ThZeal - The Zeal

DEF 14A 1 a2077620zdef14a.txt 14A SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12 THE UBS FUNDS -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1. Title of each class of securities to which transaction applies: 2. Aggregate number of securities to which transaction applies: 3. Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): 4. Proposed maximum aggregate value of transaction: 5. Total fee paid: [ ] Fee paid previously with preliminary proxy materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: ------------------------------------------------------------ 2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------ 3) Filing Party: ------------------------------------------------------------ 4) Date Filed: ------------------------------------------------------------ THE UBS FUNDS IMPORTANT SHAREHOLDER INFORMATION These materials are for a special meeting of shareholders (the "Special Meeting") of The UBS Funds (formerly, The Brinson Funds) (the "Trust"). The Special Meeting is scheduled to be held on June 19, 2002 at 10:00 a.m., Eastern time. This information will provide you with details of the proposals to be voted on at the Special Meeting, and includes your Proxy Statement and proxy card. A proxy card is, in essence, a ballot. When you vote your proxy, it tells us how you wish to vote on important issues relating to your Fund(s). If you complete and sign the proxy, we'll vote it exactly as you tell us. If you simply sign the proxy, we'll vote it in accordance with the recommendations of the Board of Trustees of the Trust on page 6 of the Proxy Statement. WE URGE YOU TO SPEND A FEW MINUTES REVIEWING THE PROPOSALS IN THE PROXY STATEMENT. THEN, FILL OUT THE PROXY CARD AND RETURN IT TO US SO THAT WE KNOW HOW YOU WOULD LIKE TO VOTE. WHEN SHAREHOLDERS RETURN THEIR PROXIES PROMPTLY, THE TRUST WILL BE ABLE TO SAVE MONEY BY NOT HAVING TO CONDUCT ADDITIONAL MAILINGS. WE WELCOME YOUR COMMENTS. IF YOU HAVE ANY QUESTIONS, CALL THE TOLL FREE NUMBER 1-866-606-0465. THE UBS FUNDS A LETTER FROM THE PRESIDENT Dear Shareholders: I am writing to request that you consider a number of important matters relating to your investment in the series of The UBS Funds (formerly, The Brinson Funds) (the "Trust"). The Trust will be holding a special meeting of shareholders (the "Special Meeting") of the Trust. The Special Meeting will be held on June 19, 2002 at 10:00 a.m., Eastern time, at the offices of the Trust's principal underwriter and administrator, UBS Global Asset Management (US) Inc. (formerly, Brinson Advisors, Inc.) ("UBS Global AM"), at 51 West 52nd Street, 16th Floor, New York, New York 10019-6114. The materials that we have included discuss the proposals to be voted on at the Special Meeting that will affect the future of the Trust and the series of the Trust (each a "Fund" or a "Series" and, collectively, the "Funds" or "Series"). The Board of Trustees (the "Board") of the Trust recommends that shareholders of the Funds (the "shareholders") cast their votes in FAVOR of: 1. Electing four Trustees to the Board of the Trust; 2. Approving the elimination of the permanent expense caps for the Funds; 3. Approving amended Investment Advisory Agreements between the Trust, on behalf of each Fund, and UBS Global Asset Management (Americas) Inc. (formerly, Brinson Partners, Inc.) (the "Advisor"); 4. Amending certain of the Funds' fundamental investment restrictions; and 5. Eliminating certain of the Funds' fundamental investment restrictions. PLEASE TAKE A MOMENT TO REVIEW THIS DOCUMENT AND FILL OUT, SIGN AND RETURN THE ENCLOSED PROXY CARD. The Board has proposed obtaining shareholder approval to elect the four current Trustees of the Trust. The Board has also proposed eliminating the permanent expense caps that are in place for certain Funds and replacing them with one-year contractual expense caps, to be reviewed by the Board on an annual basis. This is the approach taken by most fund complexes. In addition, the Board has proposed amendments to the Investment Advisory Agreements for certain Funds. The amended Investment Advisory Agreements will provide the Advisor with greater flexibility in utilizing the investment expertise of its foreign affiliates in the UBS AG investment advisory network, as well as provide the Advisor with the authority to engage sub-advisors for the Funds. The amended Investment Advisory Agreements will also permit the Advisor to seek reimbursement for fees it waived and expenses it reimbursed for a Fund, under certain conditions. Finally, the Board has proposed amending and/or eliminating certain of the Funds' fundamental investment policies. We believe that the recommended changes will provide additional investment flexibility for the Funds, as further described in the attached Proxy Statement. We urge you to approve these proposals, which are designed to benefit all shareholders by providing the Funds with greater flexibility in pursuing their investment objectives. The Proxy Statement includes a question and answer format designed to provide you with a simpler and more concise explanation of certain issues. Although much of the information in the Proxy Statement is technical and is required by the various regulations that govern the Trust and the Funds, we hope that this format will be helpful to you. Sincerely, /s/ Brian M. Storms Brian M. Storms PRESIDENT The UBS Funds THE UBS FUNDS 209 SOUTH LASALLE STREET CHICAGO, ILLINOIS 60604 ------------------- NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF THE UBS FUNDS TO BE HELD JUNE 19, 2002 ------------------- TO THE SHAREHOLDERS OF THE UBS FUNDS NOTICE IS HEREBY GIVEN THAT A SPECIAL MEETING OF SHAREHOLDERS of The UBS Funds (formerly, The Brinson Funds) (the "Trust") will be held on June 19, 2002 at the offices of the Trust's principal underwriter and administrator, UBS Global Asset Management (US) Inc. (formerly, Brinson Advisors, Inc.) ("UBS Global AM"), at 51 West 52nd Street, 16th Floor, New York, NY 10019-6114. (The special meeting is referred to in this Proxy Statement as the "Special Meeting.") Shareholders of the UBS Global Balanced Fund, UBS Global Equity Fund, UBS Global Technology Fund, UBS Global Biotech Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Growth Fund, UBS U.S. Small Cap Growth Fund, UBS U.S. Equity Fund, UBS U.S. Bond Fund, UBS High Yield Fund, UBS International Equity Fund and UBS U.S. Value Equity Fund will be eligible to vote at the Special Meeting. The Special Meeting will convene at 10:00 a.m., Eastern time. The Trust proposes to mail this notice of the Special Meeting, the proxy card, and the Proxy Statement on or about April 30, 2002, to shareholders of record as of April 2, 2002. The following proposals will be presented to the shareholders of the Funds (the "shareholders"): 1. To elect four Trustees to the Board of the Trust; 2. To approve or disapprove the elimination of the permanent expense caps for the Funds (all Funds EXCEPT UBS U.S. Value Equity Fund); 3. To approve or disapprove amended Investment Advisory Agreements between the Trust, on behalf of each Fund, and UBS Global Asset Management (Americas) Inc. (formerly, Brinson Partners, Inc.) (the "Advisor"); 4. To approve or disapprove amendments to the Funds' fundamental investment restrictions: (a) To amend the Funds' fundamental investment restrictions regarding borrowing (applies to the UBS Global Balanced Fund, UBS Global Equity Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Equity Fund, UBS U.S. Bond Fund and UBS International Equity Fund ONLY); (b) To amend the Funds' fundamental investment restrictions regarding underwriting (applies to the UBS Global Balanced Fund, UBS Global Equity Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Equity Fund, UBS U.S. Bond Fund and UBS International Equity Fund ONLY); (c) To amend the Funds' fundamental investment restrictions regarding lending (applies to the UBS Global Balanced Fund, UBS Global Equity Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Equity Fund, UBS U.S. Bond Fund and UBS International Equity Fund ONLY); (d) To amend the Funds' fundamental investment restrictions regarding investments in real estate (applies to the UBS Global Balanced Fund, UBS Global Equity Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Equity Fund, UBS U.S. Bond Fund and UBS International Equity Fund ONLY); (e) To amend the Funds' fundamental investment restrictions regarding investments in commodities (applies to the UBS Global Balanced Fund, UBS Global Equity Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Equity Fund, UBS U.S. Bond Fund and UBS International Equity Fund ONLY); (f) To amend the Funds' fundamental investment restrictions regarding issuing senior securities and making short sales (applies to the UBS Global Balanced Fund, UBS Global Equity Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Equity Fund, UBS U.S. Bond Fund and UBS International Equity Fund ONLY); (g) To amend the Funds' fundamental investment restrictions regarding industry concentration (applies to the UBS Global Balanced Fund, UBS Global Equity Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Equity Fund, UBS U.S. Bond Fund and UBS International Equity Fund ONLY); and (h) To amend the Funds' fundamental investment restrictions regarding diversification (applies to the UBS Global Balanced Fund, UBS Global Equity Fund, UBS U.S. Balanced Fund, UBS U.S. Large Cap Equity Fund and UBS U.S. Bond Fund ONLY). 5. To approve the elimination of certain fundamental investment restrictions of the Funds (the following sub-proposals apply to the UBS Global Balanced Fund, UBS Global Equity Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Equity Fund, UBS U.S. Bond Fund and UBS International Equity Fund ONLY): (a) To eliminate the Funds' fundamental investment restrictions regarding investing for control or management; (b) To eliminate the Funds' fundamental investment restrictions regarding purchasing securities on margin; (c) To eliminate the Funds' fundamental investment restrictions regarding investing in unseasoned issuers; (d) To eliminate the Funds' fundamental investment restrictions regarding investments in other investment companies; (e) To eliminate the Funds' fundamental investment restrictions regarding investing in puts, calls and straddles; and (f) To eliminate the Funds' fundamental investment restrictions regarding investments in oil, gas and/or mineral exploration or development programs or leases. Only those shareholders of record of the Funds at the close of business on April 2, 2002 will be entitled to notice of, and to vote on, the proposals at the Special Meeting, or at any adjournments thereof. Shareholders may attend in person. If you plan to attend the Special Meeting, so indicate on the enclosed proxy card and return it promptly in the enclosed envelope. No postage is required if mailed in the United States. Whether you will able to attend or not, PLEASE VOTE, SIGN AND DATE THE PROXY AND RETURN IT PROMPTLY OR VOTE YOUR SHARES BY TELEPHONE OR THE INTERNET. By Order of the Board of Trustees, AMY R. DOBERMAN SECRETARY The UBS Funds April 30, 2002 PLEASE RETURN YOUR PROXY IMMEDIATELY TO PREVENT ADDITIONAL SOLICITATION EXPENSE TABLE OF CONTENTS

(i) THE UBS FUNDS 209 SOUTH LASALLE STREET CHICAGO, ILLINOIS 60604 ------------------- PROXY STATEMENT ------------------- QUESTIONS AND ANSWERS: ABOUT THE SPECIAL MEETING AND THE PROXY STATEMENT INFORMATION ABOUT VOTING Q. WHO IS ASKING FOR MY VOTE? A. The Board of Trustees (the "Board" or the "Trustees") of The UBS Funds (formerly, The Brinson Funds) (the "Trust") requests your vote on several matters in connection with the special meeting of shareholders (the "Special Meeting") of the Trust. The Special Meeting will be held at 10:00 a.m., Eastern time, on June 19, 2002, at the offices of the Trust's principal underwriter and administrator, UBS Global Asset Management (US) Inc. (formerly, Brinson Advisors, Inc.) ("UBS Global AM"), at 51 West 52nd Street, 16th Floor, New York, NY 10019-6114. The Trust proposes to mail the Notice of the Special Meeting, the proxy card and the Proxy Statement on or about April 30, 2002, to shareholders of record as of April 2, 2002. The Trust was established as a Delaware business trust on December 1, 1993. This Proxy Statement relates to the fourteen (14) series of the Trust with shareholders (each a "Fund," and collectively, the "Funds"): - UBS Global Balanced Fund - UBS Global Equity Fund - UBS Global Technology Fund - UBS Global Biotech Fund - UBS Global Bond Fund - UBS U.S. Balanced Fund - UBS U.S. Large Cap Equity Fund - UBS U.S. Large Cap Growth Fund - UBS U.S. Small Cap Growth Fund - UBS U.S. Equity Fund - UBS U.S. Bond Fund - UBS High Yield Fund - UBS International Equity Fund - UBS U.S. Value Equity Fund

------------------- * Prior to April 8, 2002, the Funds were designated as Global Balanced Fund, U.S. Large Cap Growth Fund, Global Equity Fund, U.S. Small Cap Growth Fund, Global Technology Fund, U.S. Equity Fund, Global Biotech Fund, U.S. Bond Fund, Global Bond Fund, High Yield Fund, U.S. Balanced Fund, International Equity Fund, U.S. Large Cap Equity Fund and U.S. Value Equity Fund. A Fund may be referred to in this Proxy Statement as a "Series," and the Funds may be collectively called the"Series."* 1 The Funds' most recent audited financial statements and Annual Report, for the fiscal year ended June 30, 2001, and most recent unaudited financial statements and Semi-Annual Report, for the period ended December 31, 2001, have been previously mailed to shareholders, and are available free of charge. If you have not received an Annual Report for the Fund(s) in which you are an investor, or would like to receive additional copies, free of charge, please write the Trust at the address on the cover page of this Proxy Statement, or call the Trust at 1-800-448-2430, and the Reports and financial statements will be sent to you by first-class mail within three business days. Q. WHO IS ELIGIBLE TO VOTE? A. Shareholders of record of the Funds at the close of business on April 2, 2002 (the "Record Date") are entitled to notice of and to vote at the Special Meeting or at any adjournment thereof. Shareholders of record will be entitled to one vote for each full share and a fractional vote for each fractional share that they hold on each matter presented at the Special Meeting. GENERAL INFORMATION ABOUT THE PROPOSALS Q. WHAT IS BEING VOTED ON AT THE SPECIAL MEETING? A. The Board is asking shareholders of the Funds (the "shareholders") to vote on the following proposals affecting the Funds:
PROPOSAL # PROPOSAL DESCRIPTION APPLICABLE FUNDS ---------- -------------------- ---------------- 1 To elect four Trustees to the Board of All Funds the Trust 2 To approve the elimination of the UBS Global Balanced Fund, UBS Global permanent expense caps for the Funds Equity Fund, UBS Global Technology Fund, UBS Global Biotech Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Large Cap Growth Fund, UBS U.S. Small Cap Growth Fund, UBS U.S. Equity Fund, UBS U.S. Bond Fund, UBS High Yield Fund and UBS International Equity Fund 3 To approve amended Investment Advisory All Funds Agreements between the Trust, on behalf of each Fund, and the Advisor 4 To amend certain Funds' fundamental investment restrictions:
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PROPOSAL # PROPOSAL DESCRIPTION APPLICABLE FUNDS ---------- -------------------- ---------------- 4(a) Regarding borrowing UBS Global Balanced Fund, UBS Global Equity Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Equity Fund, UBS U.S. Bond Fund and UBS International Equity Fund 4(b) Regarding underwriting securities Same Funds as listed above for Proposal #4(a) 4(c) Regarding lending Same Funds as listed above for Proposal #4(a) 4(d) Regarding investments in real estate Same Funds as listed above for Proposal #4(a) 4(e) Regarding investments in commodities Same Funds as listed above for Proposal #4(a) 4(f) Regarding issuing senior securities and Same Funds as listed above for Proposal making short sales #4(a) 4(g) Regarding industry concentration Same Funds as listed above for Proposal #4(a) 4(h) Regarding diversification of investments UBS Global Balanced Fund, UBS Global Equity Fund, UBS U.S. Balanced Fund, UBS U.S. Large Cap Equity Fund and UBS U.S. Bond Fund 5 To eliminate certain of the Funds' fundamental investment restrictions: 5(a) Regarding investing for control or UBS Global Balanced Fund, UBS Global management Equity Fund, UBS Global Bond Fund, UBS U.S. Balanced Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Equity Fund, UBS U.S. Bond Fund and UBS International Equity Fund 5(b) Regarding purchasing securities on Same Funds as listed above for Proposal margin #5(a) 5(c) Regarding investing in unseasoned Same Funds as listed above for Proposal issuers #5(a) 5(d) Regarding investments in other Same Funds as listed above for Proposal investment companies #5(a) 5(e) Regarding investing in puts, calls and Same Funds as listed above for Proposal straddles #5(a) 5(f) Regarding investments in oil, gas and/or Same Funds as listed above for Proposal mineral exploration or development #5(a) programs or leases
At its meeting on August 28, 2001, the Board considered and approved the elimination of the permanent expense caps for the Funds. At that meeting, the Board also reviewed and approved the proposed changes to the fundamental investment restrictions of certain Funds. At meetings of the Board held on August 28, 2001 and December 13, 2001, the Board considered amendments to the Investment Advisory Agreements for the Funds. The Board approved each of the amended Investment Advisory Agreements, and recommended that the Agreements be submitted for 3 shareholder approval. Each of the proposed Investment Advisory Agreements and changes are subject to shareholder approval. At a special meeting held on February 15, 2002, the Board also approved submitting a proposal to shareholders for the election of the four Trustees. The purposes of the Special Meeting are set forth in the accompanying Notice. Q. HOW DO THE TRUSTEES RECOMMEND THAT I VOTE ON THESE PROPOSALS? A. The Trustees recommend that shareholders vote FOR each proposal. INFORMATION REGARDING PROPOSAL #1 Q WHO AM I BEING ASKED TO ELECT AS TRUSTEES TO THE BOARD OF THE TRUST? A. Shareholders are being asked to elect the four current Trustees of the Trust: Walter E. Auch, Frank K. Reilly, Edward M. Roob and Brian M. Storms. INFORMATION REGARDING PROPOSAL #2 Q. WHY IS MANAGEMENT PROPOSING THE ELIMINATION OF THE PERMANENT EXPENSE CAPS FOR THE FUNDS? A. Each Fund, except for UBS U.S. Value Equity Fund, is subject to an expense cap pursuant to which the Advisor agreed to permanently waive its fees and reimburse certain expenses in order to limit total operating expenses to a set rate for each Fund. Management is proposing to eliminate the permanent expense caps for the Funds and institute one-year contractual expense caps in their place. Management is proposing this change to better align the Funds with their current retail focus and because the permanent nature of the expense caps is no longer appropriate, considering the current and proposed target shareholder base for the Funds' shares. Q. WHAT HAPPENS IF THE PERMANENT EXPENSE CAPS ARE ELIMINATED? A. If shareholders approve the elimination of the permanent expense caps for the Funds, the Advisor will put in place one-year contractual expense caps at rates identical to the permanent expense caps. The continuation of the one-year contractual expense cap for each Fund will be reviewed by the Board each year. INFORMATION REGARDING PROPOSAL #3 Q. WHY IS MANAGEMENT PROPOSING AN AMENDMENT TO THE INVESTMENT ADVISORY AGREEMENTS FOR CERTAIN FUNDS TO PERMIT THE ADVISOR TO UTILIZE INVESTMENT PERSONNEL OF ITS FOREIGN AFFILIATES? A. Depending on the Fund, the Funds' current Investment Advisory Agreements either do not explicitly allow any exchange, or only allow a limited exchange, of information between the Advisor and its foreign affiliates in managing the assets of the Funds. By amending the Investment Advisory Agreements to explicitly permit the Advisor to utilize the investment personnel associated with its foreign affiliates, the Advisor will have the opportunity to take advantage of the investment expertise of its foreign affiliates in managing certain assets of the Funds. Q. WHY IS MANAGEMENT PROPOSING AN AMENDMENT TO THE INVESTMENT ADVISORY AGREEMENTS FOR CERTAIN FUNDS THAT WILL PROVIDE THE ADVISOR WITH THE AUTHORITY TO ENGAGE SUB-ADVISORS? A. The current Investment Advisory Agreements for certain Funds do not explicitly permit the Advisor to engage the services of sub-advisors. Although the Advisor does not currently contemplate engaging sub-advisors for these Funds, the amended Investment Advisory Agreement will provide the Advisor with the future flexibility to enter into a sub-advisory arrangement for a Fund upon its approval by the Board and, if necessary, the Fund's shareholders. 4 Q. WHY IS MANAGEMENT PROPOSING AN AMENDMENT TO THE INVESTMENT ADVISORY AGREEMENTS FOR CERTAIN FUNDS TO ALLOW THE ADVISOR TO BE REIMBURSED FOR FEES IT WAIVED AND EXPENSES IT REIMBURSED PURSUANT TO THE EXPENSE CAP ARRANGEMENTS FOR THE FUNDS? A. Certain Funds' current Investment Advisory Agreements do not contain a reimbursement provision that allows the Advisor, in connection with its expense cap arrangements with the Funds, to be reimbursed by a Fund for previously waived fees and assumed expenses during a year that the Fund's expenses are below its expense cap. Each amended Investment Advisory Agreement will include a reimbursement provision, which is common in the mutual fund industry for such expense cap arrangements. Q. WILL THESE CHANGES TO THE FUNDS' INVESTMENT ADVISORY AGREEMENTS AFFECT THE FEES AND EXPENSES CHARGED TO SHAREHOLDERS? A. The proposed amended Investment Advisory Agreement for each Fund will not include an increase in the rate of the advisory fees payable to the Advisor. The reimbursement provision in each amended Investment Advisory Agreement, however, will provide the Advisor with the ability to be reimbursed by a Fund for fees and expenses that it waives or reimburses under the Fund's expense cap arrangement in a year that the Fund's total expenses are less than its expense cap. The Investment Advisory Agreements for the Funds, other than the Agreements for UBS Global Technology Fund, UBS Global Biotech Fund and UBS U.S. Value Equity Fund, do not currently permit the Advisor to be reimbursed for previously waived or reimbursed fees and expenses. In a year that the Advisor is reimbursed for previously waived fees and reimbursed expenses, a Fund's expenses for that year will be greater under the amended Investment Advisory Agreement, which includes the reimbursement provision, than they would have been under the current Investment Advisory Agreement, which does not include a reimbursement provision. INFORMATION REGARDING PROPOSALS #4 AND #5 Q. WHY AM I BEING ASKED TO APPROVE AMENDMENTS TO THE FUNDAMENTAL INVESTMENT RESTRICTIONS OF CERTAIN FUNDS? A. Certain of the Funds' fundamental investment restrictions were adopted in response to state laws that are no longer applicable, or to market conditions that no longer exist, and thus may be overly restrictive. Approval of the proposed amendment of these fundamental restrictions will provide the Funds with greater investment flexibility within the boundaries imposed by applicable law. The proposed changes are not expected to have any immediate effect on the manner in which the Funds are managed. Q. WHY AM I BEING ASKED TO APPROVE THE ELIMINATION OF FUNDAMENTAL INVESTMENT RESTRICTIONS OF CERTAIN FUNDS? A. Several of the Funds' current fundamental investment restrictions reflect past regulatory, business or industry conditions, and practices or requirements that are outdated, unnecessary or potentially burdensome. Approval of the proposals to eliminate certain investment restrictions initially will not result in any immediate changes to the management of the Funds, but will provide the Funds with greater flexibility to pursue their investment goals. Q. ARE THERE ANY PROPOSALS THAT WILL IMPACT THE FUNDS' INVESTMENT POLICIES OR LIMITATIONS? A. Yes. Although none of the proposed changes to the Funds' investment restrictions is expected to materially impact the day-to-day management of the Funds, it is proposed that certain of the Funds' investment restrictions that are "fundamental" (that is, those that cannot be changed without shareholder approval) be amended or eliminated. If these proposals are approved by shareholders, the Advisor and the Board will have more flexibility to respond to future developments by changing the Funds' investment policies in a manner intended to achieve the Funds' investment goals without 5 obtaining shareholder approval. Shareholders, of course, will be informed of any significant changes to the Funds' investment restrictions before such changes are implemented, and any additional amendments to the fundamental investment restrictions will be required to be submitted to shareholders, for their approval. These proposals are intended only to eliminate the cost and delay of seeking shareholder approval for changes in investment restrictions that would not otherwise require convening a shareholder meeting. Given the minimal impact of these changes on the day-to-day management of the Funds, shareholder approval of these proposals is not expected to increase the Funds' overall level of risk. ADDITIONAL INFORMATION REGARDING THE PROPOSALS Q. WHEN WILL THE PROPOSALS TAKE EFFECT IF THEY ARE APPROVED? A. If Proposal #2 is approved, the permanent expense caps for the Funds will be eliminated on July 1, 2002. The other proposals will become effective immediately upon approval of the shareholders. Q. HOW DO I VOTE MY SHARES? A. You may vote your shares: (i) in person, by attending the Special Meeting; (ii) by mail, by sending the enclosed proxy card, signed and dated, to us in the enclosed envelope; (iii) by fax, by faxing both sides of the proxy card, signed and dated, to 1-888-796-9932; (iv) by telephone, by calling 1-800-597-7836; or (v) via the Internet, at https://vote.proxy-direct.com, using the control number that appears on your proxy card. Proxy cards that are properly signed, dated and received at or prior to the Special Meeting will be voted as specified. If you specify a vote for any of Proposals #1 through #5, your proxy will be voted as you indicate. If you simply sign, date and return the proxy card, but do not specify a vote for any of Proposals #1 through #5, your shares will be voted by the proxies as follows: - IN FAVOR of the election of the four Trustees (Proposal #1); - IN FAVOR of eliminating the permanent expense caps for the Funds (Proposal #2); - IN FAVOR of the amended Investment Advisory Agreements between the Trust, on behalf of each Fund, and the Advisor (Proposal #3); - IN FAVOR of amending the fundamental investment restrictions that apply to the Funds (Proposals #4(a)-#4(h)); and - IN FAVOR of eliminating the fundamental investment restrictions that apply to the Funds (Proposals #5(a)-#5(f)). Q. IF I SEND MY PROXY IN NOW AS REQUESTED, CAN I CHANGE MY VOTE LATER? A. You may revoke your proxy at any time before it is voted by: (1) sending to the Secretary of the Trust a written revocation; or (2) forwarding a later-dated proxy that is received by the Trust at or prior to the Special Meeting; or (3) attending the Special Meeting and voting in person. Even if you plan to attend the Special Meeting, we ask that you return the enclosed proxy. This will help us ensure that an adequate number of shares are present for the Special Meeting to be held. 6 THE PROPOSALS PROPOSAL #1: TO ELECT FOUR TRUSTEES TO THE BOARD OF THE TRUST WHO ARE SHAREHOLDERS BEING ASKED TO ELECT AS TRUSTEES? Management has proposed the election of Walter E. Auch, Frank K. Reilly, Edward M. Roob and Brian M. Storms (collectively the "Nominees") to the Board of Trustees of the Trust. Each Nominee is currently a member of the Board. Messrs. Auch, Reilly and Roob have served in their capacities as Trustees of the Trust since May 1994, December 1993 and February 1995, respectively, and were last elected by shareholders of the Trust on February 17, 1995. Mr. Storms was appointed to the Board in May 2001 to fill the vacancy that resulted from the resignation of Andrew J. O'Reilly. Mr. Storms (the "Interested Trustee") is considered an "interested person" of the Trust as that term is defined by the Investment Company Act of 1940, as amended (the "1940 Act"), due to the positions he holds with the Advisor and its affiliates. Messrs. Auch, Reilly and Roob (collectively, the "Independent Trustees") are not considered "interested persons" under the 1940 Act. Messrs. Auch, Reilly and Roob currently serve on the Audit Committee of the Board of the Trust. All Nominees have consented to serve if elected. If elected, each Nominee will hold office without limit in time until he dies, resigns, is declared bankrupt or incompetent by a court of competent jurisdiction, or is removed, or until the next meeting of shareholders to elect Trustees and the election and qualification of his successor. Election of a Trustee is by a plurality vote, which means that the four individuals receiving the greatest number of votes at the Special Meeting will be deemed to be elected. If each of the four Nominees is elected, they will constitute the entire Board of the Trust. If Mr. Storms should withdraw or otherwise become unavailable for election, a substitute nominee shall be selected by management. If any of the Nominees who are Independent Trustees should withdraw or otherwise become unavailable for election, the selection of a substitute nominee shall be made by a majority of the Independent Trustees. Listed in the tables below, for each Nominee, is a brief description of the Nominee's experience as a Trustee of the Trust and as a director or trustee of other funds, as well as other recent professional experience: INDEPENDENT TRUSTEES
TERM OF OFFICE(1) POSITIONS AND LENGTH NUMBER OF PORTFOLIOS IN HELD WITH THE OF TIME PRINCIPAL OCCUPATIONS FUND COMPLEX OVERSEEN NAME, ADDRESS AND AGE TRUST SERVED DURING THE PAST 5 YEARS BY NOMINEE(2) --------------------- ------------- ---------- ----------------------- ----------------------- Walter E. Auch Trustee Trustee since Retired; prior thereto, 39 portfolios in two 6001 N. 62nd Place 1994 Chairman and CEO of registered investment Paradise Valley, AZ Chicago Board of Options companies advised by the 85253 Exchange 1979-1986. Advisor Age: 80 Trustee, UBS Supplementary Trust since 1997. OTHER DIRECTORSHIPS HELD NAME, ADDRESS AND AGE BY NOMINEE --------------------- ------------------------ Walter E. Auch Trustee, Advisors 6001 N. 62nd Place Series Trust since 1997 Paradise Valley, AZ (16 portfolios); Trustee, 85253 Smith Barney Fund Complex Age: 80 since 1992 (27 portfolios); Trustee, Nicholas Applegate Institutional Funds since 1992 (19 portfolios); Trustee, Banyan Strategic Realty Trust since 1988; Director, Express America Holdings Corp. since 1992; and Director, Semele Group Inc. since 1987.
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TERM OF OFFICE(1) POSITIONS AND LENGTH NUMBER OF PORTFOLIOS IN HELD WITH THE OF TIME PRINCIPAL OCCUPATIONS FUND COMPLEX OVERSEEN NAME, ADDRESS AND AGE TRUST SERVED DURING THE PAST 5 YEARS BY NOMINEE(2) --------------------- ------------- ---------- ----------------------- ----------------------- Frank K. Reilly Chairman and Trustee since Professor, University of 40 portfolios in three College of Business Trustee 1993 Notre Dame since 1982; registered investment Administration Trustee, UBS companies advised by the University of Notre Supplementary Trust since Advisor Dame 1997; and Director, Notre Dame, IN 46556 Battery Park Funds Inc. Age: 66 (1995-2001). Edward M. Roob Trustee Trustee since Retired; prior thereto, 40 portfolios in three 841 Woodbine Road 1995 Senior Vice President, registered investment Northbrook, IL 60002 Daiwa Securities America companies advised by the Age: 67 Inc. 1986-1993; Trustee, Advisor UBS Supplementary Trust since 1997; Director, Brinson Trust Company since 1993; and Committee Member, Chicago Stock Exchange 1993-1999. INTERESTED TRUSTEE Brian M. Storms Trustee and Trustee and Chief Operating Officer 39 portfolios in two 51 W. 52nd Street President President since September 2001 and registered investment 16th Floor since 2001 President of UBS Global companies advised by the New York, NY 10019 AM since March 1999. Advisor Age: 47 Director, President and Chief Operating Officer of the Advisor since October 2001. President and Chief Operating Officer of UBS Global Asset Management (New York) Inc. since October 2001. Chief Executive Officer of UBS Global AM (2000-2001); President, Prudential Investments (1996-1999); President, Prudential mutual annuity and managed money businesses (1996-1998); and Managing Director, Fidelity Investments (prior to 1996). Trustee, UBS Supplementary Trust since 2001. Mr. Storms is president of 22 other investment companies (consisting of 46 portfolios) for which UBS Global AM, the Advisor, UBS PaineWebber or one of their affiliates serves as an investment advisor, sub-advisor or manager. OTHER DIRECTORSHIPS HELD NAME, ADDRESS AND AGE BY NOMINEE --------------------- ------------------------ Frank K. Reilly Director, Discover Bank College of Business since 1993; Director, Administration Morgan Stanley Trust, FSB University of Notre since 1996; and Director, Dame NIBCO, Inc. since 1993. Notre Dame, IN 46556 Age: 66 Edward M. Roob Trustee, CCM Fund Complex 841 Woodbine Road since 2001 (9 Northbrook, IL 60002 portfolios). Age: 67 INTERESTED TRUSTEE Brian M. Storms None 51 W. 52nd Street 16th Floor New York, NY 10019 Age: 47
------------------- (1) Each Trustee holds office for an indefinite term. (2) Each Nominee currently serves on the Board of the Trust and the Board of Trustees of UBS Relationship Funds. Messrs. Reilly and Roob also serve on the Board of Directors of Fort Dearborn Income Securities, Inc. 8 The tables below provide information concerning the dollar range of shares that the Nominees owned in the Funds and in the other funds overseen by the Nominees in the Family Funds as of March 31, 2002: INDEPENDENT TRUSTEES
AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN ALL FUNDS OVERSEEN BY DOLLAR RANGE OF EQUITY NOMINEE IN FAMILY NAME OF NOMINEE SECURITIES IN THE FUNDS FUNDS(1) --------------- ----------------------- --------------------------- Walter E. Auch.......................... UBS Equity Fund (Class Y)-- $10,001 to $50,000 $10,001 to $50,000 Frank K. Reilly......................... UBS Global Balanced Fund Over $100,000 (Class Y)--over $100,000 UBS Small Cap Growth Fund (Class Y)--less than $10,000 Edward M. Roob.......................... UBS Global Balanced Fund Over $100,000 (Class Y)--over $100,000
INTERESTED TRUSTEE
AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES IN ALL DOLLAR RANGE OF EQUITY FUNDS OVERSEEN BY SECURITIES IN THE NOMINEE IN FAMILY NAME OF NOMINEE FUNDS FUNDS(1) --------------- ---------------------- --------------------------- ~~Brian M. Storms......................... $0 $0~~
------------------- (1) This represents the aggregate dollar value of the shares owned by each Trustee in the registered investment companies in the Family Funds for which the Trustee serves as a director or trustee. The Family Funds include funds for which the Advisor is the investment advisor or UBS Global AM is the principal underwriter. HOW OFTEN DO THE TRUSTEES MEET AND WHAT ARE THEY PAID? The role of the Trustees is to provide general oversight of each Fund's business, and to ensure that the Fund is operated for the benefit of shareholders. During the fiscal year ended June 30, 2001, there were four meetings of the Board, and each Trustee then in office attended at least 75% of these meetings. The Audit Committee of the Board met once during the fiscal year ended June 30, 2001. Each Trustee who serves on the Audit Committee attended that meeting. The Audit Committee 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 Funds' basic accounting system and the effectiveness of the Funds' internal controls. The Board has no separate nominating or investment committee. The Trust pays each Independent Trustee a fee of $6,000 per year, plus $300 per Fund per meeting, and reimburses each Trustee for out-of-pocket expenses in connection with travel and attendance at Board 9 meetings. The table below includes certain information concerning the compensation of the Independent Trustees for the fiscal year ended June 30, 2001:
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM THE TRUST FOR FROM THE TRUST FISCAL YEAR ENDED AND FUND COMPLEX NAME OF TRUSTEE* JUNE 30, 2001** PAID TO TRUSTEES*** ---------------- ---------------------- ------------------- Walter E. Auch.......................... $21,600 $49,200 Frank K. Reilly......................... 21,600 61,800 Edward M. Roob.......................... 21,600 62,500
------------------- * Mr. Storms did not receive any compensation from the Trust for the fiscal year ended June 30, 2001. ** This amount represents the aggregate amount of compensation paid to the Independent Trustees for service on the Board for the Trust's fiscal year ended June 30, 2001. *** This amount represents the aggregate amount of compensation paid to the Independent Trustees for service on the Boards of Trustees/Directors of four investment companies (including the Trust) managed by the Advisor for the fiscal year ended June 30, 2001, with respect to Messrs. Reilly and Roob, and three investment companies managed by the Advisor for the fiscal year ended June 30, 2001, with respect to Mr. Auch. WHO ARE THE TRUST'S INDEPENDENT AUDITORS AND WHAT WERE THEY PAID LAST YEAR? SELECTION OF INDEPENDENT AUDITORS Upon the recommendation of the Audit Committee, the Board selected the firm of Ernst & Young LLP ("E&Y") as independent auditors of the Trust for the current fiscal year. Representatives of E&Y are not expected to be present at the Special Meeting. AUDIT FEES The aggregate fees paid to E&Y in connection with the annual audit of the Trust's financial statements for the fiscal year ended June 30, 2001 were $384,000. FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES E&Y did not render any services with respect to financial information systems design and implementation during the fiscal year ended June 30, 2001 to the Trust or entities affiliated with the Trust that provide services to the Trust. ALL OTHER FEES The aggregate fees billed for all other non-audit services, including fees for tax-related services, rendered by E&Y to the Trust or entities affiliated with the Trust that provide services to the Trust for the fiscal year ended June 30, 2001 were $21,400. The Audit Committee of the Trust has determined that provision of these non-audit services is compatible with maintaining the independence of E&Y. WHO ARE THE EXECUTIVE OFFICERS OF THE TRUST? The Trustees elect the officers of Trust, who are responsible for administering the day-to-day operations of the Funds. The following individuals are executive officers of the Trust: Brian M. Storms, Amy R. Doberman, Paul H. Schubert, David E. Floyd, Joseph T. Malone and Mark F. Kemper. In addition to being executive officers of the Trust, these individuals are also officers and/or employees of the Advisor or UBS Global AM. None of these individuals receives compensation from the Trust for services to the Trust. Exhibit A of this Proxy Statement provides information about these officers, including certain biographical information, the positions they hold with the Trust and their principal occupations over the past five years. 10 WHAT APPROVALS ARE REQUIRED TO ELECT THE NOMINEES? The Nominees will be elected by a plurality of votes cast by shareholders of the Trust, regardless of the votes of the individual Funds. This means that the Nominees receiving the largest number of votes will be elected to fill the four available Board positions. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF THE FOUR NOMINEES DESCRIBED IN PROPOSAL #1 AS TRUSTEES OF THE TRUST PROPOSAL #2: APPROVAL OF THE ELIMINATION OF THE PERMANENT EXPENSE CAPS FOR THE FUNDS THIS PROPOSAL APPLIES TO EACH FUND EXCEPT UBS U.S. VALUE EQUITY FUND. WHY ARE SHAREHOLDERS BEING ASKED TO ELIMINATE THE PERMANENT EXPENSE CAPS FOR THE FUNDS? When each Fund was organized, the Advisor agreed to permanently waive its fees and reimburse certain expenses to limit the total operating expenses (excluding 12b-1 fees) of the Funds to the rates set forth in the following chart:
FUNDS EXPENSE CAP ----- ----------- UBS Global Balanced Fund.......................... 1.10% UBS Global Equity Fund............................ 1.00% UBS Global Technology Fund........................ 1.55% UBS Global Biotech Fund........................... 1.30% UBS Global Bond Fund.............................. 0.90% UBS U.S. Balanced Fund............................ 0.80% UBS U.S. Large Cap Equity Fund.................... 0.80% UBS U.S. Large Cap Growth Fund.................... 0.80% UBS U.S. Small Cap Growth Fund.................... 1.15% UBS U.S. Equity Fund.............................. 0.80% UBS U.S. Bond Fund................................ 0.60% UBS High Yield Fund............................... 0.70% UBS International Equity Fund..................... 1.00%
At the time that the permanent expense caps were put in place for the Funds, the Funds were being offered almost exclusively to specific types of institutional shareholders, such as foundations and endowments. When instituted, these permanent expense caps were appropriate in order for the Funds to compete effectively in this institutional market. In addition, these institutional shareholders provided the Funds with a relatively stable asset base that made managing the Funds easier than managing funds offered to a more diverse group of shareholders. As a result of two mergers that have occurred over the past five years, the shareholder base of the Funds has changed. In 1998, the Union Bank of Switzerland and Swiss Bank Corporation merged, with the Advisor becoming a subsidiary of UBS AG. In 2000, UBS AG acquired PaineWebber. With the consolidation of operations and distribution resources that have resulted from the mergers, the market for the Funds has evolved to include other types of institutional investors and, more recently, to include retail investors. Because the Funds are now being offered to a broader variety of shareholders, particularly retail investors, the reasons for retaining the permanent expense caps no longer exist. Shareholders of the Funds are being asked to eliminate the permanent expense caps for their Funds, which the Advisor will replace with one-year contractual expense caps at rates that are IDENTICAL to those listed in the chart above. In the mutual fund industry generally, and in the retail mutual fund industry in particular, expense caps more commonly are for a limited duration. Contractual expense caps typically are 11 implemented at the introduction of a new fund, in order to mitigate the impact that the fund's start-up costs may have on the fund's initial shareholders. At the conclusion of the contractual period of the expense cap, the investment advisor, subject to board approval, then makes a determination as to whether the expense cap should be continued for an additional contractual period of time and the board approves any such continuation of the expense cap. Eliminating the permanent nature of the expense caps for the Funds will allow the Advisor, at the end of the one-year contractual period, to determine the appropriateness of the expense cap for each Fund in light of changes in market and economic conditions. This will give the Advisor the opportunity to ensure that the amount of fees and expenses that each Fund is responsible for paying remains at a competitive level that also is sufficient to enable the Advisor to continue to provide both quality investment management and shareholder services for the Fund. In deciding to authorize the submission to shareholders of the proposal to approve the elimination of the permanent expense caps, the Board considered that the Funds have broadened their marketing focus since the dates when the permanent expense caps were originally put in place, to include a more diverse group of institutional investors, along with retail investors. The Board noted that the permanent expense caps were initially put in place in order to compete in a specific institutional market that included foundations and endowments. The Board also noted that these institutional investors provided a relatively stable asset base, which made the Funds easier to manage. The Board considered that because the Funds have been repositioned as retail funds, the reasons for the permanent expense caps have been eliminated. The Board also noted that the permanent expense cap for each Fund would be replaced with a one-year contractual expense cap, at an identical rate to the current expense cap, and that the expense cap for each Fund would be reviewed each year. Finally, the Board considered that the proposed one-year contractual expense cap methodology for the Funds more closely resembles standard expense cap arrangements implemented by other retail investment companies. WHAT HAPPENS IF SHAREHOLDERS APPROVE THE ELIMINATION OF THE PERMANENT EXPENSE CAPS? If shareholders of the Funds approve the elimination of the permanent expense caps, the current expense caps will be replaced with one-year contractual expense caps pursuant to which the Advisor will agree to waive its fees and reimburse expenses at the current expense cap levels for a one-year period from July 1, 2002 to June 30, 2003. Thereafter, the expense cap for each Fund will be reviewed each year, at which time its continuation will be considered and discussed by the Advisor and the Board. HOW WILL THE FEES AND EXPENSES THAT THE FUNDS PAY BE AFFECTED BY THE ELIMINATION OF THE PERMANENT EXPENSE CAPS? If the permanent expense caps are eliminated, the fees and expenses that the Funds are responsible for paying will not increase for the current fiscal year because the permanent expense caps will be replaced by one-year contractual expense caps at identical rates. However, at the conclusion of the one-year period, the amount of fees and expenses paid by a Fund may increase. To illustrate the difference between Fund expenses with and without ANY expense cap in place, the chart below shows the total operating expenses 12 before waivers and/or reimbursements and after waivers and/or reimbursements for the Class Y shares of each Fund during the fiscal year ended June 30, 2001.
EXPENSES BEFORE EXPENSES AFTER WAIVERS/ WAIVERS/ FUNDS REIMBURSEMENTS REIMBURSEMENTS ----- --------------- -------------- UBS Global Balanced Fund................ 1.05% 1.05% UBS Global Equity Fund.................. 1.12% 1.00% UBS Global Technology Fund.............. 4.60% 1.55% UBS Global Biotech Fund................. 3.86% 1.30% UBS Global Bond Fund.................... 1.12% 0.90% UBS U.S. Balanced Fund.................. 1.14% 0.80% UBS U.S. Large Cap Equity Fund.......... 2.03% 0.80% UBS U.S. Large Cap Growth Fund.......... 1.34% 0.80% UBS U.S. Small Cap Growth Fund.......... 1.23% 1.15% UBS U.S. Equity Fund.................... 0.92% 0.80% UBS U.S. Bond Fund...................... 0.73% 0.60% UBS High Yield Fund..................... 0.89% 0.70% UBS International Equity Fund........... 1.06% 1.00%
The "Expenses and Fee Tables" for each Fund describing the fees and expenses that a shareholder pays directly or indirectly as an investor in the Fund, both under the permanent expense cap and the one-year contractual expense cap, are provided in Exhibit B to this Proxy Statement. The information contained in the "Expenses and Fee Tables" is identical under both the permanent and contractual expense caps. Also provided in Exhibit B is the "Expense Example" for each Fund, showing the costs of investing in the Fund, based on a hypothetical $10,000 investment by a shareholder if the shareholder held his or her shares for the periods of 1, 3, 5 or 10 years. The Expense Examples are provided for each Fund showing the hypothetical costs under both the current permanent expense cap and the proposed one-year contractual expense cap. The "Expense Example" for a Fund under the permanent expense cap reflects the costs of investing in the Fund for a shareholder if the current expense cap rate remained in place for the entire 10-year period. The "Expense Example" for a Fund under the one-year contractual expense cap shows the costs of investing in the Fund with the contractual expense cap in place for the one-year period but assumes that no expense cap was in place at the conclusion of the one-year period. Therefore, the costs shown for the 3, 5 and 10 year periods under the "Expense Example" for the one-year contractual expense cap are greater than those shown for those periods under the "Expense Example" for the permanent expense cap. For certain information regarding the Funds' current Investment Advisory Agreements and the proposed amended Investment Advisory Agreements, please refer to Proposal #3 in this Proxy Statement. WHAT APPROVALS ARE REQUIRED TO ELIMINATE THE PERMANENT EXPENSE CAPS? The elimination of the permanent expense cap amounts to an amendment to each Fund's investment advisory agreement as it relates to a potential change in contractual arrangements. Consequently, the approval of the elimination of the permanent expense cap for each Fund requires the approval of a majority of the outstanding voting securities of the Fund. The vote of a majority of the outstanding voting securities of a Fund means the vote of the lesser of: (A) 67% or more of the voting securities of the Fund present at a meeting, if the holders of more than 50% of the outstanding voting securities of the Fund are present or represented by proxy; or (B) more than 50% of the outstanding voting securities of the Fund (a "Majority Vote"). THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELIMINATION OF THE PERMANENT EXPENSE CAPS 13 PROPOSAL #3: APPROVAL OF AMENDED INVESTMENT ADVISORY AGREEMENTS, BETWEEN THE TRUST, ON BEHALF OF EACH FUND, AND THE ADVISOR WHY ARE SHAREHOLDERS BEING ASKED TO APPROVE AMENDED INVESTMENT ADVISORY AGREEMENTS FOR THE FUNDS? The Advisor provides portfolio management, research and analysis for the Funds pursuant to separate Investment Advisory Agreements (collectively the "Current Agreements," and individually, a "Current Agreement"). Shareholders are being asked to approve the replacement of each Fund's Current Agreement with an amended Investment Advisory Agreement (each an "Amended Agreement" and collectively, the "Amended Agreements") between the Trust and the Advisor. Depending on the Fund, an Amended Agreement is being proposed to revise or add at least one, but not more than three, material provisions to the Agreement. The provisions include: (i) the authority to engage sub-advisors for the Fund (the "Sub-Advisor Provision"); (ii) the utilization of foreign affiliates by the Advisor in the management of the Fund (the "Foreign Affiliate Provision"); and (iii) the ability for the Advisor to be reimbursed for previously waived fees and reimbursed expenses (the "Reimbursement Provision"). The differences between the Current Agreements and the Amended Agreements with regard to these three provisions are discussed below. The following table lists which provisions will be revised or added to a Fund's Current Agreement if shareholders of the Fund approve an Amended Agreement for the Fund:
FOREIGN AFFILIATE SUB-ADVISOR REIMBURSEMENT FUND PROVISION PROVISION PROVISION ---- --------- ----------- ------------- UBS U.S. Large Cap Growth Fund..... X X UBS U.S. Small Cap Growth Fund..... X X UBS High Yield Fund................ X X UBS Global Technology Fund......... X UBS Global Biotech Fund............ X UBS Global Balanced Fund........... X X X UBS Global Equity Fund............. X X X UBS Global Bond Fund............... X X X UBS International Equity Fund...... X X X UBS U.S. Balanced Fund............. X X X UBS U.S. Bond Fund................. X X X UBS U.S. Large Cap Equity Fund..... X X X UBS U.S. Value Equity Fund......... X X UBS U.S. Equity Fund............... X X X
The Current Agreement relating to the UBS Global Bond Fund is attached to this Proxy Statement as Exhibit C. Each of the Current Agreements is identical, with the exception of: (i) the identification of the relevant Fund; (ii) the fees payable by the various Funds to the Advisor (as described further below); and (iii) certain other differences detailed below. Many of the differences among the Current Agreements are the result of the Special Meeting of Shareholders held in 2000. At that Special Meeting of Shareholders, shareholders approved the Current Agreements for the UBS U.S. Large Cap Growth Fund, UBS U.S. Small Cap Growth Fund, UBS High Yield Fund, UBS Global Technology Fund and UBS Global Biotech Fund (collectively, the "Sub-Advised Funds" and individually, each a "Sub-Advised Fund") to include a Sub-Advisor Provision and the removal of restrictions regarding employing foreign affiliates as sub-advisors. Shareholders for the UBS Global Balanced Fund, UBS Global Equity Fund, UBS Global Bond Fund, UBS International Equity Fund, UBS U.S. Balanced Fund, UBS U.S. Bond Fund, UBS U.S. Large Cap Equity Fund, UBS U.S. Value Equity Fund and UBS U.S. Equity Fund (collectively, the "Non-Sub-Advised Funds" and individually, each a "Non-Sub-Advised Fund") were not asked to approve amended Investment Advisory Agreements in 2000, and therefore, the Current Agreements for the Non-Sub-Advised Funds do not contain 14 these amendments. However, if approved by shareholders, each Amended Agreement will be identical, with the exception of: (i) the identification of the relevant Fund; and (ii) the fees payable by the various Funds to the Advisor (as described further below). Attached as Exhibit D to this Proxy Statement is the form of Amended Agreement for the Funds. HOW DO THE PROVISIONS OF THE AMENDED AGREEMENTS DIFFER FROM THE TERMS OF THE CURRENT AGREEMENTS? The overwhelming majority of the material provisions of a Fund's Current Agreement and its Amended Agreement are identical. The terms of an Amended Agreement for a Fund are IDENTICAL to its Current Agreement as the Agreements relate to: (i) the duties of the Advisor as investment advisor to the Fund; (ii) the execution of portfolio transactions by the Advisor for the Fund; (iii) the reports that the Advisor must furnish to the Fund; (iv) the standard of care that governs the Advisor in serving as advisor to the Fund; (v) the duration of the Agreements; and (vi) certain other provisions that are not material to the present purposes. Significantly, the provisions for the compensation of the Advisor for its advisory services are also identical in each Fund's Amended Agreement and its Current Agreement. THE APPROVAL OF THE AMENDED AGREEMENTS WILL NOT RESULT IN ANY INCREASE IN THE RATE OF THE INVESTMENT ADVISORY FEE PAYABLE TO THE ADVISOR BY ANY FUND. However, a Fund's Amended Agreement may differ from its Current Agreement with regard to the Foreign Affiliate Provision, the Sub-Advisor Provision and the Reimbursement Provision, as discussed below. THE FOREIGN AFFILIATE PROVISION Unlike the Current Agreements for the Funds, the Amended Agreements will explicitly permit the Advisor to utilize the services of certain investment advisory personnel of its affiliates located throughout the world in its management of the assets of the Funds. The Current Agreements for the Non-Sub-Advised Funds allow for only a limited exchange of information between the Advisor and foreign subsidiaries of UBS AG ("UBS") in managing the assets of these Series. Under the Current Agreements for the Non-Sub-Advised Funds, the Advisor is permitted to obtain statistical and other factual information and advice regarding economic factors and trends from foreign subsidiaries and to utilize the trading departments of its foreign affiliates. However, the Current Agreements for the Non-Sub-Advised Funds state that the Advisor may not generally receive advice or recommendations regarding the purchase or sale of securities from foreign subsidiaries. Note that the Current Agreements for the Sub-Advised Funds do not contain any explicit provisions for utilizing the resources of the foreign affiliates of the Advisor. The Amended Agreement for each Fund will include the Foreign Affiliate Provision that will permit the Advisor to obtain statistical and other factual information and advice regarding economic factors and trends from foreign subsidiaries, utilize the trading departments of its foreign affiliates and obtain investment services from certain investment advisory personnel of its affiliates located throughout the world to the extent permitted under interpretations of the staff of the Securities and Exchange Commission ("SEC") of the federal securities laws. The Foreign Affiliate Provision in the Amended Agreements will enhance the Funds' ability to benefit from the investment expertise of affiliates of the Advisor located throughout the world. Under SEC staff interpretations of the federal securities laws, subject to certain requirements, an SEC registered investment advisor, such as the Advisor, is permitted to obtain investment services in managing the assets of its advisory clients, including mutual funds, from individuals associated with its foreign affiliates. As stated above, the Amended Agreements explicitly provide that the Advisor may utilize the services of certain investment advisory personnel of its affiliates located throughout the world. Under this provision, the Advisor will have the authority to utilize analysts, portfolio managers, asset allocation experts and others located in offices of its foreign affiliates in managing the assets of the Funds. While the Advisor does intend to utilize the investment personnel of its foreign affiliates in managing the assets of the Funds with a global focus, the Advisor does not contemplate using such investment personnel in managing the assets of the Funds that invest substantially all of their assets in U.S. issuers. This provision is only being added to 15 the Amended Agreements for these U.S. Funds in order to make the provisions in the Amended Agreements standard for all Funds and to permit the Advisor to utilize such foreign investment personnel to the limited extent that their services could be beneficial in the event that a U.S. Fund invests in a foreign security. THE SUB-ADVISOR PROVISION The Current Agreements for the Non-Sub-Advised Funds do not provide the Advisor with the authority to engage sub-advisors. The Amended Agreements, in their Section 8, specifically authorize the Advisor to utilize sub-advisors by providing that the Advisor may, at its own expense, select and contract with one or more affiliated or unaffiliated sub-advisors registered under the Investment Advisers Act of 1940, as amended, to perform some or all of the investment advisory services for a Fund. The Amended Agreements state that the Advisor will continue to have responsibility for all advisory services furnished by any sub-advisor for a Fund, and may, at any time in its sole discretion, terminate the services of any sub-advisor. The sub-advisory provision in the Amended Agreements is substantially identical to the provision regarding engaging sub-advisors contained in the Current Agreements for the Sub-Advised Funds. Each of the Sub-Advised Funds is currently being sub-advised by UBS Global Asset Management (New York) Inc. (formerly, Brinson Partners (NY), Inc.). Although sub-advisory arrangements are not currently contemplated for any Non-Sub-Advised Funds, this provision will provide the Advisor with the flexibility in the future to employ a sub-advisor for one of these Funds upon Board and shareholder approval, if necessary, of a sub-advisory agreement. The approval of the Amended Agreements will also make the Investment Advisory Agreements for all Funds standard with respect to the ability to engage sub-advisors. THE REIMBURSEMENT PROVISION The Current Agreements, except for the Current Agreements for the UBS Global Technology Fund, UBS Global Biotech Fund and UBS U.S. Value Equity Fund, do not contain a provision that allows the Advisor to be reimbursed for fees the Advisor waives and expenses the Advisor reimburses pursuant to the expense cap arrangements for the Funds. The Amended Agreements, in their Section 4, provide that the Advisor is entitled to reimbursement by a Fund for the amount of the fees it waived or reduced and the expenses it reimbursed with respect to the applicable Fund, subject to the following conditions: (1) the Advisor must request reimbursement within three years from the date on which the waiver and/or reimbursement was made; (2) the Fund must be able to reimburse the Advisor and remain within the operating expense limit currently in effect for that Fund; and (3) any reimbursement must not include any amounts previously reimbursed by the Fund to the Advisor. In other words, under the Reimbursement Provision, in a year that a Fund's total expenses (excluding 12b-1 fees) is less than its expense cap, the Advisor is entitled to receive payment from that Fund for fees it previously waived or expenses it previously reimbursed up to the amount of the expense cap currently in effect for that Fund. The Reimbursement Provision in the Amended Agreements is substantially identical to the Reimbursement Provision in the Investment Advisory Agreements for the UBS Global Technology Fund, UBS Global Biotech Fund, UBS U.S. Value Equity Fund, UBS U.S. Small Cap Equity Fund, UBS U.S. Real Estate Equity Fund, UBS Emerging Markets Debt Fund and UBS Emerging Markets Equity Fund. With the approval of the Amended Agreement for each Fund, the Investment Advisory Agreements for all of the Funds will contain identical Reimbursement Provisions. For each Fund that does not presently have a Reimbursement Provision in its Current Agreement (i.e., each Fund other than UBS Global Technology Fund, UBS Global Biotech Fund and UBS U.S. Value Equity Fund) the Advisor is not permitted to seek reimbursement for any fees incurred or expenses reimbursed for any period prior to the date the Amended Agreement containing the Reimbursement Provision is approved by shareholders for the Fund. 16 WHAT FACTORS DID THE BOARD CONSIDER IN APPROVING THE AMENDED AGREEMENTS? The Board, at its meetings on August 28, 2001 and December 13, 2001, upon the recommendation of the Advisor, considered the proposal to approve replacing each Fund's Current Agreement with an Amended Agreement between the Trust and the Advisor, and authorized the submission of the proposal to shareholders for approval. The Board considered that the Amended Agreements would explicitly authorize the Advisor to take advantage of the investment expertise with respect to foreign securities available through certain investment personnel of its foreign affiliates in the UBS investment advisory network. The Board also considered that approval of such changes would permit the Advisor to fully exploit the benefits that may be derived from its being part of the UBS investment advisory network. The Board noted that to the extent that the Advisor engaged investment personnel of foreign affiliates to assist in the management of the assets of a Fund, the Advisor would maintain responsibility for monitoring the foreign investment personnel with respect to the recommendations and advice relating to the Fund and would continue to have ultimate responsibility with respect to the management of the Fund's assets. The Board also considered that the Amended Agreements would provide the Advisor with the future flexibility to engage sub-advisors to assist in managing the Non-Sub-Advised Funds' portfolios. The Board noted that the proposed provision regarding the ability to engage sub-advisors in the Amended Agreement for each Fund is identical to the provision contained in the Current Agreements for the Sub-Advised Funds, which were approved by the shareholders of the Sub-Advised Funds in 2000. The Board noted that while this provision would permit the Advisor to engage a sub-advisor for a Fund without a future amendment to its investment advisory agreement, any future sub-advisory arrangement would be required to be approved by the Board and, if necessary, the Fund's shareholders. In addition, the Board reviewed the Reimbursement Provision contained in the Amended Agreements that permits the Advisor to seek reimbursement for fees that it waives and expenses it reimburses under the expense cap arrangements in place for the Funds. The Board noted that with regard to this Reimbursement Provision, the Advisor must request reimbursement within three years from the date on which the waiver and/or reimbursement was made and that the applicable Fund must be able to reimburse the Advisor and remain under the expense cap currently in place for that Fund. The Board noted that the Advisor will not be permitted to seek reimbursement for any periods prior to the approval by shareholders of the Reimbursement Provision. Furthermore, the Board considered that the Advisor would only be entitled to reimbursement for fees that were previously waived and expenses that were previously reimbursed with respect to a Fund, in a year when the Fund's total expenses (excluding 12b-1 fees) were less than the Fund's expense cap. The Board also considered that reimbursement provisions for expense cap arrangements were becoming common in the mutual fund industry. The Board also noted that the Advisor was already permitted to seek reimbursement for waived fees and reimbursed expenses under the Investment Advisory Agreements for seven series of the Trust. Finally, the Board noted that the Amended Agreements are otherwise identical to the Current Agreements. WHAT ARE THE OTHER MATERIAL PROVISIONS OF THE CURRENT AGREEMENTS AND THE AMENDED AGREEMENTS? As stated above, most of the material provisions of the Current Agreements and the Amended Agreements (collectively, the "Advisory Agreements") are identical. The Advisory Agreements provide that the Advisor will manage the investment and reinvestment of the assets of each Fund, and will continuously review, supervise and administer the investment programs of each Fund, to determine, in the Advisor's discretion, the assets to be held uninvested. The Advisor is responsible for providing the Trust with records regarding its investment advisory activities that the Trust is required to maintain, and for rendering regular reports to the Trust's officers and Trustees concerning the Advisor's discharge of its responsibilities under the Advisory Agreements. 17 The Advisor will, at its own expense, provide office space, furnishings, equipment and personnel required for performing its duties under the Advisory Agreements. The Advisor also furnishes all necessary advisory and research facilities and prepares reports to comply with the reporting requirements of various federal and state regulatory authorities. Each Fund pays all of its respective expenses other than those expressly assumed by the Advisor. The Advisory Agreements provide that decisions regarding the placement of portfolio brokerage are made by the Advisor, with the primary considerations being to obtain efficiency in execution of orders and the most favorable net prices for each Fund. Consistent with those objectives, transactions may be allocated to brokers and dealers that furnish certain research services to the Advisor. Such research services supplement the Advisor's own research activities and provide a benefit to the Advisor that is not easily evaluated in terms of a dollar amount and is not reflected in a direct monetary benefit to any Fund. Such research may be used to benefit other investment companies and advisory accounts advised by the Advisor, as well as each Fund. Transactions may also be executed through brokers and dealers who sell shares of a Fund, subject to the Advisor's duty to seek best execution for trades. The Advisory Agreements authorize the Advisor to place portfolio transactions for the Funds with broker-dealers for commissions that are greater than another broker or dealer might charge 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 Funds, and to other fund and advisory accounts as to which the Advisor exercises investment discretion. The Advisory Agreements are effective for two years from the date on which they are executed. The Advisory Agreements are renewable for successive one year periods if such continuance is approved at least annually by: (i) the Board or by the vote of a majority of the respective Fund's outstanding voting securities as defined in the 1940 Act; and (ii) by the vote of a majority of Trustees who are not parties to the Advisory Agreements or "interested persons" as defined in the 1940 Act, of any such party, cast in person at a meeting called for the purpose of voting on such approval. Each Advisory Agreement may be terminated, without penalty, at any time by the Trust, on behalf of a Fund or by the Advisor on 60 days' written notice. Each Advisory Agreement will automatically terminate in the event of its assignment. WHAT ARE THE FEES UNDER THE CURRENT AGREEMENTS AND THE AMENDED AGREEMENTS? Under the Advisory Agreements, the Advisor receives monthly fees based on the average daily net assets of each Fund at the following annual rates:
FUNDS ADVISORY FEE ----- ------------ UBS Global Balanced Fund.......................... 0.80% UBS Global Equity Fund............................ 0.80% UBS Global Bond Fund.............................. 0.75% UBS International Equity Fund..................... 0.80% UBS U.S. Balanced Fund............................ 0.70% UBS U.S. Bond Fund................................ 0.50% UBS U.S. Large Cap Equity Fund.................... 0.70% UBS U.S. Equity Fund.............................. 0.70% UBS High Yield Fund............................... 0.60% UBS U.S. Large Cap Growth Fund.................... 0.70% UBS U.S. Small Cap Growth Fund.................... 1.00% UBS Global Biotech Fund........................... 1.15% UBS Global Technology Fund........................ 1.40% UBS U.S. Value Equity Fund........................ 0.70%
18 For each Sub-Advised Fund, the Advisor pays UBS Global Asset Management (New York) Inc. for its services as sub-advisor to each Sub-Advised Fund, a portion of the fee it receives from each Sub-Advised Fund at the rate of 0.10% of the applicable Sub-Advised Fund's average net assets. THE APPROVAL OF THE AMENDED AGREEMENTS WILL NOT RESULT IN ANY INCREASE IN THE RATE OF THE ADVISORY FEE LISTED ABOVE FOR ANY FUND. Currently, each Fund, except UBS U.S. Value Equity Fund, is subject to a permanent expense cap pursuant to which the Advisor has agreed to waive all or a portion of its advisory fees and to reimburse certain expenses so that total operating expenses (excluding 12b-1 fees) of the Fund do not exceed a specified rate for the Fund. If Proposal #2 in this Proxy Statement is approved by shareholders of a Fund, the permanent expense cap for the Fund will be replaced by a one-year contractual expense cap at an identical rate. As stated above, under the Reimbursement Provision in each Amended Agreement, in a year that a Fund's total expenses (excluding 12b-1 fees) are less than its expense cap, the Advisor is entitled to receive payment from the Fund for fees it previously waived or expenses it previously reimbursed up to the amount of the expense cap currently in effect for the Fund. If the Reimbursement Provision in the Amended Agreement had been in place during the fiscal year ended June 30, 2001, the Advisor would have been permitted to be reimbursed by the UBS Global Balanced Fund and UBS International Equity Fund for previously waived fees and reimbursed expenses at the rate of 0.11% and 0.01% of average net assets, respectively. The UBS U.S. Value Equity Fund is currently subject to a one-year contractual expense cap, in which the Advisor has agreed from September 1, 2001 through September 1, 2002, to waive its fees and reimburse certain expenses so that total operating expenses (excluding 12b-1 fees) do not exceed 0.85%. WHAT FEES DID THE ADVISOR RECEIVE LAST YEAR UNDER THE CURRENT AGREEMENTS? For the fiscal year ended June 30, 2001, the gross advisory fees earned by the Advisor, the net advisory fees paid after the Advisor's fee waivers and the expenses of each Fund paid by the Advisor, were as follows:
GROSS ADVISORY NET ADVISORY FUND EXPENSES FEES EARNED BY FEES PAID AFTER PAID BY THE FUNDS THE ADVISOR FEE WAIVER ADVISOR ----- -------------- --------------- ------------- UBS Global Balanced Fund........... $1,629,697 $1,629,697 $ 0 UBS Global Equity Fund............. $ 516,271 $ 443,277 $ 72,994 UBS Global Bond Fund............... $ 290,895 $ 206,610 $ 84,285 UBS International Equity Fund...... $2,413,368 $2,398,738 $ 14,630 UBS U.S. Balanced Fund............. $ 113,210 $ 57,778 $ 55,432 UBS U.S. Bond Fund................. $ 321,255 $ 237,585 $ 83,670 UBS U.S. Large Cap Equity Fund..... $ 48,938 $ 0 $ 86,264 UBS U.S. Equity Fund............... $1,050,438 $ 875,328 $175,110 UBS High Yield Fund................ $ 317,198 $ 227,248 $ 89,950 UBS U.S. Large Cap Growth Fund..... $ 65,657 $ 14,679 $ 50,978 UBS U.S. Small Cap Growth Fund..... $ 507,842 $ 465,732 $ 42,110 UBS Global Biotech Fund............ $ 23,776 $ 0 $ 52,816 UBS Global Technology Fund......... $ 25,043 $ 0 $ 54,478
19 For the fiscal year ended June 30, 2001, the Funds listed below paid the following brokerage commissions to UBS Warburg LLC ("Warburg"), an affiliated broker-dealer of the Advisor:
AGGREGATE DOLLAR PERCENTAGE OF AMOUNT OF AGGREGATE PERCENTAGE OF COMMISSIONS PAID COMMISSIONS PAID AGGREGATE FUNDS TO WARBURG TO WARBURG DOLLAR AMOUNT PAID TO WARBURG ----- ---------------- ---------------- ----------------------------- UBS Global Balanced Fund........... $ 58,857 22.83% 22.88% UBS Global Equity Fund............. $ 3,838 2.89% 4.71% UBS U.S. Balanced Fund............. $ 3,449 17.69% 17.99% UBS U.S. Equity Fund............... $107,381 39.26% 33.82% UBS U.S. Large Cap Equity Fund..... $ 10,773 42.32% 50.35% UBS U.S. Large Cap Growth Fund..... $ 2,356 20.71% 32.12% UBS Global Technology Fund......... $ 1,346 16.92% 20.17% UBS Global Biotech Fund............ $ 254 2.72% 10.34%
During the fiscal year ended June 30, 2001, the Current Agreements were approved and continued for a one-year period at a meeting of the Board held on February 16, 2001, and were approved for an interim period from March 1, 2002 until April 1, 2002, at a meeting of the Board held on December 13, 2001. At the meeting of the Board held on March 18, 2002, the Current Agreements for the Funds were approved and continued for a one-year period. Each of the Current Agreements for the Non-Sub-Advised Funds is dated April 25, 1995, except for the Agreement for the UBS U.S. Large Cap Equity Fund, which is dated November 24, 1997, and the Agreement for the UBS U.S. Value Equity Fund, which is dated May 23, 2000. The Current Agreements for the UBS Global Balanced Fund, UBS Global Equity Fund, UBS Global Bond Fund, UBS International Equity Fund and UBS U.S. Equity Fund were last approved by shareholders at a Special Meeting of Shareholders on February 17, 1995, at which shareholders approved the Agreements in anticipation of the merger of the Advisor with Swiss Bank Corporation. The Current Agreements for the UBS U.S. Balanced Fund, UBS U.S. Bond Fund, UBS U.S. Value Equity Fund and UBS U.S. Large Cap Equity Fund were approved by the sole initial shareholder of the respective Fund in connection with the commencement of operations of the Fund. The Current Agreements between the Trust, on behalf of each Sub-Advised Fund, are each dated December 7, 2000. The Current Agreements for the Sub-Advised Funds were last approved by shareholders at a Special Meeting of Shareholders on October 30, 2000, at which shareholders approved amendments to the Agreements to permit the Advisor to engage sub-advisors and to remove restrictions in the Agreements regarding employing foreign affiliates as sub-advisors. If an Amended Agreement is not approved by shareholders of a Fund, the Current Agreement for that Fund will remain in place, and the Board will consider what additional action, if any, should be taken. WHAT APPROVALS ARE REQUIRED TO IMPLEMENT THE AMENDED AGREEMENTS? The approval of the Amended Agreement for each Fund requires a Majority Vote of that Fund. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDED AGREEMENTS AS DESCRIBED IN PROPOSAL #3 20 APPROVAL OF AMENDMENTS TO CERTAIN OF THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS INTRODUCTION TO PROPOSALS #4(a) THROUGH #4(h) AND #5(a) THROUGH #5(f) WHY ARE THE FUNDS AMENDING OR ELIMINATING CERTAIN OF THEIR FUNDAMENTAL INVESTMENT RESTRICTIONS? The Funds are subject to specific investment restrictions that govern their investment activities. Under the 1940 Act, certain investment restrictions are required to be "fundamental," which means that the investment restrictions can only be changed by a shareholder vote. An investment company may designate additional restrictions that are fundamental, and it may also adopt "non-fundamental" restrictions, which may be changed by the company's trustees without shareholder approval. These restrictions limit the investment activities of the Advisor as the Funds' investment advisor. After the Trust was organized in 1993, certain legal and regulatory requirements applicable to investment companies changed. For example, certain restrictions that were historically imposed by state laws and regulations were preempted by the National Securities Markets Improvement Act of 1996 ("NSMIA"), and therefore, these state requirements no longer apply to investment companies. Certain of the Funds are currently subject to fundamental investment restrictions that are either more restrictive than those required under present law or are no longer required at all, or that were adopted in response to regulatory, business and industry conditions that no longer exist. Accordingly, the Trustees have determined to present to the shareholders certain proposed changes to the fundamental investment restrictions of the Funds for their consideration. The proposed amendments would: - simplify, modernize and standardize the fundamental restrictions that are required to be stated under the 1940 Act; and - eliminate those fundamental restrictions that are no longer required by either the securities laws of the various states or the SEC. The Advisor believes there are several distinct advantages in revising the Funds' fundamental investment restrictions at this time. It is in the shareholders' best interests to eliminate restrictions on how the Funds are managed that were put in place because of regulatory and business conditions that no longer exist. Because there will be fewer fundamental investment restrictions, there will be less need in the future to seek shareholder approval to make the changes to how the Funds are managed. This will save shareholders the costs associated with holding shareholder meetings in the future. The Advisor believes that its ability to manage the Funds' assets in a changing investment environment will be enhanced because the Funds will have greater investment management flexibility to respond to market, industry, regulatory or technical changes by being able to revise certain investment policies with Board approval only. Furthermore, by standardizing investment restrictions, the Funds will be able to more efficiently and more easily monitor portfolio compliance. The recommended changes are specified below. Each of Proposals #4(a) through #4(h) and Proposals #5(a) through #5(f) will be voted on separately by shareholders of each Fund that is effected by the proposed changes, and the approval of each Proposal by each Fund will require the approval by a Majority Vote. (See "FURTHER INFORMATION ABOUT VOTING AND THE SPECIAL MEETING" below.) DESCRIPTION OF THE PROPOSED CHANGES The proposed standardized fundamental investment restrictions cover those areas for which the 1940 Act requires the Funds to have fundamental restrictions. They reflect all current regulatory and legal requirements under the 1940 Act, and are written to provide flexibility to respond to future legal, regulatory, market or technical changes. The proposed standardized amendments will not affect the Funds' investment objectives. ALTHOUGH THE PROPOSED AMENDMENTS TO THE FUNDAMENTAL INVESTMENT RESTRICTIONS WILL 21 GIVE THE FUNDS GREATER FLEXIBILITY TO RESPOND TO FUTURE INVESTMENT OPPORTUNITIES, THE ADVISOR DOES NOT ANTICIPATE THAT THE CHANGES, INDIVIDUALLY OR IN THE AGGREGATE, WILL RESULT AT THIS TIME IN A MATERIAL CHANGE IN THE LEVEL OF INVESTMENT RISK ASSOCIATED WITH INVESTMENT IN THE FUNDS. NOR DOES THE ADVISOR ANTICIPATE THAT THE PROPOSED CHANGES IN FUNDAMENTAL INVESTMENT RESTRICTIONS WILL, INDIVIDUALLY OR IN THE AGGREGATE, CHANGE MATERIALLY THE MANNER IN WHICH THE FUNDS ARE MANAGED AND OPERATED. The Funds' existing investment restrictions, together with the proposed investment restrictions, are presented below. Certain investment restrictions apply to some, but not to all, Funds. Shareholders of the affected Funds will be requested to vote on each proposed restriction separately. For convenience of reference, the Funds' current investment restrictions are presented in BOLD-FACED type below, and the Funds' proposed investment restrictions are presented in ITALICS. Following the restrictions, the legal authority for each investment restriction is presented, along with a discussion of the effect of each proposed change. PROPOSAL #4: APPROVAL OF AMENDMENTS TO THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS EACH OF THE FOLLOWING SUB-PROPOSALS APPLIES TO THE UBS GLOBAL BALANCED FUND, UBS GLOBAL EQUITY FUND, UBS GLOBAL BOND FUND, UBS U.S. BALANCED FUND, UBS U.S. LARGE CAP EQUITY FUND, UBS U.S. EQUITY FUND, UBS U.S. BOND FUND AND UBS INTERNATIONAL EQUITY FUND, UNLESS OTHERWISE INDICATED. PROPOSAL #4(a): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING BORROWING CURRENT RESTRICTION: EACH SERIES MAY NOT 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 FUND'S ASSETS, ASSET COVERAGE OF AT LEAST 300% IS REQUIRED. EACH SERIES WILL NOT PURCHASE SECURITIES WHEN BORROWINGS EXCEED 5% OF THAT SERIES TOTAL ASSETS. PROPOSED RESTRICTION: NO FUND MAY 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 FUND'S ASSETS, ASSET COVERAGE OF AT LEAST 300% IS REQUIRED. WHAT ARE THE LEGAL REQUIREMENTS GOVERNING BORROWING BY THE FUNDS? Borrowing creates risk and expenses for a Fund and may make a Fund's net asset value more volatile. In addition, the costs associated with borrowing may lower overall returns for a Fund. As a result, the 1940 Act imposes certain limitations on the borrowing activities of investment companies. The limitations on borrowing are generally designed to protect shareholders and their investments by restricting an investment company's ability to subject its assets to any claims of creditors that might have a claim to the investment company's assets or rights upon liquidation that would take precedence over the claims of shareholders. In addition, the 1940 Act limitations reflect a Congressional intent to limit an investment company's exposure to payments to creditors so that the investment company will not experience difficulty in managing a portfolio to meet debt payment obligations while still meeting redemption requests on demand. Under the 1940 Act, an investment company's borrowing restriction must be fundamental. 22 WHAT EFFECT WILL AMENDING THE CURRENT FUNDAMENTAL BORROWING RESTRICTIONS HAVE ON THE FUNDS? The current investment restrictions for the Funds state that the Funds may not purchase securities while borrowings exceed 5% of the value of the Funds' total assets. The 1940 Act limits on borrowing historically were interpreted to prohibit investment companies from making additional investments in securities while borrowings exceeded 5% of total assets. However, the 5% limit is not required under the 1940 Act and originated from informal regulatory positions. Accordingly, under the proposed restriction, each Fund would be permitted to make additional investments, even if borrowings exceed 5% of total assets, provided that the Advisor believed that this was in the best interests of the Fund and its shareholders. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL #4(a) PROPOSAL #4(b): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING UNDERWRITING CURRENT RESTRICTION: EACH SERIES MAY NOT 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 SECURITIES ACT OF 1933, AS AMENDED ("1933 ACT"). PROPOSED RESTRICTION: NO FUND MAY ACT AS AN UNDERWRITER, EXCEPT TO THE EXTENT A FUND MAY BE DEEMED TO BE AN UNDERWRITER WHEN SELLING ITS OWN SHARES. WHAT ARE THE LEGAL REQUIREMENTS GOVERNING UNDERWRITING BY THE FUNDS? Under the 1940 Act, the Funds' policies concerning underwriting are required to be fundamental. Under the federal securities laws, a person or company generally is considered an underwriter if it participates in the public distribution of securities of OTHER ISSUERS, usually by purchasing the securities from the issuer with the intention of reselling the securities to the public. Underwriters are subject to stringent regulatory requirements and are often exposed to substantial liability. Thus, virtually all investment companies operate in a manner that allows them to avoid acting as underwriters. WHAT EFFECT WILL AMENDING THE CURRENT UNDERWRITING RESTRICTIONS HAVE ON THE FUNDS? The proposed restriction is similar to the Funds' current investment restrictions. However, the proposed underwriting restriction would clarify that the Funds may sell their own shares without being deemed an underwriter. Under the 1940 Act, an investment company will not be considered an underwriter if it sells its own shares pursuant to a written distribution plan that complies with Rule 12b-1 under the 1940 Act. Also, unlike the current restriction, the proposed restriction does not include an exception to the underwriting restriction for the disposition of securities. The disposition of securities is not included as an exception to the proposed restriction because it is unnecessary in that the SEC staff has clarified that resales of privately placed securities by institutional investors, such as the Funds, would not make them underwriters. It is not anticipated that adoption of the proposed restriction would involve any additional risk as the proposed restriction would not affect the way the Funds are currently managed. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL #4(b) 23 PROPOSAL #4(c): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING LENDING CURRENT RESTRICTION: EACH SERIES MAY NOT MAKE LOANS, EXCEPT THAT THIS RESTRICTION SHALL NOT PROHIBIT: (a) THE PURCHASE AND HOLDING OF A PORTION OF AN ISSUE OF PUBLICLY DISTRIBUTED OR PRIVATELY PLACED DEBT SECURITIES; (b) THE LENDING OF PORTFOLIO SECURITIES; OR (c) ENTRY INTO REPURCHASE AGREEMENTS WITH BANKS OR BROKER-DEALERS. PROPOSED RESTRICTION: NO FUND MAY MAKE LOANS TO OTHER PERSONS EXCEPT: (a) THROUGH THE LENDING OF ITS PORTFOLIO SECURITIES; (b) THROUGH THE PURCHASE OF DEBT SECURITIES, LOAN PARTICIPATIONS AND/OR ENGAGING IN DIRECT CORPORATE LOANS FOR INVESTMENT PURPOSES IN ACCORDANCE WITH ITS INVESTMENT OBJECTIVES AND POLICIES; AND (c) TO THE EXTENT THE ENTRY INTO A REPURCHASE AGREEMENT IS DEEMED TO BE A LOAN. WHAT ARE THE LEGAL REQUIREMENTS GOVERNING LENDING BY THE FUNDS? Under the 1940 Act, an investment company's policy regarding lending must be fundamental. Certain investment techniques could, under certain circumstances, be considered to be loans. For example, if a Fund invests in debt securities, such investments might be considered to be a loan from the Fund to the issuer of the debt securities. In order to ensure that the Funds may invest in certain debt securities or repurchase agreements, which also could technically be characterized as the making of loans, the Funds' current fundamental investment restrictions specifically exclude such investment techniques from their prohibitions on making loans. In addition, the Funds' current fundamental restrictions explicitly permit the Funds to lend their portfolio securities. Securities lending is a practice that has become common in the mutual fund industry (the Funds frequently engage in securities lending transactions), and involves the temporary loan of portfolio securities to parties that use the securities for the settlement of other securities transactions. The collateral delivered to a Fund in connection with such a transaction is then invested to provide the Fund with additional income it might not otherwise have. Securities lending involves certain risks if the borrower fails to return the securities. These risks are mitigated by ensuring that the loans are fully collateralized. WHAT EFFECT WILL AMENDING THE CURRENT FUNDAMENTAL LENDING RESTRICTIONS HAVE ON THE FUNDS? The proposed restriction is similar to the Funds' current restrictions, but would provide the Funds with somewhat greater lending flexibility. In addition to those investment techniques specifically excluded from the prohibitions on lending in the current investment restrictions, the proposed restriction also would permit the Funds to invest in loan participations and direct corporate loans for investment purposes that recently have become more common as investments for investment companies. Loan participations and investments in direct corporate loans involve the risk that a Fund may lose money due to a default by a borrower. It is not anticipated that adoption of the proposed lending restriction would involve any additional risk as the proposed investment restriction would not affect the way the Funds are currently managed. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL #4(c) PROPOSAL #4(d): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING INVESTMENTS IN REAL ESTATE CURRENT RESTRICTION: EACH SERIES MAY NOT INVEST IN REAL ESTATE OR INTERESTS IN REAL ESTATE (THIS WILL NOT PREVENT A SERIES FROM INVESTING IN PUBLICLY-HELD REAL ESTATE INVESTMENT TRUSTS OR MARKETABLE SECURITIES OF COMPANIES WHICH MAY REPRESENT INDIRECT INTERESTS IN REAL ESTATE), INTERESTS IN OIL, GAS AND/OR MINERAL EXPLORATION OR DEVELOPMENT PROGRAMS OR LEASES. PROPOSED RESTRICTION: NO FUND MAY PURCHASE OR SELL REAL ESTATE, EXCEPT THAT A FUND MAY PURCHASE OR SELL SECURITIES OF REAL ESTATE INVESTMENT TRUSTS. 24 WHAT EFFECTS WILL AMENDING THE CURRENT FUNDAMENTAL RESTRICTIONS ON THE FUNDS' INVESTMENTS IN REAL ESTATE HAVE? Under the 1940 Act, an investment company's investment restriction regarding investment in real estate must be fundamental. The proposed real estate restrictions are substantially the same as the real estate limitation contained in the Funds' current restrictions. Accordingly, the Funds will continue to be prohibited from directly investing in real estate, but will be permitted to purchase or sell securities of real estate investment trusts. Adoption of the proposed fundamental investment restriction is not expected to materially affect the way the Funds are managed or operated. The Funds' fundamental investment restrictions prohibiting investments in interests in oil, gas and/or mineral exploration or development programs or leases, which currently are grouped within one restriction, are proposed to be eliminated, as discussed below, in Proposal #5(f) of this Proxy Statement. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL #4(d) PROPOSAL #4(e): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING INVESTMENTS IN COMMODITIES CURRENT RESTRICTION: EACH SERIES MAY NOT 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. PROPOSED RESTRICTION: NO FUND MAY PURCHASE OR SELL COMMODITIES EXCEPT THAT A FUND MAY PURCHASE OR SELL CURRENCIES, MAY ENTER INTO FUTURES CONTRACTS ON SECURITIES, CURRENCIES AND OTHER INDICES OR ANY OTHER FINANCIAL INSTRUMENTS, AND MAY PURCHASE AND SELL OPTIONS ON SUCH FUTURES CONTRACTS. WHAT ARE THE LEGAL REQUIREMENTS GOVERNING INVESTMENTS IN COMMODITIES? Under the 1940 Act, an investment company's investment restriction regarding its investments in commodities must be fundamental. The most common types of commodities are physical commodities, such as wheat, cotton, rice and corn. However, under federal law, futures contracts are considered to be commodities, and therefore, financial futures contracts, such as futures contracts related to stocks, currencies, stock indices or interest rates, are also considered to be commodities. Investment companies typically invest in financial futures contracts and options related to such contracts for hedging or other investment purposes. WHAT EFFECT WILL AMENDING THE CURRENT INVESTMENT RESTRICTIONS HAVE ON THE FUNDS? The proposed commodities restriction would clarify that the Funds have the flexibility to: (i) purchase and sell currencies; (ii) invest in futures contracts on securities, currencies and various indices or other financial instruments; and (iii) purchase and sell related options. Under the current restriction, the Funds' permissible activities were confined to futures contracts, options and forward foreign currency contracts. The proposed restriction expands the types of instruments that the Funds may acquire and the types of transactions that the Funds may enter into. The proposed restriction also clarifies that investments may be made in these instruments for any purpose, including for investment or hedging purposes. It is not currently anticipated that the proposed investment restriction would result at this time in a material change in the level of investment risk associated with investment in the Funds. Using financial futures instruments can involve substantial risks, including the possibility that market prices may move in an unexpected direction, resulting in losses to a Fund that would not have resulted if the Fund had not 25 invested in such instruments. Financial futures instruments will be utilized only if the Advisor believes such investments are advisable. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL #4(e) PROPOSAL #4(f): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING ISSUING SENIOR SECURITIES AND MAKING SHORT SALES The Funds are subject to fundamental investment restrictions on issuing senior securities that provide: CURRENT RESTRICTION: A SERIES MAY NOT ISSUE SENIOR SECURITIES. The Funds are also subject to the following restrictions pertaining to making short sales: CURRENT RESTRICTION: NO SERIES MAY 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. PROPOSED RESTRICTION: NO FUND MAY ISSUE SECURITIES SENIOR TO THE FUND'S PRESENTLY AUTHORIZED SHARES OF BENEFICIAL INTEREST, EXCEPT THAT THIS RESTRICTION SHALL NOT BE DEEMED TO PROHIBIT A FUND FROM: (a) MAKING ANY PERMITTED BORROWINGS, LOANS OR PLEDGES; (b) ENTERING INTO OPTIONS, FUTURES CONTRACTS, FORWARD CONTRACTS, REPURCHASE TRANSACTIONS, OR REVERSE REPURCHASE TRANSACTIONS; OR (c) MAKING SHORT SALES OF SECURITIES UP TO 10% OF A FUND'S NET ASSETS TO THE EXTENT PERMITTED BY THE 1940 ACT AND ANY RULE OR ORDER THEREUNDER, OR SEC STAFF INTERPRETATIONS THEREOF. WHAT ARE THE LEGAL REQUIREMENTS GOVERNING ISSUING SENIOR SECURITIES AND MAKING SHORT SALES? Under the 1940 Act, the Funds must have an investment policy describing their ability to issue senior securities. A "senior security" is defined under the 1940 Act generally as an obligation of an investment company, with respect to its earnings or assets, that takes priority over the claims of the investment company's shareholders with respect to the same earnings or assets. The 1940 Act generally prohibits a mutual fund from issuing senior securities, in order to limit the ability of the mutual fund to use leverage. In general, a mutual fund uses leverage when it borrows money to enter into securities transactions, or acquires an asset without being required to make payment until a later point in time. SEC staff interpretations allow a mutual fund to engage in a number of types of transactions that might otherwise be considered to create "senior securities" or "leverage," provided certain conditions are met that are designed to protect shareholders. For example, some transactions that may create senior security concerns include short sales, certain options and futures transactions, reverse repurchase agreements and securities transactions that obligate the mutual fund to pay money at a future date (such as when-issued, forward commitment or delayed delivery transactions). According to regulatory interpretations, when engaging in such transactions, a mutual fund must designate on its or its custodian bank's books, cash or other liquid securities to meet the SEC staff's collateralization requirements. This procedure limits the mutual fund's ability to engage in these types of transactions and thereby limits the mutual fund's exposure to risks associated with these transactions. For example, the risks of short sales include the risk of losses because the price of the stock sold short unexpectedly rises, and the risk that the Fund may be unable to replace a borrowed security sold short at an acceptable price. WHAT EFFECT WILL AMENDING THE CURRENT INVESTMENT RESTRICTIONS HAVE ON THE FUNDS? The proposed investment restriction would amend the Funds' current investment restrictions and would permit the Funds to engage in options, futures contracts and forward contracts and to make short sales up to 10% of a Fund's net assets as permitted under the 1940 Act, and any exemptions available under the 1940 Act. The proposed investment restriction also would permit the Funds to engage in permissible types of leveraging transactions. Essentially, the proposed investment restriction clarifies the 26 Funds' ability to engage in those investment transactions (such as repurchase and reverse repurchase transactions)(1) which, while appearing to raise senior security concerns, have been interpreted as not constituting the issuance of senior securities under the federal securities laws. The proposed investment restriction has been drafted to provide flexibility for the Funds to respond to legal, regulatory and market developments. The Funds' current investment restrictions relating to short sales are combined with an investment restriction relating to the maintenance of margin accounts. The adoption of this revised restriction would result in the separation of the Funds' short sales investment restrictions from the Funds' fundamental investment restrictions relating to investments in margin accounts. The investment restrictions relating to investing in margin accounts are proposed to be eliminated (SEE Proposal #5(b) of this Proxy Statement). The Advisor does not anticipate that any additional risk to the Funds will occur as a result of amending the current investment restrictions because the Funds have no present intention of changing their current investment policies. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL #4(f) PROPOSAL #4(g): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING INDUSTRY CONCENTRATION CURRENT RESTRICTION: NO SERIES MAY 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. PROPOSED RESTRICTION: NO FUND MAY CONCENTRATE (INVEST MORE THAN 25% OF ITS NET ASSETS) IN SECURITIES OF ISSUERS IN A PARTICULAR INDUSTRY (OTHER THAN SECURITIES ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT OR ANY OF ITS AGENCIES). WHAT ARE THE LEGAL REQUIREMENTS GOVERNING INDUSTRY CONCENTRATION BY THE FUNDS? Under the 1940 Act, an investment company's policy of concentrating its investments in securities of companies in the same industry must be fundamental. Under the federal securities laws, an investment company "concentrates" its investments, for SEC purposes, if it invests more than 25% of its "net" assets (exclusive of certain items such as cash, U.S. government securities, securities of other investment companies, and tax-exempt securities) in a particular industry or group of industries. An investment company is not permitted to concentrate its investments in a particular industry unless it so states. WHAT EFFECT WILL AMENDING THE CURRENT CONCENTRATION RESTRICTIONS HAVE ON THE FUNDS? The proposed restriction would amend the Funds' current investment restrictions by clarifying the concentration policy's application to the Funds' "net" assets, rather than to the Funds' "total" assets. (This is consistent with the SEC's revision of its historical position.) Further, the proposed investment restriction will provide investment flexibility that will help the Funds to respond to future legal, regulatory, market or technical developments. However, adoption of the proposed investment restriction is not expected to change materially the way in which the Funds are currently managed or operated. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL #4(g) ------------------- (1) While not explicitly mentioned in the proposed restriction, the Funds continue to be permitted, under the proposed investment restriction, to engage in when-issued and delayed delivery transactions. 27 PROPOSAL #4(h): TO AMEND THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING DIVERSIFICATION THIS PROPOSAL APPLIES TO THE UBS GLOBAL BALANCED FUND, UBS GLOBAL EQUITY FUND, UBS U.S. BALANCED FUND, UBS U.S. LARGE CAP EQUITY FUND AND UBS U.S. BOND FUND ONLY. CURRENT RESTRICTION: NO SERIES MAY, AS TO 75% OF THE TOTAL ASSETS OF THE 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 THE SERIES WOULD BE INVESTED IN SECURITIES OF SUCH ISSUER. NO SERIES MAY PURCHASE THE SECURITIES OF ANY ONE ISSUER IF, IMMEDIATELY AFTER SUCH PURCHASE, THE SERIES WOULD OWN MORE THAN 10% OF THE OUTSTANDING VOTING SECURITIES OF SUCH ISSUER. PROPOSED RESTRICTION: NO FUND MAY PURCHASE THE SECURITIES OF ANY ONE ISSUER (OTHER THAN THE U.S. GOVERNMENT OR ANY OF ITS AGENCIES OR INSTRUMENTALITIES OR SECURITIES OF OTHER INVESTMENT COMPANIES) IF IMMEDIATELY AFTER SUCH INVESTMENT: (a) MORE THAN 5% OF THE VALUE OF THE FUND'S TOTAL ASSETS WOULD BE INVESTED IN SUCH ISSUER; OR (b) MORE THAN 10% OF THE OUTSTANDING VOTING SECURITIES OF SUCH ISSUER WOULD BE OWNED BY THE FUND, EXCEPT THAT UP TO 25% OF THE VALUE OF THE FUND'S TOTAL ASSETS MAY BE INVESTED WITHOUT REGARD TO SUCH 5% AND 10% LIMITATIONS. WHAT ARE THE LEGAL REQUIREMENTS GOVERNING DIVERSIFICATION BY THE FUNDS? The 1940 Act prohibits a "diversified" investment company from purchasing securities of any one issuer if, at the time of purchase, as to 75% of the investment company's total assets, more than 5% of the company's total assets would be invested in securities of that issuer, or the investment company would own or hold more than 10% of the outstanding voting securities of that issuer, except that up to 25% of the investment company's total assets may be invested without regard to these limitations. Under the 1940 Act, these 5% and 10% limitations do not apply to securities issued or guaranteed by the U.S. government, its agencies or instrumentalities, or to the securities of other investment companies. WHAT EFFECT WILL AMENDING THE CURRENT RESTRICTIONS HAVE ON THE FUNDS? Although the 1940 Act excludes the securities of other investment companies, as well as those of the U.S. government and its agencies and instrumentalities from the diversification requirement, the Funds' current diversification restrictions do not state that the securities of other investment companies are excluded for purposes of the diversification restriction. Amending the Funds' diversification restrictions would make them consistent with the definition of a diversified investment company under the 1940 Act with respect to the securities of other investment companies, and would provide the Funds with greater investment flexibility. Although the Funds' diversification restrictions will no longer serve to limit their investment in other investment companies, the Funds will be limited in such investments by the provisions of the 1940 Act. It is not currently anticipated that adoption of the proposed restriction would materially change the way the Funds are managed. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL #4(h) 28 PROPOSAL #5: APPROVAL OF THE ELIMINATION OF CERTAIN OF THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS EACH OF THE FOLLOWING SUB-PROPOSALS APPLIES TO THE UBS GLOBAL BALANCED FUND, UBS GLOBAL EQUITY FUND, UBS GLOBAL BOND FUND, UBS U.S. BALANCED FUND, UBS U.S. LARGE CAP EQUITY FUND, UBS U.S. EQUITY FUND, UBS U.S. BOND FUND AND UBS INTERNATIONAL EQUITY FUND ONLY. WHY IS THE BOARD RECOMMENDING THAT THE FUNDAMENTAL RESTRICTIONS BE ELIMINATED, AND WHAT EFFECT WILL THESE ELIMINATIONS HAVE ON THE FUNDS? Certain of the Funds' fundamental investment restrictions were originally drafted to comply with state laws and regulations, which, as a consequence of the enactment of NSMIA, are no longer applicable. Since NSMIA eliminated the states' ability to substantively regulate investment companies, the Funds are no longer legally required to include current fundamental investment restrictions pertaining to the six restrictions discussed below in this Proxy Statement. The Advisor has determined that eliminating the fundamental investment restrictions described below is consistent with the federal securities laws, and is therefore recommending that the shareholders approve the recommended eliminations. By reducing the total number of investment restrictions that can be changed only by a shareholder vote, the Advisor believes that the Funds will be able to minimize the costs and delays associated with holding future shareholder meetings to revise fundamental policies that become outdated or inappropriate. The Advisor believes that eliminating the restrictions is in the best interest of the Funds' shareholders, as it will provide the Funds with increased flexibility to pursue their investment goals. WHAT ARE THE RISKS IN ELIMINATING THE RESTRICTIONS? The Advisor does not anticipate that eliminating the investment restrictions will result in any additional risk to the Funds. Although the Funds' current investment restrictions, as drafted, are no longer legally required, the Funds' ability to invest in these six areas will continue to be subject to the limitations of the 1940 Act, and any exemptive orders granted under the 1940 Act. Further, the Funds have no current intention to change their present investment practices as a result of eliminating these investment restrictions, except to the limited extent described below. PROPOSAL #5(a): TO REMOVE THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING INVESTING TO EXERCISE CONTROL OR MANAGEMENT CURRENT RESTRICTION: NO SERIES MAY MAKE INVESTMENTS IN SECURITIES FOR THE PURPOSE OF EXERCISING CONTROL OVER OR MANAGEMENT OF THE ISSUER. The Funds' current fundamental investment restriction limits the Funds' ability to invest for purposes of exercising control or management. This investment restriction was enacted in response to various state securities laws and is no longer required because of NSMIA. Typically, if an investment company acquires a large percentage of the securities of a single issuer, it will be deemed to have invested in such issuer for the purposes of exercising control or management. This investment restriction was intended to ensure that an investment company would not be engaged in the business of managing another company. Eliminating the investment restrictions will not have any impact on the day-to-day management of the Funds because the Funds have no present intention of investing in an issuer for the purposes of exercising control or management. Furthermore, in the case of each Fund that is classified as a diversified fund, the 1940 Act provides that, with respect to 75% of the Fund's total assets, the Fund may not purchase more than 10% of the outstanding voting securities of any issuer. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL #5(a) 29 PROPOSAL #5(b): TO REMOVE THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING PURCHASING SECURITIES ON MARGIN As discussed in Proposal #4(f) of this Proxy Statement, the Funds' current fundamental investment restrictions limit the Funds' ability to purchase securities on margin. This investment restriction was originally included in the Funds' list of investment restrictions in response to the various state law requirements to which investment companies were subject, which required a stated restriction in utilizing margin accounts. As discussed above, under NSMIA, the Funds are no longer required to have a fundamental policy regarding these types of investment activities. As a general matter, elimination of this fundamental investment restriction relating to purchasing securities on margin should not have an impact on the day-to-day management of the Funds, since the 1940 Act's prohibitions on these types of transactions would continue to apply to the Funds. The Funds are specifically precluded from purchasing securities on margin by Section 12 of the 1940 Act. The Funds' ability to purchase securities on margin also raises senior security issues. The Funds are prohibited from issuing senior securities under Section 18 of the 1940 Act, as well as under their senior securities investment restrictions. Elimination of the investment restriction, therefore, would not affect the Funds' inability to purchase securities on margin. Finally, the Funds have not previously, nor do they currently intend, to engage in these investment activities. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL #5(b) PROPOSAL #5(c): TO REMOVE THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING INVESTING IN UNSEASONED ISSUERS CURRENT RESTRICTION:NO SERIES MAY 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. The Funds' current fundamental investment restriction limits the Funds' ability to invest in companies that have a record of less than three years of continuous operations. Prior to NSMIA, the Funds were required to adopt this investment restriction under various state laws. Under NSMIA, this limitation is not required to be a fundamental investment restriction. As a general matter, elimination of the Funds' fundamental restriction regarding investing in unseasoned issuers is not intended to have a material impact on the day-to-day management of the Funds. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL #5(c) PROPOSAL #5(d): TO REMOVE THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING INVESTMENTS IN OTHER INVESTMENT COMPANIES CURRENT RESTRICTION: NO SERIES MAY INVEST IN SECURITIES OF ANY OPEN-END INVESTMENT COMPANY, EXCEPT THAT: (i) A SERIES MAY PURCHASE SECURITIES OF MONEY MARKET MUTUAL FUNDS; (ii) THE UBS GLOBAL BALANCED FUND AND UBS 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 1940 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. 30 The Funds' current fundamental investment restrictions limit the Funds' ability to invest in the securities of other open-end investment companies, except for money market mutual funds, in accordance with an SEC exemptive order, or in connection with a merger, consolidation, acquisition or reorganization. These current restrictions, which are more restrictive than the 1940 Act provisions in this regard, were originally included in the Funds' fundamental investment restrictions in response to various state law requirements. Under NSMIA, however, the Funds are no longer legally required to retain such a policy as a fundamental investment restriction. Upon elimination of this investment restriction, the Funds would remain subject to the 1940 Act's restrictions on an investment company's ability to invest in other funds except to the extent the Funds' exemptive orders permit otherwise. The 1940 Act's restrictions state that an investment company may not purchase more than 3% of another investment company's total outstanding voting stock, commit more than 5% of its assets to the purchase of another investment company's securities, or have more than 10% of its total assets invested in securities of all other investment companies. The Funds would continue to operate in accordance with the exemptive orders (the "Orders") issued by the SEC that have granted relief to the Funds from the 1940 Act's limitations. The Orders permit, subject to certain conditions: (i) the Funds to invest in the series of UBS Relationship Funds, another investment company advised by the Advisor; and (ii) the Funds to invest in unregistered investment companies advised by the Advisor. As a shareholder in another investment company, a Fund 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 a Fund would bear in connection with its own operations. Elimination of this investment restriction should not have an impact on the day-to-day management of the Funds. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL #5(d) PROPOSAL #5(e): TO REMOVE THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING INVESTING IN PUTS, CALLS AND STRADDLES CURRENT RESTRICTION: NO SERIES MAY INVEST IN PUTS, CALLS, STRADDLES OR COMBINATIONS THEREOF EXCEPT TO THE EXTENT DISCLOSED IN A SERIES' PROSPECTUS. These investment restrictions were required to be adopted by certain states up until the adoption of NSMIA in 1996. Since these restrictions are no longer required under current law, the Advisor has recommended that these restrictions be eliminated. Notwithstanding the elimination of these restrictions, the Funds, when engaging in these activities, will do so in accordance with the limitations contained in the 1940 Act and the SEC Staff's interpretations thereof. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL #5(e) PROPOSAL #5(f): TO REMOVE THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS REGARDING INVESTMENTS IN OIL, GAS AND/OR MINERAL EXPLORATION OR DEVELOPMENT PROGRAMS OR LEASES As discussed in Proposal #4(d) above, the Funds are subject to restrictions pertaining to these activities. Investments in such activities are subject to certain risks, including liquidity risk and increased susceptibility to economic cycles. These investment restrictions were required to be adopted by certain states prior to the enactment of NSMIA. As these restrictions are no longer required under present law, 31 the Advisor has recommended that they be eliminated. Notwithstanding the elimination of these fundamental restrictions, the Funds do not expect to engage in these activities. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL #5(f) OTHER BUSINESS The Trustees know of no other business to be presented at the Special Meeting other than Proposals #1 through #5, and do not intend to bring any other matters before the Special Meeting. However, if any additional matters should be properly presented, proxies will be voted or not voted as specified. Proxies reflecting no specification will be voted in accordance with the judgment of the persons named in the proxy. INFORMATION ABOUT THE TRUST WHO ARE THE SERVICE PROVIDERS TO THE TRUST? INVESTMENT ADVISOR. The Advisor, a Delaware corporation located in Chicago, Illinois, is an investment advisor registered with the SEC. As of December 31, 2001, the Advisor managed approximately $40.1 billion, primarily for institutional clients. The Advisor was organized in 1989 when it acquired the institutional asset management business of The First National Bank of Chicago and First Chicago Investment Advisors, N.A. The Advisor and its predecessor entities have managed domestic and international investment assets since 1974 and global investment assets since 1982. The Advisor is a wholly owned subsidiary of UBS and a member of the UBS Asset Management division, which managed over $405 billion as of December 31, 2001. UBS Asset Management has offices worldwide, in addition to the Advisor's principal office at 209 South LaSalle Street, Chicago, IL 60604-1295. UBS, with headquarters in Zurich, Switzerland, is an internationally diversified organization with operations in many aspects of the financial services industry. The address of UBS is P.O. Box CH-8098, Zurich, Switzerland. In addition to managing the Trust (which consists of eighteen series), the Advisor also serves as investment advisor to two other investment companies: UBS Relationship Funds (the "Relationship Trust," which consists of twenty-one series (the "Relationship Series")) and Fort Dearborn Income Securities, Inc. The Advisor serves as sub-advisor to the International Equity Fund series of the Vision Group of Funds. The Advisor acts as the investment advisor to the following series of the Trust (the "UBS Portfolios") and of the Relationship Trust (the "Relationship Portfolios") that have investment objectives similar to the Funds for which shareholders are being asked to approve amended Investment Advisory Agreements:(2)
EXPENSE CAP MANAGEMENT FEE APPLICABLE TO THE PAYABLE TO THE UBS THE UBS PORTFOLIOS NET ASSETS(3) ADVISOR PORTFOLIOS ------------------ ------------- -------------- ----------------- UBS U.S. Small Cap Equity Fund* $0 1.00% 1.15% UBS U.S. Real Estate Equity Fund* $0 0.90% 1.05% UBS Emerging Markets Debt Fund* $0 0.65% 1.15% UBS Emerging Markets Equity Fund $0 1.10% 1.60%
------------------- (2) The investment objective of each Relationship Portfolio is to maximize total return, consisting of capital appreciation and current income, while controlling risk. For the Non-Sub-Advised Funds and those UBS Portfolios marked with an asterisk (*), the investment objective is to maximize total return, consisting of capital appreciation and current income. The UBS Emerging Markets Equity Fund's investment objective is to maximize capital appreciation. The Sub-Advised Funds (except for the UBS High Yield Fund) have an investment objective of long term capital appreciation. (3) Net assets, in millions, as of January 31, 2002. 32
EXPENSE CAP MANAGEMENT FEE APPLICABLE TO THE PAYABLE TO THE RELATIONSHIP THE RELATIONSHIP PORTFOLIOS NET ASSETS(3) ADVISOR(4) PORTFOLIOS --------------------------- ------------- -------------- ----------------- UBS Global Securities Relationship Fund $535,687,555 N/A 0.05% UBS Global Bond Relationship Fund $0 N/A 0.05% UBS U.S. Equity Relationship Fund $ 46,888,012 N/A 0.01% UBS U.S. Large Cap Equity Relationship Fund $ 13,671,583 N/A 0.01% UBS High Yield Relationship Fund $258,762,177 N/A N/A(5) UBS Defensive High Yield Relationship Fund $0 N/A 0.01% UBS U.S. Intermediate Cap Equity Relationship Fund $0 N/A 0.01% UBS U.S. Value Equity Relationship Fund $118,832,260 N/A 0.01% UBS U.S. Small Cap Equity Relationship Fund $176,587,046 N/A N/A(5) UBS International Equity Relationship Fund $ 60,042,630 N/A 0.06% UBS Emerging Markets Equity Relationship Fund $255,080,080 N/A 0.50% UBS U.S. Core Plus Relationship Fund $0 N/A 0.05% UBS U.S. Bond Relationship Fund $ 28,242,911 N/A 0.01% UBS Short Duration Relationship Fund $0 N/A 0.01% UBS Emerging Markets Debt Relationship Fund $144,556,067 N/A 0.50% UBS Enhanced Yield Relationship Fund $0 N/A 0.01% UBS Short-Term Relationship Fund $ 35,948,139 N/A 0.05% UBS U.S. Securitized Mortgage Relationship Fund $511,017,563 N/A 0.10%
------------------- (4) The Advisor receives no fees from the Relationship Portfolios or the Relationship Trust for providing investment advisory services to the Relationship Portfolios, and the Advisor is responsible for paying its own expenses. (5) For these Relationship Portfolios, the Advisor has agreed to pay all of the respective Portfolio's total operating expenses. The Chairman and Chief Executive Officer of the Advisor is Benjamin F. Lenhardt, Jr. The directors of the Advisor are: Jeffrey J. Diermeier, Benjamin F. Lenhardt, Jr., Nicholas C. Rassas and Brian M. Storms. Each director's address (with the exception of Mr. Storms) is the office of the Advisor at 209 South LaSalle Street, Chicago, Illinois 60604. The address for Mr. Storms is the office of UBS Global AM at 51 West 52nd Street, New York, New York 10019. The principal occupation of each of the directors of the Advisor is as follows: Mr. Diermeier, Director, Chief Investment Officer and Managing Director, the Advisor; Mr. Lenhardt, Director, Chief Executive Officer and Managing Director, the Advisor; Mr. Rassas, Director, Vice President and Managing Director, the Advisor and Mr. Storms, Director, President and Chief Operating Officer of the Advisor, and Chief Operating Officer and President of UBS Global AM. For the fiscal year ended June 30, 2001, pursuant to the distribution plans that were adopted by the Board pursuant to Rule 12b-1 under the 1940 Act, compensation in the amount of $469,386.42 was paid to UBS, an affiliate of the Advisor, in return for services provided in selling shares of the UBS Investment Funds class of shares of the Funds. It is not anticipated that these payments will be made in the current fiscal year. It is anticipated that compensation will be paid in the current fiscal year to UBS Global AM, an affiliate of the Advisor and a subsidiary of UBS, under distribution plans adopted pursuant to Rule 12b-1 under the 1940 Act. UNDERWRITER TO THE FUNDS. UBS Global AM serves as the principal underwriter for the continuous sale of shares of each Series of the Trust pursuant to a Principal Underwriting Contract, dated November 5, 2001, which was last approved at a meeting of the Trust's Board held on May 21, 2001. UBS Global AM is a broker-dealer registered with the SEC and a member in good standing of the National Association of 33 Securities Dealers, Inc. UBS Global AM is located at 51 West 52nd Street, New York, New York 10019-6114. THE ADMINISTRATOR. UBS Global AM also serves as administrator to the Funds. UBS Global AM receives a fee from each Fund at the annual rate of 0.075% of its average daily net assets. The Funds did not pay any fees to UBS Global AM, an affiliate of the Advisor, during the fiscal year ending June 30, 2001, for services as principal underwriter or administrator. Prior to November 5, 2001, J.P. Morgan Investor Services Company ("J.P. Morgan"), a corporate affiliate of J.P. Morgan Chase & Co., was administrator to the Funds. J.P. Morgan currently serves as sub-administrator to the Funds. The address of J.P. Morgan is 73 Tremont Street, Boston, MA 02108-3913. OTHER MATTERS RELATING TO THE TRUST. The Trust is an open-end management investment company, as defined in the 1940 Act. The shares of the Trust, when issued, will be fully paid and nonassessable, and within each series or class, have no preference as to conversion, exchange, dividends, redemption or other features. The shares of the Trust, which the Trustees may, from time to time, establish, shall have no preemptive rights. The shares of the Trust have non-cumulative voting rights. On any matter submitted to a vote of shareholders, all shares of the Trust then issued and outstanding and entitled to vote, irrespective of the series or class and all shares of all series and classes shall vote as a single class ("Single Class Voting"); provided, however, that: (i) as to any matter with respect to which a separate vote of any series or class is required by the 1940 Act or by the law governing Delaware business trusts, such requirement as to a separate vote by that series or class shall apply in lieu of Single Class Voting as described above; (ii) in the event that the separate vote requirements referred to in (i) above apply with respect to one or more series or classes, then, subject to (iii) below, the shares of all other series or classes shall vote as a single class; and (iii) as to any matter which does not affect the interest of a particular series or class, only the holders of shares of the one or more affected series or classes shall be entitled to vote. FURTHER INFORMATION ABOUT VOTING AND THE SPECIAL MEETING RECORD DATE. Shareholders of record at the close of business on April 2, 2002 (the "Record Date") are entitled to be present and to vote at the Special Meeting or any adjournment of the Special Meeting. Each share of record is entitled to one vote on each matter presented at the Special Meeting, with proportionate votes for fractional shares. 34 As of the Record Date, there were the following number of shares of beneficial interest outstanding of each Fund:
NUMBER OF SHARES OUTSTANDING ----------- UBS GLOBAL BALANCED FUND.......................... 15,668,221.061 --------------- Class A......................................... 553,325.017 Class B......................................... 10,954.399 Class C......................................... 27,379.971 Class Y......................................... 15,076,561.674 UBS GLOBAL EQUITY FUND............................ 5,620,611.900 --------------- Class A......................................... 1,626,702.099 Class B......................................... 27,913.885 Class C......................................... 21,206.623 Class Y......................................... 3,944,789.293 UBS GLOBAL TECHNOLOGY FUND........................ 347,325.658 --------------- Class A......................................... 142,514.816 Class B......................................... 0.000 Class C......................................... 0.000 Class Y......................................... 204,810.842 UBS GLOBAL BIOTECH FUND........................... 537,178.724 --------------- Class A......................................... 58,800.992 Class B......................................... 2,950.047 Class C......................................... 117.509 Class Y......................................... 475,310.176 UBS U.S. LARGE CAP GROWTH FUND.................... 608,445.121 --------------- Class A......................................... 202,835.872 Class B......................................... 10,011.013 Class C......................................... 84,641.928 Class Y......................................... 310,956.308 UBS U.S. SMALL CAP GROWTH FUND.................... 3,811,312.145 --------------- Class A......................................... 178,425.285 Class B......................................... 40,328.727 Class C......................................... 29,857.361 Class Y......................................... 3,562,700.772 UBS U.S. EQUITY FUND.............................. 7,482,059.369 --------------- Class A......................................... 819,338.268 Class B......................................... 17,251.933 Class C......................................... 3,226.002 Class Y......................................... 6,642,243.166 NUMBER OF SHARES OUTSTANDING ----------- UBS U.S. BOND FUND................................ 8,997,581.182 --------------- Class A......................................... 1,143,939.675 Class B......................................... 62,910.656 Class C......................................... 89,447.057 Class Y......................................... 7,701,283.794 UBS GLOBAL BOND FUND.............................. 3,442,495.284 --------------- Class A......................................... 222,011.278 Class B......................................... 15,036.938 Class C......................................... 0.000 Class Y......................................... 3,205,447.068 UBS U.S. BALANCED FUND............................ 2,606,469.279 --------------- Class A......................................... 172,492.656 Class B......................................... 39,154.143 Class C......................................... 28,445.367 Class Y......................................... 2,366,377.113 UBS U.S. LARGE CAP EQUITY FUND.................... 379,807.053 --------------- Class A......................................... 35,117.086 Class B......................................... 7,396.771 Class C......................................... 0.000 Class Y......................................... 337,293.196 UBS HIGH YIELD FUND............................... 11,277,285.149 --------------- Class A......................................... 0.000 Class B......................................... 2,594,242.223 Class C......................................... 2,869,705.793 Class Y......................................... 5,813,337.133 UBS INTERNATIONAL EQUITY FUND..................... 15,155,469.535 --------------- Class A......................................... 259,189.277 Class B......................................... 2,276.060 Class C......................................... 3,776.350 Class Y......................................... 14,890,227.848 UBS U.S. VALUE EQUITY FUND........................ 436,071.701 --------------- Class A......................................... 90,369.057 Class B......................................... 20,313.940 Class C......................................... 25,148.240 Class Y......................................... 300,240.464
35 From time to time, the number of shares held in "street name" accounts of various securities dealers for the benefit of their clients may exceed 5% of the total shares outstanding. To the knowledge of management, as of the Record Date, the following persons owned of record or beneficially more than 5% of the outstanding voting shares of the:
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS GLOBAL BALANCED FUND CLASS A UBS AG Omnibus Reinvest Account 68,743.724 12.42% 10 E. 50th Street New York, NY 10022-6831 Fox & Co. P.O. Box 976 35,461.529 6.41% New York, NY 10268-0976 PFPC Trust Company Customer IRA FBO Preston B. Henn 32,348.628 5.85% 1117 Hillsboro Beach A1A Pompano Beach, FL 33062 UBS PaineWebber Inc. FBO Claudio Schuger 28,581.364 5.17% 6199 Wincliff Drive West Bloomfield, MI 48322-4800 UBS PaineWebber Inc. FBO The Fryer Trust Leonard Fryer & Michael Anne Fryer 31,013.381 5.60% Trustee 1857 Alameda Diablo Diablo, CA 94528 CLASS B Salomon Smith Barney Inc. 000152B00403 8,756.885 79.94% 333 West 34th Street -- 3rd Floor New York, NY 10001 UBS PaineWebber Inc. FBO Dawn L. Kramer TOD K.K. Petersen, A.J. Petersen, B.N. 1,178.226 10.76% Petersen P.O. Box 452 Ranchester, WY 82839-0452 UBS PaineWebber Inc. FBO PaineWebber Customer Robert W. Spear 951.261 8.68% 14 Eugley Hill Road Nobleboro, ME 04555-9547
36
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- CLASS C UBS PaineWebber Inc. FBO Nancy I. Blum Trustee Jeffrey D. Blum Irreovcable Trust U/A/D 1,804.264 6.59% 12/1/97 3120 Forrer Street Cincinnati, OH 45209-1016 UBS PaineWebber Inc. FBO Nancy I. Blum Trustee Daniel D. Blum Irrevocable Trust U/A/D 1,804.264 6.59% 12/1/97 3120 Forrer Street Cincinnati, OH 45209-1016 UBS PaineWebber Inc. FBO David D. Blum Custodian for Jeffrey D. Blum under the Ohio Act 2,319.77 8.47% 3120 Forrer Street Cincinnati, OH 45209-1016 UBS PaineWebber Inc. FBO David D. Blum Custodian for Daniel D. Blum under the Ohio Act 2,577.519 9.41% 3120 Forrer Street Cincinnati, OH 45209-1016 UBS PaineWebber Inc. FBO David D. Blum Custodian for Elizabeth M. Blum under the Minors Act 3,866.279 14.12% 3120 Forrer Street Cincinnati, OH 45209-1016 UBS PaineWebber Inc. FBO PaineWebber Cust Lois D. Osborn 3,358.925 12.27% 9739 Dorset Lane Eden Prairie, MN 55347-3137 UBS PaineWebber Inc. FBO Neva J. Hjelmstad & Judith Martin Ventres TTEES 1,481.481 5.41% U/A/D 4/20/94 750D Cahill Rd., Apt. 107C Edina, MN 55439-2735 UBS PaineWebber Inc. FBO PaineWebber Cust Angelo Sciullo 4,598.901 16.80% P.O. Box 38370 Pittsburgh, PA 15238-8370
37
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- CLASS Y Bankers Trust Co. Trst Supervalu Inc. 401K Master Trust c/o BTNY Services 1,906,434.285 12.65% 34 Exchange Pl. Fl. 4 Jersey City, NJ 07302-3885 Wilmington Trust Co. TTEE Brinson Partners Inc. Supp. Incent. Comp. Plan 4,998,825.116 33.16% c/o Mutual Funds P.O. Box 8880 Wilmington, DE 19899-8880 Charles Schwab & Co. Inc. Attn: Mutual Funds 1,862,564.149 12.35% 101 Montgomery Street San Francisco, CA 94104-4122 UBS GLOBAL EQUITY FUND CLASS A UBS AG Omnibus Reinvest Account 104,558.188 6.43% 10 E. 50th Street New York, NY 10022-6831 Fox & Co. P.O. Box 976 111,756.889 6.87% New York, NY 10268-0976 UBS PaineWebber Inc. FBO Jeffrey J. Diermeier & Julia M. Diermeier JT WROS 404,040.404 24.84% 109 S. County Line Road Hinsdale, IL 60521-4722 CLASS B UBS PaineWebber Inc. FBO Scott W. Jones -- T.O.D. Scott W. Jones Family Trust-Beneficiary 13,857.29 49.64% 1125 W. Schubert Chicago, IL 60614-1308 UBS PaineWebber Inc. FBO Thomas M. Cappels & Michele D. Cappels TTEES of the Thomas M. 3,021.15 10.82% Family Trust DTD 3/23/99 568 Anchor Circle Redwood City, CA 94065-8454
38
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS PaineWebber Inc. FBO Anthony & Debbie Garcia & Edwina Wood TTEES 8,987.92 32.20% IRREV TRUST DTD 2/14/95 P.O. Box 250 Velarde, NM 87582-0250 UBS PaineWebber Inc. FBO PaineWebber Cust Steve Sucic 2,047.52 7.34% IRA Rollover P.O. Box 4587 Huntsville, AL 35815-4587 CLASS C UBS PaineWebber Inc. FBO Kenneth Racke 3,524.855 16.62% 38 Bittersweet Drive Alexandria, KY 41001-1300 UBS PaineWebber Inc. FBO PaineWebber Cust Kenneth Racke 1,843.457 8.69% 38 Bittersweet Drive Alexandria, KY 41001-1300 UBS PaineWebber Inc. FBO PaineWebber Cust UBS PaineWebber CDN FBO 5,128.205 24.18% Huguette Machbitz P.O. Box 3321 Weehawken, NJ 07086-8154 UBS PaineWebber Inc. FBO Michael E. Ullian C/F Naomi Rachel Ullian U/SC/UGMA 1,170.787 5.52% 1558 Boone Hill Road Charleston, SC 29407-3002 UBS PaineWebber Inc. FBO PaineWebber Cust Michael E. Ullian C/F 2,898.951 13.67% David Marc Ullian U/SC/UGMA 1558 Boone Hill Road Charleston, SC 29407-3002 UBS PaineWebber Inc. FBO Marion W. Currier REV TR 1999 U/D/T 11/18/99 2,500.597 11.79% Marion W. Currier TTEE 32 Boulevard Road Wellesley, MA 02481-1601
39
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS PaineWebber Inc. FBO Ms. Janet E. Bulan Gracie Station 1,919.945 9.05% P.O. Box 1206 New York, NY 10028-0048 CLASS Y Wilmington Trust Co. TTEE Brinson Partners Inc. Supp. Inc. Comp. Pl. 1,227,426.053 31.12% c/o Mutual Funds P.O. Box 8880 Wilmington, DE 19899-8880 State Street Bank & Trust Co. TTEE The UBS Savings & Investment Plan 1,244,411.114 31.55% 105 Rosemont Road Westwood, MA 02090-2318 IMS & Co. FBO Various Customers 491,214.533 12.45% P.O. Box 3865 Englewood, CO 80155-3865 Charles Schwab & Co. Inc. Attn: Mutual Funds 451,385.337 11.44% 101 Montgomery Street San Francisco, CA 94104-4122 UBS GLOBAL TECHNOLOGY FUND CLASS A UBS AG Omnibus Reinvest Account 17,891.570 12.55% 10 E. 50th Street New York, NY 10022-6831 Swisstor & Company UBS AG Canada 38,415.000 26.96% 154 University Avenue, 7th Floor Toronto, Ontario CA M5H3Z4 UBS PaineWebber Inc. FBO John C. Nichols & Kathryn R. Nichols JTWROS 11,677.210 8.19% 4500 West 139th Street Leawood, KS 66224-1112 UBS PaineWebber Inc. FBO William L. Niconchuk 10,807.710 7.58% 267 Lowell Street Peabody, MA 01960-4005
40
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS PaineWebber Inc. FBO RDA International Inc. Profit Sharing Plan 28,548.309 20.03% 3401 Allen Parkway Houston, TX 77019-1807 CLASS Y Wilmington Trust Corp. TTEE FBO Brinson Partners DCP Plan A/C 47387-7 40,809.984 19.93% 1100 N. Market Street Wilmington, DE 19890-0001 IMS & Co. FBO Various Customers 80,386.493 39.25% P.O. Box 3865 Englewood, CO 80155-3865 Charles Schwab & Co. Inc. Attn: Mutual Funds 57,884.120 28.26% 101 Montgomery Street San Francisco, CA 94104-4122 UBS GLOBAL BIOTECH FUND CLASS A UBS AG Omnibus Reinvest Account 5,523.459 9.39% 10 E. 50th Street New York, NY 10022-6831 UBS PaineWebber Inc. FBO PaineWebber Cust. John C. Nichols & Kathryn R. Nichols 8,659.520 14.73% JTWROS 4500 West 139th Street Leawood, KS 66224-1112 UBS PaineWebber Inc. FBO PaineWebber Cust. Irving C. Nason MD 4,127.725 7.02% 3952 Claremont Dr. Bakersfield, CA 93306-3628 UBS PaineWebber Inc. FBO PaineWebber Cust. UBS PaineWebber CDN FBO 6,359.946 10.82% Jean Dorsey, IRA P.O. Box 3321 Weehawken, NJ 07086-8154
41
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS PaineWebber Inc. FBO Dana M. Baldwin Trustee for The Dana M. Baldwin Trust 3,917.781 6.66% 3454 Stoner Avenue Los Angeles, CA 90066-2820 UBS PaineWebber FBO PaineWebber Cust. UBS PaineWebber CDN FBO Martha Gabbay 3,561.254 6.06% P.O. Box 3321 Weehawken, NJ 07086-8154 UBS PaineWebber FBO RDA International Inc. Profit Sharing Plan 7,762.730 13.20% 3401 Allen Parkway Houston, TX 77019-1807 CLASS B UBS PaineWebber Inc. FBO Paul S. Taylor Trustee FBO Albert Adams Taylor Trust 1,336.57 45.31% U/A DTD 11/23/84 P.O. Box 5546 Madison, WI 53705-0546 UBS PaineWebber Inc. FBO Paul S. Taylor Trustee FBO Susan Peacely Taylor Trust 1,215.07 41.19% U/A DTD 11/23/84 P.O. Box 5546 Madison, WI 53705-0546 UBS PaineWebber Inc. FBO PaineWebber Cust UBS PaineWebber CDN FBO 265.604 9.00% George Quintero IRA R/O P.O. Box 3321 Weehawken, NJ 07086-8154 CLASS C UBS PaineWebber Inc. FBO Mark L. Hughes 117.509 100.00% 303 Mayflower Drive Knoxville, TN 37920-5873 CLASS Y Brinson Partners Inc. Attn: Vicki Heller 50,685.397 10.66% 209 S. LaSalle Street Chicago, IL 60604-1219
42
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- Wilmington Trust Corp. TTEE FBO Brinson Partners DCP Plan A/C 47386-6 158,279.762 33.30% 1100 N. Market Street Wilmington, DE 19890-0001 Wilmington Trust Corp. TTEE FBO Brinson Partners DCP Plan A/C 47387-6 57,303.728 12.06% 1100 N. Market Street Wilmington, DE 19890-0001 IMS & Co. FBO Various Customers 47,103.676 9.91% P.O. Box 3865 Englewood, CO 80155-3865 Charles Schwab & Co. Inc. Attn: Mutual Funds 130,806.463 27.52% 101 Montgomery Street San Francisco, CA 94104-4122 UBS GLOBAL BOND FUND CLASS A UBS AG Omnibus Cash Account 12,232.910 5.51% 10 E. 50th Street New York, NY 10022-6831 Fox & Co. P.O. Box 876 25,951.166 11.69% New York, NY 10268-0976 Wexford Clearing Services Corp. FBO Mephisto 401 Ltd. No. 2 Custom House Admn. & Corp. Svcs. 121,452.285 54.71% 25 Eden Quay Dublin 1 Ireland UBS PaineWebber Inc. FBO PaineWebber Customer Hans Ueli Surber 25,692.643 11.57% 2 Saturn Street San Francisco, CA 94114-1421 CLASS B First Clearing Corp. Magee Hemmer (IRA) FCC as Custodian 12,650.303 84.13% 1661 S. French Road Lake Leelanau, MI 49653-9557
43
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- CLASS Y BHC Securities Inc. Attn: Mutual Funds One Commerce Square, 2005 Market Street, 169,333.179 5.28% Suite 1200 Philadelphia, PA 19103-7008 Wilmington Trust Co. TTEE Brinson Partners Inc. Supp. Inc. Comp. Pl. 639,933.316 19.96% c/o Mutual Funds P.O. Box 8880 Wilmington, DE 19899-8880 Wilmington Trust Co. Trste FBO Brinson Partners Inc. D/C/P A/C 42990-06 629,951.324 19.65% c/o Mutual Funds P.O. Box 8880 Wilmington, DE 19899-8880 State Street Bank & Trust Co. TTEE The UBS Savings & Investment Plan 448,451.915 13.99% 105 Rosemont Road Westwood, MA 02090-2318 IMS & Co. FBO Various Customers 283,528.697 8.85% P.O. Box 3865 Englewood, CO 80155-3865 Charles Schwab & Co. Inc. Attn: Mutual Funds 585,328.487 18.26% 101 Montgomery Street San Francisco, CA 94104-4122 UBS U.S. BALANCED FUND CLASS A UBS AG Omnibus Reinvest Account 32,605.999 18.90% 10 E. 50th Street New York, NY 10022-6831 Thomas M. Quinn and Christine M. Brown Quinn JT Ten 9,997.391 5.80% P.O. Box 529 St. Albans, Herts England UBS PaineWebber Inc. FBO Joel S. Nachman, Christin J. Nachman JT Ten 19,160.283 11.11% Rd. 3 Box 94 W. Street Mt. Washington, MA 012580-9713
44
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS PaineWebber Inc. FBO Laura Hug Trustee for The Laura Hug Living Trust 19,919.271 11.55% 9534 Gloaming Drive Beverly Hills, CA 90210-1715 UBS PaineWebber Inc. FBO Lillie Blankenship Trustee FBO Blankenship Family Trust of 1999 DTD 13,705.941 7.95% 8/6/99 400 Madrona Avenue SE Apt. 419 Salem, OR 97302-6622 UBS PaineWebber Inc. FBO Raymond E. DiBattista 11,358.611 6.58% 975 Beechwood Drive Windber, Pa 15963-1568 CLASS B UBS PaineWebber FBO Rollin B. Norris TTEE Rollin B. Norris Trust 3,261.346 8.33% 1626 Strathcona Detroit, MI 48203-1468 UBS PaineWebber Inc. FBO Doris McKay TTEE of the Doris McKay Trust DTD 5/1/94 2,261.743 5.78% c/o Jayne Montemer 11382 Donovan Road Los Alamitos, CA 90720-2932 UBS PaineWebber Inc. FBO Paine Webber Customer PaineWebber CDN FBO Martha Julaphongs 3,633.634 9.28% P.O. Box 3321 Weehawken, NJ 07087-8154 UBS PaineWebber Inc FBO Mitchell C. Wall & Marilyn M. Wall JT TEN 2,895.047 7.39% c/o Wall & Wall P.O. Box 22064 Milwaukie, OR 97269-2064 UBS PaineWebber Inc. FBO PaineWebber Customer R. Scott Michigan 2,359.321 6.03% 6 High Meadows Drive Mullica Hill, NJ 08062-9461 UBS PaineWebber Inc. FBO PaineWebber Customer PaineWebber CDN FBO Clare L. Koznek 4,471.965 11.42% P.O. Box 3321 Weehawken, NJ 07087-8154
45
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS PaineWebber Inc. FBO Mr. David E. Wicker, III 2,441.994 6.24% 6637 Meadowcreek Drive Dallas, TX 75254-7900 UBS PaineWebber Inc. FBO Peter Hayes 3,119.630 7.97% 5 Sugarbrook Road Malvern, PA 19355-3423 CLASS C UBS PaineWebber Inc. FBO Mr. David E. Wicker, III 9,639.950 33.89% 6637 Meadowcreek Drive Dallas, TX 75254-7900 UBS PaineWebber Inc. FBO Jon H. Wilson 12,328.808 43.34% 1636 Saratoga Way Edmond, OK 73003-3550 UBS PaineWebber Inc. FBO Cynthia A. Lloyd 2,913.978 10.24% 238 Horace Baker Road Zebulon, NC 27597-6364 CLASS Y Brown Brothers Harriman Cust. For AFP Provida Attn: Susie Pestana 287,107.259 12.13% 59 Wall Street New York, NY 10005-2808 The Society of the Sisters of Christian Charity 249,040.601 10.52% 2041 Elmwood Avenue Wilmette, IL 60091-1431 State Street Bank & Trust Co. TTEE The UBS Savings & Investment Plan 1,505,166.283 63.61% 105 Rosemont Road Westwood, MA 02090-2318 Charles Schwab & Co. Inc. Attn: Mutual Funds 151,067.818 6.38% 101 Montgomery Street San Francisco, CA 94104-4122
46
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS U.S. LARGE CAP EQUITY FUND CLASS A Thomas Michael Quinn and Christine M. Brown Quinn JT Ten 12,071.985 34.38% P.O. Box 529 St. Albans, Herts England Clayton S. Hovivian Profit Sharing Plan Clayton Hovivian Plan Director 3,313.553 9.44% 601 S. Figueroa Street, Floor 47 Los Angeles, CA 90017-5704 UBS PaineWebber Inc. FBO Leonard S. Wicklund TTEE Leonard S. Wicklund 1,999.126 5.69% 4614 Forest Way Circle Long Grove, IL 60047-8229 UBS PaineWebber Inc. FBO Ms. Jocelyn L. Lorenzo c/o Ernst & Young 5,351.041 15.24% 7 Rolls Buildings Fetter Lane London EC4A 1NH England UBS PaineWebber Inc. FBO Nazar Mahmoud & Ghassan Mahmoud JT/WROS 5,131.407 14.61% 1801 Avenue of the Stars, Suite 1107 Los Angeles, CA 90067-5805 UBS PaineWebber Inc. FBO Donald & Margaret Powell TTEES FBO The Powell Rev Living Trust 4,471.061 12.73% P.O. Box 629 Genoa, NV 89411-0629 CLASS B UBS PaineWebber Inc. FBO Bernard R. Laliberte Cesaria S. Laliberte 3,087.63 41.74% JT WROS 8 Hornbeam Street Rockland, MA 02370-2847 UBS PaineWebber FBO Henry Sarno, Jr. and Marie S. Sarno 1,670.26 22.58% Cedar Creek 25611 Spring Tide Court Bonita Springs, FL 34135-9510
47
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS PaineWebber Inc. FBO Irene M. Dunchus and David E. Corey JT TEN WROS 1,098.55 14.85% 617 Baldwinville Road Baldwinville, MA 01436-1327 UBS PaineWebber Inc. FBO Lewis Levy & Ursula Levy CO-TTEES 1,540.33 20.82% SOLL UNITTRUST UAD 3/31/96 P.O. Box 4670 Scottsdale, AZ 85261-4670 CLASS Y Fidelity Invest Inst. Operations Co. Inc. Agnt. Certain Employee Benefit Plans 79,807.838 23.66% Fidelity Invest-Financial Oper. 100 Magellan Way #1C Covington, KY 41015-1987 Wilmington Trust Co. FBO Brinson Partners Inc. Supp. Incent. Comp. Plan A/C 47386-5 182,173.597 54.01% c/o Mutual Funds P.O. Box 8882 Wilmington, DE 19899-8882 Wilmington Trust Co. FBO Brinson Partners Inc. Def. Comp. Plan A/C 47387-5 64,067.885 18.99% c/o Mutual Funds P.O. Box 8882 Wilmington, DE 19899-8882 UBS U.S. LARGE CAP GROWTH FUND CLASS A UBS PaineWebber Inc. FBO MSD Ltd. 22,904.505 11.29% 2915 Cochise Court Park City, UT 84060-7447 UBS PaineWebber Inc. FBO George Arzt, Ann Weisbrod JT TEN 38,142.478 18.80% 247 W. 12th Street #3B New York, NY 10014-1992 UBS PaineWebber Inc. FBO Dana M. Baldwin, Trustee for The Dana M. Baldwin Trust 12,197.021 6.01% 3454 Stoner Avenue Lost Angeles, CA 90066-2820
48
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS PaineWebber Inc. FBO RDA International Inc. Profit Sharing Plan 11,470.453 5.66% 3401 Allen Parkway Houston, TX 77019-1807 UBS PaineWebber Inc. FBO Anron Heating & Air Conditioning Inc. Pension Plan 10,947.784 5.40% 440 Wyandanch Avenue North Babylon, NY 11704-1506 UBS PaineWebber Inc. FBO PJ Mechancial Corp. ABC Employee Pension Plan 15,696.876 7.74% 135 W. 18th Street New York, NY 10011-4104 CLASS B UBS PaineWebber Inc. FBO George Casimates Patricia Casimates JT WROS 606.281 6.06% 4006 Fox Valley Drive Rockville, MD 20853-3222 UBS PaineWebber FBO Mary F. Wolf 1,003.11 10.02% 1106 Kea Court New Bern, NC 28560-7230 UBS PaineWebber Inc. FBO Evelyn K. Marchak 668.742 6.68% 3445 Davisville Road Hatboro, PA 19040-4231 UBS PaineWebber Inc. FBO Etha Brust Quinlan Trustee FBO The Quinlan Rev Trust 540.594 5.40% U/A DTD 10/1/98 15801 W. Futura Drive Sun City West, AZ 85375-6592 UBS PaineWebber Inc. FBO Laurie Jean Bloecher 754.204 7.53% 2781 Edgewood Road Upper Arlington, OH 43220-4514 UBS PaineWebber Inc. FBO PaineWebber Cust Steve Sucic 3,123.97 31.21% IRA Rollover P.O. Box 4587 Huntsville, AL 35815-4587
49
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS PaineWebber Inc. FBO Wendy A. Crothers Custodian for Sara C. Crothers UN MA UTMA 953.041 9.52% 11 Orchard Road Southboro, MA 01772-1455 UBS PaineWebber Inc. FBO Edward J. Mieczkowski & Constance S. Mieczkowski JTWROS 636.656 6.36% 4 Laurel Drive Hadley, MA 01035-9726 CLASS C UBS PaineWebber Inc. FBO Ronald Shapiro 60,044.880 70.94% 1773 Mitchell Court Daytona Beach, FL 32128-6760 UBS PaineWebber FBO Evelyn R. Shapiro 18,274.570 21.59% 1773 Mitchell Court Daytona Beach, FL 32128-6760 CLASS Y Wilmington Trust Company FBO Brinson Partners Inc. Def. Comp. Plan AC 47387-4 98,964.786 31.83% c/o Mutual Funds P.O. Box 8882 Wilmington, DE 19899-8882 UBS PaineWebber Inc. FBO F. Davis Terry, Jr. 41,826.139 13.45% 1035 Fifth Avenue, Apt. #16C New York, NY 10028-0135 UBS PaineWebber Inc. FBO Howard, Smith & Levin Savings & Profit Sharing Plan 123,721.246 39.79% 1330 Avenue of the Americas New York, NY 10019-5400 UBS U.S. SMALL CAP GROWTH FUND CLASS A UBS AG Omnibus Reinvest Account 16,416.166 9.20% 10 E. 50th Street New York, NY 10022-6831 UBS PaineWebber Inc. FBO Scott G. Erickson 15,579.330 8.73% 250 Manzanita Avenue Santa Clara, CA 95051-6825
50
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS PaineWebber Inc. FBO Christopher P. Bently 10,359.452 5.81% P.O. Box 68 Stinson Beach, CA 94970-0068 UBS PaineWebber Inc. FBO Dana M. Baldwin, Trustee for The Dana M. Baldwin Trust 15,972.751 8.95% 3454 Stoner Avenue Los Angeles, CA 90066-2820 UBS PaineWebber Inc. FBO RDA International Inc. Profit Sharing Plan 13,627.470 7.64% 3401 Allen Parkway Houston, TX 77019-1807 CLASS B UBS PaineWebber Inc. FBO Beverly Lombardo 2,415.060 5.99% 7720 Fairmount Downers Grove, IL 60516-3932 UBS PaineWebber Inc. FBO Thomas M. Cappels & Michael D. Cappels TTEES of the Thomas M. Family Trust DTD 2,849.003 7.06% 3/23/99 568 Anchor Circle Redwood City, CA 94065-8454 UBS PaineWebber FBO PaineWebber Cust Tom Cappels 3,418.804 8.48% 568 Anchor Circle Redwood City, CA 94065-8454 UBS PaineWebber Inc. FBO Jane F. Fair 5,183.395 12.85% 6 Dogwood Court Spring Lake Heights, NJ 07762-2103 CLASS C UBS PaineWebber Inc. FBO Kevin J. Sentell & Amy B. Sentell JTWROS 4,677.268 15.67% 25 Okeena Drive Jackson, TN 38305-8819 UBS PaineWebber Inc. FBO Kenneth Axelrod TTEE Kenneth Axelrod Profit Sharing Plan DTD 3,271.467 10.96% 1/1/95 17 W. Main Street Smithtown, NY 11787-2602
51
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS PaineWebber Inc. FBO Kenneth Axelrod TTEE Kenneth Axelrod Money Purchase Plan DTD 2,432.180 8.15% 1/1/95 17 W. Main Street Smithtown, NY 11787-2602 UBS PaineWebber Inc. FBO Luna Films Inc. Attn: Enrique Trigo 1,771.891 5.93% Cond Villa Del Mar Este Apt. 15-H Isla Verde, PR 00979-0000 USB PaineWebber Inc. FBO PaineWebber Customer UBS PaineWebber CDN FBO William W. Wade 1,611.903 5.40% P.O. Box 3321 Weehawken, NJ 07086-8154 UBS PaineWebber Inc. FBO Louis A. Raimond & Jean Anne Raimond JT WROS 4,716.981 15.80% 1604 Fieldstone Lane Sewickley, PA 15143-9010 CLASS Y UBS PaineWebber Inc. FBO Howard, Smith & Levin Savings & Profit Sharing Plan 186,266.010 5.23% 1330 Avenue of the Americas New York, NY 10019-5400 UBS Omnibus Reinvest Account 1,284,447.727 36.05% 10 E. 50th Street New York, NY 10022-6831 Wilmington Trust Co. FBO Brinson Partners Inc. Def. Comp. Plan A/C 47387-3 235,104.723 6.60% c/o Mutual Funds P.O. Box 8882 Wilmington, DE 19899-8882 Charles Schwab & Co. Inc. Attn: Mutual Funds 311,896.959 8.75% 101 Montgomery Street San Francisco, CA 94104-4122 Island Holdings Inc. Attn: Accounting Dept. 324,726.545 9.11% P.O. Box 1520 Honolulu, HI 96806-1520
52
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- T. Rowe Price Trust Co. FBO Retirement Plan Clients 326,896.459 9.18% P.O. Box 17215 Baltimore, MD 21297-1215 UBS U.S. EQUITY FUND CLASS A Merrill Lynch Pierce Fenner & Smith For the Sole Benefit of its Customers Attn: Service Team 575,017.873 70.18% 4800 Deer Lane Drive E. Fl. 3 Jacksonville, FL 32246-6484 Fox & Co. P.O. Box 976 91,839.862 11.21% New York, NY 10268-0976 CLASS B UBS PaineWebber Inc. FBO Scot Stern & Norma F. Stern TTEES FBO The Stern Family 3,657.27 21.20% Trust UAD 9/25/87 1412 Ventana Drive Escondido, CA 92029-5519 UBS PaineWebber Inc. FBO Daniel L. Wyant & Karen S. Struck SUCC TTEES Della E. 1,057.50 6.13% Attn: K.S. Struck La Salle Bank 135 S. LaSalle, Suite 4010 Chicago, IL 60674-1000 UBS PaineWebber Inc. FBO Judith A. Kunkel and Robert P. Kunkel TTEES 2,980.34 17.28% Judith A. Kunkel Trust 715 Smoke Tree Road Deerfield, IL 60015-4556 UBS PaineWebber Inc. FBO Tony Haywood Harris & Virginia Ruth Harris JT TEN 4,210.02 24.40% 7335 Saint Marys Avenue La Plata, MD 20646-3968 UBS PaineWebber Inc. FBO Iris Gott Trust Account Julian Gott Trustee 1,955.48 11.33% 10 Stoneleigh Drive Scotch Plains, NJ 07076-2947
53
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- CLASS C UBS PaineWebber Inc. FBO Fred S. Fry, Jr. 901.369 27.94% 4201 S. 31st Street, Apt. #206 Arlington, VA 22206-2148 UBS PaineWebber Inc. FBO Valerie Gross 356.283 11.04% 1712 S. Bedford Street Los Angeles, CA 90035-4321 Doris E. Kellar One Songbird Drive 1,367.188 42.38% Kennebunkport, ME 04046-5829 UBS PaineWebber Inc. FBO Reynold N. Henry 505.732 15.68% 137 Wanamaker Road Northfield, MA 01360-9664 CLASS Y Wilmington Trust Co. TTEE Brinson Partners Inc. Supp. Inc. Comp. Pl. 638,212.782 9.61% c/o Mutual Funds P.O. Box 8880 Wilmington, DE 19899-8880 State Street Bank & Trust Co. TTEE The UBS Savings & Investment Plan 3,117,760.122 46.94% 105 Rosemont Road Westwood, MA 02090-2318 The Bank of New York as Trustee FBO Georgia Power Post Retirement Life Benefits Trust 380,151.784 5.72% Attn: Paula Kornfield 1 Wall Street, Floor 12 New York, NY 10286-0001 IMS & Co. FBO Various Customers 598,992.675 9.02% P.O. Box 3865 Englewood, CO 80155-3865 Charles Schwab & Co. Inc. Attn: Mutual Funds 636,665.443 9.59% 101 Montgomery Street San Francisco, CA 94104-4122
54
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS U.S. BOND FUND CLASS A Charles Schwab & Co. Inc. Attn: Mutual Funds 75,828.791 6.63% 101 Montgomery Street San Francisco, CA 94104-4122 SEI Trust Co. c/o Christiana B&T Attn: MF Admin. 492,519.946 43.05% One Freedom Valley Drive Oaks, PA 19456 SEI Trust Co. c/o Christiana B&T Attn: MF Admin. 253,408.560 22.15% One Freedom Valley Drive Oaks, PA 19456 Swiss Benevolent Society of NY -- General Account 63,785.811 5.58% 608 Fifth Avenue, Suite 309 New York, NY 10020 CLASS B UBS PaineWebber Inc. FBO PaineWebber Customer UBS PaineWebber CDN FBO Raymond G. Berry 7,109.005 11.30% P.O. Box 3321 Weehawken, NJ 07086-8154 UBS PaineWebber Inc. FBO Justin M. Wechsler 4,774.577 7.59% 415 S. Broadway Pendleton, IN 46064-1207 UBS PaineWebber Inc. FBO PaineWebber Customer Tom Cappels 6,050.931 9.62% 568 Anchor Circle Redwood City, CA 94065-1207 UBS PaineWebber Inc. FBO PaineWebber Customer UBS PaineWebber CDN FBO Shirley S. Davis 4,453.081 7.08% P.O. Box 3321 Weehawken, NJ 07086-8154 UBS PaineWebber Inc. FBO Charles L. Mott 4,016.725 6.38% 13802 Ansari Lane Baldwin, MD 21013-9765
55
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS PaineWebber Inc. FBO PaineWebber Customer Gerard V. Smith -- IRA/Rollover 9,300.239 14.78% 333 Cedar Avenue Islip, NY 11751-4627 CLASS C UBS PaineWebber Inc. FBO The Lowerre Family Charitable Trust, Paul C. Lowerre TTEE 42,938.357 48.00% 123 East 80th Street New York, NY 10021-0305 UBS PaineWebber Inc. FBO PaineWebber Customer Jeffrey A. Hinson -- Rollover IRA 5,463.417 6.11% 553 Green Mountain Street Simi Valley, CA 93065-0611 Robert N. George 8236 Post Road 5,799.991 6.48% Allison Park, PA 15101-3348 UBS PaineWebber Inc. FBO George Marres 7,446.391 8.32% P.O. Box 30, Town Hill Road Sandisfield, MA 01255-0030 CLASS Y Maureen K. Wolfson TTEE Equit Life Sep. Acct. 65 on behalf of var. 401(k) plans 434,218.573 5.64% Equitable Life Ken Butka 200 Plaza Drive, Suite 2 Secaucus, NJ 07094-3607 State Street Bank & Trust Co. TTEE The UBS Savings & Investment Plan 2,043,410.337 26.53% 105 Rosemont Road Westwood, MA 02090-2318 Charles Schwab & Co. Inc. Attn: Mutual Funds 2,257,862.002 29.32% 101 Montgomery Street San Francisco, CA 94104-4122 The Zanvyl & Isabella Krieger Fund Attn: Marilyn Loux 829,598.718 10.77% 101 W. Mount Royal Ave. Baltimore, MD 21201-5708
56
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS HIGH YIELD FUND CLASS Y UBS Omnibus Reinvest Account 1,463,186.178 25.17% 10 E. 50th Street New York, NY 10022-6831 State Street Bank & Trust Co. TTEE The UBS Savings & Investment Plan 597,816.709 10.28% 105 Rosemont Road Westwood, MA 02090-2318 Wilmington Trust Co. FBO Brinson Partners Inc. Supp Incent. Plan 307,148.333 5.28% P.O. Box 8882 Wilmington, DE 19899-8882 UBS INTERNATIONAL EQUITY FUND CLASS A Swisstor & Company UBS AG Canada 84,686.390 32.67% 154 University Avenue, 7th Floor Toronto, Ontario CA M5H3Z4 UBS PaineWebber Inc. FBO PaineWebber Customer Hans Ueli Surber 23,174.242 8.94% 2 Saturn Street San Francisco, CA 94114-1421 UBS PaineWebber FBO Patricia DeSomma 25,612.947 9.88% c/o Roney 302 No. La Brea Avenue #217 Los Angeles, CA 90026-2036 UBS PaineWebber Inc. FBO PJ Mechanical Corp. ABC Employee Pension Plan 17,302.081 6.68% 135 W. 18th Street New York, NY 10011-4104 CLASS B UBS PaineWebber Inc. FBO PaineWebber Cust UBS PaineWebber CDN FBO 245.700 10.79% Young Hee Baik P.O. Box 3321 Weehawken, NJ 07086-8154
57
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- UBS PaineWebber Inc. FBO PaineWebber Cust UBS PaineWebber CDN FBO 245.700 10.79% Seung Ku Baik P.O. Box 3321 Weehawken, NJ 07086-8154 UBS PaineWebber Inc. FBO PaineWebber Cust Carl C. Andersen 282.081 12.39% IRA/Rollover Account 1422 Haubert Street Baltimore, MD 21230-5222 UBS PaineWebber Inc. FBO PaineWebber Cust Carol L. Andersen 221.230 9.72% IRA/Rollover Account 1422 Haubert Street Baltimore, MD 21230-5222 UBS PaineWebber Inc. FBO PaineWebber Cust Mary Glynn Furlong 612.484 26.91% IRA Account 77 Westgate Blvd. Plandome, NY 11030-1452 UBS PaineWebber Inc. FBO PaineWebber Cust UBS PaineWebber CDN FBO 668.865 29.39% Stanley Trocchia P.O. Box 3321 Weehawken, NJ 07087-8154 CLASS C UBS PaineWebber Inc. FBO Attollee M. Viall 731.283 19.36% 303 N. Palisades Drive Signal Mountain, TN 37377-3040 UBS PaineWebber Inc. FBO Stevenson F. Barnes 3,045.067 80.64% 3615 Meadowbrook Avenue Nashville, TN 37205-2349 CLASS Y Brown Brothers Harriman Cust. For AFP Provida Attn: Susie Pestana 4,271,356.784 28.69% 59 Wall Street New York, NY 10005-2808
58
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- Edna McConnell Clark Foundation 250 Park Avenue, Suite 900 2,579,803.268 17.33% New York, NY 10177-0901 American Express Trust Co. FBO American Express Trust Ret. Svc. Plan 1,469,896.181 9.87% c/o Pat Brown 50534 AXP Financial Center Minneapolis, MN 55474-0505 State Street Bank & Trust Co. TTEE The UBS Savings & Investment Plan 1,698,427.647 11.41% 105 Rosemont Road Westwood, MA 02090-2318 UBS U.S. VALUE EQUITY FUND CLASS A UBS PaineWebber Inc. FBO PaineWebber Cust Phil K. Kemp Rollover IRA 7,928.642 8.77% 953 Sylvania Drive Dallas, TX 75218-2942 UBS PaineWebber Inc. FBO Anthony J. Torcasio and Faith G. Torcasio JT WROS 13,126.753 14.53% 1981 Jelinda Drive Montecito, CA 93108-2673 UBS PaineWebber Inc. FBO Peter W. Hubschmitt 9,097.175 10.07% 3760 Bobbin Mill Road Tallahassee, FL 32312-1202 UBS PaineWebber Inc. FBO Mary Lou Towner 7,571.813 8.38% 16142 Avenida Venusto #1 San Diego, CA 92128-3301 UBS PaineWebber Inc. FBO Barbara Brown Platt Family Trust U/I 09/19/88 22,626.333 25.04% Roc Page Platt TTEE 3915 Willow Wichita, KS 67218-1238 UBS PaineWebber Inc. FBO The Shirvanian Investment Family Partnership 23,764.259 26.30% 23 Corporate Plaza #247 Newport Beach, CA 92660-7934
59
NAME & ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENTAGE ----------------------------------- ---------------- ---------- CLASS B UBS PaineWebber Inc. FBO James A. & Dana D. Abbott COTTEE FBO Abbott Family Trust 13,267.46 65.31% UAD 2/25/00 3449 Quiet CV Corona De Mar, CA 92625-1637 UBS PaineWebber Inc. FBO Edward J. Mieczkowski & Constance S. Mieczkowski JTWROS 1,039.50 5.12% 4 Laurel Drive Hadley, MA 01035-9726 CLASS C UBS PaineWebber Inc. FBO The Crescent Hose Company 5,205.324 20.70% P.O. Box 89 North East, PA 16428-0089 UBS PaineWebber Inc. FBO PaineWebber Cust Lee K. Hodgson 2,536.154 10.08% 7895 Mitchell Farm Lane Cincinnati, OH 45242-6409 UBS PaineWebber Inc. FBO Lee K. Hodgson 5,230.769 20.80% 7895 Mitchell Farm Lane Cincinnati, OH 45242-6409 UBS PaineWebber Inc. FBO Margaret Hodgson 3,851.250 15.31% 7895 Mitchell Farm Lane Cincinnati, OH 45242-6409 UBS PaineWebber Inc. FBO Mr. Eric North Anderson and Mrs. Maureen Mihm Anderson 2,373.371 9.44% JT WROS 325 Olde Chapel Trail Pittsburgh, PA 15238-1255 UBS PaineWebber Inc. FBO Reynold H. Henry 1,291.322 5.13% 137 Wanamaker Road Northfield, MA 01360-9664 CLASS Y Brinson Advisors, Inc. 51 W. 52nd Street 300,001.000 99.92% New York, NY 10019-6119
60 As of April 2, 2002, each individual officer and Trustee of the Trust owned beneficially less than 1% of the outstanding shares of each class of each Fund and of the Trust. Also, as of April 2, 2002, the officers and Trustees of the Trust, as a group, owned less than 1% of the outstanding shares of each class of the Funds and of the Trust. VOTING METHODS. You may vote your shares in one of several ways. You can vote by mail, fax, telephone, the Internet or in person at the Special Meeting. To vote by mail, sign, date and send us the enclosed proxy card in the envelope provided. To vote by fax, sign the proxy and fax both sides of the card to 1-888-796-9932. To vote by telephone, call 1-800-597-7836. To vote via the Internet, access the website https://vote.proxy-direct.com and use the control number that appears on your proxy card. Proxy cards that are properly signed, dated and received at or prior to the Special Meeting will be voted as specified. If you specify a vote for any of Proposals #1 through #5, your proxy card will be voted as you indicated. If you simply sign and date the proxy card, but do not specify a vote for any of Proposals #1 through #5, your shares will be voted IN FAVOR of the election of the four Trustees (Proposal #1), IN FAVOR of the elimination of the permanent expense caps (Proposal #2), IN FAVOR of the Amended Agreements (Proposal #3), IN FAVOR of the amendments to the Funds' fundamental investment restrictions (Proposals #4(a)-#4(h)) and IN FAVOR of the elimination of certain fundamental investment restrictions of the Funds (Proposals #5(a)-#5(f)). REVOCATION OF PROXIES. You may revoke your proxy at any time by sending to the Trust a written revocation or a later-dated proxy card that is received at or before the Special Meeting, or by attending the Special Meeting and voting in person. SOLICITATION OF PROXIES. Your vote is being solicited by the Board. The cost of preparing and mailing the notice of meeting, proxy cards, this Proxy Statement, and any additional proxy materials, has been or will be shared equally between the Trust and UBS Global AM. The Trust reimburses brokerage firms and others for their expenses in forwarding proxy material to the beneficial owners and soliciting them to execute proxies. The Trust does not reimburse Trustees and officers of the Trust, or regular employees and agents of the Advisor or UBS Global AM involved in the solicitation of proxies. Proxy solicitations will be made primarily by mail, but they may also be made by telephone, telegraph, personal interview or oral solicitations conducted by certain officers or employees of the Trust, the Advisor or UBS Global AM, without additional or special compensation. The Trust has engaged Alamo Direct, a proxy solicitation firm, to assist in the solicitation of proxies from brokers, banks, other institutional holders and individual shareholders, which is expected to cost approximately $16,000. VOTING BY BROKER-DEALERS. The Trust expects that, before the Special Meeting, broker-dealer firms holding shares of the Funds in "street name" for their customers will request voting instructions from their customers and beneficial owners. If these instructions are not received by the date specified in the broker-dealer firms' proxy solicitation materials, the Trust understands that New York Stock Exchange rules permit the broker-dealers to vote on certain of the proposals to be considered at the Special Meeting on behalf of their customers and beneficial owners. Certain broker-dealers may exercise discretion over shares held in their name for which no instructions are received by voting these shares in the same proportion as they vote shares for which they received instructions. QUORUM AND REQUIRED VOTE. The presence, in person or by proxy, of the holders of record of a majority of the shares of the Funds, issued and outstanding and entitled to vote, shall constitute a quorum for the transaction of business at the Special Meeting for the Trust. For purposes of determining the presence of a quorum and counting votes on the matters presented, shares represented by abstentions and "broker non-votes" likely will be counted as present, but likely not treated as votes cast, at the Special Meeting. The affirmative vote necessary to approve a matter under consideration is determined with reference to a percentage of votes considered to be present at the Special Meeting, which would have the effect of treating abstentions and broker non-votes as if they were votes against the proposal. 61 As described in Proposal #1, each of the Trustees will be elected by the affirmative vote of a plurality of the votes cast by the shareholders of the Trust. The approval of all other Proposals described in this Proxy Statement for each Fund will be determined on the basis of a vote of a "majority of the outstanding voting securities" of the Fund, as defined in and required by the 1940 Act. This vote requires the lesser of (A) 67% or more of the voting securities of the Fund present at the Special Meeting, if the holders of more than 50% of the outstanding voting securities of such Fund are present or represented by proxy; or (B) more than 50% of the outstanding voting securities of such Fund. ADJOURNMENT. In the event that a quorum is not present at the Special Meeting, the Special Meeting will be adjourned to permit further solicitation of proxies. In the event that a quorum is present, but sufficient votes have not been received to approve one or more of the Proposals, the persons named as proxies may propose one or more adjournments of the Special Meeting to permit further solicitation of proxies with respect to those Proposals. The persons named as proxies will vote in their discretion on questions of adjournment those shares for which proxies have been received that grant discretionary authority to vote on matters that may properly come before the Special Meeting. SHAREHOLDER PROPOSALS. The Trust is not required, and does not intend, to hold regular annual meetings of shareholders. Shareholders wishing to submit proposals for consideration for inclusion in a proxy statement for the next meeting of shareholders should send their written proposals to c/o UBS Global Asset Management (US) Inc., 51 West 52nd Street, 14th Floor, New York, NY 10019-6114, Attn: Secretary, so they are received within a reasonable time before any such meeting. The Trustees know of no business, other than the matters mentioned in the Notice and described above, that is expected to come before the Special Meeting. Should any other matter requiring a vote of shareholders arise, including any question as to an adjournment or postponement of the Special Meeting, the persons named as proxies will vote on such matters according to their best judgment in the interests of the Trust. Respectfully, Amy R. Doberman Secretary The UBS Funds April 30, 2002 New York, New York 62 EXHIBIT A ADDITIONAL INFORMATION REGARDING THE EXECUTIVE OFFICERS OF THE TRUST The table below provides additional information regarding the executive officers of the Trust, including information about the titles they hold with the Trust and their principal occupations during the past five years.
TERM OF OFFICE AND NAME, ADDRESS POSITIONS HELD LENGTH OF AND AGE WITH THE TRUST TIME SERVED* PRINCIPAL OCCUPATIONS DURING THE PAST 5 YEARS ------- -------------- ------------ --------------------------------------------- Amy R. Doberman*** Vice President and Since 2000 Managing Director and General Counsel UBS Age: 40 Secretary Global Asset Management (US) Inc. ("UBS Global AM") since 2000. General Counsel, Aeltus Investment Management, Inc. 1997-2000 and previously, Assistant Chief Counsel, SEC's Division of Investment Management. Secretary of UBS Supplementary Trust and Vice President and Secretary of 24 other investment companies (consisting of 85 portfolios) for which UBS Global AM, UBS Global Asset Management (Americas) Inc., UBS PaineWebber or one of their affiliates serves as investment advisor, sub-advisor or manager. Paul H. Treasurer and Since 2001 Executive Director and Head of the Mutual Fund Schubert**** Principal Finance Department, UBS Global AM. Treasurer Age: 39 Accounting Officer and Principal Accounting Officer of UBS Supplementary Trust and two investment companies (consisting of 39 portfolios) and Vice President and Treasurer of 22 other investment companies (consisting of 46 portfolios) for which UBS Global AM, UBS Global Asset Management (Americas) Inc., UBS PaineWebber or one of their affiliates serves as investment advisor, sub-advisor or manager. David E. Floyd** Assistant Secretary Since 1998 Director, UBS Global Asset Management Age: 33 (Americas) Inc. since 2000; Associate Director, UBS Global Asset Management (Americas) Inc., 1998-2000; Associate, UBS Global Asset Management (Americas) Inc. 1994-1998; Trust Officer, Brinson Trust Company since 2000; Assistant Trust Officer, Brinson Trust Company 1993-2000; and Assistant Secretary, UBS Supplementary Trust and two investment companies (consisting of 39 portfolios) for which UBS Global AM, UBS Global Asset Management (Americas) Inc., UBS PaineWebber or one of their affiliates serves as investment advisor, sub-advisor or manager.
A-1
TERM OF OFFICE AND NAME, ADDRESS POSITIONS HELD LENGTH OF AND AGE WITH THE TRUST TIME SERVED* PRINCIPAL OCCUPATIONS DURING THE PAST 5 YEARS ------- -------------- ------------ --------------------------------------------- Mark F. Kemper** Assistant Secretary Since 1999 Executive Director, UBS Global Asset Age: 44 Management (Americas) Inc. since 2001; Director, UBS Global Asset Management (Americas) Inc. 1997-2001; Partner, UBS Global Asset Management (Americas) Inc. 1993-1997; Secretary, UBS Global Asset Management (Americas) Inc. since 1999; Assistant Secretary, UBS Global Asset Management (Americas) Inc. 1993-1999; Assistant Secretary, Brinson Trust Company since 1993; Secretary, UBS Global Asset Management (New York) Inc. since 1998; Assistant Secretary, Brinson Holdings, Inc. 1993-1998; and Assistant Secretary, UBS Supplementary Trust and two investment companies (consisting of 39 portfolios) for which UBS Global Asset Management (Americas) Inc., UBS Global AM, UBS PaineWebber or one of their affiliates serves as investment advisor, sub-advisor or manager. Joseph T. Assistant Treasurer Since 2001 Director and a senior manager of the mutual Malone**** fund finance department, UBS Global AM since Age: 34 June 2001; Controller, AEA Investors Inc. 2000-2001; Manager, Investment Management Services Department of PricewaterhouseCoopers LLC. 1998-2000; Vice President, Mutual Fund Services Group, Bankers Trust & Co. prior to 1998; and Assistant Treasurer of three investment companies for which UBS Global Asset Management (Americas) Inc., UBS Global AM, UBS PaineWebber or one of their affiliates serves as investment advisor, sub-advisor or manager.
* Each officer serves for an indefinite term at the pleasure of the Board. ** This person's business address is UBS Global Asset Management (Americas) Inc., 209 South LaSalle Street, Chicago, IL 60604-1295. *** This person's business address is UBS Global Asset Management (US) Inc., 51 West 52nd Street, New York, NY 10019-6114. **** This person's business address is UBS Global Asset Management (US) Inc., Newport Center III, 499 Washington Blvd., 14th Floor, Jersey City, NJ 07310-1998. A-2 EXHIBIT B EXPENSES AND FEE TABLES AND EXPENSE EXAMPLES For purposes of comparing the fees and expenses under the permanent expense cap and the one-year contractual expense cap, the Expenses and Fee Tables for each Fund are provided on the following pages and describe the fees and expenses that a shareholder may pay directly or indirectly as an investor in the Fund. The information contained in the Expenses and Fee Tables for each Fund is identical under the permanent expense cap and the one-year contractual expense cap. Examples are also provided for each Fund. The Examples are intended to help you compare the cost of investing in the Fund with the permanent expense cap with the cost of investing in the Fund with the one-year contractual expense cap. The Examples assume that you invest $10,000 in each Fund for the time periods indicated and then redeem all of your shares at the end of those periods. Each Example also assumes that your investment has a 5% return each year. However, each Fund's actual returns may be greater or less than the hypothetical 5% return used. The Examples for each Fund reflect net operating expenses after the contractual fee waivers and expense reimbursements under the permanent expense cap and one-year expense cap, respectively. The Example for the permanent expense cap for each Fund assumes that the current expense cap remained in place for the entire ten years, while the Example for the one-year contractual expense cap only assumes that the current expense cap was in place during year one. These are Examples only, and do not represent future expenses, which may be greater or less than those shown on the following pages. B-1 EXPENSES AND FEE TABLES SHAREHOLDER TRANSACTION EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------------------------------------------------------------------------------- Redemption Fee Maximum Front-End (as a % of Sales Charge (Load) amount Maximum Sales Imposed on redeemed Charge (Load) Purchases Maximum Contingent within 90 days Fund Names & Classes of (as a % of offering (as a % of offering Deferred Sales Charge (Load) Exchange of purchase, if Shares price) price) (as a % of offering price) Fee applicable) ---------------------------------------------------------------------------------------------------------------------------------- UBS GLOBAL BALANCED FUND Class A 5.50% 5.50% None None 1.00% Class B 5.00% None 5.00% None None Class C 2.00% 1.00% 1.00% None None Class Y None None None None 1.00% ----------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------- Management Fee Distribution and Total Annual Waivers & Fund Names & Management Service Other Fund Operating Expense Net Classes of Shares Fees (12b-1) Fees Expenses(2) Expenses Reimbursements Expenses(3) --------------------------------------------------------------------------------------------------------------------------- UBS GLOBAL BALANCED FUND Class A 0.80% 0.25% 0.19% 1.24% 0.00% 1.24% Class B 0.80% 1.00% 0.19% 1.99% 0.00% 1.99% Class C 0.80% 1.00% 0.19% 1.99% 0.00% 1.99% Class Y 0.80% None 0.19% 0.99% 0.00% 0.99% ---------------------------------------------------------------------------------------------------------------------------
(1) The operating expenses shown for the Class A shares and Class Y shares are based on expenses incurred during the Fund's most recent fiscal year ending June 30, 2001, but have been restated to reflect the Fund's current fees. The Class B shares and Class C shares are new classes of shares, so the operating expenses for these classes are based on estimated expenses for the Fund's current fiscal year. (2) Includes an administrative fee of 0.075% paid by the Fund to UBS Global AM. (3) UNDER THE PERMANENT EXPENSE CAP -- the Advisor has contracted to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 1.10% of each class of shares of the Fund. UNDER THE ONE-YEAR CONTRACTUAL EXPENSE CAP -- the Advisor will agree to waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 1.10% of each class of shares of the Fund for a period of one year from July 1, 2002 to June 30, 2003.
Examples: ------------------------------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------------------------------------------- UBS GLOBAL BALANCED FUND (WITH PERMANENT EXPENSE CAP) Class A $669 $922 $1,194 $1,967 Class B (assuming sale of all shares at end of period) 702 924 1,273 1,946 Class B (assuming no sale of shares) 202 624 1,073 1,946 Class C (assuming sale of all shares at end of period) 400 718 1,162 2,394 Class C (assuming no sale of shares) 300 718 1,162 2,394 Class Y 101 315 547 1,213 UBS GLOBAL BALANCED FUND (WITH ONE YEAR CONTRACTUAL EXPENSE CAP) Class A $669 $922 $1,194 $1,967 Class B (assuming sale of all shares at end of period) 702 924 1,273 1,946 Class B (assuming no sale of shares) 202 624 1,073 1,946 Class C (assuming sale of all shares at end of period) 400 718 1,162 2,394 Class C (assuming no sale of shares) 300 718 1,162 2,394 Class Y 101 315 547 1,213
B-2 EXPENSES AND FEE TABLES SHAREHOLDER TRANSACTION EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------------------------------------------------------------------------------- Redemption Fee Maximum Front-End (as a % of Sales Charge (Load) amount Maximum Sales Imposed on redeemed Charge (Load) Purchases Maximum Contingent within 90 days Fund Names & Classes of (as a % of offering (as a % of offering Deferred Sales Charge (Load) Exchange of purchase, if Shares price) price) (as a % of offering price) Fee applicable) ---------------------------------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND Class A 5.50% 5.50% None None 1.00% Class B 5.00% None 5.00% None None Class C 2.00% 1.00% 1.00% None None Class Y None None None None 1.00% ----------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------- Management Fee Distribution and Total Annual Waivers & Fund Names & Management Service Other Fund Operating Expense Net Classes of Shares Fees (12b-1) Fees Expenses(2) Expenses Reimbursements Expenses(3) --------------------------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND Class A 0.80% 0.25% 0.36% 1.41% 0.16% 1.25% Class B 0.80% 1.00% 0.36% 2.16% 0.16% 2.00% Class C 0.80% 1.00% 0.36% 2.16% 0.16% 2.00% Class Y 0.80% None 0.36% 1.16% 0.16% 1.00% ---------------------------------------------------------------------------------------------------------------------------
(1) The operating expenses shown for the Class A shares and Class Y shares are based on expenses incurred during the Fund's most recent fiscal year ending June 30, 2001, but have been restated to reflect the Fund's current fees. The Class B shares and Class C shares are new classes of shares, so the operating expenses for these classes are based on estimated expenses for the Fund's current fiscal year. (2) Includes an administrative fee of 0.075% paid by the Fund to UBS Global AM. (3) UNDER THE PERMANENT EXPENSE CAP -- the Advisor has contracted to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 1.00% of each class of shares of the Fund. UNDER THE ONE-YEAR CONTRACTUAL EXPENSE CAP -- the Advisor will agree to waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 1.00% of each class of shares of the Fund for a period of one year from July 1, 2002 to June 30, 2003.
Examples: ------------------------------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------------------------------------------- UBS GLOBAL EQUITY FUND (WITH PERMANENT EXPENSE CAP) Class A $670 $925 $1,199 $1,978 Class B (assuming sale of all shares at end of period) 703 927 1,278 1,956 Class B (assuming no sale of shares) 203 627 1,078 1,956 Class C (assuming sale of all shares at end of period) 401 721 1,167 2,404 Class C (assuming no sale of shares) 301 721 1,167 2,404 Class Y 102 318 552 1,225 UBS GLOBAL EQUITY FUND (WITH ONE YEAR CONTRACTUAL EXPENSE CAP) Class A $670 $956 $1,263 $2,132 Class B (assuming sale of all shares at end of period) 703 961 1,345 2,115 Class B (assuming no sale of shares) 203 661 1,145 2,115 Class C (assuming sale of all shares at end of period) 401 754 1,233 2,556 Class C (assuming no sale of shares) 301 754 1,233 2,556 Class Y 102 353 623 1,395
B-3 EXPENSES AND FEE TABLES SHAREHOLDER TRANSACTION EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------------------------------------------------------------------------------- Redemption Fee Maximum Front-End (as a % of Sales Charge (Load) amount Maximum Sales Imposed on redeemed Charge (Load) Purchases Maximum Contingent within 90 days Fund Names & Classes of (as a % of offering (as a % of offering Deferred Sales Charge (Load) Exchange of purchase, if Shares price) price) (as a % of offering price) Fee applicable) ---------------------------------------------------------------------------------------------------------------------------------- UBS GLOBAL TECHNOLOGY FUND Class A 5.50% 5.50% None None 1.00% Class B 5.00% None 5.00% None None Class C 2.00% 1.00% 1.00% None None Class Y None None None None 1.00% ----------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------- Management Fee Distribution and Total Annual Waivers & Fund Names & Management Service Other Fund Operating Expense Net Classes of Shares Fees (12b-1) Fees Expenses(2) Expenses Reimbursements Expenses(3) --------------------------------------------------------------------------------------------------------------------------- UBS GLOBAL TECHNOLOGY FUND Class A 1.40% 0.25% 11.96% 13.61% 11.81% 1.80% Class B 1.40% 1.00% 11.96% 14.36% 11.81% 2.55% Class C 1.40% 1.00% 11.96% 14.36% 11.81% 2.55% Class Y 1.40% None 11.96% 13.28% 11.81% 1.55% ---------------------------------------------------------------------------------------------------------------------------
(1) The operating expenses shown for the Class A shares and Class Y shares are based on expenses incurred during the Fund's most recent fiscal year ending June 30, 2001, but have been restated to reflect the Fund's current fees. The Class B shares and Class C shares are new classes of shares, so the operating expenses for these classes are based on estimated expenses for the Fund's current fiscal year. (2) Includes an administrative fee of 0.075% paid by the Fund to UBS Global AM. (3) UNDER THE PERMANENT EXPENSE CAP -- the Advisor has contracted to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 1.55% of each class of shares of the Fund. UNDER THE ONE-YEAR CONTRACTUAL EXPENSE CAP -- the Advisor will agree to waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 1.55% of each class of shares of the Fund for a period of one year from July 1, 2002 to June 30, 2003.
Examples: ------------------------------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------------------------------------------- UBS GLOBAL TECHNOLOGY FUND (WITH PERMANENT EXPENSE CAP) Class A $723 $1,085 $1,471 $2,550 Class B (assuming sale of all shares at end of period) 758 1,093 1,555 2,534 Class B (assuming no sale of shares) 258 793 1,355 2,534 Class C (assuming sale of all shares at end of period) 456 886 1,442 2,956 Class C (assuming no sale of shares) 356 886 1,442 2,956 Class Y 158 490 845 1,845 UBS GLOBAL TECHNOLOGY FUND (WITH ONE YEAR CONTRACTUAL EXPENSE CAP) Class A $723 $3,154 $5,184 $8,914 Class B (assuming sale of all shares at end of period) 758 3,232 5,328 8,942 Class B (assuming no sale of shares) 258 2,932 5,128 8,942 Class C (assuming sale of all shares at end of period) 456 3,002 5,177 9,063 Class C (assuming no sale of shares) 356 3,002 5,177 9,063 Class Y 158 2,683 4,807 8,756
B-4 EXPENSES AND FEE TABLES SHAREHOLDER TRANSACTION EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------------------------------------------------------------------------------- Redemption Fee Maximum Front-End (as a % of Sales Charge (Load) amount Maximum Sales Imposed on redeemed Charge (Load) Purchases Maximum Contingent within 90 days Fund Names & Classes of (as a % of offering (as a % of offering Deferred Sales Charge (Load) Exchange of purchase, if Shares price) price) (as a % of offering price) Fee applicable) ---------------------------------------------------------------------------------------------------------------------------------- UBS GLOBAL BIOTECH FUND Class A 5.50% 5.50% None None 1.00% Class B 5.00% None 5.00% None None Class C 2.00% 1.00% 1.00% None None Class Y None None None None 1.00% ----------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------- Management Fee Distribution and Total Annual Waivers & Fund Names & Management Service Other Fund Operating Expense Net Classes of Shares Fees (12b-1) Fees Expenses(2) Expenses Reimbursements Expenses(3) --------------------------------------------------------------------------------------------------------------------------- UBS GLOBAL BIOTECH FUND Class A 1.15% 0.25% 9.03% 10.43% 8.88% 1.55% Class B 1.15% 1.00% 9.03% 11.18% 8.88% 2.30% Class C 1.15% 1.00% 9.03% 11.18% 8.88% 2.30% Class Y 1.15% None 9.03% 10.10% 8.88% 1.30% ---------------------------------------------------------------------------------------------------------------------------
(1) The operating expenses shown for the Class A shares and Class Y shares are based on expenses incurred during the Fund's most recent fiscal year ending June 30, 2001, but have been restated to reflect the Fund's current fees. The Class B shares and Class C shares are new classes of shares, so the operating expenses for these classes are based on estimated expenses for the Fund's current fiscal year. (2) Includes an administrative fee of 0.075% paid by the Fund to UBS Global AM. (3) UNDER THE PERMANENT EXPENSE CAP -- the Advisor has contracted to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 1.30% of each class of shares of the Fund. UNDER THE ONE-YEAR CONTRACTUAL EXPENSE CAP -- the Advisor will agree to waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 1.30% of each class of shares of the Fund for a period of one year from July 1, 2002 to June 30, 2003.
Examples: ------------------------------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------------------------------------------- UBS GLOBAL BIOTECH FUND (WITH PERMANENT EXPENSE CAP) Class A $699 $1,103 $1,348 $2,294 Class B (assuming sale of all shares at end of period) 733 1,018 1,430 2,276 Class B (assuming no sale of shares) 233 718 1,230 2,276 Class C (assuming sale of all shares at end of period) 431 811 1,318 2,709 Class C (assuming no sale of shares) 331 811 1,318 2,709 Class Y 132 412 713 1,568 UBS GLOBAL BIOTECH FUND (WITH ONE YEAR CONTRACTUAL EXPENSE CAP) Class A $699 $2,629 $4,355 $7,914 Class B (assuming sale of all shares at end of period) 733 2,690 4,488 7,942 Class B (assuming no sale of shares) 233 2,390 4,288 7,942 Class C (assuming sale of all shares at end of period) 431 2,466 4,345 8,117 Class C (assuming no sale of shares) 331 2,466 4,345 8,117 Class Y 132 2,122 3,913 7,652
B-5 EXPENSES AND FEE TABLES SHAREHOLDER TRANSACTION EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------------------------------------------------------------- Maximum Front-End Sales Charge (Load) Maximum Sales Imposed on Charge (Load) Purchases Maximum Contingent Fund Names & Classes of (as a % of offering (as a % of offering Deferred Sales Charge (Load) Exchange Shares price) price) (as a % of offering price) Fee ---------------------------------------------------------------------------------------------------------------- UBS GLOBAL BOND FUND Class A 4.50% 4.50% None None Class B 5.00% None 5.00% None Class C 1.75% 1.00% 0.75% None Class Y None None None None ----------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------- Management Fee Distribution and Total Annual Waivers & Fund Names & Management Service Other Fund Operating Expense Net Classes of Shares Fees (12b-1) Fees Expenses(2) Expenses Reimbursements Expenses(3) --------------------------------------------------------------------------------------------------------------------------- UBS GLOBAL BOND FUND Class A 0.75% 0.25% 0.34% 1.34% 0.19% 1.15% Class B 0.75% 1.00% 0.34% 2.09% 0.19% 1.90% Class C 0.75% 0.75% 0.34% 1.84% 0.19% 1.65% Class Y 0.75% None 0.34% 1.01% 0.19% 0.90% ---------------------------------------------------------------------------------------------------------------------------
(1) The operating expenses shown for the Class A shares and Class Y shares are based on expenses incurred during the Fund's most recent fiscal year ending June 30, 2001, but have been restated to reflect the Fund's current fees. The Class B shares and Class C shares are new classes of shares, so the operating expenses for these classes are based on estimated expenses for the Fund's current fiscal year. (2) Includes an administrative fee of 0.075% paid by the Fund to UBS Global AM. (3) UNDER THE PERMANENT EXPENSE CAP -- the Advisor has contracted to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 0.90% of each class of shares of the Fund. UNDER THE ONE-YEAR CONTRACTUAL EXPENSE CAP -- the Advisor will agree to waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 0.90% of each class of shares of the Fund for a period of one year from July 1, 2002 to June 30, 2003.
Examples: ------------------------------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------------------------------------------- UBS GLOBAL BOND FUND (WITH PERMANENT EXPENSE CAP) Class A $562 $799 $1,054 $1,785 Class B (assuming sale of all shares at end of period) 693 897 1,226 1,848 Class B (assuming no sale of shares) 193 597 1,026 1,848 Class C (assuming sale of all shares at end of period) 341 615 988 2,035 Class C (assuming no sale of shares) 266 615 988 2,035 Class Y 92 287 498 1,108 UBS GLOBAL BOND FUND (WITH ONE YEAR CONTRACTUAL EXPENSE CAP) Class A $562 $838 $1,134 $1,974 Class B (assuming sale of all shares at end of period) 693 937 1,300 2,038 Class B (assuming no sale of shares) 193 637 1,106 2,038 Class C (assuming sale of all shares at end of period) 341 655 1,068 2,222 Class C (assuming no sale of shares) 266 655 1,068 2,222 Class Y 92 310 547 1,226
B-6 EXPENSES AND FEE TABLES SHAREHOLDER TRANSACTION EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------------------------------------------------------------- Maximum Front-End Sales Charge (Load) Maximum Sales Imposed on Charge (Load) Purchases Maximum Contingent Fund Names & Classes of (as a % of offering (as a % of offering Deferred Sales Charge (Load) Exchange Shares price) price) (as a % of offering price) Fee ---------------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND Class A 5.50% 5.50% None None Class B 5.00% None 5.00% None Class C 2.00% 1.00% 1.00% None Class Y None None None None ----------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------- Management Fee Distribution and Total Annual Waivers & Fund Names & Management Service Other Fund Operating Expense Net Classes of Shares Fees (12b-1) Fees Expenses(2) Expenses Reimbursements Expenses(3) --------------------------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND Class A 0.70% 0.25% 0.38% 1.33% 0.28% 1.05% Class B 0.70% 1.00% 0.38% 2.08% 0.28% 1.80% Class C 0.70% 1.00% 0.38% 2.08% 0.28% 1.80% Class Y 0.70% None 0.38% 1.08% 0.28% 0.80% ---------------------------------------------------------------------------------------------------------------------------
(1) The operating expenses shown for the Class A shares and Class Y shares are based on expenses incurred during the Fund's most recent fiscal year ending June 30, 2001, but have been restated to reflect the Fund's current fees. The Class B shares and Class C shares are new classes of shares, so the operating expenses for these classes are based on estimated expenses for the Fund's current fiscal year. (2) Includes an administrative fee of 0.075% paid by the Fund to UBS Global AM. (3) UNDER THE PERMANENT EXPENSE CAP -- the Advisor has contracted to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 0.80% of each class of shares of the Fund. UNDER THE ONE-YEAR CONTRACTUAL EXPENSE CAP -- the Advisor will agree to waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 0.80% of each class of shares of the Fund for a period of one year from July 1, 2002 to June 30, 2003.
Examples: ------------------------------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------------------------------------------- UBS U.S. BALANCED FUND (WITH PERMANENT EXPENSE CAP) Class A $651 $866 $1,098 $1,762 Class B (assuming sale of all shares at end of period) 683 866 1,175 1,738 Class B (assuming no sale of shares) 183 566 975 1,738 Class C (assuming sale of all shares at end of period) 381 661 1,065 2,195 Class C (assuming no sale of shares) 281 661 1,065 2,195 Class Y 82 255 444 990 UBS U.S. BALANCED FUND (WITH ONE YEAR CONTRACTUAL EXPENSE CAP) Class A $651 $922 $1,213 $2,040 Class B (assuming sale of all shares at end of period) 683 925 1,293 2,019 Class B (assuming no sale of shares) 183 625 1,093 2,019 Class C (assuming sale of all shares at end of period) 381 719 1,182 2,464 Class C (assuming no sale of shares) 281 719 1,182 2,464 Class Y 82 316 568 1,292
B-7 EXPENSES AND FEE TABLES SHAREHOLDER TRANSACTION EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------------------------------------------------------------- Maximum Front-End Sales Charge (Load) Maximum Sales Imposed on Charge (Load) Purchases Maximum Contingent Fund Names & Classes of (as a % of offering (as a % of offering Deferred Sales Charge (Load) Exchange Shares price) price) (as a % of offering price) Fee ---------------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP EQUITY FUND Class A 5.50% 5.50% None None Class B 5.00% None 5.00% None Class C 2.00% 1.00% 1.00% None Class Y None None None None ----------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------- Management Fee Distribution and Total Annual Waivers & Fund Names & Management Service Other Fund Operating Expense Net Classes of Shares Fees (12b-1) Fees Expenses(2) Expenses Reimbursements Expenses(3) --------------------------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP EQUITY FUND Class A 0.70% 0.25% 0.65% 1.60% 0.55% 1.05% Class B 0.70% 1.00% 0.65% 2.35% 0.55% 1.80% Class C 0.70% 1.00% 0.65% 2.35% 0.55% 1.80% Class Y 0.70% None 0.65% 1.35% 0.55% 0.80% ---------------------------------------------------------------------------------------------------------------------------
(1) The operating expenses shown for the Class A shares and Class Y shares are based on expenses incurred during the Fund's most recent fiscal year ending June 30, 2001, but have been restated to reflect the Fund's current fees. The Class B shares and Class C shares are new classes of shares, so the operating expenses for these classes are based on estimated expenses for the Fund's current fiscal year. (2) Includes an administrative fee of 0.075% paid by the Fund to UBS Global AM. (3) UNDER THE PERMANENT EXPENSE CAP -- the Advisor has contracted to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 0.80% of each class of shares of the Fund. UNDER THE ONE-YEAR CONTRACTUAL EXPENSE CAP -- the Advisor will agree to waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 0.80% of each class of shares of the Fund for a period of one year from July 1, 2002 to June 30, 2003.
Examples: ------------------------------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP EQUITY FUND (WITH PERMANENT EXPENSE CAP) Class A $651 $866 $1,098 $1,762 Class B (assuming sale of all shares at end of period) 683 866 1,175 1,738 Class B (assuming no sale of shares) 183 566 975 1,738 Class C (assuming sale of all shares at end of period) 381 661 1,065 2,195 Class C (assuming no sale of shares) 281 661 1,065 2,195 Class Y 82 255 444 990 UBS U.S. LARGE CAP EQUITY FUND (WITH ONE YEAR CONTRACTUAL EXPENSE CAP) Class A $651 $976 $1,324 $2,302 Class B (assuming sale of all shares at end of period) 683 981 1,406 2,284 Class B (assuming no sale of shares) 183 681 1,206 2,284 Class C (assuming sale of all shares at end of period) 381 774 1,294 2,718 Class C (assuming no sale of shares) 281 774 1,294 2,718 Class Y 82 373 687 1,576
B-8 EXPENSES AND FEE TABLES SHAREHOLDER TRANSACTION EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------------------------------------------------------------- Maximum Front-End Sales Charge (Load) Maximum Sales Imposed on Charge (Load) Purchases Maximum Contingent Fund Names & Classes of (as a % of offering (as a % of offering Deferred Sales Charge (Load) Exchange Shares price) price) (as a % of offering price) Fee ---------------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP GROWTH FUND Class A 5.50% 5.50% None None Class B 5.00% None 5.00% None Class C 2.00% 1.00% 1.00% None Class Y None None None None ----------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------- Management Fee Distribution and Total Annual Waivers & Fund Names & Management Service Other Fund Operating Expense Net Classes of Shares Fees (12b-1) Fees Expenses(2) Expenses Reimbursements Expenses(3) --------------------------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP GROWTH FUND Class A 0.70% 0.25% 1.24% 2.19% 1.14% 1.05% Class B 0.70% 1.00% 1.24% 2.94% 1.14% 1.80% Class C 0.70% 1.00% 1.24% 2.94% 1.14% 1.80% Class Y 0.70% None 1.24% 1.94% 1.14% 0.80% ---------------------------------------------------------------------------------------------------------------------------
(1) The operating expenses shown for the Class A shares and Class Y shares are based on expenses incurred during the Fund's most recent fiscal year ending June 30, 2001, but have been restated to reflect the Fund's current fees. The Class B shares and Class C shares are new classes of shares, so the operating expenses for these classes are based on estimated expenses for the Fund's current fiscal year. (2) Includes an administrative fee of 0.075% paid by the Fund to UBS Global AM. (3) UNDER THE PERMANENT EXPENSE CAP -- the Advisor has contracted to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 0.80% of each class of shares of the Fund. UNDER THE ONE-YEAR CONTRACTUAL EXPENSE CAP -- the Advisor will agree to waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 0.80% of each class of shares of the Fund for a period of one year from July 1, 2002 to June 30, 2003.
Examples: ------------------------------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------------------------------------------- UBS U.S. LARGE CAP GROWTH FUND (WITH PERMANENT EXPENSE CAP) Class A $651 $ 866 $1,098 $1,762 Class B (assuming sale of all shares at end of period) 683 866 1,175 1,738 Class B (assuming no sale of shares) 183 566 975 1,738 Class C (assuming sale of all shares at end of period) 381 661 1,065 2,195 Class C (assuming no sale of shares) 281 661 1,065 2,195 Class Y 82 255 444 990 UBS U.S. LARGE CAP GROWTH FUND (WITH ONE YEAR CONTRACTUAL EXPENSE CAP) Class A $651 $1,094 $1,561 $2,850 Class B (assuming sale of all shares at end of period) 683 1,102 1,647 2,839 Class B (assuming no sale of shares) 183 803 1,447 2,839 Class C (assuming sale of all shares at end of period) 381 894 1,533 3,248 Class C (assuming no sale of shares) 281 894 1,533 3,248 Class Y 82 498 941 2,172
B-9 EXPENSES AND FEE TABLES SHAREHOLDER TRANSACTION EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------------------------------------------------------------- Maximum Front-End Sales Charge (Load) Maximum Sales Imposed on Charge (Load) Purchases Maximum Contingent Fund Names & Classes of (as a % of offering (as a % of offering Deferred Sales Charge (Load) Exchange Shares price) price) (as a % of offering price) Fee ---------------------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND Class A 5.50% 5.50% None None Class B 5.00% None 5.00% None Class C 2.00% 1.00% 1.00% None Class Y None None None None ----------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------- Management Fee Distribution and Total Annual Waivers & Fund Names & Management Service Other Fund Operating Expense Net Classes of Shares Fees (12b-1) Fees Expenses(2) Expenses Reimbursements Expenses(3) --------------------------------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND Class A 1.00% 0.25% 0.39% 1.64% 0.24% 1.40% Class B 1.00% 1.00% 0.39% 2.39% 0.24% 2.15% Class C 1.00% 1.00% 0.39% 2.39% 0.24% 2.15% Class Y 1.00% None 0.39% 1.39% 0.24% 1.15% ---------------------------------------------------------------------------------------------------------------------------
(1) The operating expenses shown for the Class A shares and Class Y shares are based on expenses incurred during the Fund's most recent fiscal year ending June 30, 2001, but have been restated to reflect the Fund's current fees. The Class B shares and Class C shares are new classes of shares, so the operating expenses for these classes are based on estimated expenses for the Fund's current fiscal year. (2) Includes an administrative fee of 0.075% paid by the Fund to UBS Global AM. (3) UNDER THE PERMANENT EXPENSE CAP -- the Advisor has contracted to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 1.15% of each class of shares of the Fund. UNDER THE ONE-YEAR CONTRACTUAL EXPENSE CAP -- the Advisor will agree to waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 1.15% of each class of shares of the Fund for a period of one year from July 1, 2002 to June 30, 2003.
Examples: ------------------------------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------------------------------------------- UBS U.S. SMALL CAP GROWTH FUND (WITH PERMANENT EXPENSE CAP) Class A $685 $ 969 $1,274 $2,137 Class B (assuming sale of all shares at end of period) 718 973 1,354 2,117 Class B (assuming no sale of shares) 218 673 1,154 2,117 Class C (assuming sale of all shares at end of period) 416 766 1,243 2,558 Class C (assuming no sale of shares) 316 766 1,243 2,558 Class Y 117 365 633 1,398 UBS U.S. SMALL CAP GROWTH FUND (WITH ONE YEAR CONTRACTUAL EXPENSE CAP) Class A $685 $1,107 $1,371 $2,368 Class B (assuming sale of all shares at end of period) 718 1,023 1,454 2,350 Class B (assuming no sale of shares) 218 723 1,254 2,350 Class C (assuming sale of all shares at end of period) 416 815 1,341 2,781 Class C (assuming no sale of shares) 316 815 1,341 2,781 Class Y 117 416 738 1,648
B-10 EXPENSES AND FEE TABLES SHAREHOLDER TRANSACTION EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------------------------------------------------------------- Maximum Front-End Sales Charge (Load) Maximum Sales Imposed on Charge (Load) Purchases Maximum Contingent Fund Names & Classes of (as a % of offering (as a % of offering Deferred Sales Charge (Load) Exchange Shares price) price) (as a % of offering price) Fee ---------------------------------------------------------------------------------------------------------------- UBS U.S. EQUITY FUND Class A 5.50% 5.50% None None Class B 5.00% None 5.00% None Class C 2.00% 1.00% 1.00% None Class Y None None None None ----------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------- Management Fee Distribution and Total Annual Waivers & Fund Names & Management Service Other Fund Operating Expense Net Classes of Shares Fees (12b-1) Fees Expenses(2) Expenses Reimbursements Expenses(3) --------------------------------------------------------------------------------------------------------------------------- UBS U.S. EQUITY FUND Class A 0.70% 0.25% 0.22% 1.17% 0.12% 1.05% Class B 0.70% 1.00% 0.22% 1.92% 0.12% 1.80% Class C 0.70% 1.00% 0.22% 1.92% 0.12% 1.80% Class Y 0.70% None 0.22% 0.92% 0.12% 0.80% ---------------------------------------------------------------------------------------------------------------------------
(1) The operating expenses shown for the Class A shares and Class Y shares are based on expenses incurred during the Fund's most recent fiscal year ending June 30, 2001, but have been restated to reflect the Fund's current fees. The Class B shares and Class C shares are new classes of shares, so the operating expenses for these classes are based on estimated expenses for the Fund's current fiscal year. (2) Includes an administrative fee of 0.075% paid by the Fund to UBS Global AM. (3) UNDER THE PERMANENT EXPENSE CAP -- the Advisor has contracted to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 0.80% of each class of shares of the Fund. UNDER THE ONE-YEAR CONTRACTUAL EXPENSE CAP -- the Advisor will agree to waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 0.80% of each class of shares of the Fund for a period of one year from July 1, 2002 to June 30, 2003.
Examples: ------------------------------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------------------------------------------- UBS U.S. EQUITY FUND (WITH PERMANENT EXPENSE CAP) Class A $651 $866 $1,098 $1,762 Class B (assuming sale of all shares at end of period) 683 866 1,175 1,738 Class B (assuming no sale of shares) 183 566 975 1,738 Class C (assuming sale of all shares at end of period) 381 661 1,065 2,195 Class C (assuming no sale of shares) 281 661 1,065 2,195 Class Y 82 255 444 990 UBS U.S. EQUITY FUND (WITH ONE YEAR CONTRACTUAL EXPENSE CAP) Class A $651 $890 $1,147 $1,882 Class B (assuming sale of all shares at end of period) 683 891 1,126 1,859 Class B (assuming no sale of shares) 183 591 1,026 1,859 Class C (assuming sale of all shares at end of period) 381 686 1,115 2,311 Class C (assuming no sale of shares) 281 686 1,115 2,311 Class Y 82 281 498 1,120
B-11 EXPENSES AND FEE TABLES SHAREHOLDER TRANSACTION EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------------------------------------------------------------- Maximum Front-End Sales Charge (Load) Maximum Sales Imposed on Charge (Load) Purchases Maximum Contingent Fund Names & Classes of (as a % of offering (as a % of offering Deferred Sales Charge (Load) Exchange Shares price) price) (as a % of offering price) Fee ---------------------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND Class A 4.50% 4.50% None None Class B 5.00% None 5.00% None Class C 1.75% 1.00% 0.75% None Class Y None None None None ----------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------- Management Fee Distribution and Total Annual Waivers & Fund Names & Management Service Other Fund Operating Expense Net Classes of Shares Fees (12b-1) Fees Expenses(2) Expenses Reimbursements Expenses(3) --------------------------------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND Class A 0.50% 0.25% 0.25% 1.00% 0.15% 0.85% Class B 0.50% 1.00% 0.25% 1.75% 0.15% 1.60% Class C 0.50% 0.75% 0.25% 1.50% 0.15% 1.35% Class Y 0.50% None 0.25% 0.75% 0.15% 0.60% ---------------------------------------------------------------------------------------------------------------------------
(1) The operating expenses shown for the Class A shares and Class Y shares are based on expenses incurred during the Fund's most recent fiscal year ending June 30, 2001, but have been restated to reflect the Fund's current fees. The Class B shares and Class C shares are new classes of shares, so the operating expenses for these classes are based on estimated expenses for the Fund's current fiscal year. (2) Includes an administrative fee of 0.075% paid by the Fund to UBS Global AM. (3) UNDER THE PERMANENT EXPENSE CAP -- the Advisor has contracted to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 0.60% of each class of shares of the Fund. UNDER THE ONE-YEAR CONTRACTUAL EXPENSE CAP -- the Advisor will agree to waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 0.60% of each class of shares of the Fund for a period of one year from July 1, 2002 to June 30, 2003.
Examples: ------------------------------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------------------------------------------- UBS U.S. BOND FUND (WITH PERMANENT EXPENSE CAP) Class A $533 $709 $ 900 $1,452 Class B (assuming sale of all shares at end of period) 663 805 1,071 1,514 Class B (assuming no sale of shares) 163 505 871 1,514 Class C (assuming sale of all shares at end of period) 311 523 832 1,708 Class C (assuming no sale of shares) 236 523 832 1,708 Class Y 61 192 335 750 UBS U.S. BOND FUND (WITH ONE YEAR CONTRACTUAL EXPENSE CAP) Class A $533 $740 $ 964 $1,607 Class B (assuming sale of all shares at end of period) 663 836 1,135 1,669 Class B (assuming no sale of shares) 163 536 935 1,669 Class C (assuming sale of all shares at end of period) 311 555 396 1,860 Class C (assuming no sale of shares) 236 555 896 1,860 Class Y 61 225 402 916
B-12 EXPENSES AND FEE TABLES SHAREHOLDER TRANSACTION EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------------------------------------------------------------- Maximum Front-End Sales Charge (Load) Maximum Sales Imposed on Charge (Load) Purchases Maximum Contingent Fund Names & Classes of (as a % of offering (as a % of offering Deferred Sales Charge (Load) Exchange Shares price) price) (as a % of offering price) Fee ---------------------------------------------------------------------------------------------------------------- UBS HIGH YIELD FUND Class A 4.50% 4.50% None None Class B 5.00% None 5.00% None Class C 1.75% 1.00% 0.75% None Class Y None None None None ----------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------- Management Fee Distribution and Total Annual Waivers & Fund Names & Management Service Other Fund Operating Expense Net Classes of Shares Fees (12b-1) Fees Expenses(2) Expenses Reimbursements Expenses(3) --------------------------------------------------------------------------------------------------------------------------- UBS HIGH YIELD FUND Class A 0.60% 0.25% 0.34% 1.19% 0.24% 0.95% Class B 0.60% 1.00% 0.34% 1.94% 0.24% 1.70% Class C 0.60% 0.75% 0.34% 1.69% 0.24% 1.45% Class Y 0.60% None 0.34% 0.94% 0.24% 0.70% ---------------------------------------------------------------------------------------------------------------------------
(1) The operating expenses shown for the Class A shares and Class Y shares are based on expenses incurred during the Fund's most recent fiscal year ending June 30, 2001, but have been restated to reflect the Fund's current fees. The Class B shares and Class C shares are new classes of shares, so the operating expenses for these classes are based on estimated expenses for the Fund's current fiscal year. (2) Includes an administrative fee of 0.075% paid by the Fund to UBS Global AM. (3) UNDER THE PERMANENT EXPENSE CAP -- the Advisor has contracted to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 0.70% of each class of shares of the Fund. UNDER THE ONE-YEAR CONTRACTUAL EXPENSE CAP -- the Advisor will agree to waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 0.70% of each class of shares of the Fund for a period of one year from July 1, 2002 to June 30, 2003.
Examples: ------------------------------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------------------------------------------- UBS HIGH YIELD FUND (WITH PERMANENT EXPENSE CAP) Class A $543 $739 $ 952 $1,564 Class B (assuming sale of all shares at end of period) 673 836 1,123 1,627 Class B (assuming no sale of shares) 173 536 923 1,627 Class C (assuming sale of all shares at end of period) 321 554 884 1,818 Class C (assuming no sale of shares) 246 554 884 1,818 Class Y 72 224 390 871 UBS HIGH YIELD FUND (WITH ONE YEAR CONTRACTUAL EXPENSE CAP) Class A $543 $788 $1,053 $1,808 Class B (assuming sale of all shares at end of period) 673 886 1,225 1,871 Class B (assuming no sale of shares) 173 586 1,025 1,871 Class C (assuming sale of all shares at end of period) 321 604 986 2,058 Class C (assuming no sale of shares) 246 604 986 2,058 Class Y 72 276 497 1,133
B-13 EXPENSES AND FEE TABLES SHAREHOLDER TRANSACTION EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
---------------------------------------------------------------------------------------------------------------------------------- Redemption Fee Maximum Front-End (as a % of Sales Charge (Load) amount Maximum Sales Imposed on redeemed Charge (Load) Purchases Maximum Contingent within 90 days Fund Names & Classes of (as a % of offering (as a % of offering Deferred Sales Charge (Load) Exchange of purchase, if Shares price) price) (as a % of offering price) Fee applicable) ---------------------------------------------------------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND Class A 5.50% 5.50% None None 1.00% Class B 5.00% None 5.00% None None Class C 2.00% 1.00% 1.00% None None Class Y None None None None 1.00% ----------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
--------------------------------------------------------------------------------------------------------------------------- Management Fee Distribution and Total Annual Waivers & Fund Names & Management Service Other Fund Operating Expense Net Classes of Shares Fees (12b-1) Fees Expenses(2) Expenses Reimbursements Expenses(3) --------------------------------------------------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND Class A 0.80% 0.25% 0.19% 1.24% 0.00% 1.24% Class B 0.80% 1.00% 0.19% 1.99% 0.00% 1.99% Class C 0.80% 1.00% 0.19% 1.99% 0.00% 1.99% Class Y 0.80% None 0.19% 0.99% 0.00% 0.99% ---------------------------------------------------------------------------------------------------------------------------
(1) The operating expenses shown for the Class A shares and Class Y shares are based on expenses incurred during the Fund's most recent fiscal year ending June 30, 2001, but have been restated to reflect the Fund's current fees. The Class B shares and Class C shares are new classes of shares, so the operating expenses for these classes are based on estimated expenses for the Fund's current fiscal year. (2) Includes an administrative fee of 0.075% paid by the Fund to UBS Global AM. (3) UNDER THE PERMANENT EXPENSE CAP -- the Advisor has contracted to permanently waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 1.00% of each class of shares of the Fund. UNDER THE ONE-YEAR CONTRACTUAL EXPENSE CAP -- the Advisor will agree to waive its fees and reimburse certain expenses so that total operating expenses of the Fund, exclusive of 12b-1 fees, do not exceed 1.00% of each class of shares of the Fund for a period of one year from July 1, 2002 to June 30, 2003.
Examples: ------------------------------------------------------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------------------------------------------- UBS INTERNATIONAL EQUITY FUND (WITH PERMANENT EXPENSE CAP) Class A $669 $922 $1,194 $1,967 Class B (assuming sale of all shares at end of period) 702 924 1,273 1,946 Class B (assuming no sale of shares) 202 624 1,073 1,946 Class C (assuming sale of all shares at end of period) 400 718 1,162 2,394 Class C (assuming no sale of shares) 300 718 1,162 2,394 Class Y 101 315 547 1,213 UBS INTERNATIONAL EQUITY FUND (WITH ONE YEAR CONTRACTUAL EXPENSE CAP) Class A $669 $922 $1,194 $1,967 Class B (assuming sale of all shares at end of period) 702 924 1,273 1,946 Class B (assuming no sale of shares) 202 624 1,073 1,946 Class C (assuming sale of all shares at end of period) 400 718 1,162 2,394 Class C (assuming no sale of shares) 300 718 1,162 2,394 Class Y 101 315 547 1,213
B-14 EXHIBIT C CURRENT INVESTMENT ADVISORY AGREEMENT FOR UBS GLOBAL BOND FUND INVESTMENT ADVISORY AGREEMENT AGREEMENT made this 25th day of April, 1995 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 Brinson Global Bond 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 Sections 1 and 2 of this Agreement, the Series shall pay to the Advisor within five business days after the end of each calendar month, a monthly fee of one twelfth of 0.75% of the Series' average daily net assets for the month. In the event of termination of this Agreement, the fee provided in this Section 3 shall be paid on a pro rata basis, based on the number of days when this Agreement was in effect. 4. REPORTS. The Series and the Advisor agree to furnish to each other such information regarding their operations with regard to their affairs as each may reasonably request. C-1 5. STATUS OF ADVISOR. The services of the Advisor to the Series are not to be deemed exclusive, and the Advisor shall be free to render similar services to others so long as its services to the Series are not impaired thereby. 6. LIABILITY OF ADVISOR. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard by the Advisor of its obligations and duties hereunder, the Advisor shall not be subject to any liability whatsoever to the Series, or to any shareholder of the Series, for any error of judgment, mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder including, without limitation, for any losses that may be sustained in connection with the purchase, holding, redemption or sale of any security on behalf of the Series. 7. DURATION AND TERMINATION. This Agreement shall become effective on April 25, 1995 provided that first it is approved by the Board of Trustees of the Trust, including a majority of those trustees who are not parties to this Agreement or interested persons of any party hereto, in the manner provided in Section 15(c) of the Investment Company Act of 1940, and by the holders of a majority of the outstanding voting securities of the Series; and shall continue in effect until April 25, 1997. Thereafter, this Agreement may continue in effect only if such continuance is approved at least annually by: (i) the Trust's Board of Trustees; or (ii) 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 7, the terms "assignment," "interested person," and "a vote of a majority of the outstanding voting securities" shall have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section 2(a)(42) of the 1940 Act and Rule 18f-2 thereunder. 8. NAME OF ADVISOR. The parties agree that the Advisor has a proprietary interest in the name "Brinson," and the Trust agrees to promptly take such action as may be necessary to delete from its 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 therefor. 9. SEVERABILITY. If any provisions of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. C-2 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of this 25th day of April, 1995. Attest: THE BRINSON FUNDS By: /s/ Bruce G. Leto By: /s/ E. Thomas McFarlan ------------------------------------------ ------------------------------------------ E. Thomas McFarlan Bruce G. Leto President Secretary Attest: BRINSON PARTNERS, INC. By: /s/ Michael J. Jacobs By: /s/ Samuel W. Anderson ------------------------------------------ ------------------------------------------ Samuel W. Anderson Michael J. Jacobs Vice President Assistant Secretary

C-3 EXHIBIT D PROPOSED INVESTMENT ADVISORY AGREEMENT FOR THE FUNDS INVESTMENT ADVISORY AGREEMENT AGREEMENT made this day of , 2002, by and between The UBS Funds, a Delaware business trust (the "Trust") and UBS Asset Management (Americas) Inc., a Delaware corporation (the "Advisor"). 1. DUTIES OF THE ADVISOR. The Trust hereby appoints the Advisor to act as investment advisor to the 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, and may obtain investment services from the investment advisory personnel of its affiliates located throughout the world to the extent permitted under interpretations of the federal securities laws. 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 departments of its foreign affiliates. The Advisor shall select, and with respect to its foreign affiliates or the use of any sub-advisors, 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 Series and to other funds and advisory accounts for which the Advisor or any Sub-Advisor, as defined in Section 8 hereof, 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 Sections 1 and 2 of this Agreement, the Series shall pay to the Advisor within five business days after the end of each calendar month, a monthly fee of one twelfth of % of the Series' average daily net assets for the 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. D-1 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 three (3) 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 the rate of the "Total Expense Limit" as a percentage of average daily net assets of the Series as stated in the then current registration statement of the Series, 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, as determined from time to time by the Board of Trustees of the Trust. 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. DELEGATION OF RESPONSIBILITIES TO SUB-ADVISORS. The Advisor may, at its expense, select and contract with one or more affiliated or unaffiliated investment advisors registered under the Investment Advisers Act of 1940 ("Sub-Advisors") to perform some or all of the services for the Series for which it is responsible under this Agreement. The Advisor will compensate any Sub-Advisor for its services to the Series. The Advisor may terminate the services of any Sub-Advisor at any time in its sole discretion, and shall at such time assume the responsibility of such Sub-Advisor unless and until a successor Sub-Advisor is selected and the requisite approval of all of the Series' shareholders is obtained. The Advisor will continue to have responsibility for all advisory services furnished by any Sub-Advisor. 9. DURATION AND TERMINATION. This Agreement shall become effective on , 2002 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, as amended (the "1940 Act") and by the holders of a majority of the outstanding voting securities of the Series; and shall continue in effect until , 2004. 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 1940 Act. This Agreement may be terminated by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of the holders of a D-2 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 9, 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. 10. NAME OF ADVISOR. The parties agree that the Advisor has a proprietary interest in the name "UBS," 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 therefor. 11. 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 , 2002. Attest: THE UBS FUNDS By: By: ------------------------------------------ ------------------------------------------ Name Name Title Title Attest: UBS GLOBAL ASSET MANAGEMENT (AMERICAS) INC. By: By: ------------------------------------------ ------------------------------------------ Name Name Title Title

D-3 PROXY CARD THE UBS FUNDS PROXY PROXY CARD PROXY FOR SPECIAL MEETING OF SHAREHOLDERS - JUNE 19, 2002 The undersigned shareholders of the series of The UBS Funds listed herein (the "Fund(s)"), hereby appoint David Goldenberg, Rita Rubin and Marissa Duran-Cruz, or any one of them, true and lawful attorneys, with the power of substitution of each, to vote all shares of the Fund(s) which the undersigned may be entitled to vote at the Special Meeting of Shareholders (the "Special Meeting") to be held on June 19, 2002, at 10:00 a.m., Eastern time, at 51 West 52nd Street, 16th Floor, New York, NY 10019-6114, and at any adjournment thereto. THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES (THE "BOARD") OF THE UBS FUNDS (THE "TRUST"). THE PROXIES NAMED WILL VOTE THE SHARES REPRESENTED BY THIS PROXY IN ACCORDANCE WITH THE CHOICES MADE ON THIS BALLOT. IF NO CHOICE IS INDICATED AS TO THE ITEM, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THE MATTERS. The matters being considered have been proposed by management. The matters being proposed are related to, but not conditioned on, the approval of each other, except as noted. Discretionary authority is hereby conferred as to all other matters as may properly come before the Special Meeting or any adjournment thereof. VOTE VIA THE INTERNET: https://vote.proxy-direct.com VOTE VIA THE TELEPHONE: 1-800-597-7836 VOTE VIA FAX: 1-888-796-9932 CONTROL NUMBER: NOTE: Please sign this proxy exactly as your name appears on the books of the Trust. Joint owners should each sign personally. Directors and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign. If a corporation, this signature should be that of an authorized officer who should state his or her title. ----------------------------------- Signature ----------------------------------- Signature of joint owner, if any ----------------------------------- Date 12430_PRT FUND FUND Global Balanced 2652.8576 Global Equity 1026.8572 Global Technology 57858.6495 Global Biotech 3365.9812 Global Bond 103.0851 U.S. Balanced 9658.0602 U.S. Large Cap Equity 7023.0960 U.S. Large Cap Growth 85269.9172 U.S. Small Cap Growth 8987.0760 U.S. Equity 8569.3472 U.S. Bond 45627.0710 High Yield 95.8672 International Equity 43506.0960 U.S. Value Equity 45.1172 Please vote by filling in the appropriate box below. If you do not mark one or more proposals, your Proxy will be voted FOR each such proposal. PLEASE MARK VOTES AS IN THIS EXAMPLE: /X/ / / To vote FOR all Funds on ALL Proposals mark this box. (No other vote is necessary.) 1. To elect four Trustees to the Board of the Trust. FOR FOR WITHHOLD ALL ALL ALL EXCEPT 01 Walter E. Auch 02 Frank K. Reilly / / / / / / 03 Edward M. Roob 04 Brian M. Storms If you do not wish your shares to be voted "FOR" a particular nominee, mark the "FOR ALL EXCEPT" box and write the nominee's number on the line provided below. -------------------------------------------------------------------------------- 2. To approve the elimination of the permanent expense cap for the Fund. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Technology / / / / / / Global Biotech / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Large Cap Growth / / / / / / U.S. Small Cap Growth / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / High Yield / / / / / / International Equity / / / / / / 3. To approve an amended Investment Advisory Agreement between the Trust, on behalf of the Fund, and UBS Global Asset Management (Americas) Inc. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Technology / / / / / / Global Biotech / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Large Cap Growth / / / / / / U.S. Small Cap Growth / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / High Yield / / / / / / International Equity / / / / / / U.S. Value Equity / / / / / / 4. To make amendments to the Fund's fundamental investment restrictions: 4(a). To amend the Fund's fundamental investment restriction regarding borrowing. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / International Equity / / / / / / 4(b). To amend the Fund's fundamental investment restriction regarding underwriting. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / International Equity / / / / / / 4(c). To amend the Fund's fundamental investment restriction regarding lending. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / International Equity / / / / / / 4(d). To amend the Fund's fundamental investment restriction regarding investments in real estate. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / International Equity / / / / / / 4(e). To amend the Fund's fundamental investment restriction regarding investments in commodities. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / International Equity / / / / / / 4(f). To amend the Fund's fundamental investment restriction regarding issuing senior securities and making short sales. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / International Equity / / / / / / 4(g). To amend the Fund's fundamental investment restriction regarding industry concentration. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / International Equity / / / / / / 4(h). To amend the Fund's fundamental investment restriction regarding diversification. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Bond / / / / / / 5. To eliminate certain fundamental investment restrictions of the Fund: 5(a). To eliminate the Fund's fundamental investment restriction regarding investing for control or management. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / International Equity / / / / / / 5(b). To eliminate the Fund's fundamental investment restriction regarding purchasing securities on margin. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / International Equity / / / / / / 5(c). To eliminate the Fund's fundamental investment restriction regarding investing in unseasoned issuers. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / International Equity / / / / / / 5(d). To eliminate the Fund's fundamental investment restriction regarding investments in other investment companies. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / International Equity / / / / / / 5(e). To eliminate the Fund's fundamental investment restriction regarding investments in puts, calls and straddles. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / International Equity / / / / / / 5(f). To eliminate the Fund's fundamental investment restriction regarding investments in oil, gas and/or mineral exploration or development programs or leases. FOR AGAINST ABSTAIN Global Balanced / / / / / / Global Equity / / / / / / Global Bond / / / / / / U.S. Balanced / / / / / / U.S. Large Cap Equity / / / / / / U.S. Equity / / / / / / U.S. Bond / / / / / / International Equity / / / / / / EVERY SHAREHOLDER'S VOTE IS IMPORTANT! PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD TODAY!