<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1996
REGISTRATION NO. 33-64401
811-7431
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [x]
PRE-EFFECTIVE AMENDMENT NO. 2 [x]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. 2 [x]
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
UBS PRIVATE INVESTOR FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
------------------------
<TABLE>
<S> <C>
C/O SIGNATURE FINANCIAL GROUP, INC. 02116
6 ST. JAMES AVENUE (ZIP CODE)
BOSTON, MASSACHUSETTS
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 423-0800
C/O SIGNATURE FINANCIAL GROUP, INC.
6 ST. JAMES AVENUE
BOSTON, MASSACHUSETTS 02116
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
STEPHEN K. WEST, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this Registration Statement. It is proposed that this
filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
UBS Investor Portfolios Trust has also executed this Registration
Statement.
The Registrant elects, pursuant to Rule 24f-2 of the Investment Company Act
General Rules and Regulations, to register an indefinite number of shares of its
capital stock.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
NOTE
This Registration Statement of UBS Private Investor Funds, Inc. contains
four Prospectuses, two Statements of Additional Information (the 'SAIs') and one
Part C.
UBS Tax Exempt Bond Fund Prospectus relates to the SAI marked 'UBS Tax
Exempt Bond Fund'. The remaining three Prospectuses relate to the SAI marked
'UBS Bond Fund, UBS U.S. Equity Fund, UBS International Equity Fund'.
<PAGE>
<PAGE>
UBS PRIVATE INVESTOR FUNDS, INC.
UBS TAX EXEMPT BOND FUND
CROSS-REFERENCE SHEET
PART A
<TABLE>
<CAPTION>
FORM N-1A
ITEM NUMBER CAPTION IN PROSPECTUS
- ----------- ------------------------------------
<C> <S> <C>
1. Cover Page.................................................... Outside Cover Page of Prospectus
2. Synopsis...................................................... Investors for Whom the Fund is
Designed
3. Condensed Financial Information............................... Not applicable
4. General Description of Registrant............................. Organization; Investment Objective
and Policies; Additional
Investment Information and Risk
Factors; Investment Restrictions
5. Management of the Fund........................................ Management; Shareholder Services;
Expenses
5A. Management's Discussion of Fund............................... Not applicable
6. Capital Stock and Other Securities............................ Dividends and Distributions; Net
Asset Value; Organization; Taxes
7. Purchase of Securities Being Offered.......................... Purchase of Shares; Net Asset Value
8. Redemption or Repurchase...................................... Redemption of Shares; Net Asset
Value
9. Pending Legal Proceedings..................................... Not applicable
</TABLE>
PART B
<TABLE>
<CAPTION>
FORM N-1A CAPTION IN STATEMENT
ITEM NUMBER OF ADDITIONAL INFORMATION
- ----------- ------------------------------------
<C> <S> <C>
10. Cover Page.................................................... Outside Front Cover Page
11. Table of Contents............................................. Table of Contents
12. General Information and History............................... Not applicable
13. Investment Objectives and Policies............................ Investment Objective and Policies;
Investment Restrictions; Portfolio
Transactions
14. Management of the Fund........................................ Directors
15. Control Persons and Principal Holders of Securities........... Organization
16. Investment Advisory and Other Services........................ Investment Adviser; Adminstrator;
Distributor; Custodian;
Shareholder Services; Independent
Accountants; Expenses
17. Brokerage Allocation and Other Practices...................... Portfolio Transactions
18. Capital Stock and Other Securities............................ General; Organization
19. Purchase, Redemption and Pricing of Securities Being
Offered..................................................... Purchase of Shares; Redemption of
Shares; Exchange of Shares;
Dividends and Distributions; Net
Asset Value
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FORM N-1A CAPTION IN STATEMENT
ITEM NUMBER OF ADDITIONAL INFORMATION
- ----------- ------------------------------------
<C> <S> <C>
20. Tax Status.................................................... Taxes
21. Underwriters.................................................. Distributor; Purchase of Shares; Net
Asset Value
22. Calculation of Performance Data............................... Not applicable
23. Financial Statements.......................................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item heading.
<PAGE>
<PAGE>
UBS PRIVATE INVESTOR FUNDS, INC.
UBS BOND FUND
UBS U.S. EQUITY FUND
UBS INTERNATIONAL EQUITY FUND
CROSS-REFERENCE SHEET
PART A
<TABLE>
<CAPTION>
FORM N-1A
ITEM NUMBER CAPTION IN PROSPECTUS
- ----------- ------------------------------------
<C> <S> <C>
1. Cover Page.................................................... Outside Cover Page of Prospectus
2. Synopsis...................................................... Investors for Whom the Fund is
Designed
3. Condensed Financial Information............................... Not applicable
4. General Description of Registrant............................. Organization; Master-Feeder
Structure; Investment Objective
and Policies; Additional
Investment Information and Risk
Factors; Investment Restrictions
5. Management of the Fund........................................ Management; Shareholder Services;
Expenses
5A. Management's Discussion of Fund............................... Not applicable
6. Capital Stock and Other Securities............................ Dividends and Distributions; Net
Asset Value; Organization; Taxes;
Master-Feeder Structure
7. Purchase of Securities Being Offered.......................... Purchase of Shares; Net Asset Value
8. Redemption or Repurchase...................................... Redemption of Shares; Net Asset
Value
9. Pending Legal Proceedings..................................... Not applicable
</TABLE>
PART B
<TABLE>
<CAPTION>
FORM N-1A CAPTION IN STATEMENT
ITEM NUMBER OF ADDITIONAL INFORMATION
- ----------- ------------------------------------
<C> <S> <C>
10. Cover Page.................................................... Outside Front Cover Page
11. Table of Contents............................................. Table of Contents
12. General Information and History............................... Not applicable
13. Investment Objectives and Policies............................ Investment Objectives and Policies;
Investment Restrictions; Portfolio
Transactions
14. Management of the Fund........................................ Directors and Trustees
15. Control Persons and Principal Holders of Securities........... Organization
16. Investment Advisory and Other Services........................ Investment Adviser and Funds
Services Agent; Administrator;
Distributor; Custodian;
Shareholder Services; Independent
Accountants; Expenses
17. Brokerage Allocation and Other Practices...................... Portfolio Transactions
18. Capital Stock and Other Securities............................ General; Organization
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FORM N-1A CAPTION IN STATEMENT
ITEM NUMBER OF ADDITIONAL INFORMATION
- ----------- ------------------------------------
<C> <S> <C>
19. Purchase, Redemption and Pricing of Securities Being
Offered..................................................... Purchase of Shares; Redemption of
Shares; Exchange of Shares;
Dividends and Distributions; Net
Asset Value
20. Tax Status.................................................... Taxes
21. Underwriters.................................................. Distributor; Purchase of Shares; Net
Asset Value
22. Calculation of Performance Data............................... Not applicable
23. Financial Statements.......................................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item heading.
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
UBS TAX EXEMPT BOND FUND
6 ST. JAMES AVENUE
BOSTON, MASSACHUSETTS 02116
FOR INFORMATION CALL (800) [ ]
UBS Tax Exempt Bond Fund (the 'Fund') seeks to provide a high level of current
income exempt from federal income tax consistent with moderate risk of capital
and maintenance of liquidity. It is designed for investors who seek tax exempt
yields greater than those generally available from a portfolio of short-term tax
exempt obligations and who are willing to incur the greater price fluctuation of
intermediate-term instruments.
The Fund is a diversified, no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is one of several series of UBS
Private Investor Funds, Inc. (the 'Company'), an open-end management investment
company organized as a corporation under Maryland law.
The Fund is advised by the New York Branch (the 'Branch' or the 'Adviser') of
Union Bank of Switzerland (the 'Bank').
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
[ ], 1996, provides further discussion of certain topics
referred to in this Prospectus and other matters that may be of interest to
investors. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated herein by reference and
is available without charge upon written request from the Company or the
Distributor (as defined herein) at the addresses set forth on the back cover of
the Prospectus or by calling (800) [ ].
INVESTMENTS IN THE FUND ARE NOT DEPOSITS WITH OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, UNION BANK OF SWITZERLAND OR ANY OTHER BANK. SHARES OF THE FUND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND IS
SUBJECT TO RISKS THAT MAY CAUSE THE VALUE OF THE INVESTMENT TO FLUCTUATE. WHEN
THE INVESTMENT IS REDEEMED, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT
ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS DATED [ ], 1996.
<PAGE>
<PAGE>
UBS TAX EXEMPT BOND FUND
INVESTORS FOR WHOM THE FUND IS DESIGNED
UBS Tax Exempt Bond Fund (the 'Fund') is designed for investors seeking a higher
level of current income that is exempt from federal income tax from a portfolio
of tax exempt securities than that available from a portfolio of short-term tax
exempt obligations and who are willing to incur the greater price fluctuation of
intermediate-term instruments. The Fund seeks to achieve its investment
objective by investing primarily in municipal securities that earn interest
exempt from federal income tax in the opinion of the issuer's bond counsel. See
'Investment Objective and Policies'.
The minimum initial investment in the Fund is $25,000, except that the minimum
initial investment is $10,000 for shareholders of another series of UBS Private
Investor Funds, Inc. (the 'Company'). The minimum subsequent investment for all
investors is $5,000. These minimums may be waived for certain accounts. See
'Purchase of Shares'. If shareholders reduce their total investment in shares of
the Fund to less than $10,000, their investment will be subject to mandatory
redemption. See 'Redemption of Shares -- Mandatory Redemption'. The Fund is one
of several series of the Company, an open-end management investment company
organized as a Maryland corporation.
This Prospectus describes the Fund's investment objective and policies,
management and operations to enable investors to decide if the Fund suits their
investment needs.
The following table illustrates that Fund investors incur no shareholder
transaction expenses: their investments in the Fund are subject only to the
operating expenses set forth below as a percentage of the Fund's average daily
net assets. Fund expenses are discussed below under the headings 'Management',
'Expenses' and 'Shareholder Services'.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases................................................................... None
Sales Load Imposed on Reinvested Dividends........................................................ None
Deferred Sales Load............................................................................... None
Redemption Fees................................................................................... None
Exchange Fees..................................................................................... None
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
Advisory Fees, After Fee Waiver**................................................................. 0.00%
Rule 12b-1 Fees................................................................................... None
Other Expenses, After Expense Reimbursements***................................................... 0.80%
----
Total Operating Expenses, After Fee Waivers and Expense Reimbursements*........................... 0.80%
----
----
</TABLE>
* Expenses are expressed as a percentage of the Fund's projected average daily
net assets and are based on estimates of the expenses to be incurred during the
current fiscal year, after any applicable fee waivers and expense
reimbursements. Without such fee waivers and expense reimbursements, Total
Operating Expenses would be equal, on an annual basis, to 2.74% of the Fund's
projected average daily net assets. See 'Management'.
** The New York Branch (the 'Branch' or the 'Adviser') of Union Bank of
Switzerland (the 'Bank') has agreed to waive fees and reimburse the Fund for any
of its operating expenses to the extent that the Fund's total operating expenses
exceed, on an annual basis, 0.80% of the Fund's average daily net assets. The
Branch may modify or discontinue this undertaking at any time in the future with
30 days' notice to the Fund. The advisory fee would be 0.45% if there were not a
fee waiver. See 'Expenses'.
*** The fees and expenses in Other Expenses, After Expense Reimbursements
include fees payable to Signature Broker-Dealer Services, Inc. ('Signature')
under the Administrative Services Agreement, fees payable to Investors Bank &
Trust Company (the 'Custodian' or the 'Transfer Agent') as custodian, and fees
payable to the Branch under the Shareholder Servicing Agreement. For a more
detailed description of
-2-
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<PAGE>
contractual fee arrangements, including fee waivers and expense reimbursements,
and of the fees and expenses included in Other Expenses, see 'Management' and
'Shareholder Services'.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming a
5% annual return and a redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year...................................................... $ 8
3 Years..................................................... $26
</TABLE>
The above Expense Table is designed to assist investors in understanding the
various direct and indirect costs and expenses that Fund investors are expected
to bear. In connection with the above Example, please note that $1,000 is less
than the Fund's minimum investment requirement and that there are no redemption
or exchange fees of any kind. See 'Purchase of Shares', 'Exchange of Shares' and
'Redemption of Shares'. THE EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR
ILLUSTRATIVE PURPOSES, AND ASSUMES THE CONTINUATION OF THE FEE WAIVERS AND
EXPENSE REIMBURSEMENTS REPRESENTED IN THE ABOVE 'EXPENSE TABLE'. IT SHOULD NOT
BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL EXPENSES MAY BE
MORE OR LESS THAN THOSE SHOWN.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective and policies are described below. Additional
information about the Fund's investment policies appears in the Statement of
Additional Information (the 'SAI') under 'Investment Objective and Policies'.
There can be no assurance that the Fund's investment objective will be achieved.
The Fund's investment objective is to provide a high level of current income
exempt from federal income tax consistent with moderate risk of capital and
maintenance of liquidity. See 'Taxes'.
The Fund is designed for investors who seek tax exempt yields greater than those
generally available from a portfolio of short-term tax exempt obligations and
who are willing to incur the greater price fluctuation of longer-term
instruments.
The Fund attempts to achieve its investment objective by investing primarily in
municipal securities that pay interest that is, in the opinion of bond counsel
for the issuer, exempt from federal income tax. As a fundamental policy, during
normal market conditions, the Fund will invest at least 80% of its net assets in
obligations the interest on which is exempt from federal income taxation, which
obligations will not include obligations that may be subject to the alternative
minimum tax. Interest on these securities may be subject to state and local
taxes. For more detailed information regarding tax matters, including the
applicability of the alternative minimum tax, see 'Taxes'. The remainder of the
Fund's portfolio may be invested in U.S. dollar-denominated debt securities of
foreign and domestic issuers.
The Adviser anticipates that the duration (as defined below) of the Fund's
portfolio will usually be between one and seven years. In view of the Fund's
duration, under normal market conditions, the Fund's yield can be expected to be
higher and its net asset value less stable than those of a money market fund.
The maturities of the individual securities in the Fund's portfolio may vary
widely from its duration, however, and may be as long as 30 years. Duration is a
measure of a bond's price sensitivity, expressed in years. It is a measure of
interest rate risk of a bond calculated by taking into consideration the number
of years until the average dollar, in present value terms, is received from
principal and interest payments. For example, for a bond with a duration of four
years, every 1% change in yield will result in a 4% change in price in the
opposite direction. The Adviser will select long-term or short-term securities
for the Fund depending on several factors, including whether the Adviser
believes interest rates will rise or fall in the future.
The Fund intends to manage its portfolio actively in pursuit of its investment
objective. Portfolio transactions are undertaken principally to accomplish the
Fund's objective in relation to expected movements in the general level of
interest rates, but the Fund may also engage in short-term trading consistent
with its objective. To the extent the Fund engages in short-term trading, it may
incur
-3-
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<PAGE>
increased transaction and tax costs. See 'Taxes' below. The annual portfolio
turnover rate for the Fund is expected to be under 100%. See 'Portfolio
Transactions' in the SAI.
The value of the Fund's investments will generally fluctuate inversely with
changes in prevailing interest rates. The existing value of the Fund's
investments will also be affected by changes in the creditworthiness of issuers
and other market factors. The quality criteria applied in selecting portfolio
securities are intended to minimize adverse price changes due to credit
considerations. The value of the Fund's municipal securities can also be
affected by market reaction to legislative consideration of various tax reform
proposals. Although the net asset value of the Fund fluctuates, the Fund
attempts to preserve the value of its investments to the extent consistent with
its objective.
MUNICIPAL BONDS. The Fund may invest in bonds issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies, authorities and instrumentalities.
These obligations may be general obligation bonds secured by the issuer's pledge
of its full faith, credit and taxing power for the payment of principal and
interest, or they may be revenue bonds payable from specific revenue sources,
but not generally backed by the issuer's taxing power. These include industrial
development bonds where payment is the responsibility of the private industrial
user of the facility financed by the bonds. Because industrial development bonds
are generally subject to federal income tax or the alternative minimum tax, the
Fund may invest only up to 20% of its net assets in industrial development bonds
or other securities subject to federal income tax.
MUNICIPAL NOTES. The Fund may also invest in municipal notes of various types,
including notes issued in anticipation of receipt of taxes, the proceeds of the
sale of bonds, other revenues or grant proceeds, as well as municipal commercial
paper and municipal demand obligations such as variable rate demand notes and
master demand obligations. The interest rate on variable rate demand notes is
adjustable at periodic intervals as specified in the notes. Master demand
obligations permit the investment of fluctuating amounts at periodically
adjusted interest rates. They are governed by agreements between the municipal
issuer and the Adviser acting as agent, for no additional fee, in its capacity
as the Fund's Adviser and as fiduciary for other clients. Although master demand
obligations are not marketable to third parties, the Fund considers them to be
liquid because they are payable on demand. For more information about municipal
notes, see 'Investment Objective and Policies' in the SAI.
TAXABLE BONDS. The Fund intends to invest its assets principally in tax exempt
securities. However, it may invest up to 20% of its net assets in a broad range
of U.S. dollar denominated debt securities of domestic and foreign issuers, the
interest income from which may be subject to federal, as well as state and local
and foreign income taxes. These include debt securities of various types and
maturities, e.g., debentures, notes, mortgage securities, equipment trust
certificates and other collateralized securities, securities of the United
States government and zero coupon securities. Collateralized securities are
backed by a pool of assets such as loans or receivables that generate cash flow
to cover the payments due on the securities. Collateralized securities are
subject to certain risks, including a decline in the value of the collateral
backing the security, failure of the collateral to generate the anticipated cash
flow or in certain cases more rapid prepayment than anticipated because of
events affecting the collateral, such as accelerated prepayment of mortgages or
other loans backing these securities or destruction of equipment subject to
equipment trust certificates. In the event of any such prepayment, the Fund will
be required to reinvest the proceeds of prepayments at interest rates prevailing
at the time of reinvestment, which may be lower than the interest rates on the
prepaid securities. In addition, the value of zero coupon securities, which do
not pay interest, is more volatile than that of interest bearing debt securities
with the same maturity. The Fund does not expect to invest more than 5% of its
assets in securities of foreign issuers. All such investments will be
denominated in U.S. Dollars. See 'Additional Investment Information and Risk
Factors' for further information on foreign investments and convertible
securities. The Portfolio may purchase nonpublicly offered debt securities. See
'Illiquid Investments; Privately Placed and Other Unregistered Securities'.
The Fund may invest in money market instruments that meet the quality
requirements described below, except that short-term municipal obligations of
New York State issuers may be rated MIG-2 by Moody's Investors Service Inc.
('Moody's') or SP-2 by Standard & Poor's Corporation ('Standard & Poor's').
Under normal circumstances, the Fund will purchase these securities to invest
temporary cash balances or to
-4-
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<PAGE>
maintain liquidity to meet withdrawals. However, the Fund may also invest in
money market instruments, without limit, as a temporary defensive measure taken
during, or in anticipation of, adverse market conditions.
QUALITY INFORMATION. The Fund will not purchase any municipal obligation unless
it is rated at least Aaa, Aa, A, Baa, MIG-1 or Prime-1 by Moody's or AAA, AA, A,
BBB, SP-1 or A1 by Standard & Poor's (except for short-term obligations of New
York State issuers as described above) or, if it is unrated, in the Adviser's
opinion it is of comparable quality. It is the Fund's current policy that its
non-municipal debt securities will be rated at least Baa or BBB by Moody's or
Standard & Poor's, respectively. These standards must be satisfied at the time
an investment is made. If the quality of the investment later declines, the Fund
may continue to hold the investment. Securities rated Baa by Moody's or BBB by
Standard & Poor's are considered investment grade, but have some speculative
characteristics.
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
The Fund may purchase municipal obligations together with puts, municipal
obligations on a when-issued or delayed delivery basis, enter into repurchase
and reverse repurchase agreements, purchase synthetic variable rate instruments,
loan its portfolio securities, purchase investment company securities and
certain privately placed securities, and enter into certain hedging transactions
that may involve options on securities and securities indices, futures contracts
and options on futures contracts and currency options.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase securities on
a when-issued or delayed delivery basis. Delivery of and payment for these
securities may take as long as a month or more after the date of the purchase
commitment. The value of these securities is subject to market fluctuation
during this period and no interest or income accrues to the Fund until
settlement. At the time of settlement, a when-issued security may be valued at
less than its purchase price. Between the trade and settlement dates, the Fund
will maintain a segregated account with the Custodian consisting of a portfolio
of high grade, liquid debt securities with a value at least equal to these
commitments. When entering into a when-issued or delayed delivery transaction,
the Fund will rely on the other party to consummate the transaction; if the
other party fails to do so, the Fund may be disadvantaged. It is the Fund's
current policy not to enter into when-issued commitments exceeding in the
aggregate 15% of the market value of the Fund's total assets less liabilities
(excluding the obligations created by these commitments).
REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreement transactions
with brokers, dealers or banks that meet the credit guidelines established by
the Company's Board of Directors (the 'Directors' or the 'Board'). In a
repurchase agreement, the Fund buys a security from a seller that has agreed to
repurchase it at a mutually agreed upon date and price, reflecting the interest
rate effective for the term of the agreement. The term of these agreements is
usually from overnight to one week. A repurchase agreement may be viewed as a
fully collateralized loan of money by the Fund to the seller. The Fund always
receives securities with a market value at least equal to the purchase price
plus accrued interest as collateral and this value is maintained during the term
of the agreement. If the seller defaults and the collateral's value declines,
the Fund might incur a loss. If bankruptcy proceedings are commenced with
respect to the seller, the Fund's realization upon the disposition of collateral
may be delayed or limited. Investments in repurchase agreements maturing in more
than seven days and certain other investments that may be considered illiquid
are subject to certain limitations. See 'Illiquid Investments; Privately Placed
and Other Unregistered Securities' below.
REVERSE REPURCHASE AGREEMENTS. The Fund is permitted to enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Fund sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. It may
also be viewed as the borrowing of money by the Fund and, therefore, is a form
of leverage. Leverage may cause the Fund's gains or losses, if any, to be
magnified. For more information, including limitations on the use of reverse
repurchase agreements, see 'Investment Objective and Policies' in the SAI.
-5-
<PAGE>
<PAGE>
SECURITIES LENDING. Subject to applicable investment restrictions, the Fund may
lend its securities. The Fund may lend its securities if such loans are secured
continuously by cash or equivalent collateral or by a letter of credit in favor
of the Fund at least equal at all times to 100% of the market value of the
securities loaned, plus accrued interest. While such securities are on loan, the
borrower will pay the Fund any income accruing thereon. Loans will be subject to
termination by the Fund in the normal settlement time, generally three business
days after notice, or by the borrower on one day's notice. Borrowed securities
must be returned when the loan is terminated. Any gain or loss in the market
price of the borrowed securities that occurs during the term of the loan inures
to the Fund. The Fund may pay reasonable finders' and custodial fees in
connection with a loan. In addition, the Fund will consider all the facts and
circumstances, including the creditworthiness of the borrowing financial
institution, and the Fund will not make any loans with a term in excess of one
year. The Fund will not lend its securities to any officer, Director, employee
or affiliate or placement agent of the Fund, or the Adviser, Administrator or
Distributor, unless otherwise permitted by applicable law.
TAXABLE INVESTMENTS. The Fund attempts to invest its assets primarily in tax
exempt municipal securities; however, the Fund is permitted to invest up to 20%
of the value of its net assets in securities the interest income on which may be
subject to federal, as well as state and local and foreign income taxes. The
Fund may make taxable investments pending the investment of proceeds from
earlier sales of its portfolio securities or when -- in the opinion of the
Adviser -- adverse market conditions exist. In abnormal market conditions, if,
in the judgment of the Adviser tax exempt securities satisfying the Fund's
investment objective may not be purchased, the Fund may, for defensive purposes
only, temporarily invest more than 20% of its net assets in taxable investments.
The taxable investments permitted for the Fund include obligations of the U.S.
Government and its agencies and instrumentalities, bank obligations, commercial
paper, the debt securities of domestic and foreign issuers (U.S. dollar
denominated) and repurchase agreements and other debt securities that meet the
Fund's quality requirements. See 'Taxes'.
PUTS. The Fund may purchase, without limit, municipal bonds or notes together
with the right to resell them at an agreed price or yield within a specified
period prior to maturity. This right to resell is known as a put. The aggregate
price paid for securities with puts may be higher than the price which otherwise
would be paid. Consistent with the Fund's investment objective and subject to
the supervision of the Directors, the purpose of this practice is to permit the
Fund to be fully invested in tax exempt securities while maintaining the
necessary liquidity to purchase securities on a when-issued basis, to meet
unusually large withdrawals, to purchase at a later date securities other than
those subject to the put and to facilitate the Adviser's ability to manage the
portfolio actively. The principal risk of puts is that the put writer may
default on its obligation to repurchase. The Adviser will monitor each writer's
ability to meet its obligations under puts.
The Fund uses the amortized cost method to value all municipal securities with
maturities of less than 60 days; when these securities are subject to puts
separate from the underlying securities, no value is assigned to the puts. The
cost of any such put is carried as an unrealized loss from the time of purchase
until it is exercised or expires. See 'Investment Objective and Policies' in the
SAI for the valuation procedure if the Fund were to invest in municipal
securities with maturities of 60 days or more that are subject to separate puts.
SYNTHETIC VARIABLE RATE INSTRUMENTS. The Fund may invest in certain synthetic
variable rate instruments. Such instruments generally involve the deposit of a
long-term tax exempt bond in a custody or trust arrangement and the creation of
a mechanism to adjust the long-term interest rate on the bond to a variable
short-term rate and a right (subject to certain conditions) on the part of the
purchaser to tender it periodically to a third party at par. The Adviser will
review the structure of synthetic variable rate instruments to identify credit
and liquidity risks (including the conditions under which the right to tender
the instrument would no longer be available) and will monitor those risks. In
the event that the right to tender the instrument is no longer available, the
risk to the Fund will be that of holding the long-term bond.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Fund may not acquire any illiquid securities if, as a result thereof, more than
15% of the market value of the Fund's net
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assets would be in illiquid investments or investments that are not readily
marketable. In addition, the Fund will not invest more than 10% of the market
value of its total assets in restricted securities that cannot be offered for
public sale in the United States without first being registered under the
Securities Act of 1933 (the 'Securities Act'). Subject to those non-fundamental
policy limitations, the Fund may acquire investments that are illiquid or have
limited liquidity, such as private placements or investments that are not
registered under the Securities Act, and cannot be offered for public sale in
the United States without first being registered. An illiquid investment is any
investment that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which it is valued by the Fund.
Repurchase agreements maturing in more than seven days are considered illiquid
and, as such, are subject to the limitations set forth in this paragraph. The
price the Fund pays for illiquid securities or receives upon resale may be lower
than the price paid or received for similar securities with a more liquid
market. Accordingly, the valuation of these securities will reflect any
limitations on their liquidity.
The Fund may also purchase Rule 144A securities sold to institutional investors
without registration under the Securities Act. These securities may be
determined to be liquid in accordance with guidelines established by the Adviser
and approved by the Board. The Board will monitor the Adviser's implementation
of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Fund is permitted to enter into the
futures and options transactions described below. These instruments are commonly
known as derivatives.
The Fund may purchase and sell exchange traded and over-the-counter ('OTC') put
and call options on fixed income securities or indices of fixed income
securities, purchase and sell futures contracts on indices of fixed income
securities, and purchase and sell put and call options on futures contracts on
indices of fixed income securities. The Fund may use these techniques for
hedging or risk management purposes or, subject to certain limitations, for the
purpose of obtaining desired exposure to certain securities or markets.
The Fund may use these techniques to manage its exposure to changing interest
rates and/or security prices. Some options and futures strategies, including
selling futures contracts and buying puts, tend to hedge the Fund's investments
against price fluctuations. Other strategies, including buying futures
contracts, writing puts and calls, and buying calls, may tend to increase market
exposure. For example, if the Portfolio wishes to obtain exposure to a
particular market or market sector but does not wish to purchase the relevant
securities, it could, as an alternative, purchase a futures contract on an index
of such securities or related securities. Such a purchase would not constitute a
hedging transaction and could be considered speculative. However, the Portfolio
will use futures contracts or options in this manner only for the purpose of
obtaining the same level of exposure to a particular market or market sector
that it could have obtained by purchasing the relevant securities and will not
use futures contracts or options to leverage its exposure beyond this level.
Options and futures contracts may be combined with each other or with forward
contracts in order to adjust the risk and return characteristics of the Fund's
overall strategy in a manner deemed appropriate to the Adviser and consistent
with the Fund's objective and policies. Because combined positions involve
multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
The Fund's use of these transactions is a highly specialized activity, which
involves investment strategies and risks different from those associated with
ordinary portfolio securities transactions, and there can be no guarantee that
their use will increase the Fund's return. While the Fund's use of these
instruments may reduce certain risks associated with owning its portfolio
securities, these techniques themselves entail certain other risks. If the
Adviser applies a strategy at an inappropriate time or judges market conditions
or trends incorrectly, such strategies may lower the Fund's return. Certain
strategies limit the Fund's opportunity to realize gains as well as its exposure
to losses. The Fund could experience losses if the prices of its options and
futures positions were poorly correlated with its other investments, or if it
could not close out its positions because of an illiquid secondary market. In
addition, the Fund will incur costs, including commissions and premiums, in
connection with these transactions and these transactions could significantly
increase the Fund's turnover rate.
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The Fund may purchase and sell put and call options on securities, indices of
securities and futures contracts, or purchase and sell futures contracts for the
purposes described herein.
In addition, in order to assure that the Portfolio will not be considered a
'commodity pool' for purposes of Commodity Futures Trading Commission ('CFTC')
rules, the Portfolio will enter into transactions in futures contracts or
options on futures contracts only if (1) such transactions constitute bona fide
hedging transactions as defined under CFTC rules, or (2) no more than 5% of the
Portfolio's net assets are committed as initial margin or premiums to positions
that do not constitute bona fide hedging transactions.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Fund obtains
the right (but not the obligation) to sell the instrument underlying the option
at a fixed strike price. In return for this right, the Fund pays the current
market price for the option (known as the option premium). Options have various
types of underlying instruments, including specific securities, indices of
securities, indices of securities prices and futures contracts. The Fund may
terminate its position in a put option it has purchased by allowing it to expire
or by exercising the option. The Fund may also close out a put option position
by entering into an offsetting transaction, if a liquid market exists. If the
option is allowed to expire, the Fund will lose the entire premium it paid. If
the Fund exercises a put option on a security, it will sell the instrument
underlying the option at the strike price. If the Fund exercises an option on an
index, settlement is in cash and does not involve the actual sale of securities.
American style options may be exercised on any day up to their expiration date.
European style options may be exercised only on their expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase, rather
than sell, the instrument underlying the option at the option's strike price. A
call buyer typically attempts to participate in potential price increases of the
instrument underlying the option with risk limited to the cost of the option and
related transaction costs if security prices fall. At the same time, the buyer
can expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
SELLING (WRITING) PUT AND CALL OPTIONS. When the Fund writes a put option, it
takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Fund assumes the obligation to pay the
strike price for the instrument underlying the option if the other party to the
option chooses to exercise it. The Fund may seek to terminate its position in a
put option it writes before exercise by purchasing an offsetting option in the
market at its current price. If the market is not liquid for a put option the
Fund has written, however, the Fund must continue to be prepared to pay the
strike price while the option is outstanding, regardless of price changes, and
must continue to post margin as discussed below.
If the price of the underlying instrument rises, a put writer would generally
expect to profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is likely
that the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, however, the put writer would
expect to suffer a loss. This loss should be less than the loss from purchasing
and holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline.
Writing a call option obligates the Fund to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium a call writer offsets part of the effect of a price decrease. At the
same time, because a call writer must be prepared to deliver the underlying
instrument
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in return for the strike price, even if its current value is greater, a call
writer gives up some ability to participate in security price increases.
The writer of a U.S. exchange traded put or call option on a security, an index
of securities or a futures contract is required to deposit cash or securities or
a letter of credit as margin and to make mark-to-market payments of variation
margin if and as the position becomes unprofitable.
OPTIONS ON INDICES. The Fund is permitted to enter into options transactions and
may purchase and sell put and call options on any securities index based on
securities in which the Fund may invest. Options on securities indices are
similar to options on securities, except that the exercise of securities index
options is settled by cash payment and does not involve the actual purchase or
sale of securities. In addition, these options are designed to reflect price
fluctuations in a group of securities or segment of the securities market rather
than price fluctuations in a single security. The Fund, in purchasing or selling
index options, is subject to the risk that the value of its portfolio securities
may not change as much as an index because the Fund's investments generally will
not match the composition of an index.
For a number of reasons, a liquid market may not exist and thus the Fund may not
be able to close out an option position that it has previously entered into.
When the Fund purchases an OTC option, it will be relying on its counterparty to
perform its obligations, and the Fund may incur additional losses if the
counterparty is unable to perform.
FUTURES CONTRACTS
When the Fund purchases a futures contract, it agrees to purchase a specified
quantity of an underlying instrument at a specified future date and price or to
make or receive a cash payment based on the value of a securities index. When
the Fund sells a futures contract, it agrees to sell a specified quantity of the
underlying instrument at a specified future date and price or to receive or make
a cash payment based on the value of a securities index. The price at which the
purchase and sale will take place is fixed when the Fund enters into the
contract. Futures can be held until their delivery dates or the positions can be
(and normally are) closed out before then. There is no assurance, however, that
a liquid market will exist when a Fund wishes to close out a particular
position.
When the Fund purchases or sells a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument. Purchasing futures contracts may tend to increase the
Fund's exposure to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying instrument directly, as
discussed above. When the Fund sells a futures contract, by contrast, the value
of its futures position will tend to move in a direction contrary to the value
of the underlying instrument. Selling futures contracts on securities similar to
those held by the Fund, therefore, will tend to offset both positive and
negative market price changes, much as if the underlying instrument had been
sold. Because there are a limited number of types of exchange-traded options and
futures contracts, it is likely that these standardized instruments will not
exactly match the Fund's current or anticipated investments. The Fund may invest
in futures contracts and options thereon based on securities with different
issuers, maturities, or other characteristics from the securities in which it
typically invests, which involves a risk that the options or futures position
will not track the performance of the Fund's other investments. The Portfolio
may also enter into transactions in futures contracts and options for
non-hedging purposes, as discussed above.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Fund buys or sells a futures contract it will be
required to deposit 'initial margin' with the Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
('FCM'). Initial margin deposits are typically equal to a small percentage of
the contract's value. If the value of either party's position declines, that
party will be required to make additional 'variation margin' payments equal to
the change in value on a daily basis. The party that has a gain may be entitled
to receive all or a portion of this amount. The Fund may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Fund to close out its futures
positions. Until it closes out a futures position, the Fund will be obligated to
continue to pay variation
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margin. Initial and variation margin payments do not constitute purchasing on
margin for purposes of the Fund's investment restrictions. In the event of the
bankruptcy of an FCM that holds margin on behalf of the Fund, the Fund may be
entitled to return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to the
Fund.
The Fund will segregate liquid, high grade debt securities in connection with
its use of options and futures contracts to the extent required by the SEC.
Securities held in a segregated account cannot be sold while the futures
contract or option is outstanding, unless they are replaced with other suitable
assets. As a result, there is a possibility that the segregation of a large
percentage of the Fund's assets could impede portfolio management or the Fund's
ability to meet redemption requests or other current obligations.
For further information about the Fund's use of futures and options and a more
detailed discussion of associated risks, see 'Investment Objective and Policies'
in the SAI.
INVESTMENT RESTRICTIONS
The Fund's investment objective, together with the investment restrictions
described below and in the SAI, except as noted, are deemed fundamental
policies, i.e., they may be changed only by the 'vote of a majority of the
outstanding voting securities' (as defined in the Investment Company Act of 1940
(the '1940 Act')) of the Fund.
As a diversified investment company, 75% of the Fund's total assets are subject
to the following fundamental limitations: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except U.S.
Government securities; and (b) the Fund may not own more than 10% of the
outstanding voting securities of any one issuer. See 'Investment Objective and
Policies -- Quality and Diversification Requirements' in the SAI.
The Fund may not: (i) purchase the securities of governmental units located in
any one state, territory or possession of the United States if, as a result,
more than 25% of the Fund's assets would be so invested; (ii) enter into reverse
repurchase agreements or other permitted borrowings that constitute senior
securities under the 1940 Act, exceeding in the aggregate one-third of the value
of the Fund's assets; or (iii) borrow money, except from banks for extraordinary
or emergency purposes, or mortgage, pledge or hypothecate any assets except in
connection with any such borrowings or permitted reverse repurchase agreements
in amounts up to one-third of the value of the Fund's assets at the time of such
borrowing or purchase securities while borrowings and other senior securities
exceed 5% of its total assets. Currently, however, it is expected that the
Adviser will limit aggregate Fund borrowings, including reverse repurchase
agreements, to 10% of the Fund's total assets.
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see 'Investment
Restrictions' in the SAI.
MANAGEMENT
DIRECTORS. The Board establishes the general policies of the Company, is
responsible for the overall management of the Company and reviews the
performance of the Fund's Adviser, Administrator, Custodian, Distributor,
Shareholder Servicing Agent and other service providers. Additional information
about the Company's Board of Directors and officers appears in the SAI under the
heading 'Directors'. The officers of the Company are also employees of Signature
or its affiliates.
ADVISER. The Fund has retained the services of the Branch as investment adviser.
The Branch, which operates out of offices located at 299 Park Avenue, New York,
New York, is licensed by the Superintendent of Banks of the State of New York
under the banking laws of the State of New York and is subject to state and
federal banking laws and regulations applicable to a foreign bank that operates
a state licensed branch in the United States.
The Bank has branches, agencies, representative offices and subsidiaries in
Switzerland and in more than 40 cities outside Switzerland, including, in the
United States, New York City, Chicago, Houston, Los Angeles and San Francisco.
In addition to the receipt of deposits and the making of loans and advances, the
Bank through its offices and subsidiaries engages in a wide range of banking and
financial activities
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typical of the world's major international banks, including fiduciary,
investment advisory and custodial services and foreign exchange in the United
States, Swiss, Asian and Euro-capital markets. The Bank is one of the world's
leading asset managers and has been active in New York City since 1946. At June
30, 1995, the Bank (including its consolidated subsidiaries) had total assets of
$307.4 billion (unaudited) and equity capital and reserves of $19.7 billion
(unaudited).
The Branch provides investment advice and portfolio management to the Fund.
Subject to the supervision of the Directors, the Branch makes the Fund's
day-to-day investment decisions, arranges for the execution of portfolio
transactions and generally manages the Fund's investments and operations. See
'Investment Adviser and Funds Services Agent' in the SAI.
Ronald W. Fleming is primarily responsible for the day-to-day management and
implementation of the Adviser's process for the Fund. Mr. Fleming has been a
Vice President of the Adviser since July 1994 and is responsible for asset
allocation and security selection for other domestic fixed income portfolios,
including several tax exempt portfolios. From 1988 to 1994, Mr. Fleming was a
Senior Portfolio Manager for IBM Credit Corp. and was responsible for managing
$7 billion in domestic and international fixed income products. Mr. Fleming has
previously managed various national and state-specific tax exempt portfolios and
has previously managed the investments of mutual funds. Mr. Fleming holds an
undergraduate degree from Kent State University and has done post graduate work
at the Wharton School of the University of Pennsylvania and has 19 years of
investment experience. The Branch has not previously advised a mutual fund. This
may be viewed as a risk of investing in this Fund.
In addition to the above-listed investment advisory services, the Adviser also
provides the Fund with certain related administrative services. Subject to the
supervision of the Board, the Adviser is responsible for: establishing
performance standards for the Fund's third-party service providers and
overseeing and evaluating the performance of such entities; providing and
presenting quarterly management reports to the Directors; supervising the
preparation of reports for Fund shareholders; establishing voluntary expense
limitations for the Fund and providing any resultant expense reimbursement to
the Fund; and such other related services as the Company may reasonably request.
Under the Investment Advisory Agreement, the Fund pays the Adviser a fee,
calculated daily and payable monthly, at an annual rate of 0.45% of the Fund's
average net assets. The Branch has voluntarily agreed to waive its fees and
reimburse the Fund for any of its expenses to the extent that the Fund's total
operating expenses exceed, on an annual basis, 0.80% of the Fund's average daily
net assets. The Branch may modify or discontinue this expense limitation at any
time in the future with 30 days' notice to the Fund. See 'Expenses'.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS WITH OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, THE BRANCH OR ANY OTHER BANK.
ADMINISTRATOR. Under the Administrative Services Agreement with the Company,
Signature serves as the Fund's administrator. In this capacity, Signature
administers all aspects of the Fund's day-to-day operations, subject to the
supervision of the Adviser and the Board, except as set forth under 'Adviser',
'Distributor', 'Custodian' and 'Shareholder Services'. As administrator,
Signature: (i) furnishes general office facilities and ordinary clerical and
related services for day-to-day operations including recordkeeping
responsibilities; (ii) takes responsibility for compliance with all applicable
federal and state securities and other regulatory requirements; (iii) takes
responsibility for monitoring the Fund's status as a 'regulated investment
company' under the Internal Revenue Code of 1986, as amended (the 'Code'); and
(iv) performs administrative and managerial oversight of the activities of the
Fund's custodian, transfer agent and other agents or independent contractors.
Under the Administrative Services Agreement, the Fund has agreed to pay
Signature an administrative fee, calculated daily and payable monthly, at an
annual rate of 0.10% of the Fund's first $100 million of average net assets,
plus 0.075% of the Fund's next $100 million of average net assets, plus 0.05% of
the Fund's average net assets in excess of $200 million.
DISTRIBUTOR. Under the Distribution Agreement, Signature, located at 6 St. James
Avenue, Boston, MA 02116, serves as the distributor of Fund shares (in such
capacity, the 'Distributor'). The Distributor is a
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wholly-owned direct subsidiary of Signature Financial Group, Inc., and is a
registered broker-dealer. The Distributor does not receive a fee pursuant to the
terms of the Distribution Agreement.
CUSTODIAN. Investors Bank & Trust Company, whose principal offices are located
at 89 South Street, Boston, Massachusetts 02111, serves as the Fund's custodian
and transfer and dividend disbursing agent. See 'Custodian' in the SAI.
SHAREHOLDER SERVICES
The Company has entered into a Shareholder Servicing Agreement with the Branch
under which the Branch provides shareholder services to Fund shareholders, which
include coordinating shareholder accounts and records, assisting investors
seeking to purchase or redeem Fund shares, providing performance information
relating to the Fund, and responding to shareholder inquiries. The Company has
agreed to pay the Branch for these services at an annual rate of 0.25% of the
average daily net assets of the Fund. Under the terms of the Shareholder
Servicing Agreement, the Branch may delegate one or more of its responsibilities
to other entities at its expense.
EXPENSES
In addition to the fees of the Branch, Signature, and Investors Bank & Trust
Company, the Fund will be responsible for other expenses including brokerage
costs and litigation and extraordinary expenses. The Branch has agreed to waive
fees as necessary, if, in any fiscal year, the sum of the Fund's expenses
exceeds the limits set by applicable regulations of state securities
commissions. Such annual limits are currently 2.5% of the first $30 million of
average net assets, 2% of the next $70 million of such net assets and 1.5% of
such net assets in excess of $100 million. The Branch has also voluntarily
agreed to limit the total operating expenses of the Fund, excluding
extraordinary expenses, to an annual rate of 0.80% of the Fund's average daily
net assets. The Branch may modify or discontinue this voluntary expense
limitation at any time in the future with 30 days' notice to the Fund.
The Fund may allocate brokerage transactions to its affiliates and the Adviser's
affiliates. Brokerage transactions may be allocated to these affiliates only if
the commissions received by such affiliates are fair and reasonable when
compared to the commissions paid to unaffiliated brokers in connection with
comparable transactions. See 'Portfolio Transactions' in the SAI.
PURCHASE OF SHARES
GENERAL INFORMATION ON PURCHASES. Investors may purchase Fund shares only
through the Distributor. All purchase orders must be accepted by the
Distributor. The Company also reserves the right to determine the purchase
orders that it will accept and it reserves the right to cease offering its
shares at any time. The shares of the Fund may be purchased only in those states
where they may be lawfully sold.
The business days of the Fund are the days the New York Stock Exchange (the
'NYSE') is open for regular trading.
The shares of the Fund are sold on a continuous basis without a sales charge at
the net asset value per share next determined after receipt and acceptance of a
purchase order by the Distributor. The Fund calculates its net asset value at
the close of business. See 'Net Asset Value'. The minimum initial investment in
the Fund is $25,000, except that the minimum initial investment is $10,000 for
shareholders of another series of the Company. The minimum subsequent investment
in the Fund for all investors is $5,000. The minimum initial investment for
employees of the Bank or its affiliates is $5,000. The minimum subsequent
investment is $1,000. These minimum investment requirements may be waived for
certain accounts for the benefit of minors. For purposes of the minimum
investment requirements, the Fund may aggregate investments by related
shareholders. Investors will receive the number of full and fractional shares of
the Fund equal to the dollar amount of their subscription divided by the net
asset value per share of the Fund as next determined on the day that the
investor's subscription is accepted. See 'Purchase of Shares' in the SAI.
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Purchase orders in proper form received by the Distributor prior to 4:00 p.m.
New York time or the close of regular trading on the NYSE, whichever is earlier,
are effective and executed at the net asset value next determined that day.
Purchase orders received after 4:00 p.m. New York time or the close of the NYSE,
whichever is earlier, will be executed at the net asset value determined on the
next business day. Investors become record shareholders of the Fund on the next
business day ('day two') after they place their subscription order, provided the
Custodian receives payment for the shares on day two. As record shareholders,
investors are entitled to earn dividends.
Fund shares may be purchased in the following methods:
BRANCH CLIENTS: Private Bank Clients of the Branch should request a Branch
representative to assist them in placing a purchase order with the Distributor.
THROUGH THE DISTRIBUTOR: Shareholders who do not currently maintain a private
banking relationship with the Branch may purchase shares of the Fund directly
from the Distributor by wire transfer or mail.
The Transfer Agent will maintain the accounts for all shareholders who purchase
Fund shares directly through the Distributor. For account balance information
and shareholder services, such shareholders should contact the Transfer Agent at
(800) [ ] or in writing at UBS Private Investor Funds, Inc., c/o
Investors Bank & Trust Company, P.O. Box 1537 MFD 23, Boston, MA 02205-1537.
By wire: Purchases may be made by federal funds wire. To place a purchase order
with the Fund, the shareholder must telephone the Transfer Agent at (800)
[ ] for specific instructions.
Subject to the minimum purchase requirements discussed above, shares purchased
by federal funds wire will be effected at the net asset value per share next
determined after acceptance of the order.
A completed account application must promptly follow any wire order for an
initial purchase. No account application is required for subsequent purchases.
Completed account applications should be mailed or sent via facsimile.
Shareholders should contact the Transfer Agent for further instructions
regarding account applications.
By mail: Subject to the minimum purchase requirements discussed above,
shareholders may purchase shares of the Fund through the Distributor by
completing an account application and mailing it, together with a check payable
to 'UBS Private Investor Funds, Inc.', to UBS Private Investor Funds, Inc., c/o
Investors Bank & Trust Company, P.O. Box 1537 MFD 23, Boston, MA 02205-1537.
Account applications are not required for subsequent purchases; however, the
shareholder's account number must be clearly marked on the check to ensure
proper credit. Subsequent purchases may also be made by mailing a check together
with the detachable purchase order that accompanies transaction confirmations.
Checks are subject to collection at full value. For shares purchased by check,
dividend payments and redemption proceeds, if any, will be delayed until such
funds are collected, which may take up to 15 days from the date of purchase.
REDEMPTION OF SHARES
GENERAL INFORMATION ON REDEMPTIONS. A shareholder may redeem all or any number
of the shares registered in its name at any time at the net asset value next
determined after a redemption request in proper form is received by the
Distributor. The Fund calculates its net asset value at the close of business.
See 'Net Asset Value'.
A redemption order will be effected provided the Distributor receives such an
order prior to 4:00 p.m. New York time or the close of regular trading on the
NYSE, whichever is earlier. The redemption of Fund shares is effective and is
executed at the net asset value next determined that day. Redemption orders
received after 4:00 p.m. New York time or the close of regular trading on the
NYSE, whichever is earlier, will be executed at the net asset value determined
on the next business day. Proceeds of an effective redemption are generally
deposited the next business day in immediately available funds to the account
designated by the redeeming shareholder or mailed to the shareholder's address
of record, in accordance with the shareholder's instructions.
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Shareholders will continue to earn dividends through the day of redemption.
Fund shares may be redeemed in the following methods:
BRANCH CLIENTS: Shareholders who are Private Bank Clients of the Branch should
request a Branch representative to assist them in placing a redemption order.
THROUGH THE DISTRIBUTOR: Shareholders who are not Branch clients may redeem Fund
shares by telephone or mail.
By telephone: Telephone redemptions may be made by calling the Transfer Agent at
(800) [ ]. Redemption orders will be accepted until 4:00 p.m. New York
time or the close of regular trading on the NYSE, whichever is earlier.
Telephone redemption requests are limited to those shareholders who have
previously elected this service. Such shareholders risk possible loss of
principal and income in the event of a telephone redemption not authorized by
them. The Fund and the Transfer Agent will employ reasonable procedures to
verify that telephone redemption instructions are genuine and will require that
shareholders electing such an option provide a form of personal identification.
The failure by the Fund or the Transfer Agent to employ such procedures may
cause the Fund or the Transfer Agent to be liable for any losses incurred by
investors due to telephone redemptions based upon unauthorized or fraudulent
instructions. The telephone redemption option may be modified or discontinued at
any time upon 60 days' notice to shareholders.
By mail: Redemption requests may also be mailed to the Transfer Agent,
identifying the Fund, the dollar amount or number of shares to be redeemed and
the shareholder's account number. The request must be signed in exactly the same
manner as the account is registered (e.g., if there is more than one owner of
the shares, all must sign). In all cases, all signatures on a redemption request
must be signature guaranteed by an eligible guarantor institution which includes
a domestic bank, a domestic savings and loan institution, a domestic credit
union, a member bank of the Federal Reserve System or a member firm of a
national securities exchange, pursuant to the Fund's standards and procedures;
if the guarantor institution belongs to one of the Medallion Signature programs,
it must use the specific 'Medallion Guaranteed' stamp (guarantees by notaries
public are not acceptable). Further documentation, such as copies of corporate
resolutions and instruments of authority, may be requested from corporations,
administrators, executors, personal representatives, trustees or custodians to
evidence the authority of the person or entity making the redemption request.
The redemption request in proper form should be sent to UBS Private Investor
Funds, Inc., c/o Investors Bank & Trust Company, P.O. Box 1537 MFD 23, Boston,
MA 02205-1537.
MANDATORY REDEMPTION. If the value of a shareholder's holdings in the Fund falls
below $10,000 because of a redemption of shares, the shareholder's remaining
shares may be redeemed 60 days after written notice unless the account is
increased to $10,000 or more. For example, a shareholder whose initial and only
investment is $10,000 may be subject to mandatory redemption resulting from any
redemption that causes his or her investment to fall below $10,000.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions may
not be processed unless the redemption request is submitted in proper form. To
be in proper form, the Fund must have received the shareholder's taxpayer
identification number and address. As discussed under 'Taxes' below, the Fund
may be required to impose 'back-up' withholding of federal income tax on
dividends, distributions and redemptions when non-corporate investors have not
provided a certified taxpayer identification number. In addition, if an investor
sends a check to the Distributor for the purchase of Fund shares and shares are
purchased with funds made available by the Distributor before the check has
cleared, the transmittal of redemption proceeds from the sale of those shares
will not occur until the check used to purchase such shares has cleared, which
may take up to 15 days. Redemption delays may be avoided by purchasing shares by
federal funds wire.
The right of redemption of Fund shares may be suspended or the date of payment
postponed for such periods as the 1940 Act or the Securities and Exchange
Commission (the 'SEC') may permit. See 'Redemption of Shares' in the SAI.
-14-
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EXCHANGE OF SHARES
An investor may exchange Fund shares for shares of any other series of the
Company, without charge. An exchange may be made so long as after the exchange
the investor has shares, in each series in which it remains an investor, with a
value equal to or greater than each such series' minimum investment amount. See
'Purchase of Shares' in the prospectuses of the other Company series for the
minimum investment amounts for each of those funds. Shares are exchanged on the
basis of relative net asset value per share. Exchanges are in effect redemptions
from one fund and purchases of another fund and the usual purchase and
redemption procedures and requirements are applicable to exchanges. See
'Purchase of Shares' and 'Redemption of Shares' in this Prospectus and in the
prospectuses of the other Company series. See also 'Additional Information'
below for an explanation of the telephone exchange policy.
Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income tax
purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state
securities laws may restrict the availability of the exchange privilege.
DIVIDENDS AND DISTRIBUTIONS
The Fund will declare daily, and pay monthly, dividends from its net investment
income. The Fund may also declare an additional dividend of net investment
income in a given year to the extent necessary to avoid the imposition of
federal excise taxes on the Fund.
Substantially all of the Fund's net realized capital gains, if any, will be
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise taxes on the Fund. Declared dividends and
distributions are payable on the payment date to shareholders of record on the
record date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional Fund shares unless the shareholder has elected in
writing to have them paid in cash. Dividends and distributions to be paid in
cash are credited to the account designated by the shareholder or sent by check
to the shareholder's address of record, in accordance with the shareholder's
instructions. The Fund reserves the right to discontinue, alter or limit the
automatic reinvestment privilege at any time.
To the extent that shareholders of the Fund elect to receive their dividends in
cash, rather than electing to reinvest such dividends in additional shares, the
cash used to make these distributions must be provided from the Fund's assets.
The Fund will be required to use its own cash or the proceeds from the sales of
its securities in order to fund such distributions. Moreover, in the case of
zero coupon bonds, the Fund generally will not have received any income from the
issuer of such a security. Consequently, the Fund must rely on other sources
(e.g., proceeds from the sales of assets or other income) to meet such
distribution requirements. To the extent the Fund makes such cash distributions,
the Fund will not be able to invest that cash in income producing securities.
Consequently, the current income of the Fund may ultimately be reduced.
NET ASSET VALUE
The Fund's net asset value per share equals the value of the Fund's total assets
less the amount of its liabilities, divided by the number of its outstanding
shares, rounded to the nearest cent. Expenses, including the fees payable to the
Fund's service providers, are accrued daily. Securities for which market
quotations are readily available are valued at market value. All other
securities will be valued at 'fair value'. See 'Net Asset Value' in the SAI for
information on the valuation of the Fund's portfolio securities.
The Fund computes its net asset value once daily at the close of business on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the following legal holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. On days when U.S. trading markets close early in observance of
these holidays, the Fund expects to close for purchases and redemptions at the
same time.
-15-
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<PAGE>
ORGANIZATION
UBS Private Investor Funds, Inc., a Maryland corporation incorporated on
November 16, 1995, is an open-end management investment company registered under
the 1940 Act and organized as a series fund. The Company has no prior history.
The Company is currently authorized to issue shares in four series: The UBS Bond
Fund Series; The UBS Tax Exempt Bond Fund Series; The UBS International Equity
Fund Series; and The UBS U.S. Equity Fund Series. Each outstanding share of the
Company will have a pro rata interest in the assets of its series, but it will
have no interest in the assets of any other Company series. Only shares of The
UBS Tax Exempt Bond Fund Series are offered through this Prospectus.
Shareholder inquiries by clients of the Branch should be directed to the Branch,
while other shareholders should address their inquiries to the Transfer Agent.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and nonassessable when issued by the Company. The Company does not intend to
hold meetings of shareholders annually. The Board may call meetings of
shareholders for action by shareholder vote as may be required by the 1940 Act
or the Company's Articles of Incorporation. For further organizational
information, including certain shareholder rights, see 'Organization' in the
SAI.
The Company expects that, immediately prior to the initial public offering of
its shares, the sole holder of its capital stock will be Signature.
TAXES
The Fund intends to invest at least 80% of its net assets in 'tax exempt
securities'. Municipal obligations that are tax preference items for purposes of
the alternative minimum tax will not be considered 'tax exempt securities' for
this purpose.
The Company intends that the Fund will qualify as a separate regulated
investment company under Subchapter M of the Code. As a regulated investment
company, the Fund will not be subject to federal income taxes if at least 90% of
its net investment income and net short-term capital gains less any available
capital loss carryforwards are distributed to shareholders within allowable time
limits. In addition, the Fund intends to qualify to pay exempt-interest
dividends to its shareholders by ensuring that, at the close of each quarter of
each of its taxable years, at least 50% of the value of its total assets will
consist of tax exempt securities. An exempt-interest dividend is that part of a
distribution made by the Fund that consists of interest received by the Fund on
tax exempt securities less any expenses allocable to such interest, provided
that the 50% test described above is met. Shareholders will not incur any
federal income tax liability on the amount of exempt-interest dividends received
by them from the Fund. In view of the investment policy of the Fund, it is
expected that a substantial portion of its dividends will be exempt-interest
dividends, although the Fund may from time to time realize and distribute
ordinary income and net capital gains.
Distributions of net long-term capital gains in excess of net short-term capital
losses are taxable to Fund shareholders as long-term capital gains regardless of
how long a shareholder has held shares in the Fund and regardless of whether
received in the form of cash or reinvested in additional shares. Distributions
of taxable income and realized net short-term capital gains in excess of net
long-term capital losses, if any, are taxable as ordinary income to Fund
shareholders, whether such distributions are received in the form of cash or
reinvested in additional shares. Annual statements as to the current federal tax
status of distributions will be mailed to shareholders after the end of the
taxable year for the Fund. Distributions to corporate shareholders of the Fund
will not qualify for the dividends-received deduction because the income of the
Fund will not consist of dividends paid by United States corporations.
Interest on indebtedness incurred or continued to purchase or carry shares of
the Fund will not be deductible for Federal income tax purposes to the extent
that the Fund's distributions are exempt from Federal income tax.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities generally will be treated as
long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption or exchange of shares in the Fund
held for six months or less will be treated as a long-term capital loss to the
extent of any long-term capital gain distributions received by the
-16-
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<PAGE>
shareholder with respect to such shares. Moreover, any loss realized by a
shareholder upon the sale of shares of the Fund held for six months or less will
be disallowed to the extent of any exempt-interest dividends received by the
shareholder with respect to such shares.
In addition, no loss will be allowed on the sale or other disposition of shares
of the Fund if, within a period beginning 30 days before the date of such sale
or disposition and ending 30 days after such date, the holder acquires (such as
through dividend reinvestment) securities that are substantially identical to
the shares of the Fund.
Distributions of net investment income or net long-term capital gains will have
the effect of reducing the net asset value of the Fund's shares by the amount of
the distribution. If the net asset value is reduced below a shareholder's cost,
the distribution will nonetheless be taxable as described above, even if the
distribution represents a return of invested capital. Investors should consider
the tax implications of buying shares just prior to a distribution, when the
price of shares may reflect the amount of the forthcoming distribution.
This discussion of tax consequences is based on U.S. federal tax laws in effect
on the date of this Prospectus. These laws and regulations are subject to change
by legislative or administrative action, possibly with retroactive effect.
Shareholders are urged to consult their tax advisors concerning the effect of
Federal taxes on their individual circumstances and with respect to the
applicability of state and local taxes. See 'Taxes' in the SAI. In particular,
shareholders should be aware that interest on certain tax exempt municipal
obligations issued after August 7, 1986 is a preference item for purposes of the
alternative minimum tax applicable to individuals and corporations. In addition,
the Treasury has been granted authority under the Code to issue regulations that
would require the portion of an exempt-interest dividend of a regulated
investment company that is allocable to these obligations to be treated as a
preference item for purposes of the alternative minimum tax. Furthermore,
additional or special tax provisions may apply to corporations, financial
institutions and property and casualty insurance companies, and they should
consult their tax advisors before purchasing shares of the Fund.
If a correct and certified taxpayer identification number is not on file, the
Fund is required to withhold 31% of taxable distributions to non-corporate
shareholders. Shareholders should be aware that, under applicable regulations,
the Fund may be fined up to $50 annually for each account for which a certified
taxpayer identification number is not provided. In the event that such a fine is
imposed with respect to any uncertified account in any year, a corresponding
charge may be made against that account.
ADDITIONAL INFORMATION
The Fund will send its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports will be audited by independent
accountants. Shareholders will also be sent confirmations of each purchase and
redemption and monthly statements reflecting all account activity, including
dividends and any distributions whether reinvested in additional shares or paid
in cash.
All shareholders are given the privilege to initiate transactions automatically
by telephone upon opening an account. However, an investor should be aware that
a transaction authorized by telephone and reasonably believed to be genuine by
the Company, the Branch, the Transfer Agent or the Distributor may subject the
investor to risk of loss if such instruction is subsequently found not to be
genuine. The Company and its service providers will employ reasonable
procedures, including requiring investors to give a form of personal
identification and tape recording of telephonic instructions, to confirm that
telephonic instructions by investors are genuine; if it does not, it or the
service provider may be liable for any losses due to unauthorized or fraudulent
instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indices, including data from
Lipper Analytical Services, Morningstar, Inc., Lehman 5 Year Municipal Bond
Index and other industry publications.
The Fund may advertise 'yield' and 'tax equivalent yield'. Yield refers to the
net income generated by an investment in the Fund over a stated 30-day period.
This income is then annualized -- i.e., the amount of income generated by the
investment during the 30-day period is assumed to be generated each 30-day
period for 12 periods and is shown as a percentage of the investment. The income
earned on the investment is also assumed to be reinvested at the end of the
sixth 30-day period. The tax equivalent yield is calculated similarly to the
yield for the Fund, except that the yield is increased using a stated
-17-
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<PAGE>
income tax rate to demonstrate the taxable yield necessary to produce an
after-tax yield equivalent to that of the Fund's.
The Fund may also advertise 'total return'. The total return shows what an
investment in the Fund would have earned over a specified period of time (one,
five or ten years or since commencement of operations, if less) assuming that
all Fund distributions and dividends were reinvested on the reinvestment dates
and less all recurring fees during the period and assuming the redemption of
such investment at the end of each period.
These methods of calculating yield, tax equivalent yield and total return are
required by SEC regulations. Yield, tax equivalent yield and total return data
similarly calculated, unless otherwise indicated, over other specified periods
of time may also be used. All performance figures are based on historical
earnings and are not intended to indicate future performance. Performance
information may be obtained by clients of the Branch by calling the Branch,
while other shareholders may address their inquiries to the Transfer Agent.
-18-
<PAGE>
<PAGE>
PS
________________________________________________________________________________
INVESTMENT ADVISER
Union Bank of Switzerland,
New York Branch
299 Park Avenue
New York, New York 10171
(212) 821-3000
ADMINISTRATOR AND DISTRIBUTOR
Signature Broker-Dealer Services, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Investors for Whom the Fund is Designed...................................................................... 2
Investment Objective and Policies............................................................................ 3
Additional Investment Information and Risk Factors........................................................... 5
Options...................................................................................................... 8
Futures Contracts............................................................................................ 9
Investment Restrictions...................................................................................... 10
Management................................................................................................... 10
Shareholder Services......................................................................................... 12
Expenses..................................................................................................... 12
Purchase of Shares........................................................................................... 12
Redemption of Shares......................................................................................... 13
Exchange of Shares........................................................................................... 15
Dividends and Distributions.................................................................................. 15
Net Asset Value.............................................................................................. 15
Organization................................................................................................. 16
Taxes........................................................................................................ 16
Additional Information....................................................................................... 17
</TABLE>
UBS PRIVATE
INVESTOR FUNDS,
INC.
UBS TAX EXEMPT BOND FUND
---------------------
PROSPECTUS
---------------------
, 1996
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER OF THE FUND SHARES MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, BY THE FUND IN ANY JURISDICTION IN WHICH SUCH
OFFER TO SELL OR SOLICITATION MAY NOT LAWFULLY BE MADE.
<PAGE>
<PAGE>
UBS PRIVATE INVESTOR FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
UBS TAX EXEMPT BOND FUND
SUBJECT TO COMPLETION DATED FEBRUARY [ ], 1996
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS DATED [ ], 1996 (THE
'PROSPECTUS'), FOR THE FUND LISTED ABOVE, AS SUPPLEMENTED FROM TIME TO TIME.
COPIES OF THE PROSPECTUS MAY BE OBTAINED WITHOUT CHARGE FROM SIGNATURE BROKER-
DEALER SERVICES, INC. AT THE ADDRESS AND PHONE NUMBER SET FORTH HEREIN.
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
GENERAL............................................................................................ SAI-1
INVESTMENT OBJECTIVE AND POLICIES.................................................................. SAI-1
INVESTMENT RESTRICTIONS............................................................................ SAI-9
DIRECTORS.......................................................................................... SAI-13
INVESTMENT ADVISER................................................................................. SAI-14
ADMINISTRATOR...................................................................................... SAI-15
DISTRIBUTOR........................................................................................ SAI-16
CUSTODIAN.......................................................................................... SAI-16
SHAREHOLDER SERVICES............................................................................... SAI-17
INDEPENDENT ACCOUNTANTS............................................................................ SAI-17
EXPENSES........................................................................................... SAI-17
PURCHASE OF SHARES................................................................................. SAI-18
REDEMPTION OF SHARES............................................................................... SAI-18
EXCHANGE OF SHARES................................................................................. SAI-19
DIVIDENDS AND DISTRIBUTIONS........................................................................ SAI-19
NET ASSET VALUE.................................................................................... SAI-19
PERFORMANCE DATA................................................................................... SAI-20
PORTFOLIO TRANSACTIONS............................................................................. SAI-20
ORGANIZATION....................................................................................... SAI-21
TAXES.............................................................................................. SAI-22
ADDITIONAL INFORMATION............................................................................. SAI-23
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS......................................... F-1
</TABLE>
ii
<PAGE>
<PAGE>
GENERAL
UBS Private Investor Funds, Inc. (the 'Company') currently issues shares in
four series: UBS Bond Fund; UBS Tax Exempt Bond Fund; UBS International Equity
Fund; and UBS U.S. Equity Fund. Each series is a series of the Company, an
open-end management investment company organized as a Maryland corporation. The
Company was organized on November 16, 1995. This Statement of Additional
Information ('SAI') describes the investment objective and policies, management
and operation of UBS Tax Exempt Bond Fund (the 'Fund') to enable investors to
determine if the Fund suits their investment needs. As more fully described
herein, the Fund invests primarily in securities of states, territories and
possessions of the United States and their political subdivisions, agencies and
instrumentalities, the interest of which is exempt from federal income tax.
This SAI provides additional information with respect to the Fund, and
should be read in conjunction with its current Prospectus. Capitalized terms not
otherwise defined in this SAI have the meanings accorded to them in the Fund's
Prospectus. The Company's executive offices are located at 6 St. James Avenue,
Boston, Massachusetts 02116.
INVESTMENT OBJECTIVE AND POLICIES
The Fund is designed for investors who seek tax exempt yields greater than
those generally available from a portfolio of short-term tax exempt obligations
and who are willing to incur the greater price fluctuation of longer-term
investments. The Fund's investment objective is to provide a high level of
current income exempt from federal income tax consistent with moderate risk of
capital and maintenance of liquidity. See 'Taxes'. The Fund attempts to achieve
this investment objective by investing primarily in securities of states,
territories and possessions of the United States and their political
subdivisions, agencies and instrumentalities, the interest on which is exempt
from federal income tax in the opinion of bond counsel for the issuer. However,
the Fund may invest up to 20% of its net assets in securities the interest
income on which may be subject to federal, as well as state and local and
foreign taxes. The Fund seeks to maintain a current yield that is greater than
that obtainable from a portfolio of short-term tax exempt obligations, subject
to certain quality restrictions. See 'Investment Objective and Policies --
Quality and Diversification Requirements'.
MONEY MARKET INSTRUMENTS
As discussed in the Prospectus, the Fund may invest in money market
instruments to the extent consistent with its investment objective and policies.
A description of the various types of money market instruments that may be
purchased appears below. See 'Investment Objective and Policies -- Quality and
Diversification Requirements'.
U.S. TREASURY SECURITIES. The Fund may invest in direct obligations of the
U.S. Treasury, including Treasury Bills, Notes and Bonds, all of which are
backed as to principal and interest payments by the full faith and credit of the
United States.
ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in obligations
issued or guaranteed by U.S. Government agencies or instrumentalities. These
obligations may or may not be backed by the 'full faith and credit' of the
United States. In the case of securities not backed by the full faith and credit
of the United States, the Fund must look principally to the federal agency
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitments. Securities in which the Fund
may invest that are not backed by the full faith and credit of the United States
include, but are not limited to, obligations of the Tennessee Valley Authority,
the Federal Home Loan Mortgage Corporation and the U.S. Postal Service, each of
which has the right to borrow from the U.S. Treasury to meet its obligations,
and the obligations of the Federal Farm Credit System and the Federal
SAI-1
<PAGE>
<PAGE>
Home Loan Banks, both of whose obligations may be satisfied only by the
individual credits of each issuing agency. Securities that are backed by the
full faith and credit of the United States include obligations of the Government
National Mortgage Association, the Farmers Home Administration, and the
Export-Import Bank.
BANK OBLIGATIONS. The Fund, unless otherwise noted in the Prospectus or
below, may invest in negotiable certificates of deposit, time deposits and
bankers' acceptances of (i) banks, savings and loan associations and savings
banks that have more than $2 billion in total assets and are organized under the
laws of the United States or any state, (ii) foreign branches of these banks and
(iii) U.S. branches of foreign banks of equivalent size (Yankees). The Fund may
not invest in obligations of foreign branches of foreign banks. The Fund will
not invest in obligations for which the New York Branch (the 'Branch' or the
'Adviser') of Union Bank of Switzerland (the 'Bank'), or any of its affiliated
persons, is the ultimate obligor or accepting bank. The Fund may not invest in
obligations of international banking institutions designated or supported by
national governments to promote economic reconstruction, development or trade
between nations (e.g., the European Investment Bank, the Inter-American
Development Bank or the World Bank).
COMMERCIAL PAPER. The Fund may invest in commercial paper, including Master
Demand obligations. Master Demand obligations are obligations that provide for a
periodic adjustment in the interest rate paid and permit daily changes in the
amount borrowed. Master Demand obligations are governed by agreements between
the issuer and the Adviser acting as agent, for no additional fee, in its
capacity as investment adviser to the Fund and as a fiduciary for other clients
for whom it exercises investment discretion. The monies loaned to the borrower
come from accounts managed by the Adviser or its affiliates, pursuant to
arrangements with such accounts. Interest and principal payments are credited to
such accounts. The Adviser, acting as a fiduciary on behalf of its clients, has
the right to increase or decrease the amount provided to the borrower under an
obligation. The borrower has the right to pay without penalty all or any part of
the principal amount then outstanding on an obligation together with interest to
the date of payment. Because these obligations typically provide that the
interest rate is tied to the Federal Reserve commercial paper composite rate,
the rate on Master Demand obligations is subject to change. Repayment of a
Master Demand obligation to participating accounts depends on the ability of the
borrower to pay the accrued interest and principal of the obligation on demand,
which is continuously monitored by the Adviser. Because Master Demand
obligations typically are not rated by credit rating agencies, the Fund may
invest in such unrated obligations only if at the time of an investment the
obligation is determined by the Adviser to have a credit quality which satisfies
the Fund's quality restrictions. See 'Investment Objective and
Policies -- Quality and Diversification Requirements'. Although there is no
secondary market for Master Demand obligations, such obligations are considered
to be liquid because they are payable upon demand. The Fund does not have any
specific percentage limitation on investments in Master Demand obligations.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
brokers, dealers or banks that meet the credit guidelines approved by the
Company's Board of Directors (the 'Directors' or the 'Board'). In a repurchase
agreement, the Fund buys a security from a seller that has agreed to repurchase
the same security at a mutually agreed upon date and price. The resale price
normally is in excess of the purchase price, reflecting an agreed upon interest
rate. This interest rate is effective for the period of time the Fund is
invested in the agreement and is not related to the coupon rate on the
underlying security. A repurchase agreement may also be viewed as a fully
collateralized loan of money by the Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and at
no time will the Fund invest in repurchase agreements for more than thirteen
months. The securities that are subject to repurchase agreements, however, may
have maturity dates in excess of thirteen months from the effective date of the
repurchase agreement. The Fund will always receive securities as collateral
whose market value is, and during the entire term of the agreement remains, at
least equal to 100% of the dollar amount invested by the Fund in each agreement
plus accrued interest, and the Fund will make payment for such securities only
upon physical delivery or upon evidence of book entry transfer to the account of
the Custodian. If the seller defaults, the Fund might incur a loss if the
SAI-2
<PAGE>
<PAGE>
value of the collateral securing the repurchase agreement declines and might
incur disposition costs in connection with liquidating the collateral. In
addition, if bankruptcy proceedings are commenced with respect to the seller of
the security, realization of proceeds upon the disposition of the collateral by
the Fund may be delayed or limited.
CORPORATE BONDS AND OTHER DEBT SECURITIES
The Fund may invest up to 20% of its net assets in U.S. dollar-denominated
debt securities of domestic and foreign issuers the interest income on which may
be subject to federal, as well as state and local and foreign taxes. See
'Investment Objective and Policies' in the Prospectus.
TAX EXEMPT OBLIGATIONS
As discussed in the Prospectus, the Fund will invest in tax exempt
obligations to the extent consistent with its investment objective and policies.
The various types of tax exempt obligations that the Fund may purchase are
described in the Prospectus and below. See 'Investment Objective and Policies --
Quality and Diversification Requirements'.
MUNICIPAL BONDS. Municipal bonds are debt obligations issued by the states,
territories and possessions of the United States and the District of Columbia,
by their political subdivisions and by duly constituted authorities and
corporations. For example, states, territories, possessions and municipalities
may issue municipal bonds to raise funds for various public purposes such as
airports, housing, hospitals, mass transportation, schools, water and sewer
works. They may also issue municipal bonds to refund outstanding obligations and
to meet general operating expenses. Public authorities issue municipal bonds to
obtain funding for privately operated facilities, such as housing and pollution
control facilities, for industrial facilities or for water supply, gas,
electricity or waste disposal facilities.
Municipal bonds may be general obligation or revenue bonds. General
obligation bonds are secured by the issuer's pledge of its full faith, credit
and taxing power for the payment of principal and interest. Revenue bonds are
payable from revenues derived from particular facilities, from the proceeds of a
special excise tax or from other specific revenue sources. They are not
generally payable from the general taxing power of a municipality.
MUNICIPAL NOTES. Municipal Notes are divided into three categories of
short-term obligations: municipal notes, municipal commercial paper and
municipal demand obligations.
Municipal Notes are short-term obligations with a maturity at the time of
issuance ranging from six months to five years. The principal types of municipal
notes include tax anticipation notes, bond anticipation notes, revenue
anticipation notes, grant anticipation notes and project notes. Notes sold in
anticipation of collection of taxes, a bond sale, or receipt of other revenues
are usually general obligations of the issuing municipality or agency.
Municipal commercial paper typically consists of very short-term,
unsecured, negotiable promissory notes that are sold to meet the seasonal
working capital or interim construction financing needs of a municipality or
agency. While these obligations are intended to be paid from general revenues or
refinanced with long-term debt, they frequently are backed by letters of credit,
lending agreements, note repurchase agreements or other credit facility
agreements offered by banks or institutions.
Municipal demand obligations are subdivided into two types: Variable Rate
Demand Notes and Master Demand obligations.
Variable Rate Demand Notes are tax exempt municipal obligations or
participation interests that provide for a periodic adjustment in the interest
rate paid on the notes. They permit the holder to
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demand payment of the notes, or to demand purchase of the notes at a purchase
price equal to the unpaid principal balance, plus accrued interest either
directly by the issuer or by drawing on a bank's letter of credit or guaranty
issued with respect to such note. The issuer of the municipal obligation may
have a corresponding right to prepay at its discretion the outstanding principal
of the note plus accrued interest upon notice comparable to that required for
the holder to demand payment. The Variable Rate Demand Notes in which the Fund
may invest are payable, or are subject to purchase, on demand usually on notice
of seven calendar days or less. The terms of the notes provide that interest
rates are adjustable at intervals ranging from daily to six months, and the
adjustments are based upon the prime rate of a bank or other appropriate
interest rate index specified in the respective notes. Variable Rate Demand
notes are valued at amortized cost; no value is assigned to the right of the
holder to receive the par value of the obligation upon demand or notice.
Master Demand obligations are tax exempt municipal obligations that provide
for a periodic adjustment in the interest rate paid and permit daily changes in
the amount borrowed. The interest on such obligations is, in the opinion of
counsel for the borrower, exempt from federal income tax. For a description of
the attributes of Master Demand obligations, see 'Money Market Instruments'
above. Although there is no secondary market for Master Demand obligations, such
obligations are considered to be liquid because they are payable upon demand.
The Fund has no specific percentage limitations on investments in Master Demand
obligations.
PUTS. The Fund may purchase, without limit, municipal bonds or notes
together with the right to resell the bonds or notes to the seller at an agreed
price or yield within a specified period prior to the maturity date of the bonds
or notes. Such a right to resell is commonly known as a 'put'. The aggregate
price for bonds or notes with puts may be higher than the price for bonds or
notes without puts. Consistent with its investment objective and subject to the
supervision of the Board, the purpose of this practice is to permit the Fund to
be fully invested in tax exempt securities while preserving the necessary
liquidity to purchase securities on a when-issued basis, to meet unusually large
redemptions, and to purchase at a later date securities other than those subject
to the put. The principal risk of puts is that the writer of the put may default
on its obligation to repurchase. The Adviser will monitor each writer's ability
to meet its obligations under puts.
Puts may be exercised prior to the expiration date in order to fund
obligations to purchase other securities or to meet redemption requests. These
obligations may arise during periods in which proceeds from sales of interests
in the Fund and from recent sales of portfolio securities are insufficient to
meet such obligations or when the funds available are otherwise allocated for
investment. In addition, puts may be exercised prior to the expiration date in
order to take advantage of alternative investment opportunities or if the
Adviser revises its evaluation of the creditworthiness of the issuer of the
underlying security. In determining whether to exercise puts prior to their
expiration date and in selecting which puts to exercise, the Adviser considers
the amount of cash available to the Fund, the expiration dates of the available
puts, any future commitments for securities purchases, alternative investment
opportunities, the desirability of retaining the underlying securities and the
yield, quality and maturity dates of the underlying securities.
The Fund values municipal bonds and notes subject to puts with remaining
maturities of less than 60 days by the amortized cost method. If the Fund
invests in municipal bonds and notes with maturities of 60 days or more that are
subject to puts separate from the underlying securities, the puts and the
underlying securities will be valued at fair value as determined in accordance
with procedures established by the Board. The Board will, in determining the
value of a put, consider, among other factors, the creditworthiness of the
writer of the put, the duration of the put, the dates on which or the periods
during which the put may be exercised and the applicable rules and regulations
of the Securities and Exchange Commission ('SEC'). Prior to investing in such
securities, the Fund, if deemed necessary based upon the advice of counsel, will
apply to the SEC for an exemptive order, which may not be granted, relating to
the valuation of such securities.
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Because the value of the put is partly dependent on the ability of the put
writer to meet its obligation to repurchase, the Fund's policy is to enter into
put transactions only with municipal securities dealers who are approved by the
Adviser. Each dealer will be approved on its own merits and it is the Fund's
general policy to enter into put transactions only with those dealers that
present a minimal credit risk. In connection with such a determination, the
Board will regularly review the Adviser's list of approved dealers, which will
reflect the Adviser's consideration of, among other things, the ratings, if
available, of their debt securities, their reputation in the municipal
securities markets, their net worth, their efficiency in consummating
transactions and any collateral arrangements, such as letters of credit,
securing the puts written by them. Commercial bank dealers normally will be
members of the Federal Reserve System, and other dealers will be members of the
National Association of Securities Dealers, Inc. or members of a national
securities exchange. The Fund intends to limit its use of put writers to those
entities having an outstanding debt rating of Aa or better by Moody's Investors
Service, Inc. ('Moody's') or AA or better by Standard & Poor's Corporation
('Standard & Poor's'), or will be of comparable quality in the Adviser's opinion
or such put writers' obligations will be collateralized and of comparable
quality in the Adviser's opinion. The Board has directed the Adviser not to
enter into put transactions with any dealer that in the judgment of the Adviser
presents more than a minimal credit risk. If a dealer defaults on its obligation
to repurchase an underlying security, the Fund is unable to predict whether all
or any portion of any loss sustained could subsequently be recovered from such
dealer.
The Fund may also invest up to 20% of the value of its net assets in U.S.
dollar-denominated debt instruments of domestic and foreign issuers the interest
income on which may be subject to federal, as well as state and local and
foreign taxes. In abnormal market conditions, the Fund may, for defensive
purposes only, temporarily invest more than 20% of its net assets in debt
securities the interest on which is subject to federal income taxes. In no event
will the Fund invest more than 5% of its total assets in the securities of
foreign issuers. The Fund intends to limit its purchase of non-municipal debt
securities to those issuers rated at least Baa by Moody's or BBB by Standard and
Poor's or, if unrated, issuers of equal creditworthiness.
ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase
securities on a when-issued or delayed delivery basis. For example, delivery of
and payment for these securities can take place a month or more after the date
of the purchase commitment. The purchase price and the interest rate payable, if
any, on the securities are fixed on the purchase commitment date or at the time
the settlement date is fixed. The value of such securities is subject to market
fluctuation and no interest accrues to the Fund until settlement takes place. At
the time the Fund commits to purchase securities on a when-issued or delayed
delivery basis, it will record the transaction, reflect the value of such
securities each day in determining its net asset value and, if applicable,
calculate the maturity for the purposes of average maturity from that date. At
the time of settlement, a when-issued security may be valued at less than the
purchase price. To facilitate such acquisitions, the Fund will maintain with the
Custodian a segregated account with liquid assets, consisting of cash, U.S.
Government securities or other high-grade, liquid securities, in an amount at
least equal to the value of such commitments. On delivery dates for such
transactions, the Fund will meet its obligations from maturities or sales of the
securities held in the segregated account and/or from cash flow. If the Fund
chooses to dispose of the right to acquire a when-issued security prior to its
acquisition, it could, as with the disposition of any other portfolio
obligation, incur a gain or loss due to market fluctuation. It is the Fund's
current policy not to enter into when-issued commitments exceeding in the
aggregate 15% of the market value of its total assets, less liabilities
(excluding the obligations created by when-issued commitments).
INVESTMENT COMPANY SECURITIES. Securities of other investment companies may
be acquired by the Fund to the extent that such purchases are consistent with
its investment objectives and restrictions and are permitted under the
Investment Company Act of 1940, as amended (the '1940 Act'). The 1940 Act
requires that, as determined immediately after a purchase is made, (i) not more
than 5% of the value of
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the Fund's total assets will be invested in the securities of any one investment
company, (ii) not more than 10% of the value of the Fund's total assets will be
invested in securities of investment companies as a group and (iii) not more
than 3% of the outstanding voting stock of any one investment company will be
owned by the Fund. As a shareholder of another investment company, the 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 advisory and other expenses that the Fund would bear in
connection with its own operations.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements. In a reverse repurchase agreement, the Fund sells a security and
agrees to repurchase the same security at a mutually agreed upon date and price.
For purposes of the 1940 Act, reverse repurchase agreements are considered
borrowings by the Fund and, therefore, a form of leverage. The Fund will invest
the proceeds of borrowings under reverse repurchase agreements. In addition, the
Fund will enter into a reverse repurchase agreement only when the interest
income to be earned from the investment of the proceeds is greater than the
interest expense of the repurchase agreement. The Fund will not invest the
proceeds of a reverse repurchase agreement for a period that exceeds the term of
the reverse repurchase agreement. The Fund may not enter into reverse repurchase
agreements if such repurchase agreements, together with the Fund's other
borrowings, would exceed 10% of the Fund's total assets, less liabilities
(excluding obligations created by such borrowings and reverse repurchase
agreements). See 'Investment Restrictions'. The Fund will establish and maintain
with the Custodian a separate account with a portfolio of securities in an
amount at least equal to its obligations under its reverse repurchase
agreements.
SECURITIES LENDING. The Fund may lend its securities if such loans are
secured continuously by cash or equivalent collateral or by a letter of credit
in favor of the Fund at least equal at all times to 100% of the market value of
the securities loaned, plus accrued interest. While such securities are on loan,
the borrower will pay the Fund any income accruing thereon. Loans will be
subject to termination by the Fund in the normal settlement time, generally
three business days after notice, or by the borrower on one day's notice.
Borrowed securities must be returned when the loan is terminated. Any gain or
loss in the market price of the borrowed securities that occurs during the term
of the loan inures to the benefit of the Fund. The Fund may pay reasonable
finders' and custodial fees in connection with a loan. In addition, the Fund
will consider all facts and circumstances including the creditworthiness of the
borrowing financial institution and the Fund will not make any loans in excess
of one year. The Fund will not lend its securities to any officer, Director,
employee, or affiliate or placement agent of the Company, or the Adviser,
Administrator or Distributor, unless otherwise permitted by applicable law.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. The Fund may invest
in privately placed, restricted, Rule 144A or other unregistered securities as
described in the Prospectus.
As to illiquid investments, the Fund is subject to a risk that it might not
be able to sell such securities at a price that the Fund deems reflective of
their value. Where an illiquid security must be registered under the Securities
Act of 1933, as amended (the 'Securities Act'), before it may be resold, the
Fund may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time the Fund decides to sell and the
time the Fund is permitted to sell under an effective registration statement.
If, during such a period, adverse market conditions develop, the Fund might
obtain a less favorable price than that which prevailed when it decided to sell.
SYNTHETIC VARIABLE RATE INSTRUMENTS. The Fund may invest in certain
synthetic variable rate instruments as described in the Prospectus. In the case
of some types of instruments, credit enhancements are not provided and if
certain events occur, including a default in the payment of principal or
interest on the underlying bond, a downgrading of the bond below investment
grade or a loss of the bond's tax exempt status then the put will terminate and
the Fund will bear the risk of holding a long-term bond.
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QUALITY AND DIVERSIFICATION REQUIREMENTS
The Fund intends to meet the diversification requirements of the 1940 Act.
To meet these requirements, 75% of the Fund's assets are subject to the
following fundamental limitation: the Fund may not invest more than 5% of its
total assets in the securities of any one issuer, except obligations of the U.S.
Government, its agencies and instrumentalities. As for the 25% of the Fund's
assets not subject to the limitation described above, there is no limitation on
investment of these assets under the 1940 Act, so that all of such assets may be
invested in securities of any one issuer, subject to the limitation of any
applicable state securities laws. Investments not subject to the limitations
described above could involve an increased risk to the Fund should an issuer, or
a state or its related entities, be unable to make interest or principal
payments or should the market value of such securities decline.
For purposes of diversification and concentration under the 1940 Act,
identification of the issuer of municipal bonds or notes depends on the terms
and conditions of the obligation. If the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate from
those of the government creating the subdivision and the obligation is backed
only by the assets and revenues of the subdivision, such subdivision is regarded
as the sole issuer. Similarly, in the case of an industrial development revenue
bond or pollution control revenue bond, if the bond is backed only by the assets
and revenues of the nongovernmental user, the nongovernmental user is regarded
as the sole issuer. If in either case the creating government or another entity
guarantees an obligation, the guaranty is regarded as a separate security and
treated as an issue of such guarantor. Because securities issued or guaranteed
by states or municipalities are not voting securities, there is no limitation on
the percentage of a single issuer's securities that the Fund may own so long as
it does not invest more than 5% of its total assets that are subject to the
diversification limitation in the securities of such issuer, except obligations
issued or guaranteed by the U.S. Government. Consequently, the Fund may invest
in a greater percentage of the outstanding securities of a single issuer than
would an investment company that invests in voting securities. See 'Investment
Restrictions'.
The Fund invests principally in a diversified portfolio of 'high grade' and
'investment grade' tax exempt securities. On the date of investment (i)
municipal bonds must be rated within the four highest ratings of Moody's,
currently Aaa, Aa, A, and Baa, or of Standard & Poor's, currently AAA, AA, A,
and BBB, (ii) municipal notes must be rated MIG-1 by Moody's or SP-1 by Standard
& Poor's (or, in the case of New York State municipal notes, MIG-1 or MIG-2 by
Moody's or SP-1 or SP-2 by Standard & Poor's) and (iii) municipal commercial
paper must be rated Prime-1 by Moody's or A1 by Standard & Poor's or, if not
rated by either Moody's or Standard & Poor's, issued by an issuer either (a)
having an outstanding debt issue rated A or higher by Moody's or Standard &
Poor's or (b) having comparable quality in the opinion of the Adviser. The Fund
may invest in other tax exempt securities that are not rated if, in the opinion
of the Adviser, such securities are of comparable quality to the rated
securities discussed above. In addition, at the time the Fund invests in any
commercial paper, bank obligation, repurchase agreement, or other debt
obligations, the issuer must have outstanding debt rated Baa or BBB or higher by
Moody's or Standard & Poor's, respectively, the issuer's parent corporation, if
any, must have outstanding commercial paper rated Prime-1 by Moody's or A-1 by
Standard & Poor's, or if no such ratings are available, the investment must be
of comparable quality in the Adviser's opinion.
OPTIONS AND FUTURES TRANSACTIONS
EXCHANGE TRADED AND OVER THE COUNTER OPTIONS. All options purchased or sold
by the Fund will be exchange traded or will be purchased or sold by securities
dealers ('over-the-counter' or 'OTC options') that meet creditworthiness
standards approved by the Board. Exchange-traded options are obligations of the
Options Clearing Corporation. In OTC options, the Fund relies on the dealer from
which it purchased the option to perform if the option is exercised. Thus, when
a Fund purchases an OTC option, it relies on the dealer from which it purchased
the option to make or take delivery of the
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underlying securities. Failure by the dealer to do so would result in the loss
of the premium paid by the Fund as well as loss of the expected benefit of the
transaction.
The staff of the SEC has taken the position that, in general, purchased OTC
options and the underlying securities used to cover written OTC options are
illiquid securities. However, the Fund may treat as liquid the underlying
securities used to cover written OTC options, provided it has arrangements with
certain qualified dealers who agree that the Fund may repurchase any option it
writes for a maximum price to be calculated by a predetermined formula. In these
cases, the OTC option itself would only be considered illiquid to the extent
that the maximum repurchase price under the formula exceeds the intrinsic value
of the option.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund is permitted
to enter into futures and options transactions and may purchase or sell futures
contracts and purchase or sell put and call options, including put and call
options on futures contracts. Futures contracts obligate the buyer to take and
the seller to deliver at a future date a specified quantity of a financial
instrument or an amount of cash based on the value of a securities index or
financial instrument. Currently, futures contracts are available on various
types of fixed-income securities, including but not limited to U.S. Treasury
bonds, notes and bills, Eurodollar certificates of deposit and on indices of
fixed income securities.
Unlike a futures contract, which requires the parties to buy and sell a
security or make a cash settlement payment based on changes in a financial
instrument or securities index on an agreed date, an option on a futures
contract entitles its holder to decide on or before a future date whether to
enter into such a contract. If the holder decides not to exercise its option,
the holder may close out the option position by entering into an offsetting
transaction or may decide to let the option expire and forfeit the premium
thereon. The purchaser of an option on a futures contract pays a premium for the
option but makes no initial margin payments or daily payments of cash in the
nature of 'variation' margin payments to reflect the change in the value of the
underlying contract as does a purchaser or seller of a futures contract.
The seller of an option on a futures contract receives the premium paid by
the purchaser and may be required to pay initial margin. Amounts equal to the
initial margin and any additional collateral required on futures contracts and
on any options on futures contracts sold by the Fund are paid by the Fund into a
segregated account, in the name of the Futures Commission Merchant, as required
by the 1940 Act and the SEC's interpretations thereunder.
COMBINED POSITIONS. The Fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to adjust
the risk and return characteristics of the overall position. For example, the
Fund may, subject to regulations and interpretations of the Commodity Futures
Trading Commission, purchase a put option and write a call option on the same
underlying instrument, in order to construct a combined position whose risk and
return characteristics are similar to selling a futures contract. Another
possible combined position would involve writing a call option at one strike
price and buying a call option at a lower price, in order to reduce the risk of
the written call option in the event of a substantial price increase. Because
combined options positions involve multiple trades, they result in higher
transaction costs and may be more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized options and futures contracts available will not exactly match the
Fund's current or anticipated investments. The Fund may invest in options and
futures contracts based on securities with different issuers, maturities, or
other characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the Fund's other investments.
Options and futures contract prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match the
Fund's investments well. Options and futures contracts prices are affected by
such factors as current and anticipated short-term interest rates, changes in
volatility
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of the underlying instrument, and the time remaining until expiration of the
contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. The Fund may purchase or sell options and
futures contracts with a greater or lesser value than the securities it wishes
to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in the Fund's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
market will exist for any particular option or futures contract at any
particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for the Fund
to enter into new positions or close out existing positions. If the market for a
contract is not liquid because of price fluctuation limits or otherwise, it
could prevent prompt liquidation of unfavorable positions, and could potentially
require the Fund to continue to hold a position until delivery or expiration
regardless of changes in its value. As a result, the Fund's access to other
assets held to cover its options or futures positions could also be impaired.
See 'Exchange Traded and Over the Counter Options' above for a discussion of the
liquidity of options not traded on an exchange.
POSITION LIMITS. Futures exchanges can limit the number of futures and
options on futures contracts that can be held or controlled by an entity. If an
adequate exemption cannot be obtained, the Fund or the Adviser may be required
to reduce the size of its futures and options positions or may not be able to
trade a certain futures or options contract in order to avoid exceeding such
limits.
ASSET COVERAGE FOR FUTURES CONTRACTS AND OPTIONS POSITIONS. The Fund
intends to comply with Section 4.5 of the regulations under the Commodity
Exchange Act, which limits the extent to which the Fund can commit assets to
initial margin deposits and option premiums. In addition, the Fund will comply
with SEC guidelines with respect to coverage of options and futures contracts by
mutual funds, and if the guidelines so require, will set aside appropriate
liquid assets in a segregated custodial account in the amount prescribed.
Securities held in a segregated account cannot be sold and will be considered
illiquid while the futures contract or option is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility that
the segregation of a large percentage of the Fund's assets could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental and non-fundamental
investment restrictions (as defined and distinguished below); to the extent that
a fundamental policy and non-fundamental policy apply to a given investment
activity or strategy, the more restrictive policy shall govern.
FUNDAMENTAL INVESTMENT RESTRICTIONS. The investment restrictions below have
been adopted by the Directors with respect to the Fund. Except where otherwise
noted, these investment restrictions are 'fundamental' policies which, under the
1940 Act, may not be changed without the 'vote of a majority of the outstanding
voting securities' of the Fund. The 'vote of a majority of the outstanding
voting securities' under the 1940 Act is the lesser of (a) 67% or more of the
Fund's voting shares present at a shareholders' meeting if the holders of more
than 50% of the outstanding voting shares are present or represented by proxy,
or (b) more than 50% of the Fund's outstanding voting shares. The limitations
described below apply at the time the Fund purchases the securities.
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The Fund may not:
1. Borrow money, except from banks for extraordinary or emergency purposes and
then only in amounts up to one-third of the value of its total assets
(including the amount borrowed) taken at cost at the time of such borrowing,
less liabilities (not including the amount borrowed), or mortgage, pledge, or
hypothecate any assets, except in connection with any permitted borrowing or
reverse repurchase agreements (see Investment Restriction No. 7). It will not
purchase securities while borrowings (including reverse repurchase
agreements) exceed 5% of its net assets; provided, however, that it may
increase its interest in an open-end management investment company with the
same investment objective and restrictions while such borrowings are
outstanding and provided further that for purposes of this restriction,
short-term credits necessary for the clearance of transactions are not
considered borrowings. This borrowing provision facilitates the orderly sale
of portfolio securities, for example, in the event of abnormally heavy
redemption requests and is not for investment purposes. Collateral
arrangements for premium and margin payments in connection with its hedging
activities are not deemed to be a pledge of assets;
2. Purchase the securities of an issuer if, immediately after such purchase, it
owns more than 10% of the outstanding voting securities of such an issuer.
This limitation shall not apply to investments of up to 25% of its total
assets;
3. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of its total
assets would be invested in securities or other obligations of any one such
issuer. Each state and each political subdivision, agency or instrumentality
of such state and each multi-state agency of which such state is a member
will be a separate issuer if the security is backed only by the assets and
revenue of that issuer. If the security is guaranteed by another entity, the
guarantor will be deemed to be the issuer.* This limitation shall not apply
to securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or to investments of up to 25% of the Fund's total assets;
4. Invest more than 25% of its total assets in securities of governmental units
located in any one state, territory, or possession of the United States;
5. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities) or the entering into of repurchase
agreements or loans of portfolio securities;
6. Purchase or sell real estate, commodities or commodity contracts or options
thereon (except for its interest in hedging activities and certain other
activities as described under 'Investment Objective and Policies'), interests
in oil, gas, or mineral exploration or development programs (including
limited partnerships). However, purchases of municipal bonds, notes,
commercial paper or other obligations secured by interests in real estate are
permitted;
7. Issue any senior security, except as appropriate to evidence indebtedness
that it is permitted to incur pursuant to Investment Restriction No. 1 and
except that it may enter into reverse repurchase agreements, provided that
the aggregate of all senior securities, including reverse repurchase
agreements, shall not exceed one-third of the market value of its total
assets (including the amounts borrowed), less liabilities (excluding
obligations created by such borrowings and reverse repurchase agreements).
Hedging activities as described in 'Investment Objective and Policies' shall
not be considered senior securities for purposes hereof; or
- ------------------------------------
*For purposes of interpretation of Investment Restriction No. 3,
'guaranteed by another entity' includes credit substitutions, such as letters of
credit or insurance, unless the Adviser determines that the security meets the
relevant credit standards without regard to the credit substitution.
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8. Act as an underwriter of securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The investment restrictions
described below are not fundamental policies of the Fund and may be changed by
the Directors. These non-fundamental investment policies provide that the Fund
may not:
i. borrow money (including through reverse repurchase or forward
roll transactions) for any purpose in excess of 5% of the Fund's
total assets (taken at cost), except that the Fund may borrow for
temporary or emergency purposes up to one-third of its assets;
ii. pledge, mortgage or hypothecate for any purpose in excess of 10%
of the Fund's total assets (taken at market value), provided that
collateral arrangements with respect to options and futures,
including deposits of initial deposit and variation margin, and
reverse repurchase agreements are not considered a pledge of
assets for purposes of this restriction;
iii. purchase any security or evidence of interest therein on margin,
except that such short-term credit as may be necessary for the
clearance of purchases and sales of securities may be obtained
and except that deposits of initial deposit and variation margin
may be made in connection with the purchase, ownership, holding
or sale of futures;
iv. sell securities it does not own such that the dollar amount of
such short sales at any one time exceeds 25% of the net equity of
the Fund, and the value of securities of any one issuer in which
the Fund is short exceeds the lesser of 2.0% of the value of the
Fund's net assets or 2.0% of the securities of any class of any
U.S. issuer, and provided that short sales may be made only in
those securities which are fully listed on a national securities
exchange or a foreign exchange (This provision does not include
the sale of securities the Fund contemporaneously owns or where
the Fund has the right to obtain securities equivalent in kind
and amount to those sold, i.e., short sales against the box.)
(The Fund has no current intention to engage in short selling.);
v. invest for the purpose of exercising control or management;
vi. purchase securities issued by any investment company except by
purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase,
though not made in the open market, is part of a plan of merger
or consolidation; provided, however, that securities of any
investment company will not be purchased for the Fund if such
purchase at the time thereof would cause (a) more than 10% of the
Fund's total assets (taken at the greater of cost or market
value) to be invested in the securities of such issuers; (b) more
than 5% of the Fund's total assets (taken at the greater of cost
or market value) to be invested in any one investment company; or
(c) more than 3% of the outstanding voting securities of any such
issuer to be held for the Fund; provided further that, except in
the case of a merger or consolidation, the Fund shall not
purchase any securities of any open-end investment company unless
(1) the Fund's investment adviser waives the investment advisory
fee with respect to assets invested in other open-end investment
companies and (2) the Fund incurs no sales charge in connection
with that investment;
vii. invest more than 10% of the Fund's total assets (taken at the
greater of cost or market value) in securities (excluding Rule
144A securities) that are restricted as to resale under the 1933
Act;
viii. invest more than 15% of the Fund's total assets (taken at the
greater of cost or market value) in (a) securities (excluding
Rule 144A securities) that are restricted as to resale under the
1933 Act, and (b) securities that are issued by issuers which
(including
SAI-11
<PAGE>
<PAGE>
predecessors) have been in operation less than three years
(other than U.S. Government securities), provided, however, that
no more than 5% of the Fund's total assets are invested in
securities issued by issuers which (including predecessors) have
been in operation less than three years;
ix. invest more than 15% of the Fund's net assets (taken at the
greater of cost or market value) in securities that are illiquid
or not readily marketable (excluding Rule 144A securities deemed
by the Board of Directors of the Fund to be liquid);
x. invest in securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Director
of the Fund, or is an officer or director of the Adviser, if
after the purchase of the securities of such issuer for the Fund
one or more of such persons own beneficially more than 1/2 of 1%
of the shares or securities, or both, all taken at market value,
of such issuer, and such persons owning more than 1/2 of 1% of
such shares or securities together own beneficially more than 5%
of such shares or securities, or both, all taken at market value;
xi. invest in warrants (other than warrants acquired by the Fund as
part of a unit or attached to securities at the time of purchase)
if, as a result, the investments (valued at the lower of cost or
market) would exceed 5% of the value of the Fund's net assets or
if, as a result, more than 2% of the Fund's net assets would be
invested in warrants not listed on a recognized United States or
foreign stock exchange, to the extent permitted by applicable
state securities laws;
xii. write puts and calls on securities unless each of the following
conditions are met: (a) the security underlying the put or call
is within the investment policies of the Fund and the option is
issued by the Options Clearing Corporation, except for put and
call options issued by non-U.S. entities or listed on non-U.S.
securities or commodities exchanges; (b) the aggregate value of
the obligations underlying the puts determined as of the date
the options are sold shall not exceed 5% of the Fund's net
assets; (c) the securities subject to the exercise of the call
written by the Fund must be owned by the Fund at the time the
call is sold and must continue to be owned by the Fund until the
call has been exercised, has lapsed, or the Fund has purchased a
closing call, and such purchase has been confirmed, thereby
extinguishing the Fund's obligation to deliver securities
pursuant to the call it has sold; and (d) at the time a put is
written, the Fund establishes a segregated account with its
custodian consisting of cash or short-term U.S. Government
securities equal in value to the amount the Fund will be
obligated to pay upon exercise of the put (this account must be
maintained until the put is exercised, has expired, or the Fund
has purchased a closing put, which is a put of the same series
as the one previously written); and
xiii. buy and sell puts and calls on securities, stock index futures
or options on stock index futures, or financial futures or
options on financial futures unless: (a) the options or futures
are offered through the facilities of a national securities
association or are listed on a national securities or
commodities exchange, except for put and call options issued by
non-U.S. entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate premiums paid on all
such options which are held at any time do not exceed 20% of the
Fund's total net assets; (c) the aggregate margin deposits
required on all such futures or options thereon held at any time
do not exceed 5% of the Fund's total assets; and (d) such
activities are permitted by Regulation 4.5 under the Commodity
Exchange Act.
There will be no violation of any investment restriction if that investment
restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment or any other later change.
SAI-12
<PAGE>
<PAGE>
DIRECTORS
The Company's Board consists of three directors. The Board is responsible
for the overall management of the Fund, including the general supervision and
review of its investment activities. The Board, in turn, elects the officers of
the Company. The addresses and principal occupations of the Company's Directors
and officers are listed below. As of February 1, 1996, the Directors and
officers of the Company owned of record, as a group, less than 1% of the
outstanding shares of the Company. None of the Company's Directors or officers
receives compensation from the Company exceeding $60,000 per fiscal year.
<TABLE>
<CAPTION>
POSITION
WITH THE
NAME, ADDRESS AND AGE COMPANY PRINCIPAL OCCUPATIONS DURING THE LAST FIVE YEARS
- ------------------------------- ------------ -------------------------------------------------------------
<S> <C> <C>
Dr. Hans-Peter Lochmeier* Chairman of UBS Investor Portfolios Trust (mutual fund), Trustee
299 Park Avenue the Board (February 1996-Present); Union Bank of Switzerland
New York, NY 10171 (Investment Services Department), Department Head.
Age: 54
Timothy M. Spicer, CPA Director UBS Investor Portfolios Trust, Trustee (February 1996-
299 Park Avenue Present); Ensemble Information Systems (software and
New York, NY 10171 electronic information provider), Co-Founder, Chairman of the
Age: 46 Board and Chief Executive Officer (1990-Present); Amanda
Venture Investors (AVI) (a San Francisco based venture
capital firm), Managing Partner (1995-Present); CoreLink
Resources (provides mutual fund related services to small and
medium sized banks), Director (1993-Present); Smith & Hawken
(mail order supplier of gardening tools and clothing),
Director and Chief Financial Officer (1990-1992); Concord
Holding Corporation (provides distribution and administrative
services to mutual funds), Director (1989-1995); active in
civic/charitable organizations in the San Francisco,
California area, including Big Brothers/Big Sisters and
United Way.
Peter Lawson-Johnston Director UBS Investor Portfolios Trust, Trustee (February 1996-
299 Park Avenue Present); Zemex Corporation (mining), Chairman of the Board
New York, NY 10171 and Director (1990-Present); McGraw-Hill, Inc. (publishing),
Age: 69 Director (1990-Present); National Review, Inc. (publishing),
Director (1990-Present); Guggenheim Brothers (real
estate -- venture capital partnership), Partner (1990-
Present); Elgerbar Corporation (holding company), President
and Director (1990-Present); The Solomon R. Guggenheim
Foundation (operates the Solomon R. Guggenheim Museum in New
York and the Peggy Guggenheim Collection in Venice, Italy),
Chairman and Trustee (1990-Present); The Harry Frank
Guggenheim Foundation (charitable organization), Chairman of
the Board and Trustee (1990-Present).
Timothy P. Sullivan President UBS Investor Portfolios Trust, Vice President (February
437 Madison Avenue 1996-Present); Signature Financial Group, Inc.** (provides
New York, NY 10022 distribution and administrative services to mutual funds),
Age: 34 Vice President (1995-Present); Swiss Bank Corporation, Vice
President/Associate Director (1992-1995); EquitiLink USA,
Inc. (1989-1991).
John R. Elder, CPA Treasurer UBS Investor Portfolios Trust, Treasurer (February 1996-
6 St. James Avenue Present); Signature Financial Group, Inc.**, Vice President
Boston, MA 02116 (April 1995-Present); Phoenix Home Life Mutual Insurance
Age: 47 Company (mutual funds division), Treasurer (1983-1995).
</TABLE>
(table continued on next page)
SAI-13
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
POSITION
WITH THE
NAME, ADDRESS AND AGE COMPANY PRINCIPAL OCCUPATIONS DURING THE LAST FIVE YEARS
- ------------------------------- ------------ -------------------------------------------------------------
<S> <C> <C>
Thomas M. Lenz, Esq. Secretary UBS Investor Portfolios Trust, Secretary (February 1996-
6 St. James Avenue Present); Signature Financial Group, Inc.**, Vice President
Boston, MA 02116 and Associate General Counsel (1989-Present).
Age: 37
</TABLE>
- ------------------------------------
*'Interested Person' within the meaning of the 1940 Act.
**Signature Broker-Dealer Services, Inc., the Company's principal
underwriter and administrator, is a wholly owned subsidiary of Signature
Financial Group, Inc.
COMPENSATION TABLE*
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED FROM COMPANY AND
COMPENSATION ACCRUED AS PART OF ANNUAL BENEFITS FUND COMPLEX PAID
NAME OF PERSON, POSITION FROM COMPANY FUND EXPENSES UPON RETIREMENT TO DIRECTORS
- ---------------------------------- ------------ ------------------- --------------- ------------------
<S> <C> <C> <C> <C>
Dr. Lochmeier 0 0 0 0
Director
Mr. Spicer $ 13,000 0 0 $ 25,000**
Director
Mr. Lawson-Johnston $ 13,000 0 0 $ 25,000**
Director
</TABLE>
- ------------------------------------
*The Company has not completed its first fiscal year since its
organization, and the noted amounts are estimates for the period January 1, 1996
through December 31, 1996. The Directors are also reimbursed for all reasonable
expenses incurred during the execution of their duties.
**The other entity in the Fund Complex is UBS Investor Portfolios Trust.
INVESTMENT ADVISER
Pursuant to an Investment Advisory Agreement between the Company and the
Branch, the Branch serves as the Fund's investment adviser. Subject to the
supervision of the Directors, the Adviser makes the Fund's day-to-day investment
decisions, arranges for the execution of portfolio transactions, generally
manages the Fund's investments and provides certain administrative services.
The investment advisory services provided by the Branch to the Fund are not
exclusive under the terms of the Investment Advisory Agreement. The Branch is
free to and does render similar investment advisory services to others. The
Branch serves as investment adviser to personal investors and acts as fiduciary
for trusts, estates and employee benefit plans. Certain of the assets of trusts
and estates under management are invested in common trust funds for which the
Branch serves as trustee. The accounts managed or advised by the Branch have
varying investment objectives and the Branch invests assets of such accounts in
investments substantially similar to, or the same as, the Fund's. Such accounts
are supervised by officers and employees of the Branch who may also be acting in
similar capacities for the Fund. See 'Portfolio Transactions'.
The Bank has branches, agencies, representative offices and subsidiaries in
Switzerland and in more than 40 cities outside Switzerland, including, in the
United States, New York City, Chicago, Houston, Los Angeles and San Francisco.
In addition to the receipt of deposits and the making of loans and advances, the
Bank, through its offices and subsidiaries, engages in a wide range of banking
and financial activities typical of the world's major international banks,
including fiduciary, investment advisory and custodial services and foreign
exchange in the United States, Swiss, Asian and Euro-capital markets. The Bank
is one of the world's leading asset managers and has been active in New York
City since 1946. At
SAI-14
<PAGE>
<PAGE>
June 30, 1995, the Bank (including its consolidated subsidiaries) had total
assets of $307.4 billion (unaudited) and equity capital and reserves of $19.7
billion (unaudited).
In addition to the above discussed advisory services, the Adviser also
provides certain administrative services to the Fund. In this capacity, the
Adviser, subject to the supervision of the Board, is also responsible for:
establishing performance standards for the Fund's third-party service providers
and overseeing and evaluating the performance of such entities; providing and
presenting quarterly management reports to the Directors; supervising the
preparation of reports for Fund shareholders; establishing voluntary expense
limitations for the Fund and providing any resultant expense reimbursement to
the Fund; and such other related services as the Company may reasonably request.
Under the Investment Advisory Agreement, the Fund will pay the Adviser a
fee, calculated daily and payable monthly, at an annual rate of 0.45% of the
Fund's average net assets. The Branch has voluntarily agreed to waive its fees
and reimburse the Fund for any of its expenses to the extent that the Fund's
total operating expenses exceed, on an annual basis, 0.80% of the Fund's average
daily net assets. The Branch may modify or discontinue this fee waiver and
expense limitation at any time in the future with 30 days' notice to the Fund.
See 'Expenses'.
The Investment Advisory Agreement will continue in effect until February
1998, and thereafter will be subject to annual approval by the Directors or the
vote of a majority of the Fund's outstanding voting securities (as defined in
the 1940 Act), provided that in either case the continuance also is approved by
a majority of the Directors who are not interested persons (as defined in the
1940 Act) of the Company by vote cast in person at a meeting called for the
purpose of voting on such approval. The Investment Advisory Agreement will
terminate automatically if assigned and is terminable at any time without
penalty by a vote of a majority of the Directors or by a vote of the holders of
a majority (as defined in the 1940 Act) of the Fund's outstanding shares on 60
days' written notice to the Adviser. The Investment Advisory Agreement is also
terminable by the Adviser on 60 days' written notice to the Fund. See
'Additional Information'.
The Glass-Steagall Act and other applicable laws generally prohibit banks,
such as Union Bank of Switzerland, from engaging in the business of underwriting
or distributing securities, and the Board of Governors of the Federal Reserve
System has issued an interpretation to the effect that under these laws a bank
holding company registered under the federal Bank Holding Company Act or certain
subsidiaries thereof may not sponsor, organize, or control a registered open-end
investment company continuously engaged in the issuance of its shares, such as
the Company. The interpretation does not prohibit a holding company or a
subsidiary thereof from acting as investment adviser and custodian to such an
investment company. The Adviser believes that it may perform the services for
the Fund contemplated by the Investment Advisory Agreement without violating the
Glass-Steagall Act or other applicable banking laws or regulations. State laws
on this issue may differ from the interpretation of relevant federal law, and
banks and financial institutions may be required to register as dealers pursuant
to state securities laws. However, it is possible that future changes in either
federal or state statutes and regulations concerning the permissible activities
of banks or trust companies, as well as further judicial or administrative
decisions and interpretations of present and future statutes and regulations,
might prevent the Adviser from continuing to perform such services for the Fund.
If the Adviser were prohibited from acting as the Fund's investment
adviser, it is expected that the Directors would recommend to shareholders that
they approve the Fund's entering into a new investment advisory agreement with
another qualified investment adviser selected by the Board.
ADMINISTRATOR
Under the Administrative Services Agreement with the Company, Signature
Broker-Dealer Services, Inc. ('Signature' or, in this capacity, the
'Administrator'), serves as the Fund's administrator. Signature administers all
aspects of the Fund's day-to-day operations, subject to the supervision of the
Directors,
SAI-15
<PAGE>
<PAGE>
except as set forth under the sections captioned 'Investment Adviser',
'Distributor', 'Custodian' and 'Shareholder Services'. As Administrator,
Signature (i) furnishes general office facilities and ordinary clerical and
related services for day-to-day operations, including recordkeeping
responsibilities; (ii) is responsible for complying with all applicable federal
and state securities and other regulatory requirements including, without
limitation, preparing, mailing and filing (but not paying for) registration
statements, prospectuses, statements of additional information, proxy statements
and all required reports to the Fund's shareholders, the SEC and state
securities commissions; (iii) takes responsibility for monitoring the Fund's
status as a 'regulated investment company' under the Code; and (iv) performs
administrative and managerial oversight of the activities of the Fund's
custodian, transfer agent and other agents or independent contractors.
Under the Administrative Services Agreement, the Fund has agreed to pay
Signature an administration fee, calculated daily and payable monthly, at an
annual rate of 0.10% of the first $100 million of the Fund's average net assets,
plus 0.075% of the next $100 million of the Fund's average net assets, plus
0.05% of the Fund's average net assets in excess of $200 million.
The Administrative Services Agreement may be renewed or amended by the
Directors without shareholder vote. This agreement is terminable at any time
without penalty by a vote of a majority of the Directors or the Administrator on
not less than 60 days' written notice to the other party. The Administrator may
subcontract for the performance of its obligations under the Administrative
Services Agreement with the prior written consent of the Directors. If the
Administrator subcontracts all or a portion of its duties to another party, the
Administrator shall be as fully responsible for the acts and omissions of any
such subcontractor(s) as it would be for its own acts or omissions.
DISTRIBUTOR
Signature also serves as the exclusive distributor of the Fund's shares (in
such capacity, the 'Distributor') and holds itself available to receive purchase
orders for such shares. In this capacity, the Distributor has been granted the
right, as the Fund's agent, to solicit and accept orders for the purchase of
Fund shares in accordance with the terms of the Distribution Agreement between
the Company, on behalf of the Fund, and the Distributor. The Distribution
Agreement shall continue in effect with respect to the Fund until February 1997,
and thereafter will be subject to annual approval (i) by a vote of the holders
of a majority of the Fund's outstanding voting securities or by the Directors
and (ii) by a vote of a majority of the Directors who are not parties to the
Distribution Agreement or interested persons (as defined by the 1940 Act) of the
Company cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement will terminate automatically if assigned by
either party thereto and is terminable at any time, without penalty, by a vote
of a majority of the Directors, a vote of a majority of such Directors who are
not 'interested persons' of the Company (as defined in the 1940 Act) or by a
vote of the holders of a majority of the Fund's outstanding shares, in any case
on not less than 60 days' written notice to the other party. The Distributor
does not receive a fee pursuant to the terms of the Distribution Agreement. The
principal offices of the Distributor are located at 6 St. James Avenue, Boston,
Massachusetts 02116.
CUSTODIAN
Investors Bank & Trust Company (the 'Custodian'), located at 89 South
Street, Boston, Massachusetts 02111, serves as the custodian and transfer and
dividend disbursing agent for the Fund. Pursuant to the Custodian Agreement
between the Custodian and the Company, on behalf of the Fund, the Custodian is
responsible for maintaining the books and records of portfolio transactions and
holding portfolio securities and cash. As transfer agent and dividend disbursing
agent, the Custodian is responsible for maintaining account records detailing
the ownership of Fund shares and for crediting income, capital gains and other
changes in share ownership to investors' accounts.
SAI-16
<PAGE>
<PAGE>
The Custodian will perform its duties as the Fund's transfer agent and
dividend disbursing agent from its offices located at 89 South Street, Boston,
Massachusetts 02111.
SHAREHOLDER SERVICES
The Company, on behalf of the Fund, has entered into a Shareholder
Servicing Agreement with the Branch under which the Branch provides shareholder
services to Fund shareholders, which include performing shareholder account
administrative and servicing functions such as answering inquiries regarding
account status and history, the manner in which purchases and redemptions of
shares may be made and certain other matters pertaining to the Fund, assisting
customers in designating and changing dividend options, account designations and
addresses, providing necessary personnel and facilities to coordinate the
establishment and maintenance of shareholder accounts and records with the
Fund's Distributor and transfer agent, assisting investors seeking to purchase
or redeem Fund shares, arranging for the wiring or other transfer of funds to
and from customer accounts in connection with orders to purchase or redeem Fund
shares, verifying purchase and redemption orders, transfers among and changes in
accounts and providing other related services. In return for these services, the
Company has agreed to pay the Branch a fee, at an annual rate of 0.25% of the
average daily net assets of the Fund.
As discussed under 'Investment Adviser', the Glass-Steagall Act and other
applicable laws and regulations limit the activities of bank holding companies
and certain of their subsidiaries in connection with registered open-end
investment companies. The activities of the Branch as a shareholder servicing
agent under a Shareholder Servicing Agreement and as adviser to the Fund under
the Investment Advisory Agreement may raise issues under these laws. However,
the Branch believes that it may properly perform these services and the other
activities described herein and in the Prospectus without violating the
Glass-Steagall Act or other applicable banking laws or regulations.
If the Branch were prohibited from providing its respective services under
the above noted agreements, the Directors would seek an alternative provider of
such services. In such an event, changes in the operation of the Fund might
occur and shareholders might not receive the same level of service previously
provided by the Branch.
INDEPENDENT ACCOUNTANTS
The Company's independent accounting firm is Price Waterhouse LLP, 1177
Avenue of the Americas, New York, New York 10036. The U.S. Firm of Price
Waterhouse is a Registered Limited Liability Partnership (LLP) under the laws of
the State of Delaware. Price Waterhouse LLP will conduct an annual audit of the
financial statements of the Fund, assist in the review of the federal and state
income tax returns of the Fund and consult with the Fund as to matters of
accounting and federal and state income taxation.
EXPENSES
The Fund is responsible for the fees and expenses attributable to it.
The Branch has agreed that if, in any fiscal year, the sum of the Fund's
expenses exceeds the limits set by applicable regulations of state securities
commissions, the Branch shall waive its fees as necessary to eliminate such
excess. Currently, the Branch believes that the most restrictive expense
limitation of state securities commissions limits expenses to an annual rate of
2.5% of the first $30 million of average net assets, 2% of the next $70 million
of such net assets and 1.5% of such net assets in excess of $100 million. For
additional information regarding fee waivers or expense reimbursements, see
'Management' in the Prospectus. The Branch has also voluntarily agreed to limit
the total operating expenses of the Fund, excluding extraordinary expenses, to
an annual rate of 0.80% of the Fund's average daily net assets.
SAI-17
<PAGE>
<PAGE>
The Branch may modify or discontinue this fee waiver and expense limitation at
any time in the future with 30 days' notice to the Fund.
PURCHASE OF SHARES
Investors may purchase Fund shares as described in the Prospectus under
'Purchase of Shares'. Fund shares are sold on a continuous basis without a sales
charge at the net asset value per share next determined after receipt of a
purchase order.
The minimum investment requirement for accounts established for the benefit
of minors under the 'Uniform Gift to Minors Act' is $5,000. The minimum
subsequent investment is $1,000. The minimum investment requirement for
employees of the Bank and its affiliates is $5,000. The minimum subsequent
investment is $1,000.
In addition, the minimum investment requirements may be met by aggregating
the investments of related shareholders. A 'related shareholder' is limited to
an immediate family member, including mother, father, spouse, child, brother,
sister and grandparent, and includes step and adoptive relationships.
The Fund may, at its own option, accept securities in payment for shares.
The securities tendered are valued by the methods described in 'Net Asset Value'
as of the day the Fund shares are purchased. This is a taxable transaction to
the investor. Securities may be accepted in payment for shares only if they are,
in the judgment of the Adviser, appropriate investments for the Fund. In
addition, securities accepted in payment for shares must: (i) meet the Fund's
investment objective and policies; (ii) be acquired by the Fund for investment
and not for resale; (iii) be liquid securities that are not restricted as to
transfer either by law or by market liquidity; and (iv) have a value that is
readily ascertainable, as evidenced by a listing on a stock exchange,
over-the-counter market or by readily available market quotations from a dealer
in such securities. The Fund reserves the right to accept or reject at its own
option any and all securities offered in payment for its shares.
REDEMPTION OF SHARES
Investors may redeem Fund shares as described in the Prospectus under
'Redemption of Shares'.
If the Directors determine that it would be detrimental to the best
interest of the remaining shareholders of the Fund to effect redemptions wholly
or partly in cash, payment of the redemption price may be made in whole or in
part by an in-kind distribution of securities, in lieu of cash, in conformity
with applicable SEC rules. If shares are redeemed in-kind, the redeeming
shareholder might incur transaction costs in converting the securities into
cash. The methods of valuing portfolio securities distributed to a shareholder
are described under 'Net Asset Value', and such valuations will be made at the
same time the redemption price is determined.
FURTHER REDEMPTION INFORMATION. The right of redemption may be suspended or
the date of payment postponed: (i) during periods when the New York Stock
Exchange (the 'NYSE') is closed for other than weekends and holidays or when
trading on the NYSE is suspended or restricted; (ii) during periods in which an
emergency exists, as determined by the SEC, which causes the disposal of, or
evaluation of the net asset value of, the Fund's securities to be unreasonable
or impracticable; or (iii) for such other periods as the 1940 Act or the SEC may
permit.
SAI-18
<PAGE>
<PAGE>
EXCHANGE OF SHARES
An investor may exchange Fund shares for shares of any other series of the
Company as described under 'Exchange of Shares' in each such series' prospectus.
Investors considering an exchange of Fund shares for shares of another Company
series should read the prospectus of the series into which the transfer is being
made prior to such exchange (see 'Purchase of Shares'). Requests for exchange
are made in the same manner as requests for redemptions (see 'Redemption of
Shares'). Shares of the acquired series are purchased for settlement when the
proceeds from redemption become available. Certain state securities laws may
restrict the availability of the exchange privilege. The Company reserves the
right to discontinue, alter or limit this exchange privilege at any time.
DIVIDENDS AND DISTRIBUTIONS
The Fund will declare and pay dividends and distributions as described
under 'Dividends and Distributions' in the Prospectus.
Determination of the net income for the Fund is made at the times described
in the Prospectus; in addition, net investment income for days other than
business days is determined at the time net asset value is determined on the
prior business day.
NET ASSET VALUE
The Fund computes its net asset value once daily at the close of business
on Monday through Friday as described under 'Net Asset Value' in the Prospectus.
The net asset value will not be computed on a day in which no orders to purchase
or redeem Fund shares have been received or on the following legal holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. On days when U.S. trading markets close
early in observance of these holidays, the Fund expects to close for purchases
and redemptions at the same time.
The net asset value per share of the Fund equals the Fund's total assets
less its total liabilities, divided by the number of outstanding shares of the
Fund.
Securities with a maturity of 60 days or more, including securities that
are listed on an exchange or traded over-the-counter, are valued by the Fund by
using prices supplied daily by an independent pricing service(s). These prices
are based on the last sale price on a national securities exchange or, in the
absence of recorded sales, at the average of readily available closing bid and
asked prices, or in the absence of such prices, at the readily available closing
bid price on such exchange or at the quoted bid price in the over-the-counter
market, if such exchange or market constitutes the broadest and most
representative market for the security. In other cases, the pricing service
values the security by taking into account various factors affecting market
value, including yields and prices of comparable securities, indication as to
value from dealers and general market conditions. All portfolio securities with
a remaining maturity of less than 60 days are valued by the amortized cost
method, whereby such securities are valued at acquisition cost as adjusted for
amortization of premium or accretion of discount to maturity. Because of the
large number of municipal bond issues outstanding and their varying maturity
dates, coupons and risk factors applicable to each issuer's books, no readily
available market quotations exist for most municipal securities.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the NYSE and may also take
place on days on which the NYSE is closed. If events materially affecting the
value of securities occur between the time when the exchange on which they are
traded closes and the time when the Fund's net asset value is calculated, such
securities will be valued at fair value in accordance with procedures
established by and under the general supervision of the Directors.
SAI-19
<PAGE>
<PAGE>
If market quotations for the Fund's securities are not readily available,
such securities will be valued at 'fair value' as determined in good faith by
the Directors.
PERFORMANCE DATA
From time to time, the Fund may quote performance in terms of yield, actual
distributions, total return or capital appreciation in reports, sales literature
and advertisements published by the Fund. Current performance information for
the Fund may be obtained by calling your Shareholder Servicing Agent. See
'Additional Information' in the Prospectus.
YIELD QUOTATIONS. As required by SEC regulations, the Fund's annualized
yield is computed by dividing the Fund's net investment income per share earned
during a 30-day period by its net asset value on the last day of the period. The
average daily number of Fund shares outstanding during the period that are
eligible to receive dividends is used in determining the net investment income
per share. Income is computed by totaling the interest earned on all debt
obligations during the period and subtracting from that amount the total of all
recurring expenses incurred during the period. The 30-day yield is then
annualized on a bond-equivalent basis assuming semi-annual reinvestment and
compounding of net investment income, as described under 'Additional
Information' in the Prospectus.
TAX EQUIVALENT YIELD QUOTATION. The tax equivalent annualized yield is
computed by first computing the annualized yield as discussed above. Then the
portion of the yield attributable to securities the income of which is exempt
for federal income tax purposes is determined. This portion of the yield is then
divided by one minus 39.6% (39.6% being the 1995 maximum marginal federal income
tax rate for married taxpayers filing jointly) and then added to the portion of
the yield that was not attributable to securities, the income of which was not
tax-exempt.
TOTAL RETURN QUOTATIONS. As required by SEC regulations, the Fund's average
annual total return for a period is computed by assuming a hypothetical initial
payment of $1,000. It is then assumed that all of the Fund's dividends and
distributions over the relevant period are reinvested. It is then assumed that
at the end of the period, the entire amount is redeemed. The average annual
total return is then calculated by determining the annual rate required for the
initial payment to grow to the amount which would have been received upon
redemption (i.e., the average annual compound rate of return).
Aggregate total returns, reflecting the cumulative percentage change over a
measuring period, may also be calculated.
GENERAL. The Fund's performance will vary from time-to-time depending upon
market conditions, the composition of its portfolio and its operating expenses.
Consequently, any given performance quotation should not be considered
representative of the Fund's performance for the future. In addition, because
performance will fluctuate, it may not provide a basis for comparing an
investment in the Fund with certain bank deposits or other investments that pay
a fixed yield or return for a stated period of time.
Comparative performance information may be used from time-to-time in
advertising the Fund's shares, including data from Lipper Analytic Services,
Morningstar Inc. and other industry publications.
PORTFOLIO TRANSACTIONS
The Adviser places orders for all purchases and sales of securities on
behalf of the Fund. The Adviser enters into repurchase agreements and reverse
repurchase agreements and effects loans of portfolio securities on behalf of the
Fund. See 'Investment Objective and Policies'.
SAI-20
<PAGE>
<PAGE>
Fixed income and debt securities and municipal bonds and notes are
generally traded at a net price with dealers acting as principal for their own
accounts without a stated commission. The price of the security usually includes
profit to the dealers. In underwritten offerings, securities are purchased at a
fixed price that includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. Occasionally,
certain securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
The Fund's portfolio transactions will be undertaken principally to
accomplish the Fund's objective in relation to expected movements in the general
level of interest rates. The Fund may, however, engage in short-term trading
consistent with this objective. In connection with the Fund's portfolio
transactions, the Adviser intends to seek best price and execution on a
competitive basis for both purchases and sales of securities. Portfolio turnover
may vary from year to year, as well as within a year. The annual portfolio
turnover rate for the Fund is expected to be under 100%.
Portfolio securities will not be purchased from or through or sold to or
through the Distributor or an 'affiliated person' of the Fund or an 'affiliated
person' thereof (as defined in the 1940 Act) when such entities are acting as
principals, except to the extent permitted by law. In addition, the Fund will
not purchase securities during the existence of any underwriting group relating
thereto of which the Adviser or an affiliate of the Adviser is a member, except
to the extent permitted by law.
On those occasions when the Adviser deems the purchase or sale of a
security to be in the Fund's best interests as well as other customers, the
Adviser to the extent permitted by applicable laws and regulations may, but is
not obligated to, aggregate the securities to be sold or purchased for the Fund
with those to be sold or purchased for other customers in order to obtain best
execution, including lower brokerage commissions if appropriate. In such an
event, the securities so purchased or sold as well as any expenses incurred in
the transaction will be allocated by the Adviser in the manner it considers to
be most equitable and consistent with its fiduciary obligations to its
customers. In some instances, this procedure might adversely affect the Fund.
If the Fund writes an option and effects a closing purchase transaction
with respect to such an option, the transaction will normally be executed by the
same broker-dealer who executed the sale of the option. The writing of options
by the Fund will be subject to limitations established by each of the exchanges
governing the maximum number of options in each class that may be written by a
single investor or group of investors acting in concert, regardless of whether
the options are written on the same or different exchanges or are held or
written in one or more accounts or through one or more brokers. The number of
options that the Fund may write may be affected by options written by the
Adviser for other investment advisory clients. An exchange may order the
liquidation of positions found to be in excess of these limits and it may impose
certain other sanctions.
ORGANIZATION
UBS PRIVATE INVESTOR FUNDS, INC.
UBS Private Investor Funds, Inc. is a Maryland corporation and is currently
issuing shares of common stock, par value $0.001 per share, in four series: The
UBS Bond Fund Series; The UBS Tax Exempt Bond Fund Series; The UBS U.S. Equity
Fund Series; and The UBS International Equity Fund Series.
Each share of a series issued by the Company will have a pro rata interest
in the assets of that series. The Company is currently authorized to issue
500,000,000 shares of common stock, including 10,000,000 shares of each of the
four current series. Under Maryland law, the Board has the authority to increase
the number of shares of stock that the Company has the authority to issue. Each
share has one vote (and fractional shares have a corresponding fractional vote)
with respect to matters upon which shareholder vote is required; stockholders
have no cumulative voting rights with respect to their shares.
SAI-21
<PAGE>
<PAGE>
Shares of all series vote together as a single class except that if the matter
being voted upon affects only a particular series then it will be voted on only
by that series. If a matter affects a particular series differently from other
series, that series will vote separately on such matter. Each share is entitled
to participate equally in dividends and distributions declared by the Directors
with respect to the relevant series, and in the net distributable assets of such
series on liquidation.
Under Maryland law, the Company is not required to hold an annual meeting
of stockholders unless required to do so under the 1940 Act. It is the Company's
policy not to hold an annual meeting of stockholders unless so required. All
shares of the Company (regardless of series) have noncumulative voting rights
for the election of Directors. Under Maryland law, the Company's Directors may
be removed by vote of stockholders. The Board currently consists of three
directors.
CONTROL PERSONS. The Company expects that, immediately prior to the initial
public offering of its shares, the sole holder of the capital stock of each of
its series will be Signature. Upon the offering of the Fund shares, the Fund may
have a number of shareholders each holding 5% or more of the Fund's outstanding
shares. In such an event, the Company cannot predict the length of time that
such persons will own such amounts or whether one or more of such persons will
become 'control' persons of the Fund.
TAXES
The Fund intends to qualify and intends to remain qualified as a regulated
investment company (a 'RIC') under Subchapter M of the Code. As a RIC, the Fund
must, among other things: (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to loans of stock and securities,
gains from the sale or other disposition of stock or securities and other income
(including but not limited to gains from options, futures, and forward
contracts) derived with respect to its business of investing in such stock or
securities; (b) derive less than 30% of its gross income from the sale or other
disposition of stock, securities, options, futures or forward contracts held
less than three months; and (c) diversify its holdings so that, at the end of
each fiscal quarter, (i) at least 50% of the value of the Fund's total assets is
represented by cash, U.S. Government securities, investments in other RICs and
other securities limited in respect of any one issuer to an amount not greater
than 5% of the Fund's total assets and 10% of the outstanding voting securities
of such issuer and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other RICs). As a RIC, the Fund (as opposed to
its shareholders) will not be subject to federal income taxes on the net
investment income and capital gains that it distributes to its shareholders,
provided that at least 90% of its net investment income and realized net
short-term capital gains in excess of net long-term capital losses for the
taxable year is distributed.
For federal income tax purposes, dividends that are declared by the Fund in
October, November or December as of a record date in such month and actually
paid in January of the following year will be treated as if they were paid on
December 31 of the year declared. Therefore, such dividends will generally be
taxable to a shareholder in the year declared rather than the year paid.
The Fund intends to qualify to pay exempt-interest dividends to its
shareholders by ensuring that, at the close of each quarter of each of its
taxable years, at least 50% of the value of its total assets will consist of tax
exempt securities. An exempt-interest dividend is that part of distribution made
by the Fund that consists of interest received by the Fund on tax exempt
securities less any expenses allocable to such interest, provided the 50% test
described above is met. Shareholders will not incur any federal income tax
liability on the amount of exempt-interest dividends received by them from the
Fund. In view of the investment policy of the Fund, it is expected that a
substantial portion of its dividends will be exempt-interest dividends, although
the Fund may from time to time realize and distribute net short-term and
long-term capital gains and may invest limited amounts in taxable securities.
Gains or losses on sales of securities by the Fund will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where, if applicable, the Fund
acquires a put or writes a call with respect to such securities. Other gains or
losses on the sale of securities will be short-term capital gains or losses.
Gains and losses on the sale, lapse or other
SAI-22
<PAGE>
<PAGE>
termination of options on securities will be treated as gains and losses from
the sale of securities. If an option written by the Fund lapses or is terminated
through a closing transaction, such as a repurchase by the Fund of the option
from its holder, the Fund will realize a short-term capital gain or loss,
depending on whether the premium income is greater or less than the amount paid
by the Fund in the closing transaction. If securities are purchased by the Fund
pursuant to the exercise of a put option written by it, the Fund's cost basis in
the securities purchased will be reduced by the premium received.
Options and futures contracts entered into by the Fund may create
'straddles' for U.S. federal income tax purposes that may affect the character
and timing of gains or losses realized by the Fund on options and futures
contracts or on the underlying securities. 'Straddles' may also result in the
loss of the holding period of underlying securities for purposes of the 30% of
gross income test described above, and therefore, the Fund's ability to enter
into options and futures contracts may be limited.
Certain options and futures contracts held by the Fund at the end of each
fiscal year will be required to be 'marked to market' for federal income tax
purposes i.e., treated as having been sold at market value. For such options and
futures contracts, 60% of any gain or loss recognized on these deemed sales and
on actual dispositions will be treated as long-term capital gain or loss, and
the remainder will be treated as short-term capital gain or loss regardless of
how long the Fund has held such options or futures.
STATE AND LOCAL TAXES. The Fund may be subject to state or local taxes in
jurisdictions in which the Fund is deemed to be doing business. In addition, the
treatment of the Fund and its shareholders in those states that have income tax
laws might differ from treatment under the federal income tax laws. For example,
a portion of the dividends received by shareholders may be subject to state
income tax. Shareholders should consult their own tax advisors with respect to
any state or local taxes.
ADDITIONAL INFORMATION
This SAI does not contain all the information included in the Registration
Statement filed with the SEC under the Securities Act and the 1940 Act with
respect to the securities offered hereby. Certain portions of this SAI have been
omitted pursuant to the rules and regulations of the SEC. The Registration
Statement, including the exhibits filed therewith, the Prospectus and the SAI,
may be examined at the office of the SEC, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549.
Statements contained in this SAI as to the contents of any agreement or
other document referred to are not necessarily complete, and, in each instance,
reference is made to the copy of such agreement or other document filed as an
exhibit to the Registration Statement of which this document forms a part, each
such statement being qualified in all respects by such reference.
SAI-23
<PAGE>
<PAGE>
UBS PRIVATE INVESTOR FUNDS, INC.- UBS TAX EXEMPT BOND FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
ASSETS
<S> <C>
Cash........................................................................................ $25,000
Deferred organization costs................................................................. 72,500
-------
Total Assets........................................................................... 97,500
-------
LIABILITIES
Organization costs payable.................................................................. 72,500
-------
NET ASSETS....................................................................................... $25,000
-------
-------
Shares Outstanding ($0.001 par value)............................................................ 250
-------
-------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE................................... $100.00
-------
-------
COMPOSITION OF NET ASSETS:
Shares of common stock, at par.............................................................. $ 0
Additional paid-in capital.................................................................. 25,000
-------
-------
Net Assets, January 31, 1996..................................................................... $25,000
-------
-------
</TABLE>
See Notes to Financial Statements.
F-1
<PAGE>
<PAGE>
UBS PRIVATE INVESTOR FUNDS, INC.-UBS TAX EXEMPT BOND FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
UBS Private Investor Funds, Inc. (the 'Company') was organized as a Maryland
corporation on November 16, 1995. The Company consists of four series, as
follows: UBS Bond Fund, UBS Tax Exempt Bond Fund, UBS U.S. Equity Fund and UBS
International Equity Fund. The accompanying financial statements and notes
relate only to UBS Tax Exempt Bond Fund (the 'Fund').
Union Bank of Switzerland, New York Branch (the 'Branch') will serve as
investment adviser to the Fund. Signature Broker-Dealer Services, Inc.
('Signature') will serve as the Fund's administrator, principal underwriter and
distributor of the Fund's shares.
The Fund has had no operations through January 31, 1996, other than the sale to
Signature of 250 shares of the Fund for $25,000.
Organization costs incurred in connection with the organization and initial
registration of the Fund will be paid initially by the Branch and reimbursed by
the Fund. Such organization costs have been deferred and will be amortized
ratably over a period of sixty months from the commencement of operations. The
amount paid by the Fund on any redemption by Signature (or any subsequent
holder) of the Fund's initial shares will be reduced by the pro-rata portion of
any unamortized organization expenses of the Fund.
NOTE 2 -- AGREEMENTS
The Branch is expected to enter into an Investment Advisory Agreement with the
Fund. Pursuant to the terms of this agreement, the Branch will be responsible
for the provision of investment advice, portfolio management and certain
administrative services to the Fund. For its services, the Branch will be
entitled to a fee, accrued daily and payable monthly, at an annual rate of 0.45%
of the average net assets of the Fund.
Signature expects to enter into an Administrative Services Agreement with the
Company pursuant to which it will agree to administer the day-to-day operations
of the Fund subject to the direction and control of the Board of Directors of
the Company. For the services provided to the Fund, Signature will receive a
fee, accrued daily and payable monthly, at an annual rate of 0.10% of the Fund's
first $100 million average net assets, 0.075% of the next $100 million of such
assets and 0.05% of such assets in excess of $200 million.
Signature expects to enter into a Distribution Agreement with the Company. The
Distributor will not receive a fee pursuant to the terms of the Distribution
Agreement.
The Company expects to enter into separate Shareholder Servicing Agreements (the
'SSA') with the Branch and Signature. Pursuant to the terms of the SSA, the
Branch will agree to provide shareholder support to their clients who are also
shareholders of the Fund while Signature will agree to provide support services
to all other shareholders of the Fund. Both Signature and the Branch will be
entitled to a fee under the SSA, accrued daily and payable monthly, at an annual
rate of 0.25% of the average balance of the accounts so serviced. Services to be
provided may include, but are not limited to, any of the following: establishing
and/or maintaining shareholder accounts and records, assisting investors seeking
to purchase or redeem Fund shares, providing performance information relating to
the Fund and responding to shareholder inquiries.
The Branch has voluntarily agreed to waive a portion of its fees and reimburse a
portion of Fund expenses to the extent that the ordinary operating expenses of
the Fund exceed an annual rate of 0.80% of the Fund's average net assets.
F-2
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors of
UBS PRIVATE INVESTOR FUNDS, INC.
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of UBS Tax Exempt Bond
Fund (one of the four series constituting UBS Private Investor Funds, Inc.,
hereafter referred to as the 'Funds') at January 31, 1996, in conformity with
generally accepted accounting principles. This financial statement is the
responsibility of the Funds' management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
January 31, 1996
F-3
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
UBS BOND FUND
6 ST. JAMES AVENUE
BOSTON, MASSACHUSETTS 02116
FOR INFORMATION CALL (800) [ ]
UBS Bond Fund (the 'Fund') is designed for investors seeking a higher total
return from a portfolio of debt securities issued by foreign and domestic
companies than that generally available from a portfolio of short-term
obligations in exchange for some risk of capital.
The Fund is a diversified, no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is one of several series of UBS
Private Investor Funds, Inc. (the 'Company'), an open-end management investment
company organized as a corporation under Maryland law.
UNLIKE OTHER MUTUAL FUNDS THAT DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN UBS BOND PORTFOLIO (THE 'PORTFOLIO'), A
CORRESPONDING OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE SAME INVESTMENT
OBJECTIVE AS THE FUND. THE FUND EMPLOYS A TWO-TIER MASTER-FEEDER STRUCTURE THAT
IS MORE FULLY DESCRIBED UNDER THE SECTION CAPTIONED 'MASTER-FEEDER STRUCTURE'.
The Portfolio is advised by the New York Branch (the 'Branch' or the 'Adviser')
of Union Bank of Switzerland (the 'Bank').
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
[ ], 1996, provides further discussion of certain topics
referred to in this Prospectus and other matters that may be of interest to
investors. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated herein by reference and
is available without charge upon written request from the Company or the
Distributor (as defined herein) at the addresses set forth on the back cover of
the Prospectus or by calling (800) [ ].
INVESTMENTS IN THE FUND ARE NOT DEPOSITS WITH OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, UNION BANK OF SWITZERLAND OR ANY OTHER BANK. SHARES OF THE FUND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND IS
SUBJECT TO RISKS THAT MAY CAUSE THE VALUE OF THE INVESTMENT TO FLUCTUATE. WHEN
THE INVESTMENT IS REDEEMED, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT
ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS DATED [ ], 1996.
<PAGE>
<PAGE>
UBS BOND FUND
INVESTORS FOR WHOM THE FUND IS DESIGNED
UBS Bond Fund (the 'Fund') is designed for investors seeking a higher total
return from a portfolio of debt securities issued by foreign and domestic
companies than that generally available from a portfolio of short-term
obligations in exchange for some risk of capital. The Fund seeks to achieve its
investment objective by investing all of its investable assets in UBS Bond
Portfolio (the 'Portfolio'), an open-end management investment company having
the same investment objective as the Fund. Because the investment
characteristics and experience of the Fund will correspond directly with those
of the Portfolio, the discussion in this Prospectus focuses on the investments
and investment policies of the Portfolio. The net asset value of shares of the
Fund fluctuates with changes in the value of the investments in the Portfolio.
See 'Investment Objective and Policies -- Quality Information.'
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments for the Portfolio are bonds and debt
instruments of foreign and domestic companies. The Portfolio may also invest in
futures contracts, options, forward contracts on foreign currencies and certain
privately placed securities. For further information about these investments and
related investment techniques, see 'Investment Objective and Policies' discussed
below.
The minimum initial investment in the Fund is $25,000, except that the minimum
initial investment is $10,000 for shareholders of another series of UBS Private
Investor Funds, Inc. (the 'Company'). The minimum subsequent investment for all
investors is $5,000. These minimums may be waived for certain accounts. See
'Purchase of Shares.' If shareholders reduce their total investment in shares of
the Fund to less than $10,000, their investment will be subject to mandatory
redemption. See 'Redemption of Shares -- Mandatory Redemption.' The Fund is one
of several series of the Company, an open-end management investment company
organized as a Maryland corporation.
This Prospectus describes the Fund's investment objective and policies,
management and operations to enable investors to decide if the Fund suits their
investment needs. The Fund operates through a two-tier master-feeder structure.
The Company's Board of Directors (the 'Directors' or the 'Board') believes that
this structure provides Fund shareholders with the opportunity to achieve
certain economies of scale that would otherwise be unavailable if the
shareholders' investments were not pooled with other investors sharing similar
investment objectives.
The following table illustrates that Fund investors incur no shareholder
transaction expenses: their investments in the Fund are subject only to the
operating expenses set forth below for the Fund and the Portfolio, as a
percentage of average daily net assets of the Fund. These operating expenses
include expenses incurred by the Fund and expenses incurred by the Portfolio
that are allocable to the Fund. The Directors believe that the aggregate per
share expenses of the Fund and the Portfolio will be approximately equal to and
may be less than the expenses that the Fund would incur if it retained the
services of an investment adviser and invested its assets directly in portfolio
securities. Fund and Portfolio expenses are discussed below under the headings
'Management', 'Expenses' and 'Shareholder Services.'
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases..................................................................... None
Sales Load Imposed on Reinvested Dividends.......................................................... None
Deferred Sales Load................................................................................. None
Redemption Fees..................................................................................... None
Exchange Fees....................................................................................... None
</TABLE>
-2-
<PAGE>
<PAGE>
<TABLE>
<S> <C>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
Advisory Fees, After Fee Waiver**................................................................. 0.00%
Rule 12b-1 Fees................................................................................... None
Other Expenses, After Expense Reimbursements***................................................... 0.80%
----
Total Operating Expenses, After Fee Waivers and Expense Reimbursements*........................... 0.80%
----
----
</TABLE>
* Expenses are expressed as a percentage of the Fund's projected average daily
net assets and are based on estimates of the expenses to be incurred during the
current fiscal year, after any applicable fee waivers and expense
reimbursements. Without such fee waivers and expense reimbursements, Total
Operating Expenses would be equal, on an annual basis, to 6.00% of the Fund's
projected average daily net assets. See 'Management.'
** The New York Branch (the 'Branch' or the 'Adviser') of Union Bank of
Switzerland (the 'Bank') has agreed to waive fees and reimburse the Fund for any
of its operating expenses (including those the Fund incurs indirectly through
the Portfolio) to the extent that the Fund's total operating expenses exceed, on
an annual basis, 0.80% of the Fund's average daily net assets. The Branch may
modify or discontinue this undertaking at any time in the future with 30 days'
notice to the Fund. The advisory fee would be 0.45% if there were no fee waiver.
See 'Management -- Adviser and Funds Services Agent' and 'Expenses.'
*** The fees and expenses in Other Expenses, After Expense Reimbursements
include fees payable to Signature Broker-Dealer Services, Inc. ('Signature')
under an Administrative Services Agreement with the Fund, fees payable to
Signature Financial Group (Grand Cayman) Limited ('Signature-Cayman') under an
Administrative Services Agreement with the Portfolio, fees payable to Investors
Bank & Trust Company (the 'Custodian' or the 'Transfer Agent') as custodian of
the Fund and the Portfolio, and fees payable to the Branch under the Shareholder
Servicing Agreement. For a more detailed description of contractual fee
arrangements, including fee waivers and expense reimbursements, and of the fees
and expenses included in Other Expenses, see 'Management' and 'Shareholder
Services.'
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming a
5% annual return and a redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year...................................................... $ 8
3 Years..................................................... $26
</TABLE>
The above Expense Table is designed to assist investors in understanding the
various direct and indirect costs and expenses that Fund investors are expected
to bear and reflects the expenses of the Fund and the Fund's share of the
Portfolio's expenses. In connection with the above Example, please note that
$1,000 is less than the Fund's minimum investment requirement and that there are
no redemption or exchange fees of any kind. See 'Purchase of Shares', 'Exchange
of Shares' and 'Redemption of Shares.' THE EXAMPLE IS HYPOTHETICAL; IT IS
INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES, AND ASSUMES THE CONTINUATION OF THE
FEE WAIVERS AND EXPENSE REIMBURSEMENTS REPRESENTED IN THE ABOVE 'EXPENSE TABLE.'
IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL
EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
HISTORICAL PERFORMANCE OF COMPARABLE DISCRETIONARY ACCOUNTS. The following table
sets forth the composite average annual total returns for the one, three, five
and ten year periods ended December 31, 1995 for all discretionary accounts
described below that have been managed for at least one full quarter by UBS
Asset Management (New York) Inc., a wholly-owned subsidiary of the Bank ('UBSAM
NY'), and the average annual total return during the same periods for the Lehman
Government/Corporate Intermediate Bond Index. Such accounts have substantially
the same investment objective and policies and are managed in a manner
substantially the same as the Portfolio. While the Portfolio will be managed by
the Branch, the management of the Portfolio will be substantially the same as by
UBSAM
-3-
<PAGE>
<PAGE>
NY and will be carried out by personnel who performed these services for the
discretionary accounts at UBSAM NY, who will be employed by the Branch for this
purpose. The composite total returns for such accounts have been adjusted to
deduct all of the Fund's estimated annual total operating expenses of .80% of
projected average daily net assets as set forth in the Fee Table above. The
composite total returns are time-weighted and weighted by individual account
size and reflect the reinvestment of interest. The composite total returns of
these discretionary accounts should not be viewed as a prediction of future
performance of the Portfolio. Lehman Government/Corporate Intermediate Bond
Index is an unmanaged composite of intermediate duration consisting of
publicly-issued, fixed-rate, non-convertible, domestic bonds.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR COMPOSITE LEHMAN GOV'T/CORP.
PERIODS ENDED DECEMBER 31, 1995 TOTAL RETURN INTERMEDIATE BOND INDEX
- ----------------------------------------------------------- ------------ -----------------------
<S> <C> <C>
One Year................................................... 15.63% 15.34%
Three Year................................................. 7.06 7.16
Five Year.................................................. 8.41 8.61
Ten Year................................................... 8.44 8.81
</TABLE>
MASTER-FEEDER STRUCTURE
Unlike other mutual funds that directly acquire and manage their own portfolio
of securities, the Fund seeks to achieve its investment objective by investing
all of its investable assets in the Portfolio, a separate investment company
with the same investment objective as the Fund. The Portfolio is one of three
series of UBS Investor Portfolios Trust (the 'Trust'). See 'Organization.' The
investment objective of the Fund and the Portfolio may be changed only with the
approval of the holders of the outstanding shares of the Fund or the investors
in the Portfolio, respectively.
This master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.
In addition to selling an interest in the Portfolio to the Fund, the Portfolio
may sell interests in the Portfolio to other mutual funds or institutional
investors. Such investors will invest in the Portfolio on the same terms and
conditions as the Fund and will pay a proportionate share of the Portfolio's
expenses. However, other entities investing in the Portfolio may sell shares of
their own fund using a different pricing structure than the Fund's. Such
different pricing structures may result in differences in returns experienced by
investors in other funds that invest in the Portfolio. Such differences in
returns are not uncommon and are present in other mutual fund structures.
Information concerning other holders of interests in the Portfolio is available
from the Adviser at (800) [ ].
The Fund may withdraw its investment in the Portfolio at any time if the Board
determines that it is in the Fund's best interests to do so. Upon any such
withdrawal, the Board would consider what action might be taken, including the
investment of all the Fund's assets in another pooled investment entity having
the same investment objective and restrictions as the Fund or the retaining of
an investment adviser to manage the Fund's assets in accordance with the
investment policies described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in the
Portfolio's investment objective or restrictions, may require the Fund to
withdraw its investments in the Portfolio. Any such withdrawal could result in
an in-kind distribution of portfolio securities (as opposed to a cash
distribution) by the Portfolio to the Fund. In this event, the portfolio
securities distributed to the Fund might or might not be readily marketable.
Such a distribution may result in the Fund's having a less diversified portfolio
of investments or adversely affect the Fund's liquidity, and the Fund could
incur brokerage, tax or other charges in converting such securities to cash.
Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby lowering returns. Additionally,
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because the Portfolio would become smaller, it may become less diversified,
resulting in potentially increased portfolio risk (however, these possibilities
also exist for traditionally structured funds that have large or institutional
investors who may withdraw from a fund). Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of its
operations. Except as permitted by the Securities and Exchange Commission (the
'SEC'), whenever the Fund is requested to vote on matters pertaining to the
Portfolio, the Company will hold a meeting of Fund shareholders and will cast
all of its votes proportionately as instructed by the Fund's shareholders. See
'Organization' in the Statement of Additional Information ('SAI'). Fund
shareholders who do not vote will not affect the Fund's votes at the Portfolio
meeting. The percentage of the Company's votes representing Fund shareholders
not voting will be voted by the Company in the same proportion as the Fund
shareholders who do, in fact, vote.
For more information about the Portfolio's investment objective, policies and
restrictions, see 'Investment Objective and Policies', 'Additional Investment
Information and Risk Factors' and 'Investment Restrictions'. For more
information about the Portfolio's management and expenses, see 'Management'. For
more information about changing the investment objective, policies and
restrictions of the Fund or the Portfolio, see 'Investment Restrictions'.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below,
together with the policies they employ in their efforts to achieve this
objective. Additional information about the investment policies of the Fund and
the Portfolio appears in the SAI under 'Investment Objectives and Policies.'
There can be no assurance that the investment objective of the Fund or the
Portfolio will be achieved.
The objective of the Portfolio is to provide a high total return from a
portfolio of debt securities issued by foreign and domestic companies,
consistent with moderate risk of capital and maintenance of liquidity. Total
return will consist of realized and unrealized capital gains and losses plus net
income. Although the net asset value of the Portfolio will fluctuate, the
Portfolio attempts to preserve the value of its investments to the extent
consistent with its investment objective. The Fund attempts to achieve its
objective by investing all of its investable assets in UBS Bond Portfolio, a
series of an open-end management investment company; such series has the same
investment objective as the Fund.
The Fund is designed for investors who seek a total return over time that is
higher than that generally available from a portfolio of shorter-term
obligations while recognizing the greater price fluctuation of longer-term
instruments. The Fund may also be a convenient way to add fixed income exposure
to diversify an investor's existing portfolio.
The Adviser actively manages the Portfolio's duration (defined below), the
allocation of securities across market sectors and the selection of specific
securities within sectors. Based on fundamental economic and capital markets
research, the Adviser adjusts the duration of the Portfolio in light of market
conditions and the Adviser's opinion regarding future interest rates. For
example, if interest rates are expected to fall, the duration may be lengthened
to take advantage of the anticipated increase in bond prices. The Adviser also
actively allocates the Portfolio's assets among the broad sectors of the fixed
income market including, but not limited to, U.S. Government and agency
securities, corporate securities, private placements, asset-backed securities
and mortgage related securities. The Adviser intends to identify and purchase
specific securities that it believes are undervalued using quantitative tools,
analyses of credit risk, the expertise of a dedicated trading desk, and the
judgment of fixed income portfolio managers and analysts. Under normal
circumstances, the Adviser intends to keep at least 65% of the Portfolio's
assets invested in bonds. Bonds are debt instruments such as debentures, notes,
mortgage securities, equipment trust certificates and other collateralized
securities, zero coupon securities, government obligations and money market
instruments. See 'Corporate Bonds' and 'Government Obligations' below.
Duration is a measure of a bond's price sensitivity, expressed in years. It is a
measure of interest rate risk of a bond calculated by taking into consideration
the number of years until the average dollar, in present value terms, is
received from principal and interest payments. For example, for a bond with a
duration of four years, every 1% change in yield will result in a 4% change in
price in the opposite direction. The Portfolio's benchmark is the Lehman
Government/Corporate Intermediate Bond Index, which currently
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has a duration of approximately 3.25 years. The Portfolio intends to have a
duration between 0.5 years shorter and 0.5 years longer than its benchmark. The
maturities of the Portfolio's individual securities may vary widely from its
duration, however, and may be as long as 30 years.
The Portfolio intends to manage its securities actively in pursuit of its
investment objective. Portfolio transactions are undertaken principally to
accomplish the Portfolio's objective in relation to expected movements in the
general level of interest rates, but the Portfolio may also engage in short-term
trading consistent with its objective. To the extent the Portfolio engages in
short-term trading, it may incur increased transaction costs. See 'Taxes' below.
The annual portfolio turnover rate for the Fund is expected to be under 100%.
CORPORATE BONDS. The Portfolio may invest in a broad range of corporate bonds of
domestic and foreign issuers. These include debt securities of various types and
maturities, e.g., debentures, notes, mortgage securities, equipment trust
certificates and other collateralized securities and zero coupon securities.
Collateralized securities are backed by a pool of assets such as loans or
receivables that generate cash flow to cover the payments due on the securities.
Collateralized securities are subject to certain risks, including a decline in
the value of the collateral backing the security, failure of the collateral to
generate the anticipated cash flow or in certain cases more rapid prepayment
than anticipated because of events affecting the collateral, such as accelerated
prepayment of mortgages or other loans backing these securities or destruction
of equipment subject to equipment trust certificates. In the event of any such
prepayment, the Portfolio will be required to reinvest the proceeds of
prepayments at interest rates prevailing at the time of reinvestment, which may
be lower than the interest rates on the prepaid securities. In addition, the
value of zero coupon securities, which do not pay interest, is more volatile
than that of interest bearing debt securities with the same maturity. Although
zero coupon securities do not pay interest to the holders thereof, federal
income tax law requires the Fund to recognize a portion of such securities'
discount as income each year. This income must be distributed to shareholders
along with other income earned by the Fund. See 'Dividends and Distributions.'
The Portfolio does not intend to invest in common stock but may invest to a
limited degree in convertible debt or preferred stocks. The Portfolio does not
expect to invest more than 25% of its total assets in securities of foreign
issuers. If the Portfolio invests in non-U.S. dollar denominated securities, it
may hedge its foreign currency exposure. The Portfolio may purchase nonpublicly
offered debt securities. See 'Illiquid Investments; Privately Placed and Other
Unregistered Securities.' See 'Additional Investment Information and Risk
Factors' for further information on foreign investments and convertible
securities.
GOVERNMENT OBLIGATIONS. The Portfolio may invest in obligations issued or
guaranteed by the U.S. Government and backed by the full faith and credit of the
United States. These securities include Treasury securities, obligations of the
Government National Mortgage Association ('GNMA Certificates'), the Farmers Home
Administration and the Export Import Bank. GNMA Certificates are mortgage-backed
securities that evidence an undivided interest in mortgage pools. These
securities are subject to more rapid repayment than their stated maturity would
indicate because prepayments of principal on mortgages in the pool are passed
through to the holder of the securities. During periods of declining interest
rates, prepayments of mortgages in the pool can be expected to increase. The
pass-through of these prepayments would have the effect of reducing the
Portfolio's positions in these securities and requiring the Portfolio to
reinvest the prepayments at interest rates prevailing at the time of
reinvestment. The Portfolio may also invest in obligations issued or guaranteed
by U.S. Government agencies or instrumentalities where the Portfolio must look
principally to the issuing or guaranteeing agency for ultimate repayment; some
examples of agencies or instrumentalities issuing these obligations are the
Federal Farm Credit System, the Federal Home Loan Banks and the Federal National
Mortgage Association. Although these governmental issuers are responsible for
payments on their obligations, they do not guarantee their market value. See
'Investment Objectives and Policies' in the SAI for a more detailed discussion
of the Portfolio's investments in government securities.
The Portfolio may also invest in municipal obligations, which may be general
obligations of the issuer or payable only from specific revenue sources.
However, the Portfolio will invest only in municipal obligations that have been
issued on a taxable basis or have an attractive yield excluding tax
considerations. In addition, the Portfolio may invest in debt securities of
foreign governments and
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governmental entities. See 'Additional Investment Information and Risk Factors'
for further information on foreign investments.
MONEY MARKET INSTRUMENTS. The Portfolio may purchase money market instruments to
invest temporary cash balances or to maintain liquidity to meet withdrawals.
However, the Portfolio may also invest, without limit, in money market
instruments as a temporary defensive measure taken during, or in anticipation
of, adverse market conditions. The money market investments permitted for the
Portfolio include obligations of the U.S. Government and its agencies and
instrumentalities, other debt securities, commercial paper, bank obligations and
repurchase agreements. For more detailed information about these money market
investments, see 'Investment Objectives and Policies' in the SAI.
QUALITY INFORMATION. It is a current policy of the Portfolio that under normal
circumstances at least sixty-five percent (65%) of its investment in bonds will
consist of securities that are rated at least A by Moody's Investors Service,
Inc. ('Moody's') or Standard & Poor's Corporation ('Standard & Poor's') or that
are unrated and in the Adviser's opinion are of comparable quality. Up to thirty
percent (30%) of the Portfolio's bonds may consist of debt securities rated Baa
or better by Moody's or BBB or better by Standard & Poor's or are unrated and in
the Adviser's opinion are of comparable quality. Up to five percent (5%) of the
Portfolio's bonds may be invested in debt securities that are rated Ba or better
by Moody's or BB or better by Standard & Poor's or are unrated and in the
Adviser's opinion are of comparable quality. Securities rated Baa by Moody's or
BBB by Standard & Poor's are considered investment grade, but have some
speculative characteristics. Securities rated Ba by Moody's or BB by Standard &
Poor's are below investment grade and considered to be speculative with regard
to payment of interest and principal. These standards must be satisfied at the
time an investment is made. If the quality of the investment later declines, the
Portfolio may continue to hold the investment.
The Portfolio may also purchase obligations on a when-issued or delayed delivery
basis, enter into repurchase and reverse repurchase agreements, engage in
mortgage dollar roll transactions, loan its portfolio securities, purchase
certain privately placed securities and enter into certain hedging transactions
that may involve options on securities and securities indices, futures contracts
and options on futures contracts. For a discussion of these investments and
investment techniques, see 'Additional Investment Information and Risk Factors.'
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stocks that may be converted
into common stock or that carry the right to purchase common stock. Convertible
securities entitle the holder to exchange the securities for a specified number
of shares of common stock, usually of the same company, at specified prices
within a certain period of time.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and no interest or income accrues to the
Portfolio until settlement. At the time of settlement, a when-issued security
may be valued at less than its purchase price. Between the trade and settlement
dates, the Portfolio will maintain a segregated account with the Custodian
consisting of a portfolio of high grade, liquid debt securities with a value at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be
disadvantaged. It is the current policy of the Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets less liabilities (excluding the obligations created
by these commitments).
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Trust's Board of Trustees (the 'Trustees'). In a repurchase
agreement, the Portfolio buys a security from a seller that has agreed to
repurchase it at a mutually agreed upon date and price, reflecting the interest
rate effective for the term of
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the agreement. The term of these agreements is usually from overnight to one
week. A repurchase agreement may be viewed as a fully collateralized loan of
money by the Portfolio to the seller. The Portfolio always receives securities
as collateral with a market value at least equal to the purchase price plus
accrued interest and this value is maintained during the term of the agreement.
If the seller defaults and the collateral's value declines, the Portfolio might
incur a loss. If bankruptcy proceedings are commenced with respect to the
seller, the Portfolio's realization upon the disposition of collateral may be
delayed or limited. Investments in repurchase agreements maturing in more than
seven days and certain other investments that may be considered illiquid are
limited. See 'Illiquid Investments; Privately Placed and Other Unregistered
Securities' below.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. It may
also be viewed as the borrowing of money by the Portfolio and, therefore, is a
form of leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, including limitations on the use of reverse
repurchase agreements, see 'Investment Objectives and Policies' in the SAI and
'Investment Restrictions' below.
SECURITIES LENDING. Subject to applicable investment restrictions, the Portfolio
may lend its securities. The Portfolio may lend its securities if such loans are
secured continuously by cash or equivalent collateral or by a letter of credit
in favor of the Portfolio at least equal at all times to 100% of the market
value of the securities loaned, plus accrued interest. While such securities are
on loan, the borrower will pay the Portfolio any income accruing thereon. Loans
will be subject to termination by the Portfolio in the normal settlement time,
generally three business days after notice, or by the borrower on one day's
notice. Borrowed securities must be returned when the loan is terminated. Any
gain or loss in the market price of the borrowed securities that occurs during
the term of the loan inures to the Portfolio and its respective investors. The
Portfolio may pay reasonable finders' and custodial fees in connection with a
loan. In addition, the Portfolio will consider all the facts and circumstances,
including the creditworthiness of the borrowing financial institution, and the
Portfolio will not make any loans in excess of one year. The Portfolio will not
lend its securities to any officer, Trustee, Director, employee or affiliate or
placement agent of the Company, the Portfolio, or the Adviser, Administrator or
Distributor, unless otherwise permitted by applicable law.
FOREIGN INVESTMENT INFORMATION. The Portfolio may invest in foreign securities.
Investments in securities of foreign issuers and in obligations of foreign
branches of domestic banks involve somewhat different investment risks from
those affecting securities of domestic issuers. There may be limited publicly
available information with respect to foreign issuers, and foreign issuers are
not generally subject to uniform accounting, auditing and financial standards
and requirements comparable to those applicable to domestic companies. Dividends
and interest paid by foreign issuers may be subject to withholding and other
foreign taxes that may decrease the net return on such investments.
Investors should realize that the value of the Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the Portfolio's operations. Furthermore, the economies of individual foreign
nations may differ from the U.S. economy, favorably or unfavorably, in areas
such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign
issuer. Any foreign investments made by the Portfolio must be made in compliance
with U.S. and foreign currency restrictions and tax laws restricting the amounts
and types of foreign investments.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's foreign
investments may be less liquid and their prices may be more volatile than
comparable
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investments in securities of U.S. companies. Moreover, the settlement periods
for foreign securities, which are often longer than those for securities of U.S.
issuers, may affect portfolio liquidity. In buying and selling securities on
foreign exchanges, purchasers normally pay fixed commissions that are generally
higher than the negotiated commissions charged in the United States. In
addition, there is generally less government supervision and regulation of
securities exchanges, brokers and issuers located in countries other than in the
United States.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ('ADRs'), European Depositary Receipts
('EDRs') or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying foreign securities. Certain institutions
issuing ADRs may not be sponsored by the issuer of the underlying foreign
securities. A non-sponsored depository may not provide the same shareholder
information that a sponsored depository is required to provide under its
contractual arrangements with the foreign issuer. EDRs are receipts issued by a
European financial institution evidencing a similar arrangement. Generally,
ADRs, in registered form, are designed for use in the U.S. securities markets,
and EDRs, in bearer form, are designed for use in European securities markets.
Because investments in foreign securities involve foreign currencies, the value
of assets as measured in U.S. dollars may be affected, favorably or unfavorably,
by changes in currency exchange rates and in exchange control regulations,
including currency blockage. See 'Foreign Currency Exchange Transactions' below.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio may buy and sell
securities and receive interest and dividends in currencies other than the U.S.
dollar, the Portfolio may, from time-to-time, enter into foreign currency
exchange transactions. The Portfolio may enter into these transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, use forward currency contracts to purchase or sell foreign currencies,
use currency futures contracts or purchase or sell options thereon or purchase
or sell currency options.
A forward foreign currency exchange contract is an obligation of the Portfolio
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract. Currency options give the buyer
the right, but not the obligation, to purchase or sell a fixed amount of a
specific currency at a fixed price at a future date. These contracts are entered
into in the interbank market directly between currency traders (usually large
commercial banks) and their customers. A forward foreign currency exchange
contract generally has no deposit requirement, and is traded at a net price
without commission. The Portfolio will not enter into these foreign currency
exchange transactions for speculative purposes. Foreign currency exchange
transactions do not eliminate fluctuations in the local currency prices of the
Portfolio's securities or in foreign exchange rates, or prevent loss if the
local currency prices of these securities should decline.
A currency futures contract is a contract involving an obligation to deliver or
acquire the specified amount of a currency at a specified price at a specified
future time. Futures contracts may be settled on a net cash payment basis rather
than by the sale and delivery of the underlying currency.
The Portfolio may enter into foreign currency exchange transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or
anticipated securities transactions. The Portfolio may use these techniques to
hedge against a change in foreign currency exchange rates (with the U.S. dollar
or other foreign currencies) that would cause a decline in the value of existing
investments denominated or principally traded in a foreign currency.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, these transactions also limit any
potential gain that might be realized should the value of the hedged currency
increase. Additionally, the premiums paid by the Portfolio for currency or
futures options increase the Portfolio's transaction costs. Similarly, the cost
of the Portfolio's spot currency exchange transactions is generally the
difference between the bid and offer spot rate of the currency being purchased
or sold. The precise matching of these transactions and the value of the
securities involved will
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not generally be possible because the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of such
securities between the date such a transaction is entered into and the date it
matures. The projection of currency market movements is extremely difficult and
the successful execution of a hedging strategy is highly uncertain.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's net assets would be in illiquid
investments or investments that are not readily marketable. In addition, the
Portfolio will not invest more than 10% of the market value of its total assets
in restricted securities that cannot be offered for public sale in the United
States without first being registered under the Securities Act of 1933 (the
'Securities Act'). Subject to those non-fundamental policy limitations, the
Portfolio may acquire investments that are illiquid or have limited liquidity,
such as private placements or investments that are not registered under the
Securities Act, and cannot be offered for public sale in the United States
without first being registered. An illiquid investment is any investment that
cannot be disposed of within seven days in the normal course of business at
approximately the amount at which it is valued by the Portfolio. Repurchase
agreements maturing in more than seven days are considered illiquid investments
and, as such, are subject to the limitations set forth in this paragraph. The
price the Portfolio pays for illiquid securities or receives upon resale may be
lower than the price paid or received for similar securities with a more liquid
market. Accordingly, the valuation of these securities will reflect any
limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the Securities Act. These securities may be
determined to be liquid in accordance with guidelines established by the Adviser
and approved by the Trustees. The Trustees will monitor the Adviser's
implementation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described below. These instruments are commonly
known as derivatives.
The Portfolio may purchase and sell exchange traded and over-the-counter ('OTC')
put and call options on fixed income securities or indices of fixed income
securities, enter into forward contracts, purchase and sell futures contracts on
indices of fixed income securities, purchase and sell put and call options on
futures contracts on indices of fixed income securities and purchase and sell
options on currencies. The Portfolio may use these techniques for hedging or
risk management purposes or, subject to certain limitations, for the purpose of
obtaining desired exposure to certain securities or markets.
The Portfolio may use these techniques to manage its exposure to changing
interest rates, currency exchange rates and/or security prices. Some options and
futures strategies, including selling futures contracts and buying puts, tend to
hedge the Portfolio's investments against price fluctuations. Other strategies,
including buying futures contracts, writing puts and calls, and buying calls,
may tend to increase market exposure. For example, if the Portfolio wishes to
obtain exposure to a particular market or market sector but does not wish to
purchase the relevant securities, it could, as an alternative, purchase a
futures contract on an index of such securities or related securities. Such a
purchase would not constitute a hedging transaction and could be considered
speculative. However, the Portfolio will use futures contracts or options in
this manner only for the purpose of obtaining the same level of exposure to a
particular market or market sector that it could have obtained by purchasing the
relevant securities and will not use futures contracts or options to leverage
its exposure beyond this level. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and return
characteristics of the Portfolio's overall strategy in a manner deemed
appropriate to the Adviser and consistent with the Portfolio's objective and
policies. Because combined positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.
The Portfolio's use of these transactions is a highly specialized activity,
which involves investment strategies and risks different from those associated
with ordinary portfolio securities transactions, and there can be no guarantee
that their use will increase the Portfolio's return. While the Portfolio's use
of these instruments may reduce certain risks associated with owning its
portfolio securities, these techniques themselves entail certain other risks. If
the Adviser applies a strategy at an inappropriate time or judges market
conditions or trends incorrectly, such strategies may lower the Portfolio's
return. Certain
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strategies limit the Portfolio's opportunity to realize gains as well as
limiting its exposure to losses. The Portfolio could experience losses if the
prices of its options and futures positions were poorly correlated with its
other investments, or if it could not close out its positions because of an
illiquid secondary market. In addition, the Portfolio will incur costs,
including commissions and premiums, in connection with these transactions and
these transactions could significantly increase the Portfolio's turnover rate.
The Portfolio may purchase and sell put and call options on securities,
currencies, indices of securities and futures contracts, or purchase and sell
futures contracts for the purposes described herein.
The Commodity Exchange Act prohibits U.S. persons, such as the Fund, from buying
or selling certain foreign futures contracts or options on such contracts.
Accordingly, the Portfolio will not engage in foreign futures or options
transactions unless the contracts in question may lawfully be purchased and sold
by U.S. persons in accordance with applicable Commodity Futures Trading
Commission ('CFTC') regulations or CFTC staff advisories, interpretations and no
action letters.
In addition, in order to assure that the Portfolio will not be considered a
'commodity pool' for purposes of CFTC rules, the Portfolio will enter into
transactions in futures contracts or options on futures contracts only if (1)
such transactions constitute bona fide hedging transactions, as defined under
CFTC rules, or (2) no more than 5% of the Portfolio's net assets are committed
as initial margin or premiums to positions that do not constitute bona fide
hedging transactions.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio pays the
current market price for the option (known as the option premium). Options have
various types of underlying instruments, including specific securities,
currencies, indices of securities, indices of securities prices and futures
contracts. The Portfolio may terminate its position in a put option it has
purchased by allowing it to expire or by exercising the option. The Portfolio
may also close out a put option position by entering into an offsetting
transaction, if a liquid market exists. If the option is allowed to expire, the
Portfolio will lose the entire premium it paid. If the Portfolio exercises a put
option on a security, it will sell the instrument underlying the option at the
strike price. If the Portfolio exercises an option on an index, settlement is in
cash and does not involve the actual sale of securities. American style options
may be exercised on any day up to their expiration date. European style options
may be exercised only on their expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase, rather
than sell, the instrument underlying the option at the option's strike price. A
call buyer typically attempts to participate in potential price increases of the
instrument underlying the option with risk limited to the cost of the option and
related transaction costs if security prices fall. At the same time, the buyer
can expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
SELLING (WRITING) PUT AND CALL OPTIONS. When the Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the instrument underlying the option if the other party to
the option chooses to exercise it. The Portfolio may seek to terminate its
position in a put option it writes before exercise by purchasing an offsetting
option in the market at its current price. If the market is not liquid for a put
option the Portfolio has written, however, the Portfolio must continue to be
prepared to pay the strike price while the option is outstanding, regardless of
price changes, and must continue to post margin as discussed below.
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If the price of the underlying instrument rises, a put writer would generally
expect to profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is likely
that the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, however, the put writer would
expect to suffer a loss. This loss should be less than the loss from purchasing
and holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline.
Writing a call option obligates the Portfolio to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium a call writer offsets part of the effect of a price decrease. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
The writer of a U.S. exchange traded put or call option on a security, an index
of securities or a futures contract is required to deposit cash or securities or
a letter of credit as margin and to make mark-to-market payments of variation
margin if and as the position becomes unprofitable.
OPTIONS ON INDICES. The Portfolio is permitted to enter into options
transactions and may purchase and sell put and call options on any securities
index based on securities in which the Portfolio may invest. Options on
securities indices are similar to options on securities, except that the
exercise of securities index options is settled by cash payment and does not
involve the actual purchase or sale of securities. In addition, these options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security.
The Portfolio, in purchasing or selling index options, is subject to the risk
that the value of its portfolio securities may not change as much as an index
because the Portfolio's investments generally will not match the composition of
an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and the Portfolio may incur additional
losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a
specified quantity of an underlying instrument at a specified future date and
price or to make or receive a cash payment based on the value of a securities
index. When the Portfolio sells a futures contract, it agrees to sell a
specified quantity of the underlying instrument at a specified future date and
price or to receive or make a cash payment based on the value of a securities
index. The price at which the purchase and sale will take place is fixed when
the Portfolio enters into the contract. Futures can be held until their delivery
dates or the positions can be (and normally are) closed out before then. There
is no assurance, however, that a liquid market will exist when a Portfolio
wishes to close out a particular position.
When the Portfolio purchases or sells a futures contract, the value of the
futures contract tends to increase and decrease in tandem with the value of its
underlying instrument. Purchasing futures contracts may tend to increase the
Portfolio's exposure to positive and negative price fluctuations in the
underlying instrument, much as if it had purchased the underlying instrument
directly, as discussed above. When the Portfolio sells a futures contract, by
contrast, the value of its futures position will tend to move in a direction
contrary to the value of the underlying instrument. Selling futures contracts on
securities similar to those held by the Portfolio, therefore, will tend to
offset both positive and negative market price changes, much as if the
underlying instrument had been sold. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that these
standardized instruments will not exactly match the Portfolio's current or
anticipated investments. The Portfolio may invest in futures contracts and
options thereon based on currencies or on securities with different issuers,
maturities, or other characteristics from the securities in which it typically
invests, which involves a risk that the options or futures position will not
track the performance of the Portfolio's other investments.
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The Portfolio may also enter into transactions in futures contracts and options
for non-hedging purposes, as discussed above.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit 'initial margin' with the Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
('FCM'). Initial margin deposits are typically equal to a small percentage of
the contract's value. If the value of either party's position declines, that
party will be required to make additional 'variation margin' payments equal to
the change in value on a daily basis. The party that has a gain may be entitled
to receive all or a portion of this amount. The Portfolio may be obligated to
make payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a futures position, the Portfolio will be
obligated to continue to pay variation margin. Initial and variation margin
payments do not constitute purchasing on margin for purposes of the Portfolio's
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
The Portfolio will segregate liquid, high grade debt securities in connection
with its use of options and futures contracts to the extent required by the SEC.
Securities held in a segregated account cannot be sold while the futures
contract or option is outstanding, unless they are replaced with other suitable
assets. As a result, there is a possibility that the segregation of a large
percentage of the Portfolio's assets could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see 'Investment Objectives and
Policies' in the SAI.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the SAI, except as noted, are
deemed fundamental policies, i.e., they may be changed only by the 'vote of a
majority of the outstanding voting securities' (as defined in the Investment
Company Act of 1940 (the '1940 Act')) of the Fund and the Portfolio,
respectively. The Fund has the same investment restrictions as the Portfolio,
except that the Fund may invest all of its investable assets in another open-end
investment company with the same investment objective and restrictions (such as
the Portfolio), and the Fund may retain an investment adviser to manage the
Fund's assets in accordance with the investment policies and restrictions set
forth below. References below to the Fund's investment restrictions also include
the Portfolio's investment restrictions.
As a diversified investment company, 75% of the Fund's total assets are subject
to the following fundamental limitations: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except U.S.
Government securities; and (b) the Fund may not own more than 10% of the
outstanding voting securities of any one issuer.
The Fund may not: (i) purchase the securities or other obligations of issuers
conducting their principal business activity in the same industry if its
investments in such industry would exceed 25% of the value of the Fund's total
assets, except this limitation shall not apply to investments in U.S. Government
securities; (ii) enter into reverse repurchase agreements or other permitted
borrowings that constitute senior securities under the 1940 Act, exceeding in
the aggregate one-third of the value of the Fund's assets; or (iii) borrow
money, except from banks for extraordinary or emergency purposes, or mortgage,
pledge or hypothecate any assets except in connection with any such borrowings
or permitted reverse repurchase agreements in amounts up to one-third of the
value of the Fund's assets at the time of such borrowing or purchase securities
while borrowings and other senior securities exceed 5% of its total assets. For
a more detailed discussion of the above investment restrictions, as well as a
description of
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certain other investment restrictions, see 'Investment Restrictions' and
'Additional Information' in the SAI.
MANAGEMENT
DIRECTORS AND TRUSTEES. Pursuant to the Declaration of Trust, the Trustees
establish the Portfolio's general policies, are responsible for the overall
management of the Trust and review the actions of the Adviser, Administrator and
other service providers. Similarly, the Directors set the Company's general
policies, are responsible for the overall management of the Company and review
the performance of its service providers. Additional information about the
Company's Board of Directors and officers appears in the SAI under the heading
'Directors and Trustees'. The Trustees are also Directors of the Company, which
raises certain conflicts of interest. The Company and the Trust have adopted
written procedures reasonably appropriate to deal with these conflicts should
they arise. The officers of the Company are also employees of Signature or its
affiliates.
ADVISER AND FUNDS SERVICES AGENT. The Fund has not retained the services of an
investment adviser because the Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio. The Portfolio has
retained the services of the Branch as investment adviser. The Branch, which
operates out of offices located at 299 Park Avenue, New York, New York, is
licensed by the Superintendent of Banks of the State of New York under the
banking laws of the State of New York and is subject to state and federal
banking laws and regulations applicable to a foreign bank that operates a state
licensed branch in the United States.
The Bank has branches, agencies, representative offices and subsidiaries in
Switzerland and in more than 40 cities outside Switzerland, including, in the
United States, New York City, Chicago, Houston, Los Angeles and San Francisco.
In addition to the receipt of deposits and the making of loans and advances, the
Bank through its offices and subsidiaries engages in a wide range of banking and
financial activities typical of the world's major international banks, including
fiduciary, investment advisory and custodial services and foreign exchange in
the United States, Swiss, Asian and Euro-capital markets. The Bank is one of the
world's leading asset managers and has been active in New York City since 1946.
At June 30, 1995, the Bank (including its consolidated subsidiaries) had total
assets of $307.4 billion (unaudited) and equity capital and reserves of $19.7
billion (unaudited).
The Branch provides investment advice and portfolio management to the Portfolio.
Subject to the supervision of the Trustees, the Branch makes the Portfolio's
day-to-day investment decisions, arranges for the execution of portfolio
transactions and generally manages the Portfolio's investments and operations.
See 'Investment Adviser' in the SAI.
The Adviser uses a sophisticated, disciplined, collaborative process for
managing all asset classes. Louis N. Cohen will be primarily responsible for the
day-to-day management and implementation of the Adviser's process for the
Portfolio. Mr. Cohen is also a portfolio manager of UBS Asset Management (New
York) Inc., a position he has held since March 1991. Previously, Mr. Cohen was
employed by PaineWebber, Inc. as a credit officer from April 1990 through March
1991. Mr. Cohen is currently managing several portfolios and is responsible for
all credit research relating to the issuers in which these portfolios invest.
Mr. Cohen has previously managed the investments of an offshore mutual fund. Mr.
Cohen received both a B.A. and M.B.A. from New York University and has seventeen
years of investment experience. The Branch has not previously advised a mutual
fund. This may be viewed as a risk of investing in this Fund.
In addition to the above-listed investment advisory services, the Adviser also
provides the Fund and the Portfolio with certain related administrative
services. Subject to the supervision of the Board and Trustees, respectively,
the Adviser is responsible for: establishing performance standards for the
third-party service providers of the Fund and Portfolio and overseeing and
evaluating the performance of such entities; providing and presenting quarterly
management reports to the Directors and the Trustees; supervising the
preparation of reports for Fund and Portfolio shareholders; and establishing
voluntary expense limitations for the Fund and providing any resultant expense
reimbursement to the Fund.
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The Branch provides its administrative services to the Fund pursuant to a Funds
Services Agreement between the Branch and the Company. The Branch does not
receive a fee from the Company or the Fund pursuant to the terms of the Funds
Services Agreement.
Under the Trust's Investment Advisory Agreement, the Portfolio pays the Adviser
a fee, calculated daily and payable monthly, at an annual rate of 0.45% of the
Portfolio's average net assets. The Branch has voluntarily agreed to waive its
fees and reimburse the Fund for any of its direct or indirect expenses to the
extent that the Fund's total operating expenses exceed, on an annual basis,
0.80% of the Fund's average daily net assets. The Branch may modify or
discontinue this fee waiver and expense limitation at any time in the future
with 30 days' notice to the Fund. See 'Expenses'.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS WITH OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, THE BRANCH OR ANY OTHER BANK.
ADMINISTRATORS. Under Administrative Service Agreements with the Company and the
Trust, Signature and Signature-Cayman serve as the Administrators of the Fund
and the Portfolio, respectively (in such capacities, the 'Administrators'). In
these capacities, Signature and Signature-Cayman administer all aspects of the
Fund's and the Portfolio's day-to-day operations, subject to the supervision of
the Adviser, and the Board and Trustees, as applicable, except as set forth
under 'Adviser and Funds Services Agent', 'Distributor', 'Custodian' and
'Shareholder Services'. The Administrators (i) furnish general office facilities
and ordinary clerical and related services for day-to-day operations including
recordkeeping responsibilities; (ii) take responsibility for compliance with all
applicable federal and state securities and other regulatory requirements; and
(iii) perform administrative and managerial oversight of the activities of the
custodian, transfer agent and other agents or independent contractors of the
Fund and the Portfolio. Signature is also responsible for monitoring the Fund's
status as a regulated investment company under the Internal Revenue Code of
1986, as amended (the 'Code').
Under the Company's Administrative Services Agreement, the Fund has agreed to
pay Signature a fee, calculated daily and payable monthly, at an annual rate of
0.05% of the Fund's first $100 million of average net assets plus 0.025% of the
next $100 million of average net assets. Signature does not receive a fee from
the Fund on average net assets in excess of $200 million.
Under the Trust's Administrative Services Agreement, the Portfolio has agreed to
pay Signature-Cayman a fee, calculated daily and payable monthly, at an annual
rate of 0.05% of the Portfolio's average net assets.
DISTRIBUTOR. Under the Distribution Agreement, Signature, located at 6 St. James
Avenue, Boston, MA 02116, serves as the distributor of Fund shares (in such
capacity, the 'Distributor'). The Distributor is a wholly-owned direct
subsidiary of Signature Financial Group, Inc. and is a registered broker-dealer.
The Distributor does not receive a fee pursuant to the terms of the Distribution
Agreement.
CUSTODIAN. Investors Bank & Trust Company, whose principal offices are located
at 89 South Street, Boston, Massachusetts 02111, serves as the custodian and
transfer and dividend disbursing agent for the Portfolio and the Fund. See
'Custodian' in the SAI. The Custodian also maintains offices at 1 First Canadian
Place, Suite 2800, Toronto, Ontario M5X1C8.
SHAREHOLDER SERVICES
The Company has entered into a Shareholder Servicing Agreement with the Branch
under which the Branch provides shareholder services to Fund shareholders, which
include coordinating shareholder accounts and records, assisting investors
seeking to purchase or redeem Fund shares, providing performance information
relating to the Fund, and responding to shareholder inquiries. The Company has
agreed to pay the Branch for these services at an annual rate of 0.25% of the
average daily net assets of the Fund. Under the terms of the Shareholder
Servicing Agreement, the Branch may delegate one or more of its responsibilities
to other entities at its expense.
EXPENSES
In addition to the fees of the Branch, Signature-Cayman, Signature, and
Investors Bank & Trust Company, the Fund will be responsible for, or will
indirectly bear through its interest in the Portfolio,
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other expenses including brokerage costs and litigation and extraordinary
expenses. The Adviser has agreed to waive fees as necessary if, in any fiscal
year, the sum of the Fund's expenses exceeds the limits set by applicable
regulations of state securities commissions. Such annual limits are currently
2.5% of the first $30 million of average net assets, 2% of the next $70 million
of such net assets and 1.5% of such net assets in excess of $100 million. The
Adviser has also voluntarily agreed to limit the total operating expenses of the
Fund, excluding extraordinary expenses, to an annual rate of 0.80% of the Fund's
average daily net assets. The Adviser may modify or discontinue this voluntary
expense limitation at any time in the future with 30 days' notice to the Fund.
The Fund and the Portfolio may allocate brokerage transactions to their
affiliates and the Adviser's affiliates. Brokerage transactions may be allocated
to these affiliates only if the commissions received by such affiliates are fair
and reasonable when compared to the commissions paid to unaffiliated brokers in
connection with comparable transactions. See 'Portfolio Transactions' in the
SAI.
PURCHASE OF SHARES
GENERAL INFORMATION ON PURCHASES. Investors may purchase Fund shares only
through the Distributor. All purchase orders must be accepted by the
Distributor. The Company also reserves the right to determine the purchase
orders that it will accept and it reserves the right to cease offering its
shares at any time. The shares of the Fund may be purchased only in those states
where they may be lawfully sold.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange (the 'NYSE') is open for regular trading.
The shares of the Fund are sold on a continuous basis without a sales charge at
the net asset value per share next determined after receipt and acceptance of a
purchase order by the Distributor. The Fund calculates its net asset value at
the close of business. See 'Net Asset Value'. The minimum initial investment in
the Fund is $25,000, except that the minimum initial investment is $10,000 for
shareholders of another series of the Company. The minimum subsequent investment
in the Fund for all investors is $5,000. The minimum initial investment for
employees of the Bank or its affiliates is $5,000. The minimum subsequent
investment is $1,000. These minimum investment requirements may be waived for
certain retirement plans or accounts for the benefit of minors. For purposes of
the minimum investment requirements, the Fund may aggregate investments by
related shareholders. Investors will receive the number of full and fractional
shares of the Fund equal to the dollar amount of their subscription divided by
the net asset value per share of the Fund as next determined on the day that the
investor's subscription is accepted. See 'Purchase of Shares' in the SAI.
Purchase orders in proper form received by the Distributor prior to 4:00 p.m.
New York time or the close of regular trading on the NYSE, whichever is earlier,
are effective and executed at the net asset value next determined that day.
Purchase orders received after 4:00 p.m. New York time or the close of the NYSE,
whichever is earlier, will be executed at the net asset value determined on the
next business day. Investors become record shareholders of the Fund on the next
business day ('day two') after they place their subscription order, provided the
Custodian receives payment for the shares on day two. As record shareholders,
investors are entitled to earn dividends.
Fund shares may be purchased in the following methods:
BRANCH CLIENTS: Private Bank Clients of the Branch should request a Branch
representative to assist them in placing a purchase order with the Distributor.
THROUGH THE DISTRIBUTOR: Shareholders who do not currently maintain a private
banking relationship with the Branch may purchase shares of the Fund directly
from the Distributor by wire transfer or mail.
The Transfer Agent will maintain the accounts for all shareholders who purchase
Fund shares directly through the Distributor. For account balance information
and shareholder services, such shareholders should contact the Transfer Agent at
(800) [ ] or in writing at UBS Private
Investor Funds, Inc., c/o Investors Bank & Trust Company, P.O. Box 1537 MFD 23,
Boston, MA 02205-1537.
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By wire: Purchases may be made by federal funds wire. To place a purchase order
with the Fund, the shareholder must telephone the Transfer Agent at (800)
[ ] for specific instructions.
Subject to the minimum purchase requirements discussed above, shares purchased
by federal funds wire will be effected at the net asset value per share next
determined after acceptance of the order.
A completed account application must promptly follow any wire order for an
initial purchase. No account application is required for subsequent purchases.
Completed account applications should be mailed or sent via facsimile.
Shareholders should contact the Transfer Agent for further instructions
regarding account applications.
By mail: Subject to the minimum purchase requirements discussed above,
shareholders may purchase shares of the Fund through the Distributor by
completing an account application and mailing it, together with a check payable
to 'UBS Private Investor Funds, Inc.', to UBS Private Investor Funds, Inc., c/o
Investors Bank & Trust Company, P.O. Box 1537 MFD 23, Boston, MA 02205-1537.
Account applications are not required for subsequent purchases; however, the
shareholder's account number must be clearly marked on the check to ensure
proper credit. Subsequent purchases may also be made by mailing a check together
with the detachable purchase order that accompanies transaction confirmations.
Checks are subject to collection at full value. For shares purchased by check,
dividend payments and redemption proceeds, if any, will be delayed until such
funds are collected, which may take up to 15 days from the date of purchase.
REDEMPTION OF SHARES
GENERAL INFORMATION ON REDEMPTIONS. A shareholder may redeem all or any number
of the shares registered in its name at any time at the net asset value next
determined after a redemption request in proper form is received by the
Distributor. The Fund calculates its net asset value at the close of business.
See 'Net Asset Value'.
A redemption order will be effected provided the Distributor receives such an
order prior to 4:00 p.m. New York time or the close of regular trading on the
NYSE, whichever is earlier. The redemption of Fund shares is effective and is
executed at the net asset value next determined that day. Redemption orders
received after 4:00 p.m. New York time or the close of regular trading on the
NYSE, whichever is earlier, will be executed at the net asset value determined
on the next business day. Proceeds of an effective redemption are generally
deposited the next business day in immediately available funds to the account
designated by the redeeming shareholder or mailed to the shareholder's address
of record, in accordance with the shareholder's instructions.
Shareholders will continue to earn dividends through the day of redemption.
Fund shares may be redeemed in the following methods:
BRANCH CLIENTS: Shareholders who are Private Bank Clients of the Branch should
request a Branch representative to assist them in placing a redemption order.
THROUGH THE DISTRIBUTOR: Shareholders who are not Branch clients may redeem Fund
shares by telephone or mail.
By telephone: Telephone redemptions may be made by calling the Transfer Agent at
(800) [ ]. Redemption orders will be accepted
until 4:00 p.m. New York time or the close of regular trading on the NYSE,
whichever is earlier. Telephone redemption requests are limited to those
shareholders who have previously elected this service. Such shareholders risk
possible loss of principal and income in the event of a telephone redemption not
authorized by them. The Fund and the Transfer Agent will employ reasonable
procedures to verify that telephone redemption instructions are genuine and will
require that shareholders electing such an option provide a form of personal
identification. The failure by the Fund or the Transfer Agent to employ such
procedures may cause the Fund or the Transfer Agent to be liable for any losses
incurred by investors due to telephone redemptions
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based upon unauthorized or fraudulent instructions. The telephone redemption
option may be modified or discontinued at any time upon 60 days' notice to
shareholders.
By mail: Redemption requests may also be mailed to the Transfer Agent,
identifying the Fund, the dollar amount or number of shares to be redeemed and
the shareholder's account number. The request must be signed in exactly the same
manner as the account is registered (e.g., if there is more than one owner of
the shares, all must sign). In all cases, all signatures on a redemption request
must be signature guaranteed by an eligible guarantor institution which includes
a domestic bank, a domestic savings and loan institution, a domestic credit
union, a member bank of the Federal Reserve System or a member firm of a
national securities exchange, pursuant to the Fund's standards and procedures;
if the guarantor institution belongs to one of the Medallion Signature programs,
it must use the specific 'Medallion Guaranteed' stamp (guarantees by notaries
public are not acceptable). Further documentation, such as copies of corporate
resolutions and instruments of authority, may be requested from corporations,
administrators, executors, personal representatives, trustees or custodians to
evidence the authority of the person or entity making the redemption request.
The redemption request in proper form should be sent to UBS Private Investor
Funds, Inc., c/o Investors Bank & Trust Company, P.O. Box 1537 MFD 23, Boston,
MA 02205-01537.
MANDATORY REDEMPTION. If the value of a shareholder's holdings in the Fund falls
below $10,000 because of a redemption of shares, the shareholder's remaining
shares may be redeemed 60 days after written notice unless the account is
increased to $10,000 or more. For example, a shareholder whose initial and only
investment is $10,000 may be subject to mandatory redemption resulting from any
redemption that causes his or her investment to fall below $10,000.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions may
not be processed unless the redemption request is submitted in proper form. To
be in proper form, the Fund must have received the shareholder's taxpayer
identification number and address. As discussed under 'Taxes' below, the Fund
may be required to impose 'back-up' withholding of federal income tax on
dividends, distributions and redemptions when non-corporate investors have not
provided a certified taxpayer identification number. In addition, if an investor
sends a check to the Distributor for the purchase of Fund shares and shares are
purchased with funds made available by the Distributor before the check has
cleared, the transmittal of redemption proceeds from the sale of those shares
will not occur until the check used to purchase such shares has cleared, which
may take up to 15 days. Redemption delays may be avoided by purchasing shares by
federal funds wire.
The right of redemption may be suspended or the date of payment postponed for
such periods as the 1940 Act or the SEC may permit. See 'Redemption of Shares'
in the SAI.
EXCHANGE OF SHARES
An investor may exchange Fund shares for shares of any other series of the
Company, without charge. An exchange may be made so long as after the exchange
the investor has shares, in each series in which it remains an investor, with a
value equal to or greater than each such series' minimum investment amount. See
'Purchase of Shares' in the prospectuses of the other Company series for the
minimum investment amounts for each of those funds. Shares are exchanged on the
basis of relative net asset value per share. Exchanges are in effect redemptions
from one fund and purchases of another fund and the usual purchase and
redemption procedures and requirements are applicable to exchanges. See
'Purchase of Shares' and 'Redemption of Shares' in this Prospectus and in the
prospectuses of the other Company series. See also 'Additional Information'
below for an explanation of the telephone exchange policy.
Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income tax
purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state
securities laws may restrict the availability of the exchange privilege.
RETIREMENT PLANS
The Fund has available a form of Individual Retirement Account ('IRA') for
investment in Fund shares. Subject to certain restrictions imposed by applicable
tax laws, self-employed individuals may purchase
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shares of the Fund through tax-deductible contributions to existing retirement
plans known as Self-Employed Retirement Plans ('SERPs'). Fund shares may also be
a suitable investment for '401(k) Plans' which subject to certain restrictions
allow their participants to invest in qualified pension plans on a tax-deferred
basis. The Fund does not currently act as sponsor to such plans.
The minimum initial investment for all such retirement plans is $2,000. The
minimum for all subsequent investments is $500.
Under the Code, individuals may make IRA contributions of up to $2,000 annually,
which may be, depending on the contributor's participation in an
employer-sponsored plan and income level, wholly or partly tax-deductible.
However, dividends and distributions held in the account are not taxed until
withdrawn in accordance with the provisions of the Code. An individual with a
non-working spouse may establish a separate IRA for the spouse under the same
conditions and contribute a combined maximum of $2,250 annually to one or both
IRAs provided that no more than $2,000 may be contributed to the IRA of either
spouse. Investors should be aware that they may be subject to penalties or
additional taxes on contributions to or withdrawals from IRAs or other
retirement plans under certain circumstances. Prior to a withdrawal,
shareholders may be required to certify as to their age and awareness of such
restrictions in writing. Branch clients desiring information concerning
investments through IRAs or other retirement plans should contact their Branch
representative. Non-Branch clients may obtain such information by calling the
Transfer Agent at (800) [ ].
DIVIDENDS AND DISTRIBUTIONS
The Fund will declare daily, and pay monthly, dividends from its daily net
investment income. The Fund may also declare an additional dividend of net
investment income in a given year to the extent necessary to avoid the
imposition of federal excise taxes on the Fund.
Substantially all of the Fund's realized net capital gains, if any, will be
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise taxes on the Fund. Declared dividends and
distributions are payable on the payment date to shareholders of record on the
record date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional Fund shares unless the shareholder has elected, in
writing, to have them paid in cash. Dividends and distributions to be paid in
cash are credited to the account designated by the shareholder or sent by check
to the shareholder's address of record, in accordance with the shareholder's
instructions. The Fund reserves the right to discontinue, alter or limit the
automatic reinvestment privilege at any time.
To the extent that shareholders of the Fund elect to receive their dividends in
cash, rather than electing to reinvest such dividends in additional shares, the
cash used to make these distributions must be provided from the Fund's assets,
which may include a partial redemption of the Fund's interest in the Portfolio.
The Portfolio will be required to use its own cash or the proceeds for the sales
of its securities in order to fund its income distributions and redemptions.
Moreover, in the case of zero coupon bonds, the Portfolio generally will not
have received any income from the issuer of such a security. Consequently, the
Portfolio must rely on other sources (e.g., proceeds from the sale of assets or
other income) to meet such distribution requirements. To the extent the Fund
makes such cash distributions, the Fund, and indirectly the Portfolio, will not
be able to invest that cash in income producing securities. Consequently, the
current income of the Fund and the Portfolio may ultimately be reduced.
NET ASSET VALUE
The Fund's net asset value per share equals the value of the Fund's total assets
(i.e., the value of its investment in the Portfolio plus its other assets) less
the amount of its liabilities, divided by the number of its outstanding shares,
rounded to the nearest cent. Expenses, including the fees payable to the service
providers of the Fund and the Portfolio, are accrued daily. Securities for which
market quotations are readily available are valued at market value. All other
securities will be valued at 'fair value'. See 'Net Asset Value' in the SAI for
information on the valuation of the Portfolio's assets and liabilities.
-19-
<PAGE>
<PAGE>
The Fund computes its net asset value once daily at the close of business on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the following legal holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. On days when U.S. trading markets close early in observance of
these holidays, the Fund expects to close for purchases and redemptions at the
same time.
ORGANIZATION
UBS PRIVATE INVESTOR FUNDS, INC.
UBS Private Investor Funds, Inc., a Maryland corporation incorporated on
November 16, 1995, is an open-end management investment company registered under
the 1940 Act and organized as a series fund. The Company has no prior history.
The Company is currently authorized to issue shares in four series: The UBS Bond
Fund Series; The UBS Tax Exempt Bond Fund Series; The UBS International Equity
Fund Series; and The UBS U.S. Equity Fund Series. Each outstanding share of the
Company will have a pro rata interest in the assets of its series, but it will
have no interest in the assets of any other Company series. Only shares of The
UBS Bond Fund Series are offered through this Prospectus.
Shareholder inquiries by clients of the Branch should be directed to the Branch,
while other shareholders should address their inquiries to the Transfer Agent.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and nonassessable when issued by the Company. The Company does not intend to
hold meetings of shareholders annually. The Directors may call meetings of
shareholders for action by shareholder vote as may be required by its Articles
of Incorporation or the 1940 Act. For further organizational information,
including certain shareholder rights, see 'Organization' in the SAI.
UBS INVESTOR PORTFOLIOS TRUST
UBS Investor Portfolios Trust, a master trust fund formed under New York law,
was organized on February 9, 1996. The Declaration of Trust permits the Trustees
to issue interests divided into one or more subtrusts or series. To date, three
series have been authorized, of which UBS Bond Portfolio is one.
The Declaration of Trust provides that no Trustee, shareholder, officer,
employee, or agent of the Trust shall be held to any personal liability, nor
shall resort be had to such person's private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Portfolio, but that only the Trust property shall be liable.
The Declaration of Trust provides that the Fund and other entities investing in
the Portfolio (e.g., other investment companies, insurance company separate
accounts and common and commingled trust funds) will each be liable for all the
obligations of the Portfolio. However, the risk of the Fund's incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations. Accordingly, the Trustees believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investment in
the Portfolio.
The Company expects that, immediately prior to the initial public offering of
its shares, the sole holder of its capital stock will be Signature.
TAXES
The Company intends that the Fund will qualify as a separate regulated
investment company under Subchapter M of the Code. As a regulated investment
company, the Fund will not be subject to federal income taxes if at least 90% of
its net investment income and net short-term capital gains less any available
capital loss carryforwards are distributed to shareholders within allowable time
limits. The Portfolio intends to qualify as an association treated as a
partnership for federal income tax purposes. As
-20-
<PAGE>
<PAGE>
such, the Portfolio generally should not be subject to tax. The status of the
Fund as a regulated investment company is dependent on, among other things, the
Portfolio's continued qualification as a partnership for federal income tax
purposes.
Distributions of net long-term capital gains in excess of net short-term capital
losses are taxable to Fund shareholders as long-term capital gains regardless of
how long a shareholder has held shares in the Fund and regardless of whether
received in the form of cash or reinvested in additional shares. Distributions
of net investment income and realized net short-term capital gains in excess of
net long-term capital losses are taxable as ordinary income to Fund
shareholders, whether such distributions are received in the form of cash or
reinvested in additional shares. Annual statements as to the current federal tax
status of distributions will be mailed to shareholders after the end of the
taxable year for the Fund. Distributions to corporate shareholders of the Fund
will not qualify for the dividends-received deduction because the income of the
Fund will not consist of dividends paid by United States corporations.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities generally will be treated as
long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption or exchange of shares in the Fund
held for six months or less will be treated as a long-term capital loss to the
extent of any long-term capital gain distributions received by the shareholder
with respect to such shares. In addition, no loss will be allowed on the sale or
other disposition of shares of the Fund if, within a period beginning 30 days
before the date of such sale or disposition and ending 30 days after such date,
the holder acquires (such as through dividend reinvestment) securities that are
substantially identical to the shares of the Fund.
The Fund will generally be subject to an excise tax of 4% on the amount of any
income or capital gains, above certain permitted levels, distributed to
shareholders on a basis such that such income or gain is not taxable to
shareholders in the calendar year in which it was earned by the Fund.
Furthermore, dividends declared in October, November, or December payable to
shareholders of record on a specified date in such a month and paid in the
following January will be treated as having been paid by the Fund and received
by each shareholder in December. Under this rule, therefore, shareholders may be
taxed in one year on dividends or distributions actually received in January of
the following year.
Distributions of net investment income or net long-term capital gains will have
the effect of reducing the net asset value of the Fund's shares by the amount of
the distribution. If the net asset value is reduced below a shareholder's cost,
the distribution will nonetheless be taxable as described above, even if the
distribution represents a return of invested capital. Investors should consider
the tax implications of buying shares just prior to a distribution, when the
price of shares may reflect the amount of the forthcoming distribution.
This discussion of tax consequences is based on U.S. federal tax laws in effect
on the date of this Prospectus. These laws and regulations are subject to change
by legislative or administrative action, possibly with retroactive effect.
Investors are urged to consult their own tax advisors with respect to specific
questions as to federal taxes and with respect to the applicability of state or
local taxes. See 'Taxes' in the SAI.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
Shareholders should be aware that, under applicable regulations, the Fund may be
fined up to $50 annually for each account for which a certified taxpayer
identification number is not provided. In the event that such a fine is imposed
with respect to any uncertified account in any year, a corresponding charge may
be made against that account.
ADDITIONAL INFORMATION
The Fund will send its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports will be audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption and monthly statements reflecting all account activity, including
dividends and any distributions whether reinvested in additional shares or paid
in cash.
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<PAGE>
<PAGE>
All shareholders are given the privilege to initiate transactions automatically
by telephone upon opening an account. However, an investor should be aware that
a transaction authorized by telephone and reasonably believed to be genuine by
the Company, the Branch, the Transfer Agent or the Distributor may subject the
investor to risk of loss if such instruction is subsequently found not to be
genuine. The Company and its service providers will employ reasonable
procedures, including requiring investors to give a form of personal
identification and tape recording of telephonic instructions, to confirm that
telephonic instructions by investors are genuine; if it does not, it or the
service provider may be liable for any losses due to unauthorized or fraudulent
instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indices, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Average, the Frank Russell Indices, the EAFE Index, the Financial Times World
Stock Index and other industry publications.
The Fund may advertise 'yield'. Yield refers to the net income generated by an
investment in the Fund over a stated 30-day period. This income is then
annualized -- i.e., the amount of income generated by the investment during the
30-day period is assumed to be generated each 30-day period for 12 periods and
is shown as a percentage of the investment. The income earned on the investment
is also assumed to be reinvested at the end of the sixth 30-day period.
The Fund may also advertise 'total return'. The total return shows what an
investment in the Fund would have earned over a specified period of time (one,
five or ten years or since commencement of operations, if less) assuming that
all Fund distributions and dividends were reinvested on the reinvestment dates
and less all recurring fees during the period and assuming the redemption of
such investment at the end of each period.
These methods of calculating yield and total return are required by regulations
of the SEC. Yield and total return data similarly calculated, unless otherwise
indicated, over other specified periods of time may also be used. All
performance figures are based on historical earnings and are not intended to
indicate future performance. Performance information may be obtained by clients
of the Branch by calling the Branch, while other shareholders may address their
inquiries to the Transfer Agent.
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<PAGE>
<PAGE>
________________________________________________________________________________
INVESTMENT ADVISER OF THE PORTFOLIO
Union Bank of Switzerland,
New York Branch
299 Park Avenue
New York, New York 10171
(212) 821-3000
ADMINISTRATOR AND DISTRIBUTOR
Signature Broker-Dealer Services, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investors for Whom the Fund is Designed...................................................................... 2
Master-Feeder Structure...................................................................................... 4
Investment Objective and Policies............................................................................ 5
Additional Investment Information and Risk Factors........................................................... 7
Options...................................................................................................... 11
Futures Contracts............................................................................................ 12
Investment Restrictions...................................................................................... 13
Management................................................................................................... 14
Shareholder Services......................................................................................... 15
Expenses..................................................................................................... 15
Purchase of Shares........................................................................................... 16
Redemption of Shares......................................................................................... 17
Exchange of Shares........................................................................................... 18
Retirement Plans............................................................................................. 18
Dividends and Distributions.................................................................................. 19
Net Asset Value.............................................................................................. 19
Organization................................................................................................. 20
Taxes........................................................................................................ 20
Additional Information....................................................................................... 21
</TABLE>
UBS PRIVATE
INVESTOR FUNDS,
INC.
UBS BOND FUND
---------------------
PROSPECTUS
---------------------
, 1996
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER OF THE FUND SHARES MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, BY THE FUND IN ANY JURISDICTION IN WHICH SUCH
OFFER TO SELL OR SOLICITATION MAY NOT LAWFULLY BE MADE.
________________________________________________________________________________
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
UBS U.S. EQUITY FUND
6 ST. JAMES AVENUE
BOSTON, MASSACHUSETTS 02116
FOR INFORMATION CALL (800) [ ]
UBS U.S. Equity Fund (the 'Fund') seeks to provide long-term capital
appreciation and the potential for a high level of current income by investing
principally in dividend-paying equity securities of domestic corporations. In
selecting these securities, the Fund will also consider the potential for
capital appreciation. It is the intention of the Adviser (defined below) that
the average income yield of the common stocks held by the Fund be at least 50%
greater than that of the Standard and Poor's 500 Composite Stock Price Index
(the 'S&P 500 Index') and have less price volatility than the S&P 500 Index.
There is no assurance that the Fund will achieve its stated objective.
The Fund is a diversified, no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is one of several series of UBS
Private Investor Funds, Inc. (the 'Company'), an open-end management investment
company organized as a corporation under Maryland law.
UNLIKE OTHER MUTUAL FUNDS THAT DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN UBS U.S. EQUITY PORTFOLIO (THE 'PORTFOLIO'), A
CORRESPONDING OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE SAME INVESTMENT
OBJECTIVE AS THE FUND. THE FUND EMPLOYS A TWO-TIER MASTER-FEEDER STRUCTURE THAT
IS MORE FULLY DESCRIBED UNDER THE SECTION CAPTIONED 'MASTER-FEEDER STRUCTURE'.
THE PORTFOLIO IS ADVISED BY THE NEW YORK BRANCH (THE 'BRANCH' OR THE 'ADVISER')
OF UNION BANK OF SWITZERLAND (THE 'BANK').
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
[ ], 1996, provides further discussion of certain topics referred
to in this Prospectus and other matters that may be of interest to investors.
The Statement of Additional Information has been filed with the Securities and
Exchange Commission and is incorporated herein by reference and is available
without charge upon written request from the Company or Distributor (as defined
herein) at the addresses set forth on the back cover of the Prospectus, or by
calling (800) [ ].
INVESTMENTS IN THE FUND ARE NOT DEPOSITS WITH OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, UNION BANK OF SWITZERLAND OR ANY OTHER BANK. SHARES OF THE FUND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND IS
SUBJECT TO RISKS THAT MAY CAUSE THE VALUE OF THE INVESTMENT TO FLUCTUATE. WHEN
THE INVESTMENT IS REDEEMED, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT
ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS DATED [ ], 1996.
<PAGE>
<PAGE>
UBS U.S. EQUITY FUND
INVESTORS FOR WHOM THE FUND IS DESIGNED
UBS U.S. Equity Fund (the 'Fund') is designed for investors seeking long-term
capital appreciation and the potential for a high level of current income with
lower investment risk and volatility than is normally available from common
stock funds. Because of the risks associated with common stock investments, the
Fund is intended to be a long-term investment vehicle and is not intended to
provide investors with a means for speculating on short-term market movements.
The Fund seeks to achieve its investment objective by investing all of its
investable assets in UBS U.S. Equity Portfolio (the 'Portfolio'), an open-end
management investment company having the same investment objective as the Fund.
Because the investment characteristics and experience of the Fund will
correspond directly with those of the Portfolio, the discussion in this
Prospectus focuses on the investments and investment policies of the Portfolio.
The net asset value of shares of the Fund fluctuates with changes in the value
of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments for the Portfolio are futures contracts,
options and certain privately placed securities. The Portfolio's investments in
securities of smaller or less established issuers involve risks and may be more
volatile and less liquid than the securities of larger or more established
domestic issuers. For further information about these investments and related
investment techniques, see 'Investment Objective and Policies' discussed below.
The minimum initial investment in the Fund is $25,000, except that the minimum
initial investment is $10,000 for shareholders of another series of UBS Private
Investor Funds, Inc. (the 'Company'). The minimum subsequent investment for all
investors is $5,000. These minimums may be waived for certain accounts. See
'Purchase of Shares'. If shareholders reduce their total investment in shares of
the Fund to less than $10,000, their investment will be subject to mandatory
redemption. See 'Redemption of Shares -- Mandatory Redemption'. The Fund is one
of several series of the Company, an open-end management investment company
organized as a Maryland corporation.
This Prospectus describes the investment objective and policies, management and
operations of the Fund to enable investors to decide if the Fund suits their
investment needs. The Fund operates through a two-tier master-feeder structure.
The Company's Board of Directors (the 'Directors' or the 'Board') believes that
this structure provides Fund shareholders with the opportunity to achieve
certain economies of scale that would otherwise be unavailable if the
shareholders' investments were not pooled with other investors sharing similar
investment objectives.
The following table illustrates that investors in the Fund incur no shareholder
transaction expenses: their investments in the Fund are subject only to the
operating expenses set forth below for the Fund and the Portfolio, as a
percentage of average daily net assets of the Fund. These operating expenses
include expenses incurred by the Fund and expenses incurred by the Portfolio
that are allocable to the Fund. The Directors believe that the aggregate per
share expenses of the Fund and the Portfolio will be approximately equal to and
may be less than the expenses that the Fund would incur if it retained the
services of an investment adviser and invested its assets directly in portfolio
securities. Fund and Portfolio expenses are discussed below under the headings
'Management,' 'Expenses' and 'Shareholder Services'.
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SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases..................................................................... None
Sales Load Imposed on Reinvested Dividends.......................................................... None
Deferred Sales Load................................................................................. None
Redemption Fees..................................................................................... None
Exchange Fees....................................................................................... None
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
Advisory Fees, After Fee Waiver**................................................................... 0.00%
Rule 12b-1 Fees..................................................................................... None
Other Expenses, After Expense Reimbursements***..................................................... 0.90%
----
Total Operating Expenses, After Fee Waivers and Expense Reimbursements*............................. 0.90%
----
----
</TABLE>
* Expenses are expressed as a percentage of the Fund's projected average daily
net assets and are based on estimates of the expenses to be incurred during the
current fiscal year, after any applicable fee waivers and expense
reimbursements. Without such fee waivers and expense reimbursements, Total
Operating Expenses would be equal, on an annual basis, to 4.35% of the Fund's
projected average daily net assets. See 'Management'.
** The New York Branch (the 'Branch' or the 'Adviser') of Union Bank of
Switzerland (the 'Bank') has agreed to waive fees and reimburse the Fund for any
of its operating expenses (including those the Fund incurs indirectly through
the Portfolio) to the extent that the Fund's total operating expenses exceed, on
an annual basis, 0.90% of the Fund's average daily net assets. The Branch may
modify or discontinue this undertaking at any time in the future with 30 days'
notice to the Fund. The advisory fee would be 0.60% if there were no fee waiver.
See 'Management -- Adviser and Funds Services Agent' and 'Expenses'.
*** The fees and expenses in Other Expenses, After Expense Reimbursements
include fees payable to Signature Broker-Dealer Services, Inc. ('Signature')
under an Administrative Services Agreement with the Fund, fees payable to
Signature Financial Group (Grand Cayman) Limited ('Signature-Cayman') under an
Administrative Services Agreement with the Portfolio, fees payable to Investors
Bank & Trust Company (the 'Custodian' or the 'Transfer Agent') as custodian of
the Fund and the Portfolio, and fees payable to the Branch under the Shareholder
Servicing Agreement. For a more detailed description of contractual fee
arrangements, including fee waivers and expense reimbursements, and of the fees
and expenses included in Other Expenses, see 'Management' and 'Shareholder
Services'.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming a
5% annual return and a redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year...................................................... $ 9
3 Years..................................................... $29
</TABLE>
The above Expense Table is designed to assist investors in understanding the
various direct and indirect costs and expenses that Fund investors are expected
to bear and reflects the expenses of the Fund and the Fund's share of the
Portfolio's expenses. In connection with the above Example, please note that
$1,000 is less than the Fund's minimum investment requirement and that there are
no redemption or exchange fees of any kind. See 'Purchase of Shares', 'Exchange
of Shares' and 'Redemption of Shares'. THE EXAMPLE IS HYPOTHETICAL; IT IS
INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES, AND ASSUMES THE CONTINUATION OF THE
FEE WAIVERS AND EXPENSE REIMBURSEMENTS REPRESENTED IN THE ABOVE 'EXPENSE TABLE'.
IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL
EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
HISTORICAL PERFORMANCE OF COMPARABLE DISCRETIONARY ACCOUNTS. The following table
sets forth the composite total return for the one year ended December 31, 1995
for all discretionary accounts described
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<PAGE>
<PAGE>
below that have been managed for at least one full quarter by UBS Asset
Management (New York) Inc., a wholly-owned subsidiary of the Bank ('UBSAM NY'),
and the annual total return during the same year for the S&P 500 Index. Such
accounts have substantially the same investment objective and policies and are
managed in a manner substantially the same as the Portfolio. While the Portfolio
will be managed by the Branch, the management of the Portfolio will be
substantially the same as by UBSAM NY and will be carried out by personnel who
performed these services for the discretionary accounts at UBSAM NY, who will be
employed by the Branch for this purpose. The composite total return for such
accounts has been adjusted to deduct all of the Fund's estimated annual total
operating expenses of .90% of projected average daily net assets as set forth in
the Fee Table above. No such accounts were managed by UBSAM NY or the Branch
prior to 1995. The composite total return is time-weighted and weighted by
individual account size and reflects the reinvestment of dividends and interest.
The composite total return of these discretionary accounts should not be viewed
as a prediction of future performance of the Portfolio. The S&P 500 Index is an
unmanaged index that includes 500 U.S. stocks and is a common measure of the
performance of the U.S. stock market.
ANNUAL TOTAL RETURN
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Composite Total Return 39.08%
S&P 500 Index 37.60%
</TABLE>
MASTER-FEEDER STRUCTURE
Unlike other mutual funds that directly acquire and manage their own portfolio
of securities, the Fund seeks to achieve its investment objective by investing
all of its investable assets in the Portfolio, a separate investment company
with the same investment objective as the Fund. The Portfolio is one of three
series of UBS Investor Portfolios Trust (the 'Trust'). See 'Organization'. The
investment objective of the Fund and the Portfolio may be changed only with the
approval of the holders of the outstanding shares of the Fund or the investors
in the Portfolio, respectively.
This master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.
In addition to selling an interest in the Portfolio to the Fund, the Portfolio
may sell interests in the Portfolio to other mutual funds or institutional
investors. Such investors will invest in the Portfolio on the same terms and
conditions as the Fund and will pay a proportionate share of the Portfolio's
expenses. However, other entities investing in the Portfolio may sell shares of
their own fund using a different pricing structure than the Fund's. Such
different pricing structures may result in differences in returns experienced by
investors in other funds that invest in the Portfolio. Such differences in
returns are not uncommon and are present in other mutual fund structures.
Information concerning other holders of interests in the Portfolio is available
from the Adviser at (800) [ ].
The Fund may withdraw its investment in the Portfolio at any time if the Board
determines that it is in the Fund's best interests to do so. Upon any such
withdrawal, the Board would consider what action might be taken, including the
investment of all the Fund's assets in another pooled investment entity having
the same investment objective and restrictions as the Fund or the retaining of
an investment adviser to manage the Fund's assets in accordance with the
investment policies described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in the
Portfolio's investment objective or restrictions, may require the Fund to
withdraw its investments in the Portfolio. Any such withdrawal could result in
an in-kind distribution of portfolio securities (as opposed to a cash
distribution) by the Portfolio to the Fund. In this event, the portfolio
securities distributed to the Fund might or might not be readily marketable.
Such a distribution may result in the Fund's having a less diversified portfolio
of investments or adversely affect the Fund's liquidity, and the Fund could
incur brokerage, tax or other charges in converting such
-4-
<PAGE>
<PAGE>
securities to cash. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby lowering returns. Additionally,
because the Portfolio would become smaller, it may become less diversified,
resulting in potentially increased portfolio risk (however, these possibilities
also exist for traditionally structured funds that have large or institutional
investors who may withdraw from a fund). Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of its
operations. Except as permitted by the Securities and Exchange Commission (the
'SEC'), whenever the Fund is requested to vote on matters pertaining to the
Portfolio, the Company will hold a meeting of Fund shareholders and will cast
all of its votes proportionately as instructed by the Fund's shareholders. See
'Organization' in the Statement of Additional Information ('SAI'). Fund
shareholders who do not vote will not affect the Fund's votes at the Portfolio
meeting. The percentage of the Company's votes representing Fund shareholders
not voting will be voted by the Company in the same proportion as the Fund
shareholders who do, in fact, vote.
For more information about the Portfolio's investment objective, policies and
restrictions, see 'Investment Objective and Policies', 'Additional Investment
Information and Risk Factors' and 'Investment Restrictions'. For more
information about the Portfolio's management and expenses, see 'Management'. For
more information about changing the investment objective, policies and
restrictions of the Fund or the Portfolio, see 'Investment Restrictions'.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below,
together with the policies they employ in their efforts to achieve this
objective. Additional information about the investment policies of the Fund and
the Portfolio appears in the SAI under 'Investment Objectives and Policies'. The
Fund attempts to achieve its investment objective by investing all of its
investable assets in UBS U.S. Equity Portfolio, a series of an open-end
management investment company; such series has the same investment objective as
the Fund. There can be no assurance that the investment objective of the Fund or
the Portfolio will be achieved.
The Portfolio's objective is to provide long-term capital appreciation and the
potential for a high level of current income with lower investment risk and
volatility than is normally available from common stock funds. The average
income yield of the Portfolio's common stocks is expected to be higher than that
of the S&P 500 Index. It is also the objective of the Portfolio that the
Portfolio's investments have less price volatility than the S&P 500 Index.
Under normal circumstances, the Portfolio will invest at least 80% of its assets
in income-producing equity securities of domestic issuers, including
dividend-paying common stocks and securities which are convertible into common
stocks. The Portfolio intends to invest in securities that generate relatively
high levels of dividend income and have the potential for capital appreciation.
These generally include common stocks of established, high-quality U.S.
corporations. In addition, the Portfolio will seek to diversify its investment
over a carefully selected list of securities in order to moderate the risks
inherent in equity investments.
The Portfolio will invest in an equity security following a fundamental analysis
of the issuing company. An important part of this analysis will be the
examination of the company's ability to maintain its dividend. The Adviser
believes that dividend income has proved to be an important component of total
return. For example, during the ten-year period ended September 1994, reinvested
dividend income accounted for approximately 26% of the total return of the S&P
500 Index. Also, the Adviser believes that dividend income tends to be a more
stable source of total return than capital appreciation. While the price of a
company's common stock can be significantly affected by market fluctuations and
other short-term factors, its dividend level usually has greater stability. For
this reason, securities that pay a high level of dividend income tend to be less
volatile in price than comparable securities that pay a lower level of dividend
income.
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Although the Portfolio intends to invest primarily in equity securities, it may
invest up to 20% of its assets in certain cash investments and certain
short-term fixed income securities. See 'Investment Objectives and
Policies -- Quality and Diversification Requirements' in the SAI. Such
securities may be used to invest uncommitted cash balances, to maintain
liquidity to meet shareholder redemptions or to take a temporarily defensive
position against potential stock market declines. These securities include:
obligations of the United States Government and its agencies or
instrumentalities; commercial paper, bank certificates of deposit and bankers'
acceptances; and repurchase agreements collateralized by these securities. The
Portfolio may purchase nonpublicly offered debt securities. See 'Illiquid
Investments; Privately Placed and Other Unregistered Securities.'
The Portfolio may also utilize equity futures contracts and options to a limited
extent. Specifically, the Portfolio may enter into futures contracts and options
provided that such positions are established for hedging purposes only. See
'Futures Contracts'.
The Portfolio intends to manage its securities actively in pursuit of its
investment objective. Although it generally seeks to invest for the long-term,
the Portfolio retains the right to sell securities irrespective of how long they
have been held. It is anticipated that the annual portfolio turnover of the
Portfolio will not exceed 100%. To the extent the Portfolio engages in
short-term trading, it may incur increased transaction costs.
EQUITY INVESTMENTS. Under normal circumstances, the Adviser intends to invest at
least 80% of the Portfolio's assets in the equity securities of domestic
issuers. These investments will consist of common stocks and other securities
with equity characteristics such as preferred stock, warrants, rights and
convertible securities. The Portfolio's primary equity investments are the
common stocks of established domestic companies. The common stock in which the
Portfolio may invest includes the common stock of any class or series or any
similar equity interest such as trust or limited partnership interests. See
'Additional Investment Information and Risk Factors'. The Portfolio invests in
domestic securities listed on domestic securities exchanges and securities
traded in domestic over-the-counter markets, and may invest in certain
restricted or unlisted securities. See 'Additional Investment Information and
Risk Factors'.
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stocks that may be converted
into common stock or that carry the right to purchase common stock. Convertible
securities entitle the holder to exchange the securities for a specified number
of shares of common stock, usually of the same company, at specified prices
within a certain period of time.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and no interest or income accrues to the
Portfolio until settlement. At the time of settlement, a when-issued security
may be valued at less than its purchase price. Between the trade and settlement
dates, the Portfolio will maintain a segregated account with the Custodian
consisting of a portfolio of high grade, liquid debt securities with a value at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be
disadvantaged. It is the current policy of the Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets less liabilities (excluding the obligations created
by these commitments).
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Trust's Board of Trustees (the 'Trustees'). In a repurchase
agreement, the Portfolio buys a security from a seller that has agreed to
repurchase it at a mutually agreed upon date and price, reflecting the interest
rate effective for the term of the agreement. The term of these agreements is
usually from overnight to one week. A repurchase
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agreement may be viewed as a fully collateralized loan of money by the Portfolio
to the seller. The Portfolio always receives securities as collateral with a
market value at least equal to the purchase price plus accrued interest and this
value is maintained during the term of the agreement. If the seller defaults and
the collateral's value declines, the Portfolio might incur a loss. If bankruptcy
proceedings are commenced with respect to the seller, the Portfolio's
realization upon the disposition of collateral may be delayed or limited.
Investments in repurchase agreements maturing in more than seven days and
certain other investments that may be considered illiquid are limited. See
'Illiquid Investments; Privately Placed and Other Unregistered Securities'
below.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. It may
also be viewed as the borrowing of money by the Portfolio and, therefore, is a
form of leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, including limitations on the use of reverse
repurchase agreements, see 'Investment Objectives and Policies' in the SAI.
SECURITIES LENDING. Subject to applicable investment restrictions, the Portfolio
may lend its securities. The Portfolio may lend its securities if such loans are
secured continuously by cash or equivalent collateral or by a letter of credit
in favor of the Portfolio at least equal at all times to 100% of the market
value of the securities loaned, plus accrued interest. While such securities are
on loan, the borrower will pay the Portfolio any income accruing thereon. Loans
will be subject to termination by the Portfolio in the normal settlement time,
generally three business days after notice, or by the borrower on one day's
notice. Borrowed securities must be returned when the loan is terminated. Any
gain or loss in the market price of the borrowed securities that occurs during
the term of the loan inures to the Portfolio and its respective investors. The
Portfolio may pay reasonable finders' and custodial fees in connection with a
loan. In addition, the Portfolio will consider all the facts and circumstances,
including the creditworthiness of the borrowing financial institution, and the
Portfolio will not make any loans in excess of one year. The Portfolio will not
lend its securities to any officer, Trustee, Director, employee or affiliate or
placement agent of the Company, the Portfolio, or the Adviser, Administrator or
Distributor, unless otherwise permitted by applicable law.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's net assets would be in illiquid
investments or are not readily marketable. In addition, the Portfolio will not
invest more than 10% of the market value of its total assets in restricted
securities that cannot be offered for public sale in the United States without
first being registered under the Securities Act of 1933 (the 'Securities Act').
Subject to those non-fundamental policy limitations, the Portfolio may acquire
investments that are illiquid or have limited liquidity, such as private
placements or investments that are not registered under the Securities Act, and
cannot be offered for public sale in the United States without first being
registered. An illiquid investment is any investment that cannot be disposed of
within seven days in the normal course of business at approximately the amount
at which it is valued by the Portfolio. Repurchase agreements maturing in more
than seven days are considered illiquid investments and, as such, are subject to
the limitations set forth in this paragraph. The price the Portfolio pays for
illiquid securities or receives upon resale may be lower than the price paid or
received for similar securities with a more liquid market. Accordingly, the
valuation of these securities will reflect any limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the Securities Act. These securities may be
determined to be liquid in accordance with guidelines established by the Adviser
and approved by the Trustees. The Trustees will monitor the Adviser's
implementation of these guidelines on a periodic basis.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objective and long-term investment perspective.
The Portfolio may make money market investments pending other investments or
settlements, for liquidity or in adverse market conditions. Such money market
investments
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may include obligations of the U.S. Government and its agencies and
instrumentalities, commercial paper, bank obligations and repurchase agreements.
For more detailed information about these money market investments, see
'Investment Objectives and Policies' in the SAI.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described below. These instruments are commonly
known as derivatives.
The Portfolio may purchase and sell exchange traded and over-the-counter ('OTC')
put and call options on equity securities or indices of equity securities, enter
into forward contracts, purchase and sell futures contracts on indices of equity
securities and purchase or sell put and call options on futures contracts on
indices of equity securities. The Portfolio may use these techniques for hedging
or risk management purposes or, subject to certain limitations, for the purpose
of obtaining desired exposure to certain securities or markets.
The Portfolio may use these techniques to manage its exposure to changing
interest rates and/or security prices. Some options and futures strategies,
including selling futures contracts and buying puts, tend to hedge the
Portfolio's investments against price fluctuations. Other strategies, including
buying futures contracts, writing puts and calls, and buying calls, may tend to
increase market exposure. For example, if the Portfolio wishes to obtain
exposure to a particular market or market sector but does not wish to purchase
the relevant securities, it could, as an alternative, purchase a futures
contract on an index of such securities or related securities. Such a purchase
would not constitute a hedging transaction and could be considered speculative.
However, the Portfolio will use futures contracts or options in this manner only
for the purpose of obtaining the same level of exposure to a particular market
or market sector that it could have obtained by purchasing the relevant
securities and will not use futures contracts or options to leverage its
exposure beyond this level. Options and futures contracts may be combined with
each other or with forward contracts in order to adjust the risk and return
characteristics of the Portfolio's overall strategy in a manner deemed
appropriate to the Adviser and consistent with the Portfolio's objective and
policies. Because combined positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.
The Portfolio's use of these transactions is a highly specialized activity,
which involves investment strategies and risks different from those associated
with ordinary portfolio securities transactions, and there can be no guarantee
that their use will increase the Portfolio's return. While the Portfolio's use
of these instruments may reduce certain risks associated with owning its
portfolio securities, these techniques themselves entail certain other risks. If
the Adviser applies a strategy at an inappropriate time or judges market
conditions or trends incorrectly, such strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's opportunity to realize gains as
well as limiting its exposure to losses. The Portfolio could experience losses
if the prices of its options and futures positions were poorly correlated with
its other investments, or if it could not close out its positions because of an
illiquid secondary market. In addition, the Portfolio will incur costs,
including commissions and premiums, in connection with these transactions and
these transactions could significantly increase the Portfolio's turnover rate.
The Portfolio may purchase and sell put and call options on securities, indices
of securities and futures contracts, or purchase and sell futures contracts for
the purposes described herein.
In addition, in order to assure that the Portfolio will not be considered a
'commodity pool' for purposes of Commodity Futures Trading Commission ('CFTC')
rules, the Portfolio will enter into transactions in futures contracts or
options on futures contracts only if (1) such transactions constitute bona fide
hedging transactions as defined under CFTC rules, or (2) no more than 5% of the
Portfolio's net assets are committed as initial margin or premiums to positions
that do not constitute bona fide hedging transactions.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio pays the
current market price for the option (known as the option premium). Options have
various types of underlying instruments, including specific securities, indices
of securities, indices of
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securities prices and futures contracts. The Portfolio may terminate its
position in a put option it has purchased by allowing it to expire or by
exercising the option. The Portfolio may also close out a put option position by
entering into an offsetting transaction, if a liquid market exists. If the
option is allowed to expire, the Portfolio will lose the entire premium it paid.
If the Portfolio exercises a put option on a security, it will sell the
instrument underlying the option at the strike price. If the Portfolio exercises
an option on an index, settlement is in cash and does not involve the actual
sale of securities. American style options may be exercised on any day up to
their expiration date. European style options may be exercised only on their
expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase, rather
than sell, the instrument underlying the option at the option's strike price. A
call buyer typically attempts to participate in potential price increases of the
instrument underlying the option with risk limited to the cost of the option and
related transaction costs if security prices fall. At the same time, the buyer
can expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
SELLING (WRITING) PUT AND CALL OPTIONS. When the Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the instrument underlying the option if the other party to
the option chooses to exercise it. The Portfolio may seek to terminate its
position in a put option it writes before exercise by purchasing an offsetting
option in the market at its current price. If the market is not liquid for a put
option the Portfolio has written, however, the Portfolio must continue to be
prepared to pay the strike price while the option is outstanding, regardless of
price changes, and must continue to post margin as discussed below.
If the price of the underlying instrument rises, a put writer would generally
expect to profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is likely
that the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, however, the put writer would
expect to suffer a loss. This loss should be less than the loss from purchasing
and holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline.
Writing a call option obligates the Portfolio to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium a call writer offsets part of the effect of a price decrease. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
The writer of a U.S. exchange traded put or call option on a security, an index
of securities or a futures contract is required to deposit cash or securities or
a letter of credit as margin and to make mark-to-market payments of variation
margin if and as the position becomes unprofitable.
OPTIONS ON INDICES. The Portfolio is permitted to enter into options
transactions and may purchase and sell put and call options on any securities
index based on securities in which the Portfolio may invest. Options on
securities indices are similar to options on securities, except that the
exercise of securities index options is settled by cash payment and does not
involve the actual purchase or sale of securities. In addition, these options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security.
The Portfolio, in purchasing or selling index options, is subject to the risk
that the value of its portfolio securities may not change as much as an index
because the Portfolio's investments generally will not match the composition of
an index.
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For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and the Portfolio may incur additional
losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a
specified quantity of an underlying instrument at a specified future date and
price or to make or receive a cash payment based on the value of a securities
index. When the Portfolio sells a futures contract, it agrees to sell a
specified quantity of the underlying instrument at a specified future date and
price or to receive or make a cash payment based on the value of a securities
index. The price at which the purchase and sale will take place is fixed when
the Portfolio enters into the contract. Futures can be held until their delivery
dates or the positions can be (and normally are) closed out before then. There
is no assurance, however, that a liquid market will exist when a Portfolio
wishes to close out a particular position.
When the Portfolio purchases or sells a futures contract, the value of the
futures contract tends to increase and decrease in tandem with the value of its
underlying instrument. Purchasing futures contracts may tend to increase the
Portfolio's exposure to positive and negative price fluctuations in the
underlying instrument, much as if it had purchased the underlying instrument
directly, as discussed above. When the Portfolio sells a futures contract, by
contrast, the value of its futures position will tend to move in a direction
contrary to the value of the underlying instrument. Selling futures contracts on
securities similar to those held by the Portfolio, therefore, will tend to
offset both positive and negative market price changes, much as if the
underlying instrument had been sold. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that these
standardized instruments will not exactly match the Portfolio's current or
anticipated investments. The Portfolio may invest in futures contracts and
options thereon based on securities with different issuers, maturities, or other
characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the Portfolio's other investments. The Portfolio may also enter
into transactions in futures contracts and options for non-hedging purposes, as
discussed above.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit 'initial margin' with the Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
('FCM'). Initial margin deposits are typically equal to a small percentage of
the contract's value. If the value of either party's position declines, that
party will be required to make additional 'variation margin' payments equal to
the change in value on a daily basis. The party that has a gain may be entitled
to receive all or a portion of this amount. The Portfolio may be obligated to
make payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a futures position, the Portfolio will be
obligated to continue to pay variation margin. Initial and variation margin
payments do not constitute purchasing on margin for purposes of the Portfolio's
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
The Portfolio will segregate liquid, high-grade debt securities in connection
with its use of options and futures contracts to the extent required by the SEC.
Securities held in a segregated account cannot be sold while the futures
contract or option is outstanding, unless they are replaced with other suitable
assets. As a result, there is a possibility that the segregation of a large
percentage of the Portfolio's assets could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see 'Investment Objectives and
Policies' in the SAI.
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INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the SAI, except as noted, are
deemed fundamental policies, i.e., they may be changed only by the 'vote of a
majority of the outstanding voting securities' (as defined in the Investment
Company Act of 1940 (the '1940 Act')), of the Fund and the Portfolio,
respectively. The Fund has the same investment restrictions as the Portfolio,
except that the Fund may invest all of its investable assets in another open-end
investment company with the same investment objective and restrictions (such as
the Portfolio), and the Fund may retain an investment adviser to manage the
Fund's assets in accordance with the investment policies and restrictions set
forth below. References below to the Fund's investment restrictions also include
the Portfolio's investment restrictions.
As a diversified investment company, 75% of the Fund's total assets are subject
to the following fundamental limitations: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except U.S.
Government securities; and (b) the Fund may not own more than 10% of the
outstanding voting securities of any one issuer.
The Fund may not: (i) purchase the securities or other obligations of issuers
conducting their principal business activity in the same industry if its
investments in such industry would exceed 25% of the value of the Fund's total
assets, except this limitation shall not apply to investments in U.S. Government
securities; (ii) enter into reverse repurchase agreements or other permitted
borrowings that constitute senior securities under the 1940 Act, exceeding in
the aggregate one-third of the value of the Fund's assets; or (iii) borrow
money, except from banks for extraordinary or emergency purposes, or mortgage,
pledge or hypothecate any assets except in connection with any such borrowings
or permitted reverse repurchase agreements in amounts up to one-third of the
value of the Fund's assets at the time of such borrowing or purchase securities
while borrowings and other senior securities exceed 5% of its total assets. For
a more detailed discussion of the above investment restrictions, as well as a
description of certain other investment restrictions, see 'Investment
Restrictions' and 'Additional Information' in the SAI.
MANAGEMENT
DIRECTORS AND TRUSTEES. Pursuant to the Declaration of Trust, the Trustees
establish the Portfolio's general policies, are responsible for the overall
management of the Trust and review the actions of the Adviser, Administrator and
other service providers. Similarly, the Directors set the Company's general
policies, are responsible for the overall management of the Company and review
the performance of its service providers. Additional information about the
Company's Board of Directors and officers appears in the SAI under the heading
'Directors and Trustees'. The Trustees are also Directors of the Company, which
raises certain conflicts of interest. The Company and the Trust have adopted
written procedures reasonably appropriate to deal with these conflicts should
they arise. The officers of the Company are also employees of Signature or its
affiliates.
ADVISER AND FUNDS SERVICES AGENT. The Fund has not retained the services of an
investment adviser because the Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio. The Portfolio has
retained the services of the Branch as investment adviser. The Branch, which
operates out of offices located at 299 Park Avenue, New York, New York, is
licensed by the Superintendent of Banks of the State of New York under the
banking laws of the State of New York and is subject to state and federal
banking laws and regulations applicable to a foreign bank that operates a state
licensed branch in the United States.
The Bank has branches, agencies, representative offices and subsidiaries in
Switzerland and in more than 40 cities outside Switzerland, including, in the
United States, New York City, Chicago, Houston, Los Angeles and San Francisco.
In addition to the receipt of deposits and the making of loans and advances, the
Bank, through its offices and subsidiaries engages in a wide range of banking
and financial activities typical of the world's major international banks,
including fiduciary, investment advisory and custodial services and foreign
exchange in the United States, Swiss, Asian and Euro-capital markets. The Bank
is one of the world's leading asset managers and has been active in New York
City since 1946. At June 30,
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1995, the Bank (including its consolidated subsidiaries) had total assets of
$307.4 billion (unaudited) and equity capital and reserves of $19.7 billion
(unaudited).
The Adviser provides investment advice and portfolio management to the
Portfolio. Subject to the supervision of the Trustees, the Adviser makes the
Portfolio's day-to-day investment decisions, arranges for the execution of
portfolio transactions and generally manages the Portfolio's investments and
operations. See 'Investment Adviser and Funds Services Agent' in the SAI.
The Adviser uses a sophisticated, disciplined, collaborative process for
managing all asset classes. Nancy Tengler will be primarily responsible for the
day-to-day management and implementation of the Adviser's process for the
Portfolio. Ms. Tengler is also the Managing Director -- Senior Portfolio Manager
of UBS Asset Management (New York) Inc.'s Value Equities Group. She has held
this position since December 1994. Previously, Ms. Tengler was the President and
Senior Portfolio Manager for Spare Tengler Kaplan & Bischel from August 1989
through June 1994. Ms. Tengler is currently managing several portfolios and
researching investment opportunities in several industries, including the
pharmaceutical and electric utilities industries. Ms. Tengler co-authored a book
entitled Relative Dividend Yield -- Common Stock Investing for Income and
Appreciation, and has twelve years of investment experience. Ms. Tengler has
previously managed the investments of a mutual fund. Ms. Tengler received a B.A.
degree from Point Loma College. The Branch has not previously advised a mutual
fund. This may be viewed as a risk of investing in this Fund.
In addition to the above-listed investment advisory services, the Adviser also
provides the Fund and the Portfolio with certain related administrative
services. Subject to the supervision of the Board and Trustees, respectively,
the Adviser is responsible for: establishing performance standards for the
third-party service providers of the Fund and Portfolio and overseeing and
evaluating the performance of such entities; providing and presenting quarterly
management reports to the Directors and the Trustees; supervising the
preparation of reports for Fund and Portfolio shareholders; and establishing
voluntary expense limitations for the Fund and providing any resultant expense
reimbursement to the Fund.
The Branch provides its administrative services to the Fund pursuant to a Funds
Services Agreement between the Branch and the Company. The Branch does not
receive a fee from the Company or the Fund pursuant to the terms of the Funds
Services Agreement.
Under the Trust's Investment Advisory Agreement, the Portfolio pays the Adviser
a fee, calculated daily and payable monthly, at an annual rate of 0.60% of the
Portfolio's average net assets. The Branch has voluntarily agreed to waive its
fees and reimburse the Fund for any of its direct and indirect expenses to the
extent that the Fund's total operating expenses exceed, on an annual basis,
0.90% of the Fund's average daily net assets. The Branch may modify or
discontinue this fee waiver and expense limitation at any time in the future
with 30 days' notice to the Fund. See 'Expenses'.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS WITH OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, THE BRANCH OR ANY OTHER BANK.
ADMINISTRATORS. Under Administrative Services Agreements with the Company and
the Trust, Signature and Signature-Cayman serve as the Administrators of the
Fund and the Portfolio, respectively (in such capacities, the 'Administrators').
In these capacities, Signature and Signature-Cayman administer all aspects of
the Fund's and the Portfolio's day-to-day operations, subject to the supervision
of the Adviser and the Board and Trustees, respectively, except as set forth
under 'Adviser and Funds Services Agent', 'Distributor', 'Custodian' and
'Shareholder Services'. The Administrators (i) furnish general office facilities
and ordinary clerical and related services for day-to-day operations including
recordkeeping responsibilities; (ii) take responsibility for compliance with all
applicable federal and state securities and other regulatory requirements; and
(iii) perform administrative and managerial oversight of the activities of the
custodian, transfer agent and other agents or independent contractors of the
Fund and the Portfolio. Signature is also responsible for monitoring the Fund's
status as a regulated investment company under the Internal Revenue Code of
1986, as amended (the 'Code').
Under the Company's Administrative Services Agreement, the Fund has agreed to
pay Signature a fee, calculated daily and payable monthly, at an annual rate of
0.05% of the Fund's first $100 million of
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average net assets plus 0.025% of the next $100 million of average net assets.
Signature does not receive a fee from the Fund on average net assets in excess
of $200 million.
Under the Trust's Administrative Services Agreement, the Portfolio has agreed to
pay Signature-Cayman a fee, calculated daily and payable monthly, at an annual
rate of 0.05% of the Portfolio's average net assets.
DISTRIBUTOR. Under the Distribution Agreement, Signature, located at 6 St. James
Avenue, Boston, MA 02116, serves as the distributor of Fund shares (in such
capacity, the 'Distributor'). The Distributor is a wholly-owned direct
subsidiary of Signature Financial Group, Inc. and is a registered broker-dealer.
The Distributor does not receive a fee pursuant to the terms of the Distribution
Agreement.
CUSTODIAN. Investors Bank & Trust Company, whose principal offices are located
at 89 South Street, Boston, Massachusetts 02111, serves as the custodian and
transfer and dividend disbursing agent for the Portfolio and the Fund. See
'Custodian' in the SAI. The Custodian also maintains offices at 1 First Canadian
Place, Suite 2800, Toronto, Ontario M5X1C8.
SHAREHOLDER SERVICES
The Company has entered into a Shareholder Servicing Agreement with the Branch
under which the Branch provides shareholder services to Fund shareholders, which
include coordinating shareholder accounts and records, assisting investors
seeking to purchase or redeem Fund shares, providing performance information
relating to the Fund, and responding to shareholder inquiries. The Company has
agreed to pay the Branch for these services at an annual rate of 0.25% of the
average daily net assets of the Fund. Under the terms of the Shareholder
Servicing Agreement, the Branch may delegate one or more of its responsibilities
to other entities at its expense.
EXPENSES
In addition to the fees of the Branch, Signature, Signature-Cayman, and
Investors Bank & Trust Company, the Fund will be responsible for, or will
indirectly bear through its interest in the Portfolio, other expenses including
brokerage costs and litigation and extraordinary expenses. The Adviser has
agreed to waive fees as necessary, if, in any fiscal year, the sum of the Fund's
expenses exceeds the limits set by applicable regulations of state securities
commissions. Such annual limits are currently 2.5% of the first $30 million of
average net assets, 2% of the next $70 million of such net assets and 1.5% of
such net assets in excess of $100 million. The Adviser has also voluntarily
agreed to limit the total operating expenses of the Fund, excluding
extraordinary expenses, to an annual rate of 0.90% of the Fund's average daily
net assets. The Adviser may modify or discontinue this voluntary expense
limitation at any time in the future with 30 days' notice to the Fund.
The Fund and the Portfolio may allocate brokerage transactions to their
affiliates and the Adviser's affiliates. Brokerage transactions may be allocated
to these affiliates only if the commissions received by such affiliates are fair
and reasonable when compared to the commissions paid to unaffiliated brokers in
connection with comparable transactions. See 'Portfolio Transactions' in the
SAI.
PURCHASE OF SHARES
GENERAL INFORMATION ON PURCHASES. Investors may purchase Fund shares only
through the Distributor. All purchase orders must be accepted by the
Distributor. The Company also reserves the right to determine the purchase
orders that it will accept and it reserves the right to cease offering its
shares at any time. The shares of the Fund may be purchased only in those states
where they may be lawfully sold.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange (the 'NYSE') is open for regular trading.
The shares of the Fund are sold on a continuous basis without a sales charge at
the net asset value per share next determined after receipt and acceptance of a
purchase order by the Distributor. The Fund calculates its net asset value at
the close of business. See 'Net Asset Value'. The minimum initial investment in
the Fund is $25,000, except that the minimum initial investment is $10,000 for
shareholders of another series of the Company. The minimum subsequent investment
in the Fund for all
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investors is $5,000. The minimum initial investment for employees of the Bank or
its affiliates is $5,000. The minimum subsequent investment is $1,000. These
minimum investment requirements may be waived for certain retirement plans or
accounts for the benefit of minors. For purposes of the minimum investment
requirements, the Fund may aggregate investments by related shareholders.
Investors will receive the number of full and fractional shares of the Fund
equal to the dollar amount of their subscription divided by the net asset value
per share of the Fund as next determined on the day that the investor's
subscription is accepted. See 'Purchase of Shares' in the SAI.
Purchase orders in proper form received by the Distributor prior to 4:00 p.m.
New York time or the close of regular trading on the NYSE, whichever is earlier,
are effective and executed at the net asset value next determined that day.
Purchase orders received after 4:00 p.m. New York time or the close of the NYSE,
whichever is earlier, will be executed at the net asset value determined on the
next business day. Investors become record shareholders of the Fund on the day
they place their subscription order, provided it is received by the Distributor
before 4:00 p.m. As record shareholders, investors are entitled to earn
dividends.
Fund shares may be purchased in the following methods:
BRANCH CLIENTS: Private Bank Clients of the Branch should request a Branch
representative to assist them in placing a purchase order with the Distributor.
THROUGH THE DISTRIBUTOR: Shareholders who do not currently maintain a private
banking relationship with the Branch may purchase shares of the Fund directly
from the Distributor by wire transfer or mail.
The Transfer Agent will maintain the accounts for all shareholders who purchase
Fund shares directly through the Distributor. For account balance information
and shareholder services, such shareholders should contact the Transfer Agent at
(800) [ ] or in writing at UBS Private Investor Funds, Inc., c/o
Investors Bank & Trust Company, P.O. Box 1537 MFD 23, Boston, MA 02205-1537.
By wire: Purchases may be made by federal funds wire. To place a purchase order
with the Fund, the shareholder must telephone the Transfer Agent at (800)
[ ] for specific instructions.
Subject to the minimum purchase requirements discussed above, shares purchased
by federal funds wire will be effected at the net asset value per share next
determined after acceptance of the order.
A completed account application must promptly follow any wire order for an
initial purchase. No account application is required for subsequent purchases.
Completed account applications should be mailed or sent via facsimile.
Shareholders should contact the Transfer Agent for further instructions
regarding account applications.
By mail: Subject to the minimum purchase requirements discussed above,
shareholders may purchase shares of the Fund through the Distributor by
completing an account application and mailing it, together with a check payable
to 'UBS Private Investor Funds, Inc.', to UBS Private Investor Funds, Inc., c/o
Investors Bank & Trust Company, P.O. Box 1537 MFD 23, Boston, MA 02205-1537.
Account applications are not required for subsequent purchases; however, the
shareholder's account number must be clearly marked on the check to ensure
proper credit. Subsequent purchases may also be made by mailing a check together
with the detachable purchase order that accompanies transaction confirmations.
Checks are subject to collection at full value. For shares purchased by check,
dividend payments and redemption proceeds, if any, will be delayed until such
funds are collected, which may take up to 15 days from the date of purchase.
REDEMPTION OF SHARES
GENERAL INFORMATION ON REDEMPTIONS. A shareholder may redeem all or any number
of the shares registered in its name at any time at the net asset value next
determined after a redemption request in proper form is received by the
Distributor. The Fund calculates its net asset value at the close of business.
See 'Net Asset Value'.
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A redemption order will be effected provided the Distributor receives such an
order prior to 4:00 p.m. New York time or the close of regular trading on the
NYSE, whichever is earlier. The redemption of Fund shares is effective and is
executed at the net asset value next determined that day. Redemption orders
received after 4:00 p.m. New York time or the close of regular trading on the
NYSE, whichever is earlier, will be executed at the net asset value determined
on the next business day. Proceeds of an effective redemption are generally
deposited the next business day in immediately available funds to the account
designated by the redeeming shareholder or mailed to the shareholder's address
of record, in accordance with the shareholder's instructions.
Shareholders will not be record holders for dividend purposes on the day that
they redeem Fund shares.
Fund shares may be redeemed in the following methods:
BRANCH CLIENTS: Shareholders who are Private Bank Clients of the Branch should
request a Branch representative to assist them in placing a redemption order.
THROUGH THE DISTRIBUTOR: Shareholders who are not Branch clients may redeem Fund
shares by telephone or mail.
By telephone: Telephone redemptions may be made by calling the Transfer Agent at
(800) [ ]. Redemption orders will be accepted until 4:00 p.m. New York
time or the close of regular trading on the NYSE, whichever is earlier.
Telephone redemption requests are limited to those shareholders who have
previously elected this service. Such shareholders risk possible loss of
principal and income in the event of a telephone redemption not authorized by
them. The Fund and the Transfer Agent will employ reasonable procedures to
verify that telephone redemption instructions are genuine and will require that
shareholders electing such an option provide a form of personal identification.
The failure by the Fund or the Transfer Agent to employ such procedures may
cause the Fund or the Transfer Agent to be liable for any losses incurred by
investors due to telephone redemptions based upon unauthorized or fraudulent
instructions. The telephone redemption option may be modified or discontinued at
any time upon 60 days' notice to shareholders.
By mail: Redemption requests may also be mailed to the Transfer Agent,
identifying the Fund, the dollar amount or number of shares to be redeemed and
the shareholder's account number. The request must be signed in exactly the same
manner as the account is registered (e.g., if there is more than one owner of
the shares, all must sign). In all cases, all signatures on a redemption request
must be signature guaranteed by an eligible guarantor institution which includes
a domestic bank, a domestic savings and loan institution, a domestic credit
union, a member bank of the Federal Reserve System or a member firm of a
national securities exchange, pursuant to the Fund's standards and procedures;
if the guarantor institution belongs to one of the Medallion Signature programs,
it must use the specific 'Medallion Guaranteed' stamp (guarantees by notaries
public are not acceptable). Further documentation, such as copies of corporate
resolutions and instruments of authority, may be requested from corporations,
administrators, executors, personal representatives, trustees or custodians to
evidence the authority of the person or entity making the redemption request.
The redemption request in proper form should be sent to UBS Private Investor
Funds, Inc., c/o Investors Bank & Trust Company, P.O. Box 1537 MFD 23, Boston,
MA 02205-1537.
MANDATORY REDEMPTION. If the value of a shareholder's holdings in the Fund falls
below $10,000 because of a redemption of shares, the shareholder's remaining
shares may be redeemed 60 days after written notice unless the account is
increased to $10,000 or more. For example, a shareholder whose initial and only
investment is $10,000 may be subject to mandatory redemption resulting from any
redemption that causes his or her investment to fall below $10,000.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions may
not be processed unless the redemption request is submitted in proper form. To
be in proper form, the Fund must have received the shareholder's taxpayer
identification number and address. As discussed under 'Taxes' below, the Fund
may be required to impose 'back-up' withholding of federal income tax on
dividends, distributions and redemptions when non-corporate investors have not
provided a certified taxpayer identification number. In addition, if an investor
sends a check to the Distributor for the purchase of Fund shares and shares are
purchased with funds made available by the Distributor before the check has
cleared, the transmittal of redemption proceeds from the sale of those shares
will not occur until the
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check used to purchase such shares has cleared, which may take up to 15 days.
Redemption delays may be avoided by purchasing shares by federal funds wire.
The right of redemption may be suspended or the date of payment postponed for
such periods as the 1940 Act or the SEC may permit. See 'Redemption of Shares'
in the SAI.
EXCHANGE OF SHARES
An investor may exchange Fund shares for shares of any other series of the
Company, without charge. An exchange may be made so long as after the exchange
the investor has shares, in each series in which it remains an investor, with a
value equal to or greater than each such series' minimum investment amount. See
'Purchase of Shares' in the prospectuses of the other Company series for the
minimum investment amounts for each of those funds. Shares are exchanged on the
basis of relative net asset value per share. Exchanges are in effect redemptions
from one fund and purchases of another fund and the usual purchase and
redemption procedures and requirements are applicable to exchanges. See
'Purchase of Shares' and 'Redemption of Shares' in this Prospectus and in the
prospectuses for the other Company series. See also 'Additional Information'
below for an explanation of the telephone exchange policy.
Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income tax
purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state
securities laws may restrict the availability of the exchange privilege.
RETIREMENT PLANS
The Fund has available a form of Individual Retirement Account ('IRA') for
investment in Fund shares. Subject to certain restrictions imposed by applicable
tax laws, self-employed individuals may purchase shares of the Fund through
tax-deductible contributions to existing retirement plans known as Self-Employed
Retirement Plans ('SERPs'). Fund shares may also be a suitable investment for
'401(k) Plans' which subject to certain restrictions allow their participants to
invest in qualified pension plans on a tax-deferred basis. The Fund does not
currently act as sponsor to such plans.
The minimum initial investment for all such retirement plans is $2,000. The
minimum for all subsequent investments is $500.
Under the Code, individuals may make IRA contributions of up to $2,000 annually,
which may be, depending on the contributor's participation in an
employer-sponsored plan and income level, wholly or partly tax-deductible.
However, dividends and distributions held in the account are not taxed until
withdrawn in accordance with the provisions of the Code. An individual with a
non-working spouse may establish a separate IRA for the spouse under the same
conditions and contribute a combined maximum of $2,250 annually to one or both
IRAs provided that no more than $2,000 may be contributed to the IRA of either
spouse.
Investors should be aware that they may be subject to penalties or additional
taxes on contributions to or withdrawals from IRAs or other retirement plans
under certain circumstances. Prior to a withdrawal, shareholders may be required
to certify as to their age and awareness of such restrictions in writing. Branch
clients desiring information concerning investments through IRAs or other
retirement plans should contact their Branch representative. Non-Bank clients
may obtain such information by calling the Transfer Agent at (800) [ ].
DIVIDENDS AND DISTRIBUTIONS
Dividends consisting of substantially all of the Fund's net investment income,
if any, are declared and paid annually. The Fund may also declare an additional
dividend of net investment income in a given year to the extent necessary to
avoid the imposition of federal excise taxes on the Fund.
Substantially all of the Fund's realized net capital gains, if any, will be
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent
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necessary to avoid the imposition of federal excise taxes on the Fund. Declared
dividends and distributions are payable on the payment date to shareholders of
record on the record date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional Fund shares unless the shareholder has elected, in
writing, to have them paid in cash. Dividends and distributions to be paid in
cash are credited to the account designated by the shareholder or sent by check
to the shareholder's address of record, in accordance with the shareholder's
instructions. The Fund reserves the right to discontinue, alter or limit the
automatic reinvestment privilege at any time.
NET ASSET VALUE
The Fund's net asset value per share equals the value of the Fund's total assets
(i.e., the value of its investment in the Portfolio plus its other assets) less
the amount of its liabilities, divided by the number of its outstanding shares,
rounded to the nearest cent. Expenses, including the fees payable to the service
providers of the Fund and the Portfolio, are accrued daily. Securities for which
market quotations are readily available are valued at market value. All other
securities will be valued at 'fair value'. See 'Net Asset Value' in the SAI for
information on the valuation of the Portfolio's assets and liabilities.
The Fund computes its net asset value once daily at the close of business on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the following legal holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. On days when U.S. trading markets close early in observance of
these holidays, the Fund expects to close for purchases and redemptions at the
same time.
ORGANIZATION
UBS PRIVATE INVESTOR FUNDS, INC.
UBS Private Investor Funds, Inc., a Maryland corporation incorporated on
November 16, 1995, is an open-end management investment company registered under
the 1940 Act and organized as a series fund. The Company has no prior history.
The Company is currently authorized to issue shares in four series: The UBS Bond
Fund Series; The UBS Tax Exempt Bond Fund Series; The UBS International Equity
Fund Series; and The UBS U.S. Equity Fund Series. Each outstanding share of the
Company will have a pro rata interest in the assets of its series, but it will
have no interest in the assets of any other Company series. Only shares of The
UBS U.S. Equity Fund Series are offered through this Prospectus.
Shareholder inquiries by clients of the Branch may be directed to the Branch and
other shareholders may address their inquiries to the Transfer Agent.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and nonassessable when issued by the Company. The Company does not intend to
hold meetings of shareholders annually. The Directors may call meetings of
shareholders for action by shareholder vote as may be required by its Articles
of Incorporation or the 1940 Act. For further organizational information,
including certain shareholder rights, see 'Organization' in the SAI.
UBS INVESTOR PORTFOLIOS TRUST
UBS Investor Portfolios Trust, a master trust fund formed under New York law,
was organized on February 9, 1996. The Declaration of Trust permits the Trustees
to issue interests divided into one or more subtrusts or series. To date, three
series have been authorized, of which UBS U.S. Equity Portfolio is one.
The Declaration of Trust provides that no Trustee, shareholder, officer,
employee, or agent of the Trust shall be held to any personal liability, nor
shall resort be had to such person's private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Portfolio, but that only the Trust property shall be liable.
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The Declaration of Trust provides that the Fund and other entities investing in
the Portfolio (e.g., other investment companies, insurance company separate
accounts and common and commingled trust funds) will each be liable for all the
obligations of the Portfolio. However, the risk of the Fund's incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations. Accordingly, the Trustees believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investment in
the Portfolio.
The Company expects that, immediately prior to the initial public offering of
its shares, the sole holder of its capital stock will be Signature.
TAXES
The Company intends that the Fund will qualify as a separate regulated
investment company under Subchapter M of the Code. As a regulated investment
company, the Fund will not be subject to federal income taxes if at least 90% of
its net investment income and net short-term capital gains less any available
capital loss carryforwards are distributed to shareholders within allowable time
limits. The Portfolio intends to qualify as an association treated as a
partnership for federal income tax purposes. As such, the Portfolio generally
should not be subject to tax. The status of the Fund as a regulated investment
company is dependent on, among other things, the Portfolio's continued
qualification as a partnership for federal income tax purposes.
Dividends from net investment income and distributions from realized net
short-term capital gains in excess of net long-term capital losses are taxable
as ordinary income to Fund shareholders whether such distributions are received
in the form of cash or reinvested in additional shares. To the extent that
dividends distributed to shareholders are designated as derived from the Fund's
dividend income that would be eligible for the dividends received deduction if
the Fund were not a regulated investment company, such dividends are eligible,
subject to certain restrictions, for the 70% dividends received deduction for
corporations. Under proposals made by the Treasury Department on December 7,
1995, the dividends received deduction applicable to corporations investing in
the Fund would be reduced from 70% to 50% for dividends paid or accrued after
January 31, 1996. Distributions of net long-term capital gains in excess of net
short-term capital losses are taxable to Fund shareholders as long-term capital
gains regardless of how long a shareholder has held shares in the Fund and
regardless of whether received in the form of cash or reinvested in additional
shares. Long-term capital gains distributions to corporate shareholders are not
eligible for the dividends-received deduction. Annual statements as to the
current federal tax status of distributions will be mailed to shareholders after
the end of the taxable year for the Fund.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities generally will be treated as
long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption or exchange of shares in the Fund
held for six months or less will be treated as a long-term capital loss to the
extent of any long-term capital gain distributions received by the shareholder
with respect to such shares. In addition, no loss will be allowed on the sale or
other disposition of shares of the Fund if, within a period beginning 30 days
before the date of such sale or disposition and ending 30 days after such date,
the holder acquires (such as through dividend reinvestment) securities that are
substantially identical to the shares of the Fund.
The Fund will generally be subject to an excise tax of 4% on the amount of any
income or capital gains, above certain permitted levels, distributed to
shareholders on a basis such that such income or gain is not taxable to
shareholders in the calendar year in which it was earned by the Fund.
Furthermore, dividends declared in October, November, or December payable to
shareholders of record on a specified date in such a month and paid in the
following January will be treated as having been paid by the Fund and received
by each shareholder in December. Under this rule, therefore, shareholders may be
taxed in one year on dividends or distributions actually received in January of
the following year.
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Distributions of net investment income or net long-term capital gains will have
the effect of reducing the net asset value of the Fund's shares by the amount of
the distribution. If the net asset value is reduced below a shareholder's cost,
the distribution will nonetheless be taxable as described above, even if the
distribution represents a return of invested capital. Investors should consider
the tax implications of buying shares just prior to a distribution, when the
price of shares may reflect the amount of the forthcoming distribution.
This discussion of tax consequences is based on U.S. federal tax laws in effect
on the date of this Prospectus. These laws and regulations are subject to change
by legislative or administrative action, possibly with retroactive effect.
Investors are urged to consult their own tax advisors with respect to specific
questions as to federal taxes and with respect to the applicability of state or
local taxes. See 'Taxes' in the SAI.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
Shareholders should be aware that, under applicable regulations, the Fund may be
fined up to $50 annually for each account for which a certified taxpayer
identification number is not provided. In the event that such a fine is imposed
with respect to any uncertified account in any year, a corresponding charge may
be made against that account.
ADDITIONAL INFORMATION
The Fund will send its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports will be audited by independent
accountants. Shareholders also will be sent confirmations of each purchase and
redemption and monthly statements reflecting all account activity, including
dividends and any distributions whether reinvested in additional shares or paid
in cash.
All shareholders are given the privilege to initiate transactions automatically
by telephone upon opening an account. However, an investor should be aware that
a transaction authorized by telephone and reasonably believed to be genuine by
the Company, the Branch, the Transfer Agent or the Distributor may subject the
investor to risk of loss if such instruction is subsequently found not to be
genuine. The Company and its service providers will employ reasonable
procedures, including requiring investors to give a form of personal
identification and tape recording of telephonic instructions, to confirm that
telephonic instructions by investors are genuine; if it does not, it or the
service provider may be liable for any losses due to unauthorized or fraudulent
instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indices, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, S&P 500 Index, the Dow Jones Average, the Frank Russell Indices, the
Financial Times World Stock Index and other industry publications.
The Fund may advertise 'total return'. The total return shows what an investment
in the Fund would have earned over a specified period of time (one, five or ten
years or since commencement of operations, if less) assuming that all Fund
distributions and dividends were reinvested on the reinvestment dates and less
all recurring fees during the period and assuming the redemption of such
investment at the end of each period. This method of calculating total return is
required by regulations of the SEC. Total return data similarly calculated,
unless otherwise indicated, over other specified periods of time may also be
used. All performance figures are based on historical earnings and are not
intended to indicate future performance. Performance information may be obtained
by clients of the Branch by calling the Branch, and other shareholders may
address their inquiries to the Transfer Agent.
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________________________________________________________________________________
INVESTMENT ADVISER OF THE PORTFOLIO
Union Bank of Switzerland,
New York Branch
299 Park Avenue
New York, New York 10171
(212) 821-3000
ADMINISTRATOR AND DISTRIBUTOR
Signature Broker-Dealer Services, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Investors for Whom the Fund is Designed...................................................................... 2
Master-Feeder Structure...................................................................................... 4
Investment Objective and Policies............................................................................ 5
Additional Investment Information and Risk Factors........................................................... 6
Options...................................................................................................... 8
Futures Contracts............................................................................................ 10
Investment Restrictions...................................................................................... 11
Management................................................................................................... 11
Shareholder Services......................................................................................... 13
Expenses..................................................................................................... 13
Purchase of Shares........................................................................................... 13
Redemption of Shares......................................................................................... 14
Exchange of Shares........................................................................................... 16
Retirement Plans............................................................................................. 16
Dividends and Distributions.................................................................................. 16
Net Asset Value.............................................................................................. 17
Organization................................................................................................. 17
Taxes........................................................................................................ 18
Additional Information....................................................................................... 19
</TABLE>
UBS PRIVATE
INVESTOR FUNDS,
INC.
UBS U.S. EQUITY FUND
---------------------
PROSPECTUS
---------------------
[ ], 1996
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER OF THE FUND SHARES MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, BY THE FUND IN ANY JURISDICTION IN WHICH SUCH
OFFER TO SELL OR SOLICITATION MAY NOT LAWFULLY BE MADE.
________________________________________________________________________________
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
UBS INTERNATIONAL EQUITY FUND
6 ST. JAMES AVENUE
BOSTON, MASSACHUSETTS 02116
FOR INFORMATION CALL (800) [ ]
UBS International Equity Fund (the 'Fund') seeks to provide a high total return
from a portfolio of equity securities of foreign corporations. It is designed
for investors with a long-term investment horizon who want to diversify their
investments by adding international equities and take advantage of investment
opportunities outside the United States.
The Fund is a diversified, no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is one of several series of UBS
Private Investor Funds, Inc. (the 'Company'), an open-end management investment
company organized as a corporation under Maryland law.
UNLIKE OTHER MUTUAL FUNDS THAT DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN UBS INTERNATIONAL EQUITY PORTFOLIO (THE
'PORTFOLIO'), A CORRESPONDING OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE
SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND EMPLOYS A TWO-TIER MASTER-FEEDER
STRUCTURE THAT IS MORE FULLY DESCRIBED UNDER THE SECTION CAPTIONED
'MASTER-FEEDER STRUCTURE'.
The Portfolio is advised by the New York Branch (the 'Branch' or the 'Adviser')
of Union Bank of Switzerland (the 'Bank') and UBS International Investment
London Limited (the 'Sub-Adviser' and, together with the Adviser, the
'Advisers').
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
[ ], 1996, provides further discussion of certain topics referred to
in this Prospectus and other matters that may be of interest to investors. The
Statement of Additional Information has been filed with the Securities and
Exchange Commission and is incorporated herein by reference and is available
without charge upon written request from the Company or the Distributor (as
defined herein) at the addresses set forth on the back cover of the Prospectus,
or by calling (800) [ ].
INVESTMENTS IN THE FUND ARE NOT DEPOSITS WITH OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, UNION BANK OF SWITZERLAND OR ANY OTHER BANK. SHARES OF THE FUND
ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND IS
SUBJECT TO RISKS THAT MAY CAUSE THE VALUE OF THE INVESTMENT TO FLUCTUATE. WHEN
THE INVESTMENT IS REDEEMED, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT
ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS DATED [ ], 1996.
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UBS INTERNATIONAL EQUITY FUND
INVESTORS FOR WHOM THE FUND IS DESIGNED
UBS International Equity Fund (the 'Fund') is designed for investors who want to
participate in the risks and returns associated with equity securities issued by
foreign corporations. The Fund seeks to achieve its investment objective by
investing all of its investable assets in UBS International Equity Portfolio
(the 'Portfolio'), an open-end management investment company having the same
investment objective as the Fund. Because the investment characteristics and
experience of the Fund will correspond directly with those of the Portfolio, the
discussion in this Prospectus focuses on the investments and investment policies
of the Portfolio. The net asset value of shares of the Fund fluctuates with
changes in the value of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments for the Portfolio are common stocks and other
securities with equity characteristics issued by foreign companies. The
Portfolio may also invest in futures contracts, options, forward contracts on
foreign currencies and certain privately placed securities. The Portfolio's
investments in securities of foreign issuers, including issuers in emerging
markets, involve unique investment risks and may be more volatile and less
liquid than the securities of domestic issuers. For further information about
these investments and related investment techniques, see 'Investment Objective
and Policies' discussed below.
The minimum initial investment in the Fund is $25,000, except that the minimum
initial investment is $10,000 for shareholders of another series of UBS Private
Investor Funds, Inc. (the 'Company'). The minimum subsequent investment for all
investors is $5,000. These minimums may be waived for certain accounts. See
'Purchase of Shares'. If shareholders reduce their total investment in shares of
the Fund to less than $10,000, their investment will be subject to mandatory
redemption. See 'Redemption of Shares -- Mandatory Redemption'. The Fund is one
of several series of the Company, an open-end management investment company
organized as a Maryland corporation.
This Prospectus describes the investment objective and policies, management and
operations of the Fund to enable investors to decide if the Fund suits their
investment needs. The Fund operates through a two-tier master-feeder structure.
The Company's Board of Directors (the 'Directors' or the 'Board') believes that
this structure provides Fund shareholders with the opportunity to achieve
certain economies of scale that would otherwise be unavailable if the
shareholders' investments were not pooled with other investors sharing similar
investment objectives.
The following table illustrates that investors in the Fund incur no shareholder
transaction expenses: their investments in the Fund are subject only to the
operating expenses set forth below for the Fund and the Portfolio, as a
percentage of average daily net assets of the Fund. These operating expenses
include expenses incurred by the Fund and expenses incurred by the Portfolio
that are allocable to the Fund. The Directors believe that the aggregate per
share expenses of the Fund and the Portfolio will be approximately equal to and
may be less than the expenses that the Fund would incur if it retained the
services of an investment adviser and invested its assets directly in portfolio
securities. Fund and Portfolio expenses are discussed below under the headings
'Management', 'Expenses' and 'Shareholder Services'.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases..................................................................... None
Sales Load Imposed on Reinvested Dividends.......................................................... None
Deferred Sales Load................................................................................. None
Redemption Fees..................................................................................... None
Exchange Fees....................................................................................... None
</TABLE>
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<TABLE>
<S> <C>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
Advisory Fees, After Fee Waiver**................................................................... 0.00%
Rule 12b-1 Fees..................................................................................... None
Other Expenses, After Expense Reimbursements***..................................................... 1.40%
----
Total Operating Expenses, After Fee Waivers
and Expense Reimbursements*....................................................................... 1.40%
----
----
</TABLE>
* Expenses are expressed as a percentage of the Fund's projected average daily
net assets and are based on estimates of the expenses to be incurred during the
current fiscal year, after any applicable fee waivers and expense
reimbursements. Without such fee waivers and expense reimbursements, Total
Operating Expenses would be equal, on an annual basis, to 9.20% of the Fund's
projected average daily net assets. See 'Management'.
** The New York Branch (the 'Branch' or the 'Adviser') of Union Bank of
Switzerland (the 'Bank') has agreed to waive fees and reimburse the Fund for any
of its operating expenses (including those the Fund incurs indirectly through
the Portfolio) to the extent that the Fund's total operating expenses exceed, on
an annual basis, 1.40% of the Fund's average daily net assets. The Branch may
modify or discontinue this undertaking at any time in the future with 30 days'
notice to the Fund. The advisory fee would be 0.85% if there were no fee waiver.
See 'Management -- Adviser and Funds Services Agent' and 'Expenses'.
*** The fees and expenses in Other Expenses, After Expense Reimbursements
include fees payable to Signature Broker-Dealer Services, Inc. ('Signature')
under an Administrative Services Agreement with the Fund, fees payable to
Signature Financial Group (Grand Cayman) Limited ('Signature-Cayman') under an
Administrative Services Agreement with the Portfolio, fees payable to Investors
Bank & Trust Company (the 'Custodian' or the 'Transfer Agent') as custodian of
the Fund and the Portfolio, and fees payable to the Branch under the Shareholder
Servicing Agreement. For a more detailed description of contractual fee
arrangements, including fee waivers and expense reimbursements, and of the fees
and expenses included in Other Expenses, see 'Management' and 'Shareholder
Services'.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming a
5% annual return and a redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year...................................................... $14
3 Years..................................................... $44
</TABLE>
The above Expense Table is designed to assist investors in understanding the
various direct and indirect costs and expenses that Fund investors are expected
to bear and reflects the expenses of the Fund and the Fund's share of the
Portfolio's expenses. In connection with the above Example, please note that
$1,000 is less than the Fund's minimum investment requirement and that there are
no redemption or exchange fees of any kind. See 'Purchase of Shares', 'Exchange
of Shares' and 'Redemption of Shares'. THE EXAMPLE IS HYPOTHETICAL; IT IS
INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES, AND ASSUMES THE CONTINUATION OF THE
FEE WAIVERS AND EXPENSE REIMBURSEMENTS REPRESENTED IN THE ABOVE 'EXPENSE TABLE'.
IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL
EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
HISTORICAL PERFORMANCE OF COMPARABLE DISCRETIONARY ACCOUNTS. The following table
sets forth the composite average annual total returns for the one, three and
five year periods ended December 31, 1995 and the period from January 1, 1988
(commencement of operations of the relevant accounts) through December 31, 1995
for all discretionary accounts described below that have been managed for at
least one full quarter by UBS International Investment London Limited (the
'Sub-Adviser'), and the average annual total return during the same periods for
the Morgan Stanley Capital International EAFE Index. Such accounts have
substantially the same investment objective and policies and are managed in a
manner substantially the same as the Portfolio. The composite total returns for
such accounts have been adjusted
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to deduct all of the Fund's estimated annual total operating expenses of 1.40%
of projected average daily net assets as set forth in the Fee Table above. The
composite total returns are time-weighted and are equally weighted for periods
prior to 1994, after which they are size-weighted, and they reflect the
reinvestment of dividends and interest. The Sub-Adviser believes that the
restatement of total returns prior to 1994 would not result in any material
changes in the total returns shown. The composite total returns of these
discretionary accounts should not be viewed as a prediction of future
performance of the Portfolio. The Morgan Stanley Capital International EAFE
Index is an unmanaged index that measures stock performance in Europe, Australia
and the Far East.
<TABLE>
<CAPTION>
MORGAN STANLEY
AVERAGE ANNUAL TOTAL RETURNS FOR COMPOSITE CAPITAL INTERNATIONAL
PERIODS ENDED DECEMBER 31, 1995 TOTAL RETURN EAFE INDEX
- --------------------------------------------------------------- ------------ ---------------------
<S> <C> <C>
One Year....................................................... 8.85% 11.21%
Three Year..................................................... 16.72 16.69
Five Year...................................................... 10.18 9.36
January 1, 1988 (commencement date)
through December 31, 1995.................................... 10.53 6.84
</TABLE>
MASTER-FEEDER STRUCTURE
Unlike other mutual funds that directly acquire and manage their own portfolio
of securities, the Fund seeks to achieve its investment objective by investing
all of its investable assets in the Portfolio, a separate investment company
with the same investment objective as the Fund. The Portfolio is one of three
series of UBS Investor Portfolios Trust (the 'Trust'). See 'Organization'. The
investment objective of the Fund and the Portfolio may be changed only with the
approval of the holders of the outstanding shares of the Fund or the investors
in the Portfolio, respectively.
This master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.
In addition to selling an interest in the Portfolio to the Fund, the Portfolio
may sell interests in the Portfolio to other mutual funds or institutional
investors. Such investors will invest in the Portfolio on the same terms and
conditions as the Fund and will pay a proportionate share of the Portfolio's
expenses. However, other entities investing in the Portfolio may sell shares of
their own fund using a different pricing structure than the Fund's. Such
different pricing structures may result in differences in returns experienced by
investors in other funds that invest in the Portfolio. Such differences in
returns are not uncommon and are present in other mutual fund structures.
Information concerning other holders of interests in the Portfolio is available
from the Adviser at (800) [ ].
The Fund may withdraw its investment in the Portfolio at any time if the Board
determines that it is in the Fund's best interests to do so. Upon any such
withdrawal, the Board would consider what action might be taken, including the
investment of all the Fund's assets in another pooled investment entity having
the same investment objective and restrictions as the Fund or the retaining of
an investment adviser to manage the Fund's assets in accordance with the
investment policies described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in the
Portfolio's investment objective or restrictions, may require the Fund to
withdraw its investments in the Portfolio. Any such withdrawal could result in
an in-kind distribution of portfolio securities (as opposed to a cash
distribution) by the Portfolio to the Fund. In this event, the portfolio
securities distributed to the Fund might or might not be readily marketable.
Such a distribution may result in the Fund's having a less diversified portfolio
of investments or adversely affect the Fund's liquidity, and the Fund could
incur brokerage, tax or other charges in converting such securities to cash.
Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds
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may subsequently experience higher pro rata operating expenses, thereby lowering
returns. Additionally, because the Portfolio would become smaller, it may become
less diversified, resulting in potentially increased portfolio risk (however,
these possibilities also exist for traditionally structured funds that have
large or institutional investors who may withdraw from a fund). Also, funds with
a greater pro rata ownership in the Portfolio could have effective voting
control of its operations. Except as permitted by the Securities and Exchange
Commission (the 'SEC'), whenever the Fund is requested to vote on matters
pertaining to the Portfolio, the Company will hold a meeting of Fund
shareholders and will cast Fund votes proportionately as instructed by the
Fund's shareholders. See 'Organization' in the Statement of Additional
Information ('SAI'). Fund shareholders who do not vote will not affect the
Fund's votes at the Portfolio meeting. The percentage of the Company's votes
representing Fund shareholders not voting will be voted by the Company in the
same proportion as the Fund shareholders who do, in fact, vote.
For more information about the Portfolio's investment objective, policies and
restrictions, see 'Investment Objective and Policies', 'Additional Investment
Information and Risk Factors' and 'Investment Restrictions'. For more
information about the Portfolio's management and expenses, see 'Management'. For
more information about changing the investment objective, policies and
restrictions of the Fund or the Portfolio, see 'Investment Restrictions'.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below,
together with the policies they employ in their efforts to achieve this
objective. Additional information about the investment policies of the Fund and
the Portfolio appears in the SAI under Investment Objectives and Policies. There
can be no assurance that the investment objective of the Fund or the Portfolio
will be achieved.
The Portfolio's investment objective is to provide a high total return from a
portfolio of equity securities of foreign corporations. Total return will
consist of realized and unrealized capital gains and losses plus net income. The
Fund attempts to achieve its investment objective by investing all of its
investable assets in UBS International Equity Portfolio, a series of an open-end
management investment company; such series has the same investment objective as
the Fund. The Fund is designed for investors with a long-term investment horizon
who want to diversify their investments by adding international equities and
take advantage of investment opportunities outside the United States.
The Portfolio seeks to achieve its investment objective by investing in
companies that the Sub-Adviser believes are fundamentally sound and that are
typically selling at below market valuations and that the Sub-Adviser believes
will grow at above-market rates. The emphasis on value leads to investments in
companies with relatively low price/earnings and price/book value ratios and
high yields.
The Adviser is responsible for supervising the management of the Portfolio's
investments. Consistent with these duties, the Adviser has entered into a
Sub-Advisory Agreement with UBS International Investment London Limited ('UBSII'
or the 'Sub-Adviser' and, together with the Adviser, the 'Advisers'), whereby
the Sub-Adviser is primarily responsible for the day-to-day investment decisions
for the Portfolio. The Adviser is solely responsible for paying the Sub-Adviser
for these services. The Sub-Adviser is an affiliate of the Adviser.
The Advisers actively manage currency exposure, in conjunction with country and
stock allocations, in an attempt to protect the Portfolio's market value.
Through the use of forward foreign currency exchange contracts, futures
contracts and options on currencies, the Advisers will adjust the Portfolio's
foreign currency weightings to reduce its exposure to currencies deemed
unattractive as market conditions warrant, based on fundamental research,
technical factors and the judgment of the Advisers' experienced currency
managers. For more information on foreign currency exchange transactions, see
'Additional Investment Information and Risk Factors'.
The Portfolio intends to manage its securities actively in pursuit of its
investment objective. The Portfolio does not expect to trade in securities for
short-term profits; however, when circumstances warrant, securities may be sold
without regard to the length of time held. It is anticipated that the annual
portfolio turnover rate of the Fund will be less than 100%. To the extent the
Portfolio engages in short-term trading, it may incur increased transaction
costs.
-5-
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<PAGE>
EQUITY INVESTMENTS. Under normal circumstances, the Advisers intend to keep at
least 65% of the value of the Portfolio's total assets in equity securities of
foreign issuers, consisting of common stocks and other securities with equity
characteristics such as preferred stock, warrants, rights and convertible
securities. The Portfolio's primary equity investments are the common stock of
established companies based in developed countries outside the United States.
The Portfolio will invest in companies based in at least five foreign countries.
Initially, the Adviser expects to invest in issues located in the United
Kingdom, France, Japan, Germany and Switzerland. The common stock in which the
Portfolio may invest includes the common stock of any class or series or any
similar equity interest such as trust or limited partnership interests. The
Portfolio may also invest in securities of issuers located in developing
countries. See 'Additional Investment Information and Risk Factors -- Risk
Factors of Foreign Securities'. The Portfolio will invest in securities listed
on foreign or domestic securities exchanges and securities traded in foreign or
domestic over-the-counter markets, and may invest in certain restricted or
unlisted securities.
The Portfolio may also invest in money market instruments denominated in U.S.
dollars and other currencies, securities on a when-issued or delayed delivery
basis, enter into repurchase and reverse repurchase agreements, loan its
portfolio securities, purchase certain privately placed securities, enter into
forward contracts on foreign currencies, purchase options on currencies and
enter into certain hedging transactions that may involve options on securities
and securities indices, futures contracts and options on futures contracts. For
a discussion of these investments and investment techniques, see 'Additional
Investment Information and Risk Factors'.
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
Investments in non-U.S. issuers involve certain risks and considerations not
typically associated with investments in U.S. issuers. These risks include
greater price volatility, reduced liquidity and the significantly smaller market
capitalization of most non-U.S. securities markets, more substantial government
involvement in the economy, higher rates of inflation, greater social, economic
and political uncertainty and the risk of nationalization or expropriation of
assets and risk of war.
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stocks that may be converted
into common stock or that carry the right to purchase common stock. Convertible
securities entitle the holder to exchange the securities for a specified number
of shares of common stock, usually of the same company, at specified prices
within a certain period of time.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and no interest or income accrues to the
Portfolio until settlement. At the time of settlement, a when-issued security
may be valued at less than its purchase price. Between the trade and settlement
dates, the Portfolio will maintain a segregated account with the Custodian
consisting of a portfolio of high-grade, liquid debt securities with a value at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio will rely on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be
disadvantaged. It is the current policy of the Portfolio not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets less liabilities (excluding the obligations created
by these commitments).
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Trust's Board of Trustees (the 'Trustees'). In a repurchase
agreement, the Portfolio buys a security from a seller that has agreed to
repurchase it at a mutually agreed upon date and price, reflecting the interest
rate effective for the term of the agreement. The term of these agreements is
usually from overnight to one week. A repurchase agreement may be viewed as a
fully collateralized loan of money by the Portfolio to the seller. The Portfolio
always receives securities as collateral with a market value at least equal to
the purchase price plus accrued interest and this value is maintained during the
term of the agreement. If the seller defaults and the collateral's value
declines, the Portfolio might incur a loss. If bankruptcy proceedings are
-6-
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<PAGE>
commenced with respect to the seller, the Portfolio's realization upon the
disposition of collateral may be delayed or limited. Investments in repurchase
agreements maturing in more than seven days and certain other investments that
may be considered illiquid are limited. See 'Illiquid Investments; Privately
Placed and Other Unregistered Securities' below.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase it at a mutually agreed upon date and price,
reflecting the interest rate effective for the term of the agreement. It may
also be viewed as the borrowing of money by the Portfolio and, therefore, is a
form of leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, including limitations on the use of reverse
repurchase agreements, see 'Investment Objectives and Policies' in the SAI and
'Investment Restrictions' below.
SECURITIES LENDING. Subject to applicable investment restrictions, the Portfolio
may lend its securities. The Portfolio may lend its securities if such loans are
secured continuously by cash or equivalent collateral or by a letter of credit
in favor of the Portfolio at least equal at all times to 100% of the market
value of the securities loaned, plus accrued interest. While such securities are
on loan, the borrower will pay the Portfolio any income accruing thereon. Loans
will be subject to termination by the Portfolio in the normal settlement time,
generally three business days after notice, or by the borrower on one day's
notice. Borrowed securities must be returned when the loan is terminated. Any
gain or loss in the market price of the borrowed securities that occurs during
the term of the loan inures to the Portfolio and its respective investors. The
Portfolio may pay reasonable finders' and custodial fees in connection with a
loan. In addition, the Portfolio will consider all the facts and circumstances,
including the creditworthiness of the borrowing financial institution, and the
Portfolio will not make any loans in excess of one year. The Portfolio will not
lend its securities to any officer, Trustee, Director, employee or affiliate or
placement agent of the Portfolio, or the Adviser, Sub-Adviser, Administrator or
Distributor, unless otherwise permitted by applicable law.
RISK FACTORS OF FOREIGN SECURITIES. The Portfolio will invest primarily in
foreign securities. Investments in securities of foreign issuers and in
obligations of foreign branches of domestic banks involve somewhat different
investment risks from those affecting securities of domestic issuers. There may
be limited publicly available information with respect to foreign issuers, and
foreign issuers are not generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those applicable to domestic
companies. Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes that may decrease the net return on such
investments.
Investors should realize that the value of the Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the Portfolio's operations. Furthermore, the economies of individual foreign
nations may differ from the U.S. economy, favorably or unfavorably, in areas
such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign
issuer. Any foreign investments made by the Portfolio must be made in compliance
with U.S. and foreign currency restrictions and tax laws restricting the amounts
and types of such investments.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settlement
periods for foreign securities, which are often longer than those for securities
of U.S. issuers, may affect portfolio liquidity. In buying and selling
securities on foreign exchanges, purchasers normally pay fixed commissions that
are generally higher than the negotiated commissions charged in the United
States. In addition, there is generally less
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government supervision and regulation of securities exchanges, brokers and
issuers located in countries other than in the United States.
Although the Portfolio invests primarily in securities of established issuers
based in developed foreign countries, it may also invest in securities of
issuers in developing market countries. Investments in securities of issuers in
developing market countries may involve a high degree of risk and many may be
considered speculative. These investments carry all of the risks of investing in
securities of foreign issuers outlined in this section to a heightened degree.
These heightened risks include: (i) greater risks of expropriation, confiscatory
taxation, nationalization, and less social, political and economic stability;
(ii) the small current size of the markets for securities of emerging market
issuers and the currently low or non-existent volume of trading, resulting in
limited liquidity and in price volatility; (iii) certain national policies that
may restrict the Portfolio's investment opportunities including restrictions on
investing in issuers or industries deemed sensitive to relevant national
interests; and (iv) the absence of developed legal structures governing private
or foreign investment and private property.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depositary Receipts ('ADRs'), European Depositary Receipts
('EDRs') or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying foreign securities. Certain institutions
issuing ADRs may not be sponsored by the issuer of the underlying foreign
securities. A non-sponsored depository may not provide the same shareholder
information that a sponsored depository is required to provide under its
contractual arrangements with the foreign issuer. EDRs are receipts issued by a
European financial institution evidencing a similar arrangement. Generally,
ADRs, in registered form, are designed for use in the U.S. securities markets,
and EDRs, in bearer form, are designed for use in European securities markets.
Because investments in foreign securities involve foreign currencies, the value
of assets as measured in U.S. dollars may be affected, favorably or unfavorably,
by changes in currency exchange rates and in exchange control regulations,
including currency blockage. See 'Foreign Currency Exchange Transactions' below.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio will buy and sell
securities and will receive interest and dividends in currencies other than the
U.S. dollar, the Portfolio may, from time to time, enter into foreign currency
exchange transactions. The Portfolio may enter into these transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, use forward currency contracts to purchase or sell foreign currencies,
use currency futures contracts or purchase or sell options thereon or purchase
or sell currency options.
A forward foreign currency exchange contract is an obligation of the Portfolio
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract. Currency options give the buyer
the right, but not the obligation, to purchase or sell a fixed amount of a
specific currency at a fixed price at a future date. These contracts are entered
into in the interbank market directly between currency traders (usually large
commercial banks) and their customers. A forward foreign currency exchange
contract generally has no deposit requirement, and is traded at a net price
without commission. The Portfolio will not enter into these foreign currency
exchange transactions for speculative purposes. Foreign currency exchange
transactions do not eliminate fluctuations in the local currency prices of the
Portfolio's securities or in foreign exchange rates, or prevent loss if the
local currency prices of these securities should decline.
A currency futures contract is a contract involving an obligation to deliver or
acquire the specified amount of a currency at a specified price at a specified
future time. Futures contracts may be settled on a net cash payment basis rather
than by the sale and delivery of the underlying currency.
The Portfolio may enter into foreign currency exchange transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or
anticipated securities transactions. The Portfolio may use these techniques to
hedge against a change in foreign currency exchange rates (with the U.S. dollar
or other foreign currencies) that
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would cause a decline in the value of existing investments denominated or
principally traded in a foreign currency.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, these transactions also limit any
potential gain that might be realized should the value of the hedged currency
increase. Additionally, the premiums paid by the Portfolio for currency or
futures options increase the Portfolio's transaction costs. Similarly, the cost
of the Portfolio's spot currency exchange transactions is generally the
difference between the bid and offer spot rate of the currency being purchased
or sold. Moreover, forward contracts that convert one foreign currency into
another foreign currency will cause the Portfolio to assume the risk of
fluctuations in the value of the currency purchased vis-a-vis the hedged
currency and the U.S. dollar. The precise matching of these transactions and the
value of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the date
such a transaction is entered into and the date it matures. The projection of
currency market movements is extremely difficult and the successful execution of
a hedging strategy is highly uncertain.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's net assets would be in illiquid
investments or investments that are not readily marketable. In addition, the
Portfolio will not invest more than 10% of the market value of its total assets
in restricted securities that cannot be offered for public sale in the United
States without first being registered under the Securities Act of 1933 (the
'Securities Act'). Subject to those non-fundamental policy limitations, the
Portfolio may acquire investments that are illiquid or have limited liquidity,
such as private placements or investments that are not registered under the
Securities Act, and cannot be offered for public sale in the United States
without first being registered. An illiquid investment is any investment that
cannot be disposed of within seven days in the normal course of business at
approximately the amount at which it is valued by the Portfolio. Repurchase
agreements maturing in more than seven days are considered illiquid investments
and, as such, are subject to the limitations set forth in this paragraph. The
price the Portfolio pays for illiquid securities or receives upon resale may be
lower than the price paid or received for similar securities with a more liquid
market. Accordingly, the valuation of these securities will reflect any
limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the Securities Act. These securities may be
determined to be liquid in accordance with guidelines established by the
Advisers and approved by the Trustees. The Trustees will monitor the Advisers'
implementation of these guidelines on a periodic basis.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objectives and long-term investment
perspective. The Portfolio may make money market investments pending other
investments or settlements, for liquidity or in adverse market conditions. Such
money market investments may include obligations of the U.S. Government and its
agencies and instrumentalities, other debt securities, commercial paper, bank
obligations and repurchase agreements. The Portfolio may purchase nonpublicly
offered debt securities. The Portfolio may also invest in short-term obligations
of sovereign foreign governments, their agencies, instrumentalities and
political subdivisions. For more detailed information about these money market
investments, see 'Investment Objectives and Policies' in the SAI.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described below. These instruments are commonly
known as derivatives.
The Portfolio may purchase and sell exchange traded and over-the-counter ('OTC')
put and call options on equity securities or indices of equity securities, enter
into forward contracts, purchase and sell futures contracts on indices of equity
securities, purchase and sell put and call options on futures contracts on
indices of equity securities and purchase and sell options on currencies. The
Portfolio may use these techniques for hedging or risk management purposes or,
subject to certain limitations, for the purpose of obtaining desired exposure to
certain securities or markets.
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The Portfolio may use these techniques to manage its exposure to changing
interest rates, currency exchange rates and/or security prices. Some options and
futures strategies, including selling futures contracts and buying puts, tend to
hedge the Portfolio's investments against price fluctuations. Other strategies,
including buying futures contracts, writing puts and calls, and buying calls,
may tend to increase market exposure. For example, if the Portfolio wishes to
obtain exposure to a particular market or market sector but does not wish to
purchase the relevant securities, it could, as an alternative, purchase a
futures contract on an index of such securities or related securities. Such a
purchase would not constitute a hedging transaction and could be considered
speculative. However, the Portfolio will use futures contracts or options in
this manner only for the purpose of obtaining the same level of exposure to a
particular market or market sector that it could have obtained by purchasing the
relevant securities and will not use futures contracts or options to leverage
its exposure beyond this level. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and return
characteristics of the Portfolio's overall strategy in a manner deemed
appropriate to the Advisers and consistent with the Portfolio's objective and
policies. Because combined positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.
The Portfolio's use of these transactions is a highly specialized activity,
which involves investment strategies and risks different from those associated
with ordinary portfolio securities transactions, and there can be no guarantee
that their use will increase the Portfolio's return. While the Portfolio's use
of these instruments may reduce certain risks associated with owning its
portfolio securities, these techniques themselves entail certain other risks. If
the Advisers apply a strategy at an inappropriate time or judge market
conditions or trends incorrectly, such strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's opportunity to realize gains as
well as limiting its exposure to losses. The Portfolio could experience losses
if the prices of its options and futures positions were poorly correlated with
its other investments, or if it could not close out its positions because of an
illiquid secondary market. In addition, the Portfolio will incur costs,
including commissions and premiums, in connection with these transactions and
these transactions could significantly increase the Portfolio's turnover rate.
The Portfolio may purchase and sell put and call options on securities,
currencies, indices of securities and futures contracts, or purchase and sell
futures contracts for the purposes described herein.
The Commodity Exchange Act prohibits U.S. persons, such as the Portfolio, from
buying or selling certain foreign futures contracts or options on such
contracts. Accordingly, the Portfolio will not engage in foreign futures or
options transactions unless the contracts in question may lawfully be purchased
and sold by U.S. persons in accordance with applicable Commodity Futures Trading
Commission ('CFTC') regulations or CFTC staff advisories, interpretations and no
action letters.
In addition, in order to assure that the Portfolio will not be considered a
'commodity pool' for purposes of CFTC rules, the Portfolio will enter into
transactions in futures contracts or options on futures contracts only if (1)
such transactions constitute bona fide hedging transactions, as defined under
CFTC rules, or (2) no more than 5% of the Portfolio's net assets are committed
as initial margin or premiums to positions that do not constitute bona fide
hedging transactions.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio pays the
current market price for the option (known as the option premium). Options have
various types of underlying instruments, including specific securities,
currencies, indices of securities, indices of securities prices, and futures
contracts. The Portfolio may terminate its position in a put option it has
purchased by allowing it to expire or by exercising the option. The Portfolio
may also close out a put option position by entering into an offsetting
transaction, if a liquid market exists. If the option is allowed to expire, the
Portfolio will lose the entire premium it paid. If the Portfolio exercises a put
option on a security, it will sell the instrument underlying the option at the
strike price. If the Portfolio exercises an option on an index, settlement is in
cash and does not involve the actual sale of securities. American style options
may be exercised on any day up to their expiration date. European style options
may be exercised only on their expiration date.
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The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase, rather
than sell, the instrument underlying the option at the option's strike price. A
call buyer typically attempts to participate in potential price increases of the
instrument underlying the option with risk limited to the cost of the option and
related transaction costs if security prices fall. At the same time, the buyer
can expect to suffer a loss if security prices do not rise sufficiently to
offset the cost of the option.
SELLING (WRITING) PUT AND CALL OPTIONS. When the Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the instrument underlying the option if the other party to
the option chooses to exercise it. The Portfolio may seek to terminate its
position in a put option it writes before exercise by purchasing an offsetting
option in the market at its current price. If the market is not liquid for a put
option the Portfolio has written, however, the Portfolio must continue to be
prepared to pay the strike price while the option is outstanding, regardless of
price changes, and must continue to post margin as discussed below.
If the price of the underlying instrument rises, a put writer would generally
expect to profit, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is likely
that the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, however, the put writer would
expect to suffer a loss. This loss should be less than the loss from purchasing
and holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline.
Writing a call option obligates the Portfolio to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium a call writer offsets part of the effect of a price decrease. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
The writer of a U.S. exchange traded put or call option on a security, an index
of securities or a futures contract is required to deposit cash or securities or
a letter of credit as margin and to make mark-to-market payments of variation
margin if and as the position becomes unprofitable.
OPTIONS ON INDICES. The Portfolio is permitted to enter into options
transactions and may purchase and sell put and call options on any securities
index based on securities in which the Portfolio may invest. Options on
securities indices are similar to options on securities, except that the
exercise of securities index options is settled by cash payment and does not
involve the actual purchase or sale of securities. In addition, these options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security.
The Portfolio, in purchasing or selling index options, is subject to the risk
that the value of its portfolio securities may not change as much as an index
because the Portfolio's investments generally will not match the composition of
an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and the Portfolio may incur additional
losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a
specified quantity of an underlying instrument at a specified future date and
price or to make or receive a cash payment based on the value of a securities
index. When the Portfolio sells a futures contract, it agrees to sell a
specified
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quantity of the underlying instrument at a specified future date and price or to
receive or make a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place is fixed when the Portfolio
enters into the contract. Futures can be held until their delivery dates or the
positions can be (and normally are) closed out before then. There is no
assurance, however, that a liquid market will exist when a Portfolio wishes to
close out a particular position.
When the Portfolio purchases or sells a futures contract, the value of the
futures contract tends to increase and decrease in tandem with the value of its
underlying instrument. Purchasing futures contracts may tend to increase the
Portfolio's exposure to positive and negative price fluctuations in the
underlying instrument, much as if it had purchased the underlying instrument
directly, as discussed above. When the Portfolio sells a futures contract, by
contrast, the value of its futures position will tend to move in a direction
contrary to the value of the underlying instrument. Selling futures contracts on
securities similar to those held by the Portfolio, therefore, will tend to
offset both positive and negative market price changes, much as if the
underlying instrument had been sold. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that these
standardized instruments will not exactly match the Portfolio's current or
anticipated investments. The Portfolio may invest in futures contracts and
options thereon based on currencies or on securities with different issuers,
maturities, or other characteristics from the securities in which it typically
invests, which involves a risk that the options or futures position will not
track the performance of the Portfolio's other investments. The Portfolio may
also enter into transactions in futures contracts and options for non-hedging
purposes, as discussed above.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit 'initial margin' with the Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
('FCM'). Initial margin deposits are typically equal to a small percentage of
the contract's value. If the value of either party's position declines, that
party will be required to make additional 'variation margin' payments equal to
the change in value on a daily basis. The party that has a gain may be entitled
to receive all or a portion of this amount. The Portfolio may be obligated to
make payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a futures position, the Portfolio will be
obligated to continue to pay variation margin. Initial and variation margin
payments do not constitute purchasing on margin for purposes of the Portfolio's
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
The Portfolio will segregate liquid, high-grade debt securities in connection
with its use of options and futures contracts to the extent required by the SEC.
Securities held in a segregated account cannot be sold while the futures
contract or option is outstanding, unless they are replaced with other suitable
assets. As a result, there is a possibility that the segregation of a large
percentage of the Portfolio's assets could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see 'Investment Objectives and
Policies' in the SAI.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the SAI, except as noted, are
deemed fundamental policies, i.e., they may be changed only by the 'vote of a
majority of the outstanding voting securities' (as defined in the Investment
Company Act of 1940 (the '1940 Act')) of the Fund and the Portfolio,
respectively. The Fund has the same investment restrictions as the Portfolio,
except that the Fund may invest all of its investable assets in another open-end
investment company with the same investment objective and restrictions (such as
the Portfolio), and the Fund may retain an investment adviser to manage the
Fund's
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assets in accordance with the investment policies and restrictions set forth
below. References below to the Fund's investment restrictions also include the
Portfolio's investment restrictions.
As a diversified investment company, 75% of the Fund's total assets are subject
to the following fundamental limitations: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except U.S.
Government securities; and (b) the Fund may not own more than 10% of the
outstanding voting securities of any one issuer.
The Fund may not: (i) purchase the securities or other obligations of issuers
conducting their principal business activity in the same industry if its
investments in such industry would exceed 25% of the value of the Fund's total
assets, except this limitation shall not apply to investments in U.S. Government
securities; (ii) enter into reverse repurchase agreements or other permitted
borrowings that constitute senior securities under the 1940 Act, exceeding in
the aggregate one-third of the value of the Fund's assets; or (iii) borrow
money, except from banks for extraordinary or emergency purposes, or mortgage,
pledge or hypothecate any assets except in connection with any such borrowings
or permitted reverse repurchase agreements in amounts up to one-third of the
value of the Fund's assets at the time of such borrowing or purchase securities
while borrowings and other senior securities exceed 5% of its total assets. For
a more detailed discussion of the above investment restrictions, as well as a
description of certain other investment restrictions, see 'Investment
Restrictions' in the SAI.
MANAGEMENT
DIRECTORS AND TRUSTEES. Pursuant to the Declaration of Trust, the Trustees
establish the Portfolio's general policies, are responsible for the overall
management of the Trust and review the actions of the Adviser, Sub-Adviser,
Administrator and other service providers. Similarly, the Directors set the
Company's general policies, are responsible for the overall management of the
Company and review the performance of its service providers. Additional
information about the Company's Board of Directors and officers appears in the
SAI under the heading 'Directors and Trustees'. The Trustees are also Directors
of the Company, which raises certain conflicts of interest. The Company and the
Trust have adopted written procedures reasonably appropriate to deal with these
conflicts should they arise. The officers of the Company are also employees of
Signature or its affiliates.
ADVISER AND FUNDS SERVICES AGENT. The Fund has not retained the services of an
investment adviser because the Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio. The Portfolio has
retained the services of the Branch as investment adviser and UBSII as
investment sub-adviser. The Branch, which operates out of offices located at 299
Park Avenue, New York, New York, is licensed by the Superintendent of Banks of
the State of New York under the banking laws of the State of New York and is
subject to state and federal banking laws and regulations applicable to a
foreign bank that operates a state licensed branch in the United States. UBSII,
with principal offices at Triton Court, 14 Finsbury Square, London, England,
EC2A 1PD, is a corporation organized under the laws of the United Kingdom.
The Bank has branches, agencies, representative offices and subsidiaries in
Switzerland and in more than 40 cities outside Switzerland, including, in the
United States, New York City, Chicago, Houston, Los Angeles and San Francisco.
In addition to the receipt of deposits and the making of loans and advances, the
Bank through its offices and subsidiaries (including UBSII) engages in a wide
range of banking and financial activities typical of the world's major
international banks, including fiduciary, investment advisory and custodial
services and foreign exchange in the United States, Swiss, Asian and
Euro-capital markets. The Bank is one of the world's leading asset managers and
has been active in New York City since 1946. At June 30, 1995, the Bank
(including its consolidated subsidiaries) had total assets of $307.4 billion
(unaudited) and equity capital and reserves of $19.7 billion (unaudited).
The Advisers provide investment advice and portfolio management to the
Portfolio. Subject to the supervision of the Trustees and the Adviser, the
Sub-Adviser makes the Portfolio's day-to-day investment decisions, arranges for
the execution of portfolio transactions and generally manages the Portfolio's
investments and operations. See 'Investment Adviser and Funds Services Agent' in
the SAI.
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In addition to the above-listed investment advisory services, the Adviser also
provides the Fund and the Portfolio with certain related administrative
services. Subject to the supervision of the Board and Trustees, respectively,
the Adviser is responsible for: establishing performance standards for the
third-party service providers of the Fund and Portfolio and overseeing and
evaluating the performance of such entities; providing and presenting quarterly
management reports to the Directors and the Trustees; supervising the
preparation of reports for Fund and Portfolio shareholders; and establishing
voluntary expense limitations for the Fund and providing any resultant expense
reimbursement to the Fund.
The Branch provides its administrative services to the Fund pursuant to a Funds
Services Agreement between the Branch and the Company. The Branch does not
receive a fee from the Company or the Fund pursuant to the terms of the Funds
Services Agreement.
Under the Trust's Investment Advisory Agreement, the Portfolio pays the Adviser
a fee, calculated daily and payable monthly, at an annual rate of 0.85% of the
Portfolio's average net assets. The Branch has voluntarily agreed to waive its
fees and reimburse the Fund for any of its direct and indirect expenses to the
extent that the Fund's total operating expenses exceed, on an annual basis,
1.40% of the Fund's average daily net assets. The Branch may modify or
discontinue this fee waiver and expense limitation at any time in the future
with 30 days' notice to the Fund. See 'Expenses'.
SUB-ADVISER. The Sub-Adviser uses a sophisticated, disciplined, collaborative
process for managing all asset classes. Robin Apps is primarily responsible for
the day-to-day management and implementation of the Sub-Adviser's process for
the Portfolio. Mr. Apps has been a Senior Vice President of the Sub-Adviser
since 1987, and is responsible for researching investment opportunities in the
Far East and Europe. Mr. Apps has not previously managed the investments of a
mutual fund. Mr. Apps received a bachelors degree from Birmingham University and
has fourteen years of investment experience. Mr. Apps is also qualified as an
actuary. Neither the Branch nor UBSII has previously advised a mutual fund. This
could be viewed as a risk of investing in this Fund.
Pursuant to the Sub-Advisory Agreement between the Adviser and the Sub-Adviser,
the Adviser has agreed to pay the Sub-Adviser a fee, calculated daily and
payable monthly, at an annual rate of 0.75% of the Portfolio's first $20 million
of average net assets, plus 0.50% of the next $30 million of average net assets,
plus 0.40% of the Portfolio's average net assets in excess of $50 million. The
Adviser is solely responsible for paying the Sub-Adviser this fee.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS WITH OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, THE BRANCH OR ANY OTHER BANK.
ADMINISTRATORS. Under Administrative Service Agreements with the Company and the
Trust, Signature and Signature-Cayman serve as the Administrators of the Fund
and the Portfolio, respectively (in such capacities, the 'Administrators'). In
these capacities, Signature and Signature-Cayman administer all aspects of the
Fund's and the Portfolio's day-to-day operations, subject to the supervision of
the Adviser and the Board and Trustees, respectively, except as set forth under
'Adviser and Funds Services Agent', 'Distributor', 'Custodian' and 'Shareholder
Services'. The Administrators: (i) furnish general office facilities and
ordinary clerical and related services for day-to-day operations including
recordkeeping responsibilities; (ii) take responsibility for compliance with all
applicable federal and state securities and other regulatory requirements; and
(iii) perform administrative and managerial oversight of the activities of the
custodian, transfer agent and other agents or independent contractors of the
Fund and the Portfolio. Signature is also responsible for monitoring the Fund's
status as a regulated investment company under the Internal Revenue Code of
1986, as amended (the 'Code').
Under the Company's Administrative Services Agreement, the Fund has agreed to
pay Signature a fee, calculated daily and payable monthly, at an annual rate of
0.05% of the Fund's first $100 million of average net assets plus 0.025% of the
next $100 million of average net assets. Signature does not receive a fee from
the Fund on average net assets in excess of $200 million.
Under the Trust's Administrative Services Agreement, the Portfolio has agreed to
pay Signature-Cayman a fee, calculated daily and payable monthly, at an annual
rate of 0.05% of the Portfolio's average net assets.
DISTRIBUTOR. Under the Distribution Agreement, Signature, located at 6 St. James
Avenue, Boston, MA 02116, serves as the distributor of Fund shares (in such
capacity, the 'Distributor'). The Distributor is a
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wholly-owned direct subsidiary of Signature Financial Group, Inc. and is a
registered broker-dealer. The Distributor does not receive a fee pursuant to the
terms of the Distribution Agreement.
CUSTODIAN. Investors Bank & Trust Company, whose principal offices are located
at 89 South Street, Boston, Massachusetts 02111, serves as the custodian and
transfer and dividend disbursing agent for the Portfolio and the Fund. See
'Custodian' in the SAI. The Custodian also maintains offices at 1 First Canadian
Place, Suite 2800, Toronto, Ontario M5X1C8.
SHAREHOLDER SERVICES
The Company has entered into a Shareholder Servicing Agreement with the Branch
under which the Branch provides shareholder services to Fund shareholders, which
include coordinating shareholder accounts and records, assisting investors
seeking to purchase or redeem Fund shares, providing performance information
relating to the Fund, and responding to shareholder inquiries. The Company has
agreed to pay the Branch for these services at an annual rate of 0.25% of the
average daily net assets of the Fund. Under the terms of the Shareholder
Servicing Agreement, the Branch may delegate one or more of its responsibilities
to other entities at its expense.
EXPENSES
In addition to the fees of the Branch, Signature-Cayman, Signature, and
Investors Bank & Trust Company, the Fund will be responsible for, or will
indirectly bear through its interest in the Portfolio, other expenses including
brokerage costs and litigation and extraordinary expenses. The Adviser has
agreed to waive fees as necessary, if, in any fiscal year, the sum of the Fund's
expenses exceeds the limits set by applicable regulations of state securities
commissions. Such annual limits are currently 2.5% of the first $30 million of
average net assets, 2% of the next $70 million of such net assets and 1.5% of
such net assets in excess of $100 million. The Adviser has also voluntarily
agreed to limit the total operating expenses of the Fund, excluding
extraordinary expenses, to an annual rate of 1.40% of the Fund's average daily
net assets. The Adviser may modify or discontinue this voluntary expense
limitation at any time in the future with 30 days' notice to the Fund.
The Fund and the Portfolio may allocate brokerage transactions to their
affiliates and the Advisers' affiliates. Brokerage transactions may be allocated
to these affiliates only if the commissions received by such affiliates are fair
and reasonable when compared to the commissions paid to unaffiliated brokers in
connection with comparable transactions. See 'Portfolio Transactions' in the
SAI.
PURCHASE OF SHARES
GENERAL INFORMATION ON PURCHASES. Investors may purchase Fund shares only
through the Distributor. All purchase orders must be accepted by the
Distributor. The Company also reserves the right to determine the purchase
orders that it will accept and it reserves the right to cease offering its
shares at any time. The shares of the Fund may be purchased only in those states
where they may be lawfully sold.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange (the 'NYSE') is open for regular trading.
The shares of the Fund are sold on a continuous basis without a sales charge at
the net asset value per share next determined after receipt and acceptance of a
purchase order by the Distributor. The Fund calculates its net asset value at
the close of business. See 'Net Asset Value'. The minimum initial investment in
the Fund is $25,000, except that the minimum initial investment is $10,000 for
shareholders of another series of the Company. The minimum subsequent investment
in the Fund for all investors is $5,000. The minimum initial investment for
employees of the Bank or its affiliates is $5,000. The minimum subsequent is
$1,000. These minimum investment requirements may be waived for certain
retirement plans or accounts for the benefit of minors. For purposes of the
minimum investment requirements, the Fund may aggregate investments by related
shareholders. Investors will receive the number of full and fractional shares of
the Fund equal to the dollar amount of their subscription divided
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by the net asset value per share of the Fund as next determined on the day that
the investor's subscription is accepted. See 'Purchase of Shares' in the SAI.
Purchase orders in proper form received by the Distributor prior to 4:00 p.m.
New York time or the close of regular trading on the NYSE, whichever is earlier,
are effective and executed at the net asset value next determined that day.
Purchase orders received after 4:00 p.m. New York time or the close of the NYSE,
whichever is earlier, will be executed at the net asset value determined on the
next business day. Investors become record shareholders of the Fund on the day
they place their subscription order, provided it is received by the Distributor
before 4:00 p.m. As record shareholders, investors are entitled to earn
dividends.
Fund shares may be purchased in the following methods:
BRANCH CLIENTS: Private Bank Clients of the Branch should request a Branch
representative to assist them in placing a purchase order with the Distributor.
THROUGH THE DISTRIBUTOR: Shareholders who do not currently maintain a private
banking relationship with the Branch may purchase shares of the Fund directly
from the Distributor by wire transfer or mail.
The Transfer Agent will maintain the accounts for all shareholders who purchase
Fund shares directly through the Distributor. For account balance information
and shareholder services, such shareholders should contact the Transfer Agent at
(800) [ ] or in writing at UBS Private Investor Funds, Inc., c/o
Investors Bank and Trust Company, P.O. Box 1537 MFD 23, Boston, MA 02205-1537.
By wire: Purchases may be made by federal funds wire. To place a purchase order
with the Fund, the shareholder must telephone the Transfer Agent at (800)
[ ] for specific instructions.
Subject to the minimum purchase requirements discussed above, shares purchased
by federal funds wire will be effected at the net asset value per share next
determined after acceptance of the order.
A completed account application must promptly follow any wire order for an
initial purchase. No account application is required for subsequent purchases.
Completed account applications should be mailed or sent via facsimile.
Shareholders should contact the Transfer Agent for further instructions
regarding account applications.
By mail: Subject to the minimum purchase requirements discussed above,
shareholders may purchase shares of the Fund through the Distributor by
completing an account application and mailing it, together with a check payable
to 'UBS Private Investor Funds, Inc.', to: UBS Private Investor Funds, Inc., c/o
Investors Bank & Trust Company, P.O. Box 1537 MFD 23, Boston, MA 02205-1537.
Account applications are not required for subsequent purchases; however, the
shareholder's account number must be clearly marked on the check to ensure
proper credit. Subsequent purchases may also be made by mailing a check together
with the detachable purchase order that accompanies transaction confirmations.
Checks are subject to collection at full value. For shares purchased by check,
dividend payments and redemption proceeds, if any, will be delayed until such
funds are collected, which may take up to 15 days from the date of purchase.
REDEMPTION OF SHARES
GENERAL INFORMATION ON REDEMPTIONS. A shareholder may redeem all or any number
of the shares registered in its name at any time at the net asset value next
determined after a redemption request in proper form is received by the
Distributor. The Fund calculates its net asset value at the close of business.
See 'Net Asset Value'.
A redemption order will be effected provided the Distributor receives such an
order prior to 4:00 p.m. New York time or the close of regular trading on the
NYSE, whichever is earlier. The redemption of Fund shares is effective and is
executed at the net asset value next determined that day. Redemption orders
received after 4:00 p.m. New York time or the close of regular trading on the
NYSE, whichever is earlier, will be executed at the net asset value determined
on the next business day. Proceeds of an effective redemption are generally
deposited the next business day in immediately available funds to the
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account designated by the redeeming shareholder or mailed to the shareholder's
address of record, in accordance with the shareholder's instructions.
Shareholders will not be recordholders for dividend purposes on the day that
they redeem Fund shares.
Fund shares may be redeemed in the following methods:
BRANCH CLIENTS: Shareholders who are Private Bank Clients of the Branch should
request a Branch representative to assist them in placing a redemption order.
THROUGH THE DISTRIBUTOR: Shareholders who are not Branch clients may redeem Fund
shares by telephone or mail.
By telephone: Telephone redemptions may be made by calling the Transfer Agent at
(800) [ ]. Redemption orders will be accepted until 4:00 p.m. New York
time or the close of regular trading on the NYSE, whichever is earlier.
Telephone redemption requests are limited to those shareholders who have
previously elected this service. Such shareholders risk possible loss of
principal and income in the event of a telephone redemption not authorized by
them. The Fund and the Transfer Agent will employ reasonable procedures to
verify that telephone redemption instructions are genuine and will require that
shareholders electing such an option provide a form of personal identification.
The failure by the Fund or the Transfer Agent to employ such procedures may
cause the Fund or the Transfer Agent to be liable for any losses incurred by
investors due to telephone redemptions based upon unauthorized or fraudulent
instructions. The telephone redemption option may be modified or discontinued at
any time upon 60 days' notice to shareholders.
By mail: Redemption requests may also be mailed to the Transfer Agent,
identifying the Fund, the dollar amount or number of shares to be redeemed and
the shareholder's account number. The request must be signed in exactly the same
manner as the account is registered (e.g., if there is more than one owner of
the shares, all must sign). In all cases, all signatures on a redemption request
must be signature guaranteed by an eligible guarantor institution which includes
a domestic bank, a domestic savings and loan institution, a domestic credit
union, a member bank of the Federal Reserve System or a member firm of a
national securities exchange, pursuant to the Fund's standards and procedures;
if the guarantor institution belongs to one of the Medallion Signature programs,
it must use the specific 'Medallion Guaranteed' stamp (guarantees by notaries
public are not acceptable). Further documentation, such as copies of corporate
resolutions and instruments of authority, may be requested from corporations,
administrators, executors, personal representatives, trustees or custodians to
evidence the authority of the person or entity making the redemption request.
The redemption request in proper form should be sent to UBS Private Investor
Funds, Inc., c/o Investors Bank and Trust Company, P.O. Box 1537 MFD 23, Boston,
MA 02205-1537.
MANDATORY REDEMPTION. If the value of a shareholder's holdings in the Fund falls
below $10,000 because of a redemption of shares, the shareholder's remaining
shares may be redeemed 60 days after written notice unless the account is
increased to $10,000 or more. For example, a shareholder whose initial and only
investment is $10,000 may be subject to mandatory redemption resulting from any
redemption that causes his or her investment to fall below $10,000.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions may
not be processed unless the redemption request is submitted in proper form. To
be in proper form, the Fund must have received the shareholder's taxpayer
identification number and address. As discussed under 'Taxes' below, the Fund
may be required to impose 'back-up' withholding of federal income tax on
dividends, distributions and redemptions when non-corporate investors have not
provided a certified taxpayer identification number. In addition, if an investor
sends a check to the Distributor for the purchase of Fund shares and shares are
purchased with funds made available by the Distributor before the check has
cleared, the transmittal of redemption proceeds from the sale of those shares
will not occur until the check used to purchase such shares has cleared, which
may take up to 15 days. Redemption delays may be avoided by purchasing shares by
federal funds wire.
The right of redemption may be suspended or the date of payment postponed for
such periods as the 1940 Act or the SEC may permit. See 'Redemption of Shares'
in the SAI.
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EXCHANGE OF SHARES
An investor may exchange Fund shares for shares of any other series of the
Company, without charge. An exchange may be made so long as after the exchange
the investor has shares, in each series in which it remains an investor, with a
value equal to or greater than each such series' minimum investment amount. See
'Purchase of Shares' in the prospectuses of the other Company series for the
minimum investment amounts for each of those funds. Shares are exchanged on the
basis of relative net asset value per share. Exchanges are in effect redemptions
from one fund and purchases of another fund and the usual purchase and
redemption procedures and requirements are applicable to exchanges. See
'Purchase of Shares' and 'Redemption of Shares' in this Prospectus and in the
prospectuses of the other Company series. See also 'Additional Information'
below for an explanation of the telephone exchange policy.
Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income tax
purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state
securities laws may restrict the availability of the exchange privilege.
RETIREMENT PLANS
The Fund has available a form of Individual Retirement Account ('IRA') for
investment in Fund shares. Subject to certain restrictions imposed by applicable
tax laws, self-employed individuals may purchase shares of the Fund through
tax-deductible contributions to existing retirement plans known as Self-Employed
Retirement Plans ('SERPs'). Fund shares may also be a suitable investment for
'401(k) Plans' which subject to certain restrictions allow their participants to
invest in qualified pension plans on a tax-deferred basis. The Fund does not
currently act as sponsor to such plans.
The minimum initial investment for all such retirement plans is $2,000. The
minimum for all subsequent investments is $500.
Under the Code, individuals may make IRA contributions of up to $2,000 annually,
which may be, depending on the contributor's participation in an
employer-sponsored plan and income level, wholly or partly tax-deductible.
However, dividends and distributions held in the account are not taxed until
withdrawn in accordance with the provisions of the Code. An individual with a
non-working spouse may establish a separate IRA for the spouse under the same
conditions and contribute a combined maximum of $2,250 annually to one or both
IRAs provided that no more than $2,000 may be contributed to the IRA of either
spouse.
Investors should be aware that they may be subject to penalties or additional
taxes on contributions to or withdrawals from IRAs or other retirement plans
under certain circumstances. Prior to a withdrawal, shareholders may be required
to certify as to their age and awareness of such restrictions in writing. Branch
clients desiring information concerning investments through IRAs or other
retirement plans should contact their Bank representative. Non-Branch clients
may obtain such information by calling the Transfer Agent at (800) [ ].
DIVIDENDS AND DISTRIBUTIONS
Dividends consisting of substantially all of the Fund's net investment income,
if any, are declared and paid annually. The Fund may also declare an additional
dividend of net investment income in a given year to the extent necessary to
avoid the imposition of federal excise taxes on the Fund.
Substantially all of the Fund's realized net capital gains, if any, will be
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise taxes on the Fund. Declared dividends and
distributions are payable on the payment date to shareholders of record on the
record date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional Fund shares unless the shareholder has elected, in
writing, to have them paid in cash. Dividends and distributions to be paid in
cash are credited to the account designated by the shareholder or sent by check
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to the shareholder's address of record, in accordance with the shareholder's
instructions. The Fund reserves the right to discontinue, alter or limit the
automatic reinvestment privilege at any time.
NET ASSET VALUE
The Fund's net asset value per share equals the value of the Fund's total assets
(i.e., the value of its investment in the Portfolio plus its other assets) less
the amount of its liabilities, divided by the number of its outstanding shares,
rounded to the nearest cent. Expenses, including the fees payable to the service
providers of the Fund and the Portfolio, are accrued daily. Securities for which
market quotations are readily available are valued at market value. All other
securities will be valued at 'fair value.' See 'Net Asset Value' in the SAI for
information on the valuation of the Portfolio's assets and liabilities.
The Fund computes its net asset value once daily at the close of business on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the following legal holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. On days when U.S. trading markets close early in observance of
these holidays, the Fund expects to close for purchases and redemptions at the
same time.
Many of the securities held by the Portfolio will consist of securities
primarily listed on foreign exchanges, and these securities may trade on days
when the Fund's net asset value is not calculated. Consequently, the value of
these securities may be significantly affected on days when an investor will be
unable to redeem its shares.
ORGANIZATION
UBS PRIVATE INVESTOR FUNDS, INC.
UBS Private Investor Funds, Inc., a Maryland corporation incorporated on
November 16, 1995, is an open-end management investment company registered under
the 1940 Act and organized as a series fund. The Company has no prior history.
The Company is currently authorized to issue shares in four series: The UBS Bond
Fund Series; The UBS Tax Exempt Bond Fund Series; The UBS International Equity
Fund Series; and The UBS U.S. Equity Fund Series. Each outstanding share of the
Company will have a pro rata interest in the assets of its series, but it will
have no interest in the assets of any other Company series. Only shares of UBS
International Equity Fund Series are offered through this Prospectus.
Shareholder inquiries by clients of the Branch should be directed to the Branch,
while other shareholders should address their inquiries to the Transfer Agent.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and nonassessable when issued by the Company. The Company does not intend to
hold meetings of shareholders annually. The Directors may call meetings of
shareholders for action by shareholder vote as may be required by its Articles
of Incorporation or the 1940 Act. For further organizational information,
including certain shareholder rights, see 'Organization' in the SAI.
UBS INVESTOR PORTFOLIOS TRUST
UBS Investor Portfolios Trust, a master trust fund formed under New York law,
was organized on February 9, 1996. The Declaration of Trust permits the Trustees
to issue interests divided into one or more subtrusts or series. To date, three
series have been authorized, of which UBS International Equity Portfolio is one.
The Declaration of Trust provides that no Trustee, shareholder, officer,
employee, or agent of the Trust shall be held to any personal liability, nor
shall resort be had to such person's private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Portfolio, but that only the Trust property shall be liable.
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The Declaration of Trust provides that the Fund and other entities investing in
the Portfolio (e.g., other investment companies, insurance company separate
accounts and common and commingled trust funds) will each be liable for all the
obligations of the Portfolio. However, the risk of the Fund's incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations. Accordingly, the Trustees believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund's investment in
the Portfolio.
The Company expects that, immediately prior to the initial public offering of
its shares, the sole holder of its capital stock will be Signature.
TAXES
The Company intends that the Fund will qualify as a separate regulated
investment company under Subchapter M of the Code. As a regulated investment
company, the Fund will not be subject to federal income taxes if at least 90% of
its net investment income and net short-term capital gains less any available
capital loss carryforwards are distributed to shareholders within allowable time
limits. The Portfolio intends to qualify as an association treated as a
partnership for federal income tax purposes. As such, the Portfolio generally
should not be subject to tax. The status of the Fund as a regulated investment
company is dependent on, among other things, the Portfolio's continued
qualification as a partnership for federal income tax purposes.
Distributions of net long-term capital gains in excess of net short-term capital
losses are taxable to Fund shareholders as long-term capital gains regardless of
how long a shareholder has held shares in the Fund and regardless of whether
received in the form of cash or reinvested in additional shares. Distributions
of net investment income and realized net short-term capital gains in excess of
net long-term capital losses are taxable as ordinary income to shareholders of
the Fund whether such distributions are received in the form of cash or
reinvested in additional shares. Annual statements as to the current federal tax
status of distributions will be mailed to shareholders after the end of the
taxable year for the Fund. Distributions to corporate shareholders of the Fund
will not qualify for the dividends-received deduction because the income of the
Fund will not consist of dividends paid by United States corporations.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities generally will be treated as
long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption or exchange of shares in the Fund
held for six months or less will be treated as a long-term capital loss to the
extent of any long-term capital gain distributions received by the shareholder
with respect to such shares. In addition, no loss will be allowed on the sale or
other disposition of shares of the Fund if, within a period beginning 30 days
before the date of such sale or disposition and ending 30 days after such date,
the holder acquires (such as through dividend reinvestment) securities that are
substantially identical to the shares of the Fund.
The Fund will generally be subject to an excise tax of 4% on the amount of any
income or capital gains, above certain permitted levels, distributed to
shareholders on a basis such that such income or gain is not taxable to
shareholders in the calendar year in which it was earned by the Fund.
Furthermore, dividends declared in October, November or December payable to
shareholders of record on a specified date in such a month and paid in the
following January will be treated as having been paid by the Fund and received
by each shareholder in December. Under this rule, therefore, shareholders may be
taxed in one year on dividends or distributions actually received in January of
the following year.
The Portfolio is subject to foreign withholding taxes with respect to income
received from sources within certain foreign countries. So long as more than 50%
of the value of the Portfolio's total assets at the close of any taxable year
consists of stock or securities of foreign corporations, the Fund may elect to
treat its proportionate share of foreign income taxes paid by the Portfolio as
paid directly by the Fund's shareholders. The Fund will make such an election
only if it deems it to be in the best interests of its shareholders and will
notify shareholders in writing each year that it makes the election of the
amount of foreign income taxes, if any, to be treated as paid by the
shareholders. If the Fund makes the election,
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each shareholder will be required to include in income its proportionate share
of the amount of foreign income taxes paid by the Portfolio and will be entitled
to claim either a credit (which is subject to certain limitations), or, if the
shareholder itemizes deductions, a deduction for its share of the foreign income
taxes in computing its federal income tax liability. No deduction will be
permitted to individuals in computing their alternative minimum tax liability.
If the Portfolio or the Fund purchases shares in certain foreign investment
entities, referred to as 'passive foreign investment companies,' the Fund may be
subject to U.S. Federal income tax, and an additional charge in the nature of
interest, on a portion of any 'excess distribution' from such company or gain
from the disposition of such shares, even if the distribution or gain is paid by
the Fund as a dividend to its shareholders. If the Fund were able and elected to
treat a passive foreign investment company as a 'qualified electing fund,' in
lieu of the treatment described above, the Fund would be required each year to
include in income, and distribute to shareholders in accordance with the
distribution requirement set forth above, the Fund's pro rata share of the
ordinary earnings and net capital gains of the company, whether or not
distributed to the Fund.
Distributions of net investment income or net long-term capital gains will have
the effect of reducing the net asset value of the Fund's shares by the amount of
the distribution. If the net asset value is reduced below a shareholder's cost,
the distribution will nonetheless be taxable as described above, even if the
distribution represents a return of invested capital. Investors should consider
the tax implications of buying shares just prior to a distribution, when the
price of shares may reflect the amount of the forthcoming distribution.
This discussion of tax consequences is based on U.S. federal tax laws in effect
on the date of this Prospectus. These laws and regulations are subject to change
by legislative or administrative action, possibly with retroactive effect.
Investors are urged to consult their own tax advisors with respect to specific
questions as to federal taxes and with respect to the applicability of state or
local taxes. See 'Taxes' in the SAI.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
Shareholders should be aware that, under applicable regulations, the Fund may be
fined up to $50 annually for each account for which a certified taxpayer
identification number is not provided. In the event that such a fine is imposed
with respect to any uncertified account in any year, a corresponding charge may
be made against that account.
ADDITIONAL INFORMATION
The Fund will send its shareholders annual and semi-annual reports. The
financial statements appearing in annual reports will be audited by independent
accountants. Shareholders will also be sent confirmations of each purchase and
redemption and monthly statements reflecting all account activity, including
dividends and any distributions whether reinvested in additional shares or paid
in cash.
All shareholders are given the privilege to initiate transactions automatically
by telephone upon opening an account. However, an investor should be aware that
a transaction authorized by telephone and reasonably believed to be genuine by
the Company, the Branch, the Transfer Agent or the Distributor may subject the
investor to risk of loss if such instruction is subsequently found not to be
genuine. The Company and its service providers will employ reasonable
procedures, including requiring investors to give a form of personal
identification and tape recording of telephonic instructions, to confirm that
telephonic instructions by investors are genuine; if it does not, it or the
service provider may be liable for any losses due to unauthorized or fraudulent
instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indices, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Average, the Frank Russell Indices, the EAFE Index, the Financial Times World
Stock Index and other industry publications.
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The Fund may advertise 'total return'. The total return shows what an investment
in the Fund would have earned over a specified period of time (one, five or ten
years or since commencement of operations, if less) assuming that all Fund
distributions and dividends were reinvested on the reinvestment dates and less
all recurring fees during the period and assuming the redemption of such
investment at the end of each period. This method of calculating total return is
required by regulations of the SEC. Total return data similarly calculated,
unless otherwise indicated, over other specified periods of time may also be
used. All performance figures are based on historical earnings and are not
intended to indicate future performance. Performance information may be obtained
by clients of the Branch by calling the Branch, while other shareholders may
address their inquiries to the Transfer Agent.
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________________________________________________________________________________
INVESTMENT ADVISER OF THE PORTFOLIO
Union Bank of Switzerland,
New York Branch
299 Park Avenue
New York, New York 10171
(212) 821-3000
ADMINISTRATOR AND DISTRIBUTOR
Signature Broker-Dealer Services, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Investors for Whom the Fund is Designed...................................................................... 2
Master-Feeder Structure...................................................................................... 4
Investment Objective and Policies............................................................................ 5
Additional Investment Information and Risk Factors........................................................... 6
Options...................................................................................................... 10
Futures Contracts............................................................................................ 11
Investment Restrictions...................................................................................... 12
Management................................................................................................... 13
Shareholder Services......................................................................................... 15
Expenses..................................................................................................... 15
Purchase of Shares........................................................................................... 15
Redemption of Shares......................................................................................... 16
Exchange of Shares........................................................................................... 18
Retirement Plans............................................................................................. 18
Dividends and Distributions.................................................................................. 18
Net Asset Value.............................................................................................. 19
Organization................................................................................................. 19
Taxes........................................................................................................ 20
Additional Information....................................................................................... 21
</TABLE>
UBS PRIVATE
INVESTOR FUNDS,
INC.
UBS INTERNATIONAL EQUITY FUND
---------------------
PROSPECTUS
---------------------
, 1996
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER OF THE FUND SHARES MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, BY THE FUND IN ANY JURISDICTION IN WHICH SUCH
OFFER TO SELL OR SOLICITATION MAY NOT LAWFULLY BE MADE.
________________________________________________________________________________
<PAGE>
<PAGE>
UBS PRIVATE INVESTOR FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
UBS BOND FUND
UBS U.S. EQUITY FUND
UBS INTERNATIONAL EQUITY FUND
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUSES DATED [ ], 1996 (EACH A
'PROSPECTUS' AND TOGETHER, THE 'PROSPECTUSES'), FOR THE FUNDS LISTED ABOVE, AS
THEY MAY BE SUPPLEMENTED FROM TIME TO TIME. COPIES OF THE PROSPECTUSES MAY BE
OBTAINED WITHOUT CHARGE FROM SIGNATURE BROKER-DEALER SERVICES, INC. AT THE
ADDRESS AND PHONE NUMBER SET FORTH HEREIN.
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
GENERAL............................................................................................ SAI-1
INVESTMENT OBJECTIVES AND POLICIES................................................................. SAI-1
INVESTMENT RESTRICTIONS............................................................................ SAI-9
DIRECTORS AND TRUSTEES............................................................................. SAI-12
INVESTMENT ADVISER AND FUNDS SERVICES AGENT........................................................ SAI-14
ADMINISTRATORS..................................................................................... SAI-16
DISTRIBUTOR........................................................................................ SAI-17
CUSTODIAN.......................................................................................... SAI-17
SHAREHOLDER SERVICES............................................................................... SAI-17
INDEPENDENT ACCOUNTANTS............................................................................ SAI-18
EXPENSES........................................................................................... SAI-18
PURCHASE OF SHARES................................................................................. SAI-18
REDEMPTION OF SHARES............................................................................... SAI-19
EXCHANGE OF SHARES................................................................................. SAI-19
DIVIDENDS AND DISTRIBUTIONS........................................................................ SAI-19
NET ASSET VALUE.................................................................................... SAI-20
PERFORMANCE DATA................................................................................... SAI-21
PORTFOLIO TRANSACTIONS............................................................................. SAI-21
ORGANIZATION....................................................................................... SAI-23
TAXES.............................................................................................. SAI-24
ADDITIONAL INFORMATION............................................................................. SAI-26
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS......................................... F-1
</TABLE>
ii
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<PAGE>
GENERAL
UBS Private Investor Funds, Inc. (the 'Company') is an open-end management
investment company organized as a series fund. The Company is currently
authorized to issue shares in four series, three of which are described in this
Statement of Additional Information ('SAI'). These three series (each a 'Fund'
and collectively, the 'Funds') consist of: UBS Bond Fund; UBS International
Equity Fund; and UBS U.S. Equity Fund. The Company, a Maryland corporation, was
organized on November 16, 1995. The Company's executive offices are located at 6
St. James Avenue, Boston, Massachusetts 02116.
This SAI describes the investment objectives and policies, management and
operations of each Fund to enable investors to determine if the Funds suit their
investment needs. Each Fund employs a two-tier master-feeder structure. As more
fully described herein, each Fund invests substantially all of its assets in a
corresponding series of a separate trust having the same investment objective as
that Fund. Each Trust series will in turn directly invest in securities
consistent with its investment objective. See 'Master-Feeder Structure' in the
Prospectus.
UBS Investor Portfolios Trust, an unincorporated business trust formed
under New York law (the 'Trust'), was organized on February 9, 1996, and is an
open-end management investment company. The Declaration of Trust permits the
Board of Trustees of the Trust (the 'Trustees') to issue interests in one or
more subtrusts or 'series' (each a 'Portfolio' and collectively, the
'Portfolios'). To date, the Trust has established three Portfolios: UBS Bond
Portfolio; UBS U.S. Equity Portfolio; and UBS International Equity Portfolio.
UBS Bond Fund invests in UBS Bond Portfolio; UBS U.S. Equity Fund invests in UBS
U.S. Equity Portfolio; and UBS International Equity Fund invests in UBS
International Equity Portfolio. Where appropriate, references to a Fund refer to
that Fund acting through its corresponding Portfolio.
This SAI provides additional information with respect to each Fund, and
should be read in conjunction with that Fund's current Prospectus. Capitalized
terms not otherwise defined in this SAI have the meanings accorded to them in
the Fund's Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
UBS BOND FUND (the 'Bond Fund') is designed for investors seeking a higher
total return from a portfolio of debt securities issued by foreign and domestic
companies than that generally available from a portfolio of short-term
obligations in exchange for some risk of capital. Although the net asset value
of the Bond Fund will fluctuate, it attempts to conserve the value of its
investments to the extent consistent with its objective. The Bond Fund attempts
to achieve its objective by investing all of its investable assets in UBS Bond
Portfolio (the 'Bond Portfolio'), a series of the Trust having the same
investment objective as the Bond Fund. The Bond Portfolio attempts to achieve
its investment objective by investing primarily in the corporate and government
debt obligations and related securities described in the Prospectus and this
SAI.
UBS U.S. EQUITY FUND (the 'U.S. Equity Fund') is designed for investors
seeking long-term capital appreciation and the potential for a high level of
current income with lower investment risk and volatility than is normally
available from common stock funds. The U.S. Equity Fund attempts to achieve its
investment objective by investing all of its investable assets in UBS U.S.
Equity Portfolio (the 'U.S. Equity Portfolio'), a series of the Trust having the
same investment objective as the U.S. Equity Fund.
Under normal circumstances, at least 80% of the U.S. Equity Portfolio's
assets will be invested in income-producing domestic equity securities,
including dividend-paying common stocks and securities that are convertible into
common stocks. The U.S. Equity Portfolio's primary investments are the common
stocks of established, high-quality U.S. corporations.
UBS INTERNATIONAL EQUITY FUND (the 'International Equity Fund') is designed
for investors who want to participate in the risks and returns associated with
investing in equity securities issued by foreign corporations. The International
Equity Fund attempts to achieve its investment objective by investing all its
investable assets in UBS International Equity Portfolio (the 'International
Equity Portfolio'), a series of the Trust having the same investment objective
as the International Equity Fund.
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The International Equity Portfolio seeks to achieve its investment
objective by investing primarily in the equity securities of foreign
corporations, consisting of common stocks and other securities with equity
characteristics such as preferred stocks, warrants, rights and convertible
securities. Under normal circumstances, the International Equity Portfolio
expects to invest at least 65% of its total assets in such securities. It does
not intend to invest in U.S. securities (other than short-term instruments),
except temporarily, when extraordinary circumstances prevailing at the same time
in a significant number of developed foreign countries render investments in
such countries inadvisable.
MONEY MARKET INSTRUMENTS
As discussed in the Prospectus, each Fund may invest in money market
instruments to the extent consistent with its investment objective and policies.
A description of the various types of money market instruments that may be
purchased appears below. See 'Quality and Diversification Requirements'.
U.S. TREASURY SECURITIES. Each Fund may invest in direct obligations of the
U.S. Treasury, including Treasury Bills, Notes and Bonds, all of which are
backed as to principal and interest payments by the full faith and credit of the
United States.
ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. Each Fund may invest in obligations
issued or guaranteed by U.S. Government agencies or instrumentalities. These
obligations may or may not be backed by the 'full faith and credit' of the
United States. In the case of securities not backed by the full faith and credit
of the United States, each Fund must look principally to the federal agency
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitments. Securities in which each Fund
may invest that are not backed by the full faith and credit of the United States
include, but are not limited to, obligations of the Tennessee Valley Authority,
the Federal Home Loan Mortgage Corporation and the U.S. Postal Service, each of
which has the right to borrow from the U.S. Treasury to meet its obligations,
and the obligations of the Federal Farm Credit System and the Federal Home Loan
Banks, both of whose obligations may be satisfied only by the individual credits
of each issuing agency. Securities that are backed by the full faith and credit
of the United States include obligations of the Government National Mortgage
Association, the Farmers Home Administration and the Export-Import Bank.
BANK OBLIGATIONS. Each Fund, unless otherwise noted in the Prospectus or
below, may invest in negotiable certificates of deposit, time deposits and
bankers' acceptances of (i) banks, savings and loan associations and savings
banks that have more than $2 billion in total assets (the 'Asset Limitation')
and are organized under the laws of the United States or any state, (ii) foreign
branches of these banks or of foreign banks of equivalent size (Euros) and (iii)
U.S. branches of foreign banks of equivalent size (Yankees). The Asset
Limitation is not applicable to the International Equity Fund. See 'Foreign
Investments'. No Fund will invest in obligations for which the Adviser, defined
below (or the Sub-Adviser, defined below, in the case of the International
Equity Fund), or any of its affiliated persons, is the ultimate obligor or
accepting bank. Each Fund may also invest in obligations of international
banking institutions designated or supported by national governments to promote
economic reconstruction, development or trade between nations (e.g., the
European Investment Bank, the Inter-American Development Bank or the World
Bank).
COMMERCIAL PAPER. Each Fund may invest in commercial paper, including
Master Demand obligations. Master Demand obligations are obligations that
provide for a periodic adjustment in the interest rate paid and permit daily
changes in the amount borrowed. Master Demand obligations are governed by
agreements between the issuer and Union Bank of Switzerland (the 'Bank'), New
York Branch (the 'Branch' or the 'Adviser'), and UBS International Investment
London Limited ('UBSII' or the 'Sub-Adviser') in the case of the International
Equity Fund, acting as agent, for no additional fee, in its capacity as
investment (sub)adviser to the Portfolios and as fiduciary for other clients for
whom it exercises investment discretion. The monies loaned to the borrower come
from accounts managed by the (Sub-)Adviser, or its affiliates, pursuant to
arrangements with such accounts. Interest and principal payments are credited to
such accounts. The (Sub-)Adviser, acting as a fiduciary on behalf of its
clients, has the right to increase or decrease the amount provided to the
borrower under an obligation. The
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borrower has the right to pay without penalty all or any part of the principal
amount then outstanding on an obligation together with interest to the date of
payment. Because these obligations typically provide that the interest rate is
tied to the Federal Reserve commercial paper composite rate, the rate on Master
Demand obligations is subject to change. Repayment of a Master Demand obligation
to participating accounts depends on the ability of the borrower to pay the
accrued interest and principal of the obligation on demand, which is
continuously monitored by the (Sub-)Adviser. Because Master Demand obligations
typically are not rated by credit rating agencies, the Portfolios may invest in
such unrated obligations only if at the time of an investment the obligation is
determined by the (Sub-)Adviser to have a credit quality which satisfies a
Portfolio's quality restrictions. See 'Quality and Diversification
Requirements'. Although there is no secondary market for Master Demand
obligations, such obligations are considered to be liquid because they are
payable upon demand. The Portfolios do not have any specific percentage
limitation on investments in Master Demand obligations.
REPURCHASE AGREEMENTS. Each Portfolio may enter into repurchase agreements
with brokers, dealers or banks that meet the credit guidelines approved by the
Trustees. In a repurchase agreement, a Portfolio buys a security from a seller
that has agreed to repurchase the same security at a mutually agreed upon date
and price. The resale price normally is in excess of the purchase price,
reflecting an agreed upon interest rate. This interest rate is effective for the
period of time the Portfolio is invested in the agreement and is not related to
the coupon rate on the underlying security. A repurchase agreement may also be
viewed as a fully collateralized loan of money by the Portfolio to the seller.
The period of these repurchase agreements will usually be short, from overnight
to one week, and at no time will the Portfolio invest in repurchase agreements
for more than thirteen months. The securities that are subject to repurchase
agreements, however, may have maturity dates in excess of thirteen months from
the effective date of the repurchase agreement. The Portfolios will always
receive securities as collateral whose market value is, and during the entire
term of the agreement remains, at least equal to 100% of the dollar amount
invested by the Portfolios in each agreement plus accrued interest, and the
Portfolios will make payment for such securities only upon physical delivery or
upon evidence of book entry transfer to the account of the Custodian. If the
seller defaults, a Portfolio might incur a loss if the value of the collateral
securing the repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of proceeds upon disposition of the collateral by the Portfolio may
be delayed or limited.
CORPORATE BONDS AND OTHER DEBT SECURITIES
Each Portfolio may invest in other debt securities with remaining effective
maturities of not more than thirteen months, including without limitation
corporate and foreign bonds, asset-backed securities and other obligations
described in the Prospectus or this SAI.
As discussed in the Prospectus, the Bond Portfolio may invest in bonds and
other debt securities of domestic and foreign issuers to the extent consistent
with its investment objectives and policies. A description of these investments
appears in the Prospectus and below. See 'Quality and Diversification
Requirements'. For information on short-term investments in these securities,
see 'Money Market Instruments'.
ASSET-BACKED SECURITIES. Asset-backed securities directly or indirectly
represent a participation interest in, or are secured by or payable from, a
stream of payments generated by particular assets such as mortgages, motor
vehicles or credit card receivables. Payments of principal and interest may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit issued by a financial institution unaffiliated with the entities issuing
the securities. The asset-backed securities in which a Portfolio may invest are
subject to the Portfolio's overall credit requirements. However, asset-backed
securities, in general, are subject to certain risks. These risks include the
prepayment of the debtor's obligation and the creditor's limited interests in
applicable collateral. For example, credit card debt receivables are generally
unsecured and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, many of which give such debtors the right to
set off certain amounts owed on credit card debt thereby reducing the balance
due. Additionally, if the letter of credit is exhausted,
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holders of asset-backed securities may also experience delays in payments or
losses if the full amounts due on underlying sales contracts are not realized.
Because asset-backed securities are relatively new, the market experience in
these securities is limited and the market's ability to sustain liquidity
through all phases of the market cycle has not been tested.
EQUITY INVESTMENTS
As discussed in the Prospectus, the U.S. Equity and International Equity
Portfolios invest primarily in equity securities consisting of common stocks and
other securities with equity characteristics. The securities in which these
Portfolios invest include those listed on domestic and foreign securities
exchanges or traded on over-the-counter markets as well as certain restricted or
unlisted securities. A discussion of the various types of equity investments
that may be purchased by these Portfolios appears in the Prospectus and below.
See 'Quality and Diversification Requirements'.
EQUITY SECURITIES. The common stocks in which these Portfolios may invest
include the common stocks of any class or series of corporations or any similar
equity interests such as trust or partnership interests. The Portfolios' equity
investments include preferred stocks, warrants, rights and convertible
securities. These investments may or may not pay dividends and may or may not
carry voting rights. Common stock occupies the most junior position in a
company's capital structure.
The convertible securities in which the Portfolios may invest include debt
securities or preferred stocks that may be converted into common stock or that
carry the right to purchase common stock. Convertible securities entitle the
holder to exchange the securities for a specified number of shares of common
stock, usually of the same company, at specified prices within a certain period
of time.
The terms of a convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holders' claims on assets and earnings are subordinated to the claims of other
creditors, but are senior to the claims of preferred and common stockholders. In
the case of convertible preferred stock, the holders' claims on assets and
earnings are subordinated to the claims of all creditors, but are senior to the
claims of common stockholders.
FOREIGN INVESTMENTS
The International Equity Portfolio makes substantial investments in
companies based in foreign countries. The Bond Portfolio may also invest in
certain foreign securities. The Bond Portfolio does not expect to invest more
than 25% of its total assets at the time of purchase in securities of foreign
issuers. Foreign investments may be made directly in the securities of foreign
issuers or in the form of American Depositary Receipts ('ADRs') or European
Depositary Receipts ('EDRs'). Generally, ADRs and EDRs are receipts issued by a
bank or trust company that evidence ownership of underlying securities issued by
a foreign corporation and that are designed for use in the domestic, in the case
of ADRs, or European, in the case of EDRs, securities markets.
Because investments in foreign securities may involve foreign currencies,
the value of the International Equity and Bond Portfolios' assets as measured in
U.S. dollars may be affected, favorably or unfavorably, by changes in currency
rates and in exchange control regulations, including currency blockage. The Bond
and International Equity Portfolios may enter into foreign currency exchange
transactions in connection with the settlement of foreign securities
transactions or to manage their currency exposure related to foreign
investments. The Portfolios will not enter into such transactions for
speculative purposes. For a description of the risks associated with investing
in foreign securities, see 'Additional Investment Information and Risk Factors'
in the Prospectus.
ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Portfolio may purchase
securities on a when-issued or delayed delivery basis. For example, delivery of
and payment for these securities can take place a month or more after the date
of the purchase commitment. The purchase price and the interest rate payable, if
any, on the securities are fixed on the purchase commitment date or at the time
the settlement
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date is fixed. The value of such securities is subject to market fluctuation and
no interest accrues to a Portfolio until settlement takes place. At the time a
Portfolio makes the commitment to purchase securities on a when-issued or
delayed delivery basis, it will record the transaction, reflect the value of
such securities each day in determining its net asset value and, if applicable,
calculate the maturity for the purposes of average maturity from that date. At
the time of settlement, a when-issued security may be valued at less than the
purchase price. To facilitate such acquisitions, each Portfolio will maintain
with the Custodian a segregated account with liquid assets, consisting of cash,
U.S. Government securities or other high-grade, liquid securities, in an amount
at least equal to the value of such commitments. On delivery dates for such
transactions, each Portfolio will meet its obligations from maturities or sales
of the securities held in the segregated account and/or from cash flow. If a
Portfolio chooses to dispose of the right to acquire a when-issued security
prior to its acquisition, it could, as with the disposition of any other
portfolio obligation, incur a gain or loss due to market fluctuation. It is the
current policy of each Portfolio not to enter into when-issued commitments
exceeding in the aggregate 15% of the market value of that Portfolio's total
assets, less liabilities (excluding the obligations created by when-issued
commitments).
INVESTMENT COMPANY SECURITIES. Securities of other investment companies may
be acquired by each Fund to the extent that such purchases are consistent with
that entity's investment objectives and restrictions and are permitted under the
Investment Company Act of 1940, as amended (the '1940 Act'). The 1940 Act
requires that, as determined immediately after a purchase is made, (i) not more
than 5% of the value of the Fund's total assets will be invested in the
securities of any one investment company, (ii) not more than 10% of the value of
the Fund's total assets will be invested in securities of investment companies
as a group and (iii) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Fund, provided, however, that a Fund may
invest all of its investable assets in an open-end investment company having the
same investment objective as that Fund. As a shareholder of 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 such a Fund would bear in
connection with its own operations.
REVERSE REPURCHASE AGREEMENTS. Each Portfolio may enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase the same security at a mutually agreed upon
date and price. For purposes of the 1940 Act, reverse repurchase agreements are
considered borrowings by the Portfolio and, therefore, a form of leverage. The
Portfolios will invest the proceeds of borrowings under reverse repurchase
agreements. In addition, the Portfolios will enter into a reverse repurchase
agreement only when the interest income to be earned from the investment of the
proceeds is greater than the interest expense of the repurchase agreement. The
Portfolios will not invest the proceeds of a reverse repurchase agreement for a
period that exceeds the term of the reverse repurchase agreement. The
limitations on each Portfolio's use of reverse repurchase agreements are
discussed under 'Investment Restrictions' below. Each Portfolio will establish
and maintain with the Custodian a separate account with a portfolio of
securities in an amount at least equal to its obligations under its reverse
repurchase agreements.
MORTGAGE DOLLAR ROLL TRANSACTIONS. The Bond Portfolio may engage in
mortgage dollar roll transactions with respect to mortgage securities issued by
the Government National Mortgage Association, the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation. In a mortgage dollar
roll transaction, the Portfolio sells a mortgage backed security and
simultaneously agrees to repurchase a similar security on a specified future
date at an agreed upon price. During the roll period, the Portfolio will not be
entitled to receive any interest or principal paid on the securities sold. The
Portfolio is compensated for the lost interest on the securities sold by the
difference between the sales price and the lower price for the future repurchase
as well as by the interest earned on the reinvestment of the sales proceeds. The
Portfolio may also be compensated by receipt of a commitment fee. When the
Portfolio enters into a mortgage dollar roll transaction, liquid assets in an
amount sufficient to pay for the future repurchase are segregated with its
Custodian. Mortgage dollar roll transactions are considered reverse repurchase
agreements for purposes of the Portfolio's investment restrictions.
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SECURITIES LENDING. Each Portfolio may lend its securities if such loans
are secured continuously by cash or equivalent collateral or by a letter of
credit in favor of the Portfolio at least equal at all times to 100% of the
market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolios in the normal
settlement time, generally three business days after notice or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities that
occurs during the term of the loan inures to the Portfolio and its respective
investors. The Portfolios may pay reasonable finder's and custodial fees in
connection with a loan. In addition, the Portfolios will consider all facts and
circumstances including the creditworthiness of the borrowing financial
institution, and the Portfolios will not make any loans in excess of one year.
The Portfolios will not lend their securities to any officer, Trustee, Director,
employee, or affiliate or placement agent of the Company, the Trust, or to the
Adviser, Sub-Adviser, Administrator or Distributor or any affiliate thereof,
unless otherwise permitted by applicable law.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. The Portfolios may
invest in privately placed, restricted, Rule 144A or other unregistered
securities as described in the Prospectus.
As to illiquid investments, a Portfolio is subject to a risk that it might
not be able to sell such securities at a price that the Portfolio deems
respective of their value. Where an illiquid security must be registered under
the Securities Act of 1933, as amended (the 'Securities Act'), before it may be
resold, the Portfolio may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time the Portfolio
decides to sell and the time the Portfolio is permitted to sell under an
effective registration statement. If, during such a period, adverse market
conditions develop, the Portfolio might obtain a less favorable price than that
which prevailed when it decided to sell. When the Portfolios value these
securities, they will take into account the illiquid nature of these
instruments.
QUALITY AND DIVERSIFICATION REQUIREMENTS
Each Portfolio intends to meet the diversification requirements of the 1940
Act. To meet these requirements, 75% of the Portfolio's assets are subject to
the following fundamental limitations: (1) the Portfolio may not invest more
than 5% of its total assets in the securities of any one issuer, except
obligations of the U.S. Government, its agencies and instrumentalities and (2)
the Portfolio may not own more than 10% of the outstanding voting securities of
any one issuer. As for the 25% of a Portfolio's assets not subject to the
limitation described above, there is no limitation on investment of these assets
under the 1940 Act, so that all of such assets may be invested in securities of
any one issuer, subject to the limitation of any applicable state securities
laws. Investments not subject to the limitations described above could involve
an increased risk to a Portfolio should an issuer, or a state or its related
entities, be unable to make interest or principal payments or should the market
value of such securities decline. See 'Investment Restrictions'.
BOND PORTFOLIO. The Bond Portfolio invests principally in a diversified
portfolio of 'high grade' and 'investment grade' securities. Investment grade
debt is rated, on the date of investment, within the four highest ratings of
Moody's Investors Service, Inc. ('Moody's'), currently Aaa, Aa, A and Baa, or of
Standard & Poor's Corporation ('Standard & Poor's'), currently AAA, AA, A and
BBB. High grade debt is rated, on the date of the investment, within the two
highest categories of the above ratings. The Bond Portfolio may also invest up
to 5% of its total assets in securities which are 'below investment grade'. Such
securities must be rated, on the date of investment, Ba by Moody's or BB by
Standard & Poor's. The Portfolio may invest in debt securities that are not
rated or other debt securities to which these ratings are not applicable, if in
the opinion of the Adviser, such securities are of comparable quality to the
rated securities discussed above. In addition, at the time the Portfolio invests
in any commercial paper, bank obligation or repurchase agreement, the issuer
must have outstanding debt rated A or higher by Moody's or Standard & Poor's,
the issuer's parent corporation, if any, must have outstanding commercial paper
rated Prime-1 by Moody's or A-1 by Standard & Poor's, or if no such ratings are
available, the investment must be of comparable quality in the Adviser's
opinion.
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U.S. EQUITY AND INTERNATIONAL EQUITY PORTFOLIOS. The U.S. Equity and
International Equity Portfolios may invest in convertible debt securities for
which there are no specific quality requirements. In addition, at the time the
Portfolios invest in any commercial paper, bank obligation or repurchase
agreement, the issuer must have outstanding debt rated A or higher by Moody's or
Standard & Poor's, the issuer's parent corporation, if any, must have
outstanding commercial paper rated Prime-1 by Moody's or A-1 by Standard &
Poor's, or if no such ratings are available, the investment must be of
comparable quality in the Adviser's* opinion. At the time the Portfolios invest
in any other short-term debt securities, they must be rated A or higher by
Moody's or Standard & Poor's, or if unrated, the investment must be of
comparable quality in the Adviser's opinion.
In determining whether a particular unrated security is a suitable
investment, the Adviser takes into consideration asset and debt service
coverage, the purpose of the financing, the history of the issuer, existence of
other rated securities of the issuer, and other relevant conditions, such as
comparability to other issuers.
OPTIONS AND FUTURES TRANSACTIONS
EXCHANGE-TRADED AND OVER-THE-COUNTER OPTIONS. All options purchased or sold
by the Portfolios will be exchange traded or will be purchased or sold by
securities dealers ('over-the-counter' or 'OTC options') that meet
creditworthiness standards approved by the Trustees. Exchange-traded options are
obligations of the Options Clearing Corporation. In OTC options, the Portfolio
relies on the dealer from which it purchased the option to perform if the option
is exercised. Thus, when a Portfolio purchases an OTC option, it relies on the
dealer from which it purchased the option to make or take delivery of the
underlying securities. Failure by the dealer to do so would result in the loss
of the premium paid by the Portfolio as well as loss of the expected benefit of
the transaction. To the extent that a Portfolio may trade in foreign options,
such options may be effected through local clearing organizations.
The staff of the SEC has taken the position that, in general, purchased OTC
options and the underlying securities used to cover written OTC options are
illiquid securities. However, a Portfolio may treat as liquid the underlying
securities used to cover written OTC options, provided it has arrangements with
certain qualified dealers who agree that the Portfolio may repurchase any option
it writes for a maximum price to be calculated by a predetermined formula. In
these cases, the OTC option itself would only be considered illiquid to the
extent that the maximum repurchase price under the formula exceeds the intrinsic
value of the option.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Portfolios are
permitted to enter into futures and options transactions and may purchase or
sell futures contracts and purchase put and call options, including put and call
options on futures contracts. Futures contracts obligate the buyer to take and
the seller to deliver at a future date a specified quantity of a financial
instrument or an amount of cash based on the value of a securities index or
financial instrument. Currently, futures contracts are available on various
types of fixed-income securities, including but not limited to U.S. Treasury
bonds, notes and bills, Eurodollar certificates of deposit and on indices of
fixed income and equity securities.
Unlike a futures contract, which requires the parties to buy and sell a
security or make a cash settlement payment based on changes in a financial
instrument or securities index on an agreed date, an option on a futures
contract entitles its holder to decide on or before a future date whether to
enter into such a contract. If the holder decides not to exercise its option,
the holder may close out the option position by entering into an offsetting
transaction or may decide to let the option expire and forfeit the premium
thereon. The purchaser of an option on a futures contract pays a premium for the
option but makes no initial margin payments or daily payments of cash in the
nature of 'variation' margin payments to reflect the change in the value of the
underlying contract as does a purchaser or seller of a futures contract.
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* Unless otherwise noted, references to the Adviser in the context of the
International Equity Portfolio refer to the Adviser and/or the Sub-Adviser, as
appropriate.
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The seller of an option on a futures contract receives the premium paid by
the purchaser and may be required to pay initial margin. Amounts equal to the
initial margin and any additional collateral required on futures contracts and
on any options on futures contracts sold by a Portfolio are paid by the
Portfolio into a segregated account, in the name of the Futures Commission
Merchant, as required by the 1940 Act and the SEC's interpretations thereunder.
To the extent a Portfolio may trade in futures and options therein involving
foreign securities, such transactions may be effected according to local
regulations and business custom.
COMBINED POSITIONS. The Portfolios may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, the Portfolios may, subject to regulations and
interpretations of the Commodity Futures Trading Commission, purchase a put
option and write a call option on the same underlying instrument, in order to
construct a combined position whose risk and return characteristics are similar
to selling a futures contract. Another possible combined position would involve
writing a call option at one strike price and buying a call option at a lower
price, in order to reduce the risk of the written call option in the event of a
substantial price increase. Because combined positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open and
close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized options and futures contracts available will not exactly match a
Portfolio's current or anticipated investments. A Portfolio may invest in
options and futures contracts based on securities with different issuers,
maturities, or other characteristics from the securities in which it typically
invests, which involves a risk that the options or futures position will not
track the performance of the Portfolio's other investments.
Options and futures contracts prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match the
Portfolio's investments well. Options and futures contracts prices are affected
by such factors as current and anticipated short-term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A Portfolio may purchase or sell options
and futures contracts with a greater or lesser value than the securities it
wishes to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in a Portfolio's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
market will exist for any particular option or futures contract at any
particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for a
Portfolio to enter into new positions or close out existing positions. If the
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions, and
could potentially require a Portfolio to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, the
Portfolio's access to other assets held to cover its options or futures
positions could also be impaired. See 'Exchange Traded and Over-the-Counter
Options' above for a discussion of the liquidity of options not traded on an
exchange.
POSITION LIMITS. Futures exchanges can limit the number of futures and
options on futures contracts that can be held or controlled by an entity. If an
adequate exemption cannot be obtained, a Portfolio or the Adviser may be
required to reduce the size of its futures and options positions or may not be
able to trade a certain futures or options contract in order to avoid exceeding
such limits.
ASSET COVERAGE FOR FUTURES CONTRACTS AND OPTIONS POSITIONS. The Portfolios
intend to comply with Section 4.5 of the regulations under the Commodity
Exchange Act, which limits the extent to
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which a Portfolio can commit assets to initial margin deposits and option
premiums. In addition, the Portfolios will comply with guidelines established by
the SEC with respect to coverage of options and futures contracts by mutual
funds, and if the guidelines so require, will set aside appropriate liquid
assets in a segregated custodial account in the amount prescribed. Securities
held in a segregated account cannot be sold and will be considered illiquid
securities while the futures contract or option is outstanding, unless they are
replaced with other suitable assets. As a result, there is a possibility that
the segregation of a large percentage of a Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.
INVESTMENT RESTRICTIONS
The Funds have adopted the following fundamental and non-fundamental
investment restrictions (as defined and distinguished below); to the extent that
a fundamental policy and non-fundamental policy apply to a given investment
activity or strategy, the more restrictive policy shall govern.
FUNDAMENTAL INVESTMENT RESTRICTIONS. The investment restrictions below have
been adopted by the Company's Board of Directors (the 'Board' or the
'Directors') with respect to each Fund and by the Trustees for each
corresponding Portfolio. Except where otherwise noted, these investment
restrictions are 'fundamental' policies which, under the 1940 Act, may not be
changed without the 'vote of a majority of the outstanding voting securities' of
the Fund and Portfolio, as applicable, to which they relate. The 'vote of a
majority of the outstanding voting securities' under the 1940 Act is the lesser
of (a) 67% or more of the voting shares present at a shareholders' meeting if
the holders of more than 50% of the outstanding voting shares are present or
represented by proxy or (b) more than 50% of the outstanding voting shares. The
limitations described below apply at the time the securities are purchased by
the Fund or Portfolio, as applicable. Whenever a Fund is requested to vote on a
change in the fundamental investment restrictions of its corresponding
Portfolio, the Company will hold a meeting of that Fund's shareholders and the
Company will cast that Fund's votes in the Portfolio in proportion to the votes
cast by that Fund's shareholders. The investment restrictions of each Fund and
its corresponding Portfolio are identical, unless otherwise specified.
Accordingly, references below to a Fund also include that Fund's corresponding
Portfolio unless the context requires otherwise; similarly, references to a
Portfolio also include the corresponding Fund unless the context requires
otherwise.
1. Borrow money, except from banks for extraordinary or emergency purposes
and then only in amounts up to one-third of the value of its total assets
(including the amount borrowed), less liabilities (not including the
amounts borrowed), or mortgage, pledge, or hypothecate any assets, except
in connection with any permitted borrowing or reverse repurchase
agreements (see Investment Restrictions No. 7). It will not purchase
securities while borrowings (including reverse repurchase agreements)
exceed 5% of its net assets; provided, however, that it may increase its
interest in an open-end management investment company with the same
investment objective and restrictions while such borrowings are
outstanding and provided further that for purposes of this restriction,
short-term credits necessary for the clearance of transactions are not
considered borrowings. This borrowing provision facilitates the orderly
sale of portfolio securities, for example, in the event of abnormally
heavy redemption requests and is not for investment purposes. Collateral
arrangements for premium and margin payments in connection with its
hedging activities are not deemed to be a pledge of assets;
2. Purchase the securities of an issuer if, immediately after such purchase,
it owns more than 10% of the outstanding voting securities of such issuer;
provided, however, that a Fund may invest all or part of its investable
assets in an open-end management investment company with the same
investment objective and restrictions. This limitation shall not apply to
investments of up to 25% of its total assets;
3. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of its total
assets would be invested in securities or other obligations of any one
such issuer; provided, however, that a Fund may invest all or part of its
investable assets in an open-end management investment company with the
same investment objective and
SAI-9
<PAGE>
<PAGE>
restrictions. This limitation shall not apply to securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or to
investments of up to 25% of its total assets;
4. Purchase securities or other obligations of issuers conducting their
principal business activity in the same industry if, immediately after
such purchase the value of its investments in such industry would exceed
25% of the value of its total assets; provided, however, that a Fund may
invest all or part of its investable assets in an open-end management
investment company with the same investment objective and restrictions.
For purposes of industry concentration, there is no percentage limitation
with respect to investments in U.S. Government securities;
5. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities) or by entering into repurchase
agreements or loans of portfolio securities;
6. Purchase or sell real estate, commodities or commodities contracts or
options thereon (except for its interest in hedging and certain other
activities as described under 'Investment Objective(s) and Policies'),
interests in oil, gas, or mineral exploration or development programs
(including limited partnerships). In addition, neither the U.S. Equity
Portfolio nor the International Equity Portfolio may purchase or sell real
estate mortgage loans. The Bond Portfolio, however, may purchase debt
obligations secured by interests in real estate or issued by companies
that invest in real estate or interests therein including real estate
investment trusts ('REITs'); and the International Equity Portfolio and
the U.S. Equity Portfolio may purchase the equity securities or commercial
paper issued by companies that invest in real estate or interests therein,
including REITs;
7. Issue any senior security, except as appropriate to evidence indebtedness
that it is permitted to incur pursuant to Investment Restriction No. 1 and
except that it may enter into reverse repurchase agreements, provided that
the aggregate of senior securities, including reverse repurchase
agreements, shall not exceed one-third of the market value of its total
assets (including the amounts borrowed), less liabilities (excluding
obligations created by such borrowings and reverse repurchase agreements).
Hedging activities as described in 'Investment Objective(s) and Policies'
shall not be considered senior securities for purposes hereof; or
8. Act as an underwriter of securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS -- BOND FUND, U.S. EQUITY FUND AND
INTERNATIONAL EQUITY FUND. The investment restrictions described below are not
fundamental policies of these Funds or their corresponding Portfolios and may be
changed by their respective Directors and Trustees. These non-fundamental
investment policies provide that neither the Funds nor the Portfolios may:
i. borrow money (including through reverse repurchase or forward
roll transactions) for any purpose in excess of 5% of the Fund's
total assets (taken at cost), except that the Fund may borrow for
temporary or emergency purposes up to 1/3 of its assets;
ii. pledge, mortgage or hypothecate for any purpose in excess of 10%
of the Fund's total assets (taken at market value), provided that
collateral arrangements with respect to options and futures,
including deposits of initial deposit and variation margin, and
reverse repurchase agreements are not considered a pledge of
assets for purposes of this restriction;
iii. purchase any security or evidence of interest therein on margin,
except that such short-term credit as may be necessary for the
clearance of purchases and sales of securities may be obtained
and except that deposits of initial deposit and variation margin
may be made in connection with the purchase, ownership, holding
or sale of futures;
iv. sell securities it does not own such that the dollar amount of
such short sales at any one time exceeds 25% of the net equity of
the Fund, and the value of securities of any one issuer in which
the Fund is short exceeds the lesser of 2.0% of the value of the
Fund's net assets or 2.0% of the securities of any class of any
U.S. issuer, and provided that short sales may be made only in
those securities which are fully listed on a national securities
exchange or a foreign exchange (This provision does not include
the sale of securities the Fund contemporaneously owns or where
the Fund has the right to obtain securities
SAI-10
<PAGE>
<PAGE>
equivalent in kind and amount to those sold, i.e., short sales
against the box.) (The Fund has no current intention to engage in
short selling.);
v. invest for the purpose of exercising control or management;
vi. purchase securities issued by any investment company except by
purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase,
though not made in the open market, is part of a plan of merger
or consolidation; provided, however, that securities of any
investment company will not be purchased for the Fund if such
purchase at the time thereof would cause (a) more than 10% of the
Fund's total assets (taken at the greater of cost or market
value) to be invested in the securities of such issuers; (b) more
than 5% of the Fund's total assets (taken at the greater of cost
or market value) to be invested in any one investment company; or
(c) more than 3% of the outstanding voting securities of any such
issuer to be held for the Fund; provided further that, except in
the case of a merger or consolidation, the Fund shall not
purchase any securities of any open-end investment company unless
(1) the Fund's investment adviser waives the investment advisory
fee with respect to assets invested in other open-end investment
companies and (2) the Fund incurs no sales charge in connection
with that investment;
vii. invest more than 10% of the Fund's total assets (taken at the
greater of cost or market value) in securities (excluding Rule
144A securities) that are restricted as to resale under the 1933
Act;
viii. invest more than 15% of the Fund's total assets (taken at the
greater of cost or market value) in (a) securities (excluding
Rule 144A securities) that are restricted as to resale under the
1933 Act, and (b) securities that are issued by issuers which
(including predecessors) have been in operation less than three
years (other than U.S. Government securities), provided,
however, that no more than 5% of the Fund's total assets are
invested in securities issued by issuers which (including
predecessors) have been in operation less than three years;
ix. invest more than 15% of the Fund's net assets (taken at the
greater of cost or market value) in securities that are illiquid
or not readily marketable (excluding Rule 144A securities deemed
by the Board of Directors of the Fund to be liquid);
x. invest in securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Director
of the Fund, or is an officer or director of the Adviser, if
after the purchase of the securities of such issuer for the Fund
one or more of such persons own beneficially more than 1/2 of 1%
of the shares or securities, or both, all taken at market value,
of such issuer, and such persons owning more than 1/2 of 1% of
such shares or securities together own beneficially more than 5%
of such shares or securities, or both, all taken at market value;
xi. invest in warrants (other than warrants acquired by the Fund as
part of a unit or attached to securities at the time of purchase)
if, as a result, the investments (valued at the lower of cost or
market) would exceed 5% of the value of the Fund's net assets or
if, as a result, more than 2% of the Fund's net assets would be
invested in warrants not listed on a recognized United States or
foreign stock exchange, to the extent permitted by applicable
state securities laws;
xii. write puts and calls on securities unless each of the following
conditions are met: (a) the security underlying the put or call
is within the investment policies of the Fund and the option is
issued by the Options Clearing Corporation, except for put and
call options issued by non-U.S. entities or listed on non-U.S.
securities or commodities exchanges; (b) the aggregate value of
the obligations underlying the puts determined as of the date
the options are sold shall not exceed 5% of the Fund's net
assets; (c) the securities subject to the exercise of the call
written by the Fund must be owned by the Fund at the time the
SAI-11
<PAGE>
<PAGE>
call is sold and must continue to be owned by the Fund until the
call has been exercised, has lapsed, or the Fund has purchased a
closing call, and such purchase has been confirmed, thereby
extinguishing the Fund's obligation to deliver securities
pursuant to the call it has sold; and (d) at the time a put is
written, the Fund establishes a segregated account with its
custodian consisting of cash or short-term U.S. Government
securities equal in value to the amount the Fund will be
obligated to pay upon exercise of the put (this account must be
maintained until the put is exercised, has expired, or the Fund
has purchased a closing put, which is a put of the same series
as the one previously written); and
xiii. buy and sell puts and calls on securities, stock index futures
or options on stock index futures, or financial futures or
options on financial futures unless: (a) the options or futures
are offered through the facilities of a national securities
association or are listed on a national securities or
commodities exchange, except for put and call options issued by
non-U.S. entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate premiums paid on all
such options which are held at any time do not exceed 20% of the
Fund's total net assets; (c) the aggregate margin deposits
required on all such futures or options thereon held at any time
do not exceed 5% of the Fund's total assets; and (d) such
activities are permitted by Regulation 4.5 under the Commodity
Exchange Act.
ALL FUNDS. There will be no violation of any investment restriction if that
restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment or any other later change.
DIRECTORS AND TRUSTEES
DIRECTORS
The Company's Board consists of three directors. The Company's Directors
are also the Trust's Trustees. The Board is responsible for the overall
management of the Fund, including the general supervision and review of its
investment activities. The Board, in turn, elects the officers of the Company.
Similarly, the Trustees, as such, are responsible for the overall management of
the Trust, including the general supervision and review of its investment
activities. The officers of the Company hold similar positions with
substantially the same responsibilities with the Trust. The addresses and
principal occupations of the Company's Director's and officers and the Trust's
Trustees and officers are listed below. As of February 1, 1996, the Directors
and officers of the Company owned of record, as a group, less than 1% of the
outstanding shares of the Company. None of the Company's Directors or officers
receives compensation from the Company exceeding $60,000 per fiscal year. None
of the Trustees or the Trust's employees receives compensation from the Trust
exceeding $60,000 per fiscal year. Every Director who is an 'Interested Person'
(within the meaning of the 1940 Act) of the Company is also an 'Interested
Person' of the Trust. Similarly, every Director who is not an 'Interested
Person' of the Company is not an 'Interested Person' of the Trust.
<TABLE>
<CAPTION>
POSITION
WITH THE
NAME, ADDRESS AND AGE COMPANY PRINCIPAL OCCUPATIONS DURING THE LAST FIVE YEARS
- -------------------------------- ------------ -----------------------------------------------------------
<S> <C> <C>
Dr. Hans-Peter Lochmeier* Chairman of UBS Investor Portfolios Trust (mutual fund), Trustee
299 Park Avenue the Board (February 1996-Present); Union Bank of Switzerland
New York, NY 10171 (Investment Services Department), Department Head.
Age: 54
</TABLE>
(table continued on next page)
SAI-12
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
POSITION
WITH THE
NAME, ADDRESS AND AGE COMPANY PRINCIPAL OCCUPATIONS DURING THE LAST FIVE YEARS
- -------------------------------- ------------ -----------------------------------------------------------
<S> <C> <C>
Timothy M. Spicer, CPA Director UBS Investor Portfolios Trust, Trustee (February 1996-
299 Park Avenue Present); Ensemble Information Systems (software and
New York, NY 10171 electronic information provider), Co-Founder, Chairman of
Age: 46 the Board and Chief Executive Officer (1990-Present);
Amanda Venture Investors (AVI) (a San Francisco based
venture capital firm), Managing Partner (1995-Present);
CoreLink Resources (provides mutual fund related services
to small and medium sized banks), Director (1993-Present);
Smith & Hawken (mail order supplier of gardening tools and
clothing), Director and Chief Financial Officer
(1990-1992); Concord Holding Corporation (provides
distribution and administrative services to mutual funds),
Director (1989-1995); active in civic/charitable
organizations in the San Francisco, California area,
including Big Brothers/Big Sisters and United Way.
Peter Lawson-Johnston Director UBS Investor Portfolios Trust, Trustee (February 1996-
299 Park Avenue Present); Zemex Corporation (mining), Chairman of the Board
New York, NY 10171 and Director (1990-Present); McGraw-Hill, Inc.
Age: 69 (publishing), Director (1990-Present); National Review,
Inc. (publishing), Director (1990-Present); Guggenheim
Brothers (real estate -- venture capital partnership),
Partner (1990-Present); Elgerbar Corporation (holding
company), President and Director (1990-Present); The
Solomon R. Guggenheim Foundation (operates the Solomon R.
Guggenheim Museum in New York and the Peggy Guggenheim
Collection in Venice, Italy), Chairman and Trustee
(1990-Present); The Harry Frank Guggenheim Foundation
(charitable organization), Chairman of the Board and
Trustee (1990-Present).
Timothy P. Sullivan President UBS Investor Portfolios Trust, Vice President (February
437 Madison Avenue 1996-Present); Signature Financial Group, Inc.** (provides
New York, NY 10022 distribution and administrative services to mutual funds),
Age: 34 Vice President (1995-Present); Swiss Bank Corporation, Vice
President/Associate Director (1992-1995); EquitiLink USA,
Inc. (1989-1991).
John R. Elder, CPA Treasurer UBS Investor Portfolios Trust, Treasurer (February 1996-
6 St. James Avenue Present); Signature Financial Group, Inc.**, Vice President
Boston, MA 02116 (April 1995-Present); Phoenix Home Life Mutual Insurance
Age: 47 Company (mutual funds division), Treasurer (1983-1995).
Thomas M. Lenz, Esq. Secretary UBS Investor Portfolios Trust, Secretary (February 1996-
6 St. James Avenue Present); Signature Financial Group, Inc.**, Vice President
Boston, MA 02116 and Associate General Counsel (1989-Present).
Age: 37
</TABLE>
- ------------------------------------
* 'Interested Person' within the meaning of the 1940 Act.
** Signature Broker-Dealer Services, Inc., the Company's principal
underwriter and administrator, is a wholly owned subsidiary of Signature
Financial Group, Inc.
SAI-13
<PAGE>
<PAGE>
COMPENSATION TABLE*
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED FROM COMPANY AND
COMPENSATION ACCRUED AS PART OF ANNUAL BENEFITS FUND COMPLEX PAID
NAME OF PERSON, POSITION FROM COMPANY FUND EXPENSES UPON RETIREMENT TO DIRECTORS
- ---------------------------------- ------------ ------------------- --------------- ------------------
<S> <C> <C> <C> <C>
Dr. Lochmeier 0 0 0 0
Director
Mr. Spicer $ 13,000 0 0 $ 25,000**
Director
Mr. Lawson-Johnston $ 13,000 0 0 $ 25,000**
Director
</TABLE>
- ------------------------------------
*The Company has not completed its first fiscal year since its
organization, and the noted amounts are estimates for the period January 1, 1996
through December 31, 1996. The Directors are also reimbursed for all reasonable
expenses incurred during the execution of their duties.
**The other entity in the Fund Complex is UBS Investor Portfolios Trust.
INVESTMENT ADVISER AND FUNDS SERVICES AGENT
Pursuant to Investment Advisory Agreements between the Trust and Union Bank
of Switzerland, New York Branch, the Branch serves as the Portfolios' investment
adviser. Pursuant to a Sub-Advisory Agreement between the Branch and UBS
International Investment London Limited, UBSII serves as the sub-adviser to the
International Equity Portfolio. The Branch, which operates out of offices
located at 299 Park Avenue, New York, New York, is licensed by the
Superintendent of Banks of the State of New York under the banking laws of the
State of New York and is subject to state and federal banking laws and
regulations applicable to a foreign bank that operates a state licensed branch
in the United States. UBSII is a wholly-owned [direct/indirect (name all
intermediaries through ultimate parent)] subsidiary of the Bank. UBSII was
organized under the laws of the United Kingdom on June 19, 1986. (The Adviser
and the Sub-Adviser are collectively referred to as the 'Advisers'.) Subject to
the supervision of the Trustees, the Adviser, and in the case of the
International Equity Portfolio, UBSII, makes the Portfolios' day-to-day
investment decisions, arranges for the execution of portfolio transactions and
generally manages each Portfolio's investments and provides certain
administrative services.
The investment advisory services provided by the Advisers to the Portfolios
are not exclusive under the terms of the advisory agreements. The Advisers are
free to and do render similar investment advisory services to others. The
Advisers serve as investment advisers to personal investors and act as
fiduciaries for trusts, estates and employee benefit plans. Certain of the
assets of trusts and estates under management are invested in common trust funds
for which the Advisers serve as trustees. The accounts managed or advised by the
Advisers have varying investment objectives and the Advisers invest assets of
such accounts in investments substantially similar to, or the same as, those
which are expected to constitute the principal investments of the Portfolios.
Such accounts are supervised by officers and employees of the Advisers (or their
affiliates) who may also be acting in similar capacities for the Portfolios. See
'Portfolio Transactions'.
The Bank has branches, agencies, representative offices and subsidiaries in
Switzerland and in more than 40 cities outside Switzerland, including, in the
United States, New York City, Chicago, Houston, Los Angeles and San Francisco.
In addition to the receipt of deposits and the making of loans and advances, the
Bank, through its offices and subsidiaries (including UBSII) engages in a wide
range of banking and financial activities typical of the world's major
international banks, including fiduciary, investment advisory and custodial
services and foreign exchange in the United States, Swiss, Asian and
Euro-capital markets. The Bank is one of the world's leading asset managers and
has been active in New York City since 1946. At June 30, 1995, the Bank
(including its consolidated subsidiaries) had total assets of $307.4 billion
(unaudited) and equity capital and reserves of $19.7 billion (unaudited).
BOND FUND. The Adviser's fixed income analysts have extensive experience in
selecting bonds and monitoring their performance. These analysts review the
creditworthiness of individual issuers as well as the broad economic trends
likely to affect the bond markets.
SAI-14
<PAGE>
<PAGE>
U.S. EQUITY FUND. While many investment advisers evaluate companies
primarily on their earnings and their price/earnings ratio, the Adviser uses a
different investment approach. The Adviser believes that dividend yields, rather
than earnings, are the best indicators of future performance. Consequently, the
Adviser will select attractively priced stocks with high dividends. In addition,
the Adviser's analysts often meet with company managers, often contact a
company's suppliers, review the business operations and financial statements of
companies and try to 'get behind' the numbers to gain a true sense of a
company's value.
INTERNATIONAL EQUITY FUND. The Sub-Adviser's analysts have extensive
experience in managing international portfolios. These analysts track the
performance of more than 1,600 companies around the world, and pay particular
attention to the energy, life sciences, technology and financial industries.
The Sub-Adviser is a registered investment adviser under the Investment
Advisers Act of 1940, as amended.
Under the Trust's Advisory Agreement, each Portfolio will pay the Adviser a
fee, calculated daily and payable monthly, at an annual rate of that Portfolio's
average net assets, as shown below.
<TABLE>
<CAPTION>
PORTFOLIO ANNUALIZED FEE RATE
- ----------------------------------- ----------------------------------
<S> <C>
UBS Bond Portfolio 0.45% of Average Daily Net Assets
UBS U.S. Equity Portfolio 0.60% of Average Daily Net Assets
UBS International Equity Portfolio 0.85% of Average Daily Net Assets
</TABLE>
The Branch has voluntarily agreed to waive its fees and reimburse each Fund
for its operating expenses (including those that each Fund incurs indirectly
through its Portfolio) to the extent that the operating expenses (excluding
extraordinary items) of the Bond Fund, U.S. Equity Fund and the International
Equity Fund exceed, on an annual basis, 0.80%, 0.90% and 1.40%, respectively, of
such Fund's average daily net assets. The Branch may modify or discontinue this
expense limitation at any time in the future with 30 days' notice to the
affected Fund. See 'Expenses'.
Pursuant to the Sub-Advisory Agreement, the Sub-Adviser, under the
supervision of the Trustees and the Adviser, makes the day-to-day investment
decisions for the International Equity Portfolio. Under the Sub-Advisory
Agreement, the Adviser has agreed to pay the Sub-Adviser a fee, calculated daily
and payable monthly, at an annual rate of 0.75% of the International Equity
Portfolio's first $20 million of average net assets, plus 0.50% of the next $30
million of average net assets, plus 0.40% of this Portfolio's average net assets
in excess of $50 million. The Adviser is solely responsible for paying the
Sub-Adviser this fee.
The Investment Advisory Agreements and Sub-Advisory Agreement will each
continue in effect until February 1998, and thereafter will be subject to annual
approval by the Trustees or the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of each Portfolio provided that in
either case the continuance also is approved by a majority of the Trustees who
are not interested persons (as defined in the 1940 Act) of the Trust by vote
cast in person at a meeting called for the purpose of voting on such approval.
The Investment Advisory and Sub-Advisory Agreements will terminate automatically
if assigned and are terminable at any time without penalty by a vote of a
majority of the Trustees or by a vote of the holders of a majority (as defined
in the 1940 Act) of the Portfolio's outstanding shares on 60 days' written
notice to the Adviser or Sub-Adviser as applicable. Whenever a Fund, as a
shareholder of a Portfolio, is required by the 1940 Act to vote its Portfolio
interest, the Company will hold a meeting of that Fund's shareholders and will
vote its Portfolio interests proportionately as instructed by that Fund's
shareholders. See 'Organization'. Each Investment Advisory Agreement and
Sub-Advisory Agreement is also terminable by the Adviser or Sub-Adviser, as
applicable, on 60 days' written notice to the Trust. See 'Additional
Information'.
In addition to the above noted investment advisory services, the Adviser
(but not the Sub-Adviser) also provides certain administrative services to the
Funds and the Portfolios and subject to the supervision of the Board and
Trustees, as applicable, is responsible for: establishing performance standards
for the Funds' and Portfolios' third-party service providers and overseeing and
evaluating the performance of such entities; providing and presenting quarterly
management reports to the Directors and the Trustees;
SAI-15
<PAGE>
<PAGE>
supervising the preparation of reports for Fund and Portfolio shareholders; and
establishing voluntary expense limitations for the Fund and providing any
resultant expense reimbursement to the Fund.
These administrative services are provided to the Portfolios by the Adviser
pursuant to the above discussed Investment Advisory Agreements. However, these
administrative services are provided to the Funds pursuant to a Funds Services
Agreement between the Adviser and the Company. The Adviser is not entitled to a
fee from the Company or the Funds under the terms of the Funds Services
Agreement.
The Glass-Steagall Act and other applicable laws generally prohibit banks,
such as Union Bank of Switzerland, from engaging in the business of underwriting
or distributing securities, and the Board of Governors of the Federal Reserve
System has issued an interpretation to the effect that under these laws a bank
holding company registered under the federal Bank Holding Company Act or certain
subsidiaries thereof may not sponsor, organize, or control a registered open-end
investment company continuously engaged in the issuance of its shares, such as
the Company. The interpretation does not prohibit a holding company or a
subsidiary thereof from acting as investment adviser or custodian to such an
investment company. The Advisers believe that they may perform the services for
the Portfolios and the Funds contemplated by the Investment Advisory,
Sub-Advisory and Funds Services Agreements without violating the Glass-Steagall
Act or other applicable banking laws or regulations. State laws on this issue
may differ from the interpretation of relevant federal law, and banks and
financial institutions may be required to register as dealers pursuant to state
securities laws. However, it is possible that future changes in either federal
or state statutes and regulations concerning the permissible activities of banks
or trust companies, as well as further judicial or administrative decisions and
interpretations of present and future statutes and regulations, might prevent
these entities from continuing to perform such services.
If the Adviser or Sub-Adviser were prohibited from providing these services
to the Funds or the Portfolios, it is expected that the Directors and Trustees,
as applicable, would recommend to shareholders that they approve new agreements
with other qualified service providers.
ADMINISTRATORS
Under Administrative Services Agreements with the Company and the Trust,
Signature Broker-Dealer Services, Inc. ('Signature') and Signature Financial
Group (Grand Cayman) Limited ('Signature-Cayman') serve as the Administrators of
the Funds and the Portfolios, respectively (in such capacities, the
'Administrators'). In these capacities, Signature and Signature-Cayman
administer all aspects of their day-to-day operations subject to the supervision
of the Directors and the Trustees, as applicable, except as set forth under the
sections captioned 'Investment Adviser and Funds Services Agent', 'Distributor',
'Custodian' and 'Shareholder Services'. The Administrators (i) furnish general
office facilities and ordinary clerical and related services for day-to-day
operations, including record-keeping responsibilities; (ii) take responsibility
for complying with all applicable federal and state securities and other
regulatory requirements including, without limitation, preparing, mailing and
filing (but not paying for) registration statements, prospectuses, statements of
additional information, proxy statements and all required reports to the Funds'
and Portfolios' shareholders, the SEC, and state securities commissions; and
(iii) perform such administrative and managerial oversight of the activities of
the Funds' and Portfolios' custodian, transfer agent and other agents or
independent contractors as the Directors and Trustees, respectively, may direct
from time to time. Signature is also responsible for monitoring the status of
each Fund as a regulated investment company under the Internal Revenue Code of
1986, as amended (the 'Code').
Under the Company's Administrative Services Agreements, each Fund has
agreed to pay Signature a fee, calculated daily and payable monthly, at the
following annual rates:
<TABLE>
<CAPTION>
ANNUALIZED
FUND'S AVERAGE DAILY NET ASSETS FEE RATE
- ---------------------------------------------------------------- ----------
<S> <C>
First $100 Million.............................................. 0.050%
Next $100 Million............................................... 0.025%
In excess of $200 Million....................................... 0.000%
</TABLE>
SAI-16
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Under the Trust's Administrative Services Agreement, each Portfolio has
agreed to pay Signature-Cayman a fee, calculated daily and payable monthly, at
an annual rate of 0.05% of its average net assets.
The Administrative Services Agreements may be renewed or amended by the
Directors or Trustees, as applicable, without shareholder vote. The
Administrative Services Agreements are terminable at any time without penalty by
a vote of a majority of the Directors or Trustees, as applicable, on not less
than 60 days' written notice to the other party. The Administrators may
subcontract for the performance of their obligations under the Administrative
Services Agreements with the prior written consent of the Directors or Trustees,
as applicable. If an Administrator subcontracts all or a portion of its duties
to another party, that Administrator shall be fully responsible for the acts and
omissions of any such subcontractor(s) as it would be for its own acts or
omissions.
DISTRIBUTOR
Signature also serves as the exclusive distributor of the shares of each
Fund and holds itself available to receive purchase orders for such shares (in
this capacity, the 'Distributor'). The Distributor has been granted the right,
as each Fund's agent, to solicit and accept orders for the purchase of Fund
shares in accordance with the terms of the Distribution Agreement between the
Company, on behalf of each Fund, and the Distributor. The Distribution Agreement
shall continue in effect with respect to each Fund until February 1997, and
thereafter will be subject to annual approval (i) by a vote of the holders of a
majority of each Fund's outstanding voting securities or by the Directors and
(ii) by a vote of a majority of the Directors who are not parties to the
Distribution Agreement or interested persons (as defined by the 1940 Act) of the
Company cast in person at a meeting called for the purpose of voting on such
approval. The Distribution Agreement will terminate automatically if assigned by
either party thereto and is terminable at any time, without penalty, by a vote
of a majority of the Directors, a vote of a majority of such Directors who are
not 'interested persons' of the Company or by a vote of the holders of a
majority of the Fund's outstanding shares, in any case on not more than 60 days'
written notice to the other party. The Distributor does not receive a fee
pursuant to the terms of the Distribution Agreement. The principal offices of
the Distributor are located at 6 St. James Avenue, Boston, Massachusetts 02116.
CUSTODIAN
Investors Bank & Trust Company ('IBT' or the 'Custodian'), whose principal
offices are located at 89 South Street, Boston, Massachusetts 02111, serves as
the custodian and transfer and dividend disbursing agent for the Funds and the
Portfolios. Pursuant to the Custodian Agreements with the Trust, on behalf of
each Portfolio, and the Company, on behalf of each Fund, the Custodian is
responsible for maintaining the books and records of portfolio transactions and
holding portfolio securities and cash. As transfer agent and dividend disbursing
agent, the Custodian is responsible for maintaining account records detailing
the ownership of Portfolio and Fund interests and for crediting income, capital
gains and other changes in share ownership to investors' accounts. The Custodian
will perform its duties as the Portfolios' transfer agent and dividend
disbursing agent from its offices located at 1 First Canadian Place, Suite 2800,
Toronto, Ontario M5X1C8, while its duties as the Funds' transfer agent and
dividend disbursing agent will be performed at its offices located at 89 South
Street, Boston, Massachusetts 02111. Each Fund and Portfolio is responsible for
its proportionate share of the Company's and Trust's, as applicable, transfer
agency, custodial and dividend disbursement fees.
SHAREHOLDER SERVICES
The Company, on behalf of each Fund, has entered into a Shareholder
Servicing Agreement with the Branch under which the Branch provides shareholder
services to Fund shareholders, which include performing shareholder account
administrative and servicing functions, such as answering inquiries regarding
account status and history, the manner in which purchases and redemptions of
shares may be made and certain other matters pertaining to each Fund, assisting
customers in designating and changing dividend options, account designations and
addresses, providing necessary personnel and facilities to coordinate the
establishment and maintenance of shareholder accounts and records with the
Funds'
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Distributor and transfer agent, assisting investors seeking to purchase or
redeem Fund shares, arranging for the wiring or other transfer of funds to and
from customer accounts in connection with orders to purchase or redeem Fund
shares, verifying purchase and redemption orders, transfers among and changes in
accounts and providing other related services. In return for these services,
each Fund has agreed to pay the Branch a fee at an annual rate of 0.25% of the
average daily net assets of the Fund.
As discussed under 'Investment Adviser and Shareholder Servicing Agent',
the Glass-Steagall Act and other applicable laws and regulations limit the
activities of bank holding companies and certain of their subsidiaries in
connection with registered open-end investment companies. The activities of the
Branch under the Shareholder Servicing Agreement, the Investment Advisory
Agreement and the Funds Services Agreement and UBSII under the Sub-Advisory
Agreement, may raise issues under these laws. However, the Branch and UBSII
believe that they may properly perform these services and the other activities
described herein and in the Prospectuses without violating the Glass-Steagall
Act or other applicable banking laws or regulations.
If the Branch or UBSII were prohibited from providing their respective
services under the above noted agreements, the Directors and Trustees, as
applicable, would seek an alternative provider of such services. In such an
event, changes in the operation of the Funds or the Portfolios might occur and
shareholders might not receive the same level of service previously provided by
the Branch and UBSII.
INDEPENDENT ACCOUNTANTS
The Company's and the Trust's independent accounting firm is Price
Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036. The U.S.
firm of Price Waterhouse is a Registered Limited Liability Partnership (LLP)
under the laws of the State of Delaware and, from August 1, 1994, will continue
its practice under the name Price Waterhouse LLP. Price Waterhouse LLP will
conduct an annual audit of the financial statements of each Fund and Portfolio,
assist in the review and filing of the federal and state income tax returns of
the Funds and Portfolios and consult with the Funds and Portfolios as to matters
of accounting and federal and state income taxation.
EXPENSES
Each Fund and Portfolio is responsible for the fees and expenses
attributable to it. Each Fund will bear its proportionate share of the expenses
in its corresponding Portfolio.
The Branch has agreed that if in any fiscal year the sum of any Fund's
expenses (including each Fund's proportionate share of the expenses incurred by
its corresponding Portfolio) exceeds the limits set by applicable regulations of
state securities commissions then the Branch shall waive its fees to the extent
necessary to remove such excess. Currently, the Branch believes that the most
restrictive expense limitation of state securities commissions limits expenses
to an annual rate of 2.5% of the first $30 million of average net assets, 2% of
the next $70 million of such net assets and 1.5% of such net assets in excess of
$100 million. For additional information regarding waivers or expense subsidies,
see 'Management' in the Prospectus. The Branch has also voluntarily agreed to
limit the total operating expenses of each Fund (including each Fund's
proportionate share of the expenses incurred by its corresponding Portfolio),
excluding ordinary expenses, as set forth in each Fund's Prospectus under the
caption 'Expenses'. The Branch may modify or discontinue this fee waiver and
expense limitation at any time in the future with 30 days' notice to the
affected Fund.
PURCHASE OF SHARES
Investors may purchase Fund shares as described in each Prospectus under
'Purchase of Shares.' Fund shares are sold on a continuous basis without a sales
charge at the net asset value per share next determined after receipt of a
purchase order.
The minimum investment requirements for certain retirement plans such as
Individual Retirement Accounts ('IRAs'), Self-Employed Retirement Plans
('SERPs'), 401(k) Plans and other tax-deferred plans are $2,000. The minimum
investment requirement for all subsequent investments is $500. The
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minimum investment requirement for accounts established for the benefit of
minors under the 'Uniform Gift to Minor's Act' is $5,000. The minimum investment
requirement for all subsequent investments is $1,000. The minimum investment
requirement for employees of the Bank and its affiliates is $5,000. The minimum
subsequent investment is $1,000.
In addition, the minimum investment requirements may be met by aggregating
the investments of related shareholders. A 'related shareholder' is limited to
an immediate family member, including mother, father, spouse, child, brother,
sister and grandparent and includes step and adoptive relationships.
Each Fund may, at its own option, accept securities in payment for shares.
The securities tendered are valued by the methods described in 'Net Asset Value'
as of the day the Fund shares are purchased. This is a taxable transaction to
the investor. Securities may be accepted in payment for shares only if they are,
in the judgment of the Advisers, appropriate investments for the Portfolio
corresponding to that Fund. In addition, securities accepted in payment for
shares must: (i) meet the investment objective and policies of the relevant
Portfolio; (ii) be acquired by the Fund for investment and not for resale (other
than for resale to the corresponding Portfolio); (iii) be liquid securities that
are not restricted as to transfer either by law or by market liquidity; and (iv)
have a value that is readily ascertainable, as evidenced by a listing on a stock
exchange, over-the-counter market or by readily available market quotations from
a dealer in such securities. Each Fund reserves the right to accept or reject at
its own option any and all securities offered in payment for its shares.
REDEMPTION OF SHARES
Investors may redeem shares of each Fund as described in the Prospectus
under 'Redemption of Shares'.
If the Directors and Trustees determine that it would be detrimental to the
best interest of the remaining shareholders of a Fund or Portfolio to effect
redemptions wholly or partly in cash, payment of the redemption price may be
made in whole or in part by an in-kind distribution of securities from the
Portfolio, in lieu of cash, in conformity with the applicable rules of the SEC.
If shares are redeemed in-kind, the redeeming shareholder might incur
transaction costs in converting the securities into cash. The methods of valuing
portfolio securities distributed to a shareholder are described under 'Net Asset
Value', and such valuations will be made as of the same time the redemption
price is determined.
FURTHER REDEMPTION INFORMATION. The right of redemption may be suspended or
the date of payment postponed, in the case of the Company and the Trust: (i)
during periods when the New York Stock Exchange (the 'NYSE') is closed for other
than weekends and holidays or when trading on the NYSE is suspended or
restricted; (ii) during periods in which an emergency exists, as determined by
the SEC, which causes disposal by a Portfolio of, or evaluation of the net asset
value of, its securities to be unreasonable or impracticable; or (iii) for such
other periods as the 1940 Act or the SEC may permit.
EXCHANGE OF SHARES
An investor may exchange Fund shares for shares of any other series of the
Company as described under 'Exchange of Shares' in the prospectuses. Investors
considering an exchange of Fund shares for shares of another Company series
should read the prospectus of the series into which the transfer is being made
prior to such exchange (see 'Purchase of Shares'). Requests for exchange are
made in the same manner as requests for redemptions (see 'Redemption of
Shares'). Shares of the acquired series are purchased for settlement when the
proceeds from redemption become available. Certain state securities laws may
restrict the availability of the exchange privilege. The Company reserves the
right to discontinue, alter or limit this exchange privilege at any time.
DIVIDENDS AND DISTRIBUTIONS
Each Fund will declare and pay dividends and distributions as described
under 'Dividends and Distributions' in its Prospectus.
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Determination of the net income for the Bond Fund is made at the times
described in that Prospectus; in addition, net investment income for days other
than business days is determined at the time net asset value is determined on
the prior business day.
NET ASSET VALUE
Each Fund computes its net asset value once daily at the close of business
on Monday through Friday as described under 'Net Asset Value' in the Prospectus.
The net asset value will not be computed on a day in which no orders to purchase
or redeem Fund shares have been received or on the following legal holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. On days when U.S. trading markets close
early in observance of these holidays, the Funds and the Portfolios would expect
to close for purchases and redemptions at the same time. The days on which net
asset value is determined are the Funds' business days.
The net asset value per share of each Fund equals the value of that Fund's
pro rata interest in its corresponding Portfolio plus the value of all its other
assets not invested in the Portfolio, if any, less its total liabilities,
divided by the number of outstanding shares of that Fund. The following is a
discussion of the procedures used by the Portfolios in valuing their assets.
In the case of the Bond Portfolio, securities with a maturity of 60 days or
more, including securities that are listed on an exchange or traded
over-the-counter, are valued by the Portfolio by using the average of at least
three bid quotes from dealers or, in all other cases, by taking into account
various factors affecting market value, including yields and prices of
comparable securities, indications as to values from dealers and general market
conditions. All portfolio securities with a remaining maturity of less than 60
days are valued by the amortized cost method, whereby such securities are valued
at acquisition cost as adjusted for amortization of premium or accretion of
discount to maturity. Because many of the municipal bond issues outstanding do
not have large principal obligations and because of the varying risk factors
applicable to each issuer, no readily available market quotations exist for most
municipal securities.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the NYSE and may also take
place on days on which the NYSE is closed. If events materially affecting the
value of securities occur between the time when the exchange on which they are
traded closes and the time when the Portfolio's net asset value is calculated,
such securities will be valued at fair value in accordance with procedures
established by and under the general supervision of the Trustees.
In the case of the U.S. Equity and International Equity Portfolios,
securities listed on domestic exchanges, other than options on stock indices,
are valued using the last sales price on the most representative exchange at
4:00 p.m. New York time or, in the absence of recorded sales, at the average of
readily available closing bid and asked prices on such exchange or, in the
absence of such prices, at the readily available closing bid price on such
exchange. Securities listed on foreign exchanges are valued at the last quoted
sale price available before the time when net assets are valued or, in the
absence of such recorded sales, at the average of readily available closing bid
and asked prices on such exchange or, in the absence of such prices, at the
readily available closing bid price on such exchange. Unlisted securities are
valued at the average of the quoted bid and asked prices in the over-the-counter
market. The value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative market
for such security. For purposes of calculating net asset value per share, all
assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the prevailing market rates available at the time
of valuation.
Options on stock indices traded on national securities exchanges are valued
at the close of options trading on such exchanges, which is currently 4:10 p.m.,
New York time. Stock index futures and related options traded on commodities
exchanges are valued at their last sales price as of the close of such
commodities exchanges, which is currently 4:15 p.m., New York time. Securities
or other assets for which market quotations are not readily available are valued
at fair value in accordance with procedures established by and under the general
supervision of the Trustees. Such procedures include the use of independent
pricing services, indications as to values from dealers and general market
conditions. Short-
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term investments that mature in 60 days or less are valued at amortized cost
method (as discussed above) if their original maturity was 60 days or less, or
by amortizing their value on the 61st day prior to maturity, if their original
maturity when acquired by a Portfolio was more than 60 days, unless this is
determined not to represent fair value by the Trustees.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the NYSE and may also take
place on days on which the NYSE is closed. If events materially affecting the
value of securities occur between the time when the exchange on which they are
traded closes and the time when a Portfolio's net asset value is calculated,
such securities will be valued at fair value in accordance with procedures
established by and under the general supervision of the Trustees.
If market quotations for the securities of any Portfolio are not readily
available, such securities will be valued at 'fair value' as determined in good
faith by the Trustees.
PERFORMANCE DATA
From time to time, the Funds may quote performance in terms of yield,
actual distributions, total return or capital appreciation in reports, sales
literature and advertisements published by the Funds. Current performance
information for the Funds may be obtained by calling your Shareholder Servicing
Agent. See 'Additional Information' in the Prospectus.
YIELD QUOTATIONS. As required by regulations of the SEC, the annualized
yield for the Bond Fund is computed by dividing the Fund's net investment income
per share earned during a 30-day period by its net asset value on the last day
of the period. The average daily number of Fund shares outstanding during the
period that are eligible to receive dividends is used in determining the net
investment income per share. Income is computed by totaling the interest earned
on all debt obligations during the period and subtracting from that amount the
total of all recurring expenses incurred during the period. The 30-day yield is
then annualized on a bond-equivalent basis assuming semi-annual reinvestment and
compounding of net investment income, as described under 'Additional
Information' in the Prospectus.
TOTAL RETURN QUOTATIONS. As required by SEC regulations, the average annual
total return of the Bond, U.S. Equity and International Equity Funds for a
period is computed by assuming a hypothetical initial payment of $1,000. It is
then assumed that all of the dividends and distributions by that Fund over the
relevant period are reinvested. It is then assumed that at the end of the period
the entire amount is redeemed. The average annual total return is then
calculated by determining the annual rate required for the initial payment to
grow to the amount which would have been received upon redemption (i.e., the
average annual compound rate of return).
Aggregate total returns, reflecting the cumulative percentage change over a
measuring period, may also be calculated.
GENERAL. A Fund's performance will vary from time-to-time depending upon
market conditions, the composition of its corresponding Portfolio and its
operating expenses. Consequently, any given performance quotation should not be
considered representative of a Fund's performance for the future. In addition,
because performance will fluctuate, it may not provide a basis for comparing an
investment in a Fund with certain bank deposits or other investments that pay a
fixed yield or return for a stated period of time.
Comparative performance information may be used from time to time in
advertising the Funds' shares, including data from Lipper Analytical Services,
Inc., Micropal, Inc., Ibbotson Associates, Morningstar Inc., the S&P 500
Composite Stock Price Index, the Dow Jones Industrial Average, the Frank Russell
Indices, The EAFE Index and other industry publications.
PORTFOLIO TRANSACTIONS
The Advisers place orders for all purchases and sales of securities on
behalf of the Portfolios. The Advisers enter into repurchase agreements and
reverse repurchase agreements and effects loans of portfolio securities on
behalf of the Portfolios. See 'Investment Objectives and Policies'.
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Fixed income and debt securities and municipal bonds and notes are
generally traded at a net price with dealers acting as principal for their own
accounts without a stated commission. The price of the security usually includes
profit to the dealers. In underwritten offerings, securities are purchased at a
fixed price that includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. Occasionally,
certain securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
Portfolio transactions for the Bond Portfolio will be undertaken
principally to accomplish its objective in relation to expected movements in the
general level of interest rates. The Bond Portfolio may engage in short-term
trading consistent with its objectives.
In connection with portfolio transactions for the Bond Portfolio, the
Adviser intends to seek best price and execution on a competitive basis for both
purchases and sales of securities. Portfolio turnover may vary from year to
year, as well as within a year. The portfolio turnover rate for the Bond
Portfolio is expected to be under 100%.
In connection with portfolio transactions for the U.S. Equity and
International Equity Portfolios, the overriding objective is to obtain the best
possible execution of purchase and sale orders. Portfolio turnover may vary from
year to year, as well as within a year. The portfolio turnover rate for the U.S.
Equity and International Equity Portfolios is expected to be under 100%.
In selecting a broker, the Adviser or Sub-Adviser, as applicable, considers
a number of factors including: the price per unit of the security; the broker's
reliability for prompt, accurate confirmations and on-time delivery of
securities; the broker's financial condition; and the commissions charged. A
broker may be paid a brokerage commission greater than that another broker might
have charged for effecting the same transaction if, after considering the
foregoing factors, the Adviser or Sub-Adviser decides that the broker chosen
will provide the best possible execution and/or such a broker provides research
services to the Adviser or Sub-Adviser. The Advisers monitor the reasonableness
of the brokerage commissions paid in light of the execution received. The
Trustees regularly review the reasonableness of commissions and other
transaction costs incurred by the Portfolios in light of the facts and
circumstances deemed relevant, and, in that connection, will review reports and
published data concerning transaction costs incurred by institutional investors
generally. Research services provided by brokers to which the Advisers have
allocated brokerage business in the past include economic statistics and
forecasting services, industry and company analyses, portfolio strategy
services, quantitative data, and consulting services from economists and
political analysts. Research services furnished by brokers are used for the
benefit of all the Advisers' clients and not solely or necessarily for the
benefit of the Portfolios. The Advisers believe that the value of research
services received is not determinable and does not significantly increase
expenses. The Portfolios do not reduce their fee to the Advisers by any amount
that might be attributable to the value of such services.
Subject to the overriding objective of obtaining the best possible
execution of orders, the Advisers may allocate a portion of a Portfolio's
brokerage transactions to their affiliates. In order for their affiliates to
effect any portfolio transactions for the Portfolios, the commissions, fees or
other remuneration received by such affiliates must be reasonable and fair
compared to the commissions, fees, or other remuneration paid to other brokers
in connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange during a comparable period of time.
Furthermore, the Trustees, including a majority of the Trustees who are not
'interested persons', have adopted procedures that are reasonably designed to
ensure that any commissions, fees, or other remuneration paid to such affiliates
are consistent with the foregoing standard.
Portfolio securities will not be purchased from or through or sold to or
through the Portfolio's Adviser, Sub-Adviser, Distributor or any 'affiliated
person' (as defined in the 1940 Act) or any affiliated person of such a person
when such entities are acting as principals, except to the extent permitted by
law. In addition, the Portfolios will not purchase securities during the
existence of any underwriting group relating thereto of which the Adviser,
Sub-Adviser or affiliate thereof is a member, except to the extent permitted by
law.
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On those occasions when the Advisers deem the purchase or sale of a
security to be in the best interests of a Portfolio as well as other customers
including other Portfolios, the Advisers to the extent permitted by applicable
laws and regulations may, but are not obligated to, aggregate the securities to
be sold or purchased for a Portfolio with those to be sold or purchased for
other customers in order to obtain best execution, including lower brokerage
commissions if appropriate. In such an event, the securities so purchased or
sold as well as any expenses incurred in the transaction will be allocated by
the Advisers in a manner that is equitable and consistent with their fiduciary
obligations to their clients. In some instances, this procedure might adversely
affect a Portfolio.
If a Portfolio writes an option and effects a closing purchase transaction
with respect to an option written by it, such transaction will normally be
executed by the same broker-dealer who executed the sale of the option. The
writing of options by a Portfolio will be subject to limitations established by
each of the exchanges governing the maximum number of options in each class that
may be written by a single investor or group of investors acting in concert,
regardless of whether the options are written on the same or different exchanges
or are held or written in one or more accounts or through one or more brokers.
The number of options that a Portfolio may write may be affected by options
written by the Advisers for other investment advisory clients. An exchange may
order the liquidation of positions found to be in excess of these limits and it
may impose certain other sanctions.
ORGANIZATION
UBS PRIVATE INVESTOR FUNDS, INC.
UBS Private Investor Funds, Inc. is a Maryland corporation and is currently
issuing shares of common stock, par value $0.001 per share, in four series: The
UBS Bond Fund Series; The UBS Tax Exempt Bond Fund Series; The UBS U.S. Equity
Fund Series; and The UBS International Equity Fund Series.
Each share of a series issued by the Company will have a pro rata interest
in the assets of that series. The Company is currently authorized to issue
500,000,000 shares of common stock, including 10,000,000 shares of each of the
four current series. Under Maryland law, the Board has the authority to increase
the number of shares of stock that the Company has the authority to issue. Each
share has one vote (and fractional shares have a corresponding fractional vote)
with respect to matters upon which shareholder vote is required; stockholders
have no cumulative voting rights with respect to their shares. Shares of all
series vote together as a single class except that if the matter being voted
upon affects only a particular series then it will be voted on only by that
series. If a matter affects a particular series differently from other series,
that series will vote separately on such matter. Each share is entitled to
participate equally in dividends and distributions declared by the Directors
with respect to the relevant series, and in the net distributable assets of such
series on liquidation.
Under Maryland law, the Company is not required to hold an annual meeting
of stockholders unless required to do so under the 1940 Act. It is the Company's
policy not to hold an annual meeting of stockholders unless so required. All
shares of the Company (regardless of series) have noncumulative voting rights
for the election of Directors. Under Maryland law, the Company's Directors may
be removed by vote of stockholders. The Board currently consists of three
directors.
CONTROL PERSONS. The Company expects that, immediately prior to the initial
public offering of its shares, the sole holder of the capital stock of each of
its series will be Signature. Upon the offering of the shares of the Funds, each
Fund may have a number of shareholders each holding 5% or more of the
outstanding shares of such Fund. In such an event, the Company cannot predict
the length of time that such persons will own such amounts or whether one or
more of such persons will become 'control' persons of such Fund.
UBS INVESTOR PORTFOLIOS TRUST
UBS Investor Portfolios Trust, a master trust fund formed under New York
law, was organized on February 9, 1996. The Declaration of Trust permits the
Trustees to issue interests in one or more
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subtrusts or series. To date, three series have been authorized. Each series
(i.e., a Portfolio) of the Trust corresponds to a Fund of the Company.
A copy of the Trust's Declaration of Trust is on file in the office of the
Administrator.
Holders of interest in the Trust, such as the Funds, may redeem all or any
part of their interest in the Trust at any time, upon the submission of a
redemption request in proper form. See 'Redemption of Shares'.
TAXES
Each Fund intends to qualify and intends to remain qualified as a regulated
investment company (a 'RIC') under Subchapter M of the Code. As a RIC, a Fund
must, among other things: (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to loans of stock and securities,
gains from the sale or other disposition of stock, securities or foreign
currency and other income (including but not limited to gains from options,
futures, and forward contracts) derived with respect to its business of
investing in such stock, securities or foreign currency; (b) derive less than
30% of its gross income from the sale or other disposition of stock, securities,
options, futures or forward contracts (other than options, futures or forward
contracts on foreign currencies) held less than three months; and (c) diversify
its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
value of the Fund's total assets is represented by cash, U.S. Government
securities, investments in other RICs and other securities limited in respect of
any one issuer, to an amount not greater than 5% of the Fund's total assets, and
10% of the outstanding voting securities of such issuer and (ii) not more than
25% of the value of its total assets is invested in the securities of any one
issuer (other than U.S. Government securities or the securities of other RICs).
As a RIC, a Fund (as opposed to its shareholders) will not be subject to federal
income taxes on the net investment income and capital gains that it distributes
to its shareholders, provided that at least 90% of its net investment income and
realized net short-term capital gains in excess of net long-term capital losses
for the taxable year is distributed.
For federal income tax purposes, dividends that are declared by a Fund in
October, November or December as of a record date in such month and actually
paid in January of the following year will be treated as if they were paid on
December 31 of the year declared. Therefore, such dividends will generally be
taxable to a shareholder in the year declared rather than the year paid.
Gains or losses on sales of securities by a Portfolio will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where, if applicable, a Portfolio
acquires a put or writes a call thereon. Other gains or losses on the sale of
securities will be short-term capital gains or losses. Gains and losses on the
sale, lapse or other termination of options on securities will be treated as
gains and losses from the sale of securities. If an option written by a
Portfolio lapses or is terminated through a closing transaction, such as a
repurchase by the Portfolio of the option from its holder, the Portfolio will
realize a short-term capital gain or loss, depending on whether the premium
income is greater or less than the amount paid by the Portfolio in the closing
transaction. If securities are purchased by a Portfolio pursuant to the exercise
of a put option written by it, the Portfolio will subtract the premium received
from its cost basis in the securities purchased.
Under the Code, gains or losses attributable to disposition of foreign
currency or to foreign currency contracts, or to fluctuations in exchange rates
between the time a Portfolio accrues income or receivables or expenses or other
liabilities denominated in a foreign currency and the time a Portfolio actually
collects such income or pays such liabilities, are treated as ordinary income or
ordinary loss. Similarly, gains or losses on the disposition of debt securities
held by a Portfolio, if any, denominated in foreign currency, to the extent
attributable to fluctuations in exchange rates between the acquisition and
disposition dates are also treated as ordinary income or loss.
Forward currency contracts, options and futures contracts entered into by a
Portfolio may create 'straddles' for U.S. federal income tax purposes and this
may affect the character and timing of gains or losses realized by a Portfolio
on forward currency contracts, options and futures contracts or on the
underlying securities. 'Straddles' may also result in the loss of the holding
period of underlying securities
SAI-24
<PAGE>
<PAGE>
for purposes of the 30% of gross income test described above, and therefore, a
Portfolio's ability to enter into forward currency contracts, options and
futures contracts may be limited.
Certain options, futures and foreign currency contracts held by a Portfolio
at the end of each fiscal year will be required to be 'marked to market' for
federal income tax purposes -- i.e., treated as having been sold at market
value. For such options and futures contracts, 60% of any gain or loss
recognized on these deemed sales and on actual dispositions will be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss regardless of how long the Portfolio has held such options
or futures. Any gain or loss recognized on foreign currency contracts will be
treated as ordinary income.
FOREIGN SHAREHOLDERS. Distributions of net investment income and realized
net short-term capital gains in excess of net long-term capital losses to a
shareholder who, as to the United States, is a non-resident alien individual,
fiduciary of a foreign trust or estate, foreign corporation or foreign
partnership (a 'foreign shareholder') will be subject to U.S. withholding tax at
the rate of 30% (or lower treaty rate) unless the dividends are effectively
connected with a U.S. trade or business of the shareholder, in which case the
dividends will be subject to tax on a net income basis at the graduated rates
applicable to U.S. individuals or domestic corporations. Distributions of net
long-term capital gains to foreign shareholders will not be subject to U.S. tax
unless the distributions are effectively connected with the shareholder's trade
or business in the United States or, in the case of a shareholder who is a
non-resident alien individual, the shareholder was present in the United States
for more than 182 days during the taxable year and certain other conditions are
met.
In the case of a foreign shareholder who is a nonresident alien individual
and who is not otherwise subject to withholding as described above, a Fund may
be required to withhold U.S. federal income tax at the rate of 31% unless IRS
Form W-8 is provided. See 'Taxes' in the Prospectus. Transfers by gift of shares
of a Fund by a foreign shareholder who is a nonresident alien individual will
not be subject to U.S. federal gift tax, but the value of shares of the Fund
held by such a shareholder at his or her death will be includible in his or her
gross estate for U.S. federal estate tax purposes.
FOREIGN TAXES. It is expected that the International Equity Portfolio may
be subject to foreign withholding taxes with respect to income received from
sources within foreign countries. In the case of the International Equity
Portfolio, so long as more than 50% in value of the Portfolio's total assets at
the close of any taxable year consists of stock or securities of foreign
corporations, the Portfolio may elect to treat any foreign income taxes paid by
it as paid directly by its shareholders. The Portfolio will make such an
election only if it deems it to be in the best interest of its shareholders. The
Portfolio will notify its shareholders in writing each year if they make the
election and of the amount of foreign income taxes, if any, to be treated as
paid by the shareholders. If the Portfolio makes the election, each shareholder
of the International Equity Fund will be required to include in his or her
income their proportionate share of the amount of foreign income taxes paid by
the Portfolio and will be entitled to claim either a credit (subject to the
limitations discussed below), or, if he or she itemizes deductions, a deduction
for his or her share of the foreign income taxes in computing federal income tax
liability. (No deduction will be permitted in computing an individual's
alternative minimum tax liability.) A shareholder who is a nonresident alien
individual or a foreign corporation may be subject to U.S. withholding tax on
the income resulting from the election described in this paragraph, but may not
be able to claim a credit or deduction against such U.S. tax for the foreign
taxes treated as having been paid by such shareholder. A tax-exempt shareholder
will not ordinarily benefit from this election. Shareholders who choose to
utilize a credit (rather than a deduction) for foreign taxes will be subject to
the limitation that the credit may not exceed the shareholder's U.S. tax
(determined without regard to the availability of the credit) attributable to
his or her total foreign source taxable income. For this purpose, the portion of
dividends and distributions paid by the International Equity Fund from its
foreign source net investment income will be treated as foreign source income.
This Portfolio's gains and losses from the sale of securities will generally be
treated as derived from U.S. sources, however, and certain foreign currency
gains and losses likewise will be treated as derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
'passive income', such as the portion of dividends received from the Portfolio
that qualifies as foreign source income. In addition, the foreign tax credit is
allowed to offset only 90% of the
SAI-25
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<PAGE>
alternative minimum tax imposed on corporations and individuals. Because of
these limitations, shareholders may be unable to claim a credit for the full
amount of their proportionate shares of the foreign income taxes paid by the
International Equity Portfolio.
STATE AND LOCAL TAXES. Each Fund may be subject to state or local taxes in
jurisdictions in which that Fund is deemed to be doing business. In addition,
the treatment of a Fund and its shareholders in those states that have income
tax laws might differ from treatment under the federal income tax laws. For
example, a portion of the dividends received by shareholders may be subject to
state income tax. Shareholders should consult their own tax advisors with
respect to any state or local taxes.
ADDITIONAL INFORMATION
This SAI does not contain all the information included in the Registration
Statement filed with the SEC under the Securities Act and the 1940 Act with
respect to the securities offered hereby. Certain portions of this SAI have been
omitted pursuant to the rules and regulations of the SEC. The Registration
Statement, including the exhibits filed therewith, the Prospectus and the SAI,
may be examined at the office of the SEC, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549.
Statements contained in this SAI to the contents of any agreement or other
document referred to are not necessarily complete, and, in each instance,
reference is made to the copy of such agreement or other document filed as an
exhibit to the Registration Statement of which this document forms a part, each
such statement being qualified in all respects by such reference.
SAI-26
<PAGE>
<PAGE>
UBS PRIVATE INVESTOR FUNDS, INC.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UBS UBS
UBS U.S. EQUITY INTERNATIONAL
BOND FUND FUND EQUITY FUND
--------- ----------- -------------
<S> <C> <C> <C>
ASSETS
Cash.......................................................... $25,000 $25,000 $25,000
Deferred organization costs................................... 72,500 72,500 72,500
--------- ----------- -------------
Total Assets............................................. 97,500 97,500 97,500
--------- ----------- -------------
LIABILITIES
Organization expenses payable................................. 72,500 72,500 72,500
--------- ----------- -------------
NET ASSETS......................................................... $25,000 $25,000 $25,000
--------- ----------- -------------
--------- ----------- -------------
Shares outstanding ($0.001 par value).............................. 250 250 250
--------- ----------- -------------
--------- ----------- -------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE..... $100.00 $100.00 $100.00
--------- ----------- -------------
--------- ----------- -------------
COMPOSITION OF NET ASSETS:
Shares of common stock, at par................................ $ 0 $ 0 $ 0
Additional paid-in capital.................................... 25,000 25,000 25,000
--------- ----------- -------------
Net Assets, January 31, 1996....................................... $25,000 $25,000 $25,000
--------- ----------- -------------
--------- ----------- -------------
</TABLE>
See Notes to Financial Statements.
F-1
<PAGE>
<PAGE>
UBS Private Investor Funds, Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements
January 31, 1996
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
UBS Private Investor Funds, Inc. (the 'Company') was organized as a Maryland
corporation on November 16, 1995. The Company consists of four series, as
follows: UBS Bond Fund, UBS Tax Exempt Bond Fund, UBS U.S. Equity Fund and UBS
International Equity Fund. The accompanying financial statements and notes
relate to only UBS Bond Fund, UBS U.S. Equity Fund and UBS International Equity
Fund (collectively, the 'Funds').
UBS Bond Fund, UBS U.S. Equity Fund and UBS International Equity Fund seek to
achieve their investment objectives by investing substantially all of their
investable assets in UBS Bond Portfolio, UBS U.S. Equity Portfolio and UBS
International Equity Portfolio (collectively, the 'Portfolios'), respectively.
The Portfolios are series of UBS Investor Portfolios Trust (the 'Master'), an
open-end management investment company, and have substantially the same
investment objective as each corresponding Fund.
As the Funds seek to achieve their investment objectives by investing
substantially all of their investable assets in corresponding Portfolios of the
Master, these Funds have not retained the services of an investment adviser.
Rather, the Master will retain the services of Union Bank of Switzerland, New
York Branch (the 'Branch') as investment adviser. Under the terms of the
Investment Advisory Agreement between each Portfolio and the Branch, the Branch
will be entitled to receive a fee for the provision of investment advice,
portfolio management and certain administrative services to the Portfolios. This
fee is calculated daily and payable monthly based on a percentage of the net
assets of each Portfolio at the following annual rates:
<TABLE>
<S> <C>
UBS Bond Portfolio................................................... 0.45%
UBS U.S. Equity Portfolio............................................ 0.60%
UBS International Equity Portfolio................................... 0.85%
</TABLE>
As each Fund absorbs a pro-rata portion of the expenses of its corresponding
Portfolio, this fee, although incurred by the Portfolio, is borne by each Fund.
In addition to the Investment Advisory Agreement, the Branch expects to enter
into a Sub-Advisory Agreement with UBS International Investment London Limited
('UBSII') with respect to UBS International Equity Fund. Pursuant to the terms
of this agreement, the Branch will pay UBSII a monthly fee out of its advisory
fee.
Signature Broker-Dealer Services, Inc. ('Signature') will serve as the Funds'
administrator, principal underwriter and distributor of the Funds' shares.
The Funds have had no operations through January 31, 1996 other than the sale to
Signature of 250 shares of each Fund for $25,000.
Organization costs incurred in connection with the organization and initial
registration of the Funds will be paid initially by UBS and reimbursed by the
Funds. Such organization costs have been deferred and will be amortized ratably
over a period of sixty months from the commencement of operations. The amount
paid by each Fund on any redemption by Signature (or any subsequent holder) of a
Fund's initial shares will be reduced by the pro-rata portion of any unamortized
organization expenses of the Fund and its corresponding Portfolio. The amount of
such reduction attributable to the unamortized organization costs of the
corresponding Portfolio shall be contributed by the Fund to its corresponding
Portfolio.
NOTE 2 -- AGREEMENTS
The Company expects to enter into an Administrative Services Agreement with
Signature pursuant to which it will agree to administer the day-to-day
operations of the Funds subject to the direction and control of the Board of
Directors of the Company. For the services provided to the Funds, Signature will
F-2
<PAGE>
<PAGE>
receive a fee, accrued daily and payable monthly, at an annual rate of 0.05% of
each Fund's first $100 million average net assets and 0.025% of the next $100
million of such assets. Signature will not be paid a fee on such assets in
excess of $200 million.
The Master expects to enter into an Administrative Services Agreement with
Signature Financial Group (Grand Cayman) Limited ('Signature-Cayman'), a
wholly-owned subsidiary of Signature. Under the terms of this Agreement,
Signature-Cayman will administer the day-to-day operations of the Portfolios
subject to the direction and control of the Board of Trustees of the Master. For
services provided to the Portfolio, Signature will receive a fee, accrued daily
and payable monthly, at an annual rate of 0.05% of each Portfolio's average net
assets. As each Fund absorbs a pro-rata portion of the expenses of its
corresponding Portfolio, this fee, although incurred by the Portfolio, is borne
by each Fund.
Signature expects to enter into a Distribution Agreement with the Company. The
Distributor does not receive a fee pursuant to the terms of the Distribution
Agreement.
The Company expects to enter into separate Shareholder Servicing Agreements (the
'SSA') with the Branch and Signature. Pursuant to the terms of the SSA, the
Branch will agree to provide shareholder support to their clients who are also
shareholders of the Funds while Signature will agree to provide support services
to all other shareholders of the Funds. Both Signature and the Branch will be
entitled to a fee under the SSA, accrued daily and payable monthly, at an annual
rate of 0.25% of the average balance of the accounts so serviced. Services to be
provided may include, but are not limited to, any of the following: establishing
and/or maintaining shareholder accounts and records, assisting investors seeking
to purchase or redeem Fund shares, providing performance information relating to
the Fund and responding to shareholder inquiries.
The Branch has voluntarily agreed to waive a portion of its fees and reimburse a
portion of Fund expenses to the extent that the ordinary operating expenses of
the Funds (including the expenses of the Portfolios allocated to the Funds)
exceed the following annual rates of each such Fund's average net assets:
<TABLE>
<CAPTION>
FUND EXPENSE LIMITATION
- -------------------------------------------------------- ------------------
<S> <C>
UBS Bond Fund........................................... 0.80%
UBS U.S. Equity Fund.................................... 0.90%
UBS International Equity Fund........................... 1.40%
</TABLE>
F-3
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors of
UBS PRIVATE INVESTOR FUNDS, INC.
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of UBS Bond Fund, UBS
U.S. Equity Fund and UBS International Equity Fund (three of the four series
constituting UBS Private Investor Funds, Inc., hereafter referred to as the
'Funds') at January 31, 1996, in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Fund's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
January 31, 1996
F-4
<PAGE>
<PAGE>
PART C
UBS PRIVATE INVESTOR FUNDS, INC.
UBS BOND FUND
UBS U.S. EQUITY FUND
UBS TAX EXEMPT BOND FUND
UBS INTERNATIONAL EQUITY FUND
<PAGE>
<PAGE>
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
Part B -- UBS Private Investor Funds, Inc. (the 'Company') Financial
Statements: Statement of Assets and Liabilities, at January 31, 1996.
(b) Exhibits.
<TABLE>
<C> <S>
*(1) -- Articles of Incorporation of the Company
*(2) -- Bylaws of the Company
(3) -- Not applicable
*(4)(A) -- Specimen certificate evidencing shares of Common Stock, $.001 par value, of the Company
*(4)(B) -- Articles FIFTH, SIXTH, NINTH and TWELFTH of the Company's Articles of Incorporation, relating to
the rights of stockholders
*(4)(C) -- Selected portions of the Company's Bylaws, relating to the rights of stockholders
*(5) -- Investment Advisory Agreement between the Company and Union Bank of Switzerland (the 'Bank'),
New York Branch (the 'Adviser') on behalf of UBS Tax Exempt Bond Fund
*(6) -- Distribution Agreement between the Company and Signature Broker-Dealer Services, Inc.
(7) -- Not applicable
*(8) -- Custodian Agreement between the Company and Investors Bank & Trust Company
*(9)(A) -- Administrative Services Agreement between the Company and Signature Broker-Dealer Services, Inc.
on behalf of the Funds
*(9)(B) -- Transfer Agency and Service Agreement between the Company and Investors Bank & Trust Company on
behalf of the Funds
(10) -- Opinion and consent of Sullivan & Cromwell
*(11) -- Opinion and consent of Price Waterhouse LLP
(12) -- Not applicable
(13) -- Subscription Agreement between the Company and Signature Broker-Dealer Services, Inc. with
respect to the Company's initial capitalization
(14) -- Not applicable
(15) -- Not applicable
(16) -- Not applicable
(17) -- Not applicable
(18) -- Not applicable
</TABLE>
- ------------
* Filed in Pre-Effective Amendment No. 1 to this Registration Statement filed
on February 9, 1996.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Signature Broker-Dealer Services, Inc. ('Signature'), a Delaware
corporation, owns all of the outstanding shares of the Company's four current
series: The UBS Bond Fund Series; The UBS Tax Exempt Bond Fund Series; The UBS
International Equity Fund Series; and The UBS U.S. Equity Fund Series. Signature
Financial Group, Inc., a Delaware corporation ('SFG'), owns all of the voting
securities of Signature and, therefore, SFG controls the Company.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of January 31, 1996, the number of record holders of each series of the
Company was one. See Item 25.
C-1
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ITEM 27. INDEMNIFICATION.
State Law, Articles of Incorporation and Bylaws. It is the Company's policy
to indemnify its officers, directors, employees and other agents to the maximum
extent permitted by Section 2-418 of the Maryland General Corporation Law,
Articles SEVENTH and EIGHTH of the Company's Articles of Incorporation and
Article IV of the Company's Bylaws (each set forth below).
Section 2-418 of the Maryland General Corporation Law reads as follows:
'2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
(a) In this section the following words have the meaning indicated.
(1) 'Director' means any person who is or was a director of a
corporation and any person who, while a director of a corporation, is or
was serving at the request of the corporation as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise, or
employee benefit plan.
(2) 'Corporation' includes any domestic or foreign predecessor entity
of a corporation in a merger, consolidation, or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.
(3) 'Expenses' include attorney's fees.
(4) 'Official capacity' means the following:
(i) When used with respect to a director, the office of director in
the corporation; and
(ii) When used with respect to a person other than a director as
contemplated in subsection (j), the elective or appointive office in the
corporation held by the officer, or the employment or agency
relationship undertaken by the employee or agent in behalf of the
corporation.
(iii) 'Official capacity' does not include service for any other
foreign or domestic corporation or any partnership, joint venture,
trust, other enterprise, or employee benefit plan.
(5) 'Party' includes a person who was, is, or is threatened to be made
a named defendant or respondent in a proceeding.
(6) 'Proceeding' means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, or
investigative.
(b)(1) A corporation may indemnify any director made a party to any
proceeding by reason of service in that capacity unless it is established
that:
(i) the act or omission of the director was material to the matter
giving rise to the proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and deliberate dishonesty; or
(ii) The director actually received an improper personal benefit in
money, property, or services; or
(iii) In the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was unlawful.
(2)(i) Indemnification may be against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding.
(ii) However, if the proceeding was one by or in the right of the
corporation, indemnification may not be made in respect of any proceeding
in which the director shall have been adjudged to be liable to the
corporation.
(3)(i) The termination of any proceeding by judgment, order, or
settlement does not create a presumption that the director did not meet the
requisite standard of conduct set forth in this subsection.
C-2
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<PAGE>
(ii) The termination of any proceeding by conviction, or a plea of
nolo contendere or its equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttable presumption that the director did
not meet that standard of conduct.
(c) A director may not be indemnified under subsection (B) of this
section in respect of any proceeding charging improper personal benefit to
the director, whether or not involving action in the director's official
capacity, in which the director was adjudged to be liable on the basis that
personal benefit was improperly received.
(d) Unless limited by the charter:
(1) A director who has been successful, on the merits or otherwise,
in the defense of any proceeding referred to in subsection (B) of this
section shall be indemnified against reasonable expenses incurred by the
director in connection with the proceeding.
(2) A court of appropriate jurisdiction upon application of a
director and such notice as the court shall require, may order
indemnification in the following circumstances:
(i) If it determines a director is entitled to reimbursement
under paragraph (1) of this subsection, the court shall order
indemnification, in which case the director shall be entitled to
recover the expenses of securing such reimbursement; or
(ii) If it determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant
circumstances, whether or not the director has met the standards of
conduct set forth in subsection (b) of this section or has been
adjudged liable under the circumstances described in subsection (c)
of this section, the court may order such indemnification as the
court shall deem proper. However, indemnification with respect to any
proceeding by or in the right of the corporation or in which
liability shall have been adjudged in the circumstances described in
subsection (c) shall be limited to expenses.
(3) A court of appropriate jurisdiction may be the same court in
which the proceeding involving the director's liability took place.
(e)(1) Indemnification under subsection (b) of this section may not
be made by the corporation unless authorized for a specific proceeding
after a determination has been made that indemnification of the director
is permissible in the circumstances because the director has met the
standard of conduct set forth in subsection (b) of this section.
(2) Such determination shall be made:
(i) By the board of directors by a majority vote of a quorum
consisting of directors not, at the time, parties to the proceeding,
or, if such a quorum cannot be obtained, then by a majority vote of a
committee of the board consisting solely of two or more directors
not, at the time, parties to such proceeding and who were duly
designated to act in the matter by a majority vote of the full board
in which the designated directors who are parties may participate;
(ii) By special legal counsel selected by the board of directors
or a committee of the board by vote as set forth in subparagraph (i)
of this paragraph, or, if the requisite quorum of the full board
cannot be obtained therefor and the committee cannot be established,
by a majority vote of the full board in which director [SIC] who are
parties may participate; or
(iii) By the shareholders.
(3) Authorization of indemnification and determination as to
reasonableness of expenses shall be made in the same manner as the
determination that indemnification is permissible. However, if the
determination that indemnification is permissible is made by special
legal counsel, authorization of indemnification and determination as to
reasonableness of expenses shall be made in the manner specified in
subparagraph (ii) of paragraph (2) of this subsection for selection of
such counsel.
(4) Shares held by directors who are parties to the proceeding may
not be voted on the subject matter under this subsection.
C-3
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(f)(1) Reasonable expenses incurred by a director who is a party to
a proceeding may be paid or reimbursed by the corporation in advance of
the final disposition of the proceeding upon receipt by the corporation
of:
(i) A written affirmation by the director of the director's good
faith belief that the standard of conduct necessary for
indemnification by the corporation as authorized in this section has
been met; and
(ii) A written undertaking by or on behalf of the director to
repay the amount if it shall ultimately be determined that the
standard of conduct has not been met.
(2) The undertaking required by subparagraph (ii) of paragraph (1)
of this subsection shall be an unlimited general obligation of the
director but need not be secured and may be accepted without reference
to financial ability to make the repayment.
(3) Payments under this subsection shall be made as provided by the
charter, bylaws, or contract or as specified in subsection (e) of this
section.
(g) The indemnification and advancement of expenses provided or
authorized by this section may not be deemed exclusive of any other
rights, by indemnification or otherwise, to which a director may be
entitled under the charter, the bylaws, a resolution of shareholders or
directors, an agreement or otherwise, both as to action in an official
capacity and as to action in another capacity while holding such office.
(h) This section does not limit the corporation's power to pay or
reimburse expenses incurred by a director in connection with an
appearance as a witness in a proceeding at a time when the director has
not been made a named defendant or respondent in the proceeding.
(i) For purposes of this section:
(1) The corporation shall be deemed to have requested a director
to serve an employee benefit plan where the performance of the
director's duties to the corporation also imposes duties on, or
otherwise involves services by, the director to the plan or
participants or beneficiaries of the plan;
(2) Excise taxes assessed on a director with respect to an
employee benefit plan pursuant to applicable law shall be deemed
fines; and
(3) Action taken or omitted by the director with respect to an
employee benefit plan in the performance of the director's duties for
a purpose reasonably believed by the director to be in the interest
of the participants and beneficiaries of the plan shall be deemed to
be for a purpose which is not opposed to the best interests of the
corporation.
(j) Unless limited by the charter:
(1) An officer of the corporation shall be indemnified as and to
the extent provided in subsection (d) of this section for a director
and shall be entitled, to the same extent as a director, to seek
indemnification pursuant to the provisions of subsection (d);
(2) A corporation may indemnify and advance expenses to an
officer, employee, or agent of the corporation to the same extent
that it may indemnify directors under this section; and
(3) A corporation, in addition, may indemnify and advance
expenses to an officer, employee, or agent who is not a director to
such further extent, consistent with law, as may be provided by its
charter, bylaws, general or specific action of its board of directors
or contract.
(k)(1) A corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee, or agent of
the corporation, or who, while a director, officer, employee, or agent
of the corporation, is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, joint venture, trust,
other enterprise, or employee benefit plan against any liability
asserted against and incurred by such person in any such capacity or
C-4
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<PAGE>
arising out of such person's position, whether or not the corporation
would have the power to indemnify against liability under the provisions
of this section.
(2) A corporation may provide similar protection, including a trust
fund, letter of credit, or surety bond, not inconsistent with this
section.
(3) The insurance or similar protection may be provided by a
subsidiary or an affiliate of the corporation.
(l) Any indemnification of, or advance of expenses to, a director
in accordance with this section, if arising out of a proceeding by or in
the right of the corporation, shall be reported in writing to the
shareholders with the notice of the next stockholders' meeting or prior
to the meeting.'
Article SEVENTH of the Company's Articles of Incorporation provides:
'To the fullest extent permitted by Maryland statutory or decisional
law, as amended or interpreted, and the Investment Company Act of 1940, no
director or officer of the Corporation shall be personally liable to the
Corporation or its stockholders for money damages; provided, however, that
nothing herein shall be construed to protect any director or officer of the
Corporation against any liability to the Corporation or its security
holders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such person's office. No amendment of
the Corporation's charter or repeal of any of its provisions shall limit or
eliminate the limitation of liability provided to directors and officers
hereunder with respect to any act or omission occurring prior to such
amendment or repeal.'
Article EIGHTH of the Company's Articles of Incorporation provides:
'The Corporation shall indemnify (i) its directors and officers,
whether serving the Corporation or at its request any other entity, to the
full extent required or permitted by Maryland statutory and decisional law,
now or hereafter in force, including the advance of expenses under the
procedures and to the full extent permitted by law, and (ii) other
employees and agents to such extent as shall be authorized by the Board of
Directors or the Bylaws and as permitted by law. Nothing contained herein
shall be construed to protect any director, officer, employee or agent of
the Corporation against any liability to the Corporation or its security
holders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such person's office. The foregoing
rights of indemnification shall not be exclusive of any other rights to
which those seeking indemnification may be entitled. The Board of Directors
may take such action as is necessary to carry out these indemnification
provisions and is expressly empowered to adopt, approve and amend from time
to time such Bylaws, resolutions or contracts implementing such provisions
or such further indemnification arrangements as may be permitted by law. No
amendment of the Corporation's charter or repeal of any of its provisions
shall limit or eliminate the right of indemnification provided hereunder
with respect to acts or omissions occurring prior to such amendment or
repeal.'
Article FOURTH of the Company's Bylaws provides:
Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director or officer of the Corporation
or serves or served at the request of the Corporation any other enterprise
as a director or officer, whether or not the Corporation would have power
to indemnify such person.
------------------------
Reference is made to Article 4 of the Company's Distribution Agreement.
The Company, its Directors and officers are insured against certain
expenses in connection with the defense of claims, demands, action's suits or
proceedings, and certain liabilities that might be imposed as a result of such
actions, suits or proceedings.
C-5
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<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the 'Securities Act'), may be permitted to Directors,
officers and controlling persons of the Company and the principal underwriter
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a Director, officer, or controlling person of the Company
and the principal underwriter in connection with the successful defense of any
action, suit or proceeding) is asserted against the Company by such Director,
officer or controlling person or principal underwriter in connection with the
shares being registered, the Company will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See 'Investment Adviser and Funds Services Agent' in the Statement of
Additional Information. Information as to the directors and officers of the
Sub-Adviser is included in its forms ADV filed with the Securities and Exchange
Commission (the 'SEC') and is incorporated herein by reference thereto.
Information as to the directors and officers of the Adviser
[ ].
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Signature is the principal underwriter of the shares of The UBS Bond
Fund Series, The UBS Tax Exempt Bond Fund Series, The UBS U.S. Equity Fund
Series and The UBS International Equity Fund Series. Signature also acts as a
principal underwriter and distributor for numerous other registered investment
companies.
(b) The following are the directors and officers of Signature. The
principal business address of these individuals is 6 St. James Avenue, Suite
900, Boston, Massachusetts 02216 unless otherwise noted. Their respective
position and offices with the Company, if any, are also indicated.
Philip W. Coolidge: President, Chief Executive Officer and Director of
Signature.
John R. Elder: Assistant Treasurer of Signature. Treasurer of the Company.
Barbara M. O'Dette: Assistant Treasurer of Signature.
Linwood C. Downs: Treasurer of Signature.
Thomas M. Lenz: Secretary of Signature. Secretary of the Company.
Molly S. Mugler: Assistant Secretary of Signature.
Linda T. Gibson: Assistant Secretary of Signature.
Beth A. Remy: Assistant Treasurer of Signature.
Andres E. Saldana: Assistant Secretary of Signature. Assistant Secretary of
the Company.
Susan Jakuboski: Assistant Treasurer of Signature.
Julie J. Wyetzner: Product Management Officer of Signature.
Kate B.M. Bolsover: Director of Signature; Signature Financial Group
(Europe), Ltd., 49 St. James Street, London SW1A 1JT.
Robert G. Davidoff: Director of Signature; CMNY Capital, L.P., 135 East
57th Street, New York, NY 10022.
Leeds Hackett: Director of Signature; Hackett Associates Limited, 1260
Avenue of the Americas, 12th Floor, New York, NY 10020.
Laurence B. Levine: Director of Signature; Blair Corporation, 250 Royal
Palm Way, Palm Beach, FL 33480.
C-6
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<PAGE>
Donald S. Chadwick: Director of Signature; 4609 Bayard Street, Apartment
411, Pittsburgh, PA 15213.
(c) Signature has received no commissions or other compensation from the
Company to date.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents of the Company required to be
maintained by Section 31(a) of the 1940 Act and the rules thereunder will be
maintained at the offices of Investors Bank & Trust Company, 89 South Street,
Boston, Massachusetts 02111 and at 1 First Canadian Place, Suite 2800, Toronto,
Ontario, M5X1C8, and at the offices of Signature Broker-Dealer Services, Inc., 6
St. James Avenue, Boston, Massachusetts 02116.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
The Company undertakes that it will file:
(a) Not applicable.
(b) a post-effective amendment, using financial statements, which need
not be certified, within four to six months from the effective date of the
Company's registration statement under the Securities Act of 1933, as
amended (the 'Act').
(c) Not applicable.
C-7
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York and State of New York on the 26th day of
February, 1996.
UBS PRIVATE INVESTOR FUNDS, INC.
By: /s/ TIMOTHY P. SULLIVAN
...................................
TIMOTHY P. SULLIVAN
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on February 26, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------ ---------------------------------------------------------------------
<C> <S>
/s/ TIMOTHY P. SULLIVAN President
.........................................
TIMOTHY P. SULLIVAN
/s/ JOHN R. ELDER Treasurer and Chief Financial and Accounting Officer
.........................................
JOHN R. ELDER
/s/ PETER LAWSON-JOHNSTON Director
.........................................
PETER LAWSON-JOHNSTON
/s/ TIMOTHY MCDERMOTT SPICER Director
.........................................
TIMOTHY MCDERMOTT SPICER
/s/ HANSPETER LOCHMEIER Director
.........................................
HANSPETER LOCHMEIER
</TABLE>
C-8
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<PAGE>
SIGNATURES
UBS Investor Portfolios Trust (the 'Portfolios Trust') has duly caused the
registration statement on Form N-1A ('Registration Statement') of UBS Private
Investor Funds, Inc. ('Trust') to be signed on its behalf by the undersigned,
thereto duly authorized in George Town, Grand Cayman, B.W.I. in the 13th day of
February, 1996.
UBS INVESTOR PORTFOLIOS TRUST
By: /s/ TIMOTHY P. SULLIVAN
...................................
TIMOTHY P. SULLIVAN
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, the Trust's
Registration Statement has been signed below by the following persons in the
capacities indicated on February 13, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------ ---------------------------------------------------------------------
<C> <S>
/s/ TIMOTHY P. SULLIVAN President of the Portfolios Trust
.........................................
TIMOTHY P. SULLIVAN
/s/ JOHN R. ELDER Treasurer and Chief Financial and Accounting Officer of the
......................................... Portfolios Trust
JOHN R. ELDER
/s/ PETER LAWSON-JOHNSTON Trustee of the Portfolios Trust
.........................................
PETER LAWSON-JOHNSTON
/s/ TIMOTHY MCDERMOTT SPICER Trustee of the Portfolios Trust
.........................................
TIMOTHY MCDERMOTT SPICER
/s/ HANSPETER LOCHMEIER Trustee of the Portfolios Trust
.........................................
HANSPETER LOCHMEIER
</TABLE>
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<PAGE>
EXHIBIT 10
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 558-4000
FACSIMILE: (212) 558-3588
February 26, 1996
UBS Private Investor Funds, Inc.,
6 St. James Avenue,
Boston, Massachusetts 02116.
Dear Sirs:
In connection with Pre-Effective Amendment No. 2 under the Securities Act
of 1933 (the 'Securities Act') to the Registration Statement on Form N-1A that
UBS Private Investor Funds, Inc. (the 'Company') proposes to file with respect
to an indefinite number of shares of its Common Stock, $.001 par value (the
'Shares'), we, as counsel to the Company have examined such corporate records,
certificates and other documents, and such questions of law, as we have
considered necessary or appropriate for the purposes of this opinion.
Upon the basis of such examination, we advise you that, in our opinion, the
Shares have been duly authorized to the extent of 500,000,000 Shares and, when
the Pre-Effective Amendment referred to above has become effective under the
Securities Act and the Shares have been issued (a) for at least the par value
thereof in accordance with the Registration Statement referred to above, (b) so
as not to exceed the then authorized number of Shares and (c) in accordance with
the authorization of the Board of Directors, the Shares will be duly and validly
issued, fully paid and non-assessable.
We have relied as to certain matters on information obtained from public
officials, officers of the Company and other sources believed by us to be
responsible.
The foregoing opinion is limited to the federal laws of the United States
and the General Corporation Law of the State of Maryland, and we are expressing
no opinion as to the effect of the laws of any other jurisdiction.
We consent to the filing of this opinion with the Securities and Exchange
Commission in connection with the Pre-Effective Amendment referred to above. In
giving such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
SULLIVAN & CROMWELL
<PAGE>
<PAGE>
EXHIBIT 13
SUBSCRIPTION AGREEMENT
UBS Private Investor Funds, Inc., a Maryland corporation (the 'Company'),
and Signature Broker-Dealer Services, Inc., a Delaware corporation (the
'Distributor'), hereby agree as follows:
1. The Company hereby offers the Distributor and the Distributor
hereby agrees to purchase the following shares, par value $.001 per share,
of each series ('Series') of the Company: 250 shares at $100.00 per share
representing 250 shares of The UBS Tax Exempt Bond Fund Series; 250 shares
at $100.00 per share representing 250 shares of The UBS Bond Fund Series;
250 shares at $100.00 representing 250 shares of The UBS U.S. Equity Fund
Series; and 250 shares at $100.00 per share representing 250 shares of The
UBS International Equity Fund Series (collectively the 'Shares'). The
Distributor hereby acknowledges receipt of a purchase confirmation
reflecting the purchase of the Shares, and the Fund hereby acknowledges
receipt from the Distributor of cash in the amount of $100,000 in full
payment for the Shares.
2. The Distributor represents and warrants to the Company that the
Shares are being acquired for investment purposes and not with a view to
the distribution thereof.
3. The Distributor agrees that if it redeems the Shares of any
Series prior to the fifth anniversary of the date the Company begins its
investment activities, the Distributor will pay to the Company an amount
equal to the number resulting from multiplying each Series' total
unamortized organizational expenses by a fraction, the numerator of which
is equal to the number of Shares of that Series redeemed by the
Distributor and the denominator of which is equal to the number of shares
of that Series outstanding as of the date of such redemption, as long as
the administrative position of the staff of the Securities and Exchange
Commission requires such reimbursement.
4. The Distributor agrees that any subsequent holder of the Shares
will assume Signature's obligations set forth in paragraph 3 above.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 31st day of January 1996.
UBS PRIVATE INVESTOR FUNDS, INC.
By: /s/ Timothy P. Sullivan
.................................
Name: Timothy P. Sullivan
Title: President
SIGNATURE BROKER-DEALER SERVICES, INC.
By: /s/ Linwood C. Downs
.................................
Name: Linwood C. Downs
Title: Treasurer
<PAGE>