<PAGE>
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UBS
INTERNATIONAL
EQUITY
FUND
-----------
UBS
PRIVATE INVESTOR
FUNDS, INC.
ANNUAL REPORT
DECEMBER 31, 1997
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<PAGE>
UBS Private Investor Funds, Inc.
Chairman's Letter
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Dear Shareholder,
Thank you for your investment in the UBS International Equity Fund, which is
part of the UBS Private Investor Funds.
We are pleased to provide you with the Fund's annual report for the year ended
December 31, 1997. This report contains a letter from the portfolio manager
discussing the performance of the Fund for the year ended December 31, 1997
including a market overview. In addition, it includes a complete set of audited
financial statements as well as a schedule of investments.
The UBS Private Investor Funds are an integral part of the asset allocation
service provided by The Private Bank* of Union Bank of Switzerland, the largest
bank in Switzerland. The Funds provide investment opportunities in U.S. and
international securities markets to enhance investment performance, diversify
risk and preserve capital within your investment objectives.
The UBS Private Investor Funds bring you:
The expertise of The Private Bank's professional money managers
Global investment perspective and knowledge
A high priority on financial stability and preservation of wealth
As you are aware, in December, 1997, Union Bank of Switzerland and Swiss Bank
Corporation ('SBC') announced their intention to merge. Early in February, 1998,
the shareholders of UBS and SBC overwhelmingly approved the proposed merger.
Completion of the merger is still subject to regulatory approvals which are
expected to be received soon.
This merger will create a top-tier global financial services group which will
concentrate on clearly defined core businesses. As private banking and asset
management are core businesses of the banks, shareholders of the UBS Private
Investor Funds will continue to see a commitment to growing and building the
mutual fund business.
We will continue to keep you informed of any new developments as they occur.
To learn more about the other UBS Private Investor Funds, please call (888)
UBS-FUND. You will be provided with a copy of the prospectus which contains more
complete information including charges and expenses. Please read it carefully
before investing.
We appreciate your continued confidence in the UBS Private Investor Funds.
Sincerely,
/s/ HansPeter Lochmeier
Dr. HansPeter Lochmeier
Chairman of the Board
UBS Private Investor Funds, Inc.
- ------------
* 'The Private Bank', as used in this document, refers to Union Bank of
Switzerland, New York Branch.
This annual report must be accompanied or preceded by the Fund's prospectus.
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UBS Private Investor Funds, Inc.
Fund Commentary
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FUND PERFORMANCE
The UBS International Equity Fund achieved a total return of - 3.70% in 1997
compared to a +2.03% rise in the MSCI EAFE Index. 65% of the underperformance of
5.73% to benchmark came from stock selection while 35% came from country/asset
allocation.
(A) STOCK SELECTION
Positive returns in France where a number of the companies we held have
restructured was more than offset by disappointing performance in Australia,
Germany, Japan and the UK.
1997 has again been a poor year for value investors. Companies with either a
stable or perceived to be stable earnings stream have been pushed to ever higher
multiples. Consequently pharmaceuticals, utilities and banks (in the latter
category) have all tended to do well. At the same time cyclical companies
operating in industries such as paper, chemicals or building and construction
where the outlook is less certain have continued to underperform.
There has also been a large cap effect. This could be due to a desire for safety
or perhaps just the rise of cross border investing and the increasing popularity
of index funds.
We do not think either of these trends are sustainable and have positioned the
portfolio away from both classes of stocks.
(B) COUNTRY/ASSET ALLOCATION
The benefits that have accrued from being underweight in Japan (for most of the
year), Hong Kong and Malaysia have been more than offset by being underweight in
some highly performing European markets such as Italy and Switzerland as well as
our exposure to non-index Asian markets. Holding cash has proved modestly
beneficial. We believe the euphoria in Italy and Switzerland has been overdone
and to a certain extent is due to the type of companies quoted in each country
which fit into the stable earnings categorization. Consequently, we remain
underweight in both markets.
Conversely, the loss of confidence experienced in many Asian markets,
particularly in the last quarter, should be temporary. With many stock markets
some 80 - 90% from their peak, in US$ terms, we think there are many good
opportunities.
This chart provides a comparison of the Fund's performance to that of the MSCI
EAFE Index. This chart compares total returns (which includes changes in share
price and reinvestment of all income dividends and capital gains distributions)
of a hypothetical $10,000 investment made on April 2, 1996 (commencement of
operations) and held through December 31, 1997.
[PERFORMANCE GRAPH]
UBS INTERNATIONAL MSCI EAFE
DATE EQUITY FUND INDEX
---- ----------------- ---------
4/2/96 10,000 10,000
4/30/96 10,205 10,310.1
5/31/96 10,061 10,120.4
6/30/96 10,132 10,177.1
7/31/96 9,898 9,879.93
8/31/96 10,008 9,901.67
9/30/96 10,122 10,165
10/31/96 10,126 10,061.4
11/30/96 10,500 10,461.8
12/31/96 10,464.8 10,326.9
1/31/97 10,280.6 9,967.48
2/28/97 10,434.3 10,131
3/31/97 10,617.1 10,170.5
4/30/97 10,550.8 10,226.4
5/31/97 11,076.5 10,894.2
6/30/97 11,725.7 11,497.7
7/31/97 11,706.3 11,686.3
8/31/97 11,076.5 10,815.6
9/30/97 11,447 11,423.5
10/31/97 10,764.1 10,548.5
11/30/97 10,432.4 10,443
12/31/97 10,077.2 10,537
2
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UBS Private Investor Funds, Inc.
Fund Commentary
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Average Annual Total Return
<TABLE>
<CAPTION>
UBS
INTERNATIONAL MSCI EAFE
EQUITY FUND INDEX
------------- ---------
<S> <C> <C>
For the year ended December 31, 1997.................................. - 3.70% 2.03%
For the period April 2, 1996 (commencement of operations) through
December 31, 1997................................................... 0.44% 3.03%
</TABLE>
MARKET BACKGROUND
The year was characterized by a vast disparity in both economic and stock market
performance between Europe and Asia.
European economic growth recovered on stronger consumer confidence as progress
was seen to be made towards meeting the Maastricht guidelines. Falling interest
rates and buoyant exports also helped. Superimposed on this benign background,
corporate restructuring and take-over/merger activity acted to boost financial
markets. Potentially negative events such as the election of socialist
governments in both France and the UK, the loss of tax credits for domestic
pension funds in the UK and the continuing inability of the region to reduce
unemployment were ignored.
The area returned 24.2% in US$ in aggregate with particularly good performance
from the smaller markets as interest rates declined more sharply. Most notable
were Switzerland +44.8%, Italy +36.4% and Denmark +35.0%.
In Japan, the rise in consumption tax in April in order to raise 'Y'7 trillion
proved too much for the fragile economic recovery. New car sales and housing
starts fell by some 20% year on year through the rest of the year and GDP was
- 0.8% for the six months to end September. Several high profile financial
collapses, most notably Yamaichi Securities and Hokkaido Takushoku Bank in
November, seem to be galvanizing the authorities into action. A 'Y'2.85 trillion
tax rebate was announced in December and a potential 'Y'30 trillion public fund
bailout for the banking system are a move in the right direction.
The Japanese stock market was down 23.5% in 1997. Again there was a large
disparity of performance with small cap and domestically orientated companies
significantly underperforming the exporters.
The rest of Asia came to grief during the year as foreign investors lost
confidence in the 'economic miracle'. Deteriorating terms of trade with
currencies linked to the US$ and falling product prices served to produce large
current account deficits. As foreign investors pulled out, currencies collapsed
exposing large unhedged corporate lending. The ensuing panic and rise in
interest rates has put severe pressure on asset prices such as property and
reduced the profitability of many industrial investments. Given this background
it was not surprising that the Pacific Basin returned - 30.8%, in US$ terms,
with non-index markets such as Korea and Thailand down as much as 70%, in US$
terms.
Australasia suffered collateral damage as expectations for regional growth and
what that meant for the resource sector in particular hit home with the market
down 9.5%.
Growth and large capitalization stocks did well in all markets.
MARKET OUTLOOK
The key issue for 1998 will be the extent to which the slowdown in Asia spreads
to economies elsewhere in the world.
3
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UBS Private Investor Funds, Inc.
Fund Commentary
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Economists have estimated that the result of the Asian crisis will be to
subtract 0.5% to 1.0% from world growth, but this can only be a guesstimate.
It is clear that the medium-term outlook for Asia will be tough. For a region
accustomed to rapid economic growth there will be a shakeout as companies try to
adjust for much more modest growth. Many companies with undifferentiated
products and high levels of debt, especially if this debt is denominated in a
strong currency such as the US dollar, will fail.
Consensus profit forecasts, especially in the US, are almost certainly too high.
Multinationals have treated Asian expansion as the cornerstone of their growth
strategies, but it will be several years before Asia again provides high and
growing profitability. Exports from the rest of the world into Asia will
inevitably slow while the region uses its new competitiveness stemming from
currency devaluations to intensify its export drive at the expense of
manufacturers elsewhere.
From a stock market perspective, the challenges within Asia are also
opportunities. We believe in the long-term growth of the region though we have,
in the past, been unwilling to commit heavily to Asia because the risk/reward
equation looked wrong. The valuations on many Asian companies are now
sufficiently compelling for us to raise our exposure to the region despite the
risk.
These purchases will be funded by sales of European holdings where the benefits
of corporate restructuring have been reflected in booming stock markets.
Across all markets we expect smaller companies as well as 'value' stocks to do
much better in 1998.
Robin Apps
Portfolio Manager
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The Fund is not insured by the FDIC and is not a deposit with, an obligation of,
or guaranteed by Union Bank of Switzerland. The Fund is subject to investment
risks, including possible loss of principal amount invested.
Shares of the Fund are distributed by First Fund Distributors, Inc. which is not
affiliated with Union Bank of Switzerland.
Unlike other mutual funds, the Fund seeks to achieve its investment objective by
investing all of its investable assets in UBS Investor Portfolios Trust -- UBS
International Equity Portfolio (the 'Portfolio') which is a separate fund with
an identical investment objective. The Portfolio concentrates its investments in
securities of foreign issuers. A variety of factors such as changes in the
economic/political conditions and currency fluctuations in the international
markets may affect the value of your investment in the fund.
Union Bank of Switzerland is voluntarily waiving all shareholder servicing fees
for the Fund and reimbursing a portion of the Fund's expenses. Union Bank of
Switzerland is also waiving a portion of its advisory fees for the Portfolio. If
Union Bank of Switzerland had not waived fees and reimbursed expenses, total
return would have been lower. Past performance is not a guarantee of future
results. Investment return and principal value of an investment will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost.
The MSCI EAFE Index (Morgan Stanley Capital International -- Europe, Australia,
Far East Index) is an unmanaged index used to portray the pattern of common
stock price movement in Europe, Australia and the Far East.
4
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UBS International Equity Fund
Statement of Assets and Liabilities
December 31, 1997
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<TABLE>
<S> <C>
ASSETS:
Investment in UBS Investor Portfolios Trust -- UBS International
Equity Portfolio, at value........................................................ $23,124,610
Tax reclaims receivable............................................................. 41,307
Receivable from sale of capital stock............................................... 12,000
Receivable from funds services agent................................................ 5,903
Deferred organization expenses and other assets..................................... 89,638
-----------
Total Assets.............................................................. 23,273,458
-----------
LIABILITIES:
Administrative services fees payable................................................ 3,105
Other accrued expenses.............................................................. 22,965
-----------
Total Liabilities......................................................... 26,070
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NET ASSETS.......................................................................... $23,247,388
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-----------
SHARES OUTSTANDING ($0.001 par value, 10 million shares authorized)................. 243,761
-----------
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NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE...................... $95.37
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COMPOSITION OF NET ASSETS:
Shares of common stock, at par...................................................... $ 244
Additional paid-in capital.......................................................... 25,972,711
Net unrealized depreciation of investments, foreign currency contracts and foreign
currency translations............................................................. (3,102,319)
Accumulated undistributed net investment income..................................... 19,032
Accumulated undistributed net realized gains on securities and foreign currency
translations...................................................................... 357,720
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Net Assets................................................................ $23,247,388
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-----------
</TABLE>
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See notes to financial statements.
5
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UBS International Equity Fund
Statement of Operations
For the Year Ended December 31, 1997
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<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 $42,351)........... $ 500,589
Interest........................................................ 173,033
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Investment income.......................................... 673,622
Total expenses.................................................. $ 346,918
Less: Fee waiver................................................ (92,337)
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Net expenses.................................................... 254,581
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Net Investment Income from UBS Investor Portfolios Trust --
UBS International Equity Portfolio................................. 419,041
EXPENSES:
Shareholder service fees............................................. 66,267
Administrative services fees......................................... 16,199
Registration fees.................................................... 26,907
Reports to shareholders expense...................................... 25,692
Amortization of organization expenses................................ 21,369
Legal fees........................................................... 18,587
Transfer agent fees.................................................. 10,487
Audit fees........................................................... 10,341
Fund accounting fees................................................. 7,744
Directors' fees...................................................... 5,357
Miscellaneous expenses............................................... 8,632
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Total expenses.................................................. 217,582
Less: Fee waiver and expense reimbursements..................... (137,212)
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Net expenses.................................................... 80,370
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Net investment income................................................ 338,671
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS FROM UBS
INVESTOR PORTFOLIOS TRUST -- UBS INTERNATIONAL EQUITY PORTFOLIO
Net realized gain on securities transactions......................... 946,441
Net realized loss on foreign currency transactions................... (25,116)
Net change in unrealized depreciation of investments................. (3,438,179)
Net change in unrealized depreciation of foreign currency contracts
and translations................................................... (4,748)
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Net realized and unrealized loss on investments from UBS Investor
Portfolios Trust -- UBS International Equity Portfolio............. (2,521,602)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS................. $(2,182,931)
-----------
-----------
</TABLE>
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See notes to financial statements.
6
<PAGE>
<PAGE>
UBS International Equity Fund
Statement of Changes in Net Assets
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<TABLE>
<CAPTION>
FOR THE APRIL 2, 1996*
YEAR ENDED THROUGH
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income..................................................... $ 338,671 $ 146,877
Net realized gain on securities and foreign currency transactions......... 921,325 135,557
Net change in unrealized (depreciation) appreciation of investments,
foreign currency contracts and foreign currency translations............ (3,442,927) 340,608
----------------- -----------------
Net (decrease) increase in net assets resulting from operations........... (2,182,931) 623,042
----------------- -----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income..................................................... (323,895) (136,578)
Net realized gains........................................................ (626,539) (94,755)
----------------- -----------------
Total dividends and distributions to shareholders......................... (950,434) (231,333)
----------------- -----------------
TRANSACTIONS IN SHARES OF COMMON STOCK:
Net proceeds from sale of shares.......................................... 20,167,259 30,851,057
Net asset value of shares issued to shareholders in reinvestment of
dividends and distributions............................................. 879,502 229,580
Cost of shares redeemed................................................... (21,289,737) (4,873,617)
----------------- -----------------
Net (decrease) increase in net assets from transactions in shares of
common stock............................................................ (242,976) 26,207,020
----------------- -----------------
NET (DECREASE) INCREASE IN NET ASSETS..................................... (3,376,341) 26,598,729
NET ASSETS:
Beginning of period....................................................... 26,623,729 25,000
----------------- -----------------
End of period (including undistributed net investment income of $19,032
and $18,022, respectively).............................................. $ 23,247,388 $26,623,729
----------------- -----------------
----------------- -----------------
</TABLE>
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* Commencement of operations.
See notes to financial statements.
7
<PAGE>
<PAGE>
UBS International Equity Fund
Financial Highlights
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<TABLE>
<CAPTION>
FOR THE APRIL 2. 1996*
YEAR ENDED THROUGH
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
FOR A SHARE OUTSTANDING FOR THE PERIOD
Net asset value, beginning of period....................................... $102.84 $100.00
-------- --------
Income from investment operations:
Net investment income................................................. 1.27 1.08
Net realized and unrealized (loss) gain on investments................ (5.01) 3.54
-------- --------
Total (loss) income from investment operations........................ (3.74) 4.62
-------- --------
Less dividends and distributions to shareholders:
Dividends from net investment income.................................. (1.26) (1.05)
Distributions from net realized gains................................. (2.47) (0.73)
-------- --------
Total dividends and distributions..................................... (3.73) (1.78)
-------- --------
Net asset value, end of period............................................. $ 95.37 $102.84
-------- --------
-------- --------
Total return............................................................... (3.70%) 4.65%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted).............................. $23,247 $26,624
Ratio of expenses to average net assets(2)............................ 1.26% 1.39%(3)
Ratio of net investment income to average net assets(2)............... 1.28% 1.78%(3)
</TABLE>
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* Commencement of operations.
(1) Not annualized.
(2) Includes the Fund's share of UBS Investor Portfolios 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 0.87% and 1.66%
(annualized) for the respective periods.
(3) Annualized.
See notes to financial statements.
8
<PAGE>
<PAGE>
UBS International Equity Fund
Notes to Financial Statements
December 31, 1997
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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 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. At
December 31, 1997, the Company included six other funds, UBS Bond Fund, UBS
Value Equity Fund, UBS Institutional International Equity Fund, UBS High Yield
Bond Fund, UBS Small Cap Fund and UBS Large Cap Growth Fund. These financial
statements relate only to the Fund.
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. At December
31, 1997, certain shares of the Fund were held by UBS or its affiliates on
behalf of its clients.
Investors Bank & Trust Company ('IBT') serves as the Fund's administrator and
First Fund Distributors, Inc. ('FFDI') serves as the Fund's distributor. Union
Bank of Switzerland, New York Branch ('UBS') serves as the funds 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
(44.5% at December 31, 1997). Valuation of securities by the Portfolio is
discussed in Note 2A of the Portfolio's Notes to Financial Statements.
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 accounting principles. These 'book/tax'
differences are either considered temporary or permanent in
9
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UBS International Equity Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
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, 1997, the Fund decreased accumulated
undistributed net investment income by $13,766, increased accumulated
undistributed net realized gains by $25,116 and decreased paid-in-capital by
$11,350. 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 approximately $107,500 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 IBT, FFDI 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
by made fairly. Expenses directly attributable to the Fund are charged directly
to the Fund.
3. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
A. ADMINISTRATION AGREEMENT -- Under the terms of an Administration Agreement
with the Company, effective March 13, 1997, IBT provides overall administrative
services and general office facilities. As compensation for such services, the
Company has agreed to pay IBT a fee, accrued daily and payable monthly, at an
annual rate of 0.065% of the Fund's first $100 million average daily net assets
and 0.025% of the next $100 million average daily net assets. IBT does not
receive a fee on average daily net assets in excess of $200 million. Prior to
March 13, 1997, Signature Broker-Dealer Services, Inc. ('Signature') provided
overall administrative services and general office facilities. As compensation
for such services, the Company had agreed to pay Signature a fee, accrued daily
and paid 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 did not receive a fee on average daily net assets in excess of
$200 million. For the year ended December 31, 1997, the administrative services
fee amounted to $16,199.
B. DISTRIBUTION AGREEMENT -- Under the terms of a Distribution Agreement
effective March 13, 1997, FFDI serves as the distributor of Fund shares. FFDI
does not receive any fees from the Fund for services provided pursuant to this
agreement. Prior to March 13, 1997, Signature served as the distributor of Fund
shares. Signature did not receive any additional fees for services provided as
the distributor.
C. SHAREHOLDER SERVICING AGREEMENT -- The Fund has entered into a Shareholder
Servicing 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 year ended December 31, 1997, the
shareholder service fee amounted to $66,267, all of which was waived.
D. FUNDS SERVICES AGREEMENT -- Under the terms of a Funds 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 REIMBURSEMENT -- 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 from January 1, 1997
through April 14, 1997, the Fund's total operating expenses were limited to an
annual rate of 0.95% of the Fund's average daily net assets. Effective April 15,
1997, this expense limitation was increased to an annual rate of 1.40% of the
Fund's average daily net assets. For the year
10
<PAGE>
<PAGE>
UBS International Equity Fund
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
ended December 31, 1997, UBS reimbursed the Fund for expenses totaling $70,945
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, 1997 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 were as follows:
<TABLE>
<CAPTION>
PERIOD FROM APRIL 2, 1996
YEAR ENDED (COMMENCEMENT OF OPERATIONS)
DECEMBER 31, 1997 THROUGH DECEMBER 31, 1996
----------------- ----------------------------
<S> <C> <C>
Shares subscribed............................... 187,382 304,954
Shares issued to shareholders in reinvestment of
dividends and distributions................... 9,044 2,281
Shares redeemed................................. (211,542) (48,608)
----------------- ----------
Net (decrease) increase in shares outstanding... (15,116) 258,627
----------------- ----------
----------------- ----------
</TABLE>
11
<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, 1997, the results of its
operations for the year then ended and the changes in its net assets and the
financial highlights for the year then ended and 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 audits. We conducted our
audits 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
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of Americas
New York, New York
February 17, 1998
12
<PAGE>
<PAGE>
UBS International Equity Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ----------- --------------------------------------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK -- 94.1%
AUSTRALIA -- 5.0%
32,000 Australia & New Zealand Bank Group (Banking & Finance)................................. $ 211,480
15,800 Australian National Industries (Metals & Mining)....................................... 14,520
254,362 Burns Philp & Co. (Food)............................................................... 39,787
62,500 Coles Myer Ltd. (Retail)............................................................... 300,212
138,400 Fosters Brewing Group (Beverages)...................................................... 263,390
160,100 Goodman Fielder Limited (Food)......................................................... 254,602
721,323 MIM Holdings (Metals & Mining)......................................................... 441,915
89,000 Pacific Dunlop Ltd. (Diversified)...................................................... 188,519
570,000 Pasminco Limited (Metals & Mining)..................................................... 653,836
70,000 WMC Limited (Metals & Mining).......................................................... 244,080
-----------
2,612,341
-----------
DENMARK -- 1.8%
4,440 BG Bank A/S (Banking & Finance)........................................................ 298,774
10,500 Tele Danmark -- B shares (Telecommunications).......................................... 651,384
-----------
950,158
-----------
FRANCE -- 16.7%
3,060 AXA Company (Banking & Finance)........................................................ 236,777
10,200 Alcatel Alsthom SA (Electrical & Electronics).......................................... 1,296,502
18,768 Banque Nationale de Paris (Banking & Finance).......................................... 997,571
5,500 Compagnie de Saint Gobain (Building Materials)......................................... 781,341
11,700 Groupe Danone (Food)................................................................... 2,089,801
27,120 Moulinex (Household Appliances)........................................................ 670,058
5,200 Sefimeg (Societe Francaise d'Investissements Immobiliers et de Gestion) (Real
Estate).............................................................................. 259,201
13,400 Societe Nationale Elf-Aquitaine (Energy Sources)....................................... 1,558,528
2,048 Suez Lyonnaise des Eaux (Building & Construction)...................................... 226,629
5,070 Total Cie Francaise des Petroles -- B shares (Energy Sources).......................... 551,774
-----------
8,668,182
-----------
GERMANY -- 7.4%
45,300 Bayer AG (Chemicals)................................................................... 1,692,611
2,050 MAN AG (Automotive & Heavy Machinery).................................................. 593,856
4,500 Schering AG (Pharmaceuticals).......................................................... 434,112
2,000 Volkswagen AG (Automotive)............................................................. 1,125,382
-----------
3,845,961
-----------
GREAT BRITAIN -- 16.2%
164,000 Allied Domecq PLC (Food & Beverages)................................................... 1,416,757
88,000 B.A.T. Industries (Tobacco)............................................................ 800,678
186,117 BG PLC -- New Shares (Natural Gas)..................................................... 837,534
330,000 BTR Limited (Diversified).............................................................. 997,235
38,540 Bass PLC (Beverages)................................................................... 599,440
113,000 Coats Viyella (Apparel & Textiles)..................................................... 168,883
53,000 MEPC British Registered (Real Estate).................................................. 442,186
324,000 Marley PLC (Building Materials)........................................................ 500,194
123,550 Northern Foods PLC (Food).............................................................. 535,689
65,615 Peninsular & Orient Steam (Transportation)............................................. 746,257
79,760 Safeway PLC (Food -- Retail)........................................................... 449,309
18,336 South West Water PLC (Utilities)....................................................... 278,556
209,750 Tarmac PLC (Building Materials)........................................................ 392,711
15,000 Thames Water PLC (Utilities)........................................................... 223,319
-----------
8,388,748
-----------
</TABLE>
- ------------------------
See notes to financial statements.
13
<PAGE>
<PAGE>
UBS International Equity Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ----------- --------------------------------------------------------------------------------------- -----------
<C> <S> <C>
INDONESIA -- 0.3%
924,000 PT Bank Internasional Indonesia (Banking & Finance).................................... $ 54,600
502,000 PT Indah Kiat Pulp & Paper Corporation -- Foreign Shares (Paper & Forest Products)..... 88,991
-----------
143,591
-----------
ITALY -- 1.5%
131,000 Eni S.p.A. (Energy Sources)............................................................ 748,085
-----------
JAPAN -- 24.3%
12,000 Dai Nippon Printing Co. (Printing)..................................................... 225,167
12,000 Fuji Photo Film Co. (Photographic Equipment & Supplies)................................ 459,524
130,000 Hitachi Ltd. (Hit. Seisakusho) (Electrical & Electronics).............................. 925,940
140,000 Ishikawajima Harima Heavy Industries (Machinery)....................................... 209,083
31,000 JGC Engineering & Construction Corp. (Engineering)..................................... 65,291
74 Japan Tobacco, Inc. (Tobacco).......................................................... 524,807
75,000 Japan Wool Textile Co. (Apparel & Textiles)............................................ 258,482
56,000 Kajima Corp. (Building & Construction)................................................. 141,104
78,000 Kansai Paint Co. (Chemicals)........................................................... 188,175
15,000 Kao Corp. (Household Products)......................................................... 215,976
90,000 Koito Manufacturing Co., Ltd. (Automotive -- Parts & Equipment)........................ 358,428
39,000 Marudai Food Co., Ltd. (Food).......................................................... 85,425
50,000 Matsushita Electric Industries (Electrical & Electronics).............................. 731,408
301,000 Mitsubishi Chemical Corp. (Chemicals).................................................. 431,087
76,000 Mitsubishi Estate Co. (Real Estate).................................................... 826,530
80,000 Mitsubishi Heavy Industries (Aerospace/Defense Equipment).............................. 333,308
101,000 Nihon Cement Co. (Building Materials).................................................. 208,080
184,000 Nikko Securities Co. (Investment Banking).............................................. 487,585
162,000 Nippon Yusen Kabushiki Kaish (Shipping)................................................ 444,176
51,250 Nissan Fire & Marine Insurance (Insurance)............................................. 155,826
63,000 Nisshinbo Industries, Inc. (Apparel & Textiles)........................................ 265,375
17,000 Sanwa Bank Ltd. (Banking & Finance).................................................... 171,862
44,000 Sharp Corporation (Electronics)........................................................ 302,612
4,300 Sony Corp. (Electrical & Electronics).................................................. 382,017
58,000 Sumitomo Marine & Fire (Insurance)..................................................... 306,502
232,000 Tokyo Gas (Energy Sources)............................................................. 525,940
44,000 Tokyo Steel Manufacturing (Metals & Mining)............................................ 148,610
75,000 Toray Industries, Inc. (Chemicals)..................................................... 336,027
54,000 Tostem Corporation (Building & Construction)........................................... 579,000
44,000 Toyo Seikan Kaisha (Packaging)......................................................... 626,790
11,000 Uny Co. (Retail)....................................................................... 150,800
152 West Japan Railway (Transportation).................................................... 484,277
81,000 Yamaha Motor Co. (Automotive).......................................................... 542,812
25,000 Yamanouchi Pharmaceutical (Pharmaceuticals)............................................ 536,111
-----------
12,634,137
-----------
NETHERLANDS -- 5.2%
7,800 Akzo Nobel (Chemicals)................................................................. 1,345,212
9,490 Internationale Nederlanden Groep NV (Banking & Finance)................................ 399,806
18,700 Koninklijke Papierfabrieken BT NV (Paper & Forest Products)............................ 430,808
4,800 Philips Electronics NV (Electronics)................................................... 287,938
5,114 Royal PTT Nederland (Telecommunications)............................................... 213,430
-----------
2,677,194
-----------
NEW ZEALAND -- 0.6%
10,300 Ceramco Corp. Ltd. (Diversified)....................................................... 8,672
43,840 Fletcher Challenge Forestry Shares (Forest Products)................................... 36,402
192,000 Fletcher Challenge Paper Shares (Paper & Forest Products).............................. 250,841
-----------
295,915
-----------
PHILIPPINES -- 0.4%
190,000 San Miquel Corporation Class B (Food & Beverages)...................................... 232,222
-----------
</TABLE>
- ------------------------
See notes to financial statements.
14
<PAGE>
<PAGE>
UBS International Equity Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION VALUE
- ----------- --------------------------------------------------------------------------------------- -----------
<C> <S> <C>
SINGAPORE -- 3.9%
280,579 Dairy Farm International Holdings (Food)............................................... $ 303,025
30,000 Development Bank Of Singapore Limited -- Foreign Shares (Banking & Finance)............ 256,304
229,696 Hong Kong Land Holdings (Real Estate).................................................. 441,016
46,765 Jardine Matheson Holdings (Diversified)................................................ 238,502
194,250 Keppel Corp., Ltd. (Diversified)....................................................... 557,799
264,000 United Overseas Land Ltd. (Real Estate)................................................ 222,415
-----------
2,019,061
-----------
SOUTH KOREA -- 1.3%
39,400 Hyundai Motor Co. GDR (Automotive)*.................................................... 61,464
8,470 Hyundai Motor Co., Ltd. (Automotive)................................................... 93,445
1,551 Housing & Commercial Bank, Korea (Banking & Finance)................................... 10,432
380 SK Telecom Co. Ltd. (Telecommunications)............................................... 115,477
8,720 Korean Air (Airlines).................................................................. 36,629
42,110 Shinhan Bank (Banking & Finance)....................................................... 187,570
23,400 Yukong Ltd. (Energy Sources)........................................................... 186,372
-----------
691,389
-----------
SWEDEN -- 3.7%
19,250 Electrolux (Household Appliances)...................................................... 1,336,098
8,000 Forenings Sparbanken AB (Banking & Finance)............................................ 181,896
33,400 Stora Kopparbergs -- A shares (Paper & Forest Products)................................ 420,729
-----------
1,938,723
-----------
SWITZERLAND -- 4.4%
41 Bobst AG (Machinery)................................................................... 60,317
600 Forbo Holding (Building Materials)..................................................... 245,099
1,170 Nestle SA (Food & Beverages)........................................................... 1,752,458
210 Schindler Holding AG (Machinery)....................................................... 218,701
-----------
2,276,575
-----------
THAILAND -- 1.4%
73,000 Bangkok Bank Public Company, Ltd. (Banking & Finance).................................. 187,681
15,000 Italian-Thai Development PLC -- Foreign Shares (Building & Construction)............... 4,821
79,000 Shinawatra Computer Company -- Foreign Shares (Technology)............................. 270,809
266,000 TelecomAsia Corp. -- Foreign Shares (Telecommunications)............................... 52,431
100,000 Thai Farmers Bank Public Co., Ltd. (Banking & Finance)................................. 187,467
58,000 Thai Military Bank, Ltd. (Banking & Finance)........................................... 12,644
-----------
715,853
-----------
TOTAL COMMON STOCK (COST $54,398,010).................................................. 48,838,135
-----------
CONVERTIBLE PREFERRED STOCK -- 1.2%
JAPAN -- 1.2%
114,000,000 Sakura Finance, Series II, 0.75%, due 10/01/01* (Banking & Finance) (Cost $988,849).... 637,359
-----------
TOTAL INVESTMENTS AT MARKET VALUE -- 95.3%
(COST $55,386,859)................................................................... 49,475,494
OTHER ASSETS IN EXCESS OF LIABILITIES -- 4.7%.......................................... 2,444,405
-----------
NET ASSETS -- 100.0%................................................................... $51,919,899
-----------
-----------
</TABLE>
- ------------------------
GDR: Global Depository Receipts.
* 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, 1997, the value of these securities amounted to
$698,823 or 1.35% of net assets.
Note: Based upon the cost of investments of $55,386,859 for Federal Income Tax
purposes at December 31, 1997, the aggregate gross unrealized appreciation
and depreciation was $5,130,863 and $11,042,228, respectively, resulting
in net unrealized depreciation of $5,911,365.
See notes to financial statements.
15
<PAGE>
<PAGE>
UBS International Equity Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
FOREIGN U.S. DOLLAR U.S. DOLLAR
CURRENCY UNITS U.S. DOLLAR VALUE AT NET UNREALIZED
CURRENCY AND SETTLEMENT DATE SOLD COST DECEMBER 31, 1997 APPRECIATION
- ----------------------------------------------------- -------------- ------------ ------------------ --------------
<S> <C> <C> <C> <C>
SALE CONTRACTS
British Pound, 1/06/98............................... 274,280 $459,939 $450,327 $ 9,612
French Franc, 1/30/98................................ 2,675,794 446,434 445,394 1,040
-------
$10,652
-------
-------
</TABLE>
- ------------------------
See notes to financial statements.
16
<PAGE>
<PAGE>
UBS International Equity Portfolio
Schedule of Investments
December 31, 1997
- --------------------------------------------------------------------------------
SUMMARY OF INDUSTRY DIVERSIFICATION
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY DIVERSIFICATION (UNAUDITED) NET ASSETS
- ------------------------------------------------------------------------------------------------------ ----------
<S> <C>
Banking & Finance..................................................................................... 7.7%
Chemicals............................................................................................. 7.7
Energy Sources........................................................................................ 6.9
Food & Beverages...................................................................................... 6.6
Electrical & Electronics.............................................................................. 6.4
Food.................................................................................................. 6.4
Real Estate........................................................................................... 4.2
Building Materials.................................................................................... 4.1
Household Appliances.................................................................................. 3.9
Diversified........................................................................................... 3.8
Automotive............................................................................................ 3.5
Metals & Mining....................................................................................... 2.9
Tobacco............................................................................................... 2.6
Transportation........................................................................................ 2.4
Paper & Forest Products............................................................................... 2.3
Telecommunications.................................................................................... 2.0
Pharmaceuticals....................................................................................... 1.9
Building & Construction............................................................................... 1.8
Beverages............................................................................................. 1.7
Natural Gas........................................................................................... 1.6
Apparel & Textiles.................................................................................... 1.3
Packaging............................................................................................. 1.2
Automotive & Heavy Machinery.......................................................................... 1.1
Electronics........................................................................................... 1.1
Utilities............................................................................................. 1.0
Machinery............................................................................................. 0.9
Investment Banking.................................................................................... 0.9
Insurance............................................................................................. 0.9
Photographic Equipment & Supplies..................................................................... 0.9
Retail................................................................................................ 0.9
Food -- Retail........................................................................................ 0.9
Shipping.............................................................................................. 0.9
Automotive -- Parts & Equipment....................................................................... 0.7
Aerospace/Defense Equipment........................................................................... 0.6
Technology............................................................................................ 0.5
Printing.............................................................................................. 0.4
Household Products.................................................................................... 0.4
Engineering........................................................................................... 0.1
Airlines.............................................................................................. 0.1
Forest Products....................................................................................... 0.1
-----
Total Portfolio Holdings.............................................................................. 95.3
Other assets in excess of liabilities................................................................. 4.7
-----
Total Net Assets...................................................................................... 100.0%
-----
-----
</TABLE>
- ------------------------
See notes to financial statements.
17
<PAGE>
<PAGE>
UBS International Equity Portfolio
Statement of Assets and Liabilities
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $55,386,859)......................................... $49,475,494
Cash............................................................................. 1,469,272
Foreign currency (cost $6,980)................................................... 6,867
Receivable for investment securities sold........................................ 895,058
Dividends receivable............................................................. 112,201
Interest receivable.............................................................. 16,119
Unrealized appreciation on open forward foreign currency contracts............... 10,652
Deferred organization expenses and other assets.................................. 23,861
-----------
Total Assets................................................................ 52,009,524
-----------
LIABILITIES:
Investment advisory fees payable................................................. 23,586
Administrative services fees payable............................................. 10,147
Other accrued expenses........................................................... 55,892
-----------
Total Liabilities........................................................... 89,625
-----------
NET ASSETS....................................................................... $51,919,899
-----------
-----------
</TABLE>
- ------------------------
See notes to financial statements.
18
<PAGE>
<PAGE>
UBS International Equity Portfolio
Statement of Operations
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding tax of $192,979).............. $ 849,307
Interest............................................................ 333,088
---------
Investment income.............................................. $ 1,182,395
EXPENSES
Investment advisory fees............................................ 428,213
Administrative services fees........................................ 33,324
Custodian fees and expenses......................................... 87,000
Fund accounting fees................................................ 50,407
Audit fees.......................................................... 36,000
Amortization of organization expenses............................... 8,567
Trustees' fees...................................................... 7,000
Miscellaneous expense............................................... 4,119
---------
Total expenses................................................. 654,630
Less: Fee waiver............................................... (176,323)
---------
Net expenses................................................... 478,307
-----------
Net investment income............................................... 704,088
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities transactions........................ 2,033,639
Net realized loss on foreign currency transactions.................. (51,477)
Net change in unrealized depreciation of investments................ (6,285,266)
Net change in unrealized appreciation of foreign currency contracts
and translations.................................................. 4,482
-----------
Net realized and unrealized loss on investments..................... (4,298,622)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $(3,594,534)
-----------
-----------
</TABLE>
- ------------------------
See notes to financial statements.
19
<PAGE>
<PAGE>
UBS International Equity Portfolio
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE APRIL 2, 1996*
YEAR ENDED THROUGH
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income..................................................... $ 704,088 $ 483,834
Net realized gain on securities and foreign currency transactions......... 1,982,162 372,215
Net change in unrealized (depreciation) appreciation of investments,
foreign currency contracts and foreign currency translations............ (6,280,784) 367,572
----------------- -----------------
Net (decrease) increase in net assets resulting from operations........... (3,594,534) 1,223,621
----------------- -----------------
CAPITAL TRANSACTIONS:
Proceeds from contributions............................................... 44,945,810 60,373,286
Value of withdrawals...................................................... (30,977,956) (20,050,328)
----------------- -----------------
Net increase in net assets from capital transactions...................... 13,967,854 40,322,958
----------------- -----------------
NET INCREASE IN NET ASSETS................................................ 10,373,320 41,546,579
NET ASSETS:
Beginning of period....................................................... 41,546,579 --
----------------- -----------------
End of period............................................................. $51,919,899 $41,546,579
----------------- -----------------
----------------- -----------------
</TABLE>
- ------------------------
* Commencement of operations.
See notes to financial statements.
20
<PAGE>
<PAGE>
UBS International Equity Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE APRIL 2, 1996*
YEAR ENDED THROUGH
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted)............................. $51,920 $41,547
Average commission rate per share(1)................................. $ 0.02 $ 0.02
Ratio of expenses to average net assets(2)........................... 0.95% 0.88%(3)
Ratio of net investment income to average net assets(2).............. 1.40% 2.07%(3)
Portfolio turnover................................................... 26% 42%
</TABLE>
- ------------------------
* Commencement of operations.
(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 0.35% and 0.79% (annualized) for the
respective periods.
(3) Annualized.
See notes to financial statements.
21
<PAGE>
<PAGE>
UBS International Equity Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
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. At
December 31, 1997, all of the beneficial interests in the Portfolio were held by
UBS International Equity Fund, UBS Institutional International Equity Fund and
UBS International Equity Fund, Ltd.
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. Investors Fund Services (Ireland) Limited ('IBT
Ireland') acts as the Portfolio's administrator.
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.
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').
Trading in securities on most foreign exchanges and over-the-counter market 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 period-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 value
at the close of the period. 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 period-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
22
<PAGE>
<PAGE>
UBS International Equity Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
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 period-end to credit loss in the event of the
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 approximately $40,000 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, UBSII and IBT Ireland. 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
23
<PAGE>
<PAGE>
UBS International Equity Portfolio
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
average daily net assets and 0.40% of the Portfolio's average daily net assets
in excess of $50 million. For the year ended December 31, 1997, the investment
advisory fee amounted to $428,213. UBS voluntarily agreed to waive $176,323 of
this amount.
B. ADMINISTRATION AGREEMENT -- Under the terms of an Administration Agreement
with the Trust, effective March 13, 1997, IBT Ireland 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 IBT
Ireland an administrative services fee, accrued daily and payable monthly, at an
annual rate of 0.07% of the Portfolio's first $100 million average daily net
assets and 0.05% of the Portfolio's average daily net assets in excess of $100
million. Prior to March 13, 1997, Signature Financial Group (Grand Cayman), Ltd.
('SFG') provided overall administrative services and general office facilities
to the Portfolio and the Trust. As compensation for such services, the Portfolio
had agreed to pay SFG an administrative services fee, accrued daily and paid
monthly, at an annual rate of 0.05% of the Portfolio's average daily net assets.
For the year ended December 31, 1997, the administrative services fee amounted
to $33,324.
4. PURCHASES AND SALES OF INVESTMENTS
For the year ended December 31, 1997, purchases and sales of investment
securities, excluding short-term investments, aggregated to $30,831,633 and
$11,714,524, respectively.
24
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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 UBS Investor
Portfolios Trust) at December 31, 1997, the results of its operations for the
year then ended and the changes in its net assets and the financial highlights
for the year then ended and for the period April 2, 1996 (commencement of
operations) through December 31, 1996, in conformity with accounting principles
generally accepted 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 audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted 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 audits, which included confirmation of securities at December
31, 1997 by correspondence with the custodian and brokers, and the application
of alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Chartered Accountants
Toronto, Ontario
February 17, 1998
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UBS INTERNATIONAL EQUITY GROWTH FUND
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116
INVESTMENT ADVISER Union Bank of Switzerland,
New York Branch
1345 Avenue of the Americas
New York, NY 10105
ADMINSTRATOR Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
DISTRIBUTOR First Fund Distributors, Inc.
4455 East Camelback Road
Phoenix, AZ 85018
CUSTODIAN AND TRANSFER AGENT Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
STATEMENT OF DIFFERENCES
The Japanese Yen sign shall be expressed as......................'Y'
