<PAGE>
Rule 497(b)
File No. 333-63883
UBS PRIVATE INVESTOR FUNDS, INC.
UBS INTERNATIONAL EQUITY 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 International Equity 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 Non-U.S. Equity
Fund (the "Brinson Fund"), a 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 redundant products, 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 similar
investment objectives and 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 INTERNATIONAL EQUITY 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
International Equity 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 Non-U.S. Equity 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 Non-U.S. Equity Fund (the "Brinson Fund"), 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
--------
<S> <C>
COVER PAGE........................................................... Cover
SOLICITATION AND REVOCATION OF PROXIES AND VOTING INFORMATION........ 3
PRINCIPAL SHAREHOLDERS............................................... 4
PROPOSAL 1: TO APPROVE THE AGREEMENT AND PLAN OF REORGANIZATION...... 4
SUMMARY.............................................................. 4
Proposed Transaction............................................... 4
Voting Information................................................. 5
Federal Income Tax Consequences.................................... 5
COMPARISONS OF SOME IMPORTANT FEATURES............................... 5
Investment Objectives and Policies................................. 5
Management of the Corporation and the Trust........................ 5
Fees and Expenses.................................................. 6
Distribution Services.............................................. 7
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.... 9
Risk Factors and Comparison of Policies............................ 9
REASONS FOR THE REORGANIZATION....................................... 10
The Merger of Union Bank of Switzerland and Swiss Bank
Corporation....................................................... 10
Reorganization..................................................... 10
INFORMATION ABOUT THE REORGANIZATION................................. 11
Method of Carrying Out the Reorganization.......................... 11
Conditions Precedent to Closing.................................... 12
Expenses of the Transaction........................................ 12
Federal Income Tax Consequences.................................... 12
Description of the Class I Shares of the Brinson Fund.............. 13
Capitalization..................................................... 13
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES..................... 14
The Brinson Fund and the UBS Fund.................................. 14
Investment Policies................................................ 14
INVESTMENT RESTRICTIONS.............................................. 21
RISK FACTORS......................................................... 23
INFORMATION ABOUT THE BRINSON FUND................................... 26
INFORMATION ABOUT THE UBS FUND....................................... 27
TRANSFER AGENT AND CUSTODIAN......................................... 27
SHAREHOLDER INQUIRIES................................................ 27
EXHIBIT A--AGREEMENT AND PLAN OF REORGANIZATION...................... A-1
EXHIBIT B--THE BRINSON FUNDS PROSPECTUS, DATED SEPTEMBER 15, 1998.... Attached
EXHIBIT C--ANNUAL REPORT OF THE BRINSON FUNDS, DATED JUNE 30, 1998... Attached
</TABLE>
i
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COMBINED PROSPECTUS AND PROXY STATEMENT
DATED OCTOBER 26, 1998
ACQUISITION OF THE ASSETS OF THE
UBS INTERNATIONAL EQUITY FUND OF
UBS PRIVATE INVESTOR FUNDS, INC.
BY AND IN EXCHANGE FOR THE BRINSON CLASS I SHARES OFTHE NON-U.S. EQUITY 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
International Equity 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 Non-U.S. Equity Fund (the "Brinson Fund") of The Brinson
Funds (the "Trust"), a series of the Trust which is managed by Brinson
Partners, Inc. ("Brinson" or the "Advisor") and which has investment
objectives and policies 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 which is
substantially similar to that of the UBS Fund. The Brinson Fund's investment
objective is to maximize total
1
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return, consisting of capital appreciation and current income, by investing
primarily in the equity securities of non-U.S. issuers.
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. The UBS Fund's investment objective is to provide a high total
return from a portfolio of equity securities of foreign corporations The UBS
Fund seeks to achieve its investment objective by investing all of its
investable assets in the UBS International Equity 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. This
Prospectus/Proxy Statement is accompanied by the prospectus of the Brinson
Fund dated September 15, 1998, and the Annual Report of the Trust relating to
the Brinson Fund dated June 30, 1998, each of which is incorporated by
reference into this Prospectus/Proxy Statement and attached hereto as Exhibits
B and C, respectively. 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.
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. 33-64401; 811-07431),
each of which is incorporated by reference herein and are 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 224,179 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.
3
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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............................................... 164,232 73.26%
Omnibus Reinvest Account
10 East 50th Street
New York, NY 10022
</TABLE>
As of the Record Date, the following persons owned beneficially more than 5%
of the outstanding voting shares of the Brinson Fund:
<TABLE>
<CAPTION>
SHARES PERCENT
NAME AND ADDRESS HELD OWNERSHIP
---------------- --------- ---------
<S> <C> <C>
Northern Trust........................................ 9,650,048 25.42%
P.O. Box 92956
Chicago, IL 60675
Charles Schwab & Co., Inc............................. 2,660,207 7.01
101 Montgomery Street
San Francisco, CA 94104
Key Trust Company..................................... 1,992,592 5.25
Purchase and Savings Plan
P.O. Box 94870
Cleveland, OH 44101
</TABLE>
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 Prospectuses of the UBS Fund
and the Brinson 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.
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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 the holders of a majority 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.
COMPARISONS OF SOME IMPORTANT FEATURES
INVESTMENT OBJECTIVES AND POLICIES. The Brinson Fund's investment objective
is to maximize total return, consisting of capital appreciation and current
income by investing primarily in the equity securities of non-U.S. issuers.
The Brinson Fund seeks to achieve its objective by investing primarily in the
equity securities of issuers in at least three countries other than the United
States. In seeking to achieve its investment objective while controlling risk,
the Brinson Fund may invest in a wide range of equity securities.
Similarly, the investment objective of the UBS Fund is to seek to provide a
high total return from a portfolio of equity securities of foreign
corporations. Unlike the Brinson Fund, however, the UBS Fund seeks to achieve
its investment objective 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 objective and
policies as the UBS Fund.
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
objective 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
5
<PAGE>
agreement. Phillips & Drew International Investment Limited (formerly, UBS
International Investment London Limited), located at Triton Court, 14 Finsbury
Square, London EC2A 1PD, United Kingdom (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 0.85%
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 0.75% of the UBS Portfolio's first $20 million of average
net assets, 0.50% of the next $30 million of average net assets, and 0.40% of
the UBS Portfolio's average net 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, 1.40% 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 0.80% 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 to reimburse
certain expenses of the Brinson Fund so that the Fund's total operating
expenses never exceed 1.00% 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 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
6
<PAGE>
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 October 14, 1997 (commencement of operations) through
December 31, 1997, and the annualized ratio of operating expenses to average
net assets for the six month period ended June 30, 1998, were 1.26% and 1.40%,
respectively, which (i) includes the UBS Fund's share of the UBS Portfolio's
expenses, and (ii) are net of fee waivers and expense reimbursements. In the
absence of fee waivers and expense reimbursements by the UBS Advisor, the
ratios of total operating expenses to average net assets for the period of
October 14, 1997 through December 31, 1997, and the six months ended June 30,
1998, would have been 2.13% and 2.03%, respectively.
The ratio of operating expenses to average net assets for the Brinson Fund
and the Class I Shares for the fiscal year ended June 30, 1998 were 1.00%. 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 1.00% 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 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 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)................................ 0.05% 0.80% 0.80%
12b-1 Fees...................................... None None None
Other Expenses (after fee waivers and
reimbursements)................................ 1.21% 0.20% 0.20%
Total Operating Expenses (after fee waivers and
reimbursements)................................ 1.26% 1.00% 1.00%
</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
7
<PAGE>
share of the UBS Portfolio's expenses) exceed, on an annual basis, 1.40% 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
0.85% of the UBS Portfolio's average daily net assets, and the total
operating expenses of the UBS Fund would have been 2.13% for the fiscal year
ended December 31, 1997.
EXAMPLE:
Based on the level of expenses listed above after waivers and
reimbursements, 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....................................... $14 $44 $77 $168
Brinson Fund (after proposed transaction)...... $10 $32 $55 $122
</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.
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 the Brinson Fund's prospectus. 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 and pays dividends
annually. 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
8
<PAGE>
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.
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 objective, policies or
restrictions, or a failure by the UBS Fund's shareholders to approve a change
in the UBS Portfolio's investment objective 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 objective 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 of the similarities of the
investment objectives and policies of the UBS Fund and the Brinson Fund, 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
9
<PAGE>
investment program of the UBS Fund and the Brinson Fund. For example, (i) the
UBS Fund seeks to achieve its investment objective by investing all of its
investable assets in the UBS Portfolio, while the Brinson Fund invests
directly in portfolio securities; (ii) the UBS Portfolio is authorized to
invest in securities of issuers in developing market countries, which may
involve a high degree of risk and, in certain cases, may be considered
speculative, while the Brinson Fund may not invest in such less developed
markets; and (iii) the UBS Portfolio may purchase securities on a "when-
issued" basis, while the Brinson Fund may not purchase securities in this
manner. See "COMPARISON OF INVESTMENT POLICIES--Risk Factors" below and the
accompanying prospectus of the Brinson Fund.
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, UBS Brinson Inc., the current sub-investment advisor to certain
other UBS Portfolios, 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.") The corporate structure of the UBS Sub-Advisor was
unaffected by the Merger.
As a result of the Merger, and in an effort to promote more efficient
operations, to eliminate duplicate costs and redundant products, and to
enhance the distribution of shares, UBS A.G. and Brinson proposed that the
UBS Fund be reorganized into the Brinson Fund.
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 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.
10
<PAGE>
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.
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 aggregate net assets of the UBS Fund to be transferred (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.
11
<PAGE>
For example, on June 30, 1998, the net asset value of each share of the UBS
Fund was $110.70. The net asset value of the Class I Shares of the Brinson
Fund on that date was $12.15. Each share of the UBS Fund would have been
exchanged for 9.114 shares of the Class I Shares of the Brinson Fund if the
Closing had taken place on June 30, 1998.
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.
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 shareholder;
(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
were held by the UBS Fund.
12
<PAGE>
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 Brinson Fund's normal procedures as specified in its
prospectus, 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.
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 Fund 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 Series, except that only
the holders of Class N shareholders may vote on matters related to the rule
12b-1 plan associated with that class, and only the UBS Investment Fund 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 Fund 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 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.
13
<PAGE>
<TABLE>
<CAPTION>
UBS PRIVATE
INVESTOR FUNDS, THE BRINSON FUNDS- PRO FORMA
INC.-UBS NON-U.S. EQUITY AFTER
INTERNATIONAL EQUITY FUND FUND-CLASS I SHARES REORGANIZATION
------------------------- ------------------- --------------
<S> <C> <C> <C>
Net assets.............. $31,847,460 $439,328,830 $471,176,290
Net asset value per
share.................. $110.70 $12.15 $12.15
Shares outstanding...... 287,682 36,163,586 38,784,776
</TABLE>
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 OBJECTIVES AND POLICIES
THE BRINSON FUND AND THE UBS FUND. The investment objective of the Brinson
Fund is to maximize total return, consisting of capital appreciation and
current income, by investing primarily in the equity securities of non-U.S.
issuers. In seeking to achieve its investment objective while controlling
risk, the Brinson Fund may invest in a wide range of equity securities.
Similarly, the UBS Fund's investment objective seeks to provide a high total
return from a portfolio of equity securities of foreign corporations.
INVESTMENT POLICIES. In seeking to achieve their respective 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 objective 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 objective 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 investment objective of the Brinson Fund is fundamental and may not be
changed without approval of the Brinson Fund's shareholders. The investment
objective of the UBS Fund is also fundamental, and may be changed only with
the approval of the holders of a majority of the outstanding shares of the UBS
Fund.
Since the UBS Fund pursues its investment objective by investing all of its
investable assets in the UBS Portfolio, the UBS Fund's and the UBS Portfolio's
investment objective 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 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
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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, the UBS Portfolio invests primarily in equity
securities of non-U.S. issuers. The UBS Portfolio will invest in companies
based in at least five foreign countries. Under normal circumstances, the UBS
Sub-Advisor intends to keep at least 65% of the value of the UBS Portfolio's
total assets in equity securities of foreign issuers, consisting of common
stocks and other securities with equity characteristics, such as preferred
stocks, warrants, rights and convertible securities. In seeking to achieve its
investment objective, the UBS Portfolio will pursue total return consisting of
realized and unrealized capital gains and losses plus net income. The UBS
Portfolio seeks to achieve its objective by investing in companies that the
UBS Sub-Advisor believes are fundamentally sound and that are typically
selling at below market valuations and that the UBS Sub-Advisor believes will
grow at above-market rates. The emphasis on value leads to investments in
companies with relatively low price/earnings and price/book value ratios and
high yields. The UBS Portfolio may also engage in futures, options and
currency transactions.
Under normal conditions, the Brinson Fund will invest at least 65% of its
total assets in the equity securities of issuers in at least three countries
other than the United States. Although the Brinson Fund may invest anywhere in
the world, it is expected that the Brinson Fund's assets will be primarily
invested in the equity markets included in the Morgan Stanley Capital
International Non-U.S. Equity (Free) Index. In addition, it may engage in
futures, options and currency transactions for non-speculative purposes such
as hedging against interest rate and currency risks.
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 objective and restrictions.
EQUITY INVESTMENTS
Both the Brinson Fund and the UBS Portfolio may invest in a wide range of
equity securities of non-U.S. issuers. The Brinson Fund's and the UBS
Portfolio's investments include common stocks and other securities with equity
characteristics, such as preferred stock, debt securities convertible into or
exchangeable for common stock, warrants, rights that are convertible into
common stock, and sponsored or unsponsored American, European and Global
Depositary Receipts ("Depositary Receipts"). The Brinson Fund may also invest
in closed-end investment companies, and the UBS Portfolio may invest in
interests similar to equity securities, such as trust or limited partnership
interests.
The equity markets in which the Brinson Fund invests will typically include
available shares of larger capitalization companies. Capitalization levels are
measured relative to specific markets and thus, large, intermediate and small
capitalization ranges vary country by country. The UBS Portfolio is not
subject to a policy regarding the capitalization levels of issuers in which it
may invest, but the UBS Portfolio's primary equity investments are the common
stock of established companies based in developed countries outside the
United States.
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The Brinson Fund and the UBS Portfolio do not intend to invest in U.S.
securities other than under temporary or extraordinary circumstances. Unlike
the Brinson Fund, the UBS Portfolio may invest in securities of issuers
located in developing market countries. Both the Brinson Fund and the UBS
Portfolio will invest in securities listed on foreign or domestic securities
exchanges and securities traded in foreign or domestic over-the-counter
markets, and may invest in certain restricted or unlisted securities.
SHORT-TERM DEBT AND MONEY MARKET INSTRUMENTS
Both the Brinson Fund and the UBS Portfolio may invest a portion of their
assets in short-term debt securities (including repurchase agreements) and
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 UBS Portfolio may also invest in short-term
obligations of sovereign foreign governments, their agencies,
instrumentalities and political subdivisions. The Brinson Fund and the UBS
Portfolio may 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 may invest in money
market instruments without limitation pending other investments or
settlements, for liquidity purposes or in adverse market conditions. When the
Brinson Fund or the UBS Portfolio invests for defensive purposes, this
practice may affect the attainment of the Fund's or the Portfolio's investment
objective.
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 Sub-
Advisor. Master demand obligations are not rated, and the UBS Portfolio is not
subject to a specific percentage limitation on its investments in master
demand obligations. The Brinson Fund has no corresponding investment policy
regarding master demand obligations.
At the time the UBS Portfolio invests in any commercial paper, bank
obligations or repurchase agreements, the issuer must have outstanding debt
rated A or higher by Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Ratings Group ("S&P"); the issuer's parent corporation, if any, must
have outstanding commercial paper rated Prime-1 by Moody's or A-1 by S&P; or
if no such ratings are available, the investment must be of comparable quality
in the UBS Sub-Advisor's opinion. At the time the UBS Portfolio invests in any
short-term debt securities, they must be rated A or higher by Moody's or S&P
or if unrated, the investment must be of comparable quality in the UBS Sub-
Advisor's opinion. The Brinson Fund is not subject to specific quality
requirements for these investments.
WHEN-ISSUED OR DELAYED DELIVERY SECURITIES
The UBS Portfolio may purchase securities on a when-issued and 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 fluctuation during this period and no
interest or income accrues to 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 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 purchase securities on a when-issued or delayed delivery basis.
ASSET-BACKED SECURITIES
The UBS Portfolio may invest in asset-backed securities. Asset-backed
securities represent a participation interest in, or are secured by or payable
from, a stream of payments generated by particular assets such as
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mortgages, motor vehicles or credit card receivables. Payments of principal
and interest may be guaranteed up to certain amounts and for a certain time
period by a letter of credit issued by a financial institution unaffiliated
with the entities issuing the securities. The Brinson Fund is not permitted to
purchase asset-backed securities.
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 in a
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 UBS Portfolio's limitation 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 relevant 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 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 relevant SEC
positions.
Neither the Brinson Fund nor the UBS Portfolio may purchase investment
securities while either has any outstanding borrowings (including repurchase
agreements, in the case of the UBS Portfolio) that exceeds 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
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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 UBS Portfolio's 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 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 objective 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 Sub-Advisor waives its investment advisory fee with
respect to the assets of the UBS Portfolio invested in other open-end
investment companies.
As a matter of 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
thereof 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.
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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
100% 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
instruments described below. In addition, the UBS Portfolio and the Brinson
Fund 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 and the UBS Sub-Advisor to be consistent with the
Brinson Fund's or the UBS Portfolio's investment objective and policies.
The Brinson Fund and the UBS Portfolio may enter into contracts for the
future purchase or sale of securities, indices of securities and foreign
currencies. A financial futures contract is an agreement between the parties
to buy or sell a specified 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 ("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
affect futures transactions through futures commission merchants who are
affiliated with the Advisor or 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 UBS Portfolio may purchase and sell put
and call options on futures transactions. The Brinson Fund and the UBS
Portfolio may purchase and
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sell 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 the rules of the CFTC, 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, as a matter of non-fundamental policy, purchase and
sell stock index futures and options on stock index futures. 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 selling 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, stock index futures or options on stock
index futures, or futures or options on futures according the following
conditions. First, the options or futures are offered through the facilities
of a national securities association or are listed on a national securities or
commodities exchange (except for put and call options issued by non-U.S.
entities or listed on non-U.S. securities or commodities exchanges). Second,
the aggregate margin requirements required on all such futures or options
thereon do not exceed 5% of the Portfolio's total assets.
SWAPS
The UBS Portfolio is authorized to invest in interest rate swaps and related
products, such as equity 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 their respective 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 it anticipates purchasing at a later date, or to gain exposure to
certain markets in the most economical way possible. As a matter of non-
fundamental policy, the Brinson Fund may not engage in swaps or invest in such
related derivative instruments.
FOREIGN CURRENCIES AND FORWARD CURRENCY TRANSACTIONS
The Brinson Fund and the UBS Portfolio normally maintain a substantial
portion of their assets in foreign securities. Because both the Brinson Fund
and the UBS Portfolio may invest a substantial amount of their respective
assets in foreign securities and such securities may be denominated in various
foreign currencies, 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. Neither the Brinson Fund nor the UBS Portfolio has a percentage
limitation with respect to the amount of its assets that may be invested in
securities denominated in foreign currencies. Rather, both 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
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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. Both 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). 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.
When the Brinson Fund or the UBS Portfolio enters into a forward contract to
sell an amount of foreign currency, the Brinson Fund or the UBS Portfolio must
establish a segregated account with its custodian and will place segregated
assets in an amount not less than the value of the total assets committed to
the consummation of such forward contracts. The Brinson Fund and the UBS
Portfolio may enter into forward contracts for hedging purposes as well as for
non-hedging purposes.
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 may purchase and
sell options on foreign currencies for hedging purposes in a manner similar to
that in which futures contracts on foreign currencies, or forward contracts
will be utilized. The Brinson Fund and the UBS Portfolio may sell covered call
options on foreign currencies, meaning that they will own an equal amount of,
or an offsetting position in, the underlying currency. If the Brinson Fund or
the UBS Portfolio sells put options, it will keep cash or high-quality liquid
securities segregated in a sufficient quantity with its custodian.
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
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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 objective 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's restriction further provides that it may not purchase or
sell real estate mortgage loans. Additionally, the UBS Portfolio may purchase
the equity securities or commercial paper 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 restriction provides that it may not
purchase or sell options on commodities or commodity contracts except for its
interest in certain activities described in its statement of additional
information.
The Brinson Fund may not make investments in securities for the purpose of
exercising control over or management of the issuer. The UBS Portfolio has a
non-fundamental investment restriction that provides that it will not invest
for the purpose of exercising control or management.
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 objective and
restrictions.
The Brinson Fund may not sell securities short or purchase securities on
margin, except such short-term credits as are necessary for the clearance of
transactions. For this purpose, the deposit or payment by the Brinson Fund for
initial or maintenance margin in connection with futures contracts is not
considered to be the purchase or sale of a security on margin.
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.
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Both the Brinson Fund and the UBS Portfolio (as a matter of non-fundamental
policy) may not invest more than 5% of their total assets in securities of
companies less than three years old. Such three year periods shall include the
operation of any predecessor company or companies. Additionally, the UBS
Portfolio is subject to a non-fundamental investment restriction that provides
that it will not invest more than 15% of the its net assets (taken at the
greater of cost or market value) in securities that are issued by issuers
which (including predecessors) have been in operation less than three years
(other than U.S. government securities).
In addition to the above investment restriction, the UBS Portfolio has
adopted the following non-fundamental investment restrictions. The Brinson
Fund is not subject to comparable restrictions.
The UBS Portfolio may not invest in securities issued by an issuer any of
whose officers, directors, trustees or security holders is an officer or
Director of the UBS Fund, or is an officer or director of the UBS Advisor, if
after the purchase of the securities of such issuer for the UBS Portfolio one
or more of such persons own beneficially more than 1/2 of 1% of the shares or
securities, or both, all taken at market value, of such issuer, and such
persons owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities, or both, all taken at
market value.
The UBS Portfolio 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 or if,
as a result, more than 2% of the UBS Portfolio's net assets would be invested
in warrants not listed on a recognized United States or foreign stock
exchange, to the extent permitted by applicable state securities laws.
RISK FACTORS
The Brinson Fund and the UBS Portfolio invest primarily in equity securities
of non-U.S. issuers and corporations. Equity securities fluctuate in value as
a result of various factors, which are often unrelated to the value of the
issuer of the securities. These fluctuations may be pronounced. Fluctuations
in the value of equity investments will affect the value of the shares and
thus the Brinson Fund's and the UBS Portfolio's total return to investors.
FOREIGN SECURITIES
The Brinson Fund and the UBS Portfolio share certain risks that are inherent
when investing in foreign securities that are not typically associated with
investments in U.S. issuers, including, but 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 judgment in
the event of a lawsuit. In the case of Depository Receipts, the issuers of
these instruments are not obligated to disclose material information in the
United States.
DEVELOPING MARKET COUNTRIES
Unlike the Brinson Fund, the UBS Portfolio may invest in securities of
issuers in developing market countries. Investments in securities of issuers
in developing market countries may involve a high degree of risk and many may
be considered speculative. These investments carry all of the risks of
investing 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
23
<PAGE>
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 UBS Portfolio'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 developing 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 UBS Portfolio 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 UBS Portfolio 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.
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. Although both the
Brinson Fund and the UBS Portfolio may attempt to manage currency exchange
rate risks, there is no assurance that either will do so at an appropriate
time or that either 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
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<PAGE>
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 Brinson Fund or the UBS Portfolio invest may face
substantial conversion costs, which may not be accurately anticipated and may
impact issuer profitability and creditworthiness.
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 respective 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.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
The success of the investments by the Brinson Fund and the UBS Portfolio in
options, futures, options on futures (in the case of the UBS Portfolio),
forward contracts 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, options in futures, 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 or the UBS
Portfolio could experience a loss 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 the Fund or the Portfolio 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
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<PAGE>
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 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
The UBS Portfolio may purchase securities on a when-issued and a delayed
delivery basis. At the time of settlement, a when-issued security may be
valued at less than its purchase price. When entering into a when-issued or
delayed delivery transaction, the UBS Portfolio will rely on the other party
to consummate the transaction; if the other party fails to do so, the UBS
Portfolio may be disadvantaged.
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.
ASSET-BACKED SECURITIES
Unlike the Brinson Fund, the UBS Portfolio may invest in asset-backed
securities. 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.
INFORMATION ABOUT THE BRINSON FUND
Information about the Brinson Fund is included in its current prospectus,
which is attached to this Prospectus/Proxy Statement and incorporated by
reference herein. Additional information about the Brinson Fund is included in
a Statement of Additional Information, of even date with the prospectus 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 these Statements
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, 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 International Equity Fund, and The
Brinson Funds, on behalf of the Non-U.S. Equity Fund.
B Prospectus dated September 15, 1998 of The Brinson Funds relating to
the Brinson Non-U.S. Equity Fund Class I Shares.
C Annual Report of The Brinson Funds, dated June 30, 1998.
</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 International Equity 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 Non-U.S. Equity 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 aggregate Net Assets of the UBS Portfolio on the
Closing Date by the net asset value per share of the Class I shares of the
Brinson Fund 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 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 set forth in the Brinson
Fund's currently effective prospectus.
(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
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
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<PAGE>
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 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.
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(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 financial statements appearing in the Trust's Annual Report to
Shareholders for the fiscal year ended June 30, 1998, audited by Ernst &
Young LLP, copies of which have been delivered to the UBS Funds, fairly
present the financial position of the Brinson Fund as of the date indicated
and the results of its operations for the period indicated in conformity
with generally accepted accounting principles applied on a consistent
basis.
(e) The Trust has the necessary power and authority to conduct its
business as such business is now being conducted.
(f) 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.
(g) The Brinson Fund has elected to be treated as a regulated investment
company ("RIC") for federal income tax purposes under Part I of Subchapter
M of the Code, has qualified as a RIC for each taxable year since its
inception, and will qualify as a RIC as of the Closing Date.
(h) 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
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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.
(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
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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 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 and liabilities 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);
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(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(1) of the Code); and
(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.
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(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;
(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 which the prospectus of the Brinson
Fund relating to the Class I shares is a part, dated September 15,
1998, (the "Prospectus"), 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 Prospectus became
effective, or at the time of the signing of this Agreement, such
Prospectus (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
Prospectus or of any contract or document of a character required to be
described in the Prospectus 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.
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(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 Brinson Fund's Prospectus relating to the Class I shares
dated April 28, 1998, at the time the Prospectus 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.
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.
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(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.
(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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IN WITNESS WHEREOF, the UBS Funds and the Trust have each caused this
Agreement and Plan of Reorganization to be executed on its behalf by its duly
authorized officers, all as of the day and year first above written.
Attest: UBS Private Investor Funds, Inc.
/s/ Susan C. Mosher /s/ Paul J. Jasinski
- ------------------------------------- By: ________________________________
Susan C. Mosher, Secretary Paul J. Jasinski, President
Attest: The Brinson Funds
/s/ Carolyn M. Burke /s/ E. Thomas McFarlan
- ------------------------------------- By: _________________________________
Carolyn M. Burke, Secretary E. Thomas McFarlan, President
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SPECIAL MEETING OF SHAREHOLDERS OF THE UBS PRIVATE INVESTOR FUNDS, INC.
UBS INTERNATIONAL EQUITY FUND
DECEMBER 11, 1998
The undersigned hereby revokes all previous proxies for his/her shares and
appoints Kenneth Anderson, Paul J. Jasinski and Susan C. Mosher, and each of
them, proxies of the undersigned with full power of substitution to vote all
shares of the UBS International Equity 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 Non-U.S. Equity 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 Non-U.S.
Equity 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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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.
33
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE BRINSON FUNDS
RELATING TO THE ACQUISITION OF THE ASSETS OF
UBS INTERNATIONAL EQUITY 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 International
Equity Fund (the "UBS Fund") of UBS Private Investor Funds, Inc. (the
"Corporation") by the Non-U.S. Equity Fund (the "Brinson Fund") of The Brinson
Funds (the "Transaction").
This Statement of Additional Information consists of this Cover Page
and the following documents, which are attached and incorporated by reference:
. The Statement of Additional Information relating to the
prospectus of the Brinson Non-U.S. Equity Fund Class I shares of
the Brinson Fund, dated September 15, 1998, which includes the
audited financial statements for the fiscal year ended June 30,
1998 for the Brinson Fund. Such prospectus is included in the
Prospectus/Proxy Statement dated October 26, 1998.
. The Annual Report to Shareholders of the UBS Fund, containing
audited financial statements for the fiscal period ended December
31, 1997, and including the Annual Report to Shareholders of the
UBS International Equity 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.
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.
35
