<PAGE> 1
As filed with the Securities and Exchange Commission on February 9, 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
Pre-Effective Amendment No. 1
Post-Effective Amendment No.
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 1
(Check appropriate box or boxes)
UBS Private Investor Funds, Inc.
(Exact name of registrant as specified in charter)
c/o Signature Financial Group, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
(Address of Principal Executive Offices) (Zip Code)
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> 2
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> 3
UBS PRIVATE INVESTOR FUNDS, INC.
UBS TAX EXEMPT BOND FUND
CROSS-REFERENCE SHEET
Part A
Form N-1A
Item Number Caption in Prospectus
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
Part B
Form N-1A Caption in Statement
Item Number of Additional Information
10. Cover Page ....................... Outside Front Cover Page
11. Table of Contents ................ Table of Contents
12. General Information and
History ........................ Not applicable
<PAGE> 4
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; Sub-
Administrator; 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
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
Part C
Information required to be included in Part C is set forth under the
appropriate item heading.
<PAGE> 5
UBS PRIVATE INVESTOR FUNDS, INC.
UBS BOND FUND
UBS U.S. EQUITY FUND
UBS INTERNATIONAL EQUITY FUND
CROSS-REFERENCE SHEET
Part A
Form N-1A
Item Number Caption in Prospectus
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
Part B
Form N-1A Caption in Statement
Item Number of Additional Information
10. Cover Page ....................... Outside Front Cover Page
11. Table of Contents ................ Table of Contents
12. General Information and
History ........................ Not applicable
<PAGE> 6
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; Sub-
Administrator; 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
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
Part C
Information required to be included in Part C is set forth under the
appropriate item heading.
<PAGE> 1
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> 2
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 Management,
Expenses and Shareholder Services.
<TABLE>
<CAPTION>
<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<F1>
Advisory Fees, After Fee Waiver<F2> . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00%
Rule 12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses, After Expense Reimbursements<F3>. . . . . . . . . . . . . . . . . . . . . . . . 0.80%
Total Operating Expenses, After Fee Waivers and Expense Reimbursements* . . . . . . . . . . . . 0.80%
<FN>
<F1> 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 waiver and expense reimbursements, Total
Operating Expenses would be equal to, on an annual basis, 2.74% of the Fund's projected average daily
net assets. See "Management".
<PAGE> 3
<F2> The New York Branch (the "Branch" or the "Adviser") of Union Bank of Switzerland (the "Bank") has
agreed to waive its advisory 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 Adviser may modify or discontinue this fee waiver and expense limitation 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".
<F3> 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") as custodian, and fees payable to the
Branch and Signature under the Shareholder Servicing Agreements. For a more detailed description of
contractual fee arrangements, including expense reimbursements, and of the fees and expenses included
in Other Expenses, see "Management" and "Shareholder Services".
</FN>
</TABLE>
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>
<CAPTION>
<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.
<PAGE> 4
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 durations, 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. Duration is a measure of the weighted average maturity
of the bonds held in the portfolio and can be used to measure the
portfolio's sensitivity to changes in interest rates. The maturities of the
individual securities in the Fund's portfolio may vary widely from its
durations, 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 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,
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
<PAGE> 5
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. 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 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 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
<PAGE> 6
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.
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, state or 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.
<PAGE> 7
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 assets would be in
illiquid investments. 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, as amended (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 for hedging purposes.
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 purposes, but not for speculation.
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, tend to
increase market exposure. 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.
<PAGE> 8
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.
The Fund may purchase and sell put and call options on securities, indices
of securities and futures contracts, or purchase and sell futures contracts
only for hedging purposes.
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, currencies, 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,
<PAGE> 9
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 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 an 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 a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument. Therefore, purchasing futures contracts will 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. 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
<PAGE> 10
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 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 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, as amended (the "1940 Act")) of the Fund.
As a diversified investment company, 75% of the Fund's total assets are
subject to the following fundamental limitation: (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.
<PAGE> 11
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 Agents 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 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 Bank's financial statements are
denominated in Swiss francs. The exchange rate at June 30, 1995, was Sfr.
1.148 to one U.S. dollar.)
The Branch provides investment advice, portfolio management and certain
administrative services 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
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 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 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 Adviser 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,
<PAGE> 12
on an annual basis, 0.80% of the Fund's average daily net assets. The
Adviser may modify or discontinue this expense limitation at any time in
the future with thirty 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) is responsible for the
registration of sufficient Fund shares under federal and state securities
laws; (iv) 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 (v) 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 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 ("IBT" or the "Transfer Agent"),
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 Shareholder Servicing Agreements with the
Branch and Signature under which the Branch provides shareholder services
to Fund shareholders who are also clients of the Branch and Signature
provides services to Fund shareholders who are not Branch clients. The
Branch and Signature shall be responsible for providing shareholder
services, such as: 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 each party for these services at an annual
rate of 0.25% of the average daily net assets of the shareholder accounts
so serviced. Under the terms of the Shareholder Servicing Agreements,
Signature and the Branch may delegate one or more of their responsibilities
to other entities at their expense.
EXPENSES
In addition to the fees of the Adviser, Signature, the Shareholder
Servicing Agents and IBT, the Fund will be responsible for 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
<PAGE> 13
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 thirty 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 Fund's business days are the days the New York Stock Exchange 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 and 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 investors
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 New York Stock
Exchange (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
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
<PAGE> 14
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.
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.
<PAGE> 15
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 interest 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 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.
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
<PAGE> 16
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 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.
<PAGE> 17
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 may be directed to your Shareholder Servicing 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 Fund 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 or Bylaws. 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 short-term and long-term 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.
<PAGE> 18
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 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
<PAGE> 19
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 income tax rate to demonstrate the taxable yield
necessary to produce an after-tax equivalent to the Fund.
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 calling your
Shareholder Servicing Agent.
<PAGE> 20
<TABLE>
<CAPTION>
<S> <S>
Investment Adviser UBS PRIVATE
INVESTOR FUNDS,
Union Bank of Switzerland, INC.
New York Branch
299 Park Avenue UBS Tax Exempt Bond Fund
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 PROSPECTUS
Investors Bank & Trust Company
89 South Street _____________ __, 1996
Boston, Massachusetts 02111
TABLE OF CONTENTS
No person has been authorized to give
Page any information or to make any representations
other than those contained in this Prospectus
Investors for Whom the Fund is in connection with the offer of the Fund shares
Designed . . . . . . . . . . . . 2 made by this Prospectus, and, if given or made,
Investment Objective and Policies. 3 such other information or representations must
Additional Investment Information not be relied upon as having been authorized by
and Risk Factors . . . . . . . . 5 the Fund. This Prospectus does not constitute
Options . . . . . . . . . . . . . 8 an offer to sell, or a solicitation of an offer
Futures Contracts . . . . . . . . 9 to buy, by the Fund in any jurisdiction in
Investment Restrictions . . . . . 10 which such offer to sell or solicitation may
Management . . . . . . . . . . . . 11 not lawfully be made.
Shareholder Services . . . . . . . 12
Expenses . . . . . . . . . . . . . 13
Purchase of Shares . . . . . . . . 13
Redemption of Shares . . . . . . . 14
Exchange of Shares . . . . . . . . 16
Dividends and Distributions . . . 16
Net Asset Value . . . . . . . . . 16
Organization . . . . . . . . . . . 17
Taxes . . . . . . . . . . . . . . 17
Additional Information . . . . . . 19
</TABLE>
<PAGE> 1
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> 2
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" and
"Shareholder Services".
<TABLE>
<CAPTION>
<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
<PAGE> 3
Expense Table
Annual Operating Expenses<F1>
Advisory Fees, After Fee Waiver<F2> . . . . . . . . . . . . . . . . . . . . . 0.00%
Rule 12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses, After Expense Reimbursements<F3>. . . . . . . . . . . . . . . 0.80%
Total Operating Expenses, After Fee Waivers and Expense Reimbursements<F1>. . 0.80%
<FN>
<F1> 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 5.07% of the Fund's projected average daily net assets. See
"Management".
<F2> 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 Adviser 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".
<F3> 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")
as custodian of the Fund and the Portfolio and fees payable to the Branch
and Signature under Shareholder Servicing Agreements. 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".
</FN>
</TABLE>
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:
1 Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8
3 Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . $26
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 certain
<PAGE> 4
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 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 Lehman Gov't/Corp.
Periods Ended December 31, 1995 Composite Total Return Intermediate Bond Index
<C> <S> <S>
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 to the Fund, the Portfolio may sell
interests 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) [___________].
<PAGE> 5
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, 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"). The
Company will vote the interests held by Fund shareholders who do not give
voting instructions in the same proportion as the Fund shareholders who did
give voting instructions. Shareholders of the Fund who do not vote will
have no effect on the outcome of such matters.
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, an open-end management investment company having the same
investment objective as the Fund.
<PAGE> 6
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 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
transactions 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
<PAGE> 7
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 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.
<PAGE> 8
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 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
<PAGE> 9
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 U.S. 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 foreign investments as compared to dividends and
interest paid to the Portfolio by domestic companies.
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 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 foreign countries 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
<PAGE> 10
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 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. In addition, the Portfolio will not
invest more than 10% of the market value of the 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, as amended
(the "Securities Act"). Subject to those non-
<PAGE> 11
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 for hedging purposes.
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 purposes, but not for speculation.
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, tend to increase market exposure. 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,
currencies, indices of securities and futures contracts, or purchase and
sell futures contracts only for hedging purposes.
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. The Fund will not engage in foreign futures or options
<PAGE> 12
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.
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.
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,
<PAGE> 13
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 an 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 a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument. Therefore, purchasing futures contracts will 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. 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 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
<PAGE> 14
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, as amended (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.
<PAGE> 15
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 Bank's financial statements are
denominated in Swiss francs. The exchange rate at June 30, 1995 was Sfr.
1.148 to one U.S. dollar.)
The Branch provides investment advice, portfolio management and certain
administrative services 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 is primarily responsible for the
day-to-day management and implementation of the Adviser's process for the
Portfolio. Mr. Cohen has been a Vice President of the Adviser since
[January, 1996]. 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 Paine Webber, 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 [not]
previously managed the investments of a 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 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
<PAGE> 16
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 Adviser provides its administrative services to the Fund pursuant to a
Funds Services Agreement between the Adviser and the Company. The Adviser
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 will pay the
Adviser a fee, calculated daily and payable monthly, at an annual rate of
0.45% of the Portfolio's average net assets. The Adviser has voluntarily
agreed to waive its advisory and servicing agent 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 Adviser 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 the registration of sufficient Fund shares under federal and state
securities laws and 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 ("IBT" or the "Transfer Agent"),
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. IBT also maintains offices at 1 First Canadian Place, Suite 2800,
Toronto, M5X1C8, Canada.
<PAGE> 17
SHAREHOLDER SERVICES
The Company has entered into Shareholder Servicing Agreements with the
Branch and Signature under which the Branch provides shareholder services
to Fund shareholders who are also clients of the Branch and Signature
provides services to Fund shareholders who are not Branch clients. The
Branch and Signature shall be responsible for providing shareholder
services, such as: 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 each party for these services at an annual
rate of 0.25% of the average daily net assets of the shareholder accounts
so serviced. Under the terms of the Shareholder Servicing Agreements,
Signature and the Branch may delegate one or more of their responsibilities
to other entities at their expense.
EXPENSES
In addition to the fees of the Adviser, Signature-Cayman, Signature, the
Shareholder Servicing Agents and IBT, 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 0.80%
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 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 and 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
<PAGE> 18
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 New York
Stock Exchange (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
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.
<PAGE> 19
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 interest 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 02205-01537.
<PAGE> 20
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 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.
<PAGE> 21
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
both President Clinton and the United States Congress have set forth
different legislative proposals that would affect the amount of
contributions that can be made to IRAs and the extent to which such
contributions are deductible. 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 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.
<PAGE> 22
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 Bond Fund Series are offered
through this Prospectus.
Shareholder inquiries may be directed to your Shareholder Servicing 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
has adopted a policy of not issuing share certificates. 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, an unincorporated business trust formed
under New York law, was organized on [______________], 1996. The
Declaration of Trust permits the Trustees to issue interests in 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.
<PAGE> 23
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 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.
<PAGE> 24
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, 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)
<PAGE> 25
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 calling your Shareholder Servicing Agent.
<PAGE> 26
UBS PRIVATE
Investment Adviser of the Portfolio INVESTOR FUNDS,
INC.
Union Bank of Switzerland,
New York Branch UBS Bond Fund
299 Park Avenue
New York, New York 10171
(212) 821-3000
Administrator and Distributor
Signature Broker-Dealer Services, Inc.
6 St. James Avenue PROSPECTUS
Boston, Massachusetts 02116
[_____________ __], 1996
Custodian and Transfer Agent
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
No person has been authorized
to give any information or to make
any representations other than those
TABLE OF CONTENTS contained in this Prospectus in
connection with the offer of the
Page Fund shares made by this Prospectus,
Investors for Whom the Fund is and, if given or made, such other
Designed. . . . . . . . . . 2 information or representations must
Master-Feeder Structure . . . 4 not be relied upon as having been
Investment Objective and authorized by the Fund. This
Policies. . . . . . . . . . . 5 Prospectus does not constitute an
Additional Investment offer to sell, or a solicitation of
Information and Risk an offer to buy, by the Fund in any
Factors. . . . . . . . . . . 8 jurisdiction in which such offer to
Options. . . . . . . . . . . . 11 sell or solicitation may not
Futures Contracts. . . . . . . 13 lawfully be made.
Investment Restrictions . . . . 14
Management . . . . . . . . . . 14
Shareholder Services . . . . . 16
Expenses . . . . . . . . . . . 16
Purchase of Shares . . . . . . 17
Redemption of Shares . . . . . 18
Exchange of Shares . . . . . . 19
Retirement Plans . . . . . . . 20
Dividends and Distributions . . 20
Net Asset Value . . . . . . . . 21
Organization . . . . . . . . . 21
Taxes . . . . . . . . . . . . . 22
Additional Information . . . . 23
<PAGE> 1
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 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> 2
UBS U.S. Equity Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
UBS U.S. Equity Fund (the "Fund") is designed for investors seeking a high
level of current income and the potential for long-term capital
appreciation 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 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" and
"Shareholder Services".
<TABLE>
<CAPTION>
<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
<PAGE> 3
Expense Table
Annual Operating Expenses<F1>
Advisory Fees, After Fee Waiver<F2> . . . . . . . . . . . . . . . . . 0.00%
Rule 12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses, After Expense Reimbursements<F3> . . . . . . . . . . 0.90%
Total Operating Expenses, After Fee Waivers and Expense Reimbursements* . 0.90%
<FN>
<F1> 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 2.81% of the Fund's
projected average daily net assets. See "Management".
<F2> 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
Adviser may modify or discontinue this undertaking at any time in the future with thirty 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".
<F3> 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") as custodian of the Fund and the Portfolio, and the fees payable to the Branch and
Signature under Shareholder Servicing Agreements. 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".
</FN>
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:
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.
<PAGE> 4
Historic Performance of Comparable Discretionary Accounts. For the year
ended December 31, 1995 the composite total return for certain
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"), was 39.08%, and the total return during
the same period for the S&P 500 Index was 37.60%. 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.
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 to the Fund, the Portfolio may sell
interests 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, because the Portfolio would become smaller, it may become
<PAGE> 5
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"). The Company will vote the interests held
by Fund shareholders who do not give voting instructions in the same
proportion as the Fund shareholders who did give voting instructions.
Shareholders of the Fund who do not vote will have no effect on the outcome
of such matters.
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, an
open-end management investment company having 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 objective of the Portfolio is to provide a high level of current income
by investing principally in dividend-paying equity securities of domestic
issuers. In the selection of these securities, the Portfolio will also
consider the potential for capital appreciation. 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, 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.
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,
<PAGE> 6
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 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
<PAGE> 7
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. 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, as amended
(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 may include obligations of
the U.S. Government and its agencies and instrumentalities, commercial
paper, bank obligations and repurchase agreements.
<PAGE> 8
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 for hedging purposes
only. These instruments are commonly known as derivatives.
The Portfolio may purchase or 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 purposes, but not for speculation.
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, tend to increase market exposure. 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 only for hedging purposes.
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 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
<PAGE> 9
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 an 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.
<PAGE> 10
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 a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument. Therefore, purchasing futures contracts will 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. 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 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.
<PAGE> 11
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, as amended (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,
<PAGE> 12
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 Bank's financial statements are
denominated in Swiss francs. The exchange rate at June 30, 1995 was Sfr.
1.148 to one U.S. dollar.)
The Adviser provides investment advice, portfolio management and certain
administrative services 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" in the SAI.
The Adviser uses a sophisticated, disciplined, collaborative process for
managing all asset classes. Nancy Tengler is primarily responsible for the
day-to-day management and implementation of the Adviser's process for the
Portfolio. Ms. Tengler has been employed by the Branch since [January
1996]. 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 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 Adviser provides its administrative services to the Fund pursuant to a
Funds Services Agreement between the Adviser and the Company. The Adviser
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 will pay the
Adviser a fee, calculated daily and payable monthly, at an annual rate of
0.60% of the Portfolio's average net assets. The Adviser has voluntarily
agreed to waive its advisory and servicing agent 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 Adviser 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
<PAGE> 13
"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 the registration of
sufficient Fund shares under federal and state securities laws and
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 ("IBT" or the "Transfer Agent"),
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. IBT also maintains offices at 1 First Canadian Place, Suite 2800,
Toronto, Ontario M5X1C8.
SHAREHOLDER SERVICES
The Company has entered into Shareholder Servicing Agreements with the
Branch and Signature under which the Branch provides shareholder services
to Fund shareholders who are also clients of the Branch and Signature
provides services to Fund shareholders who are not Branch clients. The
Branch and Signature shall be responsible for providing shareholder
services, such as: 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 each party for these services at an annual
rate of 0.25% of the average daily net assets of the shareholder accounts
so serviced. Under the terms of the Shareholder Servicing Agreements,
Signature and the Branch may delegate one or more of their responsibilities
to other entities at their expense.
EXPENSES
In addition to the fees of the Adviser, Signature, Signature-Cayman, the
Shareholder Servicing Agents and IBT, 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.
<PAGE> 14
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 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 and 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 New York Stock
Exchange (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.
<PAGE> 15
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 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 interest 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
<PAGE> 16
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 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
<PAGE> 17
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
both President Clinton and the United States Congress have set forth
different legislative proposals that would affect the amount of
contributions that can be made to IRAs and the extent to which such
contributions are deductible.
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 necessary to
avoid the imposition of federal excise taxes on the Fund. Declared
dividends and distributions are payable 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.
<PAGE> 18
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 may be directed to your Shareholder Servicing 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
has adopted a policy of not issuing share certificates. 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, an unincorporated business trust formed
under New York law, was organized on [________], 1996. The Declaration of
Trust permits the Trustees to issue interests in 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.
<PAGE> 19
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.
<PAGE> 20
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 calling your
Shareholder Services Agent.
<PAGE> 21
UBS PRIVATE
INVESTOR FUNDS,
Investment Adviser of the Portfolio INC.
Union Bank of Switzerland,
New York Branch
299 Park Avenue UBS U.S. Equity Fund
New York, New York 10171
(212) 821-3000
Administrator and Distributor
Signature Broker-Dealer Services, Inc.
6 St. James Avenue PROSPECTUS
Boston, Massachusetts 02116
[_____________ __], 1996
Custodian and Transfer Agent
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
No person has been authorized
to give any information or to
make any representations other
TABLE OF CONTENTS than those contained in this
Page Prospectus in connection with the
offer of the Fund shares made
Investors for Whom the Fund is by this Propectus, and, if given
Designed . . . . . . . . . . . . . . 2 or made, such other information
Master-Feeder Structure . . . . . . . . 4 or representations must not be
Investment Objective and relied upon as having been auth-
Policies . . . . . . . . . . . . . . 5 orized by the Fund. This Pros-
Additional Investment pectus does not constitute an
Information and Risk Factors . . . . 6 offer to sell, or a solicitation
Options . . . . . . . . . . . . . . . . 8 of an offer to buy, by the Fund
Futures Contracts . . . . . . . . . . . 10 in any jurisdiction in which
Investment Restrictions . . . . . . . . 11 such offer to sell or solicita-
Management . . . . . . . . . . . . . . 11 tion may not lawfully be made.
Shareholder Services . . . . . . . . . 13
Expenses . . . . . . . . . . . . . . . 13
Purchase of Shares . . . . . . . . . . 14
Redemption of Shares . . . . . . . . . 15
Exchange of Shares . . . . . . . . . . 17
Retirement Plans . . . . . . . . . . . 17
Dividends and Distributions . . . . . . 17
Net Asset Value . . . . . . . . . . . . 18
Organization . . . . . . . . . . . . . 18
Taxes . . . . . . . . . . . . . . . . . 19
Additional Information . . . . . . . . 20
<PAGE> 1
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.
<PAGE> 2
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> 3
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 Fund shares 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 foreign 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 minimum amounts 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 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'
<PAGE> 4
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" and
"Shareholder Services".
<TABLE>
<CAPTION>
<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
<PAGE> 5
Expense Table
Annual Operating Expenses<F1>
Advisory Fees, After Fee Waiver<F2> . . . . . . . . . . . . . . . . . . . 0.00%
Rule 12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses, After Expense Reimbursements<F3> . . . . . . . . . . . . 1.40%
Total Operating Expenses, After Fee Waivers and Expense Reimbursements<F1> 1.40%
<FN>
<F1> 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
expense reimbursements. Without such fee waivers and expense
reimbursements, Total Operating Expenses would be equal, on an annual basis,
to 5.29% of the Fund's projected average daily net assets. See "Management".
<F2> The New York Branch (the "Branch" or the "Adviser") of Union Bank of
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 Adviser 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".
<F3> 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")
as custodian of the Fund and the Portfolio and fees payable to the Branch
and Signature under Shareholder Servicing Agreements. 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".
</FN>
</TABLE>
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:
1 Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14
3 Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $44
<PAGE> 6
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.
Historic 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 certain 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 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 Capital International
Periods Ended December 31, 1995 Composite Total Return EAFE Index
<C> <S> <S>
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.
<PAGE> 7
This master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.
In addition to selling an interest to the Fund, the Portfolio may sell
interests 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, 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
<PAGE> 8
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"). The
Company will vote the interests held by Fund shareholders who do not give
voting instructions in the same proportion as the Fund shareholders who did
give voting instructions. Shareholders of the Fund who do not vote will
have no effect on the outcome of such matters.
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 Fund'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, an
open-end management investment company having 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 will grow at
above-market rates. The emphasis
<PAGE> 9
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.
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
<PAGE> 10
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
<PAGE> 11
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 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.
<PAGE> 12
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, 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 U.S. 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 foreign investments as compared to dividends
and interest paid to the Portfolio by domestic companies.
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 investments
<PAGE> 13
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 foreign countries 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.
<PAGE> 14
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 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
<PAGE> 15
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. 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, as amended
(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.
<PAGE> 16
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 for hedging purposes.
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 purposes, but not for speculation.
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, tend to increase market exposure. 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
<PAGE> 17
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 only for hedging purposes.
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. 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.
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).
<PAGE> 18
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 an 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.
<PAGE> 19
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 a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument. Therefore, purchasing futures contracts will 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. 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
<PAGE> 20
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 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.
<PAGE> 21
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, as amended (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" 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
<PAGE> 22
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.
Advisers and Fund 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.
The Sub-Adviser employs a staff of approximately 85, and, as of
December 31, 1995, had assets under management totaling approximately $5.8
billion.
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 Bank's financial statements are
denominated in Swiss francs. The exchange rate at June 30, 1995 was Sfr.
1.148 to one U.S. dollar.)
The Advisers provide investment advice, portfolio management and certain
administrative services 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
<PAGE> 23
Portfolio's investments and operations. See "Investment Adviser and Funds
Services Agent" in the SAI.
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.
In addition to the above-listed investment advisory services, the Adviser
also provides the Fund and the Portfolio with certain 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 Adviser provides its administrative services to the Fund pursuant to a
Funds Services Agreement between the Adviser and the Company. The Adviser
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 will pay the
Adviser a fee, calculated daily and payable monthly, at an annual rate of
0.85% of the Portfolio's average net assets. The Adviser has voluntarily
agreed to waive its advisory and servicing agent 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, 1.40% of the Fund's average daily net
assets. The Adviser 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".
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
<PAGE> 24
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, 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 the registration of sufficient Fund shares under federal and state
securities laws and 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 ("IBT" or the "Transfer Agent"),
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
<PAGE> 25
"Custodian" in the SAI. IBT also maintains offices at 1 First Canadian
Place, Suite 2800, Toronto, Ontario M5X1C8.
SHAREHOLDER SERVICES
The Company has entered into Shareholder Servicing Agreements with the
Branch and Signature under which the Branch provides shareholder services
to Fund shareholders who are also clients of the Branch and Signature
provides services to Fund shareholders who are not Branch clients. The
Branch and Signature shall be responsible for providing shareholder
services, such as 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 each party for these services at an annual
rate of 0.25% of the average daily net assets of the shareholder accounts
so serviced. Under the terms of the Shareholder Servicing Agreements,
Signature and the Branch may delegate one or more of their responsibilities
to other entities at their expense.
EXPENSES
In addition to the fees of the Adviser, Signature-Cayman, Signature, the
Shareholder Servicing Agents and IBT, 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.
<PAGE> 26
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 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 and 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 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 New York
Stock Exchange (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.
<PAGE> 27
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.
<PAGE> 28
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 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 interest 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.
<PAGE> 29
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.
<PAGE> 30
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
<PAGE> 31
$2,000 may be contributed to the IRA of either spouse. Investors should be
aware that both President Clinton and the United States Congress have
set forth different legislative proposals that would affect the amount
of contributions that can be made to IRAs and the extent to which such
contributions are deductible.
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 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
<PAGE> 32
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 may be directed to your Shareholder Servicing 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
has adopted a policy of not issuing share certificates. 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
<PAGE> 33
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, an unincorporated business trust formed
under New York law, was organized on [________], 1995. The Declaration of
Trust permits the Trustees to issue interests in 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.
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.
<PAGE> 34
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
<PAGE> 35
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, 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
<PAGE> 36
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.
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 calling your
Shareholder Servicing Agent.
<PAGE> 37
Investment Adviser of the Portfolio
Union Bank of Switzerland,
New York Branch
299 Park Avenue UBS PRIVATE
New York, New York 10171 INVESTOR
(212) 821-3000 FUNDS, INC.
UBS International Equity Fund
Administrator and Distributor
Signature Broker-Dealer
Services, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
Custodian and Transfer Agent
PROSPECTUS
Investors Bank & Trust Company
89 South Street [_____________ __], 1996
Boston, Massachusetts 02111
TABLE OF CONTENTS
Page No person has been
authorized to give any
Investors for Whom the Fund is information or to make any
Designed . . . . . . . . . . . . . . 2 representations other than
Master-Feeder Structure . . . . . . . . 4 those contained in this
Investment Objective and Policies . . . 5 Prospectus in connection
Additional Investment Information with the offer of the Fund
and Risk Factors . . . . . . . . . . 6 shares made by this
Options . . . . . . . . . . . . . . . . 11 Prospectus, and, if given
Futures Contracts . . . . . . . . . . . 12 or made, such other
Investment Restrictions . . . . . . . . 13 information or representa-
Management . . . . . . . . . . . . . . 14 tions must not be relied
Shareholder Services . . . . . . . . . 16 upon as having been
Expenses . . . . . . . . . . . . . . . 16 authorized by the Fund.
Purchase of Shares . . . . . . . . . . 16 This Prospectus does not
Redemption of Shares . . . . . . . . . 18 constitute an offer to sell,
Exchange of Shares . . . . . . . . . . 19 or a solicitation of an
Retirement Plans . . . . . . . . . . . 19 offer to buy, the Fund in
Dividends and Distributions . . . . . . 20 any jurisdiction in which
Net Asset Value . . . . . . . . . . . . 20 such offer to sell or
Organization . . . . . . . . . . . . . 21 solicitation may not
Taxes . . . . . . . . . . . . . . . . . 22 lawfully be made.
Additional Information . . . . . . . . 23
<PAGE> i
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> ii
TABLE OF CONTENTS
Page
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . . . 1
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . 12
DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
INVESTMENT ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SHAREHOLDER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . 21
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . 22
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 23
REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 24
EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 24
DIVIDENDS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 25
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 27
ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 30
REPORT OF INDEPENDENT ACCOUNTANTS
AND FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . F-1
<PAGE> SAI-1
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 of 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, 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".
<PAGE> SAI-2
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 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
<PAGE> SAI-3
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 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 a U.S. dollar-
denominated debt securities of domestic and foreign issuers. See
"Investment Objective and Policies" in the Prospectus.
<PAGE> SAI-4
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.
<PAGE> SAI-5
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 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
<PAGE> SAI-6
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.
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 Company believes that the Fund will be considered the owner of
the securities subject to the puts so that the interest on the securities
is tax exempt income to the Fund.
<PAGE> SAI-7
Such advice of counsel is based on certain assumptions concerning the terms
of the puts and the attendant circumstances.
The Fund may also invest up to 20% of the value of its net assets in
the U.S. dollar- denominated debt instruments of domestic and foreign
issuers. 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 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
<PAGE> SAI-8
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 purchase
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
<PAGE> SAI-9
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.
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".
<PAGE> SAI-10
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 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 (write) futures contracts and purchase or sell put and call
options, including put and call options on futures contracts.
<PAGE> SAI-11
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. 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 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 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.
<PAGE> SAI-12
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 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
<PAGE> SAI-13
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.
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;
<PAGE> SAI-14
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 in
accordance with its investment objective and policies (see
"Investment Objective and Policies");
6. Purchase or sell real estate, commodities or commodity contracts or
options thereon (except for its interest in hedging 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
8. Act as an underwriter of securities.
*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.
<PAGE> SAI-15
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
<PAGE> SAI-16
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
<PAGE> SAI-17
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 [such
options are written by other persons and:] (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; and (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.
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.
<PAGE> SAI-18
DIRECTORS
The Company's Board consists of three (3) 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 [ ], 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 receive compensation from the
Company exceeding $60,000 per fiscal year.
[To come]
INVESTMENT ADVISER
Pursuant to an Investment Advisory Agreement between the Company and
the Branch, the Branch serves as the Fund's investment adviser. The
Adviser was incorporated under the laws of [Switzerland] on
[_____________]. 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
other investment companies] 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.
<PAGE> SAI-19
Active in New York City since 1946, the Branch employs a staff of
approximately 1,000. Private banking services in the United States are
provided primarily through the Branch, as well as through a branch in Los
Angeles, California. As of December 31, 1995, the Branch had assets under
management totaling approximately $750 million.
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 Bank's financial statements are
denominated in Swiss Francs. The exchange rate at June 30, 1995 was Sfr.
1.148 to one U.S. dollar.)
The basis of the Adviser's investment process is fundamental
investment research, as the firm believes that fundamentals should
determine an asset's value over the long-term. The Adviser currently
employs [_____] full-time research analysts devoted to equity, fixed
income, capital market, credit and economic research in investment
management divisions. The Adviser's experienced investment professionals
review the economic, political and other forces affecting the value of the
municipal bond market.
The Adviser is a registered investment adviser under the Investment
Advisers Act of 1940, as amended.
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 Adviser has voluntarily agreed
to waive its advisory 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 Adviser may modify
or discontinue this fee waiver and expense limitation at any time in the
future with thirty 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
<PAGE> SAI-20
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, 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) is responsible for the registration of sufficient Fund
shares under federal
<PAGE> SAI-21
and state securities laws; (iv) takes responsibility for monitoring the
Fund's status as a "regulated investment company" under the Code; and (v)
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.
<PAGE> SAI-22
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.
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 Shareholder
Servicing Agreements with the Branch and Signature under which the Branch
provides shareholder services to Fund shareholders who are also clients of
the Branch and Signature provides services to Fund shareholders who are not
Branch clients. These services 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 each
party a fee, at an annual rate of 0.25% of the average daily net assets of
the shareholder accounts so serviced. Under the terms of the Shareholder
Servicing Agreements, each party may delegate one or more of its
responsibilities to other entities at its expense.
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
<PAGE> SAI-23
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 Adviser 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 Adviser will waive its fees as necessary to
eliminate such excess. Currently, the Adviser 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
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 fee waiver and expense limitation at any time in the
future with thirty days' notice to the Fund.
The Adviser paid the Fund's organizational expenses and the expenses
incurred in the initial offering of Fund shares.
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.
<PAGE> SAI-24
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. The Company, on behalf of the Fund, has elected to be governed
by Rule 18f-1 under the 1940 Act pursuant to which the Fund is obligated to
redeem shares solely in cash up to the lesser of $250,000 or one percent of
the net asset value of the Fund during any 90 day period for any one
shareholder.
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
<PAGE> SAI-25
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.
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. 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
<PAGE> SAI-26
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.
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 [___]% ([___]% being
<PAGE> SAI-27
the assumed maximum 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 effect loans of portfolio securities on
behalf of the Fund. See "Investment Objective and Policies".
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
<PAGE> SAI-28
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.
<PAGE> SAI-29
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 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
<PAGE> SAI-30
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 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.
<PAGE> SAI-31
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.
Shareholder inquiries may be directed to your Shareholder Servicing
Agent.
<PAGE> F-1
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
<PAGE> F-2
UBS Private Investor Funds, Inc.- UBS Tax Exempt Bond Fund
Statement of Assets and Liabilities
January 31, 1996
Assets
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
____________________
See Notes to Financial Statements.
<PAGE> F-3
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.
<PAGE> F-4
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.
<PAGE> 1
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> 2
TABLE OF CONTENTS
Page
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . 1
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . 12
DIRECTORS AND TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . 20
INVESTMENT ADVISER AND FUNDS SERVICES AGENT . . . . . . . . . . . . . . 22
ADMINISTRATORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SHAREHOLDER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . 28
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . 28
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 29
REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 30
EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 31
DIVIDENDS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 31
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 34
ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 40
REPORT OF INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . F-1
<PAGE> 3
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 [__________],
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 a high level of current income and the potential for
long-term capital appreciation with lower
<PAGE> 2
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.
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
<PAGE> 3
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 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
<PAGE> 4
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
<PAGE> 5
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, 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.
<PAGE> 6
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 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).
<PAGE> 7
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
purchase 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.
<PAGE> 8
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".
<PAGE> 9
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.
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
* 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.
<PAGE> 10
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 (write) 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. 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.
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 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 purchase a put
<PAGE> 11
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.
<PAGE> 12
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 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.
<PAGE> 13
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 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 in accordance with its investment objective and
policies (see "Investment Objective(s) and Policies");
6. Purchase or sell real estate, commodities or commodities
contracts or options thereon (except for its interest in
hedging activities as described under "Investment Objective(s)
<PAGE> 14
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;
<PAGE> 15
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 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;
<PAGE> 16
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 [such
options are written by other persons and:] (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;
<PAGE> 17
(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; and (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.
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 receive compensation from the
Company exceeding $60,000 per fiscal year. None of the Trustees or the
Trust's employees receive 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.
[TO COME]
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. The Adviser was incorporated under the
laws of [Switzerland] on [_____________], and UBSII
<PAGE> 18
was organized under the laws of the United Kingdom on [________], 199[_].
(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 other investment companies 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.
Active in New York City since 1946, the Branch employs a staff
of approximately 1,000. Private banking services in the United States are
provided primarily through the Branch, as well as through a branch in Los
Angeles, California. As of December 31, 1995, the Branch had assets under
management totaling approximately $750 million. The Sub-Adviser employs a
staff of approximately [___________], and, as of December 31, 1995, had
assets under management totaling approximately [$___________].
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 Bank's financial
statements are denominated in Swiss francs. The exchange rate at June 30,
1995 was Sfr. 1.148 to one U.S. dollar.)
The basis of the Advisers' investment processes is fundamental
investment research, as they believe that fundamentals should determine an
asset's value over the long-term. The Adviser currently employs [_____]
full-time research analysts devoted to equity, fixed income, capital
market, credit and economic research in investment management divisions.
Similarly, UBSII employs [_____] full-time research analysts in [_____]
countries, who are devoted to
<PAGE> 19
equity, fixed income, capital market, credit and economic research. The
conclusions of the equity analysts' fundamental research is quantified into
a set of projected returns through the use of a dividend discount model.
These returns are projected for a number of years to enable analysts to
take a long-term view. These returns, or normalized earnings, are used to
establish relative values among stocks in each industrial sector. This
provides the basis for ranking the attractiveness of the companies in an
industry.
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.
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.
Portfolio Annualized Fee Rate
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
The Adviser has voluntarily agreed to 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 Adviser
may modify or discontinue this expense limitation at any time in the future
with 30 days' notice to the affected Fund. See "Expenses".
<PAGE> 20
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; 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
<PAGE> 21
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 the registration of sufficient shares of
the Funds under federal and state securities laws and 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:
<PAGE> 22
Annualized
Fund's Average Daily Net Assets Fee Rate
First $100 Million . . . . . . . . . . . . . . . . . . 0.050%
Next $100 Million . . . . . . . . . . . . . . . . . . . 0.025%
In excess of $200 Million . . . . . . . . . . . . . . . 0.000%
Under the Trust's Administrative Services Agreements, 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
<PAGE> 23
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
5822, 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
Shareholder Servicing Agreements with the Branch and Signature under which
the Branch provides shareholder services to Fund shareholders who are also
clients of the Branch and Signature provides services to Fund shareholders
who are not Branch clients. These services 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' 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 or Signature, as appropriate, a fee at an annual rate of 0.25% of
the average daily net assets of the shareholder accounts of that Fund so
serviced.
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
<PAGE> 24
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 Adviser 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 Adviser
shall waive its fees to the extent necessary to remove such excess.
Currently, the Adviser 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 Adviser 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 Adviser may modify or
discontinue this fee waiver and expense limitation at any time in the
future with 30 days' notice to the affected Fund.
The Adviser paid the organizational expenses of the Company and
the Trust and the expenses incurred in the initial offering of Fund shares.
The costs of organizing the Company and the Trust and registering the
Funds' shares will be paid initially by the Adviser and reimbursed by the
Company and the Trust, as applicable, at the time of the initial offering
of the shares of each Fund, which is expected to be simultaneous. These
costs in turn will be equitably allocated to each Fund and Portfolio as
provided for by the Directors and Trustees. Such organization costs have
been deferred and will be amortized ratably over a period of sixty months
from the commencement of operations of the Funds and the Portfolios.
<PAGE> 25
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 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
<PAGE> 26
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. The Company, on behalf of the Funds, and the Trust, on
behalf of the Portfolios, have elected to be governed by Rule 18f-1 under
the 1940 Act pursuant to which the Funds and the Portfolios are obligated
to redeem shares solely in cash up to the lesser of $250,000 or one percent
of the net asset value of the Fund or Portfolio, as applicable, during any
90 day period for any one shareholder. The Company will redeem Fund shares
in-kind only if it has received an in-kind redemption from the
corresponding Portfolio and therefore shareholders of a Fund that receive
Fund redemptions in-kind will receive securities of the Portfolio. The
Trust has advised the Company that the Portfolios will not redeem in-kind
except in circumstances in which a Fund is permitted to redeem in-kind.
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. 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.
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
<PAGE> 27
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
<PAGE> 28
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-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.
<PAGE> 29
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 effect loans of portfolio
securities on behalf of the Portfolios. See "Investment Objectives and
Policies".
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.
<PAGE> 30
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
<PAGE> 31
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.
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
<PAGE> 32
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, an unincorporated business trust
formed under New York law, was organized on [_________], 1996. The
Declaration of Trust permits the Trustees to issue interests in one or more
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
<PAGE> 33
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 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.
<PAGE> 34
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.
<PAGE> 35
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 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 respect
by such reference.
Shareholder inquiries may be directed to your Shareholder
Servicing Agent.
<PAGE> 1
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
<PAGE> 2
UBS Private Investor Funds, Inc.
Statement of Assets and Liabilities
January 31, 1996
UBS
UBS Interna-
U.S. tional
UBS Equity Equity
Bond Fund Fund Fund
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
___________________________
See Notes to financial statements.
<PAGE> 3
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:
UBS Bond Portfolio 0.45%
UBS U.S. Equity Portfolio 0.60%
UBS International Equity Portfolio 0.85%
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.
<PAGE> 4
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 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
<PAGE> 5
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:
Fund Expense Limitation
UBS Bond Fund 0.80%
UBS U.S. Equity Fund 0.90%
UBS International Equity Fund 1.40%
<PAGE> 1
UBS Private Investor Funds, Inc.
UBS Bond Fund
UBS U.S. Equity Fund
UBS Tax Exempt Bond Fund
UBS International Equity Fund
Part C
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:
(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
* To be filed by Amendment.
<PAGE> 2
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 [ ] 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.
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
<PAGE> 3
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.
(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;
<PAGE> 4
(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.
(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
<PAGE> 5
(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 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
<PAGE> 6
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.
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.
<PAGE> 7
(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.
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
5822,
<PAGE> 8
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.
<PAGE> 9
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 and State of New York, on the 9th day
of February, 1996.
UBS PRIVATE INVESTOR FUNDS, INC.
By: /s/ Stephen K. West
Stephen K. West
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacities and on the date indicated.
Name Title Date
/s/ Stephen K. West Director and President February 9, 1996
Stephen K. West
<PAGE> 1
ARTICLES OF INCORPORATION
OF
UBS PRIVATE INVESTOR FUNDS, INC.
FIRST: Incorporator. I, THE UNDERSIGNED, Stephen K. West,
whose post office address is 125 Broad Street, New York, New York 10004,
being at least twenty-one years of age, do under and by virtue of the
General Laws of the State of Maryland authorizing the formation of
corporations, associate myself as incorporator with the intention of
forming a corporation (hereinafter called the "Corporation").
SECOND: Name. The name of the Corporation is UBS Private
Investor Funds, Inc.
THIRD: Purposes and Powers. The purpose for which the
Corporation is formed is to act as an open-end management investment
company under the Investment Company Act of 1940, as currently in effect or
as hereafter may be amended and the Rules and Regulations from time to time
promulgated and effective thereunder (referred to herein collectively as
the "Investment Company Act of 1940") and to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations
by the General Laws of the State of Maryland now or hereafter in force.
FOURTH: Principal Office. The post office address of the
principal office of the Corporation in this State is c/o The Corporation
Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. The name of
the Corporation's resident agent is The Corporation Trust Incorporated, and
its post office address is 32 South Street, Baltimore, Maryland 21202. Said
resident agent is a corporation of the State of Maryland.
FIFTH: Capital Stock. 1. The total number of shares of capital
stock of all series and classes that the Corporation initially shall have
authority to issue is 500,000,000 shares, with a par value of one-tenth of
one cent ($.001) per share, to be known and designated as Common Stock,
such shares of Common Stock having an aggregate par value of five hundred
thousand dollars ($500,000). The Board of Directors shall have power and
authority to increase or decrease, from time to time, the aggregate number
of shares of stock, or of any series or class of stock, that the
Corporation shall have the authority to issue.
<PAGE> 2
2. Subject to the provisions of the Corporation's charter, the
Board of Directors shall have the power to issue shares of Common Stock of
the Corporation from time to time, at prices not less than the net asset
value or par value thereof, whichever is greater, for such consideration
(which may consist of, among other things, cash and/or securities) as may
be fixed from time to time pursuant to the direction of the Board of
Directors. All stock, upon issuance against receipt of the consideration
specified by the Board of Directors, shall be fully paid and non-
assessable.
3. Pursuant to Section 2-105 of the Maryland General
Corporation Law, the Board of Directors of the Corporation shall have the
power to designate one or more series of shares of Common Stock, to fix the
number of shares in any such series and to classify or reclassify any
unissued shares with respect to such series. Any series of Common Stock
shall be referred to herein individually as a "Series" and collectively,
together with any further series from time to time established, as the
"Series". Any such Series (subject to any applicable rule, regulation or
order of the Securities and Exchange Commission or other applicable law or
regulation) shall have such preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, terms
and conditions of redemption and other characteristics as the Board of
Directors may determine in the absence of a contrary provision set forth
herein. The aforesaid power shall include the power to create, by
classifying or reclassifying unissued shares in the aforesaid manner, one
or more Series in addition to those initially designated as named below and
to increase the aggregate number of shares of a Series. Subject to such
aforesaid power, the Board of Directors has initially designated four
Series of shares of Common Stock of the Corporation. The names of such
Series and the number of shares of Common Stock initially classified and
allocated to these Series are as follows:
<TABLE>
<CAPTION>
Number of Shares of Common Stock
Name of Series Initially Classified and Allocated
<S> <C>
The UBS Bond Fund Series . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
The UBS Tax Exempt Bond Fund Series . . . . . . . . . . . . . . . . . . 10,000,000
The UBS International Equity Fund Series . . . . . . . . . . . . . . . 10,000,000
The UBS U.S. Equity Fund Series . . . . . . . . . . . . . . . . . . . . 10,000,000
</TABLE>
4. The Board of Directors may, from time to time and without
stockholder action, classify shares of a particular Series into one or more
additional classes of that Series, the voting, dividend, liquidation and
other rights of which shall
<PAGE> 3
differ from the other classes of Common Stock of that Series to the extent
provided in Articles Supplementary for such additional class, such Articles
Supplementary to be filed for record with the appropriate authorities of
the State of Maryland. Any class of a Series of Common Stock shall be
referred to herein individually as a "Class" and collectively, together
with any further class or classes of such Series from time to time
established, as the "Classes".
5. All Classes of a particular Series of Common Stock of the
Corporation shall represent the same interest in the Corporation and have
identical voting, dividend, liquidation and other rights with any other
shares of Common Stock of that Series; provided, however, that
notwithstanding anything in the charter of the Corporation to the contrary:
(i) any Class of shares may be subject to such sales loads,
contingent deferred sales charges, Rule 12b-1 fees, administrative
fees, service fees or other fees, however designated, in such amounts
as may be established by the Board of Directors from time to time in
accordance with the Investment Company Act of 1940 and the applicable
rules and regulations of the National Association of Securities
Dealers, Inc;
(ii) expenses related solely to a particular Class of a Series
(including, without limitation, distribution expenses under a Rule
12b-1 plan and administrative expenses under an administration or
service agreement, plan or other arrangement, however designated)
shall be borne by that Class and shall be appropriately reflected (in
the manner determined by the Board of Directors) in the net asset
value, dividends, distributions and liquidation rights of the shares
of that Class; and
(iii) as to any matter with respect to which a separate vote of
any Class of a Series is required by the Investment Company Act of
1940 or by the Maryland General Corporation Law (including, without
limitation, approval of any plan, agreement or other arrangement
referred to in subsection (ii) above), such requirement as to a
separate vote by that Class shall apply in lieu of single class
voting (as defined in Section 7 of this Article), and if permitted by
the Investment Company Act of 1940 or the Maryland General
Corporation Law, the Classes of more than one Series shall vote
together as a single class on any such matter that shall have the
same effect on each such Class. As to any matter that does not affect
the interest of a particular Class of a Series, only the holders of
shares of the affected Class or Classes of that Series shall be
entitled to vote.
6. Subject to the foregoing, each share of a Series or Class
shall have equal rights with each other share of that Series or Class with
respect to the assets of
<PAGE> 4
the Corporation pertaining to that Series or Class. The dividends payable
to the holders of any Series or Class (subject to any applicable rule,
regulation or order of the Securities and Exchange Commission or any other
applicable law or regulation) shall be determined by the Board of Directors
and need not be individually declared, but may be declared and paid in
accordance with a formula adopted by the Board of Directors (whether or not
the amount of dividend or distribution so declared can be calculated at the
time of such declaration).
7. The holder of each share of Common Stock of the Corporation
shall be entitled to one vote for each full share, and a fractional vote
for each fractional share, irrespective of the Series or Class, then
standing in his or her name in the books of the Corporation. On any matter
submitted to a vote of stockholders, all shares of Common Stock of the
Corporation then issued and outstanding and entitled to vote, irrespective
of the Series or Class, shall be voted in the aggregate and not by Series
or Class ("single class voting") except (1) when otherwise expressly
provided by the Maryland General Corporation Law or when required by the
Investment Company Act of 1940, shares shall be voted by individual Series
or Class, and (2) when the matter does not affect any interest of a
particular Series or Class, then only stockholders of such other Series or
Class or Series or Classes whose interests may be affected shall be
entitled to vote thereon. Holders of shares of Common Stock of the
Corporation shall not be entitled to cumulative voting in the election of
Directors or on any other matter.
8. All consideration received by the Corporation for the
issuance or sale of stock of each Series or Class, together with all
income, earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any funds or
payments derived from any reinvestment of such proceeds in whatever form
the same may be, shall belong to the Series or Class of shares of stock
with respect to which such assets, payments or funds were received by the
Corporation for all purposes, subject only to the rights of creditors, and
shall be so handled upon the books of account of the Corporation. Such
assets, income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof, and any
assets derived from any reinvestment of such proceeds, in whatever form the
same may be, are herein referred to as "assets belonging to" such Series or
Class.
9. The Board of Directors may from time to time declare and
pay dividends or distributions in stock, property (including securities) or
in cash on any or all Series or Classes of stock and to the stockholders of
record as of such date as the Board of Directors may determine; provided
that such dividends or distributions on shares of any Series or Class of
stock shall be paid only out of earnings, surplus or other lawfully
available assets belonging to such Series or Class. Subject to the
<PAGE> 5
foregoing proviso, the amount of any dividends or distributions and the
payment thereof shall be wholly in the discretion of the Board of
Directors.
10. In the event of the liquidation or dissolution of the
Corporation, stockholders of each Series and Class therein shall be
entitled to receive, as a Series or Class, out of the assets of the
Corporation available for distribution to stockholders, but other than
general assets, the assets belonging to such Series or Class and the assets
so distributable to the stockholders of any Series or Class shall be
distributed among such stockholders in proportion to the number of shares
of such Series or Class held by them and recorded on the books of the
Corporation. In the event that there are any general assets not belonging
to any particular Series or Class of stock and available for distribution,
such distribution shall be made to the holders of stock of all Series and
Classes in proportion to the net asset value of the respective Series or
Class determined as hereinafter provided.
11. The assets belonging to any Series or Class of stock shall
be charged with the liabilities in respect to such Series or Class and
shall also be charged with such Series' or Classes' proportionate share of
the general liabilities of the Corporation, based upon the ratio of the net
asset value, determined as hereinafter provided, of the shares of such
Series or Class then outstanding to the net asset value of all shares of
Common Stock of the Corporation then outstanding. The determination of the
Board of Directors shall be conclusive with respect to the amount of
liabilities, including accrued expenses and reserves, the allocation of
such liabilities to a given Series or Class, and whether the same or
general assets of the Corporation are allocable to one or more Series or
Classes.
12. The Board of Directors may provide for a holder of any
Series or Class of stock of the Corporation, who surrenders his certificate
in good form for transfer to the Corporation or, if the shares in question
are not represented by certificates, who delivers to the Corporation a
written request in good order signed by the stockholder, to convert the
shares in question on such basis as the Board may provide into shares of
stock of any other Series or Class of the Corporation.
13. Subject to Section 14 below, the net asset value per share
of the Corporation's Common Stock shall be determined by adding the value
of all securities, cash and other assets of the Corporation pertaining to
that Series or Class, subtracting the liabilities applicable to that Series
or Class, proportionally allocating any general assets and general
liabilities to that Series or Class, and dividing the net result by the
number of shares of that Series or Class outstanding. Subject to
Section 14 below, the value of the securities, cash and other assets, and
the amount and nature of liabilities, and the allocation thereof to any
particular Series or Class, shall be determined pursuant to the direction
of, or procedures or methods prescribed or approved by, the Board of
Directors in its sole discretion and shall be so
<PAGE> 6
determined at the time or times prescribed or approved by the Board of
Directors in its sole discretion.
14. The net asset value per share of a Series or Class of the
Corporation's Common Stock for the purpose of issuance, redemption or
repurchase of shares, shall be determined in accordance with the Investment
Company Act of 1940 and any other applicable Federal securities law, rule
or regulation.
15. All shares of Common Stock now or hereafter authorized
shall be subject to redemption and redeemable at the option of the
stockholder, in the sense used in the General Corporation Law of the State
of Maryland. Each holder of a share, upon request to the Corporation
accompanied by surrender of the appropriate stock certificate or
certificates in proper form for transfer if certificates have been issued
to such holder, or in accordance with such other procedures as may from
time to time be in effect if certificates have not been issued, shall be
entitled to require the Corporation to redeem all or any number of the
shares of Common Stock standing in the name of such holder on the books of
the Corporation at a redemption price per share equal to an amount
determined by the Board of Directors in accordance with any applicable laws
and regulations; provided that (i) such amount shall not exceed the net
asset value per share determined in accordance with this Article, and (ii)
if so authorized by the Board of Directors, the Corporation may, at any
time from time to time, charge fees for effecting such redemption or
repurchase, at such rates as the Board of Directors may establish, as and
to the extent permitted under the Investment Company Act of 1940. The
redemption price may be paid in cash, securities or a combination thereof,
as determined by or pursuant to the direction of the Board of Directors
from time to time.
16. Notwithstanding Section 15 above (or any other provision
of the Corporation's charter), the Board of Directors of the Corporation
may suspend the right of the holders of shares of any Series to require the
Corporation to redeem such shares (or may suspend any voluntary purchase of
shares pursuant to the provisions of the Corporation's charter) or postpone
the date of payment or satisfaction upon redemption of such shares during
any financial emergency.
For the purpose of the Corporation's charter, a "financial
emergency" is defined as the whole or part of any period during which (i)
the New York Stock Exchange is closed, other than customary weekend and
holiday closings, (ii) trading on the New York Stock Exchange is
restricted, (iii) an emergency exists as a result of which disposal by the
Corporation of securities owned by such Series is not reasonably
practicable or it is not reasonably practicable for the Corporation fairly
to determine the value of the net assets of such Series or (iv) the
Securities and Exchange Commission (or any succeeding governmental
authority) may for the
<PAGE> 7
protection of security holders of the Corporation by order permit
suspension of the right of redemption or postponement of the date of
payment on redemption.
17. The Board of Directors may by resolution from time to time
authorize the repurchase by the Corporation, either directly or through an
agent, of shares upon such terms and conditions and for such consideration
as the Board of Directors shall deem advisable, out of funds legally
available therefor and at prices per share not in excess of the current net
asset value per share determined in accordance with this Article and to
take all other steps deemed necessary or advisable in connection therewith.
18. Except as otherwise permitted by the Investment Company Act
of 1940 or any other applicable rule, regulation or order of the Securities
and Exchange Commission, payment of the redemption or repurchase price of
shares surrendered to the Corporation for redemption pursuant to the
provisions of Section 15 or 20 of this Article or for repurchase by the
Corporation pursuant to the provisions of Section 17 of this Article shall
be made by the Corporation within seven (7) days after surrender of such
shares to the Corporation for such purpose. Any such payment may be made in
whole or in part in portfolio securities or in cash, as the Board of
Directors shall deem advisable, and no stockholder shall have the right,
other than as determined by the Board of Directors, to have shares redeemed
or repurchased in portfolio securities or in cash or in any particular
combination thereof.
19. In the absence of any specification of the purpose for
which the Corporation redeems or repurchases any shares of its Common
Stock, all redeemed or repurchased shares shall be deemed to be acquired
for retirement in the sense contemplated by the General Corporation Law of
the State of Maryland. Shares of any Series retired by redemption or
repurchase shall thereafter have the status of authorized but unissued
shares of such Series.
20. All shares now or hereafter authorized shall be subject to
redemption and redeemable at the option of the Corporation. From time to
time the Board of Directors may by resolution, without the vote or consent
of stockholders, authorize the redemption of all or any part of any
outstanding shares (including through the establishment of uniform
standards with respect to the minimum net asset value of a stockholder
account) upon the sending of written notice thereof to each stockholder any
of whose shares are to be so redeemed and upon such terms and conditions as
the Board of Directors shall deem advisable, out of funds legally available
therefore, at the net asset value per share determined in accordance with
the provisions of this Article and may take all other steps deemed
necessary or advisable in connection therewith. The Board of Directors may
authorize the closing and redemption of all shares of any accounts not
meeting the specified minimum standards of net asset value.
<PAGE> 8
21. The holders of shares of Common Stock or other securities
of the Corporation shall have no preemptive rights to subscribe for new or
additional shares of its Common Stock or other securities.
SIXTH: Directors. The initial number of directors of the
Corporation shall be one (1), which shall be the minimum number of
directors for so long as there is only one or no stockholder. The name of
the director who shall act until the first annual meeting or until his
successor is duly chosen and qualified is Stephen K. West. Upon such time
as the Corporation has two or more stockholders, the minimum number of
directors shall be increased in accordance with the provisions of Section
2-402 of the Maryland General Corporation Law. The number of directors may
be changed from time to time in such lawful manner as is provided in the
Bylaws of the Corporation. Unless otherwise provided by the Corporation's
Bylaws, directors of the Corporation need not be stockholders.
SEVENTH: Liabilities of Directors and Officers. To the fullest
extent permitted by Maryland statutory and decisional law, as amended and
interpreted, and the Investment Company Act of 1940, no director or officer
of the Corporation shall be 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.
EIGHTH: Indemnification of Directors, Officers, Employees and
Agents. 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 persons'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
<PAGE> 9
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.
NINTH: Management of the Affairs of the Corporation. The Board
of Directors shall manage and control the property, business and affairs of
the Corporation and is hereby vested with all the powers possessed by the
Corporation itself so far as is not inconsistent with law or the
Corporation's charter. In furtherance and without limitation of the
foregoing provisions, it is expressly declared that, subject to the
Corporation's charter, the Board of Directors shall have the power:
(i) to make, alter, amend or repeal from time to time the
Bylaws of the Corporation except as such power may otherwise be
limited in the Bylaws;
(ii) from time to time to determine whether, to what extent, at
what times and places and under what conditions and regulations the
books and accounts of the Corporation, or any of them other than the
stock ledger, shall be open to the inspection of the stockholders,
and no stockholder shall have any right to inspect any account or
book or document of the Corporation, except as conferred by law or
authorized by resolution of the Board of Directors or of the
stockholders; and
(iii) in addition to the powers and authorities granted herein
and by statute expressly conferred upon it, the Board of Directors is
authorized to exercise all such powers and do all acts and things as
may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of Maryland law and the Corporation's charter and
Bylaws.
TENTH: Corporate Books. The books of the Corporation may be
kept (subject to any provisions contained in applicable statutes) outside
the State of Maryland at such place or places as may be designated from
time to time by the Board of Directors or in the Bylaws of the Corporation.
Election of directors need not be by ballot unless the Bylaws of the
Corporation shall so provide.
ELEVENTH: Amendments. The Corporation reserves the right from
time to time to amend, alter or repeal any of the provisions of the
Corporation's charter (including any amendment that changes the terms of
any of the outstanding shares by classification, reclassification or
otherwise), and any contract rights, as expressly set forth in the
Corporation's charter, of any outstanding shares, and to add or insert any
other provisions that may, under the statutes of the State of Maryland at
the time in force, be lawfully contained in a corporation's charter, and
all rights at
<PAGE> 10
any time conferred upon the stockholders of the Corporation by this charter
are subject to the provisions of this Article ELEVENTH.
TWELFTH: Quorum; Majority Vote. 1. The presence in person or by
proxy of the holders of record of one-third of the shares issued and
outstanding and entitled to vote thereat shall constitute a quorum for the
transaction of any business at all meetings of the stockholders except as
otherwise provided by law (including the Investment Company Act of 1940) or
in the Corporation's charter.
2. On any given matter, the presence at any meeting, in person
or by proxy, of holders of record of less than one-third of the shares
issued and outstanding and entitled to vote thereat shall not prevent
action at such meeting upon any other matter or matters which may properly
come before the meeting, if there shall be present thereat, in person or by
proxy, holders of record of the number of shares required for action in
respect of such other matter or matters.
Notwithstanding any provision of Maryland law requiring more
than a majority vote of the Common Stock, or any Series or Class thereof,
in connection with any corporate action (including, but not limited to, the
amendment of the Corporation's charter), unless otherwise provided in the
Corporation's charter, the Corporation may take or authorize such action
upon the favorable vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote thereon.
THIRTEENTH: Acquisition Subject to the Corporation's Charter.
All persons who shall acquire shares in the Corporation shall acquire the
same subject to the provisions of the Corporation's charter.
FOURTEENTH: Duration. The duration of the Corporation shall be
perpetual.
<PAGE> 11
I acknowledge this to be my act and state under penalty of
perjury that with respect to all matters and facts therein, to the best of
my knowledge, information and belief, such matters and facts are true in
all material respects.
Date: November 15, 1995 By: /s/ Stephen K. West
STEPHEN K. WEST
<PAGE> 1
Adopted February 13, 1996
BYLAWS
of
UBS PRIVATE INVESTOR FUNDS, INC.
ARTICLE I
Stockholders
SECTION 1. Place of Meeting. All meetings of stockholders
shall be held at the principal office of UBS Private Investor Funds, Inc.
(the "Corporation") in the State of Maryland or at such other place within
the United States as may from time to time be designated by the Board of
Directors (the "Board") and stated in the notice of such meeting.
SECTION 2. Annual Meeting. The Corporation shall not be
required to hold an annual meeting of its stockholders in any year in which
the election of directors is not required to be acted upon under the
Investment Company Act of 1940 (the "1940 Act"). In the event that the
Corporation shall hold an annual meeting of stockholders, such meeting
shall be held at a date and time set by the Board, provided, however, that
the date and time of such meeting shall be set in compliance with the 1940
Act. Any stockholders' meeting held in accordance with the preceding
sentence may constitute the annual meeting of stockholders for the fiscal
year of the Corporation in which the meeting is held.
SECTION 3. Special Meetings. Special meetings of the
stockholders for any purpose or purposes may be called by the Chairman of
the Board, the President or a majority of the Board of Directors. In
addition, such special meetings shall be called by the Secretary upon
receipt of a request in writing signed by stockholders entitled to cast at
least 25% of all votes entitled to be cast at the meeting. Such request
shall state the purpose or purposes of the meeting and the matters proposed
to be acted on. The Secretary shall inform such stockholders of the
reasonably estimated costs of preparing and mailing a notice of the meeting
and upon payment by such stockholders to the Corporation of such costs, the
Secretary shall give notice as specified in Section 5 of this Article.
Unless requested by stockholders entitled to cast a majority of all the
votes entitled to be
<PAGE> 2
cast at the meeting, a special meeting need not be called to consider any
matter that is substantially the same as a matter voted on at a meeting of
the stockholders held during the preceding 12 months.
SECTION 4. Record Dates. The Board may fix, in advance, a
date as the record date for the purpose of determining stockholders
entitled to notice of, or to vote at, any meeting of stockholders, or
stockholders entitled to receive payment of any dividend or the allotment
of any other rights, or in order to make a determination of stockholders
for any other proper purpose. Such date in any case shall not be more than
90 days, and in case of a meeting of stockholders, not less than 10 days,
prior to the date on which the particular action, requiring such
determination of stockholders, is to be taken.
SECTION 5. Notice of Meeting. Not less than 10 and not more
than 90 days before each meeting of stockholders, the Secretary shall give
to each stockholder entitled to vote at the meeting and to each other
stockholder entitled to notice of such meeting, written notice of the time,
date, place, and, in the case of a special meeting or when otherwise
required by the laws of the State of Maryland, the purpose or purposes of
the meeting. Such notice shall be given in the manner required by the laws
of the State of Maryland.
No notice of the time, place or purpose of any meeting of
stockholders need be given to any stockholder who attends in person or by
proxy or to any stockholder who, in writing executed and filed with the
records of the meeting, either before or after the holding thereof, waives
such notice.
SECTION 6. Adjournment. A meeting of stockholders convened on
the date for which it was called may be adjourned from time to time without
further notice, other than as announced at the meeting, to a date not more
than 120 days after the original record date. At any such adjourned
meeting at which a quorum shall be present, any action may be taken that
could have been taken at the meeting originally called.
SECTION 7. Quorum and Voting. Quorum at any meeting of the
stockholders shall be as set forth in the Articles of Incorporation.
Except as otherwise provided by law, the number of votes cast at any
stockholders' meeting at which a quorum is present sufficient to approve
any matter that properly comes before such meeting shall be as set forth in
the Articles of Incorporation.
<PAGE> 3
SECTION 8. Inspectors. At any election of Directors, the
chairman of the meeting may, and upon the request of the holders of ten
percent (10%) of the stock entitled to vote at such election shall, appoint
one or more inspectors of election who shall first subscribe an oath or
affirmation to execute faithfully the duties of inspectors at such election
with strict impartiality and according to the best of their ability, and
shall after the election make a certificate of the result of the vote
taken. No candidate for the office of Director shall be appointed as such
an inspector.
SECTION 9. Conduct of Meetings. Each meeting of stockholders
shall be presided over by the Chairman of the Board or, if he is not
present, by the President or, if he is not present, by a Vice-President or
if neither of them is present, by a chairman to be elected at the meeting.
The Secretary of the Corporation shall act as secretary of the meeting or,
if he is not present, an Assistant Secretary shall so act. If neither the
Secretary nor an Assistant Secretary is present, the chairman of the
meeting shall appoint a secretary.
SECTION 10. Concerning Validity of Proxies, Ballots, etc. At
every meeting of the stockholders, all proxies shall be received and taken
in charge of and all ballots shall be received and canvassed by the
secretary of the meeting, who shall decide all questions concerning the
qualification of voters, the validity of proxies and the acceptance or
rejection of votes, unless inspectors of election shall have been appointed
by the chairman of the meeting, in which event such inspectors of election
shall decide all such questions.
SECTION 11. Action Without Meeting. Any action to be taken by
stockholders may be taken without a meeting if (a) all stockholders
entitled to vote on the matter consent to the action in writing, and
(b) all stockholders entitled to notice of the meeting but not entitled to
vote at it sign a written waiver of any right to dissent and (c) the
written consents are filed with the records of the meeting of stockholders.
Such consent shall be treated for all purposes as a vote at a meeting.
<PAGE> 4
ARTICLE II
Board of Directors
SECTION 1. Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors, which may exercise all powers of the Corporation and do all
lawful acts and things that are not by law, the Corporation's Articles of
Incorporation or these Bylaws directed or required to be done by the
stockholders.
SECTION 2. Number and Tenure. The number of Directors fixed
by the Corporation's Articles of Incorporation as the number that shall
constitute the whole Board may be increased or decreased by a vote of a
majority of the entire Board from time to time, provided that this number
shall not be more than 15. Each Director shall hold office until his
successor is elected and qualifies or until his earlier resignation or
removal. The Board of Directors shall elect a Chairman from among the
Directors.
SECTION 3. Vacancies. Any vacancies in the Board may, subject
to the 1940 Act, be filled by a majority of the Directors then in office,
although less than a quorum, or by the sole remaining Director; except
that, vacancies in the Board that result from an increase in the number of
Directors may, subject to the 1940 Act, be filled by a majority of the
entire Board. A Director elected by the Board to fill a vacancy serves
until his successor is elected and qualifies or until his earlier
resignation or removal.
SECTION 4. Removal of Directors. The stockholders of the
Corporation may remove any Director from office, either with or without
cause, by the affirmative vote of a majority of all the votes entitled to
be cast for the election of directors and may elect a successor to fill any
resulting vacancy for the unexpired term of the removed Director.
SECTION 5. Place of Meetings. Meetings of the Board, regular
or special, may be held at any place in or outside of the State of Maryland
as the Board may from time to time determine.
SECTION 6. Regular Meetings. Regular Meetings of the Board
shall be held at such time fixed by the Board. No notice of regular
meetings shall be required.
<PAGE> 5
SECTION 7. Special Meetings. Special meetings of the Board
may be called at any time by the Chairman of the Board, the President or a
majority of the Directors. Written notice of the time and place of any
special meeting shall be delivered or telecopied to each Director not less
than one day before the meeting or mailed to each Director not less than
three days before the meeting. No notice need be given to any Director who
is present at such meeting or to any Director who, in a writing executed
and filed with the records of the meeting either before or after the
holding thereof, waives such notice. Such notice or waiver of notice need
not state the purpose or purposes of such meeting.
SECTION 8. Telephone Meetings. Members of the Board or any
committee thereof may participate in a meeting by means of conference
telephone or similar communications equipment if all persons participating
in the meeting can hear each other at the same time. Participation in a
meeting by these means constitutes, subject to the provisions of the 1940
Act, presence in person at the meeting.
SECTION 9. Quorum. One-third of the total number of Directors
shall constitute a quorum for the transaction of business, provided that a
quorum shall be no less than two Directors, except where the Board consists
of only one Director, a quorum shall be one Director. If at any meeting of
the Board there shall be less than a quorum present, a majority of those
present may adjourn the meeting until a quorum shall have been obtained.
Except as otherwise provided by law, the Corporation's Articles of
Incorporation, these Bylaws or any contract or agreement to which the
Corporation is a party, the act of a majority of the Directors present at
any meeting at which there is a quorum shall be the act of the Board.
SECTION 10. Committee. The Board, by the affirmative vote of
a majority of the whole Board, may designate an executive committee and
other committees composed of two or more Directors and each committee shall
have the powers, authority and duties specified in the resolution creating
the same and permitted by law. If a member of a committee is absent or
disqualified, the members present at a meeting, whether or not constituting
a quorum, may appoint another member of the Board to act at the meeting in
place of the absent or disqualified member.
SECTION 11. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board or any committee thereof
may be taken without a
<PAGE> 6
meeting, if a written consent to such action is signed by all members of
the Board or of such committee, as the case may be, and such written
consent is filed with the minutes of the proceedings of the Board or
committee.
SECTION 12. Compensation of Directors. The Board may authorize
reasonable compensation to Directors for their services as Directors and as
members of committees of the Board and may authorize the reimbursement of
reasonable expenses incurred by Directors in connection with rendering
those services.
ARTICLE III
Officers
SECTION 1. Election. The Board of Directors shall elect a
President, a Secretary and a Treasurer. The Board may also, in its
discretion, elect one or more Vice- Presidents, Assistant Secretaries,
Assistant Treasurers and other officers, agents and employees. Any two or
more offices, except those of President and Vice-President, may be held by
the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity, if such instrument is required by law
or these Bylaws to be executed, acknowledged or verified by two or more
officers. The Board may fill any vacancy that may occur in any office.
SECTION 2. Term of Office. Officers shall serve for one year
and until their respective successors are elected and qualify or until
their earlier resignation or removal. Any officer may be removed at any
time, with or without cause, by the Board whenever, in its judgment, the
best interests of the Corporation will be served thereby.
SECTION 3. Powers and Duties. The officers of the Corporation
shall have such powers and duties as generally pertain to their respective
offices as well as such powers and duties as may from time to time be
conferred by resolution of the Board.
<PAGE> 7
ARTICLE IV
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.
ARTICLE V
General Provisions
SECTION 1. Annual Statement. The President or the Treasurer
shall prepare or cause to be prepared annually a full and correct statement
of the affairs of the Corporation, including a balance sheet and a
financial statement of operations for the preceding fiscal year. The
statement of affairs shall be submitted at the annual meeting of the
stockholders, if any, and, within 20 days after such meeting (or, in the
absence of an annual meeting, within 120 days after the end of the fiscal
year), placed on file at the Corporation's principal office in the State of
Maryland.
SECTION 2. Stock Ledger. The Corporation shall maintain at
the office of its transfer agent an original or duplicate stock ledger
containing the names and addresses of all stockholders and the number of
shares of each class held by each stockholder. Such stock ledger may be in
written form or any other form capable of being converted into written form
within a reasonable time for visual inspection.
SECTION 3. Amendment of Bylaws. These Bylaws may be altered,
amended, added to or repealed by the Board.
<PAGE> 1
[Form of Global Certificate]
COMMON STOCK COMMON STOCK
UBS Private Investor Funds, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
THE ___________________ FUND SERIES
THIS IS TO CERTIFY THAT
_____________________________________
(stockholder)
is the owner and registered Holder of ______________ (number of shares)
fully paid and non-assessable shares of the common stock, par value $.001
per share (the "Shares"), of The _________________ Fund Series of UBS
Private Investor Funds, Inc., a Maryland corporation (the "Corporation").
This Certificate and the Shares represented hereby are issued and shall be
held subject to the provisions of the General Corporation Law of the State
of Maryland (the "MGCL") and the Articles of Incorporation and Bylaws of
the Corporation, as they may be amended from time to time.
The Corporation has authority to issue stock of more than one
class or series. Each such class or series may have unique designations,
preferences, limitations, restrictions, liquidation rights, qualifications,
terms and conditions of redemption and other rights. The Corporation will
furnish a full statement of such rights and limitations, as required by
Section 2-211 of the MGCL, to any stockholder on request and without
charge.
This certificate is not valid unless manually countersigned by
the Transfer Agent.
<PAGE> 2
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated
_________________________ ________________________
SECRETARY PRESIDENT
_____________________________
TRANSFER AGENT
By ______________________________
Authorized Officer
<PAGE> 1
Selected Portions of the
Articles of Incorporation of
UBS Private Investor Funds, Inc.
FIFTH: Capital Stock. 1. The total number of shares of capital
stock of all series and classes that the Corporation initially shall have
authority to issue is 500,000,000 shares, with a par value of one-tenth of
one cent ($.001) per share, to be known and designated as Common Stock,
such shares of Common Stock having an aggregate par value of five hundred
thousand dollars ($500,000). The Board of Directors shall have power and
authority to increase or decrease, from time to time, the aggregate number
of shares of stock, or of any series or class of stock, that the
Corporation shall have the authority to issue.
2. Subject to the provisions of the Corporation's charter, the
Board of Directors shall have the power to issue shares of Common Stock of
the Corporation from time to time, at prices not less than the net asset
value or par value thereof, whichever is greater, for such consideration
(which may consist of, among other things, cash and/or securities) as may
be fixed from time to time pursuant to the direction of the Board of
Directors. All stock, upon issuance against receipt of the consideration
specified by the Board of Directors, shall be fully paid and non-
assessable.
3. Pursuant to Section 2-105 of the Maryland General
Corporation Law, the Board of Directors of the Corporation shall have the
power to designate one or more series of shares of Common Stock, to fix the
number of shares in any such series and to classify or reclassify any
unissued shares with respect to such series. Any series of Common Stock
shall be referred to herein individually as a "Series" and collectively,
together with any further series from time to time established, as the
"Series". Any such Series (subject to any applicable rule, regulation or
order of the Securities and Exchange Commission or other applicable law or
regulation) shall have such preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, terms
and conditions of redemption and other characteristics as the Board of
Directors may determine in the absence of a contrary provision set forth
herein. The aforesaid power shall include the power to create, by
classifying or reclassifying unissued shares in the aforesaid manner, one
or more Series in addition to those initially designated as named below and
to increase the aggregate number of shares of a Series. Subject to such
aforesaid power, the Board of Directors has initially designated four
Series of shares of Common Stock of the Corporation. The names of such
Series and the number of shares of Common Stock initially classified and
allocated to these Series are as follows:
<PAGE> 2
<TABLE>
<CAPTION>
Number of Shares of Common Stock
Name of Series Initially Classified and Allocated
<S> <C>
The UBS Bond Fund Series . . . . . . . . . . . . . . . . . . . . . . . 10,000,000
The UBS Tax Exempt Bond Fund Series . . . . . . . . . . . . . . . . . . 10,000,000
The UBS International Equity Fund Series . . . . . . . . . . . . . . . 10,000,000
The UBS U.S. Equity Fund Series . . . . . . . . . . . . . . . . . . . . 10,000,000
</TABLE>
4. The Board of Directors may, from time to time and without
stockholder action, classify shares of a particular Series into one or more
additional classes of that Series, the voting, dividend, liquidation and
other rights of which shall differ from the other classes of Common Stock
of that Series to the extent provided in Articles Supplementary for such
additional class, such Articles Supplementary to be filed for record with
the appropriate authorities of the State of Maryland. Any class of a Series
of Common Stock shall be referred to herein individually as a "Class" and
collectively, together with any further class or classes of such Series
from time to time established, as the "Classes".
5. All Classes of a particular Series of Common Stock of the
Corporation shall represent the same interest in the Corporation and have
identical voting, dividend, liquidation and other rights with any other
shares of Common Stock of that Series; provided, however, that
notwithstanding anything in the charter of the Corporation to the contrary:
(i) any Class of shares may be subject to such sales loads,
contingent deferred sales charges, Rule 12b-1 fees, administrative
fees, service fees or other fees, however designated, in such amounts
as may be established by the Board of Directors from time to time in
accordance with the Investment Company Act of 1940 and the applicable
rules and regulations of the National Association of Securities
Dealers, Inc;
(ii) expenses related solely to a particular Class of a Series
(including, without limitation, distribution expenses under a Rule
12b-1 plan and administrative expenses under an administration or
service agreement, plan or other arrangement, however designated)
shall be borne by that Class and shall be appropriately reflected (in
the manner determined by the Board of Directors) in the net asset
value, dividends, distributions and liquidation rights of the shares
of that Class; and
(iii) as to any matter with respect to which a separate vote of
any Class of a Series is required by the Investment Company Act of
1940 or by the Maryland General Corporation Law (including, without
limitation, approval of any plan, agreement or other arrangement
referred to in subsection (ii) above), such requirement as to a
separate vote by that Class shall apply in lieu of
<PAGE> 3
single class voting (as defined in Section 7 of this Article), and if
permitted by the Investment Company Act of 1940 or the Maryland General
Corporation Law, the Classes of more than one Series shall vote
together as a single class on any such matter that shall have the same
effect on each such Class. As to any matter that does not affect the
interest of a particular Class of a Series, only the holders of shares
of the affected Class or Classes of that Series shall be entitled to
vote.
6. Subject to the foregoing, each share of a Series or Class
shall have equal rights with each other share of that Series or Class with
respect to the assets of the Corporation pertaining to that Series or
Class. The dividends payable to the holders of any Series or Class (subject
to any applicable rule, regulation or order of the Securities and Exchange
Commission or any other applicable law or regulation) shall be determined
by the Board of Directors and need not be individually declared, but may be
declared and paid in accordance with a formula adopted by the Board of
Directors (whether or not the amount of dividend or distribution so
declared can be calculated at the time of such declaration).
7. The holder of each share of Common Stock of the Corporation
shall be entitled to one vote for each full share, and a fractional vote
for each fractional share, irrespective of the Series or Class, then
standing in his or her name in the books of the Corporation. On any matter
submitted to a vote of stockholders, all shares of Common Stock of the
Corporation then issued and outstanding and entitled to vote, irrespective
of the Series or Class, shall be voted in the aggregate and not by Series
or Class ("single class voting") except (1) when otherwise expressly
provided by the Maryland General Corporation Law or when required by the
Investment Company Act of 1940, shares shall be voted by individual Series
or Class, and (2) when the matter does not affect any interest of a
particular Series or Class, then only stockholders of such other Series or
Class or Series or Classes whose interests may be affected shall be
entitled to vote thereon. Holders of shares of Common Stock of the
Corporation shall not be entitled to cumulative voting in the election of
Directors or on any other matter.
8. All consideration received by the Corporation for the
issuance or sale of stock of each Series or Class, together with all
income, earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any funds or
payments derived from any reinvestment of such proceeds in whatever form
the same may be, shall belong to the Series or Class of shares of stock
with respect to which such assets, payments or funds were received by the
Corporation for all purposes, subject only to the rights of creditors, and
shall be so handled upon the books of account of the Corporation. Such
assets, income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof, and any
assets derived from any reinvestment of such
<PAGE> 4
proceeds, in whatever form the same may be, are herein referred to as
"assets belonging to" such Series or Class.
9. The Board of Directors may from time to time declare and
pay dividends or distributions in stock, property (including securities) or
in cash on any or all Series or Classes of stock and to the stockholders of
record as of such date as the Board of Directors may determine; provided
that such dividends or distributions on shares of any Series or Class of
stock shall be paid only out of earnings, surplus or other lawfully
available assets belonging to such Series or Class. Subject to the
foregoing proviso, the amount of any dividends or distributions and the
payment thereof shall be wholly in the discretion of the Board of
Directors.
10. In the event of the liquidation or dissolution of the
Corporation, stockholders of each Series and Class therein shall be
entitled to receive, as a Series or Class, out of the assets of the
Corporation available for distribution to stockholders, but other than
general assets, the assets belonging to such Series or Class and the assets
so distributable to the stockholders of any Series or Class shall be
distributed among such stockholders in proportion to the number of shares
of such Series or Class held by them and recorded on the books of the
Corporation. In the event that there are any general assets not belonging
to any particular Series or Class of stock and available for distribution,
such distribution shall be made to the holders of stock of all Series and
Classes in proportion to the net asset value of the respective Series or
Class determined as hereinafter provided.
11. The assets belonging to any Series or Class of stock shall
be charged with the liabilities in respect to such Series or Class and
shall also be charged with such Series' or Classes' proportionate share of
the general liabilities of the Corporation, based upon the ratio of the net
asset value, determined as hereinafter provided, of the shares of such
Series or Class then outstanding to the net asset value of all shares of
Common Stock of the Corporation then outstanding. The determination of the
Board of Directors shall be conclusive with respect to the amount of
liabilities, including accrued expenses and reserves, the allocation of
such liabilities to a given Series or Class, and whether the same or
general assets of the Corporation are allocable to one or more Series or
Classes.
12. The Board of Directors may provide for a holder of any
Series or Class of stock of the Corporation, who surrenders his certificate
in good form for transfer to the Corporation or, if the shares in question
are not represented by certificates, who delivers to the Corporation a
written request in good order signed by the stockholder, to convert the
shares in question on such basis as the Board may provide into shares of
stock of any other Series or Class of the Corporation.
13. Subject to Section 14 below, the net asset value per share
of the Corporation's Common Stock shall be determined by adding the value
of all
<PAGE> 5
securities, cash and other assets of the Corporation pertaining to that
Series or Class, subtracting the liabilities applicable to that Series or
Class, proportionally allocating any general assets and general liabilities
to that Series or Class, and dividing the net result by the number of
shares of that Series or Class outstanding. Subject to Section 14 below,
the value of the securities, cash and other assets, and the amount and
nature of liabilities, and the allocation thereof to any particular Series
or Class, shall be determined pursuant to the direction of, or procedures
or methods prescribed or approved by, the Board of Directors in its sole
discretion and shall be so determined at the time or times prescribed or
approved by the Board of Directors in its sole discretion.
14. The net asset value per share of a Series or Class of the
Corporation's Common Stock for the purpose of issuance, redemption or
repurchase of shares, shall be determined in accordance with the Investment
Company Act of 1940 and any other applicable Federal securities law, rule
or regulation.
15. All shares of Common Stock now or hereafter authorized
shall be subject to redemption and redeemable at the option of the
stockholder, in the sense used in the General Corporation Law of the State
of Maryland. Each holder of a share, upon request to the Corporation
accompanied by surrender of the appropriate stock certificate or
certificates in proper form for transfer if certificates have been issued
to such holder, or in accordance with such other procedures as may from
time to time be in effect if certificates have not been issued, shall be
entitled to require the Corporation to redeem all or any number of the
shares of Common Stock standing in the name of such holder on the books of
the Corporation at a redemption price per share equal to an amount
determined by the Board of Directors in accordance with any applicable laws
and regulations; provided that (i) such amount shall not exceed the net
asset value per share determined in accordance with this Article, and (ii)
if so authorized by the Board of Directors, the Corporation may, at any
time from time to time, charge fees for effecting such redemption or
repurchase, at such rates as the Board of Directors may establish, as and
to the extent permitted under the Investment Company Act of 1940. The
redemption price may be paid in cash, securities or a combination thereof,
as determined by or pursuant to the direction of the Board of Directors
from time to time.
16. Notwithstanding Section 15 above (or any other provision
of the Corporation's charter), the Board of Directors of the Corporation
may suspend the right of the holders of shares of any Series to require the
Corporation to redeem such shares (or may suspend any voluntary purchase of
shares pursuant to the provisions of the Corporation's charter) or postpone
the date of payment or satisfaction upon redemption of such shares during
any financial emergency.
For the purpose of the Corporation's charter, a "financial
emergency" is defined as the whole or part of any period during which (i)
the New York Stock
<PAGE> 6
Exchange is closed, other than customary weekend and holiday closings, (ii)
trading on the New York Stock Exchange is restricted, (iii) an emergency
exists as a result of which disposal by the Corporation of securities owned
by such Series is not reasonably practicable or it is not reasonably
practicable for the Corporation fairly to determine the value of the net
assets of such Series or (iv) the Securities and Exchange Commission (or
any succeeding governmental authority) may for the protection of security
holders of the Corporation by order permit suspension of the right of
redemption or postponement of the date of payment on redemption.
17. The Board of Directors may by resolution from time to time
authorize the repurchase by the Corporation, either directly or through an
agent, of shares upon such terms and conditions and for such consideration
as the Board of Directors shall deem advisable, out of funds legally
available therefor and at prices per share not in excess of the current net
asset value per share determined in accordance with this Article and to
take all other steps deemed necessary or advisable in connection therewith.
18. Except as otherwise permitted by the Investment Company Act
of 1940 or any other applicable rule, regulation or order of the Securities
and Exchange Commission, payment of the redemption or repurchase price of
shares surrendered to the Corporation for redemption pursuant to the
provisions of Section 15 or 20 of this Article or for repurchase by the
Corporation pursuant to the provisions of Section 17 of this Article shall
be made by the Corporation within seven (7) days after surrender of such
shares to the Corporation for such purpose. Any such payment may be made in
whole or in part in portfolio securities or in cash, as the Board of
Directors shall deem advisable, and no stockholder shall have the right,
other than as determined by the Board of Directors, to have shares redeemed
or repurchased in portfolio securities or in cash or in any particular
combination thereof.
19. In the absence of any specification of the purpose for
which the Corporation redeems or repurchases any shares of its Common
Stock, all redeemed or repurchased shares shall be deemed to be acquired
for retirement in the sense contemplated by the General Corporation Law of
the State of Maryland. Shares of any Series retired by redemption or
repurchase shall thereafter have the status of authorized but unissued
shares of such Series.
20. All shares now or hereafter authorized shall be subject to
redemption and redeemable at the option of the Corporation. From time to
time the Board of Directors may by resolution, without the vote or consent
of stockholders, authorize the redemption of all or any part of any
outstanding shares (including through the establishment of uniform
standards with respect to the minimum net asset value of a stockholder
account) upon the sending of written notice thereof to each stockholder any
of whose shares are to be so redeemed and upon such terms and conditions as
the Board of Directors shall deem advisable, out of funds legally
<PAGE> 7
available therefore, at the net asset value per share determined in
accordance with the provisions of this Article and may take all other steps
deemed necessary or advisable in connection therewith. The Board of
Directors may authorize the closing and redemption of all shares of any
accounts not meeting the specified minimum standards of net asset value.
21. The holders of shares of Common Stock or other securities
of the Corporation shall have no preemptive rights to subscribe for new or
additional shares of its Common Stock or other securities.
SIXTH: Directors. The initial number of directors of the
Corporation shall be one (1), which shall be the minimum number of
directors for so long as there is only one or no stockholder. The name of
the director who shall act until the first annual meeting or until his
successor is duly chosen and qualified is Stephen K. West. Upon such time
as the Corporation has two or more stockholders, the minimum number of
directors shall be increased in accordance with the provisions of Section
2-402 of the Maryland General Corporation Law. The number of directors may
be changed from time to time in such lawful manner as is provided in the
Bylaws of the Corporation. Unless otherwise provided by the Corporation's
Bylaws, directors of the Corporation need not be stockholders.
NINTH: Management of the Affairs of the Corporation. The Board
of Directors shall manage and control the property, business and affairs of
the Corporation and is hereby vested with all the powers possessed by the
Corporation itself so far as is not inconsistent with law or the
Corporation's charter. In furtherance and without limitation of the
foregoing provisions, it is expressly declared that, subject to the
Corporation's charter, the Board of Directors shall have the power:
(i) to make, alter, amend or repeal from time to time the
Bylaws of the Corporation except as such power may otherwise be
limited in the Bylaws;
(ii) from time to time to determine whether, to what extent, at
what times and places and under what conditions and regulations the
books and accounts of the Corporation, or any of them other than the
stock ledger, shall be open to the inspection of the stockholders,
and no stockholder shall have any right to inspect any account or
book or document of the Corporation, except as conferred by law or
authorized by resolution of the Board of Directors or of the
stockholders; and
(iii) in addition to the powers and authorities granted herein
and by statute expressly conferred upon it, the Board of Directors is
authorized to exercise all such powers and do all acts and things as
may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of Maryland law and the Corporation's charter and
Bylaws.
<PAGE> 8
TWELFTH: Quorum; Majority Vote. 1. The presence in person or by
proxy of the holders of record of one-third of the shares issued and
outstanding and entitled to vote thereat shall constitute a quorum for the
transaction of any business at all meetings of the stockholders except as
otherwise provided by law (including the Investment Company Act of 1940) or
in the Corporation's charter.
2. On any given matter, the presence at any meeting, in person
or by proxy, of holders of record of less than one-third of the shares
issued and outstanding and entitled to vote thereat shall not prevent
action at such meeting upon any other matter or matters which may properly
come before the meeting, if there shall be present thereat, in person or by
proxy, holders of record of the number of shares required for action in
respect of such other matter or matters.
Notwithstanding any provision of Maryland law requiring more
than a majority vote of the Common Stock, or any Series or Class thereof,
in connection with any corporate action (including, but not limited to, the
amendment of the Corporation's charter), unless otherwise provided in the
Corporation's charter, the Corporation may take or authorize such action
upon the favorable vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote thereon.
<PAGE> 1
Selected Portions of the
BYLAWS of
UBS PRIVATE INVESTOR FUNDS, INC.
Relating to Stockholder Rights
ARTICLE I
Stockholders
SECTION 2. Annual Meeting. The Corporation shall not be
required to hold an annual meeting of its stockholders in any year in which
the election of directors is not required to be acted upon under the
Investment Company Act of 1940 (the "1940 Act"). In the event that the
Corporation shall hold an annual meeting of stockholders, such meeting
shall be held at a date and time set by the Board, provided, however, that
the date and time of such meeting shall be set in compliance with the 1940
Act. Any stockholders' meeting held in accordance with the preceding
sentence may constitute the annual meeting of stockholders for the fiscal
year of the Corporation in which the meeting is held.
SECTION 3. Special Meetings. Special meetings of the
stockholders for any purpose or purposes may be called by the Chairman of
the Board, the President or a majority of the Board of Directors. In
addition, such special meetings shall be called by the Secretary upon
receipt of a request in writing signed by stockholders entitled to cast at
least 25% of all votes entitled to be cast at the meeting. Such request
shall state the purpose or purposes of the meeting and the matters proposed
to be acted on. The Secretary shall inform such stockholders of the
reasonably estimated costs of preparing and mailing a notice of the meeting
and upon payment by such stockholders to the Corporation of such costs, the
Secretary shall give notice as specified in Section 5 of this Article.
Unless requested by stockholders entitled to cast a majority of all the
votes entitled to be cast at the meeting, a special meeting need not be
called to consider any matter that is substantially the same as a matter
voted on at a meeting of the stockholders held during the preceding 12
months.
SECTION 4. Record Dates. The Board may fix, in advance, a
date as the record date for the purpose of determining stockholders
entitled to notice of, or to vote at, any meeting of stockholders, or
stockholders entitled to receive payment of any dividend or the allotment
of any other rights, or in order to make a determination of stockholders
for any other proper purpose. Such date in any case shall not be more than
90 days, and in case of a meeting of stockholders, not less than 10 days,
prior to the
<PAGE> 2
date on which the particular action, requiring such determination of
stockholders, is to be taken.
SECTION 5. Notice of Meeting. Not less than 10 and not more
than 90 days before each meeting of stockholders, the Secretary shall give
to each stockholder entitled to vote at the meeting and to each other
stockholder entitled to notice of such meeting, written notice of the time,
date, place, and, in the case of a special meeting or when otherwise
required by the laws of the State of Maryland, the purpose or purposes of
the meeting. Such notice shall be given in the manner required by the laws
of the State of Maryland.
No notice of the time, place or purpose of any meeting of
stockholders need be given to any stockholder who attends in person or by
proxy or to any stockholder who, in writing executed and filed with the
records of the meeting, either before or after the holding thereof, waives
such notice.
SECTION 6. Adjournment. A meeting of stockholders convened on
the date for which it was called may be adjourned from time to time without
further notice, other than as announced at the meeting, to a date not more
than 120 days after the original record date. At any such adjourned
meeting at which a quorum shall be present, any action may be taken that
could have been taken at the meeting originally called.
SECTION 7. Quorum and Voting. Quorum at any meeting of the
stockholders shall be as set forth in the Articles of Incorporation.
Except as otherwise provided by law, the number of votes cast at any
stockholders' meeting at which a quorum is present sufficient to approve
any matter that properly comes before such meeting shall be as set forth in
the Articles of Incorporation.
SECTION 8. Inspectors. At any election of Directors, the
chairman of the meeting may, and upon the request of the holders of ten
percent (10%) of the stock entitled to vote at such election shall, appoint
one or more inspectors of election who shall first subscribe an oath or
affirmation to execute faithfully the duties of inspectors at such election
with strict impartiality and according to the best of their ability, and
shall after the election make a certificate of the result of the vote
taken. No candidate for the office of Director shall be appointed as such
an inspector.
<PAGE> 3
SECTION 10. Concerning Validity of Proxies, Ballots, etc. At
every meeting of the stockholders, all proxies shall be received and taken
in charge of and all ballots shall be received and canvassed by the
secretary of the meeting, who shall decide all questions concerning the
qualification of voters, the validity of proxies and the acceptance or
rejection of votes, unless inspectors of election shall have been appointed
by the chairman of the meeting, in which event such inspectors of election
shall decide all such questions.
SECTION 11. Action Without Meeting. Any action to be taken by
stockholders may be taken without a meeting if (a) all stockholders
entitled to vote on the matter consent to the action in writing, and
(b) all stockholders entitled to notice of the meeting but not entitled to
vote at it sign a written waiver of any right to dissent and (c) the
written consents are filed with the records of the meeting of stockholders.
Such consent shall be treated for all purposes as a vote at a meeting.
ARTICLE II
Board of Directors
SECTION 4. Removal of Directors. The stock-holders of the
Corporation may remove any Director from office, either with or without
cause, by the affirmative vote of a majority of all the votes entitled to
be cast for the election of directors and may elect a successor to fill any
resulting vacancy for the unexpired term of the removed Director.
ARTICLE V
General Provisions
SECTION 1. Annual Statement. The President or the Treasurer
shall prepare or cause to be prepared annually a full and correct statement
of the affairs of the Corporation, including a balance sheet and a
financial statement of operations for the preceding fiscal year. The
statement of affairs shall be submitted at the annual meeting of the
stockholders, if any, and, within 20 days after such meeting (or, in the
absence of an annual meeting, within 120 days after the end of the fiscal
year), placed on file at the Corporation's principal office in the State of
Maryland.
SECTION 2. Stock Ledger. The Corporation shall maintain at
the office of its transfer agent an original or duplicate stock ledger
containing the names and addresses of
<PAGE> 4
all stockholders and the number of shares of each class held by each
stockholder. Such stock ledger may be in written form or any other form
capable of being converted into written form within a reasonable time for
visual inspection.
<PAGE> 1
UBS PRIVATE INVESTOR FUNDS, INC.
on behalf of
UBS TAX EXEMPT BOND FUND
INVESTMENT ADVISORY AGREEMENT
Agreement, made this day of 1996, between
UBS Private Investor Funds, Inc., a Maryland corporation (the "Company"),
on behalf of its series known as UBS Tax Exempt Bond Fund (the "Fund"), and
Union Bank of Switzerland, New York Branch (the "Adviser").
WHEREAS, the Company is an open-end management investment
company registered under the Investment Company Act of 1940 (the "1940
Act"); and
WHEREAS, the Fund, a diversified mutual fund, desires to retain
the Adviser to render investment advisory and certain related
administrative services, and the Adviser is willing to render such
services;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
that in consideration of the premises and mutual promises hereinafter set
forth, the parties hereto agree as follows:
1. The Fund hereby appoints the Adviser to act as investment
adviser to the Fund for the period and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Subject to the general supervision of the Directors of
the Company, the Adviser shall manage the investment operations of the Fund
and the composition of the Fund's holdings of securities and other
investments, including commodities and commodities contracts, cash, the
purchase, retention and disposition thereof and agreements relating
thereto, in accordance with the Fund's investment objective and policies as
stated in the Registration Statement (as defined in paragraph 3(d) of this
Agreement) and subject to the following understandings:
(a) the Adviser shall furnish a continuous investment
program for the Fund and determine from time to time the securities,
commodities, commodity contracts and other investments to be
purchased,
<PAGE> 2
retained, sold or lent by the Fund, and the portion of the assets to be
invested or held uninvested as cash;
(b) the Adviser shall use the same skill and care in
the management of the Fund's investments as it uses in the
administration of other accounts for which it has investment
responsibility as agent;
(c) the Adviser, in the performance of its duties and
obligations under this Agreement, shall act in conformity with the
Charter, Bylaws and Registration Statement of the Company and with
the instructions and directions of the Directors of the Company and
will conform to and comply with the requirements of the 1940 Act and
all other applicable federal and state laws and regulations;
(d) the Adviser shall determine the securities to be
purchased, sold or lent by the Fund and as agent for the Fund will
effect portfolio transactions pursuant to its determinations either
directly with the issuer or with any broker and/or dealer in such
securities, commodities or commodities contracts; in placing orders,
the Adviser will select the brokers and/or dealers as it shall deem
appropriate in conformity with the policy with respect to brokerage
as set forth in the Registration Statement; and the Adviser shall
also determine whether or not the Fund shall enter into repurchase or
reverse repurchase agreements;
On occasions when the Adviser deems the purchase or sale
of a security, commodity or commodity contract to be in the best
interest of the Fund as well as other customers of the Adviser and to
the extent permitted by applicable law, the Adviser may, but shall
not be obligated to, aggregate the securities to be so sold or
purchased in order to obtain best execution, including lower
brokerage commissions, if applicable. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred
in the transaction, will be made by the Adviser in the manner it
considers to be the most equitable and consistent with its fiduciary
obligations to the Fund;
The Adviser may execute the Fund's brokerage (but not
principal) transactions through an affiliate, provided that such
transactions are effected in accordance with Rule 17e-1 under the
1940 Act and the Company's procedures adopted thereunder as such may
be amended from time to time;
<PAGE> 3
(e) the Adviser shall maintain records with respect to
the Fund's securities transactions as required by Section 31 of the
1940 Act and the rules and regulations thereunder, to the extent such
records are necessary or appropriate to record the Adviser's
transactions with respect to the Fund;
(f) the Adviser shall establish performance standards
for the Fund's third-party service providers and oversee and evaluate
the performance of such entities, provide and present quarterly
management reports to the Directors and supervise the preparation of
reports for Fund shareholders; establish voluntary expense
limitations for the Fund (if any) and provide any resultant expense
reimbursement to the Fund; and provide such other related services as
the Company may reasonably request, to the extent permitted by
applicable law. The Adviser shall provide all personnel and
facilities necessary in order for it to provide the services
contemplated by this paragraph. The Adviser assumes no liabilities or
responsibilities for the performance of the third-party service
providers it is overseeing or any other responsibilities under this
Agreement other than to render the services called for hereunder, on
the terms and conditions provided herein; and
(g) the investment management services of the Adviser
to the Fund under this Agreement are not to be deemed exclusive, and
the Adviser shall be free to render similar services to others.
3. The Fund has delivered copies of each of the following
documents to the Adviser and will promptly notify and deliver to it all
future amendments and supplements, if any:
(a) Articles of Incorporation of the Company (such
Articles of Incorporation, as presently in effect and as amended from
time to time, are herein called the "Charter");
(b) Bylaws of the Company (such Bylaws, as presently in
effect and as amended from time to time, are herein called the
"Bylaws");
(c) Certified resolutions of the Directors of the
Company authorizing the appointment of the Adviser and approving the
form of this Agreement;
<PAGE> 4
(d) The Company's Notification of Registration on
Form N-8A under the 1940 Act and its Registration Statement on
Form N-1A (No. 811-____) under the Securities Act of 1933 and the
1940 Act (the "Registration Statement"), each as filed with the
Commission on November 17, 1995, and all amendments and supplements
thereto.
4. The Adviser agrees that all records that it maintains for
the Fund pursuant to paragraphs 2(e) and 2(f) of this Agreement are the
property of the Fund and it will promptly surrender copies of any of such
records to the Fund upon the Fund's request.
5. During the term of this Agreement the Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement, other than the cost of securities and investments purchased or
sold for the Fund (including taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant
to this Agreement, the Fund will pay to the Adviser as full compensation
therefor a fee at an annual rate equal to .45% of the Fund's average daily
net assets. This fee will be computed daily and payable monthly.
7. The Company shall not use the name of the Adviser or any
of its affiliates in any prospectus, statement of additional information,
sales literature or other material relating to the Fund in a manner not
approved by the Adviser prior thereto in writing; provided, however, that
the approval of the Adviser shall not be required for any use of its or any
affiliate's name that merely refers in accurate and factual terms to the
Adviser's appointment hereunder or as shareholder servicing agent to the
Company or that is required by the Securities and Exchange Commission or
any state securities authority or any other appropriate regulatory,
governmental or judicial authority; provided, further, that in no event
shall such approval be unreasonably withheld or delayed.
8. The Adviser shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Fund in connection with
the matters to which this Agreement relates, except a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services (in which case any award of damages shall be limited to the period
and the amount set forth in Section 36(b)(3) of the 1940 Act) or a loss
resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless
<PAGE> 5
disregard by it of its obligations and duties under this Agreement.
9. This Agreement shall continue in effect for a period of
more than two years from the date hereof only so long as such continuance
is specifically approved at least annually in conformity with the
requirements of the 1940 Act; provided, however, that this Agreement may be
terminated by the Company on behalf of the Fund at any time, without the
payment of any penalty, by vote of a majority of all the Directors of the
Company or by "vote of a majority of the outstanding voting securities" of
the Fund (as defined in the 1940 Act and a rule thereunder) on 60 days'
written notice to the Adviser, or by the Adviser at any time, without the
payment of any penalty, on 60 days' written notice to the Company. This
Agreement will automatically and immediately terminate in the event of its
"assignment" (as defined in the 1940 Act).
10. The Adviser shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly provided
herein or authorized by the Directors of the Company from time to time,
have no authority to act for or represent the Fund in any way or otherwise
be deemed an agent of the Fund.
11. Notices of any kind to be given to the Adviser by the
Company shall be in writing and shall be duly given if mailed or delivered
to the Adviser at 299 Park Avenue, New York, New York 10171, Attention:
General Counsel, with a copy to Richard A. Fabietti, or at such other
address or to such other individual as shall be specified by the Adviser to
the Company. Notices of any kind to be given to the Company by the Adviser
shall be in writing and shall be duly given if mailed or delivered to the
Company c/o Signature Financial Group Inc., 6 St. James Avenue, Boston,
Massachusetts 02116 or at such other address or to such other individual as
shall be specified by the Company to the Adviser.
12. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
<PAGE> 6
13. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the
day of 1996.
UBS PRIVATE INVESTOR FUNDS,
INC.
on behalf of
UBS TAX EXEMPT BOND FUND
By: __________________________
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By: __________________________
By: __________________________
<PAGE> 1
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, dated as of _________, 1996, by and between
UBS Private Investor Funds, Inc., a Maryland corporation (the "Company"),
and Signature Broker-Dealer Services, Inc., a Delaware corporation (the
"Distributor").
W I T N E S S E T H:
WHEREAS, the Company has been organized to operate as an open-end
investment company registered under the Investment Company Act of 1940, as
amended (collectively with the rules and regulations promulgated
thereunder, the "1940 Act") and under the Securities Act of 1933, as
amended (the "1933 Act");
WHEREAS, the shares of Common Stock (par value $.001 per share) of
the Company (the "Shares") are divided into current and future series (the
"Series"), which are subject to this Agreement;
WHEREAS, the Company wishes to engage the Distributor to provide
certain services with respect to the distribution of Shares of each Series,
and the Distributor is willing to provide such services to the Company on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties hereto as herein set forth, the parties covenant
and agree as follows:
1. The Company grants to the Distributor the right, as agent of the
Company, to solicit and accept orders for the purchase of Shares of each
Series upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Distributor agrees to use
its best efforts to find purchasers for Shares of each Series.
The Distributor shall have the right, as agent of the Company, to
order from the Company the Shares needed, but not more than the Shares
needed (except for clerical errors and errors of transmission), to fill
unconditional orders for Shares of each Series placed with the Distributor,
all such orders to be made in the manner set forth in such Series'
then-current prospectus (the "Prospectus") and then-current statement of
additional information (the "Statement of Additional Information") relating
to such Series. The price which shall be paid to the Company for the
Shares of each Series so purchased shall be the net asset value per Share
as determined in accordance with the provisions of the Company's Articles
of Incorporation and By-Laws and the respective Series' then-current
Prospectus and Statement of Additional Information, as they may from time
to time be amended (collectively, the "Governing Instruments"). The
Distributor shall notify the custodian of the Company with respect to each
Series as of the time, as disclosed in the respective Series' then-current
Prospectus, that the net asset value of such Series is determined (or such
other time as is agreed to in writing by the Distributor and the Company)
(a "Valuation Time"), on each business day, or as soon thereafter as the
orders placed with the Distributor
<PAGE> 2
have been compiled, of the number of Shares of each Series which have been
ordered through the Distributor since the last respective Valuation Time.
The right granted to the Distributor to place orders for Shares with
the Company shall be exclusive, except that this right shall not apply to
Shares issued in the event that an investment company (whether a regulated
or private investment company or a personal holding company) is merged with
and into or consolidated with the Company or in the event that the Company
acquires, by purchase or otherwise, all (or substantially all) the assets
or the outstanding shares of any such company; nor shall it apply to Shares
issued by the Company as a dividend or stock split or in connection with
the reinvestment of dividends and other distributions. The exclusivity of
the right to place orders for Shares granted to the Distributor may be
waived by the Distributor by notice to the Company in writing, either
unconditionally or subject to such conditions and limitations as may be set
forth in such notice to the Company. The Company hereby acknowledges that
the Distributor may render distribution and other services to other
parties, including other investment companies. In connection with its
duties hereunder, the Distributor shall also arrange for computation of
performance statistics with respect to each Series and arrange for
publication of current price information in newspapers and other
publications.
2. The Shares may be sold by the Distributor on behalf of the
Company, to any investor or to or through any broker-dealer or bank having
a sales agreement with the Distributor, upon the following terms and
conditions:
The public offering price of Shares of each Series, i.e., the price
per Share at which the Distributor or any dealer purchasing Shares through
the Distributor may sell shares to the public, shall be calculated as
disclosed in the respective Series' then-current Prospectus.
The Company shall have the right to suspend the sale of Shares of any
Series if, because of some extraordinary condition, the New York Stock
Exchange (the "Exchange") shall be closed, or if conditions existing during
the hours when the Exchange is open render such action advisable or for any
other reason deemed adequate by the Company.
3. The Company agrees that it will, from time to time, but subject
to the necessary approval, if any, of its shareholders and Directors, take
all necessary action to register such number of Shares of each Series under
the 1933 Act as the Distributor may reasonably be expected to sell.
The Distributor shall be an independent contractor and neither the
Distributor nor any of its directors, officers or employees as such, is or
shall be, solely by reason of this Agreement, an employee of the Company.
It is understood that Directors, officers and shareholders of the Company
are or may become interested in the Distributor, as directors, officers,
employees, or otherwise and that directors, officers and employees of the
Distributor are or may become similarly interested in the Company and that
the Distributor may be or become interested in the Company as a shareholder
or otherwise. The Distributor is responsible for its own conduct and the
employment, control and conduct (but only with respect to the duties and
obligations of the Distributor hereunder) of its agents and employees and
for any injury to any person through
<PAGE> 3
its agents or employees. The Distributor assumes full responsibility for
its agents and employees under applicable statutes and agrees to pay all
employer taxes thereunder.
4. The Distributor covenants and agrees that, in selling Shares, it
will in all respects conform with the requirements of all state and federal
laws and the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. relating to the sale of Shares, and will indemnify
and hold harmless the Company and each of its Directors and officers and
each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act or Section 20 of the Securities Exchange Act of 1934
(the "Indemnified Parties") against all losses, liabilities, damages,
claims or expenses (including the reasonable cost of investigating or
defending any alleged loss, liability, damages, claim or expense and
advances for reasonable counsel fees incurred in connection therewith)
arising from any claim, demand, action or suit (collectively, "Claims"),
arising by reason of any person's acquiring any of the Shares through the
Distributor, which may be based upon the 1933 Act or any other statute or
common law, on account of any wrongful act of the Distributor or any of its
employees (including any failure to conform with any requirement of any
state or federal law or the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. relating to the sale of Shares) or
on the ground that the registration statement of the Company under the 1933
Act, including all amendments thereto (the "Registration Statement"), or
Prospectus or previous prospectus or Statement of Additional Information or
previous statement of additional information, with respect to such Shares,
includes or included an untrue statement of a material fact or omits or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading, if and only if any
such act, statement or omission was made in reliance upon information
furnished by the Distributor to the Company; provided, however, that in no
case is the indemnity by the Distributor in favor of any Indemnified Party
to be deemed to protect any such Indemnified Party against liability to
which such Indemnified Party would otherwise be subject by reason of his or
its willful misfeasance, bad faith or gross negligence in the performance
of its or his duties or by reason of its or his reckless disregard of its
or his obligations and duties under this Agreement. The Indemnified Party
shall notify the Distributor in writing within 10 calendar days after the
summons or other first legal process giving information of the nature of
any Claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Distributor of any such Claim
shall not relieve it (a) from its obligations to provide such indemnity
except to the extent, if at all, that such failure shall have prejudiced
the Distributor or (b) from any liability which it may have to any
Indemnified Party otherwise than on account of its indemnity agreement
contained in this Section 4. The Distributor shall be entitled to
participate, at its own expense, in the defense, or, if it so elects, to
assume the defense, of any suit brought to enforce any such Claim, and, if
the Distributor elects to assume the defense, such defense shall be
conducted by counsel chosen by it and satisfactory to each Indemnified
Party. In the event that the Distributor elects to assume the defense of
any such suit and retain such counsel, each Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it but, in case
the Distributor does not elect to assume the defense of any such suit, it
shall reimburse the Indemnified Parties
<PAGE> 4
for the reasonable fees and expenses of any counsel retained by them.
Except with the prior written consent of the Distributor (not to be
unreasonably withheld or delayed), no Indemnified Party shall confess any
Claim or make any compromise in any case in which the Distributor will be
asked to indemnify such Indemnified Party. The Distributor agrees promptly
to notify the Company of the commencement of any litigation or proceeding
against it in connection with the issuance and sale of any of the Shares.
The indemnity provisions of this Agreement shall survive the termination of
this Agreement with respect to events occurring prior to such termination.
Neither the Distributor nor any dealer nor any other person is
authorized to give any information or to make any representation on behalf
of the Company in connection with the sale of Shares of any Series, other
than those contained in the Registration Statement or Prospectus or
Statement of Additional Information relating to such Series, and the
Company shall not be responsible in any way for any other information,
statements or representations given or made by the Distributor, any dealer
or any of their respective representatives or agents, or any other person.
5. The Company will pay, or cause to be paid--
(i) all costs and expenses of the Company, including, but not limited
to, fees and disbursements of its counsel, in connection with the
preparation and filing of the Registration Statement, each Prospectus and
Statement of Additional Information, and preparing and mailing to
shareholders Prospectuses, Statements of Additional Information with
respect to Shares of each Series, all costs and expenses of the holding of
meetings of the Company's Board of Directors and materials related thereto,
statements and confirmations and periodic reports (including the expense of
setting in type the Registration Statement, Prospectus and Statement of
Additional Information or any periodic report with respect to Shares of
each Series), and all costs and fees associated with registering the
Company or its Shares under federal or state securities laws;
(ii) the cost of preparing temporary or permanent certificates for
Shares;
(iii) the cost and expenses of delivering to the Distributor at its
office all Shares purchased through it as agent hereunder;
(iv) all fees and disbursements of the Company's transfer agent and
custodian or depository with respect to each Series, subject to the
Company's transfer agent and custody or depository agreements;
(v) a fee to the administrator and the fund accounting agent of the
Company, if any, pursuant to an administrative services and fund accounting
agreement; and
(vi) a fee to the investment adviser of the Company, if any, pursuant
to an investment advisory agreement with such investment adviser.
The Distributor shall receive no compensation for its services to the
Company hereunder.
<PAGE> 5
The Distributor agrees that with respect to the sale of Shares of
each Series, subject to the Company's obligations under clause (iii) above,
(a) after the Prospectus and Statement of Additional Information and
periodic reports with respect to each Series have been set in type, it will
bear the expense of printing and distributing any copies thereof ordered by
it which are to be used in connection with the offering or sale of Shares
of such Series to any dealer or prospective investor and (b) it will bear
the expenses of preparing, printing and distributing any other literature
used by the Distributor or furnished by it for use by any dealer in
connection with the offering of Shares of such Series for sale to the
public and any expense of sending confirmations and statements to any
dealer having a sales agreement with the Distributor.
6. If, at any time during the term of this Agreement, the Company
shall deem it necessary or advisable in the best interests of the Company
that any amendment of this Agreement be made in order to comply with any
recommendation or requirement of the Securities and Exchange Commission or
other governmental authority or to obtain any advantage under state or
federal tax laws, it shall notify the Distributor of the form of amendment
which it deems necessary or advisable and the reasons therefor. If the
Distributor declines to assent to such amendment (after a reasonable time),
the Company may terminate this Agreement forthwith by written notice to the
Distributor without payment of any penalty. If, at any time during the
term of this Agreement, the Distributor requests the Company to make any
change in its Governing Instruments or in its methods of doing business
which are necessary in order to comply with any requirement of federal law
or regulations of the Securities and Exchange Commission or of a national
securities association of which the Distributor is or may become a member,
relating to the sale of Shares, and the Company fails (after a reasonable
time) to make any such change as requested, the Distributor may terminate
this Agreement forthwith by written notice to the Company without payment
of any penalty.
7. The Distributor agrees that it will not take any long or short
position in the Shares of any Series and that, so far as it can control the
situation, it will prevent any of its directors or officers from taking any
long or short position in the Shares of such Series, except as permitted by
the Governing Instruments.
8. This Agreement shall become effective upon its execution and
shall continue in force for a period of one year and indefinitely
thereafter, provided that such continuance is "specifically approved at
least annually" by the vote of a majority of the Directors of the Company
who are not "interested persons" of the Company or of the Distributor at a
meeting specifically called for the purpose of voting on such approval, and
by the Board of Directors of the Company.
This Agreement may be terminated as to any Series at any time by (i)
the Company, (a) by the vote of a majority of the Directors of the Company
who are not "interested persons" of the Company or the Distributor, (b) by
the vote of the Board of Directors of the Company, or (c) by the "vote of a
majority of the outstanding voting securities" of the Company, or (ii) by
the Distributor, in any case without payment of any penalty on 60 days'
written notice to the other party.
<PAGE> 6
This Agreement shall automatically terminate in the event of its
assignment.
9. SBDS and the Company agree that all books, records, information
and data pertaining to the business of the other party which are exchanged
or received pursuant to the negotiation of or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed
to any other person, except as may be required by law.
10. The terms "vote of a majority of the outstanding voting
securities", "interested person", "assignment" and "specifically approved
at least annually" shall have the respective meanings specified in, and
shall be construed in a manner consistent with, the 1940 Act, subject,
however, to such exemptions as may be granted by the Securities and
Exchange Commission thereunder.
11. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
12. Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof. This
Agreement shall be construed and enforced in accordance with and governed
by the laws of Massachusetts. The captions in this Agreement are included
for convenience only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered in their names on their behalf by the
undersigned, thereunto duly authorized, all as of the day and year first
above written. Pursuant to the Company's Articles of Incorporation, dated
as of November 16, 1995, as amended from time to time, the obligations of
this Agreement pertaining to a particular Series shall apply only to that
particular Series and to no other Series of the Company.
UBS PRIVATE INVESTOR FUNDS, INC.
By
name:
title:
SIGNATURE BROKER-DEALER SERVICES, INC.
By
name:
title:
<PAGE> 1
CUSTODIAN AGREEMENT
between
UBS PRIVATE INVESTOR FUNDS, INC.
and
INVESTORS BANK & TRUST COMPANY
PAGE 1
TABLE OF CONTENTS
Page
1. Bank Appointed Custodian . . . . . . . . . . . . . . . . 1
2. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Authorized Person . . . . . . . . . . . . . . . . . 1
2.2 Board . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Security . . . . . . . . . . . . . . . . . . . . . . 1
2.4 Portfolio Security . . . . . . . . . . . . . . . . . 2
2.5 Officers' Certificate . . . . . . . . . . . . . . . 2
2.6 Book-Entry System . . . . . . . . . . . . . . . . . 2
2.7 Depository . . . . . . . . . . . . . . . . . . . . . 2
2.8 Proper Instructions . . . . . . . . . . . . . . . . 2
2.9 Foreign Securities . . . . . . . . . . . . . . . . . 3
2.10 Series . . . . . . . . . . . . . . . . . . . . . . . 3
3. Separate Accounts . . . . . . . . . . . . . . . . . . . 3
4. Certification as to Authorized Persons . . . . . . . . . 3
5. Custody of Cash . . . . . . . . . . . . . . . . . . . . . 4
5.1 Purchase of Securities . . . . . . . . . . . . . . . 4
5.2 Redemptions . . . . . . . . . . . . . . . . . . . . 4
5.3 Distributions and Expenses of Fund . . . . . . . . . 4
5.4 Payment in Respect of Securities . . . . . . . . . . 5
5.5 Repayment of Loans . . . . . . . . . . . . . . . . . 5
5.6 Repayment of Cash . . . . . . . . . . . . . . . . . 5
5.7 Foreign Exchange Transactions . . . . . . . . . . . 5
5.8 Other Authorized Payments . . . . . . . . . . . . . 5
5.9 Termination . . . . . . . . . . . . . . . . . . . . 5
6. Securities . . . . . . . . . . . . . . . . . . . . . . . 6
6.1 Segregation and Registration . . . . . . . . . . . . 6
6.2 Voting and Proxies . . . . . . . . . . . . . . . . . 6
6.3 Book-Entry System . . . . . . . . . . . . . . . . . 6
6.4 Use of a Depository . . . . . . . . . . . . . . . . 8
6.5 Use of Book-Entry System for Commercial Paper . . . 9
6.6 Use of Immobilization Programs . . . . . . . . . . 10
6.7 Eurodollar CDs . . . . . . . . . . . . . . . . . . 11
6.8 Options and Futures Transactions . . . . . . . . . 11
6.9 Segregated Account . . . . . . . . . . . . . . . . 12
6.10 Interest Bearing Call or Time Deposits . . . . . . 14
6.11 Transfer of Securities . . . . . . . . . . . . . . 14
7. Redemptions . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE> 2
8. Merger, Dissolution, etc. of Fund . . . . . . . . . . . 16
9. Actions of Bank Without Prior Authorization . . . . . . 17
10. Collections and Defaults . . . . . . . . . . . . . . . . . 18
11. Maintenance of Records and Accounting Services . . . . . 18
12.1 Fund Evaluation . . . . . . . . . . . . . . . . . . . . 19
12.2 Yield Calculation . . . . . . . . . . . . . . . . . . . 19
13. Concerning the Bank . . . . . . . . . . . . . . . . . . . 21
13.1 Performance of Duties and
Standard of Care . . . . . . . . . . . . . . . . 21
13.2 Agents and Subcustodians with Respect to Property
of the Fund Held in the United States . . . . . 22
13.3 Duties of the Bank with Respect to Property
of the Fund Held Outside of the United States . . 23
13.4 Insurance . . . . . . . . . . . . . . . . . . . . 27
13.5 Fees and Expenses of Bank . . . . . . . . . . . . 27
13.6 Advances by Bank . . . . . . . . . . . . . . . . . 27
14. Termination . . . . . . . . . . . . . . . . . . . . . . . 28
15. Confidentiality . . . . . . . . . . . . . . . . . . . . 29
16. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 29
17. Amendments . . . . . . . . . . . . . . . . . . . . . . . 30
18. Parties . . . . . . . . . . . . . . . . . . . . . . . . . 30
19. Governing Law . . . . . . . . . . . . . . . . . . . . . . 30
20. Counterparts . . . . . . . . . . . . . . . . . . . . . . 30
21. Entire Agreement . . . . . . . . . . . . . . . . . . . . 30
22. Attachments:
o Schedule A - List of Series
o Schedule B - Income Collection Standards
o Schedule C - Fee Schedule
<PAGE> 1
CUSTODIAN AGREEMENT
AGREEMENT made as of this [ ] day of January, 1996, between UBS
PRIVATE INVESTOR FUNDS, INC., a corporation organized under the laws of
Maryland (the "Fund"), and INVESTORS BANK & TRUST COMPANY (the "Bank").
The Fund, an open-end management investment company (the Series of
which are listed in Schedule A herein), desires to place and maintain all
of its portfolio securities and cash in the custody of the Bank. The Bank
has at least the minimum qualifications required by Section 17(f)(1) of the
Investment Company Act of 1940, as amended (the "1940 Act"), to act as
custodian of the portfolio securities and cash of the Fund, and has
indicated its willingness to so act, subject to the terms and conditions of
this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed below will
have the following meaning:
2.1 Authorized Person. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on
behalf of the Fund by appropriate resolution of its Board, and set forth in
a certificate as required by Section 4 hereof.
2.2 Board. Board will mean the Board of Directors of the
Fund.
2.3 Security. The term security as used herein will have the
same meaning as when such term is used in the Securities Act of 1933, as
amended, including, without limitation, any note, stock, treasury stock,
bond, debenture, evidence of indebtedness, certificate of interest or
participation in any profit sharing agreement, collateral-trust
certificate, preorganization certificate or subscription, transferable
share, investment contract, voting-trust certificate, certificate of
deposit for a security, fractional undivided interest in oil, gas, or other
mineral rights, any put, call, straddle, option, or privilege on any
security, certificate of deposit, or group or index of securities
(including any interest therein or based on the value
<PAGE> 2
thereof), or any put, call, straddle, option, or privilege entered into on
a national securities exchange relating to a foreign currency, or, in
general, any interest or instrument commonly known as a "security", or any
certificate of interest or participation in, temporary or interim
certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing,
and futures, forward contracts and options thereon.
2.4 Portfolio Security. Portfolio Security will mean any
Security owned by the Fund.
2.5 Officers' Certificate. Officers' Certificate will mean,
unless otherwise indicated, any request, direction, instruction, or
certification in writing signed by any two Authorized Persons of the Fund.
2.6 Book-Entry System. Book-Entry System shall mean the
Federal Reserve-Treasury Department Book Entry System for United States
government, instrumentality and agency securities operated by the Federal
Reserve Bank, its successor or successors and its nominee or nominees.
2.7 Depository. Depository shall mean The Depository Trust
Company ("DTC"), a clearing agency registered with the Securities and
Exchange Commission under Section 17A of the Securities Exchange Act of
1934, as amended ("Exchange Act"), its successor or successors and its
nominee or nominees. The term "Depository" shall further mean and include
any other person authorized to act as a depository under the 1940 Act, its
successor or successors and its nominee or nominees, specifically
identified in a certified copy of a resolution of the Board.
2.8 Proper Instructions. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by two Authorized
Persons as shall have been designated in an Officers' Certificate, such
instructions to be given in such form and manner as the Bank and the Fund
shall agree upon from time to time, and (ii) instructions (which may be
continuing instructions) regarding other matters signed or initialed by
such one or more persons from time to time designated in an Officers'
Certificate as having been authorized by the Board. Oral instructions will
be considered Proper Instructions if the Bank reasonably believes them to
have been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all oral
instructions to be promptly confirmed in writing. The Bank shall act upon
and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-
up or confirmatory instruction shall be to
<PAGE> 3
make reasonable efforts to detect any discrepancy between the original
instruction and such confirmation and to report such discrepancy to the
Fund. The Fund shall be responsible, at the Fund's expense, for taking any
action, including any reprocessing, necessary to correct any such
discrepancy or error, and to the extent such action requires the Bank to
act, the Fund shall give the Bank specific Proper Instructions as to the
action required. Upon receipt of an Officers' Certificate as to the
authorized by the Board accompanied by a detailed description of procedures
approved by the Fund, Proper Instructions may include communication
effected directly between electro-mechanical or electronic devices provided
that the Board and the Bank are satisfied that such procedures afford
adequate safeguards for the Fund's assets.
2.9 Foreign Securities. The term Foreign Securities as used
herein will have the same meaning as when such term is used in Rule 17f-5
of the 1940 Act.
2.10 Series. Series shall mean any Series or portfolio of the
Fund wherein shareholders of such Series have a pro rata interest in the
assets of that Series, but have no interest in the assets of any other
Series of the Fund.
3. Separate Accounts. The Bank will segregate the assets of each
Series or portfolio to which this Agreement relates into a separate account
for each such Series containing the assets of such Series (and all
investment earnings thereon). Unless the context otherwise requires, any
reference in this Agreement to any actions to be taken by the Fund shall be
deemed to refer to the Fund acting on behalf of one or more of its Series,
any reference in this Agreement to any assets of the Fund, including,
without limitation, any Portfolio Securities and cash and earnings thereon,
shall be deemed to refer only to assets of the applicable Series, any duty
or obligation of the Bank hereunder to the Fund shall be deemed to refer to
duties and obligations with respect to the individual Series and any
obligation or liability of the Fund hereunder shall be binding only with
respect to the individual Series, and shall be discharged only out of the
assets of such Series.
4. Certification as to Authorized Persons. The Secretary or
Assistant Secretary of the Fund will at all times maintain on file with the
Bank his or her certification to the Bank, in such form as may be
acceptable to the Bank, of (i) the names and signatures of the Authorized
Persons and (ii) the names of the Board, it being understood that upon the
occurrence of any change in the information set forth in the most recent
certification on file (including without limitation any person named in the
most recent certification who is no longer an Authorized Person as
designated therein), the Secretary or Assistant Secretary of the
<PAGE> 4
Fund will sign a new or amended certification setting forth the change and
the new, additional or omitted names or signatures. The Bank will be
entitled to rely and act upon any Officers' Certificate given to it by the
Fund which has been signed by Authorized Persons named in the most recent
certification.
5. Custody of Cash. As custodian for the Fund, the Bank will open
and maintain a separate account or accounts in the name of each Series of
the Fund or in the name of the Bank, as Custodian of the Fund, and will
deposit to the account of the Fund all of the cash of the Fund, except for
cash held by a subcustodian appointed pursuant to subsections 13.2 or 13.3
hereof, including borrowed funds, delivered to the Bank, subject only to
draft or order by the Bank acting pursuant to the terms of this Agreement.
Upon receipt by the Bank of Proper Instructions (which may be continuing
instructions) or in the case of payments for redemptions and repurchases of
outstanding shares of common stock of the Fund, notification from the
Fund's transfer agent as provided in Section 7, requesting such payment,
designating the payee or the account or accounts to which the Bank will
release funds for deposit, and stating that it is for a purpose permitted
under the terms of this Section 5, specifying the applicable subsection,
the Bank will make payments of cash held for the accounts of the Fund,
insofar as funds are available for that purpose, only as permitted in
subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities
for the Fund, against contemporaneous receipt of such securities by the
Bank registered in the name of the Fund or in the name of, or properly
endorsed and in form for transfer to, the Bank, or a nominee of the Bank,
or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown
on a broker's confirmation (or transaction report in the case of Book-Entry
Paper) of purchase of the securities received by the Bank before such
payment is made, as confirmed in the Proper Instructions received by the
Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the
repurchase or redemption of common shares of the Fund offered for
repurchase or redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on
the account of the Fund of dividends or other distributions to shareholders
as may from time to time be declared by the Board, interest, taxes,
management or supervisory fees, distribution fees, shareholder servicing
fees, fees of the Bank for its services hereunder and reimbursemmt of the
expenses and liabilities of the Bank as provided hereunder, fees of any
<PAGE> 5
transfer agent, fees for legal, accounting, and auditing services, or other
operating expenses of the Fund.
5.4 Payment in Respect of Securities. For payments in
connection with the conversion, exchange or surrender of Portfolio
Securities or securities subscribed to by the Fund held by or to be
delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the
Fund, but, in the case of final payment, only upon redelivery to the Bank
of any Portfolio Securities pledged or hypothecated therefor and upon
surrender of documents evidencing the loan.
5.6 Repayment of Cash. To repay the cash delivered to the
Fund for the purpose of collateralizing the obligation to return to the
Fund certificates borrowed from the Fund representing Portfolio Securities,
but only upon redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions. For payments in connection
with foreign exchange contracts or options to purchase and sell foreign
currencies for spot and future delivery which may be entered into by the
Bank on behalf of the Fund upon the receipt of Proper Instructions, such
Proper Instructions to specify the currency broker or banking institution
(which may be the Bank, or any other subcustodian or agent hereunder,
acting as principal) with which the contract or option is made, and the
Bank shall have no duty with respect to the selection of such currency
brokers or banking institutions with which the Fund deals or for their
failure to comply with the terms of any contract or option.
5.8 Other Authorized Payments. For other authorized
transactions of the Fund, or other obligations of the Fund incurred for
proper Fund purposes; provided that before making any such payment the Bank
will also receive a certified copy of a resolution of the Board signed by
an Authorized Person (other than the Person certifying such resolution) and
certified by its Secretary or Assistant Secretary, naming the person or
persons to whom such payment is to be made, and either describing the
transaction for which payment is to be made and declaring it to be an
authorized transaction of the Fund, or specifying the amount of the
obligation for which payment is to be made, setting forth the purpose for
which such obligation was incurred and declaring such purpose to be a
proper purpose of the Fund.
5.9 Termination. Upon the termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 14 of this
Agreement.
<PAGE> 6
6. Securities.
6.1 Segregation and Registration. Except as otherwise
provided herein, and except for securities to be delivered to any
subcustodian appointed pursuant to subsections 13.2 or 13.3 hereof, the
Bank as custodian, will receive and hold pursuant to the provisions hereof,
in a separate account or accounts and physically segregated at all times
from those of other persons, any and all Portfolio Securities which may now
or hereafter be delivered to it by or for the account of the Fund. All
such Portfolio Securities will be held or disposed of by the Bank for, and
subject at all times to, the instructions of the Fund pursuant to the terms
of this Agreement. Subject to the specific provisions herein relating to
Portfolio Securities that are not physically held by the Bank, the Bank
will register all Portfolio Securities (unless otherwise directed by Proper
Instructions or an Officers' Certificate), in the name of a registered
nominee of the Bank as defined in the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, and will execute
and deliver all such certificates in connection therewith as may be
required by such laws or regulations or under the laws of any state. The
Bank will use its best efforts to the end that the specific Portfolio
Securities held by it hereunder will be at all identifiable.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or
to register in the name of its registered nominee, any Portfolio Securities
which may from time to time be registered in the name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of
the Bank will vote any of the Portfolio Securities held hereunder, except
in accordance with Proper Instructions or an Officers' Certificate. The
Bank will execute and deliver, or cause to be executed and delivered, to
the Fund all notices, proxies and proxy soliciting materials with respect
to such Portfolio Securities, such proxies to be executed by the registered
holder of such Securities (if registered otherwise than in the name of the
Fund), but without indicating the manner in which such proxies are to be
voted.
6.3 Book-Entry System. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits
of Fund assets in the Book-Entry System, and (ii) for any subsequent
changes to such arrangements following such approval, the Board has
reviewed and approved the arrangement and has not delivered an Officers'
Certificate to the Bank indicating that the Board has withdrawn its
approval:
<PAGE> 7
(a) The Bank may keep Portfolio Securities in the Book-
Entry System provided that such Portfolio Securities are represented in an
account ("Account") of the Bank (or its agent) in such system which shall
not include any assets of the Bank (or such agent) other than assets held
as a fiduciary, custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with
respect to the Fund's participation in the Book-Entry System through the
Bank (or any such agent) will identify by book entry Portfolio
Securities which are included with other securities deposited in the
Account and shall at all times during the regular business hours of the
Bank (or such agent) be open for inspection by duly authorized officers,
employees or agents of the Fund. Where securities are transferred to the
account of each Series, the Bank shall also, by book entry or otherwise,
identify as belonging to that Series a quantity of securities in fungible
bulk of securities (i) registered in the name of the Bank or its nominee,
or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities
purchased for the account of the Fund or shall pay cash collateral against
the return of Portfolio Securities loaned by the Fund upon (i) receipt of
advice from the Book-Entry System that such Securities have been
transferred to the Account, and (ii) the making of an entry on the records
of the Bank (or its agent) to reflect such payment and transfer for the
account of the Fund. The Bank (or its agent) shall transfer securities
sold or loaned for the account of the Fund upon
(i) receipt of advice from the Book-Entry System
that payment for securities sold or payment of the initial cash collateral
against the delivery of securities loaned by the Fund has been transferred
to the Account; and
(ii) the, making of an entry on the records of the
Bank (or its agent) to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Book-Entry System of transfers of
securities for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Bank and shall be provided to the Fund at
its request. The Bank shall send the Fund a confirmation, as defined by
Rule 17f-4 of the 1940 Act, of any transfers to or from the account of the
Fund;
(d) The Bank will promptly provide the Fund with any
report obtained by the Bank or its agent on the Book-Entry System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Book-Entry System; and
<PAGE> 8
(e) The Bank shall be liable to the Fund for any loss or
damage to the Fund resulting from use of the Book-Entry System by reason of
any gross negligence, willful misfeasance or bad faith of the Bank or any
of its agents or of any of its or their employees or from any reckless
disregard by the Bank or any such agent of its duty to use its best efforts
to enforce such rights as it may have against the Book-Entry System; at the
election of the Fund, it shall be entitled to be subrogated for the Bank in
any claim against the Book-Entry System or any other person which the Bank
or its agent may have as a consequence of any such loss or damage if and to
the extent that the Fund has not been made whole for any loss or damage.
6.4 Use of a Depository. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits
in DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved
the arrangement and has not delivered an Officers' Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive,
exchange, release, lend, deliver and otherwise deal with Portfolio
Securities including stock dividends, rights and other items of like
nature, and to receive and remit to the Bank on behalf of the Fund all
income and other payments thereon and to take all steps necessary and
proper in connection with the collection thereof, provided that such
securities are maintained in an account which does not include any assets
of the Bank other than assets held as a fiduciary, custodian, or otherwise
for customers;
(b) Registration of Portfolio Securities may be made in
the name of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be
made through the clearing medium employed by such Depository for
transactions of participants acting through it. Upon any purchase of
Portfolio Securities, payment will be made only upon delivery of the
securities to or for the account of the Fund and the Fund shall pay cash
collateral against the return of Portfolio Securities loaned by the Fund
only upon delivery of the Securities to or for the account of the Fund; and
upon any sale of Portfolio Securities, delivery of the Securities will be
made only against payment thereof or, in the event Portfolio Securities are
loaned, delivery of Securities will be made only against receipt of the
initial cash collateral to or for the account of the Fund; and
<PAGE> 9
(d) The Bank shall be liable to the Fund for any loss or
damage to the Fund resulting from use of a Depository by reason of any
gross negligence, willful misfeasance or bad faith of the Bank or its
employees or from any reckless disregard by the Bank of its duty to use its
best efforts to enforce such rights as it may have against a Depository.
The Fund at its option shall be entitled to be subrogated to the rights of
the Bank with respect to any claims against a Depository as a consequence
of any loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim. In this connection, the Bank shall use its
best efforts to ensure that:
(i) The Depository obtains replacement of any
certificated Portfolio Security deposited with it in the event such
Security is lost, destroyed, wrongfully taken or otherwise not available to
be returned to the Bank upon its request;
(ii) Any proxy materials received by a Depository
with respect to Portfolio Securities deposited with such Depository are
forwarded immediately to the Bank for prompt transmittal to the Fund;
(iii) Such Depository immediately forwards to the
Bank confirmation of any purchase or sale of Portfolio Securities and of
the appropriate book entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the
Bank such records with respect to the performance of the Bank's obligations
and duties hereunder as may be necessary for the Fund to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and the rules
and regulations thereunder; and
(v) Such Depository delivers to the Bank and the
Fund all internal accounting control reports, whether or not audited by
an independent public accountant, as well as such other reports as the Fund
may reasonably request in order to verify the Portfolio Securities held by
such Depository.
6.5 Use of Book-Entry System for Commercial Paper. Provided
(i) the Bank has received a certified copy of a resolution of the Board
specifically approving participation in a system maintained by the Bank for
the holding of commercial paper in book-entry form ("Book-Entry Paper") and
(ii) for each year following such approval the Board has received and
approved the arrangements, upon receipt of Proper Instructions and upon
receipt of confirmation from an Issuer (as defined below) that
<PAGE> 10
the Fund has purchased such Issuer's Book-Entry Paper, the Bank shall issue
and hold in book-entry form, on behalf of the Fund, commercial paper issued
by issuers with whom the Bank has entered into a book-entry agreement (the
"Issuers"). In maintaining its Book-Entry Paper system, the Bank agrees
that:
(a) The Bank will maintain all Book-Entry Paper held by
the Fund in an account of the Bank that includes only assets held by it for
customers;
(b) The records of the Bank with respect to the Fund's
purchase of Book-Entry Paper through the Bank will identify, by book-entry,
commercial paper belonging to the Fund which is included in the Book-Entry
Paper system and shall at all times during the regular business hours of
the Bank be open for inspection by duly authorized officers, employees or
agents of the Funds;
(c) The Bank shall pay for Book-Entry Paper purchased
for the account of the Fund upon the contemporaneous (i) receipt of advice
from the Issuer that such sale of Book-Entry Paper has been effected, and
(ii) making of an entry on the records of the Bank to reflect such payment
and transfer for the account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper
obligations upon the maturity thereof upon the contemporaneous (i) receipt
of advice that payment for such Book-Entry Paper has been transferred to
the Fund, and (ii) making of an entry on the records of the Bank to reflect
such payment for the account of the Fund;
(e) The Bank shall transmit to the Fund a transaction
journal confirming each transaction in Book-Entry Paper for the account of
the Fund on the next business day following the transaction; and
(f) The Bank will send to the Fund such reports on its
system of internal accounting control with respect to the Book-Entry Paper
system as the Fund may reasonably request from time to time.
6.6 Use of Immobilization Programs. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically
approving the maintenance of Portfolio Securities in an immobilization
program operated by a bank which meets the requirements of Section 26(a)(1)
of the 1940 Act, and (ii) for each year following such approval the Board
has reviewed and approved the arrangement and has not delivered an
Officers' Certificate to the Bank indicating that the Board has withdrawn
<PAGE> 11
its approval, the Bank shall enter into such immobilization program with
such bank acting as a subcustodian hereunder.
6.7 Eurodollar CDs. Any Portfolio Securities which are
Eurodollar CDs may be physically held by the European branch of the U.S.
banking institution that is the issuer of such Eurodollar CD (a "European
Branch"), provided that such Securities are identified on the books of the
Bank as belonging to a Series of the Fund and that the books of the Bank
identify the European Branch holding such Securities. Notwithstanding any
other provision of this Agreement to the contrary, except as stated in the
first sentence of this subsection 6.7, the Bank shall be under no other
duty with respect to such Eurodollar CDs belonging to the Fund, and shall
have no liability to the Fund or its shareholders with respect to the
actions, inactions, whether negligent or otherwise of such European Branch
in connection with such Eurodollar CDs, except for any loss or damage to
the Fund resulting from the Bank's own gross negligence, willful
misfeasance or bad faith in the performance of its duties hereunder.
6.8 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges,
NASDAQ or Over-the-Counter.
1. The Bank shall take action as to put options ("puts")
and call options ("calls") purchased or sold (written) by the Fund
regarding escrow or other arrangements (i) in accordance with the
provisions of any agreement entered into upon receipt of Proper
Instructions between the Bank, any broker-dealer registered under the
Exchange Act and a member of the National Association of Securities
Dealers, Inc. (the "NASD"), and, if necessary, the Fund relating to the
compliance with the rules of the Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations.
2. Unless another agreement requires it to do so, the
Bank shall be under no duty or obligation to see that the Fund has
deposited or is maintaining adequate margin, if required, with any broker
in connection with any option, nor shall the Bank be under duty or
obligation to present such option to the broker for exercise unless it
receives Proper Instructions from the Fund. The Bank shall have no
responsibility for the legality of any put or call purchased or sold on
behalf of the Fund, the propriety of any such purchase or sale, or the
adequacy of any collateral delivered to a broker in connection with an
option or deposited to or withdrawn from a Segregated Account (as defined
in subsection 6.9 below). The Bank specifically, but not by way of
limitation, shall not be under any duty or obligation
<PAGE> 12
to: (i) periodically check or notify the Fund that the amount of such
collateral held by a broker or held in a Segregated Account is sufficient
to protect such broker of the Fund against any loss; (ii) effect the return
of any collateral delivered to a broker; or (iii) advise the Fund that any
option it holds, has or is about to expire. Such duties or obligations
shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities
Exchanges.
1. The Bank shall take action as to puts, calls and
futures contract ("Futures") purchased or sold by the Fund in accordance
with the provisions of any agreement among the Fund, the Bank and a Futures
Commission Merchant registered under the Commodity Exchange Act, relating
to compliance with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, as defined in the Commodity Exchange Act, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund.
2. The responsibilities and liabilities of the Bank as
to futures, puts and calls traded on commodities exchanges, any Futures
Commission Merchant account and the Segregated Account shall be limited as
set forth in subparagraph (a)(2) of this subsection 6.8 as if such
subparagraph referred to Futures Commission Merchant rather than brokers,
and Futures and puts and calls thereon instead of options.
6.9 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for
and on behalf of the Fund, into which Account or Accounts may be
transferred upon receipt of Proper Instructions cash and/or Portfolio
Securities:
(a) in accordance with the provisions of any agreement
among the Fund, the Bank and a broker-dealer registered under the Exchange
Act and a member of the NASD or any Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the rules of
the Options Clearing Corporation and of any registered national securities
exchange or the Commodity Futures Trading Commission or any registered
Contract Market, or of any similar organizations regarding escrow or other
arrangements in connection with transactions by the Fund;
(b) for the purpose of segregating cash or securities in
connection with options purchased or written by the Fund or commodity
futures purchased or written by the Fund;
<PAGE> 13
(c) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less
than the aggregate purchase price due on the settlement dates of all the
Fund's then outstanding forward commitment or "when-issued" agreements
relating to the purchase of Portfolio Securities and all the Fund's then
outstanding commitments under reverse repurchase agreements entered into
with broker-dealer firms;
(d) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(e) for other proper corporate purposes, but only, in
the case of this clause (e), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board, or of the
Executive Committee signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or purposes
of such Segregated Account and declaring such purposes to be proper
corporate purposes; and
(f) assets may be withdrawn from the Segregated Account
pursuant to Proper Instructions only
(i) with respect to assets deposited in accordance
with the provisions of any agreements referenced in (a)
or (b) above, in accordance with the provisions of such
agreements;
(ii) with respect to assets deposited pursuant to
(c) or (d) above, for sale or delivery to meet the Fund's
obligations under outstanding firm commitment or when
issued agreements for the purchase of Portfolio
Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of
equal or greater value deposited in the Segregated
Account;
(iv) to the extent that the Fund's outstanding
forward commitment or when-issued agreements for the
purchase of portfolio securities or reverse repurchase
agreements are sold to other parties or the Fund's
obligations thereunder are met from assets of the Fund
other than those in the Segregated Account;
<PAGE> 14
(v) for delivery upon settlement of a forward
commitment agreement for the sale of Portfolio
Securities; or
(vi) with respect to assets deposited pursuant to
(e) above, in accordance with the purposes of such
account as set forth in Proper Instructions.
6.10 Interest Bearing Call or Time Deposits. The Bank shall,
upon receipt of Proper Instructions relating to the purchase by the Fund of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated
in such Proper Instructions. The Bank shall include in its records with
respect to the assets of the Fund appropriate notation as to the amount of
each such deposit, the banking institution with which such deposit is made
(the "Deposit Bank"), and shall retain such forms of advice or receipt
evidencing the deposit, if any, as may be forwarded to the Bank by the
Deposit Bank. Such deposits shall be deemed Portfolio Securities of the
Fund and the responsibility of the Bank therefore shall be the same as and
no greater than the Bank's responsibility in respect of other Portfolio
Securities of the Fund.
6.11 Transfer of Securities. The Bank will transfer,
exchange, deliver or release Portfolio Securities held by it hereunder,
insofar as such Securities are available for such purpose, provided that
before making any transfer, exchange, delivery or release under this
subsection the Bank will receive Proper Instructions requesting such
transfer, exchange or delivery stating that it is for a purpose permitted
under the terms of this subsection 6.11, specifying the applicable
subsection, or describing the purpose of the transaction with sufficient
particularity to permit the Bank to ascertain the applicable subsection,
only
(a) upon sales of Portfolio Securities for the account
of the Fund, against contemporaneous receipt by the Bank of payment
therefor in full, each such payment to be in the amount of the sale price
shown in a broker's confirmation, DTC confirmation, or such other evidence
as agreed upon by the Company and the Bank, of sale of the Portfolio
Securities received by the Bank before such payment is made, as confirmed
in the Proper Instructions received by the Bank before such payment is
made;
(b) in exchange for or upon conversion into other
securities alone or other securities and cash pursuant to any plan of
merger, consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or
<PAGE> 15
otherwise, upon exercise of subscription, purchase or sale or other similar
rights represented by such Portfolio Securities, or for the purpose of
tendering shares in the event of a tender offer therefor, provided however
that in the event of an offer of exchange, tender offer, or other exercise
of rights requiring the physical tender or delivery of Portfolio
Securities, the Bank shall have no liability for failure to so tender in a
timely manner unless such Proper Instructions are received by the Bank at
least two business days prior to the date required for tender, and unless
the Bank (or its agent or subcustodian hereunder) has actual possession of
such Security at least two business days prior to the date of tender;
(c) upon conversion of Portfolio Securities pursuant to
their terms into other securities;
(d) for the purpose of redeeming in-kind shares of the
Fund upon authorization from the Fund;
(e) in the case of option contracts owned by the Fund,
for presentation to the endorsing broker;
(f) when such Portfolio securities are called, redeemed
or retired or otherwise become payable;
(g) for the purpose of effectuating the pledge of
Portfolio Securities held by the Bank in order to collateralize loans made
to the Fund by any bank, including the Bank; provided, however, that such
Portfolio Securities will be released only upon payment to the Bank for the
account of the Fund of the moneys borrowed, except that in cases where
additional collateral is required to secure a borrowing already made, and
such fact is made to appear in the Proper Instructions, further Portfolio
Securities may be released for that purpose without any such payment. In
the event that any such pledged Portfolio Securities are held by the Bank,
they will be so held for the account of the lender. After notice to the
Fund from the lender, in accordance with the normal procedures of the
lender, that an event of deficiency or default on the loan has occurred,
the Bank may deliver such pledged Portfolio Securities to or for the
account of the lender;
(h) for the purpose of releasing certificates
representing Portfolio Securities, against contemporaneous receipt by the
Bank of the fair market value of such security, as set forth in the Proper
Instructions received by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the
Fund to a bank or broker dealer, but only against receipt in accordance
with street delivery custom except as otherwise
<PAGE> 16
provided herein, of adequate collateral as agreed upon from time to time by
the Fund and the Bank, and upon receipt of payment in connection with any
repurchase agreement relating to such securities entered into by the Fund;
(j) for other authorized transactions of the Fund or for
other proper corporate purposes; provided that before making such transfer,
the Bank will also receive a certified copy of resolutions of the Board,
signed by an authorized officer of the Fund (other than the officer
certifying such resolution) and certified by its Secretary or Assistant
Secretary, specifying the Portfolio Securities to be delivered, setting
forth the transaction in or purpose for which such delivery is to
be made, declaring such transaction to be an authorized transaction of the
Fund or such purpose to be a proper corporate purpose, and naming the
person or persons to whom delivery of such securities shall be made; and
(k) for delivery in accordance with the provisions of
any agreement among the Fund, the Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with
the rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations, regarding account
deposits in connection with transactions by the Fund; and
(l) upon termination of this Agreement as hereinafter
set forth pursuant to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections
(a), (b), (c), (e), (f), (g), (h) and (i) hereof securities or cash
receivable in exchange therefor shall be delivered to the Bank.
7. Redemptions. In the case of payment of assets of the Fund held
by the Bank in connection with redemptions and repurchases by the Fund of
outstanding common shares, the Bank will rely on notification by the Fund's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment
shall be made in accordance with the Articles and By-laws of the Fund, from
assets available for said purpose.
8. Merger, Dissolution, etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of
the Fund into or the consolidation of the Fund with another investment
company, the sale by the Fund of all, or substantially all, of its assets
to another investment company, or the liquidation or dissolution of the
Fund and distribution of its assets, the Bank will deliver the Portfolio
<PAGE> 17
Securities held by it under this Agreement and disburse cash only upon the
order of the Fund set forth in an Officers' Certificate, accompanied by a
certified copy of a resolution of the Board authorizing any of the
foregoing transactions. Upon completion of such delivery and disbursement
and the payment of the fees, disbursements and expenses of the Bank, this
Agreement will terminate.
9. Actions of Bank Without Prior Authorization. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an
Officers' Certificate to the contrary, it will without prior authorization
or instruction of the Fund or the transfer agent:
(a) Endorse for collection and collect on behalf of and
in the name of the Fund all checks, drafts, or other negotiable or
transferable instruments or other orders for the payment of money received
by it for the account of the Fund and hold for the account of the Fund all
income, dividends, interest and other payments or distribution of cash with
respect to the Portfolio Securities held thereunder;
(b) Present for payment all coupons and other income
items held by it for the account of the Fund which call for payment upon
presentation and hold the cash received by it upon such payment for the
account of the Fund;
(c) Receive and hold for the account of the Fund all
securities received as a distribution on Portfolio Securities as a result
of a stock dividend, share split-up, reorganization, recapitalization,
merger, consolidation, readjustment, distribution of rights and securities
issued with respect to any Portfolio Securities held by it hereunder.
(d) Execute as agent on behalf of the Fund all necessary
ownership and other certificates and affidavits required by the Internal
Revenue Code or the regulations of the Treasury Department issued
thereunder, or by the laws of any state, now or hereafter in effect,
inserting the Funds name on such certificates as the owner of the
securities covered thereby, to the extent it may lawfully do so and as may
be required to obtain payment in respect thereof. The Bank will execute
and deliver such certificates in connection with Portfolio Securities
delivered to it or by it under this Agreement as may be required under the
provisions of the Internal Revenue Code and any Regulations of the Treasury
Department issued thereunder, or under the laws of any State;
(e) Present for payment all Portfolio Securities which
are called, redeemed, retired or otherwise become payable,
<PAGE> 18
and hold cash received by it upon payment for the account of the Fund; and
(f) Exchange interim receipts or temporary securities
for definitive securities.
10. Collections and Defaults. The Bank will use all reasonable
efforts to collect any funds which may to its knowledge become collectible
arising from Portfolio Securities, including dividends, interest and other
income, and to transmit to the Fund notice actually received by it of any
call for redemption, offer of exchange, right of subscription,
reorganization or other proceedings affecting such securities. Absent the
default of the payer of such income, the Bank will credit the Fund with the
appropriate amount if such income remains past due beyond a specified
number of days. The exact number of days may be agreed upon and modified
from time to time by written agreement between the Bank and the Fund. Such
agreement will be attached to this Agreement as Schedule B. If Portfolio
Securities upon which such income is payable are in default or payment is
received after due demand or presentation, the Bank will notify the Fund in
writing of any default or refusal to pay within two business days from the
day on which it receives knowledge of such default or refusal. In
addition, the Bank will send the Fund a written report once each month
showing any income on any Portfolio Security held by it which is more than
ten days overdue on the date of such report and which has not previously
been reported.
11. Maintenance of Records and Accounting Services. The Bank will
maintain records with respect to transactions for which the Bank is
responsible pursuant to the terms and conditions of this Agreement, and in
compliance with the applicable rules and regulations of the 1940 Act and
will furnish the Fund daily with a statement of condition of the Fund, or
other reports as may be requested. The Bank will furnish to the Fund at
the end of every month, and at the close of each quarter of the Funds
fiscal year, a list of the Portfolio Securities and the aggregate amount of
cash held by it for the Fund, along with a month-end statement of condition
and other reports and financial statements as may be agreed upon from time
to time between the parties. The books and records of the Bank pertaining
to its actions under this Agreement and reports by the Bank or its
independent accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors
employed by the Fund and will be preserved by the Bank in the manner and in
accordance with the applicable rules and regulations under the 1940 Act.
The Bank recognizes that the books and records it maintains for the Fund
pursuant to this Agreement are the property of the Fund and the Bank agrees
to
<PAGE> 19
surrender such books and records upon the request of the Fund or any
Authorized Person of the Fund. The information forwarded to the Fund daily
pursuant to this Section 11 and subsection 13.3(f) shall be sufficiently
detailed to enable the Fund to maintain detailed accounting and tax books
on a daily basis. These records will be maintained by the Custodian
pursuant to Section 12.
The Bank shall perform fund accounting (including Hub and Spoke book
and tax allocations) and shall keep the books of account and render
statements or copies from time to time as reasonably requested by the
Treasurer or any executive officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters
of like nature.
12.1 Fund Evaluation. The Bank shall compute and, unless
otherwise by the Board, determine as of the close of regular trading on the
New York Stock Exchange on each day on which said Exchange is open for
unrestricted trading and as of such other days, or hours, if any, as may be
authorized by the Board, the net asset value and the public offering price
of a share of capital stock of the Fund, such determination to be made in
accordance with the provisions of the Articles and By-laws of the Fund and
Prospectus and Statement of Additional Information relating to the Fund, as
they may from time to time be amended, and any applicable resolutions of
the Board at the time in force and applicable; and promptly notify the
Fund, the proper exchange and the NASD or such other persons as the Fund
may request of the results of such computation and determination. In
computing the net asset value hereunder, the Bank may rely in good faith
upon information furnished to it by any Authorized Person in respect of (i)
the manner of accrual of the liabilities of the Fund and in respect of
liabilities of the Fund not appearing on its books of account kept by the
Bank, (ii) reserves, if any, authorized by the Board or that no such
reserves have been authorized, (iii) the source of the quotations to be
used in computing the net asset value, (iv) the value to be assigned to any
security for which no price quotations are available, and (v) the method of
computation of the public offering price on the basis of the net asset
value of the shares, and the Bank shall not be responsible for any loss
occasioned by such reliance or for any good faith reliance on any
quotations received from a source pursuant to (iii) above.
12.2 Yield Calculation. The Bank will compute the performance
results of the Fund (the "Yield Calculation") in accordance with the
provisions of Release No. 33-6753 and Release No. IC-16245 (February 2,
1988) (the "Releases") promulgated by
<PAGE> 20
the Securities and Exchange Commission, and any subsequent amendments to,
published interpretations of or general conventions accepted by the staff
of the Securities and Exchange Commission with respect to such releases or
the subject matter thereof ("Subsequent Staff Positions"), subject to the
terms set forth below:
(a) The Bank shall compute the Yield Calculation for the
Fund for the stated periods of time as shall be mutually agreed upon, and
communicate in a timely manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, the Bank will
derive from the records it generates and maintains for the Fund pursuant to
Section 11 hereof, the items of data necessary for the computation. The
Bank shall have no responsibility to review, confirm or otherwise assume
any duty or liability with respect to the accuracy or correctness of any
such data supplied to it by the Fund, any of the Fund's designated agents
or any of the Fund's designated third party providers.
(c) At the request of the Bank, the Fund shall provide,
and the Bank shall be entitled to rely on, written standards and guidelines
to be followed by the Bank in interpreting and applying the computation
methods set forth in the Releases or any Subsequent Staff Positions as they
specifically apply to the Fund. In the event that the computation methods
in the Releases or the Subsequent Staff Positions or the application to the
Fund of a standard or guideline is not free from doubt or in the event
there is any question of interpretation as to the characterization of a
particular security or any aspect of a security or a payment with respect
thereto (e.g., original issue discount, participating debt security, income
or return of capital, etc.) or otherwise or as to any other element of the
computation which is pertinent to the Fund, the Fund or its designated
agent shall have the full responsibility for making the determination of
how the security, or payment is to be treated for purposes of the
computation and how the computation is to be made and shall inform the Bank
thereof on a timely basis. The Bank shall have no responsibility to make
independent determinations with respect to any item which is covered by
this Section, and shall not be responsible for its computations made in
accordance with such determinations so long as such computations are
mathematically correct.
(d) The Fund shall keep the Bank informed of all
publicly available information and of any non-public advice, or information
obtained by the Fund from its independent auditors or by its personnel or
the personnel of its investment adviser, or Subsequent Staff Positions
related to the computations to be undertaken by the Bank pursuant to this
Agreement and the Bank
<PAGE> 21
shall not be deemed to have knowledge of such information (except as
contained in the Releases) unless it has been furnished to the Bank in
writing.
13. Concerning the Bank.
13.1 Performance of Duties and Standard of Care. In
performing its duties hereunder and any other duties listed on any Schedule
hereto, if any, the Bank will be entitled to receive and act upon the
advice of independent counsel of its own selection, which may be counsel
for the Fund, and will be without liability for any taken or thing done or
omitted to be done in accordance with this Agreement in good faith in
conformity with such advice. In the performance of its duties hereunder,
the Bank will be protected and not be liable, and will be indemnified and
held harmless for any action taken or omitted to be taken by it in good
faith reliance upon the terms of this Agreement, any Officers' Certificate,
Proper Instructions, resolution of the Board, telegram, notice, request,
certificate or other instrument reasonably believed by the Bank to be
genuine and for any other loss to the Fund except in the case of its gross
negligence, willful misfeasance or bad faith in the performance of its
duties or reckless disregard of its obligations and duties hereunder.
The Bank will be under no duty or obligation to inquire into
and will not be liable for:
(a) the validity of the issue of any Portfolio
Securities purchased by or for the Fund, the legality of the purchases
thereof or the propriety of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities
by or for the Fund or the propriety of the amount for which the same are
sold;
(c) the legality of an issue or sale of any common
shares of the Fund;
(d) the legality of the repurchase of any common shares
of the Fund;
(e) the legality of the declaration of any dividend by
the Fund or the legality of the distribution of any Portfolio Securities as
payment in kind of such dividend; and
(f) any property or moneys of the Fund unless and until
received by it, or its agent, and any such property or moneys delivered or
paid by it pursuant to the terms hereof.
<PAGE> 22
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Portfolio Securities at any time delivered to or held
by it for the account of the Fund are such as may properly be held by the
Fund under the provisions of its Articles, By-laws, any federal or state
statutes or any rule or regulation of any governmental agency.
Notwithstanding anything in this Agreement to the contrary, in
no event shall the Bank be liable hereunder or to any third party for any
losses or damages of any kind resulting from acts of God, earthquakes,
fires, floods, storms or other disturbances of nature, epidemics, riots,
nationalization, expropriation, currency restrictions, acts of war, civil
war or terrorism, insurrection, nuclear fusion, fission or radiation, the
interruption, loss or malfunction of utilities, transportation, or
computers (hardware or software) and computer facilities, the
unavailability of energy sources and other similar happenings or events
except as results from the Bank's own gross negligence. The Bank agrees,
however, to maintain adequate backup facilities and disaster recovery
programs in an effort to minimize the disruption of service caused by any
of the conditions noted above.
13.2 Agents and Subcustodians with Respect to Property of the
Fund Held in the United States. The Bank, upon written consent of the
Board, may employ agents in the performance of its duties hereunder and
shall be responsible for the acts and omissions of such agents as if
perform by the Bank hereunder. Without limiting the foregoing, certain
duties of the Bank hereunder may be performed by one or more affiliates of
the Bank.
At the request of the Fund, and upon receipt of Proper
Instructions, the Bank will employ subcustodians, designated by the Fund,
provided that any such subcustodian meets at least the minimum
qualifications required by Section 17(f)(1) of the 1940 Act to act as a
custodian of the Fund's assets with respect to property of the Fund held in
the United States and has been previously approved by the Board. The Bank
shall have no liability to the Fund or any other person by reason of any
act or omission of any subcustodian and the Fund shall indemnify the Bank
and hold it harmless from and against any and all actions, suits and claim,
arising directly or indirectly out of the performance of any subcustodian.
Upon request of the Bank, the Fund shall assume the entire defense of any
action, suit, or claim subject to the foregoing indemnity. The Fund shall
pay all fees and expenses of any subcustodian.
<PAGE> 23
13.3 Duties of the Bank with Respect to Property of the Fund
Held Outside of the United States.
(a) Appointment of Foreign Sub-Custodians. The Fund
hereby authorizes and instructs the Bank to employ as sub-custodians for
the Fund's Foreign Securities and other assets maintained outside the
United States the foreign banking institutions and foreign securities
depositories designated by the Board (each, a "Selected Foreign Sub-
Custodian"). Upon receipt of Proper Instructions, together with a
certified resolution of the Board, the Bank and the Fund may agree to
designate additional foreign banking institutions and foreign securities
depositories to act as Selected Foreign Sub-Custodians hereunder. Upon
receipt of Proper Instructions, the Fund may instruct the Bank to cease the
employment of any one or more such Selected Foreign Sub-Custodians for
maintaining custody of the Funds assets, and the Bank shall so cease to
employ such sub-custodian as soon as alternate custodial arrangements have
been implemented.
(b) Foreign Securities Depositories. Except as may
otherwise be agreed upon in writing by the Bank and the Fund, assets of the
Fund shall be maintained in foreign securities depositories that qualify as
eligible foreign custodians under Rule 17f-5 of the 1940 Act, pursuant to
written agreements between such depositories and the Bank. Where possible,
such arrangements shall include entry into agreements containing the
provisions set forth in subparagraph (d) hereof. Notwithstanding the
foregoing, except as may be agreed upon in writing by the Bank and the
Fund, the Fund authorized the deposit in Euro-clear, the securities
clearance and depository facilities operated by Morgan Guaranty Trust
Company of [2 lines missing] utilize such securities depository in
connection with settlements of purchases and sales of securities and
deliveries and returns of securities, until notified to the contrary
pursuant to subparagraph (a) hereunder.
(c) Segregation of Securities. The Bank shall identify
on its books as belonging to the Fund the Foreign Portfolio Securities held
by each Selected Foreign Sub-Custodian. Each agreement pursuant to which
the Bank employs a foreign banking institution shall require that such
institution establish a custody account for the Bank and hold in that
account, Foreign Portfolio Securities and other assets of the Fund, and, in
the event that such institution deposits Foreign Portfolio Securities in a
foreign securities depository, that it shall identify on its books as
belonging to the Bank the securities so deposited.
(d) Agreements with Foreign Banking Institutions. Each
of the agreements pursuant to which a foreign institution holds assets of
the Fund (each, a "Foreign Sub-Custodian
<PAGE> 24
Agreement") shall be substantially in the form previously made available to
the Fund and shall provide that: (a) the Fund's assets will not be subject
to any right, charge, security interest, lien or claim of any kind in favor
of the foreign banking institution or its creditors or agent, except a
claim of payment for their safe custody or administration (including,
without limitation, any fees or taxes payable upon transfers or
reregistration of securities); (b) beneficial ownership of the Fund's
assets will be freely transferable without the payment of money or value
other than for custody or administration (including, without limitation,
any fees or taxes payable upon transfers or reregistration of securities);
(c) adequate records will be maintained identifying the assets as belonging
to the Bank; (d) officers of or auditors employed by, or other
representatives of the Bank, including to the extent permitted under
applicable law, the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Bank; and (e) assets
of the Fund held by the Selected Foreign Sub-Custodian will be subject only
to the instructions of the Bank or its agents.
(e) Access of Independent Accountants of the Fund. Upon
request of the Fund, the Bank will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books and
records of any foreign banking institution employed as a Selected Foreign
Sub-Custodian insofar as such books and records relate to the performance
of such foreign banking institution under its Foreign Sub-Custodian
Agreement.
(f) Reports by Bank. The Bank will supply to the Fund
from time to time, as may agreed upon, statements in respect of the
securities and other assets of the Fund held by Selected Foreign Sub-
Custodians, including but not limited to an identification of entities
having possession of the Foreign Portfolio Securities and other assets of
the Fund.
(g) Transactions in Foreign Custody Account.
Transactions with respect to the assets of the Fund held by a Selected
Foreign Sub-Custodian shall be effected pursuant to Proper Instructions
from the Fund to the Bank and shall be effected in accordance with the
applicable Foreign Sub-Custodian Agreement. If at any time any Foreign
Portfolio Securities shall be registered in the name of the nominee of the
Selected Foreign Sub-Custodian, the Fund agrees to hold any such nominee
harmless from any liability by reason of the registration of such
securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for Foreign Portfolio Securities
<PAGE> 25
received for the account of the Fund and delivery of Foreign Portfolio
Securities maintained for the account of the Fund may be effected in
accordance with the customary established securities trading or securities
processing practices and procedures in the jurisdiction or market in which
the transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an agent
for such or purchaser or dealer) against a receipt with the expectation of
receiving later payment for such securities from such purchaser or dealer.
In connection with any action to be taken with respect to the
Foreign Portfolio Securities held hereunder, including, without limitation,
the exercise of any voting rights, subscription rights, redemption rights,
exchange rights, conversion rights or tender rights, or any other action in
connection with any other right, interest or privilege with respect to such
Securities (collectively, the "Rights"), the Bank shall promptly transmit
to the Fund such information in connection therewith as is made available
to the Bank by the Foreign Sub-Custodian, and shall promptly forward to the
applicable Foreign Sub-Custodian any instructions, forms or certifications
with respect to such Rights, and any instructions relating to the actions
to be taken in connection therewith, as the Bank shall receive from the
Fund pursuant to Proper instructions. Notwithstanding the foregoing, the
Bank shall have no further duty or obligation with respect to such Rights,
including, without limitation, the determination of whether the Fund is
entitled to participate in such Rights under applicable U.S. and foreign
laws, or the determination of whether any action proposed to be taken with
respect to such Rights by the Fund or by the applicable Foreign Sub-
Custodian will comply with all applicable terms and conditions of any such
Rights or any applicable laws or regulations, or market practices within
the market in which such action is to be taken or omitted.
(h) Liability of Selected Foreign Sub-Custodians. Each
Foreign Sub-Custodian Agreement with a foreign banking institution shall
require the institution to exercise reasonable care in the performance of
its duties and to indemnify, and hold harmless, the Bank and each Fund from
and against certain losses, damages, costs, expenses, liabilities or claims
arising out of its failure to exercise reasonable care or in connection
with the institution's performance of such obligations, all as set forth in
the applicable Foreign Sub-Custodian Agreement. The Fund acknowledges that
the Bank, as a participant in Euro-clear, is subject to the Terms and
Conditions Governing the Euro-Clear System, a copy of which has been made
available to the Fund. The Fund acknowledges that pursuant to such Terms
and Conditions, Morgan Guaranty Brussels shall have the sole right to
exercise or assert any and all rights or claims in respect of actions or
<PAGE> 26
omissions of, or the bankruptcy or insolvency of, any other depository,
clearance system or custodian utilized by Euro-clear in connection with the
Fund's securities and other assets.
(i) Liability of Bank. The Bank shall have no more or
less responsibility or liability on account of the acts or omissions of any
Selected Foreign Sub-Custodian employed hereunder than any such Selected
Foreign Sub-Custodian has to the Bank, provided that the provision shall
not protect the Bank in the event of the Bank's own negligence or bad faith
and, without limiting the foregoing, the Bank shall not be liable for any
loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism, political risk (including, but not limited to, exchange control
restrictions, confiscation, insurrection, civil strife or armed
hostilities), other losses due to Acts of God, nuclear incident or any loss
where the Selected Foreign Sub-Custodian has otherwise exercised reasonable
care.
(j) Monitoring Responsibilities. The Bank shall
furnish, at the meeting of the Board and annually thereafter to the Fund,
information concerning the Selected Foreign Sub-Custodians employed
hereunder for use by the Fund in evaluating such Selected Foreign Sub-
Custodians to ensure compliance with the requirements of Rule 17f-5 of the
Act. In addition, the Bank will promptly inform the Fund in the event that
the Bank is notified by a Selected Foreign Sub-Custodian that there appears
to be a substantial likelihood that its shareholders' equity will decline
below $200 million (U.S. dollars or the equivalent thereof) or that its
shareholders' equity has declined below $200 million (in each case computed
in accordance with generally accepted U.S. accounting principles) or any
other capital adequacy test applicable to it by exemptive order, or if the
Bank has actual knowledge of any material loss of the assets of the Fund
held by a Foreign Sub-Custodian. In addition the Bank will, upon request
by the Fund, furnish shareholder equity reports to the Fund. The Bank will
not add to or otherwise modify the schedule of foreign sub-custodians
without appropriate notification to the Fund, including information
concerning new or proposed foreign sub-custodians to ensure compliance with
the requirements of Rule 17f-5 of the 1940 Act.
(k) Tax Law. The Bank shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund or the
Bank as custodian of the Fund by the tax laws of any jurisdiction, and it
shall be the responsibility of the Fund to notify the Bank of the
obligations imposed on the Fund or the Bank as the custodian of the Fund by
the tax law of any non-U.S. jurisdiction, including responsibility for
withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole
<PAGE> 27
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for
exemption or refund under the tax law of jurisdictions for which the Fund
has provided such information.
13.4 Insurance. The Bank shall use the same care with respect
to the safekeeping of Portfolio Securities and cash of the Fund held by it
as it uses in respect of its own similar property but it need not maintain
any special insurance for the benefit of the Fund.
13.5 Fees and Expenses of Bank. The Fund will pay or
reimburse the Bank from time to time for any transfer taxes payable upon
transfer of Portfolio Securities made hereunder, and for all necessary
proper disbursements, expenses and charges made or incurred by the Bank in
the performance of this Agreement (including any duties listed on any
Schedule hereto, if any) including any indemnities for any loss,
liabilities or expense to the Bank as provided above. For the services
rendered by the Bank hereunder, the Fund will pay to the Bank such
compensation or fees at such rate and at such times as shall be upon in
writing by the parties from time to time. The Bank will also be entitled
to reimbursement by the Fund for all reasonable expenses incurred in
conjunction with the termination of this Agreement.
13.6 Advances by Bank. The Bank may, in its sole discretion,
advance funds on behalf of the Fund to make any payment permitted by this
Agreement upon receipt of any proper authorization required by this
Agreement for such payments by the Fund. Should such a payment or
payments, with advanced funds, result in an overdraft (due to
insufficiencies of the Fund's account with the Bank, or for any other
reason) this Agreement deems any such overdraft or related indebtedness, a
loan made by the Bank to the Fund payable on demand and bearing interest at
the current rate charged by the Bank for such loans unless the Fund shall
provide the Bank with agreed upon compensating balances. The Fund agrees
that the Bank shall have a continuing lien and security interest to the
extent of any overdraft or indebtedness, in and to any property at any time
held by it for the Fund's benefit or in which the Fund has an interest and
which is then in the Bank's possession or control (or in the possession or
control of any third party acting on the Bank's behalf). The Fund
authorizes the Bank, in its sole discretion, at any time to charge any
overdraft or indebtedness, together with interest due thereupon against any
balance of account standing to the credit of the Fund on the Bank's books.
The Bank agrees to credit the Fund for interest on any cash balances left
uninvested at the Bank. The Bank will present an accounting of all
interest owed by the Fund on overdrafts and to the Fund on uninvested cash
balances on a monthly basis with its bill for custody services.
<PAGE> 28
14. Termination.
(a) This Agreement way be at any time after one year
from the date of this Agreement without penalty upon sixty days written
notice delivered by either party to the other by means of registered mail,
and upon the expiration of such sixty days this Agreement will terminate;
provided, however, that the effective date of such termination may be
postponed to a date not more than ninety days from the date of delivery of
such notice (i) by the Bank in order to prepare for the transfer by the
Bank of all of the assets of the Fund held hereunder, and (ii) by the Fund
in order to give the Fund an opportunity to make suitable arrangements for
a successor custodian. The Fund may, however, immediately terminate this
Agreement if a conservator or receiver is appointed for the Bank by the
Commonwealth of Massachusetts, Division of Banks or upon the happening of a
like event at the direction of an appropriate regulatory agency or court of
competent jurisdiction. At any time after the termination of this
Agreement, the Fund will, at its request, have access to the records of the
Bank relating to the performance of its duties as custodian.
(b) In the event of the termination of this Agreement,
the Bank will immediately upon receipt or transmittal, as the case may be,
of notice of termination, commence and prosecute diligently to completion
the transfer of all cash and the delivery of all Portfolio Securities duly
endorsed and all records maintained under Section 11 to the successor
custodian when appointed by the Fund. The obligation of the Bank to
deliver and transfer over the assets of the Fund held by it directly to
such successor custodian will commence as soon as such successor is
appointed and will continue until completed as aforesaid. If the Fund does
not select a successor custodian within ninety (90) days from the date of
delivery of notice of termination the [missing text?] the Fund held by the
Bank to a bank or trust company of its own selection which meets the
requirements of Section 17(f)(1) of the 1940 Act and has a reported
capital, surplus and undivided profits aggregating not less than
$2,000,000, to be held as the property of the Fund under terms similar to
those on which they were held by the Bank, whereupon such bank or trust
company so selected by the Bank will become the successor custodian of such
assets of the Fund with the same effect as though selected by the Board.
(c) Prior to the expiration of ninety (90) days after
notice of termination has been given, the Fund may furnish the Bank with an
order of the Fund advising that a successor custodian cannot be found
willing and able to act upon reasonable and customary terms and that there
has been submitted to the shareholders of the Fund the question of whether
the Fund will be liquidated or will function without a custodian for the
assets of
<PAGE> 29
the Fund held by the Bank. In that event the Bank will deliver the
Portfolio Securities and cash of the Fund held by it, subject as aforesaid,
in accordance with one of such alternatives which may be approved by the
requisite vote of shareholders, upon receipt by the Bank of a copy of the
minutes of the meeting of shareholders at which action was taken, certified
by the Fund's Secretary and an opinion of counsel to the Fund in form and
content satisfactory to the Bank.
15. Confidentiality. Both parties hereto agree that any non-public
information obtained hereunder concerning the other party is confidential
and may not be disclosed to any other person without the consent of the
other party, except as may be required by applicable law or at the request
of a governmental agency. The parties further agree that a breach of this
provision would irreparably damage the other party and accordingly agree
that each of them is entitled, without bond or other security, to an
injunction or injunctions to prevent breaches of this provision.
16. Notices. Any notice or other instrument in writing authorized
or required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it
at its office at the address set forth below; namely:
(a) In the case of notices sent to the Fund to:
UBS PRIVATE INVESTOR FUNDS, INC.
c\o Signature Financial Group Inc.
437 Madison Avenue
New York, NY 10022
Attention: Tim Sullivan
with copies to:
Union Bank of Switzerland, New York Branch
299 Park Avenue
New York, NY 10171-0026
Attn: Richard A. Fabietti
and
Union Bank of Switzerland, New York Branch
299 Park Avenue
New York, NY 10171-0026
Attn: Joe Hamilton
<PAGE> 30
(b) in the case of notices sent to the Bank to:
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: Carol Lowd
or at such other place as such party may from time to time designate in
writing.
17. Amendments. This Agreement may not be altered or amended,
except by an instrument in writing, executed by both parties, and in the
case of the Fund, such alteration or amendment will be authorized and
approved by its Board.
18. Parties. This Agreement will be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement will not be assignable by
the Fund without the written consent of the Bank or by the Bank without the
written consent of the Fund, authorized and approved by its Board; and
provided further termination proceedings pursuant to Section 14 hereof will
not be deemed to be an assignment within the meaning of this provision.
19. Governing Law. This Agreement and all performance hereunder
will be governed by the laws of the Commonwealth of Massachusetts.
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
21. Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes and terminates, as of the date
hereof, all prior agreements between the Bank and the Fund, whether written
or oral, relating to the custody of the Fund's assets.
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the day and year first written above.
UBS PRIVATE INVESTOR FUNDS, INC.
By:____________________________
Name:
Title:
ATTEST:
____________________________
INVESTORS BANK & TRUST COMPANY
By:____________________________
Name:
Title:
ATTEST:
____________________________
DATE:_______________________
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized as of the day and year first written above.
UBS PRIVATE INVESTOR FUNDS, INC.
By:____________________________
Name:
Title:
ATTEST:
____________________________
INVESTORS BANK & TRUST COMPANY
By:____________________________
Name:
Title:
ATTEST:
____________________________
DATE:_______________________
<PAGE> 33
SCHEDULE A
UBS PRIVATE INVESTOR FUNDS, INC.
UBS Tax Exempt Bond Fund
UBS U.S. Equity Fund
UBS Bond Fund
UBS International Equity Fund
<PAGE> 1
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT, dated as of __________, 1996, by
and between UBS Private Investor Funds, Inc., a Maryland corporation (the
"Company"), and Signature Broker-Dealer Services, Inc., a Delaware
corporation ("SBDS").
W I T N E S S E T H:
WHEREAS, the Company is engaged in business as an open-end investment
company;
WHEREAS, the Company wishes to engage SBDS to provide certain
administrative and management services with respect to all currently
existing or future series (each a "Fund") of the Company, and SBDS is
willing to provide such services to the Company, on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties hereto as herein set forth, the parties covenant
and agree as follows:
1. Administrative Duties. Subject to the direction and control of
the Board of Directors of the Company (the "Board"), SBDS shall perform
such administrative and management services as may from time to time be
reasonably requested by the Company, which shall include without
limitation: (a) providing office space, equipment and clerical personnel
necessary for maintaining the organization of the Company and performing
the administrative and management functions herein set forth;
(b) arranging, if desired by the Company, for directors, officers or
employees of SBDS to serve as Directors, officers or agents of the Company
if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law; (c) supervising
the overall administration of the Company, including the updating of
corporate organizational documents, and the negotiation of contracts and
fees with and the monitoring and coordinating of performance and billings
of the Company's transfer agent, custodian, fund accounting agent,
shareholder servicing agents and other independent contractors or agents;
(d) preparing and, if applicable, filing all documents required for
compliance by the Company with applicable laws and regulations (including
state "blue sky" laws and regulations), including registration statements
on Form N-1A, Forms N-SAR, prospectuses and statements of additional
information, or similar forms, securities registrations on Form 24f-2, and
semi-annual and annual reports to the Company's shareholders and reviewing
(including coordinating the preparing of, but not preparing) tax returns;
(e) preparation of agendas and supporting documents for and minutes of
meetings of Directors, committees of Directors and preparation of notices,
proxy statements and minutes of meetings of one or more Funds'
shareholders; (f) arranging for and supervising the maintenance of books
and records of the Company in accordance with all applicable rules and
regulations including those promulgated under the Investment Company Act of
1940, as amended; (g) maintaining telephone coverage to respond to
shareholder inquiries regarding matters to which this Agreement pertains to
which any appropriate transfer agent and any appropriate shareholder
servicing agent are unable to respond; (h) providing reports and assistance
regarding the Funds' compliance with securities and tax laws, including
state "blue sky" laws and regulations; (i)
<PAGE> 2
arranging for the calculation and dissemination of yield and other
performance information to newspapers and tracking services; (j) arranging
for and preparing annual renewals for fidelity bond and errors and
omissions insurance coverage; (k) developing a budget for the Company,
establishing the rate of expense accruals and arranging for the payment of
all fixed and management expenses; (l) assisting in the determination of
all required dividends and distributions to shareholders (for purposes of
Subchapter M under the Internal Revenue Code of 1986, as amended, and any
applicable excise taxes); (m) preparing certain tax reports to
shareholders; and (n) liaising with the Company's independent public
accountants and providing, upon request, account analyses, fiscal year
summaries and other audit-related schedules, and taking all reasonable
action to assure that the necessary information is made available to such
accountants for the issuance of their opinion, as the same may be required
by the Company from time to time. Notwithstanding the foregoing, SBDS
shall not be deemed to have assumed any duties under this Agreement with
respect to, and shall not be responsible for, the management of the
Company's assets or the rendering of investment advice and supervision with
respect thereto or the distribution of shares of common stock ("Shares") of
the Funds, nor shall SBDS be deemed to have assumed or have any
responsibility with respect to functions specifically assumed by any
transfer agent or custodian of the Company.
2. Allocation of Charges and Expenses. SBDS shall pay the entire
salaries and wages of all of the Company's Directors, officers and agents
who devote part or all of their time to the affairs of SBDS or its
affiliates, and the wages and salaries of such persons shall not be deemed
to be expenses incurred by the Company for purposes of this Section 2.
Except as provided in the foregoing sentence, the Company shall pay all of
its own expenses including, without limitation, compensation of Directors
not affiliated with SBDS; all out-of-pocket expenses and disbursements for
the benefit of a Fund, including, but not limited to, photocopying and
courier (including express mail) charges, governmental fees; interest
charges; taxes; membership dues in the Investment Company Institute
allocable to the Company; fees under this Agreement; fees and expenses of
the Company's independent auditors, of legal counsel and of any custodian,
any transfer agent, distributor or registrar or dividend disbursing agent
of the Company; expenses of distributing and redeeming Shares and servicing
shareholder accounts; expenses of preparing, printing and mailing
prospectuses and statements of additional information, reports, notices,
proxy statements to the Funds' shareholders and governmental officers and
commissions and the costs of producing and distributing copies of such
documents to others; expenses of reproducing and distributing materials for
the Board and other attendees of Board meetings; expenses connected with
the execution, recording and settlement of security transactions; insurance
premiums; expenses of meetings of shareholders of the Funds and expenses
relating to the registration of the Company and the registration and
issuance of Shares of the Funds.
3. Compensation of SBDS. For the services to be rendered and the
facilities to be provided by SBDS hereunder, the Company shall pay to SBDS
an administrative services fee computed daily and paid monthly equal to, on
an annual basis, (i) with respect to each Fund other than UBS Tax Exempt
Bond Fund, 0.05% of the first $100 million of each such Fund's average
daily net assets and 0.025% of the next $100 million of each such Fund's
average daily net assets, provided that no fee shall apply to any such
Fund's assets in excess of $200 million; (ii) with respect to UBS Tax
Exempt Bond Fund, 0.10%
<PAGE> 3
of the first $100 million of such Fund's average daily net assets, 0.075%
of the next $100 million of such Fund's average daily net assets, and 0.05%
of such Fund's average daily net assets in excess of $200 million. The
Company shall not be liable to reimburse SBDS for any out-of-pocket costs
incurred in providing the services required by this Agreement.
If SBDS serves under this Agreement for less than the whole of any
month, the compensation to SBDS hereunder shall be prorated. For purposes
of computing the fees payable to SBDS hereunder, the net asset value of
each Fund shall be computed in the manner specified in the Fund's then-
current prospectus and statement of additional information.
4. Limitation of Liability of SBDS. SBDS shall not be liable for
any error of judgment or mistake of law or for any act or omission in the
administration or management of the Company or the performance of its
duties hereunder, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of the reckless
disregard of its obligations and duties hereunder. As used in this
Section 4, the term "SBDS" shall include SBDS and/or any of its affiliates
and/or subcontractors as provided for in Section 7 and the Directors,
officers and employees of SBDS and/or any of its affiliates and/or
subcontractors as provided for in Section 7.
5. Activities of SBDS. The services of SBDS to the Company are not
to be deemed to be exclusive, SBDS being free to render administrative and/
or other services to other parties. It is understood that Directors,
officers, and shareholders of a Fund are or may become interested in SBDS
and/or any of its affiliates, as Directors, officers, employees, or
otherwise, and that Directors, officers and employees of SBDS and/or any of
its affiliates are or may become similarly interested in the Company and
that SBDS and/or any of its affiliates may be or become interested in the
Company as a shareholder of a Fund or otherwise.
6. Duration, Termination and Amendments of this Agreement. This
Agreement shall become effective as of the day and year first above written
and shall govern the relations between the parties hereto thereafter,
unless terminated as set forth in this Section 6.
This Agreement may not be altered or amended, except by an instrument
in writing, and executed by both parties. This Agreement may be terminated
at any time without the payment of any penalty, with respect to any Fund or
the Company, by the Board of the Company, or by SBDS, in each case on not
less than 60 days' written notice to the other party.
7. Assignment; Subcontracting by SBDS. Except as provided in this
Section 7, neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the written consent of the other
party. This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns. SBDS
may, without further consent on the part of the Company, subcontract for
the performance of SBDS's obligations hereunder with any one or more
persons; provided, however, that SBDS shall not enter into any such
subcontract unless the Directors of the Company shall have found the
subcontracting party to be qualified to perform the obligations sought to
be subcontracted; and provided, further, that, unless the Company otherwise
expressly agrees in writing, SBDS shall be
<PAGE> 4
as fully responsible to the Company for the acts and omissions of any
subcontractor as it would be for its own acts or omissions.
8. Confidentiality. SBDS and the Company agree that all books,
records, information and data pertaining to the business of the other party
which are exchanged or received pursuant to the negotiation of or the
carrying out of this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except as may be required by
law.
9. Severability. If any provision of this Agreement shall become or
shall be found to be invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
10. Notice. Any notices under this Agreement shall be in writing
addressed and delivered personally (or by telecopy) or mailed postage-paid,
to the other party at such address as such other party may designate in
accordance with this paragraph for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the
Company and of SBDS shall be 6 St. James Avenue, 9th Floor, Boston,
Massachusetts 02116. Copies of all notices under this Agreement shall be
telecopied or mailed postage-paid to Union Bank of Switzerland (New York
Branch), 299 Park Avenue, 40th floor, New York, New York 10171-0026.
11. Miscellaneous. Each party agrees to perform such further
actions and execute such further documents as are necessary to effectuate
the purposes hereof. This Agreement shall be construed, enforced and
interpreted in accordance with and governed by the laws of the Commonwealth
of Massachusetts without reference to principles of conflicts of law. The
captions in this Agreement are included for convenience only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered in their names and on their behalf by the
undersigned, thereunto duly authorized, all as of the day and year first
above written.
UBS PRIVATE INVESTOR FUNDS, INC.
By
Name:
Title:
SIGNATURE BROKER-DEALER SERVICES, INC.
By
Name:
Title:
<PAGE> 1
TRANSFER AGENCY AND SERVICE AGREEMENT
between
UBS PRIVATE INVESTOR FUNDS, INC.
and
INVESTORS BANK & TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1. Terms of Appointment; Duties of the Bank . . . . . . . . . . 2
ARTICLE 2. Sale of Company Shares . . . . . . . . . . . . . . . . . . . 5
ARTICLE 3. Returned Checks . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4. Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 5. Transfers and Exchanges . . . . . . . . . . . . . . . . . . . 7
ARTICLE 6. Right to Seek Assurances . . . . . . . . . . . . . . . . . . 7
ARTICLE 7. Distributions . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 8. Other Duties . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 9. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 10. Books and Records . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 11. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 12. Representations and Warranties of the Bank . . . . . . . . . 10
ARTICLE 13. Representations and Warranties of the Company . . . . . . . . 11
ARTICLE 14. Indemnification . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 15. Covenants of the Company and the Bank . . . . . . . . . . . 14
ARTICLE 16. Term of Agreement . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 17. Additional Funds . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 18. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 19. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 20. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . 17
ARTICLE 21. Merger of Agreement and Severability . . . . . . . . . . . . 17
ARTICLE 22. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 23. Confidentiality . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE> 1
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT effective as of the ___ day of January, 1996 by and between
UBS Private Investor Funds, Inc., a corporation organized under the laws of
Maryland (the "Company"), and INVESTORS BANK & TRUST COMPANY, a
Massachusetts trust company (the "Bank").
WITNESSETH:
WHEREAS, the Company desires to appoint the bank as its transfer
agent, dividend disbursing agent and agent in connection with certain other
activities, and the Bank desires to accept such appointment;
WHEREAS, the Bank is duly registered as a transfer agent as provided
in Section 17A(c) of the Securities Exchange Act of 1934, as amended (the
"1934 Act");
WHEREAS, the Company is authorized to issue shares in separate
series, with each such series representing interests in a separate
portfolio of securities and other assets;
WHEREAS, the Company intends to initially offer shares in four
series, UBS Tax Exempt Bond Fund, UBS U.S. Equity Fund, UBS Bond Fund, UBS
International Equity Fund (such series, together with all other series
subsequently established by the Company and made subject to this Agreement
in accordance with Article 17, being herein referred to as the "Funds");
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, the Company and the Bank agree as follows:
DEFINITIONS.
Authorized Person. Authorized Person will mean any of the persons
duly authorized to give Proper Instructions or otherwise act on behalf of
the Fund by appropriate resolution of its Board, and set forth in a
certificate as required by Article 15 hereof.
Proper Instructions. Proper Instructions shall mean (i) instructions
regarding the purchase or sale of Fund Shares, and payments and deliveries
in connection therewith, given by an Authorized Person as shall have been
designated in an Officers' Certificate, such instructions to be given in
such form and manner as the Bank and the Fund shall agree upon from time to
time, and (ii) instructions (which may be
<PAGE> 2
continuing instructions) regarding other matters signed or initialed by
such one or more persons from time to time designated in an Officers'
Certificate as having been authorized by the Board. Oral instructions will
be considered Proper Instructions if the Bank reasonably believes them to
have been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all oral
instructions to be promptly confirmed in writing. The Bank shall act upon
and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-
up or confirmatory instruction shall be to make reasonable efforts to
detect any discrepancy between the original instruction and such
confirmation and to report such discrepancy to the Fund. The Fund shall be
responsible, at the Fund's expense, for taking any action, including any
reprocessing, necessary to correct any such discrepancy or error, and to
the extent such action requires the Bank to act, the Fund shall give the
Bank specific Proper Instructions as to the action required. Upon receipt
of an Officers' Certificate as to the authorization by the Board
accompanied by a detailed description of procedures approved by the Fund,
Proper Instructions may include communication effected directly between
electro-mechanical or electronic devices provided that the Board and the
Bank are satisfied that such procedures afford adequate safeguards for the
Fund's assets.
ARTICLE 1. Terms of Appointment; Duties of the Bank
1.01 Subject to the terms and conditions set forth in this
Agreement, the Company on behalf of the Funds, hereby employs and appoints
the Bank to act as, and the Bank agrees to act as, transfer agent for each
of the Funds' authorized and issued shares ("Shares"), dividend disbursing
agent and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of the Company ("Shareholders")
and set out in the currently effective prospectus and statement of
additional information, as each may be amended from time to time (the
"Prospectus"), of the Company, including without limitation any periodic
investment plan or periodic withdrawal program.
1.02 The Bank agrees that it will perform the following services:
(a) In connection with procedures established from time to time by
agreement between the Company and the Bank the Bank shall: (i) Receive for
acceptance, orders for the purchase of Shares, and promptly deliver payment
and
<PAGE> 3
appropriate documentation therefor to the custodian of the Company
appointed by the Board of Directors of the Company (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the
Custodian;
(iv) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or cause to be
paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Company on behalf of a Fund;
(vii) Create and maintain all necessary records including those
specified in Article 10 hereof, in accordance with all applicable laws,
rules and regulations, including but not limited to records required by
Section 31(a) of the Investment Company Act of 1940, as amended (the "1940
Act"), and those records pertaining to the various functions or performed
by it hereunder. All records shall be available for inspection and use by
the Company. Where applicable, such records shall be maintained by the
Bank for the periods and in the places required by Rule 31a-2 under the
1940 Act;
(viii) Make available during regular business hours all records and
other data created and maintained pursuant to this Agreement for reasonable
audit and inspection by the Company, or any person retained by the Company.
Upon reasonable notice by the Company, the Bank shall make available during
regular business hours its facilities and premises employed in connection
with its performance of this Agreement for reasonable visitation by the
Company, or any person retained by the Company;
(ix) Record the issuance of Shares of the Company and maintain,
pursuant to Rule 17Ad-10(e) under the 1934 Act, a record of the total
number of Shares of the Company which are authorized, based upon data
provided to it by the Company, and issued and outstanding. The Bank shall
also
<PAGE> 4
provide the Company on a regular basis with the total number of Shares
which are authorized and issued and outstanding and shall have no
obligation, when recording the issuance of Shares, to monitor the issuance
of such Shares or to take cognizance of any laws relating to the federal or
state registration of the issue or sale of such Shares, which functions
shall be the sole responsibility of the Company; and
(x) Provide the Fund with monthly and year-to-date summaries of
purchases, redemptions, and dividend reinvestments. The Bank will also
confirm such annual activity to the Fund's auditors upon reasonable
request.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a) or in any Schedule hereto, the Bank shall: (i) perform
all of the customary services of a transfer agent, dividend disbursing
agent and, as relevant, agent in connection with accumulation, open-account
or similar plans (including without limitation any periodic investment plan
or periodic withdrawal program); including but not limited to maintaining
all Shareholder accounts, preparing Shareholder meeting lists, mailing
proxies, receiving and tabulating proxies, mailing Shareholder reports and
prospectuses to current Shareholders, withholding taxes on all accounts,
including nonresident alien accounts, preparing and filing U.S. Treasury
Department Forms 1099 and other appropriate forms required with respect to
dividends and distributions by federal authorities for all Shareholders,
preparing and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, or in the case of
shareholders who are clients of UBS, providing periodic transaction and
position files for such clients to UBS for incorporation into UBS periodic
statements, responding to Shareholder telephone calls and Shareholder
correspondence, or assisting UBS in such responses for its clients who are
Fund Shareholders, preparing and mailing activity statements for
Shareholders, providing Shareholder account information; and providing
daily reports to the Company or a designated party, and (ii) provide a
system which will enable the Company to monitor the total number of shares
sold in each State. The Administrator of the Company shall (i) identify to
the Bank in writing those transactions and assets to be treated as exempt
from blue sky reporting for each State, (ii) verify the establishment of
transactions for each State on the system prior to activation and
thereafter monitor the daily activity for each State and (iii) provide
daily reports to the Administrator of the Company or a designated party.
The
<PAGE> 5
responsibility of the Bank for a Fund's blue sky state registration status
is solely limited to the initial establishment of transactions subject to
blue sky compliance by such Funds and the reporting of such transactions to
the Administrator of the Company as provided above. The Bank shall also
furnish to the Company monthly reconciliation of total shares sold in all
states per blue sky records to total Fund Share sales as reported to the
Custodian.
(c) Additionally, the Bank shall utilize a system to identify all
share transactions which involve purchase and redemption orders that are
processed at a time other than the time of the computation of net asset
value per share next computed after receipt of such orders, and shall
compute the net effect upon the Funds of such transactions so identified on
a daily and cumulative basis.
ARTICLE 2. Sale of Company Shares
2.01 Whenever the Distributor of the Company shall sell or cause to
be sold any Shares of a Fund, the Distributor shall deliver or cause to be
delivered to the Bank a document duly specifying: (i) the name of the Fund
whose Share were sold; (ii) the number of Shares sold or the total dollar
amount to be invested, trade date, and price; (iii) the amount of money to
be delivered to the Custodian for the sale of such Shares and specifically
allocated to such Fund; and (iv) in the case of a new account, a new
account application or sufficient information to establish an account.
2.02 The Bank will, upon receipt by it of a check, wire transfer, or
other payment identified by it as an investment in Shares of one of the
Funds and drawn or endorsed to the Bank as agent for, or identified as
being the account of, one of the Funds, promptly deposit such check or
other payment to the appropriate account postings necessary to reflect the
investment. The Bank will notify the Company, or its designee, and the
Custodian of all purchases and related account adjustments.
2.03 Under procedures as established by mutual agreement between the
Company and the Bank, the Bank shall issue to the purchaser or his
authorized agent such Shares, computed to the nearest three decimal points,
as he is entitled to receive, based on the appropriate net asset value of
the Funds' Shares, determined in accordance with the prospectus and
applicable Federal law or regulation. In issuing Shares to a purchaser or
his authorized agent, the Bank shall be entitled to rely upon the latest
directions, if any, previously received by the Bank from the purchaser
<PAGE> 6
or his authorized agent concerning the delivery of such Shares.
2.04 The Bank shall not be required to issue any Shares of the
Company where it has received a written instruction from the Company or
written notification from any appropriate Federal or State authority that
the sale of the Shares of the Funds in question has been suspended or
discontinued, and the Bank shall be entitled to rely upon such written
instructions or written notification.
2.05 Upon the issuance of any Shares of any Funds in accordance with
foregoing provisions of this Section, the Bank shall not be responsible for
the payment of any original issue or other taxes, if any, required to be
paid by the Company in connection with such issuance.
2.06 The Bank may establish, given the written consent of the
Company, such additional rules and regulations governing the transfer or
registration of Shares as it may deem advisable and consistent with such
rules and regulations generally adopted by transfer agents, or with the
written consent of the Company, any other rules and regulations.
ARTICLE 3. Returned Checks
3.01 In the event that any check or other order for the transfer of
money is returned unpaid for any reason, the Bank will take such steps as
the Bank may, in its discretion, deem appropriate to protect the Company
from financial loss or as the Company or its designee may instruct.
Provided that the standard procedures, as agreed upon from time to time,
between the Company and the Bank, regarding purchases and redemptions of
Shares, are adhered to by the Bank, the Bank shall not be liable for any
loss suffered by a fund as a result of returned or unpaid purchase or
redemption transactions. Legal or other expenses incurred to collect
amounts owed to a Fund as a consequence of returned or unpaid purchase
transactions shall be an expense of that Fund.
ARTICLE 4. Redemptions
4.01 Shares of any Fund may be redeemed in accordance with the
procedures set forth in the Prospectus of the Company and the Bank will
duly process all redemption requests.
<PAGE> 7
ARTICLE 5. Transfers and Exchanges
5.01 The Bank is authorized to review and process transfers of Shares
of each Fund, exchanges between Funds on the records of the Funds
maintained by the Bank, and exchanges between the Company and any other
entity as may be permitted by the Prospectus of the Company. If Shares to
be transferred are represented by outstanding certificates, the Bank will,
upon surrender to it of the certificates in proper form for transfer, and
upon cancellation thereof, countersign and issue new certificates for a
like number of Shares and deliver the same. If the Shares to be transferred
are not represented by outstanding certificates, the Bank will, upon an
order therefor by or on behalf of the registered holder thereof in proper
form, credit the same to the transferee on its books. If Shares are to be
exchanged for Shares of another Fund, the Bank will process such exchange
in the same manner as a redemption and sale of Shares, except that it may,
in accordance with procedures agreed to by the Company and the Bank, waive
requirements for information and documentation.
ARTICLE 6. Right to Seek Assurances
6.01 The Bank reserves the right to refuse to transfer or redeem
Shares until it is reasonably satisfied that the requested transfer or
redemption is legally authorized, and it shall incur no liability for the
refusal, in good faith, to make transfers or redemptions which the Bank, in
its judgment, deems improper or unauthorized, or until it is satisfied that
there is no reasonable basis for any claims adverse to such transfer or
redemption. The Bank may, in effecting transfers, rely upon the provisions
of the Uniform Act for the Simplification of Fiduciary Security Transfers
or the Uniform Commercial Code, as the same may be amended from time to
time, which in the opinion of legal counsel for the Company or of its own
legal counsel protect it in not requiring certain documents in connection
with the transfer or redemption of Shares of any Fund, and the Company
shall indemnify the Bank for any act done or omitted by it in reliance upon
such laws or opinions of counsel of the Company or of its own counsel.
ARTICLE 7. Distributions
7.01 The Company will promptly notify the Bank of the declaration of
any dividend or distribution. The Company shall furnish to the Bank a
resolution of the Board of Directors of the Company certified by the
Secretary (a "Certificate"): (i) authorizing the declaration of dividends
on a specified periodic basis and authorizing the
<PAGE> 8
Bank to rely on a Certificate specifying the date of the declaration of
such dividend or distribution, the date of payment thereof, the record date
as of which Shareholders entitled to payment shall be determined and the
amount payable per share to Shareholders of record as of the date and the
total amount payable to the Bank on the payment date; or (ii) setting forth
the date of the declaration of any dividend or distribution by a Fund, the
date of payment thereof, the record date as of which Shareholders entitled
to payment shall be determined, and the amount payable per share to the
Shareholders of record as of that date and the total amount payable to the
Bank on the payment date.
7.02 The Bank, on behalf of the Company, shall instruct the Custodian
to place in a dividend disbursing account funds equal to the cash amount of
any dividend or distribution to be paid out. The Bank will calculate,
prepare and mail checks to (at the address as it appears on the records of
the Bank), or (where appropriate) credit such dividend or distribution to
the account of, Fund Shareholders, and maintain and safeguard all
underlying records.
7.03 The Bank will replace lost checks at its discretion and in
conformity with regular business practices.
7.04 The Bank will maintain all records necessary to reflect the
crediting of dividends which are reinvested in Shares of the Company,
including without limitation daily dividends.
7.05 The Bank shall not be liable for any improper payments made in
accordance with a resolution of the Board of Directors of the Company.
7.06 If the Bank shall not receive from the Custodian sufficient cash
to make payment to all Shareholders of the Company as of the record date,
the Bank shall, upon notifying the Company, withhold payment to all
Shareholders of record as of the record date until such sufficient cash is
provided to the Bank.
ARTICLE 8. Other Duties
8.01 In addition to the duties expressly provided for herein, the
Bank shall perform such other duties and functions and shall be paid such
amounts therefor as may from time to time be agreed to in writing.
<PAGE> 9
ARTICLE 9. Taxes
9.01 It is understood that the Bank shall file such appropriate
information returns concerning the payment of dividends and capital gain
distributions and tax withholding with the proper Federal, State and local
authorities as are required by law to be filed by the Company and shall
withhold such sums as are required to be withheld by applicable law.
ARTICLE 10. Books and Records
10.01 The Bank shall maintain confidential records showing for each
Shareholder's account the following: (i) names, addresses and tax
identification numbers; (ii) numbers of Shares held; (iii) historical
information (as available from prior transfer agents) regarding the account
of each Shareholder, including dividends paid and date and price of all
transactions on a Shareholder's account; (iv) any stop or restraining order
placed against a Shareholder's account; (v) information with respect to
withholdings; (vi) any capital gain or dividend reinvestment order, plan
application, dividend address and correspondence relating to the current
maintenance of a Shareholder's account; (vii) certificate numbers and
denominations for any Shareholders holding certificates; (viii) any
information required in order for the Bank to perform the calculations
contemplated or required by this Agreement; and (ix) such other information
and data as may be required by applicable law.
10.02 Any records required to be maintained by Rule 31a-1 under the
1940 Act will be preserved for the periods prescribed in Rule 31a-2 under
the 1940 Act. Such records may be inspected by the Company at reasonable
times. The Bank may, at its option at any time, and shall forthwith upon
the Company's demand, turn over to the Company and cease to retain in the
Bank's files, records and documents created and maintained by the Bank in
performance of its service or for its protection. At the end of the six-
year retention period, such periods and documents will either be turned
over to the Company, or destroyed in accordance with the Company's
authorization.
10.03 Procedures applicable to the services to be performed hereunder
may be established from time to time by agreement between the Funds and the
Bank. The Bank shall have the right to utilize any shareholder accounting
and recordkeeping systems which, in its opinion, qualifies to perform any
services to be performed hereunder. The Bank
<PAGE> 10
shall keep records relating to the services performed hereunder, in the
form and manner as it may deem advisable.
ARTICLE 11. Fees and Expenses
11.01 For performance by the Bank pursuant to this Agreement, the
Funds agree to pay the Bank an annual maintenance fee for each Shareholder
account as set out in the initial fee schedule attached hereto. Such fees
and out-of-pocket expenses and advances identified under Section 11.02
below may be changed from time to time subject to mutual written agreement
between the Funds and the Bank.
11.02 In addition to the fee paid under Section 11.01 above, the
Funds agree to reimburse the Bank for out-of-pocket expenses or advances
incurred by the Bank for the items set out in the fee schedule attached
hereto. In addition, any other expenses incurred by the Bank at the
request or with the consent of the Funds including, without limitation, any
equipment or supplies specifically ordered by the Company or required to be
purchased by the Company, will be reimbursed by the Funds provided that the
Bank expressly represents to the Company that any such equipment or
supplies will be used exclusively for the Company or the Funds.
11.03 The Funds agree to pay all fees and reimbursable expenses
within thirty days following the mailing of the respective billing notice
unless the Funds notify the Bank that such fees and/or expenses are in
dispute. The Bank will notify the Company of any amounts needed for
postage for the mailing of dividends, proxies, Fund reports and other
mailings to all shareholder accounts, and such amounts shall be advanced to
the Bank by the Funds at least seven (7) days prior to the mailing date of
such material.
ARTICLE 12. Representations and Warranties of the Bank
The Bank represents and warrants to the Company that:
12.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
12.02 It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
12.03 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
<PAGE> 11
12.04 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
ARTICLE 13. Representations and Warranties of the Company
The Company represents and warrants to the Bank that:
13.01 It is a corporation duly organized and existing and in good
standing under the laws of the State of its incorporation as set forth in
the preamble hereto.
13.02 It is empowered under applicable laws and by its charter
documents and by-laws to enter into and preform this Agreement.
13.03 All proceedings required by said charter documents and by-laws
have been taken to authorize it to enter into and perform this Agreement.
13.04 It is an open-end investment company registered under the 1940
Act.
13.05 A registration statement on Form N-1A (including a prospectus
and statement of additional information) under the Securities Act of 1933
and the 1940 Act is currently effective and will remain effective, and
appropriate state securities law filings have been made and will continue
to be made, with respect to all Shares of the Company being offered for
sale.
13.06 When Shares are hereafter issued in accordance with the terms
of the Prospectus, such Shares shall be validly issued, fully paid and
nonassessable by the Funds.
ARTICLE 14. Indemnification
14.01 Except as set forth in subparagraph (f) hereof, the Bank shall
not be responsible for,and the Company shall indemnify and hold the Bank
harmless from and against, any and all losses, damages, costs, charges,
reasonable counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions taken or omitted to be taken by the Bank or its agent
or subcontractors in good faith in reliance on or use by the Bank or its
agents or subcontractors of information, records and documents which
(i) are received by the Bank or its agents or subcontractors and furnished
to it by or on behalf of the Funds, (ii) have been prepared and/or
maintained by the Funds or any other
<PAGE> 12
person or firm on behalf of the Funds, and (iii) were received by the Bank
or its agents or subcontractors from a prior transfer agent.
(b) any action taken or omitted to be taken by the Bank in connection
with its appointment in good faith in reliance upon any law, act,
regulation or interpretation of the same even though the same may
thereafter have been altered, changed, amended or repealed.
(c) The Funds' refusal or failure to comply with the terms of this
Agreement, or which arise out of the Funds' lack of good faith, negligence
or willful misconduct or which arise out of the breach of any
representation or warranty of the Funds hereunder.
(d) The reliance on, or the carrying out by the Bank or its agents
or subcontractors of any instructions or requests, whether written or oral,
received from Authorized Persons of the Funds.
(e) The offer or sale of Shares by the Company in violation of any
requirement under the federal securities laws or regulations or the
securities laws or regulations of any State that such Shares be registered
in such State or in violation of any stop order or other determination or
ruling by any federal agency or any State with respect to the offer or sale
of such Shares in such state.
(f) In addition to any other limitation provided herein, or by law,
indemnification under this Agreement shall not apply to actions or
omissions of the Bank or its directors, officers, employees, agents or
subcontractors in cases of its own gross negligence, willful misconduct,
bad faith, reckless disregard of its duties or their own duties herein
under, knowing violation of law or fraud.
14.02 The Bank shall indemnify and hold the Funds harmless from and
against any and all losses, damages, costs, charges, reasonable counsel
fees, payments, expenses and liability arising out of or attributed to any
action or failure or omission to act by the Bank as a result of the Bank's
lack of good faith, negligence, willful misconduct, knowing violation of
law or fraud.
14.03 At any time the Bank may apply to any Authorized Person of the
Company for instructions, and may consult with legal counsel with respect
to any matter arising in connection with the services to be performed by
the Bank under this Agreement and, subject to Section 14.01, the Bank and
its agents or subcontractors shall not be liable and
<PAGE> 13
shall be indemnified by the Company for any action taken or omitted by it
in reliance upon such instructions or upon the opinion of such counsel
except for a knowing violation of law. The Bank, its agents and
subcontractors shall be protected and indemnified in acting upon any paper
or document furnished by or on behalf of the Funds, reasonably believed to
be genuine and to have been signed by an Authorized Person, or upon any
instruction, information, data, records or documents provided the Bank or
its agents or subcontractors by machine readable input, telex, CRT data
entry or other similar means authorized by the Funds, and shall not be held
to have notice of any change of authority of any person, until receipt of
written notice thereof from the Funds. The Bank, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of an officer of the Company, and one proper
countersignature of any former transfer agent or registrar, or of a co-
transfer agent or co-registrar.
14.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes,
interruption of electrical power or other utilities, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be liable to the
other for any damages resulting from such failure to perform or otherwise
from such causes. The Bank represents that it currently has and intends to
maintain adequate back-up facilities or other disaster recovery programs
and procedures designed to minimize service disruption caused by any such
act of God or other event referred to above.
14.05 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or
for any act or failure to act hereunder as contemplated by this Agreement.
14.06 In order that the indemnification provisions contained in this
Article 14 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking the
indemnification shall promptly notify the other party of such assertion,
and shall keep the other party advised with respect to all developments
concerning such claim. The party who may be required to indemnify shall
have the option to participate with the party seeking indemnification in
the defense of such claim. The party seeking indemnification shall in no
case confess any claim or make any compromise in any case in which the
other party may be required to indemnify it except
<PAGE> 14
with the other party's prior written consent, which consent shall not be
unreasonably withheld.
ARTICLE 15. Covenants of the Company and the Bank
15.01 The Company shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Directors of the
Company authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the charter documents and by-laws of the Company and
all amendments thereto.
(c) Copies of each vote of the Directors designating authorized
persons to give instructions to the Bank, and a Certificate providing
specimen signatures for such authorized persons.
(d) Certificates as to any change in any Authorized Person or
Director of the Company.
(e) If applicable a specimen of the certificate of Shares in each
Fund of the Company in the form approved by the Directors, with a
Certificate as to such approval.
(f) Specimens of all new certificates for Shares, accompanied by the
Directors' resolutions approving such forms.
(g) All account application forms and other documents relating to
shareholder accounts or relating to any plan, program or service offered by
the Company.
(h) A list of all Shareholders of the Funds with the name, address
and tax identification number of each Shareholder, and the number of Shares
of the Funds held by each, certificate numbers and denominations (if any
certificates have been issued), lists of any account against which stops
have been placed, together with the reasons for said stops, and the number
of Shares redeemed by the Funds, all of which shall be as of the date the
Bank commences operations as the Company's transfer agent.
(i) An opinion of counsel for the Company with respect to the
validity of the Shares and the status of such Shares under the Securities
Act of 1933.
(j) Copies of the Funds registration statement on Form N-1A as
amended and declared effective by the Securities and
<PAGE> 15
Exchange Commission and all post-effective amendments thereto.
(k) Such other certificates, documents or opinions as may mutually
be deemed necessary or appropriate for the Bank in the proper performance
of its duties.
15.02 The Bank hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Company for safekeeping of
stock certificates, check forms and facsimile signature imprinting devices,
if any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
15.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To
the extent required by Section 31 of the 1940 Act and the Rules thereunder,
the Bank agrees that all such records prepared or maintained by the Bank
relating to the services to be performed by the Bank hereunder are the
confidential property of the Company and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered to the Company on and in accordance with its request.
15.04 The Bank and the Company agree that all books, records,
information and data pertaining to the business of the other party which
are exchanged or received pursuant to the negotiation or the carrying out
of this Agreement shall remain confidential, and shall not be voluntarily
disclosed to any other person, except as may be required by law.
15.05 In case of any requests or demands for the inspection of the
Shareholder records of the Company, the Bank will endeavor to notify the
Company and to secure instructions from an authorized officer of the
Company as to such instruction. The Bank reserves the right, however, to
exhibit the Shareholder records to any person whenever it is advised by its
counsel that it may be held liable for the failure to exhibit the
Shareholder records to such person.
ARTICLE 16. Term of Agreement
16.01 This Agreement shall become effective on the date hereof (the
"Effective Date") and shall continue in effect for one year from the
Effective Date (the "Initial Term") and from year to year thereafter with
respect to each Fund, provided that this Agreement may be terminated by
either party at any time without payment of any penalty upon sixty (60)
days written notice to the other. In the event
<PAGE> 16
such notice is given by the Company, it shall be accompanied by a
resolution of the Board of Directors, certified by the Secretary, electing
to terminate this Agreement and designating a successor transfer agent.
16.02 Should the Company exercise its right to terminate, all out-
of-pocket expenses associated with the movement of records and material
will be borne by the Company. Additionally, the Bank reserves the right to
charge for any other reasonable expenses associated with such termination.
ARTICLE 17. Additional Funds
17.01 In the event that the Company establishes one or more series
of Shares in addition to the initial series with respect to which it
desires to have the Bank render services as transfer agent under the terms
hereof, it shall so notify the Bank in writing, and if the Bank agrees in
writing to provide such services, such series of Shares shall become a Fund
hereunder.
ARTICLE 18. Assignment
18.01 Except as provided in Section 18.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
18.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
18.03 The Bank may subcontract for the performance of any of the
services to be provided hereunder to third parties, including any affiliate
of the Bank, provided that the Bank shall remain liable hereunder for any
acts or omissions of any subcontractor as if performed by the Bank, and
that the Board of Directors of the Company will have previously approved
any such subcontractor provided however, such approval not be unreasonably
withheld.
ARTICLE 19. Amendment
19.01 This Agreement may be amended or modified by a written
agreement executed by both parties.
<PAGE> 17
ARTICLE 20. Massachusetts Law to Apply
20.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
ARTICLE 21. Merger of Agreement and Severability
21.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written.
21.02 In the event any provision of this Agreement shall be held
unenforceable or invalid for any reason, the remainder of the Agreement
shall remain in full force and effect.
21.03 This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original; but such counterparts
shall together, constitute only one instrument.
ARTICLE 22. Notices
22.01 any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it
at its office at the address set forth below:
For the Fund(s): UBS Private Investors Funds, Inc.
c/o Signature Financial Group, Inc.
437 Madison Ave.
New York, NY 10022
Attn: Tim Sullivan
with a copy to
UBS Private Investor Funds, Inc.
c/o Union Bank of Switzerland,
New York Branch
299 Park Avenue, 40th Floor
New York, NY 10171-0026
Attn: Karen Weeks
For the Bank: Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attn: Carol Lowd
<PAGE> 18
ARTICLE 23. Confidentiality
23.01 Both parties hereto agree that any non-public information
obtained hereunder concerning the other party is confidential and may not
be disclosed to any other person without the consent of the other party,
except as may be required by applicable law or at the request of a
governmental agency. The parties further agree that a breach of this
provision would irreparably damage the other party and accordingly agree
that each of them is entitled, without bond or other security, to an
injunction or injunctions to prevent breaches of this provision.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf under their seals by and
through their duly authorized officers, as of the day and the year first
above written.
UBS Private Investor Funds, Inc.
ATTEST: _________________________________
By:
______________________ Name:
Title:
Investors Bank & Trust Company
ATTEST: _________________________________
By:
______________________ Name:
Title:
DATE: _______________________
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statements of Additional Information
constituting part of this Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (the "Registration Statement") of our reports dated
January 31, 1996, relating to the statements of assets and liabilities of
UBS Bond Fund, UBS U.S. Equity Fund and UBS International Equity Fund and
of UBS Tax Exempt Bond Fund, which reports appear in such Statements of
Additional Information, and to the incorporation by reference of our
reports into the Prospectuses which constitute part of this Registration
Statement. We also consent to the references to us under the heading
"Independent Accountants" in such Statements of Additional Information.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
February 5, 1996
