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Rule 497(b)
File No. 333-63879
UBS PRIVATE INVESTOR FUNDS, INC.
UBS HIGH YIELD BOND FUND
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116
Dear Shareholder:
Enclosed is a Notice of Meeting for a Special Shareholders Meeting which has
been called for December 11, 1998 at 10:00 a.m., at the offices of UBS A.G.,
10 East 50th Street, 11th Floor, New York, New York. The accompanying
Prospectus/Proxy Statement details a proposal being presented for your
consideration and requests your prompt attention and vote via the enclosed
proxy card.
PLEASE TAKE A MOMENT TO FILL OUT, SIGN AND RETURN THE ENCLOSED PROXY CARD!
This meeting is critically important as you are being asked to consider and
approve an Agreement and Plan of Reorganization which would result in an
exchange of shares in your fund, the UBS High Yield Bond Fund (the "UBS Fund")
of UBS Private Investor Funds, Inc. (the "Corporation") for the Brinson Class
I shares ("Class I Shares") of beneficial interest of the High Yield Bond Fund
(the "Brinson Fund"), a newly created, comparable fund managed by Brinson
Partners, Inc. ("Brinson" or the "Advisor") that is a series of The Brinson
Funds. On the date of the exchange, you will receive Class I Shares in the
Brinson Fund equal in value to your investment in the UBS Fund of the
Corporation. Thereafter, the value of your investment will fluctuate with
market conditions and the investment performance of the Class I Shares of the
Brinson Fund.
The proposed reorganization is intended to be a tax-free reorganization
under the Internal Revenue Code of 1986, as amended, as further described in
the accompanying Prospectus/Proxy Statement.
This transaction is being proposed because of the recent merger of Union
Bank of Switzerland, the corporate parent of the UBS Fund's investment advisor
and sub-investment advisor, and Swiss Bank Corporation, the corporate parent
of the Brinson Fund's investment advisor, to form UBS A.G. In an effort to
promote more efficient operations, to eliminate duplicate costs and to enhance
the distribution of shares, UBS A.G. and Brinson proposed that the UBS Fund be
reorganized into the Brinson Fund. The Brinson Fund has identical investment
objectives and similar investment policies to the UBS Fund. In addition, the
Trust possesses certain operating economies of scale which allow shareholders
to enjoy a relatively low cost investment program while receiving a high level
of service and communications.
Please take the time to review this document and vote NOW! To ensure that
your vote is counted, indicate your position on the enclosed proxy card(s).
Sign and return your card(s) promptly. If you determine at a later date that
you wish to attend the meeting, you may revoke your proxy and vote in person.
Thank you for your attention to this matter.
Sincerely,
/s/ Paul J. Jasinski
Paul J. Jasinski
President
October 26, 1998
<PAGE>
UBS PRIVATE INVESTOR FUNDS, INC.
UBS HIGH YIELD BOND FUND
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 11, 1998
----------------
To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders of the UBS
High Yield Bond Fund (the "UBS Fund") of the UBS Private Investor Funds, Inc.
(the "Corporation") will be held at the offices of UBS A.G., 10 East 50th
Street, 11th Floor, New York, New York on December 11, 1998, at 10:00 a.m.,
Eastern time, for the following purposes:
1. To approve or disapprove an Agreement and Plan of Reorganization
between the Corporation, on behalf of the UBS Fund, and The Brinson Funds
(the "Trust"), on behalf of the High Yield Bond Fund that provides for the
acquisition of substantially all of the assets and liabilities of the UBS
Fund in exchange for the Brinson Class I shares ("Class I Shares") of
beneficial interest of the High Yield Bond Fund (the "Brinson Fund"), a
series of the Trust, the distribution of such shares to the shareholders of
the UBS Fund, and the dissolution of the UBS Fund.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
The attached Prospectus/Proxy Statement provides more information concerning
each of the foregoing matters, including the transaction contemplated by the
Agreement and Plan of Reorganization. A copy of the Agreement and Plan of
Reorganization is attached as Exhibit A.
Shareholders of record as of the close of business on October 21, 1998, are
entitled to notice of, and to vote at, the Special Meeting or any adjournment
thereof.
By Order of the Board of Directors,
/s/ Susan C. Mosher
Susan C. Mosher
Secretary
October 26, 1998
IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON. IF YOU DO NOT
EXPECT TO ATTEND THE MEETING, THE BOARD OF DIRECTORS URGES YOU TO COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID
RETURN ENVELOPE. IT IS IMPORTANT THAT YOU RETURN YOUR SIGNED PROXY PROMPTLY SO
THAT A QUORUM MAY BE ENSURED.
<PAGE>
COMBINED PROSPECTUS AND PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
COVER PAGE............................................................... Cover
SOLICITATION AND REVOCATION OF PROXIES AND VOTING INFORMATION............ 3
PRINCIPAL SHAREHOLDERS................................................... 3
PROPOSAL 1: TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION.......... 4
SUMMARY.................................................................. 4
Proposed Transaction................................................... 4
Voting Information..................................................... 4
Federal Income Tax Consequences........................................ 4
COMPARISONS OF SOME IMPORTANT FEATURES................................... 5
Investment Objectives and Policies..................................... 5
Management of the Corporation and the Trust............................ 5
Fees and Expenses...................................................... 5
Distribution Services.................................................. 6
Pro Forma Fee Table for the UBS Fund and the Brinson Fund.............. 7
Purchase Price, Redemption Price, Exchanges, Dividends and
Distributions......................................................... 8
Special Information Regarding the UBS Fund's Two-Tier Structure........ 8
Risk Factors and Comparison of Policies................................ 9
REASONS FOR THE REORGANIZATION........................................... 9
The Merger of Union Bank of Switzerland and Swiss Bank Corporation..... 9
Reorganization......................................................... 10
INFORMATION ABOUT THE REORGANIZATION..................................... 11
Method of Carrying Out the Reorganization.............................. 11
Conditions Precedent to Closing........................................ 11
Expenses of the Transaction............................................ 12
Federal Income Tax Consequences........................................ 12
Description of the Class I Shares of the Brinson Fund.................. 12
Capitalization......................................................... 13
COMPARISON OF INVESTMENT POLICIES AND RISKS.............................. 13
The Brinson Fund and the UBS Fund...................................... 13
Investment Policies.................................................... 14
Investment Restrictions................................................ 23
Risk Factors........................................................... 24
INFORMATION ABOUT THE BRINSON FUND....................................... 30
INFORMATION ABOUT THE UBS FUND........................................... 31
TRANSFER AGENT AND CUSTODIAN............................................. 31
SHAREHOLDER INQUIRIES.................................................... 31
EXHIBIT A--AGREEMENT AND PLAN OF REORGANIZATION.......................... A-1
EXHIBIT B--ADDITIONAL INFORMATION REGARDING THE BRINSON FUND............. B-1
</TABLE>
i
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COMBINED PROSPECTUS AND PROXY STATEMENT
DATED OCTOBER 26, 1998
ACQUISITION OF THE ASSETS OF THE
UBS HIGH YIELD BOND FUND OF
UBS PRIVATE INVESTOR FUNDS, INC.
BY AND IN EXCHANGE FOR THE BRINSON CLASS I SHARES OF
THE HIGH YIELD BOND FUND OF
THE BRINSON FUNDS
This Prospectus/Proxy Statement is being furnished to you in connection with
the solicitation of proxies by the Board of Directors of the UBS Private
Investor Funds, Inc. (the "Corporation"). The Corporation is a series
investment company with six series of shares. Each such series represents an
interest in a separate investment portfolio, designated as the UBS Bond Fund,
UBS High Yield Bond Fund, UBS Value Equity Fund (formerly UBS U.S. Equity
Fund), UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS International
Equity Fund. This Prospectus/Proxy Statement relates solely to the UBS High
Yield Bond Fund (the "UBS Fund"). The remaining five series of the
Corporation, other than the UBS Fund, are referred to in this Prospectus/Proxy
Statement as the "UBS Series," and the UBS Fund and the UBS Series are
collectively referred to as the "UBS Funds."
Proxies solicited will be voted at a Special Meeting of Shareholders to
approve or disapprove an Agreement and Plan of Reorganization (the "Agreement
and Plan"). The Agreement and Plan provides for the acquisition of
substantially all of the assets and liabilities of the UBS Fund of the
Corporation by the High Yield Bond Fund (the "Brinson Fund") of The Brinson
Funds (the "Trust"), a newly created series of the Trust which is managed by
Brinson Partners, Inc. ("Brinson" or the "Advisor") and which has investment
objectives that are identical and investment policies that are substantially
similar to the UBS Fund, in exchange solely for the Brinson Class I shares
("Class I Shares") of beneficial interest of the Brinson Fund. Concurrently
with the transaction proposed with respect to the UBS Fund, shareholders of
each UBS Series will be approving an agreement and plan of reorganization
relating to the sale of each UBS Series' assets and liabilities to another
Trust series managed by Brinson with similar investment objectives and
policies. A separate vote will be conducted for each of the UBS Funds, and the
six reorganizations of the UBS Funds are independent of each other.
Following such transfer, the Class I Shares of the Brinson Fund will be
distributed to shareholders of the UBS Fund in liquidation of such Fund and
individual shareholders of the UBS Fund will receive that number of the Class
I Shares of the Brinson Fund having an aggregate net asset value equal to the
aggregate net asset value of such shareholder's shares of the UBS Fund.
Thereafter, the Corporation will file an application pursuant to Section 8(f)
of the Investment Company Act of 1940, as amended (the "1940 Act"), for an
order declaring that it has ceased to be an investment company; provided that
the shareholders of each UBS Series also approve the sale of each UBS Series'
assets to a corresponding Trust series.
The Trust consists of thirteen separate investment series: Global Fund,
Global Equity Fund, Global Bond Fund, Emerging Markets Debt Fund, Emerging
Markets Equity Fund, U.S. Balanced Fund, U.S. Large Capitalization Equity
Fund, U.S. Equity Fund, U.S. Bond Fund, Non-U.S. Equity Fund, U.S. Large
Capitalization Growth Fund, U.S. Small Capitalization Fund and High Yield Bond
Fund (individually, a "Trust Series" and collectively, the "Trust Series").
Each Trust Series offers three separate classes of shares, the Class I shares,
the Class N shares, and the UBS Investment Funds class shares.
The Brinson Fund is a diversified series of the Trust, with its principal
offices located at 209 South LaSalle Street, Chicago, Illinois 60604-1295,
(800) 448-2430. The Brinson Fund has an investment objective that is
1
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identical to that of the UBS Fund. The Brinson Fund's primary investment
objective is to provide high current income from a portfolio of higher-
yielding, lower-rated debt securities issued by domestic and foreign
companies. In addition, the Brinson Fund has a secondary objective of capital
growth.
The UBS Fund is a diversified series of the Corporation, with its principal
offices located at 200 Clarendon Street, Boston, Massachusetts 02116, (888)
827-3863. Like the Brinson Fund, the UBS Fund's primary investment objective
is to provide high current income from a portfolio of higher-yielding, lower-
rated debt securities issued by domestic and foreign companies. In addition,
the UBS Fund has a secondary objective of capital growth. The UBS Fund seeks
to achieve its investment objectives by investing all of its investable assets
in the UBS High Yield Bond Portfolio (the "UBS Portfolio"), a series of UBS
Investor Portfolios Trust (the "UBS Trust"), a registered management
investment company. The investment policies and restrictions and,
consequently, the risks of investing in the Brinson Fund are substantially
similar to those of the UBS Fund, but differ in certain respects as described
more fully under "COMPARISON OF INVESTMENT POLICIES" in this Prospectus/Proxy
Statement.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about the Brinson Fund and the
Trust that a prospective investor should know before investing. A Statement of
Additional Information dated October 26, 1998, relating to this
Prospectus/Proxy Statement, the transaction described herein and the parties
thereto, has been filed with the U.S. Securities and Exchange Commission
("SEC" or the "Commission") and is incorporated by reference into this
Prospectus/Proxy Statement. A copy of that Statement may be obtained without
charge by writing to the address noted above or by calling (800) 448-2430. The
Trust will furnish, without charge, a copy of its annual and semi-annual
reports to a shareholder upon request by writing to the Trust at the address
noted above or by calling (800) 448-2430.
A prospectus, statement of additional information, and annual report to
shareholders, dated December 31, 1997, relating to the UBS Fund of the
Corporation are also on file with the SEC (File nos. 811-07431; 033-64401),
each of which is incorporated by reference herein and is available without
charge upon request to the Corporation. This Prospectus/Proxy Statement will
first be sent to shareholders on or about October 26, 1998.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT
AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE CORPORATION OR THE TRUST.
SHARES OF THE UBS FUND AND THE BRINSON FUND ARE NOT DEPOSITS OR OBLIGATIONS
OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE UBS FUND AND THE
BRINSON FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE INVESTMENT TO
FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE HIGHER OR
LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
2
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SOLICITATION AND REVOCATION OF PROXIES AND VOTING INFORMATION
The enclosed proxy is solicited by and on behalf of the Board of Directors
of the Corporation in connection with the Special Meeting of Shareholders of
the UBS Fund to be held at the offices of UBS A.G., 10 East 50th Street, 11th
Floor, New York, New York, on December 11, 1998 at 10:00 a.m. Eastern time
(the "Meeting"), and at any or all adjournments thereof. You may revoke your
proxy at any time before it is exercised by delivering a written notice to the
Corporation expressly revoking your proxy, by signing and forwarding to the
Corporation a later-dated proxy, or by attending the Meeting and casting your
votes in person.
The Corporation will request broker-dealer firms, custodians, nominees and
fiduciaries to forward proxy material to the beneficial owners of the shares
of record by such persons. Such broker-dealer firms, custodians, nominees and
fiduciaries may be reimbursed for their reasonable expenses incurred in
connection with such proxy solicitation. The cost of soliciting these proxies
will be borne by UBS A.G. and will not be borne by the Trust or the
Corporation. In addition to solicitations by mail, some of the officers and
employees of UBS A.G., without additional remuneration, may conduct additional
solicitations by telephone, telegraph and personal interviews.
Shareholders of record of the UBS Fund at the close of business on October
21, 1998 (the "Record Date") will be entitled to vote at the Meeting or any
adjournment thereof. On the Record Date, there were 244,627 outstanding shares
of the UBS Fund. Each shareholder will be entitled to one vote for each full
share, and a fractional vote for each fractional share, of the UBS Fund held
on the Record Date.
The Board of Directors does not intend to bring any matters before the
Meeting other than the proposal described below and is not aware of any other
matters to be brought before the Meeting by others. If any other matter
legally comes before the Meeting, proxyholders for which discretion has been
granted will vote shares in accordance with the views of management.
In the event that a quorum is present at the Meeting but sufficient votes to
approve the proposal set forth in the Notice of Special Meeting of
Shareholders are not received by the date of the Meeting, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative
vote of a majority of those shares represented at the Meeting in person or by
proxy. If a quorum is present, the persons named as proxies will vote those
proxies that they are entitled to vote "FOR" any proposal in favor of
adjournment and will vote those proxies required to be voted "AGAINST" any
such proposal against any adjournment.
For purposes of determining the presence of a quorum for transacting
business at the Meeting, abstentions and broker "non-votes" (that is, proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote
shares on a particular matter with respect to which brokers or nominees do not
have discretionary power) will be treated as shares that are present but which
have not been voted. Abstentions and broker non-votes would be treated in the
same manner with respect to the Trust.
The proxyholders will vote all proxies received. It is the present intention
that, absent contrary instructions, the enclosed proxy will be voted for the
approval of the Agreement and Plan; and in the discretion of the proxyholders,
upon such other matters not now known or determined as may legally come before
the Meeting.
PRINCIPAL SHAREHOLDERS
As of the Record Date, the following persons owned beneficially more than 5%
of the outstanding voting shares of the UBS Fund:
<TABLE>
<CAPTION>
SHARES PERCENT
NAME AND ADDRESS HELD OWNERSHIP
---------------- ------- ---------
<S> <C> <C>
UBS A.G............................................... 186,499 76.24%
Omnibus Reinvest Account
10 East 50th Street
New York, NY 10022
UBS A.G............................................... 38,441 15.71
Omnibus Reinvest Account
10 East 50th Street
New York, NY 10022
</TABLE>
3
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All of the respective officers and directors of the Corporation and the
officers and trustees of the Trust, as a group, owned less than 1% of the
outstanding voting securities of the UBS Fund and the Brinson Fund, as
relevant.
PROPOSAL 1: TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION
SUMMARY
This summary of certain information contained in this Prospectus/Proxy
Statement is qualified by reference to the more complete information contained
elsewhere in this Prospectus/Proxy Statement, the Prospectus of the UBS Fund,
and the Agreement and Plan of Reorganization (the "Agreement and Plan")
attached to this Prospectus/Proxy Statement as Exhibit A.
PROPOSED TRANSACTION. At meetings of the Board of Directors of the
Corporation, the directors of the Corporation, including a majority of the
directors who are not "interested persons" of the Corporation, as defined in
the 1940 Act (the "Independent Directors"), considered and subsequently
approved the Agreement and Plan providing for the transfer of substantially
all of the assets and liabilities of the UBS Fund of the Corporation in
exchange solely for the Class I Shares of beneficial interest of the Brinson
Fund. (This proposed transaction is referred to in this Prospectus/Proxy
Statement as the "Reorganization.") The value of Class I Shares issued by the
Brinson Fund in connection with the Reorganization will equal the value of the
net assets of the UBS Fund acquired by the Brinson Fund.
Pursuant to the Agreement and the Plan, the Class I Shares issued by the
Brinson Fund to the UBS Fund will be distributed to the shareholders of the
UBS Fund in liquidation of the UBS Fund. As a result, shareholders of the UBS
Fund will cease to be shareholders of such Fund and will instead be the owners
of that number of full and fractional Class I Shares of the Brinson Fund
having an aggregate net asset value equal to the aggregate net asset value of
the shares of the UBS Fund on the closing date of the Reorganization.
After presentations by representatives of Brinson and UBS A.G., the
investment advisor to the UBS Portfolio of UBS Trust, discussing why, in their
views, the proposal should be approved, the Board of Directors of the
Corporation, including all of the Independent Directors present at the
meetings at which the Reorganization was approved, concluded that the
Reorganization is in the best interests of the shareholders of the UBS Fund
and, therefore, recommended approval of the Agreement and Plan. The Board of
Directors of the Corporation and the Board of Trustees of the Trust,
respectively, also concluded that no dilution would result to the shareholders
of the Corporation or the Trust as a result of the Reorganization.
VOTING INFORMATION. Approval of the Agreement and Plan requires the
favorable vote of a majority of the holders of the outstanding shares of the
UBS Fund entitled to vote.
Each shareholder will be entitled to one vote for each full share, and a
fractional vote for each fractional share, of the UBS Fund held on the Record
Date. IF YOU GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED IN FAVOR
OF THE AGREEMENT AND PLAN.
FEDERAL INCOME TAX CONSEQUENCES. Consummation of the Reorganization is
subject to the receipt of a tax opinion by counsel to the Trust substantially
to the effect that, among other things, no gain or loss will be recognized by
the UBS Fund or its shareholders for federal income tax purposes as a result
of such Reorganization; the holding period and aggregate tax basis of Class I
Shares of the Brinson Fund received by a shareholder of the UBS Fund will be
the same as the holding period and aggregate tax basis of the shareholder's
shares of the UBS Fund; and the holding period and tax basis of the assets of
the UBS Fund in the hands of the Brinson Fund as a result of the
Reorganization generally will be the holding period and tax basis of those
assets in the hands of the UBS Fund from which they were acquired immediately
prior to the Reorganization. It is anticipated that the Brinson Fund will
continue to hold the investable assets of the UBS Fund with disposition of
such assets only in the normal course of business.
4
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COMPARISONS OF SOME IMPORTANT FEATURES
INVESTMENT OBJECTIVES AND POLICIES. The Brinson Fund and the UBS Fund have
an identical primary investment objective of seeking to provide high current
income from a portfolio of higher yielding, lower-rated debt securities issued
by domestic and foreign companies. In addition, the Brinson Fund and the UBS
Fund each have a secondary objective of capital growth. The Brinson Fund seeks
to achieve its objectives by investing in fixed income securities. Unlike the
Brinson Fund, however, the UBS Fund seeks to achieve its investment objectives
by investing all of its investable assets in the corresponding UBS Portfolio,
a series of the UBS Trust, a separate registered investment company, which UBS
Portfolio has the same investment objectives and policies as the UBS Fund. The
UBS Portfolio seeks to achieve its investment objectives by investing in fixed
income securities.
MANAGEMENT OF THE CORPORATION AND THE TRUST. Similar to the Corporation and
its Board of Directors, the management of the business and affairs of the
Trust is the responsibility of its Board of Trustees. The Corporation is
organized as a corporation under the laws of the State of Maryland, and the
Trust is organized as a business trust under the laws of the State of
Delaware. 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 Corporation, on behalf of the UBS Fund, has not retained the services of
an investment advisor since the UBS Fund seeks to achieve its investment
objectives by investing all of its investable assets in the UBS Portfolio. UBS
A.G., a universal bank organized under the laws of and having its principal
executive offices in Switzerland, through its New York office, located at 10
East 50th Street, New York, New York 10022 (the "UBS Advisor"), serves as the
investment advisor of the UBS Portfolio pursuant to an investment advisory
agreement. UBS Brinson Inc., a wholly-owned subsidiary of UBS A.G., located at
10 East 50th Street, New York, New York, 10022 (the "UBS Sub-Advisor"), serves
as the sub-investment advisor to the UBS Portfolio.
The Brinson Fund invests its assets directly in portfolio securities and is
advised and managed by Brinson, 209 South LaSalle Street, Chicago, Illinois
60604-1295. Brinson is a wholly-owned subsidiary of UBS A.G.
FEES AND EXPENSES. Pursuant to the UBS Trust's investment advisory
agreement, the UBS Portfolio pays the UBS Advisor a fee for its services,
calculated daily and paid monthly, equal on an annual basis to a rate of 0.45%
of the UBS Portfolio's average daily net assets. Pursuant to a sub-advisory
agreement between the UBS Advisor and the UBS Sub-Advisor, the UBS Advisor
pays the UBS Sub-Advisor a fee, calculated daily and payable monthly, at an
annual rate equal to 0.25% of the UBS Portfolio's first $25 million of average
daily net assets, 0.20% of the next $25 million of such assets, and 0.15% of
such assets in excess of $50 million. The UBS Advisor has voluntarily agreed
to waive its fees and reimburse the UBS Fund and the UBS Portfolio for any of
their respective operating expenses to the extent that the UBS Fund's total
operating expenses (including its share of the UBS Portfolio's expenses)
exceed, on an annual basis, 0.90% of the UBS Fund's average daily net assets.
Pursuant to its investment advisory agreement with the Advisor, the Trust,
on behalf of the Brinson Fund, is obligated to pay to Brinson a monthly fee at
the annual rate of 0.60% of the Brinson Fund's average daily net assets,
subject to certain fee waivers and expense reimbursements as further described
below. The Advisor has irrevocably agreed to waive its fees and reimburse
certain expenses of the Brinson Fund so that the Fund's total operating
expenses never exceed 0.70% of the Brinson Fund's average net assets.
The UBS Portfolio employs IBT Trust and Custodial Services (Ireland) LMTD
("IBT Ireland"), a subsidiary of Investors Bank and Trust Company ("Investors
Bank"), and the UBS Fund employs Investors Bank, as administrators,
respectively, under administration agreements (collectively, the "UBS
Administration Agreements") to provide certain administrative services to the
UBS Portfolio and the UBS Fund. The services provided by IBT Ireland and
Investors Bank under the UBS Administration Agreements include certain
accounting, clerical, and bookkeeping services, blue sky (for the UBS Fund
only), corporate secretarial services and assistance in the preparation and
filing of tax returns and reports to shareholders and the SEC. For the
services Investors Bank provides under the administration agreement with the
UBS Fund, the UBS Fund pays
5
<PAGE>
Investor Bank a fee which is calculated daily and paid monthly, equal, on an
annual basis, to 0.065% of the UBS Fund's first $100 million average daily net
assets and the 0.025% of the next $100 million average daily net assets.
Investors Bank does not receive a fee from the UBS Fund on average daily net
assets in excess of $200 million. For the services IBT Ireland provides under
the administration agreement with the UBS Portfolio, the UBS Portfolio pays
IBT Ireland a fee which is calculated daily and paid monthly, equal, on an
annual basis, to 0.07% of the UBS Portfolio's first $100 million average daily
net assets and 0.05% of the average daily net assets in excess of $100
million.
The Brinson Fund receives administrative services pursuant to a Multiple
Series Agreement (the "Services Agreement") entered into by the Trust, on
behalf of each Trust Series, including the Brinson Fund, and The Chase
Manhattan Bank ("Chase"), pursuant to which Chase is required to provide
general administrative, accounting, portfolio evaluation, transfer agency and
custodian services to the Trust Series, including the coordination and
monitoring of any third party service providers. As authorized under the
Services Agreement, Chase has entered into a Mutual Funds Service Agreement
(the "CGFSC Agreement") with Chase Global Funds Services Company ("CGFSC"), a
corporate affiliate of Chase, under which CGFSC provides administrative,
accounting, portfolio valuation and transfer agency services to each Trust
Series.
For its administrative, accounting, transfer agency and custodian services,
Chase 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. Chase 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 Trust
Series into any other investment company sponsored or managed by the Advisor
and assets of a Trust Series 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 Chase and any third party service
provider in providing such services. Pursuant to the CGFSC Agreement, Chase
pays CGFSC for services that CGFSC provides to Chase in fulfilling Chase's
obligations under the Services Agreement.
The annualized ratio of operating expenses to average net assets for the UBS
Fund for the period of September 30, 1997 (commencement of operations) through
December 31, 1997 was 0.90%. The annualized ratio of operating expenses to
average net assets for the six month period ended June 30, 1998 was 0.90%.
These ratios (i) include the UBS Fund's share of the UBS Portfolio's expenses,
and (ii) are net of fee waivers and expense reimbursements. Without such fee
waivers and expense reimbursements by the UBS Advisor, the ratios of total
operating expenses to average net assets for the period of September 30, 1997
through December 31, 1997, and for the six months ended June 30, 1998, would
have been 4.98% and 2.47%, respectively. Such fee waivers and expense
reimbursements had the effect of reducing the ratio of expenses to average net
assets and increasing the ratio of net investment income to average net assets
by 4.08% (annualized) for the period September 30, 1997 through December 31,
1997. In addition, prior to December 22, 1997, investment advisory services
were provided to the UBS Portfolio without compensation.
The Brinson Fund and its Class I Shares, which have not yet engaged in any
activities, will commence operations at the Closing Date (as hereinafter
defined), currently scheduled for December 18, 1998, or such later date as the
parties may determine. For the fiscal year ending June 30, 1999, the estimated
annualized ratio of operating expenses to average net assets for the Class I
Shares of the Brinson Fund is 0.70%. The Advisor has irrevocably agreed to
waive its fees and to reimburse certain expenses of the Brinson Fund so that
the Fund's total operating expenses never exceed 0.70% of the Brinson Fund's
average net assets.
DISTRIBUTION SERVICES. Pursuant to a Distribution Agreement, First Fund
Distributors, Inc. ("First Fund") serves as the distributor of the UBS Fund's
shares. First Fund does not receive a fee pursuant to the terms of the
distribution agreement, but receives compensation from the Administrator. The
address of First Fund is 4455
6
<PAGE>
East Camelback Road, Phoenix, Arizona 85018. Pursuant to an underwriting
agreement, Funds Distributor, Inc. ("FDI") acts as underwriter to the Trust to
facilitate the filing of notices regarding the sale of the shares of the
Trust. FDI's fees for such services are borne by the Advisor. The address of
FDI is 60 State Street, Suite 1300, Boston, Massachusetts 02109.
PRO FORMA FEE TABLE FOR THE UBS FUND AND THE BRINSON FUND
AS OF JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL
--------------------------- PRO FORMA
UBS FUND/1/ BRINSON FUND/2/ AFTER TRANSACTION
----------- --------------- -----------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases.. None None None
Sales Load Imposed on Reinvested
Dividends....................... None None None
Deferred Sales Load.............. None None None
Redemption Fees.................. None None None
Exchange Fee..................... None None None
ANNUAL FUND OPERATING EXPENSES
(as percentage of average net
assets at June 30, 1998):
Management Fees (after fee
waivers and reimbursements)..... 0.00% 0.60% 0.60%
12b-1 Fees....................... None None None
Other Expenses (after fee waivers
and reimbursements)............. 0.90% 0.10% 0.10%
Total Operating Expenses (after
fee waivers and reimbursements). 0.90% 0.70%/3/ 0.70%
</TABLE>
- --------
/1/The UBS Advisor had agreed to waive fees and reimburse the UBS Fund and the
UBS Portfolio for any of their respective operating expenses to the extent
that the UBS Fund's total operating expenses (including its share of the
UBS Portfolio's expenses) exceed, on an annual basis, 0.90% of the UBS
Fund's average daily net assets. If there were no waiver in effect, the UBS
Portfolio's advisory fee would be equal, on an annual basis, to 0.45% of
the UBS Portfolio's average daily net assets. In the absence of fee waivers
and reimbursements, the total operating expenses of the UBS Fund expected
to be incurred by the UBS Fund for the fiscal year ending December 31, 1998
would be 2.81%.
/2/The Brinson Fund has not yet engaged in activity and has no assets;
therefore, "Other Expenses" for the Brinson Fund is based on estimated
amounts for the current fiscal year.
/3/As reflected in the table above, the Advisor has agreed to irrevocably
waive its fees and to reimburse certain expenses so that total operating
expenses of the Brinson Fund do not exceed 0.70%.
EXAMPLE:
Based on the level of expenses listed above after waivers and reimbursement,
an investor would pay the following expenses on a $1,000 investment, assuming
a 5% annual return and redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
UBS Fund........................................ $ 9 $29 $50 $111
Brinson Fund (after proposed transaction)....... $ 7 $22 $39 $ 87
</TABLE>
The foregoing tables are designed to assist the investor in understanding
the various costs and expenses that a shareholder will bear directly or
indirectly. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
7
<PAGE>
PURCHASE PRICE, REDEMPTION PRICE, EXCHANGES, DIVIDENDS AND
DISTRIBUTIONS. Shares of the UBS Fund and the Class I Shares of the Brinson
Fund are sold on a continuous basis at their respective net asset values per
share. The minimum initial investment in the UBS Fund is $25,000, except that
the minimum initial investment is $10,000 for shareholders of another UBS
Series. The minimum subsequent investment for all investors is $5,000. The
minimum initial investment for employees of UBS A.G. or its affiliates is
$5,000, and the minimum subsequent investment is $1,000. Certain tax deferred
retirement plan programs (including Individual Retirement Accounts ("IRAs"))
are subject to a minimum initial investment of $2,000, and subsequent
investments must be $500.
The minimum initial investment for Class I Shares of the Brinson Fund is
$1,000,000. Subsequent investments for Class I Shares will be accepted in
minimum amounts of $2,500. The minimum initial investment pursuant to an
automatic investment plan is $1,000,000, with subsequent minimum investments
of $500. The minimum purchase requirement for IRAs is $2,000. The Brinson Fund
has agreed to waive the minimum initial investment requirement in connection
with the Reorganization. The subsequent minimum investment requirement of
$2,500 will be applied to UBS Fund shareholders who make additional
investments after the Reorganization.
Shares of the UBS Fund, the UBS Portfolio and the Brinson Fund may be
redeemed at their respective net asset values per share. With respect to the
Brinson Fund, redemptions in excess of $250,000 or 1% of net assets in any 90-
day period may be subject to certain conditions.
Shares of the UBS Fund may be exchanged for shares of the UBS Series,
subject to certain limitations, as provided in the UBS Fund's prospectus.
Class I Shares of the Brinson Fund may be exchanged for shares of the same
class of any other Trust Series, subject to certain limitations, as provided
in Exhibit B to this Prospectus/Proxy Statement. While the Corporation has
five other series of shares with which the UBS Fund shareholders may exchange
their shares, the Trust has twelve other series of shares with which the
Brinson Fund shareholders may exchange their shares.
The UBS Fund and the Brinson Fund have policies of distributing
substantially all of their net investment income and net capital gains to
their respective shareholders. The UBS Fund declares daily, and pays monthly,
dividends from its daily net investment income. The Brinson Fund distributes
its net investment income semi-annually in June and December, and distributes
annually in December substantially all of its net long-term capital gains and
any undistributed net short-term capital gains realized during the period. Any
aggregate net capital gains realized from the sale of portfolio securities of
the UBS Fund and the Brinson Fund are distributed at least once each year
unless they are used to offset capital losses carried forward from prior
years, in which case no capital gains will be distributed to the extent they
offset such capital losses. Dividends and capital gains distributions are
automatically reinvested by the UBS Fund and the Brinson Fund in additional
shares at the then current net asset value, unless and until the shareholder
requests to receive them in cash.
SPECIAL INFORMATION REGARDING THE UBS FUND'S TWO-TIER STRUCTURE. An
investment in the UBS Fund is subject to certain special considerations due to
the UBS Fund's two-tier structure, whereby it invests all of its assets in the
corresponding UBS Portfolio of the UBS Trust and the UBS Portfolio invests
directly in securities. The following discussion summarizes the considerations
that are present in a two-tier fund structure. These considerations do not
apply to an investment in the Brinson Fund.
In addition to selling beneficial interests to the UBS Fund, the UBS
Portfolio may sell beneficial interests to other mutual funds or institutional
investors. Such investors will invest in the UBS Portfolio on the same terms
and conditions and will pay a proportionate share of the UBS Portfolio's
expenses. However, the other investors investing in the UBS Portfolio are not
required to sell their shares at the same public offering price as the UBS
Fund due to variations in pricing structures and other operating expenses.
These differences may result in differences in returns experienced by
investors in the different funds that invest in the UBS Portfolio. Such
differences in returns, however, are also present in other mutual fund
structures.
8
<PAGE>
Smaller funds investing in the UBS Portfolio may be materially affected by
the actions of larger funds investing in the UBS Portfolio. For example, if a
large fund withdraws from the UBS Portfolio, the remaining funds may
subsequently experience higher pro rata operating expenses, thereby lowering
returns. Additionally, because the UBS Portfolio would become smaller, it may
become less diversified, resulting in potentially increased portfolio risk
(however, those possibilities also exist for traditionally structured funds
that have large or institutional investors who may withdraw from a fund).
Also, funds with a greater pro rata ownership in the UBS Portfolio could have
effective voting control of its operations. Except as permitted by the SEC,
whenever the UBS Fund is requested to vote on matters pertaining to the UBS
Portfolio, the Corporation will hold a meeting of UBS Fund shareholders and
will cast all of its votes proportionately as instructed by the UBS Fund's
shareholders. UBS Fund shareholders who do not vote will not affect the UBS
Fund's votes at the UBS Portfolio meeting. The percentage of the Corporation's
votes representing the UBS Fund shareholders not voting will be voted by the
Corporation in the same proportion as the UBS Fund shareholders who do, in
fact, vote.
Certain changes in the UBS Portfolio's investment objectives, policies or
restrictions, or a failure by the UBS Fund's shareholders to approve a change
in the UBS Portfolio's investment objectives or restrictions, may require the
UBS Fund to withdraw its investments in the UBS Portfolio. Any such withdrawal
could result in an in-kind distribution of portfolio securities (as opposed to
a cash distribution) by the UBS Portfolio to the UBS Fund. In no event,
however, will securities which are not readily marketable exceed 15% of the
total value of such in-kind distribution. Such a distribution may result in a
UBS Fund having a less diversified portfolio of investments or adversely
affect the UBS Fund's liquidity, and the UBS Fund could incur brokerage, tax
or other charges in converting such securities to cash. Notwithstanding the
above, there are other means for meeting shareholder redemption requests, such
as borrowing.
The UBS Fund may withdraw its investment in the UBS Portfolio at any time if
the Board of Directors of the Corporation determines that it is in the best
interests of the UBS Fund to do so. Upon any such withdrawal, the Board of
Directors of the Corporation would consider what action might be taken,
including the investment of all the UBS Fund's assets in another pooled
investment entity having the same investment objectives and restrictions as
the UBS Fund or the retaining of an investment advisor to manage the UBS
Fund's assets in accordance with its investment policies.
RISK FACTORS AND COMPARISON OF POLICIES. Because the investment objectives
of the UBS Fund and the Brinson Fund are identical, and the investment
policies are similar, the investment risks associated with an investment in
the UBS Fund are generally the same as those of the Brinson Fund. There are,
however, some distinctions in the investment program of the UBS Fund and the
Brinson Fund. For example, (i) the UBS Fund seeks to achieve its investment
objectives by investing all of its investable assets in the UBS Portfolio,
while the Brinson Fund invests directly in portfolio securities; (ii) the UBS
Sub-Advisor actively manages the UBS Portfolio's duration, while the Advisor
does not actively manage the Brinson Fund's portfolio duration; and (iii) the
Brinson Fund is authorized to invest in securities of issuers in emerging
market countries, while the UBS Portfolio may not invest in emerging market
countries. See "COMPARISON OF INVESTMENT POLICIES--Risk Factors" below and
Exhibit B to this Prospectus/Proxy Statement.
REASONS FOR THE REORGANIZATION
THE MERGER OF UNION BANK OF SWITZERLAND AND SWISS BANK CORPORATION. On June
29, 1998, pursuant to a merger agreement, dated December 6, 1997, Union Bank
of Switzerland ("UBS") and Swiss Bank Corporation ("SBC"), each a universal
bank organized under the laws of Switzerland, merged into UBS A.G., a newly-
created entity organized under Swiss law. In conjunction with this
transaction, the UBS Sub-Advisor was created by the merger of UBS Asset
Management (New York) Inc. and SBC Brinson Inc. (These transactions are
collectively referred to as the "Merger.")
As a result of the Merger, and in an effort to promote more efficient
operations, to eliminate duplicate costs and to enhance the distribution of
shares, UBS A.G. and Brinson proposed that the UBS Fund be reorganized into
the Brinson Fund.
9
<PAGE>
The Advisor is an investment management firm managing, as of June 30, 1998,
over $286 billion, primarily for pension and profit sharing institutional
accounts. The Advisor 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. On April 25, 1995, SBC purchased all of the
outstanding stock of the Advisor's former corporate parent, Brinson Holdings,
Inc. The Advisor and its predecessor entities have managed domestic and
international assets since 1974 and global investment assets since 1982.
REORGANIZATION. The Reorganization has been proposed by UBS A.G. and Brinson
as a means of combining the UBS Fund with a fund managed by the Advisor with
compatible investment objectives, policies, restrictions and portfolios. The
sale of the assets of the UBS Fund to the Brinson Fund should enable the
combined entity to obtain certain economies of scale with attendant savings in
cost for the UBS Fund as further described below.
At the same time, UBS A.G. presented and recommended for approval to the
Corporation's Board of Directors agreements and plans of reorganization
relating to the sale of assets and liabilities of each of the UBS Series to
another Trust Series with similar investment objectives and policies. Such
agreements and plans are subject to the separate approval by the shareholders
of the respective UBS Series, and each of the six reorganizations is
independent of the other.
During the meetings at which the Agreement and Plan was presented to the
Corporation's Board of Directors, the directors questioned the potential
benefits to be gained by shareholders of the UBS Fund as well as any
additional costs to be borne. In determining whether to recommend approval of
the Reorganization to shareholders, the Board of Directors considered, among
other factors: expense ratios of the Brinson Fund, as well as similar funds;
the compatibility of the investment objectives, policies, restrictions and
portfolios of the Brinson Fund with the UBS Fund; and the tax consequences of
the Reorganization. Inquiry was also made as to fund administration and the
availability of high quality shareholder services.
During the course of its deliberations, the Corporation's Board of Directors
also considered the fact that the expenses of the Reorganization will not be
borne by the UBS Fund, the Corporation, the Brinson Fund or the Trust.
In reaching the decision to recommend that shareholders of the UBS Fund vote
to approve the Reorganization, the Board of Directors concluded that the
Reorganization is in the best interests of the shareholders of the UBS Fund.
The Board's conclusion was based on a number of factors, including that, as
part of the Trust, which has higher aggregate net assets than the Corporation,
shareholders should be able to obtain the benefits of economies of scale,
permitting the reduction or elimination of certain duplicate costs and
expenses which may result in lower overall expense ratios through the
spreading of both fixed and variable costs of fund operations over a larger
asset base. As a general rule, economies can be expected to be realized
primarily with respect to fixed expenses. However, expenses that are based on
the value of assets or the number of shareholder accounts, such as custody
fees, would be largely unaffected by the Reorganization.
In its deliberations, the Directors also considered that, as shareholders of
the Trust, the Reorganization would provide shareholders with exchange
privileges with respect to the Class I shares of the other twelve Trust
Series, each with different investment objectives and policies. In addition,
the Directors also determined that it may be detrimental for the UBS Fund to
compete for the same investor assets as the Brinson Fund, each of which is
either managed by UBS A.G. or indirectly managed by a subsidiary of UBS A.G.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR THE AGREEMENT AND PLAN. If the Agreement and Plan is not approved,
the Board of Directors will consider other possible courses of action with
respect to the UBS Fund, including dissolution and liquidation.
10
<PAGE>
INFORMATION ABOUT THE REORGANIZATION
The following summary of the Agreement and Plan of Reorganization does not
purport to be complete, and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Agreement and Plan, a
copy of which is attached hereto as Exhibit A.
METHOD OF CARRYING OUT THE REORGANIZATION. Prior to the Reorganization, the
UBS Portfolio will make a pro rata in-kind liquidating distribution of all of
its assets to the UBS Fund and to each of its other shareholders.
If the shareholders of the UBS Fund approve the Agreement and Plan, the
reorganization of the UBS Fund will be consummated promptly after the various
conditions to the obligations of each of the parties are satisfied. (See
"Conditions Precedent to Closing.") Consummation of the Reorganization (the
"Closing Date") will be on December 18, 1998, or such other date as is agreed
to by the Corporation and the Trust, provided that the Agreement and Plan may
be terminated by either party if the Closing Date does not occur on or before
March 31, 1999.
On the Closing Date, the UBS Fund will transfer substantially all of its
assets and liabilities in exchange for the Class I Shares of the Brinson Fund
having an aggregate net asset value equal to the aggregate value of assets and
liabilities so transferred as of 4:00 p.m. Eastern time on the Closing Date.
The stock transfer books of the Corporation with respect to the UBS Fund will
be permanently closed as of 4:00 p.m. Eastern time on the Closing Date and
only requests for redemption of shares of the UBS Fund received in proper form
prior to 4:00 p.m. Eastern time on the Closing Date will be accepted by the
Corporation. Redemption requests relating to the UBS Fund received by the
Corporation thereafter shall be deemed to be redemption requests for shares of
the Brinson Fund to be distributed to the former shareholders of the UBS Fund.
The UBS Fund will distribute as of the Closing Date such Class I Shares of
the Brinson Fund pro rata to its shareholders of record as of the close of
business on the Closing Date. The number of shares shall be determined by
dividing the net asset value per share of the UBS Fund (computed in accordance
with the policies and procedures set forth in the current prospectus of the
UBS Fund and using market quotations determined by the UBS Fund) by the net
asset value per share of the Class I Shares of the Brinson Fund as of 4:00
p.m. Eastern time on the Closing Date, and multiplying the result by the
number of outstanding shares of the UBS Fund on the Closing Date.
For example, on June 30, 1998, the net asset value of each share of the UBS
Fund was $102.26. The Brinson Fund had no assets on that date. Each share of
the UBS Fund would have been exchanged for 10.2263 shares of the Class I
Shares of the Brinson Fund if the Closing had taken place on June 30, 1998,
and the net asset value of each share of the Class I Shares of the Brinson
Fund would have been $10.00.
In the event that the shareholders of the UBS Fund do not approve the
Agreement and Plan, the assets and liabilities of the UBS Fund will not be
transferred on the Closing Date and the obligations of the Corporation under
the Agreement and Plan shall not be effective. If the Reorganization is not
approved by the UBS Fund shareholders, the Board of Directors of the
Corporation will consider other alternatives, including dissolution and
liquidation.
CONDITIONS PRECEDENT TO CLOSING. The obligation of the Corporation to
transfer the assets and liabilities of the UBS Fund to the Brinson Fund
pursuant to the Agreement and Plan is subject to the satisfaction of certain
conditions precedent, including performance by the Trust, in all material
respects, of its agreements and undertakings under the Agreement and Plan, the
receipt of certain documents from the Trust, the receipt of an opinion of
counsel to the Trust, and requisite approval of the Agreement and Plan by the
shareholders of the UBS Fund, as described above. The obligations of the Trust
to consummate the Reorganization are subject to the satisfaction of certain
conditions precedent, including the performance by the Corporation of its
agreements and undertakings under the Agreement and Plan, the receipt of
certain documents, financial statements and certificates from the Corporation,
and the receipt of an opinion of counsel to the Corporation.
11
<PAGE>
EXPENSES OF THE TRANSACTION. The expenses incurred in connection with
entering into and consummating the transaction contemplated by the Agreement
and Plan will not be borne by the UBS Fund, the Corporation, the Brinson Fund
or the Trust.
FEDERAL INCOME TAX CONSEQUENCES. Consummation of the Reorganization is
subject to the receipt of a tax opinion by counsel to the Trust substantially
to the effect that, on the basis of then current law and certain
representations and assumptions, and subject to certain limitations, for
federal income tax purposes:
(i) the Reorganization will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and that the Brinson Fund and the UBS Fund will each be a
party to a reorganization within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by the Brinson Fund upon the
receipt of the assets of the UBS Fund solely in exchange for the Class I
Shares of the Brinson Fund and the assumption by the Brinson Fund of the
liabilities of the UBS Fund;
(iii) no gain or loss will be recognized by the UBS Fund upon the
transfer of the UBS Fund's assets to the Brinson Fund in exchange for the
Class I Shares of the Brinson Fund and the assumption by the Brinson Fund
of liabilities of the UBS Fund or upon the distribution of the Class I
Shares of the Brinson Fund to the UBS shareholders;
(iv) no gain or loss will be recognized by the shareholders of the UBS
Fund upon the exchange of their shares for Class I Shares of the Brinson
Fund;
(v) the aggregate tax basis of the shares of the Class I Shares of the
Brinson Fund pursuant to the Reorganization will be the same as the
aggregate tax basis of shares of the UBS Fund held by such shareholder
immediately prior to the Reorganization and the holding period of the Class
I Shares of the Brinson Fund to be received by each shareholder of the UBS
Fund will include the period during which shares of the UBS Fund exchanged
therefore were held by such shareholder (provided shares of the UBS Fund
were held as capital assets on the date of the Reorganization); and
(vi) the tax basis of the UBS Fund assets and liabilities acquired by the
Brinson Fund will be the same as the tax basis of such assets and
liabilities to the UBS Fund immediately prior to the Reorganization, and
the holding period of the assets and liabilities of the UBS Fund in the
hands of the Brinson Fund will include the period during which those assets
and liabilities were held by the UBS Fund.
Shareholders of the UBS Fund should consult their tax advisors regarding the
effect, if any, of the Reorganization in light of their individual
circumstances. Since the foregoing discussion only relates to the federal
income tax consequences of the Reorganization, shareholders of the UBS Fund
should also consult their tax advisors as to state and local tax consequences,
if any, of the Reorganization.
DESCRIPTION OF THE CLASS I SHARES OF THE BRINSON FUND. The Class I Shares of
the Brinson Fund will be issued to shareholders of the UBS Fund in accordance
with the procedures under the Agreement and Plan as described above. Each
share will be fully paid and nonassessable when issued with no personal
liability attaching to the ownership thereof, will have no pre-emptive or
conversion rights and will be transferable upon the books of the Trust. In
accordance with the Trust's normal procedures, the Brinson Fund will not issue
certificates for shares of its Class I Shares to former shareholders of the
UBS Fund, unless a letter is sent to the transfer agent of the Trust
requesting a certificate. Ownership of the Brinson Fund shares by former
shareholders of the UBS Fund will be recorded electronically and the Trust
will issue a confirmation to such shareholders relating to those Class I
Shares acquired as a result of the Reorganization. No redemption or repurchase
of any shares of the Brinson Fund issued to former shareholders of the UBS
Fund represented by unsurrendered share certificates shall be permitted until
such certificates have been surrendered for cancellation.
As shareholders of the Brinson Fund, former shareholders of the UBS Fund
will have substantially similar voting rights and rights upon dissolution with
respect to the Brinson Fund as they currently have with respect to the UBS
Fund. Shares of the UBS Fund and of the Brinson Fund do not have cumulative
voting rights. Like the Corporation, the Trust does not routinely hold annual
meetings of shareholders.
12
<PAGE>
Both the Corporation and the Trust are multi-series investment companies
that currently issue shares representing interests in six and thirteen series,
respectively, and shareholders of each of the UBS Funds and Trust Series
currently vote in the aggregate with the shareholders of the other relevant
series on certain matters (for example, the election of directors or trustees,
as applicable, and ratification of independent accountants). Unlike the
Corporation, however, the Trust currently offers three classes of shares of
each of the Trust Series: the UBS Investment Funds class shares, the Class N
shares and the Class I shares. Shares of a class represent an equal
proportionate interest in the assets and liabilities of the applicable Trust
Series with each other share, and each class has the same voting and other
rights and preferences as the other classes of that Trust Series, except that
only the holders of Class N shares 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. The Class I shares are primarily sold to institutional
investors and are not subject to distribution expenses pursuant to a
distribution plan under rule 12b-1. The Class N shares, which are available
exclusively to 401(k) participants, and the UBS Investment Funds class shares,
which are sold primarily to retail investors, do not have a sales load but are
subject to annual rule 12b-1 plan expenses. With respect to the UBS Fund and
voting on matters relating to the UBS Portfolio, see the discussion "Special
Information Regarding the UBS Fund's Two-Tier Structure" under "COMPARISON OF
SOME IMPORTANT FEATURES."
The UBS Trust is organized as a master trust under the laws of the State of
New York. The UBS Trust's Declaration of Trust provides that the UBS Fund and
other entities investing in the UBS Portfolio (e.g., other investment
companies, insurance company separate accounts and common and commingled trust
funds) will each be liable for all obligations of the UBS Portfolio. However,
the risk of the UBS Fund incurring financial loss on account of such liability
is limited to circumstances in which both inadequate insurance existed and the
UBS Portfolio itself was unable to meet its obligations. Accordingly, the
Directors of the Corporation believe that neither the UBS Fund nor its
shareholders will be adversely affected by reason of the UBS Fund's investing
in the UBS Portfolio.
CAPITALIZATION. The following table/1/ sets forth, as of June 30, 1998, (i)
the capitalization of the UBS Fund, (ii) the capitalization of the Brinson
Fund, and (iii) the pro forma capitalization of the Brinson Fund as adjusted
to give effect to the proposed Reorganization. The capitalization of the
Brinson Fund is likely to be different when the Reorganization is consummated.
<TABLE>
<CAPTION>
UBS PRIVATE
INVESTOR FUNDS, THE BRINSON FUNDS- PRO FORMA
INC.- UBS HIGH HIGH YIELD BOND AFTER
YIELD BOND FUND FUND-CLASS I SHARES REORGANIZATION
--------------- ------------------- --------------
<S> <C> <C> <C>
Net assets................... $16,463,467 $0 $16,463,467
Net asset value per share.... $102.26 $10.00 $10.00
Shares outstanding........... 160,991 0 1,646,341
</TABLE>
- --------
/1 /Full pro forma financial statements are included in the Statement of
Additional Information to this Prospectus/Proxy Statement.
To the extent permitted by law, the Agreement and Plan may be amended
without shareholder approval by mutual agreement in writing of the Corporation
and the Trust. The Agreement and Plan may be terminated and the Reorganization
abandoned at any time before or, to the extent permitted by law, after the
approval of shareholders of the UBS Fund by mutual consent of the parties to
the Agreement.
COMPARISON OF INVESTMENT POLICIES AND RISKS
THE BRINSON FUND AND THE UBS FUND. The primary investment objective of the
Brinson Fund and the UBS Fund is identical: to provide high current income
from a portfolio of higher-yielding, lower-rated debt securities issued by
domestic and foreign companies. In addition, the Brinson Fund and the UBS Fund
each have a secondary objective of capital growth.
13
<PAGE>
INVESTMENT POLICIES. In seeking to achieve their investment objectives, the
Brinson Fund and the UBS Fund are guided by substantially similar policies
that should be considered by the shareholders of the UBS Fund. However, unlike
the Brinson Fund, which directly acquires and manages its own portfolio
securities, the Corporation seeks to achieve the UBS Fund's investment
objectives by investing all of the UBS Fund's investable assets in the UBS
Portfolio, a series of a separate registered investment company. The UBS
Portfolio has the same investment objectives and policies as the UBS Fund.
Unless otherwise specified, the investment policies of each of the Brinson
Fund and the UBS Fund may be changed without shareholder approval. Policies or
restrictions stated as fundamental may not be changed without the approval of
the lesser of (i) a majority of the outstanding shares, or (ii) 67% or more of
the shares represented at a meeting of shareholders at which the holders of
more than 50% of the outstanding shares are represented, whichever is less
("Majority Vote").
The primary investment objective of the Brinson Fund is fundamental and may
not be changed without approval of the Brinson Fund's shareholders. The
primary investment objective of the UBS Fund is also fundamental, and may only
be changed with the approval of the holders of a majority of the outstanding
shares of the UBS Fund.
Since the UBS Fund pursues its investment objectives by investing all of its
investable assets in the UBS Portfolio, the UBS Fund's and the UBS Portfolio's
investment objectives are the same and, therefore, the investment
characteristics of the UBS Fund correspond directly to those of the UBS
Portfolio. Accordingly, the following is a discussion of the various
investments and restrictions of, and techniques employed by, the UBS
Portfolio.
The Brinson Fund is a diversified series of the Trust, a multi-series
investment company registered under the 1940 Act. The UBS Fund is a
diversified series of the Corporation, a multi-series investment company
registered under the 1940 Act. Both calculate net asset value per share as of
the close of trading (currently 4:00 P.M. Eastern time) on each day that the
New York Stock Exchange is open for business. Such net asset value per share
is calculated by subtracting the aggregate of all liabilities from the gross
value of all assets and dividing the result by the total number of shares
outstanding.
With respect to the Class I Shares of the Brinson Fund, such Class will
bear, pro rata, all of the common expenses of the Trust. The net asset value
of the outstanding shares of the Class I Shares of the Brinson Fund will be
computed on a pro rata basis for each outstanding share based on the
proportionate participation in the Brinson Fund represented by the value of
shares of each of the classes of the Fund. All income earned and expenses
incurred by the Brinson Fund will be borne on a pro rata basis by each
outstanding share of a class, based on such class' percentage in the Brinson
Fund represented by the value of the shares of the classes, except that the
Class I Shares of the Brinson Fund will not incur any of the expenses under
the distribution plans adopted by the UBS Investment Funds class of shares and
the Class N shares, respectively.
As further described below, both the Brinson Fund and the UBS Portfolio
invest primarily in higher-yielding, lower-rated debt securities. As a matter
of fundamental policy, under normal market conditions, the Brinson Fund
intends to invest 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 Investors Service, Inc. ("Moody's") and/or Standard & Poor's Ratings
Group ("S&P"), including securities rated Baa or lower by Moody's or BBB or
lower by S&P. In seeking to achieve its primary investment objective, the
Brinson Fund seeks to control risk. In pursuing its secondary investment
objective of capital growth, when consistent with high current income, the
Brinson Fund may invest in securities, including common stocks and non-income
producing securities, that 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. In addition to investing in
fixed income securities, the Brinson Fund may engage in futures, options and
currency transactions for non-speculative purposes, such as hedging against
interest rates and currency rates.
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In seeking to achieve its investment objectives, the UBS Portfolio will
invest, under normal market conditions, at least 65% of its assets in debt
securities, convertible securities or preferred stocks that are consistent
with its primary investment objective. The UBS Sub-Advisor, in selecting
securities, will use quantitative tools, analyses of credit risk, the
expertise of a dedicated trading desk, and the judgment of fixed income
portfolio managers and analysts. Similar to the Brinson Fund, the UBS
Portfolio seeks to achieve its secondary objective of capital growth, when
consistent with high current income, by investing in securities, including
common stocks and non-income producing securities, which the UBS Sub-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.
As a matter of non-fundamental policy, under normal circumstances, the UBS
Sub-Advisor intends to keep at least 65% of the UBS Portfolio's assets
invested in bonds. In addition to investing in fixed income securities, the
UBS Portfolio may engage in futures, options and currency transactions for
hedging purposes.
In contrast to the Brinson Fund, which does not have a stated policy with
respect to duration, the UBS Sub-Advisor manages, as a secondary activity, the
UBS Portfolio's duration and the allocation of securities across market
sectors. Duration is a measure of a bond's price sensitivity, expressed in
years. Duration represents the interest rate risk of a bond calculated by
taking into consideration the number of years until the average dollar, in
present value terms, is received from principal and interest payments. Based
on fundamental economic and capital markets research, the UBS Sub-Advisor may
adjust the duration of the UBS Portfolio in light of market conditions and the
UBS Sub-Advisor's opinion requiring future interest rates. The UBS Sub-Advisor
also actively allocates the UBS Portfolio's assets among the broad sectors of
the fixed income market including, but not limited to, corporate securities,
private placements, asset-backed securities and mortgage-backed securities.
The UBS Portfolio intends to have a duration between 3 and 8 years.
The benchmark for the UBS Portfolio, like the Brinson Fund, is the Merrill
Lynch High Yield Master Index, which currently has a duration of approximately
4.26 years. The maturities of the individual securities owned by the UBS
Portfolio may vary widely from their duration, however, and may be as long as
30 years. The Brinson Fund does not have a stated policy with respect to the
maturity range of its portfolio securities.
As a fundamental policy, both the Brinson Fund and the UBS Portfolio do not
intend to invest their assets in a particular industry. Both the Brinson Fund
and the UBS Portfolio may not purchase the securities (or other obligations,
in the case of the UBS Portfolio) of issuers conducting their principal
business activity 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 the Brinson Fund's or the UBS
Portfolio's investments in such industry would exceed 25% of the value of its
respective total assets. In the case of the Brinson Fund, this restriction is
applied without reference to the countries in which an industry is located.
The UBS Portfolio's restriction also provides that it may invest all or part
of its investable assets in an open-end management investment company with the
same investment objectives and restrictions.
FIXED INCOME SECURITIES
Both the Brinson Fund and the UBS Portfolio may invest in a broad range of
fixed income securities, including debt securities of U.S. and foreign
issuers. Permissible fixed income securities for the Brinson Fund and the UBS
Portfolio include debt securities of various types and maturities, such as
debentures, notes, mortgage-backed securities, asset-backed securities, zero
coupon securities, government obligations and money market instruments.
Both the Brinson Fund and the UBS Portfolio pursue their primary investment
objectives by purchasing securities that, while generally providing higher
yields, are in the lower rating categories of Moody's and/or S&P, including
securities rated Baa or lower by Moody's or BBB or lower by S&P. Securities
rated Baa or BBB are considered investment grade, but have some speculative
characteristics. Securities rated below Baa or BBB are considered to be of
poor standing and predominately 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
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adverse conditions. These bonds are commonly referred to as "junk bonds." The
Brinson Fund may invest substantially all of its assets, and the UBS Portfolio
may invest up to 10% of its assets, in securities rated below Caa by Moody's
or CCC by S&P, including securities in the lowest rating category of either
rating agency, or in unrated securities that the Advisor or the UBS Sub-
Advisor, respectively, determines to be of comparable quality. If, subsequent
to the Brinson Fund's or the UBS Portfolio's purchase of a security, the
security's rating is reduced by a rating agency, the Brinson Fund or the UBS
Portfolio will not necessarily dispose of that security. The Advisor or the
UBS Sub-Advisor, as applicable, will, however, monitor the investment to
determine whether continued investment in the security will assist in meeting
the Brinson Fund or the UBS Fund's primary investment objective.
FOREIGN INVESTMENTS
Both the Brinson Fund and the UBS Portfolio may invest up to 25% of their
total assets in securities principally traded in foreign markets. The UBS
Portfolio may also purchase Eurodollar certificates of deposit without regard
to this 25% limitation. The Brinson Fund does not have a stated percentage
limitation regarding its investment in Eurodollar certificates of deposit.
The Brinson Fund is permitted to invest in Brady Bonds and securities of
emerging market issuers. 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"). The UBS Portfolio is not
permitted to invest in Brady Bonds or securities of emerging market issuers.
The Brinson Fund, but not the UBS Portfolio, is authorized to invest in
structured securities. These are instruments that are issued by entities
organized and operated solely for the purpose of restructuring the investment
characteristics of sovereign debt obligations. These investments involve 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. Investments by the Brinson Fund in Structured Securities will be
limited by the Brinson Fund's prohibition on investing more than 15% of its
net assets in illiquid securities.
SHORT-TERM DEBT AND MONEY MARKET INVESTMENTS
Both the Brinson Fund and the UBS Portfolio may invest a portion of their
assets in short-term debt securities (including repurchase agreements) and
higher-rated money market instruments of corporations (such as commercial
paper), and short-term debt securities of the U.S. government and its agencies
and instrumentalities, and banks and finance companies (in the case of the
Brinson Fund). These instruments, other than U.S. government securities, may
be denominated in any currency. The Brinson Fund and the UBS Portfolio may
also invest in money market mutual funds.
When unusual market conditions warrant, the Brinson Fund may make
substantial temporary defensive investments in cash equivalents up to a
maximum of 100% of its net assets. The UBS Portfolio, under unusual market
circumstances, may seek to limit the risk of principal loss by reducing its
exposure to high yield bonds in favor of other, more defensive investments.
When the Brinson Fund or the UBS Portfolio invests for defensive purposes,
this practice may affect the attainment of the Brinson Fund's or the UBS
Portfolio's primary investment objective, since the yields on these types of
investments will generally be lower than those on lower-rated securities.
The UBS Portfolio may invest in obligations of (i) banks, savings and loan
associations and savings banks that have more than $2 billion in total assets
and are organized under the laws of the United States or any state, (ii)
foreign branches of these banks or of foreign banks of equivalent size (Euros)
and (iii) U.S. branches of foreign banks of equivalent size (Yankees). The
Brinson Fund is not subject to such investment restrictions when investing in
bank obligations.
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The UBS Portfolio may also invest in master demand obligations, which are a
type of commercial paper that provide for periodic adjustments in the interest
rate paid and permit daily changes in the amount borrowed. Master demand
obligations are governed by agreements between the issuer and the UBS Advisor.
Master demand obligations are not rated, and there is no specific percentage
limitation on investments in master demand obligations. The Brinson Fund has
no corresponding investment policy regarding master demand obligations.
CONVERTIBLE DEBT SECURITIES
Both the Brinson Fund and the UBS Portfolio may invest in convertible debt
securities. Convertible securities generally offer lower interest or dividend
yields than non-convertible debt securities of similar quality. The value of
convertible debt securities may reflect changes in the value of the underlying
common stock. The convertible debt securities in which the Brinson Fund and
the UBS Portfolio may invest include any debt securities or preferred stocks
that may be converted into common stock or that carry the right to purchase
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.
LOAN PARTICIPATIONS AND ASSIGNMENTS
The Brinson Fund 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 Brinson Fund's
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. To the extent that the Brinson
Fund cannot dispose of a Participation or Assignment in the ordinary course of
business within seven days at approximately the value at which it valued the
Loan Participation or Assignment, the Brinson Fund will treat the
Participation or Assignment as illiquid and subject to its overall limit on
illiquid investments of 15% of its net assets. The UBS Portfolio is not
authorized to invest in Participations or Assignments.
ZERO COUPON SECURITIES
The Brinson Fund and the UBS Portfolio may invest in zero coupon securities.
Zero coupon securities are debt obligations which do not entitle the holder to
any periodic payments of interest prior to maturity or a specified date when
the securities begin paying current interest (the "cash payment date") and,
therefore, are issued and traded at a discount from their value at maturity or
par value.
PAY-IN-KIND BONDS
The Brinson Fund may invest in pay-in-kind bonds. Pay-in-kind bonds are
securities which pay interest through the issuance of additional bonds. The
Brinson Fund 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
Brinson fund until the cash payment date or until the bonds mature. The UBS
Portfolio does not have a stated policy regarding the purchase of pay-in-kind
bonds.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
The Brinson Fund and the UBS Portfolio may invest in mortgage-backed and
asset-backed securities. 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-class 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
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instrumentalities, or they may be issued without any governmental guarantee of
the underlying mortgage assets but with some form of non-governmental credit
enhancement.
With respect to the Brinson Fund, 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. 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, the
Advisor will, consistent with the Brinson Fund's primary investment objective,
policies and quality standards, consider making investments in such new types
of mortgage-related securities.
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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Both the Brinson Fund and the UBS Portfolio may purchase securities on a
when-issued and, in the case of the UBS Portfolio, on a delayed delivery
basis. Delivery of and payment for these securities may take as long as a
month or more after the date of the purchase commitment. The value of these
securities is subject to market fluctuations during this period and no
interest or income accrues to the Brinson Fund or the UBS Portfolio until
settlement. At the time of settlement, a when-issued security may be valued at
less than its purchase price. Between the trade and settlement dates, the
Brinson Fund and the UBS Portfolio will maintain a segregated account
consisting of a portfolio of liquid securities with a value equal to these
commitments. It is the current policy of the UBS Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
such Portfolio's total assets less liabilities (excluding the obligations
created by these commitments). The Brinson Fund does not have a 15% limitation
with respect to such investments.
REPURCHASE AGREEMENTS
Both the Brinson Fund and the UBS Portfolio are authorized to enter into
repurchase agreements. In a repurchase agreement transaction, the Brinson Fund
or the UBS Portfolio 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. Repurchase agreements will be fully collateralized and the
collateral will be marked-to-market daily. The Brinson Fund and the UBS
Portfolio may not enter into a repurchase agreement having a maturity of
longer than seven days if, as a result, such agreement, together with any
other illiquid securities held, would exceed 15% of the value of their
respective net assets. At no time will the UBS Portfolio invest in repurchase
agreements maturing in more than thirteen months. The Brinson Fund is not
subject to a similar restriction.
REVERSE REPURCHASE AGREEMENTS
The Brinson Fund and the UBS Portfolio may also borrow money by entering
into reverse repurchase agreements. Reverse repurchase agreements involve
sales of portfolio securities to member banks of the Federal Reserve System or
securities dealers believed creditworthy, concurrently with an agreement to
repurchase the same securities at a later date at a fixed price, which is
generally equal to the original sales price plus interest. In a reverse
repurchase agreement transaction, the Brinson Fund and the UBS Portfolio
direct their respective custodian bank to place cash or liquid securities
segregated account in an amount equal to the repurchase price. Reverse
repurchase agreements will be considered as borrowings for purposes of the
Brinson Fund's and the
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UBS Portfolio's limitations on borrowing. In order to engage in such
investments, the Brinson Fund and the UBS Portfolio are required to maintain
asset coverage of at least 300% for such borrowings.
BORROWING POLICY
As a fundamental policy, the Brinson Fund may borrow money as a temporary
measure for extraordinary purposes or to facilitate redemptions, although it
will not borrow money in excess of 33 1/3% of the value of its total assets.
Any borrowing will be done from a bank and in accordance with the requirements
of the 1940 Act and SEC positions. The Brinson Fund has no intention of
increasing its net income through borrowing. The Brinson Fund will not pledge
more than 10% of its net assets, or issue senior securities as defined in the
1940 Act, except that it may purchase notes and enter into reverse repurchase
agreements.
Similarly, the UBS Portfolio also has a fundamental policy that it may
borrow money from banks for extraordinary or emergency purposes. The UBS
Portfolio may enter into reverse repurchase agreements and other permitted
borrowings that constitute senior securities under the 1940 Act only in
amounts up to one-third of the market value of its total assets (including the
amounts borrowed), less liabilities (excluding obligations created by such
borrowings and reverse repurchase agreements). The UBS Portfolio's borrowing
activities are done in accordance with the requirements of the 1940 Act and
SEC positions.
Neither the Brinson Fund nor the UBS Portfolio may purchase investment
securities while either has any outstanding borrowings (including reverse
repurchase agreements, in the case of the UBS Portfolio) that exceed 5% of its
respective net assets. Unlike the Brinson Fund, the UBS Portfolio may increase
its interest in an open-end management investment company with the same
investment objective and restrictions while such borrowings are outstanding.
SECURITIES LENDING
The Brinson Fund and the UBS Portfolio may each loan securities held in
their respective portfolios to qualified broker-dealers and financial
institutions provided that such loans are continuously collateralized in
amounts at least equal to the current market value and accrued interest of the
securities loaned. The UBS Portfolio will not make any loans in excess of one
year, while the Brinson Fund is not subject to a comparable restriction.
RULE 144A SECURITIES AND RESTRICTED SECURITIES
Both the Brinson Fund and the UBS Portfolio may invest in securities that
are exempt under Rule 144A under the Securities Act of 1933, as amended (the
"1933 Act"), from the registration requirements of the 1933 Act. Securities
purchased under Rule 144A are traded among qualified institutional investors.
The Brinson Fund may invest up to 15% of its total 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 1933 Act may
be determined to be liquid under guidelines adopted by the Trust's Board of
Trustees. The Brinson Fund may invest up to 15% of its total assets in
securities of issuers which are restricted from selling to the public without
registration under the 1933 Act, excluding restricted securities eligible for
resale pursuant to Rule 144A.
As a matter of non-fundamental policy, the UBS Portfolio may not invest more
than 15% of its net assets (taken at the greater of cost or market value) in
securities that are illiquid or not readily marketable excluding (a) Rule 144A
securities that have been determined to be liquid by the Board of Trustees and
(b) commercial paper that is sold under Section 4(2) of the 1933 Act which (i)
is not traded flat or in default as to interest or principal; and (ii) is
rated in one of the two highest categories by at least two nationally
recognized statistical rating organizations and the Corporation's Board of
Directors has determined the commercial paper to be liquid; or (iii) is rated
in one of the two highest categories by one nationally recognized statistical
rating organization
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and the Corporation's Board of Directors has determined that the commercial
paper is of equivalent quality and is liquid. In addition, the UBS Portfolio
will not invest more than 10% of its total assets (taken at the greater of
cost or market value) in securities (excluding Rule 144A securities) that are
restricted as to resale under the 1933 Act.
INVESTMENT COMPANY SECURITIES
The UBS Portfolio may purchase securities of other investment companies to
the extent that such purchases are consistent with the UBS Portfolio's
investment objectives and restrictions and are permitted under the 1940 Act.
Securities of any investment company will not be purchased by the UBS
Portfolio if such purchase would cause: (a) more than 10% of the UBS
Portfolio's total assets (taken at the greater of cost or market value) to be
invested in the securities of such issuers; (b) more than 5% of the UBS
Portfolio's total assets to be invested in any one investment company; or (c)
more than 3% of the outstanding voting securities of any such issuer to be
held for the UBS Portfolio. The UBS Portfolio is subject to a non-fundamental
investment restriction that provides that the UBS Portfolio will not purchase
securities issued by any investment company except by purchase in the open
market where no commission or profit to a sponsor or dealer results from such
purchase other than customary broker's commissions, or except when such
purchase, though not made in the open market, is part of a plan of merger or
consolidation. In addition, except in the case of a merger or consolidation,
the UBS Portfolio shall not purchase any securities of any open-end investment
company unless the UBS Advisor waives the investment advisory fee with respect
to the assets invested in other open-end investment companies.
As a matter of non-fundamental policy, the Brinson Fund may not invest in
securities of any open-end investment company, except that (1) the Brinson
Fund may purchase securities of money market mutual funds, and (2) the Brinson
Fund may purchase shares of an open-end investment company in accordance with
any exemptive order obtained from the SEC which permits investment by the
Brinson Fund in other Trust Series or in other investment companies or series
advised by the Advisor. In addition, the Brinson Fund 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.
Under the terms of an exemptive order issued by the SEC, the Brinson Fund
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 Brinson Fund to purchase securities or other
assets at a later date; (iv) to be invested on a strategic management basis
(i-iv herein referred to as "Uninvested Cash"); and (v) collateral that it
receives from the borrowers of its portfolio securities in connection with the
Brinson Fund's 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. The Brinson Fund's investment of
Uninvested Cash in shares of the Supplementary Trust Series will not exceed
25% of the Brinson Fund's total assets. In the event that the Advisor waives
more than 99.75% of its investment advisory fee with respect to the Brinson
Fund, as calculated monthly, then the Brinson Fund will be unable to invest in
the Supplementary Trust Series until additional investment advisory fees are
owed by the Brinson Fund. The UBS Portfolio is not subject to a similar order.
As a shareholder of another investment company, the Brinson Fund or the UBS
Portfolio would bear, along with other shareholders, the pro rata portion of
the other investment company's expenses, including any advisory fees. These
expenses would be in addition to the expenses that the Brinson Fund or the UBS
Portfolio would bear in connection with its own operations.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
The Brinson Fund and the UBS Portfolio may attempt to reduce the overall
level of investment risk of particular securities and attempt to protect
against adverse market movements by investing in certain derivative
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instruments as described below. In addition, the Brinson Fund and the UBS
Portfolio may invest in derivatives for hedging purposes. A derivative
instrument is 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 Brinson
Fund and the UBS Portfolio may invest in a variety of derivative instruments,
including futures contracts and options transactions. The Brinson Fund and the
UBS Portfolio will invest in derivatives only to the extent that the
instruments are determined by the Advisor or the UBS Advisor to be consistent
with the Brinson Fund's or the UBS Portfolio's investment objectives and
policies.
The Brinson Fund and the UBS Portfolio may enter into contracts for the
future purchase or sale of fixed income securities, indices of fixed income
securities and foreign currencies. A financial futures contract is an
agreement between the parties to buy or sell a specified security (in the case
of the Brinson Fund and the UBS Portfolio, a fixed income 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
contact 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. (This latter type of
futures contract is described below under "Foreign Currencies and Forward
Currency Transactions.") Both the Brinson Fund and the UBS Portfolio will
enter into futures transactions on domestic exchanges and, to the extent such
transactions have been approved by the Commodity Futures Trading Commission
(the "CFTC") for sale to customers in the United States, on foreign exchanges.
The Brinson Fund and the UBS Portfolio may enter into futures contracts to
the extent that not more than 5% of their respective net assets are committed
as futures contract margin deposits. The Brinson Fund may enter into these
transactions to the extent that obligations relating to such futures
transactions represent not more than 25% of its assets. The Brinson Fund may
effect futures transactions through futures commission merchants who are
affiliated with the Advisor or the Trust Series in accordance with procedures
adopted by the Trust's Board of Trustees.
The Brinson Fund and the UBS Portfolio may purchase and sell put and call
options on U.S. and foreign securities and indices and enter into related
closing transactions. In addition, the Brinson Fund and the UBS Portfolio may
purchase and sell put and call options on foreign securities, and may purchase
and sell put and call options on futures contracts (in the case of the UBS
Portfolio only) and indices of fixed income securities. The Brinson Fund and
the UBS Portfolio may use options traded on U.S. exchanges and, to the extent
permitted by law, options traded over-the-counter and on recognized foreign
exchanges. Because the SEC construes over-the-counter options as being
illiquid, the Brinson Fund and the UBS Portfolio may only invest in such
options to the extent consistent with its respective 15% limit on investments
in illiquid securities.
The Brinson Fund and the UBS Portfolio may purchase call options on
securities to the extent that premiums paid by the Brinson Fund or the UBS
Portfolio do not aggregate more than 20% of the Brinson Fund's or the UBS
Portfolio's total assets. In addition, in order to assure that the Brinson
Fund and the UBS Portfolio will not be considered a "commodity pool operator"
for purposes of CFTC Rules, the Brinson Fund and the UBS Portfolio will only
enter into transactions in futures contracts and options on futures contracts
if: (i) such transactions constitute bona fide hedging transactions, as
defined under CFTC rules, or (ii) no more than 5% of the Brinson Fund's or the
UBS Portfolio's net assets are committed as initial margin or premiums to
positions that do not constitute bona fide hedging transactions.
The Brinson Fund may only purchase put options to the extent that the
premiums on all outstanding put options do not exceed 20% of its total assets.
With regard to the writing of put options, the Brinson Fund will limit the
aggregate value of the obligations underlying such put options to 50% of its
total net assets. The Brinson Fund 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.
As a matter of non-fundamental policy the UBS Portfolio may purchase and
sell puts and calls on securities, securities index futures or options on
securities index futures, or futures or options on futures according to the
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following conditions. First, the options or futures are offered though the
facilities of a national securities association or are listed on a national
securities or commodities exchange. Second, the aggregate margin requirements
required on all such futures or options thereon do not exceed 5% of the UBS
Portfolio's total assets.
SWAPS
The UBS Portfolio is authorized to invest in interest rate swaps and related
products, such as fixed income index swaps, interest rate swaps, currency
swaps, and related caps, collars and floors. Interest rate swaps involve the
exchange by the UBS Portfolio with another party of its right to receive
interest payments. The UBS Portfolio expects to enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of the portfolio's duration, to protect against any increase in the price of
securities they anticipate purchasing at a later date, or to gain exposure to
certain markets in the most economical way possible. The Brinson Fund, as a
matter of non-fundamental policy, is not permitted to enter into swaps.
FOREIGN CURRENCIES AND FORWARD CURRENCY TRANSACTIONS
Because the Brinson Fund and the UBS Portfolio may purchase and sell foreign
securities and receive interest and dividends in currencies other than the
U.S. dollar, their assets are subject to certain risks associated with
currency or exchange rate fluctuations. Exposure to foreign currencies may be
adjusted based on the perception of the most favorable markets and issuers,
taking into consideration the relationship of the foreign currencies to the
U.S. dollar. The Brinson Fund and the UBS Portfolio do not expect to invest
more than 25% of their total assets in securities principally traded in
foreign markets, which securities may be denominated in foreign currencies.
The Brinson Fund and the UBS Portfolio are authorized to allocate their
exposure to foreign currencies to take advantage of or to protect their
investments from risk and return characteristics of foreign currencies and
exchange rates.
The Brinson Fund and the UBS Portfolio may alter fixed income or money
market exposures, enter into forward currency exchange contracts, use currency
futures contracts, purchase or sell options thereon or purchase or sell
currency options. Such investment techniques are designed to take advantage of
or protect the Brinson Fund and the UBS Portfolio from currency fluctuations.
The Brinson Fund and the UBS Portfolio may purchase or sell currencies and
forward currency transactions. The Brinson Fund and the UBS Portfolio 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, at an amount set by the parties (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 Brinson
Fund and the UBS Portfolio 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.
At the maturity of a forward contract, the Brinson Fund or the UBS Portfolio
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.
The Brinson Fund and the UBS Portfolio may purchase and sell put and call
options on foreign currencies for the purpose of protecting against declines
in the dollar value of portfolio securities and against increases in the
dollar costs of securities to be acquired. The Brinson Fund and the UBS
Portfolio may purchase covered call options on foreign currencies, meaning
that they own an equal amount of, or an offsetting position in, the underlying
currency. If the Brinson Fund or the UBS Portfolio purchases put options, it
will keep cash or high-quality liquid securities segregated in a sufficient
quantity with its custodian.
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INVESTMENT RESTRICTIONS
The investment restrictions of the Brinson Fund, the UBS Fund and the UBS
Portfolio are similar, but not identical. Each of the investment restrictions
applicable to the Brinson Fund is a fundamental policy that may not be changed
without a Majority Vote of the Brinson Fund's outstanding shares. The UBS Fund
and the UBS Portfolio, however, have adopted investment restrictions that are
fundamental and non-fundamental; to the extent that a fundamental policy and
non-fundamental policy apply to a given investment activity or strategy, the
more restrictive policy shall govern. Each investment policy of the UBS Fund
and the UBS Portfolio discussed below is fundamental, unless otherwise
indicated. These fundamental investment restrictions are in addition to those
discussed previously in the "Investment Policies" section. As with the Brinson
Fund, a fundamental investment restriction may not be changed without a
Majority Vote of the UBS Portfolio's (or the UBS Fund's) outstanding shares.
The investment restrictions applicable to the UBS Fund have been adopted by
the Corporation's Board of Directors, with respect to the UBS Fund, and by the
UBS Trust's Board of Trustees, with respect to the UBS Portfolio. The
investment restrictions of the UBS Fund and the UBS Portfolio are identical,
unless otherwise specified.
With respect to both the Brinson Fund and the UBS Portfolio, 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 the Fund's or Portfolio's total assets will not be considered
a violation.
Neither the Brinson Fund nor the UBS Portfolio may, as to 75% of its total
assets, purchase the securities (or other obligations, in the case of the UBS
Portfolio) of any one issuer, other than securities issued (or guaranteed, in
the case of the UBS Portfolio) 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 the Brinson Fund or the UBS Portfolio would be
invested in securities (or obligations, in the case of the UBS Portfolio) of
such issuer. The UBS Portfolio however, may invest all or part of its
investable assets in an open-end management investment company with the same
investment objectives and restrictions.
Neither the Brinson Fund nor the UBS Portfolio may invest in real estate (or
interests in real estate, in the case of the Brinson Fund, but this will not
prevent the Brinson Fund 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 (including limited partnerships, in the
case of the UBS Portfolio) or leases (in the case of the Brinson Fund only).
The UBS Portfolio may purchase debt obligations secured by interests in real
estate or issued by companies that invest in real estate or interests therein,
including real estate investment trusts.
Neither the Brinson Fund nor the UBS Portfolio may purchase or sell
commodities or commodity contracts. The Brinson Fund's restriction provides
that it may enter into futures contracts and options thereon in accordance
with its prospectus. The UBS Portfolio's restriction provides that it may not
purchase or sell options on commodities or commodity contracts except for its
interest in hedging and certain other activities described in its statement of
additional information.
The UBS Portfolio has a non-fundamental investment restriction that provides
that it will not invest for the purpose of exercising control or management.
The Brinson Fund is not subject to a comparable restriction.
Neither the Brinson Fund nor the UBS Portfolio (with respect to 75% of its
total assets) may purchase the securities of an issuer if, immediately after
such purchase, the Brinson Fund or the UBS Portfolio would own more than 10%
of the outstanding voting securities of such issuer. The UBS Portfolio further
provides that it may invest all or part of its investable assets in an open-
end management investment company with the same investment objectives and
restrictions.
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The UBS Portfolio is subject to a non-fundamental restriction that provides
that it may not purchase any security or evidence of interest therein on
margin, except that such short-term credit as may be necessary for the
clearance of purchases and sales of securities may be obtained and except that
deposits of initial deposit and variation margin may be made in connection
with the purchase, ownership, holding or sale of futures.
As a matter of non-fundamental policy, the UBS Portfolio may not sell
securities it does not own such that the dollar amount of such short sales at
any one time exceeds 25% of the net equity of the UBS Portfolio, and the value
of securities of any one issuer in which the UBS Portfolio is short exceeds
the lesser of 2.0% of the value of the Portfolio's net assets or 2.0% of the
securities of any class of any U.S. issuer, and provided that short sales may
be made only in those securities which are fully listed on a national
securities exchange or a foreign exchange (this provision does not include the
sale of securities the UBS Portfolio contemporaneously owns or where the UBS
Portfolio has the right to obtain securities equivalent in kind and amount to
those sold, i.e., short sales against the box). The UBS Portfolio has no
current intention to engage in short selling.
In addition to the restrictions on borrowing discussed previously in the
"Investment Policies" section, the UBS Portfolio's investment restriction also
provides that it may not mortgage, pledge, or hypothecate any assets, except
in connection with any permitted borrowing or reverse repurchase agreements.
Neither the Brinson Fund nor the UBS Portfolio may act as an underwriter of
securities, except that, with respect to the Brinson Fund, in connection with
the disposition of a security, the Brinson Fund may be deemed to be an
"underwriter" as that term is defined in the 1933 Act.
The UBS Portfolio has adopted a non-fundamental investment restriction which
provides that it may not invest in warrants (other than warrants acquired by
the UBS Portfolio as part of a unit or attached to securities at the time of
purchase) if, as a result, the investments (valued at the lower of cost or
market) would exceed 5% of the value of the UBS Portfolio's net assets. The
Brinson Fund is not subject to a comparable restriction.
RISK FACTORS
LOWER RATED SECURITIES
Both the Brinson Fund and the UBS Portfolio invest primarily in lower rated
securities. 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 either the Brinson
Fund or the UBS Portfolio from widespread bond defaults brought about by a
substantial economic downturn, or that yields will continue to offset default
rates on lower rated securities in the future.
Issuers of these securities are often smaller, less creditworthy companies,
or highly leveraged (indebted) firms, so that their ability to service their
debt obligations during an economic downturn or during sustained periods of
rising interest rates may be impaired. These issuers are generally less able
than more financially stable firms to make scheduled payments of principal and
interest. The inability (or perceived inability) of issuers to make timely
payments of interest and principal would likely make the values of securities
held by the Brinson Fund and the UBS Portfolio more volatile and could limit
the Brinson Fund's and the UBS Portfolio's ability to sell their securities at
prices approximating the values that the Brinson Fund and the UBS Portfolio
had placed on these securities. The absence of a liquid trading market for
certain of these securities may make it more difficult for the Brinson Fund
and the UBS Portfolio to establish the fair market value of these securities
and calculate the Brinson Fund's and the UBS Portfolio's net asset values. The
rating assigned to a security by Moody's or S&P does not reflect an assessment
of the volatility of the security's market value or the liquidity of an
investment in the security.
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 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
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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. The
market values of these securities tend to be more sensitive to individual
corporate developments and changes in economic conditions than higher quality
securities. 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 and
the ability of the Brinson Fund or the UBS Portfolio to dispose of particular
issues when necessary to meet the Fund's or the Portfolio's liquidity needs or
in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer may be adversely affected.
Changes by ratings services in their ratings of securities held by the
Brinson Fund and the UBS Portfolio may affect the value of these investments.
Changes in the value of portfolio investments generally will not affect the
income derived from these investments, but will affect the Brinson Fund's and
the UBS Portfolio's net asset values. Securities rated C by Moody's are the
lowest rated class and can be regarded as having extremely poor prospects of
ever attaining any real investment standing. Debt rated D by S&P, its lowest
rating, is in default or is expected to default upon maturity or payment date.
In addition to 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 legislation to restrict or
eliminate the corporate tax deduction for interest payments or to regulate
corporate restructuring such as takeovers or mergers. Such legislation may
significantly depress the prices of outstanding lower rated securities.
FIXED INCOME SECURITIES
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.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
Both the Brinson Fund and the UBS Portfolio are authorized to invest in
mortgage-backed securities, asset-backed securities and other collateralized
securities. These investments are subject to the risk of lower rates of return
than expected if lower interest rates lead to a faster rate of prepayment of
the mortgages underlying the securities. Securities issued by certain private
organizations may not be readily marketable. The Brinson Fund and the UBS
Portfolio may also invest in collateralized mortgage obligations ("CMOs").
Investors in CMOs may experience losses should the collateral prove
insufficient to meet payments. Privately-issued CMOs tend to be more sensitive
to interest rates than government-issued CMOs.
Risks of asset-backed securities include the prepayment of the debtor's
obligation and the creditor's limited interests in applicable collateral.
Additionally, if the letter of credit guaranteeing payments of principal or
interest for the asset-backed securities is exhausted, holders of asset-backed
securities may also experience delays in payments or losses if the full amount
due in underlying sales contracts are not realized.
FOREIGN SECURITIES
The Brinson Fund and the UBS Portfolio, by investing in foreign securities,
would be subject to certain additional risks. Investments in securities of
foreign issuers and in obligations of foreign branches of domestic
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banks involve somewhat different investment risks from those affecting
securities of domestic issuers, and include, but are not limited to, economic
developments, possible withholding taxes, seizure of foreign deposits, changes
in currency rates or currency exchange controls, higher transactional costs
due to a lack of negotiated commissions, or other governmental restrictions
which might affect the amount and types of foreign investments made or the
payment of principal or interest on securities in the investment portfolios of
the Brinson Fund and the UBS Portfolio. In addition, in some non-U.S.
countries, there is the possibility of political or social instability, or
diplomatic developments that could affect U.S. investments in those countries.
Also, there may be less information available about these securities in
general, and it may be more difficult to obtain or enforce a court judgement
in the event of a lawsuit.
EMERGING MARKET COUNTRIES
Unlike the UBS Portfolio, the Brinson Fund may invest in securities of
issuers in emerging market countries. Investments in securities of issuers in
emerging market countries may involve a high degree of risk and many may be
considered speculative. These investments carry all of the risks of investment
in securities of foreign issuers, as discussed above, to a heightened degree.
These heightened risks include: (i) greater risks of expropriation,
confiscatory taxation, nationalization, and less social, political and
economic stability; (ii) the small current size of the markets for securities
of emerging market issuers and the currently low or non-existent volume of
trading, resulting in limited liquidity and in price volatility; (iii) certain
national policies that may restrict the Brinson Fund's investment
opportunities, including restrictions on investing in issuers or industries
deemed sensitive to relevant national interest; and (iv) the absence of
developed legal structures governing private or foreign investment and private
property.
Securities of issuers in emerging market countries have offered greater
potential for gain, as well as loss, than securities of companies located in
developed countries. Countries such as those in which the Brinson Fund may
invest have historically experienced and may continue to experience, high
rates of inflation, high interest rates, exchange rate fluctuations or
currency depreciation, large amounts of external debt, balance of payments and
trade difficulties and extreme poverty and unemployment. Additional factors
which may influence the ability or willingness to service debt include, but
are not limited to, a country's cash flow situation, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
its debt service burden to the economy as a whole, its government's policy
towards the International Monetary Fund, the World Bank and other
international agencies and the political constraints to which a government
debtor may be subject.
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. In consideration of the
foregoing, a governmental issuer may default on its obligations. If such
default occurs, the Brinson Fund 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.
BRADY BONDS
The Brinson Fund may invest in Brady Bonds, which have been issued only
during recent years, and for that reason do not have a 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
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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 by the Brinson Fund may be viewed as speculative. There can be no
assurance that the Brady Bonds in which the Brinson Fund invests will not be
subject to restructuring arrangements or to requests for a new credit which
may cause the Brinson Fund to suffer a loss of interest or principal in any of
its holdings.
STRUCTURED SECURITIES
Because Structured Securities of the type in which the Brinson Fund
anticipates investing typically involve no credit enhancement, their credit
risk generally will be equivalent to that of the underlying instruments. The
Brinson Fund 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.
LOAN PARTICIPATIONS AND ASSIGNMENTS
The Brinson Fund will have the right to receive payments of principal,
interest and any fees to which it is 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 Brinson Fund may be treated as a general creditor 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
Brinson Fund will acquire Participations only if the Lender interpositioned
between the Brinson Fund and the borrower is determined by the Advisor to be
creditworthy. When the Brinson Fund 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
Brinson Fund 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 Brinson Fund anticipates 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
Brinson Fund's ability to dispose of particular Assignments or Participations
when necessary to meet the Brinson Fund's 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 Participations also may make it more difficult for the Brinson Fund to
assign a value to these securities for purposes of valuing the Brinson Fund's
portfolio and calculating its net asset value.
ZERO COUPON SECURITIES
The Brinson Fund and the UBS Portfolio may each invest in zero coupon
securities. Zero coupon securities are subject to the risk that the purchaser
will realize no cash until the cash payment date and, if the issuer of the
securities defaults, the purchaser may realize 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 Brinson Fund or the UBS Portfolio will be required
to include in income daily portions of original issue discount accrued and
distribute the same to shareholders annually, even if no payment is received
before the distribution date.
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CURRENCY AND EXCHANGE RATE FLUCTUATIONS
The assets of the Brinson Fund and the UBS Portfolio are subject to certain
risks associated with currency or exchange rate fluctuations. The U.S. dollar
market value of the Brinson Fund's and the UBS Portfolio's investments and
dividends and interest earned 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 could have adverse affects. The Brinson Fund
and the UBS Portfolio may enter into foreign currency exchange transactions in
connection with the settlement of foreign securities transactions or to manage
their currency exposure related to foreign investments. The Brinson Fund and
the UBS Portfolio will not enter into such transactions for speculative
purposes. Although the Brinson Fund and the UBS Portfolio may attempt to
manage currency exchange rate risks, there is no assurance that the Advisor or
the UBS Sub-Advisor will do so at an appropriate time or that they will be
able to predict exchange rates accurately.
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.
Although foreign currency transactions are intended to minimize the risk of
loss due to a decline in the value of the hedged currency, these transactions
also limit any potential gain that might be realized should the value of the
hedged currency increase. Additionally, any premiums paid for currency or
futures options increase transaction costs. Forward contracts that convert one
foreign currency into another foreign currency will cause the Brinson Fund or
the UBS Portfolio to assume the risk of fluctuations in the value of the
currency purchased vis-a-vis the hedged currency and the U.S. dollar. The
precise matching of these transactions and the value of the securities
involved will not generally be possible because the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of such securities between the date such a transaction
is entered into and the date it matures. The projection of currency market
increments is extremely difficult and the successful execution of a hedging
strategy is highly uncertain.
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 Brinson Fund or the UBS
Portfolio holds investments in nations with currencies replaced by the Euro,
its 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 Brinson Fund or
the UBS Portfolio, 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 UBS Portfolio invests may face substantial conversion
costs, which may not be accurately anticipated and may impact issuer
profitability and creditworthiness.
The Advisor has created an interdepartmental team to handle all Euro-related
changes to enable the Brinson Fund to process transactions accurately and
completely with minimal disruption to business activities. While there can be
no assurance that the Brinson Fund will not be adversely affected, the Advisor
and the Trust's service provides are taking steps that they believe are
reasonably designed to address the Euro issue.
The Brinson Fund's and the UBS Portfolio's ability to "pass through" any
foreign taxes paid for tax credit or deduction purposes will be determined by
the composition of their portfolios. 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.
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FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
The success of the investments by the Brinson Fund and the UBS Portfolio in
options, futures, forward contracts, swaps (in the case of the UBS Portfolio),
and other derivative instruments will depend on the judgment of the Advisor
and the UBS Sub-Advisor, respectively, as to trends relating to prices,
interest rates and currency rates. Risks inherent in the use of futures,
options and forward contracts include: adverse movements in the prices of
securities or currencies being hedged; the possible absence of a liquid
secondary market for any particular instrument at any time; and the possible
need to defer closing out certain hedge positions to avoid adverse tax
consequences. Options and futures can be volatile instruments and may not
perform as expected. The Brinson Fund and the UBS Portfolio 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 return. Options and futures traded on foreign exchanges
generally are not regulated by U.S. authorities and may offer less liquidity
and less protection in the event of default by the other party to the
contract. The loss from investing in futures transactions is potentially
unlimited.
The Brinson Fund's and the UBS Portfolio's purchases of options on indices
will subject them to the following risks. First, 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 the Brinson Fund or the UBS Portfolio 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 either the Brinson Fund or the UBS Portfolio of
options on indices is subject to the Advisor's or the UBS Sub-Advisor's
ability, respectively, 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.
Second, 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, the Brinson Fund and
the UBS Portfolio would not be able to close out options which they had
purchased and it 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.
Finally, if either the Brinson Fund or the UBS Portfolio 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 Brinson Fund or the UBS Portfolio 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
either the Brinson Fund or the UBS Portfolio 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.
REPURCHASE AGREEMENTS
The Brinson Fund and the UBS Portfolio may each invest in repurchase
agreements, which involve risk of loss if a seller defaults on its obligations
under the agreement, and reverse repurchase agreements, which involve risk of
loss if a purchaser defaults in its obligation to return securities to the
Brinson Fund or the UBS Portfolio.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Both the Brinson Fund and the UBS Portfolio may purchase securities on a
when-issued and, in the case of the UBS Portfolio, a delayed delivery basis.
At the time of settlement, a when-issued security may be valued at
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less than its purchase price. When entering into a when-issued or delayed
delivery transaction, the Brinson Fund or the UBS Portfolio, as relevant, will
rely on the other party to consummate the transaction; if the other party
fails to do so, the Brinson Fund or the UBS Portfolio may be disadvantaged.
SWAPS
The use of swaps by the UBS Portfolio involves investment techniques and
risks different from those associated with ordinary portfolio security
transactions. If the UBS Portfolio is incorrect in its forecast of market
values, interest rates and other applicable factors, the investment
performance of the UBS Portfolio will be less favorable than it would have
been if this investment technique were never used. Thus, if the other party to
the swap defaults, the UBS Portfolio's risk of loss consists of the net amount
of interest payments that it is contractually entitled to receive.
SECURITIES LENDING
Both the Brinson Fund and the UBS Portfolio may loan portfolio securities to
qualified broker-dealers and other institutions on a collateralized basis. As
with any extension of credit, loans by the Brinson Fund or the UBS Portfolio
may be subject to the risks of delay in recovery and loss of rights in the
collateral should the borrower of the securities fail financially. However,
loans of portfolio securities are only made to firms deemed by either the
Brinson Fund or the UBS Portfolio to be of good standing, and when, in the
judgment of either the Brinson Fund or the UBS Portfolio, the income that can
be earned from such loans justifies the attendant risk.
INFORMATION ABOUT THE BRINSON FUND
Additional information about the Brinson Fund is included in Exhibit B
attached to this Prospectus/Proxy Statement, and in the Statement of
Additional Information related to this Prospectus/Proxy Statement, which is
dated October 26, 1998, which has been filed with the Commission and is
incorporated by reference herein. Copies of the Statement of Additional
Information may be obtained without charge by writing to the Trust or calling
1-800-448-2430. The Trust is subject to the informational requirements of the
Securities Exchange Act of 1934 and the 1940 Act, as applicable, and, in
accordance with such requirements, files proxy materials, reports and other
information with the Commission. These materials can be inspected and copied
at the Public Reference Facilities maintained by the Commission at 450 Fifth
Street N.W., Washington, DC 20549, and at the offices of the Trust at 209
South LaSalle Street, Chicago, IL 60604 and at the Midwest Regional Office of
the Commission at 500 West Madison Street, Suite 1400, Chicago, IL 60661.
Copies of such material can also be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, U.S. Securities and
Exchange Commission, Washington, DC 20549, at prescribed rates.
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<PAGE>
INFORMATION ABOUT THE UBS FUND
Information about the UBS Fund is incorporated herein by reference from its
current prospectus, dated May 1, 1998, as amended or supplemented from time to
time, and Statement of Additional Information of the same date, and annual
report to shareholders, dated December 31, 1997, copies of which may be
obtained without charge by writing or calling the Corporation at the address
and telephone number shown on the cover page of this Prospectus/Proxy
Statement. Reports and other information filed by the Corporation can be
inspected and copied at the Public Reference Facilities maintained by the
Commission at 450 Fifth Street N.W., Washington, DC 20549, and copies of such
material can be obtained from the Public Reference Branch, Office of Consumer
Affairs and Information Services, U.S. Securities and Exchange Commission,
Washington, DC 20549, at prescribed rates.
TRANSFER AGENT AND CUSTODIAN
Chase, 270 Park Avenue, New York, New York 10017 provides custodian services
for the Trust. CGFSC, 73 Tremont Street, Boston, Massachusetts 02108-3913
provides transfer agency services to the Trust. Investors Bank, whose
principal offices are located at 200 Clarendon Street, Boston, Massachusetts
02116, serves as the transfer and dividend disbursing agent and custodian for
the UBS Fund and the UBS Portfolio.
SHAREHOLDER INQUIRIES
Shareholder inquiries with respect to the Brinson Fund may be made by
writing the Trust at 209 South LaSalle Street, Chicago, Illinois 60604 or by
calling toll-free (800) 448-2430. Shareholder inquiries with respect to the
Corporation and the UBS Fund may be made by writing to the Corporation at 200
Clarendon Street, Boston, Massachusetts 02116 or by calling toll-free (888)
827-3863.
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EXHIBITS TO
PROSPECTUS AND PROXY STATEMENT
<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
A Agreement and Plan of Reorganization between UBS Private Investor
Funds, Inc., on behalf of its UBS High Yield Bond Fund, and The
Brinson Funds, on behalf of the High Yield Bond Fund.
B Additional Information Regarding the Brinson Fund.
</TABLE>
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, made as of this 20th day of October,
1998, by and between The Brinson Funds (the "Trust"), a business trust created
under the laws of the State of Delaware, with its principal place of business
at 209 South LaSalle Street, Chicago, Illinois 60604 and UBS Private Investor
Funds, Inc. (the "UBS Funds"), a corporation organized under the laws of the
State of Maryland, with its principal place of business at 200 Clarendon
Street, Boston, Massachusetts 02116.
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of Reorganization")
will consist of (i) the acquisition by the Trust of substantially all of the
property, assets and goodwill of the UBS High Yield Bond Fund (the "UBS
Portfolio") of the UBS Funds in exchange solely for the Brinson Class I shares
("Class I shares") of beneficial interest of the High Yield Bond Fund (the
"Brinson Fund"), $0.001 par value, and the assumption by the Trust of the
liabilities of the UBS Portfolio, (ii) the distribution of such shares of
beneficial interest of the Brinson Fund to the shareholders of the UBS
Portfolio according to their respective interests, and (iii) the dissolution
of the UBS Portfolio as soon as practicable after the closing (as defined in
Section 3, hereinafter called the "Closing"), all upon and subject to the
terms and conditions of this Agreement hereinafter set forth.
AGREEMENT
In order to consummate the Plan of Reorganization and in consideration of
the premises and of the covenants and agreements hereinafter set forth, and
intending to be legally bound, the parties hereto covenant and agree as
follows:
1. SALE AND TRANSFER OF ASSETS AND LIABILITIES, LIQUIDATION AND DISSOLUTION OF
THE UBS PORTFOLIO
(a) Subject to the terms and conditions of this Agreement, and in reliance
on the representations and warranties of the Trust herein contained, and in
consideration of the delivery by the Trust of the number of its Class I shares
of the Brinson Fund hereinafter provided, the UBS Funds on behalf of the UBS
Portfolio agrees that it will convey, transfer and deliver to the Trust at the
Closing provided for in Section 3 (hereinafter called the "Closing") all of
the then existing liabilities and assets of the UBS Portfolio free and clear
of all liens, encumbrances, and claims whatsoever (other than shareholders'
rights of redemption and such restrictions as might arise under the Securities
Act of 1933, as amended (the "1933 Act"), with respect to privately placed or
otherwise restricted securities that the UBS Portfolio may have acquired in
the ordinary course of business), except for cash, bank deposits, or cash
equivalent securities in an estimated amount necessary (1) to pay its costs
and expenses of carrying out this Agreement (including, but not limited to,
fees of counsel and accountants, and expenses of its liquidation and
dissolution contemplated hereunder), which costs and expenses shall be
established on the books of the UBS Portfolio as liability reserves, (2) to
discharge all of the UBS Portfolio's liabilities on its books at the closing
date (as defined in Section 3, hereinafter called the "Closing Date"),
including, but not limited to, its income dividends and capital gains
distributions, if any, payable for any period prior to, and through, the
Closing Date, and excluding those liabilities and obligations which would
otherwise be discharged at a later date in the ordinary course of business,
and (3) to pay such contingent liabilities as the directors shall reasonably
deem to exist against the UBS Portfolio, if any, at the Closing Date, for
which contingent and other appropriate liability reserves shall be established
on the books of the UBS Portfolio (hereinafter "Net Assets"). The UBS
Portfolio shall also retain any and all rights which it may have over and
against any person which may have accrued up to and including the close of
business on the Closing Date.
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(b) Subject to the terms and conditions of this Agreement, and in reliance
on the representations and warranties of the Trust herein contained, and in
consideration of such sale, conveyance, transfer, and delivery, the Trust
agrees at the Closing to deliver to the UBS Portfolio the number of Class I
shares of beneficial interest of the Brinson Fund ($0.00l par value)
determined by dividing the net asset value per share of stock of the UBS
Portfolio on the Closing Date by the net asset value per share of beneficial
interest of the Class I shares of the Brinson Fund on the Closing Date, which
net asset value per share shall be identical to that determined to be the net
asset value per share of the Class I shares of the Brinson Fund on the Closing
Date, and multiplying the result by the number of outstanding shares of the
UBS Portfolio on the Closing Date. All such values shall be determined in the
manner and as of the time set forth in Section 2 hereof.
(c) Immediately following the Closing, the UBS Portfolio shall dissolve and
distribute pro rata to its shareholders of record as of the close of business
on the Closing Date the shares of beneficial interest of the Class I shares of
the Brinson Fund received by the UBS Portfolio pursuant to this Section 1.
Such liquidation and distribution shall be accomplished by the establishment
of accounts on the share records of the Brinson Fund of the type and in the
amounts due such shareholders based on their respective holdings as of the
close of business on the Closing Date. Fractional shares of beneficial
interest of the Class I shares of the Brinson Fund shall be carried to the
third decimal place. As promptly as practicable after the Closing, each holder
of any outstanding certificate or certificates representing shares of common
stock of the UBS Portfolio shall be entitled to surrender the same to the
transfer agent for the Trust and request in exchange therefor a certificate or
certificates representing the number of whole shares of beneficial interest of
the Class I shares of the Brinson Fund into which the shares of common stock
of the UBS Portfolio theretofore represented by the certificate or
certificates so surrendered shall have been converted. Certificates for
fractional shares of beneficial interest of the Class I shares of the Brinson
Fund shall not be issued, but shall continue to be carried by the Brinson Fund
for the account of such shareholder as unissued shares. Until so surrendered,
each outstanding certificate which, prior to the Closing, represented shares
of common stock of the UBS Portfolio shall be deemed for all the Brinson Fund
purposes to evidence ownership of the number of shares of beneficial interest
of the Class I shares of the Brinson Fund into which the shares of common
stock of the UBS Portfolio (which prior to the Closing were represented
thereby) have been converted.
2. VALUATION
(a) The value of the UBS Portfolio's Net Assets to be acquired by the
Brinson Fund hereunder shall be computed as of the close of business (which
shall be deemed to be the close of The New York Stock Exchange, Inc. ("NYSE"))
on the Closing Date using the valuation procedures set forth in the UBS
Portfolio's currently effective prospectus.
(b) The net asset value of a share of beneficial interest of the Class I
shares of the Brinson Fund shall be identical to the net asset value per share
of the UBS Portfolio at the close of business on the Closing Date, determined
as set forth in subsection (c) of Section 2.
(c) The net asset value of a share of common stock of the UBS Portfolio
shall be determined to the nearest full cent as of the close of business
(which shall be deemed to be the close of the NYSE) on the Closing Date, using
the valuation procedures as set forth in the UBS Portfolio's currently
effective prospectus.
3. CLOSING AND CLOSING DATE
The Closing Date shall be December 18, 1998, or such later date as the
parties may mutually agree. The Closing shall take place at the principal
office of the Trust, 209 South LaSalle Street, Chicago, Illinois 60604 at
10:00 a.m. Eastern Time on the first business day following the Closing Date.
The UBS Funds shall have provided for delivery as of the Closing of those Net
Assets of the UBS Portfolio to be transferred to the Trust's Custodian, Morgan
Stanley Trust Company, One Pierrepont Plaza, Brooklyn, New York 11201. Also,
the UBS Funds shall deliver at the Closing a list of names and addresses of
the shareholders of record of the UBS Portfolio and the number of shares of
common stock of the UBS Portfolio owned by each such shareholder, indicating
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thereon which such shares are represented by outstanding certificates and
which by book-entry accounts, all as of the close of business on the Closing
Date, certified by its transfer agent, or by its President to the best of
their knowledge and belief. The Trust shall issue and deliver a certificate or
certificates evidencing the shares of beneficial interest of the Class I
shares of the Brinson Fund to be delivered to said transfer agent registered
in such manner as the UBS Funds may request, or provide evidence satisfactory
to the UBS Portfolio that such shares of the Brinson Fund have been registered
in an account on the books of the Brinson Fund in such manner as the UBS Funds
may request.
4. REPRESENTATIONS AND WARRANTIES BY THE UBS FUNDS
The UBS Funds represents and warrants to the Trust that:
(a) UBS Funds is a corporation duly organized under the laws of the State
of Maryland on November 16, 1995, and is validly existing and in good
standing under the laws of that state. UBS Funds, of which the UBS
Portfolio is a diversified separate series of shares, is duly registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as
an open-end, management investment company and all its shares sold have
been sold pursuant to an effective registration statement filed under the
1933 Act, except for those shares sold pursuant to the private offering
exemption for the purpose of raising the required initial capital.
(b) The UBS Funds has an authorized capital of 500,000,000 shares of
common stock with $0.001 par value per share, each outstanding share of
which is fully paid, non-assessable, fully transferable and has full voting
rights.
(c) The financial statements appearing in the UBS Funds' Annual Report to
Shareholders for the fiscal year ended December 31, 1997, audited by Price
Waterhouse LLP, and the unaudited financial statements appearing in the UBS
Funds' Semi-Annual Report to Shareholders for the period ended June 30,
1998, copies of which have been delivered to the Trust, fairly present the
financial position of the UBS Funds and the UBS Portfolio as of the
respective dates indicated, in conformity with generally accepted
accounting principles applied on a consistent basis.
(d) The books and records of the UBS Portfolio made available to the
Trust and/or its counsel are true and correct and contain no material
omissions with respect to the business and operations of the UBS Portfolio.
(e) The UBS Funds has the necessary power and authority to conduct its
business as such business is now being conducted.
(f) The UBS Funds is not a party to or obligated under any provision of
its Articles of Incorporation, By-laws, or any contract or any other
commitment or obligation, and is not subject to any order or decree, which
would be violated by its execution of or performance under this Agreement
and Plan of Reorganization.
(g) The UBS Funds is not under the jurisdiction of a Court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
(h) The UBS Funds does not have any unamortized or unpaid organizational
fees or expenses.
(i) The UBS Portfolio satisfies, will at the Closing satisfy, and
consummation of this Agreement will not cause it to fail to satisfy, for
any period, the requirements of Subchapter M of the Code.
5. REPRESENTATIONS AND WARRANTIES BY THE TRUST
The Trust represents and warrants to the UBS Funds that:
(a) The Trust is a business trust created under the laws of the State of
Delaware on August 9, 1993, and is validly existing and in good standing
under the laws of that state. The Trust, of which the Brinson Fund is a
diversified separate series of shares, is duly registered under the 1940
Act, as an open-end, management investment company and all of its shares
sold have been sold pursuant to an effective
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<PAGE>
registration statement filed under the 1933 Act, except for those shares
sold pursuant to the private offering exemption for the purpose of raising
the required initial capital.
(b) The Trust is authorized to issue an unlimited number of shares of
beneficial interest, par value $0.001 per share. Each outstanding share is
fully paid, non-assessable, fully transferable, and has full voting rights.
The shares of beneficial interest of the Class I shares of the Brinson Fund
to be issued pursuant to this Agreement and Plan of Reorganization will be
fully paid, non-assessable, freely transferable and have full voting
rights.
(c) At the Closing, the shares of beneficial interest of the Class I
shares of the Brinson Fund will be eligible for offering to the public in
those states of the United States and jurisdictions in which the shares of
the UBS Portfolio are presently eligible for offering to the public, and
there are a sufficient number of such shares registered under the 1933 Act,
to permit the transfers contemplated by this Agreement to be consummated.
(d) The Trust has the necessary power and authority to conduct its
business as such business is now being conducted.
(e) The Trust is not a party to or obligated under any provision of its
Agreement and Declaration of Trust, By-laws, or any contract or any other
commitment or obligation, and is not subject to any order or decree, which
would be violated by its execution of or performance under this Agreement
and Plan of Reorganization.
(f) Neither the Trust nor the Brinson Fund is under the jurisdiction of a
Court in a Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
6. REPRESENTATIONS AND WARRANTIES BY THE UBS FUNDS AND THE TRUST
The UBS Funds and the Trust each represents and warrants to the other that:
(a) The statement of assets and liabilities to be furnished by it as of
the close of business on the Closing Date for the purpose of determining
the number of shares of beneficial interest of the Class I shares of the
Brinson Fund to be issued pursuant to Section 1 of this Agreement will
accurately reflect its Net Assets in the case of the UBS Portfolio and its
net assets in the case of the Brinson Fund, and outstanding shares of
beneficial interest or common stock, as applicable, as of such date in
conformity with generally accepted accounting principles applied on a
consistent basis.
(b) At the Closing, it will have good and marketable title to all of the
securities and other assets shown on the statement of assets and
liabilities referred to in subsection (a) above, free and clear of all
liens or encumbrances of any nature whatever except such restrictions as
might arise under the 1933 Act with respect to privately placed or
otherwise restricted securities that the UBS Portfolio may have acquired in
the ordinary course of business and such imperfections of title or
encumbrances as do not materially detract from the value or use of the
assets subject thereto, or materially affect title thereto.
(c) Except as disclosed in its currently effective prospectus, there is
no material suit, judicial action, or legal or administrative proceeding
pending or threatened against it.
(d) There are no known actual or proposed deficiency assessments with
respect to any taxes payable by it.
(e) It has full power and authority to enter into and perform its
obligations under this Agreement. The execution, delivery and performance
of this Agreement have been duly authorized by all necessary action of its
Board of Directors or Board of Trustees, as the case may be, and this
Agreement constitutes its valid and binding obligation enforceable in
accordance with its terms.
7. COVENANTS OF THE UBS FUNDS AND THE TRUST
(a) The UBS Funds and the Trust each covenant to operate their respective
businesses as presently conducted between the date hereof and the Closing.
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(b) The UBS Funds undertakes that it will not acquire the Brinson Fund's
shares for the purpose of making distributions thereof other than to the UBS
Portfolio's shareholders.
(c) The UBS Funds undertakes that if this Agreement is consummated, it will
file an application pursuant to Section 8(f) of the 1940 Act for an order
declaring that it has ceased to be an investment company.
(d) The UBS Funds and the Trust each agree that by the Closing, all of its
federal and other tax returns and reports required by law to be filed on or
before such date shall have been filed and all federal and other taxes shown
as due on said returns shall have either been paid or adequate liability
reserves shall have been provided for the payment of such taxes.
(e) The UBS Funds will at the Closing provide the Trust with:
(1) A statement of the respective tax basis of all investments and
liabilities to be transferred by the UBS Portfolio to the Brinson Fund
certified by PricewaterhouseCoopers LLP.
(2) A copy of the shareholder ledger accounts for all the shareholders of
record of the UBS Portfolio as of the close of business on the Closing
Date, who are to become shareholders of the Brinson Fund as a result of the
transfer of assets which is the subject of this Agreement, certified by its
transfer agent or its President to the best of their knowledge and belief.
(f) UBS Funds agrees to mail to each shareholder of record of the UBS
Portfolio entitled to vote at the meeting of shareholders at which action on
this Agreement is to be considered, in sufficient time to comply with
requirements as to notice thereof, a Combined Proxy Statement and Prospectus
which complies in all material respects with the applicable provisions of
Section 14(a) of the Securities Exchange Act of 1934, as amended, and Section
20(a) of the 1940 Act, and the rules and regulations, respectively,
thereunder.
(g) The Trust will file with the United States Securities and Exchange
Commission (the "Commission") a Registration Statement on Form N-14 under the
1933 Act ("Registration Statement"), relating to the shares of beneficial
interest of the Class I shares of the Brinson Fund issuable hereunder, and
will use its best efforts to provide that the Registration Statement becomes
effective as promptly as practicable. At the time the Registration Statement
becomes effective, it (i) will comply in all material respects with the
applicable provisions of the 1933 Act, and the rules and regulations
promulgated thereunder; and (ii) will not contain any untrue statement of
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading. At the time the
Registration Statement becomes effective, at the time of the UBS Portfolio's
shareholders' meeting, and at the Closing Date, the prospectus and statement
of additional information included in the Registration Statement will not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
8. CONDITIONS PRECEDENT TO BE FULFILLED BY THE UBS FUNDS AND THE TRUST
The obligations of the UBS Funds and the Trust to effectuate this Agreement
and the Plan of Reorganization hereunder shall be subject to the following
respective conditions:
(a) That (1) all the representations and warranties of the other party
contained herein shall be true and correct as of the Closing with the same
effect as though made as of and at such date; (2) the other party shall
have performed all obligations required by this Agreement to be performed
by it prior to the Closing; and (3) the other party shall have delivered to
such party a certificate signed by the President and by the Secretary or
equivalent officer to the foregoing effect.
(b) That the other party shall have delivered to such party a copy of the
resolutions approving this Agreement adopted by the other party's Board of
Directors or Board of Trustees, as applicable, certified by the Secretary
or equivalent officer.
(c) That the Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted nor threatened
to institute any proceeding seeking to enjoin consummation of
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the reorganization under Section 25(c) of the 1940 Act, and no other legal,
administrative or other proceeding shall be instituted or threatened which
would materially affect the financial condition of either party or would
prohibit the transactions contemplated hereby.
(d) That the adoption of this Agreement and Plan of Reorganization
contemplated hereby shall have been approved by the holders of at least a
majority of the outstanding shares of the UBS Portfolio at a special
meeting to be held no later than March 22, 1999 or other such date as the
parties may agree.
(e) That each party shall have declared a distribution or distributions
prior to the Closing Date which, together with all previous distributions,
shall have the effect of distributing to its shareholders (i) all of its
ordinary income and all of its capital gain net income, if any, for the
period from the close of its last fiscal year to the close of business on
the Closing Date, and (ii) any undistributed ordinary income and capital
gain net income from any prior period. Capital gain net income has the
meaning given such term by Section 1222(9) of the Code.
(f) That prior to or at the Closing, the UBS Funds and the Trust shall
receive an opinion from Messrs. Stradley, Ronon, Stevens & Young LLP,
counsel to the Trust, to the effect that provided the acquisition
contemplated hereby is carried out in accordance with this Agreement and in
accordance with customary representations provided by the UBS Funds and the
Trust in certificates delivered to counsel to the Trust:
(1) The acquisition by the Brinson Fund of substantially all of the
assets and liabilities of the UBS Portfolio in exchange for the Brinson
Fund voting shares followed by the distribution by the UBS Portfolio of
the Brinson Fund voting shares to the shareholders, in complete
liquidation, will constitute a reorganization within the meaning of
Section 368(a)(1)(C) of the Code. For these purposes, "substantially
all" means at least 70 percent of the fair market value of the gross
assets and at least 90 percent of the fair market value of the net
assets of the UBS Portfolio. Additionally, the Brinson Fund and the UBS
Portfolio will each be a "party to the reorganization" within the
meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by the UBS Portfolio upon the
transfer of substantially all of its assets and liabilities to the
Brinson Fund in exchange solely for voting shares of the Brinson Fund
(Sections 361(a) and 357(a)). No opinion will be expressed as to
whether any accrued market discount will be required to be recognized
as ordinary income pursuant to Section 1276 of the Code;
(3) No gain or loss will be recognized by the Brinson Fund upon the
receipt of substantially all of the assets and liabilities of the UBS
Portfolio in exchange solely for voting shares of the Brinson Fund
(Section 1032(a) of the Code);
(4) The basis of the assets of the UBS Portfolio received by the
Brinson Fund will be the same as the basis of such assets and
liabilities to the UBS Portfolio immediately prior to the exchange
(Section 362(b) of the Code);
(5) The holding period of the assets of the UBS Portfolio received by
the Brinson Fund will include the period during which such assets were
held by the UBS Portfolio (Section 1223(2) of the Code);
(6) No gain or loss will be recognized to the shareholders of the UBS
Portfolio upon the exchange of their shares in the UBS Portfolio for
voting shares of the Brinson Fund (including fractional shares to which
they may be entitled) (Section 354(a) of the Code);
(7) The basis of the Brinson Fund's shares received by the UBS
Portfolio shareholders (including fractional shares to which they may
be entitled) shall be the same as the basis of the shares of the UBS
Portfolio exchanged therefor (Section 358(a)(1) of the Code);
(8) The holding period of the Brinson Fund's shares received by the
UBS Portfolio's shareholders (including fractional shares to which they
may be entitled) will include the holding period of the UBS Portfolio's
shares surrendered in exchange therefor, provided that the UBS
Portfolio shares were held as a capital asset on the date of the
exchange (Section 1223(l) of the Code); and
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(9) The Brinson Fund will succeed to and take into account the items
of the UBS Portfolio described in Section 381(c) of the Code, including
the earnings and profits, or deficit earnings and profits, of the UBS
Portfolio as of the date of the transaction (Section 381(a) and
Treasury Regulations 1.381-1(a)). Any deficit in earnings and profits
of the UBS Portfolio will be used only to offset earnings and profits
accumulated after the effective date of the proposed reorganization.
The Brinson Fund will take these items into account subject to the
conditions and limitations specified under Sections 381, 382, 383 and
384 and the Treasury Regulations thereunder.
(g) That the Trust shall have received an opinion in form and substance
satisfactory to it from Messrs. Willkie Farr & Gallagher, counsel to the
UBS Funds, to the effect that, subject in all respects to the effects of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
and other laws now or hereafter affecting generally the enforcement of
creditors' rights:
(1) UBS Funds was incorporated under the laws of the State of
Maryland on November 16, 1995, and is validly existing and in good
standing under the laws of the State of Maryland;
(2) UBS Funds has an authorized capital of 500,000,000 shares of
common stock, par value $0.001 per share, and, assuming that the
initial shares of common stock of the UBS Portfolio were issued in
accordance with the 1940 Act, and the Articles of Incorporation and By-
laws of the UBS Funds, and that all other outstanding shares of the UBS
Portfolio were sold, issued and paid for in accordance with the terms
of the UBS Portfolio's prospectus in effect at the time of such sales,
each such outstanding share is fully paid, non-assessable, fully
transferable and has full voting rights;
(3) UBS Funds is an open-end, investment company of the management
type registered as such under the 1940 Act;
(4) Except as disclosed in the UBS Portfolio's currently effective
prospectus, such counsel does not know of any material suit, action, or
legal or administrative proceeding pending or threatened against the
UBS Funds, the unfavorable outcome of which would materially and
adversely affect the UBS Funds or the UBS Portfolio;
(5) All corporate actions required to be taken by the UBS Funds to
authorize this Agreement and to effect the Plan of Reorganization
contemplated hereby have been duly authorized by all necessary
corporate action on the part of the UBS Funds; and
(6) This Agreement is the legal, valid and binding obligation of the
UBS Funds and is enforceable against the UBS Funds in accordance with
its terms.
In giving the opinions set forth above, this counsel may state that it is
relying on certificates of the officers of the UBS Funds with regard to
matters of fact and certain certifications and written statements of
governmental officials with respect to the good standing of the UBS Funds
and the UBS Portfolio.
(h) That the UBS Funds shall have received an opinion in form and
substance satisfactory to it from Messrs. Stradley, Ronon, Stevens & Young
LLP, counsel to Trust, to the effect that, subject in all respects to the
effects of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other laws now or hereafter affecting generally the
enforcement of creditors' rights:
(1) The Trust was created as a business trust under the laws of the
State of Delaware on August 9, 1993, and is validly existing and in
good standing under the laws of that state;
(2) The Trust is authorized to issue an unlimited number of shares of
beneficial interest, par value $0.001 per share, and, assuming that the
initial shares of beneficial interest of the Class I shares of the
Brinson Fund were issued in accordance with the 1940 Act, and the
Trust's Agreement and Declaration of Trust and that all other such
shares were sold, issued and paid for in accordance with the terms of
the Brinson Fund's prospectus in effect at the time of such sales, each
such outstanding share is fully paid, non-assessable, freely
transferable and has full voting rights;
(3) The Trust is an open-end investment company of the management
type registered as such under the 1940 Act;
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(4) Except as disclosed in the Brinson Fund's currently effective
prospectus, such counsel does not know of any material suit, action, or
legal or administrative proceeding pending or threatened against the
Trust, the unfavorable outcome of which would materially and adversely
affect the Trust or the Brinson Fund;
(5) The shares of beneficial interest of the Brinson Fund to be
issued pursuant to the terms of this Agreement have been duly
authorized and, when issued and delivered as provided in this
Agreement, will have been validly issued and fully paid and will be
nonassessable by the Trust or the Brinson Fund;
(6) All actions required to be taken by the Trust to authorize this
Agreement and to effect the Plan of Reorganization contemplated hereby
have been duly authorized by all necessary action on the part of the
Trust;
(7) Neither the execution, delivery nor performance of this Agreement
by the Trust violates any provision of its Agreement and Declaration of
Trust, its Bylaws, or the provisions of any agreement or other
instrument, known to such counsel to which the Trust is a party or by
which the Trust is otherwise bound;
(8) This Agreement is the legal, valid and binding obligation of the
Trust and is enforceable against the Trust in accordance with its
terms; and
(9) The registration statement of the Trust filed with the Commission
on September 15, 1998, is, at the time of the signing of this
Agreement, effective under the 1933 Act, and, to the best knowledge of
such counsel, no stop order suspending the effectiveness of the
registration statement has been issued, and no proceedings for such
purpose have been instituted or are pending before or threatened by the
Commission under the 1933 Act, and nothing has come to its attention
which causes it to believe that at the time the registration statement
became effective, or at the time of the signing of this Agreement, such
registration statement (except for the financial statements and other
financial and statistical data included therein, as to which counsel
need express no opinion), contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; and such
counsel knows of no legal or government proceedings required to be
described in the registration statement or of any contract or document
of a character required to be described in the registration statement
that is not described as required.
In giving the opinions set forth above, this counsel may state that it is
relying on certificates of the officers of the Trust with regard to matters
of fact and certain certifications and written statements of governmental
officials with respect to the good standing of the Trust.
(i) That the UBS Funds shall have received a certificate from the
President and Secretary of the Trust to the effect that the statements
contained in the registration statement of the Trust filed with the
Commission on April 28, 1998, at the time the registration statement became
effective, at the date of the signing of this Agreement, at the Closing,
and at all times during this period did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
(j) That the Trust's Registration Statement with respect to the Class I
shares of the Brinson Fund to be delivered to the UBS Portfolio's
shareholders in accordance with this Agreement shall have become effective,
and no stop order suspending the effectiveness of the Registration
Statement or any amendment or supplement thereto, shall have been issued
prior to the Closing Date or shall be in effect at Closing, and no
proceedings for the issuance of such an order shall be pending or
threatened on that date.
(k) That the Class I shares of the Brinson Fund to be delivered hereunder
shall be eligible for sale by the Trust with each state commission or
agency with which such eligibility is required in order to permit the
shares lawfully to be delivered to each UBS Portfolio shareholder.
(l) That at the Closing, the UBS Funds transfers to the Brinson Fund
aggregate Net Assets of the UBS Portfolio comprising at least 90% in fair
market value of the total net assets and 70% in fair market value of the
total gross assets recorded on the books of the UBS Portfolio on the
Closing Date.
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9. BROKERAGE FEES AND EXPENSES; OTHER AGREEMENTS
(a) The UBS Funds and the Trust each represents and warrants to the other
that there are no broker or finders' fees payable by it in connection with the
transactions provided for herein.
(b) The expenses of entering into and carrying out the provisions of this
Agreement, whether or not consummated, shall be borne exclusively by UBS A.G.
or its affiliates and neither UBS Funds nor the Trust will bear any such
expenses.
(c) Any other provision of this Agreement to the contrary notwithstanding,
any liability of the UBS Funds under this Agreement with respect to any UBS
Portfolio, or in connection with the transactions contemplated herein with
respect to any UBS Portfolio, shall be discharged only out of the assets of
that UBS Portfolio, and no other Portfolio of the UBS Funds shall be liable
with respect thereto.
10. TERMINATION, WAIVER; ORDER
(a) Anything contained in this Agreement to the contrary notwithstanding,
this Agreement may be terminated and the Plan of Reorganization abandoned at
any time (whether before or after adoption thereof by the shareholders of the
UBS Portfolio) prior to the Closing as follows:
(1) by mutual consent of the UBS Funds and the Trust;
(2) by the Trust if any condition precedent to its obligations set forth
in Section 8 has not been fulfilled or waived by the Trust; or
(3) by the UBS Funds if any condition precedent to its obligations set
forth in Section 8 has not been fulfilled or waived by the UBS Funds.
An election by the UBS Funds or the Trust to terminate this Agreement and to
abandon the Plan of Reorganization shall be exercised respectively by the
Board of Directors of the UBS Funds or the Board of Trustees of the Trust.
(b) If the transactions contemplated by this Agreement have not been
consummated by March 31, 1999, this Agreement shall automatically terminate on
that date, unless a later date is agreed to by both the UBS Funds and the
Trust.
(c) In the event of termination of this Agreement pursuant to the provisions
hereof, the same shall become void and have no further effect, and there shall
not be any liability on the part of either the UBS Funds or the Trust or
persons who are their directors, trustees, officers, agents or shareholders in
respect of this Agreement.
(d) At any time prior to the Closing, any of the terms or conditions of this
Agreement may be waived by either the UBS Funds or the Trust, respectively
(whichever is entitled to the benefit thereof), by action taken by the Board
of Directors of the UBS Funds or the Board of Trustees of the Trust, if, in
the judgment of the Board of Directors of the UBS Funds or the Board of
Trustees of the Trust (as the case may be), such action or waiver will not
have a material adverse affect on the benefits intended under this Agreement
to the holders of shares of the UBS Portfolio or the Brinson Fund, on behalf
of which such action is taken.
(e) The respective representations and warranties contained in Sections 4-7
hereof shall expire with, and be terminated by, the Plan of Reorganization,
and neither the UBS Funds nor the Trust nor any of their officers, trustees or
directors, agents or shareholders shall have any liability with respect to
such representations or warranties after the Closing. This provision shall not
protect any officer, trustee or director, agent or shareholder of the UBS
Funds or the Trust against any liability to the entity for which that officer,
trustee or director, agent or shareholder so acts or to its shareholders to
which that officer, trustee or director, agent or shareholder would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties in the conduct of such office.
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(f) If any order or orders of the Commission with respect to this Agreement
shall be issued prior to the Closing and shall impose any terms or conditions
which are determined by action of the Board of Directors of the UBS Funds or
the Board Trustees of the Trust to be acceptable, such terms and conditions
shall be binding as if a part of this Agreement without further vote or
approval of the shareholders of the UBS Portfolio, unless such terms and
conditions shall result in a change in the method of computing the number of
Class I shares of the Brinson Fund to be issued to the UBS Portfolio in which
event, unless such terms and conditions shall have been included in the proxy
solicitation material furnished to the shareholders of the UBS Portfolio prior
to the meeting at which the transactions contemplated by this Agreement shall
have been approved, this Agreement shall not be consummated and shall
terminate unless the UBS Funds shall promptly call a special meeting of
shareholders of the UBS Portfolio at which such conditions so imposed shall be
submitted for approval.
11. ENTIRE AGREEMENT AND AMENDMENTS
This Agreement embodies the entire Agreement between the parties and there
are no agreements, understandings, restrictions, or warranties between the
parties other than those set forth herein or herein provided for. This
Agreement may be amended only by mutual consent of the parties in writing.
Neither this Agreement nor any interest herein may be assigned without the
prior written consent of the other party.
12. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts together shall
constitute but one instrument.
13. NOTICES
Any notice, report, or demand required or permitted by any provision of this
Agreement shall be in writing and shall be deemed to have been given if
delivered or mailed, first class postage prepaid, addressed to the UBS Funds
at 200 Clarendon Street, Boston, MA 02116 Attention: Paul J. Jasinski,
President, or to the Trust at 209 South LaSalle Street, Chicago, Illinois
60604, Attention: Thomas E. McFarlan, President, as the case may be.
14. GOVERNING LAW
This Agreement shall be governed by and carried out in accordance with the
internal laws of the State of Delaware.
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EXHIBIT B
ADDITIONAL INFORMATION REGARDING THE BRINSON FUND
Unless otherwise defined in this Exhibit B, all capitalized terms have the
meanings set forth in the Prospectus/Proxy Statement.
INVESTMENT CONSIDERATIONS AND RISKS
The following provides information about the types of instruments in which
the Brinson Fund may invest, strategies employed by the Advisor in its attempt
to attain the Brinson Fund's investment objectives 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
Brinson Fund, nor can there be any assurance that the Brinson Fund will be
able to attain its investment objectives.
HIGH YIELD SECURITIES
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 earlier in this
Prospectus/Proxy Statement must be satisfied at the time an investment is
made. If the quality of the investment later declines, the Brinson Fund may
continue to hold the investment.
Lower rated securities frequently have call or redemption features which
would permit an issuer to repurchase the security from the Brinson Fund. If a
call were exercised by the issuer during a period of declining interest rates,
the Brinson Fund likely would have to replace such called security with a
lower yielding security, thus decreasing the net investment income to the
Brinson Fund and any dividends to investors.
For a complete description of the ratings systems of Moody's and S&P, see
the Statement of Additional Information to this Prospectus/Proxy Statement.
FOREIGN INVESTMENTS
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. Settlements of transactions in some non-U.S. markets may be
delayed or be less frequent than in the United States, which could affect the
liquidity of the Brinson Fund's portfolio. Additionally, in some non-U.S.
countries, there is the possibility of expropriation or confiscatory taxation,
limitations on the removal of securities, property or other assets of the
Brinson Fund, political or social instability, or diplomatic developments
which could affect U.S. investments in those countries. The Brinson Fund
intends to diversify broadly among countries, but reserves the right to invest
a portion of its assets in one or more countries if economic and business
conditions warrant such investments. The Advisor will take these factors in
consideration by managing the Brinson Fund's investments. Because the Brinson
Fund will keep its books and records in U.S. dollars, the Brinson Fund 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 (the "Code"), 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.
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The U.S. dollar market value of the Brinson Fund's investments and of
dividends and interest earned by the Brinson Fund 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 Brinson Fund. Although the Brinson Fund may attempt to
manage currency exchange rate risks, there is no assurance that the Brinson
Fund will do so at an appropriate time or that it will be able to predict
exchange rates accurately. For example, if the Brinson Fund increases its
exposure to a currency and that currency's price subsequently falls, such
currency management may result in increased losses to the Brinson Fund.
Similarly, if the Brinson Fund decreases its exposure to a currency, and the
currency's price rises, the Brinson Fund will lose the opportunity to
participate in the currency's appreciation The Brinson Fund will manage
currency exposures relative to the normal currency allocation and will
consider return and risk of currency exposures relative to its 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.
The non-U.S. fixed income component of the Brinson Fund 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.
Payments to holders of the higher yielding foreign debt securities in which
the Brinson Fund 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.
EMERGING MARKETS SECURITIES
The Brinson Fund considers 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. 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.
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 Brinson Fund
invests. 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
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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 Brinson Fund may invest have historically experienced and may
continue to experience, high rates of inflation, high interest rates, exchange
rate fluctuations or currency depreciation, large amounts of external debt,
balance of payments and trade difficulties and extreme poverty and
unemployment. Additional factors which may influence the ability or
willingness to service debt include, but are not limited to, a country's cash
flow situation, the availability of sufficient foreign exchange on the date a
payment is due, the relative size of its debt service burden to the economy as
a whole, its government's policy towards the International Monetary Fund, the
World Bank and other international agencies and the political constraints to
which a government debtor may be subject.
The issuers of the government and government-related debt securities in
which the Brinson Fund 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
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 Brinson Fund 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.
FOREIGN CURRENCY TRANSACTIONS
To manage exposure to currency fluctuations, the Brinson Fund 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 Brinson Fund will
also use these currency exchange techniques in the normal course of business
to hedge against adverse changes in exchange rates in connection with
purchases and sales of securities. Some of these strategies may require the
Brinson Fund to set aside liquid assets in a segregated custodial account to
cover its obligations.
FUTURES, OPTIONS AND DERIVATIVE INSTRUMENTS
The investment in futures, options, forward contracts, and similar
strategies by the Brinson Fund will depend on the Advisor's 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 Brinson Fund 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 Brinson Fund 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. For example, if a hedge is
applied at an inappropriate time or price trends are judged incorrectly,
options and futures strategies may lower the Brinson Fund's return (i.e.,
options and futures may fail as hedging techniques in cases where the price
movements of the securities underlying the options and futures do not follow
the price movements of the portfolio securities subject to the hedge).
The Brinson Fund may invest in derivatives for hedging purposes, to maintain
liquidity, or in anticipation of changes in the composition of its portfolio
holdings. The Brinson Fund will not engage in derivative investments purely
for speculative purposes. The Brinson Fund 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 Brinson Fund's overall
investment objectives and policies. In making such judgment, the potential
benefits and risks will be considered in relation to the Brinson Fund's other
portfolio investments.
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Where not specified, investment limitations with respect to the Brinson
Fund's derivative instruments will be consistent with the Brinson Fund's
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 Brinson Fund, including options,
futures and forward contracts, are described in greater detail in the
Statement of Additional Information to this Prospectus/Proxy Statement.
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 Brinson Fund.
INFORMATION REGARDING THE ADVISOR
The Advisor, a Delaware corporation, is an investment management firm that,
in addition to managing the Trust, 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.
Brinson 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 is a 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.
Pursuant to its investment advisory agreement (the "Agreement") with the
Trust on behalf of the Brinson Fund, the Advisor is entitled to receive a
monthly fee equal to an annual percentage rate of the Brinson Fund's average
daily net assets for providing investment advisory services. The Advisor is
responsible for paying its own expenses. Pursuant to the Agreement, the
Advisor 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.
Investment decisions for the Brinson Fund are made by an investment
management team at Brinson. No one member of the investment management team is
primarily responsible for making recommendations for portfolio purchases for
the Brinson Fund.
ADMINISTRATION OF THE TRUST
THE UNDERWRITER
FDI was engaged as underwriter pursuant to an agreement dated February 5,
1997. The fee for FDI's service is borne by the Advisor.
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THE ADMINISTRATOR
ADMINISTRATIVE, ACCOUNTING, TRANSFER AGENCY AND CUSTODIAN SERVICES
The Trust, on behalf of the Brinson Fund, has entered into a Services
Agreement with The Chase Manhattan Bank ("Chase") pursuant to which Chase is
required to provide general administrative, accounting, portfolio valuation,
transfer agency and custodian services to the Brinson Fund.
Chase provides custodian services for the securities and cash of the Brinson
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, 200 Clarendon Street, Boston,
Massachusetts, will serve as co-custodian for the Brinson Fund with respect to
certain foreign securities until such securities are transferred to Chase.
After such securities are transferred to Chase, Chase will be the sole
custodian of the Brinson Fund under the terms of the Services Agreement.
As authorized under the Services Agreement, Chase has entered into the CGFSC
Agreement with CGFSC. Subject to the supervision of the Board of Trustees of
the Trust, Chase supervises and monitors such services provided by CGFSC.
Pursuant to the CGFSC Agreement, CGFSC provides:
(1) administrative services, including providing the necessary office
space, equipment and personnel to perform administrative and clerical
services; preparing, filing and distributing proxy materials, periodic
reports to investors, registration statements and other documents; and
responding to investor inquiries;
(2) accounting and portfolio valuation services, including the daily
calculation of the Brinson Fund's net asset value and the preparation of
certain financial statements; and
(3) transfer agency services, including the maintenance of each
investor's account records, responding to investors' inquiries concerning
accounts, processing purchases and redemptions of the Brinson 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, Chase has entered into a
sub-administration agreement (the "FDI Agreement") with FDI under which FDI
provides administrative assistance to the Brinson Fund with respect to (i)
regulatory matters, including regulatory developments and examinations, (ii)
all aspects of the Brinson Fund's day-to-day operations, (iii) office
facilities, clerical and administrative services, and (iv) maintenance of
books and records.
Pursuant to the CGFSC Agreement and the FDI Agreement, Chase pays CGFSC and
FDI, respectively, for the services that CGFSC and FDI provide to Chase in
fulfilling Chase'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 Brinson Fund may be purchased directly from the Trust at the
net asset value next determined after receipt of the order in proper form by
the transfer agent. There is no sales load in connection with the purchase of
the Brinson Fund's shares. The Trust reserves the right to reject any purchase
order and to suspend the offering of shares of the Brinson Fund or any Trust
Series. The Brinson Fund will not accept a check endorsed over by a third-
party.
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Purchase orders for shares of the Brinson Fund which are received by the
transfer agent in proper form prior to the close of regular trading hours
(currently 4:00 p.m. Eastern time) on the New York Stock Exchange (the "NYSE")
on any day that the Brinson Fund's net asset value per share is calculated,
are priced according to the net asset value determined on that day. Purchase
orders for shares of the Brinson Fund received after the close of the NYSE on
a particular day are priced as of the time the net asset value per share is
next determined. The Brinson Fund reserves 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
Brinson Fund. The Brinson 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 Brinson 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 the Brinson Fund's 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 Brinson Fund. Shares of the Brinson Fund may be purchased through broker-
dealers, banks and bank trust departments which may charge the investor a
transaction fee or other fee for their services at the time of purchase. Such
fees would not otherwise be charged if the shares were purchased directly from
the Trust.
The Advisor, or its affiliates, from its own resources, may compensate
broker-dealers or the financial intermediaries ("Services Providers") for
marketing, shareholder servicing, recordkeeping and/or other services
performed with respect to the Brinson 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
---------------------------------- --------------------------------
<C> <S> <C>
MINIMUM $1,000,000 MINIMUM $2,500
By Mail: . Complete and sign the Account . Make your check payable to
Application that accompanies the "Brinson High Yield Bond Fund-
Brinson Fund's prospectus. Class I."
. Make your check payable to . Enclose the remittance portion
"Brinson High Yield Bond Fund- of your account statement and
Class I." include the amount of
investment, the account name
and number.
. Mail to the address indicated on . Mail to the address indicated
the Account Application. on your account statement or
enclose in the envelope
provided.
By Wire: . Call 1-800-448-2430 to arrange . Wire federal funds to:
for a wire transaction. THE CHASE MANHATTAN BANK
ABA#021000021
DDA#9102-783504
FOR: "BRINSON HIGH YIELD BOND
FUND-CLASS I" AND INCLUDE YOUR
NAME AND ACCOUNT NUMBER.
</TABLE>
B-6
<PAGE>
<TABLE>
<CAPTION>
INITIAL INVESTMENT SUBSEQUENT INVESTMENTS
---------------------------------- --------------------------------
<C> <S> <C>
. Wire federal funds within 24
hours to: THE CHASE MANHATTAN
BANK
ABA#021000021
DDA#9102-783504
FOR: "BRINSON HIGH YIELD BOND
FUND-CLASS I" 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 arrange . Call 1-800-448-2430 to arrange
for a telephone transaction. for a telephone transaction.
Purchasing By . You may open a new account for a . You may purchase additional
Exchanges: Trust Series by making an shares of a Trust Series by
exchange from an existing Brinson making an exchange from an
Fund-Class I account of any other existing Brinson Fund-Class I
Trust Series. Exchanges may be account of any other Trust
made by mail or telephone. Call Series. Exchanges may be
1-800-448-2430 for assistance. made by mail or telephone. Call
1-800-448-2430 for assistance.
Automatically: . Please refer to "Automatic . Please refer to "Automatic
Investment Plan" under "Account Investment Plan" under "Account
Options" or call 1-800-448-2430 Options" or call 1-800-448-2430
for assistance. 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>
AUTOMATIC INVESTMENT PLAN . You may have money deducted directly from your
checking, savings or bank money market accounts for
investment in the Trust Series 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 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.
. 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.
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
ACCOUNT OPTIONS INSTRUCTIONS
------------------------------ ----------------------------------------------
<C> <S>
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 Brinson 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
Trust Series for Brinson Fund-Class I shares
of another Trust Series.
INDIVIDUAL RETIREMENT ACCOUNTS . An IRA is a tax-deferred retirement savings
account that may be used by an individual
under age 70 1/2 who has compensation or
self-employment income and his or her
unemployed spouse, or an individual who has
received a qualified distribution from his or
her employer's retirement plan.
. The minimum purchase requirement for IRAs is
$2,000.
</TABLE>
REDEMPTION OF SHARES
Shares of the Brinson Fund 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. A 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 Brinson Fund's net asset value per share is calculated
are effected that day. The Brinson Fund reserves 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 Brinson Fund 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.
Customers of Eligible Institutions must request a representative of their
Eligible Institution to assist them in placing a redemption order with the
Brinson Fund.
Under the Sales Agreement, the Authorized Dealer or Sub-designee is
authorized to accept redemption orders on behalf of the Brinson Fund. The
Brinson 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 Brinson Fund's net asset value next computed after such
order is accepted by the Authorized Dealer or Sub-designee.
B-8
<PAGE>
The Trust will satisfy redemption requests in cash to the fullest extent
feasible, so long as such payments would not, in the opinion the of Advisor or
the Board of Trustees, result in the necessity of the Brinson Fund selling
assets under disadvantageous conditions and to the detriment of the remaining
shareholders of the Brinson Fund. 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 part in-kind. However, the Trust has
elected, pursuant to Rule 18f-1 under the 1940 Act, to redeem its shares
solely in cash up to the lesser of $250,000 or 1% of the net asset value of
the Brinson Fund, 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 Brinson Fund. Any portfolio
securities paid or distributed in-kind would be valued as described under "Net
Asset Value." In the event that an in-kind distribution is made, a shareholder
may incur additional expenses, such as the payment of brokerage commissions,
on the sale or other disposition of the securities received from the Brinson
Fund. In-kind payments need not constitute a cross-section of the Brinson
Fund's portfolio. Where a shareholder has requested redemption of all or a
part of the shareholder's investment and where the Brinson Fund computes such
redemption in-kind, the Brinson Fund will not recognize gain or loss for
federal tax purposes on the securities used to compute the redemption, but the
shareholder will recognize gain or loss equal to the difference between the
fair market value of the securities received and the shareholder's basis in
the Fund shares redeemed.
SHARES MAY BE REDEEMED IN ONE OF THE FOLLOWING WAYS:
<TABLE>
<C> <S>
BY MAIL: . Submit a written request for redemption with:
. The Brinson Fund's name;
. Your Fund account number;
. The dollar amount or number of shares to be redeemed; and
. Signatures of all persons required to sign for transactions,
exactly as their names appear on the Account Application.
. A signature guarantee for the signature of each person in
whose name the account is registered is required on all
written redemption requests over $5,000.
. Mail to the address indicated on the Account Application.
Questions may be directed to the transfer agent at 1-800-448-
2430.
BY WIRE: . This service must be elected either on the 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: . This service must be elected either on the initial
application or subsequently arranged in 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 Fund 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 Brinson Fund will ensure that
B-9
<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 it does not, the Brinson Fund
or the transfer agent may be liable for any losses due to unauthorized or
fraudulent transactions. Written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone.
EXCHANGE OF SHARES
Shares of the Brinson Fund may be exchanged for Brinson Fund-Class I Shares
of any other Trust Series. Exchanges will not be permitted between the Brinson
Fund-Class I shares and either the UBS Investment Funds class of shares or the
Brinson Fund-Class N shares of a Trust Series.
Shares of the Brinson Fund 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 changes 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 Trust Series from which, and
the Trust Series into which, the exchange is made. Exchanges may be made only
for shares of a Trust Series and class then offering its shares for sale in
the purchaser's 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 Trust Series
and reinvested in shares of another Trust 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 Trust 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 Brinson Fund reserves 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 the
Brinson Fund's Class I Shares by transferring securities to the Brinson Fund
that meet the Brinson Fund's investment objectives and policies. Securities
transferred to the Brinson Fund will be valued in accordance with the same
procedures used to determine the Brinson Fund's net asset value at the time of
the next determination of net asset value after such acceptance. Shares issued
by the Brinson Fund in exchange for securities will be issued at the net asset
value per share of the Brinson Fund determined as of the same time. All
dividends, interest, subscription, or other rights pertaining to such
securities shall become the property of the Brinson Fund and must be delivered
to the Brinson Fund by the investor upon receipt from the issuer. Investors
who are permitted to transfer such securities will be required to recognize a
gain or loss on such transfer and pay tax thereon, if applicable, measured by
the difference between the fair market value of the securities and the
investors' basis therein. Securities will not be accepted in exchange for
shares of the Brinson Fund unless: (1) such securities are, at the time of the
exchange, eligible to be included in the Brinson Fund's 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 Brinson Fund 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
Brinson Fund, will not exceed 5% of the Brinson Fund's net assets immediately
after the transaction.
B-10
<PAGE>
NET ASSET VALUE
The net asset value per share for each class of shares of the Brinson Fund
is computed by adding, with respect to each class of shares, the value of the
Brinson Fund's 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 of the Class I
Shares 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 Brinson Fund 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 Brinson Fund 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 Brinson Fund reserves 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 securities 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 the Brinson Fund. If an event materially affecting
the value of such foreign securities occurs during such period, then such
securities will be valued at fair value as determined in good faith by or
under the direction of the Board of Trustees. Where a foreign securities
market remains open at the time that the Brinson Fund 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 Brinson Fund may be used.
The Brinson Fund's 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
B-11
<PAGE>
the Brinson Fund may be significantly affected by such trading on days when
shareholders have no access to the Brinson Fund.
All of the Brinson Fund's classes of shares will bear pro rata all of the
expenses of the Brinson Fund common to all classes. The net asset value of all
outstanding shares of each class of the Brinson Fund will be computed on a pro
rata basis for each outstanding share based on the proportionate participation
in the Brinson Fund represented by the value of shares of that class. All
income earned and expenses incurred by the Brinson Fund will be borne on a pro
rata basis by each outstanding share of a class, based on each class'
proportionate participation in the Brinson Fund represented by the 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 Brinson Fund 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 the
Brinson Fund 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 Brinson Fund will distribute its net investment income semi-annually in
June and December. The Brinson Fund will distribute annually in December
substantially all of its net long-term capital gains and any undistributed net
short-term capital gains realized during the one year period commencing
November 1 (or date of the creation of the Brinson Fund, if later) and ending
October 31, and, at the same time, will distribute all of its net investment
income earned through the end of December and not previously distributed as
ordinary (not capital) income.
Dividends and other distributions paid by the Brinson Fund 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 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 the Brinson
Fund 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 the Brinson Fund 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 disbursements 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 dividend and distributions
are subject to taxes.
TAXES
The Brinson Fund intends to qualify for taxation as a "regulated investment
company" under the Code. Such qualification would relieve the Brinson Fund of
liability for federal income taxes to the extent the Brinson
B-12
<PAGE>
Fund's earnings are distributed in accordance with the Code. The Brinson Fund
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 Class I Shares of the Brinson Fund.
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. Investors should consult their
own tax advisors for more specific information on the tax consequences of
particular types of distributions. Further information regarding the tax
consequences of investing in the Brinson Fund is included in the Statement of
Additional Information to this Prospectus/Proxy Statement. 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 the Brinson Fund's Class I Shares, and the exchange of shares
between the Trust Series, are taxable events and, accordingly, shareholders
may realize capital gains or losses on these transactions. If shares of a
Trust Series are held for six months or less, any loss that a shareholder will
have will be treated as a long-term capital loss to the extent of any capital
gains distributions received by such shareholder from the Trust Series. All or
a portion of any loss on the redemption or exchange of shares will be
disallowed if the shareholder purchases other shares in the Trust Series
within 30 days before or after such redemption or exchange. Redemptions and
exchanges of shares in a Trust Series may also be subject to state and local
taxes.
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 Brinson Fund, or if, to the
Brinson Fund's knowledge, an incorrect number has been furnished, or if the
Brinson Fund 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.
GENERAL INFORMATION
ORGANIZATION
The Trust is registered under the 1940 Act as an open-end management
investment company, commonly known as a mutual fund and consists of thirteen
Trust Series. The Trustees of the Trust may establish additional series or
classes of shares without the approval of shareholders.
DESCRIPTION OF SHARES
Each Trust 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 Trust Series represent equal
proportionate interests in the assets of that Trust Series only and have
identical voting, dividend, redemption, liquidation, and other rights, except
that only shares of each Trust Series' Brinson Fund-Class N and UBS Investment
Funds class of shares 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.
B-13
<PAGE>
VOTING RIGHTS
Each issued and outstanding full and fractional share of the Brinson Fund is
entitled to one full and fractional vote in the Brinson Fund and all shares of
the Brinson Fund participate equally with regard to dividends, distributions,
and liquidations with respect to the Brinson Fund. Shareholders do not have
cumulative voting rights. On any matter submitted to a vote of shareholders,
shares of each Trust 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 Trust
Series, in which case the shareholders of all such Trust 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.
SHAREHOLDER MEETINGS
The Trustees of the Trust do not intend to hold annual meetings of
shareholders of the Trust 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 Trust Series. In addition, subject to certain
conditions, shareholders of each Trust Series may apply to the Trust Series to
communicate with other shareholders to request a shareholders' meeting to vote
upon the removal of a Trustee or Trustees.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
The Trust will attempt to obtain the best overall price and most favorable
execution of transactions in portfolio securities. However, subject to
policies established by the Board of Trustees of the Trust, the Brinson Fund
may pay a broker-dealer a commission for effecting a portfolio transaction for
the Brinson Fund in excess of the amount of commission another broker-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 broker-dealer, viewed in terms of that particular transaction or such
firm's overall responsibilities with respect to the clients, including the
Brinson Fund, 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 Brinson Fund may pay commissions to
brokers who are affiliated with the Advisor or the Brinson Fund. The Brinson
Fund may purchase securities in certain underwritten offerings for which an
affiliate of the Brinson Fund may act as an underwriter. The Brinson Fund may
effect futures transactions through, and pay commissions to, futures
commission merchants who are affiliated with the Advisor or the Brinson Fund
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
B-14
<PAGE>
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 constructing or replacing those systems.
In addition, steps include testing the processing of Trust Series data on all
systems relied on by the Advisor, MSTC and CGFSC. As of the date of this
Prospectus/Proxy Statement, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Brinson Fund.
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 Brinson Fund's past
performance and should not be considered as representative of future results.
The current yield will be calculated by dividing the net investment income
earned per share by the Brinson 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 Brinson Fund's total return may be calculated on
an annualized and aggregate basis for various periods (which periods will be
stated in the advertisement). Average annual return reflects the average
percentage change per year in value of an investment in the Brinson Fund.
Aggregate total return reflects the total percentage change over the stated
period.
To help investors better evaluate how an investment in the Brinson Fund
might satisfy its investment objectives, advertisements regarding the Brinson
Fund may discuss yield or total return as reported by various financial
publications. Advertisements may also compare yield or total return to other
investments, indices and averages. The following publications, benchmarks,
indices and averages may be used: Lipper Mutual Fund Performance Analysis;
Lipper Fixed Income Analysis; Lipper Mutual Fund Indices; Morgan Stanley
Indices; 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 Brinson Fund will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Any fees charged by banks or other institutional investors
directly to their customer accounts in connection with investments in shares
of the Brinson Fund will not be included in the Brinson Fund's calculations of
yield or total return.
B-15
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS OF THE UBS PRIVATE INVESTOR FUNDS, INC.
UBS HIGH YIELD BOND FUND
DECEMBER 11, 1998
The undersigned hereby revokes all previous proxies for his/her shares and
appoints Kenneth Anderson, Paul J. Josinski and Susan C. Mosher, and each of
them, proxies of the undersigned with full power of substitution to vote all
shares of the UBS High Yield Bond Fund (the "UBS Fund") of UBS Private Investor
Funds, Inc. (the "Corporation") which the undersigned is entitled to vote at the
Corporation's Special Meeting to be held at 10 East 50th Street, New York, New
York 10022 at 10:00 a.m. Eastern time on the 11th day of December, 1998,
including any adjournment thereof, upon such business as may properly be brought
before the Meeting.
No. 1 To approve an Agreement and Plan of Reorganization between the
Corporation, on behalf of the UBS Fund, and The Brinson Funds, on
behalf of the High Yield Bond Fund series (the "Brinson Fund"), that
provides for the acquisition of substantially all of the assets and
liabilities of the UBS Fund in exchange for the Brinson High Yield
Bond Fund Class I shares of the Brinson Fund, the distribution of
such shares to the shareholders of the UBS Fund, and the dissolution
of the UBS Fund.
FOR AGAINST ABSTAIN
--- ------- -------
[_] [_] [_]
No. 2 To vote upon any other business which may legally come before the
meeting.
GRANT WITHHOLD
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[_] [_]
37
<PAGE>
PLEASE SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
REQUIRED IF MAILED IN THE U.S.
This proxy is solicited on behalf of the Board of Directors of the Corporation.
It will be voted as specified. If no specification is made, this proxy shall be
voted in favor of Proposal 1, regarding the reorganization of the UBS Fund of
the Corporation pursuant to the Agreement and Plan of Reorganization with The
Brinson Funds. If any other matters properly come before the meeting about
which the proxyholders were not aware prior to the time of the solicitation,
authorization is given the proxyholders to vote in accordance with the views of
management thereon. The management is not aware of any such matters.
Dated:
--------------------------------------
--------------------------------------------
Signature
--------------------------------------------
Print Name
--------------------------------------------
Signature
--------------------------------------------
Print Name
Note: Please sign exactly as your name
appears on the proxy. If signing for
estates, trusts or corporations, title or
capacity should be stated. If shares are
held jointly, each holder must sign.
38
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE BRINSON FUNDS
RELATING TO THE ACQUISITION OF THE ASSETS OF
UBS HIGH YIELD BOND FUND OF UBS PRIVATE INVESTOR FUNDS, INC.
This Statement of Additional Information relates specifically to the
proposed acquisition of substantially all of the assets of the UBS High Yield
Bond Fund (the "UBS Fund") of UBS Private Investor Funds, Inc. (the
"Corporation") by the High Yield Bond Fund (the "Brinson Fund") of The Brinson
Funds (the "Transaction").
This Statement of Additional Information also includes the following
documents, which are attached and incorporated by reference:
. Pro forma financial statements reflecting the financial situation
of the Brinson Fund following the Transaction as if the
Transaction had taken place on June 30, 1998.
. The Annual Report to Shareholders of the UBS Fund, containing
audited financial statements for the fiscal year ended December
31, 1997, and including the Annual Report to Shareholders of the
UBS High Yield Bond Portfolio (the "UBS Portfolio") of UBS
Investor Portfolios Trust, containing audited financial
statements for the fiscal year ended December 31, 1997.
. The Semi-Annual Report to Shareholders of the UBS Fund for the
period ended June 30, 1998, and including the Semi-Annual Report
to Shareholders of the UBS Portfolio for the period ended June
30, 1998.
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus/Proxy Statement.
This Statement of Additional Information is not a Prospectus; a
Prospectus/Proxy Statement dated October 26, 1998, relating to the Transaction
may be obtained from the Trust, 209 South LaSalle Street, Chicago, Illinois
60604, (800) 448-2430. This document should be read in conjunction with such
Prospectus/Proxy Statement. The date of this Statement of Additional Information
is October 26, 1998.
1
