's total return may be calculated on an annualized and aggregate basis for
various periods
39
<PAGE>
(which periods will be stated in the advertisement). Average annual return re-
flects the average percentage change per year in value of an investment in the
Fund. Aggregate total return reflects the total percentage change over the
stated period.
To help investors better evaluate how an investment in a Fund might satisfy
their investment objective, advertisements regarding the Funds may discuss
yield or total return as reported by various financial publications. Adver-
tisements may also compare yield or total return to other investments, indices
and averages. The following publications, benchmarks, indices and averages may
be used: Lipper Mutual Fund Performance Analysis; Lipper Fixed Income Analy-
sis; Lipper Mutual Fund Indices; Morgan Stanley Indices; Shearson Lehman Hut-
ton Treasury Index; Salomon Brothers Indices; Dow Jones Composite Average or
its component indices; Standard & Poor's 500 Stock Index or its component in-
dices; Wilshire Indices; The New York Stock Exchange composite or component
indices; CDA Mutual Fund Report; Weisenberger -- Mutual Funds Panorama and In-
vestment Companies; Mutual Fund Values and Mutual Fund Service Book, published
by Morningstar, Inc.; comparable global portfolios managed by the Advisor; and
financial publications such as Business Week, Kiplinger's Personal Finance,
Financial World, Forbes, Fortune, Money Magazine, The Wall Street Journal,
Barron's, et al., which rate fund performance over various time periods.
The performance of the SwissKey U.S. Cash Management Fund may be compared to
other comparable money market funds as reported by IBC/Donoghue's Money Fund
Report or Money Fund Insight, reporting services on money market funds. In-
vestors may want to compare the Fund's performance to that of various bank
products as reported by BANK RATE MONITOR, a financial reporting service that
weekly publishes average rates of bank and thrift institution money market de-
posit accounts and interest bearing checking accounts or various certificate
of deposit indices. The performance of the Fund also may be compared to that
of U.S. Treasury bills and notes. Certain of these alternative investments may
offer fixed rates of return and guaranteed principal and may be insured. In
addition, investors may want to compare the Fund's performance in the Consumer
Price Index either directly or by calculating its "real rate of return," which
is adjusted for the effects of inflation.
Further information about the performance of the Funds is included in the
Statement of Additional Information, which may be obtained without charge by
contacting the Trust at 1-800-SWISSKEY.
TOTAL RETURN
Total Return is defined as the change in value of an investment in a Fund
over a particular period, assuming that all distributions have been reinvest-
ed. Thus, total return reflects not only income earned, but also variations in
share prices at the beginning and end of the period. Average annual total re-
turn is determined by computing the annual compound return over a stated pe-
riod of time that would have produced a Fund's cumulative total return over
the same period if the Fund's performance had remained constant throughout.
Aggregate total return reflects the total percentage change over the stated
period.
YIELD
Yield refers to net income generated by an investment over a particular pe-
riod of time, which is annualized (assumed to have been generated for one
year) and expressed as an annual percentage rate. Effective yield is yield as-
suming that all distributions are reinvested. Effective yield will be slightly
higher than the yield because of the compounding effect of the assumed invest-
ment. Yield for the U.S. Cash Management Fund over a seven-day period is
called current yield.
40
<PAGE>
GENERAL INFORMATION
ORGANIZATION
The Brinson Funds is a Delaware business trust organized pursuant to an
Agreement and Declaration of Trust, dated December 1, 1993. The Trust was
originally organized as a Maryland Corporation on April 14, 1992. On December
1, 1993, the Trust reorganized as a Delaware business trust through a merger
of the Maryland corporation into the Trust. The Trust is registered under the
Act as an open-end management investment company, commonly known as a mutual
fund and consists of ten different Series. The Trustees of the Trust may es-
tablish additional series or classes of shares without the approval of share-
holders. All of the Series, except the Global Bond Fund, Short-Term Global
Income Fund and Non-U.S. Bond Fund, are diversified portfolios. The assets of
each Series belong only to that Series, and the liabilities of each Series are
borne solely by that Series and no other.
DESCRIPTION OF SHARES
Each Series is authorized to issue an unlimited number of shares of benefi-
cial interest with a $0.001 par value per share. The Board of Trustees has the
power to designate one or more series or sub-series/classes of shares of bene-
ficial interest and to classify or reclassify only unissued shares with re-
spect to such Series. Shares of each Series represent equal proportionate
interests in the assets of that Series only and have identical voting, divi-
dend, redemption, liquidation, and other rights, except that only shares of
each Series' SwissKey Fund class shall have voting rights with respect to the
Rule 12b-1 Plan relating to that class as described below. All shares issued
are fully paid and non-assessable, and shareholders have no preemptive or
other right to subscribe to any additional shares and no conversion rights.
Currently, the Trust offers ten Series--Global Fund, Global Equity Fund,
Global Bond Fund, Short-Term Global Income Fund, U.S. Balanced Fund, U.S. Eq-
uity Fund, U.S. Bond Fund, U.S. Cash Management Fund, Non-U.S. Equity Fund and
Non-U.S. Bond Fund. Two classes of shares are currently issued by the Trust
for each Series, the SwissKey Fund class and the Brinson Fund class.
VOTING RIGHTS
Each issued and outstanding full and fractional share of a Series is enti-
tled to one full and fractional vote in the Series and all shares of each Se-
ries participate equally in regard to dividends, distributions, and
liquidations with respect to that Series. Shareholders do not have cumulative
voting rights. On any matter submitted to a vote of shareholders, shares of
each Series will vote separately except when a vote of shareholders in the ag-
gregate is required by law, or when the Trustees have determined that the mat-
ter affects the interests of more than one Series, in which case the
shareholders of all such Series shall be entitled to vote thereon. Only the
SwissKey Fund class shareholders may vote on matters related to the Rule 12b-1
Plan associated with that class.
As of January 17, 1996, Swiss Bank Corporation of New York, New York was a
control person of the SwissKey Fund class of each Series of the Trust by na-
ture of its shareholdings of such classes. Under the Investment Company Act, a
control person possesses the ability to control the outcome of matters submit-
ted for shareholder vote.
SHAREHOLDER MEETINGS
The Trustees of the Trust do not intend to hold annual meetings of share-
holders of the Series. The Securities and Exchange Commission, however, re-
quires the Trustees to promptly call a meeting for the purpose of voting upon
the question of removal of any Trustee when requested to do so by not less
than 10% of the outstanding shareholders of the respective Series. In addi-
tion, subject to certain conditions, shareholders of each Series may apply to
the Series to communicate with other shareholders to request a shareholders'
meeting to vote upon the removal of a Trustee or Trustees.
41
<PAGE>
PORTFOLIO TURNOVER (GLOBAL FUND, GLOBAL BOND FUND AND SHORT-TERM GLOBAL INCOME
FUND)
As a result of a Series' investment policies, its portfolio turnover rate may
exceed 100%. High portfolio turnover (over 100%) may involve correspondingly
greater brokerage commissions and other transaction costs, which will be borne
directly by the Series and ultimately by the Series' shareholders. In addition,
high portfolio turnover may result in increased short-term capital gains,
which, when distributed to shareholders, are treated as ordinary income.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Trust will attempt to obtain the best overall price and most favorable
execution of transactions in portfolio securities. However, subject to policies
established by the Board of Trustees of the Trust, a Series may pay a broker-
dealer a commission for effecting a portfolio transaction for a Series in ex-
cess of the amount of commission another broker-dealer would have charged if
Brinson Partners determines in good faith that the commission paid was reason-
able in relation to the brokerage or research services provided by such broker-
dealer, viewed in terms of that particular transaction or such firm's overall
responsibilities with respect to the clients, including the Series, as to which
it exercises investment discretion. In selecting and monitoring broker-dealers
and negotiating commissions, consideration will be given to a broker-dealer's
reliability, the quality of its execution services on a continuing basis and
its financial condition.
SHAREHOLDER REPORTS AND INQUIRIES
Shareholders will receive semi-annual reports showing portfolio investments
and other information as of December 31 and annual reports audited by indepen-
dent auditors as of June 30. Shareholders with inquiries should call the Funds
at 1-800-SWISSKEY or write to The SwissKey Funds, P.O. Box 874, Conshohocken,
PA 19428-0874.
42
<PAGE>
ADVISOR
Brinson Partners, Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
UNDERWRITER
Fund/Plan Broker Services, Inc.
2 W. Elm Street
Conshohocken, PA 19428-0874
SHAREHOLDER SERVICES
Fund/Plan Services, Inc.
2 W. Elm Street
P.O. Box 874
Conshohocken, PA 19428-0874
CUSTODIAN
Bankers Trust Company
34 Exchange Place
Jersey City, NJ 07302-1107
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
INDEPENDENT AUDITORS
Ernst & Young LLP
Sears Tower
233 South Wacker Drive
Chicago, IL 60606-1295
LOGO
FOR ADDITIONAL INFORMATION ABOUT
THE SWISSKEY FUNDS, CALL:
1-800-SWISSKEY
LOGO
PROSPECTUS
FEBRUARY 15, 1996
SWISSKEY GLOBAL FUND
SWISSKEY GLOBAL EQUITY FUND
SWISSKEY GLOBAL BOND FUND
SWISSKEY SHORT-TERM GLOBAL INCOME FUND
SWISSKEY U.S. BALANCED FUND
SWISSKEY U.S. EQUITY FUND
SWISSKEY U.S. BOND FUND
SWISSKEY U.S. CASH MANAGEMENT FUND
SWISSKEY NON-U.S. EQUITY FUND
SWISSKEY NON-U.S. BOND FUND
<PAGE>
THE BRINSON FUNDS
LOGO
Global Fund U.S. Equity Fund
Global Equity Fund U.S. Bond Fund
Global Bond Fund U.S. Cash Management Fund
Short-Term Global Income Fund Non-U.S. Equity Fund
U.S. Balanced Fund Non-U.S. Bond Fund
STATEMENT OF ADDITIONAL INFORMATION
February 15, 1996
The Brinson Funds (the "Trust") currently offers ten separate series, each
with its own investment objectives and policies. The Trust also offers two
classes of shares for each series--the Brinson Fund class and the SwissKey
Fund class. Information concerning the Brinson Fund class of each series is
provided in the following separate Prospectuses: the Brinson Global Fund,
Brinson Global Equity Fund, Brinson Global Bond Fund, Brinson Short-Term
Global Income Fund, Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund,
Brinson U.S. Cash Management Fund, Brinson Non-U.S. Equity Fund and Brinson
Non-U.S. Bond Fund each dated September 20, 1995; and the Brinson U.S. Bond
Fund dated February 15, 1996. Information concerning the SwissKey Fund class
of each series is included in a separate Prospectus for the SwissKey Funds,
dated February 15, 1996. This Statement of Additional Information is not a
Prospectus, but should be read in conjunction with the current Prospectuses of
the Trust. Much of the information contained herein expands upon subjects
discussed in the Prospectuses. No investment in shares should be made without
first reading the applicable Prospectus. A copy of each Prospectus may be
obtained without charge from the Trust at the addresses and telephone numbers
below.
UNDERWRITER: ADVISOR:
Fund/Plan Broker Services, Inc. Brinson Partners, Inc.
2 W. Elm Street 209 South LaSalle Street
Conshohocken, PA 19428-0874 Chicago, IL 60604-1295
(800) 448-2430 (Brinson Fund class) (800) 448-2430 (Brinson Fund class)
1-800-SWISSKEY (SwissKey Fund class) 1-800-SWISSKEY (SwissKey Fund class)
S-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE BRINSON FUNDS......................................................... S-3
INVESTMENT STRATEGIES..................................................... S-3
INVESTMENTS RELATING TO GLOBAL, U.S. AND NON-U.S. FUNDS................... S-3
Repurchase Agreements................................................... S-3
Reverse Repurchase Agreements........................................... S-4
Loans of Portfolio Securities........................................... S-4
Swaps................................................................... S-4
Index Options........................................................... S-4
Special Risks of Options on Indices..................................... S-5
Futures................................................................. S-5
Options................................................................. S-7
Rule 144A Securities.................................................... S-9
Other Investments....................................................... S-9
INVESTMENTS RELATING TO GLOBAL AND NON-U.S. FUNDS......................... S-9
Foreign Securities...................................................... S-9
Forward Foreign Currency Contracts...................................... S-10
Options on Foreign Currencies........................................... S-10
INVESTMENTS RELATING TO GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL
INCOME FUND, U.S. BALANCED FUND AND U.S. BOND FUND....................... S-12
Lower Grade Debt Securities............................................. S-12
Convertible Securities.................................................. S-12
When-Issued Securities.................................................. S-13
Mortgage-Backed Securities and Mortgage Pass-Through Securities......... S-13
Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage...
Investment Conduits ("REMICs")......................................... S-15
Other Mortgage-Backed Securities........................................ S-15
Asset-Backed Securities................................................. S-16
Zero Coupon Securities.................................................. S-17
INVESTMENTS RELATING TO GLOBAL FUND....................................... S-18
Emerging Markets Investments............................................ S-18
Risks of Investing in Emerging Markets.................................. S-19
INVESTMENT RESTRICTIONS................................................... S-20
MANAGEMENT OF THE TRUST................................................... S-22
Trustees and Officers................................................... S-22
Compensation Table...................................................... S-23
CONTROL PERSONS & PRINCIPAL HOLDERS OF SECURITIES......................... S-24
INVESTMENT ADVISORY AND OTHER SERVICES.................................... S-27
Administrator........................................................... S-29
Underwriter............................................................. S-29
Distribution Plan....................................................... S-30
Code of Ethics.......................................................... S-30
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS.......................... S-31
Portfolio Turnover...................................................... S-31
Shares of Beneficial Interest........................................... S-32
PURCHASES................................................................. S-32
Exchanges of Shares..................................................... S-33
Net Asset Value......................................................... S-33
REDEMPTIONS............................................................... S-34
Taxation................................................................ S-34
PERFORMANCE CALCULATIONS.................................................. S-37
Total Return............................................................ S-37
Yield of U.S. Cash Management Fund...................................... S-38
CORPORATE DEBT RATINGS--APPENDIX A........................................ S-39
FINANCIAL STATEMENTS......................................................
</TABLE>
S-2
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THE BRINSON FUNDS
The Brinson Funds (the "Trust"), 209 South LaSalle Street, Chicago, Illinois
60604-1295, is an open-end management investment company which currently
offers shares of ten series representing separate portfolios of investments:
Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income
Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash
Management Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund (collectively
referred to as the "Series" or individually as a "Series"). The Global Fund,
Global Equity Fund, Global Bond Fund and Short-Term Global Income Fund are
referred to herein collectively as the "Global Funds" or individually as a
"Global Fund;" U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and U.S.
Cash Management Fund are referred to herein as "U.S. Funds;" Non-U.S. Equity
Fund and Non-U.S. Bond Fund are referred to herein as "Non-U.S. Funds." The
Trust currently offers two classes of shares for each Series. The Brinson Fund
class shares of the Series are as follows: Brinson Global Fund, Brinson Global
Equity Fund, Brinson Global Bond Fund, Brinson Short-Term Global Income Fund,
Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund, Brinson U.S. Bond Fund,
Brinson U.S. Cash Management Fund, Brinson Non-U.S. Equity Fund and Brinson
Non-U.S. Bond Fund. The SwissKey Fund class shares of the Series are as
follows: SwissKey Global Fund, SwissKey Global Equity Fund, SwissKey Global
Bond Fund, SwissKey Short-Term Global Income Fund, SwissKey U.S. Balanced
Fund, SwissKey U.S. Equity Fund, SwissKey U.S. Bond Fund, SwissKey U.S. Cash
Management Fund, SwissKey Non-U.S. Equity Fund and SwissKey Non-U.S. Bond
Fund. The Brinson Fund class shares of each Series have no sales charges and
are not subject to annual 12b-1 plan expenses. The SwissKey Fund class shares
of each Series have no sales charges but are subject to annual 12b-1 expenses
to a maximum of 0.90% for the respective Series.
INVESTMENT STRATEGIES
The following discussion of investment techniques and instruments should be
read in conjunction with the "Investment Objectives" and "Other Investment
Practices and Risk Factors" sections of the Prospectuses of the Series. The
investment practices described below, except for the discussion of portfolio
loan transactions, are not fundamental and may be changed by the Board of
Trustees without the approval of the shareholders.
INVESTMENTS RELATING TO GLOBAL, U.S. AND NON-U.S. FUNDS
The following discussion applies to all of the Series.
REPURCHASE AGREEMENTS
When a Series enters into a repurchase agreement, it purchases securities from
a bank or broker-dealer which simultaneously agrees to repurchase the
securities at a mutually agreed upon time and price, thereby determining the
yield during the term of the agreement. As a result, a repurchase agreement
provides a fixed rate of return insulated from market fluctuations during the
term of the agreement. The term of a repurchase agreement generally is short,
possibly overnight or for a few days, although it may extend over a number of
months (up to one year) from the date of delivery. Repurchase agreements will
be fully collateralized and the collateral will be marked-to-market daily. A
Series may not enter into a repurchase agreement or invest in any other
illiquid securities having more than seven days remaining to maturity if, as a
result, such agreements, together with any other illiquid securities, would
exceed 15% (10% in the case of the U.S. Cash Management Fund) of the value of
the net assets of the Series.
In the event of bankruptcy or other default by the seller of the security
under a repurchase agreement, a Series may suffer time delays and incur costs
or possible losses in connection with the disposition of the collateral. In
such event, instead of the contractual fixed rate of return, the rate of
return to a Series would be dependent upon intervening fluctuations of the
market value of the underlying security and the accrued interest on the
security. Although a Series would have rights against the seller for breach of
contract with respect to any losses arising from market fluctuations following
the failure of the seller to perform, the ability of a Series to recover
damages from a seller in bankruptcy or otherwise in default would be reduced.
S-3
<PAGE>
Repurchase agreements are securities for purposes of the tax diversification
requirements, for pass-through treatment under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, each Series will
limit the value of its repurchase agreements on each of the quarterly testing
dates to ensure compliance with Subchapter M of the Code.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements involve sales of portfolio securities of a
Series to member banks of the Federal Reserve System or securities dealers
believed creditworthy, concurrently with an agreement by the Series to
repurchase the same securities at a later date at a fixed price which is
generally equal to the original sales price plus interest. A Series retains
record ownership and the right to receive interest and principal payments on
the portfolio security involved. In connection with each reverse repurchase
transaction, a Series will direct its custodian bank to place cash, U.S.
government securities, or other liquid high grade debt obligations in a
segregated account of the Series in an amount equal to the repurchase price.
Reverse repurchase agreements have the same characteristics as borrowing
transactions by a Series.
LOANS OF PORTFOLIO SECURITIES
The Series may lend portfolio securities to broker-dealers and financial
institutions provided: (1) the loan is secured continuously by collateral
marked-to-market daily and maintained in an amount at least equal to the
current market value of the securities loaned; (2) a Series may call the loan
at any time and receive the securities loaned; (3) a Series will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of securities loaned will not at any time exceed 33 1/3% of the
total assets of the Global Equity Fund, Short-Term Global Income Fund, U.S.
Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Bond Fund; 25% of
the total assets of the Global Fund, Global Bond Fund and Non-U.S. Equity
Fund; or 10% of the total assets of the U.S. Cash Management Fund,
respectively.
Collateral will consist of U.S. and non-U.S. securities, cash equivalents or
irrevocable letters of credit. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to maintain the proper
amount of collateral. Therefore, a Series will only enter into portfolio loans
after a review of all pertinent facts by the Advisor, under the supervision of
the Board of Trustees, including the creditworthiness of the borrower. Such
reviews will be monitored on an ongoing basis.
SWAPS
The Series (except for the Global Equity Fund, U.S. Equity Fund, U.S. Cash
Management Fund, and Non-U.S. Equity Fund) may engage in swaps, including but
not limited to interest rate, currency and index swaps and the purchase or
sale of related caps, floors and collars and other derivative instruments. The
Series expect to enter into these transactions primarily to preserve a return
or spread on a particular investment or portion of the portfolio's duration,
to protect against any increase in the price of securities the Series
anticipates purchasing at a later date, or to gain exposure to certain markets
in the most economical way possible.
The use of swaps involves investment techniques and risks different from those
associated with ordinary portfolio security transactions. If Brinson Partners
is incorrect in its forecast of market values, interest rates and other
applicable factors, the investment performance of the Series will be less
favorable than it would have been if this investment technique was never used.
Thus, if the other party to a swap defaults, the Series' risk of loss consists
of the net amount of interest payments that the Series is contractually
entitled to receive. Under Internal Revenue Service rules, any lump sum
payment received or due under the notional principal contract must be
amortized over the life of the contract.
INDEX OPTIONS
The Series (except for the U.S. Cash Management Fund) may purchase exchange-
listed call options on stock and fixed income indices depending upon whether
the Series is an equity or bond series and sell such options in closing sale
transactions for hedging purposes. A Series may purchase call options on broad
market indices to temporarily achieve market exposure when the Series is not
fully invested. A Series may also purchase exchange-listed call options on
particular market segment indices to achieve temporary exposure to a specific
industry.
S-4
<PAGE>
In addition, the Series may purchase put options on stock and fixed income
indices and sell such options in closing sale transactions for hedging
purposes. A Series may purchase put options on broad market indices in order to
protect its fully invested portfolio from a general market decline. Put options
on market segments may be bought to protect a Series from a decline in value of
heavily weighted industries in the Series' portfolio. Put options on stock and
fixed income indices may also be used to protect a Series' investments in the
case of a major redemption.
The Series may also write (sell) put and call options on stock and fixed income
indices. While the option
is open, a Series will maintain a segregated account with its custodian in
an amount equal to the market value of the option.
Options on indices are similar to regular options except that an option on an
index gives the holder the right, upon exercise, to receive an amount of cash
if the closing level of the index upon which the option is based is greater
than (in the case of a call) or lesser than (in the case of a put) the exercise
price of the option. This amount of cash is equal to the difference between the
closing price of the index and the exercise price of the option expressed in
dollars times a specified multiple (the "multiplier"). The indices on which
options are traded include both U.S. and non-U.S. markets.
SPECIAL RISKS OF OPTIONS ON INDICES
The Series' purchases of options on indices will subject them to the risks
described below.
Because the value of an index option depends upon movements in the level of the
index rather than the price of a particular security, whether a Series will
realize gain or loss on the purchase of an option on an index depends upon
movements in the level of prices in the market generally or in an industry or
market segment rather than movements in the price of a particular security.
Accordingly, successful use by a Series of options on indices is subject to
Brinson Partners' ability to predict correctly the direction of movements in
the market generally or in a particular industry. This requires different
skills and techniques than predicting changes in the prices of individual
securities.
Index prices may be distorted if trading of a substantial number of securities
included in the index is interrupted causing the trading of options on that
index to be halted. If a trading halt occurred, a Series would not be able to
close out options which it had purchased and the Series may incur losses if the
underlying index moved adversely before trading resumed. If a trading halt
occurred and restrictions prohibiting the exercise of options were imposed
through the close of trading on the last day before expiration, exercises on
that day would be settled on the basis of a closing index value that may not
reflect current price information for securities representing a substantial
portion of the value of the index.
If a Series holds an index option and exercises it before final determination
of the closing index value for that day, it runs the risk that the level of the
underlying index may change before closing. If such a change causes the
exercised option to fall "out-of-the-money," the Series will be required to pay
the difference between the closing index value and the exercise price of the
option (times the applicable multiplier) to the assigned writer. Although a
Series may be able to minimize this risk by withholding exercise instructions
until just before the daily cutoff time or by selling rather than exercising
the option when the index level is close to the exercise price, it may not be
possible to eliminate this risk entirely because the cutoff times for index
options may be earlier than those fixed for other types of options and may
occur before definitive closing index values are announced.
FUTURES
The Series (except the U.S. Cash Management Fund) may enter into contracts for
the purchase or sale for future delivery of securities, including index
contracts, or foreign currencies (Global and Non-U.S. Funds only). While
futures contracts provide for the delivery of securities, deliveries usually do
not occur. Contracts are generally terminated by entering into offsetting
transactions.
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The Series may enter into such futures contracts to protect against the adverse
affects of fluctuations in security prices, interest or foreign exchange rates
without actually buying or selling the securities or foreign currency. For
example, if interest rates are expected to increase, a Series might enter into
futures contracts for the sale of debt securities. Such a sale would have much
the same effect as selling an equivalent value of the debt securities owned by
the Series. If interest rates did increase, the value of the debt securities in
the portfolio would decline, but the value of the futures contracts to the
Series would increase at approximately the same rate, thereby keeping the net
asset value of the Series from declining as much as it otherwise would have.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to hedge in anticipation of subsequent purchases of
securities at higher prices. Since the fluctuations in the value of futures
contracts should be similar to those of debt securities, the Series could take
advantage of the anticipated rise in value of debt securities without actually
buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Series could then buy debt securities on
the cash market.
A stock index futures contract obligates the seller to deliver (and the
purchaser to take) an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement was made.
Open futures contracts are valued on a daily basis and a Series may be
obligated to provide or receive cash reflecting any decline or increase in the
contract's value. No physical delivery of the underlying stocks in the index is
made in the future.
With respect to options on futures contracts, when a Series is temporarily not
fully invested, it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates. The purchase of a
call option on a futures contract is similar in some respects to the purchase
of a call option on an individual security. Depending on the pricing of the
option compared to either the price of the futures contract upon which it is
based, or the price of the underlying debt securities, it may or may not be
less risky than ownership of the futures contract or underlying debt
securities. As with the purchase of futures contracts, when a Series is not
fully invested, it may purchase a call option on a futures contract to hedge
against a market advance.
The writing of a call option on a futures contract constitutes a partial hedge
against the declining price of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at the
expiration of the option is below the exercise price, the Series will retain
the full amount of the option premium which provides a partial hedge against
any decline that may have occurred in the value of the Series' portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against the increasing price of the security or foreign currency
which is deliverable upon exercise of the futures contract. If the futures
price at the expiration of the option is higher than the exercise price, the
Series will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities which the Series
intends to purchase.
Call and put options on stock index futures are similar to options on
securities except that, rather than the right to purchase or sell stock at a
specified price, options on a stock index future give the holder the right to
receive cash. Upon exercise of the option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures margin account
which represents the amount by which the market price of the futures contract,
at exercise, exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the futures contract. If an option is exercised on
the last trading day prior to the expiration date of the option, the settlement
will be made entirely in cash equal to the difference between the exercise
price of the option and the closing price of the futures contract on the
expiration date.
If a put or call option which a Series has written is exercised, the Series may
incur a loss which will be reduced by the amount of the premium it received.
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its options positions, the
Series' losses from existing options on futures may, to some extent, be reduced
or increased by changes in the value of portfolio securities. The purchase of a
put option on a futures contract is similar in some respects to the purchase of
protective puts on portfolio securities and for federal tax purposes, will be
considered a "short sale." For example, a Series will purchase a put option on
a futures contract to hedge the Series' portfolio against the risk of rising
interest rates.
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To the extent that market prices move in an unexpected direction, a Series may
not achieve the anticipated benefits of futures contracts or options on futures
contracts or may realize a loss. For example, if the Series is hedged against
the possibility of an increase in interest rates which would adversely affect
the price of securities held in its portfolio and interest rates decrease
instead, the Series would lose part or all of the benefit of the increased
value which it has because it would have offsetting losses in its futures
position. In addition, in such situations, if the Series had insufficient cash,
it may be required to sell securities from its portfolio to meet daily
variation margin requirements. Such sales of securities may, but will not
necessarily, be at increased prices which reflect the rising market. A Series
may be required to sell securities at a time when it may be disadvantageous to
do so.
Further, with respect to options on futures contracts, a Series may seek to
close out an option position by writing or buying an offsetting position
covering the same securities or contracts and have the same exercise price and
expiration date. The ability to establish and close out positions on options
will be subject to the maintenance of a liquid secondary market, which cannot
be assured.
OPTIONS
The Series (except the U.S. Cash Management Fund) may purchase and write call
or put options on securities but will only engage in option strategies for non-
speculative purposes.
The U.S. Funds may invest in options that are listed on U.S. exchanges or
traded over the counter and the Global Funds and Non-U.S. Funds may invest in
options that are either listed on U.S. or recognized foreign exchanges or
traded over-the-counter. Certain over-the-counter options may be illiquid.
Thus, it may not be possible to close options positions and this may have an
adverse impact on a Series' ability to effectively hedge its securities. The
Series have been notified by the Securities and Exchange Commission that it
considers over-the-counter options to be illiquid. Accordingly, the Series will
only invest in such options to the extent consistent with the 15% limit on
investments in illiquid securities.
PURCHASING CALL OPTIONS--The Series may purchase call options on securities to
the extent that premiums paid by a Series do not aggregate more than 20% of the
Series' total assets. When a Series purchases a call option, in return for a
premium paid by the Series to the writer of the option, the Series obtains the
right to buy the security underlying the option at a specified exercise price
at any time during the term of the option. The writer of the call option, who
receives the premium upon writing the option, has the obligation, upon exercise
of the option, to deliver the underlying security against payment of the
exercise price. The advantage of purchasing call options is that a Series may
alter portfolio characteristics and modify portfolio maturities without
incurring the cost associated with transactions.
A Series may, following the purchase of a call option, liquidate its position
by effecting a closing sale transaction. This is accomplished by selling an
option of the same series as the option previously purchased. The Series will
realize a profit from a closing sale transaction if the price received on the
transaction is more than the premium paid to purchase the original call option;
the Series will realize a loss from a closing sale transaction if the price
received on the transaction is less than the premium paid to purchase the
original call option.
Although the Series will generally purchase only those call options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an Exchange will exist for any particular option, or
at any particular time, and for some options no secondary market on an Exchange
may exist. In such event, it may not be possible to effect closing transactions
in particular options, with the result that a Series would have to exercise its
options in order to realize any profit and would incur brokerage commissions
upon the exercise of such options and upon the subsequent disposition of the
underlying securities acquired through the exercise of such options. Further,
unless the price of the underlying security changes sufficiently, a call option
purchased by a Series may expire without any value to the Series, in which
event the Series would realize a capital loss which will be short-term unless
the option was held for more than one year.
COVERED CALL WRITING--The Series may write covered call options from time to
time on such portions of their portfolios, without limit, as Brinson Partners
determines is appropriate in seeking to obtain a Series' investment objective.
The advantage to a Series of writing covered calls is that the Series receives
a premium which is additional income. However, if the security rises in value,
the Series may not fully participate in the market appreciation.
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During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
or upon entering a closing purchase transaction. A closing purchase
transaction, in which a Series, as writer of an option, terminates its
obligation by purchasing an option of the same series as the option previously
written, cannot be effected with respect to an option once the option writer
has received an exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a profit
on an outstanding call option, to prevent an underlying security from being
called, to permit the sale of the underlying security or to enable a Series to
write another call option on the underlying security with either a different
exercise price or expiration date or both. A Series may realize a net gain or
loss from a closing purchase transaction depending upon whether the net amount
of the original premium received on the call option is more or less than the
cost of effecting the closing purchase transaction. Any loss incurred in a
closing purchase transaction may be partially or entirely offset by the premium
received from a sale of a different call option on the same underlying
security. Such a loss may also be wholly or partially offset by unrealized
appreciation in the market value of the underlying security. Conversely, a gain
resulting from a closing purchase transaction could be offset in whole or in
part by a decline in the market value of the underlying security.
If a call option expires unexercised, the Series will realize a short-term
capital gain in the amount of the premium on the option less the commission
paid. Such a gain, however, may be offset by depreciation in the market value
of the underlying security during the option period. If a call option is
exercised, a Series will realize a gain or loss from the sale of the underlying
security equal to the difference between the cost of the underlying security
and the proceeds of the sale of the security plus the amount of the premium on
the option less the commission paid.
The Series will write call options only on a covered basis, which means that a
Series will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected, a
Series would be required to continue to hold a security which it might
otherwise wish to sell or deliver a security it would want to hold. The
exercise price of a call option may be below, equal to or above the current
market value of the underlying security at the time the option is written.
PURCHASING PUT OPTIONS--The Series may only purchase put options to the extent
that the premiums on all outstanding put options do not exceed 20% of a Series'
total assets. A Series will, at all times during which it holds a put option,
own the security covered by such option. With regard to the writing of put
options, each Series will limit the aggregate value of the obligations
underlying such put options to 50% of its total net assets. The purchase of the
put on substantially identical securities held will constitute a short sale for
tax purposes, the effect of which is to create short-term capital gain on the
sale of the security and to suspend running of its holding period (and treat it
as commencing on the date of the closing of the short sale) or that of a
security acquired to cover the same if, at the time the put was acquired, the
security had not been held for more than one year.
A put option purchased by a Series gives it the right to sell one of its
securities for an agreed price up to an agreed date. The Series intend to
purchase put options in order to protect against a decline in the market value
of the underlying security below the exercise price less the premium paid for
the option ("protective puts"). The ability to purchase put options will allow
the Series to protect unrealized gains in an appreciated security in their
portfolios without actually selling the security. If the security does not drop
in value, a Series will lose the value of the premium paid. A Series may sell a
put option which it has previously purchased prior to the sale of the
securities underlying such option. Such sale will result in a net gain or loss
depending on whether the amount received on the sale is more or less than the
premium and other transaction costs paid on the put option which is sold.
The Series may sell a put option purchased on individual portfolio securities.
Additionally, the Series may enter into closing sale transactions. A closing
sale transaction is one in which a Series, when it is the holder of an
outstanding option, liquidates its position by selling an option of the same
series as the option previously purchased.
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WRITING PUT OPTIONS--The Series may also write put options on a secured basis
which means that a Series will maintain in a segregated account with its
custodian, cash or U.S. government securities in an amount not less than the
exercise price of the option at all times during the option period. The amount
of cash or U.S. government securities held in the segregated account will be
adjusted on a daily basis to reflect changes in the market value of the
securities covered by the put option written by the Series. Secured put options
will generally be written in circumstances where Brinson Partners wishes to
purchase the underlying security for a Series' portfolio at a price lower than
the current market price of the security. In such event, that Series would
write a secured put option at an exercise price which, reduced by the premium
received on the option, reflects the lower price it is willing to pay.
Following the writing of a put option, a Series may wish to terminate the
obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Series may not, however, effect
such a closing transaction after it has been notified of the exercise of the
option.
RULE 144A SECURITIES
The Series may invest in securities that are exempt under Rule 144A from the
registration requirements of the Securities Act of 1933. Those securities
purchased under Rule 144A are traded among qualified institutional investors.
Investing in securities under Rule 144A could have the effect of increasing the
levels of Series illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities. After the
purchase of a security under Rule 144A, however, the Board of Trustees and
Brinson Partners, Inc. ("Brinson Partners" or the "Advisor") will continue to
monitor the liquidity of that security to ensure that each Series has no more
than 15% (10% in the case of the U.S. Cash Management Series) of its total
assets in illiquid securities.
The Series will limit investments in securities of issuers which the Series are
restricted from selling to the public without registration under the Securities
Act of 1933 to no more than 15% (10% in the case of U.S. Cash Management Fund)
of the Series' total assets, excluding restricted securities eligible for
resale pursuant to Rule 144A that have been determined to be liquid by the
Trust's Board of Trustees.
OTHER INVESTMENTS
The Board of Trustees may, in the future, authorize a Series to invest in
securities other than those listed here and in the Prospectuses, provided such
investment would be consistent with that Series' investment objective and that
it would not violate any fundamental investment policies or restrictions
applicable to that Series.
INVESTMENTS RELATING TO GLOBAL AND NON-U.S. FUNDS
The following discussion of strategies, techniques and policies applies only to
Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global Income
Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund.
FOREIGN SECURITIES
Investors should recognize that investing in foreign issuers involves certain
considerations, including those set forth in the Series' Prospectuses, which
are not typically associated with investing in United States issuers. Since the
stocks of foreign companies are frequently denominated in foreign currencies,
and since the Series may temporarily hold uninvested reserves in bank deposits
in foreign currencies, the Series will be affected favorably or unfavorably by
changes in currency rates and in exchange control regulations and may incur
costs in connection with conversions between various currencies. The investment
policies of the Series permit them to enter into forward foreign currency
exchange contracts, futures, options and interest rate swaps in order to hedge
portfolio holdings and commitments against changes in the level of future
currency rates.
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There has been in the past, and there may be again in the future, an interest
equalization tax levied by the United States in connection with the purchase of
foreign securities such as those purchased by the Series. Payment of such
interest equalization tax, if imposed, would reduce the Series' rates of return
on investment. Dividends paid by foreign issuers may be subject to withholding
and other foreign taxes which may decrease the net return on such investments
as compared to dividends paid to the Series by United States corporations. The
Series' ability to "pass through" the foreign taxes paid for tax credit or
deduction purposes will be determined by the composition of the Series'
portfolios. More than 50% of a Series must be invested in stock or securities
of foreign corporations for "pass through" to be possible in the first
instance. Special rules govern the federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules generally
include the following: (i) the acquisition of, or becoming the obligor under, a
bond or other debt instrument (including, to the extent provided in Treasury
Regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract and similar financial instruments other than any
"regulated futures contract" or "non-equity option" which would be marked-to-
market under the rules of Section 1256 of the Code if held at the end of the
tax year. The disposition of a currency other than the U.S. dollar by a U.S.
taxpayer is also treated as a transaction subject to the special currency
rules. However, foreign currency-related regulated futures contracts and non-
equity options are generally not subject to these special currency rules. If
subject, they are or would be treated as sold for their fair market value at
year-end under the marked-to-market rules applicable to other futures
contracts, unless an election is made to have such currency rules apply. With
respect to transactions covered by the special rules, foreign currency gain or
loss is calculated separately from any gain or loss on the underlying
transaction and is normally taxable gain or loss. A taxpayer may elect to treat
as capital gain or loss foreign currency gain or loss arising from certain
identified forward contracts, futures contracts and options that are capital
assets in the hands of the taxpayer and which are not part of a straddle.
Certain transactions subject to the special currency rules that are part of a
"section 988 hedging transaction" (as defined in the Code and the Treasury
Regulations) will be integrated and treated as a single transaction or
otherwise treated consistently for purposes of the Code. The income tax effects
of integrating and treating a transaction as a single transaction are generally
to create a synthetic debt instrument that is subject to the original discount
provisions. It is anticipated that some of the non-U.S. dollar denominated
investments and foreign currency contracts the Series may make or enter into
will be subject to the special currency rules described above.
FORWARD FOREIGN CURRENCY CONTRACTS
The Series may purchase or sell currencies and/or engage in forward foreign
currency transactions in order to expedite settlement of portfolio transactions
and to manage currency risk.
Forward foreign currency contracts are traded in the inter-bank market
conducted directly between currency traders (usually large commercial banks)
and their customers. A forward contract generally has no deposit requirement
and no commissions are charged at any stage for trades. The Series will account
for forward contracts by marked-to-market each day at current forward values.
When a Series enters into a forward contract to sell, for a fixed amount of
U.S. dollars or other appropriate currency, an amount of foreign currency, the
Series' custodian or sub-custodian will place cash or liquid high grade debt
securities in a segregated account of the Series in an amount not less than the
value of the Series' total assets committed to the consummation of such forward
contracts. If the additional cash or securities placed in the segregated
account declines, additional cash or securities will be placed in the account
on a daily basis so that the value of the account will equal the amount of the
Series' commitments with respect to such contracts.
OPTIONS ON FOREIGN CURRENCIES
The Series may purchase and write options on foreign currencies for hedging
purposes in a manner similar to that in which futures contracts on foreign
currencies, or forward contracts, will be utilized. For example, a decline
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in the dollar value of a foreign currency in which portfolio securities are
denominated will reduce the dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against
such diminutions in the value of portfolio securities, the Series may purchase
put options on the foreign currency. If the dollar price of the currency does
decline, a Series will have the right to sell such currency for a fixed amount
in dollars and will thereby offset, in whole or in part, the adverse effect on
its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which securities
to be acquired are denominated is projected, thereby increasing the dollar
price of such securities, the Series may purchase call options on such
currency. The purchase of such options could offset, at least partially, the
effects of the adverse movement in exchange rates. As in the case of other
types of options, however, the benefit to the Series to be derived from
purchases of foreign currency options will be reduced by the amount of the
premium and related transaction costs. In addition, where currency exchange
rates do not move in the direction or to the extent anticipated, a Series
could sustain losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of advantageous changes
in such rates.
The Series may write options on foreign currencies for the same types of
hedging purposes. For example, where a Series anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates, it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution in the value
of portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an anticipated
increase in the dollar cost of securities to be acquired, a Series could write
a put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Series to hedge such
increased cost up to the amount of the premium. As in the case of other types
of options, however, the writing of a foreign currency option will constitute
only a partial hedge up to the amount of the premium, and only if rates move
in the expected direction. If this does not occur, the option may be exercised
and the Series would be required to purchase or sell the underlying currency
at a loss which may not be offset by the amount of the premium. Through the
writing of options on foreign currencies, a Series also may be required to
forego all or a portion of the benefit which might otherwise have been
obtained from favorable movements in exchange rates.
The Series may write covered call options on foreign currencies. A call option
written on a foreign currency by a Series is "covered" if the Series owns the
underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated
account by the custodian bank) upon conversion or exchange of other foreign
currency held in its portfolio. A call option is also covered if a Series has
a call on the same foreign currency and in the same principal amount as the
call written where the exercise price of the call held (a) is equal to or less
than the exercise price of the call written, or (b) is greater than the
exercise price of the call written if the difference is maintained by the
Series in cash, U.S. government securities or other high-grade liquid debt
securities in a segregated account with its custodian bank.
With respect to writing put options, at the time the put is written, a Series
will establish a segregated account with its custodian bank consisting of
cash, U.S. government securities or other high-grade liquid debt securities in
an amount equal in value to the amount the Series will be required to pay upon
exercise of the put. The account will be maintained until the put is
exercised, has expired, or the Series has purchased a closing put of the same
series as the one previously written.
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INVESTMENTS RELATING TO GLOBAL FUND, GLOBAL BOND FUND, SHORT-TERM GLOBAL INCOME
FUND, U.S. BALANCED FUND, AND U.S. BOND FUND
The following discussion applies to the Global Fund, Global Bond Fund, Short-
Term Global Income Fund, U.S. Balanced Fund and U.S. Bond Fund.
LOWER GRADE DEBT SECURITIES (not applicable to the Short-Term Global Income
Fund)
Fixed income securities rated lower than Baa3 by Moody's or BBB- by Standard &
Poor's are considered to be of poor standing and predominantly speculative.
Such securities are commonly referred to as "junk bonds" and are subject to a
substantial degree of credit risk. Medium and low-grade bonds held by the
Series, which are those that are rated below Baa3 or BBB-, may be issued as a
consequence of corporate restructurings, such as leveraged buy-outs, mergers,
acquisitions, debt recapitalizations or similar events. Also, high yield bonds
are often issued by smaller less creditworthy companies or by highly leveraged
(indebted) firms, which are generally less able than more financially stable
firms to make scheduled payments of interest and principal. The risks posed by
bonds issued under such circumstances are substantial.
In the past, the high yields from low-grade bonds have more than compensated
for the higher default rates on such securities. However, there can be no
assurance that diversification will protect the Series from widespread bond
defaults brought about by a sustained economic downturn, or that yields will
continue to offset default rates on high yield bonds in the future. Issuers of
these securities are often highly leveraged, so that their ability to service
their debt obligations during an economic downturn or during sustained periods
of rising interest rates may be impaired. In addition, such issuers may not
have more traditional methods of financing available to them and may be unable
to repay debt at maturity by refinancing. Further, an economic recession may
result in default levels with respect to such securities in excess of historic
averages.
The value of lower-rated debt securities will be influenced not only by
changing interest rates, but also by the bond market's perception of credit
quality and the outlook for economic growth. When economic conditions appear to
be deteriorating, low and medium-rated bonds may decline in market value due to
investors' heightened concern over credit quality, regardless of prevailing
interest rates.
Especially at such times, trading in the secondary market for high yield bonds
may become thin and market liquidity may be significantly reduced. Even under
normal conditions, the market for high yield bonds may be less liquid than the
market for investment grade corporate bonds. There are fewer securities dealers
in the high yield market and purchasers of high yield bonds are concentrated
among a smaller group of securities dealers and institutional investors. In
periods of reduced market liquidity, high yield bond prices may become more
volatile.
Besides credit and liquidity concerns, prices for high yield bonds may be
affected by legislative and regulatory developments. For example, from time to
time, Congress has considered legislation to restrict or eliminate the
corporate tax deduction for interest payments or to regulate corporate
restructurings such as takeovers or mergers. Such legislation may significantly
depress the prices of outstanding high yield bonds. A description of various
bond ratings appears in Appendix A.
CONVERTIBLE SECURITIES
Common stock occupies the most junior position in a company's capital
structure. Convertible securities entitle the holder to exchange the securities
for a specified number of shares of common stock, usually of the same company,
at specified prices within a certain period of time and to receive interest or
dividends until the holder elects to convert. The provisions of any convertible
security determine its ranking in a company's capital structure. In the case of
subordinated convertible debentures, the holder's claims on assets and earnings
are subordinated to the claims of other creditors and are senior to the claims
of preferred and common shareholders. In the case of preferred stock and
convertible preferred stock, the holder's claim on assets and earnings are
subordinated to the claims of all creditors but are senior to the claims of
common shareholders.
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WHEN-ISSUED SECURITIES
The Series may purchase securities offered on a "when-issued" or "forward
delivery" basis. When so offered, the price, which is generally expressed in
yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for the when-issued or forward delivery securities take
place at a later date. During the period between purchase and settlement, no
payment is made by the purchaser to the issuer and no interest on the when-
issued or forward delivery security accrues to the purchaser. While when-issued
or forward delivery securities may be sold prior to the settlement date, it is
intended that a Series will purchase such securities with the purpose of
actually acquiring them unless a sale appears desirable for investment reasons.
At the time a Series makes the commitment to purchase a security on a when-
issued or forward delivery basis, it will record the transaction and reflect
the value of the security in determining its net asset value. The market value
of when-issued or forward delivery securities may be more or less than the
purchase price. The Advisor does not believe that the Series' net asset value
or income will be adversely affected by its purchase of securities on a when-
issued or forward delivery basis. The Series will establish a segregated
account in which it will maintain cash, U.S. government securities and high-
grade debt obligations equal in value to commitments for when-issued or forward
delivery securities.
MORTGAGE-BACKED SECURITIES AND MORTGAGE PASS-THROUGH SECURITIES
The Series may also invest in mortgage-backed securities, which are interests
in pools of mortgage loans, including mortgage loans made by savings and loan
institutions, mortgage bankers, commercial banks and others. Pools of mortgage
loans are assembled as securities for sale to investors by various
governmental, government-related and private organizations as further described
below. The Series may also invest in debt securities which are secured with
collateral consisting of mortgage-backed securities (see "Collateralized
Mortgage Obligations") and in other types of mortgage-related securities.
The timely payment of principal and interest on mortgage-backed securities
issued or guaranteed by the Government National Mortgage Association ("GNMA")
is backed by GNMA and the full faith and credit of the U.S. government. These
guarantees, however, do not apply to the market value of Series shares. Also,
securities issued by GNMA and other mortgage-backed securities may be purchased
at a premium over the maturity value of the underlying mortgages. This premium
is not guaranteed and would be lost if prepayment occurs. Mortgage-backed
securities issued by U.S. government agencies or instrumentalities other than
GNMA are not "full faith and credit" obligations. Certain obligations, such as
those issued by the Federal Home Loan Bank are supported by the issuer's right
to borrow from the U.S. Treasury, while others such as those issued by the
Federal National Mortgage Association, are supported only by the credit of the
issuer. Unscheduled or early payments on the underlying mortgage may shorten
the securities' effective maturities and reduce returns. The Series may agree
to purchase or sell these securities with payment and delivery taking place at
a future date. A decline in interest rates may lead to a faster rate of
repayment of the underlying mortgages and expose the Series to a lower rate of
return upon reinvestment. To the extent that such mortgage-backed securities
are held by the Series, the prepayment right of mortgagors may limit the
increase in net asset value of the Series because the value of the mortgage-
backed securities held by the Series may not appreciate as rapidly as the price
of noncallable debt securities.
A decline in interest rates may lead to a faster rate of repayment of the
underlying mortgages and expose the Series to a lower rate of return upon
reinvestment. To the extent that such mortgage-backed securities are held by
the Series, the prepayment right will tend to limit to some degree the increase
in net asset value of the Series because the value of the mortgage-backed
securities held by the Series may not appreciate as rapidly as the price of
noncallable debt securities.
For federal tax purposes other than diversification under Subchapter M,
mortgage-backed securities are not considered to be separate securities but
rather "grantor trusts" conveying to the holder an individual interest in each
of the mortgages constituting the pool.
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Interests in pools of mortgage-backed securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities provide a monthly payment which consists of both
interest and principal payments. In effect, these payments are a "pass-through"
of the monthly payments made by the individual borrowers on their mortgage
loans, net of any fees paid to the issuer or guarantor of such securities.
Additional payments are caused by repayments of principal resulting from the
sale of the underlying property, refinancing or foreclosure, net of fees or
costs which may be incurred. Some mortgage-backed securities (such as
securities issued by the Government National Mortgage Association) are
described as "modified pass-through." These securities entitle the holder to
receive all interest and principal payments owed on the mortgage pool, net of
certain fees, at the scheduled payments dates regardless of whether or not the
mortgagor actually makes the payment.
Any discount enjoyed on the purchases of a "pass-through" type mortgage-backed
security will likely constitute market discount. As the Series receive
principal payments, it will be required to treat as ordinary income an amount
equal to the lesser of the amount of the payment or the "accrued market
discount." Market discount is to be accrued either under a constant rate method
or a proportional method. Pass-through type mortgage-backed securities
purchased at a premium to face will be subject to a similar rule requiring
recognition of an offset to ordinary interest income, an amount of premium
attributable to the receipt of principal. The amount of premium recovered is to
be determined using a method similar to that in place for market discount. A
Series may elect to accrue market discount or amortize premium notwithstanding
the amount of principal received but such election will apply to all bonds held
and thereafter acquired unless permission is granted by the Commissioner of the
Internal Revenue Service to change such method.
The principal governmental guarantor of mortgage-related securities is the
Government National Mortgage Association ("GNMA"). GNMA is a wholly-owned
United States government corporation within the Department of Housing and Urban
Development. GNMA is authorized to guarantee, with the full faith and credit of
the U.S. government, the timely payment of principal and interest on securities
issued by institutions approved by GNMA (such as savings and loan institutions,
commercial banks and mortgage bankers) and backed by pools of FHA-insured or
VA-guaranteed mortgages. These guarantees, however, do not apply to the market
value or yield of mortgage-backed securities or to the value of Series shares.
Also, GNMA securities often are purchased at a premium over the maturity value
of the underlying mortgages. This premium is not guaranteed and should be
viewed as an economic offset to interest to be earned. If prepayments occur,
less interest will be earned and the value of the premium paid will be lost.
Government-related guarantors (i.e., not backed by the full faith and credit of
the U.S. government) include the Federal National Mortgage Association ("FNMA")
and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a government-
sponsored corporation owned entirely by private stockholders. It is subject to
general regulation of the Secretary of Housing and Urban Development. FNMA
purchases conventional (i.e., not insured or guaranteed by any government
agency) mortgages from a list of approved seller/servicers which include state
and federally chartered savings and loan associations, mutual savings banks,
commercial banks and credit unions and mortgage bankers. Pass-through
securities issued by FNMA are guaranteed as to timely payment of principal and
interest by FNMA but are not backed by the full faith and credit of the U.S.
government.
FHLMC is a corporate instrumentality of the U.S. government and was created by
Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. Its stock is owned by the twelve Federal Home
Loan Banks. FHLMC issues Participation Certificates ("PCs") which represent
interests in conventional mortgages from FHLMC's national portfolio. FHLMC
guarantees the timely payment of interest and ultimate collection of principal,
but PCs are not backed by the full faith and credit of the U.S. government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the
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mortgage-related securities. Pools created by such non-governmental issuers
generally offer a higher rate of interest than government and government-
related pools because there are no direct or indirect government or agency
guarantees of payments. However, timely payment of interest and principal of
these pools may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance and letters of
credit. The insurance guarantees are issued by governmental entities, private
insurers and the mortgage poolers. Such insurance and guarantees and the
creditworthiness of the issuers thereof will be considered in determining
whether a mortgage-related security meets a Series' investment quality
standards. There can be no assurance that the private insurers or guarantors
can meet their obligations under the insurance policies or guarantee or
guarantees, even if through an examination of the loan experience and practices
of the originators/servicers and poolers, the Advisor determines that the
securities meet the Series' quality standards. Although the market for such
securities is becoming increasingly liquid, securities issued by certain
private organizations may not be readily marketable.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") AND REAL ESTATE MORTGAGE
INVESTMENT CONDUITS ("REMICS")
A CMO is a debt security on which interest and prepaid principal are paid, in
most cases, semi-annually. CMOs may be collateralized by whole mortgage loans
but are more typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC, or FNMA and their income streams.
Privately-issued CMOs tend to be more sensitive to interest rates than
Government-issued CMOs.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payments of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding
the longer maturity classes receive principal only after the first class has
been retired. An investor is partially guarded against a sooner than desired
return of principal because of the sequential payments.
In a typical CMO transaction, a corporation issues multiple series (e.g., A, B,
C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to
purchase mortgages or mortgage pass-through certificates ("Collateral"). The
Collateral is pledged to a third party trustee as security for the Bonds.
Principal and interest payments from the Collateral are used to pay principal
on the Bonds in the order A, B, C, Z. The Series A, B and C Bonds all bear
current interest. Interest on the Series Z Bond is accrued and added to
principal and a like amount is paid as principal on the Series A, B, or C Bond
currently being paid off. When the Series, A, B and C Bonds are paid in full,
interest and principal on the Series Z Bond begins to be paid currently. With
some CMOs, the issuer serves as a conduit to allow loan originators (primarily
builders or savings and loan associations) to borrow against their loan
portfolios. REMICs are private entities formed for the purpose of holding a
fixed pool of mortgages secured by an interest in real property. REMICs are
similar to CMOs in that they issue multiple classes of securities.
Most if not all newly-issued debt securities backed by pools of real estate
mortgages will be issued as regular and residual interests in REMICs because,
as of January 1, 1992, new CMOs which do not make REMIC elections will be
treated as "taxable mortgage pools," a wholly undesirable tax result. Under
certain transition rules, CMOs in existence on December 31, 1991 are unaffected
by this change. The Series will purchase only regular interests in REMICs.
REMIC regular interests are treated as debt of the REMIC and income/discount
thereon must be accounted for on the "catch-up method," using a reasonable
prepayment assumption under the original issue discount rules of the Code.
OTHER MORTGAGE-BACKED SECURITIES
The Advisor expects that governmental, government-related or private entities
may create mortgage loan pools and other mortgage-related securities offering
mortgage pass-through and mortgage-collateralized investments in
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addition to those described above. The mortgages underlying these securities
may include alternative mortgage instruments that is, mortgage instruments
whose principal or interest payments may vary or whose terms to maturity may
differ from customary long-term fixed rate mortgages. As new types of mortgage-
related securities are developed and offered to investors, the Advisor will,
consistent with a Series' investment objective, policies and quality standards,
consider making investments in such new types of mortgage-related securities.
The Advisor will not purchase any such other mortgage-backed securities until
the Series' Prospectus and this Statement of Additional Information have been
supplemented.
ASSET-BACKED SECURITIES
The Series may invest a portion of its assets in debt obligations known as
"asset-backed securities." The credit quality of most asset-backed securities
depends primarily on the credit quality of the assets underlying such
securities, how well the entity issuing the security is insulated from the
credit risk of the originator or any other affiliated entities, and the amount
and quality of any credit support provided to the securities. The rate of
principal payment on asset-backed securities generally depends on the rate of
principal payments received on the underlying assets which in turn may be
affected by a variety of economic and other factors. As a result, the yield on
any asset-backed security is difficult to predict with precision and actual
yield to maturity may be more or less than the anticipated yield to maturity.
Asset-backed securities may be classified as "pass-through certificates" or
"collateralized obligations."
Asset-backed securities are often backed by a pool of assets representing the
obligations of a number of different parties. To lessen the effect of failures
by obligors on underlying assets to make payment, such securities may contain
elements of credit support. Such credit support falls into two categories: (i)
liquidity protection; and (ii) protection against losses resulting from
ultimate default by an obligor on the underlying assets. Liquidity protection
refers to the provision of advances, generally by the entity administering the
pool of assets, to ensure that the receipt of payments due on the underlying
pool is timely. Protection against losses resulting from ultimate default
enhances the likelihood of payments of the obligations on at least some of the
assets in the pool. Such protection may be provided through guarantees,
insurance policies or letters of credit obtained by the issuer or sponsor from
third parties, through various means of structuring the transaction or through
a combination of such approaches. The Series will not pay any additional fees
for such credit support, although the existence of credit support may increase
the price of a security.
Due to the shorter maturity of the collateral backing such securities, there is
less of a risk of substantial prepayment than with mortgage-backed securities.
Such asset-backed securities do, however, involve certain risks not associated
with mortgage-backed securities, including the risk that security interests
cannot be adequately, or in many cases, ever, established. In addition, with
respect to credit card receivables, a number of state and federal consumer
credit laws give debtors the right to set off certain amounts owed on the
credit cards, thereby reducing the outstanding balance. In the case of
automobile receivables, there is a risk that the holders may not have either a
proper or first security interest in all of the obligations backing such
receivables due to the large number of vehicles involved in a typical issuance
and technical requirements under state laws. Therefore, recoveries on
repossessed collateral may not always be available to support payments on the
securities.
Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal
thereof and interest thereon, with the result that defaults on the underlying
assets are borne first by the holders of the subordinated class), creation of
"reserve funds" (where cash or investments, sometimes funded from a portion of
the payments on the underlying assets, are held in reserve against future
losses) and "over collateralization" (where the scheduled payments on, or the
principal amount of, the underlying assets exceeds that required to make
payments of the securities and pay any servicing or other fees). The degree of
credit support provided for each issue is generally based on historical
information respecting the level of credit information respecting the level of
credit risk associated with the underlying assets. Delinquencies or losses in
excess of those anticipated could adversely affect the return on an investment
in such issue.
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ZERO COUPON SECURITIES
The Series may invest in zero coupon securities which pay no cash income and
are sold at substantial discounts from their value at maturity. When held to
maturity, their entire income, which consists of accretion of discount, comes
from the difference between the purchase price and their value at maturity. The
discount varies depending on the time remaining until maturity or cash payment
date, prevailing interest rates, liquidity of the security and the perceived
credit quality of the issuer. The discount, in the absence of financial
difficulties of the issuer, decreases as the final maturity or cash payment
date of the security approaches. The market prices of zero coupon and delayed
interest securities are generally more volatile and more likely to respond to
changes in interest rates than the market prices of securities having similar
maturities and credit quality that pay interest periodically. Current federal
income tax law requires that a holder of a zero coupon security report as
income each year the portion of the original issue discount on such security
(other than tax-exempt original issue discount from a zero coupon security)
that accrues that year, even though the holder receives no cash payments of
interest during the year. The Series will be required to distribute such income
to shareholders to comply with Subchapter M of the Code and avoid excise taxes,
even though the Series have not received any cash from the issue.
Zero coupon securities are subject to greater market value fluctuations from
changing interest rates than debt obligations of comparable maturities which
make current distributions of interest (cash). Zero coupon convertible
securities offer the opportunity for capital appreciation as increases (or
decreases) in market value of such securities closely follow the movements in
the market value of the underlying common stock. Zero coupon convertible
securities generally are expected to be less volatile than the underlying
common stocks as they usually are issued with short maturities (15 years or
less) and are issued with options and/or redemption features exercisable by the
holder of the obligation entitling the holder to redeem the obligation and
receive a defined cash payment.
Zero coupon securities include securities issued directly by the U.S. Treasury,
and U.S. Treasury bonds or notes and their unmatured interest coupons and
receipts for their underlying principal ("coupons") which have been separated
by their holder, typically a custodian bank or investment brokerage firm. A
holder will separate the interest coupons from the underlying principal (the
"corpus") of the U.S. Treasury security. A number of securities firms and banks
have stripped the interest coupons and receipts and then resold them in
custodial receipt programs with a number of different names, including
"Treasury Income Growth Receipts" ("TIGRS") and Certificate of Accrual on
Treasuries ("CATS"). The underlying U.S. Treasury bonds and notes themselves
are held in book-entry form at the Federal Reserve Bank or, in the case of
bearer securities (i.e., unregistered securities which are owned ostensibly by
the bearer or holder thereof), in trust on behalf of the owners thereof.
Counsel to the underwriters of these certificates or other evidences of
ownership of the U.S. Treasury securities has stated that for federal tax and
securities purposes, in its opinion purchasers of such certificates, such as
the Series, most likely will be deemed the beneficial holder of the underlying
U.S. government securities. The Series understand that the staff of the
Securities and Exchange Commission no longer considers such privately stripped
obligations to be U.S. government securities, as defined in the Investment
Company Act of 1940, as amended (the "Act"); therefore, the Series intends to
adhere to this staff position and will not treat such privately stripped
obligations to be U.S. government securities for the purpose of determining if
the Series is "diversified," or for any other purpose, under the Act.
The U.S. Treasury has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and corpus payments on Treasury securities through the Federal
Reserve book-entry record-keeping system. The Federal Reserve program as
established by the U.S. Treasury Department is known as "STRIPS" or "Separate
Trading of Registered Interest and Principal of Securities." Under the STRIPS
program, the Series will be able to have its beneficial ownership of zero
coupon securities recorded directly in the book-entry record-keeping system in
lieu of having to hold certificates or other evidences of ownership of the
underlying U.S. Treasury securities.
When U.S. Treasury obligations have been stripped of their unmatured interest
coupons by the holder, the principal or corpus is sold at a deep discount
because the buyer receives only the right to receive a future fixed
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payment on the security and does not receive any rights to periodic interest
(cash) payments. Once stripped or separated, the corpus and coupons may be sold
separately. Typically, the coupons are sold separately or grouped with other
coupons with like maturity dates and sold in such bundled form. Purchasers of
stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero coupon securities that the U.S. Treasury
sells itself. These stripped securities are also treated as zero coupon
securities with original issue discount for tax purposes.
INVESTMENTS RELATING TO GLOBAL FUND
EMERGING MARKETS INVESTMENTS (Global Fund only).
The Series may invest up to 5% of its assets in equity and debt securities of
emerging market issuers, or securities with respect to which the return is
derived from the equity or debt securities of issuers in emerging markets. The
Series may invest in equity securities of issuers in emerging markets, or
securities with respect to which the return is derived from the equity
securities of issuers in emerging markets. The Series also may invest in fixed
income securities of emerging market issuers, including government and
governmental-related entities (including participation in loans between
governments and financial institutions), and of entities organized to
restructure outstanding debt of such issuers. The Series also may invest in
debt securities of developing countries' corporate issuers.
The Series' investments in emerging market government and government-related
securities may consist of (i) debt securities or obligations issued or
guaranteed by governments, governmental agencies or instrumentalities and
political subdivisions located in emerging countries (including participation
in loans between governments and financial institutions), (ii) debt securities
or obligations issued by government owned, controlled or sponsored entities
located in emerging countries and (iii) interests in issuers organized and
operated for the purpose of restructuring the investment characteristics of
instruments issued by any of the entities described above.
The Series' investments in the fixed income securities of emerging market
issuers may include investments in Brady Bonds, Structured Securities, Loan
Participation and Assignments, and certain non-publicly traded securities.
Brady Bonds are securities created through the exchange of existing commercial
bank loans to public and private entities in certain emerging markets for new
bonds in connection with debt restructurings under a debt restructuring plan
introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady (the
"Brady Plan"). Brady Bonds may be collateralized or uncollateralized, are
issued in various currencies (but primarily the U.S. dollar), and are actively
traded in over-the-counter secondary markets. Dollar-denominated,
collateralized Brady Bonds, which may be fixed-rate bonds or floating-rate
bonds, are generally collateralized in full as to principal by U.S. Treasury
zero coupon bonds having the same maturity as the bonds.
Structured Securities are issued by entities organized and operated solely for
the purpose of restructuring the investment characteristics of sovereign debt
obligations. This type of restructuring involves the deposit with, or purchase
by, an entity, such as a corporation or trust, of specified instruments (such
as commercial bank loans or Brady Bonds) and the issuance by that entity of one
or more classes of securities ("Structured Securities") backed by, or
representing interests in, the underlying instruments.
The Series may invest in fixed rate and floating rate loans ("Loans") arranged
through private negotiations between an issuer of sovereign debt obligations
and one or more financial institutions ("Lenders"). The Series' investments in
Loans are expected in most instances to be in the form of participation in
loans ("Participation") and assignments of all or a portion of Loans
("Assignments") from third parties. The Series will have the right to receive
payments of principal, interest and any fees to which they are entitled only
from the Lender selling the Participation and only upon receipt by the Lender
of the payments from the borrower. In the event of the insolvency of the Lender
selling a Participation, the Series may be treated as a general creditor of the
Lender and may not benefit from any set-off between the Lender and the
borrower.
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When a Series purchases Assignments from Lenders, it will acquire direct rights
against the borrower on the Loan. However, because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, the rights and obligations acquired by the Series as the purchaser
of an Assignment may differ from, and be more limited than, those held by the
assigning Lender.
The Series also may invest in securities that are neither listed on a stock
exchange nor traded over-the-counter, including privately placed securities and
limited partnerships. Investing in such unlisted emerging country equity
securities, including investments in new and early stage companies, may involve
a high degree of business and financial risk that can result in substantial
losses. As a result of the absence of a public trading market for these
securities, they may be less liquid than publicly traded securities.
The Series' investments in emerging market securities will at all times be
limited by the Series' prohibition on investing more than 15% of its net assets
in illiquid securities.
RISKS OF INVESTING IN EMERGING MARKETS
Compared to the United States and other developed countries, emerging countries
may have relatively unstable governments, economies based on only a few
industries, and securities markets that trade only a small number of securities
and employ settlement procedures different from those used in the United
States. Prices on these exchanges tend to be volatile and, in the past,
securities in these countries have offered greater potential for gain (as well
as loss) than securities of companies located in developed countries. Further,
investments by foreign investors are subject to a variety of restrictions in
many emerging countries. Countries such as those in which the Series may invest
have historically experienced and may continue to experience, high rates of
inflation, high interest rates, exchange rate fluctuations or currency
depreciation, large amounts of external debt, balance of payments and trade
difficulties and extreme poverty and unemployment. Additional factors which may
influence the ability or willingness to service debt include, but are not
limited to, a country's cash flow situation, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, its government's policy towards the
International Monetary Fund, the World Bank and other international agencies
and the political constraints to which a government debtor may be subject.
The ability of a foreign government or government-related issuer to make timely
and ultimate payments on its external debt obligations will be strongly
influenced by the issuer's balance of payments, including export performance,
its access to international credits and investments, fluctuations in interest
rates and the extent of its foreign reserves. A country whose exports are
concentrated in a few commodities or whose economy depends on certain strategic
imports could be vulnerable to fluctuations in international prices of these
commodities or imports. To the extent that a country receives payment for its
exports in currencies other than dollars, its ability to make debt payments
denominated in dollars could be adversely affected. If a foreign government or
government-related issuer cannot generate sufficient earnings from foreign
trade to service its external debt, it may need to depend on continuing loans
and aid from foreign governments, commercial banks, and multilateral
organizations, and inflows of foreign investment. The commitment on the part of
these foreign governments, multilateral organizations and others to make such
disbursements may be conditioned on the government's implementation of economic
reforms and/or economic performance and the timely service of its obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due may curtail the willingness of such
third parties to lend funds, which may further impair the issuer's ability or
willingness to service its debts in a timely manner. The cost of servicing
external debt will also generally be adversely affected by rising international
interest rates, because many external debt obligations bear interest at rates
which are adjusted based upon international interest rates. The ability to
service external debt will also depend on the level of the relevant
government's international currency reserves and its access to foreign
exchange. Currency devaluations may affect the ability of a governmental issuer
to obtain sufficient foreign exchange to service its external debt.
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As a result of the foregoing, a governmental issuer may default on its
obligations. If such a default occurs, the Series may have limited effective
legal recourse against the issuer and/or guarantor. Remedies must, in some
cases, be pursued in the courts of the defaulting country itself, and the
ability of the holder of foreign government and government-related debt
securities to obtain recourse may be subject to the political climate in the
relevant country. In addition, no assurance can be given that the holders of
commercial bank debt will not contest payments to the holders of other foreign
government and government-related debt obligations in the event of default
under their commercial bank loan agreements.
The issuers of the government and government-related debt securities in which
the Series expects to invest have in the past experienced substantial
difficulties in servicing their external debt obligations, which has led to
defaults on certain obligations and the restructuring of certain indebtedness.
Restructuring arrangements have included, among other things, reducing and
rescheduling interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and unpaid interest to
Brady Bonds, and obtaining new credit to finance interest payments. Holders of
certain foreign government and government-related debt securities may be
requested to participate in the restructuring of such obligations and to extend
further loans to their issuers. There can be no assurance that the Brady Bonds
and other foreign government and government-related debt securities in which
the Series may invest will not be subject to similar defaults or restructuring
arrangements which may adversely affect the value of such investments.
Furthermore, certain participants in the secondary market for such debt may be
directly involved in negotiating the terms of these arrangements and may
therefore have access to information not available to other market
participants.
Payments to holders of the high yield, high risk, foreign debt securities in
which the Series may invest may be subject to foreign withholding and other
taxes. Although the holders of foreign government and government-related debt
securities may be entitled to tax gross-up payments from the issuers of such
instruments, there is no assurance that such payments will be made.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies and may
not be changed as to a Series, without the approval of a majority of the
outstanding voting securities (as defined in the Act) of the Series. Unless
otherwise indicated, all percentage limitations listed below apply to the
Series only at the time of the transaction. Accordingly, if a percentage
restriction is adhered to at the time of investment, a later increase or
decrease in the percentage which results from a relative change in values or
from a change in a Series' total assets will not be considered a violation.
Except as set forth under "Investment Objectives" and "Other Investment
Practices and Risk Factors" in each Prospectus, or "Investment Strategies" in
the Trust's Statement of Additional Information, each Series may not:
(i) As to 75% of the total assets of each Series, purchase the securities
of any one issuer, other than securities issued by the U.S. government
or its agencies or instrumentalities, if immediately after such
purchase more than 5% of the value of the total assets of a Series
would be invested in securities of such issuer (this does not apply to
the Global Bond Fund, Short-Term Global Income Fund or Non-U.S. Bond
Fund);
(ii) Invest in real estate or interests in real estate (This will not
prevent a Series from investing in publicly-held real estate
investment trusts or marketable securities of companies which may
represent indirect interests in real estate.), interests in oil, gas
and/or mineral exploration or development programs or leases;
(iii) Purchase or sell commodities or commodity contracts, but may enter
into futures contracts and options thereon in accordance with its
Prospectus. Additionally, each Series (except the U.S. Cash
Management Fund) may engage in forward foreign currency contracts
for hedging purposes only;
(iv) Make investments in securities for the purpose of exercising control
over or management of the issuer;
(v) Purchase the securities of any one issuer if, immediately after such
purchase, a Series would own more than 10% of the outstanding voting
securities of such issuer;
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(vi) Sell securities short or purchase securities on margin, except such
short-term credits as are necessary for the clearance of transactions.
For this purpose, the deposit or payment by a Series for initial or
maintenance margin in connection with futures contracts is not
considered to be the purchase or sale of a security on margin;
(vii) Make loans, except that this restriction shall not prohibit (a) the
purchase and holding of a portion of an issue of publicly distributed
or privately placed debt securities, (b) the lending of portfolio
securities, or (c) entry into repurchase agreements with banks or
broker-dealers;
(viii) Borrow money in excess of 33 1/3% (10% with respect to the U.S. Cash
Management Fund) of the value of its assets except as a temporary
measure for extraordinary or emergency purposes to facilitate
redemptions or issue senior securities. All borrowings will be done
from a bank and to the extent that such borrowing exceeds 5% of the
value of a Series' assets, asset coverage of at least 300% is
required. A Series will not purchase securities when borrowings
exceed 5% of that Series' total assets;
(ix) Purchase the securities of issuers conducting their principal business
activities in the same industry other than obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities,
if immediately after such purchase the value of a Series' investments
in such industry would exceed 25% of the value of the total assets of
the Series across several countries;
(x) Act as an underwriter of securities, except that, in connection with
the disposition of a security, a Series may be deemed to be an
"underwriter" as that term is defined in the Securities Act of 1933;
(xi) Invest in securities of any open-end investment company, except that a
Series may purchase securities of money market mutual funds, and the
Global Fund and Global Equity Fund may each invest in the securities
of closed-end investment companies at customary brokerage commission
rates, but such investments in money market mutual funds or closed-end
investment companies may only be made in accordance with the
limitations imposed by the Act and the rules thereunder. Each Series
may acquire securities of other investment companies if they are
acquired pursuant to a merger, consolidation, acquisition, plan of
reorganization or a Securities and Exchange Commission approved offer
of exchange;
(xii) Invest in puts, calls, straddles or combinations thereof except to
the extent disclosed in a Series' Prospectus; and
(xiii) Invest more than 5% of its total assets in securities of companies
less than three years old. Such three year periods shall include the
operation of any predecessor company or companies.
Although not considered fundamental, in order to comply with certain state
"blue sky" restrictions, each Series will not invest: (1) more than 5% of
their respective net assets in warrants, including within that amount no more
than 2% in warrants which are not listed on the New York or American Stock
Exchanges, except warrants acquired as a result of its holdings of common
stocks; and (2) purchase or retain the securities of any issuer if, to the
knowledge of the Series, any officer or Trustee of the Series or of its
investment manager owns beneficially more than 1/2 of 1% of the outstanding
securities of such issuer, and such officers and Trustees of the Series or of
its investment manager who own more than 1/2 of 1%, own in the aggregate, more
than 5% of the outstanding securities of such issuer.
S-21
<PAGE>
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS AGE POSITION DURING PAST 5 YEARS
---------------- --- ------------ --------------------------
<C> <C> <C> <S>
Walter E. Auch 74 Trustee Retired; formerly Chairman
6001 N. 62nd Place and CEO of Chicago Board
Paradise Valley, AZ 85253 of Options Exchange (1979-
1986);
Trustee of the Trust since
May, 1994; Trustee,
Brinson Relationship Funds
since December, 1994;
Director, Thomsen Asset
Management Corp. since
1987; Fort Dearborn Income
Securities, Inc. since
1987, Geotek Industries,
Inc. since 1989, Smith
Barney VIP Fund since
1991, SB Advisers since
1992, SB Trak since 1992,
Banyan Realty Trust since
1987, Banyan Land Fund II
since 1988, Banyan
Mortgage Investment Fund
since 1989 and Express
America Holdings Corp.
since 1992.
Frank K. Reilly 60 Chairman and Professor, University of
College of Business Administration Trustee Notre Dame since 1981;
University of Notre Dame Trustee of the Trust since
208 Hurley Building December 1993; Trustee,
Notre Dame, IN 46556 Brinson Relationship Funds
since September, 1994;
Director of The Brinson
Funds, Inc. 1992-1993;
Trustee, Brinson Trust
Company, 1992-July, 1993;
Director, Fort Dearborn
Income Securities, Inc.
since 1993; Director,
First Interstate Bank of
Wisconsin from January,
1989 through March, 1990;
Director, Discover
Financing Corp., from 1990
to 1991; and Director,
Greenwood Trust Company
since 1993.
Edward M. Roob 61 Trustee Retired; prior thereto,
841 Woodbine Lane Senior Vice President,
Northbrook, IL 60002 Daiwa Securities America
Inc. (1986-1993);
Trustee of the Trust since
January 1995; Trustee,
Brinson Relationship Funds
since January 1995;
Director, Fort Dearborn
Income Securities, Inc.
since 1993; Director,
Brinson Trust Company
since 1993; Committee
Member, Chicago Stock
Exchange, since 1993;
Member of Board of
Governors, Midwest Stock
Exchange (1987-1991).
</TABLE>
OTHER OFFICERS
<TABLE>
<CAPTION>
POSITION WITH OFFICER PRINCIPAL OCCUPATION(S)
NAME AGE THE TRUST SINCE DURING PAST 5 YEARS
---- --- ----------------------- ------- -----------------------
<C> <C> <C> <C> <S>
E. Thomas McFarlan 51 President and Treasurer 1993 Managing Partner,
Brinson Partners, Inc.
since 1991; President
and Director of The
Brinson Funds, Inc.
1992-1993; Trustee,
Brinson Trust Company
since 1991; prior
thereto, Executive Vice
President of Washington
Mutual Savings Bank.
Bruce G. Leto 33 Secretary 1995 Partner, Stradley,
Ronon, Stevens & Young
since 1994; prior
thereto, Senior
Associate.
</TABLE>
S-22
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH OFFICER PRINCIPAL OCCUPATION(S)
NAME AGE THE TRUST SINCE DURING PAST 5 YEARS
---- --- ------------------- ------- --------------------------
<C> <C> <C> <C> <S>
Thomas J. Digenan 31 Assistant Treasurer 1993 Partner, Brinson Partners,
Inc. since 1993; Assistant
Secretary, The Brinson
Funds, Inc. 1993-1994;
prior thereto, Senior
Manager, KPMG Peat
Marwick.
Debra L. Nichols 29 Assistant Secretary 1993 Partner, Brinson Partners,
Inc. since 1995;
Associate, Brinson
Partners, Inc. since 1991;
Assistant Secretary, The
Brinson Funds, Inc. 1992-
1993; prior thereto,
private investor.
Catherine E. Macrae 38 Assistant Secretary 1995 Associate, Brinson
Partners, Inc. since 1992;
prior thereto, Economic
Analyst, Chicago
Mercantile Exchange.
Carolyn B. Tretter 29 Assistant Secretary 1995 Associate, Brinson
Partners, Inc, since 1995;
prior thereto, Financial
Analyst, Van Kampen
American Capital
Investment Advisory Corp.
1992-1995; Senior
Accountant, KPMG Peat
Marwick 1989-1992.
</TABLE>
COMPENSATION TABLE
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
AGGREGATE PENSION OR TOTAL
COMPENSATION RETIREMENT COMPENSATION
FROM TRUST BENEFITS ESTIMATED FROM TRUST
FOR FISCAL ACCRUED AS ANNUAL AND FUND
YEAR ENDED PART OF BENEFITS COMPLEX PAID
JUNE 30, FUND UPON TO
NAME AND POSITION HELD 1995 EXPENSES RETIREMENT TRUSTEES/1/
---------------------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
Walter E. Auch, Trustee $12,600 N/A N/A $18,750
6001 N. 62nd Place
Paradise Valley, AZ 85253
Frank K. Reilly, Trustee $10,800 N/A N/A $18,000
College of Business Administration
University of Notre Dame
208 Hurley Building
Notre Dame, IN 46556
Edward M. Roob, Trustee $ 6,600 N/A N/A $18,750
841 Woodbine Lane
Northbrook, IL 60002
</TABLE>
- --------
/1/This amount represents the aggregate amount of compensation paid to the
Trustees for (a) service on the Board of Trustees for the Trust's most
recently completed fiscal year; and (b) service on the Board of Directors
of two other investment companies managed by Brinson Partners, Inc. for the
calendar year ending December 31, 1995.
No officer or Trustee of the Trust who is also an officer or employee of
Brinson Partners receives any compensation from the Trust for services to the
Trust. The Trust pays each Trustee who is not affiliated with Brinson Partners
a fee of $6,000 per year, plus $300 per Series per meeting and reimburses each
Trustee and officer for out-of-pocket expenses in connection with travel and
attendance at Board meetings.
The Trust has an Audit Committee which has the responsibility, among other
things, to (i) recommend the selection of the Trust's independent auditors,
(ii) review and approve the scope of the independent auditors' audit
S-23
<PAGE>
activity, (iii) review the financial statements which are the subject of the
independent auditors' certification, and (iv) review with such independent
auditors the adequacy of the Series' basic accounting system and the
effectiveness of the Series' internal accounting controls. The Audit Committee
met twice during the fiscal year ended June 30, 1995. There is no separate
Nominating or Investment Committee. Items pertaining to these Committees are
submitted to the full Board of Trustees.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 17, 1996, the officers and Trustees, individually and as a
group, owned beneficially less than 1% of the Brinson Fund class, SwissKey
Fund class, Series and Trust, respectively.
As of January 17, 1996, the following persons owned of record or beneficially
more than 5% of the outstanding voting shares of the Brinson Fund class or
SwissKey Fund class, as applicable:
GLOBAL FUND
<TABLE>
<CAPTION>
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE
- ----------------------------------- ---------------- ----------
<S> <C> <C>
BRINSON FUND CLASS
First Alabama Bank 4,547,562.874 12.43%
Mobile, AL
Polk Bros. Foundation 3,253,509.113 8.89%
Evanston, IL
Medical College of Virginia Foundation 3,206,795.392 8.76%
Richmond, VA
Nations Bank of Georgia NA Trustee 2,850,134.429 7.79%
Dallas, TX
Northern Trust Company 2,120,722.018 5.79%
Chicago, IL
SWISSKEY FUND CLASS
Swiss Bank Corporation* 255,344.056 85.68%
New York, NY
Ann Bolan & Ernest Bolan JT TEN 17,867.739 5.99%
New York, NY
GLOBAL EQUITY FUND
<CAPTION>
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE
- ----------------------------------- ---------------- ----------
<S> <C> <C>
BRINSON FUND CLASS
United States Japan Foundation* 2,122,270.478 97.42%
New York, NY
SWISSKEY FUND CLASS
Swiss Bank Corporation* 1,224,393.243 49.85%
New York, NY
</TABLE>
S-24
<PAGE>
GLOBAL BOND FUND
<TABLE>
<CAPTION>
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE
- ----------------------------------- ---------------- ----------
<S> <C> <C>
BRINSON FUND CLASS
Baptist Health Systems, Inc.* 1,391,388.328 38.57%
Birmingham, AL
Munson Williams Proctor Institute* 1,150,385.194 31.89%
Utica, NY
Abell Foundation, Inc. 467,014.628 12.94%
Baltimore, MD
Ripon College 371,505.321 10.29%
Ripon, WI
SWISSKEY FUND CLASS
Swiss Bank Corporation* 146,398.910 71.75%
New York, NY
Semper Trust Co. C/F IRA of Jack Ferman 15,672.395 7.68%
Van Nuys, CA
Semper Trust Co. C/F IRA of Abraham Freeman 14,149.913 6.93%
Van Nuys, CA
U.S. BALANCED FUND
<CAPTION>
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE
- ----------------------------------- ---------------- ----------
<S> <C> <C>
BRINSON FUND CLASS
State Street Bank & Trust Co.* 14,049,196.811 72.02%
Boston, MA
MAC & Co. 2,323,263.264 11.91%
Pittsburgh, PA
Mitra & Co 1,369,712.175 7.02%
Milwaukee, WI
Harris Trust and Savings Bank 1,007,004.065 5.16%
Chicago, IL
SWISSKEY FUND CLASS
Swiss Bank Corporation* 21,887.803 92.52%
New York, NY
Martha S. Weber and Heinrich G. Weber 1,767.505 7.47%
Palos Verdes Estates, CA
</TABLE>
S-25
<PAGE>
U.S. EQUITY FUND
<TABLE>
<CAPTION>
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE
- ----------------------------------- ---------------- ----------
<S> <C> <C>
BRINSON FUND CLASS
Swiss Bank Corporation* 3,216,007.675 45.19%
New York, NY
Wachovia Bank of North Carolina* 1,139,850.775 16.01%
Winston Salem, NC
American Institute of Physics 733,225.650 10.30%
College Park, MD
Central New York Community Foundation, Inc. 381,671.332 5.36%
Syracuse, NY
Augustana College 357,463.738 5.02%
Rock Island, IL
SWISSKEY FUND CLASS
Swiss Bank Corporation* 8,624.763 81.85%
New York, NY
Elias H., Charles E. & Margaerite E. Gellad 1,911.428 18.13%
Falls Church, VA
U.S. BOND FUND
<CAPTION>
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE
- ----------------------------------- ---------------- ----------
<S> <C> <C>
BRINSON FUND CLASS
Swiss Bank Corporation* 876,545.198 99.41%
New York, New York
SWISSKEY FUND CLASS
Swiss Bank Corporation 41,130.512 95.78%
New York, NY
NON-U.S. EQUITY FUND
<CAPTION>
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE
- ----------------------------------- ---------------- ----------
<S> <C> <C>
BRINSON FUND CLASS
McConnell Trust Foundation 1,383,089.770 8.44%
Redding, CA
Edna McConnell Clark Foundation 1,333,018.144 8.13%
New York, NY
MAC & Co. 1,227,841.069 7.49%
Pittsburgh, PA
Society National Bank 1,157,920.887 7.07%
Cleveland, OH
Fifth Third Bank 1,110,517.679 6.78%
Cincinnati, OH
Northern Trust 1,102,517.484 6.73%
Chicago, IL
Bentley College 1,071,458.233 6.54%
Waltham, MA
MAC & Company 1,001,261.090 6.11%
Pittsburgh, PA
</TABLE>
S-26
<PAGE>
<TABLE>
<CAPTION>
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE
- ----------------------------------- ---------------- ----------
<S> <C> <C>
SWISSKEY FUND CLASS
Swiss Bank Corporation* 28,981.058 74.96%
New York, NY
Salim F. Abufadil & Joyce Abufadil 3,674.645 9.50%
Rolling Hill Estates, CA
Salim F. Abufadil 2,576.066 6.66%
Cust. Alexander Abufadil
Rolling Hill Estates, CA
</TABLE>
- --------
* Person deemed to control the class within the meaning of the Act. Note
that such persons possess the ability to control the outcome of matters
submitted for the vote of shareholders of that class.
As of January 17, 1996, the following persons owned of record or beneficially
more than 5% of the outstanding voting shares of the Trust:
<TABLE>
<CAPTION>
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE
- ----------------------------------- ---------------- ----------
<S> <C> <C>
State Street Bank & Trust Co. Boston, MA 14,049,196.811 15.73%
First Alabama Bank
Mobile, AL 4,547,562.874 5.09%
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
Brinson Partners, a Delaware corporation, is an investment management firm
managing, as of December 31, 1995, approximately $53 billion, primarily for
institutional pension and profit sharing funds. Brinson Partners was organized
in 1989 when it acquired the institutional asset management business of The
First National Bank of Chicago and First Chicago Investment Advisors, N.A.
Brinson Partners and its predecessor entities have managed domestic and
international investment assets since 1974 and global investment assets since
1982. Brinson Partners has offices in London and Tokyo in addition to its
principal office at 209 South LaSalle Street, Chicago, IL 60604. Brinson
Partners is an indirect wholly-owned subsidiary of Swiss Bank Corporation
("Swiss Bank"). Brinson Partners also serves as the investment advisor to six
other investment companies, Brinson Relationship Funds, which includes six
investment portfolios (series), Enterprise Accumulation Trust, Enterprise
International Growth Portfolio, Fort Dearborn Income Securities, Inc., Short-
Term World Income Portfolio and Pace Large Company Value Equity Investments.
Swiss Bank, with headquarters in Basel, Switzerland, is an internationally
diversified organization with operations in many aspects of the financial
services industry.
Brinson Partners receives from each Series a monthly fee at an annual rate (as
described in each Series' Prospectus and below) multiplied by the average
daily net assets of that Series for providing investment advisory services and
is responsible for paying its expenses. Under the Agreement, each Series pays
the following expenses: (1) the fees and expenses of the Trust's disinterested
Trustees; (2) the salaries and expenses of any of the Trust's officers or
employees who are not affiliated with Brinson Partners; (3) interest expenses;
(4) taxes and governmental fees; (5) brokerage commissions and other expenses
incurred in acquiring or disposing of portfolio securities; (6) the expenses
of registering and qualifying shares for sale with the Securities and Exchange
Commission and with various state securities commissions; (7) accounting and
legal costs; (8) insurance premiums; (9) fees and expenses of the Trust's
Custodian, Administrative and Transfer Agent and any related services; (10)
expenses of obtaining quotations of the Series' portfolio securities and of
pricing the Series' shares; (11) expenses of maintaining the Trust's legal
existence and of shareholders' meetings; (12) expenses of preparation and
distribution to existing shareholders of reports, proxies and prospectuses;
and (13) fees and expenses of membership in industry organizations.
S-27
<PAGE>
The Series pay the Advisor a monthly fee of the respective Series' average
daily net assets as follows: annual rates of 0.80% for the Global Fund, Global
Equity Fund and Non-U.S. Equity Fund, 0.75% for the Global Bond Fund and Non-
U.S. Bond Fund, 0.70% for the U.S. Balanced Fund and the U.S. Equity Fund,
0.60% for the Short-Term Global Income Fund, 0.50% for the U.S. Bond Fund and
0.30% of the U.S. Cash Management Fund. The Advisor has agreed irrevocably to
waive its fees and reimburse expenses to the extent that total operating
expenses exceed the following rates of the respective Series' average daily
net assets as follows, without regard to Rule 12b-1 Plan expenses for the
SwissKey Fund classes of each Series: 1.10% for the Global Fund, 1.00% for the
Global Equity Fund and the Non-U.S. Equity Fund, 0.90% for the Global Bond
Fund and Non-U.S. Bond Fund, 0.80% for the U.S. Balanced Fund and the U.S.
Equity Fund, 0.75% for the Short-Term Global Income Fund, 0.60% for the U.S.
Bond Fund, and 0.40% for the U.S. Cash Management Fund.
Advisory Fees paid to Brinson Partners were as follows:
With respect to the Global Fund, for the period August 31, 1992
(commencement of operations) through June 30, 1993, and the fiscal years
ended June 30, 1994 and June 30, 1995, advisory fees of $759,098,
$1,951,309 and $2,681,392, respectively, were accrued by the Series and the
Series paid to the Advisor $472,812, $1,860,397 and $2,681,392,
respectively; with respect to the Global Equity Fund for the period January
28, 1994 (commencement of operations) through June 30, 1994 and the fiscal
year ended June 30, 1995, advisory fees of $68,151 and $163,038,
respectively, were accrued by the Series and the Series paid to the Advisor
$0.00 for both 1994 and 1995; with respect to the Global Bond Fund, for the
period July 30, 1993 (commencement of operations) through June 30, 1994 and
the fiscal year ended June 30, 1995, advisory fees of $189,136 and
$329,156, respectively, were accrued by the Series and the Series paid to
the Advisor $0.00 and $95,216, respectively; with respect to the U.S.
Balanced Fund, for the period December 30, 1994 (commencement of
operations) through June 30, 1995, advisory fees of $441,419 were accrued
by the Series and the Series paid to the Advisor $275,707; with respect to
the U.S. Equity Fund, for the period February 22, 1994 (commencement of
operations) through June 30, 1994 and the fiscal year ended June 30, 1995,
advisory fees of $14,819 and $154,258, respectively, were accrued by the
Series and the Series paid to the Advisor $0.00 for both 1994 and 1995;
and, with respect to the Non-U.S. Equity Fund, for the period August 31,
1993 (commencement of operations) through June 30, 1994 and the fiscal year
ended June 30, 1995, advisory fees of $300,928 and $933,521, respectively,
were accrued by the Series and the Series paid to the Advisor $74,698 and
$666,061, respectively.
In addition, with respect to the Global Fund, for the period August 31, 1992
(commencement of operations) through June 30, 1993, and the fiscal years ended
June 30, 1994 and June 30, 1995, the Advisor paid expenses of $141,040,
$30,946 and $0.00, respectively; with respect to the Global Equity Fund for
the period January 28, 1994 (commencement of operations) through June 30, 1994
and the fiscal year ended June 30, 1995, the Advisor paid expenses of $82,834
and $216,658; with respect to the Global Bond Fund, for the period July 30,
1993 (commencement of operations) through June 30, 1994 and the fiscal year
ended June 30, 1995, the Advisor paid expenses of $149,667 and $233,940,
respectively; with respect to the U.S. Balanced Fund, for the period December
30, 1994 (commencement of operations) through June 30, 1995, the Advisor paid
expenses of $165,712; with respect to the U.S. Equity Fund, for the period
February 22, 1994 (commencement of operations) through June 30, 1994 and the
fiscal year ended June 30, 1995, the Advisor paid expenses of $63,834 and
$199,708, respectively; and with respect to the Non-U.S. Equity Fund, for the
period August 31, 1993 (commencement of operations) through June 30, 1994 and
the fiscal year ended June 30, 1995, the Advisor paid expenses of $136,835 and
$267,460, respectively.
General expenses of the Trust (such as costs of maintaining corporate
existence, legal fees, insurances, etc.) will be allocated among the Series in
proportion to their relative net assets. Expenses which relate exclusively to
a particular Series, such as certain registration fees, brokerage commissions
and other portfolio expenses, will be borne directly by that Series.
S-28
<PAGE>
Brinson Partners has agreed to waive its advisory fee in an amount equal to
the total expenses of a Series for any fiscal year which exceeds the
permissible limits applicable to that Series in any state in which its shares
are then qualified for sale. At the present time, the most restrictive state
expense limitation limits a fund's annual expenses (excluding interest, taxes,
distribution expense, brokerage commissions and extraordinary expenses and
other expenses subject to approval by state securities administrators) to 2.5%
of the first $30 million of its average daily net assets, 2.0% of the next $70
million of its average daily net assets and 1.5% of its average daily net
assets in excess of $100 million.
ADMINISTRATOR
Fund/Plan Services, Inc., 2 W. Elm Street, Conshohocken, PA 19428-0874 (the
"Administrator"), provides certain administrative services to the Trust
pursuant to an Administrative Services Agreement.
Under the Administrative Services Agreement, the Administrator: (1)
coordinates with the Custodian and Transfer Agent and monitors the services
they provide to the Series; (2) coordinates with and monitors any other third
parties furnishing services to the Series; (3) provides the Series with
necessary office space, telephones and other communications facilities and
personnel competent to perform administrative and clerical functions; (4)
supervises the maintenance by third parties of such books and records of the
Series as may be required by applicable federal or state law; (5) prepares or
supervises the preparation by third parties of all federal, state and local
tax returns and reports of the Series required by applicable law; (6) prepares
and, after approval by the Series, files and arranges for the distribution of
proxy materials and periodic reports to shareholders of the Series as required
by applicable law; (7) prepares and, after approval by the Series, arranges
for the filing of such registration statements and other documents with the
Securities and Exchange Commission and other federal and state regulatory
authorities as may be required by applicable law; (8) reviews and submits to
the officers of the Trust for their approval invoices or other requests for
payment of the Series' expenses and instructs the Custodian to issue checks in
payment thereof; and (9) takes such other action with respect to the Trust or
the Series as may be necessary in the opinion of the Administrator to perform
its duties under the Agreement.
As compensation for services performed under the Administrative Services
Agreement, the Administrator receives a fee payable monthly at an annual rate
(as described in each Series' Prospectus) multiplied by the average daily net
assets of the Trust.
Administration Fees paid to Fund/Plan Services, Inc. were as follows:
With respect to the Global Fund, for the period August 31, 1992
(commencement of operations) through June 30, 1993, the fiscal years ended
June 30, 1994, and June 30, 1995, $96,797, $186,897 and $211,243,
respectively; with respect to the Global Equity Fund, for the period
January 28, 1994 (commencement of operations) through June 30, 1994, and
the fiscal year ended June 30, 1995, $6,064 and $15,062, respectively; with
respect to the Global Bond Fund, for the period July 30, 1993 (commencement
of operations) through June 30, 1994 and the fiscal year ended June 30,
1995, $19,968 and $28,889, respectively; with respect to the U.S. Balanced
Fund, for the period December 30, 1994 (commencement of operations) through
June 30, 1995, $39,523; with respect to the U.S. Equity Fund, for the
period February 22, 1994 (commencement of operations) through June 30,
1994, and the fiscal year ended June 30, 1995, $3,482 and $15,362,
respectively; and with respect to the Non-U.S. Equity Fund, for the period
August 31, 1993 (commencement of operations) through June 30, 1994, and the
fiscal year ended June 30, 1995, $23,597 and $72,350, respectively.
UNDERWRITER
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken, PA
19428, acts as an underwriter of the Series' continuous offer of shares for
the purpose of facilitating the registration of the shares of the Series under
state securities laws and to assist in sales of shares pursuant to an
underwriting agreement (the "Underwriting Agreement") approved by the Board of
Trustees. In this regard, FPBS has agreed at its own expense to qualify as a
broker-dealer under all applicable federal or state laws in those states which
the Trust shall from time to time identify to FPBS as states in which it
wishes to offer its shares for sale, in order that state registrations may be
maintained for the Series.
S-29
<PAGE>
FPBS is a broker-dealer registered with the Securities and Exchange Commission
and a member in good standing of the National Association of Securities
Dealers, Inc.
For the services to be provided to the Trust under the Underwriting Agreement,
FPBS is entitled to receive an annual fixed fee of $7,500 for one series, plus
$2,500 for each additional operational series or class, payable in advance.
These fees are fixed for a one (1) year period from the date of the Agreement
and may be increased or decreased in future years by an amendment signed by
both the Trust and FPBS. The fees for such services are borne entirely by the
Advisor. The Trust does not impose any sales loads or redemption fees, nor does
it bear any fees pursuant to a Rule 12b-1 Plan. Each Series shall continue to
bear the expense of all filing or registration fees incurred in connection with
the registration of shares under state securities laws.
The Underwriting Agreement may be terminated by either party upon sixty (60)
days' prior written notice to the other party, and if so terminated, the pro
rata portion of the unearned fee will be returned to the Trust.
DISTRIBUTION PLAN
The Board of Trustees of the Trust has adopted a distribution plan pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Plan")
for each Series' SwissKey Fund class shares. The Plan permits each Series to
reimburse FPBS, Brinson Partners and others from the assets of the SwissKey
Fund class shares a quarterly fee for services and expenses incurred in
distributing and promoting sales of SwissKey Fund class shares. The aggregate
fees paid by the SwissKey Fund class shares to FPBS and others under the Plan
may not exceed 0.90% of a SwissKey Fund classes' average daily net assets in
any year.
The Plan does not apply to the Brinson Fund class shares of each Series and
those shares are not included in calculating the Plan's fees.
CODE OF ETHICS
The Trust has adopted a Code of Ethics which establishes standards by which
certain access persons of the Trust, which include officers of the Advisor and
officers and Trustees of the Trust, must abide relating to personal securities
trading conduct.
Under the Code, access persons are prohibited from engaging in certain conduct,
including, but not limited to: 1) investing in companies in which the Series
invest unless the securities have a broad public market and are registered on a
national securities exchange or are traded in the over-the-counter markets; 2)
making or maintaining an investment in any corporation or business with which
the Series which have business relationships if the investment might create, or
give the appearance of creating a conflict of interest; 3) participating in an
initial public offering; 4) entering into a securities transaction when the
access person knows or should know that such activity will anticipate, parallel
or counter any securities transaction of a Series; 5) entering into any
securities transaction, without prior approval, in connection with any security
which has been designated as restricted; 6) entering into a net short position
with respect to any security held by a Series; 7) entering into any derivative
transaction when a direct transaction in the underlying security would be a
violation; and 8) engaging in self-dealing or other transactions benefiting the
access person at the expense of the Series or its shareholders.
In addition, access persons are required to receive advance approval prior to
purchasing or selling a restricted security, and may not buy or sell certain
prohibited securities. The Advisor will identify for access persons prohibited
securities, which include securities that are being considered for purchase or
sale by any account or fund managed by the Advisor, and provide a list of such
securities to all access persons. Access persons are required to file quarterly
reports of security investment transactions. Trustees or officers who are not
"interested persons" of the Trust, as defined in the 1940 Act, need only report
a transaction in a security if such trustee or officer, at the time of the
transaction, knew or should have know, in the ordinary course of fulfilling his
official duties as a trustee or officer, that, during the 15-day period
immediately preceding or after the date of the transaction by the trustee, such
security was purchased or sold by a Series, or was being considered for
purchase by a Series.
S-30
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PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Brinson Partners is responsible for decisions to buy and sell securities for
the Series and for the placement of its portfolio business and the negotiation
of commissions, if any, paid on such transactions. Fixed income securities in
which the Series invest are traded in the over-the-counter market. These
securities are generally traded on a net basis with dealers acting as
principal for their own accounts without a stated commission, although the
bid/ask spread quoted on securities includes an implicit profit to the
dealers. In over-the-counter transactions, orders are placed directly with a
principal market-maker unless a better price and execution can be obtained by
using a broker. Brokerage commissions are paid on transactions in listed
securities, futures contracts and options thereon. Brinson Partners is
responsible for effecting portfolio transactions and will do so in a manner
deemed fair and reasonable to the Series. Under its advisory agreement with
the Global Funds and Non-U.S. Funds, Brinson Partners is authorized to utilize
the trading desk of its foreign subsidiaries to execute foreign securities
transactions, but monitors the selection by such subsidiaries of brokers and
dealers used to execute transactions for those Series. The primary
consideration in all portfolio transactions will be prompt execution of orders
in an efficient manner at the most favorable price. In selecting and
monitoring broker-dealers and negotiating commissions, Brinson Partners
considers the firm's reliability, the quality of its execution services on a
continuing basis and its financial condition. When more than one firm is
believed to meet these criteria, preference may be given to brokers who
provide research or statistical material or other services to the Series or to
Brinson Partners. Such services include advice, both directly and in writing,
as to the value of the securities; the advisability of investing in,
purchasing or selling securities; and the availability of securities, or
purchasers or sellers of securities, as well as analyses and reports
concerning issues, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. This allows Brinson
Partners to supplement its own investment research activities and obtain the
views and information of others prior to making investment decisions. Brinson
Partners is of the opinion that, because this material must be analyzed and
reviewed by its staff, its receipt and use does not tend to reduce expenses
but may benefit the Series by supplementing the Advisor's research.
Brinson Partners effects portfolio transactions for other investment companies
and advisory accounts. Research services furnished by dealers through whom the
Series effect its securities transactions may be used by Brinson Partners in
servicing all of its accounts; not all such services may be used in connection
with the Series. In the opinion of Brinson Partners, it is not possible to
measure separately the benefits from research services to each of the accounts
(including the Series). Brinson Partners will attempt to equitably allocate
portfolio transactions among the Series and others whenever concurrent
decisions are made to purchase or sell securities by the Series and another.
In making such allocations between the Series and others, the main factors to
be considered are the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for recommending investments to the Series
and the others. In some cases, this procedure could have an adverse effect on
the Series. In the opinion of Brinson Partners, however, the results of such
procedures will, on the whole, be in the best interest of each of the clients.
The Series incurred brokerage commissions as follows: (i) for the fiscal year
ended June 30, 1993--Global Fund -$70,000; (ii) for the fiscal year ended June
30, 1994, Global Fund--$141,430; Global Equity Fund--$45,153; Global Bond
Fund--$0.00; U.S. Equity Fund--$8,431; and Non-U.S. Equity Fund--$156,842,
respectively; (iii) for the fiscal year ended June 30, 1995, Global Fund--
$196,831; Global Equity Fund--$34,283; Global Bond Fund--$0; U.S. Balanced
Fund--$88,904; U.S. Equity Fund--$53,830; and Non-U.S. Equity Fund--$172,829,
respectively. For the fiscal year ended June 30, 1995, the Trust and the
Advisor had no agreements or understandings with a broker or otherwise causing
brokerage transactions or commissions for research services.
PORTFOLIO TURNOVER
The Series are free to dispose of their portfolio securities at any time,
subject to complying with the Internal Revenue Code and the Act, when changes
in circumstances or conditions make such a move desirable in light of the
investment objective. The Series will not attempt to achieve or be limited to
a predetermined rate of portfolio turnover, such a turnover always being
incidental to transactions undertaken with a view to achieving that Series'
investment objective.
S-31
<PAGE>
The Series do not intend to use short-term trading as a primary means of
achieving their investment objectives. The rate of portfolio turnover shall be
calculated by dividing (a) the lesser of purchases and sales of portfolio
securities for the particular fiscal year by (b) the monthly average of the
value of the portfolio securities owned by that Series during the particular
fiscal year. Such monthly average shall be calculated by totaling the values of
the portfolio securities as of the beginning and end of the first month of the
particular fiscal year and as of the end of each of the succeeding eleven
months and dividing the sum by 13.
Under normal circumstances, the portfolio turnover rate for the Global Equity
Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash
Management Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund is not expected to
exceed 100%. The portfolio turnover rates for the Global Fund, Global Bond
Fund, and Short-Term Global Income Fund, however, may exceed 100%. High
portfolio turnover rates (over 100%) may involve correspondingly greater
brokerage commissions and other transaction costs, which will be borne directly
by the Series and ultimately by that Series' shareholders. In addition, high
portfolio turnover may result in increased short-term capital gains, which,
when distributed to shareholders, are treated as ordinary income.
With respect to the Global Fund, for the period from August 31, 1992
(commencement of operations) to June 30, 1993, and for the fiscal years ended
June 30, 1994 and June 30, 1995, respectively, the portfolio turnover rate of
the Series was 149%, 231% and 238%, respectively. With respect to the Global
Bond Fund, for the period July 30, 1993 (commencement of operations) to June
30, 1994 and the fiscal year ended June 30, 1995, the portfolio turnover rate
of the Series was 189% and 199%, respectively. The significant variation in
portfolio turnover rates over such periods was due to an increase in the assets
of the Series which caused the Series to reposition their portfolio holdings in
order to meet their investment objectives and policies.
SHARES OF BENEFICIAL INTEREST
The Trust presently offers ten Series of shares of beneficial interest, which
offer two classes of shares. Each representing an equal proportionate interest
in the assets and liabilities of the applicable Series and each having the same
voting and other rights and preferences as the other class of that Series,
except that shares of the Brinson Fund class may not vote on any matter
affecting only the SwissKey Fund classes' Distribution Plan under Rule 12b-1
and neither class may vote on matters that affect only the other class. Under
Delaware law, the Trust does not normally hold annual meetings of shareholders.
Shareholders' meetings may be held from time to time to consider certain
matters including changes to a Series' fundamental investment objective and
fundamental investment policies, changes to the Trust's investment advisory
agreement and the election of Trustees when required by the Act. When matters
are submitted to shareholders for a vote, shareholders are entitled to one vote
per share with proportionate voting for fractional shares. The shares of the
Series do not have cumulative voting rights or any preemptive or conversion
rights, and the Trustees have authority from time to time to divide or combine
the shares of the Series into a greater or lesser number of shares so affected.
In the case of a liquidation of a Series, each shareholder of the Series will
be entitled to share, based upon his percentage share ownership, in the
distribution out of assets, net of liabilities, of the Series. No shareholder
is liable for further calls or assessment by the Series.
On any matters affecting only one Series or class, only the shareholders of
that Series or class are entitled to vote. On matters relating to the Trust but
affecting the Series differently, separate votes by the Series or class are
required. With respect to the submission to shareholder vote of a matter
requiring separate voting by a Series, the matter shall have been effectively
acted upon with respect to any Series or class if a majority of the outstanding
voting securities of that Series votes for the approval of the matter,
notwithstanding that: (1) the matter has not been approved by a majority of the
outstanding voting securities of any other Series; and (2) the matter has not
been approved by a majority of the outstanding voting securities of the Trust.
PURCHASES
Shares of the Brinson Fund class and the SwissKey Fund class of each Series are
sold at the net asset value next determined after the receipt of a purchase
application in proper form by the Transfer Agent. The minimum for initial
investments with respect to the Brinson Fund class for each Series is $100,000;
subsequent investment minimums are $2,500. The minimum for initial investments
with respect to the SwissKey Fund class for each Series is $1,000; subsequent
investment minimums are $50. A more detailed description of methods of purchase
is included in the Prospectuses.
S-32
<PAGE>
Certificates representing shares purchased are not issued. However, such
purchases are confirmed to the investor and credited to the shareholder's
account on the books maintained by the Transfer Agent. The investor will have
the same rights of ownership with respect to such shares as if certificates had
been issued.
EXCHANGES OF SHARES
Shares of the Brinson Fund class of a Series may only be exchanged for any
other Brinson Fund class of another Series in the Trust. The SwissKey Fund
class of a Series may be exchanged for any other SwissKey Fund class of another
Series in the Trust. Exchanges will not be permitted between the Brinson Fund
class and the SwissKey Fund class.
The SwissKey Fund class of a Series also may be exchanged for shares of the SBC
Short-Term World Income Fund, a non-diversified, open-end management investment
company advised by Brinson Partners, Inc.
Each qualifying exchange will be made on the basis of both Funds' relative net
asset values per share next computed following receipt of the order in proper
form by the Transfer Agent. Exchanges may be made by telephone if the
shareholder's Account Application Form includes specific authorization for
telephone exchanges. The telephone exchange privilege may be difficult to
implement during times of drastic economic or market changes.
The transactions described above will result in a taxable gain or loss for
federal income tax purposes. Generally, any such taxable gain or loss will be a
capital gain or loss (long-term or short-term, depending on the holding period
of the shares) in the amount of the difference between the net asset value of
the shares surrendered and the shareholder's tax basis for those shares. Each
investor should consult his or her tax adviser regarding the tax consequences
of an exchange transaction.
Any shareholder who wishes to make an exchange should first obtain and review a
prospectus of the Series to be acquired in the exchange. Requests for telephone
exchanges must be received prior to the close of regular trading on the New
York Stock Exchange ("NYSE") on any day on which such exchange is open for
regular trading.
At the discretion of the Trust, this exchange privilege may be terminated or
modified at any time for any of the participating Series upon 60 days' prior
written notice to shareholders. Contact the Transfer Agent for details about a
particular exchange.
NET ASSET VALUE
The net asset value per share is calculated separately for each class of each
Series. The net asset value per share of a Series is computed by dividing the
value of the assets of the Series, less its liabilities, by the number of
shares of the Series outstanding.
Each class of a Series will bear pro rata all of the common expenses of that
Series. The net asset values of all outstanding shares of each class of a
Series will be computed on a pro rata basis for each outstanding share based on
the proportionate participation in the Series represented by the value of
shares of that Series. All income earned and expenses incurred by a Series,
will be borne on a pro rata basis by each outstanding share of a class, based
on each class' percentage in the Series represented by the value of such shares
of such classes, except that the Brinson Fund class will not incur any of the
expenses under the SwissKey Fund classes' 12b-1 Plan.
Portfolio securities are valued and net asset value per share is determined as
of the close of regular trading on the NYSE which currently is 4:00 p.m.
Eastern time, except that orders and payment for the U.S. Cash Management
Series must be received by 12:00 p.m. Eastern time, on each day the NYSE is
open for trading. The NYSE is open for trading on every day except Saturdays,
Sundays and the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
S-33
<PAGE>
Portfolio securities listed on a national or foreign securities exchange and
over-the-counter securities carried as NASDAQ National Market Issues are valued
on the basis of the last sale on the date the valuation is made. If there has
been no sale that day, securities traded on exchanges or over NASDAQ are valued
at the last reported bid price, using prices as of the close of trading on that
exchange. Other portfolio securities which are traded in the over-the-counter
market are valued at the last available bid price. Valuations of fixed income
securities may be obtained from a pricing service when such prices are believed
to reflect the fair value of such securities. Use of a pricing service has been
approved by the Board of Trustees. Futures contracts and options thereon are
valued at their daily quoted settlement price. For valuation purposes, foreign
securities initially expressed in foreign currency values will be converted
into U.S. dollar values at the mean between the bid and offered quotations of
such currencies against U.S. dollars as last quoted by any recognized dealer or
major bank which is a regular participant in the institutional foreign exchange
markets. Securities with a remaining maturity of 60 days or less are valued at
amortized cost, which approximates market value. Securities (including over-
the-counter options) for which market quotations are not readily-available and
other assets are valued at their fair value as determined in good faith by or
under the direction of the Trustees.
REDEMPTIONS
Under normal circumstances shareholders may redeem their shares at any time
without a fee. The redemption price will be based upon the net asset value per
share next determined after receipt of the redemption request, provided it has
been submitted in the manner described below. The redemption price may be more
or less than their cost, depending upon the net asset value per share at the
time of redemption.
Payment for shares tendered for redemption is made by check within five
business days after tender in proper form, except that the Trust reserves the
right to suspend the right of redemption, or to postpone the date of payment
upon redemption beyond five business days, (I) for any period during which the
NYSE is closed (other than customary weekend and holiday closings) or during
which trading on the NYSE is restricted, (ii) for any period during which an
emergency exists as determined by the Securities and Exchange Commission as a
result of which disposal of securities owned by a Series is not reasonably
practicable or it is not reasonably practicable for the Series fairly to
determine the value of its net assets or (iii) for such other periods as the
Securities and Exchange Commission may by order permit for the protection of
shareholders of the Series.
Under unusual circumstances, when the Board of Trustees deems it in the best
interest of the Series' shareholders, the Trust may make payment for shares
repurchased or redeemed in whole or in part in securities of the Series taken
at current values. With respect to such redemptions in kind, the Trust has made
an election pursuant to Rule 18f-1 under the Act. This will require the Trust
to redeem in cash at a shareholder's election in any case where the redemption
involves less than $250,000 (or 1% of the Series' net asset value at the
beginning of each 90 day period during which such redemptions are in effect, if
that amount is less than $250,000). Should payment be made in securities, the
redeeming shareholder may incur brokerage costs in converting such securities
to cash.
TAXATION
Each of the Series has qualified, and intends to continue to qualify each year,
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). In order to so qualify, a mutual fund
must, among other things, (I) derive at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, gains
from the sale of securities or foreign currencies, or other income (including
but not limited to gains from options, futures or forward contracts) derived
with respect to its business of investing in such stock, securities or
currencies; (ii) derive less than 30% of its gross income from the sale or
other disposition of stock or securities or certain futures and options thereon
held for less than three months ("short-short gains"); (iii) distribute at
least 90% of its dividend, interest and certain other taxable income each year;
and (iv) at the end of each fiscal quarter maintain at least 50% of the value
of its total assets in cash, government securities, securities of other
regulated investment companies and other securities of issuers which represent,
with respect to each issuer, no more than 5% of the value of a fund's total
assets and 10% of the outstanding voting securities of such issuer, and with no
more than 25% of its assets invested in the securities (other than those of the
government or other regulated investment companies) of any one issuer or of two
or more issuers which the fund controls and which are engaged in the same,
similar or related trades and businesses.
S-34
<PAGE>
To the extent each of the Series qualifies for treatment as a regulated
investment company, they will not be subject to federal income tax on income
and net capital gains paid to shareholders in the form of dividends or capital
gains distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any, of each
Series' "required distributions" over actual distributions in any calendar
year. Generally, the "required distribution" is 98% of a Series' ordinary
income for the calendar year plus 98% of its capital gain net income recognized
during the one-year period ending on October 31 plus undistributed amounts from
prior years. The Series intend to make distributions sufficient to avoid
imposition of the excise tax. Distributions declared by the Series during
October, November or December to shareholders of record during such month and
paid by January 31 of the following year will be taxable to shareholders in the
calendar year in which they are declared, rather than the calendar year in
which they are received.
Gains or losses attributable to fluctuations in exchange rates which occur
between the time a Series accrues interest or other receivables or accrues
expenses or liabilities denominated in a foreign currency and the time the
Series actually collects such receivables, or pays such liabilities, are
generally treated as ordinary income or loss. Similarly, a portion of the gains
or losses realized on disposition of debt securities denominated in a foreign
currency may also be treated as ordinary gain or loss. These gains, referred to
under the Code as "Section 988" gains or losses, may increase or decrease the
amount of a Series' investment company taxable income to be distributed to its
shareholders, rather than increasing or decreasing the amount of the Series'
capital gains or losses.
When a Series writes a call, or purchases a put option, an amount equal to the
premium received or paid by it is included in the Series' assets and
liabilities as an asset and as an equivalent liability.
In writing a call, the amount of the liability is subsequently "marked-to-
market" to reflect the current market value of the option written. The current
market value of a written option is the last sale price on the principal
Exchange on which such option is traded or, in the absence of a sale, the mean
between the last bid and asked prices. If an option which a Series has written
expires on its stipulated expiration date, the Series recognizes a short-term
capital gain. If a Series enters into a closing purchase transaction with
respect to an option which the Series has written, the Series realizes a short-
term gain (or loss if the cost of the closing transaction exceeds the premium
received when the option was sold) without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If a call option which a Series has written is exercised, the
Series realizes a capital gain or loss from the sale of the underlying security
and the proceeds from such sale are increased by the premium originally
received.
The premium paid by a Series for the purchase of a put option is recorded in
the Series' assets and liabilities as an investment and subsequently adjusted
daily to the current market value of the option. For example, if the current
market value of the option exceeds the premium paid, the excess would be
unrealized appreciation and, conversely, if the premium exceeds the current
market value, such excess would be unrealized depreciation. The current market
value of a purchased option is the last sale price on the principal Exchange on
which such option is traded or, in the absence of a sale, the mean between the
last bid and asked prices. If an option which a Series has purchased expires on
the stipulated expiration date, the Series realizes a short-term or long-term
capital loss for Federal income tax purposes in the amount of the cost of the
option. If a Series exercises a put option, it realizes a capital gain or loss
(long-term or short-term, depending on the holding period of the underlying
security) from the sale which will be decreased by the premium originally paid.
Accounting for options on certain stock indices will be in accordance with
generally accepted accounting principles. The amount of any realized gain or
loss on closing out such a position will result in a realized gain or loss for
tax purposes. Such options held by a Series at the end of each fiscal year on a
broad-based stock index will be required to be "marked-to-market" for Federal
income tax purposes. Sixty percent of any net gain or loss recognized on such
deemed sales or on any actual sales will be treated as long-term capital gain
or loss and the remainder will be treated as short-term capital gain or loss.
Certain options, futures contracts and options on
S-35
<PAGE>
futures contracts utilized by the Series are "Section 1256 contracts." Any
gains or losses on Section 1256 contracts held by a Series at the end of each
taxable year (and on October 31 of each year for purposes of the 4% excise
tax) are "marked-to-market" with the result that unrealized gains or losses
are treated as though they were realized and the resulting gain or loss is
treated as a 60/40 gain or loss. Shareholders will be subject to federal
income taxes on distributions made by the Series whether received in cash or
additional shares of the Series. Distributions of net investment income and
net short-term capital gains, if any, will be taxable to shareholders as
ordinary income. Distributions of net long-term capital gains, if any, will be
taxable to shareholders as long-term capital gains, without regard to how long
a shareholder has held shares of the Series. A loss on the sale of shares held
for twelve months or less will be treated as a long-term capital loss to the
extent of any long-term capital gain dividend paid to the shareholder with
respect to such shares. Dividends eligible for designation under the dividends
received deduction and paid by a Series may qualify in part for the 70%
dividends received deduction for corporations provided, however, that those
shares have been held for at least 45 days. The Series will notify
shareholders each year of the amount of dividends and distributions, including
the amount of any distribution of long-term capital gains and the portion of
its dividends which may qualify for the 70% deduction.
Each class of shares of a Series will share proportionately in the investment
income and expenses of that Series, except that the respective SwissKey Fund
class for each Series alone will incur distribution fees under their
respective 12b-1 Plans.
It is expected that certain dividends and interest received by the Global
Funds and Non-U.S. Funds will be subject to foreign withholding taxes. If more
than 50% in value of the total assets of a fund at the close of any taxable
year consists of stocks or securities of foreign corporations, such fund may
elect to treat any foreign taxes paid by it as if paid by its shareholders.
These Series will notify shareholders in writing each year whether it has made
the election and the amount of foreign taxes it has elected to have treated as
paid by the shareholders. If the Series make the election, its shareholders
will be required to include in gross income their proportionate share of the
amount of foreign taxes paid by the Series and will be entitled to claim
either a credit or deduction for their share of the taxes in computing their
U.S. federal income tax subject to certain limitations. No deduction for
foreign taxes may be claimed by shareholders who do not itemize deductions.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the shareowner's U.S. tax attributable to his or her total foreign
source taxable income. For this purpose, the source of each Series' income
flows through to its shareholders. Gains from the sale of securities will be
treated as derived from U.S. sources and certain currency fluctuation gains,
including fluctuation gains from foreign currency denominated debt securities,
receivables and payables, will be treated income derived from U.S. sources.
The limitation on the foreign tax credit is applied separately to foreign
source passive income, (as defined for purposes of foreign tax credit) such as
foreign source passive income received from the respective Series. Because of
changes made by the Code, shareholders may be unable to claim a credit for the
full amount of their proportionate share of the foreign taxes paid by the
Series.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and regulations. The Code and regulations are subject to change by legislative
or administrative action at any time and retroactively.
Dividends and distributions also may be subject to state and local taxes.
Shareholders are urged to consult their tax advisors regarding specific
questions as to federal, state and local taxes as well as the application of
the foreign tax credit.
The foregoing discussion relates solely to U.S. federal income tax law. Non-
U.S. investors should consult their tax advisors concerning the tax
consequences of ownership of shares of the Series, including the possibility
that distributions may be subject to a 30% U.S. withholding tax (or a reduced
rate of withholding provided by treaty).
S-36
<PAGE>
PERFORMANCE CALCULATIONS
Performance information for the SwissKey Fund class and Brinson Fund class
shares of each Series will vary due to the effect of expense ratios on the
performance calculations.
TOTAL RETURN
Current yield and total return quotations used by the Series (and both classes
of shares) are based on standardized methods of computing performance mandated
by SEC Rules. As the following formula indicates, the average annual total
return is determined by multiplying a hypothetical initial purchase order of
$1,000 by the average annual compound rate of return (including capital
appreciation/depreciation and dividends and distributions paid and reinvested)
for the stated period less any fees charged to all shareholder accounts and
annualizing the result. The calculation assumes that all dividends and
distributions are reinvested at the et asset value on the reinvestment dates
during the period. The quotation assumes the account was completely redeemed
at the end of each period and deduction of all applicable charges and fees.
According to the Commission formula:
P(1+T)n=ERV
where:
P= a hypothetical initial payment of $1,000.
T= average annual total return
n= number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5 or 10 year periods at the end of
the 1, 5 or 10 year periods (or fractional portion thereof).
Based upon the foregoing calculations, the average annual total return for:
(i) the Global Fund for the period August 31, 1992 (commencement of
operations) through June 30, 1995 and the fiscal year ended June 30, 1995, was
25.64% and 8.40%, respectively; (ii) the Global Equity Fund for the period
January 28,1994 (commencement of operations) through June 30, 1995 and the
fiscal year ended June 30, 1995 was 1.08% and 0.76%, respectively; (iii) the
Global Bond Fund for the period July 30, 1993 (commencement of operations)
through June 30, 1995 and the fiscal year ended June 30, 1995 was 10.46% and
5.33%, respectively; (iv) the U.S. Balanced Fund for the period December 30,
1994 (commencement of operations) through June 30, 1995 was 13.91%; (v) the
U.S. Equity Fund for the period February 22, 1994 (commencement of operations)
through June 30, 1995 and the fiscal year ended June 30, 1995 was 17.80% and
13.07%, respectively; (vi) the Brinson U.S. Bond Fund for the period August
31, 1995 (commencement of operations) through December 31, 1995 was 5.49%;
(vii) the SwissKey U.S. Bond Fund for the period August 31, 1995 (commencement
of operations) through December 31, 1995 was 5.29%; and (viii) the Non-U.S.
Equity Fund for the period August 31, 1993 (commencement of operations)
through June 30, 1995 and the fiscal year ended June 30, 1995 was 2.55% and
1.40%, respectively.
YIELD
As indicated below, current yield is determined by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period and annualizing the result. Expenses
accrued for the period include any fees charged to all shareholders during the
30-day base periods. According to the SEC formula:
Yield = 2[(a-b + 1)/6/-1]
-----------
cd
where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
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The yield of the Series may be calculated by dividing the net investment income
per share earned by the particular Series during a 30-day (or one month) period
by the net asset value per share on the last day of the period and annualizing
the result on a semi-annual basis. A Series' net investment income per share
earned during the period is based on the average daily number of shares
outstanding during the period entitled to receive dividends and includes
dividends and interest earned during the period minus expenses accrued for the
period, net of reimbursements.
YIELD OF U.S. CASH MANAGEMENT FUND
As summarized in the Prospectus, the yield of the SwissKey Fund class and
Brinson Fund class of the U.S. Cash Management Fund for a seven-day period (the
"base period") will be computed by determining the net change in value
(calculated as set forth below) of a hypothetical account having a balance of
one share at the beginning of the period, dividing the net change in account
value by the value of the account at the beginning of the base period to obtain
the base period return, and multiplying the base period return by 365/7 with
the resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares, but will not include
realized gains or losses or unrealized appreciation or depreciation on
portfolio investments. Yield may also be calculated on a compound basis (the
"effective yield"), which assumes that net income is reinvested in shares of
the Series at the same rate as net income is earned for the base period.
The yield and effective yield of the U.S. Cash Management Fund will vary in
response to fluctuations in interest rates and in the expenses of the Series.
For comparative purposes the current and effective yields should be compared to
current and effective yields offered by competing financial institutions for
the same base period and calculated by the methods described above.
S-38
<PAGE>
CORPORATE DEBT RATINGS
APPENDIX A
Moody's Investors Service, Inc. describes classifications of corporate bonds
as follows:
AAA--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt-edged". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA--Bonds which are rated Aa are judged to be of high-quality by all
standards. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
BAA--Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
CAA--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
CA--Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's also supplies numerical indicators 1, 2, and 3 to rating categories.
The modifier 1 indicates the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates a ranking toward the lower end of the category.
Standard & Poor's Corporation describes classifications of corporate bonds as
follows:
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong and in the majority of
instances they differ from the AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the A category.
S-39
<PAGE>
BB, B, CCC, CC--Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation and CC the
highest degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
S-40
<PAGE>
BRINSON GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------- -----------
<S> <C> <C>
Equities -- 35.97%
U.S. EQUITIES -- 28.77%
Aetna Life & Casualty................................ 22,200 $ 1,395,825
Air & Water Technologies Corp. (c)................... 24,800 148,800
Allergan, Inc........................................ 58,600 1,589,525
Alza Corp. (c)....................................... 46,400 1,084,600
American Mobile Satellite (c)........................ 8,700 228,375
AON Corp............................................. 71,300 2,655,925
AST Research Corp. (c)............................... 30,300 469,650
Automatic Data Processing, Inc....................... 33,500 2,106,313
Ball Corp............................................ 11,500 401,062
Bard (C.R.), Inc..................................... 35,500 1,065,000
Beckman Instruments, Inc............................. 23,000 641,125
Biogen, Inc. (c)..................................... 5,300 235,850
Birmingham Steel..................................... 23,200 429,200
Boeing, Inc.......................................... 31,300 1,960,163
Burlington Northern, Inc............................. 54,000 3,422,250
Campbell Soup Co..................................... 17,900 877,100
Centerior Energy Co.................................. 41,200 396,550
Chubb Corp........................................... 6,600 528,825
CIGNA Corp........................................... 43,000 3,337,875
Citicorp............................................. 97,800 5,660,175
CMS Energy Corp...................................... 54,300 1,337,137
Coca-Cola Enterprises, Inc........................... 90,800 1,986,250
Comerica, Inc........................................ 15,800 507,575
Computer Sciences Corp. (c).......................... 7,700 437,938
Cooper Industries, Inc............................... 68,600 2,709,700
Enron Corp........................................... 32,300 1,134,537
Entergy Corp......................................... 63,000 1,519,875
Federated Department Stores (c)...................... 41,200 1,060,900
FHP International Corp. (c).......................... 15,500 356,500
First Financial Management Corp...................... 30,900 2,641,950
Ford Motor Co........................................ 50,200 1,493,450
Forest Laboratories, Inc. (c)........................ 35,100 1,557,562
Genzyme Corp. (c).................................... 7,500 300,000
Goodyear Tire and Rubber............................. 41,700 1,720,125
Grand Metro.......................................... 60,000 1,665,000
Harnischfeger Industries, Inc........................ 8,000 277,000
Hillenbrand Industries, Inc.......................... 14,600 454,425
Honeywell, Inc....................................... 101,200 4,364,250
Illinova Holdings Corp............................... 31,900 809,463
Inland Steel......................................... 34,000 1,037,000
Interpublic Group of Companies....................... 23,000 862,500
Kimberly-Clark Corp.................................. 43,000 2,574,625
Kroger Co. (c)....................................... 33,100 889,562
Liz Claiborne........................................ 17,400 369,750
Lockheed Martin Corp................................. 73,300 4,627,063
LTV Corp............................................. 33,600 491,400
Lyondell Petrochemical Co............................ 56,000 1,435,000
Magna Group, Inc..................................... 11,500 253,000
Manor Care, Inc...................................... 37,150 1,081,994
Mattel............................................... 77,700 2,020,200
Melville Corp........................................ 58,500 2,003,625
National Semiconductor Corp. (c)..................... 36,100 1,001,775
Nextel Communications, Inc. (c)...................... 31,500 444,937
Occidental Petroleum Corp............................ 3,300 75,488
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------- -----------
<S> <C> <C>
Old Republic International Corp...................... 22,200 $ 579,975
Owens Illinois, Inc. (c)............................. 65,200 847,600
Pentair, Inc......................................... 13,400 582,900
Pfizer, Inc.......................................... 27,100 2,503,362
Philip Morris Companies, Inc......................... 17,000 1,264,375
Raychem Corp......................................... 20,500 786,688
RJR Nabisco Convertible Preferred "C"................ 186,500 1,142,313
RJR Nabisco Holdings Corp............................ 56,340 1,570,478
Schering Plough Corp................................. 88,300 3,896,237
Schlumberger Ltd..................................... 35,300 2,193,013
Seagate Technology (c)............................... 31,300 1,228,525
Sprint Corp.......................................... 84,100 2,827,862
State Street Boston Corp............................. 25,100 925,563
Stone Container Corp. (c)............................ 16,796 356,915
Tenneco, Inc......................................... 37,100 1,706,600
Timken Co............................................ 24,100 1,111,612
TJX Cos.............................................. 36,300 480,975
Tosco Corp........................................... 10,300 328,312
Transamerica Corp.................................... 33,000 1,922,250
Ultramar Corp........................................ 17,100 431,775
US Bancorp........................................... 39,000 938,437
USF&G Corp........................................... 55,700 905,125
Walgreen Co.......................................... 35,100 1,759,388
Wellman, Inc......................................... 7,300 199,837
Westvaco Corp........................................ 13,200 584,100
------------
Total U.S. Equities.................................. 105,209,961
------------
NON-U.S. EQUITIES -- 7.20%
AUSTRALIA -- 0.35%
Amcor Ltd............................................ 7,000 51,506
ANZ Banking Group.................................... 11,953 42,366
Broken Hill Proprietary.............................. 26,180 321,427
BTR Nylex Ltd........................................ 29,976 57,160
Burns Philp Co....................................... 15,000 31,261
Coles Myer Ltd....................................... 17,000 53,144
CRA Ltd.............................................. 8,300 112,612
Lend Lease........................................... 3,491 44,494
National Australia Bank.............................. 18,547 146,199
News Corp............................................ 13,500 75,218
News Corp. Preferred................................. 4,750 23,469
Pacific Dunlop Ltd................................... 39,200 82,251
Santos............................................... 13,800 33,065
Southcorp Holdings................................... 31,041 61,831
Western Mining Corp.................................. 8,100 44,384
Westpac Bank Corp.................................... 29,638 106,938
------------
1,287,325
------------
BELGIUM -- 0.15%
Electrabel........................................... 650 137,275
Fortis AG............................................ 497 52,569
Groupe Bruxelles Lambert............................. 330 44,182
Kredietbank.......................................... 310 73,313
Petrofina............................................ 210 63,390
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
BRINSON GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------------
<S> <C> <C>
BELGIUM (CONTINUED)
Petrofina Warrants (c)............................... 13 $ 181
Societe Gen De Belgique.............................. 533 38,771
Solvay............................................... 100 55,345
Tractebel............................................ 165 59,866
Union Mineire........................................ 350 22,876
------------
547,768
------------
CANADA -- 0.36%
Alcan Aluminum Ltd................................... 3,500 105,728
Bank of Montreal..................................... 7,500 156,955
Barrick Gold Corp.................................... 2,700 68,296
Canadian Pacific Ltd................................. 9,000 154,771
Imperial Oil Canada Ltd.............................. 3,800 141,069
Noranda Inc.......................................... 3,200 62,891
Norcen Energy........................................ 2,000 26,933
Northern Telecom Ltd................................. 1,800 65,184
Nova Corporation of Alberta.......................... 5,600 47,387
Oshawa Group Ltd. "A"................................ 2,200 34,030
Royal Bank of Canada................................. 6,000 134,299
Seagram Co Ltd....................................... 4,700 161,650
Thomson Corp......................................... 7,600 103,727
TransCanada Pipeline................................. 4,700 62,864
------------
1,325,784
------------
FRANCE -- 0.41%
Alcatel Alsthom...................................... 715 64,427
Banque Nat'l Paris................................... 2,100 101,372
Carnaud Metal Box.................................... 1,500 67,086
Cie Bancaire......................................... 533 63,773
Cie de Saint Gobain.................................. 844 102,029
Cie Fin de Suez...................................... 1,289 71,769
Colas................................................ 214 39,688
Credit Local de France............................... 900 83,548
GAN.................................................. 300 9,525
Generale des Eaux.................................... 1,066 118,750
Groupe de la Cite.................................... 250 44,353
LVMH................................................. 719 129,487
Michelin Class B (c)................................. 700 31,032
Pechiney Cert D'Invest............................... 650 37,505
Peugeot.............................................. 600 83,301
Sanofi............................................... 800 44,311
Societe Generale..................................... 1,014 118,605
Societe Nationale Elf Aquitaine...................... 1,441 106,570
Total Co. "B"........................................ 2,182 131,438
UAP.................................................. 1,500 39,360
------------
1,487,929
------------
GERMANY -- 0.36%
Allianz.............................................. 82 146,867
Allianz Rights....................................... 82 6,221
BASF................................................. 290 61,851
Bayer................................................ 304 75,489
Bayer Motoren Werken................................. 130 71,288
Bayer Vereinsbank.................................... 185 56,004
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------------
<S> <C> <C>
Commerzbank.......................................... 270 $ 64,667
Daimler-Benz......................................... 100 45,987
Deutsche Bank........................................ 4,100 199,357
Hoechst.............................................. 300 64,699
Kaufhof Holdings..................................... 250 89,769
Mannesmann........................................... 210 64,103
Munchener Ruck (c)................................... 48 105,079
Munchener Ruck Warrants '98 (c)...................... 2 263
Preussag............................................. 225 67,300
Schering............................................. 590 41,220
Veba................................................. 385 151,040
------------
1,311,204
------------
HONG KONG -- 0.14%
China Light & Power.................................. 19,600 100,818
Hang Seng Bank....................................... 5,200 39,651
Hong Kong Land Holdings.............................. 26,000 47,320
Hong Kong Telecommunications......................... 14,000 27,684
Hutchison Whampoa.................................... 23,000 111,173
Jardine Matheson Holdings............................ 8,000 58,800
Swire Pacific "A".................................... 11,000 83,877
Wharf Holdings....................................... 13,000 42,423
------------
511,746
------------
ITALY -- 0.10%
Assic Gererali....................................... 3,300 77,511
Fiat Spa Priv (c).................................... 20,000 43,494
Instituto Mobilaire Italiano......................... 9,000 55,034
Italgas.............................................. 9,000 23,366
Mediobanca........................................... 2,000 14,521
Montedison (c)....................................... 32,000 22,891
La Rinascente Savings................................ 8,000 20,917
Sai Di Risp.......................................... 5,000 21,350
Sip Di Risp.......................................... 38,000 80,318
------------
359,402
------------
JAPAN -- 3.45%
Amada................................................ 21,000 179,350
Asahi Glass Co....................................... 25,000 275,651
Bank of Tokyo........................................ 12,000 192,249
Canon, Inc........................................... 19,000 308,870
Canon Sales.......................................... 6,000 166,097
Citizen Watch Co..................................... 19,000 117,505
Dai Nippon Printing.................................. 20,000 318,059
Daikin Kogyo Co...................................... 24,000 192,814
Daiwa Bank........................................... 16,000 144,187
Daiwa House Industries............................... 11,000 168,453
Fanuc Co............................................. 5,300 228,507
Fujitsu.............................................. 36,000 358,346
Hitachi Ltd.......................................... 63,000 627,106
Honda Motor Co....................................... 12,000 183,767
Inax................................................. 20,000 192,484
Isetan............................................... 8,000 108,376
Ito Yokado Co........................................ 11,000 579,220
Keio Teito Electric Railway.......................... 25,000 146,072
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
BRINSON GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------------
<S> <C> <C>
JAPAN (CONTINUED)
Kintetsu............................................. 25,000 $ 219,107
Kuraray Co. Ltd...................................... 13,000 141,041
Maeda Road Construction.............................. 5,000 96,596
Marui Co............................................. 6,000 93,940
Matsushita Electric Industrial....................... 35,000 544,234
Mitsubishi Bank...................................... 9,000 194,016
Mitsubishi Paper..................................... 25,000 131,346
NGK Insulators....................................... 36,000 326,116
Nichii Co............................................ 16,000 173,589
Nintendo............................................. 1,900 109,000
Nippon Denso Co...................................... 14,000 253,976
Nippon Meat Packers.................................. 13,000 189,893
Nippon Steel Corp.................................... 18,000 58,523
Orix Corp............................................ 2,000 66,439
Osaka Gas Corp....................................... 91,000 335,528
Pioneer Electronics.................................. 10,000 169,631
Sankyo Co............................................ 15,700 364,342
Secom Co............................................. 5,000 313,936
Seino Transportation................................. 7,000 117,917
Sekisui House........................................ 43,000 531,865
Shinmaywa Industries................................. 12,000 100,507
Sony Corp............................................ 7,000 335,611
Sumitomo Bank........................................ 23,000 398,280
Sumitomo Electric Industries......................... 17,000 202,262
Takeda Chemical Industries........................... 25,000 329,838
TDK Corp............................................. 7,000 318,294
Tokio Marine & Fire.................................. 19,000 217,552
Tokyo Electric Power................................. 8,900 272,588
Tokyo Steel Mfg...................................... 16,000 273,295
Tonen Corp........................................... 12,000 186,594
Toray Industries, Inc................................ 71,000 440,770
Toshiba Corp......................................... 69,000 436,483
Toyo Suisan Kaisha................................... 5,000 50,477
Toyota Motor Corp.................................... 7,000 138,532
------------
12,619,231
------------
MALAYSIA -- 0.03%
Genting.............................................. 1,000 9,886
Hume Industries...................................... 1,000 5,456
Kuala Lumpur Kepong.................................. 2,000 6,358
Malayan Bank......................................... 3,000 23,750
Nestle Malaysia...................................... 1,000 7,670
Sime Darby........................................... 7,000 19,525
Telekom Malaysia..................................... 2,000 15,177
Tenaga Nasional...................................... 3,000 12,244
------------
100,066
------------
NETHERLANDS -- 0.39%
ABN-AMRO Holdings.................................... 4,302 165,920
ABN-AMRO Holdings Coupon............................. 4,302 4,828
D.S.M................................................ 570 49,078
Elsevier............................................. 6,500 76,717
Internationale Nederlanden Grp....................... 3,776 208,709
Internationale Nederlanden Grp Coupon................ 3,776 5,236
KPN.................................................. 1,500 53,886
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------------
<S> <C> <C>
KPN Coupon........................................... 1,500 $ 1,451
Philips Electronics.................................. 1,300 55,002
Royal Dutch Petroleum................................ 1,400 170,835
Royal Dutch Petroleum ADS (a)........................ 3,300 402,187
Unilever............................................. 1,710 222,338
------------
1,416,187
------------
NEW ZEALAND -- 0.11%
Brierly Investment................................... 98,000 74,004
Carter Holt Harvey................................... 46,000 112,510
Fletcher Challenge Ltd............................... 42,000 117,883
New Zealand Telecom ADS (a).......................... 1,900 115,188
------------
419,585
------------
SPAIN -- 0.13%
Banco Bilbao-Vizcaya................................. 900 25,977
Banco Intercontinental............................... 430 38,707
Banco Popular........................................ 240 35,676
Banco Santander...................................... 1,400 55,207
Empresa NAC Electric................................. 1,000 49,385
Hidro Iberdrola...................................... 10,100 76,069
Repsol ADR (a)....................................... 2,000 63,250
Sevillana De Electric................................ 3,000 18,457
Telefonica De Espana................................. 8,100 104,352
Viscofan............................................. 1,400 20,695
------------
487,775
------------
SWITZERLAND -- 0.19%
BBC Brown Boverie (Br)............................... 40 41,389
Ciba-Geigy (Reg.).................................... 55 40,295
CS Holdings.......................................... 1,300 119,054
Nestle (Reg)......................................... 197 205,037
Roche Holdings Gen................................... 25 161,024
Societe Generale Surveillance (Br)................... 30 52,083
Zurich Insurance..................................... 46 57,780
------------
676,662
------------
UNITED KINGDOM -- 1.03%
Asda Group........................................... 30,000 45,346
Bass................................................. 9,300 89,005
BAT Industries....................................... 13,084 100,134
BET.................................................. 19,000 37,184
Booker PLC........................................... 6,700 44,134
British Gas.......................................... 49,300 227,086
British Petroleum.................................... 28,966 207,624
British Telecommunications........................... 50,500 314,972
Charter Group........................................ 6,175 89,211
Coats Viyella........................................ 22,000 65,107
FKI.................................................. 18,000 45,537
General Electric PLC................................. 46,500 227,136
Glaxo Holdings....................................... 12,900 158,351
Grand Metropolitan................................... 25,000 153,341
Guinness............................................. 14,000 105,362
Hanson............................................... 18,000 63,007
Hillsdown Holdings................................... 32,000 91,647
House of Fraser...................................... 36,500 73,755
HSBC Holdings........................................ 3,400 43,900
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE>
BRINSON GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Legal and General.................................... 6,500 $ 55,020
Lloyds Abbey Life.................................... 8,500 52,880
Lloyds Bank.......................................... 24,700 245,231
Lucas Industries..................................... 10,351 31,045
Marks & Spencer...................................... 12,800 82,380
MFI Furniture Group.................................. 16,300 30,214
Mirror Group......................................... 12,000 25,394
National Power....................................... 8,000 56,706
National Westminster Bank............................ 15,200 132,048
Ocean Group.......................................... 15,000 74,224
P & O................................................ 5,000 46,062
Reckitt & Coleman.................................... 7,625 80,436
Redland.............................................. 4,000 26,221
Rolls Royce.......................................... 13,000 36,094
Royal Insurance...................................... 9,666 47,523
Sears PLC............................................ 43,700 69,183
Sedgwick Group....................................... 5,600 12,296
SmithKline Beecham Units............................. 21,400 189,995
Tesco................................................ 32,900 151,806
Thames Water......................................... 8,700 65,890
Unilever Ord 5p...................................... 2,400 48,592
W.H. Smith Group A................................... 7,000 36,532
------------
3,777,611
------------
Total Non-U.S. Equities.............................. 26,328,275
------------
Total Equities (Cost $116,606,518)................... 131,538,236
------------
</TABLE>
<TABLE>
<CAPTION>
FACE AMOUNT MARKET VALUE
------------ ------------
<S> <C> <C>
Bonds -- 50.29%
U.S. BONDS -- 31.64%
U.S. CORPORATE BONDS -- 10.38%
BellSouth Corp. ESOP
9.125%, due 07/01/03................................ $ 228,721 $ 248,300
Chemical Bank
6.500%, due 01/15/09................................ 1,050,000 969,686
Chrysler Auto Receivable
7.875%, due 07/15/99................................ 200,000 206,092
Chrysler Financial
8.100%, due 02/03/97................................ 165,000 169,099
Citicorp
9.750%, due 08/01/99................................ 150,000 166,385
First of America
6.187%, due 02/15/02................................ 2,350,000 2,350,000
Ford Auto Loan Trust 92-3A3
5.625%, due 10/15/97................................ 1,200,000 1,201,140
Ford Motor Credit
6.450%, due 11/03/97................................ 3,000,000 2,996,250
GMAC
6.700%, due 04/21/97................................ 1,350,000 1,356,696
Green Tree Acceptance Corp. 94-A
6.900%, due 02/15/04................................ 620,701 621,887
Green Tree Financial 94-2
8.300%, due 05/15/19................................ 435,000 464,675
</TABLE>
<TABLE>
<CAPTION>
FACE AMOUNT MARKET VALUE
------------- ------------
<S> <C> <C>
Household Affinity
6.295%, due 03/15/99................................ $ 2,500,000 $ 2,502,325
MBNA Master Trust
6.275%, due 09/15/99................................ 3,150,000 3,153,654
News America Corp.
7.750%, due 01/20/24................................ 1,755,000 1,701,781
Premier Auto 95-1
8.050%, due 04/04/00................................ 500,000 523,405
Premier Auto Trust
4.220%, due 03/02/99................................ 88,270 86,171
Ralston Purina
7.875%, due 06/15/25................................ 450,000 450,604
Republic Bank of New York Corp. FRN
6.025%, due 12/29/02................................ 1,000,000 995,771
RJR Nabisco Inc.
8.625%, due 12/01/02................................ 2,100,000 2,164,978
Salomon, Inc.
5.340%, due 12/17/96................................ 585,000 572,177
Shearson Lehman Holdings
4.600%, due 07/22/96................................ 1,960,000 1,891,400
Signet Credit Card 1993-4A FRN
6.375%, due 05/15/02................................ 2,000,000 2,008,600
Standard Credit Card 95-1
8.250%, due 01/07/05................................ 500,000 547,615
Standard Credit Card Trust 95-1
8.500%, due 08/07/97................................ 805,000 823,515
Standard Credit Card Trust 94-1
4.650%, due 02/07/97................................ 1,065,000 1,042,635
Tele-Communications, Inc.
7.250%, due 08/01/05................................ 800,000 769,217
Thrift Financial Corp.
11.250%, due 01/01/16............................... 49,641 54,265
Time Warner, Inc.
9.125%, due 01/15/13................................ 2,250,000 2,353,662
US West Communications
6.875%, due 09/15/33................................ 110,000 99,963
US West Communications
7.125%, due 11/15/43................................ 155,000 144,773
USX Corp.
7.200%, due 02/15/04................................ 2,980,000 2,895,979
Wal Mart Stores, Inc.
10.875%, due 08/15/00............................... 75,000 77,476
Woolworth Corp.
7.000%, due 06/01/00................................ 1,100,000 1,092,443
WR Grace & Co.
8.000%, due 08/15/04................................ 1,195,000 1,266,383
------------
37,969,002
------------
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
BRINSON GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
------------- ------------
<S> <C> <C>
INTERNATIONAL DOLLAR BONDS -- 2.81%
Belgian National Railway (SNCB)
8.875%, due 12/01/24.............................. $ 942,000 $ 1,092,245
City of Oslo
7.875%, due 02/03/97.............................. 1,200,000 1,230,750
Eli Lilly & Co.
8.375%, due 02/07/05.............................. 750,000 828,986
European Investment Bank
9.250%, due 11/15/97.............................. 1,100,000 1,174,250
GMAC Euro
7.250%, due 10/17/97.............................. 325,000 330,078
Hong Kong Shanghai Perpetual FRN
6.500%, due 07/30/49.............................. 1,700,000 1,315,375
International Bank for Reconstruction and Develop-
ment
9.875%, due 10/01/97.............................. 175,000 189,203
Japanese Development Bank
8.375%, due 02/15/01.............................. 1,000,000 1,090,000
Republic of Italy
6.875%, due 09/27/23.............................. 150,000 133,619
Republic of South Africa
9.625%, due 12/15/99.............................. 1,000,000 1,037,500
Royal Bank of Scotland Perpetual FRN
7.125%, due 12/31/49.............................. 1,000,000 836,900
Tenaga Nasional
7.875%, due 06/15/04.............................. 950,000 1,003,851
------------
10,262,757
------------
U.S. GOVERNMENT AGENCIES -- 9.49%
Federal Home Loan Mortgage Corp.
9.200%, due 08/25/97.............................. 200,000 213,211
7.000%, due 11/15/07.............................. 530,000 531,855
7.000%, due 12/15/07.............................. 1,480,000 1,485,328
9.000%, due 03/01/17.............................. 568,436 597,256
8.500%, due 07/15/21.............................. 1,957,720 2,061,890
Federal Home Loan Mortgage Corp. Gold
9.500%, due 10/01/20.............................. 775,747 820,414
9.000%, due 05/01/24.............................. 1,573,901 1,652,124
Federal National Mortgage Association
7.600%, due 01/10/97.............................. 200,000 205,219
5.000%, due 06/01/01.............................. 1,900,314 1,800,300
0.000%, due 11/01/01.............................. 225,000 207,717
10.000%, due 06/01/14.............................. 991,054 1,076,305
6.500%, due 02/25/19.............................. 1,935,000 1,911,258
10.000%, due 06/25/19.............................. 472,930 523,552
9.000%, due 08/01/21.............................. 446,287 469,404
8.200%, due 08/25/21.............................. 82,894 84,463
6.750%, due 10/25/21.............................. 1,870,000 1,787,720
8.000%, due 05/01/22.............................. 251,492 255,926
8.500%, due 07/01/22.............................. 1,054,558 1,096,814
6.310%, due 01/01/23.............................. 1,920,000 1,934,400
6.500%, due 01/25/23.............................. 170,000 164,242
6.000%, due 11/01/23.............................. 1,426,298 1,337,611
6.500%, due 02/01/24.............................. 2,980,000 2,864,525
8.000%, due 06/01/24.............................. 1,795,000 1,828,087
7.000%, due 05/01/25.............................. 115,000 112,897
8.500%, due 05/01/25.............................. 550,273 567,467
Government National Mortgage
11.000%, due 09/15/15.............................. 342,424 380,090
9.000%, due 12/15/17.............................. 3,075,204 3,228,949
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
------------- ------------
<S> <C> <C>
8.500%, due 05/15/21............................... $ 89,688 $ 93,079
8.500%, due 04/15/25............................... 780,000 809,490
6.000%, due 05/15/25............................... 1,890,000 1,895,315
7.000%, due 09/15/28............................... 494,164 474,861
Refcorp Principal Strip
0.000%, due 10/15/20............................... 12,215,000 2,087,934
Tennessee Valley Authority
6.875%, due 12/15/43............................... 170,000 156,019
------------
34,715,722
------------
U.S. GOVERNMENT OBLIGATIONS -- 8.96%
U.S. Treasury Bonds
8.125%, due 05/15/21............................... 7,370,000 8,620,593
U.S. Treasury Notes
7.875%, due 04/15/98............................... 2,000,000 2,100,624
8.875%, due 02/15/99............................... 2,130,000 2,334,346
5.875%, due 03/31/99............................... 5,930,000 5,917,031
6.875%, due 08/31/99............................... 8,475,000 8,747,785
7.500%, due 11/15/01............................... 410,000 439,853
7.250%, due 05/15/04............................... 4,000,000 4,268,748
U.S. Treasury Strips
0.000%, due 02/15/03............................... 225,000 140,679
0.000%, due 05/15/21............................... 1,000,000 169,110
------------
32,738,769
------------
Total U.S. Bonds................................... 115,686,250
------------
Non-U.S. Bonds -- 18.65%
AUSTRALIA -- 0.86%
Government of Australia
12.000%, due 11/15/01.............................. AUD 3,300,000 2,693,780
9.500%, due 08/15/03............................... 600,000 435,103
------------
3,128,883
------------
BELGIUM -- 0.80%
Kingdom of Belgium
8.250%, due 06/01/99............................... BEF 24,000,000 892,703
8.750%, due 06/25/02............................... 7,000,000 266,841
9.000%, due 03/28/03............................... 24,000,000 925,425
8.500%, due 10/01/07............................... 23,000,000 847,829
------------
2,932,798
------------
DENMARK -- 2.39%
Kingdom of Denmark
9.000%, due 11/15/98............................... DKR 4,500,000 862,523
9.000%, due 11/15/00............................... 14,600,000 2,805,436
8.000%, due 05/15/03............................... 12,000,000 2,159,196
7.000%, due 12/15/04............................... 17,500,000 2,921,365
------------
8,748,520
------------
FRANCE -- 2.12%
Government of France (OAT)
8.500%, due 03/28/00............................... FRF 3,300,000 716,844
9.500%, due 01/25/01............................... 11,100,000 2,520,427
8.500%, due 04/25/03............................... 6,500,000 1,419,340
8.250%, due 02/27/04............................... 1,900,000 409,083
8.500%, due 12/26/12............................... 12,500,000 2,703,971
------------
7,769,665
------------
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
BRINSON GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
----------------- ------------
<S> <C> <C>
GERMANY -- 3.25%
Bundesrepublik Deutscheland
6.250%, due 02/20/98........................... DEM 1,360,000 $ 996,148
7.000%, due 09/20/99........................... 1,000,000 743,805
8.500%, due 08/21/00........................... 2,600,000 2,044,722
8.000%, due 07/22/02........................... 1,950,000 1,495,643
6.500%, due 07/15/03........................... 7,600,000 5,322,361
Treuhandanstalt
7.750%, due 10/01/02........................... 1,650,000 1,246,947
------------
11,849,626
------------
ITALY -- 1.82%
Republic of Italy BTP
9.000%, due 10/01/96........................... ITL 2,100,000,000 1,251,541
9.000%, due 10/01/98........................... 1,700,000,000 961,955
8.500%, due 01/01/99........................... 3,100,000,000 1,708,703
9.000%, due 10/01/03........................... 5,400,000,000 2,743,889
------------
6,666,088
------------
JAPAN -- 0.63%
Government of Japan No.129
6.400%, due 03/20/00........................... JPY 85,000,000 1,196,148
Government of Japan No.156
4.200%, due 03/20/03........................... 85,000,000 1,101,425
------------
2,297,573
------------
NETHERLANDS -- 2.27%
Government of Nederlands
6.250%, due 07/15/98........................... NLG 1,400,000 915,214
8.500%, due 03/15/01........................... 2,500,000 1,763,947
6.500%, due 04/15/03........................... 1,000,000 631,732
8.500%, due 06/01/06........................... 7,050,000 5,008,433
------------
8,319,326
------------
SPAIN -- 1.99%
Government of Spain
7.400%, due 07/30/99........................... SPN 625,000,000 4,482,719
10.300%, due 06/15/02........................... 200,000,000 1,537,369
8.000%, due 05/30/04........................... 190,000,000 1,256,787
------------
7,276,875
------------
UNITED KINGDOM--2.52%
UK Treasury
7.000%, due 11/06/01........................... GBP 2,505,000 3,720,384
8.000%, due 06/10/03........................... 1,640,000 2,542,522
UK Treasury Index-Linked (b)
2.500%, due 04/16/20........................... 404,000 893,693
4.125%, due 07/22/30........................... 1,140,000 2,077,416
------------
9,234,015
------------
Total Non-U.S. Bonds............................ 68,223,369
------------
Total Bonds
(Cost $176,753,391)............................ 183,909,619
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
------------- -------------
<S> <C> <C>
Short-Term Investments -- 9.41%
U.S. CORPORATE BOND -- 0.10%
U.S. West Financial Services, Inc. FRN 3.700%, due
09/05/95.......................................... $ 375,000 $ 375,000
-------------
COMMERCIAL PAPER -- 9.19%
Capital Access Trust, Inc. (Caterpillar)
6.150%, due 07/05/95.............................. 1,000,000 999,317
Columbia /HCA Healthcare
6.100%, due 07/11/95.............................. 7,480,000 7,467,325
Conagra Australia, Inc.
6.090%, due 07/05/95.............................. 2,000,000 1,998,647
6.050%, due 07/12/95.............................. 1,000,000 998,151
Crown Cork & Seal Co., Inc.
6.120%, due 07/05/95.............................. 4,000,000 3,997,280
6.050%, due 07/07/95.............................. 1,000,000 998,992
Ingersoll-Rand
6.130%, due 07/11/95.............................. 2,000,000 1,996,594
Maytag Corp.
6.200%, due 07/03/95.............................. 3,000,000 2,998,967
Sunstrand Corp.
6.400%, due 07/03/95.............................. 2,266,000 2,265,194
Texas Utilities Electric Co.
6.500%, due 07/03/95.............................. 4,908,000 4,906,228
Union Oil Company of California
6.110%, due 07/19/95.............................. 5,000,000 4,984,725
-------------
33,611,420
-------------
FOREIGN TIME DEPOSIT -- 0.12%
Bankers Trust
Japanese Yen
1.125%, due 07/03/95.............................. JPY 36,604,118 431,195
-------------
Total Short-Term Investments
(Cost $34,374,741)................................ 34,417,615
-------------
Total Investments
(Cost $327,734,650) -- 95.67% (d) 349,865,470
-------------
Cash and other assets, less liabilities 4.33%...... 15,812,455
-------------
Net Assets -- 100%................................. $ 365,677,925
=============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
15
<PAGE>
BRINSON GLOBAL FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a)Denominated in U.S. dollars.
(b)Linked to Britain's retail price index. Reset semi-annually.
(c)Non-income producing security.
(d)Aggregate cost for federal income tax purposes was $327,734,650; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $25,905,748
Gross unrealized depreciation................................ (3,774,928)
-----------
Net unrealized appreciation.............................. $22,130,820
===========
</TABLE>
FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1995.
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Brinson Global Fund had the following open forward foreign currency
contracts as of June 30, 1995:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
Australian Dollar........... 12/01/95 3,500,000 $ 2,472,822 $ (55,315)
Canadian Dollar............. 12/01/95 22,000,000 15,957,336 (19,425)
Swedish Krone............... 12/01/95 29,000,000 3,926,351 47,790
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Australian Dollar........... 12/01/95 3,500,000 2,472,822 16,727
Belgian Franc............... 12/01/95 100,000,000 3,530,605 (137,208)
British Pound............... 12/01/95 4,000,000 6,297,164 (29,564)
Danish Kroner............... 12/01/95 15,500,000 2,858,872 (112,106)
Dutch Guilder............... 12/01/95 15,000,000 9,737,077 (346,230)
French Franc................ 12/01/95 45,000,000 9,250,426 (460,333)
German Mark................. 12/01/95 19,000,000 13,803,247 (486,735)
Japanese Yen................ 12/01/95 1,250,000,000 15,024,816 (368,936)
Spanish Peseta.............. 12/01/95 446,000,000 3,631,323 ( 33,678)
-----------
Total..................... $(1,985,013)
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
BRINSON GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (Cost $327,734,650) (Note 1)........ $349,865,470
Cash............................................................. 1,460,086
Foreign currency, at market value (Cost $1,353,404).............. 1,381,478
Receivables:
Investment securities sold...................................... 45,064,677
Dividends....................................................... 272,101
Interest........................................................ 3,751,235
Fund shares sold................................................ 2,409
Deferred organization costs, net of amortization (Note 1)........ 33,113
Other assets..................................................... 77,146
------------
TOTAL ASSETS.................................................. 401,907,715
------------
LIABILITIES:
Payables:
Investment securities purchased................................. 33,770,831
Net unrealized depreciation on forward foreign currency con-
tracts......................................................... 1,985,013
Fund shares redeemed............................................ 57,875
Investment advisory fees (Note 2)............................... 239,764
Accrued expenses................................................ 176,307
------------
TOTAL LIABILITIES............................................. 36,229,790
------------
NET ASSETS:
Applicable to 32,208,149 shares; par value of $0.001 per share;
unlimited shares authorized..................................... $365,677,925
============
Net asset value, offering price and redemption price per share
($365,677,925 / 32,208,149 shares).............................. $ 11.35
============
NET ASSETS CONSIST OF:
Paid in capital.................................................. $337,649,200
Accumulated undistributed net investment income.................. 4,495,172
Accumulated net realized gain on investments and foreign curren-
cy.............................................................. 3,277,834
Net unrealized appreciation on investments and foreign currency.. 20,255,719
------------
NET ASSETS.................................................... $365,677,925
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<PAGE>
BRINSON GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest......................................................... $15,154,558
Dividends (net of $56,977 for foreign taxes withheld)............ 2,905,675
-----------
TOTAL INCOME.................................................. 18,060,233
-----------
EXPENSES:
Advisory fees (Note 2)........................................... 2,681,392
Custodian fees................................................... 218,400
Administration fees.............................................. 211,243
Accounting fees.................................................. 191,226
Amortization of organization costs (Note 1)...................... 15,394
Other............................................................ 353,816
-----------
TOTAL EXPENSES................................................ 3,671,471
-----------
NET INVESTMENT INCOME ........................................ 14,388,762
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized gain (loss) on:
Investments..................................................... 6,415,749
Futures contracts............................................... (646,404)
Foreign currency transactions................................... (3,202,315)
-----------
Net realized gain on investments and foreign currency......... 2,567,030
-----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................ 24,593,518
Futures contracts............................................... 1,105,130
Forward contracts............................................... (1,939,293)
Translation of other assets and liabilities denominated in for-
eign currency.................................................. 20,390
-----------
Change in net unrealized appreciation or depreciation on in-
vestments and foreign currency............................... 23,779,745
-----------
Net realized and unrealized gain on investments and foreign cur-
rency........................................................... 26,346,775
-----------
Net increase in net assets resulting from operations............. $40,735,537
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<PAGE>
BRINSON GLOBAL FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 14,388,762 $ 7,929,618
Net realized gain on investments and foreign cur-
rency............................................ 2,567,030 2,743,471
Change in net unrealized appreciation or deprecia-
tion on investments
and foreign currency............................. 23,779,745 (9,848,878)
------------ ------------
Net increase in net assets resulting from opera-
tions............................................ 40,735,537 824,211
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income.......... (8,427,640) (5,998,877)
Distributions from net realized gain.............. (2,567,030) (2,743,471)
Distributions in excess of net realized gain...... (275,888) (3,596,618)
------------ ------------
Total distributions to shareholders............... (11,270,558) (12,338,966)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 124,484,442 120,367,037
Shares issued on reinvestment of distributions.... 10,276,565 11,234,195
Shares redeemed................................... (77,406,972) (32,616,854)
------------ ------------
Net increase in net assets resulting from capital
share transactions (a)........................... 57,354,035 98,984,378
------------ ------------
TOTAL INCREASE IN NET ASSETS................... 86,819,014 87,469,623
NET ASSETS:
Beginning of year................................. 278,858,911 191,389,288
------------ ------------
End of year (including accumulated undistributed
net investment income of
$4,495,172 and $4,174,833, respectively)......... $365,677,925 $278,858,911
============ ============
</TABLE>
(a) A summary of capital share transactions follows:
<TABLE>
<CAPTION>
SHARES SHARES
------------ ------------
<S> <C> <C>
Shares sold........................................ 11,726,672 11,094,031
Shares issued on reinvestment of distributions..... 960,415 1,042,275
Shares redeemed.................................... (7,205,445) (3,012,247)
------------ ------------
Net increase in shares outstanding................ 5,481,642 9,124,059
============ ============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<PAGE>
BRINSON GLOBAL FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1993*
------------- ------------- --------------
<S> <C> <C> <C>
Net asset value, beginning of peri-
od................................. $ 10.43 $ 10.87 $ 10.00
-------- -------- --------
Income from investment operations:
Net investment income.............. 0.43 0.33 0.26
Net realized and unrealized gain
(loss) on investments and
foreign currency.................. 0.86 (0.23) 0.81
-------- -------- --------
Total income from investment op-
erations....................... 1.29 0.10 1.07
-------- -------- --------
Less distributions:
Distributions from net investment
income............................ (0.27) (0.27) (0.20)
Distributions from net realized
gain.............................. (0.09) (0.12) --
Distributions in excess of net re-
alized gain....................... (0.01) (0.15) --
-------- -------- --------
Total distributions............. (0.37) (0.54) (0.20)
-------- -------- --------
Net asset value, end of period...... $ 11.35 $ 10.43 $ 10.87
======== ======== ========
Total return........................ 12.57% 0.77% 10.76%
Ratios/Supplemental data
Net assets, end of period (in
000s)............................. $365,678 $278,859 $191,389
Ratio of expenses to average net
assets:
Before expense reimbursement...... 1.09% 1.14% 1.35%**
After expense reimbursement....... N/A 1.10% 1.05%**
Ratio of net investment income to
average net assets:
Before expense reimbursement...... 4.27% 3.21% 3.26%**
After expense reimbursement....... N/A 3.25% 3.56%**
Portfolio turnover rate............ 238% 231% 149%
</TABLE>
* The Fund commenced operations on August 31, 1992
** Annualized
N/A = Not Applicable
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
BRINSON GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ -----------
<S> <C> <C>
Equities -- 92.41%
U.S. EQUITIES -- 42.99%
Aetna Life & Casualty Co.................................. 1,900 $ 119,463
Air & Water Technologies Corp. (b)........................ 2,600 15,600
Allergan, Inc............................................. 5,000 135,625
Alza Corp. (b)............................................ 3,900 91,162
American Mobile Satellite (b)............................. 700 18,375
AON Corp.................................................. 6,100 227,225
AST Research Corp. (b).................................... 2,400 37,200
Automatic Data Processing, Inc............................ 2,900 182,337
Ball Corp................................................. 1,000 34,875
Bard (C.R.), Inc.......................................... 3,000 90,000
Beckman Instruments, Inc.................................. 2,000 55,750
Biogen, Inc. (b).......................................... 400 17,800
Birmingham Steel.......................................... 2,000 37,000
Boeing.................................................... 2,700 169,088
Burlington Northern, Inc.................................. 4,600 291,525
Campbell Soup Co.......................................... 1,500 73,500
Centerior Energy Co....................................... 3,500 33,687
Chubb Corp................................................ 1,100 88,138
CIGNA Corp................................................ 3,700 287,212
Citicorp.................................................. 8,300 480,362
CMS Energy Corp........................................... 4,600 113,275
Coca-Cola Enterprises, Inc................................ 7,700 168,437
Comerica, Inc............................................. 1,300 41,762
Computer Sciences Corp. (b)............................... 700 39,813
Cooper Industries, Inc.................................... 6,600 260,700
Enron Corp................................................ 2,200 77,275
Entergy Corp.............................................. 5,400 130,275
Federal Department Stores (b)............................. 3,500 90,125
FHP International Corp. (b)............................... 1,300 29,900
First Financial Management Corp........................... 2,600 222,300
Ford Motor Co............................................. 4,300 127,925
Forest Laboratories, Inc. (b)............................. 3,000 133,125
Genzyme Corp. (b)......................................... 600 24,000
Goodyear Tire & Rubber.................................... 3,500 144,375
Harnischfeger Industries, Inc............................. 700 24,238
Hillenbrand Industries, Inc............................... 1,500 46,687
Honeywell, Inc............................................ 8,600 370,875
Illinova Corp. Holding.................................... 2,700 68,513
Inland Steel.............................................. 2,900 88,450
Interpublic Group of Companies............................ 2,000 75,000
Kimberly-Clark Corp....................................... 3,700 221,538
Kroger Co. (b)............................................ 2,800 75,250
Liz Claiborne, Inc........................................ 2,300 48,875
Lockheed Martin Corp...................................... 6,200 391,375
LTV Corp.................................................. 2,900 42,412
Lyondell Petrochemical Co................................. 4,800 123,000
Magna Group Inc........................................... 1,000 22,000
Manor Care, Inc........................................... 3,200 93,200
Mattel.................................................... 6,600 171,600
Melville Corp............................................. 5,000 171,250
National Semiconductor Corp. (b).......................... 3,100 86,025
Nextel Communications, Inc. (b)........................... 2,700 38,138
Occidental Petroleum Corp................................. 600 13,725
Old Republic International Corp........................... 1,900 49,638
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ -----------
<S> <C> <C>
Owens Illinois, Inc. (b)................................... 5,600 $ 72,800
Pentair, Inc............................................... 1,100 47,850
Pfizer, Inc................................................ 2,300 212,462
Philip Morris Companies, Inc............................... 1,400 104,125
Raychem Corp............................................... 1,700 65,238
RJR Nabisco Convertible Preferred "C"...................... 15,900 97,388
RJR Nabisco Holdings Corp.................................. 4,800 133,800
Schering Plough Corp....................................... 7,500 330,937
Schlumberger Ltd........................................... 3,000 186,375
Seagate Technology (b)..................................... 2,700 105,975
Sprint Corp................................................ 7,200 242,100
State Street Boston Corp................................... 1,900 70,063
Stone Container Corp. (b).................................. 1,400 29,750
Tenneco, Inc............................................... 3,200 147,200
Timken Co.................................................. 2,000 92,250
TJX Cos.................................................... 3,900 51,675
Tosco Corp................................................. 900 28,687
Transamerica Corp.......................................... 2,800 163,100
Ultramar Corp.............................................. 1,500 37,875
US Bancorp................................................. 3,300 79,406
USF&G Corp................................................. 4,700 76,375
Walgreen Co................................................ 3,000 150,375
Wellman, Inc............................................... 600 16,425
Westvaco Corp.............................................. 1,100 48,675
-----------
Total U.S. Equity.......................................... 8,901,906
-----------
NON-U.S. EQUITIES -- 49.42%
AUSTRALIA -- 3.35%
Amcor Ltd. ................................................ 6,000 44,148
ANZ Banking Group.......................................... 8,947 31,711
Broken Hill Proprietary.................................... 11,550 141,806
BTR Nylex Ltd.............................................. 20,000 38,137
Coles Myer Ltd............................................. 9,000 28,135
CRA Ltd.................................................... 7,500 101,758
Lend Lease................................................. 2,500 31,864
National Australia Bank.................................... 8,275 65,229
News Corp.................................................. 7,000 39,002
News Corp. Preferred....................................... 3,500 17,293
Pacific Dunlop Ltd......................................... 14,000 29,376
Santos Ltd................................................. 7,500 17,969
Southcorp Holdings......................................... 13,748 27,385
Western Mining Corp........................................ 5,000 27,398
Westpac Banking Corp....................................... 14,545 52,480
-----------
693,691
-----------
BELGIUM -- 1.39%
Electrabel................................................. 300 63,358
Fortis AG.................................................. 300 31,732
Kredietbank................................................ 175 41,387
Petrofina.................................................. 150 45,278
Petrofina Warrants (b)..................................... 10 139
Solvay..................................................... 60 33,207
Tractebel.................................................. 200 72,565
-----------
287,666
-----------
</TABLE>
- --------------------------------------------------------------------------------
25
<PAGE>
BRINSON GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ -----------
<S> <C> <C>
CANADA -- 3.02%
Alcan Aluminium Ltd....................................... 1,700 $ 51,354
Bank of Montreal.......................................... 3,500 73,246
Barrick Gold Corp......................................... 1,300 32,883
Canadian Pacific Ltd...................................... 4,700 80,825
Imperial Oil Canada Ltd................................... 1,800 66,822
Norcen Energy............................................. 1,000 13,466
Northern Telecom Ltd...................................... 800 28,971
Nova Corporation of Alberta............................... 2,600 22,001
Oshawa Group Ltd. "A"..................................... 1,400 21,655
Royal Bank of Canada...................................... 2,800 62,673
Seagram Co Ltd............................................ 2,400 82,545
Thomson Corp.............................................. 3,900 53,228
TransCanada Pipeline...................................... 2,600 34,776
-----------
624,445
-----------
FRANCE -- 3.33%
Alcatel Alsthom........................................... 411 37,035
Banque Nat'l de Paris..................................... 800 38,618
Cie Bancaire.............................................. 280 33,502
Cie de Saint Gobain....................................... 370 44,728
Cie de Suez............................................... 700 38,974
Credit Local de France.................................... 413 38,340
GAN....................................................... 300 9,525
Generale des Eaux......................................... 612 68,175
Groupe de la Cite......................................... 200 35,482
LVMH...................................................... 330 59,431
Michelin Class B (b)...................................... 500 22,166
Pechiney Cert D'Invest.................................... 400 23,079
Peuegot SA (b)............................................ 250 34,709
Sanofi.................................................... 600 33,234
Societe Generale.......................................... 732 85,620
Total Co. "B"............................................. 1,100 66,261
UAP....................................................... 800 20,992
-----------
689,871
-----------
GERMANY -- 2.97%
Allianz................................................... 38 68,060
Allianz Rights............................................ 38 2,883
BASF AG................................................... 140 29,859
Bayer..................................................... 140 34,765
Bayer Motoren Worken...................................... 60 32,902
Bayer Vereinsbank......................................... 90 27,245
Commerzbank............................................... 130 31,136
Daimler-Benz.............................................. 50 22,993
Deutsche Bank............................................. 1,900 92,385
Hoechst................................................... 140 30,193
Kaufhof Holdings.......................................... 115 41,294
Mannesmann................................................ 100 30,525
Munchener Ruck............................................ 23 50,351
Munchener Ruck Warrants '98 (b)........................... 3 395
Preussag.................................................. 110 32,902
Schering.................................................. 250 17,466
Veba...................................................... 180 70,616
-----------
615,970
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ -----------
<S> <C> <C>
HONG KONG -- 1.13%
China Light & Power....................................... 12,000 $ 61,725
Hang Seng Bank............................................ 2,000 15,251
Hong Kong Land Holdings................................... 6,000 10,920
Hutchison Whampoa......................................... 15,000 72,504
Jardine Matheson.......................................... 1,000 7,350
Swire Pacific "A"......................................... 6,000 45,751
Wharf Holdings............................................ 6,000 19,580
-----------
233,081
-----------
ITALY -- 1.09%
Assic Generali............................................ 2,200 51,674
Fiat Spa Priv (b)......................................... 14,000 30,446
Instituto Mobilaire Italiano.............................. 6,000 36,689
Italgas................................................... 6,000 15,578
La Rinascente Savings..................................... 6,000 15,687
Mediobanca................................................ 1,000 7,260
Montedison (b)............................................ 20,000 14,307
Sai Di Risp............................................... 2,000 8,540
Telecom Italia Savings.................................... 21,000 44,387
-----------
224,568
-----------
JAPAN -- 17.19%
Amada..................................................... 10,000 85,405
Asahi Glass Co. .......................................... 7,000 77,182
Bank of Tokyo............................................. 4,000 64,083
Canon, Inc. .............................................. 5,000 81,282
Canon Sales............................................... 2,000 55,366
Citizen Watch Co. ........................................ 5,000 30,922
Dai Nippon Printing....................................... 8,000 127,224
Daikin Kogyo Co. ......................................... 3,000 24,101
Daiwa Bank................................................ 4,000 36,046
Daiwa House Industries.................................... 4,000 61,256
Fanuc Co. ................................................ 1,400 60,361
Fujitsu................................................... 9,000 89,587
Hitachi Ltd. ............................................. 17,000 169,219
Honda Motor Co. .......................................... 3,000 45,942
Inax...................................................... 6,000 57,745
Isetan.................................................... 2,000 27,094
Ito Yokado Co. ........................................... 3,000 157,969
Keio Teito Electric Railway .............................. 6,000 35,057
Kinki Nippon Railway ..................................... 6,000 52,586
Kuraray Co. Ltd. ......................................... 3,000 32,548
Maeda Road Construction................................... 1,000 19,319
Matsushita Electric Industrial............................ 9,000 139,946
Mitsubishi Bank........................................... 3,000 64,672
Mitsubishi Paper.......................................... 7,000 36,777
NGK Insulators............................................ 9,000 81,529
Nichii Co. ............................................... 5,000 54,247
Nintendo.................................................. 500 28,684
Nippon Denso Co. ......................................... 4,000 72,565
Nippon Meat Packers....................................... 3,000 43,821
Nippon Steel Corp. ....................................... 5,000 16,256
Orix Corp. ............................................... 1,000 33,220
Osaka Gas Corp. .......................................... 36,000 132,737
</TABLE>
- --------------------------------------------------------------------------------
26
<PAGE>
BRINSON GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
JAPAN (CONTINUED) SHARES VALUE
------ -----------
<S> <C> <C>
Pioneer Electronic........................................ 3,000 $ 50,889
Sankyo Co. ............................................... 4,400 102,109
Secom Co. ................................................ 1,000 62,787
Seino Transport........................................... 2,000 33,690
Sekisui House............................................. 12,000 148,427
Sony Corp. ............................................... 2,100 100,683
Suisan Kaisah ............................................ 1,000 10,095
Sumitomo Bank ............................................ 6,000 103,899
Sumitomo Electric Industries.............................. 6,000 71,386
Takeda Chemical Industries................................ 7,000 92,355
TDK Corp. ................................................ 2,000 90,941
Tokio Marine & Fire ...................................... 5,000 57,251
Tokyo Electric Power ..................................... 2,100 64,318
Tokyo Steel Mfg. ......................................... 5,000 85,405
Tonen Corp. .............................................. 3,000 46,649
Toray Industries, Inc. ................................... 20,000 124,161
Toshiba Corp. ............................................ 19,000 120,191
Toyota Motor Corp. ....................................... 5,000 98,951
-----------
3,558,935
-----------
MALAYSIA -- 0.28 %
Genting................................................... 1,000 9,886
Hume Industries........................................... 1,000 5,456
Kuala Lumpur Kepong....................................... 1,000 3,179
Malayan Bank.............................................. 2,000 15,833
Sime Darby................................................ 4,000 11,157
Telekom Malaysia.......................................... 1,000 7,588
Tenaga Nasional........................................... 1,000 4,081
-----------
57,180
-----------
NETHERLANDS -- 2.99%
ABN-AMRO Holdings......................................... 2,104 81,148
ABN-AMRO Holdings Coupon.................................. 2,104 2,348
D.S.M..................................................... 350 30,135
Elsevier.................................................. 3,500 41,309
Internationale Nederlanden Grp............................ 1,845 101,978
Internationale Nederlanden Grp Coupon..................... 1,845 2,582
Philips Electronics....................................... 600 25,385
Royal Dutch Petroleum..................................... 800 97,620
Royal Dutch Petroleum ADS (a)............................. 1,200 146,250
Unilever.................................................. 700 91,016
-----------
619,771
-----------
NEW ZEALAND -- 1.28%
Brierley Investment....................................... 51,000 38,512
Carter Holt Harvey........................................ 37,500 91,720
Fletcher Challenge Ltd.................................... 24,000 67,362
New Zealand Telecom ADS................................... 1,100 66,688
-----------
264,282
-----------
SPAIN -- 1.02%
Banco Bilbao-Vizcaya...................................... 800 23,090
Banco Popular............................................. 100 14,865
Banco Santander........................................... 600 23,660
Empresa Nac Electric...................................... 450 22,223
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ -----------
<S> <C> <C>
Iberorola SA Ord.......................................... 5,100 $ 38,411
Sevillana De Electric..................................... 3,000 18,457
Telefonica De Espana...................................... 4,500 57,974
Viscofan.................................................. 900 13,304
-----------
211,984
-----------
SWITZERLAND -- 1.78%
BBC Brown Boverie (Br).................................... 25 25,868
Ciba Geigy (Reg.)......................................... 50 36,632
CS Holdings............................................... 800 73,264
Nestle (Reg.)............................................. 100 104,080
Roche Holdings Gen........................................ 15 96,614
Zurich Insurance.......................................... 25 31,402
-----------
367,860
-----------
UNITED KINGDOM -- 8.60%
Bass...................................................... 5,100 48,809
BAT Industries............................................ 7,000 53,572
BET....................................................... 10,000 19,570
British Gas............................................... 22,500 103,640
British Petroleum......................................... 12,852 92,121
British Telecommunications................................ 22,000 137,216
Charter Group............................................. 3,750 54,177
Coats Viyella............................................. 13,000 38,472
FKI....................................................... 9,500 24,033
FKI Rights................................................ 2,375 1,266
General Electric PLC...................................... 22,000 107,462
Glaxo Holdings............................................ 6,500 79,789
Grand Metropolitan........................................ 14,000 85,871
Guinness.................................................. 8,500 63,969
Hanson.................................................... 8,000 28,003
Hillsdown Holdings........................................ 16,000 45,823
House of Fraser........................................... 20,000 40,414
Legal and General......................................... 4,500 38,091
Lloyds Abbey Life......................................... 7,000 43,548
Lloyds Bank............................................... 14,600 144,955
Lucas Industries.......................................... 5,500 16,496
Marks & Spencer........................................... 5,000 32,180
Mirror Group.............................................. 10,000 21,162
National Power............................................ 3,000 21,265
National Westminster Bank................................. 5,000 43,437
Ocean Group............................................... 7,000 34,638
P & O..................................................... 2,000 18,425
Reckitt & Colman.......................................... 3,500 36,921
Redland................................................... 2,500 16,388
Rolls Royce............................................... 12,000 33,318
Sears PLC................................................. 20,000 31,663
SmithKline Beecham Units.................................. 8,000 71,026
Tesco..................................................... 20,000 92,283
Thames Water.............................................. 4,000 30,294
W.H. Smith Group A........................................ 6,000 31,313
-----------
1,781,610
-----------
Total Non-U.S. Equities................................... 10,230,914
-----------
Total Equities
(Cost $18,277,315)....................................... 19,132,820
-----------
</TABLE>
- --------------------------------------------------------------------------------
27
<PAGE>
BRINSON GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
----------- -----------
<S> <C> <C>
Short-Term Investments -- 2.30%
U.S. GOVERNMENT OBLIGATIONS -- 1.18%
U.S. Treasury Bills 5.710%, due 11/16/95................ $ 250,000 $ 244,815
-----------
COMMERCIAL PAPER -- 1.12%
Texas Utilities Electric Co.
6.500%, due 07/03/95................................... 233,000 232,916
-----------
Total Short-Term Investments
(Cost $477,530)........................................ 477,731
-----------
Total Investments
(Cost $18,754,845) -- 94.71% (c)....................... 19,610,551
-----------
Cash and other assets, less liabilities -- 5.29%........ 1,095,014
-----------
Net Assets -- 100%...................................... $20,705,565
===========
</TABLE>
See accompanying notes to schedules of investments.
- --------------------------------------------------------------------------------
28
<PAGE>
BRINSON GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a)Denominated in U.S. dollars
(b)Non-income producing security
(c)Aggregate cost for federal income tax purposes was $18,754,845; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................. $1,785,640
Gross unrealized depreciation................................. (929,934)
----------
Net unrealized appreciation............................... $ 855,706
==========
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Brinson Global Equity Fund had the following open forward foreign currency
contracts as of June 30, 1995:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY CONTRACTS
Canadian Dollar............... 12/01/95 4,000,000 $2,901,334 $ (5,432)
Italian Lira.................. 12/01/95 650,000,000 387,090 31
Swedish Krone................. 12/01/95 3,000,000 406,174 (1,545)
FORWARD FOREIGN CURRENCY SALE CONTRACTS
Belgian Franc................. 12/01/95 8,000,000 282,448 (7,818)
British Pound................. 12/01/95 420,000 661,202 9,475
Dutch Guilder................. 12/01/95 950,000 616,682 (9,614)
French Franc.................. 12/01/95 3,400,000 698,348 (22,574)
German Mark................... 12/01/95 800,000 581,271 (7,918)
Japanese Yen.................. 12/01/95 290,000,000 3,485,757 (599)
Swiss Franc................... 12/01/95 400,000 351,141 (3,224)
--------
Total..................... $(49,218)
========
</TABLE>
FUTURES CONTRACTS (NOTE 5)
INDEX FUTURES CONTRACTS:
The Brinson Global Equity Fund had the following open index futures contracts
as of June 30, 1995:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE VALUE LOSS
---------- ---------- ----------
<S> <C> <C> <C>
INDEX FUTURES SALES CONTRACTS
Standard & Poor's 500, 8 contracts............ Sept. 1995 $2,188,600 $(26,900)
========
</TABLE>
The aggregate market value of investments pledged to cover margin requirements
for the open futures positions at June 30, 1995 was $244,815.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
29
<PAGE>
BRINSON GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (Cost $18,754,845) (Note 1)......... $19,610,551
Cash............................................................. 15,262
Foreign currency, at market value (Cost $79,228)................. 80,365
Receivables:
Investment securities sold...................................... 961,722
Dividends....................................................... 93,041
Due From Advisor (Note 2)....................................... 75,276
Unrealized appreciation on futures contracts.................... 5,178
Deferred organization costs, net of amortization (Note 1)........ 9,758
Other assets..................................................... 1,438
-----------
TOTAL ASSETS.................................................. 20,852,591
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 30,964
Net unrealized depreciation forward foreign currency contracts.. 49,218
Investment advisory fees (Note 2)............................... 13,602
Accrued expenses................................................ 53,242
-----------
TOTAL LIABILITIES............................................. 147,026
-----------
NET ASSETS:
Applicable to 2,085,106 shares; par value of $0.001 per share;
unlimited shares authorized..................................... $20,705,565
===========
Net asset value, offering price and redemption price per share
($20,705,565 / 2,085,106 shares)................................ $ 9.93
===========
NET ASSETS CONSIST OF:
Paid in capital.................................................. $20,875,263
Accumulated undistributed net investment income.................. 59,734
Accumulated net realized loss on investments and foreign curren-
cy.............................................................. (1,011,998)
Net unrealized appreciation on investments and foreign currency.. 782,566
-----------
NET ASSETS.................................................... $20,705,565
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
30
<PAGE>
BRINSON GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $33,844 for foreign taxes withheld)............. $ 516,668
Interest.......................................................... 48,658
----------
TOTAL INCOME................................................... 565,326
----------
EXPENSES:
Advisory fees (Note 2)............................................ 163,038
Accounting fees................................................... 68,248
Professional fees................................................. 56,633
Custodian fees.................................................... 49,370
Registration fees................................................. 39,388
Amortization of organization costs (Note 1)....................... 2,785
Other............................................................. 40,993
----------
TOTAL EXPENSES................................................. 420,455
Expenses waived and reimbursed by Advisor (Note 2)............. (216,658)
----------
NET EXPENSES................................................... 203,797
----------
NET INVESTMENT INCOME ......................................... 361,529
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY:
Net realized gain (loss) on:
Investments...................................................... 116,399
Futures contracts................................................ (493,853)
Foreign currency transactions.................................... (570,048)
----------
Net realized loss on investments and foreign currency.......... (947,502)
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................. 1,882,834
Futures contracts................................................ (137,150)
Forward contracts................................................ 31,614
Translation of other assets and liabilities denominated in for-
eign currency................................................... 1,504
----------
Change in net unrealized appreciation or depreciation on in-
vestments and foreign currency................................ 1,778,802
----------
Net realized and unrealized gain on investments and foreign curren-
cy................................................................ 831,300
----------
Net increase in net assets resulting from operations............... $1,192,829
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
31
<PAGE>
BRINSON GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
ENDED PERIOD
JUNE 30, ENDED
1995 JUNE 30, 1994*
----------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 361,529 $ 161,189
Net realized loss on investments and foreign cur-
rency............................................ (947,502) (169,840)
Change in net unrealized appreciation or deprecia-
tion on investments and foreign currency......... 1,778,802 (996,236)
----------- -----------
Net increase (decrease) in net assets resulting
from operations.................................. 1,192,829 (1,004,887)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income.......... (72,633) (86,612)
Distributions in excess of net realized gain...... (198,395) --
----------- -----------
Total distributions to shareholders............... (271,028) (86,612)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 133,064 21,797,084
Shares issued on reinvestment of distributions.... 271,028 86,613
Shares redeemed................................... (1,262,526) (200,000)
----------- -----------
Net increase (decrease) in net assets resulting
from capital share
transactions (a)................................. (858,434) 21,683,697
----------- -----------
TOTAL INCREASE IN NET ASSETS................... 63,367 20,592,198
----------- -----------
NET ASSETS:
Beginning of period............................... 20,642,198 50,000
----------- -----------
End of period (including accumulated undistributed
net investment income of $59,734 and $74,577, re-
spectively)...................................... $20,705,565 $20,642,198
=========== ===========
(a) A summary of capital share transactions fol-
lows:
<CAPTION>
SHARES SHARES
----------- --------------
<S> <C> <C>
Shares sold....................................... 13,700 2,181,168
Shares issued on reinvestment of distributions.... 28,495 9,185
Shares redeemed................................... (131,587) (20,855)
----------- -----------
Net increase (decrease) in shares outstanding.... (89,392) 2,169,498
=========== ===========
</TABLE>
* The Fund commenced operations on January 28, 1994
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
32
<PAGE>
BRINSON GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
JUNE 30, 1995 JUNE 30, 1994*
------------- --------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 9.49 $ 10.00
------- -------
Income from investment operations:
Net investment income............................ 0.18 0.07
Net realized and unrealized gain (loss) on in-
vestments and foreign currency.................. 0.39 (0.54)
------- -------
Total gain (loss) from investment operations.. 0.57 (0.47)
------- -------
Less distributions:
Distributions from net investment income......... (0.04) (0.04)
Distributions in excess of net realized gain..... (0.09) --
------- -------
Total distributions........................... (0.13) (0.04)
------- -------
Net asset value, end of period.................... $ 9.93 $ 9.49
======= =======
Total return...................................... 6.06% (4.70%)
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $20,706 $20,642
Ratio of expenses to average net assets:
Before expense reimbursement.................... 2.06% 2.65%**
After expense reimbursement..................... 1.00% 1.00%**
Ratio of net investment income to average net as-
sets:
Before expense reimbursement.................... 0.71% 0.24%**
After expense reimbursement..................... 1.77% 1.89%**
Portfolio turnover rate.......................... 36% 21%
</TABLE>
* The Fund commenced operations on January 28, 1994
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
BRINSON GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
----------- -----------
<S> <C> <C>
Bonds -- 87.39%
U.S. BONDS -- 25.44%
U.S. CORPORATE BONDS -- 6.49%
Chemical Bank
6.500%, due 01/15/09.................................. $ 150,000 $ 138,527
Chrysler Auto Receivable
7.875%, due 07/15/99.................................. 105,000 108,198
Chrysler Financial
8.100%, due 02/03/97.................................. 165,000 169,099
Cox Communications
6.375%, due 06/15/00.................................. 225,000 222,763
Farmers Insurance Exchange 144-A
8.625%. due 05/01/24.................................. 250,000 240,105
Ford Credit Auto Lease Trust 95-1A2
6.350%, due 10/15/98.................................. 200,000 200,598
Ford Motor Credit
6.388%, due 11/03/97.................................. 300,000 299,625
GMAC MTN
5.650%, due 12/15/97.................................. 200,000 196,278
Green Tree Acceptance Corp. 94-A
6.900%, due 02/15/04.................................. 44,336 44,421
Green Tree Financial 94-2
8.300%, due 05/15/19.................................. 25,000 26,706
News America Corp.
7.750%, due 01/20/24.................................. 275,000 266,661
Republic Bank of New York Corp. FRN 6.025%, due
12/29/02.............................................. 255,000 243,525
RJR Nabisco, Inc.
8.625%, due 12/01/02.................................. 250,000 257,735
Standard Credit Card 94-1
4.650%, due 02/07/97.................................. 250,000 244,750
The Money Store 94-A3
5.525%, due 05/15/97.................................. 105,000 101,571
Time Warner, Inc.
9.125%, due 01/15/13.................................. 210,000 219,675
USX Corp.
7.200%, due 02/15/04.................................. 280,000 272,105
Woolworth Corporation
7.000%, due 06/01/00.................................. 115,000 114,210
-----------
3,366,552
-----------
INTERNATIONAL DOLLAR BONDS -- .25%
Republic of South Africa
9.625%, due 12/15/99.................................. 125,000 129,688
-----------
U.S. GOVERNMENT AGENCIES -- 8.44%
Federal Home Loan Mortgage Corp.
7.000%, due 04/15/07.................................. 174,629 172,913
7.000%, due 11/15/07.................................. 140,000 140,490
7.000%, due 12/15/07.................................. 150,000 150,540
8.500%, due 07/15/21.................................. 97,538 102,728
Federal Home Loan Mortgage Corp. Gold
9.000%, due 05/01/24.................................. 446,669 468,869
8.500%, due 08/01/24.................................. 244,194 251,824
Federal National Mortgage Association
6.240%, due 01/28/04.................................. 75,000 71,411
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
----------- -----------
<S> <C> <C>
7.400%, due 07/01/04............................... $ 305,000 $ 324,327
6.500%, due 02/25/19............................... 390,000 385,215
9.000%, due 08/01/21............................... 44,628 46,939
8.500%, due 07/01/22............................... 30,925 32,165
6.500%, due 02/01/24............................... 280,000 269,150
8.000%, due 06/01/24............................... 320,000 325,899
7.000%, due 05/01/25............................... 275,000 269,973
8.500%, due 05/02/25............................... 113,003 116,533
Government National Mortgage
Association
9.000%, due 12/15/17............................... 310,386 325,903
7.000%, due 05/15/24............................... 90,000 88,509
8.500%, due 04/15/25............................... 505,000 524,093
6.000%, due 05/15/25............................... 250,000 250,625
Tennessee Valley Authority
6.875%, due 12/15/43............................... 65,000 59,654
-----------
4,377,760
-----------
U.S GOVERNMENT OBLIGATIONS -- 10.26%
U.S. Treasury Bonds
8.125%, due 05/15/21............................... 585,000 684,267
U.S. Treasury Coupon Strips
0.000%, due 11/15/19............................... 1,600,000 297,136
U.S. Treasury Notes
6.125%, due 07/31/96............................... 1,000,000 1,003,437
U.S. Treasury Notes
7.875%, due 04/15/98............................... 365,000 383,364
U.S. Treasury Notes
8.875%, due 02/15/99............................... 150,000 164,390
U.S. Treasury Notes
5.875%, due 03/31/99............................... 380,000 379,169
U.S. Treasury Notes
6.875%, due 08/31/99............................... 1,400,000 1,445,062
U.S. Treasury Notes
7.250%, due 05/15/04............................... 900,000 960,468
-----------
5,317,293
-----------
Total U.S. Bonds.................................... 13,191,293
-----------
NON-U.S. BONDS -- 61.95%
AUSTRALIA -- 2.65%
Government of Australia
12.000%, due 11/15/01.............................. AUD 220,000 179,585
9.500%, due 08/15/03............................... 1,650,000 1,196,534
-----------
1,376,119
-----------
BELGIUM -- 2.66%
Kingdom of Belgium
8.750%, due 06/25/02............................... BEF 23,000,000 876,763
9.000%, due 03/28/03............................... 13,000,000 501,272
-----------
1,378,035
-----------
DENMARK -- 5.83%
Kingdom of Denmark
9.000%, due 11/15/00............................... DKR 7,000,000 1,345,072
Great Belt
7.000%, due 09/02/03............................... 9,900,000 1,677,221
-----------
3,022,293
-----------
</TABLE>
- --------------------------------------------------------------------------------
37
<PAGE>
BRINSON GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
----------- ------------
<S> <C> <C>
FRANCE -- 6.33%
Eurofima
8.625%, due 09/01/99............................ FRF 5,100,000 $ 1,107,323
Government of France (OAT)
9.500%, due 06/25/98............................ 1,200,000 265,374
8.250%, due 02/27/04............................ 600,000 129,184
8.500%, due 12/26/12............................ 4,300,000 930,166
8.500%, due 04/25/23............................ 2,400,000 512,231
KFW International Finance
7.750%, due 02/17/98............................ 1,600,000 336,875
------------
3,281,153
------------
GERMANY -- 9.80%
Bundesrepublik Deutscheland
8.375%, due 05/21/01............................ DEM 650,000 507,799
8.000%, due 07/22/02............................ 700,000 536,898
6.250%, due 01/04/24............................ 700,000 428,365
Deutsche Bundesbahn
9.000%, due 12/01/00............................ 900,000 721,118
6.125%, due 10/28/03............................ 1,500,000 1,012,752
European Economic Community
6.500%, due 03/10/00............................ 750,000 546,745
Kingdom of Norway
6.125%, due 05/05/98............................ 1,040,000 761,535
LKB Baden-Wurt Finance
6.500%, due 09/15/08............................ 850,000 568,059
------------
5,083,271
------------
ITALY -- 5.76%
Deutschebank
11.750%, due 02/23/98........................... ITL1,500,000,000 930,061
European Investment Bank
12.750%, due 02/15/00........................... 580,000,000 370,695
Nordic Investment Bank
10.800%, due 05/24/03........................... 600,000,000 349,574
Republic of Italy BTP
9.000%, due 10/01/96............................ 500,000,000 297,986
8.500%, due 01/01/99............................ 600,000,000 330,717
8.500%, due 01/01/04............................ 1,450,000,000 710,832
------------
2,989,865
------------
JAPAN -- 8.16%
Government of Japan No.130
6.700%, due 06/20/00............................ JPY 110,000,000 1,572,576
Government of Japan No.140
6.600%, due 06/20/01............................ 24,000,000 347,829
Government of Japan No.145
5.500%, due 03/20/02............................ 15,000,000 207,851
International Bank of Reconstruction & Develop-
ment
4.750%, due 12/20/04............................ 104,000,000 1,420,368
Republic of Italy
3.500%, due 06/20/01............................ 56,000,000 684,003
------------
4,232,627
------------
</TABLE>
<TABLE>
<CAPTION>
FACE MARKET
AMOUNT VALUE
---------- -------------
<S> <C> <C>
NETHERLANDS -- 6.90%
Government of Nederlands
6.500%, due 04/15/03........................... NLG 750,000 $ 473,799
8.500%, due 06/01/06........................... 900,000 639,374
8.250%, due 09/15/07........................... 1,220,000 849,790
Rabobank
6.750%, due 06/25/03........................... 1,350,000 856,756
Republic of Austria
6.500%, due 05/07/99........................... 1,150,000 760,239
-------------
3,579,958
-------------
SPAIN -- 5.93%
European Investment Bank
11.250%, due 03/15/00.......................... SPN 185,000,000 1,507,737
Kingdom of Spain
7.400%, due 07/30/99........................... 140,000,000 1,004,707
8.000%, due 05/30/04........................... 85,000,000 563,321
-------------
3,075,765
-------------
UNITED KINGDOM -- 7.93%
British Gas PLC
8.125%, due 03/31/03........................... GBP 450,000 687,351
UK Treasury
7.000%, due 11/06/01........................... 450,000 668,332
8.000%, due 06/10/03........................... 750,000 1,162,739
UK Treasury Index-Linked (a)
2.500%, due 04/16/20........................... 391,000 864,936
4.125%, due 07/22/30........................... 400,000 728,918
-------------
4,112,276
-------------
Total Non-U.S. Bonds............................ 32,131,362
-------------
Total Bonds (Cost $42,343,595).................. 45,322,655
-------------
Short-Term Investments -- 8.83%
FOREIGN TIME DEPOSITS -- 3.68%
Bankers Trust
Japanese Yen -- 3.68%
4.50%, due 07/05/95............................ JPY 161,510,385 1,906,880
-------------
COMMERCIAL PAPER -- 5.15%
Conagra Australia, Inc.
6.320%, due 07/03/95........................... $ 1,375,000 1,374,517
Texas Utilities Electric Co.
6.500%, due 07/03/95........................... 1,300,000 1,299,531
-------------
Total Commercial Paper.......................... 2,674,048
-------------
Total Short-Term Investments
(Cost $4,524,401).............................. 4,580,928
-------------
Total Investments
(Cost $46,867,996) -- 96.22% (b) 49,903,583
-------------
Cash and other assets,
less liabilities -- 3.78%...................... 1,958,935
-------------
Net Assets -- 100%.............................. $ 51,862,518
=============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
38
<PAGE>
BRINSON GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a)Linked to Britain's retail price index. Reset semi-annually.
(b)Aggregate cost for federal income tax purposes was $46,867,996; and net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................. $3,233,019
Gross unrealized depreciation................................. (197,432)
----------
Net unrealized appreciation............................... $3,035,587
==========
</TABLE>
FRN: Floating Rate Note--The rate disclosed is that in effect at June 30, 1995.
MTN: Medium Term Note
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Brinson Global Bond Fund had the following open forward foreign currency
contracts as of June 30, 1995:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY BUY
CONTRACTS
Australian Dollar............. 12/01/95 1,600,000 $1,130,433 $ (24,287)
Canadian Dollar............... 12/01/95 10,000,000 7,253,335 (8,829)
Italian Lira.................. 12/01/95 1,000,000,000 595,569 19,233
Swedish Krone................. 12/01/95 9,700,000 1,313,297 15,985
FORWARD FOREIGN CURRENCY SALE
CONTRACTS
Australian Dollar............. 12/01/95 1,600,000 1,130,433 7,647
Belgian Franc................. 12/01/95 38,000,000 1,341,630 (52,139)
British Pound................. 12/01/95 2,170,000 3,416,212 (11,891)
Danish Kroner................. 12/01/95 7,000,000 1,291,103 (50,628)
Dutch Guilder................. 12/01/95 5,500,000 3,570,262 (126,951)
French Franc.................. 12/01/95 16,000,000 3,289,366 (163,674)
German Mark................... 12/01/95 7,000,000 5,085,407 (179,324)
Japanese Yen.................. 12/01/95 500,000,000 6,009,926 (147,574)
Spanish Peseta................ 12/01/95 195,000,000 1,587,686 (16,626)
---------
Total..................... $(739,058)
=========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
39
<PAGE>
BRINSON GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (Cost $46,867,996) (Note 1)......... $49,903,583
Cash............................................................. 23,830
Foreign currency, at market value (Cost $1,073,684).............. 1,076,122
Receivables:
Investment securities sold...................................... 5,788,908
Interest........................................................ 1,107,213
Fund shares sold................................................ 1,300,000
Due from Advisor (Note 2)....................................... 59,120
Deferred organization costs, net of amortization (Note 1)........ 8,659
Other assets..................................................... 24,050
-----------
TOTAL ASSETS.................................................. 59,291,485
-----------
LIABILITIES:
Payables:
Investment securities purchased................................. 6,602,968
Net unrealized depreciation on forward foreign currency con-
tracts......................................................... 739,058
Investment advisory fees (Note 2)............................... 31,183
Accrued expenses................................................ 55,758
-----------
TOTAL LIABILITIES............................................. 7,428,967
-----------
NET ASSETS:
Applicable to 4,991,549 shares; par value of $0.001 per share;
unlimited shares authorized..................................... $51,862,518
===========
Net asset value, offering price and redemption price per share
($51,862,518 / 4,991,549 shares)................................ $ 10.39
===========
NET ASSETS CONSIST OF:
Paid in capital.................................................. $49,326,686
Accumulated undistributed net investment income.................. 1,095,344
Accumulated net realized loss on investments and foreign curren-
cy.............................................................. (882,418)
Net unrealized appreciation on investments and foreign currency.. 2,322,906
-----------
NET ASSETS.................................................... $51,862,518
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
40
<PAGE>
BRINSON GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.......................................................... $3,058,914
----------
TOTAL INCOME................................................... 3,058,914
----------
EXPENSES:
Advisory fees (Note 2)............................................ 329,156
Accounting fees................................................... 79,439
Professional fees................................................. 60,034
Custodian fees.................................................... 54,952
Registration fees................................................. 44,378
Amortization of organization costs (Note 1)....................... 2,803
Other............................................................. 58,165
----------
TOTAL EXPENSES................................................. 628,927
Expenses waived by Advisor (Note 2)............................ (233,940)
----------
NET EXPENSES................................................... 394,987
----------
NET INVESTMENT INCOME.......................................... 2,663,927
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY:
Net realized gain (loss) on:
Investments...................................................... 1,053,431
Futures contracts................................................ 49,353
Foreign currency transactions.................................... (1,570,195)
----------
Net realized loss on investments and foreign currency........... (467,411)
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency................................. 3,403,211
Futures contracts................................................ 98,640
Forward contracts................................................ (619,044)
Translation of other assets and liabilities denominated in for-
eign currency................................................... (3,364)
----------
Change in net unrealized appreciation or depreciation on invest-
ments and foreign currency..................................... 2,879,443
----------
Net realized and unrealized gain on investments and foreign cur-
rency............................................................ 2,412,032
----------
Net increase in net assets resulting from operations.............. $5,075,959
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
41
<PAGE>
BRINSON GLOBAL BOND FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR
ENDED PERIOD
JUNE 30, ENDED
1995 JUNE 30, 1994*
----------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income............................. $ 2,663,927 $ 1,238,505
Net realized loss on investments and foreign cur-
rency............................................ (467,411) (984,858)
Change in net unrealized appreciation or deprecia-
tion on investments and foreign currency......... 2,879,443 (556,537)
----------- -----------
Net increase (decrease) in net assets resulting
from operations.................................. 5,075,959 (302,890)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income.......... (1,146,710) (835,923)
Distributions in excess of net realized gain...... -- (254,604)
----------- -----------
Total distributions to shareholders............... (1,146,710) (1,090,527)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold....................................... 15,734,111 38,643,595
Shares issued on reinvestment of distributions.... 824,053 259,281
Shares redeemed................................... (5,474,354) (710,000)
----------- -----------
Net increase in net assets resulting from capital
share transactions (a)........................... 11,083,810 38,192,876
----------- -----------
TOTAL INCREASE IN NET ASSETS................... 15,013,059 36,799,459
----------- -----------
NET ASSETS:
Beginning of period............................... 36,849,459 50,000
----------- -----------
End of period (including accumulated undistributed
net investment income of $1,095,344 and $664,039,
respectively).................................... $51,862,518 $36,849,459
=========== ===========
(a) A summary of capital share transactions follows:
<CAPTION>
SHARES SHARES
----------- --------------
<S> <C> <C>
Shares sold....................................... 1,615,817 3,902,459
Shares issued on reinvestment of distributions.... 80,422 25,790
Shares redeemed................................... (564,413) (73,526)
----------- -----------
Net increase in shares outstanding............... 1,131,826 3,854,723
=========== ===========
</TABLE>
* The Fund commenced operations on July 30, 1993
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
42
<PAGE>
BRINSON GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
JUNE 30, 1995 JUNE 30, 1994*
------------- --------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 9.55 $ 10.00
------- -------
Income (loss) from investment operations:
Net investment income ........................... 0.50 0.45
Net realized and unrealized gain (loss) on in-
vestments and foreign currency.................. 0.58 (0.52)
------- -------
Total income (loss) from investment opera-
tions........................................ 1.08 (0.07)
------- -------
Less distributions:
Distributions from net investment income......... (0.24) (0.28)
Distributions in excess of net realized gain..... -- (0.10)
------- -------
Total distributions........................... (0.24) (0.38)
------- -------
Net asset value, end of period.................... $ 10.39 $ 9.55
======= =======
Total return...................................... 11.34% (0.79%)
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $51,863 $36,849
Ratio of expenses to average net assets:
Before expense reimbursement.................... 1.43% 1.78%**
After expense reimbursement..................... 0.90% 0.90%**
Ratio of net investment income to average net as-
sets:
Before expense reimbursement.................... 5.53% 4.03%**
After expense reimbursement..................... 6.06% 4.91%**
Portfolio turnover rate.......................... 199% 189%
</TABLE>
* The Fund commenced operations on July 30, 1993
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
43
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1.SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is a no-load, open-end, management investment
company registered under the Investment Company Act of 1940, as amended, as a
series company. The Trust currently offers shares of ten series: Brinson Global
Fund, Brinson Global Equity Fund, Brinson Global Bond Fund, Brinson Short-Term
Global Income Fund, Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund,
Brinson U.S. Bond Fund, Brinson U.S. Cash Management Fund, Brinson Non-U.S.
Equity Fund and Brinson Non-U.S. Bond Fund. The following is a summary of
significant accounting policies consistently followed by the Brinson Global
Fund, the Brinson Global Equity Fund and the Brinson Global Bond Fund (each a
"Fund" and collectively, the "Funds") in the preparation of their financial
statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price, or lacking any sales,
at the last available bid price in the principal market in which such
securities are normally traded. Securities for which market quotations are not
readily available, including restricted securities which are subject to
limitations on their sale, are valued at fair value as determined in good faith
by or under the direction of the Trust's Board of Trustees. Fixed income/debt
securities are valued by using market quotations or independent services that
use prices provided by market makers or estimates of market values obtained
from yield data relating to instruments or securities with similar
characteristics. Short-term obligations with a maturity of 60 days or less are
valued at amortized cost, which approximates market value.
B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
at the bid prices of such currencies against the U.S. dollar as of the date of
valuation. Purchases and sales of portfolio securities, commitments under
forward foreign currency contracts, income receipts and expense accruals are
translated at the prevailing exchange rate on the date of each transaction.
Realized and unrealized foreign exchange gain or loss on investments are
included as a component of net realized and unrealized gain or loss on
investments and foreign currency in the statement of operations.
C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D.INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date.
E.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the year ended June 30, 1995,
therefore, no federal income tax provision was required. At June 30, 1995, the
Brinson Global Equity Fund had a capital loss carryforward of approximately
$1,069,000, of which $251,000 will expire on June 30, 2003 and $818,000 will
expire on June 30, 2004 and the Brinson Global Bond Fund had a capital loss
carryforward of approximately $55,000 which will expire on June 30, 2004.
F.ORGANIZATION COSTS: Organization costs are being amortized on a straight-line
basis over five years from each Fund's respective commencement of operations.
G.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions. Amounts equal to 13.27% and
100.00% of the amount taxable as ordinary income qualify for the dividends
received deduction available to corporate shareholders for the Brinson Global
Fund and the Brinson Global Equity Fund, respectively.
- --------------------------------------------------------------------------------
44
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, the Funds pay the Advisor a monthly fee based on each Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates for the year
ended June 30, 1995, were as follows:
<TABLE>
<CAPTION>
FEES
ADVISORY EXPENSE ADVISORY WAIVED OR DUE FROM
FEE CAP FEES REIMBURSED ADVISOR
-------- ------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Brinson Global Fund............. 0.80% 1.10% $2,681,392 $ -- $ --
Brinson Global Equity Fund...... 0.80 1.00 163,038 216,658 75,276
Brinson Global Bond Fund........ 0.75 0.90 329,156 233,940 59,120
</TABLE>
Certain officers of the Funds are also officers of the Advisor. All officers
serve without direct compensation from the Funds. Trustees' fees paid to
unaffiliated trustees were $11,459, $3,229 and $3,789 for the Brinson Global
Fund, Brinson Global Equity Fund and Brinson Global Bond Fund, respectively.
3.INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1995, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
Brinson Global Fund.................................. $760,872,295 $731,189,159
Brinson Global Equity Fund........................... 6,970,730 9,366,502
Brinson Global Bond Fund............................. 86,825,266 80,493,086
</TABLE>
4.FORWARD FOREIGN CURRENCY CONTRACTS
The Funds may engage in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. A forward foreign currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. Risks associated with such contracts include movement in the value of the
foreign currency relative to the U.S. dollar and the ability of the
counterparty to perform. The contracts are valued daily at forward exchange
rates and an unrealized gain or loss is recorded. The Funds realize a gain or
loss upon settlement of the contracts. The statement of operations reflects
realized and unrealized gains and losses on these contracts. The counterparty
to all forward foreign currency contracts at June 30, 1995 was the Funds'
custodian.
5.FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market and that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities in an amount (initial margin) based on the
number of open contracts. Subsequent payments (variation margin) are made or
received by the Funds each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains or
losses. The Funds recognize a realized gain or loss when the contract is closed
or expires. The statement of operations reflects realized and unrealized gains
and losses on these contracts. Futures contracts are valued at the settlement
price established each day on the exchange on which they are traded.
- --------------------------------------------------------------------------------
45
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6.SUBSEQUENT EVENTS
The Trust's Board of Trustees has approved the authorization of a second class
of shares, the "SwissKey Fund Shares," in addition to the existing class of
shares, the "Brinson Fund Shares." The new class pays a distribution services
fee and is offered only to customers of Swiss Bank Corporation, the ultimate
parent of the Advisor.
As of July 28, 1995 the Trust renamed the ten series it currently offers as
follows: Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global
Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash
Management Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund.
The Trust also entered into an Agreement and Plan of Reorganization dated June
16, 1995 (the "Plan of Reorganization"), with SwissKey Funds. As of July 28,
1995, and pursuant to the Plan of Reorganization, the Trust acquired all of the
net assets of the SBC World Growth Fund of the SwissKey Funds in exchange
solely for the SwissKey Fund shares of the Trust's Global Equity Fund. The
SwissKey Fund shares were then distributed to shareholders of the SBC World
Growth Fund according to their respective interests, and the SBC World Growth
Fund was dissolved.
- --------------------------------------------------------------------------------
46
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Brinson Global Fund
Brinson Global Equity Fund
Brinson Global Bond Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Brinson Global Fund, Brinson Global
Equity Fund, and Brinson Global Bond Fund as of June 30, 1995, the related
statements of operations for the year then ended, and the statements of changes
in net assets and the financial highlights for the year then ended and for the
year ended June 30, 1994 for Brinson Global Fund, for the period January 28,
1994 (commencement of operations) to June 30, 1994 for Brinson Global Equity
Fund and for the period July 30, 1993 (commencement of operations) to June 30,
1994 for Brinson Global Bond Fund. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for the period August 31, 1992
(commencement of operations) to June 30, 1993 for the Brinson Global Fund were
audited by other auditors whose report dated August 19, 1993 expressed an
unqualified opinion.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmations of securities owned as of
June 30, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Brinson Global Fund, Brinson Global Equity Fund and Brinson Global Bond Fund at
June 30, 1995, the results of their operations for the year then ended, the
changes in their net assets and the financial highlights for the year then
ended and for the year ended June 30, 1994 for Brinson Global Fund, for the
period January 28, 1994 to June 30, 1994 for Brinson Global Equity Fund and for
the period July 30, 1993 to June 30, 1994 for Brinson Global Bond Fund, in
conformity with generally accepted accounting principles.
[LOGO OF ERNST & YOUNG LLP]
Chicago, Illinois
August 4, 1995
- --------------------------------------------------------------------------------
47
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders was held on February 17, 1995 in connection
with the combination of Brinson Holdings, Inc., the direct parent of the
Advisor, and Swiss Bank Corporation. At the Meeting, shareholders voted (i) to
elect Messrs. Frank K. Reilly, Walter E. Auch (both of whom were incumbents)
and Edward M. Roob (who was newly elected) as Trustees; (ii) to approve new
investment advisory agreements between the Advisor and the Trust on behalf of
the Brinson Global Fund, Brinson Global Equity Fund and Brinson Global Bond
Fund, with substantially the same terms as the previously approved investment
advisory agreements; and (iii) to ratify the selection of Ernst & Young LLP as
the Trust's independent auditors for the fiscal year ending June 30, 1995.
The results of all matters voted on by shareholders at the Special Meeting held
on February 17, 1995 were as follows:
A.ELECTION OF TRUSTEES:
<TABLE>
<CAPTION>
WITHHOLD
FOR AUTHORITY
---------- ---------
<S> <C> <C>
Frank K. Reilly
Brinson Global Fund................................. 24,696,341 14,717
Brinson Global Equity Fund.......................... 2,114,671 -0-
Brinson Global Bond Fund............................ 3,754,236 -0-
Walter E. Auch
Brinson Global Fund................................. 24,687,614 23,444
Brinson Global Equity Fund.......................... 2,114,671 -0-
Brinson Global Bond Fund............................ 3,754,236 -0-
Edward M. Roob
Brinson Global Fund................................. 24,696,341 14,717
Brinson Global Equity Fund.......................... 2,114,671 -0-
Brinson Global Bond Fund............................ 3,754,236 -0-
</TABLE>
B.APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENTS BETWEEN BRINSON PARTNERS, INC.
AND THE TRUST ON BEHALF OF EACH FUND:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- ------- -------
<S> <C> <C> <C>
Brinson Global Fund............................ 24,692,033 2,135 16,890
Brinson Global Equity Fund..................... 2,114,671 -0- -0-
Brinson Global Bond Fund....................... 3,754,236 -0- -0-
</TABLE>
C.RATIFICATION OF ERNST & YOUNG LLP AS THE TRUST'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING JUNE 30, 1995:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- ------- -------
<S> <C> <C> <C>
Brinson Global Fund............................ 24,688,545 2,135 20,378
Brinson Global Equity Fund..................... 2,114,671 -0- -0-
Brinson Global Bond Fund....................... 3,754,236 -0- 0-
</TABLE>
- --------------------------------------------------------------------------------
48
<PAGE>
BRINSON U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES MARKET VALUE
------- ------------
<S> <C> <C>
U.S. EQUITIES -- 41.16%
Aetna Life & Casualty Co................................... 13,800 $ 867,675
Air & Water Technologies Corp. (a)......................... 11,000 66,000
Allergan, Inc.............................................. 36,300 984,638
Alza Corp. (a)............................................. 28,800 673,200
American Mobile Satellite (a).............................. 4,500 118,125
AON Corp................................................... 44,200 1,646,450
AST Research Corp. (a)..................................... 17,700 274,350
Automatic Data Processing, Inc............................. 20,800 1,307,800
Ball Corp.................................................. 7,100 247,612
Bard (C.R.), Inc........................................... 22,000 660,000
Beckman Instruments, Inc................................... 14,300 398,612
Biogen, Inc. (a)........................................... 3,300 146,850
Birmingham Steel........................................... 14,400 266,400
Boeing, Inc................................................ 19,400 1,214,925
Burlington Northern, Inc................................... 33,500 2,123,063
Campbell Soup Co........................................... 11,100 543,900
Centerior Energy Co........................................ 25,500 245,437
Chubb Corp................................................. 3,200 256,400
CIGNA Corp................................................. 26,700 2,072,588
Citicorp................................................... 60,600 3,507,225
CMS Energy Corp............................................ 33,700 829,862
Coca-Cola Enterprises, Inc................................. 56,300 1,231,562
Comerica, Inc.............................................. 9,800 314,825
Computer Sciences Corp. (a)................................ 4,800 273,000
Cooper Industries, Inc..................................... 39,600 1,564,200
Enron Corp................................................. 18,300 642,788
Entergy Corp............................................... 39,100 943,288
Federated Department Stores (a)............................ 25,500 656,625
FHP International Corp. (a)................................ 9,600 220,800
First Financial Management Corp............................ 19,200 1,641,600
Ford Motor Co. (Del.)...................................... 31,100 925,225
Forest Laboratories, Inc. (a).............................. 21,800 967,375
Genzyme Corp. (a).......................................... 4,700 188,000
Goodyear Tire and Rubber................................... 25,800 1,064,250
Grand Metro................................................ 50,000 1,387,500
Harnischfeger Industries, Inc.............................. 5,000 173,125
Hillenbrand Industries, Inc................................ 9,200 286,350
Honeywell, Inc............................................. 62,700 2,703,938
Illinova Corp. ............................................ 19,800 502,425
Inland Steel............................................... 21,100 643,550
Interpublic Group of Companies............................. 14,200 532,500
Kimberly-Clark Corp........................................ 26,700 1,598,662
Kroger Co. (a)............................................. 20,500 550,937
Liz Claiborne.............................................. 8,300 176,375
Lockheed Martin Corp....................................... 45,500 2,872,187
LTV Corp................................................... 20,900 305,662
Lyondell Petrochemical Co.................................. 34,700 889,188
Magna Group, Inc........................................... 7,100 156,200
Manor Care, Inc............................................ 19,500 567,938
Mattel, Inc................................................ 45,100 1,172,600
Melville Corp.............................................. 36,300 1,243,275
National Semiconductor Corp. (a)........................... 22,400 621,600
Nextel Communications, Inc. (a)............................ 19,500 275,437
Occidental Petroleum Corp.................................. 3,200 73,200
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET VALUE
------- ------------
<S> <C> <C>
Old Republic International Corp............................ 13,700 $ 357,912
Owens Illinois, Inc. (a)................................... 40,500 526,500
Pentair, Inc............................................... 6,600 287,100
Pfizer, Inc................................................ 16,800 1,551,900
Philip Morris Companies, Inc............................... 10,500 780,937
Raychem Corp............................................... 12,700 487,363
RJR Nabisco Convertible Preferred "C"...................... 115,700 708,663
RJR Nabisco Holdings Corp.................................. 34,940 973,953
Schering Plough Corp....................................... 54,800 2,418,050
Schlumberger Ltd........................................... 21,900 1,360,537
Seagate Technology (a)..................................... 19,400 761,450
Sprint Corp................................................ 52,200 1,755,225
State Street Boston Corp................................... 14,500 534,688
Stone Container Corp. (a).................................. 10,400 221,000
Tenneco, Inc............................................... 23,000 1,058,000
Timken Co.................................................. 14,900 687,263
TJX Cos.................................................... 19,300 255,725
Tosco Corp................................................. 6,400 204,000
Transamerica Corp.......................................... 20,400 1,188,300
Ultramar Corp.............................................. 10,600 267,650
U.S. Bancorp............................................... 24,200 582,313
USF&G Corp................................................. 34,600 562,250
Walgreen Co................................................ 21,800 1,092,725
Wellman, Inc............................................... 4,500 123,187
Westvaco Corp.............................................. 8,200 362,850
------------
Total U.S. Equities (Cost $60,128,086)..................... 64,926,840
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT MARKET VALUE
---------- ------------
<S> <C> <C>
BONDS -- 51.05%
U.S. CORPORATE BONDS -- 14.21%
Beneficial Home Equity 95-1A FRN
6.280%, due 03/28/25................................... $ 605,637 $ 605,736
Chrysler Financial Corp.
8.100%, due 02/03/97................................... 1,000,000 1,024,840
Dean Witter & Co. FRN
6.245%, due 03/21/97................................... 1,250,000 1,248,438
First of America FRN 95-1A
6.187%, due 02/15/02................................... 1,500,000 1,500,000
Ford Motor Credit Corp.
6.450%, due 11/03/97 FRN............................... 1,500,000 1,498,125
5.370%, due 09/08/98................................... 945,000 914,599
General Motors Acceptance Corp. MTN
8.250%, due 01/23/98................................... 1,000,000 1,040,930
Grace W.R. & Co.
8.000%, due 08/15/04................................... 1,150,000 1,218,695
Household Affinity FRN
6.232%, due 03/15/99................................... 1,500,000 1,501,395
MBNA Master Trust FRN
6.212%, due 03/15/01................................... 1,500,000 1,501,740
Midland Bank PLC
7.650%, due 05/01/25................................... 1,000,000 1,065,042
Nationwide CSN Trust FRN
9.875%, due 02/15/25................................... 1,000,000 1,125,000
News America Corp.
7.750%, due 01/20/24................................... 1,000,000 969,676
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
BRINSON U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE AMOUNT MARKET VALUE
----------- ------------
<S> <C> <C>
U.S. CORPORATE BONDS (CONTINUED)
Republic Bank of New York FRN
6.025%, due 12/29/02.................................. $ 1,065,000 $ 1,017,075
RJR Nabisco Inc.
8.625%, due 12/01/02.................................. 1,500,000 1,546,413
Signet Credit Card 1993-4A FRN
6.312%, due 05/15/02.................................. 1,500,000 1,506,450
Time Warner Inc.
9.125%, due 01/15/13.................................. 1,000,000 1,046,072
Woolworth Corp
7.000%, due 06/01/00.................................. 2,100,000 2,085,573
------------
22,415,799
------------
INTERNATIONAL DOLLAR BONDS -- 0.49%
Hong Kong Shanghai Perpetual FRN
6.375%, due 07/30/49.................................. 1,000,000 773,750
------------
U.S. GOVERNMENT AGENCIES -- 13.35%
Federal Home Loan Mortgage Association
9.250%, due 07/15/21.................................. 2,210,204 2,360,012
8.500%, due 04/15/24.................................. 1,130,000 1,205,156
Federal Home Loan Mortgage Corp. Gold
6.000%, due 09/01/09.................................. 482,079 468,590
9.500%, due 10/01/16.................................. 359,615 380,325
Federal National Mortgage Association
6.500%, due 02/25/19.................................. 1,500,000 1,481,595
6.310%, due 01/01/23.................................. 1,810,000 1,823,575
6.500%, due 02/01/24.................................. 2,500,000 2,403,125
8.000%, due 06/01/24.................................. 379,784 386,784
8.000%, due 07/01/24.................................. 25,060 25,522
8.000%, due 08/01/24.................................. 62,289 63,437
8.000%, due 11/01/24.................................. 26,978 27,476
8.000%, due 03/01/25.................................. 276,579 281,677
8.000%, due 04/01/25.................................. 1,049,179 1,068,520
8.000%, due 05/01/25.................................. 2,097,049 2,135,704
8.000%, due 06/01/25.................................. 1,840,585 1,873,946
Government National Mortgage Association
11.000%, due 09/15/15................................. 482,554 535,635
9.000%, due 12/15/17.................................. 539,593 566,570
7.000%, due 06/15/23.................................. 467,535 459,792
7.000%, due 07/15/23.................................. 507,189 498,788
7.000%, due 09/15/23.................................. 108,177 106,385
9.000%, due 07/15/24.................................. 244,840 257,081
8.500%, due 11/15/24.................................. 271,825 282,102
8.500%, due 01/15/25.................................. 605,330 628,217
9.000%, due 05/15/25.................................. 731,180 767,735
Refcorp Principal Strip
0.000%, due 10/15/20.................................. 5,585,000 954,655
------------
21,042,404
------------
</TABLE>
<TABLE>
<CAPTION>
FACE AMOUNT MARKET VALUE
----------- ------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 23.00%
U.S. Treasury Coupon Strips
0.000%, due 05/15/04.............................. $22,670,000 $ 13,001,018
0.000%, due 05/15/18.............................. 1,420,000 292,506
U.S. Treasury Notes and Bonds
6.125%, due 07/31/96.............................. 5,000,000 5,017,185
5.875%, due 03/31/99.............................. 2,600,000 2,594,314
7.125%, due 02/29/00.............................. 7,930,000 8,284,368
7.250%, due 05/15/04.............................. 4,970,000 5,303,919
8.125%, due 05/15/21.............................. 1,525,000 1,783,773
------------
36,277,083
------------
Total U.S. Bonds (Cost $77,649,111)................ 80,509,036
------------
SHORT-TERM INVESTMENTS -- 12.92%
U.S. CORPORATE BOND -- 0.96%
Associates Corp.
9.000%, due 12/15/95.............................. 1,500,000 1,518,945
------------
COMMERCIAL PAPER -- 11.96%
Capital Access Trust, Inc. (Caterpillar)
6.150%, due 07/05/95.............................. 1,500,000 1,498,975
Conagra Australia, Inc.
6.320%, due 07/03/95.............................. 2,141,000 2,140,248
6.050%, due 07/12/95.............................. 1,000,000 998,152
Columbia/HCA Healthcare
6.100%, due 07/11/95.............................. 2,000,000 1,996,611
Crown Cork & Seal Co, Inc.
6.120%, due 07/05/95.............................. 2,000,000 1,998,640
Ingersoll-Rand
6.130%, due 07/11/95.............................. 1,500,000 1,497,446
Maytag Corp.
6.200%, due 07/03/95.............................. 2,000,000 1,999,311
Sunstrand Corp.
6.400%, due 07/03/95.............................. 3,734,000 3,732,672
Union Oil Company of California
6.110%, due 07/19/95.............................. 3,000,000 2,990,835
------------
Total Commercial Paper............................. 18,852,890
------------
Total Short-Term Investments
(Cost $20,370,665)................................ 20,371,835
------------
Total Investments (Cost $158,147,862) -- 105.13%
(b) .............................................. 165,807,711
------------
Liabilities, less cash and other assets --(5.13%) . (8,083,883)
------------
Net Assets -- 100%................................. $157,723,828
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
10
<PAGE>
BRINSON U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a)Non-income producing security
(b)Aggregate cost for federal income tax purposes was $158,147,862; net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation.............................. $8,037,918
Gross unrealized depreciation.............................. (378,069)
----------
Net unrealized appreciation............................... $7,659,849
==========
</TABLE>
FRN: FLOATING RATE NOTE--THE RATE DISCLOSED IS THAT IN EFFECT AT JUNE 30,
1995.
MTN: MEDIUM TERM NOTE
FUTURES CONTRACTS (NOTE 4)
INDEX FUTURES CONTRACTS:
The Brinson U.S. Balanced Fund had the following open index futures contract as
of June 30, 1995:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE GAIN
---------- -------- -------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CONTRACTS
Standard & Poors 500, 1 con-
tract......................... Sept. 1995 $271,000 $273,575 $2,575
======
</TABLE>
The segregated cash pledged to cover margin requirements for the open position
at June 30, 1995 was $10,000.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
11
<PAGE>
BRINSON U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (Cost $158,147,862) (Note 1)........ $165,807,711
Cash............................................................. 152,873
Receivables:
Investment securities sold...................................... 5,905,777
Dividends....................................................... 103,229
Interest........................................................ 822,993
Due from Advisor (Note 2)....................................... 52,411
Deferred organization costs, net of amortization (Note 1)........ 12,645
------------
TOTAL ASSETS.................................................. 172,857,639
------------
LIABILITIES:
Payables:
Fund shares redeemed............................................ 1,107,112
Investment securities purchased................................. 13,882,252
Investment advisory fees (Note 2)............................... 83,945
Accrued expenses................................................ 60,502
------------
TOTAL LIABILITIES............................................. 15,133,811
------------
NET ASSETS:
Applicable to 14,040,134 shares; par value of $0.001 per share;
unlimited shares authorized..................................... $157,723,828
============
Net asset value, offering price and redemption price per share
($157,723,828 / 14,040,134 shares).............................. $ 11.23
============
NET ASSETS CONSIST OF:
Paid in capital.................................................. $142,963,790
Accumulated undistributed net investment income.................. 942,216
Accumulated net realized gain on investments..................... 6,155,398
Net unrealized appreciation on investments....................... 7,662,424
------------
NET ASSETS.................................................... $157,723,828
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
12
<PAGE>
BRINSON U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 30, 1994* TO JUNE 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest.......................................................... $ 2,771,036
Dividends......................................................... 669,123
-----------
TOTAL INCOME................................................... 3,440,159
-----------
EXPENSES:
Advisory fees (Note 2)............................................ 441,419
Registration fees................................................. 55,170
Administration fees............................................... 39,523
Custodian fees.................................................... 37,674
Professional fees................................................. 34,145
Amortization of organization costs (Note 1)....................... 1,291
Other............................................................. 60,970
-----------
TOTAL EXPENSES................................................. 670,192
Expenses waived by Advisor (Note 2)............................ (165,712)
-----------
NET EXPENSES................................................... 504,480
-----------
NET INVESTMENT INCOME ......................................... 2,935,679
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on:
Investments...................................................... 6,022,618
Futures contracts................................................ 132,780
-----------
Net realized gain on investments .............................. 6,155,398
-----------
Change in net unrealized appreciation on:
Investments ..................................................... 7,659,849
Futures contracts................................................ 2,575
-----------
Change in net unrealized appreciation on investments........... 7,662,424
-----------
Net realized and unrealized gain on investments .................. 13,817,822
-----------
Net increase in net assets resulting from operations.............. $16,753,501
===========
</TABLE>
*Commencement of operations
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
BRINSON U.S. BALANCED FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 30, 1994* TO JUNE 30, 1995
<TABLE>
<S> <C>
OPERATIONS:
Net investment income........................................... $ 2,935,679
Net realized gain on investments ............................... 6,155,398
Change in net unrealized appreciation on investments ........... 7,662,424
------------
Net increase in net assets resulting from operations............ 16,753,501
------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income........................ (1,993,463)
Distributions from net realized gain............................ --
------------
Total distributions to shareholders............................. (1,993,463)
------------
CAPITAL SHARE TRANSACTIONS:
Shares sold..................................................... 154,231,504
Shares issued on reinvestment of distributions.................. 1,991,226
Shares redeemed................................................. (13,268,940)
------------
Net increase in net assets resulting from capital share transac-
tions (a)...................................................... 142,953,790
------------
TOTAL INCREASE IN NET ASSETS................................. 157,713,828
------------
NET ASSETS:
Beginning of period............................................. 10,000
------------
End of period (including accumulated undistributed net invest-
ment income of $942,216)....................................... $157,723,828
============
(a) A summary of capital share transactions follows:
<CAPTION>
SHARES
------------
<S> <C>
Shares sold..................................................... 15,121,050
Shares issued on reinvestment of distributions.................. 178,265
Shares redeemed................................................. (1,260,181)
------------
Net increase in shares outstanding............................. 14,039,134
============
</TABLE>
* Commencement of operations
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
BRINSON U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period.
<TABLE>
<CAPTION>
PERIOD
ENDED
JUNE 30, 1995*
--------------
<S> <C>
Net asset value, beginning of period............................. $ 10.00
--------
Income from investment operations:
Net investment income.......................................... 0.23
Net realized and unrealized gain on investments................ 1.16
--------
Total gain from investment operations........................ 1.39
--------
Less distributions:
Distributions from net investment income....................... (0.16)
Distributions from net realized gain........................... --
--------
Total distributions.......................................... (0.16)
--------
Net asset value, end of period................................... $ 11.23
========
Total return..................................................... 13.91%
Ratios/Supplemental data
Net assets, end of period (in 000s)............................. $157,724
Ratio of expenses to average net assets:
Before expense reimbursement................................... 1.06%**
After expense reimbursement.................................... 0.80%**
Ratio of net investment income to average net assets:
Before expense reimbursement................................... 4.36%**
After expense reimbursement.................................... 4.63%**
Portfolio turnover rate......................................... 196%
</TABLE>
*The Fund commenced operations on December 30, 1994
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
BRINSON U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
---------- -----------
<S> <C> <C>
U.S. EQUITIES -- 94.34%
Aetna Life & Casualty Co................................. 8,700 $ 547,013
Air & Water Technologies Corp. (a)....................... 4,000 24,000
Allergan, Inc............................................ 22,900 621,163
Alza Corp. (a)........................................... 18,100 423,088
American Mobile Satellite (a)............................ 3,400 89,250
AON Corp................................................. 27,800 1,035,550
AST Research Corp. (a)................................... 11,900 184,450
Automatic Data Processing, Inc........................... 13,100 823,663
Ball Corp................................................ 4,500 156,938
Bard (C.R.), Inc......................................... 13,800 414,000
Beckman Instruments, Inc................................. 8,900 248,088
Biogen, Inc. (a)......................................... 2,100 93,450
Birmingham Steel......................................... 8,800 162,800
Boeing................................................... 12,200 764,025
Burlington Northern, Inc................................. 21,100 1,337,213
Campbell Soup Co......................................... 7,000 343,000
Centerior Energy Co...................................... 16,000 154,000
Chubb Corp............................................... 1,900 152,238
CIGNA Corp............................................... 16,800 1,304,100
Citicorp................................................. 38,100 2,205,038
CMS Energy Corp.......................................... 21,100 519,587
Coca-Cola Enterprises, Inc............................... 35,500 776,562
Comerica, Inc............................................ 6,100 195,963
Computer Sciences Corp. (a).............................. 3,000 170,625
Cooper Industries, Inc................................... 26,500 1,046,750
Enron Corp............................................... 12,400 435,550
Entergy Corp............................................. 24,600 593,475
Federated Department Stores (a).......................... 16,000 412,000
FHP International Corp. (a).............................. 6,000 138,000
First Financial Management Corp.......................... 12,100 1,034,550
Ford Motor Co............................................ 19,500 580,125
Forest Laboratories, Inc. (a)............................ 13,600 603,500
Genzyme Corp. (a)........................................ 2,900 116,000
Goodyear Tire & Rubber................................... 16,200 668,250
Harnischfeger Industries, Inc............................ 3,100 107,337
Hillenbrand Industries, Inc.............................. 5,600 174,300
Honeywell, Inc........................................... 39,500 1,703,437
Illinova Corp............................................ 12,300 312,113
Inland Steel............................................. 13,300 405,650
Interpublic Group of Companies........................... 8,900 333,750
Kimberly-Clark Corp...................................... 16,800 1,005,900
Kroger Co. (a)........................................... 12,900 346,687
Liz Claiborne, Inc....................................... 6,200 131,750
Lockheed Martin Corp..................................... 28,600 1,805,375
LTV Corp................................................. 12,900 188,662
Lyondell Petrochemical Co................................ 21,800 558,625
Magna Group, Inc......................................... 4,400 96,800
Manor Care, Inc.......................................... 13,600 396,100
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
---------- -----------
<S> <C> <C>
Mattel, Inc.............................................. 30,200 $ 785,200
Melville Corp............................................ 22,800 780,900
National Semiconductor Corp. (a)......................... 14,200 394,050
Nabisco Holdings Corp.................................... 2,700 75,263
Nextel Communications, Inc. (a).......................... 12,400 175,150
Old Republic International Corp.......................... 8,600 224,675
Owens Illinois, Inc. (a)................................. 25,300 328,900
Pentair, Inc............................................. 5,200 226,200
Pfizer, Inc.............................................. 10,500 969,937
Philip Morris Companies, Inc............................. 6,600 490,875
Raychem Corp............................................. 8,000 307,000
RJR Nabisco Convertible Preferred "C".................... 72,600 444,675
RJR Nabisco Holdings Corp................................ 19,340 539,102
Schering Plough Corp..................................... 34,500 1,522,312
Schlumberger Ltd......................................... 13,800 857,325
Seagate Technology (a)................................... 12,100 474,925
Sprint Corp.............................................. 32,800 1,102,900
State Street Boston Corp................................. 9,700 357,687
Stone Container Corp. (a)................................ 6,600 140,250
Tenneco, Inc............................................. 14,500 667,000
Timken Co................................................ 9,400 433,575
TJX Cos.................................................. 12,600 166,950
Tosco Corp............................................... 4,000 127,500
Transamerica Corp........................................ 12,900 751,425
Ultramar Corp............................................ 6,600 166,650
U.S. Bancorp............................................. 15,200 365,750
USF&G Corp............................................... 21,800 354,250
Walgreen Co.............................................. 13,700 686,712
Wellman, Inc............................................. 2,700 73,912
Westvaco Corp............................................ 5,200 230,100
-----------
Total U.S. Equities (Cost $35,923,442)................... 40,161,640
-----------
<CAPTION>
FACE MARKET
AMOUNT VALUE
---------- -----------
<S> <C> <C>
COMMERCIAL PAPER -- 5.49%
Ingersoll-Rand
6.130%, due 07/11/95.................................... $1,000,000 $ 998,297
Texas Utilities Electric Co.
6.500%, due 07/03/95.................................... 1,341,000 1,340,516
-----------
Total Short-Term Investments
(Cost $2,338,813)....................................... 2,338,813
-----------
Total Investments (Cost $38,262,255) -- 99.83% (b) ...... 42,500,453
-----------
Cash and other assets, less liabilities --0.17%.......... 73,008
-----------
Net Assets -- 100%....................................... $42,573,461
===========
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
19
<PAGE>
BRINSON U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Non-income producing security
(b) Aggregate cost for federal income tax purposes was $38,262,255; net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation.............................. $4,614,914
Gross unrealized depreciation.............................. (376,716)
----------
Net unrealized appreciation............................... $4,238,198
==========
</TABLE>
FUTURES CONTRACTS (NOTE 4)
INDEX FUTURES CONTRACTS:
The Brinson U.S. Equity Fund had the following open index futures contracts as
of June 30, 1995:
<TABLE>
<CAPTION>
SETTLEMENT CURRENT UNREALIZED
DATE COST VALUE GAIN
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INDEX FUTURES BUY CON-
TRACTS
Standard & Poors 500, 9
contracts Sept. 1995 $2,440,350 $2,462,175 $21,825
=======
</TABLE>
The segregated cash pledged to cover margin requirements for the open positions
at June 30, 1995 was $90,000.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20
<PAGE>
BRINSON U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (Cost $38,262,255) (Note 1) ......... $42,500,453
Cash.............................................................. 116,071
Receivables:
Investment securities sold....................................... 78,401
Dividends........................................................ 70,012
Due from Advisor (Note 2)........................................ 69,310
Deferred organization costs, net of amortization (Note 1)......... 9,990
-----------
TOTAL ASSETS................................................... 42,844,237
-----------
LIABILITIES:
Payables:
Investment securities purchased.................................. 189,741
Investment advisory fees (Note 2)................................ 22,613
Net unrealized depreciation on futures contracts................. 5,850
Accrued expenses................................................. 52,572
-----------
TOTAL LIABILITIES.............................................. 270,776
-----------
NET ASSETS:
Applicable to 3,692,314 shares; par value of $0.001 per share; un-
limited shares authorized........................................ $42,573,461
===========
Net asset value, offering price and redemption price per share
($42,573,461 / 3,692,314 shares)................................. $ 11.53
===========
NET ASSETS CONSIST OF:
Paid in capital................................................... $37,692,082
Accumulated undistributed net investment income................... 133,889
Accumulated net realized gain on investments...................... 487,467
Net unrealized appreciation on investments........................ 4,260,023
-----------
NET ASSETS..................................................... $42,573,461
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21
<PAGE>
BRINSON U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends......................................................... $ 538,253
Interest.......................................................... 78,065
----------
TOTAL INCOME................................................... 616,318
----------
EXPENSES:
Advisory fees (Note 2)............................................ 154,258
Professional fees................................................. 52,351
Custodian fees.................................................... 35,092
Accounting fees................................................... 35,068
Registration fees................................................. 31,897
Printing fees..................................................... 25,560
Transfer agent fees............................................... 19,725
Amortization of organization costs (Note 1)....................... 2,785
Other............................................................. 19,267
----------
TOTAL EXPENSES................................................. 376,003
Expenses waived and reimbursed by Advisor (Note 2)............. (199,708)
----------
NET EXPENSES................................................... 176,295
----------
NET INVESTMENT INCOME.......................................... 440,023
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on:
Investments...................................................... 362,477
Futures contracts................................................ 190,345
----------
Net realized gain on investments .............................. 552,822
----------
Change in net unrealized appreciation or depreciation on:
Investments ..................................................... 4,447,876
Futures contracts ............................................... 28,475
----------
Change in net unrealized appreciation or depreciation on in-
vestments..................................................... 4,476,351
----------
Net realized and unrealized gain on investments .................. 5,029,173
----------
Net increase in net assets resulting from operations.............. $5,469,196
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
BRINSON U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
JUNE 30, 1995 JUNE 30, 1994*
------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income............................ $ 440,023 $ 37,786
Net realized gain (loss) on investments ......... 552,822 (17,425)
Change in net unrealized appreciation or depreci-
ation on investments ........................... 4,476,351 (216,328)
----------- ----------
Net increase (decrease) in net assets resulting
from operations................................. 5,469,196 (195,967)
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income......... (318,699) (25,221)
Distributions from net realized gain............. (47,930) --
----------- ----------
Total distributions to shareholders.............. (366,629) (25,221)
----------- ----------
CAPITAL SHARE TRANSACTIONS:
Shares sold...................................... 30,972,427 8,346,164
Shares issued on reinvestment of distributions... 349,100 25,221
Shares redeemed.................................. (2,050,830) --
----------- ----------
Net increase in net assets resulting from capital
share transactions (a).......................... 29,270,697 8,371,385
----------- ----------
TOTAL INCREASE IN NET ASSETS.................. 34,373,264 8,150,197
----------- ----------
NET ASSETS:
Beginning of period.............................. 8,200,197 50,000
----------- ----------
End of period (including accumulated undistrib-
uted net investment income of $133,889 and
$12,565, respectively).......................... $42,573,461 $8,200,197
=========== ==========
(a) A summary of capital share transactions fol-
lows:
<CAPTION>
SHARES SHARES
------------- --------------
<S> <C> <C>
Shares sold...................................... 3,011,049 842,283
Shares issued on reinvestment of distributions... 33,507 2,635
Shares redeemed.................................. (202,160) --
----------- ----------
Net increase in shares outstanding.............. 2,842,396 844,918
=========== ==========
</TABLE>
* The Fund commenced operations on February 22, 1994
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
23
<PAGE>
BRINSON U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
JUNE 30, 1995 JUNE 30, 1994*
------------- --------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 9.65 $10.00
------- ------
Income from investment operations:
Net investment income............................ 0.16 0.05
Net realized and unrealized gain (loss) on in-
vestments....................................... 1.89 (0.36)
------- ------
Total gain (loss) from investment operations.. 2.05 (0.31)
------- ------
Less distributions:
Distributions from net investment income......... (0.14) (0.04)
Distributions from net realized gain............. (0.03) --
------- ------
Total distributions........................... (0.17) (0.04)
------- ------
Net asset value, end of period.................... $ 11.53 $ 9.65
======= ======
Total return...................................... 21.45% (3.10%)
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $42,573 $8,200
Ratio of expenses to average net assets:
Before expense reimbursement.................... 1.70% 5.40% **
After expense reimbursement..................... 0.80% 0.80% **
Ratio of net investment income to average net as-
sets:
Before expense reimbursement.................... 1.09% (2.82%)**
After expense reimbursement..................... 1.99% 1.78% **
Portfolio turnover rate.......................... 33% 9%
</TABLE>
*The Fund commenced operations on February 22, 1994
**Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
24
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1.SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is a no-load, open-end, management investment
company registered under the Investment Company Act of 1940, as amended, as a
series company. The Trust currently offers shares of ten series: Brinson Global
Fund, Brinson Global Equity Fund, Brinson Global Bond Fund, Brinson Short-Term
Global Income Fund, Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund,
Brinson U.S. Bond Fund, Brinson U.S. Cash Management Fund, Brinson Non-U.S.
Equity Fund and Brinson Non-U.S. Bond Fund. The following is a summary of
significant accounting policies consistently followed by the Brinson U.S.
Balanced Fund and the Brinson U.S. Equity Fund (each a "Fund," collectively the
"Funds") in the preparation of their financial statements.
A.INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price, or lacking any sales,
at the last available bid price in the principal market in which such
securities are normally traded. Securities for which market quotations are not
readily available, including restricted securities which are subject to
limitations on their sale, are valued at fair value as determined in good faith
by or under the direction of the Trust's Board of Trustees. Fixed income/debt
securities are valued using market quotations or independent services that use
prices provided by market makers or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost, which approximates market value.
B.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
C.INVESTMENT INCOME: Interest income, which includes the amortization of
premiums and discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date.
D.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable
income to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the period ended June 30,
1995, therefore, no federal income tax provision was required.
E.ORGANIZATION COSTS: Organization costs are being amortized on a straight-line
basis over five years from each Fund's respective commencement of operations.
F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and capital
gains, if any, annually. Distributions to shareholders are recorded on the ex-
dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Amounts equal to 7.21% and 68.68% of the amount taxable
as ordinary income qualify for the dividends received deduction available to
corporate shareholders for the Brinson U.S. Balanced Fund and the Brinson U.S.
Equity Fund, respectively.
- --------------------------------------------------------------------------------
25
<PAGE>
THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, each Fund pays the Advisor a monthly fee based on the Fund's
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse each Fund to the extent total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates for the year
ended June 30, 1995, were as follows:
<TABLE>
<CAPTION>
ADVISORY EXPENSE ADVISORY FEES WAIVED DUE FROM
FEE CAP FEES OR REIMBURSED ADVISOR
-------- ------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
Brinson U.S. Balanced Fund..... 0.70% 0.80% $441,419 $165,712 $52,411
Brinson U.S. Equity Fund....... 0.70 0.80 154,258 199,708 69,310
</TABLE>
Certain officers of the Funds are also officers of the Advisor. All officers
serve without direct compensation from the Funds. Trustees' fees paid to
unaffiliated trustees were $3,100 and $3,236 for the Brinson U.S. Balanced Fund
and Brinson U.S. Equity Fund, respectively.
3.INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1995, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
------------ ------------
<S> <C> <C>
Brinson U.S. Balanced Fund........................... $371,055,027 $239,300,448
Brinson U.S. Equity Fund............................. 36,321,913 6,800,501
</TABLE>
4.FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market and that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities in an amount (initial margin) based on the
number of open contracts. Subsequent payments (variation margin) are made or
received by the Funds each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains or
losses. The Funds recognize a realized gain or loss when the contract is closed
or expires. The statement of operations reflects realized and unrealized gains
and losses on these contracts. Futures contracts are valued at the settlement
price established each day on the exchange on which they are traded.
5.SUBSEQUENT EVENTS
The Trust's Board of Trustees has approved the authorization of a second class
of shares, the "SwissKey Fund Shares," in addition to the existing class of
shares, the "Brinson Fund Shares." The new class, pays a distribution services
fee and is offered only to customers of Swiss Bank Corporation, the ultimate
parent of the Advisor.
As of July 28, 1995, the Trust renamed the ten series it currently offers as
follows: Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global
Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash
Management Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund.
- --------------------------------------------------------------------------------
26
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Brinson U.S. Balanced Fund
Brinson U.S. Equity Fund
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of Brinson U.S. Balanced Fund and
Brinson U.S. Equity Fund as of June 30, 1995, the related statements of
operations and changes in net assets and the financial highlights for the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of June 30, 1995, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Brinson U.S. Balanced Fund and Brinson U.S. Equity Fund at June 30, 1995, the
results of their operations and the changes in their net assets and the
financial highlights for the periods indicated therein, in conformity with
generally accepted accounting principles.
[LOGO OF ERNST & YOUNG LLP]
Chicago, Illinois
August 4, 1995
- --------------------------------------------------------------------------------
27
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders was held on February 17, 1995 in connection
with the combination of Brinson Holdings, Inc., the direct parent of the
Advisor, and Swiss Bank Corporation. At the Meeting, shareholders of the
Brinson U.S. Equity Fund voted (i) to elect Messrs. Frank K. Reilly, Walter E.
Auch (both of whom were incumbents) and Edward M. Roob (who was newly elected)
as Trustees; (ii) to approve a new investment advisory agreement between the
Advisor and the Trust on behalf of the Brinson U.S. Equity Fund, with
substantially the same terms as the previously approved investment advisory
agreements; and (iii) to ratify the selection of Ernst & Young LLP as the
Trust's independent auditors for the fiscal year ending June 30, 1995.
The results of all matters voted on by shareholders at the Special Meeting held
on February 17, 1995 were as follows:
A.ELECTION OF TRUSTEES:
<TABLE>
<CAPTION>
WITHHOLD
FOR AUTHORITY
--------- ---------
<S> <C> <C>
Frank K. Reilly
Brinson U.S. Equity Fund............................. 1,359,090 -0-
Walter E. Auch
Brinson U.S. Equity Fund............................. 1,359,090 -0-
Edward M. Roob
Brinson U.S. Equity Fund............................. 1,359,090 -0-
</TABLE>
B.APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT BETWEEN BRINSON PARTNERS,
INC. AND THE TRUST ON BEHALF OF THE FUND:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
Brinson U.S. Equity Fund........................ 1,359,090 -0- -0-
</TABLE>
C.RATIFICATION OF ERNST & YOUNG LLP AS THE TRUST'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING JUNE 30, 1995:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
Brinson U.S. Equity Fund........................ 1,359,090 -0- -0-
</TABLE>
- --------------------------------------------------------------------------------
28
<PAGE>
BRINSON NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES MARKET VALUE
------- ------------
<S> <C> <C>
Non-U.S. Equities -- 92.08%
AUSTRALIA -- 5.86%
Amcor Ltd................................................. 60,200 $ 442,955
ANZ Banking Group......................................... 101,919 361,236
Broken Hill Proprietary................................... 170,470 2,092,961
BTR Nylex Ltd............................................. 231,802 442,013
Burns Philp............................................... 88,570 184,586
Coles Myer Ltd............................................ 90,700 283,538
CRA Ltd................................................... 53,800 729,944
Lend Lease Corp........................................... 37,365 476,234
National Australia Bank................................... 114,648 903,726
News Corp................................................. 90,000 501,453
News Corp. Preferred...................................... 21,500 106,227
Pacific Dunlop Ltd........................................ 239,300 502,111
Santos Ltd................................................ 100,500 240,795
Southcorp Holdings........................................ 213,073 424,424
Western Mining Corp....................................... 64,700 354,527
Westpac Banking Corp...................................... 177,151 639,185
------------
8,685,915
------------
BELGIUM -- 2.44%
Electrabel................................................ 4,295 907,073
Fortis AG................................................. 3,270 345,875
Groupe Bruxelles Lambert.................................. 2,150 287,851
Kredietbank............................................... 2,020 477,718
Petrofina................................................. 1,655 499,570
Petrofina Warrants (b).................................... 57 793
Societe Generale De Belgique.............................. 3,048 221,712
Solvay.................................................... 655 362,516
Tractebel................................................. 990 359,195
Union Mineire............................................. 2,450 160,134
------------
3,622,437
------------
CANADA -- 5.73%
Alcan Aluminium Ltd....................................... 23,800 718,955
Bank of Montreal.......................................... 48,500 1,014,977
Barrick Gold Corp......................................... 16,800 424,953
Canadian Pacific Ltd...................................... 58,300 1,002,575
Imperial Oil Canada Ltd................................... 24,500 909,521
Noranda, Inc.............................................. 19,700 387,174
Norcen Energy............................................. 14,000 188,528
Northern Telecom Ltd...................................... 11,100 401,969
Nova Corporation of Alberta............................... 34,300 290,244
Oshawa Group Ltd. "A"..................................... 13,600 210,365
Royal Bank of Canada...................................... 38,800 868,467
Seagram Co Ltd............................................ 30,300 1,042,128
Thomson Corp.............................................. 49,600 676,955
TransCanada Pipeline...................................... 27,000 361,133
------------
8,497,944
------------
FRANCE -- 6.73%
Alcatel Alsthom........................................... 5,013 451,713
Banque Nat'l Paris........................................ 12,640 610,162
Carnaud Metal Box......................................... 9,300 415,934
Cie Bancaire.............................................. 3,847 460,291
Cie de Saint Gobain....................................... 5,049 610,359
Cie Fin de Suez........................................... 8,850 492,752
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET VALUE
------- ------------
<S> <C> <C>
Colas..................................................... 1,357 $ 251,664
Credit Local de France.................................... 5,980 555,131
GAN....................................................... 3,350 106,357
Generale des Eaux......................................... 7,159 797,496
Groupe de la Cite......................................... 2,360 418,690
LVMH...................................................... 4,305 775,300
Michelin Class B.......................................... 5,700 252,693
Pechiney Cert D'Invest.................................... 5,190 299,462
Peugeot................................................... 3,750 520,629
Sanofi.................................................... 5,700 315,719
Societe Generale.......................................... 7,056 825,323
Societe Nationale Elf Aquitaine........................... 9,534 705,093
Total Co. "B"............................................. 13,400 807,179
UAP....................................................... 11,650 305,700
------------
9,977,647
------------
GERMANY -- 5.71%
Allianz................................................... 550 985,081
Allianz Rights............................................ 550 41,724
BASF AG................................................... 1,790 381,770
Bayer..................................................... 2,100 521,472
Bayer Motoren Werken...................................... 865 474,341
Bayer Vereinsbank......................................... 1,125 340,564
Commerzbank............................................... 1,706 408,597
Daimler-Benz.............................................. 645 296,613
Deutsche Bank............................................. 26,500 1,288,527
Hoechst................................................... 1,880 405,448
Kaufhof Holdings.......................................... 1,575 565,548
Mannesmann................................................ 1,400 427,353
Munchener Ruck (b)........................................ 307 672,068
Munchener Ruck Warrants '98 (b)........................... 12 1,578
Preussag.................................................. 1,390 415,765
Schering.................................................. 3,550 248,020
Veba...................................................... 2,525 990,590
------------
8,465,059
------------
HONG KONG -- 2.09%
China Light & Power....................................... 125,800 647,088
Hang Seng Bank............................................ 27,400 208,931
Hong Kong Land Holdings................................... 156,000 283,920
Hong Kong Telecommunications.............................. 90,000 177,964
Hutchison Whampoa......................................... 143,000 691,205
Jardine Matheson.......................................... 42,000 308,700
Swire Pacific "A"......................................... 67,000 510,888
Wharf Holdings............................................ 82,000 267,593
------------
3,096,289
------------
ITALY -- 1.98%
Assic Generali............................................ 26,600 624,787
Fiat Spa Priv (b)......................................... 195,000 424,071
Instituto Mobilaire Italiano.............................. 68,000 415,812
Italgas................................................... 72,000 186,929
La Rinascente Ordinary.................................... 28,000 158,987
La Rinascente Savings..................................... 24,000 62,749
Mediobanca................................................ 14,000 101,644
Montedison (b)............................................ 235,000 168,104
Sai Di Risp............................................... 36,000 153,721
Telecom Italia Savings.................................... 305,000 644,659
------------
2,941,463
------------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
BRINSON NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES MARKET VALUE
------- ------------
<S> <C> <C>
JAPAN -- 30.46%
Amada..................................................... 79,000 $ 674,697
Asahi Glass Co............................................ 92,000 1,014,395
Bank of Tokyo............................................. 46,000 736,954
Canon, Inc................................................ 66,000 1,072,918
Canon Sales............................................... 23,000 636,706
Citizen Watch Co.......................................... 71,000 439,098
Dai Nippon Printing....................................... 70,000 1,113,205
Daikin Kogyo Co........................................... 76,000 610,578
Daiwa Bank................................................ 55,000 495,641
Daiwa House Industries.................................... 38,000 581,930
Fanuc Co.................................................. 19,600 845,047
Fujitsu................................................... 121,000 1,204,441
Hitachi Ltd............................................... 232,000 2,309,340
Honda Motor Co............................................ 45,000 689,127
Inax...................................................... 74,000 712,192
Isetan.................................................... 24,000 325,127
Ito Yokado Co............................................. 39,000 2,053,599
Keio Teito Electric Railway............................... 87,000 508,328
Kintetsu.................................................. 86,000 753,728
Kuraray Co. Ltd........................................... 42,000 455,672
Maeda Road Construction................................... 18,000 347,744
Matsushita Electric Industrial............................ 127,000 1,974,791
Mitsubishi Bank........................................... 32,000 689,834
Mitsubishi Paper.......................................... 95,000 499,116
Mitsui Fudosan............................................ 21,000 240,205
NGK Insulators............................................ 126,000 1,141,407
Nichii Co................................................. 61,000 661,809
Nintendo.................................................. 7,000 401,579
Nippon Denso Co........................................... 52,000 943,338
Nippon Meat Packers....................................... 46,000 671,928
Nippon Steel Corp......................................... 59,000 191,825
Orix Corp................................................. 8,000 265,756
Osaka Gas Corp............................................ 340,000 1,253,622
Pioneer Electronics....................................... 34,000 576,746
Sankyo Co. ............................................... 59,500 1,380,787
Secom Co.................................................. 18,000 1,130,168
Seino Transportation...................................... 26,000 437,979
Sekisui House............................................. 155,000 1,917,187
Shinmaywa Industries...................................... 46,000 385,275
Sony Corp................................................. 25,800 1,236,965
Sumitomo Bank............................................. 85,000 1,471,905
Sumitomo Electric Industries.............................. 64,000 761,456
Takeda Chemical Industries................................ 86,000 1,134,645
TDK Corp.................................................. 23,000 1,045,824
Tokio Marine & Fire....................................... 70,000 801,508
Tokyo Electric Power...................................... 34,000 1,041,348
Tokyo Steel Mfg........................................... 56,700 968,489
Tonen Corp................................................ 40,000 621,981
Toray Industries, Inc..................................... 255,000 1,583,049
Toshiba Corp.............................................. 239,000 1,511,874
Toyo Suisan Kaisha........................................ 18,000 181,718
Toyota Motor Corp......................................... 24,000 474,968
------------
45,179,549
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET VALUE
------- ------------
<S> <C> <C>
MALAYSIA -- 0.44%
Genting........................................ 2,000 $ 19,771
Hume Industries................................ 7,000 38,189
Kuala Lumpur Kepong............................ 9,000 28,611
Land & General Holdings........................ 7,500 25,073
Malayan Bank................................... 21,000 166,250
Nestle' Malaysia............................... 11,000 84,376
Sime Darby..................................... 48,000 133,886
Telekom Malaysia............................... 12,000 91,062
Tenaga Nasional................................ 17,000 69,382
------------
656,600
------------
NETHERLANDS -- 5.95%
ABN-AMRO Coupons............................... 25,955 28,960
ABN-AMRO Holdings.............................. 25,955 1,001,038
D.S.M.......................................... 3,900 335,795
Elsevier....................................... 48,300 570,068
Internationale Nederlanden Grp................. 22,291 1,232,079
Internationale Nederlanden Grp. Coupon......... 22,291 31,485
KPN............................................ 10,400 373,609
KPN Coupon..................................... 10,400 9,860
Philips Electronics............................ 9,650 408,281
Royal Dutch Petroleum ADS (a).................... 3,300 402,187
Royal Dutch Petroleum.......................... 25,400 3,099,439
Unilever....................................... 10,200 1,326,230
------------
8,819,031
------------
NEW ZEALAND -- 2.01%
Brierley Investment............................ 772,000 582,973
Carter Holt Harvey............................. 324,000 792,462
Fletcher Challenge Ltd......................... 299,000 839,214
New Zealand Telecom ADS (a).................... 12,700 769,937
------------
2,984,586
------------
SPAIN -- 2.50%
Banco Bilbao-Vizcaya........................... 9,600 277,083
Banco Intercontinental......................... 3,320 298,852
Banco Popular.................................. 1,880 279,461
Banco Santander................................ 8,100 319,411
Empresa Nac Electric........................... 7,000 345,693
Hidro Iberdrola................................ 91,100 686,128
Repsol ADR (a)................................. 13,600 430,100
Sevillana De Electric.......................... 17,000 104,592
Telefonica De Espana........................... 62,100 800,033
Viscofan....................................... 11,100 164,085
------------
3,705,438
------------
SWITZERLAND -- 3.40%
BBC Brown Boverie (Br)........................... 288 298,000
Ciba Geigy (Reg.).............................. 507 371,448
CS Holdings.................................... 9,400 860,851
Nestle (Reg.).................................. 1,395 1,451,914
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
BRINSON NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES MARKET VALUE
------- ------------
<S> <C> <C>
SWITZERLAND (CONTINUED)
Roche Holdings Gen........................................ 188 $ 1,210,903
Societe Generale Surveillance (Br)........................ 255 442,708
Zurich Insurance.......................................... 326 409,481
------------
5,045,305
------------
UNITED KINGDOM -- 16.78%
Asda Group................................................ 226,000 341,607
Bass...................................................... 67,400 645,045
BAT Industries............................................ 89,300 683,426
BET....................................................... 134,000 262,243
Booker PLC................................................ 40,600 267,437
British Gas............................................... 292,800 1,348,697
British Petroleum......................................... 163,906 1,174,855
British Telecommunications................................ 270,600 1,687,752
Charter Group............................................. 39,625 572,466
Coats Viyella............................................. 137,500 406,921
FKI....................................................... 120,500 304,845
FKI Rights................................................ 30,125 16,057
General Electric PLC...................................... 275,000 1,343,278
Glaxo Holdings............................................ 76,800 942,740
Grand Metropolitan........................................ 197,600 1,212,009
Guinness.................................................. 112,000 842,896
Hanson.................................................... 150,900 528,210
Hillsdown Holdings........................................ 182,000 521,241
House of Fraser........................................... 239,000 482,943
HSBC Holdings............................................. 20,000 258,234
Legal and General......................................... 42,400 358,899
Lloyds Abbey Life......................................... 64,700 402,509
Lloyds Bank............................................... 155,900 1,547,838
Lucas Industries.......................................... 119,883 359,554
Marks & Spencer........................................... 87,000 559,928
MFI Furniture Group....................................... 86,500 160,338
Mirror Group.............................................. 67,600 143,052
National Power............................................ 69,000 489,093
National Westminster Bank................................. 95,000 825,298
Ocean Group............................................... 89,500 442,872
P & O..................................................... 66,000 608,019
Reckitt & Colman.......................................... 52,375 552,500
Redland................................................... 49,500 324,487
Rolls Royce............................................... 130,000 360,939
Royal Insurance........................................... 65,300 321,045
Sears PLC................................................. 271,400 429,663
Sedgwick Group............................................ 52,700 115,714
SmithKline Beecham Unit................................... 126,100 1,119,551
Tesco..................................................... 196,500 906,682
Thames Water.............................................. 56,200 425,636
Unilever Ord 5p........................................... 16,000 323,946
W.H. Smith Group "A"...................................... 52,500 273,986
------------
24,894,451
------------
Total Non-U.S. Equities (Cost $132,758,689)............... 136,571,714
------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT MARKET VALUE
-------------- ------------
Short-Term Investments -- 6.18%
<S> <C> <C>
FOREIGN TIME DEPOSITS -- 3.34%
Bankers Trust
Swedish Krona -- 3.34%
8.25%, due 07/05/95................................ SEK 36,030,158 $ 4,948,110
------------
COMMERCIAL PAPER -- 2.84%
Conagra Australia Inc.
6.09%, due 07/05/95................................ $ 1,000,000 999,323
6.05%, due 07/12/95................................ 1,000,000 998,152
Texas Utilities Electric Co.
6.50%, due 07/03/95................................ 2,218,000 2,217,199
------------
4,214,674
------------
Total Short-Term Investments (Cost $9,198,096)...... 9,162,784
------------
Total Investments (Cost $141,956,785)--98.26% (c)... 145,734,498
------------
Cash and other assets, less liabilities--1.74%...... 2,584,038
------------
Net Assets -- 100%.................................. $148,318,536
============
</TABLE>
See accompanying notes to schedule of investments.
- --------------------------------------------------------------------------------
11
<PAGE>
BRINSON NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS
June 30, 1995
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS
(a) Denominated in U.S. dollars
(b) Non-income producing security
(c) Aggregate cost for federal income tax purposes was $141,956,785; net
unrealized appreciation consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation................................ $ 8,981,279
Gross unrealized depreciation................................ (5,203,566)
-----------
Net unrealized appreciation................................ $ 3,777,713
===========
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4)
The Brinson Non-U.S. Equity Fund had the following open forward foreign
currency contracts as of June 30, 1995:
<TABLE>
<CAPTION>
SETTLEMENT LOCAL CURRENT UNREALIZED
DATE CURRENCY VALUE GAIN/(LOSS)
---------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
FORWARD FOREIGN CURRENCY
BUY CONTRACTS
Canadian Dollar......... 10/20/95 27,205,770 $19,752,210 $ 49,991
Italian Lira............ 10/20/95 8,400,000,000 5,034,349 (19,651)
FORWARD FOREIGN CURRENCY
SALE CONTRACTS
Belgian Franc........... 10/20/95 83,000,000 2,927,476 (10,897)
British Pound........... 10/20/95 4,600,000 7,269,428 98,484
Dutch Guilder........... 10/20/95 10,200,000 6,611,415 (31,725)
French Franc............ 10/20/95 42,500,000 8,743,562 (75,704)
German Mark............. 10/20/95 7,100,000 5,150,882 (25,453)
Japanese Yen............ 10/20/95 3,680,000,000 43,983,955 640,990
Swiss Franc............. 10/20/95 3,400,000 2,976,203 (2,420)
--------
Total................. $623,615
========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
12
<PAGE>
BRINSON NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (Cost $141,956,785) (Note 1)....... $145,734,498
Cash............................................................ 50,540
Foreign currency, at market value (Cost $776,906)............... 785,707
Receivables:
Investment securities sold..................................... 188,790
Dividends...................................................... 667,187
Interest ...................................................... 3,416
Fund shares sold............................................... 644,117
Due from Advisor (Note 2)...................................... 129,117
Net unrealized appreciation on forward foreign currency con-
tracts......................................................... 623,615
Deferred organization costs, net of amortization (Note 1)....... 8,882
Other assets.................................................... 6,463
------------
TOTAL ASSETS................................................. 148,842,332
------------
LIABILITIES:
Payables:
Investment securities purchased................................ 265,850
Fund shares redeemed........................................... 57,027
Investment advisory fees (Note 2).............................. 96,778
Accrued expenses............................................... 104,141
------------
TOTAL LIABILITIES............................................ 523,796
------------
NET ASSETS:
Applicable to 15,314,850 shares; par value of $0.001 per share;
unlimited shares authorized.................................... $148,318,536
============
Net asset value, offering price and redemption price per share
($148,318,536 / 15,314,850 shares)............................. $ 9.68
============
NET ASSETS CONSIST OF:
Paid in capital................................................. $149,358,288
Accumulated undistributed net investment income................. 632,906
Accumulated net realized loss on investments and foreign curren-
cy............................................................. (6,089,654)
Net unrealized appreciation on investments and foreign currency. 4,416,996
------------
NET ASSETS................................................... $148,318,536
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<PAGE>
BRINSON NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $368,832 for foreign taxes withheld)............ $2,788,292
Interest.......................................................... 897,165
----------
TOTAL INCOME................................................... 3,685,457
----------
EXPENSES:
Advisory fees (Note 2)............................................ 933,521
Custodian fees.................................................... 144,417
Accounting fees................................................... 91,827
Administration fees............................................... 72,350
Amortization of organization costs (Note 1)....................... 2,800
Other............................................................. 189,446
----------
TOTAL EXPENSES................................................. 1,434,361
Expenses waived by Advisor (Note 2)............................ (267,460)
----------
NET EXPENSES................................................... 1,166,901
----------
NET INVESTMENT INCOME ......................................... 2,518,556
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized gain (loss) on:
Investments...................................................... 759,672
Futures contracts................................................ (195,443)
Foreign currency transactions.................................... (5,614,993)
----------
Net realized loss on investments and foreign currency.......... (5,050,764)
----------
Change in net unrealized appreciation or depreciation on:
Investments and foreign currency ................................ 892,678
Futures contracts ............................................... 176,000
Forward contracts................................................ 971,960
Translation of other assets and liabilities denominated in for-
eign currency................................................... (1,276)
----------
Change in net unrealized appreciation or depreciation on in-
vestments and foreign currency................................ 2,039,362
----------
Net realized and unrealized loss on investments and foreign curren-
cy................................................................ (3,011,402)
----------
Net decrease in net assets resulting from operations............... $ (492,846)
==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<PAGE>
BRINSON NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
JUNE 30, 1995 JUNE 30, 1994*
------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income............................ $ 2,518,556 $ 712,302
Net realized loss on investments and foreign cur-
rency........................................... (5,050,764) (3,168,393)
Change in net unrealized appreciation or depreci-
ation on investments and
foreign currency................................ 2,039,362 2,377,634
------------ -----------
Net decrease in net assets resulting from opera-
tions........................................... (492,846) (78,457)
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income......... -- (468,449)
Distributions from net realized gain............. -- --
------------ -----------
Total distributions to shareholders.............. -- (468,449)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold...................................... 110,628,882 75,351,181
Shares issued on reinvestment of distributions... -- 367,668
Shares redeemed.................................. (33,361,344) (3,678,099)
------------ -----------
Net increase in net assets resulting from capital
share transactions (a).......................... 77,267,538 72,040,750
------------ -----------
TOTAL INCREASE IN NET ASSETS................... 76,774,692 71,493,844
------------ -----------
NET ASSETS:
Beginning of period.............................. 71,543,844 50,000
------------ -----------
End of period (including accumulated undistrib-
uted net investment income of $632,906 and
$253,630, respectively)......................... $148,318,536 $71,543,844
============ ===========
(a) A summary of capital share transactions fol-
lows:
<CAPTION>
SHARES SHARES
------------- --------------
<S> <C> <C>
Shares sold...................................... 11,370,317 7,717,774
Shares issued on reinvestment of distributions... -- 38,173
Shares redeemed.................................. (3,435,839) (380,575)
------------ -----------
Net increase in shares outstanding.............. 7,934,478 7,375,372
============ ===========
</TABLE>
* The Fund commenced operations on August 31, 1993
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<PAGE>
BRINSON NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
JUNE 30, 1995 JUNE 30, 1994*
------------- --------------
<S> <C> <C>
Net asset value, beginning of period.............. $ 9.69 $ 10.00
-------- -------
Income from investment operations:
Net investment income............................ 0.15 0.10
Net realized and unrealized loss on investments
and foreign currency............................ (0.16) (0.34)
-------- -------
Total loss from investment operations......... (0.01) (0.24)
-------- -------
Less distributions:
Distributions from net investment income......... -- (0.07)
Distributions from net realized gain............. -- --
-------- -------
Total distributions........................... -- (0.07)
-------- -------
Net asset value, end of period.................... $ 9.68 $ 9.69
======== =======
Total return...................................... (0.10%) (2.45%)
Ratios/Supplemental data
Net assets, end of period (in 000s).............. $148,319 $71,544
Ratio of expenses to average net assets:
Before expense reimbursement.................... 1.23% 1.60%**
After expense reimbursement..................... 1.00% 1.00%**
Ratio of net investment income to average net as-
sets:
Before expense reimbursement.................... 1.93% 1.28%**
After expense reimbursement..................... 2.16% 1.88%**
Portfolio turnover rate.......................... 14% 12%
</TABLE>
* The Fund commenced operations on August 31, 1993
** Annualized
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
BRINSON NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is a no-load, open-end, management investment
company registered under the Investment Company Act of 1940, as amended, as a
series company. The Trust currently offers shares of ten series: Brinson Global
Fund, Brinson Global Equity Fund, Brinson Global Bond Fund, Brinson Short-Term
Global Income Fund, Brinson U.S. Balanced Fund, Brinson U.S. Equity Fund,
Brinson U.S. Bond Fund, Brinson U.S. Cash Management Fund, Brinson Non-U.S.
Equity Fund and Brinson Non-U.S. Bond Fund. The following is a summary of
significant accounting policies consistently followed by the Brinson Non-U.S.
Equity Fund (the "Fund") in the preparation of its financial statements.
A. INVESTMENT VALUATION: Securities for which market quotations are readily
available are valued at the last available sales price, or lacking any sales,
at the last available bid price in the principal market in which such
securities are normally traded. Securities for which market quotations are not
readily available, including restricted securities which are subject to
limitations on their sale, are valued at fair value as determined in good faith
by or under the direction of the Trust's Board of Trustees. Short-term
obligations with a maturity of 60 days or less are valued at amortized cost,
which approximates market value.
B. FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
at the bid prices of such currencies against the U.S. dollar as of the date of
valuation. Purchases and sales of portfolio securities, commitments under
forward foreign currency contracts, income receipts and expense accruals are
translated at the prevailing exchange rate on the date of each transaction.
Realized and unrealized foreign exchange gains or losses on investments are
included as a component of net realized and unrealized gain or loss on
investments and foreign currency in the statement of operations.
C. INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
D. INVESTMENT INCOME: Interest income is recorded on the accrual basis. Dividend
income is recorded on the ex-dividend date.
E. FEDERAL INCOME TAXES: It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of its taxable income
to its shareholders. The Fund has met the requirements of the Code applicable
to regulated investment companies for the year ended June 30, 1995, therefore,
no federal income tax provision was required. At June 30, 1995, the Fund had a
capital loss carryforward of approximately $5,400,000, of which $260,000,
$1,180,000 and $3,960,000 will expire on June 30, 2002, June 30, 2003 and June
30, 2004, respectively.
F. ORGANIZATION COSTS: Organization costs are being amortized on a straight-line
basis over five years from the commencement of operations.
G. DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Fund to distribute its
net investment income on a semi-annual basis and net capital gains, if any,
annually. Distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign
currency transactions.
- --------------------------------------------------------------------------------
17
<PAGE>
BRINSON NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL
STATEMENTS
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Fund with investment management services. As compensation for
these services, the Fund pays the Advisor a monthly fee based on the Fund's
average daily net assets. The Advisor has agreed to waive its fees and
reimburse the Fund to the extent total annualized expenses exceed a specified
percentage of the Fund's average daily net assets. Investment advisory fees and
other transactions with affiliates for the year ended June 30, 1995, were as
follows:
<TABLE>
<CAPTION>
ADVISORY EXPENSE ADVISORY FEES DUE FROM
FEE CAP FEES WAIVED ADVISOR
-------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Brinson Non-U.S. Equity Fund........ 0.80% 1.00% $933,521 $267,460 $129,117
</TABLE>
Certain officers of the Fund are also officers of the Advisor. All officers
serve without direct compensation from the Fund. Trustees' fees paid to
unaffiliated trustees were $5,572.
3. INVESTMENT TRANSACTIONS
Investment transactions for the year ended June 30, 1995, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
----------- -----------
<S> <C> <C>
Brinson Non-U.S. Equity Fund............................ $82,404,161 $14,668,115
</TABLE>
4. FORWARD FOREIGN CURRENCY CONTRACTS
The Fund may engage in portfolio hedging with respect to changes in currency
exchange rates by entering into forward foreign currency contracts to purchase
or sell currencies. A forward foreign currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. Risks associated with such contracts include movement in the value of the
foreign currency relative to the U.S. dollar and the ability of the
counterparty to perform. The contracts are valued daily at forward exchange
rates and an unrealized gain or loss is recorded. The Fund realizes a gain or
loss upon settlement of the contracts. The statement of operations reflects
realized and unrealized gains and losses on these contracts. The counterparty
to all forward foreign currency contracts at June 30, 1995 was the Fund's
custodian.
5. FUTURES CONTRACTS
The Fund may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Fund to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date
at a specified price. The Fund enters into such contracts to hedge a portion of
its portfolio. Risks of entering into futures contracts include the possibility
that there may be an illiquid market and that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Fund is required to
deposit either cash or securities in an amount (initial margin) based on the
number of open contracts. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains or
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires. The statement of operations reflects realized and unrealized gains
and losses on these contracts. Futures contracts are valued at the settlement
price established each day on the exchange on which they are traded.
6. SUBSEQUENT EVENTS
The Trust's Board of Trustees has approved the authorization of a second class
of shares, the "SwissKey Fund Shares," in addition to the existing class of
shares, the "Brinson Fund Shares." The new class pays a distribution services
fee and is offered only to customers of Swiss Bank Corporation, the ultimate
parent of the Advisor.
As of July 28, 1995, the Trust renamed the ten series it currently offers as
follows: Global Fund, Global Equity Fund, Global Bond Fund, Short-Term Global
Income Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash
Management Fund, Non-U.S. Equity Fund and Non-U.S. Bond Fund.
- --------------------------------------------------------------------------------
18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Brinson Non-U.S. Equity Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Brinson Non-U.S. Equity Fund as of June 30,
1995, the related statements of operations for the year then ended and changes
in net assets and the financial highlights for the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Brinson Non-U.S. Equity Fund at June 30, 1995, the results of its operations
for the year then ended, and the changes in its net assets and the financial
highlights for the periods indicated therein, in conformity with generally
accepted accounting principles.
[LOGO OF ERNST & YOUNG]
Chicago, Illinois
August 4, 1995
- --------------------------------------------------------------------------------
19
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders was held on February 17, 1995 in connection
with the combination of Brinson Holdings, Inc., the direct parent of the
Advisor, and Swiss Bank Corporation. At the Meeting, shareholders voted (i) to
elect Messrs. Frank K. Reilly, Walter E. Auch (both of whom were incumbents)
and Edward M. Roob (who was newly elected) as Trustees; (ii) to approve a new
investment advisory agreement between the Advisor and the Trust on behalf of
the Brinson Non-U.S. Equity Fund, with substantially the same terms as the
previously approved investment advisory agreements; and (iii) to ratify the
selection of Ernst & Young LLP as the Trust's independent auditors for the
fiscal year ending June 30, 1995.
The results of all matters voted on by shareholders at the Special Meeting held
on February 17, 1995 were as follows:
A. ELECTION OF TRUSTEES:
<TABLE>
<CAPTION>
WITHHOLD
FOR AUTHORITY
--------- ---------
<S> <C> <C>
Frank K. Reilly
Brinson Non-U.S. Equity Fund... 7,530,756 -0-
Walter E. Auch
Brinson Non-U.S. Equity Fund... 7,530,756 -0-
Edward M. Roob
Brinson Non-U.S. Equity Fund... 7,530,756 -0-
</TABLE>
B. APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT BETWEEN BRINSON PARTNERS,
INC. AND THE TRUST ON BEHALF OF THE FUND:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
Brinson Non-U.S. Equity Fund.................. 7,530,756 -0- -0-
</TABLE>
C. RATIFICATION OF ERNST & YOUNG LLP AS THE TRUST'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING JUNE 30, 1995:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
Brinson Non-U.S. Equity Fund.................. 7,530,756 -0- -0-
</TABLE>
- --------------------------------------------------------------------------------
20
<PAGE>
<TABLE>
<CAPTION>
U.S. BOND FUND SCHEDULE OF INVESTMENTS
====================================================================================================
December 31, 1995 (Unaudited) Face
Amount Value
---------- -----------
<S> <C> <C>
Bonds - 94.45%
U.S. Corporate Bonds - 32.89%
Capital One Bank 8.625%, due 01/15/97 ............................. $ 250,000 $ 257,353
Citicorp Mortgage Securities 5.750%, due 06/25/09 ................. 84,462 75,898
Countrywide Funding FRN 6.480%, due 12/01/03 ...................... 250,000 238,413
Dayton Hudson Credit Card Trust 95-1A 6.100%, due 02/25/02 ........ 100,000 101,605
GMAC MTN 7.450%, due 06/05/97 ..................................... 250,000 256,280
Green Tree Financial 94-2 8.300%, due 05/15/19 .................... 160,000 176,950
Hanson PLC Notes 6.750%, due 09/15/05 ............................. 100,000 103,509
IBM Corp. 7.000%, due 10/30/25 .................................... 325,000 334,482
Lehman Brothers Holdings, Inc. MTN 6.650%, due 07/14/98 ........... 250,000 253,535
News America Corp. 7.750%, due 01/20/24 ........................... 250,000 259,331
Republic Bank of New York Corp. FRN 6.025%, due 12/29/02 .......... 250,000 242,500
RJR Nabisco, Inc. 8.750%, due 04/15/04 ............................ 250,000 256,590
Standard Credit Card Trust 94-1A 4.650%, due 02/07/97 ............. 250,000 247,920
USX Corp.
9.800%, due 07/01/01 ........................................... 130,000 149,997
8.500%, due 03/01/23 ........................................... 80,000 87,809
------------
3,042,172
------------
International Dollar Bonds - 5.08%
Republic of Italy 6.875%, due 09/27/23 ............................ 250,000 244,375
Standard Credit Card Trust 91-3 8.875%, due 09/07/99 ............. 210,000 225,292
------------
469,667
------------
U.S. Government Agencies - 27.54%
Federal Home Loan Mortgage Corp.
7.000%, due 12/15/06 ........................................... 220,000 225,353
7.000%, due 10/15/21 ........................................... 60,000 60,923
7.500%, due 07/15/22 ........................................... 250,000 262,428
Federal National Mortgage Association
6.500%, due 09/01/24 ........................................... 220,000 217,388
7.000%, due 09/01/24 ........................................... 245,000 246,914
7.500%, due 05/01/25 ........................................... 232,592 238,262
Federal National Mortgage Association Dwarf 7.000%, due 12/01/09 .. 250,000 254,531
Government National Mortgage Association
9.000%, due 12/15/09 ........................................... 72,145 76,400
9.000%, due 12/15/17 ........................................... 214,071 227,904
7.500%, due 12/15/22 ........................................... 463,088 476,740
8.000%, due 09/15/24 ........................................... 100,000 104,125
Government National Mortgage Association ARM 5.500%, due 10/20/25 156,576 156,623
------------
2,547,591
------------
U.S. Government Obligations - 28.94%
U.S. Treasury Coupon Strips 0.000%, due 11/15/19 .................. 480,000 108,960
U.S. Treasury Notes and Bonds
6.625%, due 03/31/97 ........................................... 835,000 849,352
5.500%, due 11/15/98 ........................................... 350,000 352,515
6.250%, due 08/31/00 ........................................... 185,000 191,475
7.250%, due 05/15/04 ........................................... 740,000 823,250
8.125%, due 05/15/21 ........................................... 250,000 316,406
U.S. Treasury Principal Strips 0.000%, due 05/15/20 ............... 155,000 34,351
------------
2,676,309
------------
Total U.S. Bonds (Cost $8,554,756) ................................ 8,735,739
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. BOND FUND SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------------------------------
December 31, 1995 (Unaudited) Face
Amount Value
----------- ------------
<S> <C> <C>
Short-Term Investments - 12.44%
Commercial Paper - 12.44%
Baxter International, Inc. 6.050%, due 01/02/96............. $ 451,000 $ 450,924
General American Transportation Corp. 6.200%, due 01/18/96.. 200,000 199,415
Whitman Corp. 5.950%, due 01/02/96.......................... 500,000 499,917
------------
Total Short-Term Investments
(Cost $1,150,256)....................................... 1,150,256
------------
Total Investments
(Cost $9,705,012) - 106.89%.............................. 9,885,995
------------
Liabilities, less cash and other
assets - (6.89%) (a).................................... (636,965)
------------
Net Assets - 100%........................................... $ 9,249,030
============
</TABLE>
(a) Aggregate cost for federal income tax purposes was $9,705,011; and net
unrealized appreciation consisted of:
Gross unrealized appreciation..... $181,935
Gross unrealized depreciation..... (952)
---------
$180,983
=========
FRN: Floating rate note - The rate disclosed is that in effect at December 31,
1995.
MTN: Medium Term Note
<PAGE>
<TABLE>
<CAPTION>
U.S. BOND - FINANCIAL STATEMENTS
================================================================================================================
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995 (Unaudited)
<S> <C>
ASSETS:
Investments, at value (Cost $9,705,012) (Note 1)........................................... $ 9,885,995
Cash....................................................................................... 40,223
Receivables:
Investment securities sold.............................................................. 253,203
Interest................................................................................ 117,792
Due from Advisor (Note 2)............................................................... 102,931
Deferred organization costs, net of amortization (Note 1).................................. 13,004
Other assets............................................................................... 15,935
-----------
TOTAL ASSETS..................................................................... 10,429,083
-----------
LIABILITIES:
Payables:
Investment securities purchased......................................................... 1,071,068
Investment advisory fees (Note 2)....................................................... 3,845
Accrued expenses........................................................................ 105,140
-----------
TOTAL LIABILITIES................................................................ 1,180,053
-----------
NET ASSETS:
Applicable to 897,145 shares; par value of $0.001 per share; unlimited shares authorized... $ 9,249,030
===========
Brinson Class: $9,074,299/880,184 shares ................................................ $ 10.31
===========
SwissKey Class: $174,731/16,961 shares ................................................... $ 10.30
===========
NET ASSETS CONSIST OF:
Paid in capital............................................................................ $ 8,985,395
Accumulated undistributed (distributions in excess of) net investment income............... (7,906)
Accumulated net realized gain on investments............................................... 90,558
Net unrealized appreciation on investments................................................. 180,983
-----------
NET ASSETS....................................................................... $ 9,249,030
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
U.S. BOND - FINANCIAL STATEMENTS
==========================================================================================
STATEMENT OF OPERATIONS
FOR THE PERIOD AUGUST 31, 1995* TO DECEMBER 31, 1995 (Unaudited)
<S> <C>
INVESTMENT INCOME
Interest................................................................... $ 190,503
---------
TOTAL INCOME..................................................... 190,503
---------
EXPENSES:
Professional fees.......................................................... 28,675
Custodian fees............................................................. 21,000
Registration fees.......................................................... 17,605
Transfer Agent Fees........................................................ 16,060
Advisory fees (Note 2)..................................................... 14,076
Accounting fees............................................................ 13,585
Printing fees.............................................................. 11,358
Amortization of organization costs (Note 1)................................ 932
Distribution fees (Note 5)................................................. 89
Other...................................................................... 6,897
---------
TOTAL EXPENSES................................................... 130,277
Expenses waived by Advisor (Note 2)............................. (113,298)
---------
NET EXPENSES..................................................... 16,979
---------
NET INVESTMENT INCOME ........................................... 173,524
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments........................................... 113,897
Change in net unrealized appreciation on investments ...................... 180,983
---------
Net realized and unrealized gain on investments ........................... 294,880
---------
Net increase in net assets resulting from operations....................... $ 468,404
=========
</TABLE>
* Commencement of operations
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
U.S. BOND - FINANCIAL STATEMENTS
===================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD AUGUST 31, 1995** TO DECEMBER 31, 1995 (Unaudited)
<S> <C>
OPERATIONS:
Net investment income.......................................................... $ 173,524
Net realized gain on investments .............................................. 113,897
Change in net unrealized appreciation on investments .......................... 180,983
------------
Net increase in net assets resulting from operations........................... 468,404
------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income*...................................... (173,524)
Distributions from net realized gain*.......................................... (23,339)
Distributions in excess of net investment income*.............................. (7,906)
------------
Total distributions to shareholders*........................................... (204,769)
------------
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................................................... 8,861,189
Shares issued on reinvestment of distributions................................. 204,770
Shares redeemed................................................................ (131,564)
------------
Net increase in net assets resulting from capital share transactions (Note 6).. 8,934,395
------------
TOTAL INCREASE IN NET ASSETS........................................... 9,198,030
------------
NET ASSETS:
Beginning of period............................................................ 51,000
------------
End of period (including distributions in excess of net investment income)..... $ 9,249,030
============
* Distributions by Class:
Distributions from and in Excess of Net Investment Income:
Brinson Class............................................................... $ 179,445
SwissKey Class.............................................................. 1,984
Distributions from Net Realized Gain:
Brinson Class............................................................... 23,072
SwissKey Class.............................................................. 268
------------
$ 204,769
============
</TABLE>
** Commencement of operations
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
U.S. BOND FUND - (Brinson Class)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
Period
Ended
December 31, 1995*
(Unaudited)
-----------
<S> <C>
Net asset value, beginning of period.............................. $10.00
------
Income from investment operations:
Net investment income.......................................... 0.20
Net realized and unrealized gain on investments................ 0.35
------
Total gain from investment operations..................... 0.55
------
Less distributions:
Distributions from net investment income....................... (0.20)
Distributions from net realized gain........................... (0.03)
Distributions in excess of net investment income............... (0.01)
------
Total distributions....................................... (0.24)
------
Net asset value, end of period.................................... $10.31
======
Total return...................................................... 5.49%
Ratios/Supplemental data
Net assets, end of period (in 000s)............................ $9,249
Ratio of expenses to average net assets:
Before expense reimbursement.............................. 4.69% **
After expense reimbursement............................... 0.60% **
Ratio of net investment income to average net assets:
Before expense reimbursement.............................. 2.17% **
After expense reimbursement............................... 6.26% **
Portfolio turnover rate........................................ 212%
</TABLE>
* The Fund commenced operations on August 31, 1995
** Annualized
Total return has not been annualized
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
U.S. BOND FUND - (SwissKey Class)
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
Period
Ended
December 31, 1995*
(Unaudited)
-----------
<S> <C>
Net asset value, beginning of period.......................................... $10.00
------
Income from investment operations:
Net investment income...................................................... 0.20
Net realized and unrealized gain on investments............................ 0.34
------
Total gain from investment operations................................. 0.54
------
Less distributions:
Distributions from net investment income................................... (0.20)
Distributions from net realized gain....................................... (0.03)
Distributions in excess of net investment income........................... (0.01)
------
Total distributions................................................... (0.24)
------
Net asset value, end of period................................................ $10.30
======
Total return.................................................................. 5.29%
Ratios/Supplemental data
Net assets, end of period (in 000s)........................................ $9,249
Ratio of expenses to average net assets:
Before expense reimbursement.......................................... 5.16% **
After expense reimbursement........................................... 1.07% **
Ratio of net investment income to average net assets:
Before expense reimbursement.......................................... 1.70% **
After expense reimbursement........................................... 5.79% **
Portfolio turnover rate.................................................... 212%
</TABLE>
* The Fund commenced operations on August 31, 1995
** Annualized
Total return has not been annualized
See accompanying notes to financial statements.
<PAGE>
THE BRINSON FUNDS - NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Brinson Funds (the "Trust") is a no-load, open-end, management investment
company registered under the Investment Company Act of 1940, as amended, as a
series company. The Trust currently offers shares of ten series: Global Fund,
Global Equity Fund, Global Bond Fund, Short-Term Global Income Fund, U.S.
Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, U.S. Cash Management Fund,
Non-U.S. Equity Fund and Non-U.S. Bond Fund (each a "Fund" collectively, the
"Funds"). The following is a summary of significant accounting policies
consistently followed by the U.S. Balanced Fund, the U.S. Equity Fund and the
U.S. Bond Fund in the preparation of their financial statements.
A. INVESTMENT VALUATION: Securities for which quotations are readily available
are valued at the last available sales price, or lacking any sales, at the last
available bid price in the principal market in which such securities are
normally traded. Securities for which market quotations are not readily
available, including restricted securities which are subject to limitations on
their sale, are valued at fair value as determined in good faith by or under the
direction of the Trust's Board of Trustees. Fixed income/debt securities are
valued using market quotations or independent services that use prices provided
by market makers or estimates of market values obtained from yield data relating
to instruments of securities with similar characteristics. Futures contracts
are valued at the settlement price established each day on the exchange on which
they are traded. Short-term obligations with a maturity of 60 days or less are
valued at amortized cost, which approximates market value.
B. INVESTMENT TRANSACTIONS: Security transactions are accounted for on a trade
date basis. Gains and losses on securities sold are determined on an identified
cost basis.
C. INVESTMENT INCOME: Interest income, which includes amortization of premiums
and discounts is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date.
D. FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all
requirements of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute substantially all of their taxable income
to their shareholders. The Funds have met the requirements of the Code
applicable to regulated investment companies for the six months ended December
31, 1995. Therefore, no federal income tax provision was required.
E. ORGANIZATION COSTS: Organization costs are being amortized on a straight-
line basis over five years from each Fund's respective commencement of
operations.
F. DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute
their respective net investment income on a semi-annual basis and net capital
gains annually. Distributions to shareholders are recorded on the ex-dividend
date. Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions. Amounts equal to 22.86% and 100.00% of the
amount taxable as ordinary income qualify for the dividends received deduction
available to corporate shareholders for the U.S. Balanced Fund and the U.S.
Equity Fund.
- --------------------------------------------------------------------------------
<PAGE>
THE BRINSON FUNDS - NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Brinson Partners, Inc. (the "Advisor"), a registered investment advisor,
provides the Funds with investment management services. As compensation for
these services, each Fund pays the Advisor a monthly fee based on the Funds'
respective average daily net assets. The Advisor has agreed to waive its fees
and reimburse the Funds' to the extent total annualized expenses exceed a
specified percentage of each Fund's respective average daily net assets.
Investment advisory fees and other transactions with affiliates, for the period
ended December 31, 1995, were as follows:
<TABLE>
<CAPTION>
Advisory Expense Advisory Fees Due from
Fee Cap Fees Waived Advisor
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
U.S. Balanced Fund.. 0.70% 0.80% $660,274 $303,042 $171,454
U.S. Equity Fund.... 0.70% 0.80% 254,154 199,769 129,498
U.S. Bond Fund...... 0.50% 0.60% 14,076 113,298 102,931
</TABLE>
Certain officers of the Funds are also officers and directors of the Advisor.
All officers serve without direct compensation from the Funds. Trustees' fees
paid to unaffiliated trustees were $3,623, $2,451 and $942 for the U.S. Balanced
Fund, U.S. Equity Fund and U.S. Bond Fund, respectively.
3. INVESTMENT TRANSACTIONS
Investment transactions for the period ended December 31, 1995, excluding short-
term investments, were as follows:
<TABLE>
<CAPTION>
Purchases Proceeds from sales
------------- -------------------
<S> <C> <C>
U.S. Balanced Fund............... $255,669,041 $220,420,733
U.S. Equity Fund................. 51,092,420 11,182,406
U.S. Bond Fund................... 26,005,847 17,524,350
</TABLE>
4. FUTURES CONTRACTS
The Funds may purchase or sell exchange-traded futures contracts, which are
contracts that obligate the Funds to make or take delivery of a financial
instrument or the cash value of a securities index at a specified future date at
a specified price. The Funds enter into such contracts to hedge a portion of
their portfolio. Risks of entering into futures contracts include the
possibility that there may be an illiquid market and that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities. Upon entering into a futures contract, the Funds are required to
deposit either cash or securities in an amount (initial margin) based on the
number of open contracts. Subsequent payments (variation margin) are made or
received by the Funds each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains or
losses. The Funds recognize a realized gain or loss when the contract is closed
or expires. The statement of operations reflects realized and net unrealized
gains and losses on these contracts.
- --------------------------------------------------------------------------------
<PAGE>
THE BRINSON FUNDS - NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. DISTRIBUTION PLAN
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "Act") for SwissKey class shares.
Under the Plan, the Funds reimburse Brinson Partners, Fund/Plan Broker Services
or others for expenses incurred in the promotion and distribution of SwissKey
class shares. Distribution fees for the period ended December 31, 1995, were as
follows:
<TABLE>
<CAPTION>
12b-1 Fee 12b-1 Fees Paid
---------- ---------------
<S> <C> <C>
SwissKey U.S. Balanced Fund..... 0.50% $ 8
SwissKey U.S. Equity Fund....... 0.52% 208
SwissKey U.S. Bond Fund......... 0.47% 89
</TABLE>
6. CAPITAL TRANSACTIONS
The Funds have outstanding two classes of common shares, Brinson Class and
SwissKey class. There are an unlimited number of shares of each class with par
value of $0.001 authorized.
Paid in surplus was as follows:
<TABLE>
<CAPTION>
Period Ended Period Ended
December 31, 1995 June 30, 1995
----------------- -------------
Brinson Class SwissKey Class Brinson Class SwissKey Class
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
U.S. Balanced Fund*.. $52,928,402 $221,407 142,953,790 -
U.S. Equity Fund..... 42,237,565 129,602 29,270,697 -
U.S. Bond Fund**..... 8,812,112 173,283 - -
</TABLE>
* The Fund commenced operations on December 30,1994
** The Fund commenced operations on August 31, 1995
- --------------------------------------------------------------------------------
<PAGE>
THE BRINSON FUNDS - NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Capital stock transactions were as follows:
U.S. BALANCED FUND
Six Months Ended Period Ended
December 31, 1995 June 30, 1995
------------------ -------------
Shares Value Shares Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Sales:
Brinson Class................ 3,945,476 $45,936,887 15,121,050 $154,231,504
SwissKey Class............... 19,216 221,011 - -
--------- ----------- ---------- ------------
Total Sales................... 3,964,692 $46,157,898 15,121,050 $154,231,504
========= =========== ========== ============
Dividend Reinvestment:
Brinson Class................ 1,291,889 $14,701,695 178,265 $ 1,991,226
SwissKey Class............... 123 1,394 - -
--------- ----------- ---------- ------------
Total Dividend Reinvestment... 1,292,012 $14,703,089 178,265 $ 1,991,226
========= =========== ========== ============
Repurchase:
Brinson Class................ 657,649 $ 7,710,180 1,260,181 $ 13,268,940
SwissKey Class............... 88 998 - -
--------- ----------- ---------- ------------
Total Repurchases............. 657,737 $ 7,711,178 1,260,181 $ 13,268,940
========= =========== ========== ============
U.S. EQUITY FUND
Six Months Ended Period Ended
December 31, 1995 June 30, 1995
------------------ -------------
Shares Value Shares Value
------ ----- ------ -----
Sales:
Brinson Class................ 3,374,176 $41,373,607 3,011,049 $ 30,972,427
SwissKey Class............... 10,353 127,133 - -
--------- ----------- ---------- ------------
Total Sales................... 3,384,529 $41,500,740 3,011,049 $ 30,972,427
========= =========== ========== ============
Dividend Reinvestment:
Brinson Class................ 189,516 $ 2,456,129 33,507 $ 349,100
SwissKey Class............... 268 3,473 - -
--------- ----------- ---------- ------------
Total Dividend Reinvestment... 189,784 $ 2,459,602 33,507 $ 349,100
========= =========== ========== ============
Repurchases:
Brinson Class................ 125,891 $ 1,592,171 202,160 $ 2,050,830
SwissKey Class............... 84 1,004 - -
--------- ----------- ---------- ------------
Total Repurchases............. 125,975 $ 1,593,175 202,160 $ 2,050,830
========= =========== ========== ============
U.S. BOND FUND
Period Ended
December 31, 1995
------------
Shares Value
------- ----------
Sales:
Brinson Class................ 867,974 $8,691,149
SwissKey Class............... 16,640 170,032
------- ----------
Total Sales................... 884,614 $8,861,181
======= ==========
Dividend Reinvestment:
Brinson Class................ 19,835 $ 202,518
SwissKey Class............... 221 2,251
------- ----------
Total Dividend Reinvestment... 20,056 $ 204,769
======= ==========
Repurchases:
Brinson Class................ 12,625 $ 131,555
SwissKey Class............... - -
------- ----------
Total Repurchases............. 12,625 $ 131,555
======= ==========
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
DISTRIBUTED BY:
FUND/PLAN BROKER SERVICES, INC.
2 ELM STREET
CONSHOHOCKEN, PA 19428
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective Prospectus which includes
details regarding each Funds' objectives, policies, expenses and other
information.
- --------------------------------------------------------------------------------
<PAGE>
The Brinson Funds
Form N-1A
Part C Other Information
<PAGE>
THE BRINSON FUNDS
FORM N-1A
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
----------------------------------
(a) Financial Statements.
Included in Part A: Financial Highlights
BRINSON GLOBAL FUND, BRINSON GLOBAL EQUITY FUND, BRINSON GLOBAL
BOND FUND, BRINSON U.S. EQUITY FUND, BRINSON U.S. BALANCED FUND,
BRINSON U.S. BOND FUND, AND BRINSON NON-U.S. EQUITY FUND.
BRINSON SHORT-TERM GLOBAL INCOME FUND, BRINSON U.S. CASH
MANAGEMENT FUND AND BRINSON NON-U.S. BOND FUND: NOT APPLICABLE.
SWISSKEY U.S. BOND FUND.
SWISSKEY GLOBAL FUND, SWISSKEY GLOBAL EQUITY FUND, SWISSKEY
GLOBAL BOND FUND, SWISSKEY SHORT-TERM GLOBAL INCOME FUND,
SWISSKEY U.S. BALANCED FUND, SWISSKEY U.S. EQUITY FUND, SWISSKEY
U.S. CASH MANAGEMENT FUND AND SWISSKEY NON-U.S. BOND FUND: NOT
APPLICABLE.
Included in Part B:
GLOBAL FUND
-----------
(1) Report of Independent Auditors;
(2) Schedule of Investments as of June 30, 1995 (audited);
(3) Statement of Assets and Liabilities at June 30, 1995
(audited);
(4) Statement of Operations for the year ended June 30, 1995
(audited);
(5) Statements of Changes in Net Assets for the two years in the
period ended June 30, 1995, and for the period August 31,
1992 (commencement of operations) to June 30, 1993
(audited);
(6) Financial Highlights for the two years in the period ended
June 30, 1995, and for the period August 31, 1992
(commencement of operations) to June 30, 1993 (audited);
(7) Notes to Financial Statements dated June 30, 1995 (audited).
GLOBAL EQUITY FUND
------------------
(1) Report of Independent Auditors;
(2) Schedule of Investments as of June 30, 1995 (audited);
(3) Statement of Assets and Liabilities at June 30, 1995
(audited);
<PAGE>
(4) Statement of Operations for the year ended June 30, 1995 and for
the period January 28, 1994 (commencement of operation) to June
30, 1994 (audited);
(5) Statements of Changes in Net Assets for the year ended June 30,
1995, and for the period January 28, 1994 (commencement of
operations) to June 30, 1994 (audited);
(6) Financial Highlights for the year ended June 30, 1995, and for
the period January 28, 1994 (commencement of operations) to June
30, 1994 (audited);
(7) Notes to Financial Statements dated June 30, 1995 (audited).
GLOBAL BOND FUND
----------------
(1) Report of Independent Auditors;
(2) Schedule of Investments as of June 30, 1995 (audited);
(3) Statement of Assets and Liabilities at June 30, 1995 (audited);
(4) Statement of Operations for the year ended June 30, 1995
(audited);
(5) Statements of Changes in Net Assets for the year ended June 30,
1995, and for the period July 30, 1993 (commencement of
operations) to June 30, 1994 (audited);
(6) Financial Highlights for the year ended June 30, 1995, and for
the period July 30, 1993 (commencement of operations) to
June 30, 1994 (audited);
(7) Notes to Financial Statements dated June 30, 1995 (audited).
U.S. BALANCED FUND
------------------
(1) Report of Independent Auditors;
(2) Schedule of Investments as of June 30, 1995 (audited);
(3) Statement of Assets and Liabilities at June 30, 1995 (audited);
(4) Statement of Operations for the period December 30, 1994
(commencement of operations) to June 30, 1995 (audited);
(5) Statement of Changes in Net Assets for the period December 30,
1994 (commencement of operations) to June 30, 1995 (audited);
(6) Financial Highlights for the period December 30, 1994
(commencement of operations) to June 30, 1995 (audited);
(7) Notes to Financial Statements dated June 30, 1995 (audited).
U.S. EQUITY FUND
----------------
(1) Report of Independent Auditors;
(2) Schedule of Investments as of June 30, 1995 (audited);
<PAGE>
(3) Statement of Assets and Liabilities at June 30, 1995 (audited);
(4) Statement of Operations for the year ended June 30, 1995
(audited);
(5) Statements of Changes in Net Assets for the year ended June 30,
1995, and for the period February 22, 1994 (commencement of
operations) to June 30, 1994 (audited).
(6) Financial Highlights for the year ended June 30, 1995, and for
the period February 22, 1994 (commencement of operations) to June
30, 1994 (audited);
(7) Notes to Financial Statements dated June 30, 1995 (audited).
NON-U.S. EQUITY FUND
--------------------
(1) Report of Independent Auditors;
(2) Schedule of Investments as of June 30, 1995 (audited);
(3) Statement of Assets and Liabilities at June 30, 1995 (audited);
(4) Statement of Operations for the year ended June 30, 1995
(audited);
(5) Statements of Changes in Net Assets for the year ended June 30,
1995, and for the period August 31, 1993 (commencement of
operations) to June 30, 1994 (audited).
(6) Financial Highlights for the year ended June 30, 1995, and for
the period August 31, 1993 (commencement of operations) to June
30, 1994 (audited);
(7) Notes to Financial Statements dated June 30, 1995 (audited).
U.S. BOND FUND
--------------
(1) Schedule of Investments as of December 31, 1995
(unaudited);
(2) Statement of Assets and Liabilities at December 31, 1995
(unaudited);
(3) Statement of Operations for the period August 31, 1995
(commencement of operations) to December 31, 1995 (unaudited);
(4) Statement of Changes in Net Assets for the period August 31, 1995
(commencement of operations) to December 31, 1995 (unaudited);
(5) Financial Highlights for the period August 31, 1995 (commencement
of operations) to December 31, 1995 (unaudited);
(6) Notes to Financial Statements dated December 31, 1995
(unaudited).
(b) Exhibits:
Exhibits filed pursuant to Form N-1A:
(1) Certificate of Trust and Agreement and Declaration of Trust
of The Brinson Funds is incorporated herein by reference to
Post-Effective Amendment No. 6 to Registrant's Registration
Statement No. 33-47287, Exhibit No. (1) as filed on October
5, 1993.
(2) By-Laws of The Brinson Funds is incorporated herein by
reference to Post-Effective Amendment No. 6 to Registrant's
Registration Statement No. 33-47287, Exhibit No. (2) as
<PAGE>
filed on October 5, 1993.
(3) Not Applicable.
(4) Specimen Share Certificate of The Brinson Funds is incorporated
herein by reference to Post-Effective Amendment No. 9 to
Registrant's Registration Statement No. 33-47287, Exhibit No. (4)
as filed on July 21, 1994.
(5) (a) Investment Advisory Agreement between Brinson Partners, Inc.
and the Registrant on behalf of Brinson Global Fund of The
Brinson Funds, dated April 25, 1995, is incorporated herein
by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement No. 33-4787, Exhibit No.
(5)(a) as filed on September 20, 1995.
(b) Investment Advisory Agreement between Brinson Partners, Inc.
and the Registrant on behalf of Brinson Global Bond Fund of
The Brinson Funds, dated April 25, 1995, is incorporated
herein by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement No. 33-4787, Exhibit
No.(5)(b) as filed on September 20, 1995.
(c) Investment Advisory Agreement between Brinson Partners, Inc.
and the Registrant on behalf of Brinson Non-U.S. Equity Fund
of The Brinson Funds, dated April 25, 1995, is incorporated
herein by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement No. 33-4787, Exhibit
No.(5)(c) as filed on September 20, 1995.
(d) Investment Advisory Agreement between Brinson Partners, Inc.
and the Registrant on behalf of Brinson Global Equity Fund
of The Brinson Funds, dated April 25, 1995, is incorporated
herein by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement No. 33-4787, Exhibit
No.(5)(d) as filed on September 20, 1995.
(e) Investment Advisory Agreement between Brinson Partners, Inc.
and the Registrant on behalf of Brinson U.S. Equity Fund of
The Brinson Funds, dated April 25, 1995, is incorporated
herein by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement No. 33-4787, Exhibit
No.(5)(e) as filed on September 20, 1995.
(f) Investment Advisory Agreement between Brinson Partners, Inc.
and the Registrant on behalf of Brinson U.S. Balanced Fund
of The Brinson Funds, dated April 25, 1995, is incorporated
herein by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement No. 33-4787, Exhibit
No.(5)(f) as filed on September 20, 1995.
(g) Investment Advisory Agreement between Brinson Partners, Inc.
and the Registrant on behalf of Brinson U.S. Bond Fund of
The Brinson Funds, dated April 25, 1995, is incorporated
herein by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement No. 33-4787, Exhibit
No.(5)(g) as filed on September 20, 1995.
(h) Investment Advisory Agreement between Brinson Partners, Inc.
and the Registrant on behalf of Brinson Non U.S. Bond Fund
of The Brinson Funds, dated April 25, 1995, is incorporated
herein by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement No. 33-4787, Exhibit
No.(5)(h) as filed on September 20, 1995.
(i) Investment Advisory Agreement between Brinson Partners, Inc.
and the Registrant on behalf of Brinson Short-Term Global
Income Fund of The Brinson Funds, dated
<PAGE>
April 25, 1995, is incorporated herein by reference to Post-
Effective Amendment No. 13 to Registrant's Registration
Statement No. 33-4787, Exhibit No.(5)(I) as filed on
September 20, 1995.
(j) Investment Advisory Agreement between Brinson Partners, Inc.
and the Registrant on behalf of Brinson U.S. Cash Management
Fund of The Brinson Funds, dated April 25, 1995, is
incorporated herein by reference to Post-Effective Amendment
No. 13 to Registrant's Registration Statement No. 33-4787,
Exhibit No.(5)(j) as filed on September 20, 1995.
(6) (a) Underwriting Agreement between Fund/Plan Broker Services,
Inc. and the Registrant on behalf of each of the series of
The Brinson Funds dated November 20, 1995 is attached as
Exhibit No. (6)(a) to Item 24.
(b) Amendment to Underwriting Agreement between Fund/Plan Broker
Services, Inc. and the Registrant on behalf of each of the
series of The Brinson Funds dated August 21, 1995 is
attached as Exhibit No. (6)(b) to Item 24.
(c) Underwriting Agreement between Fund/Plan Broker Services,
Inc. and the Registrant on behalf of each of the series of
The Brinson Funds dated April 25, 1995 is incorporated
herein by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement No. 33-4787, Exhibit No.
(6)(a) to Item 24 as filed on September 20, 1995.
(d) Underwriting Agreement between Fund/Plan Broker Services,
Inc. and the Registrant on behalf of each of the series of
The Brinson Funds dated September 1, 1994 is incorporated
herein by reference to Post-Effective Amendment No. 10 to
Registrant's Registration Statement No. 33-47287 Exhibit No.
(6)(a) to Item 24 as filed on September 15, 1994.
(e) Underwriting Agreement between Fund/Plan Broker Services,
Inc. and the Registrant on behalf of each of the series of
The Brinson Funds is incorporated herein by reference to
Post-Effective Amendment No. 9 to Registrant's Registration
Statement No. 33-47287, Exhibit No. (6) as filed on July 21,
1994.
(7) Not Applicable.
(8) (a) Amendment to the Custodian Agreement between the Registrant
and Bankers Trust Company to the Agreement dated June 18,
1992 is incorporated herein by reference to Post-Effective
Amendment No. 12 to Registrant's Registration Statement No.
33-47287 as filed on May 31, 1995 as Exhibit (8)(a) to Item
24.
(b) Custodian Agreement between the Registrant and Bankers Trust
Company is incorporated herein by reference to Post-
Effective Amendment No. 9 to Registrant's Registration
Statement No. 33-47287, Exhibit No. (8)(a) as filed on July
21, 1994.
(c) Amendments to the Custodian Agreement between the Registrant
and Bankers Trust Company is incorporated herein by
reference to Post-Effective Amendment No.9 to Registrant's
Registration Statement No. 33-47287, Exhibit No. (8)(b) as
filed on July 21, 1994.
(9)(a)(i) Shareholder Services Agreement between Fund/Plan Services,
Inc. and the Registrant dated November 20, 1995 is attached
as Exhibit No. (9)(a) to Item 24.
(a)(ii) Amendment to the Shareholder Services Agreement between
Fund/Plan Services, Inc. and the Registrant dated August 21,
1995 is attached as Exhibit No. (9)(a) to Item 24.
<PAGE>
(a)(iii) Shareholder Services Agreement between Fund/Plan Services,
Inc. and the Registrant dated April 25, 1995 is incorporated
herein by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement No. 33-4787,
Exhibit No. (9)(a) to Item 24 as filed on September 20,
1995.
(a)(iv) Shareholder Services Agreement between the Registrant and
Fund/Plan Services, Inc. is incorporated herein by reference
to Post-Effective Amendment No. 9 to the Registrant's
Registration Statement No. 33-47287, Exhibit No.(9)(a) as
filed on July 21, 1994.
(b)(i) Administration Agreement between Fund/Plan Services, Inc.
and the Registrant dated November 20, 1995 is attached as
Exhibit No. (9)(b) to Item 24.
(b)(ii) Amendment to the Administrative Services Agreement between
Fund/Plan Services, Inc. and the Registrant dated August 21,
1995 is attached as Exhibit No. (9)(b) to Item 24.
(b)(iii) Administrative Services Agreement between Fund/Plan
Services, Inc. and the Registrant dated April 25, 1995 is
incorporated herein by reference to Post-Effective Amendment
No. 13 to Registrant's Registration Statement No. 33-4787,
Exhibit No. (9)(b) to Item 24 as filed on September 20,
1995.
(b)(iv) Administrative Services Agreement between the Registrant and
Fund/Plan Services, Inc. is incorporated herein by reference
to Post-Effective Amendment No. 9 to the Registrant's
Registration Statement No. 33-47287, Exhibit No. (9)(b) as
filed on July 21, 1994.
(c)(i) Accounting Services Agreement between Fund/Plan Services,
Inc. and the Registrant dated November 20, 1995 is attached
as Exhibit No. (9)(c) to Item 24.
(c)(ii) Amendment to the Accounting Services Agreement between
Fund/Plan Services, Inc. and the Registrant dated August 21,
1995 is attached as Exhibit No. (9)(c) to Item 24.
(c)(iii) Accounting Services Agreement between Fund/Plan Services,
Inc. and the Registrant dated April 25, 1995 is incorporated
herein by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement No. 33-4787, Exhibit No.
(9)(c) to Item 24 as filed on September 20, 1995.
(c)(iv) Accounting Services Agreement between the Registrant and
Fund/Plan Services, Inc. is incorporated herein by reference
to Post-Effective Amendment No. 9 to the Registrant's
Registration Statement No. 33-47287, Exhibit No.(9)(c) as
filed on July 21, 1994.
(c)(v) Amendment to Accounting Services Agreement between the
Registrant and Fund/Plan Services, Inc. is incorporated
herein by reference to Post-Effective Amendment No. 9 to
Registrant's Registration Statement No. 33-47287, Exhibit
No. (9)(d) as filed on July 21, 1994.
(10) Opinion and Consent of Counsel.
(a) Incorporated herein by reference to Registrant's Notice
pursuant to Rule 24f-2 filed with the U.S. Securities and
Exchange Commission on August 25, 1995.
(b) Consent of Stradley Ronon Stevens and Young, LLP Counsel to
the Trust. Attached hereto as Exhibit (10)(b).
(11) Other Opinions and Consents.
<PAGE>
(a) Consent of Ernst & Young LLP, independent auditors to the
Trust. Attached hereto as Exhibit (11)(a).
(12) Not Applicable.
(13) Letter of Understanding relating to initial capital is
incorporated herein by reference to Pre-Effective Amendment No.
1 to Registrant's Registration Statement No. 33-47287, Exhibit
No. (13) as filed on July 9, 1992.
(14) Not Applicable.
(15) (a) Distribution Plan relating to the SwissKey Class Shares on
behalf of each Series of The Brinson Funds dated November
20, 1995 is attached as Exhibit No. (15)(a).
(15) (b) Distribution Plan relating to the SwissKey Class Shares on
behalf of each Series of The Brinson Funds dated July 31,
1995 is incorporated herein by reference to Post-Effective
Amendment No. 13 to Registrant's Registration Statement No.
33-4787, Exhibit No. (15) as filed September 20, 1995.
(16) (a) Schedule for Computation of Performance Quotations on
behalf of Brinson Global Fund, Brinson Global Equity Fund,
Brinson Global Bond Fund, Brinson U.S. Balanced Fund,
Brinson U.S. Equity Fund and Brinson Non-U.S. Equity Fund
is incorporated herein by reference to Post-Effective
Amendment No. 13 to Registrant's Registration Statement No.
33-4787, Exhibit No. (16) as filed on September 20, 1995.
(16) (b) Schedule for Computation of Performance Quotations on
behalf of the U.S. Bond Fund is attached as Exhibit No.
(16)(b).
(17) Not Applicable.
(18) Form of Multiple Class Plan relating to the Brinson Class and
Swiss Key Class Shares on behalf of each Series of The Brinson
Funds as presented to the Board of Trustees is incorporated
herein by reference to Post-Effective No. 12/13 to Registrant's
Registration Statement No. 33-47287.
(19) Powers of Attorney are incorporated herein by reference to Post-
Effective No. 11/12 to Registrants' Registration Statement No.
33-47287, Exhibit No. (18) as filed on March 17, 1995.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
--------------------------------------------------------------
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
--------------------------------
NUMBER OF RECORD HOLDERS
TITLE OF CLASS AS OF JANUARY 17, 1996
-------------- ----------------------
Shares of Beneficial Interest 1009
par value $0.001 of:
BRINSON CLASS OF THE BRINSON FUNDS
----------------------------------
Brinson Global Fund 363
Brinson Global Equity Fund 80
<PAGE>
Brinson Global Bond Fund 17
Brinson Short-Term Global Income Fund 0
Brinson U.S. Balanced Fund 17
Brinson U.S. Equity Fund 61
Brinson U.S. Bond Fund 3
Brinson U.S. Cash Management Fund 0
Brinson Non-U.S. Equity Fund 91
Brinson Non-U.S. Bond Fund 0
SWISSKEY CLASS OF THE BRINSON FUNDS
-----------------------------------
SwissKey Global Fund 10
SwissKey Global Equity Fund 342
SwissKey Global Bond Fund 10
SwissKey Short-Term Global Income Fund 0
SwissKey U.S. Balanced Fund 3
SwissKey U.S. Equity Fund 3
SwissKey U.S. Bond Fund 3
SwissKey U.S. Cash Management Fund 0
SwissKey Non-U.S. Equity Fund 6
SwissKey Non-U.S. Bond Fund 0
ITEM 27. INDEMNIFICATION.
----------------
Article VII, Sections 2 and 3 of Registrant's Agreement and
Declaration of Trust provide:
Section 2. Indemnification and Limitation of Liability. The Trustees
shall not be responsible or liable in any event for any neglect or
wrong-doing of any officer, agent, employee, Manager or Principal
Underwriter of the Trust, nor shall any Trustee be responsible for the
act or omission of any other Trustee, and, subject to the provisions
of the Bylaws, the Trust out of its assets may indemnify and hold
harmless each and every Trustee and officer of the Trust from and
against any and all claims, demands, costs, losses, expenses, and
damages whatsoever arising out of or related to such Trustee's
performance of his or her duties as a Trustee or officer of the Trust;
provided that nothing herein contained shall indemnify, hold harmless
or protect any Trustee or officer from or against any liability to the
Trust or any Shareholder to which he or she would otherwise be subject
by reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her
office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with
the Trust shall be conclusively deemed to have been issued, executed
or done only in or with respect to their or his or her capacity as
Trustees or Trustee, and such Trustees or Trustee shall not be
personally liable thereon.
Section 3. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers hereunder shall
be binding upon everyone interested in or dealing with the Trust. A
Trustee shall be liable to the Trust and to any Shareholder solely for
his or her own wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the office
of Trustee and shall not be liable for errors of judgment or mistakes
of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration
of Trust and shall be under no liability for any act or omission in
accordance with such advice nor for failing to follow such advice. The
Trustees shall not be required to give any bond as such, nor any
surety if a bond is required.
Section 4. Insurance. The Trustees shall be entitled and empowered
to the fullest extent permitted by law to purchase with Trust assets
insurance for liability and for all expenses, reasonably incurred or
<PAGE>
paid or expected to be paid by a Trustee or officer in connection with
any claim, action, suit or proceeding in which he or she becomes
involved by virtue of his or her capacity or former capacity with the
Trust, whether or not the Trust would have the power to indemnify him
or her against such liability under the provisions of this Article.
Indemnification of Registrant's custodian, transfer agent, accounting
services provider and administrator against certain stated liabilities
is provided for in the following documents:
(a) Section 12 of Accounting Services Agreement, between the
Registrant and Fund/Plan Services, Inc., incorporated herein
by reference to Post Effective No. 16 to Registrant's
Registration Statement No. 33-47287, Exhibit 9 (C) as filed
on February 15, 1996.
(b) Section 8 of Administration Agreement between the Registrant
and Fund/Plan Services, Inc., incorporated herein by
reference to Post Effective No. 16 to Registrant's
Registration Statement No. 33-47287, Exhibit 9 (b) as filed
on February 15, 1996.
(c) Section 14 of Custodian Agreement between the Registrant and
Bankers Trust Company, incorporated herein by reference to
Post Effective No. 13 to Registrant's Registration No. 33-
47287, Exhibit Nos. 8(a) and 8(b) as filed on September 20,
1995.
(d) Section 19 of Shareholder Services Agreement between
Registrant and Fund/Plan Services, Inc., incorporated herein
by reference to Post Effective No. 16 to Registrant's
Registration Statement No. 33-47287, Exhibit 9 (a) as filed
on February 15, 1996.
(e) Sections 8 of the Underwriting Agreement between Registrant
and Fund/Plan Broker Services, Inc. are incorporated herein
by reference to Post Effective No. 16 to Registrant's
Registration Statement No. 33-47287, Exhibit No.(6) as filed
on February 15, 1996.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF ADVISOR.
------------------------------------------
Brinson Partners, Inc. provides investment advisory services
consisting of portfolio management for a variety of individuals and
institutions and as of December 31, 1995 had approximately $53 billion
in assets under management. It presently acts as investment advisor to
six other investment companies, Brinson Relationship Funds, which
includes six investment portfolios (series), Enterprise Accumulation
Trust, Enterprise International Growth Portfolio, Fort Dearborn Income
Securities, Inc., and PACE Large Company Value Equity Investments.
For information as to any other business, vocation or employment of a
substantial nature in which each Trustee or officer of the
Registrant's investment advisor is or has been engaged for his own
account or in the capacity of Trustee, officer, employee, partner or
trustee, reference is made to the Form ADV (File #34910) filed by it
under the Investment Advisers Act of 1940, as amended.
ITEM 29. PRINCIPAL UNDERWRITER.
----------------------
(a) Fund/Plan Broker Services, Inc. ("FPBS"), the principal
underwriter for the Registrant's securities, currently acts as
principal underwriter for the following entities:
CT & T Funds
Farrell Alpha Strategies
First Mutual Fund, Inc.
Focus Trust, Inc.
<PAGE>
The Home State PA Growth Fund
IAA Trust Mutual Funds
Matthews International Funds
McM Funds
Roulston Family of Funds
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Stratton Funds, Inc.
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
The Timothy Plan
(b) The table below sets forth certain information as to the
underwriter's Directors, Officers and Control Persons and
officers of the Registrant holding position with the
Underwriter:
POSITION POSITION AND
NAME AND PRINCIPAL AND OFFICES OFFICES WITH
BUSINESS ADDRESS WITH UNDERWRITER REGISTRANT
- ---------------- ---------------- ----------
Kenneth J. Kempf Director, President None
2 West Elm Street and Principal
Conshohocken, PA 19428-0874
Lynne M. Cannon Vice President and None
2 West Elm Street Principal
Conshohocken, PA 19428-0874
Rocco J. Cavalieri Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Gerald J. Holland Director, None
2 West Elm Street Vice President
Conshohocken, PA 19428-0874 and Principal
Joseph M. O'Donnell, Esq. Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Sandra L. Adams Principal None
2 W. Elm Street
Conshohocken, PA 19428-0874
Mary P. Efstration Secretary None
2 W. Elm Street
Conshohocken, PA 19428-0874
John H. Leven Treasurer None
2 W. Elm Street
Conshohocken, PA 19428-0874
James W. Stratton may be considered a control person of the Underwriter due to
his direct or indirect ownership of Fund/Plan Services, Inc., the parent of the
Underwriter.
(c) Inapplicable.
<PAGE>
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all of
the requirements for effectiveness of this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment No. 16 to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Conshohocken and the Commonwealth of Pennsylvania, on the 15th day of
February, 1996.
THE BRINSON FUNDS
By: E. Thomas McFarlan*
President, Treasurer, and
Principal Accounting
Officer*
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 16 to Registrant's Registration Statement has been signed below
by the following persons in the capacities and on the date(s) indicated.
E. THOMAS MCFARLAN*
- -------------------
E. Thomas McFarlan February 15, 1996
President, Treasurer,
Principal Accounting
Officer
WALTER E. AUCH* February 15, 1996
- ---------------
Walter E. Auch
Trustee
EDWARD M. ROOB* February 15, 1996
- ---------------
Edward M. Roob
Trustee
FRANK K. REILLY* February 15, 1996
- ----------------
Frank K. Reilly
Trustee
- --------------------------------
*By: /s/ Carolyn F. Mead,
--------------------
as Attorney-in-Fact and Agent pursuant to Power of Attorney
<PAGE>
THE BRINSON FUNDS
&
INDEX TO EXHIBITS TO FORM N-1A
Exhibit Description of Sequentially
Number Exhibit Numbered Page
6(a) Underwriting Agreement
6(b) Amendment to Underwriting Agreement
9(a)(i) Shareholder Services Agreement
9(a)(ii) Amendment to Shareholder Services Agreement
9(b)(i) Administration Agreement
9(b)(ii) Amendment to Administrative Services Agreement
9(c)(i) Accounting Services Agreement
9(c)(ii) Amendment to Accounting Services Agreement
10(b) Consent and Opinion of Counsel
11(a) Consent of Ernst & Young LLP
15(a) Distribution Plan
16 Schedule of Performance Computatio
27 Financial Data Schedule
<PAGE>
Exhibit to Form N-1A
Exhibit (6)(a) Underwriting Agreement
<PAGE>
UNDERWRITING AGREEMENT
----------------------
THIS AGREEMENT, dated as of the __________ day of _________________, 1995 by
and between The Brinson Funds (the "Trust"), including any future series or
classes that may be subsequently created, and Fund/Plan Broker Services, Inc.
("FPBS").
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Trust is authorized to issue separate series of shares
representing interests in separate investment portfolios (the "Series"), which
Series are identified on Schedule "B" attached hereto, and which Schedule "B"
may be amended from time to time by mutual agreement of the Trust and FPBS; and
WHEREAS, FPBS is a broker-dealer registered with the Securities and Exchange
Commission and a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Trust and FPBS are desirous of entering into an agreement
providing for the Underwriting and Marketing Support Services by FPBS of shares
of the Trust (the "Shares");
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. APPOINTMENT.
-----------
The Trust hereby appoints FPBS as its exclusive agent for the distribution
of the Shares, and FPBS hereby accepts such appointment under the terms of
this Agreement. The Trust agrees that it will not sell any shares to any
person except to fill orders for the shares received through FPBS; provided,
however, that the foregoing exclusive right shall not apply: (a) to shares
issued or sold in connection with the merger or consolidation of any other
investment company with the Trust or the acquisition by purchase or
otherwise of all or substantially all of the assets of any investment
company or substantially all of the outstanding shares of any such company
by the Trust; (b) to shares which may be offered by the Trust to its
stockholders for reinvestment of cash distributed from capital gains or net
investment income of the Trust; or (c) to shares which may be issued to
shareholders of other funds who exercise any exchange privilege set forth in
each Series' Prospectus. Notwithstanding any other provision hereof, the
Trust may terminate, suspend, or withdraw the offering of the Shares
whenever, in its sole discretion, it deems such action to be desirable.
2. SALE AND REPURCHASE OF SHARES.
-----------------------------
(a) FPBS will have the right, as agent for the Trust, to sell Shares to the
public against orders therefor at the public offering price (as defined
in sub-paragraph 2(d) hereof).
(b) FPBS will also have the right, as agent for the Trust, to sell Shares
at their net asset value to such persons as may be approved by the
Board of Trustees of the Trust, all such sales to comply with the
provisions of the Act, the Securities Act of 1933 and the rules and
regulations of the Securities and Exchange Commission promulgated
thereunder.
(c) FPBS will also have the right to take, as agent for the Trust, all
actions which, in FPBS's judgment, are necessary to carry into effect
the distribution of the Shares.
(d) The public offering price shall be the net asset value of Shares then
in effect plus any applicable sales charge set forth in the Series'
prospectuses.
(e) The net asset value of the Shares shall be determined in the manner
provided in the then current Prospectus and Statement of Additional
information relating to the Shares (the "Prospectus"), and when
determined shall be applicable to transactions as provided for in the
Prospectus. The net asset value of the Shares shall be calculated by
the Trust or by another entity on behalf of the Trust. FPBS shall have
no duty to inquire into or liability for the accuracy of the net asset
value per Share as calculated.
<PAGE>
(f) On every sale, the Trust shall receive the applicable net asset value
of the Shares promptly.
(g) Upon receipt of purchase instructions, FPBS will transmit such
instructions to the Trust or its transfer agent for registration of the
Shares purchased.
(h) Nothing in this Agreement shall prevent FPBS or any affiliated person
(as defined in the Act) of FPBS from acting as underwriter or
distributor for any other person, firm or corporation (including other
investment companies) or in any way limit or restrict FPBS or such
affiliated person from buying, selling or trading any securities for
its or their own account or for the accounts of others for whom it or
they may be acting; provided, however, that FPBS expressly agrees that
it will not for its own account purchase any shares of the Trust except
for investment purposes and that it will not for its own account sell
any such shares except by redemption of such shares by the Trust, and
that it will undertake no activities which, in its judgment, will
adversely affect the performance of its obligations to the Trust under
this Agreement.
(i) FPBS may repurchase Shares at such prices and upon such terms and
conditions as shall be specified in the Prospectus.
3. RULES OF SALE OF SHARES.
-----------------------
FPBS does not agree to sell any specific number of Shares. FPBS, as agent
for the Trust, undertakes to sell Shares on a best efforts basis only
against orders therefor.
The Trust reserves the right to refuse at any time or times to sell any of
its Shares for any reason deemed adequate by it.
4. RULES OF NASD, ETC.
------------------
(a) FPBS will conform to the Rules of Fair Practice of the NASD and the
securities laws of any jurisdiction in which it sells, directly or
indirectly, any Shares.
(b) FPBS will require each dealer with whom FPBS has a selling agreement to
conform to the applicable provisions of the Prospectus, with respect to
the public offering price of the Shares, and FPBS shall not cause the
Trust to withhold the placing of purchase orders so as to make a profit
thereby.
(c) The Trust agrees to furnish to FPBS sufficient copies of any
agreements, plans or other materials it intends to use in connection
with any sales of Shares in adequate time for FPBS to file and clear
them with the proper authorities before they are put in use, and not to
use them until so filed and cleared.
(d) FPBS, at its own expense, will qualify as a dealer or broker, or
otherwise, under all applicable state or federal laws required in order
that the Shares may be sold in such states as may be mutually agreed
upon by the parties.
(e) FPBS shall not make, or authorize any representative, Service
Organization, broker or dealer to make, in connection with any sale or
solicitation of a sale of the Shares, any representations concerning
the Shares except those contained in the Prospectus covering the Shares
and in sales materials approved by FPBS and the Trust as information
supplemental to such Prospectus. Copies of the Prospectus will be
supplied by the Trust to FPBS in reasonable quantities upon request.
(f) FPBS shall not act as a conduit by paying any asset based sales charge
to any member in excess of NASD Rules (currently 0.75%).
5. RECORDS TO BE SUPPLIED BY THE TRUST.
-----------------------------------
The Trust shall furnish to FPBS copies of all information, financial
statements and other papers which FPBS may reasonably request for use in
connection with the distribution of the Shares, and this shall include, but
shall not
<PAGE>
be limited to, one certified copy, upon request by FPBS, of all financial
statements prepared for the Trust by independent public accountants.
6. EXPENSES.
--------
(a) The Trust will bear the following expenses:
(i) preparation, setting in type, and printing of sufficient copies
of the prospectuses and statements of additional information for
distribution to shareholders, and the distribution of same to the
shareholders;
(ii) preparation, printing and distribution of reports and other
communications to shareholders;
(iii) registration of the Shares under the federal securities laws;
(iv) qualification of the Shares for sale in the jurisdictions
mutually agreed upon by the Trust and the FPBS;
(v) maintaining facilities for the issue and transfer of the Shares;
(vi) supplying information, prices and other data to be furnished by
the Trust under this Agreement; and
(vii) any original issue taxes, transfer taxes and professional
privilege taxes applicable to the sale or delivery of the Shares
or certificates therefor.
(b) Brinson Partners, Inc. will pay all other expenses incident to the sale
and distribution of the Shares sold hereunder.
7. FEE.
---
For its services under this Agreement, FPBS shall be entitled to the fees
contained in Schedule "A" attached hereto, as amended from time to time. All
such fees will be paid by Brinson Partners, Inc. The services provided
include acting as primary underwriter/distributor of the Trust and
licensing/regulatory agent for personnel who are registered as FPBS
representatives. These fees will include the renewal of the NASD license and
the State Securities licenses for representatives in states requested by the
Trust. These fees will also cover the expenses and personnel required to
maintain the regulatory books and records of FPBS in connection with this
agreement on behalf of the Trust.
(a) Brinson Partners, Inc. will indemnify FPBS for the actions of its
employees registered with the NASD as FPBS representatives and will
undertake to see that the rules and regulations are followed with any
and all sales presentations by such employees.
8. DUTIES AND OBLIGATIONS OF FPBS.
------------------------------
(a) Subject to the succeeding provisions of this section and Schedule "B",
FPBS shall:
1. Provide its own office space, facilities, equipment and personnel
for the performance of duties under this Agreement.
2. Maintain records as the distributor as requested and as mutually
agreed upon.
3. Respond to all inquiries or other communications of shareholders of
the Fund and its representatives.
4. Attend marketing strategy and Board of Trustees meetings as
requested.
9. LIABILITY OF FPBS.
-----------------
(a) FPBS, its directors, officers, employees, shareholders and agents shall
not be liable for any error of judgment or mistake of law or for any
loss suffered by the Trust in connection with the performance of this
Agreement, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or a loss resulting
from willful misfeasance, bad faith or negligence on the part of FPBS
in the performance of its obligations and duties or by reason of its
reckless disregard of its obligations and duties
<PAGE>
under this Agreement. The Trust agrees to indemnify and hold harmless
FPBS against any and all liability, loss, damages, costs or expenses
(including counsel fees) which FPBS may incur or be required to pay
hereafter, in connection with any action, suit or other proceeding,
whether civil or criminal, before any court or administrative or
legislative body, in which FPBS may be involved as a party or otherwise
or with which FPBS may be threatened, by reason of the offer or sale of
the Trust shares prior to the execution of this Agreement which is not
due to FPBS's lack of reasonable care.
(b) Any person, even though also a director, officer, employee, shareholder
or agent of FPBS, who may be or become an officer, trustee, employee or
agent of the Trust, shall be deemed, when rendering services to the
Trust or acting on any business of the Trust (other than services or
business in connection with FPBS's duties hereunder), to be rendering
such services to or acting solely for the Trust and not as a trustee,
officer, employee, shareholder or agent, or one under the control or
direction of FPBS even though paid by it.
(c) The Trust agrees to indemnify and hold harmless FPBS, and each person,
if any, who controls FPBS within the meaning of Section 15 of the
Securities Act of 1933 (the "Securities Act") or Section 20 of the
Securities Exchange Act of 1934 (the "Exchange Act") against any and
all losses, claims, damages and liabilities, joint or several
(including any reasonable investigative, legal and other expenses
incurred in connection therewith) to which they, or any of them, may
become subject under the 1940 Act, the Securities Act, the Exchange Act
or other federal or state law or regulation, at common law or otherwise
insofar as such losses, claims, damages or liabilities (or actions,
suits or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact
contained in a Prospectus, Statement of Additional Information,
supplement thereto, sales literature or other written information
prepared by the Trust and furnished by it to FPBS for FPBS's use
hereunder, disseminated by the Trust or arise out of or are based upon
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading. Such indemnity shall not, however, inure to the
benefit of FPBS (or any person controlling FPBS) on account of any
losses, claims, damages or liabilities (or actions, suits or
proceedings in respect thereof) arising from the sale of the shares of
the Trust to any person by FPBS (i) if such untrue statement or
omission or alleged untrue statement or omission was made in the
Prospectus, Statement of Additional Information, or supplement, sales
or other literature, in reliance upon and in conformity with
information furnished in writing to the Trust by FPBS specifically for
use therein or (ii) if such losses, claims, damages or liabilities
arise out of or are based upon an untrue statement or omission or
alleged untrue statement or omission in the Prospectus, Statement of
Additional Information, or supplement, sales or other literature, if
the Trust shall correct the untrue statement or omission or the alleged
untrue statement or omission which is the basis of the loss, claim,
damage or liability for which indemnification is sought and a copy of
the Prospectus was not sent or given to such person at or before the
confirmation of the sale to such person, unless such failure to deliver
the Prospectus was a result of noncompliance by the Trust with the
obligation to furnish copies of the Prospectus and any supplements
thereto.
(d) FPBS agrees to indemnify and hold harmless the Trust, each person, if
any, who controls the Trust within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, insofar as such
losses, claims, damages or liabilities arise out of or are based upon
any untrue statement or omission or alleged untrue statement of a
material fact contained in a Prospectus or Statement of Additional
Information or any supplement thereto, or arise out of or are based
upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, if based upon information furnished in writing
to the Trust by FPBS specifically for use therein.
10. MAINTENANCE OF INSURANCE COVERAGE.
---------------------------------
FPBS shall, at its option, be a named insured party on the Trust's Errors &
Omissions policy and the Trust's Fidelity bond, both of which shall, at
FPBS's option, include coverage of FPBS's officers and employees. FPBS shall
pay its allocable share of the cost of such policies in accordance with the
provisions of the Act. The scope of coverage and amount of insurance limits
applicable to the Trust on such policies shall also be made applicable to
FPBS.
11. TERMINATION OF THIS AGREEMENT.
-----------------------------
This Agreement shall automatically terminate in the event of its assignment.
This Agreement may be terminated
<PAGE>
with respect to the Trust at any time, without payment of any penalty, by
vote of a majority of the members of the Board of Trustees of the Trust who
are not interested persons of the Trust or by vote of a majority of the
outstanding voting securities of the Trust or by FPBS on one hundred and
eighty (180) days written notice to the other party.
12. EFFECTIVE PERIOD OF THIS AGREEMENT.
----------------------------------
This Agreement shall be effective on the date noted above and shall remain
in full force and effect until October 31, 1996 (unless terminated as set
forth in Paragraph 11), and from year to year thereafter, but only so long
as such continuance is specifically approved at least annually by:
(i) the Board of Trustees of the Trust or by a majority of the outstanding
voting securities of the Trust; and
(ii) by a majority of the Trustees of the Trust who are not parties to this
Agreement or interested persons of any such party by vote cast in
person at a meeting called for the purpose of voting on such approval.
The provisions of paragraph 8 hereof shall survive the termination of this
Agreement.
13. AMENDMENTS.
----------
No amendments to this Agreement shall be executed or become effective unless
its terms have been approved:
(a) by a majority of the Trustees of the Trust or by the vote of a majority
of the outstanding voting securities of the Trust; and
(b) by a majority of those trustees who are not interested persons of the
Trust or of any party to this Agreement.
14. REPORTS.
-------
FPBS shall prepare reports for the Board of Trustees of the Trust on a
quarterly basis showing such information as from time to time shall be
reasonably requested by such Board.
15. SEVERABILITY.
------------
In the event any provision of this Agreement is determined to be void or
unenforceable, such determination shall not affect the remainder of the
Agreement, which shall continue to be in force.
16. GOVERNING LAW.
-------------
This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania.
<PAGE>
IN WITNESS WHEREOF, the Trust and FPBS have each caused this Agreement to be
signed in duplicate, as of the day and year first above written.
The Brinson Funds Fund/Plan Broker Services, Inc.
- ----------------- ---------------------------------
- --------------------------------- ---------------------------------
By: E. Thomas McFarlan, President Kenneth J. Kempf, President
- -------------------------------- ---------------------------------
Attest: Bruce G. Leto, Secretary Attest: Janet F. Davis, Secretary
(SEAL) (SEAL)
Brinson Partners, Inc.
- ----------------------
- --------------------------------------
By: Samuel W. Anderson, Vice President
- ------------------------------------
Attest: Michael J. Jacobs, Secretary
(SEAL)
<PAGE>
SCHEDULE "A"
FUND/PLAN BROKER SERVICES, INC.
MULTIPLE CLASS FEE SCHEDULE
FOR
THE BRINSON FUNDS
- --------------------------------------------------------------------------------
The following is Fund/Plan Broker Services, Inc.'s schedule for
Underwriter/Distributor services provided to The Brinson Funds and as
Licensing/Regulatory Agent for Brinson Partners, Inc. personnel including
employees who are registered as Fund/Plan Broker Services, Inc. representatives.
These fees will also cover the expenses and personnel required to maintain the
regulatory books and records of Fund/Plan Broker Services, Inc. in connection
with the Underwriting Agreement on behalf of the Trust. All fees for the Brinson
Classes to be paid by Brinson Partners, Inc.
. $7,500 Per Year Per Company with one Fund (Initial Series)
. $2,500 Additional Per Year for Each Additional Series or Class
. $1,000 Per Year Per Licensed Representative in 1-2 States
. or $2,500 Per Year Per Licensed Representative up to 30 States
. or $3,500 Per Year Per Licensed Representative in 50 States & DC
. Additional $300 Per Year Per Licensed Representative in Puerto Rico
MARKETING SUPPORT SERVICES
- --------------------------
$2.00 per call includes both Inbound Telemarketing Services and Literature
Fulfillment. Minimum $2,000 per month.
OUT-OF-POCKET EXPENSES
- ----------------------
Fund/Plan Broker Services, Inc. will be reimbursed monthly for all reasonable
out-of-pocket expenses, including telephone, postage, telecommunications,
special reports, continuing education requirements, record retention, special
transportation costs as incurred, and unusual expenses incurred.
ADDITIONAL SERVICES
- -------------------
Activities of a non-recurring nature such as fund consolidations, mergers or
reorganizations will be subject to negotiation. Any additional/enhanced
services or reports will be quoted upon request.
<PAGE>
SCHEDULE "B"
IDENTIFICATION OF SERIES
------------------------
Below are listed the Series and Classes of Shares to which services under this
Agreement are to be performed as of the Effective Date of this Agreement:
SERIES
Global Fund
Global Equity Fund
Global Bond Fund
Short-Term Global Income Fund*
U.S. Balanced Fund
U.S. Equity Fund
U.S. Bond Fund
U.S. Cash Management Fund
Non-U.S. Equity Fund
Non-U.S. Bond Fund
CLASSES
Brinson Fund class
SwissKey Fund class
* Fee and procedures subject to change/review pending definitive structure of
Fund.
This Schedule "B" may be amended from time to time by agreement of the Parties.
<PAGE>
Exhibit to Form N-1A
Exhibit (6)(b) Amendment to Underwriting Agreement
<PAGE>
AMENDMENT TO UNDERWRITING AGREEMENT
This AGREEMENT, dated as of the ________ day of August, 1995 made by and
between The Brinson Funds, a Delaware business trust (the "Trust") and Fund/Plan
Broker Services, Inc. ("FPBS"), a corporation duly organized and existing under
the laws of the State of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and FPBS have entered into an agreement dated April 25,
1995, wherein FPBS has agreed to provide certain Underwriting and Market Support
services to the Trust ("Underwriting Agreement"); and
WHEREAS, the Parties wish to amend the Underwriting Agreement to reflect
the creation of a multiple class structure for each Series of the Trust;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree:
1. To amend Schedule "A" to the Underwriting Agreement in the form
attached hereto as Schedule "A".
2. This Amendment's Effective Date, as defined in the Underwriting
Agreement, shall be July 31, 1995.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of one type written page, together with Schedule "A" to be signed by
their duly authorized officers and their corporate seals hereunto duly affixed
as of the day and year first above written.
The Brinson Funds Fund/Plan Broker Services, Inc.
- ----------------- -------------------------------
By:_____________________________ By:____________________________
E. Thomas McFarlan, President Kenneth J. Kempf, President
<PAGE>
SCHEDULE "A"
FUND/PLAN BROKER SERVICES, INC.
MULTIPLE CLASS FEE SCHEDULE
FOR
THE BRINSON FUNDS
________________________________________________________________________________
The following is Fund/Plan Broker Services, Inc.'s schedule for
Underwriter/Distributor services provided to The Brinson Funds and as
Licensing/Regulatory Agent for Brinson Partners, Inc. personnel including
employees who are registered as Fund/Plan Broker Services, Inc. representatives.
These fees will also cover the expenses and personnel required to maintain the
regulatory books and records of Fund/Plan Broker Services, Inc. in connection
with the Underwriting Agreement on behalf of the Trust. All fees for the
Brinson Classes to be paid by Brinson Partners, Inc.
. $7,500 Per Year Per Company with one Fund (Initial Series)
. $2,500 Additional Per Year for Each Additional Series or Class
. $1,000 Per Year Per Licensed Representative in 1-2 States
. or $2,500 Per Year Per Licensed Representative up to 30 States
. or $3,500 Per Year Per Licensed Representative in 50 States & DC
. Additional $300 Per Year Per Licensed Representative in Puerto Rico
MARKETING SUPPORT SERVICES
- --------------------------
$2.00 per call includes both Inbound Telemarketing Services and Literature
Fulfillment. Minimum $2,000 per month.
OUT-OF-POCKET EXPENSES
- ----------------------
Fund/Plan Broker Services, Inc. will be reimbursed monthly for all reasonable
out-of-pocket expenses, including telephone, postage, telecommunciations,
special reports, continuing education requirements, record retention, special
transportation costs as incurred, and unusual expenses incurred.
ADDITIONAL SERVICES
- -------------------
Activities of a non-recurring nature such as fund consolidations, mergers or
reorganizations will be subject to negotiation. Any additional/enhanced
services or reports will be quoted upon request.
<PAGE>
Exhibit to Form N-1A
Exhibit (9)(a)(i) Shareholder Services Agreement
<PAGE>
SHAREHOLDER SERVICES AGREEMENT
------------------------------
THIS AGREEMENT, dated as of the ________ day of ______________, 1995, made
by and between The Brinson Funds, a Delaware Business Trust (the "Trust")
operating as an open-end management investment company and Fund/Plan Services,
Inc. ("Fund/Plan"), a corporation duly organized and existing under the laws of
the State of Delaware.
W I T N E S S E T H T H A T:
-----------------------------
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Trust is authorized by its Agreement and Declaration of Trust
to issue separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "C" attached
hereto, and which Schedule "C" may be amended from time to time by mutual
agreement of the Trust and Fund/Plan; and
WHEREAS, the Trust desires to appoint Fund/Plan as its Transfer, Redemption
and Dividend Disbursing Agent as set forth in this Agreement and to perform
certain other functions in connection with these duties; and
WHEREAS, Fund/Plan is willing to perform such functions upon the terms and
conditions set forth below; and
WHEREAS, the Trust will cause to be provided certain information to
Fund/Plan as set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto, intending to be legally bound, do hereby
agree as follows:
SECTION 1. The terms as defined in this Section wherever used in this
Agreement, or in any amendment or supplement hereto, shall have the
meanings herein specified unless the context otherwise requires.
Series: The term Series shall mean any separate series of
shares issued from time to time by the authority of
the Board of Trustees.
Shareholders: The term Shareholders shall mean the registered
owners from time to time of the Shares of the Trust
in accordance with the share registry records of the
Trust.
Shares: The term Shares shall mean the issued and outstanding
shares of the Trust.
Oral Instruction: The term Oral Instruction shall mean an
authorization, instruction, approval, item or set of
data, or information of any kind transmitted to
Fund/Plan in person or by telephone, telegram,
telecopy or other mechanical or documentary means
lacking original signature, by a person or persons
believed in good faith by Fund/Plan to be a person or
persons authorized by a resolution of the Board of
Trustees of the Trust, to give Oral Instructions on
behalf of the Trust.
Written Instruction: The term Written Instruction shall mean an
authorization, instruction, approval, item or set of
data or information of any kind transmitted to
Fund/Plan in original writing containing original
signatures or a copy of such document transmitted by
telecopy including transmission of such signature
believed in good faith by Fund/Plan to be the
signature of a person authorized by a resolution of
the Board of Trustees of the Trust to give Written
Instructions on behalf of the Trust.
TRANSFER AGENCY
SECTION 2. Fund/Plan as Transfer Agent, shall make original issues of Shares in
accordance with Section 14 and
<PAGE>
15 below and with the Trust's Prospectus and Statement of Additional
Information upon the written request of the Trust and upon being
furnished with (i) a certified copy of a resolution or resolutions
of the Board of Trustees of the Trust authorizing such issue; (ii)
an opinion of counsel as to the validity of such additional Shares
which may be a copy of the opinion rendered in connection with the
Trust's Rule 24(f)(2) notice; and (iii) necessary funds for the
payment of any original issue tax applicable to such additional
Shares.
SECTION 3. Transfers of Shares shall be registered and new Shares issued by
Fund/Plan upon redemption of outstanding Shares, (i) in form deemed
by Fund/Plan to be properly endorsed for transfer, (ii) with all
necessary endorser's signatures guaranteed as permitted by Rule
17(A)(d)-15 under the Securities Exchange Act of 1934, accompanied
by, (iii) such assurances as Fund/Plan shall deem necessary or
appropriate to evidence the genuineness and effectiveness of each
necessary endorsement, and (iv) satisfactory evidence of compliance
with all applicable laws relating to the payment or collection of
taxes.
SECTION 4. When mail is used for delivery of Share Certificates, Fund/Plan
shall forward Share Certificates in "non-negotiable" form by first-
class mail, and Share Certificates in "negotiable" form by
registered mail, all mail deliveries to be covered while in transit
to the addressee by insurance arranged for by Fund/Plan.
SECTION 5. In registering transfers Fund/Plan as Transfer Agent may rely upon
the Uniform Commercial Code or any other statutes which, in the
opinion of counsel, protect Fund/Plan and the Trust in not requiring
complete documentation, in registering transfer without inquiry into
adverse claims, in delaying registration for purposes of such
inquiry, or in refusing registration where in its judgment an
adverse claim requires such refusal.
SECTION 6. With respect to confirmed trades received by Fund/Plan as Transfer
Agent for the Trust, Fund/Plan shall periodically notify the Trust
of the current status of outstanding confirmed trades. Fund/Plan is
authorized to cancel confirmed trades which have been outstanding
for thirty (30) days. Upon such cancellation, the Transfer Agent
shall instruct the Trust's Accounting Agent to adjust the books of
the Trust accordingly.
SECTION 7. Fund/Plan will maintain stock registry records in the usual form in
which it will note the issuance, transfer and redemption of Shares.
Fund/Plan is responsible to provide the Trust reports of Share
purchases, redemptions, and total Shares outstanding on the next
business day after each net asset valuation. Fund/Plan is authorized
to keep records, which will be part of the stock transfer records,
in which it will note the names and registered address of
Shareholders and the number of Shares and fractions thereof owned by
them.
SECTION 8. In case of any request or demand for the inspection of the Share
records of the Trust, Fund/Plan as Transfer Agent, shall notify the
Trust and secure instructions as to permitting or refusing such
inspection. However, Fund/Plan may exhibit such records to any
person in any case where it is advised by its counsel that it may be
held liable for failure to do so.
ISSUANCE OF SHARES
SECTION 9. Prior to the daily determination of net asset value in accordance
with the Trust's Prospectus, Fund/Plan shall process all purchase
orders received since the last determination of the Trust's net
asset value.
Fund/Plan shall calculate daily the amount available for investment
in Shares at the net asset value determined by Fund/Plan as pricing
agent (see Accounting Services Agreement) as of the close of trading
on the New York Stock Exchange, the number of Shares and fractional
Shares to be purchased and the net asset value to be deposited with
the Custodian. Fund/Plan as agent for the Shareholders, shall place
a purchase order daily with the Trust for the proper number of
Shares and fractional Shares to be purchased and confirm such number
to the Trust in writing.
<PAGE>
SECTION 10. The proper number of Shares and fractional Shares shall then be
issued daily and credited by Fund/Plan to the Shareholder
Registration Records. The Shares and fractional Shares purchased for
each Shareholder will be credited by Fund/Plan to that Shareholder's
separate account. Fund/Plan shall mail to each Shareholder a
confirmation of each purchase, with copies to the Trust if
requested. Such confirmations will show the prior Share balance, the
new Share balance, the amount invested and the price paid for the
newly purchased Shares.
REDEMPTIONS
SECTION 11. Fund/Plan shall, prior to the daily determination of net asset value
in accordance with the Trust's Prospectus and Statement of
Additional Information, process all requests from Shareholders to
redeem Shares and determine the number of Shares required to be
redeemed to make monthly payments, automatic payments or the like.
Thereupon, Fund/Plan shall advise the Trust of the total number of
Shares available for redemption and the number of Shares and
fractional Shares requested to be redeemed. Fund/Plan as Pricing
Agent shall then determine the applicable net asset value, whereupon
Fund/Plan shall furnish the Trust with an appropriate confirmation
of the redemption and process the redemption by filing with the
Custodian an appropriate statement and making the proper
distribution and application of the redemption proceeds in
accordance with the Trust's Prospectus and Statement of Additional
Information. The stock registry books recording outstanding Shares,
the Unissued Certificate Account and the individual account of the
Shareholder shall be properly debited.
SECTION 12. The proceeds of redemption shall be remitted by Fund/Plan in
accordance with the Trust's Prospectus by check mailed to the
Shareholder at his registered address or by wire transfer to an
authorized bank account. The signature of the Shareholder on the
redemption request must be guaranteed as required by Rule 1F(A)(d)-
15 of the Securities Exchange Act of 1934. The Trust may authorize
Fund/Plan to waive the signature guarantee in certain cases by
Written Instructions.
For the purposes of redemption of Shares which have been purchased
within 15 days of a redemption request, the Trust shall provide
Fund/Plan, from time to time, with Written Instructions concerning
the time within which such requests may be honored.
DIVIDENDS
SECTION 13. Upon the declaration of each dividend and each capital gains
distribution by the Board of Trustees of the Trust, the Trust shall
notify Fund/Plan of the date of such declaration, the amount payable
per share, the record date for determining the shareholders entitled
to payment, the payment, and the reinvestment date price.
SECTION 14. On or before each payment date the Trust will transfer, or cause the
Custodian to transfer, to Fund/Plan in its capacity as Dividend
Disbursing Agent, the total amount of the dividend or distribution
currently payable. Fund/Plan will, on the designated payment date,
automatically reinvest all dividends in additional Shares except in
cases where Shareholders have elected to receive distribution in
cash, in which case Fund/Plan will mail distributions checks to the
Shareholders for the proper amounts payable to them.
GENERAL PROVISIONS
SECTION 15. Fund/Plan shall maintain records (which may be part of the stock
transfer records) in connection with the issuance and redemption of
Shares, and the disbursement of dividends and dividend
reinvestments, in which will be noted the transactions effected for
each Shareholder and the number of Shares and fractional Shares
owned by each. Fund/Plan agrees to make available upon request and
to preserve for the periods prescribed in Rule 31a-2 under the
Investment Company Act of 1940 any records relating
<PAGE>
to services provided under this Agreement which are required to be
maintained by Rule 31a-1 under the Act.
SECTION 16. In addition to the services as Transfer Agent and Dividend
Disbursing Agent as above set forth, Fund/Plan will perform other
services for the Trust as agreed from time to time, including but
not limited to, preparation of and mailing Federal Tax Information
Forms, mailing semi-annual reports of the Trust, preparation of one
annual list of Shareholders, and mailing notices of Shareholders'
meetings, proxies and proxy statements.
SECTION 17. Nothing contained in this Agreement is intended to or shall require
Fund/Plan in any capacity hereunder, to perform any functions or
duties on any holiday, day of special observance or any other day on
which the Custodian or the New York Stock Exchange are closed.
Functions or duties normally scheduled to be performed on such days
shall be performed on, and as of, the next business day on which
both the New York Stock Exchange and the Custodian are open.
SECTION 18. The Trust agrees to pay Fund/Plan compensation for its services and
to reimburse it for expenses, as set forth in Schedule A attached
hereto, or as shall be set forth in amendments to such Schedule. The
Trust authorizes Fund/Plan to debit the Trust's custody account for
invoices which are rendered for the services performed for the
applicable function. The invoices for the service will be sent to
the Trust after the debiting with the indication that payment has
been made.
SECTION 19. (a) Fund/Plan, its directors, officers, employees, shareholders and
agents shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust in connection with
the performance of this Agreement, except a loss resulting from
willful misfeasance, bad faith or negligence on the part of
Fund/Plan in the performance of its obligations and duties
under this Agreement.
(b) Any person, even though also a director/trustee, officer,
employee, shareholder or agent of Fund/Plan, who may be or
become an officer, trustee, employee, or agent of the Trust,
shall be deemed, when rendering services to the Trust or acting
on any business of the Trust (other than services or business
in connection with Fund/Plan's duties hereunder), to be
rendering such services to or acting solely for the Trust and
not as a trustee, officer, employee, shareholder or agent of,
or one under the control or direction of Fund/Plan even though
paid by it.
(c) Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless Fund/Plan, its
directors, officers, employees, shareholders and agents from
and against any and all claims, demands, expenses and
liabilities (whether with or without basis in fact or law) of
any and every nature which Fund/Plan may sustain or incur or
which may be asserted against Fund/Plan by any person by reason
of, or as a result of:
(i) any action taken or omitted to be taken by Fund/Plan in
good faith hereunder;
(ii) in reliance upon any certificate, instrument, order, or
stock certificate or other document reasonably believed
by it to be genuine and to be signed, countersigned or
executed by any duly authorized person, upon the Oral
Instructions or Written Instructions of an authorized
person of the Trust or upon the opinion of legal counsel
for the Trust or its own counsel; or
(iii) any action taken or omitted to be taken by Fund/Plan in
connection with its appointment in good faith in reliance
upon any law, act, regulation or interpretation of the
same even though the same may thereafter have been
altered, changed, amended, or repealed. However,
indemnification under this subparagraph shall not apply
to actions or omissions of Fund/Plan or its directors,
officers, employees, shareholders, or agents in cases of
its or their own negligence, willful misconduct, bad
faith, or reckless disregard of its or their own duties
hereunder.
<PAGE>
(d) Fund/Plan shall give written notice to the Trust within ten
(10) business days of receipt by Fund/Plan of a written
assertion or claim of any threatened or pending legal
proceeding which may be subject to this indemnification.
However, the failure to notify the Trust of such written
assertion or claim shall not operate in any manner whatsoever
to relieve the Trust of any liability arising from this Section
or otherwise.
(e) For any legal proceeding giving rise to this indemnification,
the Trust shall be entitled to defend or prosecute any claim in
the name of Fund/Plan at its own expense and through counsel of
its own choosing if it gives written notice to Fund/Plan within
ten (10) business days of receiving notice of such claim.
Notwithstanding the foregoing, Fund/Plan may participate in the
litigation at its own expense through counsel of its own
choosing. If the Trust does choose to defend or prosecute such
claim, then the parties shall cooperate in the defense or
prosecution thereof and shall furnish such records and other
information as are reasonably necessary.
(f) The Trust shall not settle any claim without Fund/Plan's
express written consent which shall not be unreasonably
withheld. Fund/Plan shall not settle any claim without the
Trust's express written consent which shall not be unreasonably
withheld.
SECTION 20. Fund/Plan is authorized, upon receipt of Written Instructions from
the Trust or as provided in the Trust's Prospectus, to make payment
upon redemption of Shares without a signature guarantee. The Trust
hereby agrees to indemnify and hold Fund/Plan, its successors and
assigns, harmless of and from any and all expenses, damages, claims,
suits, liabilities, actions, demands, losses whatsoever arising out
of or in connection with a payment by Fund/Plan upon redemption of
Shares without a signature guarantee which is not due to Fund/Plan's
lack of reasonable care and upon the request of Fund/Plan the Trust
shall assume the entire defense of any action, suit or claim subject
to the foregoing indemnity. Fund/Plan shall notify the Trust of any
such action, suit or claim within thirty (30) days after receipt by
Fund/Plan of notice thereof.
SECTION 21. (a) This Agreement shall go into effect as of the day and year
first written above (the"Effective Date"), and shall continue
in effect until October 31, 1996. This Agreement shall continue
in force from year to year thereafter, but only so long as such
continuance is approved, (1) by Fund/Plan, (2) by vote, cast in
person at a meeting called for the purpose, of a majority of
the Trust's Trustees who are not parties to this Agreement or
interested persons (as defined in the Act) of any such party,
and (3) by vote of a majority of the Trust's Board of Trustees
or a majority of the Trust's outstanding voting securities.
(b) The Fee Schedule is fixed for the initial term of this
Agreement, with a fee increase in the second year not to exceed
10%.
(c) The Trust or Fund/Plan may give written notice to the other of
the termination of this Agreement, such termination to take
effect at the time specified in the notice, not less than one
hundred eighty (180) days after the giving of the notice. Upon
the effective termination date, the Trust shall pay to
Fund/Plan such compensation as may be due as of the date of
termination and shall likewise reimburse Fund/Plan for any out-
of-pocket expenses and disbursements reasonably incurred by
Fund/Plan to such date.
(d) In the event that in connection with termination of this
Agreement a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the
Trust by written notice to Fund/Plan, Fund/Plan shall, promptly
upon such termination and at the expense of the Trust, transfer
all Required Records and shall cooperate in the transfer of
such duties and responsibilities.
(e) The Trust acknowledges that in order for Fund/Plan to perform
the services contemplated hereunder, Fund/Plan has made and
will make significant investments of time and money. If this
Agreement is terminated for reasons other than a material
breach by Fund/Plan prior to the expiration of the initial term
of this contract, the Trust will pay Fund/Plan twenty percent
(20%) of the minimum fees remaining for the unexpired term of
the Agreement.
<PAGE>
SECTION 22. The Trust shall file with Fund/Plan a certified copy of each
resolution of its Board of Trustees authorizing the execution of
Written Instructions or the transmittal of Oral Instructions, as
provided in Section 1 of this Agreement.
SECTION 23. This Agreement may be amended from time to time by a supplemental
agreement executed by the Trust and Fund/Plan.
SECTION 24. Any notice or other communication required by or permitted to be
given in connection with this Agreement shall be in writing, and
shall be delivered in person or sent by first class mail, postage
prepaid, to the respective parties as follows:
If to the Trust: The Brinson Funds
209 S. LaSalle St.
Chicago, IL 60604-1295
Attention: E. Thomas McFarlan, President
If to Fund/Plan: Fund/Plan Services, Inc.
P.O. Box 874
Conshohocken, PA 19428
Attention: Kenneth J. Kempf, President
SECTION 25. The Trust represents and warrants to Fund/Plan that the execution
and delivery of this Shareholder Services Agreement by the
undersigned officers of the Trust has been duly and validly
authorized by resolution of the Board of Trustees of the Trust.
SECTION 26. This Agreement may be executed in two or more counterparts, each of
which when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same
instrument.
SECTION 27. This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Trust
without the written consent of Fund/Plan or by Fund/Plan without the
written consent of the Trust, authorized or approved by a resolution
of its Board of Trustees.
SECTION 28. This Agreement shall be construed in accordance with the laws of the
Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and their corporate seals hereunto duly
affixed and attested, as of the day and year first above written.
The Brinson Funds Fund/Plan Services, Inc.
_________________ ------------------------
_________________________________ _________________________________
By: E. Thomas McFarlan, President By: Kenneth J. Kempf, President
_________________________________ _________________________________
Attest: Debra L. Nichols Attest: Janet F. Davis, Secretary
Assistant Secretary
(SEAL) (SEAL)
<PAGE>
SCHEDULE "A"
------------
MULTIPLE CLASS FEE SCHEDULE FOR THE BRINSON FUNDS
Global Fund
Global Equity Fund
Global Bond Fund
Short-Term Global Income Fund
U.S. Balanced Fund
U.S. Equity Fund
U.S. Bond Fund
U.S. Cash Management Fund
Non-U.S. Equity Fund
Non-U.S. Bond Fund
TRANSFER AGENCY - ANNUAL FEES (1/12 PAYABLE MONTHLY)
- ----------------------------------------------------
$17,000 per each portfolio of the "Brinson Class" (includes $5,000 for
special 401(k) communication and reporting); plus
$18 per account (minimum $27,000) for each portfolio of the "SwissKey
Class;"
Fees are aggregated at the portfolio level and then allocated to each Class
based on their respective net assets.
OUT-OF-POCKET EXPENSES
- -----------------------
The Trust will reimburse Fund/Plan Services, Inc. monthly for all reasonable
out-of-pocket expenses, including telephone, postage, telecommunications,
special reports, record retention, special transportation costs as incurred, and
unusual expenses incurred while establishing viable agreements between the Trust
and Fund/Plan Services, Inc. The cost of copying and sending materials to
auditors for off-site audits will be an additional expense.
ADDITIONAL SERVICES
- -------------------
Activities of a non-recurring nature such as fund consolidations, mergers or
reorganizations will be subject to negotiation. Any additional/enhanced
services or reports will be quoted upon request.
The Schedules will be amended as necessary to reflect the addition of other
services for additional classes or portfolios of the Trust.
<PAGE>
SCHEDULE "B"
------------
TRANSFER AGENCY STANDARD SERVICES
I - SHAREHOLDER FILE
1. Establish new accounts and enter demographic data into shareholder
base. Includes review and file maintenance for all NSCC originated
registrations and data changes for FundServ, Networking and ACTS
accounts for compliance with Investar customer file requirements.
2. Create Customer Information File (CIF) to link accounts within the Fund
and across funds within the Fund Group. Facilitates account maintenance,
lead tracking, quality control, household mailings and combined
statements.
3. 100% quality control of new account information, including verification
of initial investment.
* 4. Systematic linkage of shareholder accounts with exact matches on SSN and
address for the purpose of consolidated account history reporting.
Periodic production of laser printed combined statements.
* 5. Production of household mailing labels which enable the Fund to do
special mailings to each address in the Fund Group rather than each
account.
6. Maintain account and customer file records based on shareholder request
and routine quality review.
7. Maintain tax ID certification and NRA records for each account,
including backup withholding.
8. Provide written confirmation of address changes.
9. Produce shareholder statements for daily activity, dividends, on-
request, third party and periodic mailings.
* 10. Produce shareholder lists, labels and ad hoc reports to Fund management
as requested.
11. Automated processing of dividends and capital gains with daily, monthly,
quarterly or annual distributions. Payment options include reinvestment,
directed payment to another fund, cash via mail, Fed wire or ACH.
II - SHAREHOLDER SERVICES
1. Provide quality service through a staff of highly trained NASD licensed
customer service personnel, including phone, research and correspondence
representatives.
2. Answer shareholder calls: provide routine account information,
transaction details including direct and wire purchases, redemptions,
exchanges, systematic withdrawals, pre-authorized drafts, Fund SERV and
wire order trades, problem solving and process telephone transactions.
3. Customized recording of fund prices daily after regular business hours
for shareholder access.
4. Silent monitoring of shareholder calls by the phone supervisor to ensure
exceptional customer service.
5. Record and maintain tape recordings of all shareholder calls for a six
month period.
<PAGE>
SCHEDULE "B"
------------
6. Phone Supervisor produces daily management reports of shareholder calls
which track volumes, length of calls, average wait time and abandoned
call rates to ensure quality service.
7. Phone representatives are thoroughly trained through in house training
programs on the techniques of providing exceptional customer service.
8. Customer inquiries received by letter or telephone are thoroughly
researched by a correspondence team member. These inquires include such
items as, account/customer file information, complete historical account
information, stop payments on checks, transaction details and lost
certificates.
III - INVESTMENT PROCESSING
1. Initial investment (checks or Fed wires).
2. Subsequent investments (checks or Fed wires) processed through lock box.
3. Pre-authorized investments (PAD) through ACH system.
4. Government allotments through ACH system.
5. Prepare and process daily bank deposit of shareholder investments.
* 6. NSCC - FundSERV trades.
IV - REDEMPTION PROCESSING
1. Process letter redemption requests.
2. Process telephone redemption transactions.
3. Establish Systematic Withdrawal File and process automated transactions
on monthly basis.
4. Issue checkbooks and process checkbook redemptions through agent bank.
5. Redemption proceeds distributed to shareholder by check, Fed wire or ACH
processing.
* 6. Provide NSCC - FundSERV trade processing.
V - EXCHANGE & TRANSFER PROCESSING
1. Process legal transfers.
2. Issue and cancel certificates.
3. Replace certificates through surety bonds (separate charge to
shareholder).
4. Process exchange transactions (letter and telephone request).
5. Process ACATS transfers.
<PAGE>
SCHEDULE "B"
------------
VI - RETIREMENT PLANS
1. Fund sponsored IRAs offered using Semper Trust Company as custodian.
Services include:
a. Contribution processing
b. Distribution processing
c. Apply rollover transactions
d. Process Transfer of Assets
e. Letters of Acceptance to prior custodians
f. Notify IRA holders of 70 1/2 requirements
g. Calculate Required Minimum Distributions
h. Maintain beneficiary information file
i. Solicit birth date information
2. Fund sponsored SEP-IRA plans offered using Semper Trust Company as
custodian. Services include those listed under IRAs and:
a. Identification of employer contributions
3. Fund sponsored Qualified plans offered.
a. Plan document available
b. Omnibus/master account processing only
c. Produce annual statements
d. Process contributions
e. Process distributions
f. Process rollover and Transfer of Assets transactions
VII - SETTLEMENT & CONTROL
1. Daily review of processed shareholder transactions to assure input was
processed correctly. Accurate trade activity figures passed to Fund's
Accounting Agent by 10:00am EST.
2. Preparation of daily cash movement information to be passed to the
Fund's Accounting Agent and Custodian Bank by 10:00am EST for use in
determining Fund's daily cash availability.
3. Prepare a daily share reconcilement which balances the shares on the
Transfer Agent system to those on the books of the Fund.
4. Resolve any outstanding share or cash issues that are not cleared by
trade date + 2.
5. Process shareholder adjustments to include the proper notification of
any booking entries needed, as well as any necessary cash movement.
6. Settlement and review of Fund's declared dividends and capital gains to
include the following:
a. Review record date report for accuracy of shares.
b. Preparation of dividend settlement report after dividend is
posted. Verify the posting date shares, the rate used and the
NAV price of reinvest date to ensure dividend was posted
properly.
c. Distribute copies to the Fund's Accounting Agent.
d. Preparation of the checks prior to being mailed.
e. Sending of any dividends via wires if requested.
f. Preparation of cash movement information for the cash portion of
the dividend payout on payable date.
7. Placement of stop payments on dividend and liquidation checks as well as
the issuance of their replacements.
8. Maintain inventory control for stock certificates and dividend check
form.
<PAGE>
SCHEDULE "B"
------------
9. Aggregate tax filings for all Fund/Plan clients. Monthly deposits to the
IRS of all taxes withheld from shareholder disbursements, distributions
and foreign account distributions. Correspond with the IRS concerning
any of the above issues.
10. Timely settlement and cash movement for all NSCC/FundSERV activity.
VIII - YEAR END PROCESSING
1. Maintain shareholder records in accordance with IRS notices for under-
reporting and invalid Tax IDs. This includes initiating 31% backup
withholding and notifying shareholders of their tax status and the
corrective action which is needed.
2. Conduct annual W-9 solicitation of all uncertified accounts. Update
account tax status to reflect backup withholding or certified status
depending upon responses.
3. Conduct periodic W-8 solicitation of all non-resident alien shareholder
accounts. Update account tax status with updated shareholder information
and treaty rates for NRA tax.
4. Review IRS Revenue Procedures for changes in transaction and
distribution reporting and specifications for the production of forms to
ensure compliance.
5. Coordinate year end activity with client. Activities include producing
year end statements, scheduling record dates for year dividends and
capital gains, production of combined statements, printing of inserts to
be mailed with tax forms.
6. Distribute Dividend Letter to funds for them to sign off on all
distributions paid year to date. Dates and rates must be authorized so
that they can be used for reporting to the IRS.
7. Coordinate the ordering of form stock and envelopes from vendor in
preparation of tax reporting. Review against IRS requirements to ensure
accuracy.
8. Prepare form flashes for the microfiche vendor. Test and oversee the
production of fiche for year end statements and tax forms.
9. Match and settle tax reporting totals to fund records and on-line date
from Investar.
10. Produce forms 1099R, 1099B, 1099Div, 5498, 1042S and year end
valuations. Quality assure forms before mailing to shareholders.
11. Monitor IRS deadlines and special events such as cross over dividends
and prior year IRA contributions.
12. Prepare IRS magnetic tapes and appropriate forms for the filing of all
reportable activity to the Internal Revenue Service.
IX - CLIENT SERVICES
1. An Account Manager is assigned to each relationship. The Account Manager
acts as the liaison between the Fund and the Transfer Agency staff.
Responsibilities include scheduling of events, system enhancement
implementation, special promotion/event implementation and follow-up,
and constant fund interaction on daily operational issues.
Specifically:
a. Scheduling of dividends, proxies, report mailing and special
mailings.
b. Coordinate with the Fund the shipment of materials for scheduled
mailings.
<PAGE>
SCHEDULE "B"
------------
c. Liaison between the Fund and support services for preparation of
proofs and eventual printing of statement forms, certificates,
proxy cards, envelopes.
d. Handle all notification regarding proxy tabulation through the
meeting. Coordinate scheduling of materials, including voted
cards, tabulation letters, and shareholder list, to be available
for the meeting.
e. Order special reports, tapes, discs for special systems requests
received.
f. Implement new operational procedures, e.g., check writing
feature, load discounts, minimum waivers, sweeps, telephone
options, PAD promotions.
g. Coordinate with systems, services and operations on special
events, e.g., mergers, new fund start ups, small account
liquidations, combined statements, household mailings,
additional mail files.
h. Prepare standard operating procedures and review prospectus for
new funds and our current client base. Coordinate implementation
of suggested changes with the Fund.
i. Liaison between the Fund and the transfer agency staff regarding
all service and operational issues.
2. Proxy Processing (Currently one free per year)
a. Coordinate printing of cards with vendor.
b. Coordinate mailing of cards with Account Manager and mailroom.
c. Provide daily report totals to Account Manager for client
notification.
d. Preparation of affidavit of mailing documents.
e. Provide one shareholder list.
f. Prepare final tabulation letter.
3. Blue Sky Processing
a. Maintain file with additions, deletions, changes and updates at
the Fund's direction.
b. Provide daily and monthly reports to enable the Fund to do
necessary state filings.
<PAGE>
IDENTIFICATION OF SERIES
------------------------
Below are listed the Series and Classes of Shares to which services under this
Agreement are to be performed as of the Effective Date of this Agreement:
SERIES
Global Fund
Global Equity Fund
Global Bond Fund
Short-Term Global Income Fund*
U.S. Balanced Fund
U.S. Equity Fund
U.S. Bond Fund
U.S. Cash Management Fund
Non-U.S. Equity Fund
Non-U.S. Bond Fund
CLASSES
Brinson Fund class
SwissKey Fund class
* Fee and procedures subject to change/review pending definitive structure of
Fund.
This Schedule "C" may be amended from time to time by agreement of the Parties.
<PAGE>
Exhibit to Form N-1A
Exhibit (9)(a)(ii) Amendment to Shareholder Services Agreement
<PAGE>
AMENDMENT TO SHAREHOLDER SERVICES AGREEMENT
This AGREEMENT, dated as of the ________ day of August, 1995 made by and
between The Brinson Funds, a Delaware business trust (the "Trust") and Fund/Plan
Services, Inc. ("Fund/Plan"), a corporation duly organized and existing under
the laws of the State of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and Fund/Plan have entered into an agreement dated April
25, 1995, wherein Fund/Plan has agreed to serve as Transfer, Redemption and
Dividend Disbursing Agent to the Trust and to perform certain other functions in
connection with these duties ("Shareholder Services Agreement"); and
WHEREAS, the Parties wish to amend the Shareholder Services Agreement to
reflect the creation of a multiple class structure for each Series of the Trust;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree:
1. To amend Schedule "A" to the Shareholder Services Agreement in the form
attached hereto as Schedule "A".
2. To replace Schedule "B" to the Shareholder Services Agreement with the
form attached hereto as Schedule "B".
3. This Amendment's Effective Date shall be July 31, 1995.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of one typewritten page, together with Schedules "A" and "B", to be
signed by their duly authorized officers and their corporate seals hereunto duly
affixed as of the day and year first above written.
The Brinson Funds Fund/Plan Services, Inc.
- ----------------- ------------------------
By:______________________________ By:________________________________
E. Thomas McFarlan, President Kenneth J. Kempf, President
<PAGE>
SCHEDULE "A"
MULTIPLE CLASS FEE SCHEDULE FOR THE BRINSON FUNDS
TRANSFER AGENCY - ANNUAL FEES (1/12 PAYABLE MONTHLY)
- ----------------------------------------------------
$17,000 per each portfolio of the "Brinson Class" (includes $5,000 for
special 401(k) communication and reporting); plus
$18 per account (minimum $27,000) for each portfolio of the "SwissKey
Class;" plus
$18 per account for each additional portfolio of an additional class
(minimum $24,000).
OUT-OF-POCKET EXPENSES
- -----------------------
The Trust will reimburse Fund/Plan Services, Inc. monthly for all reasonable
out-of-pocket expenses, including telephone, postage, telecommunications,
special reports, record retention, special transportation costs as incurred, and
unusual expenses incurred while establishing viable agreements between the Trust
and Fund/Plan Services, Inc. The cost of copying and sending materials to
auditors for off-site audits will be an additional expense.
ADDITIONAL SERVICES
- -------------------
Activities of a non-recurring nature such as fund consolidations, mergers or
reorganizations will be subject to negotiation. Any additional/enhanced services
or reports will be quoted upon request.
The Schedules will be amended as necessary to reflect the addition of other
services for additional classes or portfolios of the Trust.
<PAGE>
SCHEDULE "B"
TRANSFER AGENT/SHAREHOLDER SERVICES
FOR
THE BRINSON FUNDS
- -------------------------------------------------------------------------------
TRANSFER AGENCY SERVICES:
EACH OF THE FOLLOWING SERVICES WOULD APPLY SEPARATELY TO EACH CLASS.
. Opening new accounts and entering demographic data into shareholder base.
. Real-time Customer Information File (CIF) to link accounts within the Fund
and across Funds. Facilitate account maintenance, lead tracking, quality
control, household mailings and combined statements.
. 100% Quality Control of new accounts opened on a same-day basis. All of the
above information is checked by a separate unit.
. Account maintenance with quality control.
. Processing investments to include:
- initial investments
- subsequent investments through lock box computer interface
- pre-authorized investments through ACH
- government allotments through ACH
- wire trades.
. Establishing and maintaining Rights of Accumulation and Letters of Intent
with escrow handling as needed.
. Processing tax ID certifications and NRA processing and handling back-up
withholding.
. Processing regular and legal transfers of accounts.
. Exchange processing via automated exchange system. Calls will be
automatically recorded.
. Responding to shareholder calls and written inquiries.
. Processing reinvestment of dividends of one fund into another fund.
. Processing sweep purchases and redemptions for brokerage, bank, or other
accounts via tape or transmission.
. Generating account statements with copies to appropriate interested parties.
. Generating trade confirmations with copies to dealers, representatives and
fund.
. Redemption processing to include:
- complete and partial redemptions
- check redemption processing*
- selected group redemptions
- wire trade redemptions
<PAGE>
TRANSFER AGENT/SHAREHOLDER SERVICES - #2
- -------------------------------------------------------------------------------
. Interface withFund/SERV System.
. Maintain dealer file by fund group to include dealer, branch, representative
number and name.
. Commission processing with up to four commission tables.
. Contingent Deferred Sales Charge System.
. 12(b)1 trailing commissions system.*
. Issuing and canceling of certificates.
. Replacement of certificates through surety bonds (premium to be paid by
shareholder).
. Processing dividends from annual to daily dividend with monthly payments.
. Maintain Blue Sky reporting and produce daily and monthly reports. Daily
reports reflect a "warning system" that informs the Fund when it is within a
certain percentage of shares registered in a state, or within a certain time
period for permit renewal.
. Producing daily, monthly or periodic reports of shareholder activity.
. Producing shareholder lists, labels, ad hoc reports to management, etc.*
. Addressing, mailing, and tabulation of annual proxy cards, as necessary.
. Preparation of federal tax information forms to include 1099-DIV's, 1099-B's,
1042's, etc to shareholders with tape to IRS.
. Microfilming and indexing in PC system of all application, correspondence and
other pertinent shareholder documents to provide automated location of these
records. Also, all checks presented for payment or check redemptions are
microfilmed.
. System access by PC dial-up or by dedicated line.*
. Automatic Shareholder Control (ASC)*
- Rate
- Price/Yield
- Account Balances
- Last Transaction
- Marketing Message
- Shareholder Survey
- Exchanges/Fulfillment
. Retirement Plan processing.*
* SEPARATE FEES WILL APPLY FOR THESE SERVICES.
<PAGE>
Exhibit to Form N-1A
Exhibit (9)(b)(i) Administration Agreement
<PAGE>
ADMINISTRATION AGREEMENT
------------------------
THIS AGREEMENT, dated as of the ___________ day of ______________________,
1995, made by and between The Brinson Funds, a Delaware business trust (the
"Trust") operating as a registered investment company under the Investment
Company Act of 1940, as amended (the "Act"), duly organized and existing under
the laws of the State of Delaware and FUND/PLAN SERVICES, INC. ("Fund/Plan"), a
corporation duly organized and existing under the laws of the State of Delaware
(collectively, the "Parties").
W I T N E S S E T H T H A T:
-----------------------------
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Trust is authorized by its Agreement and Declaration of Trust
to issue separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "C" attached
hereto, and which Schedule "C" may be amended from time to time by mutual
agreement of the Trust and Fund/Plan; and
WHEREAS, the Parties desire to enter into an agreement whereby Fund/Plan
will provide certain administration services to the Trust on the terms and
conditions set forth in this Agreement; and
WHEREAS, Fund/Plan is willing to serve in such capacity and perform such
administrative services under the terms and conditions set forth below; and
WHEREAS, the Trust will provide all necessary information to Fund/Plan
concerning the Series so that Fund/Plan may appropriately execute its
responsibilities hereunder;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
SECTION 1. APPOINTMENT. The Trust hereby appoints Fund/Plan as
administrator and Fund/Plan hereby accepts such appointment. All portfolios
added to the Trust in the future and all current portfolios of the Trust are
included under this Agreement.
SECTION 2. DUTIES AND OBLIGATIONS OF FUND/PLAN.
(a) Subject to the succeeding provisions of this section and subject to the
direction and control of the Board of Trustees of the Trust, Fund/Plan shall
provide to each of the Series all administrative services set forth in Schedule
"A" attached hereto, which Schedule is incorporated by reference in its entirety
into this Agreement. In addition to the obligations set forth in Schedule "A",
Fund/Plan shall (i) provide its own office space, facilities, equipment and
personnel for the performance of its duties under this Agreement; and (ii) take
all actions it deems necessary to properly execute the administrative
responsibilities of the Trust.
(b) So that Fund/Plan may perform its duties under the terms of this
Agreement, the Board of Trustees of the Trust shall direct the officers,
investment advisor, distributor, legal counsel, independent accountants and
custodian of the Trust to cooperate fully with Fund/Plan and to provide such
information, documents and advice relating to the Trust as is within the
possession or knowledge of such persons provided that no such person need
provide any information to Fund/Plan if to do so would, in the reasoned opinion
of counsel to the Trust, result in the loss of any privilege or confidential
treatment with respect to such information. In connection with its duties,
Fund/Plan shall be entitled to rely, and shall be held harmless by the Trust
when acting in reasonable reliance upon the instruction, advice or any documents
provided by the Trust to Fund/Plan by any of the aforementioned persons. All
fees charged by any such persons shall be deemed an expense of the Trust.
<PAGE>
(c) Any activities performed by Fund/Plan under this Agreement shall conform
to the requirements of:
(1) the provisions of the Investment Company Act of 1940, as amended
(the "Act") and the Securities Act of 1933, as amended, and of any
rules or regulations in force thereunder;
(2) any other applicable provision of state and federal law;
(3) the provisions of the Trust Instrument of the Trust and By-laws of
the Trust, as amended from time to time;
(4) any policies and determinations of the Board of Trustees of the
Trust; and
(5) the fundamental policies of the Trust as reflected in its
registration statement filed pursuant to the Act.
Fund/Plan acknowledges that all records that it maintains for the Trust are
the property of the Trust and will be surrendered promptly to the Trust upon
written request. Fund/Plan will preserve, for the periods prescribed under Rule
31a-2 under the Act, all such records required to be maintained under Rule 31a-1
of the Act.
(d) Nothing in this Agreement shall prevent Fund/Plan or any officer thereof
from acting as administrator for any other person, firm or corporation. While
the administrative services supplied to the Trust may be different than those
supplied to other persons, firms or corporations, Fund/Plan shall provide the
Trust equitable treatment in supplying services. The Trust recognizes that it
will not receive preferential treatment from Fund/Plan as compared with the
treatment provided to other Fund/Plan clients. Fund/Plan agrees to maintain the
records and all other information of the Trust in a confidential manner and
shall not use such information for any purpose other than the performance of
Fund/Plan's duties under this Agreement.
SECTION 3. ALLOCATION OF EXPENSES All costs and expenses of the Trust
shall be paid by the Trust including, but not limited to:
(a) fees paid to an investment advisor (the "Advisor");
(b) interest and taxes;
(c) brokerage fees and commissions;
(d) insurance premiums;
(e) compensation and expenses of its Trustees who are not affiliated
persons of the Advisor;
(f) legal, accounting and audit expenses;
(g) custodian and transfer agent, or shareholder servicing agent, fees
and expenses;
(h) fees and expenses incident to the registration of the shares of the
Trust under Federal or state securities laws;
(i) expenses related to preparing, setting in type, printing and mailing
prospectuses, statements of additional information, reports and
notices and proxy material to shareholders of the Trust;
(j) all expenses incidental to holding meetings of shareholders and
Trustees of the Trust;
(k) such extraordinary expenses as may arise, including litigation,
affecting the Trust and the legal obligations which the Trust may
have regarding indemnification of its officers and Trustees; and
(l) fees and out-of-pocket expenses paid on behalf of the Trust by
Fund/Plan.
SECTION 4. COMPENSATION OF FUND/PLAN.
(a) The Trust agrees to pay Fund/Plan, and Fund/Plan agrees to accept as
full compensation for all services rendered hereunder, an annual fee payable
monthly and computed on the average daily net assets of the Trust at the end of
each business day at the annual rate as set forth in Schedule "B" to this
Agreement and reasonable out-of-pocket expenses incurred by Fund/Plan in the
performance of services hereunder. Except as hereinafter set forth,
compensation under this Agreement shall be calculated and accrued daily and the
amounts of the daily accruals shall be paid monthly. The minimum fee to be paid
by the Trust as constituted this date shall be $75,000 annually. New multiple
class portfolios added to the Trust shall bear a minimum annual fee of $10,000.
The Fee Schedule shall be fixed for the initial term of the Agreement, as
described below, with a fee increase
<PAGE>
thereafter not to exceed 10%. Out-of-pocket expenses shall include
telecommunication charges, postage and delivery charges, record retention costs,
reproduction charges and transportation and lodging costs. The Trust authorizes
Fund/Plan to debit the Trust's custody account for invoices which are rendered
for the services performed hereunder. The invoices for the services will be
sent to the Trust after the debiting with indication that payment has been made.
Invoices for out-of-pocket expenses shall be reviewed by the Trust promptly upon
receipt and Fund/Plan shall be authorized to debit the Trust's custody account
upon approval of the invoices by the Trust. Upon any termination of this
Agreement before the end of any month, the fee for such part of a month shall be
prorated according to the proportion which such period bears to the full monthly
period and shall be payable upon the date of termination of this Agreement.
Should the Trust be liquidated, merged or acquired by another fund, any deferred
fees would be immediately payable. For the purpose of determining fees payable
to Administrator, the value of the Trust's net assets shall be computed at the
times and in the manner specified in the Trust's Prospectus and Statement of
Additional Information as from time to time in effect.
(b) Should additional or fewer services or functions beyond those
outlined in Section 2 above, or in Schedule "A" attached, be
desired or required of Fund/Plan during the time that this contract
is in effect, a written amendment to this Administration Agreement
reflecting such shall be signed by both Fund/Plan and the Trust,
and the compensation stated in Schedule "B" may be increased or
decreased accordingly.
SECTION 5. DURATION AND TERMINATION.
(a) This Agreement shall go into effect as of the date and year first
written above ("Effective Date") and shall continue in effect until
October 31, 1996. This Agreement shall continue in force from year
to year thereafter, but only so long as such continuance is
approved:
(1) by Fund/Plan;
(2) by vote, cast in person at a meeting called for the purpose, of
a majority of the Trust's Trustees who are not parties to this
Agreement or interested persons (as defined in the Act) of any
such party; and
(3) by vote of a majority of the Trust's Board of Trustees or a
majority of the fund's outstanding voting securities.
(b) The Trust acknowledges that in order for Fund/Plan to perform the
services set forth herein, Fund/Plan has made and will make
significant investments of time and money for equipment, computer
hardware and software, training of personnel and initialization of
the Trust's records, data and information. In the event the Trust is
liquidated, merged or acquired by another Fund, or if it terminates
its contract with Fund/Plan within the initial term of this contract
for any reason other than a material breach of this agreement, the
Trust agrees to pay Fund/Plan within thirty (30) days of such
termination the equivalent of 20% of the minimum fees remaining for
the unexpired term of the Agreement.
(c) Subject to the terms of the preceding paragraph, this Agreement may
be terminated by Fund/Plan at any time without penalty upon giving
the Trust one hundred eighty (180) days written notice (which notice
may be waived in writing by the Trust) and may be terminated by the
Trust at any time upon giving Fund/Plan one hundred twenty (120)
days written notice (which notice may be waived in writing by
Fund/Plan) provided that such termination by the Trust shall be
directed or approved by the vote of a majority of its Trustees.
(d) This Agreement shall automatically terminate in the event of its
assignment. Termination shall not affect the rights of the parties
which have accrued prior thereto.
SECTION 6. AMENDMENT. The terms of this Agreement shall not be waived,
altered, modified, amended or supplemented in any manner whatsoever except by a
written instrument signed by Fund/Plan and the Trust.
SECTION 7. APPLICABLE LAW. This Agreement shall be construed in accordance
with the laws of the Commonwealth of Pennsylvania.
<PAGE>
SECTION 8. LIMITATION OF LIABILITY.
(a) The execution and delivery of this contract have been duly
authorized by the Board of Trustees of the Trust and executed on
behalf of the Trust by the undersigned officer of the Trust in his
capacity as an officer of the Trust. The obligations of this
Agreement shall be binding upon the assets and property of the Trust
only and shall not be binding upon any Trustee, officer or
shareholder of the Trust individually.
(b) Fund/Plan, its directors, officers, employees, shareholders and
agents shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Trust in connection with the
performance of this Agreement, except a loss resulting from willful
misfeasance, bad faith or negligence on the part of Fund/Plan in the
performance of its obligations and duties under this Agreement.
(c) Any person, even though also a director, officer, employee,
shareholder or agent of Fund/Plan, who may be or become an officer,
trustee, employee or agent of the Trust, shall be deemed, when
rendering services to the Trust or acting on any business of the
Trust (other than services or business in connection with
Fund/Plan's duties hereunder), to be rendering such services to or
acting solely for the Trust and not as a trustee, officer, employee,
shareholder or agent of, or one under the control or direction of
Fund/Plan even though paid by it.
(d) Notwithstanding any other provision of this Agreement, the Trust
shall indemnify and hold harmless Fund/Plan, its directors,
officers, employees, shareholders and agents from and against any
and all claims, demands, expenses and liabilities (whether with or
without basis in fact or law) of any and every nature which
Fund/Plan may sustain or incur or which may be asserted against
Fund/Plan by any person by reason of, or as a result of:
(1) any action taken or omitted to be taken by Fund/Plan in good
faith hereunder;
(2) in reliance upon any certificate, instrument, order or stock
certificate or other document reasonably believed by it to be
genuine and to be signed, countersigned or executed by any duly
authorized person, upon the oral instructions or written
instruction of an authorized person of the Trust or upon the
opinion of legal counsel for the Trust; or
(3) any action taken or omitted to be taken by Fund/Plan in
connection with its appointment in good faith in reliance upon
any law, act, regulation or interpretation of the same even
though the same may thereafter have been altered, changed,
amended or repealed. However, indemnification under this
subparagraph shall not apply to action or omissions of Fund/Plan
or its directors, officers, employees, shareholders or agents in
cases of its or their own negligence, willful misconduct, bad
faith, or reckless disregard of its or their own duties
hereunder.
(e) Fund/Plan shall give written notice to the Trust within ten (10)
business days of receipt by Fund/Plan of a written assertion or
claim of any threatened or pending legal proceeding which may be
subject to this indemnification. However, the failure to notify the
Trust of such written assertion or claim shall not operate in any
manner whatsoever to relieve the Trust of any liability arising from
this Section or otherwise, unless such failure prejudices the Trust.
(f) For any legal proceeding giving rise to this indemnification, the
Trust shall be entitled to defend or prosecute any claim in the name
of Fund/Plan at its own expense and through counsel of its own
choosing if it gives written notice to Fund/Plan within ten (10)
business days of receiving notice of such claim. Notwithstanding the
foregoing, Fund/Plan may participate in the litigation at its own
expense through counsel of its own choosing. If the Trust does
choose to defend or prosecute such claim, then the parties shall
cooperate in the defense or prosecution thereof and shall furnish
such records and other information as are reasonably necessary.
(g) The terms of Section 8 shall survive the termination of this
Agreement.
SECTION 9. NOTICES. All notices, requests, consents and other
communications pursuant to this Agreement shall be in writing and shall be
deemed to have been given when sent by registered or certified mail, return
receipt
<PAGE>
requested, or by personal delivery.
(a) Notice to Administrator shall be directed to the following address:
Fund/Plan Services, Inc.
2 W. Elm Street
Conshohocken, Pennsylvania 19428
Attention: Kenneth J. Kempf, President
(b) Notices to the Trust shall be directed to the following address:
The Brinson Funds
209 S. LaSalle St.
Chicago, IL 60604
Attention: E. Thomas McFarlan, President
SECTION 10. INVALIDITY. Any provision of this Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11. SECTION HEADINGS. Section and Paragraph headings are for
convenience only and shall not be construed as part of this Agreement.
SECTION 12. ENTIRE AGREEMENT. This Agreement constitutes the entire
Agreement of the parties hereto.
SECTION 13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original agreement but such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers and their seals to be hereunto
affixed, all as of the day and year first above written.
THE BRINSON FUNDS FUND/PLAN SERVICES, INC.
- ----------------- -----------------------
- ---------------------------------- ----------------------------------
By: E. Thomas McFarlan, President By: Kenneth J. Kempf, President
- ---------------------------------- ----------------------------------
Attest: Debra L. Nichols Attest: Janet F. Davis, Secretary
Assistant Secretary
(SEAL) (SEAL)
<PAGE>
SCHEDULE "A"
------------
FUND ADMINISTRATION SERVICES
FOR
THE BRINSON FUNDS
I. REGULATORY COMPLIANCE
---------------------
A. Compliance - Federal Investment Company Act of 1940
1. Review, report and present for renewal
a. Investment advisory contracts
b. Fidelity bond
c. Underwriting contract
d. Distribution (12b-1) plan (class specific)
e. Administration contract
f. Accounting contract
g. Custody contract
h. Transfer agent and shareholder services contract
2. Filings
a. N-SAR (semi-annual and annual report) (series and class
specific)
b. Initial registration statement on Form N1-A, post-effective
amendments on Form N-1A, and supplements ("stickers")
c. Notice pursuant to Rule 24f-2 (registration of indefinite
number of shares)
d. Filing fidelity bond under Rule 17g-1
e. Filing shareholder reports under Rule 30b2-1
f. Proxy statement, when applicable
3. Annual updates of biographical information and questionnaires for
Trustees and Officers.
B. Compliance - State "Blue Sky" (classes deemed separate funds for filing
purposes)
1. Blue Sky (state registration)
a. Registration of shares (initial/renewal)
b. Monitor sale of shares
c. Report shares sold
d. Filing of federal prospectus and contracts
e. Filing annual and semi-annual reports with states
C. Compliance - Prospectus
1. Analyze and review portfolio reports from Advisor regarding:
a. compliance with investment objectives
b. maximum investment by company/industry size
<PAGE>
SCHEDULE "A"
------------
II. CORPORATE BUSINESS AND SHAREHOLDER/PUBLIC INFORMATION
-----------------------------------------------------
A. Trustees/Management
1. Preparation of Board meetings
a. agendas and resolutions - all necessary items of compliance
b. compile and distribute Board materials
c. attend and record minutes of meetings
d. keep attendance records
e. maintain corporate records/minute book
2. Preparation and distribution of periodic operation reports to
management
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
4. Insurance
5. Underwriters
C. Maintain Corporate Calendars and Files
1. General
2. Blue sky
D. Release Corporate Information
1. To shareholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital gains)
b. tax information
c. changes to prospectus
d. letters from management
e. performance information (class specific)
4. Respond to:
a. financial press, as authorized
b. miscellaneous shareholder inquiries
c. industry questionnaires
5. Prepare, maintain and update monthly information manual
E. Communications to Shareholders
1. Coordinate printing and distribution of annual and semi-annual
reports, proxy statements when applicable and prospectuses
<PAGE>
SCHEDULE "A"
------------
F. Shareholder Meetings
1. Preparation of proxy (matters to be voted on may be class specific)
2. Solicitation of proxies
3. Preparation of minutes and record ballot results
III. FINANCIAL AND MANAGEMENT REPORTING
----------------------------------
A. Income and Expenses (class specific when applicable)
1. Preparation of monthly expense analysis (class specific)
2. Expense figures calculated and accrual levels set (class specific)
3. Monitoring of expenses paid and expense caps (monthly)
4. Approve and prepare authorization for the payment of expenses
5. Checking Account Reconciliation (monthly)
6. Write checks to pay vendors
7. Calculation and payment of advisory fees
B. Distributions to Shareholders (if applicable) (class specific)
1. Projections of distribution amounts - (semi-annually)
a. compliance with Sub-Chapter M income tax provisions
b. compliance with excise tax provisions - schedules prepared
c. compliance with Investment Company Act of 1940
2. Compilation of distributions for tax reporting for shareholders'
1099 Form
C. Financial Reporting
1. Liaison between fund management and auditors
2. Preparation of unaudited and audited financial statements to
shareholders (semi-annually) (class specific, when applicable)
- Statement of Assets and Liabilities - shares, TNA and NAV
@ class level
- Statement of Operations - prepared at fund level
- Statement of Changes in Net Assets - distributions and capital
stock at class level
- Financial Highlights (class specific)
- per share data/analysis
- Footnotes
- Schedule of Investments
3. 60 day delivery to SEC and shareholders
4. Preparation of semi-annual and annual N-SARs and Financial Data
Sheet (Financial Information)
5. Preparation of Post-effective financial statements (if applicable)
D. Other Financial Analyses
1. Sales information, portfolio turnover (monthly)
2. Performance Calculations (monthly) (class specific)
3. 1099 Miscellaneous - prepared for Directors/Trustees (annually)
4. 1099 Dividend insert card prepared - coordinate printing and
mailing (annually)
5. 1099-DIV Form - validate per share amounts and tax status
(annually)
E. Review and Monitoring Functions
<PAGE>
SCHEDULE "A"
------------
1. Review accruals and reclassification entries (class specific)
2. Review Financial Reporting generated entries to ensure proper
update by accounting, ensure proper money movement by reviewing
daily bank statements, expense analysis. Review capital stock
reconciliations
3. Asset Diversification and Income Qualification Tests - (1940 Act)
4. Analyze asset/liability accounts daily
F. Preparation and distribution of monthly operational reports to
management by 10th business day
1. Management Statistics (Recap) (per class) - when applicable
a. portfolio
b. book gains/losses/per share
c. net income, book income/per share
d. share/shareholders
e. distributions
2. Performance Analysis (per class)
a. total return
b. monthly, quarterly, year to date, average annually
3. Short-Short Analysis
a. short-short income
b. gross income (components)
4. Portfolio Turnover
a. market value
b. cost of purchases
c. net proceeds of sales
d. average market value
5. Asset Diversification Test
a. gross assets
b. non-qualifying assets
c. 5% issuers
6. Activity Summary (per class)
a. shares sold, redeemed and reinvested
b. change in investment
c. change in price per share
d. net sales
7. Expense Ratios - (per class)
a. per quarter
b. semi-annual
c. annual
G. Provide rating agencies statistical data on a monthly and quarterly
basis
H. For Money Market Funds - weekly Mark-to-Market review
- 5% test
- NAV variance
I. Board Package material (quarterly)
- financial highlights (class specific)
- expense ratios (class specific)
- other schedules can be provided (additional fees may apply)
<PAGE>
SCHEDULE "A"
------------
IV. SPECIAL ISSUES RELATED TO FOREIGN INVESTMENTS
---------------------------------------------
A. Financial Reporting
1. Monitor and review tax reclaims chronologically, by country and
type, report on same to Fund management
2. Review and monitor treatment of currency gain/loss and capital
gain/loss
a. section 988 transactions
b. section 1256 contracts
c. section 1092 deferrals
d. maintain reconciliation of portfolio forward realized
gains/losses
B. Tax Reporting (work closely with the Funds' independent audit firm)
1. Determine tax treatment of foreign investments and their impact on
taxable income and capital gains
2. Calculate distributions to shareholders (if applicable)
a. monitor character and impact of realized currency gain/loss on
distribution amount
b. adherence to 988(a)(1)(b) election (if applicable)
c. identify and compute book/tax difference
d. preparation of distribution worksheet
3. Calculate income (reclaims) and expenses (tax withheld) by country
in order to determine foreign tax credit available to shareholders
(if appropriate)
4. Work with the advisor and independent audit firm in the
identification of Passive Foreign Investment Companies (if
appropriate)
5. Calculate Dividend Received Deduction available to corporate
shareholders -analyze domestic equity security holding periods
6. Preparation and maintenance of straddle schedules
7. Preparation and maintenance of foreign bond netting schedules
8. Identification and compliance with the mark-to market rules
9. Prepare return of capital worksheet for financial statement
presentation with auditor review/discussion
10. Provide schedules to auditors for audit/tax review to enable the
audit firm to prepare and file the necessary tax forms (1120, 8613,
K-1, etc.)
<PAGE>
SCHEDULE "B"
------------
ADMINISTRATION SERVICES FEE SCHEDULE
FOR
THE BRINSON FUNDS
I. Base Fee (calculated using average monthly total net assets of the Trust at
month end and payable monthly):
.0015 On the First $ 75 Million of Average Net Assets;
.0010 On the Next $ 75 Million of Average Net Assets;
.00075 On the Next $350 Million of Average Net Assets; and
.0005 Over $500 Million of Average Net Assets
The above fee schedule is applicable to total net assets of all portfolios
within the Trust. Minimum fees are $75,000 per year for the initial
multiple class portfolio, and $10,000 for each additional multiple class
portfolio.
Maximum Administration Fees are $400,000 for the initial multiple class
portfolio, plus an additional $60,000 for each subsequent multiple class
portfolio, per annum.
Fees are totaled for the Trust and then allocated on the basis of each
Series' net assets.
II. Out-of-Pocket Expenses:
The Trust will reimburse Fund/Plan Services monthly for all out-of-pocket
expenses, including postage, telecommunications (telephone and fax),
special reports, cost of Edgar filings, Board Meeting materials, record
retention approved, transportation costs as incurred and copying and
sending materials to independent auditors for off-site audits.
III. Additional Services:
Activities of a non-recurring nature including but not limited to fund
consolidations, mergers, acquisitions, reorganizations, the addition or
deletion of a series, and shareholder meetings/proxies, are not included
herein, and will be subject to negotiation. Any additional/enhanced
services or reports will be quoted upon request.
<PAGE>
IDENTIFICATION OF SERIES
------------------------
Below are listed the Series and Classes of Shares to which services under this
Agreement are to be performed as of the Effective Date of this Agreement:
SERIES:
Global Fund
Global Equity Fund
Global Bond Fund
Short-Term Global Income Fund*
U.S. Balanced Fund
U.S. Equity Fund
U.S. Bond Fund
U.S. Cash Management Fund
Non-U.S. Equity Fund
Non-U.S. Bond Fund
CLASSES:
Brinson Fund class
SwissKey Fund class
* Fee and procedures subject to change/review pending definitive structure of
Fund.
This Schedule "C" may be amended from time to time by agreement of the Parties
<PAGE>
Exhibit to Form N-1A
Exhibit (9)(b)(ii) Amendment to Administrative Services Agreement
<PAGE>
AMENDMENT TO ADMINISTRATIVE SERVICES AGREEMENT
This AGREEMENT, dated as of the ________ day of August, 1995 made by and
between The Brinson Funds, a Delaware business trust (the "Trust") and Fund/Plan
Services, Inc. ("Fund/Plan"), a corporation duly organized and existing under
the laws of the State of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and Fund/Plan have entered into an agreement dated April
25, 1995, wherein Fund/Plan has agreed to provide certain administrative
services to the Trust ("Administrative Services Agreement"); and
WHEREAS, the Parties wish to amend the Administrative Services Agreement to
reflect the creation of a multiple class structure for each Series of the Trust;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree:
1. To amend Schedules "B" and "C" to the Administrative Services Agreement
in the form attached hereto as Schedules "B" and "C".
2. This Amendment's Effective Date shall be July 31, 1995.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement consisting
of one type written page, together with Schedules "B" and "C", to be signed by
their duly authorized officers and their corporate seals hereunto duly affixed
as of the day and year first above written.
The Brinson Funds Fund/Plan Services, Inc.
- ----------------- ------------------------
By:_______________________________ By:________________________________
E. Thomas McFarlan, President Kenneth J. Kempf, President
<PAGE>
SCHEDULE "B"
------------
MULTIPLE CLASS FEE SCHEDULE FOR THE BRINSON FUNDS
ADMINISTRATION EXPENSE
- ----------------------
.0015 On the First $75 Million of Average Net Assets
.0010 On the Next $75 Million of Average Net Assets
.00075 On the Next $350 Million of Average Net Assets
.0005 On the Next $500 Million of Average Net Assets
The above fee schedule is applicable to total net assets of all portfolios
within the Trust. Minimum fees are $75,000 per year for the initial multiple
class portfolio, and $10,000 per additional multiple class portfolio.
Maximum Administration Fees are $400,000 for the initial multiple class
portfolio, plus an additional $60,000 for each subsequent multiple class
portfolio, per annum.
OUT-OF-POCKET EXPENSES
- ----------------------
The Trust will reimburse Fund/Plan Services, Inc. monthly for all reasonable
out-of-pocket expenses, including telephone, postage, telecommunications, EDGAR
filing fees (if applicable), special reports, record retention, special
transportation costs as incurred, and unusual expenses incurred while
establishing viable agreements between the Trust and Fund/Plan Services, Inc.
The cost of copying and sending materials to auditors for off-site audits will
be an additional expense.
ADDITIONAL SERVICES
- -------------------
Activities of a non-recurring nature such as fund consolidations, mergers or
reorganizations will be subject to negotiation. Any additional/enhanced
services or reports will be quoted upon request.
The Schedules will be amended as necessary to reflect the addition of other
services for additional portfolios or classes of the Trust.
<PAGE>
SCHEDULE C
FUND ADMINISTRATION OUTLINE
FOR
THE BRINSON FUNDS
<TABLE>
<CAPTION>
Additional Tasks
Required when Multiple Class
----------------------------
<S> <C>
I. REGULATORY COMPLIANCE
---------------------
A. Compliance - Federal Investment Company Act of 1940
1. Review, report and renew
a. investment advisory contracts
b. fidelity bond
c. underwriting contracts............................. additional liability
d. distribution (12(b)-1) plans (if applicable)....... separate on certain classes only
e. administration contracts
f. accounting contracts
g. custody contracts
h. transfer agent and shareholder services contracts
2. Filings
a. N-SAR (semi-annual report)......................... will require some additional reporting for
cap stock and financial information
b. N-1A (prospectus), post effective amendments
and supplements ("stickers")
c. proxy statement (when necessary)................... separate per class
d. 24f-2 indefinite registration of shares
e. filing fidelity bond under 17g-1
f. filing shareholder reports under 30b2-1
3. Annual up-dates of biographical information
and questionnaires for Trustees and Officers
4. Monitor money market funds under Rule 2a-7
B. Compliance - State "Blue Sky".................................. Additional filings; states view separate class as
separate funds
1. Blue Sky (state registration)
a. registration shares (initial/renewal)
b. registration issuer/dealer/agent (no loads)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
c. monitor sale shares over/under
d. report shares sold
e. filing of federal prospectus and contracts
f. filing annual and semi-annual reports with
states
C. Compliance - Prospectus
1. Analyze and review portfolio reports from Advisor re:
a. compliance with investment objectives
b. maximum investment by company/industry size
D. Compliance - Other
1. Proxy when necessary................................... separate per class - separate votes on some issues
2. Applicable stock exchange rules
3. Applicable state tax laws
II. CORPORATE BUSINESS AND SHAREHOLDER/PUBLIC INFORMATION
-----------------------------------------------------
A. Trustees/Management
1. Preparation of meetings
a. agendas - all necessary items of compliance...... separate special reports on 12b-1 income and
expenditures
b. arrange and conduct meetings
c. prepare minutes of same
d. keep attendance records
e. maintain corporate records/minute book
2. Preparation and distribution of periodic operation
reports to management.................................. additional information for each class
B. Coordinate Proposals
1. Printers
2. Auditors
3. Literature fulfillment
4. Insurance
5. Underwriters
C. Maintain Corporate Calendars and Files....................... need to be expanded re separate class
1. General
2. Blue sky
D. Shareholder Meetings......................................... (see above)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
1. Preparation of proxy
2. Conduct meeting
3. Preparation of minutes and record ballot results
E. Release Corporate Information
1. To shareholders
2. To financial and general press
3. To industry publications............................... additional questionnaires/announcements
pertinent to only a certain class
a. distributions (dividends and capital gains)...... separate calculation for each class
b. tax information.................................. separate for each class
c. changes to prospectus
d. letters from management
e. Funds' performance............................... separate performance by class
4. Respond to:
a. financial press
b. miscellaneous shareholders inquiries
c. industry questionnaires
5. Prepare, maintain and update monthly information manual
F. Communications to Shareholders............................... amendments to financial highlights table
and notes only
1. Coordinate printing and distribution of annual,
semi-annual reports and prospectus
III. FINANCIAL AND MANAGEMENT REPORTING
----------------------------------
A. Income and Expenses
1. Preparation of budgets................................. separate budgets per class
2. Expense figures calculated and accrual levels set...... two levels
3. Monitoring of expenses................................. two levels
4. Approve and authorize payment of expenses.............. allocation and prorating between classes
5. Projection of Income
B. Distributions to Shareholders
1. Projections of distribution amounts.................... two separate dividend amounts
a. compliance with income tax provisions............ will require additional calculations
b. compliance with excise tax provisions
c. compliance with Investment Company Act of 1940... will require additional calculations
2. Compilation of year end tax reporting to shareholders.. separate reports per class
</TABLE>
<PAGE>
<TABLE>
<S> <C>
C. Financial Reporting.......................................... will require additional disclosure and
reporting (notes & highlights, etc.)
1. Liaison between Fund management and auditors
2. Preparation of unaudited and audited reports to
shareholders
3. 60 day delivery to SEC and shareholders
D. Subchapter M Compliance (will be run quarterly)
1. Asset diversification test
2. Short/short test (can be performed more frequently
upon request)
3. Income qualification test
E. Other Financial Analyses
1. Upon request from Fund management, other budgeting..... will have some impact
and analyses can be constructed to meet a Fund's
specific needs
F. Review and Monitoring Functions
1. Review NAV calculations................................ double review
2. Coordinate and review transfer agent, accounting and
custody functions
3. Review 12b-1, accruals, expenditures and payment of.... review of 12b-1 accruals separately
trail commissions where applicable
IV. SPECIAL ISSUES RELATED TO FOREIGN INVESTMENTS
---------------------------------------------
A. Regulatory Compliance
1. Obtain Custodian's 17f-5 package for the Fund's Board
regarding sub-custodian and selected countries for
investment
2. Coordinate Board approval of selected countries and
subsequent completion of sub-custodial documents
B. Financial Reporting
1. Monitor and review tax reclaims chronologically, by
country and type; report on same to Fund management
a. File/complete tax withholding documents,
as supplied by the Custodian
2. Monitor procedures for timely and accurate pricing
a. Oversee establishment of a Pricing Committee
to determine fair value pricing
b. Obtain independent quote verifications as needed,
or randomly as appropriate
c. Report on any action taken by the Committee
to the Board
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3. Review and monitor treatment of currency gain/loss
and capital gain/loss
a. Section 988 transactions
b. Section 1256 contracts
C. Tax Reporting
1. Determine tax treatment of foreign investments and
their impact on
a. Subchapter M tests -- e.g. diversification,
qualified income, 30% tests
b. Taxable income and capital gains
2. Calculate distributions to shareholder................. separate per class
a. Monitor character and impact of realized currency
gain/loss on distribution amount
3. Calculate income and expenses by country in order to
determine foreign tax credit available to shareholders
</TABLE>
<PAGE>
Exhibit to Form N-1A
Exhibit (9)(c)(i) Accounting Services Agreement
<PAGE>
ACCOUNTING SERVICES AGREEMENT
-----------------------------
THIS AGREEMENT, dated as of the ____ day of , 1995 (the
"Effective Date") by and between The Brinson Funds, a Delaware Business Trust
(the "Trust") operating as an open-end management investment company, and
Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly organized and
existing under the laws of the State of Delaware.
W I T N E S S E T H T H A T:
------------------------------
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Trust is authorized by its Agreement and Declaration of Trust
to issue separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "C" attached
hereto, and which Schedule "C" may be amended from time to time by mutual
agreement of the Trust and Fund/Plan; and
WHEREAS, the Trust desires to appoint Fund/Plan as its Accounting Services
Agent to maintain and keep current the books, accounts, records, journals or
other records of original entry relating to the business of the Series as set
forth in Section 2 of this Agreement (the "Accounts and Records") and to perform
certain other functions in connection with such accounts and records; and
WHEREAS, Fund/Plan is willing to perform such functions upon the terms and
conditions set forth below; and
WHEREAS, the Trust will cause to be provided certain information to
Fund/Plan as set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto, intending to be legally bound, do hereby
agree as follows:
SECTION 1. APPOINTMENT The Trust hereby appoints Fund/Plan as Accounting
Services Agent and Fund/Plan hereby accepts such appointment. Also, the Trust
agrees to appoint Fund/Plan as Accounting Services Agent for any additional
Series which, from time to time, may be added to the Trust.
SECTION 2. DEFINITIONS. For purposes of this Agreement, the terms Oral
Instructions and Written Instructions shall mean:
ORAL INSTRUCTIONS: The term Oral Instruction shall mean an
authorization, instruction, approval, item or set of data, or
information of any kind transmitted to Fund/Plan in person or by
telephone, telegram, telecopy, or other mechanical or documentary
means lacking a signature, by a person or persons believed in good
faith by Fund/Plan to be a person or persons authorized by a
resolution of the Board of Trustees of the Trust, to give Oral
Instructions on behalf of the Series.
WRITTEN INSTRUCTIONS: The term Written Instruction shall mean an
authorization, instruction, approval, item or set of data or
information of any kind transmitted to Fund/Plan in original writing
containing original signatures or a copy of such document
transmitted by telecopy including transmission of such signature
believed in good faith by Fund/Plan to be the signature of a person
authorized by a resolution of the Board of Trustees of the Trust to
give Written Instructions on behalf of the Series.
The Trust shall file with Fund/Plan a certified copy of each
resolution of its Board of Trustees authorizing execution of Written
Instructions or the transmittal of Oral Instructions as provided
above.
SECTION 3. To the extent Fund/Plan receives the necessary information from the
Trust or its agents by Written or Oral Instructions, Fund/Plan shall
maintain and keep current the following Accounts and Records and any
other records required to be kept pursuant to Rule 31a-1 of the
Investment Company Act relating to the business of the Trust in such
form as may be mutually agreed upon between the Trust and Fund/Plan:
(a) Net Asset Value Calculation Reports;
(b) Cash Receipts Journal;
(c) Cash Disbursements Journal;
(d) Dividends Paid and Payable Schedule;
(e) Purchase and Sales Journals - Portfolio Securities;
<PAGE>
(f) Subscription and Redemption Journals;
(g) Security Ledgers - Transaction Report and Tax Lot Holdings
Report;
(h) Broker Ledger - Commission Report;
(I) Daily Expense Accruals;
(j) Daily Interest Accruals;
(k) Daily Trial Balance;
(l) Portfolio Interest Receivable and Income Journal;
(m) Portfolio Dividend Receivable and Income Register;
(n) Listing of Portfolio Holdings - showing cost, market value and
percentage of portfolio comprised of each security; and
(o) Average Daily Net Assets provided on a monthly basis.
The necessary information to perform the above functions and the
calculation of the respective net asset values of the Series is to
be furnished by Written or Oral Instructions to Fund/Plan daily (in
accordance with the time frame identified in Section 7) prior to the
close of trading on the New York Stock Exchange.
SECTION 4. Fund/Plan shall perform the ministerial calculations necessary to
calculate the respective net asset values daily for the Series, in
accordance with their respective current Prospectus and utilizing
the information described in this Section. Portfolio items for which
market quotations are available by Fund/Plan's use of automated
financial information service (the "Service") shall be based on the
closing prices of the Service, except where the Trust has given or
caused to be given specific Written or Oral Instructions to utilize
a different value. All of the portfolio securities shall be given
such values as the Trust provides by Written or Oral Instructions
including all restricted securities and other securities requiring
valuation not readily ascertainable solely by the Service. Fund/Plan
shall have no responsibility or liability for the accuracy of prices
quoted or corporate action information supplied by the Service; for
the accuracy of the information supplied by the Trust; or for any
loss, liability, damage, or cost arising out of any inaccuracy of
such data. Fund/Plan shall have no responsibility or duty to include
information or valuations to be provided by the Trust, on behalf of
the Series, in any computation unless and until it is timely
supplied to Fund/Plan in usable form. Fund/Plan shall record
corporate action (including but not limited to dividends, record
date, rights issues, stock dividends, stock splits, and tender
offers) information as received from the Custodian, the Service, the
Trust or its advisors as received. Fund/Plan shall have no duty to
gather or record corporate action information not supplied by these
sources.
Fund/Plan will assume no liability for price changes caused by: the
investment advisor(s), custodian, suppliers of security prices and
corporate action and dividend information, or any party other than
Fund/Plan itself.
In the event an error is made by Fund/Plan which creates a price
change, consideration must be given to the effect of the price
change as described below. Notwithstanding the provisions of Section
12, the following provisions govern Fund/Plan's liability for errors
in calculating the NAV of the Series:
If the NAV should have been higher for a date or dates in the past,
the error would have the effect of having given more shares to
subscribers and less money to redeemers to which they were entitled.
Conversely, if the NAV should have been lower, the error would have
the effect of having given less shares to subscribers and overpaying
redeemers.
If the error affects the prior business day's NAV only, and if
Fund/Plan can rerun the prior day's work before shareholder
statements and checks are mailed, the Trust hereby accepts this
manner of correcting the error.
If the error spans five (5) business days or less, Fund/Plan shall
reprocess shareholder purchases and redemptions where redeeming
shareholders have been underpaid. Fund/Plan shall assume liability
to the Trust for overpayments to shareholders who have fully
redeemed.
If the error spans more than five (5) business days, Fund/Plan would
bear the liability to the Trust for, 1) paying for the excess shares
given to shareholders if the NAV should have been higher, or, 2)
funding overpayments to shareholders who have redeemed if the NAV
should have been lower. The cost of any reprocessing required for
shareholders who have been credited with fewer shares than
appropriate, or for redeeming shareholders who are due additional
amounts of money will also be borne by Fund/Plan.
SECTION 5. For all purposes under this Agreement, Fund/Plan is authorized to
act upon receipt of the first of any Written or Oral Instruction it
receives from the Trust or its agents on behalf of the
<PAGE>
Series of the Trust. In cases where the first instruction is an Oral
Instruction that is not in the form of a document or written record,
a confirmatory Written Instruction or Oral Instruction in the form
of a document or written record shall be delivered, on behalf of the
Series, and in cases where Fund/Plan receives an Instruction,
whether Written or Oral, to enter a portfolio transaction on the
records, the Trust shall cause the broker/dealer executing such
transaction to send a written confirmation to the Custodian.
Fund/Plan shall be entitled to rely on the first Instruction
received, and for any act or omission undertaken in compliance
therewith shall be free of liability and fully indemnified and held
harmless by the Trust, provided however, that in the event a Written
or Oral Instruction received by Fund/Plan is countermanded by a
timely later Written or Oral Instruction received by Fund/Plan prior
to acting upon such countermanded Instruction, Fund/Plan shall act
upon such later Written or Oral Instruction. The sole obligation of
Fund/Plan with respect to any follow-up or confirmatory Written
Instruction, Oral Instruction in documentary or written form, or
broker/dealer written confirmation shall be to make reasonable
efforts to detect any such discrepancy between the original
Instruction and such confirmation and to report such discrepancy to
the Trust. The Trust shall be responsible, at the Trust's expense,
for taking any action, including any reprocessing, necessary to
correct any discrepancy or error, and to the extent such action
requires Fund/Plan to act, the Trust shall give Fund/Plan specific
Written Instruction as to the action required.
SECTION 6. The Trust shall cause the Trust's Custodian, on behalf of the
Series, to forward to Fund/Plan: (i) a daily statement of cash and
portfolio transactions based upon the prior business day; and (ii)
at the end of each month, to forward to Fund/Plan a monthly
statement of portfolio transactions, which will be reconciled with
Fund/Plan's Accounts and Records maintained for the Series of the
Trust. Fund/Plan will report any discrepancies to the Custodian, and
report any unreconciled items to the Trust.
SECTION 7. Fund/Plan shall promptly supply daily and periodic reports of the
Trust, on behalf of the Series, as requested by the Trust and agreed
upon by Fund/Plan.
SECTION 8. The Trust, on behalf of the Series, shall provide and shall require
each of its agents (including without limitation its Transfer Agent
and its Custodian), to provide Fund/Plan as of the close of each
business day, or on such other schedule as the Trust determines is
necessary, with Written or Oral Instructions (to be delivered to
Fund/Plan by 11:00 AM Eastern Time the next following business day)
containing all data and information necessary for Fund/Plan to
maintain the Trust's Accounts and Records and Fund/Plan may
conclusively assume that the information it receives by Written or
Oral Instructions is complete and accurate. The Trust, on behalf of
the Series, is responsible to provide or cause to be provided to
Fund/Plan reports of share purchases, redemptions, and total shares
outstanding on the next business day after each net asset valuation.
SECTION 9. The Accounts and Records, in the agreed upon format, maintained by
Fund/Plan shall be the property of the Trust, and shall be made
available to the Trust promptly upon request and shall be maintained
for the periods prescribed in Rule 31a-2 under the Act. Fund/Plan
shall assist the Trust's independent auditors, or upon approval of
the Trust, or upon demand, any regulatory body, in any requested
review of the Trust's Accounts and Records but shall be reimbursed
for all expenses and employee time invested in any such review of
the Trust's Accounts and Records outside of routine and normal
periodic review and audits. Upon receipt from the Trust of the
necessary information, Fund/Plan shall supply the necessary data for
the Trust or the auditor's completion of any necessary tax returns,
questionnaires, periodic reports to Shareholders and such other
reports and information requests as the Trust and Fund/Plan shall
agree upon from time to time.
SECTION 10. In case of any request or demand for the inspection of the Share
records of the Trust, Fund/Plan, as Accounting Services Agent, shall
endeavor to notify the Trust and to secure instructions as to
permitting or refusing such inspection. However, Fund/Plan may
exhibit such records to any person in any case where it is advised
by its counsel that it may be held liable for failure to do so.
SECTION 11. Fund/Plan and the Trust may from time to time adopt such procedures
as they agree upon in writing, and Fund/Plan may conclusively assume
that any procedure approved by the Trust or directed by the Trust,
does not conflict with or violate any requirements of the Series'
Prospectuses, Agreement and Declaration of Trust or By-Laws. The
Trust shall be responsible for notifying Fund/Plan of any changes in
regulations or rules which might necessitate changes in Fund/Plan's
procedures, and for working out with Fund/Plan such changes.
<PAGE>
SECTION 12. (a) Fund/Plan, its directors, officers, employees,
shareholders and agents shall not be liable for any error
of judgment or mistake of law or for any loss suffered by
the Trust in connection with the performance of this
Agreement, except losses resulting from willful
misfeasance, bad faith or negligence on the part of
Fund/Plan in the performance of its obligations and duties
under this Agreement.
(b) Any person, even though also a director, officer,
employee, shareholder or agent of Fund/Plan, who may be or
become a(n) trustee, officer, employee or agent of the
Trust, shall be deemed, when rendering services to the
Trust or acting on any business of the Trust (other than
services or business in connection with Fund/Plan's duties
hereunder), to be rendering such services to or acting
solely for the Trust and not as a(n) trustee, officer,
employee, shareholder or agent of, or one under the
control or direction of Fund/Plan even though paid by it.
(c) Notwithstanding any other provision of this Agreement, the
Trust shall indemnify and hold harmless Fund/Plan, its
directors, officers, employees, shareholders and agents
from and against any and all claims, demands, expenses and
liabilities (whether with or without basis in fact or law)
of any and every nature which Fund/Plan may sustain or
incur or which may be asserted against Fund/Plan by any
person by reason of, or as a result of:
(i) any action taken or omitted to be taken by Fund/Plan in
good faith hereunder;
(ii) in reliance upon any certificate, instrument, order or
stock certificate or other document reasonably believed by
it to be genuine and to be signed, countersigned or
executed by any duly authorized person, upon the Oral
Instructions or Written Instructions of an authorized
person of the Trust or upon the opinion of legal counsel
for the Trust or its own counsel; or
(iii) any action taken or omitted to be taken by Fund/Plan in
connection with its appointment in good faith in reliance
upon any law, act, regulation or interpretation of the
same even though the same may thereafter have been
altered, changed, amended or repealed. However,
indemnification under this subparagraph shall not apply to
actions or omissions of Fund/Plan or its directors,
officers, employees, shareholders, or agents in cases of
its or their own negligence, willful misconduct, bad
faith, or reckless disregard of its or their own duties
hereunder.
(d) Fund/Plan shall give written notice to the Trust within
fifteen (15) business days of receipt by Fund/Plan of a
written assertion or claim of any threatened or pending
legal proceeding which may be subject to this
indemnification. However, the failure to notify the Trust
of such written assertion or claim shall not operate in
any manner whatsoever to relieve the Trust of any
liability arising from this Section or otherwise.
(e) For any legal proceeding giving rise to this
indemnification, the Trust shall be entitled to defend or
prosecute any claim in the name of Fund/Plan at its own
expense and through counsel of its own choosing if it
gives written notice to Fund/Plan within ten (10) business
days of receiving notice of such claim. Notwithstanding
the foregoing, Fund/Plan may participate in the litigation
at its own expense through counsel of its own choosing. If
the Trust does choose to defend or prosecute such claim,
then the parties shall cooperate in the defense or
prosecution thereof and shall furnish such records and
other information as are reasonably necessary.
(f) The Trust shall not settle any claim without Fund/Plan's
express written consent which shall not be unreasonably
withheld. Fund/Plan shall not settle any claim without the
Trust's express written consent which shall not be
unreasonably withheld.
SECTION 13. All financial data provided to, processed by, and reported by
Fund/Plan under this Agreement shall be stated in United States
dollars. Fund/Plan's obligation to convert, equate or deal in
foreign currencies or values extends only to the accurate
transposition of information received from the various pricing
and informational services into Fund/Plan's Investment Accounting
System.
SECTION 14. The Trust agrees to pay Fund/Plan compensation for its services
and to reimburse it for expenses, at the rates and amounts as set
forth in Schedule "B" attached hereto, and as shall be set forth
in any amendments to such Schedule "B" approved by the Trust and
Fund/Plan. The Trust agrees and understands that Fund/Plan's
compensation be comprised of two components and payable on a
monthly basis as follows:
<PAGE>
(i) a combined asset based fee, subject to a minimum fee, and
an additional minimum fee for subsequent classes of shares
for each Series of the Trust, which fees are to be paid by
the Trust within ten calendar days of receipt of an
invoice from Fund/Plan after the end of each month. Such
asset based fee is calculated by using that month's
combined classes' average daily net assets of the Trust;
and
(ii) reimbursement of any reasonable out-of-pocket expenses
paid by Fund/Plan on behalf of the Trust, which out-of-
pocket expenses will be billed to the Trust within the
first ten calendar days of the month following the month
in which such out-of-pocket expenses were incurred. The
Trust agrees to reimburse Fund/Plan for such expenses
within ten calendar days of receipt of such bill.
For the purpose of determining fees payable to Fund/Plan, the
value of the Series' net assets shall be computed at the times
and in the manner specified in each Series' Prospectuses and
Statement of Additional Information then in effect.
During the term of this Agreement, should the Trust seek services
or functions in addition to those outlined above or in Schedule
"A" attached, a written amendment to this Agreement specifying
the additional services and corresponding compensation shall be
executed by both Fund/Plan and the Trust.
SECTION 15. Nothing contained in this Agreement is intended to or shall
require Fund/Plan, in any capacity hereunder, to perform any
functions or duties on any holiday, day of special observance or
any other day on which the New York Stock Exchange is closed.
Functions or duties normally scheduled to be performed on such
days shall be performed on, and as of, the next succeeding
business day on which the New York Stock Exchange is open. Not
withstanding the foregoing, Fund/Plan shall compute the net asset
values of the Series on each day required pursuant to Rule 22c-1
promulgated under the Investment Act of 1940, as amended and as
described in the Series' respective Prospectuses.
SECTION 16. (a) This Agreement shall go into effect on the Effective Date
and shall continue in effect until October 31, 1996. This
Agreement shall continue in force from year to year
thereafter, but only so long as such continuance is
approved: (1) by Fund/Plan; (2) by vote, cast in person at a
meeting called for the purpose, of a majority of the Trust's
Trustees who are not parties to this Agreement or interested
persons (as defined in the Act) of any such party; and (3)
by vote of a majority of the Trust's Board of Trustees or a
majority of the Trust's outstanding voting securities.
(b) The Fee Schedule shall be fixed for the initial term of this
Agreement, with a fee increase thereafter not to exceed 10%.
(c) The Trust or Fund/Plan may give written notice to the other
of the termination of this Agreement, such termination to
take effect at the time specified in the notice, not less
than one hundred and eighty (180) days after the giving of
the notice. Upon the effective termination date, the Trust
shall pay to Fund/Plan such compensation as may be due as of
the date of termination and shall likewise reimburse
Fund/Plan for any reasonable out-of-pocket expenses and
disbursements reasonably incurred by Fund/Plan to such date.
(d) In the event that in connection with termination of this
Agreement a successor to any of Fund/Plan's duties or
responsibilities under this Agreement is designated by the
Trust by written notice to Fund/Plan, Fund/Plan shall,
promptly upon such termination and at the expense of the
Trust, transfer all Required Records and shall cooperate in
the transfer of such duties and responsibilities.
(e) The Trust acknowledges that in order for Fund/Plan to
perform the services contemplated hereunder, Fund/Plan has
made and will make significant investments of time and
money. If this Agreement is terminated for reasons other
than a material breach by Fund/Plan prior to the expiration
of the initial term of this contract, the Trust will pay
Fund/Plan twenty percent (20%) of the minimum fees remaining
for the unexpired term of the Agreement.
SECTION 17. Any notice or other communication required by or permitted to be
given in connection with this Agreement shall be in writing, and
shall be delivered in person or sent by first class mail, postage
prepaid to the respective parties as follows:
<PAGE>
If to the Trust: The Brinson Funds
209 S. LaSalle St.
Chicago, IL 60604
Attention: E. Thomas McFarlan, President
If to Fund/Plan: Fund/Plan Services, Inc.
P.O. Box 874
Conshohocken, PA 19428
Attention: Kenneth J. Kempf, President
SECTION 18. This Agreement may be amended from time to time by supplemental
agreement executed by the Trust and Fund/Plan and the
compensation stated in Schedule "B" attached hereto may be
adjusted accordingly as mutually agreed upon.
SECTION 19. This Agreement shall be construed according to the laws of the
Commonwealth of Pennsylvania.
SECTION 20. This contract sets forth the entire understanding of the parties
with respect to the provisions contemplated hereby, and
supersedes any and all prior agreements, arrangements and
understandings relating to such services.
SECTION 21. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original agreement but
such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement consisting of
ten typewritten pages, together with Schedules "A", "B" and "C", to be signed
by their duly authorized officers and their seals hereunto duly affixed and
attested, as of the day and year first above written.
THE BRINSON FUNDS
____________________________________
By: E. Thomas McFarlan, President
____________________________________
Attest: Debra L. Nichols, Assistant
Secretary
(SEAL)
FUND/PLAN SERVICES, INC.
____________________________________
By: Kenneth J.Kempf, President
____________________________________
Attest: Janet F. Davis, Secretary
(SEAL)
<PAGE>
SCHEDULE "A"
------------
ACCOUNTING & PORTFOLIO VALUATION
FOR
THE BRINSON FUNDS
The Accounting Services Unit (ASU) is pleased to provide a comprehensive level
of service to The Brinson Funds. You may expect services as follows with
respect to Series and their Multiple Classes of Shares (additional services may
be completed upon request):
DAILY ACCOUNTING SERVICES
-------------------------
1) Calculate Net Asset Value (and Offering Price) Per Share:
Series Level
. Update the daily market value of securities held by the Series using
Fund/Plan Services' standard agents for pricing domestic equity, bond
and foreign securities. The domestic equity pricing services are
Reuters, Inc., Muller Data Corporation and Interactive Data
Corporation (IDC). Muller Data Corporation/Extel Financial, Telerate,
Bloomberg and IDC are used for bond and foreign prices/exchange rates.
. Enter manual prices supplied by client and/or broker.
. Review variance reporting on-line and in hard copy for price changes
in individual securities using variance levels established by client.
Verify US dollar security prices exceeding variance levels by
notifying client and pricing sources of noted variances.
. Complete daily variance analysis on foreign exchange rates and local
foreign prices. Notify client of changes exceeding established levels
for the client's verification.
. Review for ex-dividend items indicated by pricing sources; trace to
Series' general ledger for agreement.
Series and Each class
. Allocate daily unrealized Series appreciation/depreciation, unrealized
currency gains/losses, and unrealized gains/losses on futures and
forwards to classes based upon value of outstanding class shares.
. Prepare NAV proof sheets. Review components of change in NAV for
reasonableness. (Complete fund and class control proofs).
. Communicate required pricing information (NAV) to client, transfer
agent and, electronically, to NASDAQ.
2) Determine and Report Cash Availability to Series by 9:30 AM Eastern Time:
Series Level
. Receive daily cash and transaction statements from the custodian by
8:30 AM Eastern time.
. Receive previous day shareholder activity reports from the Series'
transfer agent by 8:30 AM Eastern time. Class level shareholder
activity will be accumulated into the Series' available cash balances.
. Fax hard copy Cash Availability calculations with all details to
client.
. Supply client with 5-day cash projection report.
. For the Series, prepare and complete daily bank cash reconciliations
including documentation of any reconciling items and notify the
custodian/client.
3) Reconcile and Record All Daily Expense Accruals:
Series Level
. Accrue expenses based on client supplied budget either as percentage
of Series' net assets or specific dollar amounts.
. Monitor expense limitations established by client.
. Accrue daily amortization of Organizational Expense.
Series and Each Class
. Class specific accruals completed such as daily accrual of 12b-1
expenses.
. Allocate Series expenses to classes based upon value of outstanding
class shares.
4) Verify and Record All Daily Income Accruals for Debt Issues:
Series Level
. Review and verify all system generated Interest and Amortization
reports.
. Establish unique security codes for bond issues to permit segregated
Trial Balance income reporting.
<PAGE>
SCHEDULE "A"
------------
Series and Each Class
. Allocate Series income to classes based upon value of outstanding
class shares.
5) Monitor Domestic Securities Held for Cash Dividends, corporate actions and
capital changes such as splits, mergers, spinoffs, etc. and process
appropriately.
Series Level
. Monitor electronically received information from Muller Data
Corporation for all domestic securities.
. Review current daily security trades for dividend activity.
. Interface with custodian to monitor timely collection and postings of
corporate actions, dividends and interest.
. Process international dividend and capital change information received
from the custodian and advisor. Back-up information on foreign
dividends and corporate actions may also be obtained from Muller Data
Corporation/Extel Financial, Telerate, Bloomberg and IDC (as pricing
agents for the Series).
. Provide mark-to-market analysis for currency exchange rate
fluctuations on unsettled dividends and interest.
Series and Each Class
. Allocate Series dividend income and unrealized currency gains/losses
on dividends/interest to classes based upon value of outstanding class
shares.
6) Enter All Security Trades on Investment Accounting System (IAS) based on
written instructions from the client.
Series Level
. Review system verification of trade and interest calculations.
. Verify settlement through the custodian statements.
. Maintain security ledger transaction reporting.
. Maintain tax lot holdings.
. Determine realized gains or losses on security trades.
. Provide complete broker commission reporting.
. Provide foreign currency exchange rate realized and unrealized
gains/losses detail.
. Determine realized gains or losses on security trades.
Series and Each Class
. Allocate all realized and unrealized capital and currency gains/losses
to classes based upon value of class outstanding shares.
7) Enter All Series Share Transactions on IAS:
Each Class
. Process activity identified on the transfer agent reports.
. Verify settlement through the Series' custodian statements.
. Reconcile to the Fund/Plan Services' transfer agent report balances.
. Roll each classes' capital share values into each Series and determine
allocation percentages based upon the value of each classes'
outstanding shares to the Series total.
8) Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance (listing
all asset, liability, equity, income and expense accounts)
Series Level
. Post manual entries to the general ledger.
. Post custodian bank activity.
. Post security transactions.
. Post and verify system generated activity, i.e., income and expense
accruals.
. Segregate foreign tax expense.
. Prepare daily mark-to-market analysis for all unrealized foreign
currency exchange rate gains/losses by asset/liability category.
Series and Each Class
. Prepare Series general ledger net cash proof used in NAV calculation.
. Post class specific shareholder activity and roll values into each
Series.
. Allocate all Series level net cash accounts on the Series Trial
Balance to each
<PAGE>
SCHEDULE "A"
------------
specific class based upon value of class outstanding shares.
. Maintain allocated Trial Balance accounts on class specific Allocation
Report.
. Maintain class-specific expense accounts.
. Prepare class-specific proof/control reports to ensure accuracy of
allocations.
9) Review and Reconcile with Custodian Statements:
Series Level
. Verify all posted interest, dividends, expenses, and shareholder and
security payments/receipts, etc. (Discrepancies will be reported to
and resolved by the Custodian.)
. Post all cash settlement activity to the Trial Balance.
. Reconcile to ending cash balance accounts.
. Clear IAS subsidiary reports with settled amounts.
. Track status of past due items and failed trades handled by the
Custodian.
10) Submission of Daily Accounting Reports to Client: (Additional reports
readily available.)
Series Level
. Portfolio Valuation (listing inclusive of holdings, costs, market
values, unrealized appreciation/depreciation and percentage of
portfolio comprised of each security sorted according to Brinson's
categories - stocks (foreign), stocks (domestic), bonds (foreign),
bonds (domestic), currency (foreign), money market (domestic).
. Cash availability.
. 3-Day Cash Projection Report
Series and Each Class
. Trial Balance and Class Allocation Report
. NAV Calculation Report
MONTHLY ACCOUNTING SERVICES
---------------------------
1) For the Series, full Financial Statement Preparation (automated Statements
of Assets and Liabilities, of Operations and of Changes in Net Assets) and
submission to Client by 10th business day.
. Class specific capital share activity and expenses will be disclosed
also.
2) Submission of Monthly Automated IAS Reports to Fund/Client:
Series Level
. Security Purchase/Sales Journal
. Interest and Maturity Report
. Brokers Ledger (Commission Report)
. Security Ledger Transaction Report with Realized Gains/Losses
. Security Ledger Tax Lot Holdings Report
. Additional reports available upon request
3) Reconcile Accounting Asset Listing to Custodian Asset Listing:
Series Level
. Report any security balance discrepancies to the custodian/client.
4) Provide Monthly Analysis and Reconciliation of Additional Trial Balance
Accounts, such as:
Series Level
. Security cost and realized gains/losses
. Interest/dividend receivable and income
. Payable/receivable for securities purchased and sold
. Unrealized and realized currency gains/losses
Series and Each Class
. Payable/receivable for Fund shares; issued and redeemed
. Expense payments and accruals analysis
5) If Appropriate, Prepare and Submit to Client:
Series Level
. Income by state reporting
. Standard Industry Code Valuation Report
. Alternative Minimum Tax Income segregation schedule
<PAGE>
SCHEDULE "A"
------------
ANNUAL (AND SEMI-ANNUAL) ACCOUNTING SERVICES
--------------------------------------------
1) Assist and supply auditors with schedules supporting securities and
shareholder transactions, income and expense accruals, etc. for the Series
and each Class during the year in accordance with standard audit assistance
requirements.
2) Provide NSAR Reporting (Accounting Questions):
---------------------------------------------
If applicable for the Series and Classes, answer the following items:
2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55, 62, 63,
64B, 71, 72, 73, 74, 75, 76
<PAGE>
SCHEDULE "A"
------------
ACCOUNTING SERVICES UNIT BASIC ASSUMPTIONS FOR
THE BRINSON FUNDS
- --------------------------------------------------------------------------------
BASIC ASSUMPTIONS:
- -----------------
1) The Trust's Administrator, on behalf of the Series, will complete all
necessary compliance reports (Sub-Chapter "M"), as well as monitoring of
the various limitations and restrictions.
2) The portfolio asset composition of the Series will be comparable as
described in the Profile Document prepared by Brinson Partners, Inc.
Trading activity is expected to approximate 270 transactions per month
inclusive of equity, debt, currency and money market transactions.
3) The Trust has a tax year-end which coincides with its fiscal year-end. No
additional accounting requirements are necessary to identify or maintain
book-tax differences.
To the extent tax accounting, on behalf of the Series (as applicable), for
certain securities differs from the book accounting, it will be done by the
Trust's Administrator or the Trust's independent accountants.
The Accounting Services Unit will supply segregated Trial Balance account
details to assist the Administrator, on behalf of the Series (as
applicable), in proper identification by category of all appropriate
realized and unrealized currency gains/losses.
4) The Trust, on behalf of the Series (as applicable) foresees no difficulty
in using Fund/Plan's standard pricing agents for domestic equity, bond, ADR
and foreign securities. Fund/Plan currently uses Reuters, Inc., Muller
Data and Interactive Data (IDC) for domestic equities and listed ADR's.
IDC, Telerate, Bloomberg and Muller Data Corporation for bonds, synthetic
ADR's and foreign issues.
Muller Data Corporation/Extel Financial and IDC are the primary foreign
security pricing vendors for the Trust, on behalf of the Series (as
applicable) and supply ASU with daily (spot) foreign exchange rates to be
used in market value calculations of non-US dollar denominated securities
and currency mark-to-market requirements. To the extent IDC or Muller Data
are unable to supply certain foreign security prices, they will be provided
by Brinson Partners or a Brinson Partners' recommended pricing source.
Telerate Systems, Inc. is used for daily forward currency contract prices.
The Accounting Unit will work closely with Brinson Partners to ensure the
accuracy of the Series' NAVs and to obtain the most satisfactory pricing
sources and specific methodologies.
5) To the extent the Series require daily security prices from specific
brokers for domestic or foreign securities, these manual prices will be
obtained by Brinson Partners (or brokers) and faxed to the ASU by
approximately 4:00 PM Eastern time for inclusion in the NAV calculations.
Brinson Partners will supply ASU with the appropriate pricing contacts for
these manual quotes.
6) To the extent the Series should ever purchase/hold open-end registered
investment companies (RICs), procedural discussions should take place
between ASU and Brinson Partners clarifying the appropriate pricing and
dividend rate sources. Depending on the methodologies selected by the
Trust, additional fees may apply.
7) ASU will supply daily Portfolio Valuation Reports on behalf of the Series
(as applicable), to Brinson Partners identifying current security
positions, original/amortized cost, security market values and changes in
unrealized appreciation/depreciation.
It will be the responsibility of Brinson Partners to review these reports
and to promptly notify ASU of any possible problems, trade discrepancies,
incorrect security prices, corporate action/capital change information or
exchange rate discrepancies that could result in a misstated NAV.
8) All foreign currency will be held within the Custodian and sub-custodian
network on behalf of the Series (as applicable). Time deposits and
interest bearing currency accounts will all be reflected on the Custodian
asset listings. The Trust or Custodian will supply ASU with appropriate
and timely information for any trades/changes in the currency accounts, as
well as interest rates to ensure income accrual accuracy for the debt
issues, time deposits and currency accounts. Income accrual adjustments
(expected to be immaterial) will be completed when the interest is actually
collected and posted on the Custodian's statements.
<PAGE>
SCHEDULE "A"
------------
9) On behalf of the Series (as applicable), it is assumed for all debt issues
that Brinson Partners will supply the Accounting Unit with critical income
information such as accrual methods, interest payment frequency details,
coupon payment dates, floating rate reset dates, and complete security
descriptions with issue types and sedol/cusip numbers.
10) On behalf of the Series (as applicable), the Custodian will provide the
Accounting Unit with daily custodian statements (or on-line access to the
custody system) reflecting all prior day cash activity by 8:30 AM Eastern
time. Complete and clear descriptions of any postings, inclusive of
sedol/cusip numbers, interest/dividend payment dates, capital stock
details, expense authorizations, beginning/ending balances, etc. will be
provided by the Custodian's reports or system.
11) On behalf of the Series (as applicable), the Custodian will be responsible
for supplying the foreign dividend, capital change information, and
interest rate changes to Accounting in a timely manner. Brinson Partners
will supplement and support as appropriate. If selected by the Trust, ASU
can receive supplemental capital change and dividend information on foreign
positions from IDC and Muller Data as the pricing vendors for the Trust's
foreign securities.
12) On behalf of the Series (as applicable), the Custodian will handle and
report on all settlement problems, failed trades and unsettled
dividends/interest and capital changes. Additionally, the Custodian will
process all applicable capital change and foreign reclaim paperwork based
upon advice from Brinson Partners. ASU will supply segregated Trial
Balance reporting and supplemental reports to assist in this process.
13) On behalf of the Series (as applicable):
a) ASU will maintain US Dollar denominated futures, qualified covered
call options and index options reporting on the daily Trial Balance
and value the respective options and underlying positions daily.
b) To the extent tax classifications are required, they will be computed
by the Trust's Administrator or independent accountant.
c) The Trust does not currently expect to invest in domestic futures,
options or designated hedges. Advance notice is requested should the
Series commence trading in the above investments to clarify
operational procedures between ASU and Brinson Partners.
14) On behalf of the Series (as applicable), should Lines of Credit in
segregated accounts with the Custodian be established for temporary
administrative purposes, and/or leveraging/hedging a portfolio, Brinson
Partners will complete the appropriate paperwork/monitoring for segregation
of assets and adequacy of collateral. Accounting will reflect appropriate
Trial Balance account entries and interest expense accrual charges on the
daily Trial Balance, adjusting as necessary at month-end.
15) On behalf of the Series (as applicable), participation in Securities
Lending, Interest Rate Swaps, Leveraging, Precious Metals, Short Sales or
Foreign Currency (non-US dollar denominated) Futures and Options within
portfolio securities is not currently expected. To the extent such
techniques are utilized in the future, additional fees will apply. Forward
Currency Contracts that are directly related to payables/receivables on
trades and/or dividends/interest are included in Accounting Services and
are not to be considered an extra expense.
16) On behalf of the Series (as applicable), Brinson Partners or the
Administrator will supply ASU specific expense accrual procedures and
monitor the expense accrual balances for adequacy based on outstanding
liabilities monthly. The Trust's Administrator will promptly communicate
to the ASU any adjustments needed.
17) On behalf of the Series (as applicable):
a) Specific deadlines and complete information supplied will be
identified for all security trades in order to minimize any settlement
problems, NAV miscalculations or distribution rate adjustments.
b) Trade Authorization Forms, with the appropriate officer's signature,
should be faxed to ASU on all security trades placed by the Fund no
later than settlement/value date by 11:00 AM Eastern time for money
market and currency issues (it is assumed trade date equals settlement
date for money market/currency issues) and by 11:30 a.m. Eastern time
on trade date plus one for non-
<PAGE>
SCHEDULE "A"
------------
money market securities. Receipt of trade information within these
identified deadlines may be via telex, fax or on-line system access.
Brinson Partners will also communicate all trade information directly
to the Fund's Custodian.
c) Foreign exchange contracts will be completed by the Trust's Custodian
or Brinson Partners and communicated to the Accounting Unit in a
timely manner, i.e., the earlier of trade date plus one or value date.
For security trade information called in after the above stated
deadlines, there is no assurance it can be included in that day's
work.
d) Cusip numbers and/or ticker symbols for all US Dollar denominated
trades and sedol numbers for all foreign trades will be supplied by
Brinson Partners via the Trade Authorization, telex or on-line
support. The ASU will not responsible for NAV changes or distribution
rate adjustments that result from incomplete information about a
trade.
18) On behalf of the Series (as applicable), the Trust's Administrator will
complete the applicable performance and rate of return calculations as
required by the SEC.
19) On behalf of the Series (as applicable):
a) We would establish mutually agreed upon amortization and accretion
requirements for debt issues held by the Series. It is extremely
important that requirements and proper amortization procedures be
clarified prior to SEC effectiveness of additional series.
b) Any issues with Original Issue Discounts ("OID") are not intended to
be held. It is Fund/Plan's position that OID is a tax requirement
and, as such, is not necessarily reflected on the books. To the
extent that securities with OID are owned in the future, it is
expected that the Trust's auditors will complete the necessary OID
adjustments for financial statements and/or tax reporting.
20) The percentage/margin of error for the Trust is determined in accordance
with the Pricing Procedures as approved by the Board of Trustees of the
Trust, as amended from time to time. Fund/Plan has access to this
information as part of their responsibilities as Administrator under this
Agreement. Each individual NAV change is reviewed and the necessary
corrective actions are taken on a case by case basis. if Partner
reprocessing is required or actions needed to "make the Fund whole," it
would be expected that the party who contributed to the error, would
compensate the Trust as necessary. If Fund/Plan caused the error, then it
would be its responsibility to analyze the events, work with the Adviser to
ensure that proper controls and procedures were in place to prevent it from
occurring again, and compensate the Trust as appropriate.
<PAGE>
SCHEDULE "B"
------------
MULTIPLE CLASS FEE SCHEDULE
FOR
THE BRINSON FUNDS
- --------------------------------------------------------------------------------
FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES
- ------------------------------------------------
I. ANNUAL FEE SCHEDULE PER GLOBAL AND NON-US PORTFOLIO WITH MULTIPLE CLASSES
OF SHARES: (1/12th payable monthly)
Single Class Fees
-----------------
$45,000 On the First $10 Million of all Classes' Combined Average Net
Assets
.0004 On the Next $40 Million of all Classes' Combined Average Net Assets
.0003 On the Next $50 Million of all Classes' Combined Average Net Assets
.0001 On the Next $900 Million of all Classes' Combined Average Net Assets
.00005 Over $1 Billion of all Classes' Combined Average Net Assets
Fees with Multiple Classes
--------------------------
$15,000 Additional Per Class
II. ANNUAL FEE SCHEDULE PER DOMESTIC PORTFOLIO WITH MULTIPLE CLASSES OF SHARES:
(1/12th payable monthly)
Single Class Fees
-----------------
$30,000 On the First $10 Million of all Classes' Combined Average Net
Assets
.0004 On the Next $40 Million of all Classes' Combined Average Net Assets
.0003 On the Next $50 Million of all Classes' Combined Average Net Assets
.0001 On the Next $900 Million of all Classes' Combined Average Net Assets
.00005 Over $1 Billion of all Classes' Combined Average Net Assets
Fees with Multiple Classes
--------------------------
$10,000 Additional Per Class
III. PRICING SERVICE FEES: (Based on individual CUSIP/SEDOL or security
identification number) Specific costs will be identified based upon options
selected by the client and will be billed monthly.
A) MULLER DATA CORPORATION* (if applicable)
*Based on current vendor costs, subject to change
Government/Mortgage Backed/Corporate
Short and Long Term Quotes $ .50 per Quote per Issue
Tax-Exempt Short & Long Term Quotes $ .55 per Quote per Issue
CMOs/ARMs/ABS $1.00 per Quote per Issue
Foreign Security Quotes $ .50 per Quote per Issue
Foreign Security Supplemental
Corporation Actions, Dividends
& Capital Changes $2.00 per Issue per Month
Mortgage Backed Factors $1.00 per Issue per Month
MINIMUM WEEKLY FILE TRANSMISSION IS ASSUMED
<PAGE>
SCHEDULE "B"
------------
Fund/Plan does not currently pass along charges for the domestic equity
security prices, dividend and capital change information transmitted daily
to Fund/Plan Services, Inc. from Muller Data Corporation.
B) FUTURES AND CURRENCY FORWARD CONTRACTS $2.00 per Issue per Day
C) TELERATE SYSTEMS, INC.* (if applicable)
*Based on current vendor costs, subject to change
Specific costs will be identified based upon options selected by the
client and will be billed monthly. Fund/Plan does not currently pass
along these charges to The Brinson Funds.
C) REUTERS, INC.*
*Based on current vendor costs, subject to change
Fund/Plan does not currently pass along the charges for the domestic
security prices supplied by Reuters, Inc.
D) INTERACTIVE DATA CORP.* (if applicable)
* Based on current vendor costs, subject to change.
Domestic Equities and Options $ .15 per Quote per Issue
Corporate/Government/Agency Bonds
including Mortgage-Backed
Securities (evaluated,
seasoned, and/or closing) $ .50 per Quote per Issue
US Municipal Bonds and Collateralized
Mortgage Obligations $ .80 per Quote per Issue
International Equities and Bonds $ .50 per Quote per Issue
Domestic Dividends and Capitalization
Changes $3.50 per Month per Holding
International Dividends and Capital
Changes $4.00 per Month per Holding
Interactive Data also charges monthly transmission costs and disk storage
charges.
F) KENNY S&P*
*Based on current vendor costs, subject to change
High Yield Corporate Bonds $1.00 per Quote per Issue
($35/day minimum)
U.S. Municipal Bonds $ .50 per Quote per Issue
($25/day minimum)
Corporate/Government Bonds $ .25 per Quote per Issue
($35/day minimum)
CMO,ARM and ABS/Convertible $1.00 per Quote per Issue
Corporate Bonds ($35/day minimum)
Set up Fees $ .25 per Item
($1.00 if no CUSIP)
All Added Items $ .25 per Item
($1.00 if no CUSIP)
<PAGE>
SCHEDULE "B"
------------
OUT-OF-POCKET EXPENSES
- ----------------------
The Trust will reimburse Fund/Plan Services, Inc. monthly for all reasonable
out-of-pocket expenses, including telephone, postage, telecommunications,
special reports, record retention, special transportation costs as incurred, and
unusual expenses incurred while establishing viable agreements between the Trust
and Fund/Plan Services, Inc. The cost of copying and sending materials to
auditors for audits will be an additional expense.
ADDITIONAL SERVICES
- -------------------
To the extent the Trust commences using investment techniques such as Securities
Lending, Interest Rate Swaps, Leveraging, Short Sales, Precious Metals, or non-
US Dollar denominated Futures and Options on securities and currency, additional
fees may apply. Activities of a non-recurring nature such as consolidations,
mergers or reorganizations will be subject to negotiation. Any
additional/enhanced services or reports will be quoted upon request.
The Schedules will be amended as necessary to reflect the addition of other
services for additional portfolios or classes of the Trust.
<PAGE>
IDENTIFICATION OF SERIES
------------------------
Below are listed the Series and Classes of Shares to which services under this
Agreement are to be performed as of the Effective Date of this Agreement:
SERIES
Global Fund
Global Equity Fund
Global Bond Fund
Short-Term Global Income Fund*
U.S. Balanced Fund
U.S. Equity Fund
U.S. Bond Fund
U.S. Cash Management Fund
Non-U.S. Equity Fund
Non-U.S. Bond Fund
CLASSES
Brinson Fund class
SwissKey Fund class
* Fee and procedures subject to change/review pending definitive structure of
Fund.
This Schedule "C" may be amended from time to time by agreement of the Parties.
<PAGE>
Exhibit to Form N-1A
Exhibit (9)(c)(ii) Amendment to Accounting Services Agreement
<PAGE>
AMENDMENT TO ACCOUNTING SERVICES AGREEMENT
This AGREEMENT, dated as of the ________ day of August, 1995 made by
and between The Brinson Funds, a Delaware business trust (the "Trust") and
Fund/Plan Services, Inc. ("Fund/Plan"), a corporation duly organized and
existing under the laws of the State of Delaware (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust and Fund/Plan have entered into an agreement dated
April 25, 1995, wherein Fund/Plan has agreed to serve as accounting services
agent to maintain and keep current the accounts and records of the Trust and to
perform certain other functions in connection with such accounts and records
("Accounting Services Agreement"); and
WHEREAS, the Parties wish to amend the Accounting Services Agreement
to reflect the creation of a multiple class structure for each Series of the
Trust;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto, intending to be legally bound, do hereby
agree:
1. To amend Schedules "B" and "C" to the Accounting Services
Agreement in the form attached hereto as Schedules "B" and "C".
2. This Amendment's Effective Date shall be July 31, 1995.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of one type written page, together with Schedules "B" and "C", to be
signed by their duly authorized officers and their corporate seals hereunto duly
affixed as of the day and year first above written.
The Brinson Funds Fund/Plan Services, Inc.
- ----------------- ------------------------
By: By:
------------------------- -----------------------
E. Thomas McFarlan, President Kenneth J. Kempf, President
<PAGE>
SCHEDULE "B"
MULTIPLE CLASS FEE SCHEDULE
FOR
THE BRINSON FUNDS
- --------------------------------------------------------------------------------
FUND ACCOUNTING AND PORTFOLIO VALUATION SERVICES
- ------------------------------------------------
I. ANNUAL FEE SCHEDULE PER GLOBAL AND NON-US PORTFOLIO WITH MULTIPLE CLASSES
OF SHARES: (1/12th payable monthly)
Present Fees
------------
$45,000 On the First $10 Million of all Classes' Combined Average Net
Assets
.0004 On the Next $40 Million of all Classes' Combined Average Net Assets
.0003 On the Next $50 Million of all Classes' Combined Average Net Assets
.0001 On the Next $900 Million of all Classes' Combined Average Net Assets
.00005 Over $1 Billion of all Classes' Combined Average Net Assets
Fees with Multiple Classes
--------------------------
$15,000 Additional Per Class
II. ANNUAL FEE SCHEDULE PER DOMESTIC PORTFOLIO WITH MULTIPLE CLASSES OF SHARES:
(1/12th payable monthly)
Present Fees
------------
$30,000 On the First $10 Million of all Classes' Combined Average Net
Assets
.0004 On the Next $40 Million of all Classes' Combined Average Net Assets
.0003 On the Next $50 Million of all Classes' Combined Average Net Assets
.0001 On the Next $900 Million of all Classes' Combined Average Net Assets
.00005 Over $1 Billion of all Classes' Combined Average Net Assets
Fees with Multiple Classes
--------------------------
$10,000 Additional Per Class
III. PRICING SERVICE FEES: (Based on individual CUSIP/SEDOL or security
identification number) Specific costs will be identified based upon options
selected by the client and will be billed monthly.
A) MULLER DATA CORPORATION* (if applicable)
*Based on current vendor costs, subject to change
Government/Mortgage Backed/Corporate
Short and Long Term Quotes $ .50 per Quote per Issue
Tax-Exempt Short & Long Term Quotes $ .55 per Quote per Issue
CMOs/ARMs/ABS $1.00 per Quote per Issue
Foreign Security Quotes $ .50 per Quote per Issue
Foreign Security Supplemental
Corporation Actions, Dividends
& Capital Changes $2.00 per Issue per Month
Mortgage Backed Factors $1.00 per Issue per Month
MINIMUM WEEKLY FILE TRANSMISSION IS ASSUMED
<PAGE>
Fund/Plan does not currently pass along charges for the domestic equity
security prices, dividend and capital change information transmitted daily
to Fund/Plan Services, Inc. from Muller Data Corporation.
B) FUTURES AND CURRENCY FORWARD CONTRACTS $2.00 per Issue per Day
C) TELERATE SYSTEMS, INC.* (if applicable)
*Based on current vendor costs, subject to change
Specific costs will be identified based upon options selected by the
client and will be billed monthly. Fund/Plan does not currently pass
along these charges to The Brinson Funds.
C) REUTERS, INC.*
*Based on current vendor costs, subject to change
Fund/Plan does not currently pass along the charges for the domestic
security prices supplied by Reuters, Inc.
D) INTERACTIVE DATA CORP.* (if applicable)
*Based on current vendor costs, subject to change.
Domestic Equities and Options $ .15 per Quote per Issue
Corporate/Government/Agency Bonds
including Mortgage-Backed
Securities (evaluated,
seasoned, and/or closing) $ .50 per Quote per Issue
US Municipal Bonds and Collateralized
Mortgage Obligations $ .80 per Quote per Issue
International Equities and Bonds $ .50 per Quote per Issue
Domestic Dividends and Capitalization
Changes $3.50 per Month per Holding
International Dividends and Capital
Changes $4.00 per Month per Holding
Interactive Data also charges monthly transmission costs and disk storage
charges.
F) KENNY S&P*
*Based on current vendor costs, subject to change
High Yield Corporate Bonds $1.00 per Quote per Issue
($35/day minimum)
U.S. Municipal Bonds $ .50 per Quote per Issue
($25/day minimum)
Corporate/Government Bonds $ .50 per Quote per Issue
($35/day minimum)
CMO,ARM and ABS/Convertible $1.00 per Quote per Issue
Corporate Bonds ($35/day minimum)
Set up Fees $ .25 per Item
($1.00 if no CUSIP)
All Added Items $ .25 per Item
($1.00 if no CUSIP)
<PAGE>
OUT-OF-POCKET EXPENSES
- ----------------------
The Trust will reimburse Fund/Plan Services, Inc. monthly for all reasonable
out-of-pocket expenses, including telephone, postage, telecommunications,
special reports, record retention, special transportation costs as incurred, and
unusual expenses incurred while establishing viable agreements between the Trust
and Fund/Plan Services, Inc. The cost of copying and sending materials to
auditors for audits will be an additional expense.
ADDITIONAL SERVICES
- -------------------
To the extent the Trust commences using investment techniques such as
Securities Lending, Interest Rate Swaps, Leveraging, Short Sales, Precious
Metals, or non-US Dollar denominated Futures and Options on securities and
currency, additional fees may apply. Activities of a non-recurring nature such
as consolidations, mergers or reorganizations will be subject to negotiation.
Any additional/enhanced services or reports will be quoted upon request.
The Schedules will be amended as necessary to reflect the addition of other
services for additional portfolios or classes of the Trust.
<PAGE>
SCHEDULE "C"
ACCOUNTING SERVICES UNIT BASIC ASSUMPTIONS FOR
- --------------------------------------------------------------------------------
THE BRINSON FUNDS
BASIC ASSUMPTIONS:
- -----------------
1) The Trust's Administrator, on behalf of the Series, will complete all
necessary compliance reports (Sub-Chapter "M"), as well as monitoring of
the various limitations and restrictions.
2) The portfolio asset composition of the Series will be comparable as
described in the Profile Document prepared by Brinson Partners, Inc.
Trading activity is expected to approximate 270 transactions per month
inclusive of equity, debt, currency and money market transactions.
3) The Trust has a tax year-end which coincides with its fiscal year-end. No
additional accounting requirements are necessary to identify or maintain
book-tax differences.
To the extent tax accounting, on behalf of the Series (as applicable), for
certain securities differs from the book accounting, it will be done by the
Trust's Administrator or the Trust's independent accountants.
The Accounting Services Unit will supply segregated Trial Balance account
details to assist the Administrator, on behalf of the Series (as
applicable), in proper identification by category of all appropriate
realized and unrealized currency gains/losses.
4) The Trust, on behalf of the Series (as applicable) foresees no difficulty
in using Fund/Plan's standard pricing agents for domestic equity, bond, ADR
and foreign securities. Fund/Plan currently uses Reuters, Inc., Muller Data
and Interactive Data (IDC) for domestic equities and listed ADR's, and IDC,
Telerate, Bloomberg and Muller Data Corporation for bonds, synthetic ADR's
and foreign issues.
Muller Data Corporation/Extel Financial and IDC are the primary foreign
security pricing vendors for the Trust, on behalf of the Series (as
applicable) and supply ASU with daily (spot) foreign exchange rates to be
used in market value calculations of non-US dollar denominated securities
and currency mark-to-market requirements. To the extent IDC or Muller Data
are unable to supply certain foreign security prices, they will be provided
by Brinson Partners or a Brinson Partners' recommended pricing source.
Telerate Systems, Inc. is used for daily forward currency contract prices.
The Accounting Unit will work closely with Brinson Partners to ensure the
accuracy of the Series' NAVs and to obtain the most satisfactory pricing
sources and specific methodologies.
5) To the extent the Series require daily security prices from specific
brokers for domestic or foreign securities, these manual prices will be
obtained by Brinson Partners (or brokers) and faxed to the ASU by
approximately 4:00 PM Eastern time for inclusion in the NAV calculations.
Brinson Partners will supply ASU with the appropriate pricing contacts for
these manual quotes.
6) To the extent the Series should ever purchase/hold open-end registered
investment companies (RICs), procedural discussions should take place
between ASU and Brinson Partners clarifying the appropriate pricing and
dividend rate sources. Depending on the methodologies selected by the
Trust, additional fees may apply.
7) ASU will supply daily Portfolio Valuation Reports on behalf of the Series
(as applicable), to Brinson Partners identifying current security
positions, original/amortized cost, security market values and changes in
unrealized appreciation/depreciation.
<PAGE>
It will be the responsibility of Brinson Partners to review these reports
and to promptly notify ASU of any possible problems, trade discrepancies,
incorrect security prices, corporate action/capital change information or
exchange rate discrepancies that could result in a misstated NAV.
8) All foreign currency will be held within the Custodian and sub-custodian
network on behalf of the Series (as applicable). Time deposits and interest
bearing currency accounts will all be reflected on the Custodian asset
listings. The Trust or Custodian will supply ASU with appropriate and
timely information for any trades/changes in the currency accounts, as well
as interest rates to ensure income accrual accuracy for the debt issues,
time deposits and currency accounts. Income accrual adjustments (expected
to be immaterial) will be completed when the interest is actually collected
and posted on the Custodian's statements.
9) On behalf of the Series (as applicable), it is assumed for all debt issues
that Brinson Partners will supply the Accounting Unit with critical income
information such as accrual methods, interest payment frequency details,
coupon payment dates, floating rate reset dates, and complete security
descriptions with issue types and sedol/cusip numbers.
10) On behalf of the Series (as applicable), the Custodian will provide the
Accounting Unit with daily custodian statements (or on-line access to the
custody system) reflecting all prior day cash activity by 8:30 AM Eastern
time. Complete and clear descriptions of any postings, inclusive of
sedol/cusip numbers, interest/dividend payment dates, capital stock
details, expense authorizations, beginning/ending balances, etc. will be
provided by the Custodian's reports or system.
11) On behalf of the Series (as applicable), the Custodian will be responsible
for supplying the foreign dividend, capital change information, and
interest rate changes to Accounting in a timely manner. Brinson Partners
will supplement and support as appropriate. If selected by the Trust, ASU
can receive supplemental capital change and dividend information on foreign
positions from IDC and Muller Data as the pricing vendors for the Trust's
foreign securities.
12) On behalf of the Series (as applicable), the Custodian will handle and
report on all settlement problems, failed trades and unsettled
dividends/interest and capital changes. Additionally, the Custodian will
process all applicable capital change and foreign reclaim paperwork based
upon advice from Brinson Partners. ASU will supply segregated Trial Balance
reporting and supplemental reports to assist in this process.
13) On behalf of the Series (as applicable):
a) ASU will maintain US Dollar denominated futures, qualified covered
call options and index options reporting on the daily Trial Balance
and value the respective options and underlying positions daily.
b) To the extent tax classifications are required, they will be computed
by the Trust's Administrator or independent accountant.
c) The Trust does not currently expect to invest in domestic futures,
options or designated hedges. Advance notice is requested should the
Series commence trading in the above investments to clarify
operational procedures between ASU and Brinson Partners.
14) On behalf of the Series (as applicable), should Lines of Credit in
segregated accounts with the Custodian be established for temporary
administrative purposes, and/or leveraging/hedging a portfolio, Brinson
Partners will complete the appropriate paperwork/monitoring for segregation
of assets and adequacy of collateral. Accounting will reflect appropriate
Trial Balance account entries and interest expense accrual charges on the
daily Trial Balance, adjusting as necessary at month-end.
15) On behalf of the Series (as applicable), participation in Securities
Lending, Interest Rate Swaps, Leveraging, Precious Metals, Short Sales or
Foreign Currency (non-US dollar denominated) Futures and Options within
portfolio securities is not currently expected. To the extent such
techniques are utilized in the future, additional fees will apply. Forward
Currency Contracts that are directly related to payable/receivables on
trades and/or dividends/interest are included in Accounting Services and
are not to be considered an extra expense.
<PAGE>
16) On behalf of the Series (as applicable), Brinson Partners or the
Administrator will supply ASU specific expense accrual procedures and
monitor the expense accrual balances for adequacy based on outstanding
liabilities monthly. The Trust's Administrator will promptly communicate to
the ASU any adjustments needed.
17) On behalf of the Series (as applicable):
a) Specific deadlines and complete information supplied will be identified
for all security trades in order to minimize any settlement problems,
NAV miscalculations or distribution rate adjustments.
b) Trade Authorization Forms, with the appropriate officer's signature,
should be faxed to ASU on all security trades placed by the Fund no
later than settlement/value date by 11:30 AM Eastern time for money
market and currency issues (it is assumed trade date equals settlement
date for money market/currency issues) and by 11:30 AM Eastern time on
trade date plus one for non-money market securities. Receipt of trade
information within these identified deadlines may be via telex, fax or
on-line system access. Brinson Partners will also communicate all trade
information directly to the Fund's Custodian.
c) Foreign exchange contracts will be completed by the Trust's Custodian
or Brinson Partners and communicated to the Accounting Unit in a timely
manner, i.e., the earlier of trade date plus one or value date. For
security trade information called in after the above stated deadlines,
there is no assurance it can be included in that day's work.
d) CUSIP numbers and/or ticker symbols for all US Dollar denominated
trades and SEDOL numbers for all foreign trades will be supplied by
Brinson Partners via the Trade Authorization, telex or on-line support.
The ASU will not responsible for NAV changes or distribution rate
adjustments that result from incomplete information about a trade.
18) On behalf of the Series (as applicable), the Trust's Administrator will
complete the applicable yield, performance and rate of return calculations
as required by the SEC.
19) On behalf of the Series (as applicable):
a) We would establish mutually agreed upon annualization and accretion
requirements for debt issues held by the Series. It is extremely
important that requirements and proper amortization procedures be
clarified prior to SEC effectiveness of additional series.
b) Any issues with Original Issue Discounts ("OID") are not intended to be
held. It is Fund/Plan's position that OID is a tax requirement and, as
such, is not necessarily reflected on the books. To the extent that
securities with OID are owned in the future, it is expected that the
Trust's auditors will complete the necessary OID adjustments for
financial statements and/or tax reporting.
<PAGE>
SCHEDULE "C"
ACCOUNTING & PORTFOLIO VALUATION
FOR
THE BRINSON FUNDS
The Accounting Services Unit (ASU) is pleased to provide a comprehensive level
of service to The Brinson Funds. You may expect services as follows with
respect to Series and their Multiple Classes of Shares (additional services may
be completed upon request):
DAILY ACCOUNTING SERVICES
-------------------------
1) Calculate Net Asset Value (and Offering Price) Per Share:
Series Level
. Update the daily market value of securities held by the Series using
Fund/Plan Services' standard agents for pricing domestic equity, bond
and foreign securities. The domestic equity pricing services are
Reuters, Inc., Muller Data Corporation and Interactive Data
Corporation (IDC). Muller Data Corporation/Extel Financial, telerate,
Bloomberg and IDC are used for bond and foreign prices/exchange rates.
. Enter manual prices supplied by client and/or broker.
. Review variance reporting on-line and in hard copy for price changes
in individual securities using variance levels established by client.
Verify US dollar security prices exceeding variance levels by
notifying client and pricing sources of noted variances.
. Complete daily variance analysis on foreign exchange rates and local
foreign prices. Notify client of changes exceeding established levels
for the client's verification.
. Review for ex-dividend items indicated by pricing sources; trace to
Series' general ledger for agreement.
Series and Each class
. Allocate daily unrealized Series appreciation/depreciation, unrealized
currency gains/losses, and unrealized gains/losses on futures and
forwards to classes based upon value of outstanding class shares.
. Prepare NAV proof sheets. Review components of change in NAV for
reasonableness. (Complete fund and class control proofs).
. Communicate required pricing information (NAV) to client, transfer
agent and, electronically, to NASDAQ.
2) Determine and Report Cash Availability to Series by 9:30 AM Eastern Time:
Series Level
. Receive daily cash and transaction statements from the custodian by
8:30 AM Eastern time.
. Receive previous day shareholder activity reports from the Series'
transfer agent by 8:30 AM Eastern time. Class level shareholder
activity will be accumulated into the Series' available cash balances.
. Fax hard copy Cash Availability calculations with all details to
client.
. Supply client with 5-day cash projection report.
. For the Series, prepare and complete daily bank cash reconciliations
including documentation of any reconciling items and notify the
custodian/client.
3) Reconcile and Record All Daily Expense Accruals:
Series Level
. Accrue expenses based on client supplied budget either as percentage
of Series' net assets or specific dollar amounts.
. Monitor expense limitations established by client.
<PAGE>
. Accrue daily amortization of Organizational Expense.
Series and Each Class
. Class specific accruals completed such as daily accrual of 12b-1
expenses.
. Allocate Series expenses to classes based upon value of outstanding
class shares.
4) Verify and Record All Daily Income Accruals for Debt Issues:
Series Level
. Review and verify all system generated Interest and Amortization
reports.
. Establish unique security codes for bond issues to permit segregated
Trial Balance income reporting.
Series and Each Class
. Allocate Series income to classes based upon value of outstanding
class shares.
5) Monitor Domestic Securities Held for Cash Dividends, corporate actions and
capital changes such as splits, mergers, spinoffs, etc. and process
appropriately.
Series Level
. Monitor electronically received information from Muller Data
Corporation for all domestic securities.
. Review current daily security trades for dividend activity.
. Interface with custodian to monitor timely collection and postings of
corporate actions, dividends and interest.
. Process international dividend and capital change information received
from the custodian and advisor. Back-up information on foreign
dividends and corporate actions may also be obtained from Muller Data
Corporation/Extel Financial and IDC (as pricing agents for the
Series).
. Provide mark-to-market analysis for currency exchange rate
fluctuations on unsettled dividends and interest.
Series and Each Class
. Allocate Series dividend income and unrealized currency gains/losses
on dividends/interest to classes based upon value of outstanding class
shares.
6) Enter All Security Trades on Investment Accounting System (IAS) based on
written instructions from the client.
Series Level
. Review system verification of trade and interest calculations.
. Verify settlement through the custodian statements.
. Maintain security ledger transaction reporting.
. Maintain tax lot holdings.
. Determine realized gains or losses on security trades.
. Provide complete broker commission reporting.
. Provide foreign currency exchange rate realized and unrealized
gains/losses detail.
. Determine realized gains or losses on security trades.
Series and Each Class
. Allocate all realized and unrealized capital and currency gains/losses
to classes based upon value of class outstanding shares.
7) Enter All Series Share Transactions on IAS:
Each Class
. Process activity identified on the transfer agent reports.
. Verify settlement through the Series' custodian statements.
. Reconcile to the Fund/Plan Services' transfer agent report balances.
. Roll each classes' capital share values into each Series and determine
allocation percentages based upon the value of each classes'
outstanding shares to the Series total.
8) Prepare and Reconcile/Prove Accuracy of the Daily Trial Balance (listing
all asset, liability, equity, income and expense accounts)
Series Level
. Post manual entries to the general ledger.
. Post custodian bank activity.
. Post security transactions.
<PAGE>
. Post and verify system generated activity, i.e., income and expense
accruals.
. Segregate foreign tax expense.
. Prepare daily mark-to-market analysis for all unrealized foreign
currency exchange rate gains/losses by asset/liability category.
Series and Each Class
. Prepare Series general ledger net cash proof used in NAV calculation.
. Post class specific shareholder activity and roll values into each
Series.
. Allocate all Series level net cash accounts on the Series Trial
Balance to each specific class based upon value of class outstanding
shares.
. Maintain allocated Trial Balance accounts on class specific Allocation
Report.
. Maintain class-specific expense accounts.
. Prepare class-specific proof/control reports to ensure accuracy of
allocations.
9) Review and Reconcile with Custodian Statements:
Series Level
. Verify all posted interest, dividends, expenses, and shareholder and
security payments/receipts, etc. (Discrepancies will be reported to
and resolved by the Custodian.)
. Post all cash settlement activity to the Trial Balance.
. Reconcile to ending cash balance accounts.
. Clear IAS subsidiary reports with settled amounts.
. Track status of past due items and failed trades handled by the
Custodian.
10) Submission of Daily Accounting Reports to Client: (Additional reports
readily available.)
Series Level
. Portfolio Valuation (listing inclusive of holdings, costs, market
values, unrealized appreciation/depreciation and percentage of
portfolio comprised of each security sorted according to Brinson's
categories - stocks (foreign), stocks (domestic), bonds (foreign),
bonds (domestic), currency (foreign), money market (domestic).
. Cash availability.
. 3-Day Cash Projection Report
Series and Each Class
. Trial Balance and Class Allocation Report
. NAV Calculation Report
MONTHLY ACCOUNTING SERVICES
---------------------------
1) For the Series, full Financial Statement Preparation (automated Statements
of Assets and Liabilities, of Operations and of Changes in Net Assets) and
submission to Client by 10th business day.
. Class specific capital share activity and expenses will be disclosed
also.
2) Submission of Monthly Automated IAS Reports to Fund/Client:
Series Level
. Security Purchase/Sales Journal
. Interest and Maturity Report
. Brokers Ledger (Commission Report)
. Security Ledger Transaction Report with Realized Gains/Losses
. Security Ledger Tax Lot Holdings Report
. Additional reports available upon request
3) Reconcile Accounting Asset Listing to Custodian Asset Listing:
Series Level
. Report any security balance discrepancies to the custodian/client.
4) Provide Monthly Analysis and Reconciliation of Additional Trial Balance
Accounts, such as:
Series Level
. Security cost and realized gains/losses
. Interest/dividend receivable and income
<PAGE>
. Payable/receivable for securities purchased and sold
. Unrealized and realized currency gains/losses
Series and Each Class
. Payable/receivable for Fund shares; issued and redeemed
. Expense payments and accruals analysis
5) If Appropriate, Prepare and Submit to Client:
Series Level
. Income by state reporting
. Standard Industry Code Valuation Report
. Alternative Minimum Tax Income segregation schedule
ANNUAL (AND SEMI-ANNUAL) ACCOUNTING SERVICES
--------------------------------------------
1) Assist and supply auditors with schedules supporting securities and
shareholder transactions, income and expense accruals, etc. for the Series
and each Class during the year in accordance with standard audit assistance
requirements.
2) Provide NSAR Reporting (Accounting Questions):
If applicable for the Series and Classes, answer the following items:
2, 12B, 20, 21, 22, 23, 28, 30A, 31, 32, 35, 36, 37, 43, 53, 55, 62, 63,
64B, 71, 72, 73, 74, 75, 76
<PAGE>
Exhibit to Form N-1A
Exhibit (10)(b) - Consent opinion of Stradley Ronon Stevens & Young, LLP,
Counsel to the Trust.
<PAGE>
Exhibit 10(b)
[LETTERHEAD OF STRADLEY RONON STEVENS & YOUNG, LLP]
Direct Dial: (215) 564-8115
February 8, 1996
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: The Brinson Funds
File Nos. 33-47287 and 811-6637
-------------------------------
Gentlemen:
We are counsel to The Brinson Funds. As such, we have reviewed Post-
Effective Amendment No. 16 to the Registration Statement of The Brinson Funds to
be filed pursuant to paragraph (b) of Rule 485 promulgated under the Securities
Act of 1933.
In our judgment, Post-Effective Amendment No. 16 to the Registration
Statement of The Brinson Funds does not contain disclosures which would render
it ineligible to become effective pursuant to paragraph (b) of Rule 485.
We consent to the inclusion of this written representation as an Exhibit
to Post-Effective Amendment No. 16 to the Registration Statement of The Brinson
Funds.
Very truly yours,
/s/ Bruce G. Leto
Bruce G. Leto
BGL:jas
<PAGE>
Exhibit to Form N-1A
Exhibit (11)(a) - Consent of Ernst & Young LLP, independent auditors
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our reports dated August 4, 1995, in the Registration
Statement (Form N-1A) and related Prospectus of The Brinson Funds, filed with
the Securities and Exchange Commission in this Post-Effective Amendment No. 16
to the Registration Statement under the Securities Act of 1933 (Registration
No. 33-47287) and in this Amendment No. 17 to the Registration Statement under
the Investment Company Act of 1940 (Registration No. 811-6637).
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
February 12, 1996
<PAGE>
Exhibit to Form N-1A
Exhibit (15) - Distribution Plan
<PAGE>
Distribution Plan Relating to the SwissKey Fund Class Shares
of The Brinson Funds
The following Distribution Plan (the "Plan") has been adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "Act") by The Brinson Funds
(the "Trust") for the SwissKey Fund class shares (each individually a "Class"
and collectively the "Classes") of each of the Global Fund series, Global Equity
Fund series, Global Bond Fund series, Short-Term Global Income Fund series,
U.S. Balanced Fund series, U.S. Equity Fund series, U.S. Bond Fund series,
U.S. Cash Management Fund series, Non-U.S. Equity Fund series and Non-U.S. Bond
Fund series (individually a "Fund" or collectively the "Funds"), for the use of
SwissKey Fund class shares of a Fund and any SwissKey Fund class shares of
separate series of the Trust hereinafter organized. The Plan has been approved
by a majority of the Board of Trustees of the Trust (the "Board of Trustees"),
including a majority of the trustees who are not interested persons of the Trust
and who have no direct, or indirect financial interest in the operation of the
Plan or in any agreement related to the Plan (the "non-interested trustees"),
cast in person at a meeting called for the purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees determined that adoption of the
Plan would be prudent and in the best interests of each Fund and its
shareholders. Such approval included a determination that in the exercise of its
reasonable business judgment and in light of its fiduciary duties, there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
The provisions of the Plan are:
1. (a) Each Class shall reimburse Brinson Partners, Inc. (the "Manager"),
Fund/Plan Broker Services, Inc. (the "Distributor") or others for all expenses
incurred by such parties in the promotion and distribution of the shares of the
Class, including but not limited to, the printing of prospectuses and reports
used for sales purposes, expenses of preparing and distributing sales literature
and advertisements and other distribution-related expenses, as well as payments
to securities dealers or others for assistance in selling shares of the Class in
accordance with a selling agreement with the Trust on behalf of a Fund's Class
or the Distributor, which form of agreement has been approved from time to time
by the Trustees, including the non-interested trustees. The maximum aggregate
amount which may be reimbursed by a Class to such parties in accordance with
this paragraph shall be 0.65% per annum of the average daily net assets of the
Class. The parties hereto may, however, agree from time to time to limit the
reimbursement called for by this paragraph to amounts less than 0.65% with
respect to a Fund. The current agreement between the parties for maximum
reimbursement with respect to each Fund is attached hereto as Schedule A, which
schedule may be amended from time to time by the parties hereto.
(b) In addition to the amounts described in (a) above, the Fund shall
pay (i) to the Distributor for payment to dealers or others, or (ii) directly
to others, an amount not to exceed 0.25% per annum of the Class' average daily
net assets represented by shares of the Class from time to time, as a service
fee. The monies to be paid pursuant to this paragraph 1(b) shall be used to pay
dealers or others for, among other things, furnishing personal services and
maintaining shareholder accounts, which services include, among other things,
assisting in establishing and maintaining customer accounts and records;
assisting with the purchase and redemption requests; arranging for bank wires;
monitoring dividend payments from the Fund on behalf of customers; forwarding
certain shareholder communications from the Fund to customers; receiving and
answering correspondence; and aiding in maintaining the investment of their
respective customers in the Class. Any amounts paid under this paragraph 1(b)
shall be paid pursuant to a servicing or other agreement, which form of
agreement has been approved from time to time by the Trustees, including a
majority of the non-interested trustees.
2. All payments in connection with this Plan shall be made quarterly by
each Class to the appropriate parties, or more or less frequently upon mutual
agreement of the parties.
3. The Manager and the Distributor shall collect and monitor the
documentation of payments made under paragraph 1 above, and shall furnish to the
Board of Trustees of the Trust, for its review, on a quarterly basis, a written
report of the monies reimbursed to the Manager, the Distributor and others under
the Plan as to a Fund's Class, and shall furnish the Board of Trustees of the
Trust with such other information as the Board may reasonably request in
connection with the payments made under the Plan as to a Fund's Class in order
to enable the Board to make an informed determination of whether the Plan should
be continued for each Class.
<PAGE>
4. The Plan shall continue in effect for each Class for a period of more
than one year only so long as such continuance is specifically approved at
least annually by the Trust's Board of Trustees, including the non-interested
trustees, cast in person at a meeting called for the purpose of voting on the
Plan.
5. The Plan, or any agreements entered into pursuant to this Plan, may be
terminated at any time, without penalty, by vote of a majority of the
outstanding voting securities of a Class with respect to that Class, or by vote
of a majority of the non-interested Trustees, on not more than sixty (60) days'
written notice, and shall terminate automatically in the event of any act that
constitutes an assignment of the management agreement between the Trust on
behalf of the relevant series of the Trust and the Manager.
6. The Plan and any agreements entered into pursuant to this Plan may not
be amended to increase materially the amount to be spent by a Class for
distribution pursuant to Paragraph 1 hereof without approval by a majority of a
Class' outstanding voting securities.
7. All material amendments to the Plan, or any agreements entered into
pursuant to this Plan, shall be approved by the non-interested trustees cast in
person at a meeting called for the purpose of voting on any such amendment.
8. So long as the Plan is in effect, the selection and nomination of the
Trust's non-interested trustees shall be committed to the discretion of such
non-interested trustees.
9. This plan shall take effect on the ____ day of __________ 199_.
This Plan and the terms and provisions thereof are hereby accepted and agreed to
by the Trust, the Manager and the Distributor as evidenced by their execution
hereof.
THE BRINSON FUNDS
By:
-------------------------------
BRINSON PARTNERS, INC.
By:
-------------------------------
FUND/PLAN BROKER SERVICES, INC.
By:
-------------------------------
<PAGE>
SCHEDULE A
----------
The Brinson Funds (the "Trust"), Brinson Partners, Inc. (the "Manager") and
Fund/Plan Broker Services, Inc. (the "Distributor") hereby agree that the
maximum amount which the Manager or the Distributor shall seek reimbursement
for in accordance with the Rule 12b-1 Plan relating to SwissKey Fund class
shares of the Trust, is as follows:
Fund Amount
---- ------
SwissKey Global Fund 0.40%
SwissKey Global Equity Fund 0.51%
SwissKey Global Bond Fund 0.24%
SwissKey Short-Term Global Income Fund 0.27%
SwissKey U.S. Balanced Fund 0.25%
SwissKey U.S. Equity Fund 0.27%
SwissKey U.S. Bond Fund 0.22%
SwissKey U.S. Cash Management Fund 0.22%
SwissKey Non-U.S. Equity Fund 0.59%
SwissKey Non-U.S. Bond Fund 0.27%
THE BRINSON FUNDS
-------------------------------
BRINSON PARTNERS, INC.
-------------------------------
FUND/PLAN BROKER SERVICES, INC.
-------------------------------
<PAGE>
Exhibit to Form N-1A
Exhibit (16) - Schedule of Performance
<PAGE>
EXHIBIT 16
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TOTAL RETURN FORMULA
--------------------
ERV = P(1 + T)/N/
WHERE:
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000
T = AVERAGE ANNUAL TOTAL RETURN
N = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE OF AT THE END OF THE PERIOD OF A
HYPOTHETICAL $1,000 PAYMENT ("P") MADE AT THE BEGINNING OF THAT
PERIOD OR FRACTIONAL PORTION THEREOF.
BRINSON U.S. BOND
- -----------------
08/31/95 to 12/31/95
- --------------------
ERV = $1,018.03
T = 5.49%
N = .334247 years
SWISSKEY U.S. BOND FUND
- -----------------------
08/31/95 to 12/31/95
- --------------------
ERV = $1,017.38
T = 5.29%
N = .334247 years
<PAGE>
<TABLE>
<CAPTION>
THE BRINSON FUNDS
THE SWISSKEY U.S. BOND FUND
TOTAL RETURN PERFORMANCE STATISTICS
- --------------------------------------------------------------------------------
Aggregate Total Return
----------------------------------------------------------------------
Previous Calendar One Since
Date Monthly 3 Months YTD Year Inception
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
09/30/95 0.80% - - - 0.80%
- --------------------------------------------------------------------------------
10/31/95 1.49% - - - 2.30%
- --------------------------------------------------------------------------------
11/30/95 1.56% 3.90% - - 3.90%
- --------------------------------------------------------------------------------
12/31/95 1.34% 4.46% - - 5.29%
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE BRINSON FUNDS
SWISSKEY U.S. BOND FUND
TOTAL RETURN PERFORMANCE STATISTICS
- --------------------------- ----------------------------------- ---------------------------------------------------------
PRINCIPAL DIVIDENDS
----------------------------------- ---------------------------------------------------------
Date N.A.V. Desc. Invstmnt # Shares Value Div/Sh Total $ Cuml $ Sh Reinv Cuml Sh Value Sh
- --------------------------- ----------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
08/31/95 $10.00 $10,000 1,000.000 $10,000.00 $0.00 0.000 $0.00
09/30/95 $10.08 $0 1,000.000 $10,080.00 $0.00 0.000 $0.00
10/31/95 $10.23 $0 1,000.000 $10,230.00 $0.00 0.000 $0.00
11/30/95 $10.39 $0 1,000.000 $10,390.00 $0.00 0.000 $0.00
12/21/95 $10.20 Div. $0 1,000.000 $10,200.00 $0.200 $200.00 $200.00 19.608 19.608 $200.00
12/31/95 $10.30 $0 1,000.000 $10,300.00 $200.00 19.608 $201.96
---------------------------------------------------------- -----------------------
CAPITAL GAINS TOTALS
---------------------------------------------------------- -----------------------
CG/Sh Total $ Cuml $ Sh Reinv Cuml Sh Value Sh Shares Value
---------------------------------------------------------- -----------------------
$0.00 0.000 $0.00 1,000.000 $10,000.00
$0.00 0.000 $0.00 1,000.000 $10,080.00
$0.00 0.000 $0.00 1,000.000 $10,230.00
$0.00 0.000 $0.00 1,000.000 $10,390.00
$0.027 $27.00 $27.00 2.647 2.647 $27.00 1,022.255 $10,427.00
$27.00 2.647 $27.26 1,022.255 $10,529.23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE BRINSON FUNDS
THE BRINSON U.S. BOND FUND
TOTAL RETURN PERFORMANCE STATISTICS
- --------------------------------------------------------------------------
Aggregate Total Return
- --------------------------------------------------------------------------
Previous Calendar One Since
Monthly 3 Months YTD Year Inception
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
0.90% -- -- -- 0.90%
- --------------------------------------------------------------------------
1.49% -- -- -- 2.40%
- --------------------------------------------------------------------------
1.56% 4.00% -- -- 4.00%
- --------------------------------------------------------------------------
1.44% 4.55% -- -- 5.49%
- --------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE BRINSON FUNDS
BRINSON U.S. BOND FUND
TOTAL RETURN PERFORMANCE STATISTICS
- ------------------------- ------------------------------------- -------------------------------------------------------------
PRINCIPAL DIVIDENDS
------------------------------------- -------------------------------------------------------------
Date N.A.V. Desc. Invstmnt # Shares Value Div/Sh Total $ Cuml $ Sh Reinv Cuml Sh Value Sh
- ------------------------- ------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
08/31/95 $10.00 $100,000 10,000.000 $100,000.00 $0.00 0.000 $0.00
09/30/95 $10.09 $0 10,000.000 $100,900.00 $0.00 0.000 $0.00
10/31/95 $10.24 $0 10,000.000 $102,400.00 $0.00 0.000 $0.00
11/30/95 $10.40 $0 10,000.000 $104,000.00 $0.00 0.000 $0.00
12/21/95 $10.21 Div $0 10,000.000 $102,100.00 $0.210 $2,100.00 $2,100.00 205.681 205.681 $2,100.00
12/31/95 $10.31 $0 10,000.000 $103,100.00 $2,100.00 205.681 $2,120.57
-------------------------------------------------------------- -----------------------
CAPITAL GAINS TOTALS
-------------------------------------------------------------- -----------------------
CG/Sh Total $ Cuml $ Sh Reinv Cuml Sh Value Sh Shares Value
-------------------------------------------------------------- -----------------------
$0.00 0.000 $0.00 10,000.000 $100,000.00
$0.00 0.000 $0.00 10,000.000 $100,900.00
$0.00 0.000 $0.00 10,000.000 $102,400.00
$0.00 0.000 $0.00 10,000.000 $104,000.00
$0.027 $270.00 $270.00 26.445 26.445 $270.00 10,232.125 $104,470.00
$270.00 26.445 $272.64 10,232.125 $105,493.21
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> BRINSON U.S. BOND FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> AUG-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 9,705,012
<INVESTMENTS-AT-VALUE> 9,885,995
<RECEIVABLES> 473,926
<ASSETS-OTHER> 69,162
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,429,083
<PAYABLE-FOR-SECURITIES> 1,180,053
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 1,180,053
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,985,395
<SHARES-COMMON-STOCK> 880,184
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 7,906
<ACCUMULATED-NET-GAINS> 90,558
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 180,983
<NET-ASSETS> 9,249,030
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 190,503
<OTHER-INCOME> 0
<EXPENSES-NET> 16,979
<NET-INVESTMENT-INCOME> 173,524
<REALIZED-GAINS-CURRENT> 113,897
<APPREC-INCREASE-CURRENT> 180,983
<NET-CHANGE-FROM-OPS> 468,404
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 173,524
<DISTRIBUTIONS-OF-GAINS> 23,339
<DISTRIBUTIONS-OTHER> 7,906
<NUMBER-OF-SHARES-SOLD> 867,974
<NUMBER-OF-SHARES-REDEEMED> 12,625
<SHARES-REINVESTED> 19,835
<NET-CHANGE-IN-ASSETS> 9,198,030
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14,076
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 130,277
<AVERAGE-NET-ASSETS> 8,428,340
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .20
<PER-SHARE-GAIN-APPREC> .35
<PER-SHARE-DIVIDEND> .21
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.31
<EXPENSE-RATIO> .60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 18
<NAME> SWISSKEY U.S. BOND FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> AUG-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 9,705,012
<INVESTMENTS-AT-VALUE> 9,885,995
<RECEIVABLES> 473,926
<ASSETS-OTHER> 69,162
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,429,083
<PAYABLE-FOR-SECURITIES> 1,180,053
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 1,180,053
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,985,395
<SHARES-COMMON-STOCK> 16,961
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 7,906
<ACCUMULATED-NET-GAINS> 90,558
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 180,983
<NET-ASSETS> 9,249,030
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 190,503
<OTHER-INCOME> 0
<EXPENSES-NET> 16,979
<NET-INVESTMENT-INCOME> 173,524
<REALIZED-GAINS-CURRENT> 113,897
<APPREC-INCREASE-CURRENT> 180,983
<NET-CHANGE-FROM-OPS> 468,404
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 173,524
<DISTRIBUTIONS-OF-GAINS> 23,339
<DISTRIBUTIONS-OTHER> 7,906
<NUMBER-OF-SHARES-SOLD> 16,640
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 221
<NET-CHANGE-IN-ASSETS> 9,198,030
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14,076
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 130,277
<AVERAGE-NET-ASSETS> 8,428,340
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .20
<PER-SHARE-GAIN-APPREC> .34
<PER-SHARE-DIVIDEND> .21
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.30
<EXPENSE-RATIO> 1.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
