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UBS Institutional
International
Equity
Fund
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UBS
Private Investor
Funds, Inc.
Prospectus
April 7, 1997
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PROSPECTUS
UBS INSTITUTIONAL INTERNATIONAL EQUITY FUND
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116
FOR INFORMATION CALL (888) UBS-FUND ((888) 827-3863)
UBS Institutional 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 institutional 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. Although the
Fund is designed for institutional investors, the Fund may, in its discretion,
permit shares to be purchased by individual investors who meet the minimum
investment requirements.
The Fund is a diversified, no-load mutual fund for which there are no sales
charges 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'). THE PORTFOLIO IS A SERIES OF UBS INVESTOR PORTFOLIOS TRUST (THE
'TRUST'), AN OPEN-END MANAGEMENT INVESTMENT COMPANY. THE PORTFOLIO HAS THE SAME
INVESTMENT OBJECTIVE AS THE FUND. THE FUND EMPLOYS A TWO-TIER MASTER-FEEDER
INVESTMENT FUND 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
April 7, 1997, (the 'SAI'), provides further discussion of certain topics
referred to in this Prospectus and other matters that may be of interest to
investors. The SAI has been filed with the Securities and Exchange Commission,
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 (888)
UBS-FUND.
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 GOVERNMENT 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 APRIL 7, 1997.
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UBS INSTITUTIONAL INTERNATIONAL EQUITY FUND
INVESTORS FOR WHOM THE FUND IS DESIGNED
UBS Institutional International Equity Fund (the 'Fund') is designed for
institutional investors who want to participate in the risks and returns
associated with equity securities issued by foreign corporations. Although the
Fund is designed for institutional investors, the Fund may, in its discretion,
permit shares to be purchased by individual investors who meet the minimum
investment requirements. The Fund seeks to achieve its investment objective by
investing all of its investable assets in UBS International Equity Portfolio
(the 'Portfolio'). The Portfolio is a series of UBS Investor Portfolios Trust
(the 'Trust'), an open-end management investment company. The Portfolio has the
same investment objective as the Fund. Because the investment characteristics
and experience of the Fund will correspond directly with those of the Portfolio,
the discussion in this Prospectus focuses on the investments and investment
policies of the Portfolio. The net asset value of shares of the Fund fluctuates
with changes in the value of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments for the Portfolio are common stocks and other
securities with equity characteristics issued by foreign companies. The
Portfolio may also invest in futures contracts, options, forward contracts on
foreign currencies and certain privately placed securities. The Portfolio's
investments in securities of foreign issuers, including issuers in emerging
markets, involve unique investment risks and may be more volatile and less
liquid than the securities of domestic issuers. For further information about
these investments and related investment techniques, see 'Investment Objective
and Policies' discussed below.
The Fund's shares are only offered to investors that make a minimum initial
investment of $10 million. The Fund is designed for institutional investors,
although the Fund may, in its discretion, permit shares to be purchased by
individual investors who meet the minimum investment requirement. Individuals
who do not meet the minimum investment requirement may purchase shares of UBS
International Equity Fund, which also invests all of its investable assets in
the Portfolio. The prospectus for UBS International Equity Fund is available
without charge by writing to UBS Private Investor Funds, Inc. (the 'Company') at
the address set forth on the back cover of this Prospectus, or by calling (888)
UBS-FUND. The minimum subsequent investment is $500,000. If shareholders reduce
their total investment in shares of the Fund to less than $10 million, their
investment will be subject to mandatory redemption. See 'Redemption of
Shares -- Mandatory Redemption'. The Fund is one of several series of the
Company, an open-end management investment company organized as a Maryland
corporation.
This Prospectus describes the investment objective and policies, management and
operations of the Fund to enable investors to decide if the Fund suits their
investment needs. The Fund operates through a two-tier master-feeder investment
fund 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. 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 'Expenses'.
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SHAREHOLDER TRANSACTION EXPENSES
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Sales Load Imposed on Purchases..................................................................... None
Sales Load Imposed on Reinvested Dividends.......................................................... None
Deferred Sales Load................................................................................. None
Redemption Fees..................................................................................... None
Exchange Fees....................................................................................... None
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
Advisory Fees, After Fee Waiver**................................................................... 0.51%
Rule 12b-1 Fees..................................................................................... None
Other Expenses, After Expense Reimbursements***..................................................... 0.44%
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Total Operating Expenses, After Fee Waivers
and Expense Reimbursements*....................................................................... 0.95%
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* Expenses are expressed as a percentage of the Fund's projected average daily
net assets and are based on estimates of 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 2.30% of the Fund's average daily net
assets. See 'Management'.
** The New York Branch (the 'Branch' or the 'Adviser') of Union Bank of
Switzerland (the 'Bank') has agreed to waive fees and reimburse the Fund for any
of its operating expenses to the extent that the Fund's total operating expenses
(including its share of the Portfolio's expenses) exceed, on an annual basis,
0.95% of the Fund's average daily net assets. The Branch may modify or
discontinue this undertaking at any time in the future with 30 days' prior
notice to the Fund. The Portfolio's advisory fee would be equal, on an annual
basis, to 0.85% of the average daily net assets of the Portfolio if there were
no fee waiver in effect. See 'Management -- Adviser and Funds Services Agent'
and 'Expenses'.
*** The fees and expenses in Other Expenses include fees payable to:
(i) Investors Bank & Trust Company ('IBT', the 'Custodian', or the
'Transfer Agent') (a) under an Administration Agreement with the Fund,
(b) as custodian of the Fund and the Portfolio and (c) as transfer
agent of the Fund, and
(ii) Investors Fund Services (Ireland) Limited ('IBT Ireland') under an
Administration Agreement with the Portfolio.
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 'Expenses'.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming a
5% annual return and redemption at the end of each time period:
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1 Year...................................................... $10
3 Years..................................................... 30
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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 fees of any kind. See 'Purchase 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.
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HISTORICAL PERFORMANCE OF COMPARABLE DISCRETIONARY ACCOUNTS. The following table
sets forth (i) the composite average annual total returns for the one, three and
five year periods ended December 31, 1996 for all discretionary accounts
described below that have been managed for at least one full quarter by UBS
International Investment London Limited (the 'Sub-Adviser') and (ii) the average
annual total return during the same periods for the Morgan Stanley Capital
International EAFE'r' Index (the 'Index'). The discretionary accounts described
in (i) above 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
anticipated annual total operating expenses of 0.95% of average daily net assets
as set forth in the Expense 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
discretionary accounts are not subject to certain investment limitations,
diversification requirements and other restrictions imposed by federal
securities and tax laws on the Portfolio that, if applied to the accounts, may
have adversely affected their performance results. The Fund's anticipated annual
total operating expenses exceed the highest fee incurred by any of the
discretionary accounts. The composite total returns of these discretionary
accounts does not represent the historical performance of the Portfolio and
should not be viewed as a prediction of future performance of the Portfolio. The
Index is an unmanaged index that measures stock performance in Europe, Australia
and the Far East. The total returns of the Index do not include management fees
or commissions.
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COMPOSITE
TOTAL RETURN
OF ADVISER'S MORGAN STANLEY
DISCRETIONARY CAPITAL INTERNATIONAL
AVERAGE ANNUAL TOTAL RETURNS FOR THE: ACCOUNTS EAFE INDEX
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One Year Ended December 31, 1996............................... 9.34% 6.37%
Three Years Ended December 31, 1996............................ 9.24% 8.64%
Five Years Ended December 31, 1996............................. 10.07% 8.48%
Period April 1, 1987* through December 31, 1996................ 9.56% 6.64%
</TABLE>
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* Commencement date.
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 investment objective of the
Fund and the Portfolio may be changed only with the approval of the holders of a
majority of the outstanding voting securities of the Fund or a majority of the
investors in the Portfolio, respectively, after 30 days' prior notice.
This master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.
In addition to selling an interest in the Portfolio to the Fund, the Portfolio
may sell interests in the Portfolio to other mutual funds or institutional
investors. Such investors will invest in the Portfolio on the same terms and
conditions as the Fund and will pay a proportionate share of the Portfolio's
expenses. However, other entities investing in the Portfolio may sell shares of
their own fund using a different pricing structure than the Fund's. Such
different pricing structures may result in differences in returns experienced by
investors in other funds that invest in the Portfolio. Such differences in
returns are not uncommon and are present in other mutual fund structures.
Information concerning other holders of interests in the Portfolio is available
from IBT at (888) UBS-FUND.
The Fund may withdraw its investment in the Portfolio at any time if the Board
determines that it is in the Fund's best interest 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
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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 no event, however, will
securities which are not readily marketable exceed 15% of the total value of
such in-kind distribution. 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
Fund votes proportionately as instructed by the Fund's shareholders. See
'Organization' in the SAI. Fund shareholders who do not vote will not affect the
Fund's votes at the Portfolio meeting. The percentage of the Company's votes
representing Fund shareholders not voting will be voted by the Company in the
same proportion as the Fund shareholders who do, in fact, vote.
For more information about the Portfolio's investment objective, policies and
restrictions, see 'Investment Objective and Policies', 'Additional Investment
Information and Risk Factors' and 'Investment Restrictions'. For more
information about the Portfolio's management and expenses, see 'Management'. For
more information about changing the investment objective, policies and
restrictions of the Fund or the Portfolio, see 'Investment Restrictions'.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below,
together with the policies each employs to seek to achieve its objective.
Additional information about the investment policies of the Fund and the
Portfolio appears in the SAI under 'Investment Objectives and Policies'. The
Fund seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, which has the same investment objective as
the Fund. There can be no assurance that the investment objective of the Fund or
the Portfolio will be achieved.
The Portfolio's 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 is designed for investors with a long-term investment horizon who want to
diversify their investments by adding international equities and take advantage
of investment opportunities outside the United States.
The Portfolio seeks to achieve its investment objective by investing in
companies that the Sub-Adviser believes are fundamentally sound and that are
typically selling at below market valuations and that the Sub-Adviser believes
will grow at above-market rates. The emphasis on value leads to investments in
companies with relatively low price/earnings and price/book value ratios and
high yields.
The Adviser is responsible for supervising the management of the Portfolio's
investments. Consistent with these duties, the Adviser has entered into a
Sub-Advisory Agreement with UBS International Investment London Limited ('UBSII'
or the 'Sub-Adviser' and, together with the Adviser, the 'Advisers'), whereby
the Sub-Adviser is primarily responsible for the day-to-day investment decisions
for the Portfolio. The
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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 Portfolio will be less than 100%. See 'Portfolio
Transactions' in the SAI. 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.
The common stock in which the Portfolio may invest includes the common stock of
any class or series or any similar equity interest such as trust or limited
partnership interests. The Portfolio may also invest in securities of issuers
located in developing countries. See 'Additional Investment Information and Risk
Factors -- Risk Factors of Foreign Securities'. The Portfolio will invest in
securities listed on foreign or domestic securities exchanges and securities
traded in foreign or domestic over-the-counter markets, and may invest in
certain restricted or unlisted securities.
The Portfolio may also invest in money market instruments denominated in U.S.
dollars and other currencies, purchase 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
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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
approved 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. Any
gain or loss in the market price of the borrowed securities that occurs during
the term of the loan inures to the Portfolio and its respective investors. The
Portfolio may pay reasonable finders' and custodial fees in connection with a
loan. In addition, the Portfolio will consider all the facts and circumstances,
including the creditworthiness of the borrowing financial institution, and the
Portfolio will not make any loans in excess of one year. The Portfolio will not
lend its securities to any officer, Trustee, Director, employee or affiliate or
placement agent of the Portfolio, or the Adviser, Sub-Adviser, Administrator or
Distributor, unless otherwise permitted by applicable law.
RISK FACTORS OF FOREIGN SECURITIES. The Portfolio will invest primarily in
foreign securities. Investments in securities of foreign issuers and in
obligations of foreign branches of domestic banks involve somewhat different
investment risks from those affecting securities of domestic issuers. There may
be limited publicly available information with respect to foreign issuers, and
foreign issuers are not generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those applicable to domestic
companies. Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes that may decrease the net return on such
investments.
Investors should realize that the value of the Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the Portfolio's
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operations. Furthermore, the economies of individual foreign nations may differ
from the U.S. economy, favorably or unfavorably, in areas such as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position; it may also be more difficult
to obtain and enforce a judgment against a foreign issuer. Any foreign
investments made by the Portfolio must be made in compliance with U.S. and
foreign currency restrictions and tax laws restricting the amounts and types of
such investments.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settlement
periods for foreign securities, which are often longer than those for securities
of U.S. issuers, may affect portfolio liquidity. In buying and selling
securities on foreign exchanges, purchasers normally pay fixed commissions that
are generally higher than the negotiated commissions charged in the United
States. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers located in countries
other than in the United States.
Although the Portfolio invests primarily in securities of established issuers
based in developed foreign countries, it may also invest in securities of
issuers in developing market countries. Investments in securities of issuers in
developing market countries may involve a high degree of risk and many may be
considered speculative. These investments carry all of the risks of investing in
securities of foreign issuers outlined in this section to a heightened degree.
These heightened risks include: (i) greater risks of expropriation, confiscatory
taxation, nationalization, and less social, political and economic stability;
(ii) the small current size of the markets for securities of emerging market
issuers and the currently low or non-existent volume of trading, resulting in
limited liquidity and in price volatility; (iii) certain national policies that
may restrict the Portfolio's investment opportunities including restrictions on
investing in issuers or industries deemed sensitive to relevant national
interests; and (iv) the absence of developed legal structures governing private
or foreign investment and private property.
The Portfolio may invest in securities of foreign issuers directly or in the
form of American Depository Receipts ('ADRs'), European Depository Receipts
('EDRs') or other similar securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying foreign securities. Certain institutions
issuing ADRs may not be sponsored by the issuer of the underlying foreign
securities. A non-sponsored depository may not provide the same shareholder
information that a sponsored depository is required to provide under its
contractual arrangements with the foreign issuer. EDRs are receipts issued by a
European financial institution evidencing a similar arrangement. Generally,
ADRs, in registered form, are designed for use in the U.S. securities markets,
and EDRs, in bearer form, are designed for use in European securities markets.
Because investments in foreign securities involve foreign currencies, the value
of assets as measured in U.S. dollars may be affected, favorably or unfavorably,
by changes in currency exchange rates and in exchange control regulations,
including currency blockage. See 'Foreign Currency Exchange Transactions' below.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio will buy and sell
securities and will receive interest and dividends in currencies other than the
U.S. dollar, the Portfolio may, from time to time, enter into foreign currency
exchange transactions. The Portfolio may enter into these transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, use forward currency contracts to purchase or sell foreign currencies,
use currency futures contracts or purchase or sell options thereon or purchase
or sell currency options.
A forward foreign currency exchange contract is an obligation of the Portfolio
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract. Currency options give the buyer
the right, but not the obligation, to purchase or sell a fixed amount of a
specific currency at a fixed price at a future date. These contracts are entered
into in the interbank market directly between currency traders (usually large
commercial banks) and their customers. A forward foreign currency exchange
contract generally has no deposit requirement, and is traded at a net price
without
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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. Moreover, forward contracts that convert one foreign currency into
another foreign currency will cause the Portfolio to assume the risk of
fluctuations in the value of the currency purchased vis-a-vis the hedged
currency and the U.S. dollar. The precise matching of these transactions and the
value of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the date
such a transaction is entered into and the date it matures. The projection of
currency market movements is extremely difficult and the successful execution of
a hedging strategy is highly uncertain.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 15% of the market value of the Portfolio's net assets would be in illiquid
investments or investments that are not readily marketable. In addition, the
Portfolio will not invest more than 10% of the market value of its total assets
in restricted securities (not including Rule 144A securities) that cannot be
offered for public sale in the United States without first being registered
under the Securities Act of 1933 (the 'Securities Act'). Subject to those non-
fundamental policy limitations, the Portfolio may acquire investments that are
illiquid or have limited liquidity, such as private placements or investments
that are not registered under the Securities Act, and cannot be offered for
public sale in the United States without first being registered. An illiquid
investment is any investment that cannot be disposed of within seven days in the
normal course of business at approximately the amount at which it is valued by
the Portfolio. Repurchase agreements maturing in more than seven days are
considered illiquid investments and, as such, are subject to the limitations set
forth in this paragraph. The price the Portfolio pays for illiquid securities or
receives upon resale may be lower than the price paid or received for similar
securities with a more liquid market. Accordingly, the valuation of these
securities will reflect any limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the Securities Act. These securities may be
determined to be liquid in accordance with guidelines established by the
Advisers and approved by the Trustees of the Trust. The Trustees of the Trust
will monitor the Advisers' implementation of these guidelines on a periodic
basis.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objectives and long-term investment
perspective. The Portfolio may make money market investments pending other
investments or settlements, for liquidity or in adverse market conditions. Such
money market investments may include obligations of the U.S. Government and its
agencies and instrumentalities, other debt securities, commercial paper, bank
obligations and repurchase agreements. The Portfolio may purchase nonpublicly
offered debt securities. The Portfolio may also invest in short-term obligations
of sovereign
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foreign governments, their agencies, instrumentalities and political
subdivisions. For more detailed information about these money market
investments, see 'Investment Objectives and Policies' in the SAI.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described below. These instruments are commonly
known as derivatives.
The Portfolio may purchase and sell exchange traded and over-the-counter ('OTC')
put and call options on equity securities or indices of equity securities, enter
into forward contracts, purchase and sell futures contracts on indices of equity
securities, purchase and sell put and call options on futures contracts on
indices of equity securities and purchase and sell options on currencies. The
Portfolio may use these techniques for hedging or risk management purposes or,
subject to certain limitations, for investment purposes in lieu of investing
directly in the corresponding securities or instruments. Such use of derivatives
may be considered speculative.
The Portfolio may use these techniques to manage its exposure to changing
interest rates, currency exchange rates and/or security prices. Some options and
futures strategies, including selling futures contracts and buying puts, tend to
hedge the Portfolio's investments against price fluctuations. Other strategies,
including buying futures contracts, writing puts and calls, and buying calls,
may tend to increase market exposure. For example, if the Portfolio wishes to
obtain exposure to a particular market or market sector but does not wish to
purchase the relevant securities, it could, as an alternative, purchase a
futures contract on an index of such securities or related securities. Such a
purchase would not constitute a hedging transaction and could be considered
speculative. However, the Portfolio will use futures contracts or options in
this manner only for the purpose of obtaining the same level of exposure to a
particular market or market sector that it could have obtained by purchasing the
relevant securities and will not use futures contracts or options to leverage
its exposure beyond this level. The use of options and futures may involve some
leverage; such leverage is reduced by the requirement of the SEC to 'cover' such
obligations. See 'Cover -- Segregated Accounts' below. Options and futures
contracts may be combined with each other or with forward contracts in order to
adjust the risk and return characteristics of the Portfolio's overall strategy
in a manner deemed appropriate to the Advisers and consistent with the
Portfolio's objective and policies. Because combined positions involve multiple
trades, they result in higher transaction costs and may be more difficult to
open and close out.
The Portfolio's use of these transactions is a highly specialized activity,
which involves investment strategies and risks different from those associated
with ordinary portfolio securities transactions, and there can be no guarantee
that their use will increase the Portfolio's return. While the Portfolio's use
of these instruments may reduce certain risks associated with owning its
portfolio securities, these techniques themselves entail certain other risks. If
the Advisers apply a strategy at an inappropriate time or judge market
conditions or trends incorrectly, such strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's opportunity to realize gains as
well as limiting its exposure to losses. The Portfolio could experience losses
if the prices of its options and futures positions were poorly correlated with
its other investments, or if it could not close out its positions because of an
illiquid secondary market. In addition, the Portfolio will incur costs,
including commissions and premiums, in connection with these transactions and
these transactions could significantly increase the Portfolio's turnover rate.
The Portfolio may purchase and sell put and call options on securities,
currencies, indices of securities and futures contracts, or purchase and sell
futures contracts for the purposes described herein.
The Commodity Exchange Act prohibits U.S. persons, such as the Portfolio, from
buying or selling certain foreign futures contracts or options on such
contracts. Accordingly, the Portfolio will not engage in foreign futures or
options transactions unless the contracts in question may lawfully be purchased
and sold by U.S. persons in accordance with applicable Commodity Futures Trading
Commission ('CFTC') regulations or CFTC staff advisories, interpretations and no
action letters.
In addition, in order to assure that the Portfolio will not be considered a
'commodity pool' for purposes of CFTC rules, the Portfolio will enter into
transactions in futures contracts or options on futures contracts only if (1)
such transactions constitute bona fide hedging transactions, as defined under
CFTC rules, or (2) no more than 5% of the Portfolio's net assets are committed
as initial margin or premiums to positions that do not constitute bona fide
hedging transactions.
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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, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
The writer of a U.S. exchange traded put or call option on a security, an index
of securities or a futures contract is required to deposit cash or securities or
a letter of credit as margin and to make mark-to-market payments of variation
margin if and as the position becomes unprofitable.
OPTIONS ON INDICES. The Portfolio is permitted to enter into options
transactions and may purchase and sell put and call options on any securities
index based on securities in which the Portfolio may invest. Options on
securities indices are similar to options on securities, except that the
exercise of securities index options is settled by cash payment and does not
involve the actual purchase or sale of securities. In
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addition, these options are designed to reflect price fluctuations in a group of
securities or segment of the securities market rather than price fluctuations in
a single security. The Portfolio, in purchasing or selling index options, is
subject to the risk that the value of its portfolio securities may not change as
much as an index because the Portfolio's investments generally will not match
the composition of an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and the Portfolio may incur additional
losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a
specified quantity of an underlying instrument at a specified future date and
price or to make or receive a cash payment based on the value of a securities
index. When the Portfolio sells a futures contract, it agrees to sell a
specified quantity of the underlying instrument at a specified future date and
price or to receive or make a cash payment based on the value of a securities
index. The price at which the purchase and sale will take place is fixed when
the Portfolio enters into the contract. Futures can be held until their delivery
dates or the positions can be (and normally are) closed out before then. There
is no assurance, however, that a liquid market will exist when a Portfolio
wishes to close out a particular position.
When the Portfolio purchases or sells a futures contract, the value of the
futures contract tends to increase and decrease in tandem with the value of its
underlying instrument. Purchasing futures contracts may tend to increase the
Portfolio's exposure to positive and negative price fluctuations in the
underlying instrument, much as if it had purchased the underlying instrument
directly, as discussed above. When the Portfolio sells a futures contract, by
contrast, the value of its futures position will tend to move in a direction
contrary to the value of the underlying instrument. Selling futures contracts on
securities similar to those held by the Portfolio, therefore, will tend to
offset both positive and negative market price changes, much as if the
underlying instrument had been sold. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that these
standardized instruments will not exactly match the Portfolio's current or
anticipated investments. The Portfolio may invest in futures contracts and
options thereon based on currencies or on securities with different issuers,
maturities, or other characteristics from the securities in which it typically
invests, which involves a risk that the options or futures position will not
track the performance of the Portfolio's other investments. The Portfolio may
also enter into transactions in futures contracts and options for non-hedging
purposes, as discussed above.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit 'initial margin' with the Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
('FCM'). Initial margin deposits are typically equal to a small percentage of
the contract's value. If the value of either party's position declines, that
party will be required to make additional 'variation margin' payments equal to
the change in value on a daily basis. The party that has a gain may be entitled
to receive all or a portion of this amount. The Portfolio may be obligated to
make payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a futures position, the Portfolio will be
obligated to continue to pay variation margin. Initial and variation margin
payments do not constitute purchasing on margin for purposes of the Portfolio's
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
COVER -- SEGREGATED ACCOUNTS. 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
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percentage of the Portfolio's assets could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see 'Investment Objectives and
Policies' in the SAI.
INVESTMENT RESTRICTIONS
The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the SAI, except as noted, are
deemed fundamental policies, i.e., they may be changed only by the 'vote of a
majority of the outstanding voting securities' (as defined in the Investment
Company Act of 1940 (the '1940 Act')), of the Fund or 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). References below to the Portfolio's investment restrictions also
include the Fund's investment restrictions.
As a diversified investment company, 75% of the total assets of the Portfolio
are subject to the following fundamental limitations: (a) the Portfolio 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 Portfolio may not own more than
10% of the outstanding voting securities of any one issuer.
The Portfolio 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 Portfolio'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 Portfolio's total
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 Portfolio's total 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 Trust's Declaration of Trust, the
Trustees of the Trust 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 of the Company 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 of the Trust are also the Directors of the Company, which raises
certain conflicts of interest. The Company and the Trust have each adopted
written procedures reasonably designed to deal with these conflicts, should they
arise. The officers of the Company are also employees of IBT or its affiliates.
ADVISER AND FUNDS SERVICES AGENT. The Company has not retained the services of
an investment adviser with respect to the Fund 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 1345 Avenue of the Americas, 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, Houston, Los Angeles and
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San Francisco. In addition to the receipt of deposits and the making of loans
and advances, the Bank through its offices and subsidiaries (including UBSII)
engages in a wide range of banking and financial activities typical of the
world's major international banks, including fiduciary, investment advisory and
custodial services and foreign exchange in the United States, Swiss, Asian and
Euro-capital markets. The Bank is one of the world's leading asset managers and
has been active in New York City since 1946. At December 31, 1996, the Bank
(including its consolidated subsidiaries) had total assets of $326.7 billion and
equity capital and reserves of $17.1 billion. The Branch began advising mutual
funds in 1996, but has considerable experience managing portfolios with similar
investment objectives. This could be viewed as a risk of investing in this Fund.
The Advisers provide investment advice and portfolio management to the
Portfolio. Subject to the supervision of the Trustees and the Adviser, the
Sub-Adviser makes the Portfolio's day-to-day investment decisions, arranges for
the execution of portfolio transactions and generally manages the Portfolio's
investments and operations. See 'Investment Adviser and Funds Services Agent' in
the SAI.
In addition to the above-listed investment advisory services, the Branch also
provides the Fund and the Portfolio with certain related administrative
services. Subject to the supervision of the Directors and Trustees,
respectively, the Branch is responsible for: establishing performance standards
for the third-party service providers of the Fund and Portfolio and overseeing
and evaluating the performance of such entities; providing and presenting
quarterly management reports to the Directors and the Trustees; supervising the
preparation of reports for Fund and Portfolio shareholders; and establishing
voluntary expense limitations for the Fund and providing any resultant expense
reimbursement to the Fund.
The Branch provides its administrative services to the Fund pursuant to a Funds
Services Agreement between the Branch and the Company. The Branch does not
receive a fee from the Company or the Fund pursuant to the terms of the Funds
Services Agreement.
Under the Trust's Investment Advisory Agreement, the Portfolio pays the Adviser
a fee, calculated daily and payable monthly, equal, on an annual basis, to 0.85%
of the Portfolio's average daily net assets. The Branch has voluntarily agreed
to waive its fees and reimburse the Fund for any of its direct and indirect
expenses to the extent that the Fund's total operating expenses (including its
share of the Portfolio's expenses) exceed, on an annual basis, 0.95% of the
Fund's average daily net assets. The Branch may modify or discontinue this fee
waiver and expense limitation at any time in the future with 30 days' prior
notice to the Fund. See 'Expenses'.
SUB-ADVISER. The Sub-Adviser uses a sophisticated, disciplined, collaborative
process for managing all asset classes. Robin Apps is primarily responsible for
the day-to-day management and implementation of the Sub-Adviser's process for
the Portfolio. Mr. Apps has been a Senior Vice President of the Sub-Adviser
since 1990, and is responsible for researching investment opportunities in the
Far East. Mr. Apps has previously managed the investments of a Canadian mutual
fund. Mr. Apps received a bachelors degree from Birmingham University and has
twelve years of investment experience. Mr. Apps is also qualified as an actuary.
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, equal, on an annual basis, to 0.75% of the Portfolio's first
$20 million average daily net assets, plus 0.50% of the next $30 million average
daily net assets, plus 0.40% of the Portfolio's average daily 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. The Portfolio and the Fund employ Investors Fund Services
(Ireland) Limited ('IBT Ireland'), a subsidiary of Investors Bank & Trust
Company ('IBT') and IBT, respectively, as Administrators under Administration
Agreements (the 'Administration Agreements') to provide certain administrative
services. The services provided by IBT Ireland and IBT under the Administration
Agreements include certain accounting, clerical and bookkeeping services, Blue
Sky (for the Fund only), corporate secretarial services and assistance in the
preparation and filing of tax returns and reports to shareholders and the
Securities and Exchange Commission ('SEC'). IBT is a wholly-owned subsidiary of
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Investors Financial Services Corp., a publicly-held corporation and holding
company registered under the Bank Holding Company Act of 1956. For its services
under the Administration Agreement, the Fund pays IBT a fee which is calculated
daily and paid monthly, equal, on an annual basis, to 0.065% of the Fund's first
$100 million in average daily net assets and 0.025% of the next $100 million in
average daily net assets. IBT does not receive a fee from the Fund on average
daily net assets in excess of $200 million. For its services under the
Administration Agreement, the Portfolio pays IBT Ireland a fee which is
calculated daily and paid monthly, equal, on an annual basis, to 0.07% of the
Portfolio's first $100 million in average daily net assets and 0.05% of the
average daily net assets in excess of $100 million. IBT Ireland's principal
offices are located at Deloitte & Touche House, 29 Earlsfort Terrace, Dublin 2,
Ireland. IBT's principal offices are located at 200 Clarendon Street, Boston,
Massachusetts 02116.
DISTRIBUTOR. Pursuant to a Distribution Agreement, First Fund Distributors, Inc.
(the 'Distributor') serves as the distributor of Fund shares. The Distributor is
a broker-dealer registered with the SEC and is a member of the National
Association of Securities Dealers, Inc. ('NASD'). The Distributor is authorized
by the NASD to act as a mutual fund underwriter and distributor. The principal
offices of the Distributor are located at 4455 E. Camelback Road, Phoenix,
Arizona 85018. The Distributor does not receive a fee pursuant to the terms of
the Distribution Agreement, but receives compensation from IBT.
CUSTODIAN. IBT, whose principal offices are located at 200 Clarendon Street,
Boston, Massachusetts 02116, serves as the custodian for the Portfolio and the
Fund and transfer and dividend disbursing agent for the Fund. See 'Custodian' in
the SAI. The Custodian also maintains offices at 1 First Canadian Place, Suite
2800, Toronto, Ontario M5X 1C8.
EXPENSES
In addition to the fees of the Branch, IBT, and IBT Ireland, the Fund will be
responsible for other expenses, including brokerage costs and litigation and
extraordinary expenses. The Branch has agreed to waive fees and reimburse
operating expenses as necessary, if, in any fiscal year, the total expenses of
the Fund (including its share of the Portfolio's expenses excluding
extraordinary expenses) exceeds an annual rate of 0.95% of the Fund's average
daily net assets. The Branch may modify or discontinue this voluntary expense
limitation at any time in the future with 30 days' prior notice to the Fund.
The Fund and the Portfolio may allocate brokerage transactions to their
affiliates and the Advisers' 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. The Fund reserves the right to cease offering its
shares and the right to determine the purchase orders it will accept or decline
to accept for any reason, including that the order is not an exempt transaction
under the relevant state securities laws.
This Fund is intended for institutional investors. The initial investment in the
Fund is $10,000,000. The minimum subsequent investment is $500,000. These
minimum investment requirements may be waived at the Fund's sole discretion.
Although the Fund is designed for institutional investors, the Fund may, in its
discretion, permit shares to be purchased by individuals, as well as
institutions, who meet the minimum investment requirements.
No share certificates will be issued.
PURCHASE PRICE AND SETTLEMENT. 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 on any day on which the
New York Stock Exchange (the 'NYSE') is open for regular trading (a 'Fund
Business Day'). Purchase orders received and accepted by the Distributor prior
to 4:00 p.m. New York time on any Fund Business Day will be effective that day
and will be executed at the net asset value determined that day. The
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purchaser becomes a holder of record that day, provided the Fund receives
payment for those shares on the following business day ('settlement date'), and,
as a recordholder, is entitled to earn dividends. Purchase orders received after
4:00 p.m. will receive the net asset value determined on the next Fund Business
Day, and the investor becomes a holder of record on that day upon the Fund's
receipt of payment. 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 next determined on the day that the
investor's purchase is accepted. See also 'Purchase of Shares' in the Statement
of Additional Information.
To place a purchase order with the Fund, the shareholder must telephone the
Transfer Agent at (888) UBS-FUND ((888) 827-3863). A completed account
application must promptly follow any wire order for an initial purchase.
Completed account applications should be sent via overnight mail or via
facsimile, provided that the original application is promptly mailed to the
Transfer Agent. Investors should contact the Transfer Agent for further
instructions regarding account applications. Account applications are not
required for subsequent purchases; however, the investor's account number must
be clearly indicated on the wire to ensure proper credit.
All investments must be paid for by U.S. Federal Funds wire. An investor should
instruct its bank to wire federal funds as indicated below on settlement date:
Investors Bank & Trust Company
Attn: UBS Private Investor Funds, Inc.
ABA #: 011001438
DDA #: 841212416
for further credit to UBS Institutional International Equity Fund
[Investor account name(s) and account number]
The Transfer Agent will maintain the accounts for all shareholders of record.
For account balance information and shareholder services, shareholders should
contact the Transfer Agent at (888) UBS-FUND ((888) 827-3863) or in writing to
UBS Private Investor Funds, Inc. c/o Investors Bank & Trust Company, P.O. Box
1537; MFD 23; Boston, Massachusetts 02205-1537.
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. To be in proper form, the Fund must have received the shareholders
taxpayer identification number and address. Redemption requests must include the
name of the Fund, the dollar amount or number of shares to be redeemed and the
shareholder's account number. The request must be signed by a person who is
authorized to transact on behalf of the shareholder. 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.
REDEMPTION PRICE AND SETTLEMENT. Redemption orders received by the Distributor
in good form prior to 4:00 p.m. New York time on any Fund Business Day will be
effected and executed at the net asset value determined on that day. Redemption
orders received after 4:00 p.m. New York time will be effected and executed at
the net asset value determined on the next Fund Business Day. Proceeds from the
redemption will be generally deposited the next business day in immediately
available funds to the account designated by the redeeming shareholder.
The shareholder may place a redemption request by calling the Transfer Agent at
(888) UBS-FUND ((888) 827-3863) or in writing to UBS Private Investor Funds,
Inc. c/o Investors Bank & Trust Company,
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P.O. Box 1537; MFD 23; Boston, Massachusetts 02205-1537. Shareholders utilizing
the telephone redemption option must have previously designated this option on
the initial account application, or by subsequent written authorization to the
Fund. For additional information regarding the telephone redemption option, see
'Further Redemption Information' below.
MANDATORY REDEMPTION. If the value of a shareholder's holdings in the Fund falls
below $10 million 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 million or more. For example, a shareholder whose initial and
only investment is $10 million may be subject to mandatory redemption resulting
from any redemption that causes his or her investment to fall below $10 million.
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.
Shareholders may be 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 Fund, 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 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.
DIVIDENDS AND DISTRIBUTIONS
Dividends consisting of substantially all of the Fund's net investment income,
if any, are declared and paid annually. The Fund may also declare an additional
dividend of net investment income in a given year to the extent necessary to
avoid the imposition of federal excise taxes on the Fund.
Substantially all of the Fund's realized net capital gains, if any, will be
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise taxes on the Fund. Declared dividends and
distributions are payable on the payment date to shareholders of record on the
record date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional Fund shares unless the shareholder has elected, in
writing, to have them paid in cash. Dividends and distributions to be paid in
cash are credited to the account designated by the shareholder or sent by check
to the shareholder's address of record, in accordance with the shareholder's
instructions. The Fund reserves the right to discontinue, alter or limit the
automatic reinvestment privilege at any time.
NET ASSET VALUE
The Fund's net asset value per share equals the value of the Fund's total assets
(i.e., the value of its investment in the Portfolio plus its other assets) less
the amount of its liabilities, divided by the number of its outstanding shares,
rounded to the nearest cent. Expenses, including the fees payable to the service
providers of the Fund and the Portfolio, are accrued daily. Securities for which
market quotations are readily available are valued at market value. All other
securities will be valued at 'fair value.' See 'Net Asset Value' in the SAI for
information on the valuation of the Portfolio's assets and liabilities.
The Fund computes its net asset value once daily at the close of business on
Monday through Friday, except that the net asset value is not computed for the
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on any day on which the NYSE is closed, including the
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following 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 is currently authorized
to issue shares in five series: The UBS Bond Fund Series; The UBS Tax Exempt
Bond Fund Series; The UBS Institutional International Equity 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 Institutional International Equity Fund Series are
offered through this Prospectus.
Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and nonassessable when issued by the Company. The Company does not intend to
hold meetings of shareholders annually. The Directors may call meetings of
shareholders for action by shareholder vote as may be required by its Articles
of Incorporation or the 1940 Act. For further organizational information,
including certain shareholder rights, see 'Organization' in the SAI.
UBS INVESTOR PORTFOLIOS TRUST
UBS Investor Portfolios Trust, a master trust fund formed under New York law,
was organized on February 9, 1996. The Declaration of Trust permits the Trustees
to issue interests divided into one or more subtrusts or series. To date, three
series have been authorized, of which UBS International Equity Portfolio is one.
The Declaration of Trust provides that no Trustee, shareholder, officer,
employee, or agent of the Trust shall be held to any personal liability, nor
shall resort be had to such person's private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Portfolio, but that only the Trust property shall be liable.
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.
TAXES
The Fund intends to qualify as a regulated investment company (a 'RIC') under
Subchapter M of the Internal Revenue Code. 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. The Portfolio intends to qualify as a partnership for federal
income tax purposes. As such, the Portfolio generally should not be subject to
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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, realized net short-term capital gains in excess of net
long-term capital losses and net gains from certain foreign currency
transactions 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, and to the extent that, within a
period beginning 30 days before the date of such sale or disposition and ending
30 days after such date, the holder acquires (such as through dividend
reinvestment) securities that are substantially identical to the shares of the
Fund.
The Fund will generally be subject to an excise tax of 4% on the amount of any
income or capital gains, above certain permitted levels, distributed to
shareholders on a basis such that such income or gain is not taxable to
shareholders in the calendar year in which it was earned by the Fund.
Furthermore, dividends declared in October, November or December payable to
shareholders of record on a specified date in such a month and paid in the
following January will be treated as having been paid by the Fund and received
by each shareholder in December. Under this rule, therefore, shareholders may be
taxed in one year on dividends or distributions actually received in January of
the following year.
The Portfolio is subject to foreign withholding taxes with respect to income
received from sources within certain foreign countries. So long as more than 50%
of the value of the Portfolio's total assets at the close of any taxable year
consists of stock or securities of foreign corporations, the Fund may elect to
treat its proportionate share of foreign income taxes paid by the Portfolio as
paid directly by the Fund's shareholders. The Fund will make such an election
only if it deems it to be in the best interests of its shareholders and will
notify shareholders in writing each year that it makes the election of the
amount of foreign income taxes, if any, to be treated as paid by the
shareholders. If the Fund makes the election, 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, net short-term capital gains 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
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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.
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.
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.
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 periodic statements reflecting all account activity, including
dividends and any distributions whether reinvested in additional shares or paid
in cash.
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 Morgan Stanley Capital International
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 the Transfer Agent.
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========================================================================
TABLE OF CONTENTS
Investors for Whom the Fund is Designed ............................ 2
Master-Feeder Structure ............................................ 4
Investment Objective and Policies .................................. 5
Additional Investment Information and Risk Factors ................. 6
Investment Restrictions ............................................ 13
Management ......................................................... 13
Expenses ........................................................... 15
Purchase of Shares ................................................. 15
Redemption of Shares ............................................... 16
Dividends and Distributions ........................................ 17
Net Asset Value .................................................... 17
Organization ....................................................... 18
Taxes .............................................................. 18
Additional Information ............................................. 20
========================================================================
INVESTMENT ADVISER Union Bank of Switzerland
New York Branch
1345 Avenue of the Americas
New York, New York 10105
ADMINISTRATOR AND CUSTODIAN Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
DISTRIBUTOR First Fund Distributors, Inc.
4455 E. Camelback Road
Phoenix, Arizona 85018
========================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY THE FUND IN ANY JURISDICTION
IN WHICH SUCH OFFER TO SELL OR SOLICITATION MAY NOT LAWFULLY BE MADE.
[Recycled Logo]
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UBS PRIVATE INVESTOR FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 7, 1997
UBS BOND FUND
UBS U.S. EQUITY FUND
UBS INTERNATIONAL EQUITY FUND
UBS INSTITUTIONAL INTERNATIONAL EQUITY FUND
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUSES DATED MARCH 13, 1997 FOR UBS BOND FUND, UBS
U.S. EQUITY FUND AND UBS INTERNATIONAL EQUITY FUND AND WITH THE PROSPECTUS DATED
MARCH 31, 1997 FOR UBS INSTITUTIONAL INTERNATIONAL EQUITY FUND (EACH A
'PROSPECTUS' AND COLLECTIVELY, THE 'PROSPECTUSES'), AS THEY MAY BE SUPPLEMENTED
FROM TIME TO TIME. COPIES OF THE PROSPECTUSES MAY BE OBTAINED WITHOUT CHARGE
FROM INVESTORS BANK AND TRUST COMPANY AT THE ADDRESS AND PHONE NUMBER SET FORTH
HEREIN.
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
GENERAL............................................................................................ SAI-1
INVESTMENT OBJECTIVES AND POLICIES................................................................. SAI-1
INVESTMENT RESTRICTIONS............................................................................ SAI-9
DIRECTORS AND TRUSTEES............................................................................. SAI-12
INVESTMENT ADVISER AND FUNDS SERVICES AGENT........................................................ SAI-14
ADMINISTRATORS..................................................................................... SAI-16
DISTRIBUTOR........................................................................................ SAI-17
CUSTODIAN.......................................................................................... SAI-17
SHAREHOLDER SERVICES............................................................................... SAI-17
INDEPENDENT ACCOUNTANTS............................................................................ SAI-18
EXPENSES........................................................................................... SAI-18
PURCHASE OF SHARES................................................................................. SAI-19
REDEMPTION OF SHARES............................................................................... SAI-19
EXCHANGE OF SHARES................................................................................. SAI-19
DIVIDENDS AND DISTRIBUTIONS........................................................................ SAI-20
NET ASSET VALUE.................................................................................... SAI-20
PERFORMANCE DATA................................................................................... SAI-21
PORTFOLIO TRANSACTIONS............................................................................. SAI-22
ORGANIZATION....................................................................................... SAI-23
TAXES.............................................................................................. SAI-24
ADDITIONAL INFORMATION............................................................................. SAI-26
FINANCIAL STATEMENTS............................................................................... SAI-26
</TABLE>
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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 five series, four of which are described in this
Statement of Additional Information ('SAI'). These four series (each a 'Fund'
and collectively, the 'Funds') consist of: UBS Bond Fund; UBS International
Equity Fund; UBS Institutional 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 200 Clarendon Street, Boston,
Massachusetts 02116.
This SAI describes the investment objective 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, a master trust formed under New York law
(the 'Trust'), was organized on February 9, 1996, and is an open-end management
investment company. The Declaration of Trust of the 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; UBS International Equity Fund and UBS Institutional International
Equity Fund invest in UBS International Equity Portfolio ('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, the Bond Fund attempts to conserve the value of
its investments to the extent consistent with its objective. The Bond Fund
attempts to achieve its objective by investing all of its investable assets in
UBS Bond Portfolio (the 'Bond Portfolio'), a series of the Trust having the same
investment objective as the Bond Fund. The Bond Portfolio attempts to achieve
its investment objective by investing primarily in the corporate and government
debt obligations and related securities described in the Prospectus and this
SAI.
UBS U.S. EQUITY FUND (the 'U.S. Equity Fund') is designed for investors
seeking long-term capital appreciation and the potential for a high level of
current income with lower investment risk and volatility than is normally
available from common stock funds. The U.S. Equity Fund attempts to achieve its
investment objective by investing all of its investable assets in UBS U.S.
Equity Portfolio (the 'U.S. Equity Portfolio'), a series of the Trust having the
same investment objective as the U.S. Equity Fund.
Under normal circumstances, at least 80% of the U.S. Equity Portfolio's
assets will be invested in income-producing domestic equity securities,
including dividend-paying common stocks and securities that are convertible into
common stocks. The U.S. Equity Portfolio's primary investments are the common
stocks of established, high-quality U.S. corporations.
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
SAI-1
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<PAGE>
temporarily, when extraordinary circumstances prevailing at the same time in a
significant number of developed foreign countries render investments in such
countries inadvisable.
UBS INTERNATIONAL EQUITY FUND (the 'International Equity Fund') is designed
for investors who may not be prepared to meet the minimum investment
requirements established by the UBS Institutional International Equity Fund but
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 the International Equity Portfolio, a series of the Trust having the
same investment objective as the International Equity Fund.
UBS INSTITUTIONAL INTERNATIONAL EQUITY FUND (the 'Institutional
International Equity Fund') is designed for institutional and certain other
investors who want to participate in the risks and returns associated with
investing in equity securities issued by foreign corporations. The Institutional
International Equity Fund attempts to achieve its investment objective by
investing all its investable assets in the International Equity Portfolio, a
series of the Trust having the same investment objective as the Institutional
International Equity Fund.
MONEY MARKET INSTRUMENTS
As discussed in the Prospectus, each Fund may invest in money market
instruments to the extent consistent with its investment objective and policies.
A description of the various types of money market instruments that may be
purchased appears below. See 'Quality and Diversification Requirements'.
U.S. TREASURY SECURITIES. Each Fund may invest in direct obligations of the
U.S. Treasury, including Treasury Bills, Notes and Bonds, all of which are
backed as to principal and interest payments by the full faith and credit of the
United States.
ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. Each Fund may invest in obligations
issued or guaranteed by U.S. Government agencies or instrumentalities. These
obligations may or may not be backed by the 'full faith and credit' of the
United States. In the case of securities not backed by the full faith and credit
of the United States, each Fund must look principally to the federal agency
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitments. Securities in which each Fund
may invest that are not backed by the full faith and credit of the United States
include, but are not limited to, obligations of the Tennessee Valley Authority,
the Federal Home Loan Mortgage Corporation and the U.S. Postal Service, each of
which has the right to borrow from the U.S. Treasury to meet its obligations,
and the obligations of the Federal Farm Credit System and the Federal Home Loan
Banks, both of whose obligations may be satisfied only by the individual credits
of each issuing agency. Securities that are backed by the full faith and credit
of the United States include obligations of the Government National Mortgage
Association, the Farmers Home Administration and the Export-Import Bank.
BANK OBLIGATIONS. Each Fund, unless otherwise noted in the Prospectus or
below, may invest in negotiable certificates of deposit, time deposits and
bankers' acceptances of (i) banks, savings and loan associations and savings
banks that have more than $2 billion in total assets (the 'Asset Limitation')
and are organized under the laws of the United States or any state, (ii) foreign
branches of these banks or of foreign banks of equivalent size (Euros) and (iii)
U.S. branches of foreign banks of equivalent size (Yankees). The Asset
Limitation is not applicable to either the Institutional International Equity
Fund or the International Equity Fund (collectively, the 'International Equity
Funds'). 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 Funds), 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
SAI-2
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<PAGE>
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 in the case of the International Equity Funds, UBS International Investment
London Limited ('UBSII' or the 'Sub-Adviser') acting as agent, for no additional
fee, in its capacity as investment 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 Adviser*, or its affiliates,
pursuant to arrangements with such accounts. Interest and principal payments are
credited to such accounts. The Adviser*, acting as a fiduciary on behalf of its
clients, has the right to increase or decrease the amount provided to the
borrower under an obligation. The borrower has the right to pay without penalty
all or any part of the principal amount then outstanding on an obligation
together with interest to the date of payment. Because these obligations
typically provide that the interest rate is tied to the Federal Reserve
commercial paper composite rate, the rate on Master Demand obligations is
subject to change. Repayment of a Master Demand obligation to participating
accounts depends on the ability of the borrower to pay the accrued interest and
principal of the obligation on demand, which is continuously monitored by the
Adviser*. Because Master Demand obligations typically are not rated by credit
rating agencies, the Portfolios 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 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, with the exception of the Bond 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
- ------------
* 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.
SAI-3
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<PAGE>
Requirements'. For information on short-term investments in these securities,
see 'Money Market Instruments'.
ASSET-BACKED SECURITIES. Asset-backed securities directly or indirectly
represent a participation interest in, or are secured by or payable from, a
stream of payments generated by particular assets such as mortgages, motor
vehicles or credit card receivables. Payments of principal and interest may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit issued by a financial institution unaffiliated with the entities issuing
the securities. The asset-backed securities in which a Portfolio may invest are
subject to the Portfolio's overall credit requirements. However, asset-backed
securities, in general, are subject to certain risks. These risks include the
prepayment of the debtor's obligation and the creditor's limited interests in
applicable collateral. For example, credit card debt receivables are generally
unsecured and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, many of which give such debtors the right to
set off certain amounts owed on credit card debt thereby reducing the balance
due. Additionally, if the letter of credit is exhausted, holders of asset-backed
securities may also experience delays in payments or losses if the full amounts
due on underlying sales contracts are not realized. Because asset-backed
securities are relatively new, the market experience in these securities is
limited and the market's ability to sustain liquidity through all phases of the
market cycle has not been tested.
EQUITY INVESTMENTS
As discussed in the Prospectus, the U.S. Equity and International Equity
Portfolios invest primarily in equity securities consisting of common stocks and
other securities with equity characteristics. The securities in which these
Portfolios invest include those listed on domestic and foreign securities
exchanges or traded on over-the-counter markets as well as certain restricted or
unlisted securities. A discussion of the various types of equity investments
that may be purchased by these Portfolios appears in the Prospectus and below.
See 'Quality and Diversification Requirements'.
EQUITY SECURITIES. The common stocks in which these Portfolios may invest
include the common stocks of any class or series of corporations or any similar
equity interests such as trust or partnership interests. The Portfolios' equity
investments include preferred stocks, warrants, rights and convertible
securities. These investments may or may not pay dividends and may or may not
carry voting rights. Common stock occupies the most junior position in a
company's capital structure.
The convertible securities in which the Portfolios may invest include debt
securities or preferred stocks that may be converted into common stock or that
carry the right to purchase common stock. Convertible securities entitle the
holder to exchange the securities for a specified number of shares of common
stock, usually of the same company, at specified prices within a certain period
of time.
The terms of a convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holders' claims on assets and earnings are subordinated to the claims of other
creditors, but are senior to the claims of preferred and common stockholders. In
the case of convertible preferred stock, the holders' claims on assets and
earnings are subordinated to the claims of all creditors, but are senior to the
claims of common stockholders.
FOREIGN INVESTMENTS
The International Equity Portfolio makes substantial investments in
companies based in foreign countries. The Bond Portfolio may also invest in
certain foreign securities. The Bond Portfolio does not expect to invest more
than 25% of its total assets at the time of purchase in securities of foreign
issuers. Foreign investments may be made directly in the securities of foreign
issuers or in the form of American Depository Receipts ('ADRs') Global
Depository Receipts ('GDRs') or European Depository 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
SAI-4
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<PAGE>
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).
INVESTMENT COMPANY SECURITIES. Securities of other investment companies may
be acquired by each Fund to the extent that such purchases are consistent with
that entity's investment objectives and restrictions and are permitted under the
Investment Company Act of 1940, as amended (the '1940 Act'). The 1940 Act
requires that, as determined immediately after a purchase is made, (i) not more
than 5% of the value of the Fund's total assets will be invested in the
securities of any one investment company, (ii) not more than 10% of the value of
the Fund's total assets will be invested in securities of investment companies
as a group and (iii) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Fund, provided, however, that a Fund may
invest all of its investable assets in an open-end investment company having the
same investment objective as that Fund. As a shareholder of another investment
company, a Fund would bear, along with other shareholders, its pro rata portion
of the other investment company's expenses, including advisory fees. These
expenses would be in addition to the expenses that such a Fund would bear in
connection with its own operations.
REVERSE REPURCHASE AGREEMENTS. Each Portfolio may enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
security and agrees to repurchase the same security at a mutually agreed upon
date and price. For purposes of the 1940 Act, reverse repurchase agreements are
considered borrowings by the Portfolio and, therefore, a form of leverage. The
Portfolios will invest the proceeds of borrowings under reverse repurchase
agreements. In addition, the Portfolios will enter into a reverse repurchase
agreement only when the interest income to be earned from the investment of the
proceeds is greater than the interest expense of the repurchase agreement. The
Portfolios will not invest the proceeds of a reverse repurchase agreement for a
period that exceeds the term of the reverse repurchase agreement. The
limitations on each Portfolio's use of reverse repurchase agreements are
discussed under 'Investment Restrictions' below. Each Portfolio will establish
and maintain with the Custodian a separate account with a portfolio of
securities in an amount at least equal to its obligations under its reverse
repurchase agreements.
SAI-5
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<PAGE>
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.
SECURITIES LENDING. Each Portfolio may lend its securities if such loans
are secured continuously by cash or equivalent collateral or by a letter of
credit in favor of the Portfolio at least equal at all times to 100% of the
market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolios in the normal
settlement time, generally three business days after notice or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities that
occurs during the term of the loan inures to the Portfolio and its respective
investors. The Portfolios may pay reasonable finder's and custodial fees in
connection with a loan. In addition, the Portfolios will consider all facts and
circumstances including the creditworthiness of the borrowing financial
institution, and the Portfolios will not make any loans in excess of one year.
The Portfolios will not lend their securities to any officer, Trustee, Director,
employee, or affiliate or placement agent of the Company, the Trust, or to the
Adviser, Sub-Adviser, Administrator or Distributor or any affiliate thereof,
unless otherwise permitted by applicable law.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. The Portfolios may
invest in privately placed, restricted, Rule 144A or other unregistered
securities as described in the Prospectus.
As to illiquid investments, a Portfolio is subject to a risk that it might
not be able to sell such securities at a price that the Portfolio deems
respective of their value. Where an illiquid security must be registered under
the Securities Act of 1933, as amended (the 'Securities Act'), before it may be
resold, the Portfolio may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time the Portfolio
decides to sell and the time the Portfolio is permitted to sell under an
effective registration statement. If, during such a period, adverse market
conditions develop, the Portfolio might obtain a less favorable price than that
which prevailed when it decided to sell. When the Portfolios value these
securities, they will take into account the illiquid nature of these
instruments.
QUALITY AND DIVERSIFICATION REQUIREMENTS
Each Portfolio intends to meet the diversification requirements of the 1940
Act. To meet these requirements, 75% of the Portfolio's assets are subject to
the following fundamental limitations: (1) the Portfolio may not invest more
than 5% of its total assets in the securities of any one issuer, except
obligations of the U.S. Government, its agencies and instrumentalities and (2)
the Portfolio may not own more than 10% of the outstanding voting securities of
any one issuer. As for the 25% of a Portfolio's assets not subject to the
limitation described above, there is no limitation on investment of these assets
under the 1940 Act, so that all of such assets may be invested in securities of
any one issuer, subject to the limitation of any applicable state securities
laws. Investments not subject to the limitations described above could involve
an increased risk to a Portfolio should an issuer, or a state or its related
entities, be unable to make interest or principal payments or should the market
value of such securities decline. See 'Investment Restrictions'.
BOND PORTFOLIO. The Bond Portfolio invests principally in a diversified
portfolio of 'high grade' and 'investment grade' securities. Investment grade
debt is rated, on the date of investment, within the
SAI-6
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four highest ratings of Moody's Investors Service, Inc. ('Moody's'), currently
Aaa, Aa, A and Baa, or of Standard & Poor's Ratings Services ('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 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 Securities and Exchange Commission (the 'SEC') has taken
the position that, in general, purchased OTC options and the underlying
securities used to cover written OTC options are illiquid securities. However, a
Portfolio may treat as liquid the underlying securities used to cover written
OTC options, provided it has arrangements with certain qualified dealers who
agree that the Portfolio may repurchase any option it writes for a maximum price
to be calculated by a predetermined formula. In these cases, the OTC option
itself would only be considered illiquid to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Portfolios are
permitted to enter into futures and options transactions and may purchase or
sell futures contracts and purchase put and call options, including put and call
options on futures contracts. Futures contracts obligate the buyer to take and
the seller to deliver at a future date a specified quantity of a financial
instrument or an amount of cash based on the value of a securities index or
financial instrument. Currently, futures contracts are
- ------------
* 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.
SAI-7
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<PAGE>
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 futures contracts and
on any options on futures contracts sold by a Portfolio are paid by the
Portfolio into a segregated account, in the name of the Futures Commission
Merchant, as required by the 1940 Act and the SEC's interpretations thereunder.
To the extent a Portfolio may trade in futures and options therein involving
foreign securities, such transactions may be effected according to local
regulations and business customs.
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 write a call option at one strike
price and buy 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
SAI-8
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<PAGE>
held to cover its options or futures positions could also be impaired. See
'Exchange Traded and Over-the-Counter Options' above for a discussion of the
liquidity of options not traded on an exchange.
POSITION LIMITS. Futures exchanges can limit the number of futures and
options on futures contracts that can be held or controlled by an entity. If an
adequate exemption cannot be obtained, a Portfolio or the Adviser may be
required to reduce the size of its futures and options positions or may not be
able to trade a certain futures or options contract in order to avoid exceeding
such limits.
ASSET COVERAGE FOR FUTURES CONTRACTS AND OPTIONS POSITIONS. The Portfolios
intend to comply with Section 4.5 of the regulations under the Commodity
Exchange Act, which limits the extent to 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 or the 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 securities present at a shareholders' meeting
if the holders of more than 50% of the outstanding voting securities are present
or represented by proxy or (b) more than 50% of the outstanding voting
securities. Except as described below, 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. However, subject to applicable statutory and
regulatory requirements, a Fund would not request a vote of its shareholders
with respect to (a) any proposal relating to its corresponding Portfolio, which
proposal, if made with respect to the Fund, would not require the vote of the
shareholders of the Fund, or (b) any proposal with respect to the Portfolio that
is identical in all material respects to a proposal that has previously been
approved by shareholders of the Fund. Any proposal submitted to holders in the
Portfolio, and that is not required to be voted on by shareholders of the Fund,
would nevertheless be voted on by the Trustees of the Fund.
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. As a matter of
fundamental policy, each Fund and Portfolio 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), 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 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
SAI-9
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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 also 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;
6. Purchase or sell real estate, commodities or commodities contracts or
options thereon (except for its interest in hedging and certain other
activities as described under 'Investment Objective(s) and Policies'),
interests in oil, gas, or mineral exploration or development programs
(including limited partnerships). In addition, neither the U.S. Equity
Portfolio nor the International Equity Portfolio may purchase or sell real
estate mortgage loans. The Bond Portfolio, however, may purchase debt
obligations secured by interests in real estate or issued by companies
that invest in real estate or interests therein including real estate
investment trusts ('REITs'); and the International Equity Portfolio and
the U.S. Equity Portfolio may purchase the equity securities or commercial
paper issued by companies that invest in real estate or interests therein,
including REITs;
7. Issue any senior security, except as appropriate to evidence indebtedness
that it is permitted to incur pursuant to Investment Restriction No. 1 and
except that it may enter into reverse repurchase agreements, provided that
the aggregate of senior securities, including reverse repurchase
agreements, shall not exceed one-third of the market value of its total
assets (including the amounts borrowed), less liabilities (excluding
obligations created by such borrowings and reverse repurchase agreements).
Hedging activities as described in 'Investment Objective(s) and Policies'
shall not be considered senior securities for purposes hereof; or
8. Act as an underwriter of securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS -- ALL FUNDS. The investment
restrictions described below are non-fundamental policies of each Fund and its
corresponding Portfolio, and may be changed by their respective Directors and
Trustees without shareholder approval. These non-fundamental investment policies
provide that neither a Fund nor a Portfolio may:
1. 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;
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2. 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;
3. 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;
4. 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.);
5. invest for the purpose of exercising control or management;
6. 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;
7. 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 Securities Act;
8. invest more than 15% of the Fund's net assets (taken at the greater of
cost or market value) in 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;
9. 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 (a) Rule 144A securities that have been determined
to be liquid by the Board of Trustees; and (b) commercial paper that is
sold under Section 4(2) of the Securities Act which: (i) is not traded
flat or in default as to interest or principal; and (ii) is rated in one
of the two highest categories by at least two nationally recognized
statistical rating organizations and the Fund's Board of Directors has
determined the commercial paper to be liquid; or (iii) is rated in one of
the two highest categories by one nationally recognized statistical
rating agency and the Fund's Board of Directors has determined that the
commercial paper is of equivalent quality and is liquid;
10. 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
SAI-11
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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;
11. 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;
12. 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);
13. buy and sell puts and calls on securities, stock index futures or options
on stock index futures, or financial futures or options on financial
futures unless: (a) the options or futures are offered through the
facilities of a national securities association or are listed on a
national securities or commodities exchange, except for put and call
options issued by non-U.S. entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate premiums paid on all such
options which are held at any time do not exceed 20% of the Fund's total
net assets; (c) the aggregate margin deposits required on all such
futures or options thereon held at any time do not exceed 5% of the
Fund's total assets; and (d) such activities are permitted by Regulation
4.5 under the Commodity Exchange Act; and
14. distribute securities that are not readily marketable to residents of the
State of Arizona when effecting redemptions in kind.
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 same persons who are
the Company's Directors are also the Trust's Trustees. The Company's Board is
responsible for the overall management of the Fund, including the general
supervision and review of its investment activities. The Company's 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 the Trust with substantially the same
responsibilities. 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 March 7, 1997, 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
Trustees or Directors or officers receives compensation from the Company or 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.
SAI-12
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<TABLE>
<CAPTION>
POSITION
WITH THE
NAME, ADDRESS AND AGE COMPANY PRINCIPAL OCCUPATIONS DURING THE LAST FIVE YEARS
- -------------------------------- ------------ -----------------------------------------------------------
<S> <C> <C>
Dr. HansPeter Lochmeier* Chairman of UBS Investor Portfolios Trust (mutual fund), Trustee
1345 Avenue of the Americas the Board (February 1996-Present); Union Bank of Switzerland
New York, NY 10105 (Investment Services Department), Division Head.
Age: 55
Timothy M. Spicer, CPA Director UBS Investor Portfolios Trust, Trustee (February 1996-
1345 Avenue of the Americas Present); San Francisco Sentry Investment Group (a west
New York, NY 10105 coast investment adviser and venture capital firm),
Age: 47 President and Chief Operating Officer (1995-Present);
Ensemble Information Systems (software and electronic
information provider), Co-Founder, Chairman of the Board
and Chief Executive Officer (1990-Present); Amanda Venture
Investors (AVI) (a San Francisco based venture capital
firm), Managing Partner (1995-Present); CoreLink Resources
(provides mutual fund related services to small and medium
sized banks), Director (1993-1996); PM Squared (health care
information service company), Director (1996-Present);
Arcxel Technologies (fibre-channel company), Director
(1996-Present); Smith & Hawken (mail order supplier of
gardening tools and clothing), Director and Chief Financial
Officer (1990-1992); Concord Holding Corporation (provides
distribution and administrative services to mutual funds),
Director (1989-1995); active in civic/charitable
organizations in the San Francisco Bay area, including
Pacific Swimming, Big Brothers/Big Sisters and United Way.
Peter Lawson-Johnston Director UBS Investor Portfolios Trust, Trustee (February 1996-
1345 Avenue of the Americas Present); Zemex Corporation (mining), Chairman of the Board
New York, NY 10105 and Director (1990-Present); The McGraw-Hill Companies,
Age: 70 Inc. (publishing), Director (1990-1997); National Review,
Inc. (publishing), Director (1990-Present); Guggenheim
Brothers (real estate -- venture capital partnership),
Senior Partner (1990-Present); Elgerbar Corporation
(holding company), President and Director (1990-Present);
The Solomon R. Guggenheim Foundation (operates the
Guggenheim Museums in New York and the Peggy Guggenheim
Collection in Venice, Italy), President (1990-1995),
Chairman and Trustee (1995-Present); The Harry Frank
Guggenheim Foundation (charitable organization), Chairman
of the Board and Director (1990-Present).
Paul J. Jasinski President Managing Director, Investors Bank & Trust Company,
200 Clarendon Street 1990-Present.
Boston, Massachusetts 02116
Age: 50
Nicholas G. Chunias Treasurer Director, Mutual Fund Administration -- Reporting and
200 Clarenden Street and Chief Compliance, Investors Bank & Trust Company, 1996-Present;
Boston, Massachusetts 02116 Financial Director, Fund Accounting, Investors Bank & Trust Company,
Age: 32 Officer 1993-1996; Account Supervisor, Coopers & Lybrand, LLP,
1992-1993.
Susan C. Mosher Secretary Director, Mutual Fund Administration -- Legal and
200 Clarenden Street Regulatory, Investors Bank & Trust Company, 1995-Present;
Boston, Massachusetts 02116 Associate Counsel, 440 Financial Group of Worcester, Inc.,
Age: 42 1993-1995; Associate and Partner, Gallagher, Callahan &
Gartrell, P.A., 1986-1992.
</TABLE>
- ------------------------------------
* 'Interested Person' within the meaning of the 1940 Act.
SAI-13
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COMPENSATION TABLE*
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED FROM COMPANY AND
COMPENSATION ACCRUED AS PART OF ANNUAL BENEFITS FUND COMPLEX**
NAME OF PERSON, POSITION FROM COMPANY FUND EXPENSES UPON RETIREMENT PAID TO DIRECTORS
- ---------------------------------- ------------ ------------------- --------------- ------------------
<S> <C> <C> <C> <C>
Dr. Lochmeier 0 0 0 0
Director
Mr. Spicer $9,000 0 0 $ 21,000
Director
Mr. Lawson-Johnston $9,000 0 0 $ 21,000
Director
</TABLE>
- ------------------------------------
*The Company commenced operations on April 2, 1996, and the noted amounts
are therefore for the period from April 2, 1996 through December 31, 1996. The
Directors are also reimbursed for all reasonable expenses incurred during the
execution of their duties.
**The Fund Complex consists of the Company and UBS Investor Portfolios
Trust.
As of March 7, 1997, the following owned of record or, to the knowledge of
management, beneficially owned more than 5% of the outstanding shares of:
UBS U.S. Equity Fund -- Union Bank of Switzerland, 1345 Avenue of the
Americas, New York, NY 10105 (61.6%); C.E. Exley and S.Y. Exley Tr., u/a/d
8/2/93 C.E. Exley Trust, 2350 Kettering Tower, Dayton, OH 45423 (13.1%).
UBS Bond Fund -- Union Bank of Switzerland, 1345 Avenue of the
Americas, New York, NY 10105 (84.3%); Greenco, 213 Market Street,
Harrisburg, PA 17101 (6.9%).
UBS International Equity Fund -- Union Bank of Switzerland, 1345
Avenue of the Americas, New York, NY 10105 (41.3%); Archstone Foundation,
401 E. Ocean Blvd., Suite 206, Long Beach, CA 90802 (44.0%).
The Company has no knowledge of any other owners of record of 5% or more of
the outstanding shares of a Fund. Shareholders owning 25% or more of the
outstanding shares of a Fund may take actions without the approval of other
investors in the Fund.
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 1345 Avenue of the Americas, 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 subsidiary of UBS Asset
Management London Limited, which is a direct subsidiary of UBS UK Holding
Limited, which is in turn a wholly-owned direct subsidiary of the Bank. UBSII
was organized under the laws of the United Kingdom on June 19, 1986. (The
Adviser and the Sub-Adviser are collectively referred to as the 'Advisers'.)
Subject to the supervision of the Trustees, the Adviser, and in the case of the
International Equity Portfolio, UBSII, makes the Portfolios' day-to-day
investment decisions, arranges for the execution of portfolio transactions and
generally manages each Portfolio's investments and provides certain
administrative services.
The investment advisory services provided by the Advisers to the Portfolios
are not exclusive under the terms of the advisory agreements. The Advisers are
free to and do render similar investment advisory services to others. The
Advisers serve as investment advisers to personal investors and act as
fiduciaries for trusts, estates and employee benefit plans. Certain of the
assets of trusts and estates under management are invested in common trust funds
for which the Advisers serve as trustees. The accounts managed or advised by the
Advisers have varying investment objectives and the Advisers invest assets of
such accounts in investments substantially similar to, or the same as, those
which are expected to constitute the
SAI-14
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<PAGE>
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, Houston, Los Angeles and San Francisco. In
addition to the receipt of deposits and the making of loans and advances, the
Bank, through its offices and subsidiaries (including UBSII) engages in a wide
range of banking and financial activities typical of the world's major
international banks, including fiduciary, investment advisory and custodial
services and foreign exchange in the United States, Swiss, Asian and
Euro-capital markets. The Bank is one of the world's leading asset managers and
has been active in New York City since 1946. At December 31, 1996, the Bank
(including its consolidated subsidiaries) had total assets of $326.7 billion and
equity capital and reserves of $17.1 billion.
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 FUNDS. 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.
The prospectus for each of the Funds contains a description of fees payable
to the Adviser. For the period April 2, 1996 (commencement of operations)
through December 31, 1996, the Bond Portfolio, U.S. Equity Portfolio and
International Equity Portfolio paid investment advisory fees equal to $0, $0 and
$13,839, respectively.
The Branch has voluntarily agreed to waive its fees and reimburse each Fund
and its corresponding Portfolio for their respective operating expenses to the
extent that the operating expenses (excluding extraordinary items) of the Bond
Fund, U.S. Equity Fund, Institutional International Equity Fund and
International Equity Fund exceed, on an annual basis, 0.80%, 0.90%, 0.95% and
1.40%, respectively, of such Fund's average daily net assets. The Branch may
modify or discontinue this expense limitation at any time in the future with 30
days' prior notice to the affected Fund. See 'Expenses'. For the period April 2,
1996 (commencement of operations) through December 31, 1996, UBS reimbursed the
Bond Fund, U.S. Equity Fund and International Equity Fund for expenses totaling
$80,050, $93,511 and $52,899, respectively.
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, equal on an annual basis to 0.75% of the International
Equity Portfolio's first $20 million of average net assets, 0.50% of the next
$30 million of average net assets, and 0.40% of average net assets in excess of
$50 million. The Adviser is solely responsible for paying this fee to the Sub-
Adviser. For the period April 2, 1996 (commencement of operations) through
December 31, 1996, the Adviser paid $154,659 to the Sub-Adviser on behalf of the
International Equity Portfolio.
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
SAI-15
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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 of
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 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. The Portfolio and the Company employ Investors Fund
Services (Ireland) Limited ('IBT Ireland'), a subsidiary of Investors Bank &
Trust Company ('IBT') and IBT, respectively, as Administrators under
Administration Agreements (the 'Administration Agreements') to provide certain
administrative services. The services provided by IBT Ireland and IBT under the
Administration Agreements include certain accounting, clerical and bookkeeping
services, Blue Sky (for the Fund only), corporate secretarial services and
assistance in the preparation and filing of tax returns and reports to
shareholders and the Securities and Exchange Commission ('SEC'). IBT is a
wholly-owned subsidiary of Investors Financial Services Corp., a publicly-held
corporation and holding company registered under the Bank Holding Company Act of
1956. For its services under the Administration Agreement, each Fund
SAI-16
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<PAGE>
pays IBT a fee which is calculated daily and paid monthly, equal, on an annual
basis, to 0.065% of the Fund's first $100 million in average daily net assets
and 0.025% of the next $100 million in average daily net assets. IBT does not
receive a fee from the Fund on average daily net assets in excess of $200
million. For its services under the Administration Agreement, the Portfolio pays
IBT Ireland a fee which is calculated daily and paid monthly, equal, on an
annual basis, to 0.07% of the Portfolio's first $100 million in average daily
net assets and 0.05% of the assets in excess of $100 million. IBT Ireland's
principal offices are located at Deloitte & Touche House, 29 Earlsfort Terrace,
Dublin 2, Ireland. IBT's principal offices are located at 200 Clarendon Street,
Boston, Massachusetts 02116.
During the period April 2, 1996 (commencement of operations) through March
13, 1997, Signature Broker-Dealer Services, Inc. ('Signature') and Signature
Financial Group (Grand Cayman) Ltd. served as Administrators to the Portfolio
and Company, respectively. During the period April 2, 1996 (commencement of
operations) through December 31, 1996, the Bond Portfolio, U.S. Equity Portfolio
and International Equity Portfolio paid Signature administrative fees of
$14,594, $7,036 and $11,712, respectively, while the Bond Fund, U.S. Equity Fund
and International Equity Fund paid Signature administrative fees of $1,526,
$2,593 and $4,131, respectively.
The Administration 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
DISTRIBUTOR. Pursuant to a Distribution Agreement, First Fund Distributors,
Inc. (the 'Distributor') serves as the distributor of Fund shares. The
Distributor is a broker-dealer registered with the SEC and is a member of the
National Association of Securities Dealers, Inc. ('NASD'). The Distributor is
authorized by the NASD to act as a mutual fund underwriter and distributor. The
principal offices of the Distributor are located at 4455 E. Camelback Road,
Phoenix, Arizona 85018. The Distributor does not receive a fee pursuant to the
terms of the Distribution Agreement, but receives compensation from IBT.
CUSTODIAN
Investors Bank & Trust Company ('IBT' or the 'Custodian'), whose principal
offices are located at 200 Clarendon Street, Boston, Massachusetts 02116, serves
as the custodian and transfer and dividend disbursing agent for the Funds and
the Portfolios. Pursuant to the Custodian Agreements with the Trust, on behalf
of each Portfolio, and the Company, on behalf of each Fund, the Custodian is
responsible for maintaining the books and records of portfolio transactions and
holding portfolio securities and cash. As transfer agent and dividend disbursing
agent, the Custodian is responsible for maintaining account records detailing
the ownership of Portfolio and Fund interests and for crediting income, capital
gains and other changes in share ownership to investors' accounts. The Custodian
will perform its duties as the Portfolios' transfer agent and dividend
disbursing agent from its offices located at 1 First Canadian Place, Suite 2800,
Toronto, Ontario M5X1C8, while its duties as the Funds' transfer agent and
dividend disbursing agent will be performed at its offices located at 89 South
Street, Boston, Massachusetts 02111. Each Fund and Portfolio is responsible for
its proportionate share of the Company's and Trust's, as applicable, transfer
agency, custodial and dividend disbursement fees.
SHAREHOLDER SERVICES
The Company (excluding UBS Institutional International Equity Fund) has
entered into a shareholder servicing agreement with the Branch, and may enter
into additional shareholder servicing agreements with one or more financial
institutions (together with the Branch, 'Eligible Institutions')
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such as a federal or state-chartered bank, trust company, savings and loan
association or savings bank, or broker-dealer. Pursuant to each shareholder
servicing agreement, an Eligible Institution, as agent for its customers who are
purchasing shares of the Fund, will perform shareholder services for these
investors, which include performing shareholder account administrative and
servicing functions, such as answering inquiries regarding account status and
history, the manner in which purchases and redemptions of shares may be made and
certain other matters pertaining to each Fund, assisting customers in
designating and changing dividend options, account designations and addresses,
providing necessary personnel and facilities to coordinate the establishment and
maintenance of shareholder accounts and records with the Funds' 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 each Eligible Institution a fee equal on an annual basis to 0.25%
of the average daily net assets of such Fund represented by shares of the Fund
owned during the period for which payment is being made by customers of the
Eligible Institution. For the period April 2, 1996 (commencement of operations)
through December 31, 1996, the shareholder service fee for the Bond Fund, U.S.
Equity Fund and International Equity Fund amounted to $7,632, $12,965 and
$20,658, respectively, all of which were waived.
As discussed under 'Investment Adviser and Shareholder Servicing Agent',
the Glass-Steagall Act and other applicable laws and regulations limit the
activities of bank holding companies and certain of their subsidiaries in
connection with registered open-end investment companies. The activities of the
Branch under the Shareholder Servicing Agreement, the Investment Advisory
Agreement and the Funds Services Agreement and UBSII under the Sub-Advisory
Agreement, may raise issues under these laws. However, the Branch and UBSII
believe that they may properly perform these services and the other activities
described herein and in the Prospectuses without violating the Glass-Steagall
Act or other applicable banking laws or regulations.
If the Branch or UBSII were prohibited from providing their respective
services under the above noted agreements, the Directors and Trustees, as
applicable, would seek an alternative provider of such services. In such an
event, changes in the operation of the Funds or the Portfolios might occur and
shareholders might not receive the same level of service previously provided by
the Branch and UBSII.
INDEPENDENT ACCOUNTANTS
The Company's and the Trust's independent accounting firm is Price
Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036. The U.S.
firm of Price Waterhouse is a Registered Limited Liability Partnership (LLP)
under the laws of the State of Delaware and, from August 1, 1994, will continue
its practice under the name Price Waterhouse LLP. Price Waterhouse LLP will
conduct an annual audit of the financial statements of each Fund and Portfolio,
assist in the review and filing of the federal and state income tax returns of
the Funds and Portfolios and consult with the Funds and Portfolios as to matters
of accounting and federal and state income taxation.
EXPENSES
Each Fund and Portfolio is responsible for the fees and expenses
attributable to it. Each Fund will bear its proportionate share of the expenses
in its corresponding Portfolio.
The Branch has voluntarily agreed to limit the total operating expenses of
each Fund (including each Fund's proportionate share of the expenses incurred by
its corresponding Portfolio), excluding ordinary expenses, as set forth in each
Fund's Prospectus under the caption 'Expenses'. The Branch may modify or
discontinue this fee waiver and expense limitation at any time in the future
with 30 days' prior notice to the affected Fund. For additional information
regarding waivers or expense subsidies, see 'Management' in the Prospectus.
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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.
For each Fund except the Institutional International Equity Fund, 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. These minimum investment requirements may be waived at the
Fund's discretion. The Institutional International Equity Fund has not adopted
special minimum investment requirements for retirement plans.
In addition, the minimum investment requirements may be met by aggregating
the investments of related shareholders. A 'related shareholder' is limited to
an immediate family member, including mother, father, spouse, child, brother,
sister and grandparent and includes step and adoptive relationships.
Each Fund may, at its own option, accept securities in payment for shares.
The securities tendered are valued by the methods described in 'Net Asset Value'
as of the day the Fund shares are purchased. This is a taxable transaction to
the investor. Securities may be accepted in payment for shares only if they are,
in the judgment of the Advisers, appropriate investments for the Portfolio
corresponding to that Fund. In addition, securities accepted in payment for
shares must: (i) meet the investment objective and policies of the relevant
Portfolio; (ii) be acquired by the Fund for investment and not for resale (other
than for resale to the corresponding Portfolio); (iii) be liquid securities that
are not restricted as to transfer either by law or by market liquidity; and (iv)
have a value that is readily ascertainable, as evidenced by a listing on a stock
exchange, over-the-counter market or by readily available market quotations from
a dealer in such securities. Each Fund reserves the right to accept or reject at
its own option any and all securities offered in payment for its shares.
REDEMPTION OF SHARES
Investors may redeem shares of each Fund as described in the Prospectus
under 'Redemption of Shares'.
If the Directors and Trustees determine that it would be detrimental to the
best interest of the remaining shareholders of a Fund or Portfolio to effect
redemptions wholly or partly in cash, payment of the redemption price may be
made in whole or in part by an in-kind distribution of securities from the
Portfolio, in lieu of cash, in conformity with the applicable rules of the SEC.
If shares are redeemed in-kind, the redeeming shareholder might incur
transaction costs in converting the securities into cash. The methods of valuing
portfolio securities distributed to a shareholder are described under 'Net Asset
Value', and such valuations will be made as of the same time the redemption
price is determined.
FURTHER REDEMPTION INFORMATION. The right of redemption may be suspended or
the date of payment postponed, in the case of the Company and the Trust: (i)
during periods when the New York Stock Exchange (the 'NYSE') is closed for other
than weekends and holidays or when trading on the NYSE is suspended or
restricted; (ii) during periods in which an emergency exists, as determined by
the SEC, which causes disposal by a Portfolio of, or evaluation of the net asset
value of, its securities to be unreasonable or impracticable; or (iii) for such
other periods as the 1940 Act or the SEC may permit.
EXCHANGE OF SHARES
An investor may exchange Fund shares for shares of any other series of the
Company as described under 'Exchange of Shares' in the Prospectuses. Investors
considering an exchange of Fund shares for
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shares of another Company series should read the prospectus of the series into
which the transfer is being made prior to such exchange (see the section
regarding purchase of shares in the appropriate Prospectus). Requests for
exchange are made in the same manner as requests for redemptions (see the
section regarding redemption of shares in the appropriate Prospectus). 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. Shares of the
Institutional International Equity Fund are not eligible for the exchange
privilege.
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 not be computed on a day in which no orders to purchase
or redeem Fund shares have been received or on any day on which the NYSE is
closed, including 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 bid quotes from at least
one dealer 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.
In the case of the U.S. Equity and International Equity Portfolios,
securities listed on domestic exchanges, other than options on stock indices,
are valued using the last sales price on the most representative exchange at
4:00 p.m. New York time or, in the absence of recorded sales, at the average of
readily available closing bid and asked prices on such exchange or, in the
absence of such prices, at the readily available closing bid price on such
exchange. Securities listed on foreign exchanges are valued at the last quoted
sale price available before the time when net assets are valued or, in the
absence of such recorded sales, at the average of readily available closing bid
and asked prices on such exchange or, in the absence of such prices, at the
readily available closing bid price on such exchange. Unlisted securities are
valued at the average of the quoted bid and asked prices in the over-the-counter
market. The value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative market
for such security. For purposes of calculating net asset value per share, all
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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 may 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 Eligible Institution.
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 (which may differ from the net income per share used for accounting
purposes) earned during a 30-day period by its net asset value on the last day
of the period. The average daily number of Fund shares outstanding during the
period that are eligible to receive dividends is used in determining the net
investment income per share. Income is computed by totaling the interest earned
on all debt obligations during the period and subtracting from that amount the
total of all recurring expenses incurred during the period. The 30-day yield is
then annualized on a bond-equivalent basis assuming semi-annual reinvestment and
compounding of net investment income, as described under 'Additional
Information' in the Prospectus.
TOTAL RETURN QUOTATIONS. As required by SEC regulations, the average annual
total return of the Bond, U.S. Equity, International Equity and Institutional
International Equity Funds for a period is computed by assuming a hypothetical
initial investment 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 investment 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.
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Comparative performance information may be used from time to time in
advertising the Funds' shares, including data from Lipper Analytical Services,
Inc., Lehman Government/Corporate Intermediate Bond Index, 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'r' 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.
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 annual portfolio turnover rate for the Bond
Portfolio is expected to be under 100%. For the period April 2, 1996
(commencement of operations) through December 31, 1996, the portfolio turnover
rate for the Bond Portfolio was 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 annual portfolio turnover rate for
the U.S. Equity and International Equity Portfolios is expected to be under
100%. For the period April 2, 1996 (commencement of operations) through December
31, 1996, the portfolio turnover rate for the U.S. Equity Portfolio and
International Equity Portfolio was 19% and 42%, respectively.
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. 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 Adviser's clients and not solely or necessarily for the
benefit of the Portfolios. The Adviser believes 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 Adviser by any amount
that might be attributable to the value of such services. For the period April
2, 1996 (commencement of operations) through December 31, 1996, the Trust paid
brokerage commissions on behalf of U.S. Equity Portfolio and International
Equity Portfolio of $32,099, and $139,846, respectively.
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Subject to the overriding objective of obtaining the best possible
execution of orders, the Advisers may allocate a portion of a Portfolio's
brokerage transactions to their affiliates. In order for their affiliates to
effect any portfolio transactions for the Portfolios, the commissions, fees or
other remuneration received by such affiliates must be reasonable and fair
compared to the commissions, fees, or other remuneration paid to other brokers
in connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange during a comparable period of time.
Furthermore, the Trustees, including a majority of the Trustees who are not
'interested persons', have adopted procedures that are reasonably designed to
ensure that any commissions, fees, or other remuneration paid to such affiliates
are consistent with the foregoing standard.
Portfolio securities will not be purchased from or through or sold to or
through the Portfolio's Adviser, Sub-Adviser, Distributor or any 'affiliated
person' (as defined in the 1940 Act) or any affiliated person of such a person
when such entities are acting as principals, except to the extent permitted by
law. In addition, the Portfolios will not purchase securities during the
existence of any underwriting group relating thereto of which the Adviser,
Sub-Adviser or affiliate thereof is a member, except to the extent permitted by
law.
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
authorized to issue shares of common stock, par value $0.001 per share, in five
series: The UBS Bond Fund Series; The UBS Tax Exempt Bond Fund Series; The UBS
U.S. Equity Fund Series; The UBS Institutional International 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
five 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.
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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.
UBS INVESTOR PORTFOLIOS TRUST
UBS Investor Portfolios Trust, a master trust fund formed under New York
law, was organized on February 9, 1996. The Declaration of Trust permits the
Trustees to issue interests in one or more 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 its
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 has qualified and intends to remain qualified as a regulated
investment company (a 'RIC') under Subchapter M of the Code. As a RIC, a Fund
must, among other things: (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to loans of stock and securities,
gains from the sale or other disposition of stock, securities or foreign
currency and other income (including but not limited to gains from options,
futures, and forward contracts) derived with respect to its business of
investing in such stock, securities or foreign currency; (b) derive less than
30% of its gross income from the sale or other disposition of stock, securities,
options, futures or forward contracts (other than options, futures or forward
contracts on foreign currencies) held less than three months; and (c) diversify
its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
value of the Fund's total assets is represented by cash, U.S. Government
securities, investments in other RICs and other securities limited in respect of
any one issuer, to an amount not greater than 5% of the Fund's total assets, and
10% of the outstanding voting securities of such issuer and (ii) not more than
25% of the value of its total assets is invested in the securities of any one
issuer (other than U.S. Government securities or the securities of other RICs).
As a RIC, a Fund (as opposed to its shareholders) will not be subject to federal
income taxes on the net investment income and capital gains that it distributes
to its shareholders, provided that at least 90% of its net investment income and
realized net short-term capital gains in excess of net long-term capital losses
for the taxable year is distributed.
For federal income tax purposes, dividends that are declared by a Fund in
October, November or December as of a record date in such month and actually
paid in January of the following year will be treated as if they were paid on
December 31 of the year declared. Therefore, such dividends will generally be
taxable to a shareholder in the year declared rather than the year paid.
Gains or losses on sales of securities by a Portfolio will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where, if applicable, a Portfolio
acquires a put or writes a call thereon. Other gains or losses on the sale of
securities will be short-term capital gains or losses. Gains and losses on the
sale, lapse or other termination of options on securities will be treated as
gains and losses from the sale of securities. If an option written by a
Portfolio lapses or is terminated through a closing transaction, such as a
repurchase by the Portfolio of the option from its holder, the Portfolio will
realize a short-term capital gain or loss, depending on whether the premium
income is greater or less than the amount paid by the Portfolio in the closing
transaction. If securities are purchased by a Portfolio pursuant to the exercise
of a put option written by it, the Portfolio will subtract the premium received
from its cost basis in the securities purchased.
Under the Code, gains or losses attributable to disposition of foreign
currency or to foreign currency contracts, or to fluctuations in exchange rates
between the time a Portfolio accrues income or receivables
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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.
Certain options, futures and foreign currency contracts held by a Portfolio
at the end of each fiscal year will be required to be 'marked to market' for
federal income tax purposes -- i.e., treated as having been sold at market
value. For such options and futures contracts, 60% of any gain or loss
recognized on these deemed sales and on actual dispositions will be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss regardless of how long the Portfolio has held such options
or futures. Any gain or loss recognized on foreign currency contracts will be
treated as ordinary income.
FOREIGN SHAREHOLDERS. Distributions of net investment income and realized
net short-term capital gains in excess of net long-term capital losses to a
shareholder who, as to the United States, is a non-resident alien individual,
fiduciary of a foreign trust or estate, foreign corporation or foreign
partnership (a 'foreign shareholder') will be subject to U.S. withholding tax at
the rate of 30% (or lower treaty rate) unless the dividends are effectively
connected with a U.S. trade or business of the shareholder, in which case the
dividends will be subject to tax on a net income basis at the graduated rates
applicable to U.S. individuals or domestic corporations. Distributions of net
long-term capital gains to foreign shareholders will not be subject to U.S. tax
unless the distributions are effectively connected with the shareholder's trade
or business in the United States or, in the case of a shareholder who is a
non-resident alien individual, the shareholder was present in the United States
for more than 182 days during the taxable year and certain other conditions are
met.
In the case of a foreign shareholder who is a nonresident alien individual
and who is not otherwise subject to withholding as described above, a Fund may
be required to withhold U.S. federal income tax at the rate of 31% unless IRS
Form W-8 is provided. See 'Taxes' in the Prospectus. Transfers by gift of shares
of a Fund by a foreign shareholder who is a nonresident alien individual will
not be subject to U.S. federal gift tax, but the value of shares of the Fund
held by such a shareholder at his or her death will be includible in his or her
gross estate for U.S. federal estate tax purposes.
FOREIGN TAXES. It is expected that the International Equity Portfolio may
be subject to foreign withholding taxes with respect to income received from
sources within foreign countries. In the case of the International Equity
Portfolio, so long as more than 50% in value of the Portfolio's total assets at
the close of any taxable year consists of stock or securities of foreign
corporations, the Portfolio may elect to treat any foreign income taxes paid by
it as paid directly by its shareholders. The Portfolio will make such an
election only if it deems it to be in the best interest of its shareholders. The
Portfolio will notify its shareholders in writing each year if they make the
election and of the amount of foreign income taxes, if any, to be treated as
paid by the shareholders. If the Portfolio makes the election, each shareholder
of the International Equity Fund will be required to include in his or her
income their proportionate share of the amount of foreign income taxes paid by
the Portfolio and will be entitled to claim either a credit (subject to the
limitations discussed below), or, if he or she itemizes deductions, a deduction
for his or her share of the foreign income taxes in computing federal income tax
liability. (No deduction will be permitted in computing an individual's
alternative minimum tax liability.) A shareholder who is a nonresident alien
individual or a foreign corporation may be subject to U.S. withholding tax on
the income resulting from the election described in this paragraph, but may not
be able to claim a credit or deduction against such U.S. tax for the foreign
taxes treated as having been paid by such shareholder. A
SAI-25
<PAGE>
<PAGE>
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 Funds from their 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
With respect to the securities offered by the Prospectuses, this SAI and
the Prospectuses do 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. Pursuant to the rules and regulations
of the SEC, certain portions have been omitted. The Registration Statement,
including the exhibits filed therewith, 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 relating 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. Each such statement is
qualified in all respects by such reference.
FINANCIAL STATEMENTS
The Annual Report(s) of the Funds dated December 31, 1996 has been filed
with the SEC pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1
thereunder and is hereby included herein. The Institutional International Equity
Fund has not yet commenced operations and has no assets or liabilities as of the
date hereof. Consequently, no financial statements are available for the
Institutional International Equity Fund.
SAI-26
<PAGE>
<PAGE>
UBS Bond Fund
Statement of Assets and Liabilities
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investment in UBS Investor Portfolios Trust -- UBS Bond
Portfolio, at value.......................................................... $7,554,365
Receivable from Adviser........................................................ 6,387
Deferred organization expenses and other assets................................ 63,262
----------
Total Assets......................................................... 7,624,014
----------
LIABILITIES:
Administrative services fees payable........................................... 294
Directors' fees payable........................................................ 2,490
Dividends payable.............................................................. 33,772
Organization expenses payable.................................................. 32,742
Other accrued expenses......................................................... 54,426
----------
Total Liabilities.................................................... 123,724
----------
NET ASSETS..................................................................... $7,500,290
----------
----------
SHARES OUTSTANDING ($0.001 par value, 10 million shares authorized)............ 74,906
----------
----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE................. $100.13
----------
----------
COMPOSITION OF NET ASSETS:
Shares of common stock, at par................................................. $ 75
Additional paid-in capital..................................................... 7,495,002
Net unrealized appreciation of investments, foreign currency contracts and
foreign currency translations................................................ 621
Accumulated net investment loss................................................ (4,086)
Accumulated undistributed net realized gains on securities and foreign currency
transactions................................................................. 8,678
----------
Net Assets........................................................... $7,500,290
----------
----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-27
<PAGE>
<PAGE>
UBS Bond Fund
Statement of Operations
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Investment Income and Expenses allocated from UBS Investor
Portfolios Trust -- UBS Bond Portfolio
Interest....................................................... $195,583
Total expenses................................................. $ 28,341
Less: Fee waiver............................................... (13,889)
--------
Net expenses................................................... 14,452
--------
Net Investment Income from UBS Investor Portfolios Trust -- UBS Bond
Portfolio......................................................... 181,131
EXPENSES
Shareholder service fees............................................ 7,632
Administrative services fees........................................ 1,526
Reports to shareholders expense..................................... 22,333
Transfer agent fees................................................. 15,763
Audit fees.......................................................... 11,259
Amortization of organization expenses............................... 10,886
Fund accounting fees................................................ 8,006
Legal fees.......................................................... 7,508
Directors' fees..................................................... 6,006
Registration fees................................................... 3,065
Miscellaneous expenses.............................................. 3,669
--------
Total expenses................................................. 97,653
Less: Fee waiver and expense reimbursements.................... (87,682)
--------
Net expenses................................................... 9,971
--------
Net investment income............................................... 171,160
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM UBS
INVESTOR PORTFOLIOS TRUST -- UBS BOND PORTFOLIO
Net realized gain on securities transactions........................ 9,932
Net realized loss on foreign currency transactions.................. (6,025)
Net change in unrealized depreciation of investments................ (13,586)
Net change in unrealized appreciation of foreign currency contracts
and translations.................................................. 14,207
--------
Net realized and unrealized gain on investments from UBS Investor
Portfolios Trust -- UBS Bond Portfolio............................ 4,528
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $175,688
--------
--------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-28
<PAGE>
<PAGE>
UBS Bond Fund
Statement of Changes in Net Assets
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income............................................................ $ 171,160
Net realized gain on securities and foreign currency transactions................ 3,907
Net change in unrealized appreciation of investments, foreign currency contracts
and foreign currency translations.............................................. 621
----------
Net increase in net assets resulting from operations............................. 175,688
----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................................ (170,408)
Net realized gains on investments................................................ (1,273)
----------
Total dividends and distributions to shareholders................................ (171,681)
----------
TRANSACTIONS IN SHARES OF COMMON STOCK:
Net proceeds from sale of shares................................................. 10,846,978
Net asset value of shares issued to shareholders in reinvestment of dividends and
distributions.................................................................. 127,366
Cost of shares redeemed.......................................................... (3,503,061)
----------
Net increase in net assets from transactions in shares of common stock........... 7,471,283
----------
NET INCREASE IN NET ASSETS....................................................... 7,475,290
NET ASSETS:
Beginning of period.............................................................. 25,000
----------
End of period (including net investment loss of $4,086).......................... $7,500,290
----------
----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-29
<PAGE>
<PAGE>
UBS Bond Fund
Financial Highlights
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
FOR A SHARE OUTSTANDING FOR THE PERIOD
Net asset value, beginning of period...................................... $100.00
-------
Income from investment operations:
Net investment income................................................ 4.12
Net realized and unrealized gain on investments, foreign currency
contracts and foreign currency translations........................ 0.14
-------
Total income from investment operations.............................. 4.26
-------
Less Dividends and Distributions to Shareholders:
Dividends from net investment income................................. (4.11)
Distributions from net realized gains................................ (0.02)
-------
Total dividends and distributions.................................... (4.13)
-------
Net asset value, end of period............................................ $100.13
-------
-------
Total Return.............................................................. 4.36%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted)............................. $ 7,500
Ratio of expenses to average net assets(2)........................... 0.80%(3)
Ratio of net investment income to average net assets(2).............. 5.61%(3)
</TABLE>
- ------------------------
(1) Not annualized.
(2) Includes the Fund's share of UBS Investor Portfolio Trust -- UBS Bond
Portfolio expenses and net of fee waivers and expense reimbursements. Such
fee waivers and expense reimbursements had the effect of reducing the ratio
of expenses to average net assets and increasing the ratio of net investment
income to average net assets by 3.33% (annualized).
(3) Annualized.
See notes to financial statements.
SAI-30
<PAGE>
<PAGE>
UBS Bond Fund
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
1. GENERAL
UBS Bond Fund (the 'Fund') is a diversified, no-load mutual fund registered
under the Investment Company Act of 1940. The Fund is a series of UBS Private
Investor Funds, Inc. (the 'Company'), an open-end management investment company
organized as a corporation under Maryland law. At December 31, 1996, the Company
included two other funds, UBS U.S. Equity Fund and UBS International Equity
Fund. These financial statements relate only to the Fund.
The Fund had no operations prior to April 2, 1996 other than the sale to
Signature Financial Group, Inc. of 250 shares of common stock for $25,000.
The Fund seeks to achieve its investment objective by investing substantially
all of its investable assets in the UBS Bond Portfolio of UBS Investor
Portfolios Trust (the 'Portfolio'), an open-end management investment company
that has the same investment objective as that of the Fund.
Signature Broker-Dealer Services, Inc. ('Signature'), a wholly-owned subsidiary
of Signature Financial Group, Inc., serves as the Fund's administrator and
distributor. Union Bank of Switzerland, New York Branch ('UBS') serves as the
fund services agent to the Fund.
The financial statements of the Portfolio, including its Schedule of
Investments, are included elsewhere within this report and should be read in
conjunction with the Fund's financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. Significant accounting policies
followed by the Fund are as follows:
A. INVESTMENT VALUATION -- The value of the Fund's investment in the Portfolio
included in the accompanying Statement of Assets and Liabilities reflects the
Fund's proportionate beneficial interest in the net assets of the Portfolio
(14.3% at December 31, 1996). Valuation of securities by the Portfolio is
discussed in Note 2A of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INVESTMENT INCOME, EXPENSES AND REALIZED AND UNREALIZED GAINS AND
LOSSES -- The Fund records its share of the investment income, expenses and
realized and unrealized gains and losses recorded by the Portfolio on a daily
basis. The investment income, expenses and realized and unrealized gains and
losses are allocated daily to investors of the Portfolio based upon the amount
of their investment in the Portfolio.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies, including
the requirement to distribute substantially all of its taxable income, including
any net realized capital gains on investment transactions, to its shareholders.
Accordingly, no provision for federal income or excise taxes is necessary.
D. DIVIDENDS AND DISTRIBUTIONS -- The Fund declares dividends from net
investment income to shareholders of record on the day of declaration. Such
dividends are declared daily and paid monthly. Net realized gains, if any, will
be distributed at least annually. However, to the extent that net realized gains
of the Fund can be reduced by capital loss carryovers, such gains will not be
distributed. Dividends and distributions are recorded on the ex-dividend date.
The amounts of dividends from net investment income and distributions from net
realized gains are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles. These 'book/tax'
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the composition of net assets based upon their federal tax-basis
treatment; temporary differences do not require reclassification. For
SAI-31
<PAGE>
<PAGE>
UBS Bond Fund
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
the fiscal year ended December 31, 1996, the Fund increased accumulated
undistributed net realized gains by $6,044, reduced accumulated undistributed
net investment income by $4,838 and decreased paid-in capital by $1,206. Net
investment income, net realized gains and net assets were not affected by this
change.
E. DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in connection
with its organization in the amount of $72,500 have been deferred and are being
amortized on a straight line basis over five years from the Fund's commencement
of operations (April 2, 1996).
F. OTHER -- The Fund bears all costs of its operations other than expenses
specifically assumed by Signature and UBS. Expenses incurred by the Company on
behalf of any two or more funds are allocated in proportion to the net assets of
each fund, except when allocations of direct expenses to each fund can otherwise
be made fairly. Expenses directly attributable to the Fund are charged directly
to the Fund.
3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
A. ADMINISTRATIVE SERVICES AGREEMENT -- Under the terms of an Administrative
Services Agreement with the Company, Signature provides overall administrative
services and general office facilities. As compensation for such services, the
Company has agreed to pay Signature a fee, accrued daily and payable monthly, at
an annual rate of 0.05% of the Fund's first $100 million average daily net
assets and 0.025% of the next $100 million average daily net assets. Signature
does not receive a fee on average daily net assets in excess of $200 million.
For the period April 2, 1996 (commencement of operations) through December 31,
1996, the administrative services fee amounted to $1,526.
B. DISTRIBUTION AGREEMENT -- Under the terms of a Distribution Agreement,
Signature serves as the distributor of Fund shares. Signature does not receive
any additional fees for services provided pursuant to this agreement.
C. SHAREHOLDER SERVICES AGREEMENT -- The Fund has entered into a Shareholder
Services Agreement with UBS pursuant to which UBS provides certain services to
shareholders of the Fund. The Fund has agreed to pay UBS a fee for these
services, accrued daily and payable monthly, at an annual rate of 0.25% of the
average daily net assets of the Fund. For the period April 2, 1996 (commencement
of operations) through December 31, 1996, the shareholder service fee amounted
to $7,632, all of which was waived.
D. FUND SERVICES AGREEMENT -- Under the terms of a Fund Services Agreement with
the Company, UBS has agreed to provide certain administrative services to the
Fund. UBS is not entitled to any additional compensation pursuant to this
agreement.
E. EXPENSE REIMBURSEMENTS -- UBS has voluntarily agreed to limit the total
operating expenses of the Fund, including its share of the Portfolio's expenses
and excluding extraordinary expenses, to an annual rate of 0.80% of the Fund's
average daily net assets. For the period April 2, 1996 (commencement of
operations) through December 31, 1996, UBS reimbursed the Fund for expenses
totaling $80,050 in connection with this voluntary limitation. UBS may modify or
discontinue this voluntary expense limitation at any time with 30 days' advance
notice to the Fund.
SAI-32
<PAGE>
<PAGE>
UBS Bond Fund
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
At December 31, 1996 there were 500 million shares of the Company's common stock
authorized, of which 10 million shares were classified as common stock of the
Fund. Transactions in shares of the Fund for the period April 2, 1996
(commencement of operations) through December 31, 1996 were as follows:
<TABLE>
<S> <C>
Shares subscribed............................ 108,567
Shares issued in reinvestment of dividends
and distributions.......................... 1,278
Shares redeemed.............................. (35,189)
-------
Net increase in shares outstanding........... 74,656
-------
-------
</TABLE>
SAI-33
<PAGE>
<PAGE>
UBS Bond Fund
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors and
Shareholders of UBS Private Investor Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities, and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the UBS Bond Fund (the 'Fund') (one of the funds constituting the UBS Private
Investor Funds, Inc.) at December 31, 1996, and the results of its operations,
the changes in its net assets and the financial highlights for the period April
2, 1996 (commencement of operations) through December 31, 1996, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as 'financial statements') are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, 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
February 21, 1997
SAI-34
<PAGE>
<PAGE>
UBS Bond Portfolio
Schedule of Investments
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE COUPON MATURITY
VALUE SECURITY DESCRIPTION RATE DATE VALUE
- ---------- ------------------------------------------------------------ ------ -------- -----------
<C> <S> <C> <C> <C>
U.S. TREASURY & U.S. GOVERNMENT AGENCY OBLIGATIONS -- 60.7%
U.S. TREASURY OBLIGATIONS -- 56.3%
$ 150,000 U.S. Treasury Note.......................................... 6.25 % 1/31/97 $ 150,070
25,000 U.S. Treasury Note.......................................... 6.125 % 5/31/97 25,070
50,000 U.S. Treasury Note.......................................... 6.375 % 6/30/97 50,258
1,000,000 U.S. Treasury Note.......................................... 6.00 % 8/31/97 1,002,810
1,170,000 U.S. Treasury Note.......................................... 5.125 % 6/30/98 1,159,400
1,290,000 U.S. Treasury Note.......................................... 5.25 % 7/31/98 1,279,319
100,000 U.S. Treasury Note.......................................... 7.00 % 4/15/99 102,234
150,000 U.S. Treasury Note.......................................... 6.75 % 5/31/99 152,555
5,200,000 U.S. Treasury Note.......................................... 6.375 % 7/15/99 5,247,112
155,000 U.S. Treasury Note.......................................... 6.875 % 8/31/99 158,246
145,000 U.S. Treasury Note.......................................... 7.125 % 9/30/99 149,010
1,500,000 U.S. Treasury Bond.......................................... 5.875 % 11/15/99 1,494,135
1,203,000 U.S. Treasury Bond.......................................... 7.75 % 1/31/00 1,258,831
2,600,000 U.S. Treasury Note.......................................... 7.125 % 2/29/00 2,676,778
505,000 U.S. Treasury Note.......................................... 6.75 % 4/30/00 514,550
1,344,000 U.S. Treasury Note.......................................... 6.25 % 5/31/00 1,349,457
1,700,000 U.S. Treasury Note.......................................... 6.125 % 7/31/00 1,700,000
650,000 U.S. Treasury Note.......................................... 6.125 % 9/30/00 649,590
2,250,000 U.S. Treasury Note.......................................... 5.75 % 10/31/00 2,220,120
1,000,000 U.S. Treasury Note.......................................... 5.50 % 12/31/00 976,870
775,000 U.S. Treasury Bond.......................................... 6.25 % 4/30/01 776,697
1,500,000 U.S. Treasury Note.......................................... 6.625 % 7/31/01 1,523,910
1,200,000 U.S. Treasury Note.......................................... 6.25 % 10/31/01 1,201,128
500,000 U.S. Treasury Note.......................................... 7.50 % 11/15/01 526,330
170,000 U.S. Treasury Note.......................................... 7.50 % 5/15/02 179,748
800,000 U.S. Treasury Note.......................................... 6.375 % 8/15/02 805,248
70,000 U.S. Treasury Note.......................................... 6.25 % 2/15/03 69,913
450,000 U.S. Treasury Note.......................................... 5.75 % 8/15/03 436,500
419,000 U.S. Treasury Note.......................................... 7.25 % 5/15/04 440,868
100,000 U.S. Treasury Note.......................................... 7.25 % 8/15/04 105,250
1,450,000 U.S. Treasury Note.......................................... 6.50 % 10/15/06 1,457,932
-----------
29,839,939
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 4.4%
1,400,000 Federal Home Loan Mortgage Corp............................. 5.96 % 10/20/00 1,385,342
995,400 Federal National Mortgage Assc., Pool #250576............... 7.00 % 6/01/26 973,680
-----------
2,359,022
-----------
TOTAL U.S. TREASURY & U.S. GOVERNMENT AGENCY
OBLIGATIONS (COST $32,115,403)............................ 32,198,961
-----------
CORPORATE OBLIGATIONS -- 27.5%
CORPORATE OBLIGATIONS -- DOMESTIC -- 24.5%
AEROSPACE/DEFENSE -- 1.0%
500,000 Lockheed Martin............................................. 6.55 % 5/15/99 502,226
-----------
BANKING -- 3.9%
500,000 BanPonce Corp............................................... 6.75 % 4/26/00 502,195
500,000 Capital One Bank............................................ 6.87 % 8/16/99 502,605
250,000 Capital One Bank............................................ 6.95 % 6/14/00 251,078
720,000 J.P. Morgan & Co............................................ 8.50 % 8/15/03 785,124
-----------
2,041,002
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-35
<PAGE>
<PAGE>
UBS Bond Portfolio
Schedule of Investments
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE COUPON MATURITY
VALUE SECURITY DESCRIPTION RATE DATE VALUE
- ---------- ------------------------------------------------------------ ------ -------- -----------
<C> <S> <C> <C> <C>
BROKERAGE -- 3.2%
$ 500,000 Goldman Sachs............................................... 6.25 % 2/01/03 $ 486,795
600,000 Lehman Brothers Inc......................................... 7.14 % 9/24/99 606,666
200,000 Lehman Brothers Inc......................................... 7.25 % 4/15/03 201,266
400,000 Salomon Inc................................................. 7.25 % 5/01/01 403,549
-----------
1,698,276
-----------
CHEMICALS -- 0.5%
250,000 Praxair..................................................... 6.70 % 4/15/01 250,785
-----------
ENERGY -- 0.8%
400,000 Oryx Energy Co.............................................. 10.00 % 4/01/01 439,076
-----------
FINANCING & LEASING -- 4.8%
950,000 Associates Corp N.A......................................... 8.50 % 1/10/00 1,005,347
500,000 CIT Group Holdings.......................................... 6.50 % 7/13/98 504,220
750,000 Countrywide Home Loan....................................... 7.45 % 9/16/03 764,663
265,000 General Electric Capital Corp............................... 6.875 % 4/15/00 270,239
-----------
2,544,469
-----------
INDUSTRIAL -- CAPTIVE FINANCE -- 3.2%
600,000 Caterpillar Financial....................................... 6.77 % 12/29/00 605,274
500,000 Pitney Bowes Credit......................................... 6.54 % 7/15/99 503,590
600,000 Sears Roebuck Acceptance Corp............................... 5.59 % 2/16/01 578,790
-----------
1,687,654
-----------
MEDIA/CABLE -- 2.8%
600,000 News America Holdings....................................... 7.50 % 3/01/00 613,716
200,000 Paramount Communications.................................... 7.50 % 1/15/02 199,834
650,000 Tele-Communications Inc..................................... 7.375 % 2/15/00 646,503
-----------
1,460,053
-----------
NATURAL GAS -- 1.1%
600,000 Kern River Funding (a)...................................... 6.72 % 9/30/01 599,172
-----------
REAL ESTATE -- 1.4%
650,000 Franchise Finance........................................... 7.02 % 2/20/03 638,950
125,000 Susa Partnership LP......................................... 7.125 % 11/01/03 123,581
-----------
762,531
-----------
TECHNOLOGY -- 0.9%
500,000 CSC Enterprises (a)......................................... 6.50 % 11/15/01 496,355
-----------
UTILITIES -- 0.9%
464,000 BVPS II Funding Corp........................................ 7.38 % 12/01/99 466,320
-----------
TOTAL CORPORATE OBLIGATIONS -- DOMESTIC (COST
$12,864,655).............................................. 12,947,919
-----------
CORPORATE OBLIGATIONS -- FOREIGN -- 2.7%
BANKING -- 1.7%
500,000 Banco Central Hispano....................................... 7.50 % 6/15/05 509,585
400,000 Spintab (a)................................................. 7.50 % 8/14/49 403,120
-----------
912,705
-----------
PAPER & FOREST PRODUCTS -- 1.0%
500,000 Canadian Pacific Forest..................................... 10.25 % 1/15/03 528,550
-----------
TOTAL CORPORATE OBLIGATIONS -- FOREIGN (COST $1,473,146).... 1,441,255
-----------
CORPORATE OBLIGATIONS -- EURODOLLAR -- 0.3%
ENERGY -- 0.1%
50,000 BP America Inc.............................................. 9.75 % 3/01/99 53,531
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-36
<PAGE>
<PAGE>
UBS Bond Portfolio
Schedule of Investments
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE COUPON MATURITY
VALUE SECURITY DESCRIPTION RATE DATE VALUE
- ---------- ------------------------------------------------------------ ------ -------- -----------
<C> <S> <C> <C> <C>
INDUSTRIAL -- CAPTIVE FINANCE -- 0.2%
$ 40,000 Ford Capital BV............................................. 9.75 % 6/05/97 $ 40,625
80,000 Unilever Capital............................................ 9.25 % 3/29/00 87,000
-----------
127,625
-----------
TOTAL CORPORATE OBLIGATIONS -- EURODOLLAR (COST $180,661)... 181,156
-----------
TOTAL CORPORATE OBLIGATIONS (COST $14,518,462).............. 14,570,330
-----------
FOREIGN GOVERNMENT OBLIGATIONS -- 5.5%
CANADA -- 4.2%
1,750,000* Canada Government........................................... 7.50 % 9/01/00 1,376,538
1,000,000* Canada Government........................................... 7.00 % 9/01/01 775,493
50,000 Province of Ontario......................................... 7.375 % 1/27/03 52,107
50,000 Province of Quebec.......................................... 9.125 % 8/22/01 54,875
-----------
2,259,013
-----------
ITALY -- 0.1%
20,000 Italy (Euro Bond)........................................... 9.375 % 4/03/97 20,200
-----------
JAPAN -- 1.2%
355,000 Japan Finance Corp.......................................... 9.125 % 10/11/00 382,587
250,000 Japan Finance Corp. for Municipal Enterprises............... 6.85 % 4/15/06 252,145
-----------
634,732
-----------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS (COST $2,922,758)...... 2,913,945
-----------
ASSET BACKED SECURITIES -- 1.8%
CREDIT CARD RECEIVABLES -- 1.8%
440,000 First Omni Bank Credit Card Trust, Series 96-A.............. 6.65 % 9/15/03 443,709
500,000 Sears Credit Account Master Trust Series 96-3............... 7.00 % 7/16/08 510,000
-----------
TOTAL ASSET BACKED SECURITIES (COST $937,838)............... 953,709
-----------
TOTAL INVESTMENTS AT MARKET VALUE -- 95.5%
(COST $50,494,461)..................................................... 50,636,945
OTHER ASSETS IN EXCESS OF LIABILITIES -- 4.5%............................ 2,363,907
-----------
NET ASSETS -- 100.0%..................................................... $53,000,852
-----------
-----------
</TABLE>
- ------------------------
* Securities denominated in Canadian dollars.
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
1996, the total value of such securities amounted to $1,498,647 or 2.8% of
net assets.
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR
FOREIGN U.S. DOLLAR NET UNREALIZED
CURRENCY UNITS U.S. DOLLAR VALUE AT APPRECIATION/
CURRENCY AND SETTLEMENT DATE PURCHASED/SOLD COST/PROCEEDS DECEMBER 31, 1996 (DEPRECIATION)
- ------------------------------------------------ -------------- ------------- ------------------ --------------
<S> <C> <C> <C> <C>
PURCHASE CONTRACT
German Deutsche Mark, 1/14/97................... 1,342,000 $ 863,578 $ 873,102 $ 9,524
SALE CONTRACTS
Canadian Dollar, 1/13/97........................ 2,145,000 1,617,464 1,567,696 49,768
Canadian Dollar, 1/13/97........................ 874,767 646,539 639,333 7,206
German Deutsche Mark, 1/14/97................... 1,342,000 892,198 873,102 19,096
-------
$ 85,594
-------
-------
</TABLE>
Note: Based on the cost of investments of $50,516,946 for Federal Income Tax
purposes at December 31, 1996, the aggregate gross unrealized appreciation
and depreciation was $246,232 and $126,233, respectively, resulting in net
unrealized appreciation of $119,999.
See notes to financial statements.
SAI-37
<PAGE>
<PAGE>
UBS Bond Portfolio
Statement of Assets and Liabilities
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investment, at value (cost $50,494,461).................................... $50,636,945
Cash....................................................................... 1,443,320
Interest receivable........................................................ 905,546
Unrealized appreciation on open forward foreign currency contracts......... 85,594
Deferred organization expenses and other assets............................ 44,038
-----------
Total Assets.......................................................... 53,115,443
-----------
LIABILITIES:
Administrative services fees payable....................................... 2,061
Trustees' fees payable..................................................... 877
Organization expenses payable.............................................. 42,733
Other accrued expenses..................................................... 68,920
-----------
Total Liabilities..................................................... 114,591
-----------
NET ASSETS................................................................. $53,000,852
-----------
-----------
COMPOSITION OF NET ASSETS:
Paid-in capital for beneficial interests................................... $53,000,852
-----------
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-38
<PAGE>
<PAGE>
UBS Bond Portfolio
Statement of Operations
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest...................................................... $ 1,848,040
EXPENSES:
Investment advisory fees...................................... $ 131,348
Administrative services fees.................................. 14,594
Audit fees.................................................... 39,357
Custodian fees and expenses................................... 27,616
Fund accounting fees.......................................... 19,348
Legal fees.................................................... 18,766
Amortization of organization expenses......................... 7,508
Trustees' fees................................................ 7,508
Insurance expense............................................. 4,151
Miscellaneous expenses........................................ 6,110
---------
Total expenses........................................... 276,306
Less: Fee waiver......................................... (131,348)
---------
Net expenses............................................. 144,958
-----------
Net investment income......................................... 1,703,082
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities transactions.................. 113,360
Net realized loss on foreign currency transactions............ (68,736)
Net change in unrealized appreciation of investments.......... 142,484
Net change in unrealized appreciation of foreign currency
contracts and translations.................................. 84,921
-----------
Net realized and unrealized gain on investments............... 272,029
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $ 1,975,111
-----------
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-39
<PAGE>
<PAGE>
UBS Bond Portfolio
Statement of Changes in Net Assets
For the period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income......................................................... $ 1,703,082
Net realized gain on securities and foreign currency transactions............. 44,624
Net change in unrealized appreciation of investments, foreign currency
contracts and foreign currency translations................................. 227,405
-----------
Net increase in net assets resulting from operations.......................... 1,975,111
-----------
CAPITAL TRANSACTIONS:
Proceeds from contributions................................................... 59,142,218
Value of withdrawals.......................................................... (8,116,477)
-----------
Net increase in net assets from capital transactions.......................... 51,025,741
-----------
NET INCREASE IN NET ASSETS.................................................... 53,000,852
NET ASSETS:
Beginning of period........................................................... --
-----------
End of period................................................................. $53,000,852
-----------
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-40
<PAGE>
<PAGE>
UBS Bond Portfolio
Financial Highlights
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................................ $53,001
Ratio of expenses to average net assets(1)............................... 0.50%(2)
Ratio of net investment income to average net assets(1).................. 5.83%(2)
Portfolio turnover....................................................... 100%
</TABLE>
- ------------------------
(1) Net of fee waivers. Such fee waivers had the effect of reducing the ratio of
expenses to average net assets and increasing the ratio of net investment
income to average net assets by 0.45% (annualized).
(2) Annualized.
See notes to financial statements.
SAI-41
<PAGE>
<PAGE>
UBS Bond Portfolio
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
1. GENERAL
UBS Bond Portfolio (the 'Portfolio'), a separate series of UBS Investor
Portfolios Trust (the 'Trust'), is registered under the Investment Company Act
of 1940, as a diversified, open-end management investment company. The Trust is
organized as a trust under the laws of the State of New York.
The investment adviser of the Portfolio is Union Bank of Switzerland, New York
Branch ('UBS'). Signature Financial Group (Grand Cayman), Ltd. ('SFG'), a
wholly-owned subsidiary of Signature Financial Group, Inc., acts as the
Portfolio's administrator and placement agent.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the
Portfolio in the preparation of its financial statements:
A. INVESTMENT VALUATION -- Debt securities with a remaining maturity of more
than 60 days are normally valued by a pricing service approved by the Board of
Trustees (the 'Trustees'). Such pricing service will consider various factors
when arriving at a valuation for a security. Such factors include yields and
prices of comparable securities, indications as to values from dealers in such
securities and general market conditions. In the event a pricing service is
unable to price a security, the security will be valued by taking the average of
the bid and ask prices as provided by a dealer in such security.
Debt securities that mature in 60 days or less are valued at amortized cost,
which approximates market value. The amortized cost method involves valuing a
security at its cost on the date of purchase or, in the case of securities
purchased with more than 60 days until maturity, at their market value each day
until the 61st day prior to maturity, and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and such valuation.
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.
B. FOREIGN CURRENCY TRANSLATION -- The accounting records of the Portfolio are
maintained in U.S. dollars. Assets, including investment securities, and
liabilities denominated in foreign currency are translated into U.S. dollars at
the prevailing rate of exchange at year end. Purchases and sales of securities,
income and expenses are translated at the prevailing rate of exchange on the
respective dates of such transactions. Gain/loss on translation of foreign
currency includes net exchange gains and losses, gains and losses on disposition
of foreign currency and adjustments to the amount of foreign taxes withheld.
The assets and liabilities are presented at the exchange rates and market values
at the close of the year. The changes in net assets arising from changes in
exchange rates and the changes in net assets resulting from changes in market
prices of securities held at year-end are not separately presented. However,
gains and losses from certain foreign currency transactions are treated as
ordinary income for U.S. Federal income tax purposes.
C. FORWARD FOREIGN CURRENCY CONTRACTS -- The Portfolio may enter into forward
foreign currency contracts in connection with planned purchases or sales of
securities or to hedge the U.S. dollar value of portfolio securities denominated
in a particular currency. The Portfolio could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. The forward foreign currency contracts are marked-to-market
daily using the daily exchange rate of the underlying currency and any resulting
gains or losses are recorded for financial statement purposes as unrealized
gains or losses until the contract settlement date.
SAI-42
<PAGE>
<PAGE>
UBS Bond Portfolio
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
The Portfolio's use of forward contracts involves, to varying degrees, elements
of market risk in excess of the amount recognized in the statement of assets and
liabilities. The contract or notional amounts reflect the extent of the
Portfolio's involvement in these financial instruments. Risks arise from the
possible movements in the foreign exchange rates underlying these instruments.
The unrealized appreciation/depreciation on forward contracts reflects the
Portfolio's exposure at year end to credit loss in the event of a counterparty's
failure to perform its obligations.
D. ACCOUNTING FOR INVESTMENTS -- Securities transactions are accounted for on
trade date. Realized gains and losses on security transactions are determined on
the identified cost basis. Interest income, adjusted for amortization of
premiums and accretion of discounts on investments, is accrued daily.
E. U.S. FEDERAL INCOME TAXES -- The Portfolio is considered a partnership under
the U. S. Internal Revenue Code (the 'Code'). As such, each investor in the
Portfolio will be taxed on its share of the Portfolio's ordinary income and
capital gains. Accordingly, no provision for federal income taxes is necessary.
It is intended that the Portfolio will be managed in such a way that an investor
will be able to satisfy the requirements of the Code applicable to regulated
investment companies.
F. DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Portfolio in
connection with its organization in the amount of $50,000 have been deferred and
are being amortized on a straight line basis over five years from the
Portfolio's commencement of operations (April 2, 1996).
G. OTHER -- The Portfolio bears all costs of its operations other than expenses
specifically assumed by UBS and SFG. Expenses incurred by the Trust on behalf of
any two or more portfolios are allocated in proportion to the net assets of each
portfolio, except when allocations of direct expenses to each portfolio can
otherwise be made fairly. Expenses directly attributable to the Portfolio are
charged directly to the Portfolio.
3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
A. INVESTMENT ADVISORY AGREEMENT -- The Portfolio has retained the services of
UBS as investment adviser. UBS 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. As compensation for overall
investment management services the Trust has agreed to pay UBS an investment
advisory fee, accrued daily and payable monthly, at an annual rate of 0.45% of
the Portfolio's average daily net assets. For the period April 2, 1996
(commencement of operations) through December 31, 1996, UBS voluntarily agreed
to waive the entire investment advisory fee. Such waiver amounted to $131,348.
B. ADMINISTRATIVE SERVICES AGREEMENT -- Under the terms of an Administrative
Services Agreement with the Trust, SFG provides overall administrative services
and general office facilities to the Portfolio and the Trust. As compensation
for such services, the Portfolio has agreed to pay SFG an administrative
services fee, accrued daily and payable monthly, at an annual rate of 0.05% of
the Portfolio's average daily net assets. For the period from April 2, 1996
(commencement of operations) through December 31, 1996, the administrative
services fee amounted to $14,594.
C. EXCLUSIVE PLACEMENT AGENT AGREEMENT -- Under the terms of an Exclusive
Placement Agent Agreement with the Trust, SFG has agreed to act as the Trust's
placement agent. SFG does not receive any additional fees for services provided
pursuant to this agreement.
4. PURCHASES AND SALES OF INVESTMENTS
For the period April 2, 1996 (commencement of operations) through December 31,
1996, purchases and sales of investment securities, excluding short-term
investments, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
U.S. Government Securities......................................... $60,905,077 $30,940,595
Corporate obligations.............................................. 28,583,638 7,953,111
----------- -----------
Total.................................................... $89,488,715 $38,893,706
----------- -----------
----------- -----------
</TABLE>
SAI-43
<PAGE>
<PAGE>
UBS Bond Portfolio
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Trustees and
Investors of UBS Investor Portfolios Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the UBS Bond Portfolio (the
'Portfolio') (one of the portfolios constituting the UBS Investor Portfolios
Trust) at December 31, 1996, and the results of its operations, the changes in
its net assets and the financial highlights for the period April 2, 1996
(commencement of operations) through December 31, 1996, in conformity with
generally accepted accounting principles in the United States. These financial
statements and financial highlights (hereafter referred to as 'financial
statements') are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of securities at December 31, 1996 by correspondence with the custodian,
provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Chartered Accountants
Toronto, Ontario
February 21, 1997
SAI-44
<PAGE>
<PAGE>
UBS U.S. Equity Fund
Statement of Assets and Liabilities
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in UBS Investor Portfolios Trust -- UBS U.S. Equity Portfolio, at
value........................................................................ $9,486,697
Receivable from Adviser........................................................ 6,340
Deferred organization expenses and other assets................................ 63,344
----------
Total Assets......................................................... 9,556,381
----------
LIABILITIES:
Administrative services fees payable........................................... 341
Directors' fees payable........................................................ 1,688
Organization expenses payable.................................................. 32,538
Other accrued expenses......................................................... 56,118
----------
Total Liabilities.................................................... 90,685
----------
NET ASSETS..................................................................... $9,465,696
----------
----------
SHARES OUTSTANDING ($0.001 par value, 10 million shares authorized)............ 88,712
----------
----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE................. $106.70
----------
----------
COMPOSITION OF NET ASSETS:
Shares of common stock, at par................................................. $ 89
Additional paid-in capital..................................................... 8,765,869
Net unrealized appreciation of investments..................................... 684,896
Accumulated undistributed net investment income................................ 1,157
Accumulated undistributed net realized gains on investments.................... 13,685
----------
Net Assets........................................................... $9,465,696
----------
----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-45
<PAGE>
<PAGE>
UBS U.S. Equity Fund
Statement of Operations
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Investment Income and Expenses from UBS Investor Portfolios
Trust -- UBS U.S. Equity Portfolio
Dividends..................................................... $191,173
Interest...................................................... 13,296
--------
Investment income............................................. 204,469
Total expenses................................................ $ 77,806
Less: Fee waiver.............................................. (31,133)
---------
Net expenses.................................................. 46,673
--------
Net Investment Income from UBS Investor Portfolios Trust -- UBS
U.S. Equity Portfolio............................................ 157,796
EXPENSES
Shareholder service fees........................................... 12,965
Administrative services fees....................................... 2,593
Reports to shareholders expense.................................... 22,333
Transfer agent fees................................................ 15,763
Audit fees......................................................... 11,259
Amortization of organization expenses.............................. 10,886
Fund accounting fees............................................... 8,006
Legal fees......................................................... 7,508
Directors' fees.................................................... 6,006
Registration fees.................................................. 4,939
Miscellaneous expenses............................................. 4,218
---------
Total expenses................................................ 106,476
Less: Fee waiver and expense reimbursements................... (106,476)
---------
Net expenses.................................................. --
--------
Net investment income.............................................. 157,796
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS FROM UBS INVESTOR
PORTFOLIOS TRUST -- UBS U.S. EQUITY PORTFOLIO
Net realized gain on securities transactions....................... 13,685
Net change in unrealized appreciation of investments............... 684,896
--------
Net realized and unrealized gain on investments from UBS Investor
Portfolios Trust -- UBS U.S. Equity Portfolio.................... 698,581
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $856,377
--------
--------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-46
<PAGE>
<PAGE>
UBS U.S. Equity Fund
Statement of Changes in Net Assets
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income............................................................ $ 157,796
Net realized gain on securities transactions..................................... 13,685
Net change in unrealized appreciation of investments............................. 684,896
-----------
Net increase in net assets resulting from operations............................. 856,377
-----------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income............................................................ (156,639)
-----------
TRANSACTIONS IN SHARES OF COMMON STOCK:
Net proceeds from sale of shares................................................. 13,752,890
Net asset value of shares issued to shareholders in reinvestment of dividends.... 156,639
Cost of shares redeemed.......................................................... (5,168,571)
-----------
Net increase in net assets from transactions in shares of common stock........... 8,740,958
-----------
NET INCREASE IN NET ASSETS....................................................... 9,440,696
NET ASSETS:
Beginning of period.............................................................. 25,000
-----------
End of period (including undistributed net investment income of $1,157).......... $ 9,465,696
-----------
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-47
<PAGE>
<PAGE>
UBS U.S. Equity Fund
Financial Highlights
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
FOR A SHARE OUTSTANDING FOR THE PERIOD
Net asset value, beginning of period..................................... $100.00
-------
Income from investment operations:
Net investment income............................................... 2.05
Net realized and unrealized gain on investments..................... 6.69
-------
Total income from investment operations............................. 8.74
-------
Less dividends to shareholders:
Dividends from net investment income................................ (2.04)
-------
Net asset value, end of period........................................... $106.70
-------
-------
Total return............................................................. 8.74%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)........................... $ 9,466
Ratio of expenses to average net assets(2).......................... 0.90%(3)
Ratio of net investment income to average net assets(2)............. 3.04%(3)
</TABLE>
- ------------------------
(1) Not annualized.
(2) Includes the Fund's share of UBS Investor Portfolio Trust -- UBS U.S. Equity
Portfolio expenses and net of fee waivers and expense reimbursements. Such
fee waivers and expense reimbursements had the effect of reducing the ratio
of expenses to average net assets and increasing the ratio of net investment
income to average net assets by 2.65% (annualized).
(3) Annualized.
See notes to financial statements.
SAI-48
<PAGE>
<PAGE>
UBS U.S. Equity Fund
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
1. GENERAL
UBS U.S. Equity Fund (the 'Fund') is a diversified, no-load mutual fund
registered under the Investment Company Act of 1940. The Fund is a series of UBS
Private Investor Funds, Inc. (the 'Company'), an open-end management investment
company organized as a corporation under Maryland law. At December 31, 1996, the
Company included two other funds, UBS Bond Fund and UBS International Equity
Fund. These financial statements relate only to the Fund.
The Fund had no operations prior to April 2, 1996 other than the sale to
Signature Financial Group, Inc. of 250 shares of common stock for $25,000.
The Fund seeks to achieve its investment objective by investing substantially
all of its investable assets in the UBS U.S. Equity Portfolio of UBS Investor
Portfolios Trust (the 'Portfolio'), an open-end management investment company
that has the same investment objective as that of the Fund.
Signature Broker-Dealer Services, Inc. ('Signature'), a wholly-owned subsidiary
of Signature Financial Group, Inc., serves as the Fund's administrator and
distributor. Union Bank of Switzerland, New York Branch ('UBS') serves as the
fund services agent to the Fund.
The financial statements of the Portfolio, including its Schedule of
Investments, are included elsewhere within this report and should be read in
conjunction with the Fund's financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. Significant accounting policies
followed by the Fund are as follows:
A. INVESTMENT VALUATION -- The value of the Fund's investment in the Portfolio
included in the accompanying Statement of Assets and Liabilities reflects the
Fund's proportionate beneficial interest in the net assets of the Portfolio
(37.3% at December 31, 1996). Valuation of securities by the Portfolio is
discussed in Note 2A of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INVESTMENT INCOME, EXPENSES AND REALIZED AND UNREALIZED GAINS AND
LOSSES -- The Fund records its share of the investment income, expenses and
realized and unrealized gains and losses recorded by the Portfolio on a daily
basis. The investment income, expenses and realized and unrealized gains and
losses are allocated daily to investors of the Portfolio based upon the amount
of their investment in the Portfolio.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies, including
the requirement to distribute substantially all of its taxable income, including
any net realized capital gains on investment transactions, to its shareholders.
Accordingly, no provision for federal income or excise taxes is necessary.
D. DIVIDENDS AND DISTRIBUTIONS -- The Fund declares dividends from net
investment income to shareholders of record on the day of declaration. Such
dividends are declared and paid annually. Net realized gains, if any, will be
distributed at least annually. However, to the extent that net realized gains of
the Fund can be reduced by capital loss carryovers, such gains will not be
distributed. Dividends and distributions are recorded on the ex-dividend date.
The amounts of dividends from net investment income and distributions from net
realized gains are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles. These 'book/tax'
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the composition of net assets based upon their federal tax-basis
treatment; temporary differences do not require reclassification.
SAI-49
<PAGE>
<PAGE>
UBS U.S. Equity Fund
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
E. DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in connection
with its organization in the amount of $72,500 have been deferred and are being
amortized on a straight line basis over five years from the Fund's commencement
of operations (April 2, 1996).
F. OTHER -- The Fund bears all cost of its operations other than expenses
specifically assumed by UBS and Signature. Expenses incurred by the Company on
behalf of any two or more funds are allocated in proportion to the net assets of
each fund, except when allocations of direct expenses to each fund can otherwise
be made fairly. Expenses directly attributable to the Fund are charged directly
to the Fund.
3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
A. ADMINISTRATIVE SERVICES AGREEMENT -- Under the terms of an Administrative
Services Agreement with the Company, Signature provides overall administrative
services and general office facilities. As compensation for such services, the
Company has agreed to pay Signature a fee, accrued daily and payable monthly, at
an annual rate of 0.05% of the Fund's first $100 million average daily net
assets and 0.025% of the next $100 million average daily net assets. Signature
does not receive a fee on average net assets in excess of $200 million. For the
period April 2, 1996 (commencement of operations) through December 31, 1996, the
administrative services fee amounted to $2,593.
B. DISTRIBUTION AGREEMENT -- Under the terms of a Distribution Agreement with
the Company, Signature serves as the distributor of Fund shares. Signature does
not receive any additional fees for services provided pursuant to this
agreement.
C. SHAREHOLDER SERVICES AGREEMENT -- The Fund has entered into a Shareholder
Services Agreement with UBS pursuant to which UBS provides certain services to
shareholders of the Fund. The Fund has agreed to pay UBS a fee for these
services, accrued daily and payable monthly, at an annual rate of 0.25% of the
average daily net assets of the Fund. For the period April 2, 1996 (commencement
of operations) through December 31, 1996, the shareholder service fee amounted
to $12,965, all of which was waived.
D. FUND SERVICES AGREEMENT -- Under the terms of a Fund Services Agreement with
the Company, UBS has agreed to provide certain administrative services to the
Fund. UBS is not entitled to any additional compensation pursuant to this
agreement.
E. EXPENSE REIMBURSEMENTS -- UBS has voluntarily agreed to limit the total
operating expenses of the Fund, including its share of the Portfolio's expenses
and excluding extraordinary expenses, to an annual rate of 0.90% of the Fund's
average daily net assets. For the period April 2, 1996 (commencement of
operations) through December 31, 1996, UBS reimbursed the Fund for expenses
totaling $93,511 in connection with this voluntary limitation. UBS may modify or
discontinue this voluntary expense limitation at any time with 30 days' advance
notice to the Fund.
4. CAPITAL SHARE TRANSACTIONS
At December 31, 1996 there were 500 million shares of the Company's common stock
authorized, of which 10 million shares were classified as common stock of the
Fund. Transactions in shares of the Fund for the period April 2, 1996
(commencement of operations) through December 31, 1996 were as follows:
<TABLE>
<S> <C>
Shares subscribed........................... 137,339
Shares issued to shareholders in
reinvestment of dividends................. 1,465
Shares redeemed............................. (50,342)
-------
Net increase in shares outstanding.......... 88,462
-------
-------
</TABLE>
SAI-50
<PAGE>
<PAGE>
UBS U.S. Equity Fund
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors and
Shareholders of UBS Private Investor Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the UBS U.S. Equity Fund (the 'Fund') (one of the funds constituting the UBS
Private Investor Funds, Inc.) at December 31, 1996, and the results of its
operations, the changes in its net assets and the financial highlights for the
period April 2, 1996 (commencement of operations) through December 31, 1996, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as 'financial
statements') are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, 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
February 21, 1997
SAI-51
<PAGE>
<PAGE>
UBS U.S. Equity Portfolio
Schedule of Investments
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ------ ------------------------------------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK -- 97.6%
BANKING & FINANCIAL INSTITUTIONS -- 14.4%
1,100 BankAmerica Corp..................................................................... $ 109,725
9,200 Corestates Financial Corp............................................................ 477,250
13,100 Great Western Financial.............................................................. 379,900
10,050 J. P. Morgan & Co. Inc............................................................... 981,131
14,000 Mellon Bank Corp..................................................................... 994,000
10,700 U.S. Bancorp......................................................................... 480,831
4,300 Wachovia Corp........................................................................ 242,950
-----------
3,665,787
-----------
CHEMICALS -- 4.2%
5,690 Dow Chemical Company................................................................. 445,954
20,800 Witco Corp........................................................................... 634,400
-----------
1,080,354
-----------
CONSUMER FOODS -- 7.4%
17,870 General Mills Co..................................................................... 1,132,511
21,075 H. J. Heinz Co....................................................................... 753,431
-----------
1,885,942
-----------
CONSUMER GOODS & SERVICES -- 4.8%
23,750 H&R Block Inc........................................................................ 688,750
13,500 Readers Digest Association Inc....................................................... 543,375
-----------
1,232,125
-----------
COSMETICS -- 2.5%
14,010 International Flavors & Fragrances................................................... 630,450
-----------
DRUGS & PHARMACEUTICALS -- 10.9%
12,960 American Home Products Corp.......................................................... 759,780
8,500 Baxter International................................................................. 348,500
8,300 Bristol-Myers Squibb Co.............................................................. 902,625
18,977 Pharmacia & Upjohn Inc............................................................... 751,964
-----------
2,762,869
-----------
INSURANCE -- 5.4%
12,600 American General Corp................................................................ 515,025
4,250 Marsh & McLennan Cos. Inc............................................................ 442,000
10,700 Safeco Corp.......................................................................... 421,981
-----------
1,379,006
-----------
LUMBER, PAPER & BUILDING SUPPLIES -- 7.6%
10,550 Potlatch Corp........................................................................ 453,650
6,200 Union Camp Corp...................................................................... 296,050
24,800 Weyerhauser Co....................................................................... 1,174,900
-----------
1,924,600
-----------
MANUFACTURING -- 3.7%
11,510 Minnesota Mining & Manufacturing..................................................... 953,891
-----------
NATURAL GAS -- 0.8%
6,000 NICOR Inc............................................................................ 214,500
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-52
<PAGE>
<PAGE>
UBS U.S. Equity Portfolio
Schedule of Investments
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ------ ------------------------------------------------------------------------------------- -----------
<C> <S> <C>
OFFICE EQUIPMENT AND SUPPLIES -- 1.6%
7,250 Pitney Bowes, Inc.................................................................... $ 395,125
-----------
PETROLEUM PRODUCTION & SALES -- 7.7%
4,700 Amoco Corporation.................................................................... 378,350
5,650 Atlantic Richfield Co................................................................ 748,625
7,800 Chevron Corporation.................................................................. 507,000
2,300 Exxon Corporation.................................................................... 225,400
1,120 Texaco Inc........................................................................... 109,900
-----------
1,969,275
-----------
PRINTING & PUBLISHING -- 0.9%
9,200 Dun & Bradstreet Corporation......................................................... 218,500
-----------
RETAIL -- 4.1%
21,220 J. C. Penney Company, Inc............................................................ 1,034,475
-----------
TELECOMMUNICATIONS -- 11.0%
15,200 Bell Atlantic Corp................................................................... 984,200
22,350 GTE Corporation...................................................................... 1,016,925
4,700 SBC Communications................................................................... 243,225
16,800 US West Inc.......................................................................... 541,800
-----------
2,786,150
-----------
TOBACCO -- 8.0%
9,600 American Brands, Inc................................................................. 476,400
10,150 Philip Morris Companies, Inc......................................................... 1,143,144
12,600 UST, Inc............................................................................. 407,925
-----------
2,027,469
-----------
UTILITIES -- 2.6%
10,750 Baltimore Gas and Electric........................................................... 287,563
5,860 Central & South West Corp............................................................ 150,163
8,200 Wisconsin Energy Corp................................................................ 220,375
-----------
658,101
-----------
TOTAL INVESTMENTS AT MARKET VALUE -- 97.6%
(COST $23,144,284) ... 24,818,619
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.4%................................................. 607,114
-----------
NET ASSETS -- 100.0%.......................................................................... $25,425,733
-----------
-----------
</TABLE>
- ------------------------
Note: Based upon the cost of investments of $23,146,237 for Federal Income Tax
purposes at December 31, 1996, the aggregate gross unrealized appreciation
and depreciation was $2,047,624 and $375,242, respectively, resulting in
net unrealized appreciation of $1,672,382.
See notes to financial statements.
SAI-53
<PAGE>
<PAGE>
UBS U.S. Equity Portfolio
Statement of Assets and Liabilities
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment, at value (cost $23,144,284)..................................... $24,818,619
Cash........................................................................ 2,980,844
Dividends and interest receivable........................................... 81,913
Deferred organization expenses and other assets............................. 43,094
-----------
Total Assets........................................................... 27,924,470
-----------
LIABILITIES:
Administrative services fees payable........................................ 964
Trustees' fees payable...................................................... 1,929
Payable for investment securities purchased................................. 2,382,507
Organization expenses payable............................................... 42,733
Other accrued expenses...................................................... 70,604
-----------
Total Liabilities...................................................... 2,498,737
-----------
NET ASSETS.................................................................. $25,425,733
-----------
-----------
NET ASSETS CONSIST OF:
Paid-in capital for beneficial interests.................................... $25,425,733
-----------
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-54
<PAGE>
<PAGE>
UBS U.S. Equity Portfolio
Statement of Operations
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends.......................................................... $524,846
Interest........................................................... 35,449
--------
Investment income............................................. $ 560,295
EXPENSES
Investment advisory fees........................................... 84,435
Administrative services fees....................................... 7,036
Audit fees......................................................... 39,357
Custodian fees and expenses........................................ 24,387
Fund accounting fees............................................... 19,348
Legal fees......................................................... 15,273
Amortization of organization expenses.............................. 7,508
Trustees' fees..................................................... 7,508
Insurance expense.................................................. 1,647
Miscellaneous expenses............................................. 6,110
--------
Total expenses................................................ 212,609
Less: Fee waiver.............................................. (84,435)
--------
Net expenses.................................................. 128,174
----------
Net investment income.............................................. 432,121
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on securities transactions....................... 1,679
Net change in unrealized appreciation of investments............... 1,674,335
----------
Net realized and unrealized gain on investments.................... 1,676,014
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $2,108,135
----------
----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-55
<PAGE>
<PAGE>
UBS U.S. Equity Portfolio
Statement of Changes in Net Assets
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income............................................................ $ 432,121
Net realized gain on securities transactions..................................... 1,679
Net change in unrealized appreciation of investments............................. 1,674,335
-----------
Net increase in net assets resulting from operations............................. 2,108,135
-----------
CAPITAL TRANSACTIONS:
Proceeds from contributions...................................................... 30,786,561
Value of withdrawals............................................................. (7,468,963)
-----------
Net increase in net assets from capital transactions............................. 23,317,598
-----------
NET INCREASE IN NET ASSETS....................................................... 25,425,733
NET ASSETS:
Beginning of period.............................................................. --
-----------
End of period.................................................................... $25,425,733
-----------
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-56
<PAGE>
<PAGE>
UBS U.S. Equity Portfolio
Financial Highlights
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted)................................ $25,426
Average commission per share............................................. $ 0.06
Ratio of expenses to average net assets(1)............................... 0.91%(2)
Ratio of net investment income to average net assets(1).................. 3.07%(2)
Portfolio turnover....................................................... 19%
</TABLE>
- ------------------------
(1) Net of fee waivers. Such fee waivers had the effect of reducing the ratio of
expenses to average net assets and increasing the ratio of net investment
income to average net assets by 0.60% (annualized).
(2) Annualized.
- ------------------------
See notes to financial statements.
SAI-57
<PAGE>
<PAGE>
UBS U.S. Equity Portfolio
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
1. GENERAL
UBS U.S. Equity Portfolio (the 'Portfolio'), a separate series of UBS Investor
Portfolios Trust (the 'Trust'), is registered under the Investment Company Act
of 1940, as a diversified, open-end management investment company. The Trust is
organized as a trust under the laws of the State of New York.
The investment adviser of the Portfolio is Union Bank of Switzerland, New York
Branch ('UBS'). Signature Financial Group (Grand Cayman), Ltd. ('SFG'), a
wholly-owned subsidiary of Signature Financial Group, Inc., acts as the
Portfolio's administrator and placement agent.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the
Portfolio in the preparation of its financial statements:
A. INVESTMENT VALUATION -- Equity securities in the portfolio are valued at
their last sale price on the exchange on which they are primarily traded, or in
the absence of recorded sales, at the average of readily available closing bid
and asked prices, or at the quoted bid price. Unlisted securities are valued at
the average of the quoted bid and asked prices in the over-the-counter market.
Options on stock indices traded on national securities exchanges are valued at
their last sale price as of the close of options trading on such exchanges.
Stock index futures and related options traded on commodities exchanges are
valued at their last sales price as of the close of such exchanges.
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 Portfolio's Board of Trustees (the 'Trustees').
Debt securities that mature in 60 days or less are valued at amortized cost,
which approximates market value. The amortized cost method involves valuing a
security at its cost on the date of purchase or, in the case of securities
purchased with more than 60 days until maturity, at their market value each day
until the 61st day prior to maturity, and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and such valuation.
B. ACCOUNTING FOR INVESTMENTS -- Securities transactions are accounted for on
trade date. Realized gains and losses on security transactions are determined on
the identified cost basis. Dividend income and other distributions from
portfolio securities are recorded on the ex-dividend date. Interest income,
adjusted for amortization of premiums and accretion of discounts on investments,
is accrued daily.
C. U. S. FEDERAL INCOME TAXES -- The Portfolio is considered a partnership under
the U. S. Internal Revenue Code (the 'Code'). As such, each investor in the
Portfolio will be taxed on its share of the Portfolio's ordinary income and
capital gains. Accordingly, no provision for federal income taxes is necessary.
It is intended that the Portfolio will be managed in such a way that an investor
will be able to satisfy the requirements of the Code applicable to regulated
investment companies.
D. DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Portfolio in
connection with its organization in the amount of $50,000 have been deferred and
are being amortized on a straight line basis over five years from the
Portfolio's commencement of operations (April 2, 1996).
E. OTHER -- The Portfolio bears all costs of its operations other than expenses
specifically assumed by UBS and SFG. Expenses incurred by the Trust on behalf of
any two or more portfolios are allocated in proportion to the
SAI-58
<PAGE>
<PAGE>
UBS U.S. Equity Portfolio
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
net assets of each portfolio, except when allocations of direct expenses to each
portfolio can otherwise be made fairly. Expenses directly attributable to the
Portfolio are charged directly to the Portfolio.
3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
A. INVESTMENT ADVISORY AGREEMENT -- The Portfolio has retained the services of
UBS as investment adviser. UBS 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. As compensation for overall
investment management services the Trust has agreed to pay UBS an investment
advisory fee, accrued daily and payable monthly, at an annual rate of 0.60% of
the Portfolio's average daily net assets. For the period April 2, 1996
(commencement of operations) through December 31, 1996, UBS voluntarily agreed
to waive the entire investment advisory fee. Such waiver amounted to $84,435.
B. ADMINISTRATIVE SERVICES AGREEMENT -- Under the terms of an Administrative
Services Agreement with the Trust, SFG provides overall administrative services
and general office facilities to the Portfolio and the Trust. As compensation
for such services, the Portfolio has agreed to pay SFG an administrative
services fee, accrued daily and payable monthly, at an annual rate of 0.05% of
the Portfolio's average daily net assets. For the period April 2, 1996
(commencement of operations) through December 31, 1996, the administrative
services fee amounted to $7,036.
C. EXCLUSIVE PLACEMENT AGENT AGREEMENT -- Under the terms of an Exclusive
Placement Agent Agreement with the Trust, SFG has agreed to act as the Trust's
placement agent. SFG does not receive any additional fees for services provided
pursuant to this agreement.
4. PURCHASES AND SALES OF INVESTMENTS
For the period April 2, 1996 (commencement of operations) through December 31,
1996, purchases and sales of investment securities, excluding short-term
investments, aggregated $26,712,324 and $3,569,719, respectively.
SAI-59
<PAGE>
<PAGE>
UBS U.S. Equity Portfolio
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Trustees and
Investors of UBS Investor Portfolios Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position, of the UBS U.S. Equity Portfolio (the
'Portfolio') (one of the portfolios constituting the UBS Investor Portfolio
Trust) at December 31, 1996, and the results of its operations, the changes in
its net assets and the financial highlights for the period April 2, 1996
(commencement of operations) through December 31, 1996, in conformity with
generally accepted accounting principles in the United States. These financial
statements and financial highlights (hereafter referred to as 'financial
statements') are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of securities at December 31, 1996 by correspondence with the custodian and
brokers, provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Chartered Accountants
Toronto, Ontario
February 21, 1997
SAI-60
<PAGE>
<PAGE>
UBS International Equity Fund
Statement of Assets and Liabilities
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investment in UBS Investor Portfolios Trust -- UBS International Equity
Portfolio, at value......................................................... $26,610,544
Receivable from Adviser....................................................... 7,091
Tax reclaim receivable........................................................ 29,290
Deferred organization expenses and other assets............................... 63,600
-----------
Total Assets........................................................ 26,710,525
-----------
LIABILITIES:
Administrative services fees payable.......................................... 568
Directors' fees payable....................................................... 341
Organization expenses payable................................................. 32,509
Other accrued expenses........................................................ 53,378
-----------
Total Liabilities................................................... 86,796
-----------
NET ASSETS.................................................................... $26,623,729
-----------
-----------
SHARES OUTSTANDING ($0.001 par value, 10 million shares authorized)........... 258,877
-----------
-----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE................ $102.84
-----------
-----------
COMPOSITION OF NET ASSETS:
Shares of common stock, at par................................................ $ 259
Additional paid-in capital.................................................... 26,227,022
Net unrealized appreciation of investments, foreign currency contracts and
foreign currency translations............................................... 340,608
Accumulated undistributed net investment income............................... 18,022
Accumulated undistributed net realized gains on securities and foreign
currency translations....................................................... 37,818
-----------
Net Assets.......................................................... $26,623,729
-----------
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-61
<PAGE>
<PAGE>
UBS International Equity Fund
Statement of Operations
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Investment Income and Expenses allocated from UBS Investor
Portfolios Trust -- UBS International Equity Portfolio
Dividends (net of foreign withholding tax of $14,285)......... $194,621
Interest...................................................... 66,737
--------
Investment income............................................. 261,358
Total expenses................................................ $137,406
Less: Fee waiver.............................................. (63,711)
--------
Net expenses.................................................. 73,695
--------
Net Investment Income from UBS Investor Portfolios Trust -- UBS
International Equity Portfolio................................... 187,663
EXPENSES
Shareholder service fees...................................... 20,658
Administrative services fees.................................. 4,131
Reports to shareholders expense............................... 22,333
Transfer agent fees........................................... 15,763
Audit fees.................................................... 11,259
Amortization of organization expenses......................... 10,886
Fund accounting fees.......................................... 8,006
Legal fees.................................................... . 7,508
Directors' fees............................................... 6,006
Registration fees............................................. 2,944
Miscellaneous expenses........................................ 4,849
--------
Total expenses........................................... 114,343
Less: Fee waiver and expense reimbursements.............. (73,557)
--------
Net expenses............................................. 40,786
--------
Net investment income.............................................. 146,877
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM UBS
INVESTOR PORTFOLIOS TRUST -- UBS INTERNATIONAL EQUITY PORTFOLIO
Net realized gain on securities transactions....................... 132,573
Net realized gain on foreign currency transactions................. 2,984
Net change in unrealized appreciation of investments............... 342,866
Net change in unrealized depreciation of foreign currency contracts
and translations................................................. (2,258)
--------
Net realized and unrealized gain on investments from UBS Investor
Portfolios Trust -- UBS International Equity Portfolio........... 476,165
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $623,042
--------
--------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-62
<PAGE>
<PAGE>
UBS International Equity Fund
Statement of Changes in Net Assets
For the period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income............................................................ $ 146,877
Net realized gain on securities and foreign currency transactions................ 135,557
Net change in unrealized appreciation of investments, foreign currency contracts
and foreign currency translations.............................................. 340,608
-----------
Net increase in net assets resulting from operations............................. 623,042
-----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................................ (136,578)
Net realized gains on investments................................................ (94,755)
-----------
Total dividends and distributions to shareholders................................ (231,333)
-----------
TRANSACTIONS IN SHARES OF COMMON STOCK:
Net proceeds from sale of shares................................................. 30,851,057
Net asset value of shares issued to shareholders in reinvestment of dividends and
distributions.................................................................. 229,580
Cost of shares redeemed.......................................................... (4,873,617)
-----------
Net increase in net assets from transactions in shares of common stock........... 26,207,020
-----------
NET INCREASE IN NET ASSETS....................................................... 26,598,729
NET ASSETS:
Beginning of period.............................................................. 25,000
-----------
End of period (including undistributed net investment income of $18,022)......... $26,623,729
-----------
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-63
<PAGE>
<PAGE>
UBS International Equity Fund
Financial Highlights
For the period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING FOR THE PERIOD
<S> <C>
Net asset value, beginning of period.................................... $100.00
-------
Income from Investment Operations:
Net investment income.............................................. 1.08
Net realized and unrealized gain on investments, foreign currency
contracts and foreign currency translations...................... 3.54
-------
Total income from investment operations............................ 4.62
-------
Less Dividends and Distributions to Shareholders:
Dividends from net investment income............................... (1.05)
Distributions from net realized gains.............................. (0.73)
-------
Total dividends and distributions.................................. (1.78)
-------
Net asset value, end of period.......................................... $102.84
-------
-------
Total Return............................................................ 4.65%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted)........................... $26,624
Ratio of expenses to average net assets(2)......................... 1.39%(3)
Ratio of net investment income to average net assets(2)............ 1.78%(3)
</TABLE>
- ------------------------
(1) Not annualized.
(2) Includes the Fund's share of UBS Investor Portfolio Trust -- UBS
International Equity Portfolio expenses and net of fee waivers and expense
reimbursements. Such fee waivers and expense reimbursements had the effect
of reducing the ratio of expenses to average net assets and increasing the
ratio of net investment income to average net assets by 1.66% (annualized).
(3) Annualized.
See notes to financial statements.
SAI-64
<PAGE>
<PAGE>
UBS International Equity Fund
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
1. GENERAL
UBS International Equity Fund (the 'Fund') is a diversified, no-load mutual fund
registered under the Investment Company Act of 1940. The Fund is a series of UBS
Private Investor Funds, Inc. (the 'Company'), an open-end management investment
company organized as a corporation under Maryland law. At December 31, 1996, the
Company included two other funds, UBS Bond Fund and UBS U.S. Equity Fund. These
financial statements relate only to the Fund.
The Fund had no operations prior to April 2, 1996 other than the sale to
Signature Financial Group, Inc. of 250 shares of common stock for $25,000.
The Fund seeks to achieve its investment objective by investing substantially
all of its investable assets in the UBS International Equity Portfolio of UBS
Investor Portfolios Trust (the 'Portfolio'), an open-end management investment
company that has the same investment objective as that of the Fund.
Signature Broker-Dealer Services, Inc. ('Signature'), a wholly-owned subsidiary
of Signature Financial Group, Inc., serves as the Fund's administrator and
distributor. Union Bank of Switzerland, New York Branch ('UBS') serves as the
fund services agent to the Fund.
The financial statements of the Portfolio, including its Schedule of
Investments, are included elsewhere within this report and should be read in
conjunction with the Fund's financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. Significant accounting policies
followed by the Fund are as follows:
A. INVESTMENT VALUATION -- The value of the Fund's investment in the Portfolio
included in the accompanying Statement of Assets and Liabilities reflects the
Fund's proportionate beneficial interest in the net assets of the Portfolio
(64.0% at December 31, 1996). Valuation of securities by the Portfolio is
discussed in Note 2A of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INVESTMENT INCOME, EXPENSES AND REALIZED AND UNREALIZED GAINS AND
LOSSES -- The Fund records its share of the investment income, expenses and
realized and unrealized gains and losses recorded by the Portfolio on a daily
basis. The investment income, expenses and realized and unrealized gains and
losses are allocated daily to investors of the Portfolio based upon the amount
of their investment in the Portfolio. The amount of foreign withholding taxes
deducted from the dividend income allocated to the Fund from the Portfolio is
net of amounts the Fund expects to recover from foreign tax authorities.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies, including
the requirement to distribute substantially all of its taxable income, including
any net realized capital gains on investment transactions, to its shareholders.
Accordingly, no provision for federal income or excise taxes is necessary.
D. DIVIDENDS AND DISTRIBUTIONS -- The Fund declares dividends from net
investment income to shareholders of record on the day of declaration. Such
dividends are declared and paid annually. Net realized gains, if any, will be
distributed at least annually. However, to the extent that net realized gains of
the Fund can be reduced by capital loss carryovers, such gains will not be
distributed. Dividends and distributions are recorded on the ex-dividend date.
The amounts of dividends from net investment income and distributions from net
realized gains are determined in accordance with federal income tax regulations
which may differ from generally accepted
SAI-65
<PAGE>
<PAGE>
UBS International Equity Fund
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
accounting principles. These 'book/tax' differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the composition of net assets
based upon their federal tax-basis treatment; temporary differences do not
require reclassification. For the fiscal year ended December 31, 1996, the Fund
increased accumulated undistributed net investment income by $7,723, decreased
accumulated undistributed net realized gains by $2,984 and decreased paid-in
capital by $4,739. Net investment income, net realized gains and net assets were
not affected by this change.
E. DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Fund in connection
with its organization in the amount of $72,500 have been deferred and are being
amortized on a straight line basis over five years from the Fund's commencement
of operations (April 2, 1996).
F. OTHER -- The Fund bears all costs of its operations other than expenses
specifically assumed by Signature and UBS. Expenses incurred by the Company on
behalf of any two or more funds are allocated in proportion to the net assets of
each fund, except when allocations of direct expenses to each fund can otherwise
be made fairly. Expenses directly attributable to the Fund are charged directly
to the Fund.
3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
A. ADMINISTRATIVE SERVICES AGREEMENT -- Under the terms of an Administrative
Services Agreement with the Company, Signature provides overall administrative
services and general office facilities. As compensation for such services, the
Company has agreed to pay Signature a fee, accrued daily and payable monthly, at
an annual rate of 0.05% of the Fund's first $100 million average daily net
assets and 0.025% of the next $100 million average daily net assets. Signature
does not receive a fee on average daily net assets in excess of $200 million.
For the period April 2, 1996 (commencement of operations) through December 31,
1996, the administrative services fee amounted to $4,131.
B. DISTRIBUTION AGREEMENT -- Under the terms of a Distribution Agreement with
the Company, Signature serves as the distributor of Fund shares. Signature does
not receive any additional fees for services provided pursuant to this
agreement.
C. SHAREHOLDER SERVICES AGREEMENT -- The Fund has entered into a Shareholder
Services Agreement with UBS pursuant to which UBS provides certain services to
shareholders of the Fund. The Fund has agreed to pay UBS a fee for these
services, accrued daily and payable monthly, at an annual rate of 0.25% of the
average daily net assets of the Fund. For the period April 2, 1996 (commencement
of operations) through December 31, 1996, the shareholder service fee amounted
to $20,658, all of which was waived.
D. FUND SERVICES AGREEMENT -- Under the terms of a Fund Services Agreement with
the Company, UBS has agreed to provide certain administrative services to the
Fund. UBS is not entitled to any additional compensation pursuant to this
agreement.
E. EXPENSE REIMBURSEMENTS -- UBS has voluntarily agreed to limit the total
operating expenses of the Fund, including its share of the Portfolio's expenses
and excluding extraordinary expenses. For the period April 2, 1996 (commencement
of operations) through December 26, 1996, the Fund's total operating expenses
were limited to an annual rate of 1.40%. Effective December 27, 1996, this
expense limitation was reduced to an annual rate of 0.95% of the Fund's average
daily net assets. For the period April 2, 1996 (commencement of operations)
through December 31, 1996, UBS reimbursed the Fund for expenses totaling $52,899
in connection with this voluntary limitation. The Adviser may modify or
discontinue this voluntary expense limitation at any time with 30 days' advance
notice to the Fund.
SAI-66
<PAGE>
<PAGE>
UBS International Equity Fund
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
4. CAPITAL SHARE TRANSACTIONS
At December 31, 1996 there were 500 million shares of the Company's common stock
authorized, of which 10 million shares were classified as common stock of the
Fund. Transactions in shares of the Fund for the period April 2, 1996
(commencement of operations) through December 31, 1996 were as follows:
<TABLE>
<S> <C>
Shares subscribed..................................... 304,954
Shares issued to shareholders in reinvestment
of dividends and distributions...................... 2,281
Shares redeemed....................................... (48,608)
-------
Net increase in shares outstanding.................... 258,627
-------
-------
</TABLE>
SAI-67
<PAGE>
<PAGE>
UBS International Equity Fund
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors
and Shareholders of
UBS PRIVATE INVESTOR FUNDS, INC.
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the UBS International Equity Fund (the 'Fund') (one of the funds constituting
UBS Private Investor Funds, Inc.) at December 31, 1996, and the results of its
operations, the changes in its net assets and the financial highlights for the
period April 2, 1996 (commencement of operations) through December 31, 1996, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as 'financial
statements') are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, 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, NY
February 21, 1997
SAI-68
<PAGE>
<PAGE>
UBS International Equity Portfolio
Schedule of Investments
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ----------- -------------------------------------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK -- 83.1%
AUSTRALIA -- 6.2%
32,000 Australia & New Zealand Bank Group (Banking & Finance)................................ $ 201,701
15,800 Australian National Industries (Metals & Mining)...................................... 15,698
249,171 Burns Philp & Co. (Food).............................................................. 443,640
62,500 Coles Myer Ltd. (Retail).............................................................. 257,333
159,400 Fosters Brewing Group (Beverages)..................................................... 323,083
189,100 Goodman Fielder Limited (Food)........................................................ 234,478
565,638 MIM Holdings (Metals & Mining)........................................................ 791,291
89,000 Pacific Dunlop Ltd. (Diversified)..................................................... 226,373
50,000 Pasminco Limited (Metals & Mining).................................................... 78,690
-----------
2,572,287
-----------
DENMARK -- 1.7%
2,700 BG Bank A/S (Banking & Finance)....................................................... 126,541
10,500 Tele Danmark -- B shares (Telecommunications)......................................... 579,470
-----------
706,011
-----------
FRANCE -- 14.2%
8,800 Alcatel Alsthom SA (Electrical & Electronics)......................................... 708,009
3,060 AXA Company (Banking & Finance)....................................................... 194,923
5,358 Banque Nationale de Paris (Banking & Finance)......................................... 207,680
4,500 Casino-Guichard-PE (Etabl Econ) (Food)................................................ 209,864
4,200 Compagnie Financiere de Suez (Banking & Finance)...................................... 178,848
6,130 Groupe Danone (Food).................................................................. 855,514
22,600 Moulinex (Household Appliances)*...................................................... 521,320
5,100 Pechiney SA -- A Shares (Metals & Mining)............................................. 214,022
4,300 Pernod-Ricard SA (Beverages).......................................................... 238,220
2,050 Peugeot SA (Automotive)............................................................... 231,097
1,460 Sefimeg (Societe Francaise d'Investissements Immobiliers et de Gestion) (Real
Estate)............................................................................. 105,967
10,000 Societe Nationale Elf-Aquitaine (Energy Sources)...................................... 911,688
18,300 Thomson CSF (Defense Electronics)..................................................... 594,516
9,070 Total Cie Francaise des Petroles -- B shares (Energy Sources)......................... 738,836
-----------
5,910,504
-----------
GERMANY -- 8.1%
26,000 Bayer AG (Chemicals).................................................................. 1,061,294
13,500 Deutsche Bank AG (Banking & Finance).................................................. 630,907
770 Schmalbach-Lubeca AG (Packaging)*..................................................... 189,184
11,500 Veba AG (Diversified)................................................................. 665,258
2,000 Volkswagen AG (Automotive)............................................................ 831,979
-----------
3,378,622
-----------
GREAT BRITAIN -- 13.9%
86,320 Allied Domecq PLC (Food & Beverages).................................................. 675,630
81,900 B.A.T. Industries (Tobacco)........................................................... 680,310
115,700 BTR Limited (Diversified)............................................................. 562,773
15,840 Bass PLC (Beverages).................................................................. 222,731
247,200 British Gas Corp. (Energy Sources).................................................... 952,604
16,800 British Petroleum Co. PLC (Energy Sources)............................................ 201,557
53,000 MEPC British Registered (Real Estate)................................................. 393,955
178,000 Marley PLC (Building Materials)....................................................... 385,649
123,550 Northern Foods PLC (Food)............................................................. 427,440
43,950 Peninsular & Orient Steam (Transportation)............................................ 444,112
17,700 South West Water PLC (Utilities)...................................................... 182,798
209,750 Tarmac PLC (Building Materials)....................................................... 352,054
</TABLE>
- ------------------------
See notes to financial statements.
SAI-69
<PAGE>
<PAGE>
UBS International Equity Portfolio
Schedule of Investments
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ----------- -------------------------------------------------------------------------------------- -----------
<S> <C> <C>
30,040 Thames Water PLC (Utilities).......................................................... 316,415
-----------
5,798,028
-----------
HONG KONG -- 0.3%
548,000 Yizheng Chemical Fibre Co. (Chemicals)................................................ $ 133,201
-----------
INDONESIA -- 0.3%
47,000 PT Astra International (Automotive)................................................... 129,340
-----------
JAPAN -- 21.1%
11,000 Dai Nippon Printing Co. (Printing).................................................... 192,816
13,000 Fuji Photo Film Co. (Photographic Equipment & Supplies)............................... 428,806
80,000 Hitachi Ltd. (Hit. Seisakusho) (Electrical & Electronics)............................. 746,050
96,000 Ishikawajima Harima Heavy Industries (Machinery)...................................... 426,906
20,000 JGC Engineering & Construction Corp. (Engineering).................................... 150,073
68 Japan Tobacco Inc. (Tobacco).......................................................... 460,927
41,000 Japan Wool Textile Co. (Apparel & Textiles)........................................... 338,451
49,000 Kansai Paint Co. (Chemicals).......................................................... 220,016
14,000 Kao Corp. (Household Products)........................................................ 163,198
33,000 Koito Manufacturing Co., Ltd. (Automotive -- Parts & Equipment)....................... 220,836
36,000 Marudai Food Co., Ltd. (Food)......................................................... 192,419
22,000 Matsushita Electric Industries (Electrical & Electronics)............................. 359,036
105,000 Mitsubishi Chemical Corp. (Chemicals)*................................................ 339,997
38,000 Mitsubishi Estate Co. (Real Estate)................................................... 390,467
27,000 Mitsubishi Heavy Industries (Aerospace/Defense Equipment)............................. 214,489
38,000 Nihon Cement Co. (Building Materials)................................................. 193,921
77,000 Nippon Yusen Kabushiki Kaish (Shipping)............................................... 348,398
36,000 Nissan Fire & Marine Insurance (Insurance)............................................ 198,947
47,000 Nisshinbo Industries Inc. (Apparel & Textiles)........................................ 366,065
3,900 Sony Corp. (Electrical & Electronics)................................................. 255,600
53,000 Sumitomo Marine & Fire (Insurance).................................................... 329,505
1,000 Takashimaya Co. (Retail).............................................................. 12,002
69,000 Toray Industries Inc. (Chemicals)..................................................... 425,999
13,000 Uny Co. (Retail)...................................................................... 237,976
115 West Japan Railway (Transportation)................................................... 372,377
35,000 Yamaha Motor Co. (Automotive)......................................................... 314,308
42,000 Yamanouchi Pharmaceutical (Pharmaceuticals)........................................... 863,138
-----------
8,762,723
-----------
NETHERLANDS -- 2.3%
12,400 Internationale Nederlanden Groep NV (Banking & Finance)............................... 446,730
14,500 Koninklijke Papierfabrieken BT NV (Paper & Forest Product)............................ 316,623
5,040 Royal PTT Nederland (Telecommunications).............................................. 192,375
-----------
955,728
-----------
NEW ZEALAND -- 0.8%
10,300 Ceramco Corp. Ltd. (Diversified)...................................................... 9,830
116,000 Fletcher Challenge Paper Shares (Paper & Forest Products)............................. 238,638
39,200 Fletcher Challenge Forestry Shares (Forest Products).................................. 65,679
-----------
314,147
-----------
NORWAY -- 0.5%
8,100 Bergesen D.Y. ASA (Transportation).................................................... 196,117
-----------
SINGAPORE -- 1.9%
280,579 Dairy Farm International Holdings (Food).............................................. 225,866
121,898 Hong Kong Land Holdings (Real Estate)................................................. 338,876
34,965 Jardine Matheson Holdings (Diversified)............................................... 230,769
-----------
795,511
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-70
<PAGE>
<PAGE>
UBS International Equity Portfolio
Schedule of Investments
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ----------- -------------------------------------------------------------------------------------- -----------
<C> <S> <C>
SOUTH KOREA -- 0.3%
18,000 Hyundai Motor Co. GDR (Automotive)*................................................... $ 134,100
-----------
SPAIN -- 0.9%
46,530 Uralita (Building Materials).......................................................... 363,782
SWEDEN -- 3.9%
11,050 Electrolux (Household Appliances)..................................................... 642,588
13,020 SKF AB -- B shares (Manufacturing).................................................... 308,787
47,300 Stora Kopparbergs -- A Shares (Paper & Forest Products)............................... 652,926
-----------
1,604,301
-----------
SWITZERLAND -- 6.3%
600 Forbo Holding (Building Materials).................................................... 242,062
1,100 Nestle SA (Food & Beverages).......................................................... 1,180,949
729 Novartis (Pharmaceuticals)*........................................................... 834,932
600 Winterthur Schweiz Vers-R (Insurance)................................................. 346,956
-----------
2,604,899
-----------
THAILAND -- 0.4%
12,300 Shinawatra Computer Company (Technology).............................................. 148,678
-----------
TOTAL COMMON STOCK (COST $34,119,162)................................................. 34,507,979
-----------
CONVERTIBLE PREFERRED STOCK -- 0.6%
JAPAN -- 0.6%
30,000,000 Sakura Finance, Series II, 0.75%, due 10/01/01** (Banking & Finance)
(Cost $282,056)..................................................................... 267,140
-----------
CONTINGENT VALUE RIGHTS -- 0.0%
FRANCE -- 0.0%
3,060 AXA Company (Banking & Finance) (Cost $0)***.......................................... 0
-----------
TOTAL INVESTMENTS AT MARKET VALUE -- 83.7%
(COST $34,401,218)............................................................................... 34,775,119
OTHER ASSETS IN EXCESS OF LIABILITIES -- 16.3%..................................................... 6,771,460
-----------
NET ASSETS -- 100.0%............................................................................... $41,546,579
-----------
-----------
</TABLE>
- ------------------------
GDR -- Global Depository Receipts.
* Non-income producing security.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At December 31, 1996, the value
of this security amounted to $267,140 or 0.6% of net assets.
*** This security did not commence trading until January 14, 1997. At December
31, 1996 there was no market for this security.
Note: Based on the cost of investments of $34,401,218 for Federal Income Tax
purposes at December 31, 1996, the aggregate gross unrealized appreciation
and depreciation was $1,866,903 and $1,493,002, respectively, resulting in
net unrealized appreciation of $373,901.
See notes to financial statements.
SAI-71
<PAGE>
<PAGE>
UBS International Equity Portfolio
Schedule of Investments
December 31, 1996
- --------------------------------------------------------------------------------
SUMMARY OF INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY DIVERSIFICATION (UNAUDITED) NET ASSETS
------------------------------------ -----------
<S> <C>
Energy Sources....................................................................................... 6.8%
Food................................................................................................. 6.2%
Banking & Finance.................................................................................... 5.4%
Chemicals............................................................................................ 5.2%
Electrical & Electronics............................................................................. 5.0%
Food & Beverages..................................................................................... 4.5%
Pharmaceuticals...................................................................................... 4.1%
Diversified.......................................................................................... 4.1%
Automotive........................................................................................... 4.0%
Building Materials................................................................................... 3.7%
Real Estate.......................................................................................... 3.0%
Paper & Forest Products.............................................................................. 2.9%
Household Appliances................................................................................. 2.8%
Tobacco.............................................................................................. 2.7%
Metals & Mining...................................................................................... 2.6%
Transportation....................................................................................... 2.4%
Insurance............................................................................................ 2.1%
Beverages............................................................................................ 1.9%
Telecommunications................................................................................... 1.9%
Apparel & Textiles................................................................................... 1.7%
Defense Electronics.................................................................................. 1.4%
Retail............................................................................................... 1.2%
Utilities............................................................................................ 1.2%
Photographic Equipment & Supplies.................................................................... 1.0%
Machinery............................................................................................ 1.0%
Shipping............................................................................................. 0.8%
Manufacturing........................................................................................ 0.7%
Automotive -- Parts & Equipment...................................................................... 0.5%
Aerospace / Defense Equipment........................................................................ 0.5%
Packaging............................................................................................ 0.5%
Printing............................................................................................. 0.5%
Household Products................................................................................... 0.4%
Engineering.......................................................................................... 0.4%
Technology........................................................................................... 0.4%
Forest Products...................................................................................... 0.2%
-----------
Total Portfolio Holdings............................................................................. 83.7%
Other assets in excess of liabilities................................................................ 16.3%
-----------
Total Net Assets..................................................................................... 100.0%
-----------
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-72
<PAGE>
<PAGE>
UBS International Equity Portfolio
Schedule of Investments
December 31, 1996
- --------------------------------------------------------------------------------
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR
FOREIGN U.S. DOLLAR NET UNREALIZED
CURRENCY UNITS U.S. DOLLAR VALUE AT APPRECIATION/
CURRENCY AND SETTLEMENT DATE PURCHASED/SOLD COST/PROCEEDS DECEMBER 31, 1996 (DEPRECIATION)
- --------------------------------------------------- -------------- ------------- ----------------- --------------
<S> <C> <C> <C> <C>
PURCHASE CONTRACTS
Australian Dollar, 1/07/97......................... 562,647 $ 448,711 $ 447,175 ($ 1,536)
Australian Dollar, 1/08/97......................... 111,016 88,480 88,231 (249)
Swiss Franc, 1/06/97............................... 1,219,183 903,098 911,436 8,338
German Deutsche Mark, 1/06/97...................... 1,692,482 1,088,973 1,100,531 11,558
Danish Krone, 1/06/97.............................. 1,399,769 235,810 237,770 1,960
Spanish Peseta, 1/09/97............................ 15,642,120 119,615 120,457 842
French Franc, 1/31/97.............................. 9,045,738 1,728,711 1,749,415 20,704
British Pound, 1/07/97............................. 866,020 1,468,935 1,483,015 14,080
Hong Kong Dollar, 1/03/97.......................... 275,087 35,564 35,567 3
Japanese Yen, 1/08/97.............................. 362,927,155 3,129,155 3,137,482 8,327
Dutch Guilder, 1/06/97............................. 534,289 306,587 309,590 3,003
Norwegian Krone, 1/06/97........................... 419,630 65,252 65,148 (104)
New Zealand Dollar, 1/08/97........................ 89,738 63,534 63,407 (127)
Swedish Krona, 1/07/97............................. 3,675,096 534,249 539,855 5,606
Thai Baht, 1/06/97................................. 938,788 36,628 36,606 (22)
SALE CONTRACTS
Japanese Yen, 1/07/97.............................. 60,000 517 519 (2)
--------------
$ 72,381
--------------
--------------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-73
<PAGE>
<PAGE>
UBS International Equity Portfolio
Statement of Assets and Liabilities
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $34,401,218).......................................... $34,775,119
Cash.............................................................................. 17,165,268
Foreign currency (cost $1,237).................................................... 1,247
Dividends receivable.............................................................. 73,763
Interest receivable............................................................... 25,636
Unrealized appreciation on open forward foreign currency contracts................ 72,381
Deferred organization expenses and other assets................................... 44,063
-----------
Total Assets................................................................. 52,157,477
-----------
LIABILITIES:
Advisory fees payable............................................................. 13,839
Administrative services fees payable.............................................. 1,151
Trustees' fees payable............................................................ 582
Payable for investment securities purchased....................................... 10,476,488
Organization expenses payable..................................................... 32,933
Other accrued expenses............................................................ 85,905
-----------
Total Liabilities............................................................ 10,610,898
-----------
NET ASSETS........................................................................ $41,546,579
-----------
-----------
COMPOSITION OF NET ASSETS:
Paid-in capital for beneficial interests.......................................... $41,546,579
-----------
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-74
<PAGE>
<PAGE>
UBS International Equity Portfolio
Statement of Operations
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $141,935).................... $500,868
Interest.................................................................. 189,623
--------
Investment income.................................................... $ 690,491
EXPENSES:
Investment advisory fees.................................................. 199,112
Administrative services fees.............................................. 11,712
Custodian fees and expenses............................................... 60,563
Audit fees................................................................ 39,357
Fund accounting fees...................................................... 35,843
Legal fees................................................................ 18,766
Amortization of organization expenses..................................... 7,508
Trustees' fees............................................................ 7,508
Insurance expense......................................................... 4,053
Miscellaneous expenses.................................................... 7,508
--------
Total expenses....................................................... 391,930
Less: Fee waiver..................................................... (185,273)
--------
Net expenses......................................................... 206,657
----------
Net investment income..................................................... 483,834
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on securities transactions.............................. 361,151
Net realized gain on foreign currency transactions........................ 11,064
Net change in unrealized appreciation of investments...................... 373,901
Net change in unrealized depreciation of foreign currency contracts and
translations............................................................ (6,329)
----------
Net realized and unrealized gain on investments........................... 739,787
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................... $1,223,621
----------
----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-75
<PAGE>
<PAGE>
UBS International Equity Portfolio
Statement of Changes in Net Assets
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income................................................................ $ 483,834
Net realized gain on securities and foreign currency transactions.................... 372,215
Net change in unrealized appreciation of investments, foreign currency contracts and
foreign currency translations...................................................... 367,572
-----------
Net increase in net assets resulting from operations................................. 1,223,621
-----------
CAPITAL TRANSACTIONS:
Proceeds from contributions.......................................................... 60,373,286
Value of withdrawals................................................................. (20,050,328)
-----------
Net increase in net assets from capital transactions................................. 40,322,958
-----------
NET INCREASE IN NET ASSETS........................................................... 41,546,579
NET ASSETS:
Beginning of period.................................................................. --
-----------
End of period........................................................................ $41,546,579
-----------
-----------
</TABLE>
- ------------------------
See notes to financial statements.
SAI-76
<PAGE>
<PAGE>
UBS International Equity Portfolio
Financial Highlights
For the Period April 2, 1996 (Commencement of Operations) through December 31,
1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted)...................................... $41,547
Average commission rate per share(1)........................................... $ 0.02
Ratio of expenses to average net assets(2)..................................... 0.88%(3)
Ratio of net investment income to average net assets(2)........................ 2.07%(3)
Portfolio turnover............................................................. 42%
</TABLE>
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(1) Most foreign securities markets do not charge commissions based on a rate
per share but as a percentage of the principal value of the transaction. As
a result, the above rate is not indicative of the commission arrangements
currently in effect.
(2) Net of fee waivers. Such fee waivers had the effect of reducing the ratio of
expenses to average net assets and increasing the ratio of net investment
income to average net assets by 0.79% (annualized).
(3) Annualized.
See notes to financial statements.
SAI-77
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<PAGE>
UBS International Equity Portfolio
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
1. GENERAL
UBS International Equity Portfolio (the 'Portfolio'), a separate series of UBS
Investor Portfolios Trust (the 'Trust'), is registered under the Investment
Company Act of 1940, as a diversified, open-end management investment company.
The Trust is organized as a trust under the laws of the State of New York.
The investment adviser of the Portfolio is Union Bank of Switzerland, New York
Branch ('UBS'); UBS International Investment London Limited ('UBSII') is the
sub-adviser of the Portfolio. Signature Financial Group (Grand Cayman), Ltd.
('SFG'), a wholly-owned subsidiary of Signature Financial Group, Inc., acts as
the Portfolio's administrator and placement agent.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the
Portfolio in the preparation of its financial statements:
A. INVESTMENT VALUATION -- Equity securities in the portfolio are valued at the
last sale price on the exchange on which they are primarily traded, or in the
absence of recorded sales, at the average of readily available closing bid and
asked prices, or at the quoted bid price. Unlisted securities are valued at the
average of the quoted bid and asked prices in the over-the-counter market.
Options on stock indices traded on national securities exchanges are valued at
their last sale price as of the close of options trading on such exchanges.
Stock index futures and related options traded on commodities exchanges are
valued at their last sales price as of the close of trading on such exchanges.
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 Portfolio's Board of Trustees (the 'Trustees').
Debt securities that mature in 60 days or less are valued at amortized cost,
which approximates market value. The amortized cost method involves valuing a
security at its cost on the date of purchase or, in the case of securities
purchased with more than 60 days until maturity, at their market value each day
until the 61st day prior to maturity, and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and such valuation.
Trading in securities on most foreign exchanges and over-the-counter markets is
normally completed before the close of the New York Stock Exchange and may also
take place on days on which the New York Stock Exchange is closed. If events
materially affecting the value of foreign securities occur between the time when
the exchange on which they are traded closes and the pricing of the Portfolio,
such securities will be valued at fair value in accordance with procedures
established by and under the general supervision of the Trustees.
B. FOREIGN CURRENCY TRANSLATION -- The accounting records of the Portfolio are
maintained in U.S. dollars. Assets, including investment securities, and
liabilities denominated in foreign currency are translated into U.S. dollars at
the prevailing rate of exchange at year end. Purchases and sales of securities,
income and expenses are translated at the prevailing rate of exchange on the
respective dates of such transactions. Gain/loss on translation of foreign
currency includes net exchange gains and losses, gains and losses on disposition
of foreign currency and adjustments to the amount of foreign taxes withheld.
The assets and liabilities are presented at the exchange rates and market values
at the close of the year. The changes in net assets arising from changes in
exchange rates and the changes in net assets resulting from changes in market
prices of securities at year end are not separately presented. However, gains
SAI-78
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<PAGE>
UBS International Equity Portfolio
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
and losses from certain foreign currency transactions are treated as ordinary
income for U.S. Federal income tax purposes.
C. FORWARD FOREIGN CURRENCY CONTRACTS -- The Portfolio may enter into forward
foreign currency contracts in connection with planned purchases or sales of
securities or to hedge the U.S. dollar value of portfolio securities denominated
in a particular currency. The Portfolio could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. The forward foreign currency contracts are marked-to-market
daily using the daily exchange rate of the underlying currency and any resulting
gains or losses are recorded for financial statement purposes as unrealized
gains or losses until the contract settlement date.
The Portfolio's use of forward contracts involves, to varying degrees, elements
of market risk in excess of the amount recognized in the statement of assets and
liabilities. The contract or notional amounts reflect the extent of the
Portfolio's involvement in these financial instruments. Risks arise from the
possible movements in the foreign exchange rates underlying these instruments.
The unrealized appreciation/depreciation on forward contracts reflects the
Portfolio's exposure at year end to credit loss in the event of a counterparty's
failure to perform its obligations.
D. ACCOUNTING FOR INVESTMENTS -- Securities transactions are accounted for on
trade date. Realized gains and losses on security transactions are determined on
the identified cost basis. Dividend income and other distributions from
portfolio securities are recorded on the ex-dividend date, except, if the ex-
dividend date has passed, certain dividends from foreign securities are recorded
as soon as the Portfolio is informed of the ex-dividend date. Dividend income is
recorded net of foreign taxes withheld where recovery of such taxes is not
assured. Withholding taxes on foreign dividends have been provided for in
accordance with the Portfolio's understanding of the applicable countries' tax
rules and rates. Recoveries of foreign taxes withheld from the Portfolio's
income are generally recorded, where applicable, by the funds investing in the
Portfolio. Interest income, adjusted for amortization of premiums and accretion
of discounts on investments, is accrued daily.
E. U. S. FEDERAL INCOME TAXES -- The Portfolio is considered a partnership under
the U.S. Internal Revenue Code (the 'Code'). As such, each investor in the
Portfolio will be taxed on its share of the Portfolio's ordinary income and
capital gains. Accordingly, no provision for federal income taxes is necessary.
It is intended that the Portfolio will be managed in such a way that an investor
will be able to satisfy the requirements of the Code applicable to regulated
investment companies.
F. DEFERRED ORGANIZATION EXPENSES -- Expenses incurred by the Portfolio in
connection with its organization in the amount of $50,000 have been deferred and
are being amortized on a straight line basis over five years from the
Portfolio's commencement of operations (April 2, 1996).
G. OTHER -- The Portfolio bears all costs of its operations other than expenses
specifically assumed by UBS and SFG. Expenses incurred by the Trust on behalf of
any two or more portfolios are allocated in proportion to net assets of each
portfolio, except when allocations of direct expenses to each portfolio can
otherwise be made fairly. Expenses directly attributable to the Portfolio are
charged directly to the Portfolio.
3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
A. INVESTMENT ADVISORY AGREEMENT -- The Portfolio has retained the services of
UBS as investment adviser and UBSII as investment sub-adviser. UBSII 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 subject to the supervision of UBS and the Trustees. As compensation
for overall investment management services the Trust has agreed to pay UBS an
investment advisory fee, accrued daily and payable monthly, at an annual rate of
0.85% of the Portfolio's average daily net assets. UBS, in turn, has agreed to
pay UBSII a fee, accrued daily and payable monthly, at an annual rate of 0.75%
of the Portfolio's first $20 million average daily net assets, 0.50% of the next
$30 million
SAI-79
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<PAGE>
UBS International Equity Portfolio
Notes to Financial Statements
December 31, 1996
- --------------------------------------------------------------------------------
average daily net assets and 0.40% of the Portfolio's average daily net assets
in excess of $50 million. For the period April 2, 1996 (commencement of
operations) through December 31, 1996, the investment advisory fee amounted to
$199,112. UBS voluntarily agreed to waive $185,273 of this amount.
B. ADMINISTRATIVE SERVICES AGREEMENT -- Under the terms of an Administrative
Services Agreement with the Trust, SFG provides overall administrative services
and general office facilities to the Portfolio and the Trust. As compensation
for such services, the Portfolio has agreed to pay SFG an administrative
services fee, accrued daily and payable monthly, at an annual rate of 0.05% of
the Portfolio's average daily net assets. For the period April 2, 1996
(commencement of operations) through December 31, 1996, the administrative
services fee amounted to $11,712.
C. EXCLUSIVE PLACEMENT AGENT AGREEMENT -- Under the terms of an Exclusive
Placement Agent Agreement with the Trust, SFG has agreed to act as the Trust's
placement agent. SFG does not receive any additional fees for services provided
pursuant to this agreement.
4. PURCHASES AND SALES OF INVESTMENTS
For the period April 2, 1996 (commencement of operations) through December 31,
1996, purchases and sales of investment securities, excluding short-term
investments, aggregated $45,726,468 and $11,686,401, respectively.
SAI-80
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<PAGE>
UBS International Equity Portfolio
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Trustees
and Investors of
UBS INVESTOR PORTFOLIOS TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the UBS International Equity
Portfolio (the 'Portfolio') (one of the portfolios constituting the UBS Investor
Portfolios Trust) at December 31, 1996, and the results of its operations, the
changes in its net assets and the financial highlights for the period April 2,
1996 (commencement of operations) through December 31, 1996, in conformity with
generally accepted accounting principles in the United States. These financial
statements and financial highlights (hereafter referred to as 'financial
statements') are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of securities at December 31, 1996 by correspondence with the custodian and
brokers, and the application of alternative auditing procedures where
confirmations from brokers were not received provides a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE
Chartered Accountants
Toronto, Ontario
February 21, 1997
SAI-81
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