<PAGE>
UNITED STATES FILE NO. 33-47287
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 FILE NO. 811-6637
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. | |
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Post Effective Amendment No. 22 |X|
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | |
Amendment No. 23 |X|
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THE BRINSON FUNDS
=================
(Exact name of Registrant as Specified in Charter)
209 South LaSalle Street
Chicago, Illinois 60604-1295
- ----------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code 312-220-7100
------------
The Brinson Funds
209 South LaSalle Street
Chicago, Illinois 60604-1295
----------------------------
(Name and Address of Agent for Service)
COPIES TO: Bruce G. Leto, Esq.
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICAL AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE:
| | IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b)
| | ON (DATE), PURSUANT TO PARAGRAPH (b)
| | 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(1)
| | ON (DATE) PURSUANT TO PARAGRAPH (a)(1)
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|X| 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2)
| | ON (DATE) PURSUANT TO PARAGRAPH (a)(2) OF RULE 485.
------
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
| | THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
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<TABLE>
<CAPTION>
THE BRINSON FUNDS
Cross Reference Sheet Pursuant to Rule 481b
FORM N-1A ITEM CAPTION IN PROSPECTUSES
-----------------------
PART A INFORMATION REQUIRED IN A PROSPECTUS
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<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Annual Fund Operating Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Description of the Funds; Investment Objectives and Policies;
Investment Considerations and Risks; Appendix A
5. Management of the Fund Management of the Trust-Portfolio Management; Administration of the
Trust; General Information
5A. Management's Discussion of (Included in Annual Report to Shareholders)
Fund Performance
6. Capital Stock and Other Securities General Information; Dividends, Distributions, and Taxes;
7. Purchase of Securities Being Offered Purchase of Shares; Account Options; Exchange of Shares; Distribution
Plan;* Net Asset Value
8. Redemption or Repurchase Redemption of Shares
9. Legal Proceedings Not Applicable
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
------ -------------------------------------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Strategies; Investment Restrictions; Portfolio
Transactions and Brokerage Commissions
14. Management of the Registrant Management of the Trust; Trustees and Officers; and Compensation Table
15. Control Persons and Principal Holders of Control Persons and Principal Holders of Securities
Securities
16. Investment Advisory and Other Services Investment Advisory and Other Services
17. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage Commissions
==================================================================================================================
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*This caption and section is not included in prospectus for the Brinson
Funds-Class I shares.
PAGE 2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
18. Capital Stock and Other Securities Shares of Beneficial Interest
19. Purchase, Redemption and Pricing of Purchases; Redemptions
Securities Being Offered
20. Tax Status Redemptions-Taxation
21. Underwriters Investment Advisory and Other Services-Underwriter
22. Calculations of Performance Data Performance Calculations
23. Financial Statements Financial Statements
PART C OTHER INFORMATION
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Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C to this Registration
Statement.
</TABLE>
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PAGE 3
<PAGE>
[THE BRINSON FUNDS LOGO]
PROSPECTUS
December __, 1998
This Prospectus describes the Brinson Fund-Class I shares of the investment
portfolios offered by The Brinson Funds (the "Trust"). The Trust is a no-load,
open-end management investment company advised by Brinson Partners, Inc.
("Brinson Partners" or the "Advisor"), which currently offers thirteen
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. Large Capitalization Growth Fund, U. S. Small Capitalization Fund,
U.S. Bond Fund, High Yield Bond Fund, Global (ex-U.S.) Equity Fund (formerly,
Non-U.S. Equity Fund), Emerging Markets Equity Fund and Emerging Markets Debt
Fund (each a "Series" and collectively, the "Series"). Each Series offers
three separate classes of shares--the Brinson Fund-Class I, the Brinson Fund-
Class N and the UBS Investment Funds class. The Brinson Fund-Class I 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. Large
Capitalization Growth Fund, Brinson U.S. Small Capitalization Fund, Brinson U.S.
Bond Fund, Brinson High Yield Bond Fund, Brinson Global (ex-U.S.) Equity Fund,
Brinson Emerging Markets Equity Fund and Brinson Emerging Markets Debt Fund
(each a "Fund" and collectively, the "Brinson Funds" or "Funds"). This
Prospectus pertains only to 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. The Brinson Fund-Class N shares do not
have a sales load, but are subject to annual Rule 12b-1 plan expenses. Further
information relating to the Brinson Fund-Class N shares may be obtained by
calling 1-800-448-2430. The UBS Investment Funds 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 UBS Investment Funds
class shares may be obtained by calling 1-800-794-7753.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Class I 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 December __, 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
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Annual Fund Operating Expenses............................................. 1
Financial Highlights....................................................... 5
Prior Performance of the Advisor........................................... 8
Description of the Funds................................................... 13
Investment Objectives and Policies......................................... 13
Global Fund.............................................................. 13
Global Equity Fund....................................................... 14
Global Bond Fund......................................................... 14
U.S. Balanced Fund....................................................... 15
U.S. Equity Fund......................................................... 15
U.S. Large Capitalization Equity Fund.................................... 15
U.S. Large Capitalization Growth Fund.................................... 16
U.S. Small Capitalization Fund........................................... 17
U.S. Bond Fund........................................................... 17
High Yield Bond Fund..................................................... 18
Global (ex-U.S.) Equity Fund............................................. 19
Emerging Markets Equity Fund............................................. 19
Emerging Markets Debt Fund............................................... 19
Investment Considerations and Risks........................................ 20
Management of the Trust.................................................... 26
Portfolio Management....................................................... 27
Administration of the Trust................................................ 27
Purchase of Shares......................................................... 29
Account Options............................................................ 31
Redemption of Shares....................................................... 31
Net Asset Value............................................................ 24
Dividends, Distributions and Taxes......................................... 36
General Information........................................................ 37
Performance Information.................................................... 39
Appendix A................................................................. 41
</TABLE>
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUNDS TO MAKE
SUCH AN OFFER OR SOLICITATION. NO SALES REPRESENTATIVE, DEALER, OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS.
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING EXPENSES
(AFTER FEE WAIVER
BRINSON FUND CLASS I MANAGEMENT FEES OTHER EXPENSES AND/OR EXPENSE TRANSACTION
SHARES (AFTER FEE WAIVER)/1/ (AFTER REIMBURSEMENT)/1/ REIMBURSEMENT)/1/ CHARGES/2/
- -------------------- --------------------- ------------------------ ------------------ -----------
<S> <C> <C> <C> <C>
Global Fund ............ 0.80% 0.14% 0.94% 0.00%
Global Equity Fund...... 0.78% 0.22% 1.00% 0.00%
Global Bond Fund........ 0.69% 0.21% 0.90% 0.00%
U.S. Balanced Fund...... 0.69% 0.11% 0.80% 0.00%
U.S. Equity Fund........ 0.70% 0.10% 0.80% 0.00%
U.S. Large Capitaliza-
tion Equity Fund....... 0.00% 0.80% 0.80% 0.00%
U.S. Large Capitaliza-
tion Growth Fund....... 0.70% 0.10% 0.80% 0.00%
U.S. Small Capitaliza-
tion Fund.............. 1.00% 0.15% 1.15% 0.00%
U.S. Bond Fund.......... 0.26% 0.34% 0.60% 0.00%
High Yield Bond Fund.... 0.60% 0.10% 0.70% 0.00%
Global (ex-U.S.) Equity
Fund................... 0.80% 0.20% 1.00% 0.00%
Emerging Markets Equity
Fund................... 1.10% 0.50% 1.60% 1.50%
Emerging Markets Debt
Fund................... 0.65% 0.50% 1.15% 0.50%
</TABLE>
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/1Pursuant/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. Large Capitalization
Growth Fund, U.S. Small Capitalization Fund, U.S. Bond Fund, High Yield Bond
Fund, Global (ex-U.S.) Equity Fund, Emerging Markets Equity Fund and
Emerging Markets Debt Fund: 0.80%, 0.80%, 0.75%, 0.70%, 0.70%, 0.70%, 0.70%,
1.00%, 0.50%, 0.60%, 0.80%, 1.10% and 0.65%, respectively. The Advisor has
irrevocably agreed to waive its fees and reimburse certain expenses so that
the total operating expenses 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. Large Capitalization Growth Fund, U.S. Small
Capitalization Fund, U.S. Bond Fund, High Yield Bond Fund, Global (ex-U.S.)
Equity Fund, Emerging Markets Equity Fund and Emerging Markets Debt Fund
will never exceed 1.10%, 1.00%, 0.90%, 0.80%, 0.80%, 0.80%, 0.80%, 1.15%,
0.60%, 0.70%, 1.00%, 1.60% and 1.15%, respectively. Had the Advisor not
irrevocably agreed to waive fees and reimburse expenses, the total fund
operating expenses for the Brinson Fund Class I shares of the Series for the
fiscal year ended June 30, 1998 for the Global Equity Fund, Global Bond
Fund, U.S. Balanced Fund, U.S. Large Capitalization Equity Fund and U.S.
Bond Fund, would have been 1.02%, 0.96%, 0.81%, 1.59%, and 0.84%,
respectively. The fees and expenses for the U.S. Large Capitalization Equity
Fund are based on the period from April 6, 1998 (commencement of operations)
to June 30, 1998. The fees and expenses of the U.S. Large Capitalization
Growth Fund, the U.S. Small Capitalization Fund, the High Yield Bond Fund,
the Emerging Markets Equity Fund and the Emerging Markets Debt Fund are
based on estimates.
/2Shareholders/of the Emerging Markets Equity Fund are subject to a 1.50%
transaction charge in connection with each purchase and redemption of shares
of the Series. Shareholders of the Emerging Markets Debt Fund are subject to
a 0.50% transaction charge in connection with each purchase of shares of the
Series. Shares of each Series are sold at a price which is equal to the net
asset value of such shares, plus the transaction charge. Redemption requests
for the Emerging Markets Equity Fund are paid at the net asset value less
the transaction charge. The transaction charges do not apply to the
reinvestment of dividends or capital gain distributions.
3
<PAGE>
The transaction charges are paid to the Series and used by them to defray
transaction costs associated with the purchase and sale of securities within
the Series. The amount of the transaction charge on purchases and redemptions
represents the estimate of the costs reasonably anticipated to be associated
with the purchase of securities with cash received from shareholders and the
sale of securities to obtain cash to redeem shareholders. Therefore, the
transaction charges offset the dilutive effect such costs would otherwise
have on the net asset value of the Series' shares. Purchases and redemptions
which are made in kind with securities are not subject to the transaction
charges.
EXAMPLE: Based on the level of expenses listed above after fee waivers or
expense 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>
BRINSON FUND CLASS I SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Global Fund..................................... $10 $30 $52 $115
Global Equity Fund.............................. $10 $32 $55 $122
Global Bond Fund................................ $ 9 $29 $50 $111
U.S. Balanced Fund.............................. $ 8 $26 $44 $ 99
U.S. Equity Fund................................ $ 8 $26 $44 $ 99
U.S. Large Capitalization Equity Fund........... $ 8 $26 $44 $ 99
U.S. Large Capitalization Growth Fund........... $ 8 $26 $44 $ 99
U.S. Small Capitalization Fund.................. $12 $37 $63 $140
U.S. Bond Fund.................................. $ 6 $19 $33 $ 75
High Yield Bond Fund............................ $ 7 $22 $39 $ 87
Global (ex-U.S.) Equity Fund.................... $10 $32 $55 $122
Emerging Markets Equity Fund.................... $16 $50 $87 $190
Emerging Markets Debt Fund...................... $12 $37 $63 $140
</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.
- -------------------------------------------------------------------------------
THE EXAMPLE SHOULD NOT BE CONSIDERED REPRESENTATIVE OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER,
WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, A FUND'S ACTUAL PERFORMANCE WILL
VARY AND MAY RESULT IN ACTUAL RETURNS GREATER OR LESS THAN 5%.
- -------------------------------------------------------------------------------
4
<PAGE>
FINANCIAL HIGHLIGHTS
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 Global (ex-
U.S.) Equity Fund
The selected financial information in the following table has been audited
by the Funds' independent auditors, whose unqualified reports thereon (the
"Reports") appear in the Funds' Annual Report to Shareholders dated June 30,
1998 (the "Annual Report"). Additional performance and financial data and
related notes are contained in the Annual Report, which is available without
charge upon request. The Funds' Financial Statements for the fiscal year ended
June 30, 1998 and the Reports are incorporated by reference into the Statement
of Additional Information.
Brinson U.S. Large Capitalization Growth Fund, Brinson U.S. Small
Capitalization Fund and Brinson High Yield Bond Fund
The U.S. Large Capitalization Growth Fund, the U.S. Small Capitalization
Fund and the High Yield Bond Fund (collectively, the "New Series") are
successors to the UBS Large Cap Growth Fund, the UBS Small Cap Fund and the
UBS High Yield Bond Fund, respectively (collectively, the "Predecessor
Funds"). Each Predecessor Fund, prior to its merger into a New Series,
operated as a separate portfolio of UBS Private Investor Funds, Inc., another
investment company that was advised by another entity. The Predecessor Funds
had fiscal years ending on December 31. On December , 1998, following the
approval of the shareholders of each Predecessor Fund of an agreement and plan
of reorganization, the UBS Large Cap Growth Fund, the UBS Small Cap Fund and
the UBS High Yield Bond Fund were reorganized and merged into the U.S. Large
Capitalization Growth Fund, the U.S. Small Capitalization Fund and the High
Yield Bond Fund, respectively. (These transactions are collectively referred
to as the "Reorganizations.") In conjunction with the Reorganizations, the
fiscal year ends of the Predecessor Funds were changed to June 30. The New
Series had no operations prior to the Reorganizations.
The selected financial information in the following table has been audited
by the Predecessor Funds' independent auditors, whose unqualified reports on
the financial statements containing such information (the "Reports") appear in
the Predecessor Funds' Annual Reports to Shareholders dated December 31, 1997
(the "Predecessor Funds' Annual Reports"). In addition, the table includes
unaudited financial information for the period ended June 30, 1998, which is
included in the Predecessor Funds' Semi-Annual Reports to Shareholders (the
"Predecessor Funds' Semi-Annual Reports") dated June 30, 1998. Additional
performance and financial data and related notes are contained in the
Predecessor Funds' Annual Reports and the Predecessor Funds' Semi-Annual
Reports (the "Predecessor Funds' Reports"), which are available without charge
upon request. The Predecessor Funds' Financial Statements for the fiscal year
ended December 31, 1997, and the period ended June 30, 1998, and the
Predecessor Funds' Reports are incorporated by reference into the Statement of
Additional Information.
5
<PAGE>
FINANCIAL HIGHLIGHTS--FISCAL YEARS ENDED JUNE 30 AND DECEMBER 31
The following table presents financial data relating to a share of
beneficial interest outstanding throughout the periods presented. This
information has been derived from the Funds' and the Predecessor Funds'
financial statements.
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT
OPERATIONS LESS DISTRIBUTIONS
------------------------------ -----------------------------
DISTRIBU-
TOTAL TIONS DISTRIBU-
INCOME FROM AND TIONS NET NET
NET (LOSS) IN EXCESS FROM AND ASSET ASSETS,
NET ASSET NET REALIZED FROM OF NET IN EXCESS VALUE- TOTAL END OF
VALUE- INVEST- AND INVEST- INVEST- OF NET TOTAL END RETURN PERIOD
BEGINNING MENT UNREALIZED MENT MENT REALIZED DISTRIBU- OF (NON- (IN
YEAR OF PERIOD INCOME GAIN (LOSS) OPERATIONS INCOME GAIN TIONS PERIOD ANNUALIZED) 000S)
- ---- --------- ------- ----------- ---------- --------- --------- --------- ------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BRINSON GLOBAL FUND--CLASS I (Commencement of Operations August 31, 1992)/2/
1993............ $10.00 0.26 0.81 1.07 (0.20) -- (0.20) $10.87 10.76 % $191,389
1994............ $10.87 0.33 (0.23) 0.10 (0.27) (0.27) (0.54) $10.43 0.77 % $278,859
1995............ $10.43 0.43 0.86 1.29 (0.27) (0.10) (0.37) $11.35 12.57 % $365,678
1996............ $11.35 0.44 1.37 1.81 (0.62) (0.32) (0.94) $12.22 16.38 % $457,933
1997............ $12.22 0.38 1.79 2.17 (0.61) (0.65) (1.26) $13.13 18.79 % $586,667
1998............ $13.13 0.37 0.62 0.99 (0.65) (0.70) (1.35) $12.77 8.28 % $667,745
BRINSON GLOBAL EQUITY FUND--CLASS I (Commencement of Operations January 28, 1994)/2/
1994............ $10.00 0.07 (0.54) (0.47) (0.04) -- (0.04) $ 9.49 (4.70)% $ 20,642
1995............ $ 9.49 0.18 0.39 0.57 (0.04) (0.09) (0.13) $ 9.93 6.06 % $ 20,706
1996............ $ 9.93 0.18 2.29 2.47 (0.14) (0.69) (0.83) $11.57 25.66 % $ 27,126
1997............ $11.57 0.16 2.14 2.30 (0.12) (0.99) (1.11) $12.76 21.26 % $ 48,054
1998............ $12.76 0.22 0.78 1.00 (0.17) (1.05) (1.22) $12.54 8.99 % $ 22,724
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------
RATIO OF NET
RATIO OF EXPENSES INVESTMENT INCOME
TO AVERAGE NET TO AVERAGE NET
ASSETS ASSETS
--------------------- ---------------------
BEFORE AFTER BEFORE AFTER
EXPENSE EXPENSE EXPENSE EXPENSE PORTFOLIO
REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
YEAR MENT MENT MENT MENT RATE
- ---- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
BRINSON GLOBAL FUND--CLASS I (Commencement of Operations August 31, 1992)/2/
1993............ 1.35%/1/ 1.05%/1/ 3.26%/1/ 3.56%/1/ 149%
1994............ 1.14% 1.10% 3.21% 3.25% 231%
1995............ 1.09% N/A 4.27% N/A 238%
1996............ 1.04% N/A 3.69% N/A 142%
1997............ 0.99% N/A 3.03% N/A 150%
1998............ 0.94% N/A 2.70% N/A 88%
BRINSON GLOBAL EQUITY FUND--CLASS I (Commencement of Operations January 28, 1994)/2/
1994............ 2.65%/1/ 1.00%/1/ 0.24%/1/ 1.89%/1/ 21%
1995............ 2.06% 1.00% 0.71% 1.77% 36%
1996............ 1.77% 1.00% 0.57% 1.34% 74%
1997............ 1.25% 1.00% 1.35% 1.60% 32%
1998............ 1.02% 1.00% 1.29% 1.31% 46%
</TABLE>
/1/Annualized
/2/Formerly known as the Brinson Fund Class shares; redesignated as the
Brinson Fund-Class I shares on June 30, 1997
/3/The net investment income per share data was determined by using average
shares outstanding throughout the period.
/4/The Brinson Global (ex-U.S.) Equity Fund changed its name from the Brinson
Non-U.S. Equity Fund on December , 1998. During the fiscal year ended June
30, 1998, the Global (ex-U.S.) Equity Fund (the "ex-U.S. Fund") had total
borrowings of $32,600,000 outstanding for 1 day (June 29, 1998) under the
Trust's agreement with The Chase Manhattan Bank to provide a 364-day $100
million committed line of credit. The ex-U.S. Fund had 36,449,018.679 shares
outstanding on June 29, 1998, and the amount of debt per share was $12.05. At
June 30, 1998, the ex-U.S. Fund had no debt outstanding.
/5/For the period from commencement of operations to December 31, 1997.
/6/Prior to the Reorganizations, each of these Series operated as a separate
portfolio of UBS Private Investor Funds, Inc. and invested all of their
respective investable assets in an affiliated fund with an identical
investment objective. The U.S. Large Capitalization Growth Fund invested
solely in the UBS Investor Portfolios Trust--UBS Large Cap Growth Portfolio;
the U.S. Small Capitalization Fund invested solely in the UBS Investor
Portfolios Trust--UBS Small Cap Portfolio; and the High Yield Bond Fund
invested solely in the UBS Investor Portfolios Trust--UBS High Yield Bond
Portfolio. The funds in which each of these Series invested are referred to
herein as the "Master Funds." The ratios set forth in this Financial
Highlights table for each of these Series include the Series' share of its
respective Master Fund's expenses. The annualization of these ratios is
affected by the fact that the Investment Advisory Agreement and Investment
Sub-Advisory Agreement to which these Series were subject prior to the
Reorganizations were not ratified until December 29, 1997. Prior to that date,
investment advisory services were being provided without compensation.
/7/The Portfolio Turnover Rate reflected in this Financial Highlights Table
reflects the portfolio turnover rate for the Series' respective Master Funds.
/8/For the period from January 1, 1998 to June 30, 1998.
N/A=Not Applicable.
6
<PAGE>
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT
OPERATIONS LESS DISTRIBUTIONS
------------------------------ -----------------------------
TOTAL DISTRIBU-
INCOME DISTRIBU- TIONS NET NET
NET (LOSS) TIONS FROM AND ASSET ASSETS
NET ASSET NET REALIZED FROM FROM NET IN EXCESS VALUE- TOTAL END OF
VALUE- INVEST- AND INVEST- INVEST- OF NET TOTAL END RETURN PERIOD
BEGINNING MENT UNREALIZED MENT MENT REALIZED DISTRIBU- OF (NON- (IN
YEAR OF PERIOD INCOME GAIN (LOSS) OPERATIONS INCOME GAIN TIONS PERIOD ANNUALIZED) 000S)
- ---- --------- ------- ----------- ---------- --------- --------- --------- ------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BRINSON GLOBAL BOND FUND--CLASS I (Commencement of Operations July 30, 1993)/2/
1994............ $10.00 0.45 (0.52) (0.07) (0.28) (0.10) (0.38) $ 9.55 (0.79)% $ 36,849
1995............ $ 9.55 0.50 0.58 1.08 (0.24) -- (0.24) $10.39 11.34 % $ 51,863
1996............ $10.39 0.84 0.31 1.15 (1.40) (0.10) (1.50) $10.04 11.50 % $ 41,066
1997............ $10.04 0.67 0.08 0.75 (0.96) (0.19) (1.15) $ 9.64 7.71 % $ 54,157
1998............ $ 9.64 0.43/3/ (0.18) 0.25 (0.31) (0.17) (0.48) $9.41 2.69 % $ 91,274
BRINSON U.S. BALANCED FUND--CLASS I (Commencement of Operations December 30, 1994)/2/
1995............ $10.00 0.23 1.16 1.39 (0.16) -- (0.16) $11.23 13.91 % $157,724
1996............ $11.23 0.44 1.04 1.48 (0.43) (0.57) (1.00) $11.71 13.52 % $227,829
1997............ $11.71 0.47 1.29 1.76 (0.40) (0.54) (0.94) $12.53 15.50 % $282,860
1998............ $12.53 0.49/3/ 0.93 1.42 (0.77) (0.94) (1.71) $12.24 12.19 % $ 80,556
BRINSON U.S. EQUITY FUND--CLASS I (Commencement of Operations February 22, 1994)/2/
1994............ $10.00 0.05 (0.36) (0.31) (0.04) -- (0.04) $ 9.65 (3.10)% $ 8,200
1995............ $ 9.65 0.16 1.89 2.05 (0.14) (0.03) (0.17) $11.53 21.45 % $ 42,573
1996............ $11.53 0.17 3.31 3.48 (0.17) (0.25) (0.42) $14.59 30.57 % $126,342
1997............ $14.59 0.15 4.27 4.42 (0.14) (1.23) (1.37) $17.64 31.87 % $337,949
1998............ $17.64 0.19 3.39 3.58 (0.18) (1.13) (1.31) $19.91 21.48 % $605,768
BRINSON U.S. LARGE CAPITALIZATION EQUITY FUND--CLASS I (Commencement of Operations April 6, 1998)
1998............ $10.00 0.02 (0.20) (0.18) (0.02) -- (0.02) $ 9.80 (1.83)% $ 154
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------
RATIO OF NET
RATIO OF EXPENSES INVESTMENT INCOME
TO AVERAGE NET TO AVERAGE NET
ASSETS ASSETS
--------------------- ----------------------
BEFORE AFTER BEFORE AFTER
EXPENSE EXPENSE EXPENSE EXPENSE PORTFOLIO
REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
YEAR MENT MENT MENT MENT RATE
- ---- ---------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
BRINSON GLOBAL BOND FUND--CLASS I (Commencement of Operations July 30, 1993)/2/
1994............ 1.78%/1/ 0.90%/1/ 4.03%/1/ 4.91%/1/ 189%
1995............ 1.43% 0.90% 5.53% 6.06% 199%
1996............ 1.65% 0.90% 4.98% 5.73% 184%
1997............ 1.32% 0.90% 4.90% 5.32% 235%
1998............ 0.96% 0.90% 4.47% 4.53% 151%
BRINSON U.S. BALANCED FUND--CLASS I (Commencement of Operations December 30, 1994)/2/
1995............ 1.06%/1/ 0.80%/1/ 4.36 %/1/ 4.63%/1/ 196%
1996............ 1.01% 0.80% 3.76 % 3.97% 240%
1997............ 0.88% 0.80% 3.78 % 3.86% 329%
1998............ 0.81% 0.80% 3.88 % 3.89% 194%
BRINSON U.S. EQUITY FUND--CLASS I (Commencement of Operations February 22, 1994)/2/
1994............ 5.40%/1/ 0.80%/1/ (2.82)%/1/ 1.78%/1/ 9%
1995............ 1.70% 0.80% 1.09 % 1.99% 33%
1996............ 1.14% 0.80% 1.13 % 1.47% 36%
1997............ 0.89% 0.80% 1.06 % 1.15% 43%
1998............ 0.80% N/A 1.12 % N/A 42%
BRINSON U.S. LARGE CAPITALIZATION EQUITY FUND--CLASS I (Commencement of Operations April 6, 1998)
1998............ 1.59%/1/ 0.80%/1/ 0.52 %/1/ 1.31%/1/ 12%
</TABLE>
- -----
/1/Annualized
/2/Formerly known as the Brinson Fund Class shares; redesignated as the
Brinson Fund-Class I shares on June 30, 1997
/3/The net investment income per share data was determined by using average
shares outstanding throughout the period.
/4/The Brinson Global (ex-U.S.) Equity Fund changed its name from the Brinson
Non-U.S. Equity Fund on December , 1998. During the fiscal year ended June
30, 1998, the Global (ex-U.S.) Equity Fund (the "ex-U.S. Fund") had total
borrowings of $32,600,000 outstanding for 1 day (June 29, 1998) under the
Trust's agreement with The Chase Manhattan Bank to provide a 364-day $100
million committed line of credit. The ex-U.S. Fund had 36,449,018.679 shares
outstanding on June 29, 1998, and the amount of debt per share was $12.05. At
June 30, 1998, the ex-U.S. Fund had no debt outstanding.
/5/For the period from commencement of operations to December 31, 1997.
/6/Prior to the Reorganizations, each of these Series operated as a separate
portfolio of UBS Private Investor Funds, Inc. and invested all of their
respective investable assets in an affiliated fund with an identical
investment objective. The U.S. Large Capitalization Growth Fund invested
solely in the UBS Investor Portfolios Trust--UBS Large Cap Growth Portfolio;
the U.S. Small Capitalization Fund invested solely in the UBS Investor
Portfolios Trust--UBS Small Cap Portfolio; and the High Yield Bond Fund
invested solely in the UBS Investor Portfolios Trust--UBS High Yield Bond
Portfolio. The funds in which each of these Series invested are referred to
herein as the "Master Funds." The ratios set forth in this Financial
Highlights table for each of these Series include the Series' share of its
respective Master Fund's expenses. The annualization of these ratios is
affected by the fact that the Investment Advisory Agreement and Investment
Sub-Advisory Agreement to which these Series were subject prior to the
Reorganizations were not ratified until December 29, 1997. Prior to that date,
investment advisory services were being provided without compensation.
/7/The Portfolio Turnover Rate reflected in this Financial Highlights Table
reflects the portfolio turnover rate for the Series' respective Master Funds.
/8/For the period from January 1, 1998 to June 30, 1998.
N/A=Not Applicable.
7
<PAGE>
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT
OPERATIONS LESS DISTRIBUTIONS
------------------------------- -----------------------------
TOTAL DISTRIBU-
INCOME DISTRIBU- TIONS NET NET
NET (LOSS) TIONS FROM AND ASSET ASSETS
NET ASSET NET REALIZED FROM FROM NET IN EXCESS VALUE- TOTAL END OF
VALUE- INVEST- AND INVEST- INVEST- OF NET TOTAL END RETURN PERIOD
BEGINNING MENT UNREALIZED MENT MENT REALIZED DISTRIBU- OF (NON- (IN
YEAR OF PERIOD INCOME GAIN (LOSS) OPERATIONS INCOME GAIN TIONS PERIOD ANNUALIZED) 000S)
- ---- --------- -------- ----------- ---------- --------- --------- --------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BRINSON U.S. BOND FUND--CLASS I (Commencement of Operations August 31, 1995)/2/
1996............ $10.00 0.50 (0.14) 0.36 (0.40) (0.03) (0.43) $ 9.93 3.60 % $ 9,047
1997............ $ 9.93 0.51/3/ 0.32 0.83 (0.52) -- (0.52) $10.24 8.45 % $ 22,421
1998............ $10.24 0.53 0.53 1.06 (0.58) (0.14) (0.72) $10.58 10.60 % $ 38,874
BRINSON GLOBAL (EX-U.S.) EQUITY FUND--CLASS I (Commencement of Operations August 31, 1993)/3/,/4/
1994............ $10.00 0.10 (0.34) (0.24) (0.07) -- (0.07) $ 9.69 (2.45)% $ 71,544
1995............ $ 9.69 0.15 (0.16) (0.01) -- -- -- $ 9.68 (0.10)% $148,319
1996............ $ 9.68 0.18 2.05 2.23 (0.18) (0.56) (0.74) $11.17 23.64 % $212,366
1997............ $11.17 0.18 1.97 2.15 (0.17) (0.56) (0.73) $12.59 20.27 % $420,855
1998............ $12.59 0.18 0.30 0.48 (0.18) (0.74) (0.92) $12.15 4.78 % $439,329
BRINSON U.S. LARGE CAPITALIZATION GROWTH FUND--CLASS I (Commencement of Operations October 14, 1997)
1997/5/......... $100 0.23 (0.79) (0.56) (0.22) -- (0.22) $ 99.22 (0.55)% $ 4,137
1998 (unau-
dited)/8/....... $99.22 0.27 12.76 13.03 -- -- -- $112.25 13.13% $ 7,135
BRINSON U.S. SMALL CAPITALIZATION FUND--CLASS I (Commencement of Operations September 30, 1997)
1997/5/......... $100 -- (5.62) (5.62) -- -- -- $ 94.38 (5.62)% $ 11,954
1998 (unau-
dited)/8/....... $94.38 (0.05) 2.85 2.80 -- -- -- $ 97.18 2.89% $ 21,310
BRINSON HIGH YIELD BOND FUND--CLASS I (Commencement of Operations September 30, 1997)
1997/5/......... $100 1.80 0.52 2.32 (1.77) -- (1.77) $100.55 2.34% $ 7,861
1998 (unau-
dited)/8/....... $100.55 4.00 1.67 5.67 (3.96) -- (3.96) $102.26 5.07% $ 16,463
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------
RATIO OF NET INVESTMENT
RATIO OF EXPENSES INCOME
TO AVERAGE NET TO AVERAGE NET
ASSETS ASSETS
------------------------- -----------------------------
BEFORE AFTER BEFORE AFTER
EXPENSE EXPENSE EXPENSE EXPENSE PORTFOLIO
REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
YEAR MENT MENT MENT MENT RATE
- ---- ------------ ------------ -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
BRINSON U.S. BOND FUND--CLASS I (Commencement of Operations August 31, 1995)/2/
1996............ 3.63%/1/ 0.60%/1/ 3.00 %/1/ 6.03%/1/ 363%
1997............ 1.65% 0.60% 5.14 % 6.19% 410%
1998............ 0.84% 0.60% 5.61 % 5.85% 198%
BRINSON GLOBAL (EX-U.S.) EQUITY FUND--CLASS I (Commencement of Operations August 31, 1993)/3/,/4/
1994............ 1.60%/1/ 1.00%/1/ 1.28 %/1/ 1.88%/1/ 12%
1995............ 1.23% 1.00% 1.93 % 2.16% 14%
1996............ 1.20% 1.00% 1.67 % 1.87% 20%
1997............ 1.00% N/A 1.83 % N/A 25%
1998............ 1.00% N/A 1.52 % N/A 49%
BRINSON U.S. LARGE CAPITALIZATION GROWTH FUND--CLASS I (Commencement of Operations October 14, 1997)
1997/5/......... 8.54%/1/,/6/ 1.00%/1/,/6/ (6.19)%/1/,/6/ 1.35%/1/,/6/ 6%/7/
1998 (unau-
dited)/8/....... 3.27%/1/,/6/ 1.00%/1/,/6/ (1.69)%/1/,/6/ 0.58%/1/,/6/ 35%/7/
BRINSON U.S. SMALL CAPITALIZATION FUND--CLASS I (Commencement of Operations September 30, 1997)
1997/5/......... 3.63%/1/,/6/ 1.20%/1/,/6/ (2.53)%/1/,/6/ (0.10)%/1/,/6/ 3%/7/
1998 (unau-
dited)/8/....... 1.95%/1/,/6/ 1.20%/1/,/6/ (0.87)%/1/,/6/ (0.12)%/1/,/6/ 9%/7/
BRINSON HIGH YIELD BOND FUND--CLASS I (Commencement of Operations September 30, 1997)
1997/5/......... 4.98%/1/,/6/ 0.90%/1/,/6/ 2.25%/1/,/6/ 7.23%/1/,/6/ 80%/7/
1998 (unau-
dited)/8/....... 2.47%/1/,/6/ 0.90%/1/,/6/ 6.46%/1/,/6/ 8.03%/1/,/6/ 155%/7/
</TABLE>
- -----
/1/Annualized
/2/Formerly known as the Brinson Fund Class shares; redesignated as the
Brinson Fund-Class I shares on June 30, 1997
/3/The net investment income per share data was determined by using average
shares outstanding throughout the period.
/4/The Brinson Global (ex-U.S.) Equity Fund changed its name from the Brinson
Non-U.S. Equity Fund on December , 1998. During the fiscal year ended June
30, 1998, the Global (ex-U.S.) Equity Fund (the "ex-U.S. Fund") had total
borrowings of $32,600,000 outstanding for 1 day (June 29, 1998) under the
Trust's agreement with The Chase Manhattan Bank to provide a 364-day $100
million committed line of credit. The ex-U.S. Fund had 36,449,018.679 shares
outstanding on June 29, 1998, and the amount of debt per share was $12.05. At
June 30, 1998, the ex-U.S. Fund had no debt outstanding.
/5/For the period from commencement of operations to December 31, 1997.
/6/Prior to the Reorganizations, each of these Series operated as a separate
portfolio of UBS Private Investor Funds, Inc. and invested all of their
respective investable assets in an affiliated fund with an identical
investment objective. The U.S. Large Capitalization Growth Fund invested
solely in the UBS Investor Portfolios Trust--UBS Large Cap Growth Portfolio;
the U.S. Small Capitalization Fund invested solely in the UBS Investor
Portfolios Trust--UBS Small Cap Portfolio; and the High Yield Bond Fund
invested solely in the UBS Investor Portfolios Trust--UBS High Yield Bond
Portfolio. The funds in which each of these Series invested are referred to
herein as the "Master Funds." The ratios set forth in this Financial
Highlights table for each of these Series include the Series' share of its
respective Master Fund's expenses. The annualization of these ratios is also
affected by the fact that the Investment Advisory Agreement and Investment
Sub-Advisory Agreement to which these Series were subject prior to the
Reorganizations were not ratified until December 29, 1997. Prior to that date,
investment advisory services were being provided without compensation.
/7/The Portfolio Turnover Rate reflected in this Financial Highlights Table
reflects the portfolio turnover rate for the Series' respective Master Funds.
/8/For the period from January 1, 1998 to June 30, 1998.
N/A=Not Applicable.
8
<PAGE>
Financial Highlights are not included for the Brinson Emerging Markets Equity
Fund or the Brinson Emerging Markets Debt Fund, each of which commenced
operations on December , 1998.
9
<PAGE>
PRIOR PERFORMANCE OF ADVISOR
The following table sets forth the Advisor's composite performance data
relating to the historical performance of institutional private accounts
managed by the Advisor, that have investment objectives, policies, strategies
and risks substantially similar to those of the various Series of the Trust.
The data is provided to illustrate the past performance of the Advisor in
managing investment portfolios which are substantially similar to the
applicable Series of the Trust as measured against specified market indices.
This performance presentation includes certain composites of Brinson Partners,
Inc. and certain composites of UBS Brinson New York (formerly UBS Asset
Management New York). These two firms are now part of one organization as a
result of a business combination on June 30, 1998. The portfolio management
process and performance measurement are distinct for the two entities through
June 30, 1998. The performance data of each series of the Brinson Funds as
well as three of the UBS Private Investor Funds is also included in the table.
The Advisor adopted the Performance Presentation Standards of the
Association for Investment Management and Research (AIMR-PPS(TM)) as of
January 1, 1993. The Advisor complies with the AIMR standards on a firmwide
basis, and a list of all firm composites is available upon request. The
composite performance results 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 this report.
Investment results are time-weighted performance calculations representing
total return. Returns are calculated using geometric linking of monthly
returns. Composites are valued at least 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
exclude the impact of custodial fees, and any other 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 account.
Results include all actual fee-paying, discretionary client portfolios
including those clients no longer with the Firm. Portfolios are included in
the composite beginning with the first full month of performance to the
present or to the cessation of the client's relationship with the Firm. No
alterations of composites as presented here have occurred due to changes in
personnel. Accounts of all sizes are included in composite performance and no
minimum account relationship size was set for inclusion in the composites as
the account size does not impact portfolio management style. The composites
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 of 1986, as amended. Had such expenses, limitations, requirements
and restrictions been applicable to the composites, the performance results
could have been adversely affected. The composite's performance presented does
not represent the historical performance of the Series and should not be
interpreted as indicative of future performance of the Series.
CLASS I ANNUALIZED RETURNS
<TABLE>
<CAPTION>
AVERAGE ANNUAL
--------------------------
ONE TWO THREE FIVE TEN
TOTAL RETURNS AS OF JUNE 30, 1998 YEAR YEARS YEARS YEARS YEARS
- --------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Global Securities Portfolio/1/............... 8.22% 13.58% 14.93% 11.66% 12.40%
Brinson Global Fund Class I/2/............... 8.28 13.41 14.39 11.17 N/A
GIobal Securities Markets Index/3/........... 13.76 15.86 15.72 13.56 12.41
Global Equity with Cash Portfolio/1/......... 10.88 16.31 19.47 13.61 12.81
Brinson Global Equity Fund Class I/2/........ 8.99 14.96 18.42 N/A N/A
MSCI World Equity Index/3/, /4/.............. 17.18 19.88 19.56 16.02 11.63
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------
ONE TWO THREE FIVE TEN
YEAR YEARS YEARS YEARS YEARS
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Global Bond Portfolio/1/.............. 3.71% 5.73% 7.89% 6.55% 9.05%
Brinson Global Bond Fund Class I/2/... 2.69 5.17 7.24 N/A N/A
Salomon World Govt Bond Index/3/...... 4.32 4.10 2.84 6.33 8.35
U.S. Balanced Portfolio/1/............ 12.87 14.64 14.67 12.04 12.69
Brinson U.S. Balanced Fund Class I/2/. 12.19 13.83 13.73 N/A N/A
U.S. Balanced Mutual Fund Index/3/.... 22.38 22.05 20.83 16.32 14.57
U.S. Equity Fund/1/................... 21.89 27.26 28.66 22.02 19.66
Brinson U.S. Equity Fund Class I/2/... 21.48 26.57 27.89 N/A N/A
Wilshire 5000/3/...................... 28.86 29.09 28.13 21.56 17.61
U.S. Large Capitalization Equity Port-
folio/1/............................. 21.41 28.61 30.56 23.49 20.64
U.S. Large Capitalization Growth Port-
folio/1/, /7/........................ 25.06 27.37 25.73 19.10 17.73
Brinson U.S. Large Cap Equity Fund
Class I/2/, /5/...................... (.13) N/A N/A N/A N/A
UBS Large Cap Growth Fund/2/, /5/,
/7/.................................. 12.51 N/A N/A N/A N/A
S & P 500/3/.......................... 30.21 32.37 30.23 23.05 18.55
U.S. Small Capitalization Growth Port-
folio/1/, /7/........................ 13.60 15.28 20.99 14.98 15.73
UBS Small Cap Fund/2/, /5/, /7/....... (2.89) N/A N/A N/A N/A
Russell 2000/3/....................... 16.51 16.42 18.86 16.05 13.57
U.S. Bond Portfolio/1/................ 10.89 9.89 8.27 7.14 9.40
Brinson U.S. Bond Fund Class I/2/..... 10.60 9.52 N/A N/A N/A
Salomon BIG Index/3/.................. 10.59 9.36 7.88 6.91 9.11
High Yield Portfolio/1/, /7/.......... 13.72 14.03 13.80 N/A N/A
UBS High Yield Fund/2/, /5/, /7/...... 8.18 N/A N/A N/A N/A
Merrill Lynch All High Yield Bond In-
dex/3/............................... 11.77 N/A N/A N/A N/A
Non-U.S. Equity Portfolio/1/.......... 5.88 12.99 16.98 12.22 10.93
Brinson Non-U.S. Equity Fund Class
I/2/................................. 4.78 12.26 15.93 N/A N/A
MSCI Non-U.S. Index (Unhedged)/3/,
/4/.................................. 6.04 9.77 11.04 10.29 6.98
Emerging Markets Equity Portfolio/1/.. (11.77) (34.08) (12.54) N/A N/A
MSCI Emerging Markets (Free) Index/3/. (38.10) (16.30) N/A N/A N/A
Brinson Emerging Market Normal In-
dex/3/............................... (36.75) (15.12) N/A N/A N/A
Emerging Markets Debt Portfolio/1/.... 6.81 22.29 N/A N/A N/A
JP MORGAN EMBI+/3/.................... 1.39 16.14 N/A N/A N/A
</TABLE>
- ----------
FOOTNOTES:
/1/ Performance figures for the Advisor composites are net of advisory fees.
Advisory fees are determined by taking the average account size within the
composite as of June 30, 1998 and applying the standard fee schedule.
Performance figures for the composites gross of fees are:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
--------------------------
ONE TWO THREE FIVE TEN
YEAR YEARS YEARS YEARS YEARS
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Global Securities Portfolio............... 8.94% 14.30% 15.65% 12.38% 13.12%
Global Equity with Cash Portfolio......... 11.73 17.16 20.32 14.46 13.66
Global Bond Portfolio..................... 4.28 6.30 8.46 7.12 9.62
U.S. Balanced Portfolio................... 13.59 15.36 15.39 12.76 13.41
U.S. Equity Fund.......................... 22.47 27.84 29.24 22.60 20.24
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-------------------------
ONE TWO THREE FIVE TEN
YEAR YEARS YEARS YEARS YEARS
------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
U.S. Large Capitalization Equity Portfo-
lio..................................... 22.02 29.22 31.17 24.10 21.35
U.S. Large Capitalization Growth Portfo-
lio..................................... 25.06 27.37 25.73 19.10 17.73
U.S. Small Capitalization Growth Portfo-
lio..................................... 13.60 15.28 20.99 14.98 15.73
U.S. Bond Portfolio...................... 11.20 10.20 8.58 7.45 9.71
High Yield Portfolio..................... 13.72 14.03 13.80 N/A N/A
Non-U.S. Equity Portfolio................ 6.59 13.70 17.69 12.93 11.64
Emerging Markets Equity Portfolio........ (11.77) (34.08) N/A N/A N/A
Emerging Markets Debt Portfolio.......... 6.81 22.29 N/A N/A N/A
</TABLE>
/2/ Total returns include reinvestment of all capital gain and income
distributions. Inception dates and average annual returns since each
Fund's inception date are as follows: Brinson Global Fund Class I,
8/31/92, 11.44%; Brinson Global Equity Fund Class I, 1/31/94, 12.45%;
Brinson Global Bond Fund Class I, 7/31/93, 6.49%; Brinson U.S. Balanced
Fund Class I, 12/31/94, 15.90%; Brinson U.S. Equity Fund Class I, 2/28/94,
23.11%; Brinson U.S. Large Capitalization Equity Fund Class I, 4/30/98,
(.13)%; UBS Large Cap Growth Fund, 9/30/97, 12.51%; UBS Small Cap Fund,
9/30/97, (2.89)%; Brinson U.S. Bond Fund Class I, 8/31/95, 7.97%; UBS High
Yield Bond Fund. 9/30/97, 8.18%; and Brinson Global (ex-U.S.) Equity Fund,
8/31/93, 9.03%.
/3/ GSMI Mutual Fund Index, an un-managed index compiled by the Advisor,
currently constructed as follows: 40% Wilshire 5000 Index; 22% MSCI Non-
U.S. Equity (Free) Index; 21% Salomon BIG 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. The composition of the Index has
evolved over time and may change in the future. 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 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 Mutual Fund Index, an un-managed index
compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index
and 35% Salomon Brothers Broad Investment Grade (BIG) 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. Russell
2000 Index is an unmanaged index that includes 2,000 U.S. small
capitalization stocks and is a common measure of the performance of the
small capitalization segment of the U.S. stock market. Salomon Brothers
Broad Investment Grade (BIG) Bond Index is an un-managed market driven
broad based index which includes U.S. bonds with over one year to
maturity. Merrill Lynch All HIgh Yield Bond Index is an unmanaged
composite consisting of publicly-issued, fixed-rate, non-convertible,
domestic bonds that are rated below investment grade. 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. Brinson Emerging Markets Normal Index is constructed to
minimize country specific risk while providing regional exposure similar
to the Morgan Stanley Capital International Emerging Markets (Free) Index,
a market capitalization weighted index. MSCI Emerging Markets (Free) Index
is a market capitalization weighted equity index composed of companies
that are representative of the market structure of the countries in the
index. JP Morgan EMBI+ reflects total returns for external debt
instruments which have been traded in the emerging markets, which
instruments include Brady Bonds, Eurobonds, loans and U.S. dollar
denominated local market instruments.
/4/ Beginning 1/31/88 these indices are "free".
/5/ Non-annualized return since performance inception date for the following
Funds: Brinson U.S. Large Capitalization Equity Fund Class I: 4/30/98, UBS
Large Cap Growth Fund: 10/14/97, UBS Small Cap Fund: 9/30/97, UBS High
Yield Fund: 9/30/97.
/6/ Non-annualized return. Since commencement of operations (4/6/98).
/7/ Performance figures for the U.S. Large Capitalization Growth Portfolio,
U.S. Small Capitalization Growth Portfolio and High Yield Portfolio,
represent composites of UBS Brinson New York (formerly UBS Asset
Management New York). Performance figures for the UBS Large Cap Growth
Fund, UBS Small Cap Fund and UBS High Yield Fund represent figures for
such funds while UBS Brinson New York (formerly UBS Asset Management New
York) was the investment manager.
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DESCRIPTION OF THE FUNDS
INVESTMENT PROCESS
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 Considerations
and Risks" and Appendix A in this Prospectus, and in the Statement of
Additional Information.
The Series is a diversified portfolio that seeks to achieve its objective by
pursuing active asset allocation strategies across global equity and fixed
income markets and active security selection within each market. These
decisions are undertaken relative to the GSMI Mutual Fund 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.
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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
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 World Government Bond Index (the "Global Bond
Benchmark"). The Global Bond Benchmark is a market driven index which measures
the broad global fixed
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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 and
35% Salomon Brothers Broad Investment Grade (BIG) Bond 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
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Series' total assets will be invested in large capitalization equity
securities of U.S. companies. The Advisor defines large capitalization
companies as those with market capitalizations in the upper 65% of the
Wilshire 5000 Index at the time of the Series' investment. Companies whose
capitalization falls below this level after purchase continue to be considered
large capitalization companies. The Series is a non-diversified portfolio as
described in "Investment Consideration and Risks--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. LARGE CAPITALIZATION GROWTH FUND
INVESTMENT OBJECTIVE
The U.S. Large Capitalization Growth Fund's investment objective is to
provide long-term capital appreciation. In seeking to achieve its investment
objective, the Series attempts to control risk. Under normal circumstances, at
least 65% of the Series' total assets will be invested in large capitalization
growth companies. The Advisor defines large capitalization companies as those
with market capitalizations in the upper 65% of the Wilshire 5000 Index 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 diversified
portfolio that seeks to achieve its objective by investing in a wide range of
equity securities of large capital growth companies. The Series may invest up
to 20% of its assets in foreign securities. The Series may enter into
repurchase agreements and reverse repurchase agreements, and engage in futures
and options for hedging, 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 S&P 500 Index (the "Large Capitalization
Growth Benchmark"). The Large Capitalization Growth Benchmark is a broad
weighted index which includes primarily U.S. common stocks. The Large
Capitalization Growth Benchmark is designed to provide a representative
indication of the capitalization and return for the large capitalization U.S.
equity market.
U.S. SMALL CAPITALIZATION FUND
INVESTMENT OBJECTIVE
The U.S. Small Capitalization Fund's investment objective is to provide
long-term capital appreciation. In seeking to achieve its investment
objective, the Series attempts to control risk. Under normal circumstances, at
least 65% of the Series' total assets will be invested in small capital growth
companies. The Advisor defines small capital companies as those with market
capitalizations within the range of those stocks listed on the Russell 2000
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Index at the time of the Series' investment. The Series may also invest in
securities of emerging growth companies--i.e. small or medium sized companies
that have passed their start-up phase and that show positive earnings and
prospects of achieving significant profit and gain in a relatively short
period of time. The Series is a diversified portfolio that seeks to achieve
its objective by investing in a wide range of small capital growth companies.
The Series may invest up to 20% of its assets in foreign securities.
Growth company securities may have above average price volatility. The
Series may enter into repurchase agreements and reverse repurchase agreements,
and engage in futures and options for hedging, 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 Russell 2000 Index (the "Small Capitalization Growth Benchmark"). The
Small Capitalization Growth Benchmark is a broad weighted index which includes
primarily U.S. common stocks. The Small Capitalization Growth Benchmark is
designed to provide a representative indication of the capitalization and
return for the small 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 the Advisor. 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
(BIG) 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.
HIGH YIELD BOND FUND
INVESTMENT OBJECTIVES
The primary investment objective of the High Yield Bond Fund is to provide
high current income from a portfolio of higher-yielding, lower-rated debt
securities issued by domestic and foreign companies. In seeking to
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achieve its primary investment objective, the Series attempts to control risk.
The Series seeks to achieve its primary objective by investing, under normal
market conditions, at least 65% of its assets in fixed income securities that
provide higher yields and that are rated in the lower rating categories of
Moody's and S&P, including securities rated Baa or lower by Moody's or BBB or
lower by S&P ("high yield securities"). Securities rated below Baa or BBB are
considered to be of poor standing and predominantly speculative. The Series
may invest in a broad range of fixed income securities, including debt
securities of U.S. corporations, zero coupon securities, mortgage-backed
securities, asset-backed securities and when-issued securities. The Series may
invest up to 25% of its assets in foreign 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 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 seeks its secondary investment objective of capital growth, when
consistent with high current income, by investing in securities, including
common stocks and non-income producing securities, which the Advisor expects
will appreciate in value as a result of declines in long-term interest rates
or favorable developments affecting the business or prospects of the issuer
which may improve the issuer's financial condition and credit rating.
The High Yield Bond Fund's benchmark is the Merrill Lynch All High Yield
Bond Index (the "High Yield Benchmark"). The High Yield Benchmark is a market
driven index which currently has a duration of approximately 4.26 years. 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
high yield, fixed income securities market.
GLOBAL (EX-U.S.) EQUITY FUND (FORMERLY, NON-U.S. EQUITY FUND)
INVESTMENT OBJECTIVE
The Global (ex-U.S.) Equity Fund's investment objective is to maximize total
return, consisting of capital appreciation and current income, by investing
primarily in the equity securities of non-U.S. issuers. Under normal
conditions, at least 65% of the Series' total assets will be invested in
equity securities of issuers in at least three countries other than the United
States. In seeking to achieve its investment objective while 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.
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EMERGING MARKETS EQUITY FUND
The Brinson Emerging Markets Equity Fund's investment objective is to
maximize total U.S. dollar return, consisting of capital appreciation and
current income, while controlling risk. Under normal circumstances, at least
65% of the Series' assets will be invested in the equity securities of issuers
in emerging markets, or securities with respect to which the return is derived
from the equity securities of issuers in emerging markets, such as equity
swaps and equity index swaps, as further described below. The Series'
performance is measured relative to its benchmark, the Brinson Emerging
Markets Normal Index (the "Equity Benchmark"). The index is constructed to
minimize country specific risk while providing regional exposure similar to
the International Finance Corporation's Investable Index (IFCI), a market
capitalization weighted benchmark.
EMERGING MARKETS DEBT FUND
The Brinson Emerging Markets Debt Fund's investment objective is to maximize
total U.S. dollar return, consisting of capital appreciation and current
income, while controlling risk. Under normal circumstances, at least 65% of
the Series' assets will be invested in debt securities issued by governments,
government-related entities (including participations in loans between
governments and financial institutions), corporations and entities organized
to restructure outstanding debt of issuers in emerging markets, or debt
securities on which the return is derived primarily from other emerging market
instruments, such as interest rate swaps and currency swaps, as further
described below. The Series' performance is measured relative to its
benchmark, the J.P. Morgan Emerging Markets Bond Index Plus (the "Debt
Benchmark").
Investors should understand that all investments involve risk and that there
can be no guarantee against loss resulting from an investment in the Series,
nor can there be any assurance that the Series' respective investment
objectives will be attained.
INVESTMENT CONSIDERATIONS AND RISKS
The following provides information about the types of instruments in which
the Funds may invest, strategies employed by Brinson Partners in its attempt
to attain each Series' investment objective and a summary of related risks.
Shareholders should understand that all investments involve risks and there
can be no guarantee against loss resulting from an investment in the Series,
nor can there be any assurance that the Series will be able to 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, U.S. LARGE CAPITALIZATION
GROWTH FUND, U.S. SMALL CAPITALIZATION FUND, GLOBAL (EX-U.S.) EQUITY FUND AND
EMERGING MARKETS 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, U.S. Small Capitalization Fund and Emerging Markets Equity 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,
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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,
U.S. BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT 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.
QUALITY INFORMATION FOR HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND
AND EMERGING MARKETS DEBT FUND - At any one time substantially all of the
assets of the High Yield Bond Fund and the Emerging Markets Debt Fund and up
to 35% of the assets of the Emerging Markets Equity Fund may be invested in
investments which are lower quality, higher yielding securities and which are
rated Ba or lower by Moody's or BB or lower by S&P, or if unrated, are
determined to be of comparable quality by the Advisor.
Securities rated Baa by Moody's or BBB by S&P are considered investment
grade, but have some speculative characteristics. Securities rated Ba or below
by Moody's or BB or below by S&P are below investment grade securities and are
commonly referred to as "junk bonds." These securities are considered to be of
poor standing and are predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms of
the obligations and involve major risk exposure to adverse conditions.
Securities issued by foreign issuers rated below investment grade entail
greater risks than higher rated securities, including risk of untimely
interest and principal payment, default, price volatility and may present
problems of liquidity and valuation. Investors should carefully consider these
risks before investing. The standards described above must be satisfied at the
time an investment is made. If the quality of the investment later declines,
the Series may continue to hold the investment. The Emerging Markets Equity
Fund and the Emerging Markets Debt Fund do not intend to limit investments in
low-grade securities.
Low-grade securities generally offer a higher current yield than that
available from higher grade securities, but involve greater risk. In the past,
the high yields from low-grade securities have more than compensated for the
higher default rates on such securities. However, there can be no assurance
that the Series will be protected from widespread bond defaults brought about
by a sustained economic downturn, or that yields will continue to offset
default rates on low-grade securities in the future. Issuers of these
securities are often highly leveraged, so that their ability to service their
debt obligations during an economic downturn or during sustained periods of
rising interest rates may be impaired. In addition, such issuers may not have
more traditional methods of financing available to them and may be unable to
repay debt at maturity by refinancing. The risk of loss due to default by the
issuer is significantly greater for the holders of low-grade securities
because such securities may be unsecured and may be subordinated to other
creditors of the issuer. Past economic recessions have resulted in default
levels with respect to such securities in excess of historic averages.
The value of low-grade securities will be influenced not only by changing
interest rates, but also by the bond market's perception of credit quality and
the outlook for economic growth. When economic conditions appear to be
deteriorating, low-grade securities may decline in market value due to
investors' heightened concern over credit quality, regardless of prevailing
interest rates.
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Especially at such times, trading in the secondary market for low-grade
securities may become thin and market liquidity may be significantly reduced.
Even under normal conditions, the market for low-grade securities may be less
liquid than the market for investment grade corporate bonds. There are fewer
securities dealers in the high yield market and purchasers of low-grade
securities are concentrated among a smaller group of securities dealers and
institutional investors. In periods of reduced secondary market liquidity,
low-grade securities prices may become more volatile and the Series' ability
to dispose of particular issues when necessary to meet the Series' liquidity
needs or in response to a specific economic event such as a deterioration in
the creditworthiness of the issuer may be adversely affected.
Low-grade securities frequently have call or redemption features which would
permit an issuer to repurchase the security from the Series. If a call were
exercised by the issuer during a period of declining interest rates, the
Series likely would have to replace such called security with a lower yielding
security, thus decreasing the net investment income to the Series and any
dividends to investors.
Besides credit and liquidity concerns, prices for low-grade securities may
be affected by legislative and regulatory developments. For example, from time
to time, Congress has considered legislation to restrict or eliminate the
corporate tax deduction for interest payments or to regulate corporate
restructurings such as takeovers or mergers. Such legislation may
significantly depress the prices of outstanding low-grade securities.
For a complete description of the rating systems of Moody's and S&P, see the
Appendix to the SAI.
FOREIGN SECURITIES AND CURRENCY CONSIDERATIONS (GLOBAL FUND, GLOBAL EQUITY
FUND, GLOBAL BOND FUND, U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL
CAPITALIZATION FUND, HIGH YIELD BOND FUND, GLOBAL (EX-U.S.) EQUITY FUND,
EMERGING MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND) -Investments in
securities of foreign issuers may involve greater risks than those of U.S.
issuers. There is generally less information available to the public about
non-U.S. companies and less government regulation and supervision of non-U.S.
stock exchanges, brokers and listed companies. Non-U.S. companies are not
subject to uniform global accounting, auditing and financial reporting
standards, practices and requirements. Securities of some non-U.S. companies
are less liquid and their prices more volatile than securities of comparable
U.S. companies. Securities trading practices abroad may offer less protection
to investors. Settlement of transactions in some non-U.S. markets may be
delayed or may be less frequent than in the United States, which could affect
the liquidity of the Series' portfolios. Additionally, in some non-U.S.
countries, there is the possibility of expropriation or confiscatory taxation,
limitations on the removal of securities, property or other assets of the
Series, political or social instability, or diplomatic developments which
could affect U.S. investments in those countries. The Series intend to
diversify broadly among countries, but reserve the right to invest a
substantial portion of their assets in one or more countries if economic and
business conditions warrant such investments. Brinson Partners will take these
factors into consideration in managing the Series' investments. Because the
Series will keep their books and records in U.S. dollars, the Series will be
required, for federal income tax purposes, to account for income and losses on
all transactions involving foreign currency under Section 988 of the Internal
Revenue Code of 1986, as amended, and the applicable U.S. Treasury
Regulations, so that generally any component of a gain or loss attributable to
currency fluctuations results in ordinary income or loss and not capital gain
or loss.
The U.S. dollar market value of the Series' investments and of dividends and
interest earned by the Series may be significantly affected by changes in
currency exchange rates. Some currency prices may be volatile, and there is
the possibility of governmental controls on currency exchange or governmental
intervention in currency markets, which could adversely affect the Series.
Although the Series may attempt to manage currency exchange rate risks, there
is no assurance that the Series will do so at an appropriate time or that they
will be able to
21
<PAGE>
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.
On January 1, 1999, the European Monetary Union (the "EMU") plans to
introduce a new single currency, the Euro, which will replace the national
currencies of participating member nations. If the Series hold investments in
nations with currencies replaced by the Euro, the investment process,
including trading, foreign exchange, payments, settlements, cash accounts,
custody and accounting, will be impacted. Although it is not possible to
predict the impact of the Euro on the Series, the transition and the
elimination of currency risk among nations participating in the EMU may change
the economic environment and behavior of investors, particularly in European
markets.
The adoption of the Euro does not reduce the currency risk presented by
fluctuations in value of the U.S. dollar to other currencies and, in fact,
currency exchange risk may be magnified. Also, increased market volatility may
result. Additional risks that may result include the fact that European
issuers in which the Series invest may face substantial conversion costs,
which may not be accurately anticipated and may impact issuer profitability
and creditworthiness.
Brinson Partners has created an interdepartmental team to handle all Euro-
related changes to enable the Series to process transactions accurately and
completely with minimal disruption to business activities. While there can be
no assurance that the Series will not be adversely affected, Brinson Partners
and the Trust's service providers are taking steps that they believe are
reasonably designed to address the Euro issue.
EMERGING MARKETS SECURITIES (GLOBAL FUND, HIGH YIELD BOND FUND, EMERGING
MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND) - There are additional
risks inherent in investing in less developed countries which are applicable
to the Global Fund, the Emerging Markets Equity Fund and the Emerging Markets
Debt Fund. The Series consider a country to be an "emerging market" if it is
defined as an emerging or developing economy by any one of the following: the
International Bank for Reconstruction and Development (i.e., the World Bank),
the International Finance Corporation, or the United Nations or its
authorities. The Emerging Markets Equity Fund and Emerging Market Debt Fund
intend to invest primarily in securities of issuers located in at least three
emerging market countries which may be located in Asia, Europe, Latin America,
Africa or the Middle East. As these markets change and other countries'
markets develop, the Series expect the countries in which they invest to
change.
An emerging market security is a security issued by a government or other
issuer that, in the opinion of the Advisor, has one or more of the following
characteristics:
1. The principal trading market of the security is in an emerging market;
2. The primary revenue of the issuer (at least 50%) is generated from
goods produced or sold, investments made, or services performed in an
emerging market country; or
3. At least 50% of the assets of the issuer are situated in emerging
market countries.
22
<PAGE>
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.
These restrictions may take the form of prior governmental approval, limits
on the amount or type of securities held by foreigners, and limits on the
types of companies in which foreigners may invest. Additional restrictions may
be imposed at any time by these or other countries in which the Series invest.
In addition, the repatriation of both investment income and capital from
several foreign countries is restricted and controlled under certain
regulations, including, in some cases, the need for certain governmental
consents. Although these restrictions may in the future make it undesirable to
invest in emerging market countries, the Advisor does not believe that any
current repatriation restrictions would affect its decision to invest in such
countries. Countries such as those in which the Series may invest have
historically experienced and may continue to experience, high rates of
inflation, high interest rates, exchange rate fluctuations or currency
depreciation, large amounts of external debt, balance of payments and trade
difficulties and extreme poverty and unemployment. Additional factors which
may influence the ability or willingness to service debt include, but are not
limited to, a country's cash flow situation, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, its government's policy towards the
International Monetary Fund, the World Bank and other international agencies
and the political constraints to which a government debtor may be subject.
The ability of a foreign government or government-related issuer to make
timely and ultimate payments on its external debt obligations will be strongly
influenced by the issuer's balance of payments, including export performance,
its access to international credits and investments, fluctuations in interest
rates and the extent of its foreign reserves. A country whose exports are
concentrated in a few commodities or whose economy depends on certain
strategic imports could be vulnerable to fluctuations in international prices
of these commodities or imports. To the extent that a country receives payment
for its exports in currencies other than dollars, its ability to make debt
payments denominated in dollars could be adversely affected. If a foreign
government or government-related issuer cannot generate sufficient earnings
from foreign trade to service its external debt, it may need to depend on
continuing loans and aid from foreign governments, commercial banks, and
multilateral organizations, and inflows of foreign investment. The commitment
on the part of these foreign governments, multilateral organizations and
others to make such disbursements may be conditioned on the government's
implementation of economic reforms and/or economic performance and the timely
service of its obligations. Failure to implement such reforms, achieve such
levels of economic performance or repay principal or interest when due may
curtail the willingness of such third parties to lend funds, which may further
impair the issuer's ability or willingness to service its debts in a timely
manner. The cost of servicing external debt will also generally be adversely
affected by rising international interest rates, because many external debt
obligations bear interest at rates which are adjusted based upon international
interest rates. The ability to service external debt will also depend on the
level of the relevant government's international currency reserves and its
access to foreign exchange. Currency devaluations may affect the ability of a
government issuer to obtain sufficient foreign exchange to service its
external debt.
As a result of the foregoing, a governmental issuer may default on its
obligations. If such a default occurs, the Series may have limited effective
legal recourse against the issuer and/or guarantor. Remedies must, in some
cases, be pursued in the courts of the defaulting party itself, and the
ability of the holder of foreign government
23
<PAGE>
and government-related debt securities to obtain recourse may be subject to
the political climate in the relevant country. In addition, no assurance can
be given that the holders of commercial bank debt will not contest payments to
the holders of other foreign government and government-related debt
obligations in the event of default under their commercial bank loan
agreements.
The issuers of the government and government-related debt securities in
which the Series expect to invest have in the past experienced substantial
difficulties in servicing their external debt obligations, which has led to
defaults on certain obligations and the restructuring of certain indebtedness.
Restructuring arrangements have included, among other things, reducing and
rescheduling interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and unpaid interest to
Brady Bonds (see Appendix A), and obtaining new credit to finance interest
payments. Holders of certain foreign government and government-related debt
securities may be requested to participate in the restructuring of such
securities and to extend further loans to the issuers of such securities.
There can be no assurance that the Brady Bonds and other foreign government
and government-related debt securities in which the Series may invest will not
be subject to similar defaults or restructuring arrangements which may
adversely affect the value of such investments. Furthermore, certain
participants in the secondary market for such debt securities may be directly
involved in negotiating the terms of these arrangements and may therefore have
access to information not available to other market participants.
Payments to holders of the high yield, high risk, foreign debt securities in
which the Series may invest may be subject to foreign withholding and other
taxes. Although the holders of foreign government and government-related debt
securities may be entitled to tax gross-up payments from the issuers of such
securities, there is no assurance that such payments will be made.
FOREIGN CURRENCY TRANSACTIONS (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND
FUND, U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL CAPITALIZATION FUND,
HIGH YIELD BOND FUND, GLOBAL (EX-U.S.) EQUITY FUND, EMERGING MARKETS EQUITY
FUND AND EMERGING MARKETS DEBT 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. However, the ability to
manage foreign exchange risk through the use of these strategies may be
limited in certain emerging markets because of a lack of appropriate financial
instruments. Some of these strategies may require the Series to set aside
liquid assets in a segregated custodial account to cover their obligations.
With respect to the Emerging Markets Equity Fund and the Emerging Markets
Debt Fund, the normal currency allocation is identical to the currency mix of
their respective Benchmarks. The Series expect to maintain this normal
currency exposure when, in the judgment of the Advisor, global currency
markets are fairly priced relative to each other and relative to the
associated risks. The Series may actively deviate from such normal currency
allocations to take advantage of, or to protect its portfolio from risk and
return characteristics of, the currencies and short-term interest rates when
those prices deviate significantly from fundamental value. Deviations from the
Series' Benchmarks are determined by the Advisor based upon its research.
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
24
<PAGE>
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),
options on foreign currencies and options on futures, 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. 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, U.S. LARGE CAPITALIZATION EQUITY
FUND, EMERGING MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND ONLY) - 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, U.S. Large Capitalization Equity
Fund, Emerging Markets Equity Fund or Emerging Markets Debt Fund, may be
subject to greater fluctuations in value than an investment in a diversified
fund.
25
<PAGE>
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 June 30, 1998, approximately $286 billion, primarily for
pension and profit sharing institutional accounts. 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 Bahrain, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne,
New York, Paris, Rio de Janeiro, Singapore, Sydney, Tokyo and Zurich in
addition to its principal office at 209 South LaSalle Street, Chicago, IL
60604-1295. Brinson Partners is a direct wholly-owned subsidiary of UBS A.G.
UBS A.G., with headquarters in Basel, Switzerland, is an internationally
diversified organization with operations in many aspects of the financial
services industry. UBS A.G. was formed by the merger of Union Bank of
Switzerland and Swiss Bank Corporation in June 1998.
Brinson Partners also serves as the investment advisor to nine other
investment companies: Brinson Relationship Funds, which includes seventeen
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 Annuity Series Trust - 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.
26
<PAGE>
For providing investment advisory services during the fiscal year ended June
30, 1998, 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. Large Capitalization Growth Fund/1/............................ 0.70
U.S. Small Capitalization Fund/1/................................... 1.00
U.S. Bond Fund...................................................... 0.50
High Yield Bond Fund/1/............................................. 0.60
Global (ex-U.S.) Equity Fund........................................ 0.80
Emerging Markets Equity Fund/1/..................................... 1.10
Emerging Markets Debt Fund/1/....................................... 0.65
</TABLE>
- ----------
/1/The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Fund,
High Yield Bond Fund, Emerging Markets Equity Fund and Emerging Markets Debt
Fund each commenced operations on December , 1998.
The fee payable to Brinson Partners by the Global, Global Equity, U.S. Small
Capitalization, Global (ex-U.S.) Equity, Emerging Markets Equity and Emerging
Markets Debt 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
of the Brinson Global Fund--Class I, Brinson Global Equity Fund--Class I,
Brinson Global Bond Fund--Class I, Brinson U.S. Balanced Fund--Class I,
Brinson U.S. Equity Fund--Class I, Brinson U.S. Large Capitalization Equity
Fund--Class I, Brinson U.S. Large Capitalization Growth Fund--Class I, Brinson
U.S. Small Capitalization Fund--Class I, Brinson U.S. Bond Fund--Class I,
Brinson High Yield Bond Fund--Class I, Brinson Global (ex-U.S.) Equity Fund--
Class I, Brinson Emerging Markets Equity Fund--Class I and Brinson Emerging
Markets Debt Fund--Class I will never exceed 1.10%, 1.00%, 0.90%, 0.80%,
0.80%, 0.80%, 0.80%, 1.15%, 0.60%, 1.00%, 0.70%, 1.60% and 1.15%,
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.
27
<PAGE>
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.
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.
Investors Bank & Trust Company ("Investors Bank"), 200 Clarendon Street,
Boston, Massachusetts 02116, serves as co-custodian for the U.S. Large
Capitalization Growth Fund, the U.S. Small Capitalization Fund and the High
Yield Bond Fund with respect to certain foreign securities until such
securities are transferred to MSTC. After such securities are transferred to
MSTC, MSTC will be the sole custodian for these Series under the terms of the
Services Agreement.
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 each 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 each 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
28
<PAGE>
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.
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 I 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. Subsequent
investments for Fund shares will be accepted in minimum amounts of $2,500. The
Trust reserves the right to vary the initial investment minimum and minimums
for additional investments in any of the Funds at any time. In addition,
Brinson Partners may waive the minimum initial investment requirement for any
investor.
Purchase orders for shares of the 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.
29
<PAGE>
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 I 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.
PURCHASES MAY BE MADE IN ONE OF THE FOLLOWING WAYS:
<TABLE>
<CAPTION>
INITIAL INVESTMENT SUBSEQUENT INVESTMENTS
------------------------------- -------------------------------
<S> <C> <C>
MINIMUM $1,000,000 MINIMUM $2,500
BY MAIL n Complete and sign the Account n Make your check payable
6 Application accompanying this to "Brinson Fund- Class
Prospectus. I."
n Make your check payable to n Enclose the remittance
"Brinson Fund-Class I." portion of
your account statement and
include
the amount of investment, the
account name and number.
n Mail to the address indicated n Mail to the address indicated
on on
the Account Application. your account statement or
enclose
in the envelope provided.
BY WIRE n Call 1-800-448-2430 to
arrange for a wire
transaction.
LOGO n Wire federal funds within 24 n 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-
FOR: "BRINSON FUND- CLASS I" AND INCLUDE YOUR NAME
CLASS I" AND INCLUDE YOUR NAME AND ACCOUNT NUMBER.
AND NEW ACCOUNT NUMBER.
n Complete and sign the Account
Application and mail to the
address
indicated on the Account
Application immediately
following the initial wire
transaction.
BY TELEPHONE n Call 1-800-448-2430 to n Call 1-800-448-2430 to
= arrange for a telephone arrange for a telephone
transaction. transaction.
PURCHASING BY EXCHANGES n You may open a new account n You may purchase additional
O 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 I from an existing Brinson Fund-
account of any other Series of Class I 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.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
INITIAL INVESTMENT SUBSEQUENT INVESTMENTS
------------------------------- -------------------------------
<S> <C> <C>
AUTOMATICALLY n Please refer to "Automatic n Please refer to "Automatic
Investment Plan" under Investment Plan" under
"Account Options" or call 1- "Account Options" or call 1-
800-448-2430 for assistance. 800-448-2430 for assistance.
</TABLE>
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 n You may have money deducted directly
from your checking, savings or bank
money market accounts for investment in
the Funds each month or quarter.
n Complete the Automatic Investment Plan
Application, which is available upon
request by calling 1-800-448-2430, and
mail it to the address indicated.
n The initial account must be opened
first with the initial $1,000,000
minimum investment, with subsequent
minimum investments of $500 pursuant to
the Automatic Investment Plan.
n The account designated will be debited
in the specified amount, on the date
indicated, and Fund shares will be
purchased. The Trust may alter or
terminate the Automatic Investment Plan
at any time.
SYSTEMATIC WITHDRAWAL PLAN n A shareholder with a minimum account of
$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.
n Shareholders participating in the SWP
must elect to have their dividends and
distributions automatically reinvested
in additional Fund shares.
n The Trust may terminate any SWP for an
account if the value of the account
falls below $50,000 as a result of
share redemptions or an exchange of
shares of a Fund for Brinson Fund-Class
I shares of another Series of the
Trust.
INDIVIDUAL RETIREMENT ACCOUNTS n An IRA is a tax-deferred retirement
savings account that may be used by an
individual under age 70 1/2 who has
compensation or self-employment income
and his or her unemployed spouse, or an
individual who has received a qualified
distribution from his or her employer's
retirement plan.
n The minimum purchase requirement for
IRAs is $2,000.
</TABLE>
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<PAGE>
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 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
purchases 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.
32
<PAGE>
SHARES MAY BE REDEEMED IN ONE OF THE FOLLOWING WAYS:
<TABLE>
<C> <S>
BY MAIL . Submit a written request for redemption with:
[ART] . 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.
. To protect your account from fraud, the Fund and
its agents may require a signature guarantee for
certain redemptions to verify the identity of
the person who has authorized a redemption from
your account. Please contact the Fund for
further information.
. Mail to the address indicated on the Account
Application. Questions may be directed to the
transfer agent at 1-800-448-2430.
BY WIRE . This service must be elected either on the
[ART] 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
[ART] 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 I shares of any other
Series within the Trust. Exchanges will not be permitted between the Brinson
Fund-Class I shares and either the UBS Investment Funds class shares or the
Brinson Fund-Class N shares of a Series of the Trust.
33
<PAGE>
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 I 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 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
34
<PAGE>
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 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
35
<PAGE>
value of shares of such class, except that the Brinson Fund-Class N and UBS
Investment Funds class of 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 UBS Investment Funds class of 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 UBS Investment Funds class of
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.
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 UBS Investment Funds class of
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 UBS Investment Funds class of
shares are subject to separate 12b-1 fees. The per share dividends on UBS
Investment Funds class of 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 UBS Investment Funds class of 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 a Series at net asset value,
unless the shareholder has notified the transfer agent, in writing, of the
shareholder's election to receive them in cash. Distribution options may be
changed at any time by requesting a change in writing. Any check in payment of
dividends or other distributions which cannot be delivered by the Post Office
or which remains uncashed for a period of more than one year may be reinvested
in the shareholder's account at the then current net asset value and the
dividend option may be changed from cash to reinvest. Dividends are reinvested
on the ex dividend date (the "ex date") at the net asset value determined at
the close of business on that date. Please note that shares purchased shortly
before the record date for a dividend or distribution may have the effect of
returning capital although such dividends and distributions are subject to
taxes.
TAXES
Each Series has qualified, and intends to continue to qualify, for taxation
as a "regulated investment company" under the Internal Revenue Code of 1986,
as amended ("the Code"). Such qualification relieves a Series of liability for
federal income taxes to the extent the Series' earnings are distributed in
accordance with the Code. Each Series is treated as a separate corporate
entity for federal tax purposes.
Distributions of any net investment income and of any net realized short-
term capital gains are taxable to shareholders as ordinary income. All
distributions may be subject to state and local taxes.
36
<PAGE>
Distributions of net capital gain (the excess of net long-term capital gain
over net short-term capital loss) are taxable to shareholders as long-term
capital gain regardless of how long a shareholder may have held shares of a
Series. The tax treatment of distributions of ordinary income or capital gains
will be the same whether the shareholder reinvests the distributions or elects
to receive them in cash. A distribution will be treated as paid on December 31
of the current calendar year if it is declared in October, November or
December with a record date in such a month and paid during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Shareholders will be advised annually of the source and tax status of all
distributions for federal income tax purposes. Further information regarding
the tax consequences of investing in the Series is included in the Statement
of Additional Information. The above discussion is intended for general
information only. Investors should consult their own tax advisors for more
specific information on the tax consequences of particular types of
distributions.
Redemptions of Series shares, and the exchange of shares between two Series
of the Trust, are taxable events and, accordingly, shareholders may realize
capital gains or losses on these transactions.
Shareholders may be subject to back-up withholding on reportable dividend
and redemption payments ("back-up withholding") if a certified taxpayer
identification number is not on file with the Series, or if, to the Series'
knowledge, an incorrect number has been furnished, or if the Series has been
notified by the Internal Revenue Service that an account is subject to back-up
withholding. An individual's taxpayer identification number is the
individual's social security number.
If more than 50% of a Series' total assets at the close of its taxable year
consists of stock or securities in foreign corporations, the Series may elect
to "pass-through" to shareholders for foreign tax credit purposes the amount
of foreign income taxes paid by the Series with respect to its direct holdings
of securities in foreign corporations. A Series will make such an election
only if it deems such election to be in the best interests of its
shareholders. If this election is made, shareholders of the Series will be
required to include in their gross incomes their pro rata 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. A Series which makes investments in the
securities of foreign corporations may make investments in foreign companies
that are "passive foreign investment companies" ("PFICs"). These investments
in PFICs may cause a Series to pay income taxes and interest charges. If
possible, the Series will not invest in PFICs or will adopt other strategies
to avoid these taxes and charges.
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 thirteen 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, U.S. Large
Capitalization Equity Fund, Emerging Markets Equity Fund and Emerging
37
<PAGE>
Markets Debt 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 UBS Investment Funds 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 thirteen 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. Large Capitalization Growth Fund, U.S.
Small Capitalization Fund, U.S. Bond Fund, High Yield Bond Fund, Global (ex-
U.S.) Equity Fund, Emerging Markets Debt Fund and Emerging Markets 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 UBS Investment
Funds classes. Prior to September 15, 1998, the "UBS Investment Funds class"
was known as the "SwissKey Class" of shares.
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 Rule 12b-
1 plan associated with that class and only the UBS Investment Funds class
shareholders may vote on matters related to the Rule 12b-1 plan associated
with that class.
As of August 18, 1998, Wachovia Bank NA held of record more than 25% of the
outstanding shares of the Global Equity Fund; Wilmington Trust Co. held of
record more than 25% of the outstanding shares of the Global Bond Fund; MAC &
Co. held of record more than 25% of the outstanding shares of the U.S.
Balanced Fund; Norwest MN held of record more than 25% of the outstanding
shares of the U.S. Large Capitalization Equity Fund; Wachovia Bank NA held of
record more than 25% of the outstanding shares of the U.S. Bond Fund; The
Northern Trust Co. held of record more than 25% of the outstanding shares of
the Global (ex-U.S.) Equity Fund. A shareholder that holds such a percentage
of the outstanding shares of a class may be deemed a controlling person of
that class under the 1940 Act.
SHAREHOLDER MEETINGS
The Trustees of the Trust do not intend to hold annual meetings of
shareholders of the Series. The SEC, 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
38
<PAGE>
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, U.S.
SMALL CAPITALIZATION FUND, U.S. BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT FUND)
As a result of the investment policies of the Global Fund, Global Bond Fund,
U.S. Balanced Fund, U.S. Small Capitalization Fund, U.S. Bond Fund, Emerging
Markets Equity Fund and Emerging Markets Debt 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.
YEAR 2000 ISSUES
Like other investment companies, as well as other financial and business
organizations around the world, the Trust could be adversely affected if the
computer systems used by the Advisor, MSTC, CGFSC and other service providers,
in performing their administrative functions for the Trust, do not properly
process and calculate date-related information and data as of and after
January 1, 2000. This is commonly known as the "Year 2000 Issue." The Year
2000 Issue, and, in particular, foreign service providers' responsiveness to
the issue, could affect portfolio and operational areas including securities
trade processing, interest and dividend payments, securities pricing,
shareholder account services, custody functions and others. The Advisor, MSTC
and CGFSC
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are taking steps that they believe are reasonably designed to address the Year
2000 Issue with respect to computer systems that they use and to obtain
reasonable assurances that comparable steps are being taken by the Trust's
other service providers. These include identifying those systems that may not
function properly after December 31, 1999, and correcting or replacing those
systems. In addition, steps include testing the processing of Series data on
all systems relied on by the Advisor, MSTC and CGFSC. As of the date of this
Prospectus, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Series.
PERFORMANCE INFORMATION
From time to time, performance information, such as yield or total return,
may be quoted in advertisements or in communications to present or prospective
shareholders. Performance quotations represent the Funds' past performance and
should not be considered as representative of future results. The current
yield will be calculated by dividing the net investment income earned per
share by a Fund during the period stated in the advertisement (based on the
average daily number of shares entitled to receive dividends outstanding
during the period) by the maximum net asset value per share on the last day of
the period and annualizing the result on a semi-annual compounded basis. The
Funds' total return may be calculated on an annualized and aggregate basis for
various periods (which periods will be stated in the advertisement). Average
annual return reflects the average percentage change per year in value of an
investment in a Fund. Aggregate total return reflects the total percentage
change over the stated period.
To help investors better evaluate how an investment in the 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; Lehman Brothers 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. Except as noted, further information about the performance of
the Funds is included in the Funds' Annual Report dated June 30, 1998, which
may be obtained without charge by contacting the Trust at 1-800-448-2430. The
performance of the Predecessor Funds is included in the UBS Private Investor
Funds, Inc. Annual Report dated December 31, 1997 and Semi-Annual report dated
June 30, 1998, each of which may be obtained without charge by contacting the
Trust at 1-800-448-2430. The performance of the Brinson Emerging Markets
Equity Fund and the Brinson Emerging Markets Debt Fund commenced after June
30, 1998 and therefor are not included in the Funds' 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, U.S. LARGE CAPITALIZATION
GROWTH FUND, U.S. SMALL CAPITALIZATION FUND, GLOBAL (EX-U.S.) EQUITY FUND AND
EMERGING MARKETS 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, except for
the U.S. Small Capitalization Fund, expect their U.S. equity investments to
emphasize large and intermediate capitalization companies. The U.S. Small
Capitalization Fund expects its U.S. equity investments to emphasize small
capitalization companies. The Global Fund, U.S. Small Capitalization Fund and
Emerging Markets Equity 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 and Emerging Markets Equity 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 (and Emerging Markets Equity
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,
U.S. BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT 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 (except
for the High Yield Bond Fund, Emerging Markets Equity Fund and the Emerging
Markets Debt Fund) 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 (except for the
High Yield Bond Fund, Emerging Markets Equity Fund and Emerging Markets Debt
Fund) 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. The High Yield Bond Fund may
invest up to 10% of its assets in securities rated below Caa by Moody's or CCC
by S&P. The Emerging Markets Equity Fund may invest up to 35% of its assets
and the Emerging Markets Debt Fund may invest substantially all of its assets
in fixed income
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securities rated below investment grade. Except for the High Yield Bond Fund,
Emerging Markets Equity Fund and Emerging Markets Debt Fund, to the extent
that a security held by a Series is downgraded to below investment grade, the
Series will dispose of that or another non-investment grade security so that
no more than 5% of its assets will be invested in below investment grade
securities. Other fixed income securities in which the Series may invest
include zero coupon securities, mortgage-backed securities, asset-backed
securities and when-issued securities.
The non-U.S. fixed income component of the Series will typically be invested
in the securities of non-U.S. governments, governmental agencies and
supranational issues. A supranational entity is an entity established or
financially supported by the national governments of one or more countries to
promote reconstruction or development. Examples of supranational entities
include, among others: the World Bank, the European Economic Community, the
European Coal and Steel Community, the European Investment Bank, the Inter-
American Development Bank, the Export-Import Bank and the Asian Development
Bank.
The Global Fund, Emerging Markets Equity Fund and Emerging Markets Debt 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.
Under the terms of an exemptive order issued by the SEC, each Series may
invest cash (i) held for temporary defensive purposes; (ii) not invested
pending investment in securities; (iii) that is set aside to cover an
obligation or commitment of the Series to purchase securities or other assets
at a later date; (iv) to be invested on a strategic management basis (i-iv is
herein referred to as "Uninvested Cash"); and (v) collateral that it receives
from the borrowers of its portfolio securities in connection with the Series'
securities lending program, in a series of shares of Brinson Supplementary
Trust (the "Supplementary Trust Series"). Brinson Supplementary Trust is a
private investment company which has retained the Advisor to manage its
investments. The Trustees of the Trust also serve as Trustees of the Brinson
Supplementary Trust. The Supplementary Trust Series will invest in U.S. dollar
denominated money market instruments having a dollar-weighted average maturity
of 90 days or less. A Series' investment of Uninvested Cash in shares of the
Supplementary Trust Series will not exceed 25% of the Series' total assets. In
the event that the Advisor waives 100% of its investment advisory fee with
respect to a Series, as calculated monthly, then that Series will be unable to
invest in the Supplementary Trust Series until additional investment advisory
fees are owed by the Series.
ZERO COUPON SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND,
U.S. BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT 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
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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, U.S. BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY
FUND AND EMERGING MARKETS DEBT FUND): Mortgage-backed securities represent
direct or indirect participations in, or are secured by and payable from,
pools of mortgage loans secured by real property, and include single- and
multi-class pass-through securities and collateralized mortgage obligations.
These securities may be issued or guaranteed by agencies or instrumentalities
of the U.S. government. Other mortgage-backed securities are issued by private
issuers, generally originators of and investors in mortgage loans, including
savings associations, mortgage bankers, commercial banks, investment bankers
and special purpose entities (collectively, "private lenders"). Mortgage-
backed securities issued by private lenders may be supported by pools of
mortgage loans or other mortgage-backed securities that are guaranteed,
directly or indirectly, by the U.S. government or one of its agencies or
instrumentalities, or they may be issued without any governmental guarantee of
the underlying mortgage assets but with some form of non-governmental credit
enhancement.
Asset-backed securities have structural characteristics similar to mortgage-
backed securities. However, the underlying assets are not first-lien mortgage
loans or interests therein; rather, they include assets such as motor vehicle
installment sales contracts, other installment loan contracts, home equity
loans, leases of various types of property and receivables from credit card or
other revolving credit arrangements. Payments or distributions of principal
and interest on asset-backed securities may be supported by non-governmental
credit enhancements similar to those utilized in connection with mortgage-
backed securities.
The yield characteristics of mortgage- and asset-backed securities differ
from those of traditional debt obligations. Among the principal differences
are that interest and principal payments are made more frequently on mortgage-
and asset-backed securities, usually monthly, and that principal may be
prepaid at any time because the underlying mortgage loans or other assets
generally may be prepaid at any time. As a result, the rate of return on these
securities may be affected by prepayments of principal on the underlying
loans, which generally increase as interest rates decline. As a result, if a
Series purchases these securities at a premium, a prepayment rate that is
faster than expected will reduce yield to maturity, while a prepayment rate
that is slower than expected will have the opposite effect of increasing yield
to maturity. Conversely, if a Series purchases these securities at a discount,
a prepayment rate that is faster than expected will increase 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,
U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL CAPITALIZATION FUND, U.S.
BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND EMERGING
MARKETS DEBT 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
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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 accordance with SEC
positions. 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"), and such Segregated Assets shall be maintained in
accordance with pertinent SEC positions.
FOREIGN CURRENCY TRANSACTIONS (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND
FUND, U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL CAPITALIZATION FUND,
GLOBAL (EX-U.S.) EQUITY FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY
FUND AND EMERGING MARKETS DEBT 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 (except for the U.S. Large Capitalization Growth Fund,
the U.S. Small Capitalization Fund and the High Yield Bond Fund). 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 in accordance with SEC positions.
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,
U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL CAPITALIZATION FUND, GLOBAL
(EX-U.S.) EQUITY FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT 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 accordance with SEC positions.
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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
U.S. Large Capitalization Growth Fund, the U.S. Small Capitalization Fund, the
Global (ex-U.S.) Equity Fund, the High Yield Bond Fund, the Emerging Markets
Equity Fund and the Emerging Markets Debt 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, the U.S. Large
Capitalization Growth Fund, the U.S. Small Capitalization Fund, the Global
(ex-U.S.) Equity Fund, the High Yield Bond Fund, the Emerging Markets Equity
Fund and the Emerging Markets Debt 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.
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
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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.
SHORT SALES (U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL
CAPITALIZATION FUND AND HIGH YIELD BOND FUND): In the event that the Advisor
anticipates that the price of a security will decline, it may sell the
security short and borrow the same security from a broker or other institution
to complete the sale. The Series will only enter into short sales for hedging
purposes. The Series will incur a profit or a loss, depending upon whether the
market price of the security decreases or increases between the date of the
short sale and the date on which the Series must replace the borrowed
security. All short sales will be fully collateralized and the Series will not
sell securities short if immediately after and as a result of the short sale,
the value of all securities sold short by any Series exceeds 25% of its total
assets. Each Series will also limit short sales of any one issuer's securities
to 2% of its total assets and to 2% of any one class of the issuer's
securities.
PAY-IN-KIND BONDS (HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT FUND): The Series may invest in pay-in-kind bonds. Pay-
in-kind bonds are securities which pay interest through the issuance of
additional bonds. The Series will be deemed to receive interest over the life
of such bonds and may be treated for federal income tax purposes as if
interest were paid on a current basis, although no cash interest payments are
received by the Series until the cash payment date or until the bonds mature.
CONVERTIBLE SECURITIES (HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND
AND EMERGING MARKETS DEBT FUND): The Series may invest in convertible
securities which generally offer lower interest or dividend yields than
nonconvertible debt securities of similar quality. The value of convertible
securities may reflect changes in the value of the underlying common stock.
Convertible securities entail less credit risk than the issuer's common stock
because they rank senior to common stock.
EURODOLLAR SECURITIES (GLOBAL BOND FUND, HIGH YIELD BOND FUND, EMERGING
MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND): The Series may invest in
Eurodollar securities, which are fixed income securities of a U.S. issuer or a
foreign issuer that are issued outside the United States. Interest and
dividends on Eurodollar securities are payable in U.S. dollars.
BRADY BONDS (HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND EMERGING
MARKETS DEBT FUND): The Series may invest in Brady Bonds, which are securities
created through the exchange of existing commercial bank loans to public and
private entities in certain emerging markets for new bonds in connection with
debt restructurings under a debt restructuring plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan
debt restructurings have been implemented to date in Argentina, Bulgaria,
Brazil, Costa Rica, Jordan, Mexico, Nigeria, the Philippines, Poland, Uruguay,
Panama, Peru and Venezuela. Brady Bonds have been issued only during recent
years, and for that reason do not have a very long payment history. Brady
Bonds may be collateralized or uncollateralized, are issued in various
currencies (but primarily the U.S. dollar), and are actively traded in over-
the-counter secondary markets. Dollar-denominated, collateralized Brady Bonds,
which may be fixed-rate bonds or floating-rate bonds, are generally
collateralized in full as to principal by U.S. Treasury zero coupon bonds
having the same maturity as the bonds.
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Brady Bonds are often viewed as having three or four valuation components:
the collateralized repayment of principal at final maturity; the
collateralized interest payments; the uncollateralized interest payments; and
any uncollateralized repayment of principal at maturity (these
uncollateralized amounts constitute the "residual risk"). In light of the
residual risk of Brady Bonds and the history of defaults of countries issuing
Brady Bonds with respect to commercial bank loans by public and private
entities, investments in Brady Bonds may be viewed as speculative. There can
be no assurance that the Brady Bonds in which the Series invest will not be
subject to restructuring arrangements or to requests for a new credit which
may cause the Series to suffer a loss of interest or principal in any of their
holdings.
STRUCTURED SECURITIES (HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND
AND EMERGING MARKETS DEBT FUND): The Series may invest a portion of their
assets in entities organized and operated solely for the purpose of
restructuring the investment characteristics of sovereign debt obligations.
This type of restructuring involves the deposit with, or purchase by, an
entity, such as a corporation or trust, of specified instruments (such as
commercial bank loans or Brady Bonds) and the issuance by that entity of one
or more classes of securities ("Structured Securities") backed by, or
representing interests in, the underlying instruments. The cash flow of the
underlying instruments may be apportioned among the newly issued Structured
Securities to create securities with different investment characteristics,
such as varying maturities, payment priorities and interest rate provisions,
and the extent of the payments made with respect to Structured Securities is
dependent on the extent of the cash flow on the underlying instruments.
Because Structured Securities of the type in which the Series anticipates
investing typically involve no credit enhancement, their credit risk generally
will be equivalent to that of the underlying instruments. The Series is
permitted to invest in a class of Structured Securities that is either
subordinated or unsubordinated to the right of payment of another class.
Subordinated Structured Securities typically have higher yields and present
greater risks than unsubordinated Structured Securities. Structured Securities
are typically sold in private placement transactions, and there currently is
no active trading market for Structured Securities. Thus, investments by a
Series in Structured Securities will be limited by the Series' prohibition on
investing more than 15% of its net assets in illiquid securities.
LOAN PARTICIPATIONS AND ASSIGNMENTS (HIGH YIELD BOND FUND, EMERGING MARKETS
EQUITY FUND AND EMERGING MARKETS DEBT FUND): The Series may invest in fixed
rate and floating rate loans ("Loans") arranged through private negotiations
between an issuer of debt obligations and one or more financial institutions
("Lenders"). The Series' investments in Loans are expected in most instances
to be in the form of participations in loans ("Participations") or assignments
of all or a portion of Loans ("Assignments") from third parties.
The Series will have the right to receive payments of principal, interest
and any fees to which they are entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
borrower. In the event of the insolvency of the Lender selling a
Participation, the Series may be treated as general creditors of the Lender
and may not benefit from any set-off between the Lender and the borrower.
Certain Participations may be structured in a manner designed to avoid
purchasers of Participations being subject to the credit risk of the Lender
with respect to the Participation. Even under such a structure, in the event
of the Lender's insolvency, the Lender's servicing of the Participation may be
delayed and the assignability of the Participation may be impaired. The Series
will acquire Participations only if the Lender interpositioned between the
Series and the borrower is determined by the Advisor to be creditworthy. When
a Series purchases Assignments from Lenders, it will acquire direct rights
against the borrower on the Loan. However, because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, the rights and obligations acquired by the Series as the purchaser
of an Assignment may differ from, and be more limited than, those held by the
assigning Lender.
47
<PAGE>
Because there may be no liquid market for Participations and Assignments,
the Series anticipate that such securities could be sold only to a limited
number of institutional investors. The lack of a liquid secondary market may
have an adverse impact on the value of such securities and the Series' ability
to dispose of particular Assignments or Participations when necessary to meet
the Series' liquidity needs or in response to a specific economic event such
as a deterioration in the creditworthiness of the borrower or the Lender. The
lack of a liquid secondary market for Assignments and Participation also may
make it more difficult for the Series to assign a value to these securities
for purposes of valuing the Series' portfolios and calculating their net asset
values. To the extent that a Series cannot dispose of a Participation or
Assignment in the ordinary course of business within seven days at
approximately the value at which it has valued the Loan Participation or
Assignment, it will treat the Participation or Assignment as illiquid and
subject to its overall limit on illiquid investments of 15% of its net assets.
SWAPS (EMERGING MARKETS EQUITY FUND): The Series may engage in swaps,
including but not limited to interest rate, currency and index swaps and the
purchase or sale of related caps, floors and collars and other derivative
instruments. The Series expects to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a technique for
managing the portfolio's duration (i.e., the price sensitivity to changes in
interest rates), to protect against any increase in the price of securities
the Series anticipates purchasing at a later date or to gain exposure to
certain markets.
Interest rate swaps involve the exchange by the Series with another party of
their respective commitments to receive or pay interest (e.g., an exchange of
fixed rate payments for floating rate payments) with respect to a notional
amount of principal. Currency swaps involve the exchange of cash flows on a
notional amount based on changes in the values of referenced currencies.
The purchase of a cap entitles the purchaser to receive payments on a
notional principal amount from the party selling the cap to the extent that a
specified index exceeds a predetermined interest rate or amount. The purchase
of an interest rate floor entitles the purchaser to receive payments on a
notional principal amount from the party selling the floor to the extent that
a specified index falls below a predetermined interest rate or amount. A
collar is a combination of a cap and a floor that preserves a certain return
within a predetermined range of interest rates or values.
The use of swaps involves investment techniques and risks different from
those associated with ordinary portfolio security transactions. If the Advisor
is incorrect in its forecasts of market values, interest rates or other
applicable factors, the investment performance of the Series will be less
favorable than it would have been if this investment technique were not used.
Swaps do not involve the delivery of securities or other underlying assets or
principal. Thus, if the other party to a swap defaults, the Series' risk of
loss consists of the net amount of payments that the Series is contractually
entitled to receive. Under Internal Revenue Service rules, any lump sum
payment received or due under the notional principal contract must be
amortized over the life of the contract using the appropriate methodology
prescribed by the Internal Revenue Service.
The equity swaps in which the Series intends to invest involve agreements
with a counterparty. The return to the Series on any equity swap contract will
be the total return on the notional amount of the contract as if it were
invested in the stocks comprising the contract index in exchange for an
interest component based on the notional amount of the agreement. The Series
will only enter into an equity swap contract on a net basis, i.e., the two
parties' obligations are netted out, with the Series paying or receiving, as
the case may be, only the net amount of the payments. Payments under the
equity swap contracts may be made at the conclusion of the contract or
periodically during its term.
48
<PAGE>
If there is a default by the counterparty to a swap contract, the Series
will be limited to contractual remedies pursuant to the agreements related to
the transaction. There is no assurance that a swap contract counterparty will
be able to meet its obligations pursuant to a swap contract or that, in the
event of default, the Series will succeed in pursuing contractual remedies.
The Series thus assumes the risk that it may be delayed in or prevented from
obtaining payments owed to it pursuant to a swap contract. However, the amount
at risk is only the net unrealized gain, if any, on the swap, not the entire
notional amount. The Advisor will closely monitor, subject to the oversight of
the Board, the creditworthiness of swap counterparties in order to minimize
the risk of swaps.
The Advisor and the Trust do not believe that the Series' obligations under
swap contracts are senior securities and, accordingly, the Series will not
treat them as being subject to its borrowing or senior securities
restrictions. However, the net amount of the excess, if any, of the Series'
obligations over its entitlements with respect to each swap contract will be
accrued on a daily basis and an amount of cash, U.S. government securities or
other liquid assets having an aggregate market value at least equal to the
accrued excess will be segregated in accordance with SEC positions. To the
extent that the Series cannot dispose of a swap in the ordinary course of
business within seven days at approximately the value at which the Series has
valued the swap, it will treat the swap as illiquid and subject to its overall
limit on illiquid investments of 15% of the Series' total net assets.
INVESTMENT COMPANY SECURITIES (GLOBAL FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT FUND): The Trust has received an exemptive order (the
"Exemptive Order") from the SEC 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, EMERGING MARKETS EQUITY FUND AND EMERGING
MARKETS DEBT 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 obligation to
provide extracts to potential purchasers in a timely manner
49
<PAGE>
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.
50
<PAGE>
------------------------
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. Large
Capitalization Growth Fund
Brinson U.S. Small
Capitalization Fund
Brinson U.S. Bond Fund
Brinson High Yield Bond Fund
Brinson Global (ex - U.S.)
Equity Fund
Brinson Emerging Markets
Equity Fund
Brinson Emerging Markets
Debt Fund
Prospectus
December __, 1998
[BRINSON LOGO]
Institutional
Asset Management
------------------------
THE BRINSON FUNDS
- ------------------------
209 South LaSalle Street . Chicago, Illinois 60604-1295
Tel: 1-800-448-2430
<PAGE>
THE BRINSON FUNDS
[LOGO]
209 South LaSalle Street
Chicago, IL 60604-1295
PROSPECTUS
December __, 1998
This Prospectus describes the Brinson Fund-Class N shares of the investment
portfolios offered by The Brinson Funds (the "Trust"). The Trust is a no-load,
open-end management investment company advised by Brinson Partners, Inc.
("Brinson Partners" or the "Advisor"), which currently offers thirteen
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. Large Capitalization Growth Fund, U. S. Small Capitalization Fund,
U.S. Bond Fund, High Yield Bond Fund, Global (ex-U.S.) Equity Fund (formerly,
Non-U.S. Equity Fund), Emerging Markets Equity Fund and Emerging Markets Debt
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 UBS Investment Funds 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. Large
Capitalization Growth Fund, Brinson U.S. Small Capitalization Fund, Brinson U.S.
Bond Fund, Brinson High Yield Bond Fund, Brinson Global (ex-U.S.) Equity Fund,
Brinson Emerging Markets Equity Fund and Brinson Emerging Markets Debt 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 UBS Investment Funds 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 UBS Investment Funds
class shares may be obtained by calling 1-800-794-7753.
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 December __, 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
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Annual Fund Operating Expenses............................................. 3
Financial Highlights....................................................... 5
Prior Performance of the Advisor........................................... 10
Description of the Funds................................................... 15
Investment Objectives and Policies......................................... 15
Global Fund.............................................................. 15
Global Equity Fund....................................................... 16
Global Bond Fund......................................................... 16
U.S. Balanced Fund....................................................... 17
U.S. Equity Fund......................................................... 17
U.S. Large Capitalization Equity Fund.................................... 18
U.S. Large Capitalization Growth Fund.................................... 18
U.S. Small Capitalization Fund........................................... 18
U.S. Bond Fund........................................................... 19
High Yield Bond Fund..................................................... 20
Global (ex-U.S.) Equity Fund............................................. 20
Emerging Markets Equity Fund............................................. 21
Emerging Markets Debt Fund............................................... 21
Investment Considerations and Risks........................................ 21
Management of the Trust.................................................... 28
Portfolio Management....................................................... 29
Administration of the Trust................................................ 29
Purchase of Shares......................................................... 31
Account Options............................................................ 33
Redemption of Shares....................................................... 34
Net Asset Value............................................................ 36
Dividends, Distributions and Taxes......................................... 38
General Information........................................................ 40
Performance Information.................................................... 43
Appendix A................................................................. 43
</TABLE>
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUNDS TO MAKE
SUCH AN OFFER OR SOLICITATION. NO SALES REPRESENTATIVE, DEALER, OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS.
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND
OPERATING EXPENSES
OTHER EXPENSES (AFTER FEE WAIVER
BRINSON FUND CLASS N MANAGEMENT FEES 12B-1 (AFTER AND/OR EXPENSE TRANSACTION
SHARES (AFTER FEE WAIVER)/1/ EXPENSES/2/ REIMBURSEMENT)/1/ REIMBURSEMENT)/1/CHARGES/3/
- -------------------- --------------------- ----------- ----------------- ------------------ -----------
<S> <C> <C> <C> <C> <C>
Global Fund ............ 0.80% 0.25% 0.14% 1.19% 0.00%
Global Equity Fund...... 0.78% 0.25% 0.22% 1.25% 0.00%
Global Bond Fund........ 0.69% 0.25% 0.21% 1.15% 0.00%
U.S. Balanced Fund...... 0.69% 0.25% 0.11% 1.05% 0.00%
U.S. Equity Fund........ 0.70% 0.25% 0.10% 1.05% 0.00%
U.S. Large Capitaliza-
tion Equity Fund....... 0.00% 0.25% 0.80% 1.05% 0.00%
U.S. Large Capitaliza-
tion Growth Fund....... 0.70% 0.25% 0.10% 1.05% 0.00%
U.S. Small Capitaliza-
tion Fund.............. 1.00% 0.25% 0.15% 1.40% 0.00%
U.S. Bond Fund.......... 0.26% 0.25% 0.34% 0.85% 0.00%
High Yield Bond Fund.... 0.60% 0.25% 0.10% 0.95% 0.00%
Global (ex-U.S.) Equity
Fund................... 0.80% 0.25% 0.20% 1.25% 0.00%
Emerging Markets Equity
Fund................... 1.10% 0.25% 0.50% 1.85% 1.50%
Emerging Markets Debt
Fund................... 0.65% 0.25% 0.50% 1.40% 0.50%
</TABLE>
- ----------
/1Pursuant/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. Large Capitalization Growth Fund,
U.S. Small Capitalization Fund, U.S. Bond Fund, High Yield Bond Fund, Global
(ex-U.S.) Equity Fund, Emerging Markets Equity Fund and Emerging Markets Debt
Fund: 0.80%, 0.80%, 0.75%, 0.70%, 0.70%, 0.70%, 0.70%, 1.00%, 0.50%, 0.60%,
0.80%, 1.10% and 0.65%, respectively. The Advisor 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 Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S.
Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S.
Small Capitalization Fund, U.S. Bond Fund, High Yield Bond Fund, Global (ex-
U.S.) Equity Fund, Emerging Markets Equity Fund and Emerging Markets Debt
Fund will never exceed 1.10%, 1.00%, 0.90%, 0.80%, 0.80%, 0.80%, 0.80%,
1.15%, 0.60%, 0.70%, 1.00%, 1.60% and 1.15%, respectively. Had the Advisor
not irrevocably agreed to waive fees and reimburse expenses, the total fund
operating expenses for the Brinson Fund Class N shares of the Series for the
fiscal year ended June 30, 1998 for the Global Equity Fund, Global Bond Fund,
U.S. Balanced Fund, U.S. Large Capitalization Equity Fund and U.S. Bond Fund,
would have been 1.27%, 1.21%, 1.06%, 1.84%, and 1.09%, respectively. The fees
and expenses for the U.S. Large Capitalization Equity Fund are based on the
period from April 6, 1998 (commencement of operations) to June 30, 1998. The
fees and expenses of the U.S. Large Capitalization Growth Fund, the U.S.
Small Capitalization Fund, the High Yield Bond Fund, the Emerging Markets
Equity Fund and the Emerging Markets Debt Fund are based on estimates.
/2For/the 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
<PAGE>
/3/Shareholders of the Emerging Markets Equity Fund are subject to a 1.50%
transaction charge in connection with each purchase and redemption of shares
of the Series. Shareholders of the Emerging Markets Debt Fund are subject to
a 0.50% transaction charge in connection with each purchase of shares of the
Series. Shares of each Series are sold at a price which is equal to the net
asset value of such shares, plus the transaction charge. Redemption requests
for the Emerging Markets Equity Fund are paid at the net asset value less
the transaction charge. The transaction charges do not apply to the
reinvestment of dividends or capital gain distributions.
The transaction charges are paid to the Series and used by them to defray
transaction costs associated with the purchase and sale of securities within
the Series. The amount of the transaction charge on purchases and redemptions
represents the estimate of the costs reasonably anticipated to be associated
with the purchase of securities with cash received from shareholders and the
sale of securities to obtain cash to redeem shareholders. Therefore, the
transaction charges offset the dilutive effect such costs would otherwise have
on the net asset value of the Series' shares. Purchases and redemptions which
are made in kind with securities are not subject to the transaction charges.
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.
EXAMPLE: Based on the level of expenses listed above after fee waivers or
expense 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>
BRINSON FUND CLASS N SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Global Fund..................................... $12 $38 $ 65 $144
Global Equity Fund.............................. $13 $40 $ 69 $151
Global Bond Fund................................ $12 $37 $ 63 $140
U.S. Balanced Fund.............................. $11 $33 $ 58 $128
U.S. Equity Fund................................ $11 $33 $ 58 $128
U.S. Large Capitalization Equity Fund........... $11 $33 $ 58 $128
U.S. Large Capitalization Growth Fund........... $11 $33 $ 58 $128
U.S. Small Capitalization Fund.................. $14 $44 $ 77 $168
U.S. Bond Fund.................................. $ 9 $27 $ 47 $105
High Yield Bond Fund............................ $10 $30 $ 53 $117
Global (ex-U.S.) Equity Fund.................... $13 $40 $ 69 $151
Emerging Markets Equity Fund.................... $19 $58 $100 $217
Emerging Markets Debt Fund...................... $14 $44 $ 77 $168
</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.
- --------------------------------------------------------------------------------
THE EXAMPLE SHOULD NOT BE CONSIDERED REPRESENTATIVE OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER,
WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, A FUND'S ACTUAL PERFORMANCE WILL
VARY AND MAY RESULT IN ACTUAL RETURNS GREATER OR LESS THAN 5%.
- --------------------------------------------------------------------------------
4
<PAGE>
FINANCIAL HIGHLIGHTS
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 Global (ex-U.S.)
Equity Fund
The selected financial information in the following table has been audited by
the Funds' independent auditors, whose unqualified reports thereon (the
"Reports") appear in the Funds' Annual Report to Shareholders dated June 30,
1998 (the "Annual Report"). Additional performance and financial data and
related notes are contained in the Annual Report, which is available without
charge upon request. The Funds' Financial Statements for the fiscal year ended
June 30, 1998 and the Reports are incorporated by reference into the Statement
of Additional Information.
Brinson U.S. Large Capitalization Growth Fund, Brinson U.S. Small
Capitalization Fund and Brinson High Yield Bond Fund
The U.S. Large Capitalization Growth Fund, the U.S. Small Capitalization Fund
and the High Yield Bond Fund (collectively, the "New Series") are successors to
the UBS Large Cap Growth Fund, the UBS Small Cap Fund and the UBS High Yield
Bond Fund, respectively (collectively, the "Predecessor Funds"). Each
Predecessor Fund, prior to its merger into a New Series, operated as a separate
portfolio of UBS Private Investor Funds, Inc., another investment company that
was advised by another entity. The Predecessor Funds had fiscal years ending on
December 31. On December , 1998, following the approval of the shareholders
of each Predecessor Fund of an agreement and plan of reorganization, the UBS
Large Cap Growth Fund, the UBS Small Cap Fund and the UBS High Yield Bond Fund
were reorganized and merged into the U.S. Large Capitalization Growth Fund, the
U.S. Small Capitalization Fund and the High Yield Bond Fund, respectively.
(These transactions are collectively referred to as the "Reorganizations.") In
conjunction with the Reorganizations, the fiscal year ends of the Predecessor
Funds were changed to June 30. The New Series had no operations prior to the
Reorganizations.
The selected financial information in the following table has been audited by
the Predecessor Funds' independent auditors, whose unqualified reports on the
financial statements containing such information (the "Reports") appear in the
Predecessor Funds' Annual Reports to Shareholders dated December 31, 1997 (the
"Predecessor Funds' Annual Reports"). In addition, the table includes unaudited
financial information for the period ended June 30, 1998, which is included in
the Predecessor Funds' Semi-Annual Reports to Shareholders (the "Predecessor
Funds' Semi-Annual Reports") dated June 30, 1998. Additional performance and
financial data and related notes are contained in the Predecessor Funds' Annual
Reports and the Predecessor Funds' Semi-Annual Reports (the "Predecessor Funds'
Reports"), which are available without charge upon request. The Predecessor
Funds' Financial Statements for the fiscal year ended December 31, 1997, and
the period ended June 30, 1998, and the Predecessor Funds' Reports are
incorporated by reference into the Statement of Additional Information.
5
<PAGE>
FINANCIAL HIGHLIGHTS--FISCAL YEARS ENDED JUNE 30 AND DECEMBER 31
The following table presents financial data relating to a share of
beneficial interest outstanding throughout the periods presented. This
information has been derived from the Funds' and the Predecessor Funds'
financial statements.
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT
OPERATIONS LESS DISTRIBUTIONS
------------------------------ -----------------------------
DISTRIBU-
TOTAL TIONS DISTRIBU-
INCOME FROM AND TIONS NET NET
NET (LOSS) IN EXCESS FROM AND ASSET ASSETS,
NET ASSET NET REALIZED FROM OF NET IN EXCESS VALUE- TOTAL END OF
VALUE- INVEST- AND INVEST- INVEST- OF NET TOTAL END RETURN PERIOD
BEGINNING MENT UNREALIZED MENT MENT REALIZED DISTRIBU- OF (NON- (IN
YEAR OF PERIOD INCOME GAIN (LOSS) OPERATIONS INCOME GAIN TIONS PERIOD ANNUALIZED) 000S)
- ---- --------- ------- ----------- ---------- --------- --------- --------- ------ ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BRINSON GLOBAL FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ $13.13 0.63 0.32 0.95 (0.63) (0.70) (1.33) $12.75 7.90 % $ 1,163
BRINSON GLOBAL EQUITY FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ $12.76 0.13 0.82 0.95 (0.13) (1.05) (1.18) $12.53 8.60 % $ 1
BRINSON GLOBAL BOND FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ $ 9.64 0.42/2/ (0.20) 0.22 (0.29) (0.17) (0.46) $ 9.40 2.37 % $ 9
BRINSON U.S. BALANCED FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ $12.53 0.47/2/ 0.94 1.41 (0.73) (0.94) (1.67) $12.27 12.15 % $ 1
BRINSON U.S. EQUITY FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ $17.64 0.15 3.37 3.52 (0.15) (1.13) (1.28) $19.88 21.10 % $ 268
BRINSON U.S. LARGE CAPITALIZATION EQUITY FUND--CLASS N (Commencement of Operations April 6, 1998)
1998............ $10.00 0.02 (0.23) (0.21) (0.01) -- (0.01) $ 9.78 (2.02)% $16,033
BRINSON U.S. BOND FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ $10.24 0.61 0.42 1.03 (0.55) (0.14) (0.69) $10.58 10.30 % $ 1
BRINSON GLOBAL (EX-U.S.) EQUITY FUND/3/--CLASS N (Commencement of Operations June 30, 1997)
1998............ $12.59 0.16 0.29 0.45 (0.16) (0.74) (0.90) $12.14 4.51 % $ 11
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------
RATIO OF NET
RATIO OF EXPENSES INVESTMENT INCOME
TO AVERAGE NET TO AVERAGE NET
ASSETS ASSETS
--------------------- ---------------------
BEFORE AFTER BEFORE AFTER
EXPENSE EXPENSE EXPENSE EXPENSE PORTFOLIO
REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
YEAR MENT MENT MENT MENT RATE
- ---- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
BRINSON GLOBAL FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ 1.19% N/A 2.45% N/A 88%
BRINSON GLOBAL EQUITY FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ 1.27% 1.25% 1.04% 1.06% 46%
BRINSON GLOBAL BOND FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ 1.21% 1.15% 4.22% 4.28% 151%
BRINSON U.S. BALANCED FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ 1.06% 1.05% 3.63% 3.64% 194%
BRINSON U.S. EQUITY FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ 1.05% N/A 0.87% N/A 42%
BRINSON U.S. LARGE CAPITALIZATION EQUITY FUND--CLASS N (Commencement of Operations April 6, 1998)
1998............ 1.84%/1/ 1.05%/1/ 0.27%/1/ 1.06%/1/ 12%
BRINSON U.S. BOND FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ 1.09% 0.85% 5.36% 5.60% 198%
BRINSON GLOBAL (EX-U.S.) EQUITY FUND/3/--CLASS N (Commencement of Operations June 30, 1997)
1998............ 1.25% N/A 1.27% N/A 49%
</TABLE>
- -----
/1/Annualized
/2/The net investment income per share data was determined by using average
shares outstanding throughout the period.
/3/The Brinson Global (ex-U.S.) Equity Fund changed its name from the Brinson
Non-U.S. Equity Fund on December , 1998. During the fiscal year ended June
30, 1998, the Global (ex-U.S.) Equity Fund (the "ex-U.S. Fund") had total
borrowings of $32,600,000 outstanding for 1 day (June 29, 1998) under the
Trust's agreement with The Chase Manhattan Bank to provide a 364-day $100
million committed line of credit. The ex-U.S. Fund had 36,449,018.679 shares
outstanding on June 29, 1998, and the amount of debt per share was $12.05. At
June 30, 1998, the ex-U.S. Fund had no debt outstanding.
/4/The information provided in this table does not reflect Rule 12b-1 plan
expenses, as the Predecessor Funds were not subject to such expenses.
/5/For the period from commencement of operations to December 31, 1997.
/6/Prior to the Reorganizations, each of these Series operated as a separate
portfolio of UBS Private Investor Funds, Inc. and invested all of their
respective investable assets in an affiliated fund with an identical
investment objective. The U.S. Large Capitalization Growth Fund invested
solely in the UBS Investor Portfolios Trust--UBS Large Cap Growth Portfolio;
the U.S. Small Capitalization Fund invested solely in the UBS Investor
Portfolios Trust--UBS Small Cap Portfolio; and the High Yield Bond Fund
invested solely in the UBS Investor Portfolios Trust--UBS High Yield Bond
Portfolio. The funds in which each of these Series invested are referred to
herein as the "Master Funds." The ratios set forth in this Financial
Highlights table for each of these Series include the Series' share of its
respective Master Fund's expenses. The annualization of these ratios is
affected by the fact that the Investment Advisory Agreement and Investment
Sub-Advisory Agreement to which these Series were subject prior to the
Reorganizations were not ratified until December 29, 1997. Prior to that date,
investment advisory services were being provided without compensation.
/7/The Portfolio Turnover Rate reflected in this Financial Highlights Table
reflects the portfolio turnover rate for the Series' respective Master Funds.
/8/For the period from January 1, 1998 to June 30, 1998.
N/A = Not Applicable
6
<PAGE>
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT
OPERATIONS LESS DISTRIBUTIONS
------------------------------- -----------------------------
TOTAL DISTRIBU-
INCOME DISTRIBU- TIONS NET NET
NET (LOSS) TIONS FROM AND ASSET ASSETS
NET ASSET NET REALIZED FROM FROM NET IN EXCESS VALUE- TOTAL END OF
VALUE- INVEST- AND INVEST- INVEST- OF NET TOTAL END RETURN PERIOD
BEGINNING MENT UNREALIZED MENT MENT REALIZED DISTRIBU- OF (NON- (IN
YEAR OF PERIOD INCOME GAIN (LOSS) OPERATIONS INCOME GAIN TIONS PERIOD ANNUALIZED) 000S)
- ---- --------- -------- ----------- ---------- --------- --------- --------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BRINSON GLOBAL FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ $13.13 0.63 0.32 0.95 (0.63) (0.70) (1.33) $12.75 7.90 % $ 1,163
BRINSON GLOBAL EQUITY FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ $12.76 0.13 0.82 0.95 (0.13) (1.05) (1.18) $12.53 8.60 % $ 1
BRINSON GLOBAL BOND FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ $ 9.64 0.42/2/ (0.20) 0.22 (0.29) (0.17) (0.46) $ 9.40 2.37 % $ 9
BRINSON U.S. BALANCED FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ $12.53 0.47/2/ 0.94 1.41 (0.73) (0.94) (1.67) $12.27 12.15 % $ 1
BRINSON U.S. EQUITY FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ $17.64 0.15 3.37 3.52 (0.15) (1.13) (1.28) $19.88 21.10 % $ 268
BRINSON U.S. LARGE CAPITALIZATION EQUITY FUND--CLASS N (Commencement of Operations April 6, 1998)
1998............ $10.00 0.02 (0.23) (0.21) (0.01) N/A (0.01) $ 9.78 (2.02)% $16,033
BRINSON U.S. BOND FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ $10.24 0.61 0.42 1.03 (0.55) (0.14) (0.69) $10.58 10.30 % $ 1
BRINSON GLOBAL (EX-U.S.) EQUITY FUND/3/--CLASS N (Commencement of Operations June 30, 1997)
1998............ $12.59 0.16 0.29 0.45 (0.16) (0.74) (0.90) $12.14 4.51 % $ 11
BRINSON U.S. LARGE CAPITALIZATION GROWTH FUND/4/--CLASS N (Commencement of Operations October 14, 1997)
1997/5/......... $100 0.23 (0.79) (0.56) (0.22) -- (0.22) $ 99.22 (0.55)% $ 4.137
1998 (unau-
dited)/8/....... $99.22 0.27 12.76 13.03 -- -- -- $112.25 13.13% $ 7,135
BRINSON U.S. SMALL CAPITALIZATION FUND/4/--CLASS N (Commencement of Operations September 30, 1997)
1997/5/......... $100 -- (5.62) (5.62) -- -- -- $ 94.38 (5.62)% $11,954
1998 (unau-
dited)/8/....... $94.38 (0.05) 2.85 2.80 -- -- -- $ 97.18 2.89% $21,310
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------
RATIO OF NET
RATIO OF EXPENSES INVESTMENT INCOME
TO AVERAGE NET TO AVERAGE NET
ASSETS ASSETS
--------------------------- -------------------------------
BEFORE AFTER BEFORE AFTER
EXPENSE EXPENSE EXPENSE EXPENSE PORTFOLIO
REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
YEAR MENT MENT MENT MENT RATE
- ---- ------------- ------------- --------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
BRINSON GLOBAL FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ 1.19% N/A 2.45% N/A 88%
BRINSON GLOBAL EQUITY FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ 1.27% 1.25% 1.04% 1.06% 46%
BRINSON GLOBAL BOND FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ 1.21% 1.15% 4.22% 4.28% 151%
BRINSON U.S. BALANCED FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ 1.06% 1.05% 3.63% 3.64% 194%
BRINSON U.S. EQUITY FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ 1.05% N/A 0.87% N/A 42%
BRINSON U.S. LARGE CAPITALIZATION EQUITY FUND--CLASS N (Commencement of Operations April 6, 1998)
1998............ 1.84%/1/ 1.05%/1/ 0.27%/1/ 1.06%/1/ 12%
BRINSON U.S. BOND FUND--CLASS N (Commencement of Operations June 30, 1997)
1998............ 1.09% 0.85% 5.36% 5.60% 198%
BRINSON GLOBAL (EX-U.S.) EQUITY FUND/3/--CLASS N (Commencement of Operations June 30, 1997)
1998............ 1.25% N/A 1.27% N/A 49%
BRINSON U.S. LARGE CAPITALIZATION GROWTH FUND/4/--CLASS N (Commencement of Operations October 14, 1997)
1997/5/......... 8.54%/1/,/6/ 1.00%/1/,/6/ (6.19)%/1/,/6/ 1.35%/1/,/6/ 6%/7/
1998 (unau-
dited)/8/....... 3.27%/1/,/6/ 1.00%/1/,/6/ (1.69)%/1/,/6/ 0.58%/1/,/6/ 35%/7/
BRINSON U.S. SMALL CAPITALIZATION FUND/4/--CLASS N (Commencement of Operations September 30, 1997)
1997/5/......... 3.63%/1/,/6/ 1.20%/1/,/6/ (2.53)%/1/,/6/ (0.10)%/1/,/6/ 3%/7/
1998 (unau-
dited)/8/....... 1.95%/1/,/6/ 1.20%/1/,/6/ (0.87)%/1/,/6/ (0.12)%/1/,/6/ 9%/7/
</TABLE>
- -----
/1/Annualized
/2/The net investment income per share data was determined by using average
shares outstanding throughout the period.
/3/The Brinson Global (ex-U.S.) Equity Fund changed its name from the Brinson
Non-U.S. Equity Fund on December , 1998. During the fiscal year ended June
30, 1998, the Global (ex-U.S.) Equity Fund (the "ex-U.S. Fund") had total
borrowings of $32,600,000 outstanding for 1 day (June 29, 1998) under the
Trust's agreement with The Chase Manhattan Bank to provide a 364-day $100
million committed line of credit. The ex-U.S. Fund had 36,449,018.679 shares
outstanding on June 29, 1998, and the amount of debt per share was $12.05. At
June 30, 1998, the ex-U.S. Fund had no debt outstanding.
/4/The information provided in this table does not reflect Rule 12b-1 plan
expenses, as the Predecessor Funds were not subject to such expenses.
/5/For the period from commencement of operations to December 31, 1997.
/6/Prior to the Reorganizations, each of these Series operated as a separate
portfolio of UBS Private Investor Funds, Inc. and invested all of their
respective investable assets in an affiliated fund with an identical
investment objective. The U.S. Large Capitalization Growth Fund invested
solely in the UBS Investor Portfolios Trust--UBS Large Cap Growth Portfolio;
the U.S. Small Capitalization Fund invested solely in the UBS Investor
Portfolios Trust--UBS Small Cap Portfolio; and the High Yield Bond Fund
invested solely in the UBS Investor Portfolios Trust--UBS High Yield Bond
Portfolio. The funds in which each of these Series invested are referred to
herein as the "Master Funds." The ratios set forth in this Financial
Highlights table for each of these Series include the Series' share of its
respective Master Fund's expenses. The annualization of these ratios is
affected by the fact that the Investment Advisory Agreement and Investment
Sub-Advisory Agreement to which these Series were subject prior to the
Reorganizations were not ratified until December 29, 1997. Prior to that date,
investment advisory services were being provided without compensation.
/7/The Portfolio Turnover Rate reflected in this Financial Highlights Table
reflects the portfolio turnover rate for the Series' respective Master Funds.
/8/For the period from January 1, 1998 to June 30, 1998.
N/A=Not Applicable
7
<PAGE>
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT
OPERATIONS LESS DISTRIBUTIONS
------------------------------ -----------------------------
TOTAL DISTRIBU-
INCOME DISTRIBU- TIONS NET NET
NET (LOSS) TIONS FROM AND ASSET ASSETS
NET ASSET NET REALIZED FROM FROM NET IN EXCESS VALUE- TOTAL END OF
VALUE- INVEST- AND INVEST- INVEST- OF NET TOTAL END RETURN PERIOD
BEGINNING MENT UNREALIZED MENT MENT REALIZED DISTRIBU- OF (NON- (IN
YEAR OF PERIOD INCOME GAIN (LOSS) OPERATIONS INCOME GAIN TIONS PERIOD ANNUALIZED) 000S)
- ---- --------- ------- ----------- ---------- --------- --------- --------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BRINSON HIGH YIELD BOND FUND/4/--CLASS N (Commencement of Operations September 30, 1997)
1997/5/......... $100 1.80 0.52 2.32 (1.77) -- (1.77) $100.55 2.34% $ 7,861
1998 (unau-
dited)/8/....... $100.55 4.00 1.67 5.67 (3.96) -- (3.96) $102.26 5.07% $16,463
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------
RATIO OF NET INVESTMENT
RATIO OF EXPENSES INCOME
TO AVERAGE NET TO AVERAGE NET
ASSETS ASSETS
------------------------- -------------------------
BEFORE AFTER BEFORE AFTER
EXPENSE EXPENSE EXPENSE EXPENSE PORTFOLIO
REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
YEAR MENT MENT MENT MENT RATE
- ---- ------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
BRINSON HIGH YIELD BOND FUND/4/--CLASS N (Commencement of Operations September 30, 1997)
1997/5/......... 4.98%/1/,/6/ 0.90%/1/,/6/ 2.25%/1/,/6/ 7.23%/1/,/6/ 80%/7/
1998 (unau-
dited)/8/....... 2.47%/1/,/6/ 0.90%/1/,/6/ 6.46%/1/,/6/ 8.03%/1/,/6/ 155%/7/
</TABLE>
- -----
/1/Annualized
/2/The net investment income per share data was determined by using average
shares outstanding throughout the period.
/3/The Brinson Global (ex-U.S.) Equity Fund changed its name from the Brinson
Non-U.S. Equity Fund on December , 1998. During the fiscal year ended June
30, 1998, the Global (ex-U.S.) Equity Fund (the "ex-U.S. Fund") had total
borrowings of $32,600,000 outstanding for 1 day (June 29, 1998) under the
Trust's agreement with The Chase Manhattan Bank to provide a 364-day $100
million committed line of credit. The ex-U.S. Fund had 36,449,018.679 shares
outstanding on June 29, 1998, and the amount of debt per share was $12.05. At
June 30, 1998, the ex-U.S. Fund had no debt outstanding.
/4/The information provided in this table does not reflect Rule 12b-1 plan
expenses, as the Predecessor Funds were not subject to such expenses.
/5/For the period from commencement of operations to December 31, 1997.
/6/Prior to the Reorganizations, each of these Series operated as a separate
portfolio of UBS Private Investor Funds, Inc. and invested all of their
respective investable assets in an affiliated fund with an identical
investment objective. The U.S. Large Capitalization Growth Fund invested
solely in the UBS Investor Portfolios Trust--UBS Large Cap Growth Portfolio;
the U.S. Small Capitalization Fund invested solely in the UBS Investor
Portfolios Trust--UBS Small Cap Portfolio; and the High Yield Bond Fund
invested solely in the UBS Investor Portfolios Trust--UBS High Yield Bond
Portfolio. The funds in which each of these Series invested are referred to
herein as the "Master Funds." The ratios set forth in this Financial
Highlights table for each of these Series include the Series' share of its
respective Master Fund's expenses. The annualization of these ratios is
affected by the fact that the Investment Advisory Agreement and Investment
Sub-Advisory Agreement to which these Series were subject prior to the
Reorganizations were not ratified until December 29, 1997. Prior to that date,
investment advisory services were being provided without compensation.
/7/The Portfolio Turnover Rate reflected in this Financial Highlights Table
reflects the portfolio turnover rate for the Series' respective Master Funds.
/8/For the period from January 1, 1998 to June 30, 1998.
N/A = Not Applicable
8
<PAGE>
Financial Highlights are not included for the Brinson Emerging Markets Equity
Fund or the Brinson Emerging Markets Debt Fund, each of which commenced
operations on December , 1998.
9
<PAGE>
PRIOR PERFORMANCE OF ADVISOR
The following table sets forth the Advisor's performance data relating to
the historical performance of institutional private accounts managed by the
Advisor, that have investment objectives, policies, strategies and risks
substantially similar to those of the various Series of the Trust. The data is
provided to illustrate the past performance of the Advisor in managing
investment portfolios which are substantially similar to the applicable Series
of the Trust as measured against specified market indices. This performance
presentation includes certain composites of Brinson Partners, Inc. and certain
composites of UBS Brinson New York (formerly UBS Asset Management New York).
These two firms are now part of one organization as a result of a business
combination on June 30, 1998. The portfolio management process and performance
measurement are distinct for the two entities through June 30, 1998. The
performance data of each series of the Brinson Funds as well as three of the
UBS Private Investor Funds is also included in the table.
The Advisor adopted the Performance Presentation Standards of the
Association for Investment Management and Research (AIMR-PPS(TM)) as of
January 1, 1993. The Advisor complies with the AIMR standards on a firmwide
basis, and a list of all firm composites is available upon request. The
composite performance results 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 this report.
Investment results are time-weighted performance calculations representing
total return. Returns are calculated using geometric linking of monthly
returns. Composites are valued at least 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
exclude the impact of custodial fees, and any other 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 account.
Results include all actual fee-paying, discretionary client portfolios
including those clients no longer with the Firm. Portfolios are included in
the composite beginning with the first full month of performance to the
present or to the cessation of the clients' relationship with the Firm. No
alterations of composites as presented here have occurred due to changes in
personnel. Accounts of all sizes are included in composite performance and no
minimum account relationship size was set for inclusion in the composite as
the account size does not impact portfolio management style. The composites
are to 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 of 1986, as amended. Had such expenses, limitations, requirements
and restrictions been applicable to the composites, the performance results
could have been adversely affected. The composite's performance presented does
not represent the historical performance of the Series and should not be
interpreted as indicative of future performance of the Series.
CLASS N ANNUALIZED RETURNS
<TABLE>
<CAPTION>
AVERAGE ANNUAL
--------------------------
ONE TWO THREE FIVE TEN
TOTAL RETURNS AS OF JUNE 30, 1998 YEAR YEARS YEARS YEARS YEARS
- --------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Global Securities Portfolio/1/............... 8.22% 13.58% 14.93% 11.66% 12.40%
Brinson Global Class N Fund/2/............... 7.90 13.21 14.25 11.09 N/A
GIobal Securities Markets Index/3/........... 13.76 15.86 15.72 13.56 12.41
Global Equity with Cash Portfolio/1/......... 10.88 16.31 19.47 13.61 12.81
Brinson Global Equity Class N Fund/2/........ 8.60 14.75 18.26 N/A N/A
MSCI World Equity Index/3/, /4/.............. 17.18 19.88 19.56 16.02 11.63
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------
ONE TWO THREE FIVE TEN
YEAR YEARS YEARS YEARS YEARS
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Global Bond Portfolio/1/.............. 3.71% 5.73% 7.89% 6.55% 9.05%
Brinson Global Bond Class N Fund/2/... 2.37 5.00 7.12 N/A N/A
Salomon World Govt Bond Index/3/...... 4.32 4.10 2.84 6.33 8.35
U.S. Balanced Portfolio/1/............ 12.87 14.64 14.67 12.04 12.69
Brinson U.S. Balanced Class N Fund/2/. 12.15 13.81 13.70 N/A N/A
U.S. Balanced Mutual Fund Index/3/.... 22.38 22.05 20.83 16.32 14.57
U.S. Equity Fund/1/................... 21.89 27.26 28.66 22.02 19.66
Brinson U.S. Equity Class N Fund/2/... 21.10 26.37 27.73 N/A N/A
Wilshire 5000/3/...................... 28.86 29.09 28.13 21.56 17.61
U.S. Large Capitalization Equity Port-
folio/1/............................. 21.41 28.61 30.56 23.49 20.64
U.S. Large Capitalization Growth Port-
folio/1/, /7/........................ 25.06 27.37 25.73 19.10 17.73
Brinson U.S. Large Capitalization Eq-
uity Class N Fund/2/, /6/............ (0.37) N/A N/A N/A N/A
UBS Large Cap Growth Fund/2/, /5/,
/7/.................................. 12.51 N/A N/A N/A N/A
S & P 500/3/.......................... 30.21 32.37 30.23 23.05 18.55
U.S. Small Capitalization Growth Port-
folio/1/, /7/........................ 13.60 15.28 20.99 14.98 15.73
UBS Small Cap Fund/2/, /5/, /7/....... (2.89) N/A N/A N/A N/A
Russell 2000/3/....................... 16.51 16.42 18.86 16.05 13.57
U.S. Bond Portfolio/1/................ 10.89 9.89 8.27 7.14 9.40
Brinson U.S. Bond Class N Fund/2/..... 10.30 9.37 N/A N/A N/A
Salomon BIG Index/3/.................. 10.59 9.36 7.88 6.91 9.11
High Yield Portfolio/1/, /7/.......... 13.72 14.03 13.80 N/A N/A
UBS High Yield Fund/2/, /5/, /7/...... 8.18 N/A N/A N/A N/A
Merrill Lynch All High Yield Bond In-
dex/3/............................... 11.77 N/A N/A N/A N/A
Non-U.S. Equity Portfolio/1/.......... 5.88 12.99 16.98 12.22 10.93
Brinson Global (ex-U.S.) Equity Class
N Fund/2/............................ 4.51 12.11 15.81 N/A N/A
MSCI Non-U.S. Index (Unhedged)/3/,
/4/.................................. 6.04 9.77 11.04 10.29 6.98
Emerging Markets Equity Portfolio/1/.. (11.77) (34.08) (12.54) N/A N/A
MSCI Emerging Markets (Free) Index/3/. (38.10) (16.30) N/A N/A N/A
Brinson Emerging Markets Normal In-
dex/2/............................... (36.75) (15.12) N/A N/A N/A
Emerging Markets Debt Portfolio/1/.... 6.81 22.29 N/A N/A N/A
JP MORGAN EMBI+/3/.................... 1.39 16.14 N/A N/A N/A
</TABLE>
- ----------
FOOTNOTES:
/1/ Performance figures for the Advisor composites are net of advisory fees.
Advisory fees are determined by taking the average account size within the
composite as of June 30, 1998 and applying the standard fee schedule.
Performance figures for the composites gross of fees are:
11
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL
---------------------------
ONE TWO THREE FIVE TEN
YEAR YEARS YEARS YEARS YEARS
------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
Global Securities Portfolio............ 8.94% 14.30% 15.65% 12.38% 13.12%
Global Equity with Cash Portfolio...... 11.73 17.16 20.32 14.46 13.66
Global Bond Portfolio.................. 4.28 6.30 8.46 7.12 9.62
U.S. Balanced Portfolio................ 13.59 15.36 15.39 12.76 13.41
U.S. Equity Fund....................... 22.47 27.84 29.24 22.60 20.24
U.S. Large Capitalization Equity Port-
folio................................. 22.02 29.22 31.17 24.10 21.35
U.S. Large Capitalization Growth Port-
folio................................. 25.06 27.37 25.73 19.10 17.73
U.S. Small Capitalization Growth Port-
folio................................. 13.60 15.28 20.99 14.98 15.73
U.S. Bond Portfolio.................... 11.20 10.20 8.58 7.45 9.71
High Yield Portfolio................... 13.72 14.03 13.80 N/A N/A
Non-U.S. Equity Portfolio.............. 6.59 13.70 17.69 12.93 11.64
Emerging Markets Equity Portfolio...... (11.77) (34.08) N/A N/A N/A
Emerging Markets Debt Portfolio........ 6.81 22.29 N/A N/A N/A
</TABLE>
/2/ Total returns include reinvestment of all capital gain and income
distributions. Inception dates and average annual returns since each
Fund's inception date are as follows: Brinson Global Fund Class N,
8/31/92, 11.44%; Brinson Global Equity Fund Class N, 1/31/94, 12.45%;
Brinson Global Bond Fund Class N, 7/31/93, 6.49%; Brinson U.S. Balanced
Fund Class N, 12/31/94, 15.90%; Brinson U.S. Equity Fund Class N, 2/28/94,
23.11%; Brinson U.S. Large Capitalization Equity Fund Class N, 4/30/98,
(.13)%; UBS Large Cap Growth Fund, 9/30/97, 12.51%; UBS Small Cap Fund,
9/30/97, (2.89)%; Brinson U.S. Bond Fund Class N, 8/31/95, 7.97%; UBS High
Yield Bond Fund. 9/30/97, 8.18%; and Brinson Global (ex-U.S.) Equity Fund
Class N, 8/31/93, 9.03%.
/3/ GSMI Mutual Fund Index, an un-managed index compiled by the Advisor,
currently constructed as follows: 40% Wilshire 5000 Index; 22% MSCI Non-
U.S. Equity (Free) Index; 21% Salomon BIG 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. The composition of the Index has
evolved over time and may change in the future. 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 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 Mutual Fund Index, an un-managed index
compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index
and 35% Salomon Brothers Broad Investment Grade (BIG) 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. Russell
2000 Index is an unmanaged index that includes 2,000 U.S. small
capitalization stocks and is a common measure of the performance of the
small capitalization segment of the U.S. stock market. Salomon Brothers
Broad Investment Grade (BIG) Bond Index is an un-managed market driven
broad based index which includes U.S. bonds with over one year to
maturity. Merrill Lynch All HIgh Yield Bond Index is an unmanaged
composite consisting of publicly-issued, fixed-rate, non-convertible,
domestic bonds that are rated below investment grade. 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. Brinson Emerging Markets Normal Index is constructed to
minimize country specific risk while providing regional exposure similar
to the Morgan Stanley Capital International Emerging Markets (Free) Index,
a market capitalization weighted index. MSCI
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<PAGE>
Emerging Markets (Free) Index is a market capitalization weighted equity
index composed of companies that are representative of the market structure
of the countries in the index. JP Morgan EMBI+ reflects total returns for
external debt instruments which have been traded in the emerging markets,
which instruments include Brady Bonds, Eurobonds, loans and U.S. dollar
denominated local market instruments.
/4Beginning/1/31/88 these indices are "free".
/5Non-annualized/return since performance inception date for the following
Funds: Brinson U.S. Large Capitalization Equity Fund Class I: 4/30/98, UBS
Large Cap Growth Fund: 10/14/97, UBS Small Cap Fund: 9/30/97, UBS High
Yield Fund: 9/30/97.
/6Non-annualized/return. Since commencement of operations (4/6/98).
/7Performance/figures for the U.S. Large Capitalization Growth Portfolio,
U.S. Small Capitalization Growth Portfolio and High Yield Portfolio,
represent composites of UBS Brinson New York (formerly UBS Asset
Management New York). Performance figures for the UBS Large Cap Growth
Fund, UBS Small Cap Fund and UBS High Yield Fund represent figures for
such funds while UBS Brinson New York (formerly UBS Asset Management New
York) was the investment manager.
13
<PAGE>
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 Considerations
and Risks" and Appendix A in this Prospectus, and in the Statement of
Additional Information.
The Series is a diversified portfolio that seeks to achieve its objective by
pursuing active asset allocation strategies across global equity and fixed
income markets and active security selection within each market. These
decisions are undertaken relative to the GSMI Mutual Fund 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.
14
<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
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 World Government Bond Index (the "Global Bond
Benchmark"). The Global Bond Benchmark is a market driven index which measures
the broad global fixed
15
<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 and
35% Salomon Brothers Broad Investment Grade (BIG) Bond 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.
16
<PAGE>
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 large capitalization
companies as those with market capitalizations in the upper 65% of the
Wilshire 5000 Index at the time of the Series' investment. Companies whose
capitalization falls below this level after purchase continue to be considered
large capitalization companies. The Series is a non-diversified portfolio as
described in "Investment Considerations and Risks--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. LARGE CAPITALIZATION GROWTH FUND
INVESTMENT OBJECTIVE
The U.S. Large Capitalization Growth Fund's investment objective is to
provide long-term capital appreciation. In seeking to achieve its investment
objective, the Series attempts to control risk. Under normal circumstances, at
least 65% of the Series' total assets will be invested in large capitalization
growth companies. The Advisor defines large capitalization companies as those
with market capitalizations in the upper 65% of the Wilshire 5000 Index 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 diversified
portfolio that seeks to achieve its objective by investing in a wide range of
equity securities of large capital growth companies. The Series may invest up
to 20% of its assets in foreign securities. The Series may enter into
repurchase agreements and reverse repurchase agreements, and engage in futures
and options for hedging, 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 S&P 500 Index (the "Large Capitalization
Growth Benchmark"). The Large Capitalization Growth Benchmark is a broad
weighted index which includes primarily U.S. common stocks. The Large
Capitalization Growth Benchmark is designed to provide a representative
indication of the capitalization and return for the large capitalization U.S.
equity market.
U.S. SMALL CAPITALIZATION FUND
INVESTMENT OBJECTIVE
The U.S. Small Capitalization Fund's investment objective is to provide
long-term capital appreciation. In seeking to achieve its investment
objective, the Series attempts to control risk. Under normal circumstances, at
least 65% of the Series' total assets will be invested in small capital growth
companies. The Advisor defines small capital companies as those with market
capitalizations within the range of those stocks listed on the Russell 2000
17
<PAGE>
Index at the time of the Series' investment. The Series may also invest in
securities of emerging growth companies--i.e. small or medium sized companies
that have passed their start-up phase and that show positive earnings and
prospects of achieving significant profit and gain in a relatively short
period of time. The Series is a diversified portfolio that seeks to achieve
its objective by investing in a wide range of small capital growth companies.
The Series may invest up to 20% of its assets in foreign securities.
Growth company securities may have above average price volatility. The
Series may enter into repurchase agreements and reverse repurchase agreements,
and engage in futures and options for hedging, 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 Russell 2000 Index (the "Small Capitalization Growth Benchmark"). The
Small Capitalization Growth Benchmark is a broad weighted index which includes
primarily U.S. small capitalization common stocks. The Small Capitalization
Growth Benchmark is designed to provide a representative indication of the
capitalization and return for the small 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 the Advisor. 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
(BIG) 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.
18
<PAGE>
HIGH YIELD BOND FUND
INVESTMENT OBJECTIVES
The primary investment objective of the High Yield Bond Fund is to provide
high current income from a portfolio of higher-yielding, lower-rated debt
securities issued by domestic and foreign companies. In seeking to achieve its
primary investment objective, the Series attempts to control risk. The Series
seeks to achieve its primary objective by investing, under normal market
conditions, at least 65% of its assets in fixed income securities that provide
higher yields and that are rated in the lower rating categories of Moody's and
S&P, including securities rated Baa or lower by Moody's or BBB or lower by S&P
("high yield securities"). Securities rated below Baa or BBB are considered to
be of poor standing and predominantly speculative. The Series may invest in a
broad range of fixed income securities, including debt securities of U.S.
corporations, zero coupon securities, mortgage-backed securities, asset-backed
securities and when-issued securities. The Series may invest up to 25% of its
assets in foreign 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 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 seeks its secondary investment objective of capital growth, when
consistent with high current income, by investing in securities, including
common stocks and non-income producing securities, which the Advisor expects
will appreciate in value as a result of declines in long-term interest rates
or favorable developments affecting the business or prospects of the issuer
which may improve the issuer's financial condition and credit rating.
The High Yield Bond Fund's benchmark is the Merrill Lynch All High Yield
Bond Index (the "High Yield Benchmark"). The High Yield Benchmark is an
unmanaged composite consisting of publicly-issued, fixed-rate, non-
convertible, domestic bonds that are rated below investment grade. 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 high
yield, fixed income securities market.
GLOBAL (EX-U.S.) EQUITY FUND (FORMERLY NON-U.S. EQUITY FUND)
INVESTMENT OBJECTIVE
The Global (ex-U.S.) Equity Fund's investment objective is to maximize total
return, consisting of capital appreciation and current income, by investing
primarily in the equity securities of non-U.S. issuers. Under normal
conditions, at least 65% of the Series' total assets will be invested in
equity securities of issuers in at least three countries other than the United
States. In seeking to achieve its investment objective while 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
19
<PAGE>
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.
EMERGING MARKETS EQUITY FUND
The Brinson Emerging Markets Equity Fund's investment objective is to
maximize total U.S. dollar return, consisting of capital appreciation and
current income, while controlling risk. Under normal circumstances, at least
65% of the Series' assets will be invested in the equity securities of issuers
in emerging markets, or securities with respect to which the return is derived
from the equity securities of issuers in emerging markets, such as equity
swaps and equity index swaps, as further described below. The Series'
performance is measured relative to its benchmark, the Brinson Emerging
Markets Normal Index (the "Equity Benchmark"). The index is constructed to
minimize country specific risk while providing regional exposure similar to
the International Finance Corporation's Investable Index (IFCI), a market
capitalization weighted benchmark.
EMERGING MARKETS DEBT FUND
The Brinson Emerging Markets Debt Fund's investment objective is to maximize
total U.S. dollar return, consisting of capital appreciation and current
income, while controlling risk. Under normal circumstances, at least 65% of
the Series' assets will be invested in debt securities issued by governments,
government-related entities (including participations in loans between
governments and financial institutions), corporations and entities organized
to restructure outstanding debt of issuers in emerging markets, or debt
securities on which the return is derived primarily from other emerging market
instruments, such as interest rate swaps and currency swaps, as further
described below. The Series' performance is measured relative to its
benchmark, the J.P. Morgan Emerging Markets Bond Index Plus (the "Debt
Benchmark").
Investors should understand that all investments involve risk and that there
can be no guarantee against loss resulting from an investment in the Series,
nor can there be any assurance that the Series' respective investment
objectives will be attained.
INVESTMENT CONSIDERATIONS AND RISKS
The following provides information about the types of instruments in which
the Funds may invest, strategies employed by Brinson Partners in its attempt
to attain each Series' investment objective and a summary of related risks.
Shareholders should understand that all investments involve risks and there
can be no guarantee against loss resulting from an investment in the Series,
nor can there be any assurance that the Series will be able to 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, U.S. LARGE CAPITALIZATION
GROWTH FUND, U.S. SMALL CAPITALIZATION FUND, GLOBAL (EX-U.S.) EQUITY FUND AND
EMERGING MARKETS 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, U.S. Small Capitalization Fund and Emerging Markets Equity 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,
20
<PAGE>
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,
U.S. BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT 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.
QUALITY INFORMATION FOR HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND
AND EMERGING MARKETS DEBT FUND - At any one time substantially all of the
assets of the High Yield Bond Fund and the Emerging Markets Debt Fund and up
to 35% of the assets of the Emerging Markets Equity Fund may be invested in
investments which are lower quality, higher yielding securities and which are
rated Ba or lower by Moody's or BB or lower by S&P, or if unrated, are
determined to be of comparable quality by the Advisor.
Securities rated Baa by Moody's or BBB by S&P are considered investment
grade, but have some speculative characteristics. Securities rated Ba or below
by Moody's or BB or below by S&P are below investment grade securities and are
commonly referred to as "junk bonds." These securities are considered to be of
poor standing and are predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms of
the obligations and involve major risk exposure to adverse conditions.
Securities issued by foreign issuers rated below investment grade entail
greater risks than higher rated securities, including risk of untimely
interest and principal payment, default, price volatility and may present
problems of liquidity and valuation. Investors should carefully consider these
risks before investing. The standards described above must be satisfied at the
time an investment is made. If the quality of the investment later declines,
the Series may continue to hold the investment. The Emerging Markets Equity
Fund and the Emerging Markets Debt Fund do not intend to limit investments in
low-grade securities.
Low-grade securities generally offer a higher current yield than that
available from higher grade securities, but involve greater risk. In the past,
the high yields from low-grade securities have more than compensated for the
higher default rates on such securities. However, there can be no assurance
that the Series will be protected from widespread bond defaults brought about
by a sustained economic downturn, or that yields will continue to offset
default rates on low-grade securities in the future. Issuers of these
securities are often highly leveraged, so that their ability to service their
debt obligations during an economic downturn or during sustained periods of
rising interest rates may be impaired. In addition, such issuers may not have
more traditional methods of financing available to them and may be unable to
repay debt at maturity by refinancing. The risk of loss due to default by the
issuer is significantly greater for the holders of low-grade securities
because such securities may be unsecured and may be subordinated to other
creditors of the issuer. Past economic recessions have resulted in default
levels with respect to such securities in excess of historic averages.
The value of low-grade securities will be influenced not only by changing
interest rates, but also by the bond market's perception of credit quality and
the outlook for economic growth. When economic conditions appear to be
deteriorating, low-grade securities may decline in market value due to
investors' heightened concern over credit quality, regardless of prevailing
interest rates.
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Especially at such times, trading in the secondary market for low-grade
securities may become thin and market liquidity may be significantly reduced.
Even under normal conditions, the market for low-grade securities may be less
liquid than the market for investment grade corporate bonds. There are fewer
securities dealers in the high yield market and purchasers of low-grade
securities are concentrated among a smaller group of securities dealers and
institutional investors. In periods of reduced secondary market liquidity,
low-grade securities prices may become more volatile and the Series' ability
to dispose of particular issues when necessary to meet the Series' liquidity
needs or in response to a specific economic event such as a deterioration in
the creditworthiness of the issuer may be adversely affected.
Low-grade securities frequently have call or redemption features which would
permit an issuer to repurchase the security from the Series. If a call were
exercised by the issuer during a period of declining interest rates, the
Series likely would have to replace such called security with a lower yielding
security, thus decreasing the net investment income to the Series and any
dividends to investors.
Besides credit and liquidity concerns, prices for low-grade securities may
be affected by legislative and regulatory developments. For example, from time
to time, Congress has considered legislation to restrict or eliminate the
corporate tax deduction for interest payments or to regulate corporate
restructurings such as takeovers or mergers. Such legislation may
significantly depress the prices of outstanding low-grade securities.
For a complete description of the rating systems of Moody's and S&P, see the
Appendix to the SAI.
FOREIGN SECURITIES AND CURRENCY CONSIDERATIONS (GLOBAL FUND, GLOBAL EQUITY
FUND, GLOBAL BOND FUND, U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL
CAPITALIZATION FUND, HIGH YIELD BOND FUND, GLOBAL (EX-U.S.) EQUITY FUND,
EMERGING MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND) -Investments in
securities of foreign issuers may involve greater risks than those of U.S.
issuers. There is generally less information available to the public about
non-U.S. companies and less government regulation and supervision of non-U.S.
stock exchanges, brokers and listed companies. Non-U.S. companies are not
subject to uniform global accounting, auditing and financial reporting
standards, practices and requirements. Securities of some non-U.S. companies
are less liquid and their prices more volatile than securities of comparable
U.S. companies. Securities trading practices abroad may offer less protection
to investors. Settlement of transactions in some non-U.S. markets may be
delayed or may be less frequent than in the United States, which could affect
the liquidity of the Series' portfolios. Additionally, in some non-U.S.
countries, there is the possibility of expropriation or confiscatory taxation,
limitations on the removal of securities, property or other assets of the
Series, political or social instability, or diplomatic developments which
could affect U.S. investments in those countries. The Series intend to
diversify broadly among countries, but reserve the right to invest a
substantial portion of their assets in one or more countries if economic and
business conditions warrant such investments. Brinson Partners will take these
factors into consideration in managing the Series' investments. Because the
Series will keep their books and records in U.S. dollars, the Series will be
required, for federal income tax purposes, to account for income and losses on
all transactions involving foreign currency under Section 988 of the Internal
Revenue Code of 1986, as amended, and the applicable U.S. Treasury
Regulations, so that generally any component of a gain or loss attributable to
currency fluctuations results in ordinary income or loss and not capital gain
or loss.
The U.S. dollar market value of the Series' investments and of dividends and
interest earned by the Series may be significantly affected by changes in
currency exchange rates. Some currency prices may be volatile, and there is
the possibility of governmental controls on currency exchange or governmental
intervention in currency markets, which could adversely affect the Series.
Although the Series may attempt to manage currency exchange rate risks, there
is no assurance that the Series will do so at an appropriate time or that they
will be able to
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<PAGE>
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.
On January 1, 1999, the European Monetary Union (the "EMU") plans to
introduce a new single currency, the Euro, which will replace the national
currencies of participating member nations. If the Series hold investments in
nations with currencies replaced by the Euro, the investment process,
including trading, foreign exchange, payments, settlements, cash accounts,
custody and accounting, will be impacted. Although it is not possible to
predict the impact of the Euro on the Series, the transition and the
elimination of currency risk among nations participating in the EMU may change
the economic environment and behavior of investors, particularly in European
markets.
The adoption of the Euro does not reduce the currency risk presented by
fluctuations in value of the U.S. dollar to other currencies and, in fact,
currency exchange risk may be magnified. Also, increased market volatility may
result. Additional risks that may result include the fact that European
issuers in which the Series invest may face substantial conversion costs,
which may not be accurately anticipated and may impact issuer profitability
and creditworthiness.
Brinson Partners has created an interdepartmental team to handle all Euro-
related changes to enable the Series to process transactions accurately and
completely with minimal disruption to business activities. While there can be
no assurance that the Series will not be adversely affected, Brinson Partners
and the Trust's service providers are taking steps that they believe are
reasonably designed to address the Euro issue.
EMERGING MARKETS SECURITIES (GLOBAL FUND, HIGH YIELD BOND FUND, EMERGING
MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND) - There are additional
risks inherent in investing in less developed countries which are applicable
to the Global Fund, the Emerging Markets Equity Fund and the Emerging Markets
Debt Fund. The Series consider a country to be an "emerging market" if it is
defined as an emerging or developing economy by any one of the following: the
International Bank for Reconstruction and Development (i.e., the World Bank),
the International Finance Corporation, or the United Nations or its
authorities. The Emerging Markets Equity Fund and Emerging Market Debt Fund
intend to invest primarily in securities of issuers located in at least three
emerging market countries which may be located in Asia, Europe, Latin America,
Africa or the Middle East. As these markets change and other countries'
markets develop, the Series expect the countries in which they invest to
change.
An emerging market security is a security issued by a government or other
issuer that, in the opinion of the Advisor, has one or more of the following
characteristics:
1. The principal trading market of the security is in an emerging market;
2. The primary revenue of the issuer (at least 50%) is generated from
goods produced or sold, investments made, or services performed in an
emerging market country; or
3. At least 50% of the assets of the issuer are situated in emerging
market countries.
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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.
These restrictions may take the form of prior governmental approval, limits
on the amount or type of securities held by foreigners, and limits on the
types of companies in which foreigners may invest. Additional restrictions may
be imposed at any time by these or other countries in which the Series invest.
In addition, the repatriation of both investment income and capital from
several foreign countries is restricted and controlled under certain
regulations, including, in some cases, the need for certain governmental
consents. Although these restrictions may in the future make it undesirable to
invest in emerging market countries, the Advisor does not believe that any
current repatriation restrictions would affect its decision to invest in such
countries. Countries such as those in which the Series may invest have
historically experienced and may continue to experience, high rates of
inflation, high interest rates, exchange rate fluctuations or currency
depreciation, large amounts of external debt, balance of payments and trade
difficulties and extreme poverty and unemployment. Additional factors which
may influence the ability or willingness to service debt include, but are not
limited to, a country's cash flow situation, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, its government's policy towards the
International Monetary Fund, the World Bank and other international agencies
and the political constraints to which a government debtor may be subject.
The ability of a foreign government or government-related issuer to make
timely and ultimate payments on its external debt obligations will be strongly
influenced by the issuer's balance of payments, including export performance,
its access to international credits and investments, fluctuations in interest
rates and the extent of its foreign reserves. A country whose exports are
concentrated in a few commodities or whose economy depends on certain
strategic imports could be vulnerable to fluctuations in international prices
of these commodities or imports. To the extent that a country receives payment
for its exports in currencies other than dollars, its ability to make debt
payments denominated in dollars could be adversely affected. If a foreign
government or government-related issuer cannot generate sufficient earnings
from foreign trade to service its external debt, it may need to depend on
continuing loans and aid from foreign governments, commercial banks, and
multilateral organizations, and inflows of foreign investment. The commitment
on the part of these foreign governments, multilateral organizations and
others to make such disbursements may be conditioned on the government's
implementation of economic reforms and/or economic performance and the timely
service of its obligations. Failure to implement such reforms, achieve such
levels of economic performance or repay principal or interest when due may
curtail the willingness of such third parties to lend funds, which may further
impair the issuer's ability or willingness to service its debts in a timely
manner. The cost of servicing external debt will also generally be adversely
affected by rising international interest rates, because many external debt
obligations bear interest at rates which are adjusted based upon international
interest rates. The ability to service external debt will also depend on the
level of the relevant government's international currency reserves and its
access to foreign exchange. Currency devaluations may affect the ability of a
government issuer to obtain sufficient foreign exchange to service its
external debt.
As a result of the foregoing, a governmental issuer may default on its
obligations. If such a default occurs, the Series may have limited effective
legal recourse against the issuer and/or guarantor. Remedies must, in some
cases, be pursued in the courts of the defaulting party itself, and the
ability of the holder of foreign government
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<PAGE>
and government-related debt securities to obtain recourse may be subject to
the political climate in the relevant country. In addition, no assurance can
be given that the holders of commercial bank debt will not contest payments to
the holders of other foreign government and government-related debt
obligations in the event of default under their commercial bank loan
agreements.
The issuers of the government and government-related debt securities in
which the Series expect to invest have in the past experienced substantial
difficulties in servicing their external debt obligations, which has led to
defaults on certain obligations and the restructuring of certain indebtedness.
Restructuring arrangements have included, among other things, reducing and
rescheduling interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and unpaid interest to
Brady Bonds (see Appendix A), and obtaining new credit to finance interest
payments. Holders of certain foreign government and government-related debt
securities may be requested to participate in the restructuring of such
securities and to extend further loans to the issuers of such securities.
There can be no assurance that the Brady Bonds and other foreign government
and government-related debt securities in which the Series may invest will not
be subject to similar defaults or restructuring arrangements which may
adversely affect the value of such investments. Furthermore, certain
participants in the secondary market for such debt securities may be directly
involved in negotiating the terms of these arrangements and may therefore have
access to information not available to other market participants.
Payments to holders of the high yield, high risk, foreign debt securities in
which the Series may invest may be subject to foreign withholding and other
taxes. Although the holders of foreign government and government-related debt
securities may be entitled to tax gross-up payments from the issuers of such
securities, there is no assurance that such payments will be made.
FOREIGN CURRENCY TRANSACTIONS (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND
FUND, U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL CAPITALIZATION FUND,
HIGH YIELD BOND FUND, GLOBAL (EX-U.S.) EQUITY FUND, EMERGING MARKETS EQUITY
FUND AND EMERGING MARKETS DEBT 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. However, the ability to
manage foreign exchange risk through the use of these strategies may be
limited in certain emerging markets because of a lack of appropriate financial
instruments. Some of these strategies may require the Series to set aside
liquid assets in a segregated custodial account to cover their obligations.
With respect to the Emerging Markets Equity Fund and the Emerging Markets
Debt Fund, the normal currency allocation is identical to the currency mix of
their respective Benchmarks. The Series expect to maintain this normal
currency exposure when, in the judgment of the Advisor, global currency
markets are fairly priced relative to each other and relative to the
associated risks. The Series may actively deviate from such normal currency
allocations to take advantage of, or to protect its portfolio from risk and
return characteristics of, the currencies and short-term interest rates when
those prices deviate significantly from fundamental value. Deviations from the
Series' Benchmarks are determined by the Advisor based upon its research.
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
25
<PAGE>
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),
options on foreign currencies and options on futures, 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. 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, U.S. LARGE CAPITALIZATION EQUITY
FUND, EMERGING MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND ONLY) - 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, U.S. Large Capitalization Equity
Fund, Emerging Markets Equity Fund or Emerging Markets Debt Fund, may be
subject to greater fluctuations in value than an investment in a diversified
fund.
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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 June 30, 1998, approximately $286 billion, primarily for
pension and profit sharing institutional accounts. 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 Bahrain, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne,
New York, Paris, Rio de Janeiro, Singapore, Sydney, Tokyo and Zurich in
addition to its principal office at 209 South LaSalle Street, Chicago, IL
60604-1295. Brinson Partners is a direct wholly-owned subsidiary of UBS A.G.
UBS A.G., with headquarters in Basel, Switzerland, is an internationally
diversified organization with operations in many aspects of the financial
services industry. UBS A.G. was formed by the merger of Union Bank of
Switzerland and Swiss Bank Corporation in June 1998.
Brinson Partners also serves as the investment advisor to nine other
investment companies: Brinson Relationship Funds, which includes seventeen
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 Annuity Series Trust - 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, 1998, 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. Large Capitalization Growth Fund/1/............................ 0.70
U.S. Small Capitalization Fund/1/................................... 1.00
U.S. Bond Fund...................................................... 0.50
High Yield Bond Fund/1/............................................. 0.60
Global (ex-U.S.) Equity Fund........................................ 0.80
Emerging Markets Equity Fund/1/..................................... 1.10
Emerging Markets Debt Fund/1/....................................... 0.65
</TABLE>
- ----------
/1/The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Fund,
High Yield Bond Fund, Emerging Markets Equity Fund and Emerging Markets Debt
Fund each commenced operations on December , 1998.
The fee payable to Brinson Partners by the Global, Global Equity, U.S. Small
Capitalization, Global (ex-U.S.) Equity, Emerging Markets Equity and Emerging
Markets Debt 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. Large
Capitalization Growth Fund--Class N, Brinson U.S. Small Capitalization Fund--
Class N, Brinson U.S. Bond Fund--Class N, Brinson High Yield Bond Fund--Class
N, Brinson Global (ex-U.S.) Equity Fund--Class N, Brinson Emerging Markets
Equity Fund--Class N and Brinson Emerging Markets Debt Fund--Class N will
never exceed 1.10%, 1.00%, 0.90%, 0.80%, 0.80%, 0.80%, 0.80%, 1.15%, 0.60%,
1.00%, 0.70%, 1.60% and 1.15%, 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.
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<PAGE>
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.
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.
Investors Bank & Trust Company ("Investors Bank"), 200 Clarendon Street,
Boston, Massachusetts 02116, serves as co-custodian for the U.S. Large
Capitalization Growth Fund, the U.S. Small Capitalization Fund and the High
Yield Bond Fund with respect to certain foreign securities until such
securities are transferred to MSTC. After such securities are transferred to
MSTC, MSTC will be the sole custodian for these Series under the terms of the
Services Agreement.
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 each 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 each 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
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<PAGE>
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.
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 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 0.025% 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 UBS A.G. Through its branches and subsidiaries, UBS A.G. conducts
securities research, provides investment advisory services and manages mutual
funds in major cities throughout the world, including Amsterdam, Basel,
Frankfurt, Geneva, Hong Kong, Houston, London, Los Angeles, Luxembourg, Miami,
Monte Carlo, New York, Paris, San Francisco, 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-
30
<PAGE>
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 I 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.
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
[ART] Application accompanying this to "Brinson________Fund-
Prospectus. Class N."
. Make your check payable to . Enclose the remittance
"Brinson________Fund-Class N." portion of your account
. Mail to the address indicated statement and include
on the Account Application. the amount of investment,
the account name and
number.
. Mail to the address
indicated on your account
statement or enclose
in the envelope provided.
BY WIRE . Call 1-800-448-2430 to . Wire federal funds to:
[ART] arrange for a wire THE CHASE MANHATTAN BANK
transaction. ABA#021000021
. Wire federal funds within 24 DDA#9102-783504
hours to: FOR: "BRINSON___________
THE CHASE MANHATTAN BANK FUND-CLASS N" AND INCLUDE
ABA#021000021 YOUR NAME AND ACCOUNT
DDA#9102-783504 NUMBER.
FOR: "BRINSON__________FUND-
CLASS N" AND INCLUDE YOUR NAME
AND 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
[ART] arrange for a telephone arrange for a telephone
transaction. transaction.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
INITIAL INVESTMENT SUBSEQUENT INVESTMENTS
------------------------------- -------------------------------
<S> <C> <C>
PURCHASING BY EXCHANGES . You may open a new account . You may purchase additional
[ART] 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 . from an existing Brinson Fund-
account of any other Series of Class . account of any other
the Trust. Exchanges may be Series of the Trust. Exchanges
made by mail or telephone. may be made by mail or
Call 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>
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 upon
request 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
. 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>
32
<PAGE>
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 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
purchases 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.
33
<PAGE>
SHARES MAY BE REDEEMED IN ONE OF THE FOLLOWING WAYS:
<TABLE>
<C> <S>
BY MAIL n Submit a written request for redemption with:
6
. The Fund's name;
. Your Fund account number;
. The dollar amount or number of shares to be
redeemed; and
. Signatures of all persons required to sign for
transactions, exactly as their names appear on
the Account Application.
n To protect your account from fraud, the Fund and
its agents may require a signature guarantee for
certain redemptions to verify the identity of
the person who has authorized a redemption from
your account. Please contact the Fund for
further information.
n Mail to the address indicated on the Account
Application. Questions may be directed to the
transfer agent at 1-800-448-2430.
BY WIRE n This service must be elected either on the
LOGO initial application or subsequently arranged in
writing.
n Shares may be redeemed by instructing the
transfer agent by telephone at 1-800-448-2430.
n Wire redemption requests must be received by the
transfer agent before 4:00 p.m. Eastern time for
money to be wired the next business day.
BY TELEPHONE 1-800-448- n This service must be elected either on the
2430 initial application or subsequently arranged in
= writing.
n Shares may be redeemed by instructing the
transfer agent by telephone at 1-800-448-2430.
n Shares will be sold at the next share price
calculated after the order is received and
accepted. Share price is normally calculated at
4:00 p.m. Eastern time.
AUTOMATICALLY n Please refer to "Systematic Withdrawal Plan"
under "Account Options" or call 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 UBS Investment Funds class shares or the
Brinson Fund-Class I shares of a Series of the Trust.
34
<PAGE>
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 I 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 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
35
<PAGE>
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 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
36
<PAGE>
value of shares of such class, except that the Brinson Fund-Class N and UBS
Investment Funds class of 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 UBS Investment Funds class of 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 UBS Investment Funds class of
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 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.
UBS A.G., 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' UBS Investment Fund's class of shares 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
37
<PAGE>
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 UBS Investment Funds class of
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 UBS Investment Funds class of
shares are subject to separate 12b-1 fees. The per share dividends on UBS
Investment Funds class of 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 UBS Investment Funds class of 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 a Series at net asset value,
unless the shareholder has notified the transfer agent, in writing, of the
shareholder's election to receive them in cash. Distribution options may be
changed at any time by requesting a change in writing. Any check in payment of
dividends or other distributions which cannot be delivered by the Post Office
or which remains uncashed for a period of more than one year may be reinvested
in the shareholder's account at the then current net asset value and the
dividend option may be changed from cash to reinvest. Dividends are reinvested
on the ex dividend date (the "ex date") at the net asset value determined at
the close of business on that date. Please note that shares purchased shortly
before the record date for a dividend or distribution may have the effect of
returning capital although such dividends and distributions are subject to
taxes.
TAXES
Each Series has qualified, and intends to continue to qualify, for taxation
as a "regulated investment company" under the Internal Revenue Code of 1986,
as amended ("the Code"). Such qualification relieves a Series of liability for
federal income taxes to the extent the Series' earnings are distributed in
accordance with the Code. Each Series is treated as a separate corporate
entity for federal tax purposes.
Distributions of any net investment income and of any net realized short-
term capital gains are taxable to shareholders as ordinary income. All
distributions may be subject to state and local taxes.
Distributions of net capital gain (the excess of net long-term capital gain
over net short-term capital loss) are taxable to shareholders as long-term
capital gain regardless of how long a shareholder may have held shares of a
Series. The tax treatment of distributions of ordinary income or capital gains
will be the same whether the shareholder reinvests the distributions or elects
to receive them in cash. A distribution will be treated as paid on December 31
of the current calendar year if it is declared in October, November or
December with a record date in such a month and paid during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Shareholders will be advised annually of the source and tax status of all
distributions for federal income tax purposes. Further information regarding
the tax consequences of investing in the Series is included in the Statement
of Additional Information. The above discussion is intended for general
information only. Investors should consult their own tax advisors for more
specific information on the tax consequences of particular types of
distributions.
38
<PAGE>
Redemptions of Series shares, and the exchange of shares between two Series
of the Trust, are taxable events and, accordingly, shareholders may realize
capital gains or losses on these transactions.
Shareholders may be subject to back-up withholding on reportable dividend
and redemption payments ("back-up withholding") if a certified taxpayer
identification number is not on file with the Series, or if, to the Series'
knowledge, an incorrect number has been furnished, or if the Series has been
notified by the Internal Revenue Service that an account is subject to back-up
withholding. An individual's taxpayer identification number is the
individual's social security number.
If more than 50% of a Series' total assets at the close of its taxable year
consists of stock or securities in foreign corporations, the Series may elect
to "pass-through" to shareholders for foreign tax credit purposes the amount
of foreign income taxes paid by the Series with respect to its direct holdings
of securities in foreign corporations. A Series will make such an election
only if it deems such election to be in the best interests of its
shareholders. If this election is made, shareholders of the Series will be
required to include in their gross incomes their pro rata 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. A Series which makes investments in the
securities of foreign corporations may make investments in foreign companies
that are "passive foreign investment companies" ("PFICs"). These investments
in PFICs may cause a Series to pay income taxes and interest charges. If
possible, the Series will not invest in PFICs or will adopt other strategies
to avoid these taxes and charges.
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 thirteen 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, U.S. Large
Capitalization Equity Fund, Emerging Markets Equity Fund and Emerging Markets
Debt 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 UBS Investment Funds 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 thirteen 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. Large
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Capitalization Growth Fund, U.S. Small Capitalization Fund, U.S. Bond Fund,
High Yield Bond Fund, Global (ex-U.S.) Equity Fund, Emerging Markets Debt Fund
and Emerging Markets 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 UBS Investment Funds classes. Prior to September 15, 1998, the "UBS
Investment Funds class" was known as the "SwissKey Class" of shares.
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 Rule 12b-
1 plan associated with that class and only the UBS Investment Funds class
shareholders may vote on matters related to the Rule 12b-1 plan associated
with that class.
As of August 18, 1998, Emjayco held of record more than 25% of the
outstanding shares of the Global Fund; Brinson Partners, Inc. held of record
more than 25% of the outstanding shares of the Global Equity Fund; Emjayco
held of record more than 25% of the outstanding shares of the Global Bond
Fund; Brinson Partners, Inc. held of record more than 25% of the outstanding
shares of the U.S. Balanced Fund; Merrill Lynch Trust Co. held of record more
than 25% of the outstanding shares of the U.S. Equity Fund; National Financial
Services Corporation held of record more than 25% of the outstanding shares of
the U.S. Large Capitalization Equity Fund; Brinson Partners, Inc. held of
record more than 25% of the outstanding shares of the U.S. Bond Fund; Emjayco
held of record more than 25% of the outstanding shares of the Global (ex-U.S.)
Equity Fund. A shareholder that holds such a percentage of the outstanding
shares of a class may be deemed a controlling person of that class under the
1940 Act.
SHAREHOLDER MEETINGS
The Trustees of the Trust do not intend to hold annual meetings of
shareholders of the Series. The SEC, 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, U.S.
SMALL CAPITALIZATION FUND, U.S. BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT FUND)
As a result of the investment policies of the Global Fund, Global Bond Fund,
U.S. Balanced Fund, U.S. Small Capitalization Fund, U.S. Bond Fund, Emerging
Markets Equity Fund and Emerging Markets Debt 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.
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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.
YEAR 2000 ISSUES
Like other investment companies, as well as other financial and business
organizations around the world, the Trust could be adversely affected if the
computer systems used by the Advisor, MSTC, CGFSC and other service providers,
in performing their administrative functions for the Trust, do not properly
process and calculate date-related information and data as of and after
January 1, 2000. This is commonly known as the "Year 2000 Issue." The Year
2000 Issue, and, in particular, foreign service providers' responsiveness to
the issue, could affect portfolio and operational areas including securities
trade processing, interest and dividend payments, securities pricing,
shareholder account services, custody functions and others. The Advisor, MSTC
and CGFSC are taking steps that they believe are reasonably designed to
address the Year 2000 Issue with respect to computer systems that they use and
to obtain reasonable assurances that comparable steps are being taken by the
Trust's other service providers. These include identifying those systems that
may not function properly after December 31, 1999, and correcting or replacing
those systems. In addition, steps include testing the processing of Series
data on all systems relied on by the Advisor, MSTC and CGFSC. As of the date
of this Prospectus, however, there can be no assurance that these steps will
be sufficient to avoid any adverse impact to the Series.
PERFORMANCE INFORMATION
From time to time, performance information, such as yield or total return,
may be quoted in advertisements or in communications to present or prospective
shareholders. Performance quotations represent the Funds' past performance and
should not be considered as representative of future results. The current
yield will be calculated by dividing the net investment income earned per
share by a Fund during the period stated in the advertisement (based on the
average daily number of shares entitled to receive dividends outstanding
during the period) by the
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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; Lehman Brothers 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. Except as noted, further information about the performance of
the Funds is included in the Funds' Annual Report dated June 30, 1998, which
may be obtained without charge by contacting the Trust at 1-800-448-2430. The
performance of the Predecessor Funds is included in the UBS Private Investor
Funds, Inc. Annual Report dated December 31, 1997 and Semi-Annual report dated
June 30, 1998, each of which may be obtained without charge by contacting the
Trust at 1-800-448-2430. The performance of the Brinson Emerging Markets
Equity Fund and the Emerging Markets Debt Fund commenced after June 30, 1998
and therefor are not included in the Funds' 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, U.S. LARGE CAPITALIZATION
GROWTH FUND, U.S. SMALL CAPITALIZATION FUND, GLOBAL (EX-U.S.) EQUITY FUND AND
EMERGING MARKETS 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, except for
the U.S. Small Capitalization Fund, expect their U.S. equity investments to
emphasize large and intermediate capitalization companies. The U.S. Small
Capitalization Fund expects its U.S. equity investments to emphasize small
capitalization companies. The Global Fund, U.S. Small Capitalization Fund and
Emerging Markets Equity 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 and Emerging Markets Equity 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 (and Emerging Markets Equity
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,
U.S. BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT 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 (except
for the High Yield Bond Fund, Emerging Markets Equity Fund and the Emerging
Markets Debt Fund) 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 (except for the
High Yield Bond Fund, Emerging Markets Equity Fund and Emerging Markets Debt
Fund) 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. The High Yield Bond Fund may
invest up to 10% of its assets in securities rated below Caa by Moody's or CCC
by S&P. The Emerging Markets Equity Fund may invest up to 35% of its assets
and the Emerging Markets Debt Fund may invest substantially all of its assets
in fixed income
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securities rated below investment grade. Except for the High Yield Bond Fund,
Emerging Markets Equity Fund and Emerging Markets Debt Fund, to the extent
that a security held by a Series is downgraded to below investment grade, the
Series will dispose of that or another non-investment grade security so that
no more than 5% of its assets will be invested in below investment grade
securities. Other fixed income securities in which the Series may invest
include zero coupon securities, mortgage-backed securities, asset-backed
securities and when-issued securities.
The non-U.S. fixed income component of the Series will typically be invested
in the securities of non-U.S. governments, governmental agencies and
supranational issues. A supranational entity is an entity established or
financially supported by the national governments of one or more countries to
promote reconstruction or development. Examples of supranational entities
include, among others: the World Bank, the European Economic Community, the
European Coal and Steel Community, the European Investment Bank, the Inter-
American Development Bank, the Export-Import Bank and the Asian Development
Bank.
The Global Fund, Emerging Markets Equity Fund and Emerging Markets Debt 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.
Under the terms of an exemptive order issued by the SEC, each Series may
invest cash (i) held for temporary defensive purposes; (ii) not invested
pending investment in securities; (iii) that is set aside to cover an
obligation or commitment of the Series to purchase securities or other assets
at a later date; (iv) to be invested on a strategic management basis (i-iv is
herein referred to as "Uninvested Cash"); and (v) collateral that it receives
from the borrowers of its portfolio securities in connection with the Series'
securities lending program, in a series of shares of Brinson Supplementary
Trust (the "Supplementary Trust Series"). Brinson Supplementary Trust is a
private investment company which has retained the Advisor to manage its
investments. The Trustees of the Trust also serve as Trustees of the Brinson
Supplementary Trust. The Supplementary Trust Series will invest in U.S. dollar
denominated money market instruments having a dollar-weighted average maturity
of 90 days or less. A Series' investment of Uninvested Cash in shares of the
Supplementary Trust Series will not exceed 25% of the Series' total assets. In
the event that the Advisor waives 100% of its investment advisory fee with
respect to a Series, as calculated monthly, then that Series will be unable to
invest in the Supplementary Trust Series until additional investment advisory
fees are owed by the Series.
ZERO COUPON SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND,
U.S. BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT 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
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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, U.S. BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY
FUND AND EMERGING MARKETS DEBT FUND): Mortgage-backed securities represent
direct or indirect participations in, or are secured by and payable from,
pools of mortgage loans secured by real property, and include single- and
multi-class pass-through securities and collateralized mortgage obligations.
These securities may be issued or guaranteed by agencies or instrumentalities
of the U.S. government. Other mortgage-backed securities are issued by private
issuers, generally originators of and investors in mortgage loans, including
savings associations, mortgage bankers, commercial banks, investment bankers
and special purpose entities (collectively, "private lenders"). Mortgage-
backed securities issued by private lenders may be supported by pools of
mortgage loans or other mortgage-backed securities that are guaranteed,
directly or indirectly, by the U.S. government or one of its agencies or
instrumentalities, or they may be issued without any governmental guarantee of
the underlying mortgage assets but with some form of non-governmental credit
enhancement.
Asset-backed securities have structural characteristics similar to mortgage-
backed securities. However, the underlying assets are not first-lien mortgage
loans or interests therein; rather, they include assets such as motor vehicle
installment sales contracts, other installment loan contracts, home equity
loans, leases of various types of property and receivables from credit card or
other revolving credit arrangements. Payments or distributions of principal
and interest on asset-backed securities may be supported by non-governmental
credit enhancements similar to those utilized in connection with mortgage-
backed securities.
The yield characteristics of mortgage- and asset-backed securities differ
from those of traditional debt obligations. Among the principal differences
are that interest and principal payments are made more frequently on mortgage-
and asset-backed securities, usually monthly, and that principal may be
prepaid at any time because the underlying mortgage loans or other assets
generally may be prepaid at any time. As a result, the rate of return on these
securities may be affected by prepayments of principal on the underlying
loans, which generally increase as interest rates decline. As a result, if a
Series purchases these securities at a premium, a prepayment rate that is
faster than expected will reduce yield to maturity, while a prepayment rate
that is slower than expected will have the opposite effect of increasing yield
to maturity. Conversely, if a Series purchases these securities at a discount,
a prepayment rate that is faster than expected will increase 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,
U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL CAPITALIZATION FUND, U.S.
BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND EMERGING
MARKETS DEBT 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
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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 accordance with SEC positions. 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"), and such Segregated Assets shall be
maintained in accordance with pertinent SEC positions.
FOREIGN CURRENCY TRANSACTIONS (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND
FUND, U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL CAPITALIZATION FUND,
GLOBAL (EX-U.S.) EQUITY FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY
FUND AND EMERGING MARKETS DEBT 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 (except for the U.S. Large Capitalization Growth Fund,
the U.S. Small Capitalization Fund and the High Yield Bond Fund). 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 in accordance with SEC positions.
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,
U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL CAPITALIZATION FUND, GLOBAL
(EX-U.S.) EQUITY FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT 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 accordance with SEC positions.
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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
U.S. Large Capitalization Growth Fund, the U.S. Small Capitalization Fund, the
Global (ex-U.S.) Equity Fund, the High Yield Bond Fund, the Emerging Markets
Equity Fund and the Emerging Markets Debt 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, the U.S. Large
Capitalization Growth Fund, the U.S. Small Capitalization Fund, the Global
(ex-U.S.) Equity Fund, the High Yield Bond Fund, the Emerging Markets Equity
Fund and the Emerging Markets Debt 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.
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.
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<PAGE>
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.
SHORT SALES (U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL
CAPITALIZATION FUND AND HIGH YIELD BOND FUND): In the event that the Advisor
anticipates that the price of a security will decline, it may sell the
security short and borrow the same security from a broker or other institution
to complete the sale. The Series will only enter into short sales for hedging
purposes. The Series will incur a profit or a loss, depending upon whether the
market price of the security decreases or increases between the date of the
short sale and the date on which the Series must replace the borrowed
security. All short sales will be fully collateralized and the Series will not
sell securities short if immediately after and as a result of the short sale,
the value of all securities sold short by any Series exceeds 25% of its total
assets. Each Series will also limit short sales of any one issuer's securities
to 2% of its total assets and to 2% of any one class of the issuer's
securities.
PAY-IN-KIND BONDS (HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT FUND): The Series may invest in pay-in-kind bonds. Pay-
in-kind bonds are securities which pay interest through the issuance of
additional bonds. The Series will be deemed to receive interest over the life
of such bonds and may be treated for federal income tax purposes as if
interest were paid on a current basis, although no cash interest payments are
received by the Series until the cash payment date or until the bonds mature.
CONVERTIBLE SECURITIES (HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND
AND EMERGING MARKETS DEBT FUND): The Series may invest in convertible
securities which generally offer lower interest or dividend yields than
nonconvertible debt securities of similar quality. The value of convertible
securities may reflect changes in the value of the underlying common stock.
Convertible securities entail less credit risk than the issuer's common stock
because they rank senior to common stock.
EURODOLLAR SECURITIES (GLOBAL BOND FUND, HIGH YIELD BOND FUND, EMERGING
MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND): The Series may invest in
Eurodollar securities, which are fixed income securities of a U.S. issuer or a
foreign issuer that are issued outside the United States. Interest and
dividends on Eurodollar securities are payable in U.S. dollars.
BRADY BONDS (HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND EMERGING
MARKETS DEBT FUND): The Series may invest in Brady Bonds, which are securities
created through the exchange of existing commercial bank loans to public and
private entities in certain emerging markets for new bonds in connection with
debt restructurings under a debt restructuring plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan
debt restructurings have been implemented to date in Argentina, Bulgaria,
Brazil, Costa Rica, Jordan, Mexico, Nigeria, the Philippines, Poland, Uruguay,
Panama, Peru and Venezuela. Brady Bonds have been issued only during recent
years, and for that reason do not have a very long payment history. Brady
Bonds may be collateralized or uncollateralized, are issued in various
currencies (but primarily the U.S. dollar), and are actively traded in over-
the-counter secondary markets. Dollar-denominated, collateralized Brady Bonds,
which may be fixed-rate bonds or floating-rate bonds, are generally
collateralized in full as to principal by U.S. Treasury zero coupon bonds
having the same maturity as the bonds.
Brady Bonds are often viewed as having three or four valuation components:
the collateralized repayment of principal at final maturity; the
collateralized interest payments; the uncollateralized interest payments; and
any uncollateralized repayment of principal at maturity (these
uncollateralized amounts constitute the "residual
48
<PAGE>
risk"). In light of the residual risk of Brady Bonds and the history of
defaults of countries issuing Brady Bonds with respect to commercial bank
loans by public and private entities, investments in Brady Bonds may be viewed
as speculative. There can be no assurance that the Brady Bonds in which the
Series invest will not be subject to restructuring arrangements or to requests
for a new credit which may cause the Series to suffer a loss of interest or
principal in any of their holdings.
STRUCTURED SECURITIES (HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND
AND EMERGING MARKETS DEBT FUND): The Series may invest a portion of their
assets in entities organized and operated solely for the purpose of
restructuring the investment characteristics of sovereign debt obligations.
This type of restructuring involves the deposit with, or purchase by, an
entity, such as a corporation or trust, of specified instruments (such as
commercial bank loans or Brady Bonds) and the issuance by that entity of one
or more classes of securities ("Structured Securities") backed by, or
representing interests in, the underlying instruments. The cash flow of the
underlying instruments may be apportioned among the newly issued Structured
Securities to create securities with different investment characteristics,
such as varying maturities, payment priorities and interest rate provisions,
and the extent of the payments made with respect to Structured Securities is
dependent on the extent of the cash flow on the underlying instruments.
Because Structured Securities of the type in which the Series anticipates
investing typically involve no credit enhancement, their credit risk generally
will be equivalent to that of the underlying instruments. The Series is
permitted to invest in a class of Structured Securities that is either
subordinated or unsubordinated to the right of payment of another class.
Subordinated Structured Securities typically have higher yields and present
greater risks than unsubordinated Structured Securities. Structured Securities
are typically sold in private placement transactions, and there currently is
no active trading market for Structured Securities. Thus, investments by a
Series in Structured Securities will be limited by the Series' prohibition on
investing more than 15% of its net assets in illiquid securities.
LOAN PARTICIPATIONS AND ASSIGNMENTS (HIGH YIELD BOND FUND, EMERGING MARKETS
EQUITY FUND AND EMERGING MARKETS DEBT FUND): The Series may invest in fixed
rate and floating rate loans ("Loans") arranged through private negotiations
between an issuer of debt obligations and one or more financial institutions
("Lenders"). The Series' investments in Loans are expected in most instances
to be in the form of participations in loans ("Participations") or assignments
of all or a portion of Loans ("Assignments") from third parties.
The Series will have the right to receive payments of principal, interest
and any fees to which they are entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
borrower. In the event of the insolvency of the Lender selling a
Participation, the Series may be treated as general creditors of the Lender
and may not benefit from any set-off between the Lender and the borrower.
Certain Participations may be structured in a manner designed to avoid
purchasers of Participations being subject to the credit risk of the Lender
with respect to the Participation. Even under such a structure, in the event
of the Lender's insolvency, the Lender's servicing of the Participation may be
delayed and the assignability of the Participation may be impaired. The Series
will acquire Participations only if the Lender interpositioned between the
Series and the borrower is determined by the Advisor to be creditworthy. When
a Series purchases Assignments from Lenders, it will acquire direct rights
against the borrower on the Loan. However, because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, the rights and obligations acquired by the Series as the purchaser
of an Assignment may differ from, and be more limited than, those held by the
assigning Lender.
Because there may be no liquid market for Participations and Assignments,
the Series anticipate that such securities could be sold only to a limited
number of institutional investors. The lack of a liquid secondary market may
have an adverse impact on the value of such securities and the Series' ability
to dispose of particular Assignments or Participations when necessary to meet
the Series' liquidity needs or in response to a specific
49
<PAGE>
economic event such as a deterioration in the creditworthiness of the borrower
or the Lender. The lack of a liquid secondary market for Assignments and
Participation also may make it more difficult for the Series to assign a value
to these securities for purposes of valuing the Series' portfolios and
calculating their net asset values. To the extent that a Series cannot dispose
of a Participation or Assignment in the ordinary course of business within
seven days at approximately the value at which it has valued the Loan
Participation or Assignment, it will treat the Participation or Assignment as
illiquid and subject to its overall limit on illiquid investments of 15% of
its net assets.
SWAPS (EMERGING MARKETS EQUITY FUND): The Series may engage in swaps,
including but not limited to interest rate, currency and index swaps and the
purchase or sale of related caps, floors and collars and other derivative
instruments. The Series expects to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a technique for
managing the portfolio's duration (i.e., the price sensitivity to changes in
interest rates), to protect against any increase in the price of securities
the Series anticipates purchasing at a later date or to gain exposure to
certain markets.
Interest rate swaps involve the exchange by the Series with another party of
their respective commitments to receive or pay interest (e.g., an exchange of
fixed rate payments for floating rate payments) with respect to a notional
amount of principal. Currency swaps involve the exchange of cash flows on a
notional amount based on changes in the values of referenced currencies.
The purchase of a cap entitles the purchaser to receive payments on a
notional principal amount from the party selling the cap to the extent that a
specified index exceeds a predetermined interest rate or amount. The purchase
of an interest rate floor entitles the purchaser to receive payments on a
notional principal amount from the party selling the floor to the extent that
a specified index falls below a predetermined interest rate or amount. A
collar is a combination of a cap and a floor that preserves a certain return
within a predetermined range of interest rates or values.
The use of swaps involves investment techniques and risks different from
those associated with ordinary portfolio security transactions. If the Advisor
is incorrect in its forecasts of market values, interest rates or other
applicable factors, the investment performance of the Series will be less
favorable than it would have been if this investment technique were not used.
Swaps do not involve the delivery of securities or other underlying assets or
principal. Thus, if the other party to a swap defaults, the Series' risk of
loss consists of the net amount of payments that the Series is contractually
entitled to receive. Under Internal Revenue Service rules, any lump sum
payment received or due under the notional principal contract must be
amortized over the life of the contract using the appropriate methodology
prescribed by the Internal Revenue Service.
The equity swaps in which the Series intends to invest involve agreements
with a counterparty. The return to the Series on any equity swap contract will
be the total return on the notional amount of the contract as if it were
invested in the stocks comprising the contract index in exchange for an
interest component based on the notional amount of the agreement. The Series
will only enter into an equity swap contract on a net basis, i.e., the two
parties' obligations are netted out, with the Series paying or receiving, as
the case may be, only the net amount of the payments. Payments under the
equity swap contracts may be made at the conclusion of the contract or
periodically during its term.
If there is a default by the counterparty to a swap contract, the Series
will be limited to contractual remedies pursuant to the agreements related to
the transaction. There is no assurance that a swap contract counterparty will
be able to meet its obligations pursuant to a swap contract or that, in the
event of default, the Series will
50
<PAGE>
succeed in pursuing contractual remedies. The Series thus assumes the risk
that it may be delayed in or prevented from obtaining payments owed to it
pursuant to a swap contract. However, the amount at risk is only the net
unrealized gain, if any, on the swap, not the entire notional amount. The
Advisor will closely monitor, subject to the oversight of the Board, the
creditworthiness of swap counterparties in order to minimize the risk of
swaps.
The Advisor and the Trust do not believe that the Series' obligations under
swap contracts are senior securities and, accordingly, the Series will not
treat them as being subject to its borrowing or senior securities
restrictions. However, the net amount of the excess, if any, of the Series'
obligations over its entitlements with respect to each swap contract will be
accrued on a daily basis and an amount of cash, U.S. government securities or
other liquid assets having an aggregate market value at least equal to the
accrued excess will be segregated in accordance with SEC positions. To the
extent that the Series cannot dispose of a swap in the ordinary course of
business within seven days at approximately the value at which the Series has
valued the swap, it will treat the swap as illiquid and subject to its overall
limit on illiquid investments of 15% of the Series' total net assets.
INVESTMENT COMPANY SECURITIES (GLOBAL FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT FUND): The Trust has received an exemptive order (the
"Exemptive Order") from the SEC 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, EMERGING MARKETS EQUITY FUND AND EMERGING
MARKETS DEBT 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 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
51
<PAGE>
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.
52
<PAGE>
-----------------------
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. Large
Capitalization Growth Fund
Brinson U.S. Small
Capitalization Fund
Brinson U.S. Bond Fund
Brinson High Yield Bond Fund
Brinson Global (ex - U.S.)
Equity Fund
Brinson Emerging Markets
Equity Fund
Brinson Emerging Markets
Debt Fund
Prospectus
December __, 1998
[LOGO]
Institutional
Asset Management
-----------------
The Brinson Funds
- --------------------------------------------------------
209 South LaSalle Street . Chicago, Illinois 60604-1295
Tel: 1-800-448-2430
<PAGE>
[LOGO OF UBS INVESTMENT FUNDS]
209 South LaSalle Street
Chicago, IL 60604-1295
PROSPECTUS
DECEMBER __, 1998
This Prospectus describes the UBS Investment Funds class of shares of the
investment portfolios offered by The Brinson Funds (the "Trust"). The Trust is a
no-load, open-end management investment company advised by Brinson Partners,
Inc. ("Brinson Partners" or the "Advisor"), which currently offers thirteen
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. Large Capitalization Growth Fund, U.S. Small Capitalization Fund,
U.S. Bond Fund, High Yield Bond Fund, Global (ex-U.S.) Equity Fund, Emerging
Markets Equity Fund and Emerging Markets Debt Fund (each a "Series" and
collectively, the "Series"). Each Series offers three separate classes of
shares--UBS Investment Funds class of shares, the Brinson Fund-Class I, and the
Brinson Fund-Class N. The UBS Investment Funds class of shares of the Series are
referred to as the: UBS Investment Fund--Global, UBS Investment Fund--Global
Equity, UBS Investment Fund--Global Bond, UBS Investment Fund--U.S.Balanced, UBS
Investment Fund--U.S. Equity, UBS Investment Fund--U.S. Large Capitalization
Equity, UBS Investment Fund--U.S. Large Capitalization Growth, UBS Investment
Fund--U.S. Small Capitalization, UBS Investment Fund--U.S. Bond, UBS Investment
Fund--High Yield Bond, UBS Investment Fund--Global (ex-U.S.) Equity, UBS
Investment Fund--Emerging Markets Equity and UBS Investment Fund--Emerging
Markets Debt (each a "Fund" and collectively, the "UBS Investment Funds" or
"Funds"). This Prospectus pertains only to the UBS Investment Funds class of
shares, which do not have a sales load, but are subject to annual 12b-1 plan
expenses. The Brinson Fund--Class N shares 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 Rule 12b-1 plan expenses. Further information relating
to the Brinson Fund-Class N shares and the Brinson Fund-Class I shares of the
Trust may be obtained by calling 1-800-794-7753.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the UBS Investment Funds class of 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 December __, 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 1-800-794-7753
1-800-794-7753
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Annual Fund Operating Expenses............................................. 3
Financial Highlights....................................................... 5
Prior Performance of the Advisor........................................... 9
Description of the Funds................................................... 15
Investment Objectives and Policies......................................... 15
Global Fund.............................................................. 15
Global Equity Fund....................................................... 16
Global Bond Fund......................................................... 16
U.S. Balanced Fund....................................................... 17
U.S. Equity Fund......................................................... 17
U.S. Large Capitalization Equity Fund.................................... 18
U.S. Large Capitalization Growth Fund.................................... 18
U.S. Small Capitalization Fund........................................... 18
U.S. Bond Fund........................................................... 19
High Yield Bond Fund..................................................... 20
Global (ex-U.S.) Equity Fund............................................. 20
Emerging Markets Equity Fund............................................. 21
Emerging Markets Debt Fund............................................... 21
Investment Considerations and Risks........................................ 21
Management of the Trust.................................................... 28
Portfolio Management....................................................... 29
Administration of the Trust................................................ 29
Purchase of Shares......................................................... 31
Account Options............................................................ 33
Redemption of Shares....................................................... 34
Net Asset Value............................................................ 37
Dividends, Distributions and Taxes......................................... 39
General Information........................................................ 40
Performance Information.................................................... 43
Appendix A................................................................. 44
</TABLE>
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUNDS TO MAKE
SUCH AN OFFER OR SOLICITATION. NO SALES REPRESENTATIVE, DEALER, OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS.
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL FUND
12B-1 OTHER OPERATING EXPENSES
EXPENSES/2/ EXPENSES (AFTER FEE WAIVER
MANAGEMENT FEES (AFTER FEE (AFTER AND/OR EXPENSE TRANSACTION
UBS INVESTMENT FUNDS (AFTER FEE WAIVER)/1/ WAIVER) REIMBURSEMENT)/1/ REIMBURSEMENT)/1/CHARGES/3/
- -------------------- --------------------- ----------- ------------------ ------------------ -----------
<S> <C> <C> <C> <C> <C>
Global Fund............. 0.80% 0.65% 0.14% 1.59% 0.00%
Global Equity Fund...... 0.78% 0.76% 0.22% 1.76% 0.00%
Global Bond Fund........ 0.69% 0.49% 0.21% 1.39% 0.00%
U.S. Balanced Fund...... 0.69% 0.50% 0.11% 1.30% 0.00%
U.S. Equity Fund........ 0.70% 0.52% 0.10% 1.32% 0.00%
U.S. Large
Capitalization Equity
Fund................... 0.00% 0.52% 0.80% 1.32% 0.00%
U.S. Large
Capitalization Growth
Fund................... 0.70% 0.77% 0.10% 1.57% 0.00%
U.S. Small
Capitalization Fund.... 1.00% 0.77% 0.15% 1.92% 0.00%
U.S. Bond Fund.......... 0.26% 0.47% 0.34% 1.07% 0.00%
High Yield Bond Fund.... 0.60% 0.85% 0.10% 1.55% 0.00%
Global (ex-U.S.) Equity
Fund................... 0.80% 0.84% 0.20% 1.84% 0.00%
Emerging Markets Equity
Fund................... 1.10% 0.85% 0.50% 2.45% 1.50%
Emerging Markets Debt
Fund................... 0.65% 0.75% 0.50% 1.90% 0.50%
</TABLE>
- ----------
/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. Large Capitalization
Growth Fund, U.S. Small Capitalization Fund, U.S. Bond Fund, High Yield Bond
Fund, Global (ex-U.S.) Equity Fund, Emerging Markets Equity Fund and
Emerging Markets Debt Fund: 0.80%, 0.80%, 0.75%, 0.70%, 0.70%, 0.70%, 0.70%,
1.00%, 0.50%, 0.60%, 0.80%, 1.10% and 0.65%, respectively. The Advisor 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
Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S.
Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large
Capitalization Growth Fund, U.S. Small Capitalization Fund, U.S. Bond Fund,
High Yield Bond Fund, Global (ex-U.S.) Equity Fund, Emerging Markets Equity
Fund and Emerging Market Debt Fund will never exceed 1.10%, 1.00%, 0.90%,
0.80%, 0.80%, 0.80%, 0.80%, 1.15%, 0.60%, 0.70%, 1.00%, 1.60%, and 1.15%,
respectively. Absent these fee waivers and expense reimbursements, the total
operating expenses for the UBS Investment Funds class of shares of the
Series for the fiscal year ended June 30, 1998 would have been 1.78% Global
Equity Fund, 1.45% Global Bond Fund, 1.31% U.S. Balanced Fund, 2.11% U.S.
Large Capitalization Equity Fund and 1.31% U.S. Bond Fund. The fees and
expenses for the U.S. Large Capitalization Equity Fund are based on the
period from April 6, 1998 (commencement of operations) to June 30, 1998. The
fees and expenses of the U.S. Large Capitalization Growth Fund, the U.S.
Small Capitalization Fund, the High Yield Bond Fund, the Emerging Markets
Equity Fund and the Emerging Markets Debt Fund are based on estimates.
/2/ For purposes of this Table, "12b-1 Expenses" is comprised of an asset-based
sales charge of up to 0.65% of average daily net assets and a service fee of
0.25% of average daily net assets for the UBS Investment Funds
3
<PAGE>
class of shares of each Series. See "Distribution Plan". Although the
Distribution Plan relating to the UBS Investment Funds (the "Plan") provides
that the Trust may pay up to an annual rate of 0.65% of the average daily net
assets of the UBS Investment Funds class of shares, plus a 0.25% service fee
for each UBS Investment Fund ("distribution fees"), the Trust and the
Underwriter have agreed to limit aggregate distribution fees with respect to
the UBS Investment Funds class of shares so as not to exceed 0.65%, 0.76%,
0.49%, 0.50%, 0.52%, 0.52%, 0.77%, 0.77%, 0.47%, 0.85%, 0.84%, 0.85% and
0.75% of the average daily net assets 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. Large Capitalization Growth Fund, U.S. Small
Capitalization Fund, U.S. Bond Fund, High Yield Bond Fund, Global (ex-U.S.)
Equity Fund, Emerging Markets Equity Fund and Emerging Markets Debt Fund,
respectively.
/3/ Shareholders of the Emerging Markets Equity Fund are subject to a 1.50%
transaction charge in connection with each purchase and redemption of
shares of the Series. Shareholders of the Emerging Markets Debt Fund are
subject to a 0.50% transaction charge in connection with each purchase of
shares of the Series. Shares of each Series are sold at a price which is
equal to the net asset value of such shares, plus the transaction charge.
Redemption requests for the Emerging Markets Equity Fund are paid at the
net asset value less the transaction charge. The transaction charges do not
apply to the reinvestment of dividends or capital gain distributions.
The transaction charges are paid to the Series and used by them to defray
transaction costs associated with the purchase and sale of securities
within the Series. The amount of the transaction charge on purchases and
redemptions represents the estimate of the costs reasonably anticipated to
be associated with the purchase of securities with cash received from
shareholders and the sale of securities to obtain cash to redeem
shareholders. Therefore, the transaction charges offset the dilutive effect
such costs would otherwise have on the net asset value of the Series'
shares. Purchases and redemptions which are made in kind with securities
are not subject to the transaction charges.
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 UBS Investment Funds class of shares may pay more than the
economic equivalent of the maximum front-end sales charges permitted by the
NASD. This amount also includes service fees.
EXAMPLE: Based on the level of expenses listed above after fee waivers or
expense 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>
UBS INVESTMENT FUNDS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Global Fund..................................... $16 $50 $ 87 $189
Global Equity Fund.............................. $18 $55 $ 95 $207
Global Bond Fund................................ $14 $44 $ 76 $167
U.S. Balanced Fund.............................. $13 $41 $ 71 $157
U.S. Equity Fund................................ $13 $42 $ 72 $159
U.S. Large Capitalization Equity Fund........... $13 $42 $ 72 $159
U.S. Large Capitalization Growth Fund........... $16 $50 $ 86 $187
U.S. Small Capitalization Fund.................. $19 $60 $104 $224
U.S. Bond Fund.................................. $11 $34 $ 59 $131
High Yield Bond Fund............................ $16 $49 $ 84 $185
Global (ex-U.S.) Equity Fund.................... $19 $58 $100 $216
Emerging Markets Equity Fund.................... $25 $76 $131 $279
Emerging Markets Debt Fund...................... $19 $60 $103 $222
</TABLE>
4
<PAGE>
The foregoing table is designed to assist the investor in understanding the
various costs and expenses that a shareholder will bear directly or
indirectly.
- -------------------------------------------------------------------------------
THE EXAMPLE SHOULD NOT BE CONSIDERED REPRESENTATIVE OF PAST OR FUTURE EXPENSES
AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER,
WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, A FUND'S ACTUAL PERFORMANCE WILL
VARY AND MAY RESULT IN ACTUAL RETURNS GREATER OR LESS THAN 5%.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
UBS Investment Fund-Global, UBS Investment Fund-Global Equity, UBS Investment
Fund-Global Bond, UBS Investment Fund-U.S. Balanced, UBS Investment Fund-U.S.
Equity, UBS Investment Fund-U.S. Large Capitalization Equity, UBS Investment
Fund-U.S. Bond and UBS Investment Fund-Global (ex-U.S.) Equity Fund
The selected financial information in the following table has been audited
by the Funds' independent auditors, whose unqualified reports thereon (the
"Reports") appear in the Funds' Annual Report to Shareholders dated June 30,
1998 (the "Annual Report"). Additional performance and financial data and
related notes are contained in the Annual Report, which is available without
charge upon request. The Funds' Financial Statements for the fiscal year ended
June 30, 1998 and the Reports are incorporated by reference into the Statement
of Additional Information.
UBS Investment Fund-U.S. Large Capitalization Growth, UBS Investment Fund-U.S.
Small Capitalization and UBS Investment Fund-High Yield Bond
The U.S. Large Capitalization Growth Fund, the U.S. Small Capitalization
Fund and the High Yield Bond Fund (collectively, the "New Series") are
successors to the UBS Large Cap Growth Fund, the UBS Small Cap Fund and the
UBS High Yield Bond Fund, respectively (collectively, the "Predecessor
Funds"). Each Predecessor Fund, prior to its merger into a New Series,
operated as a separate portfolio of UBS Private Investor Funds, Inc., another
investment company that was advised by another entity. The Predecessor Funds
had fiscal years ending on December 31. On December , 1998, following the
approval of the shareholders of each Predecessor Fund of an agreement and plan
of reorganization, the UBS Large Cap Growth Fund, the UBS Small Cap Fund and
the UBS High Yield Bond Fund were reorganized and merged into the U.S. Large
Capitalization Growth Fund, the U.S. Small Capitalization Fund and the High
Yield Bond Fund, respectively. (These transactions are collectively referred
to as the "Reorganizations.") In conjunction with the Reorganizations, the
fiscal year ends of the Predecessor Funds were changed to June 30. The New
Series had no operations prior to the Reorganizations.
The selected financial information in the following table has been audited
by the Predecessor Funds' independent auditors, whose unqualified reports on
the financial statements containing such information (the "Reports") appear in
the Predecessor Funds' Annual Reports to Shareholders dated December 31, 1997
(the "Predecessor Funds' Annual Reports"). In addition, the table includes
unaudited financial information for the period ended June 30, 1998, which is
included in the Predecessor Funds' Semi-Annual Reports to Shareholders (the
"Predecessor Funds' Semi-Annual Reports") dated June 30, 1998. Additional
performance and financial data and related notes are contained in the
Predecessor Funds' Annual Reports and the Predecessor Funds' Semi-Annual
Reports (the "Predecessor Funds' Reports"), which are available without charge
upon request. The Predecessor Funds' Financial Statements for the fiscal year
ended December 31, 1997, and the period ended June 30, 1998, and the
Predecessor Funds' Reports are incorporated by reference into the Statement of
Additional Information.
5
<PAGE>
FINANCIAL HIGHLIGHTS--FISCAL YEARS ENDED JUNE 30 AND DECEMBER 31
The following table presents financial data relating to a share of
beneficial interest outstanding throughout the periods presented. This
information has been derived from the Funds' and the Predecessor Funds'
financial statements.
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT
OPERATIONS LESS DISTRIBUTIONS
----------------------------- -----------------------------
DISTRIBU-
TOTAL TIONS DISTRIBU-
INCOME FROM AND TIONS NET NET
NET (LOSS) IN EXCESS FROM AND ASSET ASSETS,
NET ASSET NET REALIZED FROM OF NET IN EXCESS VALUE- TOTAL END OF
VALUE- INVEST- AND INVEST- INVEST- OF NET TOTAL END RETURN PERIOD
BEGINNING MENT UNREALIZED MENT MENT REALIZED DISTRIBU- OF (NON- (IN
YEAR OF PERIOD INCOME GAIN (LOSS) OPERATIONS INCOME GAIN TIONS PERIOD ANNUALIZED) 000S)
- ---- --------- ------- ----------- ---------- --------- --------- --------- ------ ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UBS INVESTMENT FUND-GLOBAL (Commencement of Operations July 31, 1995)/3/
1996............ $11.60 0.39 1.10 1.49 (0.59) (0.32) (0.91) $12.18 13.24% $14,030
1997............ $12.18 0.34 1.75 2.09 (0.57) (0.65) (1.22) $13.05 18.13% $26,303
1998............ $13.05 0.30 0.61 0.91 (0.55) (0.70) (1.25) $12.71 7.60% $30,436
UBS INVESTMENT FUND-GLOBAL EQUITY (Commencement of Operations July 31, 1995)/3/
1996............ $10.35 (0.01) 1.93 1.92 (0.01) (0.69) (0.70) $11.57 19.25% $33,012
1997............ $11.57 0.08 2.13 2.21 (0.06) (0.99) (1.05) $12.73 20.34% $61,680
1998............ $12.73 0.07 0.83 0.90 (0.07) (1.05) (1.12) $12.51 8.15% $59,147
UBS INVESTMENT FUND-GLOBAL BOND (Commencement of Operations July 31, 1995)/3/
1996............ $10.56 0.78 0.15 0.93 (1.37) (0.10) (1.47) $10.02 9.17% $ 3,653
1997............ $10.02 0.62 0.10 0.72 (0.94) (0.19) (1.13) $ 9.61 7.20% $ 4,110
1998............ $ 9.61 0.38/2/ (0.18) 0.20 (0.25) (0.17) (0.42) $ 9.39 2.28% $ 4,377
UBS INVESTMENT FUND-U.S. BALANCED (Commencement of Operations July 31, 1995)/3/
1996............ $11.38 0.42 0.86 1.28 (0.42) (0.57) (0.99) $11.67 11.54% $ 779
1997............ $11.67 0.38 1.31 1.69 (0.36) (0.54) (0.90) $12.46 14.99% $ 1,649
1998............ $12.46 0.42/2/ 0.95 1.37 (0.70) (0.94) (1.64) $12.19 11.79% $ 1,880
UBS INVESTMENT FUND-U.S. EQUITY (Commencement of Operations July 31, 1995)/3/
1996............ $11.94 0.10 2.92 3.02 (0.13) (0.25) (0.38) $14.58 25.70% $ 5,387
1997............ $14.58 0.11 4.22 4.33 (0.09) (1.23) (1.32) $17.59 31.28% $35,039
1998............ $17.59 0.09 3.38 3.47 (0.10) (1.13) (1.23) $19.83 20.80% $55,063
UBS INVESTMENT FUND-U.S. LARGE CAPITALIZATION EQUITY (Commencement of Operations April 6, 1998)/3/
1998............ $10.00 0.02 (0.22) (0.20) (0.01) -- (0.01) $ 9.79 (2.06)% $ 1
UBS INVESTMENT FUND-U.S. BOND (Commencement of Operations August 31, 1995)/3/
1996............ $10.00 0.46 (0.13) 0.33 (0.38) (0.03) (0.41) $ 9.92 3.24% $ 636
1997............ $ 9.92 0.46/2/ 0.32 0.78 (0.48) -- (0.48) $10.22 7.91% $ 1,399
1998............ $10.22 0.50 0.49 0.99 (0.53) (0.14) (0.67) $10.54 9.97% $ 2,444
UBS INVESTMENT FUND-GLOBAL (EX-U.S.) EQUITY (Commencement of Operations July 31, 1995)/3/,/4/
1996............ $10.26 0.12 1.45 1.57 (0.15) (0.56) (0.71) $11.12 15.78% $ 1,262
1997............ $11.12 0.11 1.93 2.04 (0.11) (0.56) (0.67) $12.49 19.32% $ 7,797
1998............ $12.49 0.08 0.30 0.38 (0.08) (0.74) (0.82) $12.05 3.90% $ 5,310
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------
RATIO OF NET
RATIO OF EXPENSES INVESTMENT INCOME
TO AVERAGE NET TO AVERAGE NET
ASSETS ASSETS
--------------------- ---------------------
BEFORE AFTER BEFORE AFTER
EXPENSE EXPENSE EXPENSE EXPENSE PORTFOLIO
REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
YEAR MENT MENT MENT MENT RATE
- ---- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
UBS INVESTMENT FUND-GLOBAL (Commencement of Operations July 31, 1995)/3/
1996............ 1.69%/1/ N/A 3.04%/1/ N/A 142%
1997............ 1.64% N/A 2.38% N/A 150%
1998............ 1.59% N/A 2.05% N/A 88%
UBS INVESTMENT FUND-GLOBAL EQUITY (Commencement of Operations July 31, 1995)/3/
1996............ 2.53%/1/ 1.76%/1/ (0.19)%/1/ 0.58%/1/ 74%
1997............ 2.00% 1.75% 0.60% 0.85% 32%
1998............ 1.78% 1.76% 0.53% 0.55% 46%
UBS INVESTMENT FUND-GLOBAL BOND (Commencement of Operations July 31, 1995)/3/
1996............ 2.14%/1/ 1.39%/1/ 4.49%/1/ 5.24%/1/ 184%
1997............ 1.81% 1.39% 4.41% 4.83% 235%
1998............ 1.45% 1.39% 3.98% 4.04% 151%
UBS INVESTMENT FUND-U.S. BALANCED (Commencement of Operations July 31, 1995)/3/
1996............ 1.51%/1/ 1.30%/1/ 3.26%/1/ 3.47%/1/ 240%
1997............ 1.38% 1.30% 3.28% 3.36% 329%
1998............ 1.31% 1.30% 3.38% 3.39% 194%
UBS INVESTMENT FUND-U.S. EQUITY (Commencement of Operations July 31, 1995)/3/
1996............ 1.66%/1/ 1.32%/1/ 0.61%/1/ 0.95%/1/ 36%
1997............ 1.41% 1.32% 0.54% 0.63% 43%
1998............ 1.32% N/A 0.60% N/A 42%
UBS INVESTMENT FUND-U.S. LARGE CAPITALIZATION EQUITY (Commencement of Operations April 6, 1998)/3/
1998............ 2.11%/1/ 1.32%/1/ 0.00%/1/ 0.79%/1/ 12%
UBS INVESTMENT FUND-U.S. BOND (Commencement of Operations August 31, 1995)/3/
1996............ 4.10%/1/ 1.07%/1/ 2.53%/1/ 5.56%/1/ 363%
1997............ 2.12% 1.07% 4.67% 5.72% 410%
1998............ 1.31% 1.07% 5.14% 5.38% 198%
UBS INVESTMENT FUND-GLOBAL (EX-U.S.) EQUITY (Commencement of Operations July 31, 1995)/3/,/4/
1996............ 2.04%/1/ 1.84%/1/ 0.83%/1/ 1.03%/1/ 20%
1997............ 1.81% N/A 1.02% N/A 25%
1998............ 1.84% N/A 0.68% N/A 49%
</TABLE>
- -----
/1/Annualized
/2/The net investment income per share was determined by using average shares
outstanding throughout the period.
/3/Formerly known as the SwissKey class of shares, redesignated as the UBS
Investment Funds class of shares on September 15, 1998.
/4/The Brinson Global (ex-U.S.) Equity Fund changed its name from the Brinson
Non-U.S. Equity Fund on December , 1998. During the fiscal year ended June
30, 1998, the Global (ex-U.S.) Equity Fund (the "ex-U.S. Fund") had total
borrowings of $32,600,000 outstanding for 1 day (June 29, 1998) under the
Trust's agreement with The Chase Manhattan Bank to provide a 364-day $100
million committed line of credit. The ex-U.S. Fund had 36,449,018.679 shares
outstanding on June 29, 1998, and the amount of debt per share was $12.05. At
June 30, 1998, the ex-U.S. Fund had no debt outstanding.
N/A=Not Applicable
6
<PAGE>
<TABLE>
<CAPTION>
INCOME (LOSS) FROM INVESTMENT
OPERATIONS LESS DISTRIBUTIONS
------------------------------ -----------------------------
TOTAL DISTRIBU-
INCOME DISTRIBU- TIONS NET NET
NET (LOSS) TIONS FROM AND ASSET ASSETS
NET ASSET NET REALIZED FROM FROM NET IN EXCESS VALUE- TOTAL END OF
VALUE- INVEST- AND INVEST- INVEST- OF NET TOTAL END RETURN PERIOD
BEGINNING MENT UNREALIZED MENT MENT REALIZED DISTRIBU- OF (NON- (IN
YEAR OF PERIOD INCOME GAIN (LOSS) OPERATIONS INCOME GAIN TIONS PERIOD ANNUALIZED) 000S)
- ---- --------- ------- ----------- ---------- --------- --------- --------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UBS INVESTMENT FUND-U.S. LARGE CAPITALIZATION GROWTH/5/ (Commencement of Operations October 14, 1997)
1997/6/......... $100 0.23 (0.79) (0.56) (0.22) -- (0.22) $ 99.22 (0.55)% $ 4,137
1998 (unau-
dited)/9/....... $ 99.22 0.27 12.76 13.03 -- -- -- $112.25 13.13% $ 7,135
UBS INVESTMENT FUND-U.S. SMALL CAPITALIZATION/5/ (Commencement of Operations September 30, 1997)
1997/6/......... $100 -- (5.62) (5.62) -- -- -- $ 94.38 (5.62)% $11,954
1998 (unau-
dited)/9/....... $ 94.38 (0.05) 2.85 2.80 -- -- -- $ 97.18 2.89% $21,310
UBS INVESTMENT FUND-HIGH YIELD BOND/5/ (Commencement of Operations September 30, 1997)
1997/6/......... $100 1.80 0.52 2.32 (1.77) -- (1.77) $100.55 2.34% $ 7,861
1998 (unau-
dited)/9/....... $100.55 4.00 1.67 5.67 (3.96) -- (3.96) $102.26 5.07% $16,463
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------
RATIO OF NET INVESTMENT
RATIO OF EXPENSES INCOME
TO AVERAGE NET TO AVERAGE NET
ASSETS ASSETS
------------------------- --------------------------------
BEFORE AFTER BEFORE AFTER
EXPENSE EXPENSE EXPENSE EXPENSE PORTFOLIO
REIMBURSE- REIMBURSE- REIMBURSE- REIMBURSE- TURNOVER
YEAR MENT MENT MENT MENT RATE
- ---- ------------ ------------ ----------------- -------------- ---------- ---
<S> <C> <C> <C> <C> <C> <C>
UBS INVESTMENT FUND-U.S. LARGE CAPITALIZATION GROWTH/5/ (Commencement of Operations October 14, 1997)
1997/6/......... 8.54%/1/,/7/ 1.00%/1/,/7/ (6.19)%/1/,/7/ 1.35%/1/,/7/ 6%/8/
1998 (unau-
dited)/9/....... 3.27%/1/,/7/ 1.00%/1/,/7/ (1.69)%/1/,/7/ 0.58%/1/,/7/ 35%/8/
UBS INVESTMENT FUND-U.S. SMALL CAPITALIZATION/5/ (Commencement of Operations September 30, 1997)
1997/6/......... 3.63%/1/,/7/ 1.20%/1/,/7/ (2.53)%/1/,/7/ (0.10)%/1/,/7/ 3%/8/
1998 (unau-
dited)/9/....... 1.95%/1/,/7/ 1.20%/1/,/7/ (0.87)%/1/,/7/ (0.12)%/1/,/7/ 9%/8/
UBS INVESTMENT FUND-HIGH YIELD BOND/5/ (Commencement of Operations September 30, 1997)
1997/6/......... 4.98%/1/,/7/ 0.90%/1/,/7/ 2.25%/1/,/7/ 7.23%/1/,/7/ 80%/8/
1998 (unau-
dited)/9/....... 2.47%/1/,/7/ 0.90%/1/,/7/ 6.46%/1/,/7/ 8.03%/1/,/7/ 155%/8/
</TABLE>
- -----
/1/Annualized
/2/The net investment income per share was determined by using average shares
outstanding throughout the period.
/3/Formerly known as the SwissKey class of shares, redesignated as the UBS
Investment Funds class of shares on September 15, 1998.
/4/The Brinson Global (ex-U.S.) Equity Fund changed its name from the Brinson
Non-U.S. Equity Fund on December , 1998. During the fiscal year ended June
30, 1998, the Global (ex-U.S.) Equity Fund (the "ex-U.S. Fund") had total
borrowings of $32,600,000 outstanding for 1 day (June 29, 1998) under the
Trust's agreement with The Chase Manhattan Bank to provide a 364-day $100
million committed line of credit. The ex-U.S. Fund had 36,449,018.679 shares
outstanding on June 29, 1998, and the amount of debt per share was $12.05. At
June 30, 1998, the ex-U.S. Fund had no debt outstanding.
/5/The information provided in this table does not reflect Rule 12b-1 plan
expenses, as the Predecessor Funds were not subject to such expenses.
/6/For the period from commencement of operations to December 31, 1997.
/7/Prior to the Reorganizations, each of these Series operated as a separate
portfolio of UBS Private Investor Funds, Inc. and invested all of their
respective investable assets in an affiliated fund with an identical
investment objective. The U.S. Large Capitalization Growth Fund invested
solely in the UBS Investor Portfolios Trust--USB Large Cap Growth Portfolio;
the U.S. Small Capitalization Fund invested solely in the UBS Investor
Portfolios Trust--UBS Small Cap Portfolio; and the High Yield Bond Fund
invested solely in the UBS Investor Portfolios Trust--UBS High Yield Bond
Portfolio. The funds in which each of these Series invested are referred to
herein as the "Master Funds." The ratios set forth in this Financial
Highlights table for each of these Series include the Series' share of its
respective Master Fund's expenses. The annualization of these ratios is
affected by the fact that the Investment Advisory Agreement and Investment
Sub-Advisory Agreement to which these Series were subject prior to the
Reorganizations were not ratified until December 29, 1997. Prior to that date,
investment advisory services were being provided without compensation.
/8/The Portfolio Turnover Rate reflected in this Financial Highlights Table
reflects the portfolio turnover rate for the Series' respective Master Funds.
/9/For the period from January 1, 1998 to June 30, 1998.
7
<PAGE>
Financial Highlights are not included for the Emerging Markets Equity Fund or
the Emerging Markets Debt Fund, each of which commenced operations on December
, 1998.
8
<PAGE>
PRIOR PERFORMANCE OF ADVISOR
The following table sets forth the Advisor's composite performance data
relating to the historical performance of institutional private accounts
managed by the Advisor, that have investment objectives, policies, strategies
and risks substantially similar to those of the various Series of the Trust.
The data is provided to illustrate the past performance of the Advisor in
managing investment portfolios which are substantially similar to the
applicable Series of the Trust as measured against specified market indices.
This performance presentation includes certain composites of Brinson Partners,
Inc. and certain composites of UBS Brinson New York (formerly UBS Asset
Management New York). These two firms are now part of one organization as a
result of a business combination on June 30, 1998. The portfolio management
process and performance measurement are distinct for the two entities through
June 30, 1998. The performance data of each series of the Brinson Funds as
well as three of the UBS Private Investor Funds is also included in the table.
The Advisor adopted the Performance Presentation Standards of the
Association for Investment Management and Research (AIMR-PPS(TM)) as of
January 1, 1993. The Advisor complies with the AIMR standards on a firmwide
basis, and a list of all firm composites is available upon request. The
composite performance results 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 this report.
Investment results are time-weighted performance calculations representing
total return. Returns are calculated using geometric linking of monthly
returns. Composites are valued at least 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
exclude the impact of custodial fees, and any other 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 account.
Results include all actual fee-paying, discretionary client portfolios
including those clients no longer with the Firm. Portfolios are included in
the composite beginning with the first full month of performance to the
present or to the cessation of the client's relationship with the Firm. No
alterations of composites as presented here have occurred due to changes in
personnel. Accounts of all sizes are included in composite performance and no
minimum account relationship size was set for inclusion in the composites as
the account size does not impact portfolio management style. The composites
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 of 1986, as amended. Had such expenses, limitations, requirements
and restrictions been applicable to the composites, the performance results
could have been adversely affected. The composite's performance presented does
not represent the historical performance of the Series and should not be
interpreted as indicative of future performance of the Series.
UBS INVESTMENT FUNDS CLASS OF SHARES ANNUALIZED RETURNS
<TABLE>
<CAPTION>
AVERAGE ANNUAL
--------------------------
ONE TWO THREE FIVE TEN
TOTAL RETURNS AS OF JUNE 30, 1998 YEAR YEARS YEARS YEARS YEARS
- --------------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Global Securities Portfolio/1/............... 8.22% 13.58% 14.93% 11.66% 12.40%
UBS Investment Fund-Global/2/................ 7.60 12.74 13.72 10.78 N/A
GIobal Securities Markets Index/3/........... 13.76 15.86 15.72 13.56 12.41
Global Equity with Cash Portfolio/1/......... 10.88 16.31 19.47 13.61 12.81
UBS Investment Fund-Global Equity/2/......... 8.15 14.08 17.52 N/A N/A
MSCI World Equity Index/3/, /4/.............. 17.18 19.88 19.56 16.02 11.63
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------
ONE TWO THREE FIVE TEN
YEAR YEARS YEARS YEARS YEARS
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Global Bond Portfolio/1/.............. 3.71% 5.73% 7.89% 6.55% 9.05%
UBS Investment Fund-Global Bond/2/.... 2.28 4.71 6.75 N/A N/A
Salomon World Govt Bond Index/3/...... 4.32 4.10 2.84 6.33 8.35
U.S. Balanced Portfolio/1/............ 12.87 14.64 14.67 12.04 12.69
UBS Investment Fund-U.S. Balanced/2/.. 11.79 13.38 13.25 N/A N/A
U.S. Balanced Mutual Fund Index/3/.... 22.38 22.05 20.83 16.32 14.57
U.S. Equity Fund/1/................... 21.89 27.26 28.66 22.02 19.66
UBS Investment Fund-U.S. Equity/2/.... 20.80 25.92 27.29 N/A N/A
Wilshire 5000/3/...................... 28.86 29.09 28.13 21.56 17.61
U.S. Large Capitalization Equity Port-
folio/1/............................. 21.41 28.61 30.56 23.49 20.64
U.S. Large Capitalization Growth Port-
folio/1/, /7/........................ 25.06 27.37 25.73 19.10 17.73
UBS Investment Fund-U.S. Large Capi-
talization Equity/2/, /6/............ (0.32) N/A N/A N/A N/A
UBS Large Cap Growth Fund/2/, /5/,
/7/.................................. 12.51 N/A N/A N/A N/A
S & P 500/3/.......................... 30.21 32.37 30.23 23.05 18.55
U.S. Small Capitalization Growth Port-
folio/1/, /7/........................ 13.60 15.28 20.99 14.98 15.73
UBS Small Cap Fund/2/, /5/, /7/....... (2.89) N/A N/A N/A N/A
Russell 2000/3/....................... 16.51 16.42 18.86 16.05 13.57
U.S. Bond Portfolio/1/................ 10.89 9.89 8.27 7.14 9.40
UBS Investment Fund-U.S. Bond/2/...... 9.97 8.94 N/A N/A N/A
Salomon BIG Index/3/.................. 10.59 9.36 7.88 6.91 9.11
High Yield Portfolio/1/, /7/.......... 13.72 14.03 13.80 N/A N/A
UBS High Yield Fund/2/, /5/, /7/...... 8.18 N/A N/A N/A N/A
Merrill Lynch All High Yield Bond In-
dex/3/............................... 11.77 N/A N/A N/A N/A
Non-U.S. Equity Portfolio/1/.......... 5.88 12.99 16.98 12.22 10.93
UBS Investment Fund-Global (ex-U.S.)
Equity/2/............................ 3.90 11.34 15.00 N/A N/A
MSCI Non-U.S. Index (Unhedged)/3/,
/4/.................................. 6.04 9.77 11.04 10.29 6.98
Emerging Markets Equity Portfolio/1/.. (11.77) (34.08) (12.54) N/A N/A
MSCI Emerging Markets (Free) Index/3/. (38.10) (16.30) N/A N/A N/A
Brinson Emerging Markets Normal In-
dex/3/............................... (36.75) (15.12) N/A N/A N/A
Emerging Markets Debt Portfolio/1/.... 6.81 22.29 N/A N/A N/A
JP MORGAN EMBI+/3/.................... 1.39 16.14 N/A N/A N/A
</TABLE>
- ----------
FOOTNOTES:
/1Performance/figures for the Advisor composites are net of advisory fees.
Advisory fees are determined by taking the average account size within the
composite as of June 30, 1998 and applying the standard fee schedule.
Performance figures for the composites gross of fees are:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
--------------------------
ONE TWO THREE FIVE TEN
YEAR YEARS YEARS YEARS YEARS
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Global Securities Portfolio............... 8.94% 14.30% 15.65% 12.38% 13.12%
Global Equity with Cash Portfolio......... 11.73 17.16 20.32 14.46 13.66
Global Bond Portfolio..................... 4.28 6.30 8.46 7.12 9.62
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-------------------------
ONE TWO THREE FIVE TEN
YEAR YEARS YEARS YEARS YEARS
------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
U.S. Balanced Portfolio................... 13.59 15.36 15.39 12.76 13.41
U.S. Equity Fund.......................... 22.47 27.84 29.24 22.60 20.24
U.S. Large Capitalization Equity Portfo-
lio...................................... 22.02 29.22 31.17 24.10 21.35
U.S. Large Capitalization Growth Portfo-
lio...................................... 25.06 27.37 25.73 19.10 17.73
U.S. Small Capitalization Growth Portfo-
lio...................................... 13.60 15.28 20.99 14.98 15.73
U.S. Bond Portfolio....................... 11.20 10.20 8.58 7.45 9.71
High Yield Portfolio...................... 13.72 14.03 13.80 N/A N/A
Non-U.S. Equity Portfolio................. 6.59 13.70 17.69 12.93 11.64
Emerging Markets Equity Portfolio......... (11.77) (34.08) N/A N/A N/A
Emerging Markets Debt Portfolio........... 6.81 22.29 N/A N/A N/A
</TABLE>
/2/Total returns include reinvestment of all capital gain and income
distributions. Inception dates and average annual returns since each
Fund's inception date are as follows: UBS Investment Fund-Global, 8/31/92,
11.44%; UBS Investment Fund-Global Equity, 1/31/94, 12.45%; UBS Investment
Fund-Global Bond, 7/31/93, 6.49%; UBS Investment Fund-U.S. Balanced,
12/31/94, 15.90%; UBS Investment Fund-U.S. Equity, 2/28/94, 23.11%; UBS
Investment Fund-U.S. Large Capitalization Equity, 4/30/98, (.13)%; UBS
Large Cap Growth Fund, 9/30/97, 12.51%; UBS Small Cap Fund, 9/30/97,
(2.89)%; UBS Investment Fund-U.S. Bond, 8/31/95, 7.97%; UBS High Yield
Bond Fund. 9/30/97, 8.18%; and UBS Investment Fund-Global (ex-U.S.)
Equity, 8/31/93, 9.03%.
/3/GSMI Mutual Fund Index, an un-managed index compiled by the Advisor,
currently constructed as follows: 40% Wilshire 5000 Index; 22% MSCI Non-
U.S. Equity (Free) Index; 21% Salomon BIG 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. The composition of the Index has
evolved over time and may change in the future. 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 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 Mutual Fund Index, an un-managed index
compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index
and 35% Salomon Brothers Broad Investment Grade (BIG) 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. Russell
2000 Index is an unmanaged index that includes 2,000 U.S. small
capitalization stocks and is a common measure of the performance of the
small capitalization segment of the U.S. stock market. Salomon Brothers
Broad Investment Grade (BIG) Bond Index is an un-managed market driven
broad based index which includes U.S. bonds with over one year to
maturity. Merrill Lynch All HIgh Yield Bond Index is an unmanaged
composite consisting of publicly-issued, fixed-rate, non-convertible,
domestic bonds that are rated below investment grade. 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. Brinson Emerging Markets Normal Index is constructed to
minimize country specific risk while providing regional exposure similar
to the Morgan Stanley Capital International Emerging Markets (Free) Index,
a market capitalization weighted index. MSCI Emerging Markets (Free) Index
is a market capitalization weighted equity index composed of companies
that are representative of the market structure of the countries in the
index. JP Morgan EMBI+ reflects total returns for external debt
instruments which have been traded in the emerging markets, which
instruments include Brady Bonds, Eurobonds, loans and U.S. dollar
denominated local market instruments.
/4/Beginning 1/31/88 these indices are "free".
/5/Non-annualized return since performance inception date for the following
Funds: Brinson U.S. Large Capitalization Equity Fund Class I: 4/30/98, UBS
Large Cap Growth Fund: 10/14/97, UBS Small Cap Fund: 9/30/97, UBS High
Yield Fund: 9/30/97.
/6/Non-annualized return. Since commencement of operations (4/6/98).
/7/Performance figures for the U.S. Large Capitalization Growth Portfolio,
U.S. Small Capitalization Growth Portfolio and High Yield Portfolio,
represent composites of UBS Brinson New York (formerly UBS Asset
Management New York). Performance figures for the UBS Large Cap Growth
Fund, UBS Small Cap Fund and UBS High Yield Fund represent figures for
such funds while UBS Brinson New York (formerly UBS Asset Management New
York) was the investment manager.
11
<PAGE>
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 Considerations
and Risks" and Appendix A in this Prospectus, and in the Statement of
Additional Information.
The Series is a diversified portfolio that seeks to achieve its objective by
pursuing active asset allocation strategies across global equity and fixed
income markets and active security selection within each market. These
decisions are undertaken relative to the GSMI Mutual Fund 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.
12
<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
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 World Government Bond Index (the "Global
13
<PAGE>
Bond Benchmark"). The Global Bond Benchmark is a market driven index which
measures the broad global fixed income markets invested in debt issues of U.S.
and non-U.S. governments, governmental entities and supranationals. Although
it may invest anywhere in the world, it is expected that the Series' assets
will be primarily invested in fixed income markets listed in the Global Bond
Benchmark. From time to time, the Advisor 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 and
35% Salomon Brothers Broad Investment Grade (BIG) Bond 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.
14
<PAGE>
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 large capitalization
companies as those with market capitalizations in the upper 65% of the
Wilshire 5000 Index at the time of the Series' investment. Companies whose
capitalization falls below this level after purchase continue to be considered
large capitalization companies. The Series is a non-diversified portfolio as
described in "Investment Considerations and Risks--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. LARGE CAPITALIZATION GROWTH FUND
INVESTMENT OBJECTIVE
The U.S. Large Capitalization Growth Fund's investment objective is to
provide long-term capital appreciation. In seeking to achieve its investment
objective, the Series attempts to control risk. Under normal circumstances, at
least 65% of the Series' total assets will be invested in large capitalization
growth companies. The Advisor defines large capitalization companies as those
with market capitalizations in the upper 65% of the Wilshire 5000 Index 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 diversified
portfolio that seeks to achieve its objective by investing in a wide range of
equity securities of large capital growth companies. The Series may invest up
to 20% of its assets in foreign securities. The Series may enter into
repurchase agreements and reverse repurchase agreements, and engage in futures
and options for hedging, 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 S&P 500 Index (the "Large Capitalization
Growth Benchmark"). The Large Capitalization Growth Benchmark is a broad
weighted index which includes primarily U.S. common stocks. The Large
Capitalization Growth Benchmark is designed to provide a representative
indication of the capitalization and return for the large capitalization U.S.
equity market.
U.S. SMALL CAPITALIZATION FUND
INVESTMENT OBJECTIVE
The U.S. Small Capitalization Fund's investment objective is to provide
long-term capital appreciation. In seeking to achieve its investment
objective, the Series attempts to control risk. Under normal circumstances, at
least 65% of the Series' total assets will be invested in small capital growth
companies. The Advisor defines small capital companies as those with market
capitalizations within the range of those stocks listed on the Russell 2000
15
<PAGE>
Index at the time of the Series' investment. The Series may also invest in
securities of emerging growth companies--i.e. small or medium sized companies
that have passed their start-up phase and that show positive earnings and
prospects of achieving significant profit and gain in a relatively short
period of time. The Series is a diversified portfolio that seeks to achieve
its objective by investing in a wide range of small capital growth companies.
The Series may invest up to 20% of its assets in foreign securities.
Growth company securities may have above average price volatility. The
Series may enter into repurchase agreements and reverse repurchase agreements,
and engage in futures and options for hedging, 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 Russell 2000 Index (the "Small Capitalization Growth Benchmark"). The
Small Capitalization Growth Benchmark is a broad, weighted index which
includes primarily U.S. small capitalization common stocks. The Small
Capitalization Growth Benchmark is designed to provide a representative
indication of the capitalization and return for the small 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 the Advisor. 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
(BIG) 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.
16
<PAGE>
HIGH YIELD BOND FUND
INVESTMENT OBJECTIVES
The primary investment objective of the High Yield Bond Fund is to provide
high current income from a portfolio of higher-yielding, lower-rated debt
securities issued by domestic and foreign companies. In seeking to achieve its
primary investment objective, the Series attempts to control risk. The Series
seeks to achieve its primary objective by investing, under normal market
conditions, at least 65% of its assets in fixed income securities that provide
higher yields and that are rated in the lower rating categories of Moody's and
S&P, including securities rated Baa or lower by Moody's or BBB or lower by S&P
("high yield securities"). Securities rated below Baa or BBB are considered to
be of poor standing and predominantly speculative. The Series may invest in a
broad range of fixed income securities, including debt securities of U.S.
corporations, zero coupon securities, mortgage-backed securities, asset-backed
securities and when-issued securities. The Series may invest up to 25% of its
assets in foreign 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 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 seeks its secondary investment objective of capital growth, when
consistent with high current income, by investing in securities, including
common stocks and non-income producing securities, which the Advisor expects
will appreciate in value as a result of declines in long-term interest rates
or favorable developments affecting the business or prospects of the issuer
which may improve the issuer's financial condition and credit rating.
The High Yield Bond Fund's benchmark is the Merrill Lynch All High Yield
Bond Index (the "High Yield Benchmark"). The High Yield Benchmark is an
unmanaged composite consisting of publicly-issued, fixed-rate, non-
convertible, domestic bonds that are rated below investment grade. 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 high
yield, fixed income securities market.
GLOBAL (EX-U.S.) EQUITY FUND (FORMERLY NON-U.S. EQUITY FUND)
INVESTMENT OBJECTIVE
The Global (ex-U.S.) Equity Fund's investment objective is to maximize total
return, consisting of capital appreciation and current income, by investing
primarily in the equity securities of non-U.S. issuers. Under normal
conditions, at least 65% of the Series' total assets will be invested in
equity securities of issuers in at least three countries other than the United
States. In seeking to achieve its investment objective while 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
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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.
EMERGING MARKETS EQUITY FUND
The Brinson Emerging Markets Equity Fund's investment objective is to
maximize total U.S. dollar return, consisting of capital appreciation and
current income, while controlling risk. Under normal circumstances, at least
65% of the Series' assets will be invested in the equity securities of issuers
in emerging markets, or securities with respect to which the return is derived
from the equity securities of issuers in emerging markets, such as equity
swaps and equity index swaps, as further described below. The Series'
performance is measured relative to its benchmark, the Brinson Emerging
Markets Normal Index (the "Equity Benchmark"). The index is constructed to
minimize country specific risk while providing regional exposure similar to
the International Finance Corporation's Investable Index (IFCI), a market
capitalization weighted benchmark.
EMERGING MARKETS DEBT FUND
The Brinson Emerging Markets Debt Fund's investment objective is to maximize
total U.S. dollar return, consisting of capital appreciation and current
income, while controlling risk. Under normal circumstances, at least 65% of
the Series' assets will be invested in debt securities issued by governments,
government-related entities (including participations in loans between
governments and financial institutions), corporations and entities organized
to restructure outstanding debt of issuers in emerging markets, or debt
securities on which the return is derived primarily from other emerging market
instruments, such as interest rate swaps and currency swaps, as further
described below. The Series' performance is measured relative to its
benchmark, the J.P. Morgan Emerging Markets Bond Index Plus (the "Debt
Benchmark").
Investors should understand that all investments involve risk and that there
can be no guarantee against loss resulting from an investment in the Series,
nor can there be any assurance that the Series' respective investment
objectives will be attained.
INVESTMENT CONSIDERATIONS AND RISKS
The following provides information about the types of instruments in which
the Funds may invest, strategies employed by Brinson Partners in its attempt
to attain each Series' investment objective and a summary of related risks.
Shareholders should understand that all investments involve risks and there
can be no guarantee against loss resulting from an investment in the Series,
nor can there be any assurance that the Series will be able to 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, U.S. LARGE CAPITALIZATION
GROWTH FUND, U.S. SMALL CAPITALIZATION FUND, GLOBAL (EX-U.S.) EQUITY FUND AND
EMERGING MARKETS 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, U.S. Small Capitalization Fund and Emerging Markets Equity 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,
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<PAGE>
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,
U.S. BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT 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.
QUALITY INFORMATION FOR HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND
AND EMERGING MARKETS DEBT FUND - At any one time substantially all of the
assets of the High Yield Bond Fund and the Emerging Markets Debt Fund and up
to 35% of the assets of the Emerging Markets Equity Fund may be invested in
investments which are lower quality, higher yielding securities and which are
rated Ba or lower by Moody's or BB or lower by S&P, or if unrated, are
determined to be of comparable quality by the Advisor.
Securities rated Baa by Moody's or BBB by S&P are considered investment
grade, but have some speculative characteristics. Securities rated Ba or below
by Moody's or BB or below by S&P are below investment grade securities and are
commonly referred to as "junk bonds." These securities are considered to be of
poor standing and are predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms of
the obligations and involve major risk exposure to adverse conditions.
Securities issued by foreign issuers rated below investment grade entail
greater risks than higher rated securities, including risk of untimely
interest and principal payment, default, price volatility and may present
problems of liquidity and valuation. Investors should carefully consider these
risks before investing. The standards described above must be satisfied at the
time an investment is made. If the quality of the investment later declines,
the Series may continue to hold the investment. The Emerging Markets Equity
Fund and the Emerging Markets Debt Fund do not intend to limit investments in
low-grade securities.
Low-grade securities generally offer a higher current yield than that
available from higher grade securities, but involve greater risk. In the past,
the high yields from low-grade securities have more than compensated for the
higher default rates on such securities. However, there can be no assurance
that the Series will be protected from widespread bond defaults brought about
by a sustained economic downturn, or that yields will continue to offset
default rates on low-grade securities in the future. Issuers of these
securities are often highly leveraged, so that their ability to service their
debt obligations during an economic downturn or during sustained periods of
rising interest rates may be impaired. In addition, such issuers may not have
more traditional methods of financing available to them and may be unable to
repay debt at maturity by refinancing. The risk of loss due to default by the
issuer is significantly greater for the holders of low-grade securities
because such securities may be unsecured and may be subordinated to other
creditors of the issuer. Past economic recessions have resulted in default
levels with respect to such securities in excess of historic averages.
The value of low-grade securities will be influenced not only by changing
interest rates, but also by the bond market's perception of credit quality and
the outlook for economic growth. When economic conditions appear to be
deteriorating, low-grade securities may decline in market value due to
investors' heightened concern over credit quality, regardless of prevailing
interest rates.
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Especially at such times, trading in the secondary market for low-grade
securities may become thin and market liquidity may be significantly reduced.
Even under normal conditions, the market for low-grade securities may be less
liquid than the market for investment grade corporate bonds. There are fewer
securities dealers in the high yield market and purchasers of low-grade
securities are concentrated among a smaller group of securities dealers and
institutional investors. In periods of reduced secondary market liquidity,
low-grade securities prices may become more volatile and the Series' ability
to dispose of particular issues when necessary to meet the Series' liquidity
needs or in response to a specific economic event such as a deterioration in
the creditworthiness of the issuer may be adversely affected.
Low-grade securities frequently have call or redemption features which would
permit an issuer to repurchase the security from the Series. If a call were
exercised by the issuer during a period of declining interest rates, the
Series likely would have to replace such called security with a lower yielding
security, thus decreasing the net investment income to the Series and any
dividends to investors.
Besides credit and liquidity concerns, prices for low-grade securities may
be affected by legislative and regulatory developments. For example, from time
to time, Congress has considered legislation to restrict or eliminate the
corporate tax deduction for interest payments or to regulate corporate
restructurings such as takeovers or mergers. Such legislation may
significantly depress the prices of outstanding low-grade securities.
For a complete description of the rating systems of Moody's and S&P, see the
Appendix to the SAI.
FOREIGN SECURITIES AND CURRENCY CONSIDERATIONS (GLOBAL FUND, GLOBAL EQUITY
FUND, GLOBAL BOND FUND, U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL
CAPITALIZATION FUND, HIGH YIELD BOND FUND, GLOBAL (EX-U.S.) EQUITY FUND,
EMERGING MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND) -Investments in
securities of foreign issuers may involve greater risks than those of U.S.
issuers. There is generally less information available to the public about
non-U.S. companies and less government regulation and supervision of non-U.S.
stock exchanges, brokers and listed companies. Non-U.S. companies are not
subject to uniform global accounting, auditing and financial reporting
standards, practices and requirements. Securities of some non-U.S. companies
are less liquid and their prices more volatile than securities of comparable
U.S. companies. Securities trading practices abroad may offer less protection
to investors. Settlement of transactions in some non-U.S. markets may be
delayed or may be less frequent than in the United States, which could affect
the liquidity of the Series' portfolios. Additionally, in some non-U.S.
countries, there is the possibility of expropriation or confiscatory taxation,
limitations on the removal of securities, property or other assets of the
Series, political or social instability, or diplomatic developments which
could affect U.S. investments in those countries. The Series intend to
diversify broadly among countries, but reserve the right to invest a
substantial portion of their assets in one or more countries if economic and
business conditions warrant such investments. Brinson Partners will take these
factors into consideration in managing the Series' investments. Because the
Series will keep their books and records in U.S. dollars, the Series will be
required, for federal income tax purposes, to account for income and losses on
all transactions involving foreign currency under Section 988 of the Internal
Revenue Code of 1986, as amended, and the applicable U.S. Treasury
Regulations, so that generally any component of a gain or loss attributable to
currency fluctuations results in ordinary income or loss and not capital gain
or loss.
The U.S. dollar market value of the Series' investments and of dividends and
interest earned by the Series may be significantly affected by changes in
currency exchange rates. Some currency prices may be volatile, and there is
the possibility of governmental controls on currency exchange or governmental
intervention in currency markets, which could adversely affect the Series.
Although the Series may attempt to manage currency exchange rate risks, there
is no assurance that the Series will do so at an appropriate time or that they
will be able to
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<PAGE>
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.
On January 1, 1999, the European Monetary Union (the "EMU") plans to
introduce a new single currency, the Euro, which will replace the national
currencies of participating member nations. If the Series hold investments in
nations with currencies replaced by the Euro, the investment process,
including trading, foreign exchange, payments, settlements, cash accounts,
custody and accounting, will be impacted. Although it is not possible to
predict the impact of the Euro on the Series, the transition and the
elimination of currency risk among nations participating in the EMU may change
the economic environment and behavior of investors, particularly in European
markets.
The adoption of the Euro does not reduce the currency risk presented by
fluctuations in value of the U.S. dollar to other currencies and, in fact,
currency exchange risk may be magnified. Also, increased market volatility may
result. Additional risks that may result include the fact that European
issuers in which the Series invest may face substantial conversion costs,
which may not be accurately anticipated and may impact issuer profitability
and creditworthiness.
Brinson Partners has created an interdepartmental team to handle all Euro-
related changes to enable the Series to process transactions accurately and
completely with minimal disruption to business activities. While there can be
no assurance that the Series will not be adversely affected, Brinson Partners
and the Trust's service providers are taking steps that they believe are
reasonably designed to address the Euro issue.
EMERGING MARKETS SECURITIES (GLOBAL FUND, HIGH YIELD BOND FUND, EMERGING
MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND) - There are additional
risks inherent in investing in less developed countries which are applicable
to the Global Fund, the Emerging Markets Equity Fund and the Emerging Markets
Debt Fund. The Series consider a country to be an "emerging market" if it is
defined as an emerging or developing economy by any one of the following: the
International Bank for Reconstruction and Development (i.e., the World Bank),
the International Finance Corporation, or the United Nations or its
authorities. The Emerging Markets Equity Fund and Emerging Market Debt Fund
intend to invest primarily in securities of issuers located in at least three
emerging market countries which may be located in Asia, Europe, Latin America,
Africa or the Middle East. As these markets change and other countries'
markets develop, the Series expect the countries in which they invest to
change.
An emerging market security is a security issued by a government or other
issuer that, in the opinion of the Advisor, has one or more of the following
characteristics:
1. The principal trading market of the security is in an emerging market;
2. The primary revenue of the issuer (at least 50%) is generated from
goods produced or sold, investments made, or services performed in an
emerging market country; or
3. At least 50% of the assets of the issuer are situated in emerging
market countries.
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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.
These restrictions may take the form of prior governmental approval, limits
on the amount or type of securities held by foreigners, and limits on the
types of companies in which foreigners may invest. Additional restrictions may
be imposed at any time by these or other countries in which the Series invest.
In addition, the repatriation of both investment income and capital from
several foreign countries is restricted and controlled under certain
regulations, including, in some cases, the need for certain governmental
consents. Although these restrictions may in the future make it undesirable to
invest in emerging market countries, the Advisor does not believe that any
current repatriation restrictions would affect its decision to invest in such
countries. Countries such as those in which the Series may invest have
historically experienced and may continue to experience, high rates of
inflation, high interest rates, exchange rate fluctuations or currency
depreciation, large amounts of external debt, balance of payments and trade
difficulties and extreme poverty and unemployment. Additional factors which
may influence the ability or willingness to service debt include, but are not
limited to, a country's cash flow situation, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, its government's policy towards the
International Monetary Fund, the World Bank and other international agencies
and the political constraints to which a government debtor may be subject.
The ability of a foreign government or government-related issuer to make
timely and ultimate payments on its external debt obligations will be strongly
influenced by the issuer's balance of payments, including export performance,
its access to international credits and investments, fluctuations in interest
rates and the extent of its foreign reserves. A country whose exports are
concentrated in a few commodities or whose economy depends on certain
strategic imports could be vulnerable to fluctuations in international prices
of these commodities or imports. To the extent that a country receives payment
for its exports in currencies other than dollars, its ability to make debt
payments denominated in dollars could be adversely affected. If a foreign
government or government-related issuer cannot generate sufficient earnings
from foreign trade to service its external debt, it may need to depend on
continuing loans and aid from foreign governments, commercial banks, and
multilateral organizations, and inflows of foreign investment. The commitment
on the part of these foreign governments, multilateral organizations and
others to make such disbursements may be conditioned on the government's
implementation of economic reforms and/or economic performance and the timely
service of its obligations. Failure to implement such reforms, achieve such
levels of economic performance or repay principal or interest when due may
curtail the willingness of such third parties to lend funds, which may further
impair the issuer's ability or willingness to service its debts in a timely
manner. The cost of servicing external debt will also generally be adversely
affected by rising international interest rates, because many external debt
obligations bear interest at rates which are adjusted based upon international
interest rates. The ability to service external debt will also depend on the
level of the relevant government's international currency reserves and its
access to foreign exchange. Currency devaluations may affect the ability of a
government issuer to obtain sufficient foreign exchange to service its
external debt.
As a result of the foregoing, a governmental issuer may default on its
obligations. If such a default occurs, the Series may have limited effective
legal recourse against the issuer and/or guarantor. Remedies must, in some
cases, be pursued in the courts of the defaulting party itself, and the
ability of the holder of foreign government and government-related debt
securities to obtain recourse may be subject to the political climate in the
relevant
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country. In addition, no assurance can be given that the holders of commercial
bank debt will not contest payments to the holders of other foreign government
and government-related debt obligations in the event of default under their
commercial bank loan agreements.
The issuers of the government and government-related debt securities in
which the Series expect to invest have in the past experienced substantial
difficulties in servicing their external debt obligations, which has led to
defaults on certain obligations and the restructuring of certain indebtedness.
Restructuring arrangements have included, among other things, reducing and
rescheduling interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and unpaid interest to
Brady Bonds (see Appendix A), and obtaining new credit to finance interest
payments. Holders of certain foreign government and government-related debt
securities may be requested to participate in the restructuring of such
securities and to extend further loans to the issuers of such securities.
There can be no assurance that the Brady Bonds and other foreign government
and government-related debt securities in which the Series may invest will not
be subject to similar defaults or restructuring arrangements which may
adversely affect the value of such investments. Furthermore, certain
participants in the secondary market for such debt securities may be directly
involved in negotiating the terms of these arrangements and may therefore have
access to information not available to other market participants.
Payments to holders of the high yield, high risk, foreign debt securities in
which the Series may invest may be subject to foreign withholding and other
taxes. Although the holders of foreign government and government-related debt
securities may be entitled to tax gross-up payments from the issuers of such
securities, there is no assurance that such payments will be made.
FOREIGN CURRENCY TRANSACTIONS (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND
FUND, U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL CAPITALIZATION FUND,
HIGH YIELD BOND FUND, GLOBAL (EX-U.S.) EQUITY FUND, EMERGING MARKETS EQUITY
FUND AND EMERGING MARKETS DEBT 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. However, the ability to
manage foreign exchange risk through the use of these strategies may be
limited in certain emerging markets because of a lack of appropriate financial
instruments. Some of these strategies may require the Series to set aside
liquid assets in a segregated custodial account to cover their obligations.
With respect to the Emerging Markets Equity Fund and the Emerging Markets
Debt Fund, the normal currency allocation is identical to the currency mix of
their respective Benchmarks. The Series expect to maintain this normal
currency exposure when, in the judgment of the Advisor, global currency
markets are fairly priced relative to each other and relative to the
associated risks. The Series may actively deviate from such normal currency
allocations to take advantage of, or to protect its portfolio from risk and
return characteristics of, the currencies and short-term interest rates when
those prices deviate significantly from fundamental value. Deviations from the
Series' Benchmarks are determined by the Advisor based upon its research.
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
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in which the Series may invest include the purchase and writing of options on
securities (including index options), options on foreign currencies and
options on futures, 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. 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, U.S. LARGE CAPITALIZATION EQUITY
FUND, EMERGING MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND ONLY) - 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, U.S. Large Capitalization Equity
Fund, Emerging Markets Equity Fund or Emerging Markets Debt Fund, may be
subject to greater fluctuations in value than an investment in a diversified
fund.
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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 June 30, 1998, approximately $286 billion, primarily for
pension and profit sharing institutional accounts. 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 Bahrain, Basel, Frankfurt, Geneva, Hong Kong, London, Melbourne,
New York, Paris, Rio de Janeiro, Singapore, Sydney, Tokyo and Zurich in
addition to its principal office at 209 South LaSalle Street, Chicago, IL
60604-1295. Brinson Partners is a direct wholly-owned subsidiary of UBS A.G.
UBS A.G., with headquarters in Basel, Switzerland, is an internationally
diversified organization with operations in many aspects of the financial
services industry. UBS A.G. was formed by the merger of Union Bank of
Switzerland and Swiss Bank Corporation in June 1998.
Brinson Partners also serves as the investment advisor to nine other
investment companies: Brinson Relationship Funds, which includes seventeen
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 Annuity Series Trust - 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, 1998, 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. Large Capitalization Growth Fund/1/............................ 0.70
U.S. Small Capitalization Fund/1/................................... 1.00
U.S. Bond Fund...................................................... 0.50
High Yield Bond Fund/1/............................................. 0.60
Global (ex-U.S.) Equity Fund........................................ 0.80
Emerging Markets Equity Fund/1/..................................... 1.10
Emerging Markets Debt Fund/1/....................................... 0.65
</TABLE>
- ----------
/1/The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Fund,
High Yield Bond Fund, Emerging Markets Equity Fund and Emerging Markets Debt
Fund each commenced operations on December , 1998.
The fee payable to Brinson Partners by the Global Fund, Global Equity Fund,
U.S. Small Capitalization Fund, Global (ex-U.S.) Equity Fund, Emerging Markets
Equity Fund and Emerging Markets Debt Fund 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 UBS
Investment Fund--Global, UBS Investment Fund--Global Equity, UBS Investment
Fund--Global Bond, UBS Investment Fund--U.S. Balanced, UBS Investment Fund--
U.S. Equity, UBS Investment Fund--U.S. Large Capitalization Equity, UBS
Investment Fund--U.S. Large Capitalization Growth, UBS Investment Fund--U.S.
Small Capitalization Equity, UBS Investment Fund--U.S. Bond, UBS Investment
Fund--High Yield Bond, UBS Investment Fund--Global (ex-U.S.) Equity, UBS
Investment Fund--Emerging Markets Equity and UBS Investment Fund--Emerging
Markets Debt will never exceed 1.10%, 1.00%, 0.90%, 0.80%, 0.80%, 0.80%,
0.80%, 1.15%, 0.60%, 1.00%, 0.70%, 1.60% and 1.15%, 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.
26
<PAGE>
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.
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.
Investors Bank & Trust Company ("Investors Bank"), 200 Clarendon Street,
Boston, Massachusetts 02116, serves as a co-custodian for the U.S. Large
Capitalization Growth Fund, the U.S. Small Capitalization Fund and the High
Yield Bond Fund with respect to certain foreign securities until such
securities are transferred to MSTC. After such securities are transferred to
MSTC, MSTC will be the sole custodian for these Series under the terms of the
Services Agreement.
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 each 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 each 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 1-800-794-7753.
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
27
<PAGE>
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.
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 UBS Investment Funds class of shares of
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 (including IRAs).
Subsequent investments for Fund shares will be accepted in minimum amounts of
$50 (including IRAs). The Trust reserves the right to vary the initial
investment minimum and 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 UBS Investment Funds will be marketed directly through the offices of
UBS A.G. Through its branches and subsidiaries, UBS A.G. conducts securities
research, provides investment advisory services and manages mutual funds in
major cities throughout the world, including Amsterdam, Basel, Frankfurt,
Geneva, Hong Kong, Houston, London, Los Angeles, Luxembourg, Miami, Monte
Carlo, New York, Paris, San Francisco, Singapore, Sydney, Tokyo, Toronto and
Zurich.
The UBS Investment 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 UBS Investment Funds class of shares, however, are
subject to annual 12b-1 Plan expenses of up to a maximum of 0.90% (0.25% of
which are service fees to be paid by the Funds to FDI, dealers or others for
providing personal service and/or maintaining shareholder accounts) of the
Funds' average daily net assets of such shares.
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
28
<PAGE>
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 UBS Investment Funds class of 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.
PURCHASES MAY BE MADE IN ONE OF THE FOLLOWING WAYS:
<TABLE>
<CAPTION>
INITIAL INVESTMENT SUBSEQUENT INVESTMENTS
------------------------------- -------------------------------
<S> <C> <C>
MINIMUM $1,000 MINIMUM $50
BY MAIL n Complete and sign the Account n Make your check payable
6 Application accompanying this to "UBS Investment Fund-
Prospectus. ."
n Make your check payable to n Enclose the remittance
"UBS Investment Fund- ." portion of
your account statement and
include
the amount of investment, the
account name and number.
n Mail to the address indicated n Mail to the address indicated
on on
the Account Application. your account statement or
enclose
in the envelope provided.
BY WIRE n Call 1-800-794-7753 to
arrange for a wire
transaction.
LOGO n Wire federal funds within 24 n Wire federal funds to:
hours to: THE CHASE MANHATTAN BANK
THE CHASE MANHATTAN BANK ABA#021000021
ABA#021000021 DDA#9102-783504
DDA#9102-783504 FBO "UBS INVESTMENT FUND- "
FBO "UBS INVESTMENT FUND- " AND INCLUDE YOUR NAME AND
AND INCLUDE YOUR NAME AND NEW ACCOUNT NUMBER.
ACCOUNT NUMBER.
n Complete and sign the Account
Application and mail to the
address
indicated on the Account
Application immediately
following the initial wire
transaction.
BY TELEPHONE n Call 1-800-794-7753 to n Call 1-800-794-7753 to
= arrange for a telephone arrange for a telephone
transaction. transaction.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
INITIAL INVESTMENT SUBSEQUENT INVESTMENTS
------------------------------- -------------------------------
<S> <C> <C>
PURCHASING BY EXCHANGES n You may open a new account n You may purchase additional
O for a Series of the Trust by shares of a Series of the
making an exchange from an Trust by making an exchange
existing UBS Investment Funds from an existing UBS
class account of any other Investment Funds class account
Series of the Trust. Exchanges of any other Series of the
may be made by mail or Trust. Exchanges may be made
telephone. Call 1-800-794-7753 by mail or telephone. Call
for assistance. 1-800-794-7753 for assistance.
AUTOMATICALLY n Please refer to "Automatic n Please refer to "Automatic
Investment Plan" under Investment Plan" under
"Account Options" or call 1- "Account Options" or call 1-
800-794-7753 for assistance. 800-794-7753 for assistance.
</TABLE>
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 1-800-794-
7753.
<TABLE>
<CAPTION>
ACCOUNT OPTIONS INSTRUCTIONS
------------------------------ -----------------------------------------------
<C> <S> <C>
AUTOMATIC INVESTMENT PLAN n You may have money deducted directly
from your checking, savings or bank
money market accounts for investment in
the Funds each month or quarter.
n Complete the Automatic Investment Plan
section on the Account Application
accompanying this Prospectus and mail
it to the address indicated.
n The account must be opened first with
the initial $1,000 minimum investment,
with subsequent minimum investments of
$50 pursuant to the Automatic
Investment Plan.
n The account designated will be debited
in the specified amount, on the date
indicated, and Fund shares will be
purchased. The Trust may alter or
terminate the Automatic Investment Plan
at any time.
SYSTEMATIC WITHDRAWAL PLAN n A shareholder with a minimum account of
$10,000 may direct the transfer agent
to send the shareholder (or anyone the
shareholder designates) regular,
monthly, quarterly or semi-annual
payments. Each payment under a
Systematic Withdrawal Plan ("SWP") must
be at least $100. Such payments are
drawn from share redemptions.
n Shareholders participating in the SWP
must elect to have their dividends and
distributions automatically reinvested
in additional Fund shares.
n The Trust may terminate any SWP for an
account if the value of the account
falls below $5,000 as a result of share
redemptions or an exchange of shares of
a Fund for UBS Investment Funds class
of shares of another Series of the
Trust.
INDIVIDUAL RETIREMENT ACCOUNTS n An IRA is a tax-deferred retirement
savings account that may be used by an
individual under age 70 1/2 who has
compensation or self-employment income
and his or her unemployed spouse, or an
individual who has received a qualified
distribution from his or her employer's
retirement plan.
n The minimum purchase requirement for
IRAs is $1,000.
</TABLE>
30
<PAGE>
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 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
purchases 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.
31
<PAGE>
MINIMUM BALANCES
Due to the relatively high cost of maintaining smaller accounts, the Trust
reserves the right to involuntarily redeem shares in any Fund account for
their then current net asset value (which will be promptly paid to the
shareholder) if at any time the total investment does not have a value of at
least $1,000 as a result of redemptions and not due to changes in the asset
value of the Series. The shareholder will be notified that the value of his or
her Fund account is less than the required minimum and will be allowed at
least 60 days to bring the value of the account up to the minimum before the
redemption is processed.
SHARES MAY BE REDEEMED IN ONE OF THE FOLLOWING WAYS:
<TABLE>
<C> <S>
BY MAIL . Submit a written request for redemption with:
[LOGO]
. 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.
. To protect your account from fraud, the Fund and
its agents may require a signature guarantee for
certain redemptions to verify the identity of
the person who has authorized a redemption from
your account. Please contact the Fund for
further information.
. Mail to the address indicated on the Account
Application. Questions may be directed to the
transfer agent at 1-800-794-7753.
BY WIRE . This service must be elected either on the
[LOGO] initial application or subsequently arranged in
writing.
. Shares may be redeemed by instructing the
transfer agent by telephone at 1-800-794-7753.
. 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 1-800-794- . This service must be elected either on the
7753 initial application or subsequently arranged in
[LOGO] writing.
. Shares may be redeemed by instructing the
transfer agent by telephone at 1-800-794-7753.
. 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 1-800-794-7753
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
UBS Investment 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
32
<PAGE>
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 UBS Investment Funds class of shares of any
other Series within the Trust. Exchanges will not be permitted between the UBS
Investment Funds class of shares and either the Brinson Fund-Class N 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 UBS Investment Funds class of 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 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.
33
<PAGE>
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 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.
34
<PAGE>
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 the Brinson Fund-Class I will not incur any of
the expenses under the UBS Investment Funds-class' 12b-1 plan.
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 UBS
Investment Funds class of shares and the Brinson Fund-Class N 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 UBS Investment Funds class of
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 UBS Investment Funds
class of shares. The Plan permits each Series to reimburse FDI, Brinson
Partners and others from the assets of the UBS Investment Funds class of
shares a quarterly fee for services and expenses incurred in distributing and
promoting sales of the UBS Investment Fund class of 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 UBS
Investment Funds class of 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 UBS Investment
Funds or provide services with respect to the UBS Investment Funds.
UBS A.G., 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 UBS Investment Funds class of shares
of the Series.
The aggregate distribution fees paid by the Series from the assets of the
respective UBS Investment Funds class of shares to FDI and others under the
Plan may not exceed 0.90% of a Fund's average daily net assets in any year
(0.25% of which are service fees to be paid by the Series to FDI, dealers and
others, for providing personal service and/or maintaining shareholder
accounts). The Plan provides, however, that the aggregate distribution fees
for each respective Fund shall not exceed the following maximum amounts for
the 1999 fiscal year; UBS Investment Fund--Global--0.65%, UBS Investment
Fund--Global Equity--0.76%, UBS Investment Fund--Global Bond--0.49%, UBS
Investment Fund--U.S. Balanced--0.50%, UBS Investment Fund--U.S. Equity--
0.52%, UBS Investment Fund--U.S. Large Capitalization Equity--0.52%, UBS
Investment Fund--U.S. Large Capitalization Growth--0.77%, UBS Investment
Fund--U.S. Small Capitalization--0.77%, UBS Investment Fund--U.S. Bond--0.47%,
UBS Investment Fund--High Yield Bond--0.85%, UBS Investment Fund--Global (ex-
U.S.) Equity--0.84%, UBS Investment Fund--Emerging Markets Equity--0.85% and
UBS Investment Fund--Emerging Markets Debt--0.75%.
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The Plan applies only to the UBS Investment Funds class of 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' Brinson Fund-Class I or Brinson Fund-Class N shares. All payments
made by the UBS Investment Funds class of shares of a Series pursuant to the
Plan shall be made for the purpose of selling shares issued by the UBS
Investment Funds class of that 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 UBS
Investment Funds classes of shares, Brinson Fund-Class N and Brinson Fund-
Class I 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 UBS Investment Funds
class of shares are subject to separate 12b-1 fees. The per share dividends on
UBS Investment Funds class of 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 UBS Investment Funds class of 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 a Series at net asset value,
unless the shareholder has notified the transfer agent, in writing, of the
shareholder's election to receive them in cash. Distribution options may be
changed at any time by requesting a change in writing. Any check in payment of
dividends or other distributions which cannot be delivered by the Post Office
or which remains uncashed for a period of more than one year may be reinvested
in the shareholder's account at the then current net asset value and the
dividend option may be changed from cash to reinvest. Dividends are reinvested
on the ex dividend date (the "ex date") at the net asset value determined at
the close of business on that date. Please note that shares purchased shortly
before the record date for a dividend or distribution may have the effect of
returning capital although such dividends and distributions are subject to
taxes.
TAXES
Each Series has qualified, and intends to continue to qualify, for taxation
as a "regulated investment company" under the Internal Revenue Code of 1986,
as amended ("the Code"). Such qualification relieves a Series of liability for
federal income taxes to the extent the Series' earnings are distributed in
accordance with the Code. Each Series is treated as a separate corporate
entity for federal tax purposes.
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Distributions of any net investment income and of any net realized short-
term capital gains are taxable to shareholders as ordinary income. All
distributions may be subject to state and local taxes.
Distributions of net capital gain (the excess of net long-term capital gain
over net short-term capital loss) are taxable to shareholders as long-term
capital gain regardless of how long a shareholder may have held shares of a
Series. The tax treatment of distributions of ordinary income or capital gains
will be the same whether the shareholder reinvests the distributions or elects
to receive them in cash. A distribution will be treated as paid on December 31
of the current calendar year if it is declared in October, November or
December with a record date in such a month and paid during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Shareholders will be advised annually of the source and tax status of all
distributions for federal income tax purposes. Further information regarding
the tax consequences of investing in the Series is included in the Statement
of Additional Information. The above discussion is intended for general
information only. Investors should consult their own tax advisors for more
specific information on the tax consequences of particular types of
distributions.
Redemptions of Series shares, and the exchange of shares between two Series
of the Trust, are taxable events and, accordingly, shareholders may realize
capital gains or losses on these transactions.
Shareholders may be subject to back-up withholding on reportable dividend
and redemption payments ("back-up withholding") if a certified taxpayer
identification number is not on file with the Series, or if, to the Series'
knowledge, an incorrect number has been furnished, or if the Series has been
notified by the Internal Revenue Service that an account is subject to back-up
withholding. An individual's taxpayer identification number is the
individual's social security number.
If more than 50% of a Series' total assets at the close of its taxable year
consists of stock or securities in foreign corporations, the Series may elect
to "pass-through" to shareholders for foreign tax credit purposes the amount
of foreign income taxes paid by the Series with respect to its direct holdings
of securities in foreign corporations. A Series will make such an election
only if it deems such election to be in the best interests of its
shareholders. If this election is made, shareholders of the Series will be
required to include in their gross incomes their pro rata 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. A Series which makes investments in the
securities of foreign corporations may make investments in foreign companies
that are "passive foreign investment companies" ("PFICs"). These investments
in PFICs may cause a Series to pay income taxes and interest charges. If
possible, the Series will not invest in PFICs or will adopt other strategies
to avoid these taxes and charges.
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 thirteen different Series. The Trustees of the Trust
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may establish additional series or classes of shares without the approval of
shareholders. All of the Series, except the Global Bond Fund, U.S. Large
Capitalization Equity Fund, Emerging Markets Equity Fund and Emerging Markets
Debt 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 UBS Investment Funds 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 thirteen 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. Large Capitalization Growth Fund, U.S.
Small Capitalization Fund, U.S. Bond Fund, High Yield Bond Fund, Global (ex-
U.S.) Equity Fund, Emerging Markets Debt Fund and Emerging Markets 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 UBS Investment
Funds classes. Prior to September 15, 1998, the "UBS Investment Funds class"
was known as the "SwissKey Class" of shares.
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
UBS Investment Funds class shareholders may vote on matters related to the
Rule 12b-1 plan associated with that class. Only the Brinson Fund-Class N
shareholders may vote on matters related to the Rule 12b-1 plan associated
with that class.
As of August 18, 1998, UBS A.G. held of record more than 25% of the
outstanding shares of the Global Fund; UBS held of record more than 25% of the
outstanding shares of the Global Equity Fund; UBS held of record more than 25%
of the outstanding shares of the Global Bond Fund; UBS held of record more
than 25% of the outstanding shares of the U.S. Balanced Fund; UBS SA held of
record more than 25% of the outstanding shares of the U.S. Equity Fund; Thomas
J. Digenan held of record more than 25% of the outstanding shares of the U.S.
Large Capitalization Equity Fund; UBS SA held of record more than 25% of the
outstanding shares of the U.S. Bond Fund; UBS and UBS SA each held of record
more than 25% of the outstanding shares of the Global (ex-U.S.) Equity Fund. A
shareholder that holds such a percentage of the outstanding shares of a class
may be deemed a controlling person of that class under the Act.
SHAREHOLDER MEETINGS
The Trustees of the Trust do not intend to hold annual meetings of
shareholders of the Series. The SEC, however, requires the Trustees to
promptly call a meeting for the purpose of voting upon the question of removal
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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, U.S.
SMALL CAPITALIZATION FUND, U.S. BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT FUND)
As a result of the investment policies of the Global Fund, Global Bond Fund,
U.S. Balanced Fund, U.S. Small Capitalization Fund, U.S. Bond Fund, Emerging
Markets Equity Fund and Emerging Markets Debt 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 1-800-794-7753 or write to The Brinson Funds, P.O. Box
2798, Boston, MA 02208-2798.
YEAR 2000 ISSUES
Like other investment companies, as well as other financial and business
organizations around the world, the Trust could be adversely affected if the
computer systems used by the Advisor, MSTC, CGFSC and other service providers,
in performing their administrative functions for the Trust, do not properly
process and calculate date-related information and data as of and after
January 1, 2000. This is commonly known as the "Year 2000 Issue." The Year
2000 Issue, and, in particular, foreign service providers' responsiveness to
the issue, could
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affect portfolio and operational areas including securities trade processing,
interest and dividend payments, securities pricing, shareholder account
services, custody functions and others. The Advisor, MSTC and CGFSC are taking
steps that they believe are reasonably designed to address the Year 2000 Issue
with respect to computer systems that they use and to obtain reasonable
assurances that comparable steps are being taken by the Trust's other service
providers. These include identifying those systems that may not function
properly after December 31, 1999, and correcting or replacing those systems.
In addition, steps include testing the processing of Series data on all
systems relied on by the Advisor, MSTC and CGFSC. As of the date of this
Prospectus, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Series.
PERFORMANCE INFORMATION
From time to time, performance information, such as yield or total return,
may be quoted in advertisements or in communications to present or prospective
shareholders. Performance quotations represent the Funds' past performance and
should not be considered as representative of future results. The current
yield will be calculated by dividing the net investment income earned per
share by a Fund during the period stated in the advertisement (based on the
average daily number of shares entitled to receive dividends outstanding
during the period) by the maximum net asset value per share on the last day of
the period and annualizing the result on a semi-annual compounded basis. The
Funds' total return may be calculated on an annualized and aggregate basis for
various periods (which periods will be stated in the advertisement). Average
annual return reflects the average percentage change per year in value of an
investment in a Fund. Aggregate total return reflects the total percentage
change over the stated period.
To help investors better evaluate how an investment in the 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; Lehman Brothers 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. Except as noted, further information about the performance of
the Funds is included in the Funds' Annual Report dated June 30, 1998, which
may be obtained without charge by contacting the Trust at 1-800-794-7753. The
performance of the Predecessor Funds is included in the UBS Private Investor
Funds, Inc. Annual Report dated December 31, 1997 and Semi-Annual report dated
June 30, 1998, each of which may be obtained without charge by contacting the
Trust at 1-800-794-7753. The performance of the Emerging Markets Equity Fund
and the Emerging Markets Debt Fund commenced after June 30, 1998 and therefor
are not included in the Funds' 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, U.S. LARGE CAPITALIZATION
GROWTH FUND, U.S. SMALL CAPITALIZATION FUND, GLOBAL (EX-U.S.) EQUITY FUND AND
EMERGING MARKETS 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, except for
the U.S. Small Capitalization Fund, expect their U.S. equity investments to
emphasize large and intermediate capitalization companies. The U.S. Small
Capitalization Fund expects its U.S. equity investments to emphasize small
capitalization companies. The Global Fund, U.S. Small Capitalization Fund and
Emerging Markets Equity 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 and Emerging Markets Equity 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 (and Emerging Markets Equity
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,
U.S. BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT 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 (except
for the High Yield Bond Fund, Emerging Markets Equity Fund and the Emerging
Markets Debt Fund) 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 (except for the
High Yield Bond Fund, Emerging Markets Equity Fund and Emerging Markets Debt
Fund) 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. The High Yield Bond Fund may
invest up to 10% of its assets in securities rated below Caa by Moody's or CCC
by S&P. The Emerging Markets Equity Fund may invest up to 35% of its assets
and the Emerging Markets Debt Fund may invest substantially all of its assets
in fixed income
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securities rated below investment grade. Except for the High Yield Bond Fund,
Emerging Markets Equity Fund and Emerging Markets Debt Fund, to the extent
that a security held by a Series is downgraded to below investment grade, the
Series will dispose of that or another non-investment grade security so that
no more than 5% of its assets will be invested in below investment grade
securities. Other fixed income securities in which the Series may invest
include zero coupon securities, mortgage-backed securities, asset-backed
securities and when-issued securities.
The non-U.S. fixed income component of the Series will typically be invested
in the securities of non-U.S. governments, governmental agencies and
supranational issues. A supranational entity is an entity established or
financially supported by the national governments of one or more countries to
promote reconstruction or development. Examples of supranational entities
include, among others: the World Bank, the European Economic Community, the
European Coal and Steel Community, the European Investment Bank, the Inter-
American Development Bank, the Export-Import Bank and the Asian Development
Bank.
The Global Fund, Emerging Markets Equity Fund and Emerging Markets Debt 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.
Under the terms of an exemptive order issued by the SEC, each Series may
invest cash (i) held for temporary defensive purposes; (ii) not invested
pending investment in securities; (iii) that is set aside to cover an
obligation or commitment of the Series to purchase securities or other assets
at a later date; (iv) to be invested on a strategic management basis (i-iv is
herein referred to as "Uninvested Cash"); and (v) collateral that it receives
from the borrowers of its portfolio securities in connection with the Series'
securities lending program, in a series of shares of Brinson Supplementary
Trust (the "Supplementary Trust Series"). Brinson Supplementary Trust is a
private investment company which has retained the Advisor to manage its
investments. The Trustees of the Trust also serve as Trustees of the Brinson
Supplementary Trust. The Supplementary Trust Series will invest in U.S. dollar
denominated money market instruments having a dollar-weighted average maturity
of 90 days or less. A Series' investment of Uninvested Cash in shares of the
Supplementary Trust Series will not exceed 25% of the Series' total assets. In
the event that the Advisor waives 100% of its investment advisory fee with
respect to a Series, as calculated monthly, then that Series will be unable to
invest in the Supplementary Trust Series until additional investment advisory
fees are owed by the Series.
ZERO COUPON SECURITIES (GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND,
U.S. BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT 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
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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, U.S. BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY
FUND AND EMERGING MARKETS DEBT FUND): Mortgage-backed securities represent
direct or indirect participations in, or are secured by and payable from,
pools of mortgage loans secured by real property, and include single- and
multi-class pass-through securities and collateralized mortgage obligations.
These securities may be issued or guaranteed by agencies or instrumentalities
of the U.S. government. Other mortgage-backed securities are issued by private
issuers, generally originators of and investors in mortgage loans, including
savings associations, mortgage bankers, commercial banks, investment bankers
and special purpose entities (collectively, "private lenders"). Mortgage-
backed securities issued by private lenders may be supported by pools of
mortgage loans or other mortgage-backed securities that are guaranteed,
directly or indirectly, by the U.S. government or one of its agencies or
instrumentalities, or they may be issued without any governmental guarantee of
the underlying mortgage assets but with some form of non-governmental credit
enhancement.
Asset-backed securities have structural characteristics similar to mortgage-
backed securities. However, the underlying assets are not first-lien mortgage
loans or interests therein; rather, they include assets such as motor vehicle
installment sales contracts, other installment loan contracts, home equity
loans, leases of various types of property and receivables from credit card or
other revolving credit arrangements. Payments or distributions of principal
and interest on asset-backed securities may be supported by non-governmental
credit enhancements similar to those utilized in connection with mortgage-
backed securities.
The yield characteristics of mortgage- and asset-backed securities differ
from those of traditional debt obligations. Among the principal differences
are that interest and principal payments are made more frequently on mortgage-
and asset-backed securities, usually monthly, and that principal may be
prepaid at any time because the underlying mortgage loans or other assets
generally may be prepaid at any time. As a result, the rate of return on these
securities may be affected by prepayments of principal on the underlying
loans, which generally increase as interest rates decline. As a result, if a
Series purchases these securities at a premium, a prepayment rate that is
faster than expected will reduce yield to maturity, while a prepayment rate
that is slower than expected will have the opposite effect of increasing yield
to maturity. Conversely, if a Series purchases these securities at a discount,
a prepayment rate that is faster than expected will increase 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,
U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL CAPITALIZATION FUND, U.S.
BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND EMERGING
MARKETS DEBT 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
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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 accordance with SEC
positions. 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"), and such Segregated Assets shall be maintained in
accordance with pertinent SEC positions.
FOREIGN CURRENCY TRANSACTIONS (GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL BOND
FUND, U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL CAPITALIZATION FUND,
GLOBAL (EX-U.S.) EQUITY FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY
FUND AND EMERGING MARKETS DEBT 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 (except for the U.S. Large Capitalization Growth Fund,
the U.S. Small Capitalization Fund and the High Yield Bond Fund). 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 in accordance with SEC positions.
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,
U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL CAPITALIZATION FUND, GLOBAL
(EX-U.S.) EQUITY FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT 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 accordance with SEC positions.
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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
U.S. Large Capitalization Growth Fund, the U.S. Small Capitalization Fund, the
Global (ex-U.S.) Equity Fund, the High Yield Bond Fund, the Emerging Markets
Equity Fund and the Emerging Markets Debt 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, the U.S. Large
Capitalization Growth Fund, the U.S. Small Capitalization Fund, the Global
(ex-U.S.) Equity Fund, the High Yield Bond Fund, the Emerging Markets Equity
Fund and the Emerging Markets Debt 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.
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
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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.
SHORT SALES (U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL
CAPITALIZATION FUND AND HIGH YIELD BOND FUND): In the event that the Advisor
anticipates that the price of a security will decline, it may sell the
security short and borrow the same security from a broker or other institution
to complete the sale. The Series will only enter into short sales for hedging
purposes. The Series will incur a profit or a loss, depending upon whether the
market price of the security decreases or increases between the date of the
short sale and the date on which the Series must replace the borrowed
security. All short sales will be fully collateralized and the Series will not
sell securities short if immediately after and as a result of the short sale,
the value of all securities sold short by any Series exceeds 25% of its total
assets. Each Series will also limit short sales of any one issuer's securities
to 2% of its total assets and to 2% of any one class of the issuer's
securities.
PAY-IN-KIND BONDS (HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT FUND): The Series may invest in pay-in-kind bonds. Pay-
in-kind bonds are securities which pay interest through the issuance of
additional bonds. The Series will be deemed to receive interest over the life
of such bonds and may be treated for federal income tax purposes as if
interest were paid on a current basis, although no cash interest payments are
received by the Series until the cash payment date or until the bonds mature.
CONVERTIBLE SECURITIES (HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND
AND EMERGING MARKETS DEBT FUND): The Series may invest in convertible
securities which generally offer lower interest or dividend yields than
nonconvertible debt securities of similar quality. The value of convertible
securities may reflect changes in the value of the underlying common stock.
Convertible securities entail less credit risk than the issuer's common stock
because they rank senior to common stock.
EURODOLLAR SECURITIES (GLOBAL BOND FUND, HIGH YIELD BOND FUND, EMERGING
MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND): The Series may invest in
Eurodollar securities, which are fixed income securities of a U.S. issuer or a
foreign issuer that are issued outside the United States. Interest and
dividends on Eurodollar securities are payable in U.S. dollars.
BRADY BONDS (HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND EMERGING
MARKETS DEBT FUND): The Series may invest in Brady Bonds, which are securities
created through the exchange of existing commercial bank loans to public and
private entities in certain emerging markets for new bonds in connection with
debt restructurings under a debt restructuring plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan
debt restructurings have been implemented to date in Argentina, Bulgaria,
Brazil, Costa Rica, Jordan, Mexico, Nigeria, the Philippines, Poland, Uruguay,
Panama, Peru and Venezuela. Brady Bonds have been issued only during recent
years, and for that reason do not have a very long payment history. Brady
Bonds may be collateralized or uncollateralized, are issued in various
currencies (but primarily the U.S. dollar), and are actively traded in over-
the-counter secondary markets. Dollar-denominated, collateralized Brady Bonds,
which may be fixed-rate bonds or floating-rate bonds, are generally
collateralized in full as to principal by U.S. Treasury zero coupon bonds
having the same maturity as the bonds.
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Brady Bonds are often viewed as having three or four valuation components:
the collateralized repayment of principal at final maturity; the
collateralized interest payments; the uncollateralized interest payments; and
any uncollateralized repayment of principal at maturity (these
uncollateralized amounts constitute the "residual risk"). In light of the
residual risk of Brady Bonds and the history of defaults of countries issuing
Brady Bonds with respect to commercial bank loans by public and private
entities, investments in Brady Bonds may be viewed as speculative. There can
be no assurance that the Brady Bonds in which the Series invest will not be
subject to restructuring arrangements or to requests for a new credit which
may cause the Series to suffer a loss of interest or principal in any of their
holdings.
STRUCTURED SECURITIES (HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND
AND EMERGING MARKETS DEBT FUND): The Series may invest a portion of their
assets in entities organized and operated solely for the purpose of
restructuring the investment characteristics of sovereign debt obligations.
This type of restructuring involves the deposit with, or purchase by, an
entity, such as a corporation or trust, of specified instruments (such as
commercial bank loans or Brady Bonds) and the issuance by that entity of one
or more classes of securities ("Structured Securities") backed by, or
representing interests in, the underlying instruments. The cash flow of the
underlying instruments may be apportioned among the newly issued Structured
Securities to create securities with different investment characteristics,
such as varying maturities, payment priorities and interest rate provisions,
and the extent of the payments made with respect to Structured Securities is
dependent on the extent of the cash flow on the underlying instruments.
Because Structured Securities of the type in which the Series anticipates
investing typically involve no credit enhancement, their credit risk generally
will be equivalent to that of the underlying instruments. The Series is
permitted to invest in a class of Structured Securities that is either
subordinated or unsubordinated to the right of payment of another class.
Subordinated Structured Securities typically have higher yields and present
greater risks than unsubordinated Structured Securities. Structured Securities
are typically sold in private placement transactions, and there currently is
no active trading market for Structured Securities. Thus, investments by a
Series in Structured Securities will be limited by the Series' prohibition on
investing more than 15% of its net assets in illiquid securities.
LOAN PARTICIPATIONS AND ASSIGNMENTS (HIGH YIELD BOND FUND, EMERGING MARKETS
EQUITY FUND AND EMERGING MARKETS DEBT FUND): The Series may invest in fixed
rate and floating rate loans ("Loans") arranged through private negotiations
between an issuer of debt obligations and one or more financial institutions
("Lenders"). The Series' investments in Loans are expected in most instances
to be in the form of participations in loans ("Participations") or assignments
of all or a portion of Loans ("Assignments") from third parties.
The Series will have the right to receive payments of principal, interest
and any fees to which they are entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
borrower. In the event of the insolvency of the Lender selling a
Participation, the Series may be treated as general creditors of the Lender
and may not benefit from any set-off between the Lender and the borrower.
Certain Participations may be structured in a manner designed to avoid
purchasers of Participations being subject to the credit risk of the Lender
with respect to the Participation. Even under such a structure, in the event
of the Lender's insolvency, the Lender's servicing of the Participation may be
delayed and the assignability of the Participation may be impaired. The Series
will acquire Participations only if the Lender interpositioned between the
Series and the borrower is determined by the Advisor to be creditworthy. When
a Series purchases Assignments from Lenders, it will acquire direct rights
against the borrower on the Loan. However, because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, the rights and obligations acquired by the Series as the purchaser
of an Assignment may differ from, and be more limited than, those held by the
assigning Lender.
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Because there may be no liquid market for Participations and Assignments,
the Series anticipate that such securities could be sold only to a limited
number of institutional investors. The lack of a liquid secondary market may
have an adverse impact on the value of such securities and the Series' ability
to dispose of particular Assignments or Participations when necessary to meet
the Series' liquidity needs or in response to a specific economic event such
as a deterioration in the creditworthiness of the borrower or the Lender. The
lack of a liquid secondary market for Assignments and Participation also may
make it more difficult for the Series to assign a value to these securities
for purposes of valuing the Series' portfolios and calculating their net asset
values. To the extent that a Series cannot dispose of a Participation or
Assignment in the ordinary course of business within seven days at
approximately the value at which it has valued the Loan Participation or
Assignment, it will treat the Participation or Assignment as illiquid and
subject to its overall limit on illiquid investments of 15% of its net assets.
SWAPS (EMERGING MARKETS EQUITY FUND): The Series may engage in swaps,
including but not limited to interest rate, currency and index swaps and the
purchase or sale of related caps, floors and collars and other derivative
instruments. The Series expects to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a technique for
managing the portfolio's duration (i.e., the price sensitivity to changes in
interest rates), to protect against any increase in the price of securities
the Series anticipates purchasing at a later date or to gain exposure to
certain markets.
Interest rate swaps involve the exchange by the Series with another party of
their respective commitments to receive or pay interest (e.g., an exchange of
fixed rate payments for floating rate payments) with respect to a notional
amount of principal. Currency swaps involve the exchange of cash flows on a
notional amount based on changes in the values of referenced currencies.
The purchase of a cap entitles the purchaser to receive payments on a
notional principal amount from the party selling the cap to the extent that a
specified index exceeds a predetermined interest rate or amount. The purchase
of an interest rate floor entitles the purchaser to receive payments on a
notional principal amount from the party selling the floor to the extent that
a specified index falls below a predetermined interest rate or amount. A
collar is a combination of a cap and a floor that preserves a certain return
within a predetermined range of interest rates or values.
The use of swaps involves investment techniques and risks different from
those associated with ordinary portfolio security transactions. If the Advisor
is incorrect in its forecasts of market values, interest rates or other
applicable factors, the investment performance of the Series will be less
favorable than it would have been if this investment technique were not used.
Swaps do not involve the delivery of securities or other underlying assets or
principal. Thus, if the other party to a swap defaults, the Series' risk of
loss consists of the net amount of payments that the Series is contractually
entitled to receive. Under Internal Revenue Service rules, any lump sum
payment received or due under the notional principal contract must be
amortized over the life of the contract using the appropriate methodology
prescribed by the Internal Revenue Service.
The equity swaps in which the Series intends to invest involve agreements
with a counterparty. The return to the Series on any equity swap contract will
be the total return on the notional amount of the contract as if it were
invested in the stocks comprising the contract index in exchange for an
interest component based on the notional amount of the agreement. The Series
will only enter into an equity swap contract on a net basis, i.e., the two
parties' obligations are netted out, with the Series paying or receiving, as
the case may be, only the net amount of the payments. Payments under the
equity swap contracts may be made at the conclusion of the contract or
periodically during its term.
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If there is a default by the counterparty to a swap contract, the Series
will be limited to contractual remedies pursuant to the agreements related to
the transaction. There is no assurance that a swap contract counterparty will
be able to meet its obligations pursuant to a swap contract or that, in the
event of default, the Series will succeed in pursuing contractual remedies.
The Series thus assumes the risk that it may be delayed in or prevented from
obtaining payments owed to it pursuant to a swap contract. However, the amount
at risk is only the net unrealized gain, if any, on the swap, not the entire
notional amount. The Advisor will closely monitor, subject to the oversight of
the Board, the creditworthiness of swap counterparties in order to minimize
the risk of swaps.
The Advisor and the Trust do not believe that the Series' obligations under
swap contracts are senior securities and, accordingly, the Series will not
treat them as being subject to its borrowing or senior securities
restrictions. However, the net amount of the excess, if any, of the Series'
obligations over its entitlements with respect to each swap contract will be
accrued on a daily basis and an amount of cash, U.S. government securities or
other liquid assets having an aggregate market value at least equal to the
accrued excess will be segregated in accordance with SEC positions. To the
extent that the Series cannot dispose of a swap in the ordinary course of
business within seven days at approximately the value at which the Series has
valued the swap, it will treat the swap as illiquid and subject to its overall
limit on illiquid investments of 15% of the Series' total net assets.
INVESTMENT COMPANY SECURITIES (GLOBAL FUND, EMERGING MARKETS EQUITY FUND AND
EMERGING MARKETS DEBT FUND): The Trust has received an exemptive order (the
"Exemptive Order") from the SEC 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, EMERGING MARKETS EQUITY FUND AND EMERGING
MARKETS DEBT 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 obligation to
provide extracts to potential purchasers in a timely manner
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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
requirement 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 1-800-794-7753.
50
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[LOGO OF UBS INVESTMENT FUNDS]
PROSPECTUS
December __, 1998
UBS Investment Fund--Global
UBS Investment Fund--Global Equity
UBS Investment Fund--Global Bond
UBS Investment Fund--U.S. Balanced
UBS Investment Fund--U.S. Equity
UBS Investment Fund--U.S. Large
Capitalization Equity
UBS Investment Fund--U.S. Large
Capitalization Growth
UBS Investment Fund--U.S. Small
Capitalization
UBS Investment Fund--U.S. Bond
UBS Investment Fund--Higher
Yield Bond
UBS Investment Fund--Non-U.S. Equity
UBS Investment Fund--Emerging Markets
Equity
UBS Investment Fund--Emerging Markets
Debt
[LOGO OF UBS INVESTMENT FUNDS]
For Additional Information about
UBS Investment Funds, call:
1-800-794-7753
<PAGE>
THE BRINSON FUNDS
[BRINSON LOGO APPEARS HERE]
GLOBAL FUND
GLOBAL EQUITY FUND
GLOBAL BOND FUND
U.S. BALANCED FUND
U.S. EQUITY FUND
U.S. LARGE CAPITALIZATION EQUITY FUND
U.S. LARGE CAPITALIZATION GROWTH FUND
U.S. SMALL CAPITALIZATION FUND
U.S. BOND FUND
HIGH YIELD BOND FUND
GLOBAL (ex-U.S.) EQUITY FUND
EMERGING MARKETS EQUITY FUND
EMERGING MARKETS DEBT FUND
STATEMENT OF ADDITIONAL INFORMATION
December , 1998
The Brinson Funds (the "Trust") currently offers thirteen separate series,
each with its own investment objective and policies. The Trust also offers three
classes of shares for each series - the Brinson Fund-Class I, the Brinson Fund-
Class N and the UBS Investment Funds class. Information concerning the Brinson
Fund-Class I of each series is included in a separate Prospectus dated December
, 1998. Information concerning the Brinson Fund-Class N of each series is
included in a separate Prospectus dated December , 1998. Information
concerning the UBS Investment Funds class of shares of each series is included
in a separate Prospectus for the UBS Investment Funds dated December , 1998.
This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the current Prospectuses of the Trust. Much of the
information contained herein expands upon subjects discussed in the
Prospectuses. No investment in shares should be made without first reading the
applicable Prospectus. A copy of each Prospectus may be obtained without charge
from the Trust at the addresses and telephone numbers below.
UNDERWRITER: ADVISOR:
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 (Brinson Fund-Class I and
1-800-448-2430 (Brinson Fund-Class I Brinson Fund-Class N)
and Brinson Fund-Class N)
1-800-794-7753 (UBS Investment
Funds class)
1-800-794-7753 (UBS Investment Funds class)
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE BRINSON FUNDS.................................................................. 4
INVESTMENT STRATEGIES.............................................................. 4
INVESTMENTS RELATING TO ALL FUNDS.................................................. 4
Repurchase Agreements......................................................... 4
Reverse Repurchase Agreements................................................. 5
Borrowing..................................................................... 5
Loans of Portfolio Securities................................................. 5
Swaps......................................................................... 6
Futures....................................................................... 6
Options....................................................................... 7
Index Options................................................................. 10
Special Risks of Options on Indices........................................... 10
Rule 144A Securities.......................................................... 11
Other Investments............................................................. 11
INVESTMENTS RELATING TO THE GLOBAL FUNDS, U.S. LARGE CAPITALIZATION GROWTH FUND,
U.S. SMALL CAPITALIZATION FUND, HIGH YIELD BOND FUND AND THE GLOBAL (ex-U.S.)
EQUITY FUND........................................................................ 11
Foreign Securities............................................................ 12
Forward Foreign Currency Contracts............................................ 12
Options on Foreign Currencies................................................. 13
INVESTMENTS RELATING TO THE GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND,
U.S. BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND EMERGING
MARKETS DEBT FUND.................................................................. 14
Lower Rated Debt Securities................................................... 14
Convertible Securities........................................................ 15
When-Issued Securities........................................................ 15
Mortgage-Backed Securities and Mortgage Pass-Through Securities............... 16
Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage
Investment Conduits ("REMICs")........................................... 18
Other Mortgage-Backed Securities.............................................. 18
Asset-Backed Securities....................................................... 19
Zero Coupon and Delayed Interest Securities................................... 20
INVESTMENTS RELATING TO THE GLOBAL FUND, HIGH YIELD BOND FUND, EMERGING MARKETS
EQUITY FUND AND EMERGING MARKETS DEBT FUND......................................... 21
Emerging Markets Investments.................................................. 21
Risks of Investing in Emerging Markets........................................ 23
Investments in Affiliated Investment Companies................................ 24
INVESTMENT RESTRICTIONS............................................................ 25
MANAGEMENT OF THE TRUST............................................................ 26
Trustees and Officers......................................................... 26
Compensation Table............................................................ 28
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES................................ 29
INVESTMENT ADVISORY AND OTHER SERVICES............................................. 34
Advisor....................................................................... 34
Administrator................................................................. 36
Underwriter................................................................... 37
Distribution Plan............................................................. 38
Code of Ethics................................................................ 38
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS................................... 39
Portfolio Turnover............................................................ 40
SHARES OF BENEFICIAL INTEREST...................................................... 41
PURCHASES.......................................................................... 42
Exchanges of Shares........................................................... 42
Net Asset Value............................................................... 42
</TABLE>
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REDEMPTIONS................................................................ 44
Taxation.............................................................. 44
PERFORMANCE CALCULATIONS................................................... 47
Total Return.......................................................... 47
Yield................................................................. 49
FINANCIAL STATEMENTS....................................................... 49
CORPORATE DEBT RATINGS --- APPENDIX A...................................... A-1
</TABLE>
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THE BRINSON FUNDS
The Brinson Funds (the "Trust"), 209 South LaSalle Street, Chicago,
Illinois 60604-1295, is an open-end management investment company which
currently offers shares of thirteen series representing separate portfolios of
investments: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced
Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S Large
Capitalization Growth Fund, U.S. Small Capitalization Fund, U.S. Bond Fund, High
Yield Bond Fund, Global (ex-U.S.) Equity Fund (formerly, the Non-U.S.Equity
Fund), Emerging Markets Equity Fund and Emerging Markets Debt Fund (collectively
referred to as the "Series" or the "Funds", or individually as a "Series" or a
"Fund"). The Global Fund, Global Equity Fund, Global Bond Fund, Emerging Markets
Equity Fund and Emerging Markets Debt Fund are referred to herein collectively
as the "Global Funds" or individually as the "Global Fund" and the U.S. Balanced
Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large
Capitalization Growth Fund, U.S. Small Capitalization Fund, U.S. Bond Fund and
High Yield Bond Fund are referred to herein as the "U.S. Funds." The Trust
currently offers three classes of shares for each Series: the Brinson Fund-Class
I, Brinson Fund-Class N and UBS Investment Funds class of shares. The Brinson
Fund-Class I shares of each Series, which are designed primarily for
institutional investors, have no sales charges and are not subject to annual
12b-1 plan expenses. The Brinson Fund-Class N shares, which are available
exclusively to 401(k) participants, have no sales charges, but are subject to
annual 12b-1 plan expenses of 0.25% of average daily net assets of the
respective Series. The UBS Investment Funds class of shares of each Series have
no sales charges, but are subject to annual 12b-1 expenses of up to a maximum of
0.90% of average daily net assets of the respective Series.
INVESTMENT STRATEGIES
The following discussion of investment techniques and instruments
supplements and should be read in conjunction with the investment objectives and
policies set forth in the Prospectuses of the Funds. The investment practices
described below, except for the discussion of percentage limitations with
respect to portfolio loan transactions and borrowing, are not fundamental and
may be changed by the Board of Trustees without the approval of the
shareholders.
INVESTMENTS RELATING TO ALL FUNDS
The following discussion applies to all Series.
Repurchase Agreements
When a Series enters into a repurchase agreement, it purchases securities
from a bank or broker-dealer which simultaneously agrees to repurchase the
securities at a mutually agreed upon time and price, thereby determining the
yield during the term of the agreement. As a result, a repurchase agreement
provides a fixed rate of return insulated from market fluctuations during the
term of the agreement. The term of a repurchase agreement generally is short,
possibly overnight or for a few days, although it may extend over a number of
months (up to one year) from the date of delivery. Repurchase agreements will be
fully collateralized and the collateral will be marked-to-market daily. A Series
may not enter into a repurchase agreement having more than seven days remaining
to maturity if, as a result, such agreement, together with any other illiquid
securities held by the Series, would exceed 15% of the value of the net assets
of the Series.
In the event of bankruptcy or other default by the seller of the security
under a repurchase agreement, a Series may suffer time delays and incur costs or
possible losses in connection with the disposition of the collateral. In such
event, instead of the contractual fixed rate of return, the rate of return to a
Series would be dependent upon intervening fluctuations of the market value of
the underlying security and the accrued interest on the security. Although a
Series would have rights against the seller for breach of contract with respect
to any losses arising from market fluctuations following the
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failure of the seller to perform, the ability of a Series to recover damages
from a seller in bankruptcy or otherwise in default would be reduced.
Repurchase agreements are securities for purposes of the tax
diversification requirements that must be met for pass-through treatment under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, each Series will limit the value of its repurchase agreements on
each of the quarterly testing dates to ensure compliance with Subchapter M of
the Code.
Reverse Repurchase Agreements
Reverse repurchase agreements involve sales of portfolio securities of a
Series to member banks of the Federal Reserve System or securities dealers
believed creditworthy, concurrently with an agreement by the Series to
repurchase the same securities at a later date at a fixed price which is
generally equal to the original sales price plus interest. A Series retains
record ownership and the right to receive interest and principal payments on the
portfolio securities involved. In connection with each reverse repurchase
transaction, a Series will direct its custodian bank to place cash, U.S.
government securities, equity securities and/or investment and non-investment
grade debt securities in a segregated account of the Series in an amount equal
to the repurchase price. Any assets held in any segregated accounts maintained
by a Series with respect to any reverse repurchase agreements, when-issued
securities, options, futures, forward contracts or other derivative transactions
shall be liquid, unencumbered and marked-to-market daily (any such assets held
in a segregated account are referred to in this Statement of Additional
Information as "Segregated Assets"), and such Segregated Assets shall be
maintained in accordance with pertinent positions of the U.S. Securities and
Exchange Commission (the "SEC").
A reverse repurchase agreement involves the risk that the market value of
the securities retained by a Series may decline below the price of the
securities the Series has sold but is obligated to repurchase under the
agreement. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, the Series' use of the
proceeds of the agreement may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the Series' obligation to
repurchase the securities. Reverse repurchase agreements are considered
borrowings by the Series and as such, are subject to the same investment
limitations.
Borrowing
The Series may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. A Series will not borrow money in excess
of 33 1/3% of the value of its total assets. A Series has no intention of
increasing its net income through borrowing. Any borrowing will be done from a
bank with the required asset coverage of at least 300%. In the event that such
asset coverage shall at any time fall below 300%, a Series shall, within three
days thereafter (not including Sundays or holidays), or such longer period as
the SEC may prescribe by rules and regulations, reduce the amount of its
borrowings to such an extent that the asset coverage of such borrowings shall be
at least 300%. A Series will not pledge more than 10% of its net assets, or
issue senior securities as defined in the Investment Company Act of 1940, as
amended (the "Act"), except for notes to banks and reverse repurchase
agreements. Investment securities will not be purchased while a Series has an
outstanding borrowing that exceeds 5% of a Series' net assets.
Loans of Portfolio Securities
The Series may lend portfolio securities to qualified broker-dealers and
financial institutions provided: (1) the loan is secured continuously by
collateral marked-to-market daily and maintained in an amount at least equal to
the current market value of the securities loaned; (2) a Series may call the
loan at any time and receive the securities loaned; (3) a Series will receive
any interest or dividends paid on the
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loaned securities; and (4) the aggregate market value of securities loaned will
not at any time exceed 33 1/3% of the total assets of the Global Fund, Global
Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Bond Fund and Global (ex-U.S.) Equity Fund,
respectively.
Collateral will consist of U.S. and non-U.S. securities, cash equivalents
or irrevocable letters of credit. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to maintain the proper
amount of collateral. Therefore, a Series will only enter into portfolio loans
after a review of all pertinent factors by Brinson Partners, Inc. ("Brinson
Partners" or the "Advisor") under the supervision of the Board of Trustees,
including the creditworthiness of the borrower. Creditworthiness will be
monitored on an ongoing basis by the Advisor.
Swaps
The Series (except for the Global Equity Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Fund, High Yield Bond Fund and Global (ex-U.S.) Equity Fund) may
engage in swaps, including but not limited to interest rate, currency and index
swaps and the purchase or sale of related caps, floors, collars and other
derivative instruments. The Series expect to enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of the portfolio's duration, to protect against any increase in the price of
securities the Series anticipates purchasing at a later date, or to gain
exposure to certain markets in the most economical way possible.
The use of swaps involves investment techniques and risks different from
those associated with ordinary portfolio security transactions. If Brinson
Partners is incorrect in its forecast of market values, interest rates and other
applicable factors, the investment performance of the Series will be less
favorable than it would have been if this investment technique was never used.
Thus, if the other party to a swap defaults, a Series' risk of loss consists of
the net amount of interest payments that the Series is contractually entitled to
receive. Under Internal Revenue Service rules, any lump sum payment received or
due under the notional principal contract must be amortized over the life of the
contract.
Futures
The Series may enter into contracts for the purchase or sale for future
delivery of securities. The Global Funds and the Global (ex-U.S.) Equity Fund,
U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Fund and High
Yield Bond Fund may also enter into contracts for the purchase or sale for
future delivery of foreign currencies.
A purchase of a futures contract means the acquisition of a contractual
right to obtain delivery to a Series of the securities or foreign currency
called for by the contract at a specified price during a specified future month.
When a futures contract is sold, a Series incurs a contractual obligation to
deliver the securities or foreign currency underlying the contract at a
specified price on a specified date during a specified future month. A Series
may enter into futures contracts and engage in options transactions related
thereto to the extent that not more than 5% of the Series' assets are required
as futures contract margin deposits and premiums on options, and may engage in
such transactions to the extent that obligations relating to such futures and
related options on futures transactions represent not more than 25% of a Series'
assets.
When a Series enters into a futures transaction, it must deliver to the
futures commission merchant selected by a Series an amount referred to as
"initial margin." This amount is maintained by the futures commission merchant
in a segregated account at the custodian bank. Thereafter, a "variation margin"
may be paid by the Series to, or drawn by the Series from, such account in
accordance with controls set for such accounts, depending upon changes in the
price of the underlying securities subject to the futures contract.
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The Series will enter into futures transactions on domestic exchanges and,
to the extent such transactions have been approved by the Commodity Futures
Trading Commission for sale to customers in the United States, on foreign
exchanges. In addition, all of the Series except the Global Bond Fund and U.S.
Bond Fund may sell stock index futures in anticipation of or during a market
decline to attempt to offset the decrease in market value of their common stocks
that might otherwise result; and they may purchase such contracts in order to
offset increases in the cost of common stocks that they intend to purchase.
Unlike other futures contracts, a stock index futures contract specifies that no
delivery of the actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract.
While futures contracts provide for the delivery of securities, deliveries
usually do not occur. Contracts are generally terminated by entering into
offsetting transactions.
The Series may enter into futures contracts to protect against the adverse
affects of fluctuations in security prices, interest or foreign exchange rates
without actually buying or selling the securities or foreign currency. For
example, if interest rates are expected to increase, a Series might enter into
futures contracts for the sale of debt securities. Such a sale would have much
the same effect as selling an equivalent value of the debt securities owned by
the Series. If interest rates did increase, the value of the debt securities in
the portfolio would decline, but the value of the futures contracts to the
Series would increase at approximately the same rate, thereby keeping the net
asset value of the Series from declining as much as it otherwise would have.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to hedge in anticipation of subsequent purchases of
securities at higher prices. Since the fluctuations in the value of futures
contracts should be similar to those of debt securities, the Series could take
advantage of the anticipated rise in value of debt securities without actually
buying them until the market had stabilized. At that time, the futures contracts
could be liquidated and the Series could then buy debt securities on the cash
market.
To the extent that market prices move in an unexpected direction, a Series
may not achieve the anticipated benefits of futures contracts or may realize a
loss. For example, if a Series is hedged against the possibility of an increase
in interest rates which would adversely affect the price of securities held in
its portfolio and interest rates decrease instead, the Series would lose part or
all of the benefit of the increased value which it has because it would have
offsetting losses in its futures position. In addition, in such situations, if
the Series had insufficient cash, it may be required to sell securities from its
portfolio to meet daily variation margin requirements. Such sales of securities
may, but will not necessarily, be at increased prices which reflect the rising
market. A Series may be required to sell securities at a time when it may be
disadvantageous to do so.
Options
The Series may purchase and write call or put options on securities but
will only engage in option strategies for non-speculative purposes.
The U.S. Funds may invest in options that are listed on U.S. exchanges or
traded over-the-counter and the Global Funds, the U.S. Large Capitalization
Growth Fund, U.S. Small Capitalization Fund, and the Global (ex-U.S.) Equity
Fund may invest in options that are either listed on U.S. or recognized foreign
exchanges or traded over-the-counter. Certain over-the-counter options may be
illiquid. Thus, it may not be possible to close options positions and this may
have an adverse impact on a Series' ability to effectively hedge its securities.
The Series have been notified by the SEC that it considers over-the-counter
options to be illiquid. Accordingly, a Series will only invest in such options
to the extent consistent with its 15% limit on investments in illiquid
securities.
Purchasing Call Options - The Series may purchase call options on
securities to the extent that premiums paid by a Series do not aggregate more
than 20% of the Series' total assets. When a Series purchases a call option, in
return for a premium paid by the Series to the writer of the option, the Series
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obtains the right to buy the security underlying the option at a specified
exercise price at any time during the term of the option. The writer of the call
option, who receives the premium upon writing the option, has the obligation,
upon exercise of the option, to deliver the underlying security against payment
of the exercise price. The advantage of purchasing call options is that a Series
may alter portfolio characteristics and modify portfolio maturities without
incurring the cost associated with transactions.
A Series may, following the purchase of a call option, liquidate its
position by effecting a closing sale transaction. This is accomplished by
selling an option of the same series as the option previously purchased. The
Series will realize a profit from a closing sale transaction if the price
received on the transaction is more than the premium paid to purchase the
original call option; the Series will realize a loss from a closing sale
transaction if the price received on the transaction is less than the premium
paid to purchase the original call option.
Although the Series will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on an
exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that a Series would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by a Series may expire without any value
to the Series, in which event the Series would realize a capital loss which will
be short-term unless the option was held for more than one year.
Covered Call Writing - A Series may write covered call options from time to
time on such portions of its portfolio, without limit, as Brinson Partners
determines is appropriate in seeking to achieve the Series' investment
objective. The advantage to a Series of writing covered calls is that the Series
receives a premium which is additional income. However, if the security rises in
value, the Series may not fully participate in the market appreciation.
During the option period for a covered call option, the writer may be
assigned an exercise notice by the broker-dealer through whom such call option
was sold, requiring the writer to deliver the underlying security against
payment of the exercise price. This obligation is terminated upon the expiration
of the option or upon entering a closing purchase transaction. A closing
purchase transaction, in which a Series, as writer of an option, terminates its
obligation by purchasing an option of the same series as the option previously
written, cannot be effected with respect to an option once the option writer has
received an exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable a
Series to write another call option on the underlying security with either a
different exercise price or expiration date or both. A Series may realize a net
gain or loss from a closing purchase transaction depending upon whether the net
amount of the original premium received on the call option is more or less than
the cost of effecting the closing purchase transaction. Any loss incurred in a
closing purchase transaction may be partially or entirely offset by the premium
received from a sale of a different call option on the same underlying security.
Such a loss may also be wholly or partially offset by unrealized appreciation in
the market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
If a call option expires unexercised, the Series will realize a short-term
capital gain in the amount of the premium on the option less the commission
paid. Such a gain, however, may be offset by depreciation in the market value of
the underlying security during the option period. If a call option is exercised,
a Series will realize a gain or loss from the sale of the underlying security
equal to the
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difference between the cost of the underlying security and the proceeds of the
sale of the security plus the amount of the premium on the option less the
commission paid.
The Series will write call options only on a covered basis, which means
that a Series will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, a Series would be required to continue to hold a security which it
might otherwise wish to sell or deliver a security it would want to hold. The
exercise price of a call option may be below, equal to or above the current
market value of the underlying security at the time the option is written.
Purchasing Put Options - The Series may only purchase put options to the
extent that the premiums on all outstanding put options do not exceed 20% of a
Series' total assets. A Series will, at all times during which it holds a put
option, own the security covered by such option. With regard to the writing of
put options, each Series will limit the aggregate value of the obligations
underlying such put options to 50% of its total net assets. The purchase of the
put on substantially identical securities held will constitute a short sale for
tax purposes, the effect of which is to create short-term capital gain on the
sale of the security and to suspend running of its holding period (and treat it
as commencing on the date of the closing of the short sale) or that of a
security acquired to cover the same if, at the time the put was acquired, the
security had not been held for more than one year.
A put option purchased by a Series gives it the right to sell one of its
securities for an agreed price up to an agreed date. The Series intend to
purchase put options in order to protect against a decline in the market value
of the underlying security below the exercise price less the premium paid for
the option ("protective puts"). The ability to purchase put options will allow
the Series to protect unrealized gains in an appreciated security in their
portfolios without actually selling the security. If the security does not drop
in value, a Series will lose the value of the premium paid. A Series may sell a
put option which it has previously purchased prior to the sale of the securities
underlying such option. Such sale will result in a net gain or loss depending on
whether the amount received on the sale is more or less than the premium and
other transaction costs paid on the put option which is sold.
The Series may sell a put option purchased on individual portfolio
securities. Additionally, the Series may enter into closing sale transactions. A
closing sale transaction is one in which a Series, when it is the holder of an
outstanding option, liquidates its position by selling an option of the same
series as the option previously purchased.
Writing Put Options - The Series may also write put options on a secured
basis which means that a Series will maintain in a segregated account with its
custodian Segregated Assets in an amount not less than the exercise price of the
option at all times during the option period. The amount of Segregated Assets
held in the segregated account will be adjusted on a daily basis to reflect
changes in the market value of the securities covered by the put option written
by the Series. Secured put options will generally be written in circumstances
where Brinson Partners wishes to purchase the underlying security for a Series'
portfolio at a price lower than the current market price of the security. In
such event, a Series would write a secured put option at an exercise price
which, reduced by the premium received on the option, reflects the lower price
it is willing to pay.
Following the writing of a put option, a Series may wish to terminate the
obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Series may not, however, effect
such a closing transaction after it has been notified of the exercise of the
option.
Index Options
The Series may purchase exchange-listed call options on stock and fixed
income indices depending upon whether a Series is an equity or bond series and
sell such options in closing sale
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transactions for hedging purposes. A Series may purchase call options on broad
market indices to temporarily achieve market exposure when the Series is not
fully invested. A Series may also purchase exchange-listed call options on
particular market segment indices to achieve temporary exposure to a specific
industry.
In addition, the Series may purchase put options on stock and fixed income
indices and sell such options in closing sale transactions for hedging purposes.
A Series may purchase put options on broad market indices in order to protect
its fully invested portfolio from a general market decline. Put options on
market segments may be bought to protect a Series from a decline in value of
heavily weighted industries in the Series' portfolio. Put options on stock and
fixed income indices may also be used to protect a Series' investments in the
case of a major redemption.
The Series may also write (sell) put and call options on stock and fixed
income indices. While the option is open, a Series will maintain a segregated
account with its custodian in an amount equal to the market value of the option.
Options on indices are similar to regular options except that an option on
an index gives the holder the right, upon exercise, to receive an amount of cash
if the closing level of the index upon which the option is based is greater than
(in the case of a call) or lesser than (in the case of a put) the exercise price
of the option. This amount of cash is equal to the difference between the
closing price of the index and the exercise price of the option expressed in
dollars times a specified multiple (the "multiplier"). The indices on which
options are traded include both U.S. and non-U.S. markets.
Special Risks of Options on Indices
The Series' purchases of options on indices will subject them to the risks
described below.
Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular security, whether a Series will
realize gain or loss on the purchase of an option on an index depends upon
movements in the level of prices in the market generally or in an industry or
market segment rather than movements in the price of a particular security.
Accordingly, successful use by a Series of options on indices is subject to
Brinson Partners' ability to predict correctly the direction of movements in the
market generally or in a particular industry. This requires different skills and
techniques than predicting changes in the prices of individual securities.
Index prices may be distorted if trading of a substantial number of
securities included in the index is interrupted causing the trading of options
on that index to be halted. If a trading halt occurred, a Series would not be
able to close out options which it had purchased and the Series may incur losses
if the underlying index moved adversely before trading resumed. If a trading
halt occurred and restrictions prohibiting the exercise of options were imposed
through the close of trading on the last day before expiration, exercises on
that day would be settled on the basis of a closing index value that may not
reflect current price information for securities representing a substantial
portion of the value of the index.
If a Series holds an index option and exercises it before final
determination of the closing index value for that day, it runs the risk that the
level of the underlying index may change before closing. If such a change causes
the exercised option to fall "out-of-the-money," the Series will be required to
pay the difference between the closing index value and the exercise price of the
option (times the applicable multiplier) to the assigned writer. Although a
Series may be able to minimize this risk by withholding exercise instructions
until just before the daily cutoff time or by selling rather than exercising the
option when the index level is close to the exercise price, it may not be
possible to eliminate this risk entirely because the cutoff times for index
options may be earlier than those fixed for other types of options and may occur
before definitive closing index values are announced.
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Rule 144A Securities
The Series may invest in securities that are exempt under Rule 144A from
the registration requirements of the Securities Act of 1933, as amended (the
"1933 Act"). Those securities purchased under Rule 144A are traded among
qualified institutional investors.
The Board of Trustees of the Trust has instructed Brinson Partners to
consider the following factors in determining the liquidity of a security
purchased under Rule 144A: (i) the frequency of trades and trading volume for
the security; (ii) whether at least three dealers are willing to purchase or
sell the security and the number of potential purchasers; (iii) whether at least
two dealers are making a market in the security; and (iv) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
transfer). Although having delegated the day-to-day functions, the Board of
Trustees will continue to monitor and periodically review the Advisor's
selection of Rule 144A securities, as well as the Advisor's determinations as to
their liquidity. Investing in securities under Rule 144A could have the effect
of increasing the level of a Series' illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities. After the purchase of a security under Rule 144A, however, the Board
of Trustees and Brinson Partners will continue to monitor the liquidity of that
security to ensure that each Series has no more than 15% of its net assets in
illiquid securities.
The Series will limit investments in securities of issuers which the Series
are restricted from selling to the public without registration under the 1933
Act to no more than 15% of the Series' net assets, excluding restricted
securities eligible for resale pursuant to Rule 144A that have been determined
to be liquid pursuant to a policy and procedures adopted by the Trust's Board of
Trustees which includes continuing oversight by the Board of Trustees.
If Brinson Partners determines that a security purchased in reliance on
Rule 144A which was previously determined to be liquid, is no longer liquid and,
as a result, the Series' holdings of illiquid securities exceed the Series' 15%
limit on investment in such securities, Brinson Partners will determine what
action shall be taken to ensure that the Series continue to adhere to such
limitation, including disposing of illiquid assets which may include such Rule
144A securities.
Other Investments
The Board of Trustees may, in the future, authorize a Series to invest in
securities other than those listed in this Statement of Additional Information
and in the Prospectuses, provided such investment would be consistent with that
Series' investment objective and that it would not violate any fundamental
investment policies or restrictions applicable to that Series.
INVESTMENTS RELATING TO THE GLOBAL FUNDS, U.S LARGE CAPITALIZATION GROWTH FUND,
U.S. SMALL CAPITALIZATION FUND, HIGH YIELD BOND FUND AND GLOBAL (ex-U.S.) EQUITY
FUND
The following discussion of strategies, techniques and policies applies
only to the Global Fund, Global Equity Fund, Global Bond Fund, U.S. Large
Capitalization Growth Fund, U.S. Small Capitalization Fund, High Yield Bond Fund
and Global (ex-U.S.) Equity Fund.
Foreign Securities
Investors should recognize that investing in foreign issuers involves
certain considerations, including those set forth in the Series' Prospectuses,
which are not typically associated with investing in U.S. issuers. Since the
stocks of foreign companies are frequently denominated in foreign currencies,
and since the Series may temporarily hold uninvested reserves in bank deposits
in foreign currencies, the Series will be affected favorably or unfavorably by
changes in currency rates and in exchange control
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regulations and may incur costs in connection with conversions between various
currencies. The investment policies of the Series permit them to enter into
forward foreign currency exchange contracts, futures, options and interest rate
swaps (in the case of the Global Funds) in order to hedge portfolio holdings and
commitments against changes in the level of future currency rates.
There has been in the past, and there may be again in the future, an
interest equalization tax levied by the United States in connection with the
purchase of foreign securities such as those purchased by the Series. Payment of
an interest equalization tax, if imposed, would reduce the Series' rates of
return on investment. Dividends paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net return on such
investments as compared to dividends paid to the Series by U.S. corporations.
The Series' ability to "pass through" the foreign taxes paid for tax credit or
deduction purposes will be determined by the composition of the Series'
portfolios. More than 50% of a Series must be invested in stock or securities of
foreign corporations for "pass through" to be possible in the first instance.
Special rules govern the federal income tax treatment of certain transactions
denominated in terms of a currency other than the U.S. dollar or determined by
reference to the value of one or more currencies other than the U.S. dollar. The
types of transactions covered by the special rules generally include the
following: (i) the acquisition of, or becoming the obligor under, a bond or
other debt instrument (including, to the extent provided in the Treasury
Regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract and similar financial instruments other than any
"regulated futures contract" or "non-equity option" which would be marked-to-
market under the rules of Section 1256 of the Code if held at the end of the tax
year. The disposition of a currency other than the U.S. dollar by a U.S.
taxpayer is also treated as a transaction subject to the special currency rules.
However, foreign currency-related regulated futures contracts and non-equity
options are generally not subject to these special currency rules. If subject,
they are or would be treated as sold for their fair market value at year-end
under the marked-to-market rules applicable to other futures contracts, unless
an election is made to have such currency rules apply. With respect to
transactions covered by the special rules, foreign currency gain or loss is
calculated separately from any gain or loss on the underlying transaction and is
normally a taxable gain or loss. A taxpayer may elect to treat as capital gain
or loss foreign currency gain or loss arising from certain identified forward
contracts, futures contracts and options that are capital assets in the hands of
the taxpayer and which are not part of a straddle. Certain transactions subject
to the special currency rules that are part of a "section 988 hedging
transaction" (as defined in the Code and the Treasury Regulations) will be
integrated and treated as a single transaction or otherwise treated consistently
for purposes of the Code. The income tax effects of integrating and treating a
transaction as a single transaction are generally to create a synthetic debt
instrument that is subject to the original discount provisions. It is
anticipated that some of the non-U.S. dollar denominated investments and foreign
currency contracts the Series may make or enter into will be subject to the
special currency rules described above.
Forward Foreign Currency Contracts
The Series may purchase or sell currencies and/or engage in forward foreign
currency transactions in order to expedite settlement of portfolio transactions
and to manage currency risk.
Forward foreign currency contracts are traded in the inter-bank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement and no
commissions are charged at any stage for trades. The Series will account for
forward contracts by marking-to-market each day at current forward contract
values.
A Series will only enter into forward contracts to sell, for a fixed amount
of U.S. dollars or other appropriate currency, an amount of foreign currency, to
the extent that the value of the short forward contract is covered by the
underlying value of securities denominated in the currency being sold.
Alternatively, when a Series enters into a forward contract to sell an amount of
foreign currency, the Series' custodian or sub-custodian will place Segregated
Assets in a segregated account of the Series in
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an amount not less than the value of the Series' total assets committed to the
consummation of such forward contracts. If the additional Segregated Assets
placed in the segregated account decline, additional cash or securities will be
placed in the account on a daily basis so that the value of the account will
equal the amount of the Series' commitments with respect to such contracts.
Options on Foreign Currencies
The Series also may purchase and write put and call options on foreign
currencies (traded on U.S. and foreign exchanges or over-the-counter markets) to
manage the Series' exposure to changes in currency exchange rates. The Series
may purchase and write options on foreign currencies for hedging purposes in a
manner similar to that in which futures contracts on foreign currencies, or
forward contracts, will be utilized. For example, a decline in the dollar value
of a foreign currency in which portfolio securities are denominated will reduce
the dollar value of such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminutions in the value of
portfolio securities, the Series may purchase put options on the foreign
currency. If the dollar price of the currency does decline, a Series will have
the right to sell such currency for a fixed amount in dollars and will thereby
offset, in whole or in part, the adverse effect on its portfolio which otherwise
would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
dollar price of such securities, the Series may purchase call options on such
currency.
The purchase of such options could offset, at least partially, the effects
of the adverse movement in exchange rates. As in the case of other types of
options, however, the benefit to the Series to be derived from purchases of
foreign currency options will be reduced by the amount of the premium and
related transaction costs. In addition, where currency exchange rates do not
move in the direction or to the extent anticipated, a Series could sustain
losses on transactions in foreign currency options which would require it to
forego a portion or all of the benefits of advantageous changes in such rates.
The Series may write options on foreign currencies for the same types of
hedging purposes. For example, where a Series anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates, it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution in the value of
portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, a Series
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Series to hedge such
increased cost up to the amount of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Series would be required to purchase or sell the underlying currency at a loss
which may not be offset by the amount of the premium. Through the writing of
options on foreign currencies, a Series also may be required to forego all or a
portion of the benefit which might otherwise have been obtained from favorable
movements in exchange rates.
The Series may write covered call options on foreign currencies. A call
option written on a foreign currency by a Series is "covered" if the Series owns
the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by the custodian bank) upon conversion or exchange of other foreign currency
held in its portfolio. A call option is also covered if a Series has a call on
the same foreign currency and in the same principal amount as the call written
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where the exercise price of the call held (a) is equal to or less than the
exercise price of the call written, or (b) is greater than the exercise price of
the call written if the difference is maintained by the Series in Segregated
Assets in a segregated account with its custodian bank.
With respect to writing put options, at the time the put is written, a
Series will establish a segregated account with its custodian bank consisting of
Segregated Assets in an amount equal in value to the amount the Series will be
required to pay upon exercise of the put. The account will be maintained until
the put is exercised, has expired, or the Series has purchased a closing put of
the same series as the one previously written.
INVESTMENTS RELATING TO THE GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND,
U.S. BOND FUND, HIGH YIELD BOND FUND, EMERGING MARKETS EQUITY FUND AND EMERGING
MARKETS DEBT FUND
The following discussion applies to the Global Fund, Global Bond Fund, U.S.
Balanced Fund, U.S. Bond Fund, High Yield Bond Fund, Emerging Markets Equity
Fund and Emerging Markets Debt Fund.
Lower Rated Debt Securities
Fixed income securities rated lower than Baa by Moody's Investors Services,
Inc. or BBB by Standard & Poor's Ratings Group are considered to be of poor
standing and predominantly speculative. Such securities ("lower rated
securities") are commonly referred to as "junk bonds" and are subject to a
substantial degree of credit risk. Lower rated securities may be issued as a
consequence of corporate restructurings, such as leveraged buy-outs, mergers,
acquisitions, debt recapitalizations or similar events. Also, lower rated
securities are often issued by smaller, less creditworthy companies or by highly
leveraged (indebted) firms, which are generally less able than more financially
stable firms to make scheduled payments of interest and principal. The risks
posed by securities issued under such circumstances are substantial.
In the past, the high yields from lower rated securities have more than
compensated for the higher default rates on such securities. However, there can
be no assurance that diversification will protect the Series from widespread
bond defaults brought about by a sustained economic downturn, or that yields
will continue to offset default rates on lower rated securities in the future.
Issuers of these securities are often highly leveraged, so that their ability to
service their debt obligations during an economic downturn or during sustained
periods of rising interest rates may be impaired. In addition, such issuers may
not have more traditional methods of financing available to them and may be
unable to repay debt at maturity by refinancing. Further, an economic recession
may result in default levels with respect to such securities in excess of
historic averages.
The value of lower-rated securities will be influenced not only by changing
interest rates, but also by the bond market's perception of credit quality and
the outlook for economic growth. When economic conditions appear to be
deteriorating, lower rated securities may decline in market value due to
investors' heightened concern over credit quality, regardless of prevailing
interest rates.
Especially at such times, trading in the secondary market for lower rated
securities may become thin and market liquidity may be significantly reduced.
Even under normal conditions, the market for lower rated securities may be less
liquid than the market for investment grade corporate bonds. There are fewer
securities dealers in the high yield market and purchasers of lower rated
securities are concentrated among a smaller group of securities dealers and
institutional investors. In periods of reduced market liquidity, lower rated
securities prices may become more volatile.
Besides credit and liquidity concerns, prices for lower rated securities
may be affected by legislative and regulatory developments. For example, from
time to time, Congress has considered
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legislation to restrict or eliminate the corporate tax deduction for interest
payments or to regulate corporate restructurings such as takeovers or mergers.
Such legislation may significantly depress the prices of outstanding lower rated
securities. A description of various corporate debt ratings appears in Appendix
A to this Statement of Additional Information.
Convertible Securities (also for U.S. Large Capitalization Growth Fund and U.S.
Small Capitalization Fund)
The Series may invest in convertible securities which generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality. The value of convertible securities may reflect changes in the value
of the underlying common stock. Convertible securities entail less credit risk
than the issuer's common stock because they rank senior to common stock.
Convertible securities entitle the holder to exchange the securities for a
specified number of shares of common stock, usually of the same company, at
specified prices within a certain period of time and to receive interest or
dividends until the holder elects to convert. The provisions of any convertible
security determine its ranking in a company's capital structure. In the case of
subordinated convertible debentures, the holder's claims on assets and earnings
are subordinated to the claims of other creditors and are senior to the claims
of preferred and common shareholders. In the case of preferred stock and
convertible preferred stock, the holder's claim on assets and earnings are
subordinated to the claims of all creditors but are senior to the claims of
common shareholders.
When-Issued Securities (also for U.S. Large Capitalization Growth Fund and U.S.
Small Capitalization Fund)
The Series may purchase securities offered on a "when-issued" or "forward
delivery" basis. When so offered, the price, which is generally expressed in
yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for the when-issued or forward delivery securities take
place at a later date. During the period between purchase and settlement, no
payment is made by the purchaser to the issuer and no interest on the when-
issued or forward delivery security accrues to the purchaser. While when-issued
or forward delivery securities may be sold prior to the settlement date, it is
intended that a Series will purchase such securities with the purpose of
actually acquiring them unless a sale appears desirable for investment reasons.
At the time a Series makes the commitment to purchase a security on a when-
issued or forward delivery basis, it will record the transaction and reflect the
value of the security in determining its net asset value. The market value of
when-issued or forward delivery securities may be more or less than the purchase
price. The Advisor does not believe that a Series' net asset value or income
will be adversely affected by its purchase of securities on a when-issued or
forward delivery basis. The Series will establish a segregated account in which
it will maintain Segregated Assets equal in value to commitments for when-issued
or forward delivery securities.
Mortgage-Backed Securities and Mortgage Pass-Through Securities
The Series may also invest in mortgage-backed securities, which are
interests in pools of mortgage loans, including mortgage loans made by savings
and loan institutions, mortgage bankers, commercial banks and others. Pools of
mortgage loans are assembled as securities for sale to investors by various
governmental, government-related and private organizations as further described
below. The Series may also invest in debt securities which are secured with
collateral consisting of mortgage-backed securities (see "Collateralized
Mortgage Obligations") and in other types of mortgage-related securities.
The timely payment of principal and interest on mortgage-backed securities
issued or guaranteed by the Government National Mortgage Association ("GNMA") is
backed by GNMA and the full faith and credit of the U.S. government. These
guarantees, however, do not apply to the market value of Series shares. Also,
securities issued by GNMA and other mortgage-backed securities may be purchased
at a premium over the maturity value of the underlying mortgages. This premium
is not guaranteed and
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would be lost if prepayment occurs. Mortgage-backed securities issued by U.S.
government agencies or instrumentalities other than GNMA are not "full faith and
credit" obligations. Certain obligations, such as those issued by the Federal
Home Loan Bank are supported by the issuer's right to borrow from the U.S.
Treasury, while others such as those issued by the Federal National Mortgage
Association ("FNMA"), are supported only by the credit of the issuer.
Unscheduled or early payments on the underlying mortgages may shorten the
securities' effective maturities and reduce returns. The Series may agree to
purchase or sell these securities with payment and delivery taking place at a
future date. A decline in interest rates may lead to a faster rate of repayment
of the underlying mortgages and expose the Series to a lower rate of return upon
reinvestment. To the extent that such mortgage-backed securities are held by a
Series, the prepayment right of mortgagors may limit the increase in net asset
value of the Series because the value of the mortgage-backed securities held by
the Series may not appreciate as rapidly as the price of noncallable debt
securities.
A decline in interest rates may lead to a faster rate of repayment of the
underlying mortgages and expose a Series to a lower rate of return upon
reinvestment. To the extent that such mortgage-backed securities are held by a
Series, the prepayment right will tend to limit to some degree the increase in
net asset value of the Series because the value of the mortgage-backed
securities held by the Series may not appreciate as rapidly as the price of
noncallable debt securities.
For federal tax purposes other than diversification under Subchapter M,
mortgage-backed securities are not considered to be separate securities but
rather "grantor trusts" conveying to the holder an individual interest in each
of the mortgages constituting the pool.
Interests in pools of mortgage-backed securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities provide a monthly payment which consists of both
interest and principal payments. In effect, these payments are a "pass-through"
of the monthly payments made by the individual borrowers on their mortgage
loans, net of any fees paid to the issuer or guarantor of such securities.
Additional payments are caused by repayments of principal resulting from the
sale of the underlying property, refinancing or foreclosure, net of fees or
costs which may be incurred. Some mortgage-backed securities (such as securities
issued by the GNMA) are described as "modified pass-through." These securities
entitle the holder to receive all interest and principal payments owed on the
mortgage pool, net of certain fees, at the scheduled payments dates regardless
of whether or not the mortgagor actually makes the payment.
Any discount enjoyed on the purchases of a pass-through type mortgage-
backed security will likely constitute market discount. As a Series receives
principal payments, it will be required to treat as ordinary income an amount
equal to the lesser of the amount of the payment or the "accrued market
discount." Market discount is to be accrued either under a constant rate method
or a proportional method. Pass-through type mortgage-backed securities purchased
at a premium to face will be subject to a similar rule requiring recognition of
an offset to ordinary interest income, an amount of premium attributable to the
receipt of principal. The amount of premium recovered is to be determined using
a method similar to that in place for market discount. A Series may elect to
accrue market discount or amortize premium notwithstanding the amount of
principal received but such election will apply to all bonds held and thereafter
acquired unless permission is granted by the Commissioner of the Internal
Revenue Service to change such method.
The principal governmental guarantor of mortgage-related securities is
GNMA, which is a wholly-owned U. S. government corporation within the Department
of Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. government, the timely payment of principal and
interest on securities issued by institutions approved by GNMA (such as savings
and loan institutions, commercial banks and mortgage bankers) and backed by
pools of mortgages which are insured by the Federal Housing Authority or
guaranteed by the Veterans Administration. These guarantees, however, do not
apply to the market value or yield of mortgage-
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backed securities or to the value of Series shares. Also, GNMA securities often
are purchased at a premium over the maturity value of the underlying mortgages.
This premium is not guaranteed and should be viewed as an economic offset to
interest to be earned. If prepayments occur, less interest will be earned and
the value of the premium paid will be lost.
Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. government) include FNMA and the Federal Home Loan Mortgage
Corporation ("FHLMC"). FNMA is a government-sponsored corporation owned entirely
by private stockholders. It is subject to general regulation of the Secretary of
Housing and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) mortgages from a list of approved
seller/servicers which include state and federally chartered savings and loan
associations, mutual savings banks, commercial banks and credit unions and
mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to
timely payment of principal and interest by FNMA but are not backed by the full
faith and credit of the U.S. government.
FHLMC is a corporate instrumentality of the U.S. government and was created
by Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. Its stock is owned by the twelve Federal Home
Loan Banks. FHLMC issues Participation Certificates ("PCs") which represent
interests in conventional mortgages from FHLMC's national portfolio. FHLMC
guarantees the timely payment of interest and ultimate collection of principal,
but PCs are not backed by the full faith and credit of the U.S. government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create pass-
through pools of conventional mortgage loans. Such issuers may, in addition, be
the originators and/or servicers of the underlying mortgage loans as well as the
guarantors of the mortgage-related securities. Pools created by such non-
governmental issuers generally offer a higher rate of interest than government
and government-related pools because there are no direct or indirect government
or agency guarantees of payments. However, timely payment of interest and
principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit. The insurance guarantees are issued by governmental entities,
private insurers and the mortgage poolers. Such insurance and guarantees and the
creditworthiness of the issuers thereof will be considered in determining
whether a mortgage-related security meets a Series' investment quality
standards. There can be no assurance that the private insurers or guarantors can
meet their obligations under the insurance policies or guarantee or guarantees,
even if through an examination of the loan experience and practices of the
originators/servicers and poolers, the Advisor determines that the securities
meet the Series' quality standards. Although the market for such securities is
becoming increasingly liquid, securities issued by certain private organizations
may not be readily marketable.
Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage Investment
Conduits ("REMICs")
A CMO is a debt security on which interest and prepaid principal are paid,
in most cases, semi-annually. CMOs may be collateralized by whole mortgage loans
but are more typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC, or FNMA and their income streams.
Privately-issued CMOs tend to be more sensitive to interest rates than
Government-issued CMOs.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payments of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
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retired. An investor is partially guarded against a sooner than desired return
of principal because of the sequential payments.
In a typical CMO transaction, a corporation issues multiple series (e.g.,
A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to
purchase mortgages or mortgage pass-through certificates ("Collateral"). The
Collateral is pledged to a third party trustee as security for the Bonds.
Principal and interest payments from the Collateral are used to pay principal on
the Bonds in the order A, B, C, Z. The Series A, B and C Bonds all bear current
interest. Interest on the Series Z Bond is accrued and added to principal and a
like amount is paid as principal on the Series A, B, or C Bond currently being
paid off. When the Series A, B and C Bonds are paid in full, interest and
principal on the Series Z Bond begins to be paid currently. With some CMOs, the
issuer serves as a conduit to allow loan originators (primarily builders or
savings and loan associations) to borrow against their loan portfolios. REMICs
are private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities.
Most if not all newly-issued debt securities backed by pools of real estate
mortgages will be issued as regular and residual interests in REMICs because, as
of January 1, 1992, new CMOs which do not make REMIC elections will be treated
as "taxable mortgage pools," a wholly undesirable tax result. Under certain
transition rules, CMOs in existence on December 31, 1991 are unaffected by this
change. The Series will purchase only regular interests in REMICs. REMIC regular
interests are treated as debt of the REMIC and income/discount thereon must be
accounted for on the "catch-up method," using a reasonable prepayment assumption
under the original issue discount rules of the Code.
CMOs and REMICs issued by private entities are not government securities
and are not directly guaranteed by any government agency. They are secured by
the underlying collateral of the private issuer. Yields on privately-issued
CMOs, as described above, have been historically higher than yields on CMOs
issued or guaranteed by U.S. government agencies. However, the risk of loss due
to default on such instruments is higher since they are not guaranteed by the
U.S. government. Such instruments also tend to be more sensitive to interest
rates than U.S. government-issued CMOs. The Series will not invest in
subordinated privately-issued CMOs. For federal income tax purposes, the Series
will be required to accrue income on CMOs and REMIC regular interests using the
"catch-up" method, with an aggregate prepayment assumption.
Other Mortgage-Backed Securities
The Advisor expects that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those described above. The mortgages underlying these securities may
include alternative mortgage instruments, that is, mortgage instruments whose
principal or interest payments may vary or whose terms to maturity may differ
from customary long-term fixed rate mortgages. As new types of mortgage-related
securities are developed and offered to investors, the Advisor will, consistent
with a Series' investment objective, policies and quality standards, consider
making investments in such new types of mortgage-related securities. The Advisor
will not purchase any such other mortgage-backed securities until the Series'
Prospectuses and this Statement of Additional Information have been
supplemented.
Asset-Backed Securities also for U.S. Large Capitalization Growth Fund and U.S.
Small Capitalization Fund)
The Series may invest a portion of their assets in debt obligations known
as "asset-backed securities." Asset-backed securities are securities that
represent a participation in, or are secured by and payable from, a stream of
payments generated by particular assets, most often a pool or pools of similar
assets (e.g., receivables on home equity and credit loans and receivables
regarding automobile, credit card, mobile home and recreational vehicle loans,
wholesale dealer floor plans and leases). The High Yield Bond Fund will not
invest in asset-backed securities with remaining effective maturities of less
than thirteen months.
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Such receivables are securitized in either a pass-through or a pay-through
structure. Pass-through securities provide investors with an income stream
consisting of both principal and interest payments in respect of the receivables
in the underlying pool. Pay-through asset-backed securities are debt obligations
issued usually by a special purpose entity, which are collateralized by the
various receivables and in which the payments on the underlying receivables
provide that the Series pay the debt service on the debt obligations issued. The
Series may invest in these and other types of asset-backed securities that may
be developed in the future.
The credit quality of these securities depends primarily upon the quality
of the underlying assets and the level of credit support and/or enhancement
provided. Such asset-backed securities are subject to the same prepayment risks
as mortgage-backed securities. For federal income tax purposes, the Series will
be required to accrue income on pay-through asset-backed securities using the
"catch-up" method, with an aggregate prepayment assumption.
The credit quality of most asset-backed securities depends primarily on the
credit quality of the assets underlying such securities, how well the entity
issuing the security is insulated from the credit risk of the originator or any
other affiliated entities, and the amount and quality of any credit support
provided to the securities. The rate of principal payment on asset-backed
securities generally depends on the rate of principal payments received on the
underlying assets which in turn may be affected by a variety of economic and
other factors. As a result, the yield on any asset-backed security is difficult
to predict with precision and actual yield to maturity may be more or less than
the anticipated yield to maturity. Asset-backed securities may be classified as
"pass-through certificates" or "collateralized obligations."
Asset-backed securities are often backed by a pool of assets representing
the obligations of a number of different parties. To lessen the effect of
failures by obligors on underlying assets to make payment, such securities may
contain elements of credit support. Such credit support falls into two
categories: (i) liquidity protection; and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
due on the underlying pool is timely. Protection against losses resulting from
ultimate default enhances the likelihood of payments of the obligations on at
least some of the assets in the pool. Such protection may be provided through
guarantees, insurance policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the transaction
or through a combination of such approaches. The Series will not pay any
additional fees for such credit support, although the existence of credit
support may increase the price of a security.
Due to the shorter maturity of the collateral backing such securities,
there is less of a risk of substantial prepayment than with mortgage-backed
securities. Such asset-backed securities do, however, involve certain risks not
associated with mortgage-backed securities, including the risk that security
interests cannot be adequately, or in many cases, ever, established. In
addition, with respect to credit card receivables, a number of state and federal
consumer credit laws give debtors the right to set off certain amounts owed on
the credit cards, thereby reducing the outstanding balance. In the case of
automobile receivables, there is a risk that the holders may not have either a
proper or first security interest in all of the obligations backing such
receivables due to the large number of vehicles involved in a typical issuance
and technical requirements under state laws. Therefore, recoveries on
repossessed collateral may not always be available to support payments on the
securities.
Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "reserve
funds" (where cash or investments, sometimes funded from a portion of the
payments on the underlying assets, are held in
19
<PAGE>
reserve against future losses) and "over collateralization" (where the scheduled
payments on, or the principal amount of, the underlying assets exceeds that
required to make payments of the securities and pay any servicing or other
fees). The degree of credit support provided for each issue is generally based
on historical information respecting the level of credit information respecting
the level of credit risk associated with the underlying assets. Delinquencies or
losses in excess of those anticipated could adversely affect the return on an
investment in such issue.
Zero Coupon and Delayed Interest Securities
The Series may invest in zero coupon or delayed interest securities which
pay no cash income until maturity or a specified date when the securities begin
paying current interest (the "cash payment date") and are sold at substantial
discounts from their value at maturity. When held to maturity or cash payment
date, the entire income of such securities, which consists of accretion of
discount, comes from the difference between the purchase price and their value
at maturity or cash payment date. The discount varies depending on the time
remaining until maturity or cash payment date, prevailing interest rates,
liquidity of the security and the perceived credit quality of the issuer. The
discount, in the absence of financial difficulties of the issuer, decreases as
the final maturity or cash payment date of the security approaches. The market
prices of zero coupon and delayed interest securities are generally more
volatile and more likely to respond to changes in interest rates than the market
prices of securities having similar maturities and credit qualities that pay
interest periodically. Current federal income tax law requires that a holder of
a zero coupon security report as income each year the portion of the original
issue discount on such security (other than tax-exempt original issue discount
from a zero coupon security) that accrues that year, even though the holder
receives no cash payments of interest during the year. The Series will be
required to distribute such income to shareholders to comply with Subchapter M
of the Code and avoid excise taxes, even though the Series have not received any
cash from the issue.
Zero coupon securities are subject to greater market value fluctuations
from changing interest rates than debt obligations of comparable maturities
which make current distributions of interest (cash). Zero coupon convertible
securities offer the opportunity for capital appreciation as increases (or
decreases) in market value of such securities closely follow the movements in
the market value of the underlying common stock. Zero coupon convertible
securities generally are expected to be less volatile than the underlying common
stocks as they usually are issued with short maturities (15 years or less) and
are issued with options and/or redemption features exercisable by the holder of
the obligation entitling the holder to redeem the obligation and receive a
defined cash payment.
Zero coupon securities include securities issued directly by the U.S.
Treasury, and U.S. Treasury bonds or notes and their unmatured interest coupons
and receipts for their underlying principal ("coupons") which have been
separated by their holder, typically a custodian bank or investment brokerage
firm. A holder will separate the interest coupons from the underlying principal
(the "corpus") of the U.S. Treasury security. A number of securities firms and
banks have stripped the interest coupons and receipts and then resold them in
custodial receipt programs with a number of different names, including "Treasury
Income Growth Receipts" ("TIGRS") and Certificate of Accrual on Treasuries
("CATS"). The underlying U.S. Treasury bonds and notes themselves are held in
book-entry form at the Federal Reserve Bank or, in the case of bearer securities
(i.e., unregistered securities which are owned ostensibly by the bearer or
holder thereof), in trust on behalf of the owners thereof. Counsel to the
underwriters of these certificates or other evidences of ownership of the U.S.
Treasury securities has stated that for federal tax and securities purposes, in
its opinion, purchasers of such certificates, such as the Series, most likely
will be deemed the beneficial holder of the underlying U.S. government
securities. The Series understand that the staff of the SEC no longer considers
such privately stripped obligations to be U.S. government securities, as defined
in the Act; therefore, the Series intends to adhere to this staff position and
will not treat such privately stripped obligations to be U.S. government
securities for the purpose of determining if the Series is "diversified," or for
any other purpose, under the Act.
20
<PAGE>
The U.S. Treasury has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and corpus payments on Treasury securities through the Federal
Reserve book-entry record-keeping system. The Federal Reserve program as
established by the U.S. Treasury Department is known as "STRIPS" or "Separate
Trading of Registered Interest and Principal of Securities." Under the STRIPS
program, a Series will be able to have its beneficial ownership of zero coupon
securities recorded directly in the book-entry record-keeping system in lieu of
having to hold certificates or other evidences of ownership of the underlying
U.S. Treasury securities.
When U.S. Treasury obligations have been stripped of their unmatured
interest coupons by the holder, the principal or corpus is sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. Once stripped or separated, the corpus and coupons may be sold
separately. Typically, the coupons are sold separately or grouped with other
coupons with like maturity dates and sold in such bundled form. Purchasers of
stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero coupon securities that the U.S. Treasury
sells itself. These stripped securities are also treated as zero coupon
securities with original issue discount for tax purposes.
INVESTMENTS RELATING TO THE GLOBAL FUND, HIGH YIELD BOND FUND, EMERGING MARKETS
EQUITY FUND AND EMERGING MARKETS DEBT FUND
Emerging Markets Investments
The Global Fund may invest up to 10% of its assets, and the Emerging
Markets Equity Fund and Emerging Markets Debt Fund may invest substantially all
of their assets, in equity and debt securities of emerging market issuers, or
securities with respect to which the return is derived from the equity or debt
securities of issuers in emerging markets. The High Yield Bond Fund does not
expect to invest more than 25% of its assets in securities of foreign issuers.
The Series may invest in equity securities of issuers in emerging markets, or
securities with respect to which the return is derived from the equity
securities of issuers in emerging markets. The Series also may invest in fixed
income securities of emerging market issuers, including government and
government-related entities (including participation in loans between
governments and financial institutions), and of entities organized to
restructure outstanding debt of such issuers. The Series also may invest in debt
securities of corporate issuers in developing countries.
The Series' investments in emerging market government and government-
related securities may consist of (i) debt securities or obligations issued or
guaranteed by governments, governmental agencies or instrumentalities and
political subdivisions located in emerging countries (including participation in
loans between governments and financial institutions), (ii) debt securities or
obligations issued by government owned, controlled or sponsored entities located
in emerging countries and (iii) interests in issuers organized and operated for
the purpose of restructuring the investment characteristics of instruments
issued by any of the entities described above.
The Series' investments in the fixed income securities of emerging market
issuers may include investments in Brady Bonds, Structured Securities, Loan
Participation and Assignments (as such capitalized terms are defined below), and
certain non-publicly traded securities.
Brady Bonds are securities created through the exchange of existing
commercial bank loans to public and private entities in certain emerging markets
for new bonds in connection with debt restructurings under a debt restructuring
plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady (the
"Brady Plan"). Brady Bonds may be collateralized or uncollateralized, are issued
in various currencies (but primarily the U.S. dollar), and are actively traded
in over-the-counter secondary markets. Dollar-denominated, collateralized Brady
Bonds, which may be fixed-rate bonds or floating-rate bonds, are generally
collateralized in full as to principal by U.S. Treasury zero coupon bonds having
the same maturity as the bonds.
21
<PAGE>
Structured Securities are issued by entities organized and operated solely
for the purpose of restructuring the investment characteristics of sovereign
debt obligations. This type of restructuring involves the deposit with, or
purchase by, an entity, such as a corporation or trust, of specified instruments
(such as commercial bank loans or Brady Bonds) and the issuance by that entity
of one or more classes of securities ("Structured Securities") backed by, or
representing interests in, the underlying instruments.
The Series may invest in fixed rate and floating rate loans ("Loans")
arranged through private negotiations between an issuer of sovereign debt
obligations and one or more financial institutions ("Lenders"). The Series'
investments in Loans are expected in most instances to be in the form of a
participation in loans ("Participation") and assignments of all or a portion of
Loans ("Assignments") from third parties. The Series will have the right to
receive payments of principal, interest and any fees to which they are entitled
only from the Lender selling the Participation and only upon receipt by the
Lender of the payments from the borrower. In the event of the insolvency of the
Lender selling a Participation, the Series may be treated as a general creditor
of the Lender and may not benefit from any set-off between the Lender and the
borrower.
When a Series purchases Assignments from Lenders, it will acquire direct
rights against the borrower on the Loan. However, because Assignments are
arranged through private negotiations between potential assignees and potential
assignors, the rights and obligations acquired by the Series as the purchaser of
an Assignment may differ from, and be more limited than, those held by the
assigning Lender.
The Series also may invest in securities that are neither listed on a stock
exchange nor traded over-the-counter, including privately placed securities and
limited partnerships. Investing in such unlisted emerging market equity
securities, including investments in new and early stage companies, may involve
a high degree of business and financial risk that can result in substantial
losses. As a result of the absence of a public trading market for these
securities, they may be less liquid than publicly traded securities.
The Series' investments in emerging market securities will at all times be
limited by the Series' prohibition on investing more than 15% of its net assets
in illiquid securities.
Risks of Investing in Emerging Markets
Compared to the United States and other developed countries, emerging
countries may have relatively unstable governments, economies based on only a
few industries, and securities markets that trade only a small number of
securities and employ settlement procedures different from those used in the
United States. Prices on these exchanges tend to be volatile and, in the past,
securities in these countries have offered greater potential for gain (as well
as loss) than securities of companies located in developed countries. Further,
investments by foreign investors are subject to a variety of restrictions in
many emerging countries. Countries such as those in which the Series may invest
have historically experienced and may continue to experience, high rates of
inflation, high interest rates, exchange rate fluctuations or currency
depreciation, large amounts of external debt, balance of payments and trade
difficulties and extreme poverty and unemployment. Additional factors which may
influence the ability or willingness to service debt include, but are not
limited to, a country's cash flow situation, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, its government's policy towards the
International Monetary Fund, the World Bank and other international agencies and
the political constraints to which a government debtor may be subject.
The ability of a foreign government or government-related issuer to make
timely and ultimate payments on its external debt obligations will be strongly
influenced by the issuer's balance of payments,
22
<PAGE>
including export performance, its access to international credits and
investments, fluctuations in interest rates and the extent of its foreign
reserves. A country whose exports are concentrated in a few commodities or whose
economy depends on certain strategic imports could be vulnerable to fluctuations
in international prices of these commodities or imports. To the extent that a
country receives payment for its exports in currencies other than dollars, its
ability to make debt payments denominated in dollars could be adversely
affected. If a foreign government or government-related issuer cannot generate
sufficient earnings from foreign trade to service its external debt, it may need
to depend on continuing loans and aid from foreign governments, commercial
banks, and multilateral organizations, and inflows of foreign investment. The
commitment on the part of these foreign governments, multilateral organizations
and others to make such disbursements may be conditioned on the government's
implementation of economic reforms and/or economic performance and the timely
service of its obligations. Failure to implement such reforms, achieve such
levels of economic performance or repay principal or interest when due may
curtail the willingness of such third parties to lend funds, which may further
impair the issuer's ability or willingness to service its debts in a timely
manner. The cost of servicing external debt will also generally be adversely
affected by rising international interest rates, because many external debt
obligations bear interest at rates which are adjusted based upon international
interest rates. The ability to service external debt will also depend on the
level of the relevant government's international currency reserves and its
access to foreign exchange. Currency devaluations may affect the ability of a
governmental issuer to obtain sufficient foreign exchange to service its
external debt.
As a result of the foregoing, a governmental issuer may default on its
obligations. If such a default occurs, the Series may have limited effective
legal recourse against the issuer and/or guarantor. Remedies must, in some
cases, be pursued in the courts of the defaulting country itself, and the
ability of the holder of foreign government and government-related debt
securities to obtain recourse may be subject to the political climate in the
relevant country. In addition, no assurance can be given that the holders of
commercial bank debt will not contest payments to the holders of other foreign
government and government-related debt obligations in the event of default under
their commercial bank loan agreements.
The issuers of the government and government-related debt securities in
which the Series expects to invest have in the past experienced substantial
difficulties in servicing their external debt obligations, which has led to
defaults on certain obligations and the restructuring of certain indebtedness.
Restructuring arrangements have included, among other things, reducing and
rescheduling interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and unpaid interest to
Brady Bonds, and obtaining new credit to finance interest payments. Holders of
certain foreign government and government-related debt securities may be
requested to participate in the restructuring of such obligations and to extend
further loans to their issuers. There can be no assurance that the Brady Bonds
and other foreign government and government-related debt securities in which the
Series may invest will not be subject to similar defaults or restructuring
arrangements which may adversely affect the value of such investments.
Furthermore, certain participants in the secondary market for such debt may be
directly involved in negotiating the terms of these arrangements and may
therefore have access to information not available to other market participants.
Payments to holders of the high yield, high risk, foreign debt securities
in which the Series may invest may be subject to foreign withholding and other
taxes. Although the holders of foreign government and government-related debt
securities may be entitled to tax gross-up payments from the issuers of such
instruments, there is no assurance that such payments will be made.
Investments in Affiliated Investment Companies
The Series may invest in securities issued by other registered investment
companies advised by Brinson Partners pursuant to exemptive relief granted by
the SEC. Currently, the Global Fund is the only Series of the Trust that intends
to invest in portfolios of Brinson Relationship Funds, another investment
23
<PAGE>
company which is advised by Brinson Partners, and only to the extent consistent
with the Advisor's investment process of allocating assets to specific asset
classes. The Global Fund will invest in corresponding portfolios of Brinson
Relationship Funds only to the extent that the Advisor determines that such
investments are a more efficient means for the Global Fund to gain exposure to
the asset classes referred to below than by investing directly in individual
securities.
To gain exposure to equity and fixed income securities of issuers located
in emerging market countries, the Global Fund may invest that portion of its
assets allocated to emerging markets investments in the Brinson Emerging Markets
Equity Fund portfolio and the Brinson Emerging Markets Debt Fund portfolio of
Brinson Relationship Funds. The investment objective of the Brinson Emerging
Markets Equity Fund and the Brinson Emerging Markets Debt Fund is to maximize
total U.S. dollar return, consisting of capital appreciation and current income,
while controlling risk. Under normal circumstances, at least 65% of the total
assets of the Brinson Emerging Markets Equity Fund is invested in the equity
securities of issuers in emerging markets or securities with respect to which
the return is derived from the equity securities of issuers in emerging markets.
At least 65% of the total assets of the Brinson Emerging Markets Debt Fund is
invested in the debt securities issued by governments, government-related
entities (including participations in loans between governments and financial
institutions), corporations and entities organized to restructure outstanding
debt of issuers in emerging markets, or debt securities the return on which is
derived primarily from other emerging markets instruments. The Brinson Emerging
Markets Equity Fund and Brinson Emerging Markets Debt Fund are permitted to
invest in the same types of securities as the Global Fund may invest in
directly.
In lieu of investing directly in certain high yield, higher risk
securities, the Global Fund may invest a portion of its assets in the Brinson
High Yield Fund portfolio (the "High Yield Fund") of Brinson Relationship Funds.
The investment objective of the High Yield Fund is to maximize total U.S. dollar
return, consisting of capital appreciation and current income, while controlling
risk. The High Yield Fund maintains a high yield portfolio and as such, at least
65% of its assets are invested in high yield securities. The Global Fund
currently intends to limit its investment in non-investment grade debt
securities to no more than 5% of its net assets. Any investment in the High
Yield Fund will be considered within this limitation.
In lieu of investing directly in equity securities issued by companies with
relatively small overall market capitalizations, the Global Fund may invest a
portion of its assets in the Brinson Post-Venture Fund portfolio (the "Post-
Venture Fund") of Brinson Relationship Funds. The investment objective of the
Post-Venture Fund is to maximize total U.S. dollar return, consisting of capital
appreciation and current income, while controlling risk. The Post-Venture Fund
invests primarily in publicly-traded companies representing the lower 5% of the
Wilshire 5000 Index, and, as such, at least 65% of its assets are invested in
small capitalization equity securities.
Each portfolio of Brinson Relationship Funds in which the Global Fund may
invest is permitted to invest in the same securities of a particular asset class
in which the Global Fund is permitted to invest directly, and with similar
risks. Pursuant to undertakings with the SEC, the Global Fund will not be
subject to the imposition of double management or administration fees with
respect to its investments in Brinson Relationship Funds.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies and
may not be changed as to a Series, without the approval of a majority of the
outstanding voting securities (as defined in the Act) of the Series. Unless
otherwise indicated, all percentage limitations listed below apply to the Series
only at the time of the transaction. Accordingly, if a percentage restriction is
adhered to at the time of investment, a later increase or decrease in the
percentage which results from a relative change in values or from a change in a
Series' total assets will not be considered a violation.
24
<PAGE>
Except as set forth under "Investment Objectives and Policies" and
"Investment Considerations and Risks" in each Prospectus, or "Investment
Strategies" in this Statement of Additional Information, each 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 the Global (ex-
U.S.) Equity Fund may not:
(i) As to 75% of the total assets of each Series, purchase the
securities of any one issuer, other than securities issued by the
U.S. government or its agencies or instrumentalities, if immediately
after such purchase more than 5% of the value of the total assets of
a Series would be invested in securities of such issuer (this does
not apply to the Global Bond Fund);
(ii) Invest in real estate or interests in real estate (this will not
prevent a Series from investing in publicly-held real estate
investment trusts or marketable securities of companies which may
represent indirect interests in real estate), interests in oil, gas
and/or mineral exploration or development programs or leases;
(iii) Purchase or sell commodities or commodity contracts, but may enter
into futures contracts and options thereon in accordance with its
Prospectus. Additionally, each Series may engage in forward foreign
currency contracts for hedging and non-hedging purposes;
(iv) Make investments in securities for the purpose of exercising control
over or management of the issuer;
(v) Purchase the securities of any one issuer if, immediately after such
purchase, a Series would own more than 10% of the outstanding voting
securities of such issuer;
(vi) Sell securities short or purchase securities on margin, except such
short-term credits as are necessary for the clearance of
transactions. For this purpose, the deposit or payment by a Series
for initial or maintenance margin in connection with futures
contracts is not considered to be the purchase or sale of a security
on margin;
(vii) Make loans, except that this restriction shall not prohibit (a) the
purchase and holding of a portion of an issue of publicly
distributed or privately placed debt securities, (b) the lending of
portfolio securities, or (c) entry into repurchase agreements with
banks or broker-dealers;
(viii) Borrow money in excess of 33 1/3% of the value of its assets except
as a temporary measure for extraordinary or emergency purposes to
facilitate redemptions or issue senior securities. All borrowings
will be done from a bank and to the extent that such borrowing
exceeds 5% of the value of a Series' assets, asset coverage of at
least 300% is required. A Series will not purchase securities when
borrowings exceed 5% of that Series' total assets;
(ix) Purchase the securities of issuers conducting their principal
business activities in the same industry, other than obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities, if immediately after such purchase, the value of
a Series' investments in such industry would exceed 25% of the value
of the total assets of the Series across several countries;
(x) Act as an underwriter of securities, except that, in connection with
the disposition of a security, a Series may be deemed to be an
"underwriter" as that term is defined in the 1933 Act;
25
<PAGE>
(xi) Invest in securities of any open-end investment company, except that
(i) a Series may purchase securities of money market mutual funds,
(ii) the Global Fund and Global Equity Fund may each invest in the
securities of closed-end investment companies at customary brokerage
commission rates in accordance with the limitations imposed by the
Act and the rules thereunder, and (iii) in accordance with any
exemptive order obtained from the SEC which permits investment by a
Series in other Series or other investment companies or series
thereof advised by the Advisor. In addition, each Series may acquire
securities of other investment companies if the securities are
acquired pursuant to a merger, consolidation, acquisition, plan of
reorganization or a SEC approved offer of exchange;
(xii) Invest in puts, calls, straddles or combinations thereof except to
the extent disclosed in a Series' Prospectus; and
(xiii) Invest more than 5% of its total assets in securities of companies
less than three years old. Such three year periods shall include the
operation of any predecessor company or companies.
Except as set forth under "Investment Objectives and Policies" and
"Investment Considerations and Risks" in each Prospectus, or "Investment
Strategies" in this Statement of Additional Information, each of the U.S. Large
Capitalization Growth Fund, U.S. Small Capitalization Fund, High Yield Bond
Fund, Emerging Markets Equity Fund and Emerging Markets Debt Fund may not:
(i) As to 75% of the total assets of each Series, purchase the securities
of any one issuer, other than securities issued by the U.S.
government or its agencies or instrumentalities, if immediately after
such purchase more than 5% of the value of the total assets of a
Series would be invested in securities of such issuer (this does not
apply to the Emerging Markts Equity Fund and Emerging Markets Debt
Fund) or purchase the securities of any one issuer if, immediately
after such purchase, a Series would own more than 10% of the
outstanding voting securities of such issuer;
(ii) Invest in real estate or interests in real estate (this will not
prevent a Series from investing in publicly-held real estate
investment trusts or marketable securities of companies which may
represent indirect interests in real estate), interests in oil, gas
and/or mineral exploration or development programs or leases;
(iii) Purchase or sell commodities or commodity contracts, but may enter
into futures contracts and options thereon in accordance with its
Prospectus. Additionally, each Series may engage in forward foreign
currency contracts for hedging and non-hedging purposes;
(iv) Make loans, except that this restriction shall not prohibit (a) the
purchase and holding of a portion of an issue of publicly distributed
or privately placed debt securities, (b) the lending of portfolio
securities, or (c) entry into repurchase agreements with banks or
broker-dealers;
(v) Borrow money in excess of 33 1/3% of the value of its assets except
as a temporary measure for extraordinary or emergency purposes to
facilitate redemptions or issue senior securities. All borrowings
will be done from a bank and to the extent that such borrowing
exceeds 5% of the value of a Series' assets, asset coverage of at
least 300% is required. A Series will not purchase securities when
borrowings exceed 5% of that Series' total assets;
26
<PAGE>
(vi) Purchase the securities of issuers conducting their principal
business activities in the same industry, other than obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities, if immediately after such purchase, the value of
a Series' investments in such industry would exceed 25% of the value
of the total assets of the Series across several countries; and
(vii) Act as an underwriter of securities, except that, in connection with
the disposition of a security, a Series may be deemed to be an
"underwriter" as that term is defined in the 1933 Act.
MANAGEMENT OF THE TRUST
Trustees and Officers
<TABLE>
<CAPTION>
POSITION
WITH
NAME AGE THE TRUST PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ---- --- --------- -------------------------------------------
<S> <C> <C> <C>
Walter E. Auch 77 Trustee Retired; formerly Chairman and CEO of Chicago Board of Options
6001 N. 62nd Place Exchange (1979-1986); Trustee of the Trust since May, 1994;
Paradise Valley, AZ 85253 Trustee, Brinson Relationship Funds since December, 1994;
Director, Thomsen Asset Management Corp. since 1987;
Director, Fort Dearborn Income Securities, Inc. 1987 to 1995;
Director, Geotek Industries, Inc. since 1989; Director, Smith
Barney VIP Fund since 1991; Director, SB Advisers since 1992;
Director, SB Trak since 1992; Director, Banyan Realty Trust
since 1987; Director, Banyan Land Fund II since 1988;
Director, Banyan Mortgage Investment Fund since 1989; and
Director, Express America Holdings Corp. since 1992, and
Nicholas/Applegate, Legend Properties, Inc.
Frank K. Reilly 62 Chairman and Professor, University of Notre Dame since 1982; Trustee of the
College of Business Trustee Trust since December, 1993; Trustee, Brinson Relationship
Administration Funds since September, 1994; Director of The Brinson Funds,
University of Notre Dame Inc. 1992-1993; Trustee, Brinson Trust Company, 1992-July,
Notre Dame, IN 46556-0399 1993; Director, Fort Dearborn Income Securities, Inc. since
1993; Director, First Interstate Bank of Wisconsin from
January, 1989 through March, 1990; Director, Greenwood Trust
Company since 1993; and Director, Dean Witter Trust, FSB,
since 1996.
Edward M. Roob 63 Trustee Retired; prior thereto, Senior Vice President, Daiwa
841 Woodbine Lane Securities America Inc. (1986-1993); Trustee of the Trust
Northbrook, IL 60002 since January, 1995; Trustee, Brinson Relationship Funds since
January 1995; Director, Fort Dearborn Income Securities, Inc.
since 1993; Director, Brinson Trust Company since 1993;
Committee Member, Chicago Stock Exchange since 1993; Member of
Board of Governors, Midwest Stock Exchange (1987-1991).
</TABLE>
27
<PAGE>
Other Officers
<TABLE>
<CAPTION>
POSITION
WITH OFFICER
NAME AGE THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ---- --- --------- ------- -------------------------------------------
<S> <C> <C> <C> <C>
E. Thomas McFarlan 54 President 1992 Managing Director, Brinson Partners, Inc. since 1991;
Treasurer and Principal Accounting Officer, The
Brinson Funds 1995-1997; President and Director of
The Brinson Funds, Inc., 1992 - 1993; Trustee,
Brinson Trust Company since 1991; prior thereto,
Executive Vice President of Washington Mutual Savings
Bank.
Thomas J. Digenan 34 Vice 1993 Director, Brinson Partners, Inc. since 1993;
President Assistant Treasurer, The Brinson Funds 1995-1997;
Assistant Secretary, The Brinson Funds, 1993 - 1995;
Assistant Secretary, The Brinson Funds, Inc., 1993;
prior thereto, Senior Manager, KPMG Peat Marwick.
Debra L. Nichols 32 Vice 1992 Director, Brinson Partners, Inc. since 1995;
President Associate, Brinson Partners, Inc. from 1991 to 1995;
Vice President, The Brinson Funds since 1997;
Secretary, The Brinson Funds 1997; Assistant
Secretary, The Brinson Funds 1993 - 1997; Assistant
Secretary, The Brinson Funds, Inc. 1992-1993; prior
thereto, private investor.
Carolyn M. Burke 31 Treasurer, 1995 Director, Brinson Partners, Inc., since January 1997;
Secretary Associate, Brinson Partners, Inc. from 1995 to 1997;
and Secretary, Treasurer and Principal Accounting
Principal Officer, The Brinson Funds since 1997; Assistant
Accounting Secretary, The Brinson Funds 1995-1997; prior
Officer thereto, Financial Analyst, Van Kampen American
Capital Investment Advisory Corp. 1992-1995; Senior
Accountant, KPMG Peat Marwick 1989-1992.
Catherine E. Macrae 41 Assistant 1995 Associate Director, Brinson Partners, Inc. since
Secretary January 1996; Associate Brinson Partners, Inc., from
1992 to 1996; prior thereto, Economic Analyst,
Chicago Mercantile Exchange.
</TABLE>
COMPENSATION TABLE
Trustees and Officers
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
FROM TRUST FOR FISCAL YEAR TRUST AND FUND COMPLEX
NAME AND POSITION HELD ENDED JUNE 30, 1998 PAID TO TRUSTEES/1/
- ---------------------- ------------------- -------------------
<S> <C> <C>
Walter E. Auch, Trustee $12,300 $24,900
6001 N. 62nd Place
Paradise Valley, AZ 85253
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
FROM TRUST FOR FISCAL YEAR TRUST AND FUND COMPLEX
NAME AND POSITION HELD ENDED JUNE 30, 1998 PAID TO TRUSTEES/1/
- ------------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
Frank K. Reilly, Trustee $14,400 $42,450
College of Business Administration
University of Notre Dame
Notre Dame, IN 46556-0399
Edward M. Roob, Trustee $14,400 $42,450
841 Woodbine Lane
Northbrook, IL 60002
</TABLE>
/1/ This amount represents the aggregate amount of compensation paid to the
Trustees for (a) service on the Board of Trustees for the Trust's most
recently completed fiscal year; and (b) service on the Board of Directors
of two other investment companies managed by Brinson Partners for the
calendar year ending June 30, 1998.
No officer or Trustee of the Trust who is also an officer or employee of
Brinson Partners receives any compensation from the Trust for services to the
Trust. The Trust pays each Trustee who is not affiliated with Brinson Partners a
fee of $6,000 per year, plus $300 per Series per meeting, and reimburses each
Trustee and officer for out-of-pocket expenses in connection with travel and
attendance at Board meetings.
The Board of Trustees has an Audit Committee which has the responsibility,
among other things, to (i) recommend the selection of the Trust's independent
auditors, (ii) review and approve the scope of the independent auditors' audit
activity, (iii) review the audited financial statements, and (iv) review with
such independent auditors the adequacy of the Series' basic accounting system
and the effectiveness of the Series' internal controls. The Audit Committee met
once during the fiscal year ended June 30, 1998. There is no separate nominating
or investment committee. Items pertaining to these committees are submitted to
the full Board of Trustees.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of August 18, 1998 , the officers and Trustees as a group owned less
than 1% of the outstanding equity securities of the Trust and of each class of
equity securities of the Trust.
As of August 18, 1998, , the following persons owned of record or
beneficially more than 5% of the outstanding voting shares of the Brinson Fund-
Class I, Brinson Fund-Class N, UBS Investment Funds class of shares or the
Series, as applicable:
GLOBAL FUND
<TABLE>
<CAPTION>
Percentage of Percentage of
Name & Address of Beneficial Owners Class Series
- ----------------------------------- ----- ------
<S> <C> <C>
Brinson Fund-Class I
First Alabama Bank 11.57% 11.02%
Mobile, AL
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SunTrust Bank 7.68% 7.32%
Atlanta, GA
American Express 6.36% 6.06%
Minneapolis, MN
Brinson Fund-Class N
*Emjayco 88.76% N/A
Milwaukee, WI
Merrill Lynch Trust Co. 10.66% N/A
Somerset, NJ
UBS Investment Funds Class
*UBS A.G. 74.50% N/A
New York, NY
</TABLE>
<TABLE>
<CAPTION>
GLOBAL EQUITY FUND
Percentage of Percentage of
Name & Address of Beneficial Owners Class Series
- ----------------------------------- ----- ------
<S> <C> <C>
Brinson Fund-Class I
*Wachovia Bank NA 42.06% 12.51%
Winston Salem, NC
Charles Schwab & Co. Inc. 18.39% 5.47%
San Francisco, CA
Wilmington Trust Co. 6.29% N/A
Wilmington, DE
National Financial Services Corp.
New York, NY 5.31% N/A
Brinson Fund-Class N
Brinson Partners, Inc. 100% N/A
Chicago, IL
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
UBS Investment Funds Class
*+UBS 38.10% 26.77%
New York, NY
UBS SA 22.83% 16.04%
Zurich, Switzerland
UBS SA 11.67% 8.20%
Zurich, Switzerland
</TABLE>
<TABLE>
<CAPTION>
GLOBAL BOND FUND
Percentage of Percentage of
Name & Address of Beneficial Owners Class Series
- --------------------------------------- ------------- -------------
<S> <C> <C>
Brinson Fund-Class I
*+Wilmington Trust Co. 27.78% 26.83%
Wilmington, DE
Baptist Health Systems, Inc. 16.93% 16.35%
Birmingham, AL
Charles Schwab & Co. Inc. 14.38% 13.89%
San Francisco, CA
Wilmington Trust Co. Trustee 11.40% 11.01%
Wilmington, DE
Munson Williams Proctor Institute 11.11% 10.73%
Utica, NY
Brinson Fund-Class N
*Emjayco 89.38% N/A
Milwaukee, WI
Brinson Partners, Inc. 10.62% N/A
Chicago, IL
UBS Investment Funds Class
*UBS 58.54% N/A
New York, NY
UBS 13.98% N/A
New York, NY
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
UBS SA 7.47% N/A
Zurich, Switzerland
</TABLE>
U.S. BALANCED FUND
<TABLE>
<CAPTION>
Percentage of Percentage of
Name & Address of Beneficial Owners Class Series
- ----------------------------------- ----- ------
<S> <C> <C>
Brinson Fund-Class I
*+MAC & Co. 46.94% 45.87%
Pittsburgh, PA
Wachovia Bank of NA 18.09% 17.68%
Winston Salem, NC
Mitra & Co. 17.19% 16.80%
Milwaukee, WI
American Express 8.98% 8.77%
Minneapolis, MN
Lasalle National Bank 5.86% 5.72%
Chicago, IL
Brinson Fund-Class N
*Brinson Partners, Inc. 100% N/A
Chicago, IL
UBS Investment Funds Class
*UBS 60.13% N/A
New York, NY
UBS SA 15.39% N/A
Zurich, Switzerland
UBS SA 15.17% N/A
Zurich, Switzerland
</TABLE>
32
<PAGE>
U.S. EQUITY FUND
<TABLE>
<CAPTION>
Percentage of Percentage of
Name & Address of Beneficial Owners Class Series
- ----------------------------------- ----- ------
<S> <C> <C>
Brinson Fund-Class I
Wachovia Bank NA 14.89% 13.25%
Winston Salem, NC
Charles Schwab & Co. Inc. 11.69% 10.40%
San Francisco, CA
The Northern Trust Company Trustee 5.26% N/A
Chicago, IL
Brinson Fund-Class N
*Merrill Lynch Trust Co. 78.96% N/A
Somerset, NJ
Emjayco 20.17% N/A
Milwaukee, WI
Cowen Co. 7.73% N/A
New York, NY
UBS Investment Funds Class
*UBS SA 55.74% 6.04%
Zurich, Switzerland
*UBS SA 34.31% N/A
Zurich, Switzerland
UBS 8.52% N/A
New York, NY
</TABLE>
33
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND
<TABLE>
<CAPTION>
Percentage of Percentage of
Name & Address of Beneficial Owners Class Series
- ----------------------------------- ----- ------
<S> <C> <C>
Brinson Fund-Class I
*Norwest MN 58.12% N/A
Minneapolis, MN
Jay M. and Rebekah A. Enoch 21.27% N/A
Moraga, CA
National Financial Services Corp. 10.60% N/A
New York, NY
Donaldson Lufkin & Jenrette 8.23% N/A
Jersey City, NJ
Brinson Fund-Class N
*+National Financial Services Corp. 99.99% 97.50%
New York, NY
UBS Investment Funds Class
*Thomas J. Digenan 100.00% N/A
Chicago, IL
</TABLE>
U.S. BOND FUND
<TABLE>
<CAPTION>
Percentage of Percentage of
Name & Address of Beneficial Owners Class Series
- ----------------------------------- ----- ------
<S> <C> <C>
Brinson Fund-Class I
*+Wachovia Bank NA 26.87% 25.21%
Winston Salem, NC
Charles Schwab & Co. Inc. 18.07% 16.96%
San Francisco, CA
Lafayette College Endowment 16.17% 15.17%
Easton, PA
Firstcinco Rein 11.71% 10.99%
Cincinnati, OH
</TABLE>
34
<PAGE>
<TABLE>
<S> <C> <C>
Lafayette College Endowment 7.29% 6.84%
Easton, PA
Resources Trust Company 6.06% 5.68%
Englewood, CO
Sealaska Corporation 5.58% 5.23%
Juneau, AK
Brinson Fund-Class N
*Brinson Partners, Inc. 100% N/A
Chicago, IL
UBS Investment Funds Class
*UBS SA 29.66% N/A
Zurich, Switzerland
UBS SA 22.20% N/A
Zurich, Switzerland
ICM Investments LTD 15.44% N/A
Newport Beach, CA
UBS 12.30% N/A
New York, NY
UBS 8.12% N/A
New York, NY
GLOBAL (ex-U.S.) EQUITY FUND
Percentage of Percentage of
Name & Address of Beneficial Owners Class Series
- ----------------------------------- ------------- --------------
Brinson Fund-Class I
*+The Northern Trust Company 25.76% 25.46%
Chicago, IL
Charles Schwab & Co. Inc. 5.69% 5.62%
San Francisco, CA
Key Trust Company 5.28% 5.22%
Cleveland, OH
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Brinson Fund-Class N
<S> <C> <C>
*Emjayco 90.53% N/A
Milwaukee, WI
Brinson Partners Inc 9.47% N/A
Chicago, IL
UBS Investment Funds Class
*UBS 39.38% N/A
New York, NY
*UBS SA 36.93% N/A
Zurich, Switzerland
UBS SA 12.95% N/A
Zurich, Switzerland
</TABLE>
* Person deemed to control the class within the meaning of the Act. Note that
such persons possess the ability to control the outcome of matters
submitted for the vote of shareholders of that class.
+ Person deemed to control the Series within the meaning of the Act. Note
that such persons possess the ability to control the outcome of matters
submitted for the vote of shareholders of that Series.
INVESTMENT ADVISORY AND OTHER SERVICES
Advisor
Brinson Partners, a Delaware corporation, is an investment management
firm, managing as of March 31, 1998, over $158 billion, primarily for
institutional pension and profit sharing funds. Brinson Partners was organized
in 1989 when it acquired the institutional asset management business of The
First National Bank of Chicago and First Chicago Investment Advisors, N.A.
Brinson Partners and its predecessor entities have managed domestic and
international investment assets since 1974 and global investment assets since
1982. Brinson Partners has offices in Bahrain, Basel, Frankfurt, Geneva, Hong
Kong, London, Melbourne, New York, Paris, Rio de Janeiro, Singapore, Sydney,
Tokyo and Zurich in addition to its principal office at 209 South LaSalle
Street, Chicago, IL 60604-1295. Brinson Partners is a direct wholly-owned
subsidiary of UBS A.G. UBS A.G., with headquarters in Basel, Switzerland, is an
internationally diversified organization with operations in many aspects of the
financial services industry. UBS A.G. was formed by the merger of Union Bank of
Switzerland and Swiss Bank Corporation in June 1998.
36
<PAGE>
Brinson Partners also serves as the investment advisor to nine other
investment companies: Brinson Relationship Funds, which includes
seventeen investment portfolios (series); The Enterprise Group of Funds, Inc. -
International Growth Portfolio; Enterprise Accumulation Trust - the
International Equity Portfolio; Enterprise International Growth Portfolio; Fort
Dearborn Income Securities, Inc.; The Hirtle Callaghan International Trust -
International Equity Portfolio; John Hancock Variable Annuity 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 receives from each Series
a monthly fee at an annual rate (as described in each Series' Prospectus and
below) multiplied by the average daily net assets of that Series for providing
investment advisory services. Brinson Partners is responsible for paying its
expenses. Under the Agreements, each Series pays the following expenses: (1) the
fees and expenses of the Trust's disinterested Trustees; (2) the salaries and
expenses of any of the Trust's officers or employees who are not affiliated with
Brinson Partners; (3) interest expenses; (4) taxes and governmental fees; (5)
brokerage commissions and other expenses incurred in acquiring or disposing of
portfolio securities; (6) the expenses of registering and qualifying shares for
sale with the SEC and with various state securities commissions; (7) auditing
and legal costs; (8) insurance premiums; (9) fees and expenses of the Trust's
custodian, administrative and transfer agent and any related services; (10)
expenses of obtaining quotations of the Series' portfolio securities and of
pricing the Series' shares; (11) expenses of maintaining the Trust's legal
existence and of shareholders' meetings; (12) expenses of preparation and
distribution to existing shareholders of reports, proxies and prospectuses; and
(13) fees and expenses of membership in industry organizations.
Under the Agreements, the Advisor is entitled to a monthly fee of the
respective Series' average daily net assets as follows: annual rates of 1.10%
for the Emerging Markets Debt Fund; 1.00% for the U.S. Small Capitalization
Fund; 0.80% for the Global Fund, Global Equity Fund and Global(ex-U.S.) Equity
Fund; 0.75% for the Global Bond Fund; 0.70% for the U.S. Balanced Fund, U.S.
Equity Fund, U.S. Large Capitalization Growth Fund and the U.S. Large
Capitalization Equity Fund; 0.65% for the Emerging Markets Equity Fund; 0.60%
for the High Yield Bond Fund; and 0.50% for the U.S. Bond Fund. The Advisor has
agreed irrevocably to waive its fees and reimburse expenses to the extent that
total operating expenses exceed the following rates of the respective Series'
average daily net assets as follows, without regard to 12b-1 Plan expenses for
the UBS Investment Funds class of shares or the Brinson-Class N of each Series:
1.60% for the Emerging Markets Debt Fund; 1.15% for the U.S. Small
Capitalization Fund and the Emerging Markets Equity Fund; 1.10% for the Global
Fund; 1.00% for the Global Equity Fund and the Global (ex-U.S.) Equity Fund;
0.90% for the Global Bond Fund; 0.80% for the U.S. Balanced Fund, the U.S.
Equity Fund and the U.S. Large Capitalization Growth Fund; 0.70% for the High
Yield Bond Fund and the U.S. Large Capitalization Equity Fund; and 0.60% for the
U.S. Bond Fund.
Advisory fees accrued to Brinson Partners were as follows:
37
<PAGE>
<TABLE>
<CAPTION>
A. FISCAL YEAR ENDED JUNE 30, 1996
GROSS ADVISORY FEES NET ADVISORY FEES PAID FUND EXPENSES PAID
SERIES* EARNED BY ADVISOR AFTER FEE WAIVER BY ADVISOR
------- ----------------- ---------------- ----------
<S> <C> <C> <C>
GLOBAL FUND $3,415,057 $3,415,057 $ 0.00
GLOBAL EQUITY FUND $ 390,824 $ 12,198 $378,626
GLOBAL BOND FUND $ 310,066 $ 158 $309,908
U.S. BALANCED FUND $1,465,283 $1,015,531 $449,752
U.S. EQUITY FUND $ 638,063 $ 326,322 $311,741
U.S. BOND FUND $ 37,868 $ 0.00 $230,216
NON-U.S. EQUITY FUND $1,403,109 $1,050,199 $352,910
</TABLE>
B. FISCAL YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
GROSS ADVISORY FEES NET ADVISORY FEES PAID FUND EXPENSES PAID
SERIES* EARNED BY ADVISOR AFTER FEE WAIVER BY ADVISOR
------- ----------------- ---------------- ----------
<S> <C> <C> <C>
GLOBAL FUND $4,294,925 $4,294,925 $ 0.00
GLOBAL EQUITY FUND $ 641,075 $ 445,564 $195,511
GLOBAL BOND FUND $ 344,152 $ 149,228 $194,924
U.S. BALANCED FUND $1,775,454 $1,559,981 $215,473
U.S. EQUITY FUND $1,423,666 $1,234,361 $189,305
U.S. BOND FUND $ 67,835 $0.00 $142,178
NON-U.S. EQUITY FUND $2,420,667 $2,420,667 $ 0.00
</TABLE>
* The U.S. Large Capitalization Equity Fund, the U.S. Large Capitalization
Growth Fund, the U.S. Small Capitalization Fund, the High Yield Bond Fund, the
Emerging Markets Debt Fund and the Emerging Markets Equity Fund had not
commenced operations as of the time periods indicated.
<TABLE>
<CAPTION>
C. FISCAL YEAR ENDED JUNE 30, 1998
GROSS ADVISORY FEES NET ADVISORY FEES PAID FUND EXPENSES PAID
SERIES* EARNED BY ADVISOR AFTER FEE WAIVER BY ADVISOR
------- ----------------- ---------------- ----------
<S> <C> <C> <C>
GLOBAL FUND $5,378,141 $5,378,141 $ 0.00
GLOBAL EQUITY FUND $ 719,439 $ 697,541 $21,898
GLOBAL BOND FUND $ 500,982 $ 457,480 $43,502
U.S. BALANCED FUND $1,674,661 $1,655,564 $19,097
U.S. EQUITY FUND $3,792,120 $3,792,120 $ 0.00
U.S. LARGE CAPITALIZATION
EQUITY FUND $ 21,230 $ 0.00 $23,989
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
GROSS ADVISORY FEES NET ADVISORY FEES PAID FUND EXPENSES PAID
SERIES* EARNED BY ADVISOR AFTER FEE WAIVER BY ADVISOR
------- ----------------- ---------------- ----------
<S> <C> <C> <C>
U.S. BOND FUND $ 142,474 $ 74,626 $67,848
GLOBAL (ex-U.S.) EQUITY FUND* $3,475,953 $3,475,953 $ 0.00
</TABLE>
* The U.S. Large Capitalization Growth Fund, the U.S. Small Capitalization
Fund, the High Yield Bond Fund, the Emerging Markets Debt Fund and the Emerging
Markets Equity Fund had not commenced operations as of the time periods
indicated. Effective December __, 1998, the Non-U.S. Equity Fund changed its
name to the Global (ex-U.S.) Equity Fund.
Prior to the reorganization of the U.S. Large Capitalization Growth Fund
(the successor to the UBS Large Cap Growth Fund), the U.S. Small Capitalization
Fund (the successor to the UBS Small Cap Fund) and the High Yield Bond Fund (the
successor to the UBS High Yield Bond Fund) (collectively, the "UBS Funds" and
each a "UBS Fund") into the Trust, under their investment advisory agreements
with the New York office of UBS A.G., as the successor to the New York Branch of
the Union Bank of Switzerland ("UBS"), UBS was entitled to a monthly fee of the
corresponding UBS Portfolios' average daily net assets as follows: annual rates
of 0.60% for the UBS Large Cap Growth Fund 0.60% for the UBS Small Cap Fund and
0.45% for the UBS High Yield Bond Fund. UBS agreed to waive its fees and
reimburse each UBS Fund and its corresponding Portfolio to the extent that each
UBS Fund's total operating expenses (including its share of its corresponding
Portfolio's expenses) exceeded, on an annual basis, the following rates of the
respective UBS Funds' average daily net assets: 1.00% for the UBS Large Cap
Growth Fund, 1.20% for the UBS Small Cap Fund and 0.90% for the UBS High Yield
Bond Fund.
For the period December 22, 1997 to December 31, 1997, the advisory fees
for the UBS Large Cap Growth Portfolio amounted to $923, all of which were
waived. For the period December 22, 1997 to December 31, 1997, the advisory fees
for the UBS Small Cap and UBS High Yield Bond Portfolios amounted to $4,233 and
$1,611, respectively, all of which were waived.
Under Sub-Advisory Agreements with UBS Brinson, Inc., as the successor to
UBS Asset Management (New York) Inc. (the "Sub-Advisor"), UBS paid the Sub-
Adviser a monthly fee of the respective UBS Portfolios' average daily net assets
as follows:
UBS LARGE CAP GROWTH PORTFOLIO 0.30% of the first $25 million;
0.25% of the next $25 million;
and 0.20% over $50 million
UBS SMALL CAP PORTFOLIO 0.40% of the first $25
million; 0.325% of the next
$25 million; and 0.25% over
$50 million
UBS HIGH YIELD BOND PORTFOLIO 0.25% of the first $25 million;
0.20% of the next $25 million;
and 0.15% over $50 million
UBS was responsible for paying the Sub-Advisor their fees. For the period
December 29, 1997 to December 31, 1997, UBS paid $100 to the Sub-Advisor on
behalf of the Large Cap Growth Portfolio. For the period December 22, 1997 to
December 31, 1997, UBS paid $1,250 and $535 to the Sub-Advisor on behalf of the
UBS Small Cap and UBS High Yield Bond Portfolios, respectively.
39
<PAGE>
General expenses of the Trust (such as costs of maintaining corporate
existence, legal fees, insurance, etc.) will be allocated among the Series in
proportion to their relative net assets. Expenses which relate exclusively to a
particular Series, such as certain registration fees, brokerage commissions and
other portfolio expenses, will be borne directly by that Series.
Administrator
Administrative, Accounting, Transfer Agency and Custodian Services
Effective May 10, 1997, the Trust, on behalf of each Fund, entered into a
Multiple Services Agreement (the "Services Agreement") with Morgan Stanley Trust
Company, One Pierrepont Plaza, Brooklyn, New York 11201 ("MSTC"), pursuant to
which MSTC is required to provide general administrative, accounting, portfolio
valuation, transfer agency and custodian services to the Funds, including the
coordination and monitoring of any third party service providers.
Custody Services. MSTC provides custodian services for the securities and
cash of the Fund. 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.
Investors Bank and Trust Company ("Investors Bank"), 200 Clarendon Street,
Boston, Massachusetts 02116, serves as co-custodian for the U.S. Large
Capitalization Growth Fund, the U.S. Small Capitalization Fund and the High
Yield Bond Fund with respect to certain foreign securities until such securities
are transferred to MSTC. After such securities are transferred to MSTC, MSTC
will be the sole custodian for these Series under the terms of the Services
Agreement.
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 Funds. CGFSC's business address is 73 Tremont
Street, Boston, Massachusetts 02108-3913.
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 each 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 each 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 (for the Brinson Fund-Class N and
Brinson Fund-Class I) or 1-800-794-7753 (for the UBS Investment
Funds).
40
<PAGE>
Also as authorized under the Services Agreement, MSTC has entered into a
sub-administration agreement (the "FDI Agreement") with Funds Distributor, Inc.
("FDI") under which FDI provides administrative assistance to the Funds with
respect to (i) regulatory matters, including regulatory developments and
examinations, (ii) all aspects of each Fund's day-to-day operations, (iii)
office facilities, clerical and administrative services, and (iv) maintenance of
books and records. FDI's business address is 60 State Street, Suite 1300,
Boston, Massachusetts 02109.
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.
For the fiscal years ended June 30, 1997 and June 30, 1998, aggregate fees
paid to MSTC for administration, accounting, portfolio valuation and transfer
agency services under the Services Agreement were as follows:
<TABLE>
<CAPTION>
MAY 10, 1997
THROUGH FISCAL FISCAL YEAR ENDED
SERIES* YEAR END JUNE 30, 1997 JUNE 30, 1998
- ------- ---------------------- -------------
<S> <C> <C>
GLOBAL FUND $69,572 $464,398
GLOBAL EQUITY FUND $ 7,799 $ 9,809
GLOBAL BOND FUND $ 3,707 $ 0.00
U.S. BALANCED FUND $10,324 $ 79,503
U S. EQUITY FUND $12,495 $247,167
U.S. LARGE CAPITALIZATION EQUITY FUND $ 0.00 $ 0.00
U.S. BOND FUND $ 0.00 $ 0.00
GLOBAL (ex-U.S.) EQUITY FUND $17,159 $305,643
</TABLE>
* The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Fund,
High Yield Bond Fund, Emerging Markets Debt and Emerging Markets Equity Funds
had not commenced oeprations as of the time periods indicated. Effective
December __, 1998, the Non-U.S. Equity Fund changed its name to the Global
(ex-U.S.) Equity Fund.
41
<PAGE>
Until May 9, 1997, FPS Services, Inc., 3200 Horizon Drive, King of Prussia,
PA 19406-0903 ("FPS"), provided certain administrative services to the Trust
pursuant to an administration agreement (the "Administration Agreement").
As compensation for services performed under the Administration Agreement,
FPS received a fee payable monthly at an annual rate multiplied by the average
daily net assets of the Trust.
Administration fees paid to FPS were as follows:
<TABLE>
<CAPTION>
JUNE 1, 1997
FISCAL YEAR ENDED THROUGH MAY 9,
SERIES* JUNE 30, 1996 1997
- ------- ------------- ----
<S> <C> <C>
GLOBAL FUND $293,601 $271,364
GLOBAL EQUITY FUND $ 32,468 $ 38,047
GLOBAL BOND FUND $ 29,216 $ 25,412
U.S. BALANCED FUND $140,841 $121,580
U.S. EQUITY FUND $ 58,286 $ 76,534
U.S. BOND FUND $ 58,286 $ 6,542
GLOBAL (ex-U.S.) EQUITY FUND* $119,433 $122,780
</TABLE>
* The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Fund,
High Yield Bond Fund, Emerging Markets Debt and Emerging Markets Equity Funds
had not commenced operations as of the time periods indicated. *Effective
December __, 1998, the Non-U.S. Equity Fund changed its name to the Global
(ex-U.S.) Equity Fund.
Prior to the reorganization of the U.S. Large Capitalization Growth Fund
(the successor to the UBS Large Cap Growth Fund), the U.S. Small Capitalization
Fund (the successor to the UBS Small Cap Fund) and the High Yield Bond Fund (the
successor to the UBS High Yield Bond Fund) (collectively the "UBS Funds" and
each a "UBS Fund") into the Trust, IBT Trust & Custodial Services (Ireland)
Limited ("IBT Ireland") provided certain administrative services to the UBS
Funds pursuant to an Administration Agreement. For its services under the
Administration Agreement, each corresponding UBS Portfolio paid IBT Ireland a
fee calculated daily and paid monthly equal, on an annual basis, to 0.07% of the
Portfolio's first $100 million in average daily net assets and 0.05% of the
assets in excess of $100 million.
During the period October 14, 1997 (commencement of operations) through
December 31, 1997, the UBS Large Cap Growth Portfolio paid IBT Ireland an
administrative fee of $2,096. During the period September 30, 1997 (commencement
of operations) through December 31, 1997, the UBS Small Cap and UBS High Yield
Bond Portfolios paid IBT Ireland administrative fees of $3,362 and $1,870,
respectively.
Underwriter
FDI, 60 State Street, Suite 1300, Boston, MA 02109, acts as an underwriter
of the Series' continuous offer of shares for the purpose of facilitating the
filing of notices regarding sale of the shares of the Series under state
securities laws and to assist in sales of shares pursuant to an underwriting
agreement (the "Underwriting Agreement") approved by the Board of Trustees. In
this regard, FDI has agreed at its own expense to qualify as a broker-dealer
under all applicable federal or state laws in those states which the Trust shall
from time to time identify to FDI as states in which it wishes to offer the
Series' shares for sale, in order that state filings may be maintained for the
Series. FDI does not receive any compensation under the Underwriting Agreement.
FDI is a broker-dealer registered with the SEC and a member in good
standing of the National Association of Securities Dealers, Inc.
42
<PAGE>
The Trust does not impose any sales loads or redemption fees. Each Series
shall continue to bear the expense of all filing fees incurred in connection
with the filing of notices regarding sale of shares under state securities laws.
The Underwriting Agreement may be terminated by either party upon sixty
(60) days' prior written notice to the other party, and if so terminated, the
pro rata portion of the unearned fee will be returned to the Trust.
Distribution Plan
The Board of Trustees of the Trust has adopted a distribution plan (the
"UBS Investment Plan") pursuant to Rule 12b-1 under the Act, for each Series'
UBS Investment Funds class of shares and a separate distribution plan (the
"Class N Plan") pursuant to Rule 12b-1 under the Act for each Series' Brinson
Fund-Class N shares (the UBS Investment Plan and the Class N Plan together, the
"Plans"). The UBS Investment Funds class of shares was formerly known as the
Swisskey class of shares. The name change was made effective on September 15,
1998. The Plans permit each Series to reimburse FDI, Brinson Partners and others
from the assets of the UBS Investment Funds class of shares and Brinson Fund-
Class N shares with a quarterly fee for services and expenses incurred in
distributing and promoting sales of UBS Investment Funds class of shares and
Brinson Fund-Class N shares, respectively. The aggregate fees paid by the UBS
Investment Funds class of shares and Brinson Fund-Class N shares to FDI, and
others under the Plan for each Class may not exceed 0.90% of a UBS Investment
Funds classes' average daily net assets and 0.25% of a Brinson Fund-Class N's
average daily net assets, respectively, in any year. The UBS Investment Plan
does not apply to the Brinson Fund-Class I or the Brinson Fund-Class N shares of
each Series and those shares are not included in calculating the UBS Investment
Plan's fees.
The Class N Plan does not apply to the Brinson Fund-Class I or the UBS
Investment Funds class of shares of each Series and those shares are not
included in calculating the Class N Plan's fees. The UBS Investment Plan does
not apply to the Brinson Fund - Class I or the Brinson Fund - Class N classes of
shares of each Series and those shares are not included in calculating the UBS
Investment Plan's fees. Amounts spent on behalf of each UBS Investment Funds
class of shares pursuant to the UBS Investment Plan during the fiscal year ended
June 30, 1998 are set forth below.
<TABLE>
<CAPTION>
=====================================================================================================================
COMPENSATION COMPENSATION COMPENSATION TO
OF OF SWISSBANK SALES
FUND PRINTING UNDERWRITERS DEALERS PERSONNEL ADVERTISING OTHER
=====================================================================================================================
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
UBS $3,741.36 $0.00 $0.00 $215,695.93 $0.00 $ 64,708.62
Investment
Fund-Global
- ---------------------------------------------------------------------------------------------------------------------
UBS $8,392.57 $0.00 $0.00 $483,844.59 $0.00 $145,153.37
Investment
Fund-Global
Equity
- ---------------------------------------------------------------------------------------------------------------------
UBS $1,000.00 $0.00 $0.00 $ 34,008.30 $0.00 $ 10,202.99
Investment
Fund-Global
Bond
- ---------------------------------------------------------------------------------------------------------------------
UBS $1,000.00 $0.00 $0.00 $ 61,691.74 $0.00 $ 20,307.52
Investment
Fund-U.S.
Balanced
- ---------------------------------------------------------------------------------------------------------------------
UBS $5,825.06 $0.00 $0.00 $335,823.55 $0.00 $100,747.06
Investment
Fund-U.S.
Equity
- ---------------------------------------------------------------------------------------------------------------------
UBS
Investment $ 0.00 $0.00 $0.00 $ 0.00 $0.00 $ 0.00
Fund-U.S.
Large
Capitalizati
on Equity
- ---------------------------------------------------------------------------------------------------------------------
UBS $1,000.00 $0.00 $0.00 $ 11,891.51 $0.00 $ 3,567.95
Investment
Fund-U.S.
Bond
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
UBS $1,000.00 $0.00 $0.00 $14,053.50 $0.00 $4,216.05
Investment
Fund Global
(ex-U.S.)
Equity*
================================================================================================
</TABLE>
Amounts spent on behalf of each Brinson Fund - Class N class pursuant
to the Class N Plan during the fiscal year ended June 30, 1998 are set
forth below.
<TABLE>
<CAPTION>
==================================================================================================================
COMPENSATION COMPENSATION COMPENSATION TO
OF OF SWISSBANK SALES
FUND PRINTING UNDERWRITER DEALERS PERSONNEL ADVERTISING OTHER
==================================================================================================================
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Global $0.00 $0.00 $ 671.71 $0.00 $0.00 $0.00
Fund -
Class N
- ------------------------------------------------------------------------------------------------------------------
Global $0.00 $0.00 $ 0.00 $0.00 $0.00 $0.00
Equity
Fund -
Class N
- ------------------------------------------------------------------------------------------------------------------
Global $0.00 $0.00 $ 4.13 $0.00 $0.00 $0.00
Bond
Fund -
Class N
- ------------------------------------------------------------------------------------------------------------------
U.S. $0.00 $0.00 $ 0.00 $0.00 $0.00 $0.00
Balanced
Fund -
Class N
- ------------------------------------------------------------------------------------------------------------------
U.S. $0.00 $0.00 $ 148.66 $0.00 $0.00 $0.00
Equity
Fund -
Class N
- ------------------------------------------------------------------------------------------------------------------
U.S. $0.00 $0.00 $7,577.29 $0.00 $0.00 $0.00
Large
Capitaliz-
ation
Equity
Fund -
Class N
- ------------------------------------------------------------------------------------------------------------------
U.S. $0.00 $0.00 $ 0.00 $0.00 $0.00 $0.00
Bond
Fund -
Class N
- ------------------------------------------------------------------------------------------------------------------
Global $0.00 $0.00 $ 5.40 $0.00 $0.00 $0.00
(ex-U.S.
Equity
Fund -
Class N*
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Effective December __, 1998, the Non-U.S. Equity Fund changed its name to the
Global (ex-U.S.) Equity Fund.
44
<PAGE>
Code of Ethics
The Trust has adopted a Code of Ethics which establishes standards by which
certain access persons of the Trust, which include officers of the Advisor and
officers and Trustees of the Trust, must abide relating to personal securities
trading conduct.
Under the Code of Ethics, access persons are prohibited from engaging in
certain conduct, including, but not limited to: 1) investing in companies in
which the Series invest unless the securities have a broad public market and are
registered on a national securities exchange or are traded in the over-the-
counter markets; 2) making or maintaining an investment in any corporation or
business with which the Series have business relationships if the investment
might create, or give the appearance of creating, a conflict of interest; 3)
participating in an initial public offering; 4) entering into a securities
transaction when the access person knows or should know that such activity will
anticipate, parallel or counter any securities transaction of a Series; 5)
entering into any securities transaction, without prior approval, in connection
with any security which has been designated as restricted; 6) entering into a
net short position with respect to any security held by a Series; 7) entering
into any derivative transaction when a direct transaction in the underlying
security would be a violation; and 8) engaging in self-dealing or other
transactions benefiting the access person at the expense of the Series or its
shareholders.
In addition, access persons are required to receive advance approval prior
to purchasing or selling a restricted security, and may not buy or sell certain
prohibited securities. The Advisor will identify for access persons prohibited
securities, which include securities that are being considered for purchase or
sale by any account or fund managed by the Advisor, and provide a list of such
securities to all access persons. Access persons are required to file quarterly
reports of security investment transactions. Trustees or officers who are not
"interested persons" of the Trust, as defined in the 1940 Act, need only report
a transaction in a security if such Trustee or officer, at the time of the
transaction, knew or should have known, in the ordinary course of fulfilling his
or her official duties as a Trustee or officer, that, during the 15-day period
immediately preceding or after the date of the transaction by the Trustee or
officer, such security was purchased or sold by a Series, or was being
considered for purchase by a Series.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Brinson Partners is responsible for decisions to buy and sell securities
for the Series and for the placement of the Series' portfolio business and the
negotiation of commissions, if any, paid on such transactions. Fixed income
securities in which the Series invest are traded in the over-the-counter market.
These securities are generally traded on a net basis with dealers acting as
principal for their own accounts without a stated commission, although the
bid/ask spread quoted on securities includes an implicit profit to the dealers.
In over-the-counter transactions, orders are placed directly with a principal
market-maker unless a better price and execution can be obtained by using a
broker. Brokerage commissions are paid on transactions in listed securities,
futures contracts and options thereon. Brinson Partners is responsible for
effecting portfolio transactions and will do so in a manner deemed fair and
reasonable to the Series. Under its advisory agreements with the Global Funds
and the Non-U.S. Equity Fund, Brinson Partners is authorized to utilize the
trading desk of its foreign subsidiaries to execute foreign securities
transactions, but monitors the selection by such subsidiaries of brokers and
dealers used to execute transactions for those Series. The primary consideration
in all portfolio transactions will be prompt execution of orders in an efficient
manner at the most favorable price. In selecting and monitoring broker-dealers
and negotiating commissions, Brinson Partners considers the firm's reliability,
the quality of its execution services on a continuing basis and its financial
condition. When more than one firm is believed to meet these criteria,
preference may be given to brokers who provide research or
45
<PAGE>
statistical material or other services to the Series or to Brinson Partners.
Such services include advice, both directly and in writing, as to the value of
the securities; the advisability of investing in, purchasing or selling
securities; and the availability of securities, or purchasers or sellers of
securities, as well as analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts. This allows Brinson Partners to supplement its own investment
research activities and obtain the views and information of others prior to
making investment decisions. Brinson Partners is of the opinion that, because
this material must be analyzed and reviewed by its staff, its receipt and use
does not tend to reduce expenses but may benefit the Series by supplementing the
Advisor's research.
Brinson Partners effects portfolio transactions for other investment
companies and advisory accounts. Research services furnished by dealers through
whom the Series effect its securities transactions may be used by Brinson
Partners in servicing all of its accounts; not all such services may be used in
connection with the Series. In the opinion of Brinson Partners, it is not
possible to measure separately the benefits from research services to each of
the accounts (including the Series). Brinson Partners will attempt to equitably
allocate portfolio transactions among the Series and others whenever concurrent
decisions are made to purchase or sell securities by the Series and another. In
making such allocations between the Series and others, the main factors to be
considered are the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for recommending investments to the Series
and the others. In some cases, this procedure could have an adverse effect on
the Series. In the opinion of Brinson Partners, however, the results of such
procedures will, on the whole, be in the best interest of each of the clients.
The Series incurred brokerage commissions as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
SERIES JUNE 30, 1996* JUNE 30, 1997* JUNE 30, 1998*
====== ============== ============== ==============
<S> <C> <C> <C>
GLOBAL FUND $327,191 $385,571 $442,603
GLOBAL EQUITY FUND $123,467 $142,922 $166,103
GLOBAL BOND FUND $ 0.00 $ 0.00 $ 0.00
U.S. BALANCED FUND $ 99,554 $139,165 $ 85,784
U.S. EQUITY FUND $105,887 $290,526 $560,721
U.S. LARGE CAPITALIZATION EQUITY FUND NA NA $ 9,714
U.S. BOND FUND $ 0.00 $ 0.00 $ 0.00
GLOBAL (ex-U.S.) FUND* $322,915 $833,293 $942,115
</TABLE>
* The U.S. Large Capitalization Equity Fund, the Emerging Markets Debt Fund and
the Emerging Markets Equity Fund had not commenced operations as of the time
periods indicated. Effective December __, 1998, the Non-U.S. Equity Fund
changed its name to the Global (ex-U.S.) Equity Fund.
46
<PAGE>
For the fiscal year ended June 30, 1998, the Brinson Global Fund, Brinson
U.S. Balanced Fund, Brinson U.S. Equity Fund and Brinson U.S. Large
Capitalization Equity Fund paid brokerage commissions to Warburg Dillon Read
("Warburg"), an affiliated broker-dealer, as follows:
<TABLE>
<CAPTION>
Aggregate % of Aggregate
Dollar Amount of % of Aggregate Dollar Amount Paid
Commissions Paid Commissions to
to Warburg Paid to Warburg Warburg
Fund
<S> <C> <C> <C>
Global Fund $ 6,078 1.37% 0.78%
U.S. Balanced Fund
$ 2,190 2.55% 0.27%
U.S. Equity Fund $93,356 16.65% 21.43%
U.S. Large
Capitalization
Equity Fund $ 453 4.66% 5.16%
</TABLE>
For the fiscal year ended June 30, 1998 the Trust and the Advisor had
no agreements or understandings with a broker or otherwise causing brokerage
transactions or commissions for research services.
Portfolio Turnover
The Series are free to dispose of their portfolio securities at any
time, subject to complying with the Code and the Act, when changes in
circumstances or conditions make such a move desirable in light of the
respective investment objective. The Series will not attempt to achieve or be
limited to a predetermined rate of portfolio turnover, such a turnover always
being incidental to transactions undertaken with a view to achieving that
Series' investment objective.
The Series do not intend to use short-term trading as a primary means
of achieving their investment objectives. The rate of portfolio turnover shall
be calculated by dividing (a) the lesser of purchases and sales of portfolio
securities for the particular fiscal year by (b) the monthly average of the
value of the portfolio securities owned by that Series during the particular
fiscal year. Such monthly average shall be calculated by totaling the values of
the portfolio securities as of the beginning and end of the first month of the
particular fiscal year and as of the end of each of the succeeding eleven months
and dividing the sum by 13.
Under normal circumstances, the portfolio turnover rate for the Global
Equity Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund and Global
(ex-U.S.) Equity Fund is not expected to exceed 100%. The portfolio turnover
rates for the Global Fund, Global Bond Fund, Emerging Markets Equity Fund and
Emerging Markets Debt Fund may exceed 100% and in some years, 200%. The
portfolio turnover rate for the U.S. Small Capitalization Fund may exceed 150%.
and for the U.S. Balanced Fund and U.S. Bond Fund, may exceed 100% and in some
years, 300%. High portfolio turnover rates (over 100%) may involve
correspondingly greater brokerage commissions and other transaction costs, which
will be borne directly by the Series and ultimately by that Series'
shareholders. In addition, high portfolio turnover may result in increased
short-term capital gains, which, when distributed to shareholders, are treated
as ordinary income.
47
<PAGE>
With respect to the Global Fund, for the fiscal years ended June 30, 1997
and June 30, 1998 the portfolio turnover rate of the Series was 150% and 88%,
respectively. With respect to the Global Bond Fund, for the fiscal years ended
June 30, 1997 and June 30, 1998 the portfolio turnover rate of the Series was
235% and 151%, respectively. With respect to the U.S. Balanced Fund, for the
fiscal years ended June 30, 1997 and June 30, 1998 the portfolio turnover rate
of the Series was 329% and 194%, respectively. With respect to the U.S. Bond
Fund, for fiscal years ended June 30, 1997 and June 30, 1998, the portfolio
turnover rate of the Series was 410% and 198%, respectively. With respect to the
High Yield Bond Fund, for the fiscal years ended December 31, 1997 and the six
month period ended June 30, 1998 the portfolio turnover rate was 80% and 155%,
respectively. The portfolio turnover rates for the High Yield Bond Fund reflect
the portfolio turnover rates for UBS Investor Portfolios Trust - UBS High Yield
Bond Portfolio. The significant variation in portfolio turnover rates over such
periods was due to an increase in the assets of the Series which caused the
Series to reposition their portfolio holdings in order to meet their investment
objectives and policies.
SHARES OF BENEFICIAL INTEREST
The Trust presently offers eight Series of shares of beneficial interest,
each of which offers three classes of shares. Each share of beneficial interest
represents an equal proportionate interest in the assets and liabilities of the
applicable Series and has the same voting and other rights and preferences as
the other class of that Series, except that only shares of the UBS Investment
Funds class may vote on any matter affecting only the UBS Investment Plan under
Rule 12b-1. Similarly, only shares of the Brinson Fund-Class N may vote on
matters that affect only the Class N Plan. No class may vote on matters that
affect only another class. Under Delaware law, the Trust does not normally hold
annual meetings of shareholders. Shareholders' meetings may be held from time to
time to consider certain matters including changes to a Series' fundamental
investment objective and fundamental investment policies, changes to the Trust's
investment advisory agreement and the election of Trustees when required by the
Act. When matters are submitted to shareholders for a vote, shareholders are
entitled to one vote per share with proportionate voting for fractional shares.
The shares of the Series do not have cumulative voting rights or any preemptive
or conversion rights, and the Trustees have authority from time to time to
divide or combine the shares of the Series into a greater or lesser number of
shares so affected. In the case of a liquidation of a Series, each shareholder
of the Series will be entitled to share, based upon the shareholder's percentage
share ownership, in the distribution out of assets, net of liabilities, of the
Series. No shareholder is liable for further calls or assessment by the
Series.
On any matters affecting only one Series or class, only the shareholders of
that Series or class are entitled to vote. On matters relating to the Trust but
affecting the Series differently, separate votes by the Series or class are
required. With respect to the submission to shareholder vote of a matter
requiring separate voting by a Series or class, the matter shall have been
effectively acted upon with respect to any Series or class if a majority of the
outstanding voting securities of that Series or class votes for the approval of
the matter, notwithstanding that: (1) the matter has not been approved by a
majority of the outstanding voting securities of any other Series or class; and
(2) the matter has not been approved by a majority of the outstanding voting
securities of the Trust.
PURCHASES
Shares of each class of each Series are sold at the net asset value next
determined after the receipt of a purchase application in proper form by the
transfer agent. The minimum for initial investments with respect to the Brinson
Fund-Class I for each Series is $1,000,000; subsequent investment minimums are
$2,500. The minimum for initial investments with respect to the UBS Investment
Funds class of shares for each Series is $1,000; subsequent investment minimums
are $50. The minimum for initial investment with respect to the Brinson Fund-
Class N for each Series is $1,000,000. A more detailed description of methods of
purchase is included in the Prospectuses.
48
<PAGE>
Certificates representing shares purchased are not issued. However, such
purchases are confirmed to the investor and credited to the shareholder's
account on the books maintained by the Trust's transfer agent. The investor will
have the same rights of ownership with respect to such shares as if certificates
had been issued.
Exchanges of Shares
Shares of one class of a Series may only be exchanged for the same class of
another Series of the Trust. Exchanges will not be permitted between the
different classes.
Each qualifying exchange will be made on the basis of the relative net
asset values per share of both the Series from which, and the Series into which,
the exchange is made, that is next computed following receipt of the exchange
order in proper form by the Trust's transfer agent. Exchanges may be made by
telephone if the shareholder's Account Application Form includes specific
authorization for telephone exchanges. The telephone exchange privilege may be
difficult to implement during times of drastic economic or market changes.
The transactions described above will result in a taxable gain or loss for
federal income tax purposes. Generally, any such taxable gain or loss will be a
capital gain or loss (long-term or short-term, depending on the holding period
of the shares) in the amount of the difference between the net asset value of
the shares surrendered and the shareholder's tax basis for those shares. Each
investor should consult his or her tax adviser regarding the tax consequences of
an exchange transaction.
Any shareholder who wishes to make an exchange should first obtain and
review the Prospectus of the Series to be acquired in the exchange. Requests for
telephone exchanges must be received prior to the close of regular trading on
the New York Stock Exchange ("NYSE") on any day on which the NYSE is open for
regular trading.
At the discretion of the Trust, this exchange privilege may be terminated
or modified at any time for any of the participating Series upon 60 days' prior
written notice to shareholders. Contact the transfer agent for details about a
particular exchange.
Net Asset Value
The net asset value per share is calculated separately for each class of
each Series. The net asset value per share of a class of a Series is computed by
dividing the value of the assets related to that class of the Series, less the
liabilities related to that class, by the number of shares of the class of the
Series outstanding.
Each class of a Series will bear pro rata all of the common expenses of
that Series. The net asset values of all outstanding shares of each class of a
Series will be computed on a pro rata basis for each outstanding share based on
the proportionate participation in the Series represented by the value of shares
of that Series. All income earned and expenses incurred by a Series will be
borne on a pro rata basis by each outstanding share of a class, based on each
class' percentage in the Series represented by the value of such shares of such
classes, except that none of the shares of a class will incur any of the
expenses under the 12b-1 plan of another class.
Portfolio securities are valued and net asset value per share is determined
as of the close of regular trading on the NYSE which currently is 4:00 p.m.
Eastern time on each day the NYSE is open for trading. The Series of the Trust
reserve the right to change the time at which purchases, redemptions or
exchanges are priced if the NYSE closes at a time other than 4:00 p.m. Eastern
time or if an emergency exits. The NYSE is open for trading on every day except
Saturdays, Sundays and the following holidays: New Year's Day, Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day (day
49
<PAGE>
observed), Independence Day, Labor Day, Thanksgiving Day and Christmas Day and
on the preceding Friday or subsequent Monday when any of these holidays falls on
a Saturday or Sunday, respectively.
Portfolio securities listed on a national or foreign securities exchange
are valued on the basis of the last sale on the date the valuation is made.
Securities that are not traded on a particular day or 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. Other portfolio securities which are traded in the over-the-
counter market are valued at the bid price as long as the bid price, in the
opinion of the Advisor, continues to reflect the value of the security.
Valuations of fixed income and equity securities may be obtained from a pricing
service and/or broker-dealers when such prices are believed to reflect the 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. A Series
realizes a gain or loss upon settlement of the contracts. Swaps will be priced
at fair value based on (1) swap prices provided by broker-dealers; (2) values,
or estimates of values, of the applicable equity indices and foreign rates
underlying the contracts; and (3) consideration of other relevant factors. A
Series' obligation under a swap agreement will be accrued daily (offset by any
amounts owing to the portfolio) and any accrued but unpaid net amounts owed to a
swap counterparty will be covered by the maintenance of a segregated account
consisting of Segregated Assets. For valuation purposes, foreign securities
initially expressed in foreign currency values will be converted into U.S.
dollar values using WM/Reuters closing spot rates as of 4:00 p.m. London time.
Securities with a remaining maturity of 60 days or less are valued at amortized
cost, which approximates market value. 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 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.
Because of time zone differences, foreign exchanges and securities markets
will usually be closed prior to the time of the closing of the NYSE and values
of foreign futures and options and foreign securities will be determined as of
the earlier closing of such exchanges and securities markets. However, events
affecting the values of such foreign securities may occasionally occur between
the earlier closings of such exchanges and securities markets and the closing of
the NYSE which will not be reflected in the computation of the net asset value
of a Series. If an event materially affecting the value of such foreign
securities occurs during such period, then such securities will be valued at
fair value as determined in good faith by or under the direction of the Board of
Trustees. Where a foreign securities market remains open at the time that a
Series values its portfolio securities, or closing prices of securities from
that market may not be retrieved because of local time differences or other
difficulties in obtaining such prices at that time, last sale prices in such
market at a point in time most practicable to timely valuation of the Series may
be used.
REDEMPTIONS
Under normal circumstances shareholders may redeem their shares at any time
without a fee. The redemption price will be based upon the net asset value per
share next determined after receipt of the redemption request, provided it has
been submitted in the manner described below. The redemption price may be more
or less than the original cost, depending upon the net asset value per share at
the time of redemption.
50
<PAGE>
Payment for shares tendered for redemption is made by check within five
business days after tender in proper form, except that the Trust reserves the
right to suspend the right of redemption, or to postpone the date of payment
upon redemption beyond five business days, (i) for any period during which the
NYSE is closed (other than customary weekend and holiday closings) or during
which trading on the NYSE is restricted, (ii) for any period during which an
emergency exists as determined by the SEC as a result of which disposal of
securities owned by a Series is not reasonably practicable or it is not
reasonably practicable for the Series fairly to determine the value of its net
assets, or (iii) for such other periods as the SEC may by order permit for the
protection of shareholders of the Series.
Under unusual circumstances, when the Board of Trustees deems it in the
best interest of the Series' shareholders, the Trust may make payment for shares
repurchased or redeemed in whole or in part in securities of the Series taken at
current values. With respect to such redemptions in kind, the Trust has made an
election pursuant to Rule 18f-1 under the Act. This will require the Trust to
redeem in cash at a shareholder's election in any case where the redemption
involves less than $250,000 (or 1% of the Series' net asset value at the
beginning of each 90 day period during which such redemptions are in effect, if
that amount is less than $250,000), during any 90-day period for any one
shareholder. Should payment be made in securities, the redeeming shareholder may
incur brokerage costs in converting such securities to cash.
Taxation
Each of the Series has qualified, and intends to continue to qualify each
year, as a regulated investment company under Subchapter M of the Code. In order
to so qualify, a mutual fund must, among other things, (i) derive at least 90%
of its gross income from dividends, interest, payments with respect to certain
securities loans, gains from the sale of securities or foreign currencies, or
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies; (ii) distribute at least 90% of its dividend,
interest and certain other taxable income each year; and (iii) at the end of
each fiscal quarter maintain at least 50% of the value of its total assets in
cash, government securities, securities of other regulated investment companies
and other securities of issuers which represent, with respect to each issuer, no
more than 5% of the value of a fund's total assets and 10% of the outstanding
voting securities of such issuer, and with no more than 25% of its assets
invested in the securities (other than those of the government or other
regulated investment companies) of any one issuer or of two or more issuers
which the fund controls and which are engaged in the same, similar or related
trades and businesses.
To the extent each of the Series qualifies for treatment as a regulated
investment company, it will not be subject to federal income tax on income and
net capital gains paid to shareholders in the form of dividends or capital gains
distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any, of
each Series' "required distributions" over actual distributions in any calendar
year. Generally, the "required distribution" is 98% of a Series' ordinary income
for the calendar year plus 98% of its capital gain net income recognized during
the one-year period ending on October 31 plus undistributed amounts from prior
years. The Series intend to make distributions sufficient to avoid imposition of
the excise tax. Distributions declared by the Series during October, November or
December to shareholders of record during such month and paid by January 31 of
the following year will be taxable to shareholders in the calendar year in which
they are declared, rather than the calendar year in which they are received.
Gains or losses attributable to fluctuations in exchange rates which occur
between the time a Series accrues interest or other receivables or accrues
expenses or liabilities denominated in a foreign currency and the time the
Series actually collects such receivables, or pays such liabilities, are
generally treated as ordinary income or loss. Similarly, a portion of the gains
or losses realized on disposition of debt securities denominated in a foreign
currency may also be treated as ordinary gain or loss. These
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<PAGE>
gains, referred to under the Code as "Section 988" gains or losses, may increase
or decrease the amount of a Series' investment company taxable income to be
distributed to its shareholders, rather than increasing or decreasing the amount
of the Series' capital gains or losses.
When a Series writes a call, or purchases a put option, an amount equal to
the premium received or paid by it is included in the Series' assets and
liabilities as an asset and as an equivalent liability.
In writing a call, the amount of the liability is subsequently "marked-to-
market" to reflect the current market value of the option written. The current
market value of a written option is the last sale price on the principal
Exchange on which such option is traded or, in the absence of a sale, the mean
between the last bid and asked prices. If an option which a Series has written
expires on its stipulated expiration date, the Series recognizes a short-term
capital gain. If a Series enters into a closing purchase transaction with
respect to an option which the Series has written, the Series realizes a short-
term gain (or loss if the cost of the closing transaction exceeds the premium
received when the option was sold) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such option is
extinguished. If a call option which a Series has written is exercised, the
Series realizes a capital gain or loss from the sale of the underlying security
and the proceeds from such sale are increased by the premium originally
received.
The premium paid by a Series for the purchase of a put option is recorded
in the Series' assets and liabilities as an investment and subsequently adjusted
daily to the current market value of the option. For example, if the current
market value of the option exceeds the premium paid, the excess would be
unrealized appreciation and, conversely, if the premium exceeds the current
market value, such excess would be unrealized depreciation. The current market
value of a purchased option is the last sale price on the principal Exchange on
which such option is traded or, in the absence of a sale, the mean between the
last bid and asked prices. If an option which a Series has purchased expires on
the stipulated expiration date, the Series realizes a short-term or long-term
capital loss for Federal income tax purposes in the amount of the cost of the
option. If a Series exercises a put option, it realizes a capital gain or loss
(long-term or short-term, depending on the holding period of the underlying
security) from the sale which will be decreased by the premium originally paid.
Accounting for options on certain stock indices will be in accordance with
generally accepted accounting principles. The amount of any realized gain or
loss on closing out such a position will result in a realized gain or loss for
tax purposes. Such options held by a Series at the end of each fiscal year on a
broad-based stock index will be required to be "marked-to-market" for Federal
income tax purposes. Sixty percent of any net gain or loss recognized on such
deemed sales or on any actual sales will be treated as long-term capital gain or
loss and the remainder will be treated as short-term capital gain or loss.
Certain options, futures contracts and options on futures contracts utilized by
the Series are "Section 1256 contracts." Any gains or losses on Section 1256
contracts held by a Series at the end of each taxable year (and on October 31 of
each year for purposes of the 4% excise tax) are "marked-to-market" with the
result that unrealized gains or losses are treated as though they were realized
and the resulting gain or loss is treated as a 60/40 gain or loss.
If there is a constructive sale for federal income tax purposes (e.g.,
short sale against the box) of an appreciated financial position, a taxpayer
must recognize gain as if such position were sold, assigned, or otherwise
terminated at its fair market value as of the date of the constructive sale and
immediately repurchased. Shareholders will be subject to federal income taxes on
distributions made by the Series whether received in cash or additional shares
of the Series. Distributions of net investment income and net short-term capital
gains, if any, will be taxable to shareholders as ordinary income. Distributions
of net long-term capital gains, if any, will be taxable to shareholders as long-
term capital gains, without regard to how long a shareholder has held shares of
the Series. A loss on the sale of shares held for six months or less will be
treated as a long-term capital loss to the extent of any long-term capital gain
dividend paid to the shareholder with respect to such shares. Dividends eligible
for designation under the dividends received deduction and paid by a
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<PAGE>
Series may qualify in part for the 70% dividends received deduction for
corporations provided, however, in respect of any dividend, that those shares
have been held for at least 46 days during the 90-day period that begins 45 days
before the stock becomes ex-dividend with respect to such dividend. The Series
will notify shareholders each year of the amount of dividends and distributions,
including the amount of any distribution of long-term capital gains and the
portion of its dividends which may qualify for the 70% deduction.
Each class of shares of a Series will share proportionately in the
investment income and expenses of that Series, except that the respective UBS
Investment Funds class and Brinson Fund-Class N for each Series will incur
distribution fees under their respective 12b-1 plans.
It is expected that certain dividends and interest received by the Global
Funds and the Global(ex-U.S.) Equity Fund will be subject to foreign withholding
taxes. If more than 50% in value of the total assets of a fund at the close of
any taxable year consists of stocks or securities of foreign corporations, such
fund may elect to treat any foreign taxes paid by it as if paid by its
shareholders. These Series will notify shareholders in writing each year whether
it has made the election and the amount of foreign taxes it has elected to have
treated as paid by the shareholders. If a Series makes the election, its
shareholders will be required to include in gross income their proportionate
share of the amount of foreign taxes paid by the Series and will be entitled to
claim either a credit or deduction for their share of the taxes in computing
their U.S. federal income tax subject to certain limitations. No deduction for
foreign taxes may be claimed by shareholders who do not itemize deductions.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, the source of each Series'
income flows through to its shareholders. Gains from the sale of securities will
be treated as derived from U.S. sources and certain currency fluctuation gains,
including fluctuation gains from foreign currency denominated debt securities,
receivables and payables, will be treated income derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income (as defined for purposes of foreign tax credit), such as foreign
source passive income received from the respective Series. Because of changes
made by the Code, shareholders may be unable to claim a credit for the full
amount of their proportionate share of the foreign taxes paid by the Series.
Beginning in 1998, an individual with $300 or less ($600 or less for joint
filers) of foreign tax credits is generally exempt from the foreign tax credit
limitation and likely will not have to file Form 1116 in order to claim a
foreign tax credit.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury Regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
Regulations. The Code and Regulations are subject to change by legislative or
administrative action at any time and retroactively.
Dividends and distributions also may be subject to state and local taxes.
53
<PAGE>
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state and local taxes as well as the application of the
foreign tax credit.
The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Series, including the possibility
that distributions may be subject to a 30% U.S. withholding tax (or a reduced
rate of withholding provided by treaty).
PERFORMANCE CALCULATIONS
Performance information for the UBS Investment Funds class of shares,
Brinson Fund-Class N and Brinson Fund-Class I shares of each Series will vary
due to the effect of expense ratios on the performance calculations.
Total Return
Current yield and total return quotations used by the Series (and classes
of shares) are based on standardized methods of computing performance mandated
by rules adopted by the SEC. As the following formula indicates, the average
annual total return is determined by multiplying a hypothetical initial purchase
order of $1,000 by the average annual compound rate of return (including capital
appreciation/depreciation and dividends and distributions paid and reinvested)
for the stated period less any fees charged to all shareholder accounts and
annualizing the result. The calculation assumes that all dividends and
distributions are reinvested at the net asset value on the reinvestment dates
during the period. The quotation assumes the account was completely redeemed at
the end of each period and deduction of all applicable charges and fees.
According to the SEC formula:
P(1+T)/n/=ERV
where:
P = a hypothetical initial payment of $1,000,
T = average annual total return,
n = number of years,
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10 year periods at the
end of the 1, 5 or 10 year periods (or fractional portion
thereof).
Based upon the foregoing calculations, the average annual total return for
the Brinson Fund-Class I (previously Brinson Fund Class) shares of:*
(i) the Global Fund, for the one-and three-year periods ended June 30,
1998 and the periods August 31, 1992 (commencement of operations)
through June 30, 1998 was 8.28%, 14.38% and 11.44%, respectively;
(ii) the Global Equity Fund, for the one-and three-year periods ended
June 30, 1998 and the period January 28, 1994 (commencement of
operations) through June 30, 1998 was 8.99%, 18.41%, and 12.45%,
respectively;
(iii) the Global Bond Fund, for the one-and three-year periods ended June
30, 1998 and the period July 30, 1993 (commencement of operations)
through June 30, 1998 was 2.69%, 7.23% and 6.49%, respectively;
(iv) the U.S. Balanced Fund, for the one and three-year periods ended
June 30, 1998 and the period December 30, 1994 (commencement of
operations) through June 30, 1998 was 12.19%, 13.72% and 15.90%,
respectively;
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<PAGE>
(v) the U.S. Equity Fund, for the one-and three-year periods ended June
30, 1998 and the period February 22, 1994 (commencement of
operations) through June 30, 1998 was 21.48%, 27.86% and 23.11%
respectively;
(vi) the U.S. Large Capitalization Equity Fund, for the period April 6,
1998 (commencement of operations) through June 30, 1998 was -0.13%;
(vii) the U.S. Bond Fund, for the one-year period ended June 30, 1998 and
the period August 31, 1995 (commencement of operations) through June
30, 1998 was 10.60% and 7.99%, respectively; and
(viii) the Global (ex-U.S.) Equity Fund, for the one-and three-year periods
ended June 30, 1998 and the period August 31, 1993 (commencement of
operations) through June 30, 1998 was 4.78%, 15.91% and 9.03%,
respectively.
Based upon the foregoing calculations, the average annual total return for
the UBS Investment Funds class of shares (previously Swisskey Fund class) of:*
(i) the Global Fund, for the one-year period ended June 30, 1998 and the
period July 31, 1995 (commencement of operations) through June 30,
1998 was 7.60% and 13.30%, respectively;
(ii) the Global Equity Fund, for the one-year period ended June 30, 1998
and the period July 31, 1995 (commencement of operations) through
June 30, 1998 was 8.15% and 16.26%, respectively;
(iii) the Global Bond Fund, for the one-year period ended June 30, 1998
and the period July 31, 1995 (commencement of operations) through
June 30, 1998 was 2.28% and 6.36%, respectively;
(iv) the U.S. Balanced Fund, for the one-year period ended June 30, 1998
and the period July 31, 1995 (commencement of operations) through
June 30, 1998 was 11.79% and 13.15%, respectively;
(v) the U.S. Equity Fund, for the one-year period ended June 30, 1998
and the period July 31, 1995 (commencement of operations) through
June 30, 1998 was 20.80% and 26.66%, respectively;
(vi) the U.S. Large Capitalization Equity Fund, for the period April 6,
1998 (commencement of operations) through June 30, 1998 was -0.32%;
(vii) the U.S. Bond Fund, for the one-year period ended June 30, 1998 and
the period August 31, 1995 (commencement of operations) through June
30, 1998 was 9.97% and 7.43%, respectively; and
(viii) the Global (ex-U.S.) Equity Fund, for the one-year period ended June
30, 1998 and the period July 31, 1995 (commencement of operations)
through June 30, 1998 was 3.90% and 13.19%, respectively.
55
<PAGE>
Based on the foregoing calculations, the average annual total return for
the Brinson Fund-Class N shares of:
(i) the Global Fund, for the period June 30, 1997 (commencement of
operations) through June 30, 1998 was 7.90%;
(ii) the Global Equity Fund, for the period June 30, 1997 (commencement
of operations) through June 30, 1998 was 8.60%;
(iii) the Global Bond Fund, for the period June 30, 1997 (commencement of
operations) through June 30, 1998 was 2.37%;
(iv) the U.S. Balanced Fund, for the period June 30, 1997 (commencement
of operations) through June 30, 1998 was 12.15%;
(v) the U.S. Equity Fund, for the period June 30, 1997 (commencement of
operations) through June 30, 1998 was 21.10%;
(vi) the U.S. Large Capitalization Equity Fund, for the period April 6,
1998 (commencement of operations) through June 30, 1998 was -0.37%;
(vii) the U.S. Bond Fund, for the period June 30, 1997 (commencement of
operations) through June 30, 1998 was 10.30%; and
(viii) the Global (ex-U.S.) Equity Fund, for the period June 30, 1997
(commencement of operations) through June 30, 1998 was 4.51%.
* The Emerging Markets Debt Fund and the Emerging Markets Equity Fund
had not commenced operations as of the time periods indicated.
Based on the foregoing calculations, the average annual total return for
the U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Fund and
High Yield Bond Fund was as follows:
(i) the U.S. Large Capitalization Growth Fund, for the period
October 14, 1997 (commencement of operations) through June 30, 1998
was 12.51%*;
(ii) the U.S. Small Capitalization Fund, for the period September 30,
1997 (commencement of operations) through June 30, 1998 was
(2.89)%*; and
(iii) the High Yield Bond Fund, for the period September 30, 1997
(commencement of operations) through June 30, 1998 was 8.18%*.
* These Series were reorganized as Series of The Brinson Funds on
December __, 1998. The average annual total return calculations reflect the
performance of these Series while they were series of the UBS Private Investor
Funds, Inc.
Yield
As indicated below, current yield is determined by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period and annualizing the result.
Expenses accrued for the period include any fees charged to all shareholders
during the 30-day base periods. According to the SEC formula:
Yield = 2[(a-b + 1)/6/ - 1
------------------
cd
where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
The yield of a Series may be calculated by dividing the net investment
income per share earned by the particular Series during a 30-day (or one month)
period by the net asset value per share on the last
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<PAGE>
day of the period and annualizing the result on a semi-annual basis. A Series'
net investment income per share earned during the period is based on the average
daily number of shares outstanding during the period entitled to receive
dividends and includes dividends and interest earned during the period minus
expenses accrued for the period, net of reimbursements.
FINANCIAL STATEMENTS
The Series' Financial Statements for the fiscal year ended June 30, 1998
and the report thereon of Ernst & Young LLP, which are contained in the Series'
Annual Reports dated June 30, 1998 (which do not include the U.S. Large
Capitalization Growth Fund, U.S. Small Capitalization Fund, High Yield Bond
Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund, which had not
commenced operations as of the time period indicated) are incorporated herein by
reference. The Financial Statements of the U.S. Large Capitalization Growth
Fund, U.S. Small Capitalization Fund and High Yield Bond Fund (formerly the UBS
Large Cap Growth Portfolio, the UBS Small Cap Portfolio and the UBS High Yield
Bond Portfolio (the "Portfolios"), respectively), which appear in the Annual
Reports dated December 31, 1997 and the reports thereon of Price Waterhouse LLP
as of and for the fiscal year ended December 31, 1997 are incorporated herein by
reference. The unaudited Financial Statements of the Portfolios for the six
month period ended June 30, 1998 are incorporated herein by reference.
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CORPORATE DEBT RATINGS APPENDIX A
Moody's Investors Service, Inc. describes classifications of corporate bonds as
follows:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edged". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high-quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's also supplies numerical indicators 1, 2, and 3 to rating
categories. The modifier 1 indicates the security is in the higher end of its
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates a ranking toward the lower end of the category.
A-1
<PAGE>
Standard & Poor's Ratings Group describes classifications of corporate bonds as
follows:
AAA - This is the highest rating assigned by Standard & Poor's Ratings
Group to a debt obligation and indicates an extremely strong capacity to pay
principal and interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong and in the majority of instances
they differ from the AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lend
to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC - Debt rated CCC has a current identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest or repay principal.
CC - The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in default, or is expected to default upon maturity or
payment date.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
A-2
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THE BRINSON FUNDS
FORM N-1A
PART C. OTHER INFORMATION
ITEM 22. FINANCIAL STATEMENTS AND EXHIBITS.
----------------------------------
(a) Financial Statements.
Included in Part A: Financial Highlights for the year ended
June 30, 1998 and previous years.
BRINSON GLOBAL FUND--CLASS I, BRINSON GLOBAL EQUITY FUND--CLASS
I, BRINSON GLOBAL BOND FUND--CLASS I, BRINSON U.S. EQUITY FUND--
CLASS I, BRINSON U.S. LARGE CAPITALIZATION EQUITY FUND--CLASS I,
BRINSON U.S. BALANCED FUND--CLASS I, BRINSON U.S. BOND FUND--
CLASS I, AND BRINSON GLOBAL (EX-U.S.) EQUITY FUND--CLASS I
(FORMERLY KNOWN AS BRINSON NON-U.S. EQUITY FUND--CLASS I.)
UBS INVESTMENT FUND--GLOBAL (F/K/A SWISSKEY GLOBAL FUND), UBS
INVESTMENT FUND--GLOBAL EQUITY (F/K/A SWISSKEY GLOBAL EQUITY
FUND), UBS INVESTMENT FUND--GLOBAL BOND (F/K/A SWISSKEY GLOBAL
BOND FUND), UBS INVESTMENT FUND--U.S. BALANCED (F/K/A SWISSKEY
U.S. BALANCED FUND), UBS INVESTMENT FUND--U.S. EQUITY (F/K/A
SWISSKEY U.S. EQUITY FUND), UBS INVESTMENT FUND--U.S. LARGE
CAPITALIZATION EQUITY (F/K/A SWISSKEY U.S. LARGE CAPITALIZATION
EQUITY FUND), UBS INVESTMENT FUND--U.S. BOND (F/K/A SWISSKEY U.S.
BOND FUND) AND UBS INVESTMENT FUND--GLOBAL (EX-U.S.) EQUITY
(F/K/A SWISSKEY NON-U.S. EQUITY FUND).
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 GLOBAL (EX-U.S.) EQUITY FUND--CLASS N
(FORMERLY KNOWN AS BRINSON NON-U.S. EQUITY FUND--CLASS N).*
Financial Highlights for the year ended December 31, 1997 and the
six months ended June 30, 1998.
UBS Large Cap Growth Fund, UBS Small Cap Fund, UBS High Yield
Bond Fund.
* The Brinson Fund-Class N Shares commenced operations on June
30, 1997.
(b) Annual Report
Included in Part B:
GLOBAL FUND
-----------
(1) Report of Independent Auditors/1/;
(2) Schedule of Investments as of June 30, 1998
(audited)/1/;
(3) Statement of Assets and Liabilities at June 30, 1998
(audited)/1/;
(4) Statement of Operations for the year ended June 30, 1998
(audited)/1/;
(5) Statements of Changes in Net Assets for the two years
ended June 30, 1998, and June 30, 1997 (audited)/1/;
(6) Financial Highlights for the Brinson Fund--Class I
Shares for the five years ended June 30, 1998, June 30,
1997, June 30, 1996, June 30, 1995 and June 30, 1994,
and for the period August 31, 1992 (commencement of
operations) to June 30, 1993 (audited)/1/; and for the
Brinson Fund--Class N Shares for the year ended June 30,
1998 (audited)/1/; and for the SwissKey Fund Class
Shares for the two years ended June 30, 1998 and June
30, 1997 and for the period July 31, 1995 (commencement
of operations) to June 30, 1996 (audited)/1/;
(7) Notes to Financial Statements dated June 30, 1998
(audited)/1/.
GLOBAL EQUITY FUND
-------------------
(1) Report of Independent Auditors/1/;
(2) Schedule of Investments as of June 30, 1998 (audited)/1/;
(3) Statement of Assets and Liabilities at June 30, 1998
(audited)/1/;
(4) Statement of Operations for the year ended June 30, 1998
(audited)/1/;
1
<PAGE>
(5) Statements of Changes in Net Assets for the two years
ended June 30, 1998, June 30, 1997 (audited)/1/;
(6) Financial Highlights for the Brinson Fund--Class I Shares
for the four years ended June 30, 1998, June 30, 1997,
June 30, 1996 and June 30, 1995 and for the period
January 28, 1994 (commencement of operations) to June 30,
1994 (audited)/1/; and for the Brinson Fund--Class N
Shares for the year ended June 30, 1998 (audited)/1/; and
for the SwissKey Fund Class Shares for the two years
ended June 30, 1998 and June 30, 1997 and for the period
July 31, 1995 (commencement of operations) to June 30,
1996 (audited)/1/;
(7) Notes to Financial Statements dated June 30, 1998
(audited)/1/.
GLOBAL BOND FUND
-----------------
(1) Report of Independent Auditors/1/;
(2) Schedule of Investments as of June 30, 1998 (audited)/1/;
(3) Statement of Assets and Liabilities at June 30, 1998
(audited)/1/;
(4) Statement of Operations for the year ended June 30, 1998
(audited)/1/;
(5) Statements of Changes in Net Assets for the two years
ended June 30, 1998 and June 30, 1997 (audited)/1/;
(6) Financial Highlights for the Brinson Fund--Class I shares
for the four years ended June 30, 1998, June 30, 1997,
June 30, 1996 and June 30, 1995 and for the period July
30, 1993 (commencement of operations) to June 30, 1994
(audited)/1/; and for the Brinson Fund--Class N Shares
for the year ended June 30, 1998 (audited)/1/; and for
the SwissKey Fund Class Shares for the two years ended
June 30, 1998, June 30, 1997 and for the period July 31,
1995 (commencement of operations) to June 30, 1996
(audited)/1/;
(7) Notes to Financial Statements dated June 30, 1998
(audited)/1/.
U.S. BALANCED FUND
-------------------
(1) Report of Independent Auditors/1/;
(2) Schedule of Investments as of June 30, 1998 (audited)/1/;
(3) Statement of Assets and Liabilities at June 30, 1998
(audited)/1/;
(4) Statement of Operations for the year ended June 30, 1998
(audited)/1/;
(5) Statement of Changes in Net Assets for the two years
ended June 30, 1998 and June 30, 1997 (audited)/1/;
(6) Financial Highlights for the Brinson Fund--Class I Shares
for three years ended June 30, 1998, June 30, 1997 and
June 30, 1996, and for the period December 30, 1994
(commencement of operations) to June 30, 1995
(audited)/1/; and for the Brinson Fund--Class N Shares
for the year ended June 30, 1998, (audited)/1/; and for
the SwissKey Fund Class Shares for the two years ended
June 30, 1998, June 30, 1997 and for the period July 31,
1995 to June 30, 1996 (audited)/1/;
(7) Notes to Financial Statements dated June 30, 1998
(audited)/1/.
U.S. EQUITY FUND
-----------------
(1) Report of Independent Auditors/1/;
(2) Schedule of Investments as of June 30, 1998 (audited)/1/;
(3) Statement of Assets and Liabilities at June 30, 1998
(audited)/1/;
(4) Statement of Operations for the year ended June 30, 1998
(audited) /1/;
<PAGE>
(5) Statements of Changes in Net Assets for the two years
ended June 30, 1998 and June 30, 1997 (audited)/1/;
(6) Financial Highlights for the Brinson Fund--Class I Shares
for the four years ended June 30, 1998, June 30, 1997,
June 30, 1996 and June 30, 1995 and for the period
February 22, 1994 (commencement of operations) to June
30, 1994 (audited)/1/; and for the Brinson Fund--Class N
Shares for the year ended June 30, 1998 (audited)/1/; and
for the SwissKey Fund Class Shares for two years ended
June 30, 1998 and June 30, 1997 and for the period July
31, 1995 (commencement of operations) to June 30, 1996
(audited)/1/;
(7) Notes to Financial Statements dated June 30, 1998
(audited)/1/.
U.S. LARGE CAPITALIZATION EQUITY FUND
-------------------------------------
(1) Report of Independent Accountants/1/;
(2) Schedule of Investments as of June 30, 1998
(audited)/1/;
(3) Statement of Assets and Liabilities at June 30, 1998
(audited)/1/;
(4) Statement of Operations for the period April 6, 1998
(commencement of operations) to June 30, 1998
(audited)/1/;
(5) Statement of Changes in Net Assets for the period April
6, 1998 (commencement of operations) to June 30, 1998
(audited)/1/;
(6) Financial Highlights for the Brinson Fund--Class I Shares
for the period April 6, 1998 (commencement of operations)
to June 30, 1998 (audited)/1/; Brinson Fund--Class N
Shares for the period April 6, 1998 (commencement of
operations) to June 30, 1998 (audited)/1/; and for the
SwissKey Fund Class Shares for the period April 6, 1998
(commencement of operations) to June 30, 1998
(audited)/1/;
(7) Notes to Financial Statements dated June 30, 1998
(audited)/1/.
U.S. BOND FUND
---------------
(1) Report of Independent Auditors/1/;
(2) Schedule of Investments as of June 30, 1998
(audited)/1/;
(3) Statement of Assets and Liabilities at June 30, 1998
(audited)/1/;
(4) Statement of Operations for the year ended June 30, 1998
(audited)/1/;
(5) Statement of Changes in Net Assets for the two years
ended June 30, 1998 and June 30, 1997 (audited)/1/;
(6) Financial Highlights for Brinson Fund--Class I Shares for
the two years ended June 30, 1998 and June 30, 1997 and
for the period August 31, 1995 (commencement of
operations) to June 30, 1996 (audited)/1/; and for the
Brinson Fund--Class N Shares for the year ended June 30,
1998 (audited)/1/; and for the SwissKey Fund Class Shares
for the two years ended June 30, 1998 and June 30, 1997
and for the period August 31, 1995 (commencement of
operations) to June 30, 1996 (audited)/1/;
(7) Notes to Financial Statements dated June 30, 1998
(audited)/1/.
GLOBAL (EX-U.S.) EQUITY FUND (formerly Non-U.S. Equity Fund)
------------------------------------------------------------
(1) Report of Independent Auditors/1/;
(2) Schedule of Investments as of June 30, 1998 (audited)/1/;
(3) Statement of Assets and Liabilities at June 30, 1998
(audited)/1/;
(4) Statement of Operations for the year ended June 30, 1998
(audited)/1/;
(5) Statements of Changes in Net Assets for the two years
ended June 30, 1998 and June 30, 1997 (audited)/1/;
(6) Financial Highlights for the Brinson Fund--Class I Shares
for the four years ended June 30, 1998 and June 30, 1997,
June 30, 1996, June 30, 1995 and for the period August
31, 1993 (commencement of operations) to June 30, 1994
(audited)/1/; and for the Brinson Fund--Class N Shares
for the year ended June 30, 1998 (audited)/1/; and for
the SwissKey Fund Class Shares for the two years ended
June 30, 1998 and June 30, 1997 and for the period July
31, 1995 (commencement of operations) June 30, 1996
(audited)/1/;
(7) Notes to Financial Statements dated June 30, 1998
(audited)/1/.
UBS LARGE CAP GROWTH FUND
-------------------------
(1) Report of Independent Accountants/2/;
(2) Schedule of Investments as of December 31, 1997
(audited)/2/;
(3) Statement of Assets and Liabilities at December 31, 1997
(audited)/2/;
(4) Statement of Operations for the period October 14, 1997
(commencement of operations) to December 31, 1997
(audited)/2/;
(5) Statement of Changes in Net Assets for the period October
14, 1997 (commencement of operations) to December 31,
1997 (audited)/2/;
(6) Financial Highlights for the period October 14, 1997
(commencement of operations) to December 31, 1997
(audited)/2/;
(7) Notes to Financial Statements dated December 31, 1997
(audited)/2/.
UBS SMALL CAP FUND
------------------
(1) Report of Independent Accountants/2/;
(2) Schedule of Investments as of December 31, 1997
(audited)/2/;
(3) Statement of Assets and Liabilities at December 31, 1997
(audited)/2/;
(4) Statement of Operations for the period September 30, 1997
(commencement of operations) to December 31, 1997
(audited)/2/;
(5) Statement of Changes in Net Assets for the period
September 30, 1997 (commencement of operations) to
December 31, 1997 (audited)/2/;
(6) Financial Highlights for the period September 30, 1997
(commencement of operations) to December 31, 1997
(audited)/2/;
(7) Notes to Financial Statements dated December 31, 1997
(audited)/2/.
UBS HIGH YIELD BOND FUND
------------------------
(1) Report of Independent Accountants/2/;
(2) Schedule of Investments as of December 31, 1997
(audited)/2/;
(3) Statement of Assets and Liabilities at December 31, 1997
(audited)/2/;
(4) Statement of Operations for the period September 30, 1997
(commencement of operations) to December 31, 1997
(audited)/2/;
(5) Statement of Changes in Net Assets for the period
September 30, 1997 (commencement of operations) to
December 31, 1997 (audited)/2/;
(6) Financial Highlights for the period September 30, 1997
(commencement of operations) to December 31, 1997
(audited)/2/;
(7) Notes to Financial Statements dated December 31, 1997
(audited)/2/.
(c) Semi-Annual Report
UBS LARGE CAP GROWTH FUND
-------------------------
(1) Schedule of Investments as of June 30, 1998
(unaudited)/3/;
(2) Statement of Assets and Liabilities at June 30, 1998
(unaudited)/3/;
(3) Statement of Operations for the six months ended June
30, 1998 (unaudited)/3/;
(4) Statement of Changes in Net Assets for six months ended
June 30, 1998 (unaudited)/3/;
(5) Financial Highlights for the six months ended June 30,
1998 (unaudited)/3/;
(6) Notes to Financial Statements dated June 30, 1998
(unaudited)/3/.
UBS SMALL CAP FUND
------------------
(1) Schedule of Investments as of June 30, 1998
(unaudited)/3/;
(2) Statement of Assets and Liabilities at June 30, 1998
(unaudited)/3/;
(3) Statement of Operations for the six months ended June
30, 1998 (unaudited)/3/;
(4) Statement of Changes in Net Assets for six months ended
June 30, 1998 (unaudited)/3/;
(5) Financial Highlights for the six months ended June 30,
1998 (unaudited)/3/;
(6) Notes to Financial Statements dated June 30, 1998
(unaudited)/3/.
UBS HIGH YIELD BOND FUND
------------------------
(1) Schedule of Investments as of June 30, 1998
(unaudited)/3/;
(2) Statement of Assets and Liabilities at June 30, 1998
(unaudited)/3/;
(3) Statement of Operations for the six months ended June
30, 1998 (unaudited)/3/;
(4) Statement of Changes in Net Assets for six months ended
June 30, 1998 (unaudited)/3/;
(5) Financial Highlights for the six months ended June 30,
1998 (unaudited)/3/;
(6) Notes to Financial Statements dated June 30, 1998
(unaudited)/3/.
/1/ Incorporated by reference to the Trust's Financial Statements in the
Annual Report to Shareholders dated June 30, 1998 and filed
electronically with the Securities and Exchange Commission (the
"Commission") on September 9, 1998 (Accession No.
0000950131-98-005115).
/2/ Incorporated by reference to the Financial Statements relating to the
UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS High Yield Bond
Fund in the Annual Reports to Shareholders each dated December 31,
1997 and filed electronically with the Commission on March 3, 1998
(Accession Nos. 0000950117-98-000477, 0000950117-98-000472 and
000950117-98-000479, respectively).
/3/ Incorporated by reference to the Financial Statements relating to the
UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS High Yield Bond
Fund into the Semi-Annual Reports to Shareholders each dated June 30,
1998 and filed electronically with the Commission on August 27, 1998
(Accession Nos. 0000950117-98-001633, 00009500117-98-001632 and
0000950117-98-001630, respectively)
(b) Exhibits:
Exhibits filed pursuant to Form N-1A:
(a) Articles of Incorporation.
(1) Certificate of Trust of the Registrant dated August 9,
1993, as filed with the Office of the Secretary of State
of the State of Delaware on August 13, 1993, is
incorporated herein by reference to Post-Effective
Amendment No. 21 to Registrant's Registration Statement
(Nos. 33-47287 and 811-6637) as filed electronically on
September 15, 1998.
(2) Agreement and Declaration of Trust dated August 19, 1993,
as amended through August 24, 1998, of the Registrant is
incorporated herein by reference to Post-Effective
Amendment No. 21 to Registrant's Registration Statement
(Nos. 33-47287 and 811-6637) as filed electronically on
September 15, 1998.
(3) Certificates of the Secretary of the Registrant dated
April 14, 1998 are incorporated herein by reference to
Post-Effective Amendment No. 21 to Registrant's
Registration Statement (Nos. 33-47287 and 811-6637) as
filed electronically on September 15, 1998.
<PAGE>
(b) By-Laws.
By-Laws of The Brinson Funds dated August 9, 1993, are
incorporated herein by reference to Exhibit 2 Post-Effective
Amendment No. 17 to Registrant's Registration Statement on
Form N-1A (File Nos. 33-47287 and 811-6637), as
electronically filed with the Commission on August 29, 1996.
(c) Instruments Defining the Rights of Security Holders.
(1) Form of Specimen Share Certificate of The Brinson Funds is
incorporated herein by reference to Post-Effective Amendment
No. 9 to Registrant's Registration Statement (Nos. 33-47287,
and 811-6637) as filed on July 21, 1994 and is incorporated
herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement (Nos. 33-47287 and
811-6637) as filed electronically on September 15, 1998.
The rights of security holders of the Trust are further
defined in the following sections of the Trust's By-Laws and
Declaration:
a. By-Laws.
See Article II - "Voting", Section 7 and Section
10.
b. Declaration.
See Article III - "Shares", Section 1, Section 2
and Section 6.
(d) Investment Advisory Contracts.
(1) Investment Advisory Agreement dated April 25, 1995 between
Brinson Partners, Inc. and the Registrant on behalf of the
Global Fund (f/k/a Brinson Global Fund) series, and
Secretary's Certificate relating thereto, is incorporated
herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement (Nos. 33-47287 and
811-6637) as filed electronically on September 15, 1998.
(2) Investment Advisory Agreement dated April 25, 1995 between
Brinson Partners, Inc. and the Registrant on behalf of the
Global Bond Fund (f/k/a Brinson Global Bond Fund) series,
and Secretary's Certificate relating thereto, is
incorporated herein by reference to Post-Effective Amendment
No. 21 to Registrant's Registration Statement (Nos. 33-47287
and 811-6637) as filed electronically on September 15, 1998.
(3) Investment Advisory Agreement dated April 25, 1995 between
Brinson Partners, Inc. and the Registrant on behalf of the
Global (ex-U.S.) Equity Fund (f/k/a Non-U.S. Equity Fund)
series, and Secretary's Certificate relating thereto, is
incorporated herein by reference to Post-Effective Amendment
No. 21 to Registrant's Registration Statement (Nos. 33-47287
and 811-6637) as filed electronically on September 15, 1998.
(4) Investment Advisory Agreement dated April 25, 1995 between
Brinson Partners, Inc. and the Registrant on behalf of the
Global Equity Fund (f/k/a Brinson Global Equity Fund)
series, and Secretary's Certificate relating thereto, is
incorporated herein by reference to Post-Effective Amendment
No. 21 to Registrant's Registration Statement (Nos. 33-47287
and 811-6637) as filed electronically on September 15, 1998.
(5) Investment Advisory Agreement dated April 25, 1995 between
Brinson Partners, Inc. and the Registrant on behalf of the
U.S. Equity Fund (f/k/a Brinson U.S. Equity Fund) series,
and Secretary's Certificate relating thereto, is
incorporated herein by reference to Post-Effective Amendment
No. 21 to Registrant's Registration Statement (Nos. 33-47287
and 811-6637) as filed electronically on September 15, 1998.
(6) Investment Advisory Agreement dated April 25, 1995 between
Brinson Partners, Inc. and the Registrant on behalf of the
U.S. Balanced Fund (f/k/a Brinson U.S. Balanced Fund)
series, and Secretary's Certificate relating thereto, is
incorporated herein by reference to Post-Effective Amendment
No. 21 to Registrant's Registration Statement (Nos. 33-47287
and 811-6637) as filed electronically on September 15, 1998.
(7) Investment Advisory Agreement dated April 25, 1995 between
Brinson Partners, Inc. and the Registrant on behalf of the
U.S. Bond Fund (f/k/a Brinson U.S. Bond Fund) series, and
Secretary's Certificate relating thereto, is incorporated
herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement (Nos. 33-47287 and
811-6637) as filed electronically on September 15, 1998.
(8) Investment Advisory Agreement dated November 24, 1997
between Brinson Partners, Inc. and the Registrant on behalf
of the U.S. Large Capitalization Equity Fund series is
incorporated herein by reference to Post-Effective Amendment
No. 21 to Registrant's Registration Statement (Nos. 33-47287
and 811-6637) as filed electronically on September 15, 1998.
(9) Form of Investment Advisory Agreement dated December , 1998
between Brinson Partners, Inc. and the Registrant on behalf
of the U.S. Large Capitalization Growth Fund series is filed
electronically herewith as EX-99.d9.
(10) Form of Investment Advisory Agreement dated December , 1998
between Brinson Partners, Inc. and the Registrant on behalf
of the U.S. Small Capitalization Fund series is filed
electronically herewith as EX-99.d10.
(11) Form of Investment Advisory Agreement dated December , 1998
between Brinson Partners, Inc. and the Registrant on behalf
of the High Yield Bond Fund series is filed electronically
herewith as EX-99.d11.
(12) Form of Investment Advisory Agreement dated December , 1998
between Brinson Partners, Inc. and the Registrant on behalf
of the Emerging Markets Equity Fund series is filed
electronically herewith as EX-99.d12.
(13) Form of Investment Advisory Agreement dated December , 1998
between Brinson Partners, Inc. and the Registrant on behalf
of the Emerging Markets Debt Fund series is filed
electronically herewith as EX-99.d13.
<PAGE>
(e) Underwriting Contracts
Distribution Agreement dated February 24, 1997, as amended
through August 24, 1998, between Funds Distributor, Inc. and the
Registrant on behalf of each series is incorporated herein by
reference to Post-Effective Amendment No. 21 to Registrant's
Registration Statement (Nos. 33-47287 and 811-6637) as filed
electronically on September 15, 1998.
(f) Bonus or Profit Sharing Contracts.
Not applicable.
(g) Custodian Agreements.
Custodial arrangements are provided under the Multiple Services
Agreement dated May 9, 1997, as amended through January 23, 1998,
between Morgan Stanley Trust Company and the Registrant on behalf
of each series of the Registrant which is incorporated herein by
reference to Post-Effective Amendment No. 21 to Registrant's
Registration Statement (Nos. 33-47287 and 811-6637) as filed
electronically on September 15, 1998, and forms of amendments to
Schedule B1 and Schedule F are filed electronically herewith as
Ex-99.g.
(h) Other Material Contracts.
Not applicable.
<PAGE>
(i) Legal Opinion
(1) Legal opinion of Stradley, Ronon, Stevens & Young LLP,
counsel to the Registrant, is filed electronically herewith
as EX-99.il.
(j) Other Opinions and Consents.
(1) Consent of Ernst & Young LLP, independent auditors to the
Registrant is filed electronically herewith as EX-99.j1.
(2) Consents of PricewaterhouseCoopers LLP independent auditors
to the UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS
High Yield Bond Fund is filed electronically herewith as EX-
99.j2.
(k) Omitted Financial Statements.
Not applicable.
(l) Initial Capital Agreements.
Letter of Understanding dated July 1, 1992, relating to initial
capital is incorporated herein by reference to Post-Effective
Amendment No. 21 to Registrant's Registration Statement (Nos. 33-
47287 and 811-6637) as filed electronically on September 15,
1998.
(m) Rule 12b-1 Plan.
(1) Amended Distribution Plan dated February 21, 1995, as
amended through August 24, 1998, relating to the UBS
Investment Fund class of shares (f/k/a the SwissKey Fund
Class) of each series of the Registrant is incorporated
herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement (Nos. 33-47287 and 811-
6637) as filed electronically on September 15, 1998 and form
of amendment to Schedule A is filed electronically herewith
as EX-99.m1.
(2) Distribution Plan dated June 30, 1997, as amended through
August 24, 1998, relating to the Brinson Fund-Class N shares
of each series of the Registrant is incorporated herein by
reference to Post-Effective Amendment No. 21 to Registrant's
Registration Statement (Nos. 33-47287 and 811-6637) as filed
electronically on September 15, 1998 and amendment to
Schedule A is filed electronically herewith as EX-99.m2.
(3) Selected Dealer and Selling Agreement as last approved on
August 24, 1998 for the UBS Investment Fund class of shares
(f/k/a SwissKey Fund Class) of each series of the Registrant
is incorporated herein by reference to Post-Effective
Amendment No. 21 to Registrant's Registration Statement
(Nos. 33-47287 and 811-6637) as filed electronically on
September 15, 1998 and amendment to Exhibits A and B are
filed electronically herewith as EX-99.m3.
(4) The Selected Dealer and Selling Agreements as approved
November 24, 1997 on behalf of each Series of The Brinson
Funds are incorporated herein by reference to Post-Effective
Amendment No. 21 to Registrant's Registration Statement
(Nos. 33-47287 and 811-6637) as filed electronically on
September 15, 1998.
(n) Financial Data Schedule.
(1) Financial Data Schedules dated June 30, 1998, relating to
The Brinson Fund-Class I Shares, Brinson Fund-Class N Shares
and SwissKey Fund Class Shares are filed electronically
herewith as EX-99.27.
(2) Financial Data Schedules dated December 31, 1997 and June
30, 1998 relating to the UBS Large Cap Growth Fund, UBS
Small Cap Fund and UBS High Yield Fund are filed
electronically herewith as EX-99.27.
(o) Rule 18f-3 Plan.
Revised Multiple Class Plan dated May 19, 1997, as amended
through August 24, 1998, pursuant to Rule 18f-3 on behalf of each
series of the Registrant is incorporated herein by reference to
Post-Effective Amendment No. 21 to Registrant's Registration
Statement (Nos. 33-47287 and 811-6637) as filed electronically on
September 15, 1998 and amendment to Appendix A is filed
electronically herewith as Ex-99.o.
<PAGE>
(p) Power of Attorney.
(1) Power-of-Attorney appointing Karl Hartmann, Lloyd Lipsett,
Kathleen O'Neill, Eddie Wang and Paul Roselli as attorneys-in-
fact and agents is incorporated herein by reference to Post-
Effective Amendment No. 21 to Registrant's Registration Statement
(Nos. 33-47287 and 811-6637) as filed electronically on September
15, 1998.
(2) Certificate of Secretary and resolution relating to the
appointment of power of attorney is incorporated herein by
reference to Post-Effective Amendment No. 21 to Registrant's
Registration Statement (Nos. 33-47287 and 811-6637) as filed
electronically on September 15, 1998.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
--------------------------------------------------------------
None.
-----
ITEM 25. INDEMNIFICATION.
----------------
Indemnification of the Registrant's Trustees is provided for in
Article VII, Sections 2 and 3 of the Registrant's Agreement and
Declaration of Trust dated August 9, 1993, as amended through August
24, 1998, as follows:
Section 2. Indemnification and Limitation of Liability. The Trustees
shall not be responsible or liable in any event for any neglect or
wrong-doing of any officer, agent, employee, Manager or Principal
Underwriter of the Trust, nor shall any Trustee be responsible for the
act or omission of any other Trustee, and, subject to the provisions
of the Bylaws, the Trust out of its assets may indemnify and hold
harmless each and every Trustee and officer of the Trust from and
against any and all claims, demands, costs, losses, expenses, and
damages whatsoever arising out of or related to such Trustee's
performance of his or her duties as a Trustee or officer of the Trust;
provided that nothing
<PAGE>
herein contained shall indemnify, hold harmless or protect any Trustee
or officer from or against any liability to the Trust or any
Shareholder to which he or she would otherwise be subject by reason of
wilful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with
the Trust shall be conclusively deemed to have been issued, executed
or done only in or with respect to their or his or her capacity as
Trustees or Trustee, and such Trustees or Trustee shall not be
personally liable thereon.
Section 3. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers hereunder shall
be binding upon everyone interested in or dealing with the Trust. A
Trustee shall be liable to the Trust and to any Shareholder solely for
his or her own wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the office
of Trustee and shall not be liable for errors of judgment or mistakes
of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration
of Trust and shall be under no liability for any act or omission in
accordance with such advice nor for failing to follow such advice. The
Trustees shall not be required to give any bond as such, nor any
surety if a bond is required.
Section 4. Insurance. The Trustees shall be entitled and empowered to
the fullest extent permitted by law to purchase with Trust assets
insurance for liability and for all expenses, reasonably incurred or
paid or expected to be paid by a Trustee or officer in connection with
any claim, action, suit or proceeding in which he or she becomes
involved by virtue of his or her capacity or former capacity with the
Trust, whether or not the Trust would have the power to indemnify him
or her against such liability under the provisions of this Article.
Indemnification of Registrant's custodian, transfer agent, accounting
services provider, administrator and distributor against certain
stated liabilities is provided until May 9, 1997 under the following
documents:
(a) Section 12 of Accounting Services Agreement, between the
Registrant and Fund/Plan Services, Inc., incorporated herein
by reference to Post Effective No. 16 to Registrant's
Registration Statement on Form N-1A (File Nos. 33-47287 and
811-6637), Exhibit 9(c) as filed electronically on February
15, 1996.
(b) Section 8 of Administration Agreement between the Registrant
and Fund/Plan Services, Inc., incorporated herein by
reference to Post Effective No. 16 to Registrant's
Registration Statement on Form N-1A (File Nos. 33-47287 and
811-6637), Exhibit 9(b) as filed electronically on
February 15, 1996.
(c) Section 14 of Custodian Agreement between the Registrant and
Bankers Trust Company, incorporated herein by reference to
Post Effective No. 13 to Registrant's Registration Statement
on Form N-1A (File Nos. 33-47287 and 811-6637), Exhibit Nos.
8(a) and 8(b) as filed electronically on September 20, 1995.
(d) Section 19 of Shareholder Services Agreement between
Registrant and Fund/Plan Services, Inc., incorporated herein
by reference to Post Effective No. 16 to Registrant's
Registration Statement on Form N-1A (File Nos. 33-47287 and
811-6637), Exhibit 9(a) as filed electronically on February
15, 1996.
(e) Section 8 of the Underwriting Agreement between Registrant
and Fund/Plan Broker Services, Inc. are incorporated herein
by reference to Post Effective No. 16 to Registrant's
Registration Statement on Form N-1A (File Nos. 33-47287 and
811-6637), Exhibit No. (6) as filed electronically on
February 15, 1996.
Effective May 10, 1997, indemnification of Registrant's custodian,
transfer agent, accounting services provider, administrator and
distributor against certain stated liabilities is provided for in the
following documents:
(a) Sections I.8(a), I.8(c)(iii), I.10, II.A.2, II.B.5, II.C.6,
III.1., III.2.(b) through III.2.(e), III.4.(e) and III.9.(b)
of the Multiple Services Agreement dated May 9, 1997, as
amended through January 23, 1998, between Morgan Stanley
Trust Company and the Registrant on behalf of each of the
series of the Registrant is incorporated herein by reference
to Post-Effective Amendment No. 21 to Registrant's
Registration Statement (Nos. 33-47287 and 811-6637) as filed
electronically on September 15, 1998.
Effective February 24, 1997, indemnification of Registrant's
distributor against certain stated liabilities is provided for in the
following document:
(b) Section 1.10 of the Distribution Agreement between Funds
Distributor, Inc. and the Registrant on behalf of each
series of the Registrant dated February 24, 1997, as amended
through August 24, 1998, is incorporated herein by reference
to Post-Effective Amendment No. 21 to Registrant's
Registration Statement (Nos. 33-47287 and 811-6637) as filed
electronically on September 15, 1998.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF ADVISOR.
------------------------------------------
Brinson Partners, Inc. provides investment advisory services
consisting of portfolio management for a variety of individuals and
institutions and as of March 31, 1998 had approximately $158
billion in assets under management. It presently acts as investment
advisor to nine other investment companies, Brinson Relationship
Funds, which includes seventeen investment portfolios (series);
<PAGE>
Enterprise Accumulation Trust - International Growth Portfolio;
Enterprise Group of Funds, Inc. - International Growth Portfolio; Fort
Dearborn Income Securities, Inc.; The Hirtle Callaghan International
Trust - International Equity Portfolio; John Hancock Variable Annuity
Series Trust I - International Balanced Fund; Managed Accounts
Services Portfolio Trust - Pace Large Company Value Equity
Investments; AON Funds - International Equity Fund and The Republic
Funds - Republic Equity Fund.
For information as to any other business, vocation or employment of a
substantial nature in which each Trustee or officer of the
Registrant's investment advisor is or has been engaged for his own
account or in the capacity of Trustee, officer, employee, partner or
trustee, reference is made to the Form ADV (File #801-34910) filed by
it under the Investment Advisers Act of 1940, as amended.
ITEM 27. PRINCIPAL UNDERWRITER.
----------------------
(a) Funds Distributor, Inc. (the "Distributor") acts as principal
underwriter for the following investment companies.
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
BJB Investment Funds
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Equity Funds, Inc.
Founders Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Merrimac Series
Monetta Funds, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Orbitex Groups of Funds
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.
Funds Distributor is registered with the Commission as a broker-dealer and
is a member of the National Association of Securities Dealers. Funds
Distributor is located at 60 State Street, Suite 1300, Boston, Massachusetts
02109. Funds Distributor is an indirect wholly-owned subsidiary of Boston
Institutional Group, Inc., a holding company, all of whose outstanding shares
are owned by key employees.
(b) The following is a list of the executive officers, directors and
partners of Funds Distributor, Inc.
<TABLE>
<CAPTION>
<S> <C> <C>
Director, President and -Marie E. Connolly
Chief Executive Officer
Executive Vice President -George A. Rio
Executive Vice President -Donald R. Roberson
Executive Vice President -William S. Nichols
Senior Vice President, -Margaret W. Chambers
General Counsel, Chief
Compliance Officer,
Secretary and Clerk
Senior Vice President -Michael S. Petrucelli
Director, Senior Vice -Joseph F. Tower, III
President, Treasurer
and Chief Financial
Officer
Senior Vice President -Paula R. David
Senior Vice President -Allen B. Closser
Senior Vice President -Bernard A. Whalen
Chairman and Director -William J. Nutt
</TABLE>
<PAGE>
(c) Inapplicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
---------------------------------
All records described in Section 31(a) of the Investment Company Act
of 1940, as amended and Rules 17 CFR 270.31a-1 to 31a-31 promulgated
thereunder, are maintained by the Registrant's investment advisor,
Brinson Partners, Inc., 209 South LaSalle Street, Chicago, IL 60604-
1295, except for those maintained by the Fund's Custodian, Morgan
Stanley Trust Company ("MSTC"), One Pierrepont Plaza, Brooklyn, New
York 11201.
MSTC provides general administrative, accounting, portfolio valuation,
transfer agency and custodian services to the Registrant, including
the coordination and monitoring of any third party service providers
and maintains all such records relating to these services.
ITEM 29. MANAGEMENT SERVICES.
--------------------
There are no management-related service contracts not discussed in
Part A or Part B.
ITEM 30. UNDERTAKINGS.
-------------
(a) Inapplicable.
(b)(1) The Registrant hereby undertakes to furnish each person to
whom a Prospectus for one or more series of the Registrant is
delivered with a copy of the relevant latest annual report to
shareholders, upon request and without charge.
(c) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of
removal of any Trustee when requested in writing to do so by
the record holders of not less than 10 percent of the
Registrant's outstanding shares and to assist its shareholders
in accordance with the requirements of Section 16(c) of the
Investment Company Act of 1940, as amended, relating to
shareholder communications.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused Post-Effective Amendment No.
22/23 to this Registration Statement to be signed on its behalf by the
undersigned, duly authorized, in the City of Boston, and Commonwealth of
Massachusetts on the 16th day of September, 1998.
THE BRINSON FUNDS
By: E. Thomas McFarlan*
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date(s) indicated.
<TABLE>
<CAPTION>
<S> <C>
E. THOMAS MCFARLAN*
E. Thomas McFarlan September 16, 1998
President
WALTER E. AUCH*
Walter E. Auch September 16, 1998
Trustee
EDWARD M. ROOB*
Edward M. Roob September 16, 1998
Trustee
FRANK K. REILLY*
Frank K. Reilly September 16, 1998
Trustee
CAROLYN M. BURKE*
Carolyn M. Burke September 16, 1998
Treasurer, Principal
Accounting Officer
</TABLE>
- --------------------------
*By: /s/ Karl O. Hartmann
--------------------
as Attorney-in-Fact and Agent pursuant to Power of Attorney
<PAGE>
REGISTRATION NO. 33-47287
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 22 TO THE
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ON FORM N-1A
AND AMENDMENT NO. 23 TO
THE REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
THE BRINSON FUNDS
<PAGE>
THE BRINSON FUNDS
INDEX TO EXHIBITS TO FORM N-1A
<TABLE>
<CAPTION>
Exhibit Description of
Number Exhibit
<C> <S>
EX-99.d9 Form of Investment Advisory Agreement on behalf of the U.S. Large
Capitalization Growth Fund
EX-99.d10 Form of Investment Advisory Agreement on behalf of the U.S. Small
Capitalization Fund
EX-99.d11 Form of Investment Advisory Agreement on behalf of the High Yield
Bond Fund
EX-99.d12 Form of Investment Advisory Agreement on behalf of the Emerging
Markets Equity Fund
EX-99.d13 Form of Investment Advisory Agreement on behalf of the Emerging
Markets Debt Fund
Ex-99.g Forms of Amendments to Schedule B1 and Schedule F to the Multiple
Services Agreement
EX-99.i Legal Opinion from Stradley, Ronon, Stevens & Young LLP
EX-99.j1 Consent of Ernst & Young LLP
EX-99.j2 Consents of PricewaterhouseCoopers LLP
EX-99.m1 Form of Amendment to Schedule A to Amended Distribution Plan
relating to the UBS Investment Funds class of shares
EX-99.m2 Amendment to Schedule A to Distribution Plan relating to the
Brinson Fund-Class N Shares
EX-99.m3 Amendments to Exhibits B and A to the Selected Dealer and Selling
Agreement, respectively, relating to the UBS Investment Funds
class of shares
EX-99.n Financial Data Schedules on behalf of each Series of the Trust
EX-99.o Amended Appendix A to Revised Multiple Class Plan pursuant to
Rule 18f-3
</TABLE>
<PAGE>
EX-99.d9
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ___day of _______, 1998 by and between The Brinson Funds, a
Delaware Business Trust (the "Trust") and Brinson Partners, Inc., a Delaware
corporation (the "Advisor").
1. Duties of the Advisor. The Trust hereby appoints the Advisor to act as
investment advisor to the U.S. Large Capitalization Growth Fund for the period
and on such terms set forth in this Agreement. The Trust employs the Advisor to
manage the investment and reinvestment of the assets of the Series, to
continuously review, supervise and administer the investment program of the
Series, to determine in its discretion the assets to be held uninvested, to
provide the Trust with records concerning the Advisor's activities which the
Trust is required to maintain, and to render regular reports to the Trust's
officers and Board of Trustees concerning the Advisor's discharge of the
foregoing responsibilities. The Advisor shall discharge the foregoing
responsibilities subject to the control of the officers and the Board of
Trustees of the Trust, and in compliance with the objectives, policies and
limitations set forth in the Trust's Prospectus and Statement of Additional
Information. The Advisor accepts such employment and agrees to render the
services and to provide, at its own expense, the office space, furnishings,
equipment and the personnel required by it to perform the services on the terms
and for the compensation provided herein. With respect to foreign securities, at
its own expense, the Advisor may obtain statistical and other factual
information and advice regarding economic factors and trends from its foreign
subsidiaries, but it may not generally receive advice or recommendations
regarding the purchase or sale of securities from such subsidiaries.
2. Portfolio Transactions. The Advisor shall provide the Series with a
trading department and with respect to foreign securities, the Advisor is
authorized to utilize the trading department of its foreign subsidiaries. The
Advisor shall select, and with respect to its foreign
<PAGE>
subsidiaries, shall monitor the selection of, the brokers or dealers that will
execute the purchases and sales of securities for the Series and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities transactions for the Series are obtained. Subject to
policies established by the Board of Trustees of the Trust and communicated to
the Advisor, it is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Series, or be in breach of any obligation owing to the Trust or in respect
of the Series under this Agreement, or otherwise, solely by reason of its having
caused the Series to pay a member of a securities exchange, a broker or a dealer
a commission for effecting a securities transaction for the Series in excess of
the amount of commission another member of an exchange, broker or dealer would
have charged if the Advisor determines in good faith that the commission paid
was reasonable in relation to the brokerage or research services provided by
such member, broker or dealer, viewed in terms of that particular transaction or
the Advisor's overall responsibilities with respect to the accounts, including
the Series, as to which it exercises investment discretion. The Advisor will
promptly communicate to the officers and directors of the Trust such information
relating to the Series transactions as they may reasonably request.
3. Compensation of the Advisor. For the services to be rendered by the
Advisor as provided in Section 1 and 2 of this Agreement, the U.S. Large
Capitalization Growth Fund shall pay to the Advisor annual management fees of
.70%, calculated on the Series' daily net assets to be paid to the Advisor
within five business days after the end of each month.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rata basis, based on the number of days when
this Agreement was in effect.
4. Reports. The Series and the Advisor agree to furnish to each other such
information regarding their operations with regard to their affairs as each may
reasonably request.
5. Status of Advisor. The services of the Advisor to the Series are not to
be deemed exclusive, and the Advisor shall be free to render similar services to
others so long as its services to the Series are not impaired thereby.
<PAGE>
6. Liability of Advisor. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard by the Advisor of its obligations and
duties hereunder, the Advisor shall not be subject to any liability whatsoever
to the Series, or to any shareholder of the Series, for any error of judgment,
mistake of law or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any losses that
may be sustained in connection with the purchase, holding, redemption or sale of
any security on behalf of the Series.
7. Duration and Termination. This Agreement shall become effective on
__________, 1998 provided that first it is approved by the Board of Trustees of
the Trust, including a majority of those trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
Section 15(c) of the Investment Company Act of 1940, and by the holders of a
majority of the outstanding voting securities of the Series; and shall continue
in effect until __________, 2000. Thereafter, this Agreement may continue in
effect only if such continuance is approved at least annually by: (i) the
Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding
voting securities of the Series; and in either event by a vote of a majority of
those trustees of the Trust who are not parties to this Agreement or interested
persons of any such party in the manner provided in Section 15(c) of the
Investment Company Act of 1940. This Agreement may be terminated by the Trust at
any time, without the payment of any penalty, by the Board of Trustees of the
Trust or by vote of the holders of a majority of the outstanding voting
securities of the Series on 60 days' written notice to the Advisor. This
Agreement may be terminated by the Advisor at any time, without the payment of
any penalty, upon 60 days' written notice to the Trust. This Agreement will
automatically terminate in the event of its assignment. Any notice under this
Agreement shall be given in writing, addressed and delivered or mailed postpaid,
to the other party at the principal office of such party.
As used in this Section 8, the terms "assignment", "interested person", and
"a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
<PAGE>
8. Name of Advisor. The parties agree that the Advisor has a proprietary
interest in the name "Brinson," and the Trust agrees to promptly take such
action as may be necessary to delete from its corporate name and/or the name of
the Series any reference to the name of the Advisor promptly after receipt from
the Advisor of a written request therefore.
9. Severability. If any provisions of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of this ___ of ______, 1998.
<TABLE>
<CAPTION>
<S> <C>
ATTEST: THE BRINSON FUNDS
By:_______________________________ By:______________________________
Carolyn S. Burke E. Thomas McFarlan
Secretary President
ATTEST: BRINSON PARTNERS, INC.
By:_______________________________ By:______________________________
Catherine E. Macrae Samuel W. Anderson
Assistant Secretary
</TABLE>
<PAGE>
Exhibit 99.d10
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ___ day of ______, 1998 by and between The Brinson Funds, a
Delaware Business Trust (the "Trust") and Brinson Partners, Inc., a Delaware
corporation (the "Advisor").
1. Duties of the Advisor. The Trust hereby appoints the Advisor to act as
investment advisor to the U.S. Small Capitalization Fund for the period and on
such terms set forth in this Agreement. The Trust employs the Advisor to manage
the investment and reinvestment of the assets of the Series, to continuously
review, supervise and administer the investment program of the Series, to
determine in its discretion the assets to be held uninvested, to provide the
Trust with records concerning the Advisor's activities which the Trust is
required to maintain, and to render regular reports to the Trust's officers and
Board of Trustees concerning the Advisor's discharge of the foregoing
responsibilities. The Advisor shall discharge the foregoing responsibilities
subject to the control of the officers and the Board of Trustees of the Trust,
and in compliance with the objectives, policies and limitations set forth in the
Trust's Prospectus and Statement of Additional Information. The Advisor accepts
such employment and agrees to render the services and to provide, at its own
expense, the office space, furnishings, equipment and the personnel required by
it to perform the services on the terms and for the compensation provided
herein. With respect to foreign securities, at its own expense, the Advisor may
obtain statistical and other factual information and advice regarding economic
factors and trends from its foreign subsidiaries, but it may not generally
receive advice or recommendations regarding the purchase or sale of securities
from such subsidiaries.
2. Portfolio Transactions. The Advisor shall provide the Series with a
trading department and with respect to foreign securities, the Advisor is
authorized to utilize the trading department of its foreign subsidiaries. The
Advisor shall select, and with respect to its foreign
<PAGE>
subsidiaries, shall monitor the selection of, the brokers or dealers that will
execute the purchases and sales of securities for the Series and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities transactions for the Series are obtained. Subject to
policies established by the Board of Trustees of the Trust and communicated to
the Advisor, it is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Series, or be in breach of any obligation owing to the Trust or in respect
of the Series under this Agreement, or otherwise, solely by reason of its having
caused the Series to pay a member of a securities exchange, a broker or a dealer
a commission for effecting a securities transaction for the Series in excess of
the amount of commission another member of an exchange, broker or dealer would
have charged if the Advisor determines in good faith that the commission paid
was reasonable in relation to the brokerage or research services provided by
such member, broker or dealer, viewed in terms of that particular transaction or
the Advisor's overall responsibilities with respect to the accounts, including
the Series, as to which it exercises investment discretion. The Advisor will
promptly communicate to the officers and directors of the Trust such information
relating to the Series transactions as they may reasonably request.
3. Compensation of the Advisor. For the services to be rendered by the
Advisor as provided in Section 1 and 2 of this Agreement, the U.S. Small
Capitalization Fund shall pay to the Advisor annual management fees of 1.00%,
calculated on the Series' daily net assets to be paid to the Advisor within five
business days after the end of each month.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rata basis, based on the number of days when
this Agreement was in effect.
4. Reports. The Series and the Advisor agree to furnish to each other such
information regarding their operations with regard to their affairs as each may
reasonably request.
5. Status of Advisor. The services of the Advisor to the Series are not to
be deemed exclusive, and the Advisor shall be free to render similar services to
others so long as its services to the Series are not impaired thereby.
<PAGE>
6. Liability of Advisor. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard by the Advisor of its obligations and
duties hereunder, the Advisor shall not be subject to any liability whatsoever
to the Series, or to any shareholder of the Series, for any error of judgment,
mistake of law or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any losses that
may be sustained in connection with the purchase, holding, redemption or sale of
any security on behalf of the Series.
7. Duration and Termination. This Agreement shall become effective on
, 1998 provided that first it is approved by the Board of Trustees of
the Trust, including a majority of those trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
Section 15(c) of the Investment Company Act of 1940, and by the holders of a
majority of the outstanding voting securities of the Series; and shall continue
in effect until , 2000. Thereafter, this Agreement may continue in
effect only if such continuance is approved at least annually by: (i) the
Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding
voting securities of the Series; and in either event by a vote of a majority of
those trustees of the Trust who are not parties to this Agreement or interested
persons of any such party in the manner provided in Section 15(c) of the
Investment Company Act of 1940. This Agreement may be terminated by the Trust at
any time, without the payment of any penalty, by the Board of Trustees of the
Trust or by vote of the holders of a majority of the outstanding voting
securities of the Series on 60 days' written notice to the Advisor. This
Agreement may be terminated by the Advisor at any time, without the payment of
any penalty, upon 60 days' written notice to the Trust. This Agreement will
automatically terminate in the event of its assignment. Any notice under this
Agreement shall be given in writing, addressed and delivered or mailed postpaid,
to the other party at the principal office of such party.
As used in this Section 8, the terms "assignment", "interested person", and
"a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
<PAGE>
8. Name of Advisor. The parties agree that the Advisor has a proprietary
interest in the name "Brinson," and the Trust agrees to promptly take such
action as may be necessary to delete from its corporate name and/or the name of
the Series any reference to the name of the Advisor promptly after receipt from
the Advisor of a written request therefore.
9. Severability. If any provisions of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this of , 1998.
<TABLE>
<CAPTION>
ATTEST: THE BRINSON FUNDS
<S> <C>
By:________________________________ By:________________________________
Carolyn S. Burke E. Thomas McFarlan
Secretary President
ATTEST: BRINSON PARTNERS, INC.
By:_______________________________ By:________________________________
Catherine E. Macrae Samuel W. Anderson
Assistant Secretary
</TABLE>
<PAGE>
Exhibit 99.d11
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this day of , 1998 by and between The Brinson Funds,
a Delaware Business Trust (the "Trust") and Brinson Partners, Inc., a Delaware
corporation (the "Advisor").
1. Duties of the Advisor. The Trust hereby appoints the Advisor to act as
investment advisor to the High Yield Bond Fund for the period and on such terms
set forth in this Agreement. The Trust employs the Advisor to manage the
investment and reinvestment of the assets of the Series, to continuously review,
supervise and administer the investment program of the Series, to determine in
its discretion the assets to be held uninvested, to provide the Trust with
records concerning the Advisor's activities which the Trust is required to
maintain, and to render regular reports to the Trust's officers and Board of
Trustees concerning the Advisor's discharge of the foregoing responsibilities.
The Advisor shall discharge the foregoing responsibilities subject to the
control of the officers and the Board of Trustees of the Trust, and in
compliance with the objectives, policies and limitations set forth in the
Trust's Prospectus and Statement of Additional Information. The Advisor accepts
such employment and agrees to render the services and to provide, at its own
expense, the office space, furnishings, equipment and the personnel required by
it to perform the services on the terms and for the compensation provided
herein. With respect to foreign securities, at its own expense, the Advisor may
obtain statistical and other factual information and advice regarding economic
factors and trends from its foreign subsidiaries, but it may not generally
receive advice or recommendations regarding the purchase or sale of securities
from such subsidiaries.
2. Portfolio Transactions. The Advisor shall provide the Series with a
trading department and with respect to foreign securities, the Advisor is
authorized to utilize the trading department of its foreign subsidiaries. The
Advisor shall select, and with respect to its foreign
<PAGE>
subsidiaries, shall monitor the selection of, the brokers or dealers that will
execute the purchases and sales of securities for the Series and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities transactions for the Series are obtained. Subject to
policies established by the Board of Trustees of the Trust and communicated to
the Advisor, it is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Series, or be in breach of any obligation owing to the Trust or in respect
of the Series under this Agreement, or otherwise, solely by reason of its having
caused the Series to pay a member of a securities exchange, a broker or a dealer
a commission for effecting a securities transaction for the Series in excess of
the amount of commission another member of an exchange, broker or dealer would
have charged if the Advisor determines in good faith that the commission paid
was reasonable in relation to the brokerage or research services provided by
such member, broker or dealer, viewed in terms of that particular transaction or
the Advisor's overall responsibilities with respect to the accounts, including
the Series, as to which it exercises investment discretion. The Advisor will
promptly communicate to the officers and directors of the Trust such information
relating to the Series transactions as they may reasonably request.
3. Compensation of the Advisor. For the services to be rendered by the
Advisor as provided in Section 1 and 2 of this Agreement, the High Yield Bond
Fund shall pay to the Advisor annual management fees of .60%, calculated on the
Series' daily net assets to be paid to the Advisor within five business days
after the end of each month.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rata basis, based on the number of days when
this Agreement was in effect.
4. Reports. The Series and the Advisor agree to furnish to each other
such information regarding their operations with regard to their affairs as each
may reasonably request.
5. Status of Advisor. The services of the Advisor to the Series are not
to be deemed exclusive, and the Advisor shall be free to render similar services
to others so long as its services to the Series are not impaired thereby.
<PAGE>
6. Liability of Advisor. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard by the Advisor of its obligations
and duties hereunder, the Advisor shall not be subject to any liability
whatsoever to the Series, or to any shareholder of the Series, for any error of
judgment, mistake of law or any other act or omission in the course of, or
connected with, rendering services hereunder including, without limitation, for
any losses that may be sustained in connection with the purchase, holding,
redemption or sale of any security on behalf of the Series.
7. Duration and Termination. This Agreement shall become effective on
, 1998 provided that first it is approved by the Board of Trustees of
the Trust, including a majority of those trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
Section 15(c) of the Investment Company Act of 1940, and by the holders of a
majority of the outstanding voting securities of the Series; and shall continue
in effect until , 2000. Thereafter, this Agreement may continue in
effect only if such continuance is approved at least annually by: (i) the
Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding
voting securities of the Series; and in either event by a vote of a majority of
those trustees of the Trust who are not parties to this Agreement or interested
persons of any such party in the manner provided in Section 15(c) of the
Investment Company Act of 1940. This Agreement may be terminated by the Trust at
any time, without the payment of any penalty, by the Board of Trustees of the
Trust or by vote of the holders of a majority of the outstanding voting
securities of the Series on 60 days' written notice to the Advisor. This
Agreement may be terminated by the Advisor at any time, without the payment of
any penalty, upon 60 days' written notice to the Trust. This Agreement will
automatically terminate in the event of its assignment. Any notice under this
Agreement shall be given in writing, addressed and delivered or mailed postpaid,
to the other party at the principal office of such party.
As used in this Section 8, the terms "assignment", "interested person", and
"a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
<PAGE>
8. Name of Advisor. The parties agree that the Advisor has a proprietary
interest in the name "Brinson," and the Trust agrees to promptly take such
action as may be necessary to delete from its corporate name and/or the name of
the Series any reference to the name of the Advisor promptly after receipt from
the Advisor of a written request therefore.
9. Severability. If any provisions of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this ____ of ______, 1998.
ATTEST: THE BRINSON FUNDS
By: By:
---------------------------- -----------------------------
Carolyn S. Burke E. Thomas McFarlan
Secretary President
ATTEST: BRINSON PARTNERS, INC.
By: By:
---------------------------- -----------------------------
Catherine E. Macrae Samuel W. Anderson
Assistant Secretary
<PAGE>
EX-99.d12
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____ day of ______, 1998 by and between The Brinson Funds, a
Delaware Business Trust (the "Trust") and Brinson Partners, Inc., a Delaware
corporation (the "Advisor").
1. Duties of the Advisor. The Trust hereby appoints the Advisor to act as
investment advisor to the Emerging Markets Equity Fund for the period and on
such terms set forth in this Agreement. The Trust employs the Advisor to manage
the investment and reinvestment of the assets of the Series, to continuously
review, supervise and administer the investment program of the Series, to
determine in its discretion the assets to be held uninvested, to provide the
Trust with records concerning the Advisor's activities which the Trust is
required to maintain, and to render regular reports to the Trust's officers and
Board of Trustees concerning the Advisor's discharge of the foregoing
responsibilities. The Advisor shall discharge the foregoing responsibilities
subject to the control of the officers and the Board of Trustees of the Trust,
and in compliance with the objectives, policies and limitations set forth in the
Trust's Prospectus and Statement of Additional Information. The Advisor accepts
such employment and agrees to render the services and to provide, at its own
expense, the office space, furnishings, equipment and the personnel required by
it to perform the services on the terms and for the compensation provided
herein. With respect to foreign securities, at its own expense, the Advisor may
obtain statistical and other factual information and advice regarding economic
factors and trends from its foreign subsidiaries, but it may not generally
receive advice or recommendations regarding the purchase or sale of securities
from such subsidiaries.
2. Portfolio Transactions. The Advisor shall provide the Series with a
trading department and with respect to foreign securities, the Advisor is
authorized to utilize the trading department of its foreign subsidiaries. The
Advisor shall select, and with respect to its foreign
<PAGE>
subsidiaries, shall monitor the selection of, the brokers or dealers that will
execute the purchases and sales of securities for the Series and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities transactions for the Series are obtained. Subject to
policies established by the Board of Trustees of the Trust and communicated to
the Advisor, it is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Series, or be in breach of any obligation owing to the Trust or in respect
of the Series under this Agreement, or otherwise, solely by reason of its having
caused the Series to pay a member of a securities exchange, a broker or a dealer
a commission for effecting a securities transaction for the Series in excess of
the amount of commission another member of an exchange, broker or dealer would
have charged if the Advisor determines in good faith that the commission paid
was reasonable in relation to the brokerage or research services provided by
such member, broker or dealer, viewed in terms of that particular transaction or
the Advisor's overall responsibilities with respect to the accounts, including
the Series, as to which it exercises investment discretion. The Advisor will
promptly communicate to the officers and directors of the Trust such information
relating to the Series transactions as they may reasonably request.
3. Compensation of the Advisor. For the services to be rendered by the
Advisor as provided in Section 1 and 2 of this Agreement, the Emerging Markets
Equity Fund shall pay to the Advisor annual management fees of 1.10%, calculated
on the Series' daily net assets to be paid to the Advisor within five business
days after the end of each month.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rata basis, based on the number of days when
this Agreement was in effect.
4. Reports. The Series and the Advisor agree to furnish to each other
such information regarding their operations with regard to their affairs as each
may reasonably request.
5. Status of Advisor. The services of the Advisor to the Series are not
to be deemed exclusive, and the Advisor shall be free to render similar services
to others so long as its services to the Series are not impaired thereby.
<PAGE>
6. Liability of Advisor. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard by the Advisor of its obligations
and duties hereunder, the Advisor shall not be subject to any liability
whatsoever to the Series, or to any shareholder of the Series, for any error of
judgment, mistake of law or any other act or omission in the course of, or
connected with, rendering services hereunder including, without limitation, for
any losses that may be sustained in connection with the purchase, holding,
redemption or sale of any security on behalf of the Series.
7. Duration and Termination. This Agreement shall become effective on
______ __, 1998 provided that first it is approved by the Board of Trustees of
the Trust, including a majority of those trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
Section 15(c) of the Investment Company Act of 1940, and by the holders of a
majority of the outstanding voting securities of the Series; and shall continue
in effect until ______ __, 2000. Thereafter, this Agreement may continue in
effect only if such continuance is approved at least annually by: (i) the
Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding
voting securities of the Series; and in either event by a vote of a majority of
those trustees of the Trust who are not parties to this Agreement or interested
persons of any such party in the manner provided in Section 15(c) of the
Investment Company Act of 1940. This Agreement may be terminated by the Trust at
any time, without the payment of any penalty, by the Board of Trustees of the
Trust or by vote of the holders of a majority of the outstanding voting
securities of the Series on 60 days' written notice to the Advisor. This
Agreement may be terminated by the Advisor at any time, without the payment of
any penalty, upon 60 days' written notice to the Trust. This Agreement will
automatically terminate in the event of its assignment. Any notice under this
Agreement shall be given in writing, addressed and delivered or mailed postpaid,
to the other party at the principal office of such party.
As used in this Section 8, the terms "assignment", "interested person", and
"a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
<PAGE>
8. Name of Advisor. The parties agree that the Advisor has a proprietary
interest in the name "Brinson," and the Trust agrees to promptly take such
action as may be necessary to delete from its corporate name and/or the name of
the Series any reference to the name of the Advisor promptly after receipt from
the Advisor of a written request therefore.
9. Severability. If any provisions of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this ____ of ______, 1998.
ATTEST: THE BRINSON FUNDS
By: By:
------------------------ -----------------------
Carolyn S. Burke E. Thomas McFarlan
Secretary President
ATTEST: BRINSON PARTNERS, INC.
By: By:
-------------------------- ---------------------
Catherine E. Macrae Samuel W. Anderson
Assistant Secretary
<PAGE>
EX-99.d13
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ____ day of ______, 1998 by and between The Brinson Funds, a
Delaware Business Trust (the "Trust") and Brinson Partners, Inc., a Delaware
corporation (the "Advisor").
1. Duties of the Advisor. The Trust hereby appoints the Advisor to act as
investment advisor to the Emerging Markets Debt Fund for the period and on such
terms set forth in this Agreement. The Trust employs the Advisor to manage the
investment and reinvestment of the assets of the Series, to continuously review,
supervise and administer the investment program of the Series, to determine in
its discretion the assets to be held uninvested, to provide the Trust with
records concerning the Advisor's activities which the Trust is required to
maintain, and to render regular reports to the Trust's officers and Board of
Trustees concerning the Advisor's discharge of the foregoing responsibilities.
The Advisor shall discharge the foregoing responsibilities subject to the
control of the officers and the Board of Trustees of the Trust, and in
compliance with the objectives, policies and limitations set forth in the
Trust's Prospectus and Statement of Additional Information. The Advisor accepts
such employment and agrees to render the services and to provide, at its own
expense, the office space, furnishings, equipment and the personnel required by
it to perform the services on the terms and for the compensation provided
herein. With respect to foreign securities, at its own expense, the Advisor may
obtain statistical and other factual information and advice regarding economic
factors and trends from its foreign subsidiaries, but it may not generally
receive advice or recommendations regarding the purchase or sale of securities
from such subsidiaries.
2. Portfolio Transactions. The Advisor shall provide the Series with a
trading department and with respect to foreign securities, the Advisor is
authorized to utilize the trading department of its foreign subsidiaries. The
Advisor shall select, and with respect to its foreign
<PAGE>
subsidiaries, shall monitor the selection of, the brokers or dealers that will
execute the purchases and sales of securities for the Series and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities transactions for the Series are obtained. Subject to
policies established by the Board of Trustees of the Trust and communicated to
the Advisor, it is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Series, or be in breach of any obligation owing to the Trust or in respect
of the Series under this Agreement, or otherwise, solely by reason of its having
caused the Series to pay a member of a securities exchange, a broker or a dealer
a commission for effecting a securities transaction for the Series in excess of
the amount of commission another member of an exchange, broker or dealer would
have charged if the Advisor determines in good faith that the commission paid
was reasonable in relation to the brokerage or research services provided by
such member, broker or dealer, viewed in terms of that particular transaction or
the Advisor's overall responsibilities with respect to the accounts, including
the Series, as to which it exercises investment discretion. The Advisor will
promptly communicate to the officers and directors of the Trust such information
relating to the Series transactions as they may reasonably request.
3. Compensation of the Advisor. For the services to be rendered by the
Advisor as provided in Section 1 and 2 of this Agreement, the Emerging Markets
Debt Fund shall pay to the Advisor annual management fees of 0.65%, calculated
on the Series' daily net assets to be paid to the Advisor within five business
days after the end of each month.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rata basis, based on the number of days when
this Agreement was in effect.
4. Reports. The Series and the Advisor agree to furnish to each other
such information regarding their operations with regard to their affairs as each
may reasonably request.
5. Status of Advisor. The services of the Advisor to the Series are not
to be deemed exclusive, and the Advisor shall be free to render similar services
to others so long as its services to the Series are not impaired thereby.
<PAGE>
6. Liability of Advisor. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard by the Advisor of its obligations
and duties hereunder, the Advisor shall not be subject to any liability
whatsoever to the Series, or to any shareholder of the Series, for any error of
judgment, mistake of law or any other act or omission in the course of, or
connected with, rendering services hereunder including, without limitation, for
any losses that may be sustained in connection with the purchase, holding,
redemption or sale of any security on behalf of the Series.
7. Duration and Termination. This Agreement shall become effective on
______ __, 1998 provided that first it is approved by the Board of Trustees of
the Trust, including a majority of those trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
Section 15(c) of the Investment Company Act of 1940, and by the holders of a
majority of the outstanding voting securities of the Series; and shall continue
in effect until ______ __, 2000. Thereafter, this Agreement may continue in
effect only if such continuance is approved at least annually by: (i) the
Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding
voting securities of the Series; and in either event by a vote of a majority of
those trustees of the Trust who are not parties to this Agreement or interested
persons of any such party in the manner provided in Section 15(c) of the
Investment Company Act of 1940. This Agreement may be terminated by the Trust at
any time, without the payment of any penalty, by the Board of Trustees of the
Trust or by vote of the holders of a majority of the outstanding voting
securities of the Series on 60 days' written notice to the Advisor. This
Agreement may be terminated by the Advisor at any time, without the payment of
any penalty, upon 60 days' written notice to the Trust. This Agreement will
automatically terminate in the event of its assignment. Any notice under this
Agreement shall be given in writing, addressed and delivered or mailed postpaid,
to the other party at the principal office of such party.
As used in this Section 8, the terms "assignment", "interested person", and
"a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
<PAGE>
8. Name of Advisor. The parties agree that the Advisor has a proprietary
interest in the name "Brinson," and the Trust agrees to promptly take such
action as may be necessary to delete from its corporate name and/or the name of
the Series any reference to the name of the Advisor promptly after receipt from
the Advisor of a written request therefore.
9. Severability. If any provisions of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this ____ of ________, 1998.
ATTEST: THE BRINSON FUNDS
By: By:
--------------------------- -------------------------------
Carolyn S. Burke E. Thomas McFarlan
Secretary President
ATTEST: BRINSON PARTNERS, INC.
By: By:
--------------------------- -------------------------------
Catherine E. Macrae Samuel W. Anderson
Assistant Secretary
<PAGE>
EX-99.g
[Morgan Stanley Letterhead]
August 24, 1998
The Brinson Funds
209 South LaSalle Street
Chicago, IL 60604
Re: Amendment to Multiple Service Agreement effective May 9, 1997
- Addition of U.S. Large Capitalization Growth Fund, U.S. Small
---------------------------------------------------------------
Capitalization Fund, High Yield Bond Fund Series, Emerging Markets Equity
-------------------------------------------------------------------------
Fund and Emerging Markets Debt Fund
-----------------------------------
Dear Sirs:
We refer to the Multiple Services Agreement effective May 9, 1997 (the
"MSA") between Morgan Stanley Trust Company and The Brinson Funds.
The parties hereby agree as follows:
1. "Schedule B1 - List of Series of The Brinson Funds" is replaced in its
entirety with "Schedule B1 - List of Series of The Brinson Funds, as
amended on August 24, 1998," attached hereto.
2. "Schedule F - Fee Schedule for The Brinson Funds" is replaced in its
entirety with "Schedule F - Fee Schedule for The Brinson Funds, as
amended on August 24, 1998," attached hereto.
The MSA, as amended by this letter amendment, shall continue in full force and
effect.
Please evidence your acceptance of the terms of this letter by signing
below and returning one copy to Michael Reinbold, Morgan Stanley Trust Company,
1 Pierrepont Plaza, Brooklyn, NY 11201.
Very truly yours,
MORGAN STANLEY TRUST COMPANY
By: ________________________________
Name: Giacomo Federico
Title: Principal
<PAGE>
The Brinson Funds
August 24, 1998
Page Two
Accepted and Agreed:
THE BRINSON FUNDS
By: _______________________________
Name: E. Thomas McFarlan
Title: President
<PAGE>
SCHEDULE B1
-----------
LIST OF SERIES OF THE BRINSON FUNDS
-----------------------------------
As amended August 24, 1998
Global Fund
Global Equity Fund
Global Bond Fund
U.S. Balanced Fund
U.S. Equity Fund
U.S. Bond Fund
Non-U.S. Equity Fund
U.S. Large Capitalization Equity Fund
U.S. Large Capitalization Growth Fund
U.S. Small Capitalization Fund
High Yield Bond Fund
Emerging Markets Equity Fund
Emerging Markets Debt Fund
<PAGE>
SCHEDULE F
----------
FEE SCHEDULE FOR THE BRINSON FUNDS
----------------------------------
as amended on August 24, 1998
Accounting, Administration, Transfer Agency and
Custody Services Annual Fee Schedule
1. On an annual basis, 0.25 basis points of the average weekly U.S. assets of
the Customer and 5.25. basis points of the average weekly non-U.S. assets
of the Customer, 32.50 basis points of the average weekly emerging markets
equity assets of the Customer and 1.90 basis points of the average weekly
emerging markets debt assets of the Customer.
There will be an annual fee of $25 for each shareholder account within The
Brinson Funds.
An additional fee of 7.50 basis points will be charged for administrative
duties. PLEASE NOTE: The additional fee of 7.50 basis points can ONLY be
charged up to the extent it does not make a fund exceed its expense cap.
Please see below for the expense caps of each fund within The Brinson
Funds, excluding all loads and 12(b)-1 fees:
<TABLE>
<CAPTION>
Fund Expense Cap
---- -----------
<S> <C>
Global Fund 110 basis points
Global Equity Fund 100 basis points
Global Bond Fund 90 basis points
U.S. Balanced Fund 80 basis points
U.S. Equity Fund 80 basis points
U.S. Bond Fund 60 basis points
Non-U.S. Equity Fund 100 basis points
U.S. Large Capitalization Equity Fund 80 basis points
U.S. Large Capitalization Growth Fund 80 basis points
U.S. Small Capitalization Fund 115 basis points
High Yield Bond Fund 70 basis points
Emerging Markets Equity Fund 160 basis points
Emerging Markets Debt Fund 115 basis points
</TABLE>
NO FEE (asset based or otherwise) will be charged on any investments made
by any fund into any other fund managed by Brinson Partners, Inc. Fees are
to be charged ONLY where actual non-Brinson Partners, Inc.-sponsored
investment company or series securities are held. Assets of a series which
are invested in another Brinson Partners, Inc.-sponsored investment company
or series shall not be counted in determining whether or not the charging
of the 7.50 basis points charge for administrative duties would cause a
fund to exceed its fee cap and shall not be counted in determining the
amount of assets subject to the 7.50 basis points.
<PAGE>
SCHEDULE F
as amended on August 24, 1998
For purposes of this Schedule F, the "average weekly U.S. assets of the
customer" means the average weekly U.S. assets custodied within the United
States of the Customer as calculated by the Accounting Agent for the month for
which the statement reflecting the charges for a given month relates. For
purposes of this Schedule F, the "average weekly non-U.S. assets of the
customer" means the average weekly balance of countries included in the Morgan
Stanley Capital World Ex-U.S.A. (free) Index or the Salomon Non-U.S. Government
Bond Index (including assets with a country of issue of the European Economic
Community and held in Euroclear or CEDEL) custodied outside the United States of
the Customer as calculated by the Accounting Agent for the month for which the
statement reflecting the charges for a given month relates. For purposes of this
Schedule F, the "average weekly emerging markets equity assets of the customer"
means the average weekly balance of the countries included in the International
Finance Corporation Global Index (excluding countries included in the Morgan
Stanley Capital World Ex-U.S.A. (free) Index or the Salomon Non-U.S. Government
Bond Index, but including assets with a country of issue in the local market
contained in such index that are held in Euroclear or CEDEL) custodied outside
the United States of the Customer's emerging markets equity funds as calculated
by the Accounting Agent for the month for which the statement reflecting the
charges for a given month relates. For purposes of this Schedule F, the "average
weekly emerging markets debt assets of the customer" means the average weekly
balance of the countries included in the J. P. Morgan Emerging Markets Bond
Index Plus custodied outside the United States of the Customer's emerging
markets debt funds (including assets with a country of issue in the local market
contained in such index that are held in Euroclear or CEDEL) as calculated by
the Accounting Agent for the month for which the statement reflecting the
charges for a given month relates.
Those fees include all out-of-pocket expenses or transaction charges incurred by
the accountant, administrator, transfer agent and custodian with the exception
of the following.
The Customer will be billed directly by Other Parties for the following direct
Customer expenses or transaction charges:
(1) taxes;
(2) salaries and other fees of officers and directors who are not officers,
directors, shareholders or employees of Other Parties, or the Customer's
investment adviser;
(3) SEC and state Blue Sky registration and qualification fees, levies, fines
and other charges;
(4) EDGAR filing fees;
(5) independent public accountants;
<PAGE>
SCHEDULE F
as amended on August 24, 1998
(6) insurance premiums including fidelity bond premiums;
(7) outside legal expenses;
(8) costs of maintenance of corporate existence;
(9) expenses of typesetting and printing of prospectuses for regulatory
purposes and for distribution to current shareholders of the
Customer;
(10) expenses of printing and production costs of shareholders' reports
and proxy statements and materials;
(11) trade association dues and expenses; and
(12) travel and lodging expenses of the Customer's directors and officers
who are not directors, officers and/or employees of Other Parties.
Customers will not be billed directly for any direct Customer Expenses or
pay any other direct Customer expenses, unless the payment of such direct
expenses is agreed to in writing by Customer.
2. Upon termination of the provisions of services under this Agreement before
the end of any month, the fee for the part of the month before such
termination or the date after which the provision of services ceases,
whichever is later, shall be prorated according to the proportion which
such part bears to the full monthly period and shall be payable upon the
date of such termination or the date after which the provision of the
services ceases, whichever is later.
<PAGE>
EX-99.i
Law Offices
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8115
September 14, 1998
The Brinson Funds
209 South LaSalle Street
Chicago IL 60604-1295
Re: Legal Opinion-Securities Act of 1933
Ladies and Gentlemen:
We have examined the Agreement and Declaration of Trust, as amended (the
"Declaration of Trust") of the The Brinson Funds (the "Trust"), a business trust
organized under the laws of the State of Delaware on August 9, 1993, the By-Laws
of the Trust and the various pertinent proceedings we deem material. We have
also examined the Notification of Registration and the Registration Statements
filed under the Investment Company Act of 1940 (the "Investment Company Act")
and the Securities Act of 1933 (the "Securities Act"), all as amended to date,
as well as other items we deem material to this opinion.
The Trust is authorized by its Declaration of Trust to issue an unlimited
number of shares of beneficial interest with a par value of $0.001 per share.
The Trust issues series designated the Global Fund, the Global Equity Fund, the
Global Bond Fund, the U.S. Balanced Fund, the U.S. Equity Fund, the U.S. Bond
Fund, the U.S. Large Capitalization Equity Fund, the U.S. Large Capitalization
Growth Fund, the U.S. Small Capitalization Fund, the High Yield Bond Fund, the
Emerging Markets Equity Fund, the Emerging Markets Debt Fund and the NonU.S.
Equity Fund (effective December, 1998, the Non-U.S. Equity Fund will be
redesignated the Global (ex-U.S.) Equity Fund). The Declaration of Trust
designates, or authorizes the Trustees to designate, one or more series or
classes of shares of the Trust, and allocates, or authorizes the Trustees to
allocate, shares of beneficial interest to each such series or class. The
Declaration of Trust also empowers the Trustees to designate any additional
series or classes and allocate shares to such series or classes.
The Trust has filed with the U.S. Securities and Exchange Commission (the
"Commission"), a Registration Statement under the Securities Act, which
Registration Statement is deemed to register an indefinite number of shares of
the Trust pursuant to the provisions of Rule 24f-2 under the Investment Company
Act. You have further advised us that the Trust has filed, and each year
hereafter will timely file, a Notice pursuant to Rule 24f-2 perfecting the
registration of the shares sold by the Trust during each fiscal year during
which such registration of an indefinite number of shares remains in effect.
<PAGE>
Legal Opinion-Securities Act of 1933
September 14, 1998
Page Two
You have also informed us that the shares of the Trust have been, and will
continue to be, sold in accordance with the Trust's usual method of distributing
its registered shares, under which prospectuses are made available for delivery
to offerees and purchasers of such shares in accordance with Section 5(b) of the
Securities Act.
Based upon the foregoing information and examination, so long as the Trust
remains a valid and subsisting trust under the laws of the State of Delaware,
and the registration of an indefinite number of shares of the Trust remains
effective, the authorized shares of the Trust when issued for the consideration
set by the Board of Trustees pursuant to the Declaration of Trust, and subject
to compliance with Rule 24f-2, will be legally outstanding, fully-paid, and non-
assessable shares, and the holders of such shares will have all the rights
provided for with respect to such holding by the Declaration of Trust and the
laws of the State of Delaware.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement of the Trust, and any amendments thereto, covering the
registration of the shares of the Trust under the Securities Act and the
applications, registration statements or notice filings, and amendments thereto,
filed in accordance with the securities laws of the several states in which
shares of the Trust are offered, and we further consent to reference in the
registration statement of the Trust to the fact that this opinion concerning the
legality of the issue has been rendered by us.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
BY: /s/Bruce G. Leto
----------------
Bruce G. Leto
<PAGE>
Ex-99.j1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights," "Independent Auditors" and "Financial Statements" and to the
incorporation by reference of our reports for The Brinson Funds (comprised of
Global Fund, Global Equity Fund, Global 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) dated August 7, 1998, in the Registration Statement (Form N-1A) and
related Prospectus, filed with the Securities and Exchange Commission in this
Post-Effective Amendment No. 22 to the Registration Statement under the
Securities Act of 1933 (Registration No. 33-47287) and in this Amendment No. 23
to the Registration Statement Under the Investment Company Act of 1940
(Registration No. 811-6637).
ERNST & YOUNG LLP
Chicago, Illinois
September 15, 1998
<PAGE>
Consent of Independent Accountants
We hereby consent to the incorporation in the Prospectuses and Statement of
Additional Information constituting parts of this Post-Effective Amendment No.
22 to the Registration Statement on Form N-1A of The Brinson Funds (the
"Registration Statement") of our reports dated February 17, 1998 relating to the
financial statements of UBS Large Cap Growth Fund, UBS Small Cap Fund, and UBS
High Yield Bond Fund, three portfolios of UBS Private Investors Fund, Inc.,
appearing in the Annual Reports to Shareholders of such funds, which are also
incorporated by reference in the Registration Statement. We also consent to the
reference to us under the heading "Financial Statements" in the Statement of
Additional Information.
PricewaterhouseCoopers LLP
New York, New York
September 17, 1998
<PAGE>
Consent of Independent Accountants
We hereby consent to the incorporation in the Prospectuses and Statement of
Additional Information constituting parts of this Post-Effective Amendment No.
22 to the Registration Statement on Form N-1A of The Brinson Funds (the
"Registration Statement") of our reports dated February 17, 1998 relating to the
financial statements of UBS Large Cap Growth Portfolio, UBS Small Cap Portfolio,
and UBS High Yield Bond Portfolio appearing in the Annual Reports to
Shareholders of UBS Private Investor Funds, Inc., which are also incorporated
by reference in the Registration Statement. We also consent to the reference to
us under the heading "Financial Statements" in the Statement of Additional
Information.
PricewaterhouseCoopers
Toronto, Ontario
September 17, 1998
<PAGE>
EX-99.M1
SCHEDULE A*
The Brinson Funds (the "Trust"), Brinson Partners, Inc. (the "Manager") and
Funds Distributor, Inc. (the "Distributor") hereby agree that the maximum amount
which the Manager or the Distributor shall seek reimbursement for in accordance
with the Rule 12b-1 Plan relating to the UBS Investment Funds class of shares of
the Trust, is as follows:
<TABLE>
<CAPTION>
Fund Amount
---- ------
<S> <C>
UBS Investment Fund - Global 0.40%
UBS Investment Fund - Global Equity 0.51%
UBS Investment Fund - Global Bond 0.24%
UBS Investment Fund - U.S. Balanced 0.25%
UBS Investment Fund - U.S. Equity 0.27%
UBS Investment Fund - U.S. Bond 0.22%
UBS Investment Fund - Global (ex-U.S.) Equity 0.59%
UBS Investment Fund - U.S. Large Capitalization Equity 0.27%
UBS Investment Fund - U.S. Large Capitalization Growth 0.52%
UBS Investment Fund - U.S. Small Capitalization 0.52%
UBS Investment Fund - High Yield Bond 0.60%
UBS Investment Fund - Emerging Markets Equity 0.60%
UBS Investment Fund - Emerging Markets Debt 0.50%
</TABLE>
THE BRINSON FUNDS
-----------------------------------
BRINSON PARTNERS, INC.
-----------------------------------
FUNDS DISTRIBUTOR, INC.
-----------------------------------
* As approved February 21, 1995 and Amended/Revised on November 26, 1995, July
28, 1995, August 26, 1996, February 24, 1997, November 24, 1997 and August
24, 1998
<PAGE>
EX-99.M2
SCHEDULE "A"*
Series subject to the Distribution Plan relating to the following class of
shares of The Brinson Funds:
Series
------
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. Bond Fund - Class N
Brinson Global (ex-U.S.) Equity Fund - Class N
Brinson U.S. Large Capitalization Equity Fund - Class N
Brinson U.S. Large Capitalization Growth Fund - Class N
Brinson U.S. Small Capitalization Fund - Class N
Brinson High Yield Bond Fund - Class N
Emerging Markets Equity Fund - Class N
Emerging Markets Debt Fund - Class N
Date: August 24, 1998
*As approved 5/19/97, revised 11/24/97, revised 8/24/98
<PAGE>
EX-99.M3
UBS INVESTMENT FUNDS CLASS
SELECTED DEALER AGREEMENT
SCHEDULE OF 12B-1 FEES
EXHIBIT B
<TABLE>
<CAPTION>
=========================================================================================================
SERIES DISTRIBUTION FEE SERVICE FEE TOTAL 12B-1 FEES
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Fund 0.40% 0.25% 0.65%
- ---------------------------------------------------------------------------------------------------------
Global Equity Fund 0.51% 0.25% 0.76%
- ---------------------------------------------------------------------------------------------------------
Global Bond Fund 0.24% 0.25% 0.49%
- ---------------------------------------------------------------------------------------------------------
U.S. Balanced Fund 0.25% 0.25% 0.50%
- ---------------------------------------------------------------------------------------------------------
U.S. Equity Fund 0.27% 0.25% 0.52%
- ---------------------------------------------------------------------------------------------------------
U.S. Bond Fund 0.22% 0.25% 0.47%
- ---------------------------------------------------------------------------------------------------------
Global (ex-U.S.) Equity Fund 0.59% 0.25% 0.84%
- ---------------------------------------------------------------------------------------------------------
U.S. Large Capitalization 0.27% 0.25% 0.52%
Equity Fund
- ---------------------------------------------------------------------------------------------------------
U.S. Large Capitalization 0.52% 0.25% 0.77%
Growth Fund
- ---------------------------------------------------------------------------------------------------------
U.S. Small Capitalization 0.52% 0.25% 0.77%
Fund
- ---------------------------------------------------------------------------------------------------------
High Yield Bond Fund 0.60% 0.25% 0.85%
- ---------------------------------------------------------------------------------------------------------
Emerging Markets Equity Fund 0.60% 0.25% 0.85%
- ---------------------------------------------------------------------------------------------------------
Emerging Markets Debt Fund 0.50% 0.25% 0.75%
=========================================================================================================
</TABLE>
Approved: May 19, 1997
Amended: November 24, 1997 and August 24, 1998
<PAGE>
EX-99.M3
UBS INVESTMENT FUNDS
SELECTED SELLING AGREEMENT
COMPENSATION SCHEDULE
Exhibit A
As compensation for the sales of shares of the series of the UBS Investment
Funds (individually a "Series" and collectively, the "Series"), and as
compensation for ongoing shareholder servicing and distribution functions, UBS
AG (the "Bank") will receive .25% of the aggregate dollar amount of shares of
the Series held in the accounts of Bank's customers and not redeemed. In
addition, as compensation for distribution services, the Bank will be entitled
to receive the following fees based upon the amount of shares of the Series held
in the accounts of the Bank's customers and not redeemed, or such lesser amount
as may be determined from time to time by the Board of Trustees of the Trust:
<TABLE>
<CAPTION>
<S> <C>
Global Fund 0.65%
Global Equity Fund 0.76%
Global Bond Fund 0.49%
U.S. Balanced Fund 0.50%
U.S. Equity Fund 0.52%
U.S. Bond Fund 0.47%
Global (ex-U.S.) Equity Fund 0.84%
U.S. Large Capitalization Equity Fund 0.52%
U.S. Large Capitalization Growth Fund 0.77%
U.S. Small Capitalization Fund 0.77%
High Yield Bond Fund 0.85%
Emerging Markets Equity Fund 0.85%
Emerging Markets Debt Fund 0.75%
</TABLE>
Such fees will be paid quarterly from the date of original sales of shares until
the Bank is no longer named the broker of record.
It is understood that the above compensation arrangement may be amended or
discontinued at any time at the discretion of Funds Distributor, Inc.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> BRINSON GLOBAL - CLASS I
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 737,872,584
<INVESTMENTS-AT-VALUE> 805,012,615
<RECEIVABLES> 24,395,718
<ASSETS-OTHER> 55,119
<OTHER-ITEMS-ASSETS> 2,688,148
<TOTAL-ASSETS> 832,151,600
<PAYABLE-FOR-SECURITIES> 23,236,470
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 109,572,407
<TOTAL-LIABILITIES> 132,808,877
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 618,908,532
<SHARES-COMMON-STOCK> 52,298,571
<SHARES-COMMON-PRIOR> 44,671,292
<ACCUMULATED-NII-CURRENT> (845,490)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 18,624,289
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 62,655,392
<NET-ASSETS> 699,342,723
<DIVIDEND-INCOME> 6,105,294
<INTEREST-INCOME> 18,386,739
<OTHER-INCOME> 0
<EXPENSES-NET> (6,535,181)
<NET-INVESTMENT-INCOME> 17,956,852
<REALIZED-GAINS-CURRENT> 39,774,075
<APPREC-INCREASE-CURRENT> (6,545,821)
<NET-CHANGE-FROM-OPS> 51,185,106
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (32,129,657)
<DISTRIBUTIONS-OF-GAINS> (33,973,096)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,850,057
<NUMBER-OF-SHARES-REDEEMED> (16,402,396)
<SHARES-REINVESTED> 5,179,618
<NET-CHANGE-IN-ASSETS> 86,371,921
<ACCUMULATED-NII-PRIOR> (964,704)
<ACCUMULATED-GAINS-PRIOR> 29,814,069
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,378,141
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,535,181
<AVERAGE-NET-ASSETS> 672,311,409
<PER-SHARE-NAV-BEGIN> 13.13
<PER-SHARE-NII> 0.37
<PER-SHARE-GAIN-APPREC> 0.62
<PER-SHARE-DIVIDEND> (0.65)
<PER-SHARE-DISTRIBUTIONS> (0.70)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.77
<EXPENSE-RATIO> 0.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> BRINSON GLOBAL - CLASS N
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 737,872,584
<INVESTMENTS-AT-VALUE> 805,012,615
<RECEIVABLES> 24,395,718
<ASSETS-OTHER> 55,119
<OTHER-ITEMS-ASSETS> 2,688,148
<TOTAL-ASSETS> 832,151,600
<PAYABLE-FOR-SECURITIES> 23,236,470
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 109,572,407
<TOTAL-LIABILITIES> 132,808,877
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 618,908,532
<SHARES-COMMON-STOCK> 91,194
<SHARES-COMMON-PRIOR> 76
<ACCUMULATED-NII-CURRENT> (845,490)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 18,624,289
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 62,655,392
<NET-ASSETS> 699,342,723
<DIVIDEND-INCOME> 6,105,294
<INTEREST-INCOME> 18,386,739
<OTHER-INCOME> 0
<EXPENSES-NET> (6,535,181)
<NET-INVESTMENT-INCOME> 17,956,852
<REALIZED-GAINS-CURRENT> 39,774,075
<APPREC-INCREASE-CURRENT> (6,545,821)
<NET-CHANGE-FROM-OPS> 51,185,106
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,572)
<DISTRIBUTIONS-OF-GAINS> (53)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 90,370
<NUMBER-OF-SHARES-REDEEMED> (21)
<SHARES-REINVESTED> 769
<NET-CHANGE-IN-ASSETS> 86,371,921
<ACCUMULATED-NII-PRIOR> (964,704)
<ACCUMULATED-GAINS-PRIOR> 29,814,069
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,378,141
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,535,181
<AVERAGE-NET-ASSETS> 672,311,409
<PER-SHARE-NAV-BEGIN> 13.13
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> 0.32
<PER-SHARE-DIVIDEND> (0.63)
<PER-SHARE-DISTRIBUTIONS> (0.70)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.75
<EXPENSE-RATIO> 1.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 013
<NAME> BRINSON GLOBAL - CLASS S
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 737,872,584
<INVESTMENTS-AT-VALUE> 805,012,615
<RECEIVABLES> 24,395,718
<ASSETS-OTHER> 55,119
<OTHER-ITEMS-ASSETS> 2,688,148
<TOTAL-ASSETS> 832,151,600
<PAYABLE-FOR-SECURITIES> 23,236,470
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 109,572,407
<TOTAL-LIABILITIES> 132,808,877
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 618,908,532
<SHARES-COMMON-STOCK> 2,395,337
<SHARES-COMMON-PRIOR> 2,015,597
<ACCUMULATED-NII-CURRENT> (845,490)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 18,624,289
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 62,655,392
<NET-ASSETS> 699,342,723
<DIVIDEND-INCOME> 6,105,294
<INTEREST-INCOME> 18,386,739
<OTHER-INCOME> 0
<EXPENSES-NET> (6,535,181)
<NET-INVESTMENT-INCOME> 17,956,852
<REALIZED-GAINS-CURRENT> 39,774,075
<APPREC-INCREASE-CURRENT> (6,545,821)
<NET-CHANGE-FROM-OPS> 51,185,106
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,196,808)
<DISTRIBUTIONS-OF-GAINS> (1,492,307)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 803,666
<NUMBER-OF-SHARES-REDEEMED> (641,736)
<SHARES-REINVESTED> 217,810
<NET-CHANGE-IN-ASSETS> 86,371,921
<ACCUMULATED-NII-PRIOR> (964,704)
<ACCUMULATED-GAINS-PRIOR> 29,814,069
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<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 6,535,181
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<PER-SHARE-NII> 0.30
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.71
<EXPENSE-RATIO> 1.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 021
<NAME> BRINSON GLOBAL BOND - CLASS I
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 101,617,424
<INVESTMENTS-AT-VALUE> 101,654,255
<RECEIVABLES> 4,253,418
<ASSETS-OTHER> 40,817
<OTHER-ITEMS-ASSETS> 558,663
<TOTAL-ASSETS> 106,507,153
<PAYABLE-FOR-SECURITIES> 10,384,748
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 462,196
<TOTAL-LIABILITIES> 10,846,944
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 96,506,368
<SHARES-COMMON-STOCK> 9,698,203
<SHARES-COMMON-PRIOR> 5,616,633
<ACCUMULATED-NII-CURRENT> 1,003,399
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,521,835)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (327,723)
<NET-ASSETS> 95,660,209
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,631,663
<OTHER-INCOME> 0
<EXPENSES-NET> (621,827)
<NET-INVESTMENT-INCOME> 3,009,836
<REALIZED-GAINS-CURRENT> (1,114,801)
<APPREC-INCREASE-CURRENT> (276,626)
<NET-CHANGE-FROM-OPS> 1,618,409
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,070,571)
<DISTRIBUTIONS-OF-GAINS> (969,902)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,561,105
<NUMBER-OF-SHARES-REDEEMED> (699,882)
<SHARES-REINVESTED> 220,347
<NET-CHANGE-IN-ASSETS> 37,392,195
<ACCUMULATED-NII-PRIOR> 489,146
<ACCUMULATED-GAINS-PRIOR> 322,580
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 500,982
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 665,329
<AVERAGE-NET-ASSETS> 66,798,482
<PER-SHARE-NAV-BEGIN> 9.64
<PER-SHARE-NII> 0.43
<PER-SHARE-GAIN-APPREC> (0.18)
<PER-SHARE-DIVIDEND> (0.31)
<PER-SHARE-DISTRIBUTIONS> (0.17)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.41
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 022
<NAME> BRINSON GLOBAL BOND - CLASS N
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 101,617,424
<INVESTMENTS-AT-VALUE> 101,654,255
<RECEIVABLES> 4,253,418
<ASSETS-OTHER> 40,817
<OTHER-ITEMS-ASSETS> 558,663
<TOTAL-ASSETS> 106,507,153
<PAYABLE-FOR-SECURITIES> 10,384,748
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 462,196
<TOTAL-LIABILITIES> 10,846,944
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 96,506,368
<SHARES-COMMON-STOCK> 954
<SHARES-COMMON-PRIOR> 104
<ACCUMULATED-NII-CURRENT> 1,003,399
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,521,835)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (327,723)
<NET-ASSETS> 95,660,209
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,631,663
<OTHER-INCOME> 0
<EXPENSES-NET> (621,827)
<NET-INVESTMENT-INCOME> 3,009,836
<REALIZED-GAINS-CURRENT> (1,114,801)
<APPREC-INCREASE-CURRENT> (276,626)
<NET-CHANGE-FROM-OPS> 1,618,409
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (98)
<DISTRIBUTIONS-OF-GAINS> (18)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 860
<NUMBER-OF-SHARES-REDEEMED> (22)
<SHARES-REINVESTED> 12
<NET-CHANGE-IN-ASSETS> 37,392,195
<ACCUMULATED-NII-PRIOR> 489,146
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> 665,329
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<PER-SHARE-NAV-BEGIN> 9.64
<PER-SHARE-NII> 0.42
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<PER-SHARE-NAV-END> 9.40
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 023
<NAME> BRINSON GLOBAL BOND - CLASS S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
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<INVESTMENTS-AT-VALUE> 101,654,255
<RECEIVABLES> 4,253,418
<ASSETS-OTHER> 40,817
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<PAYABLE-FOR-SECURITIES> 10,384,748
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<SHARES-COMMON-STOCK> 466,193
<SHARES-COMMON-PRIOR> 427,815
<ACCUMULATED-NII-CURRENT> 1,003,399
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,521,835)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (327,723)
<NET-ASSETS> 95,660,209
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,631,663
<OTHER-INCOME> 0
<EXPENSES-NET> (621,827)
<NET-INVESTMENT-INCOME> 3,009,836
<REALIZED-GAINS-CURRENT> (1,114,801)
<APPREC-INCREASE-CURRENT> (276,626)
<NET-CHANGE-FROM-OPS> 1,618,409
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (112,673)
<DISTRIBUTIONS-OF-GAINS> (71,935)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 293,533
<NUMBER-OF-SHARES-REDEEMED> (273,680)
<SHARES-REINVESTED> 18,525
<NET-CHANGE-IN-ASSETS> 37,392,195
<ACCUMULATED-NII-PRIOR> 489,146
<ACCUMULATED-GAINS-PRIOR> 322,580
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 500,982
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 665,329
<AVERAGE-NET-ASSETS> 66,798,482
<PER-SHARE-NAV-BEGIN> 9.61
<PER-SHARE-NII> 0.38
<PER-SHARE-GAIN-APPREC> (0.18)
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> (0.17)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.39
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 031
<NAME> BRINSON GLOBAL EQUITY - CLASS I
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 65,834,504
<INVESTMENTS-AT-VALUE> 81,718,165
<RECEIVABLES> 1,053,047
<ASSETS-OTHER> 2,603
<OTHER-ITEMS-ASSETS> 337,729
<TOTAL-ASSETS> 83,111,544
<PAYABLE-FOR-SECURITIES> 836,123
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 403,413
<TOTAL-LIABILITIES> 1,239,536
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 66,347,204
<SHARES-COMMON-STOCK> 1,811,660
<SHARES-COMMON-PRIOR> 3,765,449
<ACCUMULATED-NII-CURRENT> 377,184
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (78,467)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,226,087
<NET-ASSETS> 81,872,008
<DIVIDEND-INCOME> 1,778,109
<INTEREST-INCOME> 298,325
<OTHER-INCOME> 0
<EXPENSES-NET> (1,399,065)
<NET-INVESTMENT-INCOME> 677,369
<REALIZED-GAINS-CURRENT> 6,903,703
<APPREC-INCREASE-CURRENT> (1,282,988)
<NET-CHANGE-FROM-OPS> 6,298,084
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (242,673)
<DISTRIBUTIONS-OF-GAINS> (1,266,777)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,466,054
<NUMBER-OF-SHARES-REDEEMED> (3,546,702)
<SHARES-REINVESTED> 126,859
<NET-CHANGE-IN-ASSETS> (27,862,840)
<ACCUMULATED-NII-PRIOR> 336,561
<ACCUMULATED-GAINS-PRIOR> 3,533,361
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 719,439
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,420,963
<AVERAGE-NET-ASSETS> 89,851,314
<PER-SHARE-NAV-BEGIN> 12.76
<PER-SHARE-NII> 0.22
<PER-SHARE-GAIN-APPREC> 0.78
<PER-SHARE-DIVIDEND> (0.17)
<PER-SHARE-DISTRIBUTIONS> (1.05)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.54
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 032
<NAME> BRINSON GLOBAL EQUITY - CLASS N
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 65,834,504
<INVESTMENTS-AT-VALUE> 81,718,165
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<NAME> BRINSON NON-U.S. EQUITY - CLASS N
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<NAME> BRINSON NON-U.S. EQUITY - CLASS S
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<NAME> BRINSON U.S. EQUITY - CLASS I
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<NAME> BRINSON U.S. EQUITY - CLASS N
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<NAME> BRINSON U.S. EQUITY - CLASS S
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<NAME> BRINSON U.S. BALANCED -- CLASS I
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<NAME> BRINSON U.S. BALANCED - CLASS N
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<NAME> BRINSON U.S. BALANCED - CLASS S
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<TABLE> <S> <C>
<PAGE>
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<NUMBER> 081
<NAME> BRINSON U.S. BOND - CLASS I
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<S> <C>
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<NAME> BRINSON U.S. BOND - CLASS N
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<PAGE>
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<NAME> BRINSON U.S. BOND - CLASS S
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<PAGE>
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<NUMBER> 091
<NAME> BRINSON U.S. LARGE CAPITALIZATION EQUITY -- CLASS I
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<S> <C>
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<NAME> BRINSON U.S. LARGE CAPITALIZATION EQUITY - CLASS N
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<NAME> BRINSON U.S. LARGE CAPITALIZATION EQUITY -- CLASS S
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<S> <C>
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<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 16,187,373
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21,230
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 55,789
<AVERAGE-NET-ASSETS> 78,297
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> (0.22)
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.79
<EXPENSE-RATIO> 1.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information extracted from
the Semi-Annual Report dated June 30, 1998, for the UBS High Yield Bond Fund and
qualified in its entirety by refer to such Semi-Annual Report.
</LEGEND>
<SERIES>
<NUMBER> 006
<NAME> UBS HIGH YIELD BOND FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 16,195,953
<RECEIVABLES> 504,104
<ASSETS-OTHER> 11,806
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16,711,866
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 248,459
<TOTAL-LIABILITIES> 248,459
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,256,995
<SHARES-COMMON-STOCK> 160,991
<SHARES-COMMON-PRIOR> 78,181
<ACCUMULATED-NII-CURRENT> 11,388
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 199,336
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4,312)
<NET-ASSETS> 16,463,407
<DIVIDEND-INCOME> 349
<INTEREST-INCOME> 476,948
<OTHER-INCOME> 0
<EXPENSES-NET> 48,080
<NET-INVESTMENT-INCOME> 429,217
<REALIZED-GAINS-CURRENT> 181,956
<APPREC-INCREASE-CURRENT> (36,190)
<NET-CHANGE-FROM-OPS> 574,983
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (420,106)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,377,090
<NUMBER-OF-SHARES-REDEEMED> (1,344,747)
<SHARES-REINVESTED> 414,926
<NET-CHANGE-IN-ASSETS> 8,602,146
<ACCUMULATED-NII-PRIOR> 2,277
<ACCUMULATED-GAINS-PRIOR> 17,380
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 132,218
<AVERAGE-NET-ASSETS> 10,773,018
<PER-SHARE-NAV-BEGIN> 100.55
<PER-SHARE-NII> 4.00
<PER-SHARE-GAIN-APPREC> 1.67
<PER-SHARE-DIVIDEND> (3.96)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 102.26
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial data extraete the Semi-Annual Report
dated June 30, 1998, for the UBS Small Cap Fund and qualified in its entirety by
reference such Semi-Annual Report
</LEGEND>
<SERIES>
<NUMBER> 007
<NAME> UBS SMALL CAP FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 21,380,262
<RECEIVABLES> 14,000
<ASSETS-OTHER> 13,349
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,407,611
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 97,313
<TOTAL-LIABILITIES> 97,313
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,639,336
<SHARES-COMMON-STOCK> 219,287
<SHARES-COMMON-PRIOR> 126,657
<ACCUMULATED-NII-CURRENT> (11,248)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (314,162)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3,628)
<NET-ASSETS> 21,310,298
<DIVIDEND-INCOME> 39,135
<INTEREST-INCOME> 60,006
<OTHER-INCOME> 0
<EXPENSES-NET> 110,389
<NET-INVESTMENT-INCOME> (11,248)
<REALIZED-GAINS-CURRENT> (318,411)
<APPREC-INCREASE-CURRENT> 523,130
<NET-CHANGE-FROM-OPS> 193,471
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,099,656
<NUMBER-OF-SHARES-REDEEMED> (1,936,827)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9,356,300
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 4,249
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 179,689
<AVERAGE-NET-ASSETS> 18,550,493
<PER-SHARE-NAV-BEGIN> 94.38
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> 2.85
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 97.18
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information extracted from the
Semi-Annual Report dated June 30, 1998, for the UBS Large Cap Growth Fund and
qualified in its entirety by reference to such Semi-Annual Report.
</LEGEND>
<SERIES>
<NUMBER> 008
<NAME> UBS LARGE CAP GROWTH FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 7,138,155
<RECEIVABLES> 14,937
<ASSETS-OTHER> 10,169
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,163,261
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28,571
<TOTAL-LIABILITIES> 28,571
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,362,895
<SHARES-COMMON-STOCK> 63,563
<SHARES-COMMON-PRIOR> 41,697
<ACCUMULATED-NII-CURRENT> 17,826
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (10,461)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 764,430
<NET-ASSETS> 7,134,690
<DIVIDEND-INCOME> 35,477
<INTEREST-INCOME> 12,087
<OTHER-INCOME> 0
<EXPENSES-NET> 30,038
<NET-INVESTMENT-INCOME> 17,526
<REALIZED-GAINS-CURRENT> 4,084
<APPREC-INCREASE-CURRENT> 730,609
<NET-CHANGE-FROM-OPS> 752,219
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,662,313
<NUMBER-OF-SHARES-REDEEMED> (2,416,956)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,997,576
<ACCUMULATED-NII-PRIOR> 300
<ACCUMULATED-GAINS-PRIOR> (14,545)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 98,250
<AVERAGE-NET-ASSETS> 6,057,253
<PER-SHARE-NAV-BEGIN> 99.22
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 12.76
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 112.25
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 006
<NAME> UBS HIGH YIELD BOND FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 7,882,781
<RECEIVABLES> 8,000
<ASSETS-OTHER> 30,855
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,921,636
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 60,375
<TOTAL-LIABILITIES> 60,375
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,809,726
<SHARES-COMMON-STOCK> 78,181
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,277
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17,380
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 31,878
<NET-ASSETS> 7,861,261
<DIVIDEND-INCOME> 2,165
<INTEREST-INCOME> 146,094
<OTHER-INCOME> 0
<EXPENSES-NET> 16,409
<NET-INVESTMENT-INCOME> 131,850
<REALIZED-GAINS-CURRENT> 17,380
<APPREC-INCREASE-CURRENT> 31,878
<NET-CHANGE-FROM-OPS> 181,108
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (129,573)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,756,774
<NUMBER-OF-SHARES-REDEEMED> (76,294)
<SHARES-REINVESTED> 129,246
<NET-CHANGE-IN-ASSETS> 7,861,261
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 965
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 90,847
<AVERAGE-NET-ASSETS> 7,233,355
<PER-SHARE-NAV-BEGIN> 100.00
<PER-SHARE-NII> 1.80
<PER-SHARE-GAIN-APPREC> 0.52
<PER-SHARE-DIVIDEND> (1.77)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 100.55
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information
</LEGEND>
<SERIES>
<NUMBER> 007
<NAME> UBS SMALL CAP FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 11,944,837
<RECEIVABLES> 25,000
<ASSETS-OTHER> 38,289
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,008,126
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54,128
<TOTAL-LIABILITIES> 54,128
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,476,507
<SHARES-COMMON-STOCK> 126,657
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,249
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (526,758)
<NET-ASSETS> 11,953,998
<DIVIDEND-INCOME> 7,705
<INTEREST-INCOME> 19,156
<OTHER-INCOME> 0
<EXPENSES-NET> 29,174
<NET-INVESTMENT-INCOME> (2,313)
<REALIZED-GAINS-CURRENT> 6,540
<APPREC-INCREASE-CURRENT> (526,758)
<NET-CHANGE-FROM-OPS> (522,531)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,731,529
<NUMBER-OF-SHARES-REDEEMED> (255,000)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 11,953,998
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,873
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 88,260
<AVERAGE-NET-ASSETS> 9,649,332
<PER-SHARE-NAV-BEGIN> 100.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> (5.62)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 94.38
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information
</LEGEND>
<SERIES>
<NUMBER> 008
<NAME> UBS LARGE CAP GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 4,138,823
<RECEIVABLES> 11,705
<ASSETS-OTHER> 32,273
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,182,801
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 45,687
<TOTAL-LIABILITIES> 45,687
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,117,538
<SHARES-COMMON-STOCK> 41,697
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 300
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14,545)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,821
<NET-ASSETS> 4,137,114
<DIVIDEND-INCOME> 10,648
<INTEREST-INCOME> 5,624
<OTHER-INCOME> 0
<EXPENSES-NET> 6,922
<NET-INVESTMENT-INCOME> 9,350
<REALIZED-GAINS-CURRENT> (14,545)
<APPREC-INCREASE-CURRENT> 33,821
<NET-CHANGE-FROM-OPS> 28,626
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,050)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,108,844
<NUMBER-OF-SHARES-REDEEMED> (356)
<SHARES-REINVESTED> 9,050
<NET-CHANGE-IN-ASSETS> 4,137,114
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 198
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 59,083
<AVERAGE-NET-ASSETS> 3,239,263
<PER-SHARE-NAV-BEGIN> 100.00
<PER-SHARE-NII> 0.23
<PER-SHARE-GAIN-APPREC> (0.79)
<PER-SHARE-DIVIDEND> (0.22)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 99.22
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EX-99.0
Appendix "A"
List of Series and Classes
<TABLE>
<CAPTION>
Series Classes
- ------ -------
<S> <C>
Global Fund Brinson Global Fund - Class I
Brinson Global Fund - Class N
UBS Investment Fund - Global
Global Equity Fund Brinson Global Equity Fund - Class I
Brinson Global Equity Fund - Class N
UBS Investment Fund - Global Equity
Global Bond Fund Brinson Global Bond Fund - Class I
Brinson Global Bond Fund - Class N
UBS Investment Fund - Global Bond
U.S. Balanced Fund Brinson U.S. Balanced Fund - Class I
Brinson U.S. Balanced Fund - Class N
UBS Investment Fund - U.S. Balanced
U.S. Equity Fund Brinson U.S. Equity Fund - Class I
Brinson U.S. Equity Fund - Class N
UBS Investment Fund - U.S. Equity
U.S. Large Capitalization Brinson U.S. Large Capitalization Equity Fund - Class I
Equity Fund Brinson U.S. Large Capitalization Equity Fund - Class N
UBS Investment Fund - U.S. Large Capitalization Equity
U.S. Bond Fund Brinson U.S. Bond Fund - Class I
Brinson U.S. Bond Fund - Class N
UBS Investment Fund - U.S. Bond
Global (ex-U.S.) Equity Fund Brinson Global (ex-U.S.) Equity Fund - Class I
Brinson Global (ex-U.S.) Equity Fund - Class N
UBS Investment Fund - Global (ex-U.S.) Equity
U.S. Large Capitalization Growth Fund Brinson U.S. Large Capitalization Growth - Class I
Brinson U.S. Large Capitalization Growth - Class N
UBS Investment Fund - U.S. Large Capitalization Growth
U.S. Small Capitalization Fund Brinson U.S. Small Capitalization Fund - Class I
Brinson U.S. Small Capitalization Fund - Class N
UBS Investment Fund - U.S. Small Capitalization
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
High Yield Bond Fund Brinson High Yield Bond Fund - Class I
Brinson High Yield Bond Fund - Class N
UBS Investment Fund - High Yield Bond
Emerging Markets Equity Fund Brinson Emerging Markets Equity Fund - Class I
Brinson Emerging Markets Equity Fund - Class N
UBS Investment Fund - Emerging Markets Equity
Emerging Markets Debt Fund Brinson Emerging Markets Debt Fund - Class I
Brinson Emerging Markets Debt Fund - Class N
UBS Investment Fund - Emerging Markets Debt
</TABLE>
