-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R0b5wJAq22Iy0po6khaGlCFR//iBGd52VD+Hrie9elNC7vNrzsFbF7CrTeDo8YLr qm/e+O5aE4Cxj7dA9HANCA== 0000950131-00-002957.txt : 20000503 0000950131-00-002957.hdr.sgml : 20000503 ACCESSION NUMBER: 0000950131-00-002957 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 23 FILED AS OF DATE: 20000502 EFFECTIVENESS DATE: 20000502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRINSON FUNDS INC CENTRAL INDEX KEY: 0000886244 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-47287 FILM NUMBER: 616221 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-06637 FILM NUMBER: 616222 BUSINESS ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 BUSINESS PHONE: 8001482430 MAIL ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 485BPOS 1 THE BRINSON FUNDS - POST EFFECTIVE AMEND. #30 UNITED STATES FILE NO. 33-47287 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FILE NO. 811-6637 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. | | ------ Post Effective Amendment No. 30 |X| ------ REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | | Amendment No. 31 |X| ------ THE BRINSON FUNDS ================= (Exact name of Registrant as Specified in Charter) 209 South LaSalle Street Chicago, Illinois 60604-1295 - ----------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code 312-220-7100 ------------ The Brinson Funds 209 South LaSalle Street Chicago, Illinois 60604-1295 ---------------------------- (Name and Address of Agent for Service) COPIES TO: Bruce G. Leto, Esq. Stradley, Ronon, Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103-7098 APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICAL AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE: |X| IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b) | | ON ________________ PURSUANT TO PARAGRAPH (b) | | 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(1) | | ON ______ PURSUANT TO PARAGRAPH (a) (1) | | 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2) | | ON April 28, 2000 PURSUANT TO PARAGRAPH (a)(2) OF RULE 485. IF APPROPRIATE, CHECK THE FOLLOWING BOX: | | THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT. ================================================================================ The Brinson Funds Global Fund Global Equity Fund Global Technology Fund Global Biotech Fund Global Bond Fund U.S. Balanced Fund U.S. Equity Fund U.S. Value Equity Fund U.S. Large Cap Equity Fund U.S. Large Cap Growth Fund U.S. Small Cap Equity Fund U.S. Small Cap Growth Fund U.S. Real Estate Equity Fund U.S. Bond Fund High Yield Fund Emerging Markets Debt Fund Global (Ex-U.S.) Equity Fund Emerging Markets Equity Fund Class I Shares [BRINSON LOGO HERE] Prospectus May 1, 2000 As with any mutual fund, the Securities and Exchange Commission (SEC) has not approved or disapproved of these securities or determined whether this prospectus is adequate or complete. Any representation to the contrary is a criminal offense.
Table of Contents The Brinson Investment Process ........................ 2 Overview of the Funds Global Fund ....................................... 3 Global Equity Fund ................................ 4 Global Technology Fund ............................ 5 Global Biotech Fund ............................... 6 Global Bond Fund .................................. 7 U.S. Balanced Fund ................................ 8 U.S. Equity Fund .................................. 9 U.S. Value Equity Fund ............................ 10 U.S. Large Cap Equity Fund ........................ 11 U.S. Large Cap Growth Fund ........................ 12 U.S. Small Cap Equity Fund ........................ 13 U.S. Small Cap Growth Fund ........................ 14 U.S. Real Estate Equity Fund ...................... 15 U.S. Bond Fund .................................... 16 High Yield Fund ................................... 17 Emerging Markets Debt Fund ........................ 18 Global (Ex-U.S.) Equity Fund ...................... 19 Emerging Markets Equity Fund ...................... 20 Risk Considerations ................................... 21 Fees and Expenses ..................................... 24 Investment Advisor .................................... 26 Pricing of Fund Shares ................................ 27 Purchasing Shares ..................................... 28 Redeeming Shares ...................................... 30 Dividends and Distributions ........................... 31 Tax Considerations .................................... 32 Financial Highlights .................................. 33
1 Overview of the Funds A Look at the Brinson Investment Process At Brinson Partners, Inc. ("Brinson Partners" or the "Advisor"), we believe that the fundamental value of any investment is related to the future cash flows that it will generate for its investors. We believe that this determination must be made within a framework of globally integrated capital markets. World economies and financial markets are interactive. Thus, investment management, both within and across global stock and bond markets, must be based upon comprehensive knowledge and analysis of integrated investment fundamentals. When making asset allocation decisions, if we are indifferent with respect to a market, industry, or other characteristic, we tend toward the "normal" weight, as determined by its proportion within the passive benchmark. Decisions to deviate from the normal mix of assets are a blend of rigorous quantitative analysis, an understanding of the fundamental relationships among global markets, and the expertise and insights of our investment professionals. Security selection decisions for the core/value equity, growth equity and fixed income Funds are also made in relation to the benchmark, as described in each Fund's principal strategy section. We may substitute securities from an equivalent index that we believe more accurately reflects changes in our expectations for various classes of investments. Equity Selections Core/Value Equity Funds Our Core/Value equity process focuses on identifying discrepancies between securities' fundamental values and their observed market prices. For each stock under our analysis, we estimate an intrinsic or fundamental value using disciplined quantitative techniques that incorporate our team of analysts' considerations of company management, competitive advantage, and each company's core competencies. These value estimates are then compared to current market prices and ranked against the other stocks in our valuation universe. Portfolios are constructed by focusing on those stocks that rank in the top 20% of the valuation output. The Fund's risk is carefully monitored, with consideration given to market sensitivity, common factor exposures, industry weightings and individual stock selection. Growth Equity Funds Brinson Partners also manages portfolios against growth-oriented equity benchmarks. In the growth universe, we seek to invest in companies that possess a dominant market position and franchise, a major technical edge or a unique competitive advantage. Factors employed in our quantitative disciplines include earnings revisions, favorable analyst diffusion trends, positive stock price momentum and sales acceleration. Our seasoned investment professionals then conduct intensive fundamental research on the universe of companies identified as attractive by our quantitative models. Portfolios are constructed and monitored with close adherence to risk control guidelines. Specialized Sector Funds In response to changing market conditions and to the varied and dynamic needs of our clients, we offer several specialized sector Funds. These Funds are diversified among narrower market segments than our core/value and growth Funds, and are intended to compliment a diversified investment program. Security selection for these Funds is driven by relative valuation attractiveness over other securities within the specified sector. Investment decisions rely on quantitative analysis and screening, as well as fundamental research and valuation work. Fixed Income Selections We use an internally developed valuation model for fixed income selections for our Funds, which quantifies our return expectations for all of the bond markets. Inputs to this model include forecasts of inflation, risk premiums and interest rates. Our credit review process incorporates both a top-down strategy, which focuses on how macroeconomic forces shape various industry outlooks, and a bottom-up strategy, which relies on a combination of qualitative and quantitative factors. Our qualitative assessment focuses on management strength, market position, competitive environment and financial flexibility. Our quantitative assessment focuses on historical operating results, calculation of various credit ratios and an expected future outlook. With the exception of the High Yield Fund, our fixed income selections generally include all categories of investment grade fixed income securities, but emphasize the higher quality securities in this spectrum (those with a credit rating of AA and above). Our fixed income strategies combine judgments about the absolute value of the fixed income universe and the relative value of issuer sectors, maturity intervals, duration of securities, quality and coupon segments and specific fixed income securities. Cash and Cash Equivalents Each Fund may invest in cash or cash equivalent instruments, including units of an affiliated money market fund. See the Statement of Additional Information for further information. Shares of The Brinson Funds are not bank deposits and are not insured or guaranteed by the FDIC or any other government agency. The value of your investment in a Fund will fluctuate, which means that you may lose money. 2 Global Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income. Principal Strategies The Fund employs both core/value equity and fixed income strategies. The Fund invests primarily in a portfolio of global equity and global fixed income securities. At least 65% of the Fund's assets are invested in securities of issuers in at least three countries (which may include the United States). All security selection decisions are made relative to the Global Securities Markets Index (GSMI) Mutual Fund Index, the benchmark against which the Fund measures its portfolio. Although it may invest anywhere in the world, the Fund invests primarily in: * Equity markets listed in the Morgan Stanley Capital International ("MSCI") World Equity (Free) Index * Fixed income markets listed in the Salomon Smith Barney World Government Bond Index The Fund may invest in different types of securities in order to access these markets. Other investments may include other open-end investment companies advised by Brinson Partners. The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 11.15% -1.89% 24.14% 14.10% 11.00% 8.32% 1.49% - ------------------------------------------------------------------ 93 94 95 96 97 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -1.07%. Best Quarter: Q2 1997 8.24% Worst Quarter: Q3 1998 -5.32% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (8/31/92) - --------------------------------------------------------------- Global Fund 1.49% 11.56% - 9.51% Salomon Smith Barney -4.26% 6.42% - 6.06% World Gov't. Bond Index MSCI World Equity (Free) 25.12% 20.09% - 17.22% Index GSMI Mutual Fund Index 16.85% 17.03% - 14.07%
GSMI Mutual Fund Index An unmanaged index compiled by Brinson Partners, currently constructed as follows: 40% Wilshire 5000 Equity 3% Merrill Lynch High Index Yield Master 22% MSCI World Ex USA Index (Free) Index 3% MSCI Emerging 21% Salomon Smith Barney Markets Free BIG Bond Index Index 9% Salomon Smith Barney 2% JP Morgan EMBI+ Non-U.S. Gov't. Bond Index From time to time, underlying indices may change. MSCI World Equity (Free) Index A broad based securities index that represents the U.S. and developed global (ex-U.S.) equity markets in terms of capitalization and performance. It is designed to provide a representative total return for all major stock exchanges located inside and outside the United States. Salomon Smith Barney World Government Bond Index A securities index that represents the broad global fixed income markets and includes debt issues of U.S. and most developed global (ex-U.S.) governments, governmental entities and supranationals. 3 Global Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income. Principal Strategies The Fund employs a core/value equity strategy, and invests primarily in a portfolio of global equity securities, which may include dividend-paying securities. At least 65% of the Fund's assets are invested in securities of issuers in at least three countries (which may include the United States). Although it may invest anywhere in the world, the Fund invests primarily in equity markets listed in the Morgan Stanley Capital International ("MSCI") World Equity (Free) Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 21.93% 17.26% 10.72% 14.03% 12.87% - ---------------------------------------------------- 95 96 97 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -5.47%. Best Quarter: Q4 1998 14.25% Worst Quarter: Q3 1998 -9.97% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (1/31/94) - --------------------------------------------------------------- Global Equity Fund 12.87% 15.29% - 11.94% MSCI World Equity 25.12% 20.09% - 16.52% (Free) Index
MSCI World Equity (Free) Index A broad based securities index that represents the U.S. and developed global (ex-U.S.) equity markets in terms of capitalization and performance. It is designed to provide a representative total return for all major stock exchanges located inside and outside the United States. 4 Global Technology Fund Objective The Fund seeks to provide long-term capital appreciation. Principal Strategies Under normal circumstances, the Fund invests at least 65% of its assets in equity securities of technology companies. The Fund employs a specialized sector strategy, and is a non-diversified portfolio. The selection of companies is mainly influenced by a strong competitive position allowing the Fund to participate in the growth of each industry. Furthermore, the quality of the management, the technological innovation and the revenue growth of the companies are very important. The Fund's benchmark is the Morgan Stanley High Tech Index. Investments in equity securities may include: * Common stock * Preferred stock Given that the Fund invests primarily in technology-related securities, there is a risk that economic factors such as patent considerations, intense competition, rapid technological changes and obsolescence may have a substantial impact on the Fund's investments. The Fund's portfolio turnover rate may exceed 100%. Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Technology Companies Technology companies develop, sell, or significantly benefit from the use of technology products and services. The term technology includes electronics, data processing, semi-conductors, telecommunications, and technology services. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Morgan Stanley High Tech Index The Morgan Stanley High Tech Index is an equal dollar-weighted index of 35 stocks from 9 technology subsectors: computer services, design software, server software, PC software and new media, networking and telecom equipment, server hardware, PC hardware and peripherals, specialized systems, and semiconductors. The index was developed with a base value of 200 as of December 16, 1994, and is rebalanced annually. 5 Global Biotech Fund Objective The Fund seeks to provide long-term capital appreciation. Principal Strategies Under normal circumstances, the Fund invests at least 65% of its assets in equity securities of biotechnology companies. The Fund employs a specialized sector strategy, and is a non-diversified portfolio. Stock selection is based on bottom-up, fundamental analysis. Biotechnology companies generate value by developing new kinds of drugs and technologies. The basis of the fundamental analysis is to analyze the science behind the drugs and technologies. Although the Fund may invest anywhere in the world, it principally invests in the equity securities contained in the NASDAQ Biotech Index, which consists of 200 companies. One company currently represents approximately 30% of this index, occasionally causing direct comparison to the Fund to be distorted. Investments in equity securities may include: * Common stock * Preferred stock Given that the Fund invests primarily in biotechnology-related securities, there is a risk that factors such as patent considerations, intense competition, rapid technological changes and obsolescence, and government regulation may have a substantial impact on the Fund's investments. The Fund's portfolio turnover rate may exceed 100%. Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Biotechnology Companies Companies focusing on research, product development, product manufacture and distribution in the biotechnology sector. The majority of companies are newly established and have a single product in its early development stage. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. NASDAQ Biotech Index The NASDAQ Biotech Index is a capitalization-weighted index of 200 biotechnology stocks listed on the NASDAQ exchange. The index was developed with a base value of 200 as of November 1, 1993. 6 Global Bond Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income. Principal Strategies The Fund employs a fixed income strategy, and invests primarily in a portfolio of global debt securities that may also provide the potential for capital appreciation. The Fund is a non-diversified portfolio. Normally, at least 65% of the Fund's assets are invested in long-term debt securities of issuers in at least three countries (which may include the United States). Although it may invest anywhere in the world, the Fund invests primarily in fixed income markets listed in the Salomon Smith Barney World Government Bond Index, the benchmark against which the Fund measures its portfolio. Investments in fixed income securities may include: * Debt securities of the U.S. government, its agencies and instrumentalities * Debt securities of global (ex-U.S.) governments * Debt securities of corporations * Mortgage-backed securities * Asset-backed securities The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] -3.49% 20.32% 9.30% 1.63% 11.98% -6.27% - --------------------------------------------------------------------- 94 95 96 97 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -0.99%. Best Quarter: Q3 1998 6.06% Worst Quarter: Q1 1999 -3.33% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (7/31/93) - --------------------------------------------------------------- Global Bond Fund -6.27% 7.00% - 5.45% Salomon Smith Barney -4.26% 6.42% - 6.02% World Government Bond Index
Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Long-Term Debt Debt securities with an initial maturity of more than one year. Salomon Smith Barney World Government Bond Index A securities index that represents the broad global fixed income markets and includes debt issues of U.S. and most developed global (ex-U.S.) governments, governmental entities and supranationals. 7 U.S. Balanced Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income. Principal Strategies The Fund employs both core/value equity and fixed income strategies. The Fund invests primarily in a wide range of U.S. equity, fixed income and money market securities. Under normal circumstances, the Fund will invest at least 25% of its net assets in fixed income securities. All selection decisions are made relative to the U.S. Balanced Mutual Fund Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Investments in fixed income securities may include: * Debt securities of the U.S. government, its agencies and instrumentalities * Debt securities of U.S. corporations * Mortgage-backed securities * Asset-backed securities * When-issued securities The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 25.48% 11.32% 13.22% 9.92% -6.95% - ---------------------------------------------------------- 95 96 97 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -0.95%. Best Quarter: Q2 1997 7.10% Worst Quarter: Q3 1999 -5.12% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (12/31/94) - --------------------------------------------------------------- U.S. Balanced Fund -6.95% 10.09% - 10.09% Salomon Smith Barney -0.84% 7.74% - 7.74% BIG Bond Index Wilshire 5000 Equity 23.56% 27.06% - 27.06% Index U.S. Balanced Mutual 14.66% 20.14% - 20.14% Fund Index
U.S. Balanced Mutual Fund Index Compiled by Brinson Partners, this unmanaged index represents a fixed composite of 65% Wilshire 5000 Equity Index and 35% Salomon Smith Barney Broad Investment Grade (BIG) Bond Index. From time to time, underlying indices may change. Wilshire 5000 Equity Index A broad-based, market capitalization weighted index that includes all U.S. common stocks. It is designed to provide a representative indication of the capitalization and return for the U.S. equity market. Salomon Smith Barney Broad Investment Grade (BIG) Bond Index A broad-based index that includes U.S. bonds with over one year to maturity. 8 U.S. Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy. Normally, the Fund invests at least 65% of its assets in equity securities, which may include dividend-paying securities, of U.S. companies. All selection decisions are made relative to the Wilshire 5000 Equity Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 40.58% 25.65% 24.76% 18.57% -4.05% - --------------------------------------------------------- 95 96 97 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -5.83%. Best Quarter: Q4 1998 16.35% Worst Quarter: Q3 1999 -14.25% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (2/28/94) - --------------------------------------------------------------- U.S. Equity Fund -4.05% 20.17% - 16.71% Wilshire 5000 Equity 23.56% 27.06% - 22.60% Index
Wilshire 5000 Equity Index A broad-based, market capitalization weighted index that includes all U.S. common stocks. It is designed to provide a representative indication of the capitalization and return for the U.S. equity market. 9 U.S. Value Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy. Under normal circumstances, the Fund invests at least 65% of its assets in equity securities, which may include dividend-paying securities, of U.S. companies. The Fund invests primarily in securities in the Russell 1000(R) Value Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Russell 1000(R) Value Index The Russell 1000(R) Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market cap of the Russell 3000 Index. As of the latest reconstitution, the average market cap of the Russell 1000(R) Index was approximately $12.1 billion; the median market cap was approximately $3.8 billion. The smallest company in the index had an approximate market cap of $1,350.8 million. The Russell 1000(R) Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. 10 U.S. Large Cap Equity Fund (formerly the U.S. Large Capitalization Equity Fund) Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy. Under normal circumstances, the Fund invests at least 65% of its assets in equity securities of U.S. large cap companies. The Fund is a non-diversified portfolio. All selection decisions are undertaken relative to the Standard & Poor's 500 Equity Index ("S&P 500 Index"), the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows the Fund's performance over the past year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Return for the period ended 12/31* [BAR CHART APPEARS HERE] - -11.05% - ------- 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -9.35%. Best Quarter: Q4 1998 15.44% Worst Quarter: Q3 1999 -15.36% Average Annual Total Returns (for the periods ended 12/31/99) Performance 1 5 10 Inception Year Year Year (4/30/98) - ----------------------------------------------------- U.S. Large Cap Equity Fund -11.05% - - -3.53% S&P 500 Index 21.04% - - 19.85% Large Cap Companies Companies with market caps in the upper 65% of the Wilshire 5000 Equity Index. Companies whose capitalization falls below this level after purchase will continue to be considered large cap companies. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. S&P 500 Index A broad cap market-weighted index that includes common stocks of the leading companies in the top industries in the United States. It is designed to provide a representative indication of the capitalization and return of the large cap U.S. equity market. 11 U.S. Large Cap Growth Fund (formerly the U.S. Large Capitalization Growth Fund) Objective The Fund seeks to provide long-term capital appreciation. Principal Strategies The Fund employs a growth equity strategy, and invests primarily in a portfolio of equity securities of large cap growth companies. The Fund is a non- diversified portfolio. All selection decisions are made relative to the Russell 1000(R) Growth Index, the benchmark against which the Fund measures its portfolio. * Normally, at least 65% of the Fund's assets are invested in securities issued by large cap growth companies. * Up to 20% of the Fund's assets may be invested in foreign securities. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 24.90% 32.73% - --------------- 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was 7.15%. Best Quarter: Q4 1998 26.41% Worst Quarter: Q3 1998 -12.67% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (10/31/97) - ------------------------------------------------------------ U.S. Large Cap 32.73% - - 28.53% Growth Fund Russell 1000(R) 33.16% - - 36.00% Growth Index S&P 500 Index/1/ 21.04% - - 26.23%
(1) The Advisor has changed the Fund's benchmark index from the S&P 500 Index to the Russell 1000(R) Growth Index based on the Advisor's determination that the Russell 1000(R) Growth Index is more representative of the Fund's investment strategies. Large Cap Growth Companies Companies with market caps in the upper 65% of the Wilshire 5000 Equity Index. Companies whose capitalization falls below this level after purchase will continue to be considered large cap growth companies. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Russell 1000(R) Growth Index The Russell 1000(R) Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market cap of the Russell 3000 Index. As of the latest reconstitution, the average market cap of the Russell 1000(R) Index was approximately $12.1 billion; the median market cap was approximately $3.8 billion. The smallest company in the index had an approximate market cap of $1,350.8 million. The Russell 1000(R) Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. 12 U.S. Small Cap Equity Fund Objective The Fund seeks to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy, and will invest primarily in publicly traded companies represented in the Wilshire Small Stock Index. All selection decisions are made relative to the Wilshire Small Stock Index, the benchmark against which the Fund measures its portfolio. * Normally, at least 65% of the Fund's assets are invested in equity securities issued by U.S. small cap companies. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Small Cap Companies Companies with market caps in the lower 10% of the Wilshire 5000 Equity Index. Wilshire Small Stock Index This benchmark represents approximately the smallest 10% of the Wilshire 5000 Equity Index in terms of capitalization. The Wilshire 5000 Equity Index is a broad-based, market cap weighted index that includes all U.S. common stocks. 13 U.S. Small Cap Growth Fund (formerly the U.S. Small Capitalization Growth Fund) Objective The Fund seeks to provide long-term capital appreciation. Principal Strategies The Fund employs a growth equity strategy. Under normal conditions, the Fund invests at least 65% of its assets in equity securities of U.S. small cap companies. All selection decisions are made relative to the Russell 2000 Growth Index, the benchmark against which the Fund measures its portfolio. The Fund may also invest in securities of emerging growth companies. The Fund may invest up to 20% of its assets in foreign securities. Investments in equity securities may include: * Common stock * Preferred stock The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] - -6.70% 41.70% - --------------- 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was 22.37%. Best Quarter: Q4 1999 32.94% Worst Quarter: Q3 1998 -23.86% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (9/30/97) - ----------------------------------------------------------- U.S. Small Cap 41.70% - - 10.33% Growth Fund Russell 2000 Growth 43.09% - - 13.51% Index Russell 2000 Index/1/ 21.26% - - 6.08%
/1/ The Advisor has changed the Fund's benchmark index from the Russell 2000 Index to the Russell 2000 Growth Index based on the Advisor's determination that the Russell 2000 Growth Index is more representative of the Fund's investment strategies. Small Cap Companies Companies with market caps in the lower 10% of the Wilshire 5000 Equity Index. Emerging Growth Companies Small or medium sized companies that have passed their start-up phase and are showing positive earnings, as well as potential for achieving significant profit in a relatively short period of time. Russell 2000 Growth Index An unmanaged index composed of those companies in the Russell 2000 Index with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an index composed of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. 14 U.S. Real Estate Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a specialized sector strategy. Normally, the Fund invests at least 65% of its assets in real estate equity securities, including real estate investment trusts (REITs). The Fund is a non-diversified portfolio. Although the Fund may invest in any real estate related security, the Morgan Stanley REIT Index serves as its benchmark. Investments in equity securities may include: * Common stock * Preferred stock Given that the Fund invests primarily in securities issued by REITs, there is a risk that changes in real estate values or economic downturns can have a substantial impact on the Fund's investments. The Fund's portfolio turnover rate may exceed 100%. Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. REITs Publicly traded companies that own and often operate real property and/or invest in mortgage and mortgage-backed securities. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Morgan Stanley REIT Index The Morgan Stanley REIT Index is a total-return index comprised of the most actively-traded real estate investment trusts and is designed to be a measure of real estate equity performance. The index was developed with a base value of 200 as of December 31, 1994. 15 U.S. Bond Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a fixed income strategy, and invests primarily in a portfolio of investment-grade fixed income securities that may also provide the potential for capital appreciation. As a matter of fundamental policy, under normal circumstances, at least 65% of the Fund's total assets are invested in U.S. long-term debt securities. All selection decisions are made relative to the Salomon Smith Barney Broad Investment Grade (BIG) Bond Index, the benchmark against which the Fund measures its portfolio. Investments in fixed income securities may include: * Debt securities of the U.S. government, its agencies and instrumentalities * Debt securities of U.S. corporations * Mortgage-backed securities * Asset-backed securities The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 3.53% 9.64% 8.37% -1.04% - ------------------------------ 96 97 98 99 *The Fund's total return for the period January 1, 2000 through March 31, 2000 was 1.95% Best Quarter: Q4 1995 4.55% Worst Quarter: Q1 1996 -2.23% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (8/31/95) - ---------------------------------------------------------- U.S. Bond Fund -1.04% - - 5.94% Salomon Smith Barney -0.84% - - 6.05% BIG Bond Index
Investment-Grade Fixed income securities possessing a minimum rating of: * BBB by Standard & Poor's Ratings Group ("S&P") or * Baa by Moody's Investors Services, Inc. ("Moody's") or * If unrated, are determined to be of comparable quality by the Advisor. Long-Term Debt Debt securities with an initial maturity of more than one year. Salomon Smith Barney Broad Investment Grade (BIG) Bond Index A broad-based index that includes U.S. bonds with over one year to maturity. 16 High Yield Fund Objectives The Fund's primary objective is to provide high current income from a portfolio of higher-yielding, lower-rated debt securities issued by domestic and foreign companies. The Fund also seeks capital growth, when consistent with high current income, by investing in securities, including common stocks and non-income producing securities, which the Advisor expects will appreciate in value as a result of declines in long-term interest rates or favorable developments affecting the business or prospects of the issuer which may improve the issuer's financial condition and credit rating. Principal Strategies The Fund employs a fixed income strategy, and invests primarily in a portfolio of U.S. higher-yielding, lower-rated bonds: * Under normal conditions, at least 65% of the Fund's assets are invested in fixed income securities that provide higher yields and are "lower-rated" * Up to 25% of the Fund's assets may be invested in foreign securities All selection decisions are undertaken relative to the Merrill Lynch High Yield Master Index, the benchmark against which the Fund measures its portfolio. Investments in fixed income securities may include: * Debt securities of corporations * Zero coupon securities * Asset-backed securities * When-issued securities * Eurodollar securities The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 7.75% 4.85% - ------------- 98 99 *The Fund's total return for the period January 1, 2000 through March 31, 2000 was -3.85%. Best Quarter: Q4 1998 4.32% Worst Quarter: Q1 2000 -3.85% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (9/30/97) - ---------------------------------------------------------------- High Yield Fund 4.85% - - 6.66% Merrill Lynch High Yield 1.57% - - 3.48% Master Index
Lower-Rated Bonds Bonds rated in the lower rating categories of Moody's and S&P, including securities rated: * Ba or lower by Moody's or * BB or lower by S&P. Securities rated in these categories or lower are considered to be of poorer quality and predominantly speculative. Merrill Lynch High Yield Master Index An index of publicly placed non-convertible, coupon-bearing U.S. domestic debt with a term to maturity of at least one year. 17 Emerging Markets Debt Fund Objective The Fund seeks to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a fixed income strategy, and intends to invest primarily in a portfolio of debt securities of issuers located in at least three emerging markets countries, which may be located in Asia, Europe, Latin America, Africa or the Middle East. As these markets change and other countries' markets develop, the Fund expects the countries in which it invests to change. The Fund is a non-diversified portfolio. All selection decisions are undertaken relative to the J.P. Morgan Emerging Markets Bond Index Plus, the benchmark against which the Fund measures its portfolio. Normally, the Fund invests at least 65% of its total assets in debt securities issued by: * Governments * Government-related entities (including participations in loans between governments and financial institutions) * Corporations * Entities organized to restructure outstanding debt of issuers in emerging markets The Fund also invests in debt securities on which the return is derived primarily from other emerging market instruments, such as interest rate swap contracts and currency swap contracts. The Fund may invest in Eurodollar securities, which are fixed income securities of a U.S. issuer or a foreign issuer that are issued outside the United States. A substantial amount of the assets of the Fund may be invested in higher- yielding, lower-rated bonds. Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Emerging Markets The World Bank and other international agencies consider a country to be an "emerging markets" country on the basis of such factors as trade initiatives, per capita income and level of industrialization. Emerging market countries generally include every nation in the world except the U.S., Canada, Japan, Australia, New Zealand and most nations located in Western Europe. Non-Diversified Portfolio Invests most of its assets in a smaller number of issuers, resulting in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Lower-Rated Bonds Bonds rated in the lower rating categories of Moody's and S&P, including securities rated: . Ba or lower by Moody's or . BB or lower by S&P Securities rated in these categories or lower are considered to be of poorer quality and predominantly speculative. J.P. Morgan Emerging Markets Bond Index Plus Comprised of external-currency-denominated emerging markets debt, including Brady Bonds, loans, Eurobonds and local market instruments. 18 Global (Ex-U.S.) Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, by investing primarily in the equity securities of global (ex- U.S.) issuers. Principal Strategies The Fund employs a core/value equity strategy. Normally, the Fund invests at least 65% of its assets in equity securities of issuers in at least three countries other than the United States. Although it may invest anywhere in the world, the Fund invests primarily in the equity markets listed in the Morgan Stanley Capital International ("MSCI") World Ex USA (Free) Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 0.94% 15.55% 12.75% 5.74% 14.39% 19.16% - ------------------------------------------------- 94 95 96 97 98 99 *The Fund's total return for the period January 1, 2000 through March 31, 2000 was -4.25%. Best Quarter: Q4 1998 17.15% Worst Quarter: Q3 1998 -13.66% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (8/31/93) - -------------------------------------------------------------------- Global (Ex-U.S.) Equity 19.16% 13.42% - 10.01% Fund MSCI World Ex USA 27.77% 13.12% - 11.28% (Free) Index
MSCI World Ex USA (Free) Index An unmanaged, market driven broad based securities index which includes global (ex-U.S.) equity markets in terms of capitalization and performance. 19 Emerging Markets Equity Fund Objective The Fund seeks to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy, and intends to invest primarily in a portfolio of equity securities of issuers located in at least three emerging markets countries, which may be located in Asia, Europe, Latin America, Africa or the Middle East. As these markets change and other countries' markets develop, the Fund expects the countries in which it invests to change. The Fund is a non-diversified portfolio. All selection decisions are undertaken relative to the Morgan Stanley Capital International (MSCI) Emerging Markets (Free) Index, the benchmark against which the Fund measures its portfolio. Normally, the Fund invests at least 65% of its assets in the equity securities of issuers in emerging markets or securities on which the return is derived from the equity securities of issuers in emerging markets, such as equity swap contracts and equity index swap contracts. Up to 35% of the Fund's assets may be invested in higher-yielding, lower-rated bonds. The Fund may invest in Eurodollar securities, which are fixed income securities of a U.S. issuer or a foreign issuer that are issued outside of the United States. Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Emerging Markets The World Bank and other international agencies consider a country to be an "emerging markets" country on the basis of such factors as trade initiatives, per capita income and level of industrialization. Emerging market countries generally include every nation in the world except the U.S., Canada, Japan, Australia, New Zealand and most nations located in Western Europe. Non-Diversified Portfolio Invests most of its assets in a smaller number of issuers, resulting in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Lower-Rated Bonds Bonds rated in the lower rating categories of Moody's and S&P, including securities rated: . Ba or lower by Moody's or . BB or lower by S&P Securities rated in these categories or lower are considered to be of poorer quality and predominantly speculative. Morgan Stanley Capital International (MSCI) Emerging Markets (Free) Index A market capitalization weighted index which captures 60% of a country's total capitalization while maintaining the overall risk structure of the market. Stocks are included at their full market capitalization weight, and the index reflects actual buyable opportunities for the non-domestic investor. 20 Risk Considerations The chart below illustrates the primary risks of investing in the Funds.
Foreign Geographic Industry Non- Country Concen- High Concen- Interest Diversifi- Pre- Small Credit & Currency tration Yield tration Rate Market cation payment Company - ------------------------------------------------------------------------------------------------------------------------------------ Global Fund * * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Equity Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Technology Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Biotech Fund * * * * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Bond Fund * * * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Balanced Fund * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Equity Fund * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Value Equity Fund * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Large Cap Equity Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Large Cap Growth Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Small Cap Equity Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Small Cap Growth Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Real Estate Equity Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Bond Fund * * * - ------------------------------------------------------------------------------------------------------------------------------------ High Yield Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ Emerging Markets * * * * * * Debt Fund - ------------------------------------------------------------------------------------------------------------------------------------ Global (Ex-U.S.) Equity Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ Emerging Markets * * * * * Equity Fund - ------------------------------------------------------------------------------------------------------------------------------------
21 Risk Considerations (cont.) All Fund investments are subject to risk and may decline in value. Each Fund's exposure depends upon its specific investment practices. The amount and types of risk vary depending on: * The investment objective(s) * The Fund's ability to achieve its objectives * The markets in which the Fund invests * The investments the Fund makes in those markets * Prevailing economic conditions over the period of an investment Please note that there are other circumstances that could adversely affect your investment and potentially prevent a Fund from achieving its objectives. Credit Risk The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise be unable to honor a financial obligation. Debt securities rated below investment-grade are especially susceptible to this risk. Foreign Country and Currency Risks The risk that prices of a Fund's investments in foreign securities may go down because of unfavorable foreign government actions, political instability or the absence of accurate information about foreign issuers. Also, a decline in the value of foreign currencies relative to the U.S. dollar will reduce the value of securities denominated in those currencies. Foreign securities are sometimes less liquid and harder to value than securities of U.S. issuers. These risks are more severe for securities of issuers in emerging markets countries. The World Bank and other international agencies consider a country to be an "emerging markets" country on the basis of such factors as trade initiatives, per capita income and level of industrialization. Emerging market countries generally include every nation in the world except the U.S., Canada, Japan, Australia, New Zealand and most nations located in Western Europe. On January 1, 1999, the European Monetary Union introduced a new single currency, the Euro, which replaced the national currencies of participating member nations. If a Fund held investments in nations with currencies replaced by the Euro, the investment process, including trading, foreign exchange, payments, settlements, cash accounts, custody and accounting, was impacted. To the extent the Funds hold non-U.S. dollar denominated securities (Euro or other), they will still be exposed to currency risk due to fluctuations in those currencies versus the U.S. dollar. Geographic Concentration Risk The risk that if a Fund has most of its investments in a single country or region, its portfolio will be more susceptible to factors adversely affecting issuers located in that country or region than would a more geographically diverse portfolio of securities. High Yield Risk The risk that the issuer of bonds with ratings of BB (S&P) or Ba (Moody's) or below will default or otherwise be unable to honor a financial obligation. These securities are considered to be of poor standing and are predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations and involve major risk exposure. Bonds in this category may also be called "high yield bonds" or "junk bonds." Industry Concentration Risk The risk that changes in economic, political or other conditions may have a particularly negative effect on issuers in an industry in which a Fund's investments are concentrated. Interest Rate Risk The risk that changing interest rates may adversely affect the value of an investment. With fixed-rate securities, an increase in prevailing interest rates typically causes the value of a Fund's securities to fall, while a decline in prevailing interest rates may produce an increase in the market value of the securities. Changes in interest rates will affect the value of longer-term fixed income securities more than shorter-term securities and lower quality securities more than higher quality securities. The investment objective of each Fund is "fundamental" and may be changed only with shareholder approval. Unless otherwise stated, each Fund's investment policies are not fundamental and may be changed by the Trust's Trustees without a shareholder vote. There can be no assurance that the Funds will be able to attain their objectives. Each Fund's primary investment practices and strategies are discussed in this prospectus. Other practices, and their related risks, are described in the Statement of Additional Information ("SAI"). 22 Risk Considerations (cont.) Market Risk The risk that the market value of a Fund's investments will fluctuate as the stock and bond markets fluctuate. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Non-Diversification Risk The risk that a non-diversified Fund will be more volatile than a diversified Fund because it invests its assets in a smaller number of issuers. The gains or losses on a single security or issuer will, therefore, have a greater impact on the non-diversified Fund's net asset value. Portfolio Turnover The Funds generally intend to purchase securities for long-term investment. Portfolio turnover rates are not a factor in making buy and sell decisions. Increased portfolio turnover may result in higher costs for brokerage commissions, dealer mark-ups and other transaction costs. It may also result in taxable capital gains. Higher costs associated with increased portfolio turnover may offset gains in a Fund's performance. Prepayment Risk The risk that issuers will prepay fixed rate obligations when interest rates fall, forcing the Fund to re-invest in obligations with lower interest rates than the original obligations. Small Company Risk The risk that investments in smaller companies may be more volatile than investments in larger companies, as smaller companies generally experience higher growth and failure rates. The trading volume of smaller company securities is normally lower than that of larger companies. Changes in the demand for the securities of smaller companies generally have a disproportionate effect on their market price, tending to make prices rise more in response to buying demand and fall more in response to selling pressure. 23 Fees and Expenses The tables below describe the fees and expenses that you may pay if you buy and hold shares of The Brinson Funds-Class I shares. Shareholder Transaction Fees (fees paid directly from your investment) Sales Charge (Load) Imposed on Purchases None Emerging Markets Equity Fund: Purchase/Redemption Transaction Fee 1.50%* * This transaction charge is paid to the Fund and used by it to defray transaction costs associated with each purchase and sale of securities by the Fund. Annual Fund Operating Expenses (expenses that are deducted from Fund assets, expressed as a % of average net assets)
Amount of Fee Total Fund Operating Waiver and/or Expenses (after fee Investment Other Gross Operating Expense waiver and/or expense (06/30/99) Advisory Fees/1/ Expenses/1/ Expenses/1/ Reimbursement/1/ reimbursement)/1/ - ----------------------------------------------------------------------------------------------------------------------- Global 0.80% 0.16% 0.96% 0.00% 0.96% Global Equity 0.80% 0.25% 1.05% 0.05% 1.00% Global Technology/2/ 1.40% 0.15% 1.55% 0.00% 1.55% Global Biotech/2/ 1.15% 0.15% 1.30% 0.00% 1.30% Global Bond 0.75% 0.15% 0.90% 0.00% 0.90% U.S. Balanced 0.70% 0.26% 0.96% 0.16% 0.80% U.S. Equity 0.70% 0.10% 0.80% 0.00% 0.80% U.S. Value Equity/2/ 0.70% 0.15% 0.85% 0.00% 0.85% U.S. Large Cap Equity 0.70% 0.59% 1.29% 0.49% 0.80% U.S. Large Cap Growth/3/ 0.70% 1.68% 2.38% 1.58% 0.80% U.S. Small Cap Equity/2/ 1.00% 0.15% 1.15% 0.00% 1.15% U.S. Small Cap Growth/3/ 1.00% 0.32% 1.32% 0.17% 1.15% U.S. Real Estate Equity/2/ 0.90% 0.15% 1.05% 0.00% 1.05% U.S. Bond 0.50% 0.11% 0.61% 0.01% 0.60% High Yield/3/ 0.60% 0.23% 0.83% 0.13% 0.70% Emerging Markets Debt/2/ 0.65% 0.50% 1.15% 0.00% 1.15% Global (Ex-U.S.) Equity 0.80% 0.19% 0.99% 0.00% 0.99% Emerging Markets Equity/2/ 1.10% 0.50% 1.60% 0.00% 1.60%
24 Fees and Expenses (cont.) (1) The Advisor has irrevocably agreed to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Funds do not exceed the percentages noted in the chart on page 26. (2) The fees and expenses noted for the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund are based on estimates. (3) The U.S. Large Cap Growth Fund, the U.S. Small Cap Growth Fund and the High Yield Fund were created as the result of a reorganization of three corresponding funds of UBS Private Investor Funds, Inc. into these Funds on December 18, 1998. The fees and expenses of these three Funds are based on fees and expenses incurred for the period January 1, 1999 through June 30, 1999 (annualized). Expense Example This example is intended to help you compare the cost of investing in the Brinson Funds-Class I shares to the cost of investing in other mutual funds. The example assumes that you invest $10,000 in a Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs and the return on your investment may be higher or lower, based on these assumptions your costs would be:
1 year 3 years 5 years 10 years Global Fund $ 98 $306 $531 $1,178 Global Equity Fund $102 $318 $552 $1,225 Global Technology Fund $158 $490 $845 $1,845 Global Biotech Fund $132 $412 $713 $1,568 Global Bond Fund $ 92 $287 $498 $1,108 U.S. Balanced Fund $ 82 $255 $444 $ 990 U.S. Equity Fund $ 82 $255 $444 $ 990 U.S. Value Equity Fund $ 87 $271 $471 $1,049 U.S. Large Cap Equity Fund $ 82 $255 $444 $ 990 U.S. Large Cap Growth Fund $ 82 $255 $444 $ 990 U.S. Small Cap Equity Fund $117 $365 $633 $1,398 U.S. Small Cap Growth Fund $117 $365 $633 $1,398 U.S.Real Estate Equity Fund $107 $334 $579 $1,283 U.S. Bond Fund $ 61 $192 $335 $ 750 High Yield Fund $ 72 $224 $390 $ 871 Emerging Markets Debt Fund $117 $365 $633 $1,398 Global (Ex-U.S.) Equity Fund $101 $315 $547 $1,213 Emerging Markets Equity Fund $163 $505 $871 $1,900
25 Investment Advisor Advisory Fees The following chart shows the investment advisory fees payable to Brinson Partners, before fee waivers, by each Fund during its last fiscal year. About the Advisor Investment Advisory Fees (expressed as a percentage of average net assets) Global Fund 0.80% Global Equity Fund 0.80 Global Technology Fund/1,2/ 1.40 Global Biotech Fund/1,2/ 1.15 Global Bond Fund 0.75 U.S. Balanced Fund 0.70 U.S. Equity Fund 0.70 U.S. Value Equity Fund/1,2/ 0.70 U.S. Large Cap Equity Fund 0.70 U.S. Large Cap Growth Fund 0.70 U.S. Small Cap Equity Fund/1,2/ 1.00 U.S. Small Cap Growth Fund 1.00 U.S. Real Estate Equity Fund/1,2/ 0.90 U.S. Bond Fund 0.50 High Yield Fund 0.60 Emerging Markets Debt Fund/1,2/ 0.65 Global (Ex-U.S.) Equity Fund 0.80 Emerging Markets Equity Fund/1,2/ 1.10 (1) Management fees shown for the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund are based on estimates as the Funds had not commenced operations as of the date of this prospectus. (2) The Advisor is entitled to reimbursement of advisory fees waived during any of the previous five years, provided that the reimbursement will never cause the total operating expense ratio to exceed the limits in the table below. The Advisor has irrevocably agreed to waive its fees and reimburse certain expenses so that the total operating expenses of the Brinson Fund-Class I shares do not exceed the following amounts for each of the respective Funds: Global Fund 1.10% Global Equity Fund 1.00 Global Technology Fund 1.55 Global Biotech Fund 1.30 Global Bond Fund 0.90 U.S. Balanced Fund 0.80 U.S. Equity Fund 0.80 U.S. Value Equity Fund 0.85 U.S. Large Cap Equity Fund 0.80 U.S. Large Cap Growth Fund 0.80 U.S. Small Cap Equity Fund 1.15 U.S. Small Cap Growth Fund 1.15 U.S. Real Estate Equity Fund 1.05 U.S. Bond Fund 0.60 High Yield Fund 0.70 Emerging Markets Debt Fund 1.15 Global (Ex-U.S.) Equity Fund 1.00 Emerging Markets Equity Fund 1.60 Brinson Partners, Inc., a Delaware corporation located in Chicago, Illinois, is an investment advisor registered with the U.S. Securities and Exchange Commission. As of December 31, 1999, Brinson Partners was responsible for the management of USD 159 billion in institutional assets. Brinson Partners was organized in 1989 when it acquired the institutional asset management business of The First National Bank of Chicago and First Chicago Investment Advisors, N.A. Brinson Partners and its predecessor entities have managed both U.S. and non-U.S. investment portfolios since 1974 and global investment portfolios since 1982. Brinson Partners is an indirect wholly owned subsidiary of UBS AG, and a core business area within the UBS Asset Management Division. The UBS Asset Management Division is responsible for the institutional asset management activities of UBS, and employs more than 1,800 people worldwide. The Division manages USD 360 billion of institutional assets, including USD 236 billion of discretionary institutional assets on an active basis, as well as mutual fund assets for UBS Private Banking which total over USD 124 billion. Clients include corporations, public funds, endowments, foundations, central banks and other investors located throughout the world. Portfolio Management Investment decisions for the Funds are made by an investment management team at Brinson Partners. No member of the investment management team is primarily responsible for making recommendations for portfolio purchases. Brinson Partners, Inc. 209 South LaSalle Street Chicago, Ill 60604-1295 26 Pricing of Fund Shares The Brinson Fund--Class I shares are bought and sold at net asset value ("NAV"), which is calculated as of the close of business on each day that the New York Stock Exchange ("NYSE") is open (currently 4:00 p.m. Eastern time). A Fund's securities are valued based on the last sale price or, where market quotations are not readily available, are based on fair value as determined in good faith by the Trust's Board of Trustees. Foreign securities are valued at their closing prices on the exchange on which they are traded. The resulting values are converted from the local currency into U.S. dollars using current exchange rates. Foreign securities may trade in their local markets on weekends or other days when a Fund does not price its shares. Therefore, the NAV of Funds holding foreign securities may change on days when shareholders will not be able to buy or sell their Fund shares. Purchase and redemption orders for shares received in good form by the close of regular trading (currently 4:00 p.m., Eastern time) are priced according to the NAV determined on that day. Purchase and redemption orders received after the close of trading are priced according to the next determined price per share. The Funds reserve the right to change the time at which purchases and redemptions are priced if the NYSE closes at a time other than 4:00 p.m. Eastern time or if an emergency exists. How the Funds Calculate NAV The NAV of a class of shares of a Fund is determined by dividing the value of the securities and other assets, less liabilities, allocated to the class by the number of outstanding shares of the class. 27 Purchasing Shares The minimum initial investment for shares of the Global Technology Fund, Global Biotech Fund and U.S. Real Estate Equity Fund is $2,500. Subsequent investments for shares of the Global Technology Fund, Global Biotech Fund and U.S. Real Estate Equity Fund will be accepted in minimum amounts of $100. The minimum initial investment for shares of each other Fund is $1,000,000. Subsequent investments for shares of each other Fund will be accepted in minimum amounts of $2,500. The minimum purchase requirement for Individual Retirement Accounts ("IRAs") is $2,000. The Funds reserve the right to vary the investment minimums and subsequent minimums for additional investments at any time. In addition, Brinson Partners may waive the minimum initial investment requirement for any investor at its discretion. Purchases may be made in one of the following ways: By Telephone Call 1-800-448-2430 to arrange for a telephone transaction. If you want to make future transactions (e.g., purchase additional shares, redeem or exchange shares) by telephone, you will need to elect this option either on the initial application or subsequently in writing. By Mail Complete and sign an application for Class I shares. Make your check payable to "Brinson __________ Fund - Class I." If you are adding to your existing account, enclose the remittance portion of your account statement and include the amount of investment, account name and number. Mail your application and/or check to: The Brinson Funds c/o Transfer Agent P.O. Box 2798 Boston, MA 02208-2798 By Wire If you are opening a new account, call the Funds at 1-800-448-2430 to arrange for a wire transaction. Then wire federal funds to: The Chase Manhattan Bank ABA#021000021 DDA#9102-783504 FBO: "Brinson ________ Fund - Class I" and include your name and new account number. Complete and sign an application for Class I shares and mail immediately following the initial wire transaction to: The Brinson Funds c/o Transfer Agent P.O. Box 2798 Boston, MA 02208-2798 If you are adding to your existing account, you do not need to call the Funds to arrange for a wire transaction, but be sure to include your name and account number. Through Financial Institutions/Professionals In some cases, the Funds have entered into one or more Sales Agreements with brokers, dealers or other financial intermediaries ("Service Providers"), as well as with financial institutions (banks and bank trust departments) (each an "Authorized Dealer"). The Authorized Dealer, or intermediaries designated by the Authorized Dealer (a "Sub-designee"), may accept purchase and redemption orders that are in "good form" on behalf of the Funds. A Fund will be deemed to have received a purchase or redemption order when the Authorized Dealer or Sub- designee accepts the order. Such orders will be priced at the Fund's net asset value next computed after such order is accepted by the Authorized Dealer or Sub-designee. These Authorized Dealers may charge the investor a transaction fee or other fee for their services at the time of purchase. These fees would not be otherwise charged if you purchased shares directly from the Funds. It is the responsibility of such Authorized Dealers or Sub-designees to promptly forward purchase orders with payments to the Funds. Telephone orders are accepted from broker-dealers or service organizations if they have been previously approved by the Funds. Brinson Partners, or its affiliates, may, from its own resources, compensate Service Providers for services performed with respect to a Fund's Class I shares. These services may include marketing, shareholder servicing, recordkeeping and/or other services. Payments made for any of these purposes may be made from Brinson Partners' revenues, its profits or any other sources available. When these service arrangements are in effect, they are generally made available to all qualified Service Providers. If you have any questions or need further information, call 1-800-448-2430. The Brinson Funds strongly discourage market timers and short-term traders from investing in the funds. 28 Purchasing Shares (cont.) The Funds will not accept a check endorsed over by a third party. The Funds reserve the right to reject any purchase order and to suspend the offering of shares of The Brinson Funds. This includes purchase orders that, in the reasonable belief of the Funds, have been made by market timers or short-term traders. You will be subject to a 1.50% transaction charge in connection with your purchase of shares of the Emerging Markets Equity Fund. Shares of the Fund are sold at a price which is equal to the NAV of such shares, plus the transaction charge. The transaction charges do not apply to the reinvestment of dividends or capital gains distributions. The transaction charge is paid to the Fund and used by it to defray the transaction costs associated with each purchase and sale of securities within the Fund. Exchanging Shares You can exchange your Class I shares for Class I shares of other Funds. Exchanges will not be permitted between the Brinson Funds-Class I shares and either the UBS Investment Funds class of shares or the Brinson Funds-Class N shares. Requests for exchanges received prior to the close of regular trading hours on the NYSE will be processed at the net asset value computed on the date of receipt. Requests received after the close of regular trading hours will be processed at the next determined net asset value. Under certain circumstances, the Funds may: * Limit the number of exchanges between Funds * Reject a telephone exchange order * Modify or discontinue the exchange privilege upon 60 days' written notice Exchanged Funds are subject to the minimum initial investment requirement. The procedures that apply to redeeming shares also apply to exchanging shares. An exchange is the sale of shares of one Fund and purchase of shares of another and could result in taxable gain or loss in a non-tax sheltered account. Account Options The following account options are available. There are no charges for the programs noted below and you may change or terminate these plans at any time by written notice to the Funds. For information about participating in these account options, call the transfer agent at 1-800-448-2430. Automatic Investment Plan Through this option, money can be electronically deducted from your checking, savings or bank money market accounts and invested in the Funds each month or quarter. Complete the Automatic Investment Plan Application, which is available upon request by calling 1-800-448-2430, and mail it to the address indicated. The initial $2,500 minimum investment still applies for the Global Technology Fund, Global Biotech Fund and U.S. Real Estate Equity Fund, however, subsequent investments in these Funds can be as little as $100. The initial $1,000,000 minimum investment still applies to each of the other Funds, however, subsequent investments can be as little as $2,500. Systematic Withdrawal Plan The Funds may alter or terminate the Automatic Investment Plan at any time. If you have a minimum of $1,000,000 in your account, you may direct the transfer agent to make payments to you (or anyone you designate) monthly, quarterly or semi-annually. Withdrawals are drawn from share redemptions and must be a minimum of $500 per payment. Under the Systematic Withdrawal Plan ("SWP"), you must elect to have dividends and distributions automatically reinvested in additional Fund shares. The Funds may terminate any SWP if the value of the account falls below $50,000 due to share redemptions or an exchange of shares for Class I shares of another Fund. Individual Retirement Account You may open an IRA, a tax-deferred retirement account, with the Funds if you are under age 70 1/2. The minimum purchase requirement for an IRA is $2,000. 29 Redeeming Shares Your shares will be redeemed at the NAV next calculated after your order is received by the Funds' transfer agent in good order. Redemption requests received prior to the close of regular trading hours (generally 4:00 p.m. Eastern time) on the NYSE will be executed at the net asset value computed on the date of receipt. Redemption requests received after the close of regular trading hours will be executed at the next determined net asset value. Your order will be processed promptly and you will generally receive the proceeds within seven days. Please note that proceeds for redemption requests made shortly after a recent purchase by check will be distributed once the check clears, which may take up to 15 days. The Funds reserve the right to pay redemptions "in kind" (i.e., payment in securities rather than in cash) if the amount you are redeeming is large enough to affect a Fund's operations (for example, if it represents more than $250,000 or 1% of the Fund's assets). In these cases, you might incur brokerage costs converting the securities to cash. You will be subject to a 1.50% transaction charge in connection with each redemption of shares of the Emerging Markets Equity Fund. Redemption requests for the Emerging Markets Equity Fund are paid at the NAV less the transaction charge. Redemptions which are made in kind with securities are not subject to the transaction charge. You may redeem some or all of your shares any day the NYSE is open for business by doing one of the following (if you have any questions, call the transfer agent at 1-800-448-2430). By Telephone If you have chosen the telephone redemption privilege on the initial application or subsequently arranged in writing, you may call 1-800-448-2430 to redeem shares. By Mail Shareholders may sell shares by making a written request to: The Brinson Funds c/o Transfer Agent P.O. Box 2798 Boston, MA 02208-2798 Include signatures of all persons required to sign for transactions, exactly as their names appear on the account application. To protect your account from fraud, the Funds may require a signature guarantee for certain redemptions (see "Signature Guarantees" below). By Bank Wire If you have chosen the wire redemption privilege on the initial application or subsequently arranged in writing, you may request the Funds to wire your proceeds to a predesignated bank account. Call 1-800-448-2430. Wire redemption requests must be received by the transfer agent by 4:00 p.m. Eastern time for money to be wired the next business day. Through Financial Institutions/Professionals Contact your financial institution or professional for more information. If you purchased shares through an Authorized Dealer or Sub-designee, you should contact it for more information. Important note: Each institution or professional may have its own procedures and requirements for selling shares and may charge fees. 30 Redeeming Shares (cont.) Redemption requests should be accompanied by the Fund's name, your Fund account number and the dollar amount or number of shares to be redeemed. The Fund will mail a check to your account address or, if you have elected the wire redemption privilege, the Fund will wire the proceeds to your bank. Signature Guarantees To protect your account from fraud, the Fund and its agent may require a signature guarantee for certain redemptions to verify the identity of the person who has authorized a redemption from your account. Please contact the Fund for further information. Telephone Transactions You may give up some level of security by choosing to buy or sell shares by telephone, rather than by mail. The Funds will employ reasonable procedures to confirm that telephone instructions are genuine. If they do not employ these procedures, the Funds or the transfer agent may be liable for any losses due to unauthorized or fraudulent transactions. A written confirmation will be provided for all purchase, exchange and redemption transactions initiated by telephone. Transfer of Securities Under certain circumstances, investors may be permitted to purchase Fund shares by transferring securities to the Fund that meet the Fund's investment objective and policies. (Please see the SAI for more information.) Dividends and Distributions Each Fund passes most of its net investment income along to investors in the form of distributions. All shareholders of a Fund are entitled to a proportionate share of the Fund's net income and realized capital gains on its investments. Net investment income for all of the Funds consists of all dividends and interest received, less expenses (including fees payable to the Advisor and its affiliates). Dividends from net investment income are declared, and paid, by each Fund semi- annually - in June and December. In December, the Funds will distribute substantially all of their net long-term capital gains and any undistributed net short-term capital gains realized during the one year period commencing November 1(or date of the creation of the Fund, if later) and ending October 31. At the same time, the Funds will distribute all of their net investment income earned through the end of December and not previously distributed as ordinary (not capital) income. Dividends and other distributions paid on each class of shares of a Fund are calculated at the same time and in the same manner. Dividends on each class might be affected differently by the allocation of other class-specific expenses. Unless you notify the transfer agent in writing that you elect to receive your income dividends and capital gains distributions in cash, all will be reinvested automatically in additional Fund shares of the same class of a Fund. Distribution options may be changed at any time by requesting a change in writing. Dividends are reinvested on the reinvestment date at the net asset value determined at the close of business on that date. Please note that shares purchased shortly before the record date for a dividend or distribution may have the effect of returning capital, although such dividends and distributions are subject to taxes. 31 Tax Considerations Following is a brief discussion of the general tax treatment of various distributions from the Funds. It is not an exhaustive discussion, and your particular tax status may be different. We encourage you to consult with your own tax advisor about federal, state and local tax considerations. In general, distributions from a Fund are taxable to you as either ordinary income or capital gains, depending upon how long the Fund has held the underlying assets. This is true whether you invest your distributions in additional shares of a Fund or receive them in cash. Any capital gains distributed by a Fund are taxable to you as long-term capital gains no matter how long you have owned your shares. When you sell or exchange your shares of a Fund, you may have a capital gain or loss. The tax rate on any gain from the sale or exchange of your shares depends on how long you have held your shares. Fund distributions and gains from the sale or exchange of your shares will generally be subject to state and local income tax. Foreign investors may be subject to U.S. withholding and estate tax. If any of the following situations apply to you, the Funds will be required by the IRS to withhold 31% of your taxable distributions: * you do not provide your correct taxpayer identification number, or * you do not certify that such number is correct, or * the IRS instructs the Fund to do so. Buying a Dividend If you buy shares in a stock Fund just before the Fund makes any distribution, or if you buy shares in any fixed income Fund just prior to a capital gains distribution, you will receive some of the purchase price back in the form of a taxable distribution. Shareholders will be advised annually of the source and the tax status of all Fund distributions for federal income tax purposes. Multiple Classes The Funds are series of The Brinson Funds, a Delaware business trust, and currently offer three classes of shares: Brinson Funds-Class I, Brinson Funds- Class N and UBS Investment Funds Class of shares. 32 Financial Highlights The financial highlights table is intended to help you understand a Fund's financial performance for the past five years (or, if shorter, the period of the Fund's operations). Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in each Fund (assuming reinvestment of all dividends and distributions). Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Cap Equity Fund, U.S. Bond Fund and Global (Ex-U.S.) Equity Fund The selected financial information in the following table has been audited by the Funds' independent auditors, whose unqualified reports thereon (the "Reports") appear in the Funds' Annual Report to Shareholders dated June 30, 1999 (the "Annual Report"). In addition, the table includes unaudited financial information for the period ended December 31, 1999, which is included in the Funds' Semi-Annual Report to Shareholders (the "Semi-Annual Report") dated December 31, 1999. Additional performance and financial data and related notes are contained in the Annual Report and the Semi-Annual Report, which are available without charge upon request. The Funds' financial statements for the fiscal year ended June 30, 1999 and the Reports, as well as the Semi-Annual Report, are incorporated by reference into the SAI. U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund The U.S. Large Cap Growth Fund, the U.S. Small Cap Growth Fund and the High Yield Fund (collectively, the "New Funds") are successors to the UBS Large Cap Growth Fund, the UBS Small Cap Fund and the UBS High Yield Bond Fund, respectively (collectively, the "Predecessor Funds"). Each Predecessor Fund, prior to its merger into a New Fund, operated as a separate portfolio of UBS Private Investor Funds, Inc., another investment company that was advised by another entity. The Predecessor Funds had fiscal years ending on December 31. On December 18, 1998, following the approval of the shareholders of each Predecessor Fund of an agreement and plan of reorganization, the UBS Large Cap Growth Fund, the UBS Small Cap Fund and the UBS High Yield Bond Fund were reorganized and merged into the U.S. Large Cap Growth Fund, the U.S. Small Cap Growth Fund and the High Yield Fund, respectively. (These transactions are collectively referred to as the "Reorganizations.") The New Funds had no operations prior to the Reorganizations. The New Funds have fiscal years ending on June 30. The selected financial information in the following table, for the year ended June 30, 1999, has been audited by the Funds' independent auditors, whose unqualified reports on the financial statements containing such information appear in the Annual Report. In addition, the table includes unaudited financial information for the period ended December 31, 1999, which is included in the Funds' Semi-Annual Report dated December 31,1999. The selected financial information in the following table for the year ended December 31, 1998 has been audited by the Funds' independent auditors, whose unqualified reports on the financial statements containing such information appear in the New Funds' Annual Report to Shareholders (the "New Funds' Report") dated December 31, 1998. The selected financial information in the following table for the year ended December 31, 1997 has been audited by the Predecessor Funds' independent auditors, whose unqualified reports on the financial statements containing such information (the "Predecessor Funds' Reports") appear in the Predecessor Funds' Annual Report to Shareholders dated December 31, 1997 (the "Predecessor Funds' Annual Report"). Additional performance and financial data and related notes are contained in the Annual Report, the Semi-Annual Report, the New Funds' Report and the Predecessor Funds' Annual Reports (collectively, the "New Funds' and Predecessor Funds' Reports"), which are available without charge upon request. The New Funds' financial statements for the fiscal years ended June 30, 1999 and December 31, 1998, and the Predecessor Funds' financial statements for the fiscal year ended December 31, 1997, and the New Funds' and Predecessor Funds' Reports, are incorporated by reference into the SAI. Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund, and Emerging Markets Equity Fund No financial information is presented for these Funds as they had not commenced operations as of the date of this prospectus. 33 Financial Highlights (cont). Financial Highlights-Fiscal Years Ended June 30 and December 31; and Semi-Annual Period Ended December 31, 1999 The following table presents financial data relating to a share of beneficial interest outstanding throughout the periods presented. This information has been derived from the Funds' and the Predecessor Funds' financial statements.
Income (Loss) from Investment Operations Less Distributions ------------------------------------------- ----------------------------- Distributions Distributions Total from and from and Net asset Net income in excess in excess value- Net realized and (loss) from of net of net Total beginning Investment unrealized investment investment realized Distribu- Year of period income (loss) gain (loss) operations income gain tions BRINSON GLOBAL FUND-Class I (Commencement of Operations August 31, 1992)/2/ 1995 $ 10.43 0.43 0.86 1.29 (0.27) (0.10) (0.37) 1996 $ 11.35 0.44 1.37 1.81 (0.62) (0.32) (0.94) 1997 $ 12.22 0.38 1.79 2.17 (0.61) (0.65) (1.26) 1998 $ 13.13 0.37 0.62 0.99 (0.65) (0.70) (1.35) 1999 $ 12.77 0.30 0.25 0.55 (0.46) (0.84) (1.30) 1999 (December 31st) (unaudited) $ 12.02 0.12/3/ (0.27) (0.15) (0.18) (0.52) (0.70) BRINSON GLOBAL EQUITY FUND-Class I (Commencement of Operations January 28, 1994)/2/ 1995 $ 9.49 0.18 0.39 0.57 (0.04) (0.09) (0.13) 1996 $ 9.93 0.18 2.29 2.47 (0.14) (0.69) (0.83) 1997 $ 11.57 0.16 2.14 2.30 (0.12) (0.99) (1.11) 1998 $ 12.76 0.22 0.78 1.00 (0.17) (1.05) (1.22) 1999 $ 12.54 0.14/3/ 1.09 1.23 (0.17) (0.18) (0.35) 1999 (December 31st) (unaudited) $ 13.42 0.03/3/ 0.64 0.67 (0.08) (1.21) (1.29) BRINSON GLOBAL BOND FUND-Class I (Commencement of Operations July 30, 1993)/2/ 1995 $ 9.55 0.50 0.58 1.08 (0.24) - (0.24) 1996 $ 10.39 0.84 0.31 1.15 (1.40) (0.10) (1.50) 1997 $ 10.04 0.67 0.08 0.75 (0.96) (0.19) (1.15) 1998 $ 9.64 0.43/3/ (0.18) 0.25 (0.31) (0.17) (0.48) 1999 $ 9.41 0.39/3/ (0.07) 0.32 (0.47) (0.08) (0.55) 1999 (December 31st) (unaudited) $ 9.18 0.20/3/ (0.19) (0.01) (0.13) (0.01) (0.14) BRINSON U.S. BALANCED FUND-Class I (Commencement of Operations December 30, 1994)/2/ 1995 $ 10.00 0.23 1.16 1.39 (0.16) - (0.16) 1996 $ 11.23 0.44 1.04 1.48 (0.43) (0.57) (1.00) 1997 $ 11.71 0.47 1.29 1.76 (0.40) (0.54) (0.94) 1998 $ 12.53 0.49/3/ 0.93 1.42 (0.77) (0.94) (1.71) 1999 $ 12.24 0.34/3/ 0.18 0.52 (0.73) (2.65) (3.38) 1999 (December 31st) (unaudited) $ 9.38 0.14 (0.87) (0.73) (0.19) (0.06) (0.25) BRINSON U.S. EQUITY FUND-Class I (Commencement of Operations February 22, 1994)/2/ 1995 $ 9.65 0.16 1.89 2.05 (0.14) (0.03) (0.17) 1996 $ 11.53 0.17 3.31 3.48 (0.17) (0.25) (0.42) 1997 $ 14.59 0.15 4.27 4.42 (0.14) (1.23) (1.37) 1998 $ 17.64 0.19 3.39 3.58 (0.18) (1.13) (1.31) 1999 $ 19.91 0.17/3/ 2.67 2.84 (0.15) (1.12) (1.27) 1999 (December 31st) (unaudited) $ 21.48 0.06/3/ (2.90) (2.84) (0.05) (1.77) (1.82) BRINSON U.S. LARGE CAP EQUITY FUND4-Class I (Commencement of Operations April 6, 1998) 1998 $ 10.00 0.02 (0.20) (0.18) (0.02) - (0.02) 1999 $ 9.80 0.11/3/ 1.31 1.42 (0.09) - (0.09) 1999 (December 31st) (unaudited) $ 11.13 0.05/3/ (2.01) (1.96) (0.09) (0.95) (1.04)
(1) Annualized. (2) Formerly known as the Brinson Fund Class shares; redesignated as the Brinson Fund-Class I shares on June 30, 1997. 34
RATIOS/SUPPLEMENTAL DATA ---------------------------------------------------- Ratio of Net Ratio of Expenses Investment Income to Average Net to Average Net Assets Assets ------------------------ ------------------------ Net Net asset Total assets, Before After Before After value- Return end of expense expense expense expense Portfolio end of (non- period reimburse- reimburse- reimburse- reimburse- turnover Year period annualized) (in 000s) ment ment ment ment rate ------- ----------- --------- ---------- ---------- ---------- ---------- --------- BRINSON GLOBAL FUND-Class I (Commencement of Operations August 31, 1992)/2/ 1995 $ 11.35 12.57% $ 365,678 1.09% N/A 4.27% N/A 238% 1996 $ 12.22 16.38% $ 457,933 1.04% N/A 3.69% N/A 142% 1997 $ 13.13 18.79% $ 586,667 0.99% N/A 3.03% N/A 150% 1998 $ 12.77 8.28% $ 667,745 0.94% N/A 2.70% N/A 88% 1999 $ 12.02 4.76% $ 469,080 0.96% N/A 2.23% N/A 105% 1999 (December 31st) (unaudited) $ 11.17 (1.19)% $ 318,094 0.99%/1/ N/A 1.98%/1/ N/A 36% BRINSON GLOBAL EQUITY FUND-Class I (Commencement of Operations January 28, 1994)/2/ 1995 $ 9.93 6.06% $ 20,706 2.06% 1.00% 0.71% 1.77% 36% 1996 $ 11.57 25.66% $ 27,126 1.77% 1.00% 0.57% 1.34% 74% 1997 $ 12.76 21.26% $ 48,054 1.25% 1.00% 1.35% 1.60% 32% 1998 $ 12.54 8.99% $ 22,724 1.02% 1.00% 1.29% 1.31% 46% 1999 $ 13.42 10.14% $ 42,106 1.05% 1.00% 1.05% 1.10% 86% 1999 (December 31st) (unaudited) $ 12.80 5.41% $ 40,734 1.05%/1/ 1.00% 0.37%/1/ 0.42%/1/ 57% BRINSON GLOBAL BOND FUND-Class I (Commencement of Operations July 30, 1993)/2/ 1995 $ 10.39 11.34% $ 51,863 1.43% 0.90% 5.53% 6.06% 199% 1996 $ 10.04 11.50% $ 41,066 1.65% 0.90% 4.98% 5.73% 184% 1997 $ 9.64 7.71% $ 54,157 1.32% 0.90% 4.90% 5.32% 235% 1998 $ 9.41 2.69% $ 91,274 0.96% 0.90% 4.47% 4.53% 151% 1999 $ 9.18 3.13% $ 92,832 0.90% N/A 4.05% N/A 138% 1999 (December 31st) (unaudited) $ 9.05 0.10% $ 77,217 1.04%/1/ 0.96%/1/ 4.16%/1/ 4.24%/1/ 35% BRINSON U.S. BALANCED FUND-Class I (Commencement of Operations December 30, 1994)/2/ 1995 $ 11.23 13.91% $ 157,724 1.06%/1/ 0.80%/1/ 4.36%/1/ 4.63%/1/ 196% 1996 $ 11.71 13.52% $ 227,829 1.01% 0.80% 3.76% 3.97% 240% 1997 $ 12.53 15.50% $ 282,860 0.88% 0.80% 3.78% 3.86% 329% 1998 $ 12.24 12.19% $ 80,556 0.81% 0.80% 3.88% 3.89% 194% 1999 $ 9.38 4.74% $ 37,603 0.96% 0.80% 3.00% 3.16% 113% 1999 (December 31st) (unaudited) $ 8.40 (7.83)% $ 32,263 0.95%/1/ 0.80%/1/ 2.85%/1/ 3.00%/1/ 42% BRINSON U.S. EQUITY FUND-Class I (Commencement of Operations February 22, 1994)/2/ 1995 $ 11.53 21.45% $ 42,573 1.70% 0.80% 1.09% 1.99% 33% 1996 $ 14.59 30.57% $ 126,342 1.14% 0.80% 1.13% 1.47% 36% 1997 $ 17.64 31.87% $ 337,949 0.89% 0.80% 1.06% 1.15% 43% 1998 $ 19.91 21.48% $ 605,768 0.80% N/A 1.12% N/A 42% 1999 $ 21.48 15.22% $ 713,321 0.80% N/A 0.82% N/A 48% 1999 (December 31st) (unaudited) $ 16.82 (13.13)% $ 445,593 0.80%/1/ N/A 0.84%/1/ N/A 26% BRINSON U.S. LARGE CAP EQUITY FUND4-Class I (Commencement of Operations April 6, 1998) 1998 $ 9.80 (1.83)% $ 154 1.59%/1/ 0.80%/1/ 0.52%/1/ 1.31%/1/ 12% 1999 $ 11.13 14.54% $ 22,668 1.29% 0.80% 0.57% 1.06% 88% 1999 (December 31st) (unaudited) $ 8.13 (17.67)% $ 29,012 1.18%/1/ 0.80%/1/ 0.72%/1/ 1.10%/1/ 84%
(3) The net investment income per share data was determined by using average shares outstanding throughout the period. (4) The U.S. Large Cap Equity Fund changed its name from the U.S. Large Capitalization Equity Fund on May 1, 2000. N/A = Not Applicable. 35 Financial Highlights (cont.)
Income (Loss) from Investment Operations Less Distributions ------------------------------------------- ----------------------------- Distributions Distributions Total from and from and Net asset Net income in excess in excess value- Net realized and (loss) from of net of net Total beginning Investment unrealized investment investment realized Distribu- Year of period income (loss) gain (loss) operations income gain tions BRINSON U.S. LARGE CAP GROWTH FUND/4,7,8/-Class I (Commencement of Operations October 14, 1997)/9/ 1997/6/ $ 10.00 0.02 (0.08) (0.06) (0.02) - (0.02) 1998 (December 31st) $ 9.92 0.06 2.38 2.44 (0.06) (0.46) (0.52) 1999 (June 30th) $ 11.84 0.02 2.05 2.07 - - - 1999 (December 31st) (unaudited) $ 13.91 0.02/3/ 1.71 1.73 - (0.95) (0.95) BRINSON U.S. SMALL CAP GROWTH FUND/4,7,8/-Class I (Commencement of Operations September 30, 1997)/9/ 1997/6/ $ 10.00 - (0.56) (0.56) - - - 1998 (December 31st) $ 9.44 (0.02) (0.57) (0.59) (0.05) - (0.05) 1999 (June 30th) $ 8.80 (0.02) 0.40 0.38 - - - 1999 (December 31st) (unaudited) $ 9.18 (0.01)/3/ 3.30 3.29 - - - BRINSON U.S. BOND FUND-Class I (Commencement of Operations August 31, 1995)/2/ 1996 $ 10.00 0.50 (0.14) 0.36 (0.40) (0.03) (0.43) 1997 $ 9.93 0.51/3/ 0.32 0.83 (0.52) - (0.52) 1998 $ 10.24 0.53 0.53 1.06 (0.58) (0.14) (0.72) 1999 $ 10.58 0.58/3/ (0.26) 0.32 (0.47) (0.15) (0.62) 1999 (December 31st) (unaudited) $ 10.28 0.31/3/ (0.27) (0.04) (0.56) - (0.56) BRINSON HIGH YIELD FUND/4,7,8/-Class I (Commencement of Operations September 30, 1997)/9/ 1997/6/ $ 10.00 0.18 0.05 0.23 (0.18) - (0.18) 1998 (December 31st) $ 10.05 7.30 0.02 7.32 (7.33) (0.06) (7.39) 1999 (June 30th) $ 9.98 0.44/3/ (0.15) 0.29 (0.31) - (0.31) 1999 (December 31st) (unaudited) $ 9.96 0.46/3/ (0.27) 0.19 (0.47) (0.07) (0.54) BRINSON GLOBAL (EX-U.S.) EQUITY FUND-Class I (Commencement of Operations August 31, 1993)/2,3,5/ 1995 $ 9.69 0.15 (0.16) (0.01) - - - 1996 $ 9.68 0.18 2.05 2.23 (0.18) (0.56) (0.74) 1997 $ 11.17 0.18 1.97 2.15 (0.17) (0.56) (0.73) 1998 $ 12.59 0.18 0.30 0.48 (0.18) (0.74) (0.92) 1999 $ 12.15 0.16 0.27 0.43 (0.12) (0.12) (0.24) 1999 (December 31st) (unaudited) $ 12.34 0.04/3/ 1.95 1.99 (0.07) (0.14) (0.21)
(1) Annualized. (2) Formerly known as the Brinson Fund Class shares; redesignated as the Brinson Fund-Class I shares on June 30, 1997. (3) The net investment income per share data was determined by using average shares outstanding throughout the period. (4) The U.S. Large Cap Growth Fund and U.S. Small Cap Growth Fund changed their names from the U.S. Large Capitalization Growth Fund and U.S. Small Capitalization Growth Fund, respectively, on May 1, 2000. (5) The Global (Ex-U.S.) Equity Fund changed its name from the Non-U.S. Equity Fund on December 10, 1998. (6) For the period from commencement of operations to December 31, 1997. (7) Prior to the Reorganizations, each of these Series operated as a separate portfolio of UBS Private Investor Funds, Inc. and invested all of its respective investable assets in an affiliated investment company with an identical investment objective. The U.S. 36
RATIOS/SUPPLEMENTAL DATA ---------------------------------------------------- Ratio of Net Ratio of Expenses Investment Income to Average Net to Average Net Assets Assets ------------------------ ------------------------ Net Net asset Total assets, Before After Before After value- Return end of expense expense expense expense Portfolio end of (non- period reimburse- reimburse- reimburse- reimburse- turnover Year period annualized) (in 000s) ment ment ment ment rate BRINSON U.S. LARGE CAP GROWTH FUND/4,7,8/-Class I (Commencement of Operations October 14, 1997)/9/ 1997/6/ $ 9.92 (0.55)% $ 4,137 8.54%/1/ 1.00%/1/ (6.19)%/1/ 1.35%/1/ N/A 1998 (December 31st) $ 11.84 24.90% $ 4,147 2.76% 0.99% (1.40)% 0.37% N/A 1999 (June 30th) $ 13.91 17.48% $ 2,947 2.38%/1/ 0.80%/1/ (1.26)%/1/ 0.32% 51% 1999 (December 31st) (unaudited) $ 14.69 12.98% $ 3,767 2.17%/1/ 0.80%/1/ (1.29)%/1/ 0.08%/1/ 46% BRINSON U.S. SMALL CAP GROWTH FUND/4,7,8/-Class I (Commencement of Operations September 30, 1997)/9/ 1997/6/ $ 9.44 (5.62)% $ 11,954 3.63%/1/ 1.20%/1/ (2.53)%/1/ (0.10)%/1/ N/A 1998 (December 31st) $ 8.80 (6.70)% $ 22,607 1.69% 1.20% (0.76)% (0.27)% N/A 1999 (June 30th) $ 9.18 4.32% $ 35,211 1.32%/1/ 1.15%/1/ (0.62)%/1/ (0.45)%/1/ 71% 1999 (December 31st) (unaudited) $ 12.47 35.84% $ 45,915 1.34%/1/ 1.15%/1/ (0.75)%/1/ (0.56)%/1/ 69% BRINSON U.S. BOND FUND-Class I (Commencement of Operations August 31, 1995)/2/ 1996 $ 9.93 3.60% $ 9,047 3.63%/1/ 0.60%/1/ 3.00%/1/ 6.03%/1/ 363% 1997 $ 10.24 8.45% $ 22,421 1.65% 0.60% 5.14% 6.19% 410% 1998 $ 10.58 10.60% $ 38,874 0.84% 0.60% 5.61% 5.85% 198% 1999 $ 10.28 2.97% $ 92,030 0.61% 0.60% 5.42% 5.43% 260% 1999 (December 31st) (unaudited) $ 9.76 0.36% $ 74,461 0.61%/1/ 0.60%/1/ 5.94%/1/ 5.95%/1/ 103% BRINSON HIGH YIELD FUND/4,7,8/-Class I (Commencement of Operations September 30, 1997)/9/ 1997/6/ $ 10.05 2.34% $ 7,861 4.98%/1/ 0.90%/1/ 3.15%/1/ 7.23%/1/ N/A 1998 (December 31st) $ 9.98 7.75% $ 34,900 1.59% 0.89% 7.38% 8.08% N/A 1999 (June 30th) $ 9.96 2.91% $ 60,044 0.83%/1/ 0.70%/1/ 8.54%/1/ 8.67%/1/ 77% 1999 (December 31st) (unaudited) $ 9.61 1.89% $ 53,461 0.83%/1/ 0.70%/1/ 9.14%/1/ 9.27%/1/ 29% BRINSON GLOBAL (EX-U.S.) EQUITY FUND-Class I (Commencement of Operations August 31, 1993)/2,3,5/ 1995 $ 9.68 (0.10)% $148,319 1.23% 1.00% 1.93% 2.16% 14% 1996 $ 11.17 23.64% $212,366 1.20% 1.00% 1.67% 1.87% 20% 1997 $ 12.59 20.27% $420,855 1.00% N/A 1.83% N/A 25% 1998 $ 12.15 4.78% $439,329 1.00% N/A 1.52% N/A 49% 1999 $ 12.34 3.65% $490,322 0.99% N/A 1.35% N/A 74% 1999 (December 31st) (unaudited) $ 14.12 16.29% $522,621 0.98%/1/ N/A 0.33%/1/ N/A 32%
Large Cap Growth Fund invested solely in the UBS Investor Portfolios Trust-UBS Large Cap Growth Portfolio; the U.S. Small Cap Growth Fund invested solely in the UBS Investor Portfolios Trust-UBS Small Cap Portfolio; and the High Yield Fund invested solely in the UBS Investor Portfolios Trust-UBS High Yield Bond Portfolio. The funds in which each of these Series invested are referred to herein as the "Master Funds." The ratios set forth in this Financial Highlights table for each of these Series include the Series' share of its respective Master Fund's expenses. The annualization of these ratios is also affected by the fact that the Investment Advisory Agreement and Investment Sub-Advisory Agreement to which these Series were subject prior to the Reorganizations were not ratified until December 29, 1997. Prior to that date, investment advisory services were being provided without compensation. (8) Prior to the Reorganizations, U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund had a fiscal year end of December 31. (9) Reflects 10 for 1 share split effective December 9, 1998. N/A=Not Applicable. 37 For More Information More information on The Brinson Funds is available free upon request: Shareholder Reports Additional information about the Funds' investments is available in the Funds' annual and semi-annual reports to shareholders. In the Funds' annual report, you will find a discussion of the market conditions and investment strategies that significantly affected each Fund's performance during its last fiscal year. Statement of Additional Information ("SAI") The SAI provides more details about each Fund and its policies. The SAI is on file with the Securities and Exchange Commission ("SEC") and is incorporated by reference into (is legally considered part of) this prospectus. TO OBTAIN INFORMATION: By Telephone Call 1-800-448-2430 By Mail The Brinson Funds P.O. Box 2798 Boston, MA 02208-2798 By Email fulfill@fdinet.com On The Internet Text-only versions of the prospectus and other documents pertaining to the Funds can be viewed online or downloaded from: SEC:http://www.sec.gov Brinson Partners: http://www.ubsbrinson.com Information about the Funds (including the SAI) can also be reviewed and copied at the SEC's public reference room in Washington, DC (phone 1-800-SEC-0330). Or, you can obtain copies of this information by sending a request, along with a duplicating fee, to the SEC's Public Reference Section, Washington, DC 20549- 6009, or by electronic request at publicinfo@sec.gov. The Funds are series of The Brinson Funds; Registration Number: 811-6637 [BRINSON LOGO GOES HERE] The Brinson Funds - ------------------------------------------------------- 209 South LaSalle Street . Chicago, Illinois 60604-1295 Tel: 1-800-448-2430 Table of Contents
The Brinson Investment Process.......... 2 Overview of the Funds Global Fund.......................... 3 Global Equity Fund................... 4 Global Technology Fund............... 5 Global Biotech Fund.................. 6 Global Bond Fund..................... 7 U.S. Balanced Fund................... 8 U.S. Equity Fund..................... 9 U.S. Value Equity Fund............... 10 U.S. Large Cap Equity Fund........... 11 U.S. Large Cap Growth Fund........... 12 U.S. Small Cap Equity Fund........... 13 U.S. Small Cap Growth Fund........... 14 U.S. Real Estate Equity Fund......... 15 U.S. Bond Fund....................... 16 High Yield Fund...................... 17 Emerging Markets Debt Fund........... 18 Global (Ex-U.S.) Equity Fund......... 19 Emerging Markets Equity Fund......... 20 Risk Considerations..................... 21 Fees and Expenses....................... 24 Investment Advisor...................... 27 Pricing of Fund Shares.................. 28 Purchasing Shares....................... 29 Redeeming Shares........................ 31 Dividends and Distributions............. 32 Tax Considerations...................... 33 Distribution Arrangements............... 34 Financial Highlights.................... 35
1 Overview of the Funds A Look at the Brinson Investment Process At Brinson Partners, Inc. ("Brinson Partners" or the "Advisor"), we believe that the fundamental value of any investment is related to the future cash flows that it will generate for its investors. We believe that this determination must be made within a framework of globally integrated capital markets. World economies and financial markets are interactive. Thus, investment management, both within and across global stock and bond markets, must be based upon comprehensive knowledge and analysis of integrated investment fundamentals. When making asset allocation decisions, if we are indifferent with respect to a market, industry, or other characteristic, we tend toward the "normal" weight, as determined by its proportion within the passive benchmark. Decisions to deviate from the normal mix of assets are a blend of rigorous quantitative analysis, an understanding of the fundamental relationships among global markets, and the expertise and insights of our investment professionals. Security selection decisions for the core/value equity, growth equity and fixed income Funds are also made in relation to the benchmark, as described in each Fund's principal strategy section. We may substitute securities from an equivalent index that we believe more accurately reflects changes in our expectations for various classes of investments. Equity Selections Core/Value Equity Funds Our Core/Value equity process focuses on identifying discrepancies between securities' fundamental values and their observed market prices. For each stock under our analysis, we estimate an intrinsic or fundamental value using disciplined quantitative techniques that incorporate our team of analysts' considerations of company management, competitive advantage, and each company's core competencies. These value estimates are then compared to current market prices and ranked against the other stocks in our valuation universe. Portfolios are constructed by focusing on those stocks that rank in the top 20% of the valuation output. The Fund's risk is carefully monitored, with consideration given to market sensitivity, common factor exposures, industry weightings and individual stock selection. Growth Equity Funds Brinson Partners also manages portfolios against growth-oriented equity benchmarks. In the growth universe, we seek to invest in companies that possess a dominant market position and franchise, a major technical edge or a unique competitive advantage. Factors employed in our quantitative disciplines include earnings revisions, favorable analyst diffusion trends, positive stock price momentum and sales acceleration. Our seasoned investment professionals then conduct intensive fundamental research on the universe of companies identified as attractive by our quantitative models. Portfolios are constructed and monitored with close adherence to risk control guidelines. Specialized Sector Funds In response to changing market conditions and to the varied and dynamic needs of our clients, we offer several specialized sector Funds. These Funds are diversified among narrower market segments than our core/value and growth Funds, and are intended to compliment a diversified investment program. Security selection for these Funds is driven by relative valuation attractiveness over other securities within the specified sector. Investment decisions rely on quantitative analysis and screening, as well as fundamental research and valuation work. Fixed Income Selections We use an internally developed valuation model for fixed income selections for our Funds, which quantifies our return expectations for all of the bond markets. Inputs to this model include forecasts of inflation, risk premiums and interest rates. Our credit review process incorporates both a top-down strategy, which focuses on how macroeconomic forces shape various industry outlooks, and a bottom-up strategy, which relies on a combination of qualitative and quantitative factors. Our qualitative assessment focuses on management strength, market position, competitive environment and financial flexibility. Our quantitative assessment focuses on historical operating results, calculation of various credit ratios and an expected future outlook. With the exception of the High Yield Fund, our fixed income selections generally include all categories of investment grade fixed income securities, but emphasize the higher quality securities in this spectrum (those with a credit rating of AA and above). Our fixed income strategies combine judgments about the absolute value of the fixed income universe and the relative value of issuer sectors, maturity intervals, duration of securities, quality and coupon segments and specific fixed income securities. Cash and Cash Equivalents Each Fund may invest in cash or cash equivalent instruments, including units of an affiliated money market fund. See the Statement of Additional Information for further information. Shares of The Brinson Funds are not bank deposits and are not insured or guaranteed by the FDIC or any other government agency. The value of your investment in a Fund will fluctuate, which means that you may lose money. 2 Global Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income. Principal Strategies The Fund employs both core/value equity and fixed income strategies. The Fund invests primarily in a portfolio of global equity and global fixed income securities. At least 65% of the Fund's assets are invested in securities of issuers in at least three countries (which may include the United States). All security selection decisions are made relative to the Global Securities Markets Index (GSMI) Mutual Fund Index, the benchmark against which the Fund measures its portfolio. Although it may invest anywhere in the world, the Fund invests primarily in: * Equity markets listed in the Morgan Stanley Capital International ("MSCI") World Equity (Free) Index * Fixed income markets listed in the Salomon Smith Barney World Government Bond Index The Fund may invest in different types of securities in order to access these markets. Other investments may include other open-end investment companies advised by Brinson Partners. The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 13.54% 10.20% 7.60% 0.83 - -------------------------------- 96 97 98 99 *The Fund's total return for the period January 1, 2000 through March 31, 2000 was -1.17%. Best Quarter: Q2 1997 8.12% Worst Quarter: Q3 1998 -5.51% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (7/31/95) - --------------------------------------------------------------- Global Fund 0.83% - - 9.18% Salomon Smith Barney -4.26% - - 3.52% World Government Bond Index MSCI World Equity (Free) 25.12% - - 19.22% Index GSMI Mutual Fund Index 16.85% - - 15.18%
GSMI Mutual Fund Index An unmanaged index compiled by Brinson Partners, currently constructed as follows: 40% Wilshire 5000 3% Merrill Lynch High Yield Equity Index Master Index 22% MSCI World Ex USA 3% MSCI Emerging Markets (Free) Index Free Index 21% Salomon Smith Barney BIG 2% JP Morgan EMBI+ Bond Index 9% Salomon Smith Barney Non-U.S. Gov't. Bond Index From time to time, underlying indices may change. MSCI World Equity (Free) Index A broad based securities index that represents the U.S. and developed global (ex-U.S.) equity markets in terms of capitalization and performance. It is designed to provide a representative total return for all major stock exchanges located inside and outside the United States. Salomon Smith Barney World Government Bond Index A securities index that represents the broad global fixed income markets and includes debt issues of U.S. and most developed global (ex-U.S.) governments, governmental entities and supranationals. 3 Global Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income. Principal Strategies The Fund employs a core/value equity strategy, and invests primarily in a portfolio of global equity securities, which may include dividend-paying securities. At least 65% of the Fund's assets are invested in securities of issuers in at least three countries (which may include the United States). Although it may invest anywhere in the world, the Fund invests primarily in equity markets listed in the Morgan Stanley Capital International ("MSCI") World Equity (Free) Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 16.31% 9.86% 13.17% 12.02% - ------------------------------------ 96 97 98 99 *The Fund's total return for the period January 1, 2000 through March 31, 2000 was -5.71%. Best Quarter: Q4 1998 14.11% Worst Quarter: Q3 1998 -10.23% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (7/31/95) - -------------------------------------------------------- Global Equity Fund 12.02% - - 13.94% MSCI World Equity 25.12% - - 19.22% (Free) Index
MSCI World Equity (Free) Index A broad based securities index that represents the U.S. and developed global (ex-U.S.) equity markets in terms of capitalization and performance. It is designed to provide a representative total return for all major stock exchanges located inside and outside the United States. 4 Global Technology Fund Objective The Fund seeks to provide long-term capital appreciation. Principal Strategies Under normal circumstances, the Fund invests at least 65% of its assets in equity securities of technology companies. The Fund employs a specialized sector strategy, and is a non-diversified portfolio. The selection of companies is mainly influenced by a strong competitive position allowing the Fund to participate in the growth of each industry. Furthermore, the quality of the management, the technological innovation and the revenue growth of the companies are very important. The Fund's benchmark is the Morgan Stanley High Tech Index. Investments in equity securities may include: * Common stock * Preferred stock Given that the Fund invests primarily in technology-related securities, there is a risk that economic factors such as patent considerations, intense competition, rapid technological changes and obsolescence may have a substantial impact on the Fund's investments. The Fund's portfolio turnover rate may exceed 100%. Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Technology Companies Technology companies develop, sell, or significantly benefit from the use of technology products and services. The term technology includes electronics, data processing, semi-conductors, telecommunications, and technology services. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Morgan Stanley High Tech Index The Morgan Stanley High Tech Index is an equal dollar-weighted index of 35 stocks from 9 technology subsectors: computer services, design software, server software, PC software and new media, networking and telecom equipment, server hardware, PC hardware and peripherals, specialized systems, and semiconductors. The index was developed with a base value of 200 as of December 16, 1994, and is rebalanced annually. 5 Global Biotech Fund Objective The Fund seeks to provide long-term capital appreciation. Principal Strategies Under normal circumstances, the Fund invests at least 65% of its assets in equity securities of biotechnology companies. The Fund employs a specialized sector strategy, and is a non-diversified portfolio. Stock selection is based on bottom-up, fundamental analysis. Biotechnology companies generate value by developing new kinds of drugs and technologies. The basis of the fundamental analysis is to analyze the science behind the drugs and technologies. Although the Fund may invest anywhere in the world, it principally invests in the equity securities contained in the NASDAQ Biotech Index, which consists of 200 companies. One company currently represents approximately 30% of this index, occasionally causing direct comparison to the Fund to be distorted. Investments in equity securities may include: * Common stock * Preferred stock Given that the Fund invests primarily in biotechnology-related securities, there is a risk that factors such as patent considerations, intense competition, rapid technological changes and obsolescence, and government regulation may have a substantial impact on the Fund's investments. The Fund's portfolio turnover rate may exceed 100%. Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Biotechnology Companies Companies focusing on research, product development, product manufacture and distribution in the biotechnology sector. The majority of companies are newly established and have a single product in its early development stage. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. NASDAQ Biotech Index The NASDAQ Biotech Index is a capitalization-weighted index of 200 biotechnology stocks listed on the NASDAQ exchange. The index was developed with a base value of 200 as of November 1, 1993. 6 Global Bond Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income. Principal Strategies The Fund employs a fixed income strategy, and invests primarily in a portfolio of global debt securities that may also provide the potential for capital appreciation. The Fund is a non-diversified portfolio. Normally, at least 65% of the Fund's assets are invested in long-term debt securities of issuers in at least three countries (which may include the United States). Although it may invest anywhere in the world, the Fund invests primarily in fixed income markets listed in the Salomon Smith Barney World Government Bond Index, the benchmark against which the Fund measures its portfolio. Investments in fixed income securities may include: * Debt securities of the U.S. government, its agencies and instrumentalities * Debt securities of global (ex-U.S.) governments * Debt securities of corporations * Mortgage-backed securities * Asset-backed securities The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 8.70% 1.17% 11.58% -6.74% - -------------------------------------------- 96 97 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -1.11%. Best Quarter: Q4 1998 5.86% Worst Quarter: Q1 1999 -3.54% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (7/31/95) - --------------------------------------------------------------- Global Bond Fund -6.74% - - 4.74% Salomon Smith Barney -4.26% - - 3.52% World Government Bond Index
Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Long-Term Debt Debt Securities with an initial maturity of more than one year. Salomon Smith Barney World Government Bond Index A securities index that represents the broad global fixed income markets and includes debt issues of U.S. and most developed global (ex-U.S.) governments, governmental entities and supranationals. 7 U.S. Balanced Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income. Principal Strategies The Fund employs both core/value equity and fixed income strategies. The Fund invests primarily in a wide range of U.S. equity, fixed income and money market securities. Under normal circumstances, the Fund will invest at least 25% of its net assets in fixed income securities. All selection decisions are made relative to the U.S. Balanced Mutual Fund Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Investments in fixed income securities may include: * Debt securities of the U.S. government, its agencies and instrumentalities * Debt securities of U.S. corporations * Mortgage-backed securities * Asset-backed securities * When-issued securities The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 10.86% 12.66% 9.57% -7.44% - ------------------------------------------- 96 97 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -1.08%. Best Quarter: Q2 1997 6.99% Worst Quarter: Q3 1999 -5.15% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (7/31/95) - --------------------------------------------------------------- U.S. Balanced Fund -7.44% - - 7.43% Salomon Smith Barney -0.84% - - 6.21% - --------------------------------------------------------------- BIG Bond Index Wilshire 5000 23.56% - - 24.88% - --------------------------------------------------------------- Equity Index U.S. Balanced Mutual 14.66% - - 18.33% Fund Index
U.S. Balanced Mutual Fund Index Compiled by Brinson Partners, this unmanaged index represents a fixed composite of 65% Wilshire 5000 Equity Index and 35% Salomon Smith Barney Broad Investment Grade (BIG) Bond Index. From time to time, underlying indices may change. Wilshire 5000 Equity Index A broad-based, market capitalization weighted index that includes all U.S. common stocks. It is designed to provide a representative indication of the capitalization and return for the U.S. equity market. Salomon Smith Barney Broad Investment Grade (BIG) Bond Index A broad-based index that includes U.S. bonds with over one year to maturity. 8 U.S. Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy. Normally, the Fund invests at least 65% of its assets in equity securities, which may include dividend-paying securities, of U.S. companies. All selection decisions are made relative to the Wilshire 5000 Equity Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 24.90% 24.23% 17.91% -4.51% - ---------------------------------------- 96 97 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -5.97%. Best Quarter: Q4 1998 16.24% Worst Quarter: Q3 1999 -14.40% Average Annual Total Return (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (7/31/95) - --------------------------------------------------------------- U.S. Equity Fund -4.51% - - 16.71% Wilshire 5000 Equity 23.56% - - 24.88% Index
Wilshire 5000 Equity Index A broad-based, market capitalization weighted index that includes all U.S. common stocks. It is designed to provide a representative indication of the capitalization and return for the U.S. equity market. 9 U.S. Value Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy. Under normal circumstances, the Fund invests at least 65% of its assets in equity securities, which may include dividend-paying securities, of U.S. companies. The Fund invests primarily in securities in the Russell 1000(r) Value Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Russell 1000(r) Value Index The Russell 1000(r) Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market cap of the Russell 3000 Index. As of the latest reconstitution, the average market cap of the Russell 1000(r) Index was approximately $12.1 billion; the median market cap was approximately $3.8 billion. The smallest company in the index had an approximate market cap of $1,350.8 million. The Russell 1000(r) Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. 10 U.S. Large Cap Equity Fund (formerly the U.S. Large Capitalization Equity Fund) Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy. Under normal circumstances, the Fund invests at least 65% of its assets in equity securities of U.S. large cap companies. The Fund is a non-diversified portfolio. All selection decisions are undertaken relative to the Standard & Poor's 500 Equity Index ("S&P 500 Index"), the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you the Fund's performance over the past year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Return for the period ended 12/31* [BAR CHART APPEARS HERE] - -11.39% - ------- 99 *The Fund's total return for the period January 1, 2000 through March 31, 2000 was -9.41%. Best Quarter: Q4 1998 15.29% Worst Quarter: Q3 1999 -15.45% Average Annual Total Returns (for the periods ended 12/31/99) Performance 1 5 10 Inception Year Year Year (4/30/98) - ---------------------------------------------------------------------- U.S. Large Cap Equity Fund -11.39% - - -4.06% S&P 500 Index 21.04% - - 19.85% Large Cap Companies Companies with market caps in the upper 65% of the Wilshire 5000 Equity Index. Companies whose capitalization falls below this level after purchase will continue to be considered large cap companies. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. S&P 500 Index A broad cap market-weighted index that includes common stocks of the leading companies in the top industries in the United States. It is designed to provide a representative indication of the capitalization and return of the large cap U.S. equity market. 11 U.S. Large Cap Growth Fund (formerly the U.S. Large Capitalization Growth Fund) Objective The Fund seeks to provide long-term capital appreciation. Principal Strategies The Fund employs a growth equity strategy, and invests primarily in a portfolio of equity securities of large cap growth companies. The Fund is a non- diversified portfolio. All selection decisions are made relative to the Russell 1000(R) Growth Index, the benchmark against which the Fund measures its portfolio. * Normally, at least 65% of the Fund's assets are invested in securities issued by large cap growth companies. * Up to 20% of the Fund's assets may be invested in foreign securities Investments in equity securities may include: * Common stock * Preferred stock Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you the Fund's performance over the past year. The table which follows compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Return for the period ended 12/31* [BAR CHART APPEARS HERE] 31.63% - ------ 99 *The Fund's total return for the period January 1, 2000 through March 31, 2000 was 6.94% Best Quarter: Q4 1999 21.75% Worst Quarter: Q3 1999 -7.58% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (12/31/98) - ----------------------------------------------------------------- U.S. Large Cap 31.63% - - 31.63% Growth Fund Russell 1000(R) Growth Index 33.16% - - 33.16% S&P 500 Index/1/ 21.04% - - 21.04%
/1/ The Advisor has changed the Fund's benchmark index from the S&P 500 Index to the Russell 1000(R) Growth Index based on the Advisor's determination that the Russell 1000(R) Growth Index is more representative of the Fund's investment strategies. Large Cap Growth Companies Companies with market caps in the upper 65% of the Wilshire 5000 Equity Index. Companies whose cap falls below this level after purchase will continue to be considered large cap growth companies. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on a Fund's net asset value. Russell 1000(R) Growth Index The Russell 1000(R) Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market cap of the Russell 3000 Index. As of the latest reconstitution, the average market cap of the Russell 1000(R) Index was approximately $12.1 billion; the median market cap was approximately $3.8 billion. The smallest company in the index had an approximate market cap of $1,350.8 million. The Russell 1000(R) Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. 12 U.S. Small Cap Equity Fund Objective The Fund seeks to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy, and will invest primarily in publicly traded companies represented in the Wilshire Small Stock Index. All selection decisions are made relative to the Wilshire Small Stock Index, the benchmark against which the Fund measures its portfolio. * Normally, at least 65% of the Fund's assets are invested in equity securities issued by U.S. small cap companies. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Small Cap Companies Companies with market caps in the lower 10% of the Wilshire 5000 Equity Index. Wilshire Small Stock Index This benchmark represents approximately the smallest 10% of the Wilshire 5000 Equity Index in terms of capitalization. The Wilshire 5000 Equity Index is a broad-based, market cap weighted index that includes all U.S. common stocks. 13 U.S. Small Cap Growth Fund (formerly the U.S. Small Capitalization Growth Fund) Objective The Fund seeks to provide long-term capital appreciation. Principal Strategies The Fund employs a growth equity strategy. Under normal conditions, the Fund invests at least 65% of its assets in equity securities of U.S. small cap companies. All selection decisions are made relative to the Russell 2000 Growth Index, the benchmark against which the Fund measures its portfolio. The Fund may also invest in securities of emerging growth companies. The Fund may invest up to 20% of its assets in foreign securities. Investments in equity securities may include: * Common stock * Preferred stock The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you the Fund's performance over the past year. The table which follows compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 40.57% - ------ 99 *The Fund's total return for the period January 1, 2000 through March 31, 2000 was 22.07%. Best Quarter: Q4 1999 32.73% Worst Quarter: Q1 1999 -6.48% Average Annual Total Returns (for the periods ended 12/31/99) Performance 1 5 10 Inception Year Year Year (12/31/98) - ----------------------------------------------------------- U.S. Small Cap 40.57% - - 40.57% Growth Fund Russell 2000 43.09% - - 43.09% Growth Index Russell 2000 Index/(1)/ 21.26% - - 21.26% (1) The Advisor has changed the Fund's benchmark index from the Russell 2000 Index to the Russell 2000 Growth Index based on the Advisor's determination that the Russell 2000 Growth Index is more representative of the Fund's investment strategies. Small Cap Companies Companies with market caps in the lower 10% of the Wilshire 5000 Equity Index. Emerging Growth Companies Small or medium sized companies that have passed their start-up phase and are showing positive earnings, as well as potential for achieving significant profit in a relatively short period of time. Russell 2000 Growth Index An unmanaged index composed of those companies in the Russell 2000 Index with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an index composed of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. 14 U.S. Real Estate Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a specialized sector strategy. Normally, the Fund invests at least 65% of its assets in real estate equity securities, including real estate investment trusts (REITs). The Fund is a non-diversified portfolio. Although the Fund may invest in any real estate related security, the Morgan Stanley REIT Index serves as its benchmark. Investments in equity securities may include: * Common stock * Preferred stock Given that the Fund invests primarily in securities issued by REITs, there is a risk that changes in real estate values or economic downturns can have a substantial impact on the Fund's investments. The Fund's portfolio turnover rate may exceed 100%. Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. REITs Publicly traded companies that own and often operate real property and/or invest in mortgage and mortgage-backed securities. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Morgan Stanley REIT Index The Morgan Stanley REIT Index is a total-return index comprised of the most actively-traded real estate investment trusts and is designed to be a measure of real estate equity performance. The index was developed with a base value of 200 as of December 31, 1994. 15 U.S. Bond Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a fixed income strategy, and invests primarily in a portfolio of investment-grade fixed income securities that may also provide the potential for capital appreciation. As a matter of fundamental policy, under normal circumstances, at least 65% of the Fund's total assets are invested in U.S. long-term debt securities. All selection decisions are made relative to the Salomon Smith Barney Broad Investment Grade (BIG) Bond Index, the benchmark against which the Fund measures its portfolio. Investments in fixed income securities may include: * Debt securities of the U.S. government, its agencies and instrumentalities * Debt securities of U.S. corporations * Mortgage-backed securities * Asset-backed securities The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 3.15% 9.05% 7.80% -1.55% - -------------------------------- 96 97 98 99 *The Fund's total return for the period January 1, 2000 through March 31, 2000 was 1.85%. Best Quarter: Q4 1995 4.46% Worst Quarter: Q1 1996 -2.33% Average Annual Total Returns (for the periods ended 12/31/99) Performance 1 5 10 Inception Year Year Year (8/31/95) - ----------------------------------------------------------- U.S. Bond Fund -1.55% - - 5.41% Salomon Smith Barney -0.84% - - 6.05% Big Bond Index Investment-Grade Fixed income securities possessing a minimum rating of: * BBB by Standard & Poor's Ratings Group ("S&P") or * Baa by Moody's Investors Services, Inc. ("Moody's") or * If unrated, are determined to be of comparable quality by the Advisor. Long-Term Debt Debt securities with an initial maturity of more than one year. Salomon Smith Barney Broad Investment Grade (BIG) Bond Index A broad-based index that includes U.S. bonds with over one year to maturity. 16 High Yield Fund Objectives The Fund's primary objective is to provide high current income from a portfolio of higher-yielding, lower-rated debt securities issued by domestic and foreign companies. The Fund also seeks capital growth, when consistent with high current income, by investing in securities, including common stocks and non-income producing securities, which the Advisor expects will appreciate in value as a result of declines in long-term interest rates or favorable developments affecting the business or prospects of the issuer which may improve the issuer's financial condition and credit rating. Principal Strategies The Fund employs a fixed income strategy, and invests primarily in a portfolio of U.S. higher-yielding, lower-rated bonds: * Under normal conditions, at least 65% of the Fund's assets are invested in fixed income securities that provide higher yields and are "lower-rated" * Up to 25% of the Fund's assets may be invested in foreign securities All selection decisions are undertaken relative to the Merrill Lynch High Yield Master Index, the benchmark against which the Fund measures its portfolio. Investments in fixed income securities may include: * Debt securities of corporations * Zero coupon securities * Asset-backed securities * When-issued securities * Eurodollar securities The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you the Fund's performance over the past year. The table below compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 4.09% - ----- 99 *The Fund's total return for the period January 1, 2000 through March 31, 2000 was -3.96%. Best Quarter: Q1 1999 3.91% Worst Quarter: Q1 2000 -3.96% Average Annual Total Returns (for the periods ended 12/31/99) Performance 1 5 10 Inception Year Year Year (12/31/98) - ----------------------------------------------------------------- High Yield Fund 4.09% - - 4.09% Merrill Lynch High Yield 1.57% - - 1.57% Master Index Lower-Rated Bonds Bonds rated in the lower rating categories of Moody's and S&P, including securities rated: * Ba or lower by Moody's or * BB or lower by S&P. Securities rated in these categories or lower are considered to be of poorer quality and predominantly speculative. Merrill Lynch High Yield Master Index An index of publicly placed non-convertible, coupon-bearing U.S. domestic debt with a term to maturity of at least one year. 17 Emerging Markets Debt Fund Objective The Fund seeks to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a fixed income strategy, and intends to invest primarily in a portfolio of debt securities of issuers located in at least three emerging markets countries, which may be located in Asia, Europe, Latin America, Africa or the Middle East. As these markets change and other countries' markets develop, the Fund expects the countries in which it invests to change. The Fund is a non-diversified portfolio. All selection decisions are undertaken relative to the J.P. Morgan Emerging Markets Bond Index Plus, the benchmark against which the Fund measures its portfolio. Normally, the Fund invests at least 65% of its total assets in debt securities issued by: * Governments * Government-related entities (including participations in loans between governments and financial institutions) * Corporations * Entities organized to restructure outstanding debt of issuers in emerging markets The Fund also invests in debt securities on which the return is derived primarily from other emerging market instruments, such as interest rate swap contracts and currency swap contracts. The Fund may invest in Eurodollar securities, which are fixed income securities of a U.S. issuer or a foreign issuer that are issued outside the United States. A substantial amount of the assets of the Fund may be invested in higher- yielding, lower-rated bonds. Fund Performance There is no performance quoted as the Fund had not commenced operations prior to the date of this prospectus. Emerging Markets The World Bank and other international agencies consider a country to be an "emerging markets" country on the basis of such factors as trade initiatives, per capita income and level of industrialization. Emerging market countries generally include every nation in the world except the U.S., Canada, Japan, Australia, New Zealand and most nations located in Western Europe. Non-Diversified Portfolio Invests most of its assets in a smaller number of issuers, resulting in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Lower-Rated Bonds Bonds rated in the lower rating categories of Moody's and S&P, including securities rated: . Ba or lower by Moody's or . BB or lower by S&P. Securities rated in these categories or lower are considered to be of poorer quality and predominantly speculative. J.P. Morgan Emerging Markets Bond Index Plus Comprised of external-currency-denominated emerging markets debt, including Brady Bonds, loans, Eurobonds and local market instruments. 18 Global (Ex-U.S.) Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, by investing primarily in the equity securities of global (ex- U.S.) issuers. Principal Strategies The Fund employs a core/value equity strategy. Normally, the Fund invests at least 65% of its assets in equity securities of issuers in at least three countries other than the United States. Although it may invest anywhere in the world, the Fund invests primarily in the equity markets listed in the Morgan Stanley Capital International ("MSCI") World Ex USA (Free) Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 11.81% 5.02% 13.44% 18.15% - -------------------------------- 96 97 98 99 *The Fund's total return for the period January 1, 2000 through March 31, 2000 was -4.44%. Best Quarter: Q4 1998 16.86% Worst Quarter: Q3 1998 -13.78% Average Annual Total Returns (for the periods ended 12/31/99) Performance 1 5 10 Inception Year Year Year (7/31/95) - -------------------------------------------------------------- Global (Ex-U.S.) Equity 18.15% - - 12.88% Fund MSCI World Ex USA 27.77% - - 12.68% (Free) Index MSCI World Ex USA (Free) Index An unmanaged, market driven broad based securities index which includes global (ex-U.S.) equity markets in terms of capitalization and performance. 19 Emerging Markets Equity Fund Objective The Fund seeks to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy, and intends to invest primarily in a portfolio of equity securities of issuers located in at least three emerging markets countries, which may be located in Asia, Europe, Latin America, Africa or the Middle East. As these markets change and other countries' markets develop, the Fund expects the countries in which it invests to change. The Fund is a non-diversified portfolio. All selection decisions are undertaken relative to the Morgan Stanley Capital International (MSCI) Emerging Markets (Free) Index, if the benchmark against which the Fund measures its portfolio. Normally, the Fund invests at least 65% of its assets in the equity securities of issuers in emerging markets or securities on which the return is derived from the equity securities of issuers in emerging markets, such as equity swap contracts and equity index swap contracts. Up to 35% of the Fund's assets may be invested in higher-yielding, lower-rated bonds. The Fund may invest in Eurodollar securities, which are fixed income securities of a U.S. issuer or a foreign issuer that are issued outside of the United States. Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Emerging Markets The World Bank and other international agencies consider a country to be an "emerging markets" country on the basis of such factors as trade initiatives, per capita income and level of industrialization. Emerging market countries generally include every nation in the world except the U.S., Canada, Japan, Australia, New Zealand and most nations located in Western Europe. Non-Diversified Portfolio Invests most of its assets in a smaller number of issuers, resulting in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Lower-Rated Bonds Bonds rated in the lower rating categories of Moody's and S&P, including securities rated: . Ba or lower by Moody's or . BB or lower by S&P Securities rated in these categories or lower are considered to be of poorer quality and predominantly speculative. Morgan Stanley Capital International (MSCI) Emerging Markets (Free) Index A market capitalization weighted index which captures 60% of a country's total capitalization while maintaining the overall risk structure of the market. Stocks are included at their full market capitalization weight, and the index reflects actual buyable opportunities for the non-domestic investor. 20 Risk Considerations The chart below illustrates the primary risks of investing in the Funds.
Foreign Geographic Industry Non- Country Concen- High Concen- Interest Diversifi- Pre- Small Credit & Currency tration Yield tration Rate Market cation payment Company - ------------------------------------------------------------------------------------------------------------------------------------ Global Fund * * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Equity Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Technology Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Biotech Fund * * * * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Bond Fund * * * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Balanced Fund * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Equity Fund * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Value Equity Fund * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Large Cap Equity Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Large Cap Growth Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Small Cap Equity Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Small Cap Growth Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Real Estate Equity Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Bond Fund * * * - ------------------------------------------------------------------------------------------------------------------------------------ High Yield Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ Emerging Markets * * * * * * Debt Fund - ------------------------------------------------------------------------------------------------------------------------------------ Global (Ex-U.S.) Equity Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ Emerging Markets * * * * * Equity Fund - ------------------------------------------------------------------------------------------------------------------------------------
Risk Considerations (cont.) All Fund investments are subject to risk and may decline in value. Each Fund's exposure depends upon its specific investment practices. The amount and types of risk vary depending on: * The investment objective(s) * The Fund's ability to achieve its objectives * The markets in which the Fund invests * The investments the Fund makes in those markets * Prevailing economic conditions over the period of an investment Please note that there are other circumstances that could adversely affect your investment and potentially prevent a Fund from achieving its objectives. Credit Risk The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise be unable to honor a financial obligation. Debt securities rated below investment-grade are especially susceptible to this risk. Foreign Country and Currency Risks The risk that prices of a Fund's investments in foreign securities may go down because of unfavorable foreign government actions, political instability or the absence of accurate information about foreign issuers. Also, a decline in the value of foreign currencies relative to the U.S. dollar will reduce the value of securities denominated in those currencies. Foreign securities are sometimes less liquid and harder to value than securities of U.S. issuers. These risks are more severe for securities of issuers in emerging markets countries. The World Bank and other international agencies consider a country to be an "emerging markets" country on the basis of such factors as trade initiatives, per capita income and level of industrialization. Emerging market countries generally include every nation in the world except the U.S., Canada, Japan, Australia, New Zealand and most nations located in Western Europe. On January 1, 1999, the European Monetary Union introduced a new single currency, the Euro, which replaced the national currencies of participating member nations. If a Fund held investments in nations with currencies replaced by the Euro, the investment process, including trading, foreign exchange, payments, settlements, cash accounts, custody and accounting, was impacted. To the extent the Funds hold non-U.S. dollar denominated securities (Euro or other) they will still be exposed to currency risk due to fluctuations in those currencies versus the U.S. dollar. Geographic Concentration Risk The risk that if a Fund has most of its investments in a single country or region, its portfolio will be more susceptible to factors adversely affecting issuers located in that country or region than would a more geographically diverse portfolio of securities. High Yield Risk The risk that the issuer of bonds with ratings of BB (S&P) or Ba (Moody's) or below will default or otherwise be unable to honor a financial obligation. These securities are considered to be of poor standing and are predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations and involve major risk exposure. Bonds in this category may also be called "high yield bonds" or "junk bonds." Industry Concentration Risk The risk that changes in economic, political or other conditions may have a particularly negative effect on issuers in an industry in which a Fund's investments are concentrated. The investment objective of each Fund is "fundamental" and may be changed only with shareholder approval. Unless otherwise stated, each Fund's investment policies are not fundamental and may be changed by the Trust's Trustees without a shareholder vote. There can be no assurance that the Funds will be able to attain their objectives. Each Fund's primary investment practices and strategies are discussed in this prospectus. Other practices, and their related risks, are described in the Statement of Additional Information ("SAI"). 22 Risk Considerations (cont.) Interest Rate Risk The risk that changing interest rates may adversely affect the value of an investment. With fixed-rate securities, an increase in prevailing interest rates typically causes the value of a Fund's securities to fall, while a decline in prevailing interest rates may produce an increase in the market value of the securities. Changes in interest rates will affect the value of longer-term fixed income securities more than shorter-term securities and lower quality securities more than higher quality securities. Market Risk The risk that the market value of a Fund's investments will fluctuate as the stock and bond markets fluctuate. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Non-Diversification Risk The risk that a non-diversified Fund will be more volatile than a diversified Fund because it invests its assets in a smaller number of issuers. The gains or losses on a single security or issuer will, therefore, have a greater impact on the non-diversified Fund's net asset value. Portfolio Turnover The Funds generally intend to purchase securities for long-term investment. Portfolio turnover rates are not a factor in making buy and sell decisions. Increased portfolio turnover may result in higher costs for brokerage commissions, dealer mark-ups and other transaction costs. It may also result in taxable capital gains. Higher costs associated with increased portfolio turnover may offset gains in a Fund's performance. Prepayment Risk The risk that issuers will prepay fixed rate obligations when interest rates fall, forcing the Fund to re-invest in obligations with lower interest rates than the original obligations. Small Company Risk The risk that investments in smaller companies may be more volatile than investments in larger companies, as smaller companies generally experience higher growth and failure rates. The trading volume of smaller company securities is normally lower than that of larger companies. Changes in the demand for the securities of smaller companies generally have a disproportionate effect on their market price, tending to make prices rise more in response to buying demand and fall more in response to selling pressure. 23 Fees and Expenses The tables below describe the fees and expenses that you may pay if you buy and hold shares of the UBS Investment Funds Class of shares. Shareholder Transaction Fees (fees paid directly from your investment) Sales Charge (Load) Imposed on Purchases None Emerging Markets Equity Fund: Purchase/Redemption Transaction Fee 1.50%* * This transaction charge is paid to the Fund and used by it to defray transaction costs associated with each purchase and sale of securities by the Fund. Annual Fund Operating Expenses (expenses that are deducted from Fund assets, expressed as a % of average net assets)
Total Fund Amount of Fee Operating Expenses Waiver and/or (after fee waiver Investment 12b-1 Other Gross Operating Expense and/or expense (06/30/99) Advisory Fees/1/ Expenses/2/ Expenses/1/ Expenses/1/ Reimbursement/1/ reimbursement)/1/ - ------------------------------------------------------------------------------------------------------------------------------------ Global 0.80% 0.65% 0.16% 1.61% 0.00% 1.61% Global Equity 0.80% 0.76% 0.25% 1.81% 0.05% 1.76% Global Technology/3/ 1.40% 1.00% 0.15% 2.55% 0.00% 2.55% Global Biotech/3/ 1.15% 1.00% 0.15% 2.30% 0.00% 2.30% Global Bond 0.75% 0.49% 0.15% 1.39% 0.00% 1.39% U.S. Balanced 0.70% 0.50% 0.26% 1.46% 0.16% 1.30% U.S. Equity 0.70% 0.52% 0.10% 1.32% 0.00% 1.32% U.S. Value Equity/3/ 0.70% 1.00% 0.15% 1.85% 0.00% 1.85% U.S. Large Cap Equity 0.70% 0.52% 0.59% 1.81% 0.49% 1.32% U.S. Large Cap Growth/4/ 0.70% 0.77% 1.68% 3.15% 1.58% 1.57% U.S. Small Cap Equity/3/ 1.00% 1.00% 0.15% 2.15% 0.00% 2.15% U.S. Small Cap Growth/4/ 1.00% 0.77% 0.32% 2.09% 0.17% 1.92% U.S. Real Estate Equity Fund/4/ 0.90% 1.00% 0.15% 2.05% 0.00% 2.05% U.S. Bond 0.50% 0.47% 0.11% 1.08% 0.01% 1.07% High Yield/3/ 0.60% 0.85% 0.23% 1.68% 0.13% 1.55% Emerging Markets Debt/3/ 0.65% 1.00% 0.50% 1.90% 0.00% 2.15% Global (Ex-U.S.) Equity 0.80% 0.84% 0.19% 1.83% 0.00% 1.83% Emerging Markets Equity/3/ 1.10% 1.00% 0.50% 2.45% 0.00% 2.60%
24 Fees and Expenses (cont.) (1) The Advisor has irrevocably agreed to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Funds do not exceed the percentages noted in the chart on page 27. (2) For purposes of this Table, "12b-1 Expenses" are comprised of an asset-based sales charge of up to 0.65% of average daily net assets and a service fee of 0.25% of average daily net assets for each of the Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund, U.S. Bond Fund, High Yield Fund and the GLobal (Ex-U.S.) Equity Fund. "12b-1 Expenses" are comprised of an asset-based sales charge of up to 0.75% of average daily net assets and a service fee of 0.25% of average daily net assets for each of the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund. See "Distribution Arrangements" on page 37. Although the Distribution Plan provides that the Funds may pay fees at these rates, the Funds and the Funds' underwriter have agreed to limit aggregate distribution fees on certain of the Funds so they do not exceed the percentages noted on page 37. Pursuant to rules of the National Association of Securities Dealers, Inc. ("NASD"), the aggregate initial sales charges, deferred sales charges and asset-based sales charges on shares of the Funds may not exceed 6.25% of total gross sales, subject to certain exclusions. This 6.25% limitation is imposed on a Fund basis rather than on a per shareholder basis. Therefore, long-term shareholders of the Funds may pay more than the economic equivalent of the maximum front-end sales charges permitted by the NASD. This amount also includes service fees. (3) The fees and expenses noted for the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund are based on estimates. (4) The U.S. Large Cap Growth Fund, the U.S. Small Cap Growth Fund and the High Yield Fund were created as the result of a reorganization of three corresponding funds of UBS Private Investor Funds, Inc. into these Funds on December 18, 1998. The fees and expenses of these three Funds are based on fees and expenses incurred for the period January 1, 1999 through June 30, 1999 (annualized). 25 Fees and Expenses (cont.) Expense Example This example is intended to help you compare the cost of investing in the UBS Investment Funds Class of shares to the cost of investing in other mutual funds. The example assumes that you invest $10,000 in a Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs and the return on your investment may be higher or lower, based on these assumptions your costs would be:
1 year 3 years 5 years 10 years - ----------------------------------------------------------------------------- Global $ 164 $ 508 $ 876 $ 1,911 Global Equity $ 179 $ 554 $ 954 $ 2,073 Global Technology $ 258 $ 793 $ 1,355 $ 2,885 Global Biotech $ 233 $ 718 $ 1,230 $ 2,636 Global Bond $ 142 $ 440 $ 761 $ 1,669 U.S. Balanced $ 132 $ 412 $ 713 $ 1,568 U.S. Equity $ 134 $ 418 $ 723 $ 1,590 U.S. Value Equity $ 188 $ 582 $ 1,001 $ 2,169 U.S. Large Cap Equity $ 134 $ 418 $ 723 $ 1,590 U.S. Large Cap Growth $ 160 $ 496 $ 855 $ 1,867 U.S. Small Cap Equity $ 218 $ 673 $ 1,154 $ 2,483 U.S. Small Cap Growth $ 195 $ 603 $ 1,037 $ 2,243 U.S. Real Estate Equity $ 208 $ 643 $ 1,103 $ 2,379 U.S. Bond Fund $ 109 $ 340 $ 590 $ 1,306 High Yield Fund $ 158 $ 490 $ 845 $ 1,845 Emerging Markets Debt Fund $ 218 $ 673 $ 1,154 $ 2,483 Global (Ex-U.S.) Equity Fund $ 186 $ 576 $ 990 $ 2,148 Emerging Markets Equity Fund $ 263 $ 808 $ 1,380 $ 2,934
26 Investment Advisor Advisory Fees The following chart shows the investment advisory fees payable to Brinson Partners, before fee waivers, by each Fund during its last fiscal year. Investment Advisory Fees (expressed as a percentage of average net assets) Global Fund 0.80% Global Equity Fund 0.80 Global Technology Fund/1,2/ 1.40 Global Biotech Fund/1,2/ 1.15 Global Bond Fund 0.75 U.S. Balanced Fund 0.70 U.S. Equity Fund 0.70 U.S. Value Equity Fund/1,2/ 0.70 U.S. Large Cap Equity Fund 0.70 U.S. Large Cap Growth Fund 0.70 U.S. Small Cap Equity Fund/1,2/ 1.00 U.S. Small Cap Growth Fund 1.00 U.S. Real Estate Equity Fund/1,2/ 0.90 U.S. Bond Fund 0.50 High Yield Fund 0.60 Emerging Markets Debt Fund/1,2/ 0.65 Global (Ex-U.S.) Equity Fund 0.80 Emerging Markets Equity Fund/1,2/ 1.10 (1) Management fees shown for the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund are based on estimates as the Funds had not commenced operations as of the date of this prospectus. (2) The Advisor is entitled to reimbursement of advisory fees waived during any of the previous five years, provided that the reimbursement will never cause the total operating expense ratio to exceed the limits in the table below. The Advisor has irrevocably agreed to waive its fees and reimburse certain expenses so that the total operating expenses, with the exception of 12b-1 expenses, of the UBS Investment Funds Class of shares do not exceed the following amounts for each of the respective Funds: Global Fund 1.10% Global Equity Fund 1.00 Global Technology Fund 1.55 Global Biotech Fund 1.30 Global Bond Fund 0.90 U.S. Balanced Fund 0.80 U.S. Equity Fund 0.80 U.S. Value Equity Fund 0.85 U.S. Large Cap Equity Fund 0.80 U.S. Large Cap Growth Fund 0.80 U.S. Small Cap Equity Fund 1.15 U.S. Small Cap Growth Fund 1.15 U.S. Real Estate Equity Fund 1.05 U.S. Bond Fund 0.60 High Yield Fund 0.70 Emerging Markets Debt Fund 1.15 Global (Ex-U.S.) Equity Fund 1.00 Emerging Markets Equity Fund 1.60 About the Advisor Brinson Partners, Inc., a Delaware corporation located in Chicago, Illinois, is an investment advisor registered with the U.S. Securities and Exchange Commission. As of December 31, 1999, Brinson Partners was responsible for the management of USD 159 billion in institutional assets. Brinson Partners was organized in 1989 when it acquired the institutional asset management business of The First National Bank of Chicago and First Chicago Investment Advisors, N.A. Brinson Partners and its predecessor entities have managed both U.S. and non-U.S. investment portfolios since 1974 and global investment portfolios since 1982. Brinson Partners is an indirect wholly owned subsidiary of UBS AG, and a core business area within the UBS Asset Management Division. The UBS Asset Management Division is responsible for the institutional asset management activities of UBS, and employs more than 1,800 people worldwide. The Division manages USD 360 billion of institutional assets, including USD 236 billion of discretionary institutional assets on an active basis, as well as mutual fund assets for UBS Private Banking which total over USD 124 billion. Clients include corporations, public funds, endowments, foundations, central banks and other investors located throughout the world. Portfolio Management Investment decisions for the Funds are made by an investment management team at Brinson Partners. No member of the investment management team is primarily responsible for making recommendations for portfolio purchases. Brinson Partners, Inc. 209 South LaSalle Street Chicago, Ill 60604-1295 27 Pricing of Fund Shares The UBS Investment Funds Class of shares are bought and sold at net asset value ("NAV"), which is calculated as of the close of business on each day that the New York Stock Exchange ("NYSE") is open (currently 4:00 p.m. Eastern time). A Fund's securities are valued based on the last sale price or, where market quotations are not readily available, are based on fair value as determined in good faith by the Trust's Board of Trustees. Foreign securities are valued at their closing prices on the exchange on which they are traded. The resulting values are converted from the local currency into U.S. dollars using current exchange rates. Foreign securities may trade in their local markets on weekends or other days when a Fund does not price its shares. Therefore, the NAV of Funds holding foreign securities may change on days when shareholders will not be able to buy or sell their Fund shares. Purchase and redemption orders for shares received in good form by the close of regular trading (currently 4:00 p.m., Eastern time) are priced according to the NAV determined on that day. Purchase and redemption orders received after the close of trading are priced according to the next determined price per share. The Funds reserve the right to change the time at which purchases and redemptions are priced if the NYSE closes at a time other than 4:00 p.m. Eastern time or if an emergency exists. How the Funds Calculate NAV The NAV of a class of shares of a Fund is determined by dividing the value of the securities and other assets, less liabilities, allocated to the class by the number of outstanding shares of the class. 28 Purchasing Shares The minimum initial investment for Fund shares is $25,000, including Individual Retirement Accounts ("IRAs"). Subsequent investments for Fund shares will be accepted in minimum amounts of $5,000 (including IRAs). The Funds reserve the right to vary the investment minimums and impose minimums for additional investments at any time. In addition, Brinson Partners may waive the minimum initial investment requirement for any investor at its discretion. Purchases may be made in one of the following ways: By Telephone Call 1-800-794-7753 to arrange for a telephone transaction. If you want to make future transactions (e.g., purchase additional shares, redeem or exchange shares) by telephone, you will need to elect this option either on the initial application or subsequently in writing. Complete and sign an application for the UBS Investment Funds Class of shares. By Mail Make your check payable to "UBS Investment Fund - ____________." If you are adding to your existing account, enclose the remittance portion of your account statement and include the amount of investment, account name and number. Mail your application and/or check to: UBS Investment Funds c/o Transfer Agent P.O. Box 2798 Boston, MA 02208-2798 By Wire If you are opening a new account, call the Funds at 1-800-794-7753 to arrange for a wire transaction. Then wire federal funds to: The Chase Manhattan Bank ABA#021000021 DDA#9102-783504 FBO: "UBS Investment Fund - _________" and include your name and new account number. Complete and sign an application for UBS Investment Funds Class of shares and mail immediately following the initial wire transaction to: UBS Investment Funds c/o Transfer Agent P.O. Box 2798 Boston, MA 02208-2798 If you are adding to your existing account, you do not need to call the Funds to arrange for a wire transaction, but be sure to include your name and account number. Through Financial Institutions/Professionals In some cases, the Funds have entered into one or more Sales Agreements with brokers, dealers or other financial intermediaries ("Service Providers" as well as with financial institutions (banks and bank trust departments) (each an "Authorized Dealer"). The Authorized Dealer, or intermediaries designated by the Authorized Dealer (a "Sub-designee"), may accept purchase and redemption orders that are in "good form" on behalf of the Funds. A Fund will be deemed to have received a purchase or redemption order when the Authorized Dealer or Sub-designee accepts the order. Such orders will be priced at the Fund's net asset value next computed after such order is accepted by the Authorized Dealer or Sub-designee. These Authorized Dealers may charge the investor a transaction fee or other fee for their services at the time of purchase. These fees would not be otherwise charged if you purchased shares directly from the Funds. It is the responsibility of such Authorized Dealers or Sub-designees to promptly forward purchase orders with payments to the Funds. Telephone orders are accepted from broker-dealers or service organizations if they have been previously approved by the Funds. Brinson Partners, or its affiliates, may, from its own resources, compensate Service Providers for services performed with respect to the UBS Investment Funds Class of shares. These services may include marketing, shareholder servicing, recordkeeping and/or other services. Payments made for any of these purposes may be made from Brinson Partners' revenues, its profits or any other sources available. When these service arrangements are in effect, they are generally made available to all qualified Service Providers. If you have any questions or need further information, call 1-800-794-7753. The Brinson Funds strongly discourage market timers and short-term traders from investing in the Funds. 29 Purchasing Shares (cont.) The Funds will not accept a check endorsed over by a third party. The Funds reserve the right to reject any purchase order and to suspend the offering of shares of The Brinson Funds. This includes purchase orders that, in the reasonable belief of the Funds, have been made by market timers or short-term traders. You will be subject to a 1.50% transaction charge in connection with your purchase of shares of the Emerging Markets Equity Fund. Shares of the Funds are sold at a price which is equal to the NAV of such shares, plus the transaction charge. The transaction charges do not apply to the reinvestment of dividends or capital gains distributions. The transaction charge is paid to the Fund and used by it to defray the transaction costs associated with each purchase and sale of securities within the Fund. Exchanging Shares You can exchange your UBS Investment Funds shares for UBS Investment Funds shares of other Funds. Exchanges will not be permitted between the UBS Investment Funds shares and either the Brinson Funds - Class I shares or the Brinson Funds - Class N shares. Requests for exchanges received prior to the close of regular trading hours on the NYSE will be processed at the net asset value computed on the date of receipt. Requests received after the close of regular trading hours will be processed at the next determined net asset value. Under certain circumstances, the Funds may: * Limit the number of exchanges between Funds * Reject a telephone exchange order * Modify or discontinue the exchange privilege upon 60 days' written notice Exchanged Funds are subject to the minimum initial investment requirement. The procedures that apply to redeeming shares also apply to exchanging shares. An exchange is the sale of shares of one Fund and purchase of shares of another and could result in taxable gain or loss in a non-tax sheltered account. Account Options The following account options are available. There are no charges for the programs noted below and you may change or terminate these plans at any time by written notice to the Funds. For information about participating in these account options, call the transfer agent at 1-800-448-2430. Automatic Investment Plan Through this option, money can be electronically deducted from your checking, savings or bank money market accounts and invested in the Funds each month or quarter. Complete the Automatic Investment Plan Application, which is available upon request by calling 1-800-794-7753, and mail it to the address indicated. The initial $25,000 minimum investment still applies, however, subsequent investments can be as little as $5,000. The Funds may alter or terminate the Automatic Investment Plan at any time. Systematic Withdrawal Plan If you have a minimum of $25,000 in your account, you may direct the transfer agent to make payments to you (or anyone you designate) monthly, quarterly or semi-annually. Withdrawals are drawn from share redemptions and must be a minimum of $500 per payment. Under the Systematic Withdrawal Plan ("SWP"), you must elect to have dividends and distributions automatically reinvested in additional Fund shares. The Funds may terminate any SWP if the value of the account falls below $50,000 due to share redemptions or an exchange of shares for UBS Investment Fund shares of another Fund. Individual Retirement Account You may open an IRA, a tax-deferred retirement account, with the Funds if you are under age 70 1/2. The minimum purchase requirement for an IRA is $25,000. 30 Redeeming Shares Your shares will be redeemed at the NAV next calculated after your order is accepted by the Funds' transfer agent in good order. Redemption requests received prior to the close of regular trading hours (generally 4:00 p.m. Eastern time) on the NYSE will be executed at the net asset value computed on the date of receipt. Redemption requests received after the close of regular trading hours will be executed at the next determined net asset value. Your order will be processed promptly and you will generally receive the proceeds within seven days. Please note that proceeds for redemption requests made shortly after a recent purchase by check will be distributed once the check clears, which may take up to 15 days. The Funds reserve the right to pay redemptions "in kind" (i.e., payment in securities rather than in cash) if the amount you are redeeming is large enough to affect a Fund's operations (for example, if it represents more than $250,000 or 1% of the Fund's assets). In these cases, you might incur brokerage costs converting the securities to cash. You will be subject to a 1.50% transaction charge in connection with each redemption of shares of the Emerging Markets Equity Fund. Redemption requests for the Emerging markets Equity Fund are paid at the NAV less the transaction charge. Redemptions which are made in kind with securities are not subject to the transaction charge. Minimum Balances Due to the relatively high cost of maintaining smaller accounts, the Funds reserve the right to involuntarily redeem shares in any Fund account for their then current net asset value if at any time your total investment does not have a value of at least $1,000 as a result of redemptions and not due to changes in the asset value of the Fund. You will be notified if your account drops below the required minimum and will be allowed at least 60 days to bring the value of the account up to the minimum before the redemption is processed. The Fund will promptly pay you the NAV for such a redemption. You may redeem some or all of your shares any day the NYSE is open for business by doing one of the following (if you have any questions, call the transfer agent at 1-800-794-7753). By Telephone If you have chosen the telephone redemption privilege on the initial application or subsequently arranged in writing, you may call 1-800-794-7753 to redeem shares. By Mail Shareholders may sell shares by making a written request to: UBS Investment Funds P.O. Box 2798 Boston, MA 02208-2798 Include signatures of all persons required to sign for transactions, exactly as their names appear on the account application. To protect your account from fraud, the Funds may require a signature guarantee for certain redemptions (see "Signature Guarantees" below). By Bank Wire If you have chosen the wire redemption privilege on the initial application or subsequently arranged in writing, you may request the Funds to wire your proceeds to a predesignated bank account. Call 1-800-794-7753. Wire redemption requests must be received by the transfer agent by 4:00 p.m. Eastern time for money to be wired the next business day. Through Financial Institutions/Professionals Contact your financial institution or professional for more information. If you purchased shares through an Authorized Dealer or Sub-designee, you should contact it for more information. Important note: Each institution or professional may have its own procedures and requirements for selling shares and may charge fees. 31 Redeeming Shares (cont.) Redemption requests should be accompanied by the Fund's name, your Fund account number and the dollar amount or number of shares to be redeemed. The Fund will mail a check to your account address or, if you have elected the wire redemption privilege, the Fund will wire the proceeds to your bank. Signature Guarantees To protect your account from fraud, the Fund and its agent may require a signature guarantee for certain redemptions to verify the identity of the person who has authorized a redemption from your account. Please contact the Fund for further information. Telephone Transactions You may give up some level of security by choosing to buy or sell shares by telephone, rather than by mail. The Funds will employ reasonable procedures to confirm that telephone instructions are genuine. If they do not employ these procedures, the Funds or the transfer agent may be liable for any losses due to unauthorized or fraudulent transactions. A written confirmation will be provided for all purchase, exchange and redemption transactions initiated by telephone. Transfer of Securities Under certain circumstances, investors may be permitted to purchase Fund shares by transferring securities to the Fund that meet the Fund's investment objective and policies. (Please see the SAI for more information.) Dividends and Distributions Each Fund passes most of its net investment income along to investors in the form of distributions. All shareholders of a Fund are entitled to a proportionate share of the Fund's net income and realized capital gains on its investments. Net investment income for all of the Funds consists of all dividends and interest received, less expenses (including fees payable to the Advisor and its affiliates). Dividends from net investment income are declared, and paid, by each Fund semi-annually - in June and December. In December, the Funds will distribute substantially all of their net long-term capital gains and any undistributed net short-term capital gains realized during the one year period commencing November 1 (or date of the creation of the Fund, if later) and ending October 31. At the same time, the Funds will distribute all of their net investment income earned through the end of December and not previously distributed as ordinary (not capital) income. Dividends and other distributions paid on each class of shares of a Fund are calculated at the same time and in the same manner. Dividends on each class might be affected differently by the allocation of other class-specific expenses. Unless you notify the transfer agent in writing that you elect to receive your income dividends and capital gains distributions in cash, all will be reinvested automatically in additional Fund shares of the same class of a Fund. Distribution options may be changed at any time by requesting a change in writing. Dividends are reinvested on the reinvestment date at the net asset value determined at the close of business on that date. Please note that shares purchased shortly before the record date for a dividend or distribution may have the effect of returning capital, although such dividends and distributions are subject to taxes. 32 Tax Considerations Following is a brief discussion of the general tax treatment of various distributions from the Funds. It is not an exhaustive discussion, and your particular tax status may be different. We encourage you to consult with your own tax advisor about federal, state and local tax considerations. In general, distributions from a Fund are taxable to you as either ordinary income or capital gains, depending upon how long the Fund has held the underlying assets. This is true whether you invest your distributions in additional shares of a Fund or receive them in cash. Any capital gains distributed by a Fund are taxable to you as long-term capital gains no matter how long you have owned your shares. When you sell or exchange your shares of a Fund, you may have a capital gain or loss. The tax rate on any gain from the sale or exchange of your shares depends on how long you have held your shares. Fund distributions and gains from the sale or exchange of your shares will generally be subject to state and local income tax. Foreign investors may be subject to U.S. withholding and estate tax. If any of the following situations apply to you, the Funds will be required by the IRS to withhold 31% of your taxable distributions: * you do not provide your correct taxpayer identification number, or * you do not certify that such number is correct, or * the IRS instructs the Fund to do so. Buying a Dividend If you buy shares in a stock Fund just before the Fund makes any distribution, or if you buy shares in any fixed income Fund just prior to a capital gains distribution, you will receive some of the purchase price back in the form of a taxable distribution. Shareholders will be advised annually of the source and the tax status of all Fund distributions for federal income tax purposes. 33 Distribution Arrangements Distribution Arrangements The Funds have adopted two distribution plans under rule 12b-1 of the Investment Company Act of 1940 to compensate Brinson Partners, Funds Distributor, Inc. ("FDI") and others for distributing and promoting sales of the UBS Investment Funds Class of shares. One plan covers the Global, Global Equity, Global Bond, U.S. Balanced, U.S. Equity, U.S. Large Cap Equity, U.S. Large Cap Growth, U.S. Small Cap Growth, U.S. Bond, High Yield and Global (Ex-U.S.) Equity Funds and annual fees paid under this plan may not exceed 0.90% of the average daily net assets of each UBS Investment Fund's class of shares. The other plan covers the Global Technology, Global Biotech, U.S. Value Equity, U.S. Small Cap Equity, U.S. Real Estate Equity, Emerging Markets Debt and Emerging Markets Equity Funds and annual fees paid under this plan may not exceed 1.00% of the average daily net assets of each UBS Investment Fund's class of shares. 0.25% of each plan's fees are service fees to be paid by the Funds to FDI, dealers and others, for providing personal service and/or maintaining shareholder accounts. The plan provides, however, that the aggregate distribution fees for each respective Fund shall not exceed the following maximum amounts for the 2000 fiscal year: Global Fund 0.65% Global Equity Fund 0.76 Global Technology Fund 1.00 Global Biotech Fund 1.00 Global Bond Fund 0.49 U.S. Balanced Fund 0.50 U.S. Equity Fund 0.52 U.S. Value Equity Fund 1.00 U.S. Large Cap Equity Fund 0.52 U.S. Large Cap Growth Fund 0.77 U.S. Small Cap Equity Fund 1.00 U.S. Small Cap Growth Fund 0.77 U.S. Real Estate Equity Fund 1.00 U.S. Bond Fund 0.47 High Yield Fund 0.85 Emerging Markets Debt Fund 1.00 Global (Ex-U.S.) Equity Fund 0.84 Emerging Markets Equity Fund 1.00 Because these distribution and service fees are paid out of the assets of the UBS Investment Funds Class of shares on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Multiple Classes The Funds are series of The Brinson Funds, a Delaware business trust, and currently offer three classes of shares: Brinson Funds--Class I, Brinson Funds-- Class N and UBS Investment Funds Class of shares. 34 Financial Highlights The financial highlights table is intended to help you understand a Fund's financial performance for the past five years (or, if shorter, the period of the Fund's operations). Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in each Fund (assuming reinvestment of all dividends and distributions). Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Cap Equity Fund, U.S. Bond Fund and Global (Ex-U.S.) Equity Fund The selected financial information in the following table has been audited by the Funds' independent auditors, whose unqualified reports thereon (the "Reports") appear in the Funds' Annual Report to Shareholders dated June 30, 1999 (the "Annual Report"). In addition, the table includes unaudited financial information for the period ended December 31, 1999, which is included in the Funds' Semi-Annual Report to Shareholders (the "Semi-Annual Report") dated December 31, 1999. Additional performance and financial data and related notes are contained in the Annual Report and the Semi-Annual Report, which are available without charge upon request. The Funds' financial statements for the fiscal year ended June 30, 1999 and the Reports, as well as the Semi-Annual Report, are incorporated by reference into the SAI. U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund The U.S. Large Cap Growth Fund, the U.S. Small Cap Growth Fund and the High Yield Fund (collectively, the "New Funds") are successors to the UBS Large Cap Growth Fund, the UBS Small Cap Fund and the UBS High Yield Bond Fund, respectively (collectively, the "Predecessor Funds"). Each Predecessor Fund, prior to its merger into a New Fund, operated as a separate portfolio of UBS Private Investor Funds, Inc., another investment company that was advised by another entity. The Predecessor Funds had fiscal years ending on December 31. On December 18, 1998, following the approval of the shareholders of each Predecessor Fund of an agreement and plan of reorganization, the UBS Large Cap Growth Fund, the UBS Small Cap Fund and the UBS High Yield Bond Fund were reorganized and merged into the U.S. Large Cap Growth Fund, the U.S. Small Cap Growth Fund and the High Yield Fund, respectively. (These transactions are collectively referred to as the "Reorganizations.") The New Funds had no operations prior to the Reorganizations. The New Funds have fiscal years ending on June 30. The selected financial information in the following table, for the year ended June 30, 1999, has been audited by the Funds' independent auditors, whose unqualified reports on the financial statements containing such information appear in the Annual Report. In addition, the table includes unaudited financial information for the period ended December 31, 1999, which is included in the Funds' Semi-Annual Report dated December 31,1999. The selected financial information in the following table for the year ended December 31, 1998 has been audited by the Funds' independent auditors, whose unqualified reports on the financial statements containing such information appear in the New Funds' Annual Report to Shareholders (the "New Funds' Report") dated December 31, 1998. The selected financial information in the following table for the year ended December 31, 1997 has been audited by the Predecessor Funds' independent auditors, whose unqualified reports on the financial statements containing such information (the "Predecessor Funds' Reports") appear in the Predecessor Funds' Annual Report to Shareholders dated December 31, 1997 (the "Predecessor Funds' Annual Report"). Additional performance and financial data and related notes are contained in the Annual Report, the Semi-Annual Report, the New Funds' Report and the Predecessor Funds' Annual Reports (collectively, the "New Funds' and Predecessor Funds' Reports"), which are available without charge upon request. The New Funds' financial statements for the fiscal years ended June 30, 1999 and December 31, 1998, and the Predecessor Funds' financial statements for the fiscal year ended December 31, 1997, and the New Funds' and Predecessor Funds' Reports, are incorporated by reference into the SAI. Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund No financial information is presented for these Funds as they had not commenced operations as of the date of this prospectus. 35 Financial Highlights (cont.) Financial Highlights--Fiscal Year Ended June 30 and the Semi-Annual Period Ended December 31, 1999. The following table presents financial data relating to a share of beneficial interest outstanding throughout the periods presented. This information has been derived from the Funds' financial statements.
Income (Loss) from Investment Operations Less Distributions ------------------------------------------- ----------------------------- Distributions Distributions Total from and from and Net asset Net income in excess in excess value- Net realized and (loss) from of net of net Total beginning Investment unrealized investment investment realized Distribu- Year of period income (loss) gain (loss) operations income gain tions UBS INVESTMENT FUND-GLOBAL (Commencement of Operations July 31, 1995)/(3)/ 1996 $ 11.60 0.39 1.10 1.49 (0.59) (0.32) (0.91) 1997 $ 12.18 0.34 1.75 2.09 (0.57) (0.65) (1.22) 1998 $ 13.05 0.30 0.61 0.91 (0.55) (0.70) (1.25) 1999 $ 12.71 0.20 0.25 0.45 (0.37) (0.84) (1.21) 1999 (December 31st) (unaudited) $ 4.95 0.09/2/ (0.27) (0.18) (0.13) (0.52) (0.65) --------- ------------- ------------ ----------- -------------- ------------- --------- UBS INVESTMENT FUND-GLOBAL EQUITY (Commencement of Operations July 31, 1995)(3) 1996 $ 10.35 (0.01) 1.93 1.92 (0.01) (0.69) (0.70) 1997 $ 11.57 0.08 2.13 2.21 (0.06) (0.99) (1.05) 1998 $ 12.73 0.07 0.83 0.90 (0.07) (1.05) (1.12) 1999 $ 12.51 0.04/2/ 1.09 1.13 (0.06) (0.18) (0.24) 1999 (December 31st) (unaudited) $ 13.40 (0.03)/2/ 0.64 0.61 (0.02) (1.21) (1.23) --------- ------------- ------------ ----------- -------------- ------------- --------- UBS INVESTMENT FUND-GLOBAL BOND (Commencement of Operations July 31, 1995)(3) 1996 $ 10.56 0.78 0.15 0.93 (1.37) (0.10) (1.47) 1997 $ 10.02 0.62 0.10 0.72 (0.94) (0.19) (1.13) 1998 $ 9.61 0.38/2/ (0.18) 0.20 (0.25) (0.17) (0.42) 1999 $ 9.39 0.34/2/ (0.07) 0.27 (0.42) (0.08) (0.50) 1999 (December 31st) (unaudited) $ 9.16 0.19/2/ (0.19) - (0.11) (0.01) (0.12) --------- ------------- ------------ ----------- -------------- ------------- --------- UBS INVESTMENT FUND-U.S. BALANCED (Commencement of Operations July 31, 1995)(3) 1996 $ 11.38 0.42 0.86 1.28 (0.42) (0.57) (0.99) 1997 $ 11.67 0.38 1.31 1.69 (0.36) (0.54) (0.90) 1998 $ 12.46 0.42/2/ 0.95 1.37 (0.70) (0.94) (1.64) 1999 $ 12.19 0.27/2/ 0.18 0.45 (0.67) (2.65) (3.32) 1999 (December 31st) (unaudited) $ 9.32 0.13/2/ (0.87) (0.74) (0.17) (0.06) (0.23) --------- ------------- ------------ ----------- -------------- ------------- --------- UBS INVESTMENT FUND-U.S. EQUITY (Commencement of Operations July 31, 1995)(3) 1996 $ 11.94 0.10 2.92 3.02 (0.13) (0.25) (0.38) 1997 $ 14.58 0.11 4.22 4.33 (0.09) (1.23) (1.32) 1998 $ 17.59 0.09 3.38 3.47 (0.10) (1.13) (1.23) 1999 $ 19.83 0.06/2/ 2.67 2.73 (0.05) (1.12) (1.17) 1999 (December 31st) (unaudited) $ 21.39 0.08/2/ (2.90) (2.82) (0.05) (1.77) (1.82) --------- ------------- ------------ ----------- -------------- ------------- --------- UBS INVESTMENT FUND-U.S. LARGE CAP EQUITY (Commencement of Operations April 6, 1998)(3),(4) 1998 $ 10.00 0.02 (0.22) (0.20) (0.01) - (0.01) 1999 $ 9.79 0.04/2/ 1.31 1.35 (0.07) - (0.07) 1999 (December 31st) (unaudited) $ 11.07 0.05/2/ (2.01) (1.96) (0.08) (0.95) (1.03) --------- ------------- ------------ ----------- -------------- ------------- ---------
(1) Annualized (2) The net investment income per share data was determined by using average shares outstanding throughout the period. (3) Formerly known as the SwissKey class of shares, redesignated as the UBS Investment Funds Class of shares on September 15, 1998. (4) The U.S. Large Cap Equity Fund changed its name from the U.S. Large Capitalization Equity Fund on May 1, 2000. 36
RATIOS/SUPPLEMENTAL DATA ---------------------------------------------------- Ratio of Net Ratio of Expenses Investment Income to Average Net to Average Net Assets Assets ------------------------ ------------------------ Net Net asset Total assets, Before After Before After value- Return end of expense expense expense expense Portfolio end of (non- period reimburse- reimburse- reimburse- reimburse- turnover Year period annualized) (in 000s) ment ment ment ment rate ------- ----------- --------- ---------- ---------- ---------- ---------- --------- UBS INVESTMENT FUND-GLOBAL (Commencement of Operations July 31, 1995)(3) 1996 $12.18 13.24% 1.69%/1/ N/A 3.04%/1/ N/A 142% 1997 $13.05 18.13% $26,303 1.64% N/A 2.38% N/A 150% 1998 $12.71 7.60% $30,436 1.59% N/A 2.05% N/A 88% 1999 $11.95 3.92% $22,060 1.61% N/A 1.58% N/A 105% 1999 (December 31st) (unaudited) $11.12 (1.44)% $14,221 1.64%/1/ N/A 1.33%/1/ N/A 36% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- UBS INVESTMENT FUND-GLOBAL EQUITY (Commencement of Operations July 31, 1995)(3) 1996 $11.57 19.25% $33,012 2.53%/1/ 1.76%/1/ (0.19)%/1/ 0.58%/1/ 74% 1997 $12.73 20.34% $61,680 2.00% 1.75% 0.60% 0.85% 32% 1998 $12.51 8.15% $59,147 1.78% 1.76% 0.53% 0.55% 46% 1999 $13.40 9.28% $44,042 1.81% 1.76% 0.29% 0.34% 86% 1999 (December 31st) (unaudited) $12.78 5.00% $42,061 1.81%/1/ 1.76%/1/ (0.39)%/1/ (0.34)%/1/ 57% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- UBS INVESTMENT FUND-GLOBAL BOND (Commencement of Operations July 31, 1995)(3) 1996 $10.02 9.17% $ 3,653 2.14%/1/ 1.39%/1/ 4.49%/1/ 5.24%/1/ 184% 1997 $ 9.61 7.20% $ 4,110 1.81% 1.39% 4.41% 4.83% 235% 1998 $ 9.39 2.28% $ 4,377 1.45% 1.39% 3.98% 4.04% 151% 1999 $ 9.16 2.58% $ 4,429 1.39% N/A 3.56% N/A 1.38% 1999 (December 31st) (unaudited) $ 9.04 (0.07)% $ 3,624 1.53%/1/ 1.45%/1/ 3.67%/1/ 3.81%/1/ 35% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- UBS INVESTMENT FUND-U.S. BALANCED (Commencement of Operations July 31, 1995)(3) 1996 $11.67 11.54% $ 779 1.51%/1/ 1.30%/1/ 3.26%/1/ 3.47%/1/ 240% 1997 $12.46 14.99% $ 1,649 1.38% 1.30% 3.28% 3.36% 329% 1998 $12.19 11.79% $ 1,880 1.31% 1.30% 3.38% 3.39% 194% 1999 $ 9.32 4.13% $ 1,789 1.46% 1.30% 2.50% 2.66% 113% 1999 (December 31st) (unaudited) $ 8.35 (7.44)% $ 1,446 1.45%/1/ 1.30%/1/ 2.35%/1/ 2.50%/1/ 42% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- UBS INVESTMENT FUND-U.S. EQUITY (Commencement of Operations July 31, 1995)(3) 1996 $14.58 25.70% $ 5,387 1.66%/1/ 1.32%/1/ 0.61%/1/ 0.95%/1/ 36% 1997 $17.59 31.28% $35,039 1.41% 1.32% 0.54% 0.63% 43% 1998 $19.83 20.80% $55,063 1.32% N/A 0.60% N/A 42% 1999 $21.39 14.63% $69,167 1.32% N/A 0.30% N/A 48% 1999 (December 31st) (unaudited) $16.75 (4.51)% $50,772 1.32%/1/ N/A 0.32%/1/ N/A 26% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- UBS INVESTMENT FUND-U.S. LARGE CAP EQUITY (Commencement of Operations April 6, 1998)(3),(4) 1998 $ 9.79 (2.06)% $ 1 2.11%/1/ 1.32%/1/ 0.00%/1/ 0.79%/1/ 12% 1999 $11.07 13.86% $ 6 1.81% 1.32% 0.05% 0.54% 88% 1999 (December 31st) (unaudited) $ 8.08 (11.39)% $ 77 1.70%/1/ 1.32%/1/ 0.20%/1/ 0.58%/1/ 84% ------- ----------- --------- ---------- ---------- ---------- ---------- ---------
N/A = Not Applicable 37 Financial Highlights (cont.)
Income (Loss) from Investment Operations Less Distributions --------------------------------------- ------------------------------ Distributions Distributions Net Total from and from and Net asset Net realized income in excess in excess value- Invest- and (loss) from of net of net Total beginning ment unrealized investment investment realized Distribu- Year of period income (loss) gain (loss) operations income gain tions UBS INVESTMENT FUND-U.S. LARGE CAP GROWTH/6/ (Commencement of Operations December 31, 1998)/4/ 1999 $ 11.84 (0.04) 2.05 2.01 - - - 1999 (December 31st) (unaudited) $ 13.85 (0.05)/2/ 1.71 1.66 - (0.95) (0.95) --------- ------------- ---------- ---------- -------------- ------------- --------- UBS INVESTMENT FUND-U.S. SMALL CAP GROWTH/6/ (Commencement of Operations December 31, 1998)/4/ 1999 $ 8.80 (0.06) 0.40 0.34 - - - 1999 (December 31st) (unaudited) $ 9.14 (0.07)/2/ 3.30 3.23 - --------- ------------- ---------- ---------- -------------- ------------- --------- UBS INVESTMENT FUND-U.S. BOND (Commencement of Operations August 31, 1995)/3/ 1996 $ 10.00 0.46 (0.13) 0.33 (0.38) (0.03) (0.41) 1997 $ 9.92 0.46/2/ 0.32 0.78 (0.48) - (0.48) 1998 $ 10.22 0.50 0.49 0.99 (0.53) (0.14) (0.67) 1999 $ 10.54 0.52/2/ (0.26) 0.26 (0.42) (0.15) (0.57) 1999 (December 31st) (unaudited) $ 10.23 0.29/2/ (0.27) 0.02 (0.54) - (0.54) --------- ------------- ---------- ---------- -------------- ------------- --------- UBS INVESTMENT FUND-HIGH YIELD/6/ (Commencement of Operations December 31, 1998) 1999 $ 9.98 0.41/2/ (0.15) 0.26 (0.29) - (0.29) 1999 (December 31st) (unaudited) $ 9.95 0.42/2/ (0.27) 0.15 (0.43) (0.07) (0.50) --------- ------------- ---------- ---------- -------------- ------------- --------- UBS INVESTMENT FUND-GLOBAL (EX-U.S.) EQUITY (Commencement of Operations July 31, 1995)/3,5/ 1996 $ 10.26 0.12 1.45 1.57 (0.15) (0.56) (0.71) 1997 $ 11.12 0.11 1.93 2.04 (0.11) (0.56) (0.67) 1998 $ 12.49 0.08 0.30 0.38 (0.08) (0.74) (0.82) 1999 $ 12.05 0.05 0.27 0.32 (0.05) (0.12) (0.17) 1999 (December 31st) (unaudited) $ 12.20 (0.03) 1.95 1.92 (0.02) (0.14) (0.16) --------- ------------- ---------- ---------- -------------- ------------- ---------
(1) Annualized. (2) The net investment income per share data was determined by using average shares outstanding throughout the period. (3) Formerly known as the SwissKey class of shares, redesignated as the UBS Investment Funds Class of shares on September 15, 1998. (4) The U.S. Large Cap Growth Fund and U.S. Small Cap Growth Fund changed their names from the U.S. Large Capitalization Growth Fund and U.S. Small Capitalization Growth Fund, respectively, on May 1, 2000. (5) The Global (Ex-U.S.) Equity Fund changed its name from the Non-U.S. Equity Fund on December 10, 1998. (6) Prior to the Reorganizations, U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund had a fiscal year end of December 31. N/A = Not Applicable 38
RATIOS/SUPPLEMENTAL DATA ------------------------------------ Ratio of Net Ratio of Expenses Investment Income to Average Net to Average Net Assets Assets ----------------------- ----------------------- Net Net asset Total assets, Before After Before After value- Return end of expense expense expense expense Portfolio end of (non- period reimburse- reimburse- reimburse- reimburse- turnover Year period annualized) (in 000s) ment ment ment ment rate UBS INVESTMENT FUND-U.S. LARGE CAP GROWTH/6/ (Commencement of Operations December 31, 1998)/4/ 1999 $ 13.85 16.98% $ 5,136 3.15%/1/ 1.57%/1/ (2.03)%/1/ (0.45)%/1/ 51% 1999 (December 31st) (unaudited) $ 14.56 31.63% $ 7,080 2.94%/1/ 1.57%/1/ (2.06)%/1/ (0.69)%/1/ 46% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- UBS INVESTMENT FUND-U.S. SMALL CAP GROWTH/6/ (Commencement of Operations December 31, 1998)/4/ 1999 $ 9.14 3.86% $ 640 2.09%/1/ 1.92%/1/ (1.39)%/1/ (1.22)%/1/ 71% 1999 (December 31st) (unaudited) $ 12.37 40.57% $ 1,378 2.11%/1/ 1.92%/1/ (1.52)%/1/ (1.33)%/1/ 69% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- UBS INVESTMENT FUND-U.S. BOND (Commencement of Operations August 31, 1995)/3/ 1996 $ 9.92 3.24% $ 636 4.10%/1/ 1.07%/1/ 2.53%/1/ 5.56%/1/ 363% 1997 $ 10.22 7.91% $ 1,399 2.12% 1.07% 4.67% 5.72% 410% 1998 $ 10.54 9.97% $ 2,444 1.31% 1.07% 5.14% 5.38% 198% 1999 $ 10.23 2.45% $ 6,015 1.08% 1.07% 4.95% 4.96% 260% 1999 (December 31st) (unaudited) $ 9.71 (1.55)% $ 5,771 1.08%/1/ 1.07%/1/ 5.47%/1/ 5.48%/1/ 103% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- UBS INVESTMENT FUND-HIGH YIELD/6/ (Commencement of Operations December 31, 1998) 1999 $ 9.95 2.61% $ 6,292 1.68%/1/ 1.55%/1/ 7.69%/1/ 7.82%/1/ 77% 1999 (December 31st) (unaudited) $ 9.60 4.09% $ 2,920 1.68%/1/ 1.55%/1/ 8.29%/1/ 8.42%/1/ 29% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- UBS INVESTMENT FUND-GLOBAL (EX-U.S.) EQUITY (Commencement of Operations July 31, 1995)/3,5/ 1996 $ 11.12 15.78% $ 1,262 2.04%/1/ 1.84%/1/ 0.83%/1/ 1.03%/1/ 20% 1997 $ 12.49 19.32% $ 7,797 1.81% N/A 1.02% N/A 25% 1998 $ 12.05 3.90% $ 5,310 1.84% N/A 0.68% N/A 49% 1999 $ 12.20 2.78% $ 6,739 1.83% N/A 0.51% N/A 74% 1999 (December 31st) (unaudited) $ 13.96 18.15% $ 7,304 1.82%/1/ N/A (0.51)%/1/ N/A 32% ------- ----------- --------- ---------- ---------- ---------- ---------- ---------
39 For More Information More information on The Brinson Funds is available free upon request: Shareholder Reports Additional information about the Funds' investments is available in the Funds' annual and semi-annual reports to shareholders. In the Funds' annual report, you will find a discussion of the market conditions and investment strategies that significantly affected each Fund's performance during its last fiscal year. Statement of Additional Information ("SAI") The SAI provides more details about each Fund and its policies. The SAI is on file with the Securities and Exchange Commission ("SEC") and is incorporated by reference into (is legally considered part of) this prospectus. TO OBTAIN INFORMATION: By Telephone Call 1-800-794-7753 By Mail UBS Investment Funds P.O. Box 2798 Boston, MA 02208-2798 By Email fulfill@fdinet.com On The Internet Text-only versions of the prospectus and other documents pertaining to the Funds can be viewed online or downloaded from: SEC: http://www.sec.gov Brinson Partners: http://www.ubsbrinson.com Information about the Funds (including the SAI) can also be reviewed and copied at the SEC's public reference room in Washington, DC (phone 1-800-SEC-0330). Or, you can obtain copies of this information by sending a request, along with a duplicating fee, to the SEC's Public Reference Section, Washington, DC 20549- 6009, or by electronic request at publicinfo@sec.gov. The Funds are series of The Brinson Funds; Registration Number: 811-6637 [LOGO OF UBS] Investment Funds P.O. Box 2798.Boston, MA 02208-9915 Tel: 1-800-794-7753 The Brinson Funds Global Fund Global Equity Fund Global Technology Fund Global Biotech Fund Global Bond Fund U.S. Balanced Fund U.S. Equity Fund U.S. Value Equity Fund U.S. Large Cap Equity Fund U.S. Large Cap Growth Fund U.S. Small Cap Equity Fund U.S. Small Cap Growth Fund U.S. Real Estate Equity Fund U.S. Bond Fund High Yield Fund Emerging Markets Debt Fund Global (Ex-U.S.) Equity Fund Emerging Markets Equity Fund Class N Shares Prospectus May 1, 2000 As with any mutual fund, the Securities and Exchange Commission (SEC) has not approved or disapproved of these securities or determined whether this prospectus is adequate or complete. Any representation to the contrary is a criminal offense. Table of Contents
The Brinson Investment Process............ 2 Overview of the Funds Global Fund............................ 3 Global Equity Fund..................... 4 Global Technology Fund................. 5 Global Biotech Fund.................... 6 Global Bond Fund....................... 7 U.S. Balanced Fund..................... 8 U.S. Equity Fund....................... 9 U.S. Value Equity Fund................. 10 U.S. Large Cap Equity Fund............. 11 U.S. Large Cap Growth Fund............. 12 U.S. Small Cap Equity Fund............. 13 U.S. Small Cap Growth Fund............. 14 U.S. Real Estate Equity Fund........... 15 U.S. Bond Fund......................... 16 High Yield Fund........................ 17 Emerging Markets Debt Fund............. 18 Global (Ex-U.S.) Equity Fund........... 19 Emerging Markets Equity Fund........... 20 Risk Considerations....................... 21 Fees and Expenses......................... 24 Investment Advisor........................ 26 Pricing of Fund Shares.................... 27 Purchasing Shares......................... 28 Redeeming Shares.......................... 30 Dividends and Distributions............... 31 Tax Considerations........................ 32 Distribution Arrangements................. 32 Financial Highlights...................... 33
1 Overview of the Funds A Look At The Brinson Investment Process At Brinson Partners, Inc. ("Brinson Partners" or the "Advisor"), we believe that the fundamental value of any investment is related to the future cash flows that it will generate for its investors. We believe that this determination must be made within a framework of globally integrated capital markets. World economies and financial markets are interactive. Thus, investment management, both within and across global stock and bond markets, must be based upon comprehensive knowledge and analysis of integrated investment fundamentals. When making asset allocation decisions, if we are indifferent with respect to a market, industry, or other characteristic, we tend toward the "normal" weight, as determined by its proportion within the passive benchmark. Decisions to deviate from the normal mix of assets are a blend of rigorous quantitative analysis, an understanding of the fundamental relationships among global markets, and the expertise and insights of our investment professionals. Security selection decisions for the core/value equity, growth equity and fixed income Funds are also made in relation to the benchmark, as described in each Fund's principal strategy section. We may substitute securities from an equivalent index that we believe more accurately reflects changes in our expectations for various classes of investments. Equity Selections Core/Value Equity Funds Our Core/Value equity process focuses on identifying discrepancies between securities' fundamental values and their observed market prices. For each stock under our analysis, we estimate an intrinsic or fundamental value using disciplined quantitative techniques that incorporate our team of analysts' considerations of company management, competitive advantage, and each company's core competencies. These value estimates are then compared to current market prices and ranked against the other stocks in our valuation universe. Portfolios are constructed by focusing on those stocks that rank in the top 20% of the valuation output. The Fund's risk is carefully monitored, with consideration given to market sensitivity, common factor exposures, industry weightings and individual stock selection. Growth Equity Funds Brinson Partners also manages portfolios against growth-oriented equity benchmarks. In the growth universe, we seek to invest in companies that possess a dominant market position and franchise, a major technical edge or a unique competitive advantage. Factors employed in our quantitative disciplines include earnings revisions, favorable analyst diffusion trends, positive stock price momentum and sales acceleration. Our seasoned investment professionals then conduct intensive fundamental research on the universe of companies identified as attractive by our quantitative models. Portfolios are constructed and monitored with close adherence to risk control guidelines. Specialized Sector Funds In response to changing market conditions and to the varied and dynamic needs of our clients, we offer several specialized sector Funds. These Funds are diversified among narrower market segments than our core/value and growth Funds, and are intended to compliment a diversified investment program. Security selection for these Funds is driven by relative valuation attractiveness over other securities within the specified sector. Investment decisions rely on quantitative analysis and screening, as well as fundamental research and valuation work. Fixed Income Selections We use an internally developed valuation model for fixed income selections for our Funds, which quantifies our return expectations for all of the bond markets. Inputs to this model include forecasts of inflation, risk premiums and interest rates. Our credit review process incorporates both a top-down strategy, which focuses on how macroeconomic forces shape various industry outlooks, and a bottom-up strategy, which relies on a combination of qualitative and quantitative factors. Our qualitative assessment focuses on management strength, market position, competitive environment and financial flexibility. Our quantitative assessment focuses on historical operating results, calculation of various credit ratios and an expected future outlook. With the exception of the High Yield Fund, our fixed income selections generally include all categories of investment grade fixed income securities, but emphasize the higher quality securities in this spectrum (those with a credit rating of AA and above). Our fixed income strategies combine judgments about the absolute value of the fixed income universe and the relative value of issuer sectors, maturity intervals, duration of securities, quality and coupon segments and specific fixed income securities. Cash and Cash Equivalents Each Fund may invest in cash or cash equivalent instruments, including units of an affiliated money market fund. See the Statement of Additional Information for further information. Shares of The Brinson Funds are not bank deposits and are not insured or guaranteed by the FDIC or any other government agency. The value of your investment in a Fund will fluctuate, which means that you may lose money. 2 Global Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income. Principal Strategies The Fund employs both core/value equity and fixed income strategies. The Fund invests primarily in a portfolio of global equity and global fixed income securities. At least 65% of the Fund's assets are invested in securities of issuers in at least three countries (which may include the United States). All security selection decisions are made relative to the Global Securities Markets Index (GSMI) Mutual Fund Index, the benchmark against which the Fund measures its portfolio. Although it may invest anywhere in the world, the Fund invests primarily in: * Equity markets listed in the Morgan Stanley Capital International ("MSCI") World Equity (Free) Index * Fixed income markets listed in the Salomon Smith Barney World Government Bond Index The Fund may invest in different types of securities in order to access these markets. Other investments may include other open-end investment companies advised by Brinson Partners. The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 8.00% 1.18% - ------------------- 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -1.17%. Best Quarter: Q4 1998 7.61% Worst Quarter: Q3 1998 -5.33% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (6/30/97) - --------------------------------------------------------------------- Global Fund 1.18% - - 4.34% Salomon Smith Barney World -4.26% - - 4.65% Government Bond Index MSCI World Equity (Free) Index 25.12% - - 19.61% GSMI Mutual Fund Index 16.85% - - 14.58%
GSMI Mutual Fund Index An unmanaged index compiled by Brinson Partners, currently constructed as follows:
40% Wilshire 5000 9% Salomon Smith Barney Equity Index Non-U.S. Gov't. 22% MSCI World Ex USA Bond Index (Free) Index 3% Merrill Lynch High Yield 21% Salomon Smith Barney Master Index BIG Bond Index 3% MSCI Emerging Markets Free Index 2% JP Morgan EMBI+
From time to time, underlying indices may change. MSCI World Equity (Free) Index A broad based securities index that represents the U.S. and developed global (ex-U.S.) equity markets in terms of capitalization and performance. It is designed to provide a representative total return for all major stock exchanges located inside and outside the United States. Salomon Smith Barney World Government Bond Index A securities index that represents the broad global fixed income markets and includes debt issues of U.S. and most developed global (ex-U.S.) governments, governmental entities and supranationals. 3 Global Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income. Principal Strategies The Fund employs a core/value equity strategy, and invests primarily in a portfolio of global equity securities, which may include dividend-paying securities. At least 65% of the Fund's assets are invested in securities of issuers in at least three countries (which may include the United States). Although it may invest anywhere in the world, the Fund invests primarily in equity markets listed in the Morgan Stanley Capital International ("MSCI") World Equity (Free) Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 13.63% 12.59% - ----------------------- 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -5.56%. Best Quarter: Q4 1998 14.16% Worst Quarter: Q3 1998 -10.06% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (6/30/97) - ------------------------------------------------------------ Global Equity Fund 12.59% - - 9.51% MSCI World Equity 25.12% - - 19.61% (Free) Index
MSCI World Equity (Free) Index A broad based securities index that represents the U.S. and developed global (ex-U.S.) equity markets in terms of capitalization and performance. It is designed to provide a representative total return for all major stock exchanges located inside and outside the United States. 4 Global Technology Fund Objective The Fund seeks to provide long-term capital appreciation. Principal Strategies Under normal circumstances, the Fund invests at least 65% of its assets in equity securities of technology companies. The Fund employs a specialized sector strategy, and is a non-diversified portfolio. The selection of companies is mainly influenced by a strong competitive position allowing the Fund to participate in the growth of each industry. Furthermore, the quality of the management, the technological innovation and the revenue growth of the companies are very important. The Fund's benchmark is the Morgan Stanley High Tech Index. Investments in equity securities may include: * Common stock * Preferred stock Given that the Fund invests primarily in technology-related securities, there is a risk that economic factors such as patent considerations, intense competition, rapid technological changes and obsolescence may have a substantial impact on the Fund's investments. The Fund's portfolio turnover rate may exceed 100%. Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Technology Companies Technology companies develop, sell, or significantly benefit from the use of technology products and services. The term technology includes electronics, data processing, semi-conductors, telecommunications, and technology services. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Morgan Stanley High Tech Index The Morgan Stanley High Tech Index is an equal dollar-weighted index of 35 stocks from 9 technology subsectors: computer services, design software, server software, PC software and new media, networking and telecom equipment, server hardware, PC hardware and peripherals, specialized systems, and semiconductors. The index was developed with a base value of 200 as of December 16, 1994, and is rebalanced annually. 5 Global Biotech Fund Objective The Fund seeks to provide long-term capital appreciation. Principal Strategies Under normal circumstances, the Fund invests at least 65% of its assets in equity securities of biotechnology companies. The Fund employs a specialized sector strategy, and is a non-diversified portfolio. Stock selection is based on bottom-up, fundamental analysis. Biotechnology companies generate value by developing new kinds of drugs and technologies. The basis of the fundamental analysis is to analyze the science behind the drugs and technologies. Although the Fund may invest anywhere in the world, it principally invests in the equity securities contained in the NASDAQ Biotech Index, which consists of 200 companies. One company currently represents approximately 30% of this index, occasionally causing direct comparison to the Fund to be distorted. Investments in equity securities may include: * Common stock * Preferred stock Given that the Fund invests primarily in biotechnology-related securities, there is a risk that factors such as patent considerations, intense competition, rapid technological changes and obsolescence, and government regulation may have a substantial impact on the Fund's investments. The Fund's portfolio turnover rate may exceed 100%. Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Biotechnology Companies Companies focusing on research, product development, product manufacture and distribution in the biotechnology sector. The majority of companies are newly established and have a single product in its early development stage. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. NASDAQ Biotech Index The NASDAQ Biotech Index is a capitalization-weighted index of 200 biotechnology stocks listed on the NASDAQ exchange. The index was developed with a base value of 200 as of November 1, 1993. 6 Global Bond Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income. Principal Strategies The Fund employs a fixed income strategy, and invests primarily in a portfolio of global debt securities that may also provide the potential for capital appreciation. The Fund is a non-diversified portfolio. Normally, at least 65% of the Fund's assets are invested in long-term debt securities of issuers in at least three countries (which may include the United States). Although it may invest anywhere in the world, the Fund invests primarily in fixed income markets listed in the Salomon Smith Barney World Government Bond Index, the benchmark against which the Fund measures its portfolio. Investments in fixed income securities may include: * Debt securities of the U.S. government, its agencies and instrumentalities * Debt securities of global (ex-U.S.) governments * Debt securities of corporations * Mortgage-backed securities * Asset-backed securities The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 11.83% -6.58% - -------------------- 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -1.09%. Best Quarter: Q3 1998 5.85% Worst Quarter: Q1 1999 -3.44% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (6/30/97) - -------------------------------------------------------------- Global Bond Fund -6.58% - - 2.09% Salomon Smith Barney -4.26% - - 4.65% World Government Bond Index
Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Long-Term Debt Debt securities with an initial maturity of more than one year. Salomon Smith Barney World Government Bond Index A securities index that represents the broad global fixed income markets and includes debt issues of U.S. and most developed global (ex-U.S.) governments, governmental entities and supranationals. 7 U.S. Balanced Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income. Principal Strategies The Fund employs both core/value equity and fixed income strategies. The Fund invests primarily in a wide range of U.S. equity, fixed income and money market securities. Under normal circumstances, the Fund will invest at least 25% of its net assets in fixed income securities. All selection decisions are made relative to the U.S. Balanced Mutual Fund Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Investments in fixed income securities may include: * Debt securities of the U.S. government, its agencies and instrumentalities * Debt securities of U.S. corporations * Mortgage-backed securities * Asset-backed securities * When-issued securities The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 9.92% -7.43% - -------------------------------------- 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -0.95%. Best Quarter: Q1 1998 5.71% Worst Quarter: Q3 1999 -5.12% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (6/30/97) - --------------------------------------------------------------- U.S. Balanced Fund -7.43% - - 2.96% Salomon Smith Barney -0.84% - - 5.63% BIG Bond Index Wilshire 5000 23.56% - - 23.70% Equity Index U.S. Balanced Mutual 14.66% - - 17.51% Fund Index
U.S. Balanced Mutual Fund Index Compiled by Brinson Partners, this unmanaged index represents a fixed composite of 65% Wilshire 5000 Equity Index and 35% Salomon Smith Barney Broad Investment Grade (BIG) Bond Index. From time to time, underlying indices may change. Wilshire 5000 Equity Index A broad-based, market capitalization weighted index that includes all U.S. common stocks. It is designed to provide a representative indication of the capitalization and return for the U.S. equity market. Salomon Smith Barney Broad Investment Grade (BIG) Bond Index A broad-based index that includes U.S. bonds with over one year to maturity. 8 U.S. Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy. Normally, the Fund invests at least 65% of its assets in equity securities, which may include dividend-paying securities, of U.S. companies. All selection decisions are made relative to the Wilshire 5000 Equity Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 17.99% -4.22% - -------------------------------------------------- 98 99 *The Fund's total return for the period January 1, 2000 through March 31, 2000 was -5.97%. Best Quarter: Q4 1998 16.28% Worst Quarter: Q3 1999 -14.31% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (6/30/97) - ------------------------------------------------------------------------- U.S. Equity Fund -4.22% - - 7.77% Wilshire 5000 Equity 23.56% - - 23.70% Index
Wilshire 5000 Equity Index A broad-based, market capitalization weighted index that includes all U.S. common stocks. It is designed to provide a representative indication of the capitalization and return for the U.S. equity market. 9 U.S. Value Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy. Under normal circumstances, the Fund invests at least 65% of its assets in equity securities, which may include dividend-paying securities, of U.S. companies. The Fund invests primarily in securities in the Russell 1000(R) Value Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Russell 1000(R) Value Index The Russell 1000(R) Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market cap of the Russell 3000 Index. As of the latest reconstitution, the average market cap of the Russell 1000(R) Index was approximately $12.1 billion; the median market cap was approximately $3.8 billion. The smallest company in the index had an approximate market cap of $1,350.8 million. The Russell 1000(R) Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. 10 U.S. Large Cap Equity Fund (formerly the U.S. Large Capitalization Equity Fund) Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy. Under normal circumstances, the Fund invests at least 65% of its assets in equity securities of U.S. large cap companies. The Fund is a non-diversified portfolio. All selection decisions are undertaken relative to the Standard & Poor's 500 Equity Index ("S&P 500 Index"), the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows the Fund's performance over the past year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Return for the period ended 12/31* [BAR CHART APPEARS HERE] -11.12% - --------------------------------------------- 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -9.55%. Best Quarter: Q4 1998 15.41% Worst Quarter: Q3 1999 -15.36% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (4/30/98) - ------------------------------------------------------------------------------ U.S. Large Cap Equity Fund -11.12% - - -3.74% S & P 500 Index 21.04% - - 19.85%
Large Cap Companies Companies with market caps in the upper 65% of the Wilshire 5000 Equity Index. Companies whose capitalization falls below this level after purchase will continue to be considered large cap companies. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. S&P 500 Index A broad cap market-weighted index that includes common stocks of the leading companies in the top industries in the United States. It is designed to provide a representative indication of the capitalization and return of the large cap U.S. equity market. 11 U.S. Large Cap Growth Fund (formerly the U.S. Large Capitalization Growth Fund) Objective The Fund seeks to provide long-term capital appreciation. Principal Strategies The Fund employs a growth equity strategy, and invests primarily in a portfolio of equity securities of large cap growth companies. The Fund is a non-diversified portfolio. All selection decisions are made relative to the Russell 1000(R) Growth Index, the benchmark against which the Fund measures its portfolio. * Normally, at least 65% of the Fund's assets are invested in securities issued by large cap growth companies. * Up to 20% of the Fund's assets may be invested in foreign securities. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows the Fund's performance over the past year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Return for the period ended 12/31* [BAR CHART APPEARS HERE] 32.22% - ---------------------------------- 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was 7.11%. Best Quarter: Q4 1999 21.92% Worst Quarter: Q3 1999 -7.49% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (12/31/98) - --------------------------------------------------------------- U.S. Large Cap 32.22% - - 32.22% Growth Fund Russell 1000(R) 33.16% - - 33.16% Growth Index S&P 500 Index(1) 21.04% - - 21.04%
(1) The Advisor has changed the Fund's benchmark index from the S&P 500 Index to the Russell 1000(R) Growth Index based on the Advisor's determination that the Russell 1000(R) Growth Index is more representative of the Fund's investment strategies. Large Cap Growth Companies Companies with market caps in the upper 65% of the Wilshire 5000 Equity Index. Companies whose capitalization falls below this level after purchase will continue to be considered large cap growth companies. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Russell 1000(R) Growth Index The Russell 1000(R) Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market cap of the Russell 3000 Index. As of the latest reconstitution, the average market cap of the Russell 1000(R) Index was approximately $12.1 billion; the median market cap was approximately $3.8 billion. The smallest company in the index had an approximate market cap of $1,350.8 million. The Russell 1000(R) Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. 12 U.S. Small Cap Equity Fund Objective The Fund seeks to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy, and will invest primarily in publicly traded companies represented in the Wilshire Small Stock Index. All selection decisions are made relative to the Wilshire Small Stock Index, the benchmark against which the Fund measures its portfolio. * Normally, at least 65% of the Fund's assets are invested in equity securities issued by U.S. small cap companies. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Small Cap Companies Companies with market caps in the lower 10% of the Wilshire 5000 Equity Index. Wilshire Small Stock Index This benchmark represents approximately the smallest 10% of the Wilshire 5000 Equity index in terms of capitalization. The Wilshire 5000 Equity Index is a broad-based, market cap weighted index that includes all U.S. common stocks. 13 U.S. Small Cap Growth Fund (formerly the U.S. Small Capitalization Growth Fund) Objective The Fund seeks to provide long-term capital appreciation. Principal Strategies The Fund employs a growth equity strategy. Under normal conditions, the Fund invests at least 65% of its assets in equity securities of U.S. small cap companies. All selection decisions are made relative to the Russell 2000 Growth Index, the benchmark against which the Fund measures its portfolio. The Fund may also invest in securities of emerging growth companies. The Fund may invest up to 20% of its assets in foreign securities. Investments in equity securities may include: * Common stock * Preferred stock The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you the Fund's performance over the past year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 41.14% - ------ 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was 22.30%. Best Quarter: Q4 1999 32.83% Worst Quarter: Q1 1999 -6.48% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (12/31/98) - --------------------------------------------------------------------- U.S. Small Cap 41.14% - - 41.14% Growth Fund Russell 2000 Growth 43.09% - - 43.09% Index Russell 2000 Index(1) 21.26% - - 21.26%
(1) The Advisor has changed the Fund's benchmark index from the Russell 2000 Index to the Russell 2000 Growth Index based on the Advisor's determination that the Russell 2000 Growth Index is more representative of the Fund's investment strategies. Small Cap Companies Companies with market caps in the lower 10% of the Wilshire 5000 Equity Index. Emerging Growth Companies Small or medium sized companies that have passed their start-up phase and are showing positive earnings, as well as potential for achieving significant profit in a relatively short period of time. Russell 2000 Growth Index An unmanaged index composed of those companies in the Russell 2000 Index with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index is an index composed of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. 14 U.S. Real Estate Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a specialized sector strategy. Normally, the Fund invests at least 65% of its assets in real estate equity securities, including real estate investment trusts (REITs). The Fund is a non-diversified portfolio. Although the Fund may invest in any real estate related security, the Morgan Stanley REIT Index serves as its benchmark. Investments in equity securities may include: * Common stock * Preferred stock Given that the Fund invests primarily in securities issued by REITs, there is a risk that changes in real estate values or economic downturns can have a substantial impact on the Fund's investments. The Fund's portfolio turnover rate may exceed 100%. Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. REITs Publicly traded companies that own and often operate real property and/or invest in mortgage and mortgage-backed securities. Non-Diversified Portfolio Invests in fewer securities, which may result in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Morgan Stanley REIT Index The Morgan Stanley REIT Index is a total-return index comprised of the most actively-traded real estate investment trusts and is designed to be a measure of real estate equity performance. The index was developed with a base value of 200 as of December 31, 1994. 15 U.S. Bond Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a fixed income strategy, and invests primarily in a portfolio of investment-grade fixed income securities that may also provide the potential for capital appreciation. As a matter of fundamental policy, under normal circumstances, at least 65% of the Fund's total assets are invested in U.S. long-term debt securities All selection decisions are made relative to the Salomon Smith Barney Broad Investment Grade (BIG) Bond Index, the benchmark against which the Fund measures its portfolio. Investments in fixed income securities may include: * Debt securities of the U.S. government, its agencies and instrumentalities * Debt securities of U.S. corporations * Mortgage-backed securities * Asset-backed securities The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART APPEARS HERE] 8.25% -1.45% - -------------- 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was 1.84%. Best Quarter: Q3 1997 3.52% Worst Quarter: Q2 1999 -1.30% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (6/30/97) - -------------------------------------------------------------- U.S. Bond Fund -1.45% - - 5.24% Salomon Smith Barney -0.84% - - 5.63% BIG Bond Index
Investment-Grade Fixed income securities possessing a minimum rating of: * BBB by Standard & Poor's Ratings Group ("S&P") or * Baa by Moody's Investors Services, Inc. ("Moody's") or * If unrated, are determined to be of comparable quality by the Advisor. Long-Term Debt Debt securities with an initial maturity of more than one year. Salomon Smith Barney Broad Investment Grade (BIG) Bond Index A broad-based index that includes U.S. bonds with over one year to maturity. 16 High Yield Fund Objectives The Fund's primary objective is to provide high current income from a portfolio of higher-yielding, lower-rated debt securities issued by domestic and foreign companies. The Fund also seeks capital growth, when consistent with high current income, by investing in securities, including common stocks and non-income producing securities, which the Advisor expects will appreciate in value as a result of declines in long-term interest rates or favorable developments affecting the business or prospects of the issuer which may improve the issuer's financial condition and credit rating. Principal Strategies The Fund employs a fixed income strategy, and invests primarily in a portfolio of U.S. higher-yielding, lower-rated bonds: * Under normal conditions, at least 65% of the Fund's assets are invested in fixed income securities that provide higher yields and are "lower-rated" * Up to 25% of the Fund's assets may be invested in foreign securities All selection decisions are undertaken relative to the Merrill Lynch High Yield Master Index, the benchmark against which the Fund measures its portfolio. Investments in fixed income securities may include: * Debt securities of corporations * Zero coupon securities * Asset-backed securities * When-issued securities * Eurodollar securities The Fund's portfolio turnover rate may exceed 100%. Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you the Fund's performance over the past year. The table compares the Fund's performance over time to that of a broad measure of market performance. When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART GOES HERE] 4.53% - ----- 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -3.85%. Best Quarter: Q1 1999 3.91% Worst Quarter: Q1 2000 -3.85% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (12/31/98) - ----------------------------------------------------------------------- High Yield Fund 4.53% - - 4.53% Merrill Lynch High Yield 1.57% - - 1.57% Master Index
Lower-Rated Bonds Bonds rated in the lower rating categories of Moody's and S&P, including securities rated: * Ba or lower by Moody's or * BB or lower by S&P. Securities rated in these categories or lower are considered to be of poorer quality and predominantly speculative. Merrill Lynch High Yield Master Index An index of publicly placed non-convertible, coupon-bearing U.S. domestic debt with a term to maturity of at least one year. 17 Emerging Markets Debt Fund Objective The Fund seeks to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a fixed income strategy, and intends to invest primarily in a portfolio of debt securities of issuers located in at least three emerging markets countries, which may be located in Asia, Europe, Latin America, Africa or the Middle East. As these markets change and other countries' markets develop, the Fund expects the countries in which it invests to change. The Fund is a non-diversified portfolio. All selection decisions are undertaken relative to the J.P. Morgan Emerging Markets Bond Index Plus, the benchmark against which the Fund measures its portfolio. Normally, the Fund invests at least 65% of its total assets in debt securities issued by: * Governments * Government-related entities (including participations in loans between governments and financial institutions) * Corporations * Entities organized to restructure outstanding debt of issuers in emerging markets The Fund also invests in debt securities on which the return is derived primarily from other emerging market instruments, such as interest rate swap contracts and currency swap contracts. The Fund may invest in Eurodollar securities, which are fixed income securities of a U.S. issuer or a foreign issuer that are issued outside the United States. A substantial amount of the assets of the Fund may be invested in higher-yielding, lower-rated bonds. Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Emerging Markets The World Bank and other international agencies consider a country to be an "emerging markets" country on the basis of such factors as trade initiatives, per capita income and level of industrialization. Emerging market countries generally include every nation in the world except the U.S., Canada, Japan, Australia, New Zealand and most nations located in Western Europe. Non-Diversified Portfolio Invests most of its assets in a smaller number of issuers, resulting in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Lower-Rated Bonds Bonds rated in the lower rating categories of Moody's and S&P, including securities rated: . Ba or lower by Moody's or . BB or lower by S&P. Securities rated in these categories or lower are considered to be of poorer quality and predominantly speculative. J.P. Morgan Emerging Markets Bond Index Plus Comprised of external-currency-denominated emerging markets debt, including Brady Bonds, loans, Eurobonds and local market instruments. 18 Global (Ex-U.S.) Equity Fund Objective The Fund seeks to maximize total return, consisting of capital appreciation and current income, by investing primarily in the equity securities of global (ex-U.S.) issuers. Principal Strategies The Fund employs a core/value equity strategy. Normally, the Fund invests at least 65% of its assets in equity securities of issuers in at least three countries other than the United States. Although it may invest anywhere in the world, the Fund invests primarily in the equity markets listed in the Morgan Stanley Capital International ("MSCI") World Ex USA (Free) Index, the benchmark against which the Fund measures its portfolio. Investments in equity securities may include: * Common stock * Preferred stock Fund Performance The chart and table which follow give an indication of the Fund's risks and performance. The chart shows you how the Fund's performance has varied from year to year. The table compares the Fund's performance over time to that of a broad measure of market performance . When you consider this information, please remember that the Fund's past performance is not necessarily an indication of how it will perform in the future. Annual Total Returns for the periods ended 12/31* [BAR CHART GOES HERE] 13.96% 18.90% - --------------- 98 99 * The Fund's total return for the period January 1, 2000 through March 31, 2000 was -4.32%. Best Quarter: Q4 1998 16.86% Worst Quarter: Q3 1998 -13.67% Average Annual Total Returns (for the periods ended 12/31/99)
Performance 1 5 10 Inception Year Year Year (6/30/97) - --------------------------------------------------------------- Global (Ex-U.S.) Equity 18.90% - - 9.44% Fund MSCI World Ex USA 27.77% - - 14.13% (Free) Index
MSCI World Ex USA (Free) Index An unmanaged, market driven broad based securities index which includes global (ex-U.S.) equity markets in terms of capitalization and performance. 19 Emerging Markets Equity Fund Objective The Fund seeks to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. Principal Strategies The Fund employs a core/value equity strategy, and intends to invest primarily in a portfolio of equity securities of issuers located in at least three emerging markets countries, which may be located in Asia, Europe, Latin America, Africa or the Middle East. As these markets change and other countries' markets develop, the Fund expects the countries in which it invests to change. The Fund is a non-diversified portfolio. All selection decisions are undertaken relative to the Morgan Stanley Capital International (MSCI) Emerging Markets (Free) Index, the benchmark against which the Fund measures its portfolio. Normally, the Fund invests at least 65% of its assets in the equity securities of issuers in emerging markets or securities on which the return is derived from the equity securities of issuers in emerging markets, such as equity swap contracts and equity index swap contracts. Up to 35% of the Fund's assets may be invested in higher-yielding, lower-rated bonds. The Fund may invest in Eurodollar securities, which are fixed income securities of a U.S. issuer or a foreign issuer that are issued outside of the United States. Fund Performance There is no performance quoted as the Fund had not commenced operations as of the date of this prospectus. Emerging Markets The World Bank and other international agencies consider a country to be an "emerging markets" country on the basis of such factors as trade initiatives, per capita income and level of industrialization. Emerging market countries generally include every nation in the world except the U.S., Canada, Japan, Australia, New Zealand and most nations located in Western Europe. Non-Diversified Portfolio Invests most of its assets in a smaller number of issuers, resulting in more potential volatility than a diversified portfolio. Gains or losses on a single security or issuer within the portfolio will, therefore, have a greater impact on the Fund's net asset value. Lower-Rated Bonds Bonds rated in the lower rating categories of Moody's and S&P, including securities rated: . Ba or lower by Moody's or . BB or lower by S&P Securities rated in these categories or lower are considered to be of poorer quality and predominantly speculative. Morgan Stanley Capital International (MSCI) Emerging Markets (Free) Index A market capitalization weighted index which captures 60% of a country's total capitalization while maintaining the overall risk structure of the market. Stocks are included at their full market capitalization weight, and the index reflects actual buyable opportunities for the non-domestic investor. 20 Risk Considerations The chart below illustrates the primary risks of investing in the Funds.
Foreign Geographic Industry Non- Country Concen- High Concen- Interest Diversifi- Pre- Small Credit & Currency tration Yield tration Rate Market cation payment Company - ------------------------------------------------------------------------------------------------------------------------------------ Global Fund * * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Equity Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Technology Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Biotech Fund * * * * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Bond Fund * * * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Balanced Fund * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Equity Fund * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Value Equity Fund * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Large Cap Equity Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Large Cap Growth Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Small Cap Equity Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Small Cap Growth Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Real Estate Equity Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Bond Fund * * * - ------------------------------------------------------------------------------------------------------------------------------------ High Yield Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ Emerging Markets * * * * * * Debt Fund - ------------------------------------------------------------------------------------------------------------------------------------ Global (Ex-U.S.) Equity Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ Emerging Markets * * * * * Equity Fund - ------------------------------------------------------------------------------------------------------------------------------------
Risk Considerations (cont.) All Fund investments are subject to risk and may decline in value. Each Fund's exposure depends upon its specific investment practices. The amount and types of risk vary depending on: * The investment objective(s) * The Fund's ability to achieve its objectives * The markets in which the Fund invests * The investments the Fund makes in those markets * Prevailing economic conditions over the period of an investment Please note that there are other circumstances that could adversely affect your investment and potentially prevent a Fund from achieving its objectives. Credit Risk The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise be unable to honor a financial obligation. Debt securities rated below investment-grade are especially susceptible to this risk. Foreign Country and Currency Risks The risk that prices of a Fund's investments in foreign securities may go down because of unfavorable foreign government actions, political instability or the absence of accurate information about foreign issuers. Also, a decline in the value of foreign currencies relative to the U.S. dollar will reduce the value of securities denominated in those currencies. Foreign securities are sometimes less liquid and harder to value than securities of U.S. issuers. These risks are more severe for securities of issuers in emerging markets countries. The World Bank and other international agencies consider a country to be an "emerging markets" country on the basis of such factors as trade initiatives, per capita income and level of industrialization. Emerging market countries generally include every nation in the world except the U.S., Canada, Japan, Australia, New Zealand and most nations located in Western Europe. On January 1, 1999, the European Monetary Union introduced a new single currency, the Euro, which replaced the national currencies of participating member nations. If a Fund held investments in nations with currencies replaced by the Euro, the investment process, including trading, foreign exchange, payments, settlements, cash accounts, custody and accounting, was impacted. To the extent the Funds hold non-U.S. dollar denominated securities (Euro or other), they will still be exposed to currency risk due to fluctuations in those currencies versus the U.S. dollar. Geographic Concentration Risk The risk that if a Fund has most of its investments in a single country or region, its portfolio will be more susceptible to factors adversely affecting issuers located in that country or region than would a more geographically diverse portfolio of securities. High Yield Risk The risk that the issuer of bonds with ratings of BB (S&P) or Ba (Moody's) or below will default or otherwise be unable to honor a financial obligation. These securities are considered to be of poor standing and are predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations and involve major risk exposure. Bonds in this category may also be called "high yield bonds" or "junk bonds." Industry Concentration Risk The risk that changes in economic, political or other conditions may have a particularly negative effect on issuers in an industry in which a Fund's investments are concentrated. The investment objective of each Fund is "fundamental" and may be changed only with shareholder approval. Unless otherwise stated, each Fund's investment policies are not fundamental and may be changed by the Trust's Trustees without a shareholder vote. There can be no assurance that the Funds will be able to attain their objectives. Each Fund's primary investment practices and strategies are discussed in this prospectus. Other practices, and their related risks, are described in the Statement of Additional Information ("SAI"). 22 Risk Considerations (cont.) Interest Rate Risk The risk that changing interest rates may adversely affect the value of an investment. With fixed-rate securities, an increase in prevailing interest rates typically causes the value of a Fund's securities to fall, while a decline in prevailing interest rates may produce an increase in the market value of the securities. Changes in interest rates will affect the value of longer-term fixed income securities more than shorter-term securities and lower quality securities more than higher quality securities. Market Risk The risk that the market value of a Fund's investments will fluctuate as the stock and bond markets fluctuate. Market risk may affect a single issuer, industry or section of the economy, or it may affect the market as a whole. Non-Diversification Risk The risk that a non-diversified Fund will be more volatile than a diversified Fund because it invests its assets in a smaller number of issuers. The gains or losses on a single security or issuer will, therefore, have a greater impact on the non-diversified Fund's net asset value. Portfolio Turnover The Funds generally intend to purchase securities for long-term investment. Portfolio turnover rates are not a factor in making buy and sell decisions. Increased portfolio turnover may result in higher costs for brokerage commissions, dealer mark-ups and other transaction costs. It may also result in taxable capital gains. Higher costs associated with increased portfolio turnover may offset gains in a Fund's performance. Prepayment Risk The risk that issuers will prepay fixed rate obligations when interest rates fall, forcing the Fund to re-invest in obligations with lower interest rates than the original obligations. Small Company Risk The risk that investments in smaller companies may be more volatile than investments in larger companies, as smaller companies generally experience higher growth and failure rates. The trading volume of smaller company securities is normally lower than that of larger companies. Changes in the demand for the securities of smaller companies generally have a disproportionate effect on their market price, tending to make prices rise more in response to buying demand and fall more in response to selling pressure. 23 Fees and Expenses The tables below describe the fees and expenses that you may pay if you buy and hold shares of The Brinson Funds - Class N shares. Shareholder Transaction Fees (fees paid directly from your investment) Sales Charge (Load) Imposed on Purchases None Emerging Markets Equity Fund: Purchase/Redemption Transaction Fee 1.50%* * This transaction charge is paid to the Fund and used by it to defray transaction costs associated with each purchase and sale of securities by the Fund. Annual Fund Operating Expenses (expenses that are deducted from Fund assets, expressed as a % of average net assets)
Total Fund Amount of Fee Operating Expenses Waiver and/or (after fee waiver Investment 12b-1 Other Gross Operating Expense and/or expense (06/30/99) Advisory Fees/1/ Expenses/2/ Expenses/1/ Expenses/1/ Reimbursement/1/ reimbursement)/1/ - ------------------------------------------------------------------------------------------------------------------------------------ Global Fund 0.80% 0.25% 0.16% 1.21% 0.00% 1.21% Global Equity Fund 0.80% 0.25% 0.25% 1.30% 0.05% 1.25% Global Technology Fund/3/ 1.40% 0.25% 0.15% 1.80% 0.00% 1.80% Global Biotech Fund/3/ 1.15% 0.25% 0.15% 1.55% 0.00% 1.55% Global Bond Fund 0.75% 0.25% 0.15% 1.15% 0.00% 1.15% U.S. Balanced Fund 0.70% 0.25% 0.26% 1.21% 0.16% 1.05% U.S. Equity Fund 0.70% 0.25% 0.10% 1.05% 0.00% 1.05% U.S. Value Equity Fund/3/ 0.70% 0.25% 0.15% 1.10% 0.00% 1.10% U.S. Large Cap Equity Fund 0.70% 0.25% 0.59% 1.54% 0.49% 1.05% U.S. Large Cap Growth Fund/4/ 0.70% 0.25% 1.68% 2.63% 1.58% 1.05% U.S. Small Cap Equity Fund/3/ 1.00% 0.25% 0.15% 1.40% 0.00% 1.40% U.S. Small Cap Growth Fund/4/ 1.00% 0.25% 0.32% 1.57% 0.17% 1.40% U.S. Real Estate Equity Fund/3/ 0.90% 0.25% 0.15% 1.30% 0.00% 1.30% U.S. Bond Fund 0.50% 0.25% 0.11% 0.86% 0.01% 0.85% High Yield Fund/4/ 0.60% 0.25% 0.23% 1.08% 0.13% 0.95% Emerging Markets Debt Fund 0.65% 0.25% 0.50% 1.40% 0.00% 1.40% Global (Ex-U.S.) Equity Fund 0.80% 0.25% 0.19% 1.24% 0.00% 1.24% Emerging Markets Equity Fund 1.10% 0.25% 0.50% 1.85% 0.00% 1.85%
24 Fees and Expenses (cont.) (1) The Advisor has irrevocably agreed to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Funds do not exceed the percentages noted in the chart on page 26. (2) For purposes of this Table, "12b-1 Expenses" are comprised of an asset-based sales charge of 0.25% of average daily net assets for each Fund. See "Distribution Arrangements" on page 35. Pursuant to rules of the National Association of Securities Dealers, Inc. ("NASD"), the aggregate initial sales charges, deferred sales charges and asset-based sales charges on shares of the Funds may not exceed 6.25% of total gross sales, subject to certain exclusions. This 6.25% limitation is imposed on a Fund basis rather than on a per shareholder basis. Therefore, long-term shareholders of the Funds may pay more than the economic equivalent of the maximum front-end sales charges permitted by NASD. This amount also includes service fees. (3) The fees and expenses noted for the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund are based on estimates. (4) The U.S. Large Cap Growth Fund, the U.S. Small Cap Growth Fund and the High Yield Fund were created as the result of a reorganization of three corresponding funds of UBS Private Investor Funds, Inc. into these Funds on December 18, 1998. The fees and expenses of these three Funds are based on fees and expenses incurred for the period January 1, 1999 through June 30, 1999 (annualized). Expense Example This example is intended to help you compare the cost of investing in the Brinson Funds - Class N shares to the cost of investing in other mutual funds. The example assumes that you invest $10,000 in a Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs and the return on your investment may be higher or lower, based on these assumptions your costs would be:
1 year 3 years 5 years 10 years - ----------------------------------------------------------------------------- Global Fund $ 123 $ 384 $ 665 $ 1,466 Global Equity Fund $ 127 $ 397 $ 686 $ 1,511 Global Technology Fund $ 183 $ 566 $ 975 $ 2,116 Global Biotech Fund $ 158 $ 490 $ 845 $ 1,845 Global Bond Fund $ 117 $ 365 $ 633 $ 1,398 U.S. Balanced Fund $ 107 $ 334 $ 579 $ 1,283 U.S. Equity Fund $ 107 $ 334 $ 579 $ 1,283 U.S. Value Equity Fund $ 112 $ 350 $ 606 $ 1,340 U.S. Large Cap Equity Fund $ 107 $ 334 $ 579 $ 1,283 U.S. Large Cap Growth Fund $ 107 $ 334 $ 579 $ 1,283 U.S. Small Cap Equity Fund $ 143 $ 443 $ 766 $ 1,680 U.S. Small Cap Growth Fund $ 143 $ 443 $ 766 $ 1,680 U.S. Real Estate Equity Fund $ 132 $ 412 $ 713 $ 1,568 U.S. Bond Fund $ 87 $ 271 $ 471 $ 1,049 High Yield Fund $ 97 $ 303 $ 525 $ 1,166 Emerging Markets Debt Fund $ 143 $ 443 $ 766 $ 1,680 Global (Ex-U.S.) Equity Fund $ 126 $ 393 $ 681 $ 1,500 Emerging Markets Equity Fund $ 188 $ 582 $ 1,001 $ 2,169
25 Investment Advisor Advisory Fees The following chart shows the investment advisory fees payable to Brinson Partners, before fee waivers, by each Fund during its last fiscal year. Investment Advisory Fees (expressed as a percentage of average net assets) Global Fund 0.80% Global Equity Fund 0.80 Global Technology Fund/1,2/ 1.40 Global Biotech Fund/1,2/ 1.15 Global Bond Fund 0.75 U.S. Balanced Fund 0.70 U.S. Equity Fund 0.70 U.S. Value Equity Fund/1,2/ 0.70 U.S. Large Cap Equity Fund 0.70 U.S. Large Cap Growth Fund 0.70 U.S. Small Cap Equity Fund/1,2/ 1.00 U.S. Small Cap Growth Fund 1.00 U.S. Real Estate Equity Fund/1,2/ 0.90 U.S. Bond Fund 0.50 High Yield Fund 0.60 Emerging Markets Debt Fund/1,2/ 0.65 Global (Ex-U.S.) Equity Fund 0.80 Emerging Markets Equity Fund/1,2/ 1.10 (1) Management fees shown for the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund are based on estimates as the Funds had not commenced operations as of the date of this prospectus. (2) The Advisor is entitled to reimbursement of advisory fees waived during any of the previous five years, provided that the reimbursement will never cause the total operating expense ratio to exceed the limits in the table below. The Advisor has irrevocably agreed to waive its fees and reimburse certain expenses so that the total operating expenses, with the exception of 12b-1 expenses, of the Brinson Fund - Class N shares do not exceed the following amounts for each of the respective Funds: Global Fund 1.10% Global Equity Fund 1.00 Global Technology Fund 1.80 Global Biotech Fund 1.55 Global Bond Fund 0.90 U.S. Balanced Fund 0.80 U.S. Equity Fund 0.80 U.S. Value Equity Fund 1.10 U.S. Large Cap Equity Fund 0.80 U.S. Large Cap Growth Fund 0.80 U.S. Small Cap Equity Fund 1.40 U.S. Small Cap Growth Fund 1.15 U.S. Real Estate Equity Fund 1.30 U.S. Bond Fund 0.60 High Yield Fund 0.70 Emerging Markets Debt Fund 1.15 Global (Ex-U.S.) Equity Fund 1.00 Emerging Markets Equity Fund 1.60 About the Advisor Brinson Partners, Inc., a Delaware corporation located in Chicago, Illinois, is an investment advisor registered with the U.S. Securities and Exchange Commission. As of December 31, 1999, Brinson Partners was responsible for the management of USD 159 billion in institutional assets. Brinson Partners was organized in 1989 when it acquired the institutional asset management business of The First National Bank of Chicago and First Chicago Investment Advisors, N.A. Brinson Partners and its predecessor entities have managed both U.S. and non-U.S. investment portfolios since 1974 and global investment portfolios since 1982. Brinson Partners is an indirect wholly owned subsidiary of UBS AG, and a core business area within the UBS Asset Management Division. The UBS Asset Management Division is responsible for the institutional asset management activities of UBS, and employs more than 1,800 people worldwide. The Division manages USD 360 billion of institutional assets, including USD 236 billion of discretionary institutional assets on an active basis, as well as mutual fund assets for UBS Private Banking which total over USD 124 billion. Clients include corporations, public funds, endowments, foundations, central banks and other investors located throughout the world. Portfolio Management Investment decisions for the Funds are made by an investment management team at Brinson Partners. No member of the investment management team is primarily responsible for making recommendations for portfolio purchases. Brinson Partners, Inc. 209 South LaSalle Street Chicago, Ill 60604-1295 26 Pricing of Fund Shares The Brinson Fund - Class N shares are bought and sold at net asset value ("NAV"), which is calculated as of the close of business on each day that the New York Stock Exchange ("NYSE") is open (currently 4:00 p.m. Eastern time). A Fund's securities are valued based on the last sale price or, where market quotations are not readily available, are based on fair value as determined in good faith by the Trust's Board of Trustees. Foreign securities are valued at their closing prices on the exchange on which they are traded. The resulting values are converted from the local currency into U.S. dollars using current exchange rates. Foreign securities may trade in their local markets on weekends or other days when a Fund does not price its shares. Therefore, the NAV of Funds holding foreign securities may change on days when shareholders will not be able to buy or sell their Fund shares. Purchase and redemption orders for shares received in good form by the close of regular trading (currently 4:00 p.m., Eastern time) are priced according to the NAV determined on that day. Purchase and redemption orders received after the close of trading are priced according to the next determined price per share. The Funds reserve the right to change the time at which purchases and redemptions are priced if the NYSE closes at a time other than 4:00 p.m. Eastern time or if an emergency exists. How the Funds Calculate NAV The NAV of a class of shares of a Fund is determined by dividing the value of the securities and other assets, less liabilities, allocated to the class by the number of outstanding shares of the class. 27 Purchasing Shares The minimum initial investment for Fund shares is $1,000,000. Subsequent investments for Fund shares will be accepted in minimum amounts of $2,500. The minimum purchase requirement for Individual Retirement Accounts ("IRAs") is $2,000. The Funds reserve the right to vary the investment minimums and subsequent minimums for additional investments at any time. In addition, Brinson Partners may waive the minimum initial investment requirement for any investor at its discretion. Purchases may be made in one of the following ways: By Telephone Call 1-800-448-2430 to arrange for a telephone transaction. If you want to make future transactions (e.g., purchase additional shares, redeem or exchange shares) by telephone, you will need to elect this option either on the initial application or subsequently in writing. By Mail Complete and sign an application for the Brinson Funds - Class N shares. Make your check payable to "Brinson __________ Fund - Class N." If you are adding to your existing account, enclose the remittance portion of your account statement and include the amount of investment, account name and number. Mail your application and/or check to: The Brinson Funds c/o Transfer Agent P.O. Box 2798 Boston, MA 02208-2798 By Wire If you are opening a new account, call the Funds at 1-800-448-2430 to arrange for a wire transaction. Then wire federal funds to: The Chase Manhattan Bank ABA#021000021 DDA#9102-783504 FBO: "Brinson ________ Fund - Class N" and include your name and new account number. Complete and sign an application for the Brinson Funds - Class N shares and mail immediately following the initial wire transaction to: The Brinson Funds c/o Transfer Agent P.O. Box 2798 Boston, MA 02208-2798 If you are adding to your existing account, you do not need to call the Funds to arrange for a wire transaction, but be sure to include your name and account number. Through Financial Institutions/Professionals In some cases, the Funds have entered into one or more Sales Agreements with brokers, dealers or other financial intermediaries ("Service Providers"), as well as with financial institutions (banks and bank trust departments) (each an "Authorized Dealer"). The Authorized Dealer, or intermediaries designated by the Authorized Dealer (a "Sub-designee"), may accept purchase and redemption orders that are in "good form" on behalf of the Funds. A Fund will be deemed to have received a purchase or redemption order when the Authorized Dealer or Sub-designee accepts the order. Such orders will be priced at the Fund's net asset value next computed after such order is accepted by the Authorized Dealer or Sub-designee. These Authorized Dealers may charge the investor a transaction fee or other fee for their services at the time of purchase. These fees would not be otherwise charged if you purchased shares directly from the Funds. It is the responsibility of such Authorized Dealers or Sub-designees to promptly forward purchase orders with payments to the Funds. Telephone orders are accepted from broker-dealers or service organizations if they have been previously approved by the Funds. Brinson Partners, or its affiliates, may, from its own resources, compensate Service Providers for services performed with respect to a Fund's Class N shares. These services may include marketing, shareholder servicing, record keeping and/or other services. Payments made for any of these purposes may be made from Brinson Partners' revenues, its profits or any other sources available. When these service arrangements are in effect, they are generally made available to all qualified Service Providers. If you have any questions or need further information, call 1-800-448-2430. The Brinson Funds strongly discourage market timers and short-term traders from investing in the Funds. 28 Purchasing Shares (cont.) The Funds will not accept a check endorsed over by a third party. The Funds reserve the right to reject any purchase order and to suspend the offering of shares of The Brinson Funds. This includes purchase orders that, in the reasonable belief of the Funds, have been made by market timers or short-term traders. You will be subject to a 1.50% transaction charge in connection with your purchase of shares of the Emerging Markets Equity Fund. Shares of the Fund are sold at a price which is equal to the NAV of such shares, plus the transaction charge. The transaction charges do not apply to the reinvestment of dividends or capital gains distributions. The transaction charge is paid to the Fund and used by it to defray the transaction costs associated with each purchase and sale of securities within the Fund. Exchanging Shares You can exchange your Class N shares for Class N shares of other Funds. Exchanges will not be permitted between The Brinson Funds - Class N shares and either the UBS Investment Funds class of shares or The Brinson Funds - Class I shares. Requests for exchanges received prior to the close of regular trading hours on the NYSE will be processed at the net asset value computed on the date of receipt. Requests received after the close of regular trading hours will be processed at the next determined net asset value. Under certain circumstances, the Funds may: * Limit the number of exchanges between Funds * Reject a telephone exchange order * Modify or discontinue the exchange privilege upon 60 days' written notice Exchanged Funds are subject to the minimum initial investment requirement. The procedures that apply to redeeming shares also apply to exchanging shares. An exchange is the sale of shares of one Fund and purchase of shares of another and could result in taxable gain or loss in a non-tax sheltered account. Account Options The following account options are available. There are no charges for the programs noted below and you may change or terminate these plans at any time by written notice to the Funds. For information about participating in these account options, call the transfer agent at 1-800-448-2430. Automatic Investment Plan Through this option, money can be electronically deducted from your checking, savings or bank money market accounts and invested in the Funds each month or quarter. Complete the Automatic Investment Plan Application, which is available upon request by calling 1-800-448-2430, and mail it to the address indicated. The initial $1,000,000 minimum investment still applies, however, subsequent investments can be as little as $2,500. The Funds may alter or terminate the Automatic Investment Plan at any time. Systematic Withdrawal Plan If you have a minimum of $1,000,000 in your account, you may direct the transfer agent to make payments to you (or anyone you designate) monthly, quarterly or semi-annually. Withdrawals are drawn from share redemptions and must be a minimum of $500 per payment. Under the Systematic Withdrawal Plan ("SWP"), you must elect to have dividends and distributions automatically reinvested in additional Fund shares. The Funds may terminate any SWP if the value of the account falls below $50,000 due to share redemptions or an exchange of shares for Class N shares of another Fund. Individual Retirement Account You may open an IRA, a tax-deferred retirement account, with the Funds if you are under age 70 1/2. The minimum purchase requirement for an IRA is $2,000 29 Redeeming Shares Your shares will be redeemed at the NAV next calculated after your order is accepted by the Funds' transfer agent in good order. Redemption requests received prior to the close of regular trading hours (generally 4:00 p.m. Eastern time) on the NYSE will be executed at the net asset value computed on the date of receipt. Redemption requests received after the close of regular trading hours will be executed at the next determined net asset value. Your order will be processed promptly and you will generally receive the proceeds within seven days. Please note that proceeds for redemption requests made shortly after a recent purchase by check will be distributed once the check clears, which may take up to 15 days. The Funds reserve the right to pay redemptions "in kind" (i.e., payment in securities rather than in cash) if the amount you are redeeming is large enough to affect a Fund's operations (for example, if it represents more than $250,000 or 1% of the Fund's assets). In these cases, you might incur brokerage costs converting the securities to cash. You will be subject to a 1.50% transaction charge in connection with each redemption of shares of the Emerging Markets Equity Fund. Redemption requests for the Emerging Markets Equity Fund are paid at the NAV less the transaction charge. Redemptions which are made in kind with securities are not subject to the transaction charge. You may redeem some or all of your shares any day the NYSE is open for business by doing one of the following (if you have any questions, call the transfer agent at 1-800-448-2430 By Telephone If you have chosen the telephone redemption privilege on the initial application or subsequently arranged in writing, you may call 1-800-448-2430 to redeem shares. By Mail Shareholders may sell shares by making a written request to: The Brinson Funds c/o Transfer Agent P.O. Box 2798 Boston, MA 02208-2798 Include signatures of all persons required to sign for transactions, exactly as their names appear on the account application. To protect your account from fraud, the Funds may require a signature guarantee for certain redemptions (see "Signature Guarantees" below) By Bank Wire If you have chosen the wire redemption privilege on the initial application or subsequently arranged in writing, you may request the Funds to wire your proceeds to a predesignated bank account. Call 1-800-448-2430. Wire redemption requests must be received by the transfer agent by 4:00 p.m. Eastern time for money to be wired the next business day. Through Financial Institutions/Professionals Contact your financial institution or professional for more information. If you have purchased shares through an Authorized Dealer or Sub-designee, you should contact it for more information. Important note: Each institution or professional may have its own procedures and requirements for selling shares and may charge fees. 30 Redeeming Shares (cont.) Redemption requests should be accompanied by the Fund's name, your Fund account number and the dollar amount or number of shares to be redeemed. The Fund will mail a check to your account address or, if you have elected the wire redemption privilege, the Fund will wire the proceeds to your bank. Signature Guarantees To protect your account from fraud, the Fund and its agent may require a signature guarantee for certain redemptions to verify the identity of the person who has authorized a redemption from your account. Please contact the Fund for further information. Telephone Transactions You may give up some level of security by choosing to buy or sell shares by telephone, rather than by mail. The Funds will employ reasonable procedures to confirm that telephone instructions are genuine. If they do not employ these procedures, the Funds or the transfer agent may be liable for any losses due to unauthorized or fraudulent transactions. A written confirmation will be provided for all purchase, exchange and redemption transactions initiated by telephone. Transfer of Securities Under certain circumstances, investors may be permitted to purchase Fund shares by transferring securities to a Fund that meet the Fund's investment objective and policies. (Please see the SAI for more information.) Dividends and Distributions Each Fund passes most of its net investment income along to investors in the form of distributions. All shareholders of a Fund are entitled to a proportionate share of the Fund's net income and realized capital gains on its investments. Net investment income for all of the Funds consists of all dividends and interest received, less expenses (including fees payable to the Advisor and its affiliates). Dividends from net investment income are declared, and paid, by each Fund semi- annually - in June and December. In December, the Funds will distribute substantially all of their net long-term capital gains and any undistributed net short-term capital gains realized during the one year period commencing November 1 (or date of the creation of the Fund, if later) and ending October 31. At the same time, the Funds will distribute all of their net investment income earned through the end of December and not previously distributed as ordinary (not capital) income. Dividends and other distributions paid on each class of shares of a Fund are calculated at the same time and in the same manner. Dividends on each class might be affected differently by the allocation of other class-specific expenses. Unless you notify the transfer agent in writing that you elect to receive your income dividends and capital gains distributions in cash, all will be reinvested automatically in additional Fund shares of the same class of a Fund. Distribution options may be changed at any time by requesting a change in writing. Dividends are reinvested on the reinvestment date at the net asset value determined at the close of business on that date. Please note that shares purchased shortly before the record date for a dividend or distribution may have the effect of returning capital, although such dividends and distributions are subject to taxes. 31 Tax Considerations Following is a brief discussion of the general tax treatment of various distributions from the Funds. It is not an exhaustive discussion, and your particular tax status may be different. We encourage you to consult with your own tax advisor about federal, state and local tax considerations. In general, distributions from a Fund are taxable to you as either ordinary income or capital gains, depending upon how long the Fund has held the underlying assets. This is true whether you invest your distributions in additional shares of a Fund or receive them in cash. Any capital gains distributed by a Fund are taxable to you as long-term capital gains no matter how long you have owned your shares. When you sell or exchange your shares of a Fund, you may have a capital gain or loss. The tax rate on any gain from the sale or exchange of your shares depends on how long you have held your shares. Fund distributions and gains from the sale or exchange of your shares will generally be subject to state and local income tax. Foreign investors may be subject to U.S. withholding and estate tax. If any of the following situations apply to you, the Funds will be required by the IRS to withhold 31% of your taxable distributions: * you do not provide your correct taxpayer identification number, or * you do not certify that such number is correct, or * the IRS instructs the Fund to do so. Buying a Dividend If you buy shares in a stock Fund just before the Fund makes any distribution, or if you buy shares in any fixed income Fund just prior to a capital gains distribution, you will receive some of the purchase price back in the form of a taxable distribution. Shareholders will be advised annually of the source and the tax status of all Fund distributions for federal income tax purposes. Distribution Arrangements The Funds have adopted a distribution plan under rule 12b-1 of the Investment Company Act of 1940 to compensate Brinson Partners, Funds Distributor, Inc. and others for distributing and promoting sales of the Brinson Funds - Class N shares. Annual fees paid under the plan may not exceed 0.25% of the average daily net assets of each Fund's Class N shares. Because these distribution and service fees are paid out of the assets of the Class N Shares on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Multiple Classes The Funds are series of The Brinson Funds, a Delaware business trust, and currently offer three classes of shares: Brinson Funds - Class I, Brinson Funds - Class N and UBS Investment Funds Class of shares. 32 Financial Highlights The financial highlights table is intended to help you understand a Fund's financial performance for the past five years (or, if shorter, the period of the Fund's operations). Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in each Fund (assuming reinvestment of all dividends and distributions). Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Cap Equity Fund, U.S. Bond Fund and Global (Ex-U.S.) Equity Fund The selected financial information in the following table has been audited by the Funds' independent auditors, whose unqualified reports thereon (the "Reports") appear in the Funds' Annual Report to Shareholders dated June 30, 1999 (the "Annual Report"). In addition, the table includes unaudited financial information for the period ended December 31, 1999, which is included in the Funds' Semi-Annual Report to Shareholders (the "Semi-Annual Report") dated December 31, 1999. Additional performance and financial data and related notes are contained in the Annual Report and the Semi-Annual Report, which are available without charge upon request. The Funds' financial statements for the fiscal year ended June 30, 1999 and the Reports, as well as the Semi-Annual Report, are incorporated by reference into the SAI. U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund The U.S. Large Cap Growth Fund, the U.S. Small Cap Growth Fund and the High Yield Fund (collectively, the "New Funds") are successors to the UBS Large Cap Growth Fund, the UBS Small Cap Fund and the UBS High Yield Bond Fund, respectively (collectively, the "Predecessor Funds"). Each Predecessor Fund, prior to its merger into a New Fund, operated as a separate portfolio of UBS Private Investor Funds, Inc., another investment company that was advised by another entity. The Predecessor Funds had fiscal years ending on December 31. On December 18, 1998, following the approval of the shareholders of each Predecessor Fund of an agreement and plan of reorganization, the UBS Large Cap Growth Fund, the UBS Small Cap Fund and the UBS High Yield Bond Fund were reorganized and merged into the U.S. Large Cap Growth Fund, the U.S. Small Cap Growth Fund and the High Yield Fund, respectively. (These transactions are collectively referred to as the "Reorganizations.") The New Funds had no operations prior to the Reorganizations. The New Funds have fiscal years ending on June 30. The selected financial information in the following table, for the year ended June 30, 1999, has been audited by the Funds' independent auditors, whose unqualified reports on the financial statements containing such information appear in the Annual Report. In addition, the table includes unaudited financial information for the period ended December 31, 1999, which is included in the Funds' Semi-Annual Report dated December 31, 1999. The selected financial information in the following table for the year ended December 31, 1998 has been audited by the Funds' independent auditors, whose unqualified reports on the financial statements containing such information appear in the New Funds' Annual Report to Shareholders (the "New Funds' Report") dated December 31, 1998. The selected financial information in the following table for the year ended December 31, 1997 has been audited by the Predecessor Funds' independent auditors, whose unqualified reports on the financial statements containing such information (the "Predecessor Funds' Reports") appear in the Predecessor Funds' Annual Report to Shareholders dated December 31, 1997 (the "Predecessor Funds' Annual Report"). Additional performance and financial data and related notes are contained in the Annual Report, the Semi-Annual Report, the New Funds' Report and the Predecessor Funds' Annual Reports (collectively, the "New Funds' and Predecessor Funds' Reports"), which are available without charge upon request. The New Funds' financial statements for the fiscal years ended June 30, 1999 and December 31, 1998, and the Predecessor Funds' financial statements for the fiscal year ended December 31, 1997, and the New Funds' and Predecessor Funds' Reports, are incorporated by reference into the SAI. Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund No financial information is presented for these Funds as they had not commenced operations as of the date of this prospectus. 33 Financial Highlights (cont.) Financial Highlights--Fiscal Year Ended June 30 and the Semi-Annual Period Ended December 31, 1999 The following table presents financial data relating to a share of beneficial interest outstanding throughout the periods presented. This information has been derived from the Funds' financial statements.
Income (Loss) from Investment Operations Less Distributions ---------------------------------- --------------------------- Distributions Distributions Total from and from and Net asset Net Net income in excess in excess value- Invest- realized and (loss) from of net of net Total beginning ment unrealized investment investment realized Distribu- Year of period income (loss) gain (loss) operations income gain tions BRINSON GLOBAL FUND - Class N (Commencement of Operations June 30, 1997) 1998 $ 13.13 0.63 0.32 0.95 (0.63) (0.70) (1.33) 1999 $ 12.75 0.27 0.25 0.52 (0.44) (0.84) (1.28) 1999 (December 31st) (unaudited) $ 11.99 0.10/2/ (0.27) (0.17) (0.16) (0.52) (0.68) ------- ------- ------ ------ ------ ------ ------ BRINSON GLOBAL EQUITY FUND - Class N (Commencement of Operations June 30, 1997) 1998 $ 12.76 0.13 0.82 0.95 (0.13) (1.05) (1.18) 1999 $ 12.53 0.10/2/ 1.09 1.19 (0.14) (0.18) (0.32) 1999 (December 31st) (unaudited) $ 13.40 0.01 0.64 0.65 (0.06) (1.21) (1.27) ------- ------- ------ ------ ------ ------ ------ BRINSON GLOBAL BOND FUND - Class N (Commencement of Operations June 30, 1997) 1998 $ 9.64 0.42/2/ (0.20) 0.22 (0.29) (0.17) (0.46) 1999 $ 9.40 0.37/2/ (0.07) 0.30 (0.46) (0.08) (0.54) 1999 (December 31st) (unaudited) $ 9.16 0.19/2/ (0.19) - - (0.01) (0.01) ------- ------- ------ ------ ------ ------ ------ BRINSON U.S. BALANCED FUND - Class N (Commencement of Operations June 30, 1997) 1998 $ 12.53 0.47/2/ 0.94 1.41 (0.73) (0.94) (1.67) 1999 $ 12.27 0.29/2/ 0.18 0.47 (0.71) (2.65) (3.36) 1999 (December 31st) (unaudited) $ 9.38 0.13 (0.87) (0.74) (0.18) (0.06) (0.24) ------- ------- ------ ------ ------ ------ ------ BRINSON U.S. EQUITY FUND - Class N (Commencement of Operations June 30, 1997) 1998 $ 17.64 0.15 3.37 3.52 (0.15) (1.13) (1.28) 1999 $ 19.88 0.08/2/ 2.67 2.75 (0.12) (1.12) (1.24) 1999 (December 31st) (unaudited) $ 21.39 0.06/2/ (2.90) (2.84) (0.03) (1.77) (1.80) ------- ------- ------ ------ ------ ------ ------ BRINSON U.S. LARGE CAP EQUITY FUND/4/ - Class N (Commencement of Operations April 6, 1998) 1998 $ 10.00 0.02 (0.23) (0.21) (0.01) - (0.01) 1999 $ 9.78 0.09/2/ 1.31 1.40 (0.05) - (0.05) 1999 (December 31st) (unaudited) $ 11.13 0.05/2/ (2.01) (1.96) (0.05) (0.95) (1.00) ------- ------- ------ ------ ------ ------ ------ BRINSON U.S. LARGE CAP GROWTH FUND/4/ - Class N (Commencement of Operations December 31, 1998) 1999 $ 11.84 (0.01) 2.05 2.04 - - - 1999 (December 31st) (unaudited) $ 13.88 (0.01)/2/ 1.71 1.70 - (0.95) (0.95) ------- ------- ------ ------ ------ ------ BRINSON U.S. SMALL CAP GROWTH FUND/4/ - Class N (Commencement of Operations December 31, 1998) 1999 $ 8.80 (0.04) 0.40 0.36 - - - 1999 (December 31st) (unaudited) $ 9.16 (0.04)/2/ 3.30 3.26 - - - ------- ------- ------ ------ BRINSON U.S. BOND FUND - Class N (Commencement of Operations June 30, 1997) 1998 $ 10.24 0.61 0.42 1.03 (0.55) (0.14) (0.69) 1999 $ 10.58 0.57/2/ (0.26) 0.31 (0.44) (0.15) (0.59) 1999 (December 31st) (unaudited) $ 10.30 0.29/2/ (0.27) 0.02 (0.55) - (0.55) ------- ------- ------ ------ ------ ------ BRINSON HIGH YIELD FUND - Class N (Commencement of Operations December 31, 1998) 1999 $ 9.98 0.42 (0.15) 0.27 (0.30) - (0.30) 1999 (December 31st) (unaudited) $ 9.95 0.45/2/ (0.27) 0.18 (0.46) (0.07) (0.53) ------- ------- ------ ------ ------ ------ ------ BRINSON GLOBAL (EX-U.S.) EQUITY FUND/3/ - Class N (Commencement of Operations June 30, 1997) 1998 $ 12.59 0.16 0.29 0.45 (0.16) (0.74) (0.90) 1999 $ 12.14 0.12 0.27 0.39 (0.11) (0.12) (0.23) 1999 (December 31st) (unaudited) $ 12.30 0.02/2/ 1.95 1.97 - (0.14) (0.14) ------- ------- ------ ------ ------ ------ ------
(1) Annualized. (2) The net investment income per share data was determined by using average shares outstanding throughout the period. (3) The Global (Ex-U.S.) Equity Fund changed its name from the Non-U.S. Equity Fund on December 10, 1998, (4) The U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund and U.S. Small Cap Growth Fund changed their names from the U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, respectively, on May 1, 2000. N/A = Not Applicable 34
RATIOS/SUPPLEMENTAL DATA ------------------------------------------------- Ratio of Net Ratio of Expenses Investment Income to Average Net to Average Net Assets Assets -------------------------------------------------- Net Net asset Total assets, Before After Before After value- Return end of expense expense expense expense Portfolio end of (non- period reimburse- reimburse- reimburse- reimburse- turnover Year period annualized) (in 000s) ment ment ment ment rate BRINSON GLOBAL FUND - Class N (Commencement of Operations June 30, 1997) 1998 $ 12.75 7.90 % $ 1,163 1.19% N/A 2.45% N/A 88% 1999 $ 11.99 4.47 % $ 1,576 1.21% N/A 1.98% N/A 105% 1999 (December 31st) (unaudited) $ 11.14 (1.33)% $ 1,331 1.23%/1/ N/A 1.73%/1/ N/A 36% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- BRINSON GLOBAL EQUITY FUND - Class N (Commencement of Operations June 30, 1997) 1998 $ 12.53 8.60 % $ 1 1.27% 1.25% 1.04% 1.06% 46% 1999 $ 13.40 9.80 % $ 220 1.30% 1.25% 0.80% 0.85% 86% 1999 (December 31st) (unaudited) $ 12.78 5.29 % $ 232 1.30%/1/ 1.25%/1/ 0.12%/1/ 0.17% 57% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- BRINSON GLOBAL BOND FUND - Class N (Commencement of Operations June 30, 1997) 1998 $ 9.40 2.37 % $ 9 1.21% 1.15% 4.22% 4.28% 151% 1999 $ 9.16 2.89 % $ 1,085 1.15% N/A 3.80% N/A 138% 1999 (December 31st) (unaudited) $ 9.15 0.00 % $ 1 1.29%/1/ 1.21%/1/ 3.91%/1/ 3.99%/1/ 35% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- BRINSON U.S. BALANCED FUND - Class N (Commencement of Operations June 30, 1997) 1998 $ 12.27 12.15 % $ 1 1.06% 1.05% 3.63% 3.64% 194% 1999 $ 9.38 4.17 % $ 1 1.21% 1.05% 2.75% 2.91% 113% 1999 (December 31st) (unaudited) $ 8.40 (7.92)% $ 1 1.20%/1/ 1.05%/1/ 2.60%/1/ 2.75%/1/ 42% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- BRINSON U.S. EQUITY FUND - Class N (Commencement of Operations June 30, 1997) 1998 $ 19.88 21.10 % $ 268 1.05% N/A 0.87% N/A 42% 1999 $ 21.39 14.75 % $ 7,563 1.05% N/A 0.57% N/A 48% 1999 (December 31st) (unaudited) $ 16.75 (13.20)% $ 8,136 1.05%/1/ N/A 0.59%/1/ N/A 26% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- BRINSON U.S. LARGE CAP EQUITY FUND/4/ - Class N (Commencement of Operations April 6, 1998) 1998 $ 9.78 (2.02)% $ 16,033 1.84%/1/ 1.05%/1/ 0.27%/1/ 1.06%/1/ 12% 1999 $ 11.13 14.40 % $ 3,756 1.54% 1.05% 0.32% 0.81% 88% 1999 (December 31st) (unaudited) $ 8.17 (17.67)% $ 562 1.43%/1/ 1.05%/1/ 0.47%/1/ 0.85%/1/ 84% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- BRINSON U.S. LARGE CAP GROWTH FUND/4/ - Class N (Commencement of Operations December 31, 1998) 1999 $ 13.88 17.23 % $ 1 2.63%/1/ 1.05%/1/ (1.51)%/1/ 0.07%/1/ 51% 1999 (December 31st) (unaudited) $ 14.63 12.79 % $ 1 2.42%/1/ 1.05%/1/ (1.54)%/1/ (0.17)%/1/ 46% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- BRINSON U.S. SMALL CAP GROWTH FUND/4/ - Class N (Commencement of Operations December 31, 1998) 1999 $ 9.16 4.09 % $ 1 1.57%/1/ 1.40%/1/ (0.87)%/1/ 0.70%/1/ 71% 1999 (December 31st) (unaudited) $ 12.42 35.59 % $ 1 1.59%/1/ 1.40%/1/ (1.00)%/1/ (0.81)%/1/ 69% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- BRINSON U.S. BOND FUND - Class N (Commencement of Operations June 30, 1997) 1998 $ 10.58 10.30 % $ 1 1.09% 0.85% 5.36% 5.60% 198% 1999 $ 10.30 2.88 % $ 1 0.86% 0.85% 5.17% 5.18% 260% 1999 (December 31st) (unaudited) $ 9.77 0.14 % $ 1 0.86%/1/ 0.85%/1/ 5.69%/1/ 5.70%/1/ 103% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- BRINSON HIGH YIELD FUND - Class N (Commencement of Operations December 31, 1998) 1999 $ 9.95 2.71 % $ 1 1.08%/1/ 0.95%/1/ 8.29%/1/ 8.42%/1/ 77% 1999 (December 31st) (unaudited) $ 9.60 1.77 % $ 1 1.08%/1/ 0.95%/1/ 8.89%/1/ 9.02%/1/ 29% ------- ----------- --------- ---------- ---------- ---------- ---------- --------- BRINSON GLOBAL (EX-U.S.) EQUITY FUND3 - Class N (Commencement of Operations June 30, 1997) 1998 $ 12.14 4.51 % $ 11 1.25% N/A 1.27% N/A 49% 1999 $ 12.30 3.30 % $ 15 1.24% N/A 1.10% N/A 74% 1999 (December 31st) (unaudited) $ 14.13 16.11 % $ 1 1.23%/1/ N/A 0.08%/1/ N/A 32% ------- ----------- --------- ---------- ---------- ---------- ---------- ---------
35 For More Information More information on The Brinson Funds is available free upon request: Shareholder Reports Additional information about the Funds' investments is available in the Funds' annual and semi-annual reports to shareholders. In the Funds' annual report, you will find a discussion of the market conditions and investment strategies that significantly affected each Fund's performance during its last fiscal year. Statement of Additional Information ("SAI") The SAI provides more details about each Fund and its policies. The SAI is on file with the Securities and Exchange Commission ("SEC") and is incorporated by reference into (is legally considered part of) this prospectus. TO OBTAIN INFORMATION: By Telephone Call 1-800-448-2430 By Mail The Brinson Funds P.O. Box 2798 Boston, MA 02208-2798 By Email fulfill@fdinet.com On The Internet Text-only versions of the prospectus and other documents pertaining to the Funds can be viewed online or downloaded from: SEC: http://www.sec.gov Brinson Partners: http://www.ubsbrinson.com Information about the Funds (including the SAI) can also be reviewed and copied at the SEC's public reference room in Washington, DC (phone 1-800-SEC-0330). Or, you can obtain copies of this information by sending a request, along with a duplicating fee, to the SEC' s Public Reference Section, Washington, DC 20549- 6009, or by electronic request at publicinfo@sec.gov. The Funds are series of The Brinson Funds; Registration Number: 811-6637 [BRINSON FUNDS LOGO APPEARS HERE] - ------------------------------------------------------- 209 South LaSalle Street . Chicago, Illinois 60604-1295 Tel: 1-800-448-2430 THE BRINSON FUNDS GLOBAL FUND GLOBAL EQUITY FUND GLOBAL TECHNOLOGY FUND GLOBAL BIOTECH FUND GLOBAL BOND FUND U.S. BALANCED FUND U.S. EQUITY FUND U.S. VALUE EQUITY FUND U.S. LARGE CAP EQUITY FUND U.S. LARGE CAP GROWTH FUND U.S. SMALL CAP EQUITY FUND U.S. SMALL CAP GROWTH FUND U.S. REAL ESTATE EQUITY FUND U.S. BOND FUND HIGH YIELD FUND EMERGING MARKETS DEBT FUND GLOBAL (EX-U.S.) EQUITY FUND EMERGING MARKETS EQUITY FUND STATEMENT OF ADDITIONAL INFORMATION May 1, 2000 The Brinson Funds (the "Trust") currently offers eighteen separate series, each with its own investment objective and policies. The Trust also offers three classes of shares for each series - the Brinson Fund-Class I, the Brinson Fund-Class N and the UBS Investment Funds class. Information concerning the Brinson Fund-Class I of each series is included in a separate Prospectus dated May 1, 2000. Information concerning the Brinson Fund-Class N of each series is included in a separate Prospectus dated May 1, 2000. Information concerning the UBS Investment Funds class of shares of each series is included in a separate Prospectus dated May 1, 2000. This Statement of Additional Information ("SAI") is not a Prospectus, but should be read in conjunction with the current Prospectuses of the Trust. Much of the information contained herein expands upon subjects discussed in the Prospectuses. No investment in shares should be made without first reading the applicable Prospectus. A copy of each Prospectus and the Annual Report and the Semi-Annual Report may be obtained without charge from the Trust at the addresses and telephone numbers below.
UNDERWRITER: ADVISOR: Funds Distributor, Inc. Brinson Partners, Inc. 60 State Street, Suite 1300 209 South LaSalle Street Boston, MA 02109 Chicago, IL 60604-1295 1-800-448-2430 (Brinson Fund-Class I 1-800-448-2430 (Brinson Fund-Class I and and Brinson Fund-Class N) Brinson Fund-Class N) 1-800-794-7753 (UBS Investment Funds class) 1-800-794-7753 (UBS Investment Funds Class)
1 The Annual Reports dated June 30, 1999 and the Semi-Annual Reports dated December 31, 1999 to shareholders of the Trust's series are separate documents supplied with this SAI, and the financial statements, accompanying notes and report of independent auditors appearing in each of the Annual Reports and the financial statements and accompanying notes appearing in each of the Semi-Annual Reports are incorporated by reference into (legally made a part of) this SAI. 2 TABLE OF CONTENTS GENERAL INFORMATION ABOUT THE TRUST............................................................................. 5 Diversified Status......................................................................................... 5 General Definitions........................................................................................ 5 INVESTMENT STRATEGIES........................................................................................... 6 INVESTMENTS RELATING TO ALL FUNDS............................................................................... 6 Cash and Cash Equivalents.................................................................................. 6 Repurchase Agreements...................................................................................... 7 Reverse Repurchase Agreements.............................................................................. 7 Borrowing.................................................................................................. 8 Loans of Portfolio Securities.............................................................................. 8 Swaps...................................................................................................... 8 Futures.................................................................................................... 9 Options.................................................................................................... 11 Index Options.............................................................................................. 13 Special Risks of Options on Indices........................................................................ 14 Rule 144A and Illiquid Securities.......................................................................... 14 Investment Company Securities.............................................................................. 15 Real Estate Investment Trusts (REITS)...................................................................... 15 Other Investments.......................................................................................... 15 INVESTMENTS RELATING TO THE GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL TECHNOLOGY FUND, GLOBAL BIOTECH FUND, U.S. BALANCED FUND, U.S. EQUITY FUND, U.S. VALUE EQUITY FUND, U.S. LARGE CAP EQUITY FUND, U.S. LARGE CAP GROWTH FUND, U.S. SMALL CAP EQUITY FUND, U.S. SMALL CAP GROWTH FUND, U.S. REAL ESTATE EQUITY FUND, GLOBAL (EX-U.S.) EQUITY FUND AND EMERGING MARKETS EQUITY FUND......................................................... 16 Equity Securities............................................................................................... 16 Exchange-Trust Index Securities................................................................................. 16 INVESTMENTS RELATING TO THE GLOBAL FUNDS, U.S. VALUE EQUITY FUND, U.S. LARGE CAP GROWTH FUND, U.S. SMALL CAP EQUITY FUND, U.S. SMALL CAP GROWTH FUND, U.S. REAL ESTATE EQUITY FUND AND HIGH YIELD FUND....................... 16 Foreign Securities......................................................................................... 17 Forward Foreign Currency Contracts......................................................................... 17 Options on Foreign Currencies.............................................................................. 18 Short Sales................................................................................................ 19 INVESTMENTS RELATING TO THE GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND, U.S. REAL ESTATE EQUITY FUND, U.S. BOND FUND, HIGH YIELD FUND, EMERGING MARKETS DEBT FUND AND EMERGING MARKETS EQUITY FUND.................... 19 Lower Rated Debt Securities................................................................................ 19 Pay-In-Kind Bonds.......................................................................................... 20 When-Issued Securities..................................................................................... 21 Mortgage-Backed Securities and Mortgage Pass-Through Securities............................................ 21 Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage Investment Conduits ("REMICs")........................................................................ 23 Other Mortgage-Backed Securities....................................................................... 24
3 Asset-Backed Securities.............................................................................. 24 Zero Coupon and Delayed Interest Securities.......................................................... 26 INVESTMENTS RELATING TO THE GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL TECHNOLOGY FUND, GLOBAL BIOTECH FUND, HIGH YIELD FUND, EMERGING MARKETS DEBT FUND, GLOBAL (EX-US) EQUITY FUND AND EMERGING MARKETS EQUITY FUND............................................................................................... 27 Emerging Markets Investments......................................................................... 27 Risks of Investing in Emerging Markets............................................................... 29 Investments in Russian Securities.................................................................... 30 Investments in Affiliated Investment Companies....................................................... 31 SECONDARY RISKS........................................................................................... 32 INVESTMENT RESTRICTIONS................................................................................... 32 MANAGEMENT OF THE TRUST................................................................................... 36 Trustees and Officers................................................................................ 36 Compensation Table................................................................................... 38 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES....................................................... 38 INVESTMENT ADVISORY AND OTHER SERVICES.................................................................... 46 Advisor.............................................................................................. 46 Administrator........................................................................................ 51 Independent Auditors................................................................................. 55 Legal Counsel........................................................................................ 55 Underwriter.......................................................................................... 55 Distribution Plan.................................................................................... 55 Code of Ethics....................................................................................... 59 PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS.......................................................... 59 Portfolio Turnover................................................................................... 63 SHARES OF BENEFICIAL INTEREST............................................................................. 64 PURCHASES................................................................................................. 65 Exchanges of Shares.................................................................................. 66 Transfer of Securities............................................................................... 67 Net Asset Value...................................................................................... 67 REDEMPTIONS............................................................................................... 69 TAXATION.................................................................................................. 70 ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................................................ 72 PERFORMANCE CALCULATIONS.................................................................................. 72 Total Return......................................................................................... 73 Yield................................................................................................ 77 FINANCIAL STATEMENTS AND REPORTS OF INDEPENDENT AUDITORS.................................................. 77 CORPORATE DEBT RATINGS --- APPENDIX A..................................................................... A-1 SECONDARY RISKS --- APPENDIX B............................................................................
4 GENERAL INFORMATION ABOUT THE TRUST The Brinson Funds (the "Trust"), 209 South LaSalle Street, Chicago, Illinois 60604-1295, is an open-end management investment company which currently offers shares of eighteen series representing separate portfolios of investments: Global Fund, Global Equity Fund, Global Technology Fund, Global Biotech Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Value Equity Fund, U.S. Large Cap Equity Fund (formerly, U.S. Large Capitalization Equity Fund), U.S. Large Cap Growth Fund (formerly, U.S. Large Capitalization Growth Fund), U.S. Small Cap Equity Fund, U.S. Small Cap Growth Fund (formerly, U.S. Small Capitalization Growth Fund), U.S. Real Estate Equity Fund, U.S. Bond Fund, High Yield Fund, Emerging Markets Debt Fund, Global (Ex-U.S.) Equity Fund (formerly, Non-U.S. Equity Fund) and Emerging Markets Equity Fund. The Trust currently offers three classes of shares for each Series: the Brinson Fund-Class I, Brinson Fund-Class N and UBS Investment Funds class of shares. The Brinson Fund-Class I shares of each Series, which are designed primarily for institutional investors, have no sales charges and are not subject to annual 12b-1 plan expenses. The Brinson Fund-Class N shares, which are available exclusively to 401(k) participants, have no sales charges, but are subject to annual 12b-1 plan expenses of 0.25% of average daily net assets of the respective Series. The UBS Investment Funds class of shares of each Series have no sales charges, but are subject to annual 12b-1 expenses of up to a maximum of either 0.90% or 1.00% of average daily net assets of the respective Series, as further described below. The Trust was organized as a Delaware business trust on December 1, 1993. Diversified Status Each of the Global Fund, Global Equity Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Value Equity Fund, U.S. Small Cap Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund is "diversified" as that term is defined in the Investment Company Act of 1940, as amended (the "Act"). Each of the Global Technology Fund, Global Biotech Fund, Global Bond Fund, U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund is classified as "non-diversified" for purposes of the Act, which means that each Fund is not limited by the Act with regard to the portion of its assets that may be invested in the securities of a single issuer. To the extent that a non-diversified Fund makes investments in excess of 5% of its assets in the securities of a particular issuer, its exposure to the risks associated with that issuer is increased. Because each Fund may invest in a limited number of issuers, the performance of particular securities may adversely affect the performance of the Fund or subject the Fund to greater price volatility than that experienced by diversified investment companies. General Definitions As used throughout this SAI, the following terms shall have the meanings listed: "Act" shall mean the Investment Company Act of 1940, as amended. "Advisor" or "Brinson Partners" shall mean Brinson Partners, Inc., which serves as the Funds' investment advisor. "Board" shall mean the Board of Trustees of the Trust. "Code" shall mean the Internal Revenue Code of 1986, as amended. 5 "Funds" or "Series" shall mean collectively the Global Fund, Global Equity Fund, Global Technology Fund, Global Biotech Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Value Equity Fund, U.S. Large Cap Equity Fund, U.S Large Cap Growth Fund, U.S. Small Cap Equity Fund, U.S. Small Cap Growth Fund, U.S. Real Estate Equity Fund, U.S. Bond Fund, High Yield Fund, Emerging Markets Debt Fund, Global (Ex-U.S.) Equity Fund and Emerging Markets Equity Fund (or individually, a "Fund" or a "Series"). "Global Funds" shall mean collectively the Global Fund, Global Equity Fund, Global Technology Fund, Global Biotech Fund, Global Bond Fund, Emerging Markets Debt Fund, Global (Ex-U.S.) Equity Fund and Emerging Markets Equity Fund (or individually, as the "Global Fund"). "Moody's" shall mean Moody's Investors Services, Inc. "SEC" shall mean the U.S. Securities and Exchange Commission. "S&P" shall mean Standard & Poor's Ratings Group. "Trust" shall mean The Brinson Funds, an open-end management investment company registered under the Act. "U.S. Funds" shall mean collectively the U.S. Balanced Fund, U.S. Equity Fund, U.S. Value Equity Fund, U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Equity Fund, U.S. Small Cap Growth Fund, U.S. Real Estate Equity Fund, U.S. Bond Fund and High Yield Fund. "1933 Act" shall mean the Securities Act of 1933, as amended. INVESTMENT STRATEGIES The following discussion of investment techniques and instruments supplements and should be read in conjunction with the investment objectives and policies set forth in the Prospectuses of the Funds. The investment practices described below, except for the discussion of percentage limitations with respect to portfolio loan transactions and borrowing, are not fundamental and may be changed by the Board without the approval of the shareholders. INVESTMENTS RELATING TO ALL FUNDS The following discussion applies to all Series. Cash and Cash Equivalents The Series may invest a portion of their assets in short-term debt securities (including repurchase agreements and reverse repurchase agreements) of corporations, the U.S. government and its agencies and instrumentalities and banks and finance companies, which may be denominated in any currency. The Series may also invest a portion of their assets in shares issued by money market mutual funds. When unusual market conditions warrant, a Series may make substantial temporary defensive investments in cash equivalents up to a maximum of 100% of its net assets. Cash equivalent holdings may be in any currency (although such holdings may not constitute "cash or cash equivalents" for tax diversification purposes under the Code). When a Series invests for defensive purposes, it may affect the attainment of the Series' investment objective. 6 Under the terms of an exemptive order issued by the SEC, each Series may invest cash (i) held for temporary defensive purposes; (ii) not invested pending investment in securities; (iii) that is set aside to cover an obligation or commitment of the Series to purchase securities or other assets at a later date; (iv) to be invested on a strategic management basis (i-iv is herein referred to as "Uninvested Cash"); and (v) collateral that it receives from the borrowers of its portfolio securities in connection with the Series' securities lending program, in a series of shares of Brinson Supplementary Trust (the "Supplementary Trust Series"). Brinson Supplementary Trust is a private investment company which has retained Brinson Partners to manage its investments. The Trustees of the Trust also serve as Trustees of the Brinson Supplementary Trust. The Supplementary Trust Series invests in U.S. dollar denominated money market instruments having a dollar-weighted average maturity of 90 days or less, and operates in accordance with Rule 2a-7 under the Act. A Series' investment of Uninvested Cash in shares of the Supplementary Trust Series will not exceed 25% of the Series' total assets. In the event that Brinson Partners waives 100% of its investment advisory fee with respect to a Series, as calculated monthly, then that Series will be unable to invest in the Supplementary Trust Series until additional investment advisory fees are owed by the Series. Repurchase Agreements When a Series enters into a repurchase agreement, it purchases securities from a bank or broker-dealer which simultaneously agrees to repurchase the securities at a mutually agreed upon time and price, thereby determining the yield during the term of the agreement. As a result, a repurchase agreement provides a fixed rate of return insulated from market fluctuations during the term of the agreement. The term of a repurchase agreement generally is short, possibly overnight or for a few days, although it may extend over a number of months (up to one year) from the date of delivery. Repurchase agreements are considered under the Act to be collateralized loans by a Series to the seller secured by the securities transferred to the Series. Repurchase agreements will be fully collateralized and the collateral will be marked-to-market daily. A Series may not enter into a repurchase agreement having more than seven days remaining to maturity if, as a result, such agreement, together with any other illiquid securities held by the Series, would exceed 15% of the value of the net assets of the Series. In the event of bankruptcy or other default by the seller of the security under a repurchase agreement, a Series may suffer time delays and incur costs or possible losses in connection with the disposition of the collateral. In such event, instead of the contractual fixed rate of return, the rate of return to a Series would be dependent upon intervening fluctuations of the market value of the underlying security and the accrued interest on the security. Although a Series would have rights against the seller for breach of contract with respect to any losses arising from market fluctuations following the failure of the seller to perform, the ability of a Series to recover damages from a seller in bankruptcy or otherwise in default would be reduced. Repurchase agreements are securities for purposes of the tax diversification requirements that must be met for pass-through treatment under the Code. Accordingly, each Series will limit the value of its repurchase agreements on each of the quarterly testing dates to ensure compliance with Subchapter M of the Code. Reverse Repurchase Agreements Reverse repurchase agreements involve sales of portfolio securities of a Series to member banks of the Federal Reserve System or securities dealers believed creditworthy, concurrently with an agreement by the Series to repurchase the same securities at a later date at a fixed price which is generally equal to the original sales price plus interest. A Series retains record ownership and the right to receive interest and principal payments on the portfolio securities involved. In connection with each reverse repurchase transaction, a Series will direct its custodian bank to place cash, U.S. government securities, equity securities and/or investment and non-investment grade debt securities in a segregated account of the Series in an amount equal to the repurchase price. Any assets held in any segregated accounts 7 maintained by a Series with respect to any reverse repurchase agreements, when-issued securities, options, futures, forward contracts or other derivative transactions shall be liquid, unencumbered and marked-to-market daily (any such assets held in a segregated account are referred to in this SAI as "Segregated Assets"), and such Segregated Assets shall be maintained in accordance with pertinent positions of the SEC. A reverse repurchase agreement involves the risk that the market value of the securities retained by a Series may decline below the price of the securities the Series has sold but is obligated to repurchase under the agreement. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Series' use of the proceeds of the agreement may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Series' obligation to repurchase the securities. Reverse repurchase agreements are considered borrowings by the Series and as such, are subject to the same investment limitations. Borrowing The Series may borrow money as a temporary measure for extraordinary purposes or to facilitate redemptions. A Series will not borrow money in excess of 33 1/3% of the value of its total assets. A Series has no intention of increasing its net income through borrowing. Any borrowing will be done from a bank with the required asset coverage of at least 300%. In the event that such asset coverage shall at any time fall below 300%, a Series shall, within three days thereafter (not including Sundays or holidays), or such longer period as the SEC may prescribe by rules and regulations, reduce the amount of its borrowings to such an extent that the asset coverage of such borrowings shall be at least 300%. A Series will not pledge more than 10% of its net assets, or issue senior securities as defined in the Act, except for notes to banks and reverse repurchase agreements. Except with respect to the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund and U.S. Real Estate Equity Fund, investment securities will not be purchased while a Series has an outstanding borrowing that exceeds 5% of the Series' net assets. Loans of Portfolio Securities The Series may lend portfolio securities to qualified broker-dealers and financial institutions pursuant to agreements provided: (1) the loan is secured continuously by collateral marked-to-market daily and maintained in an amount at least equal to the current market value of the securities loaned; (2) a Series may call the loan at any time and receive the securities loaned; (3) a Series will receive any interest or dividends paid on the loaned securities; and (4) the aggregate market value of securities loaned will not at any time exceed 33 1/3% of the total assets of the respective Series. Collateral will consist of U.S. and non-U.S. securities, cash equivalents or irrevocable letters of credit. Loans of securities involve a risk that the borrower may fail to return the securities or may fail to maintain the proper amount of collateral. Therefore, a Series will only enter into portfolio loans after a review of all pertinent factors by the Advisor under the supervision of the Board, including the creditworthiness of the borrower and then only if the consideration to be received from such loans would justify the risk. Creditworthiness will be monitored on an ongoing basis by the Advisor. Swaps The Series (except for the Global Equity Fund, U.S. Equity Fund, U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund,) may engage in swaps, including but not limited to interest rate, currency and index swaps and the purchase or sale of related caps, floors, collars and other derivative instruments. A Series expects to enter into these transactions primarily to preserve a return or spread on a particular 8 investment or portion of the portfolio's duration, to protect against any increase in the price of securities the Series anticipates purchasing at a later date, or to gain exposure to certain markets in the most economical way possible. Interest rate swaps involve the exchange by a Series with another party of their respective commitments to receive or pay interest (e.g., an exchange of fixed rate payments for floating rate payments) with respect to a notional amount of principal. Currency swaps involve the exchange of cash flows on a notional amount based on changes in the values of referenced currencies. The purchase of a cap entitles the purchaser to receive payments on a notional principal amount from the party selling the cap to the extent that a specified index exceeds a predetermined interest rate or amount. The purchase of an interest rate floor entitles the purchaser to receive payments on a notional principal amount from the party selling the floor to the extent that a specified index falls below a predetermined interest rate or amount. A collar is a combination of a cap and a floor that preserves a certain return with a predetermined range of interest rates or values. The use of swaps involves investment techniques and risks different from those associated with ordinary portfolio security transactions. If Brinson Partners is incorrect in its forecast of market values, interest rates and other applicable factors, the investment performance of the Series will be less favorable than it would have been if this investment technique was never used. Swaps do not involve the delivery of securities or other underlying assets or principal. Thus, if the other party to a swap defaults, a Series' risk of loss consists of the net amount of interest payments that the Series is contractually entitled to receive. Under Internal Revenue Service rules, any lump sum payment received or due under the notional principal contract must be amortized over the life of the contract using the appropriate methodology prescribed by the Internal Revenue Service. The equity swaps in which all aforementioned Series intend to invest involve agreements with a counterparty. The return to the Series on any equity swap contact will be the total return on the notional amount of the contract as if it were invested in the stocks comprising the contract index in exchange for an interest component based on the notional amount of the agreement. A Series will only enter into an equity swap contract on a net basis, i.e., the two parties' obligations are netted out, with the Series paying or receiving, as the case may be, only the net amount of the payments. Payments under the equity swap contracts may be made at the conclusion of the contract or periodically during its term. If there is a default by the counterparty to a swap contract, the Series will be limited to contractual remedies pursuant to the agreements related to the transaction. There is no assurance that a swap contract counterparty will be able to meet its obligations pursuant to a swap contract or that, in the event of a default, the Series will succeed in pursuing contractual remedies. The Series thus assumes the risk that it may be delayed in or prevented from obtaining payments owed to it pursuant to a swap contract. However, the amount at risk is only the net unrealized gain, if any, on the swap, not the entire notional amount. The Advisor will closely monitor, subject to the oversight of the Board, the creditworthiness of swap counterparties in order to minimize the risk of swaps. The Advisor and the Trust do not believe that the Series' obligations under swap contracts are senior securities and, accordingly, the Series will not treat them as being subject to its borrowing or senior securities restrictions. However, the net amount of the excess, if any, of a Series' obligations over its entitlements with respect to each swap contract will be accrued on a daily basis and an amount of cash, U.S. government securities or other liquid assets having an aggregate market value at least equal to the accrued excess will be segregated in accordance with SEC positions. To the extent that a Series cannot dispose of a swap in the ordinary course of business within seven days at approximately the value at which the Series has valued the swap, the Series will treat the swap as illiquid and subject to its overall limit on illiquid investments of 15% of the Series' total net assets. 9 Futures The Series may enter into contracts for the purchase or sale for future delivery of securities and indices. The Global Funds, U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund, High Yield Fund, U.S. Small Cap Equity Fund, U.S. Value Equity Fund and U.S. Real Estate Equity Fund may also enter into contracts for the purchase or sale for future delivery of foreign currencies. A purchase of a futures contract means the acquisition of a contractual right to obtain delivery to a Series of the securities or foreign currency called for by the contract at a specified price during a specified future month. When a futures contract is sold, a Series incurs a contractual obligation to deliver the securities or foreign currency underlying the contract at a specified price on a specified date during a specified future month. A Series may enter into futures contracts and engage in options transactions related thereto to the extent that not more than 5% of the Series' assets are required as futures contract margin deposits and premiums on options, and may engage in such transactions to the extent that obligations relating to such futures and related options on futures transactions represent not more than 25% of the Series' assets. When a Series enters into a futures transaction, it must deliver to the futures commission merchant selected by the Series an amount referred to as "initial margin." This amount is maintained by the futures commission merchant in a segregated account at the custodian bank. Thereafter, a "variation margin" may be paid by the Series to, or drawn by the Series from, such account in accordance with controls set for such accounts, depending upon changes in the price of the underlying securities subject to the futures contract. The Series may also effect futures transactions through futures commission merchants who are affiliated with the Advisor or the Series in accordance with procedures adopted by the Board. The Series will enter into futures transactions on domestic exchanges and, to the extent such transactions have been approved by the Commodity Futures Trading Commission for sale to customers in the United States, on foreign exchanges. In addition, all of the Series may sell stock index futures in anticipation of or during a market decline to attempt to offset the decrease in market value of their common stocks that might otherwise result; and they may purchase such contracts in order to offset increases in the cost of common stocks that they intend to purchase. Unlike other futures contracts, a stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract. While futures contracts provide for the delivery of securities, deliveries usually do not occur. Contracts are generally terminated by entering into offsetting transactions. The Series may enter into futures contracts to protect against the adverse affects of fluctuations in security prices, interest or foreign exchange rates without actually buying or selling the securities or foreign currency. For example, if interest rates are expected to increase, a Series might enter into futures contracts for the sale of debt securities. Such a sale would have much the same effect as selling an equivalent value of the debt securities owned by the Series. If interest rates did increase, the value of the debt securities in the portfolio would decline, but the value of the futures contracts to the Series would increase at approximately the same rate, thereby keeping the net asset value of the Series from declining as much as it otherwise would have. Similarly, when it is expected that interest rates may decline, futures contracts may be purchased to hedge in anticipation of subsequent purchases of securities at higher prices. Since the fluctuations in the value of futures contracts should be similar to those of debt securities, the Series could take advantage of the anticipated rise in value of debt securities without actually buying them until the market had stabilized. At that time, the futures contracts could be liquidated and the Series could then buy debt securities on the cash market. 10 To the extent that market prices move in an unexpected direction, a Series may not achieve the anticipated benefits of futures contracts or may realize a loss. For example, if a Series is hedged against the possibility of an increase in interest rates which would adversely affect the price of securities held in its portfolio and interest rates decrease instead, the Series would lose part or all of the benefit of the increased value which it has because it would have offsetting losses in its futures position. In addition, in such situations, if the Series had insufficient cash, it may be required to sell securities from its portfolio to meet daily variation margin requirements. Such sales of securities may, but will not necessarily, be at increased prices which reflect the rising market. A Series may be required to sell securities at a time when it may be disadvantageous to do so. Options The Series may purchase and write call or put options on foreign or U.S. securities and indices and enter into related closing transactions, but will only engage in option strategies for non-speculative purposes. The U.S. Funds may invest in options that are listed on U.S. exchanges or traded over-the-counter and the Global Funds, the U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund, U.S. Small Cap Equity Fund, U.S. Value Equity Fund, U.S. Real Estate Equity Fund and High Yield Fund may invest in options that are either listed on U.S. or recognized foreign exchanges or traded over-the- counter. Certain over-the-counter options may be illiquid. Thus, it may not be possible to close options positions and this may have an adverse impact on a Series' ability to effectively hedge its securities. The Series have been notified by the SEC that it considers over-the-counter options to be illiquid. Accordingly, a Series will only invest in such options to the extent consistent with its 15% limit on investments in illiquid securities. Purchasing Call Options - The Series may purchase call options on securities to the extent that premiums paid by a Series do not aggregate more than 20% of the Series' total assets. When a Series purchases a call option, in return for a premium paid by the Series to the writer of the option, the Series obtains the right to buy the security underlying the option at a specified exercise price at any time during the term of the option. The writer of the call option, who receives the premium upon writing the option, has the obligation, upon exercise of the option, to deliver the underlying security against payment of the exercise price. The advantage of purchasing call options is that a Series may alter portfolio characteristics and modify portfolio maturities without incurring the cost associated with transactions. A Series may, following the purchase of a call option, liquidate its position by effecting a closing sale transaction. This is accomplished by selling an option of the same series as the option previously purchased. The Series will realize a profit from a closing sale transaction if the price received on the transaction is more than the premium paid to purchase the original call option; the Series will realize a loss from a closing sale transaction if the price received on the transaction is less than the premium paid to purchase the original call option. Although the Series will generally purchase only those call options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market on an exchange will exist for any particular option, or at any particular time, and for some options no secondary market on an exchange may exist. In such event, it may not be possible to effect closing transactions in particular options, with the result that a Series would have to exercise its options in order to realize any profit and would incur brokerage commissions upon the exercise of such options and upon the subsequent disposition of the underlying securities acquired through the exercise of such options. Further, unless the price of the underlying security changes sufficiently, a call option purchased by a Series may expire without any value to the Series, in which event the Series would realize a capital loss which will be short-term unless the option was held for more than one year. 11 Covered Call Writing - A Series may write covered call options from time to time on such portions of its portfolio, without limit, as Brinson Partners determines is appropriate in seeking to achieve the Series' investment objective. The advantage to a Series of writing covered calls is that the Series receives a premium which is additional income. However, if the security rises in value, the Series may not fully participate in the market appreciation. During the option period for a covered call option, the writer may be assigned an exercise notice by the broker-dealer through whom such call option was sold, requiring the writer to deliver the underlying security against payment of the exercise price. This obligation is terminated upon the expiration of the option or upon entering a closing purchase transaction. A closing purchase transaction, in which a Series, as writer of an option, terminates its obligation by purchasing an option of the same series as the option previously written, cannot be effected with respect to an option once the option writer has received an exercise notice for such option. Closing purchase transactions will ordinarily be effected to realize a profit on an outstanding call option, to prevent an underlying security from being called, to permit the sale of the underlying security or to enable a Series to write another call option on the underlying security with either a different exercise price or expiration date or both. A Series may realize a net gain or loss from a closing purchase transaction depending upon whether the net amount of the original premium received on the call option is more or less than the cost of effecting the closing purchase transaction. Any loss incurred in a closing purchase transaction may be partially or entirely offset by the premium received from a sale of a different call option on the same underlying security. Such a loss may also be wholly or partially offset by unrealized appreciation in the market value of the underlying security. Conversely, a gain resulting from a closing purchase transaction could be offset in whole or in part by a decline in the market value of the underlying security. If a call option expires unexercised, the Series will realize a short-term capital gain in the amount of the premium on the option less the commission paid. Such a gain, however, may be offset by depreciation in the market value of the underlying security during the option period. If a call option is exercised, a Series will realize a gain or loss from the sale of the underlying security equal to the difference between the cost of the underlying security and the proceeds of the sale of the security plus the amount of the premium on the option less the commission paid. The Series will write call options only on a covered basis, which means that a Series will own the underlying security subject to a call option at all times during the option period. Unless a closing purchase transaction is effected, a Series would be required to continue to hold a security which it might otherwise wish to sell or deliver a security it would want to hold. The exercise price of a call option may be below, equal to or above the current market value of the underlying security at the time the option is written. Purchasing Put Options - The Series may only purchase put options to the extent that the premiums on all outstanding put options do not exceed 20% of a Series' total assets. A Series will, at all times during which it holds a put option, own the security covered by such option. With regard to the writing of put options, each Series will limit the aggregate value of the obligations underlying such put options to 50% of its total net assets. The purchase of the put on substantially identical securities held will constitute a short sale for tax purposes, the effect of which is to create short-term capital gain on the sale of the security and to suspend running of its holding period (and treat it as commencing on the date of the closing of the short sale) or that of a security acquired to cover the same if, at the time the put was acquired, the security had not been held for more than one year. A put option purchased by a Series gives it the right to sell one of its securities for an agreed price up to an agreed date. The Series intend to purchase put options in order to protect against a decline in the market value of the underlying security below the exercise price less the premium paid for the option ("protective puts"). The ability to purchase put options will allow the Series to protect unrealized 12 gains in an appreciated security in their portfolios without actually selling the security. If the security does not drop in value, a Series will lose the value of the premium paid. A Series may sell a put option which it has previously purchased prior to the sale of the securities underlying such option. Such sale will result in a net gain or loss depending on whether the amount received on the sale is more or less than the premium and other transaction costs paid on the put option which is sold. The Series may sell a put option purchased on individual portfolio securities. Additionally, the Series may enter into closing sale transactions. A closing sale transaction is one in which a Series, when it is the holder of an outstanding option, liquidates its position by selling an option of the same series as the option previously purchased. Writing Put Options - The Series may also write put options on a secured basis which means that a Series will maintain in a segregated account with its custodian Segregated Assets in an amount not less than the exercise price of the option at all times during the option period. The amount of Segregated Assets held in the segregated account will be adjusted on a daily basis to reflect changes in the market value of the securities covered by the put option written by the Series. Secured put options will generally be written in circumstances where Brinson Partners wishes to purchase the underlying security for a Series' portfolio at a price lower than the current market price of the security. In such event, a Series would write a secured put option at an exercise price which, reduced by the premium received on the option, reflects the lower price it is willing to pay. Following the writing of a put option, a Series may wish to terminate the obligation to buy the security underlying the option by effecting a closing purchase transaction. This is accomplished by buying an option of the same series as the option previously written. The Series may not, however, effect such a closing transaction after it has been notified of the exercise of the option. Index Options The Series may purchase exchange-listed call options on stock and fixed income indices depending upon whether a Series is an equity or bond series and sell such options in closing sale transactions for hedging purposes. A Series may purchase call options on broad market indices to temporarily achieve market exposure when the Series is not fully invested. A Series may also purchase exchange-listed call options on particular market segment indices to achieve temporary exposure to a specific industry. In addition, the Series may purchase put options on stock and fixed income indices and sell such options in closing sale transactions for hedging purposes. A Series may purchase put options on broad market indices in order to protect its fully invested portfolio from a general market decline. Put options on market segments may be bought to protect a Series from a decline in value of heavily weighted industries in the Series' portfolio. Put options on stock and fixed income indices may also be used to protect a Series' investments in the case of a major redemption. The Series may also write (sell) put and call options on stock and fixed income indices. While the option is open, a Series will maintain a segregated account with its custodian in an amount equal to the market value of the option. Options on indices are similar to regular options except that an option on an index gives the holder the right, upon exercise, to receive an amount of cash if the closing level of the index upon which the option is based is greater than (in the case of a call) or lesser than (in the case of a put) the exercise price of the option. This amount of cash is equal to the difference between the closing price of the index and the exercise price of the option expressed in dollars times a specified multiple (the "multiplier"). The indices on which options are traded include both U.S. and non-U.S. markets. 13 Special Risks of Options on Indices The Series' purchases of options on indices will subject them to the risks described below. Because the value of an index option depends upon movements in the level of the index rather than the price of a particular security, whether a Series will realize gain or loss on the purchase of an option on an index depends upon movements in the level of prices in the market generally or in an industry or market segment rather than movements in the price of a particular security. Accordingly, successful use by a Series of options on indices is subject to Brinson Partners' ability to predict correctly the direction of movements in the market generally or in a particular industry. This requires different skills and techniques than predicting changes in the prices of individual securities. Index prices may be distorted if trading of a substantial number of securities included in the index is interrupted causing the trading of options on that index to be halted. If a trading halt occurred, a Series would not be able to close out options which it had purchased and the Series may incur losses if the underlying index moved adversely before trading resumed. If a trading halt occurred and restrictions prohibiting the exercise of options were imposed through the close of trading on the last day before expiration, exercises on that day would be settled on the basis of a closing index value that may not reflect current price information for securities representing a substantial portion of the value of the index. If a Series holds an index option and exercises it before final determination of the closing index value for that day, it runs the risk that the level of the underlying index may change before closing. If such a change causes the exercised option to fall "out-of-the-money," the Series will be required to pay the difference between the closing index value and the exercise price of the option (times the applicable multiplier) to the assigned writer. Although a Series may be able to minimize this risk by withholding exercise instructions until just before the daily cutoff time or by selling rather than exercising the option when the index level is close to the exercise price, it may not be possible to eliminate this risk entirely because the cutoff times for index options may be earlier than those fixed for other types of options and may occur before definitive closing index values are announced. Rule 144A and Illiquid Securities The Series may invest in securities that are exempt under Rule 144A from the registration requirements of the 1933 Act. Those securities purchased under Rule 144A are traded among qualified institutional investors. The Board has instructed Brinson Partners to consider the following factors in determining the liquidity of a security purchased under Rule 144A: (i) the frequency of trades and trading volume for the security; (ii) whether at least three dealers are willing to purchase or sell the security and the number of potential purchasers; (iii) whether at least two dealers are making a market in the security; and (iv) the nature of the security and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). Although having delegated the day-to-day functions, the Board will continue to monitor and periodically review the Advisor's selection of Rule 144A securities, as well as the Advisor's determinations as to their liquidity. Investing in securities under Rule 144A could have the effect of increasing the level of a Series' illiquidity to the extent that qualified institutional buyers become, for a time, uninterested in purchasing these securities. After the purchase of a security under Rule 144A, however, the Board and Brinson Partners will continue to monitor the liquidity of that security to ensure that each Series has no more than 15% of its net assets in illiquid securities. The Series will limit investments in securities of issuers which the Series are restricted from selling to the public without registration under the 1933 Act to no more than 15% of the Series' net assets, excluding restricted securities eligible for resale pursuant to Rule 144A that have been determined 14 to be liquid pursuant to a policy and procedures adopted by the Trust's Board which includes continuing oversight by the Board. The U.S. Small Cap Equity Fund may invest up to 10% of its net assets in equity securities or interests in non-public companies that are expected to have an initial public offering within 18 months. If Brinson Partners determines that a security purchased in reliance on Rule 144A which was previously determined to be liquid, is no longer liquid and, as a result, the Series' holdings of illiquid securities exceed the Series' 15% limit on investment in such securities, Brinson Partners will determine what action shall be taken to ensure that the Series continue to adhere to such limitation, including disposing of illiquid assets which may include such Rule 144A securities. Investment Company Securities Securities of other investment companies may be acquired by each Series to the extent that such purchases are consistent with that entity's investment objectives and restrictions and are permitted under the Act. The Act requires that, as determined immediately after a purchase is made, (i) not more than 5% of the value of the Series' total assets will be invested in the securities of any one investment company, (ii) not more than 10% of the value of the Series' total assets will be invested in securities of investment companies as a group and (iii) not more than 3% of the outstanding voting stock of any one investment company will be owned by the Series. Certain exceptions to these limitations may apply. As a shareholder of another investment company, a Series would bear, along with other shareholders, its pro rata portion of the other investment company's expenses, including advisory fees. These expenses would be in addition to the expenses that such a Series would bear in connection with its own operations. Real Estate Investment Trusts (REITs) (THE U.S. REAL ESTATE EQUITY FUND ONLY) Real estate investment trusts ("REITs") pool investors' funds for investment primarily in income producing real estate or real estate related loans or interests. A REIT is not taxed on income distributed to its shareholders or unitholders if it complies with regulatory requirements relating to its organization, ownership, assets and income, and with a regulatory requirement that it distribute to its shareholders or unitholders at least 95% of its taxable income for each taxable year. Generally, REITs can be classified as Equity REITs, Mortgage REITs or Hybrid REITs. Equity REITs invest the majority of their assets directly in real property and derive their income primarily from rents and capital gains from appreciation realized through property sales. Equity REITs are further categorized according to the types of real estate securities they own, e.g., apartment properties, retail shopping centers, office and industrial properties, hotels, health-care facilities, manufactured housing and mixed-property types. Mortgage REITs invest the majority of their assets in real estate mortgages and derive their income primarily from interest payments. Hybrid REITs combine the characteristics of both Equity REITs and Mortgage REITs. A shareholder in the U.S. Real Estate Equity Fund, by investing in REITs indirectly through the Series, will bear not only his proportionate share of the expenses of the Series, but also, indirectly, the management expenses of underlying REITs. REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. Mortgage REITs may be affected by the quality of the credit extended. Furthermore, REITs are dependent on specialized management skills. Some REITs may have limited diversification and maybe subject to risks inherent in investments in a limited number of properties, in a narrow geographic area, or in a single property type. REITs depend generally on their ability to generate cash flow to make distributions to shareholders or unitholders, and may be subject to defaults by borrowers and to self-liquidations. In addition, the performance of a REIT may be affected by its failure to qualify for tax-free pass-through of income, or the REITs failure to maintain exemption from registration under the Act. Other Investments The Board may, in the future, authorize a Series to invest in securities other than those listed in this SAI and in the Prospectuses, provided such investment would be consistent with that Series' 15 investment objective and that it would not violate any fundamental investment policies or restrictions applicable to that Series. INVESTMENTS RELATING TO THE GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL TECHNOLOGY FUND, GLOBAL BIOTECH FUND, U.S. BALANCED FUND, U.S. EQUITY FUND, U.S. VALUE EQUITY FUND, U.S. LARGE CAP EQUITY FUND, U.S. LARGE CAP GROWTH FUND, U.S. SMALL CAP EQUITY FUND, U.S. SMALL CAP GROWTH FUND, U.S. REAL ESTATE EQUITY FUND, HIGH YIELD FUND, GLOBAL (EX-U.S.) EQUITY FUND AND EMERGING MARKETS EQUITY FUND Equity Securities The Series may invest in a broad range of equity securities of U.S. and non-U.S. issuers, including common stocks of companies or closed-end investment companies, preferred stocks, debt securities convertible into or exchangeable for common stock, securities such as warrants or rights that are convertible into common stock and sponsored or unsponsored American, European and Global depositary receipts ("Depositary Receipts"). The issuers of unsponsored Depositary Receipts are not obligated to disclose material information in the United States. The Series, except for the U.S. Small Cap Growth Fund, U.S. Small Cap Equity Fund and Global Biotech Fund, expect their U.S. equity investments to emphasize large and intermediate capitalization companies. The U.S. Small Cap Growth Fund, U.S. Small Cap Equity Fund and Global Biotech Fund, expect their U.S. equity investments to emphasize small capitalization companies. The Global Fund, U.S. Small Cap Growth Fund, U.S. Small Cap Equity Fund and Global Biotech Fund, may also invest in small capitalization equity markets. The equity markets in the non-U.S. component of the Series will typically include available shares of larger capitalization companies. Capitalization levels are measured relative to specific markets, thus large, intermediate and small capitalization ranges vary country by country. The Global Fund, U.S. Small Cap Equity Fund, Global Technology Fund and Global Biotech Fund may invest in equity securities of companies considered by the Advisor to be in their post-venture capital stage, or "post-venture capital companies." A post-venture capital company is a company that has received venture capital financing either: (a) during the early stages of the company's existence or the early stages of the development of a new product or service, or (b) as part of a restructuring or recapitalization of the company. The Global Fund, Global Equity Fund and Global (Ex-U.S.) Equity Fund may also invest in open-end investment companies advised by Brinson Partners. The Global Fund, Global Equity Fund, Global (Ex-U.S.) Equity Fund, Global Technology Fund, Global Biotech Fund and Emerging Markets Equity Fund may invest in equity securities of issuers in emerging markets and in securities with respect to which the return is derived from the equity securities of issuers in emerging markets. Exchange-Traded Index Securities Subject to the limitations on investment in investment company securities and their own investment objectives, the Series may invest in exchange-traded index securities that are currently operational and that may be developed in the future. Examples of currently operational exchange-traded index securities include, without limitation, DIAMONDS, QQQs, SPDRs, WEBS (each of which is more fully described below) and various country index funds. Exchange-traded index securities generally trade on the American Stock Exchange and are subject to the risks of an investment in a broadly based portfolio of common stocks, including the risk that the general level of stock prices may decline, thereby adversely affecting the value of the investment. These securities generally bear certain operational expenses. To the extent a Series invests in these securities, the Series must bear these expenses in addition to the expenses of its own operation. DIAMONDS. Diamonds are shares of a publicly-traded unit investment trust that owns the stocks in the Dow Jones Industrial Average ("DJIA") in approximately the same proportions as represented in the DJIA. QQQs. QQQs are shares of a publicly-traded unit investment trust that owns the stocks in the NASDAQ-100 Index(R) in approximately the same proportions as represented in the NASDAQ-100 Index(R). SPDRs. (Standard & Poor's Depositary Receipts). SPDRs are shares of a publicly-traded unit investment trust that owns the stocks in the Standard & Poor's 500 Composite Stock Price Index(R) (the "S&P 500 Index") in approximately the same proportions as represented in the S&P 500 Index. WEBS (World Equity Benchmark Shares). WEBS are shares of index funds based on the stock markets of particular countries or geographic regions. INVESTMENTS RELATING TO THE GLOBAL FUNDS, U.S. VALUE EQUITY FUND, U.S LARGE CAP GROWTH FUND, U.S. SMALL CAP EQUITY FUND, U.S. SMALL CAP GROWTH FUND, U.S. REAL ESTATE EQUITY FUND AND HIGH YIELD FUND The following discussion of strategies, techniques and policies applies only to the Global Fund, Global Equity Fund, Global Bond Fund, U.S. Value Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Equity Fund, U.S. Small Cap Growth Fund, Global Technology Fund, Global Biotech Fund, U.S. Real Estate Equity Fund, High Yield Fund, Emerging Markets Debt Fund, Global (Ex- U.S.) Equity Fund and Emerging Markets Equity Fund. 16 Foreign Securities Investors should recognize that investing in foreign issuers involves certain considerations, including those set forth in the Series' Prospectuses, which are not typically associated with investing in U.S. issuers. Since the stocks of foreign companies are frequently denominated in foreign currencies, and since the Series may temporarily hold uninvested reserves in bank deposits in foreign currencies, the Series will be affected favorably or unfavorably by changes in currency rates and in exchange control regulations and may incur costs in connection with conversions between various currencies. The investment policies of the Series permit them to enter into forward foreign currency exchange contracts, futures, options and interest rate swaps (in the case of the Global Funds) in order to hedge portfolio holdings and commitments against changes in the level of future currency rates. The Global Bond Fund, High Yield Fund, Emerging Markets Debt Fund, Emerging Markets Equity Fund, Global Technology Fund, U.S. Small Cap Equity Fund, Global Biotech Fund, U.S. Value Equity Fund and U.S. Real Estate Equity Fund may invest in Eurodollar securities, which are fixed income securities of a U.S. issuer or a foreign issuer that are issued outside the United States. Interest and dividends on Eurodollar securities are payable in U.S. dollars. On January 1, 1999, the European Monetary Union introduced a new single currency, the Euro, which replaced the national currencies of participating member nations. If the Series hold investments in nations with currencies replaced by the Euro, the investment process, including trading, foreign exchange, payments, settlements, cash accounts, custody and accounting, was impacted. Because this change to a single currency is new and untested, the establishment of the Euro may result in market volatility. For the same reason, it is not possible to predict the impact of the Euro on the business or financial condition of European issuers which the Funds may hold in their portfolios and the impact of the Euro on the performance of the Funds. To the extent the Funds hold non-U.S. dollar (Euro or other) denominated securities, they will still be exposed to currency risk due to fluctuations in those currencies versus the U.S. dollar. Additional risks that may result include the fact that European issuers in which the Series invest may face substantial conversion costs which may not be accurately anticipated and may impact issuer profitability and creditworthiness. Forward Foreign Currency Contracts The Series may purchase or sell currencies and/or engage in forward foreign currency transactions in order to expedite settlement of portfolio transactions and to manage currency risk. Forward foreign currency contracts are traded in the inter-bank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement and no commissions are charged at any stage for trades. The Series will account for forward contracts by marking-to-market each day at current forward contract values. A Series will only enter into forward contracts to sell, for a fixed amount of U.S. dollars or other appropriate currency, an amount of foreign currency, to the extent that the value of the short forward contract is covered by the underlying value of securities denominated in the currency being sold. Alternatively, when a Series enters into a forward contract to sell an amount of foreign currency, the Series' custodian or sub-custodian will place Segregated Assets in a segregated account of the Series in an amount not less than the value of the Series' total assets committed to the consummation of such forward contracts. If the additional Segregated Assets placed in the segregated account decline, additional cash or securities will be placed in the account on a daily basis so that the value of the account will equal the amount of the Series' commitments with respect to such contracts. 17 Options on Foreign Currencies The Series also may purchase and write put and call options on foreign currencies (traded on U.S. and foreign exchanges or over-the-counter markets) to manage the Series' exposure to changes in currency exchange rates. The Series may purchase and write options on foreign currencies for hedging purposes in a manner similar to that in which futures contracts on foreign currencies, or forward contracts, will be utilized. For example, a decline in the dollar value of a foreign currency in which portfolio securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against such diminutions in the value of portfolio securities, the Series may purchase put options on the foreign currency. If the dollar price of the currency does decline, a Series will have the right to sell such currency for a fixed amount in dollars and will thereby offset, in whole or in part, the adverse effect on its portfolio which otherwise would have resulted. Conversely, where a rise in the dollar value of a currency in which securities to be acquired are denominated is projected, thereby increasing the dollar price of such securities, the Series may purchase call options on such currency. The purchase of such options could offset, at least partially, the effects of the adverse movement in exchange rates. As in the case of other types of options, however, the benefit to the Series to be derived from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, a Series could sustain losses on transactions in foreign currency options which would require it to forego a portion or all of the benefits of advantageous changes in such rates. The Series may write options on foreign currencies for the same types of hedging purposes. For example, where a Series anticipates a decline in the dollar value of foreign currency denominated securities due to adverse fluctuations in exchange rates, it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option will most likely not be exercised, and the diminution in the value of portfolio securities will be offset by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against an anticipated increase in the dollar cost of securities to be acquired, a Series could write a put option on the relevant currency which, if rates move in the manner projected, will expire unexercised and allow the Series to hedge such increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the Series would be required to purchase or sell the underlying currency at a loss which may not be offset by the amount of the premium. Through the writing of options on foreign currencies, a Series also may be required to forego all or a portion of the benefit which might otherwise have been obtained from favorable movements in exchange rates. The Series may write covered call options on foreign currencies. A call option written on a foreign currency by a Series is "covered" if the Series owns the underlying foreign currency covered by the call or has an absolute and immediate right to acquire that foreign currency without additional cash consideration (or for additional cash consideration held in a segregated account by the custodian bank) upon conversion or exchange of other foreign currency held in its portfolio. A call option is also covered if a Series has a call on the same foreign currency and in the same principal amount as the call written where the exercise price of the call held (a) is equal to or less than the exercise price of the call written, or (b) is greater than the exercise price of the call written if the difference is maintained by the Series in Segregated Assets in a segregated account with its custodian bank. 18 With respect to writing put options, at the time the put is written, a Series will establish a segregated account with its custodian bank consisting of Segregated Assets in an amount equal in value to the amount the Series will be required to pay upon exercise of the put. The account will be maintained until the put is exercised, has expired, or the Series has purchased a closing put of the same series as the one previously written. Short Sales The U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund, High Yield Fund, Global Technology Fund, U.S. Small Cap Equity Fund, Global Biotech Fund, U.S. Value Equity Fund and U.S. Real Estate Equity Fund may from time to time sell securities short. In the event that the Advisor anticipates that the price of a security will decline, it may sell the security short and borrow the same security from a broker or other institution to complete the sale. The Series will only enter into short sales for hedging purposes. The Series will incur a profit or a loss, depending upon whether the market price of the security decreases or increases between the date of the short sale and the date on which the Series must replace the borrowed security. All short sales will be fully collateralized and a Series will not sell securities short if immediately after and as a result of the short sale, the value of all securities sold short by the Series exceeds 25% of its total assets. Each Series will also limit short sales of any one issuer's securities to 2% of its total assets and to 2% of any one class of the issuer's securities. Short sales involve certain risks and special considerations. Possible losses from short sales may be unlimited, whereas losses from direct purchases of securities are limited to the total amount invested. INVESTMENTS RELATING TO THE GLOBAL FUND, GLOBAL BOND FUND, U.S. BALANCED FUND, U.S. REAL ESTATE EQUITY FUND, U.S. BOND FUND, HIGH YIELD FUND, EMERGING MARKETS DEBT FUND AND EMERGING MARKETS EQUITY FUND The following discussion applies to the Global Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Real Estate Equity Fund, U.S. Bond Fund, High Yield Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund, except as otherwise noted. Lower Rated Debt Securities Fixed income securities rated lower than Baa by Moody's or BBB by S&P are below investment grade and are considered to be of poor standing and predominantly speculative. Such securities ("lower rated securities") are commonly referred to as "junk bonds" and are subject to a substantial degree of credit risk. Lower rated securities may be issued as a consequence of corporate restructurings, such as leveraged buy-outs, mergers, acquisitions, debt recapitalizations or similar events. Also, lower rated securities are often issued by smaller, less creditworthy companies or by highly leveraged (indebted) firms, which are generally less able than more financially stable firms to make scheduled payments of interest and principal. The risks posed by securities issued under such circumstances are substantial. In the past, the high yields from lower rated securities have more than compensated for the higher default rates on such securities. However, there can be no assurance that diversification will protect the Series from widespread bond defaults brought about by a sustained economic downturn, or that yields will continue to offset default rates on lower rated securities in the future. Issuers of these securities are often highly leveraged, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. In addition, such issuers may not have more traditional methods of financing available to them and may be unable to repay debt at maturity by refinancing. The risk of loss due to default by the issuer is significantly greater for the holders of low-grade securities because such securities may be unsecured and may be subordinated to other creditors of the issuer. Further, an economic recession may result in default levels with respect to such securities in excess of historic averages. 19 The value of lower-rated securities will be influenced not only by changing interest rates, but also by the bond market's perception of credit quality and the outlook for economic growth. When economic conditions appear to be deteriorating, lower rated securities may decline in market value due to investors' heightened concern over credit quality, regardless of prevailing interest rates. Especially at such times, trading in the secondary market for lower rated securities may become thin and market liquidity may be significantly reduced. Even under normal conditions, the market for lower rated securities may be less liquid than the market for investment grade corporate bonds. There are fewer securities dealers in the high yield market and purchasers of lower rated securities are concentrated among a smaller group of securities dealers and institutional investors. In periods of reduced market liquidity, lower rated securities prices may become more volatile and the Series' ability to dispose of particular issues when necessary to meet the Series' liquidity needs or in response to a specific economic event such as a deterioration in the creditworthiness of the issuer may be adversely affected. Low-grade securities frequently have call or redemption features that would permit an issuer to repurchase the security from the Series. If a call were exercised by the issuer during a period of declining interest rates, the Series likely would have to replace such called security with a lower yielding security, thus decreasing the net investment income to the Series and any dividends to investors. Besides credit and liquidity concerns, prices for lower rated securities may be affected by legislative and regulatory developments. For example, from time to time, Congress has considered legislation to restrict or eliminate the corporate tax deduction for interest payments or to regulate corporate restructurings such as takeovers or mergers. Such legislation may significantly depress the prices of outstanding lower rated securities. A description of various corporate debt ratings appears in Appendix A to this SAI. Securities issued by foreign issuers rated below investment grade entail greater risks than higher rated securities, including risk of untimely interest and principal payment, default, price volatility and may present problems of liquidity and valuation. The Emerging Markets Debt Fund and the Emerging Markets Equity Fund do not intend to limit investments in low-grade securities. Pay-In-Kind Bonds The U.S. Real Estate Equity Fund, High Yield Fund, the Emerging Markets Debt Fund and the Emerging Markets Equity Fund may invest in pay-in-kind bonds. Pay-in-kind bonds are securities that pay interest through the issuance of additional bonds. The Series will be deemed to receive interest over the life of such bonds and may be treated for federal income tax purposes as if interest were paid on a current basis, although no cash interest payments are received by the Series until the cash payment date or until the bonds mature. Convertible Securities (also for Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Equity Fund, U.S. Small Cap Growth Fund and U.S. Real Estate Equity Fund) The Series may invest in convertible securities which generally offer lower interest or dividend yields than non-convertible debt securities of similar quality. The value of convertible securities may reflect changes in the value of the underlying common stock. Convertible securities entail less credit risk than the issuer's common stock because they rank senior to common stock. Convertible securities entitle the holder to exchange the securities for a specified number of shares of common stock, usually of the same company, at specified prices within a certain period of time and to receive interest or dividends until the holder elects to convert. The provisions of any convertible security determine its ranking in a company's capital structure. In the case of subordinated convertible debentures, the holder's claims on assets and earnings are subordinated to the claims of other creditors and are senior to the claims of 20 preferred and common shareholders. In the case of preferred stock and convertible preferred stock, the holder's claim on assets and earnings are subordinated to the claims of all creditors but are senior to the claims of common shareholders. When-Issued Securities (also for U.S. Large Cap Growth Fund and U.S. Small Cap Growth Fund) The Series may purchase securities offered on a "when-issued" or "forward delivery" basis. When so offered, the price, which is generally expressed in yield terms, is fixed at the time the commitment to purchase is made, but delivery and payment for the when-issued or forward delivery securities take place at a later date. During the period between purchase and settlement, no payment is made by the purchaser to the issuer and no interest on the when-issued or forward delivery security accrues to the purchaser. While when-issued or forward delivery securities may be sold prior to the settlement date, it is intended that a Series will purchase such securities with the purpose of actually acquiring them unless a sale appears desirable for investment reasons. At the time a Series makes the commitment to purchase a security on a when-issued or forward delivery basis, it will record the transaction and reflect the value of the security in determining its net asset value. The market value of when-issued or forward delivery securities may be more or less than the purchase price. The Advisor does not believe that a Series' net asset value or income will be adversely affected by its purchase of securities on a when-issued or forward delivery basis. The Series will establish a segregated account in which it will maintain Segregated Assets equal in value to commitments for when-issued or forward delivery securities. The Segregated Assets maintained by the Series with respect to any when-issued or forward delivery securities shall be liquid, unencumbered and marked-to-market daily, and such Segregated Assets shall be maintained in accordance with pertinent SEC positions. Mortgage-Backed Securities and Mortgage Pass-Through Securities The Series may also invest in mortgage-backed securities, which are interests in pools of mortgage loans, including mortgage loans made by savings and loan institutions, mortgage bankers, commercial banks and others. Pools of mortgage loans are assembled as securities for sale to investors by various governmental, government-related and private organizations as further described below. The Series may also invest in debt securities which are secured with collateral consisting of mortgage-backed securities (see "Collateralized Mortgage Obligations") and in other types of mortgage-related securities. The timely payment of principal and interest on mortgage-backed securities issued or guaranteed by the Government National Mortgage Association ("GNMA") is backed by GNMA and the full faith and credit of the U.S. government. These guarantees, however, do not apply to the market value of Series shares. Also, securities issued by GNMA and other mortgage-backed securities may be purchased at a premium over the maturity value of the underlying mortgages. This premium is not guaranteed and would be lost if prepayment occurs. Mortgage- backed securities issued by U.S. government agencies or instrumentalities other than GNMA are not "full faith and credit" obligations. Certain obligations, such as those issued by the Federal Home Loan Bank are supported by the issuer's right to borrow from the U.S. Treasury, while others such as those issued by Fannie Mae, formerly known as the Federal National Mortgage Association ("FNMA"), are supported only by the credit of the issuer. Unscheduled or early payments on the underlying mortgages may shorten the securities' effective maturities and reduce returns. The Series may agree to purchase or sell these securities with payment and delivery taking place at a future date. A decline in interest rates may lead to a faster rate of repayment of the underlying mortgages and expose the Series to a lower rate of return upon reinvestment. To the extent that such mortgage-backed securities are held by a Series, the prepayment right of mortgagors may limit the increase in net asset value of the Series because the value of the mortgage-backed securities held by the Series may not appreciate as rapidly as the price of noncallable debt securities. A decline in interest rates may lead to a faster rate of repayment of the underlying mortgages and expose a Series to a lower rate of return upon reinvestment. To the extent that such mortgage-backed 21 securities are held by a Series, the prepayment right will tend to limit to some degree the increase in net asset value of the Series because the value of the mortgage-backed securities held by the Series may not appreciate as rapidly as the price of noncallable debt securities. For federal tax purposes other than diversification under Subchapter M, mortgage-backed securities are not considered to be separate securities but rather "grantor trusts" conveying to the holder an individual interest in each of the mortgages constituting the pool. Interests in pools of mortgage-backed securities differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. Instead, these securities provide a monthly payment which consists of both interest and principal payments. In effect, these payments are a "pass- through" of the monthly payments made by the individual borrowers on their mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by repayments of principal resulting from the sale of the underlying property, refinancing or foreclosure, net of fees or costs which may be incurred. Some mortgage-backed securities (such as securities issued by the GNMA) are described as "modified pass-through." These securities entitle the holder to receive all interest and principal payments owed on the mortgage pool, net of certain fees, at the scheduled payments dates regardless of whether or not the mortgagor actually makes the payment. Any discount enjoyed on the purchases of a pass-through type mortgage- backed security will likely constitute market discount. As a Series receives principal payments, it will be required to treat as ordinary income an amount equal to the lesser of the amount of the payment or the "accrued market discount." Market discount is to be accrued either under a constant rate method or a proportional method. Pass-through type mortgage-backed securities purchased at a premium to face will be subject to a similar rule requiring recognition of an offset to ordinary interest income, an amount of premium attributable to the receipt of principal. The amount of premium recovered is to be determined using a method similar to that in place for market discount. A Series may elect to accrue market discount or amortize premium notwithstanding the amount of principal received but such election will apply to all bonds held and thereafter acquired unless permission is granted by the Commissioner of the Internal Revenue Service to change such method. The principal governmental guarantor of mortgage-related securities is GNMA, which is a wholly-owned U. S. government corporation within the Department of Housing and Urban Development. GNMA is authorized to guarantee, with the full faith and credit of the U.S. government, the timely payment of principal and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of mortgages which are insured by the Federal Housing Authority or guaranteed by the Veterans Administration. These guarantees, however, do not apply to the market value or yield of mortgage-backed securities or to the value of Series shares. Also, GNMA securities often are purchased at a premium over the maturity value of the underlying mortgages. This premium is not guaranteed and should be viewed as an economic offset to interest to be earned. If prepayments occur, less interest will be earned and the value of the premium paid will be lost. Government-related guarantors (i.e., not backed by the full faith and credit of the U.S. government) include FNMA and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a government-sponsored corporation owned entirely by private stockholders. It is subject to general regulation of the Secretary of Housing and Urban Development. FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA but are not backed by the full faith and credit of the U.S. government. 22 FHLMC is a corporate instrumentality of the U.S. government and was created by Congress in 1970 for the purpose of increasing the availability of mortgage credit for residential housing. Its stock is owned by the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates ("PCs") which represent interests in conventional mortgages from FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but PCs are not backed by the full faith and credit of the U.S. government. Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass-through pools of conventional mortgage loans. Such issuers may, in addition, be the originators and/or servicers of the underlying mortgage loans as well as the guarantors of the mortgage-related securities. Pools created by such non-governmental issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government or agency guarantees of payments. However, timely payment of interest and principal of these pools may be supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard insurance and letters of credit. The insurance guarantees are issued by governmental entities, private insurers and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage-related security meets a Series' investment quality standards. There can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee or guarantees, even if through an examination of the loan experience and practices of the originators/servicers and poolers, the Advisor determines that the securities meet the Series' quality standards. Although the market for such securities is becoming increasingly liquid, securities issued by certain private organizations may not be readily marketable. Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage Investment Conduits ("REMICs") A CMO is a debt security on which interest and prepaid principal are paid, in most cases, semi-annually. CMOs may be collateralized by whole mortgage loans but are more typically collateralized by portfolios of mortgage pass- through securities guaranteed by GNMA, FHLMC, or FNMA and their income streams. Privately-issued CMOs tend to be more sensitive to interest rates than Government-issued CMOs. CMOs are structured into multiple classes, each bearing a different stated maturity. Actual maturity and average life will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payments of principal received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes receive principal only after the first class has been retired. An investor is partially guarded against a sooner than desired return of principal because of the sequential payments. In a typical CMO transaction, a corporation issues multiple series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to purchase mortgages or mortgage pass-through certificates ("Collateral"). The Collateral is pledged to a third party trustee as security for the Bonds. Principal and interest payments from the Collateral are used to pay principal on the Bonds in the order A, B, C, Z. The Series A, B and C Bonds all bear current interest. Interest on the Series Z Bond is accrued and added to principal and a like amount is paid as principal on the Series A, B, or C Bond currently being paid off. When the Series A, B and C Bonds are paid in full, interest and principal on the Series Z Bond begins to be paid currently. With some CMOs, the issuer serves as a conduit to allow loan originators (primarily builders or savings and loan associations) to borrow against their loan portfolios. REMICs are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. REMICs are similar to CMOs in that they issue multiple classes of securities. 23 Most if not all newly-issued debt securities backed by pools of real estate mortgages will be issued as regular and residual interests in REMICs because, as of January 1, 1992, new CMOs which do not make REMIC elections will be treated as "taxable mortgage pools," a wholly undesirable tax result. Under certain transition rules, CMOs in existence on December 31, 1991 are unaffected by this change. The Series will purchase only regular interests in REMICs. REMIC regular interests are treated as debt of the REMIC and income/discount thereon must be accounted for on the "catch-up method," using a reasonable prepayment assumption under the original issue discount rules of the Code. CMOs and REMICs issued by private entities are not government securities and are not directly guaranteed by any government agency. They are secured by the underlying collateral of the private issuer. Yields on privately- issued CMOs, as described above, have been historically higher than yields on CMOs issued or guaranteed by U.S. government agencies. However, the risk of loss due to default on such instruments is higher since they are not guaranteed by the U.S. government. Such instruments also tend to be more sensitive to interest rates than U.S. government-issued CMOs. The Series will not invest in subordinated privately-issued CMOs. For federal income tax purposes, the Series will be required to accrue income on CMOs and REMIC regular interests using the "catch-up" method, with an aggregate prepayment assumption. Other Mortgage-Backed Securities The Advisor expects that governmental, government-related or private entities may create mortgage loan pools and other mortgage-related securities offering mortgage pass-through and mortgage-collateralized investments in addition to those described above. The mortgages underlying these securities may include alternative mortgage instruments, that is, mortgage instruments whose principal or interest payments may vary or whose terms to maturity may differ from customary long-term fixed rate mortgages. As new types of mortgage-related securities are developed and offered to investors, the Advisor will, consistent with a Series' investment objective, policies and quality standards, consider making investments in such new types of mortgage-related securities. The Advisor will not purchase any such other mortgage-backed securities until the Series' Prospectuses and this SAI have been supplemented. Asset-Backed Securities (also for U.S. Large Cap Growth Fund and U.S. Small Cap Growth Fund) The Series may invest a portion of their assets in debt obligations known as "asset-backed securities." Asset-backed securities are securities that represent a participation in, or are secured by and payable from, a stream of payments generated by particular assets, most often a pool or pools of similar assets (e.g., receivables on home equity and credit loans and receivables regarding automobile, credit card, mobile home and recreational vehicle loans, wholesale dealer floor plans and leases). The High Yield Fund will not invest in asset-backed securities with remaining effective maturities of less than thirteen months. Such receivables are securitized in either a pass-through or a pay- through structure. Pass-through securities provide investors with an income stream consisting of both principal and interest payments in respect of the receivables in the underlying pool. Pay-through asset-backed securities are debt obligations issued usually by a special purpose entity, which are collateralized by the various receivables and in which the payments on the underlying receivables provide that the Series pay the debt service on the debt obligations issued. The Series may invest in these and other types of asset-backed securities that may be developed in the future. The credit quality of these securities depends primarily upon the quality of the underlying assets and the level of credit support and/or enhancement provided. Such asset-backed securities are subject to the same prepayment risks as mortgage-backed securities. For federal income tax purposes, the Series 24 will be required to accrue income on pay-through asset-backed securities using the "catch-up" method, with an aggregate prepayment assumption. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit support provided to the securities. The rate of principal payment on asset- backed securities generally depends on the rate of principal payments received on the underlying assets which in turn may be affected by a variety of economic and other factors. As a result, the yield on any asset-backed security is difficult to predict with precision and actual yield to maturity may be more or less than the anticipated yield to maturity. Asset-backed securities may be classified as "pass-through certificates" or "collateralized obligations." Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make payment, such securities may contain elements of credit support. Such credit support falls into two categories: (i) liquidity protection; and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments due on the underlying pool is timely. Protection against losses resulting from ultimate default enhances the likelihood of payments of the obligations on at least some of the assets in the pool. Such protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. The Series will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security. Due to the shorter maturity of the collateral backing such securities, there is less of a risk of substantial prepayment than with mortgage-backed securities. Such asset-backed securities do, however, involve certain risks not associated with mortgage-backed securities, including the risk that security interests cannot be adequately, or in many cases, ever, established. In addition, with respect to credit card receivables, a number of state and federal consumer credit laws give debtors the right to set off certain amounts owed on the credit cards, thereby reducing the outstanding balance. In the case of automobile receivables, there is a risk that the holders may not have either a proper or first security interest in all of the obligations backing such receivables due to the large number of vehicles involved in a typical issuance and technical requirements under state laws. Therefore, recoveries on repossessed collateral may not always be available to support payments on the securities. Examples of credit support arising out of the structure of the transaction include "senior-subordinated securities" (multiple class securities with one or more classes subordinate to other classes as to the payment of principal thereof and interest thereon, with the result that defaults on the underlying assets are borne first by the holders of the subordinated class), creation of "reserve funds" (where cash or investments, sometimes funded from a portion of the payments on the underlying assets, are held in reserve against future losses) and "over collateralization" (where the scheduled payments on, or the principal amount of, the underlying assets exceeds that required to make payments of the securities and pay any servicing or other fees). The degree of credit support provided for each issue is generally based on historical information respecting the level of credit information respecting the level of credit risk associated with the underlying assets. Delinquencies or losses in excess of those anticipated could adversely affect the return on an investment in such issue. 25 Zero Coupon and Delayed Interest Securities The Series may invest in zero coupon or delayed interest securities which pay no cash income until maturity or a specified date when the securities begin paying current interest (the "cash payment date") and are sold at substantial discounts from their value at maturity. When held to maturity or cash payment date, the entire income of such securities, which consists of accretion of discount, comes from the difference between the purchase price and their value at maturity or cash payment date. The discount varies depending on the time remaining until maturity or cash payment date, prevailing interest rates, liquidity of the security and the perceived credit quality of the issuer. The discount, in the absence of financial difficulties of the issuer, decreases as the final maturity or cash payment date of the security approaches. The market prices of zero coupon and delayed interest securities are generally more volatile and more likely to respond to changes in interest rates than the market prices of securities having similar maturities and credit qualities that pay interest periodically. Current federal income tax law requires that a holder of a zero coupon security report as income each year the portion of the original issue discount on such security (other than tax-exempt original issue discount from a zero coupon security) that accrues that year, even though the holder receives no cash payments of interest during the year. The Series will be required to distribute such income to shareholders to comply with Subchapter M of the Code and avoid excise taxes, even though the Series have not received any cash from the issue. Zero coupon securities are subject to greater market value fluctuations from changing interest rates than debt obligations of comparable maturities which make current distributions of interest (cash). Zero coupon convertible securities offer the opportunity for capital appreciation as increases (or decreases) in market value of such securities closely follow the movements in the market value of the underlying common stock. Zero coupon convertible securities generally are expected to be less volatile than the underlying common stocks as they usually are issued with short maturities (15 years or less) and are issued with options and/or redemption features exercisable by the holder of the obligation entitling the holder to redeem the obligation and receive a defined cash payment. Zero coupon securities include securities issued directly by the U.S. Treasury, and U.S. Treasury bonds or notes and their unmatured interest coupons and receipts for their underlying principal ("coupons") which have been separated by their holder, typically a custodian bank or investment brokerage firm. A holder will separate the interest coupons from the underlying principal (the "corpus") of the U.S. Treasury security. A number of securities firms and banks have stripped the interest coupons and receipts and then resold them in custodial receipt programs with a number of different names, including "Treasury Income Growth Receipts" ("TIGRS") and Certificate of Accrual on Treasuries ("CATS"). The underlying U.S. Treasury bonds and notes themselves are held in book-entry form at the Federal Reserve Bank or, in the case of bearer securities (i.e., unregistered securities which are owned ostensibly by the bearer or holder thereof), in trust on behalf of the owners thereof. Counsel to the underwriters of these certificates or other evidences of ownership of the U.S. Treasury securities has stated that for federal tax and securities purposes, in its opinion, purchasers of such certificates, such as the Series, most likely will be deemed the beneficial holder of the underlying U.S. government securities. The Series understand that the staff of the SEC no longer considers such privately stripped obligations to be U.S. government securities, as defined in the Act; therefore, each Series intends to adhere to this staff position and will not treat such privately stripped obligations to be U.S. government securities for the purpose of determining if the Series is "diversified," or for any other purpose, under the Act. The U.S. Treasury has facilitated transfers of ownership of zero coupon securities by accounting separately for the beneficial ownership of particular interest coupon and corpus payments on Treasury securities through the Federal Reserve book-entry record-keeping system. The Federal Reserve program as established by the U.S. Treasury Department is known as "STRIPS" or "Separate Trading of Registered Interest and Principal of Securities." Under the STRIPS program, a Series will be able to have its beneficial ownership of zero coupon securities recorded directly in the book-entry record-keeping system in lieu of having to hold certificates or other evidences of ownership of the underlying U.S. Treasury securities. 26 When U.S. Treasury obligations have been stripped of their unmatured interest coupons by the holder, the principal or corpus is sold at a deep discount because the buyer receives only the right to receive a future fixed payment on the security and does not receive any rights to periodic interest (cash) payments. Once stripped or separated, the corpus and coupons may be sold separately. Typically, the coupons are sold separately or grouped with other coupons with like maturity dates and sold in such bundled form. Purchasers of stripped obligations acquire, in effect, discount obligations that are economically identical to the zero coupon securities that the U.S. Treasury sells itself. These stripped securities are also treated as zero coupon securities with original issue discount for tax purposes. INVESTMENTS RELATING TO THE GLOBAL FUND, GLOBAL EQUITY FUND, GLOBAL TECHNOLOGY FUND, GLOBAL BIOTECH FUND, HIGH YIELD FUND, EMERGING MARKETS DEBT FUND, GLOBAL (EX-U.S.) EQUITY FUND AND EMERGING MARKETS EQUITY FUND Emerging Markets Investments The Global Fund may invest up to 10% of its assets in each of equity and debt securities of emerging market issuers, or securities with respect to which the return is derived from the equity or debt securities of issuers in emerging markets. The Global Equity Fund, Global Technology Fund, Global Biotech Fund and Global (Ex-U.S.) Equity Fund may each invest up to 15% of their assets in equity securities of emerging market issuers, or securities with respect to which the return is derived from the equity securities of issuers in emerging markets. The Emerging Markets Debt Fund and the Emerging Markets Equity Fund may invest substantially all of their assets in equity and debt securities of emerging market issuers, or securities with respect to which the return is derived from the equity or debt securities of issuers in emerging markets. The High Yield Fund may invest up to 25% of its assets in securities of foreign issuers, which may include securities of issuers in emerging markets. The Series may invest in equity securities of issuers in emerging markets, or securities with respect to which the return is derived from the equity securities of issuers in emerging markets. The Series also may invest in fixed income securities of emerging market issuers, including government and government- related entities (including participation in loans between governments and financial institutions), and of entities organized to restructure outstanding debt of such issuers. The Series also may invest in debt securities of corporate issuers in developing countries. The Series' investments in emerging market government and government- related securities may consist of: (i) debt securities or obligations issued or guaranteed by governments, governmental agencies or instrumentalities and political subdivisions located in emerging countries (including participation in loans between governments and financial institutions), (ii) debt securities or obligations issued by government owned, controlled or sponsored entities located in emerging countries and (iii) interests in issuers organized and operated for the purpose of restructuring the investment characteristics of instruments issued by any of the entities described above. Except as noted, the Series' investments in the fixed income securities of emerging market issuers may include investments in Brady Bonds, Structured Securities, Loan Participation and Assignments (as such capitalized terms are defined below), and certain non-publicly traded securities. The High Yield Fund, the Emerging Markets Debt Fund and the Emerging Markets Equity Fund may invest in Brady Bonds, which are securities created through the exchange of existing commercial bank loans to public and private entities in certain emerging markets for new bonds in connection with debt restructurings under a debt restructuring plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady (the "Brady Plan"). Brady Plan debt restructurings have been implemented to date in Argentina, Bulgaria, Brazil, Costa Rica, Jordan, Mexico, Nigeria, the Philippines, Poland, Uruguay, Panama, Peru and Venezuela. Brady Bonds have been issued only in recent years, and for that reason do not have a very long payment history. Brady Bonds may be collateralized or uncollateralized, are issued in various currencies (but primarily the U.S. dollar), and are actively traded in over-the-counter secondary markets. Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate bonds or floating-rate bonds, are generally collateralized in full as to principal by U.S. Treasury zero coupon bonds having the same maturity as the bonds. 27 Brady Bonds are often viewed as having three or four valuation components: the collateralized repayment of principal at final maturity; the collateralized interest payments; the uncollateralized interest payments; and any uncollateralized repayment of principal at maturity (these uncollateralized amounts constitute the "residual risk"). In light of the residual risk of Brady Bonds and the history of defaults of countries issuing Brady Bonds with respect to commercial bank loans by public and private entities, investments in Brady Bonds may be viewed as speculative. There can be no assurance that the Brady Bonds in which the Series invests will not be subject to restructuring arrangements or to requests for a new credit which may cause the Series to suffer a loss of interest or principal in any of its holdings. The High Yield Fund, the Emerging Markets Debt Fund and the Emerging Markets Equity Fund may invest a portion of their assets in entities organized and operated solely for the purpose of restructuring the investment characteristics of sovereign debt obligations. This type of restructuring involves the deposit with, or purchase by, an entity, such as a corporation or trust, of specified instruments (such as commercial bank loans or Brady Bonds) and the issuance by that entity of one or more classes of securities ("Structured Securities") backed by, or representing interests in, the underlying instruments. The cash flow of the underlying instruments may be apportioned among the newly issued Structured Securities to create securities with different investment characteristics, such as varying maturities, payment priorities and interest rate provisions, and the extent of the payments made with respect to Structured Securities is dependent on the extent of the cash flow on the underlying instruments. Because Structured Securities of the type in which the Series anticipate investing typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. The Series are permitted to invest in a class of Structured Securities that is either subordinated or unsubordinated to the right of payment of another class. Subordinated Structured Securities are typically sold in private placement transactions, and there currently is no active trading market for Structured Securities. Thus, investments by a Series in Structured Securities will be limited by the Series' prohibition on investing more than 15% of its net assets in illiquid securities. The High Yield Fund, the Emerging Markets Debt Fund and the Emerging Markets Equity Fund may invest in fixed rate and floating rate loans ("Loans") arranged through private negotiations between an issuer of sovereign debt obligations and one or more financial institutions ("Lenders"). The Series' investments in Loans are expected in most instances to be in the form of a participation in loans ("Participation") and assignments of all or a portion of Loans ("Assignments") from third parties. The Series will have the right to receive payments of principal, interest and any fees to which they are entitled only from the Lender selling the Participation and only upon receipt by the Lender of the payments from the borrower. In the event of the insolvency of the Lender selling a Participation, the Series may be treated as a general creditor of the Lender and may not benefit from any set-off between the Lender and the borrower. Certain Participations may be structured in a manner designed to avoid purchasers of Participations being subject to the credit risk of the Lender with respect to the Participations. Even under such a structure, in the event of the Lender's insolvency, the Lender's servicing of the Participation may be delayed and the assignability of the Participation may be impaired. A Series will acquire the Participations only if the Lender interpositioned between the Series and the borrower is determined by the Advisor to be creditworthy. When a Series purchases Assignments from Lenders, it will acquire direct rights against the borrower on the Loan. However, because Assignments are arranged through private negotiations between potential assignees and potential assignors, the rights and obligations acquired by the Series as the purchaser of an Assignment may differ from, and be more limited than, those held by the assigning Lender. The Series also may invest in securities that are neither listed on a stock exchange nor traded over-the-counter, including privately placed securities and limited partnerships. Investing in such unlisted emerging market equity securities, including investments in new and early stage companies, may involve a high degree of business and financial risk that can result in substantial losses. As a result 28 of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. The Series' investments in emerging market securities will at all times be limited by the Series' prohibition on investing more than 15% of its net assets in illiquid securities. Risks of Investing in Emerging Markets There are additional risks inherent in investing in less developed countries which are applicable to the Global Fund, Global Equity Fund, Global Technology Fund, Global Biotech Fund, High Yield Fund, Emerging Markets Debt Fund, Global (Ex-U.S.) Equity Fund and Emerging Markets Equity Fund. The Series consider a country to be an "emerging market" if it is defined as an emerging or developing economy by any one of the following: the International Bank for Reconstruction and Development (i.e., the World Bank), the International Finance Corporation, or the United Nations or its authorities. An emerging market security is a security issued by a government or other issuer that, in the opinion of the Advisor, has one or more of the following characteristics: (i) the principal trading market of the security is an emerging market; (ii) the primary revenue of the issuer (at least 50%) is generated from goods produced or sold, investments made, or services performed in an emerging market country; or (iii) at least 50% of the assets of the issuer are situated in emerging market countries. Compared to the United States and other developed countries, emerging countries may have relatively unstable governments, economies based on only a few industries, and securities markets that trade only a small number of securities and employ settlement procedures different from those used in the United States. Prices on these exchanges tend to be volatile and, in the past, securities in these countries have offered greater potential for gain (as well as loss) than securities of companies located in developed countries. Further, investments by foreign investors are subject to a variety of restrictions in many emerging countries. Countries such as those in which the Series may invest have historically experienced and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations or currency depreciation, large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. Additional factors which may influence the ability or willingness to service debt include, but are not limited to, a country's cash flow situation, the availability of sufficient foreign exchange on the date a payment is due, the relative size of its debt service burden to the economy as a whole, its government's policy towards the International Monetary Fund, the World Bank and other international agencies and the political constraints to which a government debtor may be subject. The ability of a foreign government or government-related issuer to make timely and ultimate payments on its external debt obligations will be strongly influenced by the issuer's balance of payments, including export performance, its access to international credits and investments, fluctuations in interest rates and the extent of its foreign reserves. A country whose exports are concentrated in a few commodities or whose economy depends on certain strategic imports could be vulnerable to fluctuations in international prices of these commodities or imports. To the extent that a country receives payment for its exports in currencies other than dollars, its ability to make debt payments denominated in dollars could be adversely affected. If a foreign government or government-related issuer cannot generate sufficient earnings from foreign trade to service its external debt, it may need to depend on continuing loans and aid from foreign governments, commercial banks, and multilateral organizations, and inflows of foreign investment. The commitment on the part of these foreign governments, multilateral organizations and others to make such disbursements may be conditioned on the government's implementation of economic reforms and/or economic performance and the timely service of its obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may curtail the willingness of such third parties to lend funds, which may further impair the issuer's ability or willingness to service its debts in a timely manner. The cost of servicing external debt will also generally be adversely affected by rising international interest rates, because many external debt obligations bear interest at rates which are adjusted based upon international interest rates. The ability to service external 29 debt will also depend on the level of the relevant government's international currency reserves and its access to foreign exchange. Currency devaluations may affect the ability of a governmental issuer to obtain sufficient foreign exchange to service its external debt. As a result of the foregoing, a governmental issuer may default on its obligations. If such a default occurs, the Series may have limited effective legal recourse against the issuer and/or guarantor. Remedies must, in some cases, be pursued in the courts of the defaulting country itself, and the ability of the holder of foreign government and government-related debt securities to obtain recourse may be subject to the political climate in the relevant country. In addition, no assurance can be given that the holders of commercial bank debt will not contest payments to the holders of other foreign government and government-related debt obligations in the event of default under their commercial bank loan agreements. The issuers of the government and government-related debt securities in which the Series expect to invest have in the past experienced substantial difficulties in servicing their external debt obligations, which has led to defaults on certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, reducing and rescheduling interest and principal payments by negotiating new or amended credit agreements or converting outstanding principal and unpaid interest to Brady Bonds, and obtaining new credit to finance interest payments. Holders of certain foreign government and government-related debt securities may be requested to participate in the restructuring of such obligations and to extend further loans to their issuers. There can be no assurance that the Brady Bonds and other foreign government and government-related debt securities in which the Series may invest will not be subject to similar defaults or restructuring arrangements which may adversely affect the value of such investments. Furthermore, certain participants in the secondary market for such debt may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants. Payments to holders of the high yield, high risk, foreign debt securities in which the Series may invest may be subject to foreign withholding and other taxes. Although the holders of foreign government and government- related debt securities may be entitled to tax gross-up payments from the issuers of such instruments, there is no assurance that such payments will be made. Investments in Russian Securities The Global Fund, Global Equity Fund, Global Technology Fund, Global Biotech Fund, Emerging Markets Debt Fund, Global (Ex-U.S.) Equity Fund and Emerging Markets Equity Fund may invest in securities of Russian companies. The registration, clearing and settlement of securities transactions in Russia are subject to significant risks not normally associated with securities transactions in the United States and other more developed markets. Ownership of shares of Russian companies is evidenced by entries in a company's share register (except where shares are held through depositories that meet the requirements of the Act) and the issuance of extracts from the register or, in certain limited cases, by formal share certificates. However, Russian share registers are frequently unreliable and a Series could possibly lose its registration through oversight, negligence or fraud. Moreover, Russia lacks a centralized registry to record securities transactions and registrars located throughout Russia or the companies themselves maintain share registers. Registrars are under no obligation to provide extracts to potential purchasers in a timely manner or at all and are not necessarily subject to state supervision. In addition, while registrars are liable under law for losses resulting from their errors, it may be difficult for a Series to enforce any rights it may have against the registrar or issuer of the securities in the event of loss of share registration. Although Russian companies with more than 1,000 shareholders are required by law to employ an independent company to maintain share registers, in practice, such companies have not always followed this law. Because of this lack of independence of registrars, management of a Russian company may be able to exert considerable influence over who can purchase or sell the company's shares by illegally instructing the registrar to refuse to record transactions on the share register. Furthermore, these practices may prevent a Series from investing in the securities 30 of certain Russian companies deemed suitable by the Advisor and could cause a delay in the sale of Russian securities by the Series if the company deems a purchaser unsuitable, which may expose the Series to potential loss on its investment. In light of the risks described above, the Board has approved certain procedures concerning the Series' investments in Russian securities. Among these procedures is a requirement that the Series will not invest in the securities of a Russian company unless that issuer's registrar has entered into a contract with the Series' sub-custodian containing certain protective conditions including, among other things, the sub-custodian's right to conduct regular share confirmations on behalf of the Series. This requirement will likely have the effect of precluding investments in certain Russian companies that the Series would otherwise make. Investments in Affiliated Investment Companies The Series may invest in securities issued by other registered investment companies advised by Brinson Partners pursuant to exemptive relief granted by the SEC. Currently, the Global Fund is the only Series of the Trust that intends to invest in portfolios of the Brinson Relationship Funds, another investment company which is advised by Brinson Partners, and only to the extent consistent with the Advisor's investment process of allocating assets to specific asset classes. The Global Fund will invest in corresponding portfolios of the Brinson Relationship Funds only to the extent that the Advisor determines that such investments are a more efficient means for the Global Fund to gain exposure to the asset classes referred to below than by investing directly in individual securities. To gain exposure to equity and fixed income securities of issuers located in emerging market countries, the Global Fund, Global Equity Fund and Global (Ex-U.S.) Equity Fund may invest that portion of their assets allocated to emerging markets investments in the Brinson Emerging Markets Equity Fund portfolio and, in the case of the Global Fund, the Brinson Emerging Markets Debt Fund portfolio of the Brinson Relationship Funds. The investment objective of the Brinson Emerging Markets Equity Fund and the Brinson Emerging Markets Debt Fund is to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. Under normal circumstances, at least 65% of the total assets of the Brinson Emerging Markets Equity Fund is invested in the equity securities of issuers in emerging markets or securities with respect to which the return is derived from the equity securities of issuers in emerging markets. At least 65% of the total assets of the Brinson Emerging Markets Debt Fund is invested in the debt securities issued by governments, government-related entities (including participations in loans between governments and financial institutions), corporations and entities organized to restructure outstanding debt of issuers in emerging markets, or debt securities the return on which is derived primarily from other emerging markets instruments. The Brinson Emerging Markets Equity Fund is permitted to invest in the same types of securities that the Global Fund, Global Equity Fund and Global (Ex-U.S.) Equity Fund may invest in directly and the Brinson Emerging Markets Debt Fund is permitted to invest in the same types of securities that the Global Fund may invest in directly. In lieu of investing directly in certain high yield, higher risk securities, the Global Fund may invest a portion of its assets in the Brinson High Yield Fund portfolio of the Brinson Relationship Funds. The investment objective of the Brinson High Yield Fund is to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. The Brinson High Yield Fund maintains a high yield portfolio and as such, at least 65% of its assets are invested in high yield securities. The Global Fund currently intends to limit its investment in non-investment grade debt securities to no more than 5% of its net assets. Any investment in the Brinson High Yield Fund will be considered within this limitation. In lieu of investing directly in equity securities issued by companies with relatively small overall market capitalizations, the Global Fund may invest a portion of its assets in the Brinson U.S. Small Capitalization Equity Fund portfolio (the "U.S. Small Capitalization Equity Fund") of the Brinson Relationship Funds. The investment objective of the U.S. Small Capitalization Equity Fund is to maximize total U.S. dollar return, consisting of capital appreciation and current income, while controlling risk. The U.S. 31 Small Capitalization Equity Fund invests primarily in publicly-traded companies representing the lower 7.5% of the Wilshire 5000 Equity Index, and, as such, at least 65% of its assets are invested in small capitalization equity securities. Each portfolio of the Brinson Relationship Funds in which the Global Fund, Global Equity Fund and Global (Ex-U.S.) Equity Fund may invest is permitted to invest in the same securities of a particular asset class in which the Global Fund, Global Equity Fund and Global (Ex-U.S.) Equity Fund are permitted to invest directly, and with similar risks. Pursuant to undertakings with the SEC, the Global Fund, Global Equity Fund and Global (Ex-U.S.) Equity Fund will not be subject to the imposition of double management or administration fees with respect to its investments in portfolios of the Brinson Relationship Funds. SECONDARY RISKS The principal risks of investing in each Fund are described in the "Risk Considerations" section of the Funds' prospectus. The secondary risks of investing in each Fund are described in Appendix B hereto. INVESTMENT RESTRICTIONS The investment restrictions set forth below are fundamental policies and may not be changed as to a Series without the approval of a majority of the outstanding voting securities (as defined in the Act) of the Series. Unless otherwise indicated, all percentage limitations listed below apply to the Series only at the time of the transaction. Accordingly, if a percentage restriction is adhered to at the time of investment, a later increase or decrease in the percentage which results from a relative change in values or from a change in a Series' total assets will not be considered a violation. Except as set forth under "The Funds" and "Risk Considerations" in each Prospectus, or "Investment Strategies" in this SAI, each of the Funds may not: (i) As to 75% of the total assets of each Series, purchase the securities of any one issuer, other than securities issued by the U.S. government or its agencies or instrumentalities, if immediately after such purchase more than 5% of the value of the total assets of a Series would be invested in securities of such issuer (this does not apply to the Global Technology Fund, Global Biotech Fund, Global Bond Fund, U.S. Value Equity Fund, U.S. Large Cap Equity Fund, U.S Large Cap Growth Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, High Yield Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund; (ii) Invest in real estate or interests in real estate (this will not prevent a Series from investing in publicly-held REITs 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 (this prohibition, with respect to interests in oil, gas and/or mineral exploration or development programs or leases, does not apply to the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund, and U.S. Real Estate Equity Fund); (iii) Purchase or sell commodities or commodity contracts, but may enter into futures contracts and options thereon in accordance with its Prospectus. Additionally, each Series may engage in forward foreign currency contracts for hedging and non-hedging purposes; (iv) Make investments in securities for the purpose of exercising control over or management of the issuer (this does not apply to the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Equity Fund, U.S. Small Cap Growth Fund, U.S. Real Estate Equity Fund, High Yield Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund; (v) Purchase the securities of any one issuer if, immediately after such purchase, a Series would own more than 10% of the outstanding voting securities of such issuer (this does not apply to the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund and U.S. Real Estate Equity Fund); 32 (vi) Sell securities short or purchase securities on margin, except such short-term credits as are necessary for the clearance of transactions. For this purpose, the deposit or payment by a Series for initial or maintenance margin in connection with futures contracts is not considered to be the purchase or sale of a security on margin (this does not apply to the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Equity Fund, U.S. Small Cap Growth Fund, U.S. Real Estate Equity Fund, High Yield Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund); (vii) Make loans, except that this restriction shall not prohibit (a) the purchase and holding of a portion of an issue of publicly distributed or privately placed debt securities, (b) the lending of portfolio securities, or (c) entry into repurchase agreements with banks or broker-dealers; (viii) Issue senior securities or borrow money in excess of 33 1/3% of the value of its assets except as a temporary measure for extraordinary or emergency purposes to facilitate redemptions. All borrowings will be done from a bank and to the extent that such borrowing exceeds 5% of the value of a Series' assets, asset coverage of at least 300% is required. Except for the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund and U.S. Real Estate Equity Fund, a Series will not purchase securities when borrowings exceed 5% of that Series' total assets; (ix) Purchase the securities of issuers conducting their principal business activities in the same industry, other than obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, if immediately after such purchase, the value of a Series' investments in such industry would exceed 25% of the value of the total assets of the Series across several countries (this does not apply to the Global Technology Fund, Global Biotech Fund or U.S. Real Estate Equity Fund); (x) Act as an underwriter of securities, except that, in connection with the disposition of a security, a Series may be deemed to be an "underwriter" as that term is defined in the 1933 Act; (xi) Invest in securities of any open-end investment company, except that (i) a Series may purchase securities of money market mutual funds, (ii) the Global Fund and Global Equity Fund may each invest in the securities of closed-end investment companies at customary brokerage commission rates in accordance with the limitations imposed by the Act and the rules thereunder, and (iii) in accordance with any exemptive order obtained from the SEC which permits investment by a Series in other Series or other investment companies or series thereof advised by the Advisor. In addition, each Series may acquire securities of other investment companies if the securities are acquired pursuant to a merger, consolidation, acquisition, plan of reorganization or a SEC approved offer of exchange (this does not apply to the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Equity Fund, U.S. Small Cap Growth Fund, U.S. Real Estate Equity Fund, High Yield Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund; (xii) Invest in puts, calls, straddles or combinations thereof except to the extent disclosed in a Series' Prospectus (this does not apply to the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Equity Fund, U.S. Small Cap Growth Fund, U.S. Real Estate Equity Fund, High Yield Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund); and 33 (xiii) Invest more than 5% of its total assets in securities of companies less than three years old. Such three year periods shall include the operation of any predecessor company or companies (this does not apply to the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Equity Fund, U.S. Small Cap Growth Fund, U.S. Real Estate Equity Fund, High Yield Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund. 34 MANAGEMENT OF THE TRUST The Trust is a Delaware business trust. Under Delaware law, the Board has overall responsibility for managing the business and affairs of the Trust. The Trustees elect the officers of the Trust, who are responsible for administering the day-to-day operations of the Series. The Trustees and executive officers of the Trust, along with their principal occupations over the past five years and their affiliations, if any, with Brinson Partners, are listed below. Trustees and Officers
POSITION WITH NAME AGE THE TRUST PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - ---- --- --------- ------------------------------------------- Walter E. Auch 79 Trustee Retired; prior thereto, Chairman and CEO of Chicago Board 6001 N. 62nd Place of Options Exchange 1979-1986; Trustee of the Trust since Paradise Valley, AZ 85253 May, 1994; Trustee, Brinson Relationship Funds since 1994; Trustee, Brinson Supplementary Trust since 1997; Director, Thomson Asset Management Corp. since 1987; Director, Fort Dearborn Income Securities, Inc. 1987-1995; Director, Smith Barney VIP Fund since 1991; Director, SB Advisers since 1992; Director, SB Trak since 1992; Director, Banyan Realty Trust since 1988; Director, Banyan Land Fund II since 1988; Director, Banyan Mortgage Investment Fund since 1989; and Director, Express America Holdings Corp. since 1992, and Nicholas/Applegate Funds and Legend Properties, Inc.; Director, Geotek Industries, Inc. 1987-1998. Frank K. Reilly 64 Chairman Professor, University of Notre Dame since 1982; Trustee College of Business and of the Trust since 1993; Trustee, Brinson Relationship Administration Trustee Funds since 1994; Trustee, Brinson Supplementary Trust University of Notre Dame since 1997; Director of The Brinson Funds, Inc. 1992- Notre Dame, IN 46556-0399 1993; Director, Fort Dearborn Income Securities, Inc. since 1993; Director, Greenwood Trust Company since 1993; and Director, Dean Witter Trust, FSB since 1996. Edward M. Roob 65 Trustee Retired; prior thereto, Senior Vice President, Daiwa 841 Woodbine Lane Securities America Inc. 1986-1993; Trustee of the Trust Northbrook, IL 60002 since 1995; Trustee, Brinson Relationship Funds since 1995; Trustee, Brinson Supplementary Trust since 1997; Director, Fort Dearborn Income Securities, Inc. since 1993; Director, Brinson Trust Company since 1993; Committee Member, Chicago Stock Exchange since 1993.
36
POSITION WITH OFFICER NAME AGE THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - ---- --- --------- ----- ------------------------------------------- E. Thomas 56 President 1992 Managing Director, Brinson Partners, Inc. since 1991; Chairman, McFarlan Brinson Trust Company since 1996; Trustee, Brinson Trust Company since 1991; Chairman, UBS Brinson Funds Management Co. since 1999; Managing Director, UBS Brinson since 1998; President, The Brinson Funds since 1993; Treasurer and Principal Accounting Officer, The Brinson Funds 1995-1997; President, Brinson Relationship Funds since 1994; President, Brinson Supplementary Trust since 1997. Thomas J. 35 Vice 1993 Director, Brinson Partners, Inc. since 1993; Vice President, The Digenan President Brinson Funds since 1997; Assistant Treasurer, The Brinson Funds 1995-1997; Assistant Secretary, The Brinson Funds 1993-1995; Vice President, Brinson Relationship Funds 1994-1995 and since 1997; Assistant Treasurer and Assistant Secretary, Brinson Relationship Funds since 1995-1997; Vice President, Brinson Supplementary Trust since 1997. Debra L. 34 Vice 1992 Director, Brinson Partners, Inc. since 1995; Associate, Brinson Nichols President Partners, Inc. 1991-1995; Vice President, The Brinson Funds since 1997; Secretary, The Brinson Funds 1997; Assistant Secretary, The Brinson Funds 1993-1997; Assistant Secretary, Brinson Relationship Funds 1994-1997; Secretary, Brinson Relationship Funds 1997; Vice President, Brinson Relationship Funds since 1997; Vice President, Brinson Supplementary Trust since 1997. Carolyn M. 33 Treasurer, 1995 Director, Brinson Partners, Inc. since 1997; Associate, Brinson Burke Secretary Partners, Inc. 1995-1996; Secretary, Treasurer and Principal and Accounting Officer, The Brinson Funds since 1997; Assistant Principal Secretary, The Brinson Funds 1996-1997; Assistant Secretary, Accounting Brinson Relationship Funds, 1996-1997; Secretary, Treasurer and Officer Principal Accounting Officer, Brinson Relationship Funds since 1997; Secretary, Treasurer and Principal Accounting Officer, Brinson Supplementary Trust since 1997; Financial Analyst, Van Kampen American Capital Investment Advisory Corp. 1992-1995. David E. 31 Assistant 1998 Associate Director, Brinson Partners, Inc. since 1998; Associate, Floyd Secretary Brinson Partners, Inc., 1994-1998; Assistant Trust Officer, Brinson Trust Company since 1993; Assistant Secretary, The Brinson Funds since 1998; Assistant Secretary, Brinson Relationship Funds since 1998; Assistant Secretary, Brinson Supplementary Trust since 1998. Mark F. 42 Assistant 1999 Assistant Secretary, Brinson Partners, Inc. since 1993; Assistant Kemper Secretary Secretary, Brinson Trust Company since 1993; Secretary, UBS Brinson since 1998; Assistant Secretary, Brinson Holdings, Inc. 1993-1998; Assistant Secretary, The Brinson Funds since 1999; Assistant Secretary, Brinson Relationship Funds since 1999; Assistant Secretary, Brinson Supplementary Trust since 1999.
37 COMPENSATION TABLE Trustees
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM FROM TRUST FOR FISCAL YEAR TRUST AND FUND COMPLEX NAME AND POSITION HELD ENDED JUNE 30, 1999 PAID TO TRUSTEES/1/ - ---------------------- ------------------- ------------------- Walter E. Auch, Trustee $17,400 $42,600 6001 N. 62nd Place Paradise Valley, AZ 85253 Frank K. Reilly, Trustee $17,400 $54,600 College of Business Administration University of Notre Dame Notre Dame, IN 46556-0399 Edward M. Roob, Trustee $17,400 $55,350 841 Woodbine Lane Northbrook, IL 60002
/1/ This amount represents the aggregate amount of compensation paid to the Trustees for (a) service on the Board for the Trust's most recently completed fiscal year; and (b) service on the Board of Trustees of three other investment companies managed by Brinson Partners for the fiscal year ended June 30, 1999 with respect to Messrs. Reilly and Roob and two other investment companies managed by Brinson Partners for the fiscal year ended June 30, 1999 with respect to Mr. Auch. No officer or Trustee of the Trust who is also an officer or employee of Brinson Partners receives any compensation from the Trust for services to the Trust. The Trust pays each Trustee who is not affiliated with Brinson Partners a fee of $6,000 per year, plus $300 per Series per meeting, and reimburses each Trustee and officer for out-of-pocket expenses in connection with travel and attendance at Board meetings. The Board has an Audit Committee which has the responsibility, among other things, to (i) recommend the selection of the Trust's independent auditors, (ii) review and approve the scope of the independent auditors' audit activity, (iii) review the audited financial statements, and (iv) review with such independent auditors the adequacy of the Series' basic accounting system and the effectiveness of the Series' internal controls. The Audit Committee met once during the fiscal year ended June 30, 1999. There is no separate nominating or investment committee. Items pertaining to these committees are submitted to the full Board. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES As of April 14, 2000, the officers and Trustees unless otherwise noted, as a group owned less than 1% of the outstanding equity securities of the Trust and of each class of equity securities of the Trust. As of April 14, 2000, the following persons owned of record or beneficially more than 5% of the outstanding voting shares of the Brinson Fund-Class I, Brinson Fund-Class N, UBS Investment Funds class of shares or the Series, as applicable: 38 GLOBAL FUND
Percentage of Percentage of Name & Address of Beneficial and Record Owners Class Series - ---------------------------------------------- ----- ------ Brinson Fund-Class I Wilmington Trust Company 14.38% 13.87% Wilmington, DE Northern Trust Company 8.13% 7.84% Chicago, IL Charles Schwab & Co., Inc. 7.45% 7.19% San Francisco, CA Norwest Bank 6.53% 6.30% Minneapolis, MN American Express 6.47% 6.24% Minneapolis, MN Alabama Business Charitable Trust 5.32% 5.13% Birmingham, AL Wilmington Trust Company 5.24% 5.05% Wilmington, DE Brinson Fund-Class N * Emjayco 65.57% N/A Milwaukee, WI * Merrill Lynch Trust Co. 30.60% N/A Jacksonville, FL UBS Investment Funds Class * UBS AG 72.06% N/A New York, NY UBS AG 5.86% N/A New York, NY
GLOBAL EQUITY FUND
Percentage of Percentage of Name & Address of Beneficial and Record Owners Class Series - ---------------------------------------------- ----- ------ Brinson Fund-Class I * State Street Bank & Trust 34.29% 19.55% Westwood, MA * Wilmington Trust Co. 27.44% 15.64% Wilmington, DE Charles Schwab & Co., Inc. 11.72% 6.68% San Francisco, CA Resources Trust Company 8.58% 4.89% Englewood, CO Brinson Fund-Class N * National Financial Services Corp. 99.46% N/A New York, NY UBS Investment Funds Class * UBS AG 43.23% 18.46% New York, NY UBS SA 13.47% 5.75% Zurich, Switzerland UBS SA 7.34% N/A Zurich, Switzerland
GLOBAL BOND FUND
Percentage of Percentage of Name & Address of Beneficial and Record Owners Class Series - ---------------------------------------------- ----- ------ Brinson Fund-Class I Wilmington Trust Co. 16.59% 15.99% Wilmington, DE Munson Williams Proctor Institute 14.14% 13.63% Utica, NY Baptist Health Systems, Inc. 13.15% 12.68% Birmingham, AL Resources Trust Company 13.07% 12.60% Englewood, CO Charles Schwab & Co., Inc. 11.76% 11.34% San Francisco, CA Wilmington Trust Co., Trustee 10.60% 10.22% Wilmington, DE State Street Bank & Trust 6.40% 6.17% Westwood, MA Brinson Fund-Class N * Brinson Partners, Inc. 73.10% N/A Chicago, IL * Merrill Lynch Trust Co. 26.90% N/A Jacksonville, FL UBS Investment Funds Class * UBS AG 39.39% N/A New York, NY * UBS AG 26.18% N/A New York, NY UBS SA 8.35% N/A Zurich, Switzerland
U.S. BALANCED FUND
Percentage of Percentage of Name & Address of Beneficial and Record Owners Class Series - ---------------------------------------------- ----- ------ Brinson Fund-Class I *+ State Street Bank & Trust 33.08% 29.75% Westwood, MA The Society of Sisters of Christian Charity 15.09% 13.57% Wilmette, IL Carn & Co. 14.10% 12.68% Washington, DC National Investors Corp. 9.93% 8.93% New York, NY Charles Schwab & Co., Inc. 9.56% 8.59% San Francisco, CA Carn & Co. 7.63% 6.86% Washington, DC Wilmington Trust Company 5.83% 5.25% Wilmington, DE Brinson Fund-Class N * Brinson Partners, Inc. 100% N/A Chicago, IL UBS Investment Funds Class *UBS AG 54.79% 5.51% New York, NY APD Profit Sharing Plan 15.98% N/A Key West, FL UBS SA 12.03% N/A Zurich, Switzerland Thomas M. Quinn 4.60% N/A St. Albans Herts, England
U.S. EQUITY FUND
Percentage of Percentage of Name & Address of Beneficial and Record Owners Class Series - ---------------------------------------------- ----- ------ Brinson Fund-Class I Charles Schwab & Co., Inc. 23.50% 21.74% San Francisco, CA State Street Bank & Trust 17.21% 15.92% Westwood, MA The Chase Manhattan Bank 6.24% 5.77% Rochester, NY Brinson Fund-Class N * Merrill Lynch Trust Co. 98.10% N/A Jacksonville, FL UBS Investment Funds Class * UBS SA 43.12% N/A Zurich, Switzerland UBS AG 9.56% N/A New York, NY UBS SA 9.56% N/A Zurich, Switzerland
U.S. LARGE CAP EQUITY FUND
Percentage of Percentage of Name & Address of Beneficial and Record Owners Class Series - ---------------------------------------------- ----- ------ Brinson Fund-Class I *+ Firlin Co. 54.13% 53.64% Lincoln, NE Resources Trust Company 14.37% 14.24% Englewood, CO Norwest Bank 10.85% 10.75% Minneapolis, MN Charles Schwab & Co., Inc. 6.34% 6.29% San Francisco, CA Brinson Fund-Class N * National Financial Services Corp. 99.98% N/A New York, NY UBS Investment Funds Class * Thomas Michael Quinn 63.27% N/A England, United Kingdom * UBS AG 28.41% N/A New York, NY
U.S. LARGE CAP GROWTH FUND
Percentage of Percentage of Name & Address of Beneficial and Record Owners Class Series - ---------------------------------------------- ----- ------ Brinson Fund-Class I *+ UBS AG 29.94% 43.63% New York, NY * Howard Smith & Levin LLP 29.88% 12.42% New York, NY Wilmington Trust Company 19.44% 8.08% Wilmington, DE RDA International Inc. 10.67% N/A Houston, TX Brinson Fund-Class N * Brinson Partners, Inc. 100% N/A Chicago, IL UBS Investment Funds Class *+ UBS AG 53.38% 43.63% New York, NY Brian Vaughan 12.66% 7.40% Moraga, CA
U.S. SMALL CAP GROWTH FUND
Percentage of Percentage of Name & Address of Beneficial and Record Owners Class Series - ---------------------------------------------- ----- ------ Brinson Fund-Class I *+ UBS AG 71.43% 71.46% New York, NY Island Holdings 7.59% 7.16% Honolulu, HI Wilmington Trust Company 5.65% 5.33% Wilmington, DE Brinson Fund-Class N * Brinson Partners, Inc. 100% N/A Chicago, IL UBS Investment Funds Class *+ UBS AG 71.94% 71.46% New York, NY Donald L. Chalmers 9.97% N/A Profit Sharing Plan Houston, TX
U.S. BOND FUND
Percentage of Percentage of Name & Address of Beneficial and Record Owners Class Series - ---------------------------------------------- ----- ------ Brinson Fund-Class I Charles Schwab & Co., Inc. 24.71% 23.20% San Francisco, CA State Street Bank & Trust 18.88% 17.73% Westwood, MA Resources Trust Company 13.21% 12.40% Englewood, CO Norwest Bank 9.35% 8.78% Minneapolis, MN UBS AG 6.20% 5.82% New York, NY Reid Hospital & Health Care 6.03% 5.66% Richmond, IN Brinson Fund-Class N * Brinson Partners, Inc. 100% N/A Chicago, IL UBS Investment Funds Class UBS AG 21.74% N/A New York, NY UBS AG 21.51% N/A New York, NY UBS AG 18.95% N/A Zurich, Switzerland PJ Mechanical Corp. 7.95% N/A Employee Pension Plan New York, NY Anron Heating & Air Conditioning 6.86% N/A North Babylon, NY Donald L. Chalmers 4.59% N/A Profit Sharing Plan Houston, TX
HIGH YIELD FUND
Percentage of Percentage of Name & Address of Beneficial and Record Owners Class Series - ---------------------------------------------- ----- ------ Brinson Fund-Class I *+ UBS AG 78.18% 75.02% New York, NY Brinson Fund-Class N * Brinson Partners, Inc. 100% N/A Chicago, IL UBS Investment Funds Class UBS AG 44.28% N/A New York, NY UBS AG 14.04% N/A New York, NY David J. Nash 7.04% N/A New York, NY PJ Mechanical Corp. 5.68% N/A Employee Pension Plan New York, NY
GLOBAL (EX-U.S.) EQUITY FUND
Percentage of Percentage of Name & Address of Beneficial and Record Owners Class Series - ---------------------------------------------- ----- ------ Brinson Fund-Class I The Northern Trust Company 15.45% 15.23% Chicago, IL The Northern Trust Company 11.58% 11.41% Chicago, IL Key Trust Company 10.81% 10.65% San Francisco, CA Charles Schwab & Co., Inc. 5.38% 5.30% Cleveland, OH Edna McConnell Clark Foundation 4.51% N/A New York, NY Brinson Fund-Class N Brinson Partners, Inc. 100% N/A Chicago, IL UBS Investment Funds Class * UBS AG 35.74% N/A New York, NY * Emjayco 28.80% N/A Milwaukee, WI UBS AG 12.03% N/A Zurich Switzerland
39 UBS Investment Funds Class * Person deemed to control the class within the meaning of the Act. Note that such persons possess the ability to control the outcome of matters submitted for the vote of shareholders of that class. + Person deemed to control the Series within the meaning of the Act. Note that such persons possess the ability to control the outcome of matters submitted for the vote of shareholders of that Series. INVESTMENT ADVISORY AND OTHER SERVICES Advisor Brinson Partners, a Delaware corporation, is an investment management firm, managing as of December 31, 1999, USD 159 billion, primarily for institutional pension and profit sharing funds. Brinson Partners was organized in 1989 when it acquired the institutional asset management business of The First National Bank of Chicago and First Chicago Investment Advisors, N.A. Brinson Partners and its predecessor entities have managed domestic and international investment assets since 1974 and global investment assets since 1982. Brinson Partners has offices in Australia, Bahrain, Brazil, China, France, Germany, Japan, Singapore, Switzerland and the United Kingdom in addition to its principal office at 209 South LaSalle Street, Chicago, IL 60604-1295. Brinson Partners 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. Brinson Partners also serves as the investment advisor to seven other investment companies: Brinson Relationship Funds, which includes nineteen investment portfolios (series); Fort Dearborn 40 Income Securities, Inc.; The Hirtle Callaghan International Trust -International Equity Portfolio; John Hancock Variable Annuity Series Trust I -International Balanced Portfolio; Managed Accounts Services Portfolio Trust -Pace Large Company Value Equity Investments; The Republic Funds -Republic Equity Fund; Governor Funds International Equity Fund and Villanova Mutual Fund Trust - -Prestige Large Cap Value Fund. Pursuant to its investment advisory agreements (the "Agreements") with the Trust, on behalf of each Series, Brinson Partners receives from each Series a monthly fee at an annual rate (as described in the Prospectuses and below) multiplied by the average daily net assets of that Series for providing investment advisory services. Brinson Partners is responsible for paying its expenses. Under the Agreements, each Series pays the following expenses: (1) the fees and expenses of the Trust's disinterested Trustees; (2) the salaries and expenses of any of the Trust's officers or employees who are not affiliated with Brinson Partners; (3) interest expenses; (4) taxes and governmental fees; (5) brokerage commissions and other expenses incurred in acquiring or disposing of portfolio securities; (6) the expenses of registering and qualifying shares for sale with the SEC and with various state securities commissions; (7) auditing and legal costs; (8) insurance premiums; (9) fees and expenses of the Trust's custodian, administrative and transfer agent and any related services; (10) expenses of obtaining quotations of the Series' portfolio securities and of pricing the Series' shares; (11) expenses of maintaining the Trust's legal existence and of shareholders' meetings; (12) expenses of preparation and distribution to existing shareholders of reports, proxies and prospectuses; and (13) fees and expenses of membership in industry organizations. Under the Agreements, the Advisor is entitled to a monthly fee of the respective Series' average daily net assets as follows: annual rates of 1.40% for the Global Technology Fund; 1.15% for the Global Biotech Fund; 1.10% for the Emerging Markets Equity Fund; 1.00% for the U.S. Small Cap Equity Fund and the U.S. Small Cap Growth Fund; 0.90% for the U.S. Real Estate Equity Fund; 0.80% for the Global Fund, Global Equity Fund and Global (Ex-U.S.) Equity Fund; 0.75% for the Global Bond Fund; 0.70% for the U.S. Balanced Fund, U.S. Equity Fund, U.S. Value Equity Fund, U.S. Large Cap Growth Fund and the U.S. Large Cap Equity Fund; 0.65% for the Emerging Markets Debt Fund; 0.60% for the High Yield Fund; and 0.50% for the U.S. Bond Fund. The fee payable to Brinson Partners by the Global Fund, Global Equity Fund, Global Technology Fund, Global Biotech Fund, U.S. Small Cap Equity Fund, U.S. Small Cap Growth Fund, U.S. Real Estate Equity Fund, Global (Ex-U.S.) Equity Fund and Emerging Markets Equity Fund is higher than the advisory fees paid by most other mutual funds, but is comparable to those of other mutual funds with similar investment objectives. The Advisor has agreed irrevocably to waive its fees and reimburse expenses to the extent that total operating expenses exceed the following rates of the respective Series' average daily net assets as follows, without regard to 12b-1 Plan expenses for the UBS Investment Funds class of shares or the Brinson-Class N shares of each Series: 1.60% for the Emerging Markets Equity Fund; 1.55% for the Global Technology Fund; 1.30% for the Global Biotech Fund; 1.15% for the U.S. Small Cap Equity Fund, U.S. Small Cap Growth Fund and the Emerging Markets Debt Fund; 1.10% for the Global Fund; 1.05% for the U.S. Real Estate Equity Fund; 1.00% for the Global Equity Fund and the Global (Ex-U.S.) Equity Fund; 0.90% for the Global Bond Fund; 0.85% for the U.S. Value Equity Fund; 0.80% for the U.S. Balanced Fund, the U.S. Equity Fund, the U.S. Large Cap Equity Fund and the U.S. Large Cap Growth Fund; 0.70% for the High Yield Fund; and 0.60% for the U.S. Bond Fund. The Advisor may recapture any amounts waived or reimbursed with respect to the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund or Emerging Markets Equity Fund subject to the following conditions: (1) the Advisor must request reimbursement within five years from the date on which the waiver and/or reimbursement was made, and (2) the Fund must be able to reimburse the Advisor and remain within the operating expense limits noted in the preceding chart. Advisory fees accrued to Brinson Partners were as follows: A. FISCAL YEAR ENDED JUNE 30, 1997
GROSS ADVISORY FEES NET ADVISORY FEES PAID FUND EXPENSES PAID SERIES* EARNED BY ADVISOR AFTER FEE WAIVER BY ADVISOR - ------ ----------------- ---------------- ---------- GLOBAL FUND $4,294,925 $4,294,925 $ 0 GLOBAL EQUITY FUND $ 641,075 $ 445,564 $195,511 GLOBAL BOND FUND $ 344,152 $ 149,228 $194,924 U.S. BALANCED FUND $1,775,454 $1,559,981 $215,473
41 U.S. EQUITY FUND $1,423,666 $1,234,361 $189,305 U.S. BOND FUND $ 67,835 $ 0 $142,178 GLOBAL (EX-U.S.) EQUITY FUND $2,420,667 $2,420,667 $ 0
* The U.S. Large Cap Equity Fund, the U.S. Large Cap Growth Fund, the U.S. Small Cap Growth Fund, the High Yield Fund, the Emerging Markets Debt Fund, the Emerging Markets Equity Fund, the Global Technology Fund, the U.S. Small Cap Equity Fund, the Global Biotech Fund, the U.S. Value Equity Fund and the U.S. Real Estate Equity Fund had not commenced operations as of the time period indicated. Effective December 10, 1998, the Non-U.S. Equity Fund changed its name to the Global (Ex-U.S.) Equity Fund. B. FISCAL YEAR ENDED JUNE 30, 1998
GROSS ADVISORY FEES NET ADVISORY FEES PAID FUND EXPENSES PAID SERIES* EARNED BY ADVISOR AFTER FEE WAIVER BY ADVISOR - ------ ----------------- ---------------- ---------- GLOBAL FUND $5,378,141 $5,378,141 $ 0 GLOBAL EQUITY FUND $ 719,439 $ 697,541 $21,898 GLOBAL BOND FUND $ 500,982 $ 457,480 $43,502 U.S. BALANCED FUND $1,674,661 $1,655,564 $19,097 U.S. EQUITY FUND $3,792,120 $3,792,120 $ 0 U.S. LARGE CAP EQUITY FUND U.S. BOND FUND $ 142,474 $ 74,626 $67,848 GLOBAL (Ex-U.S.) EQUITY FUND $3,475,953 $3,475,953 $ 0
* The U.S. Large Cap Growth Fund, the U.S. Small Cap Growth Fund, the High Yield Fund, the Emerging Markets Debt Fund, the Emerging Markets Equity Fund, the Global Technology Fund, the U.S. Small Cap Equity Fund, the Global Biotech Fund, the U.S. Value Equity Fund and the U.S. Real Estate Equity Fund had not commenced operations as of the time period indicated. Effective December 10, 1998, the Non-U.S. Equity Fund changed its name to the Global (Ex-U.S.) Equity Fund. Effective as of the date hereof, the U.S. Large Capitalization Equity Fund changed its name to the U.S. Large Cap Equity Fund. 42 C. PERIOD FROM DECEMBER 19, 1998 THROUGH DECEMBER 31, 1998
GROSS ADVISORY FEES EARNED NET ADVISORY FEES PAID FUND EXPENSES PAID SERIES*,** BY BRINSON PARTNERS AFTER FEE WAIVER BY BRINSON PARTNERS - ------ ------------------- ---------------- ------------------- U.S. LARGE CAP GROWTH FUND $ 849 $ 0 $ 849 U.S. SMALL CAP GROWTH FUND $6,538 $2,107 $4,431 HIGH YIELD FUND $6,278 $3,630 $2,648
D. FISCAL YEAR ENDED JUNE 30, 1999
GROSS ADVISORY FEES EARNED NET ADVISORY FEES PAID FUND EXPENSES PAID SERIES* BY ADVISOR AFTER FEE WAIVER BY ADVISOR - ------ ---------- ---------------- ---------- GLOBAL FUND $ 4,403,642 $ 4,403,642 $ 0 GLOBAL EQUITY FUND $ 628,067 $ 591,107 $36,960 GLOBAL BOND FUND $ 957,176 $ 957,176 $ 0 U.S. BALANCED FUND $ 347,296 $ 268,010 $79,286 U.S. EQUITY FUND $ 5,047,492 $ 5,047,492 $ 0 U.S. LARGE CAP EQUITY FUND $ 137,200 $ 0 $97,158 U.S. LARGE CAP GROWTH FUND* $ 18,582 $42,136 U.S. SMALL CAP GROWTH FUND** $ 148,873 $ 123,087 $25,786 U.S. BOND FUND $ 418,445 $ 407,073 $11,372 HIGH YIELD FUND** $ 173,302 $ 137,039 $36,263 GLOBAL (EX-U.S.) EQUITY FUND $ 3,713,448 $ 3,713,448 $ 0
* The Emerging Markets Debt Fund, the Emerging Markets Equity Fund, the Global Technology Fund, the U.S. Small Cap Equity Fund, the Global Biotech Fund, the U.S. Value Equity Fund and the U.S. Real Estate Equity Fund had not commenced operations as of the time period indicated. Effective December 10, 1998, the Non-U.S. Equity Fund changed its name to the Global (Ex-U.S.) Equity Fund. Effective as of the date hereof, the U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund and U.S. Small Capitalization Growth Fund changed their names to the U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund and U.S. Small Cap Growth Fund, respectively. ** Effective on December 19, 1998, and as further discussed below, the UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS High Yield Bond Fund were reorganized into the U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund, respectively. Fees for the U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund reflect fees paid during the period from January 1, 1999 through June 30, 1999. The U.S. Large Cap Growth Fund, U.S. Small Cap 43 Growth Fund and High Yield Fund initially had fiscal years ending on December 31. At the February 22, 1999 Board of Trustees' meeting, the Board of Trustees of the Trust voted to change the fiscal year end of these three Funds to June 30. Prior to the reorganization of the UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS High Yield Bond Fund (collectively, the "UBS Funds" and each a "UBS Fund") into the U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund, respectively, each of the UBS Funds invested substantially all of its investable assets in a corresponding portfolio of UBS Investor Portfolios Trust (collectively, the "UBS Portfolios" and each a "UBS Portfolio"). Under the investment advisory agreement of each UBS Portfolio with the New York office of UBS A.G., as the successor to the New York Branch of the Union Bank of Switzerland ("UBS"), UBS was entitled to a monthly fee of the corresponding UBS Portfolios' average daily net assets as follows: annual rates of 0.60% for the UBS Large Cap Growth Fund and the UBS Small Cap Fund and 0.45% for the UBS High Yield Bond Fund. UBS agreed to waive its fees and reimburse each UBS Fund and its corresponding Portfolio to the extent that each UBS Fund's total operating expenses (including its share of its corresponding Portfolio's expenses) exceeded, on an annual basis, the following rates of the respective UBS Fund's average daily net assets: 1.00% for the UBS Large Cap Growth Fund, 1.20% for the UBS Small Cap Fund and 0.90% for the UBS High Yield Bond Fund. Advisory fees accrued to UBS for the UBS Funds were as follows: A. PERIOD FROM DECEMBER 21, 1997 THROUGH DECEMBER 31, 1997
GROSS ADVISORY FEES EARNED NET ADVISORY FEES PAID FUND EXPENSES PAID SERIES BY UBS AFTER FEE WAIVER BY UBS - ------ ------ ---------------- ------ UBS LARGE CAP GROWTH FUND* $ 923 $ 0 $ 923 UBS SMALL CAP FUND $4,233 $ 0 $4,233 UBS HIGH YIELD BOND FUND $1,611 $ 0 $1,611
* Advisory fees for the UBS Large Cap Growth Fund were for the period December 29, 1997 through December 31, 1997. B. PERIOD FROM JANUARY 1, 1998 THROUGH DECEMBER 18, 1998
GROSS ADVISORY FEES NET ADVISORY FEES PAID FUND EXPENSES PAID SERIES EARNED BY UBS AFTER FEE WAIVER BY UBS - ------ ------------- ---------------- ------ UBS LARGE CAP GROWTH FUND $ 32,644 $ 0 $ 97,199 UBS SMALL CAP FUND $107,673 $19,971 $ 87,702 UBS HIGH YIELD BOND FUND $ 71,860 $ 0 $117,430
Under Sub-Advisory Agreements with UBS Brinson, Inc., as the successor to UBS Asset Management (New York) Inc. (the "Sub-Advisor"), UBS paid the Sub- Advisor a monthly fee of the respective UBS Portfolios' average daily net assets as follows: 44 UBS LARGE CAP GROWTH PORTFOLIO 0.30% of the first $25 million; 0.25% of the next $25 million; and 0.20% over $50 million UBS SMALL CAP PORTFOLIO 0.40% of the first $25 million; 0.325% of the next $25 million; and 0.25% over $50 million UBS HIGH YIELD BOND PORTFOLIO 0.25% of the first $25 million; 0.20% of the next $25 million; and 0.15% over $50 million UBS was responsible for paying the Sub-Advisor its fees. For the period December 29, 1997 to December 31, 1997, UBS paid $100 to the Sub-Advisor on behalf of the UBS Large Cap Growth Portfolio. For the period December 22, 1997 to December 31, 1997, UBS paid $1,250 and $535 to the Sub-Advisor on behalf of the UBS Small Cap and UBS High Yield Bond Portfolios, respectively. For the period January 1, 1998 to December 20, 1998, UBS paid $ 0 to the Sub-Advisor on behalf of the UBS Large Cap Growth Portfolio, UBS Small Cap Portfolio and UBS High Yield Bond Portfolio. General expenses of the Trust (such as costs of maintaining corporate existence, legal fees, insurance, etc.) will be allocated among the Series in proportion to their relative net assets. Expenses which relate exclusively to a particular Series, such as certain registration fees, brokerage commissions and other portfolio expenses, will be borne directly by that Series. Administrator Administrative, Accounting, Transfer Agency and Custodian Services Effective May 10, 1997, the Trust, on behalf of each Fund, entered into a Multiple Services Agreement (the "Services Agreement") with Morgan Stanley Trust Company, One Pierrepont Plaza, Brooklyn, New York 11201 ("MSTC"), pursuant to which MSTC was required to provide general administrative, accounting, portfolio valuation, transfer agency and custodian services to the Funds, including the coordination and monitoring of any third party service providers. Effective October 1, 1998, MSTC was merged into The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017 ("Chase"), and Chase assumed all of MSTC's rights and obligations under the Services Agreement. Custody Services. Chase provides custodian services for the securities and cash of the Funds. The custody fee schedule is based primarily on the net amount of assets held during the period for which payment is being made plus a per transaction fee for transactions during the period and out-of-pocket expenses. Effective October 1, 1998, Chase became the custodian of the Funds pursuant to the Services Agreement as a result of the merger of MSTC into Chase. As authorized under the Services Agreement, MSTC had entered into a Mutual Funds Service Agreement (the "CGFSC Agreement") with Chase Global Funds Services Company ("CGFSC"), a corporate affiliate of Chase, under which CGFSC provides administrative, accounting, portfolio valuation and transfer agency services to the Funds. Chase has assumed all of MSTC's rights and obligations under the CGFSC Agreement. CGFSC's business address is 73 Tremont Street, Boston, Massachusetts 02108-3913. Pursuant to the CGFSC Agreement, CGFSC provides: (1) administrative services, including providing the necessary office space, equipment and personnel to perform administrative and clerical services; preparing, filing and 45 distributing proxy materials, periodic reports to investors, registration statements and other documents; and responding to investor inquiries; (2) accounting and portfolio valuation services, including the daily calculation of each Fund's net asset value and the preparation of certain financial statements; and (3) transfer agency services, including the maintenance of each investor's account records, responding to investors' inquiries concerning accounts, processing purchases and redemptions of each Fund's shares, acting as dividend and distribution disbursing agent and performing other service functions. Shareholder inquiries should be made to the transfer agent at 1-800-448-2430 (for the Brinson Fund-Class N and Brinson Fund-Class I) or 1-800-794-7753 (for the UBS Investment Funds class of shares). For its administrative, accounting, transfer agency and custodian services, Chase receives the following as compensation from the Trust on an annual basis: 0.0025% of the average daily U.S. assets of the Trust; 0.0525% of the average daily non-U.S. assets of the Trust; 0.3250% of the average daily emerging markets equity assets of the Trust; and 0.019% of the average daily emerging markets debt assets of the Trust. Chase receives an additional fee of 0.075% of the average daily net assets of the Trust for administrative duties, the latter subject to the expense limitation applicable to the Trust. No fee (asset based or otherwise) is charged on any investments made by any fund into any other fund sponsored or managed by the Advisor and assets of a fund that are invested in another investment company or series thereof sponsored or managed by the Advisor will not be counted in determining the 0.075% administrative duties fee or the applicability of the expense limitation on such fee. The foregoing fees include all out-of-pocket expenses or transaction charges incurred by Chase and any third party service provider in providing such services. Also as authorized under the Services Agreement, Chase has entered into a sub-administration agreement (the "FDI Agreement") with Funds Distributor, Inc. ("FDI") under which FDI provides administrative assistance to the Funds with respect to: (i) regulatory matters, including regulatory developments and examinations, (ii) all aspects of each Fund's day-to-day operations, (iii) office facilities, clerical and administrative services, and (iv) maintenance of books and records. FDI's business address is 60 State Street, Suite 1300, Boston, Massachusetts 02109. Pursuant to the CGFSC Agreement and the FDI Agreement, Chase pays CGFSC and FDI, respectively, for the services that CGFSC and FDI provide to Chase in fulfilling Chase's obligations under the Services Agreement. For the period October 1, 1998 through June 30, 1999, aggregate fees paid to Chase for administration, accounting, portfolio valuation and transfer agency services under the Services Agreement were as follows:
OCTOBER 1, 1998 THROUGH FISCAL YEAR SERIES* ENDED JUNE 30, 1999 - ------- ------------------- GLOBAL FUND $ 265,350 GLOBAL EQUITY FUND $ 0 GLOBAL BOND FUND $ 13,905 U.S. BALANCED FUND $ 0 U.S. EQUITY FUND $ 209,093 U.S. LARGE CAP EQUITY FUND $ 0 U.S. LARGE CAP GROWTH FUND $ 0 U.S. SMALL CAP GROWTH FUND $ 0 U.S. BOND FUND $ 0 HIGH YIELD FUND $ 0
46 GLOBAL (EX-U.S.) EQUITY FUND $ 265,131
* Effective December 10, 1998, the Non-U.S. Equity Fund changed its name to the Global (Ex-U.S.) Equity Fund. Effective as of the date hereof, the U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund and U.S. Small Capitalization Growth Fund changed their names to the U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund and U.S. Small Cap Growth Fund, respectively. Effective on December 19, 1998, and as further discussed below, the UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS High Yield Bond Fund were reorganized into the U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund, respectively. Fees for the U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund reflect fees paid during the period from January 1, 1999 through June 30, 1999. The Global Technology Fund, U.S. Small Cap Equity Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund had not commenced operations as of the time periods indicated. For the period December 19, 1998 through December 31, 1998, the U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund did not pay any fees to Chase for administration, accounting, portfolio valuation and transfer agency services under the Services Agreement. For the fiscal years ended June 30, 1997, June 30, 1998 and the period July 1, 1998 through September 30, 1998, aggregate fees paid to MSTC, prior to the merger into Chase, for administration, accounting, portfolio valuation and transfer agency services under the Services Agreement were as follows:
MAY 10, 1997 FISCAL YEAR JULY 1, 1998 THROUGH FISCAL ENDED THROUGH SERIES* YEAR END JUNE 30, 1997 JUNE 30, 1998 SEPTEMBER 30, 1998 - ------- ---------------------- ------------- ------------------ GLOBAL FUND $69,572 $464,398 $ 112,813 GLOBAL EQUITY FUND $ 7,799 $ 9,809 $ 865 GLOBAL BOND FUND $ 3,707 $ 0 $ 1,985 U.S. BALANCED FUND $10,324 $ 79,503 $ 0 U.S. EQUITY FUND $12,495 $247,167 $ 58,362 U.S. LARGE CAP U.S. BOND FUND $ 0 $ 0 $ 0 GLOBAL (EX-U.S.) EQUITY $17,159 $305,643 $ 82,044 FUND
* The U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund, High Yield Fund, Emerging Markets Debt Fund, Emerging Markets Equity Fund, Global Technology Fund, U.S. Small Cap Equity Fund, Global Biotech Fund, U.S. Value Equity Fund and U.S. Real Estate Equity Fund had not commenced operations as of the time periods indicated. Effective December 10, 1998, the Non-U.S. Equity Fund changed its name to the Global (Ex-U.S.) Equity Fund. Effective as of the date hereof, the U.S. Large Capitalization Equity Fund changed its name to the U.S. Large Cap Equity Fund. Until May 9, 1997, FPS Services, Inc., 3200 Horizon Drive, King of Prussia, PA 19406-0903 ("FPS"), provided certain administrative services to the Trust pursuant to an administration agreement (the "Administration Agreement"). As compensation for services performed under the Administration Agreement, FPS received a fee payable monthly at an annual rate multiplied by the average daily net assets of the Trust. 47 Administration fees paid to FPS were as follows:
JULY 1, 1996 THROUGH SERIES* MAY 9, 1997 - ------ ---------- GLOBAL FUND $ 271,364 GLOBAL EQUITY FUND $ 38,047 GLOBAL BOND FUND $ 25,412 U.S. BALANCED FUND $ 121,580 U.S. EQUITY FUND $ 76,534 U.S. BOND FUND $ 6,542 GLOBAL (EX-U.S.) EQUITY FUND $ 122,780
* The U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund, High Yield Fund, Emerging Markets Debt Fund, Emerging Markets Equity Fund, Global Technology Fund, U.S. Small Cap Equity Fund, Global Biotech Fund, U.S. Value Equity Fund and U.S. Real Estate Equity Fund had not commenced operations as of the time period indicated. Effective December 10, 1998, the Non-U.S. Equity Fund changed its name to the Global (Ex-U.S.) Equity Fund. Prior to the reorganization of the UBS Funds into the Trust, IBT Trust & Custodial Services (Ireland) Limited ("IBT Ireland") and Investors Bank and Trust Company ("Investors Bank"), 200 Clarendon Street, Boston, Massachusetts 02116, provided certain administrative services to the UBS Portfolios and the UBS Funds, respectively, pursuant to Administration Agreements. For its services under the Administration Agreements, each corresponding UBS Portfolio paid IBT Ireland a fee calculated daily and paid monthly equal, on an annual basis, to 0.07% of the UBS Portfolio's first $100 million in average daily net assets and 0.05% of the assets in excess of $100 million. For its services under the Administration Agreements, each corresponding UBS Fund paid Investors Bank a fee calculated daily and paid monthly equal, on an annual basis, to 0.065% of the UBS Fund's first $100 million in average daily net assets and 0.025% of the next $100 million in average daily net assets. Investors Bank was not paid a fee from a UBS Fund on average daily net assets in excess of $200 million. Administrative fees paid to IBT Ireland by the UBS Portfolios were as follows:
COMMENCEMENT OF JANUARY 1, 1998 OPERATIONS** THROUGH THROUGH SERIES* DECEMBER 31, 1997 DECEMBER 18, 1998 ------- ----------------- ----------------- UBS LARGE CAP GROWTH PORTFOLIO $2,096 $12,574 UBS SMALL CAP PORTFOLIO $3,362 $22,896 UBS HIGH YIELD BOND PORTFOLIO $1,870 $16,854
Administrative fees paid to Investors Bank by the UBS Funds were as follows:
COMMENCEMENT OF JANUARY 1, 1998 OPERATIONS** THROUGH THROUGH SERIES* DECEMBER 31, 1997 DECEMBER 18, 1998 - ------ ----------------- ----------------- UBS LARGE CAP GROWTH FUND $ 450 $ 7,361
48 UBS SMALL CAP FUND $1,580 $24,165 UBS HIGH YIELD BOND FUND $1,185 $21,515
* Effective on December 19, 1998, the UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS High Yield Bond Fund were reorganized into the U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund, respectively. The U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund initially had fiscal years ending on December 31. At the February 22, 1999 Board of Trustees' meeting, the Board of Trustees of the Trust voted to change the fiscal year end of these three Funds to June 30. ** The UBS Large Cap Growth Portfolio and its corresponding UBS Fund commenced operations on October 14, 1997. The UBS Small Cap Portfolio and UBS High Yield Bond Portfolio and their respective corresponding UBS Funds commenced operations on September 30, 1997. Independent Auditors Ernst & Young LLP, Chicago, Illinois, are the independent auditors of the Trust. Legal Counsel Stradley, Ronon, Stevens & Young, LLP, Philadelphia, Pennsylvania, is legal counsel to the Trust. Underwriter FDI, 60 State Street, Suite 1300, Boston, MA 02109, acts as an underwriter of the Series' continuous offer of shares for the purpose of facilitating the filing of notices regarding sale of the shares of the Series under state securities laws and to assist in sales of shares pursuant to an underwriting agreement (the "Underwriting Agreement") approved by the Board. In this regard, FDI has agreed at its own expense to qualify as a broker-dealer under all applicable federal or state laws in those states which the Trust shall from time to time identify to FDI as states in which it wishes to offer the Series' shares for sale, in order that state filings may be maintained for the Series. FDI does not receive any compensation under the Underwriting Agreement. FDI is a broker-dealer registered with the SEC and a member in good standing of the National Association of Securities Dealers, Inc. The Trust does not impose any sales loads or redemption fees, except for a transaction charge applicable to purchases of shares of the Emerging Markets Debt Fund and Emerging Markets Equity Fund and to redemptions of shares of the Emerging Markets Equity Fund. Each Series shall continue to bear the expense of all filing fees incurred in connection with the filing of notices regarding sale of shares under state securities laws. The Underwriting Agreement may be terminated by either party upon sixty (60) days prior written notice to the other party, and if so terminated, the pro rata portion of the unearned fee will be returned to the Trust. Distribution Plan The Board has adopted a distribution plan pursuant to Rule 12b-1 under the Act, for the UBS Investment Funds class of shares of the Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund, U.S. Bond Fund, High Yield Fund and 49 Global (Ex-U.S.) Equity Fund (the "UBS Investment Plan I") and a separate distribution plan pursuant to Rule 12b-1 under the Act, for the UBS Investment Funds class of shares of the U.S. Value Equity Fund, U.S. Small Cap Equity Fund, Global Technology Fund, Global Biotech Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund (the "UBS Investment Plan II", and together with UBS Investment Plan I, the "UBS Investment Plans"). The Board has also adopted a separate distribution plan (the "Class N Plan") pursuant to Rule 12b-1 under the Act, for each Series' Brinson Fund-Class N shares (the UBS Investment Plans and the Class N Plan together, the "Plans"). The UBS Investment Funds class of shares was formerly known as the SwissKey class of shares. The name change was made effective on September 15, 1998. The Plans permit each Series to reimburse FDI, Brinson Partners and others from the assets of the UBS Investment Funds class of shares and Brinson Fund-Class N shares with a quarterly fee for services and expenses incurred in distributing and promoting sales of UBS Investment Funds class of shares and Brinson Fund- Class N shares, respectively. These expenses include, but are not limited to, preparing and distributing advertisements and sales literature, printing prospectuses and reports used for sales purposes, and paying distribution and maintenance fees to brokers, dealers and others in accordance with a selling agreement with the Trust on behalf of the UBS Investment Funds class of shares and the Brinson Fund-Class N shares or FDI. In addition, each Series may make payments directly to FDI for payment to dealers or others, or directly to others, such as banks, who assist in the distribution of the UBS Investment Funds class of shares or Brinson Fund-Class N shares or provide services with respect to the UBS Investment Funds class of shares or Brinson Fund-Class N shares. UBS A.G., or one of its affiliates, pursuant to a selected dealer agreement, may provide additional compensation to securities dealers from its own resources in connection with sales of the UBS Investment Funds class of shares or Brinson Fund-Class N shares of the Series. The aggregate distribution fees paid by the Series from the assets of the respective UBS Investment Funds class of shares to FDI and others under the UBS Investment Plan I and UBS Investment Plan II may not exceed 0.90% and 1.00%, respectively, of a Fund's average daily net assets in any year (0.25% of which are service fees to be paid by the Series to FDI, dealers and others, for providing personal service and/or maintaining shareholder accounts). The UBS Investment Plan I provides, however, that the aggregate distribution fees for each subject Fund shall not exceed the following maximum amounts for the 1999 fiscal year: UBS Investment Fund-Global - 0.65%, UBS Investment Fund-Global Equity - 0.76%, UBS Investment Fund-Global Bond - 0.49%, UBS Investment Fund- U.S. Balanced - 0.50%, UBS Investment Fund-U.S. Equity - 0.52%, UBS Investment Fund-U.S. Large Cap Equity - 0.52%, UBS Investment Fund-U.S. Large Cap Growth - 0.77%, UBS Investment Fund-U.S. Small Cap Growth - 0.77%, UBS Investment Fund- U.S. Bond - 0.47%, UBS Investment Fund-High Yield - 0.85% and UBS Investment Fund-Global (Ex-U.S.) Equity - 0.84%. The UBS Investment Plan II provides that the aggregate distribution fees for each subject Fund shall not exceed the following maximum amounts for the 2000 fiscal year: UBS Investment Fund-U.S. Value Equity - 1.00%, UBS Investment Fund-U.S. Small Cap Equity - 1.00%, UBS Investment Fund-Global Technology - 1.00%, UBS Investment Fund-Global Biotech - 1.00%, UBS Investment Fund-U.S. Real Estate Equity Fund - 1.00%, UBS Investment Fund-Emerging Markets Debt - 1.00% and UBS Investment Fund-Emerging Markets Equity - 1.00%. The aggregate distribution fees paid by the Series from the assets of the respective Brinson Fund-Class N shares to FDI and others under the Class N Plan may not exceed 0.25% of a Fund's average daily net assets in any year. The UBS Investment Plans do not apply to the Brinson Fund-Class I or the Brinson Fund-Class N shares of each Series and those shares are not included in calculating the UBS Investment Plans' respective fees. The Class N Plan does not apply to the Brinson Fund-Class I or the UBS Investment Funds class of shares of each Series and those shares are not included in calculating the Class N Plan's fees. 50 The quarterly fees paid to FDI under the Plans are subject to the review and approval by the Trust's Trustees who are not "interested persons" of the Advisor or FDI (as defined in the Act) and who may reduce the fees or terminate the Plans at any time. Amounts spent on behalf of each UBS Investment Funds class of shares pursuant to the UBS Investment Plan I during the fiscal year ended June 30, 1999 are set forth below.
- ------------------------------------------------------------------------------------------------------------------------------------ COMPENSATION COMPENSATION COMPENSATION TO OF OF UBS SALES FUND* PRINTING UNDERWRITERS DEALERS PERSONNEL ADVERTISING OTHER ==================================================================================================================================== UBS Investment $0.00 $0.00 $0.00 $169,039.77 $0.00 $0.00 Fund-Global - ------------------------------------------------------------------------------------------------------------------------------------ UBS Investment $0.00 $0.00 $0.00 $359,693.61 $0.00 $0.00 Fund-Global Equity - ------------------------------------------------------------------------------------------------------------------------------------ UBS Investment $0.00 $0.00 $0.00 $21,247.50 $0.00 $0.00 Fund-Global Bond - ------------------------------------------------------------------------------------------------------------------------------------ UBS Investment Fund-U.S. $0.00 $0.00 $0.00 $9,692.92 $0.00 $0.00 Balanced - ------------------------------------------------------------------------------------------------------------------------------------ UBS Investment Fund-U.S. $0.00 $0.00 $0.00 $352,849.81 $0.00 $0.00 Equity - ------------------------------------------------------------------------------------------------------------------------------------ UBS Investment Fund-U.S. $0.00 $0.00 $0.00 $6.22 $0.00 $0.00 Large Cap Equity - ------------------------------------------------------------------------------------------------------------------------------------ UBS Investment Fund- $0.00 $0.00 $0.00 $8,852.64 $0.00 $0.00 U.S. Large Cap Growth** - ------------------------------------------------------------------------------------------------------------------------------------ UBS Investment Fund- $0.00 $0.00 $0.00 $1,597.63 $0.00 $0.00 U.S. Small Cap Growth** - ------------------------------------------------------------------------------------------------------------------------------------ UBS Investment Fund-U.S. $0.00 $0.00 $0.00 $24,945.86 $0.00 $0.00 Bond - ------------------------------------------------------------------------------------------------------------------------------------ UBS Investment Fund- $0.00 $0.00 $0.00 $15,533.05 $0.00 $0.00 High Yield** - ------------------------------------------------------------------------------------------------------------------------------------ UBS Investment Fund- Global (Ex-U.S.) Equity $0.00 $0.00 $0.00 $43,437.06 $0.00 $0.00 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
Amounts spent on behalf of each Brinson Fund - Class N class of shares pursuant to the Class N Plan during the fiscal year ended June 30, 1999 are set forth below. 51
- ------------------------------------------------------------------------------------------------------------------------------------ COMPENSATION COMPENSATION COMPENSATION TO OF OF UBS SALES FUND* PRINTING UNDERWRITER DEALERS PERSONNEL ADVERTISING OTHER ==================================================================================================================================== Global Fund - $0.00 $0.00 $ 758.24 $0.00 $0.00 $0.00 Class N - ------------------------------------------------------------------------------------------------------------------------------------ Global Equity Fund $0.00 $0.00 $ 0.00 $0.00 $0.00 $0.00 - - Class N - ------------------------------------------------------------------------------------------------------------------------------------ Global Bond Fund - $0.00 $0.00 $ 5.57 $0.00 $0.00 $0.00 Class N - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Balanced Fund $0.00 $0.00 $ 0.00 $0.00 $0.00 $0.00 - - Class N - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Equity Fund - $0.00 $0.00 $ 701.32 $0.00 $0.00 $0.00 Class N - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Large Cap $0.00 $0.00 $9,277.02 $0.00 $0.00 $0.00 Equity Fund - Class N - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Large Cap $0.00 $0.00 $ 0.00 $0.00 $0.00 $0.00 Growth - Class N** - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Small Cap $0.00 $0.00 $ 0.00 $0.00 $0.00 $0.00 Growth Class N** - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Bond Fund - $0.00 $0.00 $ 0.00 $0.00 $0.00 $0.00 Class N - ------------------------------------------------------------------------------------------------------------------------------------ High Yield - $0.00 $0.00 $ 0.00 $0.00 $0.00 $0.00 Class N** - ------------------------------------------------------------------------------------------------------------------------------------ Global (Ex-U.S.) $0.00 $0.00 $ 6.03 $0.00 $0.00 $0.00 Equity Fund - Class N - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
* The U.S. Value Equity Fund, U.S. Small Cap Equity Fund, Global Technology Fund, Global Biotech Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund had not commenced operations as of the time period indicated. Effective December 10, 1998, the Non-U.S. Equity Fund changed its name to the Global (Ex-U.S.) Equity Fund. Effective as of the date hereof, the U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund and U.S. Small Capitalization Growth Fund changed their names to the U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund and U.S. Small Cap Growth Fund, respectively. ** Effective on December 19, 1998, the UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS High Yield Bond Fund were reorganized into the U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund, respectively. Amounts spent for the U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund reflect the amounts spent for the period from January 1, 1999 to June 30, 1999. 52 The U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund did not pay any fees under their respective Plans for the period December 19, 1998 through December 31, 1998. Code of Ethics The Trust and the Advisor have each adopted a Code of Ethics. Each Code of Ethics establishes standards by which certain access persons must abide relating to personal securities trading conduct. Under each Code of Ethics, access persons are prohibited from engaging in certain conduct, including, but not limited to: 1) investing in companies in which the Series invest unless the securities have a broad public market and are registered on a national securities exchange or are traded in the over-the- counter markets; 2) making or maintaining an investment in any corporation or business with which the Series have business relationships if the investment might create, or give the appearance of creating, a conflict of interest; 3) participating in an initial public offering; 4) entering into a securities transaction when the access person knows or should know that such activity will anticipate, parallel or counter any securities transaction of a Series; 5) entering into any securities transaction, without prior approval, in connection with any security which has been designated as restricted; 6) entering into a net short position with respect to any security held by a Series; 7) entering into any derivative transaction when a direct transaction in the underlying security would be a violation; and 8) engaging in self-dealing or other transactions benefiting the access person at the expense of the Series or its shareholders. In addition, access persons are required to receive advance approval prior to purchasing or selling a restricted security, and may not buy or sell certain prohibited securities. The Advisor will identify for access persons prohibited securities, which include securities that are being considered for purchase or sale by any account or fund managed by the Advisor, and provide a list of such securities to all access persons. Access persons of the Trust and the Advisor are required to file the following reports: 1) an initial holdings report disclosing all securities owned by the access persons and any securities accounts maintained by the access persons, which must be filed within ten days of becoming an access person and then annually thereafter; 2) quarterly reports of security investment transactions and new securities accounts. Access persons of FDI need only file quarterly reports of securities transactions. Trustees or officers who are not "interested persons" of the Trust, as defined in the Act, need only report a transaction in a security if such Trustee or officer, at the time of the transaction, knew or should have known, in the ordinary course of fulfilling his or her official duties as a Trustee or officer, that, during the 15-day period immediately preceding or after the date of the transaction by the Trustee or officer, such security was purchased or sold by a Series, or was being considered for purchase by a Series. Copies of each of the Trust's and the Advisor's Code of Ethics have been filed with and are available through the SEC. PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS Brinson Partners is responsible for decisions to buy and sell securities for the Series and for the placement of the Series' portfolio business and the negotiation of commissions, if any, paid on such transactions. Fixed income securities in which the Series invest are traded in the over-the-counter market. These securities are generally traded on a net basis with dealers acting as principal for their own accounts without a stated commission, although the bid/ask spread quoted on securities includes an implicit profit to the dealers. In over-the-counter transactions, orders are placed directly with a principal market-maker unless a better price and execution can be obtained by using a broker. Brokerage commissions are paid on transactions in listed securities, futures contracts and options thereon. Brinson Partners is responsible for effecting portfolio transactions and will do so in a manner deemed fair and reasonable to the Series. Under its advisory agreements with the Global Funds and the Global (Ex-U.S.) Equity Fund, Brinson Partners is authorized to utilize the trading desk of its foreign subsidiaries to execute foreign securities 53 transactions, but monitors the selection by such subsidiaries of brokers and dealers used to execute transactions for those Series. The primary consideration in all portfolio transactions will be prompt execution of orders in an efficient manner at the most favorable price. However, subject to policies established by the Board of the Trust, a Series may pay a broker-dealer a commission for effecting a portfolio transaction for the Series in excess of the amount of commission another broker-dealer would have charged if Brinson Partners determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such broker-dealer, viewed in terms of that particular transaction or such firm's overall responsibilities with respect to the clients, including the Series, as to which it exercises investment discretion. In selecting and monitoring broker-dealers and negotiating commissions, Brinson Partners considers the firm's reliability, the quality of its execution services on a continuing basis and its financial condition. When more than one firm is believed to meet these criteria, preference may be given to brokers who provide research or statistical material or other services to the Series or to Brinson Partners. Such services include advice, both directly and in writing, as to the value of the securities; the advisability of investing in, purchasing or selling securities; and the availability of securities, or purchasers or sellers of securities, as well as analyses and reports concerning issues, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts. This allows Brinson Partners to supplement its own investment research activities and obtain the views and information of others prior to making investment decisions. Brinson Partners is of the opinion that, because this material must be analyzed and reviewed by its staff, its receipt and use does not tend to reduce expenses but may benefit the Series by supplementing the Advisor's research. Brinson Partners effects portfolio transactions for other investment companies and advisory accounts. Research services furnished by dealers through whom the Series effect their securities transactions may be used by Brinson Partners in servicing all of its accounts; not all such services may be used in connection with the Series. In the opinion of Brinson Partners, it is not possible to measure separately the benefits from research services to each of the accounts (including the Series). Brinson Partners will attempt to equitably allocate portfolio transactions among the Series and others whenever concurrent decisions are made to purchase or sell securities by the Series and another. In making such allocations between the Series and others, the main factors to be considered are the respective investment objectives, the relative size of portfolio holdings of the same or comparable securities, the availability of cash for investment, the size of investment commitments generally held and the opinions of the persons responsible for recommending investments to the Series and the others. In some cases, this procedure could have an adverse effect on the Series. In the opinion of Brinson Partners, however, the results of such procedures will, on the whole, be in the best interest of each of the clients. When buying or selling securities, the Series may pay commissions to brokers who are affiliated with the Advisor or the Series. The Series may purchase securities in certain underwritten offerings for which an affiliate of the Series or the Advisor may act as an underwriter. The Series may effect future transactions through, and pay commissions to, futures commission merchants who are affiliated with the Advisor or the Series in accordance with procedures adopted by the Board. The Series incurred brokerage commissions as follows:
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED SERIES* JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1999 - ------- ------------- ------------- ------------- GLOBAL FUND $385,571 $442,603 $ 612,462 GLOBAL EQUITY FUND $142,922 $166,103 $ 225,396 GLOBAL BOND FUND $ 0 $ 0 $ 0 U.S. BALANCED FUND $139,165 $ 85,784 $ 38,711 U.S. EQUITY FUND $290,526 $560,721 $ 798,223 U.S. LARGE CAP EQUITY FUND* N/A $ 9,714 $ 33,488
54 U.S. LARGE CAP GROWTH FUND** N/A N/A $ 6,142 U.S. SMALL CAP GROWTH FUND** N/A N/A $ 110,942 U.S. BOND FUND $ 0 $ 0 $ 0 HIGH YIELD FUND** N/A N/A $ 0 GLOBAL (EX-U.S.) EQUITY FUND* $833,293 $942,155 $1,617,312
* The U.S. Large Cap Equity Fund commenced operations on April 6, 1998. The U.S. Value Equity Fund, U.S. Small Cap Equity Fund, Global Technology Fund, Global Biotech Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund had not commenced operations as of the time periods indicated. Effective December 10, 1998, the Non-U.S. Equity Fund changed its name to the Global (Ex-U.S.) Equity Fund. Effective as of the date hereof, the U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund and U.S. Small Capitalization Growth Fund changed their names to the U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund and U.S. Small Cap Growth Fund, respectively. ** Effective on December 19, 1998, the UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS High Yield Bond Fund were reorganized into the U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund, respectively. Brokerage commissions for the U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund reflect fees paid during the period from January 1, 1999 to June 30, 1999. For the fiscal year ended June 30, 1998, the Global Fund, U.S. Balanced Fund, U.S. Equity Fund and U.S. Large Cap Equity Fund paid brokerage commissions to Warburg Dillon Read ("Warburg"), an affiliated broker-dealer, as follows:
AGGREGATE % OF AGGREGATE DOLLAR AMOUNT OF % OF AGGREGATE DOLLAR AMOUNT COMMISSIONS PAID COMMISSIONS PAID TO SERIES TO WARBURG PAID TO WARBURG WARBURG - ------ ---------- -------------- ------- GLOBAL FUND $ 6,078 1.37% 0.78% U.S. BALANCED FUND $ 2,190 2.55% 0.27% U.S. EQUITY FUND $93,356 16.65% 21.43% U.S. LARGE CAP EQUITY FUND $ 453 4.66% 5.16%
For the fiscal year ended June 30, 1999, the Global Fund, Global Equity Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund, and U.S. Small Cap Growth Fund paid brokerage commissions to Warburg, as follows: 55
AGGREGATE % OF AGGREGATE DOLLAR AMOUNT OF % OF AGGREGATE DOLLAR AMOUNT COMMISSIONS PAID COMMISSIONS PAID TO SERIES TO WARBURG PAID TO WARBURG WARBURG - ------ --------- --------------- ------- GLOBAL FUND $42,341 6.91% 2.26% GLOBAL EQUITY FUND $ 6,322 2.80% 4.45% U.S. BALANCED FUND $ 3,207 8.28% 2.08% U.S. EQUITY FUND $55,295 6.93% 8.01% U.S. LARGE CAP EQUITY FUND $10,625 31.73% 22.35% U.S. LARGE CAP GROWTH FUND $ 2,469 40.20% 59.78% U.S. SMALL CAP GROWTH FUND $ 5,232 4.72% 8.23%
For the fiscal year ended June 30, 1999, the Global (Ex-U.S.) Equity Fund paid brokerage commissions to UBS, A.G., London, an affiliated broker-dealer, as follows:
AGGREGATE % OF AGGREGATE DOLLAR AMOUNT OF % OF AGGREGATE DOLLAR AMOUNT COMMISSIONS PAID COMMISSIONS PAID TO SERIES TO UBS, A.G. PAID TO UBS, A.G. UBS, A.G. - ------ ------------ ----------------- --------- GLOBAL (EX-U.S.) EQUITY FUND $47,584 2.94% 2.46%
For the fiscal years ended June 30, 1998 and June 30, 1999, the Trust and the Advisor had no agreements or understandings with a broker or otherwise causing brokerage transactions or commissions for research services. The U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund, and the UBS Funds that were merged into the Funds, incurred brokerage commissions as follows:
COMMENCEMENT OF OPERATIONS ** JANUARY 1, 1998 DECEMBER 19, 1998 THROUGH THROUGH THROUGH SERIES* DECEMBER 31, 1997 DECEMBER 18, 1998 DECEMBER 31, 1998 - ------- ----------------- ----------------- ----------------- U.S. LARGE CAP GROWTH FUND $18,270*** $31,628*** $ 25 U.S. SMALL CAP GROWTH FUND $30,680*** $52,862*** $4,722 HIGH YIELD FUND N/A*** N/A*** $ 0
* The U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund commenced operations effective on December 19, 1998. Effective on December 19, 1998, the UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS High Yield Bond Fund were reorganized into the U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund, respectively. The U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund and High Yield Fund initially had fiscal 56 years ending on December 31. At the February 22, 1999 Board of Trustees' meeting, the Board of Trustees of the Trust voted to change the fiscal year end of these three Funds to June 30. ** The UBS Large Cap Growth Fund commenced operations on October 14, 1997. The UBS Small Cap Fund and UBS High Yield Bond Fund commenced operations on September 30, 1997. *** Prior to the reorganization of the UBS Funds into the corresponding series of the Trust, each of the UBS Funds invested substantially all of its investable assets in corresponding series of the UBS Investor Portfolios Trust (collectively, the "UBS Portfolios"). As a result, the UBS Funds did not incur brokerage commissions. The brokerage commissions reflected were incurred by the UBS Portfolios. Portfolio Turnover The Series are free to dispose of their portfolio securities at any time, subject to complying with the Code and the Act, when changes in circumstances or conditions make such a move desirable in light of the respective investment objective. The Series will not attempt to achieve or be limited to a predetermined rate of portfolio turnover, such a turnover always being incidental to transactions undertaken with a view to achieving that Series' investment objective. The Series do not intend to use short-term trading as a primary means of achieving their investment objectives. The rate of portfolio turnover shall be calculated by dividing (a) the lesser of purchases and sales of portfolio securities for the particular fiscal year by (b) the monthly average of the value of the portfolio securities owned by that Series during the particular fiscal year. Such monthly average shall be calculated by totaling the values of the portfolio securities as of the beginning and end of the first month of the particular fiscal year and as of the end of each of the succeeding eleven months and dividing the sum by 13. Under normal circumstances, the portfolio turnover rate for the Global Equity Fund, U.S. Equity Fund, U.S. Value Equity Fund, U.S. Large Cap Growth Fund and Global (Ex-U.S.) Equity Fund is not expected to exceed 100%. The portfolio turnover rates for the Global Fund, Global Bond Fund, U.S. Large Cap Equity Fund, High Yield Fund, Emerging Markets Equity Fund, Emerging Markets Debt Fund, Global Technology Fund, U.S. Small Cap Equity Fund, Global Biotech Fund and U.S. Real Estate Equity Fund may exceed 100%, and in some years, 200%. The portfolio turnover rate for the U.S. Small Cap Growth Fund may exceed 150%, and for the U.S. Balanced Fund and U.S. Bond Fund, may exceed 100% and in some years, 300%. High portfolio turnover rates (over 100%) may involve correspondingly greater brokerage commissions and other transaction costs, which will be borne directly by the Series and ultimately by that Series' shareholders. In addition, high portfolio turnover may result in increased short-term capital gains, which, when distributed to shareholders, are treated as ordinary income. With respect to the Global Fund, for the fiscal years ended June 30, 1998 and June 30, 1999, the portfolio turnover rate of the Series was 88% and 105%, respectively. With respect to the Global Bond Fund, for the fiscal years ended June 30, 1998 and June 30, 1999, the portfolio turnover rate of the Series was 151% and 138%, respectively. With respect to the U.S. Balanced Fund, for the fiscal years ended June 30, 1998 and June 30, 1999, the portfolio turnover rate of the Series was 194% and 113%, respectively. With respect to the U.S. Bond Fund, for the fiscal years ended June 30, 1998 and June 30, 1999, the portfolio turnover rate of the Series was 198% and 260%, respectively. With respect to the Global Equity Fund, for the fiscal years ended June 30, 1998 and June 30, 1999, the portfolio turnover rate of the Series was 46% and 86%, respectively. With respect to the Global (Ex-U.S.) Equity Fund, for the fiscal years ended June 30, 1998 and June 30, 1999, the portfolio turnover rate of the Series was 49% and 74%, respectively. With respect to the U.S. Equity Fund, for the fiscal years ended June 30, 1998 and June 30, 1999, the portfolio turnover rate of the Series was 42% and 48%, respectively. With respect to the U.S. Large Cap Equity Fund, for the period April 6, 1998 (commencement of 57 operations) to June 30, 1998 and for the fiscal year ended June 30, 1999, the portfolio turnover rate of the Series was 12% and 88%, respectively. With respect to the High Yield Fund for the period December 19, 1998 to December 31, 1998 the portfolio turnover rate was 2%. With respect to the High Yield Fund for the period January 1, 1999 to June 30, 1999, the portfolio turnover rate of the Series was 77%. With respect to the U.S. Large Cap Growth Fund, for the period December 19, 1998 to December 31, 1998 , the portfolio turnover rate was 0%. With respect to the U.S. Large Cap Growth Fund for the period January 1, 1999 to June 30, 1999, the portfolio turnover rate of the Series was 51%. With respect to the U.S. Small Cap Growth Fund, for the period December 19, 1998 to December 31, 1998, the portfolio turnover rate was 5%. With respect to the U.S. Small Cap Growth Fund for the period January 1, 1999 to June 30, 1999, the portfolio turnover rate of the Series was 71%. Any significant variation in portfolio turnover rates over such periods was due to an increase in the assets of the Series which caused the Series to reposition their portfolio holdings in order to meet their investment objectives and policies. SHARES OF BENEFICIAL INTEREST Each Series is authorized to issue an unlimited number of shares of beneficial interest with a $0.001 par value per share. Each share of beneficial interest represents an equal proportionate interest in the assets and liabilities of the applicable Series and has identical voting, dividend, redemption, liquidation, and other rights and preferences as the other class of that Series, except that only shares of the UBS Investment Funds class may vote on any matter affecting only the UBS Investment Plans under Rule 12b-1. Similarly, only shares of the Brinson Fund-Class N may vote on matters that affect only the Class N Plan. No class may vote on matters that affect only another class. Under Delaware law, the Trust does not normally hold annual meetings of shareholders. Shareholders' meetings may be held from time to time to consider certain matters including changes to a Series' fundamental investment objective and fundamental investment policies, changes to the Trust's investment advisory agreement and the election of Trustees when required by the Act. When matters are submitted to shareholders for a vote, shareholders are entitled to one vote per share with proportionate voting for fractional shares. The shares of the Series do not have cumulative voting rights or any preemptive or conversion rights, and the Trustees have authority from time to time to divide or combine the shares of the Series into a greater or lesser number of shares so affected. In the case of a liquidation of a Series, each shareholder of the Series will be entitled to share, based upon the shareholder's percentage share ownership, in the distribution out of assets, net of liabilities, of the Series. No shareholder is liable for further calls or assessment by the Series. On any matters affecting only one Series or class, only the shareholders of that Series or class are entitled to vote. On matters relating to the Trust but affecting the Series differently, separate votes by the Series or class are required. With respect to the submission to shareholder vote of a matter requiring separate voting by a Series or class, the matter shall have been effectively acted upon with respect to any Series or class if a majority of the outstanding voting securities of that Series or class votes for the approval of the matter, notwithstanding that: (1) the matter has not been approved by a majority of the outstanding voting securities of any other Series or class; and (2) the matter has not been approved by a majority of the outstanding voting securities of the Trust. The Trustees of the Trust do not intend to hold annual meetings of shareholders of the Series. The SEC, however, requires the Trustees to promptly call a meeting for the purpose of voting upon the question of removal of any Trustee when requested to do so by not less than 10% of the outstanding shareholders of the respective Series. In addition, subject to certain conditions, shareholders of each Series may apply to the Series to communicate with other shareholders to request a shareholders' meeting to vote upon the removal of a Trustee or Trustees. Currently, the Trust offers eighteen Series: Global Fund, Global Equity Fund, Global Technology Fund, Global Biotech Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Value Equity Fund, U.S. Large Cap 58 Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Equity Fund, U.S. Small Cap Growth Fund, U.S. Real Estate Equity Fund, U.S. Bond Fund, High Yield Fund, Emerging Markets Debt Fund, Global (Ex-U.S.) Equity Fund and Emerging Markets Equity Fund. Three classes of shares are currently issued by the Trust for each Series: the Brinson Fund-Class N, Brinson Fund-Class I and UBS Investment Funds classes. Prior to September 15, 1998, the "UBS Investment Funds class" of shares was known as the "SwissKey Class" of shares. PURCHASES Shares of each class of each Series are sold at the net asset value (plus transaction charges applicable to purchases of shares of the Emerging Markets Equity Fund) next determined after the receipt of a purchase application in proper form by the transfer agent. There is no sales load in connection with the purchase of Fund shares. The Trust reserves the right to reject any purchase order and to suspend the offering of shares of the Brinson Fund-Class I shares, Brinson Fund-Class N shares, UBS Investment Funds class of shares or any Series. The minimum for initial investments with respect to the Brinson Fund-Class I for each Series is $1,000,000; subsequent investment minimums are $2,500. The minimum for initial investments with respect to the UBS Investment Funds class of shares for each Series is $25,000; subsequent investment minimums are $5,000. The minimum for initial investments with respect to the Brinson Fund-Class N for each Series is $1,000,000. The Trust reserves the right to vary the initial investment minimum and minimums for additional investments in any of the Funds at any time. In addition, Brinson Partners may waive the minimum initial investment requirement for any investor. The Brinson Fund-Class N shares and UBS Investment Funds class of shares may be purchased through broker-dealers having sales agreements with FDI, or through financial institutions having agency agreements with FDI. The Brinson Fund-Class N shares are subject to annual 12b-1 plan expenses of 0.25% (all of which are service fees to be paid by the Funds to FDI, dealers or others for providing personal service and/or maintaining shareholder accounts) of the Funds' average daily net assets of such share class. The UBS Investment Funds class of shares of the Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund, U.S. Small Cap Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund are subject to annual 12b-1 plan expenses of 0.90% (0.25% of which are service fees to be paid by the Funds to FDI, dealers or others for providing personal service and/or maintaining shareholder accounts) of the Funds' average daily net assets of such share class. The UBS Investment Funds class of shares of the U.S. Value Equity Fund, U.S. Small Cap Equity Fund, Global Technology Fund, Global Biotech Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund are subject to annual 12b-1 expenses of 1.00% (0.25% of which are service fees to be paid by the Funds to FDI, dealers or others for providing personal service and/or maintaining shareholder accounts) of the Funds' average daily net assets of such share class. The Brinson Fund-Class N shares may also, and the UBS Investment Funds will, be marketed directly through the offices of UBS A.G. Through its branches and subsidiaries, UBS A.G. conducts securities research, provides investment advisory services and manages mutual funds in major cities throughout the world, including Amsterdam, Basel, Frankfurt, Geneva, Hong Kong, Houston, London, Los Angeles, Luxembourg, Miami, Monte Carlo, New York, Paris, San Francisco, Singapore, Sydney, Tokyo, Toronto and Zurich. Purchase orders for shares of the Funds which are received by the transfer agent in proper form prior to the close of regular trading hours (currently 4:00 p.m. Eastern time) on the New York Stock Exchange (the "NYSE") on any day that the Funds' net asset values per share are calculated, are priced according to the net asset value determined on that day. Purchase orders for shares of the Funds received after the close of the NYSE on a particular day are priced as of the time the net asset value per share is 59 next determined. The Funds reserve the right to change the time at which purchases are priced if the NYSE closes at a time other than 4:00 p.m. Eastern time or if an emergency exists. Under certain circumstances, the Trust has entered into one or more agreements (each, a "Sales Agreement") with brokers, dealers or financial institutions (each, an "Authorized Dealer") under which the Authorized Dealer may directly, or through intermediaries that the Authorized Dealer is authorized to designate under the Sales Agreement (each, a "Sub-designee"), accept purchase and redemption orders that are in "good form" on behalf of the Funds. A Fund will be deemed to have received a purchase order when the Authorized Dealer or Sub-designee accepts the purchase order and such order will be priced at the Fund's net asset value next computed after such order is accepted by the Authorized Dealer or Sub-designee. The Trust may accept telephone orders for Fund shares from broker-dealers or service organizations which have been previously approved by the Trust. It is the responsibility of such broker-dealers or service organizations to promptly forward purchase orders and payments for the same to the Fund. Shares of the Funds may be purchased through broker-dealers, banks and bank trust departments which may charge the investor a transaction fee or other fee for their services at the time of purchase. Such fees would not otherwise be charged if the shares were purchased directly from the Trust. Brinson Partners, or its affiliates, from its own resources, may compensate broker-dealers or other financial intermediaries ("Service Providers") for marketing, shareholder servicing, recordkeeping and/or other services performed with respect to a Fund's Class N shares, Class I shares and UBS Investment Funds class of shares. Payments made for any of these purposes may be made from its revenues, its profits or any other sources available to it. When such service arrangements are in effect, they are made generally available to all qualified Service Providers. Certificates representing shares purchased are not issued. However, such purchases are confirmed to the investor and credited to the shareholder's account on the books maintained by the Trust's transfer agent. The investor will have the same rights of ownership with respect to such shares as if certificates had been issued. Exchanges of Shares Shares of one class of a Series may only be exchanged for the same class of another Series of the Trust. Exchanges will not be permitted between the different classes. Exchanges may be made only for shares of a Series and class then offering its shares for sale in your state of residence and are subject to the minimum initial investment requirement. Each qualifying exchange will be made on the basis of the relative net asset values per share of both the Series from which, and the Series into which, the exchange is made, that is next computed following receipt of the exchange order in proper form by the Trust's transfer agent. Transaction charges applicable to purchases and redemptions of shares of the Emerging Markets Equity Fund will apply to exchanges of shares into and out of that Fund. Exchanges may be made by telephone if the shareholder's Account Application Form includes specific authorization for telephone exchanges. The telephone exchange privilege may be difficult to implement during times of drastic economic or market changes. The transactions described above will result in a taxable gain or loss for federal income tax purposes. Generally, any such taxable gain or loss will be a capital gain or loss (long-term or short-term, depending on the holding period of the shares) in the amount of the difference between the net asset value of the shares surrendered and the shareholder's tax basis for those shares. Each investor should consult his or her tax adviser regarding the tax consequences of an exchange transaction. 60 Any shareholder who wishes to make an exchange should first obtain and review the Prospectus of the Series to be acquired in the exchange. Requests for telephone exchanges must be received prior to the close of regular trading on the NYSE (currently 4:00 p.m. Eastern time) on any day on which the NYSE is open for regular trading. The Funds reserve the right to change the time at which exchanges are priced if the NYSE closes at a time other than 4:00 p.m. Eastern time or if an emergency exists. At the discretion of the Trust, this exchange privilege may be terminated or modified at any time for any of the participating Series upon 60 days' prior written notice to shareholders. Contact the transfer agent for details about a particular exchange. Transfer of Securities At the discretion of the Trust, investors may be permitted to purchase Fund shares by transferring securities to a Series that meet the Series' investment objective and policies. Securities transferred to a Series will be valued in accordance with the same procedures used to determine the Fund's net asset value at the time of the next determination of net asset value after such acceptance. Shares issued by a Series in exchange for securities will be issued at net asset value per share of the Fund determined as of the same time. All dividends, interest, subscription, or other rights pertaining to such securities shall become the property of the Series and must be delivered to the Series by the investor upon receipt from the issuer. Investors who are permitted to transfer such securities will be required to recognize a gain or loss on such transfer and pay tax thereon, if applicable, measured by the difference between the fair market value of the securities and the investors' basis therein. Securities will not be accepted in exchange for shares of a Fund unless: (1) such securities are, at the time of the exchange, eligible to be included in the Series' portfolio and current market quotations are readily available for such securities; (2) the investor represents and warrants that all securities offered to be exchanged are not subject to any restrictions upon their sale by the Series under the 1933 Act, or under the laws of the country in which the principal market for such securities exists, or otherwise; and (3) the value of any such security (except U.S. government securities) being exchanged, together with other securities of the same issuer owned by the Series, will not exceed 5% of the Series' net assets immediately after the transaction. Net Asset Value The net asset value per share is calculated separately for each class of each Series. The net asset value per share of a class of a Series is computed by dividing the value of the assets related to that class of the Series, less the liabilities related to that class, by the number of shares of the class of the Series outstanding. Each class of a Series will bear pro rata all of the common expenses of that Series. The net asset values of all outstanding shares of each class of a Series will be computed on a pro rata basis for each outstanding share based on the proportionate participation in the Series represented by the value of shares of that Series. All income earned and expenses incurred by a Series will be borne on a pro rata basis by each outstanding share of a class, based on each class' percentage in the Series represented by the value of such shares of such classes, except that none of the shares of a class will incur any of the expenses under the 12b-1 plan of another class. Portfolio securities are valued and net asset value per share is determined as of the close of regular trading on the NYSE which currently is 4:00 p.m. Eastern time on each day the NYSE is open for trading. The Series of the Trust reserve the right to change the time at which purchases, redemptions or exchanges are priced if the NYSE closes at a time other than 4:00 p.m. Eastern time or if an emergency exists. The NYSE is open for trading on every day except Saturdays, Sundays and the following holidays: New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day (day observed), Independence Day, Labor Day, Thanksgiving Day and Christmas Day and on the preceding Friday or subsequent Monday when any of these holidays falls on a Saturday or Sunday, respectively. 61 Portfolio securities listed on a national or foreign securities exchange are valued on the basis of the last sale on the date the valuation is made. Securities that are not traded on a particular day or an exchange, are valued at either (a) the bid price or (b) a valuation within the range considered best to represent value in the circumstances. Price information on listed securities is generally taken from the closing price on the exchange where the security is primarily traded. Other portfolio securities which are traded in the over-the- counter market are valued at the bid price as long as the bid price, in the opinion of the Advisor, continues to reflect the value of the security. Valuations of fixed income and equity securities may be obtained from a pricing service and/or broker-dealers when such prices are believed to reflect the fair value of such securities. Use of a pricing service and/or broker-dealers has been approved by the Board. Futures contracts are valued at their daily quoted settlement price on the exchange on which they are traded. Forward foreign currency contracts are valued daily using the mean between the bid and asked forward points added to the current exchange rate and an unrealized gain or loss is recorded. A Series realizes a gain or loss upon settlement of the contracts. Swaps will be priced at fair value based on (1) swap prices provided by broker-dealers; (2) values, or estimates of values, of the applicable equity indices and foreign rates underlying the contracts; and (3) consideration of other relevant factors. A Series' obligation under a swap agreement will be accrued daily (offset by any amounts owing to the portfolio) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the maintenance of a segregated account consisting of Segregated Assets. For valuation purposes, foreign securities initially expressed in foreign currency values will be converted into U.S. dollar values using WM/Reuters closing spot rates as of 4:00 p.m. London time. Securities with a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. Fixed income securities having a remaining maturity of over 60 days are valued at market price. Debt securities are valued on the basis of prices provided by a pricing service, or at the bid price where readily available, as long as the bid price, in the opinion of the Advisor, continues to reflect the value of the security. Redeemable securities issued by open-end investment companies are valued using their respective net asset values for purchase orders placed at the close of the NYSE. Securities (including over-the-counter options) for which market quotations are not readily available and other assets are valued at their fair value as determined in good faith by or under the direction of the Trustees. Because of time zone differences, foreign exchanges and securities markets will usually be closed prior to the time of the closing of the NYSE and values of foreign futures and options and foreign securities will be determined as of the earlier closing of such exchanges and securities markets. However, events affecting the values of such foreign securities may occasionally occur between the earlier closings of such exchanges and securities markets and the closing of the NYSE which will not be reflected in the computation of the net asset value of a Series. If an event materially affecting the value of such foreign securities occurs during such period, then such securities will be valued at fair value as determined in good faith by or under the direction of the Board. Where a foreign securities market remains open at the time that a Series values its portfolio securities, or closing prices of securities from that market may not be retrieved because of local time differences or other difficulties in obtaining such prices at that time, last sale prices in such market at a point in time most practicable to timely valuation of the Series may be used. Due to the specific distribution expenses and other costs that will be allocable to each class, the dividends paid to each class, and related performance, of the Series may vary. The per share net asset value of the Brinson Fund-Class N shares and the UBS Investment Funds class of shares will generally be lower than that of the Brinson Fund-Class I shares of a Series because of the higher expenses borne by the UBS Investment Funds class of shares and the Brinson Fund-Class N shares. It is expected, however, that the net asset value per share of the two classes will tend to converge immediately after the payment of dividends, which will differ by approximately the amount of the service and distribution expenses differential among the classes. 62 REDEMPTIONS Under normal circumstances shareholders may redeem their shares at any time without a fee, except for the transaction charge applicable to redemptions of shares of the Emerging Markets Equity Fund. The redemption price will be based upon the net asset value per share (less the transaction charge applicable to redemptions of shares of the Emerging Markets Equity Fund) next determined after receipt of the redemption request, provided it has been submitted in the manner described below. Redemption requests received prior to the close of regular trading hours (generally 4:00 p.m. Eastern time) on the NYSE will be executed at the net asset value computed on the date of receipt. Redemption requests received after the close of regular trading hours will be executed at the next determined net asset value. The redemption price may be more or less than the original cost, depending upon the net asset value per share at the time of redemption. Payment for shares tendered for redemption is made by check within seven days after tender in proper form, except that the Trust reserves the right to suspend the right of redemption, or to postpone the date of payment upon redemption beyond seven days, (i) for any period during which the NYSE is closed (other than customary weekend and holiday closings) or during which trading on the NYSE is restricted, (ii) for any period during which an emergency exists as determined by the SEC as a result of which disposal of securities owned by a Series is not reasonably practicable or it is not reasonably practicable for the Series fairly to determine the value of its net assets, or (iii) for such other periods as the SEC may by order permit for the protection of shareholders of the Series. Shares of the Funds may be redeemed through certain broker-dealers, banks and bank trust departments who may charge the investor a transaction fee or other fee for their services at the time of redemption. Such fees would not otherwise be charged if the shares were redeemed directly from the Trust. Under the Sales Agreement, the Authorized Dealer or Sub-designee is authorized to accept redemption orders on behalf of the Funds. A Fund will be deemed to have received a redemption order when the Authorized Dealer or Sub- designee accepts the redemption order and such order will be priced at the Fund's net asset value next computed after such order is accepted by the Authorized Dealer or Sub-designee. The Trust will satisfy redemption requests in cash to the fullest extent feasible, so long as such payments would not, in the opinion of Brinson Partners or the Board, result in the necessity of a Series selling assets under disadvantageous conditions and to the detriment of the remaining shareholders of the Series. Pursuant to the Trust's Agreement and Declaration of Trust, payment for shares redeemed may be made either in cash or in-kind, or partly in cash and partly in-kind. Under unusual circumstances, when the Board deems it in the best interest of the Series' shareholders, the Trust may make payment for shares repurchased or redeemed in whole or in part in securities of the Series taken at current values. With respect to such redemptions in kind, the Trust has made an election pursuant to Rule 18f-1 under the Act. This will require the Trust to redeem in cash at a shareholder's election in any case where the redemption involves less than $250,000 (or 1% of the Series' net asset value at the beginning of each 90 day period during which such redemptions are in effect, if that amount is less than $250,000), during any 90-day period for any one shareholder. Should payment be made in securities, the redeeming shareholder may incur brokerage costs in converting such securities to cash. In-kind payments to non-affiliated shareholders need not constitute a cross-section of a Series' portfolio. Where a shareholder has requested redemption of all or a part of the shareholder's investment and where a Series computes such redemption in-kind, the Series will not recognize gain or loss for federal tax purposes on the securities used to compute the redemption, but the shareholder will recognize gain or loss equal to the difference between the fair market value of the securities received and the shareholder's basis in the Fund shares redeemed. Pursuant to an exemptive order issued by the SEC, the Trust is permitted to pay redemptions in-kind to shareholders that are affiliated persons of the Funds by nature of a greater than 5% ownership interest in the Funds. Any such redemptions in-kind would be undertaken in compliance with the order's condition. 63 Due to the relatively high cost of maintaining smaller accounts, the Trust reserves the right to involuntarily redeem UBS Investment Funds class of shares in any Fund account for their then current net asset value (which will be promptly paid to the shareholder) if at any time the total investment does not have a value of at least $1,000 as a result of redemptions and not due to changes in the asset value of the Series. The shareholder will be notified that the value of his or her Fund account is less than the required minimum and will be allowed at least 60 days to bring the value of the account up to the minimum before the redemption is processed. Shareholders who wish to initiate purchase, exchange or redemption transactions by telephone must elect the option either on the initial application or by subsequently arranging it in writing. With respect to such telephone transactions, the Funds will ensure that reasonable procedures are used to confirm that instructions communicated by telephone are genuine (including verification of the shareholder's social security number or mother's maiden name) and, if they do not, the Funds or the transfer agent may be liable for any losses due to unauthorized or fraudulent transactions. Written confirmation will be provided for all purchase, exchange and redemption transactions initiated by telephone. TAXATION Additional Information On Distributions And Taxes Distributions Distributions of Net Investment Income. Each Series receives income generally in the form of dividends and interest on its investments. This income, less expenses incurred in the operation, constitute a Series' net investment income from which dividends may be paid to you. Any distributions by a Series from such income will be taxable to you as ordinary income, whether you take them in cash or in additional shares. Distributions of Capital Gains. A Series may derive capital gains and losses in connection with sales or other dispositions of its portfolio securities. Distributions derived from the excess of net short-term capital gain over net long-term capital loss will be taxable to you as ordinary income. Distributions paid from long-term capital gains realized by a Series will be taxable to you as long-term capital gain, regardless of how long you have held your shares in the Series. Any net short-term or long-term capital gains realized by a Series (net of any capital loss carryovers) generally will be distributed once each year, and may be distributed more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Series. Effect of Foreign Investments on Distributions. For Series which invest in foreign debt instruments, most foreign exchange gains realized on the sale of debt instruments are treated as ordinary income by such Series. Similarly, foreign exchange losses realized by such Series on the sale of debt instruments are generally treated as ordinary losses by the Series. These gains when distributed will be taxable to you as ordinary dividends, and any losses will reduce the Series' ordinary income otherwise available for distribution to you. This treatment could increase or reduce the Series' ordinary income distributions to you, and may cause some or all of the Series' previously distributed income to be classified as a return of capital. A Series may be subject to foreign withholding taxes on income from certain of its foreign securities. If more than 50% of the Series' total assets at the end of the fiscal year are invested in securities of foreign corporations, the Series may elect to pass-through to you your pro rata share of foreign taxes paid by the Series. If this election is made, the year-end statement you receive from the Series will show more taxable income than was actually distributed to you. However, you will be entitled to either deduct your share of such taxes in computing your taxable income or claim a foreign tax credit 64 for such taxes against your U.S. federal income tax. The Series will provide you with the information necessary to complete your individual income tax return if such election is made. Information on the Tax Character of Distributions. Each Series will inform you of the amount and character of your distributions at the time they are paid, and will advise you of the tax status for federal income tax purposes of such distributions shortly after the close of each calendar year. If you have not held shares of a Series for a full year, you may have designated and distributed to you as ordinary income or capital gain a percentage of income that is not equal to the actual amount of such income earned during the period of your investment in the Series. Taxes Election to be Taxed as a Regulated Investment Company. Each Series has elected to be treated as a regulated investment company under Subchapter M of the Code, has qualified as such for its most recent fiscal year, and intends to so qualify during the current fiscal year. As a regulated investment company, each Series generally pays no federal income tax on the income and gains it distributes to you. The Board reserves the right not to maintain the qualification of the Series as a regulated investment company if it determines such course of action to be beneficial to you. In such case, the Series will be subject to federal, and possibly state, corporate taxes on its taxable income and gains, and distributions to you will be taxed as ordinary dividend income to the extent of the Series' available earnings and profits. Excise Tax Distribution Requirements. The Code requires each Series to distribute at least 98% of its taxable ordinary income earned during the calendar year and 98% of its capital gain net income earned during the twelve month period ending October 31 (in addition to undistributed amounts from the prior year) to you by December 31 of each year in order to avoid federal excise taxes. Each Series intends to declare and pay sufficient dividends in December (or in January that are treated by you as received in December) but does not guarantee and can give no assurances that its distributions will be sufficient to eliminate all such taxes. Redemption of Series Shares. Redemptions and exchanges of shares of a Series are taxable transactions for federal and state income tax purposes that cause you to recognize a gain or loss. If you hold your shares as a capital asset, the gain or loss that you realize will be capital gain or loss. Any loss incurred on the redemption or exchange of shares held for six months or less will be treated as a long-term capital loss to the extent of any long-term capital gains distributed to you by the Series on those shares. All or a portion of any loss that you realize upon the redemption of your shares of a Series will be disallowed to the extent that you purchase other shares in such Series (through reinvestment of dividends or otherwise) within 30 days before or after your share redemption. Any loss disallowed under these rules will be added to your tax basis in the new shares you purchase. U.S. Government Obligations. Many states grant tax-free status to dividends paid to you from interest earned on direct obligations of the U.S. government, subject in some states to minimum investment requirements that must be met by a Series. Investments in GNMA/FNMA securities, bankers' acceptances, commercial paper and repurchase agreements collateralized by U.S. government securities do not generally qualify for tax-free treatment. The rules on exclusion of this income are different for corporations. Dividends-Received Deduction for Corporations. Corporate investors in certain Series may be entitled to a dividends-received deduction on a portion of the ordinary dividends they receive from such Series. The portion of the dividends which qualifies for the dividends-received deduction depends on the aggregate qualifying dividend income received by a Series from domestic (US) sources. Certain holding period and debt financing restrictions may also apply to corporate investors seeking to claim the 65 deduction. All dividends (including the deducted portion) must be included in your alternative minimum taxable income calculation. Investment in Complex Securities. A Series may invest in complex securities. Such investments may be subject to numerous special and complex tax rules. These rules could affect whether gains and losses recognized by a Series are treated as ordinary income or capital gain, accelerate the recognition of income to a Series or defer a Series' ability to recognize losses, and, in limited cases, subject the Series to U.S. federal income tax on income from certain of its foreign securities. In turn, these rules may affect the amount, timing or character of the income distributed to you by a Series. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION Shareholders of the Emerging Markets Equity Fund are subject to a 1.50% transaction charge in connection with each purchase and redemption of shares of the Series. Shareholders of the Emerging Markets Debt Fund are subject to a 0.75% transaction charge in connection with each purchase of shares of the Series. Shares of the Series are sold at a price which is equal to the net asset value of such shares, plus the transaction charge. Redemption requests for the Emerging Markets Equity Fund are paid at the net asset value less the transaction charge. The transaction charges do not apply to the reinvestment of dividends or capital gain distributions. The transaction charges are paid to the Series and used by them to defray the transaction costs associated with the purchase and sale of securities within the Series. The amount of the transaction charge on purchase and redemptions represents the estimate of the costs reasonably anticipated to be associated with the purchase of securities with cash received from shareholders and the sale of securities to obtain cash to redeem shareholders. Therefore, the transaction charges offset the dilutive effect such costs would otherwise have on the net asset value of the Series' shares. Purchases and redemptions which are made in kind with securities are not subject to the transaction charges. PERFORMANCE CALCULATIONS From time to time, performance information, such as yield or total return, may be quoted in advertisements or in communications to present or prospective shareholders. Performance quotations represent the Funds' past performance and should not be considered as representative of future results. The current yield will be calculated by dividing the net investment income earned per share by a Fund during the period stated in the advertisement (based on the average daily number of shares entitled to receive dividends outstanding during the period) by the maximum net asset value per share on the last day of the period and annualizing the result on a semi-annual compounded basis. The Funds' total return may be calculated on an annualized and aggregate basis for various periods (which periods will be stated in the advertisement). Average annual return reflects the average percentage change per year in value of an investment in a Fund. Aggregate total return reflects the total percentage change over the stated period. To help investors better evaluate how an investment in the Brinson Funds might satisfy their investment objectives, advertisements regarding the Funds may discuss yield or total return as reported by various financial publications. Advertisements may also compare yield or total return to other investments, indices and averages. The following publications, benchmarks, indices and averages may be used: Lipper Mutual Fund Performance Analysis; Lipper Fixed Income Analysis; Lipper Mutual Fund Indices; Morgan Stanley Indices; Lehman Brothers Treasury Index; Salomon Smith Barney Indices; Dow Jones Composite Average or its component indices; Standard & Poor's 500 Stock Index or its component indices; Wilshire Indices; The New York Stock Exchange composite or component indices; CDA Mutual Fund Report; Weisenberger-Mutual Funds Panorama and Investment Companies; Mutual Fund Values and Mutual Fund Service Book, published by Morningstar, Inc.; comparable portfolios managed by the Advisor; and financial publications, such as Business Week, Kiplinger's Personal Finance, Financial World, Forbes, Fortune, Money Magazine, The Wall Street Journal, Barron's, et al., which rate fund performance over various time periods. 66 The principal value of an investment in the Funds will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Any fees charged by banks or other institutional investors directly to their customer accounts in connection with investments in shares of the Funds will not be included in the Brinson Funds' calculations of yield or total return. Performance information for the UBS Investment Funds class of shares, Brinson Fund-Class N and Brinson Fund-Class I shares of each Series will vary due to the effect of expense ratios on the performance calculations. Total Return Current yield and total return quotations used by the Series (and classes of shares) are based on standardized methods of computing performance mandated by rules adopted by the SEC. As the following formula indicates, the average annual total return is determined by multiplying a hypothetical initial purchase order of $1,000 by the average annual compound rate of return (including capital appreciation/depreciation and dividends and distributions paid and reinvested) for the stated period less any fees charged to all shareholder accounts and annualizing the result. The calculation assumes that all dividends and distributions are reinvested at the net asset value on the reinvestment dates during the period. The quotation assumes the account was completely redeemed at the end of each period and deduction of all applicable charges and fees. According to the SEC formula: P(1+T)/n/=ERV where: P = a hypothetical initial payment of $1,000, T = average annual total return, n = number of years, ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the 1, 5 or 10 year periods at the end of the 1, 5 or 10 year periods (or fractional portion thereof). Based upon the foregoing calculations, the average annual total return for the Brinson Fund-Class I (previously Brinson Fund Class) shares of:* (i) the Global Fund, for the one and five-year periods ended December 31, 1999 and the period August 31, 1992 (commencement of operations) through December 31, 1999 was 1.49%, 11.56% and 9.51%, respectively; (ii) the Global Equity Fund, for the one and five-year periods ended December 31, 1999 and the period January 28, 1994 (commencement of operations) through December 31, 1999 was 12.87%, 15.29%, and 11.94%, respectively; (iii) the Global Bond Fund, for the one and five-year periods ended December 31, 1999 and the period July 30, 1993 (commencement of operations) through December 31, 1999 was -6.27%, 7.00% and 5.45%, respectively; (iv) the U.S. Balanced Fund, for the one- and five-year periods ended December 31, 1999 and the period December 30, 1994 (commencement of operations) through December 31, 1999 was -6.95%, 10.09% and 10.09%, respectively; (v) the U.S. Equity Fund, for the one- and five-year periods ended December 31, 1999 and the period February 22, 1994 (commencement of operations) through December 31, 1999 was -4.05%, 20.17% and 16.17%, respectively; 67 (vi) the U.S. Large Cap Equity Fund, for the one-year period ended December 31, 1999 and for the period April 30, 1998 (performance inception date) through December 31, 1999 was 11.05% and -3.53%, respectively; (vii) the U.S. Large Cap Growth Fund, for the one-year period ended December 31, 1999 and the period October 31, 1997 (performance inception date) through December 31, 1999 was 32.73% and 28.53%, respectively;** (viii) the U.S. Small Cap Growth Fund, for the one-year period ended December 31, 1999 and the period September 30, 1997 (commencement of operations) through December 31, 1999 was 41.70% and 10.33%, respectively; ** (ix) the U.S. Bond Fund, for the one- and three-year periods ended December 31, 1999 and the period August 31, 1995 (commencement of operations) through December 31, 1999 was -1.04%, 5.55% and 5.94%, respectively; (x) the High Yield Fund, for the one-year period ended December 31, 1999 and the period September 30, 1997 (commencement of operations) through December 31, 1999 was 4.85% and 6.66%, respectively; ** and (xi) the Global (Ex-U.S.) Equity Fund, for the one- and five-year periods ended December 31, 1999 and the period August 31, 1993 (commencement of operations) through December 31, 1999 was 19.16%, 13.42%, and 10.01%, respectively. * The U.S. Value Equity Fund, U.S. Small Cap Equity Fund, Global Technology Fund, Global Biotech Fund, U.S Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund had not commenced operations as of the time periods indicated. ** These Series were reorganized as Series of the Trust on December 18, 1998. The average annual total return calculations also reflect the performance of these Series while they were series of the UBS Private Investor Funds, Inc. Based upon the foregoing calculations, the average annual total return for the Brinson Funds-UBS Investment Funds (previously the SwissKey Class) class of shares of:* (i) the Global Fund, for the one- and three-year periods ended December 31, 1999 and the period July 31, 1995 (commencement of operations) through December 31, 1999 was 0.83%, 6.13% and 9.18%, respectively; 68 (ii) the Global Equity Fund, for the one- and three-year periods ended December 31, 1999 and the period July 31, 1995 (commencement of operations) through December 31, 1999 was 12.02%, 11.68% and 13.94%, respectively; (iii) the Global Bond Fund, for the one- and three-year periods ended December 31, 1999 and the period July 31, 1995 (commencement of operations) through December 31, 1999 was -6.74%, 1.73% and 4.74%, respectively; (iv) the U.S. Balanced Fund, for the one- and three-year periods ended December 31, 1999 and the period July 31, 1995 (commencement of operations) through December 31, 1999 was -7.44%, 4.54% and 7.43%, respectively; (v) the U.S. Equity Fund, for the one- and three-year periods ended December 31, 1999 and the period July 31, 1995 (commencement of operations) through December 31, 1999 was -4.51%, 11.83% and 16.71%, respectively; (vi) the U.S. Large Cap Equity Fund, for the one-year period ended December 31, 1999 and the period April 30, 1998 (performance inception date) through December 31, 1999 was 11.39% and -4.06%, respectively; (vii) the U.S. Large Cap Growth Fund, for the one-year period ended December 31, 1999 and the period December 31, 1998 (commencement of operations) through December 31, 1999 was 31.63%;** (viii) the U.S. Small Cap Growth Fund, for the one-year period ended December 31, 1999 and the period December 31, 1998 (commencement of operations) through December 31, 1999 was 40.57%; ** (ix) the U.S. Bond Fund, for the one- and three-year periods ended December 31, 1999 and the period August 31, 1995 (commencement of operations) through December 31, 1999 was -1.55%, 4.99% and 5.41%, respectively; (x) the High Yield Fund, for the one-year period ended December 31, 1999 and the period December 31, 1998 (commencement of operations) through December 31, 1999 was 4.09%; ** and (xi) the Global (Ex-U.S.) Equity Fund, for the one- and three-year periods ended December 31, 1999 and the period July 31, 1995 (commencement of operations) through December 31, 1999 was 18.15%, 12.07% and 12.88%, respectively. * The U.S. Value Equity Fund, U.S. Small Cap Equity Fund, Global Technology Fund, Global Biotech Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund 69 had not commenced operations as of the time periods indicated. ** These Series were reorganized as Series of the Trust on December 18, 1998. Based on the foregoing calculations, the average annual total return for the Brinson Fund-Class N shares of *: (i) the Global Fund, for the one-year period ended December 31, 1999 and the period June 30, 1997 (commencement of operations) through December 31, 1999 was 1.18% and 4.34%, respectively; (ii) the Global Equity Fund, for the one-year period ended December 31, 1999 and the period June 30, 1997 (commencement of operations) through December 31, 1999 was 12.59% and 9.51%, respectively; (iii) the Global Bond Fund, for the one-year period ended December 31, 1999 and the period June 30, 1997 (commencement of operations) through December 31, 1999 was -6.58% and 2.09%, respectively; (iv) the U.S. Balanced Fund, for the one-year period ended December 31, 1999 and the period June 30, 1997 (commencement of operations) through December 31, 1999 was -7.43% and 2.96%, respectively; (v) the U.S. Equity Fund, for the one-year period ended December 31, 1999 and the period June 30, 1997 (commencement of operations) through December 31, 1999 was -4.22% and 7.77%, respectively; (vi) the U.S. Large Cap Equity Fund, for the one-year period ended December 31, 1999 and the period April 30, 1998 (performance inception date) through December 31, 1999 was -11.12% and -3.74%, respectively; (vii) the U.S. Large Cap Growth Fund, for the one-year period ended December 31, 1999 and the period December 31, 1998 (commencement of operations) through December 31, 1999 was 32.22%;** (viii) the U.S. Small Cap Growth Fund, for the one-year period ended December 31, 1999 and the period December 31, 1998 (commencement of operations) through December 31, 1999 was 41.14%; ** (ix) the U.S. Bond Fund, for the one-year period ended December 31, 1999 and the period June 30, 1997 (commencement of operations) through December 31, 1999 was -1.45% and 5.24%, respectively; (x) the High Yield Fund, for the one-year period ended December 31, 1999 and the period December 31, 1998 (commencement of operations) through December 31, 1999 was 4.53%;** and (xi) the Global (Ex-U.S.) Equity Fund, for the one-year period ended December 31, 1999 and the period June 30, 1997 (commencement of operations) through December 31, 1999 was 18.90% and 9.44%, respectively. 70 * The U.S. Value Equity Fund, U.S. Small Cap Equity Fund, Global Technology Fund, Global Biotech Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund had not commenced operations as of the time periods indicated. ** These Series were reorganized as Series of the Trust on December 18, 1998. Yield As indicated below, current yield is determined by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period and annualizing the result. Expenses accrued for the period include any fees charged to all shareholders during the 30-day base periods. According to the SEC formula: Yield = 2[(a-b + 1)/6/ - 1 ------------------ cd where: a = dividends and interest earned during the period. b = expenses accrued for the period (net of reimbursements). c = the average daily number of shares outstanding during the period that were entitled to receive dividends. d = the maximum offering price per share on the last day of the period. The yield of a Series may be calculated by dividing the net investment income per share earned by the particular Series during a 30-day (or one month) period by the net asset value per share on the last day of the period and annualizing the result on a semi-annual basis. A Series' net investment income per share earned during the period is based on the average daily number of shares outstanding during the period entitled to receive dividends and includes dividends and interest earned during the period minus expenses accrued for the period, net of reimbursements. FINANCIAL STATEMENTS AND REPORTS OF INDEPENDENT AUDITORS The Series' unaudited financial statements for the six month period ended December 31, 1999, which are contained in the Series' Semi-Annual Reports dated December 31, 1999 (as filed with the SEC on March 3, 2000 pursuant to Section 30(b) of the Act and Rule 30b2-1 thereunder (Accession Number 000950109-00-000763)) are incorporated herein by reference. The Series' financial statements for the fiscal year ended June 30, 1999 and the reports thereon of August 11, 1999, which are contained in the Series' Annual Reports dated June 30, 1999 (as filed with SEC on September 3, 1999, pursuant to Section 30(b) of the Act and Rule 30b2-1 thereunder (Accession Number 0000950109-99-003295)) are incorporated herein by reference. 71 72 73 74 75 76 77 CORPORATE DEBT RATINGS APPENDIX A Moody's Investors Service, Inc. describes classifications of corporate bonds as follows: Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt-edged". Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa - Bonds which are rated Aa are judged to be of high-quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A - Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa - Bonds which are rated Baa are considered as medium-grade obligations, (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba - Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B - Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa - Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca - Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C - Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Moody's also supplies numerical indicators 1, 2, and 3 to rating categories. The modifier 1 indicates the security is in the higher end of its rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking toward the lower end of the category. A-1 Standard & Poor's Ratings Group describes classifications of corporate bonds as follows: AAA - This is the highest rating assigned by Standard & Poor's Ratings Group to a debt obligation and indicates an extremely strong capacity to pay principal and interest. AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay principal and interest is very strong and in the majority of instances they differ from the AAA issues only in small degree. A - Bonds rated A have a strong capacity to pay principal and interest, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions. BBB - Bonds rated BBB are regarded as having an adequate capacity to pay principal and interest. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay principal and interest for bonds in this category than for bonds in the A category. BB - Debt rated BB has less near-term vulnerability to default than other speculative grade debt. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lend to inadequate capacity to meet timely interest and principal payments. B - Debt rated B has a greater vulnerability to default but presently has the capacity to meet interest payments and principal repayments. Adverse business, financial or economic conditions would likely impair capacity or willingness to pay interest and repay principal. CCC - Debt rated CCC has a current identifiable vulnerability to default, and is dependent upon favorable business, financial and economic conditions to meet timely payments of interest and repayment of principal. In the event of adverse business, financial or economic conditions, it is not likely to have the capacity to pay interest or repay principal. CC - The rating CC is typically applied to debt subordinated to senior debt which is assigned an actual or implied CCC rating. C - The rating C is typically applied to debt subordinated to senior debt which is assigned an actual or implied CCC rating. CI - The rating CI is reserved for income bonds on which no interest is being paid. D - Debt rated D is in default, or is expected to default upon maturity or payment date. Plus (+) or minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. A-2 APPENDIX B SECONDARY RISKS The chart below illustrates secondary risks of investing in the Funds.
Foreign Geographic Counter- Country Concen- High Interest Non-Public Pre- Small party Credit Derivative & Currency tration Yield Rate Securities payment Company - ------------------------------------------------------------------------------------------------------------------------------------ Global Fund * * * * * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Equity Fund * * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Technology Fund * * * * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Biotech Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ Global Bond Fund * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Balanced Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Equity Fund * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Value Equity Fund * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Large Cap Equity Fund * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Large Cap Growth Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Small Cap Equity Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Small Cap Growth Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Real Estate Equity Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Bond Fund * * * * - ------------------------------------------------------------------------------------------------------------------------------------ High Yield Fund * * * * * - ------------------------------------------------------------------------------------------------------------------------------------ Emerging Markets * * * * Debt Fund - ------------------------------------------------------------------------------------------------------------------------------------ Global (Ex-U.S.) Equity Fund * * - ------------------------------------------------------------------------------------------------------------------------------------ Emerging Markets * * * * * * Equity Fund - ------------------------------------------------------------------------------------------------------------------------------------
1 Definition of Risks Counterparty Risk The risk that when a Fund engages in repurchase, reverse repurchase, derivative, when-issued, forward commitment, delayed settlement and securities lending transactions with another party, it relies on the other party to consummate the transaction and is subject to the risk of default by the other party. Failure of the other party to complete the transaction may cause the Fund to incur a loss or to miss an opportunity to obtain a price believed to be advantageous Credit Risk The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise be unable to honor a financial obligation. Debt securities rated below investment-grade are especially susceptible to this risk. Derivative Risk The risk that downward price changes in a security may result in a loss greater than a Fund's investment in the security. This risk exists through the use of certain securities or techniques that tend to magnify changes in an index or market. Foreign Country and Currency Risks The risk that prices of a Fund's investments in foreign securities may go down because of unfavorable foreign government actions, political instability or the absence of accurate information about foreign issuers. Also, a decline in the value of foreign currencies relative to the U.S. dollar will reduce the value of securities denominated in those currencies. Foreign securities are sometimes less liquid and harder to value than securities of U.S. issuers. These risks are more severe for securities of issuers in emerging market countries. The World Bank and other international agencies consider a country to be an "emerging markets" country on the basis of such factors as trade initiatives, per capita income and level of industrialization. Emerging market countries generally include every nation in the world except the U.S., Canada, Japan, Australia, New Zealand and most nations located in Western Europe. On January 1, 1999, the European Monetary Union introduced a new single currency, the Euro, which replaced the national currencies of participating member nations. If a Fund held investments in nations with currencies replaced by the Euro, the investment process, including trading, foreign exchange, payments, settlements, cash accounts, custody and accounting, was impacted. To the extent the Funds hold non-U.S. dollar denominated securities (Euro or other), they will still be exposed to currency risk due to fluctuations in those currencies versus the U.S. dollar. Geographic Concentration Risk The risk that if a Fund has most of its investments in a single country or region, its portfolio will be more susceptible to factors adversely affecting issuers located in that country or region than would a more geographically diverse portfolio of securities. B-2 High Yield Risk The risk that the issuer of bonds with ratings of BB (S&P) or Ba (Moody's) or below will default or otherwise be unable to honor a financial obligation. These securities are considered to be of poor standing and are predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligations and involve major risk exposure. Bonds in this category may also be called "high yield bonds" or "junk bonds." Interest Rate Risk The risk that changing interest rates may adversely affect the value of an investment. With fixed-rate securities, an increase in prevailing interest rates typically causes the value of a Fund's securities to fall, while a decline in prevailing interest rates may produce an increase in the market value of the securities. Changes in interest rates will affect the value of longer-term fixed income securities more than shorter-term securities and lower quality securities more than higher quality securities. Non-Public Securities Risk The risk that there may be a less liquid market for unlisted securities than for publicly traded securities. A Fund, therefore, may not be able to resell its investments. In addition, less disclosure is required from non-public companies. Although unlisted securities may be resold in private transactions, the prices realized from the sale may be less than what the investing Fund considers the fair value of the securities. Portfolio Turnover The Funds generally intend to purchase securities for long-term investment. Portfolio turnover rates are not a factor in making buy and sell decisions. Increased portfolio turnover may result in higher costs for brokerage commissions, dealer mark-ups and other transaction costs. It may also result in taxable capital gains. Higher costs associated with increased portfolio turnover may offset gains in a Fund's performance. Prepayment Risk The risk that issuers will prepay fixed rate obligations when interest rates fall, forcing the Fund to re-invest in obligations with lower interest rates than the original obligations. Small Company Risk The risk that investments in smaller companies may be more volatile than investments in larger companies, as smaller companies generally experience higher growth and failure rates. The trading volume of smaller company securities is normally lower than that of larger companies. Changes in the demand for the securities of smaller companies generally have a disproportionate effect on their market price, tending to make prices rise more in response to buying demand and fall more in response to selling pressure. B-3 THE BRINSON FUNDS FORM N-1A PART C. OTHER INFORMATION ITEM 22. FINANCIAL STATEMENTS. -------------------- (a) Registration Statement. Included in Part A: Financial Highlights for the year ended June 30, 1999 and previous years:
CLASS I - ------- Brinson Global Fund - Class I Brinson U.S. Small Cap Growth Fund*** - Brinson Global Equity Fund - Class I Class I Brinson Global Bond Fund - Class I Brinson U.S. Bond Fund - Class I Brinson U.S. Balanced Fund - Class I Brinson High Yield Fund - Class I Brinson U.S. Equity Fund - Class I Brinson Global (Ex-U.S.) Equity Fund **** - Class I Brinson U.S. Large Cap Equity Fund* - Class I Brinson U.S. Large Cap Growth Fund** - Class I
UBS INVESTMENT FUNDS CLASS OF SHARES***** - ------------------------------------ UBS Investment Fund - Global UBS Investment Fund - U.S. Small Cap UBS Investment Fund - Global Equity Growth*** UBS Investment Fund - Global Bond UBS Investment Fund - U.S. Bond UBS Investment Fund - U.S. Balanced UBS Investment Fund - High Yield UBS Investment Fund - U.S. Equity UBS Investment Fund - Global (Ex-U.S.) Equity **** UBS Investment Fund - U.S. Large Cap Equity* UBS Investment Fund - U.S. Large Cap Growth**
CLASS N - ------- Brinson Global Fund - Class N Brinson U.S. Small Cap Growth Fund*** - Brinson Global Equity Fund - Class N Class N Brinson Global Bond Fund - Class N Brinson U.S. Bond Fund - Class N Brinson U.S. Balanced Fund - Class N Brinson High Yield Fund - Class N Brinson U.S. Equity Fund - Class N Brinson Global (Ex-U.S.) Equity Fund **** - Class N Brinson U.S. Large Cap Equity Fund* - Class N Brinson U.S. Large Cap Growth Fund** - Class N
* Formerly known as the U.S. Large Capitalization Equity Fund. ** Formerly known as the U.S. Large Capitalization Growth Fund. *** Formerly known as the U.S. Small Capitalization Growth Fund. **** Formerly known as the Non-U.S. Equity Fund. ***** Formerly known as the SwissKey Funds Class of Shares. (b) Annual Report. Included in Part B: GLOBAL FUND - ----------- (1) Report of Independent Auditors /1/; (2) Schedule of Investments as of June 30, 1999 (audited) /1/; (3) Statement of Assets and Liabilities at June 30, 1999 (audited) /1/; (4) Statement of Operations for the year ended June 30, 1999 (audited) /1/; (5) Statement of Changes in Net Assets for the years ended June 30, 1999 and June 30, 1998 (audited) /1/; (6) Financial Highlights for the Brinson Fund - Class I shares for the years ended June 30, 1999, June 30, 1998, June 30, 1997, June 30, 1996 and June 30, 1995 (audited) /1/; and for the Brinson Fund - Class N shares for the years ended June 30, 1999 and June 30, 1998 (audited) /1/; and for the UBS Investment Funds class of shares for the years ended June 30, 1999, June 30, 1998 and June 30, 1997 and for the period July 31, 1995 (commencement of operations) to June 30, 1996 (audited) /1/; (7) Notes to Financial Statements dated June 30, 1999 /1/. GLOBAL EQUITY FUND - ------------------ (1) Report of Independent Auditors /1/; (2) Schedule of Investments as of June 30, 1999 (audited) /1/; (3) Statement of Assets and Liabilities at June 30, 1999 (audited) /1/; (4) Statement of Operations for the year ended June 30, 1999 (audited) /1/; (5) Statement of Changes in Net Assets for the years ended June 30, 1999 and June 30, 1998 (audited) /1/; (6) Financial Highlights for the Brinson Fund - Class I shares for the years ended June 30, 1999, June 30, 1998, June 30, 1997, June 30, 1996 and June 30, 1995 (audited) /1/; and for the Brinson Fund - Class N shares for the years ended June 30, 1999 and June 30, 1998 (audited) /1/; and for the UBS Investment Funds class of shares for the years ended June 30, 1999, June 30, 1998 and June 30, 1997 and for the period July 31, 1995 (commencement of operations) to June 30, 1996 (audited) /1/; (7) Notes to Financial Statements dated June 30, 1999 /1/. GLOBAL BOND FUND - ---------------- (1) Report of Independent Auditors /1/; (2) Schedule of Investments as of June 30, 1999 (audited) /1/; (3) Statement of Assets and Liabilities at June 30, 1999 (audited) /1/; (4) Statement of Operations for the year ended June 30, 1999 (audited) /1/; (5) Statement of Changes in Net Assets for the years ended June 30, 1999 and June 30, 1998 (audited) /1/; (6) Financial Highlights for the Brinson Fund - Class I shares for the years ended June 30, 1999, June 30, 1998, June 30, 1997, June 30, 1996 and June 30, 1995 (audited) /1/; and for the Brinson Fund - Class N shares for the years ended June 30, 1999 and June 30, 1998 (audited) /1/; and for the UBS Investment Funds class of shares for the years ended June 30, 1999, June 30, 1998 and June 30, 1997 and for the period July 31, 1995 (commencement of operations) to June 30, 1996 (audited) /1/; (7) Notes to Financial Statements dated June 30, 1999 /1/. U.S. BALANCED FUND - ------------------ (1) Report of Independent Auditors /1/; (2) Schedule of Investments as of June 30, 1999 (audited) /1/; (3) Statement of Assets and Liabilities at June 30, 1999 (audited) /1/; (4) Statement of Operations for the year ended June 30, 1999 (audited) /1/; (5) Statement of Changes in Net Assets for the years ended June 30, 1999 and June 30, 1998 (audited) /1/; (6) Financial Highlights for the Brinson Fund - Class I shares for the years ended June 30, 1999, June 30, 1998, June 30, 1997 and June 30, 1996 and for the period December 30, 1994 (commencement of operations) to June 30, 1995 (audited) /1/; and for the Brinson Fund - Class N shares for the years ended June 30, 1999 and June 30, 1998 (audited) /1/; and for the UBS Investment Funds class of shares for the years ended June 30, 1999, June 30, 1998 and June 30, 1997 and for the period July 31, 1995 (commencement of operations) to June 30, 1996 (audited) /1/; (7) Notes to Financial Statements dated June 30, 1999 /1/. U.S. EQUITY FUND - ---------------- (1) Report of Independent Auditors /1/; (2) Schedule of Investments as of June 30, 1999 (audited) /1/; (3) Statement of Assets and Liabilities at June 30, 1999 (audited) /1/; (4) Statement of Operations for the year ended June 30, 1999 (audited) /1/; (5) Statement of Changes in Net Assets for the years ended June 30, 1999 and June 30, 1998 (audited) /1/; (6) Financial Highlights for the Brinson Fund - Class I shares for the years ended June 30, 1999, June 30, 1998, June 30, 1997, June 30, 1996 and June 30, 1995 and for the period February 22, 1994 (commencement of operations) to June 30, 1994 (audited) /1/; and for the Brinson Fund - Class N shares for the years ended June 30, 1999 and June 30, 1998 (audited) /1/; and for the UBS Investment Funds class of shares for the years ended June 30, 1999, June 30, 1998 and June 30, 1997 and for the period July 31, 1995 (commencement of operations) to June 30, 1996 (audited) /1/; (7) Notes to Financial Statements dated June 30, 1999 /1/. U.S. LARGE CAP EQUITY FUND (FORMERLY U.S. LARGE CAPITALIZATION EQUITY FUND) - --------------------------------------------------------------------------- (1) Report of Independent Auditors /1/; (2) Schedule of Investments as of June 30, 1999 (audited) /1/; (3) Statement of Assets and Liabilities at June 30, 1999 (audited) /1/; (4) Statement of Operations for the year ended June 30, 1999 (audited) /1/; (5) Statement of Changes in Net Assets for the year ended June 30, 1999 and for the period April 6, 1998 (commencement of operations) to June 30, 1998 (audited) /1/; (6) Financial Highlights for the Brinson Fund - Class I shares for the year ended June 30, 1999 and for the period April 6, 1998 (commencement of operations) to June 30, 1998 (audited) /1/; and for the Brinson Fund - Class N shares for the year ended June 30, 1999 and for the period April 6, 1998 (commencement of operations) to June 30, 1998 (audited) /1/; and for the UBS Investment Funds class of shares for the year ended June 30, 1999 and for the period April 6, 1998 (commencement of operations) to June 30, 1998 (audited) /1/; (7) Notes to Financial Statements dated June 30, 1999 /1/. U.S. BOND FUND - -------------- (1) Report of Independent Auditors /1/; (2) Schedule of Investments as of June 30, 1999 (audited) /1/; (3) Statement of Assets and Liabilities at June 30, 1999 (audited) /1/; (4) Statement of Operations for the year ended June 30, 1999 (audited) /1/; (5) Statement of Changes in Net Assets for the years ended June 30, 1999 and June 30, 1998 (audited) /1/; (6) Financial Highlights for the Brinson Fund - Class I shares for the years ended June 30, 1999, June 30, 1998, June 30, 1997 and for the period August 31, 1995 (commencement of operations) to June 30, 1996 (audited) /1/; and for the Brinson Fund - Class N shares for the years ended June 30, 1999 and June 30, 1998 (audited) /1/; and for the UBS Investment Funds class of shares for the years ended June 30, 1999, June 30, 1998 and June 30, 1997 and for the period August 31, 1995 (commencement of operations) to June 30, 1996 (audited) /1/; (7) Notes to Financial Statements dated June 30, 1999 /1/. GLOBAL (EX-U.S.) EQUITY FUND (FORMERLY NON-U.S. EQUITY FUND) - ------------------------------------------------------------ (1) Report of Independent Auditors /1/; (2) Schedule of Investments as of June 30, 1999 (audited) /1/; (3) Statement of Assets and Liabilities at June 30, 1999 (audited) /1/; (4) Statement of Operations for the year ended June 30, 1999 (audited) /1/; (5) Statement of Changes in Net Assets for the years ended June 30, 1999 and June 30, 1998 (audited) /1/; (6) Financial Highlights for the Brinson Fund - Class I shares for the years ended June 30, 1999, June 30, 1998, June 30, 1997, June 30, 1996 and June 30, 1995 (audited) /1/; and for the Brinson Fund - Class N shares for the years ended June 30, 1999 and June 30, 1998 (audited) /1/; and for the UBS Investment Funds class of shares for the years ended June 30, 1999, June 30, 1998 and June 30, 1997 and for the period July 31, 1995 (commencement of operations) to June 30, 1996 (audited) /1/; (7) Notes to Financial Statements dated June 30, 1999 /1/. U.S. LARGE CAP GROWTH FUND (FORMERLY U.S. LARGE CAPITALIZATION GROWTH FUND) - --------------------------------------------------------------------------- (FORMERLY UBS LARGE CAP GROWTH FUND) * - ------------------------------------ (1) Report of Independent Auditors /1/; (2) Schedule of Investments as of June 30, 1999 (audited) /1/; (3) Statement of Assets and Liabilities at June 30, 1999 (audited) /1/; (4) Statement of Operations for the year ended June 30, 1999 (audited) /1/; (5) Statement of Changes in Net Assets for the period ended June 30, 1999 and for the year ended December 31, 1998 (audited) /1/; (6) Financial Highlights for the Brinson Fund - Class I shares for the period ended June 30, 1999 and for the year ended December 31, 1998 and for the period October 14, 1997 (commencement of operations) to December 31, 1998 (audited) /1/ /2/; (7) Notes to Financial Statements dated June 30, 1999 /1/. U.S. SMALL CAP GROWTH FUND (FORMERLY U.S. SMALL CAPITALIZATION GROWTH FUND) - --------------------------------------------------------------------------- (FORMERLY UBS SMALL CAP FUND) * - ----------------------------- (1) Report of Independent Auditors /1/; (2) Schedule of Investments as of June 30, 1999 (audited) /1/; (3) Statement of Assets and Liabilities at June 30, 1999 (audited) /1/; (4) Statement of Operations for the period ended June 30, 1999 and for the year ended December 31, 1998 (audited) /1/; (5) Statement of Changes in Net Assets for the period ended June 30, 1999 and for the year ended December 31, 1998 (audited) /1/; (6) Financial Highlights for the Brinson Fund - Class I shares for the period ended June 30, 1999 and for the year ended December 31, 1998 and for the period September 30, 1997 (commencement of operations) to December 31, 1997 (audited) /1/ /2/; (7) Notes to Financial Statements dated June 30, 1999 /1/. HIGH YIELD FUND (FORMERLY UBS HIGH YIELD BOND FUND) * - --------------------------------------------------- (1) Report of Independent Auditors /1/; (2) Schedule of Investments as of June 30, 1999 (audited) /1/; (3) Statement of Assets and Liabilities at June 30, 1999 (audited) /1/; (4) Statement of Operations for the period ended June 30, 1999 (audited) /1/; (5) Statement of Changes in Net Assets for the period ended June 30, 1999 and for the year ended December 31, 1998 (audited) /1/; (6) Financial Highlights for the Brinson Fund - Class I shares for the period ended June 30, 1999 and for the year ended December 31, 1998 and for the period September 30, 1997 (commencement of operations) to December 31, 1997 (audited) /1/ /2/; (7) Notes to Financial Statements dated June 30, 1999 /1/. * Prior to a reorganization into a series of the Trust on December 19, 1998, each Fund was a portfolio of the UBS Private Investor Funds, Inc. The accompanying Financial Statements reflect the results of operations for each of these three Funds for the six-month period ended June 30, 1999 and the year ended December 31, 1998, including the operations of the Funds prior to their reorganizations into series of the Trust. At a Board of Trustees meeting held on February 22, 1999, the Board of Trustees voted to change the Funds' fiscal year end from December 31, 1998 to June 30, 1999. (c) Semi-Annual Report GLOBAL FUND - ----------- (1) Schedule of Investments as of December 31, 1999 (unaudited) /3/; (2) Statement of Assets and Liabilities at December 31, 1999 (unaudited) /3/; (3) Statement of Operations for the six months ended December 31, 1999 (unaudited) /3/; (4) Statement of Cash Flows for the six months ended December 31, 1999 (unaudited) /3/; (5) Statement of Changes in Net Assets for the six months ended December 31, 1999 (unaudited) and for the year ended June 30, 1999 (unaudited) /3/; (6) Financial Highlights for the Brinson Fund--Class I shares for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999, June 30, 1998, June 30, 1997, June 30, 1996, and June 30, 1995 (audited) /3/; and for the Brinson Fund--Class N for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999 and June 30, 1998 (audited) /3/; and for the UBS Investment Funds class of shares for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999, June 30, 1998, June 30, 1997, and for the period July 31, 1995 (commencement of UBS Investment Funds Class) through June 30, 1996 (audited) /3/; (7) Notes to Financial Statements dated December 31, 1999 /3/. GLOBAL EQUITY FUND - ------------------ (1) Schedule of Investments as of December 31, 1999 (unaudited) /3/; (2) Statement of Assets and Liabilities at December 31, 1999 (unaudited) /3/; (3) Statement of Operations for the six months ended December 31, 1999 (unaudited) /3/; (4) Statement of Changes in Net Assets for the six months ended December 31, 1999 (unaudited) and for the year ended June 30, 1999 /3/; (5) Financial Highlights for the Brinson Fund--Class I shares for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999, June 30, 1998, June 30, 1997, June 30, 1996, and June 30, 1995 (audited) /3/; and for the Brinson Fund--Class N for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999 and June 30, 1998 (audited) /3/; and for the UBS Investment Funds class of shares for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999, June 30, 1998, June 30, 1997, and for the period July 31, 1995 (commencement of UBS Investment Funds Class) through June 30, 1996 (audited) /3/; (6) Notes to Financial Statements dated December 31, 1999 /3/. GLOBAL BOND FUND - ---------------- (1) Schedule of Investments as of December 31, 1999 (unaudited) /3/; (2) Statement of Assets and Liabilities at December 31, 1999 (unaudited) /3/; (3) Statement of Operations for the six months ended December 31, 1999 (unaudited) /3/; (4) Statement of Changes in Net Assets for the six months ended December 31, 1999 (unaudited) and for the year ended June 30, 1999 /3/; (5) Financial Highlights for the Brinson Fund--Class I shares for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999, June 30, 1998, June 30, 1997, June 30, 1996, and June 30, 1995 (audited) /3/; and for the Brinson Fund--Class N for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999 and June 30, 1998 (audited) /3/; and for the UBS Investment Funds class of shares for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999, June 30, 1998, June 30, 1997, and for the period July 31, 1995 (commencement of UBS Investment Funds Class) through June 30, 1996 (audited) /3/; (6) Notes to Financial Statements dated December 31, 1999 /3/. U.S. BALANCED FUND - ------------------ (1) Schedule of Investments as of December 31, 1999 (unaudited) /3/; (2) Statement of Assets and Liabilities at December 31, 1999 (unaudited) /3/; (3) Statement of Operations for the six months ended December 31, 1999 (unaudited) /3/; (4) Statement of Changes in Net Assets for the six months ended December 31, 1999 (unaudited) and for the year ended June 30, 1999 (unaudited) /3/; (5) Financial Highlights for the Brinson Fund--Class I shares for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999, June 30, 1998, June 30, 1997, June 30, 1996, and for the period December 30, 1994 (commencement of operations) through June 30, 1995 (audited) /3/; and for the Brinson Fund--Class N for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999 and June 30, 1998 (audited) /3/; and for the UBS Investment Funds class of shares for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999, June 30, 1998, June 30, 1997, and for the period August 31, 1995 (commencement of operations) through June 30, 1996 (audited) /3/; (6) Notes to Financial Statements dated December 31, 1999 /3/. U.S. EQUITY FUND - ---------------- (1) Schedule of Investments as of December 31, 1999 (unaudited) /3/; (2) Statement of Assets and Liabilities at December 31, 1999 (unaudited) /3/; (3) Statement of Operations for the six months ended December 31, 1999 (unaudited) /3/; (4) Statement of Changes in Net Assets for the six months ended December 31, 1999 (unaudited) and for the year ended June 30, 1999 (unaudited) /3/; (5) Financial Highlights for the Brinson Fund--Class I shares for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999, June 30, 1998, June 30, 1997, June 30, 1996, and for the period December 30, 1994 (commencement of operations) through June 30, 1995 (audited) /3/; and for the Brinson Fund--Class N for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999 and June 30, 1998 (audited) /3/; and for the UBS Investment Funds class of shares for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999, June 30, 1998, June 30, 1997, and for the period August 31, 1995 (commencement of operations) through June 30, 1996 (audited) /3/; (6) Notes to Financial Statements dated December 31, 1999 /3/. U.S. LARGE CAP EQUITY FUND (formerly U.S. Large Capitalization Equity Fund) - --------------------------------------------------------------------------- (1) Schedule of Investments as of December 31, 1999 (unaudited) /3/; (2) Statement of Assets and Liabilities at December 31, 1999 (unaudited) /3/; (3) Statement of Operations for the six months ended December 31, 1999 (unaudited) /3/; (4) Statement of Changes in Net Assets for the six months ended December 31, 1999 (unaudited) and for the six months ended June 30, 1999 (unaudited) /3/; (5) Financial Highlights for the Brinson Fund--Class I shares for the six months ended December 31, 1999 (unaudited) and for the year ended June 30, 1999 and for the period April 6, 1998 (commencement of operations) through June 30, 1998 (audited) /3/; and for the Brinson Fund--Class N for the six months ended December 31, 1999 (unaudited) and for the year ended June 30, 1999 (audited) /3/; and for the UBS Investment Funds class of shares for the six months ended December 31, 1999, (unaudited) and for the period ended June 30, 1999 (unaudited) and for the six months ended December 31, 1999* (audited) /3/; (6) Notes to Financial Statements dated December 31, 1999 /3/. U.S. LARGE CAP GROWTH FUND (formerly U.S. Large Capitalization Growth Fund) - --------------------------------------------------------------------------- (1) Schedule of Investments as of December 31, 1999 (unaudited) /3/; (2) Statement of Assets and Liabilities at December 31, 1999 (unaudited) /3/; (3) Statement of Operations for the six months ended December 31, 1999 (unaudited) /3/; (4) Statement of Changes in Net Assets for the six months ended December 31, 1999 (unaudited) and for the six months ended June 30, 1999* (unaudited) /3/; (5) Financial Highlights for the Brinson Fund--Class I shares for the six months ended December 31, 1999 (unaudited), for the six months ended June 30, 1999*, for the year ended December 31, 1998 and for the period October 14, 1997 (commencement of operations) through December 31, 1997 (audited) /3/; and for the Brinson Fund--Class N for the six months ended December 31, 1999 (unaudited) and for the year ended June 30, 1999 (audited) /3/; and for the UBS Investment Funds class of shares for the six months ended December 31, 1999 (unaudited) and for the period ended June 30, 1999 (audited) /3/; (6) Notes to Financial Statements dated December 31, 1999 /3/. U.S. SMALL CAP GROWTH FUND (formerly U.S. Small Capitalization Growth Fund) - --------------------------------------------------------------------------- (1) Schedule of Investments as of December 31, 1999 (unaudited) /3/; (2) Statement of Assets and Liabilities at December 31, 1999 (unaudited) /3/; (3) Statement of Operations for the six months ended December 31, 1999 (unaudited) /3/; (4) Statement of Changes in Net Assets for the six months ended December 31, 1999 (unaudited) and for the six months ended June 30, 1999* (unaudited) /3/; (5) Financial Highlights for the Brinson Fund--Class I shares for the six months ended December 31, 1999 (unaudited), for the six months ended June 30, 1999*, for the year ended December 31, 1998 and for the period September 30, 1997 (commencement of operations) through December 31, 1997 (audited) /3/; and for the Brinson Fund--Class N for the six months ended December 31, 1999 (unaudited) and for the period ended June 30, 1999 (audited) /3/; and for the UBS Investment Funds class of shares for the six months ended December 31, 1999 (unaudited) and for the six months ended June 30, 1999* (audited) /3/; (6) Notes to Financial Statements dated December 31, 1999 /3/. U.S. BOND FUND - -------------- (1) Schedule of Investments as of December 31, 1999 (unaudited) /3/; (2) Statement of Assets and Liabilities at December 31, 1999 (unaudited) /3/; (3) Statement of Operations for the six months ended December 31, 1999 (unaudited) /3/; (4) Statement of Changes in Net Assets for the six months ended December 31, 1999 (unaudited) and for the year ended June 30, 1999 (unaudited) /3/; (5) Financial Highlights for the Brinson Fund -- Class I shares for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999, June 30, 1998, and June 30, 1997 and for the period August 31, 1995 (commencement of operations) through June 30, 1996 (audited) /3/; and for the Brinson Fund -- Class N for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999 and June 30, 1998 (audited) /3/; and for the UBS Investment Funds class of shares for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999, June 30, 1998 and June 30, 1997 and for the period August 31, 1995 (commencement of operations) through June 30, 1996 (audited)/3/; (6) Notes to Financial Statements dated December 31, 1999 /3/. HIGH YIELD FUND - --------------- (1) Schedule of Investments as of December 31, 1999 (unaudited) /3/; (2) Statement of Assets and Liabilities at December 31, 1999 (unaudited) /3/; (3) Statement of Operations for the six months ended December 31, 1999 (unaudited) /3/; (4) Statement of Changes in Net Assets for the six months ended December 31, 1999 (unaudited) and for the six months ended June 30, 1999* (unaudited) /3/; (5) Financial Highlights for the Brinson Fund--Class I shares for the six months ended December 31, 1999 (unaudited), for the six months ended June 30, 1999*, for the year ended December 31, 1998 and for the period September 30, 1997 (commencement of operations) through December 31, 1997 (audited) /3/; and for the Brinson Fund--Class N for the six months ended December 31, 1999 (unaudited) and for the period ended June 30, 1999 (audited) /3/; and for the UBS Investment Funds class of shares for the six months ended December 31, 1999 (unaudited) and for the six months ended June 30, 1999* (audited) /3/; (6) Notes to Financial Statements dated December 31, 1999 /3/. GLOBAL (EX-U.S.) EQUITY FUND (formerly Non-U.S. Equity Fund) - ------------------------------------------------------------ (1) Schedule of Investments as of December 31, 1999 (unaudited) /3/; (2) Statement of Assets and Liabilities at December 31, 1999 (unaudited) /3/; (3) Statement of Operations for the six months ended December 31, 1999 (unaudited) /3/; (4) Statement of Changes in Net Assets for the six months ended December 31, 1999 (unaudited) and for the year ended June 30, 1999 (unaudited) /3/; (6) Financial Highlights for the Brinson Fund--Class I shares for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999, June 30, 1998, June 30, 1997, June 30, 1996, and June 30, 1995 (audited) /3/; and for the Brinson Fund--Class N for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999 and June 30, 1998 (audited) /3/; and for the UBS Investment Funds class of shares for the six months ended December 31, 1999 (unaudited) and for the years ended June 30, 1999, June 30, 1998, June 30, 1997, and for the period July 31, 1995 (commencement of UBS Investment Funds Class) through June 30, 1996 (audited) /3/; (6) Notes to Financial Statements dated December 31, 1999 /3/. * Reflects the Fund's change in fiscal year end from December 31 to June 30. /1/ Incorporated by reference to the Financial Statements in the Annual Reports to Shareholders dated June 30, 1999 and filed electronically with the Securities and Exchange Commission (the "Commission") on September 3, 1999 (Accession No. 0000950131-99-005179). /2/ Incorporated by reference to the Financial Statements relating to the U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund and High Yield Fund (formerly UBS Large Cap Growth Fund, UBS Small Cap Fund and UBS High Yield Bond Fund, respectively) in the Annual Report to Shareholders dated December 31, 1998 and filed electronically with the Commission on March 11, 1999 (Accession No. 0000950131-99-001426). /3/ Incorporated by reference to the Financial Statements in the Semi-Annual Reports to Shareholders dated December 31, 1999 and filed electronically with the Commission on March 3, 2000 (Accession No. 000950109-00-000763). Item 23. Exhibits: Exhibits filed pursuant to Form N-1A: (a) Articles of Incorporation. (1) Certificate of Trust of the Registrant dated August 9, 1993, as filed with the Office of the Secretary of State of the State of Delaware on August 13, 1993, is incorporated herein by reference to Post-Effective Amendment No. 21 to Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed electronically with the Commission on September 15, 1998. (2)(a) Agreement and Declaration of Trust (the "Declaration") dated August 19, 1993, as amended through November 24, 1997, of the Registrant is incorporated herein by reference to Post-Effective Amendment No. 21 to Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed electronically with the Commission on September 15, 1998. (b) Certificates of the Secretary/Assistant Secretary of the Registrant re: applicable resolutions pertaining to: I. Meeting held August 9, 1993 designating initial eight (8) Series of shares (from The Brinson Funds, Inc.). * II. Meeting held November 8, 1993 creating Class B Shares and redesignating Class A Shares. * III. Meeting held February 21, 1995 adding Class A and B shares to the Brinson Short-Term Global Income Fund and Brinson U.S. Cash Management Fund and adding Class C shares for all Series. * IV. Meeting held May 22, 1995 redesignating Class A shares to Brinson Class shares and Class C shares to SwissKey Class shares. * V. Unanimous written consent of Trustees executed on July 27, 1995 changing the names of series, as follows and redesignating the Brinson Class and SwissKey Class. * (a) Redesignation of the Brinson Global Fund to the Global Fund; (b) Redesignation of the Brinson Global Bond Fund to the Global Bond Fund; (c) Redesignation of the Brinson Non-U.S. Equity Fund to the Non-U.S. Equity Fund; (d) Redesignation of the Brinson Global Equity Fund to the Global Equity Fund; (e) Redesignation of the Brinson U.S. Equity Fund to the U.S. Equity Fund; (f) Redesignation of the Brinson U.S. Balanced Fund to the U.S. Balanced Fund; (g) Redesignation of the Brinson U.S. Bond Fund to the U.S. Bond Fund. VI. Meeting held November 20, 1995 eliminating Brinson Short-Term Global Income Fund. * VII. Meeting held August 26, 1996 eliminating U.S. Cash Management Fund and Non-U.S. Bond Fund. * VIII. Meeting held May 19, 1997 redesignating Brinson Fund Class as Brinson Fund-- Class I and adding Brinson Fund -- Class N. * IX. Meeting held November 24, 1997 adding U.S. Large Capitalization Equity Fund Series and adding Brinson Fund --Class I Shares, SwissKey Fund Class and Brinson Fund --Class N Shares. * X. Meeting held August 24, 1998 approving redesignation of the SwissKey Class to the UBS Investment Funds Class. ** XI. Meeting held August 24, 1998 approving redesignation of the Non-U.S. Equity Fund to the Global (ex-U.S.) Equity Fund. ** XII. Meeting held August 24, 1998 establishing and designating the U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Fund, High Yield Bond Fund, Emerging Markets Equity Fund and Emerging Markets Debt Fund and adding Brinson Fund - Class I Shares, UBS Investment Funds class of shares and Brinson Fund - Class N Shares to such Series.** XIII. Meeting held November 23, 1998 changing the name of the High Yield Bond Fund Series to the High Yield Fund Series and U.S. Small Capitalization Fund Series to the U.S. Small Capitalization Growth Fund Series.** XIV. Meeting held February 28, 2000 establishing and designating the Global Technology Fund, Global Biotech Fund, U.S. Small Cap Equity Fund, U.S. Value Equity Fund and U.S. Real Estate Equity Fund and adding Brinson Fund--Class I Shares, UBS Investment Funds class of shares and Brinson Fund--Class N Shares to such Series.*** XV. Meeting held February 28, 2000 redesignating names of the U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund and U.S. Small Capitalization Growth Fund to the U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund and U.S. Small Cap Growth Fund, respectively.*** * Incorporated herein by reference to Post-Effective Amendment No. 21 to Registrant's Registration Statement on Form N-1A (No. 33-47287 and 811-6637), as filed electronically with the Commission on September 15, 1998. ** Incorporated herein by reference to Post-Effective Amendment No. 21 to Registrant's Registration Statement on Form N-1A (No. 33-47287 and 811-6637), as filed electronically with the Commission on May 3, 1999. *** Filed electronically herewith. (b) By-Laws. By-Laws of The Brinson Funds dated August 9, 1993, are incorporated herein by reference to Post-Effective Amendment No. 17 to Registrant's Registration Statement on Form N-1A (File Nos. 33-47287 and 811-6637), as filed electronically with the Commission on August 29, 1996. (c) Instruments Defining the Rights of Security Holders. (1) Form of Specimen Share Certificate of The Brinson Funds* The rights of security holders of the Registrant are further defined in the following sections of the Registrant's By-Laws and Declaration and are herein incorporated by reference to such documents as applicable: a. By-Laws. Article II - "Voting", Section 7 and Section 10. b. Declaration. Article III - "Shares", Section 1, Section 2 and Section 6. (d) Investment Advisory Contracts. (1) Investment Advisory Agreement dated April 25, 1995 between Brinson Partners, Inc. ("Brinson Partners") and the Registrant on behalf of the Global Fund (f/k/a Brinson Global Fund) series, and Secretary's Certificate relating thereto. * (2) Investment Advisory Agreement dated April 25, 1995 between Brinson Partners and the Registrant on behalf of the Global Bond Fund (f/k/a Brinson Global Bond Fund) series, and Secretary's Certificate relating thereto. * (3) Investment Advisory Agreement dated April 25, 1995 between Brinson Partners and the Registrant on behalf of the Global (Ex-U.S.) Equity Fund (f/k/a Non-U.S. Equity Fund) series, and Secretary's Certificate relating thereto. * (4) Investment Advisory Agreement dated April 25, 1995 between Brinson Partners and the Registrant on behalf of the Global Equity Fund (f/k/a Brinson Global Equity Fund) series, and Secretary's Certificate relating thereto. * (5) Investment Advisory Agreement dated April 25, 1995 between Brinson Partners and the Registrant on behalf of the U.S. Equity Fund (f/k/a Brinson U.S. Equity Fund) series, and Secretary's Certificate relating thereto. * (6) Investment Advisory Agreement dated April 25, 1995 between Brinson Partners and the Registrant on behalf of the U.S. Balanced Fund (f/k/a Brinson U.S. Balanced Fund) series, and Secretary's Certificate relating thereto. * (7) Investment Advisory Agreement dated April 25, 1995 between Brinson Partners and the Registrant on behalf of the U.S. Bond Fund (f/k/a Brinson U.S. Bond Fund) series, and Secretary's Certificate relating thereto. * (8) Investment Advisory Agreement dated November 24, 1997 between Brinson Partners and the Registrant on behalf of the U.S. Large Capitalization Equity Fund series. * (a) Certificate of the Secretary and resolutions redesignating the U.S. Large Capitalization Equity Fund as the U.S. Large Cap Equity Fund. **** (9) Investment Advisory Agreement dated December 18, 1998 between Brinson Partners and the Registrant on behalf of the U.S. Large Capitalization Growth Fund series. ** (a) Certificate of the Secretary and resolutions redesignating the U.S. Large Capitalization Growth Fund as the U.S. Large Cap Growth Fund. **** (10) Investment Advisory Agreement dated December 18, 1998 between Brinson Partners and the Registrant on behalf of the U.S. Small Capitalization Growth Fund series. ** (a) Certificate of the Secretary and resolutions redesignating the U.S. Small Capitalization Fund series as U.S. Small Capitalization Growth Fund. *** (b) Certificate of the Secretary and resolutions redesignating the U.S. Small Capitalization Growth Fund as the U.S. Small Cap Growth Fund. **** (11) Investment Advisory Agreement dated December 18, 1998 between Brinson Partners and the Registrant on behalf of the High Yield Bond Fund series. ** (a) Certificate of the Secretary and resolutions changing the name of the High Yield Bond Fund series as High Yield Fund. *** (12) Investment Advisory Agreement dated December 10, 1998 between Brinson Partners and the Registrant on behalf of the Emerging Markets Equity Fund series. ** (13) Investment Advisory Agreement dated December 10, 1998 between Brinson Partners and the Registrant on behalf of the Emerging Markets Debt Fund series. ** (14) Form of Investment Advisory Agreement dated , -------- -- 2000 between Brinson Partners and the Registrant on behalf of the Global Technology Fund. **** (15) Form of Investment Advisory Agreement dated , -------- -- 2000 between Brinson Partners and the Registrant on behalf of the Global Biotech Fund. **** (16) Form of Investment Advisory Agreement dated , -------- -- 2000 between Brinson Partners and the Registrant on behalf of the U.S. Small Cap Equity Fund. **** (17) Form of Investment Advisory Agreement dated , -------- -- 2000 between Brinson Partners and the Registrant on behalf of the U.S. Value Equity Fund. **** (18) Form of Investment Advisory Agreement dated , -------- -- 2000 between Brinson Partners and the Registrant on behalf of the U.S. Real Estate Equity Fund. **** * Incorporated herein by reference to Post-Effective Amendment No. 21 to Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed electronically with the Commission on September 15, 1998. ** Incorporated herein by reference to Post-Effective Amendment No. 25 to Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed electronically with the Commission on March 1, 1999. *** Incorporated herein by reference to Post-Effective Amendment No. 28 to Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed electronically with the Commission on October 14, 1999. **** Filed electronically herewith. (e) Underwriting Contracts. (1) Distribution Agreement dated February 24, 1997, as amended through December 10, 1998, between Funds Distributor, Inc. and the Registrant. ** (a) Form of revised Exhibit A to the Registrant's Distribution Agreement dated February 24, 1997, as amended through April 28, 2000. **** (f) Bonus or Profit Sharing Contracts. Not applicable. (g) Custodian Agreements. (1) Custodial arrangements are provided under the Multiple Services Agreement dated May 9, 1997, as amended through December 10, 1998, between Morgan Stanley Trust Company, and succeeded by The Chase Manhattan Bank, and the Registrant on behalf of each series of the Registrant. ** (a) Amended Schedule A as approved through February 28, 2000 to the Registrant's Multiple Services Agreement's Securities Lending Authorization. **** (b) Revised Schedules B3 as approved through February 28, 2000 to the Registrant's Multiple Services Agreement. **** (c) Amended Schedule B1 and Schedule F as approved through February 28, 2000 to the Registrant's Multiple Services Agreement. **** (2) Co-custodial arrangements between Investors Bank & Trust and Chase Global Funds Services Company dated December 18, 1998. ** (h) Other Material Contracts. Not applicable. * Incorporated herein by reference to Post-Effective Amendment No. 21 to Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed electronically with the Commission on September 15, 1998. ** Incorporated herein by reference to Post-Effective Amendment No. 25 to Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed electronically with the Commission on March 1, 1999. *** Incorporated herein by reference to Post-Effective Amendment No. 28 to Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed electronically with the Commission on October 14, 1999. **** Filed electronically herewith. (i) Legal Opinion (1) Legal Opinion of Stradley, Ronon, Stevens & Young, LLP, counsel to the Registrant, dated April __, 2000.**** (j) Other Opinions and Consents. (1) Consent of Ernst & Young LLP, independent auditors to the Registrant.**** (k) Omitted Financial Statements. Not applicable. (l) Initial Capital Agreements. Letter of Understanding dated July 1, 1992.* (m) Rule 12b-1 Plan. (1) (a) Amended Distribution Plan dated February 21, 1995, as amended through December 10, 1998 relating to the UBS Investment Funds Class of shares (f/k/a the SwissKey Fund Class) of the Registrant.**** (1) Form of revised Schedule A to the Registrant's Amended Distribution Plan dated February 21, 1995, amended through April 28, 2000, with respect to the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund relating to the UBS Investment Funds class of shares of the Registrant. **** (b) Form of Distribution Plan dated April 28, 2000 with respect to the U.S. Value Equity Fund, U.S. Small Cap Equity Fund, Global Technology Fund, Global Biotech Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund relating to the UBS Investment Funds class of shares of the Registrant. **** (2) Distribution Plan dated June 30, 1997, as amended through December 10, 1998, relating to the Brinson Fund- Class N shares of each series of the Registrant. ** (a) Revised Schedule A to the Registrant's Distribution Plan dated June 30, 1997, as amended through April 28, 2000 relating to the Brinson Fund-Class N shares of each series of the Registrant. **** (3) (a) Selected Dealer and Selling General Dealer Agreement as last approved on August 24, 1998 and amended through December 10, 1998 for the UBS Investment Funds class of shares (f/k/a the SwissKey Fund Class) of each series of the Registrant. ** (1) Revised Exhibit A to the Registrant's Selected Selling Agreement dated February 21, 1995, amended through April 28, 2000, relating to the UBS Investment Funds class of shares of each series of the Registrant. **** (2) Revised Exhibit B to the Registrant's Selected Dealer Agreement dated February 21, 1995, amended through April 28, 2000, relating to the UBS Investment Funds class of shares of each series of the Registrant. **** (4) The Selected Dealer and Selling Agreements as approved November 24, 1997 and amended through December 10, 1998 on behalf of each series of the Registrant. ** (n) Rule 18f-3 Plan. (a) Revised Multiple Class Plan adopted May 22, 1995, as amended through June 11, 1999, pursuant to Rule 18f-3 on behalf of each series of the Registrant. *** (1) Appendix A to the Registrant's Revised Multiple Class Plan adopted May 22, 1995, as amended through April 28, 2000, adding the Global Technology Fund, Global Biotech Fund, U.S. Small Cap Equity Fund, U.S. Value Equity Fund and U.S. Real Estate Equity Fund pursuant to Rule 18f-3. **** (o) Reserved. (p) (1) Code of Ethics pursuant to Rule 17j-1 relating to the Registrant. **** (2) Code of Ethics pursuant to Rule 17j-1 relating to the Registrant's investment advisor, Brinson Partners, Inc. **** (q) Power of Attorney. (1) Power-of-Attorney appointing Karl Hartmann, Lloyd Lipsett, Kathleen O'Neill, Eddie Wang, Paul Roselli and Kelli Meidhof as attorneys-in-fact and agents. *** (a) Certificate of Secretary and resolution relating to the Power-of- Attorney.**** * Incorporated herein by reference to Post-Effective Amendment No. 21 to Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed electronically with the Commission on September 15, 1998. ** Incorporated herein by reference to Post-Effective Amendment No. 25 to Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed electronically with the Commission on March 1, 1999. *** Incorporated herein by reference to Post-Effective Amendment No. 28 to Registrant's Registration Statement on Form N-1A (Nos. 33-47287 and 811-6637) as filed electronically with the Commission on October 14, 1999. **** Filed electronically herewith. ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT. -------------------------------------------------------------- None. ----- ITEM 25. INDEMNIFICATION. ---------------- Indemnification of the Registrant's Trustees is provided for in Article VII, Sections 2 and 3 of the Registrant's Agreement and Declaration of Trust dated August 9, 1993, as amended through November 23, 1998, as follows: Section 2. Indemnification and Limitation of Liability. The Trustees shall not be responsible or liable in any event for any neglect or wrong-doing of any officer, agent, employee, Manager or Principal Underwriter of the Trust, nor shall any Trustee be responsible for the act or omission of any other Trustee, and, subject to the provisions of the Bylaws, the Trust out of its assets may indemnify and hold harmless each and every Trustee and officer of the Trust from and against any and all claims, demands, costs, losses, expenses, and damages whatsoever arising out of or related to such Trustee's performance of his or her duties as a Trustee or officer of the Trust; provided that nothing herein contained shall indemnify, hold harmless or protect any Trustee or officer from or against any liability to the Trust or any Shareholder to which he or she would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. Every note, bond, contract, instrument, certificate or undertaking and every other act or thing whatsoever issued, executed or done by or on behalf of the Trust or the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been issued, executed or done only in or with respect to their or his or her capacity as Trustees or Trustee, and such Trustees or Trustee shall not be personally liable thereon. Section 3. Trustee's Good Faith Action, Expert Advice, No Bond or Surety. The exercise by the Trustees of their powers hereunder shall be binding upon everyone interested in or dealing with the Trust. A Trustee shall be liable to the Trust and to any Shareholder solely for his or her own wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee and shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust and shall be under no liability for any act or omission in accordance with such advice nor for failing to follow such advice. The Trustees shall not be required to give any bond as such, nor any surety if a bond is required. Section 4. Insurance. The Trustees shall be entitled and empowered to the fullest extent permitted by law to purchase with Trust assets insurance for liability and for all expenses, reasonably incurred or paid or expected to be paid by a Trustee or officer in connection with any claim, action, suit or proceeding in which he or she becomes involved by virtue of his or her capacity or former capacity with the Trust, whether or not the Trust would have the power to indemnify him or her against such liability under the provisions of this Article. Indemnification of Registrant's custodian, transfer agent, accounting services provider, administrator and distributor against certain stated liabilities is provided until May 9, 1997 under the following documents: (a) Section 12 of Accounting Services Agreement, between the Registrant and Fund/Plan Services, Inc., incorporated herein by reference to Post-Effective Amendment No. 16 to Registrant's Registration Statement on Form N-1A (File Nos. 33-47287 and 811-6637), Exhibit 9(c) as filed electronically on February 15, 1996. (b) Section 8 of Administration Agreement between the Registrant and Fund/Plan Services, Inc., incorporated herein by reference to Post-Effective Amendment No. 16 to Registrant's Registration Statement on Form N-1A (File Nos. 33-47287 and 811-6637), Exhibit 9(b) as filed electronically on February 15, 1996. (c) Section 14 of Custodian Agreement between the Registrant and Bankers Trust Company, incorporated herein by reference to Post-Effective Amendment No. 13 to Registrant's Registration Statement on Form N-1A (File Nos. 33-47287 and 811-6637), Exhibit Nos. 8(a) and 8(b) as filed electronically on September 20, 1995. (d) Section 19 of Shareholder Services Agreement between Registrant and Fund/Plan Services, Inc., incorporated herein by reference to Post-Effective Amendment No. 16 to Registrant's Registration Statement on Form N-1A (File Nos. 33-47287 and 811-6637), Exhibit 9(a) as filed electronically on February 15, 1996. (e) Section 8 of the Underwriting Agreement between Registrant and Fund/Plan Broker Services, Inc. are incorporated herein by reference to Post-Effective Amendment No. 16 to Registrant's Registration Statement on Form N-1A (File Nos. 33-47287 and 811-6637), Exhibit No. (6) as filed electronically on February 15, 1996. Effective May 10, 1997, indemnification of Registrant's custodian, transfer agent, accounting services provider, administrator and distributor against certain stated liabilities is provided for in the following documents: (a) Sections I.8(a), I.8(c)(iii), I.10, II.A.2, II.B.5, II.C.6, III.1., III.2.(b) through III.2.(e), III.4.(e) and III.9.(b) of the Multiple Services Agreement dated May 9, 1997, as amended through December 10, 1998, between Morgan Stanley Trust Company, as succeeded by The Chase Manhattan Bank, and the Registrant on behalf of each series of the Registrant is incorporated by reference to Post-Effective Amendment No. 25 to Registrant's Registration Statement (Nos. 33-47287 and 811-6637) as filed electronically on March 1, 1999. Effective February 24, 1997, indemnification of Registrant's distributor against certain stated liabilities is provided for in the following document: (b) Section 1.10 of the Distribution Agreement between Funds Distributor, Inc. and the Registrant on behalf of each series of the Registrant dated February 24, 1997, as amended through August 24, 1998, is incorporated herein by reference to Post-Effective Amendment No. 25 to Registrant's Registration Statement (Nos. 33-47287 and 811-6637) as filed electronically on March 1, 1999. ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR. ----------------------------------------------------- Brinson Partners, Inc. provides investment advisory services consisting of portfolio management for a variety of individuals and institutions and as of December 31, 1999 had USD $159 billion in assets under management. It presently acts as investment advisor to seven other investment companies. For information as to any other business, vocation or employment of a substantial nature in which the Registrant's investment advisor and each officer of the Registrant's investment advisor is or has been engaged for his or her own account or in the capacity of director, officer, employee, partner or trustee, within the last two fiscal years, reference is made to the Form ADV (File #801-34910) filed by it under the Investment Advisers Act of 1940, as amended. ITEM 27. PRINCIPAL UNDERWRITERS. ----------------------- (a) Funds Distributor, Inc. (the "Distributor") acts as principal underwriter for the following investment companies. American Century California Tax-Free and Municipal Funds American Century Capital Portfolios, Inc. American Century Government Income Trust American Century International Bond Funds American Century Investment Trust American Century Municipal Trust American Century Mutual Funds, Inc. American Century Premium Reserves, Inc. American Century Quantitative Equity Funds American Century Strategic Asset Allocations, Inc. American Century Target Maturities Trust American Century Variable Portfolios, Inc. American Century World Mutual Funds, Inc. The Brinson Funds CDC MPT+ Funds Dresdner RCM Capital Funds, Inc. Dresdner RCM Global Funds, Inc. Dresdner RCM Investment Funds, Inc. J.P. Morgan Institutional Funds J.P. Morgan Funds JPM Series Trust JPM Series Trust II LaSalle Partners Funds, Inc. Merrimac Series Monetta Fund, Inc. Monetta Trust The Montgomery Funds I The Montgomery Funds II The Munder Framlington Funds Trust The Munder Funds Trust The Munder Funds, Inc. National Investors Cash Management Fund, Inc. Nomura Pacific Basin Fund, Inc. Orbitex Group of Funds The Saratoga Advantage Trust SG Cowen Funds, Inc. SG Cowen Income + Growth Fund, Inc. SG Cowen Standby Reserve Fund, Inc. SG Cowen Standby Tax-Exempt Reserve Fund, Inc. SG Cowen Series Funds, Inc. The Skyline Funds SoGen Funds, Inc. SoGen Variable Funds, Inc. St. Clair Funds, Inc. TD Waterhouse Family of Funds, Inc. TD Waterhouse Trust The Distributor is registered with the Commission as a broker-dealer and is a member of the National Association of Securities Dealers. The Distributor is located at 60 State Street, Suite 1300, Boston, Massachusetts 02109. The Distributor is an indirect wholly-owned subsidiary of Boston Institutional Group, Inc., a holding company, all of whose outstanding shares are owned by key employees. (b) The following is a list of the executive officers, directors and partners of Funds Distributor, Inc.
Director, President and -Marie E. Connolly Chief Executive Officer Executive Vice President -George A. Rio Executive Vice President -Donald R. Roberson Executive Vice President -William S. Nichols Senior Vice President, -Margaret W. Chambers General Counsel, Chief Compliance Officer, Secretary and Clerk Director, Senior Vice -Joseph F. Tower, III President and Treasurer Senior Vice President -Paula R. David Senior Vice President -Gary S. MacDonald Senior Vice President -Judith K. Benson Chairman and Director -William J. Nutt Vice President and -William J. Stetter Chief Financial Officer
(c) Not applicable. ITEM 28. LOCATION OF ACCOUNTS AND RECORDS. --------------------------------- All accounts, books and other documents required to be maintained by Section 31(a)[15 U.S.C. 80a-3-(a)] and rules under that section, are maintained by The Chase Manhattan Bank ("Chase"), 270 Park Avenue, New York, New York 10017 with the exception of those maintained by the Registrant's investment advisor, Brinson Partners, Inc., 209 South LaSalle Street, Chicago, IL, 60604-1295. Chase provides general administrative, accounting, portfolio valuation, transfer agency and custodian services to the Registrant, including the coordination and monitoring of any third-party service providers and maintains all such records relating to these services. ITEM 29. MANAGEMENT SERVICES. -------------------- There are no management-related service contracts not discussed in Part A or Part B. ITEM 30. UNDERTAKINGS. ------------- Not applicable. SIGNATURES Pursuant to the requirements of the Securities Act and the Investment Company Act, the Fund certifies that it meets all of the requirements for effectiveness of this registration statement under Rule 485(b) under the Securities Act and has duly caused Post-Effective Amendment No. 30/31 to this registration statement to be signed on its behalf by the undersigned, duly authorized, in the City of Boston, and Commonwealth of Massachusetts on the 1st day of May, 2000. THE BRINSON FUNDS (Fund) /s/ E. Thomas McFarlan By: E. Thomas McFarlan* President Pursuant to the requirements of the Securities Act, this Registration Statement has been signed below by the following persons in the capacities and on the date(s) indicated.
(Signature) (Title) (Date) E. THOMAS MCFARLAN* President May 1, 2000 E. Thomas McFarlan WALTER E. AUCH* Trustee May 1, 2000 Walter E. Auch EDWARD M. ROOB* Trustee May 1, 2000 Edward M. Roob FRANK K. REILLY* Chairman and Trustee May 1, 2000 Frank K. Reilly CAROLYN M. BURKE* Treasurer, Principal May 1, 2000 Carolyn M. Burke Accounting Officer
- -------------------------- *By: /s/ Lloyd Lipsett -------------------- as Attorney-in-Fact and Agent pursuant to Power of Attorney THE BRINSON FUNDS INDEX TO EXHIBITS TO FORM N-1A
Exhibit Description of Number Exhibit EX-99.a.2b.XIV Certificate of the Secretary and resolutions adding new series: Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund and U.S. Real Estate Equity Fund EX-99.a.2b.XV Certificate of the Secretary and resolutions redesignating names of the U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund and U.S. Small Capitalization Growth Fund EX-99.d.8a Certificate of the Secretary and resolutions to the Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant redesignating U.S. Large Capitalization Equity Fund as the U.S. Large Cap Equity Fund EX-99.d.9a Certificate of the Secretary and resolutions to the Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant redesignating U.S. Large Capitalization Growth Fund as the U.S. Large Cap Growth Fund EX-99.d.10b Certificate of the Secretary and resolutions to the Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant redesignating U.S. Small Capitalization Growth Fund as the U.S. Small Cap Growth Fund EX-99.d.14 Form of Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Global Technology Fund EX-99.d.15 Form of Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of Global Biotech Fund EX-99.d.16 Form of Investment Advisory Agreement between Brinson Partners, Inc. and the Registrant on behalf of the U.S. Small Cap Equity Fund EX-99.d.17 Form of Investment Advisory Ageement between Brinson Partners, Inc. and the Registrant on behalf of U.S. Value Equity Fund EX-99.d.18 Form of Investment Advisory Ageement between Brinson Partners, Inc. and the Registrant on behalf of U.S. Real Estate Equity Fund EX-99.e.1a Form of Revised Exhibit A to the Registrant's Distribution Agreement on behalf of each Series EX-99.g.1a Form of Revised Schedule A to the Registrant's Multiple Services Agreement's Securities Lending Authorization EX-99.g.1b Revised Schedule B3 to the Registrant's Multiple Services Agreement on behalf of each Series EX-99.g.1c Form of Amended Schedule B1 and Schedule F to the Registrant's Multiple Services Agreement EX-99.i Legal Opinion of Stradley, Ronon, Stevens & Young, LLP, counsel to the Registrant EX-99.j.1 Consent of Ernst & Young LLP, independent auditors to the Registrant EX-99.m.1a.1 Form of Revised Schedule A to the Registrant's Amended Distribution Plan relating to the UBS Investment Funds class of shares EX-99.m.1b Form of the Registrant's Distribution Plan relating to the UBS Investment Funds class of shares with respect to the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund, U.S. Real Estate Equity Fund, Emerging Markets Debt Fund and Emerging Markets Equity Fund EX-99.m.2a Revised Schedule A to the Registrant's Distribution Plan relating to the Brinson Fund--Class N shares of each Series EX-99.m.3a.1 Revised Exhibit A to the Registrant's Selected Selling Agreement relating to the UBS Investment Funds class of shares of each Series EX-99.m.3a.2 Revised Exhibit B to the Registrant's Selected Dealer Agreement relating to the UBS Investment Funds class of shares of each Series EX-99.n.a1 Appendix A to the Registrant's Revised Multiple Class Plan with respect to the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund and U.S. Real Estate Equity Fund EX-99.p.1 Code of Ethics pursuant to Rule 17j-1 relating to the Registrant EX-99.p.2 Code of Ethics pursuant to Rule 17j-1 relating to the Registrant's investment advisor, Brinson Partners, Inc. EX-99.q.1a Form of Certificate of Secretary and resolution relating to the Power of Attorney
EX-99.A.2B 2 CERTIFICATE OF THE SECRETARY OF BRINSON EX-99.a.2b.XIV CERTIFICATE OF THE SECRETARY of THE BRINSON FUNDS RESOLUTIONS ADDING BRINSON GLOBAL TECHNOLOGY FUND, BRINSON GLOBAL BIOTECH FUND, BRINSON U.S. VALUE EQUITY FUND, BRINSON U.S. SMALL CAP EQUITY AND BRINSON U.S. REAL ESTATE EQUITY FUND AND ADDING BRINSON FUND-CLASS I SHARES, UBS INVESTMENT FUNDS CLASS OF SHARES AND BRINSON FUND CLASS-N SHARES TO SUCH SERIES Pursuant to Article V, Section 9 of the By-Laws, dated August 9, 1993, of The Brinson Funds, a Delaware business trust (the "Trust"), the undersigned does hereby certify the following: 1. She is the duly elected, qualified and acting Secretary of the Trust. 2. Attached hereto and incorporated by reference into the Trust's Agreement and Declaration of Trust dated August 9, 1993, (the "Declaration"), pursuant to Article III, Section 6 of the Declaration, is a true and complete copy of the resolutions adopted by the Board of Trustees of the Trust (the "Resolutions") with respect to the (i) authorization and designation of the Brinson Global Technology Fund, Brinson Global Biotech Fund, Brinson U.S. Value Equity Fund, Brinson U.S. Small Cap Equity Fund and Brinson U.S. Real Estate Equity Fund; and (ii) establishment of Brinson Fund-Class I Shares, UBS Investment Funds class of shares and Brinson Fund-Class N Shares to such Series. 3. The Resolutions were unanimously adopted by the Trust's Board of Trustees at a meeting duly called and held on February 28, 2000 at which a quorum was present and acting throughout and, unless subsequently amended by resolutions duly adopted by the Board of Trustees of the Trust, have remained in full force and effect as of the date hereof. IN WITNESS WHEREOF, the undersigned has caused this certificate to be signed on this 31st day of March, 2000. (Trust Seal) /s/Carolyn M. Burke ------------------------------- Carolyn M. Burke, Secretary The Brinson Funds Resolutions Adopted February 28, 2000 and Incorporated by Reference Into the Agreement and Declaration of Trust of The Brinson Funds dated August 9, 1993 Pursuant to Article III, Section 6 thereof ADDING BRINSON GLOBAL TECHNOLOGY FUND, BRINSON GLOBAL BIOTECH FUND, BRINSON U.S. VALUE EQUITY FUND, BRINSON U.S. SMALL CAP EQUITY FUND, AND BRINSON U.S. REAL ESTATE EQUITY FUND AND ADDING BRINSON FUND-CLASS I SHARES, UBS INVESTMENT FUNDS CLASS OF SHARES AND BRINSON FUND CLASS-N SHARES RESOLVED, that pursuant to Article III, Section 6 of the Agreement and Declaration of Trust, five additional Series of shares be, and they hereby are, authorized and designated as the: Brinson Global Technology Fund; and Brinson Global Biotech Fund; and Brinson U.S. Value Equity Fund; and Brinson U.S. Small Cap Equity Fund; and Brinson U.S. Real Estate Equity Fund; and FURTHER RESOLVED, that an unlimited number of shares of beneficial interest ($0.001 par value) are hereby allocated to each New Series. FURTHER RESOLVED, that the shares of the New Series shall have the same relative rights and preferences as other shares of the Trust, as set forth in the Agreement and Declaration of Trust, and as described in Article III, Section 6 thereof. * * * RESOLVED, that the three classes of shares of the series of the Trust known as the Global Technology Fund, Global Biotech Fund, U.S. Value Equity Fund, U.S. Small Cap Equity Fund and U.S. Real Estate Equity Fund, are hereby established and designated as the "Brinson Global Technology Fund-Class I", "Brinson Global Technology Fund-Class N", and the "UBS Investment Fund - Global Technology" class of shares (sometimes referred to herein individually and collectively as the "Brinson Global Technology Fund Classes"); "Brinson Global Biotech Fund-Class I", "Brinson Global Biotech Fund-Class N", and the "UBS Investment Fund - Global Biotech" class of shares (sometimes referred to herein individually and collectively as the "Brinson Global Biotech Fund Classes"); "Brinson U.S. Value Equity Fund-Class I", "Brinson U.S. Value Equity Fund-Class N", and the "UBS Investment Fund -U.S. Value Equity" class of shares (sometimes referred to herein individually and collectively as the "Brinson U.S. Value Equity Fund Classes"); and the "Brinson U.S. Small Cap Equity Fund-Class I", "Brinson U.S. Small Cap Equity Fund-Class N", and the "UBS Investment Fund - U.S. Small Cap Equity" class of shares, (sometimes referred to herein individually and collectively as the "Brinson U.S. Small Cap Equity Fund Classes"); "Brinson U.S. Real Estate Equity Fund-Class I", "Brinson U.S. Real Estate Equity Fund-Class N", and the "UBS Investment Fund - U.S. Real Estate Equity" class of shares (sometimes referred to herein individually and collectively as the "Brinson U.S. Real Estate Equity Fund Classes"); of the New Series, and an unlimited number of shares of beneficial interest ($0.001 par value) are hereby classified and allocated to each such "Brinson Global Technology Fund Classes", "Brinson Global Biotech Fund Classes", "Brinson U.S. Value Equity Fund Classes", "Brinson U.S. Small Cap Equity Fund Classes" and "Brinson U.S. Real Estate Equity Fund Classes"; and FURTHER RESOLVED, that each share of each class of shares of each New Series shall have the same rights and limitations as set forth in Section 1 of Article III of the Trust's Agreement and Declaration of Trust, except that dividends paid on the Class N and UBS Investment Funds class of shares of each New Series shall reflect reductions for payments of fees under the Trust's Distribution Plans relating to the Class N and UBS Investment Funds class of shares of each New Series, respectively, adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act") (each a "Plan"), and provided further, that only the Class N and UBS Investment Funds class of shares of each New Series shall be entitled to vote upon or with respect to any matter relating to or arising from the Plan that has been adopted by the respective class; and FURTHER RESOLVED, that the officers of the Trust are authorized to take whatever actions are necessary, with the advice of Trust counsel, to revise the Trust's Registration Statement to reflect the creation of the three aforementioned classes of shares of each New Series. * * * RESOLVED, that the officers of the Trust are authorized and directed to issue to Brinson Partners, Inc. ("Brinson Partners" or the "Advisor") one authorized share of beneficial interest ($0.001 par value) of each of the following series of the Trust designated as the: Global Technology Fund; and Global Biotech Fund; and U.S. Value Equity Fund; and U.S. Small Cap Equity Fund; and U.S. Real Estate Equity Fund; and at a purchase price of $10.00 per share; and FURTHER RESOLVED, that each such share, when issued and paid for, shall be validly issued, fully-paid and non-assessable. EX-99.a.2b.XV CERTIFICATE OF THE SECRETARY of THE BRINSON FUNDS RESOLUTIONS CHANGING THE NAMES OF THE U.S. LARGE CAPITALIZATION EQUITY FUND, U.S. LARGE CAPITALIZATION GROWTH FUND AND U.S. SMALL CAPITALIZATION GROWTH FUND SERIES Pursuant to Article V, Section 9 of the By-Laws, dated August 9, 1993, of The Brinson Funds, a Delaware Business Trust (the "Trust"), the undersigned does hereby certify the following: 1. She is the duly elected, qualified and acting Secretary of the Trust. 2. Attached hereto and incorporated by reference into the Trust's Agreement and Declaration of Trust dated August 9, 1993 (the "Declaration"), pursuant to Article III, Section 6 of the Declaration, is a true and complete copy of the resolutions adopted by the Board of Trustees of the Trust (the "Resolutions") regarding the name changes of the U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund and U.S. Small Capitalization Growth Fund series of the Trust. 3. The Resolutions were unanimously adopted by the Trust's Board of Trustees at a meeting duly called and held on February 28, 2000 and at which a quorum was present and acting throughout and, unless subsequently amended by resolutions duly adopted by the Board of Trustees of the Trust, have remained in full force and effect as of the date hereof. IN WITNESS WHEREOF, the undersigned has caused this certificate to be signed on this 31st day of March, 2000. (Trust Seal) /s/Carolyn M. Burke ------------------------------- Carolyn M. Burke, Secretary The Brinson Funds Resolutions Adopted February 28, 2000 and Incorporated by Reference Into the Agreement and Declaration of Trust of The Brinson Funds dated August 9, 1993 Pursuant to Article III, Section 6 thereof RESOLUTIONS CHANGING THE NAMES OF THE U.S. LARGE CAPITALIZATION EQUITY FUND, U.S. LARGE CAPITALIZATION GROWTH FUND AND U.S. SMALL CAPITALIZATION GROWTH FUND SERIES RESOLVED, that the Board of Trustees hereby redesignates the Series currently known as the U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund and U.S. Small Capitalization Growth Fund as the U.S. Large Cap Equity Fund, U.S. Large Cap Growth Fund and U.S. Small Cap Growth Fund, respectively, which redesignations shall become effective upon the filing of the next Post-Effective Amendment to the Trust's registration statement with the SEC; and FURTHER RESOLVED, that the officers of the Trust, with the advice of Trust counsel, are hereby authorized and directed to take such actions as are necessary to effectuate the redesignation of the Series identified above, including making such revisions to the Trust's registration statement, prospectuses, and other relevant documents, as required. EX-99.d.8a CERTIFICATE OF THE SECRETARY of THE BRINSON FUNDS RESOLUTIONS CHANGING NAME OF SERIES Pursuant to the Investment Advisory Agreement dated November 24, 1997 of The Brinson Funds, a Delaware business trust (the "Trust"), the undersigned does hereby certify the following: 1. She is the duly elected, qualified and acting Secretary of the Trust. 2. Attached hereto and incorporated by reference into the Trust's Investment Advisory Agreement dated November 24, 1997, is a true and complete copy of the resolutions adopted by the Board of Trustees of the Trust (the "Resolutions") with respect to the name change of the U.S. Large Capitalization Equity Fund series of the Trust. 3. The Resolutions were unanimously adopted by the Trust's Board of Trustees at a meeting duly called and held on February 28, 2000 and, unless subsequently amended by resolutions duly adopted by the Board of Trustees of the Trust, have remained in full force and effect as of the date hereof. IN WITNESS WHEREOF, the undersigned has caused this certificate to be signed on this 31st day of March, 2000. (Trust Seal) /s/Carolyn M. Burke ------------------------------- Carolyn M. Burke, Secretary The Brinson Funds Resolutions Adopted February 28, 2000 and Incorporated By Reference Into the Investment Advisory Agreement dated November 24, 1997 RESOLUTIONS CHANGING THE NAME OF THE U.S. LARGE CAPITALIZATION EQUITY FUND RESOLVED, that the Board of Trustees hereby redesignates the Series currently known as the U.S. Large Capitalization Equity Fund as the U.S. Large Cap Equity Fund, which redesignation shall be effective upon the filing of the next Post-Effective Amendment to the Trust's registration statement with the SEC; and FURTHER RESOLVED, that the officers of the Trust, with the advice of Trust counsel, are hereby authorized and directed to take such actions as are necessary to effectuate the redesignation of the Series identified above, including making such revisions to the Trust's registration statement, prospectuses, and other relevant documents, as required. EX-99.d.9a CERTIFICATE OF THE SECRETARY of THE BRINSON FUNDS RESOLUTIONS CHANGING NAME OF SERIES Pursuant to the Investment Advisory Agreement dated December 18, 1998 of The Brinson Funds, a Delaware business trust (the "Trust"), the undersigned does hereby certify the following: 1. She is the duly elected, qualified and acting Secretary of the Trust. 2. Attached hereto and incorporated by reference into the Trust's Investment Advisory Agreement dated December 18, 1998, is a true and complete copy of the resolutions adopted by the Board of Trustees of the Trust (the "Resolutions") with respect to the name change of the U.S. Large Capitalization Growth Fund series of the Trust. 3. The Resolutions were unanimously adopted by the Trust's Board of Trustees at a meeting duly called and held on February 28, 2000 and, unless subsequently amended by resolutions duly adopted by the Board of Trustees of the Trust, have remained in full force and effect as of the date hereof. IN WITNESS WHEREOF, the undersigned has caused this certificate to be signed on this 31st day of March, 2000. (Trust Seal) /s/Carolyn M. Burke ------------------------------- Carolyn M. Burke, Secretary The Brinson Funds Resolutions Adopted February 28, 2000 and Incorporated By Reference Into the Investment Advisory Agreement dated December 18, 1998 RESOLUTIONS CHANGING THE NAME OF THE U.S. LARGE CAPITALIZATION GROWTH FUND RESOLVED, that the Board of Trustees hereby redesignates the Series currently known as the U.S. Large Capitalization Growth Fund as the U.S. Large Cap Growth Fund, which redesignation shall be effective upon the filing of the next Post-Effective Amendment to the Trust's registration statement with the SEC; and FURTHER RESOLVED, that the officers of the Trust, with the advice of Trust counsel, are hereby authorized and directed to take such actions as are necessary to effectuate the redesignation of the Series identified above, including making such revisions to the Trust's registration statement, prospectuses, and other relevant documents, as required. EX-99.D10 3 RESOLUTIONS CHANGING NAME OF SERIES EX-99.d.10b CERTIFICATE OF THE SECRETARY of THE BRINSON FUNDS RESOLUTIONS CHANGING NAME OF SERIES Pursuant to the Investment Advisory Agreement dated December 18, 1998 of The Brinson Funds, a Delaware business trust (the "Trust"), the undersigned does hereby certify the following: 1. She is the duly elected, qualified and acting Secretary of the Trust. 2. Attached hereto and incorporated by reference into the Trust's Investment Advisory Agreement dated December 18, 1998, is a true and complete copy of the resolutions adopted by the Board of Trustees of the Trust (the "Resolutions") with respect to the name change of the U.S. Small Capitalization Growth Fund series of the Trust. 3. The Resolutions were unanimously adopted by the Trust's Board of Trustees at a meeting duly called and held on February 28, 2000 and, unless subsequently amended by resolutions duly adopted by the Board of Trustees of the Trust, have remained in full force and effect as of the date hereof. IN WITNESS WHEREOF, the undersigned has caused this certificate to be signed on this 31st day of March, 2000. (Trust Seal) /s/Carolyn M. Burke ------------------------------- Carolyn M. Burke, Secretary The Brinson Funds Resolutions Adopted February 28, 2000 and Incorporated By Reference Into the Investment Advisory Agreement dated December 18, 1998 RESOLUTIONS CHANGING THE NAME OF THE U.S. SMALL CAPITALIZATION GROWTH FUND RESOLVED, that the Board of Trustees hereby redesignates the Series currently known as the U.S. Small Capitalization Growth Fund as the U.S. Small Cap Growth Fund, which redesignation shall be effective upon the filing of the next Post-Effective Amendment to the Trust's registration statement with the SEC; and FURTHER RESOLVED, that the officers of the Trust, with the advice of Trust counsel, are hereby authorized and directed to take such actions as are necessary to effectuate the redesignation of the Series identified above, including making such revisions to the Trust's registration statement, prospectuses, and other relevant documents, as required. EX-99.D14 4 FORM OF INVESTMENT ADVISORY AGREEMENT EX-99.d.14 FORM OF INVESTMENT ADVISORY AGREEMENT AGREEMENT made this ____ day of _____________, 2000 by and between The Brinson Funds, a Delaware Business Trust (the "Trust") and Brinson Partners, Inc., a Delaware corporation (the "Advisor"). 1. Duties of the Advisor. The Trust hereby appoints the Advisor to act as --------------------- investment advisor to the Global Technology Fund (the "Series") for the period and on such terms set forth in this Agreement. The Trust employs the Advisor to manage the investment and reinvestment of the assets of the Series, to continuously review, supervise and administer the investment program of the Series, to determine in its discretion the assets to be held uninvested, to provide the Trust with records concerning the Advisor's activities which the Trust is required to maintain, and to render regular reports to the Trust's officers and Board of Trustees concerning the Advisor's discharge of the foregoing responsibilities. The Advisor shall discharge the foregoing responsibilities subject to the control of the officers and the Board of Trustees of the Trust, and in compliance with the objectives, policies and limitations set forth in the Trust's Prospectus and Statement of Additional Information. The Advisor accepts such employment and agrees to render the services and to provide, at its own expense, the office space, furnishings, equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. With respect to foreign securities, at its own expense, the Advisor may obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it may not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. 2. Portfolio Transactions. The Advisor shall provide the Series with a ----------------------- trading department and with respect to foreign securities, the Advisor is authorized to utilize the trading department of its foreign subsidiaries. The Advisor shall select, and with respect to its foreign subsidiaries, shall monitor the selection of, the brokers or dealers that will execute the purchases and sales of securities for the Series and is directed to use its best efforts to ensure that the best available price and most favorable execution of securities transactions for the Series are obtained. Subject to policies established by the Board of Trustees of the Trust and communicated to the Advisor, it is understood that the Advisor will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Trust or in respect of the Series, or be in breach of any obligation owing to the Trust or in respect of the Series under this Agreement, or otherwise, solely by reason of its having caused the Series to pay a member of a securities exchange, a broker or a dealer a commission for effecting a securities transaction for the Series in excess of the amount of commission another member of an exchange, broker or dealer would have charged if the Advisor determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such member, broker or dealer, viewed in terms of that particular transaction or the Advisor's overall responsibilities with respect to the accounts, including the Series, as to which it exercises investment discretion. The Advisor will promptly communicate to the officers and directors of the Trust such information relating to the Series transactions as they may reasonably request. 3. Compensation of the Advisor. For the services to be rendered by the ---------------------------- Advisor as provided in Section 1 and 2 of this Agreement, the Global Technology Fund shall pay to the Advisor annual management fees of 1.40%, calculated on the Series' daily net assets to be paid to the Advisor within five business days after the end of each month. In the event of termination of this Agreement, the fee provided in this Section 3 shall be paid on a pro rata basis, based on the number of days when this Agreement was in effect. 4. Reimbursement Of Fee Waivers And Expense Reimbursements. If on any day -------------------------------------------------------- during which this Agreement is in effect, the estimated annualized Operating Expenses (as defined below) of the Series for that day are less than the Operating Expense Limit (as defined below), the Advisor shall be entitled to reimbursement by the Series of the investment management fees waived or reduced, and of any expense reimbursements or similar payments remitted by the Advisor to the Series pursuant to the Advisor's agreement to limit the Series' Operating Expenses (the "Reimbursement Amount") during any of the previous five (5) years, to the extent that the Series' annualized Operating Expenses, plus the amount so reimbursed, equals, for such day, the Operating Expense Limit, provided that such amount paid to the Advisor will in no event exceed the total Reimbursement Amount and will not include any amounts previously reimbursed by the Series to the Advisor. For purposes of this Section 4: (i) "Operating Expenses" shall include the ordinary operating expenses incurred by the Series in any fiscal year, including, without limitation, management fees paid to the Advisor, but excluding interest, taxes, brokerage commissions, other investment-related costs and extraordinary expenses not incurred in the ordinary course of the Series' business; and (ii) "Operating Expense Limit" shall mean, with respect to the Series' Class I shares, 1.55% of average daily net assets of the Series, and shall mean, with respect to the Series' Class N shares and UBS Investment Fund shares, 1.55% of the Series' average daily net assets, plus any distribution service fees under Rule 12b-1 under the Investment Company Act of 1940 and/or shareholder service fees as described in the then current registration statement of the Series. 5. Reports. The Series and the Advisor agree to furnish to each other such -------- information regarding their operations with regard to their affairs as each may reasonably request. 6. Status of Advisor. The services of the Advisor to the Series are not to ------------------ be deemed exclusive, and the Advisor shall be free to render similar services to others so long as its services to the Series are not impaired thereby. 7. Liability of Advisor. In the absence of willful misfeasance, bad faith, --------------------- gross negligence or reckless disregard by the Advisor of its obligations and duties hereunder, the Advisor shall not be subject to any liability whatsoever to the Series, or to any shareholder of the Series, for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Series. 8. Duration and Termination. This Agreement shall become effective 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 of 1940, and by the holders of a majority of the outstanding voting securities of the Series; and shall continue in effect until _____________ __, 2002. Thereafter, this Agreement may continue in effect only if such continuance is approved at least annually by: (i) the Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding voting securities of the Series; and in either event by a vote of a majority of those trustees of the Trust who are not parties to this Agreement or interested persons of any such party in the manner provided in Section 15(c) of the Investment Company Act of 1940. This Agreement may be terminated by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of the Series on 60 days' written notice to the Advisor. This Agreement may be terminated by the Advisor at any time, without the payment of any penalty, upon 60 days' written notice to the Trust. This Agreement will automatically terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered or mailed postpaid, to the other party at the principal office of such party. As used in this Section 8, the terms "assignment", "interested person", and "a vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder. 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 corporate name and/or the name of the Series any reference to the name of the Advisor promptly after receipt from the Advisor of a written request therefore. 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: THE BRINSON FUNDS By: By: --------------------------------- ---------------------------------- Carolyn M. Burke E. Thomas McFarlan Secretary President ATTEST: BRINSON PARTNERS, INC. By: By: --------------------------------- ---------------------------------- ATTEST: BRINSON PARTNERS, INC. By: By: --------------------------------- ---------------------------------- EX-99.D15 5 FORM OF INVESTMENT ADVISORY AGREEMENT EX-99.d.15 FORM OF INVESTMENT ADVISORY AGREEMENT AGREEMENT made this ____ day of _____________, 2000 by and between The Brinson Funds, a Delaware Business Trust (the "Trust") and Brinson Partners, Inc., a Delaware corporation (the "Advisor"). 1. Duties of the Advisor. The Trust hereby appoints the Advisor to act as --------------------- investment advisor to the Global Biotech Fund (the "Series") for the period and on such terms set forth in this Agreement. The Trust employs the Advisor to manage the investment and reinvestment of the assets of the Series, to continuously review, supervise and administer the investment program of the Series, to determine in its discretion the assets to be held uninvested, to provide the Trust with records concerning the Advisor's activities which the Trust is required to maintain, and to render regular reports to the Trust's officers and Board of Trustees concerning the Advisor's discharge of the foregoing responsibilities. The Advisor shall discharge the foregoing responsibilities subject to the control of the officers and the Board of Trustees of the Trust, and in compliance with the objectives, policies and limitations set forth in the Trust's Prospectus and Statement of Additional Information. The Advisor accepts such employment and agrees to render the services and to provide, at its own expense, the office space, furnishings, equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. With respect to foreign securities, at its own expense, the Advisor may obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it may not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. 2. Portfolio Transactions. The Advisor shall provide the Series with a ----------------------- trading department and with respect to foreign securities, the Advisor is authorized to utilize the trading department of its foreign subsidiaries. The Advisor shall select, and with respect to its foreign subsidiaries, shall monitor the selection of, the brokers or dealers that will execute the purchases and sales of securities for the Series and is directed to use its best efforts to ensure that the best available price and most favorable execution of securities transactions for the Series are obtained. Subject to policies established by the Board of Trustees of the Trust and communicated to the Advisor, it is understood that the Advisor will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Trust or in respect of the Series, or be in breach of any obligation owing to the Trust or in respect of the Series under this Agreement, or otherwise, solely by reason of its having caused the Series to pay a member of a securities exchange, a broker or a dealer a commission for effecting a securities transaction for the Series in excess of the amount of commission another member of an exchange, broker or dealer would have charged if the Advisor determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such member, broker or dealer, viewed in terms of that particular transaction or the Advisor's overall responsibilities with respect to the accounts, including the Series, as to which it exercises investment discretion. The Advisor will promptly communicate to the officers and directors of the Trust such information relating to the Series transactions as they may reasonably request. 3. Compensation of the Advisor. For the services to be rendered by the ---------------------------- Advisor as provided in Section 1 and 2 of this Agreement, the Global Biotech Fund shall pay to the Advisor annual management fees of 1.15%, calculated on the Series' daily net assets to be paid to the Advisor within five business days after the end of each month. In the event of termination of this Agreement, the fee provided in this Section 3 shall be paid on a pro rata basis, based on the number of days when this Agreement was in effect. 4. Reimbursement Of Fee Waivers And Expense Reimbursements. If on any day -------------------------------------------------------- during which this Agreement is in effect, the estimated annualized Operating Expenses (as defined below) of the Series for that day are less than the Operating Expense Limit (as defined below), the Advisor shall be entitled to reimbursement by the Series of the investment management fees waived or reduced, and of any expense reimbursements or similar payments remitted by the Advisor to the Series pursuant to the Advisor's agreement to limit the Series' Operating Expenses (the "Reimbursement Amount") during any of the previous five (5) years, to the extent that the Series' annualized Operating Expenses, plus the amount so reimbursed, equals, for such day, the Operating Expense Limit, provided that such amount paid to the Advisor will in no event exceed the total Reimbursement Amount and will not include any amounts previously reimbursed by the Series to the Advisor. For purposes of this Section 4: (i) "Operating Expenses" shall include the ordinary operating expenses incurred by the Series in any fiscal year, including, without limitation, management fees paid to the Advisor, but excluding interest, taxes, brokerage commissions, other investment-related costs and extraordinary expenses not incurred in the ordinary course of the Series' business; and (ii) "Operating Expense Limit" shall mean, with respect to the Series' Class I shares, 1.30% of average daily net assets of the Series, and shall mean, with respect to the Series' Class N shares and UBS Investment Fund shares, 1.30% of the Series' average daily net assets, plus any distribution service fees under Rule 12b-1 under the Investment Company Act of 1940 and/or shareholder service fees as described in the then current registration statement of the Series. 5. Reports. The Series and the Advisor agree to furnish to each other such -------- information regarding their operations with regard to their affairs as each may reasonably request. 6. Status of Advisor. The services of the Advisor to the Series are not to ------------------ be deemed exclusive, and the Advisor shall be free to render similar services to others so long as its services to the Series are not impaired thereby. 7. Liability of Advisor. In the absence of willful misfeasance, bad faith, --------------------- gross negligence or reckless disregard by the Advisor of its obligations and duties hereunder, the Advisor shall not be subject to any liability whatsoever to the Series, or to any shareholder of the Series, for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Series. 8. Duration and Termination. This Agreement shall become effective 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 of 1940, and by the holders of a majority of the outstanding voting securities of the Series; and shall continue in effect until _________ __, 2002. Thereafter, this Agreement may continue in effect only if such continuance is approved at least annually by: (i) the Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding voting securities of the Series; and in either event by a vote of a majority of those trustees of the Trust who are not parties to this Agreement or interested persons of any such party in the manner provided in Section 15(c) of the Investment Company Act of 1940. This Agreement may be terminated by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of the Series on 60 days' written notice to the Advisor. This Agreement may be terminated by the Advisor at any time, without the payment of any penalty, upon 60 days' written notice to the Trust. This Agreement will automatically terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered or mailed postpaid, to the other party at the principal office of such party. As used in this Section 8, the terms "assignment", "interested person", and "a vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder. 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 corporate name and/or the name of the Series any reference to the name of the Advisor promptly after receipt from the Advisor of a written request therefore. 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: THE BRINSON FUNDS By: By: ---------------------------------- -------------------------------- Carolyn M. Burke E. Thomas McFarlan Secretary President ATTEST: BRINSON PARTNERS, INC. By: By: ---------------------------------- -------------------------------- ATTEST: BRINSON PARTNERS, INC. By: By: ---------------------------------- -------------------------------- EX-99.D16 6 FORM OF INVESTMENT ADVISORY AGREEMENT EX-99.d.16 FORM OF INVESTMENT ADVISORY AGREEMENT AGREEMENT made this ____ day of _____________, 2000 by and between The Brinson Funds, a Delaware Business Trust (the "Trust") and Brinson Partners, Inc., a Delaware corporation (the "Advisor"). 1. Duties of the Advisor. The Trust hereby appoints the Advisor to act as --------------------- investment advisor to the U.S. Small Cap Equity Fund (the "Series") for the period and on such terms set forth in this Agreement. The Trust employs the Advisor to manage the investment and reinvestment of the assets of the Series, to continuously review, supervise and administer the investment program of the Series, to determine in its discretion the assets to be held uninvested, to provide the Trust with records concerning the Advisor's activities which the Trust is required to maintain, and to render regular reports to the Trust's officers and Board of Trustees concerning the Advisor's discharge of the foregoing responsibilities. The Advisor shall discharge the foregoing responsibilities subject to the control of the officers and the Board of Trustees of the Trust, and in compliance with the objectives, policies and limitations set forth in the Trust's Prospectus and Statement of Additional Information. The Advisor accepts such employment and agrees to render the services and to provide, at its own expense, the office space, furnishings, equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. With respect to foreign securities, at its own expense, the Advisor may obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it may not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. 2. Portfolio Transactions. The Advisor shall provide the Series with a ----------------------- trading department and with respect to foreign securities, the Advisor is authorized to utilize the trading department of its foreign subsidiaries. The Advisor shall select, and with respect to its foreign subsidiaries, shall monitor the selection of, the brokers or dealers that will execute the purchases and sales of securities for the Series and is directed to use its best efforts to ensure that the best available price and most favorable execution of securities transactions for the Series are obtained. Subject to policies established by the Board of Trustees of the Trust and communicated to the Advisor, it is understood that the Advisor will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Trust or in respect of the Series, or be in breach of any obligation owing to the Trust or in respect of the Series under this Agreement, or otherwise, solely by reason of its having caused the Series to pay a member of a securities exchange, a broker or a dealer a commission for effecting a securities transaction for the Series in excess of the amount of commission another member of an exchange, broker or dealer would have charged if the Advisor determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such member, broker or dealer, viewed in terms of that particular transaction or the Advisor's overall responsibilities with respect to the accounts, including the Series, as to which it exercises investment discretion. The Advisor will promptly communicate to the officers and directors of the Trust such information relating to the Series transactions as they may reasonably request. 3. Compensation of the Advisor. For the services to be rendered by the ---------------------------- Advisor as provided in Section 1 and 2 of this Agreement, the U.S. Small Cap Equity Fund shall pay to the Advisor annual management fees of 1.00%, calculated on the Series' daily net assets to be paid to the Advisor within five business days after the end of each month. In the event of termination of this Agreement, the fee provided in this Section 3 shall be paid on a pro rata basis, based on the number of days when this Agreement was in effect. 4. Reimbursement Of Fee Waivers And Expense Reimbursements. If on any day -------------------------------------------------------- during which this Agreement is in effect, the estimated annualized Operating Expenses (as defined below) of the Series for that day are less than the Operating Expense Limit (as defined below), the Advisor shall be entitled to reimbursement by the Series of the investment management fees waived or reduced, and of any expense reimbursements or similar payments remitted by the Advisor to the Series pursuant to the Advisor's agreement to limit the Series' Operating Expenses (the "Reimbursement Amount") during any of the previous five (5) years, to the extent that the Series' annualized Operating Expenses, plus the amount so reimbursed, equals, for such day, the Operating Expense Limit, provided that such amount paid to the Advisor will in no event exceed the total Reimbursement Amount and will not include any amounts previously reimbursed by the Series to the Advisor. For purposes of this Section 4: (i) "Operating Expenses" shall include the ordinary operating expenses incurred by the Series in any fiscal year, including, without limitation, management fees paid to the Advisor, but excluding interest, taxes, brokerage commissions, other investment-related costs and extraordinary expenses not incurred in the ordinary course of the Series' business; and (ii) "Operating Expense Limit" shall mean, with respect to the Series' Class I shares, 1.15% of average daily net assets of the Series, and shall mean, with respect to the Series' Class N shares and UBS Investment Fund shares, 1.15% of the Series' average daily net assets, plus any distribution service fees under Rule 12b-1 under the Investment Company Act of 1940 and/or shareholder service fees as described in the then current registration statement of the Series. 5. Reports. The Series and the Advisor agree to furnish to each other such -------- information regarding their operations with regard to their affairs as each may reasonably request. 6. Status of Advisor. The services of the Advisor to the Series are not to ------------------ be deemed exclusive, and the Advisor shall be free to render similar services to others so long as its services to the Series are not impaired thereby. 7. Liability of Advisor. In the absence of willful misfeasance, bad faith, --------------------- gross negligence or reckless disregard by the Advisor of its obligations and duties hereunder, the Advisor shall not be subject to any liability whatsoever to the Series, or to any shareholder of the Series, for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Series. 8. Duration and Termination. This Agreement shall become effective 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 of 1940, and by the holders of a majority of the outstanding voting securities of the Series; and shall continue in effect until _________ __, 2002. Thereafter, this Agreement may continue in effect only if such continuance is approved at least annually by: (i) the Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding voting securities of the Series; and in either event by a vote of a majority of those trustees of the Trust who are not parties to this Agreement or interested persons of any such party in the manner provided in Section 15(c) of the Investment Company Act of 1940. This Agreement may be terminated by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of the Series on 60 days' written notice to the Advisor. This Agreement may be terminated by the Advisor at any time, without the payment of any penalty, upon 60 days' written notice to the Trust. This Agreement will automatically terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered or mailed postpaid, to the other party at the principal office of such party. As used in this Section 8, the terms "assignment", "interested person", and "a vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder. 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 corporate name and/or the name of the Series any reference to the name of the Advisor promptly after receipt from the Advisor of a written request therefore. 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: THE BRINSON FUNDS By: By: ---------------------------------- ----------------------------------- Carolyn M. Burke E. Thomas McFarlan Secretary President ATTEST: BRINSON PARTNERS, INC. By: By: ---------------------------------- ---------------------------------- ATTEST: BRINSON PARTNERS, INC. By: By: ---------------------------------- ---------------------------------- EX-99.D17 7 FORM OF INVESTMENT ADVISORY AGREEMENT EX-99.d.17 FORM OF INVESTMENT ADVISORY AGREEMENT AGREEMENT made this ____ day of _____________, 2000 by and between The Brinson Funds, a Delaware Business Trust (the "Trust") and Brinson Partners, Inc., a Delaware corporation (the "Advisor"). 1. Duties of the Advisor. The Trust hereby appoints the Advisor to act as --------------------- investment advisor to the U.S. Value Equity Fund (the "Series") for the period and on such terms set forth in this Agreement. The Trust employs the Advisor to manage the investment and reinvestment of the assets of the Series, to continuously review, supervise and administer the investment program of the Series, to determine in its discretion the assets to be held uninvested, to provide the Trust with records concerning the Advisor's activities which the Trust is required to maintain, and to render regular reports to the Trust's officers and Board of Trustees concerning the Advisor's discharge of the foregoing responsibilities. The Advisor shall discharge the foregoing responsibilities subject to the control of the officers and the Board of Trustees of the Trust, and in compliance with the objectives, policies and limitations set forth in the Trust's Prospectus and Statement of Additional Information. The Advisor accepts such employment and agrees to render the services and to provide, at its own expense, the office space, furnishings, equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. With respect to foreign securities, at its own expense, the Advisor may obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it may not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. 2. Portfolio Transactions. The Advisor shall provide the Series with a ----------------------- trading department and with respect to foreign securities, the Advisor is authorized to utilize the trading department of its foreign subsidiaries. The Advisor shall select, and with respect to its foreign subsidiaries, shall monitor the selection of, the brokers or dealers that will execute the purchases and sales of securities for the Series and is directed to use its best efforts to ensure that the best available price and most favorable execution of securities transactions for the Series are obtained. Subject to policies established by the Board of Trustees of the Trust and communicated to the Advisor, it is understood that the Advisor will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Trust or in respect of the Series, or be in breach of any obligation owing to the Trust or in respect of the Series under this Agreement, or otherwise, solely by reason of its having caused the Series to pay a member of a securities exchange, a broker or a dealer a commission for effecting a securities transaction for the Series in excess of the amount of commission another member of an exchange, broker or dealer would have charged if the Advisor determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such member, broker or dealer, viewed in terms of that particular transaction or the Advisor's overall responsibilities with respect to the accounts, including the Series, as to which it exercises investment discretion. The Advisor will promptly communicate to the officers and directors of the Trust such information relating to the Series transactions as they may reasonably request. 3. Compensation of the Advisor. For the services to be rendered by the ---------------------------- Advisor as provided in Section 1 and 2 of this Agreement, the U.S. Value Equity Fund shall pay to the Advisor annual management fees of 0.70%, calculated on the Series' daily net assets to be paid to the Advisor within five business days after the end of each month. In the event of termination of this Agreement, the fee provided in this Section 3 shall be paid on a pro rata basis, based on the number of days when this Agreement was in effect. 4. Reimbursement Of Fee Waivers And Expense Reimbursements. If on any day -------------------------------------------------------- during which this Agreement is in effect, the estimated annualized Operating Expenses (as defined below) of the Series for that day are less than the Operating Expense Limit (as defined below), the Advisor shall be entitled to reimbursement by the Series of the investment management fees waived or reduced, and of any expense reimbursements or similar payments remitted by the Advisor to the Series pursuant to the Advisor's agreement to limit the Series' Operating Expenses (the "Reimbursement Amount") during any of the previous five (5) years, to the extent that the Series' annualized Operating Expenses, plus the amount so reimbursed, equals, for such day, the Operating Expense Limit, provided that such amount paid to the Advisor will in no event exceed the total Reimbursement Amount and will not include any amounts previously reimbursed by the Series to the Advisor. For purposes of this Section 4: (i) "Operating Expenses" shall include the ordinary operating expenses incurred by the Series in any fiscal year, including, without limitation, management fees paid to the Advisor, but excluding interest, taxes, brokerage commissions, other investment-related costs and extraordinary expenses not incurred in the ordinary course of the Series' business; and (ii) "Operating Expense Limit" shall mean, with respect to the Series' Class I shares, 0.85% of average daily net assets of the Series, and shall mean, with respect to the Series' Class N shares and UBS Investment Fund shares, 0.85% of the Series' average daily net assets, plus any distribution service fees under Rule 12b-1 under the Investment Company Act of 1940 and/or shareholder service fees as described in the then current registration statement of the Series. 5. Reports. The Series and the Advisor agree to furnish to each other such -------- information regarding their operations with regard to their affairs as each may reasonably request. 6. Status of Advisor. The services of the Advisor to the Series are not to ------------------ be deemed exclusive, and the Advisor shall be free to render similar services to others so long as its services to the Series are not impaired thereby. 7. Liability of Advisor. In the absence of willful misfeasance, bad faith, --------------------- gross negligence or reckless disregard by the Advisor of its obligations and duties hereunder, the Advisor shall not be subject to any liability whatsoever to the Series, or to any shareholder of the Series, for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Series. 8. Duration and Termination. This Agreement shall become effective 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 of 1940, and by the holders of a majority of the outstanding voting securities of the Series; and shall continue in effect until _________ __, 2002. Thereafter, this Agreement may continue in effect only if such continuance is approved at least annually by: (i) the Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding voting securities of the Series; and in either event by a vote of a majority of those trustees of the Trust who are not parties to this Agreement or interested persons of any such party in the manner provided in Section 15(c) of the Investment Company Act of 1940. This Agreement may be terminated by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of the Series on 60 days' written notice to the Advisor. This Agreement may be terminated by the Advisor at any time, without the payment of any penalty, upon 60 days' written notice to the Trust. This Agreement will automatically terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered or mailed postpaid, to the other party at the principal office of such party. As used in this Section 8, the terms "assignment", "interested person", and "a vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder. 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 corporate name and/or the name of the Series any reference to the name of the Advisor promptly after receipt from the Advisor of a written request therefore. 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: THE BRINSON FUNDS By: By: ------------------------------- ---------------------------------- Carolyn M. Burke E. Thomas McFarlan Secretary President ATTEST: BRINSON PARTNERS, INC. By: By: ---------------------------------- ----------------------------------- ATTEST: BRINSON PARTNERS, INC. By: By: ---------------------------------- ----------------------------------- EX-99.D18 8 FORM OF INVESTMENT ADVISORY AGREEMENT EX-99.d.18 FORM OF INVESTMENT ADVISORY AGREEMENT AGREEMENT made this ____ day of _____________, 2000 by and between The Brinson Funds, a Delaware Business Trust (the "Trust") and Brinson Partners, Inc., a Delaware corporation (the "Advisor"). 1. Duties of the Advisor. The Trust hereby appoints the Advisor to act as --------------------- investment advisor to the U.S. Real Estate Equity Fund (the "Series") for the period and on such terms set forth in this Agreement. The Trust employs the Advisor to manage the investment and reinvestment of the assets of the Series, to continuously review, supervise and administer the investment program of the Series, to determine in its discretion the assets to be held uninvested, to provide the Trust with records concerning the Advisor's activities which the Trust is required to maintain, and to render regular reports to the Trust's officers and Board of Trustees concerning the Advisor's discharge of the foregoing responsibilities. The Advisor shall discharge the foregoing responsibilities subject to the control of the officers and the Board of Trustees of the Trust, and in compliance with the objectives, policies and limitations set forth in the Trust's Prospectus and Statement of Additional Information. The Advisor accepts such employment and agrees to render the services and to provide, at its own expense, the office space, furnishings, equipment and the personnel required by it to perform the services on the terms and for the compensation provided herein. With respect to foreign securities, at its own expense, the Advisor may obtain statistical and other factual information and advice regarding economic factors and trends from its foreign subsidiaries, but it may not generally receive advice or recommendations regarding the purchase or sale of securities from such subsidiaries. 2. Portfolio Transactions. The Advisor shall provide the Series with a ----------------------- trading department and with respect to foreign securities, the Advisor is authorized to utilize the trading department of its foreign subsidiaries. The Advisor shall select, and with respect to its foreign subsidiaries, shall monitor the selection of, the brokers or dealers that will execute the purchases and sales of securities for the Series and is directed to use its best efforts to ensure that the best available price and most favorable execution of securities transactions for the Series are obtained. Subject to policies established by the Board of Trustees of the Trust and communicated to the Advisor, it is understood that the Advisor will not be deemed to have acted unlawfully, or to have breached a fiduciary duty to the Trust or in respect of the Series, or be in breach of any obligation owing to the Trust or in respect of the Series under this Agreement, or otherwise, solely by reason of its having caused the Series to pay a member of a securities exchange, a broker or a dealer a commission for effecting a securities transaction for the Series in excess of the amount of commission another member of an exchange, broker or dealer would have charged if the Advisor determines in good faith that the commission paid was reasonable in relation to the brokerage or research services provided by such member, broker or dealer, viewed in terms of that particular transaction or the Advisor's overall responsibilities with respect to the accounts, including the Series, as to which it exercises investment discretion. The Advisor will promptly communicate to the officers and directors of the Trust such information relating to the Series transactions as they may reasonably request. 3. Compensation of the Advisor. For the services to be rendered by the ---------------------------- Advisor as provided in Section 1 and 2 of this Agreement, the U.S. Real Estate Equity Fund shall pay to the Advisor annual management fees of 0.90%, calculated on the Series' daily net assets to be paid to the Advisor within five business days after the end of each month. In the event of termination of this Agreement, the fee provided in this Section 3 shall be paid on a pro rata basis, based on the number of days when this Agreement was in effect. 4. Reimbursement Of Fee Waivers And Expense Reimbursements. If on any day -------------------------------------------------------- during which this Agreement is in effect, the estimated annualized Operating Expenses (as defined below) of the Series for that day are less than the Operating Expense Limit (as defined below), the Advisor shall be entitled to reimbursement by the Series of the investment management fees waived or reduced, and of any expense reimbursements or similar payments remitted by the Advisor to the Series pursuant to the Advisor's agreement to limit the Series' Operating Expenses (the "Reimbursement Amount") during any of the previous five (5) years, to the extent that the Series' annualized Operating Expenses, plus the amount so reimbursed, equals, for such day, the Operating Expense Limit, provided that such amount paid to the Advisor will in no event exceed the total Reimbursement Amount and will not include any amounts previously reimbursed by the Series to the Advisor. For purposes of this Section 4: (i) "Operating Expenses" shall include the ordinary operating expenses incurred by the Series in any fiscal year, including, without limitation, management fees paid to the Advisor, but excluding interest, taxes, brokerage commissions, other investment-related costs and extraordinary expenses not incurred in the ordinary course of the Series' business; and (ii) "Operating Expense Limit" shall mean, with respect to the Series' Class I shares, 1.05% of average daily net assets of the Series, and shall mean, with respect to the Series' Class N shares and UBS Investment Fund shares, 1.05% of the Series' average daily net assets, plus any distribution service fees under Rule 12b-1 under the Investment Company Act of 1940 and/or shareholder service fees as described in the then current registration statement of the Series. 5. Reports. The Series and the Advisor agree to furnish to each other such -------- information regarding their operations with regard to their affairs as each may reasonably request. 6. Status of Advisor. The services of the Advisor to the Series are not to ------------------ be deemed exclusive, and the Advisor shall be free to render similar services to others so long as its services to the Series are not impaired thereby. 7. Liability of Advisor. In the absence of willful misfeasance, bad faith, --------------------- gross negligence or reckless disregard by the Advisor of its obligations and duties hereunder, the Advisor shall not be subject to any liability whatsoever to the Series, or to any shareholder of the Series, for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Series. 8. Duration and Termination. This Agreement shall become effective 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 of 1940, and by the holders of a majority of the outstanding voting securities of the Series; and shall continue in effect until _________ __, 2002. Thereafter, this Agreement may continue in effect only if such continuance is approved at least annually by: (i) the Trust's Board of Trustees or, (ii) by the vote of a majority of the outstanding voting securities of the Series; and in either event by a vote of a majority of those trustees of the Trust who are not parties to this Agreement or interested persons of any such party in the manner provided in Section 15(c) of the Investment Company Act of 1940. This Agreement may be terminated by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of the holders of a majority of the outstanding voting securities of the Series on 60 days' written notice to the Advisor. This Agreement may be terminated by the Advisor at any time, without the payment of any penalty, upon 60 days' written notice to the Trust. This Agreement will automatically terminate in the event of its assignment. Any notice under this Agreement shall be given in writing, addressed and delivered or mailed postpaid, to the other party at the principal office of such party. As used in this Section 8, the terms "assignment", "interested person", and "a vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder. 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 corporate name and/or the name of the Series any reference to the name of the Advisor promptly after receipt from the Advisor of a written request therefore. 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: THE BRINSON FUNDS By: By: -------------------------------- ------------------------------------ Carolyn M. Burke E. Thomas McFarlan Secretary President ATTEST: BRINSON PARTNERS, INC. By: By: -------------------------------- --------------------------------- ATTEST: BRINSON PARTNERS, INC. By: By: -------------------------------- --------------------------------- EX-99.E 9 FORM OF REVISED EXHIBIT A EX-99.e.1a EXHIBIT A Series of the Fund ------------------ THE BRINSON FUNDS* Global Fund Global Equity Fund Global Technology Fund Global Biotech Fund Global Bond Fund U.S. Balanced Fund U.S. Equity Fund U.S. Value Equity Fund U.S. Large Cap Equity Fund U.S. Large Cap Growth Fund U.S. Small Cap Equity Fund U.S. Small Cap Growth Fund U.S. Real Estate Equity Fund U.S. Bond Fund High Yield Fund Emerging Markets Debt Fund Global (Ex-U.S.) Equity Fund Emerging Markets Equity Fund * Each Series offers three separate classes of shares-the UBS Investment Funds shares, the Brinson Fund-Class I shares, and the Brinson Fund-Class N shares. This Amendment has been agreed to as of this 28th day of April, 2000 by the undersigned. THE BRINSON FUNDS Name: E. Thomas McFarlan ----------------------- By: /s/ E. Thomas McFarlan ----------------------- Title: President ----------------------- Accepted: FUNDS DISTRIBUTOR, INC. Name: ----------------------- By: ----------------------- Title: ----------------------- EX-99.G1A 10 FORM OF REVISED SCHEDULE A EX-99.g.1a The Chase Manhattan Bank 4 New York Plaza New York, NY 10004-2413 April 28, 2000 The Brinson Funds 209 South LaSalle Street Chicago, IL 60604 Re: Amendment to the Multiple Services Agreement's Securities Lending Authorization dated July 15, 1997 - Addition of Series to Schedule A Dear Sirs: We refer to the Amendment to the Multiple Services Agreement's Securities Lending Authorization dated July 15, 1997 (the "Securities Lending Authorization") between Morgan Stanley Trust Company, which was succeeded by The Chase Manhattan Bank (the "Custodian"), and The Brinson Funds (the "Client"). The parties hereby agree as follows: 1. Schedule A is replaced in its entirety with "Schedule A - As last amended April 28, 2000", attached hereto. The Multiple Services Agreement, as amended by this letter amendment, shall continue in full force and effect. Please evidence your acceptance of the terms of this letter by signing below and returning one copy to Richard Weinhart, The Chase Manhattan Bank, Third Floor, 4 New York Plaza, New York, NY 10004-2413. Very truly yours, THE CHASE MANHATTAN BANK By: /s/ Stephen Buck -------------------------------- Name: Stephen Buck Title: Principal Accepted and Agreed: THE BRINSON FUNDS By: -------------------- Name: Title: Schedule A As last amended April 28, 2000
Maximum Permissible Loan Maximum Permissible Loan Account Percentage--Total Fund Percentage--Single Issue - ------------------------------------------------------------------------------------------------------ The Brinson Funds - ----------------- Global Fund 33 1/3% of total assets Global Equity Fund 33 1/3% of total assets Global Technology Fund 33 1/3% of total assets Global Biotech Fund 33 1/3% of total assets Global Bond Fund 33 1/3% of total assets U.S. Balanced Fund 33 1/3% of total assets U.S. Equity Fund 33 1/3% of total assets U.S. Value Equity Fund 33 1/3% of total assets U.S. Large Cap Equity Fund 33 1/3% of total assets U.S. Large Cap Growth Fund 33 1/3% of total assets U.S. Small Cap Equity Fund 33 1/3% of total assets U.S. Small Cap Growth Fund 33 1/3% of total assets U.S. Real Estate Equity Fund 33 1/3% of total assets U.S. Bond Fund 33 1/3% of total assets High Yield Fund 33 1/3% of total assets Emerging Markets Debt Fund 33 1/3% of total assets Global (Ex-U.S.) Equity Fund 33 1/3% of total assets
Emerging Markets Equity Fund 33 1/3% of total assets * U.S. Equity Securities 80% * All other Securities 100%
EX-99.G1B 11 FORM OF REVISED SCHEDULE EXHIBIT 99.g.1(b) LIST OF AUTHORIZED PERSONS THE BRINSON FUNDS AND BRINSON RELATIONSHIP FUNDS The following is a list of individuals at The Brinson Funds and Brinson Relationship Funds who are authorized to originate trades on behalf of The Brinson Funds and Brinson Relationship Funds. All prior authorizations are superseded by this list. Initials -------- /s/ Michael A. Abellera M.A.A. - ------------------------------------ ----------- Michael A. Abellera /s/ Shelley J. Aron S.J.A. - ------------------------------------ ----------- Shelley J. Aron /s/ Christopher B. Baker C.B.B. - ------------------------------------ ----------- Christopher B. Baker /s/ Thomas D. Clarkson T.D.C. - ------------------------------------ ----------- Thomas D. Clarkson /s/ Norman Cumming N.C. - ------------------------------------ ----------- Norman Cumming /s/ James D. Foster J.D.F. - ------------------------------------ ----------- James D. Foster /s/ Paul J. Harvey P.J.H. - ------------------------------------ ----------- Paul J. Harvey /s/ B. Craig Hutson B.C.H. - ------------------------------------ ----------- B. Craig Hutson /s/ Jane L. Hutson J.L.H. - ------------------------------------ ----------- Jane L. Hutson /s/ James C. Jackson J.C.J. - ------------------------------------ ----------- James C. Jackson /s/ Debbie J. Johnson D.J.J. - ------------------------------------ ----------- Debbie J. Johnson /s/ Kiki Katsikas K.K. - ------------------------------------ ----------- Kiki Katsikas /s/ Linda A. Kent L.A.K. - ------------------------------------ ----------- Linda A. Kent /s/ Phillip B. Krauss P.B.K. - ------------------------------------ ----------- Phillip B. Krauss /s/ Matt Kruyswyk M.K. - ------------------------------------ ----------- Matt Kruyswyk /s/ Megan B. Lamb M.B.L. - ------------------------------------ ----------- Megan B. Lamb /s/ James K. Law J.K.L. - ------------------------------------ ----------- James K. Law /s/ John C. Leonard J.C.L. - ------------------------------------ ----------- John C. Leonard /s/ Cheryl Lim C.L. - ------------------------------------ ----------- Cheryl Lim /s/ James C. Malles J.C.M. - ------------------------------------ ----------- James C. Malles /s/ Alvin W. Marley A.W.M. - ------------------------------------ ----------- Alvin W. Marley /s/ Anthony J. Meyer A.J.M. - ------------------------------------ ----------- Anthony J. Meyer /s/ Lydia J. Miller L.J.M. - ------------------------------------ ----------- Lydia J. Miller /s/ Robert C. Moore R.C.M. - ------------------------------------ ----------- Robert C. Moore /s/ Ranji Nagaswami R.N. - ------------------------------------ ----------- Ranji Nagaswami /s/ Ilene W. Simmons I.W.S. - ------------------------------------ ----------- Ilene W. Simmons /s/ Pamela M. Siple P.M.S. - ------------------------------------ ----------- Pamela M. Siple /s/ Gregory P. Smith G.P.S. - ------------------------------------ ----------- Gregory P. Smith /s/ David A. Strouse D.A.S. - ------------------------------------ ----------- David A. Strouse /s/ Justin C. Tabellione J.C.T. - ------------------------------------ ----------- Justin C. Tabellione /s/ Chester F. Wierciak C.F.W. - ------------------------------------ ----------- Chester F. Wierciak /s/ Mary Wilson M.W. - ------------------------------------ ----------- Mary Wilson /s/ Glenn G. Wozniak G.G.W. - ------------------------------------ ----------- Glenn G. Wozniak LIST OF AUTHORIZED PERSONS THE BRINSON FUNDS AND BRINSON RELATIONSHIP FUNDS The following is a list of individuals at The Brinson Funds and Brinson Relationship Funds who are authorized to originate memos and other instructions, excluding cash movements. All prior authorizations are superseded by this list. Initials -------- /s/ Joseph A. Anderson J.A.A. - ------------------------------------ ----------- Joseph A. Anderson /s/ Erik D. Boyme E.D.B. - ------------------------------------ ----------- Erik D. Boyme /s/ Jennifer J. Drum J.J.D. - ------------------------------------ ----------- Jennifer J. Drum /s/ Renee Frodin R.F. - ------------------------------------ ----------- Renee Frodin /s/ Alta M. Jacko A.M.J. - ------------------------------------ ----------- Alta M. Jacko /s/ Jennifer L. Lauer J.L.L. - ------------------------------------ ----------- Jennifer L. Lauer /s/ Robert J. Oliver R.J.O. - ------------------------------------ ----------- Robert J. Oliver /s/ Kirk R. Sims K.R.S. - ------------------------------------ ----------- Kirk R. Sims The following is a list of individuals at The Brinson Funds and Brinson Relationship Funds who are authorized to originate memos and other instructions, as well as initiate cash movements. Initials -------- /s/ Samuel W. Anderson S.W.A. - ------------------------------------ ----------- Samuel W. Anderson /s/ Carolyn M. Burke C.M.B. - ------------------------------------ ----------- Carolyn M. Burke /s/ Richard C. Carr R.C.C. - ------------------------------------ ----------- Richard C. Carr /s/ Jeffrey J. Diermeier J.J.D. - ------------------------------------ ----------- Jeffrey J. Diermeier /s/ Thomas J. Digenan T.J.D. - ------------------------------------ ----------- Thomas J. Digenan /s/ David E. Floyd D.E.F. - ------------------------------------ ----------- David E. Floyd /s/ Mark F. Kemper M.F.K. - ------------------------------------ ----------- Mark F. Kemper /s/ E. Thomas McFarlan E.T.M. - ------------------------------------ ----------- E. Thomas McFarlan /s/ Debra L. Nichols D.L.N. - ------------------------------------ ----------- Debra L. Nichols /s/ Nicholas C. Rassas N.C.R. - ------------------------------------ ----------- Nicholas C. Rassas CHASE GLOBAL FUNDS SERVICES COMPANY DATE: February 10, 2000 RE: Funds Transfer Authorization ---------------------------- The following is a list of Chase Global Funds Services Company personnel authorized to instruct Chase to transfer funds between the transfer agent operating accounts and the Brinson custody accounts. NAME TITLE SIGNATURE Nick Tuberosa Director, Vice President /s/ Nick Tuberosa --------------------- John Sheppard Assistant Vice President /s/ John Sheppard --------------------- Danielle Murray Assistant Treasurer /s/ Danielle Murray --------------------- Louis DiMuzio Supervisor /s/ Louis DiMuzio --------------------- NingSu Chan Supervisor /s/ NingSu Chan --------------------- Brenda Sparrow Supervisor /s/ Brenda Sparrow --------------------- Eric Klein Assistant Treasurer /s/ Eric Klein --------------------- UBS Brinson Limited - London List of Authorized Signatures - January 1, 2000 ----------------------------------------------- Printed Name Signature Tony Anderson /s/ Tony Anderson ------------------------- Martin Ashdown /s/ Martin Ashdown ------------------------- Ronald Aziz /s/ Ronald Aziz ------------------------- Tom Barrett /s/ Tom Barrett ------------------------- Sarah Bedwell /s/ Sarah Bedwell ------------------------- Justin Beech /s/ Justin Beech ------------------------- David Blaskett /s/ David Blaskett ------------------------- Mark Boylan /s/ Mark Boylan ------------------------- Katy Bradbury /s/ Katy Bradbury ------------------------- Douglas Bryden /s/ Douglas Bryden ------------------------- Richard Bustard /s/ Richard Bustard ------------------------- Tiffany Clay /s/ Tiffany Clay ------------------------- Richard Collins /s/ Richard Collins ------------------------- Norman Cumming /s/ Norman Cumming ------------------------- Megan Doherty /s/ Megan Doherty ------------------------- Godfrey Dutton /s/ Godfrey Dutton ------------------------- Sally Elliott /s/ Sally Elliott ------------------------- Richard Fosker /s/ Richard Fosker ------------------------- List of Authorized Signatures - January 1, 2000 ----------------------------------------------- Printed Name Signature Michael Frankland /s/ Michael Frankland ------------------------- Mark Gunn /s/ Mark Gunn ------------------------- Peter Haliwell /s/ Peter Haliwell ------------------------- Susan Hakki-Haroun /s/ Susan Hakki-Haroun ------------------------- Nigel Head /s/ Nigel Head ------------------------- James Hedley /s/ James Hedley ------------------------- David Helson /s/ David Helson ------------------------- Steven Herbert /s/ Steven Herbert ------------------------- Amanda Hext /s/ Amanda Hext ------------------------- Theresa Hickman /s/ Theresa Hickman ------------------------- Nicola Hinton /s/ Nicola Hinton ------------------------- Sam Horowitz /s/ Sam Horowitz ------------------------- Michael Humphries /s/ Michael Humphries ------------------------- Steve Jenson /s/ Steve Jenson ------------------------- Suhail Khawaja /s/ Suhail Khawaja ------------------------- Christopher Leonard /s/ Christopher Leonard ------------------------- Steven Liu /s/ Steven Liu ------------------------- Graham Lock /s/ Graham Lock ------------------------- Steven Lowe /s/ Steven Lowe ------------------------- Caroline Martin /s/ Caroline Martin ------------------------- Darren Mason /s/ Darren Mason ------------------------- Paula Matthews /s/ Paula Matthews ------------------------- Piers Maynard /s/ Piers Maynard ------------------------- List of Authorized Signatures - January 1, 2000 ----------------------------------------------- Printed Name Signature Nicola Milne /s/ Nicola Milne ------------------------- Anne-Marie Parish /s/ Anne-Marie Parish ------------------------- Mark Petherham /s/ Mark Petherham ------------------------- Suzanne Phillips /s/ Suzanne Phillips ------------------------- Richard Pollack /s/ Richard Pollack ------------------------- Paul Purser /s/ Paul Purser ------------------------- Philip Roberts /s/ Philip Roberts ------------------------- Barrie Senior /s/ Barrie Senior ------------------------- Mark Skeggs /s/ Mark Skeggs ------------------------- Hanneke Smits /s/ Hanneke Smits ------------------------- Lena Stoneham /s/ Lena Stoneham ------------------------- Nina Terry /s/ Nina Terry ------------------------- Frances Wadsworth /s/ Frances Wadsworth ------------------------- Mark Wauton /s/ Mark Wauton ------------------------- Arwyn Wickerson /s/ Arwyn Wickerson ------------------------- EX-99.G1C 12 FORM OF AMENDED SCHEDULE B1 EX-99.g.1.c The Chase Manhattan Bank 4 New York Plaza New York, NY 10004-2413 April 28, 2000 The Brinson Funds 209 South LaSalle Street Chicago, IL 60604 Re: Amendment to Multiple Services Agreement effective May 9, 1997 - Addition of Global Biotech Fund, U.S. Real Estate Equity Fund, U.S. Value --------------------------------------------------------------------------- Equity Fund, Global Technology Fund and U.S. Small Cap Equity Fund ------------------------------------------------------------------ Dear Sirs: We refer to the Multiple Services Agreement, effective May 9, 1997 (the "MSA") between Morgan Stanley Trust Company, which was succeeded by The Chase Manhattan Bank, and The Brinson Funds. The parties hereby agree as follows: 1. "Schedule B1 - List of Series of The Brinson Funds" is replaced in its entirety with "Schedule B1 - List of Series of The Brinson Funds, as amended on April 28, 2000," attached hereto. 2. "Schedule F - Fee Schedule for The Brinson Funds" is replaced in its entirety with "Schedule F - Fee Schedule for The Brinson Funds, as amended on April 28, 2000," attached hereto. The MSA, as amended by this letter amendment, shall continue in full force and effect. Please evidence your acceptance of the terms of this letter by signing below and returning one copy to Richard Weinhart, The Chase Manhattan Bank, Third Floor, 4 New York Plaza, New York, NY 10004-2413. The Brinson Funds April 28, 2000 Page Two Very truly yours, THE CHASE MANHATTAN BANK By: -------------------------- Name: Stephen Buck Title: Principal Accepted and Agreed: THE BRINSON FUNDS By: /s/ E. Thomas McFarlan ---------------------- Name: E. Thomas McFarlan Title: President SCHEDULE B1 ----------- LIST OF SERIES OF THE BRINSON FUNDS ----------------------------------- As amended April 28, 2000 Global Fund Global Equity Fund Global Technology Fund Global Biotech Fund Global Bond Fund U.S. Balanced Fund U.S. Equity Fund U.S. Value Equity Fund U.S. Large Cap Equity Fund U.S. Large Cap Growth Fund U.S. Small Cap Equity Fund U.S. Small Cap Growth Fund U.S. Real Estate Equity Fund U.S. Bond Fund High Yield Fund Emerging Markets Debt Fund Global (Ex-U.S.) Equity Fund Emerging Markets Equity Fund SCHEDULE F ---------- FEE SCHEDULE FOR THE BRINSON FUNDS ---------------------------------- as amended on April 28, 2000 Accounting, Administration, Transfer Agency and Custody Services Annual Fee Schedule 1. On an annual basis, 0.25 basis points of the average weekly U.S. assets of the Customer and 5.25 basis points of the average weekly non-U.S. assets of the Customer, 32.50 basis points of the average weekly emerging markets equity assets of the Customer and 1.90 basis points of the average weekly emerging markets debt assets of the Customer. There will be an annual fee of $25 for each shareholder account within The Brinson Funds. An additional fee of 7.50 basis points will be charged for administrative duties. PLEASE NOTE: The additional fee of 7.50 basis points can ONLY be charged up to the extent it does not make a fund exceed its expense cap. Please see below for the expense caps of each fund within The Brinson Funds, excluding all loads and 12(b)-1 fees: Fund Expense Cap ---- ----------- Global Fund 110 basis points Global Equity Fund 100 basis points Global Technology Fund 155 basis points Global Biotech Fund 130 basis points Global Bond Fund 90 basis points U.S. Balanced Fund 80 basis points U.S. Equity Fund 80 basis points U.S. Value Equity Fund 85 basis points U.S. Large Cap Equity Fund 80 basis points U.S. Large Cap Growth Fund 80 basis points U.S. Small Cap Equity Fund 115 basis points U.S. Small Cap Growth Fund 115 basis points U.S. Real Estate Equity Fund 105 basis points U.S. Bond Fund 60 basis points High Yield Fund 70 basis points Emerging Markets Debt Fund 115 basis points Global (Ex-U.S.) Equity Fund 100 basis points Emerging Markets Equity Fund 160 basis points SCHEDULE F as amended on April 28, 2000 NO FEE (asset based or otherwise) will be charged on any investments made by any fund into any other fund managed by Brinson Partners, Inc. Fees are to be charged ONLY where actual non-Brinson Partners, Inc.-sponsored investment company or series securities are held. Assets of a series which are invested in another Brinson Partners, Inc.-sponsored investment company or series shall not be counted in determining whether or not the charging of the 7.50 basis points charge for administrative duties would cause a fund to exceed its fee cap and shall not be counted in determining the amount of assets subject to the 7.50 basis points. For purposes of this Schedule F, the "average weekly U.S. assets of the customer" means the average weekly U.S. assets custodied within the United States of the Customer as calculated by the Accounting Agent for the month for which the statement reflecting the charges for a given month relates. For purposes of this Schedule F, the "average weekly non-U.S. assets of the customer" means the average weekly balance of countries included in the Morgan Stanley Capital World Ex-U.S.A. (free) Index or the Salomon Non-U.S. Government Bond Index (including assets with a country of issue of the European Economic Community and held in Euroclear or CEDEL) custodied outside the United States of the Customer as calculated by the Accounting Agent for the month for which the statement reflecting the charges for a given month relates. For purposes of this Schedule F, the "average weekly emerging markets equity assets of the customer" means the average weekly balance of the countries included in the International Finance Corporation Global Index (excluding countries included in the Morgan Stanley Capital World Ex-U.S.A. (free) Index or the Salomon Non-U.S. Government Bond Index, but including assets with a country of issue in the local market contained in such index that are held in Euroclear or CEDEL) custodied outside the United States of the Customer's emerging markets equity funds as calculated by the Accounting Agent for the month for which the statement reflecting the charges for a given month relates. For purposes of this Schedule F, the "average weekly emerging markets debt assets of the customer" means the average weekly balance of the countries included in the J.P. Morgan Emerging Markets Bond Index Plus custodied outside the United States of the Customer's emerging markets debt funds (including assets with a country of issue in the local market contained in such index that are held in Euroclear or CEDEL) as calculated by the Accounting Agent for the month for which the statement reflecting the charges for a given month relates. Those fees include all out-of-pocket expenses or transaction charges incurred by the accountant, administrator, transfer agent and custodian with the exception of the following. SCHEDULE F as amended on April 28, 2000 The Customer will be billed directly by Other Parties for the following direct Customer expenses or transaction charges: (1) taxes; (2) salaries and other fees of officers and directors who are not officers, directors, shareholders or employees of Other Parties, or the Customer's investment adviser; (3) SEC and state Blue Sky registration and qualification fees, levies, fines and other charges; (4) EDGAR filing fees; (5) independent public accountants; (6) insurance premiums including fidelity bond premiums; (7) outside legal expenses; (8) costs of maintenance of corporate existence; (9) expenses of typesetting and printing of prospectuses for regulatory purposes and for distribution to current shareholders of the Customer; (10) expenses of printing and production costs of shareholders' reports and proxy statements and materials; (11) trade association dues and expenses; and (12) travel and lodging expenses of the Customer's directors and officers who are not directors, officers and/or employees of Other Parties. Customer will not be billed directly for any direct Customer Expenses or pay any other direct Customer expenses, unless the payment of such direct expenses is agreed to in writing by Customer. 2. Upon termination of the provision of services under this Agreement before the end of any month, the fee for the part of the month before such termination or the date after which the provision of services ceases, whichever is later, shall be prorated according to the proportion which such part bears to the full monthly period and shall be payable upon the date of such termination or the date after which the provision of the services ceases, whichever is later. EX-99.I 13 LEGAL OPINION Exhibit 99.1 Direct Dial: (215) 564-8115 April 28, 2000 The Brinson Funds 209 South LaSalle Street Chicago IL 60604-1295 Re: Legal Opinion - Securities Act of 1933 -------------------------------------- Ladies and Gentlemen: We have examined the Agreement and Declaration of Trust, as amended (the "Declaration of Trust") of the The Brinson Funds (the "Trust"), a business trust organized under the laws of the State of Delaware on August 9, 1993, the By-Laws of the Trust and the resolutions adopted by the Trust's Board of Trustees organizing the business of the Trust, all as amended to date, and the various pertinent proceedings we deem material. We have also examined the Notification of Registration and the Registration Statements filed under the Investment Company Act of 1940 (the "Investment Company Act") and the Securities Act of 1933 (the "Securities Act"), all as amended to date, as well as other items we deem material to this opinion. The Trust is authorized by its Declaration of Trust to issue an unlimited number of shares of beneficial interest with a par value of $0.001 per share. The Trust issues shares of the series designated the Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Bond Fund, Global (Ex-U.S.) Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, High Yield Fund, Emerging Markets Equity Fund and Emerging Markets Debt Fund. Effective May 1, 2000, the Trust will also issue shares of the series designated as the Global Biotech Fund, U.S. Real Estate Equity Fund, U.S. Value Equity Fund, Global Technology Fund, and U.S. Small Cap Equity Fund. As of the same date, the U.S. Large Capitalization Equity Fund, the U.S. Large Capitalization Growth Fund and the U.S. Small Capitalization Growth Fund The Brinson Funds April 28, 2000 Page 2 will be known as the U.S. Large Cap Equity Fund, the U.S. Large Cap Growth Fund and the U.S. Small Cap Growth Fund, respectively. The Declaration of Trust designates, or authorizes the Trustees to designate, one or more series or classes of shares of the Trust, and allocates, or authorizes the Trustees to allocate, shares of beneficial interest to each such series or class. The Declaration of Trust also empowers the Trustees to designate any additional series or classes and allocate shares to such series or classes. The Trust has filed with the U.S. Securities and Exchange Commission (the "Commission"), a Registration Statement under the Securities Act, which Registration Statement is deemed to register an indefinite number of shares of the Trust pursuant to the provisions of Rule 24f-2 under the Investment Company Act. You have further advised us that the Trust has filed, and each year hereafter will timely file, a Notice pursuant to Rule 24f-2 perfecting the registration of the shares sold by the Trust during each fiscal year during which such registration of an indefinite number of shares remains in effect. You have also informed us that the shares of the Trust have been, and will continue to be, sold in accordance with the Trust's usual method of distributing its registered shares, under which prospectuses are made available for delivery to offerees and purchasers of such shares in accordance with Section 5(b) of the Securities Act. Based upon the foregoing information and examination, so long as the Trust remains a valid and subsisting trust under the laws of the State of Delaware, and the registration of an indefinite number of shares of the Trust remains effective, the authorized shares of the Trust when issued for the consideration set by the Board of Trustees pursuant to the Declaration of Trust, and subject to compliance with Rule 24f-2, will be legally outstanding, fully- paid, and non-assessable shares, and the holders of such shares will have all the rights provided for with respect to such holding by the Declaration of Trust and the laws of the State of Delaware. We hereby consent to the use of this opinion as an exhibit to the Registration Statement of the Trust, and any amendments thereto, covering the registration of the shares of the Trust under the Securities Act and the applications, registration statements or notice filings, and amendments thereto, filed in accordance with the securities laws of the several states in which shares of the Trust are offered, and we further consent to reference in the registration statement of the Trust to the fact that this opinion concerning the legality of the issue has been rendered by us. The Brinson Funds April 28, 2000 Page 3 Very truly yours, STRADLEY, RONON, STEVENS & YOUNG, LLP BY:/s/ Bruce G. Leto ----------------- Bruce G. Leto EX-99.J1 14 CONSENT OF ERNST & YOUNG EX-99.j.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Financial Highlights" and "Financial Statements and Reports of Independent Auditors" and to the use of our reports on The Brinson Funds (Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Large Capitalization Equity Fund, U.S. Large Capitalization Growth Fund, U.S. Small Capitalization Growth Fund, U.S. Bond Fund, High Yield Fund and Global (Ex-U.S.) Equity Fund dated August 11, 1999 in the Registration Statement (Form N-1A) and their incorporation by reference in the related Prospectuses and Statement of Additional Information, filed with the Securities and Exchange Commission in this Post-Effective Amendment No. 30 to the Registration Statement under the Securities Act of 1933 (Registration No. 33-47287) and in this Amendment No. 31 to the Registration Statement under the Investment Company Act of 1940 (Registration No. 811-6637). ERNST & YOUNG LLP Chicago, Illinois May 1, 2000 EX-99.M1A1 15 REGISTRANT'S AMENDED DISTRIBUTION PLAN EX-99.m.1a.1 SCHEDULE A* The Brinson Funds (the "Trust"), Brinson Partners, Inc. (the "Manager") and Funds Distributor, Inc. (the "Distributor") hereby agree that the maximum amount that the Manager or the Distributor shall seek reimbursement for in accordance with the Rule 12b-1 Plan relating to the UBS Investment Funds class of shares of the Trust, is as follows: Fund Amount ---- ------ UBS Investment Fund - Global 0.40% UBS Investment Fund - Global Equity 0.51% UBS Investment Fund - Global Bond 0.24% UBS Investment Fund - U.S. Balanced 0.25% UBS Investment Fund - U.S. Equity 0.27% UBS Investment Fund - U.S. Large Cap Equity 0.27% UBS Investment Fund - U.S. Large Cap Growth 0.52% UBS Investment Fund - U.S. Small Cap Growth 0.52% UBS Investment Fund - U.S. Bond 0.22% UBS Investment Fund - High Yield 0.60% UBS Investment Fund - Global (Ex-U.S.) Equity 0.59% THE BRINSON FUNDS ------------------------------- Name: Title: BRINSON PARTNERS, INC. ------------------------------- Name: Title: BRINSON PARTNERS, INC. ------------------------------- Name: Title: FUNDS DISTRIBUTOR, INC. ------------------------------- Name: Title: * As approved February 21, 1995 and Amended/Revised on November 26, 1995, July 28, 1995, August 26, 1996, February 24, 1997, November 24, 1997, December 10, 1998, April 28, 2000 EX-99.M1 16 DISTRIBUTION PLAN EX-99.m.1b Distribution Plan Relating to the UBS Investment Funds Shares of The Brinson Funds The following Distribution Plan (the "Plan") has been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by The Brinson Funds (the "Trust") for the UBS Investment Funds class of shares (each individually a "Class" and collectively the "Classes") of each of the Emerging Markets Equity Fund series, Emerging Markets Debt Fund series, Global Biotech Fund series, U.S. Real Estate Equity Fund series, U.S. Value Equity Fund series, Global Technology Fund series, and U.S. Small Cap Equity Fund series (individually a "Fund" or collectively the "Funds"), for the use of UBS Investment Funds class of shares of a Fund and any UBS Investment Funds class of shares of separate series of the Trust hereinafter organized. The Plan has been approved by a majority of the Board of Trustees of the Trust (the "Board of Trustees"), including a majority of the Trustees who are not interested persons of the Trust and who have no direct, or indirect financial interest in the operation of the Plan or in any agreement related to the Plan (the "non-interested Trustees"), cast in person at a meeting called for the purpose of voting on such Plan. In reviewing the Plan, the Board of Trustees determined that adoption of the Plan would be prudent and in the best interests of each Fund and its shareholders. Such approval included a determination that in the exercise of its reasonable business judgment and in light of its fiduciary duties, there is a reasonable likelihood that the Plan will benefit the Fund and its shareholders. The provisions of the Plan are: 1. (a) Each Class shall reimburse Brinson Partners, Inc. (the "Manager"), Funds Distributor, Inc. (the "Distributor") or others for all expenses incurred by such parties in the promotion and distribution of the shares of the Class, including but not limited to, the printing of prospectuses and reports used for sales purposes, expenses of preparing and distributing sales literature and advertisements and other distribution-related expenses, as well as any payments to securities dealers or others for assistance in selling shares of the Class in accordance with a selling agreement with the Trust on behalf of a Fund's Class or the Distributor, which form of agreement has been approved from time to time by the Trustees, including the non-interested Trustees. The maximum aggregate amount which may be reimbursed by a Class to such parties in accordance with this paragraph shall be 0.75 % per annum of the average daily net assets of the Class. The parties hereto may, however, agree from time to time to limit the reimbursement called for by this paragraph to amounts less than 0.75 % with respect to a Fund. The current agreement between the parties for maximum reimbursement with respect to each Fund is attached hereto as Schedule A, which schedule may be amended from time to time by the parties hereto. (b) In addition to the amounts described in (a) above, the Fund shall pay (i) to the Distributor for payment to dealers or others, or (ii) directly to others, an amount not to exceed 0.25% per annum of the Class' average daily net assets represented by shares of the Class from time to time, as a service fee. The monies to be paid pursuant to this paragraph l(b) shall be used to pay dealers or others for, among other things, furnishing personal services and maintaining shareholder accounts, which services include, among other things, assisting in establishing and maintaining customer accounts and records; assisting with purchase and redemption requests; arranging for bank wires; monitoring dividend payments from the Fund on behalf of customers; forwarding certain shareholder communications from the Fund to customers; receiving and answering correspondence; and aiding in maintaining the investment of their respective customers in the Class. Any amounts paid under this paragraph l(b) shall be paid pursuant to a servicing or other agreement, which form of agreement has been approved from time to time by the Trustees, including a majority of the non-interested Trustees. 2. All payments in connection with this Plan shall be made quarterly by each Class to the appropriate parties, or more or less frequently upon mutual agreement of the parties. 3. The Manager and the Distributor shall collect and monitor the documentation of payments made under paragraph 1 above, and shall furnish to the Board of Trustees of the Trust, for its review, on a quarterly basis, a written report of the monies reimbursed to the Manager, the Distributor and others under the Plan as to a Fund's Class, and shall furnish the Board of Trustees of the Trust with such other information as the Board may reasonably request in connection with the payments made under the Plan as to a Fund's Class in order to enable the Board to make an informed determination of whether the Plan should be continued for each Class. 4. The Plan shall continue in effect for each Class for a period of more than one year only so long as such continuance is specifically approved at least annually by the Trust's Board of Trustees, including the non-interested Trustees, cast in person at a meeting called for the purpose of voting on the Plan. 5. The Plan, or any agreements entered into pursuant to this Plan, may be terminated at any time, without penalty, by vote of a majority of the outstanding voting securities of a Class with respect to that Class, or by vote of a majority of the non-interested Trustees, on not more than sixty (60) days' written notice, and shall terminate automatically in the event of any act that constitutes an assignment of the management agreement between the Trust on behalf of the relevant series of the Trust and the Manager. 6. The Plan and any agreements entered into pursuant to this Plan may not be amended to increase materially the amount to be spent by a Class for distribution pursuant to Paragraph 1 hereof without approval by a majority of the Class' outstanding voting securities. 7. All material amendments to the Plan, or any agreements entered into pursuant to this Plan, shall be approved by the non-interested Trustees cast in person at a meeting called for the purpose of voting on any such amendment. 8. So long as the Plan is in effect, the selection and nomination of the Trust's non-interested Trustees shall be committed to the discretion of such non-interested Trustees. SCHEDULE A* The Brinson Funds (the "Trust"), Brinson Partners, Inc. (the "Manager") and Funds Distributor, Inc. (the "Distributor") hereby agree that the maximum amount which the Manager or the Distributor shall seek reimbursement for in accordance with the Rule 12b-1 Plan relating to the UBS Investment Funds class of shares of the Trust, is as follows: Fund Amount ---- ------ UBS Investment Fund - Global Technology 1.00% UBS Investment Fund - Global Biotech 1.00% UBS Investment Fund - U.S. Value Equity 1.00% UBS Investment Fund - U.S. Small Cap Equity 1.00% UBS Investment Fund - U.S. Real Estate Equity 1.00% UBS Investment Fund - Emerging Markets Debt 1.00% UBS Investment Fund - Emerging Markets Equity 1.00% THE BRINSON FUNDS BRINSON PARTNERS, INC. /s/ E. Thomas McFarlan - ---------------------- ---------------------- Name: E. Thomas McFarlan Name: Title: President Title: FUNDS DISTRIBUTOR, INC. BRINSON PARTNERS, INC. - ---------------------- ---------------------- Name: Name: Title: Title: * April 28, 2000. EX-99.M2 17 REVISED SCHEDULE A TO THE DISTRIBUTION PLAN EX-99.m.2a SCHEDULE "A"* Series subject to the Distribution Plan relating to the following class of shares of The Brinson Funds: Series ------ Brinson Global Fund - Class N Brinson Global Equity Fund - Class N Brinson Global Technology Fund - Class N Brinson Global Biotech Fund - Class N Brinson Global Bond Fund - Class N Brinson U.S. Balanced Fund - Class N Brinson U.S. Equity Fund - Class N Brinson U.S. Value Equity Fund - Class N Brinson U.S. Large Cap Equity Fund - Class N Brinson U.S. Large Cap Growth Fund - Class N Brinson U.S. Small Cap Equity Fund - Class N Brinson U.S. Small Cap Growth Fund - Class N Brinson U.S. Real Estate Equity Fund - Class N Brinson U.S. Bond Fund - Class N Brinson High Yield Fund - Class N Brinson Emerging Markets Debt Fund - Class N Brinson Global (Ex-U.S.) Equity Fund - Class N Brinson Emerging Markets Equity Fund - Class N Date: April 28, 2000 *As approved 5/19/97, revised 11/24/97, revised 8/24/98, revised 4/28/00. EX-99.M3 18 UBS SELECTED SELLING AGREEMENT EX-99.m.3a.1 UBS INVESTMENT FUNDS SELECTED SELLING AGREEMENT COMPENSATION SCHEDULE Exhibit A As compensation for the sales of shares of the series of the UBS Investment Funds (individually a "Series" and collectively, the "Series"), and as compensation for ongoing shareholder servicing and distribution functions, UBS AG (the "Bank") will receive 0.25% of the aggregate dollar amount of shares of the Series held in the accounts of Bank's customers and not redeemed. In addition, as compensation for distribution services, the Bank will be entitled to receive the following fees based upon the amount of shares of the Series held in the accounts of the Bank's customers and not redeemed, or such lesser amount as may be determined form time to time by the Board of Trustees of the Trust: Global Fund 0.65% Global Equity Fund 0.76% Global Technology Fund 1.00% Global Biotech Fund 1.00% Global Bond Fund 0.49% U.S. Balanced Fund 0.50% U.S. Equity Fund 0.52% U.S. Value Equity Fund 1.00% U.S. Large Cap Equity Fund 0.52% U.S. Large Cap Growth Fund 0.77% U.S. Small Cap Equity Fund 1.00% U.S. Small Cap Growth Fund 0.77% U.S. Real Estate Equity Fund 1.00% U.S. Bond Fund 0.47% High Yield Fund 0.85% Emerging Markets Debt Fund 1.00% Global (Ex-U.S.) Equity Fund 0.84% Emerging Markets Equity Fund 1.00% Such fees will be paid quarterly from the date of original sales of shares until the Bank is no longer named the broker of record. It is understood that the above compensation arrangement may be amended or discontinued at any time at the discretion of Funds Distributor, Inc. Amended: April 28, 2000 EX-99.M32 19 SELECTED DEALER AGREEMENT EX-99.m.3a.2 UBS INVESTMENT FUNDS CLASS SELECTED DEALER AGREEMENT SCHEDULE OF 12B-1 FEES EXHIBIT B
=============================================================================== SERIES DISTRIBUTION FEE SERVICE FEE TOTAL 12B-1 FEES - ------------------------------------------------------------------------------- Global Fund 0.40% 0.25% 0.65% - ------------------------------------------------------------------------------- Global Equity Fund 0.51% 0.25% 0.76% - ------------------------------------------------------------------------------- Global Technology Fund 0.75% 0.25% 1.00% - ------------------------------------------------------------------------------- Global Biotech Fund 0.75% 0.25% 1.00% - ------------------------------------------------------------------------------- Global Bond Fund 0.24% 0.25% 0.49% - ------------------------------------------------------------------------------- U.S. Balanced Fund 0.25% 0.25% 0.50% - ------------------------------------------------------------------------------- U.S. Equity Fund 0.27% 0.25% 0.52% - ------------------------------------------------------------------------------- U.S. Value Equity Fund 0.75% 0.25% 1.00% - ------------------------------------------------------------------------------- U.S. Large Cap Equity Fund 0.27% 0.25% 0.52% - ------------------------------------------------------------------------------- U.S. Large Cap Growth Fund 0.52% 0.25% 0.77% - ------------------------------------------------------------------------------- U.S. Small Cap Equity Fund 0.75% 0.25% 1.00% - ------------------------------------------------------------------------------- U.S. Small Cap Growth Fund 0.52% 0.25% 0.77% - ------------------------------------------------------------------------------- U.S. Real Estate Equity Fund 0.75% 0.25% 1.00% - ------------------------------------------------------------------------------- U.S. Bond Fund 0.22% 0.25% 0.47% - ------------------------------------------------------------------------------- High Yield Fund 0.60% 0.25% 0.85% - ------------------------------------------------------------------------------- Emerging Markets Debt Fund 0.75% 0.25% 1.00% - ------------------------------------------------------------------------------- Global (Ex-U.S.) Equity Fund 0.59% 0.25% 0.84% - ------------------------------------------------------------------------------- Emerging Markets Equity Fund 0.75% 0.25% 1.00% ===============================================================================
Approved: May 19, 1997 Amended: November 24, 1997 and December 10, 1998, April 28, 2000 EX-99.NA 20 LIST OF SERIES AND CLASSES EX-99.n.a1 Appendix "A" List of Series and Classes Series Classes - ------ ------- Global Fund Brinson Global Fund - Class I Brinson Global Fund - Class N UBS Investment Fund - Global Global Equity Fund Brinson Global Equity Fund - Class I Brinson Global Equity Fund - Class N UBS Investment Fund - Global Equity Global Bond Fund Brinson Global Bond Fund - Class I Brinson Global Bond Fund - Class N UBS Investment Fund - Global Bond U.S. Balanced Fund Brinson U.S. Balanced Fund - Class I Brinson U.S. Balanced Fund - Class N UBS Investment Fund - U.S. Balanced U.S. Equity Fund Brinson U.S. Equity Fund - Class I Brinson U.S. Equity Fund - Class N UBS Investment Fund - U.S. Equity U.S. Large Cap Equity Fund Brinson U.S. Large Cap Equity Fund - Class I Brinson U.S. Large Cap Equity Fund - Class N UBS Investment Fund - U.S. Large Cap Equity U.S. Bond Fund Brinson U.S. Bond Fund - Class I Brinson U.S. Bond Fund - Class N UBS Investment Fund - U.S. Bond Global (Ex-U.S.) Equity Fund Brinson Global (Ex-U.S.) Equity Fund - Class I Brinson Global (Ex-U.S.) Equity Fund - Class N UBS Investment Fund - Global (Ex-U.S.) Equity U.S. Large Cap Growth Fund Brinson U.S. Large Cap Growth - Class I Brinson U.S. Large Cap Growth - Class N UBS Investment Fund - U.S. Large Cap Growth U.S. Small Cap Growth Fund Brinson U.S. Small Cap Growth Fund - Class I Brinson U.S. Small Cap Growth Fund - Class N UBS Investment Fund - U.S. Small Cap Growth High Yield Fund Brinson High Yield Fund - Class I Brinson High Yield Fund - Class N UBS Investment Fund - High Yield Emerging Markets Equity Fund Brinson Emerging Markets Equity Fund - Class I Brinson Emerging Markets Equity Fund - Class N UBS Investment Fund - Emerging Markets Equity Emerging Markets Debt Fund Brinson Emerging Markets Debt Fund - Class I Brinson Emerging Markets Debt Fund - Class N UBS Investment Fund - Emerging Markets Debt Global Biotech Fund Brinson Global Biotech Fund - Class I Brinson Global Biotech Fund - Class N UBS Investment Fund - Global Biotech U.S. Real Estate Equity Fund Brinson U.S. Real Estate Equity Fund - Class I Brinson U.S. Real Estate Equity Fund - Class N UBS Investment Fund - U.S. Real Estate Equity U.S. Value Equity Fund Brinson U.S. Value Equity Fund - Class I Brinson U.S. Value Equity Fund - Class N UBS Investment Fund - U.S. Value Equity Global Technology Fund Brinson Global Technology Fund - Class I Brinson Global Technology Fund - Class N UBS Investment Fund - Global Technology U.S. Small Cap Equity Fund Brinson U.S. Small Cap Equity Fund - Class I Brinson U.S. Small Cap Equity Fund - Class N UBS Investment Fund - U.S. Small Cap Equity Amended as of February 28, 2000 EX-99.P1 21 CODE OF ETHICS EX-99.p.1 CODE OF ETHICS OF THE BRINSON FUNDS PREAMBLE - -------- This Code of Ethics (the "Code") is being adopted in compliance with the requirements of Rule 17j-1 (the "Rule") adopted by the United States Securities and Exchange Commission under the Investment Company Act of 1940 (the "Act") to effectuate the purposes and objectives of that Rule. The Rule makes it unlawful for certain affiliated persons, including any officer or trustee of The Brinson Funds (the "Fund"), in connection with the purchase or sale, directly or indirectly, by such person of a security held or to be acquired by the Fund:/1/ (1) To employ a device, scheme or artifice to defraud the Fund; (2) To make any untrue statement of a material fact to the Fund or omit to state a material fact necessary in order to make the statements made to the Fund, in light of the circumstances in which they are made, not misleading; (3) To engage in any act, practice or course of business that operates or would operate as a fraud or deceit on the Fund; or (4) To engage in any manipulative practice with respect to the Fund. The Rule also requires that each of the Fund, Brinson Partners, Inc., as the investment advisor to the Fund, and the Fund's principal underwriter adopt a written code of ethics containing provisions reasonably necessary to prevent Access Persons (as defined below) from engaging in any conduct prohibited by the above standards, and that each entity use reasonable diligence and institute procedures reasonably necessary to prevent violations of its code of ethics. Set forth below is the Code of Ethics adopted by the Board of Trustees (the "Board") of the Fund in compliance with the Rule. The Code is based upon the principle that the trustees and officers of the Fund, and certain affiliated persons of the Fund and its investment advisor (together, "Covered Persons"), owe a fiduciary duty to, among others, the shareholders of the Fund to conduct the Covered Persons' affairs, including their personal securities transactions, in a manner to avoid (i) serving the Covered Persons' own personal interests ahead of the interests of shareholders; (ii) taking inappropriate advantage of the Covered Persons' positions with the Fund; and (iii) any actual or potential conflicts of interest or any abuse of the Covered Persons' positions of trust and responsibility. - -------------------- /1/A security is deemed to be a "security held or to be acquired" if, within the most recent 15 days, the security (i) is or has been held by the Fund, or (ii) is being or has been considered by the Fund or its investment advisor for purchase by the Fund. 1. DEFINITIONS ----------- For the purposes of this Code: (a) "Access Person" means any trustee, officer or Advisory Person of the Fund. (b) "Advisory Person" means (i) any employee of the Fund who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a Covered Security by the Fund, or whose functions relate to the making of any recommendations with respect to such purchases or sales; (ii) any natural person in a control relationship to the Fund who regularly obtains current information concerning recommendations made to the Fund with regard to the purchase or sale of a security by the Fund; and (iii) any Investment Personnel as defined in subparagraph (d) below. (c) "Covered Security" means a "security" as defined in Section 2(a)(36) of the Act, except that it does not include (i) direct obligations of the Government of the United States; (ii) bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; and (iii) shares issued by registered open-end investment companies. (d) "Investment Personnel" means (i) all members of the staff of the Fund and of the investment advisor to the Fund, including all officers, directors, managing partners, partners and associates of the investment advisor to the Fund, and (ii) any natural person who controls the Fund or the investment advisor to the Fund and who obtains information concerning recommendations made to the Fund regarding the purchase or sale of securities by the Fund. (e) "Purchase or sale of a Covered Security" includes the writing of an option to purchase or sell a Covered Security. Unless otherwise noted, capitalized terms that are not defined in this Code shall have the meanings assigned to such terms in the Rule. 2. PROHIBITED TRANSACTIONS ----------------------- (a) No Access Person shall engage in any act, practice or course of conduct that would violate the provisions of the Rule, as described in the Preamble to this Code. (b) The Integrity Policy of Brinson Partners, Inc., effective January 1, 2000, as amended from time to time (the "Integrity Policy"), is incorporated herein by reference and is attached as Exhibit B to the Code. No Advisory Person shall engage in any act, practice or course of conduct that would violate the Integrity Policy. In the event of any conflicts between the provisions of this Code and of the Integrity Policy, the terms of this Code shall govern. 3. COMPLIANCE PROCEDURES --------------------- (a) Pre-clearance ------------- To ensure compliance with this Code, all Access Persons must receive prior approval from the compliance officer of the investment advisor (the "Compliance Officer") or other officer designated by the Board before purchasing or selling any Covered Securities. (b) Reporting Requirements ---------------------- (i) Every Access Person shall report to the Compliance Officer the information requested on Exhibits A-1 through A-3 to this Code with respect to transactions and holdings in any Covered Security in which such Person has, or by reason of any transaction acquires, any direct or indirect beneficial ownership in the Covered Security; provided, however, that an Access Person shall not be required to make a report with respect to transactions effected for any account over which such Access Person does not have any direct or indirect influence. (ii) Initial holdings reports required to be made under this subparagraph (b)(ii) shall be made no later than 10 days after the person submitting the report becomes an Access Person. Each such Access Person shall make a report on the form attached hereto as Exhibit A-1, or on any other form that contains the following information: (A) the title, number of shares and principal amount of each Covered Security in which the Access Person had any direct or indirect beneficial ownership when the person became an Access Person; (B) the name of any broker, dealer or bank with whom the Access Person maintained an account in which any securities were held for the direct or indirect benefit of the Access Person as of the date the person became an Access Person; and (C) the date that the report was submitted by the Access Person. (iii) Each trustee who is not an "interested person" of the Fund, as such term is defined in the Act, need only report a transaction in a Covered Security if such trustee, at the time of that transaction, knew, or, in the ordinary course of fulfilling his official duties as a trustee, should have known that during the 15-day period immediately before or after the trustee's transaction, such Covered Security was purchased or sold by the Fund or was being considered for purchase or sale by the Fund or by its investment advisor. Such reports will include the information described in Exhibit A-2. (iv) Quarterly transaction reports required to be made under this subparagraph (b)(iv) shall be made no later than 10 days after the end of a calendar quarter. Every Access Person shall be required to submit a report for all periods, including those periods in which no securities transactions were effected. A report shall be made on the form attached hereto as Exhibit A-2, or on any other form that contains the following information: (A) the date of the transaction, the title, the interest rate and maturity date (if applicable), the number of shares and the principal amount of each Covered Security involved; (B) the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition); (C) the price of the Covered Security at which the transaction was effected; (D) the name of the broker, dealer or bank with or through which the transaction was effected; and (E) the date that the report was submitted by the Access Person. Such quarterly transaction report shall also include, with respect to any account established by an Access Person in which any Covered Securities were held during the quarter for the direct or indirect benefit of the Access Person, the following information: (A) the name of the broker, dealer or bank with whom the Access Person established the account; and (B) the date the account was established. (v) Annual holdings reports required to be made under this subparagraph (b)(v) shall be made annually. The information, which must be current as of a date no more than 30 days before the report is submitted, must be made on the form attached hereto as Exhibit A-3, or on any other form that contains the following information: (A) the title, number of shares and principal amount of each Covered Security in which the Access Person had any direct or indirect beneficial ownership; (B) the name of any broker, dealer or bank with whom the Access Person maintained an account in which any Covered Securities were held for the direct or indirect benefit of the Access Person; and (C) the date that the report was submitted by the Access Person. (vi) Any report submitted pursuant to this paragraph (b) may contain a statement that the report will not be construed as an admission by the person making the report that he or she has any direct or indirect beneficial ownership in the Covered Security to which the report relates. (vii) No quarterly transaction report required to be made under this paragraph (b) by an Access Person shall be required to be submitted if such Access Person is required to file a substantially similar report with the investment advisor to the Fund. No Access Person shall be required to submit a quarterly transaction report under this paragraph (b) if the report would duplicate information contained in broker trade confirmations or account statements received by the Fund or the Fund's investment advisor, and such broker trade confirmations or account statements contain all of the information required by subparagraph (b)(iv) of this Code. (viii) The Compliance Officer shall notify each Access Person that he or she is subject to these reporting requirements, and shall deliver a copy of this Code to each such Access Person upon request. 4. REPORTING OF VIOLATIONS TO THE BOARD OF TRUSTEES ------------------------------------------------ (a) The Compliance Officer shall promptly report to the Board all apparent violations of this Code and the reporting requirements thereunder. (b) When the Compliance Officer finds that a transaction otherwise reportable to the Board under paragraph (a) of this Section could not reasonably be found to have resulted in a fraud, deceit or manipulative practice in violation of Rule 17j-l(b), the Compliance Officer may, in its discretion, lodge a written memorandum of such finding and the reasons therefor with the reports made pursuant to this Code, in lieu of reporting the transaction to the Board. (c) The Board, or a Committee of Trustees created by the Board for the purpose, shall consider reports made to the Board hereunder and shall determine whether or not this Code has been violated and what sanctions, if any, should be imposed. 5. ANNUAL REPORTING TO THE BOARD OF TRUSTEES ----------------------------------------- The Compliance Officer shall furnish to the Board, no less frequently than annually, a written report relating to this Code that: (a) describes any issues arising under the Code or the related procedures since the last report to the Board, including but not limited to, information about material violations of the Code or the related procedures and sanctions imposed in response to such material violations; (b) certifies that the Fund and the Fund's investment advisor have adopted procedures reasonably necessary to prevent Access Persons from violating the Code; and (c) identifies any recommended changes in the existing restrictions or procedures based upon the Fund's experience under the Code, evolving industry practices or developments in applicable laws or regulations. 6. SANCTIONS --------- Upon discovering a violation of this Code, the Board may impose such sanctions as it deems appropriate, including, among other things, a letter of censure or suspension or termination of the employment of the violator. 7. RETENTION OF RECORDS -------------------- This Code (as well as any other code of ethics that was in effect within the past five years), a list of all persons required to make reports hereunder from time to time, a list of all persons responsible for reviewing reports submitted pursuant to this Code from time to time, a copy of each report made (or any information provided in lieu of a quarterly report) by an Access Person hereunder, each memorandum prepared by the Compliance Officer hereunder, each written report submitted to the Board relating to the Code, a record of any violation of this Code and any action taken as a result of such violation, and all other information designated in the Rule shall be maintained by the Fund as required under the Rule. Dated: February 21, 1995, as amended August 24, 1998 and February 28, 2000. Exhibit A-1 THE BRINSON FUNDS Initial Holdings Report To the Compliance Officer of The Brinson Funds (the "Fund"): As of ___________, _______, the date that I became an Access Person, I had a direct or indirect beneficial ownership in the following Covered Securities, which are required to be reported pursuant to the Code of Ethics adopted by the Fund:
============================================================================== PRINCIPAL AMOUNT COVERED NUMBER OF OF COVERED BROKER/DEALER OR BANK SECURITY SHARES SECURITY WITH WHOM ACCOUNT IS HELD - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ ==============================================================================
This report (i) excludes Covered Securities with respect to which I had no direct or indirect influence or control, (ii) other securities not required to be reported, and (iii) is not an admission that I have or had any direct or indirect beneficial ownership in the Covered Securities listed above. Except as noted on the reverse side of this report, I hereby certify that I have no knowledge of the existence of any personal conflict of interest relationship that may involve the Fund, such as the existence of any economic relationship between the Covered Securities reported above and any securities held or to be acquired by the Fund or any of its series. Dated: ____________________ Signature: ____________________________ Print Name: ___________________________ Title: ________________________________ Employer's Name: ______________________ Exhibit A-2 THE BRINSON FUNDS Quarterly Securities Transactions Report For the Calendar Quarter Ended: ______________________ To the Compliance Officer of The Brinson Funds (the "Fund"): During the quarter referred to above, the following transactions were effected in Covered Securities of which I had, or by reason of such transaction acquired, direct or indirect beneficial ownership, and that are required to be reported pursuant to the Code of Ethics adopted by the Fund:
======================================================================================================== INTEREST BROKER/DEALER RATE AND NATURE OF OR BANK MATURITY NUMBER PRINCIPAL TRANSACTION THROUGH COVERED DATE OF DATE (IF OF AMOUNT OF (Purchase, Sale, WHOM SECURITY TRANSACTION APPLICABLE) SHARES TRANSACTION Other) PRICE EFFECTED - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- ========================================================================================================
During the quarter referred to above, I have established and/or maintained the following accounts in which the Covered Securities identified above were held:
=========================================================================== BROKER/DEALER OR BANK WITH DATE UPON WHICH ACCOUNT WAS WHOM ACCOUNT WAS ESTABLISHED ESTABLISHED - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- ===========================================================================
This report (i) excludes transactions with respect to which I had no direct or indirect influence or control, (ii) other transactions not required to be reported, and (iii) is not an admission that I have or had any direct or indirect beneficial ownership in the Covered Securities listed above. Except as noted on the reverse side of this report, I hereby certify that I have no knowledge of the existence of any personal conflict of interest relationship that may involve the Fund, such as the existence of any economic relationship between the transactions reported above and any securities held or to be acquired by the Fund or any of its series. Dated: ____________________ Signature: _______________________________ Print Name: ______________________________ Title: ___________________________________ Employer's Name: _________________________ Exhibit A-3 THE BRINSON FUNDS Annual Holdings Report For the Annual Period Ended: To the Compliance Officer of The Brinson Funds (the "Fund"): During the twelve-month period referred to above, I had a direct or indirect beneficial ownership in the following Covered Securities, which are required to be reported pursuant to the Code of Ethics adopted by the Fund:
============================================================================== PRINCIPAL AMOUNT COVERED NUMBER OF OF COVERED BROKER/DEALER OR BANK SECURITY SHARES SECURITIES WITH WHOM ACCOUNT IS HELD - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ ==============================================================================
This report (i) excludes Covered Securities with respect to which I had no direct or indirect influence or control, (ii) other securities not required to be reported, and (iii) is not an admission that I have or had any direct or indirect beneficial ownership in the Covered Securities listed above. Except as noted on the reverse side of this report, I hereby certify that I have no knowledge of the existence of any personal conflict of interest relationship that may involve the Fund, such as the existence of any economic relationship between the Covered Securities reported above and any securities held or to be acquired by the Fund or any of its series. Dated: ____________________ Signature: _______________________________ Print Name: ______________________________ Title: ___________________________________ Employer's Name: _________________________ EX-99.P2 22 INTEGRITY POLICY UBS BRINSON Exhibit 99.p.2 INTEGRITY POLICY Effective February 4, 2000 __________________________ UBS BRINSON INTEGRITY POLICY Table of Contents I. General................................................................. 3 II. Investments............................................................. 4 A. General................................................................. 4 B. Improper Conduct........................................................ 4 C. Definition of Security.................................................. 5 D. Personal Securities Trading Procedures.................................. 5 E. Initial Public Offerings................................................ 6 F. Short Term Trading...................................................... 6 G. Frequency............................................................... 7 H. Disclosure of Personal Interest......................................... 7 I. Securities Transaction Reports.......................................... 7 III. Disclosure or Use of Confidential Information........................ 7 A. General................................................................. 7 B. Insider Trading Policy.................................................. 8 C. Material Inside Information............................................. 8 D. Disclosure.............................................................. 8 E. Procedures for Safeguarding Confidential Information.................... 9 IV. Personal and Business Conduct........................................ 9 A. Use of Proper Accounting Procedures..................................... 9 B. Individual Expense Guidelines........................................... 9 C. Gifts and Bequests...................................................... 10 D. Use of UBS Brinson Assets............................................... 10 E. Dealing with Suppliers.................................................. 11 F. Use of UBS Brinson Intellectual Property and Proprietary Information.... 11 G. Candor Among Employees.................................................. 11 V. Outside Activities................................................... 11 A. General................................................................. 11 B. Reporting of Business Interests and Governmental Positions.............. 12 VI. Observance of Laws................................................... 12 A. General................................................................. 12 B. Industry Regulators..................................................... 13 VII. Individual Compliance................................................ 13 VIII. AIMR Code of Ethics and Standards of Professional Conduct............ 14 2 UBS BRINSON INTEGRITY POLICY I. GENERAL ------- UBS Brinson/1/ has many important assets. Perhaps the most valuable is its established and unquestioned reputation for integrity. Preserving this integrity demands the continuing alertness of every employee. Each employee must avoid any activity or relationship that may reflect unfavorably on UBS Brinson as a result of a possible conflict of interest, the appearance of such a conflict, the improper use of confidential information or the appearance of any impropriety. Although no written code can take the place of personal integrity, the following, in addition to common sense and sound judgment, should serve as a guide to the minimum standards of proper conduct. Any conduct that violates this policy statement is never acceptable and always constitutes an activity beyond the scope of the employee's legitimate employment. This policy statement is drafted broadly and represents UBS Brinson's effort not only to meet but also to exceed the requirements of law and industry practice in a manner consistent with UBS Brinson's high standard of business conduct. The Integrity Policy is designed to ensure, among other things, that all employees conduct their personal securities transactions in keeping with the following principles: . The interests of UBS Brinson's clients should be placed first and foremost; . All employees should conduct their personal investment activity in a manner consistent with the law and this Integrity Policy and in such a manner as to avoid any actual or potential conflict of interest or any abuse of an employee's position of trust and responsibility; and . Employees should not take inappropriate advantage of their positions. Attached is a copy of the "Code of Ethics and Standards of Professional Conduct" issued by the Association for Investment Management and Research, the terms of which are incorporated within this Integrity Policy by reference. Local guidelines issued by regulatory agencies or industry associations that govern conduct of investment professionals must be followed and are incorporated in this Integrity Policy by reference. In addition, other policies and practices may be in place in various locations that govern employee conduct. This policy should be followed in conjunction with any such guidelines. In addition to the specific prohibitions on certain personal securities transactions as set forth herein, this Integrity Policy prohibits all employees from: (a) Employing any device, scheme or artifice to defraud any client or prospective client; (b) Making to any client or prospective client any untrue statement of a material fact or failing to state to such client or prospective client a material fact necessary to make the statements made, in light of the circumstances under which they are made, not misleading; ______________________________ /1/ In this Policy "UBS Brinson" refers to the UBS Brinson/Brinson Partners Inc. business unit of the UBS Asset Management Division of UBS AG. The term "employees" refers to all members of the staff of UBS Brinson. 3 (c) Engaging in any act, practice or course of business that operates or would operate as a fraud or deceit upon any client or any prospective client; (d) Engaging in any fraudulent, deceptive or manipulative act, practice or course of business with respect to any client or any prospective client; (e) Revealing to any other person (except in the normal course of his or her duties on behalf of a client) any information regarding investments of or transactions by any client or the consideration by any client or UBS Brinson of any securities transactions; or (f) Misrepresentation of official or functional position to any other person. An employee who has any question about the application of this Integrity Policy in a particular instance should immediately consult the applicable UBS Brinson compliance officer. Any violation of these policies may subject the employee involved to disciplinary action, including dismissal and possible civil or criminal penalties. In the case of certain employee activities and circumstances, more specific policies and regulations may apply. All employees shall comply with this policy statement in addition to any local integrity policy that applies to an employee's conduct. This Integrity Policy applies to all employees of UBS Brinson. For purposes of this Integrity Policy, the term "employees" includes all consultants on long-term contracts (defined as in excess of 3 months) who work for UBS Brinson and who have access to client or investment information. II. INVESTMENTS ----------- A. General ------- Unless approved by UBS Brinson Compliance, no employee should make or maintain investments or enter into any transactions, directly or indirectly, which will create or give the appearance of creating conflicts of interest between the employee and UBS Brinson and any client or supplier. In addition to investments for an employee's personal account, this policy covers any investments financed by an employee and any investments over which an employee exercises discretion or has direct, indirect, or shared influence or control, including: (1) assets held in partnership, (2) UBS Brinson accounts, (3) investment clubs or any other joint trading arrangement, (4) investments by the employee's immediate family sharing the same household (child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, orsister-in-law, and shall and shall include adoptive relationships), and (5) other similar arrangements. No employee may have another person do something on his or her behalf that the employee could not have properly done personally. It is expected that employees of UBS Brinson shall maintain all personal investment account relationships with UBS AG or a subsidiary of UBS AG if, at the location at which the employee works, UBS AG or its subsidiaries offers such service. At locations where UBS AG or its subsidiaries do not offer such service, the employee may utilize a third party for his/her personal investment accounts, but must report the relationship to UBS Brinson Compliance. Exceptions must be pre-approved by UBS Brinson Compliance. A listing of any non-UBS AG provider accounts and, where applicable, a statement of holdings, must be submitted annually to UBS Brinson Compliance. 4 B. Improper Conduct ---------------- It is not possible to enumerate all the circumstances where potential actions or inactions may be contrary to this Integrity Policy; however, the following list and your common sense and sound judgment should serve as a guide for your conduct. It would be improper for an employee: 1. to make or maintain an investment in the securities of a company that the employee knows or should know is being financed by UBS Brinson, unless the securities of the company have a broad public market and are registered on a national securities exchange or traded in over-the-counter markets; 2. to permit any third party to arrange an investment for the account of the employee or to participate in investments arranged, sponsored or participated in by another under circumstances that might create, or give the appearance of creating, a conflict of interest; 3. to make or maintain an investment in any corporation or business with which UBS Brinson has business relationships if the investment is of such a character (whether because of the size or value of the investment or for any other reason) as might create, or give the appearance of creating a conflict of interest; 4. to participate in an initial public offering of any securities of any company, unless such offering is approved by UBS Brinson Compliance, which will review the nature of the offer to ensure that there is no actual or perceived conflict of interest; 5. to enter into a security transaction when the employee knows or should know that such action will anticipate, parallel or counter any securities transaction of UBS Brinson, whether UBS Brinson is acting for itself or in a fiduciary capacity (this would not apply to exchange traded futures contracts); 6. to enter into a security transaction, without the prior approval of UBS Brinson Compliance or its authorized delegates; 7. to enter into a net short position with respect to any security held by UBS Brinson individually or in its fiduciary capacity (this would not apply to exchange-traded futures contracts); 8. to enter into any derivative transaction when a direct transaction in the underlying security would violate this policy; 9. to engage in any self-dealing or other transactions benefiting the employee at the expense of UBS Brinson or its clients, and 10. to engage in personal trading that is out of proportion with the employee's personal assets or that might result in financial hardship or dereliction of duty to clients or UBS Brinson. C. Definition of Security ---------------------- For purposes of this policy, a "security" means any interest or instrument commonly known as a security, whether in the nature of debt or equity, including any stock, bond, note, debenture, evidence of indebtedness or any participation in or right to subscribe to or purchase any such interest or instrument. For purposes of this Policy, the term, "security" includes commodity transactions, puts, 5 calls, futures, futures contracts and margin account transactions, but does not include: (1) a deposit or share account in a banking institution, (2) a loan participation, (3) a letter of credit or other form of bank indebtedness incurred in the ordinary course of business, (4) currency, (5) any note, draft, bill of exchange or bankers acceptance which has a maturity at the time of issuance not in excess of nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited, (6) units of a collective investment fund, (7) interests in a variable amount (master note) (8) direct obligations of any government or (9) units of open-end, registered investment companies. D. Personal Securities Trading Procedures -------------------------------------- Employees may not purchase or sell a prohibited security or enter into any derivative transactions with respect to a prohibited security. Prohibited securities include those of any company with which UBS Brinson or an employee has a special relationship and/or about which UBS Brinson or an employee has confidential information as defined below. Employees are required to obtain approval from UBS Brinson Compliance or its authorized delegates prior to purchasing or selling any security, or engaging in a derivative transaction based on such a security. It is improper for an employee to enter into any transactions with respect to a security on any day UBS Brinson has traded, has an open order pending, or anticipates trading such security on behalf of itself or clients. All private placements must be approved for purchase or sale by UBS Brinson Compliance. In circumstances where an employee knows or should know that UBS Brinson is actively considering trading a security, the employee may not transact for his/her personal account. Research analysts are prohibited from purchasing or selling any security, or derivatives of such security, that is covered by the research analyst unless prior approval has been obtained from the Director of Research and from UBS Brinson Compliance. Research analysts are not permitted to effect personal transactions in securities they cover that are contrary to their recommendations. Violation of these procedures will result in disgorgement of profits realized on improper trades as well as imposition of appropriate disciplinary action or sanctions. E. Initial Public Offerings ------------------------ In general, employees will not be permitted to participate in the initial public offering of any company. Employees must seek the approval of UBS Brinson Compliance to participate in an initial public offering of any securities of any company. Approval may be granted for the privatisation or demutualization of a major organization which actively encourages participation by the community as a whole. All initial public offerings will be viewed on a case by case basis taking into account any actual or perceived impediment to clients' portfolios. If an employee is offered an initial public offering, the employee is required to seek approval from UBS Brinson Compliance which will review the nature of the offer relating to any potential conflicts of interest. F. Short-Term Trading ------------------ It is UBS Brinson's policy to discourage short term trading. 6 Employees must hold securities for a minimum of 30 calendar days, unless the holding has experienced a loss greater than or equal to 10% of the capital invested in the security. Forward trades may only be entered into if they have a duration of 7 calendar days or more. Exchange traded futures or options contracts on a currency, a broadly based index, interest rates, or other broadly based index-like products must be held for a minimum of 7 calendar days. This policy applies to trading in all types of securities and instruments, except where in a particular case UBS Brinson Compliance has made a specific finding of hardship and no issue of abuse or conflict is presented (for example, when an employee's request to sell a security which was purchased within 30 days prior to the request is prompted by a major corporate or market event, such as a tender offer, and the security is not held in client accounts). G. Frequency --------- Employees should not trade more than would be reasonable for an active portfolio management account and are not permitted more than 20 transactions per month. H. Disclosure of Personal Interest ------------------------------- All investment personnel must disclose to their functional head any position in a security held in their personal portfolio before participating in investment research or making an investment decision for a client account regarding that security or an equivalent or related security. The functional head will determine if the investment decision should be reviewed by investment personnel with no personal interest in the issuer. I. Securities Transactions Reports ------------------------------- All employees are required to file quarterly a report of security investment transactions in accordance with this Integrity Policy. The disclosure statement for each calendar quarter must be filed no later than 10 days after the end of the calendar quarter. The quarterly report must be filed even if there were no transactions during the quarter. If there were no reportable security transactions, the quarterly report should be so noted. In addition, all employees must send a written communication to every broker/dealer with whom they trade instructing the broker to forward to the designated UBS Brinson Compliance Officer duplicate trade confirmations for all trades of securities made by that employee. The designated UBS Brinson Compliance Officer should receive a copy of all such written communications sent to broker/dealers. To simplify reporting, it will not be necessary to report (1) the purchase or sale of a fractional share, (2) the purchase of shares with the current dividend under an automatic dividend reinvestment plan, (3) transactions in UBS stock when using UBS as an executing broker. III. DISCLOSURE OR USE OF CONFIDENTIAL INFORMATION --------------------------------------------- A. General ------- The nature of UBS Brinson's business is such that employees may be in possession of confidential, proprietary or market-sensitive information, including material non-public information. All employees have an obligation to respect and protect the confidential nature of relationships with and information about former, present and prospective clients, portfolio companies and suppliers of UBS Brinson. Any such information that is acquired by employees in the course of UBS Brinson's business must be kept 7 confidential and may be used solely for proper purposes of UBS Brinson. Under no circumstances shall an employee disclose such information to unauthorized persons or use or assist others in using confidential information for personal gain. A person is not an authorized individual simply because that person is an employee of UBS Brinson. In addition to information concerning other companies or persons, confidential information about UBS Brinson or its employees should not be disclosed to outside persons or to employees who have no reasonable need for such information in the course of their duties, nor should any employee use or assist others in using confidential information for personal gain or any other reason. This principle applies, among other matters, to investment policy and strategy, trade secrets, pricing information (especially non-public fee schedules), internal policies and financial status. B. Insider Trading Policy ---------------------- UBS Brinson prohibits any employee from trading, either personally or on behalf of others (including any funds and private accounts managed by UBS Brinson), on confidential information and prohibits communication or dissemination of confidential information to others in violation of the law. UBS Brinson's policy applies to every employee and extends to activities within and outside their duties at UBS Brinson. It is particularly important that employees not disclose confidential information to unauthorized persons, or use such information for personal gain. Any employee of UBS Brinson who engages in securities transactions while in possession of confidential information relating to the securities in question, or who discloses such information to others (including relatives and friends) who trade in such securities, subjects himself or herself to severe legal sanctions including the possibility of dismissal, fines and imprisonment. If an employee has any question regarding the confidentiality of information, the employee should convey the particulars of such information to, and confer with, UBS Brinson Compliance. C. Material Inside Information --------------------------- The term "material inside information" is not subject to being precisely defined. Generally, information is considered to be "inside" or "non- public" information if it has not been publicly disclosed. Information about a company should be deemed to be inside information if it is not generally known to the marketplace. Information considered to be "material" is any information about a company which, if disclosed, is likely to affect the market price of the company's securities or to be considered important by a reasonable investor in deciding whether or not to trade in those securities. Information should be presumed "material" if it relates to matters such as dividend changes, earnings estimates by the company, changes in the company's previously released earnings estimates, significant calls for redemption of outstanding securities, financing, significant developments in relationships with clients, suppliers, lenders and key personnel, significant new products or discoveries, major litigation by or against the company, liquidity or solvency problems, extraordinary management developments, significant merger or acquisition proposals, or other similar major events. It includes all information with respect to a company or its securities that is not publicly available and might reasonably be expected to have an effect on the market price of the company's securities. While the mere possession of material inside information is not a violation of securities laws, the improper use of such information can result in both civil and criminal liability. The duty to preserve the confidentiality of material non-public information arises from the anti-fraud provisions of securities laws. 8 Among other penalties, these laws may provide for the imposition of criminal and civil sanctions, including fines and imprisonment. D. Disclosure ---------- This policy prohibits UBS Brinson employees from disclosing confidential information to anyone outside UBS Brinson, including friends and relatives, and from using such information for personal gain. Generally, however, such information may be disclosed to legal counsel, accountants and advisors to UBS Brinson who need to know such information and to the extent disclosure is required by law. Otherwise, only after there is a full public disclosure of information by a company, usually by means of an announcement to the press, is a person who had access to or knew about the information relieved of the requirement of keeping it strictly to him or herself. Correspondingly, no trade or recommendation of any trade in a company's securities can be made on the basis of such information until the company has made a public announcement or the information is known generally to the marketplace. E. Procedures For Safeguarding Confidential Information ---------------------------------------------------- To ensure that any confidential information that comes to UBS Brinson in the course of its business is kept confidential, each employee of UBS Brinson is expected to adhere to the following policies: 1. Employees should not discuss with or disclose to any family member or other non-employee any confidential information or non-public information about any company, whether the company is a portfolio company or one about which UBS Brinson may have information because of a special transaction or relationship; 2. Employees should treat as confidential all non-public documents and materials, whether generated by a portfolio company, a company UBS Brinson is investigating, UBS Brinson itself, a UBS Brinson venture partnership or another entity with a special relationship to UBS Brinson. Non-public documents should be placed in files overnight and not left unattended on top of desks, in conference rooms or any work space if they might be seen by visitors to the office; 3. Employees should not permit visitors to walk through the offices unattended or to make use of unoccupied offices which may contain non- public information. All visitors who wish to work in UBS Brinson's offices or to make telephone calls should be directed to the reception area or an unoccupied conference room; 4. Employees should not discuss confidential matters in elevators, airports, restaurants, public transportation or other places where people outside UBS Brinson are present. Similarly, papers relating to confidential matters should not be displayed in the elevators or other public places; 5. Employees should hold telephone conversations regarding confidential matters privately and; 6. Before trading, employees should think about whether they may have confidential information relative to the securities under consideration. If an employee believes that he or she may have confidential information, the employee should not purchase or sell the securities in questions. Further, the employee should not communicate the information inside or outside UBS Brinson (other than as permitted above) and should immediately contact the UBS Brinson Compliance Officer or the UBS Brinson Chief Operating Officer, who will review the issue and determine whether trades may be made and information may be communicated. 9 IV. PERSONAL AND BUSINESS CONDUCT A. Use of Proper Accounting Procedures ----------------------------------- All financial transactions engaged in by UBS Brinson for itself or its clients shall be recorded immediately, completely and accurately. The knowing entry of false or inaccurate information in UBS Brinson's accounting and corporate records or any attempt to circumvent UBS Brinson's internal accounting controls shall be a violation of this Integrity Policy. All assets, liabilities, revenues and expenses shall be properly recorded in the books of UBS Brinson so as not to conceal any act that might violate the Integrity Policy. B. Individual Expense Guidelines ----------------------------- Each employee is expected to be familiar with and to comply with guidelines established to govern the circumstances in which employees are entitled to have individual expenses paid for by UBS Brinson. In general terms, such expenses are limited to those incurred in the course of developing and maintaining beneficial business relationships. All such expenses must be documented. Entertainment of government officials requires analysis of and sensitivity to a number of legal prohibitions and, accordingly, should be cleared with UBS Brinson Compliance. C. Gifts and Bequests ------------------ To avoid even an unwarranted suspicion of impropriety, it is extremely important that no employee accept any gifts and/or bequests if such acceptance would leave even the slightest implication of improper influence. As a general rule, no gifts or bequests from present or former clients or suppliers, not related by blood or marriage, may be accepted. If the circumstances surrounding a particular gift or bequest are such that its rejection or return might cause embarrassment or be in bad taste, or if an employee is otherwise in doubt as to the propriety of accepting a gift or bequest, the employee should report the gift or bequest and its estimated value in writing to UBS Brinson Compliance, which will either approve or disapprove its acceptance or retention by the employee. It is important to note that employees are not permitted to borrow from clients or suppliers, except those who engage in lending in the usual course of their business and then only on terms offered to others in similar circumstances, without special treatment as to interest rates, terms, security, repayment terms and the like. This prohibition does not preclude borrowing from anyone related to the employee by blood or marriage. D. Use of UBS Brinson Assets ------------------------- UBS Brinson provides workstations, telephones, personal computers and other equipment to assist employees in the performance of their work. While limited personal use may be made of these assets, such use must not interfere with UBS Brinson's business and the privilege for such use may be terminated at any time. Use of personal computers (including use on the Internet, intranet and for e-mail) and telephones may be subject to monitoring for security, supervisory and/or network management reasons. Employees should not have any expectation of privacy for their Internet, e-mail or other personal computer usage. The use of any employment-related tools (including computer hardware, software and telephone systems) for other than legitimate business activities is prohibited. Further, each employee is obligated 10 to use proper care to prevent unauthorized access to UBS Brinson's data, the introduction of any computer related virus or any breach of secured information lines. Employees must not: . Visit Internet sites that contain obscene, lewd, hateful or other objectionable materials; send or receive material that is obscene or defamatory or which is intended to annoy, harass or intimidate another person; . Use personal computers or telephones for any illegal purpose; . Represent personal opinions as those of UBS Brinson; . Upload, download or otherwise transmit or receive commercial software or any copyrighted materials belonging to parties outside of UBS Brinson or UBS Brinson itself; . Reveal or publicize confidential or propriety information, which includes, but is not limited to: financial information, new business and product ideas, marketing strategies and plans, databases and the information contained therein, client lists, computer software source codes, computer/network access codes and business relationships; and, . Examine, change or use another person's files, output or user name for which they do not have explicit authorization. E. Dealing with Suppliers ---------------------- Employees should award orders, contracts and commitments to suppliers of goods and services only after a fair and impartial evaluation of all relevant information has been completed. No employee shall accept any bribe, "kick-back" or similar consideration from a supplier or potential supplier, nor deal with a supplier solely on the basis of family relationship, friendship or similar considerations (direct or indirect ownership or financial relationship). Although a family or other personal or financial relationship will not necessarily preclude UBS Brinson from conducting business with a particular supplier, all such relationships must be clearly identified by an employee, to the extent known, to his/her supervisor prior to the awarding of a supplier contract. F. Use of UBS Brinson Intellectual Property and Proprietary Information -------------------------------------------------------------------- Employees must not use UBS Brinson's intellectual property or proprietary information such as trade secrets, inventions, software applications, product plans, business systems and procedures, manuals and other business data for personal gain. UBS Brinson's intellectual and proprietary information belongs to UBS Brinson and shall be kept confidential. Employees shall not, either during or after their employment, disclose any such information to the public or to any third party unless and until such time as the information becomes publicly available. Particular care should be taken when using electronic mail (e-mail) and the Internet. These forms of communication are not guaranteed to be private and they should not be used for transmitting or receiving confidential information unless adequate precautions are taken. 11 G. Candor Among Employees ---------------------- Management must be promptly informed at all times of matters which might adversely affect the operation or reputation of UBS Brinson, regardless of the source of such information. Moreover, complete candor is essential in dealing with UBS Brinson's independent and internal auditors, investigators, attorneys and regulatory authorities. It is UBS Brinson policy that such communications will be treated confidentially, to the extent possible, and that retaliatory action should not be taken against employees providing such information in good faith. V. OUTSIDE ACTIVITIES ------------------ A. General ------- Employees owe their primary duty of loyalty to UBS Brinson and its clients. Unless approved by UBS Brinson Compliance, no employee may engage in any outside activity, including the conduct of another business or acceptance of employment with another business firm, that may interfere with the employee's duties to UBS Brinson, may reflect adversely on UBS Brinson, or may raise actual, potential or perceived conflict of interest issues. Except as specifically approved by UBS Brinson Compliance, any compensation received for services as a director, or the equivalent of a director, of an entity in which UBS Brinson in its individual or fiduciary capacity has an equity interest shall be paid over to UBS Brinson, its clients or charity, as appropriate. UBS Brinson is interested in good government and the sponsorship of nonprofit activities in our society, and wishes to encourage such participation by employees to the extent it does not reduce effectiveness in performing duties on behalf of UBS Brinson, reflect adversely on UBS Brinson, or generate a potential conflict of interest. If there are any questions regarding participation in any such activity that does not meet these standards, no action should be taken without the proper approval of UBS Brinson Compliance. Employees who serve as directors or trustees of nonprofit organizations must report that involvement to UBS Brinson Compliance. Any request for UBS Brinson's involvement with nonprofit organizations should be referred to UBS Brinson Compliance. B. Reporting of Business Interests and Governmental Positions ---------------------------------------------------------- Each employee is required to maintain on file with UBS Brinson Compliance current information with respect to the employee's Reportable Business Interests and Reportable Governmental Positions. This information is to be reported by the filing of an Employee Affirmation and Affiliation Statement not less often than annually by each employee. All employees are required to file an amended statement promptly upon obtaining or disposing of a Reportable Business Interest or assuming or relinquishing a Reportable Government Position. An employee is deemed to have a "Reportable Business Interest" as to each corporation, association, partnership, firm, business trust, sole proprietorship or other business entity (other than UBS Brinson) with respect to which: 12 1. Such employee together with his/her spouse and minor children (i) own (whether legally, equitably or otherwise) in the aggregate 10 percent or more of an equity interest in such entity (or, in the case of a corporation, 10 percent or more of the total outstanding shares of any class of stock), or (ii) hold, in the aggregate, indebtedness of such entity which equals or exceeds 5 percent of such entity's outstanding debt; 2. Such employee has the power to direct, or cause the direction of, the management or policies of such entity, whether through the ownership of securities, by contract, by intercompany relationships, or otherwise; or 3. Such employee or spouse or minor child holds any of the following positions in such entity: (i) officer, director, trustee or general partner; or (ii) employee, beneficiary, participant or associate with managerial or policy-making responsibilities. An employee is deemed to have a "Reportable Governmental Position" in each national, local or other government entity where the employee serves as a director, agent, employee, officer, trustee or member of any governing body or committee. VI. OBSERVANCE OF LAWS ------------------ A. General ------- Each employee has an obligation not to take any action that might result in a violation of law in any jurisdiction in which UBS Brinson does business. If there should be any question as to the legality of any action to be taken in the name, or on behalf, of UBS Brinson, such action should not be taken without the prior approval of UBS Brinson Compliance. B. Industry Regulators ------------------- It is UBS Brinson's policy to cooperate with investigators seeking information concerning UBS Brinson operations. At the same time, UBS Brinson is entitled to all the safeguards provided by law for the benefit of persons under investigation. The financial services industry is highly regulated, so there is often a need for contact with the regulators. If an employee is contacted by a regulator or investigator by telephone, letter or home or office visit, the employee may not, under any circumstances, engage in any discussion or take any other action in response to the contact prior to notifying UBS Brinson Compliance. Outside regulators and investigators should be given access to UBS Brinson records and personnel only by UBS Brinson Compliance. VII. INDIVIDUAL COMPLIANCE --------------------- The Integrity Policy sets forth a standard of conduct required of all employees of UBS Brinson, regardless of position. UBS Brinson's management shall monitor and report any violations of this Integrity Policy. Any employee who is aware of a suspected violation of this Integrity Policy by other employees, including management, should immediately report this information to UBS Brinson Compliance. 13 This Integrity Policy is designed to foster a working environment in which employees will be conscious of their obligation to avoid any actions that could cause embarrassment to themselves or UBS Brinson by virtue of any actual or seeming conflict of interest or improper influence. No employee can be expected to know the identity of every client, portfolio company and supplier of UBS Brinson. However, if there is cause for an employee to believe that he or she may be dealing with a client, portfolio company or supplier in a transaction described herein, it is that employee's obligation to make an appropriate inquiry to ascertain whether that is the circumstance. Failure to comply with the Integrity Policy or refusal to sign the Employee Affirmation and Affiliation Statement is considered a major infraction of our personnel policies, which can result in termination of employment, in addition to other potential sanctions, including criminal and civil prosecution. 14 EX-99.Q1A 23 RESOLUTION APPOINTING POWER OF ATTORNEY EX-99.q.1a FORM OF CERTIFICATE OF THE SECRETARY of THE BRINSON FUNDS RESOLUTION APPOINTING POWER OF ATTORNEY Pursuant to Paragraph 24 of Regulation S-K of the Securities Act of 1933, of The Brinson Funds, a Delaware business trust (the "Trust"), the undersigned does hereby certify the following: 1. Attached hereto as incorporated by reference into the Trust's Registration Statement is a true and complete copy of a resolution adopted by the Board of Trustees of the Trust (the "Resolution") with respect to the Power of Attorney appointing Karl Hartmann, Lloyd Lipsett, Kathleen O'Neill, Eddie Wang, Paul Roselli and Kelli Meidhof (each with full power to act alone) as attorneys-in-fact for the Trust, and the Trustees, President, Principal Accounting Officer, Secretary and Treasurer of the Trust, for the purpose of executing and filing on behalf of the Trust all requisite papers and documents with the U.S. Securities and Exchange Commission (the "SEC") and the offices of the securities administrators of the states to comply with applicable federal and state securities laws, is hereby approved and may be executed by each designated officer. 2. The Resolution was unanimously adopted by the Trust's Board of Trustees at the regularly scheduled Board Meeting held on August 23, 1999 and, unless subsequently amended by resolutions duly adopted by the Board of Trustees of the Trust, have remained in full force and effect as of the date hereof. IN WITNESS WHEREOF, the undersigned has caused this certificate to be signed on this 23rd day of August, 1999. (Trust Seal) ______________________________ Carolyn M. Burke, Secretary The Brinson Funds Resolution Adopted on August 23, 1999 and Incorporated by Reference Into the Registration Statement of The Brinson Funds APPOINTMENT POWER OF ATTORNEY RESOLVED, that the proposed Power of Attorney, in substantially the form presented to this meeting, appointing Karl Hartmann, Lloyd Lipsett, Kathleen O'Neill, Eddie Wang, Paul Roselli and Kelli Meidhof (each with full power to act alone) as attorneys-in-fact for The Brinson Funds (the "Trust"), and the Trustees, President, Principal Accounting Officer, Secretary and Treasurer of the Trust, for the purpose of executing and filing on behalf of the Trust all requisite papers and documents with the U.S. Securities and Exchange Commission (the "SEC") and the offices of the securities administrators of the states to comply with applicable federal and state securities laws, is hereby approved and may be executed by each designated officer. -----END PRIVACY-ENHANCED MESSAGE-----