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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Brinson Relationship Funds
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
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BRINSON RELATIONSHIP FUNDS
IMPORTANT UNITHOLDER INFORMATION
These materials are for a special meeting of unitholders of the Brinson High
Yield Fund series (the "Fund") of Brinson Relationship Funds (the "Trust"). The
special meeting (the "Special Meeting") is scheduled to be held on October 30,
2000 at 4:00 p.m., Central time. This information will provide you with details
of the proposals to be voted on at the Special Meeting, and includes your Proxy
Statement and proxy card. A proxy card is, in essence, a ballot. When you vote
your proxy, it tells us how you wish to vote on important issues relating to the
Fund. If you complete and sign the proxy, we'll vote it exactly as you tell us.
If you simply sign the proxy, we'll vote it in accordance with the
recommendations of the Board of Trustees of the Trust on page [3] of the Proxy
Statement.
We urge you to spend a few minutes reviewing the proposals in the Proxy
Statement. Then, fill out the proxy card and return it to us either in the
enclosed envelope or by faxing both sides of the card to 312-554-2723 so that
we know how you would like to vote. When unitholders return their proxies
promptly, the Trust may be able to save money by not having to conduct
additional mailings.
We welcome your comments. If you have any questions, call 312-220-7847.
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BRINSON RELATIONSHIP FUNDS
Dear Unitholders:
I am writing to request that you consider a number of important matters relating
to your investment in the Brinson High Yield Fund series (the "Fund") of Brinson
Relationship Funds (the "Trust"). The Trust will be holding a special meeting
(the "Special Meeting") of unitholders of the Fund. The Special Meeting will be
held on October 30, 2000 at 4:00 p.m., Central time, at the offices of the
Trust's investment advisor and manager, Brinson Partners, Inc. ("Brinson"), at
The Rookery Building, 209 South LaSalle Street, Chicago, IL 60604. The materials
that we have included discuss the proposals to be voted on at the Special
Meeting that will affect the future of the Trust and the Fund.
The Board of Trustees (the "Board") of the Trust recommends that unitholders of
the Fund (the "shareholders") cast their votes in favor of:
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1. Approving the termination of the Investment Advisory Agreement between
the Trust, on behalf of the Fund, and Brinson, and approving a new
Investment Advisory Agreement between the Trust, on behalf of the
Fund, and Brinson;
2. Approving the Sub-Advisory Agreements (the "Sub-Advisory Agreements")
between Brinson and UBS Asset Management (New York), Inc. ("UBS New
York"), with respect to the Fund;
3. Amending certain of the Fund's fundamental investment restrictions;
and
4. Eliminating certain of the Fund's fundamental investment restrictions.
Please take a moment to review this document and fill out, sign and return the
enclosed proxy card.
The Board has proposed implementing the Sub-Advisory Agreement as a consequence
of the consolidation of investment management functions among various
subsidiaries of UBS AG, the corporate parent of Brinson and UBS New York. In
order to put the Sub-Advisory Agreement into place, it is first necessary to
terminate the current Investment Advisory Agreement with Brinson, on behalf of
the Fund, and to implement a New Investment Advisory Agreement for the Fund.
If approved by shareholders, these proposed changes will not result in any
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additional fees being paid by shareholders.
The Board has also proposed amending and/or eliminating certain of the Fund's
fundamental investment policies. We believe that the recommended changes will
provide additional investment opportunities to the Fund, as further described in
the attached Proxy Statement. We urge you to approve these proposals that are
designed to benefit all shareholders by providing the Fund with greater
flexibility in pursuing its investment objective.
The Proxy Statement includes a question and answer format designed to provide
you with a simpler and more concise explanation of certain issues. Although much
of the information in the Proxy Statement is technical and is required by the
various regulations that govern the Trust and the Fund, we hope that this format
will be helpful to you.
Sincerely,
Thomas J. Digenan
President of Brinson
Relationship Funds
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BRINSON RELATIONSHIP FUNDS
209 South LaSalle Street
Chicago, Illinois 60604
NOTICE OF SPECIAL MEETING OF UNITHOLDERS
of the
Brinson High Yield Fund Series
of
BRINSON RELATIONSHIP FUNDS
To be held October 30, 2000
TO THE UNITHOLDERS OF BRINSON RELATIONSHIP FUNDS
NOTICE IS HEREBY GIVEN THAT A SPECIAL MEETING OF UNITHOLDERS of the Brinson High
Yield Fund series (the "Fund") of Brinson Relationship Funds (the "Trust") will
be held on October 30, 2000 at the offices of the Trust's investment advisor and
manager, Brinson Partners, Inc. ("Brinson"), at The Rookery Building, 209 South
LaSalle Street, 11th Floor Board Room, Chicago, IL 60604. (The special meeting
is referred to as the "Special Meeting.") The Special Meeting will convene at
4:00 p.m., Central time. The Trust proposes to mail this notice of the Special
Meeting, the proxy card, and the Proxy Statement to unitholders of record on or
about September 25, 2000.
The following proposals will be presented to the unitholders (the
"shareholders"):
1. To approve or disapprove the termination of the Investment Advisory
Agreement between the Trust, on behalf of the Fund, and Brinson, and to
approve a new Investment Advisory Agreement between the Trust, on behalf of
the Fund, and Brinson;
2. To approve or disapprove the Sub-Advisory Agreement between Brinson and UBS
Asset Management (New York), Inc., with respect to the Fund;
3. To approve or disapprove amendments to certain of the Fund's fundamental
investment restrictions:
(a) To amend the Fund's fundamental investment restriction regarding
borrowing;
(b) To amend the Fund's fundamental investment restriction regarding
underwriting;
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(c) To amend the Fund's fundamental investment restriction regarding
lending;
(d) To amend the Fund's fundamental investment restriction regarding
investments in real estate;
(e) To amend the Fund's fundamental investment restriction regarding
investments in commodities;
(f) To amend the Fund's fundamental investment restriction regarding
issuing senior securities and making short sales; and
(g) To amend the Fund's fundamental investment restriction regarding
industry concentration.
4. To approve the elimination of certain of the Fund's fundamental investment
restrictions:
(a) To eliminate the Fund's fundamental investment restriction regarding
investing to exercise control or management;
(b) To eliminate the Fund's fundamental investment restriction regarding
purchasing securities on margin;
(c) To eliminate the Fund's fundamental investment restriction regarding
investments in other investment companies; and
(d) To eliminate the Fund's fundamental investment restriction regarding
investments in oil, gas and/or mineral exploration or development
programs or leases.
The transfer books of the Trust will not be closed, but only those shareholders
of record of the Fund at the close of business on September 18, 2000 will be
entitled to notice of, and to vote on, the proposals at the Special Meeting, or
at any adjournments thereof.
Shareholders may attend in person. If you plan to attend the Special Meeting,
so indicate on the enclosed proxy card and return it promptly in the enclosed
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envelope. No postage is required if mailed in the United States. Whether you
will able to attend or not, PLEASE VOTE, SIGN AND DATE THE PROXY AND RETURN IT
PROMPTLY.
September 25, 2000 By Order of the Board of Trustees
Carolyn M. Burke
Secretary of Brinson
Relationship Funds
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PLEASE RETURN YOUR PROXY IMMEDIATELY
TO PREVENT ADDITIONAL SOLICITATION EXPENSE
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TABLE OF CONTENTS
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PAGE
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Questions and Answers: About the Special Meeting and the Proxy Statement............................. 1
Proposal 1: Approval of the Termination of the Investment Advisory Agreement
between the Trust, on behalf of the Fund, and Brinson, and Approval of a New
Investment Advisory Agreement between the Trust, on behalf of the Fund, and
Brinson...............................................................................................
Proposal 2: Approval of the Sub-Advisory Agreement between Brinson and UBS
Asset Management (New York), Inc., with respect to the Fund...........................................
Proposal 3: Approval of Amendments to Certain of the Fund's Fundamental
Investment Restrictions...............................................................................
3(a): Borrowing Money..........................................................................
3(b): Underwriting Securities..................................................................
3(c): Lending..................................................................................
3(d): Investments in Real Estate...............................................................
3(e): Investments in Commodities...............................................................
3(f): Issuing Senior Securities and Making Short Sales.........................................
3(g): Concentration of Investments.............................................................
Proposal 4: Approval of the Elimination of Certain of the Fund's Fundamental
Investment Restrictions...............................................................................
4(a): Investing to Exercise Control or Management..............................................
4(b): Purchasing Securities on Margin..........................................................
4(c): Investments in Other Investment Companies................................................
4(d): Investments in Oil, Gas and/or Mineral Exploration or Development........................
Programs or Leases.......................................................................
Other Business........................................................................................
Information about the Trust...........................................................................
Further Information about Voting and the Special Meeting..............................................
</TABLE>
(i)
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BRINSON RELATIONSHIP FUNDS
209 South LaSalle Street
Chicago, Illinois 60604
PROXY STATEMENT
QUESTIONS AND ANSWERS: ABOUT THE SPECIAL
MEETING AND THE PROXY STATEMENT
INFORMATION ABOUT VOTING
Q. Who is asking for my vote?
A. The Board of Trustees (the "Board" or the "Trustees") of Brinson
Relationship Funds (the "Trust") has requested your vote on several matters
in connection with the special meeting of unitholders of the Brinson High
Yield Fund series (the "Fund" or the "Series") of the Trust. The special
meeting (the "Special Meeting") will be held at 4:00 p.m., Central time, on
October 30, 2000, at the offices of the Trust's investment advisor and
manager, Brinson Partners, Inc. ("Brinson"), at The Rookery Building, 209
South LaSalle Street, Chicago, IL 60604. The Trust proposes to mail the
Notice of the Special Meeting, the proxy card and the Proxy Statement to
unitholders of record (the "shareholders") on or about September 25, 2000.
The Trust was established as a Delaware business trust on August 16, 1994.
This Proxy Statement relates to one series of the Trust, the Fund.
Q. Who is eligible to vote?
A. Shareholders of record of the Fund at the close of business on September
18, 2000 (the "Record Date") are entitled to notice of and to vote at the
Special Meeting or at any adjournment of the Special Meeting. Shareholders
of record will be entitled to one vote for each full unit ("share") and a
fractional vote for each fractional share that they hold on each matter
presented at the Special Meeting.
GENERAL INFORMATION ABOUT THE PROPOSALS
Q. What is being voted on at the Special Meeting?
A. The Board is asking shareholders of the Fund to vote on the following
proposals affecting the Fund:
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1. To terminate the Investment Advisory Agreement between the Trust, on behalf
of the Fund, and Brinson, and to approve a new Investment Advisory
Agreement between the Trust, on behalf of the Fund, and Brinson (Proposal
1);
2. To approve the Sub-Advisory Agreement between Brinson and UBS Asset
Management (New York), Inc. ("UBS New York"), with respect to the Fund
(Proposal 2);
3. To amend certain of the Fund's fundamental investment restrictions
(Proposals 3(a)-3(g)); and
4. To eliminate certain of the Fund's fundamental investment restrictions
(Proposals 4(a)-4(d)).
At its meeting on August 21, 2000, the Board considered terminating and
implementing a new Investment Advisory Agreement for the Fund and
implementing the Sub-Advisory Agreement. The Board approved each of the
proposed Agreements, and recommended that the Agreements be submitted for
shareholder approval. At the meeting, the Board also reviewed and approved
the proposed changes to the fundamental investment restrictions of the
Fund. Each of the proposed Agreements and changes are subject to
shareholder approval. The purposes of the Special Meeting are set forth in
the accompanying Notice.
Q. How do the Trustees recommend that I vote on these proposals?
A. The Trustees recommend that shareholders vote FOR each proposal.
INFORMATION REGARDING PROPOSALS 1 AND 2
Q. Why is management proposing changes to the Fund's investment advisory
agreement?
A. The Trust's current Investment Advisory Agreement, on behalf of the Fund,
does not permit the use of sub-advisers to manage the Fund. By terminating
the current Investment Advisory Agreement and implementing a new Investment
Advisory Agreement for the Fund, Brinson will have greater flexibility to
engage sub-advisers, including UBS New York, to assist in managing certain
assets of the Fund.
Q. Why is management proposing that Brinson enter into the Sub-Advisory
Agreement with UBS New York for the Fund?
A. As a result of the consolidation by UBS AG of investment management
activities among its various subsidiaries, including Brinson and UBS
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New York, following UBS AG's merger with Swiss Bank Corporation in 1998,
management has determined to centralize certain investment management
expertise in various locations and subsidiaries of UBS AG. Because the
management expertise in the specific investment disciplines relating to
portions of the Fund is concentrated in UBS New York, the determination has
been made to have certain investment decisions made at UBS New York. In the
event that the Sub-Advisory Agreement is approved by shareholders, UBS New
York will be responsible for managing a portion of the Fund, while being
subject to the continuing oversight and direction of Brinson, and
ultimately, the Board.
Q. Will these changes effect the fees charged to shareholders?
A. THERE WILL BE NO INCREASES IN THE FEES THAT YOU, AS A SHAREHOLDER OF THE
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FUND, WILL BEAR IF THESE AGREEMENTS ARE APPROVED. UBS New York (like
Brinson, under the current and proposed Investment Advisory Agreements)
will provide its services without compensation.
INFORMATION REGARDING PROPOSALS 3 AND 4
Q. Are there any proposals that will impact the Fund's investment policies or
limitations?
A. Yes. Although none of the proposed changes to the Fund's investment
restrictions is expected to materially impact the day-to-day management of
the Fund, it is proposed that certain of the Fund's investment restrictions
that are "fundamental" (that is, those that cannot be changed without
shareholder approval) be amended, reclassified as non-fundamental, or
eliminated. If these proposals are approved by shareholders, the Board of
the Trust will have more flexibility to respond to future developments by
changing the Fund's investment policies in a manner intended to achieve the
Fund's investment goals without obtaining shareholder approval.
Shareholders, of course, will be informed of any significant changes to the
Fund's investment restrictions before such changes are implemented, and any
additional amendments to the fundamental investment restrictions will have
to be submitted to shareholders, for their approval. These proposals are
intended only to eliminate the cost and delay of seeking shareholder
approval for changes in investment restrictions that would not otherwise
require convening a shareholder meeting. Given the minimal impact of these
changes on the day-to-day management of the Fund, shareholder approval of
these proposals is not expected to increase the Fund's overall level of
risk.
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<PAGE>
Q. Why am I being asked to approve amendments to certain of the Fund's
fundamental investment restrictions?
A. Certain of the Fund's fundamental investment restrictions were adopted in
response to state laws that are no longer applicable, or to market
conditions that no longer exist, and thus may be overly restrictive.
Approval of the proposed amendment and/or reclassification of these
fundamental restrictions will provide the Fund with greater investment
flexibility within the boundaries imposed by applicable law. The proposed
changes are not expected to have any immediate effect on the manner in
which the Fund is managed.
Q. Why am I being asked to approve the elimination of certain of the Fund's
fundamental investment restrictions?
A. Several of the Fund's current fundamental investment restrictions reflect
past regulatory, business or industry conditions, and practices or
requirements that are outdated, unnecessary or potentially burdensome.
Approval of the proposals to eliminate certain investment restrictions
initially will not result in any immediate changes to the management of the
Fund, but will provide the Fund with greater flexibility to pursue its
investment goals.
Q. When will the proposals take effect if they are approved?
A. If approved, each of the proposals will become effective on or about
November 1, 2000.
ADDITIONAL INFORMATION REGARDING THE PROPOSALS
Q. How do I vote my shares?
A. You may vote your shares (i) in person, by attending the Special Meeting,
or (ii) by mail or fax. To vote by mail, sign, date and send us the
enclosed proxy in the envelope provided. You can fax your vote by signing
and dating the proxy and faxing both sides of the card to 312-554-2723.
Proxy cards that are properly signed, dated and received at or prior to the
Special Meeting will be voted as specified. If you specify a vote for any
of the Proposals 1 through 4, your proxy will be voted as you indicate. If
you simply sign, date and return the proxy card, but do not specify a vote
for any of the Proposals 1 through 4, your shares will be voted by the
proxies as follows:
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<PAGE>
. IN FAVOR of terminating the Investment Advisory Agreement between the
Trust, on behalf of the Fund, and Brinson, and approving a New
Investment Advisory Agreement on behalf of the Fund (Proposal 1);
. IN FAVOR of approving the Sub-Advisory Agreement between Brinson and UBS
New York relating to the Fund (Proposal 2);
. IN FAVOR of amending the fundamental investment restrictions that apply
to the Fund (Proposals 3(a)-3(g)); and
. IN FAVOR of eliminating the fundamental investment restrictions that
apply to the Fund (Proposals 4(a)-4(d)).
Q. If I send my proxy in now as requested, can I change my vote later?
A. You may revoke your proxy at any time before it is voted by: (1) sending to
the Secretary of the Trust a written revocation, or (2) forwarding a later-
dated proxy that is received by the Trust at or prior to the Special
Meeting, or (3) attending the Special Meeting and voting in person. Even
if you plan to attend the Special Meeting, we ask that you return the
enclosed proxy. This will help us ensure that an adequate number of shares
are present for the Special Meeting to be held.
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<PAGE>
THE PROPOSALS
PROPOSAL 1: APPROVAL OF THE TERMINATION OF THE TRUST'S
INVESTMENT ADVISORY AGREEMENT WITH BRINSON, ON
BEHALF OF THE FUND, AND APPROVAL OF A NEW INVESTMENT
ADVISORY AGREEMENT, ON BEHALF OF THE FUND, WITH
BRINSON
Introduction to the Proposal
Brinson provides portfolio management, research and analysis for each series of
the Trust pursuant to an Investment Advisory Agreement (the "Current
Relationship Agreement") dated April 26, 1995, as amended from time to time.
The Current Relationship Agreement has been amended to add new series of the
Trust as such new series have been created. The Current Relationship Agreement
is attached to this Proxy Statement as Exhibit A.
The Board of the Trust, at its meeting on August 21, 2000, at the recommendation
of Brinson, considered the proposal to terminate the Current Relationship
Agreement with respect to the Fund, and to implement a new Investment Advisory
Agreement, on behalf of the Fund (the "Proposed Relationship Agreement"), that
would permit Brinson to engage the services of sub-advisers to assist in
managing the assets of the Fund. In order to accomplish these changes for the
Fund, it is necessary for shareholders of the Fund to approve the termination of
the Current Relationship Agreement between the Trust, on behalf of the Fund, and
Brinson, and to approve the Proposed Relationship Agreement. Attached as
Exhibit B to this Proxy Statement is the Proposed Relationship Agreement for the
Fund.
What factors did the Board consider in approving the Proposed Relationship
Agreement?
The Board of the Trust considered that the Current Relationship Agreement is
silent on the issue of engaging sub-advisers to assist in managing the Fund.
Additionally, the Board considered that, with respect to foreign securities,
while Brinson is permitted, under the Current Relationship Agreement, to obtain
statistical and other factual information and advice regarding economic factors
and trends from foreign subsidiaries, the Current Relationship Agreement does
not permit Brinson to obtain general advice and recommendations regarding the
purchase or sale of securities from such subsidiaries. Finally, the Board noted
that the Proposed Relationship Agreement is otherwise identical to the Current
Relationship Agreement.
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How do the provisions of the Proposed Relationship Agreement differ from the
terms of the Current Relationship Agreement?
The terms of the Current Relationship Agreement and the Proposed Relationship
Agreement (together, the "Relationship Agreements") are identical as they relate
to (i) the duties of Brinson as investment advisor to the Fund, (ii) the
placement of portfolio transactions by Brinson for the Fund, (iii) the reports
that Brinson must furnish to the Trust, (iv) the standard of care that governs
Brinson in serving as advisor to the Fund, (v) the duration of the Agreements,
and (vi) certain other provisions that are not material to the present purposes.
Significantly, the provisions for the compensation of Brinson for its advisory
services are also identical under the Relationship Agreements. The approval of
the Proposed Relationship Agreement will not result in any fees being payable to
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Brinson, or in the charging of any fees to shareholders of the Fund.
The Proposed Relationship Agreement differs from the Current Relationship
Agreement in two ways. First, as discussed above, the Current Relationship
Agreement is silent on the issue of engaging sub-advisers. The Proposed
Relationship Agreement specifically authorizes Brinson to utilize sub-advisers
by stating, in Section 7, that:
Delegation of Responsibilities to Sub-Advisers. [Brinson] may, at its
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expense, select and contract with one or more investment advisers
registered under the Investment Advisers Act of 1940, as amended ("Sub-
Advisers"), to perform some or all of the services for the Series for which
it is responsible under this Agreement. [Brinson] will compensate any Sub-
Adviser for its services to the Series. [Brinson] may terminate the
services of any Sub-Adviser at any time in its sole discretion, and shall
at such time assume the responsibility of such Sub-Adviser unless and until
a successor Sub-Adviser is selected and the requisite approval of all of
the Series' shareholders is obtained. [Brinson] will continue to have
responsibility for all advisory services furnished by any Sub-Adviser.
Second, the Current Relationship Agreement allows for only a limited exchange of
information between Brinson and foreign subsidiaries of UBS AG in managing the
assets of the Fund. To enhance the Fund's flexibility, it is proposed that the
provision allowing for only a limited exchange of information between Brinson
and foreign subsidiaries of UBS AG be deleted from the Proposed Relationship
Agreement. If the Proposed Relationship Agreement is approved by shareholders
of the Fund, Brinson would be permitted to engage foreign subsidiaries as sub-
advisers, subject to the provisions cited above, should Brinson determine to do
so.
<PAGE>
What are the other material provisions of the Relationship Agreements?
The Relationship Agreements provide that Brinson will manage the investment and
reinvestment of the assets of the Fund, and will continuously review, supervise
and administer the investment programs of the Fund, to determine, in Brinson's
discretion, the assets to be held uninvested. Brinson is responsible for
providing the Trust with records regarding its investment advisory activities
that the Trust is required to maintain, and for rendering regular reports to the
Trust's officers and Trustees concerning Brinson's discharge of its
responsibilities under the Relationship Agreements.
Brinson will, at its own expense, provide office space, furnishings, equipment
and personnel required for managing the corporate affairs and conducting the
business of the Fund, including complying with corporate reporting requirements.
Brinson also furnishes all necessary advisory and research facilities and
prepares reports to comply with the reporting requirements of various federal
and state regulatory authorities. The Fund pays all of its own expenses other
than those expressly assumed by Brinson.
The Relationship Agreements provide that decisions regarding the placement of
portfolio brokerage are made by Brinson, with the primary considerations being
to obtain efficiency in execution of orders and the most favorable net prices
for the Fund. Consistent with those objectives, transactions may be allocated
to brokers and dealers who furnish certain research services to Brinson. Such
research services supplement Brinson's own research activities and provide a
benefit to Brinson that is not easily evaluated in terms of a dollar amount and
is not reflected in a direct monetary benefit to the Fund. Such research may be
used to benefit other investment companies advised by Brinson, as well as each
series of the Trust. Transactions may also be executed through brokers and
dealers who sell shares of series of the Trust, but such sales will not be
either a qualifying or disqualifying factor in the selection of executing
broker-dealers. The Relationship Agreements authorize Brinson to place
portfolio transactions for the series of the Trust with broker-dealers for
commissions that are greater than another broker or dealer might charge if
Brinson 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 Brinson's overall
responsibilities with respect to its accounts, including the series of the
Trust, as to which it exercises investment discretion.
The Relationship Agreements are effective for two years from the date on which
they are executed. They are renewable for successive one-year periods if such
continuance is approved at least annually by: (i) the Board of Trustees of the
Trust or by the vote of a majority of the Fund's outstanding voting securities,
as defined in the
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<PAGE>
1940 Act; and (ii) by the vote of a majority of Trustees who are not parties to
the Relationship Agreements or interested persons as defined in the 1940 Act of
any such party, cast in person at a meeting called for the purpose of voting on
such approval.
The Relationship Agreements may be terminated without penalty at any time by the
Trust, on behalf of the Fund, or by Brinson on 60 days' written notice; they
will automatically terminate in the event of their assignment.
Under the Relationship Agreements, Brinson receives no fees from the Fund for
providing investment advisory services to the Fund, and Brinson is responsible
for paying its own expenses. In the case of the Fund, Brinson has agreed to pay
all of the Fund's total operating expenses. Brinson may discontinue this
assumption of expenses at any time in Brinson's sole discretion.
The Current Relationship Agreement was initially approved by the Trustees of the
Trust on April 26, 1995. The Board most recently approved and continued the
Current Relationship Agreement for the Fund at its meeting on February 28, 2000.
The Current Relationship Agreement was approved by the sole initial shareholder
of the Fund on April 28, 1995.
During the fiscal year ended December 31, 1999, the Fund did not pay any
brokerage commissions.
If the Proposed Relationship Agreement is not approved by shareholders of the
Fund, the Current Relationship Agreement will remain in effect for the Fund, and
the Board will consider what additional action, if any, should be taken.
What shareholder approval is required to implement the Proposed Relationship
Agreement?
The approval of the Proposed Relationship Agreement for the Fund requires the
approval of a majority of the outstanding voting securities of the Fund. The
vote of a majority of the outstanding voting securities of the Fund means the
vote of the lesser of (A) 67% or more of the voting securities of the Fund
present at a meeting, if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy; or (B) more than 50%
of the outstanding voting securities of the Fund.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE TERMINATION
OF THE TRUST'S INVESTMENT ADVISORY AGREEMENT
WITH BRINSON, ON BEHALF OF THE FUND, AND FOR THE NEW
INVESTMENT ADVISORY AGREEMENT WITH BRINSON
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<PAGE>
PROPOSAL 2: APPROVAL OF THE SUB-ADVISORY AGREEMENT
BETWEEN BRINSON AND UBS ASSET MANAGEMENT (NEW YORK),
INC. WITH RESPECT TO THE FUND
Introduction to the Proposal
At its meeting on August 21, 2000, the Board of the Trust, at the request of
Brinson, considered entering into the Sub-Advisory Agreement relating to the
Fund. It was pointed out that, as a consequence of the consolidation of
investment management functions among various subsidiaries of UBS AG, including
Brinson and UBS New York, following the merger of UBS AG with Swiss Bank
Corporation in 1998, management has determined to centralize certain investment
management expertise in various locations and subsidiaries of UBS AG. Because
the investment management expertise in the specific investment disciplines
relating to portions of the Fund is concentrated at UBS New York, management
proposed certain investment decisions for the Fund be made by UBS New York. The
Board, in determining to approve the proposed Sub-Advisory Agreement and the
contemplated arrangements between Brinson and UBS New York, noted that (i) UBS
New York will be subject to continuing oversight and direction of Brinson, and
ultimately, the Board; (ii) the Sub-Advisory Agreement, if implemented, will not
result in any additional fees being paid by the shareholders of the Fund; and
(iii) UBS New York is familiar with the Fund and its operations, having in the
past, informally and without compensation, assisted Brinson in managing the
Fund.
The Board unanimously voted to approve the Sub-Advisory Agreement and to
recommend its approval to shareholders. Attached to this Proxy Statement, as
Exhibit C, is the form of proposed Sub-Advisory Agreement for the Trust,
relating to the Fund.
What are the provisions of the Sub-Advisory Agreement?
The Sub-Advisory Agreement provides that UBS New York will be responsible for
managing a portion of the portfolio of the Fund, as determined from time to
time, by Brinson. In all cases, UBS New York will be subject to the direction
of Brinson and, ultimately, the Board of Trustees of the Trust. UBS New York
will be responsible for managing specific portions of the Fund's assets, but is
also permitted to furnish Brinson with investment recommendations, asset
allocation advice, research and other investment services. UBS New York will
also be responsible for placing all portfolio transactions.
Under the Sub-Advisory Agreement, with respect to the portion of the Fund's
assets managed by UBS New York, UBS New York will be responsible for placing
orders for the purchase and sale of portfolio securities with broker/dealers who
provide statistical, factual and financial information and
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<PAGE>
services to the Fund, to Brinson, to UBS New York (as the sub-adviser), or to
any other funds for which Brinson or UBS New York provides investment advisory
services and/or with broker/dealers who sell shares of the Fund or who sell
shares of any other fund for which Brinson or UBS New York provides investment
advisory services. In addition, consistent with SEC rules and regulations, and
subject to any policies and procedures as may be adopted by the Board of
Trustees and officers of the Trust, UBS New York may cause the Fund to pay a
member of an exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that transaction.
This may be done in such instances where the Trust, on behalf of the Fund, and
UBS New York have determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member, broker or dealer, viewed in terms of either that
particular transaction or the sub-adviser's overall responsibilities with
respect to the Fund, and to other funds and other advisory accounts for which
Brinson or the sub-adviser exercises investment discretion.
Will shareholders of the Fund be subject to management fees under the proposed
Sub-Advisory Agreement?
No fees will be imposed on shareholders of the Fund as a result of the approval
of the proposed Sub-Advisory Agreement. No investment advisory fees currently
are charged at the Fund level, and this will remain the case under the proposed
Sub-Advisory Agreement. Thus, the proposed Sub-Advisory Agreement does not
provide for the payment of any fees to Brinson.
What approval is required by shareholders to implement the Sub-Advisory
Agreement?
The approval of the Sub-Advisory Agreement for the Fund requires the approval of
a majority of the outstanding voting securities of the Fund. The vote of a
majority of the outstanding voting securities of the Fund means the vote of the
lesser of (A) 67% or more of the voting securities of the Fund present at a
meeting, if the holders of more than 50% of the outstanding voting securities of
the Fund are present or represented by proxy; or (B) more than 50% of the
outstanding voting securities of the Fund.
What is the term of the proposed Sub-Advisory Agreement, and when may the
Agreement be terminated?
A sub-advisory agreement is treated like an investment advisory agreement for
purposes of the 1940 Act. Thus, the proposed Sub-Advisory Agreement contains
the same statutorily required provisions relating to its term and termination as
does the Current Relationship Agreement. The Sub-Advisory Agreement
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<PAGE>
provides that it will continue for a period longer than two years, only so long
as such continuance is specifically approved at least annually by the Board of
Trustees of the Trust, on behalf of the Fund, or by a vote of a majority of the
outstanding voting securities of the Fund, but in any event, provided the
continuance has been approved by the vote of a majority of Non-Interested
Trustees.
The proposed Sub-Advisory Agreement also provides that it will terminate in the
event of its assignment, and that it may be terminated by Brinson or the Trust,
on behalf of the Fund, at any time, without the payment of any penalty, on not
more than sixty (60) days' written notice to UBS New York, of Brinson's or the
Trust's intention to do so. In the case of the Fund, termination must be
accomplished by action of the Trust's Board or by vote of a majority of the
outstanding voting securities of the Fund. UBS New York may also terminate the
sub-advisory agreement at any time, without the payment of any penalty, on not
more than sixty (60) days' written notice to Brinson and the Trust on behalf of
the Fund, of its intention to do so. The Sub-Advisory Agreement also provides
that it will terminate upon termination of the investment advisory agreement
between the Trust, on behalf of the Fund, and Brinson.
Information Concerning UBS New York
UBS New York is an investment advisor registered with the SEC. The address of
UBS New York is 10 East 50/th/ Street, New York, New York 10022. UBS New York is
a wholly-owned subsidiary of UBS AG. (For additional information regarding UBS
AG, see "Information About the Trust" in this Proxy Statement.) As of June 30,
2000, UBS New York had approximately $14.98 billion in assets under management.
UBS New York has not previously served as an investment advisor to a registered
investment company.
The President and Chief Executive Officer of UBS New York is Benjamin F.
Lenhardt, Jr., whose address is 209 South LaSalle Street, Chicago, IL 60604. Mr.
Lenhardt's principal occupations are Director, President, Chief Executive
Officer and Managing Director of Brinson. The directors of UBS New York are:
Gary P. Brinson, Jeffrey J. Diermeier, Benjamin F. Lenhardt, Jr. and Carlos
Penny. The address of each of the directors of UBS New York, except Mr. Penny,
is 209 South LaSalle Street, Chicago, IL 60604. The address of Mr. Penny is the
offices of UBS New York at 10 East 50/th/ Street, New York, New York 10022. The
principal occupations of each of the directors of UBS New York are as follows:
Mr. Brinson, Director, Chairman of the Board of Directors and Managing Director,
Brinson; Mr. Diermeier, Director, Chief Investment Officer and Managing
Director, Brinson; Mr. Lenhardt, Director, President, Chief Executive Officer
and Managing Director, Brinson; and Mr. Penny, Director and Managing Director,
UBS New York.
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<PAGE>
If the Sub-Advisory Agreement is not approved by the shareholders of the Fund,
the Sub-Advisory Agreement will not be implemented, and the Board will consider
what additional action, if any, should be taken.
THE BOARD OF TRUSTEES RECOMMENDS
THAT SHAREHOLDERS VOTE FOR THE APPROVAL
OF THE SUB-ADVISORY AGREEMENT
APPROVAL OF CHANGES TO THE FUND'S
FUNDAMENTAL INVESTMENT RESTRICTIONS
Introduction to Proposals 3(a) through 3(g) and 4(a) through 4(d)
Why is the Fund amending or eliminating certain of its fundamental investment
restrictions?
The Fund is subject to specific investment restrictions that govern its
investment activities. Under the 1940 Act, certain investment restrictions are
required to be "fundamental," which means that the investment restrictions can
only be changed by a shareholder vote. An investment company may designate
additional restrictions that are fundamental, and it may also adopt "non-
fundamental" restrictions, which may be changed by the company's trustees
without shareholder approval. These restrictions limit the investment activities
of Brinson as the Fund's investment advisor and manager, and will limit the
investment activities of UBS New York, as the Fund's sub-adviser, in the event
that Proposal 2 in this Proxy Statement is approved by shareholders.
After the Trust was organized in 1994, certain legal and regulatory requirements
applicable to investment companies changed. For example, certain restrictions
that were historically imposed by state laws and regulations were preempted by
the National Securities Markets Improvement Act of 1996 ("NSMIA"), and
therefore, these state requirements no longer apply to investment companies. The
Fund is currently subject to fundamental investment restrictions that are either
more restrictive than those required under present law, or are no longer
required at all, and that were adopted in response to regulatory, business and
industry conditions that no longer exist.
Accordingly, the Trustees have determined to present to the shareholders certain
proposed changes to the fundamental investment restrictions of the Fund for
their consideration. The proposed amendments would:
. simplify, modernize and standardize the fundamental restrictions that are
required to be stated under the 1940 Act;
. reclassify as non-fundamental certain fundamental investment restrictions
that are not required to be fundamental under the 1940 Act; and
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. eliminate those fundamental restrictions that are no longer required by
either the securities laws of the various states or the SEC.
Brinson believes there are several distinct advantages in revising the Fund's
fundamental investment restrictions at this time. First, by reducing the total
number of investment restrictions that can be changed only by a shareholder
vote, Brinson believes that the Fund will be able to minimize the costs and
delays associated with holding future shareholder meetings to revise fundamental
policies that become outdated or inappropriate or are not consistent with the
Fund's investment management techniques. Brinson also believes that its ability
to manage the Fund's assets in a changing investment environment will be
enhanced because the Fund will have greater investment management flexibility to
respond to market, industry, regulatory or technical changes by seeking Board
approval only when necessary to revise certain investment policies. Thus,
investment management opportunities will be increased by these changes.
Furthermore, the standardized investment restrictions are expected to enable the
Fund to more efficiently and more easily monitor portfolio compliance.
The chart that follows briefly describes the differences between fundamental
restrictions and non-fundamental restrictions.
Fundamental Non-Fundamental
Restrictions Restrictions
--------------------------- ----------------
Who must approve changes Board of Trustees and Board of Trustees.
in the restrictions? shareholders.
How quickly can a change Fairly slowly, since a Fairly quickly,
in the restrictions be vote of shareholders is because the change
made? required. can be accomplished
by action of the
Board of Trustees
alone.
What is the relative cost Costly to change because Less costly to change
to change a restriction? a shareholder vote because a change can
requires holding a be accomplished by
meeting of shareholders. action of the Board
of Trustees alone.
The recommended changes are specified below. Each of Proposals 3(a) through
3(g) and Proposals 4(a) through 4(d) will be voted on separately by shareholders
of the Fund, and the approval of each Proposal by the Fund will require the
approval of a majority of the outstanding voting securities of the Fund as
defined
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in the 1940 Act. (See "Further Information About Voting and the Special Meeting"
below.)
Description of the Proposed Changes
The proposed standardized fundamental investment restrictions cover those areas
for which the 1940 Act requires the Fund to have fundamental restrictions. They
reflect all current regulatory and legal requirements under the 1940 Act, and
are written to provide flexibility to respond to future legal, regulatory,
market or technical changes. The proposed standardized amendments will not
affect the Fund's investment objectives. Although the proposed amendments to the
fundamental investment restrictions will give the Fund greater flexibility to
respond to future investment opportunities, Brinson does not anticipate that the
changes, individually or in the aggregate, will result at this time in a
material change in the level of investment risk associated with investment in
the Fund. Nor does Brinson anticipate that the proposed changes in fundamental
investment restrictions will, individually or in the aggregate, change
materially the manner in which Fund is managed and operated.
The Fund's existing investment restrictions, together with the proposed
investment restrictions, are presented below. Shareholders of the Fund will be
requested to vote on each proposed restriction separately. For convenience of
reference, the Fund's current investment restrictions are presented in bold-
faced type below, and the Fund's proposed investment restrictions are presented
in italics. Following the restrictions, the legal authority for each investment
restriction is presented, along with a discussion of the effect of each proposed
change.
PROPOSAL 3: APPROVAL OF AMENDMENTS TO THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTIONS
PROPOSAL 3(a): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTION REGARDING
BORROWING
Current Restriction: The Fund may not borrow money except as a temporary
-------------------
measure for extraordinary or emergency purposes or to facilitate redemptions and
in no event in excess of 33 1/3% of the value of its total assets. All
borrowings will be from a bank and to the extent that such borrowing exceeds 5%
of the value of the Fund's assets, asset coverage of at least 300% is required.
The Fund will not purchase securities while borrowings exceed 5% of the Fund's
total assets.
Proposed Restriction: The Fund may not borrow money, except that the Fund may
--------------------
borrow money from banks to the extent permitted by the 1940 Act, or to the
extent permitted by any exemptions therefrom which may be granted by the SEC,
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or for temporary or emergency purposes and then in an amount not exceeding 33
1/3% of the value of the Fund's total assets (including the amount borrowed).
What are the legal requirements governing borrowing by the Fund?
The 1940 Act requires investment companies to impose certain limitations on
borrowing activities. The limitations on borrowing are generally designed to
protect shareholders and their investments by restricting an investment
company's ability to subject its assets to any claims of creditors who might
have a claim to the investment company's assets or rights upon liquidation that
would take precedence over the claims of shareholders. In addition, the 1940 Act
limitations reflect a Congressional intent to limit an investment company's
exposure to payments to creditors so that the investment company will not
experience difficulty in managing a portfolio to meet debt payment obligations
while still meeting redemption requests on demand. Under the 1940 Act, an
investment company's borrowing restriction must be fundamental.
Under the 1940 Act, an investment company is permitted to borrow up to 5% of its
total assets from any person for temporary purposes, and may also borrow from
banks, provided that if borrowings exceed 5%, the investment company must have
assets totaling at least 300% of the borrowing when the amount of the borrowing
is added to the company's other assets. Put another way, an investment company
may borrow, in the aggregate, from banks and others, amounts up to one-third (33
1/3%) of its total assets (including those assets represented by the borrowing).
(So, for example, an investment company's borrowing of an amount, from an entity
other than a bank, equal to 5% of its total assets, for temporary purposes,
would serve, while the borrowing is outstanding, to reduce the subsequent bank
borrowings that the company may make to 28 1/3% of its total assets.) Investment
companies may desire to borrow money to meet redemptions while waiting for cash
from sales of new shares without being forced to sell portfolio securities
before they would have otherwise been sold. This technique allows investment
companies greater flexibility to buy and sell portfolio securities for
investment or tax considerations, rather than because of a need for short-term
cash.
What effect will amending the current fundamental borrowing restriction have on
the Fund?
The proposed restriction would clarify that the Fund may borrow: (1) from banks
to the extent permitted by the 1940 Act or any exemptions therefrom, and (2)
from any person for temporary or emergency purposes, but (3) in any event all
borrowings must not exceed 33 1/3% of total assets. The current restriction
confines the Fund's permissible borrowing activities to temporary measures for
extraordinary or emergency purposes, and to meeting shareholder redemption
requests. The proposed restriction would expand the circumstances when the
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Fund may borrow, to include any situations permitted by the 1940 Act (for
example, if the Fund intended to engage in leverage). The current investment
restriction for the Fund also states that the Fund may not purchase securities
while borrowings exceed 5% of the value of the Fund's total assets. The 1940 Act
limits on borrowing historically were interpreted to prohibit investment
companies from making additional investments in securities while borrowings
exceeded 5% of total assets. However, such a 5% limit is not required under the
1940 Act and originated from informal regulatory positions. Accordingly, under
the proposed restriction, the Fund would be permitted to make additional
investments, even if borrowings exceed 5% of total assets.
Since the proposed borrowing restriction would provide the Fund with greater
borrowing flexibility, the Fund may be subject to additional costs, as well as
the risks inherent to borrowing, such as reduced total return.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE FOR PROPOSAL 3(a)
PROPOSAL 3(b): TO AMEND THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION REGARDING UNDERWRITING
Current Restriction: The Fund may not act as an underwriter of securities
-------------------
issued by other persons, except that, in connection with the disposition of a
security, the Fund may technically be deemed to be an "underwriter" as that term
is defined in the Securities Act, in selling a portfolio security.
Proposed Restriction: The Fund may not act as an underwriter except to the
--------------------
extent the Fund may be deemed to be an underwriter when disposing of securities
it owns or when selling its own shares.
What are the legal requirements governing underwriting by the Fund?
Under the 1940 Act, the Fund's policies concerning underwriting are required to
be fundamental. Under the federal securities laws, a person or company generally
is considered an underwriter if it participates in the public distribution of
securities of other issuers, usually by purchasing the securities from the
issuer with the intention of reselling the securities to the public.
Underwriters are subject to stringent regulatory requirements and are often
exposed to substantial liability. Thus, virtually all investment companies
operate in a manner that allows them to avoid acting as underwriters.
From time to time, however, an investment company may purchase a security for
investment purposes that it later resells or redistributes to institutional
investors or others under circumstances where the investment company could
possibly be considered to be an underwriter under the technical definition of
"underwriter"
-12-
<PAGE>
contained in the securities laws. For example, an investment company often
purchases securities in private securities transactions where a resale could
raise a question relating to whether or not the company is technically acting as
an underwriter. However, recent interpretations of the SEC Staff clarify that
resales of privately-placed securities by institutional investors do not make
the institutional investor an underwriter in these circumstances. The proposed
restriction encompasses these SEC positions.
What effect will amending the current underwriting restriction have on the Fund?
The proposed restriction is similar to the Fund's current investment
restriction. However, the proposed underwriting restriction, in addition to
specifically permitting the Fund to dispose of portfolio securities that it
owns, would clarify that the Fund may sell its own shares without being deemed
an underwriter. Under the 1940 Act, an investment company will not be
considered an underwriter if it sells its own shares pursuant to a written
distribution plan that complies with Rule 12b-1 of the 1940 Act. It is not
anticipated that adoption of the proposed restriction would involve any
additional risk as the proposed restriction would not affect the way the Fund is
currently managed.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE FOR PROPOSAL 3(b)
PROPOSAL 3(c): TO AMEND THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION REGARDING LENDING
Current Restriction: The Fund may not 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.
Proposed Restriction: The Fund may not make loans to other persons except (a)
--------------------
through the lending of its portfolio securities, (b) through the purchase of
debt securities, loan participations and/or engaging in direct corporate loans
in accordance with its investment objectives and policies, and (c) to the extent
the entry into a repurchase agreement is deemed to be a loan. The Fund may also
make loans to affiliated investment companies to the extent permitted by the
1940 Act or any exemptions therefrom that may be granted by the SEC.
What are the legal requirements governing lending by the Fund?
Under the 1940 Act, an investment company's policy regarding lending must be
fundamental. Certain investment techniques could, under certain circumstances,
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<PAGE>
be considered to be loans. For example, if the Fund invests in debt securities,
such investments might be considered to be a loan from the Fund to the issuer of
the debt securities. In order to ensure that the Fund may invest in certain debt
securities or repurchase agreements, which also could technically be
characterized as the making of loans, the Fund's current fundamental investment
restrictions specifically carve out such policies from its prohibitions. In
addition, the Fund's current fundamental restrictions explicitly permit the Fund
to lend its portfolio securities. Securities lending is a practice that has
become common in the investment company industry, and involves the temporary
loan of portfolio securities to parties that use the securities for the
settlement of other securities transactions. The collateral delivered to the
Fund in connection with such a transaction is then invested to provide the Fund
with additional income it might not otherwise have. Securities lending involves
certain risks if the borrower fails to return the securities.
What effect will amending the current fundamental lending restriction have on
the Fund?
The proposed restriction is similar to the Fund's current restriction, but would
provide the Fund with somewhat greater lending flexibility. Although the
proposed restriction retains the carve-outs contained in the existing investment
restriction, it also would permit the Fund to invest in loan participations and
direct corporate loans that recently have become more common as investments for
investment companies. Furthermore, the proposed restriction contemplates the
possibility of the Fund engaging in interfund lending activities, a practice
that also has recently become more common in the investment company industry.
It is not anticipated that adoption of the proposed lending restriction would
involve any additional risk as the proposed investment restriction would not
affect the way the Fund is currently managed.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE FOR PROPOSAL 3(c)
PROPOSAL 3(d): TO AMEND THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION REGARDING INVESTMENTS
IN REAL ESTATE
Current Restriction: The Fund may not invest in real estate or interests in
-------------------
real estate (provided that this will not prevent the Fund from investing in
publicly-held real estate investment trusts or marketable securities of
companies which may represent indirect interests in real estate), interests in
oil, gas and/or mineral exploration or development programs or leases.
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<PAGE>
Proposed Restriction: The Fund may not purchase or sell real estate, except
--------------------
that the Fund may purchase or sell securities of real estate investment trusts.
What effects will amending the current fundamental restriction on the Fund's
investments in real estate have?
Under the 1940 Act, an investment company's investment restriction regarding
investment in real estate must be fundamental. The proposed real estate
restriction is substantially the same as the real estate limitation contained in
the Fund's current restriction. Accordingly, the Fund will continue to be
prohibited from directly investing in real estate, but will be permitted to
purchase or sell securities of real estate investment trusts. Adoption of the
proposed fundamental investment restriction is not expected to materially affect
the way the Fund is managed or operated.
The Fund's fundamental investment restriction prohibiting investments in
interests in oil, gas and/or mineral exploration or development programs or
leases, which currently is grouped within one restriction, is proposed to be
eliminated, as discussed below, in Proposal 4(d) of this Proxy Statement.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE FOR PROPOSAL 3(d)
PROPOSAL 3(e): TO AMEND THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION REGARDING INVESTMENT
IN COMMODITIES
Current Restriction: The Fund may not purchase or sell commodities or commodity
-------------------
contracts, except the Fund may enter into futures contracts and options thereon
in accordance with its Registration Statement and may engage in forward foreign
currency contracts and swaps.
Proposed Restriction: The Fund may not purchase or sell commodities except that
--------------------
the Fund may purchase or sell currencies, may enter into futures contracts on
securities, currencies and other indices or any other financial instruments, and
may purchase and sell options on such futures contracts.
What are the legal requirements governing investments in commodities?
Under the 1940 Act, an investment company's investment restriction regarding its
investments in commodities must be fundamental. The most common types of
commodities are physical commodities, such as wheat, cotton, rice and corn.
However, under federal law, futures contracts are considered to be commodities,
and therefore, financial futures contracts, such as futures contracts related to
stocks, currencies, stock indices or interest rates, are also considered to be
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commodities. Investment companies typically invest in financial futures
contracts and options related to such contracts for hedging or other investment
purposes.
What effect will amending the current investment restriction have on the Fund?
The proposed commodities restriction would clarify that the Fund has the
flexibility to: (i) purchase and sell currencies, (ii) invest in futures
contracts on securities, currencies and various indices and (iii) purchase and
sell related options. Thus, while the current restriction had confined the
Fund's permissible activities to futures contracts, options, forward foreign
currency contracts and swaps, the proposed restriction expands the types of
instruments that the Fund may acquire and the types of transactions the Fund may
enter into. The proposed restriction also clarifies that investments may be made
in these instruments for any purpose, including investment or hedging purposes.
The Fund has historically invested in options on securities and options on
futures. The Fund intends, in the future, to invest in financial futures
contracts and related options in an amount that will be substantially similar to
its prior investment activity. Therefore, it is not anticipated that the
proposed investment restriction would involve any additional risk. Using
financial futures instruments can involve substantial risks, and will be
utilized only if Brinson believes such investments are advisable.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE FOR PROPOSAL 3(e)
PROPOSAL 3(f): TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT
RESTRICTION REGARDING ISSUING SENIOR
SECURITIES AND MAKING SHORT SALES
The Fund is subject to a fundamental investment restriction on issuing senior
securities that provide:
Current Restriction: The Fund may not issue senior securities as defined in the
-------------------
[1940] Act except that this restriction will not prevent the Fund from entering
into repurchase agreements or reverse repurchase agreements, borrowing money in
accordance with [the investment] restriction [relating to borrowing money - see
---
Proposal 3(a) above] or purchasing when-issued, delayed delivery or similar
securities.
The Fund is also subject to the following restriction pertaining to making short
sales:
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Current Restriction: The Fund may not sell securities short, except "short
-------------------
sales against the box" or purchase securities on margin, and also except such
short-term credits as are necessary for the clearance of transactions. For this
purpose, the deposit or payment by the Fund for initial or maintenance margin in
connection with futures contracts is not considered to be the purchase or sale
of a security on margin.
Proposed Restriction: The Fund may not issue securities senior to the Fund's
--------------------
presently authorized shares of beneficial interest. Except that this
restriction shall not be deemed to prohibit the Fund from (a) making any
permitted borrowings, loans, mortgages or pledges, (b) entering into options,
futures contracts, forward contracts, repurchase transactions, or reverse
repurchase transactions, or (c) making short sales of securities to the extent
permitted by the 1940 Act and any rule or order thereunder, or SEC staff
interpretations thereof.
What are the legal requirements governing issuing senior securities and making
short sales?
Under the 1940 Act, the Fund must have an investment policy describing its
ability to issue senior securities. A "senior security" is defined under the
1940 Act generally as an obligation of an investment company, with respect to
its earnings or assets, that takes precedence over the claims of the investment
company's shareholders with respect to the same earnings or assets. The 1940 Act
generally prohibits an open-end fund from issuing senior securities, in order to
limit the ability of investment companies to use leveraging. In general, an
investment company uses leveraging when it borrows money to enter into
securities transactions, or acquires an asset without being required to make
payment until a later point in time.
SEC staff interpretations allow an investment company to engage in a number of
types of transactions which might otherwise be considered to create "senior
securities" or "leverage," provided certain conditions are met that are designed
to protect investment company shareholders. For example, some transactions that
may create senior security concerns include short sales, certain options and
futures transactions, reverse repurchase agreements and securities transactions
that obligate the investment company to pay money at a future date (such as
when-issued, forward commitment or delayed delivery transactions). According to
regulatory interpretations, when engaging in such transactions, an investment
company must mark on its or its custodian bank's books, or set aside in a
segregated account with its custodian bank, cash or other liquid securities to
meet the SEC staff's collateralization requirements. This procedure limits the
investment company's ability to engage in these types of transactions and
thereby limits the investment company's exposure to risk associated with these
transactions.
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<PAGE>
What effect will amending the current investment restriction have on the Fund?
The proposed investment restriction would amend the Fund's current investment
restriction and would permit the Fund to engage in options, futures contracts
and forward contracts and to make short sales as permitted under the 1940 Act,
and any exemptions available under the 1940 Act. The proposed investment
restriction also would permit the Fund to engage in permissible types of
leveraging transactions. Essentially, the proposed investment restriction
clarifies the Fund's ability to engage in those investment transactions (such as
repurchase and reverse repurchase transactions)/1/ which, while appearing to
raise senior security concerns, have been interpreted as not constituting the
issuance of senior securities under the federal securities laws. The proposed
investment restriction has been drafted to provide flexibility for the Fund to
respond to legal, regulatory and market developments.
The Fund's current investment restriction relating to short sales is combined
with an investment restriction relating to the maintenance of margin accounts.
The adoption of this revised restriction would result in the separation of the
Fund's short sales investment restrictions from the Fund's fundamental
investment restrictions relating to investments in margin accounts. The
investment restriction relating to investing in margin accounts are proposed to
be eliminated (see Proposal 4(b) of this Proxy Statement).
---
Brinson does not anticipate that any additional risk to the Fund will occur as a
result of amending the current investment restriction because the Fund has no
present intention of changing its current investment policies or engaging in
transactions that may be interpreted as issuing senior securities.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE FOR PROPOSAL 3(f)
PROPOSAL 3(g): TO AMEND THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION REGARDING INDUSTRY
CONCENTRATION
Current Restriction: The Fund may not 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 or by foreign governments or their political subdivisions, or
by supranational organizations) if immediately after such
____________________
/1/ While not explicitly mentioned in the proposed restriction, the Fund
continues to be permitted, under the proposed investment restriction, to engage
in when-issued and delayed delivery transactions.
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<PAGE>
purchase the value of the Fund's investments in such industry would exceed 25%
of the value of the total assets of the Fund.
Proposed Restriction: The Fund may not concentrate (invest more than 25% of its
--------------------
net assets) in securities of issuers in a particular industry (other than
securities issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities or securities of other investment companies).
What are the legal requirements governing industry concentration by the Fund?
Under the 1940 Act, an investment company's policy of concentrating its
investments in securities of companies in the same industry must be fundamental.
Under the federal securities laws, an investment company "concentrates" its
investments, for SEC purposes, if it invests more than 25% of its "net" assets
(exclusive of certain items such as cash, U.S. government securities, securities
of other investment companies, and tax-exempt securities) in a particular
industry or group of industries. An investment company is not permitted to
concentrate its investments in a particular industry unless it so states.
What effect will amending the current concentration restriction have on the
Fund?
The proposed restriction would amend the Fund's current investment restriction
by clarifying the concentration policy's application to the Fund's "net" assets,
rather than to the Fund's "total" assets. (This is consistent with the SEC's
revision of its historical position.) Further, the new investment restriction
provides the Fund with additional flexibility because it exempts from the 25%
limitation securities of other investment companies as permitted by the 1940
Act. Such investment flexibility will help the Fund respond to future legal,
regulatory, market or technical developments. However, adoption of the proposed
investment restriction is not expected to change materially the way in which the
Fund is currently managed or operated, as the Fund does not intend to begin
concentrating in shares of other investment companies.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE FOR PROPOSAL 3(g)
PROPOSAL 4: ELIMINATION OF CERTAIN OF THE FUND'S
FUNDAMENTAL INVESTMENT RESTRICTIONS
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<PAGE>
Why is the Board recommending that the fundamental restrictions be eliminated,
and what effect will these eliminations have on the Fund?
Certain of the Fund's fundamental investment restrictions were originally
drafted to comply with state laws and regulations, which, as a consequence of
the enactment of NSMIA, are no longer in accordance with SEC staff positions
(since such positions have either changed or are no longer relevant to the
Fund). Since NSMIA eliminated the states' ability to substantively regulate
investment companies, the Fund is no longer legally required to include current
fundamental investment restrictions pertaining to the four restrictions
discussed below in this Proxy Statement.
Brinson has determined that eliminating the fundamental investment restrictions
described below is consistent with the federal securities laws, and is therefore
recommending that the shareholders approve the recommended elimination. By
reducing the total number of investment restrictions that can be changed only by
a shareholder vote, Brinson believes that the Fund will be able to minimize the
costs and delays associated with holding future shareholder meetings to revise
fundamental policies that become outdated or inappropriate. Brinson believes
that eliminating the restrictions is in the best interest of the Fund's
shareholders, as it will provide the Fund with increased flexibility to pursue
its investment goals.
What are the risks in eliminating the restrictions?
Brinson does not anticipate that eliminating the investment restrictions will
result in any additional risk to the Fund. Although the Fund's current
investment restrictions, as drafted, are no longer legally required, the Fund's
ability to invest in these four areas will continue to be subject to the
limitations of the 1940 Act, and any exemptive orders granted under the 1940
Act. Further, the Fund has no current intention to change its present investment
practices as a result of eliminating these investment restrictions, except to
the limited extent described below.
PROPOSAL 4(a): TO REMOVE THE FUND'S
FUNDAMENTAL INVESTMENT RESTRICTION REGARDING
INVESTING TO EXERCISE CONTROL OR MANAGEMENT
The Fund is presently subject to an investment restriction that provides that
"the Fund may not make investments in securities for the purpose of exercising
control over or management of the issuer."
The Fund's current fundamental investment restriction limits the Fund's ability
to invest for purposes of exercising control or management. This investment
restriction was enacted in response to various state securities laws and is no
-20-
<PAGE>
longer required under NSMIA. Typically, if an investment company acquires a
large percentage of the securities of a single issuer, it will be deemed to have
invested in such issuer for the purposes of exercising control or management.
This investment restriction was intended to ensure that an investment company
would not be engaged in the business of managing another company.
Eliminating the investment restriction will not have any impact on the day to
day management of the Fund because the Fund has no present intention of
investing in an issuer for the purposes of exercising control or management.
THE BOARD OF TRUSTEES RECOMMENDS
THAT SHAREHOLDERS VOTE FOR PROPOSAL 4(a)
PROPOSAL 4(b): TO REMOVE THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION REGARDING PURCHASING
SECURITIES ON MARGIN
As discussed in Proposal 3(f) of this Proxy Statement, the Fund's current
fundamental investment restriction limits the Fund's ability to purchase
securities on margin. This investment restriction was originally included in the
Fund's list of investment limitations in response to the various state law
requirements to which investment companies were subject, which required a stated
restriction in utilizing margin accounts. As discussed above, under NSMIA, the
Fund is no longer required to retain a fundamental policy regarding these types
of investment activities.
As a general matter, elimination of this fundamental investment restriction
relating to purchasing securities on margin should not have an impact on the day
to day management of the Fund, since the 1940 Act's prohibitions on these types
of transactions would continue to apply to the Fund. The Fund's ability to
purchase securities on margin raises senior security issues and is specifically
prohibited under the 1940 Act, as well as under the Fund's senior securities
investment restriction. Elimination of the investment restriction, therefore,
would not affect the Fund's inability to purchase securities on margin. Finally,
the Fund has not previously, nor does it currently intend, to engage in these
investment activities.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE FOR PROPOSAL 4(b)
PROPOSAL 4(c): TO REMOVE THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION REGARDING INVESTMENTS IN
OTHER INVESTMENT COMPANIES
21
<PAGE>
Current Restriction: The Fund may not invest in securities of any open-end or
-------------------
closed-end investment company, except in accordance with the [1940] Act or any
exemptive order therefrom obtained from the Commission which permits investment
by a Series in other funds or other investment companies or series thereof
advised by the Advisor, and also may invest in the securities of closed-end
investment companies at customary brokerage commission rates.
The Fund's current fundamental investment restriction limits the Fund's ability
to invest in the securities of other open-end investment companies, except where
there is no commission, other than ordinary brokerage commission paid. This
current restriction, which is more restrictive than the 1940 Act provisions in
this regard, was originally included in the Fund's fundamental investment
restrictions in response to various state law requirements. Under NSMIA,
however, the Fund is no longer legally required to retain such a policy as a
fundamental investment restriction.
Upon elimination of this investment restriction, the Fund would remain subject
to the 1940 Act's restrictions on an investment company's ability to invest in
other open-end funds. The 1940 Act's restrictions state that an investment
company may not purchase more than 3% of another investment company's total
outstanding voting stock, commit more than 5% of its assets to the purchase of
another investment company's securities, or have more than 10% of its total
assets invested in securities of all other investment companies. Additionally,
the Fund would continue to operate in accordance with the exemptive orders (the
"Orders") issued by the SEC that have granted relief to the Fund from the 1940
Act's limitations. The Orders permit, subject to certain conditions, (i) the
Fund to invest in other series of the Trust, (ii) certain series of the Trust
that are asset allocation series to invest in other series of the Trust that are
core series, and (iii) the Fund to invest in unregistered money market funds
advised by Brinson.
Elimination of this investment restriction should not have an impact on the day
to day management of the Fund as the Fund does not intend to begin pursuing its
investment objective through the purchase of other open-end investment company
securities.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE FOR PROPOSAL 4(c)
PROPOSAL 4(d): TO REMOVE THE FUND'S FUNDAMENTAL
INVESTMENT RESTRICTION REGARDING INVESTMENTS IN OIL
GAS AND/OR MINERAL EXPLORATION OR DEVELOPMENT
PROGRAMS OR LEASES
-22-
<PAGE>
As discussed in Proposal 3(d) above, the Fund is subject to a restriction
pertaining to these activities. This investment restriction was required to be
adopted by certain states prior to the enactment of NSMIA. As the restriction is
no longer required under present law, Brinson has recommended that it be
eliminated. Notwithstanding the elimination of the fundamental restriction, the
Fund does not expect to engage in these activities.
THE BOARD OF TRUSTEES RECOMMENDS THAT
SHAREHOLDERS VOTE FOR PROPOSAL 4(d)
OTHER BUSINESS
The Trustees know of no other business to be presented at the Special Meeting
other than Proposals 1 through 4, and do not intend to bring any other matters
before the Special Meeting. However, if any additional matters should be
properly presented, proxies will be voted or not voted as specified. Proxies
reflecting no specification will be voted in accordance with the judgment of the
persons named in the proxy.
INFORMATION ABOUT THE TRUST
Who are the service providers to the Trust?
The Investment Advisor. Brinson, a Delaware corporation located in Chicago,
Illinois, is an investment advisor registered with the SEC. As of June 30, 2000,
Brinson was managing over USD $199 billion, primarily for institutional pension
and profit sharing funds. Brinson 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 and its predecessor entities
have managed domestic and international investment assets since 1974 and global
investment assets since 1982. Brinson has offices in Australia, Austria,
Bahrain, Brazil, China, France, Germany, Italy, Japan, Luxembourg, Singapore,
Switzerland and the United Kingdom, in addition to its principal office at 209
South LaSalle Street, Chicago, IL 60604-1295. Brinson is a 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. The address of UBS AG is
P.O. Box CH-8098, Zurich, Switzerland.
In addition to managing the Trust (which consists of nineteen series, including
the Fund), Brinson also serves as the investment advisor to four other
investment companies: The Brinson Funds (the "Brinson Trust," which consists of
eighteen series); Fort Dearborn Income Securities, Inc.; Governor Funds
International Equity Fund and Villanova Mutual Fund Trust - Prestige Large Cap
Value Fund.
-24-
<PAGE>
Brinson acts as the investment advisor to the following series of the Brinson
Trust (the "Brinson Portfolios") and of the Trust (the "Relationship
Portfolios") that have investment objectives similar to the Series:/2/
<TABLE>
<CAPTION>
Expense Cap
Management Applicable to
Net Fee Payable the
The Brinson Portfolios Assets/3/ to Brinson Portfolio
---------------------- -------- ------------- ------------
<S> <C> <C> <C>
Global Fund* $239.9 0.80% 1.10%
Global Equity Fund* $65.2 0.80% 1.00%
Global Bond Fund* $37.7 0.75% 0.90%
U.S. Balanced Fund* $12.7 0.70% 0.80%
U.S. Equity Fund* $163.2 0.70% 0.80%
U.S. Value Equity Fund* $--- 0.70% 0.85%
U.S. Large Cap Equity Fund* $ 6.3 0.70% 0.80%
U.S. Small Cap Equity Fund $--- 1.00% 1.15%
U.S. Real Estate Equity Fund* $--- 0.90% 1.05%
U.S. Bond Fund* $ 66.1 0.50% 0.60%
Emerging Markets Debt Fund $--- 0.65% 1.15
Emerging Markets Equity Fund $--- 1.10% 1.60%
</TABLE>
<TABLE>
<CAPTION>
Expense Cap
Management Applicable to the
Net Fee Payable Relationship
The Relationship Portfolios Assets/4/ to Brinson Portfolios
__________________________ __________ ----------- -----------------
<S> <C> <C> <C>
Brinson Global Securities $798.3 N/A 0.05%
Fund
Brinson Global Bond Fund $--- N/A 0.05%
Brinson U.S. Equity Fund $ 75.2 N/A 0.01%
</TABLE>
________________________________
/2/ The investment objectives of the Fund, along with the investment objectives
of the Brinson Portfolios and Relationship Portfolios listed herein, is to
maximize total U.S. dollar return, consisting of capital appreciation and
current income, while controlling risk. For those Brinson Portfolios marked with
an (*), the investment objective of each of the Portfolios is to maximize total
return, consisting of capital appreciation and current income, while controlling
risk.
/3/ Net assets, in millions, as of August 31, 2000
/4/ Net assets, in millions, as of August 31, 2000
-25-
<PAGE>
<TABLE>
<CAPTION>
Expense Cap
Management Applicable to the
Net Fee Payable Relationship
The Relationship Portfolios Assets/4/ to Brinson Portfolios
--------------------------- ---------- ----------- ----------
<S> <C> <C> <C>
Brinson U.S. Large $ 10.1 N/A 0.01%
Capitalization Equity Fund
Brinson U.S. Intermediate $ -- N/A 0.01%
Capitalization Equity Fund
Brinson U.S. Value Equity Fund $108.0 N/A 0.01%
Brinson U.S. Small $468.7 N/A N/A/5/
Capitalization Equity Fund
Brinson Global (Ex-U.S.) $ 74.8 N/A 0.06%
Equity Fund
Brinson Emerging Markets $284.7 N/A 0.50%
Equity Fund
Brinson Bond Plus Fund $ -- N/A 0.05%
Brinson U.S. Bond Fund $ 10.9 N/A 0.01%
Brinson U.S. Short $ -- N/A 0.01%
Intermediate Fixed Income Fund
Brinson Emerging Markets
Debt Fund $182.2 N/A 0.50%
Brinson Limited Duration Fund $ -- N/A 0.01%
Brinson Short-Term Fund $ 41.9 N/A 0.05%
</TABLE>
The President and Chief Executive Officer of Brinson is Benjamin F. Lenhardt,
Jr. The directors of Brinson are: Gary P. Brinson, Jeffrey J. Diermeier,
Benjamin F. Lenhardt, Jr. and Nicholas C. Rassas. The address of each of the
directors of Brinson is the offices of Brinson at 209 South LaSalle Street,
Chicago, Illinois, 60604. The principal occupation of the directors of Brinson
is as follows: Mr. Brinson, Director, Chairman of the Board of Directors and
Managing Director, Brinson; Mr. Diermeier, Director, Chief Investment Officer
and Managing Director, Brinson; Mr. Lenhardt, Director, President, Chief
Executive Officer and Managing Director, Brinson; and Mr. Rassas, Director, Vice
President and Managing Director, Brinson.
__________________________
/5/ For this Relationship Portfolio, Brinson has agreed to pay all of the
Portfolio's total operating expenses.
-25-
<PAGE>
For additional information regarding UBS New York, the proposed sub-adviser to
the Fund, see "Information Concerning UBS New York" on page [__] of this Proxy
Statement.
The Administrator. Chase Global Funds Services Company ("CGFSC"), a corporate
affiliate of The Chase Manhattan Bank, provides administrative, accounting,
portfolio valuation and transfer agency services to the Fund. The address of
CGFSC is 73 Tremont Street, Boston, MA 02108-3913.
Annual and Semi-Annual Reports. The Relationship Series' most recent audited
financial statements and Annual Report, for the fiscal year ended December 31,
1999, and most recent unaudited financial statements and Semi-Annual Report, for
the period ended June 30, 2000, have been previously mailed to shareholders, and
are available free of charge. If you have not received an Annual Report or Semi-
Annual Report for the Fund, or would like to receive additional copies, free of
charge, please write the Trust at the address on the cover page of this Proxy
Statement, or call the Trust at 312-220-7487, and the Reports and financial
statements will be sent to you by first-class mail within three business days.
Other Matters Relating to the Trust. The Trust is an open-end, diversified
management investment company, as defined in the 1940 Act. The shares of the
Trust, when issued, will be fully paid and nonassessable, and within each series
or class, have no preference as to conversion, exchange, dividends, redemption
or other features. The shares of the Trust which the Trustees may, from time to
time, establish, shall have no preemptive rights. The shares of the Trust have
non-cumulative voting rights. On any matter submitted to a vote of shareholders,
all shares of the Trust then issued and outstanding and entitled to vote,
irrespective of the series or class and all shares of all series and classes
shall vote as a single class ("Single Class Voting"); provided, however, that:
(i) as to any matter with respect to which a separate vote of any series or
class is required by the 1940 Act or by the law governing Delaware business
trusts, such requirement as to a separate vote by that series or class shall
apply in lieu of Single Class Voting as described above; (ii) in the event that
the separate vote requirements referred to in (i) above apply with respect to
one or more series or classes, then, subject to (iii) below, the shares of all
other series or classes shall vote as a single class; and (iii) as to any matter
which does not affect the interest of a particular series or class, only the
holders of shares of the one or more affected series or classes shall be
entitled to vote.
FURTHER INFORMATION ABOUT VOTING AND THE SPECIAL MEETING
Record Date. Shareholders of record at the close of business on September 18,
2000 (the "Record Date") are entitled to be present and to vote at the Special
-26-
<PAGE>
Meeting or any adjournment of the Special Meeting. Each share of record is
entitled to one vote on each matter presented at the Special Meeting, with
proportionate votes for fractional shares.
As of the Record Date, there were _________ outstanding shares of beneficial
interest of the Fund.
From time to time, the number of shares held in "street name" accounts of
various securities dealers for the benefit of their clients may exceed 5% of the
total shares outstanding. To the knowledge of management, as of the Record
Date, the following persons owned of record or beneficially more than 5% of the
outstanding voting shares of the:
Name & Address of Beneficial Owners Number of Shares Percentage
----------------------------------- ---------------- ----------
Do the Trustees and Officers of the Trust Own Shares of the Fund?
As of the Record Date, the Trustees and officers of the Trust owned the
following number of shares of beneficial interest of the Fund and the other
series of the Trust:
Name and Position(s) with the Trust Ownership of Series Shares
----------------------------------- --------------------------
Frank K. Reilly _______
Chairman and Trustee
Walter E. Auch _______
Trustee
Andrew J. O'Reilly* _______
Trustee
Edward M. Roob _______
Trustee
Thomas J. Digenan _______
President
Carolyn M. Burke _______
Vice President, Treasurer, Secretary
and Principal Accounting Officer
-27-
<PAGE>
Name and Position(s) with the Trust Ownership of Series Shares
----------------------------------- --------------------------
David E. Floyd _______
Assistant Secretary
Mark F. Kemper _______
Assistant Secretary
Alanna N. Palmer _______
Assistant Secretary
* "Interested person" of the Trust as that term is defined in the 1940 Act.
Mr. O'Reilly is the Treasurer, Chief Financial Officer and Managing Director of
Brinson, the Trust's investment advisor and manager, and, as such, is an
"interested person" (as that term is defined in the 1940 Act) of the Trust. In
addition, Mr. Digenan, Ms. Burke, Mr. Floyd, Mr. Kemper and Ms. Palmer are
officers and/or employees of Brinson. These individuals do not receive any
compensation from the Trust.
As of September 18, 2000, each individual officer and Trustee of the Trust owned
beneficially less than 1% of the outstanding shares of the Fund and of the
Trust. Also, as of September 18, 2000, the officers and Trustees of the Trust,
as a group, owned less than 1% of the outstanding shares of the Fund and of the
Trust.
None of the Trustees or executive officers have familial relationships with any
other Trustee or executive officer.
Voting Methods. You may vote your shares in one of several ways. You can vote
by mail, fax, or in person at the Special Meeting.
To vote by mail, sign, date and send us the enclosed proxy card in the envelope
provided. To vote by fax, sign the proxy and fax both sides of the card to 312-
554-2723.
Proxy cards that are properly signed, dated and received at or prior to the
Special Meeting will be voted as specified. If you specify a vote for any of the
Proposals 1 through 4, your proxy card will be voted as you indicated. If you
simply sign and date the proxy card, but do not specify a vote for any of the
Proposals 1 through 4, your shares will be voted IN FAVOR of the termination of
the Current Relationship Agreement, and the approval of the Proposed
Relationship Agreement (Proposal 1), IN FAVOR of the approval of the Sub-
Advisory Agreement with UBS New York (Proposal 2), IN FAVOR of the amendments to
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<PAGE>
the Fund's fundamental investment restrictions (Proposals 3(a)-3(g)) and IN
FAVOR of the elimination of certain fundamental investment restrictions of the
Fund (Proposals 4(a)-4(d)).
Revocation of Proxies. You may revoke your proxy at any time by sending to the
Trust a written revocation or a later-dated proxy card that is received at or
before the Special Meeting, or by attending the Special Meeting and voting in
person.
Solicitation of Proxies. Your vote is being solicited by the Board of Trustees
of the Trust. The cost of preparing and mailing the notice of meeting, proxy
cards, this Proxy Statement, and any additional proxy materials, has been or
will be borne by the Trust. The Trust reimburses brokerage firms and others for
their expenses in forwarding proxy material to the beneficial owners and
soliciting them to execute proxies. The Trust does not reimburse Trustees and
officers of the Trust, or regular employees and agents of Brinson or CGFSC
involved in the solicitation of proxies. The Trust intends to pay all costs
associated with the solicitation and the Special Meeting.
Proxy solicitations will be made primarily by mail, but they may also be made by
telephone, telegraph, personal interview or oral solicitations conducted by
certain officers or employees of the Trust, Brinson or CGFSC.
Voting by Broker-Dealers. The Trust expects that, before the Special Meeting,
broker-dealer firms holding shares of the Fund in "street name" for their
customers will request voting instructions from their customers and beneficial
owners. If these instructions are not received by the date specified in the
broker-dealer firms' proxy solicitation materials, the Trust understands that
New York Stock Exchange rules permit the broker-dealers to vote on certain of
the proposals to be considered at the Special Meeting on behalf of their
customers and beneficial owners. Certain broker-dealers may exercise discretion
over shares held in their name for which no instructions are received by voting
these shares in the same proportion as they vote shares for which they received
instructions.
Quorum and Required Vote. The presence, in person or by proxy, of the holders
of record of a majority of the shares of the Fund, issued and outstanding and
entitled to vote, shall constitute a quorum for the transaction of business at
the Special Meeting for the Fund. For purposes of determining the presence of a
quorum and counting votes on the matters presented, shares represented by
abstentions and "broker non-votes" likely will be counted as present, but likely
not treated as votes cast, at the Special Meeting. The affirmative vote
necessary to approve a matter under consideration is determined with reference
to a percentage of votes considered to be present at the Special Meeting, which
would
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<PAGE>
have the effect of treating abstentions and broker non-votes as if they were
votes against the proposal.
-------
The approval of each Proposal described in this Proxy Statement for the Fund
will be determined on the basis of a vote of a "majority of the outstanding
voting securities" of the Fund, as defined in and required by the 1940 Act.
This vote requires the lesser of (A) 67% or more of the voting securities of the
Fund present at the Special Meeting, if the holders of more than 50% of the
outstanding voting securities of such Fund are present or represented by proxy;
or (B) more than 50% of the outstanding voting securities of such Fund.
Adjournment. In the event that a quorum is not present at the Special Meeting,
the Special Meeting will be adjourned to permit further solicitation of proxies.
In the event that a quorum is present, but sufficient votes have not been
received to approve one or more of the Proposals, the persons named as proxies
may propose one or more adjournments of the Special Meeting to permit further
solicitation of proxies with respect to those Proposals. The persons named as
proxies will vote in their discretion on questions of adjournment those shares
for which proxies have been received that grant discretionary authority to vote
on matters that may properly come before the Special Meeting.
Shareholder Proposals. The Trust is not required, and does not intend, to hold
regular annual meetings of shareholders. Shareholders wishing to submit
proposals for consideration for inclusion in a proxy statement for the next
meeting of shareholders should send their written proposals to the Trust's
offices, 209 South LaSalle Street, Chicago, Illinois 60604, Attn: Secretary, so
they are received within a reasonable time before any such meeting. The
Trustees know of no business, other than the matters mentioned in the Notice and
described above, that is expected to come before the Special Meeting. Should
any other matter requiring a vote of shareholders arise, including any question
as to an adjournment or postponement of the Special Meeting, the persons named
as proxies will vote on such matters according to their best judgment in the
interests of the Trust.
Respectfully,
Carolyn M. Burke
Secretary of Brinson Relationship Funds
September 25, 2000
Chicago, Illinois
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<PAGE>
EXHIBIT A
---------
CURRENT INVESTMENT ADVISORY AGREEMENT FOR
-----------------------------------------
BRINSON RELATIONSHIP FUNDS
--------------------------
INVESTMENT ADVISORY AGREEMENT
This Agreement made this 26th day of April, 1995, by and between Brinson
Relationship Funds, a Delaware Business Trust (the "Trust") and Brinson
Partners, Inc., a Delaware corporation (the "Advisor").
WITNESSETH:
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Trust is authorized to issue separate series of shares
representing interests in separate investment portfolios (each referred to as a
"Portfolio" and collectively referred to as the "Portfolios"), which Portfolios
are identified on Schedule A attached hereto, and which Schedule A may be
amended from time to time by mutual agreement of the Trust and the Advisor; and
WHEREAS, the Trust and the Advisor desire to enter into an agreement
pursuant to which the Adviser will provide investment advisory services for each
of the Portfolios of the Trust that are from time to time set forth on Schedule
A hereto, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Duties of Advisor. The Trust hereby appoints the Advisor to act as
-----------------
investment adviser to the Portfolios 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 Portfolios, to continuously review, supervise
and administer the investment program of the Portfolios, 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
A-1
<PAGE>
limitations set forth in the Trust's prospectuses 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
provided herein. With respect to foreign securities, at its own expense, the
Advisor may obtain statistical and other factual information and advice
regarding the 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 Portfolios 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
and sales of securities for the Portfolios and is directed to use its best
efforts to ensure that the best available price and most favorable execution of
securities transactions for the Portfolios 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
any Portfolio, or be in breach of any obligation owing to the Trust or in
respect of any Portfolio under this Agreement, or otherwise, solely by reason of
its having caused any Portfolio to pay a member of a securities exchange, a
broker or a dealer a commission for effecting a securities transaction for any
Portfolio 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 Portfolios, as to which it exercises investment
discretion. The Advisor will promptly communicate to the officers and Trustees
of the Trust such information relating to Portfolio transactions as they may
reasonably request.
3. Compensation of the Advisor. The Advisor shall not receive a fee from
---------------------------
the Trust or its Portfolios for the services to be rendered by the Advisor.
4. Reports. The Portfolios 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 Portfolios 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 Portfolios are not impaired
thereby.
A-2
<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 Portfolios, or to any shareholder of the Portfolios, 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 Portfolios.
7. Duration and Termination. This Agreement shall become effective April
------------------------
28, 1995, 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, and by the holders of a majority of
the outstanding voting securities of the Portfolios; and shall continue in
effect until April 28, 1997. 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 Portfolios; 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. 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 Portfolios 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 7, 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 Investment Company Act and Rule 18f-2 thereunder.
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 legal name and/or the name of the
Portfolios any reference to the name of the Advisor promptly after receipt from
the Advisor of a written request therefor.
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.
A-3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this 26th day of April, 1995.
ATTEST: THE BRINSON FUNDS
By: /s/ Debra L. Nichols By: /s/ E. Thomas McFarlan
-------------------- ----------------------
Debra L. Nichols E. Thomas McFarlan
Assistant Secretary President
ATTEST: BRINSON PARTNERS, INC.
By: /s/ Mark F. Kemper By: /s/ Samuel W. Anderson
------------------ ----------------------
Mark F. Kemper Samuel W. Anderson
Assistant Secretary President
A-4
<PAGE>
SCHEDULE A
PORTFOLIOS OF BRINSON RELATIONSHIP FUNDS
Brinson Global Securities Fund
Brinson Short-Term Fund
Brinson Post-Venture Fund
Brinson High Yield Fund
Brinson Emerging Markets Equity Fund
Brinson Emerging Markets Debt Fund
A-5
<PAGE>
EXHIBIT B
---------
PROPOSED INVESTMENT ADVISORY AGREEMENT FOR
------------------------------------------
BRINSON RELATIONSHIP FUNDS
--------------------------
INVESTMENT ADVISORY AGREEMENT
This Agreement made this ____ day of _________, 2000, by and between
Brinson Relationship Funds, a Delaware business trust (the "Trust"), and Brinson
Partners, Inc., a Delaware corporation (the "Advisor").
WITNESSETH:
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"); and
WHEREAS, the Trust is authorized to issue separate series of shares
representing interests in separate investment portfolios (each referred to as a
"Portfolio" and collectively referred to as the "Portfolios"), which Portfolios
are identified on Schedule A attached hereto, and which Schedule A may be
amended from time to time by mutual agreement of the Trust and the Advisor; and
WHEREAS, the Trust and the Advisor desire to enter into an agreement
pursuant to which the Advisor will provide investment advisory services for each
of the Portfolios of the Trust that are from time to time set forth on Schedule
A hereto, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Duties of Advisor. The Trust hereby appoints the Advisor to act as
-----------------
investment adviser to the Portfolios for the period and on such terms as are set
forth in this Agreement. The Trust employs the Advisor to manage the investment
and reinvestment of the assets of the Portfolios, to continuously review,
supervise and administer the investment program of the Portfolios, to determine
in its discretion the assets to be held uninvested, to provide the Trust with
records concerning the Advisor's activities that 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
B-1
<PAGE>
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 prospectuses
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 provided herein.
2. Portfolio Transactions. The Advisor shall provide the Portfolios with
----------------------
a trading department. The Advisor shall select, and with respect to the use of
any Sub-Advisers, as defined in Section 7 of this Agreement, shall monitor the
selection of, the brokers or dealers that will execute the purchases and sales
of securities for the Portfolios and is directed to use its best efforts to
ensure that the best available price and most favorable execution of securities
transactions for the Portfolios 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 any Portfolio, or
be in breach of any obligation owing to the Trust or in respect of any Portfolio
under this Agreement, or otherwise, solely by reason of its having caused any
Portfolio to pay a member of a securities exchange, a broker or a dealer a
commission for effecting a securities transaction for any Portfolio 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 Portfolios and to
other funds and advisory accounts for which the Advisor, or any Sub-Advisor,
exercises investment discretion. The Advisor will promptly communicate to the
officers and Trustees of the Trust such information relating to Portfolio
transactions as they may reasonably request.
3. Compensation of the Advisor. The Advisor shall not receive a fee from
---------------------------
the Trust or its Portfolios for the services to be rendered by the Advisor.
4. Reports. The Portfolios 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 Portfolios 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 Portfolios are not impaired
thereby.
6. Liability of Advisor. In the absence of willful misfeasance, bad
--------------------
faith, gross negligence or reckless disregard by the Advisor of its obligations
and
B-2
<PAGE>
duties hereunder, the Advisor shall not be subject to any liability whatsoever
to the Portfolios, or to any shareholder of the Portfolios, 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 Portfolios.
7. Delegation of Responsibilities to Sub-Advisers. The Advisor may, at
----------------------------------------------
its expense, select and contract with one or more investment advisers registered
under the Investment Advisers Act of 1940, as amended ("Sub-Advisers") to
perform some or all of the services for the Series for which it is responsible
under this Agreement. The Advisor will compensate any Sub-Adviser for its
services to the Portfolios. The Advisor may terminate the services of any Sub-
Adviser at any time in its sole discretion, and shall at such time assume the
responsibility of such Sub-Adviser unless and until a successor Sub-Adviser is
selected and the requisite approval of the Portfolios' shareholders is obtained.
The Advisor will continue to have responsibility for all advisory services
furnished by any Sub-Adviser.
8. Duration and Termination. This Agreement shall become effective as to
------------------------
a Portfolio on ____________, 2000, 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, and by the
holders of a majority of the outstanding voting securities of the Portfolios;
and shall continue in effect until ____________, 2002. Thereafter, this
Agreement may continue in effect as to a Portfolio only if such continuance is
approved at least annually by: (i) the Trust's Board of Trustees or, (ii) the
vote of a majority of the outstanding voting securities of the Portfolio; 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. This Agreement may be
terminated by the Trust at any time as to a Portfolio, 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 Portfolio 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
B-3
<PAGE>
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the Investment Company Act and Rule 18f-2 thereunder.
9. 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 legal name and/or the name of the
Portfolios any reference to the name of the Advisor promptly after receipt from
the Advisor of a written request therefor.
10. 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 ____ day of _________, 2000.
Attest: BRINSON RELATIONSHIP FUNDS
By:_____________________________ By:________________________
Name: Name:
Title: Title:
Attest: BRINSON PARTNERS, INC.
By:_____________________________ By:________________________
Name: Name:
Title: Title:
B-4
<PAGE>
SCHEDULE A
PORTFOLIOS OF BRINSON RELATIONSHIP FUNDS
Brinson High Yield Fund
B-5
<PAGE>
EXHIBIT C
---------
PROPOSED SUB-ADVISORY AGREEMENT BETWEEN THE
--------------------------------------------
TRUST AND UBS ASSET MANAGEMENT (NEW YORK)
-----------------------------------------
BRINSON RELATIONSHIP FUNDS
SUB-ADVISORY AGREEMENT
AGREEMENT, made by and between BRINSON PARTNERS, INC., a Delaware
corporation (the "Investment Manager"), and UBS ASSET MANAGEMENT (NEW YORK),
INC., a New York corporation (the "Sub-Adviser").
WITNESSETH:
WHEREAS, BRINSON RELATIONSHIP FUNDS, a Delaware business trust (the
"Trust"), has been organized and operates as an investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), and
engages in the business of investing and reinvesting its assets in securities;
and
WHEREAS, the Investment Manager and the Sub-Adviser are registered
investment advisers under the Investment Advisers Act of 1940, as amended, and
engage in the business of providing investment management services; and
WHEREAS, the Investment Manager and the Trust have entered into an
agreement dated as of _____________, 2000 (the "Investment Management
Agreement") whereby the Investment Manager provides investment advisory services
to the Trust on behalf of each of its series (the "Series"); and
WHEREAS, the Investment Management Agreement permits the Investment
Manager to hire one or more sub-advisers to assist the Investment Manager in
providing investment advisory services to the Series;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Investment Manager hereby employs the Sub-Adviser, subject
always to the Investment Manager's control and supervision, with respect to each
Series listed on Exhibit A to this Agreement, which Exhibit may be amended from
time to time, to manage the investment and reinvestment of that portion of the
portfolio of each Series, as the Investment Manager shall designate
C-1
<PAGE>
from time to time, and to furnish the Investment Manager with investment
recommendations, asset allocation advice, research and other investment
services, subject to the direction of the Board of Trustees and officers of the
Trust for the period and on the terms hereinafter set forth. The Sub-Adviser
hereby accepts such employment and agrees during such period to render the
services and assume the obligations herein set forth. The Sub-Adviser shall, for
all purposes herein, be deemed to be an independent contractor, and shall,
unless otherwise expressly provided and authorized, have no authority to act for
or represent the Trust or the Series in any way, or in any way be deemed an
agent of the Trust or the Series. The Sub-Adviser shall regularly make decisions
as to what securities to purchase and sell on behalf of the Series, shall effect
the purchase and sale of investments in furtherance of the Series' objectives
and policies by placing transactions through its trading department or the
Investment Manager's trading department, and shall furnish the Board of Trustees
of the Trust with such information and reports regarding the Series' investments
as the Investment Manager deems appropriate or as the Trustees of the Trust may
reasonably request. The Sub-Adviser shall act in conformity with the Agreement
and Declaration of Trust and By-Laws of the Trust, and the Series' prospectus
and with the instructions and directions of the Investment Manager and of the
Board of Trustees of the Trust, and shall conform to and comply with the
requirements of the 1940 Act, the Internal Revenue Code of 1986, as amended, and
all other applicable federal and state laws and regulations consistent with the
provisions of Section 15(c) of the 1940 Act.
2. (a) Subject to the primary objective of obtaining the best
available prices and execution, the Sub-Adviser will place orders for the
purchase and sale of portfolio securities with such broker/dealers who provide
statistical, factual and financial information and services to the Trust, to the
Investment Manager, to the Sub-Adviser or to any other fund for which the
Investment Manager or Sub-Adviser provides investment advisory services and/or
with broker/dealers who sell shares of the Series or who sell shares of any
other fund for which the Investment Manager or Sub-Adviser provides investment
advisory services. Broker/dealers who sell shares of the funds for which the
Investment Manager or Sub-Adviser provides advisory services shall only receive
orders for the purchase or sale of portfolio securities to the extent that the
placing of such orders is in compliance with the Rules of the Securities and
Exchange Commission ("SEC") and the National Association of Securities Dealers,
Inc.
(b) Notwithstanding the provisions of subparagraph (a) above and
subject to such policies and procedures as may be adopted by the Board of
Trustees and officers of the Trust, the Sub-Adviser may ask the Trust, on behalf
of a Series, and the Trust, on behalf of a Series, may agree to pay a member of
an exchange, broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another member of an exchange,
broker or dealer would have charged for effecting that
C-2
<PAGE>
transaction, in such instances where the Trust and the Sub-Adviser have
determined in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
member, broker or dealer, viewed in terms of either that particular transaction
or the Sub-Adviser's overall responsibilities with respect to the Series and to
other funds and other advisory accounts for which the Investment Manager or the
Sub-Adviser exercises investment discretion.
3. No compensation shall be paid to the Sub-Adviser for the
services to be provided under this Agreement.
4. The services to be rendered by the Sub-Adviser to the Series
under the provisions of this Agreement are not to be deemed to be exclusive, and
the Sub-Adviser shall be free to render similar or different services to others
so long as its ability to render the services provided for in this Agreement
shall not be impaired thereby.
5. The Sub-Adviser, its directors, officers, employees, agents and
shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Series or to any other investment company, corporation, association, firm or
individual.
6. In the absence of willful misfeasance, bad faith, gross
negligence, or a reckless disregard of the performance of duties of the Sub-
Adviser to the Series, the Sub-Adviser shall not be subject to liability to the
Series or to any shareholder of the Series for any action or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security, or
otherwise.
7. (a) This Agreement shall be executed and become effective as of
the date written below. It shall continue in effect for a period of two years
and may be renewed thereafter as to a Series only so long as such renewal and
continuance is specifically approved at least annually by the Board of Trustees
of the Trust or by vote of a majority of the outstanding voting securities of
the particular Series and only if the terms and the renewal hereof have been
approved by the vote of a majority of the Trustees of the Trust who are not
parties hereto or interested persons of any such party ("Independent Trustees"),
cast in person at a meeting called for the purpose of voting on such approval.
(b) No amendment to this Agreement shall be effective as to a
particular Series unless approved by: (i) a majority of the Trustees; and (ii) a
majority of the outstanding voting securities of the Series. Notwithstanding the
foregoing, this Agreement may be amended as to a particular Series without the
approval of a majority of the outstanding voting securities of the Series if the
C-3
<PAGE>
amendment relates solely to a change that is permitted or not prohibited under
federal law, rule, regulation or SEC staff interpretation thereof to be made
without shareholder approval.
Notwithstanding the foregoing, this Agreement may be terminated as to
a Series by the Investment Manager or the Trust at any time, without the payment
of a penalty, on not more than sixty days' written notice to the Sub-Adviser, of
the Investment Manager's or the Trust's intention to do so, in the case of the
Trust pursuant to action by the Board of Trustees of the Trust or pursuant to
vote of a majority of the outstanding voting securities of a particular Series.
The Sub-Adviser may terminate this Agreement at any time, without the payment of
a penalty, on not more than sixty days' written notice to the Investment Manager
and the Trust of its intention to do so. Upon termination of this Agreement, the
obligations of all the parties hereunder shall cease and terminate as of the
date of such termination, except for any obligation to respond for a breach of
this Agreement committed prior to such termination. This Agreement shall
automatically terminate in the event of its assignment. This Agreement shall
automatically terminate upon the termination of the Investment Management
Agreement.
8. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
9. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities;" "interested person;" and "assignment"
shall have the respective meanings set forth in the 1940 Act.
C-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
having it signed by their duly authorized officers as of the ____ day of
_________, 2000.
BRINSON PARTNERS, INC.
Attest:________________ By:__________________
Name: Name:
Title: Title:
UBS ASSET MANAGEMENT
(NEW YORK), INC.
Attest:________________ By:_________________
Name: Name:
Title: Title:
Agreed to and accepted as of the day and year first above written:
BRINSON RELATIONSHIP
FUNDS
Attest:________________ By:___________________
Name: Name:
Title: Title:
C-5
<PAGE>
EXHIBIT A
Series Subject to this Agreement
Brinson High Yield Fund
C-6
<PAGE>
BRINSON HIGH YIELD FUND
Proxy for Special Meeting of Unitholders - October 30, 2000
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned unitholders
("shareholders") of the Brinson High Yield Fund (the "Fund"), a series of
Brinson Relationship Funds (the "Trust"), hereby appoint Thomas J. Digenan,
Carolyn M. Burke and Alanna N. Palmer, or any one of them, true and lawful
attorneys, with the power of substitution of each, to vote all units ("shares")
of the Fund which the undersigned may be entitled to vote at the Special Meeting
of Unitholders (the "Special Meeting") to be held on October 30, 2000, at The
Rookery Building, 209 South LaSalle Street, Chicago, IL 60604, at 4:00 p.m.,
Central time, and at any adjournment thereof.
The proxies named will vote the shares represented by this proxy in accordance
with the choices made on this ballot. If no choice is indicated as to the item,
this proxy will be voted affirmatively on the matters. The matters being
considered have been proposed by management. The matters being proposed are
related to, but not conditioned on, the approval of each other, except as noted.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF BRINSON
RELATIONSHIP FUNDS. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" THE PROPOSALS.
By checking the box "FOR" below, you will vote to approve
each of the proposed items in this proxy.
FOR [ ]
Proposal 1 To approve the termination of the Investment Advisory Agreement
between the Trust, with respect to the Fund, and Brinson Partners,
Inc. ("Brinson"), and to approve a new Investment Advisory
Agreement between the Trust, on behalf of the Fund, and Brinson
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
-31-
<PAGE>
Proposal 2 To approve the Sub-Advisory Agreement between Brinson and UBS Asset
Management (New York), Inc.
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
Proposal 3 To make amendments to the Fund's fundamental investment
restrictions:
3 (a) To amend the Fund's fundamental investment restriction regarding
borrowing
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3 (b) To amend the Fund's fundamental investment restriction regarding
underwriting
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3 (c) To amend the Fund's fundamental investment restriction regarding
lending
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3 (d) To amend the Fund's fundamental investment restriction regarding
investments in real estate
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
-32-
<PAGE>
3 (e) To amend the Fund's fundamental investment restriction regarding
investments in commodities
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3 (f) To amend the Fund's fundamental investment restriction regarding
issuing senior securities and making short sales
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
3 (g) To amend the Fund's fundamental investment restriction regarding
concentration
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
Proposal 4 To eliminate certain fundamental investment restrictions of the
Fund:
4 (a) To eliminate the Fund's fundamental investment restriction
regarding investing to exercise control or management
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
4 (b) To eliminate the Fund's fundamental investment restriction
regarding purchasing securities on margin
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
-33-
<PAGE>
4 (c) To eliminate the Fund's fundamental investment restriction
regarding investing in other investment companies
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
4 (d) To eliminate the Fund's fundamental investment restriction
regarding investing in oil, gas and/or mineral exploration or
development programs or leases
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
YOUR VOTE IS IMPORTANT
Please complete, sign and return
this card as soon as possible.
__________________________________
Dated
__________________________________
Signature
__________________________________
Signature (Joint Owners)
Please sign this proxy exactly as your name appears on the books of the Trust.
Joint owners should each sign personally. Directors and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If a corporation, this signature should be that of an
authorized officer who should state his or her title.
-34-
