<PAGE>
UNITED STATES FILE NO. 33-47287
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 FILE NO. 811-6637
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. | |
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Post Effective Amendment No. 25 |X|
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | |
Amendment No. 26 |X|
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THE BRINSON FUNDS
=================
(Exact name of Registrant as Specified in Charter)
209 South LaSalle Street
Chicago, Illinois 60604-1295
- ----------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code 312-220-7100
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The Brinson Funds
209 South LaSalle Street
Chicago, Illinois 60604-1295
----------------------------
(Name and Address of Agent for Service)
COPIES TO: Bruce G. Leto, Esq.
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICAL AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE:
| | IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b)
| | ON (DATE) PURSUANT TO PARAGRAPH (b)
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| | 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(1)
|X| ON May 1, 1999 PURSUANT TO PARAGRAPH (a)(1)
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| | 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2)
| | ON (DATE) PURSUANT TO PARAGRAPH (a)(2) OF RULE 485.
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IF APPROPRIATE, CHECK THE FOLLOWING BOX:
| | THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
================================================================================
<PAGE>
(front cover)
THE BRINSON FUNDS
Brinson Fund--Class I Shares Prospectus
May 1, 1999
The Securities and Exchange Commission (SEC) has not approved or disapproved of
these securities or determined whether this prospectus is adequate or complete.
Any representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
The Funds
Global Fund
Global Equity Fund
Global Bond Fund
U.S. Balanced Fund
U.S. Equity Fund
U.S. Large Capitalization Equity Fund
U.S. Large Capitalization Growth Fund
U.S. Small Capitalization Growth Fund
U.S. Bond Fund
High Yield Fund
Global (ex-U.S.) Equity Fund
------------------------------------------------
Emerging Markets Debt Fund
Emerging Markets Equity Fund
Risk Considerations
Fees and Expenses
Investment Advisor
Prior Performance of Advisor
Pricing of Fund Shares
Purchasing Shares
Redeeming Shares
Dividends and Distributions
Tax Considerations
Financial Highlights
For More Information
<PAGE>
THE FUNDS
A Look At The Brinson Process
At Brinson Partners, we employ a global asset allocation strategy, actively
diversifying investments within and across all major asset classes. In managing
the Funds, we believe that asset allocation should influence every step in the
selection process, whether evaluating securities, countries, sectors or
currencies.
Allocation decisions are based on our comprehensive understanding of global
financial markets and their interrelationships. Security selections are based on
an active, global assessment of value in contrast to observed market prices.
Another aspect of the Brinson Partners' approach is the management of a
portfolio of securities against a selected benchmark, which serves as a
reference from which we derive performance and risk/return parameters. All
security selection decisions are then made in consideration of the benchmark.
The benchmark for each Fund is an index consisting of securities that we believe
are representative of that Fund's investments. From time to time, we may
substitute securities in an equivalent index that we believe more accurately
reflects the relevant market.
Each Fund attempts to control risk by maintaining a lower level of volatility
than its benchmark.
[sidebar]
The investment objective of each Fund is "fundamental" and may be
changed only with shareholder approval. Unless otherwise stated, each
Fund's investment policies are not fundamental and may be changed
without a shareholder vote. There can be no assurance that the Funds
will be able to attain their objectives.
Each Fund's primary investment practices and strategies are discussed
in this prospectus. Other practices, and their related risks, are
described in the Statement of Additional Information (SAI).
Each Fund's principal risks are provided in an alphabetical listing
within the Fund descriptions that follow. Principal and secondary risks
are discussed in detail under "Risk Considerations" on page...
Shares of The Brinson Funds are not bank deposits and are not insured
or guaranteed by the FDIC or any other government agency. The value of
your investment in a Fund will fluctuate, which means that you may lose
money.
<PAGE>
GLOBAL FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income.
Policies
The Fund invests primarily in a portfolio of U.S. and non-U.S. equity and fixed
income securities. At least 65% of the Fund's assets are invested in securities
of issuers in at least three countries (which may include the United States).
Other investments may include:
. Money market securities in domestic and foreign markets
. Eurodollar securities
. Other open-end investment companies advised by Brinson Partners
. Up to 10% of the Fund's assets in securities of emerging markets
issuers or in securities whose return is derived primarily from this
index consists of eight securities of emerging markets issuers distinct
asset classes:
All security selection decisions are made in consideration of the Global
Securities Markets Index (GSMI) Mutual Fund Index, the benchmark against which
the Fund measures its portfolio.
Although it may invest anywhere in the world, the Fund invests primarily in:
. Equity markets listed in the Morgan Stanley Capital International
(MSCI) World Equity (Free) Index
. Fixed income markets listed in the Salomon Smith Barney World
Government Bond Index
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements. Each asset class above is represented by an index
compiled by an independent data provider. From time to time, indexes may change.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
. Currency futures and forward contracts
The Fund's Principal Risks Include:
. Foreign Country and Currency Risks
. Geographic Risk
. Market Risk
Emerging Markets
The World Bank and other international agencies consider a country to be an
"emerging markets" country on the basis of such factors as trade initiatives,
per capita income and level of industrialization. Emerging market countries
generally include every nation in the world except the U.S., Canada, Japan,
Australia, New Zealand and most nations located in Western Europe.
GSMI Mutual Fund Index
Compiled by Brinson Partners, this index consists of eight distinct asset
classes:
. U.S. equities
. Global (ex-U.S.)
equities
. Emerging markets
equities
. U.S. bonds
. Global (ex-U.S.) bonds
. Emerging markets bonds
. High yield bonds
. Cash equivalents
Each asset class above is represented by an index compiled by an independent
data provider. From time to time, indexes may change.
MSCI World Equity (Free)
Index
A broad based securities index that represents the U.S. and non-U.S. equity
markets in terms of capitalization and performance.
It is designed to provide a representative total return for all major stock
exchanges located inside and outside the United States.
<PAGE>
Salomon Smith Barney World
Government Bond Index
A securities index that
represents the broad
global fixed income
markets and includes debt
issues of U.S. and non-
U.S. governments
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
GLOBAL EQUITY FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income.
Policies MSCI World Equity (Free)
Index
See page [...]
The Fund invests primarily in a portfolio of U.S. and non-U.S. equity
securities. At least 65% of the Fund's assets are invested in securities of
issuers in at least three countries (which may include the United States).
In order to achieve the Fund's objective, we pursue:
. An active asset allocation strategy across global equity markets
. Active management of currency exposures
. Active security selection within each market
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including: o Index futures
contracts and currency futures contracts o Options on index contracts and
options on currency contracts o Currency futures and forward contracts
Although it may invest anywhere in the world, the Fund invests primarily in
equity markets listed in the Morgan Stanley Capital International (MSCI) World
Equity (Free) Index, the benchmark against which the Fund measures its
portfolio.
The Fund's Principal Risks Include:
. Foreign Country and Currency Risks
. Geographic Risk
. Market Risk
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
GLOBAL BOND FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income.
Policies
The Fund invests primarily in a portfolio of U.S and non-U.S. debt securities
that may also provide the potential for capital appreciation. The Fund is a non-
diversified portfolio.
Normally, at least 65% of the Fund's assets are invested in debt securities with
an initial maturity of more than one year of issuers in at least three countries
(which may include the United States).
Although it may invest anywhere in the world, the Fund invests primarily in
fixed income markets listed in the Salomon Smith Barney World Government Bond
Index, the benchmark against which the Fund measures its portfolio.
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including the use of:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Credit Risk
. Diversification Risk
. Foreign Country and Currency Risks
. Interest Rate Risk
Non-Diversified Portfolio
Invests most of its assets in a smaller number of issuers, resulting in more
potential volatility than diversified portfolios. Gains or losses on a single
security or issuer within the portfolio will, therefore, haves a greater impact
on a fund's net asset value.
Salomon Smith Barney World
Government Bond Index
See page [...]
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. BALANCED FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income.
Policies
The Fund invests primarily in a wide range of equity, fixed income and money
market securities. Under normal circumstances, the Fund invests at least 25% of
its assets in fixed income securities.
Investments in equity securities may include:
. Common Stock
. Preferred stock
. Securities convertible into equity securities
. Warrants
Investments in fixed income securities may include:
. Debt securities of the U.S. government, its agencies and
instrumentalities
. Debt securities of U.S. corporations
. Zero coupon securities
. Mortgage-backed securities
. Asset-backed securities
. When-issued securities
All selection decisions are made in consideration of the U.S. Balanced Mutual
Fund Index, the benchmark against which the Fund measures its portfolio.
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Interest Rate Risk
. Market Risk
U.S. Balanced Mutual Fund
Index
Compiled by Brinson Partners, this index represents a fixed composite of 65%
Wilshire 5000 Equity Index and 35% Salomon Smith Barney Broad Investment Grade
(BIG) Bond Index. (See page [...] for descriptions of these two indexes.)
From time to time, indexes may change when the Advisor believes an alternative
index more accurately reflects the relevant U.S. market.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. EQUITY FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income, while controlling risk.
Policies
Normally, the Fund invests at least 65% of its assets in equity securities of
U.S. companies.
Investments in equity securities may include:
. Common stock
. Preferred stock
. Securities convertible into equity securities
. Warrants
All selection decisions are made in consideration of the Wilshire 5000 Equity
Index, the benchmark against which the Fund measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Market Risk
Wilshire 5000 Equity Index
A broad weighted index that includes all U.S. common stocks. It is designed to
provide a representative indication of the capitalization and return for the
U.S. equity market.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income, while controlling risk.
Policies
Under normal circumstances, the Fund invests at least 65% of its assets in
equity securities of U.S. large capitalization companies. The Fund is a non-
diversified portfolio.
Investments in equity securities may include:
. Common stock
. Preferred stock
. Securities convertible into equity securities
. Warrants
All selection decisions are made in consideration of the S&P 500 Index, the
benchmark against which the Fund measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Diversification Risk
. Market Risk
Large Capitalization
Companies
Those with market capitalizations in the upper 65% of the Wilshire 5000 Equity
Index. (Companies whose capitalization falls below this level after purchase
will continue to be considered large capitalization companies.)
Non-Diversified Portfolio
See page [...]
S&P 500 Index
A broad capitalization market-weighted index that includes common stocks of the
leading companies in the top industries in the United States. It is designed to
provide a representative indication of the capitalization and return of the
large capitalization U.S. equity market.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. LARGE CAPITALIZATION GROWTH FUND
Objective
The Fund seeks to provide long-term capital appreciation.
Policies
The Fund invests primarily in a portfolio of equity securities of large
capitalization growth companies. The Fund is a non-diversified portfolio.
. Normally, at least 65% of the Fund's assets are invested in securities
issued by such companies
. Up to 20% of the Fund's assets may be invested in foreign securities
Investments in equity securities may include:
. Common stock
. Preferred stock
. Securities convertible into equity securities
. Warrants
All selection decisions are undertaken relative to the Standard & Poor's 500
Stock Index (S&P 500 Index), the benchmark against which the Fund
measures its portfolio.
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Diversification Risk
. Foreign Country and Currency Risks
. Market Risk
Large Capitalization Growth
Companies
Companies with market capitalizations in the upper 65% of the Wilshire 5000
Equity Index. (Companies whose capitalization falls below this level after
purchase will continue to be considered large capitalization growth companies.)
Non-Diversified Portfolio
See page [...]
S&P 500 Index
See page [...]
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. SMALL CAPITALIZATION GROWTH FUND
Objective
The Fund seeks to provide long-term capital appreciation.
Policies
Under normal conditions, the Fund invests at least 65% of its assets in equity
securities of U.S. small capitalization companies.
The Fund may also invest in securities of emerging market growth companies. The
Fund may invest up to 20% of its assets in foreign securities.
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
All selection decisions are made in consideration of the Russell 2000 Index, the
benchmark against which the Fund measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Foreign Country and Currency Risks
. Market Risk
. Small Company Risk
Small Capitalization
Companies
Companies with market capitalizations of less than $1 billion.
Emerging Market Growth
Companies
Small or medium sized companies that have passed their start-up phase and are
showing positive earnings, as well as potential for achieving significant profit
in a relatively short period of time.
Russell 2000 Index
A securities index that includes primarily U.S. common stocks. It is designed to
provide a representative indication of the capitalization and return for the
small capitalization U.S. equity market.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. BOND FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income, while controlling risk.
Policies
The Fund invests primarily in a portfolio of investment-grade fixed income
securities that may also provide the potential for capital appreciation. As a
matter of fundamental policy, under normal circumstances, at least 65% of the
Fund's total assets are invested in U.S. debt securities with an initial
maturity of more than one year.
Investments in fixed income securities may include:
. Debt securities of the U.S. government, its agencies and
instrumentalities
. Debt securities of U.S. corporations
. Zero coupon securities
. Mortgage-backed securities
. Asset-backed securities
. When-issued securities
A portion of the Fund's assets may be invested in short-term debt securities
(including repurchase and reverse repurchase agreements) of corporations, the
U.S. government, its agencies or instrumentalities, and banks and finance
companies.
All selection decisions are made in consideration of the Salomon Smith Barney
Broad Investment Grade (BIG) Bond Index, the benchmark against which the Fund
measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Credit Risk
. Interest Rate Risk
Investment-Grade
Fixed income securities
possessing a minimum rating of:
. BBB by Standard & Poor's Ratings Group (S&P) or
. Baa by Moody's Investors Services, Inc. (Moody's) or,
. If unrated, are determined to be of comparable quality by the Advisor.
Salomon Smith Barney Broad
Investment Grade (BIG) Bond
Index
A broad-based index that includes U.S. bonds with over one year to maturity.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
HIGH YIELD FUND
Objectives
Primary
- -------
The Fund seeks to provide high current income from a portfolio of higher-
yielding, lower-rated debt securities issued by domestic and foreign companies.
Secondary
- ---------
The Fund seeks capital growth, when consistent with high current income, by
investing in securities, including common stocks and non-income producing
securities, which the Advisor expects will appreciate in value as a result of
declines in long-term interest rates or favorable developments affecting the
business or prospects of the issuer which may improve the issuer's financial
condition and credit rating.
Policies
The Fund invests primarily in a portfolio of U.S. and global (ex-U.S.) higher-
yielding, lower-rated bonds:
. Under normal conditions, at least 65% of the Fund's assets are
invested in fixed income securities that provide higher yields and are
"lower-rated"
. Up to 25% of the Fund's assets may be invested in foreign securities
Investments in fixed income securities may include:
. Debt securities of U.S. corporations
. Zero coupon securities
. Mortgage-backed securities
. Asset-backed securities
. When-issued securities
. Eurodollar securities
A portion of the Fund's assets may be invested in short-term debt securities
(including repurchase and reverse repurchase agreements) of corporations, the
U.S. government or its agencies or instrumentalities, and banks and finance
companies.
All selection decisions are undertaken relative to the Merrill Lynch High Yield
Master Index, the benchmark against which the Fund measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Credit Risk
. Foreign Country and Currency Risks
. High Yield Risk
. Interest Rate Risk
Lower-Rated Bonds
Bonds rated in the lower rating categories of Moody's and S&P, including
securities rated:
. Ba or lower by Moody's or
. BB or lower by S&P ("high yield securities").
Securities rated in these categories or lower are considered to be of poorer
quality and predominantly speculative.
Merrill Lynch High Yield
Master Index
An index of corporate debt securities that currently has a duration of
approximately 4.26 years.
Please note that the maturities of individual securities owned by the Fund may
vary widely from their duration (and may be as long as 30 years).
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
GLOBAL (ex-U.S.) EQUITY FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income, by investing primarily in the equity securities of non-U.S.
issuers.
Policies
Normally, the Fund invests at least 65% of its assets in equity securities of
issuers in at least three countries other than the United States.
Investments may include:
. American, European and Global Depositary Receipts
. Common and preferred stock
. Debt securities convertible into or exchangeable for common stock
. Warrants or rights that are convertible into common stock
Although it may invest anywhere in the world, the Fund invests primarily in the
equity markets listed in the Morgan Stanley Capital International (MSCI) World
ex USA (Free) Index, the benchmark against which the Fund measures its
portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
. Currency futures and forward contracts
The Fund's Principal Risks Include:
. Foreign Country and Currency Risks
. Market Risk
MSCI World ex USA (Free)
Index
An unmanaged, market driven broad based securities index which includes global
(ex-U.S.) equity markets in terms of capitalization and performance.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
EMERGING MARKETS DEBT FUND
Objective
The Fund seeks to maximize total U.S. dollar return, consisting of capital
appreciation and current income, while controlling risk.
Policies
The Fund intends to invest primarily in a portfolio of debt securities of
issuers located in at least three emerging markets countries, which may be
located in Asia, Europe, Latin America, Africa or the Middle East. As these
markets change and other countries' markets develop, the Fund expects the
countries in which it invests to change. The Fund is a non-diversified
portfolio.
Normally, the Fund invests at least 65% of its total assets in debt securities
issued by:
. Governments
. Government-related entities (including participations in loans between
governments and financial institutions)
. Corporations
. Entities organized to restructure outstanding debt of issuers in
emerging markets
The Fund also invests in debt securities on which the return is derived
primarily from other emerging market instruments, such as interest rate swap
contracts and currency swap contracts. The Fund may invest in Eurodollar
securities, which are fixed income securities of a U.S. issuer or a foreign
issuer that are issued outside the United States.
A substantial amount of the assets of the Fund may be invested in higher-
yielding, lower-rated bonds.
All selection decisions are undertaken relative to the J.P. Morgan Emerging
Markets Bond Index Plus, the benchmark against which the Fund measures its
portfolio.
The Fund's Principal Risks Include:
. Diversification Risk
. Foreign Country and Currency Risks
. Geographic Concentration Risk
. High Yield Risk
. Interest Rate Risk
Emerging Markets
See page [...]
Non-Diversified Portfolio
See page [...]
Lower-Rated Bonds
See page [...]
J.P. Morgan Emerging
Markets Bond Index Plus
Comprised of external-currency-denominated emerging markets debt, including
Brady Bonds, loans, Eurobonds and local market instruments.
<PAGE>
EMERGING MARKETS EQUITY FUND
Objective
The Fund seeks to maximize total U.S. dollar return, consisting of capital
appreciation and current income, while controlling risk.
Policies
The Fund intends to invest primarily in a portfolio of equity securities of
issuers located in at least three emerging markets countries, which may be
located in Asia, Europe, Latin America, Africa or the Middle East. As these
markets change and other countries' markets develop, the Fund expects the
countries in which it invests to change. The Fund is a non-diversified
portfolio.
Normally, the Fund invests at least 65% of its assets in the equity securities
of issuers in emerging markets or securities on which the return is derived from
the equity securities of issuers in emerging markets, such as equity swap
contracts and equity index swap contracts.
Up to 35% of the Fund's assets may be invested in higher-yielding, lower-rated
bonds. The Fund may invest in Eurodollar securities, which are fixed income
securities of a U.S. issuer or a foreign issuer that are issued outside of the
United States.
All selection decisions are undertaken relative to the Brinson Emerging Markets
Normal Index, the benchmark against which the Fund measures its portfolio.
The Fund's Principal Risks Include:
. Diversification Risk
. Foreign Country and Currency Risks
. Geographic Concentration Risk
. High Yield Risk
. Market Risk
Emerging Markets
See page [...]
Non-Diversified Portfolio
See page [...]
Lower-Rated Bonds
See page [...]
Brinson Emerging Markets
Normal Index
Constructed by Brinson Partners, this index is designed to minimize country
specific risk while providing regional exposure similar to the Morgan Stanley
Capital International Emerging Markets (Free) Index (MSCI-EMF), a market
capitalization weighted benchmark.
<PAGE>
RISK CONSIDERATIONS
All Fund investments are subject to risk and may decline in value. Each Fund's
exposure depends upon its specific investment practices. The amount and types of
risk vary depending on:
. The investment objective
. The Fund's ability to achieve its objectives
. The markets in which the Fund invests
. The investments the Fund makes in those markets
. Prevailing economic conditions over the period of an investment
Please note that there are other circumstances that could adversely affect your
investment and potentially prevent a Fund from achieving its objectives.
Counterparty Risk
The risk that when a Fund engages in repurchase, reverse repurchase, derivative,
when-issued, forward commitment, delayed settlement and securities lending
transactions with another party, it relies on the other party to consummate the
transaction and is subject to the risk of default by the other party. Failure of
the other party to complete the transaction may cause the Fund to incur a loss
or to miss an opportunity to obtain a price believed to be advantageous.
Credit Risk
The risk that the issuer of a security, or the counterparty to a contract, will
default or otherwise be unable to honor a financial obligation. Debt securities
rated below investment-grade are especially susceptible to this risk.
Diversification Risk
The risk that a non-diversified Fund will be more volatile than a diversified
Fund because it invests more of its assets in a smaller number of issuers. The
gains or losses on a single security or issuer will, therefore, have a greater
impact on the non-diversified Fund's net asset value.
Foreign Country and Currency Risks
The risk that prices of a Fund's investments in foreign securities may go down
because of unfavorable foreign government actions, political instability or the
absence of accurate information about foreign issuers. Also, a decline in the
value of foreign currencies relative to the U.S. dollar will reduce the value of
securities denominated in those currencies. Foreign securities are sometimes
less liquid and harder to value than securities of U.S. issuers. These risks are
more severe for securities of issuers in emerging market countries.
On January 1, 1999, the European Monetary Union (the "EMU") introduced a new
single currency, the Euro, which will replace the national currencies of
participating member nations. If a Fund holds investments in nations with
currencies replaced by the Euro, the investment process, including trading,
foreign exchange, payments, settlements, cash accounts, custody and accounting,
will be impacted. Although it is not possible to fully predict the impact of the
Euro on a Fund, 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.
Geographic Concentration Risk
The risk that if a Fund has most of its investments in a single country or
region, its portfolio will be more susceptible to factors adversely affecting
issuers located in that country or region than would a more geographically
diverse portfolio of securities.
<PAGE>
High Yield Risk
The risk that bonds with ratings of BB (S&P) or Ba (Moody's) or below are
subject to greater credit risk than investment grade bonds. These securities are
considered to be of poor standing and are predominantly speculative with respect
to the issuer's capacity to pay interest and repay principal in accordance with
the terms of the obligations and involve major risk exposure. Also called "high
yield bonds" or "junk bonds."
Interest Rate Risk
The risk that changing interest rates may adversely affect the value of an
investment. With fixed-rate securities, an increase in prevailing interest rates
typically causes the value of a Fund's securities to fall, while a decline in
prevailing interest rates may produce an increase in the market value of the
securities. Changes in interest rates will affect the value of longer-term fixed
income securities more than shorter-term securities and lower quality securities
more than higher quality securities.
Leverage Risk
The risk that downward price changes in a security may result in a loss greater
than a Fund's investment in the security. This risk exists through the use of
certain securities or techniques that tend to magnify changes in an index or
market.
Market Risk
The risk that the market value of a Fund's investments will fluctuate as the
stock and bond markets fluctuate. Market risk may affect a single issuer,
industry or section of the economy or it may affect the market as a whole.
Prepayment Risk
The risk that issuers will prepay fixed rate obligations when interest rates
fall, forcing the Fund to re-invest in obligations with lower interest rates
than the original obligations.
Small Company Risk
The risk that investments in smaller companies may be more volatile than
investments in larger companies, as smaller companies generally experience
higher growth and failure rates. The trading volume of smaller company
securities is normally lower than that of larger companies. Changes in the
demand for the securities of smaller companies generally has a disproportionate
effect on their market price, tending to make prices rise more in response to
buying demand and fall more in response to selling pressure.
<TABLE>
<CAPTION>
The risks of investing in the various Funds are illustrated in the chart below.
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Counterparty Credit Currency Diversification Foreign Geographic High Interest
Rate Country Concentration Yield Rate
&
Currency
- --------------------------------------------------------------------------------------------------------------------
U.S. Bond * * *
Fund
- --------------------------------------------------------------------------------------------------------------------
High Yield * * * * * * *
Fund
- --------------------------------------------------------------------------------------------------------------------
Global * * * * * * *
Bond Fund
- --------------------------------------------------------------------------------------------------------------------
U.S. * * *
Balanced
Fund
- --------------------------------------------------------------------------------------------------------------------
U.S. Large * * * *
Capitali-
zation
Growth
Fund
- --------------------------------------------------------------------------------------------------------------------
U.S. Equity *
Fund
- --------------------------------------------------------------------------------------------------------------------
U.S. Large * *
Capitali-
zation
Equity
Fund
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------
<S> Leverage Market Prepayment Small
Company
- -------------------------------------------------------------------
U.S. Bond <C> <C> <C> <C>
Fund * * *
- -------------------------------------------------------------------
High Yield * * *
Fund
- -------------------------------------------------------------------
Global * * *
Bond Fund
- -------------------------------------------------------------------
U.S. * * *
Barrowed
Fund
- -------------------------------------------------------------------
U.S. Large * *
Capitali-
zation
Growth
Fund
- -------------------------------------------------------------------
U.S. Equity * *
Fund
- -------------------------------------------------------------------
U.S. Large * *
Capitali-
zation
Equity
Fund
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Counterparty Credit Currency Diversification Foreign Geographic High Interest
Rate Country Concentration Yield Rate
&
Currency
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Small * * * *
Capitali-
zation
Growth
Fund
- ----------------------------------------------------------------------------------------------------------------------
Global * * * * * *
Fund
- ----------------------------------------------------------------------------------------------------------------------
Global * * * *
Equity
Fund
- ----------------------------------------------------------------------------------------------------------------------
Global * * * *
(U.S.)
Equity
Fund
- ----------------------------------------------------------------------------------------------------------------------
Emerging * * * * * * * *
Markets
Debt Fund
- ----------------------------------------------------------------------------------------------------------------------
Emerging * * * * * * * *
Markets
Equity
Fund
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
Leverage Market Prepayment Small
Company
- ------------------------------------------------------------------------------------
<S> * * *
U.S. Small
Capitali-
zation
Growth
Fund
- ------------------------------------------------------------------------------------
Global * * * *
Fund
- ------------------------------------------------------------------------------------
Global
Equity * *
Fund
- ------------------------------------------------------------------------------------
Global
(U.S.) * *
Equity
Fund
- ------------------------------------------------------------------------------------
Emerging
Markets * * *
Debt Fund
- ------------------------------------------------------------------------------------
Emerging
Markets * * * *
Equity
Fund
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FEES AND EXPENSES
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Brinson Fund--Class I shares.
SHAREHOLDER TRANSACTION FEES (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Emerging Markets Equity Fund Only:
Purchase/Redemption Transaction Fee 1.50%*
Emerging Markets Debt Fund Only:
Purchase Transaction Fee 0.75%*
* These transaction charges are paid to the Funds and used by them to defray
transaction costs associated with the purchase and sale of securities by the
Funds.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a % of average net assets)
[List all Funds]
Investment Advisory Fees
Other Expenses
Total Fund Operating Expenses
[Footnote with Net Expenses]
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the
Brinson Fund--Class I shares to the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in a Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
(Place Table Of Example Here, list all Funds)
1 year
3 years
5 years
10 years
<PAGE>
INVESTMENT ADVISOR
Brinson Partners Inc., an investment management firm primarily for pension and
profit sharing institutional accounts, and is the investment advisor for The
Brinson Funds. Brinson Partners Inc. and its predecessor entities have managed
domestic and international investment assets since 1974 and global investment
assets since 1982. Brinson Partners Inc. also manages investment portfolios for
corporations, public funds, endowments, foundations, central banks and other
investors located throughout the world. Offices are located worldwide:
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Bahrain Frankfurt London Paris Sydney
- ---------------------------------------------------------------------------------------------
Basel Geneva Melbourne Rio de Janeiro Tokyo
- ---------------------------------------------------------------------------------------------
Chicago Hong Kong New York Singapore Zurich
- ---------------------------------------------------------------------------------------------
</TABLE>
As of December 31, 1998, Brinson Partners Inc. had total assets under management
of approximately $297 billion. Brinson Partners is a wholly-owned subsidiary of
UBS AG (formed by the merger of Union Bank of Switzerland and Swiss Bank
Corporation).
[sidebar]
Brinson Partners Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
ADVISORY FEES
The following chart shows the investment advisory fees payable to Brinson
Partners Inc., before fee waivers, by each Fund during its last fiscal year.
Management Fees Paid (expressed as a percentage of average net assets)
- ---------------------------------------------------------------------
Global Fund 0.80%
- ---------------------------------------------------------------------
Global Equity Fund 0.80
- ---------------------------------------------------------------------
Global Bond Fund 0.75
- ---------------------------------------------------------------------
U.S. Balanced Fund 0.70
- ---------------------------------------------------------------------
U.S. Equity Fund 0.70
- ---------------------------------------------------------------------
U.S. Large Capitalization Equity Fund 0.70
- ---------------------------------------------------------------------
U.S. Large Capitalization Growth Fund1 0.70
- ---------------------------------------------------------------------
U.S. Small Capitalization Growth Fund1 1.00
- ---------------------------------------------------------------------
U.S. Bond Fund 0.50
- ---------------------------------------------------------------------
High Yield Fund1 0.60
- ---------------------------------------------------------------------
Global (ex-U.S.) Equity Fund 0.80
- ---------------------------------------------------------------------
Emerging Markets Debt Fund1 0.65
- ---------------------------------------------------------------------
Emerging Markets Equity Fund1 1.10
- ---------------------------------------------------------------------
1. The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth
Fund and High Yield Fund each commenced operations on 10/14/97, 9/30/97 and
9/30/97, respectively. The Emerging Markets Debt Fund and Emerging Markets
Equity Fund commenced operations on [date].
<PAGE>
The Advisor has irrevocably agreed to waive its fees and reimburse certain
expenses so that the total operating expenses of the Brinson Fund--Class I
shares never exceeds the following amounts for each of the respective Funds:
- -----------------------------------------------------------------------
Global Fund 1.10%
- -----------------------------------------------------------------------
Global Equity Fund 1.00
- -----------------------------------------------------------------------
Global Bond Fund 0.90
- -----------------------------------------------------------------------
U.S. Balanced Fund 0.80
- -----------------------------------------------------------------------
U.S. Equity Fund 0.80
- -----------------------------------------------------------------------
U.S. Large Capitalization Equity Fund 0.80
- -----------------------------------------------------------------------
U.S. Large Capitalization Growth Fund/1/ 0.80
- -----------------------------------------------------------------------
U.S. Small Capitalization Growth Fund/1/ 1.15
- -----------------------------------------------------------------------
U.S. Bond Fund 0.60
- -----------------------------------------------------------------------
High Yield Fund1 1.00
- -----------------------------------------------------------------------
Global (ex-U.S.) Equity Fund 0.70
- -----------------------------------------------------------------------
Emerging Markets Debt Fund/1/ 1.15
- -----------------------------------------------------------------------
Emerging Markets Equity Fund/1/ 1.60
- -----------------------------------------------------------------------
Portfolio Management
Investment decisions for the Funds are made by an investment management team at
Brinson Partners. No member of the investment management team is primarily
responsible for making recommendations for portfolio purchases.
Year 2000 Issue
The Funds' securities trades, pricing and accounting services and other
operations could be adversely affected if the computer systems of Brinson
Partners and other service providers were unable to recognize dates after 1999.
Brinson Partners and other service providers have told the Funds that they are
taking action to prevent, and do not expect the Funds to suffer from,
significant Year 2000 problems.
The cost of addressing the Year 2000 Issue, if substantial, could adversely
affect companies and governments that issue securities held by the Emerging
Markets Equity and the Emerging Markets Debt Funds, particularly in the emerging
markets which have been reported not to be as prepared as domestic companies and
markets for Year 2000. The Year 2000 Issue also could cause improperly
functioning trading systems in emerging markets which could cause settlement and
liquidity problems. At this point, the Emerging Markets Equity and the Emerging
Markets Debt Funds cannot predict the impact on their portfolios of the Year
2000 problems in such markets.
Portfolio Turnover
As a result of the investment policies of the Global Fund, Global Bond Fund,
U.S. Balanced Fund, U.S. Small Capitalization Growth Fund and U.S. Bond Fund,
their portfolio turnover rates may exceed 100%. High portfolio turnover (over
100%) may involve correspondingly greater brokerage commissions and other
transaction costs, which will be borne directly by the Funds and ultimately by
the Funds' shareholders. In addition, high portfolio turnover may result in
increased short-term capital gains, which, when distributed to shareholders, are
treated as ordinary income for tax purposes.
<PAGE>
PRIOR PERFORMANCE OF ADVISOR
[Drop in table]
PRICING OF FUND SHARES
The Brinson Fund--Class I shares are bought and sold at net asset value (NAV),
which is calculated as of the close of business on each day that the New York
Stock Exchange (NYSE) is open (currently 4:00 p.m. Eastern time). A Fund's
securities are valued based on the last sale price or, where market quotations
are not readily available, are based on fair value as determined in good faith
by the Trust's board of trustees.
[Sidebar]
How the Funds Calculate NAV
The NAV of a class of shares of a Fund is determined by dividing the value
of the securities and other assets, less liabilities, allocated to the
class by the number of outstanding shares of the class.
Foreign securities are valued at their closing prices on the exchange on which
they are traded. The resulting values are converted from the local currency into
U.S. dollars using current exchange rates. Foreign securities may trade in their
local markets on weekends or other days when a Fund does not price its shares.
Therefore, the NAV of Funds holding foreign securities may change on days when
shareholders will not be able to buy or sell their Fund shares.
Purchase and redemption orders for shares received by the close of regular
trading (currently 4:00 p.m., Eastern time) are priced according to the NAV
determined on that day. Purchase and redemption orders received after the close
of trading are priced according to the next determined price per share. The
Funds reserve the right to change the time at which purchases and redemptions
are priced if the NYSE closes at a time other than 4:00 p.m. Eastern time or if
an emergency exists.
PURCHASING SHARES
The minimum initial investment for Fund shares is $1,000,000. Subsequent
investments for Fund shares will be accepted in minimum amounts of $2,500. The
minimum purchase requirement for IRAs is $2,000. The Funds reserve the right to
vary the investment minimums and subsequent minimums for additional investments
at any time. In addition, Brinson Partners may waive the minimum initial
investment requirement for any investor at its discretion.
[Call out or sidebar]
If you have any questions or need further information, call 1-
800-448-2430.
<PAGE>
Purchases may be made in one of the following ways:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
By Telephone By Mail By Wire Through Financial
Institutions/Professionals
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Call 1-800-448-2430 to Complete and sign an If you are opening a new Shares of the Funds may
arrange for a telephone application for Class I account, call the Funds be purchased through
transaction. shares. at 1-800-448-2430 to broker-dealers, banks and
arrange for a wire bank trust departments,
If you want to make future Make your check payable transaction. all of which may charge
transactions (e.g., to "Brinson ____________ the investor a
purchasing additional Fund - Class I." Then wire federal funds transaction fee or other
shares, redeeming or to: fee for their services.
exchanging shares) by If you are adding to The Chase Manhattan Bank It is the responsibility
telephone, you will need to your existing account, ABA#021000021 of such broker-dealers or
elect this option either on enclose the remittance DDA#9102-783504 service organizations to
the initial application or portion of your account For: "Brinson _________ promptly forward purchase
subsequently in writing. statement and include Fund - Class I" and orders with payments to
the amount of include your name and the Funds.
investment, account name new account number.
and number.
Complete and sign an Telephone orders are
Mail your application application for Class I accepted from
and/or check to The shares and mail broker-dealers or service
Brinson Funds at the immediately following organizations if they
address noted on the the initial wire have been previously
application form. transaction to The approved by the Funds.
Brinson Funds at the
address noted on the
application form.
If you are adding to
your existing account,
you do not need to call
the Funds to arrange for
a wire transaction, but
be sure to include your
name and account number.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The Funds will not accept a check endorsed over by a third party. The Funds
reserve the right to reject any purchase order and to suspend the offering of
shares of The Brinson Funds.
You will be subject to a 1.50% transaction charge in connection with your
purchase of shares of the Emerging Markets Equity Fund and a 0.75% transaction
charge in connection with your purchase of shares of the Emerging Markets Debt
Fund. Shares of these Funds are sold at a price which is equal to the NAV of
such shares, plus the transaction charge. The transaction charges do not apply
to the reinvestment of dividends or capital gain distributions. The transaction
charges are paid to the Funds and used by them to defray the transaction costs
associated with the purchase and sale of securities within the Funds.
Exchanging Shares
You can exchange your Class I shares for Class I shares of other Funds.
Exchanges will not be permitted between the Brinson Fund--Class I shares and
either the UBS Investment Funds class of shares or the Brinson Fund--Class N
shares.
Under certain circumstances, the Funds may:
. Limit the number of exchanges between Funds
. Reject a telephone exchange order
. Modify or discontinue the exchange privilege upon 60 days' written notice
<PAGE>
Exchanged Funds are subject to the minimum initial investment requirement. The
procedures that apply to redeeming shares also apply to exchanging shares.
Account Options
The following account options are available. There are no charges for the
programs noted below and you may change or terminate these plans at any time by
written notice to the Funds. For information about participating in these
account options, call the transfer agent at 1-800-448-2430.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Automatic Investment Plan Systematic Withdrawal Plan Individual Retirement Account
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through this option, money can be If you have a minimum of $1,000,000 You may open an IRA, a tax-deferred
electronically deducted from your in your account, you may direct the retirement account, with the Funds if you
checking, savings or bank money market agent to make payments to you (or are under age 70 1/2. The minimum
accounts and invested in the Funds anyone you designate) regularly, purchase requirement for an
each month or quarter. monthly, quarterly semi-annually. or IRA is $2,000.
Complete the Automatic Investment Plan Withdrawals are drawn from share
Application, which is available upon redemptions and must be a minimum
request by calling 1-800-448-2430, and of $500 per payment. Under the
mail it to the address indicated. Systematic Withdrawal Plan (SWP),
you must elect to have dividends
The initial $1,000,000 minimum and distributions automatically
investment still applies, however, reinvested in additional Fund
subsequent investments can be as shares.
little as $500.
The Funds may terminate any SWP if
The Funds may alter or terminate the the value of the account falls
Automatic Investment Plan at any time. below $50,000 due to share
redemptions or an exchange of
shares for shares of another Class
I Fund.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
REDEEMING SHARES
Your shares will be redeemed at the NAV next calculated after your order is
accepted by the Funds' transfer agent in good order. Your order will be
processed promptly and you will generally receive the proceeds within five
business days.
Please note that proceeds for redemption requests made shortly after a recent
purchase by check will be distributed once the check clears, which may take up
to 15 days.
The Funds reserve the right to pay redemptions "in kind" (i.e., payment in
securities rather than in cash) if the amount you are redeeming is large enough
to affect a Fund's operations (for example, if it represents more than $250,000
or 1% of the Fund's assets). In these cases, you might incur brokerage costs
converting the securities to cash.
You will be subject to a 1.50% transaction charge in connection with each
redemption of shares of the Emerging Markets Equity Fund. Redemption requests
for the Emerging Markets Equity Fund are paid at the NAV less the transaction
charge. Redemptions which are made in kind with securities are not subject to
the transaction charge.
<PAGE>
You may redeem some or all of your shares any day the NYSE is open for business
by doing one of the following (if you have any questions, call the transfer
agent at 1-800-448-2430).
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
By Telephone By Mail By Bank Wire Through Financial
Institutions/Professionals
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
If you have chosen the Shareholders may sell If you have chosen the Contact your financial
telephone redemption shares by making a wire redemption institution or professional
privilege on the initial written request to the privilege on the initial for more information.
application or Funds at the address application or
subsequently arranged in noted on the account subsequently arranged in Important note: Each
writing, you may call application. writing, you may request institution or professional
1-800-448-2430 to redeem the Funds to wire your may have its own procedures
shares. proceeds to a and requirements for selling
Include signatures of predesignated bank shares and may charge fees.
all persons required to account.
sign for transactions,
exactly as their name Call 1-800-448-2430.
appears on the account
application. Wire redemption requests
must be received by the
transfer agent by 4:00 p.m.
To protect your account Eastern time for money to
from fraud, the funds be wired the next business
may require a signature day.
guarantee for certain
redemptions (see
"Signature Guarantees"
below).
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Redemption requests should be accompanied by the Fund's name, your Fund account
number and the dollar amount or number of shares to be redeemed. The Fund will
mail a check to your account address or, if you have elected the wire redemption
privilege, the Fund will wire the proceeds to your bank.
Signature Guarantees
To protect your account from fraud, the Fund and its agent may require a
signature guarantee for certain redemptions to verify the identity of the person
who has authorized a redemption from your account. Please contact the Fund for
further information.
Telephone Transactions
You may give up some level of security by choosing to buy or sell shares by
telephone, rather than by mail. The Funds will employ reasonable procedures to
confirm that telephone instructions are genuine. If they do not employ these
procedures, the Funds or the transfer agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
Transfer of Securities
Under certain circumstances, investors may be permitted to purchase Fund shares
by transferring securities to a separate Fund that meets the original Fund's
investment objective and policies. (Please see the Statement of Additional
Information for more information.)
DIVIDENDS AND DISTRIBUTIONS
Each Fund passes most of its net investment income along to investors in the
form of distributions. All shareholders of a Fund are entitled to a
proportionate share of the Fund's net income and realized capital gains on its
investments.
<PAGE>
Net investment income for all of the Funds consists of all dividends and
interest received, less expenses (including fees payable to the Advisor and its
affiliates).
Dividends from net investment income are declared, and paid, by each Fund semi-
annually - in June and December. In December, the Funds will distribute
substantially all of their net long-term capital gains and any undistributed net
short-term capital gains realized during the one year period commencing November
1 (or date of the creation of the Fund, if later) and ending October 31. At the
same time, the Funds will distribute all of their net investment income earned
through the end of December and not previously distributed as ordinary (not
capital) income.
Dividends and other distributions paid on each class of shares of a Fund are
calculated at the same time and in the same manner. Dividends on each class
might be affected differently by the allocation of other class-specific
expenses.
Unless you notify the transfer agent in writing that you elect to receive your
income dividends and capital gain distributions in cash, all will be reinvested
automatically in additional Fund shares of the same class of a Fund.
Distribution options may be changed at any time by requesting a change in
writing. Dividends are reinvested on the ex dividend date (the "ex date") at the
net asset value determined at the close of business on that date. Please note
that shares purchased shortly before the record date for a dividend or
distribution may have the effect of returning capital, although such dividends
and distributions are subject to taxes.
TAX CONSIDERATIONS
Following is a brief discussion of the general tax treatment of various
distributions from the Funds; your particular tax status may be different. We
encourage you to consult with your own tax advisor about federal, state and
local tax considerations.
In general, distributions from a Fund are taxable to you as either ordinary
income or capital gains. This is true whether you re-invest your distributions
in additional shares of a Fund or receive them in cash. Any capital gains
distributed by a Fund are taxable to you as long-term capital gains no matter
how long you have owned your shares. Distributions taxed as capital gains may be
taxable at different rates depending on how long a Fund holds its assets.
It is expected that distributions from the U.S. Bond Fund, High Yield Fund,
Global Bond Fund and Emerging Markets Debt Fund will consist primarily of
ordinary income as a result of their investment objectives and strategies.
When you sell or exchange your shares of a Fund, you may have a capital gain or
loss. The tax rate on any gain from the sale or exchange of your shares depends
on how long you have held your shares.
Fund distributions and gains from the sale or exchange of your shares will
generally be subject to state and local income tax. Non-U.S. investors may be
subject to U.S. withholding and estate tax.
By law, a Fund must withhold 31% of your taxable distributions and proceeds if
you do not provide your correct taxpayer identification number or certify that
such number is correct or if the IRS instructs the Fund to do so.
Shareholders will be advised annually of the source and the tax status of all
Fund distributions for federal income tax purposes.
<PAGE>
Multiple Classes
The Funds are a series of The Brinson Funds, a Delaware business trust, and
currently offer three classes of shares: the Brinson Fund-Class I, Brinson Fund-
Class N and UBS Investment Funds class of shares.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand a Fund's
financial performance for the past five years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in each Fund (assuming reinvestment
of all dividends and distributions). This information has been audited by
_____________, whose report, along with the Funds' financial statements, is
included in the Funds' annual report, which is available upon request.
(Place Table and Related Footnotes Here)
<PAGE>
[back cover]
FOR MORE INFORMATION
More information on The Brinson Funds is available free upon request:
Shareholder Reports
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected each Fund's performance during it last fiscal year.
Statement Of Additional Information (SAI)
The SAI provides more details about each Fund and its policies. The SAI is on
file with the Securities and Exchange Commission (SEC) and is incorporated by
reference into (is legally considered part of) this prospectus.
(Sidebar)
To obtain information:
By Telephone
Call 1-800-448-2430
By Mail
The Brinson Funds
P.O. Box 2798
Boston, MA 02208-2798
By Email
[email protected]
On The Internet
Text-only versions of the prospectus and other documents pertaining to the Funds
can be viewed online or downloaded from:
SEC
http://www.sec.gov
Brinson Partners Inc.
http://www.ubsbrinson.com
Information about the Funds (including the SAI) can also be reviewed and copied
at the SEC's public reference room in Washington, DC (phone 1-800-SEC-0330). Or,
you can obtain copies of this information by sending a request, along with a
duplicating fee, to the SEC's Public Reference Section, Washington, DC 20549-
6009.
The Funds are series of The Brinson Funds, whose investment company act file
number is 811-6637.
<PAGE>
(front cover)
THE BRINSON FUNDS
Brinson Fund--Class N Shares Prospectus
May 1, 1999
As with any mutual fund, the Securities and Exchange Commission (SEC) has not
approved or disapproved of these securities or determined whether this
prospectus is adequate or complete. Any representation to the contrary is a
criminal offense.
<PAGE>
TABLE OF CONTENTS
The Funds
Global Fund
Global Equity Fund
Global Bond Fund
U.S. Balanced Fund
U.S. Equity Fund
U.S. Large Capitalization Equity Fund
U.S. Large Capitalization Growth Fund
U.S. Small Capitalization Growth Fund
U.S. Bond Fund
High Yield Fund
Global (ex-U.S.) Equity Fund
------------------------------------------------
Emerging Markets Debt Fund
Emerging Markets Equity Fund
Risk Considerations
Fees and Expenses
Investment Advisor
Prior Performance of Advisor
Pricing of Fund Shares
Purchasing Shares
Redeeming Shares
Dividends and Distributions
Tax Considerations
Financial Highlights
For More Information
<PAGE>
THE FUNDS
A Look At The Brinson Process
At Brinson Partners, we employ a global asset allocation strategy, actively
diversifying investments within and across all major asset classes. In managing
the Funds, we believe that asset allocation should influence every step in the
selection process, whether evaluating securities, countries, sectors or
currencies.
Allocation decisions are based on our comprehensive understanding of global
financial markets and their interrelationships. Security selections are based on
an active, global assessment of value in contrast to observed market prices.
Another aspect of the Brinson Partners' approach is the management of a
portfolio of securities against a selected benchmark, which serves as a
reference from which we derive performance and risk/return parameters. All
security selection decisions are then made in consideration of the benchmark.
The benchmark for each Fund is an index consisting of securities that we believe
are representative of that Fund's investments. From time to time, we may
substitute securities in an equivalent index that we believe more accurately
reflects the relevant market.
Each Fund attempts to control risk by maintaining a lower level of volatility
than its benchmark.
[sidebar]
The investment objective of each Fund is "fundamental" and may be
changed only with shareholder approval. Unless otherwise stated, each
Fund's investment policies are not fundamental and may be changed
without a shareholder vote. There can be no assurance that the Funds
will be able to attain their objectives.
Each Fund's primary investment practices and strategies are discussed
in this prospectus. Other practices, and their related risks, are
described in the Statement of Additional Information (SAI).
Each Fund's principal risks are provided in an alphabetical listing
within the Fund descriptions that follow. Principal and secondary risks
are discussed in detail under "Risk Considerations" on page...
Shares of The Brinson Funds are not bank deposits and are not insured or
guaranteed by the FDIC or any other government agency. The value of your
investment in a Fund will fluctuate, which means that you may lose money.
<PAGE>
GLOBAL FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation
and current income.
Policies
The Fund invests primarily in a portfolio of U.S. and non-U.S. equity and
fixed income securities. At least 65% of the Fund's assets are invested in
securities of issuers in at least three countries (which may include the
United States).
Other investments may include:
. Money market securities in domestic and foreign markets
. Eurodollar securities
. Other open-end investment companies advised by Brinson Partners
. Up to 10% of the Fund's assets in securities of emerging markets
issuers or in securities whose return is derived primarily from
securities of emerging markets issuers
All security selection decisions are made in consideration of the Global
Securities Markets Index (GSMI) Mutual Fund Index, the benchmark against
which the Fund measures its portfolio.
Although it may invest anywhere in the world, the Fund invests primarily in:
. Equity markets listed in the Morgan Stanley Capital International
(MSCI) World Equity (Free) Index
. Fixed income markets listed in the Salomon Smith Barney World
Government Bond Index
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
. Currency futures and forward contracts
The Fund's Principal Risks Include:
. Foreign Country and Currency Risks
. Geographic Risk
. Market Risk
Emerging Markets
The World Bank and other international agencies consider a country to be an
"emerging markets" country on the basis of such factors as trade initiatives,
per capita income and level of industrialization. Emerging market countries
generally include every nation in the world except the U.S., Canada, Japan,
Australia, New Zealand and most nations located in Western Europe.
GSMI Mutual Fund Index
Compiled by Brinson Partners, this index consists of eight distinct asset
classes:
. U.S. equities
. Global (ex-U.S.)
equities
. Emerging markets
equities
. U.S. bonds
. Global (ex-U.S.) bonds
. Emerging markets bonds
. High yield bonds
. Cash equivalents
Each asset class above is represented by an index compiled by an independent
data provider. From time to time, indexes may change.
MSCI World Equity (Free)
Index
A broad based securities index that represents the U.S. and non-U.S. equity
markets in terms of capitalization and performance.
It is designed to provide a representative total return for all major stock
exchanges located inside and outside the United States.
Salomon Smith Barney World
Government Bond Index
<PAGE>
A securities index that represents the broad global fixed income markets and
includes debt issues of U.S. and non-U.S. governments
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
GLOBAL EQUITY FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income.
Policies
The Fund invests primarily in a portfolio of U.S. and non-U.S. equity
securities. At least 65% of the Fund's assets are invested in securities of
issuers in at least three countries (which may include the United States).
In order to achieve the Fund's objective, we pursue:
. An active asset allocation strategy across global equity markets
. Active management of currency exposures
. Active security selection within each market
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
. Currency futures and forward contracts
Although it may invest anywhere in the world, the Fund invests primarily in
equity markets listed in the Morgan Stanley Capital International (MSCI) World
Equity (Free) Index, the benchmark against which the Fund measures its
portfolio.
The Fund's Principal Risks Include:
. Foreign Country and Currency Risks
. Geographic Risk
. Market Risk
MSCI World Equity (Free) Index
See page [...]
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
GLOBAL BOND FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income.
Policies
The Fund invests primarily in a portfolio of U.S and non-U.S. debt securities
that may also provide the potential for capital appreciation. The Fund is a
non-diversified portfolio.
Normally, at least 65% of the Fund's assets are invested in debt securities with
an initial maturity of more than one year of issuers in at least three countries
(which may include the United States).
Although it may invest anywhere in the world, the Fund invests primarily in
fixed income markets listed in the Salomon Smith Barney World Government Bond
Index, the benchmark against which the Fund measures its portfolio.
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including the use of:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Credit Risk
. Diversification Risk
. Foreign Country and Currency Risks
. Interest Rate Risk
Non-Diversified Portfolio
Invests most of its assets in a smaller number of issuers, resulting in more
potential volatility than diversified portfolios. Gains or losses on a single
security or issuer within the portfolio will, therefore, have a greater impact
on a fund's net asset value.
Salomon Smith Barney World
Government Bond Index
See page [...]
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. BALANCED FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income.
Policies
The Fund invests primarily in a wide range of equity, fixed income and money
market securities. Under normal circumstances, the Fund invests at least 25% of
its assets in fixed income securities.
Investments in equity securities may include:
. Common Stock
. Preferred stock
. Securities convertible into equity securities
. Warrants
Investments in fixed income securities may include:
. Debt securities of the U.S. government, its agencies and
instrumentalities
. Debt securities of U.S. corporations
. Zero coupon securities
. Mortgage-backed securities
. Asset-backed securities
. When-issued securities
All selection decisions are made in consideration of the U.S. Balanced Mutual
Fund Index, the benchmark against which the Fund measures its portfolio.
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Interest Rate Risk
. Market Risk
U.S. Balanced Mutual Fund
Index
Compiled by Brinson Partners, this index represents a fixed composite of 65%
Wilshire 5000 Equity Index and 35% Salomon Smith Barney Broad Investment Grade
(BIG) Bond Index. (See page [...] for descriptions of these two indexes.)
From time to time, indexes may change when the Advisor believes an alternative
index more accurately reflects the relevant U.S. market.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. EQUITY FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income, while controlling risk.
Policies
Normally, the Fund invests at least 65% of its assets in equity securities of
U.S. companies.
Investments in equity securities may include:
. Common stock
. Preferred stock
. Securities convertible into equity securities
. Warrants
All selection decisions are made in consideration of the Wilshire 5000 Equity
Index, the benchmark against which the Fund measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Market Risk
Wilshire 5000 Equity Index
A broad weighted index that includes all U.S. common stocks. It is designed to
provide a representative indication of the capitalization and return for the
U.S. equity market.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income, while controlling risk.
Policies
Under normal circumstances, the Fund invests at least 65% of its assets in
equity securities of U.S. large capitalization companies. The Fund is a
non-diversified portfolio.
Investments in equity securities may include:
. Common stock
. Preferred stock
. Securities convertible into equity securities
. Warrants
All selection decisions are made in consideration of the S&P 500 Index, the
benchmark against which the Fund measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Diversification Risk
. Market Risk
Large Capitalization
Companies
Those with market capitalizations in the upper 65% of the Wilshire 5000 Equity
Index. (Companies whose capitalization falls below this level after purchase
will continue to be considered large capitalization companies.)
Non-Diversified Portfolio
See page [...]
S&P 500 Index
A broad capitalization market-weighted index that includes common stocks of the
leading companies in the top industries in the United States. It is designed to
provide a representative indication of the capitalization and return of the
large capitalization U.S. equity market.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. LARGE CAPITALIZATION GROWTH FUND
Objective
The Fund seeks to provide long-term capital appreciation.
Policies
The Fund invests primarily in a portfolio of equity securities of large
capitalization growth companies. The Fund is a non-diversified portfolio.
. Normally, at least 65% of the Fund's assets are invested in
securities issued by such companies
. Up to 20% of the Fund's assets may be invested in foreign securities
Investments in equity securities may include:
. Common stock
. Preferred stock
. Securities convertible into equity securities
. Warrants
All selection decisions are undertaken relative to the Standard & Poor's 500
Stock Index (S&P 500 Index), the benchmark against which the Fund measures its
portfolio.
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Diversification Risk
. Foreign Country and Currency Risks
. Market Risk
Large Capitalization Growth
Companies
Companies with market capitalizations in the upper 65% of the Wilshire 5000
Equity Index. (Companies whose capitalization falls below this level after
purchase will continue to be considered large capitalization growth companies.)
Non-Diversified Portfolio
See page [...]
S&P 500 Index
See page [...]
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. SMALL CAPITALIZATION GROWTH FUND
Objective
The Fund seeks to provide long-term capital appreciation.
Policies
Under normal conditions, the Fund invests at least 65% of its assets in
equity securities of U.S. small capitalization companies.
The Fund may also invest in securities of emerging market growth companies.
The Fund may invest up to 20% of its assets in foreign securities.
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
All selection decisions are made in consideration of the Russell 2000 Index,
the benchmark against which the Fund measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Index Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Foreign Country and Currency Risks
. Market Risk
. Small Company Risk
Small Capitalization
Companies
Companies with market capitalizations of less than $1 billion .
Emerging Market Growth
Companies
Small or medium sized companies that have passed their start-up phase and are
showing positive earnings, as well as potential for achieving significant profit
in a relatively short period of time.
Russell 2000 Index
A securities index that includes primarily U.S. common stocks. It is designed to
provide a representative indication of the capitalization and return for the
small capitalization U.S. equity market.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. BOND FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income, while controlling risk.
Policies
The Fund invests primarily in a portfolio of investment-grade fixed income
securities that may also provide the potential for capital appreciation. As a
matter of fundamental policy, under normal circumstances, at least 65% of the
Fund's total assets are invested in U.S. debt securities with an initial
maturity of more than one year.
Investments in fixed income securities may include:
. Debt securities of the U.S. government, its agencies and
instrumentalities
. Debt securities of U.S. corporations
. Zero coupon securities
. Mortgage-backed securities
. Asset-backed securities
. When-issued securities
A portion of the Fund's assets may be invested in short-term debt securities
(including repurchase and reverse repurchase agreements) of corporations, the
U.S. government, its agencies or instrumentalities, and banks and finance
companies.
All selection decisions are made in consideration of the Salomon Smith Barney
Broad Investment Grade (BIG) Bond Index, the benchmark against which the Fund
measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Credit Risk
. Interest Rate Risk
Investment-Grade
Fixed income securities
possessing a minimum rating of:
. BBB by Standard & Poor's Ratings Group (S&P) or
. Baa by Moody's Investors Services, Inc. (Moody's) or,
. If unrated, are determined to be of comparable quality by the
Advisor.
Salomon Smith Barney Broad
Investment Grade (BIG) Bond
Index
A broad-based index that includes U.S. bonds with over one year to maturity.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
HIGH YIELD FUND
Objectives
Primary
- -------
The Fund seeks to provide high current income from a portfolio of
higher-yielding, lower-rated debt securities issued by domestic and foreign
companies.
Secondary
- ---------
The Fund seeks capital growth, when consistent with high current income, by
investing in securities, including common stocks and non-income producing
securities, which the Advisor expects will appreciate in value as a result of
declines in long-term interest rates or favorable developments affecting the
business or prospects of the issuer which may improve the issuer's financial
condition and credit rating.
Policies
The Fund invests primarily in a portfolio of U.S. and global (ex-U.S.)
higher-yielding, lower-rated bonds:
. Under normal conditions, at least 65% of the Fund's assets are
invested in fixed income securities that provide higher yields and
are "lower-rated"
. Up to 25% of the Fund's assets may be invested in foreign
securities
Investments in fixed income securities may include:
. Debt securities of U.S. corporations
. Zero coupon securities
. Mortgage-backed securities
. Asset-backed securities
. When-issued securities
. Eurodollar securities
A portion of the Fund's assets may be invested in short-term debt securities
(including repurchase and reverse repurchase agreements) of corporations, the
U.S. government or its agencies or instrumentalities, and banks and finance
companies.
All selection decisions are undertaken relative to the Merrill Lynch High Yield
Master Index, the benchmark against which the Fund measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Credit Risk
. Foreign Country and Currency Risks
. High Yield Risk
. Interest Rate Risk
Lower-Rated Bonds
Bonds rated in the lower rating categories of Moody's and S&P, including
securities rated:
. Ba or lower by Moody's or
. BB or lower by S&P ("high yield securities"),
Securities rated in these categories or lower are considered to be of poorer
quality and predominantly speculative.
Merrill Lynch High Yield
Master Index
An index of corporate debt securities that currently has a duration of
approximately 4.26 years.
Please note that the maturities of individual securities owned by the Fund may
vary widely from their duration (and may be as long as 30 years).
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
GLOBAL (ex-U.S.) EQUITY FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income, by investing primarily in the equity securities of non-U.S.
issuers.
Policies
Normally, the Fund invests at least 65% of its assets in equity securities of
issuers in at least three countries other than the United States.
Investments may include:
. American, European and Global Depositary Receipts
. Common and preferred stock
. Debt securities convertible into or exchangeable for common stock
. Warrants or rights that are convertible into common stock
Although it may invest anywhere in the world, the Fund invests primarily in the
equity markets listed in the Morgan Stanley Capital International (MSCI) World
ex USA (Free) Index, the benchmark against which the Fund measures its
portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
. Currency futures and forward contracts
The Fund's Principal Risks Include:
. Foreign Country and Currency Risks
. Market Risk
MSCI World ex USA (Free)
Index
An unmanaged, market driven broad based securities index which includes global
(ex-U.S.) equity markets in terms of capitalization and performance.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
EMERGING MARKETS DEBT FUND
Objective
The Fund seeks to maximize total U.S. dollar return, consisting of capital
appreciation and current income, while controlling risk.
Policies
The Fund intends to invest primarily in a portfolio of debt securities of
issuers located in at least three emerging markets countries, which may be
located in Asia, Europe, Latin America, Africa or the Middle East. As these
markets change and other countries' markets develop, the Fund expects the
countries in which it invests to change. The Fund is a non-diversified
portfolio.
Normally, the Fund invests at least 65% of its total assets in debt securities
issued by:
. Governments
. Government-related entities (including participations in loans
between governments and financial institutions)
. Corporations
. Entities organized to restructure outstanding debt of issuers in
emerging markets
The Fund also invests in debt securities on which the return is derived
primarily from other emerging market instruments, such as interest rate swap
contracts and currency swap contracts. The Fund may invest in Eurodollar
securities, which are fixed income securities of a U.S. issuer or a foreign
issuer that are issued outside the United States.
A substantial amount of the assets of the Fund may be invested in
higher-yielding, lower-rated bonds.
All selection decisions are undertaken relative to the J.P. Morgan Emerging
Markets Bond Index Plus, the benchmark against which the Fund measures its
portfolio.
The Fund's Principal Risks Include:
. Diversification Risk
. Foreign Country and Currency Risks
. Geographic Concentration Risk
. High Yield Risk
. Interest Rate Risk
Emerging Markets
See page [...]
Non-Diversified Portfolio
See page [...]
Lower-Rated Bonds
See page [...]
J.P. Morgan Emerging
Markets Bond Index Plus
Comprised of external-currency-denominated emerging markets debt, including
Brady Bonds, loans, Eurobonds local market instruments.
<PAGE>
EMERGING MARKETS EQUITY FUND
Objective
The Fund seeks to maximize total U.S. dollar return, consisting of capital
appreciation and current income, while controlling risk.
Policies
The Fund intends to invest primarily in a portfolio of equity securities of
issuers located in at least three emerging markets countries, which may be
located in Asia, Europe, Latin America, Africa or the Middle East. As these
markets change and other countries' markets develop, the Fund expects the
countries in which it invests to change. The Fund is a non-diversified
portfolio.
Normally, the Fund invests at least 65% of its assets in the equity securities
of issuers in emerging markets or securities on which the return is derived from
the equity securities of issuers in emerging markets, such as equity swap
contracts and equity index swap contracts.
Up to 35% of the Fund's assets may be invested in higher-yielding,
lower-rated bonds. The Fund may invest in Eurodollar securities, which are
fixed income securities of a U.S. issuer or a foreign issuer that are issued
outside of the United States.
All selection decisions are undertaken relative to the Brinson Emerging
Markets Normal Index, the benchmark against which the Fund measures its
portfolio.
The Fund's Principal Risks Include:
. Diversification Risk
. Foreign Country and Currency Risks
. Geographic Concentration Risk
. High Yield Risk
. Market Risk
Emerging Markets
See page [...]
Non-Diversified Portfolio
See page [...]
Lower-Rated Bonds
See page [...]
Brinson Emerging Markets
Normal Index
Constructed by Brinson Partners, this index is designed to minimize country
specific risk while providing regional exposure similar to the Morgan Stanley
Capital International Emerging Markets (Free) Index (MSCI-EMF), a market
capitalization weighted benchmark.
<PAGE>
RISK CONSIDERATIONS
All Fund investments are subject to risk and may decline in value. Each Fund's
exposure depends upon its specific investment practices. The amount and types of
risk vary depending on:
. The investment objective
. The Fund's ability to achieve its objectives
. The markets in which the Fund invests
. The investments the Fund makes in those markets
. Prevailing economic conditions over the period of an investment
Please note that there are other circumstances that could adversely affect your
investment and potentially prevent a Fund from achieving its objectives.
Counterparty Risk
The risk that when a Fund engages in repurchase, reverse repurchase, derivative,
when-issued, forward commitment, delayed settlement and securities lending
transactions with another party, it relies on the other party to consummate the
transaction and is subject to the risk of default by the other party. Failure of
the other party to complete the transaction may cause the Fund to incur a loss
or to miss an opportunity to obtain a price believed to be advantageous.
Credit Risk
The risk that the issuer of a security, or the counterparty to a contract, will
default or otherwise be unable to honor a financial obligation. Debt securities
rated below investment-grade are especially susceptible to this risk.
Diversification Risk
The risk that a non-diversified Fund will be more volatile than a diversified
Fund because it invests more of its assets in a smaller number of issuers. The
gains or losses on a single security or issuer will, therefore, have a greater
impact on the non-diversified Fund's net asset value.
Foreign Country and Currency Risks
The risk that prices of a Fund's investments in foreign securities may go down
because of unfavorable foreign government actions, political instability or the
absence of accurate information about foreign issuers. Also, a decline in the
value of foreign currencies relative to the U.S. dollar will reduce the value of
securities denominated in those currencies. Foreign securities are sometimes
less liquid and harder to value than securities of U.S. issuers. These risks are
more severe for securities of issuers in emerging market countries.
On January 1, 1999, the European Monetary Union (the "EMU") introduced a new
single currency, the Euro, which will replace the national currencies of
participating member nations. If a Fund holds investments in nations with
currencies replaced by the Euro, the investment process, including trading,
foreign exchange, payments, settlements, cash accounts, custody and accounting,
will be impacted. Although it is not possible to fully predict the impact of the
Euro on a Fund, 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.
Geographic Concentration Risk
The risk that if a Fund has most of its investments in a single country or
region, its portfolio will be more susceptible to factors adversely affecting
issuers located in that country or region than would a more geographically
diverse portfolio of securities.
High Yield Risk
The risk that bonds with ratings of BB (S&P) or Ba (Moody's) or below are
subject to greater credit risk than investment grade bonds. These securities are
considered to be of poor standing and are predominantly
<PAGE>
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations and involve major risk
exposure. Also called "high yield bonds" or "junk bonds."
Interest Rate Risk
The risk that changing interest rates may adversely affect the value of an
investment. With fixed-rate securities, an increase in prevailing interest rates
typically causes the value of a Fund's securities to fall, while a decline in
prevailing interest rates may produce an increase in the market value of the
securities. Changes in interest rates will affect the value of longer-term fixed
income securities more than shorter-term securities and lower quality securities
more than higher quality securities.
Leverage Risk
The risk that downward price changes in a security may result in a loss greater
than a Fund's investment in the security. This risk exists through the use of
certain securities or techniques that tend to magnify changes in an index or
market.
Market Risk
The risk that the market value of a Fund's investments will fluctuate as the
stock and bond markets fluctuate. Market risk may affect a single issuer,
industry or section of the economy or it may affect the market as a whole.
Prepayment Risk
The risk that issuers will prepay fixed rate obligations when interest rates
fall, forcing the Fund to re-invest in obligations with lower interest rates
than the original obligations.
Small Company Risk
The risk that investments in smaller companies may be more volatile than
investments in larger companies, as smaller companies generally experience
higher growth and failure rates. The trading volume of smaller company
securities is normally lower than that of larger companies. Changes in the
demand for the securities of smaller companies generally has a disproportionate
effect on their market price, tending to make prices rise more in response to
buying demand and fall more in response to selling pressure.
<TABLE>
<CAPTION>
The risks of investing in the various Funds are illustrated in the chart below.
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Counterparty Credit Currency Diversification Foreign Geographic High Interest
Rate Country Concentration Yield Rate
&
Currency
- --------------------------------------------------------------------------------------------------------------------
U.S. Bond * * *
Fund
- --------------------------------------------------------------------------------------------------------------------
High Yield * * * * * * *
Fund
- --------------------------------------------------------------------------------------------------------------------
Global * * * * * * *
Bond Fund
- --------------------------------------------------------------------------------------------------------------------
U.S. * * *
Balanced
Fund
- --------------------------------------------------------------------------------------------------------------------
U.S. Large * * * *
Capitali-
zation
Growth
Fund
- --------------------------------------------------------------------------------------------------------------------
U.S. Equity *
Fund
- --------------------------------------------------------------------------------------------------------------------
U.S. Large * *
Capitali-
zation
Equity
Fund
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------
<S> Leverage Market Prepayment Small
Company
- -------------------------------------------------------------------
U.S. Bond <C> <C> <C> <C>
Fund * * *
- -------------------------------------------------------------------
High Yield * * *
Fund
- -------------------------------------------------------------------
Global * * *
Bond Fund
- -------------------------------------------------------------------
U.S. * * *
Balanced
Fund
- -------------------------------------------------------------------
U.S. Large * *
Capitali-
zation
Growth
Fund
- -------------------------------------------------------------------
U.S. Equity * *
Fund
- -------------------------------------------------------------------
U.S. Large * *
Capitali-
zation
Equity
Fund
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Counterparty Credit Currency Diversification Foreign Geographic High Interest
Rate Country Concentration Yield Rate
&
Currency
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Small * * * *
Capitali-
zation
Growth
Fund
- ----------------------------------------------------------------------------------------------------------------------
Global * * * * * *
Fund
- ----------------------------------------------------------------------------------------------------------------------
Global * * * *
Equity
Fund
- ----------------------------------------------------------------------------------------------------------------------
Global * * * *
(U.S.)
Equity
Fund
- ----------------------------------------------------------------------------------------------------------------------
Emerging * * * * * * * *
Markets
Debt Fund
- ----------------------------------------------------------------------------------------------------------------------
Emerging * * * * * * * *
Markets
Equity
Fund
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
Leverage Market Prepayment Small
Company
- ------------------------------------------------------------------------------------
<S> * * *
U.S. Small
Capitali-
zation
Growth
Fund
- ------------------------------------------------------------------------------------
Global * * * *
Fund
- ------------------------------------------------------------------------------------
Global
Equity * *
Fund
- ------------------------------------------------------------------------------------
Global
(U.S.) * *
Equity
Fund
- ------------------------------------------------------------------------------------
Emerging
Markets * * *
Debt Fund
- ------------------------------------------------------------------------------------
Emerging
Markets * * * *
Equity
Fund
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FEES AND EXPENSES
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Brinson Fund--Class N shares.
SHAREHOLDER TRANSACTION FEES (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Emerging Markets Equity Fund Only:
Purchase/Redemption Transaction Fee 1.50%*
Emerging Markets Debt Fund Only:
Purchase Transaction Fee 0.75%*
*These transaction charges are paid to the Funds and used by them to defray
transaction costs associated with the purchase and sale of securities by the
Funds.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a % of average net assets)
[List all Funds]
Investment Advisory Fees
Distribution (12b-1) Fees
Other Expenses
Total Fund Operating Expenses
[Footnote with Net Expenses]
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the
Brinson Fund--Class N shares to the cost of investing in other mutual funds. The
example assumes that you invest $10,000 in a Fund for the time periods indicated
and then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
(Place Table Of Example Here, list all Funds)
1 year
3 years
5 years
10 years
<PAGE>
INVESTMENT ADVISOR
Brinson Partners Inc., an investment management firm primarily for pension and
profit sharing institutional accounts, is the investment advisor for The Brinson
Funds, as well as for nine other investment companies. Brinson Partners and its
predecessor entities have managed domestic and international investment assets
since 1974 and global investment assets since 1982. Offices are located
worldwide:
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
Bahrain Frankfurt London Paris Sydney
- -----------------------------------------------------------------------------------------
Basel Geneva Melbourne Rio de Janeiro Tokyo
- -----------------------------------------------------------------------------------------
Chicago Hong Kong New York Singapore Zurich
- -----------------------------------------------------------------------------------------
</TABLE>
As of December 31, 1998, Brinson Partners Inc. had total assets under management
of approximately $297 billion. Brinson Partners is a wholly-owned subsidiary of
UBS A.G (formed by the merger of Union Bank of Switzerland and Swiss Bank
Corporation).
[sidebar]
Brinson Partners Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
ADVISORY FEES
The following chart shows the investment advisory fees payable to Brinson
Partners, before fee waivers, by each Fund during its last fiscal year.
Management Fees Paid (expressed as a percentage of average net assets)
- ------------------------------------------------------------------------
Global Fund 0.80%
- ------------------------------------------------------------------------
Global Equity Fund 0.80
- ------------------------------------------------------------------------
Global Bond Fund 0.75
- ------------------------------------------------------------------------
U.S. Balanced Fund 0.70
- ------------------------------------------------------------------------
U.S. Equity Fund 0.70
- ------------------------------------------------------------------------
U.S. Large Capitalization Equity Fund 0.70
- ------------------------------------------------------------------------
U.S. Large Capitalization Growth Fund/1/ 0.70
- ------------------------------------------------------------------------
U.S. Small Capitalization Growth Fund/1/ 1.00
- ------------------------------------------------------------------------
U.S. Bond Fund 0.50
- ------------------------------------------------------------------------
High Yield Fund1 0.60
- ------------------------------------------------------------------------
Global (ex-U.S.) Equity Fund 0.80
- ------------------------------------------------------------------------
Emerging Markets Debt Fund/1/ 0.65
- ------------------------------------------------------------------------
Emerging Markets Equity Fund/1/ 1.10
- ------------------------------------------------------------------------
1. The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth
Fund and High Yield Fund each commenced operations on 10/14/97, 9/30/97 and
9/30/97, respectively. The Emerging Markets Debt Fund and Emerging Markets
Equity Fund commenced operations on [date].
The Advisor has irrevocably agreed to waive its fees and reimburse certain
expenses so that the total operating expenses, with the exception of 12b-1
expenses, of the Brinson Fund--Class N shares never exceeds the following
amounts for each of the respective Funds:
<PAGE>
- ----------------------------------------------------------------------
Global Fund 1.10%
- ----------------------------------------------------------------------
Global Equity Fund 1.00
- ----------------------------------------------------------------------
Global Bond Fund 0.90
- ----------------------------------------------------------------------
U.S. Balanced Fund 0.80
- ----------------------------------------------------------------------
U.S. Equity Fund 0.80
- ----------------------------------------------------------------------
U.S. Large Capitalization Equity Fund 0.80
- ----------------------------------------------------------------------
U.S. Large Capitalization Growth Fund/1/ 0.80
- ----------------------------------------------------------------------
U.S. Small Capitalization Growth Fund/1/ 1.15
- ----------------------------------------------------------------------
U.S. Bond Fund 0.60
- ----------------------------------------------------------------------
High Yield Fund/1/ 1.00
- ----------------------------------------------------------------------
Global (ex-U.S.) Equity Fund 0.70
- ----------------------------------------------------------------------
Emerging Markets Debt Fund/1/ 1.15
- ----------------------------------------------------------------------
Emerging Markets Equity Fund/1/ 1.60
- ----------------------------------------------------------------------
Portfolio Management
Investment decisions for the Funds are made by an investment management team at
Brinson Partners. No member of the investment management team is primarily
responsible for making recommendations for portfolio purchases.
Year 2000 Issue
The Funds' securities trades, pricing and accounting services and other
operations could be adversely affected if the computer systems of Brinson
Partners and other service providers were unable to recognize dates after 1999.
Brinson Partners and other service providers have told the Funds that they are
taking action to prevent, and do not expect the Funds to suffer from,
significant Year 2000 problems.
The cost of addressing the Year 2000 Issue, if substantial, could adversely
affect companies and governments that issue securities held by the Emerging
Markets Equity and the Emerging Markets Debt Funds, particularly in the emerging
markets which have been reported not to be as prepared as domestic companies and
markets for Year 2000. The Year 2000 Issue also could cause improperly
functioning trading systems in emerging markets which could cause settlement and
liquidity problems. At this point, the Emerging Markets Equity and the Emerging
Markets Debt Funds cannot predict the impact on their portolios of the Year 2000
problems in such markets.
Portfolio Turnover
As a result of the investment policies of the Global Fund, Global Bond Fund,
U.S. Balanced Fund, U.S. Small Capitalization Growth Fund and U.S. Bond Fund,
their portfolio turnover rates may exceed 100%. High portfolio turnover (over
100%) may involve correspondingly greater brokerage commissions and other
transaction costs, which will be borne directly by the Funds and ultimately by
the Funds' shareholders. In addition, high portfolio turnover may result in
increased short-term capital gains, which, when distributed to shareholders, are
treated as ordinary income for tax purposes.
<PAGE>
PRIOR PERFORMANCE OF ADVISOR
[If Brinson wants to include, drop in table]
PRICING OF FUND SHARES
The Brinson Fund--Class N shares are bought and sold at net asset value (NAV),
which is calculated as of the close of business on each day that the New York
Stock Exchange (NYSE) is open (currently 4:00 p.m. Eastern time). A Fund's
securities are valued based on the last sale price or, where market quotations
are not readily available, are based on fair value as determined in good faith
by the Trust's board of trustees.
[Sidebar]
How the Funds Calculate NAV
The NAV of a class of shares of a Fund is determined by dividing the value
of the securities and other assets, less liabilities, allocated to the
class by the number of outstanding shares of the class.
Foreign securities are valued at their closing prices on the exchange on which
they are traded. The resulting values are converted from the local currency into
U.S. dollars using current exchange rates. Foreign securities may trade in their
local markets on weekends or other days when a Fund does not price its shares.
Therefore, the NAV of Funds holding foreign securities may change on days when
shareholders will not be able to buy or sell their Fund shares.
Purchase and redemption orders for shares received by the close of regular
trading (currently 4:00 p.m., Eastern time) are priced according to the NAV
determined on that day. Purchase and redemption orders received after the close
of trading are priced according to the next determined price per share. The
Funds reserve the right to change the time at which purchases and redemptions
are priced if the NYSE closes at a time other than 4:00 p.m.
Eastern time or if an emergency exists.
PURCHASING SHARES
The minimum initial investment for Fund shares is $1,000,000. The minimum
initial investment for Individual Retirement Accounts (IRAs) is $2,000. The
Funds reserve the right to vary the investment minimums and impose minimums for
additional investments at any time. In addition, Brinson Partners may waive the
minimum initial investment requirement for any investor at its discretion.
[Call out or sidebar]
If you have any questions or need further information, call
1-800-448-2430.
<PAGE>
Purchases may be made in one of the following ways:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
By Telephone By Mail By Wire Through Financial
Institutions/Professionals
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Call 1-800-448-2430 to Complete and sign an If you are opening a new Shares of the Funds may
arrange for a telephone application for Class N account, call the Funds be purchased through
transaction. shares. at 1-800-448-2430 to broker-dealers, banks and
arrange for a wire bank trust departments,
If you want to make Make your check payable transaction. all of which may charge
future transactions to "Brinson ____________ the investor a
(e.g., purchasing Fund - Class N." Then wire federal funds transaction fee or other
additional shares, to: fee for their services.
redeeming or exchanging If you are adding to your The Chase Manhattan Bank It is the responsibility
shares) by telephone, you existing account, enclose ABA#021000021 of such broker-dealers or
will need to elect this the remittance portion of DDA#9102-783504 service organizations to
option either on the your account statement For: "Brinson _________ promptly forward purchase
initial application or and include the amount of Fund - Class N" and orders with payments to
subsequently in writing. investment, account name include your name and the Funds.
and number. new account number.
Mail your application Complete and sign an Telephone orders are
and/or check to The application for Class N accepted from
Brinson Funds at the shares and mail broker-dealers or service
address noted on the immediately following organizations if they
application form. the initial wire have been previously
transaction to The approved by the Funds.
Brinson Funds at the
address noted on the
application form.
If you are adding to
your existing account,
you do not need to call
the Funds to arrange for
a wire transaction, but
be sure to include your
name and account number.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The Funds will not accept a check endorsed over by a third party. The Funds
reserve the right to reject any purchase order and to suspend the offering of
shares of The Brinson Funds.
You will be subject to a 1.50% transaction charge in connection with your
purchase of shares of the Emerging Markets Equity Fund and a 0.50% transaction
charge in connection with your purchase of shares of the Emerging Markets Debt
Fund. Shares of the Funds are sold at a price which is equal to the NAV of such
shares, plus the transaction charge. The transaction charges do not apply to the
reinvestment of dividends or capital gain distributions. The transaction charges
are paid to the Funds and used by them to defray the transaction costs
associated with the purchase and sale of securities within the Funds.
Exchanging Shares
You can exchange your Class N shares for Class N shares of other Funds.
Exchanges will not be permitted between the Brinson Fund--Class N shares and
either the UBS Investment Funds class of shares or the Brinson Fund--Class I
shares.
Under certain circumstances, the Funds may:
. Limit the number of exchanges between Funds
. Reject a telephone exchange order
. Modify or discontinue the exchange privilege upon 60 days'
written notice
Exchanged Funds are subject to the minimum initial investment requirement. The
procedures that apply to redeeming shares also apply to exchanging shares.
<PAGE>
Account Options
The following account options are available. There are no charges for the
programs noted below and you may change or terminate these plans at any time by
written notice to the Funds. For information about participating in these
account options, call the transfer agent at 1-800-448-2430.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Automatic Investment Plan Systematic Withdrawal Plan Individual Retirement Account
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through this option, money can be If you have a minimum of $1,000,000 You may open an IRA, a tax-deferred
electronically deducted from your in your account, you may direct the retirement account, with the Funds
checking, savings or bank money transfer agent to make payments to if you are under age 70 1/2.
The market accounts and invested in the you (or anyone you designate) minimum purchase requirement for an
Funds each month or quarter. regularly, monthly, quarterly or IRA is $2,000.
semi-annually.
Complete the Automatic Investment
Plan Application, which is available Withdrawals are drawn from share
upon request by calling redemptions and must be a minimum
1-800-448-2430, and mail it to the of $500 per payment. Under the
address indicated. Systematic Withdrawal Plan (SWP),
you must elect to have dividends
The initial $1,000,000 minimum and distributions automatically
investment still applies, however, reinvested in additional Fund
subsequent investments can be as shares.
little as $500.
The Funds may terminate any SWP if
The Funds may alter or terminate the the value of the account falls
Automatic Investment Plan at any time. below $50,000 due to share
redemptions or an exchange of
shares for shares of another Class
N Fund.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
REDEEMING SHARES
Your shares will be redeemed at the NAV next calculated after your order is
accepted by the Funds' transfer agent in good order. Your order will be
processed promptly and you will generally receive the proceeds within five
business days.
Please note that proceeds for redemption requests made shortly after a recent
purchase by check will be distributed once the check clears, which may take up
to 15 days.
The Funds reserve the right to pay redemptions "in kind" (i.e., payment in
securities rather than in cash) if the amount you are redeeming is large enough
to affect a Fund's operations (for example, if it represents more than $250,000
or 1% of the Fund's assets). In these cases, you might incur brokerage costs
converting the securities to cash.
You will be subject to a 1.50% transaction charge in connection with each
redemption of shares of the Emerging Markets Equity Fund. Redemption requests
for the Emerging Markets Equity Fund are paid at the NAV less the transaction
charge. Redemptions which are made in kind with securities are not subject to
the transaction charge.
<PAGE>
You may redeem some or all of your shares any day the NYSE is open for business
by doing one of the following (if you have any questions, call the transfer
agent at 1-800-448-2430).
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
By Telephone By Mail By Bank Wire Through Financial
Institutions/Professionals
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
If you have chosen the Shareholders may sell If you have chosen the Contact your financial
telephone redemption shares by making a wire redemption institution or professional
privilege on the initial written request to the privilege on the initial for more information.
application or Funds at the address application or
subsequently arranged in noted on the account subsequently arranged in Important note: Each
writing, you may call application. writing, you may request institution or professional
1-800-448-2430 to redeem the Funds to wire your may have its own procedures
shares. proceeds to a and requirements for selling
Include signatures of predesignated bank shares and may charge fees.
all persons required to account.
sign for transactions,
exactly as their name Call 1-800-448-2430.
appears on the account
application. Wire redemption requests
must be received by the
To protect your account transfer agent by 4:00 p.m.
from fraud, the Funds Eastern time for
may require a signature money to be wired the
guarantee for certain next business day.
redemptions (see
"Signature Guarantees"
below).
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Redemption requests should be accompanied by the Fund's name, your Fund account
number and the dollar amount or number of shares to be redeemed. The Fund will
mail a check to your account address or, if you have elected the wire redemption
privilege, the Fund will wire the proceeds to your bank.
Signature Guarantees
To protect your account from fraud, the Fund and its agent may require a
signature guarantee for certain redemptions to verify the identity of the person
who has authorized a redemption from your account. Please contact the Fund for
further information.
Telephone Transactions
You may give up some level of security by choosing to buy or sell shares by
telephone, rather than by mail. The Funds will employ reasonable procedures to
confirm that telephone instructions are genuine. If they do not employ these
procedures, the Funds or the transfer agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
Transfer of Securities
Under certain circumstances, investors may be permitted to purchase Fund shares
by transferring securities to a separate Fund that meets the original Fund's
investment objective and policies. (Please see the Statement of Additional
Information for more information.)
DIVIDENDS AND DISTRIBUTIONS
Each Fund passes most of its net investment income along to investors in the
form of distributions. All shareholders of a Fund are entitled to a
proportionate share of the Fund's net income and realized capital gains on its
investments.
<PAGE>
Net investment income for all of the Funds consists of all dividends and
interest received, less expenses (including fees payable to the Advisor and its
affiliates).
Dividends from net investment income are declared, and paid, by each Fund
semi-annually - in June and December. In December, the Funds will distribute
substantially all of their net long-term capital gains and any undistributed net
short-term capital gains realized during the one year period commencing November
1 (or date of the creation of the Fund, if later) and ending October 31. At the
same time, the Funds will distribute all of their net investment income earned
through the end of December and not previously distributed as ordinary (not
capital) income.
Dividends and other distributions paid on each class of shares of a Fund are
calculated at the same time and in the same manner. Dividends on each class
might be affected differently by the allocation of other class-specific
expenses.
Unless you notify the transfer agent in writing that you elect to receive your
income dividends and capital gain distributions in cash, all will be reinvested
automatically in additional Fund shares of the same class of a Fund.
Distribution options may be changed at any time by requesting a change in
writing. Dividends are reinvested on the ex dividend date (the "ex date") at the
net asset value determined at the close of business on that date. Please note
that shares purchased shortly before the record date for a dividend or
distribution may have the effect of returning capital, although such dividends
and distributions are subject to taxes.
TAX CONSIDERATIONS
Following is a brief discussion of the general tax treatment of various
distributions from the Funds. It is not an exhaustive discussion, and your
particular tax status may be different. We encourage you to consult with your
own tax advisor about federal, state and local tax considerations.
In general, distributions from a Fund are taxable to you as either ordinary
income or capital gains. This is true whether you invest your distributions in
additional shares of a Fund or receive them in cash. Any capital gains
distributed by a Fund are taxable to you as long-term capital gains no matter
how long you have owned your shares. Distributions taxed as capital gains may be
taxable at different rates depending on how long a Fund holds its assets.
It is expected that distributions from the U.S. Bond Fund, High Yield Fund,
Global Bond Fund and Emerging Markets Debt Fund will consist primarily of
ordinary income as a result of their investment objectives and strategies.
When you sell or exchange your shares of a Fund, you may have a capital gain or
loss. The tax rate on any gain from the sale or exchange of your shares depends
on how long you have held your shares.
Fund distributions and gains from the sale or exchange of your shares will
generally be subject to state and local income tax. Non-U.S. investors may be
subject to U.S. withholding and estate tax.
By law, a Fund must withhold 31% of your taxable distributions and proceeds if
you do not provide your correct taxpayer identification number or certify that
such number is correct or if the IRS instructs the Fund to do so.
Shareholders will be advised annually of the source and the tax status of all
Fund distributions for federal income tax purposes.
<PAGE>
DISTRIBUTION ARRANGEMENTS
The Funds have adopted a distribution plan under rule 12b-1 of the Investment
Company Act of 1940 to compensate Brinson Partners, Funds Distributor Inc. and
others for distributing and promoting sales of the Brinson Fund Class N shares.
Annual fees paid under the plan may not exceed 0.25% of the average daily net
assets of each Fund's Class N shares. Because these distribution and service
fees are paid out of the assets of each share class' assets on an ongoing basis,
over time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
MULTIPLE CLASSES
The Funds are a series of The Brinson Funds, a Delaware business trust, and
currently offer three classes of shares: the Brinson Fund-Class I, Brinson
Fund-Class N and UBS Investment Funds class of shares.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand a Fund's
financial performance for the past five years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in each Fund (assuming reinvestment
of all dividends and distributions). This information has been audited by
_______________, whose report, along with the Funds' financial statements, is
included in the Funds' annual report, which is available upon request.
(Place Table and Related Footnotes Here)
<PAGE>
[back cover]
FOR MORE INFORMATION
More information on The Brinson Funds is available free upon request:
Shareholder Reports
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected each Fund's performance during it last fiscal year.
Statement Of Additional Information (SAI)
The SAI provides more details about each Fund and its policies. The SAI is on
file with the Securities and Exchange Commission (SEC) and is incorporated by
reference into (is legally considered part of) this prospectus.
(Sidebar)
To obtain information:
By Telephone
Call 1-800-448-2430
By Mail
The Brinson Funds
P.O. Box 2798
Boston, MA 02208-2798
By Email
[email protected]
On The Internet
Text-only versions of the prospectus and other documents pertaining to the Funds
can be viewed online or downloaded from:
SEC
http://www.sec.gov
Brinson Partners
http://www.ubsbrinson.com
Information about the Funds (including the SAI) can also be reviewed and copied
at the SEC's public reference room in Washington, DC (phone 1-800-SEC-0330). Or,
you can obtain copies of this information by sending a request, along with a
duplicating fee, to the SEC's Public Reference Section, Washington, DC
20549-6009.
The Funds are series of The Brinson Funds, whose investment company act file
number is 811-6637.
<PAGE>
(front cover)
THE BRINSON FUNDS
UBS Investment Funds Class of Shares Prospectus
May 1, 1999
As with any mutual fund, the Securities and Exchange Commission (SEC) has not
approved or disapproved of these securities or determined whether this
prospectus is adequate or complete. Any representation to the contrary is a
criminal offense.
<PAGE>
TABLE OF CONTENTS
The Funds
Global Fund
Global Equity Fund
Global Bond Fund
U.S. Balanced Fund
U.S. Equity Fund
U.S. Large Capitalization Equity Fund
U.S. Large Capitalization Growth Fund
U.S. Small Capitalization Growth Fund
U.S. Bond Fund
High Yield Fund
Global (ex-U.S.) Equity Fund
------------------------------------------------
Emerging Markets Debt Fund
Emerging Markets Equity Fund
Risk Considerations
Fees and Expenses
Investment Advisor
Prior Performance of Advisor
Pricing of Fund Shares
Purchasing Shares
Redeeming Shares
Dividends and Distributions
Tax Considerations
Financial Highlights
For More Information
<PAGE>
THE FUNDS
A Look At The Brinson Process
At Brinson Partners, we employ a global asset allocation strategy, actively
diversifying investments within and across all major asset classes. In managing
the Funds, we believe that asset allocation should influence every step in the
selection process, whether evaluating securities, countries, sectors or
currencies.
Allocation decisions are based on our comprehensive understanding of global
financial markets and their interrelationships. Security selections are based on
an active, global assessment of value in contrast to observed market prices.
Another aspect of the Brinson Partners' approach is the management of a
portfolio of securities against a selected benchmark, which serves as a
reference from which we derive performance and risk/return parameters. All
security selection decisions are then made in consideration of the benchmark.
The benchmark for each Fund is an index consisting of securities that we believe
are representative of that Fund's investments. From time to time, we may
substitute securities in an equivalent index that we believe more accurately
reflects the relevant market.
Each Fund attempts to control risk by maintaining a lower level of volatility
than its benchmark.
[sidebar]
The investment objective of each Fund is "fundamental" and may be changed
only with shareholder approval. Unless otherwise stated, each Fund's
investment policies are not fundamental and may be changed without a
shareholder vote. There can be no assurance that the Funds will be able to
attain their objectives.
Each Fund's primary investment practices and strategies are discussed in
this prospectus. Other practices, and their related risks, are described in
the Statement of Additional Information (SAI).
Each Fund's principal risks are provided in an alphabetical listing within
the Fund descriptions that follow. Principal and secondary risks are
discussed in detail under "Risk Considerations" on page...
Shares of The Brinson Funds are not bank deposits and are not insured or
guaranteed by the FDIC or any other government agency. The value of your
investment in a Fund will fluctuate, which means that you may lose money.
<PAGE>
GLOBAL FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income.
Policies
The Fund invests primarily in a portfolio of U.S. and non-U.S. equity and fixed
income securities. At least 65% of the Fund's assets are invested in securities
of issuers in at least three countries (which may include the United States).
Other investments may include:
. Money market securities in domestic and foreign markets
. Eurodollar securities
. Other open-end investment companies advised by Brinson
Partners
. Up to 10% of the Fund's assets in securities of emerging
markets issuers or in securities whose return is derived
primarily from securities of emerging markets issuers
All security selection decisions are made in consideration of the Global
Securities Markets Index (GSMI) Mutual Fund Index, the benchmark against which
the Fund measures its portfolio.
Although it may invest anywhere in the world, the Fund invests primarily in:
. Equity markets listed in the Morgan Stanley Capital
International (MSCI) World Equity (Free) Index
. Fixed income markets listed in the Salomon Smith Barney
World Government Bond Index
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
. Currency futures and forward contracts
The Fund's Principal Risks Include:
. Foreign Country and Currency Risks
. Geographic Risk
. Market Risk
Emerging Markets
The World Bank and other international agencies consider a country to be an
"emerging markets" country on the basis of such factors as trade initiatives,
per capita income and level of industrialization. Emerging market countries
generally include every nation in the world except the U.S., Canada, Japan,
Australia, New Zealand and most nations located in Western Europe.
GSMI Mutual Fund Index
Compiled by Brinson Partners, this index consists of eight distinct asset
classes:
. U.S. equities
. Global (ex-U.S.) equities
. Emerging markets equities
. U.S. bonds
. Global (ex-U.S.) bonds
. Emerging markets bonds
. High yield bonds
. Cash equivalents
Each asset class above is represented by an index compiled by an independent
data provider. From time to time, indexes may change.
MSCI World Equity (Free) Index
A broad based securities index that represents the U.S. and non-U.S. equity
markets in terms of capitalization and performance.
It is designed to provide a representative total return for all major stock
exchanges located inside and outside the United States.
<PAGE>
Salomon Smith Barney World Government Bond Index
A securities index that represents the broad global fixed income markets and
includes debt issues of U.S. and non-U.S. governments
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
GLOBAL EQUITY FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income.
Policies
The Fund invests primarily in a portfolio of U.S. and non-U.S. equity
securities. At least 65% of the Fund's assets are invested in securities of
issuers in at least three countries (which may include the United States).
In order to achieve the Fund's objective, we pursue:
. An active asset allocation strategy across global equity markets
. Active management of currency exposures
. Active security selection within each market
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
. Currency futures and forward contracts
Although it may invest anywhere in the world, the Fund invests primarily in
equity markets listed in the Morgan Stanley Capital International (MSCI) World
Equity (Free) Index, the benchmark against which the Fund measures its
portfolio.
The Fund's Principal Risks Include:
. Foreign Country and Currency Risks
. Geographic Risk
. Market Risk
MSCI World Equity (Free) Index
See page [...]
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
GLOBAL BOND FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income.
Policies
The Fund invests primarily in a portfolio of U.S and non-U.S. debt securities
that may also provide the potential for capital appreciation. The Fund is a non-
diversified portfolio.
Normally, at least 65% of the Fund's assets are invested in debt securities with
an initial maturity of more than one year of issuers in at least three countries
(which may include the United States).
Although it may invest anywhere in the world, the Fund invests primarily in
fixed income markets listed in the Salomon Smith Barney World Government Bond
Index, the benchmark against which the Fund measures its portfolio.
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including the use of:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Credit Risk
. Diversification Risk
. Foreign Country and Currency Risks
. Interest Rate Risk
Non-Diversified Portfolio
Invests most of its assets in a smaller number of issuers, resulting in more
potential volatility than diversified portfolios. Gains or losses on a single
security or issuer within the portfolio will, therefore, have a greater impact
on a fund's net asset value.
Salomon Smith Barney World Government Bond Index
See page [...]
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. BALANCED FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income.
Policies
The Fund invests primarily in a wide range of equity, fixed income and money
market securities. Under normal circumstances, the Fund invests at least 25% of
its assets in fixed income securities.
Investments in equity securities may include:
. Common Stock
. Preferred stock
. Securities convertible into equity securities
. Warrants
Investments in fixed income securities may include:
. Debt securities of the U.S. government, its agencies and
instrumentalities
. Debt securities of U.S. corporations
. Zero coupon securities
. Mortgage-backed securities
. Asset-backed securities
. When-issued securities
All selection decisions are made in consideration of the U.S. Balanced
Mutual Fund Index, the benchmark against which the Fund measures its
portfolio.
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Interest Rate Risk
. Market Risk
U.S. Balanced Mutual Fund Index
Compiled by Brinson Partners, this index represents a fixed composite of 65%
Wilshire 5000 Equity Index and 35% Salomon Smith Barney Broad Investment Grade
(BIG) Bond Index. (See page [...] for descriptions of these two indexes.)
From time to time, indexes may change when the Advisor believes an alternative
index more accurately reflects the relevant U.S. market.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. EQUITY FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income, while controlling risk.
Policies
Normally, the Fund invests at least 65% of its assets in equity securities of
U.S. companies.
Investments in equity securities may include:
. Common stock
. Preferred stock
. Securities convertible into equity securities
. Warrants
All selection decisions are made in consideration of the Wilshire 5000 Equity
Index, the benchmark against which the Fund measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Market Risk
Wilshire 5000 Equity Index
A broad weighted index that includes all U.S. common stocks. It is designed to
provide a representative indication of the capitalization and return for the
U.S. equity market.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. LARGE CAPITALIZATION EQUITY FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income, while controlling risk.
Policies
Under normal circumstances, the Fund invests at least 65% of its assets in
equity securities of U.S. large capitalization companies. The Fund is a non-
diversified portfolio.
Investments in equity securities may include:
. Common stock
. Preferred stock
. Securities convertible into equity securities
. Warrants
All selection decisions are made in consideration of the S&P 500 Index, the
benchmark against which the Fund measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Diversification Risk
. Market Risk
Large Capitalization Companies
Those with market capitalizations in the upper 65% of the Wilshire 5000 Equity
Index. (Companies whose capitalization falls below this level after purchase
will continue to be considered large capitalization companies.)
Non-Diversified Portfolio
See page [...]
S&P 500 Index
A broad capitalization market-weighted index that includes common stocks of the
leading companies in the top industries in the United States. It is designed to
provide a representative indication of the capitalization and return of the
large capitalization U.S. equity market.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. LARGE CAPITALIZATION GROWTH FUND
Objective
The Fund seeks to provide long-term capital appreciation.
Policies
The Fund invests primarily in a portfolio of equity securities of large
capitalization growth companies. The Fund is a non-diversified portfolio.
. Normally, at least 65% of the Fund's assets are invested in securities
issued by such companies
. Up to 20% of the Fund's assets may be invested in foreign securities
Investments in equity securities may include:
. Common stock
. Preferred stock
. Securities convertible into equity securities
. Warrants
All selection decisions are undertaken relative to the Standard & Poor's 500
Stock Index (S&P 500 Index), the benchmark against which the Fund measures its
portfolio.
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Diversification Risk
. Foreign Country and Currency Risks
. Market Risk
Large Capitalization Growth Companies
Companies with market capitalizations in the upper 65% of the Wilshire 5000
Equity Index. (Companies whose capitalization falls below this level after
purchase will continue to be considered large capitalization growth companies.)
Non-Diversified Portfolio
See page [...]
S&P 500 Index
See page [...]
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. SMALL CAPITALIZATION GROWTH FUND
Objective
The Fund seeks to provide long-term capital appreciation.
Policies
Under normal conditions, the Fund invests at least 65% of its assets in equity
securities of U.S. small capitalization companies.
The Fund may also invest in securities of emerging market growth companies. The
Fund may invest up to 20% of its assets in foreign securities.
A portion of the Fund's assets may be invested in repurchase and reverse
repurchase agreements.
All selection decisions are made in consideration of the Russell 2000
Index, the benchmark against which the Fund measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Foreign Country and Currency Risks
. Market Risk
. Small Company Risk
Small Capitalization Companies
Companies with market capitalizations of less than $1 billion.
Emerging Market Growth Companies
Small or medium sized companies that have passed their start-up phase and are
showing positive earnings, as well as potential for achieving significant profit
in a relatively short period of time.
Russell 2000 Index
A securities index that includes primarily U.S. common stocks. It is designed to
provide a representative indication of the capitalization and return for the
small capitalization U.S. equity market.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
U.S. BOND FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income, while controlling risk.
Policies
The Fund invests primarily in a portfolio of investment-grade fixed income
securities that may also provide the potential for capital appreciation. As a
matter of fundamental policy, under normal circumstances, at least 65% of the
Fund's total assets are invested in U.S. debt securities with an initial
maturity of more than one year.
Investments in fixed income securities may include:
. Debt securities of the U.S. government, its agencies and
instrumentalities
. Debt securities of U.S. corporations
. Zero coupon securities
. Mortgage-backed securities
. Asset-backed securities
. When-issued securities
A portion of the Fund's assets may be invested in short-term debt securities
(including repurchase and reverse repurchase agreements) of corporations, the
U.S. government, its agencies or instrumentalities, and banks and finance
companies.
All selection decisions are made in consideration of the Salomon Smith Barney
Broad Investment Grade (BIG) Bond Index, the benchmark against which the Fund
measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Credit Risk
. Interest Rate Risk
Investment-Grade Fixed income securities possessing a minimum rating of:
. BBB by Standard & Poor's Ratings Group (S&P) or
. Baa by Moody's Investors Services, Inc. (Moody's) or,
. If unrated, are determined to be of comparable quality by the Advisor.
Salomon Smith Barney Broad Investment Grade (BIG) Bond Index
A broad-based index that includes U.S. bonds with over one year to maturity.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
HIGH YIELD FUND
Objectives
Primary
- -------
The Fund seeks to provide high current income from a portfolio of
higher-yielding, lower-rated debt securities issued by domestic and
foreign companies.
Secondary
- ---------
The Fund seeks capital growth, when consistent with high current income,
by investing in securities, including common stocks and non-income
producing securities, which the Advisor expects will appreciate in value
as a result of declines in long-term interest rates or favorable
developments affecting the business or prospects of the issuer which may
improve the issuer's financial condition and credit rating.
Policies
The Fund invests primarily in a portfolio of U.S. and global (ex-U.S.)
higher-yielding, lower-rated bonds:
. Under normal conditions, at least 65% of the Fund's assets are invested
in fixed income securities that provide higher yields and are
"lower-rated"
. Up to 25% of the Fund's assets may be invested in foreign securities
Investments in fixed income securities may include:
. Debt securities of U.S. corporations
. Zero coupon securities
. Mortgage-backed securities
. Asset-backed securities
. When-issued securities
. Eurodollar securities
A portion of the Fund's assets may be invested in short-term debt securities
(including repurchase and reverse repurchase agreements) of corporations, the
U.S. government or its agencies or instrumentalities, and banks and finance
companies.
All selection decisions are undertaken relative to the Merrill Lynch High Yield
Master Index, the benchmark against which the Fund measures its portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
The Fund's Principal Risks Include:
. Credit Risk
. Foreign Country and Currency Risks
. High yield Risk
. Interest Rate Risk
Lower-Rated Bonds
Bonds rated in the lower rating categories of Moody's and S&P, including
securities rated:
. Ba or lower by Moody's or
. BB or lower by S&P ("high yield securities").
Securities rated in these categories or lower are considered to be of poorer
quality and predominantly speculative.
Merrill Lynch High Yield Master Index
An index of corporate debt securities that currently has a duration of
approximately 4.26 years.
Please note that the maturities of individual securities owned by the Fund may
vary widely from their duration (and may be as long as 30 years).
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
GLOBAL (ex-U.S.) EQUITY FUND
Objective
The Fund seeks to maximize total return, consisting of capital appreciation and
current income, by investing primarily in the equity securities of non-U.S.
issuers.
Policies
Normally, the Fund invests at least 65% of its assets in equity securities of
issuers in at least three countries other than the United States.
Investments may include:
. American, European and Global Depositary Receipts
. Common and preferred stock
. Debt securities convertible into or exchangeable for common stock
. Warrants or rights that are convertible into common stock
Although it may invest anywhere in the world, the Fund invests primarily in the
equity markets listed in the Morgan Stanley Capital International (MSCI) World
ex USA (Free) Index, the benchmark against which the Fund measures its
portfolio.
To help reduce overall portfolio risk, the Advisor employs a number of
strategies to hedge against share price declines, including:
. Index futures contracts and currency futures contracts
. Options on index contracts and options on currency contracts
. Currency futures and forward contracts
The Fund's Principal Risks Include:
. Foreign Country and Currency Risks
. Market Risk
MSCI World ex USA (Free) Index
An unmanaged, market driven broad based securities index which includes global
(ex-U.S.) equity markets in terms of capitalization and performance.
<PAGE>
Fund Performance
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the Fund's performance has varied from year
to year. The table compares the Fund's performance over time to that of a broad
measure of market performance. When you consider this information, please
remember that the Fund's past performance is not necessarily an indication of
how it will perform in the future.
Year-by-Year Total Return (as of 12/31 each year)
(Place Bar Chart Here)
Best Quarter: Q[...] [...]%
Worst Quarter: Q[...] [...]%
Average Annual Total Return (as of 12/31/98)
(Place Table Here)
<PAGE>
EMERGING MARKETS DEBT FUND
Objective
The Fund seeks to maximize total U.S. dollar return, consisting of capital
appreciation and current income, while controlling risk.
Policies
The Fund intends to invest primarily in a portfolio of debt securities of
issuers located in at least three emerging markets countries, which may be
located in Asia, Europe, Latin America, Africa or the Middle East. As these
markets change and other countries' markets develop, the Fund expects the
countries in which it invests to change. The Fund is a non-diversified
portfolio.
Normally, the Fund invests at least 65% of its total assets in debt
securities issued by:
. Governments
. Government-related entities (including participations in loans between
governments and financial institutions)
. Corporations
. Entities organized to restructure outstanding debt of issuers in
emerging markets
The Fund also invests in debt securities on which the return is derived
primarily from other emerging market instruments, such as interest rate swap
contracts and currency swap contracts. The Fund may invest in Eurodollar
securities, which are fixed income securities of a U.S. issuer or a foreign
issuer that are issued outside the United States.
A substantial amount of the assets of the Fund may be invested in
higher-yielding, lower-rated bonds.
All selection decisions are undertaken relative to the J.P. Morgan Emerging
Markets Bond Index Plus, the benchmark against which the Fund measures its
portfolio.
The Fund's Principal Risks Include:
. Diversification Risk
. Foreign Country and Currency Risks
. Geographic Concentration Risk
. High Yield Risk
. Interest Rate Risk
Emerging Markets
See page [...]
Non-Diversified Portfolio
See page [...]
Lower-Rated Bonds
See page [...]
J.P. Morgan Emerging Markets Bond Index Plus
Comprised of external-currency-denominated emerging markets debt, including
Brady Bonds, loans, Eurobonds and local market instruments.
<PAGE>
EMERGING MARKETS EQUITY FUND
Objective
The Fund seeks to maximize total U.S. dollar return, consisting of capital
appreciation and current income, while controlling risk.
Policies
The Fund intends to invest primarily in a portfolio of equity securities of
issuers located in at least three emerging markets countries, which may be
located in Asia, Europe, Latin America, Africa or the Middle East. As these
markets change and other countries' markets develop, the Fund expects the
countries in which it invests to change. The Fund is a non-diversified
portfolio.
Normally, the Fund invests at least 65% of its assets in the equity securities
of issuers in emerging markets or securities on which the return is derived from
the equity securities of issuers in emerging markets, such as equity swap
contracts and equity index swap contracts.
Up to 35% of the Fund's assets may be invested in higher-yielding, lower-rated
bonds. The Fund may invest in Eurodollar securities, which are fixed income
securities of a U.S. issuer or a foreign issuer that are issued outside of the
United States.
All selection decisions are undertaken relative to the Brinson Emerging Markets
Normal Index, the benchmark against which the Fund measures its portfolio.
The Fund's Principal Risks Include:
. Diversification Risk
. Foreign Country and Currency Risks
. Geographic Concentration Risk
. High Yield Risk
. Market Risk
Emerging Markets
See page [...]
Non-Diversified Portfolio
See page [...]
Lower-Rated Bonds
See page [...]
Brinson Emerging Markets Normal Index
Constructed by Brinson Partners, this index is designed to minimize country
specific risk while providing regional exposure similar to the Morgan Stanley
Capital International Emerging Markets (Free) Index (MSCI-EMF), a market
capitalization weighted benchmark.
<PAGE>
RISK CONSIDERATIONS
All Fund investments are subject to risk and may decline in value. Each Fund's
exposure depends upon its specific investment practices. The amount and types
of risk vary depending on:
. The investment objective
. The Fund's ability to achieve its objectives
. The markets in which the Fund invests
. The investments the Fund makes in those markets
. Prevailing economic conditions over the period of an investment
Please note that there are other circumstances that could adversely affect your
investment and potentially prevent a Fund from achieving its objectives.
Counterparty Risk
The risk that when a Fund engages in repurchase, reverse repurchase, derivative,
when-issued, forward commitment, delayed settlement and securities lending
transactions with another party, it relies on the other party to consummate the
transaction and is subject to the risk of default by the other party. Failure of
the other party to complete the transaction may cause the Fund to incur a loss
or to miss an opportunity to obtain a price believed to be advantageous.
Credit Risk
The risk that the issuer of a security, or the counterparty to a contract, will
default or otherwise be unable to honor a financial obligation. Debt securities
rated below investment-grade are especially susceptible to this risk.
Diversification Risk
The risk that a non-diversified Fund will be more volatile than a diversified
Fund because it invests more of its assets in a smaller number of issuers. The
gains or losses on a single security or issuer will, therefore, have a greater
impact on the non-diversified Fund's net asset value.
Foreign Country and Currency Risks
The risk that prices of a Fund's investments in foreign securities may go down
because of unfavorable foreign government actions, political instability or the
absence of accurate information about foreign issuers. Also, a decline in the
value of foreign currencies relative to the U.S. dollar will reduce the value of
securities denominated in those currencies. Foreign securities are sometimes
less liquid and harder to value than securities of U.S. issuers. These risks are
more severe for securities of issuers in emerging market countries.
On January 1, 1999, the European Monetary Union (the "EMU") introduced a new
single currency, the Euro, which will replace the national currencies of
participating member nations. If a Fund holds investments in nations with
currencies replaced by the Euro, the investment process, including trading,
foreign exchange, payments, settlements, cash accounts, custody and accounting,
will be impacted. Although it is not possible to fully predict the impact of the
Euro on a Fund, 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.
Geographic Concentration Risk
The risk that if a Fund has most of its investments in a single country or
region, its portfolio will be more susceptible to factors adversely affecting
issuers located in that country or region than would a more geographically
diverse portfolio of securities.
<PAGE>
High Yield Risk
The risk that bonds with ratings of BB (S&P) or Ba (Moody's) or below are
subject to greater credit risk than investment grade bonds. These securities are
considered to be of poor standing and are predominantly speculative with respect
to the issuer's capacity to pay interest and repay principal in accordance with
the terms of the obligations and involve major risk exposure. Also called "high
yield bonds" or "junk bonds."
Interest Rate Risk
The risk that changing interest rates may adversely affect the value of an
investment. With fixed-rate securities, an increase in prevailing interest
rates typically causes the value of a Fund's securities to fall, while a decline
in prevailing interest rates may produce an increase in the market value of the
securities. Changes in interest rates will affect the value of longer-term fixed
income securities more than shorter-term securities and lower quality securities
more than higher quality securities.
Leverage Risk
The risk that downward price changes in a security may result in a loss greater
than a Fund's investment in the security. This risk exists through the use of
certain securities or techniques that tend to magnify changes in an index or
market.
Market Risk
The risk that the market value of a Fund's investments will fluctuate as the
stock and bond markets fluctuate. Market risk may affect a single issuer,
industry or section of the economy or it may affect the market as a whole.
Prepayment Risk
The risk that issuers will prepay fixed rate obligations when interest rates
fall, forcing the Fund to re-invest in obligations with lower interest rates
than the original obligations.
Small Company Risk
The risk that investments in smaller companies may be more volatile than
investments in larger companies, as smaller companies generally experience
higher growth and failure rates. The trading volume of smaller company
securities is normally lower than that of larger companies. Changes in the
demand for the securities of smaller companies generally has a disproportionate
effect on their market price, tending to make prices rise more in response to
buying demand and fall more in response to selling pressure.
<TABLE>
<CAPTION>
The risks of investing in the various Funds are illustrated in the chart below.
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Counterparty Credit Currency Diversification Foreign Geographic High Interest
Rate Country Concentration Yield Rate
&
Currency
- --------------------------------------------------------------------------------------------------------------------
U.S. Bond * * *
Fund
- --------------------------------------------------------------------------------------------------------------------
High Yield * * * * * * *
Fund
- --------------------------------------------------------------------------------------------------------------------
Global * * * * * * *
Bond Fund
- --------------------------------------------------------------------------------------------------------------------
U.S. * * *
Balanced
Fund
- --------------------------------------------------------------------------------------------------------------------
U.S. Large * * * *
Capitali-
zation
Growth
Fund
- --------------------------------------------------------------------------------------------------------------------
U.S. Equity *
Fund
- --------------------------------------------------------------------------------------------------------------------
U.S. Large * *
Capitali-
zation
Equity
Fund
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------
<S> Leverage Market Prepayment Small
Company
- -------------------------------------------------------------------
U.S. Bond <C> <C> <C> <C>
Fund * * *
- -------------------------------------------------------------------
High Yield * * *
Fund
- -------------------------------------------------------------------
Global * * *
Bond Fund
- -------------------------------------------------------------------
U.S. * * *
Balanced
Fund
- -------------------------------------------------------------------
U.S. Large * *
Capitali-
zation
Growth
Fund
- -------------------------------------------------------------------
U.S. Equity * *
Fund
- -------------------------------------------------------------------
U.S. Large * *
Capitali-
zation
Equity
Fund
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Counterparty Credit Currency Diversification Foreign Geographic High Interest
Rate Country Concentration Yield Rate
&
Currency
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Small * * * *
Capitali-
zation
Growth
Fund
- ----------------------------------------------------------------------------------------------------------------------
Global * * * * * *
Fund
- ----------------------------------------------------------------------------------------------------------------------
Global * * * *
Equity
Fund
- ----------------------------------------------------------------------------------------------------------------------
Global * * * *
(U.S.)
Equity
Fund
- ----------------------------------------------------------------------------------------------------------------------
Emerging * * * * * * * *
Markets
Debt Fund
- ----------------------------------------------------------------------------------------------------------------------
Emerging * * * * * * * *
Markets
Equity
Fund
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------
Leverage Market Prepayment Small
Company
- ------------------------------------------------------------------------------------
<S> * * *
U.S. Small
Capitali-
zation
Growth
Fund
- ------------------------------------------------------------------------------------
Global * * * *
Fund
- ------------------------------------------------------------------------------------
Global
Equity * *
Fund
- ------------------------------------------------------------------------------------
Global
(U.S.) * *
Equity
Fund
- ------------------------------------------------------------------------------------
Emerging
Markets * * *
Debt Fund
- ------------------------------------------------------------------------------------
Emerging
Markets * * * *
Equity
Fund
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FEES AND EXPENSES
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the UBS Investment Funds Class of shares.
SHAREHOLDER TRANSACTION FEES (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Emerging Markets Equity Fund Only:
Purchase/Redemption Transaction Fee 1.50%*
Emerging Markets Debt Fund Only:
Purchase Transaction Fee 0.75%*
*These transaction charges are paid to the Funds and used by them to defray
transaction costs associated with the purchase and sale of securities by the
Funds.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets,
expressed as a % of average net assets)
[List all Funds]
Investment Advisory Fees
Distribution (12b-1) and/or Shareholder Servicing Fees
Other Expenses
Total Fund Operating Expenses
[Footnote with Net Expenses]
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the UBS
Investment Funds Class of shares to the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in a Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs and the
return on your investment may be higher or lower, based on these assumptions
your costs would be:
(Place Table Of Example Here, list all Funds)
1 year
3 years
5 years
10 years
<PAGE>
INVESTMENT ADVISOR
Brinson Partners Inc., an investment management firm primarily for pension and
profit sharing institutional accounts, is the investment advisor for the Brinson
Funds, as well as for nine other investment companies. Brinson Partners Inc. and
its predecessor entities have managed domestic and international investment
assets since 1974 and global investment assets since 1982. Offices are located
worldwide:
Bahrain Frankfurt London Paris Sydney
- --------------------------------------------------------------------------
Basel Geneva Melbourne Rio de Janeiro Tokyo
- --------------------------------------------------------------------------
Chicago Hong Kong New York Singapore Zurich
- --------------------------------------------------------------------------
As of December 31, 1998, Brinson Partners Inc. had total assets under management
of approximately $297 billion. Brinson Partners is a wholly-owned subsidiary of
UBS AG (formed by the merger of Union Bank of Switzerland and Swiss Bank
Corporation).
[sidebar]
Brinson Partners Inc.
209 South LaSalle Street
Chicago, IL 60604-1295
ADVISORY FEES
The following chart shows the investment advisory fees payable to Brinson
Partners Inc., before fee waivers, by each Fund during its last fiscal year.
Management Fees Paid (expressed as a percentage of average net assets)
Global Fund 0.80%
- ----------------------------------------------------------------------------
Global Equity Fund 0.80
- ----------------------------------------------------------------------------
Global Bond Fund 0.75
- ----------------------------------------------------------------------------
U.S. Balanced Fund 0.70
- ----------------------------------------------------------------------------
U.S. Equity Fund 0.70
- ----------------------------------------------------------------------------
U.S. Large Capitalization Equity Fund 0.70
- ----------------------------------------------------------------------------
U.S. Large Capitalization Growth Fund/1/ 0.70
- ----------------------------------------------------------------------------
U.S. Small Capitalization Growth Fund/1/ 1.00
- ----------------------------------------------------------------------------
U.S. Bond Fund 0.50
- ----------------------------------------------------------------------------
High Yield Fund/1/ 0.60
- ----------------------------------------------------------------------------
Global (ex-U.S.) Equity Fund 0.80
- ----------------------------------------------------------------------------
Emerging Markets Debt Fund/1/ 0.65
- ----------------------------------------------------------------------------
Emerging Markets Equity Fund/1/ 1.10
- ----------------------------------------------------------------------------
1. The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth
Fund and High Yield Fund each commenced operations on 10/14/97, 9/30/97 and
9/30/97, respectively. The Emerging Markets Debt Fund and Emerging Markets
Equity Fund commenced operations on [date].
The Advisor has irrevocably agreed to waive its fees and reimburse certain
expenses so that the total operating expenses, with the exception of 12b-1
expenses, of the UBS Investment Funds Class of shares never exceeds the
following amounts for each of the respective Funds:
<PAGE>
Global Fund 1.10%
- ----------------------------------------------------------------------------
Global Equity Fund 1.00
- ----------------------------------------------------------------------------
Global Bond Fund 0.90
- ----------------------------------------------------------------------------
U.S. Balanced Fund 0.80
- ----------------------------------------------------------------------------
U.S. Equity Fund 0.80
- ----------------------------------------------------------------------------
U.S. Large Capitalization Equity Fund 0.80
- ----------------------------------------------------------------------------
U.S. Large Capitalization Growth Fund/1/ 0.80
- ----------------------------------------------------------------------------
U.S. Small Capitalization Growth Fund/1/ 1.15
- ----------------------------------------------------------------------------
U.S. Bond Fund 0.60
- ----------------------------------------------------------------------------
High Yield Fund/1/ 1.00
- ----------------------------------------------------------------------------
Global (ex-U.S.) Equity Fund 0.70
- ----------------------------------------------------------------------------
Emerging Markets Debt Fund/1/ 1.15
- ----------------------------------------------------------------------------
Emerging Markets Equity Fund/1/ 1.60
- ----------------------------------------------------------------------------
Portfolio Management
Investment decisions for the Funds are made by an investment management team at
Brinson Partners. No member of the investment management team is primarily
responsible for making recommendations for portfolio purchases.
Year 2000 Issue
The Funds' securities trades, pricing and accounting services and other
operations could be adversely affected if the computer systems of Brinson
Partners and other service providers were unable to recognize dates after 1999.
Brinson Partners and other service providers have told the Funds that they are
taking action to prevent, and do not expect the Funds to suffer from,
significant Year 2000 problems.
The cost of addressing the Year 2000 Issue, if substantial, could adversely
affect companies and governments that issue securities held by the Emerging
Markets Equity and the Emerging Markets Debt Funds, particularly in the emerging
markets which have been reported not to be as prepared as domestic companies and
markets for Year 2000. The Year 2000 Issue also could cause improperly
functioning trading systems in emerging markets which could cause settlement and
liquidity problems. At this point, the Emerging Markets Equity and the Emerging
Markets Debt Funds cannot predict the impact on their portfolios of Year 2000
problems in such markets.
Portfolio Turnover
As a result of the investment policies of the Global Fund, Global Bond Fund,
U.S. Balanced Fund, U.S. Small Capitalization Growth Fund and U.S. Bond Fund,
their portfolio turnover rates may exceed 100%. High portfolio turnover (over
100%) may involve correspondingly greater brokerage commissions and other
transaction costs, which will be borne directly by the Funds and ultimately by
the Funds' shareholders. In addition, high portfolio turnover may result in
increased short-term capital gains, which, when distributed to shareholders, are
treated as ordinary income for tax purposes.
<PAGE>
PRIOR PERFORMANCE OF ADVISOR
[If Brinson wants to include, drop in table]
PRICING OF FUND SHARES
The UBS Investment Funds Class of shares are bought and sold at net asset value
(NAV), which is calculated as of the close of business on each day that the New
York Stock Exchange (NYSE) is open (currently 4:00 p.m. Eastern time). A Fund's
securities are valued based on the last sale price or, where market quotations
are not readily available, are based on fair value as determined in good faith
by the Trust's board of trustees.
[Sidebar]
How the Funds Calculate NAV
The NAV of a class of shares of a Fund is determined by dividing the value of
the securities and other assets, less liabilities, allocated to the class by
the number of outstanding shares of the class.
Foreign securities are valued at their closing prices on the exchange on which
they are traded. The resulting values are converted from the local currency into
U.S. dollars using current exchange rates. Foreign securities may trade in their
local markets on weekends or other days when a Fund does not price its shares.
Therefore, the NAV of Funds holding foreign securities may change on days when
shareholders will not be able to buy or sell their Fund shares.
Purchase and redemption orders for shares received by the close of regular
trading (currently 4:00 p.m., Eastern time) are priced according to the NAV
determined on that day. Purchase and redemption orders received after the close
of trading are priced according to the next determined price per share. The
Funds reserve the right to change the time at which purchases and redemptions
are priced if the NYSE closes at a time other than 4:00 p.m. Eastern time or if
an emergency exists.
PURCHASING SHARES
The minimum initial investment for Fund shares is $25,000 (including IRAs).
Subsequent investments for the Fund shares will be accepted in minimum amounts
of $5,000 (including IRAs). The Funds reserve the right to vary the investment
minimums and impose minimums for additional investments at any time. In
addition, Brinson Partners may waive the minimum initial investment requirement
for any investor at its discretion.
[Call out or sidebar]
If you have any questions or need further information, call 1-800-794-7753.
<PAGE>
Purchases may be made in one of the following ways:
- ------------------------------------------------------------------------------
By Telephone By Mail
- ------------------------------------------------------------------------------
Call 1-800-794-7753 to arrange Complete and sign an application
for a telephone transaction. for the UBS Investment Funds
Class of shares.
If you want to make future
transactions (e.g., purchasing Make your check payable to "UBS
additional shares, redeeming Investment Fund -- ____________."
or exchanging shares) by
telephone, you will need to If you are adding to your
elect this option either on existing account, enclose the
the initial application or remittance portion of your
subsequently in writing. account statement and include
the amount of investment,
account name and number.
Mail your application and/or
check to The Brinson Funds at
the address noted on the
application form.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
By Wire Through Financial
Institutions / Professionals
- ------------------------------------------------------------------------------
If you are opening a new Shares of the Funds may be
account, call the Funds at purchased through broker-dealers,
1-800-794-7753 to arrange for a banks and bank trust departments,
wire transaction. all of which may charge the
investor a transaction fee or
Then wire federal funds to: other fee for their services. It
The Chase Manhattan Bank is the responsibility of such
ABA#021000021 broker-dealers or service
DDA#9102-783504 organizations to promptly forward
FBO: "UBS Investment Fund -- purchase orders with payments to
_________" and include your name the Funds.
and new account number.
Complete and sign an application Telephone orders are accepted from
for UBS Investment Funds Class broker-dealers or service
of shares and mail immediately organizations if they have been
following the initial wire previously approved by the Funds.
transaction to The Brinson Funds
at the address noted on the
application form.
If you are adding to your
existing account, you do not
need to call the Funds to
arrange for a wire transaction,
but be sure to include your name
and account number.
- ------------------------------------------------------------------------------
The Funds will not accept a check endorsed over by a third party. The Funds
reserve the right to reject any purchase order and to suspend the offering of
shares of the Brinson Funds.
You will be subject to a 1.50% transaction charge in connection with your
purchase of shares of the Emerging Markets Equity Fund and a 0.50% transaction
charge in connection with your purchase of shares of the Emerging Markets Debt
Fund. Shares of the Funds are sold at a price which is equal to the NAV of such
shares, plus the transaction charge. The transaction charges do not apply to the
reinvestment of dividends or capital gain distributions. The transaction charges
are paid to the Funds and used by them to defray the transaction costs
associated with the purchase and sale of securities within the Funds.
Exchanging Shares
You can exchange your UBS Investment Funds Class of shares for UBS Investment
Funds Class of shares of other Funds. Exchanges will not be permitted between
the UBS Investment Funds class of shares and either the Brinson Fund--Class N
shares or the Brinson Fund--Class I shares.
Under certain circumstances, the Funds may:
. Limit the number of exchanges between Funds
. Reject a telephone exchange order
. Modify or discontinue the exchange privilege upon 60 days' written notice
<PAGE>
Exchanged Funds are subject to the minimum initial investment requirement. The
procedures that apply to redeeming shares also apply to exchanging shares.
Account Options
The following account options are available. There are no charges for the
programs noted below and you may change or terminate these plans at any time by
written notice to the Funds. For information about participating in these
account options, call the transfer agent at 1-800-794-7753.
- -----------------------------------------------------------------------
Automatic Investment Plan Systematic Withdrawal Plan
- -----------------------------------------------------------------------
Through this option, money If you have a minimum of
can be electronically $25,000 in your account, you
deducted from your checking, may direct the transfer agent
savings or bank money market to make payments to you (or
accounts and invested in the anyone you designate)
Funds each month or quarter. regularly, monthly, quarterly
or semi-annually.
Complete the Automatic
Investment Plan Application, Withdrawals are drawn from
which is available upon share redemptions and must be
request by calling a minimum of $1,000 per
1-800-794-7753, and mail it payment. Under the Systematic
to the address indicated. Withdrawal Plan (SWP), you
must elect to have dividends
The initial $25,000 minimum and distributions
investment still applies, automatically reinvested in
however, subsequent additional Fund shares.
investments can be a minimum
of $5,000. The Funds may terminate any
SWP if the value of the
The Funds may alter or account falls below $1,000 due
terminate the Automatic to share redemptions or an
Investment Plan at any time. exchange of shares for shares
of another UBS Investment Fund.
- -----------------------------------------------------------------------
- -------------------------------
Individual Retirement Account
- -------------------------------
You may open an IRA, a
tax-deferred retirement
account, with the Funds if you
are under age 70 1/2. The
minimum purchase requirement
for an IRA is $25,000.
- -------------------------------
REDEEMING SHARES
Your shares will be redeemed at the NAV next calculated after your order is
accepted by the Funds' transfer agent in good order. Your order will be
processed promptly and you will generally receive the proceeds within five
business days.
Please note that proceeds for redemption requests made shortly after a recent
purchase by check will be distributed once the check clears, which may take up
to 15 days.
The Funds reserve the right to pay redemptions "in kind" (i.e., payment in
securities rather than in cash) if the amount you are redeeming is large enough
to affect a Fund's operations (for example, if it represents more than $250,000
or 1% of the Fund's assets). In these cases, you might incur brokerage costs
converting the securities to cash.
You will be subject to a 1.50% transaction charge in connection with each
redemption of shares of the Emerging Markets Equity Fund. Redemption requests
for the Emerging Markets Equity Fund are paid at NAV less the transaction
charge. Redemptions which are made in kind with securities are not subject to
the transaction charge.
Minimum Balances
Due to the relatively high cost of maintaining smaller accounts, the Funds
reserve the right to involuntarily redeem shares in any Fund account for their
then current net asset value if at any time your total investment does not have
a value of at least $1,000 as a result of redemptions and not due to changes in
the asset value of the Fund.
<PAGE>
You will be notified if your account drops below the required minimum and will
be allowed at least 60 days to bring the value of the account up to the minimum
before the redemption is processed. The Fund will promptly pay you the NAV for
such a redemption.
You may redeem some or all of your shares any day the NYSE is open for business
by doing one of the following (if you have any questions, call the transfer
agent at 1-800-794-7753).
- ------------------------------------------------------------------------------
By Telephone By Mail
- ------------------------------------------------------------------------------
If you have chosen the telephone Shareholders may sell shares by
redemption privilege on the making a written request to the
initial application or Funds at the address noted on
subsequently arranged in the account application.
writing, you may call
1-800-794-7753 to redeem shares.
Include signatures of all
persons required to sign for
transactions, exactly as their
name appears on the account
application.
To protect your account from
fraud, the Funds may require a
signature guarantee for certain
redemptions (see "Signature
Guarantees" below).
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
By Bank Wire Through Financial
Institutions/Professionals
- ------------------------------------------------------------------------------
If you have chosen the wire Contact your financial institution
redemption privilege on the or professional for more
initial application or information.
subsequently arranged in
writing, you may request the Important note: Each institution or
Funds to wire your proceeds to a professional may have its own
predesignated bank account. procedures and requirements for
selling shares and may charge fees.
Call 1-800-794-7753.
Wire redemption requests must be
received by the transfer agent
by 4:00 p.m. Eastern time for
money to be wired the next
business day.
- ------------------------------------------------------------------------------
Redemption requests should be accompanied by the Fund's name, your Fund account
number and the dollar amount or number of shares to be redeemed. The Fund will
mail a check to your account address or, if you have elected the wire redemption
privilege, the Fund will wire the proceeds to your bank.
Signature Guarantees
To protect your account from fraud, the Fund and its agent may require a
signature guarantee for certain redemptions to verify the identity of the person
who has authorized a redemption from your account. Please contact the Fund for
further information.
Telephone Transactions
You may give up some level of security by choosing to buy or sell shares by
telephone, rather than by mail. The Funds will employ reasonable procedures to
confirm that telephone instructions are genuine. If they do not employ these
procedures, the Funds or the transfer agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
Transfer of Securities
Under certain circumstances, investors may be permitted to purchase Fund shares
by transferring securities to a separate Fund that meets the original Fund's
investment objective and policies. (Please see the Statement of Additional
Information for more information.)
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Each Fund passes most of its net investment income along to investors in the
form of distributions. All shareholders of a Fund are entitled to a
proportionate share of the Fund's net income and realized capital gains on its
investments.
Net investment income for all of the Funds consists of all dividends and
interest received, less expenses (including fees payable to the Advisor and its
affiliates).
Dividends from net investment income are declared, and paid, by each Fund semi-
annually - in June and December. In December, the Funds will distribute
substantially all of their net long-term capital gains and any undistributed net
short-term capital gains realized during the one year period commencing November
1 (or date of the creation of the Fund, if later) and ending October 31. At the
same time, the Funds will distribute all of their net investment income earned
through the end of December and not previously distributed as ordinary (not
capital) income.
Dividends and other distributions paid on each class of shares of a Fund are
calculated at the same time and in the same manner. Dividends on each class
might be affected differently by the allocation of other class-specific
expenses.
Unless you notify the transfer agent in writing that you elect to receive your
income dividends and capital gain distributions in cash, all will be reinvested
automatically in additional Fund shares of the same class of a Fund.
Distribution options may be changed at any time by requesting a change in
writing. Dividends are reinvested on the ex dividend date (the "ex date") at
the net asset value determined at the close of business on that date. Please
note that shares purchased shortly before the record date for a dividend or
distribution may have the effect of returning capital, although such dividends
and distributions are subject to taxes.
TAX CONSIDERATIONS
Following is a brief discussion of the general tax treatment of various
distributions from the Funds. It is not an exhaustive discussion, and your
particular tax status may be different. We encourage you to consult with your
own tax advisor about federal, state and local tax considerations.
In general, distributions from a Fund are taxable to you as either ordinary
income or capital gains. This is true whether you invest your distributions in
additional shares of a Fund or receive them in cash. Any capital gains
distributed by a Fund are taxable to you as long-term capital gains no matter
how long you have owned your shares. Distributions taxed as capital gains may be
taxable at different rates depending on how long a Fund holds its assets.
It is expected that distributions from the U.S. Bond Fund, High Yield Fund,
Global Bond Fund and Emerging Markets Debt Fund will consist primarily of
ordinary income as a result of their investment objectives and strategies.
When you sell or exchange your shares of a Fund, you may have a capital gain or
loss. The tax rate on any gain from the sale or exchange of your shares depends
on how long you have held your shares.
Fund distributions and gains from the sale or exchange of your shares will
generally be subject to state and local income tax. Non-U.S. investors may be
subject to U.S. withholding and estate tax.
By law, a Fund must withhold 31% of your taxable distributions and proceeds if
you do not provide your correct taxpayer identification number or certify that
such number is correct or if the IRS instructs the Fund to do so.
<PAGE>
Shareholders will be advised annually of the source and the tax status of all
Fund distributions for federal income tax purposes.
DISTRIBUTION ARRANGEMENTS
The Funds have adopted a distribution plan under rule 12b-1 of the Investment
Company Act of 1940 to compensate Brinson Partners, Funds Distributor Inc. (FDI)
and others for distributing and promoting sales of the UBS Investment Funds
Class of shares. Annual fees paid under the plan may not exceed 0.90% of the
average daily net assets (0.25% of which are service fees to be paid by the
Funds to FDI, dealers and others, for providing personal service and/or
maintaining shareholder accounts) of each UBS Investment Fund's Class of shares.
The plan provides, however, that the aggregate distribution fees for each
respective Fund shall not exceed the following maximum amounts for the 1999
fiscal year:
Global Fund 0.65%
- ----------------------------------------------------------------------------
Global Equity Fund 0.76
- ----------------------------------------------------------------------------
Global Bond Fund 0.49
- ----------------------------------------------------------------------------
U.S. Balanced Fund 0.50
- ----------------------------------------------------------------------------
U.S. Equity Fund 0.52
- ----------------------------------------------------------------------------
U.S. Large Capitalization Equity Fund 0.52
- ----------------------------------------------------------------------------
U.S. Large Capitalization Growth Fund 0.77
- ----------------------------------------------------------------------------
U.S. Small Capitalization Growth Fund 0.77
- ----------------------------------------------------------------------------
U.S. Bond Fund 0.47
- ----------------------------------------------------------------------------
High Yield Fund 0.85
- ----------------------------------------------------------------------------
Global (ex-U.S.) Equity Fund 0.84
- ----------------------------------------------------------------------------
Emerging Markets Debt Fund 0.75
- ----------------------------------------------------------------------------
Emerging Markets Equity Fund 0.85
- ----------------------------------------------------------------------------
Because these distribution and service fees are paid out of the assets of each
share class' assets on an ongoing basis, over time these fees will increase the
cost of your investment and may cost you more than paying other types of sales
charges.
MULTIPLE CLASSES
The Funds are a series of The Brinson Funds, a Delaware business trust, and
currently offer three classes of shares: the Brinson Fund-Class I, Brinson Fund-
Class N and UBS Investment Funds class of shares.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand a Fund's
financial performance for the past five years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in each Fund (assuming reinvestment
of all dividends and distributions). This information has been audited by
_____________________, whose report, along with the Funds' financial statements,
is included in the Funds' annual report, which is available upon request.
(Place Table and Related Footnotes Here)
<PAGE>
[back cover]
FOR MORE INFORMATION
More information on the UBS Investment Funds is available free upon request:
Shareholder Reports
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected each Fund's performance during its last fiscal year.
Statement Of Additional Information (SAI)
The SAI provides more details about each Fund and its policies. The SAI is on
file with the Securities and Exchange Commission (SEC) and is incorporated by
reference into (is legally considered part of) this prospectus.
(Sidebar)
To obtain information:
By Telephone
Call 1-800-794-7753
By Mail
UBS Investment Funds
P.O. Box 2798
Boston, MA 02208-2798
By Email
[email protected]
On The Internet
Text-only versions of the prospectus and other documents pertaining to the Funds
can be viewed online or downloaded from:
SEC
http://www.sec.gov
Brinson Partners
http://www.ubsbrinson.com
Information about the Funds (including the SAI) can also be reviewed and copied
at the SEC's public reference room in Washington, DC (phone 1-800-SEC-0330). Or,
you can obtain copies of this information by sending a request, along with a
duplicating fee, to the SEC's Public Reference Section, Washington, DC 20549-
6009.
The Funds are series of The Brinson Funds, whose investment company act file
number is 811-6637.
<PAGE>
THE BRINSON FUNDS
GLOBAL FUND
GLOBAL EQUITY FUND
GLOBAL BOND FUND
U.S. BALANCED FUND
U.S. EQUITY FUND
U.S. LARGE CAPITALIZATION EQUITY FUND
U.S. LARGE CAPITALIZATION GROWTH FUND
U.S. SMALL CAPITALIZATION GROWTH FUND
U.S. BOND FUND
HIGH YIELD FUND
GLOBAL (EX-U.S.) EQUITY FUND
EMERGING MARKETS EQUITY FUND
EMERGING MARKETS DEBT FUND
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1999
The Brinson Funds (the "Trust") currently offers thirteen separate
series, each with its own investment objective and policies. The Trust also
offers three classes of shares for each series - the Brinson Fund-Class I, the
Brinson Fund-Class N and the UBS Investment Funds class. Information concerning
the Brinson Fund-Class I of each series is included in a separate Prospectus
dated May 1, 1999. Information concerning the Brinson Fund-Class N of each
series is included in a separate Prospectus dated May 1, 1999. Information
concerning the UBS Investment Funds class of shares of each series is included
in a separate Prospectus dated May 1, 1999. This Statement of Additional
Information ("SAI") is not a Prospectus, but should be read in conjunction with
the current Prospectuses of the Trust. Much of the information contained herein
expands upon subjects discussed in the Prospectuses. No investment in shares
should be made without first reading the applicable Prospectus. A copy of each
Prospectus and the Annual Report may be obtained without charge from the Trust
at the addresses and telephone numbers below.
<TABLE>
<CAPTION>
UNDERWRITER: ADVISOR:
<S> <C>
Funds Distributor, Inc. Brinson Partners, Inc.
60 State Street, Suite 1300 209 South LaSalle Street
Boston, MA 02109 Chicago, IL 60604-1295
1-800-448-2430 (Brinson Fund-Class I 1-800-448-2430 (Brinson Fund-Class I and
and Brinson Fund-Class N) Brinson Fund-Class N)
1-800-794-7753 (UBS Investment 1-800-794-7753 (UBS Investment Funds
Funds class) Class)
</TABLE>
1
<PAGE>
The Annual Reports and Semi-Annual Reports dated _________to shareholders
of the Trust's series are separate documents supplied with this SAI, and the
financial statements, accompanying notes and report of independent auditors
appearing in the Annual Reports dated ________are incorporated by reference into
(legally made a part of) this SAI. The unaudited financial statements of the
series (except for the U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund, High Yield Fund, Emerging Markets Debt Fund and
Emerging Markets Equity Fund, which had not commenced operations as of the time
period indicated) appearing in their Semi-Annual Reports also are incorporated
by reference into this SAI.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
GENERAL INFORMATION ABOUT THE TRUST........................................................................................ 5
Diversified Status.................................................................................................... 5
General Definitions................................................................................................... 5
INVESTMENT STRATEGIES...................................................................................................... 6
INVESTMENTS RELATING TO ALL FUNDS.......................................................................................... 6
Cash and Cash Equivalents............................................................................................. 6
Repurchase Agreements................................................................................................. 7
Reverse Repurchase Agreements......................................................................................... 7
Borrowing............................................................................................................. 8
Loans of Portfolio Securities......................................................................................... 8
Swaps................................................................................................................. 8
Futures............................................................................................................... 9
Options............................................................................................................... 10
Index Options......................................................................................................... 13
Special Risks of Options on Indices................................................................................... 13
Rule 144A and Illiquid Securities..................................................................................... 14
Other Investments..................................................................................................... 14
INVESTMENTS RELATING TO THE GLOBAL FUNDS, U.S. LARGE CAPITALIZATION GROWTH FUND,
U.S. SMALL CAPITALIZATION GROWTH FUND, HIGH YIELD FUND,
GLOBAL (ex-U.S.) EQUITY FUND, EMERGING MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND.................................. 14
Foreign Securities.................................................................................................... 15
Forward Foreign Currency Contracts.................................................................................... 15
Options on Foreign Currencies......................................................................................... 16
Short Sales........................................................................................................... 17
INVESTMENTS RELATING TO THE GLOBAL FUND, GLOBAL BOND FUND, U.S.
BALANCED FUND, U.S. BOND FUND, HIGH YIELD FUND, EMERGING MARKETS
EQUITY FUND AND EMERGING MARKETS DEBT FUND................................................................................. 17
Lower Rated Debt Securities........................................................................................... 17
Pay-In-Kind Bonds..................................................................................................... 18
Convertible Securities................................................................................................ 18
When-Issued Securities................................................................................................ 19
Mortgage-Backed Securities and Mortgage Pass-Through Securities....................................................... 19
Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage
Investment Conduits ("REMICs")................................................................................... 21
Other Mortgage-Backed Securities...................................................................................... 22
Asset-Backed Securities............................................................................................... 22
Zero Coupon and Delayed Interest Securities........................................................................... 24
INVESTMENTS RELATING TO THE GLOBAL FUND, HIGH YIELD FUND, EMERGING MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND...... 25
Emerging Markets Investments.......................................................................................... 25
Risks of Investing in Emerging Markets................................................................................ 27
Investments in Russian Securities..................................................................................... 28
Investments in Affiliated Investment Companies........................................................................ 29
INVESTMENT RESTRICTIONS.................................................................................................... 30
MANAGEMENT OF THE TRUST.................................................................................................... 32
Trustees and Officers................................................................................................. 32
Compensation Table.................................................................................................... 34
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES........................................................................ 35
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
INVESTMENT ADVISORY AND OTHER SERVICES..................................................................................... 43
Advisor............................................................................................................... 43
Administrator......................................................................................................... 48
Independent Auditors.................................................................................................. 51
Underwriter........................................................................................................... 51
Distribution Plan..................................................................................................... 51
Code of Ethics........................................................................................................ 53
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS........................................................................... 54
Portfolio Turnover.................................................................................................... 56
SHARES OF BENEFICIAL INTEREST.............................................................................................. 57
PURCHASES.................................................................................................................. 58
Exchanges of Shares................................................................................................... 59
Transfer of Securities................................................................................................ 60
Net Asset Value....................................................................................................... 60
REDEMPTIONS................................................................................................................ 62
TAXATION................................................................................................................... 63
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................................................................. 65
PERFORMANCE CALCULATIONS................................................................................................... 65
Total Return.......................................................................................................... 66
Yield................................................................................................................. 69
FINANCIAL STATEMENTS AND REPORTS OF INDEPENDENT AUDITORS................................................................... 69
CORPORATE DEBT RATINGS --- APPENDIX A...................................................................................... A-1
</TABLE>
4
<PAGE>
GENERAL INFORMATION ABOUT THE TRUST
The Brinson Funds (the "Trust"), 209 South LaSalle Street, Chicago,
Illinois 60604-1295, is an open-end management investment company which
currently offers shares of thirteen series representing separate portfolios of
investments: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced
Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S Large
Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond
Fund, High Yield Fund, Global (ex-U.S.) Equity Fund (formerly, the Non-U.S.
Equity Fund), Emerging Markets Equity Fund and Emerging Markets Debt Fund. The
Trust currently offers three classes of shares for each Series: the Brinson
Fund-Class I, Brinson Fund-Class N and UBS Investment Funds class of shares. The
Brinson Fund-Class I shares of each Series, which are designed primarily for
institutional investors, have no sales charges and are not subject to annual
12b-1 plan expenses. The Brinson Fund-Class N shares, which are available
exclusively to 401(k) participants, have no sales charges, but are subject to
annual 12b-1 plan expenses of 0.25% of average daily net assets of the
respective Series. The UBS Investment Funds class of shares of each Series have
no sales charges, but are subject to annual 12b-1 expenses of up to a maximum of
0.90% of average daily net assets of the respective Series.
DIVERSIFIED STATUS
Each of the Global Fund, Global Equity Fund, U.S. Balanced Fund, U.S.
Equity Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund, High Yield
Fund and Global (ex-U.S.) Equity Fund are "diversified" as that term is defined
in the Investment Company Act of 1940, as amended (the "Act"). Each of the
Global Bond Fund, U.S. Large Capitalization Equity Fund, U.S. Large
Capitalization Growth Fund, Emerging Markets Equity Fund and Emerging Markets
Debt Fund are classified as "non-diversified" for purposes of the Act, which
means that each Fund is not limited by the Act with regard to the portion of its
assets that may be invested in the securities of a single issuer. To the extent
that a non-diversified Fund makes investments in excess of 5% of its assets in
the securities of a particular issuer, its exposure to the risks associated with
that issuer is increased. Because each Fund may invest in a limited number of
issuers, the performance of particular securities may adversely affect the
performance of the Fund or subject the Fund to greater price volatility than
that experienced by diversified investment companies.
GENERAL DEFINITIONS
As used throughout this SAI, the following terms shall have the meanings
listed:
"Act" shall mean the Investment Company Act of 1940, as amended.
"Advisor" or "Brinson Partners" shall mean Brinson Partners, Inc., which
serves as the Funds' investment advisor.
"Board" shall mean the Board of Trustees of the Trust.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Funds" or "Series" shall mean collectively the Global Fund, Global Equity
Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund, Global (ex-U.S.)
Equity Fund, Emerging Markets Equity Fund and Emerging Markets Debt Fund (or
individually, a "Fund" or a "Series").
"Global Funds" shall mean collectively the Global Fund, Global Equity Fund,
Global Bond Fund, Emerging Markets Equity Fund and Emerging Markets Debt Fund
(or individually, as the "Global Fund").
5
<PAGE>
"Moody's" shall mean Moody's Investors Service, Inc.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"S&P" shall mean Standard & Poor's Ratings Group.
"Trust" shall mean The Brinson Funds, an open-end management investment
company registered under the Act.
"U.S. Funds" shall mean collectively the U.S. Balanced Fund, U.S. Equity
Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth
Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund and High Yield Fund.
"1933 Act" shall mean the Securities Act of 1933, as amended.
INVESTMENT STRATEGIES
The following discussion of investment techniques and instruments
supplements and should be read in conjunction with the investment objectives and
policies set forth in the Prospectuses of the Funds. The investment practices
described below, except for the discussion of percentage limitations with
respect to portfolio loan transactions and borrowing, are not fundamental and
may be changed by the Board without the approval of the shareholders.
INVESTMENTS RELATING TO ALL FUNDS
The following discussion applies to all Series.
CASH AND CASH EQUIVALENTS
The Series may invest a portion of their assets in short-term debt
securities (including repurchase agreements and reverse repurchase agreements)
of corporations, the U.S. government and its agencies and instrumentalities and
banks and finance companies, which may be denominated in any currency. When
unusual market conditions warrant, a Series may make substantial temporary
defensive investments in cash equivalents up to a maximum of 100% of its net
assets. Cash equivalent holdings may be in any currency (although such holdings
may not constitute "cash or cash equivalents" for tax diversification purposes
under the Code). When a Series invests for defensive purposes, it may affect
the attainment of the Series' investment objective.
Under the terms of an exemptive order issued by the SEC, each Series may
invest cash (i) held for temporary defensive purposes; (ii) not invested pending
investment in securities; (iii) that is set aside to cover an obligation or
commitment of the Series to purchase securities or other assets at a later date;
(iv) to be invested on a strategic management basis (i-iv is herein referred to
as "Uninvested Cash"); and (v) collateral that it receives from the borrowers of
its portfolio securities in connection with the Series' securities lending
program, in a series of shares of Brinson Supplementary Trust (the
"Supplementary Trust Series"). Brinson Supplementary Trust is a private
investment company which has retained Brinson Partners to manage its
investments. The Trustees of the Trust also serve as Trustees of the Brinson
Supplementary Trust. The Supplementary Trust Series will invest in U.S. dollar
denominated money market instruments having a dollar-weighted average maturity
of 90 days or less. A Series' investment of Uninvested Cash in shares of the
Supplementary Series Trust will not exceed 25% of the Series' total assets. In
the event that Brinson Partners waives 100% of its investment advisory fee with
respect to a Series, as calculated monthly, then that Series will be unable to
invest in the Supplementary Trust Series until additional investment advisory
fees are owed by the Series.
6
<PAGE>
REPURCHASE AGREEMENTS
When a Series enters into a repurchase agreement, it purchases securities
from a bank or broker-dealer which simultaneously agrees to repurchase the
securities at a mutually agreed upon time and price, thereby determining the
yield during the term of the agreement. As a result, a repurchase agreement
provides a fixed rate of return insulated from market fluctuations during the
term of the agreement. The term of a repurchase agreement generally is short,
possibly overnight or for a few days, although it may extend over a number of
months (up to one year) from the date of delivery. Repurchase agreements are
considered under the Act to be collateralized loans by a Series to the seller
secured by the securities transferred to the Series. Repurchase agreements will
be fully collateralized and the collateral will be marked-to-market daily. A
Series may not enter into a repurchase agreement having more than seven days
remaining to maturity if, as a result, such agreement, together with any other
illiquid securities held by the Series, would exceed 15% of the value of the net
assets of the Series.
In the event of bankruptcy or other default by the seller of the security
under a repurchase agreement, a Series may suffer time delays and incur costs or
possible losses in connection with the disposition of the collateral. In such
event, instead of the contractual fixed rate of return, the rate of return to a
Series would be dependent upon intervening fluctuations of the market value of
the underlying security and the accrued interest on the security. Although a
Series would have rights against the seller for breach of contract with respect
to any losses arising from market fluctuations following the failure of the
seller to perform, the ability of a Series to recover damages from a seller in
bankruptcy or otherwise in default would be reduced.
Repurchase agreements are securities for purposes of the tax
diversification requirements that must be met for pass-through treatment under
the Code. Accordingly, each Series will limit the value of its repurchase
agreements on each of the quarterly testing dates to ensure compliance with
Subchapter M of the Code.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements involve sales of portfolio securities of a
Series to member banks of the Federal Reserve System or securities dealers
believed creditworthy, concurrently with an agreement by the Series to
repurchase the same securities at a later date at a fixed price which is
generally equal to the original sales price plus interest. A Series retains
record ownership and the right to receive interest and principal payments on the
portfolio securities involved. In connection with each reverse repurchase
transaction, a Series will direct its custodian bank to place cash, U.S.
government securities, equity securities and/or investment and non-investment
grade debt securities in a segregated account of the Series in an amount equal
to the repurchase price. Any assets held in any segregated accounts maintained
by a Series with respect to any reverse repurchase agreements, when-issued
securities, options, futures, forward contracts or other derivative transactions
shall be liquid, unencumbered and marked-to-market daily (any such assets held
in a segregated account are referred to in this SAI as "Segregated Assets"), and
such Segregated Assets shall be maintained in accordance with pertinent
positions of the SEC.
A reverse repurchase agreement involves the risk that the market value of
the securities retained by a Series may decline below the price of the
securities the Series has sold but is obligated to repurchase under the
agreement. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, the Series' use of the
proceeds of the agreement may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the Series' obligation to
repurchase the securities. Reverse repurchase agreements are considered
borrowings by the Series and as such, are subject to the same investment
limitations.
7
<PAGE>
BORROWING
The Series may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. A Series will not borrow money in excess
of 33 1/3% of the value of its total assets. A Series has no intention of
increasing its net income through borrowing. Any borrowing will be done from a
bank with the required asset coverage of at least 300%. In the event that such
asset coverage shall at any time fall below 300%, a Series shall, within three
days thereafter (not including Sundays or holidays), or such longer period as
the SEC may prescribe by rules and regulations, reduce the amount of its
borrowings to such an extent that the asset coverage of such borrowings shall be
at least 300%. A Series will not pledge more than 10% of its net assets, or
issue senior securities as defined in the Act, except for notes to banks and
reverse repurchase agreements. Investment securities will not be purchased while
a Series has an outstanding borrowing that exceeds 5% of a Series' net assets.
LOANS OF PORTFOLIO SECURITIES
The Series may lend portfolio securities to qualified broker-dealers and
financial institutions pursuant to agreements provided: (1) the loan is secured
continuously by collateral marked-to-market daily and maintained in an amount at
least equal to the current market value of the securities loaned; (2) a Series
may call the loan at any time and receive the securities loaned; (3) a Series
will receive any interest or dividends paid on the loaned securities; and (4)
the aggregate market value of securities loaned will not at any time exceed 33
1/3% of the total assets of the Global Fund, Global Equity Fund, Global Bond
Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity
Fund, U.S. Bond Fund and Global (ex-U.S.) Equity Fund, respectively.
Collateral will consist of U.S. and non-U.S. securities, cash equivalents
or irrevocable letters of credit. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to maintain the proper
amount of collateral. Therefore, a Series will only enter into portfolio loans
after a review of all pertinent factors by the Advisor under the supervision of
the Board, including the creditworthiness of the borrower and then only if the
consideration to be received from such loans would justify the risk.
Creditworthiness will be monitored on an ongoing basis by the Advisor.
SWAPS
The Series (except for the Global Equity Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund, High Yield Fund and Global (ex-U.S.) Equity Fund)
may engage in swaps, including but not limited to interest rate, currency and
index swaps and the purchase or sale of related caps, floors, collars and other
derivative instruments. A Series expects to enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of the portfolio's duration, to protect against any increase in the price of
securities the Series anticipates purchasing at a later date, or to gain
exposure to certain markets in the most economical way possible.
Interest rate swaps involve the exchange by a Series with another party of
their respective commitments to receive or pay interest (e.g., an exchange of
fixed rate payments for floating rate payments) with respect to a notional
amount of principal. Currency swaps involve the exchange of cash flows on a
notional amount based on changes in the values of referenced currencies.
The purchase of a cap entitles the purchaser to receive payments on a
notional principal amount from the party selling the cap to the extent that a
specified index exceeds a predetermined interest rate or amount. The purchase
of an interest rate floor entitles the purchaser to receive payments on a
notional principal amount from the party selling the floor to the extent that a
specified index falls below a predetermined interest rate or amount. A collar
is a combination of a cap and a floor that preserves a certain return with a
predetermined range of interest rates or values.
8
<PAGE>
The use of swaps involves investment techniques and risks different from
those associated with ordinary portfolio security transactions. If Brinson
Partners is incorrect in its forecast of market values, interest rates and other
applicable factors, the investment performance of the Series will be less
favorable than it would have been if this investment technique was never used.
Swaps do not involve the delivery of securities or other underlying assets or
principal. Thus, if the other party to a swap defaults, a Series' risk of loss
consists of the net amount of interest payments that the Series is contractually
entitled to receive. Under Internal Revenue Service rules, any lump sum payment
received or due under the notional principal contract must be amortized over the
life of the contract using the appropriate methodology prescribed by the
Internal Revenue Service.
The equity swaps in which all aforementioned Series intend to invest
involve agreements with a counterparty. The return to the Series on any equity
swap contact will be the total return on the notional amount of the contract as
if it were invested in the stocks comprising the contract index in exchange for
an interest component based on the notional amount of the agreement. A Series
will only enter into an equity swap contract on a net basis, i.e., the two
parties' obligations are netted out, with the Series paying or receiving, as the
case may be, only the net amount of the payments. Payments under the equity
swap contracts may be made at the conclusion of the contract or periodically
during its term.
If there is a default by the counterparty to a swap contract, the Series
will be limited to contractual remedies pursuant to the agreements related to
the transaction. There is no assurance that a swap contract counterparty will
be able to meet its obligations pursuant to a swap contract or that, in the
event of a default, the Series will succeed in pursuing contractual remedies.
The Series thus assumes the risk that it may be delayed in or prevented from
obtaining payments owed to it pursuant to a swap contract. However, the amount
at risk is only the net unrealized gain, if any, on the swap, not the entire
notional amount. The Advisor will closely monitor, subject to the oversight of
the Board, the creditworthiness of swap counterparties in order to minimize the
risk of swaps.
The Advisor and the Trust do not believe that the Series' obligations under
swap contracts are senior securities and, accordingly, the Series will not treat
them as being subject to its borrowing or senior securities restrictions.
However, the net amount of the excess, if any, of a Series' obligations over its
entitlements with respect to each swap contract will be accrued on a daily basis
and an amount of cash, U.S. government securities or other liquid assets having
an aggregate market value at least equal to the accrued excess will be
segregated in accordance with SEC positions. To the extent that a Series cannot
dispose of a swap in the ordinary course of business within seven days at
approximately the value at which the Series has valued the swap, the Series will
treat the swap as illiquid and subject to its overall limit on illiquid
investments of 15% of the Series' total net assets.
FUTURES
The Series may enter into contracts for the purchase or sale for future
delivery of securities and indices. The Global Funds and the Global (ex-U.S.)
Equity Fund, U.S Large Capitalization Growth Fund, U.S. Small Capitalization
Growth Fund and High Yield Fund may also enter into contracts for the purchase
or sale for future delivery of foreign currencies.
A purchase of a futures contract means the acquisition of a contractual
right to obtain delivery to a Series of the securities or foreign currency
called for by the contract at a specified price during a specified future month.
When a futures contract is sold, a Series incurs a contractual obligation to
deliver the securities or foreign currency underlying the contract at a
specified price on a specified date during a specified future month. A Series
may enter into futures contracts and engage in options transactions related
thereto to the extent that not more than 5% of the Series' assets are required
as futures contract margin deposits and premiums on options, and may engage in
such transactions to the extent that obligations relating to such futures and
related options on futures transactions represent not more than 25% of the
Series' assets.
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When a Series enters into a futures transaction, it must deliver to the
futures commission merchant selected by the Series an amount referred to as
"initial margin." This amount is maintained by the futures commission merchant
in a segregated account at the custodian bank. Thereafter, a "variation margin"
may be paid by the Series to, or drawn by the Series from, such account in
accordance with controls set for such accounts, depending upon changes in the
price of the underlying securities subject to the futures contract. The Series
may also effect futures transactions through futures commission merchants who
are affiliated with the Advisor or the Series in accordance with procedures
adopted by the Board.
The Series will enter into futures transactions on domestic exchanges and,
to the extent such transactions have been approved by the Commodity Futures
Trading Commission for sale to customers in the United States, on foreign
exchanges. In addition, all of the Series may sell stock index futures in
anticipation of or during a market decline to attempt to offset the decrease in
market value of their common stocks that might otherwise result; and they may
purchase such contracts in order to offset increases in the cost of common
stocks that they intend to purchase. Unlike other futures contracts, a stock
index futures contract specifies that no delivery of the actual stocks making up
the index will take place. Instead, settlement in cash must occur upon the
termination of the contract.
While futures contracts provide for the delivery of securities, deliveries
usually do not occur. Contracts are generally terminated by entering into
offsetting transactions.
The Series may enter into futures contracts to protect against the adverse
affects of fluctuations in security prices, interest or foreign exchange rates
without actually buying or selling the securities or foreign currency. For
example, if interest rates are expected to increase, a Series might enter into
futures contracts for the sale of debt securities. Such a sale would have much
the same effect as selling an equivalent value of the debt securities owned by
the Series. If interest rates did increase, the value of the debt securities in
the portfolio would decline, but the value of the futures contracts to the
Series would increase at approximately the same rate, thereby keeping the net
asset value of the Series from declining as much as it otherwise would have.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to hedge in anticipation of subsequent purchases of
securities at higher prices. Since the fluctuations in the value of futures
contracts should be similar to those of debt securities, the Series could take
advantage of the anticipated rise in value of debt securities without actually
buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Series could then buy debt securities on
the cash market.
To the extent that market prices move in an unexpected direction, a Series
may not achieve the anticipated benefits of futures contracts or may realize a
loss. For example, if a Series is hedged against the possibility of an increase
in interest rates which would adversely affect the price of securities held in
its portfolio and interest rates decrease instead, the Series would lose part or
all of the benefit of the increased value which it has because it would have
offsetting losses in its futures position. In addition, in such situations, if
the Series had insufficient cash, it may be required to sell securities from its
portfolio to meet daily variation margin requirements. Such sales of securities
may, but will not necessarily, be at increased prices which reflect the rising
market. A Series may be required to sell securities at a time when it may be
disadvantageous to do so.
OPTIONS
The Series may purchase and write call or put options on foreign or U.S.
securities and indices and enter into related closing transactions, but will
only engage in option strategies for non-speculative purposes.
The U.S. Funds may invest in options that are listed on U.S. exchanges or
traded over-the-counter and the Global Funds, the U.S. Large Capitalization
Growth Fund, U.S. Small Capitalization Growth Fund and the Global (ex-U.S.)
Equity Fund may invest in options that are either listed on U.S. or
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recognized foreign exchanges or traded over-the-counter. Certain over-the-
counter options may be illiquid. Thus, it may not be possible to close options
positions and this may have an adverse impact on a Series' ability to
effectively hedge its securities. The Series have been notified by the SEC that
it considers over-the-counter options to be illiquid. Accordingly, a Series will
only invest in such options to the extent consistent with its 15% limit on
investments in illiquid securities.
PURCHASING CALL OPTIONS - The Series may purchase call options on
securities to the extent that premiums paid by a Series do not aggregate more
than 20% of the Series' total assets. When a Series purchases a call option, in
return for a premium paid by the Series to the writer of the option, the Series
obtains the right to buy the security underlying the option at a specified
exercise price at any time during the term of the option. The writer of the
call option, who receives the premium upon writing the option, has the
obligation, upon exercise of the option, to deliver the underlying security
against payment of the exercise price. The advantage of purchasing call options
is that a Series may alter portfolio characteristics and modify portfolio
maturities without incurring the cost associated with transactions.
A Series may, following the purchase of a call option, liquidate its
position by effecting a closing sale transaction. This is accomplished by
selling an option of the same series as the option previously purchased. The
Series will realize a profit from a closing sale transaction if the price
received on the transaction is more than the premium paid to purchase the
original call option; the Series will realize a loss from a closing sale
transaction if the price received on the transaction is less than the premium
paid to purchase the original call option.
Although the Series will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on an
exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that a Series would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by a Series may expire without any value
to the Series, in which event the Series would realize a capital loss which will
be short-term unless the option was held for more than one year.
COVERED CALL WRITING - A Series may write covered call options from time
to time on such portions of its portfolio, without limit, as Brinson Partners
determines is appropriate in seeking to achieve the Series' investment
objective. The advantage to a Series of writing covered calls is that the
Series receives a premium which is additional income. However, if the security
rises in value, the Series may not fully participate in the market appreciation.
During the option period for a covered call option, the writer may be
assigned an exercise notice by the broker-dealer through whom such call option
was sold, requiring the writer to deliver the underlying security against
payment of the exercise price. This obligation is terminated upon the
expiration of the option or upon entering a closing purchase transaction. A
closing purchase transaction, in which a Series, as writer of an option,
terminates its obligation by purchasing an option of the same series as the
option previously written, cannot be effected with respect to an option once the
option writer has received an exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable a
Series to write another call option on the underlying security with either a
different exercise price or expiration date or both. A Series may realize a net
gain or loss from a closing purchase transaction depending upon whether the net
amount of the original premium received on the call option is more or less than
the cost of effecting the closing purchase transaction. Any loss incurred in a
closing purchase transaction may be partially or entirely offset by the premium
received from a sale of a
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different call option on the same underlying security. Such a loss may also be
wholly or partially offset by unrealized appreciation in the market value of the
underlying security. Conversely, a gain resulting from a closing purchase
transaction could be offset in whole or in part by a decline in the market value
of the underlying security.
If a call option expires unexercised, the Series will realize a short-term
capital gain in the amount of the premium on the option less the commission
paid. Such a gain, however, may be offset by depreciation in the market value
of the underlying security during the option period. If a call option is
exercised, a Series will realize a gain or loss from the sale of the underlying
security equal to the difference between the cost of the underlying security and
the proceeds of the sale of the security plus the amount of the premium on the
option less the commission paid.
The Series will write call options only on a covered basis, which means
that a Series will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, a Series would be required to continue to hold a security which it
might otherwise wish to sell or deliver a security it would want to hold. The
exercise price of a call option may be below, equal to or above the current
market value of the underlying security at the time the option is written.
PURCHASING PUT OPTIONS - The Series may only purchase put options to the
extent that the premiums on all outstanding put options do not exceed 20% of a
Series' total assets. A Series will, at all times during which it holds a put
option, own the security covered by such option. With regard to the writing of
put options, each Series will limit the aggregate value of the obligations
underlying such put options to 50% of its total net assets. The purchase of the
put on substantially identical securities held will constitute a short sale for
tax purposes, the effect of which is to create short-term capital gain on the
sale of the security and to suspend running of its holding period (and treat it
as commencing on the date of the closing of the short sale) or that of a
security acquired to cover the same if, at the time the put was acquired, the
security had not been held for more than one year.
A put option purchased by a Series gives it the right to sell one of its
securities for an agreed price up to an agreed date. The Series intend to
purchase put options in order to protect against a decline in the market value
of the underlying security below the exercise price less the premium paid for
the option ("protective puts"). The ability to purchase put options will allow
the Series to protect unrealized gains in an appreciated security in their
portfolios without actually selling the security. If the security does not drop
in value, a Series will lose the value of the premium paid. A Series may sell a
put option which it has previously purchased prior to the sale of the securities
underlying such option. Such sale will result in a net gain or loss depending
on whether the amount received on the sale is more or less than the premium and
other transaction costs paid on the put option which is sold.
The Series may sell a put option purchased on individual portfolio
securities. Additionally, the Series may enter into closing sale transactions.
A closing sale transaction is one in which a Series, when it is the holder of an
outstanding option, liquidates its position by selling an option of the same
series as the option previously purchased.
WRITING PUT OPTIONS - The Series may also write put options on a secured
basis which means that a Series will maintain in a segregated account with its
custodian Segregated Assets in an amount not less than the exercise price of the
option at all times during the option period. The amount of Segregated Assets
held in the segregated account will be adjusted on a daily basis to reflect
changes in the market value of the securities covered by the put option written
by the Series. Secured put options will generally be written in circumstances
where Brinson Partners wishes to purchase the underlying security for a Series'
portfolio at a price lower than the current market price of the security. In
such event, a Series would write a secured put option at an exercise price
which, reduced by the premium received on the option, reflects the lower price
it is willing to pay.
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Following the writing of a put option, a Series may wish to terminate the
obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Series may not, however, effect
such a closing transaction after it has been notified of the exercise of the
option.
INDEX OPTIONS
The Series may purchase exchange-listed call options on stock and fixed
income indices depending upon whether a Series is an equity or bond series and
sell such options in closing sale transactions for hedging purposes. A Series
may purchase call options on broad market indices to temporarily achieve market
exposure when the Series is not fully invested. A Series may also purchase
exchange-listed call options on particular market segment indices to achieve
temporary exposure to a specific industry.
In addition, the Series may purchase put options on stock and fixed income
indices and sell such options in closing sale transactions for hedging purposes.
A Series may purchase put options on broad market indices in order to protect
its fully invested portfolio from a general market decline. Put options on
market segments may be bought to protect a Series from a decline in value of
heavily weighted industries in the Series' portfolio. Put options on stock and
fixed income indices may also be used to protect a Series' investments in the
case of a major redemption.
The Series may also write (sell) put and call options on stock and fixed
income indices. While the option is open, a Series will maintain a segregated
account with its custodian in an amount equal to the market value of the option.
Options on indices are similar to regular options except that an option on
an index gives the holder the right, upon exercise, to receive an amount of cash
if the closing level of the index upon which the option is based is greater than
(in the case of a call) or lesser than (in the case of a put) the exercise price
of the option. This amount of cash is equal to the difference between the
closing price of the index and the exercise price of the option expressed in
dollars times a specified multiple (the "multiplier"). The indices on which
options are traded include both U.S. and non-U.S. markets.
SPECIAL RISKS OF OPTIONS ON INDICES
The Series' purchases of options on indices will subject them to the risks
described below.
Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular security, whether a Series will
realize gain or loss on the purchase of an option on an index depends upon
movements in the level of prices in the market generally or in an industry or
market segment rather than movements in the price of a particular security.
Accordingly, successful use by a Series of options on indices is subject to
Brinson Partners' ability to predict correctly the direction of movements in the
market generally or in a particular industry. This requires different skills
and techniques than predicting changes in the prices of individual securities.
Index prices may be distorted if trading of a substantial number of
securities included in the index is interrupted causing the trading of options
on that index to be halted. If a trading halt occurred, a Series would not be
able to close out options which it had purchased and the Series may incur losses
if the underlying index moved adversely before trading resumed. If a trading
halt occurred and restrictions prohibiting the exercise of options were imposed
through the close of trading on the last day before expiration, exercises on
that day would be settled on the basis of a closing index value that may not
reflect current price information for securities representing a substantial
portion of the value of the index.
If a Series holds an index option and exercises it before final
determination of the closing index value for that day, it runs the risk that the
level of the underlying index may change before closing. If
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such a change causes the exercised option to fall "out-of-the-money," the Series
will be required to pay the difference between the closing index value and the
exercise price of the option (times the applicable multiplier) to the assigned
writer. Although a Series may be able to minimize this risk by withholding
exercise instructions until just before the daily cutoff time or by selling
rather than exercising the option when the index level is close to the exercise
price, it may not be possible to eliminate this risk entirely because the cutoff
times for index options may be earlier than those fixed for other types of
options and may occur before definitive closing index values are announced.
RULE 144A AND ILLIQUID SECURITIES
The Series may invest in securities that are exempt under Rule 144A from
the registration requirements of the 1933 Act. Those securities purchased under
Rule 144A are traded among qualified institutional investors.
The Board has instructed Brinson Partners to consider the following factors
in determining the liquidity of a security purchased under Rule 144A: (i) the
frequency of trades and trading volume for the security; (ii) whether at least
three dealers are willing to purchase or sell the security and the number of
potential purchasers; (iii) whether at least two dealers are making a market in
the security; and (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of transfer). Although having delegated
the day-to-day functions, the Board will continue to monitor and periodically
review the Advisor's selection of Rule 144A securities, as well as the Advisor's
determinations as to their liquidity. Investing in securities under Rule 144A
could have the effect of increasing the level of a Series' illiquidity to the
extent that qualified institutional buyers become, for a time, uninterested in
purchasing these securities. After the purchase of a security under Rule 144A,
however, the Board and Brinson Partners will continue to monitor the liquidity
of that security to ensure that each Series has no more than 15% of its net
assets in illiquid securities.
The Series will limit investments in securities of issuers which the Series
are restricted from selling to the public without registration under the 1933
Act to no more than 15% of the Series' net assets, excluding restricted
securities eligible for resale pursuant to Rule 144A that have been determined
to be liquid pursuant to a policy and procedures adopted by the Trust's Board
which includes continuing oversight by the Board.
If Brinson Partners determines that a security purchased in reliance on
Rule 144A which was previously determined to be liquid, is no longer liquid and,
as a result, the Series' holdings of illiquid securities exceed the Series' 15%
limit on investment in such securities, Brinson Partners will determine what
action shall be taken to ensure that the Series continue to adhere to such
limitation, including disposing of illiquid assets which may include such Rule
144A securities.
OTHER INVESTMENTS
The Board may, in the future, authorize a Series to invest in securities
other than those listed in this SAI and in the Prospectuses, provided such
investment would be consistent with that Series' investment objective and that
it would not violate any fundamental investment policies or restrictions
applicable to that Series.
INVESTMENTS RELATING TO THE GLOBAL FUNDS, U.S LARGE CAPITALIZATION GROWTH FUND,
U.S. SMALL CAPITALIZATION GROWTH FUND, HIGH YIELD FUND, GLOBAL (EX-U.S.) EQUITY
FUND, EMERGING MARKETS EQUITY FUND AND EMERGING MARKETS DEBT FUND
The following discussion of strategies, techniques and policies applies
only to the Global Fund, Global Equity Fund, Global Bond Fund, U.S. Large
Capitalization Growth Fund, U.S. Small
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Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, High Yield
Fund, Global (ex-U.S.) Equity Fund, Emerging Markets Equity Fund and Emerging
Markets Debt Fund.
FOREIGN SECURITIES
Investors should recognize that investing in foreign issuers involves
certain considerations, including those set forth in the Series' Prospectuses,
which are not typically associated with investing in U.S. issuers. Since the
stocks of foreign companies are frequently denominated in foreign currencies,
and since the Series may temporarily hold uninvested reserves in bank deposits
in foreign currencies, the Series will be affected favorably or unfavorably by
changes in currency rates and in exchange control regulations and may incur
costs in connection with conversions between various currencies. The investment
policies of the Series permit them to enter into forward foreign currency
exchange contracts, futures, options and interest rate swaps (in the case of the
Global Funds) in order to hedge portfolio holdings and commitments against
changes in the level of future currency rates.
The Global Bond Fund, High Yield Fund, Emerging Markets Equity Fund
and Emerging Markets Debt Fund may invest in Eurodollar securities, which are
fixed income securities of a U.S. issuer or a foreign issuer that are issued
outside the United States. Interest and dividends on Eurodollar securities are
payable in U.S. dollars.
On January 1, 1999, the European Monetary Union (the "EMU") plans to
introduce a new single currency, the Euro, which will replace the national
currencies of participating member nations. If the Series hold investments in
nations with currencies replaced by the Euro, the investment process, including
trading, foreign exchange, payments, settlements, cash accounts, custody and
accounting, will be impacted. Although it is not possible to predict the impact
of the Euro on the Series, the transition and the elimination of currency risk
among nations participating in the EMU may change the economic environment and
behavior of investors, particularly in European markets.
The adoption of the Euro does not reduce the currency risk presented by the
fluctuations in value of the U.S. dollar to other currencies and, in fact,
currency risk may be magnified. Also, increased market volatility may result.
Additional risks that may result include the fact that European issuers in which
the Series invest may face substantial conversion costs, which may not be
accurately anticipated and may impact issuer profitability and creditworthiness.
Brinson Partners has created an interdepartmental team to handle all Euro-
related changes to enable the Series to process transactions accurately and
completely with minimal disruption to business activities. While there can be
no assurance that the Series will not be adversely affected, Brinson Partners
and the Trust's service providers are taking steps that they believe are
reasonably designed to address the Euro issue.
FORWARD FOREIGN CURRENCY CONTRACTS
The Series may purchase or sell currencies and/or engage in forward foreign
currency transactions in order to expedite settlement of portfolio transactions
and to manage currency risk.
Forward foreign currency contracts are traded in the inter-bank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement and no
commissions are charged at any stage for trades. The Series will account for
forward contracts by marking-to-market each day at current forward contract
values.
A Series will only enter into forward contracts to sell, for a fixed amount
of U.S. dollars or other appropriate currency, an amount of foreign currency, to
the extent that the value of the short forward contract is covered by the
underlying value of securities denominated in the currency being sold.
Alternatively, when a Series enters into a forward contract to sell an amount of
foreign currency, the
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Series' custodian or sub-custodian will place Segregated Assets in a segregated
account of the Series in an amount not less than the value of the Series' total
assets committed to the consummation of such forward contracts. If the
additional Segregated Assets placed in the segregated account decline,
additional cash or securities will be placed in the account on a daily basis so
that the value of the account will equal the amount of the Series' commitments
with respect to such contracts.
OPTIONS ON FOREIGN CURRENCIES
The Series also may purchase and write put and call options on foreign
currencies (traded on U.S. and foreign exchanges or over-the-counter markets) to
manage the Series' exposure to changes in currency exchange rates. The Series
may purchase and write options on foreign currencies for hedging purposes in a
manner similar to that in which futures contracts on foreign currencies, or
forward contracts, will be utilized. For example, a decline in the dollar value
of a foreign currency in which portfolio securities are denominated will reduce
the dollar value of such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminutions in the value of
portfolio securities, the Series may purchase put options on the foreign
currency. If the dollar price of the currency does decline, a Series will have
the right to sell such currency for a fixed amount in dollars and will thereby
offset, in whole or in part, the adverse effect on its portfolio which otherwise
would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
dollar price of such securities, the Series may purchase call options on such
currency.
The purchase of such options could offset, at least partially, the effects
of the adverse movement in exchange rates. As in the case of other types of
options, however, the benefit to the Series to be derived from purchases of
foreign currency options will be reduced by the amount of the premium and
related transaction costs. In addition, where currency exchange rates do not
move in the direction or to the extent anticipated, a Series could sustain
losses on transactions in foreign currency options which would require it to
forego a portion or all of the benefits of advantageous changes in such rates.
The Series may write options on foreign currencies for the same types of
hedging purposes. For example, where a Series anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates, it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution in the value of
portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, a Series
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Series to hedge such
increased cost up to the amount of the premium. As in the case of other types
of options, however, the writing of a foreign currency option will constitute
only a partial hedge up to the amount of the premium, and only if rates move in
the expected direction. If this does not occur, the option may be exercised and
the Series would be required to purchase or sell the underlying currency at a
loss which may not be offset by the amount of the premium. Through the writing
of options on foreign currencies, a Series also may be required to forego all or
a portion of the benefit which might otherwise have been obtained from favorable
movements in exchange rates.
The Series may write covered call options on foreign currencies. A call
option written on a foreign currency by a Series is "covered" if the Series owns
the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by the custodian bank) upon conversion or exchange of other foreign currency
held in its portfolio. A call option is also covered
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if a Series has a call on the same foreign currency and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written, or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Series in Segregated Assets in a segregated account with its custodian bank.
With respect to writing put options, at the time the put is written, a
Series will establish a segregated account with its custodian bank consisting of
Segregated Assets in an amount equal in value to the amount the Series will be
required to pay upon exercise of the put. The account will be maintained until
the put is exercised, has expired, or the Series has purchased a closing put of
the same series as the one previously written.
SHORT SALES
The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth
Fund and High Yield Fund may from time to time sell securities short. In the
event that the Advisor anticipates that the price of a security will decline, it
may sell the security short and borrow the same security from a broker or other
institution to complete the sale. The Series will only enter into short sales
for hedging purposes. The Series will incur a profit or a loss, depending upon
whether the market price of the security decreases or increases between the date
of the short sale and the date on which the Series must replace the borrowed
security. All short sales will be fully collateralized and a Series will not
sell securities short if immediately after and as a result of the short sale,
the value of all securities sold short by the Series exceeds 25% of its total
assets. Each Series will also limit short sales of any one issuer's securities
to 2% of its total assets and to 2% of any one class of the issuer's securities.
Short sales involve certain risks and special considerations. Possible losses
from short sales may be unlimited, whereas losses from direct purchases of
securities are limited to the total amount invested.
INVESTMENTS RELATING TO THE GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND,
U.S. BOND FUND, HIGH YIELD FUND, EMERGING MARKETS EQUITY FUND AND EMERGING
MARKETS DEBT FUND
The following discussion applies to the Global Fund, Global Bond Fund, U.S.
Balanced Fund, U.S. Bond Fund, High Yield Fund, Emerging Markets Equity Fund and
Emerging Markets Debt Fund.
LOWER RATED DEBT SECURITIES
Fixed income securities rated lower than Baa by Moody's or BBB by S&P are
below investment grade and are considered to be of poor standing and
predominantly speculative. Such securities ("lower rated securities") are
commonly referred to as "junk bonds" and are subject to a substantial degree of
credit risk. Lower rated securities may be issued as a consequence of corporate
restructurings, such as leveraged buy-outs, mergers, acquisitions, debt
recapitalizations or similar events. Also, lower rated securities are often
issued by smaller, less creditworthy companies or by highly leveraged (indebted)
firms, which are generally less able than more financially stable firms to make
scheduled payments of interest and principal. The risks posed by securities
issued under such circumstances are substantial.
In the past, the high yields from lower rated securities have more than
compensated for the higher default rates on such securities. However, there can
be no assurance that diversification will protect the Series from widespread
bond defaults brought about by a sustained economic downturn, or that yields
will continue to offset default rates on lower rated securities in the future.
Issuers of these securities are often highly leveraged, so that their ability to
service their debt obligations during an economic downturn or during sustained
periods of rising interest rates may be impaired. In addition, such issuers may
not have more traditional methods of financing available to them and may be
unable to repay debt at maturity by refinancing. The risk of loss due to
default by the issuer is significantly greater for the holders of low-grade
securities because such securities may be unsecured and may be
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subordinated to other creditors of the issuer. Further, an economic recession
may result in default levels with respect to such securities in excess of
historic averages.
The value of lower-rated securities will be influenced not only by changing
interest rates, but also by the bond market's perception of credit quality and
the outlook for economic growth. When economic conditions appear to be
deteriorating, lower rated securities may decline in market value due to
investors' heightened concern over credit quality, regardless of prevailing
interest rates.
Especially at such times, trading in the secondary market for lower rated
securities may become thin and market liquidity may be significantly reduced.
Even under normal conditions, the market for lower rated securities may be less
liquid than the market for investment grade corporate bonds. There are fewer
securities dealers in the high yield market and purchasers of lower rated
securities are concentrated among a smaller group of securities dealers and
institutional investors. In periods of reduced market liquidity, lower rated
securities prices may become more volatile and the Series' ability to dispose of
particular issues when necessary to meet the Series' liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer may be adversely affected.
Low-grade securities frequently have call or redemption features that would
permit an issuer to repurchase the security from the Series. If a call were
exercised by the issuer during a period of declining interest rates, the Series
likely would have to replace such called security with a lower yielding
security, thus decreasing the net investment income to the Series and any
dividends to investors.
Besides credit and liquidity concerns, prices for lower rated securities
may be affected by legislative and regulatory developments. For example, from
time to time, Congress has considered legislation to restrict or eliminate the
corporate tax deduction for interest payments or to regulate corporate
restructurings such as takeovers or mergers. Such legislation may significantly
depress the prices of outstanding lower rated securities. A description of
various corporate debt ratings appears in Appendix A to this SAI.
Securities issued by foreign issuers rated below investment grade entail
greater risks than higher rated securities, including risk of untimely interest
and principal payment, default, price volatility and may present problems of
liquidity and valuation. The Emerging Markets Equity Fund and the Emerging
Markets Debt Fund do not intend to limit investments in low-grade securities.
PAY-IN-KIND BONDS
The Series may invest in pay-in-kind bonds for the High Yield Fund, the
Emerging Markets Equity Fund and the Emerging Markets Debt Fund. Pay-in-kind
bonds are securities that pay interest through the issuance of additional bonds.
The Series will be deemed to receive interest over the life of such bonds and
may be treated for federal income tax purposes as if interest were paid on a
current basis, although no cash interest payments are received by the Series
until the cash payment date or until the bonds mature.
CONVERTIBLE SECURITIES (ALSO FOR U.S. LARGE CAPITALIZATION GROWTH FUND AND U.S.
SMALL CAPITALIZATION GROWTH FUND)
The Series may invest in convertible securities which generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality. The value of convertible securities may reflect changes in the value
of the underlying common stock. Convertible securities entail less credit risk
than the issuer's common stock because they rank senior to common stock.
Convertible securities entitle the holder to exchange the securities for a
specified number of shares of common stock, usually of the same company, at
specified prices within a certain period of time and to receive interest or
dividends until the holder elects to convert. The provisions of any convertible
security determine its ranking in a company's capital structure. In the case of
subordinated convertible debentures, the holder's claims on
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assets and earnings are subordinated to the claims of other creditors and are
senior to the claims of preferred and common shareholders. In the case of
preferred stock and convertible preferred stock, the holder's claim on assets
and earnings are subordinated to the claims of all creditors but are senior to
the claims of common shareholders.
WHEN-ISSUED SECURITIES (ALSO FOR U.S. LARGE CAPITALIZATION GROWTH FUND AND U.S.
SMALL CAPITALIZATION GROWTH FUND)
The Series may purchase securities offered on a "when-issued" or "forward
delivery" basis. When so offered, the price, which is generally expressed in
yield terms, is fixed at the time the commitment to purchase is made, but
delivery and payment for the when-issued or forward delivery securities take
place at a later date. During the period between purchase and settlement, no
payment is made by the purchaser to the issuer and no interest on the when-
issued or forward delivery security accrues to the purchaser. While when-issued
or forward delivery securities may be sold prior to the settlement date, it is
intended that a Series will purchase such securities with the purpose of
actually acquiring them unless a sale appears desirable for investment reasons.
At the time a Series makes the commitment to purchase a security on a when-
issued or forward delivery basis, it will record the transaction and reflect the
value of the security in determining its net asset value. The market value of
when-issued or forward delivery securities may be more or less than the purchase
price. The Advisor does not believe that a Series' net asset value or income
will be adversely affected by its purchase of securities on a when-issued or
forward delivery basis. The Series will establish a segregated account in which
it will maintain Segregated Assets equal in value to commitments for when-issued
or forward delivery securities. The Segregated Assets maintained by the Series
with respect to any when-issued or forward delivery securities shall be liquid,
unencumbered and marked-to-market daily, and such Segregated Assets shall be
maintained in accordance with pertinent SEC positions.
MORTGAGE-BACKED SECURITIES AND MORTGAGE PASS-THROUGH SECURITIES
The Series may also invest in mortgage-backed securities, which are
interests in pools of mortgage loans, including mortgage loans made by savings
and loan institutions, mortgage bankers, commercial banks and others. Pools of
mortgage loans are assembled as securities for sale to investors by various
governmental, government-related and private organizations as further described
below. The Series may also invest in debt securities which are secured with
collateral consisting of mortgage-backed securities (see "Collateralized
Mortgage Obligations") and in other types of mortgage-related securities.
The timely payment of principal and interest on mortgage-backed securities
issued or guaranteed by the Government National Mortgage Association ("GNMA") is
backed by GNMA and the full faith and credit of the U.S. government. These
guarantees, however, do not apply to the market value of Series shares. Also,
securities issued by GNMA and other mortgage-backed securities may be purchased
at a premium over the maturity value of the underlying mortgages. This premium
is not guaranteed and would be lost if prepayment occurs. Mortgage-backed
securities issued by U.S. government agencies or instrumentalities other than
GNMA are not "full faith and credit" obligations. Certain obligations, such as
those issued by the Federal Home Loan Bank are supported by the issuer's right
to borrow from the U.S. Treasury, while others such as those issued by Fannie
Mae, formerly known as the Federal National Mortgage Association ("FNMA"), are
supported only by the credit of the issuer. Unscheduled or early payments on
the underlying mortgages may shorten the securities' effective maturities and
reduce returns. The Series may agree to purchase or sell these securities with
payment and delivery taking place at a future date. A decline in interest rates
may lead to a faster rate of repayment of the underlying mortgages and expose
the Series to a lower rate of return upon reinvestment. To the extent that such
mortgage-backed securities are held by a Series, the prepayment right of
mortgagors may limit the increase in net asset value of the Series because the
value of the mortgage-backed securities held by the Series may not appreciate as
rapidly as the price of noncallable debt securities.
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A decline in interest rates may lead to a faster rate of repayment of the
underlying mortgages and expose a Series to a lower rate of return upon
reinvestment. To the extent that such mortgage-backed securities are held by a
Series, the prepayment right will tend to limit to some degree the increase in
net asset value of the Series because the value of the mortgage-backed
securities held by the Series may not appreciate as rapidly as the price of
noncallable debt securities.
For federal tax purposes other than diversification under Subchapter M,
mortgage-backed securities are not considered to be separate securities but
rather "grantor trusts" conveying to the holder an individual interest in each
of the mortgages constituting the pool.
Interests in pools of mortgage-backed securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities provide a monthly payment which consists of both
interest and principal payments. In effect, these payments are a "pass-through"
of the monthly payments made by the individual borrowers on their mortgage
loans, net of any fees paid to the issuer or guarantor of such securities.
Additional payments are caused by repayments of principal resulting from the
sale of the underlying property, refinancing or foreclosure, net of fees or
costs which may be incurred. Some mortgage-backed securities (such as
securities issued by the GNMA) are described as "modified pass-through." These
securities entitle the holder to receive all interest and principal payments
owed on the mortgage pool, net of certain fees, at the scheduled payments dates
regardless of whether or not the mortgagor actually makes the payment.
Any discount enjoyed on the purchases of a pass-through type mortgage-
backed security will likely constitute market discount. As a Series receives
principal payments, it will be required to treat as ordinary income an amount
equal to the lesser of the amount of the payment or the "accrued market
discount." Market discount is to be accrued either under a constant rate method
or a proportional method. Pass-through type mortgage-backed securities
purchased at a premium to face will be subject to a similar rule requiring
recognition of an offset to ordinary interest income, an amount of premium
attributable to the receipt of principal. The amount of premium recovered is to
be determined using a method similar to that in place for market discount. A
Series may elect to accrue market discount or amortize premium notwithstanding
the amount of principal received but such election will apply to all bonds held
and thereafter acquired unless permission is granted by the Commissioner of the
Internal Revenue Service to change such method.
The principal governmental guarantor of mortgage-related securities is
GNMA, which is a wholly-owned U. S. government corporation within the Department
of Housing and Urban Development. GNMA is authorized to guarantee, with the
full faith and credit of the U.S. government, the timely payment of principal
and interest on securities issued by institutions approved by GNMA (such as
savings and loan institutions, commercial banks and mortgage bankers) and backed
by pools of mortgages which are insured by the Federal Housing Authority or
guaranteed by the Veterans Administration. These guarantees, however, do not
apply to the market value or yield of mortgage-backed securities or to the value
of Series shares. Also, GNMA securities often are purchased at a premium over
the maturity value of the underlying mortgages. This premium is not guaranteed
and should be viewed as an economic offset to interest to be earned. If
prepayments occur, less interest will be earned and the value of the premium
paid will be lost.
Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. government) include FNMA and the Federal Home Loan Mortgage
Corporation ("FHLMC"). FNMA is a government-sponsored corporation owned
entirely by private stockholders. It is subject to general regulation of the
Secretary of Housing and Urban Development. FNMA purchases conventional (i.e.,
not insured or guaranteed by any government agency) mortgages from a list of
approved seller/servicers which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by FNMA are
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guaranteed as to timely payment of principal and interest by FNMA but are not
backed by the full faith and credit of the U.S. government.
FHLMC is a corporate instrumentality of the U.S. government and was created
by Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. Its stock is owned by the twelve Federal Home
Loan Banks. FHLMC issues Participation Certificates ("PCs") which represent
interests in conventional mortgages from FHLMC's national portfolio. FHLMC
guarantees the timely payment of interest and ultimate collection of principal,
but PCs are not backed by the full faith and credit of the U.S. government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create pass-
through pools of conventional mortgage loans. Such issuers may, in addition, be
the originators and/or servicers of the underlying mortgage loans as well as the
guarantors of the mortgage-related securities. Pools created by such non-
governmental issuers generally offer a higher rate of interest than government
and government-related pools because there are no direct or indirect government
or agency guarantees of payments. However, timely payment of interest and
principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit. The insurance guarantees are issued by governmental
entities, private insurers and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of the issuers thereof will be considered in
determining whether a mortgage-related security meets a Series' investment
quality standards. There can be no assurance that the private insurers or
guarantors can meet their obligations under the insurance policies or guarantee
or guarantees, even if through an examination of the loan experience and
practices of the originators/servicers and poolers, the Advisor determines that
the securities meet the Series' quality standards. Although the market for such
securities is becoming increasingly liquid, securities issued by certain private
organizations may not be readily marketable.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") AND REAL ESTATE MORTGAGE INVESTMENT
CONDUITS ("REMICS")
A CMO is a debt security on which interest and prepaid principal are paid,
in most cases, semi-annually. CMOs may be collateralized by whole mortgage
loans but are more typically collateralized by portfolios of mortgage pass-
through securities guaranteed by GNMA, FHLMC, or FNMA and their income streams.
Privately-issued CMOs tend to be more sensitive to interest rates than
Government-issued CMOs.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payments of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding
the longer maturity classes receive principal only after the first class has
been retired. An investor is partially guarded against a sooner than desired
return of principal because of the sequential payments.
In a typical CMO transaction, a corporation issues multiple series (e.g.,
A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to
purchase mortgages or mortgage pass-through certificates ("Collateral"). The
Collateral is pledged to a third party trustee as security for the Bonds.
Principal and interest payments from the Collateral are used to pay principal on
the Bonds in the order A, B, C, Z. The Series A, B and C Bonds all bear current
interest. Interest on the Series Z Bond is accrued and added to principal and a
like amount is paid as principal on the Series A, B, or C Bond currently being
paid off. When the Series A, B and C Bonds are paid in full, interest and
principal on the Series Z Bond begins to be paid currently. With some CMOs, the
issuer serves as a conduit to allow loan originators (primarily builders or
savings and loan associations) to borrow against their loan portfolios.
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REMICs are private entities formed for the purpose of holding a fixed pool of
mortgages secured by an interest in real property. REMICs are similar to CMOs in
that they issue multiple classes of securities.
Most if not all newly-issued debt securities backed by pools of real estate
mortgages will be issued as regular and residual interests in REMICs because, as
of January 1, 1992, new CMOs which do not make REMIC elections will be treated
as "taxable mortgage pools," a wholly undesirable tax result. Under certain
transition rules, CMOs in existence on December 31, 1991 are unaffected by this
change. The Series will purchase only regular interests in REMICs. REMIC
regular interests are treated as debt of the REMIC and income/discount thereon
must be accounted for on the "catch-up method," using a reasonable prepayment
assumption under the original issue discount rules of the Code.
CMOs and REMICs issued by private entities are not government securities
and are not directly guaranteed by any government agency. They are secured by
the underlying collateral of the private issuer. Yields on privately-issued
CMOs, as described above, have been historically higher than yields on CMOs
issued or guaranteed by U.S. government agencies. However, the risk of loss due
to default on such instruments is higher since they are not guaranteed by the
U.S. government. Such instruments also tend to be more sensitive to interest
rates than U.S. government-issued CMOs. The Series will not invest in
subordinated privately-issued CMOs. For federal income tax purposes, the Series
will be required to accrue income on CMOs and REMIC regular interests using the
"catch-up" method, with an aggregate prepayment assumption.
OTHER MORTGAGE-BACKED SECURITIES
The Advisor expects that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those described above. The mortgages underlying these securities
may include alternative mortgage instruments, that is, mortgage instruments
whose principal or interest payments may vary or whose terms to maturity may
differ from customary long-term fixed rate mortgages. As new types of mortgage-
related securities are developed and offered to investors, the Advisor will,
consistent with a Series' investment objective, policies and quality standards,
consider making investments in such new types of mortgage-related securities.
The Advisor will not purchase any such other mortgage-backed securities until
the Series' Prospectuses and this SAI have been supplemented.
ASSET-BACKED SECURITIES (ALSO FOR U.S. LARGE CAPITALIZATION GROWTH FUND AND U.S.
SMALL CAPITALIZATION GROWTH FUND)
The Series may invest a portion of their assets in debt obligations known
as "asset-backed securities." Asset-backed securities are securities that
represent a participation in, or are secured by and payable from, a stream of
payments generated by particular assets, most often a pool or pools of similar
assets (e.g., receivables on home equity and credit loans and receivables
regarding automobile, credit card, mobile home and recreational vehicle loans,
wholesale dealer floor plans and leases). The High Yield Fund will not invest
in asset-backed securities with remaining effective maturities of less than
thirteen months.
Such receivables are securitized in either a pass-through or a pay-through
structure. Pass-through securities provide investors with an income stream
consisting of both principal and interest payments in respect of the receivables
in the underlying pool. Pay-through asset-backed securities are debt obligations
issued usually by a special purpose entity, which are collateralized by the
various receivables and in which the payments on the underlying receivables
provide that the Series pay the debt service on the debt obligations issued. The
Series may invest in these and other types of asset-backed securities that may
be developed in the future.
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The credit quality of these securities depends primarily upon the quality
of the underlying assets and the level of credit support and/or enhancement
provided. Such asset-backed securities are subject to the same prepayment risks
as mortgage-backed securities. For federal income tax purposes, the Series will
be required to accrue income on pay-through asset-backed securities using the
"catch-up" method, with an aggregate prepayment assumption.
The credit quality of most asset-backed securities depends primarily on the
credit quality of the assets underlying such securities, how well the entity
issuing the security is insulated from the credit risk of the originator or any
other affiliated entities, and the amount and quality of any credit support
provided to the securities. The rate of principal payment on asset-backed
securities generally depends on the rate of principal payments received on the
underlying assets which in turn may be affected by a variety of economic and
other factors. As a result, the yield on any asset-backed security is difficult
to predict with precision and actual yield to maturity may be more or less than
the anticipated yield to maturity. Asset-backed securities may be classified as
"pass-through certificates" or "collateralized obligations."
Asset-backed securities are often backed by a pool of assets representing
the obligations of a number of different parties. To lessen the effect of
failures by obligors on underlying assets to make payment, such securities may
contain elements of credit support. Such credit support falls into two
categories: (i) liquidity protection; and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
due on the underlying pool is timely. Protection against losses resulting from
ultimate default enhances the likelihood of payments of the obligations on at
least some of the assets in the pool. Such protection may be provided through
guarantees, insurance policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the transaction
or through a combination of such approaches. The Series will not pay any
additional fees for such credit support, although the existence of credit
support may increase the price of a security.
Due to the shorter maturity of the collateral backing such securities,
there is less of a risk of substantial prepayment than with mortgage-backed
securities. Such asset-backed securities do, however, involve certain risks not
associated with mortgage-backed securities, including the risk that security
interests cannot be adequately, or in many cases, ever, established. In
addition, with respect to credit card receivables, a number of state and federal
consumer credit laws give debtors the right to set off certain amounts owed on
the credit cards, thereby reducing the outstanding balance. In the case of
automobile receivables, there is a risk that the holders may not have either a
proper or first security interest in all of the obligations backing such
receivables due to the large number of vehicles involved in a typical issuance
and technical requirements under state laws. Therefore, recoveries on
repossessed collateral may not always be available to support payments on the
securities.
Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "reserve
funds" (where cash or investments, sometimes funded from a portion of the
payments on the underlying assets, are held in reserve against future losses)
and "over collateralization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceeds that required to make payments of the
securities and pay any servicing or other fees). The degree of credit support
provided for each issue is generally based on historical information respecting
the level of credit information respecting the level of credit risk associated
with the underlying assets. Delinquencies or losses in excess of those
anticipated could adversely affect the return on an investment in such issue.
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ZERO COUPON AND DELAYED INTEREST SECURITIES
The Series may invest in zero coupon or delayed interest securities which
pay no cash income until maturity or a specified date when the securities begin
paying current interest (the "cash payment date") and are sold at substantial
discounts from their value at maturity. When held to maturity or cash payment
date, the entire income of such securities, which consists of accretion of
discount, comes from the difference between the purchase price and their value
at maturity or cash payment date. The discount varies depending on the time
remaining until maturity or cash payment date, prevailing interest rates,
liquidity of the security and the perceived credit quality of the issuer. The
discount, in the absence of financial difficulties of the issuer, decreases as
the final maturity or cash payment date of the security approaches. The market
prices of zero coupon and delayed interest securities are generally more
volatile and more likely to respond to changes in interest rates than the market
prices of securities having similar maturities and credit qualities that pay
interest periodically. Current federal income tax law requires that a holder of
a zero coupon security report as income each year the portion of the original
issue discount on such security (other than tax-exempt original issue discount
from a zero coupon security) that accrues that year, even though the holder
receives no cash payments of interest during the year. The Series will be
required to distribute such income to shareholders to comply with Subchapter M
of the Code and avoid excise taxes, even though the Series have not received any
cash from the issue.
Zero coupon securities are subject to greater market value fluctuations
from changing interest rates than debt obligations of comparable maturities
which make current distributions of interest (cash). Zero coupon convertible
securities offer the opportunity for capital appreciation as increases (or
decreases) in market value of such securities closely follow the movements in
the market value of the underlying common stock. Zero coupon convertible
securities generally are expected to be less volatile than the underlying common
stocks as they usually are issued with short maturities (15 years or less) and
are issued with options and/or redemption features exercisable by the holder of
the obligation entitling the holder to redeem the obligation and receive a
defined cash payment.
Zero coupon securities include securities issued directly by the U.S.
Treasury, and U.S. Treasury bonds or notes and their unmatured interest coupons
and receipts for their underlying principal ("coupons") which have been
separated by their holder, typically a custodian bank or investment brokerage
firm. A holder will separate the interest coupons from the underlying principal
(the "corpus") of the U.S. Treasury security. A number of securities firms and
banks have stripped the interest coupons and receipts and then resold them in
custodial receipt programs with a number of different names, including "Treasury
Income Growth Receipts" ("TIGRS") and Certificate of Accrual on Treasuries
("CATS"). The underlying U.S. Treasury bonds and notes themselves are held in
book-entry form at the Federal Reserve Bank or, in the case of bearer securities
(i.e., unregistered securities which are owned ostensibly by the bearer or
holder thereof), in trust on behalf of the owners thereof. Counsel to the
underwriters of these certificates or other evidences of ownership of the U.S.
Treasury securities has stated that for federal tax and securities purposes, in
its opinion, purchasers of such certificates, such as the Series, most likely
will be deemed the beneficial holder of the underlying U.S. government
securities. The Series understand that the staff of the SEC no longer considers
such privately stripped obligations to be U.S. government securities, as defined
in the Act; therefore, the Series intends to adhere to this staff position and
will not treat such privately stripped obligations to be U.S. government
securities for the purpose of determining if the Series is "diversified," or for
any other purpose, under the Act.
The U.S. Treasury has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and corpus payments on Treasury securities through the Federal
Reserve book-entry record-keeping system. The Federal Reserve program as
established by the U.S. Treasury Department is known as "STRIPS" or "Separate
Trading of Registered Interest and Principal of Securities." Under the STRIPS
program, a Series will be able to have its beneficial ownership of zero coupon
securities recorded directly in the book-entry record-keeping system in lieu of
having to hold certificates or other evidences of ownership of the underlying
U.S. Treasury securities.
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When U.S. Treasury obligations have been stripped of their unmatured
interest coupons by the holder, the principal or corpus is sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. Once stripped or separated, the corpus and coupons may be sold
separately. Typically, the coupons are sold separately or grouped with other
coupons with like maturity dates and sold in such bundled form. Purchasers of
stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero coupon securities that the U.S. Treasury
sells itself. These stripped securities are also treated as zero coupon
securities with original issue discount for tax purposes.
INVESTMENTS RELATING TO THE GLOBAL FUND, HIGH YIELD FUND, EMERGING MARKETS
EQUITY FUND AND EMERGING MARKETS DEBT FUND
EMERGING MARKETS INVESTMENTS
The Global Fund may invest up to 10% of its assets, and the Emerging
Markets Equity Fund and Emerging Markets Debt Fund may invest substantially all
of their assets, in equity and debt securities of emerging market issuers, or
securities with respect to which the return is derived from the equity or debt
securities of issuers in emerging markets. The High Yield Fund may invest up to
25% of its assets in securities of foreign issuers, which may include securities
of issuers in emerging markets. The Series may invest in equity securities of
issuers in emerging markets, or securities with respect to which the return is
derived from the equity securities of issuers in emerging markets. The Series
also may invest in fixed income securities of emerging market issuers, including
government and government-related entities (including participation in loans
between governments and financial institutions), and of entities organized to
restructure outstanding debt of such issuers. The Series also may invest in
debt securities of corporate issuers in developing countries.
The Series' investments in emerging market government and government-
related securities may consist of (i) debt securities or obligations issued or
guaranteed by governments, governmental agencies or instrumentalities and
political subdivisions located in emerging countries (including participation in
loans between governments and financial institutions), (ii) debt securities or
obligations issued by government owned, controlled or sponsored entities located
in emerging countries and (iii) interests in issuers organized and operated for
the purpose of restructuring the investment characteristics of instruments
issued by any of the entities described above.
The Series' investments in the fixed income securities of emerging market
issuers may include investments in Brady Bonds, Structured Securities, Loan
Participation and Assignments (as such capitalized terms are defined below), and
certain non-publicly traded securities.
The High Yield Fund, the Emerging Markets Equity Fund and the Emerging
Markets Debt Fund may invest in Brady Bonds, which are securities created
through the exchange of existing commercial bank loans to public and private
entities in certain emerging markets for new bonds in connection with debt
restructurings under a debt restructuring plan introduced by former U.S.
Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan debt
restructurings have been implemented to date in Argentina, Bulgaria, Brazil,
Costa Rica, Jordan, Mexico, Nigeria, the Philippines, Poland, Uruguay, Panama,
Peru and Venezuela. Brady Bonds have been issued only in recent years, and for
that reason do not have a very long payment history. Brady Bonds may be
collateralized or uncollateralized, are issued in various currencies (but
primarily the U.S. dollar), and are actively traded in over-the-counter
secondary markets. Dollar-denominated, collateralized Brady Bonds, which may be
fixed-rate bonds or floating-rate bonds, are generally collateralized in full as
to principal by U.S. Treasury zero coupon bonds having the same maturity as the
bonds.
Brady Bonds are often viewed as having three or four valuation components:
the collateralized repayment of principal at final maturity; the collateralized
interest payments; the uncollateralized interest
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payments; and any uncollateralized repayment of principal at maturity (these
uncollateralized amounts constitute the "residual risk"). In light of the
residual risk of Brady Bonds and the history of defaults of countries issuing
Brady Bonds with respect to commercial bank loans by public and private
entities, investments in Brady Bonds may be viewed as speculative. There can be
no assurance that the Brady Bonds in which the Series invests will not be
subject to restructuring arrangements or to requests for a new credit which may
cause the Series to suffer a loss of interest or principal in any of its
holdings.
The High Yield Fund, the Emerging Markets Equity Fund and the Emerging
Markets Debt Fund may invest a portion of their assets in entities organized and
operated solely for the purpose of restructuring the investment characteristics
of sovereign debt obligations. This type of restructuring involves the deposit
with, or purchase by, an entity, such as a corporation or trust, of specified
instruments (such as commercial bank loans or Brady Bonds) and the issuance by
that entity of one or more classes of securities ("Structured Securities")
backed by, or representing interests in, the underlying instruments. The cash
flow of the underlying instruments may be apportioned among the newly issued
Structured Securities to create securities with different investment
characteristics, such as varying maturities, payment priorities and interest
rate provisions, and the extent of the payments made with respect to Structured
Securities is dependent on the extent of the cash flow on the underlying
instruments. Because Structured Securities of the type in which the Series
anticipate investing typically involve no credit enhancement, their credit risk
generally will be equivalent to that of the underlying instruments. The Series
are permitted to invest in a class of Structured Securities that is either
subordinated or unsubordinated to the right of payment of another class.
Subordinated Structured Securities are typically sold in private placement
transactions, and there currently is no active trading market for Structured
Securities. Thus, investments by a Series in Structured Securities will be
limited by the Series' prohibition on investing more than 15% of its net assets
in illiquid securities.
The High Yield Fund, the Emerging Markets Equity Fund and the Emerging
Markets Debt Fund may invest in fixed rate and floating rate loans ("Loans")
arranged through private negotiations between an issuer of sovereign debt
obligations and one or more financial institutions ("Lenders"). The Series'
investments in Loans are expected in most instances to be in the form of a
participation in loans ("Participation") and assignments of all or a portion of
Loans ("Assignments") from third parties. The Series will have the right to
receive payments of principal, interest and any fees to which they are entitled
only from the Lender selling the Participation and only upon receipt by the
Lender of the payments from the borrower. In the event of the insolvency of the
Lender selling a Participation, the Series may be treated as a general creditor
of the Lender and may not benefit from any set-off between the Lender and the
borrower. Certain Participations may be structured in a manner designed to
avoid purchasers of Participations being subject to the credit risk of the
Lender with respect to the Participations. Even under such a structure, in the
event of the Lender's insolvency, the Lender's servicing of the Participation
may be delayed and the assignability of the Participation may be impaired. A
Series will acquire the Participations only if the Lender interpositioned
between the Series and the borrower is determined by the Advisor to be
creditworthy.
When a Series purchases Assignments from Lenders, it will acquire direct
rights against the borrower on the Loan. However, because Assignments are
arranged through private negotiations between potential assignees and potential
assignors, the rights and obligations acquired by the Series as the purchaser of
an Assignment may differ from, and be more limited than, those held by the
assigning Lender.
The Series also may invest in securities that are neither listed on a stock
exchange nor traded over-the-counter, including privately placed securities and
limited partnerships. Investing in such unlisted emerging market equity
securities, including investments in new and early stage companies, may involve
a high degree of business and financial risk that can result in substantial
losses. As a result of the absence of a public trading market for these
securities, they may be less liquid than publicly traded securities.
26
<PAGE>
The Series' investments in emerging market securities will at all times be
limited by the Series' prohibition on investing more than 15% of its net assets
in illiquid securities.
RISKS OF INVESTING IN EMERGING MARKETS
There are additional risks inherent in investing in less developed
countries which are applicable to the Global Fund, High Yield Fund, Emerging
Markets Equity Fund and Emerging Markets Debt Fund. The Series consider a
country to be an "emerging market" if it is defined as an emerging or developing
economy by any one of the following: the International Bank for Reconstruction
and Development (i.e., the World Bank), the International Finance Corporation,
or the United Nations or its authorities. An emerging market security is a
security issued by a government or other issuer that, in the opinion of the
Advisor, has one or more of the following characteristics: (i) the principal
trading market of the security is an emerging market; (ii) the primary revenue
of the issuer (at least 50%) is generated from goods produced or sold,
investments made, or services performed in an emerging market country; or (iii)
at least 50% of the assets of the issuer are situated in emerging market
countries.
Compared to the United States and other developed countries, emerging
countries may have relatively unstable governments, economies based on only a
few industries, and securities markets that trade only a small number of
securities and employ settlement procedures different from those used in the
United States. Prices on these exchanges tend to be volatile and, in the past,
securities in these countries have offered greater potential for gain (as well
as loss) than securities of companies located in developed countries. Further,
investments by foreign investors are subject to a variety of restrictions in
many emerging countries. Countries such as those in which the Series may invest
have historically experienced and may continue to experience, high rates of
inflation, high interest rates, exchange rate fluctuations or currency
depreciation, large amounts of external debt, balance of payments and trade
difficulties and extreme poverty and unemployment. Additional factors which may
influence the ability or willingness to service debt include, but are not
limited to, a country's cash flow situation, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, its government's policy towards the
International Monetary Fund, the World Bank and other international agencies and
the political constraints to which a government debtor may be subject.
The ability of a foreign government or government-related issuer to make
timely and ultimate payments on its external debt obligations will be strongly
influenced by the issuer's balance of payments, including export performance,
its access to international credits and investments, fluctuations in interest
rates and the extent of its foreign reserves. A country whose exports are
concentrated in a few commodities or whose economy depends on certain strategic
imports could be vulnerable to fluctuations in international prices of these
commodities or imports. To the extent that a country receives payment for its
exports in currencies other than dollars, its ability to make debt payments
denominated in dollars could be adversely affected. If a foreign government or
government-related issuer cannot generate sufficient earnings from foreign trade
to service its external debt, it may need to depend on continuing loans and aid
from foreign governments, commercial banks, and multilateral organizations, and
inflows of foreign investment. The commitment on the part of these foreign
governments, multilateral organizations and others to make such disbursements
may be conditioned on the government's implementation of economic reforms and/or
economic performance and the timely service of its obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may curtail the willingness of such third parties
to lend funds, which may further impair the issuer's ability or willingness to
service its debts in a timely manner. The cost of servicing external debt will
also generally be adversely affected by rising international interest rates,
because many external debt obligations bear interest at rates which are adjusted
based upon international interest rates. The ability to service external debt
will also depend on the level of the relevant government's international
currency reserves and its access to foreign exchange. Currency devaluations may
affect the ability of a governmental issuer to obtain sufficient foreign
exchange to service its external debt.
27
<PAGE>
As a result of the foregoing, a governmental issuer may default on its
obligations. If such a default occurs, the Series may have limited effective
legal recourse against the issuer and/or guarantor. Remedies must, in some
cases, be pursued in the courts of the defaulting country itself, and the
ability of the holder of foreign government and government-related debt
securities to obtain recourse may be subject to the political climate in the
relevant country. In addition, no assurance can be given that the holders of
commercial bank debt will not contest payments to the holders of other foreign
government and government-related debt obligations in the event of default under
their commercial bank loan agreements.
The issuers of the government and government-related debt securities in
which the Series expect to invest have in the past experienced substantial
difficulties in servicing their external debt obligations, which has led to
defaults on certain obligations and the restructuring of certain indebtedness.
Restructuring arrangements have included, among other things, reducing and
rescheduling interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and unpaid interest to
Brady Bonds, and obtaining new credit to finance interest payments. Holders of
certain foreign government and government-related debt securities may be
requested to participate in the restructuring of such obligations and to extend
further loans to their issuers. There can be no assurance that the Brady Bonds
and other foreign government and government-related debt securities in which the
Series may invest will not be subject to similar defaults or restructuring
arrangements which may adversely affect the value of such investments.
Furthermore, certain participants in the secondary market for such debt may be
directly involved in negotiating the terms of these arrangements and may
therefore have access to information not available to other market participants.
Payments to holders of the high yield, high risk, foreign debt securities
in which the Series may invest may be subject to foreign withholding and other
taxes. Although the holders of foreign government and government-related debt
securities may be entitled to tax gross-up payments from the issuers of such
instruments, there is no assurance that such payments will be made.
RUSSIAN SECURITIES
The Global Fund, Emerging Markets Equity Fund and Emerging Markets Debt
Fund may invest in securities of Russian companies. The registration, clearing
and settlement of securities transactions in Russia are subject to significant
risks not normally associated with securities transactions in the United States
and other more developed markets. Ownership of shares of Russian companies is
evidenced by entries in a company's share register (except where shares are held
through depositories that meet the requirements of the Act) and the issuance of
extracts from the register or, in certain limited cases, by formal share
certificates. However, Russian share registers are frequently unreliable and a
Series could possibly lose its registration through oversight, negligence or
fraud. Moreover, Russia lacks a centralized registry to record securities
transactions and registrars located throughout Russia or the companies
themselves maintain share registers. Registrars are under no obligation to
provide extracts to potential purchasers in a timely manner or at all and are
not necessarily subject to state supervision. In addition, while registrars are
liable under law for losses resulting from their errors, it may be difficult for
a Series to enforce any rights it may have against the registrar or issuer of
the securities in the event of loss of share registration. Although Russian
companies with more than 1,000 shareholders are required by law to employ an
independent company to maintain share registers, in practice, such companies
have not always followed this law. Because of this lack of independence of
registrars, management of a Russian company may be able to exert considerable
influence over who can purchase or sell the company's shares by illegally
instructing the registrar to refuse to record transactions on the share
register. Furthermore, these practices may prevent a Series from investing in
the securities of certain Russian companies deemed suitable by the Advisor and
could cause a delay in the sale of Russian securities by the Series if the
company deems a purchaser unsuitable, which may expose the Series to potential
loss on its investment.
28
<PAGE>
In light of the risks described above, the Board has approved certain
procedures concerning the Series' investments in Russian securities. Among
these procedures is a requirement that the Series will not invest in the
securities of a Russian company unless that issuer's registrar has entered into
a contract with the Series' sub-custodian containing certain protective
conditions including, among other things, the sub-custodian's right to conduct
regular share confirmations on behalf of the Series. This requirement will
likely have the effect of precluding investments in certain Russian companies
that the Series would otherwise make.
INVESTMENTS IN AFFILIATED INVESTMENT COMPANIES
The Series may invest in securities issued by other registered investment
companies advised by Brinson Partners pursuant to exemptive relief granted by
the SEC. Currently, the Global Fund is the only Series of the Trust that
intends to invest in portfolios of Brinson Relationship Funds, another
investment company which is advised by Brinson Partners, and only to the extent
consistent with the Advisor's investment process of allocating assets to
specific asset classes. The Global Fund will invest in corresponding portfolios
of Brinson Relationship Funds only to the extent that the Advisor determines
that such investments are a more efficient means for the Global Fund to gain
exposure to the asset classes referred to below than by investing directly in
individual securities.
To gain exposure to equity and fixed income securities of issuers located
in emerging market countries, the Global Fund may invest that portion of its
assets allocated to emerging markets investments in the Brinson Emerging Markets
Equity Fund portfolio and the Brinson Emerging Markets Debt Fund portfolio of
Brinson Relationship Funds. The investment objective of the Brinson Emerging
Markets Equity Fund and the Brinson Emerging Markets Debt Fund is to maximize
total U.S. dollar return, consisting of capital appreciation and current income,
while controlling risk. Under normal circumstances, at least 65% of the total
assets of the Brinson Emerging Markets Equity Fund is invested in the equity
securities of issuers in emerging markets or securities with respect to which
the return is derived from the equity securities of issuers in emerging markets.
At least 65% of the total assets of the Brinson Emerging Markets Debt Fund is
invested in the debt securities issued by governments, government-related
entities (including participations in loans between governments and financial
institutions), corporations and entities organized to restructure outstanding
debt of issuers in emerging markets, or debt securities the return on which is
derived primarily from other emerging markets instruments. The Brinson Emerging
Markets Equity Fund and Brinson Emerging Markets Debt Fund are permitted to
invest in the same types of securities as the Global Fund may invest in
directly.
In lieu of investing directly in certain high yield, higher risk
securities, the Global Fund may invest a portion of its assets in the Brinson
High Yield Fund portfolio of Brinson Relationship Funds. The investment
objective of the Brinson High Yield Fund is to maximize total U.S. dollar
return, consisting of capital appreciation and current income, while controlling
risk. The Brinson High Yield Fund maintains a high yield portfolio and as such,
at least 65% of its assets are invested in high yield securities. The Global
Fund currently intends to limit its investment in non-investment grade debt
securities to no more than 5% of its net assets. Any investment in the Brinson
High Yield Fund will be considered within this limitation.
In lieu of investing directly in equity securities issued by companies with
relatively small overall market capitalizations, the Global Fund may invest a
portion of its assets in the Brinson Post-Venture Fund portfolio (the "Post-
Venture Fund") of Brinson Relationship Funds. The investment objective of the
Post-Venture Fund is to maximize total U.S. dollar return, consisting of capital
appreciation and current income, while controlling risk. The Post-Venture Fund
invests primarily in publicly-traded companies representing the lower 5% of the
Wilshire 5000 Index, and, as such, at least 65% of its assets are invested in
small capitalization equity securities.
Each portfolio of Brinson Relationship Funds in which the Global Fund may
invest is permitted to invest in the same securities of a particular asset class
in which the Global Fund is permitted to invest
29
<PAGE>
directly, and with similar risks. Pursuant to undertakings with the SEC, the
Global Fund will not be subject to the imposition of double management or
administration fees with respect to its investments in portfolios of Brinson
Relationship Funds.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies and
may not be changed as to a Series, without the approval of a majority of the
outstanding voting securities (as defined in the Act) of the Series. Unless
otherwise indicated, all percentage limitations listed below apply to the Series
only at the time of the transaction. Accordingly, if a percentage restriction
is adhered to at the time of investment, a later increase or decrease in the
percentage which results from a relative change in values or from a change in a
Series' total assets will not be considered a violation.
Except as set forth under "Investment Objectives and Policies" and
"Investment Considerations and Risks" in each Prospectus, or "Investment
Strategies" in this SAI, each of the Global Fund, Global Equity Fund, Global
Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization
Equity Fund, U.S. Bond Fund and the Global (ex-U.S.) Equity Fund may not:
(i) As to 75% of the total assets of each Series, purchase the
securities of any one issuer, other than securities issued by the
U.S. government or its agencies or instrumentalities, if immediately
after such purchase more than 5% of the value of the total assets of
a Series would be invested in securities of such issuer (this does
not apply to the Global Bond Fund);
(ii) Invest in real estate or interests in real estate (this will not
prevent a Series from investing in publicly-held real estate
investment trusts or marketable securities of companies which may
represent indirect interests in real estate), interests in oil, gas
and/or mineral exploration or development programs or leases;
(iii) Purchase or sell commodities or commodity contracts, but may enter
into futures contracts and options thereon in accordance with its
Prospectus. Additionally, each Series may engage in forward foreign
currency contracts for hedging and non-hedging purposes;
(iv) Make investments in securities for the purpose of exercising control
over or management of the issuer;
(v) Purchase the securities of any one issuer if, immediately after such
purchase, a Series would own more than 10% of the outstanding voting
securities of such issuer;
(vi) Sell securities short or purchase securities on margin, except such
short-term credits as are necessary for the clearance of
transactions. For this purpose, the deposit or payment by a Series
for initial or maintenance margin in connection with futures
contracts is not considered to be the purchase or sale of a security
on margin;
(vii) Make loans, except that this restriction shall not prohibit (a) the
purchase and holding of a portion of an issue of publicly
distributed or privately placed debt securities, (b) the lending of
portfolio securities, or (c) entry into repurchase agreements with
banks or broker-dealers;
(viii) Borrow money in excess of 33 1/3% of the value of its assets except
as a temporary measure for extraordinary or emergency purposes to
facilitate redemptions or issue senior securities. All borrowings
will be done from a bank and to the extent that such borrowing
exceeds 5% of the value of a Series' assets, asset coverage of at
least 300% is
30
<PAGE>
required. A Series will not purchase securities when borrowings
exceed 5% of that Series' total assets;
(ix) Purchase the securities of issuers conducting their principal
business activities in the same industry, other than obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities, if immediately after such purchase, the value of
a Series' investments in such industry would exceed 25% of the value
of the total assets of the Series across several countries;
(x) Act as an underwriter of securities, except that, in connection with
the disposition of a security, a Series may be deemed to be an
"underwriter" as that term is defined in the 1933 Act;
(xi) Invest in securities of any open-end investment company, except that
(i) a Series may purchase securities of money market mutual funds,
(ii) the Global Fund and Global Equity Fund may each invest in the
securities of closed-end investment companies at customary brokerage
commission rates in accordance with the limitations imposed by the
Act and the rules thereunder, and (iii) in accordance with any
exemptive order obtained from the SEC which permits investment by a
Series in other Series or other investment companies or series
thereof advised by the Advisor. In addition, each Series may acquire
securities of other investment companies if the securities are
acquired pursuant to a merger, consolidation, acquisition, plan of
reorganization or a SEC approved offer of exchange;
(xii) Invest in puts, calls, straddles or combinations thereof except to
the extent disclosed in a Series' Prospectus; and
(xiii) Invest more than 5% of its total assets in securities of companies
less than three years old. Such three year periods shall include the
operation of any predecessor company or companies.
Except as set forth under "Investment Objectives and Policies" and
"Investment Considerations and Risks" in each Prospectus, or "Investment
Strategies" in this SAI, each of the U.S. Large Capitalization Growth Fund, U.S.
Small Capitalization Growth Fund, High Yield Fund, Emerging Markets Equity Fund
and Emerging Markets Debt Fund may not:
(i) As to 75% of the total assets of each Series, purchase the
securities of any one issuer, other than securities issued by the
U.S. government or its agencies or instrumentalities, if immediately
after such purchase more than 5% of the value of the total assets of
a Series would be invested in securities of such issuer (this does
not apply to the Emerging Markets Equity Fund and Emerging Markets
Debt Fund) or purchase the securities of any one issuer if,
immediately after such purchase, a Series would own more than 10% of
the outstanding voting securities of such issuer ;
(ii) Invest in real estate or interests in real estate (this will not
prevent a Series from investing in publicly-held real estate
investment trusts or marketable securities of companies which may
represent indirect interests in real estate), interests in oil, gas
and/or mineral exploration or development programs or leases;
(iii) Purchase or sell commodities or commodity contracts, but may enter
into futures contracts and options thereon in accordance with its
Prospectus. Additionally, each Series may engage in forward foreign
currency contracts for hedging and non-hedging purposes;
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<PAGE>
(iv) Make loans, except that this restriction shall not prohibit (a) the
purchase and holding of a portion of an issue of publicly
distributed or privately placed debt securities, (b) the lending of
portfolio securities, or (c) entry into repurchase agreements with
banks or broker-dealers;
(v) Borrow money in excess of 33 1/3% of the value of its assets except
as a temporary measure for extraordinary or emergency purposes to
facilitate redemptions or issue senior securities. All borrowings
will be done from a bank and to the extent that such borrowing
exceeds 5% of the value of a Series' assets, asset coverage of at
least 300% is required. A Series will not purchase securities when
borrowings exceed 5% of that Series' total assets;
(vi) Purchase the securities of issuers conducting their principal
business activities in the same industry, other than obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities, if immediately after such purchase, the value of
a Series' investments in such industry would exceed 25% of the value
of the total assets of the Series across several countries; and
(vii) Act as an underwriter of securities, except that, in connection with
the disposition of a security, a Series may be deemed to be an
"underwriter" as that term is defined in the 1933 Act.
MANAGEMENT OF THE TRUST
The Trust is a Delaware business trust. Under Delaware law, the Board has
overall responsibility for managing the business and affairs of the Trust. The
Trustees elect the officers of the Trust, who are responsible for administering
the day-to-day operations of the Series.
The Trustees and executive officers of the Trust, along with their
principal occupations over the past five years and their affiliations, if any,
with Brinson Partners, are listed below.
TRUSTEES AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
POSITION
WITH
NAME AGE THE TRUST PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ------------------------------- ------- --------------- ----------------------------------------------------------------
<S> <C> <C> <C>
Walter E. Auch 77 Trustee Retired; formerly Chairman and CEO of Chicago Board of Options
6001 N. 62nd Place Exchange (1979-1986); Trustee of the Trust since May, 1994;
Paradise Valley, AZ 85253 Trustee, Brinson Relationship Funds since December, 1994;
Trustee, Brinson Supplementary Trust since November, 1997;
Director, Thomsen Asset Management Corp. since 1987; Director,
Fort Dearborn Income Securities, Inc. 1987 to 1995; Director,
Smith Barney VIP Fund since 1991; Director, SB Advisers since
1992; Director, SB Trak since 1992; Director, Banyan Realty
Trust since 1988; Director, Banyan Land Fund II since 1988;
Director, Banyan Mortgage Investment Fund since 1989; and
Director, Express America Holdings Corp. since 1992, and
Nicholas/Applegate Funds and Legend Properties, Inc.; Director,
Geotek Industries, Inc. 1987 to 1998.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Frank K. Reilly 63 Chairman and Professor, University of Notre Dame since 1982; Trustee of the
College of Business Trustee Trust since December, 1993; Trustee, Brinson Relationship
Administration Funds since September, 1994; Trustee, Brinson Supplementary
University of Notre Dame Trust since November, 1997; Director of The Brinson Funds,
Notre Dame, IN 46556-0399 Inc. 1992-1993; Trustee, Brinson Trust Company, 1992-July,
1993; Director, Fort Dearborn Income Securities, Inc. since
1993; Director, First Interstate Bank of Wisconsin from
January, 1989 through March, 1990; Director, Greenwood Trust
Company since 1993; and Director, Dean Witter Trust, FSB,
since 1996.
Edward M. Roob 64 Trustee Retired; prior thereto, Senior Vice President, Daiwa
841 Woodbine Lane Securities America Inc. (1986-1993); Trustee of the Trust
Northbrook, IL 60002 since January, 1995; Trustee, Brinson Relationship Funds since
January 1995; Trustee, Brinson Supplementary Trust since
November, 1997; Director, Fort Dearborn Income Securities,
Inc. since 1993; Director, Brinson Trust Company since 1993;
Committee Member, Chicago Stock Exchange since 1993; Member of
Board of Governors, Midwest Stock Exchange (1987-1991).
</TABLE>
OFFICERS
<TABLE>
<CAPTION>
POSITION
WITH OFFICER
NAME AGE THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- -------------------------- -------- --------------- ------------ ------------------------------------------------------
<S> <C> <C> <C> <C>
E. Thomas McFarlan 55 President 1992 Managing Director, Brinson Partners, Inc. since 1991;
Treasurer and Principal Accounting Officer, The
Brinson Funds 1995-1997; President and Director of
The Brinson Funds, Inc., 1992 - 1993; Chairman,
Brinson Trust Company since 1996; Trustee, Brinson
Trust Company since 1991; President, Brinson
Supplementary Trust since 1997; Chairman, UBS Brinson
Funds Management Co. since 1999; Managing Director,
UBS Brinson since 1998; prior thereto, Executive Vice
President of Washington Mutual Savings Bank.
Thomas J. Digenan 34 Vice President 1993 Director, Brinson Partners, Inc. since 1993; Vice
President, Brinson Supplementary Trust since 1997;
Assistant Treasurer, The Brinson Funds 1995-1997;
Assistant Secretary, The Brinson Funds, 1993 - 1995;
Assistant Secretary, The Brinson Funds, Inc., 1993;
prior thereto, Senior Manager, KPMG Peat Marwick.
Debra L. Nichols 33 Vice President 1992 Director, Brinson Partners, Inc. since 1995;
Associate, Brinson Partners, Inc. from 1991 to 1995;
Vice President, The Brinson Funds since 1997;
Secretary, The Brinson Funds 1997; Assistant
Secretary, The Brinson Funds 1993 - 1997; Assistant
Secretary, The Brinson Funds, Inc. 1992-1993;
Secretary, Brinson Supplementary Trust since 1997;
prior thereto, private investor.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Carolyn M. Burke 32 Treasurer, 1995 Director, Brinson Partners, Inc., since January 1997;
Secretary Associate, Brinson Partners, Inc. from 1995 to 1997;
and Secretary, Treasurer and Principal Accounting
Principal Officer, The Brinson Funds since 1997; Assistant
Accounting Secretary, The Brinson Funds 1995-1997; Treasurer and
Officer Principal Accounting Officer, Brinson Supplementary
Trust since 1997; prior thereto, Financial Analyst,
Van Kampen American Capital Investment Advisory Corp.
1992-1995; Senior Accountant, KPMG Peat Marwick
1989-1992.
David E. Floyd 30 Assistant 1998 Associate Director, Brinson Partners, Inc. since June
Secretary 1998; Associate, Brinson Partners, Inc., from 1994
to 1998; Assistant Secretary, The Brinson Funds since
1998; Assistant Secretary, Brinson Supplementary
Trust since 1998; Assistant Trust Officer, Brinson
Trust Company since 1993; prior thereto, Mutual Fund
Accountant, John Nuveen & Co.
Mark F. Kemper 41 Assistant 1999 Assistant Secretary, Brinson Partners, Inc. since
Secretary 1993; Assistant Secretary, Brinson Trust Company
since 1993; Secretary, UBS Brinson, Inc. since 1998;
Assistant Secretary, The Brinson Funds since 1999;
Assistant Secretary, Brinson Supplementary Trust
since 1999; Assistant Secretary, Brinson Holdings,
Inc. (1993-1998).
</TABLE>
COMPENSATION TABLE
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
FROM TRUST FOR FISCAL YEAR TRUST AND FUND COMPLEX
NAME AND POSITION HELD ENDED JUNE 30, 1998 PAID TO TRUSTEES1
- ------------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
Walter E. Auch, Trustee $12,300 $24,900
6001 N. 62nd Place
Paradise Valley, AZ 85253
Frank K. Reilly, Trustee $14,400 $42,450
College of Business Administration
University of Notre Dame
Notre Dame, IN 46556-0399
Edward M. Roob, Trustee $14,400 $42,450
841 Woodbine Lane
Northbrook, IL 60002
</TABLE>
/1/ This amount represents the aggregate amount of compensation paid to the
Trustees for (a) service on the Board for the Trust's most recently completed
fiscal year; and (b) service on the Board of Directors of two other investment
companies managed by Brinson Partners for the calendar year ending June 30,
1998.
No officer or Trustee of the Trust who is also an officer or employee of
Brinson Partners receives any compensation from the Trust for services to the
Trust. The Trust pays each Trustee who is not affiliated with Brinson Partners a
fee of $6,000 per year, plus $300 per Series per meeting, and
34
<PAGE>
reimburses each Trustee and officer for out-of-pocket expenses in connection
with travel and attendance at Board meetings.
The Board has an Audit Committee which has the responsibility, among other
things, to (i) recommend the selection of the Trust's independent auditors, (ii)
review and approve the scope of the independent auditors' audit activity, (iii)
review the audited financial statements, and (iv) review with such independent
auditors the adequacy of the Series' basic accounting system and the
effectiveness of the Series' internal controls. The Audit Committee met once
during the fiscal year ended June 30, 1998. There is no separate nominating or
investment committee. Items pertaining to these committees are submitted to the
full Board.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 29, 1999, the officers and Trustees as a group owned less
than 1% of the outstanding equity securities of the Trust and of each class of
equity securities of the Trust except for Thomas J. Digenan who owned 100% of
the outstanding UBS Investment Funds class of shares of the U.S. Large
Capitalization Equity Fund.
As of January 29, 1999, the following persons owned of record or
beneficially more than 5% of the outstanding voting shares of the Brinson Fund-
Class I, Brinson Fund-Class N, UBS Investment Funds class of shares or the
Series, as applicable:
GLOBAL FUND
Percentage of Percentage of
Name & Address of Beneficial and Record Owners Class Series
- ---------------------------------------------- ----- ------
BRINSON FUND-CLASS I
American Express 7.56% 7.16%
Minneapolis, MN
Charles Schwab & Co., Inc. 6.72% 6.36%
San Francisco, CA
Wilmington Trust Company 6.35% 6.02%
Wilmington, DE
Northern Trust Company 5.16% N/A
Chicago, IL
BRINSON FUND-CLASS N
* Emjayco 87.97% N/A
Milwaukee, WI
Merrill Lynch Trust Co. 11.53% N/A
Somerset, NJ
UBS INVESTMENT FUNDS CLASS
* UBS AG 75.71% N/A
New York, NY
35
<PAGE>
GLOBAL EQUITY FUND
Percentage of Percentage of
Name & Address of Beneficial and Record Owners Class Series
- ------------------------------------------------ ----- ------
BRINSON FUND-CLASS I
Wachovia Bank NA 23.33% 10.48%
Winston Salem, NC
Charles Schwab & Co. Inc. 18.35% 8.24%
San Francisco, CA
Wilmington Trust Co. 17.58% 7.89%
Wilmington, DE
Resources Trust Company 14.22% 6.39%
Englewood, CO
FTC & Co. 5.99% N/A
Denver, CO
BRINSON FUND-CLASS N
*National Financial Services Corp. 99.45% N/A
New York, NY
UBS INVESTMENT FUNDS CLASS
*UBS 38.32% 21.02%
New York, NY
UBS SA 19.67% 10.79%
Zurich, Switzerland
UBS SA 12.72% 6.98%
Zurich, Switzerland
GLOBAL BOND FUND
Percentage of Percentage of
Name & Address of Beneficial and Record Owners Class Series
- ------------------------------------------------ ----- ------
BRINSON FUND-CLASS I
*+ Wilmington Trust Co. 32.77% 31.77%
Wilmington, DE
Charles Schwab & Co. Inc. 14.82% 14.36%
San Francisco, CA
36
<PAGE>
Baptist Health Systems, Inc. 10.61% 10.29%
Birmingham, AL
Resources Trust Company 8.97% 8.70%
Englewood, CO
Munson Williams Proctor Institute 7.22% 7.00%
Utica, NY
Wilmington Trust Co. 5.03% N/A
Wilmington, DE
BRINSON FUND-CLASS N
* Emjayco 98.96% N/A
Milwaukee, WI
UBS INVESTMENT FUNDS CLASS
* UBS 58.55% N/A
New York, NY
UBS 16.51% N/A
New York, NY
UBS SA 6.54% N/A
Zurich, Switzerland
U.S. BALANCED FUND
Percentage of Percentage of
Name & Address of Beneficial and Record Owners Class Series
- ------------------------------------------------ ----- ------
BRINSON FUND-CLASS I
*+ Wachovia Bank of NA 33.63% 32.22%
Winston Salem, NC
* + Mitra & Co. 32.88% 31.50%
Milwaukee, WI
American Express 16.71% 16.01%
Minneapolis, MN
Carn & Co. 6.11% 5.86%
Washington, DC
BRINSON FUND-CLASS N
* Brinson Partners, Inc. 100% N/A
Chicago, IL
37
<PAGE>
UBS INVESTMENT FUNDS CLASS
* UBS 59.24% N/A
New York, NY
APD Profit Sharing Plan 15.72% N/A
Key West, FL
UBS SA 12.42% N/A
Zurich, Switzerland
U.S. EQUITY FUND
Percentage of Percentage of
Name & Address of Beneficial and Record Owners Class Series
- ------------------------------------------------ ----- ------
BRINSON FUND-CLASS I
Wachovia Bank NA 12.47% 11.27%
Winston Salem, NC
Charles Schwab & Co., Inc. 10.28% 9.28%
San Francisco, CA
BRINSON FUND-CLASS N
* Merrill Lynch Trust Co. 89.76% N/A
Somerset, NJ
Emjayco 9.99% N/A
Milwaukee, WI
UBS INVESTMENT FUNDS CLASS
* UBS SA 55.84% 5.07%
Zurich, Switzerland
* UBS SA 31.62% N/A
Zurich, Switzerland
UBS 9.52% N/A
New York, NY
U.S. LARGE CAPITALIZATION EQUITY FUND
Percentage of Percentage of
Name & Address of Beneficial and Record Owners Class Series
- ------------------------------------------------ ----- ------
Brinson Fund-Class I
* Resources Trust Company 40.04% 18.33%
Englewood, CO
38
<PAGE>
* Charles Schwab & Co., Inc. 31.62% 14.47%
San Francisco, CA
FTC & Co. 13.24% 6.06%
Denver, CO
Wilmington Trust Company 6.02% N/A
Wilmington, DE
BRINSON FUND-CLASS N
*+ National Financial Services Corp. 99.99% 54.22%
New York, NY
UBS Investment Funds Class
* Thomas J. Digenan 100% N/A
Chicago, IL
U.S. BOND FUND
Percentage of Percentage of
Name & Address of Beneficial Owners Class Series
- ------------------------------------------------ ----- ------
BRINSON FUND-CLASS I
Wachovia Bank NA 15.53% 14.56%
Winston Salem, NC
Charles Schwab & Co. Inc. 13.97% 13.10%
San Francisco, CA
Resources Trust Company 12.01% 11.26%
Englewood, CO
UBS AG 9.75% 9.15%
New York, NY
Lafayette College Endowment 9.33% 8.75%
Easton, PA
Firstcinco Reid 5.98% 5.61%
Cincinnati, OH
Norwest Bank 5.67% 5.32%
Minneapolis, MN
FTC & Co. 5.54% 5.20%
Denver, CO
39
<PAGE>
BRINSON FUND-CLASS N
* Brinson Partners, Inc. 100% N/A
Chicago, IL
UBS INVESTMENT FUNDS CLASS
* UBS 37.76% N/A
New York, NY
UBS SA 14.98% N/A
Zurich, Switzerland
UBS 13.41% N/A
New York, NY
Arlington Press Profit Sharing Plan 7.84% N/A
Brooklyn, NY
Dr. Murray Davidson 5.20% N/A
San Diego, CA
GLOBAL (ex-U.S.) EQUITY FUND
Percentage of Percentage of
Name & Address of Beneficial and Record Owners Class Series
- ------------------------------------------------ ----- ------
BRINSON FUND-CLASS I
The Northern Trust Company 24.12% 23.84%
Chicago, IL
Charles Schwab & Co. Inc. 7.50% 7.43%
San Francisco, CA
Key Trust Company 5.03% N/A
Cleveland, OH
BRINSON FUND-CLASS N
* Emjayco 92.24% N/A
Milwaukee, WI
Brinson Partners Inc 7.76% N/A
Chicago, IL
UBS INVESTMENT FUNDS CLASS
* UBS 36.96% N/A
New York, NY
UBS SA 22.62% N/A
Zurich, Switzerland
40
<PAGE>
Emjayco 9.78% N/A
Milwaukee, WI
UBS SA 9.56% N/A
Zurich, Switzerland
Hans-Ueli Surber 5.32% N/A
San Francisco, CA
HIGH YIELD FUND
Percentage of Percentage of
Name & Address of Beneficial and Record Owners Class Series
- ------------------------------------------------ ----- ------
BRINSON FUND-CLASS I
* UBS AG 75.87% N/A
New York, NY
UBS AG 11.68% N/A
New York, NY
Warburg Dillon Reed LLC 6.86 N/A
Stamford, CT
BRINSON FUND-CLASS N
* Brinson Partners Inc. 100% N/A
Chicago, IL
UBS INVESTMENT FUNDS CLASS
* David J. Nash 35.92% N/A
New York, NY
* PJ Mechanical Corp. 28.99% N/A
Employee Pension Plan
New York, NY
PJ Mechanical Corp. 16.12% N/A
Profit Sharing Plan
New York, NY
Anron Heating & Air Conditioning Inc. 12.65% N/A
Employee Pension Plan
North Babylon, NY
Anron Heating & Air Conditioning Inc. 6.06% N/A
Profit Sharing Plan
North Babylon, NY
41
<PAGE>
U.S. LARGE CAPITALIZATION GROWTH FUND
Percentage of Percentage of
Name & Address of Beneficial and Record Owners Class Series
- ------------------------------------------------ ----- ------
BRINSON FUND-CLASS I
*+ UBS AG 46% 36.76%
New York, NY
*+ Howard Smith & Levin LLP 33.66% 26.91%
New York, NY
CRC Asset Management Corp. 11.06% 8.84%
Hackensack, NJ
Clinical Systems 5.24% N/A
Garden City, NY
BRINSON FUND-CLASS N
* Brinson Partners Inc. 100% N/A
Chicago, IL
UBS INVESTMENT FUNDS CLASS
* Arlington Press Profit Sharing Plan 31.13% 6.24%
Brooklyn, NY
* PJ Mechanical Corp. 27.57% 5.53%
Employee Pension Plan
New York, NY
David J. Nash 15.43% N/A
New York, NY
PJ Mechanical Corp. 12.66% N/A
Profit Sharing Plan
New York, NY
Anron Heating & Air Conditioning Inc. 10.37% N/A
North Babylon, NY
U.S. SMALL CAPITALIZATION GROWTH FUND
Percentage of Percentage of
Name & Address of Beneficial and Record Owners Class Series
- ------------------------------------------------ ----- ------
BRINSON FUND-CLASS I
*+ UBS AG 86.48% 85.29%
New York, NY
42
<PAGE>
BRINSON FUND-CLASS N
* Brinson Partners Inc. 100% N/A
Chicago, IL
UBS INVESTMENT FUNDS CLASS
* PJ Mechanical Corp. 40.11% N/A
Employee Pension Plan
New York, NY
Anron Heating & Air Conditioning Inc. 21.06% N/A
Employee Pension Plan
North Babylon, NY
PJ Mechanical Corp. 16.56% N/A
Profit Sharing Plan
New York, NY
David J. Nash 15.75% N/A
New York, NY
Anron Heating & Air Conditioning Inc. 6.27% N/A
Profit Sharing Plan
North Babylon, NY
* Person deemed to control the class within the meaning of the Act. Note that
such persons possess the ability to control the outcome of matters
submitted for the vote of shareholders of that class.
+ Person deemed to control the Series within the meaning of the Act. Note
that such persons possess the ability to control the outcome of matters
submitted for the vote of shareholders of that Series.
INVESTMENT ADVISORY AND OTHER SERVICES
ADVISOR
Brinson Partners, a Delaware corporation, is an investment management
firm, managing as of December 31, 1998, over $297 billion, primarily for
institutional pension and profit sharing funds. Brinson Partners was organized
in 1989 when it acquired the institutional asset management business of The
First National Bank of Chicago and First Chicago Investment Advisors, N.A.
Brinson Partners and its predecessor entities have managed domestic and
international investment assets since 1974 and global investment assets since
1982. Brinson Partners has offices in Bahrain, Basel, Frankfurt, Geneva, Hong
Kong, London, Melbourne, New York, Paris, Rio de Janeiro, Singapore, Sydney,
Tokyo and Zurich in addition to its principal office at 209 South LaSalle
Street, Chicago, IL 60604-1295. Brinson Partners is a direct wholly-owned
subsidiary of UBS AG. UBS AG, with headquarters in Zurich, Switzerland, is an
internationally diversified organization with operations in many aspects of the
financial services industry. UBS AG was formed by the merger of Union Bank of
Switzerland and Swiss Bank Corporation in June 1998.
Brinson Partners also serves as the investment advisor to nine other
investment companies: Brinson Relationship Funds, which includes seventeen
investment portfolios (series); The Enterprise Group of Funds, Inc. -
International Growth Portfolio; Enterprise Accumulation Trust - International
Growth Portfolio; Fort Dearborn Income Securities, Inc.; The
43
<PAGE>
Hirtle Callaghan Trust - The International Equity Portfolio; John Hancock
Variable Annuity Series Trust -International Balanced Portfolio; Managed
Accounts Services Portfolio Trust -Pace Large Company Value Equity Investments;
AON Funds -International Equity Fund; and The Republic Funds -Republic Equity
Fund.
Pursuant to its investment advisory agreements (the "Agreements") with
the Trust, on behalf of each Series, Brinson Partners receives from each Series
a monthly fee at an annual rate (as described in the Prospectuses and below)
multiplied by the average daily net assets of that Series for providing
investment advisory services. Brinson Partners is responsible for paying its
expenses. Under the Agreements, each Series pays the following expenses: (1) the
fees and expenses of the Trust's disinterested Trustees; (2) the salaries and
expenses of any of the Trust's officers or employees who are not affiliated with
Brinson Partners; (3) interest expenses; (4) taxes and governmental fees; (5)
brokerage commissions and other expenses incurred in acquiring or disposing of
portfolio securities; (6) the expenses of registering and qualifying shares for
sale with the SEC and with various state securities commissions; (7) auditing
and legal costs; (8) insurance premiums; (9) fees and expenses of the Trust's
custodian, administrative and transfer agent and any related services; (10)
expenses of obtaining quotations of the Series' portfolio securities and of
pricing the Series' shares; (11) expenses of maintaining the Trust's legal
existence and of shareholders' meetings; (12) expenses of preparation and
distribution to existing shareholders of reports, proxies and prospectuses; and
(13) fees and expenses of membership in industry organizations.
Under the Agreements, the Advisor is entitled to a monthly fee of the
respective Series' average daily net assets as follows: annual rates of 1.10%
for the Emerging Markets Debt Fund; 1.00% for the U.S. Small Capitalization
Growth Fund; 0.80% for the Global Fund, Global Equity Fund and Global(ex-U.S.)
Equity Fund; 0.75% for the Global Bond Fund; 0.70% for the U.S. Balanced Fund,
U.S. Equity Fund, U.S. Large Capitalization Growth Fund and the U.S. Large
Capitalization Equity Fund; 0.65% for the Emerging Markets Equity Fund; 0.60%
for the High Yield Fund; and 0.50% for the U.S. Bond Fund. The fee payable to
Brinson Partners by the Global Fund, Global Equity Fund, U.S. Small
Capitalization Growth Fund, Global (ex-U.S.) Equity Fund, Emerging Markets
Equity Fund and Emerging Markets Debt Fund is higher than the advisory fees paid
by most other mutual funds, but is comparable to those of other mutual funds
with similar investment objectives. The Advisor has agreed irrevocably to waive
its fees and reimburse expenses to the extent that total operating expenses
exceed the following rates of the respective Series' average daily net assets as
follows, without regard to 12b-1 Plan expenses for the UBS Investment Funds
class of shares or the Brinson-Class N of each Series: 1.60% for the Emerging
Markets Debt Fund; 1.15% for the U.S. Small Capitalization Growth Fund and the
Emerging Markets Equity Fund; 1.10% for the Global Fund; 1.00% for the Global
Equity Fund and the Global (ex-U.S.) Equity Fund; 0.90% for the Global Bond
Fund; 0.80% for the U.S. Balanced Fund, the U.S. Equity Fund and the U.S. Large
Capitalization Growth Fund; 0.70% for the High Yield Fund and the U.S. Large
Capitalization Equity Fund; and 0.60% for the U.S. Bond Fund.
44
<PAGE>
Advisory fees accrued to Brinson Partners were as follows:
A. FISCAL YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
GROSS ADVISORY NET ADVISORY FEES FUND EXPENSES
FEES EARNED PAID PAID
SERIES* BY ADVISOR AFTER FEE WAIVER BY ADVISOR
- ------- ---------- ---------------- ----------
<S> <C> <C> <C>
GLOBAL FUND $3,415,057 $3,415,057 $ 0.00
GLOBAL EQUITY FUND $ 390,824 $ 12,198 $378,626
GLOBAL BOND FUND $ 310,066 $ 158 $309,908
U.S. BALANCED FUND $1,465,283 $1,015,531 $449,752
U.S. EQUITY FUND $ 638,063 $ 326,322 $311,741
U.S. BOND FUND $ 37,868 $ 0.00 $230,216
GLOBAL(ex-U.S.) EQUITY FUND $1,403,109 $1,050,199 $352,910
</TABLE>
B. FISCAL YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
GROSS ADVISORY NET ADVISORY FEES FUND EXPENSES
FEES EARNED PAID PAID
SERIES* BY ADVISOR AFTER FEE WAIVER BY ADVISOR
- ------- ---------- ---------------- ----------
<S> <C> <C> <C>
GLOBAL FUND $4,294,925 $4,294,925 $ 0.00
GLOBAL EQUITY FUND $ 641,075 $ 445,564 $195,511
GLOBAL BOND FUND $ 344,152 $ 149,228 $194,924
U.S. BALANCED FUND $1,775,454 $1,559,981 $215,473
U.S. EQUITY FUND $1,423,666 $1,234,361 $189,305
U.S. BOND FUND $ 67,835 $ 0.00 $142,178
GLOBAL (ex-U.S.) EQUITY FUND $2,420,667 $2,420,667 $ 0.00
</TABLE>
* The U.S. Large Capitalization Equity Fund, the U.S. Large Capitalization
Growth Fund, the U.S. Small Capitalization Growth Fund, the High Yield Fund, the
Emerging Markets Debt Fund and the Emerging Markets Equity Fund had not
commenced operations as of the time periods indicated.
C. FISCAL YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
GROSS ADVISORY NET ADVISORY FEES FUND EXPENSES
FEES EARNED PAID PAID
SERIES* BY ADVISOR AFTER FEE WAIVER BY ADVISOR
- ------- ---------- ---------------- ----------
<S> <C> <C> <C>
GLOBAL FUND $5,378,141 $5,378,141 $ 0.00
GLOBAL EQUITY FUND $ 719,439 $ 697,541 $21,898
GLOBAL BOND FUND $ 500,982 $ 457,480 $43,502
U.S. BALANCED FUND $1,674,661 $1,655,564 $19,097
U.S. EQUITY FUND $3,792,120 $3,792,120 $ 0.00
U.S. LARGE CAPITALIZATION EQUITY FUND $ 21,230 $ 0.00 $23,989
U.S. BOND FUND $ 142,474 $ 74,626 $67,848
GLOBAL (ex-U.S.) EQUITY FUND $3,475,953 $3,475,953 $ 0.00
</TABLE>
* The U.S. Large Capitalization Growth Fund, the U.S. Small Capitalization
Growth Fund, the High Yield Fund, the Emerging Markets Debt Fund and the
Emerging Markets Equity Fund had not commenced operations as
45
<PAGE>
of the time period indicated. Effective December 10, 1998, the Non-U.S. Equity
Fund changed its name to the Global (ex-U.S.) Equity Fund.
Prior to the reorganization of the U.S. Large Capitalization Growth Fund
(the successor to the UBS Large Cap Growth Fund), the U.S. Small Capitalization
Growth Fund (the successor to the UBS Small Cap Fund) and the High Yield Fund
(the successor to the UBS High Yield Bond Fund) (collectively, the "UBS Funds"
and each a "UBS Fund") into the Trust, under their investment advisory
agreements with the New York office of UBS A.G., as the successor to the New
York Branch of the Union Bank of Switzerland ("UBS"), UBS was entitled to a
monthly fee of the corresponding UBS Portfolios' average daily net assets as
follows: annual rates of 0.60% for the UBS Large Cap Growth Fund, 0.60% for the
UBS Small Cap Fund and 0.45% for the UBS High Yield Bond Fund. UBS agreed to
waive its fees and reimburse each UBS Fund and its corresponding Portfolio to
the extent that each UBS Fund's total operating expenses (including its share of
its corresponding Portfolio's expenses) exceeded, on an annual basis, the
following rates of the respective UBS Funds' average daily net assets: 1.00%
for the UBS Large Cap Growth Fund, 1.20% for the UBS Small Cap Fund and 0.90%
for the UBS High Yield Bond Fund.
Advisory fees accrued to UBS were as follows:
A. PERIOD FROM DECEMBER 21, 1997 THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
GROSS ADVISORY NET ADVISORY FEES
FEES PAID FUND EXPENSES
SERIES* EARNED BY UBS AFTER FEE WAIVER PAID BY UBS
- ------- ------------- ---------------- -----------
<S> <C> <C> <C>
U.S. Large Capitalization $ 923 $0 $ 923
Growth Fund
U.S. Small Capitalization $4,233 $0 $4,233
Growth Fund
High Yield Fund $1,611 $0 $1,611
</TABLE>
B. PERIOD FROM JANUARY 1, 1998 THROUGH DECEMBER 20, 1998
<TABLE>
<CAPTION>
GROSS ADVISORY NET ADVISORY FEES
FEES PAID FUND EXPENSES
SERIES* EARNED BY UBS AFTER FEE WAIVER PAID BY UBS
- ------- ------------- ---------------- -----------
<S> <C> <C> <C>
U.S. Large Capitalization $ $ $
Growth Fund
U.S. Small Capitalization $ $ $
Growth Fund
High Yield Fund $ $ $
</TABLE>
[To be completed by amendment.]
46
<PAGE>
Advisory fees accrued to Brinson Partners were as follows:
A. PERIOD FROM DECEMBER 21, 1998 THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
GROSS ADVISORY NET ADVISORY FEES FUND EXPENSES
FEES EARNED BY PAID PAID BY
SERIES* BRINSON PARTNERS AFTER FEE WAIVER BRINSON PARTNERS
- ------- ---------------- ----------------- ----------------
<S> <C> <C> <C>
U.S. Large Capitalization $ $ $
Growth Fund
U.S. Small Capitalization $ $ $
Growth Fund
High Yield Fund $ $ $
</TABLE>
[To be completed by amendment.]
* The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization
Growth Fund and High Yield Fund were reorganized into the Trust on December 21,
1998. Prior to the reorganization, the U.S. Large Capitalization Growth Fund,
U.S. Small Capitalization Growth Fund and High Yield Fund were known as the UBS
Large Cap Growth Portfolio, UBS Small Cap Growth Portfolio and UBS High Yield
Bond Portfolio, respectively. The U.S. Large Capitalization Growth Fund, U.S.
Small Capitalization Growth Fund and High Yield Fund currently have fiscal years
ending on December 31. At the February 22, 1999 Board of Trustees' meeting, the
Board of Trustees of the Trust voted to change the fiscal year end of these
three Funds to June 30.
Under Sub-Advisory Agreements with UBS Brinson, Inc., as the successor to
UBS Asset Management (New York) Inc. (the "Sub-Advisor"), UBS paid the Sub-
Advisor a monthly fee of the respective UBS Portfolios' average daily net assets
as follows:
UBS LARGE CAP 0.30% of the first
GROWTH PORTFOLIO $25 million; 0.25%
of the next $25
million; and 0.20%
over $50 million
UBS SMALL CAP 0.40% of the first
PORTFOLIO $25 million; 0.325%
of the next $25
million; and 0.25%
over $50 million
UBS HIGH YIELD 0.25% of the first
BOND PORTFOLIO $25 million; 0.20%
of the next $25
million; and 0.15%
over $50 million
UBS was responsible for paying the Sub-Advisor its fees. For the period
December 29, 1997 to December 31, 1997, UBS paid $100 to the Sub-Advisor on
behalf of the UBS Large Cap Growth Portfolio. For the period December 22, 1997
to December 31, 1997, UBS paid $1,250 and $535 to the Sub-Advisor on behalf of
the UBS Small Cap and UBS High Yield Bond Portfolios, respectively. For the
period January 1, 1998 to December 20, 1998, UBS paid $________, $_________, and
$__________ to the Sub-Advisor on behalf of the UBS Large Cap Growth Portfolio,
UBS Small Cap Growth Portfolio and UBS High Yield Bond Portfolio, respectively.
[To be completed by amendment.]
47
<PAGE>
General expenses of the Trust (such as costs of maintaining corporate
existence, legal fees, insurance, etc.) will be allocated among the Series in
proportion to their relative net assets. Expenses which relate exclusively to a
particular Series, such as certain registration fees, brokerage commissions and
other portfolio expenses, will be borne directly by that Series.
ADMINISTRATOR
ADMINISTRATIVE, ACCOUNTING, TRANSFER AGENCY AND CUSTODIAN SERVICES
Effective May 10, 1997, the Trust, on behalf of each Fund, entered into a
Multiple Services Agreement (the "Services Agreement") with Morgan Stanley Trust
Company, One Pierrepont Plaza, Brooklyn, New York 11201 ("MSTC"), pursuant to
which MSTC was required to provide general administrative, accounting, portfolio
valuation, transfer agency and custodian services to the Funds, including the
coordination and monitoring of any third party service providers. Effective
October 1, 1998, MSTC was acquired by The Chase Manhattan Bank, 270 Park Avenue,
New York, New York 10017 ("Chase"), and Chase assumed all of MSTC's rights and
obligations under the Services Agreement.
Custody Services. Chase provides custodian services for the securities and
cash of the Funds. The custody fee schedule is based primarily on the net amount
of assets held during the period for which payment is being made plus a per
transaction fee for transactions during the period and out-of-pocket expenses.
Effective October 1, 1998, Chase became the custodian of the Funds pursuant to
the Services Agreement as a result of the merger of MSTC into Chase.
Investors Bank and Trust Company ("Investors Bank"), 200 Clarendon Street,
Boston, Massachusetts 02116, serves as co-custodian for the U.S. Large
Capitalization Growth Fund, the U.S. Small Capitalization Growth Fund and the
High Yield Fund with respect to certain foreign securities until such securities
are transferred to Chase. After such securities are transferred to Chase, Chase
will be the sole custodian for these Series under the terms of the Services
Agreement.
As authorized under the Services Agreement, MSTC had 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
the Funds. Chase has assumed all of MSTC's rights and obligations under the
CGFSC Agreement. CGFSC's business address is 73 Tremont Street, Boston,
Massachusetts 02108-3913.
Pursuant to the CGFSC Agreement, CGFSC provides:
(1) administrative services, including providing the necessary office
space, equipment and personnel to perform administrative and clerical
services; preparing, filing and distributing proxy materials, periodic
reports to investors, registration statements and other documents; and
responding to investor inquiries;
(2) accounting and portfolio valuation services, including the daily
calculation of each Fund's net asset value and the preparation of
certain financial statements; and
(3) transfer agency services, including the maintenance of each investor's
account records, responding to investors' inquiries concerning
accounts, processing purchases and redemptions of each Fund's shares,
acting as dividend and distribution disbursing agent and performing
other service functions. Shareholder inquiries should be made to the
transfer agent at 1-800-448-2430 (for the Brinson Fund-Class N and
Brinson Fund-Class I) or 1-800-794-7753 (for the UBS Investment Funds
class of shares).
48
<PAGE>
For its administrative, accounting, transfer agency and custodian services,
Chase receives the following as compensation from the Trust on an annual basis:
0.0025% of the average daily U.S. assets of the Trust; 0.0525% of the average
daily non-U.S. assets of the Trust; 0.3250% of the average daily emerging
markets equity assets of the Trust; and 0.019% of the average daily emerging
markets debt assets of the Trust. Chase receives an additional fee of 0.075% of
the average daily net assets of the Trust for administrative duties, the latter
subject to the expense limitation applicable to the Trust. No fee (asset based
or otherwise) is charged on any investments made by any fund into any other fund
sponsored or managed by the Advisor and assets of a fund that are invested in
another investment company or series thereof sponsored or managed by the Advisor
will not be counted in determining the 0.075% administrative duties fee or the
applicability of the expense limitation on such fee. The foregoing fees include
all out-of-pocket expenses or transaction charges incurred by Chase and any
third party service provider in providing such services.
Also as authorized under the Services Agreement, Chase has entered into a
sub-administration agreement (the "FDI Agreement") with Funds Distributor, Inc.
("FDI") under which FDI provides administrative assistance to the Funds with
respect to (i) regulatory matters, including regulatory developments and
examinations, (ii) all aspects of each Fund's day-to-day operations, (iii)
office facilities, clerical and administrative services, and (iv) maintenance of
books and records. FDI's business address is 60 State Street, Suite 1300,
Boston, Massachusetts 02109.
Pursuant to the CGFSC Agreement and the FDI Agreement, Chase pays CGFSC and
FDI, respectively, for the services that CGFSC and FDI provide to Chase in
fulfilling Chase's obligations under the Services Agreement.
For the fiscal years ended June 30, 1997 and June 30, 1998, aggregate fees
paid to MSTC for administration, accounting, portfolio valuation and transfer
agency services under the Services Agreement were as follows:
<TABLE>
<CAPTION>
MAY 10, 1997
THROUGH FISCAL FISCAL YEAR ENDED
SERIES* YEAR END JUNE 30, 1997 JUNE 30, 1998
- ------- ---------------------- -------------
<S> <C> <C>
GLOBAL FUND $69,572 $464,398
GLOBAL EQUITY FUND $ 7,799 $ 9,809
GLOBAL BOND FUND $ 3,707 $ 0.00
U.S. BALANCED FUND $10,324 $ 79,503
U S. EQUITY FUND $12,495 $247,167
U.S. LARGE CAPITALIZATION EQUITY FUND $ 0.00 $ 0.00
U.S. BOND FUND $ 0.00 $ 0.00
GLOBAL (ex-U.S.) EQUITY FUND $17,159 $305,643
</TABLE>
* The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth
Fund, High Yield Fund, Emerging Markets Debt and Emerging Markets Equity Funds
had not commenced operations as of the time periods indicated. Effective
December 10, 1998, the Non-U.S. Equity Fund changed its name to the Global (ex-
U.S.) Equity Fund.
Until May 9, 1997, FPS Services, Inc., 3200 Horizon Drive, King of Prussia,
PA 19406-0903 ("FPS"), provided certain administrative services to the Trust
pursuant to an administration agreement (the "Administration Agreement").
As compensation for services performed under the Administration Agreement,
FPS received a fee payable monthly at an annual rate multiplied by the average
daily net assets of the Trust.
49
<PAGE>
Administration fees paid to FPS were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 1, 1996
SERIES* JUNE 30, 1996 THROUGH MAY 9, 1997
- ------- ------------- -------------------
<S> <C> <C>
GLOBAL FUND $293,601 $271,364
GLOBAL EQUITY FUND $ 32,468 $ 38,047
GLOBAL BOND FUND $ 29,216 $ 25,412
U.S. BALANCED FUND $140,841 $121,580
U.S. EQUITY FUND $ 58,286 $ 76,534
U.S. BOND FUND $ 58,286 $ 6,542
GLOBAL (ex-U.S.) EQUITY FUND $119,433 $122,780
</TABLE>
* The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth
Fund, High Yield Fund, Emerging Markets Debt and Emerging Markets Equity Funds
had not commenced operations as of the time periods indicated. Effective
December 10, 1998, the Non-U.S. Equity Fund changed its name to the Global (ex-
U.S.) Equity Fund.
Prior to the reorganization of the UBS Funds into the Trust, IBT Trust &
Custodial Services (Ireland) Limited ("IBT Ireland") provided certain
administrative services to the UBS Funds pursuant to an Administration
Agreement. For its services under the Administration Agreement, each
corresponding UBS Portfolio paid IBT Ireland a fee calculated daily and paid
monthly equal, on an annual basis, to 0.07% of the Portfolio's first $100
million in average daily net assets and 0.05% of the assets in excess of $100
million.
Administrative fees paid to IBT Ireland were as follows:
<TABLE>
<CAPTION>
COMMENCEMENT
OF OPERATIONS ** JANUARY 1, 1998
THROUGH THROUGH
SERIES * DECEMBER 31, 1997 DECEMBER 20, 1998
- -------- ----------------- -----------------
<S> <C> <C>
U.S. Large Capitalization $ $
Growth Fund
U.S. Small Capitalization $ $
Growth Fund
High Yield Fund $ $
</TABLE>
Administrative fees paid to CGFSC were as follows:
<TABLE>
<CAPTION>
DECEMBER 21, 1998
THROUGH
SERIES * DECEMBER 31, 1998
- -------- -----------------
<S> <C>
U.S. Large Capitalization $
Growth Fund
U.S. Small Capitalization $
Growth Fund
High Yield Fund $
</TABLE>
[To be completed by admendment.]
50
<PAGE>
* The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization
Growth Fund and High Yield Fund were reorganized into the Trust on December 21,
1998. Prior to the reorganization, the U.S. Large Capitalization Growth Fund,
U.S. Small Capitalization Growth Fund and High Yield Fund were known as the UBS
Large Cap Growth Portfolio, UBS Small Cap Growth Portfolio and UBS High Yield
Bond Portfolio, respectively. The U.S. Large Capitalization Growth Fund, U.S.
Small Capitalization Growth Fund and High Yield Fund currently have fiscal years
ending on December 31. At the February 22, 1999 Board of Trustees' meeting, the
Board of Trustees' of the Trust voted to change the fiscal year end of these
three Funds to June 30.
** The UBS Large Cap Growth Portfolio commenced operations on October 14,
1997. The UBS Small Cap Portfolio and UBS High Yield Bond Portfolio commenced
operations on September 30, 1997.
INDEPENDENT AUDITORS
[To be completed], are the independent auditors of the Trust.
UNDERWRITER
FDI, 60 State Street, Suite 1300, Boston, MA 02109, acts as an underwriter
of the Series' continuous offer of shares for the purpose of facilitating the
filing of notices regarding sale of the shares of the Series under state
securities laws and to assist in sales of shares pursuant to an underwriting
agreement (the "Underwriting Agreement") approved by the Board. In this regard,
FDI has agreed at its own expense to qualify as a broker-dealer under all
applicable federal or state laws in those states which the Trust shall from time
to time identify to FDI as states in which it wishes to offer the Series' shares
for sale, in order that state filings may be maintained for the Series. FDI does
not receive any compensation under the Underwriting Agreement.
FDI is a broker-dealer registered with the SEC and a member in good
standing of the National Association of Securities Dealers, Inc.
The Trust does not impose any sales loads or redemption fees. Each Series
shall continue to bear the expense of all filing fees incurred in connection
with the filing of notices regarding sale of shares under state securities laws.
The Underwriting Agreement may be terminated by either party upon sixty
(60) days prior written notice to the other party, and if so terminated, the pro
rata portion of the unearned fee will be returned to the Trust.
DISTRIBUTION PLAN
The Board has adopted a distribution plan (the "UBS Investment Plan")
pursuant to Rule 12b-1 under the Act, for each Series' UBS Investment Funds
class of shares and a separate distribution plan (the "Class N Plan") pursuant
to Rule 12b-1 under the Act, for each Series' Brinson Fund-Class N shares (the
UBS Investment Plan and the Class N Plan together, the "Plans"). The UBS
Investment Funds class of shares was formerly known as the SwissKey class of
shares. The name change was made effective on September 15, 1998. The Plans
permit each Series to reimburse FDI, Brinson Partners and others from the assets
of the UBS Investment Funds class of shares and Brinson Fund-Class N shares with
a quarterly fee for services and expenses incurred in distributing and promoting
sales of UBS Investment Funds class of shares and Brinson Fund-Class N shares,
respectively. These expenses include, but are not limited to, preparing and
distributing advertisements and sales literature, printing prospectuses and
reports used for sales purposes, and paying distribution and maintenance fees to
brokers, dealers and others in accordance with a selling agreement with the
Trust on behalf of the UBS Investment Funds class of shares and the Brinson
Fund-Class N shares or FDI. In addition, each Series may make
51
<PAGE>
payments directly to FDI for payment to dealers or others, or directly to
others, such as banks, who assist in the distribution of the UBS Investment
Funds class of shares or Brinson Fund-Class N shares or provide services with
respect to the UBS Investment Funds class of shares or Brinson Fund-Class N
shares.
UBS A.G., or one of its affiliates, pursuant to a selected dealer
agreement, may provide additional compensation to securities dealers from its
own resources in connection with sales of the UBS Investment Funds class of
shares or Brinson Fund-Class N shares of the Series.
The aggregate distribution fees paid by the Series from the assets of the
respective UBS Investment Funds class of shares to FDI and others under the UBS
Investment Plan may not exceed 0.90% of a Fund's average daily net assets in any
year (0.25% of which are service fees to be paid by the Series to FDI, dealers
and others, for providing personal service and/or maintaining shareholder
accounts). The UBS Investment Plan provides, however, that the aggregate
distribution fees for each respective Fund shall not exceed the following
maximum amounts for the 1999 fiscal year: UBS Investment Fund-Global - 0.65%,
UBS Investment Fund-Global Equity - 0.76%, UBS Investment Fund-Global Bond -
0.49%, UBS Investment Fund-U.S. Balanced - 0.50%, UBS Investment Fund-U.S.Equity
- - 0.52%, UBS Investment Fund-U.S. Large Capitalization Equity - 0.52%, UBS
Investment Fund-U.S. Large Capitalization Growth - 0.77%, UBS Investment Fund-
U.S. Small Capitalization Growth - 0.77%, UBS Investment Fund-U.S. Bond - 0.47%,
UBS Investment Fund-High Yield - 0.85%, UBS Investment Fund-Global (ex-U.S.)
Equity - 0.84%, UBS Investment Fund-Emerging Markets Equity - 0.85% and UBS
Investment Fund-Emerging Markets Debt - 0.75%.
The aggregate distribution fees paid by the Series from the assets of the
respective Brinson Fund-Class N shares to FDI and others under the Class N Plan
may not exceed 0.25% of a Fund's average daily net assets in any year.
The UBS Investment Plan does not apply to the Brinson Fund-Class I or the
Brinson Fund-Class N shares of each Series and those shares are not included in
calculating the UBS Investment Plan's fees. The Class N Plan does not apply to
the Brinson Fund-Class I or the UBS Investment Funds class of shares of each
Series and those shares are not included in calculating the Class N Plan's fees.
The quarterly fees paid to FDI under the Plans are subject to the review
and approval by the Trust's Trustees who are not "interested persons" of the
Advisor or FDI (as defined in the Act) and who may reduce the fees or terminate
the Plans at any time.
Amounts spent on behalf of each UBS Investment Funds class of shares
pursuant to the UBS Investment Plan during the fiscal year ended June 30, 1998
are set forth below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
COMPENSATION COMPENSATION COMPENSATION TO
OF OF UBS SALES
FUND PRINTING UNDERWRITERS DEALERS PERSONNEL ADVERTISING OTHER
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
UBS Investment $3,741.36 $0.00 $0.00 $215,695.93 $0.00 $ 64,708.62
Fund-Global
- -----------------------------------------------------------------------------------------------------
UBS Investment $8,392.57 $0.00 $0.00 $483,844.59 $0.00 $145,153.37
Fund-Global Equity
- -----------------------------------------------------------------------------------------------------
UBS Investment $1,000.00 $0.00 $0.00 $ 34,008.30 $0.00 $ 10,202.99
Fund-Global Bond
- -----------------------------------------------------------------------------------------------------
UBS Investment $1,000.00 $0.00 $0.00 $ 61,691.74 $0.00 $ 20,307.52
Fund-U.S. Balanced
- -----------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
UBS Investment $5,825.06 $0.00 $0.00 $335,823.55 $0.00 $100,747.06
Fund-U.S.Equity
- -----------------------------------------------------------------------------------------------------
UBS Investment $ 0.00 $0.00 $0.00 $ 0.00 $0.00 $ 0.00
Fund-U.S. Large
Capitalization Equity
- -----------------------------------------------------------------------------------------------------
UBS Investment $1,000.00 $0.00 $0.00 $ 11,891.51 $0.00 $ 3,567.95
Fund-U.S. Bond
UBS Investment $1,000.00 $0.00 $0.00 $ 14,053.50 $0.00 $ 4,216.05
Fund Global (ex-U.S.)
Equity *
- ------------------------------------------------------------------------------------------------------
</TABLE>
Amounts spent on behalf of each Brinson Fund - Class N class pursuant to the
Class N Plan during the fiscal year ended June 30, 1998 are set forth below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
COMPENSATION COMPENSATION COMPENSATION TO
OF OF UBS SALES
FUND PRINTING UNDERWRITERS DEALERS PERSONNEL ADVERTISING OTHER
=====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Global Fund - $0.00 $0.00 $ 670.71 $0.00 $0.00 $0.00
Class N
- ----------------------------------------------------------------------------------------------------
Global Equity $0.00 $0.00 $ 0.00 $0.00 $0.00 $0.00
Fund - Class N
- ----------------------------------------------------------------------------------------------------
Global Bond $0.00 $0.00 $ 4.13 $0.00 $0.00 $0.00
Fund - Class N
- ----------------------------------------------------------------------------------------------------
U.S. Balanced $0.00 $0.00 $ 0.00 $0.00 $0.00 $0.00
Fund - Class N
- ----------------------------------------------------------------------------------------------------
U.S. Equity $0.00 $0.00 $ 148.66 $0.00 $0.00 $0.00
Fund - Class N
- ----------------------------------------------------------------------------------------------------
U.S. Large $0.00 $0.00 $7,577.29 $0.00 $0.00 $0.00
Capitalization Equity
Fund - Class N
- ----------------------------------------------------------------------------------------------------
U.S. Bond Fund -
Class N $0.00 $0.00 $ 0.00 $0.00 $0.00 $0.00
- ----------------------------------------------------------------------------------------------------
Global $0.00 $0.00 $ 5.40 $0.00 $0.00 $0.00
(ex-U.S.) Equity
Fund - Class N*
- ----------------------------------------------------------------------------------------------------
</TABLE>
* Effective December 10, 1998, the Non-U.S. Equity Fund changed its name to the
Global (ex-U.S.) Equity Fund.
CODE OF ETHICS
The Trust has adopted a Code of Ethics which establishes standards by which
certain access persons of the Trust, which include officers of the Advisor and
officers and Trustees of the Trust, must abide relating to personal securities
trading conduct.
Under the Code of Ethics, access persons are prohibited from engaging in
certain conduct, including, but not limited to: 1) investing in companies in
which the Series invest unless the securities have a broad public market and are
registered on a national securities exchange or are traded in the over-the-
counter markets; 2) making or maintaining an investment in any corporation or
business with which the Series have business relationships if the investment
might create, or give the appearance of creating, a conflict of interest; 3)
participating in an initial public offering; 4) entering into a securities
transaction
53
<PAGE>
when the access person knows or should know that such activity will anticipate,
parallel or counter any securities transaction of a Series; 5) entering into any
securities transaction, without prior approval, in connection with any security
which has been designated as restricted; 6) entering into a net short position
with respect to any security held by a Series; 7) entering into any derivative
transaction when a direct transaction in the underlying security would be a
violation; and 8) engaging in self-dealing or other transactions benefiting the
access person at the expense of the Series or its shareholders.
In addition, access persons are required to receive advance approval prior to
purchasing or selling a restricted security, and may not buy or sell certain
prohibited securities. The Advisor will identify for access persons prohibited
securities, which include securities that are being considered for purchase or
sale by any account or fund managed by the Advisor, and provide a list of such
securities to all access persons. Access persons are required to file quarterly
reports of security investment transactions. Trustees or officers who are not
"interested persons" of the Trust, as defined in the Act, need only report a
transaction in a security if such Trustee or officer, at the time of the
transaction, knew or should have known, in the ordinary course of fulfilling his
or her official duties as a Trustee or officer, that, during the 15-day period
immediately preceding or after the date of the transaction by the Trustee or
officer, such security was purchased or sold by a Series, or was being
considered for purchase by a Series.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Brinson Partners is responsible for decisions to buy and sell securities for
the Series and for the placement of the Series' portfolio business and the
negotiation of commissions, if any, paid on such transactions. Fixed income
securities in which the Series invest are traded in the over-the-counter market.
These securities are generally traded on a net basis with dealers acting as
principal for their own accounts without a stated commission, although the
bid/ask spread quoted on securities includes an implicit profit to the dealers.
In over-the-counter transactions, orders are placed directly with a principal
market-maker unless a better price and execution can be obtained by using a
broker. Brokerage commissions are paid on transactions in listed securities,
futures contracts and options thereon. Brinson Partners is responsible for
effecting portfolio transactions and will do so in a manner deemed fair and
reasonable to the Series. Under its advisory agreements with the Global Funds
and the Global (ex-U.S.) Equity Fund, Brinson Partners is authorized to utilize
the trading desk of its foreign subsidiaries to execute foreign securities
transactions, but monitors the selection by such subsidiaries of brokers and
dealers used to execute transactions for those Series. The primary consideration
in all portfolio transactions will be prompt execution of orders in an efficient
manner at the most favorable price. However, subject to policies established by
the Board of the Trust, a Series may pay a broker-dealer a commission for
effecting a portfolio transaction for the Series in excess of the amount of
commission another broker-dealer would have charged if Brinson Partners
determines in good faith that the commission paid was reasonable in relation to
the brokerage or research services provided by such broker-dealer, viewed in
terms of that particular transaction or such firm's overall responsibilities
with respect to the clients, including the Series, as to which it exercises
investment discretion. In selecting and monitoring broker-dealers and
negotiating commissions, Brinson Partners considers the firm's reliability, the
quality of its execution services on a continuing basis and its financial
condition. When more than one firm is believed to meet these criteria,
preference may be given to brokers who provide research or statistical material
or other services to the Series or to Brinson Partners. Such services include
advice, both directly and in writing, as to the value of the securities; the
advisability of investing in, purchasing or selling securities; and the
availability of securities, or purchasers or sellers of securities, as well as
analyses and reports concerning issues, industries, securities, economic factors
and trends, portfolio strategy and the performance of accounts. This allows
Brinson Partners to supplement its own investment research activities and obtain
the views and information of others prior to making investment decisions.
Brinson Partners is of the opinion that, because this material must be analyzed
and reviewed by its staff, its receipt and use does not tend to reduce expenses
but may benefit the Series by supplementing the Advisor's research.
54
<PAGE>
Brinson Partners effects portfolio transactions for other investment
companies and advisory accounts. Research services furnished by dealers through
whom the Series effect their securities transactions may be used by Brinson
Partners in servicing all of its accounts; not all such services may be used in
connection with the Series. In the opinion of Brinson Partners, it is not
possible to measure separately the benefits from research services to each of
the accounts (including the Series). Brinson Partners will attempt to equitably
allocate portfolio transactions among the Series and others whenever concurrent
decisions are made to purchase or sell securities by the Series and another. In
making such allocations between the Series and others, the main factors to be
considered are the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for recommending investments to the Series
and the others. In some cases, this procedure could have an adverse effect on
the Series. In the opinion of Brinson Partners, however, the results of such
procedures will, on the whole, be in the best interest of each of the clients.
When buying or selling securities, the Series may pay commissions to brokers
who are affiliated with the Advisor or the Series. The Series may purchase
securities in certain underwritten offerings for which an affiliate of the
Series or the Advisor may act as an underwriter. The Series may effect future
transactions through, and pay commissions to, futures commission merchants who
are affiliated with the Advisor or the Series in accordance with procedures
adopted by the Board.
The Series incurred brokerage commissions as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
SERIES JUNE 30, 1996* JUNE 30, 1997* JUNE 30, 1998*
- ------ -------------- -------------- --------------
<S> <C> <C> <C>
GLOBAL FUND $327,191 $385,571 $442,603
GLOBAL EQUITY FUND $123,467 $142,922 $166,103
GLOBAL BOND FUND $ 0.00 $ 0.00 $ 0.00
U.S. BALANCED FUND $ 99,554 $139,165 $ 85,784
U.S. EQUITY FUND $105,887 $290,526 $560,721
U.S. LARGE CAPITALIZATION
EQUITY FUND NA NA $ 9,714
U.S. BOND FUND $ 0.00 $ 0.00 $ 0.00
GLOBAL (ex-U.S.) EQUITY FUND* $322,915 $833,293 $942,115
</TABLE>
* The U.S. Large Capitalization Equity Fund, the Emerging Markets Debt Fund
and the Emerging Markets Equity Fund had not commenced operations as of the time
periods indicated. Effective December 10, 1998, the Non-U.S. Equity Fund changed
its name to the Global (ex-U.S.) Equity Fund.
55
<PAGE>
For the fiscal year ended June 30, 1998, the Global Fund, U.S. Balanced
Fund, U.S. Equity Fund and U.S. Large Capitalization Equity Fund paid brokerage
commissions to Warburg Dillon Read ("Warburg"), an affiliated broker-dealer, as
follows:
<TABLE>
<CAPTION>
AGGREGATE % OF AGGREGATE
DOLLAR AMOUNT OF % OF AGGREGATE DOLLAR AMOUNT
COMMISSIONS PAID COMMISSIONS PAID TO
FUND TO WARBURG PAID TO WARBURG WARBURG
- ---- ---------- --------------- -------
<S> <C> <C> <C>
GLOBAL FUND $ 6,078 1.37% 0.78%
U.S. BALANCED FUND $ 2,190 2.55% 0.27%
U.S. EQUITY FUND $93,356 16.65% 21.43%
U.S. LARGE CAPITALIZATION
EQUITY FUND $ 453 4.66% 5.16%
</TABLE>
For the fiscal year ended June 30, 1998, the Trust and the Advisor had no
agreements or understandings with a broker or otherwise causing brokerage
transactions or commissions for research services.
The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth
Fund and High Yield Fund incurred brokerage commissions as follows:
<TABLE>
<CAPTION>
COMMENCEMENT
OF OPERATIONS ** JANUARY 1, 1998 DECEMBER 21, 1998
THROUGH THROUGH THROUGH
SERIES * DECEMBER 31, 1997 DECEMBER 20, 1998 DECEMBER 31, 1998
- -------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
U.S. Large Capitalization $ $ $
Growth Fund
U.S. Small Capitalization $ $ $
Growth Fund
High Yield Fund $ $ $
</TABLE>
[To be completed by amendment.]
* The U.S. Large Capitalization Growth Fund, U.S. Small Capitalization
Growth Fund and High Yield Fund were reorganized into the Trust on December 21,
1998. Prior to the reorganization, the U.S. Large Capitalization Growth Fund,
U.S. Small Capitalization Growth Fund and High Yield Fund were known as the UBS
Large Cap Growth Portfolio, UBS Small Cap Growth Portfolio and UBS High Yield
Bond Portfolio, respectively. The U.S. Large Capitalization Growth Fund, U.S.
Small Capitalization Growth Fund and High Yield Fund currently have fiscal years
ending on December 31. At the February 22, 1999 Board of Trustees' meeting, the
Board of Trustees of the Trust voted to change the fiscal year end of these
three Funds to June 30.
** The UBS Large Cap Growth Portfolio commenced operations on October 14,
1997. The UBS Small Cap Portfolio and UBS High Yield Bond Portfolio commenced
operations on September 30, 1997.
PORTFOLIO TURNOVER
The Series are free to dispose of their portfolio securities at any time,
subject to complying with the Code and the Act, when changes in circumstances or
conditions make such a move desirable in light of the respective investment
objective. The Series will not attempt to achieve or be limited to a
predetermined rate of portfolio turnover, such a turnover always being
incidental to transactions undertaken with a view to achieving that Series'
investment objective.
The Series do not intend to use short-term trading as a primary means of
achieving their investment objectives. The rate of portfolio turnover shall be
calculated by dividing (a) the lesser of purchases and sales of portfolio
securities for the particular fiscal year by (b) the monthly average of the
value of the portfolio securities owned by that Series during the particular
fiscal year. Such monthly average shall be calculated by totaling the values of
the portfolio securities as of the beginning and end of the first month of the
particular fiscal year and as of the end of each of the succeeding eleven months
and dividing the sum by 13.
Under normal circumstances, the portfolio turnover rate for the Global
Equity Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund and Global
(ex-U.S.) Equity Fund is not expected to exceed 100%. The portfolio turnover
rates for the Global Fund, Global Bond Fund, Emerging Markets Equity Fund and
Emerging Markets Debt Fund may exceed 100% and in some years, 200%. The
portfolio turnover rate for the U.S. Small Capitalization Growth Fund may exceed
150%, and for the U.S. Balanced Fund and U.S. Bond Fund, may exceed 100% and in
some years, 300%. High portfolio turnover rates (over 100%) may involve
correspondingly greater brokerage commissions and other
56
<PAGE>
transaction costs, which will be borne directly by the Series and ultimately by
that Series' shareholders. In addition, high portfolio turnover may result in
increased short-term capital gains, which, when distributed to shareholders, are
treated as ordinary income.
With respect to the Global Fund, for the fiscal years ended June 30, 1997
and June 30, 1998,the portfolio turnover rate of the Series was 150% and 88%,
respectively. With respect to the Global Bond Fund, for the fiscal years ended
June 30, 1997 and June 30, 1998, the portfolio turnover rate of the Series was
235% and 151%, respectively. With respect to the U.S. Balanced Fund, for the
fiscal years ended June 30, 1997 and June 30, 1998, the portfolio turnover rate
of the Series was 329% and 194%, respectively. With respect to the U.S. Bond
Fund, for the fiscal years ended June 30, 1997 and June 30, 1998, the portfolio
turnover rate of the Series was 410% and 198%, respectively. With respect to the
Global Equity Fund, for the fiscal years ended June 30, 1997 and June 30, 1998,
the portfolio turnover rate of the Series was 32% and 46%, respectively. With
respect to the Global (ex-U.S.) Equity Fund, for the fiscal years ended June 30,
1997 and June 30, 1998, the portfolio turnover rate of the Series was 25% and
49%, respectively. With respect to the U.S. Equity Fund, for the fiscal years
ended June 30, 1997 and June 30, 1998, the portfolio turnover rate of the Series
was 43% and 42%, respectively. With respect to the U.S. Large Capitalization
Equity Fund, for the period April 6, 1998 (commencement of operations) to June
30, 1998, the portfolio turnover rate of the Series was 12%. With respect to
the High Yield Fund for the period September 30, 1997 (commencement of
operations) to December 31, 1997 and the fiscal year ended December 31, 1998,
the portfolio turnover rate was 80% and _____%, respectively. The portfolio
turnover rates for the High Yield Fund also reflect the portfolio turnover rates
for UBS Investor Portfolios Trust - UBS High Yield Bond Portfolio through
December 18, 1998. With respect to the U.S. Large Capitalization Growth Fund,
for the period October 14, 1997 (commencement of operations) to December 31,
1997 and the fiscal year ended December 31, 1998, the portfolio turnover rate
was 6% and _____%, respectively. The portfolio turnover rates for the U.S.
Large Capitalization Growth Fund also reflect the portfolio turnover rates for
UBS Investor Portfolios Trust - UBS Large Cap Growth Portfolio through December
18, 1998. With respect to the U.S. Small Capitalization Growth Fund, for the
period September 30, 1997 (commencement of operations) to December 31, 1997 and
the fiscal year ended December 31, 1998, the portfolio turnover rate was 3% and
_____%, respectively. The portfolio turnover rates for the U.S. Small
Capitalization Growth Fund also reflect the portfolio turnover rates for UBS
Investor Portfolios Trust - UBS Small Cap Portfolio through December 18, 1998.
Any significant variation in portfolio turnover rates over such periods was due
to an increase in the assets of the Series which caused the Series to reposition
their portfolio holdings in order to meet their investment objectives and
policies.
SHARES OF BENEFICIAL INTEREST
Each Series is authorized to issue an unlimited number of shares of
beneficial interest with a $0.001 par value per share. Each share of beneficial
interest represents an equal proportionate interest in the assets and
liabilities of the applicable Series and has identical voting, dividend,
redemption, liquidation, and other rights and preferences as the other class of
that Series, except that only shares of the UBS Investment Funds class may vote
on any matter affecting only the UBS Investment Plan under Rule 12b-1.
Similarly, only shares of the Brinson Fund-Class N may vote on matters that
affect only the Class N Plan. No class may vote on matters that affect only
another class. Under Delaware law, the Trust does not normally hold annual
meetings of shareholders. Shareholders' meetings may be held from time to time
to consider certain matters including changes to a Series' fundamental
investment objective and fundamental investment policies, changes to the Trust's
investment advisory agreement and the election of Trustees when required by the
Act. When matters are submitted to shareholders for a vote, shareholders are
entitled to one vote per share with proportionate voting for fractional shares.
The shares of the Series do not have cumulative voting rights or any preemptive
or conversion rights, and the Trustees have authority from time to time to
divide or combine the shares of the Series into a greater or lesser number of
shares so affected. In the case of a liquidation of a Series, each shareholder
of the Series will be entitled to share, based upon the shareholder's percentage
share ownership, in the distribution out
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of assets, net of liabilities, of the Series. No shareholder is liable for
further calls or assessment by the Series.
On any matters affecting only one Series or class, only the shareholders of
that Series or class are entitled to vote. On matters relating to the Trust but
affecting the Series differently, separate votes by the Series or class are
required. With respect to the submission to shareholder vote of a matter
requiring separate voting by a Series or class, the matter shall have been
effectively acted upon with respect to any Series or class if a majority of the
outstanding voting securities of that Series or class votes for the approval of
the matter, notwithstanding that: (1) the matter has not been approved by a
majority of the outstanding voting securities of any other Series or class; and
(2) the matter has not been approved by a majority of the outstanding voting
securities of the Trust.
The Trustees of the Trust do not intend to hold annual meetings of
shareholders of the Series. The SEC, however, requires the Trustees to promptly
call a meeting for the purpose of voting upon the question of removal of any
Trustee when requested to do so by not less than 10% of the outstanding
shareholders of the respective Series. In addition, subject to certain
conditions, shareholders of each Series may apply to the Series to communicate
with other shareholders to request a shareholders' meeting to vote upon the
removal of a Trustee or Trustees.
Currently, the Trust offers thirteen Series: Global Fund, Global Equity
Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large
Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small
Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund, Global (ex-U.S.)
Equity Fund, Emerging Markets Equity Fund and Emerging Markets Debt Fund. Three
classes of shares are currently issued by the Trust for each Series: the Brinson
Fund-Class N, Brinson Fund-Class I and UBS Investment Funds classes. Prior to
September 15, 1998, the "UBS Investment Funds class" of shares was known as the
"SwissKey Class" of shares.
PURCHASES
Shares of each class of each Series are sold at the net asset value (plus
transaction charges applicable to purchases of shares of the Emerging Markets
Equity Fund and Emerging Markets Debt Fund) next determined after the receipt of
a purchase application in proper form by the transfer agent. There is no sales
load in connection with the purchase of Fund shares. The Trust reserves the
right to reject any purchase order and to suspend the offering of shares of the
Brinson Fund-Class I shares, Brinson Fund-Class N shares, UBS Investment Funds
class of shares or any Series. The minimum for initial investments with respect
to the Brinson Fund-Class I for each Series is $1,000,000; subsequent investment
minimums are $2,500. The minimum for initial investments with respect to the UBS
Investment Funds class of shares for each Series is $25,000 (including
Individual Retirement Accounts ("IRAs")); subsequent investment minimums are
$5,000 (including IRAs). The minimum for initial investments with respect to the
Brinson Fund-Class N for each Series is $1,000,000. The minimum initial
investment for IRAs is $2,000. The Trust reserves the right to vary the initial
investment minimum and minimums for additional investments in any of the Funds
at any time. In addition, Brinson Partners may waive the minimum initial
investment requirement for any investor.
The Brinson Fund-Class N shares and UBS Investment Funds class of shares
may be purchased through broker-dealers having sales agreements with FDI, or
through financial institutions having agency agreements with FDI. The Brinson
Fund-Class N shares and UBS Investment Funds class of shares are subject to
annual 12b-1 plan expenses of 0.25% and 0.90% (0.25% of which are service fees
to be paid by the Funds to FDI, dealers or others for providing personal service
and/or maintaining shareholder accounts), respectively, of the Funds' average
daily net assets of such share class. The Brinson Fund-Class N shares may also,
and the UBS Investment Funds will, be marketed directly through the offices of
UBS A.G. Through its branches and subsidiaries, UBS A.G. conducts securities
research, provides investment advisory services and manages mutual funds in
major cities throughout the world, including Amsterdam, Basel, Frankfurt,
Geneva, Hong Kong, Houston, London, Los Angeles, Luxembourg, Miami, Monte Carlo,
New York, Paris, San Francisco, Singapore, Sydney, Tokyo, Toronto and Zurich.
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Purchase orders for shares of the Funds which are received by the transfer
agent in proper form prior to the close of regular trading hours (currently 4:00
p.m. Eastern time) on the New York Stock Exchange (the "NYSE") on any day that
the Funds' net asset values per share are calculated, are priced according to
the net asset value determined on that day. Purchase orders for shares of the
Funds received after the close of the NYSE on a particular day are priced as of
the time the net asset value per share is next determined. The Funds reserve the
right to change the time at which purchases are priced if the NYSE closes at a
time other than 4:00 p.m. Eastern time or if an emergency exists.
Under certain circumstances, the Trust has entered into one or more
agreements (each, a "Sales Agreement") with brokers, dealers or financial
institutions (each, an "Authorized Dealer") under which the Authorized Dealer
may directly, or through intermediaries that the Authorized Dealer is authorized
to designate under the Sales Agreement (each, a "Sub-designee"), accept
purchase and redemption orders that are in "good form" on behalf of the Funds.
A Fund will be deemed to have received a purchase order when the Authorized
Dealer or Sub-designee accepts the purchase order and such order will be priced
at the Fund's net asset value next computed after such order is accepted by the
Authorized Dealer or Sub-designee.
The Trust may accept telephone orders for Fund shares from broker-dealers
or service organizations which have been previously approved by the Trust. It is
the responsibility of such broker-dealers or service organizations to promptly
forward purchase orders and payments for the same to the Fund. Shares of the
Funds may be purchased through broker-dealers, banks and bank trust departments
which may charge the investor a transaction fee or other fee for their services
at the time of purchase. Such fees would not otherwise be charged if the shares
were purchased directly from the Trust.
Brinson Partners, or its affiliates, from its own resources, may compensate
broker-dealers or other financial intermediaries ("Service Providers") for
marketing, shareholder servicing, recordkeeping and/or other services performed
with respect to a Fund's Class N shares, Class I shares and UBS Investment Funds
class of shares. Payments made for any of these purposes may be made from its
revenues, its profits or any other sources available to it. When such service
arrangements are in effect, they are made generally available to all qualified
Service Providers.
Certificates representing shares purchased are not issued. However, such
purchases are confirmed to the investor and credited to the shareholder's
account on the books maintained by the Trust's transfer agent. The investor will
have the same rights of ownership with respect to such shares as if certificates
had been issued.
EXCHANGES OF SHARES
Shares of one class of a Series may only be exchanged for the same class of
another Series of the Trust. Exchanges will not be permitted between the
different classes. Exchanges may be made only for shares of a Series and class
then offering its shares for sale in your state of residence and are subject to
the minimum initial investment requirement.
Each qualifying exchange will be made on the basis of the relative net
asset values per share of both the Series from which, and the Series into which,
the exchange is made, that is next computed following receipt of the exchange
order in proper form by the Trust's transfer agent. Transaction charges
applicable to purchases and redemptions of shares of the Emerging Markets Equity
Fund and purchases of shares of the Emerging Markets Debt Fund will apply to
exchanges of shares into these funds and to exchanges of shares out of the
Emerging Markets Equity Fund. Exchanges may be made by telephone if the
shareholder's Account Application Form includes specific authorization for
telephone exchanges. The telephone exchange privilege may be difficult to
implement during times of drastic economic or market changes.
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The transactions described above will result in a taxable gain or loss for
federal income tax purposes. Generally, any such taxable gain or loss will be a
capital gain or loss (long-term or short-term, depending on the holding period
of the shares) in the amount of the difference between the net asset value of
the shares surrendered and the shareholder's tax basis for those shares. Each
investor should consult his or her tax adviser regarding the tax consequences of
an exchange transaction.
Any shareholder who wishes to make an exchange should first obtain and
review the Prospectus of the Series to be acquired in the exchange. Requests for
telephone exchanges must be received prior to the close of regular trading on
the NYSE (currently 4:00 p.m. Eastern time) on any day on which the NYSE is open
for regular trading. The Funds reserve the right to change the time at which
exchanges are priced if the NYSE closes at a time other than 4:00 p.m. Eastern
time or if an emergency exists.
At the discretion of the Trust, this exchange privilege may be terminated
or modified at any time for any of the participating Series upon 60 days' prior
written notice to shareholders. Contact the transfer agent for details about a
particular exchange.
TRANSFER OF SECURITIES
At the discretion of the Trust, investors may be permitted to purchase Fund
shares by transferring securities to a Series that meet the Series' investment
objective and policies. Securities transferred to a Series will be valued in
accordance with the same procedures used to determine the Fund's net asset value
at the time of the next determination of net asset value after such acceptance.
Shares issued by a Series in exchange for securities will be issued at net asset
value per share of the Fund determined as of the same time. All dividends,
interest, subscription, or other rights pertaining to such securities shall
become the property of the Series and must be delivered to the Series by the
investor upon receipt from the issuer. Investors who are permitted to transfer
such securities will be required to recognize a gain or loss on such transfer
and pay tax thereon, if applicable, measured by the difference between the fair
market value of the securities and the investors' basis therein. Securities will
not be accepted in exchange for shares of a Fund unless: (1) such securities
are, at the time of the exchange, eligible to be included in the Series'
portfolio and current market quotations are readily available for such
securities; (2) the investor represents and warrants that all securities offered
to be exchanged are not subject to any restrictions upon their sale by the
Series under the 1933 Act, or under the laws of the country in which the
principal market for such securities exists, or otherwise; and (3) the value of
any such security (except U.S. government securities) being exchanged, together
with other securities of the same issuer owned by the Series, will not exceed 5%
of the Series' net assets immediately after the transaction.
NET ASSET VALUE
The net asset value per share is calculated separately for each class of
each Series. The net asset value per share of a class of a Series is computed by
dividing the value of the assets related to that class of the Series, less the
liabilities related to that class, by the number of shares of the class of the
Series outstanding.
Each class of a Series will bear pro rata all of the common expenses of
that Series. The net asset values of all outstanding shares of each class of a
Series will be computed on a pro rata basis for each outstanding share based on
the proportionate participation in the Series represented by the value of shares
of that Series. All income earned and expenses incurred by a Series will be
borne on a pro rata basis by each outstanding share of a class, based on each
class' percentage in the Series represented by the value of such shares of such
classes, except that none of the shares of a class will incur any of the
expenses under the 12b-1 plan of another class.
Portfolio securities are valued and net asset value per share is determined
as of the close of regular trading on the NYSE which currently is 4:00 p.m.
Eastern time on each day the NYSE is open for
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trading. The Series of the Trust reserve the right to change the time at which
purchases, redemptions or exchanges are priced if the NYSE closes at a time
other than 4:00 p.m. Eastern time or if an emergency exists. The NYSE is open
for trading on every day except Saturdays, Sundays and the following holidays:
New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day (day observed), Independence Day, Labor Day, Thanksgiving Day and
Christmas Day and on the preceding Friday or subsequent Monday when any of these
holidays falls on a Saturday or Sunday, respectively.
Portfolio securities listed on a national or foreign securities exchange
are valued on the basis of the last sale on the date the valuation is made.
Securities that are not traded on a particular day or an exchange, are valued at
either (a) the bid price or (b) a valuation within the range considered best to
represent value in the circumstances. Price information on listed securities is
generally taken from the closing price on the exchange where the security is
primarily traded. Other portfolio securities which are traded in the over-the-
counter market are valued at the bid price as long as the bid price, in the
opinion of the Advisor, continues to reflect the value of the security.
Valuations of fixed income and equity securities may be obtained from a pricing
service and/or broker-dealers when such prices are believed to reflect the fair
value of such securities. Use of a pricing service and/or broker-dealers has
been approved by the Board.
Futures contracts are valued at their daily quoted settlement price on the
exchange on which they are traded. Forward foreign currency contracts are valued
daily using the mean between the bid and asked forward points added to the
current exchange rate and an unrealized gain or loss is recorded. A Series
realizes a gain or loss upon settlement of the contracts. Swaps will be priced
at fair value based on (1) swap prices provided by broker-dealers; (2) values,
or estimates of values, of the applicable equity indices and foreign rates
underlying the contracts; and (3) consideration of other relevant factors. A
Series' obligation under a swap agreement will be accrued daily (offset by any
amounts owing to the portfolio) and any accrued but unpaid net amounts owed to a
swap counterparty will be covered by the maintenance of a segregated account
consisting of Segregated Assets. For valuation purposes, foreign securities
initially expressed in foreign currency values will be converted into U.S.
dollar values using WM/Reuters closing spot rates as of 4:00 p.m. London time.
Securities with a remaining maturity of 60 days or less are valued at amortized
cost, which approximates market value. Fixed income securities having a
remaining maturity of over 60 days are valued at market price. Debt securities
are valued on the basis of prices provided by a pricing service, or at the bid
price where readily available, as long as the bid price, in the opinion of the
Advisor, continues to reflect the value of the security. Redeemable securities
issued by open-end investment companies are valued using their respective net
asset values for purchase orders placed at the close of the NYSE. Securities
(including over-the-counter options) for which market quotations are not readily
available and other assets are valued at their fair value as determined in good
faith by or under the direction of the Trustees.
Because of time zone differences, foreign exchanges and securities markets
will usually be closed prior to the time of the closing of the NYSE and values
of foreign futures and options and foreign securities will be determined as of
the earlier closing of such exchanges and securities markets. However, events
affecting the values of such foreign securities may occasionally occur between
the earlier closings of such exchanges and securities markets and the closing of
the NYSE which will not be reflected in the computation of the net asset value
of a Series. If an event materially affecting the value of such foreign
securities occurs during such period, then such securities will be valued at
fair value as determined in good faith by or under the direction of the Board.
Where a foreign securities market remains open at the time that a Series values
its portfolio securities, or closing prices of securities from that market may
not be retrieved because of local time differences or other difficulties in
obtaining such prices at that time, last sale prices in such market at a point
in time most practicable to timely valuation of the Series may be used.
Due to the specific distribution expenses and other costs that will be
allocable to each class, the dividends paid to each class, and related
performance, of the Series may vary. The per share net asset
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value of the Brinson Fund-Class N shares and the UBS Investment Funds class of
shares will generally be lower than that of the Brinson Fund-Class I shares of a
Series because of the higher expenses borne by the UBS Investment Funds class of
shares and the Brinson Fund-Class N shares. It is expected, however, that the
net asset value per share of the two classes will tend to converge immediately
after the payment of dividends, which will differ by approximately the amount of
the service and distribution expenses differential among the classes.
REDEMPTIONS
Under normal circumstances shareholders may redeem their shares at any time
without a fee, except for the transaction charge applicable to redemptions of
shares of the Emerging Markets Equity Fund. The redemption price will be based
upon the net asset value per share (less the transaction charge applicable to
redemptions of shares of the Emerging Markets Equity Fund) next determined after
receipt of the redemption request, provided it has been submitted in the manner
described below. The redemption price may be more or less than the original
cost, depending upon the net asset value per share at the time of redemption.
Payment for shares tendered for redemption is made by check within five
business days after tender in proper form, except that the Trust reserves the
right to suspend the right of redemption, or to postpone the date of payment
upon redemption beyond five business days, (i) for any period during which the
NYSE is closed (other than customary weekend and holiday closings) or during
which trading on the NYSE is restricted, (ii) for any period during which an
emergency exists as determined by the SEC as a result of which disposal of
securities owned by a Series is not reasonably practicable or it is not
reasonably practicable for the Series fairly to determine the value of its net
assets, or (iii) for such other periods as the SEC may by order permit for the
protection of shareholders of the Series.
Shares of the Funds may be redeemed through certain broker-dealers, banks
and bank trust departments who may charge the investor a transaction fee or
other fee for their services at the time of redemption. Such fees would not
otherwise be charged if the shares were redeemed directly from the Trust.
Under the Sales Agreement, the Authorized Dealer or Sub-designee is
authorized to accept redemption orders on behalf of the Funds. A Fund will be
deemed to have received a redemption order when the Authorized Dealer or Sub-
designee accepts the redemption order and such order will be priced at the
Fund's net asset value next computed after such order is accepted by the
Authorized Dealer or Sub-designee.
The Trust will satisfy redemption requests in cash to the fullest extent
feasible, so long as such payments would not, in the opinion of Brinson Partners
or the Board, result in the necessity of a Series selling assets under
disadvantageous conditions and to the detriment of the remaining shareholders of
the Series. Pursuant to the Trust's Agreement and Declaration of Trust, payment
for shares redeemed may be made either in cash or in-kind, or partly in cash and
partly in-kind. Under unusual circumstances, when the Board deems it in the best
interest of the Series' shareholders, the Trust may make payment for shares
repurchased or redeemed in whole or in part in securities of the Series taken at
current values. With respect to such redemptions in kind, the Trust has made an
election pursuant to Rule 18f-1 under the Act. This will require the Trust to
redeem in cash at a shareholder's election in any case where the redemption
involves less than $250,000 (or 1% of the Series' net asset value at the
beginning of each 90 day period during which such redemptions are in effect, if
that amount is less than $250,000), during any 90-day period for any one
shareholder. Should payment be made in securities, the redeeming shareholder may
incur brokerage costs in converting such securities to cash. In-kind payments
need not constitute a cross-section of a Series' portfolio. Where a shareholder
has requested redemption of all or a part of the shareholder's investment and
where a Series computes such redemption in-kind, the Series will not recognize
gain or loss for federal tax purposes on the securities used to compute the
redemption, but the
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shareholder will recognize gain or loss equal to the difference between the fair
market value of the securities received and the shareholder's basis in the Fund
shares redeemed.
Due to the relatively high cost of maintaining smaller accounts, the Trust
reserves the right to involuntarily redeem UBS Investment Funds class of shares
in any Fund account for their then current net asset value (which will be
promptly paid to the shareholder) if at any time the total investment does not
have a value of at least $1,000 as a result of redemptions and not due to
changes in the asset value of the Series. The shareholder will be notified that
the value of his or her Fund account is less than the required minimum and will
be allowed at least 60 days to bring the value of the account up to the minimum
before the redemption is processed.
Shareholders who wish to initiate purchase, exchange or redemption
transactions by telephone must elect the option either on the initial
application or by subsequently arranging it in writing. With respect to such
telephone transactions, the Funds will ensure that reasonable procedures are
used to confirm that instructions communicated by telephone are genuine
(including verification of the shareholder's social security number or mother's
maiden name) and, if they do not, the Funds or the transfer agent may be liable
for any losses due to unauthorized or fraudulent transactions. Written
confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone.
TAXATION
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES
Distributions
Distributions of Net Investment Income. Each Series receives income generally
in the form of dividends and interest on its investments. This income, less
expenses incurred in the operation, constitute a Series' net investment income
from which dividends may be paid to you. Any distributions by a Series from
such income will be taxable to you as ordinary income, whether you take them in
cash or in additional shares.
Distributions of Capital Gains. A Series may derive capital gains and losses in
connection with sales or other dispositions of its portfolio securities.
Distributions derived from the excess of net short-term capital gain over net
long-term capital loss will be taxable to you as ordinary income. Distributions
paid from long-term capital gains realized by a Series will be taxable to you as
long-term capital gain, regardless of how long you have held your shares in the
Series. Any net short-term or long-term capital gains realized by a Series (net
of any capital loss carryovers) generally will be distributed once each year,
and may be distributed more frequently, if necessary, in order to reduce or
eliminate federal excise or income taxes on the Series.
Effect of Foreign Investments on Distributions. For Series which invest in
foreign debt instruments, most foreign exchange gains realized on the sale of
debt instruments are treated as ordinary income by such Series. Similarly,
foreign exchange losses realized by such Series on the sale of debt instruments
are generally treated as ordinary losses by the Series. These gains when
distributed will be taxable to you as ordinary dividends, and any losses will
reduce the Series' ordinary income otherwise available for distribution to you.
This treatment could increase or reduce the Series' ordinary income
distributions to you, and may cause some or all of the Series' previously
distributed income to be classified as a return of capital.
A Series may be subject to foreign withholding taxes on income from certain of
its foreign securities. If more than 50% of the Series' total assets at the end
of the fiscal year are invested in securities of foreign corporations, the
Series may elect to pass-through to you your pro rata share of foreign taxes
paid by the Series. If this election is made, the year-end statement you
receive from the Series will show more
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taxable income than was actually distributed to you. However, you will be
entitled to either deduct your share of such taxes in computing your taxable
income or claim a foreign tax credit for such taxes against your U.S. federal
income tax. The Series will provide you with the information necessary to
complete your individual income tax return if such election is made.
Information on the Tax Character of Distributions. Each Series will inform you
of the amount and character of your distributions at the time they are paid, and
will advise you of the tax status for federal income tax purposes of such
distributions shortly after the close of each calendar year. If you have not
held shares of a Series for a full year, you may have designated and distributed
to you as ordinary income or capital gain a percentage of income that is not
equal to the actual amount of such income earned during the period of your
investment in the Series.
TAXES
Election to be Taxed as a Regulated Investment Company. Each Series has elected
to be treated as a regulated investment company under Subchapter M of the Code,
has qualified as such for its most recent fiscal year, and intends to so qualify
during the current fiscal year. As a regulated investment company, each Series
generally pays no federal income tax on the income and gains it distributes to
you. The Board reserves the right not to maintain the qualification of the
Series as a regulated investment company if it determines such course of action
to be beneficial to you. In such case, the Series will be subject to federal,
and possibly state, corporate taxes on its taxable income and gains, and
distributions to you will be taxed as ordinary dividend income to the extent of
the Series' available earnings and profits.
Excise Tax Distribution Requirements. The Code requires each Series to
distribute at least 98% of its taxable ordinary income earned during the
calendar year and 98% of its capital gain net income earned during the twelve
month period ending October 31 (in addition to undistributed amounts from the
prior year) to you by December 31 of each year in order to avoid federal excise
taxes. Each Series intends to declare and pay sufficient dividends in December
(or in January that are treated by you as received in December) but does not
guarantee and can give no assurances that its distributions will be sufficient
to eliminate all such taxes.
Redemption of Series Shares. Redemptions and exchanges of shares of a Series
are taxable transactions for federal and state income tax purposes that cause
you to recognize a gain or loss. If you hold your shares as a capital asset,
the gain or loss that you realize will be capital gain or loss. Any loss
incurred on the redemption or exchange of shares held for six months or less
will be treated as a long-term capital loss to the extent of any long-term
capital gains distributed to you by the Series on those shares.
All or a portion of any loss that you realize upon the redemption of your shares
of a Series will be disallowed to the extent that you purchase other shares in
such Series (through reinvestment of dividends or otherwise) within 30 days
before or after your share redemption. Any loss disallowed under these rules
will be added to your tax basis in the new shares you purchase.
U.S. Government Obligations. Many states grant tax-free status to dividends paid
to you from interest earned on direct obligations of the U.S. government,
subject in some states to minimum investment requirements that must be met by a
Series. Investments in GNMA/FNMA securities, bankers' acceptances, commercial
paper and repurchase agreements collateralized by U.S. government securities do
not generally qualify for tax-free treatment. The rules on exclusion of this
income are different for corporations.
Dividends-Received Deduction for Corporations. Corporate investors in certain
Series may be entitled to a dividends-received deduction on a portion of the
ordinary dividends they receive from such Series. The portion of the dividends
which qualifies for the dividends-received deduction depends on the aggregate
qualifying dividend income received by a Series from domestic (US) sources.
Certain holding period and debt financing restrictions may also apply to
corporate investors seeking to claim the
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deduction. All dividends (including the deducted portion) must be included in
your alternative minimum taxable income calculation.
Investment in Complex Securities. A Series may invest in complex securities.
Such investments may be subject to numerous special and complex tax rules.
These rules could affect whether gains and losses recognized by a Series are
treated as ordinary income or capital gain, accelerate the recognition of income
to a Series or defer a Series' ability to recognize losses, and, in limited
cases, subject the Series to U.S. federal income tax on income from certain of
its foreign securities. In turn, these rules may affect the amount, timing or
character of the income distributed to you by a Series.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shareholders of the Emerging Markets Equity Fund are subject to a 1.50%
transaction charge in connection with each purchase and redemption of shares of
the Series. Shareholders of the Emerging Markets Debt Fund are subject to a
0.50% transaction charge in connection with each purchase of shares of the
Series. Shares of the Series are sold at a price which is equal to the net
asset value of such shares, plus the transaction charge. Redemption requests
for the Emerging Markets Equity Fund are paid at the net asset value less the
transaction charge. The transaction charges do not apply to the reinvestment of
dividends or capital gain distributions. The transaction charges are paid to
the Series and used by them to defray the transaction costs associated with the
purchase and sale of securities within the Series. The amount of the
transaction charge on purchase and redemptions represents the estimate of the
costs reasonably anticipated to be associated with the purchase of securities
with cash received from shareholders and the sale of securities to obtain cash
to redeem shareholders. Therefore, the transaction charges offset the dilutive
effect such costs would otherwise have on the net asset value of the Series'
shares. Purchases and redemptions which are made in kind with securities are
not subject to the transaction charges.
PERFORMANCE CALCULATIONS
From time to time, performance information, such as yield or total return,
may be quoted in advertisements or in communications to present or prospective
shareholders. Performance quotations represent the Funds' past performance and
should not be considered as representative of future results. The current yield
will be calculated by dividing the net investment income earned per share by a
Fund during the period stated in the advertisement (based on the average daily
number of shares entitled to receive dividends outstanding during the period) by
the maximum net asset value per share on the last day of the period and
annualizing the result on a semi-annual compounded basis. The Funds' total
return may be calculated on an annualized and aggregate basis for various
periods (which periods will be stated in the advertisement). Average annual
return reflects the average percentage change per year in value of an investment
in a Fund. Aggregate total return reflects the total percentage change over the
stated period.
To help investors better evaluate how an investment in the Brinson Funds
might satisfy their investment objectives, advertisements regarding the Funds
may discuss yield or total return as reported by various financial publications.
Advertisements may also compare yield or total return to other investments,
indices and averages. The following publications, benchmarks, indices and
averages may be used: Lipper Mutual Fund Performance Analysis; Lipper Fixed
Income Analysis; Lipper Mutual Fund Indices; Morgan Stanley Indices; Lehman
Brothers Treasury Index; Salomon Brothers Indices; Dow Jones Composite Average
or its component indices; Standard & Poor's 500 Stock Index or its component
indices; Wilshire Indices; The New York Stock Exchange composite or component
indices; CDA Mutual Fund Report; Weisenberger-Mutual Funds Panorama and
Investment Companies; Mutual Fund Values and Mutual Fund Service Book, published
by Morningstar, Inc.; comparable portfolios managed by the Advisor; and
financial publications, such as Business Week, Kiplinger's Personal Finance,
Financial World, Forbes, Fortune, Money Magazine, The Wall Street Journal,
Barron's, et al., which rate fund performance over various time periods.
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The principal value of an investment in the Funds will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Any fees charged by banks or other institutional investors
directly to their customer accounts in connection with investments in shares of
the Funds will not be included in the Brinson Funds' calculations of yield or
total return.
Performance information for the UBS Investment Funds class of shares,
Brinson Fund-Class N and Brinson Fund-Class I shares of each Series will vary
due to the effect of expense ratios on the performance calculations.
TOTAL RETURN
Current yield and total return quotations used by the Series (and classes
of shares) are based on standardized methods of computing performance mandated
by rules adopted by the SEC. As the following formula indicates, the average
annual total return is determined by multiplying a hypothetical initial purchase
order of $1,000 by the average annual compound rate of return (including capital
appreciation/depreciation and dividends and distributions paid and reinvested)
for the stated period less any fees charged to all shareholder accounts and
annualizing the result. The calculation assumes that all dividends and
distributions are reinvested at the net asset value on the reinvestment dates
during the period. The quotation assumes the account was completely redeemed at
the end of each period and deduction of all applicable charges and fees.
According to the SEC formula:
P(1+T)/n/=ERV
where:
P = a hypothetical initial payment of $1,000,
T = average annual total return,
n = number of years,
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10
year periods at the end of the 1, 5 or 10 year periods
(or fractional portion thereof).
Based upon the foregoing calculations, the average annual total return
for the Brinson Fund-Class I (previously Brinson Fund Class) shares of:*
(i) the Global Fund, for the one-and five-year periods ended December
31, 1998 and the period August 31, 1992 (commencement of operations)
through December 31, 1998 was ____%, _____% and _____%,
respectively;
(ii) the Global Equity Fund, for the one-and three-year periods ended
December 31, 1998 and the period January 28, 1994 (commencement of
operations) through December 31, 1998 was ____%, _____%, and _____%,
respectively;
(iii) the Global Bond Fund, for the one-and five-year periods ended
December 31, 1998 and the period July 30, 1993 (commencement of
operations) through December 31, 1998 was _____%,______% and _____%,
respectively;
(iv) the U.S. Balanced Fund, for the one and three-year periods ended
December 31, 1998 and the period December 30, 1994 (commencement of
operations) through December 31, 1998 was _____%, _____% and
______%, respectively;
(v) the U.S. Equity Fund, for the one-and three-year periods ended
December 31, 1998 and the period February 22, 1994 (commencement of
operations) through December 31, 1998 was _____%, ______% and
______%, respectively;
66
<PAGE>
(vi) the U.S. Large Capitalization Equity Fund, for the period April 6,
1998 (commencement of operations) through December 31, 1998
was_______%;
(vii) the U.S. Bond Fund, for the one-and three-year periods ended
December 31, 1998 and the period August 31, 1995 (commencement of
operations) through December 31, 1998 was _____%, _____% and______%,
respectively; and
(viii) the Global (ex-U.S.) Equity Fund, for the one-and five-year periods
ended December 31, 1998 and the period August 31, 1993 (commencement
of operations) through December 31, 1998 was _____%, _____% and
______%, respectively.
Based upon the foregoing calculations, the average annual total return for
the UBS Investment Funds class of shares of:*
(i) the Global Fund, for the one-and three-year periods ended December
31, 1998 and the period July 31, 1995 (commencement of operations)
through December 31, 1998 was _____%, _____% and ______%,
respectively;
(ii) the Global Equity Fund, for the one-and three-year periods ended
December 31, 1998 and the period July 31, 1995 (commencement of
operations) through December 31, 1998 was _____%, ____% and ______%,
respectively;
(iii) the Global Bond Fund, for the one-and three-year periods ended
December 31, 1998 and the period July 31, 1995 (commencement of
operations) through December 31, 1998 was _____%, ____% and _____%,
respectively;
(iv) the U.S. Balanced Fund, for the one-and three-year periods ended
December 31, 1998 and the period July 31, 1995 (commencement of
operations) through December 31, 1998 was ______%, _____% and
______%, respectively;
(v) the U.S. Equity Fund, for the one-and three-year periods ended
December 31, 1998 and the period July 31, 1995 (commencement of
operations) through December 31, 1998 was ______%, _____% and
_______%, respectively;
(vi) the U.S. Large Capitalization Equity Fund, for the period April 6,
1998 (commencement of operations) through December 31, 1998
was______%;
(vii) the U.S. Bond Fund, for the one-and three-year periods ended
December 31, 1998 and the period August 31, 1995 (commencement of
operations) through December 31, 1998 was____%, _____% and ______%,
respectively; and
(viii) the Global (ex-U.S.) Equity Fund, for the one-and three-year periods
ended December 31, 1998 and the period July 31, 1995 (commencement
of operations) through December 31, 1998 was _____%, _____% and
_______%, respectively.
Based on the foregoing calculations, the average annual total return for
the Brinson Fund-Class N shares of*:
(i) the Global Fund, for the one-year period ended December 31, 1998 and
the period June 30, 1997 (commencement of operations) through
December 31, 1998 was _____% and _____%, respectively;
67
<PAGE>
(ii) the Global Equity Fund, for the one-year period ended December 31,
1998 and the period June 30, 1997 (commencement of operations)
through December 31, 1998 was _____% and _____%, respectively;
(iii) the Global Bond Fund, for the one-year period ended December 31,
1998 and the period June 30, 1997 (commencement of operations)
through December 31, 1998 was _____% and _____%, respectively;
(iv) the U.S. Balanced Fund, for the one-year period ended December 31,
1998 and the period June 30, 1997 (commencement of operations)
through December 31, 1998 was ______% and ______%, respectively;
(v) the U.S. Equity Fund, for the one-year period ended December 31,
1998 and the period June 30, 1997 (commencement of operations)
through December 31, 1998 was _____% and _____%, respectively;
(vi) the U.S. Large Capitalization Equity Fund, for the one-year period
ended December 31, 1998 and the period April 6, 1998 (commencement
of operations) through December 31, 1998 was _____% and _______%,
respectively;
(vii) the U.S. Bond Fund, for the one-year period ended December 31, 1998
and the period June 30, 1997 (commencement of operations) through
December 31, 1998 was ______% and ______% , respectively; and
(viii) the Global (ex-U.S.) Equity Fund, for the one-year period ended
December 31, 1998 and the period June 30, 1997 (commencement of
operations) through December 31, 1998 was _____% and _____%,
respectively.
* The Emerging Markets Debt Fund and the Emerging Markets Equity Fund had
not commenced operations as of the time periods indicated.
Based on the foregoing calculations, the average annual total return for
the U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund
and High Yield Fund was as follows:
(i) the U.S. Large Capitalization Growth Fund, for the one-year period
ended December 31, 1998 and the period October 14, 1997
(commencement of operations) through December 31, 1998 was ______%
and ____%, respectively*;
(ii) the U.S. Small Capitalization Growth Fund, for the one-year period
ended December 31, 1998 and the period September 30, 1997
(commencement of operations) through December 31, 1998 was ______%
and _____%, respectively*; and
(iii) the High Yield Fund, for the one-year period ended December 31, 1998
and the period September 30, 1997 (commencement of operations)
through December 31, 1998 was _____% and ______%, respectively*.
* These Series were reorganized as Series of The Brinson Funds on
December 10, 1998. The average annual total return calculations also
reflect the performance of these Series while they were series of the
UBS Private Investor Funds, Inc.
[TO BE COMPLETED BY AMENDMENT.]
68
<PAGE>
YIELD
As indicated below, current yield is determined by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period and annualizing the result.
Expenses accrued for the period include any fees charged to all shareholders
during the 30-day base periods. According to the SEC formula:
Yield = 2[(a-b + 1)/6/ - 1
------------------
cd
where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of
the period.
The yield of a Series may be calculated by dividing the net investment
income per share earned by the particular Series during a 30-day (or one month)
period by the net asset value per share on the last day of the period and
annualizing the result on a semi-annual basis. A Series' net investment income
per share earned during the period is based on the average daily number of
shares outstanding during the period entitled to receive dividends and includes
dividends and interest earned during the period minus expenses accrued for the
period, net of reimbursements.
FINANCIAL STATEMENTS AND REPORTS OF INDEPENDENT AUDITORS
The Series' Financial Statements for the fiscal year ended _____________
and the report thereon of________________, which are contained in the Series'
Annual Reports dated _____________ (which do not include the U.S. Large
Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, High Yield
Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund, which had not
commenced operations as of the time period indicated) (as filed with the SEC on
[date] pursuant to Section 30(b) of the Act and Rule 30b2-1 thereunder
----
(Accession Number[accession number])) are incorporated herein by reference. The
----------------
unaudited Financial Statements of the Series for the six month period ended
______________ (as filed with the SEC on [date] pursuant to Section 30(b) of the
Act and Rule 30b2-1 thereunder (Accession Number [number])) are incorporated
herein by reference. The Financial Statements of the U.S. Large Capitalization
Growth Fund, U.S. Small Capitalization Growth Fund and High Yield Fund (formerly
the UBS Large Cap Growth Portfolio, the UBS Small Cap Portfolio and the UBS High
Yield Bond Portfolio (the "Portfolios")), respectively, which appear in the
Annual Reports dated _________and the reports thereon of _____________as of and
for the fiscal year ended _____________ (as filed with the SEC on [date]
pursuant to Section 30(b) of the Act and Rule 30b2-1 thereunder (Accession
Number [number])) are incorporated herein by reference.
69
<PAGE>
CORPORATE DEBT RATINGS APPENDIX A
MOODY'S INVESTORS SERVICE, INC. DESCRIBES CLASSIFICATIONS OF CORPORATE BONDS AS
FOLLOWS:
AAA - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edged". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
AA - Bonds which are rated Aa are judged to be of high-quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
BAA - Bonds which are rated Baa are considered as medium-grade
obligations, (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
BA - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
CAA - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
CA - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's also supplies numerical indicators 1, 2, and 3 to rating
categories. The modifier 1 indicates the security is in the higher end of its
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates a ranking toward the lower end of the category.
A-1
<PAGE>
STANDARD & POOR'S RATINGS GROUP DESCRIBES CLASSIFICATIONS OF CORPORATE BONDS AS
FOLLOWS:
AAA - This is the highest rating assigned by Standard & Poor's Ratings
Group to a debt obligation and indicates an extremely strong capacity to pay
principal and interest.
AA - Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong and in the majority of
instances they differ from the AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB - Debt rated BB has less near-term vulnerability to default than
other speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lend
to inadequate capacity to meet timely interest and principal payments.
B - Debt rated B has a greater vulnerability to default but presently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC - Debt rated CCC has a current identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payments of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest or repay principal.
CC - The rating CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC rating.
C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC rating.
CI - The rating CI is reserved for income bonds on which no interest
is being paid.
D - Debt rated D is in default, or is expected to default upon
maturity or payment date.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
A-2
<PAGE>
THE BRINSON FUNDS
FORM N-1A
PART C. OTHER INFORMATION
ITEM 22. FINANCIAL STATEMENTS.
--------------------
(a) Financial Statements.
Included in Part A: To be filed by Amendment.
(b) Annual Report.
Included in Part B: To be filed by Amendment.
<PAGE>
(c) Semi-Annual Report
None.
Item 23. Exhibits:
Exhibits filed pursuant to Form N-1A:
(a) Articles of Incorporation.
(1) Certificate of Trust of the Registrant dated August 9,
1993, as filed with the Office of the Secretary of State
of the State of Delaware on August 13, 1993, is
incorporated herein by reference to Post-Effective
Amendment No. 21 to Registrant's Registration Statement
(Nos. 33-47287 and 811-6637) as filed electronically on
September 15, 1998.
(2)(a) Agreement and Declaration of Trust ("Declaration") dated
August 19, 1993, as amended through August 24, 1998, of
the Registrant is incorporated herein by reference to
Post-Effective Amendment No. 21 to Registrant's
Registration Statement (Nos. 33-47287 and 811-6637) as
filed electronically on September 15, 1998.
(b) Certificates of the Secretary and resolutions of the
Registrant dated April 14, 1998 are incorporated herein
by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement (Nos. 33-47287 and
811-6637) as filed electronically on September 15, 1998.
(c) Form of Certificates of the Assistant Secretary and
resolutions dated August 24, 1998 and November 23, 1998
are filed electronically herewith as EX-99.a2c.
<PAGE>
(b) By-Laws.
By-Laws of The Brinson Funds dated August 9, 1993, are
incorporated herein by reference to Exhibit 2 Post-Effective
Amendment No. 17 to Registrant's Registration Statement on
Form N-1A (File Nos. 33-47287 and 811-6637), as
electronically filed with the Commission on August 29, 1996.
(c) Instruments Defining the Rights of Security Holders.
(1) Form of Specimen Share Certificate of The Brinson Funds is
incorporated herein by reference to Post-Effective Amendment
No. 9 to Registrant's Registration Statement (Nos. 33-47287,
and 811-6637) as filed on July 21, 1994 and is incorporated
herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement (Nos. 33-47287 and
811-6637) as filed electronically on September 15, 1998.
The rights of security holders of the Trust are further
defined in the following sections of the Trust's By-Laws and
Declaration:
a. By-Laws.
See Article II - "Voting", Section 7 and Section
10.
b. Declaration.
See Article III - "Shares", Section 1, Section 2
and Section 6.
(d) Investment Advisory Contracts.
(1) Investment Advisory Agreement dated April 25, 1995 between
Brinson Partners, Inc. and the Registrant on behalf of the
Global Fund (f/k/a Brinson Global Fund) series, and
Secretary's Certificate relating thereto, is incorporated
herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement (Nos. 33-47287 and
811-6637) as filed electronically on September 15, 1998.
(2) Investment Advisory Agreement dated April 25, 1995 between
Brinson Partners, Inc. and the Registrant on behalf of the
Global Bond Fund (f/k/a Brinson Global Bond Fund) series,
and Secretary's Certificate relating thereto, is
incorporated herein by reference to Post-Effective Amendment
No. 21 to Registrant's Registration Statement (Nos. 33-47287
and 811-6637) as filed electronically on September 15, 1998.
(3) Investment Advisory Agreement dated April 25, 1995 between
Brinson Partners, Inc. and the Registrant on behalf of the
Global (ex-U.S.) Equity Fund (f/k/a Non-U.S. Equity Fund)
series, and Secretary's Certificate relating thereto, is
incorporated herein by reference to Post-Effective Amendment
No. 21 to Registrant's Registration Statement (Nos. 33-47287
and 811-6637) as filed electronically on September 15, 1998.
(4) Investment Advisory Agreement dated April 25, 1995 between
Brinson Partners, Inc. and the Registrant on behalf of the
Global Equity Fund (f/k/a Brinson Global Equity Fund)
series, and Secretary's Certificate relating thereto, is
incorporated herein by reference to Post-Effective Amendment
No. 21 to Registrant's Registration Statement (Nos. 33-47287
and 811-6637) as filed electronically on September 15, 1998.
(5) Investment Advisory Agreement dated April 25, 1995 between
Brinson Partners, Inc. and the Registrant on behalf of the
U.S. Equity Fund (f/k/a Brinson U.S. Equity Fund) series,
and Secretary's Certificate relating thereto, is
incorporated herein by reference to Post-Effective Amendment
No. 21 to Registrant's Registration Statement (Nos. 33-47287
and 811-6637) as filed electronically on September 15, 1998.
(6) Investment Advisory Agreement dated April 25, 1995 between
Brinson Partners, Inc. and the Registrant on behalf of the
U.S. Balanced Fund (f/k/a Brinson U.S. Balanced Fund)
series, and Secretary's Certificate relating thereto, is
incorporated herein by reference to Post-Effective Amendment
No. 21 to Registrant's Registration Statement (Nos. 33-47287
and 811-6637) as filed electronically on September 15, 1998.
(7) Investment Advisory Agreement dated April 25, 1995 between
Brinson Partners, Inc. and the Registrant on behalf of the
U.S. Bond Fund (f/k/a Brinson U.S. Bond Fund) series, and
Secretary's Certificate relating thereto, is incorporated
herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement (Nos. 33-47287 and
811-6637) as filed electronically on September 15, 1998.
(8) Investment Advisory Agreement dated November 24, 1997
between Brinson Partners, Inc. and the Registrant on behalf
of the U.S. Large Capitalization Equity Fund series is
incorporated herein by reference to Post-Effective Amendment
No. 21 to Registrant's Registration Statement (Nos. 33-47287
and 811-6637) as filed electronically on September 15, 1998.
<PAGE>
(9) Investment Advisory Agreement dated December 18, 1998
between Brinson Partners, Inc. and the Registrant on behalf
of the U.S. Large Capitalization Growth Fund series is
filed electronically herewith as Ex-99.d9.
(10) Investment Advisory Agreement dated December 18, 1998
between Brinson Partners, Inc. and the Registrant on behalf
of the U.S. Small Capitalization Growth Fund series is filed
electronically herewith as Ex-99.d10.
(11) Investment Advisory Agreement dated December 18, 1998
between Brinson Partners, Inc. and the Registrant on behalf
of the High Yield Fund series is filed electronically
herewith as Ex-99.d11.
(12) Investment Advisory Agreement dated December 10, 1998
between Brinson Partners, Inc. and the Registrant on behalf
of the Emerging Markets Equity Fund series is filed
electronically herewith as Ex-99.d12.
(13) Investment Advisory Agreement dated December 10, 1998
between Brinson Partners, Inc. and the Registrant on behalf
of the Emerging Markets Debt Fund series is filed
electronically herewith as Ex-99.d13.
<PAGE>
(e) Underwriting Contracts
Distribution Agreement dated February 24, 1997, as amended
through December 10, 1998, between Funds Distributor, Inc. and
the Registrant is filed electronically herewith as Ex-99.e.
(f) Bonus or Profit Sharing Contracts.
Not applicable.
(g) Custodian Agreements.
(1) Custodial arrangements are provided under the Multiple Services
Agreement dated May 9, 1997, as amended through December 10,
1998, between Morgan Stanley Trust Company, and succeeded by the
Chase Manhattan Bank, and the Registrant on behalf of each series
of the Registrant is filed electronically herewith as Ex-99.g1.
(2) Co-custodial arrangements between Investors Bank & Trust and
Chase Global Funds Services Company dated December 18, 1998 is
filed electronically herewith as Ex-99.g2.
(h) Other Material Contracts.
Not applicable.
<PAGE>
(i) Legal Opinion
(1) Legal opinion of Stradley, Ronon, Stevens & Young LLP,
counsel to the Registrant, is incorporated herein by
reference to Post-Effective Amendment No. 22 to Registrant's
Registration Statement (Nos. 33-47287 and 811-6637) as filed
electronically on September 18, 1998.
(j) Other Opinions and Consents.
Not Applicable.
(k) Omitted Financial Statements.
Not applicable.
(l) Initial Capital Agreements.
Letter of Understanding dated July 1, 1992, relating to initial
capital is incorporated herein by reference to Post-Effective
Amendment No. 21 to Registrant's Registration Statement (Nos. 33-
47287 and 811-6637) as filed electronically on September 15,
1998.
(m) Rule 12b-1 Plan.
(1) Amended Distribution Plan dated February 21, 1995, as
amended through December 10, 1998, relating to the UBS
Investment Funds class of shares (f/k/a the SwissKey Fund
Class) of each series of the Registrant is filed
electronically herewith as Ex-99.m1.
(2) Distribution Plan dated June 30, 1997, as amended through
December 10, 1998, relating to the Brinson Fund-Class N
shares of each series of the Registrant is filed
electronically herewith as Ex-99.m2.
(3) Selected Dealer and Selling General Dealer Agreement as last
approved on August 24, 1998 and amended on December 10,
1998 for the UBS Investments Fund class of shares (f/k/a
SwissKey Fund Class) of each series of the Registrant is
filed electronically herewith as Ex-99.m3.
(4) The Selected Dealer and Selling Agreements as approved
November 24, 1997 and amended on December 10, 1998
on behalf of each series of The Brinson Funds are filed
electronically herewith as Ex-99.m4.
(n) Financial Data Schedule.
Not Applicable.
(o) Rule 18f-3 Plan.
Revised Multiple Class Plan dated May 19, 1997, as amended
through August 24, 1998, pursuant to Rule 18f-3 on behalf of each
series of the Registrant is incorporated herein by reference to
Post-Effective Amendment No. 21 to Registrant's Registration
Statement (Nos. 33-47287 and 811-6637) as filed electronically on
September 15, 1998 and amendment to Appendix A is incorporated
herein by reference to Post-Effective Amendment No. 22 to
Registrant's Registration Statement (Nos. 33-47287 and 811-6637)
as filed electronically on September 18, 1998.
<PAGE>
(p) Power of Attorney.
(1) Power-of-Attorney appointing Karl Hartmann, Lloyd Lipsett,
Kathleen O'Neill, Eddie Wang and Paul Roselli as attorneys-in-
fact and agents is incorporated herein by reference to Post-
Effective Amendment No. 21 to Registrant's Registration Statement
(Nos. 33-47287 and 811-6637) as filed electronically on September
15, 1998.
(a) Certificate of Secretary and resolution relating to the
appointment of power of attorney is incorporated herein by
reference to Post-Effective Amendment No. 21 to Registrant's
Registration Statement (Nos. 33-47287 and 811-6637) as filed
electronically on September 15, 1998.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
--------------------------------------------------------------
None.
-----
ITEM 25. INDEMNIFICATION.
----------------
Indemnification of the Registrant's Trustees is provided for in
Article VII, Sections 2 and 3 of the Registrant's Agreement and
Declaration of Trust dated August 9, 1993, as amended through August
24, 1998, as follows:
Section 2. Indemnification and Limitation of Liability. The Trustees
shall not be responsible or liable in any event for any neglect or
wrong-doing of any officer, agent, employee, Manager or Principal
Underwriter of the Trust, nor shall any Trustee be responsible for the
act or omission of any other Trustee, and, subject to the provisions
of the Bylaws, the Trust out of its assets may indemnify and hold
harmless each and every Trustee and officer of the Trust from and
against any and all claims, demands, costs, losses, expenses, and
damages whatsoever arising out of or related to such Trustee's
performance of his or her duties as a Trustee or officer of the Trust;
provided that nothing
<PAGE>
herein contained shall indemnify, hold harmless or protect any Trustee
or officer from or against any liability to the Trust or any
Shareholder to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with
the Trust shall be conclusively deemed to have been issued, executed
or done only in or with respect to their or his or her capacity as
Trustees or Trustee, and such Trustees or Trustee shall not be
personally liable thereon.
Section 3. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers hereunder shall
be binding upon everyone interested in or dealing with the Trust. A
Trustee shall be liable to the Trust and to any Shareholder solely for
his or her own willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the office
of Trustee and shall not be liable for errors of judgment or mistakes
of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration
of Trust and shall be under no liability for any act or omission in
accordance with such advice nor for failing to follow such advice. The
Trustees shall not be required to give any bond as such, nor any
surety if a bond is required.
Section 4. Insurance. The Trustees shall be entitled and empowered to
the fullest extent permitted by law to purchase with Trust assets
insurance for liability and for all expenses, reasonably incurred or
paid or expected to be paid by a Trustee or officer in connection with
any claim, action, suit or proceeding in which he or she becomes
involved by virtue of his or her capacity or former capacity with the
Trust, whether or not the Trust would have the power to indemnify him
or her against such liability under the provisions of this Article.
Indemnification of Registrant's custodian, transfer agent, accounting
services provider, administrator and distributor against certain
stated liabilities is provided until May 9, 1997 under the following
documents:
(a) Section 12 of Accounting Services Agreement, between the
Registrant and Fund/Plan Services, Inc., incorporated herein
by reference to Post Effective No. 16 to Registrant's
Registration Statement on Form N-1A (File Nos. 33-47287 and
811-6637), Exhibit 9(c) as filed electronically on February
15, 1996.
(b) Section 8 of Administration Agreement between the Registrant
and Fund/Plan Services, Inc., incorporated herein by
reference to Post Effective No. 16 to Registrant's
Registration Statement on Form N-1A (File Nos. 33-47287 and
811-6637), Exhibit 9(b) as filed electronically on
February 15, 1996.
(c) Section 14 of Custodian Agreement between the Registrant and
Bankers Trust Company, incorporated herein by reference to
Post Effective No. 13 to Registrant's Registration Statement
on Form N-1A (File Nos. 33-47287 and 811-6637), Exhibit Nos.
8(a) and 8(b) as filed electronically on September 20, 1995.
(d) Section 19 of Shareholder Services Agreement between
Registrant and Fund/Plan Services, Inc., incorporated herein
by reference to Post Effective No. 16 to Registrant's
Registration Statement on Form N-1A (File Nos. 33-47287 and
811-6637), Exhibit 9(a) as filed electronically on February
15, 1996.
(e) Section 8 of the Underwriting Agreement between Registrant
and Fund/Plan Broker Services, Inc. are incorporated herein
by reference to Post Effective No. 16 to Registrant's
Registration Statement on Form N-1A (File Nos. 33-47287 and
811-6637), Exhibit No. (6) as filed electronically on
February 15, 1996.
Effective May 10, 1997, indemnification of Registrant's custodian,
transfer agent, accounting services provider, administrator and
distributor against certain stated liabilities is provided for in the
following documents:
(a) Sections I.8(a), I.8(c)(iii), I.10, II.A.2, II.B.5, II.C.6,
III.1., III.2.(b) through III.2.(e), III.4.(e) and III.9.(b)
of the Multiple Services Agreement dated May 9, 1997, as
amended through January 23, 1998, between Morgan Stanley
Trust Company and the Registrant on behalf of each of the
series of the Registrant is incorporated herein by reference
to Post-Effective Amendment No. 21 to Registrant's
Registration Statement (Nos. 33-47287 and 811-6637) as filed
electronically on September 15, 1998.
Effective February 24, 1997, indemnification of Registrant's
distributor against certain stated liabilities is provided for in the
following document:
(b) Section 1.10 of the Distribution Agreement between Funds
Distributor, Inc. and the Registrant on behalf of each
series of the Registrant dated February 24, 1997, as amended
through August 24, 1998, is incorporated herein by reference
to Post-Effective Amendment No. 21 to Registrant's
Registration Statement (Nos. 33-47287 and 811-6637) as filed
electronically on September 15, 1998.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF ADVISOR.
------------------------------------------
Brinson Partners, Inc. provides investment advisory services
consisting of portfolio management for a variety of individuals and
institutions and as of December 31, 1998 had over $297 billion in
assets under management. It presently acts as investment advisor to
nine other investment companies, Brinson Relationship Funds, which
includes seventeen investment portfolios (series);
<PAGE>
Enterprise Accumulation Trust - International Growth Portfolio;
Enterprise Group of Funds, Inc. - International Growth Portfolio; Fort
Dearborn Income Securities, Inc.; The Hirtle Callaghan International
Trust - The International Equity Portfolio; John Hancock Variable
Annuity Series Trust - International Balanced Portfolio; Managed
Accounts Services Portfolio Trust - Pace Large Company Value Equity
Investments; AON Funds - International Equity Fund and The Republic
Funds - Republic Equity Fund.
For information as to any other business, vocation or employment of a
substantial nature in which the Registrant's investment advisor and
each officer of the Registrant's investment advisor is or has been
engaged for his or her own account or in the capacity of director,
officer, employee, partner or trustee, within the last two fiscal
years, reference is made to the Form ADV (File #801-34910) filed by it
under the Investment Advisers Act of 1940, as amended.
ITEM 27. PRINCIPAL UNDERWRITER.
----------------------
(a) Funds Distributor, Inc. (the "Distributor") acts as principal
underwriter for the following investment companies.
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Equity Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
J.P. Morgan Institutional Funds
J.P. Morgan Funds
JPM Series Trust
JPM Series Trust II
Kobrick-Cendant Investment Trust
LaSalle Partners Funds, Inc.
Merrimac Series
Monetta Funds, Inc.
Monetta Trust
The Montgomery Funds I
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
National Investors Cash Management Fund, Inc.
Orbitex Groups of Funds
SG Cowen Funds, Inc.
SG Cowen Income + Growth Fund, Inc.
SG Cowen Standby Reserve Fund, Inc.
SG Cowen Standby Tax-Exempt Reserve Fund, Inc.
SG Cowen Series Funds, Inc.
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.
Funds Distributor is registered with the Commission as a broker-dealer and
is a member of the National Association of Securities Dealers. Funds
Distributor is located at 60 State Street, Suite 1300, Boston, Massachusetts
02109. Funds Distributor is an indirect wholly-owned subsidiary of Boston
Institutional Group, Inc., a holding company, all of whose outstanding shares
are owned by key employees.
(b) The following is a list of the executive officers and directors of
Funds Distributor, Inc.
<TABLE>
<CAPTION>
<S> <C> <C>
Director, President and -Marie E. Connolly
Chief Executive Officer
Executive Vice President -George A. Rio
Executive Vice President -Donald R. Roberson
Executive Vice President -William S. Nichols
Senior Vice President, -Margaret W. Chambers
General Counsel, Chief
Compliance Officer,
Secretary and Clerk
Senior Vice President -Michael S. Petrucelli
Director, Senior Vice -Joseph F. Tower, III
President, Treasurer
and Chief Financial
Officer
Senior Vice President -Paula R. David
Senior Vice President -Allen B. Closser
Senior Vice President -Bernard A. Whalen
Chairman and Director -William J. Nutt
</TABLE>
<PAGE>
(c) Inapplicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
---------------------------------
All records described in Section 31(a) of the Investment Company Act
of 1940, as amended and Rules 17 CFR 270.31a-1 to 31a-31 promulgated
thereunder, are maintained by the Registrant's investment advisor,
Brinson Partners, Inc., 209 South LaSalle Street, Chicago, IL 60604-
1295, except for those maintained by the Fund's Custodian, The Chase
Manhattan Bank ("Chase"), 270 Park Avenue, New York, New York 10017.
Chase provides general administrative, accounting, portfolio
valuation, transfer agency and custodian services to the Registrant,
including the coordination and monitoring of any third party service
providers and maintains all such records relating to these
services.
ITEM 29. MANAGEMENT SERVICES.
--------------------
There are no management-related service contracts not discussed in
Part A or Part B.
ITEM 30. UNDERTAKINGS.
-------------
Inapplicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment Company
Act, the Fund has duly caused Post-Effective Amendment No. 25/26 to this
Registration Statement to be signed on its behalf by the undersigned, duly
authorized, in the City of Boston, and Commonwealth of Massachusetts on the 26th
day of February, 1999.
THE BRINSON FUNDS
(Fund)
By: E. Thomas McFarlan*
President
Pursuant to the requirements of the Securities Act, this Registration Statement
has been signed below by the following persons in the capacities and on the
date(s) indicated.
<TABLE>
<CAPTION>
<S> <C>
E. THOMAS MCFARLAN*
E. Thomas McFarlan February 26, 1999.
President
WALTER E. AUCH*
Walter E. Auch February 26, 1999.
Trustee
EDWARD M. ROOB*
Edward M. Roob February 26, 1999.
Trustee
FRANK K. REILLY*
Frank K. Reilly February 26, 1999.
Trustee
CAROLYN M. BURKE*
Carolyn M. Burke February 26, 1999.
Treasurer, Principal
Accounting Officer
</TABLE>
- --------------------------
*By: /s/ Lloyd Lipsett
--------------------
as Attorney-in-Fact and Agent pursuant to Power of Attorney
<PAGE>
REGISTRATION NO. 33-47287
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
EXHIBITS TO POST-EFFECTIVE AMENDMENT NO. 25 TO THE
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ON FORM N-1A
AND AMENDMENT NO. 26 TO
THE REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
THE BRINSON FUNDS
<PAGE>
THE BRINSON FUNDS
INDEX TO EXHIBITS TO FORM N-1A
<TABLE>
<CAPTION>
Exhibit Description of
Number Exhibit
<C> <S>
EX-99.a2c Form of Certificates of the Assistant Secretary and resolutions
to the Agreement and Declaration of Trust.
EX-99.d9 Investment Advisory Agreement between Brinson Partners, Inc. and
the Registrant on behalf of U.S. Large Capitalization Growth
Fund.
EX-99.d10 Investment Advisory Agreement between Brinson Partners, Inc. and
the Registrant on behalf of U.S. Small Capitalization Growth
Fund.
EX-99.d11 Investment Advisory Agreement between Brinson Partners, Inc. and
the Registrant on behalf of High Yield Fund.
EX-99.d12 Investment Advisory Agreement between Brinson Partners, Inc. and
the Registrant on behalf of Emerging Markets Equity Fund.
EX-99.d13 Investment Advisory Agreement between Brinson Partners, Inc. and
the Registrant on behalf of Emerging Markets Debt Fund.
EX-99.e Amended Distribution Agreement between Funds Distributor, Inc.
and the Registrant
EX-99.g1 Amended Multiple Services Agreement between The Chase Manhattan
Bank and the Registrant
EX-99.g2 Co-custodian Agreement between Investors Banker & Trust and
[Chase Global Funds Services]
Ex-99.m1 Amended Distribution Plan relating to the UBS Investment Funds
class of shares
Ex-99.m2 Amended Distribution Plan relating to the Brinson Fund-Class N
shares
Ex-99.m3 Amended Selected Dealer and Selling (General Dealer) Agreements
relating to the UBS Investment Funds class of shares
Ex-99.m4 Amended Selected Dealer and Selling Agreements on behalf of each
series of the Registrant
</TABLE>
<PAGE>
CERTIFICATE OF THE ASSISTANT SECRETARY
OF
THE BRINSON FUNDS
RESOLUTIONS APPROVING RE-DESIGNATION
OF THE
SWISSKEY CLASS
TO THE
UBS INVESTMENT FUNDS CLASS
Pursuant to Article V, Section 9 of the By-Laws, dated August 9, 1993, of
The Brinson Funds, a Delaware Business Trust (the "Trust"), the undersigned does
hereby certify the following:
1. He is the duly elected, qualified and acting Assistant Secretary of the
Trust.
2. Attached hereto as incorporated by reference into the Trust's Agreement
and Declaration of Trust dated August 9, 1993 (the "Declaration"), pursuant
to Article III, Section 6 of the Declaration, is a true and complete copy
of the resolutions adopted by the Board of Trustees of the Trust (the
"Resolutions") regarding the re-designation of the SwissKey Class to the
UBS Investment Funds Class.
3. The Resolutions were unanimously adopted by the Trust's Board of
Trustees at a meeting duly called and held on August 24, 1998 and at which
a quorum was present and acted throughout, have not been amended or
rescinded and have remained in full force and effect as of the date hereof.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
signed on this 28th day of January, 1999.
(Trust Seal)
__________________________
David E. Floyd
Assistant Secretary
The Brinson Funds
1
<PAGE>
RESOLUTIONS ADOPTED AUGUST 24, 1998 AND INCORPORATED BY REFERENCE INTO
THE AGREEMENT AND DECLARATION OF TRUST
OF THE BRINSON FUNDS
DATED AUGUST 9, 1993,
PURSUANT TO ARTICLE III, SECTION 6 THEREOF
APPROVAL OF RE-DESIGNATION OF THE
SWISSKEY CLASS TO THE
UBS INVESTMENT FUNDS CLASS
RESOLVED, that the class of shares of the Trust presently designated as the
"SwissKey Global Fund,"
"SwissKey Global Equity Fund,"
"SwissKey Global Bond Fund,"
"SwissKey U.S. Balanced Fund,"
"SwissKey U.S. Equity Fund,"
"SwissKey U.S. Large Capitalization Equity Fund,"
"SwissKey U.S. Bond Fund" and
"SwissKey Non-U.S. Equity Fund"
is hereby redesignated as the
"UBS Investment Fund-Global,"
"UBS Investment Fund-Global Equity,"
"UBS Investment Fund-Global Bond,"
"UBS Investment Fund-U.S. Balanced,"
"UBS Investment Fund- U.S. Equity,"
"UBS Investment Fund- U.S. Large Capitalization Equity,"
"UBS Investment Fund- U.S. Bond" and
"UBS Investment Fund- Non-U.S. Equity,"
respectively.
2
<PAGE>
CERTIFICATE OF THE ASSISTANT SECRETARY
OF
THE BRINSON FUNDS
RESOLUTIONS APPROVING RE-DESIGNATION
OF THE
NON-U.S. EQUITY FUND
TO THE
GLOBAL (EX-U.S.) EQUITY FUND
Pursuant to Article V, Section 9 of the By-Laws, dated August 9, 1993, of
The Brinson Funds, a Delaware Business Trust (the "Trust"), the undersigned does
hereby certify the following:
1. He is the duly elected, qualified and acting Assistant Secretary of the
Trust.
2. Attached hereto as incorporated by reference into the Trust's Agreement
and Declaration of Trust dated August 9, 1993 (the "Declaration"), pursuant
to Article III, Section 6 of the Declaration, is a true and complete copy
of the resolutions adopted by the Board of Trustees of the Trust (the
"Resolutions") regarding the re-designation of the Non-U.S. Equity Fund to
the Global (ex-U.S.) Equity Fund.
3. The Resolutions were unanimously adopted by the Trust's Board of
Trustees at a meeting duly called and held on August 24, 1998 and at which
a quorum was present and acted throughout, have not been amended or
rescinded and have remained in full force and effect as of the date hereof.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
signed on this 28TH day of January, 1999.
(Trust Seal)
_______________________
David E. Floyd
Assistant Secretary
The Brinson Funds
3
<PAGE>
RESOLUTIONS ADOPTED AUGUST 24, 1998 AND INCORPORATED BY REFERENCE INTO
THE AGREEMENT AND DECLARATION OF TRUST
OF THE BRINSON FUNDS
DATED AUGUST 9, 1993,
PURSUANT TO ARTICLE III, SECTION 6 THEREOF
APPROVAL OF RE-DESIGNATION OF THE
NON-U.S. EQUITY FUND TO THE
GLOBAL (EX-U.S.) EQUITY FUND
RESOLVED, that the Board of Trustees hereby redesignates the Series
currently known as the Non-U.S. Equity Fund as the Global (ex-U.S.) Equity Fund,
which redesignation will be effective in December, 1998; and
FURTHER RESOLVED, that the officers of the Trust are hereby authorized and
directed to take such actions as necessary to effectuate such Series'
redesignation, including making such revisions to the Trust's registration
statement, prospectuses, and other relevant documents, as required.
4
<PAGE>
CERTIFICATE OF THE ASSISTANT SECRETARY
OF
THE BRINSON FUNDS
RESOLUTIONS ESTABLISHING AND DESIGNATING THE
U.S. LARGE CAPITALIZATION GROWTH FUND,
U.S. SMALL CAPITALIZATION FUND,
HIGH YIELD BOND FUND,
EMERGING MARKETS EQUITY FUND,
AND
EMERGING MARKETS DEBT FUND
AND ADDING THE
BRINSON FUND --- CLASS I SHARES,
UBS INVESTMENT FUNDS CLASS SHARES
AND
BRINSON FUND --- CLASS N SHARES
TO SUCH SERIES
Pursuant to Article V, Section 9 of the By-Laws, dated August 9, 1993, of
The Brinson Funds, a Delaware Business Trust (the "Trust"), the undersigned does
hereby certify the following:
1. He is the duly elected, qualified and acting Assistant Secretary of the
Trust.
2. Attached hereto as incorporated by reference into the Trust's Agreement
and Declaration of Trust dated August 9, 1993 (the "Declaration"), pursuant
to Article III, Section 6 of the Declaration, is a true and complete copy
of the resolutions adopted by the Board of Trustees of the Trust (the
"Resolutions") with respect to the:
(i) authorization and designation of the:
U.S. Large Capitalization Growth Fund,
U.S. Small Capitalization Fund,
High Yield Bond Fund,
Emerging Markets Equity Fund, and
Emerging Markets Debt Fund; and
(ii) establishment of the Brinson Fund -- Class I Shares, UBS
Investment Funds Class Shares and Brinson Fund -- Class N Shares of the:
5
<PAGE>
U.S. Large Capitalization Growth Fund,
U.S. Small Capitalization Fund,
High Yield Bond Fund,
Emerging Markets Equity Fund, and
Emerging Markets Debt Fund
series of the Trust.
3. The Resolutions were unanimously adopted by the Trust's Board of
Trustees at a meeting duly called and held on August 24, 1998 and at which
a quorum was present and acted throughout and, unless subsequently amended
by resolutions duly adopted by the Board of Trustees of the Trust, have
remained in full force and effect as of the date hereof.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
signed on this 28th day of January, 1999.
(Trust Seal)
_______________________
David E. Floyd
Assistant Secretary
The Brinson Funds
6
<PAGE>
RESOLUTIONS ADOPTED AUGUST 24, 1998 AND INCORPORATED BY REFERENCE INTO
THE AGREEMENT AND DECLARATION OF TRUST
OF THE BRINSON FUNDS
DATED AUGUST 9, 1993,
PURSUANT TO ARTICLE III, SECTION 6 THEREOF
RESOLUTIONS ESTABLISHING AND DESIGNATING THE
U.S. LARGE CAPITALIZATION GROWTH FUND,
U.S. SMALL CAPITALIZATION FUND,
HIGH YIELD BOND FUND,
EMERGING MARKETS EQUITY FUND, AND
EMERGING MARKETS DEBT FUND
AND
ADDING THE
BRINSON FUND --- CLASS I SHARES,
UBS INVESTMENT FUNDS CLASS SHARES
AND
BRINSON FUND --- CLASS N SHARES
TO SUCH SERIES
RESOLVED, that pursuant to Article III, Section 6 of the Trust's Agreement
and Declaration of Trust, five additional series of shares (sometimes referred
to herein as the "New Series"), be, and they hereby are, authorized and designed
as the:
U.S. Large Capitalization Growth Fund,
U.S. Small Capitalization Fund,
High Yield Bond Fund
Emerging Markets Equity Fund, and
Emerging Markets Debt Fund; and
FURTHER RESOLVED, that an unlimited number of shares of beneficial interest
($0.001 par value) are hereby allocated to each New Series.
* * *
RESOLVED, that the three classes of shares of the series of the Trust known
as the U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Fund,
High Yield Bond Fund, Emerging Markets Equity Fund and Emerging Markets Debt
Fund, are hereby established and designated as the "Brinson U.S. Large
Capitalization Growth Fund-Class I," "Brinson U.S. Large Capitalization Growth
Fund-Class N," and the "UBS Investment Fund-U.S. Large Capitalization Growth"
class of shares (sometimes referred to herein individually and collectively as
the "Brinson U.S. Large Capitalization Growth Fund Classes"); the "Brinson U.S.
Small Capitalization Fund-Class I," "Brinson U.S. Small Capitalization Fund-
Class N," and "UBS Investment Fund-U.S. Small Capitalization" class of shares
(sometimes referred to herein individually and collectively as the "Brinson U.S.
Small Capitalization Fund Classes"); the "Brinson High Yield Bond Fund-Class I,"
"Brinson High Yield Bond Fund-Class N," and "UBS
7
<PAGE>
Investment Fund-High Yield Bond" class of shares (sometimes referred to herein
individually and collectively as the "Brinson High Yield Bond Fund Classes");
the "Brinson Emerging Markets Equity Fund-Class I," "Brinson Emerging Markets
Equity Fund-Class N," and "UBS Investment Fund-Emerging Markets Equity" class of
shares (sometimes referred to herein individually and collectively as the
"Brinson Emerging Markets Equity Fund Classes"); and the "Brinson Emerging
Markets Debt Fund-Class I," "Brinson Emerging Markets Debt Fund-Class N," and
"UBS Investment Fund-Emerging Markets Debt" class of shares (sometimes referred
to herein individually and collectively as the "Brinson Emerging Markets Debt
Fund Classes"); of the New Series, and an unlimited number of shares of
beneficial interest ($0.001 par value) are hereby classified and allocated to
each such "Brinson U.S. Large Capitalization Growth Fund Class," "Brinson U.S.
Small Capitalization Fund Class," "Brinson High Yield Bond Fund Class," "Brinson
Emerging Markets Equity Fund Class" and "Brinson Emerging Markets Debt Fund
Class;" and
FURTHER RESOLVED, that each share of each class of shares of each New
Series shall have the same rights and limitations as set forth in Section 1 of
Article III of the Trust's Agreement and Declaration of Trust, except that
dividends paid on the Class N and UBS Investment Funds Class of shares of each
New Series shall reflect reductions for payments of fees under the Trust's
Distribution Plans relating to the Class N and UBS Investment Funds class of
shares of each New Series, respectively, adopted pursuant to rule 12b-1 under
the 1940 Act (each a "Plan"), and provided further, that only the Class N and
UBS Investment Funds class of shares of each New Series shall be entitled to
vote upon or with respect to any matter relating to or arising from the Plan
that has been adopted by the respective class; and
FURTHER RESOLVED, that the officers of the Trust are authorized to take
whatever actions are necessary to revise the Trust's registration statement on
Form N-1A to reflect the creation of the three aforementioned classes of shares
of each New Series.
* * *
RESOLVED, that the officers of the Trust are authorized and directed to
issue to the Advisor one authorized share of beneficial interest ($0.001 par
value) of each of the following series of the Trust designated as the:
8
<PAGE>
U.S. Large Capitalization Growth Fund,
U.S. Small Capitalization Fund,
High Yield Bond Fund,
Emerging Markets Equity Fund, and
Emerging Markets Debt Fund,
at a purchase price of $10.00 per share; and
FURTHER RESOLVED, that each such share, when issued and paid for, shall be
validly issued, fully-paid and non-assessable.
9
<PAGE>
CERTIFICATE OF THE ASSISTANT SECRETARY
OF
THE BRINSON FUNDS
RESOLUTIONS CHANGING THE NAME OF THE
HIGH YIELD BOND FUND
AND
U.S. SMALL CAPITALIZATION FUND SERIES
Pursuant to Article V, Section 9 of the By-Laws, dated August 9, 1993, of
The Brinson Funds, a Delaware Business Trust (the "Trust"), the undersigned does
hereby certify the following:
1. He is the duly elected, qualified and acting Assistant Secretary of the
Trust.
2. Attached hereto as incorporated by reference into the Trust's Agreement
and Declaration of Trust dated August 9, 1993 (the "Declaration"), pursuant
to Article III, Section 6 of the Declaration, is a true and complete copy
of the resolutions adopted by the Board of Trustees of the Trust (the
"Resolutions") regarding the name changes of the High Yield Bond Fund and
U.S. Small Capitalization Fund series of the Trust.
3. The Resolutions were unanimously adopted by the Trust's Board of
Trustees at a meeting duly called and held on November 23, 1998 and at
which a quorum was present and acted throughout, have not been amended or
rescinded and have remained in full force and effect as of the date hereof.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be
signed on this 28th day of January, 1999.
(Trust Seal)
_______________________
David E. Floyd
Assistant Secretary
The Brinson Funds
10
<PAGE>
RESOLUTIONS ADOPTED NOVEMBER 23, 1998 AND INCORPORATED BY REFERENCE INTO
THE AGREEMENT AND DECLARATION OF TRUST
OF THE BRINSON FUNDS
DATED AUGUST 9, 1993,
PURSUANT TO ARTICLE III, SECTION 6 THEREOF
RESOLUTIONS CHANGING THE NAME OF THE
HIGH YIELD BOND FUND
AND
U.S. SMALL CAPITALIZATION FUND SERIES
RESOLVED, that the Board of Trustees hereby redesignates the Series
currently known as the High Yield Bond Fund and the U.S. Small Capitalization
Fund as the High Yield Fund and the U.S. Small Capitalization Growth Fund,
respectively, which redesignations will become effective December 10, 1998; and
FURTHER RESOLVED, that the officers of the Trust are hereby authorized and
directed to take such actions as necessary to effectuate such Series'
redesignations, including making such revisions to the Trust's registration
statement, prospectuses, and other relevant documents, as required.
11
<PAGE>
EXHIBIT 99(D9)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 18TH day of DECEMBER, 1998 by and between THE BRINSON FUNDS,
a Delaware Business Trust (the "Trust") and BRINSON PARTNERS, INC., a Delaware
corporation (the "Advisor").
1. DUTIES OF THE ADVISOR. The Trust hereby appoints the Advisor to act as
---------------------
investment advisor to the U.S. SMALL CAPITALIZATION GROWTH FUND for the period
and on such terms set forth in this Agreement. The Trust employs the Advisor to
manage the investment and reinvestment of the assets of the Series, to
continuously review, supervise and administer the investment program of the
Series, to determine in its discretion the assets to be held uninvested, to
provide the Trust with records concerning the Advisor's activities which the
Trust is required to maintain, and to render regular reports to the Trust's
officers and Board of Trustees concerning the Advisor's discharge of the
foregoing responsibilities. The Advisor shall discharge the foregoing
responsibilities subject to the control of the officers and the Board of
Trustees of the Trust, and in compliance with the objectives, policies and
limitations set forth in the Trust's Prospectus and Statement of Additional
Information. The Advisor accepts such employment and agrees to render the
services and to provide, at its own expense, the office space, furnishings,
equipment and the personnel required by it to perform the services on the terms
and for the compensation provided herein. With respect to foreign securities,
at its own expense, the Advisor may obtain statistical and other factual
information and advice regarding economic factors and trends from its foreign
subsidiaries, but it may not generally receive advice or recommendations
regarding the purchase or sale of securities from such subsidiaries.
2. PORTFOLIO TRANSACTIONS. The Advisor shall provide the Series with a
-----------------------
trading department and with respect to foreign securities, the Advisor is
authorized to utilize the trading department of its foreign subsidiaries. The
Advisor shall select, and with respect to its foreign
<PAGE>
subsidiaries, shall monitor the selection of, the brokers or dealers that will
execute the purchases and sales of securities for the Series and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities transactions for the Series are obtained. Subject to
policies established by the Board of Trustees of the Trust and communicated to
the Advisor, it is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Series, or be in breach of any obligation owing to the Trust or in respect
of the Series under this Agreement, or otherwise, solely by reason of its having
caused the Series to pay a member of a securities exchange, a broker or a dealer
a commission for effecting a securities transaction for the Series in excess of
the amount of commission another member of an exchange, broker or dealer would
have charged if the Advisor determines in good faith that the commission paid
was reasonable in relation to the brokerage or research services provided by
such member, broker or dealer, viewed in terms of that particular transaction or
the Advisor's overall responsibilities with respect to the accounts, including
the Series, as to which it exercises investment discretion. The Advisor will
promptly communicate to the officers and directors of the Trust such information
relating to the Series transactions as they may reasonably request.
3. COMPENSATION OF THE ADVISOR. For the services to be rendered by the
----------------------------
Advisor as provided in Section 1 and 2 of this Agreement, the U.S. Small
Capitalization Growth Fund shall pay to the Advisor annual management fees of
1.00%, calculated on the Series' daily net assets to be paid to the Advisor
within five business days after the end of each month.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rata basis, based on the number of days when
this Agreement was in effect.
4. REPORTS. The Series and the Advisor agree to furnish to each other such
--------
information regarding their operations with regard to their affairs as each may
reasonably request.
5. STATUS OF ADVISOR. The services of the Advisor to the Series are not to
------------------
be deemed exclusive, and the Advisor shall be free to render similar services to
others so long as its services to the Series are not impaired thereby.
<PAGE>
6. LIABILITY OF ADVISOR. In the absence of willful misfeasance, bad faith,
---------------------
gross negligence or reckless disregard by the Advisor of its obligations and
duties hereunder, the Advisor shall not be subject to any liability whatsoever
to the Series, or to any shareholder of the Series, for any error of judgment,
mistake of law or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any losses that
may be sustained in connection with the purchase, holding, redemption or sale of
any security on behalf of the Series.
7. DURATION AND TERMINATION. This Agreement shall become effective on
-------------------------
DECEMBER 18, 1998 provided that first it is approved by the Board of Trustees of
the Trust, including a majority of those trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
Section 15(c) of the Investment Company Act of 1940, and by the holders of a
majority of the outstanding voting securities of the Series; and shall continue
in effect until DECEMBER 18, 2000. Thereafter, this Agreement may continue in
effect only if such continuance is approved at least annually by: (i) the
Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding
voting securities of the Series; and in either event by a vote of a majority of
those trustees of the Trust who are not parties to this Agreement or interested
persons of any such party in the manner provided in Section 15(c) of the
Investment Company Act of 1940. This Agreement may be terminated by the Trust
at any time, without the payment of any penalty, by the Board of Trustees of the
Trust or by vote of the holders of a majority of the outstanding voting
securities of the Series on 60 days' written notice to the Advisor. This
Agreement may be terminated by the Advisor at any time, without the payment of
any penalty, upon 60 days' written notice to the Trust. This Agreement will
automatically terminate in the event of its assignment. Any notice under this
Agreement shall be given in writing, addressed and delivered or mailed postpaid,
to the other party at the principal office of such party.
As used in this Section 8, the terms "assignment", "interested person", and "a
vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
<PAGE>
8. NAME OF ADVISOR. The parties agree that the Advisor has a proprietary
----------------
interest in the name "Brinson," and the Trust agrees to promptly take such
action as may be necessary to delete from its corporate name and/or the name of
the Series any reference to the name of the Advisor promptly after receipt from
the Advisor of a written request therefore.
9. SEVERABILITY. If any provisions of this Agreement shall be held or made
-------------
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of this 18TH of DECEMBER, 1998.
ATTEST: THE BRINSON FUNDS
/s/Bruce G. Leto By: /s/ E. Thomas McFarlan
- ----------------------------- -------------------------------
Bruce G. Leto E. Thomas McFarlan
Secretary President
ATTEST: BRINSON PARTNERS, INC.
/s/Michael J. Jacobs By: /s/Samuel W. Anderson
- ----------------------------- -------------------------------
Michael J. Jacobs
Assistant Secretary
<PAGE>
EXHIBIT 99(D10)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 18TH day of DECEMBER, 1998 by and between THE BRINSON FUNDS,
a Delaware Business Trust (the "Trust") and BRINSON PARTNERS, INC., a Delaware
corporation (the "Advisor").
1. DUTIES OF THE ADVISOR. The Trust hereby appoints the Advisor to act as
---------------------
investment advisor to the U.S. LARGE CAPITALIZATION GROWTH FUND for the period
and on such terms set forth in this Agreement. The Trust employs the Advisor to
manage the investment and reinvestment of the assets of the Series, to
continuously review, supervise and administer the investment program of the
Series, to determine in its discretion the assets to be held uninvested, to
provide the Trust with records concerning the Advisor's activities which the
Trust is required to maintain, and to render regular reports to the Trust's
officers and Board of Trustees concerning the Advisor's discharge of the
foregoing responsibilities. The Advisor shall discharge the foregoing
responsibilities subject to the control of the officers and the Board of
Trustees of the Trust, and in compliance with the objectives, policies and
limitations set forth in the Trust's Prospectus and Statement of Additional
Information. The Advisor accepts such employment and agrees to render the
services and to provide, at its own expense, the office space, furnishings,
equipment and the personnel required by it to perform the services on the terms
and for the compensation provided herein. With respect to foreign securities, at
its own expense, the Advisor may obtain statistical and other factual
information and advice regarding economic factors and trends from its foreign
subsidiaries, but it may not generally receive advice or recommendations
regarding the purchase or sale of securities from such subsidiaries.
2. PORTFOLIO TRANSACTIONS. The Advisor shall provide the Series with a
-----------------------
trading department and with respect to foreign securities, the Advisor is
authorized to utilize the trading department of its foreign subsidiaries. The
Advisor shall select, and with respect to its foreign
<PAGE>
subsidiaries, shall monitor the selection of, the brokers or dealers that will
execute the purchases and sales of securities for the Series and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities transactions for the Series are obtained. Subject to
policies established by the Board of Trustees of the Trust and communicated to
the Advisor, it is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Series, or be in breach of any obligation owing to the Trust or in respect
of the Series under this Agreement, or otherwise, solely by reason of its having
caused the Series to pay a member of a securities exchange, a broker or a dealer
a commission for effecting a securities transaction for the Series in excess of
the amount of commission another member of an exchange, broker or dealer would
have charged if the Advisor determines in good faith that the commission paid
was reasonable in relation to the brokerage or research services provided by
such member, broker or dealer, viewed in terms of that particular transaction or
the Advisor's overall responsibilities with respect to the accounts, including
the Series, as to which it exercises investment discretion. The Advisor will
promptly communicate to the officers and directors of the Trust such information
relating to the Series transactions as they may reasonably request.
3. COMPENSATION OF THE ADVISOR. For the services to be rendered by the
----------------------------
Advisor as provided in Section 1 and 2 of this Agreement, the U.S. Small
Capitalization Growth Fund shall pay to the Advisor annual management fees of
1.00%, calculated on the Series' daily net assets to be paid to the Advisor
within five business days after the end of each month.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rata basis, based on the number of days when
this Agreement was in effect.
4. REPORTS. The Series and the Advisor agree to furnish to each other
--------
such information regarding their operations with regard to their affairs as each
may reasonably request.
5. STATUS OF ADVISOR. The services of the Advisor to the Series are not
------------------
to be deemed exclusive, and the Advisor shall be free to render similar services
to others so long as its services to the Series are not impaired thereby.
<PAGE>
6. LIABILITY OF ADVISOR. In the absence of willful misfeasance, bad
---------------------
faith, gross negligence or reckless disregard by the Advisor of its obligations
and duties hereunder, the Advisor shall not be subject to any liability
whatsoever to the Series, or to any shareholder of the Series, for any error of
judgment, mistake of law or any other act or omission in the course of, or
connected with, rendering services hereunder including, without limitation, for
any losses that may be sustained in connection with the purchase, holding,
redemption or sale of any security on behalf of the Series.
7. DURATION AND TERMINATION. This Agreement shall become effective on
-------------------------
DECEMBER 18, 1998 provided that first it is approved by the Board of Trustees of
the Trust, including a majority of those trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
Section 15(c) of the Investment Company Act of 1940, and by the holders of a
majority of the outstanding voting securities of the Series; and shall continue
in effect until DECEMBER 18, 2000. Thereafter, this Agreement may continue in
effect only if such continuance is approved at least annually by: (i) the
Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding
voting securities of the Series; and in either event by a vote of a majority of
those trustees of the Trust who are not parties to this Agreement or interested
persons of any such party in the manner provided in Section 15(c) of the
Investment Company Act of 1940. This Agreement may be terminated by the Trust at
any time, without the payment of any penalty, by the Board of Trustees of the
Trust or by vote of the holders of a majority of the outstanding voting
securities of the Series on 60 days' written notice to the Advisor. This
Agreement may be terminated by the Advisor at any time, without the payment of
any penalty, upon 60 days' written notice to the Trust. This Agreement will
automatically terminate in the event of its assignment. Any notice under this
Agreement shall be given in writing, addressed and delivered or mailed postpaid,
to the other party at the principal office of such party.
As used in this Section 8, the terms "assignment", "interested person", and
"a vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
<PAGE>
8. NAME OF ADVISOR. The parties agree that the Advisor has a proprietary
----------------
interest in the name "Brinson," and the Trust agrees to promptly take such
action as may be necessary to delete from its corporate name and/or the name of
the Series any reference to the name of the Advisor promptly after receipt from
the Advisor of a written request therefore.
9. SEVERABILITY. If any provisions of this Agreement shall be held or
-------------
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this 18TH of DECEMBER, 1998.
ATTEST: THE BRINSON FUNDS
/s/Bruce G. Leto By: /s/ E. Thomas McFarlan
- ----------------------------- --------------------------------
Bruce G. Leto E. Thomas McFarlan
Secretary President
ATTEST: BRINSON PARTNERS, INC.
/s/Michael J. Jacobs By: /s/Samuel W. Anderson
- ------------------------------ --------------------------------
Michael J. Jacobs
Assistant Secretary
<PAGE>
EXHIBIT 99(D11)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 18TH day of DECEMBER, 1998 by and between THE BRINSON FUNDS,
a Delaware Business Trust (the "Trust") and BRINSON PARTNERS, INC., a Delaware
corporation (the "Advisor").
1. DUTIES OF THE ADVISOR. The Trust hereby appoints the Advisor to act as
---------------------
investment advisor to the HIGH YIELD FUND for the period and on such terms set
forth in this Agreement. The Trust employs the Advisor to manage the investment
and reinvestment of the assets of the Series, to continuously review, supervise
and administer the investment program of the Series, to determine in its
discretion the assets to be held uninvested, to provide the Trust with records
concerning the Advisor's activities which the Trust is required to maintain, and
to render regular reports to the Trust's officers and Board of Trustees
concerning the Advisor's discharge of the foregoing responsibilities. The
Advisor shall discharge the foregoing responsibilities subject to the control of
the officers and the Board of Trustees of the Trust, and in compliance with the
objectives, policies and limitations set forth in the Trust's Prospectus and
Statement of Additional Information. The Advisor accepts such employment and
agrees to render the services and to provide, at its own expense, the office
space, furnishings, equipment and the personnel required by it to perform the
services on the terms and for the compensation provided herein. With respect to
foreign securities, at its own expense, the Advisor may obtain statistical and
other factual information and advice regarding economic factors and trends from
its foreign subsidiaries, but it may not generally receive advice or
recommendations regarding the purchase or sale of securities from such
subsidiaries.
2. PORTFOLIO TRANSACTIONS. The Advisor shall provide the Series with a
-----------------------
trading department and with respect to foreign securities, the Advisor is
authorized to utilize the trading department of its foreign subsidiaries. The
Advisor shall select, and with respect to its foreign
<PAGE>
subsidiaries, shall monitor the selection of, the brokers or dealers that will
execute the purchases and sales of securities for the Series and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities transactions for the Series are obtained. Subject to
policies established by the Board of Trustees of the Trust and communicated to
the Advisor, it is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Series, or be in breach of any obligation owing to the Trust or in respect
of the Series under this Agreement, or otherwise, solely by reason of its having
caused the Series to pay a member of a securities exchange, a broker or a dealer
a commission for effecting a securities transaction for the Series in excess of
the amount of commission another member of an exchange, broker or dealer would
have charged if the Advisor determines in good faith that the commission paid
was reasonable in relation to the brokerage or research services provided by
such member, broker or dealer, viewed in terms of that particular transaction or
the Advisor's overall responsibilities with respect to the accounts, including
the Series, as to which it exercises investment discretion. The Advisor will
promptly communicate to the officers and directors of the Trust such information
relating to the Series transactions as they may reasonably request.
3. COMPENSATION OF THE ADVISOR. For the services to be rendered by the
----------------------------
Advisor as provided in Section 1 and 2 of this Agreement, the High Yield Fund
shall pay to the Advisor annual management fees of .60%, calculated on the
Series' daily net assets to be paid to the Advisor within five business days
after the end of each month.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rata basis, based on the number of days when
this Agreement was in effect.
4. REPORTS. The Series and the Advisor agree to furnish to each other such
--------
information regarding their operations with regard to their affairs as each may
reasonably request.
5. STATUS OF ADVISOR. The services of the Advisor to the Series are not to
------------------
be deemed exclusive, and the Advisor shall be free to render similar services to
others so long as its services to the Series are not impaired thereby.
<PAGE>
6. LIABILITY OF ADVISOR. In the absence of willful misfeasance, bad faith,
---------------------
gross negligence or reckless disregard by the Advisor of its obligations and
duties hereunder, the Advisor shall not be subject to any liability whatsoever
to the Series, or to any shareholder of the Series, for any error of judgment,
mistake of law or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any losses that
may be sustained in connection with the purchase, holding, redemption or sale of
any security on behalf of the Series.
7. DURATION AND TERMINATION. This Agreement shall become effective on
-------------------------
DECEMBER 18, 1998 provided that first it is approved by the Board of Trustees of
the Trust, including a majority of those trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
Section 15(c) of the Investment Company Act of 1940, and by the holders of a
majority of the outstanding voting securities of the Series; and shall continue
in effect until DECEMBER 18, 2000. Thereafter, this Agreement may continue in
effect only if such continuance is approved at least annually by: (i) the
Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding
voting securities of the Series; and in either event by a vote of a majority of
those trustees of the Trust who are not parties to this Agreement or interested
persons of any such party in the manner provided in Section 15(c) of the
Investment Company Act of 1940. This Agreement may be terminated by the Trust
at any time, without the payment of any penalty, by the Board of Trustees of the
Trust or by vote of the holders of a majority of the outstanding voting
securities of the Series on 60 days' written notice to the Advisor. This
Agreement may be terminated by the Advisor at any time, without the payment of
any penalty, upon 60 days' written notice to the Trust. This Agreement will
automatically terminate in the event of its assignment. Any notice under this
Agreement shall be given in writing, addressed and delivered or mailed postpaid,
to the other party at the principal office of such party.
As used in this Section 8, the terms "assignment", "interested person", and "a
vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
<PAGE>
8. NAME OF ADVISOR. The parties agree that the Advisor has a proprietary
----------------
interest in the name "Brinson," and the Trust agrees to promptly take such
action as may be necessary to delete from its corporate name and/or the name of
the Series any reference to the name of the Advisor promptly after receipt from
the Advisor of a written request therefore.
9. SEVERABILITY. If any provisions of this Agreement shall be held or made
-------------
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of this 18TH of DECEMBER, 1998.
ATTEST: THE BRINSON FUNDS
/s/Bruce G. Leto By: /s/ E. Thomas McFarlan
- ---------------------------- ---------------------------
Bruce G. Leto E. Thomas McFarlan
Secretary President
ATTEST: BRINSON PARTNERS, INC.
/s/Michael J. Jacobs By: /s/Samuel W. Anderson
- ---------------------------- ---------------------------
Michael J. Jacobs
Assistant Secretary
<PAGE>
EXHIBIT 99(D12)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 10TH day of DECEMBER, 1998 by and between THE BRINSON FUNDS,
a Delaware Business Trust (the "Trust") and BRINSON PARTNERS, INC., a Delaware
corporation (the "Advisor").
1. DUTIES OF THE ADVISOR. The Trust hereby appoints the Advisor to act as
---------------------
investment advisor to the EMERGING MARKETS EQUITY FUND for the period and on
such terms set forth in this Agreement. The Trust employs the Advisor to manage
the investment and reinvestment of the assets of the Series, to continuously
review, supervise and administer the investment program of the Series, to
determine in its discretion the assets to be held uninvested, to provide the
Trust with records concerning the Advisor's activities which the Trust is
required to maintain, and to render regular reports to the Trust's officers and
Board of Trustees concerning the Advisor's discharge of the foregoing
responsibilities. The Advisor shall discharge the foregoing responsibilities
subject to the control of the officers and the Board of Trustees of the Trust,
and in compliance with the objectives, policies and limitations set forth in the
Trust's Prospectus and Statement of Additional Information. The Advisor accepts
such employment and agrees to render the services and to provide, at its own
expense, the office space, furnishings, equipment and the personnel required by
it to perform the services on the terms and for the compensation provided
herein. With respect to foreign securities, at its own expense, the Advisor may
obtain statistical and other factual information and advice regarding economic
factors and trends from its foreign subsidiaries, but it may not generally
receive advice or recommendations regarding the purchase or sale of securities
from such subsidiaries.
2. PORTFOLIO TRANSACTIONS. The Advisor shall provide the Series with a
-----------------------
trading department and with respect to foreign securities, the Advisor is
authorized to utilize the trading department of its foreign subsidiaries. The
Advisor shall select, and with respect to its foreign subsidiaries, shall
monitor the selection of, the brokers or dealers that will execute the purchases
<PAGE>
and sales of securities for the Series and is directed to use its best efforts
to ensure that the best available price and most favorable execution of
securities transactions for the Series are obtained. Subject to policies
established by the Board of Trustees of the Trust and communicated to the
Advisor, it is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Series, or be in breach of any obligation owing to the Trust or in respect
of the Series under this Agreement, or otherwise, solely by reason of its having
caused the Series to pay a member of a securities exchange, a broker or a dealer
a commission for effecting a securities transaction for the Series in excess of
the amount of commission another member of an exchange, broker or dealer would
have charged if the Advisor determines in good faith that the commission paid
was reasonable in relation to the brokerage or research services provided by
such member, broker or dealer, viewed in terms of that particular transaction or
the Advisor's overall responsibilities with respect to the accounts, including
the Series, as to which it exercises investment discretion. The Advisor will
promptly communicate to the officers and directors of the Trust such information
relating to the Series transactions as they may reasonably request.
3. COMPENSATION OF THE ADVISOR. For the services to be rendered by the
----------------------------
Advisor as provided in Section 1 and 2 of this Agreement, the Emerging Markets
Equity Fund shall pay to the Advisor annual management fees of 1.10%, calculated
on the Series' daily net assets to be paid to the Advisor within five business
days after the end of each month.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rata basis, based on the number of days when
this Agreement was in effect.
4. REPORTS. The Series and the Advisor agree to furnish to each other such
--------
information regarding their operations with regard to their affairs as each may
reasonably request.
5. STATUS OF ADVISOR. The services of the Advisor to the Series are not to
------------------
be deemed exclusive, and the Advisor shall be free to render similar services to
others so long as its services to the Series are not impaired thereby.
<PAGE>
6. LIABILITY OF ADVISOR. In the absence of willful misfeasance, bad faith,
---------------------
gross negligence or reckless disregard by the Advisor of its obligations and
duties hereunder, the Advisor shall not be subject to any liability whatsoever
to the Series, or to any shareholder of the Series, for any error of judgment,
mistake of law or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any losses that
may be sustained in connection with the purchase, holding, redemption or sale of
any security on behalf of the Series.
7. DURATION AND TERMINATION. This Agreement shall become effective on
-------------------------
DECEMBER 10, 1998 provided that first it is approved by the Board of Trustees of
the Trust, including a majority of those trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
Section 15(c) of the Investment Company Act of 1940, and by the holders of a
majority of the outstanding voting securities of the Series; and shall continue
in effect until DECEMBER 10, 2000. Thereafter, this Agreement may continue in
effect only if such continuance is approved at least annually by: (i) the
Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding
voting securities of the Series; and in either event by a vote of a majority of
those trustees of the Trust who are not parties to this Agreement or interested
persons of any such party in the manner provided in Section 15(c) of the
Investment Company Act of 1940. This Agreement may be terminated by the Trust
at any time, without the payment of any penalty, by the Board of Trustees of the
Trust or by vote of the holders of a majority of the outstanding voting
securities of the Series on 60 days' written notice to the Advisor. This
Agreement may be terminated by the Advisor at any time, without the payment of
any penalty, upon 60 days' written notice to the Trust. This Agreement will
automatically terminate in the event of its assignment. Any notice under this
Agreement shall be given in writing, addressed and delivered or mailed postpaid,
to the other party at the principal office of such party.
As used in this Section 8, the terms "assignment", "interested person", and "a
vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
<PAGE>
8. NAME OF ADVISOR. The parties agree that the Advisor has a proprietary
----------------
interest in the name "Brinson," and the Trust agrees to promptly take such
action as may be necessary to delete from its corporate name and/or the name of
the Series any reference to the name of the Advisor promptly after receipt from
the Advisor of a written request therefore.
9. SEVERABILITY. If any provisions of this Agreement shall be held or made
-------------
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of this 10TH of DECEMBER, 1998.
ATTEST: THE BRINSON FUNDS
By: /s/ David E. Floyd By: /s/ E. Thomas McFarlan
------------------------------ -----------------------------
David E. Floyd E. Thomas McFarlan
Assistant Secretary President
ATTEST: BRINSON PARTNERS, INC.
By: /s/ Mark F. Kemper By: /s/ Henry Doorn, Jr.
------------------------------ -------------------------------
Mark F. Kemper Henry Doorn, Jr.
Assistant Secretary Treasurer
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 10th day of December, 1998 by and between The Brinson Funds,
a Delaware Business Trust (the "Trust") and Brinson Partners, Inc., a Delaware
corporation (the "Advisor").
1. Duties of the Advisor. The Trust hereby appoints the Advisor to act as
investment advisor to the Emerging Markets Debt Fund for the period and on such
terms set forth in this Agreement. The Trust employs the Advisor to manage the
investment and reinvestment of the assets of the Series, to continuously review,
supervise and administer the investment program of the Series, to determine in
its discretion the assets to be held uninvested, to provide the Trust with
records concerning the Advisor's activities which the Trust is required to
maintain, and to render regular reports to the Trust's officers and Board of
Trustees concerning the Advisor's discharge of the foregoing responsibilities.
The Advisor shall discharge the foregoing responsibilities subject to the
control of the officers and the Board of Trustees of the Trust, and in
compliance with the objectives, policies and limitations set forth in the
Trust's Prospectus and Statement of Additional Information. The Advisor accepts
such employment and agrees to render the services and to provide, at its own
expense, the office space, furnishings, equipment and the personnel required by
it to perform the services on the terms and for the compensation provided
herein. With respect to foreign securities, at its own expense, the Advisor may
obtain statistical and other factual information and advice regarding economic
factors and trends from its foreign subsidiaries, but it may not generally
receive advice or recommendations regarding the purchase or sale of securities
from such subsidiaries.
2. Portfolio Transactions. The Advisor shall provide the Series with a
trading department and with respect to foreign securities, the Advisor is
authorized to utilize the trading department of its foreign subsidiaries. The
Advisor shall select, and with respect to its foreign
<PAGE>
subsidiaries, shall monitor the selection of, the brokers or dealers that will
execute the purchases and sales of securities for the Series and is directed to
use its best efforts to ensure that the best available price and most favorable
execution of securities transactions for the Series are obtained. Subject to
policies established by the Board of Trustees of the Trust and communicated to
the Advisor, it is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Trust or in respect of
the Series, or be in breach of any obligation owing to the Trust or in respect
of the Series under this Agreement, or otherwise, solely by reason of its having
caused the Series to pay a member of a securities exchange, a broker or a dealer
a commission for effecting a securities transaction for the Series in excess of
the amount of commission another member of an exchange, broker or dealer would
have charged if the Advisor determines in good faith that the commission paid
was reasonable in relation to the brokerage or research services provided by
such member, broker or dealer, viewed in terms of that particular transaction or
the Advisor's overall responsibilities with respect to the accounts, including
the Series, as to which it exercises investment discretion. The Advisor will
promptly communicate to the officers and directors of the Trust such information
relating to the Series transactions as they may reasonably request.
3. Compensation of the Advisor. For the services to be rendered by the
Advisor as provided in Section 1 and 2 of this Agreement, the Emerging Markets
Debt Fund shall pay to the Advisor annual management fees of 0.65%, calculated
on the Series' daily net assets to be paid to the Advisor within five business
days after the end of each month.
In the event of termination of this Agreement, the fee provided in this
Section 3 shall be paid on a pro rata basis, based on the number of days when
this Agreement was in effect.
4. Reports. The Series and the Advisor agree to furnish to each other such
information regarding their operations with regard to their affairs as each may
reasonably request.
5. Status of Advisor. The services of the Advisor to the Series are not to
be deemed exclusive, and the Advisor shall be free to render similar services to
others so long as its services to the Series are not impaired thereby.
<PAGE>
6. Liability of Advisor. In the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard by the Advisor of its obligations and
duties hereunder, the Advisor shall not be subject to any liability whatsoever
to the Series, or to any shareholder of the Series, for any error of judgment,
mistake of law or any other act or omission in the course of, or connected with,
rendering services hereunder including, without limitation, for any losses that
may be sustained in connection with the purchase, holding, redemption or sale of
any security on behalf of the Series.
7. Duration and Termination. This Agreement shall become effective on
December 10, 1998 provided that first it is approved by the Board of Trustees of
the Trust, including a majority of those trustees who are not parties to this
Agreement or interested persons of any party hereto, in the manner provided in
Section 15(c) of the Investment Company Act of 1940, and by the holders of a
majority of the outstanding voting securities of the Series; and shall continue
in effect until December 10, 2000. Thereafter, this Agreement may continue in
effect only if such continuance is approved at least annually by: (i) the
Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding
voting securities of the Series; and in either event by a vote of a majority of
those trustees of the Trust who are not parties to this Agreement or interested
persons of any such party in the manner provided in Section 15(c) of the
Investment Company Act of 1940. This Agreement may be terminated by the Trust
at any time, without the payment of any penalty, by the Board of Trustees of the
Trust or by vote of the holders of a majority of the outstanding voting
securities of the Series on 60 days' written notice to the Advisor. This
Agreement may be terminated by the Advisor at any time, without the payment of
any penalty, upon 60 days' written notice to the Trust. This Agreement will
automatically terminate in the event of its assignment. Any notice under this
Agreement shall be given in writing, addressed and delivered or mailed postpaid,
to the other party at the principal office of such party.
As used in this Section 8, the terms "assignment", "interested person", and "a
vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act and Rule 18f-2 thereunder.
<PAGE>
8. Name of Advisor. The parties agree that the Advisor has a proprietary
interest in the name "Brinson," and the Trust agrees to promptly take such
action as may be necessary to delete from its corporate name and/or the name of
the Series any reference to the name of the Advisor promptly after receipt from
the Advisor of a written request therefore.
9. Severability. If any provisions of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of this 10th of December, 1998.
ATTEST: THE BRINSON FUNDS
By: /s/ David E. Floyd By: /s/ E. Thomas McFarlan
------------------------- -------------------------
David E. Floyd E. Thomas McFarlan
Assistant Secretary President
ATTEST: BRINSON PARTNERS, INC.
By: /s/ Mark F. Kemper By: /s/ Henry Doorn, Jr.
------------------------- -------------------------
Mark F. Kemper Henry Doorn, Jr.
Assistant Secretary Treasurer
<PAGE>
EXHIBIT 99(E)
DISTRIBUTION AGREEMENT
THE BRINSON FUNDS
209 South LaSalle Street
Chicago, Il 60604-1295
February 24, 1997
Funds Distributor, Inc.
60 State Street
Suite 1300
Boston, Massachusetts 02109
Dear Sirs:
This is to confirm that, in consideration of the agreements
hereinafter contained, the above-named investment company (the "Fund") has
agreed that you shall be, for the period of this agreement, the distributor of
(a) shares of each Series of the Fund set forth on Exhibit A hereto, as such
Exhibit may be revised from time to time (each, a "Series"). For purposes of
this agreement the term "Shares" shall mean the authorized shares of each of the
relevant Series of the Fund.
1. Services as Distributor
1.1 You will act as agent for the distribution of Shares covered by, and
in accordance with, the Fund's registration statement and prospectus and
statement of additional information then in effect under the Securities Act of
1933, as amended, and will transmit promptly any orders received by you for
purchase or redemption of Shares to the Transfer Agent for the Fund of which the
Fund has notified you in writing from time to time.
1.2 You agree to use your best efforts to solicit orders for the sale of
Shares. It is contemplated that you may appoint sub-agents and enter into sales
or servicing agreements with securities dealers, financial institutions and
other industry professionals, such as investment advisers, accountants and
estate planning firms, and in so doing you will act only on your own behalf as
principal and not as principal for the Fund. This Agreement shall not be
construed as authorizing any securities dealer or other person to accept orders
for sale or repurchase on our behalf or otherwise act as our agent for any
purpose. However, the Fund and each Series retain the right to make direct
sales of Shares consistent with the terms of the prospectus and statement of
additional information relating to the Shares then in effect under the
Securities Act of 1933, as amended, and applicable law, and to engage in other
legally authorized transactions in Shares which do not involve the sale of
Shares to the general public. Such other transactions may include, without
limitation, transactions between the Fund or any Series or class and its
shareholders only, transactions involving the reorganization of the Fund or any
Series, and transactions involving the merger or combination of the Fund or any
Series with another corporation or trust.
1
<PAGE>
1.3 You shall act as distributor of Shares in compliance with all
applicable laws, rules and regulations, including, without limitations, the
Investment Company Act of 1940, as amended, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, and the National
Association of Securities Dealers, Inc.'s (the "NASD") Rules of Fair Practice,
Constitution and By-Laws. You represent and warrant that you are a broker-dealer
registered with the Securities and Exchange Commission and that you are
registered with the relevant securities regulatory agencies in all fifty states,
the District of Columbia and Puerto Rico. You also represent and warrant that
you are a member in good standing of the NASD and that you will maintain
registration and membership for the life of the agreement.
1.4 Other than our prospectus and statement of additional information
relating to the Shares then in effect under the Securities Act of 1933, as
amended, you will not issue any sales material or statements except literature
or advertising which conforms to the requirements of Federal and State
securities laws and regulations and which have been filed, where necessary, with
the appropriate regulatory authorities. You shall file Fund advertisements,
sales literature and other marketing and sales related materials with the
appropriate regulatory agencies and shall obtain such approvals for their use as
may be required by the Securities and Exchange Commission, the NASD and/or state
securities administrators.
1.5 The Fund may decline to accept any orders for, or make any sales of,
any Shares until such time as it deems it advisable to accept such orders and to
make such sales and the Fund shall advise you promptly of any such
determination.
1.6 The Fund agrees to pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933, as amended, and all
expenses in connection with maintaining facilities for the issue and transfer of
Shares and for supplying information, prices and other data to be furnished by
the Fund hereunder, and all expenses in connection with the preparation and
printing of the Fund's prospectuses and statements of additional information for
regulatory purposes and for their distribution to shareholders; provided
however, that the Fund shall not pay any of the costs of advertising or
promotion for the sale of Shares pursuant to this agreement. You shall also be
entitled to compensation for your services as provided in any Distribution Plan
adopted as to any Series and class of the Fund's Shares pursuant to Rule 12b-1
under the Investment Company Act of 1940.
1.7 The Fund agrees to execute any and all documents and to furnish any
and all information and otherwise to take all actions which may be reasonably
necessary in the discretion of the Fund's officers in connection with the
registration and/or qualification, as applicable, of Shares for sale in such
states as you may designate to the Fund and the Fund may approve, and the Fund
agrees to pay all reasonable expenses which may be incurred in connection with
such qualification or registration. You shall pay all expenses connected with
your own qualification as a dealer under state or Federal laws and, except as
otherwise specifically provided in this agreement, all other expenses incurred
by you in connection with the sale of Shares as contemplated in this agreement.
1.8 The Fund shall furnish you from time to time, for use in connection
with the sale of Shares, such information with respect to the Fund or any
relevant Series and the Shares as you may reasonably request, all of which shall
be signed by one or more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such information, when so signed
by the Fund's officers, shall be true and correct. The Fund also shall furnish
you
2
<PAGE>
upon request with: (a) semi-annual reports and annual audited reports of the
Fund's books and accounts made by independent public accountants regularly
retained by the Fund, (b) semi-annual financial statements prepared by us; (c)
registration statements; and (d) from time to time such additional information
regarding the Fund's financial condition as you may reasonably request.
1.9 The Fund represents to you that all registration statements and
prospectuses filed by the Fund with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, with respect to the Shares and the Fund have been prepared in
conformity with the requirements of said Acts and rules and regulations of the
Securities and Exchange Commission thereunder. As used in this agreement the
terms "registration statement" and "prospectus" shall mean any registration
statement and prospectus, including the statement of additional information
incorporated by reference therein, filed with the Securities and Exchange
Commission and any amendments and supplements thereto which at any time shall
have been filed with said Commission. The Fund represents and warrants to you
that any registration statement and prospectus, when such registration statement
becomes effective, will contain all statements required to be stated therein in
conformity with said Acts and the rules and regulations of said Commission; that
all statements of fact contained in any such registration statement and
prospectus will be true and correct when such registration statement becomes
effective; and that neither any registration statement nor any prospectus when
such registration statement becomes effective will include an 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. The Fund
may, but shall not be obligated to, propose from time to time such amendment or
amendments to any registration statement and such supplement or supplements to
any prospectus as, in the light of future developments, may, in the opinion of
the Fund's counsel, be necessary or advisable. If the Fund shall not propose
such amendment or amendments and/or supplement or supplements within fifteen
days after receipt by the Fund of a written request from you to do so, you may,
at your option, terminate this agreement or decline to make offers of the Fund's
securities until such amendments are made. The Fund shall not file any
amendment to any registration statement or supplement to any prospectus without
giving you reasonable notice thereof in advance; provided, however, that nothing
contained in this agreement shall in any way limit the Fund's right to file at
any time such amendments to any registration statement and/or supplements to any
prospectus, of whatever character, as the Fund may deem advisable, such right
being in all respects absolute and unconditional.
1.10 The Fund authorizes you and any dealers with whom you have entered
into dealer agreements to use any currently effective prospectus in the form
furnished by the Fund in connection with the sale of Shares. The Fund agrees to
indemnify, defend and hold you, your several officers and directors, and any
person who controls you within the meaning of Section 15 of the Securities Act
of 1933, as amended, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the reasonable cost of
investigating or defending such claims, demands or liabilities and any
reasonable counsel fees incurred in connection therewith) which you, your
officers and directors, or any such controlling persons, may incur under the
Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, or common law or otherwise, arising out of or on the basis of any
untrue statement, or alleged untrue statement, of a material fact required to be
stated in either any registration statement or any prospectus or any statement
of additional information, or arising out of or based upon any omission, or
alleged omission, to state a material fact required to be stated in any
3
<PAGE>
registration statement, any prospectus or any statement of additional
information or necessary to make the statements in any of the aforementioned
documents not misleading, except that the Fund's agreement to indemnify you,
your officers or directors, and any such controlling person will not be deemed
to cover any such claim, demand, liability or expense to the extent that it
arises out of or is based upon any such untrue statement, alleged untrue
statement, omission or alleged omission made in any registration statement, any
prospectus or any statement of additional information in reliance upon
information furnished by you, your officers, directors or any such controlling
person to the Fund or a person that you reasonably believe is a person
designated by the Fund for use in the preparation thereof, and except that the
Fund's agreement to indemnify you and the Fund's representations and warranties
set out in paragraph 1.9 of this Agreement will not be deemed to cover any
liability to the Funds or their shareholders to which you would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties, or by reason of your reckless disregard in the
performance of your obligations and duties under this Agreement ("Disqualifying
Conduct"). The Fund's agreement to indemnify you, your officers and directors,
and any such controlling person, as aforesaid, is expressly conditioned upon the
Fund's being notified of any action brought against you, your officers or
directors, or any such controlling person, such notification to be given by
letter, by facsimile or by telegram addressed to the Fund at its address set
forth above promptly after the summons or other first legal process shall have
been served. The failure to so notify the Fund of any such action shall not
relieve the Fund from any liability which the Fund may have to the person
against whom such action is brought by reason of any such untrue, or alleged
untrue, statement or omission, or alleged omission, otherwise than on account of
the Fund's indemnity agreement contained in this paragraph 1.10. The Fund will
be entitled to assume the defense of any suit brought to enforce any such claim,
demand or liability, but, in such case, such defense shall be conducted by
counsel of good standing chosen by the Fund and approved by you. In the event
the Fund elects to assume the defense of any such suit and retain counsel of
good standing approved by you, the defendant or defendants in such suit shall
bear the fees and expenses of any additional counsel retained by any of them;
but in case the Fund does not elect to assume the defense of any such suit, the
Fund will reimburse you, your officers and directors, or the controlling person
or persons named as defendant or defendants in such suit, for the reasonable
fees and expenses of any counsel retained by you or them. The Fund's
indemnification agreement contained in this paragraph 1.10 and the Fund's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
you, your officers and directors, or any controlling person, and shall survive
the delivery of any Shares. This agreement of indemnity will inure exclusively
to your benefit, to the benefit of your several officers and directors, and
their respective estates, and to the benefit of any controlling persons and
their successors. The Fund agrees promptly to notify you of the commencement of
any litigation or proceedings against the Fund or any of its officers or Board
members in connection with the issue and sale of Shares.
1.11 You agree to indemnify, defend and hold the Fund, its several
officers and Board members, and any person who controls the Fund within the
meaning of Section 15 of the Securities Act of 1933, as amended, free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the reasonable cost of investigating or defending such claims,
demands or liabilities and any reasonable counsel fees incurred in connection
therewith) which the Fund, its officers or Board members, or any such
controlling person, may incur under the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, or under common law or otherwise,
but only to the extent that such liability or expense incurred by the Fund, its
officers or Board members, or such controlling person resulting from
4
<PAGE>
such claims or demands, (a) shall arise out of or be based upon any
Disqualifying Conduct, or (b) shall arise out of or be based upon any untrue, or
alleged untrue, statement of a material fact contained in information furnished
in writing by you to the Fund specifically for use in the Fund's registration
statement and used in the answers to any of the items of the registration
statement or in the corresponding statements made in the prospectus or statement
of additional information, or shall arise out of or be based upon any omission,
or alleged omission, to state a material fact in connection with such
information furnished in writing by you to the Fund and required to be stated in
such answers or necessary to make such information not misleading. Your
agreement to indemnify the Fund, its officers and Board members, and any such
controlling person, as aforesaid, is expressly conditioned upon your being
notified of any action brought against the Fund, its officers or Board members,
or any such controlling person, such notification to be given by letter, by
facsimile or by telegram addressed to you at your address set forth above
promptly after the summons or other first legal process shall have been served.
The failure so to notify you of any such action shall not relieve you from any
liability which you may have to the person against whom such action is brought
by reason of any such untrue, or alleged untrue, statement or omission, or
alleged omission, otherwise than on account of your indemnity agreement
contained in this paragraph 1.11. You will be entitled to assume the defense of
any suit brought to enforce any such claim, demand or liability, but, in such
case, such defense shall be conducted by counsel of good standing chosen by you
and approved by the Fund. In the event you elect to assume the defense of any
such suit and retain counsel of good standing approved by the Fund, the
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in the case you do not elect to
assume the defense of any such suit, you will reimburse the Fund, the Fund's
officers and directors, or the controlling person or persons named as defendant
or defendants in such suit, for the reasonable fees and expenses of any counsel
retained by the Fund or them. Your indemnification agreement contained in this
paragraph 1.11 and your representations and warranties in this agreement shall
remain operative and in full force and effect regardless of any investigation
made by you or on behalf of you, your officers and directors, or any controlling
person, and shall survive the delivery of any Shares. This agreement of
indemnity will inure exclusively to the Fund's benefit, to the benefit of the
Fund's officers and Board members, and their respective estates, and to the
benefit of any controlling persons and their successors. You agree promptly to
notify the Fund of the commencement of any litigation or proceedings against you
or any of your officers or directors in connection with the issue and sale of
Shares.
1.12 No Shares shall be offered by either you or the Fund under any of the
provisions of this agreement and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act of 1933, as amended, or if and so long as a current prospectus as
required by Section 10 of said Act, as amended, is not on file with the
Securities and Exchange Commission or if the Fund or its Transfer Agent has
notified you that Shares are not registered and/or qualified for sale in a given
state or jurisdiction; provided, however, that nothing contained in this
paragraph 1.12 shall in any way restrict or have an application to or bearing
upon the Fund's obligation to repurchase any Shares from any shareholder in
accordance with the provisions of the Fund's prospectus or charter documents.
5
<PAGE>
1.13 The Fund agrees to advise you promptly in writing:
(a) of any request by the Securities and Exchange Commission for
amendments to the registration statement or prospectus then in effect or of
additional information that materially affects you;
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the
registration statement or prospectus then in effect or the initiation of
any proceeding for that purpose;
(c) of the happening of any event which makes untrue any statement
of a material fact made in the registration statement or prospectus then in
effect or which requires the making of a change in such registration
statement or prospectus in order to make the statements therein not
misleading; and
(d) of all actions of the Securities and Exchange Commission with
respect to any amendments to any registration statement or prospectus which
may from time to time be filed with the Securities and Exchange Commission.
2. Offering Price
Shares of any class of the Fund offered for sale by you shall be offered
at a price per share (the "offering price") equal to (a) the net asset value
(determined in the manner set forth in the Fund's charter documents) plus (b) a
sales charge, if any and except to those persons set forth in the then-current
prospectus, which shall be the percentage of the offering price of such Shares
as set forth in the Fund's then-current prospectus. All Shares will be sold in
the manner set forth in the Fund's then current prospectus and statement of
additional information, and in compliance with applicable law. The offering
price, if not an exact multiple of one cent, shall be adjusted to the nearest
cent. In addition, Shares of any class of the Fund offered for sale by you may
be subject to a contingent deferred sales charge as set forth in the Fund's
then-current prospectus. Any payments to dealers shall be governed by a
separate agreement between you and such dealer and the Fund's then-current
prospectus.
3. Orders for and Sales of Shares
Orders for shares shall be directed to the Fund's Transfer Agent for
acceptance on behalf of the Fund. Sales of Shares shall be deemed to be made
when and where accepted by the Fund's Transfer Agent.
4. Term
This Agreement shall become effective with respect to the Fund as of the
date hereof and will continue for an initial one-year term and will continue
thereafter so long as such continuance is specifically approved at least
annually (i) by the Fund's Board or (ii) by a vote of a majority of the Shares
of the Fund or the relevant Series, as the case may be, provided that in either
event its continuance also is approved by a majority of the Board members who
are not "interested persons" of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. This
agreement is terminable with respect to the Fund,
6
<PAGE>
without penalty, on not less than sixty days' notice, by the Fund's Board of
Trustees, by vote of a majority of the outstanding voting securities of such
Fund, or by you. This Agreement will automatically and immediately terminate in
the event of its "assignment." (As used in this Agreement, the terms "majority
of the outstanding voting securities," "interested person" and "assignment"
shall have the same meanings as such terms have in the Investment Company Act of
1940, as amended). You agree to notify the Fund immediately upon the event of
your expulsion or suspension by the NASD. This Agreement will automatically and
immediately terminate in the event of your expulsion or suspension by the NASD.
5. Miscellaneous
5.1 The Fund recognizes that, except to the extent otherwise agreed to by
the parties hereto, your directors, officers and employees may from time to time
serve as directors, trustees, officers and employees of corporations and
business trusts (including other investment companies), and that you or your
affiliates may enter into distribution or other agreements with such other
corporations and trusts.
5.2 No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.
5.3 This Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts without giving effect to principles of conflicts
of laws.
5.4 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
Please confirm that the foregoing is in accordance with your
understanding and indicate your acceptance hereof by signing below, whereupon it
shall become a binding Agreement between us.
Very truly yours,
THE BRINSON FUNDS
By: /s/ Thomas J. Digenan
----------------------------------
Name: Thomas J. Digenan
--------------------------------
Title: Assistant Treasurer
--------------------------------
7
<PAGE>
Accepted:
FUNDS DISTRIBUTOR, INC.
By: /s/ Marie E. Connolly
-------------------------------
Name: Marie E. Connolly
------------------------------
Title: President & CEO
-----------------------------
8
<PAGE>
EXHIBIT A
Series of the Funds
-------------------
THE BRINSON FUNDS*
Global Fund
Global Equity Fund
Global Bond Fund
U.S. Balanced Fund
U.S. Equity Fund
U.S. Bond Fund
Non-U.S. Equity Fund
*Each Series above offers two separate classes of shares - the SwissKey Fund
class and the Brinson Fund class.
9
<PAGE>
EXHIBIT A
Series of Funds
---------------
THE BRINSON FUNDS*
Global Fund
Global Equity Fund
Global Bond Fund
U.S. Balanced Fund
U.S. Equity Fund
U.S. Bond Fund
Non-U.S. Equity Fund
U.S. Large Capitalization Equity Fund
* Each Series offers three separate classes of shares-the SwissKey Fund
class, the Brinson Fund-Class I shares, and the Brinson Fund-Class N shares.
As amended November 24, 1997
10
<PAGE>
EXHIBIT A
Series of Funds
---------------
THE BRINSON FUNDS*
Global Fund
Global Equity Fund
Global Bond Fund
U.S. Balanced Fund
U.S. Equity Fund
U.S. Bond Fund
Global (ex-U.S.) Equity Fund
U.S. Large Capitalization Equity Fund
U.S. Large Capitalization Growth Fund
U.S. Small Capitalization Growth Fund
High Yield Bond Fund
Emerging Markets Equity Fund
Emerging Markets Debt Fund
* Each Series offers three separate classes of shares-the UBS Investment
Funds shares, the Brinson Fund-Class I shares, and the Brinson Fund-Class N
shares.
This Amendment has been agreed to as of this 10th day of December, 1998 by
the undersigned.
THE BRINSON FUNDS
Name: /s/ E. Thomas McFarlan
--------------------------------------
By: E. Thomas McFarlan
--------------------------------------
Title: President
--------------------------------------
Accepted:
FUNDS DISTRIBUTOR, INC.
By: /s/Margaret W. Chambers
----------------------------------------
Name: Margaret W. Chambers
---------------------------------------
Title: Senior Vice President and General Counsel
------------------------------------------
11
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EXHIBIT 99(G1)
MULTIPLE SERVICES AGREEMENT
This AGREEMENT is effective May 9, 1997, and is between Morgan Stanley
Trust Company, a New York state chartered trust company (the "Bank"), and The
Brinson Funds, a Delaware business trust (the "Customer") on behalf of its
separate series of shares representing interests in separate portfolios which
are listed on Schedule B1, as may be amended from time to time ("Series").
WHEREAS, Customer is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act") as an open-end investment
company; and
WHEREAS, the Customer desires to enter into one agreement providing for the
furnishing of global custody, administrative, accounting and transfer agency
services to the Series; and
WHEREAS, the Bank desires to furnish such services to the Customer or to
arrange for the furnishing of such services through the use of certain agents;
NOW, THEREFORE, IT IS AGREED AS FOLLOWS
I. GLOBAL CUSTODY SERVICES
-----------------------
The Customer hereby appoints the Bank as its global custodian to the
Series, and the Bank hereby accepts such appointment. This Section I. of this
Multiple Services Agreement (the "Agreement") relates solely to the provision of
global custody services to the Customer.
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
Separate custody accounts for each Series in the name of the Customer on
behalf of each such Series as listed in Schedule Bl for any and all stocks,
shares, bonds, debentures, notes, mortgages or other obligations for the payment
of money, bullion, coin and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase or subscribe to the same or
evidencing or representing any other rights or interests therein and other
similar property whether certificated or uncertificated as may be received by
the Bank or its Subcustodian (as defined in Sub-section 3 of this Section I.)
for the account of the Customer on behalf of a Series (`Securities") and any and
all cash equivalents.
Prior to the delivery of any Assets (as defined hereinafter) by the
Customer to the Bank, the Customer shall deliver to the Bank each applicable
document or other item listed in Schedule B2, which schedule may be amended from
time to time by the Customer and the Bank.
<PAGE>
The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in Sub-
section 11 of this Section I.) concerning the Accounts. Such Instructions shall
specifically indicate to which Series such Assets belong or, if such Assets
belong to more than one Series, shall allocate such Assets to the appropriate
Series. The Bank may deliver securities of the same type and class in place of
those deposited in the Accounts.
Upon receipt of Instructions and appropriate documentation, the Bank shall
establish additional Accounts, which shall be separately accounted for as
additional Accounts under the terms of this Agreement.
The procedures the Bank and the Customer will use in performing activities
in connection with this Agreement are set forth in a client services guide
provided to the Customer by the Bank, as such guide may be amended from time to
time by the Bank (the "Client Services Guide") with the consent of the Customer;
provided, however, that any customer enhancement or amendments deemed necessary
- -------- -------
by the Bank in order to comply with existing or new rules, regulations or market
practices, in any jurisdiction, may be made by the Custodian without the consent
of the Customer. Any Customer specific procedures which are included in the
Client Services Guide must be agreed to or changed in writing by both parties
and such Customer specific procedures shall be deemed to be a part of this
Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.
Unless Instructions specifically require another location, securities will
be held in the country or other jurisdiction in which the principal trading
market for such Securities is located, where such Securities are to be presented
for payment or where such Securities are acquired.
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Subject to the provisions of Sub-section 2 above of this Section I., the
Assets held for each Series may be held in custody and deposit accounts that
have been established by the Bank (i) with one or more domestic or foreign banks
or other institutions as listed on Schedule Al (the "Subcustodians"), as such
Schedule may be amended from time to time by the Bank by ninety (90) days'
written notice to the Customer, or (ii) through the facilities of one or more
securities depositories or clearing agencies as listed on Schedule A2, as such
Schedule may be amended from time to time by the Bank by sixty (60) days' prior
written notice to the Customer. Any Subcustodian may hold Assets of the
Customer in a securities depository and may utilize a clearing agency. Each of
the entities listed on Schedule Al are "Eligible Foreign Custodians" (as such
term is defined in Rule 17f-5(c)(2) of the Investment Company Act of 1940 (the
"1940 Act")), except as otherwise noted on Schedule Al. Each of the entities
listed on Schedule A2 are "Eligible Foreign Custodians" or "Securities
Depositories" as such term is defined in Rule 17f-4(a) and (b) of the 1940 Act,
or have been so qualified by exemptive order, rule or other appropriate action
of the SEC, except as otherwise noted on Schedule A2; provided, however, that
-------- -------
although the Bank is of the opinion that each of the securities depositories
used by it does operate either a central system for handling securities in their
respective countries or a
2
<PAGE>
transnational system for the central handling of securities or equivalent book-
entries, the determination that a securities depository operates a central
system absent any official proclamation by the SEC is a factual one and the Bank
shall not be liable for any future determination by the SEC that any such
securities depository does not in fact operate such a central system.
The Customer will given reasonable notice by the Bank of any amendment to
Schedule Al or A2. Upon request by the Customer, the Bank will identify the
name, address and principal place of business of any Subcustodian of the
Customer's Assets and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) The Bank will identify the Assets on its books as belonging to the
Customer on behalf of a particular Series.
(b) A Subcustodian will hold such Assets together with assets belonging to
other customers of the Bank in accounts identified on such Subcustodian's books
as custody accounts for the exclusive benefit of customers of the Bank. In the
event the Subcustodian holds Assets in a securities depository, such
Subcustodian shall be required by its agreement with the Bank to identify on its
books such Assets as being held for the account of the Bank as custodian for its
customers or in such other manner as is required by local law or market
practice.
(c) Any Assets in the Accounts held by a Subcustodian will be subject only
to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only to
the instructions of such Subcustodian or its agent.
(d) Any agreement the Bank enters into with a Subcustodian for holding the
Customer's Assets shall provide that: (i) the Account will be adequately
indemnified and its assets adequately insured in the event of a loss; (ii) the
Assets are not subject to any right, charge, security interest, lien or claim of
any kind in favor of such Subcustodian or its creditors except a claim of
payment for their safe custody or administration; (iii) beneficial ownership of
such Assets will be freely transferable without the payment of money or value
other than for safe custody or administration; (iv) adequate records will be
maintained identifying the Assets held pursuant to such Agreement as belonging
to the Bank on behalf of Customer; (v) the independent public accountants of or
designated by, the Customer, will be given access to or confirmation of the
contents of the books and records of such Subcustodian relating to its actions
under its agreement pertaining to any Assets held by it thereunder; and (vi)
Customer will receive periodic reports with respect to the safekeeping of the
Assets, including notification of any transfer to or from the Customer's
account.
(e) The Bank shall deliver to the Customer annually documents stating: (i)
the identity of each Subcustodian then acting on behalf of the Bank and the name
and address of the
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governmental agency or other regulatory authority that supervises or regulates
such Subcustodian; (ii) the countries in which each Subcustodian is located; and
(iii) so long as Rule 17f-5 of the 1940 Act requires the Customer's Board of
Trustees to directly approve its foreign custody arrangements, such other
information relating to such Subcustodians as may reasonably be requested by the
Customer to ensure Customer's compliance with Rule 17f-5 of the 1940 Act. The
Bank shall furnish annually to the Customer information concerning such
Subcustodians similar in kind and scope as that furnished to the Customer in
connection with the initial approval of this Agreement. Bank agrees to provide
Customer with notice of any material adverse changes in the facts or
circumstances upon which such information is based as soon as practicable after
it becomes aware of any such material adverse changes in the normal course of
its custodian activities.
5. CASH TRANSACTIONS.
(a) All cash received by the Bank for each of the Accounts shall be held
by the Bank as a short-term credit balance in favor of the Customer on behalf of
the Series to which the Account relates and, because the Bank and the Customer
have agreed in writing in advance that such credit balances shall bear interest,
the relevant Series shall earn interest at the rates and times as agreed between
the Bank and the Customer. The Customer acknowledges that any such credit
balances shall not be accompanied by the benefit of any governmental insurance.
(b) The Bank or its Subcustodians will make cash payments from the Account
upon receipt of Instructions.
(c) In the event that any payment to be made under this Sub-section 5
exceeds the funds available in an Account, the Bank, in its discretion, may
advance the Customer on behalf of the relevant Series whose Assets are held in
such Account such excess amount which shall be deemed a short-term credit
extension which is (i) necessary in connection with payment and clearance of
securities and foreign exchange transactions or (ii) pursuant to an agreed
schedule, as and if set forth in the Client Services Guide, of credits for
dividends and interest payments on the Assets. Such credit extensions shall be
payable on demand, bearing interest at the rate customarily charged by the Bank
on similar loans and consistent with the fee schedule set forth on Schedule F.
(d) If the Bank credits an Account on a payable date, or at any time prior
to actual collection and reconciliation to the Account, with interest,
dividends, redemptions or any other amount due, the Customer on behalf of and
from the Assets of the Series to which the Account relates will promptly return
any such amount upon written notification: (i) that such amount has not been
received in the ordinary course of business, or (ii) that such amount was
incorrectly credited. If the Customer on behalf of and from the Assets of the
Series to which the Account relates does not promptly return any amount upon
such notification, the Bank shall be entitled, upon written notification to the
Customer, to reverse such credit by debiting the Account for the amount
previously credited. The Bank shall be entitled to charge the Customer on
behalf of the Assets of the Series in the Account interest for any such credit
extension at rates to be agreed upon from time to time or, if such credit is
arranged by the Bank with a third party on behalf of
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the Series, the Customer out of the Series' assets shall reimburse the Bank for
any interest charge. In addition to any other remedies available, with respect
to the extension of credit to a particular Series, the Bank shall be entitled to
a right of set-off against the Assets of such Series to satisfy the repayment of
such credit extension and the payment of, or reimbursement for, accrued interest
thereon.
(e) The Bank shall provide the Customer by 9:45 a.m. Eastern time, in a
format mutually agreed upon by both parties, the Customer's opening U.S. Dollar
cash balance in each Account, as well as cash projection activity known to the
Bank on each business day that the Bank is open or authorized to transact
business in the State of New York. Cash activity from Class level shareholder
activity available to the Bank by 9:00 a.m. Eastern time will be included in
this cash forecast. Other cash activity reported to the Bank by 9:15 a.m.
Eastern time, such as futures variation margins, fund expenses and collateral
movements related to futures and swap contracts will be included in the cash
forecast. The Customer shall be entitled to rely on such cash projection
information supplied by the Bank to the Customer and, notwithstanding any other
provision of this Agreement, the Bank shall be liable to and shall indemnify the
Customer for any losses or damages suffered by the Customer as a result of such
reliance.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securities will be transferred, exchanged or delivered by the Bank or
its Subcustodian upon receipt by the Bank of Instructions. Settlement and
payment for Securities received for, and delivery of Securities out of, the
Accounts may be made in accordance with the customary or established securities
trading or securities processing practices and procedures in the jurisdiction or
market in which the transaction occurs. Under all circumstances, Bank shall use
its reasonable efforts to make delivery of Securities to a purchaser, dealer or
their agents only against payment subject to local custom and regulations.
Delivery of Securities out of an Account may also be made in any other manner
specifically required by Instructions.
(b) The Bank, upon receipt of Instructions, will credit or debit an
Account on a contractual settlement date, if consistent with applicable law,
with cash or Securities with respect to any sale, exchange or purchase of
Securities. Otherwise, such transactions will be credited or debited to an
Account on the date cash or Securities are actually received by the Bank and
reconciled to such Account.
7. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Bank or Subcustodian
is actually aware of such opportunities.
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(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
(e) Receive and collect all income and principal with respect to
Securities and to credit cash receipts to the Accounts.
(f) Take non-discretionary action on mandatory corporate actions.
(g) Pay or cause to be paid, from the Accounts, any and all taxes and
levies of any nature imposed on the Assets by any governmental authority in
connection with custody of and transactions in such Assets.
(h) In general, attend to all nondiscretionary details in connection with
the custody, sale, purchase, transfer and other dealings with the Assets held in
the Accounts.
The Bank will send the Customer an advice or notification of any transfers
of Assets to or from the Accounts. Such statements, advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within ninety (90) days of receipt, the Customer shall be deemed to
have approved such statement.
All collections of funds or other property paid or distributed in respect
of Securities in the Accounts shall be made at the risk of the Customer. The
Bank shall have no liability for an loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment, redemption
or other transaction regarding Securities in the Accounts in respect of which
the Bank has agreed to take any action under this Agreement.
8. CORPORATE ACTIONS; PROXIES; TAX RECLAIMS.
(a) Corporate Actions. Whenever the Bank receives information concerning
-----------------
the Securities which requires discretionary action by the beneficial owner of
the Securities (other than a proxy), such as subscription rights, bonus issues,
stock repurchase plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate Actions"), the Bank
will give the Customer notice of such Corporate Actions to the extent that the
Bank's central corporate actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, the Bank will endeavor to obtain Instructions, as
defined in Sub-section 11 of this Section I., but if
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Instructions are not received in time for the Bank to take timely action, or
actual notice of such Corporate Action was received too late to seek
Instructions, the Bank is authorized to act in accordance with the default
option provided by local market practice and/or the issuer of the Securities.
Fractional interests resulting from Corporate Action activity shall be treated
in accordance with local market practices. The Bank shall be held harmless for
any such action provided such action was made in good faith.
The indemnification provision of this Sub-section 8(a) will survive the
termination of this Agreement.
(b) Proxy Voting. The Bank will provide proxy voting services only
------------
pursuant to the Client Services Guide. Proxy voting services may be provided by
the Bank or, in whole or in part, by one or more third parties appointed by the
Bank (which may be affiliates of the Bank).
(c) Tax Reclaims.
------------
(i) Subject to the provisions hereof and the receipt of
Instructions as described in the Client Services Guide, the Bank will timely
apply for or facilitate the application for a reduction of withholding tax and
any refund of any tax paid or tax credits which apply in each applicable market
in respect of income payments on Securities for the benefit of the Customer
which the Bank believes may be available to such Customer. The Bank shall notify
the Customer that it is making such application for a reduction of withholding
tax and refund of any tax paid or tax credits which apply in each applicable
market in respect of income payments on Securities for the benefit of Customer.
(ii) The provisions of tax reclaim services by the Bank is
conditional upon the Bank receiving from the beneficial owner of Securities (A)
a declaration of its identity and place of residence and (B) certain other
documentation (pro forma copies of which are available from the Bank). The Bank
--- -----
shall use reasonable means to notify Customer of the declarations, documentation
and information which the Customer is to provide to Bank in order for the Bank
to perform the tax reclaim services described herein. The Customer acknowledges
that, if the Bank does not receive such information, additional United Kingdom
taxation will be deducted from all income received in respect of Securities
issued outside the United Kingdom and that U.S. non-resident alien tax or U.S.
backup withholding tax will be deducted from U.S. source income. The Customer
shall provide to the Bank such documentation and information as it may require
in connection with taxation, and warrants that, when given, this information
shall be true and correct in every respect, not misleading in any way, and
contain all material information. The Customer undertakes to notify the Bank
immediately if any such information requires updating or amendment.
(iii) The Bank shall not be liable to the Customer or any third party
for any tax, fines or penalties payable by the Bank or the Customer, and shall
be indemnified accordingly, whether these result from the inaccurate completion
of documents by the Customer or any third party, or as a result of the provision
to the Bank or any third party of inaccurate or misleading information or the
withholding of material information by the Customer or any other third party,
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or as a result of any delay of any revenue authority or any other matter beyond
the control of the Bank. The provisions of this Sub-section 8(c)(iii) shall
survive the termination of this Agreement.
(iv) The Customer confirms that the Bank is authorized to deduct
from any cash received or credited to the Accounts any taxes or levies required
by any revenue or governmental authority for whatever reason in respect of the
Accounts.
(v) The Bank shall perform tax reclaim services only with respect
to taxation levied by the revenue authorities of the countries notified to the
Customer from time to time and, upon Instructions as described in the Client
Services Guide, the Bank may, if the Bank offers tax reclaim services in new
markets, supplement or amend the markets in which the tax reclaim services are
offered. Other than as expressly provided in this sub-clause and to the extent
that the Bank acts in accordance with the information provided on Schedule B2,
the Bank shall have no responsibility with regard to the Customer's tax position
or status in any jurisdiction.
(vi) The Customer confirms that the Bank is authorized to disclose
any information requested by any revenue authority or any governmental body in
relation to the Customer or the Securities and/or Cash held for the Customer for
the purpose of obtaining tax reclaims only. This provision does not authorize
any other disclosure to any revenue authority or any governmental body without
the prior written consent of Customer.
(vii) Tax reclaim services may be provided by the Bank or, in whole
or in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank); provided that the Bank shall be liable for the
performance of any such third party to the same extent as the Bank would have
been if it performed such services itself.
(viii) The Bank shall monitor tax reclaims and report on such reclaims
on a monthly basis.
9. NOMINEES.
Securities which are ordinarily held in registered form may be registered
in the name of the Bank, Subcustodian or securities depository or any of their
nominees, as the case may be. The Bank may without notice to the Customer cause
any such Securities to cease to be registered in the name of any such nominee
and to be registered in the name of the Customer. Under no circumstances, shall
any of the Securities be registered in the name of Brinson Partners, Inc. unless
the Bank has been instructed otherwise. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
Where the Bank has been instructed by the Customer to hold any Securities
in the name of any person or entity other than the Bank, its Subcustodian or any
such entity's nominee, the
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Bank shall not be responsible for any failure to collect such dividends or other
income or participate in any such corporate action with respect to such
Securities.
10. AUTHORIZED PERSONS.
As used in this Agreement, the term "Authorized Person" means persons as
have been designated on Schedule B3, or entities as have been designated on
Schedule B4, as such Schedules may be amended from time to time by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons or entities shall continue to be
Authorized Persons until such time as the Bank receives Instructions that any
such person or entity is no longer an Authorized Person. Prior to the delivery
of the Assets to the Bank, the Bank shall provide to Customer a list of
designated system user ID numbers and passwords that the Customer shall be
responsible for assigning to Authorized Persons. The Bank shall assume that an
electronic transmission received and identified by a system user ID number and
password was sent by an Authorized Person. The Bank agrees to provide
additional designated system user ID numbers and passwords as needed by the
Customer. The Customer authorizes the Bank to issue new system user ID numbers
upon the request of a previously existing Authorized Person. Upon the issuance
of additional system user ID numbers by the Bank to the Customer, Schedule B4
shall be deemed automatically amended accordingly. The Customer authorizes and
instructs the Bank to assume that a facsimile transmission received which sets
forth only the typed name of an Authorized Person is an Instruction sent by an
Authorized Person. The Customer authorizes the Bank to receive, act and rely
upon any Instructions received by the Bank which have been issued, or purport to
have been issued, by an Authorized Person.
Any Authorized Person may cancel/correct or otherwise amend any Instruction
received by the Bank, but the Customer agrees to indemnify the Bank for any
liability, loss or expense incurred by the Bank and its Subcustodians as a
result of their having relied upon or acted in good faith on any prior
Instruction. The Bank will use its reasonable efforts to process trades once
the trades have settled, upon receipt of an amendment or cancellation of an
Instruction to deliver or receive any security or funds with respect to such
trades.
11. INSTRUCTIONS.
The term "Instructions" for purposes of Section I. of this Agreement means
instructions of any Authorized Person received by the Bank, via telex, facsimile
transmission, bank wire, SWIFT or other teleprocess or electronic instruction or
trade information system acceptable to the Bank which the Bank reasonably
believes in good faith to have been given by Authorized Persons or by such other
means as may be agreed in writing by Bank and Customer or which are transmitted
with proper testing or authentication pursuant to terms and conditions which the
Bank may specify and provided that such Instructions are timely received by the
Bank. Unless otherwise expressed, Instructions shall continue in full force and
effect until canceled or superseded.
The Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.
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II. ADMINISTRATIVE, ACCOUNTING AND TRANSFER AGENCY SERVICES
-------------------------------------------------------
The Customer hereby appoints the Bank as its administrative, accounting
services and transfer agent to the Series, and the Bank hereby accepts such
appointment. This Section II. of this Agreement relates solely to the provision
of administrative, accounting and transfer agency services to the Customer and
its Series. For purposes of this Section II., the term "Bank" shall include the
Bank and its agents.
A. ADMINISTRATIVE SERVICES
-----------------------
1. SERVICES.
Subject to the succeeding provisions of this section and subject to
the direction and supervision of the Board of Trustees of the Customer, Bank
shall provide to Customer and each of the Series administrative services as set
forth in Schedule C attached hereto and incorporated by reference into this
Agreement. In addition to the obligations set forth in Schedule C, the Bank, in
its capacity as administrator for the Customer and each of the Series
("Administrator"), shall: (i) provide its own office space, facilities,
equipment and personnel for the performance of its duties under this Section
II.A. of this Agreement; and (ii) take all actions the Bank deems necessary to
properly execute administration on behalf of the Series.
2. COOPERATION OF OTHER PARTIES.
So that the Bank may perform its duties under the terms of this
Agreement, the Board of Trustees of the Customer shall direct the officers,
investment adviser, legal counsel, independent accountants and other agents of
the Customer to cooperate with the Bank in performing administrative services
hereunder and, upon request of the Bank, to provide such information, documents
and advice as is within the possession or knowledge of such persons provided
that no such person need provide any information to the Bank if to do so would
result in the loss of any privilege with respect to such information unless the
Customer elects to waive such privilege. In the event that the Customer does
not elect to waive such privilege, the Bank shall not be liable for and shall be
indemnified against any losses directly resulting from the failure to deliver
such information, documents or advice. In connection with its duties hereunder,
the Bank shall be entitled to rely, and shall be held harmless by the Customer
when acting in reliance upon the instruction, advice or any documents relating
to the Customer as provided to the Bank by any of the aforementioned persons
provided that such reliance is reasonable.
The indemnification provisions of this Sub-section 2 of this Section
II.A. shall survive the termination of the Agreement.
3. COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS.
Any activities performed by the Bank under this Section II.A. of this
Agreement shall conform to the requirements of:
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(a) the provisions of the 1940 Act and of any rules or regulations in
force thereunder;
(b) any other applicable provision of state and Federal law;
(c) the provisions of the Declaration of Trust and the By-Laws of the
Customer, as amended from time to time;
(d) any policies and determinations of the Board of Trustees of the
Customer provided to the Bank in writing; and
(e) the fundamental policies of the Series as reflected in the
Customer's registration statement on Form N-lA ("Form N-lA") under the 1940 Act
and the Securities Act of 1933 (the "1933 Act") and any amendments thereto.
4. NON-EXCLUSIVITY.
Nothing in this Agreement shall prevent the Bank or any officer or
employee thereof from acting as administrator for or with any other person,
firm, corporation or trust. While the administrative services supplied to the
Customer and the Series may be different than those supplied to other persons,
firms, corporations or trusts, the Bank shall provide the Customer and the
Series equitable treatment in supplying services. The Bank agrees to maintain
the records and all other information of the Customer and the Series as required
by the 1940 Act and shall not use such information for any purpose other than
the performance of the Bank's duties under this Agreement.
B. ACCOUNTING SERVICES
-------------------
1. SERVICES.
The Bank, in its capacity as accounting services agent for the
Customer and the Series ("Accounting Agent"), will in addition to the duties and
functions listed below, perform accounting services listed in Schedule D
attached hereto.
2. INSTRUCTIONS.
For purposes of this Section II.B. of this Agreement:
(a) Oral Instructions shall mean an authorization, instruction,
-----------------
approval, item or set of data, or information of any kind transmitted to the
Bank in person or by telephone, telegram, telecopy, or other mechanical or
documentary means lacking a signature, by an Authorized Person, as defined in
Sub-section 10 of Section I. of this Agreement or by any of the Customer's
officers, employees, shareholders or other agents reasonably believed by Bank to
be authorized to give such Oral Instructions.
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(b) Written Instructions shall mean an authorization, instruction,
--------------------
approval, item or set of data or information of any kind transmitted to the Bank
in original writing containing original signatures or a copy of such document
transmitted by telecopy or facsimile transmission including transmission of such
signature reasonably identified to the Bank to be the signature of an Authorized
Person, as defined in Sub-section 10 of Section I. of this Agreement or by any
of the Customer's officers, employees, shareholders or other agents reasonably
believed by Bank to be authorized to give such Written Instructions.
3. MAINTENANCE OF ACCOUNTS AND RECORDS.
To the extent the Bank receives the necessary information from the
Customer or its agents by Written or Oral Instructions, the Bank shall maintain
and keep current the following Accounts and Records relating to the Customer's
business in such form as may be agreed upon between the Customer and the Bank:
(a) Net Asset Value Calculation Reports;
(b) cash Receipts Journal;
(c) cash Disbursements Journal;
(d) dividends Paid and Payable Schedule;
(e) purchase and Sales Journals - Portfolio Securities;
(f) security Ledgers - Transaction Report and Tax Lot Holdings
Report;
(g) broker Ledger - Commission Report;
(h) daily Expense Accruals;
(i) daily Interest Accruals;
(j) daily Trial Balance;
(k) portfolio Interest Receivable and Income Journal;
(l) portfolio Dividend Receivable and Income Register;
(m) listing of Portfolio Holdings - showing cost, market value and
percentage of portfolio comprised of each security;
(n) average daily net assets provided on monthly basis; and
(o) daily accounting reports as agreed to by the parties.
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The necessary information to perform the above functions and the
calculation of each Series' net asset value as provided below, is to be
furnished by Written or Oral Instructions to the Bank daily (in accordance with
the time frame identified in Sub-section 7 of this Section II.B.).
4. CALCULATION OF NET ASSET VALUE.
The Bank shall perform the calculations necessary to calculate each
Series' net asset value daily, in accordance with: (i) the Customer's Advisory
Agreements and Declaration of Trust; (ii) the provisions of the Customer's Form
N-lA; and (iii) any other procedures approved by the Board of Trustees of the
Customer and supplied to the Bank by the Customer in writing. Portfolio items
for which market quotations are available by the Bank's use of automated
financial information services which shall be authorized the Customer in writing
to the Bank ("Services") shall be based on the closing prices of such Services
except where the Customer has given or caused to be given specific Written
Instructions to utilize a different value. Restricted securities and other
securities requiring valuation not readily ascertainable solely by such Services
shall be given values as the Customer provides by Written Instructions. The
Bank shall not have any responsibility or liability for: (i) the accuracy of
prices quoted by any of the Services; (ii) the accuracy of any information
supplied by the Customer; or (iii) for any loss, liability, damage, or cost
arising out of any inaccuracy, delay or omissions from such data provided by the
Services or the Customer. The Bank shall have no responsibility or duty to
include information or valuations to be provided by the Customer in any
computation unless and until it is timely supplied to the Bank in usable form.
The Bank shall record corporate action information of which it has become aware
in its capacity as Custodian for Customer or from the Services or the Customer.
The Bank shall not have any duty to gather or record corporate action
information not supplied by these sources.
The Bank will not be responsible for any losses, damages or costs to
the Customer, the Series or its shareholders for any price errors caused by:
the Customer, the Series, its advisers, corporate action and dividend
information, or any other party other than the Bank itself.
5. AUTHORITY TO ACT UPON RECEIPT OF INSTRUCTIONS.
For all purposes under Section II.B. of this Agreement, the Bank is
authorized to act upon receipt of any Written or Oral Instruction. The Customer
agrees to provide Written Instructions to the Bank with respect to trade
confirmation and cash instruction. The Bank shall be entitled to rely on any
Oral or Written Instruction received. For any act or omission undertaken in
compliance with such Oral or Written Instruction received, the Bank shall be
free of liability and fully indemnified and held harmless by the Customer,
provided, however, that in the event an Oral or Written Instruction received by
the Bank is countermanded by a timely later Oral or Written Instruction received
by the Bank prior to acting upon such countermanded Instruction, the Bank shall
act upon such later Oral or Written Instruction. The indemnification provisions
of this Sub-section 5 shall survive termination of this Agreement.
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6. PROVISION OF REPORTS.
The Bank shall promptly supply daily and periodic reports to the
Customer as requested by the Customer and agreed upon by the Bank.
7. PROVISION OF INFORMATION BY THE CUSTOMER.
The Customer shall provide to the Bank or shall cause to be provided
to the Bank as of the close of each business day or on such other schedule as
the Bank determines is necessary, Oral or Written Instructions containing any
additional data or information necessary for the Bank to maintain the Customer's
and the Series' Accounts and Records. Such Oral or Written Instructions shall
be delivered to the Bank no later than 11:00 a.m., Eastern time the following
business day.
8. ADOPTION OF ADDITIONAL PROCEDURES.
In connection with and in furtherance of the rendering of services
under this Section II.B., the Bank and the Customer may from time to time adopt
such procedures as agreed upon in writing, and the Bank may conclusively assume
that any procedure approved by the Customer or direction by the Customer does
not conflict with or violate any requirements of the Customer's Declaration of
Trust, By-Laws, or any rule or regulation of any regulatory body or governmental
agency.
C. TRANSFER AGENCY SERVICES
------------------------
1. SERVICES.
The Bank, in its capacity as transfer agent to the Customer and the
Series ("Transfer Agent") will, in addition to the duties and functions listed
below, perform the duties and functions of a transfer agent for an open-end
investment company as listed in Schedule E attached hereto. The terms as
defined in this Section II.C. wherever used in this Section II.C., or in any
amendment or supplement with respect to this Section II.C., shall have the
meanings herein specified unless the context otherwise requires.
Share Certificates shall mean the certificates representing shares of
------------------
beneficial interest of the Series.
Shareholders shall mean the registered owners of the Shares of the
------------
Series in accordance with the share registry records maintained by the Bank.
Shares shall mean the issued and outstanding shares of the Series.
------
Signature Guarantee shall mean the guarantee of signatures by an
-------------------
"eligible guarantor institution" as defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Eligible guarantor
institutions include banks, brokers, dealers,
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credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. Broker-dealers
guaranteeing signatures must be members of a clearing corporation or maintain
net capital of at least $100,000. Signature guarantees will be accepted from any
eligible guarantor institution which participates in a signature guarantee
program.
2. ISSUANCE OF SHARES.
The Bank, as Transfer Agent, shall make original issuances of Shares
in accordance with Sub-sections 7 and 8 of this Section II.C. of this Agreement
and with the Customer's Declaration of Trust upon the written request of the
Customer and upon being furnished with: (i) a certified copy of a resolution or
resolutions of the Board of Trustees of the Customer authorizing such; and (ii)
necessary funds for the payment of any original issue tax applicable to such
additional Shares.
3. TRANSFER OF SHARES.
Transfers of Shares shall be registered and new Shares issued by the
Bank upon redemption of outstanding Shares:
(a) in the form deemed by the Bank to be properly endorsed for
transfer;
(b) with all necessary endorser's signatures as required to be
guaranteed in accordance with the Customer's Form N-lA;
(c) upon receipt of such assurances as the Bank shall deem necessary
or appropriate to evidence the genuineness and effectiveness of each necessary
endorsement; and
(d) upon receipt of satisfactory evidence of compliance with all
applicable laws relating to the payment or collection of taxes.
4. RELIANCE ON APPLICABLE LAW.
In registering transfers, the Bank, as Transfer Agent, will comply
with applicable law relating to its activities as Transfer Agent for the
Customer.
5. MAINTENANCE OF RECORDS.
The Bank will maintain records in the usual form in which it will note
the issuance, transfer and redemption of Shares. The Bank is responsible for
providing reports of Share purchases, redemptions and total Shares outstanding
on the next business day after each net asset value calculation. The Bank is
authorized to keep records, which will be part of the transfer records, in which
it will note the names and registered address of Shareholders and the number of
Shares and fractions thereof held by them.
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6. RELIANCE UPON LISTS, INSTRUCTIONS OR OTHER INSTRUMENTS.
The Bank, as Transfer Agent, may rely conclusively and act without
further investigation upon any list, instruction, certification, authorization
or other instrument or paper believed by it in good faith to be genuine and
unaltered, and to have been signed, countersigned, or executed by a duly
authorized person or persons, or upon the instructions of any officer of the
Customer, or upon the advice of counsel for the Customer or for the Bank. The
Bank may record any transfer of Shares which is reasonably believed by it to
have been duly authorized or may refuse to record any transfer of Shares if in
good faith, the Bank, in its capacity as Transfer Agent, deems such refusal
necessary in order to avoid any liability on the part of either the Series or
the Bank. The Customer agrees to indemnify and hold the Bank harmless from and
against any and all losses, costs, claims, and liability which it may suffer or
incur by reason of so relying or acting or refusing to act, except for actions
taken pursuant to advice of the Bank's counsel and actions resulting from the
Bank's negligence or lack of good faith. The Bank shall maintain and reconcile
all operating bank accounts necessary to facilitate all transfer agency
processes; including, but not limited to, distribution disbursements,
redemptions and payment clearance accounts. The indemnification provisions of
this Sub-section II.C.6. shall survive the termination of this Agreement.
7. PROCESSING OF PURCHASE ORDERS.
Prior to the daily determination of net asset value in accordance with
the Customer's Declaration of Trust and Form N-lA, the Bank shall process all
purchase orders received since the last determination of each Series' net asset
value.
The Bank shall place a purchase order daily with the appropriate
Series for the proper number of Shares and fractional Shares to be Purchased and
confirm such number to the Customer in writing.
8. ISSUANCE AND CREDITING OF SHARES.
The proper number of Shares and fractional shares shall then be issued
daily and credited by the Bank to the Shareholder Registration Records. The
Shares and fractional Shares purchased for each Shareholder will be credited by
the Bank to that Shareholder's account. The Bank shall mail to each Shareholder
a confirmation of each purchase, with copies to the Customer as requested by the
Customer. Such confirmations will show the prior Share balance, the new Share
balance, the amount invested and the price paid for the newly purchased Shares.
9. DAILY PROCESSING OF REDEMPTION REQUESTS.
The Bank shall, prior to the daily determination of net asset value in
accordance with the Customer's Declaration of Trust and Form N-1A, process all
requests from Shareholders to redeem Shares and determine the number of Shares
required to be redeemed to make monthly payments, automatic payments or the
like. Thereupon, the Bank shall advise the Customer of total number of Shares
available for redemption and the number of Shares and fractional Shares
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requested to be redeemed. The Bank shall furnish the Customer with an
appropriate confirmation of the redemption and process the redemption by making
the proper distribution and application of the redemption proceeds in accordance
with the Customer's Declaration of Trust and Form N-1A then in effect. The
registry books recording outstanding Shares, the Shareholder Registration
Records and the individual account of the Shareholder shall be properly debited.
10. REDEMPTIONS AFTER RECENT PURCHASE.
With respect to redemption of Shares which have been purchased within
fifteen (15) calendar days of a redemption request, the Customer shall provide
the Bank, from time to time, with Written Instructions concerning the time
within which such requests may be honored.
III. GENERAL PROVISIONS
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1. STANDARD OF CARE; LIABILITIES - SECTION I.
(a) With respect to Section I. of this Agreement, the Bank shall be
responsible for the performance of only such duties as are set forth in Section
I. of this Agreement or expressly contained in Instructions which are consistent
with the provisions of Section I. of this Agreement as follows:
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Assets. The Bank shall
be liable to the Customer for any loss which shall occur as the result of the
negligence or willful misconduct of the Bank or a Subcustodian with respect to
the safekeeping of such Assets. In the event of any loss to the Customer or
Series by reason of the failure of the Bank or its Subcustodian to utilize
reasonable care, the Bank shall be liable to the Customer and the Series only to
the extent of the Customer's actual damages.
(ii) The Bank will not be responsible for any act, omission, default
or the solvency of any agent which it or a Subcustodian uses unless such use was
made negligently or in bad faith.
(iii) The Customer and the Series shall be indemnified by, and
without liability to, the Bank for any action taken or omitted by the Bank
within the scope of this Agreement as a result of the Bank's negligence or
willful misconduct.
(iv) The Bank and its nominees shall be indemnified by, and without
liability to, the Customer, the Series, or the Shareholders for any action taken
or omitted by the Bank whether pursuant to or in reliance upon Instructions for
any losses arising out of the Bank's performance hereunder, arising out of its
nominees acting as a nominee or holder of record of the Securities, or for any
action or omission otherwise within the scope of this Agreement if such act or
omission was in good faith, without negligence. In performing its obligations
under this
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Agreement, the Bank may rely on the genuineness of any document which it
reasonably believes in good faith to have been validly executed.
(v) The Customer agrees to pay for and hold the Bank harmless from
any liability or loss resulting from the imposition or assessment of any taxes
or other governmental charges, and any related expenses with respect to income
from or Assets in the Accounts.
(vi) The Bank shall be entitled to rely, and may act, upon the
advice of counsel for the Customer on all matters and shall be without liability
for any action reasonably taken or omitted pursuant to such advice.
(vii) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of investing, or 2)
investing or holding Assets in a particular country including, but not limited
to, losses resulting from nationalization, expropriation or other governmental
actions; regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market conditions which prevent
the orderly execution of securities transactions or affect the value of Assets
provided, however, that where the Bank is required to provide information to the
Customer as part of its services herewith, the Bank shall be responsible for
obtaining and relaying such information in accordance with the standard of care
described in this Section III.1.
(viii) In no event shall the Bank be liable to the Customer or the
Series for any indirect, incidental, special or consequential losses or damages
of any kind whatsoever (including but not limited to lost profits), even if the
Bank has been advised of the likelihood of such loss or damage and regardless of
the form of action.
(b) Consistent with and without limiting the first paragraph of this Sub-
section 1 of this Section III. of this Agreement , it is specifically
acknowledged that the Bank shall have no duty or responsibility to:
(i) supervise or make recommendations with respect to investments
or the retention of Securities;
(ii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other than as
provided in Sub-section 5(c) of Section I. of this Agreement;
(iii) evaluate or report to the Customer or an Authorized Person
regarding the financial condition of any broker, agent or other party to which
Securities are delivered or payments are made pursuant to this Agreement.
Nothing contained in this clause shall limit the Bank's responsibilities
pursuant to Section I.4 of this Agreement;
(iv) review or reconcile trade confirmations received from brokers.
The Customer or its Authorized Persons (as defined in Sub-section 10 of Section
I. of this
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Agreement) issuing Instructions shall bear any responsibility to review such
confirmations against Instructions issued to and statements issued by the Bank;
(v) The Bank hereby warrants to the Customer that in its opinion,
after due inquiry, the established procedures to be followed by each of its
branches, each branch of a qualified U.S. bank, each eligible foreign custodian
and each eligible foreign securities depository holding the Customer's
Securities pursuant to this Agreement afford reasonable protection for such
Securities given prevailing practices, procedures and controls available in that
market; and
(vi) The provisions of this Section III. 1 shall survive the
termination of this Agreement.
2. STANDARD OF CARE; LIABILITIES - SECTION II.
(a) For purposes of Section II. of this Agreement, the Bank shall not be
liable for any error of judgment or mistake of law or for any loss or expense
suffered by the Bank or the Customer, the Series, or the Shareholders in
connection with the matters to which this Agreement relates, except for a loss
or expense to the extent caused by or resulting from willful misfeasance, bad
faith or negligence on the Bank's part in the performance of its duties or from
reckless disregard by the Bank of its obligations and duties under this
Agreement. In the performance of its services, however, the Bank shall be
obligated to exercise the due care and diligence of an open-end fund
administrative, accounting and transfer agent. In no event shall the Bank be
liable for any indirect, incidental, special or consequential losses or damages
of any kind whatsoever (including but not limited to lost profits), even if the
Bank has been advised of the likelihood of such loss or damage and regardless of
the form of action.
(b) Subject to Section 2(a) above, the Bank shall not be responsible for,
and the Customer shall indemnify and hold the Bank harmless from and against,
any and all losses, damages, costs, reasonable attorneys' fees and expenses,
payments, expenses and liabilities incurred by the Bank, any of its agents, or
the Customer's agents in the performance of its/their duties hereunder,
including but not limited to those arising out of or attributable to:
(i) any and all actions of the Bank or its officers or agents
required to be taken pursuant to this Agreement;
(ii) the reasonable reliance on or use by the Bank or its officers or
agents of information, records, or documents which are received by the Bank or
its officers or agents and furnished to it or them by or on behalf of the
Customer, and which have been prepared or maintained by the Customer or any
third party on behalf of the Customer;
(iii) the Customer's refusal or failure to comply with the material
terms of this Agreement or the Customer's lack of good faith, or its actions, or
lack thereof, involving negligence or willful misfeasance;
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(iv) the breach of any material representation or warranty of the
Customer hereunder;
(v) the taping or other form of recording of telephone
conversations or other forms of electronic communications with investors and
shareholders, or reliance by the Bank, its officers or agents on telephone or
other electronic instructions of any person acting on behalf of a shareholder or
shareholder account for which telephone or other electronic services have been
authorized, provided the Bank, its officers or agents complies with all laws
relating to the taping or other form of recording of telephone conversations;
(vi) the reliance on or the carrying out by the Bank or its officers
or agents of any proper instructions reasonably believed to be duly authorized,
or requests of the Customer or recognition by the Bank or its officers or agents
of any share certificates which are reasonably believed to bear the proper
signatures of the officers of the Customer and the proper countersignature of
any transfer agent or registrar of the Customer;
(vii) any delays, inaccuracies or omissions from information or data
provided to the Bank or its officers or agents by data services, corporate
action services, Services or securities brokers and dealers;
(viii) the offer or sale of shares by the Customer in violation of
any requirement under the Federal securities laws or regulations or the
securities laws or regulations of any state, or in violation of any stop order
or other determination or ruling by any Federal agency or any state agency with
respect to the offer or sale of such shares in such state (1) resulting from
activities, actions or omissions by the Customer or its other service providers
and agents, or (2) existing or arising out of activities, actions or omissions
by or on behalf of the Customer prior to the effective date of this Agreement;
(ix) any failure of the Customer's registration statement to
materially comply with the 1933 Act and the 1940 Act (including the rules and
regulations thereunder) and any other applicable laws, or any untrue statement
of a material fact or omission of a material fact necessary to make any
statement therein not misleading in a Customer's prospectus; and
(x) the actions taken by the Customer, and its investment advisers,
in compliance with applicable securities, tax, commodities and other laws, rules
and regulations, or the failure to so comply.
(c) In performing the services required under Section II. hereof, the Bank
shall be entitled to rely on any Oral or Written Instructions, notices or other
communications, including electronic transmissions, from the Customer and its
officers and trustees, investors, agents and other service providers which the
Bank or its agents reasonably believes to be genuine, valid and authorized, and
shall be indemnified by the Customer for any loss or expense caused by such
reliance. The Bank shall be entitled to consult with and rely on the advice and
opinions of outside legal counsel retained by the Customer, as necessary or
appropriate.
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(d) The Bank shall indemnify and hold the customer and the Series harmless
from and against any and all losses, damages, costs, charges, reasonable
attorneys' fees and expenses, payments and liabilities arising out of or
attributable to the Bank's refusal or failure to comply with the material terms
of this Agreement; the Bank's breach of any material representation made by it
herein; or the Bank's lack of good faith or acts involving negligence, willful
misfeasance or reckless disregard of its duties under this Agreement.
(e) The provisions of this Section III.2. shall survive the termination of
this Agreement.
3. INDEMNIFICATION.
(a) In connection with any indemnification required under this Section
III., the party seeking indemnification ("Indemnified Party") shall give written
notice within a reasonable period of time to the other party ("Indemnifying
Party") of a written assertion or claim of any threatened or pending legal
proceeding which may be subject to this indemnification. The failure to so
notify the Indemnifying Party of such written assertion or claim shall not,
however, operate in any manner whatsoever to relieve the Indemnifying Party of
any liability arising from this Section III. or otherwise, except to the extent
failure to give notice prejudices the Indemnifying Party.
(b) For any legal proceeding giving rise to indemnification under this
Agreement, the Indemnifying Party shall be entitled to defend or prosecute any
claim in the name of the Indemnified Party at its own expense and through
counsel of its own choosing if it gives written notice to the Indemnified Party
within fifteen (15) business days of receiving notice of such claim.
Notwithstanding the foregoing, the Indemnified Party may participate in the
litigation at its own expense through counsel of its own choosing. If the
Indemnifying Party chooses to defend or prosecute such claim, then the parties
shall cooperate in the defense or prosecution thereof and shall furnish such
records and other information as are reasonably necessary.
(c) The provisions of this Sub-section 3 shall survive the termination of
this Agreement.
4. USE OF OTHER PARTIES BY THE BANK.
(a) In furnishing the services required to be provided under Section II. of
this Agreement, the Bank may, upon prior written approval of Customer, sub-
contract with other parties ("Other Parties") for the provision of all or such
part of those services as Bank deems appropriate. In the event that the Bank
utilizes the services of Other Parties in performing the functions required to
be performed by it as set forth in Section II. of this Agreement, the Bank shall
be responsible for the actions of such Other Parties to the same extent as if
the Bank performed such functions, except for as provided under Sub-section
III.4(e) of this Agreement. Termination of such Other Parties may be made only
upon prior written approval of Customer.
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<PAGE>
(b) To the extent the Bank contracts with Other Parties to perform services
required by Section II., of this Agreement, Bank is authorized to make
representations in writing to such Other Parties concerning the Customer only
(i) to the same extent as the Customer makes representations and warranties to
the Bank in this Agreement; and (ii) concerning the obligations of Customer set
forth in Sub-section III.4(c) of this Agreement.
(c) The Customer and the Bank agree that to the extent the Bank utilizes
Other Parties to perform certain functions called for by Section II. of this
Agreement, the Customer may communicate directly with such Other Parties and
agrees to pay the direct Customer expenses set forth in Schedule F.
(d) To the extent the Bank contracts with Other Parties to perform any of
the functions required under Section II. of this Agreement and is required
pursuant to contracts with such Other Parties to supply documents to such Other
Parties relating to the Customer, the Customer shall supply such documents to
the Bank upon reasonable request.
(e) The Bank shall enter into a sub-administration agreement dated as of
the date of this Agreement (the "Sub-Administration Agreement") with FDI
Distribution Services, Inc., or its delegatee (the "Sub-Administrator') for the
provision of sub-administration services as outlined in Schedule C.V. Any claim
for breach of this Agreement arising out of or attributable to the Sub-
Administrator's performance or nonperformance of its duties under the Sub-
Administration Agreement may only be brought by Customer, its rightful assignee
or third-party beneficiary, against the Sub-Administrator, and not against the
Bank. In addition, the Customer shall indemnify and hold the Bank harmless from
and against any and all losses, damages, costs, charges, reasonable attorneys'
fees and expenses, payments and liabilities arising out of or attributable to
Sub-Administrator's conduct in respect of the Customer, including the Sub-
Administrator's performance or nonperformance of its duties under the Sub-
Administration Agreement.
5. REPRESENTATIONS AND WARRANTIES OF CUSTOMER.
The Customer represents and Warrants to Bank that:
(a) the Customer is a business trust duly organized and existing and in
good standing under the laws of the State of Delaware;
(b) The Customer is an open-end investment company properly registered
under the 1940 Act; and
(c) all records and regulatory filings of the Customer have been properly
maintained or made in accordance with applicable laws.
6. REPRESENTATIONS OF BANK
The Bank represents and warrants to the Customer that:
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(a) the Bank is a New York State Chartered Trust Company duly organized and
existing and in good standing under the laws of New York;
(b) the Bank is empowered under applicable laws and by its Charter Document
and By-Laws to enter into and perform this Agreement;
(c) all requisite proceedings have been taken to authorize the Bank to
enter into and perform this Agreement;
(d) the Bank is not a party to any pending or threatened legal proceedings
which would impair its ability to perform the duties and obligations called for
by this Agreement; and
(e) the Bank will only sub-contract with an Other Party to perform services
under this Agreement if such Other Party:
(i) is duly organized, existing and in good standing under the laws
of its state of organization;
(ii) is duly qualified to carry on its business wherever it is legally
required to be so qualified;
(iii) is empowered under applicable laws and by its charter documents
and By-Laws to perform the functions required under Section II. of this
Agreement which the Bank has contracted with it to provide;
(iv) has and will continue to have access to the facilities, personnel
and equipment required to fully perform the functions which the Bank has
contracted with it to provide; and
(v) is not a party to any pending or threatened legal proceedings
which would impair such Other Party's ability to perform the duties and
obligations which the Bank has contracted with it to provide.
7. FEES AND EXPENSES.
(a) The Customer agrees to pay the Bank or its agents for all services to
be provided under this Agreement such amount as may be agreed upon in writing
and as set forth on Schedule F. For any amount of fees that has not been
contested in accordance with Sub-section (e) of this Section III.7., the Bank
shall have a lien on and is authorized to charge the Account of any Series for
any amount owing to the Bank by Customer on behalf of such Series under any
provision of this Agreement. The fee schedule agreed to and as set forth on
Schedule F shall be fixed for a period of three years from the date hereof.
(b) The Bank is, and any subcustodians are, authorized to charge the
Account of any Series for such items and the Bank shall have a lien, charge and
security interest on any and all
23
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Assets of such Series for any amount owing to the Bank with respect to such
Series from time to time under this Agreement.
(c) The Customer may from time to time request additional services,
additional processing, or special reports. The Customer shall submit such
requests in writing together with such specifications and requirements
documentation as may be reasonably required by the Bank. If the Bank elects to
provide such services or arrange for their provision, it shall be entitled to
additional fees and expenses at its customary rates and charges. The Bank's
agreement to perform such additional services shall not be unreasonably
withheld.
(d) The Bank will render, after the close of each month in which services
have been furnished, a statement reflecting all of the charges for such month.
Undisputed charges remaining unpaid after sixty (60) days shall bear interest in
finance charges equivalent to, in the aggregate, the Prime Rate (as determined
by the Bank) plus two percent per year and all costs and expenses of effecting
collection of any such sums, including reasonable attorney's fees, shall be paid
by the Customer to the Bank.
(e) In the event that the Customer is more than ninety (90) days delinquent
in its payments of monthly billings in connection with this Agreement (with the
exception of specific amounts which may be reasonably contested by the
Customer), this Agreement may be terminated upon sixty (60) days' written notice
to the Customer by the Bank. The Customer must notify the Bank in writing of
any contested amounts within thirty (30) days of receipt of a billing for such
amounts. Disputed amounts are not due and payable while they are being
investigated.
8. RECORDS; PROPRIETARY NATURE; DUTY TO MAINTAIN; ACCESS AND INSPECTION;
REPORT ON INTERNAL ACCOUNTING CONTROLS.
(a) Proprietary Name. The Bank agrees that all accounts, books and records
----------------
of the Bank relating thereto, in its capacity as Custodian under this Agreement,
are the property of the Bank. The Bank agrees that all accounts, books and
records of the Customer maintained in its capacity as Administrator, Accounting
Services and Transfer Agent pursuant to Section 31 of the 1940 Act and Rule 3la-
1 and 3la-2 are the property of the Customer. All books and records maintained
in accordance with this Agreement shall be open to inspection and audit at all
reasonable times during normal business hours by any person designated by the
Customer. All such accounts, books and records shall be maintained and
preserved in the form acceptable to and the periods prescribed by the Customer
and in accordance with and for the periods prescribed by the 1940 Act and the
Rules and Regulations thereunder, including, without limitation, Section 31
thereof and Rules 3la-1 and 3la-2 thereunder.
(b) Access and Inspection. The Bank shall assist the Customer, the
---------------------
Customer's independent auditors, or, upon approval of the Customer, any
regulatory body, in any requested review of the Customer's or Series' accounts,
books and records maintained by the Bank in its capacity as Custodian,
Administrative, Accounting or Transfer Agent. The Bank shall be reimbursed by
the Customer for all reasonable expenses incurred in connection with any such
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review, other than routine and normal periodic reviews and audits. Bank, in its
capacity as Accounting Agent, will supply the necessary data for the Customer's
or an independent auditor's completion of any necessary tax returns,
questionnaires, periodic reports to shareholders and such other reports and
information requests as the Customer and the Bank shall agree upon from time to
time. In case of any other request or demand for the inspection of any
accounts, books or records maintained by the Bank on Customer's behalf, the Bank
shall not permit such inspection except upon prior written approval of Customer,
which approval shall not be unreasonably withheld.
(c) Records of Subcustodians. Subject to restrictions under applicable
------------------------
law, the Bank shall also obtain from each Subcustodian an undertaking to permit
the Customer's independent public accountants reasonable access to the records
of each Subcustodian which has physical possession of any Assets, as may be
required in connection with the examination of the Customer's books and records.
(d) Report on Internal Accounting Controls. Upon reasonable request from
--------------------------------------
the Customer, the Bank shall furnish the Customer such reports (or portions
thereof) of the Bank's system of internal accounting controls (SAS-70)
applicable to the Bank's duties under this Agreement. The Bank shall use its
reasonable efforts to obtain and furnish the Customer with such similar reports
as it may reasonably request with respect to each Subcustodian and securities
depository holding the Customer's assets.
9. MISCELLANEOUS.
(a) Foreign Exchange Transactions. To facilitate the administration of the
-----------------------------
Customer's trading and investment activity, the Bank is authorized to enter into
spot or forward foreign exchange contracts with the Customer or an Authorized
Person for the Customer on behalf of a Series on a principal and agency basis
and may also provide foreign exchange through its subsidiaries, affiliates,
Subcustodians or third parties. Instructions, including standing instructions,
may be issued with respect to such contracts but the Bank may establish rules or
limitations concerning any foreign exchange facility made available. In all
cases where the Bank, its subsidiaries, affiliates or Subcustodians enter into a
foreign exchange contract related to Accounts, the terms and conditions of the
then current foreign exchange contract of the Bank, its subsidiary, affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply to
such transaction.
(b) Certification of Residency, etc. The Customer certifies that it is a
-------------------------------
resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications. The indemnification provisions of this Sub-section 9(b) shall
survive termination of this Agreement.
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(c) Governing Law; Successors and Assign. This Agreement shall be governed
------------------------------------
by the laws of the State of New York and shall not be assignable by either
party, but shall bind the successors in interest of the Customer and the Bank.
(d) Entire Agreement: Applicable Riders. This Agreement consists
-----------------------------------
exclusively of this document together with Schedule Al, Schedule A2, Schedules
Bl, B2, B3, B4, Schedule C, Schedule D, Schedule E, and Schedule F. There are no
other provisions of this Agreement, and this Agreement supersedes any other
agreements, whether written or oral, between the parties. Any amendment to this
Agreement must be in writing, executed by both parties. With respect to the
services required to be provided under Section II. of this Agreement, the Bank
and the Customer may from time to time adopt such procedures to facilitate the
provision of such services, as agreed upon in writing.
(e) Severability. In the event that one or more provisions of this
------------
Agreement are held invalid, illegal or unenforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of such provision or provisions under other circumstances or
in other jurisdictions and of the remaining provisions will not in any way be
affected or impaired.
(f) Waiver. Except as otherwise provided in this Agreement, no failure or
------
delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise, or the exercise of any
other power or right. No waiver by a party of any provision of this Agreement,
or waiver of any breach or default, is effective unless in writing and signed by
the party against whom the waiver is to be enforced.
(g) Notices. All notices under this Agreement shall be effective when
-------
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses or
such other addresses as may subsequently be furnished to the other party in
writing by certified or registered mail, unless otherwise specified in this
Agreement or in the Client Services Guide:
Bank: Morgan Stanley Trust Company
One Pierrepont Plaza
Brooklyn, NY 11201
Attention: President
or facsimile: (718) 754-6160
Customer: The Brinson Funds
209 South LaSalle Street
Chicago, IL 60604-1295
Attention: President
or facsimile: (312) 554-3935
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(h) Term and Termination.
--------------------
(i) This Agreement shall become effective on the date first written
above and shall continue in effect for an initial three year period. The
Agreement may be terminated in its entirety or as to Section I. or Section II.
only prior to the expiration of the initial term only if a party commits a
material breach of any term or condition hereof and any such breach is not cured
or rectified within ninety (90) calendar days after the party claiming the
breach shall have given written notice of such to the other party ("Curable
Breach") except that neither party shall have a right to cure a material breach
resulting from willful misconduct, reckless disregard or intentional misconduct
("Non-curable Breach"). In the event that a Curable Breach is not cured within
such ninety (90) day period, the party claiming a material breach shall have
thirty (30) days to notify the party committing the breach of its intention to
terminate this Agreement in accordance with subparagraph (ii) of Section
III.9.(h).
(ii) The Customer or the Bank may give notification of termination to
the other party following a Non-Curable Breach or following a Curable Breach
which has not been cured or after the initial three year period by giving ninety
(90) days written notice to the other, provided that such notice to the Bank
shall specify the names of the persons to whom the Bank shall deliver the Assets
in the Accounts; and further provided that, if Bank is the terminating party
(other than on account of a material breach hereof by Customer) Customer may
extend the termination period by up to an additional sixty (60) days by sending
prompt written notice ("Extension Notice") to Bank of its intent to do so
(including the number of additional days). If notice of termination is given by
the Bank, the Customer shall, within ninety (90) days (or such other amount of
days as is contemplated by the Extension Notice) following receipt of the
notice, deliver to the Bank Instructions specifying the names of the persons to
whom the Bank shall deliver the Assets. In either case the Bank will deliver
the Assets to the persons so specified, after deducting any amounts which the
Bank determines in good faith to be owed to it under Sub-section 7 of Section
III. of this Agreement.
If within ninety (90) days following receipt of a notice of
termination by the Bank, the Bank does not receive Instructions from the
Customer specifying the names of the persons to whom the Bank shall deliver the
Assets, the Bank, at its election, may deliver the Assets to a bank or trust
company doing business in any State within the United States to be held and
disposed of pursuant to the provisions of this Agreement, or to Authorized
Persons, or may continue to hold the Assets until Instructions are provided to
the Bank; provided, however, that the Bank shall have no obligation to settle
-------- -------
any transactions in securities for the Accounts following the expiration of the
ninety (90) day period referred to in this sentence except those transactions
which remained open prior to the expiration of such ninety (90) day period.
(iii) Termination as to One or More Series. This Agreement may be
------------------------------------
terminated as to one or more Series (but less than all of the Series) by
delivery of an amended Schedule Bl deleting such Series, in which case
termination as to such deleted Series shall take effect sixty (60) days after
the date of such delivery. The execution and delivery of an amended Schedule B1
which deletes one or more Series shall constitute a termination of this
Agreement only with respect to such deleted Series, shall be governed by the
preceding provisions of this
27
<PAGE>
Sub-section 9(h) of Section III. of this Agreement as to the identification of a
successor custodian and the delivery of Assets of the Series so deleted to such
successor custodian, and shall not affect the obligations of the Bank and the
Customer hereunder with respect to the other Series set forth in Schedule Bl, as
amended from time to time.
(i) Several Obligations of the Series. With respect to any obligations of
---------------------------------
the Customer on behalf of the Series and their related Accounts arising out of
this Agreement, the Bank shall look for payment or satisfaction of any
obligation solely to the assets and property of the Series and such Accounts to
which such obligation relates as though the Customer had separately contracted
with the Custodian by separate written instrument with respect to each Series
and its related Accounts.
(j) Representations and Warranties. (A) The Customer represents and
------------------------------
warrants that (i) the execution, delivery and performance of this agreement
(including, without limitation, the ability to obtain the short-term extensions
of credit in accordance with Section I.5.) are within the Customer's and the
Series' power and authority and have been duly authorized by all requisite
action (corporate or otherwise) of the Customer, and (ii) this Agreement and
each extension of short-term credit extended to or arranged for the benefit of
any Series in accordance with Section I.5. shall at all times constitute a
legal, valid and binding obligation of the Customer on behalf of and solely from
the assets attributable to such Series and be enforceable against the Customer
on behalf of and solely from the assets attributable to such Series in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
in general and subject to the effect of general principles of equity (regardless
of whether considered in a proceeding in equity or at law).
(k) The Bank represents and warrants that (i) the execution, delivery and
performance of this Agreement are within the Bank's power and authority and have
been duly authorized by all requisite action (corporate or otherwise) of the
Bank and (ii) this Agreement constitutes the legal, valid and binding obligation
of the Bank enforceable against the Bank in accordance with its terms, except as
may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and subject to the effect of general
principles of equity (regardless of whether considered in a proceeding in equity
or at law).
(l) Force Majeure. Subject to reasonable compliance with the Bank's then-
-------------
existing disaster recovery plans, the Bank shall not be liable for any harm,
loss or damage suffered by the Customer, its investors, or other third parties
or for any failure or delay in performance of the Bank's obligations under this
Agreement arising out of or caused, directly or indirectly, by circumstances
beyond the Bank's control. In the event of a force majeure, any resulting harm,
loss, damage, failure or delay by the Bank will not give the Customer the right
to terminate this Agreement.
(m) Confidentially.
--------------
(i) Except to the extent necessary to perform the functions required
under this Agreement, the Bank, its agents and employees shall maintain the
confidentiality of information
28
<PAGE>
concerning any Assets held under this Agreement, including in dealings with
affiliates of the Bank. In the event the Bank or any Subcustodian is requested
or required to disclose any confidential information concerning any such Assets,
the Bank shall, to the extent practicable and legally permissible, promptly
notify the Customer of such request or requirement so that the Bank may seek a
protective order or waive any objection to the Bank's or such Subcustodian's
compliance with this Sub-section 9(m). In the absence of such a waiver, if the
Bank or such Subcustodian is compelled, in the opinion of its counsel, to
disclose any confidential information, the Bank or such Subcustodian may
disclose such information to such persons as, in the opinion of counsel, is so
required.
(ii) The Customer shall maintain the confidentiality of, and not
provide to any third parties absent the written permission of the Bank, any
computer software, hardware or communications facilities made available to the
Customer or its agents by the Bank.
(iii) Neither the Bank nor any Other Party may create written or
other promotional materials and/or distribute such promotional materials to the
public or to prospective customers or clients which state that it is providing
services to the Customer or any of its affiliates in connection with this
Agreement without the prior verbal or written consent of the Customer, which
consent will not be reasonably withheld. For purposes of Sub-section 9(m) of
this Agreement, the term "written or other promotional materials" shall mean any
(A) material prepared in connection with the solicitation of prospective or
existing customers; and (B) material published, or designed for use in, a
newspaper, magazine or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, telephone
directories (other than routine listings), electronic or other public media.
THE BRINSON FUNDS
By:/s/ E. Thomas McFarlan
----------------------
Title: President/Treasurer
Date: May 6, 1997
MORGAN STANLEY TRUST COMPANY
By:/s/ G. Federico
---------------
Title: Vice President
Date: May 7, 1997
29
<PAGE>
STATE OF ILLINOIS )
: SS.
COUNTY OF COOK )
On this 6th day of May, 1997, before me personally came E. Thomas McFarlan,
to me known, who being by me duly sworn, did depose and say that he/she resides
in Chicago, Illinois at 209 South LaSalle that he/she is President/Treasurer of
The Brinson Funds, the entity described in and which executed the foregoing
instrument; that he/she knows the seal of said entity, that the seal affixed to
said instrument is such seal, that it was so affixed by order of said entity,
and that he/she signed his/her name thereto by like order.
/s/ E. Thomas McFarlan
----------------------
Sworn to before me this 6th,
day of May, 1997.
/s/ Cynthia G. Biechler
- -----------------------
Notary
30
<PAGE>
STATE OF NEW YORK )
: SS.
COUNTY OF KING )
On this 7th day of May, 1997, before me personally came Gracomo Federico,
to me known, who being by me duly sworn, did depose and say that he/she resides
in One Pierreport Plaza at Brooklyn, New York; that he/she is a Vice President
of Morgan Stanley Trust Company, the corporation described in and which executed
the foregoing instrument; that he/she knows the seal of said corporation, that
the seal affixed to said instrument is such corporate seal, that it was so
affixed by order of the Board of Trustees of said corporation, and that he/she
signed his/her name thereto by like order.
/s/ G. Federico
------------------
Sworn to before me this 7th,
day of May, 1997.
/s/ Michael Selzer
- ---------------------
Notary
31
<PAGE>
SCHEDULE A1
-----------
LIST OF SUBCUSTODIANS
---------------------
<TABLE>
<CAPTION>
COUNTRY SUB-CUSTODIAN
------- -------------
<S> <C>
Argentina Citibank N.A.
Australia Westpac Banking Corporation
Austria Creditanstalt-Bankverein
Bangladesh Standard Chartered Bank
Belgium Bank Brussels Lambert S.A.
Botswana Barclays Bank of Botswana Ltd.
Brazil Banco de Boston
Canada The Toronto-Dominion Bank
Canada Royal Bank of Canada*
Chile Citibank, N.A.
China Hongkong and Shanghai Banking Corporation
Colombia Citibank S.A.
Cote d'Ivoire Societe Generale
Cyprus Barclays Bank PLC
Czech Republic ING Bank N.V.
Denmark Den Danske Bank
Ecuador Citibank N.A.
Egypt Citibank N.A.
Estonia Hansabank**
Finland Merita Bank
France Banque Indosuez
Germany Dresdner Bank AG
Ghana Barclays Bank of Ghana Ltd.
Greece Citibank N.A.
Hong Kong Hongkong and Shanghai Banking Corporation
Hungary Citibank Budapest Rt.
India Standard Chartered Bank
India Hongkong and Shanghai Banking Corporation
India MSTC Mumbai Branch
Indonesia Hongkong and Shanghai Banking Corporation
Ireland Allied Irish Banks plc
Israel Bank Leumi
Italy Citibank N.A.
Japan The Bank of Tokyo-Mitsubishi Limited
</TABLE>
*Effective May 23, 1997
**Not an eligible foreign custodian under Rule 17f-5
32
<PAGE>
LIST OF SUBCUSTODIANS
---------------------
<TABLE>
<CAPTION>
COUNTRY SUB-CUSTODIAN
------- -------------
<S> <C>
Japan Morgan Stanley Japan Limited**
Jordan Arab Bank plc
Kenya Barclays Bank Kenya Ltd.
Luxembourg Bank Brussels Lambert S.A.
Malaysia OCBC Bank (Malaysia) Berhad
Mauritius Hongkong and Shanghai Banking Corporation
Mexico Citibank Mexico S.A.
Morocco Banque Commerciale de Maroc
Netherlands ABN AMRO Bank N.V.
New Zealand ANZ Banking Group (New Zealand) Limited
Norway Den Norske Bank
Pakistan Standard Chartered Bank
Papua New Guinea Westpac Banking Corporation
Peru Citibank N.A.
Philippines Hongkong and Shanghai Banking Corporation
Poland Citibank Poland S.A.
Portugal Banco Comercial Portugues
Russia Credit Suisse (Moscow) Ltd.
Singapore Oversea-Chinese Banking Corporation Limited
Slovakia ING Bank N.V.
South Africa First National Bank of Southern Africa, Ltd.
South Korea Standard Chartered Bank
Spain Banco Santander
Sri Lanka Hongkong and Shanghai Banking Corporation
Swaziland Barclays Bank of Swaziland Ltd.
Sweden Svenska Handelsbanken
Switzerland Bank Leu Limited
Taiwan Hongkong and Shanghai Banking Corporation
Thailand Standard Chartered Bank
Tunisia Banque Internationale Arabe de Tunisie**
Turkey Citibank N.A.
UK Barclays Bank PLC
USA Chase Manhattan Bank
Uruguay Citibank N.A.
Venezuela Citibank N.A.
Zambia Barclays Bank of Zambia Ltd.
Zimbabwe Barclays Bank of Zimbabwe Ltd.
</TABLE>
**Not an eligible foreign custodian under Rule 17f-5
33
<PAGE>
SCHEDULE A2
-----------
LIST OF SECURITIES DEPOSITORIES OR CLEARING AGENCIES
----------------------------------------------------
<TABLE>
<CAPTION>
COUNTRY CENTRAL DEPOSITORY
------- ------------------
<S> <C> <C>
Argentina Caja de Valores
Australia CHESS Clearing House Electronic
Subregister System
Austria OKB OsterreicheKontrollbank
Bangladesh None
Belgium CIK Caisse Interprofessionelle de
Depots et de Virements de
Titres
Botswana None
Brazil BOVESPA Bolsa de Valores de Sao Paulo
BVRJ Bolsa de Valores de Rio de
Janeiro
CETIP - fixed income Central de Custodia e
Liquidacao Financeira de
Titulos
SELIC - fixed income Sistema Especial de Liquidacao
e Custodia
Canada CDS The Canadian Depository for
Securities
Chile Depositorio Central de
Valores
China SSCCRC Shanghai Securities Central
Clearing and Registration
Corporation
SSCC Shenzhen Securities Central
Clearing Company Ltd.
Colombia DCV - central bank Deposito Central de Valores
securities
DECEVAL - fixed income
securities
Cote d'Ivoire None
Cyprus None
Czech Republic SCP Stredisko cennych papiru
(Center for Securities)
Denmark VP Vaerdipapircentralen
Ecuador None
Egypt None
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
COUNTRY CENTRAL DEPOSITORY
------- ------------------
<S> <C> <C>
Finland None
France SICOVAM Societe Interprofessionelle pour
la Compensation des Valeurs
Mobilieres
Germany DKV Deutscher Kassenverein AG
Ghana None
Greece Apothetirio Titlon A.E.
Hong Kong CCASS Central Clearing and Settlement
System
Hungary KELER Kozponti Elszamolohas es
Ertktar (Budapest) Rt.
India National Securities National Securities Depository
Depository Limited Limited
Indonesia KDEI Kustodian Depositari Efek
Indonesia
Ireland CGO - gilts only Central Gilts Office
Israel SECH (for securities listed Stock Exchange Clearing House
on the Tel Aviv Stock
Exchange)
Italy Monte Titoli S.P.A.
Banco d'Italia
Japan JASDEC Japan Securities Depository
Center
Jordan None
Kenya None
South Korea KSD Korean Securities Depository
Luxembourg None
Malaysia MCD Malaysian Central Depository
Mauritius None
Mexico S.D. INDEVAL, S.A.
Morocco None
Netherlands NECIGEF Netherlands Central Institute for
Giral Effectenclearing
New Zealand
NZCSD New Zealand Central Securities
Depository
Norway VPS Verdipapirsentralen
Pakistan CDC Central Depository Company of
Pakistan
Papua New CHESS Clearing House Electronic
Guinea Subregister System
Peru Caja de Valores Caja de Valores de Lima
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
COUNTRY CENTRAL DEPOSITORY
------- ------------------
<S> <C> <C>
Philippines PCD Philippines Central Depository
Poland NDS National Depository of
Securities
Portugal CENTRAL
Russia None
Singapore CDP Central Depository Pte Ltd.
Slovak Republic SCP Stredisko cennych papierov
Slovenskej Republiky (Center
for Securities)
South Africa Central Depository Ltd.
Spain SCLV Servicio de Compensacion y
Liquidacion de Valores
Sri Lanka CDS Central Depository System Pvt
Ltd.
Swaziland None
Sweden VPS Vardipapperscentralen
Switzerland SEGA Schweizerische EffektenGiro
AG
Taiwan TSCD Taiwan Securities Depository
Co.
Thailand SDC or TSD Thailand Securities Depository
Center
Tunisia
Turkey None
United Kingdom CGO - gilts only Central Gilts Office
CREST
United States DTC Depository Trust Company
Uruguay None
Venezuela None
Zambia Lusaka Stock Exchange
Depository
Zimbabwe None
</TABLE>
36
<PAGE>
SCHEDULE B1
-----------
LIST OF SERIES OF THE BRINSON FUNDS
-----------------------------------
Global Fund
Global Equity Fund
Global Bond Fund
U.S. Balanced Fund
U.S. Equity Fund
U.S. Bond Fund
Non-U.S. Equity Fund
37
<PAGE>
[Morgan Stanley Letterhead]
November 24, 1997
The Brinson Funds
209 South LaSalle Street
Chicago, IL 60604
RE: AMENDMENT TO MULTIPLE SERVICES AGREEMENT EFFECTIVE MAY 9, 1997
- ADDITION OF U.S. LARGE CAPITALIZATION EQUITY FUND SERIES
----------------------------------------------------------
Dear Sirs:
We refer to the Multiple Services Agreement effective May 9, 1997 (the
"MSA") between Morgan Stanley Trust Company and The Brinson Funds.
The parties hereby agree as follows:
1. "Schedule B1 - List of Series of The Brinson Funds" is replaced in its
entirety with "Schedule B1 - List of Series of The Brinson Funds, AS
AMENDED ON NOVEMBER 24, 1997," attached hereto.
2. "Schedule F - Fee Schedule for The Brinson Funds" is replaced in its
entirety with "Schedule F - Fee Schedule for The Brinson Funds, AS
AMENDED ON NOVEMBER 24, 1997," attached hereto.
The MSA, as amended by this letter amendment, shall continue in full force and
effect.
Please evidence your acceptance of the terms of this letter by signing
below and returning one copy to Michael Reinbold, Morgan Stanley Trust Company,
1 Pierrepont Plaza, Brooklyn, NY 11201.
Very truly yours,
MORGAN STANLEY TRUST COMPANY
By: /s/ Giacomo Federico
--------------------
Name: Giacomo Federico
Title: Principal
38
<PAGE>
The Brinson Funds
November 24, 1997
Page Two
Accepted and Agreed:
THE BRINSON FUNDS
By: /s/ E. Thomas McFarlan
----------------------
Name: E. Thomas McFarlan
Title: President
39
<PAGE>
SCHEDULE B1
-----------
LIST OF SERIES OF THE BRINSON FUNDS
-----------------------------------
AS AMENDED NOVEMBER 24, 1997
Global Fund
Global Equity Fund
Global Bond Fund
U.S. Balanced Fund
U.S. Equity Fund
U.S. Bond Fund
Non-U.S. Equity Fund
U.S. Large Capitalization Equity Fund
40
<PAGE>
SCHEDULE B2
-----------
LIST OF DOCUMENTS TO BE PROVIDED BY CUSTOMER TO BANK
----------------------------------------------------
REQUIRED DOCUMENTATION FOR CORE CUSTODIAL SERVICES (INCLUDING
- -------------------------------------------------------------
TAX RECLAIMS):
- --------------
CUSTODY AGREEMENT
CLIENT SERVICES GUIDE (INCLUDING APPENDICES)
FEE SCHEDULE/BILLING GUIDE
GENERAL ACCOUNT INFORMATION
US TAX AUTHORITY DOCUMENTATION
LOCAL TAX OFFICE LETTER/APPLICATION LETTER
(NON-UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
FORM 6166/REQUEST FOR FOREIGN CERTIFICATION FORM
(UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
CERTIFICATION OF BENEFICIAL OWNERSHIP, LEGAL NAME, LEGAL
RESIDENCY, TAX STATUS AND TAX IDS
TAX RECLAIM POWER OF ATTORNEY
PREVIOUS TAX RECLAIM FILING INFORMATION
(PREVIOUS FILERS, ONLY)
UK TAX AUTHORITY DOCUMENTATION
SOPHISTICATED INVESTOR (ACCREDITED INVESTOR LETTER)
(UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
DOCUMENTATION THAT IS REQUIRED FROM AN ENTITY CLASSIFIED AS
- -----------------------------------------------------------
TAX-EXEMPT BY ITS LOCAL TAX AUTHORITY:
- --------------------------------------
UK FORM 4338
(EXEMPT NON-UNITED KINGDOM-RESIDENT BENEFICIAL OWNERS, ONLY)
41
<PAGE>
UK FORM 309A
(EXEMPT UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
FOREIGN EXEMPTION LETTERS/APPLICATION FOR AUSTRALIAN
EXEMPTION LETTER
(EXEMPT BENEFICIAL OWNERS, ONLY)
DOCUMENTATION THAT IS REQUIRED ONLY IF YOU WILL DEAL IN CERTAIN SECURITIES:
- --------------------------------------------------------------------------
THAI AUTHORIZATION LETTER
JGB INDEMNIFICATION LETTER
KOREAN SECURITIES POWER OF ATTORNEY
NEW ZEALAND "APPROVED ISSUER LEVY" LETTER
SPANISH POWER OF ATTORNEY WITH APOSTILE
ITALIAN GOVERNMENT BOND LETTER
UK STAR LETTER
42
<PAGE>
SCHEDULE B3
LIST OF AUTHORIZED PERSONS
THE BRINSON FUNDS
The following is a list of individuals at The Brinson Funds who are authorized
to originate trades on behalf of The Brinson Funds. All prior authorizations
are superseded by this list.
INITIALS
/s/ Michael A. Abellera M.A.
- -------------------------------- -------------
Michael A. Abellera
/s/ Shelley Aron S.A.
- -------------------------------- -------------
Shelley J. Aron
/s/ Jenifer Aronson J.A.
- -------------------------------- -------------
Jenifer A. Aronson
/s/ Christopher Brightman C.B.
- -------------------------------- -------------
Christopher Brightman
/s/ Thomas Clarkson T.C.
- -------------------------------- -------------
Thomas D. Clarkson
/s/ Paul Harvey P.H.
- -------------------------------- -------------
Paul J. Harvey
/s/ Dennis L. Hesse D.L.H.
- -------------------------------- -------------
Dennis L. Hesse
/s/ B. Craig Hutson B.C.H.
- -------------------------------- -------------
B. Craig Hutson
/s/ Debbie J. Johnson D.J.J.
- -------------------------------- -------------
Debbie J. Johnson
/s/ Kiki Katsikas K.K.
- -------------------------------- -------------
Kiki Katsikas
/s/ Linda Kent L.K.
- -------------------------------- -------------
Linda A. Kent
/s/ Constance M. McGarrity C.M.M.
- -------------------------------- -------------
Constance M. McGarrity
43
<PAGE>
Schedule B3
Page 2
INITIALS
/s/ James C. Malles J.M.
- -------------------------------- -------------
James C. Malles
/s/ Wendy L. Nickerson W.L.N.
- -------------------------------- -------------
Wendy L. Nickerson
________________________________ _____________
Pamela M. Siple
/s/ Mark C. Skorey M.S.
- -------------------------------- -------------
Mark C. Skorey
/s/ Gregory P. Smith G.P.S.
- -------------------------------- -------------
Gregory P. Smith
/s/ David A. Strouse D.S.
- -------------------------------- -------------
David A. Strouse
/s/ Anne Tremmel A.M.T.
- -------------------------------- -------------
Anne M. Tremmel
/s/ Chester F. Wierciak C.W.
- -------------------------------- -------------
Chester F. Wierciak
/s/ Mary Wilson M.W.
- -------------------------------- -------------
Mary Wilson
/s/ Glenn G. Wozniak G.W.
- -------------------------------- -------------
Glenn G. Wozniak
/s/ Jane L. Zobel J.L.Z.
- -------------------------------- -------------
Jane L. Zobel
44
<PAGE>
SCHEDULE B3
LIST OF AUTHORIZED PERSONS
THE BRINSON FUNDS
The following is a list of individuals at The Brinson Funds who are authorized
to originate memos and other instructions, EXCLUDING CASH MOVEMENTS. All prior
authorizations are superseded by this list.
INITIALS
/s/ Joseph A. Anderson J.A.
- -------------------------------- -------------
Joseph A. Anderson
/s/ David E. Floyd D.F.
- -------------------------------- -------------
David E. Floyd
/s/ Alta Jacko A.J.
- -------------------------------- -------------
Alta M. Jacko
/s/ Jennifer L. Lauer J.L.L.
- -------------------------------- -------------
Jennifer L. Lauer
/s/ Ngoc-Dung S. Le N.L.
- -------------------------------- -------------
Ngoc-Dung S. Le
/s/ Athena D. Svolos A.S.
- -------------------------------- -------------
Athena D. Svolos
/s/ Terry L. Winkless T.W.
- -------------------------------- -------------
Terry L. Winkless
45
<PAGE>
Schedule B3
Page 2
The following is a list of individuals at The Brinson Funds who are authorized
to originate memos and other instructions, as well as initiate cash movements:
INITIALS
/s/ Samuel W. Anderson S.A.
- -------------------------------- -------------
Samuel W. Anderson
/s/ Carolyn M. Burke C.M.B.
- -------------------------------- -------------
Carolyn M. Burke
/s/ Richard C. Carr R.C.C.
- -------------------------------- -------------
Richard C. Carr
/s/ Jeffrey J. Diermeier J.J.D.
- -------------------------------- -------------
Jeffrey J. Diermeier
/s/ Thomas J. Digenan T.J.D.
- -------------------------------- -------------
Thomas J. Digenan
/s/ Megan M. Doherty M.D.
- -------------------------------- -------------
Megan M. Doherty
/s/ Dennis L. Hesse D.L.H.
- -------------------------------- -------------
Dennis L. Hesse
/s/ E. Thomas McFarlan E.T.M.
- -------------------------------- -------------
E. Thomas McFarlan
/s/ Catherine E. Macrae C.M.
- -------------------------------- -------------
Catherine E. Macrae
/s/ Debra L. Nichols D.L.N.
- -------------------------------- -------------
Debra L. Nichols
/s/ Nicholas C. Rassas N.C.R.
- -------------------------------- -------------
Nicholas C. Rassas
46
<PAGE>
DATE: April 8, 1997
TO: Debra Nichols
FROM: Lynda Kaplan
RE: Funds Transfer Authorization
The following is a list of Chase Global Funds Services Company personnel
authorized to instruct MSTC to transfer funds between the transfer agent
operating accounts and the Brinson Mutual Fund custody accounts.
NAME TITLE SIGNATURE
- --------------------- ------------------------- -----------------------
Thomas Curran Vice President /s/ Thomas Curran
-----------------------
Bill O'Neill Assistant Treasurer /s/ Bill O'Neill
-----------------------
Scott Fagan Assistant Treasurer /s/ Scott Fagan
-----------------------
John Sheppard Assistant Treasurer /s/ John Sheppard
-----------------------
John Fahey Assistant Treasurer /s/ John Fahey
-----------------------
Louis DiMuzio Senior Control Accountant /s/ Louis DiMuzio
-----------------------
Eileen McGillicuddy Senior Control Accountant /s/ Eileen McGillicuddy
-----------------------
Should you have any questions, please contact me at (617) 557-8134 or Tom Curran
at (617) 557-8106. Thank you.
47
<PAGE>
LIST OF AUTHORIZED SIGNATURES - APRIL 10, 1997
----------------------------------------------
PRINTED NAME SIGNATURE
Martin Ashdown /s/ Martin Ashdown
----------------------------
Ronald Aziz /s/ Ronald Aziz
----------------------------
Tom Barrett /s/ Tom Barrett
----------------------------
David Blaskett /s/ David Blaskett
----------------------------
Mark Boylan /s/ Mark Boylan
----------------------------
Richard Bustard /s/ Richard Bustard
----------------------------
Susan Clarke /s/ Susan Clarke
----------------------------
Richard Collins /s/ Richard Collins
----------------------------
Norman Cumming /s/ Norman Cumming
----------------------------
Godfrey Dutton /s/ Godfrey Dutton
----------------------------
Sally Elliott ____________________________
Richard Fosker /s/ Richard Fosker
----------------------------
Mark Gunn /s/ Mark Gunn
----------------------------
Natalie Hagan /s/ Natalie Hagan
----------------------------
Nigel Head /s/ Nigel Head
----------------------------
James Hedley /s/ James Hedley
----------------------------
Steven Herbert /s/ Steven Herbert
----------------------------
Theresa Hickman /s/ Theresa Hickman
----------------------------
Michael Humphries /s/ Michael Humphries
----------------------------
48
<PAGE>
Cont/...
LIST OF AUTHORIZED SIGNATURES - APRIL 10, 1997
----------------------------------------------
PRINTED NAME SIGNATURE
Christopher Leonard /s/ Christopher Leonard
----------------------------
Steven Liu /s/ Steven Liu
----------------------------
Graham Lock /s/ Graham Lock
----------------------------
Piers Maynard /s/ Piers Maynard
----------------------------
Nicola Milne /s/ Nicola Milne
----------------------------
Tony Mint /s/ Tony Mint
----------------------------
Anne-Marie Parish /s/ Anne-Marie Parish
----------------------------
Suzanne Phillips /s/ Suzanne Phillips
----------------------------
Paul Purser /s/ Paul Purser
----------------------------
Danny Roberts /s/ Danny Roberts
----------------------------
Philip Roberts /s/ Philip Roberts
----------------------------
Barrie Senior /s/ Barrie Senior
----------------------------
Arwyn Wickerson /s/ Arwyn Wickerson
----------------------------
49
<PAGE>
SCHEDULE B3
LIST OF AUTHORIZED PERSONS
THE BRINSON FUNDS
The following is a list of individuals at The Brinson Funds who are authorized
to originate memos and other instructions, excluding cash movements. All prior
authorizations are superseded by this list.
INITIALS
--------
/s/ Joseph A. Anderson J.A.A.
- ------------------------------- ------------
Joseph A. Anderson
/s/ Erik D. Boyme E.D.B.
- ------------------------------- ------------
Erik D. Boyme
/s/ David E. Floyd D.E.F.
- ------------------------------- ------------
David E. Floyd
/s/ Alta M. Jacko A.M.J.
- ------------------------------- ------------
Alta M. Jacko
/s/ Jennifer L. Lauer J.L.L.
- ------------------------------- ------------
Jennifer L. Lauer
/s/ Ngoc-Dung S. Le N.S.L.
- ------------------------------- ------------
Ngoc-Dung S. Le
/s/ Larry W. Rinne L.W.R.
- ------------------------------- ------------
Larry W. Rinne
/s/ Athena D. Svolos A.D.S.
- ------------------------------- ------------
Athena D. Svolos
/s/ Terry L. Winkless T.L.W.
- ------------------------------- ------------
Terry L. Winkless
50
<PAGE>
Schedule B3
Page 2
The following is a list of individuals at The Brinson Funds who are authorized
to originate memos and other instructions, AS WELL AS INITIATE CASH MOVEMENTS.
INITIALS
--------
/s/ Samuel W. Anderson S.W.A.
- ----------------------------- ------------
Samuel W. Anderson
/s/ Carolyn M. Burke C.M.B.
- ----------------------------- ------------
Carolyn M. Burke
/s/ Richard C. Carr R.C.C.
- ----------------------------- ------------
Richard C. Carr
/s/ Jeffrey J. Diermeier J.J.D.
- ----------------------------- ------------
Jeffrey J. Diermeier
/s/ Thomas J. Digenan T.J.D.
- ----------------------------- ------------
Thomas J. Digenan
/s/ Dennis L. Hesse D.L.H.
- ----------------------------- ------------
Dennis L. Hesse
/s/ E. Thomas McFarlan E.T.M.
- ----------------------------- ------------
E. Thomas McFarlan
/s/ Catherine E. Macrae C.E.M.
- ----------------------------- ------------
Catherine E. Macrae
/s/ Debra L. Nichols D.L.N.
- ----------------------------- ------------
Debra L. Nichols
/s/ Nicholas C. Rassas N.C.R.
- ----------------------------- ------------
Nicholas C. Rassas
51
<PAGE>
SCHEDULE B3
LIST OF AUTHORIZED PERSONS
THE BRINSON FUNDS
The following is a list of individuals at The Brinson Funds who are authorized
TO ORIGINATE TRADES on behalf of The Brinson Funds. All prior authorizations
are superseded by this list.
INITIALS
--------
/s/ Michael A. Abellera M.A.A.
- ----------------------------- ------------
Michael A. Abellera
/s/ Shelley J. Aron S.J.A.
- ----------------------------- ------------
Shelley J. Aron
/s/ Jenifer A. Aronson J.A.A.
- ----------------------------- ------------
Jenifer A. Aronson
/s/ Thomas D. Clarkson T.D.C.
- ----------------------------- ------------
Thomas D. Clarkson
/s/ Paul J. Harvey P.J.H.
- ----------------------------- ------------
Paul J. Harvey
/s/ Dennis L. Hesse D.L.H.
- ----------------------------- ------------
Dennis L. Hesse
/s/ B. Craig Hutson B.C.H.
- ----------------------------- ------------
D. Craig Hutson
/s/ Jane L. Hutson J.L.H.
- ----------------------------- ------------
Jane L. Hutson
/s/ James C. Jackson J.C.J.
- ----------------------------- ------------
James C. Jackson
/s/ Debbie J. Johnson D.J.J.
- ----------------------------- ------------
Debbie J. Johnson
/s/ Kiki Katsikas K.K.
- ----------------------------- ------------
Kiki Katsikas
52
<PAGE>
Schedule B3
Page 2
INITIALS
--------
/s/ Linda A. Kent L.A.K.
- ----------------------------- ------------
Linda A. Kent
/s/ Phillip B. Kraus P.B.K.
- ----------------------------- ------------
Phillip B. Kraus
/s/ Constance M. McGarrity C.M.M.
- ----------------------------- ------------
Constance M. McGarrity
/s/ James C. Malles J.C.M.
- ----------------------------- ------------
James C. Malles
/s/ Wendy L. Nickerson W.L.N.
- ----------------------------- ------------
Wendy L. Nickerson
/s/ Pamela M. Siple P.M.S.
- ----------------------------- ------------
Pamela M. Siple
/s/ Gregory P. Smith G.P.S.
- ----------------------------- ------------
Gregory P. Smith
/s/ David A. Strouse D.A.S.
- ----------------------------- ------------
David A. Strouse
/s/ Anne M. Tremmel A.M.T.
- ----------------------------- ------------
Anne M. Tremmel
/s/ Chester F. Wierciak C.F.W.
- ----------------------------- ------------
Chester F. Wierciak
/s/ Mary Wilson M.W.
- ----------------------------- ------------
Mary Wilson
/s/ Glenn G. Wozniak G.G.W.
- ----------------------------- ------------
Glenn G. Wozniak
53
<PAGE>
SBC BRINSON LIMITED - LONDON
List of Authorized Signatures - January 23, 1998
------------------------------------------------
PRINTED NAME SIGNATURE
Martin Ashdown /s/ Martin Ashdown
-------------------------
Ronald Aziz /s/ Ronald Aziz
-------------------------
Tom Barrett /s/ Tom Barrett
-------------------------
Sarah Bodwell /s/ Sarah Bodwell
-------------------------
Justin Beech /s/ Justin Beech
-------------------------
David Blaskett /s/ David Blaskett
-------------------------
Mark Boylan /s/ Mark Boylan
-------------------------
Kathy Bradbury /s/ Kathy Bradbury
-------------------------
Richard Bustard /s/ Richard Bustard
-------------------------
Susan Clarke /s/ Susan Clarke
-------------------------
Tiffany Clay /s/ Tiffany Clay
-------------------------
Richard Collins /s/ Richard Collins
-------------------------
Norman Cumming /s/ Norman Cumming
-------------------------
Godfrey Dutton /s/ Godfrey Dutton
-------------------------
Sally Elliott /s/ Sally Elliott
-------------------------
Richard Fosker /s/ Richard Fosker
-------------------------
Michael Frankland /s/ Michael Frankland
-------------------------
Mark Gunn /s/ Mark Gunn
-------------------------
Peter Halliwell /s/ Peter Halliwell
-------------------------
Nigel Head /s/ Nigel Head
-------------------------
54
<PAGE>
Page 2
LIST OF AUTHORIZED SIGNATURES - JANUARY 23, 1998
------------------------------------------------
PRINTED NAME SIGNATURE
James Hedley /s/ James Hedley
-------------------------
David Helson /s/ David Helson
-------------------------
Steven Herbert /s/ Steven Herbert
-------------------------
Theresa Hickman /s/ Theresa Hickman
-------------------------
Michael Humphries /s/ Michael Humphries
-------------------------
Christopher Leonard /s/ Christopher Leonard
-------------------------
Steven Liu /s/ Steven Liu
-------------------------
Graham Lock /s/ Graham Lock
-------------------------
Paula Matthews /s/ Paula Matthews
-------------------------
Piers Maynard /s/ Piers Maynard
-------------------------
Nicola Milne /s/ Nicola Milne
-------------------------
Amanda Nathan /s/ Amanda Nathan
-------------------------
Anne-Marie Parish /s/ Anne-Marie Parish
-------------------------
Suzanne Phillips /s/ Suzanne Phillips
-------------------------
Paul Purser /s/ Paul Purser
-------------------------
Philip Roberts /s/ Philip Roberts
-------------------------
Barrie Senior /s/ Barrie Senior
-------------------------
Arwyn Wickerson /s/ Arwyn Wickerson
-------------------------
55
<PAGE>
SCHEDULE B4
-----------
THE BRINSON FUNDS
-----------------
DESIGNATED SYSTEM USER ID NUMBERS
---------------------------------
CHASE GLOBAL FUNDS SERVICES
<TABLE>
<CAPTION>
USER ID EMAIL ID
- --------- --------
<S> <C>
ECH1924 ECH1924
ECH1925 ECH1925
ECH1926 ECH1926
ECH1927 ECH1927
ECH1928 ECH1928
ECH1929 ECH1929
ECH1930 ECH1930
ECH1931 ECH1931
ECH1932 ECH1932
ECH1933 ECH1933
ECH1934 ECH1934
ECH1935 ECH1935
ECH1936 ECH1936
ECH1937 ECH1937
</TABLE>
BRINSON PARTNERS, INC.
<TABLE>
<S> <C>
EBP1757 BRNSYST1
EBP1784 BRNCFND1
EBP1787 BRNPRIV1
EBP1788 BRNUSEQ1
EBP1789 BRNUSFI1
EBP1790 BRNCORP
EBP1791 BRNPRIV2
EBP1792 BRNLSET1
EBP1793 BRNMNY
EBP1941 EBP1941
</TABLE>
56
<PAGE>
SCHEDULE C
----------
THE BRINSON FUNDS
-----------------
GENERAL DESCRIPTION OF FUND ADMINISTRATIVE SERVICES
---------------------------------------------------
I. REGULATORY COMPLIANCE
---------------------
A. Compliance - Federal Investment Company Act of 1940
1. Review, report and renew
a. Investment advisory contracts
b. File and monitor compliance with fidelity bond
c. Underwriting contract
d. Distribution (12b-1) plans (class specific)
e. Multiple Services Agreement
2. Filings
a. N-SAR (semi-annual report and annual report) (series and
class specific)
b. Initial registration statement on Form N-1A, post-effective
amendments on Form N1-A, and supplements ("stickers")
c. Notice pursuant to Rule 24f-2 (registration of indefinite
number of shares)
d. Filing fidelity bond under Rule 17g-1
e. Filing shareholders reports under Rule 30b2-1
f. Proxy statement, when necessary
3. Annual up-dates of biographical information and questionnaires
for Trustees and Officers, coordinated with the Brinson
Relationship Funds' questionnaire.
B. Compliance - State "Blue Sky" (classes deemed separate funds for
filing purposes)
1. Blue Sky (state registration)
a. Registration shares (initial/renewal)
b. Monitor sales shares
c. Report shares sold
d. Filing of federal registration statements and contracts
e. Filing annual and semi-annual reports with states
C. Compliance - Prospectus
1. Analyze and review portfolio reports from Adviser regarding:
a. compliance with investment objectives, although primary
responsibility for such compliance will be with the
investment adviser or investment manager.
57
<PAGE>
SCHEDULE C
----------
b. maximum investment by company/industry, although primary
responsibility for such compliance will be with the
investment adviser or investment manager.
D. Compliance - Exemptive Orders and No-Action Letters
1. Monitor compliance with all exemptive orders and no-action
letters, although primary responsibility for such compliance will
be with the investment adviser or investment manager.
II. CORPORATE BUSINESS AND SHAREHOLDER/PUBLIC INFORMATION
-----------------------------------------------------
A. Trustees/Management
1. Preparation of meetings
a. agendas and resolutions - all necessary items of compliance
b. compile and distribute Board materials
c. attend and record minutes of meetings
d. keep attendance records
e. maintain corporate records/minute book
2. Preparation and distribution of periodic operation reports to
management
B. Maintain Corporate Calendars and Files
1. General
2. Blue Sky
C. Release Corporate Information
1. To shareholders
2. To financial and general press
3. To industry publications
a. distributions (dividends and capital gains)
b. tax information
c. changes to prospectus
d. letters from management
e. performance information (class specific)
4. Respond to:
a. financial press, as authorized
b. miscellaneous shareholder inquiries
c. industry questionnaires
5. Prepare, maintain and update monthly information manual
58
<PAGE>
SCHEDULE C
----------
D. Communications to Shareholders
1. Coordinate printing and distribution of annual and semi-annual
reports, proxy statements when applicable and prospectuses
E. Shareholder Meetings
1. Assist with Preparation of proxy (matters to be voted on may be
class specific)
2. Preparation of minutes and record ballot results
III. FINANCIAL AND MANAGEMENT REPORTING
----------------------------------
A. Income and Expenses (class specific when applicable)
1. Preparation of monthly expense analysis (class specific)
2. Expense figures calculated and accrual levels set (class
specific)
3. Monitoring of expenses paid and expense caps (monthly)
4. Approve and process the payment of authorized expenses
5. Checking Account Reconciliation (monthly)
6. Write checks to pay vendors
7. Calculation and payment of advisory fees
B. Distributions to Shareholders (if applicable)
1. Projections of distribution amounts
a. compliance with Sub-Chapter M income tax provisions
b. compliance with excise tax provisions - schedules prepared
2. Compilation of distributions for tax reporting for shareholders'
Form 1099
C. Financial Reporting
1. Liaison between fund management and auditors
2. Preparation of unaudited and audited financial statements to
shareholders (semi-annually) (class specific, when applicable)
- Statement of Assets and Liabilities - shares, TNA and NAV at
class level
- Statement of Operations - prepared at fund level
- Statement of Changes in Net Assets - distributions and
capital stock at class level
- Financial Highlights (class specific)
- per share data/analysis (class specific)
- Footnotes
- Schedule of Investments
3. 60 day delivery to SEC and shareholders
59
<PAGE>
SCHEDULE C
----------
4. Preparation of semi-annual and annual N-SARs and Financial Data
Sheet (Financial Information)
5. Preparation of Post-effective financial statements (if
applicable)
6. Provide work area for auditors
D. Other Financial Analyses
1. Sales information, portfolio turnover (monthly)
2. Performance Calculations (monthly) (class specific)
3. 1099 Miscellaneous - prepared for Directors/Trustees (annually)
4. 1099 Dividend insert card prepared - coordinate printing and
mailing (annually)
5. 1099-DIV Form - validate per share amounts and tax status
(annually)
E. Review and Monitoring Functions
1. Review accruals and reclassification entries (class specific)
2. Review Financial Reporting generated entries to ensure proper
update by accounting, ensure proper money movement by reviewing
bank statements, expense analysis. Review capital stock
reconciliations.
3. Asset Diversification (Sub-Chapter M and 1940 Act) and Income
Qualification Tests (Sub-Chapter M)
F. Preparation and distribution of monthly operational reports to
management by 10th business day
1. Management Statistics (Recap) -when applicable
a. portfolio (including top ten holdings)
b. book gains/losses/per share
c. net income, book income/per share
d. share/shareholders
e. distributions
2. Performance Analysis (per class)
a. total return
b. monthly, quarterly, year to date, average annually
c. calculation of SEC yield (in accordance with SEC guidelines
and interpretations and as mutually agreed upon with
Customer)
3. Short-Short Analysis
a. short-short income
b. gross income (components)
60
<PAGE>
SCHEDULE C
----------
4. Portfolio Turnover
a. market value
b. cost of purchases
c. net proceeds of sales
d. average market value
5. Asset Diversification Test
a. gross assets
b. non-qualifying assets
c. 5% issuers
6. Activity Summary
a. shares sold, redeemed and reinvested
b. change in investment
c. change in price per share
d. net sales
7. Expense Ratios - (per class)
a. per quarter
b. semiannual
c. annual
G. Provide rating agencies with statistical data on a monthly and
quarterly basis
H. For Money Market Funds - weekly Mark-to-Market review
- 5% test
- NAV variance
IV. SPECIAL ISSUES RELATED TO FOREIGN INVESTMENTS
---------------------------------------------
A. Financial Reporting
1. Review and monitor treatment of currency gain/loss and capital
gain/loss
a. section 988 transactions
b. section 1256 contracts
c. section 1092 deferrals
d. maintain reconciliation of portfolio forward realized
gains/losses
B. Tax Reporting (work closely with the Funds' independent audit
firm)
1. Determine tax treatment of foreign investments and their impact
on taxable income and capital gains
2. Calculate distributions to shareholders (if applicable)
a. monitor character and impact of realized currency gain/loss
on distribution amount
b. adherence to 988(a)(1)(b) election (if applicable)
61
<PAGE>
SCHEDULE C
----------
c. identify and compute book/tax difference
d. preparation of distribution worksheet
3. Calculate income (reclaims) and expenses (tax withheld) by
country in order to determine foreign tax credit available to
shareholders (if appropriate)
4. Work with the advisor and independent audit firm in the
identification of Passive Foreign Investment Companies (if
appropriate), although primary responsibility will be with the
investment adviser or investment manager
5. Calculate Dividend Received Deduction available to corporate
shareholders and analyze domestic equity security holding periods
6. Preparation and maintenance of straddle schedules
7. Identification and compliance with the mark-to-market rules
8. Prepare return of capital worksheet for financial statement
presentation with auditor review/discussion, if necessary
9. Provide schedules to auditors for audit/tax review to enable the
audit firm to prepare and file the necessary tax forms (1120,
8613, K-1, etc.)
V. OTHER ADMINISTRATIVE SERVICES WHICH MAY BE PERFORMED BY OTHER PARTY
-------------------------------------------------------------------
A. The provision of advice and counsel to the Funds with respect to
regulatory matters, including monitoring regulatory and legislative
developments that may affect the Funds and assisting the Funds in
routine regulatory examinations or investigations.
B. Generally, assisting in all aspects of the Funds' operations and
providing general consulting services on a day to day, as needed,
basis.
C. In connection with the foregoing activities, maintenance of an office
facility;
D. In connection with the foregoing activities, the furnishing of
clerical services and internal executive and administrative services,
stationery and office supplies; and
E. The maintenance by FDI of all books and records relating to its
services to the Funds in accordance with Rule 3la-1 under the 1940
Act.
62
<PAGE>
SCHEDULE D
----------
THE BRINSON FUNDS
-----------------
DESCRIPTION OF FUND ACCOUNTING SERVICES
---------------------------------------
DAILY ACCOUNTING SERVICES
-------------------------
1) Maintain the books and records of each Series and each Class within the
-----------------------------------------------------------------------
Series.
------
2) Calculate Net Asset Value (and Offering Price) Per Share, at both a Series
--------------------------------------------------------------------------
level and on Class level:
-------------------------
. Enter manual prices supplied by Customer and/or broker.
. Review variance reporting on-line and in hard copy for price changes
in individual securities using variance levels established by
Customer. Verify US dollar security prices exceeding variance levels
by notifying Customer and pricing sources, of noted variance.
. Complete daily variance review on foreign exchange rates and local
foreign prices. Notify Customer of changes exceeding established
levels for the Customer's verification.
3) Reconcile and Record All Daily Expense Accruals; on a Series level and on
-------------------------------------------------------------------------
Class level.
-----------
4) Verify and Record All Daily Income Accruals for Debt Issues, on Series
----------------------------------------------------------------------
level and on Class level, if necessary.
--------------------------------------
5) Record Corporate Action, Cash Dividends and Capital changes on Securities,
--------------------------------------------------------------------------
on a Series level and on Class level.
------------------------------------
6) Record all Security Trades based on instruction from the Customer, on a
-----------------------------------------------------------------------
Series level and Class level.
----------------------------
7) Record All Series Share Transactions.
------------------------------------
8) Review and Reconcile With Custodian Statements:
-----------------------------------------------
. Track status of past due items and failed trades handled by the
Custodian.
9) Submission of Daily Accounting Reports as agreed to from time to time
---------------------------------------------------------------------
by Bank and Customer:
--------------------
. Bank represents that all Customer Information, in whatever form, is
the property of the Customer.
63
<PAGE>
SCHEDULE D
----------
MONTHLY ACCOUNTING SERVICES
---------------------------
1) For the Series, full Financial Statement Preparation (automated Statements
--------------------------------------------------------------------------
of Assets and Liabilities, of Operations and of Changes in Net Assets) and
--------------------------------------------------------------------------
submission to Customer by 10th Business Day.
-------------------------------------------
. Class specific capital share activity and expenses will be disclosed
also.
2) Submission of Monthly Reports Series Level:
-------------------------------------------
. Security Purchase/Sales Journal.
. Interest and Maturity Report.
. Brokers Ledger (Commission Report).
. Security Ledger Transaction Report with Realized Gains/Losses.
. Security Ledger Tax Lot Holdings Report.
. Additional reports available upon request.
3) Reconcile Accounting Asset Listing to Custodian Asset Listing:
--------------------------------------------------------------
Series Level
. Report any security balance discrepancies to the Custodian/Customer.
4) Provide Monthly Analysis and Reconciliation of Additional Trial Balance
-----------------------------------------------------------------------
Accounts, such as:
-----------------
Series Level
. Security cost and realized gains/losses.
. Interest/dividend receivable and income.
. Payable/receivable for securities purchased and sold.
. Unrealized and realized currency gains/losses.
Series and Each Class
. Payable/receivable for Fund shares; issued and redeemed
. Expense payments and accruals analysis
ANNUAL (AND SEMI-ANNUAL) ACCOUNTING SERVICES
--------------------------------------------
1) Assist and supply auditors with schedules supporting securities and
shareholder transactions, income and expense accruals, etc. for the Series
and each Class during the year in accordance with standard audit assistance
requirements. Provide reasonable space and necessary personnel to
accommodate auditors.
2) Provide NSAR Reporting (Accounting Questions).
---------------------------------------------
64
<PAGE>
SCHEDULE D
----------
3) If Appropriate, Prepare and Submit Annually During the Excise Reporting
-----------------------------------------------------------------------
Period (October-December) to the Customer at the Series level:
-------------------------------------------------------------
. Income by state reporting.
. Standard Industry Code Valuation Report.
. Alternative Minimum Tax Income segregation schedule.
65
<PAGE>
SCHEDULE E
----------
THE BRINSON FUNDS
-----------------
DESCRIPTION OF TRANSFER AGENCY
------------------------------
I. SHAREHOLDERS FILE
1. Establish new accounts and enter demographic data into shareholder
base. Includes review and file maintenance for all NSCC originated
registration and data changes for FundServ, Networking and ACTS
accounts for compliance with Investar customer file requirements.
2. Create Combined Statement File to link accounts within the Fund and
across funds within the Fund Group. Facilitates account maintenance,
lead tracking, quality control, household mailings and combined
statements.
3. Systematic linkage of shareholder accounts with exact matches on
Social Security Number and address for the purpose of consolidated
account history reporting. Monthly production of laser printed
combined statements.
4. Production of mailing labels which enable the Fund to do special
mailings to each address in the Fund Group rather than each account.
5. Maintain account and customer file records based on shareholder
request and routine quality review.
6. Maintain tax ID certification and NRA records for each account,
including backup withholding.
7. Produce shareholder statements for daily activity, dividends, on-
request, third party and monthly mailings.
8. Produce shareholder lists, labels and ad hoc reports to Fund
management as requested.
9. Automated processing of dividends and capital gains with daily,
monthly, quarterly or annual distributions. Payment options include
reinvestment, directed payment to another fund, cash via mail, Fed
wire or ACH.
10. Coordination of registration of the Funds with the National Securities
Clearing Corporation ("NSCC") and filing of required Fund/SERV reports
with the NSCC.
66
<PAGE>
SCHEDULE E
----------
II. SHAREHOLDER SERVICES
1. Answer shareholder calls: provide routine account information,
transaction details including direct and wire purchases, redemptions,
exchanges, systematic withdrawals, pre-authorized drafts, Fund SERV
and wire order trades, problem solving and process telephone
transactions.
2. Customized recording of fund prices daily after regular business hours
for shareholder access.
3. Silent monitoring of shareholder class by the phone supervisor to
ensure quality of customer service.
4. Record and maintain tape recordings of all shareholder calls for a six
month period.
5. Systematic production of daily management reports of shareholder calls
which track volumes, length of calls, average wait time and abandoned
call rates to ensure quality service.
6. Customer inquiries received by letter or telephone are researched by a
correspondence team member. These inquires include such items as,
account/customer file information, complete historical account
information, stop payments on checks, transaction details and lost
certificates.
III. INVESTMENT PROCESSING
1. Initial and subsequent investments by checks, Fed wire, or Automated
Clearing House ("ACH").
2. Pre-authorized investment (PAD) through ACH System.
3. Prepare and process daily bank deposit of shareholder investments.
4. NSCC - FundSERV and networking trades.
IV. REDEMPTION PROCESSING
1. Process letter redemption requests.
2. Process telephone redemption transactions.
67
<PAGE>
SCHEDULE E
----------
3. Establish Systematic Withdrawal File and process automated
transactions on monthly basis.
4. Issue checkbooks and process checkbook redemptions through agent bank.
5. Redemption proceeds distributed to shareholder by check, Fed wire or
ACH processing.
6. Provide NSCC - FundSERV and networking trade processing.
V. EXCHANGE & TRADE PROCESSING
1. Process legal transfers.
2. Issue and cancel certificates.
3. Replace certificates through surety bonds (separate charge to
shareholder).
4. Process exchange transactions (letter and telephone request).
5. Process ACATS transfers.
VI. RETIREMENT PLANS
1. Fund sponsored IRAs offered using Chase as custodian. Services
include:
a. Contribution processing
b. Distribution processing
c. Apply rollover transactions
d. Process Transfer of Assets
e. Letters of Acceptance to prior custodians
f. Notify IRA holders of 70 1/2 requirements
g. Calculate Required Minimum Distributions
h. Maintain beneficiary information file
i. Solicit birth date information
2. Fund sponsored SEP-IRA plans offered using Chase as custodian.
Services include those listed under IRAs and:
a. Identification of employer contributions
3. Fund sponsored Qualified plans (401(k) and 403(b) only) offered.
a. Omnibus account processing only
b. Produce annual statements (omnibus account only)
c. Process contributions (omnibus account only)
68
<PAGE>
SCHEDULE E
----------
d. Process distributions (omnibus account only)
e. Process rollover and Transfer of Assets transactions (omnibus
account only)
VII. SETTLEMENT & CONTROL
1. Daily review of processed shareholder transactions to assure input was
processed correctly. Accurate trade activity figures passed to Fund's
Accounting Agent by 10:00am EST.
2. Preparation of daily cash movement information to be passed to the
Fund's Accounting Agent and Custodian Bank by 10:00am EST for use in
determining Fund's daily cash availability.
3. Prepare a daily share reconcilement which balances the shares on the
Transfer Agent system to those on the books of the Fund.
4. Resolve any outstanding share or cash issues that are not cleared.
5. Process shareholder adjustments to include the proper notification of
any booking entries needed, as well as any necessary cash movement.
6. Settlement and review of Fund's declared dividends and capital gains
to include the following:
a. Review record date report for accuracy of shares.
b. Preparation of dividend settlement report after dividend is
posted. Verify the posting date shares, the rates used and the
NAV price of reinvest date to ensure dividend was posted
properly.
c. Distribute copies to the Fund's Accounting Agent.
d. Preparation of the checks prior to being mailed.
e. Sending of any dividends via wires if requested.
f. Preparation of cash movement information for each portion of the
dividend payout on payable date.
7. Placement of stop payments on dividend and liquidation checks as well
as the issuance of their replacements.
8. Maintain inventory control for stock certificates and dividend check
form.
9 Monthly deposits to the IRS of all taxes withheld from shareholder
disbursements, distributions and foreign account distributions.
Correspond with the IRS concerning any of the above issues.
10. Timely settlement and cash movement for all NSCC/FundSERV activity.
69
<PAGE>
SCHEDULE E
----------
VIII. YEAR END PROCESSING
1. Maintain shareholder records in accordance with IRS notices for under-
reporting and invalid Tax Ids. This includes initiating 31 % backup
withholding and notifying shareholders of their tax status and the
corrective action which is needed.
2. Conduct annual W-9 solicitation of all uncertified accounts. Update
account tax status to reflect backup withholding or certified status
depending upon responses.
3. Conduct periodic W-8 solicitation of all non-resident alien
shareholder accounts. Update account tax status with updated
shareholder information and treaty rates for NRA tax.
4. Review IRS Revenue Procedures for changes in transaction and
distribution reporting and specifications for the production of forms
to ensure compliance.
5. Coordinate year end activity with client. Activities include
producing year end statement, scheduling record dates for year
dividends and capital gains, production of combined statements,
printing of inserts to be mailed with tax forms.
6. Distribute Dividend Letter to funds for them to sign off on all
distributions paid year to date. Dates and rates must be authorized
so that they can be used for reporting to the IRS.
7. Coordinate the ordering of form stock and envelopes from vendor in
preparation of tax reporting. Review against IRS requirements to
ensure accuracy.
8. Prepare form flashes for the microfiche or microfilm vendor. Test and
oversee the production of fiche or film for year end statements and
tax forms.
9. Match and settle tax reporting totals to fund records and on-line data
from Investar.
10. Produce forms 1099R, 1099B, 1099Div, 5498, 1042S and year end
valuations. Quality assure forms before mailing to shareholders.
11. Monitor IRS deadlines and special events such as cross over dividends
and prior year IRA contributions.
12. prepare IRS magnetic tapes and appropriate forms for the filing of all
reportable activity to the Internal Revenue Service.
70
<PAGE>
SCHEDULE E
----------
IX. CLIENT SERVICES
1. An Account Manager is assigned to each relationship. The Account
Manager acts as the liaison between the Fund and the Transfer Agency
staff. Responsibilities include scheduling of events, system
enhancement implementation, special promotion/event implementation and
follow-up, and constant fund interaction on daily operational issues.
Specifically:
a. Scheduling of dividends, proxies, report mailing and special
mailings.
b. Coordinate with the Fund the shipment of materials for scheduled
mailings.
c. Liaison between the Fund and support services for preparation of
proofs and eventual printing of statement forms, certificates,
proxy cards, envelopes.
d. Handle all notification regarding proxy tabulation through the
meeting. Coordinate scheduling of materials, including voted
cards, tabulation letters, and shareholder list, to be available
for the meeting.
e. Order special reports, tapes, discs for special systems requests
received.
f. Implement new operational procedures, e.g., check writing
feature, load discounts, minimum waivers, sweeps, telephone
options, PAD promotions.
g. Coordinate with systems, services and operations on special
events, e.g., mergers, new fund start ups, small account
liquidations, combined statements, household mailings, additional
mail files.
h. Prepare standard operating procedures and review prospectus for
new funds and our current client base. Coordinate implementation
of suggested changes with the Fund.
i. Liaison between the Fund and the transfer agency staff regarding
all service and operational issues.
2. Proxy Processing
a. Coordinate printing of cards with vendor.
b. Coordinate mailing of cards with Account Manger and mailroom.
c. Provide daily report totals to Account Manager for client
notification.
d. Preparation of affidavit of mailing documents.
e. Provide one shareholder list.
f. Prepare final tabulation letter.
3. Blue Sky Processing
a. Maintain file with additions, deletions, changes and updates at
the Fund's direction.
b. Provide daily and monthly reports to enable the Fund to do
necessary state filings.
71
<PAGE>
SCHEDULE F
FEE SCHEDULE FOR THE BRINSON FUNDS
----------------------------------
ACCOUNTING, ADMINISTRATION, TRANSFER AGENCY AND
CUSTODY SERVICES ANNUAL FEE SCHEDULE
1. On an annual basis, 0.25 basis points of the average weekly U.S. assets of
the Customer and 5.25 basis points of the average weekly non-U.S. assets of
the Customer, 32.50 basis points of the average weekly emerging markets
equity assets of the Customer and 1.90 basis points of the average weekly
emerging markets debt assets of the Customer.
There will be an annual fee of $25 for each shareholder account within The
Brinson Funds.
An additional fee of 7.50 basis points will be charged for administrative
duties. PLEASE NOTE: The additional fee of 7.50 basis points can ONLY be
charged up to the extent it does not make a fund exceed its expense cap.
Please see below for the expense caps of each fund within The Brinson
Funds, excluding all loads and 12(b)-l fees:
FUND EXPENSE CAP
---- -----------
Global Fund 110 basis points
Global Equity Fund 100 basis points
Global Bond Fund 90 basis points
U.S. Balanced Fund 80 basis points
U.S. Equity Fund 80 basis points
U. S. Bond Fund 60 basis points
Non-U.S. Equity Fund 100 basis points
NO FEE (asset based or otherwise) will be charged on any investments made
by any fund into any other fund managed by Brinson Partners, Inc. Fees are
to be charged ONLY where actual non-Brinson Partners, Inc.-sponsored
investment company or series securities are held. Assets of a series which
are invested in another Brinson Partners, Inc. sponsored investment company
or series shall not be counted in determining whether or not the charging
of the 7.50 basis points charge for administrative duties would cause a
fund to exceed its fee cap and shall not be counted in determining the
amount of assets subject to the 7.50 basis points.
For purposes of this Schedule F, the "AVERAGE WEEKLY U.S. ASSETS OF THE
CUSTOMER" means the average weekly U.S. assets custodied within the United
States of the Customer as calculated by the Accounting Agent for the month
for which the statement reflecting the charges for a given month relates.
For purposes of this Schedule F, the "AVERAGE WEEKLY NON-U.S. ASSETS OF THE
CUSTOMER" means the average weekly balance of countries included in the
Morgan Stanley Capital World Ex-U.S.A. (free) Index or the Salomon Non-U.S.
Government Bond Index (including assets with a country of issue of the
European Economic Community and held in Euroclear or CEDEL) custodied
outside the
72
<PAGE>
SCHEDULE F
----------
United States of the Customer as calculated by the Accounting Agent for the
month for which the statement reflecting the charges for a given month
relates. For purposes of this Schedule F, the "AVERAGE WEEKLY EMERGING
MARKETS EQUITY ASSETS OF THE CUSTOMER" means the average weekly balance of
the countries included in the International Finance Corporation Global
index (excluding countries included in the Morgan Stanley Capital World Ex-
U.S.A. (free) Index or the Salomon Non-U.S. Government Bond Index, but
including assets with a country of issue in the local market contained in
such index that are held in Euroclear or CEDEL) custodied outside the
United States of the Customer's emerging markets equity funds as calculated
by the Accounting Agent for the month for which the statement reflecting
the charges for a given month relates. For purposes of this Schedule F, the
"AVERAGE WEEKLY EMERGING MARKETS DEBT ASSETS OF THE CUSTOMER" means the
average weekly balance of the countries included in the J.P. Morgan
Emerging Markets Bond Index Plus custodied outside the United States of the
Customer's emerging markets debt funds (including assets with a country of
issue in the local market contained in such index that are held in
Euroclear or CEDEL) as calculated by the Accounting Agent for the month for
which the statement reflecting the charges for a given month relates.
Those fees include all out-of-pocket expenses or transaction charges
incurred by the accountant, administrator, transfer agent and custodian
with the exception of the following.
The Customer will be billed directly by Other Parties for the following
direct Customer expenses or transaction charges:
(1) taxes;
(2) salaries and other fees of officers and directors who are not
officers, directors, shareholders or employees of Other Parties, or
the Customer's investment adviser;
(3) SEC and state Blue Sky registration and qualification fees, levies,
fines and other charges;
(4) EDGAR filing fees;
(5) independent public accountants;
(6) insurance premiums including fidelity bond premiums;
(7) outside legal expenses;
(8) costs of maintenance of corporate existence;
(9) expenses of typesetting and printing of prospectuses for regulatory
purposes and for distribution to current shareholders of the Customer;
73
<PAGE>
SCHEDULE F
----------
(10) expenses of printing and production costs of shareholders' reports and
proxy statements and materials;
(11) trade association dues and expenses; and
(12) travel and lodging expenses of the Customer's directors and officers
who are not directors, officers and/or employees of Other Parties.
Customer will not be billed directly for any direct Customer Expenses or
pay any other direct Customer expenses, unless the payment of such direct
expenses is agreed to in writing by Customer.
2. Upon termination of the provision of services under this Agreement before
the end of any month, the fee for the part of the month before such
termination or the date after which the provision of services ceases,
whichever is later, shall be prorated according to the proportion which
such part bears to the full monthly period and shall be payable upon the
date of such termination or the date after which the provision of the
services ceases, whichever is later.
74
<PAGE>
SCHEDULE F
----------
SCHEDULE F
----------
FEE SCHEDULE FOR THE BRINSON FUNDS
----------------------------------
AS AMENDED ON NOVEMBER 24, 1997
ACCOUNTING, ADMINISTRATION, TRANSFER AGENCY AND
CUSTODY SERVICES ANNUAL FEE SCHEDULE
1. On an annual basis, 0.25 basis points of the average weekly U.S. assets of
the Customer and 5.25 basis points of the average weekly non-U.S. assets of
the Customer, 32.50 basis points of the average weekly emerging markets
equity assets of the Customer and 1.90 basis points of the average weekly
emerging markets debt assets of the Customer.
There will be an annual fee of $25 for each shareholder account within The
Brinson Funds.
An additional fee of 7.50 basis points will be charged for administrative
duties. PLEASE NOTE: The additional fee of 7.50 basis points can ONLY be
charged up to the extent it does not make a fund exceed its expense cap.
Please see below for the expense caps of each fund within The Brinson
Funds, excluding all loads and 12(b)-1 fees:
FUND EXPENSE CAP
---- -----------
Global Fund 110 basis points
Global Equity Fund 100 basis points
Global Bond Fund 90 basis points
U.S. Balanced Fund 80 basis points
U.S. Equity Fund 80 basis points
U.S. Bond Fund 60 basis points
Non-U.S. Equity Fund 100 basis points
U.S. Large Capitalization Equity Fund 80 basis points
NO FEE (asset based or otherwise) will be charged on any investments made
by any fund into any other fund managed by Brinson Partners, Inc. Fees are
to be charged ONLY where actual non-Brinson Partners, Inc.-sponsored
investment company or series securities are held. Assets of a series which
are invested in another Brinson Partners, Inc.-sponsored investment company
or series shall not be counted in determining whether or not the charging
of the 7.50 basis points charge for administrative duties would cause a
fund to exceed its fee cap and shall not be counted in determining the
amount of assets subject to the 7.50 basis points.
For purposes of this Schedule F, the "AVERAGE WEEKLY U.S. ASSETS OF THE
CUSTOMER" means the average weekly U.S. assets custodied within the United
States of the Customer as calculated by the Accounting Agent for the month
for which the statement reflecting the charges for a given month relates.
For purposes of this Schedule F, the "AVERAGE
75
<PAGE>
SCHEDULE F
----------
SCHEDULE F
AS AMENDED ON NOVEMBER 24, 1997
WEEKLY NON-U.S. ASSETS OF THE CUSTOMER" means the average weekly balance of
countries included in the Morgan Stanley Capital World Ex-U.S.A. (free)
Index or the Salomon Non-U.S. Government Bond Index (including assets with
a country of issue of the European Economic Community and held in Euroclear
or CEDEL) custodied outside the United States of the Customer as calculated
by the Accounting Agent for the month for which the statement reflecting
the charges for a given month relates. For purposes of this Schedule F, the
"AVERAGE WEEKLY EMERGING MARKETS EQUITY ASSETS OF THE CUSTOMER" means the
average weekly balance of the countries included in the International
Finance Corporation Global Index (excluding countries included in the
Morgan Stanley Capital World Ex-U.S.A. (free) Index or the Salomon Non-U.S.
Government Bond Index, but including assets with a country of issue in the
local market contained in such index that are held in Euroclear or CEDEL)
custodied outside the United States of the Customer's emerging markets
equity funds as calculated by the Accounting Agent for the month for which
the statement reflecting the charges for a given month relates. For
purposes of this Schedule F, the "AVERAGE WEEKLY EMERGING MARKETS DEBT
ASSETS OF THE CUSTOMER" means the average weekly balance of the countries
included in the J.P. Morgan Emerging Markets Bond Index Plus custodied
outside the United States of the Customer's emerging markets debt funds
(including assets with a country of issue in the local market contained in
such index that are held in Euroclear or CEDEL) as calculated by the
Accounting Agent for the month for which the statement reflecting the
charges for a given month relates.
Those fees include all out-of-pocket expenses or transaction charges
incurred by the accountant, administrator, transfer agent and custodian
with the exception of the following.
The Customer will be billed directly by Other Parties for the following
direct Customer expenses or transaction charges:
(1) taxes;
(2) salaries and other fees of officers and directors who are not
officers, directors, shareholders or employees of Other Parties, or
the Customer's investment adviser;
(3) SEC and state Blue Sky registration and qualification fees, levies,
fines and other charges;
(4) EDGAR filing fees;
(5) independent public accountants;
(6) insurance premiums including fidelity bond premiums;
76
<PAGE>
SCHEDULE F
----------
SCHEDULE F
AS AMENDED ON NOVEMBER 24, 1997
(7) outside legal expenses;
(8) costs of maintenance of corporate existence;
(9) expenses of typesetting and printing of prospectuses for regulatory
purposes and for distribution to current shareholders of the Customer;
(10) expenses of printing and production costs of shareholders' reports and
proxy statements and materials;
(11) trade association dues and expenses; and
(12) travel and lodging expenses of the Customer's directors and officers
who are not directors, officers and/or employees of Other Parties.
Customer will not be billed directly for any direct Customer Expenses or
pay any other direct Customer expenses, unless the payment of such direct
expenses is agreed to in writing by Customer.
2. Upon termination of the provision of services under this Agreement before
the end of any month, the fee for the part of the month before such
termination or the date after which the provision of services ceases,
whichever is later, shall be prorated according to the proportion which
such part bears to the full monthly period and shall be payable upon the
date of such termination or the date after which the provision of the
services ceases, whichever is later.
77
<PAGE>
SCHEDULE F
----------
[LOGO OF CHASE APPEARS HERE]
The Chase Manhattan Bank
1 Pierrepont Plaza
Brooklyn, NY 11201
December 10, 1998
The Brinson Funds
209 South LaSalle Street
Chicago, IL 060604
RE: AMENDMENT TO MULTIPLE SERVICES AGREEMENT EFFECTIVE MAY 9, 1997
- ADDITION OF U.S. LARGE CAPITALIZATION GROWTH FUND, U.S. SMALL
---------------------------------------------------------------
CAPITALIZATION GROWTH FUND, HIGH YIELD FUND, EMERGING MARKETS EQUITY FUND
-------------------------------------------------------------------------
AND EMERGING MARKETS DEBT FUND
------------------------------
Dear Sirs:
We refer to the Multiple Services Agreement effective May 9, 1997 (the
"MSA") between Morgan Stanley Trust Company (and succeeded to by The Chase
Manhattan Bank on October 1, 1998) and The Brinson Funds.
The parties hereby agree as follows:
1. "Schedule B1 - List of Series of The Brinson Funds" is replaced in its
entirety with "Schedule B1 - List of Series of The Brinson Funds, AS
AMENDED ON DECEMBER 10, 1998", attached hereto.
2. "Schedule F - Fee Schedule for The Brinson Funds" is replaced in its
entirety with "Schedule F - Fee Schedule for The Brinson Funds, AS
AMENDED ON DECEMBER 10, 1998", attached hereto.
The MSA, as amended by this letter amendment, shall continue in full force and
effect.
Please evidence your acceptance of the terms of this letter by signing
below and returning one copy to Jeanne Hoffman, The Chase Manhattan Bank, 1
Pierrepont Plaza, Brooklyn, NY 11201.
Very truly yours,
THE CHASE MANHATTAN BANK
78
<PAGE>
SCHEDULE F
----------
By: /S/ Robert M. Boyles
--------------------
Name: Robert M. Boyles
Title: Senior Vice President
The Brinson Funds
December 10, 1998
Page Two
Accepted and Agreed:
THE BRINSON FUNDS
By: /S/ E. Thomas McFarlan
----------------------
Name: E. Thomas McFarlan
Title President
79
<PAGE>
SCHEDULE F
----------
SCHEDULE B1
-----------
LIST OF SERIES OF THE BRINSON FUNDS
-----------------------------------
AS AMENDED DECEMBER 10, 1998
Global Fund
Global Equity Fund
Global Bond Fund
U.S. Balanced Fund
U.S. Equity Fund
U.S. Bond Fund
Global (ex-U.S.) Equity Fund
U.S. Large Capitalization Equity Fund
U.S. Large Capitalization Growth Fund
U.S. Small Capitalization Growth Fund
High Yield Fund
Emerging Markets Equity Fund
Emerging Markets Debt Fund
80
<PAGE>
SCHEDULE F
----------
SCHEDULE F
----------
FEE SCHEDULE FOR THE BRINSON FUNDS
----------------------------------
AS AMENDED ON DECEMBER 10, 1998
ACCOUNTING, ADMINISTRATION, TRANSFER AGENCY AND
CUSTODY SERVICES ANNUAL FEE SCHEDULE
1. On an annual basis, 0.25 basis points of the average weekly U.S. assets of
the Customer and 5.25 basis points of the average weekly non-U.S. assets of
the Customer, 32.50 basis points of the average weekly emerging markets
equity assets of the Customer and 1.90 basis points of the average weekly
emerging markets debt assets of the Customer.
There will be an annual fee of $25 for each shareholder account within The
Brinson Funds.
An additional fee of 7.50 basis points will be charged for administrative
duties. PLEASE NOTE: The additional fee of 7.50 basis points can ONLY be
charged up to the extent it does not make a fund exceed its expense cap.
Please see below for the expense caps of each fund within The Brinson
Funds, excluding all loads and 12(b)-1 fees:
FUND EXPENSE CAP
---- -----------
Global Fund 110 basis points
Global Equity Fund 100 basis points
Global Bond Fund 90 basis points
U.S. Balanced Fund 80 basis points
U.S. Equity Fund 80 basis points
U.S. Bond Fund 60 basis points
Global (ex-U.S.) Equity Fund 100 basis points
U.S. Large Capitalization Equity Fund 80 basis points
U.S. Large Capitalization Growth Fund 80 basis points
U.S. Small Capitalization Growth Fund 115 basis points
High Yield Fund 70 basis points
Emerging Markets Equity Fund 160 basis points
Emerging Markets Debt Fund 115 basis points
NO FEE (asset based or otherwise) will be charged on any investments made
by any fund into any other fund managed by Brinson Partners, Inc. Fees are
to be charged ONLY where actual non-Brinson Partners, Inc.-sponsored
investment company or series securities are held. Assets of a series which
are invested in another Brinson Partners, Inc.-sponsored investment company
or series shall not be counted in determining whether or not the charging
of the 7.50 basis points charge for administrative duties would cause a
fund to exceed its fee cap and shall not be counted in determining the
amount of assets subject to the 7.50 basis points.
81
<PAGE>
SCHEDULE F
----------
SCHEDULE F
AS AMENDED ON DECEMBER 10, 1998
For purposes of this Schedule F, the "AVERAGE WEEKLY U.S. ASSETS OF THE
CUSTOMER" means the average weekly U.S. assets custodied within the United
States of the Customer as calculated by the Accounting Agent for the month
for which the statement reflecting the charges for a given month relates.
For purposes of this Schedule F, the "AVERAGE WEEKLY NON-U.S. ASSETS OF THE
CUSTOMER" means the average weekly balance of countries included in the
Morgan Stanley Capital World Ex-U.S.A. (free) Index or the Salomon Non-U.S.
Government Bond Index (including assets with a country of issue of the
European Economic Community and held in Euroclear or CEDEL) custodied
outside the United States of the Customer as calculated by the Accounting
Agent for the month for which the statement reflecting the charges for a
given month relates. For purposes of this Schedule F, the "AVERAGE WEEKLY
EMERGING MARKETS EQUITY ASSETS OF THE CUSTOMER" means the average weekly
balance of the countries included in the International Finance Corporation
Global Index (excluding countries included in the Morgan Stanley Capital
World Ex-U.S.A. (free) Index or the Salomon Non-U.S. Government Bond Index,
but including assets with a country of issue in the local market contained
in such index that are held in Euroclear or CEDEL) custodied outside the
United States of the Customer's emerging markets equity funds as calculated
by the Accounting Agent for the month for which the statement reflecting
the charges for a given month relates. For purposes of this Schedule F, the
"AVERAGE WEEKLY EMERGING MARKETS DEBT ASSETS OF THE CUSTOMER" means the
average weekly balance of the countries included in the J.P. Morgan
Emerging Markets Bond Index Plus custodied outside the United States of the
Customer's emerging markets debt funds (including assets with a country of
issue in the local market contained in such index that are held in
Euroclear or CEDEL) as calculated by the Accounting Agent for the month for
which the statement reflecting the charges for a given month relates.
Those fees include all out-of-pocket expenses or transaction charges
incurred by the accountant, administrator, transfer agent and custodian
with the exception of the following.
The Customer will be billed directly by Other Parties for the following
direct Customer expenses or transaction charges:
(1) taxes;
(2) salaries and other fees of officers and directors who are not
officers, directors, shareholders or employees of Other Parties, or
the Customer's investment adviser;
(3) SEC and state Blue Sky registration and qualification fees, levies,
fines and other charges;
(4) EDGAR filing fees;
(5) independent public accountants;
82
<PAGE>
SCHEDULE F
----------
SCHEDULE F
AS AMENDED ON DECEMBER 10, 1998
(6) insurance premiums including fidelity bond premiums;
(7) outside legal expenses;
(8) costs of maintenance of corporate existence;
(9) expenses of typesetting and printing of prospectuses for regulatory
purposes and for distribution to current shareholders of the Customer;
(10) expenses of printing and production costs of shareholders' reports and
proxy statements and materials;
(11) trade association dues and expenses; and
(12) travel and lodging expenses of the Customer's directors and officers
who are not directors, officers and/or employees of Other Parties.
Customer will not be billed directly for any direct Customer Expenses or
pay any other direct Customer expenses, unless the payment of such direct
expenses is agreed to in writing by Customer.
2. Upon termination of the provision of services under this Agreement before
the end of any month, the fee for the part of the month before such
termination or the date after which the provision of services ceases,
whichever is later, shall be prorated according to the proportion which
such part bears to the full monthly period and shall be payable upon the
date of such termination or the date after which the provision of the
services ceases, whichever is later.
83
<PAGE>
EXHIBIT 99(G2)
INVESTORS BANK & TRUST COMPANY
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02117-9130
December 18, 1998
The Brinson Funds
209 South LaSalle Street
Chicago, IL 60604-1295
Gentlemen:
Reference is made to the contemplated acquisition of assets of each of
the portfolios of the UBS Private Investor Funds, Inc. (the "UBS Funds") set
forth below (individually, a "UBS Portfolio" and collectively, the "UBS
Portfolios") by a series (collectively, the "Brinson Series") of The Brinson
Funds (the "Trust"):
<TABLE>
<CAPTION>
UBS PORTFOLIO THE BRINSON SERIES
------------- ------------------
<S> <C>
UBS Bond Fund U.S. Bond Fund
UBS Value Equity Fund U.S. Equity Fund
UBS International Equity Fund Global (ex-U.S.) Equity Fund
UBS Small Cap Fund U.S. Small Capitalization Growth Fund
UBS Large Cap Growth Fund U.S. Large Capitalization Growth Fund
UBS High Yield Bond Fund High Yield Fund
</TABLE>
Reference is also made to the six Agreements and Plans of Reorganization, each
dated as of October 20, 1998 (collectively, the "Agreements and Plans of
Reorganization"), between the UBS Funds and the Trust, whereby the UBS Funds and
the Trust have agreed that the closing date (the "Closing Date") of each
acquisition of assets of a UBS Portfolio by a corresponding Brinson Series shall
be December 18, 1998, or such later date as the UBS Funds and the Trust may
mutually agree.
Investors Bank & Trust Company ("Investors Bank") presently serves as
the custodian of the portfolio securities and cash of the UBS Portfolios
pursuant to a Custodian Agreement between the UBS Funds and Investors Bank dated
July 24, 1996 (the "Custodian Agreement"). Commencing on the day of Closing (as
such term is defined in the Agreements and Plans of Reorganization), subject to
the execution of this letter by the parties named below, Investors Bank hereby
undertakes, in accordance with the terms of the Custodian Agreement, to serve as
a co-custodian of the Brinson Series with respect to the portfolio securities,
cash and cash equivalents, which are held outside of the United States ("Foreign
Securities"), and which are to be transferred by a UBS Portfolio to the
corresponding Brinson Series for such period of time as necessary to accomplish
the transfer and reregistration of the Foreign Securities with The Chase
Manhattan Bank ("CMB"), the current custodian for all existing series of the
Trust.
Notwithstanding the above, the parties agree that all trades that
settle after the Closing Date will settle with CMB. CMB and Investors Bank
further agree to produce a reconcilement report on the first business day
following the Closing Date (the "Closing") setting forth all Foreign Securities
of the UBS Portfolios that have not been transferred from Investors Bank to CMB
for the account of the applicable Brinson Series as of the Closing. The UBS
Funds shall deposit with Investors Bank sufficient currency to settle any open
purchase orders for the UBS Portfolios on or before the Closing Date that fail
to settle at Investors Bank as of the Closing Date ("Failed Trades"). With
respect to all outstanding Failed Trades, Investors Bank will deliver a list of
such Failed Trades as of the close of business on January 29, 1999 to CMB, and
then The Brinson Funds will instruct the counterparty on such Failed Trades to
deliver the Foreign Securities that are the subject of the Failed Trade to CMB,
and CMB agrees to accept
<PAGE>
the delivery of such Failed Trades. On January 29, 1999, Investors Bank shall
remit to CMB all remaining currency, if any, deposited with Investors Bank to
fund the Failed Trades referred to in the previous sentence.
Please indicate your agreement with the terms of this letter by executing
where indicated below.
INVESTORS BANK & TRUST COMPANY
By:/s/ John E. Henry
---------------------------------
Name: John E. Henry
------------------------------
Title: General Counsel
------------------------------
Acknowledged and Agreed:
UBS PRIVATE INVESTOR FUNDS, INC.
By:/s/ Susan C. Mosher
----------------------------------
Name: Susan C. Mosher
--------------------------------
Title: Secretary
-------------------------------
THE BRINSON FUNDS
By:/s/ E. Thomas McFarlan
----------------------------------
Name: E. Thomas McFarlan
--------------------------------
Title: President
-------------------------------
CHASE MANHATTAN BANK
By:/s/ Joseph Conway
----------------------------------
Name: Joseph Conway
--------------------------------
Title: Vice President
-------------------------------
<PAGE>
EXHIBIT 99(M1)
AMENDED DISTRIBUTION PLAN
RELATING TO THE UBS INVESTMENT FUNDS SHARES
OF THE BRINSON FUNDS
The following Distribution Plan (the "Plan") has been adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "Act") by The Brinson Funds
(the "Trust") for the UBS Investment Funds class of shares (each individually a
"Class" and collectively the "Classes") of each of the Global Fund series,
Global Equity Fund series, Global Bond Fund series, U.S. Balanced Fund series,
U.S. Equity Fund series, U.S. Bond Fund series, Non-U.S. Equity Fund series and
U.S. Large Capitalization Equity Fund series (individually a "Fund" or
collectively the "Funds"), for the use of the UBS Investment Funds class of
shares of a Fund and any UBS Investment Funds class of shares of separate series
of the Trust hereinafter organized. The Plan has been approved by a majority of
the Board of Trustees of the Trust (the "Board of Trustees"), including a
majority of the Trustees who are not interested persons of the Trust and who
have no direct, or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan (the "non-interested Trustees"), cast in
person at a meeting called for the purpose of voting on such Plan.
In reviewing the Plan, the Board of Trustees determined that adoption of the
Plan would be prudent and in the best interests of each Fund and its
shareholders. Such approval included a determination that in the exercise of
its reasonable business judgment and in light of its fiduciary duties, there is
a reasonable likelihood that the Plan will benefit the Fund and its
shareholders.
The provisions of the Plan are:
1. (a) Each Class shall reimburse Brinson Partners, Inc. (the
"Manager"), Funds Distributor, Inc. (the "Distributor") or others for all
expenses incurred by such parties in the promotion and distribution of the
shares of the Class, including but not limited to, the printing of prospectuses
and reports used for sales purposes, expenses of preparing and distributing
sales literature and advertisements and other distribution-related expenses, as
well as any payments to securities dealers or others for assistance in selling
shares of the Class in accordance with a selling agreement with the Trust on
behalf of a Fund's Class or the Distributor, which form of agreement has been
approved from time to time by the Trustees, including the non-interested
Trustees. The maximum aggregate amount which may be reimbursed by a Class to
such parties in accordance with this paragraph shall be 0.65 % per annum of the
average daily net assets of the Class. The parties hereto may, however, agree
from time to time to limit the reimbursement called for by this paragraph to
amounts less than 0.65 % with respect to a Fund. The current agreement between
the parties for maximum reimbursement with respect to each Fund is attached
hereto as Schedule A, which schedule may be amended from time to time by the
parties hereto.
(b) In addition to the amounts described in (a) above, the Fund shall
pay (i) to the Distributor for payment to dealers or others, or (ii) directly to
others, an amount not to exceed 0.25% per annum of the Class' average daily net
assets represented by shares of the Class from time to time, as a service fee.
The monies to be paid pursuant to this paragraph l(b) shall be used
<PAGE>
to pay dealers or others for, among other things, furnishing personal services
and maintaining shareholder accounts, which services include, among other
things, assisting in establishing and maintaining customer accounts and records;
assisting with purchase and redemption requests; arranging for bank wires;
monitoring dividend payments from the Fund on behalf of customers; forwarding
certain shareholder communications from the Fund to customers; receiving and
answering correspondence; and aiding in maintaining the investment of their
respective customers in the Class. Any amounts paid under this paragraph l(b)
shall be paid pursuant to a servicing or other agreement, which form of
agreement has been approved from time to time by the Trustees, including a
majority of the non-interested Trustees.
2. All payments in connection with this Plan shall be made quarterly by
each Class to the appropriate parties, or more or less frequently upon mutual
agreement of the parties.
3. The Manager and the Distributor shall collect and monitor the
documentation of payments made under paragraph 1 above, and shall furnish to the
Board of Trustees of the Trust, for its review, on a quarterly basis, a written
report of the monies reimbursed to the Manager, the Distributor and others under
the Plan as to a Fund's Class, and shall furnish the Board of Trustees of the
Trust with such other information as the Board may reasonably request in
connection with the payments made under the Plan as to a Fund's Class in order
to enable the Board to make an informed determination of whether the Plan should
be continued for each Class.
4. The Plan shall continue in effect for each Class for a period of more
than one year only so long as such continuance is specifically approved at least
annually by the Trust's Board of Trustees, including the non-interested
Trustees, cast in person at a meeting called for the purpose of voting on the
Plan.
5. The Plan, or any agreements entered into pursuant to this Plan, may be
terminated at any time, without penalty, by vote of a majority of the
outstanding voting securities of a Class with respect to that Class, or by vote
of a majority of the non-interested Trustees, on not more than sixty (60) days'
written notice, and shall terminate automatically in the event of any act that
constitutes an assignment of the management agreement between the Trust on
behalf of the relevant series of the Trust and the Manager.
6. The Plan and any agreements entered into pursuant to this Plan may not
be amended to increase materially the amount to be spent by a Class for
distribution pursuant to Paragraph 1 hereof without approval by a majority of
the Class' outstanding voting securities.
7. All material amendments to the Plan, or any agreements entered into
pursuant to this Plan, shall be approved by the non-interested Trustees cast in
person at a meeting called for the purpose of voting on any such amendment.
8. So long as the Plan is in effect, the selection and nomination of the
Trust's non-interested Trustees shall be committed to the discretion of such
non-interested Trustees.
<PAGE>
SCHEDULE A*
The Brinson Funds (the "Trust"), Brinson Partners, Inc. (the "Manager") and
Funds Distributor, Inc. (the "Distributor") hereby agree that the maximum amount
which the Manager or the Distributor shall seek reimbursement for in accordance
with the Rule 12b-1 Plan relating to the UBS Investment Funds class of shares of
the Trust, is as follows:
FUND AMOUNT
---- ------
UBS Investment Fund - Global 0.40%
UBS Investment Fund - Global Equity 0.51%
UBS Investment Fund - Global Bond 0.24%
UBS Investment Fund - U.S. Balanced 0.25%
UBS Investment Fund - U.S. Equity 0.27%
UBS Investment Fund - U.S. Large Capitalization Equity 0.27%
UBS Investment Fund - U.S. Bond 0.22%
UBS Investment Fund - Non-U.S. Equity 0.59%
THE BRINSON FUNDS
/s/Carolyn M. Burke
---------------------------------------
Carolyn M. Burke
Secretary
BRINSON PARTNERS, INC.
/s/ E. Thomas McFarlan
---------------------------------------
E. Thomas McFarlan
President
FUNDS DISTRIBUTOR, INC.
/s/Marie E. Connolly
---------------------------------------
Marie E. Connolly
President and Chief Executive Officer
* As approved February 21, 1995 and Amended/Revised on November 26, 1995, July
28, 1995, August 26, 1996, February 24, 1997, November 24, 1997 and August
24, 1998
<PAGE>
SCHEDULE A*
The Brinson Funds (the "Trust"), Brinson Partners, Inc. (the "Manager") and
Funds Distributor, Inc. (the "Distributor") hereby agree that the maximum amount
which the Manager or the Distributor shall seek reimbursement for in accordance
with the Rule 12b-1 Plan relating to the UBS Investment Funds class of shares of
the Trust, is as follows:
FUND AMOUNT
---- ------
UBS Investment Fund - Global 0.40%
UBS Investment Fund - Global Equity 0.51%
UBS Investment Fund - Global Bond 0.24%
UBS Investment Fund - U.S. Balanced 0.25%
UBS Investment Fund - U.S. Equity 0.27%
UBS Investment Fund - U.S. Bond 0.22%
UBS Investment Fund - Global (ex-U.S.) Equity 0.59%
UBS Investment Fund - U.S. Large Capitalization Equity 0.27%
UBS Investment Fund - U.S. Large Capitalization Growth 0.52%
UBS Investment Fund - U.S. Small Capitalization Growth 0.52%
UBS Investment Fund - High Yield Bond 0.60%
UBS Investment Fund - Emerging Markets Equity 0.60%
UBS Investment Fund - Emerging Markets Debt 0.50%
THE BRINSON FUNDS
/s/E. Thomas McFarlan
----------------------------------------
E. Thomas McFarlan
President
BRINSON PARTNERS, INC.
/s/E. Thomas McFarlan
----------------------------------------
E. Thomas McFarlan
Managing Director
FUNDS DISTRIBUTOR, INC.
/s/Margaret W. Chambers
----------------------------------------
Margaret W. Chambers
Senior Vice President and General Counsel
* As approved February 21, 1995 and Amended/Revised on November 26, 1995, July
28, 1995, August 26, 1996, February 24, 1997, November 24, 1997, December
10, 1998
<PAGE>
EXHIBIT 99(M2)
DISTRIBUTION PLAN RELATING TO
THE BRINSON FUND-CLASS N SHARES
OF THE BRINSON FUNDS
The following Distribution Plan (the "Plan") has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"), by The Brinson Funds (the "Trust") on behalf of the Brinson Fund-Class N
shares (each individually a "Class" and collectively, the "Classes") of each of
the series of the Trust as listed on Schedule A attached hereto (which may be
amended from time to time to add or delete series). Each series listed on
Schedule A is referred to herein individually as a "Fund" or collectively as the
"Funds". The Plan is adopted for the use of Brinson Fund-Class N shares of the
Funds and any Brinson Fund-Class N shares of separate series of the Trust
hereinafter organized. The Plan has been approved by a majority of the Trust's
Board of Trustees, including a majority of the trustees who are not interested
persons of the Trust (as that term is defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of the Plan (the "non-
interested trustees"), cast in person at a meeting called for the purpose of
voting on such Plan.
In reviewing the Plan, the Board of Trustees of the Trust determined that
adoption of the Plan would be prudent and in the best interests of each Fund and
its shareholders. Such approval included a determination by the Trustees that
in the exercise of their reasonable business judgment and in light of their
fiduciary duties, there is a reasonable likelihood that the Plan will benefit
each Fund and its shareholders. The Plan has also been approved by a vote of
the sole initial shareholder of the Brinson Fund-Class N shares of each Fund.
The provisions of the Plan are:
1. Each Class shall reimburse Brinson Partners, Inc. (the "Manager"),
Funds Distributor, Inc. (the "Distributor") or others for all expenses incurred
by such parties in the promotion and distribution of the shares of the Class,
including but not limited to, the printing of prospectuses and reports used for
sales purposes, expenses of preparing and distributing sales literature and
related expenses, advertisements, and other distribution-related expenses, as
well as any distribution or service fees paid to securities dealers or others
who have executed a servicing agreement with the Trust on behalf of the Class,
the Manager on behalf of the Class, the Distributor, the Fund's transfer agent,
shareholder servicing agent, administrator or sub-administrator on behalf of the
Class, which form of agreement has been approved from time to time by the
trustees, including the non-interested trustees.
2. The maximum aggregate amount which may be reimbursed by a Class to
such parties pursuant to Paragraph 1 herein shall be 0.25% per annum of the
average daily net assets of the Class. Said reimbursement shall be made
quarterly by the Class to such parties.
<PAGE>
3. The Manager and the Distributor shall collect and monitor the
documentation of payments made under paragraphs 1 and 2 above, and shall furnish
to the Board of Trustees of the Trust, for their review, on a quarterly basis, a
written report of the monies reimbursed to them and others under the Plan as to
a Fund's Class, and shall furnish the Board of Trustees of the Trust with such
other information as the Board may reasonably request in connection with the
payments made under the Plan as to a Fund's Class in order to enable the Board
to make an informed determination of whether the Plan should be continued for
such Class.
4. The Plan shall continue in effect for each Class for a period of more
than one year only so long as such continuance is specifically approved at least
annually by the Trust's Board of Trustees, including the non-interested
trustees, cast in person at a meeting called for the purpose of voting on the
Plan.
5. The Plan, or any agreements entered into pursuant to the Plan, may be
terminated at any time, without penalty, by vote of a majority of the
outstanding voting securities of a Class with respect to that Class, or by vote
of a majority of the non-interested trustees, on not more than sixty (60) days'
written notice, and shall terminate automatically in the event of any act that
constitutes an assignment of the management agreement between the Trust on
behalf of the relevant Funds of the Trust and the Manager.
6. The Plan and any agreements entered into pursuant to the Plan may not
be amended to increase materially the amount to be spent by a Class for
distribution pursuant to Paragraph 2 hereof without approval by a majority of
the outstanding voting securities of the Class.
7. All material amendments to the Plan, and any agreements entered into
pursuant to the Plan, shall be approved by the non-interested trustees cast in
person at a meeting called for the purpose of voting on any such amendment or
agreement.
8. So long as the Plan is in effect, the selection and nomination of the
Trust's non-interested trustees shall be committed to the discretion of such
non-interested trustees.
9. This Plan shall take effect on the 30th day of June, 1997.
<PAGE>
This Plan and the terms and provisions thereof are hereby accepted and
agreed to by the Fund, the Manager and the Distributor as evidenced by their
execution hereof.
THE BRINSON FUNDS
/s/ Carolyn M. Burke
----------------------------
Carolyn M. Burke
Secretary
BRINSON PARTNERS, INC.
/s/ E. Thomas McFarlan
----------------------------
E. Thomas McFarlan
President
FUNDS DISTRIBUTOR, INC.
/s/ Marie E. Connolly
----------------------------
Marie E. Connolly
President and Chief Executive Officer
<PAGE>
SCHEDULE "A"*
Series subject to the Distribution Plan relating to the following class of
shares of The Brinson Funds:
Series
------
Brinson Global Fund - Class N
Brinson Global Equity Fund - Class N
Brinson Global Bond Fund - Class N
Brinson U.S. Balanced Fund - Class N
Brinson U.S. Equity Fund - Class N
Brinson U.S. Large Capitalization Equity Fund - Class N
Brinson U.S. Bond Fund - Class N
Brinson Non-U.S. Equity Fund - Class N
Date: June 30, 1998
* As approved 5/19/97 and revised 11/24/97
<PAGE>
SCHEDULE "A"*
Series subject to the Distribution Plan relating to the following class of
shares of The Brinson Funds:
Series
------
Brinson Global Fund - Class N
Brinson Global Equity Fund - Class N
Brinson Global Bond Fund - Class N
Brinson U.S. Balanced Fund - Class N
Brinson U.S. Equity Fund - Class N
Brinson U.S. Bond Fund - Class N
Brinson Global (ex-U.S.) Equity Fund - Class N
Brinson U.S. Large Capitalization Equity Fund - Class N
Brinson U.S. Large Capitalization Growth Fund - Class N
Brinson U.S. Small Capitalization Growth Fund - Class N
Brinson High Yield Fund - Class N
Brinson Emerging Markets Equity Fund - Class N
Brinson Emerging Markets Debt Fund - Class N
THE BRINSON FUNDS
/s/ E. Thomas McFarlan
--------------------------------------
E. Thomas McFarlan
President
BRINSON PARTNERS, INC.
/s/ E. Thomas McFarlan
--------------------------------------
E. Thomas McFarlan
Managing Director
FUNDS DISTRIBUTOR, INC.
/s/ Margaret W. Chambers
--------------------------------------
Margaret W. Chambers
Senior Vice President and General Counsel
*As approved 5/19/97, revised 11/24/97, revised 12/10/98
<PAGE>
EXHIBIT 99(M3)
[UBS INVESTMENT FUNDS CLASS GENERAL DEALER AGREEMENT]
Dear Sirs:
As the principal underwriter of the UBS Investment Funds class of shares
(the "UBS Investment Funds") of certain registered investment companies
presently or hereafter managed, advised or administered by Brinson Partners,
Inc., shares of which companies are distributed by us at their respective net
asset values plus sales charges as applicable and as described in the current
prospectuses and statements of additional information for such registered
investment companies, pursuant to our Distribution Agreements with such
companies (the "Trust"), we invite you to participate as a non-exclusive agent
in the distribution of shares of any and all of the UBS Investment Funds upon
the following terms and conditions:
1. You are to offer and sell such shares only at the public offering prices
which shall be currently in effect, in accordance with the terms of the
then current prospectuses and statements of additional information of the
UBS Investment Funds subject in each case to the delivery prior to or at
the time of such sales of the then current prospectus. You agree to act
only as agent in such transactions and nothing in this Agreement shall
constitute either of us the agent of the other or shall constitute you or
the Trust the agent of the other. In all transactions in these shares
between you and us, we are acting as agent for the Trust and not as
principal. All orders are subject to acceptance by us, and ultimately the
UBS Investment Funds, and become effective only upon confirmation by us.
We reserve the right in our sole discretion and the UBS Investment Funds
reserve the right in their sole discretion to reject any order. The
minimum dollar purchase of shares of the UBS Investment Funds shall be the
applicable minimum amounts described in the then current prospectuses and
statements of additional information and no order for less than such
amounts will be accepted.
2. On each purchase of shares by you from us, the total sales charges and
discount to selected dealer, if any, shall be as stated in each UBS
Investment Fund's then current prospectus.
Such sales charges and discount to selected dealers are subject to
reductions under a variety of circumstances as described in each UBS
Investment Fund's then current prospectus and statement of additional
information. To obtain these reductions, we must be notified when the sale
takes place which would qualify for the reduced charge.
There is no sales charge or discount to selected dealers on the
reinvestment of any dividends or distributions.
3. All purchases of shares of a UBS Investment Fund made under any cumulative
purchase privilege as set forth in a Fund's then current effective
Prospectus shall be considered an individual transaction for the purpose of
determining the concession from the public offering price to which you are
entitled as set forth in paragraph 2 hereof.
<PAGE>
4. As an authorized agent to sell shares, you agree to purchase shares of the
UBS Investment Funds only through us or from your customers. Purchases
through us shall be made only for your own investment purposes or for the
purpose of covering purchase orders already received from your customers,
and we agree that we will not place orders for the purchase of shares from
a UBS Investment Fund except to cover purchase orders already received by
us. Purchases from your customers shall be at a price not less than the net
asset value quoted by each such UBS Investment Fund at the time of such
purchase. Nothing herein contained shall prevent you from selling any
shares of a UBS Investment Fund for the account of a record holder to us or
to such UBS Investment Fund at the net asset value quoted by us and
charging your customer a fair commission for handling the transaction.
5. You agree that you will not withhold placing customers' orders so as to
profit yourself as a result of such withholding.
6. You agree to sell shares of the UBS Investment Funds only (a) to your
customers at the public offering prices then in effect or (b) to us as
agent for the UBS Investment Funds or to each such UBS Investment Fund
itself at the redemption price, as described in each UBS Investment Fund's
then current effective Prospectus.
7. Settlement shall be made promptly, but in no case later than the time
customary for such payments after our acceptance of the order or, if so
specified by you, we will make delivery by draft on you, the amount of
which draft you agree to pay on presentation to you. If payment is not so
received or made, the right is reserved forthwith to cancel the sale or at
our option to resell the shares to the applicable UBS Investment Fund, at
the then prevailing net asset value in which latter case you agree to be
responsible for any loss resulting to such UBS Investment Fund or to us
from your failure to make payment as aforesaid.
8. If any shares sold to you under the terms of this Agreement are repurchased
by a UBS Investment Fund or by us as agent, or for the account of that UBS
Investment Fund or are tendered to that UBS Investment Fund for purchase at
liquidating value under the terms of the Agreement and Declaration of Trust
or other document governing such UBS Investment Fund within seven (7)
business days after the date of confirmation to you of your original
purchase order therefor, you agree to pay forthwith to us the full amount
of the concession allowed to you on the original sale and we agree to pay
such amount to the UBS Investment Fund when received by us. We shall
notify you of such repurchase within ten (10) days of the effective date of
such repurchase.
9. All sales will be subject to receipt of shares by us from the UBS
Investment Funds. We reserve the right in our discretion without notice to
you to suspend sales or withdraw the offering of shares entirely, or to
modify or cancel this Agreement. We will notify you promptly when we
become aware that the UBS Investment Funds have suspended sales or
withdrawn their offering of shares.
<PAGE>
10. From time to time during the term of this Agreement we may make payments to
you pursuant to one or more of the distribution and/or service plans
adopted by certain of the UBS Investment Funds pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "Act") in consideration of your
furnishing distribution and/or shareholder services hereunder with respect
to each such Fund (each, a "Plan," together, the "Plans"). We have no
obligation to make any such payments and you hereby waive any such payments
until we receive monies therefor from the Fund. Any such payments made
pursuant to this Section 10 shall be subject to the following terms and
conditions:
(a) Any such payments shall be based on the current net asset values of
shares of the UBS Investment Funds held in the accounts of your customers
or certain customers and the periods for which such shares have been held,
as set forth in the Dealer Compensation Schedule attached hereto as Exhibit
A, as the same may be amended by us at any time and from time to time by
notice thereof to you. Any such payments shall be in addition to the
selling concession, if any, allowed to you pursuant to this Agreement. No
such fee will be paid to you with respect to shares purchased by you and
redeemed by the UBS Investment Funds or by us as agent within seven
business days after the dates of confirmation of such purchase.
(b) The provisions of this Section 10 relate to the Plan adopted by a
particular Fund pursuant to Rule 12b-1. In accordance with Rule 12b-1, any
person authorized to direct the disposition of monies paid or payable by a
Fund pursuant to this Section 10 shall provide the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such
expenditures were made. You agree to provide us with such information as
requested from time to time in order for us to fulfill our obligations
under this Agreement and under the Plans to provide the Board of Trustees
of the UBS Investment Funds with the required information on at least a
quarterly basis.
(c) The provisions of this Section 10 applicable to each UBS Investment
Fund shall remain in effect for not more than a year and thereafter for
successive annual periods only so long as such continuance is specifically
approved at least annually in conformity with Rule 12b-1 and the Act. The
provisions of this Section 10 shall automatically terminate with respect to
a particular Plan in the event of the assignment (as defined by the Act) of
this Agreement, in the event such Plan terminates or is not continued or in
the event this Agreement terminates or ceases to remain in effect. In
addition, the provisions of this Section 10 may be terminated at any time,
without penalty, with respect to any particular Plan by you, by a majority
of the Board of Trustees of a UBS Investment Fund who are not interested
persons of the Trust and have no direct or indirect financial interest in
the operation of the particular Plan or in any agreements related to the
Plan, or by vote of a majority of the outstanding voting securities of the
Trust on not more than 60 days' nor less than 30 days' written notice
delivered or mailed by registered mail, postage prepaid, to the other
party.
<PAGE>
11. No person is authorized to make any representations concerning the UBS
Investment Funds or shares of the UBS Investment Funds except those
contained in each UBS Investment Fund's then current effective Prospectus
or Statement of Additional Information and any such information as may be
released by a UBS Investment Fund as information supplemental to such
Prospectus or Statement of Additional Information. In purchasing shares
through us you shall rely solely on the representations contained in each
UBS Investment Fund's then current effective Prospectus or Statement of
Additional Information and supplemental information above-mentioned.
12. Additional copies of each such Prospectus or Statement of Additional
Information and any printed information issued as supplemental to each such
Prospectus or Statement of Additional Information will be supplied by us to
you in reasonable quantities upon request.
13. We, our affiliates and the Trust shall not be liable for any loss, expense,
damages, costs or other claim arising out of any redemption or exchange
pursuant to telephone instructions from any person or our refusal to
execute such instructions for any reason.
14. All communications to us shall be sent to us at Funds Distributor Inc., 60
State Street, Suite 1300, Boston, MA 02109. Any notice to you shall be
duly given if mailed or telegraphed to you at your address as registered
from time to time with the National Association of Securities Dealers, Inc.
15. This Agreement may be terminated upon written notice by either party at any
time, and shall automatically terminate upon its attempted assignment by
you, whether by operation of law or otherwise, or by us otherwise than by
operation of law.
16. By accepting this Agreement, you represent that you are registered as a
broker-dealer under the Securities Exchange Act of 1934, are qualified to
act as a dealer in the states or other jurisdictions where you transact
business, and are a member in good standing of the National Association of
Securities Dealers, Inc., and you agree that you will maintain such
registrations, qualifications, and membership in good standing and in full
force and effect throughout the term of this Agreement. You further agree
to comply with all applicable Federal laws, the laws of the states or other
jurisdictions concerned, and the rules and regulations promulgated
thereunder and with the Constitution, By-Laws and Rules of Fair Practice of
the National Association of Securities Dealers, Inc., and that you will not
offer or sell shares of the UBS Investment Funds in any state or
jurisdiction where they may not lawfully be offered and/or sold.
If you are offering and selling shares of the UBS Investment Funds in
jurisdictions outside the several states, territories, and possessions of
the United States and are not otherwise required to be registered,
qualified, or a member of the National Association of Securities Dealers,
Inc., as set forth above you, you nevertheless agree to observe the
applicable laws of the jurisdiction in which such offer and/or sale is
made, to comply with the full disclosure requirements of the Securities Act
of 1933 and the regulations promulgated thereunder, to conduct your
business in accordance with the spirit of the
<PAGE>
Rules of Fair Practice of the National Association of Securities Dealers,
Inc. You agree to indemnify and hold the UBS Investment Funds, their
investment advisor, and us harmless from loss or damage resulting from any
failure on your part to comply with applicable laws.
17. You agree to maintain records of all sales of shares made through you and
to furnish us with copies of each record on request.
18. This Agreement and all amendments to this Agreement shall take effect with
respect to and on the date of any orders placed by you after the date set
forth below or, as applicable, after the date of the notice of amendment
sent to you by the undersigned. Any amendment to this Agreement may be
made unilaterally by us upon written notification to you.
19. This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts and shall be binding upon both Parties hereto
when signed and accepted by you in the space provided below.
FOR FUNDS DISTRIBUTOR INC.:
________________________________ ______________________________
By: Date
For:
- --------------------------------------------------------------------------------
________________________________________________________________________________
Address of Principal Office
_______________________ _________________________ _____________________
City State Zip Code
BY: ITS:
- ----------------------- ------------------------- ---------------------
Authorized Signature Title Date
__________________________
Print Name
<PAGE>
UBS INVESTMENT FUNDS
SELECTED DEALER AGREEMENT
DEALER COMPENSATION SCHEDULE
Exhibit A
As compensation for the sales of shares of the series of the UBS Investment
Funds (individually a "Series" and collectively, the "series"), and as
compensation for ongoing shareholder servicing and distribution functions,
__________________________ (the "Dealer") will receive the following fees based
upon the aggregate dollar amount of shares of the Series sold, held in the
accounts of Dealer's customers and not redeemed:
.25% for $0-5 million
.40% for $5-20 million
.45% for over $20 million
The above fees will be paid quarterly from the date of original sales of shares
until Dealer is no longer named the broker of record. To the extent that the
compensation listed above exceeds any individual Series' 12b-1 fee (which varies
among the Series and are listed in the attached Exhibit B), UBS AG will pay the
difference.
It is understood that the above compensation arrangement may be amended or
discontinued at any time at the discretion of Funds Distributor, Inc.
<PAGE>
UBS INVESTMENT FUNDS CLASS
SELECTED DEALER AGREEMENT
SCHEDULE OF 12B-1 FEES
EXHIBIT B
<TABLE>
<CAPTION>
==========================================================================================================
SERIES DISTRIBUTION FEE SERVICE FEE TOTAL 12B-1 FEES
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Fund 0.40% 0.25% 0.65%
- ----------------------------------------------------------------------------------------------------------
Global Equity Fund 0.51% 0.25% 0.76%
- ----------------------------------------------------------------------------------------------------------
Global Bond Fund 0.24% 0.25% 0.49%
- ----------------------------------------------------------------------------------------------------------
U.S. Balanced Fund 0.25% 0.25% 0.50%
- ----------------------------------------------------------------------------------------------------------
U.S. Equity Fund 0.27% 0.25% 0.52%
- ----------------------------------------------------------------------------------------------------------
U.S. Bond Fund 0.22% 0.25% 0.47%
- ----------------------------------------------------------------------------------------------------------
Non-U.S. Equity Fund 0.59% 0.25% 0.84%
- ----------------------------------------------------------------------------------------------------------
U.S. Large Capitalization 0.27% 0.25% 0.52%
Equity Fund
==========================================================================================================
</TABLE>
Approved: May 19, 1997
Amended: November 24, 1997
<PAGE>
UBS INVESTMENT FUNDS CLASS
SELECTED DEALER AGREEMENT
SCHEDULE OF 12B-1 FEES
EXHIBIT B
<TABLE>
<CAPTION>
==========================================================================================================
SERIES DISTRIBUTION FEE SERVICE FEE TOTAL 12B-1 FEES
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Fund 0.40% 0.25% 0.65%
- ----------------------------------------------------------------------------------------------------------
Global Equity Fund 0.51% 0.25% 0.76%
- ----------------------------------------------------------------------------------------------------------
Global Bond Fund 0.24% 0.25% 0.49%
- ----------------------------------------------------------------------------------------------------------
U.S. Balanced Fund 0.25% 0.25% 0.50%
- ----------------------------------------------------------------------------------------------------------
U.S. Equity Fund 0.27% 0.25% 0.52%
- ----------------------------------------------------------------------------------------------------------
U.S. Bond Fund 0.22% 0.25% 0.47%
- ----------------------------------------------------------------------------------------------------------
Global (ex-U.S.) Equity Fund 0.59% 0.25% 0.84%
- ----------------------------------------------------------------------------------------------------------
U.S. Large Capitalization 0.27% 0.25% 0.52%
Equity Fund
- ----------------------------------------------------------------------------------------------------------
U.S. Large Capitalization 0.52% 0.25% 0.77%
Growth Fund
- ----------------------------------------------------------------------------------------------------------
U.S. Small Capitalization 0.52% 0.25% 0.77%
Growth Fund
- ----------------------------------------------------------------------------------------------------------
High Yield Bond Fund 0.60% 0.25% 0.85%
- ----------------------------------------------------------------------------------------------------------
Emerging Markets Equity Fund 0.60% 0.25% 0.85%
- ----------------------------------------------------------------------------------------------------------
Emerging Markets Debt Fund 0.50% 0.25% 0.75%
==========================================================================================================
</TABLE>
Approved: May 19, 1997
Amended: November 24, 1997 and December 10, 1998
<PAGE>
[UBS SELECTED SELLING AGREEMENT]
Dear Sirs:
As the principal underwriter of the UBS Investment Funds class of shares
("the UBS Investment Funds") of certain registered investment companies
presently or hereafter managed, advised or administered by Brinson Partners,
Inc., shares of which companies are distributed by us at their respective net
asset values plus sales charges as applicable and as described in the current
prospectuses and statements of additional information for such registered
investment companies, pursuant to our Distribution Agreements with such
companies (the "Trust"), we invite you, a "bank" (as such term is defined in
Section 3(a)(6) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) to participate as a non-exclusive agent in the distribution of
shares of any and all of the UBS Investment Funds upon the following terms and
conditions:
1. You are to offer and sell such shares only at the public offering prices
which shall be currently in effect, in accordance with the terms of the
then current prospectuses and statements of additional information of the
UBS Investment Funds subject in each case to the delivery prior to or at
the time of such sales of the then current prospectus. You agree to act
only as agent in such transactions and nothing in this Agreement shall
constitute either of us the agent of the other or shall constitute you or
the Trust the agent of the other. In all transactions in these shares
between you and us, we are acting as agent for the Trust and not as
principal. All orders are subject to acceptance by us, and ultimately the
UBS Investment Funds, and become effective only upon confirmation by us.
We reserve the right in our sole discretion and the UBS Investment Funds
reserve the right in their sole discretion to reject any order. The
minimum dollar purchase of shares of the UBS Investment Funds shall be the
applicable minimum amounts described in the then current prospectuses and
statements of additional information and no order for less than such
amounts will be accepted.
2. On each purchase of shares by you from us, the total sales charges and
discount to selected dealer, if any, shall be as stated in each UBS
Investment Fund's then current prospectus and statement of additional
information.
Such sales charges and discount to selected dealers are subject to
reductions under a variety of circumstances as described in each UBS
Investment Fund's then current prospectus and statement of additional
information. To obtain these reductions, we must be notified when the sale
takes place which would qualify for the reduced charge.
There is no sales charge or discount to selected dealers on the
reinvestment of any dividends or distributions.
3. All purchases of shares of a UBS Investment Fund made under any cumulative
purchase privilege as set forth in a Fund's then current effective
Prospectus shall be considered an individual transaction for the purpose of
determining the concession from the public offering price to which you are
entitled as set forth in paragraph 2 hereof.
<PAGE>
4. As an authorized agent to sell shares, you agree to purchase shares of the
UBS Investment Funds only through us or from your customers. Purchases
through us shall be made only for your own investment purposes or for the
purpose of covering purchase orders already received from your customers,
and we agree that we will not place orders for the purchase of shares from
a UBS Investment Fund except to cover purchase orders already received by
us. Purchases from your customers shall be at a price not less than the net
asset value quoted by each such UBS Investment Fund at the time of such
purchase. Nothing herein contained shall prevent you from selling any
shares of a UBS Investment Fund for the account of a record holder to us or
to such UBS Investment Fund at the net asset value quoted by us and
charging your customer a fair commission for handling the transaction.
5. You agree that you will not withhold placing customers' orders so as to
profit yourself as a result of such withholding.
6. You agree to sell shares of the UBS Investment Funds only (a) to your
customers at the public offering prices then in effect or (b) to us as
agent for the UBS Investment Funds or to each such UBS Investment Fund
itself at the redemption price, as described in each UBS Investment Fund's
then current effective Prospectus.
7. Settlement shall be made promptly, but in no case later than the time
customary for such payments after our acceptance of the order or, if so
specified by you, we will make delivery by draft on you, the amount of
which draft you agree to pay on presentation to you. If payment is not so
received or made, the right is reserved forthwith to cancel the sale or at
our option to resell the shares to the applicable UBS Investment Fund, at
the then prevailing net asset value in which latter case you agree to be
responsible for any loss resulting to such UBS Investment Fund or to us
from your failure to make payment as aforesaid.
8. If any shares sold to you under the terms of this Agreement are repurchased
by a UBS Investment Fund or by us as agent, or for the account of that UBS
Investment Fund or are tendered to that UBS Investment Fund for purchase at
liquidating value under the terms of the Agreement and Declaration of Trust
or other document governing such UBS Investment Fund within seven (7)
business days after the date of confirmation to you of your original
purchase order therefor, you agree to pay forthwith to us the full amount
of the concession allowed to you on the original sale and we agree to pay
such amount to the UBS Investment Fund when received by us. We shall
notify you of such repurchase within ten (10) days of the effective date of
such repurchase.
9. All sales will be subject to receipt of shares by us from the UBS
Investment Funds. We reserve the right in our discretion without notice to
you to suspend sales or withdraw the offering of shares entirely, or to
modify or cancel this Agreement. We will notify you promptly when we
become aware that the UBS Investment Funds have suspended sales or
withdrawn their offering of shares.
10. From time to time during the term of this Agreement we may make payments to
you pursuant to one or more of the distribution and/or service plans
adopted by certain of The
<PAGE>
UBS Investment Funds pursuant to Rule 12b-1 under the Investment Company
Act of 1940 (the "Act") in consideration of your furnishing distribution
and/or shareholder services hereunder with respect to each such Fund (each,
a "Plan," together, the "Plans"). We have no obligation to make any such
payments and you hereby waive any such payments until we receive monies
therefor from the Fund. Any such payments made pursuant to this Section 10
shall be subject to the following terms and conditions:
(a) Any such payments shall be based on the current net asset values of
shares of the UBS Investment Funds held in the accounts of your customers
or certain customers and the periods for which such shares have been held,
as set forth in the Compensation Schedule attached hereto as Exhibit A, as
the same may be amended by us at any time and from time to time by notice
thereof to you. Any such payments shall be in addition to the selling
concession, if any, allowed to you pursuant to this Agreement. No such fee
will be paid to you with respect to shares purchased by you and redeemed by
the UBS Investment Funds or by us as agent within seven business days after
the dates of confirmation of such purchase.
(b) The provisions of this Section 10 relate to the Plan adopted by a
particular Fund pursuant to Rule 12b-1. In accordance with Rule 12b-1, any
person authorized to direct the disposition of monies paid or payable by a
Fund pursuant to this Section 10 shall provide the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such
expenditures were made. You agree to provide us with such information as
requested from time to time in order for us to fulfill our obligations
under this Agreement and under the Plans to provide the Board of Trustees
of the UBS Investment Funds with the required information on at least a
quarterly basis.
(c) The provisions of this Section 10 applicable to each UBS Investment
Fund shall remain in effect for not more than a year and thereafter for
successive annual periods only so long as such continuance is specifically
approved at least annually in conformity with Rule 12b-1 and the Act. The
provisions of this Section 10 shall automatically terminate with respect to
a particular Plan in the event of the assignment (as defined by the Act) of
this Agreement, in the event such Plan terminates or is not continued or in
the event this Agreement terminates or ceases to remain in effect. In
addition, the provisions of this Section 10 may be terminated at any time,
without penalty, with respect to any particular Plan by you, by a majority
of the Board of Trustees of a UBS Investment Fund who are not interested
persons of the Trust and have no direct or indirect financial interest in
the operation of the particular Plan or in any agreements related to the
Plan, or by vote of a majority of the outstanding voting securities of the
Trust on not more than 60 days' nor less than 30 days' written notice
delivered or mailed by registered mail, postage prepaid, to the other
party.
11. No person is authorized to make any representations concerning the UBS
Investment Funds or shares of the UBS Investment Funds except those
contained in each UBS Investment Fund's then current effective Prospectus
or Statement of Additional Information and any such information as may be
released by a UBS Investment Fund as
<PAGE>
information supplemental to such Prospectus or Statement of Additional
Information. In purchasing shares through us you shall rely solely on the
representations contained in each UBS Investment Fund's then current
effective Prospectus or Statement of Additional Information and
supplemental information above-mentioned. In addition, in making UBS
Investment Fund shares available to your customers hereunder, or in
providing investment advice regarding such shares to your customers, you
shall at all times act in compliance with all applicable Federal laws, and
the laws of the States or other jurisdictions concerned, including the
Interagency Statement on Retail Sales of Nondeposit Investment Products
issued by the Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, the Office of the Comptroller of the
Currency, and the Office of Thrift Supervision (February 15, 1994) or any
successor interagency requirements as in force at the time such services
are provided. You further agree that you will not offer or sell shares of
the UBS Investment Funds in any state or jurisdiction where they may not
lawfully be offered and/or sold.
12. Additional copies of each such Prospectus or Statement of Additional
Information and any printed information issued as supplemental to each such
Prospectus or Statement of Additional Information will be supplied by us to
you in reasonable quantities upon request.
13. We, our affiliates and the Trust shall not be liable for any loss, expense,
damages, costs or other claim arising out of any redemption or exchange
pursuant to telephone instructions from any person or our refusal to
execute such instructions for any reason.
14. All communications to us shall be sent to us at Funds Distributor Inc., 60
State Street, Suite 1300, Boston, MA 02109. Any notice to you shall be
duly given if mailed or telegraphed to you at your address as registered
from time to time with the National Association of Securities Dealers, Inc.
15. This Agreement may be terminated upon written notice by either party at any
time, and shall automatically terminate upon its attempted assignment by
you, whether by operation of law or otherwise, or by us otherwise than by
operation of law.
16. You hereby represent that: (a) you are a "bank" as such term is defined in
Section 3(a)(6) of the Exchange Act; (b) you are a duly organized and
validly existing "bank" in good standing under the laws of the jurisdiction
in which you were organized; (c) all authorizations (if any) required for
your lawful execution of this Agreement and your performance hereunder have
been obtained; and (d) upon execution and delivery by us, and assuming due
and valid execution and delivery by us, this Agreement will constitute a
valid and binding agreement, enforceable against you in accordance with its
terms. You agree to give written notice to us promptly in the event that
you shall cease to be a "bank" as such term is defined in Section 3(a)(6)
of the Exchange Act. In such event, this Agreement shall be automatically
terminated upon written notice.
If you are offering and selling shares of the UBS Investment Funds in
jurisdictions outside the several states, territories, and possessions of
the United States and are not
<PAGE>
otherwise required to be registered, qualified, or a member of the National
Association of Securities Dealers, Inc., as set forth above you, you
nevertheless agree to observe the applicable laws of the jurisdiction in
which such offer and/or sale is made, to comply with the full disclosure
requirements of the Securities Act of 1933 and the regulations promulgated
thereunder, to conduct your business in accordance with the spirit of the
Rules of Fair Practice of the National Association of Securities Dealers,
Inc. You agree to indemnify and hold the UBS Investment Funds, their
investment advisor, and us harmless from loss or damage resulting from any
failure on your part to comply with applicable laws.
17. You agree to maintain records of all sales of shares made through you and
to furnish us with copies of each record on request.
18. This Agreement and all amendments to this Agreement shall take effect with
respect to and on the date of any orders placed by you after the date set
forth below or, as applicable, after the date of the notice of amendment
sent to you by the undersigned. Any amendment to this Agreement may be
made unilaterally by us upon written notification to you.
19. This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts and shall be binding upon both Parties hereto
when signed and accepted by you in the space provided below.
FOR FUNDS DISTRIBUTOR INC.:
___________________________ __________________________
By: Date
FOR UBS AG:
- ------------------------------------------------------------------------
________________________________________________________________________
Address of Principal Office
________________________________________________________________________
City State Zip Code
BY: ITS:
- ------------------------- ---------------------------- __________
Authorized Signature Title Date
_______________________
Print Name
<PAGE>
UBS INVESTMENT FUNDS
SELECTED SELLING AGREEMENT
COMPENSATION SCHEDULE
EXHIBIT A
As compensation for the sales of shares of the series of the UBS Investment
Funds (individually a "Series" and collectively, the "Series"), and as
compensation for ongoing shareholder servicing and distribution functions, UBS
AG (the "Bank") will receive .25% of the aggregate dollar amount of shares of
the Series held in the accounts of Bank's customers and not redeemed. In
addition, as compensation for distribution services, the Bank will be entitled
to receive the following fees based upon the amount of shares of the Series held
in the accounts of the Bank's customers and not redeemed, or such lesser amount
as may be determined from time to time by the Board of Trustees of the Trust:
Global Fund 0.65%
Global Equity Fund 0.76%
Global Bond Fund 0.49%
U.S. Balanced Fund 0.50%
U.S. Equity Fund 0.52%
U.S. Bond Fund 0.47%
Non-U.S. Equity Fund 0.84%
U.S. Large Capitalization Equity Fund 0.52%
Such fees will be paid quarterly from the date of original sales of shares until
the Bank is no longer named the broker of record.
It is understood that the above compensation arrangement may be amended or
discontinued at any time at the discretion of Funds Distributor, Inc.
<PAGE>
UBS INVESTMENT FUNDS
SELECTED SELLING AGREEMENT
COMPENSATION SCHEDULE
EXHIBIT A
As compensation for the sales of shares of the series of the UBS Investment
Funds (individually a "Series" and collectively, the "Series"), and as
compensation for ongoing shareholder servicing and distribution functions, UBS
AG (the "Bank") will receive .25% of the aggregate dollar amount of shares of
the Series held in the accounts of Bank's customers and not redeemed. In
addition, as compensation for distribution services, the Bank will be entitled
to receive the following fees based upon the amount of shares of the Series held
in the accounts of the Bank's customers and not redeemed, or such lesser amount
as may be determined from time to time by the Board of Trustees of the Trust:
Global Fund 0.65%
Global Equity Fund 0.76%
Global Bond Fund 0.49%
U.S. Balanced Fund 0.50%
U.S. Equity Fund 0.52%
Bond Fund 0.47%
Global (ex-U.S.) Equity Fund 0.84%
U.S. Large Capitalization Equity Fund 0.52%
U.S. Large Capitalization Growth Fund 0.77%
U.S. Small Capitalization Growth Fund 0.77%
High Yield Bond Fund 0.85%
Emerging Markets Equity Fund 0.85%
Emerging Markets Debt Fund 0.75%
Such fees will be paid quarterly from the date of original sales of shares until
the Bank is no longer named the broker of record.
It is understood that the above compensation arrangement may be amended or
discontinued at any time at the discretion of Funds Distributor, Inc.
<PAGE>
EXHIBIT 99(M4)
[CLASS N SELECTED DEALER AGREEMENT]
Dear Sirs:
As the principal underwriter of shares of certain registered investment
companies presently or hereafter managed, advised or administered by Brinson
Partners, Inc., shares of which companies are distributed by us at their
respective net asset values plus sales charges as applicable and as described in
the current prospectuses and statements of additional information for such
registered investment companies, pursuant to our Distribution Agreements with
such companies (the "Funds"), we invite you to participate as a non-exclusive
agent in the distribution of shares of any and all of the Funds upon the
following terms and conditions:
1. You are to offer and sell such shares only at the public offering prices
which shall be currently in effect, in accordance with the terms of the
then current prospectuses and statements of additional information of the
Funds subject in each case to the delivery prior to or at the time of such
sales of the then current prospectus. You agree to act only as agent in
such transactions and nothing in this Agreement shall constitute either of
us the agent of the other or shall constitute you or the Fund the agent of
the other. In all transactions in these shares between you and us, we are
acting as agent for the Fund and not as principal. All orders are subject
to acceptance by us, and ultimately the Funds, and become effective only
upon confirmation by us. We reserve the right in our sole discretion and
the Funds reserve the right in their sole discretion to reject any order.
The minimum dollar purchase of shares of the Funds shall be the applicable
minimum amounts described in the then current prospectuses and statements
of additional information and no order for less than such amounts will be
accepted.
2. On each purchase of shares by you from us, the total sales charges and
discount to selected dealer, if any, shall be as stated in each Fund's then
current prospectus.
Such sales charges and discount to selected dealers are subject to
reductions under a variety of circumstances as described in each Fund's
then current prospectus and statement of additional information. To obtain
these reductions, we must be notified when the sale takes place which would
qualify for the reduced charge.
There is no sales charge or discount to selected dealers on the
reinvestment of any dividends or distributions.
3. All purchases of shares of a Fund made under any cumulative purchase
privilege as set forth in a Fund's then current effective Prospectus shall
be considered an individual transaction for the purpose of determining the
concession from the public offering price to which you are entitled as set
forth in paragraph 2 hereof.
4. As an authorized agent to sell shares, you agree to purchase shares of the
Funds only through us or from your customers. Purchases through us shall be
made only for your own investment purposes or for the purpose of covering
purchase orders already received from your customers, and we agree that we
will not place orders for the purchase of shares from a Fund except to
cover purchase orders already received by us. Purchases from your customers
shall be at a price not less than the net asset value quoted by each
<PAGE>
such Fund at the time of such purchase. Nothing herein contained shall
prevent you from selling any shares of a Fund for the account of a record
holder to us or to such Fund at the net asset value quoted by us and
charging your customer a fair commission for handling the transaction.
5. You agree that you will not withhold placing customers' orders so as to
profit yourself as a result of such withholding.
6. You agree to sell shares of the Funds only (a) to your customers at the
public offering prices then in effect or (b) to us as agent for the Funds
or to each such Fund itself at the redemption price, as described in each
Fund's then current effective Prospectus.
7. Settlement shall be made promptly, but in no case later than the time
customary for such payments after our acceptance of the order or, if so
specified by you, we will make delivery by draft on you, the amount of
which draft you agree to pay on presentation to you. If payment is not so
received or made, the right is reserved forthwith to cancel the sale or at
our option to resell the shares to the applicable Fund, at the then
prevailing net asset value in which latter case you agree to be responsible
for any loss resulting to such Fund or to us from your failure to make
payment as aforesaid.
8. If any shares sold to you under the terms of this Agreement are repurchased
by a Fund or by us as agent, or for the account of that Fund or are
tendered to that Fund for purchase at liquidating value under the terms of
the Agreement and Declaration of Trust or other document governing such
Fund within seven (7) business days after the date of confirmation to you
of your original purchase order therefor, you agree to pay forthwith to us
the full amount of the concession allowed to you on the original sale and
we agree to pay such amount to the Fund when received by us. We shall
notify you of such repurchase within ten (10) days of the effective date of
such repurchase.
9. All sales will be subject to receipt of shares by us from the Funds. We
reserve the right in our discretion without notice to you to suspend sales
or withdraw the offering of shares entirely, or to modify or cancel this
Agreement. We will notify you promptly when we become aware that the Funds
have suspended sales or withdrawn their offering of shares.
10. From time to time during the term of this Agreement we may make payments to
you pursuant to one or more of the distribution and/or service plans
adopted by certain of the Funds pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "Act") in consideration of your furnishing
distribution and/or shareholder services hereunder with respect to each
such Fund (each, a "Plan," together, the "Plans"). We have no obligation to
make any such payments and you hereby wave any such payments until we
receive monies therefor from the Fund. Any such payments made pursuant to
this Section 10 shall be subject to the following terms and conditions:
(a) Any such payments shall be in such amounts as we may from time to time
advise you in writing but in any event not in excess of the amounts
permitted by the Plan in effect with respect to each particular Fund and
will be based on the dollar amount of Fund
<PAGE>
shares which are owned of record by your firm as nominee for your customers
or which are owned by those customers of your firm whose records, as
maintained by the Funds or their agents, designate your firm as the
customer's dealer of record. Any such payments shall be in addition to the
selling concession, if any, allowed to you pursuant to this Agreement. No
such fee will be paid to you with respect to shares purchased by you and
redeemed by the funds or by us as agent within seven business days after
the dates of confirmation of such purchase.
(b) The provisions of this Section 10 relate to the Plan adopted by a
particular Fund pursuant to Rule 12b-1. In accordance with Rule 12b-1, any
person authorized to direct the disposition of monies paid or payable by a
Fund pursuant to this Section 10 shall provide the Fund's Board of
Trustees, and the Trustees shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such
expenditures were made. You agree to provide us with such information as
requested from time to time in order for us to fulfill our obligations
under this Agreement and under the Plans to provide the Board of Trustees
of the Funds with the required information on at least a quarterly basis.
(c) The provisions of this Section l0 applicable to each Fund shall remain
in effect for not more than a year and thereafter for successive annual
periods only so long as such continuance is specifically approved at least
annually in conformity with Rule 12b-1 and the Act. The provisions of this
Section 10 shall automatically terminate with respect to a particular Plan
in the event of the assignment (as defined by the Act) of this Agreement,
in the event such Plan terminates or is not continued or in the event this
Agreement terminates or ceases to remain in effect. In addition, the
provisions of this Section 10 may be terminated at any time, without
penalty, with respect to any particular Plan by you, by a majority of the
Board of Trustees of a Fund who are not interested persons of the Fund and
have no direct or indirect financial interest in the operation of the
particular Plan, or in any agreements related to the Plan, or by vote of a
majority of the outstanding voting securities of the Fund on not more than
60 days' nor less than 30 days' written notice delivered or mailed by
registered mail, postage prepaid, to the other party.
11. No person is authorized to make any representations concerning the Funds or
shares of the Funds except those contained in each Fund's then current
effective Prospectus or Statement of Additional Information and any such
information as may be released by a Fund as information supplemental to
such Prospectus or Statement of Additional Information. In purchasing
shares through us you shall rely solely on the representations contained in
each Fund's then current effective Prospectus or Statement of Additional
Information and supplemental information above-mentioned.
12. Additional copies of each such Prospectus or Statement of Additional
Information and any printed information issued as supplemental to each such
Prospectus or Statement of Additional Information will be supplied by us to
you in reasonable quantities upon request.
<PAGE>
13. We, our affiliates and the Funds shall not be liable for any loss, expense,
damages, costs or other claim arising out of any redemption or exchange
pursuant to telephone instructions from any person or our refusal to
execute such instructions for any reason.
14. All communications to us shall be sent to us at Funds Distributor Inc., 60
State Street, Suite 1300, Boston, MA 02109. Any notice to you shall be
duly given if mailed or telegraphed to you at your address as registered
from time to time with the National Association of Securities Dealers, Inc.
15. This Agreement may be terminated upon written notice by either party at any
time, and shall automatically terminate upon its attempted assignment by
you, whether by operation of law or otherwise, or by us otherwise than by
operation of law.
16. By accepting this Agreement, you represent that you are registered as a
broker-dealer under the Securities Exchange Act of 1934, are qualified to
act as a dealer in the states or other jurisdictions where you transact
business, and are a member in good standing of the National Association of
Securities Dealers, Inc., and you agree that you will maintain such
registrations, qualifications, and membership in good standing and in full
force and effect throughout the term of this Agreement. You further agree
to comply with all applicable Federal laws, the laws of the states or other
jurisdictions concerned, and the rules and regulations promulgated
thereunder and with the Constitution, By-Laws and Rules of Fair Practice of
the National Association of Securities Dealers, Inc., and that you will not
offer or sell shares of the Funds in any state or jurisdiction where they
may not lawfully be offered and/or sold.
If you are offering and selling shares of the Funds in jurisdictions
outside the several states, territories, and possessions of the United
States and are not otherwise required to be registered, qualified, or a
member of the National Association of Securities Dealers, Inc., as set
forth above you, you nevertheless agree to observe the applicable laws of
the jurisdiction in which such offer and/or sale is made, to comply with
the full disclosure requirements of the Securities Act of 1933 and the
regulations promulgated thereunder, to conduct your business in accordance
with the spirit of the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. You agree to indemnify and hold the Funds,
their investment advisor, and us harmless from loss or damage resulting
from any failure on your part to comply with applicable laws.
17. You agree to maintain records of all sales of shares made through you and
to furnish us with copies of each record on request.
18. This Agreement and all amendments to this Agreement shall take effect with
respect to and on the date of any orders placed by you after the date set
forth below or, as applicable, after the date of the notice of amendment
sent to you by the undersigned. Any amendment to this Agreement may be
made unilaterally by us upon written notification to you.
