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LOGO THE BRINSON FUNDS
209 South LaSalle Street
Chicago, IL 60604-1295
PROSPECTUS
FEBRUARY 11, 1998
AS SUPPLEMENTED APRIL 7, 1998 AND JUNE 9, 1998
This Prospectus describes the BRINSON FUND-CLASS N SHARES of the investment
portfolios offered by The Brinson Funds (the "Trust"). The Trust is an open-
end management investment company advised by Brinson Partners, Inc. ("Brinson
Partners" or the "Advisor"), which currently offers eight distinct investment
portfolios: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced
Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Bond Fund
and Non-U.S. Equity Fund (each a "Series" and collectively, the "Series").
Each Series offers three separate classes of shares-the Brinson Fund-Class N,
the Brinson Fund-Class I and the SwissKey Fund class. The Brinson Fund-Class N
shares of the Series are referred to herein as the: Brinson Global Fund,
Brinson Global Equity Fund, Brinson Global Bond Fund, Brinson U.S. Balanced
Fund, Brinson U.S. Equity Fund, Brinson U.S. Large Capitalization Equity Fund,
Brinson U.S. Bond Fund and Brinson Non-U.S. Equity Fund (each a "Fund" and
collectively, the "Brinson Funds" or "Funds"). This Prospectus pertains only
to the Brinson Fund-Class N shares, which do not have a sales load, but are
subject to annual 12b-1 plan expenses. The Brinson Fund-Class I 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 I shares may be obtained by calling 1-800-
448-2430. The SwissKey Fund class shares do not have a sales load, but have
slightly higher Rule 12b-1 fees and a lower minimum investment requirement.
Further information relating to the SwissKey Fund class shares may be obtained
by calling 1-800-SWISSKEY.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Class N shares of any of the Brinson
Funds. Investors should read and retain this Prospectus for future reference.
Additional information about the Funds and the other classes of shares of the
Trust's investment portfolios is contained in the Statement of Additional
Information dated February 11, 1998, as amended from time to time, which has
been filed with the U.S. Securities and Exchange Commission and is available
upon request and without charge from the Trust at the addresses and telephone
numbers below. The Statement of Additional Information is incorporated by
reference into this Prospectus. The Statement of Additional Information,
material incorporated by reference into this Prospectus, and other information
regarding the Trust and each of the Series is maintained electronically with
the U.S. Securities and Exchange Commission at its Internet Web site
(http://www.sec.gov).
AN INVESTMENT IN ANY OF 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. AN
INVESTMENT IN ANY SERIES INVOLVES INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S.
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE U.S. SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITER: ADVISOR:
Funds Distributor, Inc. Brinson Partners, Inc.
60 State Street 209 South LaSalle Street
Suite 1300 Chicago, IL 60604-1295
Boston, MA 02109 1-800-448-2430
1-800-448-2430
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Annual Fund Operating Expenses............................................. 3
Prior Performance of Investment Advisor.................................... 5
Description of the Funds................................................... 7
Investment Objectives and Policies......................................... 7
Global Fund.............................................................. 7
Global Equity Fund....................................................... 8
Global Bond Fund......................................................... 8
U.S. Balanced Fund....................................................... 9
U.S. Equity Fund......................................................... 9
U.S. Large Capitalization Equity Fund.................................... 8
U.S. Bond Fund........................................................... 10
Non-U.S. Equity Fund..................................................... 10
Investment Considerations and Risks........................................ 11
Management of the Trust.................................................... 14
Portfolio Management....................................................... 15
Administration of the Trust................................................ 15
Purchase of Shares......................................................... 17
Account Options............................................................ 19
Redemption of Shares....................................................... 19
Net Asset Value............................................................ 22
Distribution Plan.......................................................... 23
Dividends, Distributions and Taxes......................................... 24
General Information........................................................ 26
Performance Information.................................................... 27
Appendix A................................................................. 29
</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.
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ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
BRINSON FUND-CLASS N SHARES
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING EXPENSES
MANAGEMENT FEES 12B-1 OTHER EXPENSES (AFTER FEE WAIVER AND/OR
(AFTER FEE WAIVER)/1/ EXPENSES/2/ (AFTER REIMBURSEMENT)/3/ EXPENSE REIMBURSEMENT)
--------------------- ----------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
Brinson Global Fund..... 0.80% 0.25% 0.19% 1.24%
Brinson Global Equity
Fund................... 0.55% 0.25% 0.45% 1.25%
Brinson Global Bond
Fund................... 0.33% 0.25% 0.57% 1.15%
Brinson U.S. Balanced
Fund................... 0.62% 0.25% 0.18% 1.05%
Brinson U.S. Equity
Fund................... 0.61% 0.25% 0.19% 1.05%
Brinson U.S. Large Capi-
talization Equity Fund. 0.70% 0.25% 0.10% 1.05%
Brinson U.S. Bond Fund.. 0.00% 0.25% 0.60% 0.85%
Brinson Non-U.S. Equity
Fund................... 0.80% 0.25% 0.20% 1.25%
</TABLE>
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/1/Pursuant to the terms of the Investment Advisory Agreements between the
Trust on behalf of each Series and the Advisor, the Advisor is entitled to
receive a monthly fee at the following annual rates for each of the Global
Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity
Fund, U.S. Large Capitalization Equity Fund, U.S. Bond Fund and Non-U.S.
Equity Fund: 0.80%, 0.80%, 0.75%, 0.70%, 0.70%, 0.70%, 0.50% and 0.80%,
respectively. Brinson Partners has agreed irrevocably to waive its fees and
reimburse certain expenses so that total operating expenses, with the
exception of 12b-1 expenses, of the Brinson Global Fund, Brinson Global
Equity Fund, Brinson Global Bond Fund, Brinson U.S. Balanced Fund, Brinson
U.S. Equity Fund, U.S. Large Capitalization Equity Fund, Brinson U.S. Bond
Fund and Brinson Non-U.S. Equity Fund will never exceed 1.10%, 1.00%,
0.90%, 0.80%, 0.80%, 0.80%, 0.60% and 1.00%, respectively. Absent these fee
waivers and expense reimbursements, the total operating expenses for the
Brinson Fund-Class N shares of the Series for the fiscal year ended June
30, 1997 would have been 1.50% - Global Equity Fund, 1.57% - Global Bond
Fund, 1.13% - U.S. Balanced Fund, 1.14% - U.S. Equity Fund and 1.90% - U.S.
Bond Fund. The fees and expenses for the Brinson U.S. Large Capitalization
Equity Fund are based on estimates.
/2/For purposes of this Table, "12b-1 Expenses" is comprised of an asset-based
sales charge of 0.25% of average daily net assets of each Series. See
"Distribution Plan."
/3/The Brinson Fund-Class N shares commenced operations on June 30, 1997.
Therefore, for the purpose of the table above, "Other Expenses" for the
Brinson Fund-Class N shares of a Fund are based on the operating expenses for
the Brinson Fund-Class I and SwissKey Fund class shares of the same Fund for
the fiscal year ended June 30, 1997.
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 Brinson Funds may pay more than the economic equivalent of
the maximum front-end sales charges permitted by the NASD. This amount also
includes service fees.
3
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EXAMPLE: Based on the level of expenses listed above after fee waivers and
reimbursements, the total expenses relating to an investment of $1,000 would
be as follows assuming a 5% annual return and redemption at the end of each
time period.
<TABLE>
<CAPTION>
NAME OF FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
Brinson Global Fund............................. $13 $39 $68 $150
Brinson Global Equity Fund...................... $13 $40 $69 $151
Brinson Global Bond Fund........................ $12 $37 $63 $140
Brinson U.S. Balanced Fund...................... $11 $33 $58 $128
Brinson U.S. Equity Fund........................ $11 $33 $58 $128
Brinson U.S. Large Capitalization Equity Fund... $11 $33 $58 $128
Brinson U.S. Bond Fund.......................... $ 9 $27 $47 $105
Brinson Non-U.S. Equity Fund.................... $13 $40 $69 $151
</TABLE>
The foregoing table is designed to assist the investor in understanding the
various costs and expenses that a shareholder will bear directly or
indirectly.
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THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE INDICATED.
MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, A FUND'S ACTUAL
PERFORMANCE WILL VARY AND MAY RESULT IN ACTUAL RETURNS GREATER OR LESS THAN
5%.
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4
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PRIOR PERFORMANCE OF INVESTMENT ADVISOR
The following table sets forth the Investment Advisor's performance data
relating to the historical performance of funds contained within an
institutional collective investment trust ("CIT") (described below) managed by
the Investment Advisor. Such CITs have investment objectives, policies,
strategies and risks substantially similar to those of the various Series of
The Brinson Funds. The data is provided to illustrate the past performance of
the Investment Advisor in managing investment portfolios which are
substantially similar to each applicable Series of The Brinson Funds as
measured against specified market indices.
The Investment Advisor adopted the Performance Presentation Standards of the
Association for Investment Management and Research (AIMR Standards) as of
January 1, 1993. The CIT returns presented in this prospectus are the
responsibility of the Investment Advisor. They are presented in compliance
with the Performance Presentation Standards of the Association for Investment
Management and Research (AIMR--PPS(TM)). AIMR has not been involved with the
preparation or review of these returns.
Investment results are time-weighted performance calculations representing
total return. Returns are calculated using geometric linking of monthly
returns. Each composite is a single entity composite, consisting of the assets
of each applicable fund of the Brinson Trust Company Collective Investment
Trust for Pension and Profit Sharing Trusts, or its predecessors, which may be
a single client. Clients must be an ERISA or governmental employee benefit
plan in order to qualify to invest in a CIT. Composites are valued monthly,
taking into account cash flows. All realized and unrealized capital gains and
losses, as well as all dividends and interest from investments and cash
balances, are included. Investment transactions are accounted for on a trade
date basis. Total returns for the CIT composites exclude the impact of
administrative expenses and the impact of any income taxes an investor might
have incurred as a result of taxable ordinary income and capital gains
realized by the CIT.
The composite for each CIT is composed of all actual fee-paying,
discretionary client portfolios invested in the CIT. No alterations of
composites as presented here have occurred due to changes in personnel.
Accounts of all sizes invested in each CIT are included in composite
performance and no minimum account relationship size was set for inclusion in
the composites as the individual account size does not impact portfolio
management style. CITs are not subject to certain expenses, investment
limitations, diversification requirements and restrictions to which the Series
are subject and which are imposed by the Investment Company Act of 1940 (the
"Act") and the Internal Revenue Code. Had such expenses, limitations,
requirements and restrictions been applicable to the CITs, the performance
results of the CIT composites could have been adversely affected. The CITs
performance presented does not represent the historical performance of the
Series and should not be interpreted as indicative of future performance of
the Series.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
--------------------------
ONE TWO THREE FIVE TEN
TOTAL RETURNS AS OF JUNE 30, 1997 YEAR YEARS YEARS YEARS YEARS
- --------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Global Securities Portfolio/1/............... 19.18% 18.43% 16.71% 12.72% 12.86%
Brinson Global Fund/2/....................... 18.79 17.58 15.88 NA NA
Global Securities Markets Index/3/........... 18.00 16.71 16.86 13.83 11.16
Global Equity Portfolio/1/................... 22.01 24.01 17.66 14.24 12.38
Brinson Global Equity Fund/2/................ 21.26 23.44 17.35 NA NA
MSCI World Equity (Free) Index/3/, /4/....... 22.64 20.77 17.48 16.07 9.84
Global Bond Portfolio/1/..................... 7.78 10.05 10.43 8.49 9.73
Brinson Global Bond Fund/2/.................. 7.71 9.59 10.17 NA NA
Salomon World Govt Bond Index/3/............. 3.89 2.11 7.39 7.64 8.89
U.S. Balanced Portfolio/1/................... 16.43 15.56 15.58 12.27 12.76
Brinson U.S. Balanced Fund/2/................ 15.50 14.51 NA NA NA
U.S. Balanced Index/3/....................... 22.07 20.35 20.22 14.85 12.30
U.S. Equity Fund/1/.......................... 32.86 32.18 28.84 22.38 17.21
Brinson U.S. Equity Fund/2/.................. 31.87 31.22 27.88 NA NA
Wilshire 5000/3/............................. 29.32 27.76 26.74 19.07 13.96
</TABLE>
5
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<TABLE>
<CAPTION>
AVERAGE ANNUAL
--------------------------
ONE TWO THREE FIVE TEN
AS OF JUNE 30, 1997 YEAR YEARS YEARS YEARS YEARS
- ------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
U.S. Large Capitalization Equity Portfo-
lio/1/, /5/................................ 36.29% 35.46% 31.46% 24.29% 18.52%
S & P 500/3/................................ 34.56 30.24 28.83 19.73 14.64
U.S. Bond Portfolio/1/...................... 8.88 6.98 8.67 7.34 9.18
Brinson U.S. Bond Fund/2/................... 8.45 NA NA NA NA
Salomon BIG Index/3/........................ 8.15 6.56 8.52 7.18 8.87
Non-U.S. Equity Portfolio/1/................ 20.57 22.94 15.00 13.35 10.25
Brinson Non-U.S. Equity Fund/2/............. 20.27 21.94 14.10 NA NA
MSCI Non-U.S. Equity (Free) Index/3/, /4/... 13.64 13.63 9.79 13.06 6.79
</TABLE>
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FOOTNOTES:
/1/Performance figures for the Investment Advisor's composite accounts are
net of advisory fees. Advisory fees are determined by taking the average
account size within the fund at September 30, 1997 and applying the
standard fee schedule. Performance figures for the Investment Advisor's
composite accounts gross of fees would be:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
--------------------------
ONE TWO THREE FIVE TEN
YEAR YEARS YEARS YEARS YEARS
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Global Securities Portfolio............... 19.91% 19.16% 17.44% 13.45% 13.59%
Global Equity Portfolio................... 22.86 24.86 18.51 15.09 13.23
Global Bond Portfolio..................... 8.35 10.62 11.00 9.06 10.30
U.S. Balanced Portfolio................... 17.17 16.30 16.32 13.01 13.50
U.S. Equity Fund.......................... 33.44 32.76 29.42 22.96 17.79
U.S. Large Capitalization Equity Portfo-
lio....................................... 36.94 36.11 32.11 24.94 19.17
U.S. Bond Portfolio....................... 9.20 7.30 8.99 7.66 9.50
Non-U.S. Equity Portfolio................. 21.29 23.66 15.72 14.07 10.97
</TABLE>
/2/Total returns include reinvestment of all capital gain and income
distributions. 12b-1 fee applies after June 30, 1997. Inception dates and
average annual returns since each Fund's inception date are as follows:
Brinson Global Fund, 8/31/92, 12.10%; Brinson Global Equity Fund, 1/31/94,
13.49%; Brinson Global Bond Fund, 7/31/93, 7.48%; Brinson U.S. Balanced
Fund, 12/31/94, 17.40%; Brinson U.S. Equity Fund, 2/28/94, 23.61%; Brinson
U.S. Bond Fund, 8/31/95, 6.58%; and Brinson Non-U.S. Equity Fund, 8/31/93,
10.16%.
/3/Global Securities Markets Index, an un-managed index compiled by the
Advisor, constructed as follows: 40% Wilshire 5000 Index; 22% MSCI Non-
U.S. Equity (Free) Index; 19% Salomon BIG Bond Index; 2% International
Dollar Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged);
2% JP Morgan EMBI+; 3% IFC Investable Index; and 3% High Yield Bond Index.
MSCI World Equity (Free) Index is an un-managed market driven broad based
index which includes U.S. and non-U.S. equity markets in terms of
capitalization and performance. Salomon Brothers World Government Bond
Index is an un-managed market driven index which measures the broad global
fixed income markets invested in debt issues of U.S. and non-U.S.
governments, governmental entities and supranationals. U.S. Balanced
Index, an un-managed index compiled by the Advisor, constructed as
follows: 65% Wilshire 5000 Index and 35% Salomon Brothers Broad Investment
Grade Bond Index. Wilshire 5000 Index is an un-managed broad weighted
index which includes all U.S. common stocks. S & P 500 Index is an un-
managed index containing common stocks of 500 industrial, transportation,
utility and financial companies, regarded as generally representative of
the U.S. stock market. Salomon Brothers Broad Investment Grade Bond Index
is an un-managed market driven broad based index which includes U.S. bonds
with over one year to maturity. MSCI Non-U.S. Equity (Free) Index is an
un-managed market driven broad based index which includes non-U.S. equity
markets in terms of capitalization and performance.
/4/Beginning 1/31/88 these indices are "free".
/5/Prior to 6/30/97, returns represent the large capitalization holdings of
our audited U.S. Equity Portfolio (inception date as of 12/31/81).
6
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DESCRIPTION OF THE FUNDS
The investment objective of each Series is fundamental and may not be
changed without the affirmative vote of the holders of a majority of the
outstanding voting securities of the Series, as defined in the Act. Unless
otherwise stated in this Prospectus or the Statement of Additional
Information, each Series' investment policies are not fundamental and may be
changed without shareholder approval. There can be no assurance that a Series
will achieve its investment objective.
None of the Series intends to concentrate its investments in a particular
industry. None of the Series intends to issue senior securities as defined in
the Act, except that each Series may engage in borrowing activities as defined
in Appendix A and in the Statement of Additional Information. Each Series'
investment objective and its policies concerning portfolio lending, borrowing,
the issuance of senior securities and concentration are "fundamental," which
means that they may not be changed without the affirmative vote of the holders
of a majority of the Series' outstanding voting securities (as defined in the
Act).
INVESTMENT OBJECTIVES AND POLICIES
GLOBAL FUND
INVESTMENT OBJECTIVE
The Global Fund's investment objective is to maximize total return,
consisting of capital appreciation and current income. The Series will attempt
to control risk while seeking to achieve its investment objective. As a global
fund, at least 65% of the Series' total assets will be invested in securities
of issuers in at least three countries, one of which may be the United States.
The Series may utilize a wide range of equity, debt and money market
securities in domestic and foreign markets, and the Series may invest in other
open-end investment companies advised by Brinson Partners. The Series may
enter into repurchase agreements and reverse repurchase agreements, and engage
in futures, options and currency transactions for hedging and other
permissible purposes, as more fully described in "Investment Consideration and
Risks" and Appendix A in this Prospectus, and in the Statement of Additional
Information.
The Series is a diversified portfolio that seeks to achieve its objective by
pursuing active asset allocation strategies across global equity and fixed
income markets and active security selection within each market. These
decisions are undertaken relative to the Global Securities Markets Index (the
"Global Benchmark"), which is compiled by Brinson Partners.
The Global Benchmark consists of eight distinct asset classes representing
the primary wealth-holding public securities markets. These asset classes are
U.S. equities, non-U.S. equities, emerging markets equities, U.S. bonds, non-
U.S. bonds, emerging markets bonds, high yield bonds and cash equivalents.
Each asset class is represented in the Global Benchmark by an index compiled
by an independent data provider. In order to compile the Global Benchmark, the
Advisor determines current relative market capitalizations in the world
markets (U.S. equities, non-U.S. equities, emerging markets equities, U.S.
bonds, non-U.S. bonds, emerging markets bonds, high yield bonds and cash) and
then weights each relevant index. Based on this weighting, the Advisor
determines the return of the relative indices, applies the index weighting and
then determines the return of the Global Benchmark. From time to time, the
Advisor may substitute an equivalent index within a given asset class when it
believes that such index more accurately reflects the relevant global market.
7
<PAGE>
Although it may invest anywhere in the world, it is expected that the
Series' assets will be primarily invested in equity markets listed in the
Morgan Stanley Capital International ("MSCI") World Equity (Free) Index. The
Series will primarily invest in fixed income markets listed in the Salomon
Brothers World Government Bond Index. The Series may invest up to 10% of its
net assets in equity and debt securities of emerging market issuers, or
securities with respect to which the return is derived from the equity or debt
securities of issuers in emerging markets.
GLOBAL EQUITY FUND
INVESTMENT OBJECTIVE
The Global Equity Fund's investment objective is to maximize total return,
consisting of capital appreciation and current income. The Series will attempt
to control risk while seeking to achieve its investment objective. As a global
fund, at least 65% of the Series' total assets will be invested in equity
securities of issuers in at least three countries, one of which may be the
United States. The Series may utilize a wide range of equity securities that
are traded on both domestic and foreign stock exchanges or, in the case of
domestic stocks, in the over-the-counter market. The Series may enter into
repurchase agreements and reverse repurchase agreements, and engage in
futures, options and currency transactions for hedging and other permissible
purposes, as more fully described in "Investment Considerations and Risks" and
Appendix A in this Prospectus, and in the Statement of Additional Information.
The Series is a diversified portfolio that seeks to achieve its objective by
pursuing an active asset allocation strategy across global equity markets,
active management of currency exposures and active security selection within
each market. The benchmark for the Series is the MSCI World Equity (Free)
Index (the "Global Equity Benchmark"). The Global Equity Benchmark is a market
driven broad based index which includes U.S. and non-U.S. equity markets in
terms of capitalization and performance. The Global Equity Benchmark is
designed to provide a representative total return for all major stock
exchanges located inside and outside the United States. Although it may invest
anywhere in the world, it is expected that the Series' assets will primarily
be invested in equity markets listed in the Global Equity Benchmark. From time
to time, the Advisor may substitute securities in an equivalent index when it
believes that such securities in the index more accurately reflect the
relevant global market.
GLOBAL BOND FUND
INVESTMENT OBJECTIVE
The Global Bond Fund's investment objective is to maximize total return,
consisting of capital appreciation and current income. The Series will attempt
to control risk while seeking to achieve its investment objective. As a global
fund, at least 65% of the Series' total assets will be invested in debt
securities with an initial maturity of more than one year of issuers in at
least three countries, one of which may be the United States. The Series seeks
to achieve this objective by investing primarily in debt securities that may
also provide the potential for capital appreciation. The Series may enter into
repurchase agreements and reverse repurchase agreements, and may engage in
futures, options and currency transactions for hedging and other permissible
purposes, as more fully described in "Investment Considerations and Risks" and
Appendix A in this Prospectus, and in the Statement of Additional Information.
The Series is a non-diversified portfolio as described in "Investment
Considerations and Risks-Non-Diversified Status."
The benchmark for the Series is the Salomon Brothers World Government Bond
Index (the "Global Bond Benchmark"). The Global Bond Benchmark is a market
driven index which measures the broad global fixed
8
<PAGE>
income markets invested in debt issues of U.S. and non-U.S. governments,
governmental entities and supranationals. Although it may invest anywhere in
the world, it is expected that the Series' assets will be primarily invested
in fixed income markets listed in the Global Bond Benchmark. From time to
time, the Advisor may substitute securities in an equivalent index when it
believes that such securities in the index more accurately reflect the
relevant global fixed income securities market.
U.S. BALANCED FUND
INVESTMENT OBJECTIVE
The U.S. Balanced Fund's investment objective is to maximize total return,
consisting of capital appreciation and current income. In seeking to achieve
its investment objective, the Series attempts to control risk. Under normal
circumstances, the Series will invest at least 25% of its net assets in fixed
income securities. The Series may utilize a wide range of equity, debt and
money market securities. The Series may also invest in equity securities,
including warrants, preferred stock and securities convertible into equity
securities. The Series may enter into repurchase agreements and reverse
repurchase agreements, and may engage in futures and options for hedging and
other permissible purposes, as more fully described in "Investment
Considerations and Risks" and Appendix A in this Prospectus, and in the
Statement of Additional Information. It is not the policy of the Series to
take unreasonable risks to obtain speculative or aggressively high returns.
The Series is a diversified portfolio that seeks to achieve its objective by
pursuing active asset allocation strategies across U.S. equity and fixed
income markets and active security selection within each market. These
decisions are undertaken relative to the U.S. Balanced Mutual Fund Index (the
"U.S. Balanced Benchmark"), which is compiled by Brinson Partners. The U.S.
Balanced Benchmark represents a fixed composite of 65% Wilshire 5000 Index,
30% Salomon Brothers Broad Investment Grade Bond Index and 5% 30-day Treasury
Bill Index. From time to time, the Advisor may substitute an equivalent index
within a given asset class when the Advisor believes that such new index more
accurately reflects the relevant U.S. market.
U.S. EQUITY FUND
INVESTMENT OBJECTIVE
The U.S. Equity Fund's investment objective is to maximize total return,
consisting of capital appreciation and current income, while controlling risk.
Under normal circumstances, at least 65% of the Series' total assets will be
invested in equity securities of U.S. companies. The Series is a diversified
portfolio that seeks to achieve its objective by investing in a wide range of
equity securities of U.S. companies that are traded on major stock exchanges
as well as in the over-the-counter market. The Series may engage in futures
and options for hedging and other permissible purposes, as more fully
described in "Investment Considerations and Risks" and Appendix A in this
Prospectus, and in the Statement of Additional Information. The benchmark for
the Series is the Wilshire 5000 Index (the "U.S. Equity Benchmark"). The U.S.
Equity Benchmark is a broad weighted index which includes all U.S. common
stocks. The U.S. Equity Benchmark is designed to provide a representative
indication of the capitalization and return for the U.S. equity market.
U.S. LARGE CAPITALIZATION EQUITY FUND
INVESTMENT OBJECTIVE
The U.S. Large Capitalization Equity Fund's investment objective is to
maximize total return, consisting of capital appreciation and current income,
while controlling risk. Under normal circumstances, at least 65% of the
Series' total assets will be invested in large capitalization equity
securities of U.S. companies. The Advisor defines
9
<PAGE>
large capitalization companies as those with market capitalizations of $6.1
billion or more at the time of the Series' investment. Companies whose
capitalization falls below this level after purchase continue to be considered
large capitalization companies for purposes of the 65% policy. The Series is a
non-diversified portfolio as described in "Investment Considerations and Risk
- - Non-Diversified Status." The Series seeks to achieve its objective by
investing in a wide range of equity securities of U.S. companies that are
traded on major stock exchanges as well as in the over-the-counter market. The
Series may engage in futures and options for hedging and other permissible
purposes, as more fully described in "Investment Considerations and Risks" and
Appendix A in this Prospectus, and in the Statement of Additional Information.
The benchmark for the Series is the Standard & Poor's 500 Stock Index (the
"U.S. Large Capitalization Equity Benchmark"). The U.S. Large Capitalization
Equity Benchmark is a broad weighted index which includes primarily U.S.
common stocks. The U.S. Large Capitalization Equity Benchmark is designed to
provide a representative indication of the capitalization and return for the
large capitalization U.S. equity market.
U.S. BOND FUND
INVESTMENT OBJECTIVE
The U.S. Bond Fund's investment objective is to maximize total return,
consisting of capital appreciation and current income, while controlling risk.
As a matter of fundamental policy, under normal circumstances, the Series
intends to invest at least 65% of its total assets in U.S. debt securities
with an initial maturity of more than one year. The Series is a diversified
portfolio that seeks to achieve its objective by investing primarily in fixed
income securities, which may also provide the potential for capital
appreciation. The Series may also engage in futures and options transactions
for hedging and other permissible purposes, as more fully described in
"Investment Considerations and Risks" and Appendix A in this Prospectus, and
in the Statement of Additional Information.
The Series may invest in a broad range of fixed income securities, including
debt securities of the U.S. government, together with its agencies and
instrumentalities and the debt securities of U.S. corporations. A majority of
the fixed income securities in which the Series will invest will possess a
minimum rating of BBB- by Standard & Poor's Ratings Group ("S&P") or Baa3 by
Moody's Investors Services, Inc. ("Moody's") or, if unrated, will be
determined to be of comparable quality by Brinson Partners. Such securities
are considered to be investment grade. Other fixed income securities in which
the Series may invest include zero coupon securities, mortgage-backed
securities, asset-backed securities and when-issued securities. The Series may
invest a portion of its assets in short-term debt securities (including
repurchase and reverse repurchase agreements) of corporations, the U.S.
government or its agencies or instrumentalities, and banks and finance
companies.
The benchmark for the Series is the Salomon Brothers Broad Investment Grade
Bond Index (the "U.S. Bond Benchmark"). The U.S. Bond Benchmark is a market
driven broad based index which includes U.S. bonds with over one year to
maturity. From time to time, the Advisor may substitute securities in an
equivalent index when it believes that such securities in the index more
accurately reflect the relevant fixed income securities market.
NON-U.S. EQUITY FUND
INVESTMENT OBJECTIVE
The Non-U.S. Equity Fund's investment objective is to maximize total return,
consisting of capital appreciation and current income, by investing primarily
in the equity securities of non-U.S. issuers. Under
10
<PAGE>
normal conditions, at least 65% of the Series' total assets will be invested
in equity securities of issuers in at least three countries other than the
United States. In seeking to achieve its investment objective while
controlling risk, the Series may invest in a wide range of equity securities,
including: American, European and Global Depositary Receipts, common and
preferred stock; debt securities convertible into or exchangeable for common
stock; and securities such as warrants or rights that are convertible into
common stock. The Series may engage in futures, options and currency
transactions for hedging and other permissible purposes, as more fully
described in "Investment Considerations and Risks" and Appendix A in this
Prospectus, and in the Statement of Additional Information.
The Series is a diversified portfolio that seeks to achieve its objective by
investing primarily in the equity securities of non-U.S. issuers. The
benchmark for the Series is the MSCI Non-U.S. Equity (Free) Index (the "Non-
U.S. Equity Benchmark"). The Non-U.S. Equity Benchmark is a market driven
broad based index which includes non-U.S. equity markets in terms of
capitalization and performance. From time to time, the Advisor may substitute
securities in an equivalent index when it believes that such securities in the
index more accurately reflect the relevant international market. Although it
may invest anywhere in the world, it is expected that the Series' assets will
be primarily invested in the equity markets included in the MSCI Non-U.S.
Equity (Free) Index.
INVESTMENT CONSIDERATIONS AND RISKS
The following provides information about the types of instruments in which
the Series may invest, strategies employed by Brinson Partners in its attempt
to attain each Series' investment objective and a summary of related risks.
Shareholders should understand that all investments involve risks and there
can be no guarantee against loss resulting from an investment in the Series,
nor can there be any assurance that the Series will be able to attain their
investment objectives. A complete list of the Series' investment restrictions
and more detailed information about the Series' investments are contained in
Appendix A in this Prospectus, and in the Statement of Additional Information.
EQUITY SECURITIES (GLOBAL FUND, GLOBAL EQUITY FUND, U.S. BALANCED FUND, U.S.
EQUITY FUND, U.S. LARGE CAPITALIZATION EQUITY FUND AND NON-U.S. EQUITY FUND) -
Equity securities fluctuate in value as a result of various factors, which
are often unrelated to the value of the issuer of the securities. These
fluctuations may be pronounced. The Global Fund may invest in small market
capitalization companies and in equity securities that are considered by the
Advisor to be in their post-venture capital stage. These securities may have
limited marketability, and therefore, may be more volatile. Fluctuations in
the value of the Series' equity investments will affect the value of their
shares and thus the Funds' total returns to investors.
FIXED INCOME SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND
AND U.S. BOND FUND) - All fixed income securities are subject to two types of
risks: credit risk and interest rate risk. The credit risk relates to the
ability of the issuer to meet interest or principal payments or both as they
come due. The interest rate risk refers to the fluctuations in the net asset
value of any portfolio of fixed income securities resulting from the inverse
relationship between the price and yield of fixed income securities; that is,
when the general level of interest rates rises, the prices of outstanding
fixed income securities decline, and when interest rates fall, prices rise.
FOREIGN SECURITIES AND CURRENCY CONSIDERATIONS (GLOBAL FUND, GLOBAL EQUITY
FUND, GLOBAL BOND FUND AND NON-U.S. EQUITY FUND) - Investments in securities
of foreign issuers may involve greater risks than those of U.S. issuers. There
is generally less information available to the public about non-U.S. companies
and less government regulation and supervision of non-U.S. stock exchanges,
brokers and listed companies. Non-U.S.
11
<PAGE>
companies are not subject to uniform global accounting, auditing and financial
reporting standards, practices and requirements. Securities of some non-U.S.
companies are less liquid and their prices more volatile than securities of
comparable U.S. companies. Securities trading practices abroad may offer less
protection to investors. Settlement of transactions in some non-U.S. markets
may be delayed or may be less frequent than in the United States, which could
affect the liquidity of the Series' portfolios. Additionally, in some non-U.S.
countries, there is the possibility of expropriation or confiscatory taxation,
limitations on the removal of securities, property or other assets of the
Series, political or social instability, or diplomatic developments which
could affect U.S. investments in those countries. The Series intend to
diversify broadly among countries, but reserve the right to invest a
substantial portion of their assets in one or more countries if economic and
business conditions warrant such investments. Brinson Partners will take these
factors into consideration in managing the Series' investments. Because the
Series will keep their books and records in U.S. dollars, the Series will be
required, for federal income tax purposes, to account for income and losses on
all transactions involving foreign currency under Section 988 of the Internal
Revenue Code of 1986, as amended, and the applicable U.S. Treasury
Regulations, so that generally any component of a gain or loss attributable to
currency fluctuations results in ordinary income or loss and not capital gain
or loss.
The U.S. dollar market value of the Series' investments and of dividends and
interest earned by the Series may be significantly affected by changes in
currency exchange rates. Some currency prices may be volatile, and there is
the possibility of governmental controls on currency exchange or governmental
intervention in currency markets, which could adversely affect the Series.
Although the Series may attempt to manage currency exchange rate risks, there
is no assurance that the Series will do so at an appropriate time or that they
will be able to predict exchange rates accurately. For example, if the Series
increase their exposure to a currency and that currency's price subsequently
falls, such currency management may result in increased losses to the Series.
Similarly, if the Series decrease their exposure to a currency, and the
currency's price rises, the Series will lose the opportunity to participate in
the currency's appreciation. Each Series will manage currency exposures
relative to the normal currency allocation and will consider return and risk
of currency exposures relative to its respective Benchmark. In addition, if
the currency in which a security is denominated appreciates against the U.S.
dollar, the dollar value of the security will increase. Conversely, a decline
in the exchange rate of the currency would adversely affect the value of the
security expressed in dollars.
There are additional risks inherent in investing in less developed countries
which are applicable to the Global Fund. Compared to the United States and
other developed countries, emerging market countries may have relatively
unstable governments, economies based on only a few industries, and securities
markets that trade only a small number of securities and employ settlement
procedures different from those used in the United States. Prices on these
exchanges tend to be volatile and, in the past, securities in these countries
have offered greater potential for gain (as well as loss) than securities of
companies located in developed countries. Further, investments by foreign
investors are subject to a variety of restrictions in many emerging countries.
Emerging markets countries such as those in which the Global Fund may invest
have historically experienced and may continue to experience, high rates of
inflation, high interest rates, exchange rate fluctuations or currency
depreciation, large amounts of external debt, balance of payments and trade
difficulties and extreme poverty and unemployment. Additional factors which
may influence the ability or willingness to service debt include, but are not
limited to, a country's cash flow situation, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, its government's policy towards the
International Monetary Fund, the World Bank and other international agencies
and the political constraints to which a government debtor may be subject.
12
<PAGE>
FOREIGN CURRENCY TRANSACTIONS (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND
FUND AND NON-U.S. EQUITY FUND) - To manage exposure to currency fluctuations,
the Series may alter fixed income or money market exposures, enter into
forward currency exchange contracts, buy or sell options or futures relating
to foreign currencies and may purchase securities indexed to currency baskets.
The Series will also use these currency exchange techniques in the normal
course of business to hedge against adverse changes in exchange rates in
connection with purchases and sales of securities. Some of these strategies
may require the Series to set aside liquid assets in a segregated custodial
account to cover their obligations.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS (ALL SERIES) - The Series
may attempt to reduce the overall level of investment risk of particular
securities and attempt to protect against adverse market movements by
investing in futures, options and other derivative instruments. A derivative
instrument is commonly defined as a financial instrument whose performance and
value are derived, at least in part, from another source, such as the
performance of an underlying asset, a specific security or an index of
securities. The derivative instruments in which the Series may invest include
the purchase and writing of options on securities (including index options)
and options on foreign currencies, investing in futures contracts for the
purchase or sale of instruments based on financial indices, including interest
rate indices or indices of U.S. or foreign government securities, equity or
fixed income securities ("futures contracts"), forward contracts and swaps and
swap-related products such as equity index swaps, interest rate swaps,
currency swaps, and related caps, collars and floors.
The investment in futures, options, forward contracts, swaps and similar
strategies by the Series will depend on Brinson Partners' judgment as to the
potential risks and rewards of different types of strategies, and it should be
recognized that the use of these instruments exposes the Series to additional
investment risks and transaction costs. If the Advisor incorrectly analyzes
the market conditions or does not employ the appropriate strategy with respect
to these instruments, the Series could be left in a less favorable position.
For example, gains and losses on investments in futures depend on the
Advisor's ability to predict correctly the direction of security prices,
interest rates and other economic factors. Additional risks inherent in the
use of futures, options and forward contracts include: adverse movements in
the prices of securities or currencies being hedged; the possible absence of a
liquid secondary market for any particular instrument at any time; and the
possible need to defer closing out certain hedge positions to avoid adverse
tax consequences. Options and futures can be volatile instruments and may not
perform as expected. A Series could experience losses if the prices of its
options and futures positions are poorly correlated with its other
investments. If a hedge is applied at an inappropriate time or price trends
are judged incorrectly, options and futures strategies may lower a Series'
return (i.e., options and futures may fail as hedging techniques in cases
where the price movements of the securities underlying the options and futures
do not follow the price movements of the portfolio securities subject to the
hedge). Options and futures traded on foreign exchanges generally are not
regulated by U.S. authorities and may offer less liquidity and less protection
to a Series in the event of default by the other party to the contract. The
loss from investing in futures transactions is potentially unlimited. A Series
does not intend to purchase put and call options that are traded on a national
stock exchange in an amount exceeding 5% of its net assets.
Each Series may invest in derivatives for hedging purposes, to maintain
liquidity, or in anticipation of changes in the composition of its portfolio
holdings. No Series will engage in derivative investments purely for
speculative purposes. A Series will invest in one or more derivatives only to
the extent that the instrument under consideration is judged by the Advisor to
be consistent with the Series' overall investment objective and policies. In
making such judgment, the potential benefits and risks will be considered in
relation to the Series' other portfolio investments.
Where not specified, investment limitations with respect to a Series'
derivative instruments will be consistent with that Series' existing
percentage limitations with respect to its overall investment policies and
restrictions.
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<PAGE>
The risks and policies of various types of derivative instruments permitted
for the Series, including options, futures, forward contracts and applicable
interest rate swaps, are described in greater detail in Appendix A in this
Prospectus, and in the Statement of Additional Information.
NON-DIVERSIFIED STATUS (GLOBAL BOND FUND AND U.S. LARGE CAPITALIZATION
EQUITY FUND) - Each Series is classified as a "non-diversified" investment
company under the Act, which means that the proportion of the Series' assets
that may be invested in the securities of a single issuer is not limited by
the Act. Since each Series may invest a larger portion of its assets in the
securities of a single issuer than investment companies that are classified as
diversified funds under the Act, an investment in the Global Bond Fund or in
the U.S. Large Capitalization Equity Fund may be subject to greater
fluctuations in value than an investment in a diversified fund.
MANAGEMENT OF THE TRUST
THE BOARD OF TRUSTEES
The Trust is a Delaware business trust. Under Delaware law, the Board of
Trustees has overall responsibility for managing the business and affairs of
the Trust. The Trustees 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 September 30, 1997, over $143.5 billion, primarily for pension
and profit sharing institutional accounts. Brinson Partners was organized in
1989 when it acquired the institutional asset management business of The First
National Bank of Chicago and First Chicago Investment Advisors, N.A. Brinson
Partners and its predecessor entities have managed domestic and international
investment assets since 1974 and global investment assets since 1982. Brinson
Partners has offices in Basel, Frankfurt, Geneva, London, Melbourne, New York,
Paris, Singapore, Sydney, Tokyo and Zurich, in addition to its principal
office at 209 South LaSalle Street, Chicago, IL 60604-1295. Brinson Partners
is an indirect wholly-owned subsidiary of Swiss Bank Corporation ("Swiss
Bank"). Swiss Bank, with headquarters in Basel, Switzerland, is an
internationally diversified organization with operations in many aspects of
the financial services industry. Brinson Partners also serves as the
investment advisor to nine other investment companies: Brinson Relationship
Funds, which includes fifteen investment portfolios (series); The Enterprise
Group of Funds, Inc. - International Growth Portfolio; Enterprise
Accumulation Trust - International Growth Portfolio; Fort Dearborn Income
Securities, Inc.; The Hirtle Callaghan International Trust - The International
Equity Portfolio; John Hancock Variable Series Trust I - International
Balanced Portfolio; Managed Accounts Services Portfolio Trust - Pace Large
Company Value Equity Investments; AON Funds - International Equity Fund; and
The Republic Funds - Republic Equity Fund.
Pursuant to its investment advisory agreements (the "Agreements") with the
Trust on behalf of each Series, Brinson Partners is entitled to receive a
monthly fee at various annual percentage rates of the Series' average daily
net assets, as described below, for providing investment advisory services.
Brinson Partners is responsible for paying its own expenses. Pursuant to the
Agreements, Brinson Partners is authorized, at its own expense, to obtain
statistical and other factual information and advice regarding economic
factors and trends from its foreign subsidiaries, but it does not generally
receive advice or recommendations regarding the purchase or sale of securities
from such subsidiaries.
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For providing investment advisory services during the fiscal year ended June
30, 1997 (with the exception of the Brinson U.S. Large Capitalization Equity
Fund, which had not commenced operations), Brinson Partners was entitled to
receive, under the Agreements, a monthly fee at an annual rate as follows of
the average daily net assets of the Funds:
<TABLE>
<S> <C>
Global Fund......................................................... 0.80%
Global Equity Fund.................................................. 0.80
Global Bond Fund.................................................... 0.75
U.S. Balanced Fund.................................................. 0.70
U.S. Equity Fund.................................................... 0.70
U.S. Large Capitalization Equity Fund............................... 0.70
U.S. Bond Fund...................................................... 0.50
Non-U.S. Equity Fund................................................ 0.80
</TABLE>
The fee payable to Brinson Partners by the Brinson Global, Brinson Global
Equity and Brinson Non-U.S. Equity Funds is higher than the advisory fees paid
by most other mutual funds, but is comparable to those of other mutual funds
with similar investment objectives. The Advisor, however, has irrevocably
agreed to waive its fees and reimburse certain expenses so that the total
operating expenses, with the exception of 12b-1 expenses, of the Brinson
Global Fund-Class N, Brinson Global Equity Fund-Class N, Brinson Global Bond
Fund-Class N, Brinson U.S. Balanced Fund-Class N, Brinson U.S. Equity Fund-
Class N, Brinson U.S. Large Capitalization Equity Fund-Class N, Brinson U.S.
Bond Fund-Class N and Brinson Non-U.S. Equity Fund-Class N will never exceed
1.10%, 1.00%, 0.90%, 0.80%, 0.80%, 0.80%, 0.60% and 1.00%, respectively.
PORTFOLIO MANAGEMENT
Investment decisions for the Series are made by an investment management
team at Brinson Partners. No member of the investment management team is
primarily responsible for making recommendations for portfolio purchases.
ADMINISTRATION OF THE TRUST
THE UNDERWRITER
Funds Distributor, Inc. ("FDI"), 60 State Street, Suite 1300, Boston, MA
02109, was engaged pursuant to an agreement dated February 5, 1997, for the
limited purpose of acting as underwriter to facilitate the filing of notices
regarding sale of the shares of the Trust under state securities laws and to
assist in the sale of shares. The fee for such service is borne by the
Advisor.
THE ADMINISTRATOR
ADMINISTRATIVE, ACCOUNTING, TRANSFER AGENCY AND CUSTODIAN SERVICES
The Trust, on behalf of each Series, has entered into a Multiple Services
Agreement (the "Services Agreement") with Morgan Stanley Trust Company
("MSTC"), One Pierrepont Plaza, Brooklyn, New York 11201, pursuant to which
MSTC is required to provide general administrative, accounting, portfolio
valuation, transfer agency and custodian services to the Series, including the
coordination and monitoring of any third party service providers.
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<PAGE>
MSTC provides custodian services for the securities and cash of the Series.
The custody fee schedule is based primarily on the net amount of assets held
during the period for which payment is being made plus a per transaction fee
for transactions during the period and out-of-pocket expenses.
As authorized under the Services Agreement, MSTC has entered into a Mutual
Funds Service Agreement (the "CGFSC Agreement") with Chase Global Funds
Services Company ("CGFSC"), a corporate affiliate of The Chase Manhattan Bank,
under which CGFSC provides administrative, accounting, portfolio valuation and
transfer agency services to the Series. CGFSC's business address is 73 Tremont
Street, Boston, Massachusetts 02108-3913. Subject to the supervision of the
Board of Trustees of the Trust, MSTC supervises and monitors such services
provided by CGFSC.
Pursuant to the CGFSC Agreement, CGFSC provides:
(1) administrative services, including providing the necessary office
space, equipment and personnel to perform administrative and clerical
services; preparing, filing and distributing proxy materials, periodic
reports to investors, registration statements and other documents; and
responding to Investor inquiries;
(2) accounting and portfolio valuation services, including the daily
calculation of the Fund's net asset value and the preparation of certain
financial statements; and
(3) transfer agency services, including the maintenance of each
investor's account records, responding to investors' inquiries concerning
accounts, processing purchases and redemptions of the Fund's shares, acting
as dividend and distribution disbursing agent and performing other service
functions. Shareholder inquiries should be made to the transfer agent at 1-
800-448-2430.
Also as authorized under the Services Agreement, MSTC has entered into a
sub-administration agreement (the "FDI Agreement") with FDI under which FDI
provides administrative assistance to the Series with respect to (i)
regulatory matters, including regulatory developments and examinations, (ii)
all aspects of the Series' day-to-day operations, (iii) office facilities,
clerical and administrative services, and (iv) maintenance of books and
records.
For its administrative, accounting, transfer agency and custodian services,
MSTC receives the following as compensation from the Trust on an annual basis:
0.0025% of the average daily U.S. assets of the Trust; 0.0525% of the average
daily non-U.S. assets of the Trust; 0.3250% of the average daily emerging
markets equity assets of the Trust; and 0.019% of the average daily emerging
markets debt assets of the Trust. MSTC receives an additional fee of 0.075% of
the average daily net assets of the Trust for administrative duties, the
latter subject to the expense limitation applicable to the Trust. No fee
(asset based or otherwise) is charged on any investments made by any fund into
any other fund sponsored or managed by the Advisor and assets of a fund that
are invested in another investment company or series thereof sponsored or
managed by the Advisor will not be counted in determining the 0.075%
administrative duties fee or the applicability of the expense limitation on
such fee. The foregoing fees include all out-of-pocket expenses or transaction
charges incurred by MSTC and any third party service provider in providing
such services. Pursuant to the CGFSC Agreement and the FDI Agreement, MSTC
pays CGFSC and FDI, respectively, for the services that CGFSC and FDI provide
to MSTC in fulfilling MSTC's obligations under the Services Agreement.
INDEPENDENT AUDITORS
Ernst & Young LLP, Chicago, Illinois, are the independent auditors of the
Trust.
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PURCHASE OF SHARES
Shares of the Funds may be purchased directly from the Trust at the net
asset value next determined after receipt of the order in proper form by the
transfer agent. There is no sales load in connection with the purchase of Fund
shares. The Trust reserves the right to reject any purchase order and to
suspend the offering of shares of the Brinson Fund-Class N shares or any
Series. The Funds will not accept a check endorsed over by a third-party. The
minimum initial investment for Fund shares is $1,000,000. The minimum initial
investment for Individual Retirement Accounts ("IRAs") is $2,000. The Trust
reserves the right to vary the initial investment minimum and impose minimums
for additional investments in any of the Funds at any time. In addition,
Brinson Partners may waive the minimum initial investment requirement for any
investor.
The Brinson Funds may be purchased through broker-dealers having sales
agreements with FDI, or through financial institutions having agency
agreements with FDI. There is no sales load or charge in connection with the
purchase of shares. The Brinson Fund-Class N shares, however, are subject to
annual 12b-1 plan expenses of 0.25% of the Funds' average daily net assets of
such shares.
The Brinson Fund-Class N shares may also be marketed directly through the
offices of Swiss Bank. Swiss Bank has been providing investment advisory
services since its formation in 1872. Through its branches and subsidiaries,
Swiss Bank conducts securities research, provides investment advisory services
and manages mutual funds in major cities throughout the world, including
Amsterdam, Basel, Geneva, Frankfurt, Hong Kong, London, Luxembourg, Monte
Carlo, New York, Paris, Singapore, Sydney, Tokyo, Toronto and Zurich.
Purchase orders for shares of the Funds which are received by the transfer
agent in proper form prior to the close of regular trading hours (currently
4:00 p.m. Eastern time) on the New York Stock Exchange (the "NYSE") on any day
that the Funds' net asset values per share are calculated, are priced
according to the net asset value determined on that day. Purchase orders for
shares of the Funds received after the close of the NYSE on a particular day
are priced as of the time the net asset value per share is next determined.
The Funds reserve the right to change the time at which purchases are priced
if the NYSE closes at a time other than 4:00 p.m. Eastern time or if an
emergency exists.
Under certain circumstances, the Trust has entered into one or more
agreements (each, a "Sales Agreement") with brokers, dealers or financial
institutions (each, an "Authorized Dealer") under which the Authorized Dealer
may directly, or through intermediaries that the Authorized Dealer is
authorized to designate under the Sales Agreement (each, a "Sub-designee"),
accept purchase and redemption orders that are in "good form" on behalf of the
Funds. A Fund will be deemed to have received a purchase order when the
Authorized Dealer or Sub-designee accepts the purchase order and such order
will be priced at the Fund's net asset value next computed after such order is
accepted by the Authorized Dealer or Sub-designee.
The Trust may accept telephone orders for Fund shares from broker-dealers or
service organizations which have been previously approved by the Trust. It is
the responsibility of such broker-dealers or service organizations to promptly
forward purchase orders and payments for the same to the Fund. Shares of the
Funds may be purchased through broker-dealers, banks and bank trust
departments which may charge the investor a transaction fee or other fee for
their services at the time of purchase. Such fees would not otherwise be
charged if the shares were purchased directly from the Trust.
Brinson Partners, or its affiliates, from its own resources, may compensate
broker-dealers or other financial intermediaries ("Service Providers") for
marketing, shareholder servicing, recordkeeping and/or other services
performed with respect to a Fund's Class N shares. Payments made for any of
these purposes may be made from its revenues, its profits or any other sources
available to it. When such service arrangements are in effect, they are made
generally available to all qualified Service Providers.
17
<PAGE>
PURCHASES MAY BE MADE IN ONE OF THE FOLLOWING WAYS:
<TABLE>
<CAPTION>
INITIAL INVESTMENT SUBSEQUENT INVESTMENTS
------------------------------- -------------------------------
<S> <C> <C>
MINIMUM $1,000,000
BY MAIL . Complete and sign the Account . Make your check payable
[LOGO ENVELOPE] Application accompanying this to "Brinson Fund- Class
Prospectus. N."
. Make your check payable to . Enclose the remittance
"Brinson Fund- Class portion of
N." your account statement and
include
the amount of investment, the
account name and number.
. Mail to the address indicated . Mail to the address indicated
on on
the Account Application. your account statement or
enclose
in the envelope provided.
BY WIRE . Call 1-800-448-2430 to
arrange for a wire
transaction.
[LOGO WIRE] . Wire federal funds within 24 . Wire federal funds to:
hours to: THE CHASE MANHATTAN BANK
THE CHASE MANHATTAN BANK ABA#021000021
ABA#021000021 DDA#9102-783504
DDA#9102-783504 FOR: "BRINSON FUND-CLASS
FOR: "BRINSON FUND-CLASS N" AND INCLUDE YOUR NAME AND
N" AND INCLUDE YOUR NAME AND ACCOUNT NUMBER.
NEW ACCOUNT NUMBER.
. Complete and sign the Account
Application and mail to the
address
indicated on the Account
Application immediately
following the initial wire
transaction.
BY TELEPHONE . Call 1-800-448-2430 to . Call 1-800-448-2430 to
[LOGO TELEPHONE] arrange for a telephone arrange for a telephone
transaction. transaction.
PURCHASING BY EXCHANGES . You may open a new account . You may purchase additional
[LOGO ARROW] for a Series of the Trust by shares of a Series of the
making an exchange from an Trust by making an exchange
existing Brinson Fund-Class N from an existing Brinson Fund-
account of any other Series of Class N account of any other
the Trust. Exchanges may be Series of the Trust. Exchanges
made by mail or telephone. may be made by mail or
Call 1-800-448-2430 for telephone. Call 1-800-448-2430
assistance. for assistance.
AUTOMATICALLY . Please refer to "Automatic . Please refer to "Automatic
Investment Plan" under Investment Plan" under
"Account Options" or call 1- "Account Options" or call 1-
800-448-2430 for assistance. 800-448-2430 for assistance.
</TABLE>
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<PAGE>
ACCOUNT OPTIONS
The following account options are available to shareholders. There are no
charges for the programs noted below and an investor may change or terminate
these plans at any time by written notice to the Trust. For information about
participating in these account options, call the transfer agent at 1-800-448-
2430.
<TABLE>
<CAPTION>
ACCOUNT OPTIONS INSTRUCTIONS
------------------------------ -----------------------------------------------
<C> <S> <C>
AUTOMATIC INVESTMENT PLAN . You may have money deducted directly
from your checking, savings or bank
money market accounts for investment in
the Funds each month or quarter.
. Complete the Automatic Investment Plan
Application which is available by
calling 1-800-448-2430 and mail it to
the address indicated.
. The account must be opened first with
the initial $1,000,000 minimum
investment, with subsequent investments
of $500 pursuant to the Automatic
Investment Plan.
. 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 of
$1,000,000 may direct the transfer
agent to send the shareholder (or
anyone the shareholder designates)
regular, monthly, quarterly or semi-
annual payments. Each payment under a
Systematic Withdrawal Plan ("SWP") must
be at least $500. Such payments are
drawn from share redemptions.
. Shareholders participating in the SWP
must elect to have their dividends and
distributions automatically reinvested
in additional Fund shares.
. The Trust may terminate any SWP for an
account if the value of the account
falls below $50,000 as a result of
share redemptions or an exchange of
shares of a Fund for Brinson Fund-Class
N shares of another Series of 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 $2,000.
</TABLE>
REDEMPTION OF SHARES
Shares of the Funds may be redeemed without charge on any business day that
the NYSE is open. Redemptions will be effected at the net asset value per
share next determined after the receipt by the transfer agent of a redemption
request meeting the requirements described below. The Trust normally sends
redemption proceeds on the next business day but, in any event, redemption
proceeds are sent within five business days of receipt of a redemption request
in proper form. Payment also may be made by wire directly to any bank
previously designated by the shareholder in an Account Application. 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
19
<PAGE>
shares by check, but will not mail the proceeds until it is reasonably
satisfied that the purchase check has cleared, which may take up to fifteen
days from the purchase date.
Except as noted below, redemption requests received in proper form by the
transfer agent prior to the close of regular trading hours on the NYSE on any
business day that the Funds' net asset values per share are calculated are
effected that day. The Funds reserve the right to change the time at which
redemptions are priced if the NYSE closes at a time other than 4:00 p.m.
Eastern time or if an emergency exists. Redemption requests received in proper
form by the transfer agent after the close of the NYSE are effected as of the
time the net asset value per share is next determined. No redemption will be
processed until the transfer agent has received a completed application with
respect to the account.
Shares of the Funds may be redeemed through certain broker-dealers, banks
and bank trust departments who may charge the investor a transaction fee or
other fee for their services at the time of redemption. Such fees would not
otherwise be charged if the shares were redeemed directly from the Trust.
Under the Sales Agreement, the Authorized Dealer or Sub-designee is
authorized to accept redemption orders on behalf of the Funds. A Fund will be
deemed to have received a redemption order when the Authorized Dealer or Sub-
designee accepts the redemption order and such order will be priced at the
Fund's net asset value next computed after such order is accepted by the
Authorized Dealer or Sub-designee.
The Trust will satisfy redemption requests in cash to the fullest extent
feasible, so long as such payments would not, in the opinion of Brinson
Partners or the Board of Trustees, result in the necessity of a Series selling
assets under disadvantageous conditions and to the detriment of the remaining
shareholders of the Series. Pursuant to the Trust's Agreement and Declaration
of Trust, payment for shares redeemed may be made either in cash or in-kind,
or partly in cash and partly in-kind. However, the Trust has elected, pursuant
to Rule 18f-1 under the Act, to redeem its shares solely in cash up to the
lesser of $250,000 or 1% of the net asset value of a Series, during any 90-day
period for any one shareholder. Payments in excess of this limit will also be
made wholly in cash unless the Board of Trustees believes that economic
conditions exist which would make such a practice detrimental to the best
interests of the Series. Any portfolio securities paid or distributed in-kind
would be valued as described under "Net Asset Value." In the event that an in-
kind distribution is made, a shareholder may incur additional expenses, such
as the payment of brokerage commissions, on the sale or other disposition of
the securities received from a Series. In-kind payments need not constitute a
cross-section of a Series' portfolio. Where a shareholder has requested
redemption of all or a part of the shareholder's investment and where a Series
computes such redemption in-kind, the Series will not recognize gain or loss
for federal tax purposes on the securities used to compute the redemption, but
the shareholder will recognize gain or loss equal to the difference between
the fair market value of the securities received and the shareholder's basis
in the Fund shares redeemed.
SHARES MAY BE REDEEMED IN ONE OF THE FOLLOWING WAYS:
<TABLE>
<C> <S>
BY MAIL . Submit a written request for redemption with:
[LOGO ENVELOPE]
. The Fund's name;
. Your Fund account number;
. The dollar amount or number of shares to be
redeemed; and
. Signatures of all persons required to sign for
transactions, exactly as their names appear on
the Account Application.
. 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.
. Mail to the address indicated on the Account
Application. Questions may be directed to the
transfer agent at 1-800-448-2430.
</TABLE>
20
<PAGE>
<TABLE>
<C> <S>
BY WIRE . This service must be elected either on the
[LOGO WIRE] initial application or subsequently arranged in
writing.
. Shares may be redeemed by instructing the
transfer agent by telephone at 1-800-448-2430.
. Wire redemption requests must be received by the
transfer agent before 4:00 p.m. Eastern time for
money to be wired the next business day.
BY TELEPHONE 1-800-448- . This service must be elected either on the
2430 initial application or subsequently arranged in
[LOGO TELEPHONE] writing.
. Shares may be redeemed by instructing the
transfer agent by telephone at 1-800-448-2430.
. Shares will be sold at the next share price
calculated after the order is received and
accepted. Share price is normally calculated at
4:00 p.m. Eastern time.
AUTOMATICALLY . Please refer to "Systematic Withdrawal Plan"
under "Account Options" or call 1-800-448-2430
for assistance.
</TABLE>
- ----------
NOTE: The Trust reserves the right to refuse a wire or telephone redemption if
it is believed advisable to do so. Procedures for redeeming shares of the
Brinson Funds by wire or telephone may be modified or terminated at any
time by the Trust.
TELEPHONE TRANSACTIONS:
Shareholders who wish to initiate purchase, exchange or redemption
transactions by telephone must elect the option, as described above. With
respect to such telephone transactions, the Funds will ensure that reasonable
procedures are used to confirm that instructions communicated by telephone are
genuine (including verification of the shareholder's social security number or
mother's maiden name) and, if they do not, the Funds or the transfer agent may
be liable for any losses due to unauthorized or fraudulent transactions.
Written confirmation will be provided for all purchase, exchange and
redemption transactions initiated by telephone.
EXCHANGE OF SHARES:
Fund shares may be exchanged for Brinson Fund-Class N shares of any other
Series within the Trust. Exchanges will not be permitted between the Brinson
Fund-Class N shares and either the SwissKey Fund class shares or the Brinson
Fund-Class I shares of a Series of the Trust.
Fund shares may be exchanged by written request or by telephone if the
shareholder has previously signed a telephone authorization on the Account
Application. The telephone exchange may be difficult to implement during times
of drastic economic or market changes. The Trust reserves the right to
restrict the frequency of, or otherwise modify, condition, terminate or impose
charges upon the exchange and/or telephone transfer privileges upon 60 days'
prior written notice to shareholders.
Exchanges will be made on the basis of the relative net asset value per
share of the Brinson Fund-Class N shares of the Fund from which, and the Fund
into which, the exchange is made. 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
21
<PAGE>
wishing to make an exchange should first obtain and review a prospectus of the
other Series. Requests for telephone exchanges must be received by the
transfer agent by the close of regular trading hours (currently 4:00 p.m.
Eastern time) on the NYSE on any day that the NYSE is open for regular
trading. The Funds reserve the right to change the time at which exchanges are
priced if the NYSE closes at a time other than 4:00 p.m. Eastern time or if an
emergency exists.
TRANSFER OF SECURITIES:
At the discretion of the Trust, investors may be permitted to purchase Fund
shares by transferring securities to a Series that meet the Series' investment
objective and policies. Securities transferred to a Series will be valued in
accordance with the same procedures used to determine the Fund's net asset
value at the time of the next determination of net asset value after such
acceptance. Shares issued by a Series in exchange for securities will be
issued at net asset value per share of the Fund determined as of the same
time. All dividends, interest, subscription, or other rights pertaining to
such securities shall become the property of the Series and must be delivered
to the Series by the investor upon receipt from the issuer. Investors who are
permitted to transfer such securities will be required to recognize a gain or
loss on such transfer and pay tax thereon, if applicable, measured by the
difference between the fair market value of the securities and the investors'
basis therein. Securities will not be accepted in exchange for shares of a
Fund unless: (1) such securities are, at the time of the exchange, eligible to
be included in the Series' portfolio and current market quotations are readily
available for such securities; (2) the investor represents and warrants that
all securities offered to be exchanged are not subject to any restrictions
upon their sale by the Series under the Securities Act of 1933, as amended, or
under the laws of the country in which the principal market for such
securities exists, or otherwise; and (3) the value of any such security
(except U.S. government securities) being exchanged, together with other
securities of the same issuer owned by the Series, will not exceed 5% of the
Series' net assets immediately after the transaction.
NET ASSET VALUE
The net asset value per share for each class of shares of the Series is
computed by adding, with respect to each class of shares, the value of a
Series' investments, cash and other assets attributable to that class,
deducting liabilities of the class and dividing the result by the number of
shares of that class outstanding. The public offering price of the shares of
each classes' shares, all of which are sold on a continuous basis, is the net
asset value of that class. The valuation of assets for determining the net
asset value may be summarized as follows:
Securities traded on securities exchanges are valued at the last
available sale price. Securities that are not traded on a particular day or
on an exchange are valued at either (a) the bid price or (b) a valuation
within the range considered best to represent value in the circumstances.
Price information on listed securities is generally taken from the closing
price on the exchange where the security is primarily traded. Valuations of
equity securities may be obtained from a pricing service and/or broker-
dealers when such prices are believed to reflect fair value of such
securities. Use of a pricing service and/or broker-dealers has been
approved by the Board of Trustees. Futures contracts are valued at their
daily quoted settlement price on the exchange on which they are traded.
Forward foreign currency contracts are valued daily using the mean between
the bid and asked forward points added to the current exchange rate and an
unrealized gain or loss is recorded. The Series realizes a gain or loss
upon settlement of the contracts. For valuation purposes, foreign
securities initially expressed in foreign currency values will be converted
into U.S. dollar values using WM/Reuters closing spot rates as of 4:00 p.m.
London time.
Securities with a remaining maturity of 60 days or less are valued at
amortized cost, which approximates market value. Fixed income securities
having a remaining maturity of over 60 days are valued at market price.
Debt securities are valued on the basis of prices provided by a pricing
service, or at the bid price where readily available, as long as the bid
price, in the opinion of the Advisor, continues to reflect the
22
<PAGE>
value of the security. Redeemable securities issued by open-end investment
companies are valued using their respective net asset values for purchase
orders placed at the close of the NYSE. Securities (including over-the-
counter options) for which market quotations are not readily available and
other assets are valued at their fair value as determined in good faith by
or under the direction of the Trustees.
Net asset value is determined on each day that the NYSE is open, as of the
close of business of the regular session of the NYSE (currently 4:00 p.m.
Eastern time). Investments and requests to exchange or redeem shares received
by the Series in proper form before such close of business are effective, and
will receive the price determined, on that day. Investment, exchange and
redemption requests received after such close of business are effective, and
will receive the share price determined, on the next business day. The Funds
reserve the right to change the time at which purchases, redemptions and
exchanges are priced if the NYSE closes at a time other than 4:00 p.m. Eastern
time or if an emergency exists.
Because of time zone differences, foreign exchanges and securities markets
will usually be closed prior to the time of the closing of the NYSE and values
of foreign futures and options and foreign securities will be determined as of
the earlier closing of such exchanges and securities markets. However, events
affecting the values of such foreign securities may occasionally occur between
the earlier closings of such exchanges and securities markets and the closing
of the NYSE which will not be reflected in the computation of the net asset
value of a class of a Series. If an event materially affecting the value of
such foreign securities occurs during such period, then such securities will
be valued at fair value as determined in good faith by or under the direction
of the Board of Trustees. Where a foreign securities market remains open at
the time that a Series values its portfolio securities, or closing prices of
securities from that market may not be retrieved because of local time
differences or other difficulties in obtaining such prices at that time, last
sale prices in such market at a point in time most practicable to timely
valuation of the Series may be used.
The Series' portfolio securities from time to time may be listed primarily
on foreign exchanges which trade on days when the NYSE is closed (such as
Saturday). As a result, the net asset value of a class of a Fund may be
significantly affected by such trading on days when shareholders have no
access to the Fund.
All of the Series' classes of shares will bear pro rata all of the expenses
of that Series common to all classes. 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' proportionate participation
in the Series represented by the value of shares of such class, except that
the Brinson Fund-Class N and SwissKey Fund class shares will bear 12b-1
expenses payable under their respective 12b-1 plans.
Due to the specific distribution expenses and other costs that will be
allocable to each class, the dividends paid to each class, and related
performance, of the Series may vary. The per share net asset value of the
Brinson Fund-Class N shares and the SwissKey Fund class shares will generally
be lower than that of the Brinson Fund-Class I shares of a Series because of
the higher expenses borne by the SwissKey Fund class shares and the Brinson
Fund-Class N shares. It is expected, however, that the net asset value per
share of the two classes will tend to converge immediately after the payment
of dividends, which will differ by approximately the amount of the service and
distribution expenses differential among the classes.
DISTRIBUTION PLAN
The Board of Trustees of the Trust has adopted a distribution plan (the
"Plan") pursuant to Rule 12b-1 under the Act for the Brinson Fund-Class N
shares. The Plan permits each Series to reimburse FDI, Brinson
23
<PAGE>
Partners and others from the assets of the Brinson Fund-Class N shares a
quarterly fee for services and expenses incurred in distributing and promoting
sales of the Brinson Fund-Class N shares. These expenses include, but are not
limited to, preparing and distributing advertisements and sales literature,
printing prospectuses and reports used for sales purposes, and paying
distribution and maintenance fees to brokers, dealers and others in accordance
with a selling agreement with the Trust on behalf of the Brinson Fund-Class N
shares or FDI. In addition, each Series may make payments directly to FDI for
payment to dealers or others, or directly to others, such as banks, who assist
in the distribution of the Brinson Fund-Class N shares or provide services
with respect to the Brinson Fund-Class N shares.
Swiss Bank, or one of its affiliates, pursuant to a selected dealer
agreement, may provide additional compensation to securities dealers from its
own resources in connection with sales of the Brinson Fund-Class N shares of
the Series.
The aggregate distribution fees paid by the Series from the assets of the
respective Brinson Fund-Class N shares to FDI and others under the Plan may
not exceed 0.25% of a Fund's average daily net assets in any year.
The Plan applies only to the Brinson Fund-Class N shares of each Series.
Shares of other classes 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' SwissKey Fund class or Brinson Fund-Class I shares. All payments made
by the Brinson Fund-Class N shares of a Series pursuant to the Plan shall be
made for the purpose of selling shares issued by the Brinson Fund-Class N of
the Series. Distribution expenses which are attributable to a particular class
of a Series will be charged against the assets of that class of that Series.
Distribution expenses which are attributable to more than one class or Series
will be allocated among the classes or Series, in proportion to their relative
net assets.
The quarterly fees paid to FDI under the Plan are subject to the review and
approval by the Trust's Trustees who are not "interested persons" of the
Advisor or FDI (as defined in the Act) and who may reduce the fees or
terminate the Plan at any time.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS
The Series will distribute their net investment income semi-annually in June
and December. The Series will distribute annually in December substantially
all of their net long-term capital gains and any undistributed net short-term
capital gains realized during the one year period commencing November 1 (or
date of the creation of the Series, if later) and ending October 31, and, at
the same time, will distribute all of their net investment income earned
through the end of December and not previously distributed as ordinary (not
capital) income.
Dividends and other distributions paid by a Series with respect to its
Brinson Fund-Class N, Brinson Fund-Class I and SwissKey Fund class shares are
calculated in the same manner and at the same time. The per share amount of
any income dividends will generally differ among the classes only to the
extent that the Brinson Fund-Class N and SwissKey Fund class are subject to
separate 12b-1 fees. The per share dividends on SwissKey Fund class shares and
Brinson Fund-Class N shares will be lower than the per share dividends on the
Brinson Fund-Class I shares of each Series as a result of the distribution and
service fees applicable with respect to the SwissKey Fund class shares and
Brinson Fund-Class N shares.
Income dividends and capital gain distributions are reinvested automatically
in additional Fund shares of the same class of Series at net asset value,
unless the shareholder has notified the transfer agent, in writing, of
24
<PAGE>
the shareholder's election to receive them in cash. Distribution options may
be changed at any time by requesting a change in writing. Any check in payment
of dividends or other distributions which cannot be delivered by the Post
Office or which remains uncashed for a period of more than one year may be
reinvested in the shareholder's account at the then current net asset value
and the dividend option may be changed from cash to reinvest. Dividends are
reinvested on the ex dividend date (the "ex date") at the net asset value
determined at the close of business on that date. Please note that shares
purchased shortly before the record date for a dividend or distribution may
have the effect of returning capital although such dividends and distributions
are subject to taxes.
TAXES
Each Series has qualified, and intends to continue to qualify, for taxation
as a "regulated investment company" under the Internal Revenue Code of 1986,
as amended ("the Code"). Such qualification relieves a Series of liability for
federal income taxes to the extent the Series' earnings are distributed in
accordance with the Code. Each Series is treated as a separate corporate
entity for federal tax purposes.
Distributions of any net investment income and of any net realized short-
term capital gains are taxable to shareholders as ordinary income. All
distributions may be subject to state and local taxes.
Distributions of net capital gain (the excess of net long-term capital gain
over net short-term capital loss) are taxable to shareholders as long-term
capital gain regardless of how long a shareholder may have held shares of a
Series. The tax treatment of distributions of ordinary income or capital gains
will be the same whether the shareholder reinvests the distributions or elects
to receive them in cash. A distribution will be treated as paid on December 31
of the current calendar year if it is declared in October, November or
December with a record date in such a month and paid during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Shareholders will be advised annually of the source and tax status of all
distributions for federal income tax purposes. Further information regarding
the tax consequences of investing in the Series is included in the Statement
of Additional Information. The above discussion is intended for general
information only. Investors should consult their own tax advisors for more
specific information on the tax consequences of particular types of
distributions.
Redemptions of Series shares, and the exchange of shares between two Series
of the Trust, are taxable events and, accordingly, shareholders may realize
capital gains or losses on these transactions.
Shareholders may be subject to back-up withholding on reportable dividend
and redemption payments ("back-up withholding") if a certified taxpayer
identification number is not on file with the Series, or if, to the Series'
knowledge, an incorrect number has been furnished, or if the Series has been
notified by the Internal Revenue Service that an account is subject to back-up
withholding. An individual's taxpayer identification number is the
individual's social security number.
If more than 50% of a Series' total assets at the close of its taxable year
consists of stock or securities in foreign corporations, the Series may elect
to "pass-through" to shareholders for foreign tax credit purposes the amount
of foreign income taxes paid by the Series with respect to its direct holdings
of securities in foreign corporations. A Series will make such an election
only if it deems such election to be in the best interests of its
shareholders. If this election is made, shareholders of the Series will be
required to include in their gross incomes
25
<PAGE>
their pro rata share of foreign taxes paid by the Series. However,
shareholders will be able to treat their pro rata share of foreign taxes as
either a deduction (itemized deduction in the case of individuals) or a
foreign tax credit (but not both) against U.S. income taxes on their tax
returns.
GENERAL INFORMATION
ORGANIZATION
The Brinson Funds is a Delaware business trust organized pursuant to an
Agreement and Declaration of Trust, dated December 1, 1993. The Trust was
originally organized as a Maryland corporation on April 14, 1992. On December
1, 1993, the Trust reorganized as a Delaware business trust through a merger
of the Maryland corporation into the Trust. The Trust is registered under the
Act as an open-end management investment company, commonly known as a mutual
fund and consists of eight different Series. The Trustees of the Trust may
establish additional series or classes of shares without the approval of
shareholders. All of the Series, except the Global Bond Fund and the U.S.
Large Capitalization Equity Fund, are diversified portfolios. The assets of
each Series belong only to that Series, and the liabilities of each Series are
borne solely by that Series and no other.
DESCRIPTION OF SHARES
Each Series is authorized to issue an unlimited number of shares of
beneficial interest with a $0.001 par value per share. The Board of Trustees
has the power to designate one or more series or sub-series/classes of shares
of beneficial interest and to classify or reclassify only unissued shares with
respect to such series. Shares of each series represent equal proportionate
interests in the assets of that series only and have identical voting,
dividend, redemption, liquidation, and other rights, except that only shares
of each Series' Brinson Fund-Class N and SwissKey Fund classes shall have
voting rights with respect to the Rule 12b-1 plan relating to such classes,
respectively, 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
eight investment portfolios or series-Global Fund, Global Equity Fund, Global
Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization
Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. Three classes of shares
are currently issued by the Trust for each Series, the Brinson Fund-Class N,
Brinson Fund-Class I and SwissKey Fund classes.
VOTING RIGHTS
Each issued and outstanding full and fractional share of a Series is
entitled to one full and fractional vote in the Series and all shares of each
Series participate equally with regard to dividends, distributions, and
liquidations with respect to that Series. Shareholders do not have cumulative
voting rights. On any matter submitted to a vote of shareholders, shares of
each Series will vote separately except when a vote of shareholders in the
aggregate is required by law, or when the Trustees have determined that the
matter affects the interests of more than one Series, in which case the
shareholders of all such Series shall be entitled to vote thereon. Only the
Brinson Fund-Class N shareholders may vote on matters related to the Plan
associated with that class and only the SwissKey Fund class shareholders may
vote on matters related to the 12b-1 plan associated with that class.
As of October 31, 1997, Swiss Bank Corporation, Schweizerischer Bankverein
and Wachovia Bank NA each held of record more than 25% of the outstanding
shares of the Global Equity Fund; Baptist Health Systems, Inc. held of record
more than 25% of the outstanding shares of the Global Bond Fund; Bankers Trust
Co. held of record more than 25% of the outstanding shares of the U.S.
Balanced Fund; Wachovia Bank and Lafayette College Endowment each held of
record more than 25% of the outstanding shares of the U.S. Bond Fund; and
26
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Northern Trust held of record more than 25% of the Non-U.S. Equity Fund. A
shareholder that holds such a percentage of the outstanding shares of a Series
may be deemed a controlling person of that Series under the 1940 Act.
SHAREHOLDER MEETINGS
The Trustees of the Trust do not intend to hold annual meetings of
shareholders of the Series. The U.S. Securities and Exchange Commission,
however, requires the Trustees to promptly call a meeting for the purpose of
voting upon the question of removal of any Trustee when requested to do so by
not less than 10% of the outstanding shareholders of the respective Series. In
addition, subject to certain conditions, shareholders of each Series may apply
to the Series to communicate with other shareholders to request a
shareholders' meeting to vote upon the removal of a Trustee or Trustees.
PORTFOLIO TURNOVER (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND AND U.S.
BOND FUND)
As a result of the investment policies of the Global Fund, Global Bond Fund,
U.S. Balanced Fund and U.S. Bond Fund, their portfolio turnover rates may
exceed 100%. High portfolio turnover (over 100%) may involve correspondingly
greater brokerage commissions and other transaction costs, which will be borne
directly by the Series and ultimately by the Series' shareholders. In
addition, high portfolio turnover may result in increased short-term capital
gains which, when distributed to shareholders, are treated as ordinary income
for tax purposes.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Trust will attempt to obtain the best overall price and most favorable
execution of transactions in portfolio securities. However, subject to
policies established by the Board of Trustees of the Trust, a Series may pay a
broker-dealer a commission for effecting a portfolio transaction for the
Series in excess of the amount of commission another broker-dealer would have
charged if Brinson Partners determines in good faith that the commission paid
was reasonable in relation to the brokerage or research services provided by
such broker-dealer, viewed in terms of that particular transaction or such
firm's overall responsibilities with respect to the clients, including the
Series, as to which it exercises investment discretion. In selecting and
monitoring broker-dealers and negotiating commissions, consideration will be
given to a broker-dealer's reliability, the quality of its execution services
on a continuing basis and its financial condition.
When buying or selling securities, the Series may pay commissions to brokers
who are affiliated with the Advisor or the Series. The Series may purchase
securities in certain underwritten offerings for which an affiliate of the
Series or the Advisor may act as an underwriter. The Series may effect futures
transactions through, and pay commissions to, futures commission merchants who
are affiliated with the Advisor or the Series in accordance with procedures
adopted by the Board of Trustees of the Trust.
SHAREHOLDER REPORTS AND INQUIRIES
Shareholders will receive semi-annual reports showing portfolio investments
and other information as of December 31 and annual reports audited by
independent auditors as of June 30. Shareholders with inquiries should call
The Brinson Funds at 1-800-448-2430 or write to The Brinson Funds, P.O. Box
2798, Boston, MA 02208-2798.
PERFORMANCE INFORMATION
From time to time, performance information, such as yield or total return,
may be quoted in advertisements or in communications to present or prospective
shareholders. Performance quotations represent the Funds' past
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performance and should not be considered as representative of future results.
The current yield will be calculated by dividing the net investment income
earned per share by a Fund during the period stated in the advertisement
(based on the average daily number of shares entitled to receive dividends
outstanding during the period) by the maximum net asset value per share on the
last day of the period and annualizing the result on a semi-annual compounded
basis. The Funds' total return may be calculated on an annualized and
aggregate basis for various periods (which periods will be stated in the
advertisement). Average annual return reflects the average percentage change
per year in value of an investment in a Fund. Aggregate total return reflects
the total percentage change over the stated period.
To help investors better evaluate how an investment in the Brinson Funds
might satisfy their investment objectives, advertisements regarding the Funds
may discuss yield or total return as reported by various financial
publications. Advertisements may also compare yield or total return to other
investments, indices and averages. The following publications, benchmarks,
indices and averages may be used: Lipper Mutual Fund Performance Analysis;
Lipper Fixed Income Analysis; Lipper Mutual Fund Indices; Morgan Stanley
Indices; Shearson Lehman Hutton Treasury Index; Salomon Brothers Indices; Dow
Jones Composite Average or its component indices; Standard & Poor's 500 Stock
Index or its component indices; Wilshire Indices; The New York Stock Exchange
composite or component indices; CDA Mutual Fund Report; Weisenberger-Mutual
Funds Panorama and Investment Companies; Mutual Fund Values and Mutual Fund
Service Book, published by Morningstar, Inc.; comparable portfolios managed by
the Advisor; and financial publications, such as Business Week, Kiplinger's
Personal Finance, Financial World, Forbes, Fortune, Money Magazine, The Wall
Street Journal, Barron's, et al., which rate fund performance over various
time periods.
The principal value of an investment in the Funds will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Any fees charged by banks or other institutional investors
directly to their customer accounts in connection with investments in shares
of the Funds will not be included in the Brinson Funds' calculations of yield
or total return. Further information about the performance of the Funds is
included in the Funds' Annual Report dated June 30, 1997, which may be
obtained without charge by contacting the Trust at 1-800-448-2430. The
performance of the Brinson Fund-Class N shares commenced on June 30, 1997 and
the performance of the Brinson U.S. Large Capitalization Equity Fund commenced
after June 30, 1997 and therefore are not included in such Annual Report.
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APPENDIX A
INVESTMENT POLICIES AND TECHNIQUES
EQUITY SECURITIES (GLOBAL FUND, GLOBAL EQUITY FUND, U.S. BALANCED FUND, U.S.
EQUITY FUND, U.S. LARGE CAPITALIZATION EQUITY FUND, AND NON-U.S. EQUITY FUND):
The Series may invest in a broad range of equity securities of U.S. and non-
U.S. issuers, including common stocks of companies or closed-end investment
companies, preferred stocks, debt securities convertible into or exchangeable
for common stock, securities such as warrants or rights that are convertible
into common stock and sponsored or unsponsored American, European and Global
depositary receipts ("Depositary Receipts"). The issuers of unsponsored
Depositary Receipts are not obligated to disclose material information in the
United States. The Series expect their U.S. equity investments to emphasize
large and intermediate capitalization companies, although the Global Fund may
also invest in small capitalization equity markets. The equity markets in the
non-U.S. component of the Series will typically include available shares of
larger capitalization companies. Capitalization levels are measured relative
to specific markets, thus large, intermediate and small capitalization ranges
vary country by country. The Global Fund may invest in equity securities of
companies considered by the Advisor to be in their post-venture capital stage,
or "post-venture capital companies." A post-venture capital company is a
company that has received venture capital financing either (a) during the
early stages of the company's existence or the early stages of the development
of a new product or service, or (b) as part of a restructuring or
recapitalization of the company. The Global Fund also may invest in open-end
investment companies advised by Brinson Partners, in equity securities of
issuers in emerging markets and in securities with respect to which the return
is derived from the equity securities of issuers in emerging markets.
FIXED INCOME SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND
AND U.S. BOND FUND): The Series may invest in a broad range of fixed income
securities of U.S. and non-U.S. issuers, including governments and
governmental entities, supranational issuers as well as corporations and other
business organizations. The Series may purchase U.S. dollar denominated
securities that reflect a broad range of investment maturities, qualities and
sectors. A majority of the fixed income securities in which the Series will
invest will possess a minimum rating of BBB- by S&P or Baa3 by Moody's or, if
unrated, will be determined to be of comparable quality by Brinson Partners.
Such securities are considered to be investment grade. While securities rated
BBB- or Baa3 are regarded as having an adequate capacity to pay principal and
interest, such bonds lack outstanding investment characteristics and, in fact,
have speculative characteristics; and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher rated bonds. Securities
rated lower than BBB- by S&P and Baa3 by Moody's are classified as non-
investment grade securities (commonly referred to as "junk bonds"), carry a
higher degree of risk and are considered to be speculative by the major credit
rating agencies. Each Series currently intends to limit its aggregate
investment in non-investment grade debt securities of its U.S. and non-U.S.
dollar denominated fixed income assets to no more than 5% of its net assets.
To the extent that a security held by a Series is downgraded to below
investment grade, the Series will dispose of that or another non-investment
grade security so that no more than 5% of its assets will be invested in below
investment grade securities. Other fixed income securities in which the Series
may invest include zero coupon securities, mortgage-backed securities, asset-
backed securities and when-issued securities.
The non-U.S. fixed income component of the Series will typically be invested
in the securities of non-U.S. governments, governmental agencies and
supranational issues. A supranational entity is an entity established or
financially supported by the national governments of one or more countries to
promote reconstruction or development. Examples of supranational entities
include, among others: the World Bank, the European
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Economic Community, the European Coal and Steel Community, the European
Investment Bank, the Inter-American Development Bank, the Export-Import Bank
and the Asian Development Bank.
The Global Fund may invest in fixed income securities of emerging market
issuers, including government and government-related entities (including
participation in loans between governments and financial institutions), and of
entities organized to restructure outstanding debt securities of developing
countries' corporate issuers.
CASH AND CASH EQUIVALENTS (ALL SERIES): The Series may invest a portion of
their assets in short-term debt securities (including repurchase agreements
and reverse repurchase agreements) of corporations, the U.S. government and
its agencies and instrumentalities and banks and finance companies, which may
be denominated in any currency. When unusual market conditions warrant, a
Series may make substantial temporary defensive investments in cash
equivalents up to a maximum of 100% of its net assets. Cash equivalent
holdings may be in any currency (although such holdings may not constitute
"cash or cash equivalents" for tax diversification purposes under the Code).
When a Series invests for defensive purposes, it may affect the attainment of
the Series' investment objective.
ZERO COUPON SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND
AND U.S. BOND FUND): Zero coupon securities are debt obligations which do not
entitle the holder to any periodic payments of interest prior to maturity or a
specified date when the securities begin paying current interest (the "cash
payment date") and, therefore, are issued and traded at a discount from their
value at maturity or par value. Such bonds carry an additional risk in that,
unlike bonds which pay interest throughout the period to maturity, a Series
investing in zero coupon securities will realize no cash until the cash
payment date and, if the issuer defaults, a Series may obtain no return at all
on its investment. The market price of zero coupon securities generally is
more volatile than the market price of securities that pay interest
periodically and are likely to be more responsive to changes in interest rates
than non-zero coupon securities having similar maturities and credit
qualities. For federal tax purposes, the Series will be required to include in
income daily portions of original issue discount accrued and to distribute the
same to shareholders annually, even if no payment is received before the
distribution date.
MORTGAGE- AND ASSET-BACKED SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S.
BALANCED FUND AND U.S. BOND FUND): Mortgage-backed securities represent direct
or indirect participations in, or are secured by and payable from, pools of
mortgage loans secured by real property, and include single- and multi-class
pass-through securities and collateralized mortgage obligations. These
securities may be issued or guaranteed by agencies or instrumentalities of the
U.S. government. Other mortgage-backed securities are issued by private
issuers, generally originators of and investors in mortgage loans, including
savings associations, mortgage bankers, commercial banks, investment bankers
and special purpose entities (collectively, "private lenders"). Mortgage-
backed securities issued by private lenders may be supported by pools of
mortgage loans or other mortgage-backed securities that are guaranteed,
directly or indirectly, by the U.S. government or one of its agencies or
instrumentalities, or they may be issued without any governmental guarantee of
the underlying mortgage assets but with some form of non-governmental credit
enhancement.
Asset-backed securities have structural characteristics similar to mortgage-
backed securities. However, the underlying assets are not first-lien mortgage
loans or interests therein; rather, they include assets such as motor vehicle
installment sales contracts, other installment loan contracts, home equity
loans, leases of various types of property and receivables from credit card or
other revolving credit arrangements. Payments or distributions of principal
and interest on asset-backed securities may be supported by non-governmental
credit enhancements similar to those utilized in connection with mortgage-
backed securities.
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The yield characteristics of mortgage- and asset-backed securities differ
from those of traditional debt obligations. Among the principal differences
are that interest and principal payments are made more frequently on mortgage-
and asset-backed securities, usually monthly, and that principal may be
prepaid at any time because the underlying mortgage loans or other assets
generally may be prepaid at any time. As a result, the rate of return on these
securities may be affected by prepayments of principal on the underlying
loans, which generally increase as interest rates decline. As a result, if a
Series purchases these securities at a premium, a prepayment rate that is
faster than expected will reduce yield to maturity, while a prepayment rate
that is slower than expected will have the opposite effect of increasing yield
to maturity. Conversely, if a Series purchases these securities at a discount,
a prepayment rate that is faster than expected will increase yield to
maturity, while a prepayment rate that is slower than expected will reduce
yield to maturity. Accelerated prepayments on securities purchased by a Series
at a premium also impose a risk of loss of principal because the premium may
not have been fully amortized at the time the principal is prepaid in full. In
addition, like other debt securities, the values of mortgage-related
securities, including government and government-related mortgage pools,
generally will fluctuate in response to market interest rates. The market for
privately issued mortgage- and asset-backed securities is smaller and less
liquid than the market for government sponsored mortgage-backed securities.
WHEN-ISSUED SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND
AND U.S. BOND FUND): The Series may purchase securities on a "when-issued"
basis for payment and delivery at a later date. The price is generally fixed
on the date of commitment to purchase. During the period between purchase and
settlement, no interest accrues to a Series. At the time of settlement, the
market value of the security may be more or less than the purchase price. The
Series will establish a segregated account consisting of cash, U.S. government
securities, equity securities and/or investment and non-investment grade debt
securities in an amount equal to the amounts of their when-issued securities.
The cash, U.S. government securities, equity securities, investment or non-
investment grade debt securities and other assets held in any segregated
account maintained by the Series with respect to any when-issued securities,
options, futures, forward contracts or other derivative transactions shall be
liquid, unencumbered and marked-to-market daily (the assets held in a
segregated account are referred to in this Prospectus as "Segregated Assets").
FOREIGN CURRENCY TRANSACTIONS (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND
FUND AND NON-U.S. EQUITY FUND): The Series may conduct their foreign currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market or through entering into contracts to
purchase or sell foreign currencies at a future date (i.e., a "forward foreign
currency" contract or "forward" contract). A forward contract involves an
obligation to purchase or sell a specific currency amount at a future date,
which may be any fixed number of days from the date of the contract agreed
upon by the parties at a price set at the time of the contract. The Series
will convert currency on a spot basis from time to time and investors should
be aware that changes in currency exchange rates and exchange control
regulations may affect the costs of currency conversion.
The Series may enter into forward contracts for hedging purposes as well as
non-hedging purposes. For hedging purposes, a Series may enter into contracts
to deliver or receive foreign currency it will receive from or require for its
normal investment activities. It may also use contracts in a manner intended
to protect foreign currency-denominated securities from declines in value due
to unfavorable exchange rate movements. A Series may also enter into contracts
with the intent of changing the relative exposure of the Series' portfolio of
securities to different currencies to take advantage of anticipated changes in
exchange rates.
When a Series enters into forward contracts for non-hedging purposes, it
will establish a segregated account with its custodian bank in which it will
maintain Segregated Assets equal in value to its obligations with respect to
their forward contracts for non-hedging purposes.
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At the maturity of a forward contract, a Series may either sell a portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader,
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. A Series may realize a gain or loss from currency
transactions.
OPTIONS ON CURRENCIES (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND FUND AND
NON-U.S. EQUITY FUND): The Series also may purchase and write put and call
options on foreign currencies (traded on U.S. and foreign exchanges or over-
the-counter markets) to manage the respective portfolio's exposure to changes
in currency exchange rates. Call options on foreign currency written by a
Series will be "covered," which means that the Series will own an equal amount
of, or an offsetting position in, the underlying foreign currency. With
respect to put options on foreign currency written by a Series, the Series
will establish a segregated account with its custodian bank consisting of
Segregated Assets equal in value to the amount the Series would be required to
deliver upon exercise of the put.
FUTURES CONTRACTS (ALL SERIES): The Series may enter into contracts for the
future purchase or sale of securities and indices. The Global Funds and the
Non-U.S. Equity Fund also may enter into contracts for the future purchase or
sale of foreign currencies. A financial futures contract is an agreement
between two parties to buy or sell a specified debt security at a set price on
a future date. An index futures contract is an agreement to take or make
delivery of an amount of cash based on the difference between the value of the
index at the beginning and at the end of the contract period. A futures
contract on a foreign currency is an agreement to buy or sell a specified
amount of a currency for a set price on a future date. A Series may enter into
a futures contract to the extent that not more than 5% of its assets are
required as futures contract margin deposits and its obligations relating to
such futures transactions represent not more than 25% of the Series' assets.
The Series may also effect futures transactions through futures commission
merchants who are affiliated with the Advisor or the Series in accordance with
procedures adopted by the Board of Trustees.
The Global Fund, Global Equity Fund, Global Bond Fund and Non-U.S. Equity
Fund will enter into such futures transactions on domestic exchanges and, to
the extent such transactions have been approved by the Commodity Futures
Trading Commission for sale to customers in the United States, on foreign
exchanges.
OPTIONS (ALL SERIES): The Series may purchase and write put and call options
on foreign or U.S. securities and indices and enter into related closing
transactions. A Series' may use options traded on U.S. exchanges and, to the
extent permitted by law, options traded over-the-counter and recognized
foreign exchanges. It is the position of the U.S. Securities and Exchange
Commission that over-the-counter options are illiquid. Accordingly, a Series
will invest in such options only to the extent consistent with its 15% limit
on investment in illiquid securities.
REPURCHASE AGREEMENTS (ALL SERIES): The Series may enter into repurchase
agreements with banks or broker-dealers. Repurchase agreements are considered
under the Act to be collateralized loans by a Series to the seller secured by
the securities transferred to the Series. Repurchase agreements under the Act
will be fully collateralized by securities which the Series may invest in
directly. Such collateral will be marked-to-market daily. If the seller of the
underlying security under the repurchase agreement should default on its
obligation to repurchase the underlying security, the Series may experience
delay or difficulty in recovering its cash. To the extent that, in the
meantime, the value of the security purchased had decreased, the Series could
experience a loss. No more than 15% of a Series' net assets will be invested
in illiquid securities, including repurchase agreements which have a maturity
of longer than seven days. The Series must treat each repurchase agreement as
a security for tax diversification purposes and not as cash, a cash equivalent
or as a receivable.
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BORROWING (ALL SERIES): Each Series is authorized, within specified limits,
to borrow money as a temporary defensive measure for extraordinary purposes
and to pledge its assets in connection with such borrowings.
LOANS OF PORTFOLIO SECURITIES (ALL SERIES): Each Series may loan its
portfolio securities to broker-dealers and other institutional investors
pursuant to agreements requiring that the loans be continuously secured by
collateral equal at all times in value to at least the market value of the
securities loaned. The major risk to which a Series would be exposed on a loan
transaction is the risk that the borrower would become bankrupt at a time when
the value of the security goes up. Therefore, a Series will only enter into
loan arrangements after a review of all pertinent factors by Brinson Partners,
subject to overall supervision by the Board of Trustees, including the
creditworthiness of the borrowing broker-dealer or institution and then only
if the consideration to be received from such loans would justify the risk.
Creditworthiness will be monitored on an ongoing basis by Brinson Partners.
RULE 144A AND ILLIQUID SECURITIES (ALL SERIES): Each Series may invest up to
15% of its net assets in illiquid securities. Illiquid securities are those
securities that are not readily marketable, including restricted securities
and repurchase obligations that mature in more than seven days. Certain
restricted securities that may be resold to institutional investors pursuant
to Rule 144A under the Securities Act of 1933 may be determined to be liquid
under guidelines adopted by the Trust's Board of Trustees.
INVESTMENT COMPANY SECURITIES (GLOBAL FUND): The Trust has received an
exemptive order (the "Exemptive Order") from the U.S. Securities and Exchange
Commission which permits each Series to invest its assets in certain
portfolios of Brinson Relationship Funds, another registered investment
company advised by Brinson Partners. Currently, only the Global Fund intends
to invest in the portfolios of Brinson Relationship Funds and only to the
extent consistent with Brinson Partners' investment process of allocating
assets to specific asset classes. The Global Fund will invest in the
portfolios of Brinson Relationship Funds to obtain exposure to the following
asset classes: (1) equity and fixed income securities of issuers located in
emerging market countries ("Emerging Market Securities"); (2) equity
securities issued by companies with relatively small overall market
capitalizations ("Small Cap Securities"); and (3) high yield securities ("High
Yield Securities"). The Global Fund will invest in corresponding portfolios of
Brinson Relationship Funds only to the extent the Advisor determines that such
investments are a more efficient means for the Global Fund to gain exposure to
the asset classes identified above than by investing directly in individual
securities. Thus, to gain exposure to Emerging Market Securities, the Global
Fund will invest in the Brinson Emerging Markets Equity Fund and the Brinson
Emerging Markets Debt Fund portfolios of Brinson Relationship Funds. To gain
exposure to Small Cap Securities and High Yield Securities, the Global Fund
will invest in the Brinson Post-Venture Fund and the Brinson High Yield Fund
portfolios, respectively, of Brinson Relationship Funds. Each portfolio of
Brinson Relationship Funds in which the Global Fund may invest is permitted to
invest in the same securities of a particular asset class in which the Global
Fund is permitted to invest directly, and with similar risks.
RUSSIAN SECURITIES (GLOBAL FUND): The Series may invest in securities of
Russian companies. The registration, clearing and settlement of securities
transactions in Russia are subject to significant risks not normally
associated with securities transactions in the United States and other more
developed markets. Ownership of shares of Russian companies is evidenced by
entries in a company's share register (except where shares are held through
depositories that meet the requirements of the Investment Company Act) and the
issuance of extracts from the register or, in certain limited cases, by formal
share certificates. However, Russian share registers are frequently unreliable
and the Series could possibly lose its registration through oversight,
negligence or fraud. Moreover, Russia lacks a centralized registry to record
securities transactions and registrars located throughout Russia or the
companies themselves maintain share registers. Registrars are under no
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obligation to provide extracts to potential purchasers in a timely manner or
at all and are not necessarily subject to state supervision. In addition,
while registrars are liable under law for losses resulting from their errors,
it may be difficult for the Series to enforce any rights it may have against
the registrar or issuer of the securities in the event of loss of share
registration. Although Russian companies with more than 1,000 shareholders are
required by law to employ an independent company to maintain share registers,
in practice, such companies have not always followed this law. Because of this
lack of independence of registrars, management of a Russian company may be
able to exert considerable influence over who can purchase and sell the
company's shares by illegally instructing the registrar to refuse to record
transactions on the share register. Furthermore, these practices may prevent
the Series from investing in the securities of certain Russian companies
deemed suitable by the Advisor and could cause a delay in the sale of Russian
securities by the Fund if the company deems a purchaser unsuitable, which may
expose the Fund to potential loss on its investment.
In light of the risks described above, the Board of Trustees of the Series
has approved certain procedures concerning the Series' investments in Russian
securities. Among these procedures is a requirement that the Series will not
invest in the securities of a Russian company unless that issuer's registrar
has entered into a contract with the Series' sub-custodian containing certain
protective conditions including, among other things, the sub-custodian's right
to conduct regular share confirmations on behalf of the Series. This
requirements will likely have the effect of precluding investments in certain
Russian companies that the Series would otherwise make.
For more detailed descriptions of these investment policies and techniques,
please refer to the Statement of Additional Information, which is available
without charge upon request by calling 1-800-448-2430.
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- ----------------
The Brinson Funds
Brinson Global Fund
Brinson Global Equity Fund
Brinson Global Bond Fund
Brinson U.S. Balanced Fund
Brinson U.S. Equity Fund
Brinson U.S. Large
Capitalization Equity Fund
Brinson U.S. Bond Fund
Brinson Non-U.S. Equity Fund
Prospectus
February 11, 1998
as supplemented
April 7, 1998
and
June 9, 1998
Global Institutional
Asset Management
- --------------------
The Brinson Funds
- -------------------------------------------------------
209 South LaSalle Street . Chicago, Illinois 60604-1295
Tel: 1-800-448-2430
